Issued Share Capital and Shares
The Company’s share capital currently amounts toS26,400,000. It consists of 26,400,000 ordinary shares with no par value (Stu¨ckaktien), each such share representing a notional value ofS1.00.
The Company’s shares are divided into registered shares and bearer shares. Following the exchange on September 10, 2009, of the total 26,400,000 shares 26,188,777 (approximately 99.2%) were held as bearer shares, while 211,223 (approximately 0.8%) were held as registered shares. If the shares are issued as registered shares, registered shareholders are entitled to request from the management board in writing or in text form (as defined by Section 126b of the BGB) that the registered shares recorded on their behalf in the Company’s stock register be converted to bearer shares. Conversions are subject to the consent of the management board. Any new shares issued under capital increases will be issued as bearer shares. The next scheduled dates for exchanges, according to information published in the German Securities Notices (Wertpapier-Mitteilungen) on October 5, 2006, are December 10, 2009 and February 11, 2010.
A resolution of the general shareholders’ meeting passed by a majority of 95% of the share capital represented is required in order to amend the Company’s articles of association to provide for a direct conversion of bearer shares to registered shares or to permit such a conversion upon the advance request of shareholders pursuant to Section 24 of the AktG. The same requirement applies to an amendment of the provision that stipulates that new shares created under capital increases are issued as bearer shares. This majority requirement will expire on January 1, 2010.
Article 4(5) of the articles of association states that shareholders are not entitled to have their shares evidenced by individual share certificates.
The Company’s Existing Shares have been deposited with Clearstream Banking AG, Neue Bo¨rsenstraße 1, 60487 Frankfurt am Main, Germany, in the form of global share certificates without dividend coupons. Neither the Company nor any of its subsidiaries currently holds any shares of Deutsche Wohnen AG. Development of the Share Capital since the Company’s Formation
The share capital of the Company amounted to DM100,000 when it was formed. It was increased by DM19,900,000 to DM20,000,000 and divided into 4,000,000 no par value shares by a resolution of an extraordinary meeting of the Company’s shareholders on October 30, 1998. The general shareholders’ meeting of June 20, 2001 resolved to convert the share capital to euros. The Company’s share capital then amounted toS10,225,837.62 and was divided into 4,000,000 ordinary shares with no par value (no par value shares), each such share representing a notional value of approximatelyS2.56.
On August 10, 2006, the general shareholders’ meeting resolved to increase the Company’s share capital from own funds byS9,774,162.38, from S10,225,837.62 to S20,000,000, by converting a S9,774,162.38 portion of the capital reserves reported on the balance sheet as of December 31, 2005. No new shares were issued and the share capital as it existed at the time was newly divided, so that five shares representing a notional value ofS1.00 each replaced every no par value share that would have represented a notional value ofS5.00 (following the capital increase from own funds). Subsequently, the share capital was divided into 20,000,000 no par value shares.
Through a resolution of the management board on July 2, 2007, which was approved by the supervisory board on July 2, 2007, the Company’s share capital was increased from authorized capital byS6,400,000 by issuing 6,400,000 new no par value bearer shares against non-cash contributions. This increased the total share capital fromS20,000,000 to S26,400,000 and the total number of no par value shares to 26,400,000. Each of the Oaktree Companies was permitted to underwrite and subscribe for a total of 3,200,000 new shares. On August 7, 2009, an extraordinary shareholders’ meeting of the Company resolved to increase the share capital against cash contributions by up toS250,000,000, from S26,400,000 to up to S276,400,000. The management board and supervisory board resolved on September 13, 2009 to set the subscription price at S4.50 per share and, thus, the total number of New Shares to be issued at 55,440,000.
