Related parties
Related parties as defined by IAS 24 (Related Party Disclo- sures) are legal entities and natural persons who can exer- cise significant influence or control over Celesio AG and its subsidiaries or, alternatively, are subject to the control or significant influence of Celesio AG or its subsidiaries. In par- ticular, related parties include members of the Management Board, Franz Haniel & Cie., Duisburg, and its subsidiaries and joint venture, associates and members of the boards of Celesio AG.
All transactions with related parties have been conducted at arm’s length.
There are contracts for management and other services in place with Franz Haniel & Cie. GmbH and its subsidiaries. In addition, the German companies of the Celesio Group are included in the consolidated tax group for VAT of which Franz Haniel & Cie. GmbH is the parent.
There are ongoing business relationships with joint ventures and associates for deliveries of merchandise.
The goods and services received from or delivered to related parties are summarised below:
Franz Haniel & Cie. GmbH, Duisburg
Subsidiaries of Franz Haniel & Cie. GmbH
Joint ventures and associates 2009 EUR m 2010 EUR m 2009 EUR m 2010 EUR m 2009 EUR m 2010 EUR m
Loans and receivables 4.6 4.5 3.0 4.3 2.9 0.1
Liabilities 0.1 1.5 0.3 2.5 0.0 0.0
Income 0.0 0.0 0.0 0.2 11.0 12.1
Expenses 0.5 0.6 0.4 0.3 0.0 0.0
Total remuneration and the structure of compensation paid to members of the Management Board and Supervisory Board are presented in the following sections.
Notices from shareholders
According to a notice dated 1 April 2002 issued pursuant to Sec. 41 (2) Sentence 1 Wertpapierhandelsgesetz (WpHG, Securities Trading Act) Franz Haniel & Cie. GmbH, Duisburg, held a total of 60% of the voting rights in Celesio on 2 April 2002. Franz Haniel & Cie. GmbH prepares conso- lidated financial statements containing Celesio AG and its subsidiaries. These consolidated financial statements are published in the electronic version of the German Federal Gazette. According to Celesio AG, the shareholding of Franz Haniel & Cie. GmbH, Duisburg, came to 54.6% (previous year 54.6%) at the end of the reporting year.
Corporate governance
The Management Board and Supervisory Board last issued a declaration of compliance with the recommendations of the German Corporate Governance Codex pursuant to Sec. 161 Aktiengesetz (AktG, German Stock Corporation Act) on 22 December 2010 and published this permanently on their website at celesio.com.
Audit fees
The annual financial statements of Celesio AG, the German subsidiaries and the consolidated financial statements were audited by Ernst & Young GmbH Wirtschaftsprüfungsgesell- schaft (Ernst & Young Germany), Stuttgart, Germany. In the fiscal year, expenses for services rendered by Ernst & Young Germany totalled EUR 1.2m (previous year EUR 1.1m). Of this amount, EUR 0.7m (previous year EUR 0.6m) is for the audit of the financial statements, EUR 0.2m for other attest services (previous year EUR 0.1m), EUR 0.1m for tax advi- sory services (previous year EUR 0.2m) and EUR 0.2m (pre- vious year EUR 0.2m) for other services.
Exemption pursuant to Sec. 264 (3) and Sec. 264b HGB The following entities are exempted under Sec. 264 (3) HGB from the duty to publish their financial statements:
– ABG Apotheken-Beratungsgesellschaft mbH, Stuttgart – Admenta Deutschland GmbH, Stuttgart
– Admenta Deutschland Beteiligungs-GmbH, Stuttgart – Alliance Apotheken Management GmbH, Stuttgart – Apo Interim Personalservice GmbH, Stuttgart – Apotheke DocMorris Holding GmbH, Stuttgart – Celesio Manufacturer Solutions Deutschland
Vertriebsgesellschaft mbH, Stuttgart
– Celesio Manufacturer Solutions Europe Distributors GmbH, Stuttgart
– DocMorris Apotheken Management GmbH, Stuttgart – DocMorris Kooperationen GmbH, Stuttgart
– DocMorris Pharma GmbH, Aachen – GEHE Pharma Handel GmbH, Stuttgart – CEGE Beteiligungsgesellschaft mbH, Stuttgart – Gesellschaft für Versorgungskonzepte
in der Wundbehandlung GmbH, Stuttgart – Inten GmbH, Stuttgart
– Movianto GmbH, Stuttgart – Movianto Deutschland GmbH, Kist – Pharmexx GmbH, Hirschberg – pharmexpert GmbH, Hirschberg – pharmdirekt GmbH, Hirschberg
– Rudolf Spiegel GmbH, Grafschaft-Gelsdorf
GEHE Immobilien GmbH & Co. KG (Stuttgart), GEHE Infor- matik Services GmbH & Co. KG, Stuttgart, and Ancavion GmbH & Co. KG (Weiterstadt) are exempted from the duty to publish their financial statements pursuant to Secs. 264b, 264a HGB.
