Agenda Annual General Meeting 2004

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Annual General Meeting 2004

Agenda Annual General Meeting 2004

01 Submission of the adopted Company financial statements and management report for the business year 2003, the approved consolidated financial statements and management report for the Group for the business year 2003, and the report of the Supervisory Board.

These documents can be inspected as components of the annual reports of Munich Reinsurance Company and the Munich Re Group at the Company's head office at Königinstrasse 107, 80802 München, and on the internet at www.munichre.com/agm/archive. They will be sent to shareholders on request.

02 Resolution on the appropriation of the balance sheet profit from the business year 2003

The Supervisory Board and the Board of Management propose that the balance sheet profit of €286,975,291.25 be utilised as follows:

Payment of a dividend of €1.25
per share entitled to dividend
€286,253,948.75
Carried forward to new account €721,342.50
Balance sheet profit €286,975,291.25

The proposal for the appropriation of the profit takes into account own shares held directly or indirectly by the Company, which as per Section 71b of the German Stock Companies Act are not entitled to dividend. Up to the Annual General Meeting, the number of shares entitled to dividend may decrease or increase through the further acquisition or sale of own shares. In this case, an appropriately modified proposal for the appropriation of the profit, with an unchanged dividend of €1.25 per share entitled to dividend, will be made to the Annual General Meeting.

03 Resolution to approve the actions of the Board of Management in respect of the business year 2003

The Supervisory Board and the Board of Management propose that approval for the Board of Management's actions be given.

04 Resolution to approve the actions of the Supervisory Board in respect of the business year 2003

The Supervisory Board and the Board of Management propose that approval for the Supervisory Board's actions be given.

05 Elections to the Supervisory Board

The term of office of the Supervisory Board members expires at the end of the Annual General Meeting on 26 May 2004. The employee representatives on the Supervisory Board have already been elected by the staff in a ballot held on 24 March 2004. The representatives of the shareholders will be elected at the Annual General Meeting on 26 May 2004.

The Supervisory Board proposes that the following gentlemen be elected to the Supervisory Board as representatives of the shareholders for the next term of office, i.e. until the end of the Annual General Meeting in 2009:

Ulrich Hartmann, Düsseldorf,
Chairman of the Supervisory Board of E.ON AG

Prof. Dr. rer. nat. Henning Kagermann, Hockenheim,
Chairman of the Executive Board and Chief Executive Officer of SAP AG

Prof. Dr. rer. nat. Hubert Markl, Constance,
Former President of the Max Planck Society

Wolfgang Mayrhuber, Hamburg,
Chairman of the Board of Management of Deutsche Lufthansa AG

Prof. Karel Van Miert, Beersel, Belgium,
Professor at the University of Nyenrode, Netherlands

Dr. jur. Dr.-Ing. E. h. Heinrich v. Pierer, Erlangen,
Chairman of the Board of Management of Siemens AG

Dr. e. h. Dipl.-Ing. Bernd Pischetsrieder, Groß Schwülper,
Chairman of the Board of Management of Volkswagen AG

Dr. jur. Hans-Jürgen Schinzler, Ottobrunn,
Former Chairman of the Board of Management of Munich Reinsurance Company

Dr. jur. Albrecht Schmidt, Grasbrunn,
Chairman of the Supervisory Board of Bayerische Hypo- und Vereinsbank AG

Dr. phil. Ron Sommer, Colonge,
Former Chairman of the Board of Management of Deutsche Telekom AG

Der Aufsichtsrat schlägt ferner vor,

Herrn Dr. jur. Wolf Otto Bauer, Munich,
Former Member of the Board of Management of Munich Reinsurance Company, and

Herrn Dr. jur. Hans-Wilmar von Stockhausen, Munich,
Former Member of the Board of Management of Munich Reinsurance Company,

be elected as substitute members for the above-mentioned representatives of the shareholders.

They will become members of the Supervisory Board in the above order if one of the above representatives of the shareholders proposed for election to the Supervisory Board retires from the Board before the end of his term of office and the AGM does not elect a successor prior to their retirement. The above two gentlemen will become substitute members again in the same order if they cease to be members of the Supervisory Board before the end of the term of office of the Supervisory Board members they have replaced.

