Convenience Translation/media/Files/O/Osram...financial statements, management reports, consolidated financial statements, group management reports or the management of OSRAM AG. Pursuant

Report

on the Audit

of the Domination and Profit and Loss Transfer

Agreement

between

ams Offer GmbH, Ismaning

and

OSRAM Licht AG, Munich

Convenience Translation

This document is a translation of the report “Bericht über die Prüfung des

Beherrschungs- und Gewinnabführungsvertrags zwischen der ams Offer GmbH,

Ismaning, und der OSRAM Licht AG, München“ which was written in German. The

translation was performed by a professional translator. Ebner Stolz GmbH & Co. KG

does not assume any responsibility for the correctness of the translation. The German

version is authoritative for decision-making purposes.

Abbreviations

Abbreviation Full term

AktG Aktiengesetz: German Stock Corporation Act

ams AG ams AG, Premstetten, Austria

ams Offer GmbH ams Offer GmbH, Ismaning

BaFin Bundesanstalt für Finanzdienstleistungsaufsicht:

Federal Financial Supervisory Agency

BGH Bundesgerichtshof: Federal Court of Justice

Bloomberg Bloomberg Finance L.P., New York, USA

BVerfG Bundesverfassungsgericht: Federal Constitutional

Court

CAGR Compound Annual Growth Rate

CAPM Capital Asset Pricing Model

CF Corporate Finance: a trade journal

DB Der Betrieb: a German business administration journal

Ebner Stolz Ebner Stolz GmbH & Co. KG, Wirtschaftsprüfungs-

gesellschaft Steuerberatungsgesellschaft, Stuttgart

EMEA Europe, Middle East and Africa

ECJ European Court of Justice

EUR Euro

EY Ernst & Young GmbH

Wirtschaftsprüfungsgesellschaft, Munich


FAUB Technical committee for business valuations and

commerce of the Institute of Public Auditors in

Germany

FB Finanz-Betrieb: a German journal on finance

HGB Handelsgesetzbuch: German Commercial Code

IDW Institut der Wirtschaftsprüfer in Deutschland e.V.

[Institute of Public Auditors in Germany], Düsseldorf

IDW-FN IDW Fachnachrichten: Newsletters from the IDW

IFRS International Fincancial Reporting Standards

Ledvance Ledvance GmbH, Garching

LG Landgericht: Regional Court

mEUR Million Euro

OSRAM AG OSRAM Licht AG, Munich

OSRAM Continental OSRAM Continental GmbH, Munich

OLG Oberlandesgericht: Higher Regional Court

PwC PricewaterhouseCoopers GmbH

Wirtschaftsprüfungsgesellschaft, Munich

UmwG Umwandlungsgesetz: Transformation Act

WM Wertpapier-Mitteilung für Wirtschafts- und Bankrecht:

a German journal for commercial law and banking law

notifications related to securities

WPg Die Wirtschaftsprüfung: a German journal for the

auditing profession


WpÜG-AngebV Verordnung über den Inhalt der Angebotsunterlage, die

Gegenleistung bei Übernahmeangeboten und

Pflichtangeboten und die Befreiung von der

Verpflichtung zur Veröffentlichung und zur Abgabe

eines Angebots: Regulation on the Contents of

Takeover Bids, the Consideration Paid in Takeover

Bids and Mandatory Bids and the Exemption from the

Duty to Publish and Tender a Bid

ZIP Zeitschrift für Wirtschaftsrecht: a German journal for

commercial law

Contents

Page

1. Engagement and Performance of the Engagement 1

2. Purpose, Nature and Scope of the Audit Pursuant to Sec. 293b AktG 5

2.1. Domination and Profit and Loss Transfer Agreement 5

2.2. Joint Report on the Corporate Agreement 5

2.3. Auditor’s Report 5

3. Audit of the Completeness of the Agreement 7

3.1. Registered Names and Offices of the Entities Involved 7

3.2. Management 7

3.3. Profit Transfer 7

3.4. Assumption of Losses (Sec. 302 AktG) 8

3.5. Guaranteed Dividend (Sec. 304 AktG) 8

3.6. Fair Compensation (Sec. 305 AktG) 10

3.7. Duration and Termination of the Agreement 11

3.8. Letter of Comfort 12

3.9. Conclusion 12

4. Audit of the Appropriateness of the Measurement Methods Applied 13

4.1. Equity Value 14

4.2. Liquidation Value 18

4.3. Net Asset Value as Defined by the IDW 19

4.4. Market Price 19

4.5. Comparative Valuations 20

4.6. Prior Acquisitions by ams Offer GmbH 21

4.7. Method Used to Calculate the Fair Compensation 22

4.8. Method Used to Calculate the Guaranteed Dividend 23

4.9. Conclusion 23

5. Methods Used to Audit the Fairness of the Guaranteed Dividend and the Fair

Compensation 24

6. Audit Findings in Detail 26

6.1. Valuation Object 26

6.2. Valuation Date 32

6.3. Capitalized Earnings Value 33

a) Analysis of Historical Results 33

b) Operating Planning 38

c) Other Planning Components 62

d) Terminal Value and Retained Earnings in the Terminal Phase 63

e) Discount Rate 66

f) Growth Factor 80

g) Derivation of the Discount Rate 85

h) Calculation of Equity Value Using the Capitalized Earnings Approach 85

6.4. Separately-Valued Assets 90

6.5. Business Value 91

6.6. Price on the Stock Exchange 91

6.7. Comparative Valuations 94

6.8. Sensitivity Analysis 95

6.9. Particular Difficulties in the Valuation 95

7. Calculation of the Fair Compensation and Guaranteed Dividend 96

7.1. Calculation of the Fair Compensation pursuant to Sec. 305 AktG 96

7.2. Calculation of the Guaranteed Dividend pursuant to Sec. 304 AktG 96

8. Concluding Declaration of the Fairness of the Compensation and Guaranteed Dividend 100

Exhibits

Ruling of the Regional Court of Munich I dated 19 May 2020 Exhibit 1

General Engagement Terms Exhibit 2

For technical reasons the tables may contain rounding differences

of ± one unit (EUR, % etc.)

EOC-Nr. 2020-28263

Dr. Pp/Dr. Rufr/Dr. Unf/Pad

M:\O\OSRAM_3005275_G\OSRAM Licht AG_3005275\Projekte\UBW\2020\BEAV\B Gutachten\Englisch\I1-01-009 DPLTA-Audit Report 23.09.2020 (convenience

translation) final.docx

- 1 -

1. Engagement and Performance of the Engagement

ams Offer GmbH, Ismaning

(hereinafter also referred to as “ams Offer GmbH”)

and

OSRAM Licht AG, Munich

(hereinafter also referred to as “OSRAM AG” or “Company”)

intend to conclude a domination and profit and loss transfer agreement. According to Sec. 293b

AktG, the Agreement must be audited by one or more independent auditors. The Regional Court

of Munich I has appointed us at the joint instigation of both contractual partners to audit the

Agreement pursuant to Sec. 293c AktG by court order dated 19 May 2020 (see Exhibit 2).

Pursuant to Sec. 321 (4a) HGB, we confirm that we observed the applicable laws regarding our

independence during our audit.

In the course of our review, we observed the “Principles for the Performance of Business

Valuations” issued by the Institute of Public Auditors in Germany (“IDW”) released on 2 April 2008

(IDW S1 2008). Moreover, we observed the IDW practice statement 2/2017 “Beurteilung einer

Unternehmensplanung bei Bewertung, Restrukturierungen, Due Diligence und Fairness Opinion“

(evaluation of business planning in the course of business valuations, restructuring, due diligence

and fairness opinions).

When calculating the business value and deriving the compensation payment and guaranteed

dividend, the management of ams Offer GmbH and the managing board of OSRAM AG jointly

engaged the professional services of PricewaterhouseCoopers GmbH

Wirtschaftsprüfungsgesellschaft (hereinafter also referred to as “PwC“ or “Neutral Valuer“), which

issued an expert valuation report on their work. In the course of our audit activities we inspected

the valuation documentation.

The managing board of OSRAM AG and the contact people they named to us willingly provided

us with all the explanations and supporting documentation we requested. The completeness of

the explanations and documentation provided was confirmed to us by the management of ams

Offer GmbH and the managing board of OSRAM AG in a written declaration.

- 2 -

We conducted our audit in the period from 2 June 2020 to 23 September 2020 in the offices of

OSRAM AG in Munich and in our offices in Stuttgart. Although we conducted our audit in parallel

to the work of the Neutral Valuer, PwC, we audited the interim results on the valuation and the

preparatory work for the joint report, coming to our audit opinion independently and at our own

initiative.

The following meetings were held with the Neutral Valuer and representatives of OSRAM AG

and/or ams AG:

Date Participants Topic/Content Place

02.06.2020OSRAM AG, PwC,

Ebner Stolz

Kick-Off and presentation of the business

plan by management of OSRAM AGOffice OSRAM AG, Munich


Ebner StolzMeeting market position/strategy Telephone/Video conference


Ebner StolzMeeting past performance Telephone/Video conference


Ebner StolzMeeting tax planning Telephone/Video conference


Ebner StolzMeeting market position/strategy Telephone/Video conference


Ebner Stolz

Meeting planning business unit OS with

BU managementTelephone/Video conference

29.06.2020OSRAM AG, ams AG,

PwC, Ebner Stolz

Meeting planning business unit AM and DI

with BU management

Office OSRAM AG, Munich/

Telephone/Video conference


Ebner StolzMeeting Peer Group Telephone/Video conference


Ebner StolzMeeting planning OSRAM Continental

Office OSRAM AG, Munich/

Telephone/Video conference

22.07.2020 PwC, Ebner StolzMeeting different topics concerning

ModelOffice PwC, Munich


Ebner Stolz

Q&A planning business unit DI with BU

managementTelephone/Video conference


Ebner Stolz

Q&A planning business unit OS with BU



Ebner Stolz

Explanation long-term profitability targets

by management of OSRAM AGOffice OSRAM AG, Munich


Ebner Stolz

Q&A planning business unit AM with BU



Ebner StolzExplanation potential for synergies Telephone/Video conference

26.08.2020ams AG, PwC, Ebner

Stolz

Explanation long-term profitability targets

by management of ams AGTelephone/Video conference

10.09.2020OSRAM AG, ams AG,

PwC, Ebner Stolz

Presentation of updated business plan by

management of OSRAM AGOffice OSRAM AG, Munich

- 3 -

In addition, numerous meetings and telephone calls were held at a working level over the entire

course of our audit work on the various issues relevant to the valuation.