Management Board members benefit from a defined contri- butions plan. An annual contribution of 16% of the fixed basic component plus standard bonus, or 14% of the fixed basic component, standard bonus and performance cash scheme components is made. The contribution is made for the period of office as Management Board member. The con- tributions bear minimum interest. Pensions can be claimed after leaving the company and from the age of 60 years. In the case of invalidity or death, the contributions that would have been due until the age of 63 are credited to the pen- sion account which is then paid out.
Performance-related remuneration components. The
performance-related components consist of bonuses which are paid out annually as well as a rolling remuneration com- ponent as a long-term incentive, currently in the form of the performance cash scheme. The performance cash scheme was set up for the first time with effect as at 1 January 2008 for the period from 2008 to 2010 (2008 tranche). The second performance cash scheme was set up with effect as at 1 Jan- uary 2009 for the period 2009 to 2011 (2009 tranche) and the third was set up with effect as at 1 January 2010 for the period 2010 to 2012 (2010 tranche).
The basis for assessment of the bonus in the Celesio Group is the EBITDA or EBIT. The bonus amount is determined as a percentage share of the EBITDA or EBIT generated in the fiscal year and an additional payment due if the year-on-year EBITDA or EBIT growth exceeds a pre-defined threshold. The maximum bonus is capped at twice the standard bonus. If, in its best judgement, the Supervisory Board deems the extraordinary service or success of a Management Board member to be worthy of special payments including special remuneration, it is entitled to award these. The same applies in the case of mutual agreement to terminate contracts. The performance cash schemes are each payable in cash after three years upon achievement of targets. The amount of cash payment for each of the three schemes started so far depends on the standard set for each member of the Management Board as well as fulfilment of several perform- ance targets. These include an increase in the share price compared to a defined reference share price, the accumulated Celesio value added and, starting from the 2009 tranche, the implementation of operating measures to improve profit- ability over the term of the scheme. The share-based com- ponent is classified as a cash-settled share-based payment transaction in the meaning of IFRS 2 and is measured using a binominal option pricing model. The expenses for the bene- fits received or the debt to settle these benefits are recog- nised over the vesting period. The debt is remeasured at Remuneration report
This remuneration report is in line with the recommendations of the German Corporate Governance Code and contains disclosures pursuant to the requirements of the Handels- gesetzbuch (HGB, German Commercial Code) as well as the International Financial Reporting Standards (IFRSs).
Total remuneration and compensation structure of the Management Board
In determining Management Board remuneration the provi- sions of Aktiengesetz (AktG, German Stock Corporation Act) and the German Corporate Governance Code were observed. By resolution of the annual general meeting on 27 April 2006, no disclosures are to be made on the individual remunera- tion of Management Board members for five years. Celesio therefore discloses the remuneration of the Management Board in total, broken down into individual components. The total remuneration of the members of the Management Board comprises both performance-related and non-perform- ance-related components. The compensation structure is conducive to the sustainable development of the company on account of remuneration components with a long-term incentive. In determining the remuneration of members of the Management Board, we take into account the size and complexity of the company, its economic and financial posi- tion and the amount and structure of remuneration of man- agement boards of comparable companies, as well as the compensation structure otherwise in place at the company. We also consider the responsibilities and performance of each member of the Management Board. The Supervisory Board regularly reviews the structure of the remuneration system at the instigation of the General Committee, includ- ing the appropriateness of remuneration amounts for the Management Board.
Non-performance related remuneration components. The non-performance-related components consist of a fixed basic component, additional benefits and pension contribu- tions. The fixed basic component is paid as a monthly salary. The additional benefits received by the Management Board comprise the use of company cars, accident insurance, health insurance abroad, legal protection and D&O insurance. Man- agement Board members are individually liable to pay tax on the use of a company car.
Disclosures pursuant to IAS 24 (»Related Parties«). The cost of short-term benefits as defined by IAS 24.16 a) amounted to EUR 7,278k in 2010 (previous year EUR 5,220k). For the company pension scheme as defined by IAS 24.16 b) a service expense of EUR 785k was incurred in 2010 (previ- ous year EUR 774k). Expenses for other long-term employee benefits pursuant to IAS 24.16 c) came to EUR 163k (previ- ous year EUR 80k). There were no expenses for termination benefits pursuant to IAS 24.16 d) in the reporting period (previous year EUR 1,190k). Share-based payments as defined by IAS 24.16 e) gave rise to an expense of EUR 82k (previous year EUR 56k) based on the valuation of the performance cash scheme at the end of the reporting period. The provision for these components of the performance cash schemes amounts to EUR 150k in total (previous year EUR 68k).