In accordance with the German Stock Companies Act (Section 96 para. 1 and Section 101 para. 1) in conjunction with the German Co-Determination Act of 1976 (Section 7 para. 1 sentence 2 in conjunction with sentence 1 item 3), the Supervisory Board is composed of ten members elected by the shareholders at the AGM and ten members elected by the employees. The AGM is not obliged to follow election proposals.

06 Authorisation to buy back and use own shares

The authorisation granted to the Board of Management by the AGM on 11 June 2003 to buy back shares in accordance with Section 71 para. 1 item 8 of the German Stock Companies Act expires on 11 December 2004 and therefore needs to be renewed.

The Supervisory Board and the Board of Management propose that the following resolutions be adopted:

a) The Company shall be authorised to buy back its own shares up to a total amount of 10% of the current share capital. The authorisation may be exercised as a whole or in part amounts, on one or more occasions and for one or more purposes by the Company, but also by dependent Group companies or enterprises in which the Company has a majority shareholding, or by third parties for its or their account. The shares acquired plus other own shares in the possession of the Company or attributable to the Company in accordance with Sections 71a ff. of the German Stock Companies Act shall at no time amount to more than 10% of the share capital. The authorisation may not be used for trading in own shares.

It shall run until 25 November 2005. The authorisation to buy back shares granted by the AGM on 11 June 2003 shall be cancelled as from the moment this new authorisation comes into effect.

b) In accordance with the requirement of equal treatment (Section 53a of the German Stock Companies Act), the shares will be acquired by the Board of Management (aa) via the stock exchange or (bb) via a public purchase offer to all shareholders or via a public invitation to tender such an offer, or (cc) via a public offer to all shareholders to exchange Munich Re shares for shares in another listed company as defined in Section 3 para. 2 of the German Stock Companies Act or via a public invitation to tender such an offer. In the event of bb) and cc), the provisions of the German Securities Acquisition and Takeover Act shall be observed where applicable.

aa) If the shares are acquired via the stock exchange, the purchase price (excluding incidental expenses) may not exceed or undercut by more than 10% the price determined for Company shares with the same securities reference number in the opening auction in Xetra trading (or a comparable successor system) on the Frankfurt stock exchange.

bb) If the shares are acquired via a public purchase offer or a public invitation to tender such an offer, the purchase price per share or the upper and lower limits of the price range (excluding incidental expenses) may not exceed or undercut by more than 20% the arithmetic mean price for Company shares with the same securities reference number in the closing auction in Xetra trading (or a comparable successor system) on the Frankfurt stock exchange on the fifth, fourth and third trading day before the date on which the offer is published. If after a public purchase offer or a public invitation to tender such an offer there are significant deviations in the relevant share price, the offer or the invitation to tender such an offer may be adjusted. In this case, the basis for the adjustment will be the arithmetic mean price in the closing auction in Xetra trading (or a comparable successor system) on the Frankfurt stock exchange on the fifth, fourth and third trading day before the public announcement of the adjustment. The volume may be restricted. If the offer is then oversubscribed or, in the case of an invitation to tender such an offer, not all equivalent offers can be accepted, acceptance shall be based on quotas. For this, the Company may provide for preferred acceptance of small lots of shares (up to 100 shares tendered per shareholder). The purchase offer or the invitation to tender such an offer may provide for further conditions.

cc) In the case of a public offer to exchange, or a public invitation to tender an offer to exchange, Munich Re shares for shares in another listed company ("exchange shares") as defined in Section 3 para. 2 of the German Stock Companies Act, a certain exchange ratio may be specified or also determined by way of an auction procedure. A cash benefit may also be provided for as an additional payment to the exchange offered or as compensation for any fractional shares. In each of these procedures for the exchange of shares, the exchange price or the applicable top and bottom end of the price range in the form of one or more exchange shares and calculated fractional amounts, including any cash or fractional amounts (excluding incidental expenses), may not exceed or undercut by more than 20% the relevant value of Munich Re shares.