The audit of the corporate agreement was managed and performed by the two auditors signing

this report. They were supported by a manager experienced in business planning and valuation

issues, a senior consultant and a consultant.

Should there be any material changes in the assets, liabilities, financial position or financial

performance, or any other basis used for the valuation of OSRAM AG in the period between the

conclusion of our audit and the prospective date of 3 November 2020 on which the extraordinary

general meeting of OSRAM AG passes a resolution on the Domination and Profit and Loss Transfer

Agreement, then these must be considered in the measurement of the guaranteed dividend and

the compensation payment.

We make express reference to the fact that our audit activities did not extend to the accounting,

financial statements, management reports, consolidated financial statements, group management

reports or the management of OSRAM AG. Pursuant to Sec. 293b AktG, a review of this nature is

not included in the scope of our activities. The compliance of the financial statements of OSRAM

AG (pursuant to HGB) and the consolidated financial statements (pursuant to IFRS) with the

relevant legal requirements was confirmed by the independent auditors of EY engaged to perform

this task.

Execution of the assignment and the extent of our responsibility and liability is governed by the

“General Engagement Terms for Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften” dated

1 January 2017 attached to this report as Exhibit 3. In addition to the statutory limitation of liability

found in Sec. 293d (2) AktG in conjunction with Sec. 323 HGB, the General Engagement Terms

also govern our responsibilities to third parties.

The sole purpose of this audit report is to serve as an informative basis to be used by the

companies involved in the Domination and Profit and Loss Transfer Agreement for their decisions

as well as by their consultants and legal advisors and the court which engaged us to conduct the

audit or any courts hearing disputes related to the Domination and Profit and Loss Transfer

Agreement. In addition, a copy of this report may be provided to the minority shareholders of

OSRAM AG and also published on the website of OSRAM AG for this purpose. It may not be used

for any other purposes.

- 4 -

The following documents were made available for our audit, among others:

▪ Joint report issued by the management of ams Offer GmbH and the managing board of

OSRAM AG on the Domination and Profit and Loss Transfer Agreement between ams Offer

GmbH and OSRAM AG (as at 22 September 2020),

▪ Domination and Profit and Loss Transfer Agreement dated 22 September 2020 (Exhibit 1),

▪ Report from PwC on the business valuation of OSRAM AG dated 21 September 2020

(including prior drafts) attached to the joint report as Annex 4,

▪ Reports from EY on the audit of the separate financial statements and management report of

OSRAM AG for fiscal years 2017 to 20191,

▪ Reports from EY on the audit of the IFRS consolidated financial statements and group

management report of OSRAM AG for fiscal years 2017 to 2019,

▪ Annual reports of OSRAM AG for the fiscal years 2017 to 2019,

▪ Financial planning statements of OSRAM AG for the fiscal years 2020 to 2025 and the

underlying planning assumptions dated 7 September 2020, and forecast for the fiscal year

2020 dated 16 September 2020 (“financial planning statements”),

▪ Business planning of key income statement figures for the business units OS, AM and DI of

OSRAM AG for the fiscal years 2020 to 2025,

▪ Documents concerning the identification and assessment of synergy potentials on the part of

OSRAM AG and ams AG, Premstätten (“ams AG“),

▪ Internal analyses from the management accounting (controlling department) of OSRAM AG,

▪ Combined minutes of the managing board meetings from 8 March 2019 to 15 July 2020 and

the agenda of the meetings of the supervisory board from 7 May 2019 to 17 June 2020 (all

inspected on site),

▪ The articles of association of OSRAM AG,

▪ Excerpt from the entry in the commercial register of OSRAM AG,

▪ Excerpt from the entry in the commercial register of ams Offer GmbH,

▪ Various market and industry-related publications,

▪ Valuation papers of PwC,

▪ Publicly available information, capital market data in particular.

1 The annual dates relate to the calendar year in which the respective fiscal year of OSRAM AG ends, which

does not equate with the calendar year.

- 5 -

2. Purpose, Nature and Scope of the Audit Pursuant to Sec. 293b

AktG

2.1. Domination and Profit and Loss Transfer Agreement

The subject of this audit, performed in accordance with Sec. 293b AktG, is the Domination and

Profit and Loss Transfer Agreement or its draft version. This Agreement (or its draft version) must

be audited to determine the completeness and accuracy of the information it contains and, in

particular, whether the proposed guaranteed dividend and compensation are fair. The German

terms “Ausgleich” and “Ausgleichszahlung” as defined by Sec. 304 AktG have been uniformly

translated as “guaranteed dividend”.

2.2. Joint Report on the Corporate Agreement

According to Sec. 293a AktG, the legal representatives of each of the companies participating in

the Domination and Profit and Loss Transfer Agreement must issue a detailed written report

explaining the legal and economic aspects of the corporate agreement, the details of the

agreement and, in particular, the amount and type of guaranteed dividend pursuant to Sec. 304

AktG and the compensation payment pursuant to Sec. 305 AktG. For this reason, the managing

board of OSRAM AG and the management of ams Offer GmbH have issued a joint report on the

Domination and Profit and Loss Transfer Agreement between OSRAM AG and ams Offer GmbH.

This report must make special mention of any particular difficulties in valuing the companies that

are party to the Agreement and the consequences for the equity interests of the shareholders.

In the course of our work, we audited the disclosures on the subject of the audit and the

methodical and computational explanations and justifications of the business value of the

dependent company and the proposed guaranteed dividend and cash compensation derived on

this basis contained in the joint report on the corporate agreement and the attached valuation

report as well as the – earlier – draft versions of the joint report and valuation report. An audit of

the completeness and accuracy of the joint report as well as the suitability of the Domination and

Profit and Loss Transfer Agreement for the stated purpose were not within the scope of our audit

engagement.

2.3. Auditor’s Report

As auditors, we report in writing pursuant to Sec. 293e AktG on the findings of our audit in

accordance with our professional standards.

- 6 -

The focus of the audit of the corporate agreement is placed on an assessment of the proposed

guaranteed dividend and the proposed compensation payment. The auditor must review whether

the methods applied by the legal representatives to determine the guaranteed dividend and the

compensation payment are suitable. In particular, if the valuation is based on a forward-looking

analytical business valuation methodology, the audit must review whether the business valuation

on which the proposed guaranteed dividend and severance payment is based, comply with

generally accepted principles of business valuations, whether the data on which these valuations

are based have been professionally derived and whether the forecasts used are plausible. If the

share prices quoted on the exchange are used to derive the compensation payment, the method

used to derive the exchange price must be assessed.

Sec. 293e (1) sentence 3 AktG makes it clear that an auditor of a corporate agreement is not

obliged to carry out another independent business valuation. Rather, the auditor can restrict his

activities to reviewing the plausibility of the business valuation on which the proposed

compensation is based, including the report on the business valuation (see Emmerich/Habersack,

Aktien- und GmbH-Konzernrecht, 9th edition 2019, Sec. 293 b, No. 17 with further references;

Servatius, in: Grigoleit, Aktiengesetz, 2nd edition 2020, Sec 293b No. 6; OLG Stuttgart, 17 October

2011, 20 W 7/11, No. 232 (juris); LG Munich I, 28 August 2008, 5 HKO 2522/08, AG 2008, pp. 904,

908).

According to Sec. 293e (1) sentence 2 AktG, the auditor’s report must conclude with a declaration

of whether the proposed guaranteed dividend and the proposed compensation are fair. The

following must be included in the report:

1. which methods were used to determine the guaranteed dividend and the fair compensation

2. the reasons why application of these methods is appropriate, and

3. if more than one method has been applied, the respective guaranteed dividends and

compensation payments resulting from the various methods. At the same time, the report

must illustrate which weighting has been given to the various methods when determining the

proposed guaranteed dividend or the proposed compensation payment and the underlying

values and indicate any particular difficulties arising in the valuation.

- 7 -

3. Audit of the Completeness of the Agreement

The minimum requirements of a Domination and Profit and Loss Transfer Agreement are defined

in Secs. 291 et seq. AktG. The audit of the completeness and accuracy of the Domination and

Profit and Loss Transfer Agreement therefore relates to the general disclosures on the parties to

the agreement, the definition of the subject of the agreement, its inception and duration of the

agreement as well as the agreements on the guaranteed dividend and compensation payment.

3.1. Registered Names and Offices of the Entities Involved

The registered names of the companies who are parties to the Domination and Profit and Loss

Transfer Agreement and the addresses of their registered offices are stated in the Agreement and

agree with the entries in the commercial register.

3.2. Management

According to § 1 of the Agreement, OSRAM AG subordinates its management to ams Offer GmbH.

ams Offer GmbH is entitled to instruct the managing board of OSRAM AG with regard to the

management of the Company. ams Offer GmbH cannot issue instructions to the managing board

of OSRAM AG to amend, maintain, or terminate the Agreement. These contractual arrangements

comply with the requirements of Sec. 291 (1) sentence 1, and Sec. 299 AktG.

3.3. Profit Transfer

The obligation to transfer profits for the full fiscal year of OSRAM AG originates in the year in

which the Profit and Loss Transfer Agreement first comes into effect (see § 2.3 of the Agreement).

- 8 -

According to § 2 of the Agreement, OSRAM AG agrees to transfer its full profit to ams Offer GmbH.

Pursuant to § 2 of the Agreement and in accordance with the statutory provisions of Sec. 301 AktG,

in the applicable version, any net profit generated in the year (prior to the transfer of profits) is to

be transferred as profit after deducting any losses carried forward from the prior year, the amount

to be added to statutory reserves pursuant to Sec. 300 AktG, and the amount barred from

distribution in accordance with Sec. 268 (8) HGB. With the agreement of ams Offer GmbH, OSRAM

AG may allocate other portions of the net profit for the year to revenue reserves, provided this is

permitted under commercial law and makes sense from the perspective of due fiscal prudence.

Any revenue reserves created during the term of the Agreement must be released upon written

request from ams Offer GmbH and used to offset any loss incurred or be transferred as profit.

The obligation to transfer profit becomes due at the end of each fiscal year of OSRAM AG, and

bears interest of 5% p.a. from that date onwards. These provisions satisfy the statutory

requirements of Sec. 291 (1) sentence 1, and Sec. 301 in conjunction with Sec. 300 No. 1 AktG.

