Fundamental information about the company

BREMER LAGERHAUS-GESELLSCHAFT -Aktienge-sellschaft von 1877-, Bremen (BLG AG), a listed company, is the sole personally liable general partner of BLG LOGISTICS GROUP AG & Co. KG, Bremen (BLG KG). In this function, the company has assumed the management of BLG KG. BLG AG maintains a branch office in Bremerhaven.

BLG AG does not hold any share capital in BLG KG and is also not entitled to participate in the company’s profits. All limited partnership shares of BLG KG are held by the Free Hanseatic City of Bremen (municipality). BLG AG receives remuneration for the liability it has assumed and for its company management activities. The business of BLG KG is managed by the Board of Management of BLG AG as a body of the general partner. The Board of Management is fully accountable for managing the business in accordance with Section 76 (1) of the German Stock Corporation Act (AktG) and is not subject to instructions from the shareholders.

For the liability it has assumed, BLG AG receives remuneration from BLG KG in the amount of 5 percent of the equity reported in the annual financial statements for the respective previous year in accordance with Sections 266 ff. of the German Commercial Code (HGB). This liability remuneration must be paid regardless of BLG KG’s net income for the year. For its management activities, BLG AG receives remuneration in the amount of 5 percent of the net income of BLG KG prior to deduction of this remuneration. The remuneration amounts to a minimum of EUR 256,000 and a maximum of EUR 2,500,000. In addition, expenses directly incurred by BLG AG in connection with management activities at BLG KG are reimbursed by the latter. Further information on transactions with affiliated companies and related parties can be found in the notes to the financial statements.

Non-financial report

In accordance with the provisions of the Act to Strengthen Non-Financial Reporting by Companies in their Management Reports and Group Reports (CSR Directive Implementation Act), BLG LOGISTICS has prepared a non-financial Group statement in accordance with Section 315b HGB since the 2017 financial year. This statement is integrated into the sustainability report as a separate non-financial report, which can be downloaded from reporting.blg-logistics.com.

Report on economic position

Report on net assets, financial position and
results of operations

In accordance with its corporate function, BLG AG lent all financial facilities available to it to BLG KG for proportionate financing of the working capital necessary for performing its services. This essentially takes place via the central cash management of BLG KG, in which BLG AG is included. The interest on the funds provided is based on unchanged conditions.

In the reporting year, BLG AG received liability remuneration (EUR 1,047,000; previous year: EUR 1,061,000) and remuneration for management activities (EUR 256,000; previous year: EUR 765,000) from BLG KG.

Earnings per share of EUR 0.29

The earnings per share are calculated by dividing the net income for the year by the average number of shares outstanding during the financial year. Unchanged from the previous year, there were 3,840,000 registered shares outstanding during the 2020 financial year. Earnings before taxes were down significantly year on year by EUR 401,000 in the 2020 financial year. This is primarily attributable to the lower earnings of BLG KG due to the coronavirus crisis, and the lower remuneration of the Board of Management compared with the previous year at the minimum level of remuneration (2020: EUR 256,000; 2019: EUR 765,000). Higher expenses for publication and for verifying the requirements of the European Single Electronic Format (ESEF) were compensated by the lower expenses incurred as a result of holding the Annual General Meeting virtually. An adjustment of pension obligations resulted in increased personnel expenses, which were reimbursed by BLG KG (other operating income). Resulting exceptional tax-related factors affecting corporation tax and deferred tax assets largely offset each other. In line with the adjustments to pension obligations, these increased significantly on the liabilities side of the statement of financial position. See also the remarks in the “Remuneration report” section.

The BLG share

Markets defy coronavirus

The uncertain outcome of Brexit, fears of recession, and not least the trade war between the US and China did not provide good stock market conditions from the outset of 2020. These were eclipsed by the COVID-19 pandemic that emerged in the spring, causing the stock markets to record a roller-coaster year. In mid-March the German DAX experienced the fastest crash in its history, tumbling by over 5,000 points in a matter of just a few weeks. Yet despite this, Germany’s benchmark index bounced back just as quickly and since bottoming out in mid-March has gained over 60 percent. While at year’s end 2020 the German economy risked slipping into a second coronavirus-induced recession, shortly after Christmas the DAX recorded a new all-time high.