The basis for calculating the relevant value of each Munich Re share and of each exchange share shall be the respective arithmetic mean price in the closing auction in Xetra trading (or a comparable successor system) on the Frankfurt stock exchange on the fifth, fourth and third trading day before the date on which the exchange offer or the invitation to tender such an offer is published. If the exchange shares are not traded in the Xetra trading system on the Frankfurt stock exchange, the basis will be the closing prices quoted on the stock exchange having the highest average trading volume in respect of the exchange shares in the course of the preceding calendar year. If after a public exchange offer or a public invitation to tender such an offer there are significant deviations in the relevant share price, the offer or the invitation to tender such an offer may be adjusted. In this case, the basis for the adjustment will be the arithmetic mean price in the respective closing auctions on the fifth, fourth and third trading day before the date of the public announcement of the adjustment. The volume may be restricted. If the exchange offer is then oversubscribed or, in the case of an invitation to tender an exchange offer, not all of several equivalent offers are accepted, acceptance shall be based on quotas. For this, the Company may provide for preferred acceptance of small lots of shares (up to 100 shares tendered per shareholder). The exchange offer or the invitation to tender such an offer may provide for further conditions.

c) The Board of Management shall be empowered to use shares acquired on the basis of the aforementioned authorisation for all legally admissible purposes, and in particular as follows:

aa) They may be used for launching the Company's shares on foreign stock exchanges where they are not yet listed.

bb) They may be sold in return for non-cash payment, in particular as part of offers to third parties in connection with mergers, acquisitions of companies or parts of companies, shareholdings or assets connected with such investments. Selling in this connection may also include the granting of conversion or subscription rights or of warrants and the transferring of shares in conjunction with securities lending.

cc) They may be sold to third parties for cash other than via the stock exchange or via an offer to all shareholders.

dd) They may be offered for subscription to the holders of conversion rights or warrants issued by the Company or one of its dependent Group companies.

ee) They may be offered as employee shares to staff of the Company or of enterprises affiliated with the Company within the meaning of Section 15 ff. of the German Stock Companies Act.

ff) They may be retired without a further resolution of the AGM being required. They may also be retired in a simplified process, without reducing the share capital, by adjusting the proportion of the Company's share capital represented by each of the remaining no-par-value shares. Any retirement may be limited to a portion of the bought-back shares. If the shares are retired in a simplified process, the Board of Management shall be authorised to adjust the number of no-par-value shares in the Articles of Association.

d) The price at which the shares are launched on other stock exchanges in accordance with item c) aa) or sold in accordance with item c) cc) may not significantly undercut the stock price determined for Company shares with the same securities number in the opening auction in Xetra trading (or a comparable successor system) on the Frankfurt stock exchange (excluding incidental costs) on the day the shares are launched or the binding agreement with the third party is concluded. In addition, in these cases the sum of the shares sold, together with any shares that may be issued or sold during the term of this authorisation by excluding the shareholders' subscription rights, directly or indirectly pursuant to Section 186 para. 3 sentence 4 of the German Stock Companies Act, may not exceed a total of 10% of the share capital at the time the shares are issued or sold or are to be issued.

e) The authorisations in accordance with item c) above may be utilised one or more times, partially or wholly, individually or jointly; the authorisations in accordance with item c) bb), cc), dd) or ee) may also be utilised by dependent Group companies or enterprises in which the Company has a majority shareholding, or utilised for its or their account by third parties. The authorisations shall also include the use of shares of the Company acquired on the basis of earlier authorisations in accordance with Section 71 para. 1 item 8 of the German Stock Companies Act and – with the exception of item c) ff) above – the use of shares acquired in accordance with Section 71d sentence 5 of the German Stock Companies Act.

f) Shareholders' subscription rights in respect of these bought-back shares shall be excluded insofar as the shares are used in accordance with the aforementioned authorisations in items c) aa), bb), cc), dd) or ee). Beyond this, if bought-back shares are sold via an offer to the shareholders, the Board of Management shall be entitled to exclude shareholders' subscription rights insofar as this is necessary to grant preemptive rights to the bearers of Company or Group-company convertible bonds or bonds with warrants to the extent to which such bearers would be entitled as shareholders after exercising their warrants or after the conversion requirements from such bonds have been satisfied.

