Report of the Supervisory Board of RATIONAL AG for fiscal year 2017.
On 28 July 2017, Mr Siegfried Meister, company founder, majority shareholder and Supervisory Board chairman of RATIONAL AG, died at the age of 78. The Supervisory Board, Executive Board and employees of RATIONAL AG mourn the loss of an eminent entrepreneur and will continue to manage the company as Mr Meister intended.
The position of Chairman of the Supervisory Board, which was left vacant as a result, was taken over by Mr Walter Kurtz, until then Deputy Chairman of the Supervisory Board, on an acting basis on 29 July 2017. Mr Walter Kurtz was elected Chairman of the Supervisory Board with effect from 11 August 2017. Dr Georg Sick was appointed to the vacant Supervisory Board position with effect from 18 October 2017.
Siegfried Meister was the majority shareholder of RATIONAL AG, holding 7,161,311 shares. As stated in the mandatory disclosures published on 1 August 2017 and 3 August 2017, these shares were transferred to the community of heirs of Siegfried Meister.
In fiscal 2017, RATIONAL AG once again continued on its long-term growth path. The focus in the year under review remained on the stability of the Company as a whole and on sustained improvement of the quality of the business.
Dialogue and communication as a basis for advice and monitoring.
In fiscal year 2017, we performed the tasks incumbent on the Supervisory Board by law and by the Articles of Association. We regularly advised the Executive Board on the management of the Company and monitored its activities. The Supervisory Board was directly involved in all decisions of strategic importance to the RATIONAL Group. Cooperation between the Executive Board and the Supervisory Board was characterised by comprehensive, timely and regular communication, both written and verbal. The Executive Board also reported on major transactions outside the regular meetings. The Supervisory Board received monthly and quarterly reports on market developments, the competitive situation, and the Company’s marketing, sales and profit trends. In addition, the Supervisory Board and the Chairman of the Supervisory Board took steps to ensure that at all times it was informed about the current business situation, significant transactions and important decisions by the Executive Board. With this aim in mind, the Supervisory Board maintained close and regular contact with all members of the Executive Board to exchange information and ideas.
Where called for by law, the Articles of Association or the rules of procedure, the Supervisory Board voted on the reports and draft resolutions of the Executive Board, after detailed consultation and careful scrutiny. All operations requiring consent were approved. In fiscal 2017 and in 2018 to date, these included, in particular, decisions concerning product development, expansion and optimisation of the sales and marketing organisation, further development of the management structure, global HR development, risk management, and planning and approval of construction work at the Landsberg site.
Consultations in the Supervisory Board.
The Supervisory Board had eleven meetings in 2017. In 2018, one further meeting was held before of the meeting of the Supervisory Board on 28 February 2018 in order to adopt the financial statements. The members of the Supervisory Board also consulted each other in writing and by telephone, and held eight other internal consultative meetings and four meetings of the Audit Committee in fiscal 2017. Where applicable, the Supervisory Board also passed resolutions outside the ordinary meetings. During the past fiscal year, the Supervisory Board regularly examined and further improved the efficiency of its activities, in particular the procedures and the timely provision of sufficient information. According to a review carried out by the Supervisory Board itself, its members are, as a whole, familiar with the sector in which the Company is active.
Key areas of consultation.
The consultations with the Executive Board and the internal discussions within the Supervisory Board dealt with all relevant aspects of the development of the business, including financial, investment and HR planning; business trends; the economic situation of the Company and of the consolidated group; the risk situation; risk management; and last but not least the current cost and earnings position. In addition, numerous individual topics were on the agenda of the Supervisory Board meetings, and were discussed in depth. These included:
- The appropriation of earnings and proposed dividend
- Business planning for fiscal year 2018
- The realignment of the investment strategy
- The election of the Chairman and Deputy Chairman of the Supervisory Board
- The appointment of Dr Sick to the vacant Supervisory Board position
- The change in the Audit Committee, where Mr Werner Schwind was replaced by Mr Erich Baumgärtner
- The definition of a target quota for women on the Supervisory Board
- The development strategy for new markets
- Further development in the focus market USA
- Key points in product development
- Launch of the new CombiMaster® Plus generation of appliances
- Enhancement of the RATIONAL Compliance Programme
- Construction projects at the Landsberg and Wittenheim locations
- Enhancement of the medium-term strategy, including the product portfolio and sales and marketing strategy
- Resolution to make a special U.i.U.® special payment
- Further networking of the sales activities for combi-steamers and the VarioCooking Center®
At the Supervisory Board meeting to adopt the financial statements on 28 February 2018, the principal topics included not only the audit and adoption or approval of the annual and consolidated financial statements, but also, in particular, the draft resolutions to be proposed to the 2018 General Meeting of Shareholders.