The loose monetary policy of the central banks, COVID-relief packages worth billions made available by many governments and not least the approval of coronavirus vaccines fueled hope and gave the stock markets their best November in a long time. Following the massive downturns in 2020, experts predict that 2021 could see an increasing return to a familiar pattern of consumption and lifestyle and that it could be a year of recovery. In this environment, the German economy shrank in 2020 by around 5 percent. The DAX grew by 3.7 percent and closed the year with 13,719 points.

BLG share¹ falls 5.9 percent

After opening the 2020 financial year at EUR 13.10, the BLG share initially moved sideways in line with the major German indices. The highest closing price of the year was EUR 14.47 on February 5, 2020, before the wide-scale onset of the coronavirus crisis. In March, the share price fell significantly less than the major German indices. In the further course of the year, the share price essentially moved sideways, with the level mostly hovering below the opening price. Due to the share’s low trading volume, even a small number of transactions can affect the price. The BLG share fell by a total of 5.9 percent in the reporting year and was thus below the general market level (DAX +3.7 percent, MDAX +8.8 percent, SDAX +17.7 percent). On the basis of the annual closing price of EUR 12.33 on December 30, 2020, market capitalization amounted to EUR 47.3 million.

¹ All market prices of BLG AG in this management report indicated as average on the listed stock exchanges.

Distribution of the minimum dividend of EUR 0.11

Primarily due to the lower remuneration year on year (minimum remuneration amounting to EUR 256,000) from BLG KG, the annual financial statements of BLG AG showed net retained profits in accordance with HGB of EUR 1,117,000 (previous year: EUR 1,536,000) for the 2020 financial year. According to German law, this amount forms the basis for the dividend distribution.

We pursue the goal of an earnings-related and consistent dividend policy. For the 2020 financial year, the Board of Management, in consultation with the Supervisory Board, will propose to the Annual General Meeting on June 2, 2021 that due to the impact of the coronavirus pandemic on the earnings situation of the entire BLG Group, only the statutory minimum dividend of EUR 0.11 per share (previous year: EUR 0.40 per share) be distributed on the dividend-eligible share capital of EUR 9,984,000.00, corresponding to 3,840,000 shares (registered shares). This represents a distribution total of EUR 422,000 and a pay-out ratio of 37.8 percent. Based on the year-end share price of EUR 12.33, this results in a dividend yield of 0.9 percent for the 2020 financial year. The Board of Management and Supervisory Board propose that the remaining net retained profits of EUR 695,000 be transferred to other revenue reserves.

Shareholder structure of
BREMER LAGERHAUS-GESELLSCHAFT-Aktiengesellschaft von 1877-
as of December 31, 2020

The share capital of BLG AG amounted to EUR 9,984,000.00 and was divided into 3,840,000 no-par value registered shares with voting rights (registered shares). Transfer of the shares requires the approval of the company in accordance with Section 5 of the Articles of Incorporation.

As of December 31, 2020, the Free Hanseatic City of Bremen (municipality) was the main shareholder of BLG AG with a share of 50.4 percent. Other large institutional investors are Finanzholding der Sparkasse in Bremen and Panta Re AG, Bremen, each with a share of 12.6 percent, and the Waldemar Koch Foundation, Bremen, with a share of 5.9 percent. 18.5 percent of shares are in free float, corresponding to around 710,000 shares. 1.2 percent of the free float is held by institutional investors; the remaining 17.3 percent is held by private investors.

Corporate governance statement

In accordance with German statutory requirements, the auditor only audited the existence of disclosures on corporate governance within the meaning of Section 289 HGB. To avoid duplication, they are reported elsewhere in the financial report together with the corporate governance statement in accordance with Section 289f HGB; see Corporate governance statement

Takeover-related disclosures in accordance with Section 289a (1) HGB

The takeover-related disclosures are presented on
Takeover-related disclosures.

Remuneration report

The remuneration report in accordance with Section 289a (2) HGB can be found on Remuneration report.

Risk report

Opportunity and risk management

Corporate activity is accompanied by opportunities and risks. Responsible handling of potential risks is a key element of sound corporate governance for BLG AG. At the same time it is important to identify and take advantage of opportunities. Our opportunities and risks policy aims to increase the company’s value without taking any inappropriately high risks.

The Board of Management of BLG AG assumes responsibility for formulating risk policy principles and earnings-oriented management of overall risk. The Board of Management regularly informs the Supervisory Board of decisions holding potential risk in connection with the dutiful discharge of its responsibilities under company law.

