Shareholder meeting on May 6, 2008

The agenda for the general meeting taking place on May 6, 2008 was published by AMB Generali Holding AG on March 20, 2008 in the electronic edition of the Federal Gazette (“Bundesanzeiger”). Filed under agenda items 12 (Reporting), 13 (Appointment of a special representative pursuant to § 147 AktG [Companies Act]) and 14 (Appointment of a special auditor pursuant to § 142 AktG) were the demands of shareholders supporting the demands of VzfK (“The Consumer Protection Agency for Investors”) as published in the Aktionärsforum (“Shareholder Forum”) on September 26, 2007. The shareholders in question have an aggregate stockholding of 2,688,993 shares, equivalent to 5.01% of the equity, with a current market valuation far in excess of €250m.

You may download the relevant press releases in German or in English at t.

VzfK offers to represent other shareholders as well at the general meeting to be held on May 6, 2008. Please instruct your bank accordingly, or send us already issued admission tickets together with a corresponding power of attorney.

Request to Convene an Extraordinary Shareholders Meeting Pursuant to Sec. 122 para. 1 Sentence 1 AktG

VzfK e.V. represents many shareholders of AMB Generali Holding AG. In light of recent events, it is intended to request the holding of an extraordinary general meeting pursuant to Sec. 122 AktG with the following agenda items:

1. Report of the Management Board on the status quo of the integration of the company into the Assicurazioni Generali S.p.A. corporate group.
2. Appointment of a special representative pursuant to Sec. 147 AktG to assert damage claims against the majority shareholder Generali Beteiligungs GmbH or its parent entity Assicurazioni Generali S.p.A. or the latter’s subsidiary Generali Investments S.p.A and their responsible boards as well as against the responsible members of the Management Board and Supervisory Board of AMB Generali Holding AG as joint and several debtors in connection with
1. the contribution of AMB Generali Asset Managers Kapitalanlagegesellschaft mbH to Generali Investments S.p.A. and
2. the retirement of the former Chairman of the Management Board Dr. Walter Thießen with effect as of June 30, 2007.
3. Appointment of a special auditor pursuant to Sec. 142 AktG to investigate
   disadvantageous transactions caused by the majority shareholder Generali Beteiligungs GmbH or its parent company Assicurazioni Generali S.p.A. as well as harmful actions of the Management Board and the Supervisory Board of AMB Generali Holding AG. In this context, the special auditor shall, in particular, scrutinize (i) if there are any business opportunities which the Company does not pursue itself because such opportunities are pursued by other companies of the Assicurazioni-Generali-Group and (ii) to what extent the Management Board of AMB Generali Holding AG runs the business in the best interest of the Company taking into account that the stock options issued to it are completely directed at the success of  Assicurazioni Generali only.

We call on other shareholders to join our request.

Documents available for download

Vollmacht_an_VZfK_wg_AMB_eBanz_26.09.07.doc Power of Attorney [currently german language version]

23 K

Reasons:

Recent events at AMB Generali Holding AG (hereinafter: AMB) require immediate discussions in a general meeting in order to clarify disadvantageous transactions and to assert damages already suffered by the Company as well as to avert further damages. Waiting for the next orderly annual general meeting would not give consideration to the urgency of the following matters:

Initial Steps for the Integration into the Corporate Group Disregards Shareholder Rights

Following the voluntary takeover offer in 2006, Generali Beteiligungs GmbH and its parent company Assicurazioni Generali S.p.A., (hereinafter „Generali“) hold approximately 85% of the AMB shares.  There are increasing signs that Generali strives for a complete integration of the Company and has initiated first important steps already. A complete integration, however, would require the prior conclusion of a domination agreement. Even though AMB has quite a large free float of roughly 15% of the shares, Generali – in the good tradition of other Italian majority shareholders such as UniCredit, Buzzi etc. – is obviously afraid to comply with the  system of minority shareholder protection as provided for by statutory law.

