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Dear shareholders,

Deutsche Wohnen SE again performed well in financial year 2018: it once again improved its key figures and profited from a high demand of estates,  especially located in the Core+ and Core regions. The company invested specifically in the maintenance and refurbishment of its portfolio, targeting a sustainable and long-term value increase.

Consolidated group profit came to EUR 1.9 billion, especially due to the value increase of the portfolio, which is focused on metropolitan areas and conurbations.  The Group’s debt ratio remained low at 36%, which is an indication of its conservative funding policy.

The positive performance of the share price and good ratings from Standard & Poor’s and Moody’s confirm the company’s successful strategy.

Trustful working relationship with the Management Board

In financial year 2018, as in prior years, the Supervisory Board carried out the duties entrusted to it by law, the company’s articles of association, the German Corporate Governance Code and the rules of procedure with great care. It advised the Management Board regularly on the management of the company and monitored its work. In addition, it was directly involved at an early stage in all decisions of fundamental importance for the company.

The Management Board informed the Supervisory Board regularly, promptly and fully, in writing and orally, about all relevant matters of commercial policy, company planning and strategy, the company’s position, including opportunities and risks, the course of business, risk management and compliance. Any variance between actual and planned performance was explained in detail. Important transactions were agreed between the Management Board and the Supervisory Board.

The Chair of the Supervisory Board and other members of the Supervisory Board were in regular contact with the Management Board to discuss important matters, also outside the meetings of the Supervisory Board and its committees. Topics included the company’s strategy, performance and risk management.

Supervisory Board meetings

In financial year 2018 the Supervisory Board discussed the company’s current performance, important individual matters and transactions requiring approval at seven meetings, one of which was in the form of a conference call. To the extent necessary, the Supervisory Board gave its approval as requested at the individual meetings, after an in-depth review and detailed discussion. The resolution to amend the articles of association was adopted on 24 January 2018 by circulation of documents in view of the issue of company shares to external shareholders of GSW Immobilien AG in 2017. The resolution concerning a company acquisition was also taken by circulation of documents on 18 July 2018. Average attendance at Supervisory Board meetings was 98.0%. Mr Hünlein was unable to attend one meeting in the reporting year; otherwise all Supervisory Board members attended all of them. In one case a member voted on a proposed resolution in writing.

Individualized participation of meetings in financial year 2018

Member of Supervisory Board

Supervisory Board

Executive and Nomination Committee Audit Committee Capital Market and Acquisition Committee
Matthias Hünlein 6/7
85.7%
4/4
100%
2/2
100%
3/3
100%
Dr Andreas Kretschmer 7/7
100%
4/4
100%
3/3
100%
3/3
100%
Jürgen Fenk 7/7
100%
2/2
100%
2/2
100%
 
Tina Kleingarn
(since 15/06/2018)
4/4
100%
     
Dr Florian Stetter 7/7
100%
  4/5
80%
 
Claus Wisser 7/7
100%
    3/3
100%
Uwe E. Flach
(until 15/06/2018)
3/3
100%
2/2
100%
3/3
100%
 

In the reporting year the focus of Supervisory Board work was on the business planning and performance of Deutsche Wohnen SE, (re)financing activities, corporate strategy, acquisition targets and the integration of purchases.

The Supervisory Board had regular and detailed discussions about the performance of the segments Residential Property Management, Disposals, Nursing and Assisted Living, and the Group’s financial and liquidity position. Reviewing and advising on the internal control and risk management systems of the Deutsche Wohnen Group were other key areas of the Supervisory Board’s work.

At its meeting on 8 March 2018 the Supervisory Board dealt particularly with the reports of committee meetings, the separate and consolidated financial statements for 2017 and the remuneration of the Management Board. Representatives of the auditors were present for the discussions on the 2017 financial statements; they explained positions and amounts in the financial statements for the company and the group.  Other important topics were the proposal for electing the auditors, the adoption of the Supervisory Board Report and the Corporate Governance Report, as well as current projects.

The meeting on 26 April 2018 (conference call) centred on adopting the agenda and proposals for resolution at the ordinary Annual General Meeting.

The Supervisory Board meeting on 7 May 2018 dealt with the report from the Audit Committee, the report on performance in the first quarter of 2018, current acquisition targets and matters of HR strategy.

A new Supervisory Board chair was elected at the meeting on 15 June 2018, which took place after the Annual General Meeting and so after the departure of Mr Flach and the election of Ms Kleingarn. The Supervisory Board committees were also restructured and new members elected. In addition, a capital increase and the related publication of a rights issue was approved to implement the option of receiving shares in lieu of dividends, and the matter was delegated to the Capital Markets and Acquisition Committee for further implementation. Acquisition targets were also discussed.

The core elements of the meeting on 11 September 2018 were reports from committees and a discussion of current business performance in the first half of 2018, an analysis of competitors, compliance and risk management.

At the meeting on 6 November 2018 the focus was on reports from the committees, the company’s performance on the basis of the report for the third quarter 2018, Supervisory Board matters (including amendments to the rules of procedure) and ongoing acquisition projects.