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, will be proposed as auditors for the 2018 fiscal year. We also adopted the remaining draft resolutions for the ordinary General Meeting of Shareholders.
Our duties in 2017, and, in particular, at the meeting held on 28 February 2018 to adopt the financial statements, included not only the audit plus the entire accounting process in RATIONAL AG and the Group, but also the monitoring of the internal control system and the effectiveness of the internal audit and the risk management system.
The Supervisory Board has formed an Audit Committee. Its members are Mr Walter Kurtz, Dr Hans Maerz and Mr Erich Baumgärtner. On 11 August 2017, the members of the Supervisory Board elected Mr Baumgärtner as a member of the Audit Committee, following Mr Werner Schwind’s resignation from the Audit Committee for personal reasons. The Audit Committee met four times in the 2017 fiscal year. At its meetings, it dealt, in particular, with the Half-Year Report and the annual and consolidated financial statements, as well as the monitoring of accounting, the accounting processes, the effectiveness of the internal control system, of the risk management system and the internal audit system, and the selection and independence of the auditors. The Audit Committee reported regularly to the Supervisory Board.
After the death of Mr Siegfried Meister on 28 July 2017, Mr Walter Kurtz was elected Chairman of the Supervisory Board and Dr Hans Maerz was confirmed in his office of Deputy Chairman of the Supervisory Board. No second Deputy Chairman was elected. Dr Georg Sick was appointed to the vacant Supervisory Board position on 18 October 2017. He was delegated by the shareholder Mr Walter Kurtz in accordance with his right of delegation as stated in the Articles of Association. Dr Sick will hold this position until the next regular Supervisory Board elections by the General Meeting of Shareholders in 2019.
In fiscal year 2017, the composition of the Supervisory Board of RATIONAL AG is fully in accordance with the German Corporate Governance Code recommendation that the Supervisory Board should include what it considers to be an adequate number of independent members.
No conflicts of interest in respect of individual Supervisory Board members occurred in the 2017 reporting year in connection with consultations, draft resolutions and the audit engagement.
On 9 March 2017, the German government passed the implementing act that transposes the European CSR Directive (2014/95/EU) into national law. The act takes retrospective effect from 1 January 2017. As a result, non-financial reporting in accordance with sections 289b and 315b respectively of the Handelsgesetzbuch (HGB, German Commercial Code) has been a mandatory requirement since the 2017 fiscal year. RATIONAL AG will publish the 2017 sustainability report, including the disclosures required in this regard, in time for the deadline of 30 April 2018.
The last amendment to the German Corporate Governance Code entered into force on 24 April 2017. Together with the Executive Board, an account was rendered for the fiscal year 2017 in the Corporate Governance Report and Declaration of Corporate Governance pursuant to section 289f of the HGB. RATIONAL AG largely complies with the recommendations and suggestions set out in the German Corporate Governance Code. This resulted in the submission of the declaration of conformity of February 2018. This was resolved at the meeting of the Supervisory Board on 31 January 2018 pursuant to section 161 of the Aktiengesetz (AktG, German Stock Corporation Act) and published in the 2017 Annual Report. The declarations of conformity of recent years can also be found under Investor Relations on the RATIONAL website (www.rational-online.com).
Audit of the annual financial statements and consolidated financial statements.