With regard to the timing differences between the origination of the right to receive the profit

transfer and the right of non-controlling interests to receive compensation, the Federal Court of

Justice found that equal treatment of non-controlling interests whose right to a guaranteed

dividend falls due pursuant to § 4.2 of the Agreement, is not possible vis à vis the controlling

company, nor necessary (see BGH, 19 April 2011, II ZR 237/09 No. 14 (juris)).

3.4. Assumption of Losses (Sec. 302 AktG)

According to § 3.1 of the Agreement, ams Offer GmbH is obliged to assume losses in accordance

with the applicable version of Sec. 302 AktG.

The dynamic aspect of this clause corresponds in full to the requirements of Sec. 302 AktG.

According to § 3.2 in conjunction with § 2.3 of the Agreement, the right to compensation of the

net loss for the year falls due upon the closing date of the fiscal year of OSRAM AG, and bears

interest of 5% p.a. from this date onwards. This arrangement complies with the legal requirements

and the court rulings.

3.5. Guaranteed Dividend (Sec. 304 AktG)

ams Offer GmbH is obliged from the fiscal year in which the right to a profit transfer becomes

effective, i.e. most likely from 1 October 2020, to pay an annual guaranteed dividend for the

duration of the corporate agreement.

- 9 -

The guaranteed dividend amounts to EUR 2.57 for each no-par share in OSRAM AG less corporate

income tax and solidarity surcharge on the basis of the tax rate for the respective fiscal year,

whereby these taxes are only deducted from the share of the profit burdened by German

corporate income tax contained in the before tax guaranteed dividend of EUR 2.08 per no-par

share.

The guaranteed dividend is due for payment on the first bank-day following the annual general

meeting of OSRAM AG for the preceding fiscal year. Furthermore, the guaranteed dividend falls

due for payment no later than eight months after the close of the respective fiscal year.

In its benchmark decision on 19 April 2011 (II ZR 237/09, No. 8 (juris)), the Federal Court of Justice

ruled that the right to a guaranteed dividend arises every year upon the end of the annual general

meeting following the close of the fiscal year, provided that, as in this case, the contractual

agreement does not make some other arrangement (supported by OLG Stuttgart, 3 April 2012,

20 W 6/09, No. 90 (juris).

The payment of a guaranteed dividend corresponds to the legal requirements of Sec. 304 (1)

Sentences 1 and 2 AktG.

Reference is made to section 7 with regard to the calculation of the guaranteed dividend.

The guaranteed dividend is granted for the first fiscal year in which the right to a profit transfer

arises. Pursuant to § 2.3 of the Agreement, this will be in the fiscal year 2021 of OSRAM AG,

assuming the Agreement becomes effective upon being entered in the commercial register in

2020.

The guaranteed dividend is reduced on a pro rata basis in the event that the contract is terminated

during a fiscal year of OSRAM AG or OSRAM AG creates an abbreviated fiscal period during the

period in which it is obliged to transfer its profits (§ 4.3 of the Agreement).

The Agreement does not include any arrangement for a pro rata temporis allocation of the

guaranteed dividend if, for example, the minority shareholders are squeezed out during a fiscal

year. With regard to the squeeze-out proceeding under the German Stock Corporation Act, the

Federal Court of Justice found that there is no right to payment of a guaranteed dividend on a

pro rata temporis basis (see BGH, 19 April 2011, II ZR 237/09, benchmark decision and No. 8

(juris)). The Domination and Profit and Loss Transfer Agreement does not terminate upon a

squeeze-out (see OLG Stuttgart, 3 April 2012, 20 W 6/09, No. 95). Owing to a lack of a contractual

arrangement or legal regulation, the minority shareholders do not have any right to a pro rata

temporis payment of the guaranteed dividend in the event of a squeeze-out.

- 10 -

In the event that the issued capital of OSRAM AG is increased from company funds by the issue

of new shares, § 4.4 of the Agreement stipulates that the guaranteed dividend is reduced in such

a way that the sum total of all guaranteed dividends remains unchanged. In the prevailing opinion,

such a reduction applies by force of law even without any corresponding contractual arrangement.

In the event of a capital increase from a cash contribution and/or contribution in kind then the

new shares are also entitled to an annual guaranteed dividend. This too corresponds to the

prevailing opinion in the legal literature.

§ 4.5 of the Agreement corresponds to Sec. 13 SpruchG [Spruchverfahrensgesetz: German act on

the procedures to be applied for certain corporate law disputes] whereby the decision of the court

applies to all parties, including those shareholders who have already left the legal entity concerned

after accepting the original compensation payment arising from the Domination and Profit and

Loss Transfer Agreement or some other settlement. Likewise, all other minority shareholders are

treated equally if ams Offer GmbH agrees to pay a higher guaranteed dividend to another

shareholder of OSRAM AG in the course of a court settlement or to avoid or terminate court

proceedings.

3.6. Fair Compensation (Sec. 305 AktG)

According to § 5.1 of the Agreement, ams Offer GmbH agrees to acquire the no-par value shares

of a minority shareholder of OSRAM AG in consideration for payment of EUR 44.65.

The choice of the type of the compensation is based on Sec. 305 (2) No. 3 AktG and is therefore

in agreement with Sec. 305 AktG.

According to § 5.2 of the Agreement, the obligation to purchase such shares is only for a limited

term, ending two months after the day on which a public announcement pursuant to Sec. 10 HGB

is made that the contract has been filed with the commercial register of OSRAM AG. This

contractual arrangement complies with the requirements of Sec. 305 (4) sentence 2 AktG. Due to

the law and corresponding contractual arrangements, an announcement of the court’s decision

in the Federal Gazette may take the place of the above announcement if an application has been

filed to have the guaranteed dividend and/or compensation payment determined under the rules

of the SpruchG (Sec. 305 (4) sentence 3 AktG).

- 11 -

If, by the expiry of the period defined in § 5.2 of the Agreement, the share capital of OSRAM AG

is increased from company funds by issue of new shares, the compensation paid per share shall

decrease in such a way that the total amount of all compensation paid remains the same. If the

issued capital of OSRAM AG is increased by cash contribution and/or contribution in kind, then

the rights under § 5 of the Agreement also apply to the new shares subscribed to by the minority

shareholders from the new share issue (§ 5.3 of the Agreement).

The Agreement does not govern the issue of interest. In this case the law requires interest to be

paid on the compensation after expiry of the day on which the Domination and Profit and Loss

Transfer Agreement takes effect at a rate of 5 percentage points above the respective base rate

as defined by Sec. 247 BGB, without thereby affecting any claims for further damages (Sec. 305

(3) sentence 3 AktG).

§ 5.4 of the Agreement governs the settlement of the fair compensation. There are no legal

requirements in this regard.

In the event of a court settlement under the terms of the SpruchG, in which a court orders a higher

fair compensation payment, the shareholders who have already accepted a settlement can

demand a corresponding step-up of their compensation payments. Likewise, all other minority

shareholders are treated equally if ams Offer GmbH agrees to pay a higher compensation

payment to another shareholder of OSRAM AG in the course of a court settlement or to avoid or

terminate court proceedings (§ 5.5 of the Agreement).

3.7. Duration and Termination of the Agreement

In agreement with the applicable law, § 6.1 and § 6.2 of the Agreement state that the Agreement

requires the prior approval of the annual general meeting of OSRAM AG and the shareholders’

meeting of ams Offer GmbH. The Agreement comes into force upon being entered into the

commercial register of OSRAM AG.

§ 6.3, § 6.4 and § 6.5 of the Agreement govern the duration and termination of the Domination

and Profit and Loss Transfer Agreement. There are no requirements in the law with regard to the

duration or termination of a domination and profit and loss transfer agreement.

- 12 -

3.8. Letter of Comfort

§ 7 of the Agreement refers to the letter of comfort issued by ams AG, the sole shareholder of

ams Offer GmbH. Without acceding to the Agreement itself, ams AG agrees to ensure that ams

Offer GmbH is provided with the financial resources it needs to meet its obligations to pay the

guaranteed dividend and the compensation payments in full as they fall due.

The letter of comfort is attached to the Domination and Profit and Loss Transfer Agreement as an

annex.

In contrast to a squeeze-out, in which the compensation payment is secured by a bank guarantee

pursuant to Sec. 327b (3) AktG, the law governing corporate agreements does not consider any

guarantees.

In this case, the credit rating of ams AG has an impact via the letter of comfort on the other party

to the Agreement, namely ams Offer GmbH, and therefore provides additional security to the

minority shareholders.

3.9. Conclusion

Based on our audit, we have found that the Domination and Profit and Loss Transfer Agreement

contains the full and proper components as required by Sec. 291 et seq. AktG, and therefore

complies with statutory requirements.

- 13 -

4. Audit of the Appropriateness of the Measurement Methods

Applied

The guaranteed dividend and the fair compensation are based on the findings of the business

valuation unless a higher share price obtainable on the stock exchange applies for the fair

compensation in light of the rulings of the highest court. Section E of the report on the Agreement

contains comments on how the fair compensation and guaranteed dividend were arrived at and

justified.

The valuation report, which is integrated in the joint report as Annex 4, states that the valuation

standards which have been applied comply with the standards of business valuation now generally

accepted in both theory and practice as reflected in the statements issued by the IDW, in

particular, the IDW Standard, “Principles for the Performance of Business Valuations” (IDW

S1 issued in 2008). In order to derive the arithmetical cash compensation, the companies were

valued by applying the capitalized earnings value (Ertragswertverfahren).

According to prevailing court rulings and generally accepted valuation practice, which this

business valuation is based on, the guaranteed dividend and fair compensation should be derived

from an objectified measure of the business value. The objectified business value represents the

“inter-subjective” verifiable value of future earnings from the perspective of the various

shareholders which would result when the company continues to operate under its existing

business model. Should the business valuation be required under company law or for contractual

reasons, the valuation is performed from the perspective of the shareholder as a natural domestic

tax-payer subject to unrestricted tax in Germany (IDW S1 2008 No. 31).

As explained in detail below, we are of the opinion that the presentations and comments in the

joint report relating to the valuation method used and the decision about the amount of the

guaranteed dividend and the compensation payment are accurate.

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4.1. Equity Value

Assuming the exclusive pursuit of financial objectives, the value of a company is determined by

the present value of the net inflows to the shareholders. The value of future earnings is basically

the result of the free cash flow which can be generated from continuing the company’s operations.

