Full Press Release Details
Convenience Translation
Invitation to the Annual General Meeting
Fresenius Medical Care AG & Co. KGaA
ISIN: DE0005785802 // Securities Identification No.: 578580
ISIN: DE000A169Q13 // Securities Identification No.: A169Q1
ISIN: US3580291066 // CUSIP: 358029106
We hereby invite our shareholders to the
Annual General Meeting
to be held on Thursday, 12 May 2016, at 10:00 a.m. at the Congress Center Messe Frankfurt, Ludwig-Erhard-Anlage 1, 60327 Frankfurt am Main, Germany.
1. Presentation of the annual financial statements and consolidated group financial statements each approved by the Supervisory Board, the management reports for Fresenius Medical Care AG & Co. KGaA and the consolidated group, the explanatory report by the General Partner on the information pursuant to sections 289 (4), 315 (4) of the German Commercial Code (Handelsgesetzbuch - HGB) and the report of the Supervisory Board of Fresenius Medical Care AG & Co. KGaA for fiscal year 2015; resolution on the approval of the annual financial statements of Fresenius Medical Care AG & Co. KGaA for fiscal year 2015
The Supervisory Board endorsed the annual financial statements and the consolidated group financial statements drawn up by the General Partner according to section 171 German Stock Corporation Act (Aktiengesetz - AktG). According to section 286 (1) AktG, the annual financial statements are to be submitted for approval by the General Meeting; the other aforementioned documents are to be made accessible to the General Meeting without requiring the passing of any additional resolution.
The General Partner and the Supervisory Board propose that the annual financial statements of Fresenius Medical Care AG & Co. KGaA for the fiscal year 2015 as presented, showing a profit of EUR 3,933,193,161.40 be approved.
2. Resolution on the allocation of distributable profit
The General Partner and the Supervisory Board propose to allocate the profit shown in the annual financial statements in the amount of EUR 3,933,193,161.40 for the fiscal year 2015 as follows:
| Payment of a dividend of EUR 0.80 for each of the 305,314,120 shares entitled to a dividend | EUR | 244,251,296.00 | ||
| Profit carried forward to new account | EUR | 3,688,941,865.40 | ||
| Distributable profit | EUR | 3,933,193,161.40 |
The proposal on the allocation of distributable profit reflects the 999,951 treasury shares currently held directly by the Company that are not entitled to a dividend pursuant to section 71b AktG. In case the number of shares entitled to the dividend for fiscal year 2015 changes before the date of the Annual General Meeting, the above proposal will be amended accordingly and presented for resolution under this agenda item 2 at the Annual General Meeting, with an unchanged dividend of EUR 0.80 for each share entitled to receive dividend payments, as well as amounts for the sum to be distributed and the carryforward amended with regard to such new proposal on the allocation of distributable profit.
The dividend is payable on 13 May 2016.
3. Resolution on the approval of the actions of the General Partner for fiscal year 2015
The General Partner and the Supervisory Board propose to approve the actions of the General Partner of the Company during the fiscal year 2015.
4. Resolution on the approval of the actions of the Supervisory Board for fiscal year 2015
The General Partner and the Supervisory Board propose to approve the actions of the members of the Supervisory Board of the Company during the fiscal year 2015.
5. Election of the auditor and consolidated group auditor for fiscal year 2016
The Supervisory Board, based on the recommendation of its Audit and Corporate Governance Committee (Pr fungs- und Corporate-Governance-Ausschuss), proposes the election of KPMG AG Wirtschaftspr fungsgesellschaft, Berlin, as auditor and consolidated group auditor for the fiscal year 2016.
6. Resolution on the approval of the revised compensation system for the members of the Management Board of the General Partner
With a vast majority (around 99.71% of votes cast), the shareholders of Fresenius Medical Care AG & Co. KGaA have last approved the current compensation system for the members of the Management Board of the General Partner in the Annual General Meeting on 12 May 2011.