Several shareholders have objected in writing to the resolution of the extraordinary shareholders’ meeting on August 7, 2009 to increase the Company’s share capital by up toS250,000,000 against cash contributions. However, the Company has concluded an out-of-court settlement with these shareholders, under which the shareholders agree to not file an action against the resolution. In accordance with this settlement, the
Company has granted the holders of statutory subscription rights the possibility to subscribe for additional New Shares, as part of the capital increase resolved by the extraordinary shareholders’ meeting on August 7, 2009, to the extent that holders of subscription rights do not exercise their subscription rights. As part of this settlement, the Company has agreed to establish subscription rights trading and allow the holders of statutory subscription rights Additional Subscription of the New Shares under the capital increase resolved by the extraordinary shareholders’ meeting on August 7, 2009, to the extent that holders of subscription rights have not exercised their subscription rights. Furthermore, the Company has agreed to provide all of the shareholders with additional information on the Company’s business and the capital increase. An additional shareholder informed the Company that he reserves the right to file a plea to nullify the resolution. The Company believes that there are clearly no grounds for a plea of nullity, which, in accordance with the AktG, is only permissible in very limited circumstances. However, it is possible that this shareholder or other shareholders might file such a plea.
The implementation of the capital increase is expected to be registered with the Commercial Register of the Local Court (Amtsgericht) of Frankfurt am Main on October 7, 2009. This capital increase is the subject of this offering circular.
Authorized Capital
The Company’s authorized capital as of the date of this offering circular isS3,600,000.
By a resolution of the general shareholders’ meeting on August 10, 2006, the management board was authorized, subject to the consent of the supervisory board, to increase the Company’s share capital on one or more occasions before August 9, 2011 by up to a total ofS10,000,000 by issuing up to 10,000,000 new ordinary bearer shares against cash or non-cash contributions. The management board utilized this authorization through a management board resolution of July 2, 2007, which was approved by the supervisory board on July 2, 2007, and increased the share capital byS6,400,000 by issuing 6,400,000 new no par value bearer shares against non-cash contributions. See above “—Development of the Share
Capital since the Company’s Formation.”
As a result of partial utilization of this authority, the management board is authorized, subject to the consent of the supervisory board, to increase the Company’s share capital on one or more occasions before August 9, 2011 by up to a total ofS3,600,000 by issuing up to 3,600,000 new ordinary bearer shares against cash or non-cash contributions. Shareholders are to be granted subscription rights. However, the management board is authorized, subject to the consent of the supervisory board, to exclude shareholders’statutory subscription rights for one or more capital increases from authorized capital if the exclusion:
k serves the purpose of consolidating fractional amounts;
k is for capital increases against non-cash contributions, including but not limited to those involving the
acquisition of companies, parts of companies or equity stakes in companies, or capital increases aimed at issuing shares to holders of convertible bonds or bonds with warrants or profit participation rights with conversion or subscription rights that were issued in exchange for non-cash contributions;
k is for a capital increase against cash contributions, and the issue price of the new shares is not materially
below the market price within the meaning of Sections 203(1) and (2) as well as 186(3) Sentence 4 of the AktG of previously listed shares of the same class and with the same terms at the time the final issue price is determined, and the aggregate proportionate amount of the share capital attributable to the new shares for which the subscriptions rights are being excluded pursuant to Section 186(3) Sentence 4 of the AktG does not exceed 10% of the Company’s share capital, whether at the time the authorization goes into effect or at the time it is exercised. Shares that were or are to be issued to satisfy the rights of convertible bonds or bonds with warrants or profit participation rights with conversion or subscription rights should count towards the 10% threshold to the extent that the instruments were issued under the exclusion of subscription rights in analogous application of Section 186(3) Sentence 4 of the AktG. Any own shares sold under exclusion of shareholders’ subscription rights pursuant to Section 71(1) No. 8 Sentence 5 and Section 186(3) Sentence 4 of the AktG during the term of the authorized capital shall also be counted towards the 10% threshold. To qualify as “not materially below market price,” the issue price must be less than 5% below the market price, which is defined for these purposes as the computed average of the stock’s price in the Frankfurt Stock Exchange’s XETRA closing auction (or a comparable successor system) for the last ten trading days;
k is necessary to grant subscription rights for new shares to the holders of warrants or convertible bonds or
profit participation rights with conversion or subscription rights that were granted by the Company or an 149
affiliated company directly or indirectly wholly-owned by the Company, to the degree to which such holders would be entitled to them once they exercised their option or conversion rights or satisfied their conversion obligations.