The liquidation value of any non-operating assets must be added to this. The net present value of

these surpluses is derived by applying a discount rate that equates with the return of an

investment that can be reasonably taken as an adequate alternative investment to an investment

in the company being valued.

The present value of future earnings is thus the theoretically correct value of an enterprise.

According to IDW S1 2008 No. 7 the business value, as a value of future earnings, can be

determined using the capitalized earnings method or the discounted cash flow method. In this

case the business value of OSRAM AG has been determined by PwC using the capitalized earnings

method which is most commonly used in practice in Germany and recognized by the courts.

Considering the fact that both methods lead to the same business value if the underlying

assumptions are identical, particularly with regards to financing and risk content of the tax shield,

as well as the use of suitable formulas to adjust the beta factor to the capital structure (see IDW

S1 (revised) No. 101), the Neutral Valuer has refrained from applying the discounted cash flow

method in addition to the capitalized earnings method.

In spite of the general acceptance of the capitalized earnings method, it should be noted that this

model is associated with a number of uncertainties. For this reason, the business valuation

presented to us by PwC cannot determine the mathematically exact or true business value as at

the valuation date (see BVerfG, 24 May 2012, 1 BvR 3221/10, No. 30 (juris); BGH, 29 September

2015, II ZB 23/14/14, No. 36 (bundesgerichtshof.juris); OLG Munich, 14 July 2009, 31 Wx 121/06,

No. 10 (juris)). The numerous forward-looking estimates and individual decisions in the method

are not commensurate to an assessment of accuracy but rather to an assessment of

reasonableness (see OLG Munich, 2 September 2019, 31 Wx 358/16, No. 34 (BeckRS); OLG

Stuttgart, 17 October 2011, 20 W 7/11, No. 179 (juris)).

- 15 -

The valuation of OSRAM AG was performed on a stand-alone basis in keeping with the prevailing

opinion of the courts and professional practice (see OLG Munich, 2 September 2019, 31 Wx

358/16, No. 81 (BeckRS); OLG Frankfurt, 28 March 2014, 21 W 15/11, No. 146 (juris); OLG Stuttgart,

5 June 2013, 20 W 6/10, No. 169 (juris); Popp, AG 2010, pp. 1, 2; van Rossum, in: Münchener

Komm. zum AktG, 5th edition, 2020, § 305 No. 171; Koch, in Hüffer/Koch, AktG, 14th edition, 2020,

§ 305 No. 33; krit.: Krieger, in: Münch. Hdb. AG, 4th edition, 2015, § 71, No. 135; Emmerich, in:

Emmerich/Habersack, Aktien- und GmbH-Konzernrecht, 9th edition, 2019, § 305 No. 70a, 71).

Consequently, any effects that only arise from the execution of the structural measure do not need

to be considered during the valuation. The right to a fair guaranteed dividend and a fair

compensation payment does not endow the holder with any rights to participate in the benefits

that would not exist without the corporate agreement (see LG Stuttgart, 17 September 2018, 31 O

1/15, ratio decidendi p. 84).

When considering potential synergies, the courts and also IDW S1 make a distinction between

genuine synergies and pseudo (non-genuine) synergies (for details see Popp/Ruthardt, § 12

Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann, Rechtshandbuch

Unternehmensbewertung, 2nd edition 2019, No. 12.25 et seq.). Genuine synergies are to be

ignored in an objectified valuation (see OLG Stuttgart, 3 April 2020, 20 W 2/17, ratio decidendi p.

21; OLG Munich, 26 June 2018, 31 Wx 382/15, No. 46 (BeckRS); OLG Frankfurt, 26 January 2017,

21 W 75/5, No. 61 (BeckRS)). These only arise when the structural measures underlying the

valuation are executed (in this case a domination and profit and loss transfer agreement). In other

words, genuine synergies cannot be realized without executing the structural measure, which is

the very reason for the valuation. Pseudo synergies, on the other hand, are characterized by the

fact that they can be realized without executing the domination and profit and loss transfer

agreement (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chap. C, No. 120). OLG

Munich has stressed, justifiably so, that hypothetical future developments do not provide a

sufficiently sound basis for forecasting the future earnings of the business being valued (31 March

2008, 31 Wx 88/06, No. 22 (juris)).

To specify, it is advisable in the context of corporate agreements to make a distinction between

pre-contractual synergies and contractual synergies. Pre-contractual synergies are those that

can be generated within the existing structure of the group (Sec. 311 et seq. AktG), even without

any corporate agreement being made (i.e. pseudo synergies/synergies independent of the

structural measure concerned: LG Stuttgart, 17 September 2018, 31 O 1/15, ratio decidendi, p. 85).

By contrast, contractual synergies require additional action to be taken before they can be

realized, whereby such measures can only be effected upon conclusion of a domination and profit

and loss transfer agreement (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der

Rechtsprechung, in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung,

2nd edition 2019, No. 12.28).

- 16 -

A joint analysis was conducted by ams and OSRAM with regard to potential measures. In the

course of this analysis, planned integration projects were examined to determine the extent to

which they were realizable even without the corporate agreement and what economic benefits

could be realized by such projects for the companies involved. Within the scope of our audit

procedures we discussed the issue of synergies with both the managing board of OSRAM AG and

the management of ams Offer GmbH (see LG Munich I, 27 November 2019, 5 HK O 6321/17, ratio

decidendi, p. 55). For more information see our comments in Section 6.3.b).

Integrated business planning considers the planned investments, the distribution policy, retained

earnings and the financial policy of the organization. If the business plan reveals a temporary need

for more capital after exploiting planned borrowings, this could be financed by not distributing

profits. This form of internal financing in the detailed planning phase (actual retention of

earnings) can be used to repay liabilities or make the investments required for business

operations. Pursuant to IDW S1 2008, No. 35 when determining objectified business values, an

assumption is made that all financial surpluses will in fact be distributed that are available for

distribution after considering the documented business concept and legal restrictions. The volume

of distributions is reflected in the valuation as the value added from distributions. In the

continuation phase (known as the terminal value) a standardized assumption is made that the

distribution patterns of the valuation object are equivalent to the distribution patterns of the

alternative investment.

In the terminal value, it is generally assumed that there will be inflation-induced growth. Even if

all financial surpluses are distributed (sometimes referred to as fictitious full distribution) the

capital remaining in the company is subject to inflation-induced growth. Consequently, the assets

and liabilities presented in the final balance sheet of the detailed planning phase are rolled

forward in the terminal value considering a growth factor for inflation (see WPH Edition:

Bewertung und Transaktionsberatung, 2018, Chap. A No. 455). To finance growth in the terminal

value, certain components of the sustainable net income must definitely be retained otherwise it

would be impossible for the company’s leverage to reach a steady state. This is referred to as

growth-related retention of earnings (see Popp Der Konzern 2019, pp. 105, 108 et seq.;

Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:

Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung, 2nd edition 2019

No. 12.56).

- 17 -

If the net profit for the year is retained (or a portion thereof) without there being any specific

plans for its use, this is within the framework of the capitalized earnings model customarily treated

as an economically reasonable net present value neutral reinvestment (see IDW S1 2008, No. 37).

These funds, which are not actually distributed, can be modeled by a fictitious direct allocation to

the shareholders and constitute the value added from retained earnings. The (fictitious)

investment of these amounts at the level of the company results in additional income in the years

following their initial retention. From the perspective of a typified shareholder, the fictitious direct

allocation represents an assumed gain on sale from a tax perspective, which is subject to a lower

effective tax burden from personal income taxes for the purpose of the valuation. Moreover,

inflation-induced gains on sale need to be considered when deriving the net financial surpluses

(see Popp, Berücksichtigung von Steuern, in: Peemöller (publisher), Praxishandbuch der

Unternehmensbewertung, 7th edition, 2019, pp. 1425, 1437 et seq.; Popp, Der Konzern 2019,

pp. 149 et seq.).

Due to the fact that the business value is determined from the perspective of a shareholder, the

shareholders’ tax burden incurred on the dividends and the gains on sale must be considered.

The value of future earnings is determined by discounting future distributable cash flows using

the cost of capital. Here too, the tax effect at shareholder level must be taken into consideration.

In our opinion and according to the professional standards of business valuations, the yield

obtained from a stock portfolio must be taken as an alternative investment and the average tax

burden incurred on such returns must be calculated (IDW S1 2008, No. 93).

Non-operating assets which can be sold separately without affecting the operations of the

company (criteria of a functional distinction) are considered at their liquidation value after

deducting selling costs and the tax impact of the sale at company level. To what extent taxes need

to be considered at the level of the owners depends on the intended use of the profits generated

(see IDW S1 2008, No. 61). Neither the possibility of a non-recurring tax-free share repurchase

discussed in earlier years nor the reinvestment of earnings at the same rate of return until the

liquidation proceeds are distributed to the shareholders (see: Wagner et al., WPg 2006, pp. 1005,

1022) are possible without incurring income tax under the current withholding tax regime that is

relevant for OSRAM AG. If it is assumed that earnings or non-essential liquidity are distributed to

the owners, this normally entails consideration of (typified) personal income taxes of the

shareholder in the valuation (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der

Rechtsprechung, in: Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd

edition. 2019, No. 12.156; Popp, Der Konzern 2020, pp. 177, 179 with additional comments).

- 18 -

4.2. Liquidation Value

According to the Principles for the Performance of Business Valuations, the liquidation value must

be determined alternatively to the capitalized earnings value (“equity value”) if the net present

value of financial surpluses resulting from a liquidation of the company exceeds the equity value

assuming the company is a going concern (see IDW S1 2008, No. 5).

According to the court rulings, the liquidation value should be applied only if there is an intention

to actually liquidate the company and the earnings forecasts of the company are negative for a

sustained period (see BGH ruling dated 18 September 2006, II ZR 225/04, AG 2006 pp. 887, 889;

OLG Munich, 30 July 2018, 31 Wx 122/16, ratio decidendi p. 14; OLG Munich, 17 July 2014,

31 Wx 407/13, p. 6 (BeckRS); OLG Düsseldorf, 10 June 2009, 26 W 1/07, Nos. 96 et seq. (juris); OLG

Düsseldorf, 29 July 2009, 26 W 1/08, No. 37 (juris)).

However, more recent court rulings not only make a distinction as to whether there is an intention

to liquidate the company but also on the basis of the reasons and circumstances of companies

remaining in business, even if they may be unprofitable. If there is a legal or de facto necessity to

keep the company in business (see OLG Düsseldorf, 28 January 2009, 26 W 7/07, AG 2009, pp.