To date, one of the essential components of the compensation system for the members of the Management Board of the General Partner was the Company s Long Term Incentive Program 2011 (LTIP 2011), which consists of the Stock Option Plan 2011 and the Phantom Stock Plan 2011. Since the end of fiscal year 2015, the issuance of stock options and phantom stocks under the LTIP 2011 is not possible anymore. In order to continue, in the interest of the Company, to enable the members of the Management Board to adequately participate in the long-term, sustained success of Fresenius Medical Care, the Supervisory Board of Fresenius Medical Care Management AG has resolved the introduction of the Long Term Incentive Plan (LTIP 2016) as successor program with effect as of 1 January 2016. The compensation system as revised by the introduction of the LTIP 2016 shall be presented to the Annual General Meeting for approval pursuant to section 120 (4) AktG. In all other respects, the compensation system for the members of the Management Board will remain unchanged.
The essential contents of the LTIP 2016 and the corresponding adjustments to the existing compensation system are described below:
As well as the LTIP 2011, which expired at the end of the fiscal year, the LTIP 2016 is a variable compensation component with long-term incentive effects. Pursuant to the LTIP 2016, the members of the Management Board may be granted so-called Performance Shares once or several times a year in the years from 2016 to 2018. Performance Shares are virtual share-based compensation components which, depending on the achievement of certain success targets, entitle to cash compensation. The Supervisory Board will, in due exercise of its discretion and taking into account the individual responsibility and performance of each of the members of the Management Board, determine the number of Performance Shares to be granted to the individual Management Board members by initially granting a so-called grant
value. In order to determine the number of Performance Shares to be granted, the respective grant value will then be divided by the value of a Performance Share at the time of the grant. This number of Performance Shares may change over a period of three years, depending on the level of achievement of certain ambitious success targets; such change may lead to the entire loss of all Performance Shares or (as a maximum) to the doubling of their number. The resulting number of Performance Shares, which is determined after a performance period of three years and based on the respective level of target achievement, is deemed finally earned four years after the day of the respective grant. The number of such vested performance shares is then multiplied by the average stock exchange price of the Company s share over a period of thirty days prior to the lapse of this vesting period. The respective resulting amount will be paid to the Management Board members as cash compensation for their respective Performance Shares.
The level of overall target achievement in the three-year performance period is determined on the basis of the three performance targets (i) revenue growth, (ii) net income growth and (iii) return on invested capital (ROIC) improvement.
An annual target achievement level of 100% will be reached for the revenue growth performance target if revenue growth is 7% in each individual year of the three-year performance period; revenue growth of 0% will lead to a target achievement level of 0% and the maximum target achievement level of 200% will be reached in the case of revenue growth of at least 16%. If revenue growth ranges between these values, the degree of target achievement will be linearly interpolated between these values.
In addition, the target achievement for the net income growth performance target is determined. An annual target achievement level of 100% will be reached if net income growth is 7% in each individual year of the three-year performance period. In the case of net income growth of 0%, the target achievement level will also be 0%; the maximum target achievement of 200% will be reached in the case of net income growth of at least 14%. Between these values, the degree of target achievement will be determined by means of linear interpolation.
The third performance target measured is the improvement of the return on invested capital (ROIC). An annual target achievement level of 100% will be reached if the target ROIC as defined for the relevant year is reached. The target ROIC is 7.3% for 2016 and will increase by 0.2 percentage points per year to 7.5% (2017), 7.7% (2018), 7.9% (2019) and 8.1% (2020). A target achievement level of 0% will be reached if the ROIC falls below the target ROIC for the respective year by 0.2 percentage points or more, whereas the maximum target achievement level of 200% will be reached if the target ROIC for the respective year is exceeded by 0.2 percentage points or more. Again, the degree of target achievement will be determined by
means of linear interpolation if the ROIC ranges between these values. In case the ROIC target achievement level in the third year of a performance period is equal or higher than the ROIC target achievement level in each of the previous years, the ROIC target achievement level of the third year is deemed to be achieved for all years of the respective performance period.
