31. Equity

The subscribed capital of METRO AG amounts to €363,097,253. It is divided as follows:

The share capital of METRO Wholesale & Food Specialist GmbH (registered in the commercial registry of the District Court in Düsseldorf under HRB 79055) as of 30 September 2016 amounted to €204,517,000.00 and was represented by a single share. Upon transformation of the company into a stock corporation pursuant to the German Entity Transformation Act (UmwG) on 11 November 2016, share capital in the same amount became share capital of METRO Wholesale & Food Specialist AG (MWFS AG), which was divided into 32,410,956 no-par bearer ordinary shares and 267,796 no-par bearer non-voting preference shares.

The Annual General Meeting of MWFS AG on 16 November 2016 resolved to conduct an ordinary capital decrease, which became effective upon being recorded in the commercial registry on 23 November 2016. This resulted in a decrease of the post-transformation share capital from €204,517,000.00 to €32,678,752.00. The resultant income of €171,838,248.00 increased the net earnings accordingly. The capital decrease did not change the number of ordinary and preference shares.

By resolution of the Annual General Meeting on 10 February 2017 and recording in the commercial registry on 12 July 2017, the share capital of MWFS AG was increased for the purpose of completing the demerger and spin off by the amount of €330,418,501.00 to €363,097,253.00 by way of issuing 3,601,217 and 324,109,563 new ordinary shares and 29,755 and 2,677,966 new preference shares against non-cash contributions. MWFS AG changed its name to METRO AG on 18 August 2017.

The subscribed capital of METRO AG as of 30 September 2017 amounted to €363,097,253 and is divided as follows:

Each ordinary share entitles the bearer to a single vote in the company’s Annual General Meeting. The ordinary shares carry full dividend rights. In contrast to ordinary shares, preference shares do not carry voting rights but confer a preferential entitlement to profits as stipulated in § 21 of the Articles of Association of METRO AG, which state:

“(1) Holders of non-voting preference shares will receive a preliminary dividend from the annual balance sheet profit in the amount of €0.17 for each preference share.

(2) Should the net earnings available for distribution not suffice in any 1 financial year to pay the preliminary dividend, the arrears (excluding any interest) shall be paid from the net earnings of subsequent financial years in an order based on age, meaning in such manner that any older arrears are paid off prior to any more recent ones and that the preference dividends payable from the profit of a financial year are not distributed until all accrued arrears have been paid.

(3) Following distribution of the preliminary dividends, the holders of ordinary shares will be paid a dividend of €0.17 for each ordinary share. Subsequently, a non-cumulative extra dividends per share will be paid to the holders of non-voting preference shares. The extra dividend shall amount to 10% of the dividends paid to the holders of ordinary shares under observation of Section 4, provided such dividend equals or exceeds €1.02 per ordinary share.

(4) The holders of non-voting preference shares and those holding ordinary shares will equally share in any additional profit distribution in the proportion corresponding to the number of shares held by them in the share capital.”

Authorised capital

The Annual General Meeting on 11 April 2017 authorised the Management Board to increase the share capital, subject to the consent of the Supervisory Board, by issuing new ordinary bearer shares against cash or non-cash contributions in one or several tranches for a total maximum of €181,000,000 by 28 February 2022 (authorised capital). The Management Board is, subject to the consent of the Supervisory Board, authorised to exclude shareholder subscription rights in certain cases. To date, the authorised capital has not been utilised.

Contingent capital

The Annual General Meeting held on 11 April 2017 resolved a contingent increase in the share capital by up to €16,339,376, divided into a maximum of 16,339,376 ordinary bearer shares (contingent capital). This contingent capital increase is related to the establishment of an authority of the Management Board to issue, subject to the consent of the Supervisory Board, one or several tranches of warrant or convertible bearer bonds (collectively “bonds”) with an aggregate par value of €1,500,000,000 prior to 28 February 2022, and to grant the holders of warrant or convertible bearer bonds warrant or conversion rights or to impose warrant or conversion obligations upon them for ordinary bearer shares in METRO AG representing up to €16,339,376 of the share capital in accordance with the terms of the warrant or convertible bearer bonds, or to provide for the company’s right to deliver ordinary shares in the company as full or partial payment in lieu of a cash redemption of the bonds. The Management Board is, subject to the consent of the Supervisory Board, authorised to exclude shareholder subscription rights in certain cases. To date, no warrant and/or convertible bearer bonds have been issued under the aforementioned authority.

Repurchase of own shares

On the basis of § 71 Section 1 No. 8 of the German Stock Corporation Act, the Annual General Meeting on 11 April 2017 authorised the company to acquire own shares of any share class representing a maximum of 10% of the share capital issued at the time the authority became effective, or – if this figure is lower – at the time the authority is exercised. The authority expires on 28 February 2022. To date, neither the company nor any company controlled or majority-owned by it, or any other company acting on behalf of the company or of any company controlled or majority-owned by that company has exercised this authority.

Capital reserve and reserves retained from earnings

Prior to the effective date of the hive-down and demerger of CECONOMY AG on 12 July 2017, METRO AG was not yet a group within the meaning of IFRS 10. Accordingly, combined financial statements of the MWFS GROUP were prepared for the IPO prospectus of METRO AG. Equity in the combined financial statements was the residual amount from the combined assets and liabilities of the MWFS GROUP. Following the demerger, METRO became an independent group with METRO AG as the listed parent company. Therefore, the equity in the consolidated financial statements is subdivided according to legal requirements. The subscribed capital in the amount of €363 million and the capital reserve in the amount of €6,118 million were recognised at the carrying amounts from the annual financial statements of METRO AG as of 30 September 2017. For this purpose, a reclassification was made from the equity item “net assets”, recognised as of 1 October 2016, attributable to the former METRO GROUP of the combined financial statements of the MWFS GROUP. The remaining negative amount of this equity item was reclassified to reserves retained from earnings. It cannot be traced back to a history of loss. In addition, the measurement of a put option, which became effective in the demerger, in the amount of €53 million was recognised in reserves retained from earnings as part of the division of net assets in accordance with the legal structure.

Other components of reserves retained from earnings are the profit or loss for the period attributable to the shareholders of METRO AG and the components of other comprehensive income, which are composed as follows:

Changes in the financial instruments presented above consist of the following components:

In addition, currency translation differences changed by €−36 million (2015/16: €44 million). They can be broken down as follows:

The translation of the local balance sheets to the group currency resulted in a decrease of €−12 million in equity outside of profit or loss. In addition, the effective derecognition of cumulative currency differences of companies that were deconsolidated or discontinued operation within financial year 2016/17 had an effect of € −24 million.

The remeasurement of defined benefit pension plans resulted in effects outside of profit or loss before deferred taxes in the amount of €76 million. The related deferred taxes amount to €−21 million.

Other reserves retained from earnings as of 30 September are at €−2,478 million. The profit or loss for the period attributable to the shareholders of METRO AG in the amount of €325 million has an opposite effect on the negative adjustment of the residual amount from the distribution of net assets.

Non-controlling interests

Non-controlling interests comprise the shares held by third parties in the share capital of the consolidated subsidiaries. They amounted to €46 million at the end of financial year (30/9/2016: €36 million).

Appropriation of the balance sheet profit, dividends

Dividend distribution of METRO AG is based on METRO AG’s annual financial statements prepared under German commercial law.

Regarding the appropriation of the balance sheet profit for 2016/17, the Management Board of METRO AG proposes to the Annual General Meeting to distribute a dividend in the amount of €0.70 per ordinary share and €0.70 per preference share – that is, a total of €254 million – from the reported balance sheet profit of €302 million and to carry forward the remaining amount to new account.