Explanatory Report. of the Executive Board. of RWE Aktiengesellschaft

Transcription

1 Explanatory Report of the Executive Board of RWE Aktiengesellschaft in accordance with Section 175, Paragraph 2 and Section 176, Paragraph 1 of the German Stock Corporation Act (AktG) on Takeover-related Issues pursuant to Section 289, Paragraph 4 and Section 315, Paragraph 4 of the German Commercial Code (HGB) as of the Balance Sheet Date, December 31, 2011

2 The combined review of operations for RWE Aktiengesellschaft and the Group includes what are known as Takeover-related Issues in accordance with Sec. 289, Para. 4 and Sec. 315, Para. 4 of the German Commercial Code (HGB). An explanatory report by the Executive Board on this must be made available to the Annual General Meeting. Since the capital increase was entered in the Commercial Register on 7 December 2011, RWE AG s subscribed capital has consisted of 575,745,499 no-par-value common shares in the name of the bearer and 39,000,000 no-par-value preferred shares in the name of the bearer without voting rights. They account for % and 6.34 % of the subscribed capital, respectively. Holders of preferred shares are given priority when distributable profit is distributed. Pursuant to the Articles of Incorporation, it is appropriated in the following order: 1) to make back payments on shares of the profit allocable to preferred shares from preceding years; 2) to pay a preferred share of the profit of 0.13 per preferred share; 3) to pay the share of the profit allocable to common shares of up to 0.13 per common share; and 4) to make consistent payments of potential further portions of the profit allocable to common and preferred shares unless the Annual General Meeting decides in favour of a different appropriation. The composition of the subscribed capital and the rights and obligations of the shareholders comply with the requirements of the law and the Articles of Incorporation. As of 31 December 2011, one holding in RWE AG exceeded 10 % of the voting rights. It is held by RW Energie-Beteiligungsgesellschaft mbh & Co. KG, which is headquartered in Dortmund. In compliance with Sec. 21, Para. 1 of the German Securities Trading Act, on 21 December 2007, the company informed us that it held % of RWE AG s voting stock at the time. Within the scope of the capital increase conducted in December 2011, Deutsche Bank AG, headquartered in Frankfurt am Main, temporarily held a stake exceeding the 10 % threshold. Pursuant to the German Securities Trading Act, Deutsche Bank informed us on 12 December 2011 that it held 71,416,748 voting rights on 7 December, corresponding to 12.4 % of the voting rights. At the same time, the bank informed us that its share of voting rights had fallen back under the 10 % threshold on 8 December. In accordance with Sec. 27a, Para. 1 of the German Securities Trading Act, Deutsche Bank declared that the technical implementation of RWE AG s capital increase was the only reason for the purchase of voting stock, which temporarily caused it to exceed the reportable threshold of 10 %. 2

3 Executive Board members are appointed and dismissed in accordance with Sec. 84 et seq. of the German Stock Corporation Act in connection with Sec. 31 of the German Co- Determination Act. Amendments to the Articles of Incorporation are made pursuant to Sec. 179 et seqq. of the German Stock Corporation Act in connection with Art. 16, Para. 6 of the Articles of Incorporation of RWE AG. According to Art. 16, Para. 6 of the Articles of Incorporation, unless otherwise required by law or in the Articles of Incorporation, the Annual General Meeting shall adopt all resolutions with a simple majority of the votes cast; if a majority of the capital stock represented is required, the simple majority shall suffice. The legal right to determine a majority of the capital required to amend the Articles of Incorporation that differs from the majority required by law was thus exercised. Pursuant to Art. 10, Para. 9 of the Articles of Incorporation, the Supervisory Board is authorised to pass resolutions to amend the Articles of Incorporation that only concern the wording, without changing the content. Pursuant to the resolution passed by the Annual General Meeting on 20 April 2011, the Executive Board was authorised to purchase shares of any class in the company until 19 October 2012, totalling up to 10 % of the share capital when the Annual General Meeting passed the resolution or if the following is lower when the authorisation is exercised. The purchase may be limited to shares of a single class. It is at the Executive Board s discretion to purchase the shares on the stock market or by making a public call for shares. This can be done through the use of put or call options. The treasury shares may then be called in. If common shares are bought back, they can also be transferred to third parties within the scope of mergers or acquisitions of companies, parts of companies or stakes in companies, or sold in another manner. A sale not conducted on the stock exchange or via a tender to all shareholders may only be made in exchange for cash. Moreover, the price at the time of sale may not be significantly lower than the stock-market price for common shares bearing the same rights. The company may use common shares bought back to redeem convertible and option bonds issued on the basis of the resolutions passed by the Annual General Meeting held on 22 April The company may also use the common shares bought back to meet obligations arising from employee stock ownership plans. The authorisations may be exercised in full or in part and also for partial amounts. Within the scope of the capital increase conducted in December 2011, 28,105,327 treasury shares were sold on the basis of the authorisations in effect. This corresponds to 4.57 % of the company s subscribed capital. Pursuant to the resolution passed by the Annual General Meeting on 22 April 2009, the Executive Board is authorised to issue option or convertible bonds until 21 April The 3

