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Dear shareholders,

Deutsche Wohnen SE again performed well in financial year 2019: it once again continued its success story 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. In addition, the portfolio was further optimised through purchases and sales, taking advantage of the positive market situation.

Consolidated Group profit came to EUR 1.6 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 35.4%, which is an indication of its conservative funding policy.

Trustful working relationship with the Management Board

In financial year 2019, 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 2019 the Supervisory Board discussed the company’s current performance, important individual matters and transactions requiring approval during nine meetings, three of which were 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. By circulation of documents the resolution to amend the articles of association was adopted on 29 January 2019 in view of the issue of company shares to external shareholders of GSW Immobilien AG as well as to members of the Management Board in 2018. The resolution concerning the amendment of the appointment of Henrik Thomsen as new member of the Management Board at an earlier start date was also taken by circulation of documents on 23 September 2019. Average attendance at Supervisory Board meetings was 96.8%.

Individualized participation of meetings in financial year 2019

Member of Supervisory Board Supervisory Board Executive and Nomination Committee Audit Committee Capital Market and Acquisition Committee
Matthias Hünlein 9/9
100%
3/3
100%
5/5
100%
6/6
100%
Dr. Andreas Kretschmer 9/9
100%
3/3
100%
  6/6
100%
Jürgen Fenk 7/9
78%
3/3
100%
4/5
80%
 
Arwed Fischer
(since 18.06.2019)
4/4
100%
     
Tina Kleingarn 9/9
100%
    5/5
100%
Dr. Florian Stetter 9/9
100%
  5/5
100%
 
Claus Wisser
(until 18.06.2019
5/5
100%
    1/1
100%

 

In the reporting year the focus of Supervisory Board work was on the business planning and performance of Deutsche Wohnen SE, management board matters, corporate strategy, acquisition and disposal transactions as well as the integration of purchases.

The Supervisory Board had regular and detailed discussions about the performance of the segments Residential Property Management, Disposals, Nursing operations, and Nursing assets, 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 the meeting on 15 March 2019, which was held as a conference call, the Supervisory Board dealt with an acquisition project for approximately 3,000 units.

At its meeting on 18 March 2019 the Supervisory Board dealt particularly with the reports of committee meetings, the separate and consolidated financial statements for 2018 and matters regarding the Management Board, in particular remuneration, allocation of responsibilities and the appointment of Lars Urbansky as a further member of the Management Board. Representatives of the auditors were present for the discussions on the 2018 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 Supervisory Board meeting on 7 May 2019 dealt with the reports from the committees, matters of the Supervisory Board and the Management Board, in particular the expansion of the Management Board by appointing Henrik Thomsen and contractual matters, the adoption of the agenda and proposals for resolution at the ordinary Annual General Meeting, the report on performance in the first quarter of 2019 and current political developments.

The meeting of the Supervisory Board on 17 May 2019, held as a conference call, dealt with matters regarding the Management Board.

In the meeting held on 11 June 2019, in form of a conference call, the Supervisory Board dealt with current political developments in Berlin, particularly the planned rental freeze law and its impact.

In the meeting on 18 June 2019, which took place after the Annual General Meeting and so after the departure of Claus Wisser and the election of Arwed Fischer, a new member of the Capital Market and Acquisition Committee of the Supervisory Board was 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 and other current topics were also discussed.

The core elements of the meeting on 7 August 2019 were reports from committees and a discussion of current business performance in the first half of 2019, a portfolio for disposal and Supervisory Board matters.

At the meeting on 5 November 2019 the focus was on reports from the committees, the company’s performance, in particular on the basis of the report for the third quarter 2019, data privacy issues, Management Board and Supervisory Board matters and a potential share buy-back.

At its meeting on 13 December 2019 the Supervisory Board dealt particularly with the report from the Executive and Nomination Committee, adopting the business plan for 2020, several acquisition and disposal projects, the alterations of ARUG II and the amended version and the German Corporate Governance Code, as well as adopting the statement of compliance issued jointly with the Management Board. Other topics included aspects of remuneration of the Management Board and the examination of efficiency of the Supervisory Board.

Efficient work in 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.

There were three committees in the reporting year:

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

Their composition and duties are described in more detail in the Declaration on Corporate Governance.

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 three times in the reporting year. On the agenda of the two meetings held by conference call in January and February 2019 were Management Board remuneration, i.e. the variable remuneration components STI 2018 and 2019, the SOP 2014 and succession planning for the composition of the Management Board. At its meeting in April 2019, the committee dealt with recommendations on the composition of the Management Board and the election of a Supervisory Board member.

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 2019, obtained a statement of independence from the auditors, supervised their work and defined the main areas of the audit. A resolution was also passed in writing concerning the commissioning of a non-audit service to the audit firm. The members of the Audit Committee have expert knowledge and experience in the application of accounting standards and internal control procedures. The committee chair meets all the requirements of section 100 para. 5 German Stock Corporation Act [Aktiengesetz – AktG].

The Capital Market and Acquisition Committee met six times in the reporting year. In January 2019 the committee dealt primarily with capital market issues, the shareholder structure, Investor Relations activities and the ability of the company to pay dividends. At the two meetings in July 2019, 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 November, due to the delegation by the Supervisory Board, the committee resolved upon the execution of a share buy-back programme. In two meetings in August and December 2019 the Committee discussed acquisition issues.

Corporate Governance

The Supervisory Board permanently monitored and discussed the ongoing development of the company’s own corporate governance standards. The Declaration on Corporate Governance included in this Management Report provides comprehensive information about the company’s corporate governance and the Remuneration Report about 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 declaration of compliance in accordance with section 161 German Stock Corporation Act [Aktiengesetz – AktG] in December 2019 and made it permanently available on our website (https://ir.deutsche-wohnen.com/websites/dewohnen/English/4400/declaration-of-compliance.html).

Separate and consolidated financial statements discussed in depth

The financial statements of Deutsche Wohnen SE prepared by the Management Board as of 31 December 2019, 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 18 June 2019 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 24 February 2020 and 19 March 2020. 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 19 March 2020. 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 2019. 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 2020 will therefore include a resolution to distribute a dividend of EUR 1 per share with dividend rights.

Changes in the Management Board and Supervisory Board

Since the period of office of Claus Wisser as member of the Supervisory Board ended at the close of the Annual General Meeting on 18 June 2019, Arwed Fischer was elected to the Supervisory Board at the Annual General Meeting on 18 June 2019. The Supervisory Board elected Tina Kleingarn to its Capital Markets and Acquisition Committee to replace Claus Wisser.

In 2019 the Management Board was expanded from three to four members. As of 1 April 2019 Lars Urbansky was appointed as a further member of the Management Board. Lars Wittan resigned from the Management Board as of 30 September 2019 and as of 1 October 2019 Henrik Thomsen was appointed as a further member of the Management Board.

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 2019.

Berlin, March 2020

On behalf of the Supervisory Board

Matthias Hünlein