Combined Management Report 2022

The management report pertaining to the annual financial statements pursuant to Section 315e HGB of BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-, Bremen (BLG AG) was combined with the management report prepared in accordance with the German Commercial Code (HGB) of BLG AG pursuant to Section 315 (5) HGB in conjunction with Section 298 (2) HGB. The management report is therefore referred to as the combined management report. The financial statements of BLG AG, which are prepared in accordance with the requirements of the HGB, and the combined management report are published together. Unless otherwise stated, the information provided applies to both sets of financial statements. Disclosures that contain information relating solely to the HGB financial statements of BLG AG are denoted separately.

Fundamental information about the company

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 management activities. The business of BLG KG is managed by the Board of Management of BLG AG as a governing 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 prior period in accordance with Sections 266 et seq. 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 thousand and a maximum of EUR 2,500 thousand. 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

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 financial position, financial performance and cash flows

In accordance with its corporate function, BLG AG lent all cash funds available to it to BLG KG for proportionate financing of the working capital necessary for the provision of 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 was based on unchanged conditions. As a result of slightly lower average cash management balances, interest income from this decreased by EUR 45 thousand compared with the previous year.

In the reporting year, BLG AG received liability remuneration (EUR 1,063 thousand, previous year: EUR 1,026 thousand) and remuneration for management activities (EUR 256 thousand, previous year: EUR 256 thousand) from BLG KG. Remunerations accruing to the members of the Board of Management and the Supervisory Board are reimbursed in full by BLG KG.

Earnings per share of EUR 0.25

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 2022 financial year.

In the outlook as of December 31, 2021 and in the interim report as of June 30, 2022, earnings (EBT) for the financial year 2022 were forecast to be at a similar level to or slightly lower than in the financial year 2021. Earnings before taxes in the 2022 financial year were ultimately down year on year by EUR 175 thousand. This is explained primarily by the fact that provisions had to be recognized for higher costs for the planned physical Annual General Meeting in 2023. Furthermore, the above-mentioned lower interest income and lower income from the reversal of provisions also had an impact on earnings compared with the previous year.

Due to accumulated losses brought forward during the coronavirus crisis and low net investment income at BLG KG, the remuneration for the management of BLG KG was again at the minimum level (EUR 256 thousand, previous year: EUR 256 thousand).

Refinancing for pensions/fair-value remeasurement

In order to enable insolvency-protected reinsurance cover or refinancing for the pension obligations, a two-tier model with additional premium deposit accounts to cover the outstanding premium payments for the reinsurance was introduced. As a result of the fair-value remeasurement, the carrying amount of the premium deposit account in the balance sheet at December 31, 2022, after taking the planned premium withdrawals for 2022 into account, had to be adjusted downward by a substantial amount to reflect the price development. On the income side, this did not lead to additional expense for BLG AG, as the costs incurred from this were assumed by BLG KG. This write-down was not taken into account for tax purposes and resulted in significantly higher corporate income tax expense year on year. This was offset by higher income from deferred taxes.

Furthermore, due in particular to the significant rise in interest rates, the measurement of pension provisions as of December 31, 2022 resulted in a significantly lower obligation being recognized, and the net amount of the pension obligation and the asset value was therefore reported in the annual financial statements on the assets side in accordance with Section 315e HGB. Accordingly, the settlement amount recognized toward BLG KG in the annual financial statements was adjusted in accordance with Section 315e to reflect the measurement differences between HGB and IFRSs (previous year: benefit entitlement, reporting year: obligation). In the German GAAP annual financial statements, the rise in interest rates was less marked, so that the net amount of the pension obligation and the asset value was recognized as a liability on the liabilities side.

Provisions for variable remuneration

The new, currently valid remuneration system for members of the Board of Management was introduced retroactively from January 1, 2021. The previous system was thus also terminated with retroactive effect from December 31, 2020 and the variable remuneration components agreed under it will, accordingly, no longer be paid out.

The switch to the new Board of Management remuneration system in accordance with the provisions of the Act on the Implementation of the Second Shareholders’ Rights Directive (ARUG II) with short-term and long-term target components leads to a significant increase in provisions, as the transfers for the long-term remuneration components are no longer made in installments over time, but become due in the full amount when the target agreement is reached.

On the basis of the remeasurement as of December 31, 2022, the existing provision for variable remuneration for the financial year 2021 was adjusted slightly. Furthermore, on the basis of the target figures achieved to date, provisions of EUR 2,423 thousand (EUR 2,551 thousand under German commercial law) were recognized for variable remuneration for the financial year 2022, which represented a corresponding increase compared with the previous year. The variable compensation for Andrea Eck was settled at the end of December 2022 as part of the severance agreement. The expenses arising from the severance agreement were reported under other operating expense, which, accordingly, increased significantly year on year. All expenses relating to the Board of Management remuneration were reimbursed by BLG KG by way of offsetting and were included in other operating income.

