Investor Relations

Investor Relations

Corporate Governance

All actions taken by the management and control bodies of TOMORROW FOCUS AG are governed by the principles of responsible and efficient corporate governance.

Declaration of the Management Board and the Supervisory Board of TOMOROW FOCUS AG in respect of the recommendations of the Government Commission on the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz, AktG)

The Management Board and Supervisory Board of TOMORROW FOCUS AG hereby declare that the company has complied with the recommendations of the Government Commission on the German Corporate Governance Code announced by the Federal Ministry of Justice on 26 May 2010 in the official section of the electronic Federal Gazette (Bundesanzeiger), with the following exceptions:

1. For the time being, the company intends to refrain from applying the recommendation to offer shareholders the option to submit a postal vote (Number 2.3.3 sentence 2).
2. The D&O insurance policy for the Supervisory Board does not include a deductible (Number 3.8, paragraph 3).
3. Up to the present, the calculation of variable compensation components has not taken both positive and negative developments into account (Number 4.2.3, paragraph 2, sentence 4).
4. The reference parameters used when calculating variable components of compensation may be adjusted retroactively under certain specifically defined conditions (Number 4.2.3, paragraph 3, sentence 3).
5. Calculation of the settlement cap in the case of early termination (of the service agreement) of a member of the Management Board is not based on the total compensation for the previous year and the anticipated total compensation for the current year (Number 4.2.3, paragraph 4, sentence 2).
6. No age limit is specified for members of the Management Board (Number 5.1.2, paragraph 2, sentence 3).
7. The Supervisory Board does not specify concrete objectives regarding its composition (Number 5.4.1 paragraph 2). Consequently, it is not possible to comply with the associated recommendations in Number 5.4.3.
8. The Supervisory Board does not form committees (Numbers 5.3.1, 5.3.2 and 5.3.3).
9. The Supervisory Board does not receive any performance-related compensation (Number 5.4.6).
10. The compensation of the Deputy Chairperson of the Supervisory Board is not considered in the specification of compensation for Supervisory Board members (Number 5.4.6, paragraph 1, sentence 3).
11. Half-yearly and quarterly financial reports are not discussed by the Supervisory Board with the Management Board before publication (Number 7.1.2, sentence 2).

Notes on deviations from the German Corporate Governance Code recommendations

1. TOMORROW FOCUS AG already offers its shareholders an option to exercise their voting rights through a proxy designated by the company. Shareholders are therefore already able to submit their votes before the general meeting of shareholders is held. It follows that the additional option to submit a postal vote would not make it easier still for shareholders to exercise their voting rights. For the time being, TOMORROW FOCUS AG intends to refrain from applying the recommendation to offer shareholders the option to submit a postal vote.

2. TOMORROW FOCUS AG does not agree that the imposition of a deductible would have any effect in improving the attitude to work of, or the responsibility taken by, the members of the Supervisory Board. There is, therefore, no deductible in the D&O insurance policy for the Supervisory Board.

3. To date, with regard to the current service contracts of members of the Management Board, the calculation of variable compensation has not taken both positive and negative developments into account. The reasons for this deviation from the recommendations of the Code are that TOMORROW FOCUS AG is not obliged to comply with the new legislation on the structure of variable compensation components until such time as the existing methods of calculating variable compensation for the Management Board change and that existing service contracts for the Management Board cannot be amended immediately. TOMORROW FOCUS AG will comply fully with the statutory provisions of Section 87 of the German Stock Corporation Act (Aktiengesetz, AktG) with regard to all future Management Board service contracts and will take both positive and negative developments into account in the calculation of variable compensation components. Notwithstanding the above, the Supervisory Board is of the opinion that the structure and level of the compensation of all members of the Management Board are commensurate and geared towards the sustainable development of the company.

4. From the financial year 2011 onwards, members of the company’s Management Board will receive long-term incentives in the form of a share price-based ‘Performance Share Plan’ awarded in annual tranches. Members of the company’s Management Board are allocated a number of virtual shares in the company based on the degree to which EBTA targets have been met. These virtual shares are subject to a vesting period of three years, after which the members of the company’s Management Board may receive a cash payment. Under the terms of this programme, the target EBTA figure for the ongoing financial year and future financial years may be adjusted retroactively if significant changes are anticipated on account of specific transactions and if the company reaches a written agreement to that effect with members of the Management Board either during the ongoing financial year or before commencement of the financial year. In this context, changes are regarded as significant if the target EBTA figure varies from the original target figure for the financial year in question by more than 5 percent on account of a specific transaction (acquisitions or equity holdings). There is no automatic entitlement to an adjustment. This provision aims to ensure that target EBTA figures are calculated in a manner that is fair on both sides in the event of a new acquisition or equity holding.

5. Existing service agreements of the Management Board provide for a settlement cap of two years’ compensation in the case of early termination. Given that the current members of the Management Board have been with TOMORROW FOCUS AG for many years, the company does not deem it necessary to apply the recommendation of the Code, according to which the settlement cap is based on the total compensation for the previous year and, where applicable, the anticipated total compensation for the current year. In the view of the Supervisory Board, the existing rules in the service agreements of the Management Board comply with the requirement for commensurate remuneration. It therefore sees no need for change. Furthermore, if such an agreement is made in advance to calculate the settlement cap on the basis of the total compensation for the previous year and, where applicable, the anticipated total compensation for the current year, this might not adequately reflect the concrete circumstances that subsequently lead to the early termination of service or other aspects of the situation in particular cases at the time of termination.