Without a domination agreement, which could have legalized the action, our successful and promising asset management company was secretly and under nebulous circumstances transferred to an affiliate of Generali. Despite the fact that his service agreement was not due to expire before another 4 years, our widely recognized and extremely successful Chairman of the Management Board, Dr. Walter Thießen, was sacked this summer, because, as it was reported in the press, the self-confident Thießen did not get along well with the Italian owner and got in the way of a tighter integration of AMB into the Generali Group. The impression that the interest of the Generali Group is apparently considered more important than the business interest of AMB is supported by the fact that the successor Dietmar Meister was not appointed Chairman of the Management Board but rather Speaker of the Management Board only and the Italian Lorenzo Kravina, the former general representative, was sent to the Management Board. This, already, evidences the weakening of AMB’s independency vis-à-vis third parties. More critical, however, is the signal to AMB itself – each employee, each manager, and each member of the Management Board does know by now that it is of utmost importance for his own career to make decisions in the interest of the Generali Group rather than in the interest of AMB.

Management under the own responsibility of the Management Board as provided for by the German Stock Corporation Act is simply no longer possible in a corporate group environment where persons are ruthlessly fired because they do not get along with the majority shareholder.

With a view to what was done to Dr. Thießen, the employees and members of the Boards are incentivized to act in accordance with the interest of Generali only. Furthermore, the stock option plan incentivizes the members of the Management Board to pursue the interest of the Generali Group rather than the business interest of AMB. This provides an ideal basis for a wide-ranging integration into the corporate group without the formal instruction rights of a domination agreement. Yet, the law on factual corporate groups in Germany provides for the protection of minority shareholders. The running of a German stock corporation as a mere business line of the parent entity is illegal.

Parallels to the Integration HVB/UniCredit?

Shareholders should be alarmed since the aggressive integration of Bayerische Hypo- und Vereinsbank AG (hereinafter HVB) into the Italian bank UniCredit. Are there any parallels? As a reminder:

Following the takeover, those members of HVB’s key personnel that were, in the opinion of UniCredit, not in line with the Group’s interest were made redundant. HVB was rigorously pressed into the group structure of UniCredit, transformed and, in effect, set up as a regional sales organization in Germany. In this context, the most valuable subsidiaries were moved to UniCredit for “Sale of the Century” prices. Only after HVB was completely stripped-off its crown jewels in the fast growing emerging markets, Unicredit decided to squeeze-out the minority shareholders on the basis of the reduced value of the business. Because this comprehensive integration was effected without a domination agreement, several financial investors sued UniCredit and members of the boards for damages in the amount of EUR 17.3 billion. The general meeting commissioned a special representative (Sec. 147 AktG) to assert further damages against the majority company and the board members. On September 6, 2007, the local court of Munich granted a preliminary injunction allowing the special representative to start its investigation and vesting him with far reaching inspection rights regarding the affairs of the company.

For an outside shareholder, it is difficult to asses whether in terms of speed and intensity the integration of HVB/Unicredit can be compared with the integration AMB/Generali. For us minority shareholders, however, this is not a reason for slowing-down but - using HVB as an example - should bring us to the highest level of alarm. We minority shareholders should have learned our lesson and should not be waiting doing nothing until the integration of AMB is completed. Watch for the beginning! All minority rights guaranteed by law must be utilized in time. For that purpose, the shareholder must be fully briefed by the Management Board about the true scope of the integration measures. Special auditors must, if necessary, provide further clarification of facts. Minority shareholder must immediately push a claim for each single damage inflicted on the Company. It should not be waited until damages in the amount of billions have accrued. The general meeting serves exactly this purpose. 

Comprehensive Report of the Management Board on the Status Quo of the Integration required

An extraordinary general meeting is at all costs required in order to inform the shareholders by way of a comprehensive report of the Management Board on the status quo and the real scope of the integration in the corporate group. Only a general meeting allows the minority shareholders to ask questions and find out if, secretly, a complete integration of AMB is planned and effected following the disreputable blue-print of HVB. In particular any changes of the focus of the business, which usually go along with a change of the management, must be reported and explained to the shareholders before the Company suffers severe and irreparable damages. Any questions asked in a general meeting must be truthfully answered by the Management Board. The Management Board will be personally measured by those answers. The shareholders could use the extraordinary general meeting to commission a special auditor to further clarify the facts should there remain any doubts. Even if the appointment of the special auditor is voted down by the votes of the majority shareholder, minority shareholders holding 1% or a nominal amount of EUR 100,000 of the registered share capital could bring a motion to have the special auditor appointed by a court, provided there are facts available which give reason to believe that the law was breached (Sec. 142 para. 2 AktG).

