Report of the supervisory board

In 2018, the Supervisory Board of Fresenius SE & Co. KGaA fulfilled its obligations in accordance with the provisions of the law, the articles of association, and the rules of procedure. It regularly advised the Management Board of the general partner, Fresenius Management SE, regarding the management of the Company and supervised the management in accordance with its Supervisory Board responsibilities.

S.16 Dr.Gerd content

Cooperation between the management and the supervisory board

Carrying out its monitoring and advisory activities, the Supervisory Board was regularly kept informed by the management in a timely and comprehensive oral and written manner – about, among other things:

  • all important matters relating to business policy,
  • the course of business,
  • profitability,
  • the situation of the Company and of the Group,
  • corporate strategy and planning,
  • the risk situation,
  • risk management and compliance, and
  • important business events.

Based on the reports provided by the Management Board of the general partner, the Supervisory Board ­discussed all significant business transactions in both the Audit Committee and in its plenary meetings. The Management Board of the general partner discussed the Company’s strategic direction with the Supervisory Board. The Supervisory Board passed resolutions within its legal and Company statutory authority.

The Supervisory Board of Fresenius SE & Co. KGaA convened for four regular meetings in 2018 – in March, May, October, and December. Before the meetings, the Management Board of the general partner sent detailed reports and comprehensive approval documents to the members of the Supervisory Board. At the meetings, the Supervisory Board discussed in detail the sales and earnings growth, based on the reports provided by the general partner’s Management Board. They also discussed significant Company decisions.

All matters requiring Supervisory Board approval were submitted with sufficient time for proper scrutiny. After reviewing the related approval documents and following detailed consultation with the Management Board of the general partner, the Supervisory Board approved all matters submitted to it.

The Supervisory Board was also informed about any important business events occurring between meetings. In addition, the Chairman of the general partner’s Management Board regularly informed the Chairman of the Supervisory Board in separate meetings about the latest development of the business and forthcoming decisions and discussed them with him.

Every member of the Supervisory Board of Fresenius SE & Co. KGaA attended all of the Supervisory Board Meetings in 2018.

Participation in meetings of the Supervisory Board and the Audit Committee is reported individually for all members on the Company’s website. Information on this can be found under “Supervisory Board”.

Main focus of the supervisory board’s activities

In 2018, the Supervisory Board mostly focused its monitoring and consulting activities on business operations and investments by the business segments. The Supervisory Board thoroughly reviewed and discussed all business activities of significance to the Company with the Management Board. This related to the intended acquisition of Akorn, Inc., USA (Akorn) by Fresenius Kabi and the related litigation, and investments in the expansion of existing production facilities of Fresenius Kabi. The Supervisory Board also dealt with the following items:

  • 2019 budget
  • medium-term strategy of the Fresenius Group
  • business segment strategies (particularly the business outlook for Fresenius Helios and Fresenius Medical Care)
  • auditor rotation (scheduled for the annual financial statements for 2020)

At its meetings and within the Audit Committee, the Supervisory Board also kept itself regularly informed about the Group’s risk situation and risk management activities, as well as compliance.

At the meeting on March 16, 2018, the Supervisory Board dealt intensively with the audit and approval of the financial statements, the consolidated financial statements (IFRS), as well as the management report and consolidated management report of Fresenius SE & Co. KGaA. The results for 2017 were discussed on the basis of a detailed report provided by the Chairman of the Audit Committee and statements by the auditor. At the same meeting, a resolution was passed on profit distribution proposed by the general partner, Fresenius Management SE, and the Group Non-financial Report for 2017.

In addition, the business segments reported in detail on the course of business in the first two months of the fiscal year. The focus was on Fresenius Medical Care. Furthermore, the Supervisory Board was informed by Fresenius Kabi about the status of the Akorn transaction and the plans to expand the Fresenius Kabi plants in Melrose Park, United States, and Haina, Dominican Republic. Another item discussed was the agenda of the Annual General Meeting of Fresenius SE & Co. KGaA on May 18, 2018. The Supervisory Board also dealt with IT security (“cybersecurity”). Finally, the Supervisory Board conducted its annual efficiency review at this meeting.