There were no other significant changes in income and expenses or in financial position and cash flows compared with the previous year.

The BLG share

Weak year on the stock exchanges

With the coronavirus pandemic slowly appearing to have been overcome, 2022 was characterized by geopolitical crises and a high level of uncertainty. Worldwide, losses on the stock markets were great, leading to one of the worst years since the financial crisis of 2008. At the beginning of the year, many share prices were at an all-time high, making a downward correction likely. The outbreak of the war in Ukraine intensified this value adjustment, which continued through the turn of the year 2022/2023. High inflation also impacted on the stock markets. The central banks reacted by raising the key interest rates, in some cases substantially, to counter inflation.

BLG share¹ falls 8.2 percent

After opening the 2022 financial year at EUR 10.93, the BLG share initially moved sideways while the major German indices lost value against the backdrop of the global economic environment. The highest closing price of the year for the BLG share was EUR 11.43 on August 22, 2022. In the last quarter of the 2022 financial year, the share price level fell and remained consistently below the opening price. The lowest price of EUR 9.17 was measured in early October as well as on three days in December 2022.

Due to the share’s low trading volume, even a small number of transactions can affect the price. The BLG share price fell by a total of 8.2 percent in the reporting year and was thus still above the level of the major German indices (DAX, minus around 13 percent, MDAX, minus around 29 percent, SDAX, minus around 28 percent). On the basis of the annual closing price of EUR 10.03 on December 30, 2022, market capitalization of the BLG share stood at EUR 38.5 million.

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

Dividend of EUR 0.28

Due to the unchanged remuneration year on year (minimum remuneration amounting to EUR 256 thousand) from BLG KG, the annual financial statements of BLG AG showed net retained profits in accordance with HGB of EUR 1,075 thousand for the 2022 financial year, which was lower than in the previous year (EUR 1,152 thousand). This includes a proposed withdrawal of EUR 110 thousand from other revenue reserves (previous year: appropriation of EUR 2 thousand). According to German law, net retained profits form the basis for the dividend distribution.

On this basis, for the 2022 financial year, the Board of Management and the Supervisory Board will propose to the Annual General Meeting on June 7, 2023 that a dividend of EUR 0.28 per share (previous year: dividend of EUR 0.30 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 payout of EUR 1,075 thousand and a distribution ratio of 111.4 percent. Based on the year-end share price of EUR 10.03, this results in a dividend yield of 2.8 percent for the 2022 financial year.

We will continue in the future to pursue the goal of an earnings-related and consistent dividend policy. Accordingly, we will allow our shareholders to participate appropriately in share in earnings in line with our business performance.

Shareholder structure of BLG AG
as of December 31 2022
zum 31. Dezember 2022

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, 2022, 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. A total of 18.5 percent of shares are in free float, corresponding to around 710,000 shares; 1.1 percent of the free float is held by institutional investors; the remaining 17.4 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 Chapter 04 “Further Information” of this financial report.

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

Takeover-related disclosures are also reported in the corporate governance statement; see Chapter 04 “Further Information” of this financial report.

Remuneration report and remuneration system

The applicable remuneration system of the Board of Management pursuant to Section 87a (1) and (2) sentence 1 of the German Stock Corporation Act (AktG), which was approved by the Annual General Meeting on June 2, 2021, and the system for the remuneration of the members of the Supervisory Board (Section 113 (3) AktG), which was also approved by the Annual General Meeting on June 2, 2021, are publicly available under www.blg-logistics.com/en/ir (under Corporate Governance). The remuneration report, including the auditor's audit opinion pursuant to Section 162 AktG, is made publicly available in the Download area at the same Internet address.

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. In this regard, we give special consideration to risks jeopardizing the company’s continued existence as a going concern arising from strategic decisions. Currently no going concern risks jeopardizing the company’s future development can be identified in the context 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 BLG AG’s stable corporate development.

The risk management system, compliance management system and internal control system of BLG AG are integrated into the respective systems of the BLG Group – in particular by reason of the former’s status as personally liable general partner of BLG KG. Therefore, the following presents a summarized description of the systems at Group level of BLG LOGISTICS. For more information, see the group management report pertaining to the 2022 consolidated financial statements published by BLG AG and BLG KG as joint parents. reporting.blg-logistics.com

Risk-rewards culture

The BLG Group aims to achieve profitable growth while giving consideration to sustainability-related objectives.

