Corporate governance statement pursuant to 289a HGB The corporate governance statement under 289a of the German Commercial Code (Handelsgesetzbuch, "HGB") constitutes a component of the management report. Pursuant to 317 (2) sentence 3 HGB, the disclosures provided under 289a HGB are not to be included in the audit. The statement published on the ADLER website at www.adlermodeunternehmen.com under the heading Investor Relations / Corporate Governance contains the declaration of conformity, information on corporate governance practices, a description of the procedures applied by the Executive Board and the Supervisory Board, as well as information about setting targets under 76 (4) and 111 (5) German Stock Corporation Act (Aktiengesetz, "AktG"). Declaration of Conformity The Executive Board and the Supervisory Board of Adler Modemärkte AG have issued the following declaration pursuant to 161 AktG as per 12 May 2015: "Declaration of the Executive Board and Supervisory Board of Adler Modemärkte Aktiengesellschaft relating to the recommendations of the "German Corporate Governance Code Government Committee" as per Section 161 of the German Stock Corporation Act (Aktiengesetz, "AktG"): The Executive Board and Supervisory Board of Adler Modemärkte AG declare that the recommendations of the German Corporate Governance Code ("Code") as amended on May 13, 2013, published by the Federal Ministry of Justice on June 10, 2013 in the official section of the Federal Gazette, were complied with during the time period since the last Declaration of Conformity from May 13, 2014 until September 29, 2014 with the subsequent exceptions. Furthermore, the Executive Board and Supervisory Board declare that the recommendations of the German Corporate Governance Code ("Code") as amended on June 24, 2014, published by the Federal Ministry of Justice on September 30, 2014 in the official section of the Federal Gazette, were complied with since their publication and will be complied with in the future with the following exceptions: Fixed amount as cap for the overall Executive Board remuneration (Section 4.2.3 para. 2 sent. 6 of the Code) All current employment contracts of the Executive Board include caps for the fixed as well as the variable remuneration components. A fixed amount as cap for the overall amount of remuneration is not included in all current employment contracts of the Executive Board. The Supervisory Board sees no necessity for the explicit definition of a fixed amount as cap for the overall remuneration, since all employment contracts of the Executive Board contain a fixed monetary cap for all key remuneration components and thus implicitly the amount of total remuneration is limited accordingly. Disclosure of Executive Board remuneration (Section 4.2.5 para. 3 of the Code) The Company's Annual General Meeting on May 30, 2011 passed a resolution that there would be no individualized disclosure of Executive Board remuneration. Therefore, the Company will also not Page 1 of 6
implement the recommendations in Section 4.2.5 para. 3 of the Code which relate to the disclosure of the remuneration of each member of the Executive Board and the use of according model tables. Re-appointment of Members of the Executive Board (Section 5.1.2 para. 2 sent. 2 of the Code) In its decision dated July 17, 2012 (Az. II ZR 55/11), the Federal Court of Justice (Bundesgerichtshof, "BGH") generally permitted the early re-appointment after the consensual resignation of a member of the Executive Board prior to one year before the end of the original appointment period. In the opinion of the BGH, this generally also applies if there are no special circumstances for this course of action. Based on this decision and the requirement of a resolution by the Supervisory Board, which must act in the interest of the company, we do not consider necessary additional preconditions ("special circumstances") and we declare, as a precautionary measure, a deviation from the recommendation in Section 5.1.2 para. 2 sent. 2 of the Code. Composition of Supervisory Board (Section 5.4.1 para. 2 and 3 of the Code) The Company's Supervisory Board has not named any specific targets relating to the composition of the Board; for that reason, there is also no publication of the target and status of implementation in the Corporate Governance report. It is true that the Supervisory Board aims to have members with different and complementary professional experience and skills and it is planned that women, who now constitute more than 30% of members, will continue to be represented appropriately on the Supervisory Board. Nevertheless, the Supervisory Board believes that the stipulation of specific targets would restrict the flexibility of the Supervisory Board too greatly in its search for candidates with the necessary ability and experience. For the same reason, the Company does not stipulate an age limit for members of the Supervisory Board either. With regard to nominations of the Supervisory Board, therefore, no specific targets are taken into consideration, but rather the intentions mentioned above. Haibach, May 12, 2015 Adler Modemärkte Aktiengesellschaft The Executive Board The Supervisory Board" This Declaration of Conformity may also be viewed on the ADLER website at www.adlermode-unternehmen.com under the heading Investor Relations / Corporate Governance / Declaration of Conformity. The same applies to declarations of conformity that are no longer current and up to five years old. Key corporate governance practices Adler Modemärkte AG regards sustainable corporate governance as meaning responsible corporate action that meets both statutory and Group-internal rules and ecological requirements. The ADLER Group's business activities are based on the following corporate governance practices that are applied above and beyond the statutory requirements. Conduct guidelines and compliance ADLER considers corporate compliance a measure aimed at ensuring adherence to statutory and official provisions, as well as to internal Company guidelines to be a key management and supervisory duty. In addition to the commitment towards social and ecological sustainability which ADLER meets by selling "Fairtrade" products, participating in the I:CO recycling system and adhering to BSCI Code of Conduct for protecting workers' rights in the supply chain, this also includes compliance with capital market, corruption and antitrust law. ADLER has consolidated the understanding of corporate compliance in the Page 2 of 6