At its meeting on May 18, 2018, immediately following the Annual General Meeting, the Supervisory Board passed resolutions on the appointment of the auditor of the annual and consolidated financial statements for 2018. In addition, the Management Board reported on business performance for the months January through April 2018. Furthermore, the Supervisory Board was informed about the status of the Akorn transaction and the litigation related to it.

At the Supervisory Board meeting on October 19, 2018, the members of the Supervisory Board were informed in detail about business performance from January through September 2018. The focus was on the Fresenius Helios business segment. The Management Board of the general partner reported on the ­biosimilars business of Fresenius Kabi, the Akorn litigation, and the effects of the withdrawal of the United Kingdom from the European Union on the Fresenius Group.

The meeting of the Supervisory Board on December 7, 2018, focused on the development of business in 2018. Plans for the years 2019 to 2021 for the Group and separately for all four segments were also presented. The Chairman of the Audit Committee reported in detail on the status of preparation of financial statements. Additional focal points were the deliberations on the rotation of the auditor planned for 2020 and the resolution on the recommendation of the Audit Committee on the proposal for the selection of the auditor for 2020. In addition, resolutions were passed on the Declaration of Conformity with the German Corporate Governance Code and on the commissioning of the auditor of the Group Non-financial Report of Fresenius SE & Co. KGaA for 2018. In addition, the members of the Supervisory Board dealt with compliance, regulatory issues, and legal risks, as well as the Akorn litigation.

Corporate governance

On December 20, 2018, the Supervisory Board and the Management Board of the general partner jointly issued a Declaration of Conformity in accordance with the German Corporate Governance Code under Section 161 of the German Stock Corporation Act (AktG).

The Management Board of the general partner and the Supervisory Board of Fresenius SE & Co. KGaA have a duty to act in the best interests of the Company. In performing their activities, they do not pursue personal interests or bestow unjustified benefits on others. Any secondary activities or dealings with the Company by members of the corporate bodies must immediately be reported to, and approved by, the Supervisory Board.

Prof. Dr. med. D. Michael Albrecht is a member of the Supervisory Board of our Company and medical director and spokesman for the management board of the University Hospital Carl Gustav Carus Dresden, as well as a member of the supervisory board of the University Hospital in Aachen. The Fresenius Group maintains regular business relationships with these hospitals in line with normal market conditions. Mr. Klaus-Peter Müller is a member of the Supervisory Board and chairman of the Audit Committee of our Company and a member of the Supervisory Board of Fresenius Management SE. He was also Chairman of the Super­visory Board of Commerzbank AG until May 8, 2018. The Fresenius Group maintains business relations with Commerzbank under normal market conditions. Mr. Michael Diekmann is Deputy Chairman of the Supervisory Board and a member of the Supervisory Board of Fresenius Management SE. He is also a member of the Supervisory Board of Allianz SE. In 2018, the Fresenius Group paid insurance premiums to Allianz under normal market conditions.

There are no direct consultant or other service agreements between the Company and any member of the Supervisory Board.

There are regular separate preliminary meetings of the employee representatives and consultations among the shareholder representatives.

For more information on Corporate Governance at Fresenius, please refer to the Corporate Governance Declaration and Report on pages 131 to 162 of the Annual Report. Fresenius has disclosed the information on related parties in its quarterly reports and on page 258 of the Annual Report.

Group Non-finacial Report

KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, audited the Group Non-financial Report for 2018. This was done in accordance with a resolution of the Supervisory Board of December 7, 2018, and the subsequent appointment.

The Group Non-financial Report and the audit report of the appointed auditor were made available to each member of the Supervisory Board of the Company in good time. At their meetings on March 13 and 14, 2019, the Audit Committee and then the Supervisory Board discussed all the documents in detail.

The auditor delivered a detailed report on the results of the audit at each of these meetings. The Audit Committee and the Supervisory Board approved the auditor’s findings. The Audit Committee’s and the Supervisory Board’s own review also found no objections to the Group Non-financial Report. At its meeting on March 14, 2019, the Supervisory Board approved the Group Non-financial Report presented by the general partner.

The Group Non-financial Report is published on pages 92 to 130 of the Annual Report and the auditor’s findings are published on page 129 f. of the Annual Report.