Our risk-rewards culture as part of the corporate culture of BLG LOGISTICS sets out the company’s basic policy and rules of conduct for managing risks and opportunities. It greatly influences risk awareness when making business decisions and forms the basis for the implementation of appropriate and effective measures to enable us to pursue our opportunities responsibly and sustainably.

Our risk-rewards culture therefore constitutes the basis for the success of our risk management. Risk management works provided that transparency and a willingness to actively communicate and collaborate are practiced as part of an actual risk culture.

Dovetailing of the compliance and risk management system and internal control system¹

Responsible, continuous and systematic management of operating risks, but also of opportunities, is of fundamental importance for BLG LOGISTICS. To this end, we rely on the close dovetailing of the compliance and risk management systems and the internal control system (ICS). The three systems are described in more detail below.

Main features of the compliance organization

Compliance means conforming to all statutory and internal company regulations, such as guidelines and organizational instructions, with the goal to avoid and minimize liability.

In its Code of Conduct, BLG LOGISTICS already committed to complying at all times with the relevant laws and the company’s internal guidelines.

Based on these fundamental values as well as our own ethical principles, we aim to be a reliable and fair partner for our customers, business partners and shareholders.

The goal of compliance is to ensure that an organization operates in a manner that is legally and ethically irreproachable, including the prevention of legal violations within the organization. The task of the compliance officer to support the management and the employees responsible for BLG LOGISTICS’ business processes in achieving these goals derives from this.

In accordance with the rules of procedure of the Board of Management of BLG AG, the compliance officer reports to the Board of Management member responsible for compliance, the Chief Compliance Officer. At the invitation of the Board of Management, the compliance officer reports at meetings of the full Board of Management on the current status of compliance activities at BLG LOGISTICS. Also at the invitation of the Board of Management, the compliance officer reports directly to the Supervisory Board of BLG AG.

Thanks to the compliance management system, misconduct within the organization is prevented and appropriate measures are taken to counter compliance risks or legal violations within the organization or from within BLG LOGISTICS.

The full Board of Management supports the compliance officer in the discharge of their duties.

The compliance officer has set up a regular Compliance Committee.

BLG LOGISTICS’ compliance officer is the point of contact for the external compliance ombudsperson, and at the same time assumes the role of internal ombudsperson.

In the event of a violation of relevant laws or internal guidelines of BLG LOGISTICS, the compliance officer supports the internal investigations of the Audit department.

Should sanctions be required, the compliance officer, in coordination with the Human Resources department, proposes the necessary measures in the Compliance Committee. The Human Resources department then implements the proposals in coordination with the Board of Management, the responsible management and the Compliance Committee.

One particular focus of supplier compliance in the reporting year was the preparation, organized as part of a cross-divisional project, for the German Supply Chain Due Diligence Act, which came into force on January 1, 2023.

The objective of this act is to improve compliance with human rights internationally by specifying the human rights due diligence obligations that companies must observe along the supply chain. It also stipulates environmental requirements. Derived from this, the law defines requirements for responsible management.

Basic elements of risk management

In line with the risk strategy of the BLG Group, the basic conceptual elements of the risk management system are rolled out centrally using a standardized approach to ensure coverage of clear risk accountability and described in the Group guideline on risk management. This leads to systematic and comparable risk identification/documentation, risk analysis/assessment, risk control/monitoring and communication/reporting.

The objective of risk management is to create a shared awareness and positive understanding among management and all employees in managing operating risks in order to ensure the company's risk-bearing capacity. The aim is to identify and assess risks, manage these risks efficiently through appropriate and effective measures, monitor them, and ensure ongoing risk reporting as a basis for sound decision-making. In this way, risk management is intended to contribute to achieving the aims of the corporate strategy and objectives.

The objectives of risk management are:

• Identify risks early and prevent crises and insolvencies (support continuity of the organization)
• Improve planning reliability and risk costs through optimal risk management
• Sound preparation of business decisions with risk analyses to improve the company’s success
• Achieve sustainability-related corporate goals and monitor sustainability-related risks with regard to the three ESG dimensions (Environment, Social, Governance), taking into account the principle of dual materiality (i.e., BLG LOGISTICS’ impact on, for example, the climate or other environmental issues is also monitored).

Risk management organization

The areas of responsibility and roles with regard to the measures pursuant to Section 91 (2) and (3) AktG are clearly defined in the BLG Group’s organizational charts and specified, communicated and documented in the risk management tool. BLG LOGISTICS ensures that those vested with responsibility fulfill the required personal and professional criteria and receive regular training from central Risk Management. As part of the annual planning process, BLG sees to it that sufficient resources are made available for measures designed to promptly identify, evaluate, control and monitor developments that could jeopardize the organization’s continued existence as a going concern. The key provisions governing the organizational structure and workflows are documented and made binding.

