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Declaration on Corporate Governance

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Declaration on Corporate Governance pursuant to Section 289a German Commercial Code (HGB) with Corporate Governance Report

The Management Board and Supervisory Board report below inter alia on corporate governance, the working methodology of the Management Board and Supervisory Board and the practical aspects of corporate management of Delticom AG. The report includes the declaration of compliance with the German Corporate Governance Code in accordance with Section 161 of the German Stock Corporation Law (AktG). The declaration on corporate governance is accessible to the public on Delticom’s website in the "Corporate Governance“ section, sub-section "Company Governance“ (www.Delti.com/CG). Equivalent statements have been waived in the management report in accordance with Section 289 paragraph 1 sentence 2 HGB in order to avoid repetition. The management report simply makes a reference to the above-mentioned website in accordance with Section 289 paragraph 1 sentence 3 HGB.

Declaration of Compliance with German Corporate Governance Code

Delticom AG implements the great majority of the recommendations of the German Corporate Governance Code. Deviations from the recommendations and our justifications for these are explicitly stated in this report, citing the relevant recommendation numbers. The Declaration of Compliance applicable on the balance sheet date of 18.03.2011 is published on www.Delti.com/CG and its text reads as follows:

"1. Since issuing the last declaration of compliance on 19.03.2010, Delticom AG complied by 02.07.2010 with the recommendations of the German Corporate Governance Code in the version of 18.06.2009, published in the official section of the online Federal Gazette (Bundesanzeiger) on 05.08.2009, with the following exceptions: Recommendation 2.3.2 of the Code, on emailing the convening notice for the Annual General Meeting together with the convening documentation to all German and foreign financial service providers, shareholders and shareholder associations, if the approval requirements are met, was not complied with. Emailing is only permitted under Section 30b paragraph 3 no. 1 a) of the German Securities Trading Law (WpHG) if the Annual General Meeting has given its approval. This is not the case. Furthermore, we consider that publishing the invitation to the Annual General Meeting in the online Federal Gazette, giving notification of convening in accordance with Section 125 paragraphs 1 and 2 AktG and making the relevant documentation available on the homepage is sufficient.

Recommendation 3.8 of the Code, to the effect that Supervisory Board members should agree an excess for D&O insurance, was not complied with. We believe that the commitment and responsibility shown by the members of the Supervisory Board in performing their duties will not be improved by agreeing an excess.

Recommendation 5.3 of the Code, on creating committees in the Supervisory Board regardless of specific circumstances, was not complied with. In our view, it is not reasonable to create committees for a Supervisory Board containing three members.

Recommendation 5.4.6 of the Code, on providing for a performance component in the Supervisory Board compensation, was not complied with. Given the Supervisory Board’s control function, we do not consider a variable fee either expedient or appropriate. In addition, the articles of incorporation limit the total compensation of the Supervisory Board to EUR 50,000. This does not give any leeway for variable components. We are therefore retaining the conventional fixed compensation.

2. Delticom AG has complied with the recommendations of the German Corporate Governance Code in the version of 26.05.2010, published in the official section of the online Federal Gazette on 02.07.2010, from 02.07.2010 with the exceptions stated in Item 1 regarding Recommendations 2.3.2, 3.8, 5.3 and 5.4.6 as well as the following exceptions to the nine recommendations:

Recommendation 5.1.2 sentence 2 of the Code, to take diversity into account when appointing Management Board members, and in particular to aim for an appropriate consideration of women, has not been and will not be complied with. Since this recommendation was introduced, there have been no changes in the composition of the Management Board to which this criterion would apply. We believe that the composition of the Management Board should continue to focus solely on competence, qualifications and availability, and in any event the nature of the industry means that the number of eligible women is low and locating suitable candidates would incur disproportionate expenditure.

