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METRO GROUP : ANNUAL REPORT 2011 : BUSINESS → GROUP MANAGEMENT REPORT : 11. Risk REPORT Control of Media-Saturn-Holding GmbH MeTRo aG indirectly – through its subsidiary MeTRo Kaufhaus und Fachmarkt Holding GmbH – holds 75.41 percent of the shares in Media-saturn-Holding GmbH. pursuant to IFRs (International Financial Reporting standards), the power to influence the financial or business decisions of an entity and/or the extent of this influence determines the way in which a holding company is included in the consolidated financial statements. In the process, Ias 27 (Consolidated and separate Financial statements) draws on the control criterion as a concept of possible domination. This means that the “power to govern the financial and operating policies of an entity so as to obtain benefits from its activities” (Ias 27.4) suffices to evidence control. In addition, according to Ias 27.13, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than 50 percent of the voting power of an entity unless in exceptional circumstances it can clearly be demonstrated that such ownership does not constitute control. In case of doubt, therefore, control can be assumed. Under the definition of Ias 27.4, the question of whether an entity controls another must consider not only these legal criteria, but also the economic relationship to a holding company. The key factor is the consideration of all rights, facts and relationships that determine a partnership. Based on the holistic treatment required under Ias 27 and in consideration of the relationship with Media-saturn- Holding GmbH, the Management Board of MeTRo aG assumes the existence of control. This assumption includes the possibility that the advisory board may take decisions with a simple majority in number. In spring 2011, MeTRo aG initiated measures to strengthen the governance structures at Media-saturn-Holding GmbH. With the creation of an advisory board, a simple majority is to apply to certain authorisation requirements, including the approval of the budget. In the past, these authorisations required an 80 percent majority in the shareholders’ general meeting. a non-controlling shareholder of Media-saturn- Holding GmbH has initiated an action to rescind the shareholders’ decision to create an advisory board. This lawsuit was dismissed by the district court of Ingolstadt in its ruling of 11 october 2011. as such, the court agreed that the advisory board had been created in a lawful manner. as part of a separate action for a declaratory judgement that → p. 163 was initiated by the same non-controlling shareholder, the district court ruled that the advisory board should take its decisions with an 80 percent majority for matters requiring authorisation. MeTRo aG’s legal opinion is that these matters should be decided by simple majority in number. MeTRo aG has appealed this decision through its subsid iary MeTRo Kaufhaus und Fachmarkt Holding GmbH and is confident that it will prevail. In addition, MeTRo Kaufhaus und Fachmarkt Holding GmbH submitted an arbitration action by written application of 28 March 2011 with the aim of having the ad - visory board of Media-saturn-Holding GmbH declared the body responsible for transactions requiring approval and of enabling it to take decisions in these areas by simple majority. The Management Board of MeTRo aG also expects a decision in favour of the simple majority in number in the case of the arbitration action. according to the articles of association of Media-saturn-Holding GmbH, MeTRo aG has the right to delegate one more member to the advisory board than the collective body of shareholders and therefore has a majority by number on the advisory board. If, contrary to expectations, this legal action should lead to a legal decision that would put MeTRo aG at a disadvantage – that is, the decision to block the advisory board from taking certain decisions requiring authorisation with a simple majority – this could make it necessary for the Group to deconsolidate the Media-saturn group of compan ies, unless the Group’s sustained ability to exercise control could be assumed also in that case. The deconsolidation would be a non-cash transaction. However, as a result of the first-time recog nition of the Media-saturn shareholdings at their fair value, it would have a significant positive effect on earnings in the year of deconsolidation. The assets and liabilities of the partnership with the Media-saturn group of companies would no longer be shown separately, but in a single balance sheet line as an investment book value recognised at equity. The result of the “at equity” investment would then also be shown in a single line in the income statement, which means that the profit or loss contributions would no longer be shown in individual items of the income statements, such as sales, selling expenses or general administrative expenses. This changed inclusion of the Media-saturn Group could affect the Group’s financial results and its rating. a rating downgrade would be expected to have a negative impact on earnings before taxes in the mid-double-digit millions based on the Group’s refinancing structure in 2011.
METRO GROUP : ANNUAL REPORT 2011 : BUSINESS → GROUP MANAGEMENT REPORT : 11. Risk REPORT MeTRo GRoUp’s segment report on pages 184 to 185 provides an overview of the assets, liabilities and profit or loss contributions of the Media-saturn group of companies. MeTRo GRoUp’s ability to collect dividends or income from its shareholding in the Media-saturn Group, in particular, would remain unaffected by the procedures applied to include the Media-saturn group of companies in the consolidated financial statements. additional information on legal issues is included in the notes to the consolidated financial statements in no. 45 “other legal issues”. Compliance risks The activities of MeTRo GRoUp are subject to various legal stipulations and self-imposed standards of conduct. In 2007, MeTRo GRoUp bundled and complemented existing compliance measures in its uniform Group-wide compliance programme. since then, a Group-wide compliance organisation has been established, developed and refined to meet both increased legal requirements in the various relevant jurisdictions and public expectations. MeTRo GRoUp’s compliance system aims to sustainably prevent regulatory infringements within the Company or at least hinder such infringements. MeTRo GRoUp regularly iden- tif ies behavioural corporate risks, establishing the necessary organisational structures and rigorously monitoring and controlling these risks through the responsible departments. The responsible management teams and all employees at the management companies of MeTRo GRoUp’s sales divisions and the national subsidiaries can draw on the support and advice of Compliance officers. MeTRo GRoUp’s Chief Compliance officer reports directly to the Chairman of the Management Board of MeTRo aG, Mr olaf Koch. To rigorously monitor behavioural risks, MeTRo aG has, in particular, assigned clear responsibilities for areas of risk, introduced or adapted clear standards of conduct and developed and provided sensible risk management and control processes. added to this are training courses, systematic and understandable communications and the transparent handling of compliance risks and their monitoring. In addition, MeTRo GRoUp employees have access → p. 164 to a professional reporting system which enables them to notify the Company of compliance violations and potential violations in all Group languages. Where necessary, incidents may be reported anonymously. The compliance organisation ensures that all reported cases are investigated in an appropriate fashion. Reaching back to 2007, MeTRo GRoUp’s business principles continue to represent the core component of the Group’s compliance initiatives and have been anchored throughout the Group through ongoing training programmes, in particular. essential elements of the compliance programme include the standards of conduct and guidelines on antitrust law as well as the anti-corruption guideline for dealings with public officials and private business partners, which was rolled out across the Group during the reporting year. Training courses designed for managers and employees, the creation and review of internal controls as well as the continued integration of compliance requirements in operating business processes are directly related to the compliance initiatives. Financial risks The financial department of MeTRo aG manages the financial risks of MeTRo GRoUp. Financial risks include the risk of price changes (interest rate risks, currency risks, share price risks), liquidity risks, creditworthiness risks and risks arising from cash flow fluctuations. These risks and their management are described in the notes to the consolidated financial statements in no. 42 “Management of financial risks”. Presentation of the opportunity situation The supplementary and Forecast Report on pages 166 to 174 describes the opportunities we expect to arise over the next few years. Overall assessment of the risk situation by the Company’s management The Management Board, the supervisory Board and other important bodies of MeTRo aG are regularly informed about the Company’s risk situation. overall, the risk-and-opportunities profile of MeTRo GRoUp has deteriorated slightly compared to the previous year, which is largely due to economic parameters.
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