Corporate governance declaration in accordance with Sections 289 f and 315 d of the German Commercial Code of TAG Immobilien AG and Group for 2020

The Management Board and the Supervisory Board hereby issue the corporate governance declaration for TAG Immobilien AG (hereinafter also referred to as “TAG”) and simultaneously for the TAG Immobilien AG Group (hereinafter also referred to as the “Group” or “TAG Group”) in accordance with Sections 289 f and 315 d of the German Commercial Code (HGB), taking into account the recommendations of the German Corporate Governance Code of 16 December 2019 as published on 20 March 2020:

 

I. Declaration of conformity

The Management Board and Supervisory Board of TAG have issued the following declaration in accordance with Section 161 (1) of the German Stock Corporation Act, which was jointly adopted at the meeting of the Supervisory Board on 11 December 2020:

Declaration of conformity issued by the Management Board and Supervisory Board in accordance with Section 161 of the German Stock Corporation Act

The Management Board and Supervisory Board of TAG Immobilien AG (hereinafter also the “Company”) declare in accordance with Section 161 of the German Stock Corporation Act that the Company has complied with the recommendations of the German Corporate Governance Code (hereinafter also the “Code”) in the following manner since the last declaration of conformity issued in December 2019 and will continue to do so in the future. As the Code has been revised since the declaration of conformity issued in December 2019, the declaration is divided into two sections, one relating to the Code of 7 February 2017 as published on 24 April 2017 (“2017 Code”) and the other relating to the revised Code of 16 December 2019 as published on 20 March 2020 (“2020 Code”):

A. Code in the version of 7 February 2017 (“2017 Code”)

In the period between the last declaration of conformity issued in December 2019 and the date of this declaration of conformity, the Company complied with the recommendations of the 2017 Code subject to the exception mentioned below:

Given an earlier reduction in the size of the Management Board to just three members, the Company’s Management Board has had no spokesman or Chairman since 1 November 2014. Accordingly, the recommendation in Section 4.2.1 Sentence 1 of the 2017 Code was not followed in this regard. The Supervisory Board and the Management Board believed that the rules of procedure and the business allocation plan assigned the tasks of the Management Board in a sufficiently detailed and appropriate way and that TAG was represented appropriately in relations with third parties.

B. Code in the version of 16 December 2019 (“2020 Code”)

As of the date of this declaration of conformity, the Company will comply in the future with the recommendations of the 2020 Code subject to the exceptions listed below:

Under recommendation C.5, a member of the Supervisory Board who is also a member of the Management Board of a listed company may not hold more than two Supervisory Board mandates and may not accept the chairmanship of Supervisory Boards of non-group listed companies in order to be able to devote sufficient time to the performance of his/her duties. The Chairman of the Company’s Supervisory Board, Mr Rolf Elgeti, exceeds the maximum number of mandates recommended by the 2020 Code. Mr Elgeti has been Chairman of the Supervisory Board of TAG Immobilien AG since the end of 2014. At no time has he had insufficient time for the performance of his duties as a result of his responsibilities at other companies and nor is this expected to be the case any time in the future. Competence, expertise and many years of experience, including on other Supervisory Boards, are essential qualities for TAG Immobilien AG. Mr Elgeti possesses these qualities. In this respect, the Company benefits from the fact that he is Chairman of the Supervisory Board.

Prior to serving as Chairman of the Supervisory Board, Mr Elgeti was Chairman of TAG Immobilien AG’s Management Board. This means that the Company does not comply with sentence 1 of recommendation C.10 stating that the Chairman of the Supervisory Board should be independent from the Company and that the Chairman is not deemed to be independent under the definition in C.7 of the 2020 Code if he was a member of the Company’s Management Board in the two years prior to being elected to the Supervisory Board. However, the Company does not see this as compromising his independence. At the time, Mr Elgeti’s transition from the Management Board to the Supervisory Board was expressly supported and requested by the shareholders. On the contrary, the fact that he holds the Chairmanship of the Supervisory Board is considered to be beneficial in view of the continuity with which this provides the Company.

