The global recession and the slump in the international aviation market presented MTU Aero Engines Holding AG with considerable challenges in the past financial year. However, thanks to the extraordinary commitment of its employees and the Board of Management, the company was successful in meeting these challenges, as the Annual Report 2009 clearly documents.
The Supervisory Board regularly advised the Board of Management on the running of the company, oversaw its work, and continually followed business developments and the situation of MTU. The Supervisory Board was informed and consulted in a direct and timely manner regarding all decisions of consequence for the company. The Board of Management briefed the Supervisory Board in a regular, timely and comprehensive manner on the situation of the company and important business transactions. The Supervisory Board further received monthly written reports on the company’s earnings, financial situation, and net asset position. Any deviations from the planned business performance were discussed in detail with the Supervisory Board.
In strategy meetings with the Board of Management, the Supervisory Board discussed all relevant planning issues and, after careful deliberation and examination, endorsed the outlined strategic orientation of the company. All business activities requiring the approval of the Supervisory Board under the provisions of the law, the company’s articles of association, or the Board of Management’s rules of procedure were closely examined, discussed with the Board of Management and endorsed.
In 2009, the Supervisory Board devoted special attention to MTU’s system of internal controls, in particular to the company’s risk management system, its auditing practices and the conformity of its corporate governance with the relevant legal provisions and all aspects of compliance. The Supervisory Board examined these aspects with reference to the documents submitted to it and in dialog with the Board of Management.
The status report on compliance was presented to the full Supervisory Board at its regular meetings in July and December. The internal auditing team presented its findings to the Audit Committee at the latter’s March and September meetings, at which the team also reported on the latest developments in the field of compliance.
During the financial year 2009, the Supervisory Board convened five ordinary meetings, in the course of which resolutions were adopted. On average, 96.7 % of the members of the Supervisory Board were present at these meetings. Between official meetings, the chairman of the Supervisory Board was regularly briefed on the company’s current situation, significant business transactions and important pending decisions.
At its meetings with the Board of Management, the Supervisory Board discussed the business performance of MTU and all its affiliated companies. The situation on the commercial and military engine markets was analyzed, as was MTU’s market position compared with its competitors. In view of the international economic crisis, special attention was paid to the company’s earnings, including its risk situation and risk management activities. Above and beyond this, other topics of note included both the progress made in the development of the TP400-D6 engine program for the new Airbus A400M military transporter and MTU’s industrial property rights portfolio. In addition, the Supervisory Board examined in detail the Challenge 2010 cost-reduction program, long-running MRO contracts at the Ludwigsfelde, Hannover and Vancouver locations, and the sale of the production operations of the U.S. subsidiary MTU Aero Engines North America (AENA). Further topics discussed by the Supervisory Board included the company’s negotiation of a promissory note loan and the renewal of its revolving credit facility. The Supervisory Board also closely addressed the German Act on the Appropriateness of Management Board Compensation (VorstAG) and the corresponding amendments to the German Corporate Governance Code.
It is the firm belief of the Supervisory Board that good corporate governance is of fundamental importance to the company’s business success. For this reason, in 2009 the Supervisory Board again closely studied the recommendations of the relevant corporate governance standards and the way in which they are being implemented. In doing so, it also reviewed the efficiency of its own activities. In particular, the Supervisory Board addressed the amendments to the German Corporate Governance Code made by the Government Commission on the Code at its meeting of June 18, 2009. Further, the Supervisory Board ascertained that, in its own estimation, it has an adequate number of independent members within its ranks.
Cooperation between the Supervisory Board and the Board of Management, and among the members of the Supervisory Board, was judged to be of a very high quality. There were no conflicts of interest between MTU and any member of its Board of Management or Supervisory Board. The Supervisory Board has assured itself that, throughout the past year, the company has complied with the recommendations laid down in the German Corporate Governance Code, as stated in its declaration of conformity.
In a joint declaration with the Board of Management dated December 10, 2009, pursuant to the requirements of Section 161 of the German Stock Corporation Act (AktG), the Supervisory Board states that MTU Aero Engines Holding AG fully complies with the recommendations of the German Corporate Governance Code, with three exceptions only. The company’s declaration of conformity is reproduced on page 307 of this Annual Report together with a more detailed description of the company’s corporate governance; the declaration has also been posted on the company’s website.
By convention, the Supervisory Board has three committees equally representing the workforce and the management of the company: the Audit Committee, the Personnel Committee and the Mediation Committee – the latter formed to comply with Section 27, paragraph 3 of the German Co-Determination Act. Each committee reports regularly to the full Supervisory Board on its work.
In addition, a Nomination Committee was created in 2007 pursuant to the recommendations of the German Corporate Governance Code. It is the task of this committee, which meets on an ad hoc basis, to identify suitable candidates for election to the Supervisory Board, who are then recommended to the Annual General Meeting by the Supervisory Board. Its members are Klaus Eberhardt and Dr. Jürgen M. Geißinger. The Nomination Committee convened once during the financial year 2009.