07 Resolution to cancel the existing authorisation for increasing the share capital under "Authorised Capital Increase 2002", to replace this with a new authorisation "Authorised Capital Increase 2004", and to make the relevant amendments to the Articles of Association

After its partial utilisation in 2003, Authorised Capital Increase 2002 adopted by the AGM on 17 July 2002 now totals €89,662,858.24. To enable the Company to further strengthen its shareholders' equity by means of this instrument if required in the coming years, the Supervisory Board and the Board of Management propose the following:

a) Cancellation of the authorisation of 17 July 2002

The authorisation granted by the AGM on 17 July 2002 regarding Authorised Capital Increase 2002, as laid down in Article 4 para. 1 of the Articles of Association, shall be cancelled as soon as this resolution becomes effective through entry in the Commercial Register.

b) Authorisation

The Board of Management shall be authorised, with the consent of the Supervisory Board, to increase the Company's share capital at any time up to 25 May 2009 in one or more stages by an amount of up to €280 million by issuing new registered no-par-value shares against cash or non-cash contribution (Authorised Capital Increase 2004).

In the case of capital increases against cash contribution, shareholders shall be granted a subscription right. However, the Board of Management is authorised, with the consent of the Supervisory Board, to exclude the shareholders' subscription rights in the following cases:

  • in order to exclude fractional amounts from the subscription rights;
  • insofar as this is necessary to grant the bearers of warrants or convertible bonds or bonds with warrants, issued by the Company or by one of its dependent Group companies, pre-emptive rights to the extent to which they would be entitled as shareholders after exercising their warrants or after the conversion requirements from such bonds have been satisfied; or
  • if the issue price of the new shares is not significantly lower than the stock market price and the shares issued with exclusion of the shareholders' subscription rights pursuant to Section 186 para. 3 sentence 4 of the German Stock Companies Act do not exceed a total of 10% of the share capital either at the time this authorisation becomes effective or at the time it is exercised. This maximum limit shall include shares sold or issued, or to be issued, during the term of this authorisation on the basis of other authorisations with exclusion of subscription rights, directly or indirectly pursuant to Article 186 para. 3 sentence 4 of the German Stock Companies Act.


In addition, the Board of Management shall be authorised, with the consent of the Supervisory Board, to exclude subscription rights in the case of capital increases against non-cash contribution.

The Board of Management shall also be authorised, with the consent of the Supervisory Board, to determine all other rights of the shares and the terms of issue.

c) Amendment to the Articles of Association

Article 4 paragraph 1 of the Articles of Association shall be reworded as follows:

"(1)The Board of Management shall be authorised, with the consent of the Supervisory Board, to increase the Company's share capital at any time up to 25 May 2009 in one or more stages by an amount of up to €280 million by issuing new registered no-par-value shares against cash or non-cash contribution (Authorised Capital Increase 2004).

In the case of capital increases against cash contribution, shareholders shall be granted a subscription right. However, the Board of Management shall be entitled, with the consent of the Supervisory Board, to exclude fractional amounts from such subscription rights and insofar as this is necessary to grant the bearers of warrants or convertible bonds or bonds with warrants, issued by the Company or by one of its dependent Group companies, pre-emptive rights to the extent to which they would be entitled as shareholders after exercising their warrants or after the conversion requirements from such bonds have been satisfied. The Board of Management shall also be entitled, with the consent of the Supervisory Board, to exclude subscription rights if the issue price of the new shares is not significantly lower than the stock market price and the shares issued with exclusion of the shareholders' subscription rights pursuant to Section 186 para. 3 sentence 4 of the German Stock Companies Act do not exceed a total of 10% of the share capital either at the time this authorisation becomes effective or at the time it is exercised. This maximum limit shall include shares sold or issued, or to be issued, during the term of this authorisation on the basis of other authorisations with exclusion of subscription rights, directly or indirectly pursuant to Article 186 para. 3 sentence 4 of the German Stock Companies Act.

In addition, the Board of Management shall be authorised, with the consent of the Supervisory Board, to exclude the shareholders' subscription rights in the case of capital increases against non-cash contribution.

The Board of Management shall also be authorised, with the consent of the Supervisory Board, to determine all other rights of the shares and the terms of issue."