Hamburg, December 2020
Management Board and Supervisory Board of TAG Immobilien AG

The declaration of conformity was published on 18 December 2020 on the Company’s website at https://www.tag-ag.com/en/investor-relations/interim-reports/declaration-of-conformity. The declarations of conformity issued in the past five years are also permanently accessible there.

 

II. Disclosures on corporate governance

The governance of TAG as a listed German stock corporation and of the Group is primarily determined by the German Stock Corporation Act and the relevant rules governing the regulated market issued by the Frankfurt Stock Exchange, together with the recommendations of the German Corporate Governance Code (hereinafter also referred to as the “Code”) as most recently amended. Compliance with the relevant regulatory requirements and standards is of central importance for TAG and the Group and forms the basis for successful activity and the sustainable creation of value by the Group.

1. Compliance management system

TAG’s Management Board has installed a Group-wide compliance management system to ensure that all statutory and regulatory requirements are observed. The compliance management system (hereinafter also referred to as “CMS”) is designed to systematically and permanently prevent any statutory and regulatory violations. It is a central component of the TAG Group’s corporate governance.

The CMS includes guidelines for corporate governance and all business activities carried out within the Group. In addition to the existing statutory requirements, TAG has defined internal business principles to encourage honest and ethical behaviour and responsible conduct towards customers, business partners and employees.

In 2020, TAG issued a series of policies that update and provide further details on the business principles. These are in particular the

  • TAG Anti-Discrimination Policy,
  • TAG Anti-Corruption Policy,
  • TAG Procurement Policy,
  • TAG Social Responsibility Policy and the
  • TAG Environmental Policy.

The business principles and guidelines are binding on all Group employees.

The CMS is constantly being updated. Employees undergo regular training on compliance matters. The aforementioned rules, policies and other components of the CMS are accessible to all employees via the TAG intranet. Vantage Development SA, Wroclaw, has its own CMS, the content of which conform to TAG’s requirements. 

To further strengthen corporate governance, TAG’s Management Board adopted a Business Partner Code in 2019, which underlies the legal relationships with third parties and is intended to ensure that the general principles of good compliance are also observed by contractual partners. Finally, TAG has a whistleblower system via which employees can submit information – including on an anonymous basis – concerning possible violations of or failure to comply with the internal rules and regulations to an external body or directly to TAG’s Compliance Office.

2. Risk management

Risk management at TAG and the Group forms an integral part of TAG’s general business activities. TAG has a risk management system tailored to its specific requirements, which is implemented as a monitoring instrument and is included in corporate management at all times.

Potential risks are regularly monitored and evaluated so that threats arising from these risks can be detected in good time and appropriate precautions taken. Risk management is regularly reviewed by the auditor as part of the audit of TAG’s annual financial statements and is the subject of discussions on the Audit Committee of TAG’s Supervisory Board.

3. Sustainability

TAG is committed to sustainable value creation. For this reason, economic, ecological and social aspects are taken into account in decision-making processes in a balanced manner. In addition to the long-term increases in shareholder value, TAG also creates value for other stakeholders.

TAG regularly publishes sustainability reports. The current report provides a comprehensive insight into the Company’s sustainability strategy and documents it comprehensively and transparently. The report is available on the Company’s website at https://www.tag-ag.com/en/sustainability/sustainability-reports.

 

III. Working methods and composition of the Management Board and the Supervisory Board

The manner in which the Management Board and Supervisory Board perform their duties is characterised by the “dual management system”, i.e. there is a strict personnel separation between the Management Board as the Company’s executive body and the Supervisory Board as its non-executive body. However, the Management Board and Supervisory Board work together closely in the Company’s best interests.