667, 668), then the liquidation value can be ruled out as a measure of the business value. Neither

of these cases apply in the current case.

According to the IDW, if the liquidation value exceeds the going concern value, the liquidation

value represents the lower limit for the business value (see IDW S1 2008, No. 40). This constellation

can arise particularly in the case of weak earnings. On this topic, WPH Edition states the following:

“If optimum business policies are assumed, a company must always be liquidated when its going

concern value is lower than its liquidation value, i.e. when liquidation (and ensuing reinvestment

elsewhere) leads to higher financial surpluses than continuing the business using the business

policies that are actually planned. However, if, in reality, a company continues in business even

though its liquidation value exceeds its going concern value, this can be explained by the fact that

subjective or non-financial factors take precedence in the reasoning of the owners or that

management does not pursue the optimum business policies for the shareholders” (see IDW, WPH

Edition, Bewertung und Transaktionsberatung, Chap. A No. 155).

As an objectified business valuation should distance itself from such non-financial factors, “the

(lower) going concern value may only be applied when there is a legal or de facto requirement to

continue the business (e.g. a requirement of testamentary obligations, public law obligations,

pressure of public interest). In all other cases, the liquidation value represents the lower limit for

the business valuation” (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chap. A

No. 156).

- 19 -

The Neutral Valuer made an approximate calculation of the liquidation value of OSRAM AG. We

assessed the calculations and underlying considerations. In conclusion it can be assumed that the

liquidation value in this case is not relevant for deriving the business value.

4.3. Net Asset Value as Defined by the IDW

In contrast to the liquidation value, the net asset value as defined by the IDW is without any

informative value when determining the overall value of a going concern, even if there are plans

to liquidate the business (see IDW S1 2008, No. 6.; OLG Stuttgart, 14 September 2011, 20 W 6/08,

No. 202 (juris); OLG Düsseldorf, 28 January 2009, 26 W 7/07, AG 2009, pp. 667, 668; Popp/Ruthardt,

§ 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),

Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.162;

Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th edition, 2016, p. 329; LG Munich,

14 February 2014, 5 HK O 16505/08, ratio decidendi p. 64). Even in the case where a liquidation is

planned, the liquidation value should be used, not the net asset value. It was therefore not

necessary to determine the net asset value.

4.4. Market Price

The shares of OSRAM AG are admitted to trading on the regulated market of the stock exchanges

in Frankfurt a.M. and Munich and are also traded on the electronic trading platform, Xetra.

Moreover, they are traded on the open market at the exchanges of Berlin, Düsseldorf, Hamburg,

Hanover, Munich, Stuttgart, Vienna and the Tradegate Exchange (based in Berlin). For this reason,

the share price is fundamentally an option for measuring a fair compensation or setting its lower

limit.

In its DAT/ALTANA ruling dated 27 April 1999 (1 BvR 1613/94, AG 1999 pp. 566 et seq.), the

Federal Constitutional Court emphasized the relevance of market prices for establishing the lower

limit for calculating the fair compensation in cases where a profit transfer agreement is to be

concluded, and also for corporate integrations.

- 20 -

Use of the market price as the lower limit for the compensation can be justified from a commercial

perspective. The potential divestment value, or more exactly, the divestment price is relevant for

setting the lower limit. The divestment price is the price at which an individual share (not a bundle

of shares or the company as a whole) could be sold – actually and voluntary – on the market,

divorced from the structural measure (for details on the relevance of the market price, see

Ruthardt/Popp, AG 2020, pp. 240, 244 et seq.). The criteria of Sec. 5 (4) WpÜG-AngebV can be

used as an indication when reviewing the voluntary saleability (see OLG Karlsruhe, 12 September

2017, 12 W 1/17, No. 33 (BeckRS); OLG Frankfurt a.M., 28 March 2014, 21 W 15/11, AG 2014, p.

822; LG Stuttgart, 8 May 2019, 31 O 25/13, No. 294 (BeckRS)).

In its ruling dated 19 July 2010 (II ZB 18/09, AG 2010, pp. 629 et seq., “Stollwerck”) the Federal

Court of Justice ruled that the market price of the share used to derive a fair compensation paid

to squeeze-out minority shareholders must be measured on the average share price over a three-

month period prior to announcement of the structural measures. This approach should also be

applied to the compensation payment to be paid upon the conclusion of a corporate contract.

According to the prevailing opinion and numerous court rulings, a fair guaranteed dividend

pursuant to Sec. 304 AktG should be derived, by contrast, from the business value (OLG Munich,

11 March 2020, 31 Wx 341/17, No. 104 (BeckRS)). The average market price does not have any

relevance in this regard (see BGH, 13 February 2006, II ZR 392/03, AG 2006, pp. 331, 332; OLG

Düsseldorf, 25 May 2016, 26 W 2/15, No. 74 (BeckRS); OLG Frankfurt, 26 January 2015, 21 W 26/13,

No. 70 (juris); OLG Stuttgart, 17 October 2011, 20 W 7/11, No. 481 (juris); LG Munich I, 27

November 2019, 5 HK O 6321/14, ratio decidendi p. 275, for a contrary view: LG Frankfurt, 27 June

2019, 3-05 O 38/18, No. 87 (BeckRS)).

4.5. Comparative Valuations

In addition to discounted cash flow based valuations, business valuation practice also uses

multiples of various indicators to estimate preliminary business value, set a range of values or to

test plausibility. Like the capitalized earnings method, this valuation concept is also based on

earnings. However, the business value in this case is determined by multiplying a performance

indicator. The multiples method is based on a comparative valuation in the sense that the suitable

multiples are derived from capital market data of listed peer group companies or transactions and

then applied to the company to be valued.

- 21 -

Such multiples-based valuations only represent a simplified valuation, but in some cases they can

provide an indication of the plausibility of other methods (see IDW S1 2008, No. 143; for critical

opinions on their informative value see: OLG Frankfurt, 17 January 2017, 21 W 37/12, No. 146

(BeckRS); OLG Frankfurt 2 May 2011, 21 W 3/11, No. 83 (juris); OLG Frankfurt, 15 February 2010, 5

W 52/09; No. 105 (juris); LG Munich I, 2 December 2016, 5 HK 5781/15, No. 62 (juris)). In addition

to the analytical valuation using the capitalized earnings method, the Neutral Valuer also

conducted a comparative valuation using analyst estimates.

We assessed the calculations performed by the Neutral Valuer. In conclusion, there is no indication

that the calculated capitalized earnings value is too low in comparison to the current situation on

the capital markets.

4.6. Prior Acquisitions by ams Offer GmbH

In its ruling on 27 April 1999, the Federal Constitutional Court ruled that the price actually paid by

a majority shareholder for shares in an entity it controlled could be ignored in the valuation of

equity when calculating a fair compensation pursuant to Sec. 305 AktG because they have no

relationship to the “true” value of equity held by the minority shareholder nor to the fair market

value of the shares (see BVerfG, 27 April 1999, BvR 1613/94, AG 1999, pp. 566, 568). The

deliberations of a majority shareholder prior to taking and preparing any measure to alter the

legal structure of the entity with the concomitant willingness to pay a higher price, for example in

the context of a takeover bid, only apply to the situation of the majority shareholder and have no

relevance for third parties. From the view of the minority shareholder, the (elevated) price paid by

the majority shareholder for individual shares can only be realized if it managed to sell its shares

to the majority shareholder. However, the minority shareholder has no constitutional right to force

such a sale. This ruling agrees with the prevailing opinion in the technical literature and the rulings

from the highest court (see, for all, van Rossum, in: Münchener Kommentar zum AktG, 5th edition,

2020, § 305, No. 91, BGH, 19 July 2010, II ZB 18/09, AG 2010, pp. 629, 632).

- 22 -

The European Court of Justice came to a similar conclusion in its ruling dated 15 October 2009

((Rs. C 101/08, AG 2009, pp. 821 et seq.). In the opinion of the ECJ, European law does not contain

any legal principle which would protect minority interests to the extent that the majority

shareholder is duty-bound to buy shares at the same terms and conditions as those it accepted

when it acquired its majority holding to obtain control or reinforce its control of the entity. The

irrelevance of prices paid by the majority shareholder was once again expressly confirmed in a

ruling handed down by the Federal Court of Justice (19 July 2010, II ZR 18/09, AG 2010, pp. 629,

632), the OLG Munich (26 June 2018, 31 Wx 382/15, No. 34 (BeckRS), the OLG Düsseldorf (22

March 2018, 26 W 20/14, No. 58 (BeckRS); 12 November 2015, 26 W 9/14, No. 43 (BeckRS), the

OLG Stuttgart (4 May 2011, 20 W 11/08, AG 2011, pp. 560, 562), the OLG Frankfurt (24 November

2011, 21 W 7/11, No. 30 (juris)), as well as the OLG Hamburg (8 October 2018, 13 W 20/16, No. 30

(BeckRS); (27 March 2012, 13 W 20/09, ratio decidendi, p. 7), (for a similar view see also LG Munich

I, 21 June 2013, 5 HK O 19183/09, Nos. 322 with further references (juris).) The most important

point in this regard being that the prices were not fair market values. On the other hand, the LG

Frankfurt (22 September 2015, 3-5 O 63/14, ratio decidendi p. 33; LG Frankfurt, 25 November 2014,

3-5 O 43/13, No. 86 (juris)) does assign a certain relevance to the pre-acquisition prices paid

(supported by: LG Hanover, 22 August 2012, 23 AktE 149/10 in opposition to the ruling of the

Federal Court of Justice).

4.7. Method Used to Calculate the Fair Compensation

According to Sec. 305 AktG, a domination and profit and loss transfer agreement must place an

obligation on the other party to acquire upon request the shares of minority shareholders upon

payment of a fair compensation stipulated in the agreement.

Pursuant to Sec. 305 (3) sentence 2 AktG, the fair compensation must reflect the circumstances of

the company at the time when the shareholders’ meeting passes the resolution on the transfer of

the shares. A compensation is fair when it represents the full, actual value of the share in the

company. The departing shareholder should receive the value of his participation in the inherent

value of the company in operation in its entirety (BVerG dated 7 August 1962, 1 BvL 16/60 and

BVerfG dated 27 April 1999, 1 BvR 1613/94).

In this case, the defined compensation is based on the business value derived from its capitalized

earnings value taking into account the non-operating assets.