On the basis of the level of target achievement in respect of each of these three performance targets over the three-year performance period, average values are calculated, which are taken into account for the determination of the level of overall target achievement, each weighted at one-third. The level of overall target achievement will then be determined on the basis of the mean of these three average values. The overall target achievement can be in a range of 0% to 200%. The number of Performance Shares granted to the individual Management Board members at the beginning of the performance period will each be multiplied by the level of overall target achievement in order to determine the final number of Performance Shares, which forms the basis for the cash payments under the LTIP 2016 described above.
The General Partner and the Supervisory Board propose to approve this compensation system for the members of the Management Board of the General Partner of Fresenius Medical Care AG & Co. KGaA as revised with effect as of 1 January 2016.
7. Elections to the Supervisory Board and to the Joint Committee
With effect as from the conclusion of the Annual General Meeting on 12 May 2016, the regular term in office of the current members of the Supervisory Board ends. Pursuant to the Articles of Association, also the term of the members of the Joint Committee who were appointed from the Supervisory Board of the Company to the Joint Committee by the General Meeting ends at the same time. Therefore, new elections of the members of the Supervisory Board and of the members of the Joint Committee of the Company to be elected by the Annual General Meeting are required.
According to sections 278 (3), 96 (1), 101 (1) AktG and Article 8 (1) of the Articles of Association of the Company, the Supervisory Board consists of six members who are elected by the General Meeting in accordance with the German Stock Corporation Act. Pursuant to Article 8 (2) of the Company s Articles of Association, the Supervisory Board members are in principle elected for the period until the conclusion of the Annual General Meeting which resolves on the discharge (Entlastung) for the fourth fiscal year after the commencement of the term of office. The year in which the term of office commences shall not be counted.
Pursuant to clause 5.4.3 sentence 1 of the German Corporate Governance Code (Deutscher Corporate Governance Kodex DCGK), elections to the Supervisory Board are intended to be conducted on an individual basis.
According to Article 13a of the Company s Articles of Association, the Joint Committee consists of two members of the Supervisory Board of the General Partner delegated by the General Partner and two members of the Supervisory Board of the Company. As laid out in Article 13b (2) sentence 1 of the Articles of Association of the Company, the two Supervisory Board members of the Company on the Joint Committee will be appointed by resolution of the General Meeting. According to Article 13b (4) and Article 8 (2) of the Company s Articles of Association, the Supervisory Board members in the Joint Committee are also elected for the period until the conclusion of the Annual General Meeting which resolves on the discharge for the fourth fiscal year after the commencement of the term of office. The year in which the term of office commences shall not be considered for this calculation.
The Supervisory Board proposes the election of the following persons to the Supervisory Board for a term until the conclusion of the General Meeting which resolves on the discharge for fiscal year 2020 and, in parallel and for the same period, the election of Mr. Rolf A. Classon and Mr. William P. Johnston to the Joint Committee of the Company in accordance with sections 13a et seqq. of the Articles of Association of the Company:
a) Dr. Gerd Krick, Chairman of the Supervisory Board of Fresenius SE & Co. KGaA, Gleinst tten, Austria
b) Dr. Dieter Schenk, lawyer and tax adviser, Partner at Noer LLP, Ottobrunn
c) Rolf A. Classon, non-executive Chairman of the Board of Directors of Hill-Rom Corp., Martinsville, New Jersey, USA
d) William P. Johnston, former Chairman of the Board of Directors of Renal Care Group, Inc., Nashville, Tennessee, USA
e) Deborah Doyle McWhinney, former Chief Executive Officer and Chief Operating Officer of Citi Enterprise Payments (Citigroup, Inc.), New York, New York, USA
f) Pascale Witz, Executive Vice President, Global Diabetes & Cardiovascular, Sanofi S.A., Paris, France.
As a result of his broad experience and his longstanding membership in the Audit and Corporate Governance Committee of the Supervisory Board as well as his independence from Fresenius Medical Care AG & Co. KGaA, its General Partner and its Management Board, Mr. William P. Johnston meets the qualifications for the function as independent financial expert in the Supervisory Board within the meaning of section 100 (5) AktG.