1. Management Board

The Management Board manages the company at its own initiative and is committed to the goal of sustainable value creation. The statutory principle of joint responsibility applies, i.e. the individual members of the Management Board jointly bear responsibility for all aspects of corporate governance and strategy. The Company’s strategy is determined in consultation with the Supervisory Board. The principles and details of the joint activities between the Management Board and the Supervisory Board of TAG are documented in the Management Board’s rules of procedure. The responsibilities of the individual members of the Management Board and of the Management Board as a whole are set out in the rules of procedure and the allocation of responsibilities. Legal transactions and decisions requiring the approval of the Supervisory Board are specified in the rules of procedure.

The age limit for the members of the Management Board is 67 years.

The Management Board is required to brief the Supervisory Board regularly, comprehensively and with minimum delay on all main aspects of the Company’s business performance, significant transactions and the current earnings situation including risk position and risk management. This information is provided regularly at the meetings of the Supervisory Board, which are held at least four times a year. In addition, the Supervisory Board is updated regularly and on a monthly basis on the Company’s business performance. The Management Board communicates directly with the Chairman of the Supervisory Board on an ad hoc basis. The annual financial statements, the report by the Supervisory Board and the Company’s management report provide details of the Company’s business performance, joint activities with the Supervisory Board and the decisions made by the Supervisory Board. 

2. Composition of the Management Board and succession planning

For details of the current composition of the Management Board, which currently consists of three members, please refer to the presentation on TAG’s homepage at https://www.tag-ag.com/ueber-die-tag/vorstand/.

The composition of the Management Board is based on the interests of the Company and aims to ensure effective and sustainable management of TAG and the Group. An initial appointment is for a maximum period of three years.

The Supervisory Board and the Management Board ensure long-term succession planning for the Management Board. This is prepared by the Supervisory Board’s Personnel Committee in particular. The requirements of the German Stock Corporation Act, the German Corporate Governance Code and the gender representation targets for the Management Board, further requirements with respect to personal qualities and diversity criteria such as the personal background of the candidates, their expertise, experience and educational and professional background as well as their age and gender and the principles of non-discrimination are taken into account. Accordingly, the Personnel Committee draws up a profile of requirements for the position to be filled as a basis for entering into structured discussions with possible candidates. Subsequently, it submits a recommendation to the Supervisory Board on the further selection procedure or for a resolution. If necessary, the Personnel Committee and the Supervisory Board can be assisted by external consultants in the preparation of job profiles and the selection of candidates.

3. Supervisory Board and Committees

As the senior body within the Company, the Supervisory Board appoints and dismisses the members of the Management Board. It decides on the remuneration system for the members of the Management Board on the basis of a proposal by the Personnel Committee and determines the total annual remuneration, including the variable remuneration components based on the performance of the Company and the remuneration for the individual members of the Management Board.

The Supervisory Board is regularly informed of current business activities and particularly any risks. This information is provided at least four times a year in face-to-face meetings and on the basis of written submissions. Moreover, each member of the Supervisory Board receives a monthly report on the Company’s current business performance. The Chairman of the Supervisory Board and the Management Board liaise on an ongoing basis.

The Supervisory Board has also established committees. The Audit Committee, which regularly oversees the preparation and audit of the annual financial statements and particularly also deals with the risk management system including compliance is of prime importance. The Personnel Committee, which prepares personnel decisions for the Supervisory Board and also performs the tasks of a nomination committee, meets as required. The revision of the Management Board remuneration system in 2020 was first discussed on the Personnel Committee. Both committees prepare the decisions for the entire Supervisory Board in accordance with corresponding rules of conduct.

Under the articles of incorporation, the Supervisory Board has six members, four of whom are elected by the shareholders and two by the employees. In this respect, the law on the one-third participation of employees on supervisory boards applies.

The composition of the Supervisory Board and its committees is as follows:

 

  Supervisory Board Audit Committee Personnel Committee
Rolf Elgeti Chairman Member Chairman
Lothar Lanz Deputy Chairman Chairman Member
Prof. Dr. Kristin Wellner Member Member from 8 September 2020 ./.
Dr. Philipp K. Wagner Member ./. Member
Harald Kintzel (until 22 May 2020, from 21 August 2020) Member Member until 22 May 2020 ./.
Marco Schellenberg (until 22 May 2020) Member ./. ./.
Katja Gehrmann (from 21 August 2020) Member ./. ./.