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4.8. Method Used to Calculate the Guaranteed Dividend

In terms of the amount of the guaranteed dividend, Sec. 304 (2) sentence 1 AktG states that the

guaranteed payment must at least ensure an annual payment that is commensurate to the

prospective average share in profits allocable to the individual share on the basis of past earnings

and its future earnings prospects, after taking account of appropriate depreciation, amortization

and impairments but disregarding the creation of other revenue reserves. The minority

shareholders should therefore be fundamentally entitled to a share of average future profits that

they could otherwise expect if the profit and loss transfer agreement had not been concluded.

The sustainable amount that the company can distribute is therefore what is decisive.

Based on the prevailing opinion in the profession, the average return allocable to a shareholder

under the terms of the law is derived from expressing the business value as an annuity. In light of

the fact that corporate agreements are generally for an indefinite term, this arithmetical

relationship can be represented by translating the general calculation of the business value into a

terminal value calculation.

𝑉 =𝐷

𝑖𝑏𝑧𝑤. 𝐷 = 𝑉 ∗ 𝑖

The formula used to calculate the guaranteed dividend (D) has been correctly translated into a

perpetual annuity by multiplying the business value (V) with the interest rate (i) of the annuity.

4.9. Conclusion

In sum, we believe that use of the capitalized earnings method to value the company concerned

and to derive the fair compensation and the guaranteed dividend is a fair approach in terms of

Sec. 293e (1) sentence 3 No. 2 AktG.

On the basis of our audit, no other method should have been applied and was not in fact used.

There is no need to report on weighting the various methods pursuant to Sec. 293e (1) sentence

3 No. 3 AktG, due to the sole use of the capitalized earnings value (taking into account the value

of non-operating assets) to determine the fair compensation and the guaranteed dividend.

- 24 -

5. Methods Used to Audit the Fairness of the Guaranteed

Dividend and the Fair Compensation

The business valuation is based on the planning calculations of OSRAM AG for fiscal years 2020

to 2025. In the course of our audit we examined the business planning to assess its consistency

and review the plausibility of the assumptions made (see IDW AcPS 2/2017, No. 5). In the course

of our audit procedures we relied on analyses of historical figures, management explanations of

the business planning, working papers of the Neutral Valuer and market and competitor

information available in the public domain. The persons named to us as contacts at OSRAM AG

explained to us in detail the business activities and the basis of the business plans. Moreover, we

determined various indicators and growth rates and compared these to the available market

information to verify the plausibility of the planning. For details, we refer to our comments on the

planning hereafter.

For the purpose of analyzing the past performance of the company, we were provided with the

audit reports for the financial statements and the audit report for the consolidated financial

statements for the fiscal years 2017 to 2019 of OSRAM AG. Key influencing factors were explained

to us by the respondents in discussions.

We used the valuation model of the Neutral Valuer which was provided to us in electronic form

and the valuation report to audit the business valuation. Responses to individual questions were

provided to us orally or in writing. While assessing the methods used in the business valuation,

we examined whether the principles of IDW S1 2008 were observed. We audited the discount rate

using the working papers of the Neutral Valuer and capital market data that is available in the

public domain. We examined whether non-essential operating assets needed to be recognized

separately based on the audit reports on the financial statements and interviews with the

respondents named to us.

We set the following audit focus when auditing the calculation of the capitalized earnings value

or the fair compensation and the guaranteed dividend:

1. Analysis of the adjustments performed within the context of analyzing historical data

2. Plausibility and timeliness of the business planning

3. Identification and consideration of synergy potentials

4. Correct application of IDW S1 2008

5. Derivation of sustainable earnings and and the sustainable retention

6. Compilation of the peer group and determination of the beta factor

- 25 -

7. Relevance of the market share price in deriving the fair compensation

8. Calculation of the guaranteed dividend

The differences in opinion between Ebner Stolz and the Neutral Valuer, PwC, on certain points

were discussed in the course of the audit.

In connection with the derivation of the beta factor, different delimitations of the peer group

companies, the stock indexes used and the consideration of capital structure risks were discussed

intensively with the Neutral Valuer.

By the time the valuation work was completed there were no longer any differences in opinion

between Ebner Stolz and PwC that had any effect on our assessment of the fairness.

Correspondingly, our audit report is not qualified in any regard and confirms in full the

appropriateness of the fair compensation and the guaranteed dividend.

- 26 -

6. Audit Findings in Detail

The generally accepted standards for the valuation of business enterprises explained in Section 4

represent abstract parameters which require specification. We verified to our satisfaction that the

general principles for the performance of business valuations have been appropriately applied in

the specific methods used to value OSRAM AG, as explained below.

The business value of OSRAM AG was derived by the Neutral Valuer from the capitalized earnings

value based on the operating business of the company. Based on our findings, this specific

method is appropriate for the purpose and fairly reflects the business value of OSRAM AG within

a valuation model.

We verified every material step of the valuation, particularly with regard to the derivation of

distributable financial surpluses, the determination of the discount rate and the discounting of

the financial surpluses to the valuation date.

6.1. Valuation Object

OSRAM AG is a global player organized as a German stock corporation with its registered offices

in Munich. The Company is entered in Department B of the Commercial Register of the local court

of Munich under the number HRB 199675. According to its articles of association, the Company’s

business objective is to manage other companies, particularly those active in the following fields:

1. Development, engineering design, production and distribution of electronic components,

electronic systems, software, lighting, illumination and photonic products, including photonic

converters, systems and solutions, including lightbulbs, lamps, operating and manufacturing

equipment and machines, controls, semi-finished products, parts and accessories for such

products, systems and solutions as well as products, systems and solutions in neighboring or

related fields.

2. Development, engineering design, production and distribution of components and systems

for automobiles of all kinds.

3. Consulting, service and aftersales service in the above fields.

The fiscal year of OSRAM Licht AG begins on 1 October and ends on 30 September of each

subsequent year. Its share capital as at 23 September 2020 amounts to EUR 96,848,074. Share

capital consists of 96,848,074 no-par value registered shares with an imputed value of EUR 1.00

each.

- 27 -

The managing board of the Company is authorized to repurchase shares and to sell any

repurchased shares in the cases stipulated in Sec. 71 AktG. According to the annual report for

2019, the managing board was authorized on 14 February 2017 to repurchase shares within a

period expiring on 13 February 2022 of a volume equal to 10% of share capital as at the date of

the authorization of EUR 104,689,400 at the time, or, if lower, the share capital on the date on

which the authorization is exercised. As at the valuation date, OSRAM AG holds 2,664,388 own

shares.

Directly and indirectly held subsidiaries over which OSRAM AG exercises control are consolidated

in the Group’s consolidated financial statements. In this regard, OSRAM holds direct investments

in two entities:

Figure 1: Annual Report 2019, OSRAM AG; Audit Report 2019, OSRAM GmbH Munich, our own

presentation.

The business being valued (“valuation object”) is accurately presented in the report on the

corporate agreement. The valuation object is OSRAM AG and all its equity investments in Germany

and abroad (hereinafter also referred to as the “OSRAM Group”). The OSRAM Group develops,

produces and distributes products and solutions for the visible and invisible light spectrums that

are primarily used in mobility, networking, healthcare and wellness as well as safety and security

applications. Generally, the Group is organized into three business units: Opto Semiconductor

(“OS”), Automotive (“AM“) and Digital (“DI“).

The OSRAM Group operates globally and distributes its products in over 120 countries. The Group

has 26 international and national production locations.

OSRAM AG

OSRAM Beteiligungen GmbH,

MunichOSRAM GmbH, Munich

100% 39.7%

60.3%

- 28 -

The sale of the lighting (“luminaires”) business on 1 October 2019 constituted a material corporate

transaction that changed the structure of the OSRAM Group. The Lighting Solutions division,

which was previously a part of the Lighting Solutions & Systems (“LSS”) business unit was almost

completely dissolved. Essentially this concerned the entity Siteco Beleuchtungstechnik GmbH,

Traunreut (“Siteco“). From that point on, as presented in the annual report, the assets and liabilities

of LSS, Siteco and the remaining European luminaires business were recognized as “Assets held

for sale” and as “Liabilities associated with assets held for sale” pursuant to IFRS 5 in the

consolidated balance sheet and classified as “Discontinued operations” pursuant to IFRS 5 in the

consolidated income statement and consolidated cash flow statement.

The majority of the Group’s revenue is generated in the automotive, mobile devices and general

lighting markets. The geographical segment reporting is divided into the EMEA region (Europe,

Middle East, Russia and Africa), the APAC region (Asia, Australia and Pacific) and the Americas

region (USA, Canada, Mexico and South America). Within the EMEA, APAC and Americas regions,

Germany, China and the USA are the countries with the greatest share of sales.

The OS business unit offers a wide range of LEDs in the visible and infrared spectrums and Low-

Power, Mid-Power, High-Power und Ultra-High-Power categories for general illumination,

automotive, consumer goods and industrial applications as well as laser diodes and optical

sensors. The most important markets for its components are the automotive sector, smartphones

and wearables, general illumination, horticulture and industrial markets. As at 30 September 2019,

approximately 11.4 thousand staff were employed in the OS business unit.

The AM business unit focuses on the development, production and distribution of lamps, light

modules and sensors, which it sells to original equipment manufacturers and their suppliers in the

automotive industry and to the spare parts market (aftermarket). The product portfolio includes

products based on traditional lighting technologies as well as LED-based solutions. The AM

business unit currently also includes the subsidiary OSRAM CONTINENTAL, which operates the

automotive system (or module) original equipment manufacturer business based on LED and laser

technology. There are plans to discontinue OSRAM Contintental by the end of fiscal year 2021.

The joint venture partners, OSRAM and Continental, will take back the assets, customer projects

and related employees they each contributed to the venture. Until the beginning of the 2019 fiscal

year, the AM business unit, together with other divisions, constituted the Specialty Lighting

segment. These other divisions were transferred to the new DI business unit in the course of the

restructuring.

- 29 -

The DI business unit was established at the beginning of the 2019 fiscal year. The DI business unit

combines all of the business activities that will benefit the most from the growing use of digital

technologies. These businesses can be summarized as follows:

▪ The business of the former Digital Systems business unit in traditional electronic ballasts and

LED drivers, LED modules, light engines and light management systems (including

sensorbased and softwarebased valueadded services).