With a view to clause 5.4.3 sentence 3 DCGK, it should be noted that it is intended to propose the election of Dr. Gerd Krick as Chairman of the Supervisory Board in case of his reelection as a member of the Supervisory Board.
Also, the following is disclosed as a matter of precaution in view of number 5.4.1 para. 5 and para. 6 DCGK: Dr. Krick is the Chairman of the Supervisory Board of Fresenius SE & Co. KGaA and of Fresenius Management SE as well as member of the Supervisory Board of Fresenius Medical Care Management AG. Dr. Schenk is the Deputy Chairman of the Supervisory Board of Fresenius Management SE and of Fresenius Medical Care Management AG. Dr. Schenk is also the Chairman of the Foundation Board of the Else Kr ner-Fresenius-Stiftung, the sole shareholder of Fresenius Management SE as well as limited shareholder of Fresenius SE & Co. KGaA, and co-executor of the estate of Mrs. Else Kr ner. Furthermore, Dr. Schenk is a partner of the law firm Noerr LLP which renders legal advice to the Company. Other than indicated above, it is the Supervisory Board s assessment that no personal or business relations exist between the candidates proposed for election under this agenda item and the enterprise, the corporate bodies of the Company or a shareholder holding a material interest in the Company which an objective shareholder would consider material for his election decision.
The aforementioned election proposals are based on the recommendations of the Supervisory Board s Nomination Committee.
The relevant personal details of the individuals proposed for election under this agenda item as well as further relevant information are listed under Section II. following this Agenda. Corresponding information will be available on the Company s website under www.freseniusmedicalcare.com/en/home/investors/annual-general-meeting from the day of the convening of the Annual General Meeting.
8. Resolution on modifications of the remuneration of the members of the Supervisory Board and its committees and on the corresponding amendments to Article 13 of the Company s Articles of Association
The General Meeting lastly approved the current compensation system for the members of the Supervisory Board of the Company on 12 May 2011. Since then, the demands as to the
qualification of members of supervisory boards and to time requirements for the work in supervisory boards as well as to the degree of professionalism in supervisory boards have once more noticeably increased. In order to adequately account for these increased demands and for the variety of tasks and responsibilities of the members of the Supervisory Board and to ensure, in the interest of the Company, that the Company can continue to recruit first-class candidates for service on the Supervisor Board, it is proposed to increase the fixed remuneration components of the compensation for the members of the Supervisory Board by ten percent each. This relates to the fixed remuneration of the members of the Supervisory Board for their work in the Supervisory Board as well as to the remuneration for services on committees of the Supervisory Board and the acceptance of functions as chairman or deputy chairman of the Supervisory Board and of committees.
The General Partner and the Supervisory Board therefore propose the following resolution to be passed:
a) Articles 13 (2), (3) and (6) of the Articles of Association of the Company are amended as follows:
Art. 13 Remuneration of Supervisory Board Members
(2) Each member of the supervisory board shall receive a fixed fee of USD 88,000.00 per annum for each full fiscal year, payable in four equal installments at the end of each calendar quarter.
(3) The chairman of the supervisory board shall receive additional remuneration in the amount of USD 88,000.00 and his deputy additional remuneration in the amount of USD 44,000.00.
(6) As a member of a committee, a supervisory board member shall receive an additional amount of USD 44,000.00 per year. As chairman of a committee, a member of the committee shall in addition receive USD 22,000.00 per year and as deputy chairman an additional USD 11,000.00 respectively, payable in each case in four equal installments at the end of each calendar quarter. For memberships in the Nomination Committee and in the Joint Committee (Articles 13a et seqq.) as well as in the capacity of their respective chairmen and deputy chairmen, no separate remuneration shall be granted. Article 13e (3) shall remain unaffected.
b) Apart from the above, Article 13 of the Company s Articles of Association shall remain unchanged.
c) The modifications above shall apply for fiscal years as from 1 January 2017.
