Statement of compliance by the management and supervisory board of Borussia Dortmung GmbH & Co. KGaA according to § 161 AktG
The management of the general partner (Borussia Dortmund Geschäftsführungs-GmbH) and the Supervisory Board of Borussia Dortmund GmbH & Co. KGaA hereby state in accordance with § 161 AktG, that since the last Statement of Compliance issued in December 2005, Borussia Dortmund GmbH & Co. KGaA has been in compliance with the recommendations of the German Corporate Governance Code (the 'Code') in the version dated 12 June 2006 and that the Code's recommendations will be complied with in the future; excepted herefrom are the following deviations which in part are due to organisation distinctions specific to the legal form of the KGaA and their expression in the Articles of Association:
As to Section 3.8 sentence 3: The D&O insurance does not provide for any deductible. Based on our understanding, such an agreement would not be suitable as an incentive, nor would it strengthen the sense of responsibility with which members of corporate bodies conduct their duties and functions.
As to Section 4.2.1 sentence 2: The Supervisory Board of Borussia Dortmund GmbH & Co. KGaA has no authority with respect to personnel matters; this is the purview of the Executive Committee of Borussia Dortmund Geschäftsführungs-GmbH, whose management Consisted of two managing directors - Hans Joachim Watzke (CEO and chairman of the management board) and Thomas Treß (CFO) - since January 2006, The division of responsibilities and the co-operation of the managing directors are regulated by means of contracts of employment. Therefore the Executive Committee of Borussia Dortmund Geschäftsführungs-GmbH renounced to establish separate rules of procedure.
As to Sections 4.2.2, 4.2.3, 4.2.5 and Section 7.1.3: Section 7 of our Company's Articles of Association provides that the general partner is entitled to reimbursement of personnel and property costs incurred in connection with managing the Company, plus compensation equivalent to 3% of any otherwise accruing annual net income for the year of the Company. Compensation and the compensation system for managing directors of Borussia Dortmund Geschäftsführungs-GmbH are otherwise determined by its Executive Committee (deviation from Section 4.2.2 sentence 1) . Compensation consisting of components that are long-term or risk based in nature, such as stock options for managing directors, was not and is not being provided and thus no further information or explanations primarily targeted thereto was or will be made. (Deviation from Section 4.2.3 sentences 6 until 9, Section 4.2.5. sentences 2 and 3 and Section 7.1.3).
As to Section 4.3.4 sentence 3: Material transactions between the general partner and certain related parties on the one hand, and the Company on the other, within the meaning of §§ 89, 112 in conjunction with § 278 (3), 283 No. 5 AktG (e.g., loans) require the involvement of the Supervisory Board. In this respect, the recommendation was and is being followed. In addition, the Supervisory Board is not authorised to adopt a list of transactions requiring its consent for the general partner or its managing directors.
As to Section 4.3.5: Because the Supervisory Board lacks authority in matters involving personnel, the Advisory Board at Borussia Dortmund Geschäftsführungs-GmbH is responsible for approving any side activities of the managing directors of the general partner. As such, the recommendation was and is being followed mutatis mutandis.
As to Section 5.1.2 sentences 2, 5 and 6: These Code recommendations directed toward the Supervisory Board of stock corporations are at most applicable by analogy to our Company, whose Supervisory Board does not have any authority with respect to personnel matters. The managing directors and the Executive Committee at Borussia Dortmund Geschäftsführungs-GmbH are responsible for ensuring successors over the long term (in accordance with Section 5.1.2 sentence 2). The Executive Committee has and will have in the future the discretion to decide in the case of pending (re)appointments of managing directors on the age limit for managing directors of the general partner without this generally needing to be stipulated (in deviation from Section 5.1.2 sentence 6).
As to Section 5.2 sentence 2, 5.3.1 sentence 1 and 5.3.2: Owing to its size the supervisory board does not form committees. The supervisory board is and will be in the future responsible for the handling of all company issues.
As to Section 5.4.1 sentence 2: There has been no set age limit for Supervisory Board members to date, nor will there be any in the future. The Supervisory Board feels that such a limitation is not justified as against other criteria for proposed candidates for the election of Supervisory Board members.
As to Section 5.4.3 sentence 3: Proposals for candidates for the chair of the Supervisory Board have not been made public in the past, nor will they be made public in the future, because the Supervisory Board feels that the individual election of its members already conducted is sufficient and does not feel that a vote in the General Shareholders' Meeting for or against a given candidate is practicable in view of its position on the Supervisory Board.
As to Section 5.4.7 sentences 3, 4, 6: Pursuant to § 13 Section 1 of the Articles of Association, the members of the Supervisory Board receive only a comparatively low annual fixed compensation of EUR 7,000; the chairman receives twice this amount and the deputy chairman receives one and a half times this amount. It was and is considered sufficient to provide the information on the Supervisory Board's compensation only as an aggregate figure in the notes to the consolidated financial statements.
As to Section 5.5.3 sentence 1: The recommendation that the Supervisory Board inform the General Shareholders' Meeting in its report of any conflicts of interest that may arise and how these are handled is not being followed. The principle of confidentiality of discussions within the Supervisory Board (see, § 116 sentence 2 AktG and Section 3.5 of the Code) is accorded priority over this.
As to Section 7.1.2 sentence 3: The annual financial statements for the reporting period of 2005/2006 were published with a slight delay on 16 October 2006. The interim financial statements were and will be published within a reasonable period, which in the individual case may exceed 45 days after the end of the reporting period.
Dortmund, November 2006