Potential risks are identified at an early stage within the framework of continuous risk controlling and a risk management and reporting system geared to the corporate structure under company law. We give special consideration to possible risks to continuity of operations based on strategic decisions. Currently no risks to continuity of operations and to the future development of our company can be identified on the basis of an overall analysis. Our financial base in connection with extending the range of services in all strategic divisions of the Group continues to offer good opportunities for stable corporate development on the part of BLG AG.

Description of the main features of the internalcontrol and risk management system with regard to the accounting process in accordance with Section 289 (4) HGB

Definition and elements of the internal controland risk management system

BLG AG’s principles of risk management are documented in a guideline. The regulations and necessary documentation as well as reporting cycles defined there are supported by standard software to ensure a uniform process standard.

The internal control system of BLG LOGISTICS with regard to the accounting process includes all principles, procedures and measures to ensure the correct and legally compliant recognition, measurement and presentation of business transactions in the financial statements. The aim is to avoid any material misstatements in accounting and external reporting.

Since the internal control system is an integral component of the risk management system, they are presented in a condensed form.

The internal monitoring and management systems are components of the internal control system. The Board of Management of BLG AG has assigned responsibility for the internal management system in particular to the Financial Controlling, Finance and Accounting departments.

The internal monitoring system comprises controls that are both integrated into and independent of the accounting process. The controls integrated into the process particularly include the dual control principle and IT-supported controls, as well as the involvement of internal departments such as Legal or Tax departments and of external experts.

Controls that are independent of the process are carried out by the Internal Audit department, the Quality Management department and the Supervisory Board, in the latter case principally through its Audit Committee. The Audit Committee concerns itself in particular with the accounting for the company and the Group, including reporting. The activities of the Audit Committee also focus on the risk situation, monitoring the further development of risk management and on compliance issues. This also includes the effectiveness of the internal control system.

Process-independent audit activities are also performed by external auditing bodies such as the auditing company or the tax auditor. With regard to the financial reporting process, the audit of the annual and consolidated financial statements and the financial statements pursuant to Section 315e HGB by the auditing company forms the main component of the process-independent review.

Accounting-related risks

Accounting-related risks can arise, for example, through the conclusion of unusual or complex business dealings or the establishment of business combinations as well as the processing of non-routine transactions.

Potential risks also result from discretionary scope in the recognition and measurement of assets and liabilities, or from the effect of estimates on the annual financial statements, such as for provisions or contingent liabilities.

Accounting process and measures to ensure itscorrectness

Business transactions are generally accounted for in the single-entity financial statements of the subsidiaries of BLG AG using the standard software SAP R/3. The consolidated financial statements are prepared using the SAP consolidation module EC-CS, with the separate financial statements of the companies included in the consolidation being combined, if necessary after adjustment to comply with international financial reporting standards. Foreign subsidiaries are included on the basis of standardized, Excel-based reporting packages, which are transferred into the EC-CS consolidation system by way of flexible uploads. This is a standard interface in SAP.

BLG AG has issued accounting guidelines for financial reporting in accordance with the International Financial Reporting Standards (IFRSs) to ensure consistent recognition and measurement. In addition to general principles, these guidelines cover in particular accounting principles and methods and regulations on the income statement, consolidation principles and special topics. To ensure the implementation of consistent, standardized and efficient accounting and financial reporting, guidelines for uniform Group-wide accounting have also been drawn up. In addition, a code of practice for the notes and the management report has also been defined that aims to ensure consistent reconcilability of the various sets of financial statements.

Impairment tests for the Group’s cash-generating units are carried out centrally. This ensures that consistent and standardized measurement criteria are used. The same applies to the specification of the parameters to be used for the measurement of pension provisions and other provisions based on expert opinions.

When preparing the debt consolidation, internal balances are regularly reconciled in order to clarify and remedy any differences in good time. At Group level, in addition to a validation by the system of the data reported in the separate financial statements, the reporting packages in particular are tested for plausibility and transferred into the EC-CS consolidation system.

The disclosures in the notes to the consolidated financial statements are produced mainly from the EC-CS consolidation system and enhanced by additional information on the subsidiaries.

Special software is used for tax accounting. Current and deferred taxes are calculated at the level of the individual subsidiaries and the recoverability of the deferred tax assets is tested. Current and deferred taxes to be recognized are thus calculated at the Group level in the statement of financial position and in the income statement, taking into account the effects of consolidation.