All other details of the shares and the terms on which they are issued are decided by the management board and approved by the supervisory board.
Contingent Capital
The amount of contingent capital the Company has registered with the Commercial Register isS12,800,000. It was created by three contingent capital increases.
Contingent Capital I
By a resolution of the Company’s general shareholders’ meeting on August 10, 2006, the share capital was increased on a contingent basis by up toS10,000,000 through the issuance of new no par value bearer shares with dividend entitlement from the beginning of the fiscal year in which they are issued (Contingent Capital I, entered in the Commercial Register as Contingent Capital 2006/I). The purpose of this contingent capital increase is to grant shares to holders of warrants or convertible bonds or holders of profit participation rights with conversion or subscription rights that the Company or an affiliated company directly or indirectly wholly-owned by the Company issues before August 9, 2011 on the basis of the authorization that was also granted on August 10, 2006 by the general shareholders’ meeting, provided that the issue is against cash. The contingent capital increase will only be implemented to the extent that subscription rights or conversion rights under these warrants, convertible bonds and/or profit participation rights are exercised or conversion obligations under such instruments are satisfied, and only to the extent that treasury shares are not used. The management board is authorized to determine further details of the implementation of the contingent capital increase (Article 4b of the Company’s articles of association). By a resolution of the management board on July 2, 2007, which was approved by the supervisory board on the same day, Deutsche Wohnen AG issued convertible bonds with a total nominal value ofS25 million on July 31, 2007. The bonds are divided into 500 bearer bonds with a nominal value ofS50,000 each. The convertible bonds were issued as three-year bonds with a term ending July 31, 2010, provided they are not repaid, converted or redeemed and cancelled prior to that time. There are no periodic interest payments on the bonds. Instead, they are repaid at 109% of their nominal value at the end of the term. Holders of the convertible bonds are entitled to convert their bonds into bearer shares at a nominal value ofS1.00 in the period from July 31, 2008 to July 31, 2010. The initial conversion price per share isS45.00. The statutory subscription rights of shareholders for the issued bonds were excluded pursuant to the authorization resolved by the general shareholders’ meeting on August 10, 2006. Each of the Oaktree Companies was permitted to underwrite and subscribe for a total of 250 convertible bonds.
Contingent Capital II
By a resolution adopted at the Company’s general shareholders’ meeting on June 17, 2008, the Company’s share capital was increased on a contingent basis by up toS2,700,000 through the issuance of new no par value bearer shares with dividend entitlement from the beginning of the fiscal year in which they are issued (Contingent Capital I, entered in the Commercial Register as Contingent Capital 2008/I). The purpose of the contingent capital increase is to grant shares to holders of warrants or convertible bonds or holders of profit participation rights with conversion or subscription rights that the Company or a company controlled or majority owned by the Company issues before June 16, 2013 on the basis of the authorization that was also granted on June 17, 2008 by the general shareholders’ meeting, provided that the issue is against cash. The contingent capital increase will only be implemented to the extent that subscription rights or conversion rights under the aforementioned warrants, convertible bonds and/or profit participation rights are exercised or conversion obligations under such instruments are satisfied, and only to the extent that treasury shares are not used (Article 4c of the Company’s articles of association). The management board is authorized to determine further details of the implementation of the contingent capital increase.
Contingent Capital III
On June 17, 2008, the general shareholders’ meeting also resolved to increase the share capital on a contingent basis by a further S100,000 (Contingent Capital III, entered in the Commercial Register as Contingent Capital 2008/II). The contingent capital increase will only be implemented to the extent that holders of subscription rights issued on the basis of the Company’s Performance Share Program, an employee
compensation program that was also resolved on June 17, 2008, exercise their subscription rights. The new shares will be entitled to dividends from the beginning of the fiscal year in which they are issued (Article 4d of the Company’s articles of association).