6. TOMORROW FOCUS AG’s corporate policies deviate from the recommendation of the German Corporate Governance Code by not stipulating any age limit for Management Board members, which it feels would arbitrarily restrict TOMORROW FOCUS AG’s Supervisory Board in its choice of suitable Management Board members.

7. The Supervisory Board of TOMORROW FOCUS AG does not specify concrete objectives regarding its composition. Consequently, it is not possible to comply with the associated recommendations in Number 5.4.3. Up to the present, when submitting proposals for election to the Supervisory Board, it has been guided solely by the suitability of candidates with the aim of ensuring that the Supervisory Board is made up of members who between them possess the knowledge, skills and professional experience to perform their duties in the correct manner. In the view of the Supervisory Board, this method has proven successful, and it therefore sees no need to change the current practice.

8. The TOMORROW FOCUS AG Supervisory Board has six members and is proportionate to the company’s size. TOMORROW FOCUS AG does not believe that the formation of committees consisting of members of this six-person board would improve its efficiency, which is why no committees are formed. The Supervisory Board as a whole also handles issues of accounting, risk management and compliance, the necessary independence required of the auditor, the issuing of the audit mandate to the auditor, the determination of focal points for the audit and the fee agreement.

9. At the Annual General Meeting of TOMORROW FOCUS AG on 1 June 2011, a resolution was adopted to amend the Articles of Association of the company in such a way that with effect from the financial year beginning on 1 January 2011 the compensation payable to members of the Supervisory Board would consist entirely of a fixed salary.
In removing the variable component of compensation, the aim is to strengthen the independence of the Supervisory Board. Experience shows that the volume of work and the liability risk of members of the Supervisory Board do not develop in line with the business performance of the company and the corresponding movements in the company’s share price. These indicators were previously used to calculate the variable compensation payable to members of the Supervisory Board. In the view of TOMORROW FOCUS AG, it is often in difficult times, when the share price and therefore variable compensation may fall, that the Supervisory Board is called upon to perform its supervisory and advisory roles with particular attention. The exclusion of a variable component is supported by many of those involved on different sides of the corporate governance debate and accords with international best practice in this area. The new rule adopted by the Annual General Meeting reflects this view.

10. Although the Chairperson of the Supervisory Board, by virtue of his/her function, has a considerably higher workload, the Deputy Chairperson’s workload is no higher than that of the other Supervisory Board members. For this reason the Deputy Chairperson of the Supervisory Board does not receive a different level of remuneration from that received by the other members of the Supervisory Board.

11. The company refrains from discussing half-yearly and quarterly reports with the Supervisory Board before their publication. For reasons of time and because of legislation covering insider dealing, it is the view of the company that respective discussions would lead to delays in providing information to the capital markets.

Since issuing its last declaration of conformity in April 2011, TOMORROW FOCUS AG has observed all the recommendations of the latest version of the Code (26 May 2010) with the exception of points 1 to 3 and 5 to 11 above.

Munich, Germany, December 2011
For the Supervisory Board For the Management Board

Dr Paul-Bernhard Kallen Stefan Winners

Management and control structure

Roles of the Management Board and Supervisory Board
TOMORROW FOCUS AG is a company under German law, which also forms the basis of the German Corporate Governance Code. One of the fundamental principles of German stock corporation law is the dual management system involving two bodies, the Management Board and the Supervisory Board, each of which is endowed with independent competences. TOMORROW FOCUS AG’s Management Board and Supervisory Board cooperate closely and in a spirit of trust in managing and controlling the Company.

TOMORROW FOCUS AG’s Management Board currently comprises three members. As an executive body, they are jointly responsible for managing the Company’s business operations in the best interests of the organisation with a view to achieving a sustained increase in shareholder value. The allocation of duties and responsibilities to the individual Board members is presented separately in this section.

The Supervisory Board advises and supervises the Management Board in the management of the Company. It is involved in strategic and planning decisions and all decisions of fundamental importance to the Company. In accordance with the terms of reference, decisions taken by the Management Board on major transactions such as the annual budget, major acquisitions or divestments require the approval of the Supervisory Board. The Chairperson of the Supervisory Board coordinates the work of the Supervisory Board, chairs its meetings and represents its interests in all contact with outside bodies.

The Management Board provides the Supervisory Board with comprehensive up-to-date information in writing and at regular meetings about the budget, the development of business and the situation of the Group, including risk management and compliance. An extraordinary Supervisory Board meeting may be convened if required when events of particular relevance occur. The Supervisory Board has adopted rules of procedure governing its work. In the run-up to Supervisory Board meetings, the representatives of shareholders and employees meet separately, where necessary.

TOMORROW FOCUS AG has taken out a D&O insurance policy for all members of the Management Board and Supervisory Board.

Composition of the Supervisory Board
In accordance with the Articles of Association, TOMORROW FOCUS AG’s Supervisory Board comprises six members with identical periods of office. The current members of the Supervisory Board were elected at the general meeting of shareholders on 1 June 2011. Factors taken into account in nominating candidates for election to the Supervisory Board are the knowledge, skills and expertise required to implement the tasks as well as diversity. The Supervisory Board does not include any former members of the Management Board. It comprises a sufficient number of independent members not maintaining any personal or business relationship with the Company or its Management Board. The Supervisory Board has been elected for a period of five years that will expire at the end of the 2016 annual general meeting. The Supervisory Board of TOMORROW FOCUS AG does not form any committees.

Management and Supervisory Board members are obliged to act in TOMORROW FOCUS AG’s best interests. In the last financial year, there were no conflicts of interest requiring immediate disclosure to the Supervisory Board. None of the Management Board members of TOMORROW FOCUS AG sat on the supervisory boards of incorporated firms outside the Group.