Recommendation 5.4.1 of the Code was not complied with. When appointing members, the Supervisory Board is concerned solely with the competence and qualifications of the candidates. We believe this to be in the best interests of Delticom AG. Accordingly, the Supervisory Board has no concrete targets for the composition of the Supervisory Board in accordance with Recommendation 5.4.1 paragraph 2 of the Code.

3. Delticom AG will comply with the recommendations of the German Corporate Governance Code in the version of 26.05.2010, published in the official section of the online Federal Gazette on 02.07.2010, from today’s date, with the exceptions stated under Items 1 and 2 regarding Recommendations 2.3.2, 3.8, 5.1.2, 5.3, 5.4.1 and 5.4.6, for the reasons given.“

Hanover, 18 March 2011

Management Board

Supervisory Board

Corporate Governance Report

Information required under Section 289a paragraph 2 no. 2 HGB: relevant information on practical aspects of corporate management implemented over and above the statutory requirements

Corporate success relies on creative and motivated employees. We therefore allow our employees space in their everyday work and give them responsibilities. All employees are encouraged to continuously improve existing processes in terms of costs, quality, efficiency and scalability. It is the responsibility of each individual to develop processes and systems further.

Information required under Section 289a paragraph 2 no. 3 HGB: Description of the working methodology of the Management Board and Supervisory Board

As a German joint stock corporation, Delticom AG operates a dual management system with a Supervisory Board and a Management Board. The Boards‘ common goal is to achieve a sustainable appreciation of corporate value.

The Supervisory Board appoints, supervises and advises the Management Board, and is directly involved in decisions of fundamental significance for the company. It deals with the quarterly and semi-annual reports, prepares the annual financial statements of Delticom AG and approves the consolidated financial statements, taking into account the auditor’s audit reports. As part of its supervisory and advisory function, the Supervisory Board also works closely with the Management Board outside the scope of its meetings. In the context of strategic valuation of the company, risk management and reporting, the Management Board communicates with the whole of the Supervisory Board.

The Supervisory Board has drawn up its own rules of procedure. These define the duties, obligations and internal arrangements of the Supervisory Board and include among other things provisions concerning the non-disclosure requirement.

Recommendation 5.3 of the Code, to create committees in the Supervisory Board regardless of specific circumstances, is not currently being complied with. In our view, it is not reasonable to create committees for a Supervisory Board containing three members. The audit measures required in Recommendation 5.3.2 of the Code have been assigned to Supervisory Board member Mr Thöne-Flöge; he has been appointed as an independent financial expert within the meaning of Section 100 paragraph 5 AktG. The Supervisory Board checks the efficiency of his work at regular intervals. No conflicts of interests arose during the last fiscal year.

The Supervisory Board comprises the following members:

NameFunctionOccupationLocationStart dateExpiry
Andreas PrüferChairmanFormer Management Board member, managing director Prüfer GmbHHanover06.05.2008AGM 2016
Michael Thöne-FlögeDeputy ChairmanManaging director Becker & Flöge GmbHPeine06.05.2008AGM 2016
Alan RevieMemberAdvisory Board member at Axle Group Holdings LimitedHamilton, UK30.08.2006AGM 2016

The Management Board manages the company in accordance with the provisions of the AktG, the articles of incorporation and its rules of procedure and business allocation plan. The Management Board develops the company’s strategy, which it coordinates with the Supervisory Board and subsequently implements. It informs the Supervisory Board regularly, promptly and comprehensively about all relevant questions relating to planning, business development, risk position, risk management and compliance with codes of conduct, laws and guidelines.

The rules of procedure establish among other things the information and reporting obligations of the Management Board and reserves consent to the Supervisory Board for fundamentally important transactions. Notwithstanding their overall responsibility, the Boards have clearly defined and delineated task areas as a result of the business allocation plan, for which they are individually responsible. Along with regular Management Board meetings, there is a constant exchange of information between Management Board members.

The Management Board of Delticom AG comprises the following three members.