Right of Sell-out
DB Real Estate Management GmbH (now RREEF Management GmbH) granted all of the registered shareholders entered in the Company’s stock ledger as of June 30, 2009 the irrevocable right to sell their registered shares to DB Real Estate Management GmbH by December 31, 2009. The sell-out price per registered share corresponds to the original purchase price ofS140.00 when the shares were acquired (excluding premium) (approximatelyS28.00 following the capital increase from own funds and stock split) plus annual compounded interest in the amount of 4.5% (based on 365 interest days per year). This amount is to be reduced by the sum of all dividends paid on the sell-out shares, which, for purposes of the calculation, will also increase by interest on the dividend at an annual compounded rate of 4.5% (based on 365 interest days per year). The result is an adjusted sell-out price ofS26.12. In addition to the sell-out price, any original owners who exercise their sell-out rights will receive a 50% share of any additional proceeds that DB Real Estate Management GmbH generates by reselling the shares. To accept the offer, shareholders had to give DB Real Estate Management GmbH written notice on June 30, 2009. As of June 30, 2009, the right of sell-out date, the right of sell-out was used for a total of 579,675 (approximately 2.2% of the Company’s shares) of the 677,822 outstanding registered shares as of June 30, 2009 (approximately 2.6% of the Company’s shares).
See above under “General Information on the Company—Company History” for additional information on the registered shareholders’ sell-out rights.
Authorization to Purchase and Sell Own Shares
A resolution was adopted at the general shareholders’ meeting on June 16, 2009 that authorizes the management board through December 15, 2010, subject to the consent of the supervisory board and provided it complies with the legal requirement of equal treatment, to purchase up to a total of 10% of the Company’s existing share capital. The shares can be purchased in one or more tranches and may used for any purpose permitted by law. The shares may also be sold. In particular, the shares can be sold by means other than on a stock exchange; they can be sold as part of a merger of companies, sold to satisfy conversion or subscription rights or conversion obligations under convertible bonds or bonds with warrants or profit participation rights and sold at a price near the market price if sold as part of a placement, with the possibility to exclude subscription rights in any of these three cases; the shares may also be retired. In addition, the management board can exclude shareholders’ subscription rights for fractional amounts with the approval of the supervisory board if the treasury shares are sold as part of an offering to the Company’s shareholders. Performance Share Program
On June 17, 2008, the general shareholders’ meeting resolved to create a Performance Share Program in which subscription rights to the Company’s shares can be issued to members of the management board and other executives of the Company and subordinate affiliated companies in accordance with separate subscription agreements. The Performance Share Program does not entitle participants to subscribe for one share per subscription right, as is typical of such programs, but rather for a fraction of a share according to a formula. In return, shares can be subscribed for at the reduced price of one euro. Ultimately, the only financial advantage to participants is the difference in the stock price between issuance and exercise of the subscription price. The Performance Share Program will be funded by contingent capital (“Contingent Capital III”). This program has not yet been implemented, and no subscription agreement has been executed as of yet.
General Provisions Governing a Change in the Share Capital
In accordance with the AktG, the share capital of a stock corporation may be increased by a resolution of the general shareholders’ meeting with a majority of at least three-quarters of the share capital represented when the vote is taken, unless the stock corporation’s articles of association prescribe different majority requirements. The Company has exercised its right to stipulate a smaller majority of shares. Pursuant to Article 11(3) of its articles of association, the Company’s general shareholders’ meeting adopts its resolutions by a simple majority of the votes cast and, to the extent that a majority vote of shares is required, by a simple majority of the shares present, except as otherwise required by the law or the articles of association.
The shareholders may also create authorized capital. The creation of authorized capital requires a resolution adopted by a majority of three-quarters of the share capital represented when the vote is taken to authorize the management board to issue shares of up to a specific nominal amount within a period of no more than five years. The nominal amount of the authorized capital may not exceed half of the share capital existing at the time of the authorization.
Additionally, shareholders may resolve to create contingent capital to issue shares to holders of convertible bonds or other securities that grant their holders the right to subscribe for shares, to grant shares as consideration in a merger with another company, or to offer shares to officers and employees, provided that, in each case, a corresponding resolution is approved by a three-quarters majority of the share capital represented when the vote is taken. The nominal amount of contingent capital created for the issuance of