9. Resolution on the authorization to purchase and use treasury shares pursuant to section 71 (1) No. 8 AktG and on the exclusion of subscription rights
The authorization of the Management Board of the General Partner to purchase and use the treasury shares for specific purposes as granted by the Annual General Meeting on 12 May 2011 ends upon the expiration of 11 May 2016. In order to also enable the Company to purchase and use treasury shares in the future, this authorization shall be renewed for a period of five further years in accordance with the well-established practice of large listed companies.
The General Partner and the Supervisory Board therefore propose to resolve:
a) The Company is authorized until the expiration of 11 May 2021 to purchase treasury shares up to a maximum amount of 10% of the registered share capital existing at the time of this resolution. The shares acquired, together with other treasury shares held by the Company or attributable to the Company pursuant to sections 71a et seqq. AktG, must at no time exceed 10% of the registered share capital. The authorization must not be used for the purpose of trading in treasury shares.
b) Subject to the decision of the General Partner, the purchase will be effected either on the stock exchange, by way of a public tender offer or a public invitation to shareholders to submit an offer for sale.
aa) If and to the extent shares are purchased on the stock exchange, the share price paid by the Company (not including incidental acquisition costs) must not exceed or fall short of 10% of the market price for shares of the Company of the same class determined by the opening auction in the Xetra trading system (or a comparable successor system) on the respective stock exchange trading day.
bb) If shares are acquired by way of a public tender offer or a public invitation to shareholders to submit an offer for sale, the offer price per share paid by the Company (not including incidental acquisition costs) must not exceed or fall short of the 3-day average trading price of shares of the same class determined by the closing auction in the Xetra trading system (or a comparable subsequent
system) on the last stock exchange trading day before the publication of the public tender offer or public invitation to shareholders to submit an offer for sale by more than 10%. If, following the announcement of a public tender offer or a public invitation to submit an offer for sale, there are significant changes in the relevant stock price, the offer or the invitation to shareholders to submit an offer for sale may be adjusted. In this case, the 3-day average trading price prior to the public announcement of any such adjustment will be the relevant reference stock price. The public tender offer or the invitation to submit an offer for sale may provide for further conditions. If the total volume of the shares made available following a public tender offer or the invitation to submit an offer for sale exceeds the envisaged repurchase volume, the acquisition then must be effected on a pro rata basis in accordance with the ratio of shares tendered (tender ratio). Preference may be given to accepting small quantities up to 100 shares per shareholder.
c) The General Partner is authorized to use treasury shares purchased on the basis of this authorization or any other earlier authorization for any purpose legally permissible and in particular for the following purposes:
aa) The shares may be redeemed without the redemption or its execution requiring any further resolution by the General Meeting. They may also be redeemed without a capital reduction by way of adjusting the calculated pro rata amount of the Company s share capital represented by the remaining shares (simplified method). The redemption may be restricted to a portion of the purchased shares only. If the redemption is made by way of the simplified method, the General Partner is authorized to modify the number of the shares in the Company s Articles of Association accordingly.
bb) The General Partner is authorized to sell treasury shares also in other ways than a sale on the stock exchange or an offer to all shareholders, also by way of an invitation to submit an offer, provided that the shares are sold for cash at a price that does not significantly fall short of the stock market price of shares of the Company that are subject to the same terms at the time of the sale. In this case, the total number of shares to be sold is limited to 10% of the registered share capital existing at the time the resolution of the General Meeting on this authorization is passed or if the corresponding registered share capital is lower at the time the authorization is exercised. If, during the term of this authorization until its utilization, other authorizations regarding the issuance or the sale of the Company s shares or regarding the issuance of rights that allow for or
oblige to subscribe the Company s shares are exercised and thereby subscription rights are excluded in direct or analogous application of section 186 (3) sentence 4 AktG, such exclusion of subscription rights will be taken into account when calculating the aforementioned 10% limit.