Preconditions for attending the Annual General Meeting

Every shareholder may attend the Annual General Meeting in person or be represented by a proxy, provided the shareholder has given notice of his or her intention to participate to the Board of Management of the Company not later than Wednesday, 19 May 2004, and is entered in the register of shareholders. The shares entered in the register of shareholders on 19 May 2004 shall be material for establishing the right to participate and voting rights.

As part of our service, we are again offering shareholders the opportunity to be represented at the AGM – in accordance with their instructions – by one of the proxies nominated by the Company. These proxies will exercise the voting rights solely in accordance with the instructions they receive from the shareholders. The proxies may be appointed in writing by means of the form sent to shareholders, or via the internet at www.munichre.com/agm/archive. Instructions issued to the proxies via the internet may be changed on the day of the AGM at www.munichre.com/agm/archive right up to the end of the general debate.

Shareholders may also exercise their voting rights through a proxy appointed in writing, a bank or a shareholders' association. In these cases, the proxies must give due notice of their intention to attend or arrange for the shareholders to give such notice for them. If neither a bank nor a shareholders' association is authorised in this way, authorisation should be granted in writing, by fax using number +49 (89) 38 91-92 16, or via the internet at www.munichre.com/agm/archive.

If a bank is entered in the shareholders' register, it may only exercise the voting rights for shares that it does not own if it has an authorisation to do so from the shareholders concerned.

Shareholders may use the internet (www.munichre.com/agm/archive) to order admission cards or to appoint proxies nominated by the Company. To do so, they will need their shareholder number and the relevant AGM access code. This and other information for registering, issuing proxies and following the AGM on the internet will be sent by post to all shareholders entered in our shareholders' register.

Transmission of the AGM on the internet

We are again offering shareholders who are unable to attend the AGM in person the chance to follow the whole AGM live on the internet (also at www.munichre.com/agm/archive), using their shareholder number and the relevant AGM access code. The opening of the Annual General Meeting by the Chairman of the Meeting and the report of the Chairman of the Board of Management can be publicly viewed live on the internet (www.munichre.com/agm/archive) and will be available after the AGM as a recording. There will be no recording of the whole live transmission.

Address for enquiries or motions from shareholders 
 
Enquiries from shareholders regarding the AGM should be sent to the following address only:

Münchener Rückversicherungs-Gesellschaft
ZA/G – Aktienregister
80791 München
Germany
(Fax: +49 (89) 38 91-92 16)

or by e-mail to

shareholder@munichre.com

This is also the address to which motions and any election proposals from shareholders must be sent; motions and election proposals sent to other addresses cannot be considered. Any countermotions or election proposals that reach us by 24.00 hrs on 11 May 2004 will be published on the internet at www.munichre.com/agm/archive. Any comments by the Supervisory Board and the Board of Management on such proposals will also be published at the above-mentioned internet address.

Munich, 16 April 2004

The Board of Management

For the Annual General Meeting on 26 May 2004

Report of the Board of Management on the exclusion of subscription subscription rights proposed under items 6 and 7 of the agenda (in accordance with Section 186 para. 4 sentence 2 in conjunction with Sections 71 para. 1 item 8 and 203 para. 2 sentence 2 of the German Stock Companies Act)

1) Re item 6 on the agenda

At past AGMs, resolutions were adopted authorising the Company to buy back and sell its own shares. The latest of these authorisations is due to expire on 11 December 2004. Owing to the expiry of this authorisation in the current business year, the proposed resolution is designed to replace the current authorisation granted by the AGM on 11 June 2003. Apart from a few small changes, the new proposal corresponds to the previous authorisation.

It will enable the Company or dependent Group companies, or enterprises in which the Company has a majority shareholding, or third parties acting for its or their account, to buy back shares up to a total amount of 10% of the Company's current share capital.

For this purpose, the Company is to be enabled to buy back shares not only via the stock exchange but also through a public offer to shareholders of the Company or through a public invitation to tender such an offer. The Company is also to be given the possibility to offer not only cash but also shares in other listed companies by way of exchange, which for shareholders can be an attractive alternative to a public purchase offer. It gives the Company additional options for optimally structuring share buy-backs, which is also in the interests of the shareholders. In this regard, a specific exchange ratio is to be determined, which may be supplemented by a cash benefit as an additional payment to the exchange offered or as compensation for any fractional shares.