NameFunctionMandate start dateMandate expiry date
Rainer BinderCEO08.09.200431.12.2012
Philip von GrolmanLogistics, North Amerika09.08.200708.08.2012
Frank SchuhardtCFO09.08.200708.08.2012

Compensation report

The Supervisory Board is responsible for determining the structure of the compensation system as well as the compensation of the individual members of the Management Board. It reviews the appropriateness of the compensation system on a regular basis. The main criteria for assessing the appropriateness of compensation are the tasks and services performed by the individual Management Board member and the company‘s success and sustainable development. The Management Board’s compensation is made up of non-performance-related and performance-related components and – in the case of Management Board member Frank Schuhardt – a variable component with a long-term incentive. The non-performance-related compensation consists mainly of the annual base salary, which is paid in equal monthly installments. Mr von Grolman also has use of a company car taxed by the company. The performance-related components for all the members of the Management Board are based on the operating results of Delticom AG and are paid in the form of an annual bonus. Mr Schuhardt’s performance-related compensation also includes dividend-related components.

non-performance related compensationperformance-related compensationlong-term incentive
in € thousands201120102011201020112010
Rainer Binder30035027223900
Philip von Grolman12712813611900
Frank Schuhardt 210210136362048

Management Board member Frank Schuhardt was allowed to participate in a stock option program as a variable component with a long-term incentive.

The Supervisory Board has just developed a new system for compensating the members of the Management Board in accordance with the requirements of the Law on the Appropriateness of Director Compensation of 31.07.2009. It intends to finalize this shortly and present it to the Ordinary Annual General Meeting 2012 for approval pursuant to Section 120 paragraph 4 AktG.

Stock options held by Management Board member Frank Schuhardt

4th tranche3th tranche2th tranche1th tranche
Date of issuance30.03.200925.11.20088.05.200822.11.2007
Term10 years10 years10 years10 years
Blackout period2 years2 years2 years2 years
Exercise price12,88 €12,23 €13,19 €19,81 €
Number of options issued15.00037.50037.50015.810
Number of exercised options issued08.00000
Number of expired options issued0000
Outstanding on 31.12.201115.00029.50037.50015.810
Exercisable on 12.201115.00029.50037.50015.810

Valuation parameters of stock options held by Management Board member Frank Schuhardt

4th tranche3th tranche2th tranche1th tranche
Fair value per option on the date granted3,18 €3,27 €3,75 € 6,47 €
Total fair value of the options on the date granted47.700,00 €122.500,00 €140.750,00 €102.291,00 €
Expenses from the stock option program to be taken into account in fiscal year 201123.856,00 €56.148,00 €23.513,00 €0,00 €
Expected time to maturity of issued stock options3,36 Jahre3,70 Jahre4,25 Jahre4,71 Jahre
Expected average annual dividend yield per share5,00 %5,00 %5,00 %3,00 %
Risk-free interest rate1,80 %2,57 %4,31 %3,90 %
Stock price at issue date13,63 €12,83 €13,41 € 19,65 €
Exercise price12,88 €12,23 €13,19 €19,81 €
Expected volatility42,00 %44,00 %45,00 %45,00 %

The members of the Management Board do not perform any secondary professional activities. No loans were given or advances granted on salary to the Management Board or the members of the Supervisory Board. The current members of the Management Board did not receive any individual pension commitments.

The total compensation for the Supervisory Board amounts to EUR 50,000 in accordance with Article 12 of the articles of incorporation. Of this, Chairman Andreas Prüfer receives EUR 35,000, Deputy Chairman Michael Thöne-Flöge EUR 10,000 and member Alan Revie EUR 5,000.

Stock option programs

    1. 2006 stock option program

    Delticom’s Annual General Meeting of 30.08.2006 authorized the Management Board, or the Supervisory Board in place of the Management Board, to the extent that options are granted to members of the Management Board, to grant options on a total of up to 100,000 new, no par registered shares of the company to members of the company’s Management Board and to employees of the company on one or more occasions up until 29.08.2011 in accordance with the criteria determined by the Annual General Meeting.