cc) The General Partner is furthermore authorized to sell treasury shares to third parties against contributions in kind, in particular in the context of the acquisition of companies, parts of companies, interests in companies or other assets (including receivables) and with regard to mergers.
dd) The General Partner is also authorized to award treasury shares in lieu of the utilization of a conditional capital of the Company to employees of the Company and companies affiliated with the Company, including members of the management of affiliated companies, and use them to service options or obligations to purchase shares of the Company granted to employees of the Company or companies affiliated with the Company as well as to members of the management of affiliated companies, e.g. in the context of stock option programs or employee benefit schemes.
ee) In addition, the General Partner is authorized to use treasury shares to service bonds carrying warrant and/or conversion rights or conversion obligations issued by the Company or companies affiliated with the Company pursuant to section 17 AktG.
d) The Supervisory Board of the General Partner is authorized to use shares purchased on the basis of this or a prior authorization instead of utilizing a conditional capital of the Company for the servicing of options or obligations to purchase shares which were or will be granted as variable compensation component, in particular in the context of stock option plans, to members of the Management Board of the General Partner.
e) The authorizations under lit. c) and lit. d) also include the use of shares of the Company acquired pursuant to section 71d sentence 5 AktG.
f) The authorizations under lit. c) and lit. d) may be exercised once or several times, in full or in part and individually or together, while the authorizations under lit. c), bb) to ee) may also be exercised by dependent companies or companies that are majority owned by the Company, or by third parties acting for their account or for the account of the Company.
g) Shareholders subscription rights for these treasury shares are excluded insofar as these shares are used according to the aforementioned authorizations under lit. c), bb) to ee) and lit. d) or as far as this is necessary to exclude fractional amounts in case of a sale of shares to all shareholders. The above authorizations to exclude subscription rights of shareholders may only be exercised to the extent that the pro-rata amount of the overall shares excluded from subscription does not exceed 20% of the registered share capital at the time of the resolution of the Annual General Meeting or at the time the authorizations are exercised. If, during the term of this authorization to use treasury shares, other authorizations regarding the issuance or the sale of the Company s shares or regarding the issuance of rights that allow for or oblige to subscribe the Company s shares are exercised and thereby subscription rights are excluded, such exclusion of subscription rights will be taken into account when calculating the aforementioned limit.
In connection with the authorization to purchase and utilize treasury shares proposed under this agenda item 9, the General Partner submits under Section III. of this convening a written report on the reasons for which it shall be authorized to exclude shareholders subscription rights in certain cases when using treasury shares (section 278 (3) AktG in connection with section 186 (4) sentence 2, section 71 (1) no. 8 sentence 5 AktG). This report is part of this notice on the convening of the Annual General Meeting and will be available on the Company s website under www.freseniusmedicalcare.com/en/home/investors/annual-general-meeting as of the time of convening the Annual General Meeting and will also be available for inspection during the Annual General Meeting.
10. Resolution on the approval of the amendment of the Pooling Agreement entered into by the Company, Fresenius SE & Co. KGaA and the Independent Directors
The subject matter of this agenda item is the amendment of the so-called Pooling Agreement, under which the Company is required to inter alia prepare the group accounting and group reporting in accordance with U.S. accounting principles U.S. GAAP. The proposed amendment shall enable the Company to abandon this costly and time-consuming additional reporting.
Today s Fresenius Medical Care Group was formed in 1996 in the course of a reorganization under participation of the former Fresenius AG (today Fresenius SE & Co. KGaA), its former subsidiary Fresenius USA, Inc., and W. R. Grace & Co., a company incorporated under the laws of the State of New York. As a consequence of this reorganization, the voting shares of the
Company in its former legal form as Fresenius Medical Care AG were held by the former Fresenius AG and the so-called minority shareholders, i.e. the other shareholders of Fresenius USA Inc. and the shareholders of W. R. Grace & Co. In this context, an agreement between the former Fresenius AG, the former Fresenius Medical Care AG and two Independent Directors of the Supervisory Board, as representatives of the minority shareholders, was concluded on 27 September 1996 with effect from 30 September 1996 (the Ordinary-Shares-Pooling Agreement 1996 ); on 27 November 1996, the above-named parties also entered into an essentially identical agreement regarding the former preference shares of Fresenius Medical Care AG (the Preference-Shares-Pooling Agreement 1996 , together with the Ordinary-Shares-Pooling Agreement 1996 the Pooling Agreements 1996 ).