Risk management organization encompasses the following components:

The organizational structure describes the tasks and responsibilities of all persons responsible for the risk management process and the measures taken to maintain the implemented system at a consistently high level and to communicate developments to those responsible in a structured and systematic manner.

Opportunity and risk management at BLG LOGISTICS

The risk management process is the process of assessing risks by identifying, documenting, analyzing, evaluating, controlling, monitoring as well as communicating and reporting risks.

The platform for an effective risk management system is the risk management tool, which enables risk managers to exchange information, prepare assessments and consolidate risks in a timely and flexible manner.

The divisions feed reports into the risk management tool on a continuous basis. The risks entered in the risk management tool are then evaluated and monitored by centrally responsible risk managers, who submit detailed risk reports to the Board of Management and the Supervisory Board at least four times a year.

Internal control system

The internal control system (ICS) as the set of all systemically defined controls and monitoring activities has the objective of ensuring the security and efficiency of business transactions, the reliability of financial reporting, and the compliance of all activities with laws and policies. An effective and efficient internal control system is crucial to successfully managing risks in our business processes. In its design, the internal control system at BLG LOGISTICS considers all material business processes and goes beyond controls in the accounting process. The non-financial ICS covers areas such as environmental violations, occupational health and safety and anti-corruption.

The ICS and the elements that contribute to it are regularly the focus of audit activities by the Internal Audit department. These are carried out either within the scope of the risk-based annual audit plan or within the scope of audits scheduled during the year at the request of management.

¹ The disclosures in this section are so-called non-management report disclosures and have not been audited by the auditor.

Integrated governance, risk and compliance approach²

Risk management within the BLG Group is based on an integrated governance, risk and compliance model, which enables responsible management of risks and opportunities.

First line of defense:
Operational management
Operational management of the individual business areas and central departments forms the front line of defense. They manage and are responsible for their processes and identify and assess risks locally at the level of the operating companies. Countermeasures are initiated promptly, and the residual potential impact is assessed. Material risks are reported in the risk management system on the basis of the published internal risk management guideline. The outcomes are continuously incorporated into risk reporting, thus also providing the Board of Management with an overall picture of the current risk situation during the course of the year via the documented reporting lines.

Second line of defense:
Central risk management system, compliance management system, internal control system
Central risk management is closely dovetailed with the two other governance control systems, the compliance management system and the internal control system. All three systems serve to support and systemically monitor operational management. These three core governance control systems provide the organizational framework and control the implementation of the framework guidelines in the operational processes, thus ensuring compliance with laws and our internal corporate standards and rules. Giving consideration to the findings from the other two control systems, the compliance management system and the internal control system, central Risk Management draws up the central risk map and acts as an important node for passing on relevant information to the Internal Audit department as well as for preparation of the annual financial statements.

Third line of defense:
Audit by the Group Internal Audit department
The Group Internal Audit department supports the Board of Management in overseeing the various divisions and business units within the Group. It regularly checks the early risk identification system and the structure and implementation of risk management as part of its independent audit activities.

Fourth line of defense:
Audit by the independent auditor
The risk management system is assessed with regard to the accounting process by the independent auditor within the scope of the audit of the annual financial statements.

² The disclosures in this section are so-called non-management report disclosures and have not been audited by the auditor.

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

Definition and elements of the internal control and 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 appropriate and legally compliant recognition, measurement and presentation of business transactions in financial accounting and reporting as well as non-financial information within the scope of sustainability reporting. The objective is to avoid any material misstatements in accounting and external reporting.

Since the internal control system is an integral component of risk management, they are presented summarized.

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 central Management Accounting, Finance and Accounting departments (Financial Services).

The internal monitoring system comprises controls that are both integrated into and independent of the financial reporting 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 financial reporting 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. In line with the Supervisory Board’s profile of skills and expertise, consideration has also been given to ensuring that its members have appropriate expertise in sustainability aspects that are material for BLG LOGISTICS. The Audit Committee concerns itself in particular with the financial accounting for the company and the Group, including reporting. The activities of the Audit Committee also focus on the risk situation, overseeing the further development of risk management and on compliance issues. This also includes the effectiveness of the internal control system.

Audit activities that are independent of the financial reporting process are also performed by external auditing bodies such as the German public auditing firm 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 German public auditing firm 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.

Financial accounting and reporting process and measures to ensure compliance with the applicable legal requirements
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.