Apparently, the ongoing restructuring concerns not only minority shareholder but also rating agencies. According to an article of the Handelsblatt of August 21, 2007, the reputable international rating agency Moody’s grants AMB only an Aa3 rating with a negative outlook due to increased risks stemming from the restructuring, whereas the corporate group report of 2006 quoted a Standard & Poor’s AA rating with a stable outlook. All this gives strong reasons for a widespread shareholders education in the context of an extraordinary general meeting.

Independent Special Representative Necessary to Prevent Damages

In the opinion of VzfK, it is of utmost importance to take immediate action against the integration (which has obviously started already) and to appoint a special representative to assert compensation claims in respect of damages or disadvantages already inflicted. The minority right to appoint a special representative pursuant to Sec. 147 AktG is based on the rightful considerations of the German legislator that it is unlikely that the Management Board itself will assert damages claims against its majority shareholder or members of the management board or the supervisory board of its company. Furthermore, experience shows that neither the board members nor the auditors, which have an own economic interest in getting further profitable business of the corporate group, can adequately safeguard the rights and legitimate interests of the minority shareholders. The special representative, however, is in a position to pursue, from an independent point of view (not being subject to any conflict of interest), the interest of the company in the best interests of all shareholders   

The appointment of the special representative at the DIS AG can be named as a successful precedent. In the DIS AG case the special representative reported in this years’ general meeting that the management board has acted in the interest of the majority shareholder to the detriment of the company which compromised the company’s assets.  

Although the members of the boards of DIS AG had always stressed the legitimacy of their actions and even though the auditor had confirmed the dependency report, DIS AG and its majority shareholder, following the investigations of the special representative, agreed to far reaching compensation payments thereby principally acknowledging their wrongdoing. This life example illustrates the significance of a special representative, in particular as an independent control authority at the level of controlled stock corporations.

The appointment of a special auditor pursuant to Sec. 147 AktG requires a simple majority of the votes cast in the general meeting. However, this does not render the ballot hopeless. The majority shareholder is, in this respect, barred from voting as a matter of statutory law (Sec. 136 AktG). Therefore, we majority shareholders have a realistic chance to appoint a special representative. Only by actively pursuing their interest and making use of their statutory rights will minority shareholders be able to protect themselves against the unconscionable influence of those controlling shareholders which are acting with a simple majority but without a domination agreement – so as if they were the sole shareholder of the company.

A special representative has far reaching rights to further investigate damage claims and is obliged to bring those to court. Any damages suffered as a result of the transfer of the Asset Management Company and the resignation of Dr. Thießen can already be asserted in the interest of the Company and its minority shareholders. The filing of claims against Generali, its board members and the responsible members of the Management Board and Supervisory Board of AMB may then hopefully have the side effect that, in future situations, those boards represent the interests of all shareholders and, against the background of their personal liability, not only the interest of the corporate group Generali. In doing so, we could potentially also achieve that Generali may only implement its group integration after having put in place the legal pre-requisites therefore.

Reversal of the Transfer of the Asset Management Company

According to the Financial Report 2006, the General Committee of the Supervisory Board approved on November 23, 2006 the contribution of all of AMB’s shares in AMB Generali Asset Managers Kapitalanlagegesellschaft mbH to Generali Investments SPA (scheduled for the year 2007). This funds and asset management entity of AMB has approximately EUR 76.4 billion assets under management. This business area of AMB is now part of the Italian holding company which now has approximately EUR 270 billion assets under management. Such Holding - the shareholders of which have now become Generali with a 40% stake and AMB as well as Generali France with a stake of 30% each - is the umbrella company for the regional centers in Triest, Paris and Cologne. While this, at a first glance, looks like an exchange of shares for a shareholding in the Holding, it unmasks, on closer inspection, soon as a transaction with significant disadvantages for AMB and its outside shareholders.