revised code of conduct, which applies throughout the Group. However, these principles for avoiding violations of corruption, competition and antitrust law also address how to deal with employees, clients, suppliers and company property properly and respectfully. Using the existing principles as a foundation, the objective is to continue to promote the understanding of corporate compliance within the Company through training measures. Audits and the lasting implementation of solutions to address issues identified during the course of audits will further improve corporate compliance. The programme will be supported by a whistleblower system that will encourage employees to openly address any concerns they have and report circumstances that may indicate a violation of law or internal guidelines. Organisational guidelines With its organisational guidelines, Adler Modemärkte AG seeks to create an appropriate basis for communicating organisational, business and technical matters as well as principles and processes. The internal organisation manual covers agreements and principles for the individual organisations and divisions of the Company, the Company's management and provides a framework within which the relevant employees of the divisions operate. The organisational guidelines help business processes run smoothly and ensure the efficient use of resources. ADLER believes that this leads to targeted development and economic efficiency on the part of the Company. The organisational guidelines may be accessed by all employees on the Intranet. Procedures applied by the Executive Board and the Supervisory Board As a German stock corporation, Adler Modemärkte AG is subject to the German Stock Corporation Act and therefore has a dual governance system consisting of an Executive Board and a Supervisory Board. The current members of the Executive Board and the Supervisory Board may be viewed on the ADLER website at www.adlermodeunternehmen.com under the heading Investor Relations / The Company / Management. Cooperation The Executive Board and the Supervisory Board of ADLER work closely together for the benefit of the Company and are in regular contact. An intensive dialogue between the two boards forms the basis for efficient corporate governance. The Executive Board regularly and promptly provides the Supervisory Board with detailed information on any and all issues relevant to the Company. This includes business development, budgeting, the risk situation, risk management, adherence to compliance guidelines and any variances between the business development and the original budget. The Supervisory Board has specified reporting duties of the Executive Board that go above and beyond the statutory obligations. Moreover, there is a regular exchange of information between the CEO and the Chairman of the Supervisory Board. Procedures applied by the Executive Board The Executive Board of Adler Modemärkte AG currently has two members. As the board that manages the Group, the Executive Board is bound by the Company's interest and obliged to sustainably increase the enterprise value. The members jointly bear responsibility for the entire management and decide on the fundamental issues relating to business policies, corporate strategy, annual and multi-year budgets, risk management and compliance with statutory and internal rules. The Executive Board is responsible for preparation of the quarterly, semi-annual and consolidated financial statements of the Company and the annual financial statements of Adler Modemärkte AG. The rules of procedure and the allocation of responsibilities govern the working method and allocation of duties within the Executive Board. The Executive Board reports to the Supervisory Board regularly, promptly and in detail on any and all issues relevant for the Company as a whole. Page 3 of 6
The Executive Board's remuneration is explained in detail in the remuneration report. This is part of ADLER's Annual Report, which is published on the ADLER website at www.adlermode-unternehmen.com under the heading Investor Relations / Reports and Publications / Annual Report. Procedures applied by the Supervisory Board According to the currently valid Articles of Association, the Supervisory Board of Adler Modemärkte AG has twelve members and, in line with the German Co-determination Act (Mitbestimmungsgesetz), has an equal number of shareholder and employee representatives. The term of office of the current Supervisory Board members will terminate upon conclusion of the 2018 Annual General Meeting, which resolves to formally ratify their actions for financial year 2017. The Supervisory Board aims to have members with different and complementary professional experience and skills in order to duly perform the tasks that arise, and it is planned that women, who now constitute more than 30% of members, will continue to be represented appropriately on the Supervisory Board. However, the Company's Supervisory Board has specified no specific targets in terms of its constitution since in its opinion the designation of specific targets would too greatly limit its flexibility in searching for candidates with the necessary expertise and experience. For the same reason, the Company does not specify an age limit for Supervisory Board members. The Supervisory Board supervises and advises the Executive Board in managing the businesses. In this regard, it discusses at regular intervals the business performance and budgeting as well as the strategy and its implementation. The basis for this is formed by the reporting duties above and beyond the statutory ones as defined for the Executive Board by the Supervisory Board. Accordingly, the Executive Board provides both regular oral and written reports on key company ratios and events, in particular. Particularly important corporate decisions are subject to the Supervisory Board's consent in line with the rules of procedure issued to the