Shares which the Company buys back may be sold again via the stock exchange or a public offer to all shareholders. This takes account of the legal requirement of equal treatment (Section 53a of the German Stock Companies Act).

Besides this, the Company may also limit the shareholders' subscription rights and, pursuant to Article 186 para. 3 sentence 4 of the German Stock Companies Act, may sell the Company's own shares to institutional investors, for example, or launch the shares on foreign stock exchanges. This is in the interest of the Company and puts it in a position to react quickly and flexibly to favourable stock market situations. The shares may only be sold at a price which does not significantly undercut the current stock market price. The Board of Management will endeavour – taking into account current market circumstances – to keep any discount on the stock market price as low as possible. The Board of Management will only avail itself of the authorisation to exclude subscription rights in the sale of own shares, pursuant to Section 186 para. 3 sentence 4 of the German Stock Companies Act, insofar as together with existing authorisations to issue shares from capital approved for this purpose, excluding shareholders' subscription rights, or as a result of an issue of convertible bonds or bonds with warrants, the limit provided for under Section 186 para. 3 sentence 4 of the German Stock Companies Act – namely 10% of the Company's share capital – is not exceeded.

The authorisation also gives the Company the option of having own shares available to offer as a consideration in connection with mergers, acquisitions of companies or the purchase of shareholdings. International competition and the globalisation of the economy increasingly require this type of acquisition financing. The proposed authorisation is intended to give the Company the necessary scope to take quick and flexible advantage of opportunities that arise for acquiring companies or shareholdings. This is reflected in the proposed exclusion of subscription rights. In determining the valuation ratios, the Board of Management will ensure the interests of the shareholders are appropriately considered. As a rule, when measuring the value of the shares offered as a consideration, it will take as a basis the stock market price of Munich Re shares. However, a systematic coupling of the valuation to a stock market price is not provided for, in particular to prevent fluctuations in the share price from jeopardising negotiation outcomes once they have been reached.

The Company will have the possibility to issue convertible bonds or bonds with warrants against both cash and non-cash payment. To service these bonds, it may be expedient to use own shares in part or in full, instead of a capital increase. This is also provided for in the authorisation, with an exclusion of shareholders' subscription rights to this extent.

Finally, the authorisation allows the possibility, in the event of own shares being sold by means of an offer to all shareholders, for shareholders' subscription rights to be partially excluded in favour of the holders of convertible bonds or bonds with warrants. This enables the holders of convertible bonds or bonds with warrants to be granted a subscription right as protection against dilution, instead of a reduction of the exercise or conversion price.

In addition, the Company is to be enabled to issue employee shares to staff of the Company or of its affiliated enterprises.

The authorisation regarding the uses to which own shares may be put is to apply not only in respect of shares acquired on the basis of this resolution. Rather, the authorisation is also to include shares acquired on the basis of the authorisations adopted by earlier AGMs pursuant to Section 71 para. 1 item 8 and Section 71d sentence 5 of the German Stock Companies Act. It is advantageous for the Company and creates further flexibility to be able to use these own shares in the same way as those acquired on the basis of the above resolution.

Own shares acquired on the basis of this resolution and earlier resolutions may be retired without requiring a new resolution of the AGM. This shall not apply to shares acquired on the basis of Section 71d sentence 5 of the German Stock Companies Act. In accordance with item 3 of Section 237 para 3 of the German Stock Companies Act, newly introduced as a result of the Transparency and Public Disclosure Act of 19 July 2002, the AGM may resolve to retire no-par-value shares without reducing the share capital. The proposed authorisation provides for this option in addition to retirement with a share capital reduction. If own shares are retired without reducing the share capital, the proportion of the share capital represented by each of the other no-par-value shares automatically increases. The Board of Management is therefore also to be authorised to make the necessary amendment to the Articles of Association to take account of the resultant reduction in the number of no-par-value shares.