The segment asset management has apparently gone through complete group integration already, thereby implementing the regional structures. Cologne is left as a “regional centre” for the entire corporate group. This is also evidenced by the change of the corporate name to “Generali Investments Deutschland” effective as of June 18, 2007. In light of the boost of private pension plans, the asset management, however, is a fast growing market at high margins and a core business for insurance companies. The concealed construction of exchanging the wholly owned company for a minority stake in a holding company dominated by Generali leads to the loss of AMB’s direct control over this business area. As a consequence, the business is not subject to operational control any longer - not even in relation to the German business which has been downsized to a regional centre. With this new structure, key decisions are now being passed by Generali only. By way of this clever “contribution in kind structure”, Generali secured direct instructions rights and control over the asset management of AMB without even paying a single penny. AMB is only a minority shareholder in the Holding and is no longer in a position to scrutinize the transfer of assets to other group entities or can, in the absence of control or voting rights, not block such transfers. Generali basically acquired our company with EUR 76 billion assets under management for free. This alone is an adverse transaction taking into account that (i) the minority shareholding must be considered completely worthless due to the missing operational control and that (ii) a transfer of assets to the detriment of AMB can be disguised by this structure and hardly be vetoed. Members of a management board and supervisory board acting in the best interest of an independent company would have never voted in favor of such structures.

The special representative should, therefore, be committed to investigate the facts and to assert damage claims. Most important objective should be the reversal of the adverse transaction so that our company regains control over the asset management as an important field of business. The special representative is entitled and obliged to demand the reversal of the transaction. This would also apply under the restitution in kind principle – the overriding legal consequence for damage claims under German law. In addition, the special representative is commissioned to identify all further damages incurred in this context and to recover such damages from the responsible members of AMB’s Management Board and Supervisory Board (i.e. to the extent they voted in favor of such transactions) who are jointly and severally liable with Generali and its subsidiaries.

Assertion of Damage Claims in the Millions

At the instigation of the controlling shareholder, Dr. Thießen’s service agreement was terminated although he had a remaining term of office of four years. As a consequence, it is most likely that AMB suffered damages in the millions. Those damages do not even take into account the negative effects for the independency and the culture of AMB, which are virtually impossible to assess. Unfortunately, such effects can only be taken into account in an advanced stadium of the integration under the aspect of a defacto group. However, an exact figure can be assigned to costs which are incurred in connection with the early replacement by way of the alleged “amicable” termination of the service agreement. With a remaining term of four years, the compensation payments alone are likely to have caused damages in the amount of many millions. Taking into consideration that a “missing understanding” with the chairman of the majority shareholder does, under the principles of the German Stock Corporation Act, not justify the dismissal of a member of the Management Board, all members of the Supervisory Board which participated in that decision are directly jointly and severally liable (Sec. 116 AktG). In this context, the reason forming the basis of the dismissal is decisive and not the formal announcement of an amicable solution. Conforming articles of the financial press give reason to believe that this personnel measure was caused by the controlling shareholder Generali. The special representative has to enforce damage claims if Generali has not made good all damages of AMB by the end of the financial year.

Special Audit to Investigate Further Damages

One cannot help thinking that the Management Board of AMB does not act in the best interest of the Company but rather in the best interest of the majority shareholder Generali. This is evidenced by the fact that the members of the Management Board – at least both the former Chairmen Dr. Walther Thießen and the present Chairmen Dietmar Meister – were granted stock options of Generali. Such options account for a substantial part of the annual remuneration package of the aforementioned members of the Management Board. A task of the special audit is to determine as to whether Lorenzo Kravina as member of the Management Board is incentivized by similar success based remuneration schemes.