For more information on the current composition of the Supervisory Board, please refer to the TAG website at https://www.tag-ag.com/en/company/supervisory-board/.

The Supervisory Board believes that all of its members are “independent” within the meaning of recommendation C. 7 of the Code.

Although Mr Elgeti was Chairman of the Management Board of TAG Immobilien AG from 2009 to October 2014, he was elected to the Supervisory Board in November 2014 at the request of the shareholders in a motion that was approved by a majority of the shareholders. However, the Company does not see this as compromising his independence. On the contrary, the fact that he holds the Chairmanship of the Supervisory Board is considered to be beneficial in view of the continuity with which this provides the Company. This decision has proved itself over the last few years, as the Company’s success clearly shows.

The Supervisory Board works on the basis of its rules of procedure, which define the way in which its members work together. These rules of procedure were updated with effect from 8 September 2020 and are available on the Company’s website at https://www.tag-ag.com/en/company/supervisory-board/bylaws.

4. Remuneration

The remuneration of the Supervisory Board was determined in resolutions passed at the annual general meeting of 26 August 2011 and – following the establishment of the Supervisory Board committees – at the annual general meetings of 14 June 2023 and 19 June 2015. Currently, the members of the Supervisory Board receive annual remuneration of EUR 20,000.00, the Deputy Chairman of the Supervisory Board, Mr Lothar Lanz, receives 1 ½ times this amount as well as EUR 75,000.00 for his Chairmanship of the Audit Committee, meaning that he receives a total of EUR 105,000.00 per year. The Chairman of the Supervisory Board, Mr Rolf Elgeti, receives annual remuneration of EUR 175,000.00.

5. Profile of skills, diversity and age limit

In accordance with recommendation C .1 of the 2020 Code (formerly 5.4.1 of the 2017 Code), the Supervisory Board has defined the following profile of skills and specific objectives for the entire Board. Potential conflicts of interest are taken into account, while ensuring diversity, particularly in terms of age, gender and educational and professional background:

  • Each member of the Supervisory Board should possess the knowledge, skills and professional experience required for the proper exercise of their duties and should be sufficiently independent. Each member of the Supervisory Board ensures that they have enough time to fulfil the duties of their mandate. Members of the Supervisory Board should not hold office beyond the end of the annual general meeting that follows their 75th birthday.
  • No more than two former members of the Company’s Management Board may sit on the Supervisory Board. The Supervisory Board should have at least two members who it considers to be independent. In particular, a member of the Supervisory Board is not considered to be independent if they are in a personal or business relationship with the Company, its corporate governance bodies or a controlling shareholder or a company affiliated with the latter that may constitute a significant and not merely temporary conflict of interest.
  • Members of the Management Board may not sit on the Company’s Supervisory Board until two years have passed since the end of their Management Board term, unless shareholders who hold more than 25% of the voting rights in the Company propose their appointment. In such a case, the move to the Supervisory Board should be an exception and the reasons submitted to the shareholders at the Annual General Meeting.

Overall, the members of the Supervisory Board are expected to possess specialist knowledge and experience in the German real estate market, the capital market and other business activities pursued in the TAG Group besides the already presupposed knowledge, skills and professional qualities as well as the accounting and auditing skills stipulated in Section 100 Paragraph 5 of the German Stock Corporation Act.

In addition, the Supervisory Board has specified a “competence profile” relevant to its composition and will take the following skills into account in the composition and selection of future candidates as follows:

Financial competence Real-estate competence Supervisory competence
Accounting Professional qualification Industry experience
Financial indicators Industry/product expertise Risk management
Liquidity planning M & A experience Compliance
Auditing Strategic management Corporate governance

At this time, the members of the Supervisory Board fulfil these criteria and also cover these competences.

