Report of the Supervisory Board of RATIONAL AG
for fiscal year 2015
Once again in 2015, RATIONAL AG 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 sustained improvement of the quality of the business.
In fiscal 2015, 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 was in 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 and rules of procedure, the Su-pervisory Board voted, following detailed consultation and scrutiny, on the reports and draft resolutions of the Executive Board. All operations requiring consent were approved. In fiscal 2015 and in 2016 to date, this in particular related to decisions concerning product development, expansion and optimisation of the sales and mar-keting organisation, further development of the management structure, global HR development, risk management, and planning and approval of construction work at the Landsberg site.
The Supervisory Board had 11 meetings in 2015. In 2016, one further meeting was held up to the time of the meeting of the Supervisory Board on 24 February 2016 to adopt the financial statements. The members of the Supervisory Board also consult-ed each other in writing and by telephone, and held 11 other internal consultative meetings and three meetings of the Audit Committee in fiscal 2015. Where applica-ble, 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.
The consultations with the Executive Board and the internal discussions in the Su-pervisory 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:
At the Supervisory Board meeting to adopt the financial statements on 24 February 2016, 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 2016 General Meeting of Shareholders.
PricewaterhouseCoopers AG, Wirtschaftsprüfungsgesellschaft, Munich, will be pro-posed as auditors for the 2016 fiscal year. We also adopted the remaining draft reso-lutions for the ordinary General Meeting of Shareholders.
Our duties in 2015, and, in particular, at the meeting held on 24 February 2016 to adopt the financial statements, covered 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.
After more than 17 successful years as the Company’s Chief Financial Officer, Mr Erich Baumgärtner resigned from his Executive Board position by mutual agreement as at 31 December 2015. Through his entrepreneurial thinking and action, RATIONAL became one of the most sought-after companies on the German stock exchange. The Supervisory Board would like to thank Mr Erich Baumgärtner for his many years of service for the benefit of our customers and our Company. The Supervisory appointed his successor, Dr Axel Kaufmann, as member of the Executive Board with sole responsibility for Finance with effect from 1 October 2015.
During fiscal year 2015, the Supervisory Board of RATIONAL AG was enlarged from three to six members. At its meeting on 21 July 2015, the Supervisory Board also resolved to form an Audit Committee. Mr Walter Kurtz, Dr Hans Maerz and Mr Werner Schwind were elected as members of the Audit Committee, and Dr Hans Maerz is its Chairman. In fiscal year 2015, the composition of the Supervisory Board of RA-TIONAL AG fully complied with the German Corporate Governance Code recom-mendation 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 2015 reporting year in connection with consultations, draft resolutions and the audit engagement.
On 12 June 2015, a new version of the German Corporate Governance Code en-tered into force. The Supervisory Board has dealt in detail with the new recommendations in the Code. Together with the Executive Board, an account was rendered for the fiscal year 2015 in the Corporate Governance Report. 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 as at 31 December 2015. A resolution to this effect was passed at the meeting of the Supervisory Board on 21 January 2015 pursuant to section 161 of the Aktiengesetz (AktG, German Stock Corporation Act). This declaration of conformity was updated to reflect the enlargement of the Supervisory Board and the establishment of an Audit Committee and resolved at the meeting of the Supervisory Board held on 23 September. The declaration of conformity as at 31 December 2015 has been published in the 2015 Annual Report. The declarations of conformity can also be found under Investor Relations on the RATIONAL website (www.rational-online.com).
As proposed by the Supervisory Board and elected by the General Meeting of Shareholders on 29 April 2015, PricewaterhouseCoopers AG, Wirtschaftsprüfungsgesellschaft, Munich, audited the financial statements of RA-TIONAL AG and of the RATIONAL Group for fiscal year 2015. The audit engagement was awarded by the Supervisory Board. Prior to the proposal for election, the Super-visory Board obtained a declaration of independence from the auditors. No reasons were apparent to doubt the independence of the auditors. The auditors were addi-tionally obliged to inform us 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. The Supervisory Board 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 2015, prepared by the Executive Board in accordance with the provisions of the Handelsgesetzbuch (HGB, German Commercial Code), and the Company’s man-agement 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 all Supervisory Board members for examination. They were the subject of intensive deliberations at the meeting of the Supervisory Board held on 24 February 2016. In particular, the Supervisory Board concerned itself thoroughly with the findings of the audit by the auditors.
The auditors took part in the discussion of the Company’s annual financial state-ments 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 infor-mation. One area on which the auditors’ explanations concentrated was the assess-ment 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 further to its own final results of the de-liberations and its own examination. The Supervisory Board approves the results of the audit. At its meeting held on 24 February 2016, the Supervisory Board approved the annual financial statements of RATIONAL AG prepared by the Executive Board as at 31 December 2015, including the certified version, dated 23 February 2016, of the management report for fiscal year 2015, as well as the consolidated financial statements as at 31 December 2015 and the certified version, dated 23 February 2016, of the Group management report. The 2015 annual financial statements for RATIONAL AG, including the management report, are thereby adopted in accord-ance with section 172 sentence 1 of the AktG.
The dependent company report, prepared by the Executive Board pursuant to sec-tion 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 infor-mation 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 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 pre-sent. 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.
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 profits of 242.6 million euros, a dividend of 7.50 euros per share or a total of 85.3 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 construc-tive cooperation, and the trust they have placed in us. But our very special thanks go to all employees. Once again in 2015, 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, 2 March 2016
Chairman of the Supervisory Board