Other disclosures. Former members of the Management
Board and their surviving dependents received remunera- tion of EUR 294k in the reporting period (previous year EUR 1,749k). Celesio has set up pension provisions of EUR 6,251k (previous year EUR 4,796k) for this group of persons. In the 2010 fiscal year, no loans were granted to members of the Management Board, nor did the company enter into any contingent liabilities in favour of these persons. Total remuneration and compensation structure of the Supervisory Board
The remuneration paid to the Supervisory Board is defined in Art. 5 of the articles of association of Celesio AG. In addition to reimbursement of their out-of-pocket expenses, the mem- bers of the Supervisory Board receive fixed remuneration of EUR 5,000 annually and an additional payment of EUR 800 for each half percentage point of dividends distributed to shareholders in the past fiscal year that is in excess of 4% of issued capital entitled to dividends. These payments are net of VAT. The chairman receives twice the standard amount paid to the other members of the Supervisory Board and the deputy chairman receives one and a half times the standard. Each member of a committee – with the exception of the committee founded to satisfy Sec. 27 (3) Mitbestimmungsge- setz (MitbestG, Codetermination Act) – receives EUR 2,000, with the chairman of a committee receiving EUR 4,000. each reporting date and on the settlement date. Changes
in fair value are recognised in the income statement. The Celesio value added is a key performance indicator which serves our value-based corporate management. To obtain this indicator, the ratio of earnings before interest and taxes (EBIT) to capital employed is compared with the weighted average costs of capital. The remuneration is thus conducive to a sustainable increase in the company value. The imple- mentation of operating measures to improve profitability relates to the effect on earnings of cost-cutting measures and growth initiatives. The performance cash schemes are also capped at a maximum payout.
The claim for payout from the performance cash scheme is valid only if the claimant held office in the performance period. A payment is made pro rata temporis upon reaching retirement age or stepping down from the Management Board. A transitional arrangement is in place until the date that the rolling system is fully in force, i.e. all three tranches have been granted. If a member of the Management Board leaves before then, the full standard value will be granted for all tranches set up by then.
Total remuneration. The total remuneration of the Manage-
ment Board pursuant to German Accounting Standard 17 stood at EUR 7,513k in 2010 (previous year EUR 5,493k). This breaks down into EUR 1,884k for the annual basic component including additional benefits (previous year EUR 2,251k), EUR 5,394k for bonuses (previous year EUR 2,969k) and EUR 235k for the value of the performance cash plan for the years 2010 to 2012 (2010 tranche) as at the date of issue (previous year 2009 tranche EUR 273k). Of the bonuses, an amount of EUR 968k (previous year EUR 781k) was guaranteed.
The total remuneration of the Supervisory Board came to EUR 848k in 2010 (previous year EUR 761k). Of this, EUR 68k (previous year EUR 68k) pertained to fixed remu- neration for membership of the Supervisory Board. The variable components pegged to dividend pay-outs for mem- bership of the Supervisory Board came to EUR 756k (pre- vious year EUR 669k). The variable components pegged to dividend payouts for serving on committees came to EUR 24k (previous year EUR 24k).
In the 2010 fiscal year, no loans were granted to members of the Supervisory Board, nor did the company enter into any contingent liabilities in favour of these persons.
Proposal of the Management Board for the appropriation of profits
The profit available for distribution of Celesio AG amounts to EUR 85,050,000 (previous year EUR 85,050,000). The Management Board proposes distributing the entire profit available for distribution as a dividend for the 2010 fiscal year. On the basis of this proposal for the appropriation of profits, the dividend for a no-par share will be EUR 0.50 (previous year an ordinary dividend of EUR 0.50).
Stuttgart, 21 February 2011 The Management Board
Special appointments Membership in other Supervisory Boards and comparable bodies
” none Dr Fritz Oesterle
Chairman
” Herba Chemosan Apotheker-AG, Deputy Chairman of the Supervisory Board
” Landesbank Baden-Württemberg, Member of the Supervisory Board
” Untertürkheimer Volksbank eG, Member of the Supervisory Board
” none
Dr Christian Holzherr ” Gruppe Boerse Stuttgart, Member of the Supervisory Board
- Boerse Stuttgart Holding GmbH - Boerse Stuttgart AG
- EUWAX AG
” Medco Celesio B.V., Member of the Supervisory Board
” none
Wolfgang Mähr ” GEHE Pharma Handel GmbH,
Chairman of the Supervisory Board
” Herba Chemosan Apotheker-AG, Member of the Supervisory Board
” OCP S.A., Chairman of the Supervisory Board
” none Dr Michael Lonsert
(since 1 October 2010)
” Medco Celesio B.V., Chairman of the Supervisory Board