    Out of the options to purchase a total of up to 100,000 shares, options to purchase a total of up to 50,000 shares could be issued to members of the company’s Management Board (Group A) and a total of up to 50,000 shares to employees of the company (Group B).

    Only Group A exercised these options. On 09.08.2007, the Supervisory Board agreed the terms and conditions of the stock option plan for members of the Management Board of Delticom AG. These were as follows (the number of stock options quoted is at the level prior to the capital increase from company funds approved on 19.05.2009, which increased the number of stock options proportionately):

    Under the stock option program, a maximum of 50,000 stock options are issued to members of the company’s Management Board ("Allottees"). The Allottees must have a current employment contract with the company at the time the stock options are granted. No stock options accrue to shareholders.

    The Supervisory Board determines the individual Allottees and the number of stock options. It also decides on the annual tranches and the volume of stock options to be issued to the members of the Management Board. No tranche may contain more than 12,500 stock options.

    The maximum term of each stock option is 10 years from the date of creation of the stock option by the Supervisory Board resolution accepting the offer to grant the Allottee the stock option ("Issue Date"). The Issue Date must be within the 60-day period after publication of the final quarterly report for the third quarter or the final annual results of the company. The stock options expire without compensation at the end of the term.

    Each stock option entitles the Allottee to purchase one no par registered share of the company based on the exercise price stated in the stock option terms and conditions.

    Allottees may exercise their stock options at the earliest after a two-year waiting period from the date of issue. Furthermore, stock options may only be exercised during a period of six weeks after publication of the final quarterly results or the final results for the company’s previous fiscal year ("Exercise Periods").

    In addition, exercise is not permitted during the following blackout periods:

    • within two weeks before the end of the company’s fiscal year and
    • between the date on which the company publishes an offer to its shareholders to purchase new stocks or bonds with conversion rights or warrants in the online Federal Gazette, and the date on which the company’s shares are quoted for the first time "ex-rights" on the Frankfurt Stock Exchange.

    Before a stock option can be exercised, the unweighted average of the closing prices of the company share must be at least 120% of the exercise price on the five stock exchange trading days before the first day of the Exercise Period in which the stock option is exercised. Provided this requirement for a specific Exercise Period is fulfilled, exercise during this exercise period is permitted regardless of the further price movement of the company’s share ("Performance Target"). Subsequent modification of the Performance Target is prohibited.

    The exercise price payable when exercising a stock option corresponds to the unweighted average of the closing prices of the company’s share on the five stock exchange trading days before the issue date of the stock option ("Exercise Price").

    The "Closing Price" in relation to each individual stock exchange trading day, is the closing price determined in XETRA trading (or a successor system) of the Frankfurt Stock Exchange in the closing auction or, if such closing price is not determined on the relevant trading day, the last price of the company’s share determined in ongoing XETRA trading (or a successor system) on the Frankfurt Stock Exchange. In any event, at least the lowest issue price within the meaning Section 9 paragraph 1 AktG must be paid as the exercise price.

    The enabling provision for the 2006 stock option program expired on 29.08.2011, preventing the issue of further options from this program. However, options issued on the basis of this program were still outstanding on the balance sheet date. Under the 2006 stock option program, a total of 105,810 options were issued exclusively to Management Board member Frank Schuhardt in four tranches, of which 97,810 had not yet been exercised on the balance sheet date, but were exercisable. By subscription declaration of 03.05.2011, Mr Schuhardt exercised a total of 8,000 options, which entitled him to purchase 8,000 new, no par registered shares of the company. For further details on these options, please refer to the above compensation report.