At its meeting on 14 December 2018 the Supervisory Board dealt particularly with the report from the Steering and Nomination Committee, adopting the budget for 2019 and the German Corporate Governance Code, as well as adopting the statement of compliance issued jointly with the Management Board. Other topics included Management Board matters, particularly renewing the appointment of Michael Zahn and Philip Grosse.

Efficient work in four Supervisory Board committees

To carry out its duties efficiently the Supervisory Board has formed committees, each of which has three members. Their work and the need for the committees were assessed on an ongoing basis in the reporting year.

The committees were restructured in the reporting year, so there are now three:

  • Executive and Nomination Committee,
  • Audit Committee and
  • Capital Market and Acquisition Committee.

Their duties are described in more detail in the Corporate Governance Report.

Generally speaking, the committees prepare the Supervisory Board resolutions and topics to be discussed by the full Supervisory Board. To the extent permitted by law, decision-making authority has been passed to individual committees by the rules of procedure or Supervisory Board resolutions. The committee chairs report regularly and fully on the contents and results of the committee meetings at the Supervisory Board meetings.

The Executive and Nomination Committee met four times in the reporting year. On the agenda of the two meetings held by conference call in January and February 2018 were Management Board remuneration, i.e. the STI 2017 and 2018, the AOP 2014 and the LTI 2018. In October and November 2018 the committee particularly discussed Management Board matters.

The Audit Committee met five times in the reporting year and dealt with the relevant aspects of the Supervisory Board’s work. They particularly included the preliminary review of the financial statements, the consolidated financial statements and the interim reports of Deutsche Wohnen SE, as well as a discussion of the risk management system. It gave a recommendation to the Supervisory Board for the election of the auditors for 2018, obtained a statement of independence from the auditors, supervised their work and defined the main areas of the audit. The members of the Audit Committee have expert knowledge and experience in the application of accounting standards and internal control procedures. The respective committee chair meets all the requirements of section 100 para. 5 German Stock Corporation Act [Aktiengesetz – AktG].

The Capital Market and Acquisition Committee met three times in the reporting year. At the meetings in July 2018, which were held by telephone conference, the main items were details of the share dividend (capital increase, rights issue, document obviating the need for a prospectus, and changes to the articles of association). In October the committee discussed the focus of its further programme of work.

Corporate Governance

The Supervisory Board permanently monitored and discussed the ongoing development of the company’s own corporate governance standards. The Corporate Governance Report included in this Management Report provides comprehensive information about the company’s corporate governance, including the structure and amount of Management Board and Supervisory Board remuneration.

The Management Board and Supervisory Board discussed the requirements of the German Corporate Governance Code as amended for the reporting year and compliance with these requirements. They updated their joint decleration of compliance in accordance with section 161 German Stock Corporation Act [Aktiengesetz – AktG] in December 2018 and made it permanently available at Declaration of Compliance.

Separate and consolidated financial statements discussed in depth

The financial statements of Deutsche Wohnen SE prepared by the Management Board as of 31 December 2018, the consolidated financial statements and the company’s combined management report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, the auditors elected at the Annual General Meeting on 15 June 2018 and appointed by the Supervisory Board, who provided an unmodified opinion.

The financial statements of Deutsche Wohnen SE and the consolidated financial statements, the combined management report for Deutsche Wohnen SE and the group and the auditors’ reports were sent to all Supervisory Board members without delay as they were prepared. The auditors took part in the meetings of the Audit Committee in preparation for the Supervisory Board meeting to discuss the financial statements on 21 February 2019 and 18 March 2019. They reported on the main findings of their audit and provided additional information. After in-depth discussion the Audit Committee approved the results of the audit of the company’s financial statements, the consolidated financial statements and the combined management report.

The Chair of the Audit Committee gave a full report on the financial statements and the audit to the Supervisory Board at its meeting on 18 March 2019. The auditors also explained the main results of the audit and made themselves available to the Supervisory Board members for additional questions and information. The Supervisory Board carried out a careful review of the financial statements, the consolidated financial statements, the combined management report, the non-financial report, the proposal for the appropriation of distributable profit and the auditors’ reports. It had no objections to make. In accordance with the recommendation of the Audit Committee, the Supervisory Board then approved the separate and consolidated financial statements as prepared by the Management Board as of 31 December 2018. The financial statements are thereby adopted.

The adopted financial statements show a distributable profit. The Supervisory Board concurs with the Management Board’s proposal for the use of distributable profit. The agenda for the Annual General Meeting 2019 will therefore include a resolution to distribute a dividend of EUR 0.78 per share with dividend rights. The Management Board and Supervisory Board are also considering whether again to offer shareholders the option of receiving the dividend in cash or partly in shares.

Changes in the Management Board and Supervisory Board

Since the period of office of the Supervisory Board Chair Mr Uwe E. Flach ended at the close of the Annual General Meeting on 15 June 2018, Ms Tina Kleingarn was elected to the Supervisory Board at the Annual General Meeting on 15 June 2018. The Supervisory Board elected Mr Matthias Hünlein as its new chair.

There were no changes in the members of the Management Board in 2018.

On behalf of the Supervisory Board I thank the members of the Management Board and the employees of Deutsche Wohnen SE and all the group companies for their great commitment and all their work in 2018.

Berlin, in March 2019

On behalf of the Supervisory Board

Matthias Hünlein