The main purpose of the provisions of the Pooling Agreements 1996 was to grant the former Fresenius Medical Care AG a high degree of independence within the existing group structure and to ensure that the minority shareholders rights were particularly protected.
On the occasion of the change of legal form of Fresenius Medical Care AG into its current legal form as Fresenius Medical Care AG & Co. KGaA the Pooling Agreements 1996 were replaced by a new essentially identical Pooling Agreement dated 13 February 2006 (the Pooling Agreement ), reflecting the implications resulting from the new legal form. The parties of the Pooling Agreement are Fresenius SE & Co. KGaA (formerly: Fresenius AG), Fresenius Medical Care Management AG, also in its capacity as General Partner of Fresenius AG & Co. KGaA, and two so-called Independent Members of the Supervisory Board.
The Pooling Agreement contains provisions with regard to inter alia requirements for the independence of members of the Supervisory Board, approval requirements concerning certain inter-company transactions which exceed a certain value limit, the listing of the Company s shares at the New York Stock Exchange (NYSE) as well as terms of accounting and public disclosure.
On account of the listing of the Company s shares in the form of American Depository Shares (ADSs) at the NYSE, the Company is obligated to file annual reports and other reports with the U.S. Securities and Exchange Commission (SEC). In addition, under the Company s Pooling Agreement the Company is in particular obligated to prepare the financial statements included in those reports according to the U.S. accounting principles U.S. GAAP. In addition to the accounting for the individual financial statements of Fresenius Medical Care AG & Co. KGaA in accordance with the provisions of the German Commercial Code, the Company as a result is subject to and must comply with two different accounting standards for the group accounting, i.e. the International Financial Reporting Standards (IFRS) as required by law, and the provisions of U.S. GAAP as required by the Pooling Agreement. While the SEC, by now, allows for
the submission of the accounting reports required for the continued listing of ADRs at the NYSE on the basis of IFRS, an (additional) submission of accounting reports on the basis of U.S. GAAP would still required by the Pooling Agreement.
The parallelism of group accounting reports on the basis of two different accounting standards as currently still demanded by the provisions of the Pooling Agreement not only constitutes additional, substantial administrative expenses but also requires statements on the in some cases complex business transactions in accordance with the two different reporting standards.
Using common accounting standards in Germany and in the USA, in contrast, would have the considerable advantage of saving the Company substantial additional expenses for group accounting.
In addition, considerable legal risks naturally arise as a consequence of applying two accounting standards setting forth different provisions. If the accounting system is changed to one common accounting and reporting system based on IFRS, it will be possible to largely eliminate such risks as well as the administrative and advisory expenses required to avoid such risks in the future.
Therefore, the General Partner and the Supervisory Board share the view that the Company should be able to file accounting reports with the SEC at least alternatively on the basis of IFRS. Creating such flexibility in the interest of the Company requires an amendment of the Pooling Agreement. In accordance with the provisions of the Pooling Agreement this amendment requires a resolution of the General Meeting approving of the amendment with a majority of at least 75% of the votes cast.
Against this background, the General Partner and the Supervisory Board propose to amend Clause 5 (c) and Clause 5 (d) of the Pooling Agreement to read as follows:
5. Listing of American Depositary Shares; SEC Filings. During the term of this Agreement, Fresenius AG and FMC Management AG shall use their best efforts as sole shareholder of FMC Management AG and general partner of FMC KGaA, respectively, to cause FMC KGaA to, and FMC KGaA shall:
(c) prepare all financial statements required to be included in any Securities Filings in accordance with US GAAP or the International Financial Reporting Standards (IFRS);