Regardless of the statutory requirement that came into force in 2015 to strengthen the proportion of women in leadership positions, care had already been taken to ensure an equitable representation of women in the entire Group in the past few years. The Supervisory Board has defined a minimum gender representation quota of 33% for the Management Board, which has been met for many years. The Supervisory Board has been and continues to be committed to increasing the representation of women among its number and strives for a balanced gender quota. Against the background of new legislative initiatives, it set a minimum gender representation target of 30% for the entire Supervisory Board at its meeting of 15 March 2021. Currently, this target is being met or exceeded. The proportion of women on the Supervisory Board is 33% in relation to the entire Supervisory Board.

Overall, the gender ratio at TAG can be considered balanced. In the first and second management tiers of the Group, for which the Management Board has stipulated a quota of at least 40%, the proportion of women is around 48%, and in the Group as a whole it is around 50% as of 31 December 2020.

6. Self-assessment

The Supervisory Board regularly carries out a self-assessment of the effectiveness and efficiency of its work in accordance with recommendation D. 13 of the 2020 Code. This can also be done on an ad hoc basis. The self-assessment is carried out either in the form of a survey of the individual members by the Chairman of the Supervisory Board prior to a meeting or by means of self-assessment forms, which the members of the Supervisory Board complete prior to the meetings. In particular, the members of the Supervisory Board comment on its organisation, the provision of information, the activities, selection and composition of the Supervisory Board and the provision of information to shareholders and third parties. The results of the survey are then analysed and evaluated in a subsequent meeting. External consultants have so far not been involved in this process.

The last self-assessment was completed in February 2020.

7. Diversity policy

TAG has not prepared a separate formal diversity policy within the meaning of Section 289 f (2) No. 6 of the German Commercial Code for the Company’s Supervisory Board and Management Board (Section 289 f (5) of the German Commercial Code). It considers the internal rules on the equal participation of women and men in management positions as well as the diversity criteria mentioned in items 2 and 5 to be sufficient. In addition, as described in Section 3 of this declaration, the Supervisory Board has drawn up the objectives and requirements as well as the skills that are decisive for the election of the members of the Supervisory Board and will take these into account when selecting new candidates to ensure that the required areas of competence are covered and the personal qualities sought are available. The Management Board and Supervisory Board consider themselves to be diverse and appropriately staffed in terms of qualifications and skills.

8. Reportable securities transactions

The members of the Supervisory Board and the Management Board as well as parties closely related to them are obliged to notify the Company without delay of any transactions in shares or securities issued by TAG Immobilien AG or financial instruments relating to them, so that the Company can publish these on a corresponding financial portal within the statutory deadlines (“Directors’ Dealings”). With the exception of the award of shares under the long-term remuneration for the three members of the Management Board, there were no reportable securities transactions in 2020. The total number of shares in TAG Immobilien AG held by members of the Management Board and Supervisory Board amounted to less than 1% of the total shares issued by the company as of 31 December 2020.

9. D&O insurance

TAG has taken out directors and officers liability insurance (“D&O insurance”) for the members of the Management Board and the Supervisory Board. This insurance provides for a deductible of at least 10% of the claim capped at an amount equalling at least one and a half times the fixed annual remuneration of the member concerned of the Management Board or Supervisory Board. The obligation to include a deductible for the members of the Management Board is stipulated in Section 93 (2) of the German Stock Corporation Act. The Supervisory Board of TAG has decided to continue applying the recommendation in the 2017 Code (Section 3.8) to provide for a corresponding deductible despite the fact that the 2020 Code no longer contains this recommendation.

10. Remuneration report and disclosure

The remuneration report for the Management Board is included in the Annual Report/Management Report 2020 and is available at https://www.tag-ag.com/en/investor-relations/financial-statements/annual-reports.

General information on TAG’s financial reporting as well as further details of corporate governance and current corporate announcements can be found in the corporate governance section of the Company’s website (https://www.tag-ag.com/en/investor-relations).

Hamburg, March 2021

Supervisory Board and Management Board of
TAG Immobilien AG