The Personnel Committee consists of Klaus Eberhardt, Dr. Jürgen M. Geißinger and the two workforce representatives Josef Hillreiner and Michael Leppek. The Personnel Committee met twice in 2009 to discuss matters including the results of the Supervisory Board’s efficiency audit, the renewal of the contract with Board of Management member Dr. Stefan Weingartner, and the composition and appropriateness of compensation for members of the Board of Management as well as proposals for revision of the long-term component of that compensation.
The Mediation Committee, whose members are identical with those of the Personnel Committee, did not have to convene in 2009.
The members of the Audit Committee are Prof. Dr. Walter Kröll (until May 26, 2009), Dr. Joachim Rauhut (since May 26, 2009), Klaus Eberhardt, Babette Fröhlich and Josef Hillreiner. In 2009, the Audit Committee met three times in person and once via conference call. The committee was primarily concerned with reviewing the annual financial statements of MTU Aero Engines Holding AG, the MTU consolidated financial statements and group management report, the financial situation of MTU, and the quarterly reports.
The committee also specified the key areas for audit in the 2009 financial statements, reviewed the proposed fees to be paid for the services of the accounting firm Deloitte & Touche, and recommended that the Supervisory Board should award the contract.
To aid the committee members in their tasks, they and all other members of the Supervisory Board were supplied with copies of the reports prepared by Deloitte & Touche concerning the auditing of the annual financial statements and consolidated financial statements, the management report and the group management report. These documents were thoroughly reviewed in the presence of the auditor. In conclusion, the committee recommended that the Supervisory Board should adopt the financial statements, approve the management reports and consent to the Board of Management’s profit distribution proposal.
In accordance with the legal requirements, the Audit Committee monitored the financial reporting process as well as the efficacy of the company’s risk management system, its system of internal controls, and its internal auditing. In addition, the committee obtained the auditor’s statement of independence pursuant to Section 7.2.1 of the German Corporate Governance Code and also monitored the auditor’s independence.
As well as reviewing the compliance system of the company in detail, the Audit Committee was briefed by the Board of Management on the company’s negotiation of a promissory note loan and the renewal of its revolving credit facility. The committee also took a closer look at the group’s patented technologies and the TP400-D6 engine program.
Adoption of the annual financial statements, the approved consolidated financial statements, the management report and the group management report
MTU Aero Engines Holding AG’s annual financial statements, consolidated financial statements, management report and group management report for the financial year 2009 were audited and fully certified by the accounting firm Deloitte & Touche, Munich, whose engagement had been confirmed by the Annual General Meeting. The audit reports and documents to be reviewed were submitted in a timely manner to all members of the Supervisory Board. The Supervisory Board thoroughly reviewed the annual financial statements, consolidated financial statements, management report and group management report of MTU Aero Engines Holding AG for 2009 and the Board of Management’s profit distribution proposal on the basis of the preliminary audit by the Audit Committee, on which the chair of the Audit Committee had presented a full report to the Supervisory Board. The auditor attended the meeting of the Audit Committee of MTU Aero Engines Holding AG on March 2, 2010, and the balance sheet meeting of the Supervisory Board on March 10, 2010, and presented the main findings of the audit. The Supervisory Board reviewed the annual financial statements, consolidated financial statements, management report, group management report and the Board of Management’s profit distribution proposal, and raised no objections. The annual financial statements and consolidated financial statements for the financial year 2009 as submitted by the Board of Management were approved at the Supervisory Board meeting on March 10, 2010. The annual financial statements are thereby adopted. The Supervisory Board agreed to the Board of Management’s profit distribution proposal, after giving due consideration to the interests of the company and its shareholders. At its meeting on March 10, 2010, the Supervisory Board took note that MTU Aero Engines Holding AG had not entered into any change-of-control agreements. This excludes the indirect consequences of any agreements contracted by associated companies containing change-of-control clauses that might affect MTU Aero Engines Holding AG. More detailed notes on this subject can be found in the group management report on page 133 ff.
On May 26, 2009, the Annual General Meeting appointed Dr. Joachim Rauhut to the Supervisory Board. Dr. Rauhut is a member of the Executive Board (CFO) of Wacker Chemie AG in Munich. He replaced Prof. Dr. Walter Kröll, who took leave as a member of the Supervisory Board on attaining the age limit stipulated in the articles of association, which state that members of the Supervisory Board must relinquish their seats after the Annual General Meeting that follows their 70th birthday.
The Supervisory Board expresses its gratitude to Prof. Dr. Kröll for his long years of dedicated, professional work. The Supervisory Board also wishes to thank all MTU employees and the Board of Management for their successful work and the great commitment shown in 2009. Thanks are also extended to the works council for its constructive cooperation and, last but not least, to all the shareholders who have placed their trust in MTU over the past business year.
Munich, March 10, 2010
Chairman of the Supervisory Board
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