The audited financial statements in accordance with Section 315e HGB are converted into the ESEF-compliant format for submission to the German Federal Gazette using dedicated software, and the necessary checks are carried out and documented in accordance with a published ESEF technical concept based on the dual control principle.

Qualifying notes

The internal control and risk management system ensures the correctness of the accounting process and compliance with the relevant legal requirements.

Discretionary decisions, controls containing errors, or malicious acts may, however, limit the effectiveness of the internal control and risk management system, with the effect that the systems established cannot guarantee with absolute certainty that the risks will be identified and managed.

Risks and opportunities of future development

Risks for the company result from its position as general partner of BLG KG, Bremen. There is no identifiable risk of being subject to claims. A risk but also an opportunity arises from the development of earnings of BLG KG, including its equity investments, on which the amount of the company’s remuneration for management activities depends. Market, macroeconomic, political and other risks (e.g. high competitive pressure, economic development, effects of the coronavirus crisis) can have a direct impact. In this regard, we also refer to the group management report prepared by BLG AG and BLG KG as part of their jointly prepared consolidated financial statements for the 2020 financial year. A credit risk results from the receivables from loans and cash management with respect to BLG KG. There is currently no identifiable credit risk.

Due to the coronavirus crisis, the remuneration for the Board of Management in 2020 fell to the minimum level of EUR 256,000, with a corresponding negative impact on the income of BLG AG. No further isolated risks for BLG AG resulting from the coronavirus crisis are currently identifiable. Based on what is known at present, the United Kingdom’s exit from the European Union and the ongoing phase of low interest rates have no impact on the risk assessment.

Outlook

Report on forecasts and other statements regarding expected development

Against the backdrop of the massive advance of the coronavirus pandemic from the spring of 2020, the previous year’s forecast projected significantly lower earnings than in the 2019 financial year. The huge impact of the coronavirus crisis on BLG LOGISTICS ultimately led to a reduction of the performance-based remuneration for the Board of Management of BLG KG (remuneration for work) to the minimum amount of EUR 256,000. For this reason in particular, the previous year’s forecast proved accurate and earnings before taxes fell by EUR 401,000 to EUR 1,349,000. Ultimately, net income for the year also decreased accordingly by EUR 337,000. Please see the report on economic position for further details.

At the beginning of 2021, it is still not possible to reliably predict the further course of the coronavirus pandemic and thus its impact on the world economy, global trade flows and BLG LOGISTICS’ customers. Given the prevailing high level of uncertainty and the sluggish vaccination rollout, it is difficult to make a dependable forecast for the business development of BLG LOGISTICS for the 2021 financial year.

According to current knowledge, BLG AG forecasts that BLG KG’s business development and earnings in the 2021 financial year could gradually recover in the course of 2021. Nevertheless, the repercussions of the coronavirus pandemic and global uncertainties will continue to persist and we can therefore expect another difficult year.

Against this backdrop, it is to be expected that there will be no material change in BLG AG’s results of operations, because, besides the liability remuneration, the remuneration for business management is likely to remain at a similar level. In addition, exceptional factors, such as the reversal of expenses not required for an in-person Annual General Meeting, are not expected to recur in the 2021 financial year. BLG AG’s earnings (EBT) for 2021 will therefore likely be at a similar level to 2020 or slightly lower. With respect to the dividend, we will continue in the future to allow our shareholders to participate appropriately in earnings in line with our business performance.

Taking the significant uncertainty into account and on the basis of the estimates currently possible for the 2021 financial year, the Board of Management assumes that, despite the burden of the pandemic, the liquidity of BLG AG and of the Group will continue to be sufficient to allow payment obligations to be met at all times.

Apart from historical financial information, this annual report contains forward-looking statements on the future development of the business and the business performance of BLG AG, which are based on estimates, forecasts and expectations, and can be identified by wording such as “assume,” “expect” and similar terms. These statements may, of course, vary from actual future events or developments. We are not under any obligation to update these forward-looking statements with new information.

Final statement of the Board of Management in accordance with Section 312 (3) of the German Stock Corporation Act

BLG AG received appropriate consideration for each legal transaction indicated in the report on relationships with affiliated companies and was not disadvantaged by the measures taken as disclosed in the report. No measures pursuant to Section 312 AktG were omitted. This assessment is based on the circumstances of which we were aware at the time the reportable transactions were conducted.

Bremen, March 30, 2021

BREMER LAGERHAUS-GESELLSCHAFT
-Aktiengesellschaft von 1877-

THE BOARD OF MANAGEMENT