▪ The business of the former Specialty Lighting business unit especially in specialty lamps and

lighting systems for stages, cinemas, and studios. In addition, it includes LED based plant

cultivation systems in the area of smart farming, as well as lighting solutions for medical and

industrial applications, such as highintensity UV lamps and textile illumination.

▪ OSRAM’s remaining business of the former Lighting Solutions business unit. This comprises

connected lighting solutions for architectural, interior and exterior lighting (Traxon).

As at 30 September 2019 the DI business unit employed around 4,475 staff.

In addition to the three business units, there are additional units at corporate level. In this regard,

the much smaller business unit, Fluxunit, is to be mentioned. This unit focuses on venture capital

investments. Fluxunit makes targeted investments in young startups with innovative business

models and technologies that will be a good fit to the future business of the OSRAM Group in the

long term. In fiscal year 2019 the investment portfolio of the venture capital unit consisted of

eight companies and two venture capital funds. One of the more recent additions to the portfolio

is the start-up Recogni, Inc., Cupertino, USA (“Recogni“), which focuses on artificial intelligence

systems for self-driving cars.

- 30 -

The following chart presents the organizational structure of OSRAM AG as well as the distribution

of its revenue and EBITDA for fiscal year 2019 among the various business units:

Source: The OSRAM Group, internal presentation, revenue includes intercompany sales.

External revenue of EUR 3,464 million in the year 2019 (2018: EUR 3,789 million) breaks down into

EUR 1,776 million for the AM business unit (2018: EUR 1,920 million), EUR 916 million for the

DI business unit (2018: EUR 914 million), EUR 701 million for the OS business unit (2018:

EUR 861 million) and EUR 70 million for corporate items (2018: EUR 93 million).

Automotive

Revenue: EUR 1,776 Mio.

EBITDA: EUR 117 Mio.

(FY 2019)

Digital

Revenue: EUR 916 Mio.

EBITDA: EUR -39 Mio.

(FY 2019)

Shareholders

OSRAM AG

Opto Semiconductors

Revenue: EUR 1,453 Mio.

EBITDA: EUR 202 Mio.

(FY 2019)

- 31 -

Source: OSRAM, Annual Report 2019; own presentation.

In terms of the geographical regions, approximately 34% of revenue was generated in EMEA, 36%

in APAC and 30% in the Americas in fiscal year 2019.

Based on market segment, in fiscal year 2019 roughly 55% of revenue was generated in the

Automotive Lighting segment, around 20% in the General Lighting segment and 5% each in the

segments of Mobile & Electronics, Entertainment and Horticulture. The remaining 10% of revenue

was generated in other markets.

Basically, a number of methods can be considered for valuing a group of companies like OSRAM

Group. Using the sum of the parts approach, each group company is valued separately, and in

isolation, with the value of the group being determined by addition of the individual values.

Alternatively, the value of the group can be derived directly on the basis of aggregating

consolidated earnings. The third approach is the flow of dividends model, by which the anticipated

investment income is modeled as dividends to be received by the parent company, in this case

OSRAM AG (see OLG Frankfurt, 5 December 2013, 21 W 36/12, No. 53 (juris); OLG Stuttgart, 15

October 2013, 20 W 3/13, No. 101 (juris); for general remarks on the three approaches: Wollny,

DStR 2014, pp. 2089, 2091).

In this case, the Neutral Valuer correctly derived the business value from the consolidated business

planning.

20.3%

51.3%

26.4%

2.0%

External Sales per Business Unit

(FY 2019)

Opto Semiconductor

Automotive

Digital

Reconciliation to consolidated financial statements

18.1%

16.0%

13.6%21.9%

7.2%

23.2%

Revenue per region

(FY 2019)

EMEA (without Germany)

Germany

APAC (without China)

China

Americas (without USA)

USA

- 32 -

To review the completeness of the valuation object, we referred to the list of shareholdings of the

OSRAM Group and analyzed whether the expected value contributions of the individual group

companies and equity investments are either integrated in the Group’s consolidated planning or

considered as separately-valued assets by the Neutral Valuer. Based on our findings the valuation

object was fully considered in the business valuation performed by PwC.

6.2. Valuation Date

The valuation date for the fair compensation was set at 3 November 2020. Pursuant to Sec. 305

(3) sentence 2 AktG, this treatment is correct because this is the day on which the extraordinary

general shareholders’ meeting of OSRAM AG will pass a resolution on the Domination and Profit

and Loss Transfer Agreement.

The Neutral Valuer set the technical valuation date at 30 September 2019 and then geometrically

discounted the future distributable surpluses to this date. The capitalized earnings value

determined on 30 September 2019 was then compounded to 3 November 2020. We verified the

arithmetic accuracy of the compounding.

The calculation of the guaranteed dividend is derived from the equity value at the beginning of

the fiscal year in which the Domination and Profit and Loss Transfer Agreement becomes effective,

or is scheduled to take effect (see WPH Edition: Bewertung und Transaktionsberatung, 2018 Chap.

C No. 82; Popp, WPg 2008, p. 29; OLG Munich, 11 March 2020, 31 Wx 341/17, No. 102 (BeckRS)

in conjunction with LG Munich I, 28 April 2017, 5 HJ IO 4736/11, ratio decidendi p. 126; OLG

Düsseldorf, 29 October 2018, 26 W 13/17, No. 8 (BeckRS); OLG Frankfurt, 26 January 2015, 21 W

26/13, No. 71 (juris)). The Neutral Valuer appropriately calculated the guaranteed dividend on the

basis of the business value determined using the capitalized earnings method as of 30 September

2020.

- 33 -

6.3. Capitalized Earnings Value

a) Analysis of Historical Results

In order to assess the existing profitability of the Group and the plausibility of the business

planning, the Neutral Valuer analyzed the historical results based on the financial reporting of

OSRAM AG for the fiscal years 2017 to 2019, breaking down income and expenses, eliminating

extraordinary items and explaining them, in order to reveal the effective profit drivers in the past.

Moreover, the year-to-date figures for the third quarter were also analyzed on the basis of the

interim reporting for the period between 1 October 2019 and 30 June 2020 of the current fiscal

year.

To audit this analysis of the historical results we were provided with the audited consolidated

financial statements of OSRAM AG for fiscal years 2017 to 2019. In addition, we considered

analyses prepared for internal purposes and the interim reports of OSRAM AG. On this basis we

tested the plausibility of the analyses conducted by the Neutral Valuer.

- 34 -

The following summary presents the unadjusted financial performance of the OSRAM Group for

the fiscal years 2017 to 2019 as well as the third quarter of 2020:

Consolidated Statement of Income, unadjusted

FY17 FY18 FY19 Q1-Q3 20 FY17-19

FY as of 30.09 Actual Actual Actual Actual CAGR

mEUR mEUR mEUR mEUR in %

Revenue 4,128 3,789 3,464 2,300 -8.4%

Cost of goods sold 2,692 2,555 2,578 1,734 -2.1%

Gross profit 1,436 1,234 886 566 -21.5%

Research and development costs 364 400 418 300 7.1%

Marketing, selling and general admin. expenses 697 584 612 480 -6.3%

Other operating income 30 37 33 40 5.4%

Other operating expenses 7 16 234 3 480.4%

EBIT 397 271 -345 -176 n/a

Depreciation and amortization 224 251 521 308 52.5%

EBITDA 621 522 176 132 -46.7%

Financial result -8 -9 -32 -27

EBT 389 263 -377 -203

Income taxes -114 -74 33 25

Income (loss) OSRAM (continuing operations) 275 188 -343 -178

Income (loss) from discontinued operations, net of

tax -51 -48 -123 -7

Net income (loss) 224 141 -467 -185

Capital expenditure 537 455 208 67

Capital expenditure in % of revenue 13.0% 12.0% 6.0% 2.9%

Annual change in revenue in % n/a -8.2% -8.6% n/a

in % of revenue

Gross profit 34.8% 32.6% 25.6% 24.6%

Research and development costs 8.8% 10.6% 12.1% 13.0%

Marketing, selling and general admin. expenses 16.9% 15.4% 17.7% 20.9%

Other operating income 0.7% 1.0% 1.0% 1.7%

Other operating expenses 0.2% 0.4% 6.8% 0.1%

EBIT-Margin 9.6% 7.2% -10.0% -7.7%

EBITDA-Margin 15.1% 13.8% 5.1% 5.7%

- 35 -

The business units of the OSRAM Group were reorganized at the beginning of fiscal year 2019.

Before the reorganization, the business was mainly conducted by the OS, Specialty Lighting and

Lighting Solutions & Systems business units. The OS business unit remained after the

reorganization. The Specialty Lighting business unit was allocated to the new business units AM

and DI in the course of the reorganization. The former Lighting Solutions & Systems business unit

was dissolved in the course of the reorganization and reported as discontinued operations, with

the exception of the Digital Systems, Digital Lumens und Traxon divisions, which were allocated

to the DI business unit.

In light of the fact that there is no comparative earnings statement for fiscal year 2017, comparison

between the fiscal years 2017, 2018 and 2019 is limited. As a result, the Neutral Valuer focused on

the developments in fiscal years 2018, 2019 and the first three quarters of 2020 when eliminating

extraordinary items and normalizing earnings. In addition to adjusting the financial performance

to eliminate non-recurring items, the most significant adjustments involved considering the

financial performance in light of the organizational changes and any changes made due to

changes in accounting standards.

The following summary presents a breakdown of revenue to the (new) business units and

corporate items as well as a summary of the consolidation effects in the fiscal years 2018, 2019

and the first three quarters of 2020.

Pages 65 et seq. of the valuation report from PwC contain explanations of the adjustments

performed at corporate level. In terms of content, the eliminations relate to items that were

unique, non-recurring or not matched to the period. Above the level of EBITDA the adjustments

mostly consist of transformation costs, acquisition-related costs and other costs. Transformation

costs represent costs of the measures taken to adjust organizational structures. This includes such

items as severance payments to personnel in the wake of the necessary adjustment of capacities

and restructuring expenses undertaken to reduce the cost base. Acquisition-related costs

generally consist of consulting fees, integration costs and contingent consideration related to the

acquisition or divestment of companies and equity investments.