    2. 2011 stock option program

    To ensure that the Management Board can continue using this instrument to motivate Management Board members and employees of the company in future and bind them to the company long-term, the Management Board or the Supervisory Board in place of the Management Board, to the extent that options are granted to members of the Management Board, was authorized by resolution of the Annual General Meeting of 03.05.2011 to grant options on a total of up to 300,000 new, no par registered shares of the company to members of the company’s Management Board and to employees of the company on one or more occasions up until 02.05.2016 in accordance with the criteria determined by the Annual General Meeting. These criteria are basically identical to those of the 2006 stock option program. In order to grant new stock to the holders of options, the company’s share capital was conditionally increased by up to EUR 300,000 (contingent capital I/2011). The contingent capital I/2011 was entered into the Commercial Register on 10.06.2011. No use has yet been made of this enabling provision.

Shareholders and Annual General Meeting

Shareholders may exercise their rights and vote at the Annual General Meeting. Each share gives entitlement to one vote. There are no multiple voting shares, preferential voting shares or maximum voting shares.

The Management Board presents the annual financial statements and the consolidated financial statements to the Annual General Meeting. The Annual General Meeting determines the use of the net profit and discharges the Management Board and the Supervisory Board. The Annual General Meeting also votes on changes to the company’s articles of incorporation and elects the members of the Supervisory Board and the auditor. In the reporting year, the Annual General Meeting voted on authorization to purchase treasury stock.

Shareholders may exercise their vote at the Annual General Meeting themselves or exercise it through an authorized representative of their choice or a proxy appointed by the company and bound by instruction. The Management Board publishes the reports and documentation required by law for the Annual General Meeting, including the annual report, which is easily accessible on the company’s website, along with the agenda.

Transparency

Delticom operates a policy of transparent and prompt information to shareholders, financial analysts, media and interested members of the public as regards the position of the company and any key business changes in the company.

Delticom immediately publishes insider information that directly concerns the company, including outside the scope of regular reporting. Information on mandatorily notifiable securities transactions of members of the Management Board and the Supervisory Board for fiscal year 2011 is included in the "Annual Document“ prepared in accordance with Section 10 of the German Securities Prospectus Act (WpPG). This document also contains the other publications (including ad hoc announcements) in line with capital market regulations released by Delticom in the fiscal year.

The following table shows the shares held by members of the Supervisory Board and Management Board of Delticom AG (as of 31 December 2011):

NameHolderNumberPercentage
Rainer BinderBinder GmbH3.137.05826,48 %
Dr. Andreas PrüferPrüfer GmbH3.429.76928,95 %
Philip von Grolmanpersönlich287.9012,43 %
Alan Reviepersönlich150.0001,27 %
Frank Schuhardtpersönlich11.8700,10 %
Michael Thöne-Flögepersönlich00 %

Accounts and Auditing

Since fiscal year 2004, accounts have been rendered in accordance with International Financial Reporting Standards (IFRS) and in the separate financial statements in accordance with national regulations (HGB). Reporting complies with the statutory and stock exchange obligations, and annual financial statements and quarterly interim reports are produced. The consolidated financial statements are prepared by the Management Board and audited by the auditor and the Supervisory Board.

Relationships with shareholders classified as related parties within the meaning of the applicable accounting regulations are explained in the consolidated notes.

The assigned auditors have their independence certified in writing. It is agreed with Delticom’s auditor that the Chairman of the Supervisory Board will be informed immediately of any potential grounds for exclusion or bias that might arise during the audit. The Chairman of the Supervisory Board is responsible for commissioning the annual auditor on behalf of the Supervisory Board, whereby the annual auditor is selected prior to the Annual General Meeting.

The auditor advises the Supervisory Board on the annual and consolidated financial statements and reports to the Supervisory Board on the results of the audit of the annual financial statements and the management report of Delticom AG, as well as the consolidated financial statements and consolidated management report of the Delticom Group.

Hanover, 8 March 2012
Rainer Binder, Chairman of the Management Board
Philip von Grolman, member of the Management Board
Frank Schuhardt, member of the Management Board

Hanover, 8 March 2012
Andreas Prüfer, Chairman of the Supervisory Board



Delticom AG
Brühlstr. 11
30169 Hannover
Deutschland


URL: http://www.delti.com
E-Mail: ir@delti.com