To ensure consistent recognition and measurement, BLG AG has issued accounting guidelines for financial reporting in accordance with the International Financial Reporting Standards (IFRSs). In addition to general principles, these guidelines cover in particular accounting principles and policies and regulations on the statement of profit or loss and other comprehensive income, consolidation principles and special topics. Guidelines for uniform Group-wide accounting have also been drawn up to ensure the implementation of consistent, standardized and efficient accounting and financial reporting across the Group. In addition, a code of practice for the notes and the management report has 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.

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 statement, of profit or loss and other comprehensive income, 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 (Bundesanzeiger) 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 as well as the compliance management system, i.e., the set of all governance systems, ensure the compliance of the financial accounting and reporting process with legally required accounting principles and with the relevant legal requirements as well as the sustainability-related objectives. Discretionary decisions, erroneous controls or fraud may, however, limit the effectiveness of the internal control and risk management system and the compliance management system, so that the established systems cannot guarantee with absolute certainty that the risks will be identified and managed.

Effectiveness of the internal control system and risk management system, including compliance³

With the integrated governance, risk and compliance approach, the Board of Management has created and implemented a management framework for BLG AG, which aims to ensure appropriate and effective internal control and risk management. The measures implemented as part of this approach are similarly aimed at the effectiveness and appropriateness of internal control and risk management as well as compliance management and are explained in more detail in this report. In the context of anchoring the three lines of defense business model and the legal framework, independent reviews and audits simultaneously take place, in particular through audits carried out by the Internal Audit department, and their reporting to the Board of Management and Supervisory Board, and by the Supervisory Board’s Audit Committee, as well as through other external audits.

Based on its review of the internal control and risk management system and compliance management system, as well as the reporting by the Internal Audit department, the Board of Management is not aware of any circumstances which contradict the appropriateness and effectiveness of these systems.

³ The disclosures in this section are so-called non-management report disclosures and have not been audited by the auditor.

Risks and opportunities of future development

Risks for the company arise from its status as personally liable general partner of BLG KG, Bremen. There is currently no identifiable risk of being subject to recourse. 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, supply chain disruptions, inflation and interest rates, further repercussions of the war in Ukraine) 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 2022 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 continuing impact of loss carryforwards resulting from the effects of the coronavirus pandemic and lower investment income from subsidiaries, the management remuneration (remuneration for work) in financial year 2022 remained at the minimum level. For 2023, BLG KG could again be exposed to revenue risks due to the global multiple crisis situation, despite the fact that BLG expects a further reduction in the above loss carryforwards (see Outlook). As a result of the rise in interest rates, BLG AG stands to benefit from higher income from cash management with BLG KG. No further risks isolated to BLG AG are currently identifiable, as its business activities essentially consist of the liability and management function for BLG KG. Based on current knowledge, neither climate change and the related requirements and restrictions, nor the high cost of energy, human resources and materials have a bearing on the risk assessment exclusively for BLG AG. This also applies to the effects of the ongoing war between Russia and Ukraine.

Outlook

Report on forecasts and other statements regarding expected development

Due to the ongoing war between Russia and Ukraine, high energy prices and generally high inflation, coupled with the cooling of the economy, there is also a high level of uncertainty concerning planning for the 2023 financial year. It is still too early to reliably estimate the further impact this will have on the world economy, global trade flows and BLG LOGISTICS’ customers, so that it is again not possible to make an accurate forecast for the current year.

Based on what we know to date, BLG AG forecasts that the general economic conditions described above will again pose challenges for BLG KG’s business development and earnings in the 2023 financial year. Rising interest rates could also lead to additional burdens for BLG KG.

Nevertheless, BLG AG expects to see a further decrease in the loss carryforwards from the subsidiaries of BLG KG, which had ensued as a result of the coronavirus pandemic. On the back of these loss carryforwards, the remuneration for the assumed management of BLG KG was again at the minimum level in the reporting year. This is expected to rise above the minimum level of remuneration again in 2023.

In addition, BLG AG will benefit from rising interest rates to the extent that higher interest on cash management receivables from BLG KG will generate additional interest income.

Overall, BLG AG therefore expects earnings for the 2023 financial year to be significantly higher than in 2022. With respect to the dividend, we plan in the future to allow our shareholders to participate appropriately in earnings in line with our business performance.

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. No other measures were taken or omitted. This assessment is based on the circumstances known to us at the time the reportable transactions were conducted.

Bremen, March 30, 2023

BREMER LAGERHAUS-GESELLSCHAFT
-Aktiengesellschaft von 1877-

THE BOARD OF MANAGEMENT