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Joint Demerger Report of the Management Boards

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Joint Demerger Report of the Management Boards Non-binding convenience translation Joint Demerger Report of the Management Boards of METRO AG, Düsseldorf, and METRO Wholesale & Food Specialist AG, Düsseldorf, on the hive-down and spin-off of the wholesale trading and food retail trade activities pursuant to § 127 sent. 1 of the German Transformation Act Non-binding convenience translation Table of contents I. Introduction ................................................................................................................ 9 II. Starting position – The entities participating in the demerger and METRO GROUP prior to the demerger ....................................................................13 1. Overview of METRO GROUP ...........................................................................13 2. METRO AG as transferring entity ....................................................................15 a) Registered office and financial year ......................................................15 b) Share capital and shares ........................................................................15 c) Stock exchange trading and shareholder structure .............................17 d) Management board .................................................................................18 e) Supervisory board ..................................................................................19 f) Remuneration and employee incentive programmes ...........................21 3. METRO Wholesale & Food Specialist AG as receiving entity .......................23 a) General information under company law; registered office and financial year ...........................................................................................23 b) Historical information .............................................................................23 c) Share capital and shares; shareholder structure .................................25 d) Management board .................................................................................26 e) Supervisory board ..................................................................................27 f) Independent auditor ................................................................................27 4. Business activities of METRO Group .............................................................27 a) METRO Cash & Carry .............................................................................28 b) Real ..........................................................................................................29 c) Media-Saturn ...........................................................................................30 d) "Other" segment .....................................................................................32 III. Decision in favour of a splitting up of METRO GROUP by way of a combined hive-down and spin-off (demerger) ..........................................................................33 1. Reasons for the decision to divide METRO GROUP ......................................35 2. Decision in favour of splitting up of METRO GROUP by way of demerger pursuant to the UmwG .....................................................................................40 a) Reasons against an initial public offering .............................................43 b) Reasons against an M&A transaction ...................................................44 c) Reasons against a dividend in kind from the MWFS Business Division ....................................................................................................45 3 3. Reasons for a demerger of the MWFS Business Division .............................45 4. Decision in favour of the interest in MWFS AG remaining with METRO AG ........................................................................................................46 5. Decision in favour of a demerger by way of acquisition ...............................47 IV. Preparations for the splitting up of METRO GROUP ..............................................48 1. Preparatory steps .............................................................................................48 a) Measures referring to the receiving entity METRO Wholesale & Food Specialist AG .................................................................................48 b) Pre-transfer of material parts of the operations to METRO Wholesale & Food Specialist AG ...........................................................49 c) Separation of the activities of METRO AG into an MWFS Branch of Activity and a CE Branch of Activity ......................................................50 d) Separation of the MWFS and CE Business Divisions on group level .52 2. Determination of asset components of the MWFS Business Division .........53 a) Existing assets of METRO Wholesale & Food Specialist AG as receiving entity ........................................................................................54 b) Hive-Down Assets ...................................................................................54 c) Spin-Off Assets .......................................................................................55 3. Assets of the CE Business Division ...............................................................55 V. Legal implementation of the splitting up of METRO GROUP through hive-down and spin-off ................................................................................................................56 1. Transferring and receiving entity ....................................................................56 2. Hive-down pursuant to § 123 para. 3 no. 1 UmwG (hive-down by way of acquisition) and Hive-Down Assets ................................................................56 3. Spin-off pursuant to § 123 para. 2 no. 1 UmwG (spin-off by way of acquisition) and Spin-Off Assets ....................................................................57 4. Hive-down and spin-off agreement (Demerger Agreement) ..........................57 5. Relevant Hive-Down Date and Relevant Spin-Off Date, right of withdrawal, Tax Transfer Effective Date .........................................................58 6. Demerger audit and demerger audit report ....................................................58 7. General meetings of METRO AG and METRO Wholesale & Food Specialist AG ....................................................................................................59 8. Capital increase to implement hive-down and spin-off; audit of post- formation acquisition and contribution in kind ..............................................59 9. Filings and registrations of hive-down and spin-off in the commercial register ..............................................................................................................62 10. Effects of the registration with the commercial register ...............................64 4 11. Allocation of shares; stock exchange admission and stock market trading ...............................................................................................................65 a) Allocation of the shares in MWFS AG issued to METRO AG within the framework of the hive-down ............................................................65 b) Allocation of the shares in MWFS AG issued to METRO AG shareholders within the framework of the spin-off ...............................65 c) Profit entitlement.....................................................................................66 d) Processing...............................................................................................66 e) No fractional shares ................................................................................67 f) Stock exchange listing and stock market trading ................................67 12. Change of the company name of METRO AG ................................................67 13. Group Separation Agreement .........................................................................68 14. Share ownership ratios at the transferring and the receiving entity after the consummation of the demerger ................................................................68 15. Costs and transfer taxes related to the demerger .........................................69 VI. Explanations and reasons for the share allocation ratio for the spin-off; granting of special rights ..........................................................................................69 1. Share allocation ratio .......................................................................................69 2. Granting of special rights (features of the preference shares) .....................71 VII. Balance sheet, fiscal and other effects of the demerger ........................................73 1. Effects of the demerger on the balance sheet ...............................................73 a) Effects on the HGB balance sheets .......................................................73 b) Effects on the IFRS consolidated balance sheets ................................88 2. Fiscal effects of the demerger .........................................................................97 a) Description of the concept / valuation ...................................................97 b) Tax effects for METRO AG ................................................................... 100 c) Tax effects for MWFS AG ..................................................................... 107 d) Tax effects for the shareholders .......................................................... 109 e)
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