4 bonds combined nominal value is limited to 6 billion. The shareholders subscription rights can be excluded if the bonds are issued at a price in line with the market and the new shares do not account for more than 10 % of the share capital when the Annual General Meeting passed the resolution or if the following is lower when the authorisation is exercised. The 10 % limit is calculated taking into account other cash capital measures under exclusion of subscription rights, such as the cash capital increase from authorised capital conducted in December The Executive Board may also exclude the shareholders subscription rights in order to prevent the number of shares allocated from the subscription resulting in fractional amounts (fractions of shares). Furthermore, the subscription rights of holders of convertible or option bonds already issued may be excluded. They may be granted subscription rights commensurate to the rights to which they would be entitled as shareholders on conversion of the bond or on exercise of the option. Pursuant to Art. 4, Paras. 3a and 3b of the Articles of Incorporation, 143,975,680 in conditional capital, divided among 56,240,500 common shares in the name of the bearer, may be used to exercise conversion or option rights. In December 2011, RWE AG issued 52,340,499 new common shares in the name of the bearer from authorised capital in exchange for a cash contribution and excluding shareholders subscription rights. As a result, the capital stock was increased by 133,991, to 1,573,748, The Executive Board is now authorised to increase the company s capital stock with the Supervisory Board s approval by up to 153,959, until 16 April 2013 either at once or in several increments through the issuance of common shares in the name of the bearer in exchange for contributions in cash or in kind (authorised capital). The shareholders subscription rights can be excluded with the Supervisory Board s approval, in order to avoid allocating fractions of shares as a result of the subscription. The subscription rights can also be excluded in order to issue shares in exchange for contributions in kind within the scope of mergers or for the purpose of acquiring stakes in companies. Subscription rights can also be excluded in the event of a cash capital increase if the price at which the new shares are issued is not significantly lower than the price at which shares outstanding are traded on the stock market, and if the portion of the capital stock accounted for by the new shares, for which subscription rights are excluded, does not exceed 10 % of the share capital in total. We already made use of most of this amount by implementing the cash capital increase in December The Executive Board shall be empowered, subject to the consent of the Supervisory Board, to determine the further details and conditions of the share issuance. Shares from authorised 4

5 capital are added to shares from conditional capital in cases where they are both issued excluding the shareholders subscription rights. RWE AG s syndicated credit line has a change of control clause including the following main provisions: in the event of a change of control or majority at RWE, further drawings are suspended until further notice. The lenders shall enter into negotiations with us on a continuation of the credit line. Should we fail to reach an agreement with the majority of them within 30 days from such a change of control, the lenders may cancel the line of credit. RWE s non-subordinated bonds also have a change of control clause: in the event of a change of control in conjunction with a drop in RWE AG s credit rating below investmentgrade status, creditors may demand immediate redemption. The redemption amount is calculated on the basis of the corresponding bond conditions. Our 1.75 billion and CHF 250 million hybrid bonds also have change of control clauses. We have the right to cancel and redeem them within the defined change of control period. If they are not redeemed and the credit rating drops below investment-grade status during the change of control period, the annual compensation payable on the hybrid bonds increases by 500 basis points. Members of the Executive Board of RWE AG have a special right of termination in the event of a change of control. On exercise of this right, they receive a one-off payment covering the contract s agreed term, which shall correspond to at least twice and no more than three times their annual contractual compensation. This is in line with the requirements of the German Corporate Governance Code, which has been in force since Dr. Jürgen Großmann was granted a special right of termination before these Code rules became effective. His employment contract provides for a one-off payment that covers all of the remuneration due until the end of the contractual term as well as the sum contractually agreed instead of a pension commitment. Furthermore, in the event of a change of control, retained Executive Board bonuses are prematurely valued and possibly paid. This is done on the basis of the average bonus malus factor of the three preceding years. This is what determines whether retained bonuses are paid out and the amount of the payout. You will find detailed information on this topic in the compensation report. The 2005 long-term incentive plan (Beat) and the 2010 RWE performance share plan (Beat 2010) for the Executive Board and executives of RWE AG and of affiliated companies include a provision for a change of control. In such events, all holders of performance shares 5

6 receive a compensatory payment. It is determined by multiplying the price paid for RWE shares as part of the takeover by the final number of performance shares as of the date of the takeover offer, in line with the corresponding plan conditions. The authorisation to conduct share buybacks and the authorised capital are in line with standards generally accepted by German listed companies. The same applies to the provisions governing changes of control, in particular clauses included in the contracts governing the syndicated credit line, the RWE bonds and Executive Board compensation. Essen, 2 March 2012 RWE Aktiengesellschaft The Executive Board (Großmann) (Birnbaum) (Fitting) (Pohlig) (Schmitz) (Terium) Handwritten signatures 6