As a consequence of this remuneration scheme, it is in the interest of the members of the Management Board to primarily increase the stock price of Generali. To that effect, the development of AMB as one aspect only is less important than the overall development of the Group. This is, from a minority shareholders’ point of view, exceptionally dangerous, as it is not necessarily in the economic interest of the Management Board to duly comply with the minimum standards for dealings with the majority shareholder as provided for by corporate law. The surrender of business opportunities to the majority shareholder may, for instance, be viewed harmless by the Management Board, as they may benefit from the prospects of such opportunities via the development of the stock price of the majority shareholder – even if this is to the detriment of their own company. This applies, in particular, to the business opportunities outside of Germany, which apparently are utilized by the majority shareholder only. Here, AMB loses a tremendous growth potential to the sole benefit of the majority shareholder Generali. This becomes even more evident if one takes the saturation of the German market with financial products as well as the weak economic growth compared to the growth of other regions into account – not to mention the fact that, according to the prevailing opinion of legal commentaries, a majority shareholder is, prior to the execution of a domination agreement, subject to an extensive non-compete obligations.

This is also supported by the predominant view in German legal literature, which takes a rather critical view towards the granting of options for stock of the controlling shareholder to the management of subsidiaries. All of the legal authors come to the conclusion that this practice entails a substantial conflict of interest. It is evident, that a stock options program, where the success components are subject to the performance of the shares of the parent entity, hold the danger of the Management Board of the controlled company directing its actions unilaterally to the benefit of the parent entity but not – as is required by mandatory law – solely to the benefit of the company managed by it.

This holds, in particular, true for scenarios – such as AMB – where stock options of the group parent are granted to the management board of a German stock corporation, which is not subject to a domination agreement with the group parent. Many corporate law experts take the view, that in such “defacto groups” the management board of the controlled company simply must not participate in stock option program of the controlling company. 

Furthermore, the restriction of the business of AMB to the German market virtually dictated by Generali gives reason to believe that the company was and is run as a mere business unit of the parent shareholder – thereby criminally breaching applicable German corporate group law principles. This can no longer be accepted. It is, from the outside shareholders’ point of view, not only essential to establish the most evident violations of German corporate group law principles but also to investigate and assess further harmful transaction under the cover of “cooperation agreements”, “data exchange” or other euphemism. All such other details of an illegal integration must also be clarified in the course of the special audit.

In order to come up against the evident danger of collusion and be able to enforce potential claims, it is crucial that a special auditor works out the most obvious violations of applicable corporate group law principles and puts a number to the compensation/ damage claims. If necessary, also the bringing of criminal charges must be considered. For that reason, an extraordinary general meeting must immediately be called to commission a special auditor before further accomplished facts are made by the majority shareholder and the Management Board to the detriment of the company and its minority shareholders.

5% for Motion required; Lots of Support Already Received

A minority shareholding of 5% of the registered capital of the company is required to call an extraordinary general meeting. To date, VzfK has already received power of attorneys or corresponding support of lots of shareholders. By this means, VzfK has in many other cases been able to successfully organize the necessary quorum in the general meeting. VzfK is confident to succeed in the AMB case, too. We kindly ask all minority shareholders of AMB to support the convening of an extraordinary general meeting and to send to VzfK power of attorneys corresponding to the template provided above.

AMB Generali Holding AG

Request to Convene a Shareholders Meeting pursuant to Sec. 122 Para. 1 Sentence 1 German Stock Corporation Act (“AktG”)

We represent shareholders and intend to request the holding of an extraordinary general meeting regarding the following items: (1) Report of the Management Board on the status of the group integration, (2) appointment of a special representative pursuant to Sec. 147 AktG to assert compensation claims, (3) appointment of a special auditor pursuant to Sec. 142 AktG to investigate disadvantageous transactions in connection with the group integration. We call on other shareholders to join our request.

A reasoned statement for our request is available in german at this link.

Verbraucherzentrale für Kapitalanleger e.V. (VzfK) (Aktionärsvereinigung)
Dr. Martin Weimann
Hiddenseer Straße 9
10437 Berlin
E-Mail: info(at)vzfk.de