 

If the authorisation is utilised, the Board of Management will inform shareholders about the details at the next AGM following the utilisation.

2) Re item 7 on the agenda

The proposal being made to the AGM is that a new authorisation be granted for increasing the share capital by a total of up to €280 million (Authorised Capital Increase 2004) to replace Authorised Capital Increase 2002, granted until 17 July 2007 and now amounting to €89,662,858.24 after the capital increase last November.

In the case of utilisation of Authorised Capital Increase 2004 through capital increases against cash contribution, the shareholders will generally have a subscription right.

The Board of Management is to be authorised, with the consent of the Supervisory Board, to exclude subscription rights in capital increases against cash contribution if the shares are issued in accordance with Section 186 para. 3 sentence 4 of the German Stock Companies Act at an amount that is not significantly lower than the stock market price. The Board of Management will endeavour – taking into account current market circumstances – to keep any discount on the stock market price as low as possible. The authorisation will enable the Company to cover any capital needs at very short notice in order to take swift and flexible advantage of market opportunities in different fields of business. The exclusion of subscription rights enables the Company to act quickly and place the shares at a price close to the market price, i.e. without the discount usual in rights issues. Neither at the time the authorisation becomes effective nor at the time of its execution may this capital increase exceed 10% of the current share capital. This maximum of 10% of the share capital includes shares issued, or to be issued, within the term of this authorisation by excluding subscription rights, indirectly pursuant to Article 186 para. 3 sentence 4 of the German Stock Companies Act, to service convertible bonds or bonds with warrants. It also includes own shares insofar as they are sold within the term of this authorisation by excluding subscription rights pursuant to Article 71 para 1 item 8 in conjunction with Article 186 para. 3 sentence 4 of the German Stock Companies Act.

 

Through this limitation, account is taken of the shareholders' need for protection against dilution of their stock. As the new shares will be placed at a price close to the market price, shareholders wishing to maintain their proportionate holding in the Company always have the possibility of buying the requisite number of shares at approximately the same conditions on the stock market.

In addition, subscription rights are to be excluded to the extent that is necessary to grant holders or creditors of bonds a subscription right for new shares if the conditions of the bonds provide for this. To facilitate their placement on the capital market, such bonds have a protection against dilution which provides for the holders or creditors to be granted a subscription right for new shares in subsequent share issues. They are thus treated as if they were already shareholders. In order to equip the bonds with such protection against dilution, the subscription right of shareholders must be excluded in respect of these shares. This makes it easier to place the bonds and thus accords with the shareholders' interest in an optimum financing structure for the Company.

Subscription rights are also to be excluded for fractional amounts. This is to facilitate the handling of issues with a general subscription right for shareholders. Such fractional amounts may result from the volume of the respective issue and the fixing of a practicable subscription ratio. The value of the excluded rights per shareholder is usually small, whereas the expenditure for an issue without such exclusion rights would be markedly higher. In other words, such subscription rights are excluded for reasons of practicability and efficiency of the respective issue.

Subscription rights are also to be excluded for capital increases against non-cash contribution. We want to continue to be in a position to acquire companies, parts of companies, shareholdings or assets connected with such investments, in order to strengthen our competitiveness and to increase our earnings power and corporate value. It has become apparent that ever greater units are involved in such investments. In many cases, very high considerations have to be paid. Often these need to be or may be of a non-cash nature – for example, in order to achieve an optimum financing structure. Frequently sellers insist on receiving shares as a consideration, as this is more favourable for them. The option of using own shares for acquisition financing gives the Company the necessary scope to take quick and flexible advantage of acquisition opportunities that arise. It enables the Company to acquire larger units by transferring shares. There should also be the opportunity to acquire assets in return for shares. For both eventualities, it has to be possible to exclude shareholders' subscription rights. As such acquisitions have to be effected at short notice, they cannot be approved by an Annual General Meeting taking place only yearly. They require capital which the Board of Management – with the consent of the Supervisory Board – can access quickly. We also want to be able to use the proposed authorised capital increase for this. The amount of the new authorisation for capital increases is designed to ensure that major acquisitions can be financed, be it through cash contribution or in return for shares.

Munich, 16 April 2004

The Board of Management


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