As proposed by the Supervisory Board and elected by the General Meeting of Shareholders on 3 May 2017, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, audited the financial statements of RATIONAL AG and of the Group for fiscal year 2017. The audit contract was awarded by the Supervisory Board. Prior to the proposal for election, the Supervisory Board obtained a declaration of independence from the auditors. No reasons were apparent to doubt the independence of the auditors. The auditors were additionally obliged to provide information immediately of any circumstances which could give rise to a lack of impartiality on their part and, where appropriate, to notify us of services which they have performed in addition to the audit. With regard to the audit reform, the Supervisory Board is adhering to the existing in-house rule on the strict separation of consulting and auditing services. The Supervisory Board and the Audit Committee reported, prior to and during the audit in discussions with the auditor, on the latter’s approach to the audit and the progress of the audit.
The annual financial statements for the fiscal year from 1 January to 31 December 2017, prepared by the Executive Board in accordance with the provisions of the Handelsgesetzbuch (HGB, German Commercial Code), and the Company’s management report, which also refers to the Declaration of Corporate Governance on the Company’s website, were audited by the auditors and given an unqualified audit opinion. The Executive Board prepared consolidated financial statements for the Group in accordance with the International Financial Reporting Standards (IFRSs), supplemented by the commercial law provisions applicable under section 315a (1) of the HGB. In addition, a Group management report was prepared. The auditors audited the consolidated financial statements and the Group management report and issued an unqualified audit opinion.
The annual financial statements, the consolidated financial statements, the management reports, the auditors’ reports, and the Executive Board’s proposal on the appropriation of unappropriated profits were forwarded in good time to the Audit Committee and all Supervisory Board members for examination. They were the subject of intensive deliberations at the meeting of the Supervisory Board held on 28 February 2018. In particular, the Supervisory Board carefully reviewed the findings of the audit by the auditors.
The auditors took part in the discussion of the Company’s annual financial statements and the consolidated financial statements. They reported on the results of the audits, in particular on the points on which it was agreed the audit would focus, and were available to the Supervisory Board for questions and supplementary information. One area on which the auditors’ explanations concentrated was the assessment of the accounts-related internal control and risk management system. Both the Executive Board and the auditors answered all our questions comprehensively and to our satisfaction.
The Supervisory Board raises no objections beyond its own final results of the deliberations and its own examination. The Supervisory Board approves the results of the audit. At its meeting held on 28 February 2018, the Supervisory Board approved the annual financial statements, prepared by the Executive Board, for RATIONAL AG as of 31 December 2017, including the certified version, dated 27 February 2017, of the management report for fiscal year 2017, as well as the consolidated financial statements as of 31 December 2017 and the certified version, dated 27 February 2017, of the group management report for fiscal year 2017. The 2017 annual financial statements for RATIONAL AG, including the management report, are thereby adopted in accordance with section 172 sentence 1 of the AktG.
Dependent company report.
The dependent company report, prepared by the Executive Board pursuant to section 312 of the AktG, on RATIONAL AG’s relations with affiliated and associated companies was examined by the auditors. The auditors issued the following audit opinion:
“Based on our statutory audit and our judgement, we confirm that the actual information in the report is correct and the consideration the company paid for the legal transactions listed in the report was not inappropriately high.”
The auditors’ report on the dependent company report was made available to all members of the Supervisory Board in good time before the meeting to approve the financial statements and was examined by us and discussed in detail with the auditors present. Following its own examination, the Supervisory Board concluded that there were no objections to the report on relations with affiliated and associated companies and the final statement by the Executive Board contained therein.
Appropriation of profits.
After consideration of the operating environment, the situation on the global financial and capital markets and the financial position of the Company, we approve the appropriation of profits proposed by the Executive Board.
From RATIONAL AG’s net retained earnings of 297.4 million euros, a dividend of 11.00 euros per share (8.80 euros plus a special dividend of 2.20 euros per share) or a total of 125.1 million euros is to be distributed and the remainder is to be carried forward to new account.
The Supervisory Board would like to thank all managers for their close and constructive cooperation, and for the trust they have placed in us. But our very special thanks go to all employees. Once again in 2017, they succeeded in convincing our customers of the high added value of RATIONAL’s products and services, and thus in making outstanding use of the market opportunities open to us.
Landsberg am Lech, 1 March 2018
Chairman of the Supervisory Board of RATIONAL AG
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