Work of the committees

The Audit Committee held three meetings and four conference calls in 2018. The main focus of its monitoring activities was on the preliminary audit of the annual financial statements of Fresenius SE & Co. KGaA and the Group for 2017 and discussions with the auditor about their reports and the terms of reference of the audit. Another matter dealt with by the Audit Committee was its recommendation to the Supervisory Board regarding which auditing firm to propose as auditor for the annual financial statements of Fresenius SE & Co. KGaA and the Group for 2018. The Supervisory Board’s proposal to the Annual General Meeting in 2018 to elect KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, as auditor was based on a recommendation to this effect by the Audit Committee. The Audit Committee also dealt with the following items in detail:

  • the 2018 quarterly reports,
  • monitoring reports on progress of acquisitions,
  • compliance,
  • review of the risk management system, the internal control system, and the internal auditing system,
  • preparation of the selection of the auditor for the annual financial statements for 2020 (auditor rotation), and
  • approval of non-auditing services provided by KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin.

The Chairman of the Audit Committee reported regularly in subsequent Supervisory Board meetings on the work of the committee.

The Chairman of the Audit Committee maintains a regular dialog between the Supervisory Board and the Audit Committee on the one hand, and auditors on the other, even outside of meetings.

The Company’s Nomination Committee did not meet in 2018.

The Joint Committee is responsible for approving certain important transactions of Fresenius SE & Co. KGaA and certain legal transactions between the Company and the Else Kröner-Fresenius Foundation. In 2018, there were no transactions conducted that required its approval. For this reason, it did not meet in 2018.

There is no Mediation Committee because the Supervisory Board of Fresenius SE & Co. KGaA does not appoint the Management Board members of Fresenius Management SE.

For more information about the committees, their composition, and their work methods, please refer to the Corporate Governance Declaration and Report on pages 135 and 136 and page 271 of the Annual Report.

Personnel

Mr. Rainer Stein retired from the Supervisory Board of Fresenius SE & Co. KGaA on August 31, 2018. He was succeeded on the Board by Mr. Bernd Behlert with effect from September 1, 2018. At its meeting on May 18, 2018, the Supervisory Board elected Mr. Niko Stumpfögger as a member of the Audit Committee with effect from the date of Mr. Rainer Stein’s resignation.

In 2018, there were no changes in the composition of the Management Board of the general partner Fresenius Management SE.

Financial statements and consolidated financial statements

KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, audited the accounting records, the annual financial statements prepared in accordance with the accounting principles of the German Commercial Code (HGB), and the Company’s management report for 2018. The firm was elected as auditor in accordance with a resolution passed at the Annual General Meeting of Fresenius SE & Co. KGaA on May 18, 2018, and was subsequently commissioned by the Super­visory Board. The Company’s financial statements, management report, and the consolidated financial statements were prepared in accordance with IFRS accounting principles and with the regulations governing such statements under Section 315e of the German Commercial Code (HGB). The auditors of KPMG issued their unqualified audit opinion for these statements.

The financial statement, the consolidated financial statement, the Management Reports, and the auditor’s reports were submitted to each member of the Company’s Supervisory Board within the required time. At their meetings on March 13 and 14, 2019, the Audit Committee and then the Supervisory Board discussed all the documents in detail.

The auditor gave a detailed report on the results of the audit at each of these meetings. The auditor found no weaknesses in the risk management system or the internal control system with regard to the accounting process. The auditor attended all meetings of the Supervisory Board and all meetings and conference calls of the Audit Committee.

The Audit Committee and the Supervisory Board approved the auditor’s findings. Independent reviews by the Audit Committee and the Supervisory Board raised no objections to the Company’s financial statements and Management Report or the consolidated financial statements and the Group Management Reports. At its meeting on March 14, 2019, the Supervisory Board approved the financial statements and Management Reports presented by the general partner and the statements contained therein with respect to future development.

The Supervisory Board concurs with the general partner’s proposal on the 2018 profit distribution.

The Supervisory Board would like to thank the members of the Management Board of the general partner and all employees for their achievements.

Bad Homburg v. d. H., March 14, 2019

The Supervisory Board of Fresenius SE & Co. KGaA

Dr. Gerd Krick

Chairman