Executive Board by the Supervisory Board. In addition, the Supervisory Board reviews the annual financial statements, the management report and the recommendation for the appropriation of net retained profits, as well as the consolidated financial statements and the Group management report. It checks compliance with legal provisions, the quarterly and semi-annual reports, adopts the annual financial statements of Adler Modemärkte AG and approves the consolidated financial statements, in each case taking into account the auditor's reports and the findings of the preliminary audit by the Audit Committee. In order to perform its tasks the Supervisory Board has formed a total of four committees, which effectively support the work in the full Supervisory Board, and whose tasks, responsibilities and work processes are in line with the stipulations of the German Stock Corporation Act and the German Corporate Governance Code. The Personnel Committee consists of the Supervisory Board chairman, his/her deputy and two members each from among the employee and shareholder representatives. The Personnel Committee decides on Executive Board matters relating to service and other agreements, provided the remuneration of Executive Board members is not concerned. In addition, it prepares decisions of the full Supervisory Board concerning remuneration of Executive Board members, regularly reviews the appropriateness of the Executive Board remuneration system and drafts motions for resolution in this regard. Moreover, the Personnel Committee makes decisions in accordance with 114 AktG (Agreements with Supervisory Board Members) and 89, 115 AktG (Grant of Loans to Agents within the meaning of 89 AktG, Commercial Attorneys-in-Fact and Supervisory Board Members). The Audit Committee consists of six members of the Supervisory Board. In line with German law, the Audit Committee must have at least one independent member of the Supervisory Board who has expertise in accounting or auditing. The chairman of the Audit Committee, Mr Wolfgang Burgard, meets these statutory requirements. The Audit Committee prepares the Page 4 of 6
Supervisory Board's proposal for election of the auditor and makes a recommendation in this regard to the Supervisory Board. After the Annual General Meeting has adopted a resolution, it appoints the auditor and supervises the audit. It discusses the quarterly, semi-annual and annual financial statements and makes recommendations on the adoption of the annual financial statements of Adler Modemärkte AG and approval of the consolidated financial statements based on the auditor's report and its own preliminary audit. Moreover, it supervises the accounting process, the effectiveness of the internal control, risk management, compliance and internal auditing system. The Nomination Committee consists of the Supervisory Board chairman and two shareholder representatives. The Nomination Committee's task is to make recommendations to the shareholder representatives on the Supervisory Board for the nominations for the election of Supervisory Board members from the shareholders by the Annual General Meeting. In this regard, it must take into account that the candidates should possess the knowledge, abilities and expert experience necessary to perform their tasks and be independent. In addition, in the context of the Declaration of Conformity rendered, it monitors diversity and the appropriate degree of female representation. The Conciliation Committee consists of the chairman of the Supervisory Board, the deputy elected in accordance with the German Co-determination Act, and one member each from the employee and shareholder representatives on the Supervisory Board elected by a majority of votes cast. It makes recommendations to the Supervisory Board for the appointment of Executive Board members if the required two-thirds majority is not achieved in the first round of voting by the Supervisory Board. The current composition of the Supervisory Board may be viewed on the ADLER website under the heading Investor Relations / The Company / Management. The Supervisory Board report provides details on the work of the board and the committees. The remuneration of the Supervisory Board members is explained in detail in the remuneration report. Both reports are part of ADLER's Annual Report, which is published on the ADLER website at www.adlermode-unternehmen.com under the heading Investor Relations / Reports and Publications / Annual Report. Setting targets under 76 (4) and 111 (5) AktG Adler Modemärkte AG is a listed German stock corporation (Aktiengesellschaft, "AG") subject to co-determination pursuant to the German Co-determination Act (Mitbestimmungsgesetz, "MitbestG"). Therefore, the Executive Board must set targets for the percentage of women on both management levels below the Executive Board in accordance with 76 (4) AktG. In its meeting held on 14 July 2015, the Executive Board set these targets for the first time as follows: 30% on the first management level and 30% on the second management level. The initial deadline to reach these targets was set for 30 June 2017. Pursuant to 96 (2) AktG, the Supervisory Board of the Company must consist of at least 30% women and at least 30% men. The Company is therefore exempt from the requirement to set targets for the Supervisory Board in accordance with 111 (5) sentence 5 AktG. The percentage of women and men on the Supervisory Board is currently over 30% each. Furthermore, the Supervisory Board must also set targets for the percentage of women on the Executive Board pursuant to 111 (5) AktG. In its meeting held on 4 August 2015, the Supervisory Board resolved to set a target of 0% for the percentage of women on the Executive Board. The initial deadline to reach this target was set for 30 June 2017. Page 5 of 6
Corporate governance report The Executive Board and the Supervisory Board of Adler Modemärkte AG issue in the Annual Report a corporate governance report on the Company's governance in accordance with the provisions of the German Corporate Governance Code. This is published on the ADLER website at www.adlermode-unternehmen.com under the heading Investor Relations / Reports and Publications / Annual Report. Page 6 of 6