Revenues per Business Units

FY18 FY19 Q1-Q3 20 FY18 FY19

FY as of 30.09 Actual Actual Actual

mEUR mEUR mEUR in % in %

Opto Semiconductors 1,725 1,453 1,018 2.4% -15.8%

Automotive 1,920 1,776 1,193 n/a -7.5%

Digital 914 916 576 n/a 0.2%

Reconciliation to cons. fin. statements -770 -681 -487 n/a -11.6%

Total Revenue 3,789 3,464 2,300 -8.2% -8.6%

Change

- 36 -

When making the eliminations, the Neutral Valuer followed the approach used by the Company

for its external reporting and treated the expenses mentioned above as special items. In this

regard, the Neutral Valuer points out that additional significant transformation costs can be

expected in the planning periods, quite independently from the above approach.

In addition to the adjustments made by the Company itself, the Neutral Valuer has eliminated

income from the sale of a business division and real estate sold in 2018 as well as the costs of

establishing a provision for the costs of litigation in the year 2019. Loss allowances recorded on

trade receivables and inventories were eliminated from the first three quarters of the fiscal year

2020.

To arrive at adjusted EBIT, the Neutral Valuer analyzed depreciation, amortization and

impairments in addition to the adjustments made to EBITDA, and eliminated any extraordinary

write-downs it identified. These impairment losses relate to the goodwill carried in OSRAM

Continental in the year 2019 and the first three quarters of the current fiscal year 2020 as well as

in Digital Systems in the year 2019. In addition, two impairment losses recorded on property, plant

and equipment in the fiscal years 2018 and 2019 were eliminated.

Due to the first-time application of the new IFRS 16 standard in fiscal year 2020 the Neutral Valuer,

PwC, adjusted historical financial performance to make the historical figures for fiscal years 2018,

2019 and Q1 to Q3 2020 comparable (referred to by PwC as “pro forma adjustments”).

- 37 -

The adjustments performed by PwC and the adjusted consolidated income statement can be

summarized as follows:

Consolidated Statement of Income, adjusted

FY18 FY19 Q1-Q3 20

FY as of 30.09 Actual Actual Actual

mEUR mEUR mEUR

Revenue 3,789 3,464 2,300

Normalization EBITDA

EBITDA before adjustments 522 176 132

Transformation costs 79 87 48

Acquisition-related costs 18 41 2

Other 2 3 0

Total Special Items 100 131 50

Adjusted EBITDA I 622 307 182

Further Normalization EBITDA

Legal dispute Lighting Science Group Corp. n/a 7 n/a

Receivable write-off Fluence Bioeng. n/a n/a 5

Inventory write-off Business Unit DI n/a n/a 5

Income from sale of real estate assets 5 n/a n/a

Income from sale of Process Heat Business 15 n/a n/a

Pro-forma Adjustments EBITDA

Adjustments Leasing IFRS 16 57 58 n/a

Adjusted EBITDA II 659 372 192

Depreciation and amortization before adjustments 251 521 308

Normalization EBIT

EBIT before adjustments 271 -345 -176

Normalization EBITDA 137 196 60

Adjusted EBIT I 408 -149 -116

Further Normalization EBIT

Goodwill impairment Digital Systems n/a 39 n/a

Goodwill impairment OSRAM Continental n/a 171 48

Impairment OLED 5 n/a n/a

Impairment FEP n/a 5 n/a

Pro-forma Adjustments EBIT

Adjustments Leasing IFRS 16 -49 -50 n/a

Adjusted EBIT II 364 16 -68

Margin in % of revenue

EBIT-Margin 7.2% -10.0% -7.7%

Adj. EBIT-Margin I 10.8% -4.3% -5.0%

Adj. EBIT-Margin II 9.6% 0.5% -3.0%

EBITDA-Margin 13.8% 5.1% 5.7%

Adj. EBITDA-Margin I 16.4% 8.9% 7.9%

Adj. EBITDA-Margin II 17.4% 10.7% 8.4%

- 38 -

Within the course of our audit, we reconciled the historical results with the corresponding

consolidated and quarterly financial statements. In addition, we checked the eliminations and

adjustments made by the Neutral Valuer. In our opinion the eliminations, adjustments and

comments made by the Neutral Valuer relating to the financial performance are appropriate.

b) Operating Planning

Planning process

The consolidated planning of the Group covers five years from 2020 to 2025. The consolidated

business planning has been prepared in accordance with International Financial Reporting

Standards (IFRS) corresponding to the consolidated financial statements of OSRAM AG.

The corporate planning of the OSRAM Group uses the top-down, bottom-up mixed planning

approach.

The planning process used to prepare the business planning generally underlying the business

valuation commenced in April 2020 and was completed in June 2020. The planning projections

for the fiscal years 2020 and 2021 are on a quarterly basis and on an annual basis for the ensuing

years. In the meantime, a new strategy has been formulated with regard to joint venture, OSRAM

Continental. It is assumed on this basis that the joint venture will be dissolved. The assets

contributed by OSRAM and Continental will be transferred back to the respective partner by the

end of fiscal year 2021. The planning statements were revised at the beginning of September 2020

to take account of this circumstance. For the fiscal year 2020, the current forecast dated 16

September 2020 is used.

The business planning is based on the planning statements of each business unit and the

individual segments of each business unit. The central planning assumptions were initially set by

corporate management and provided to the officers in charge of budgeting in a planning letter.

In addition the officers in charge of the planning were also provided with guidelines on

macroeconomic developments from the corporate strategy department on account of the special

circumstances created by the corona pandemic. In addition to information on the anticipated

trends in GDP, this letter also includes disclosures on the expected trends in automobile

production. Moreover, the corporate strategy department of OSRAM provides projected market

sizes for the markets that are relevant to the Group which it has derived from internal market

models and forecasts.

- 39 -

Due to the great relevance of the automotive and automotive lighting market, the Neutral Valuer

has described in detail how the corporate strategy department of the OSRAM Group derived the

market model for the automotive lighting market. The relevant market size for the planning period

is derived in four steps. With the aid of data from IHS Markit, an information services provider, an

initial forecast of the anticipated volume of automobile production is made at the level of the

automobile manufacturers' series. Thereafter the penetration rates are determined by referring to

the individual technologies used in the various models of automobiles using data from IHS Markit

and the number of lights per vehicle is forecasted in cooperation with the sales departments of

the business units. In a final step, the customary average sales prices per lighting source are

analyzed to arrive at an indicator of market size for the planning period. A similar logic is used to

forecast the other markets of relevance to the OSRAM Group.

Budgets are then drawn up for the individual segments of the business units that take account of

the top-down targets. The officers in charge of the planning consider the planning for both the

production facilities and sales and distribution. At the OS business unit sales are planned using a

bottom-up approach at the level of each application. Thereafter the imputed market share is

validated to ensure that this meets the expectations of the officers in charge of the planning. The

AM business unit prepares its planning mainly on the basis of the automotive market model

explained above and supplements this with internal analyses. The DI business unit draws up a

SWOT analysis for each segment that considers the internal strengths and weaknesses and the

external market trends and competitive developments. After taking account of price and volume

trends and any changes to the portfolio, the revenues of the AM and DI segments are then

projected.

The planning projections of expenses within the planning period are performed at the level of the

business units and mostly also on level of their segments. The cost of sales is projected after taking

account of productivity gains in order to cushion the customary erosion of prices on the

semiconductor market.

Finally, the planned revenue and expenses are aggregated at the level of the business units and

approved by the head of the business unit. The plausibility of the forecasts drawn up by the

business units is then checked against external sources. The planning statements of the individual

business units are then supplemented by the costs of corporate functions at group level with any

intercompany revenue being eliminated in the consolidation. The managing board only suggests

amendments in isolated cases with the planning being returned to the business units for revision.

The planning statements were ratified by the managing board on 7 September 2020. The

supervisory board acknowledged the planning on 7 September 2020.

- 40 -

We had the officers in charge of the planning process explain the planning process to us in the

course of our audit procedures whereupon we verified it using our own procedures. We

particularly focused on the planning approach and methodology used to model the automotive

market. In conclusion, we are of the opinion that the planning process provides a suitable planning

foundation for the purposes of a business valuation.

Budget comparisons

To assess the reliability of the planning process, the Neutral Valuer compared the revenue and

the adjusted and unadjusted EBITDA projected in the budget of the corresponding prior year

against the actual revenue and adjusted and unadjusted EBITDA recorded for the years 2017 to

2019 (analysis of budget deviations).

The following summary presents the budget deviations identified by the Neutral Value for the

three fiscal years analyzed at the level of revenue, adjusted EBITDA and unadjusted EBITDA.2

In fiscal year 2017 the budgeted revenue target was surpassed, while in fiscal years 2018 and 2019

the budgeted revenue target was missed by a wide margin, -5.1% and -14.5% respectively. With

regard to EBITDA, there was a positive deviation to the budget target of 6.3% in 2017. In the years

2018 and 2019, by contrast, the target was missed significantly by -23.8% and -66.2% respectively.

Also, at the level of adjusted EBITDA I on which special items, such as transformation costs and

acquisition-related transaction costs, were eliminated the budget target was missed by a wide

margin in fiscal years 2018 and 2019.

In the year 2019, the budget deviations were primarily due to the AM and OS business units, which

were largely influenced by the low volume of automobile production. The main reasons for the

failure to meet the budget targets in the DI business unit lie in a delay in opening a new production

plant, scarcity in sourcing components and a fall in revenue associated with the city beautification

projects in China. At the level of EBITDA I the failure to meet the budget lies primarily in the

development of revenue and the associated negative effects.

2 The green light stands for a positive budget deviation and the red light for a negative budget deviation.

Budget Deviations FY17 FY18 FY19

Revenue 1.7% -5.1% -14.5%

Adj. EBITDA I 3.7% -13.6% -48.0%

EBITDA 6.3% -23.8% -66.2%

Plan

- 41 -

In particular, the Neutral Valuer states that revenue and EBITDA displayed good planning reliability

in 2017, which was an economically stable year. Deviations in revenue and EBITDA in the fiscal

years 2018 and 2019, by contrast, indicate that the planning was ambitious in economically

challenging times. In this regard, the budget deviations in earnings can be mostly attributed to

the budget deviations at the level of gross profit.

In the course of our audit procedures we verified the calculations and explanations provided by

the Neutral Valuer. In conclusion, we agree with the assessment made by the Neutral Valuer that

the planning statements are ambitious.

To allow us to present budget deviations for a longer planning period and not just a very short

planning horizon, the Company provided us with a comparison of the historical mid-range

planning statements of the OS business unit with the actual figures of the business unit after

eliminating special items.

The following summaries compare the projected revenue, adjusted EBITDA and adjusted EBITDA

margin listed in the business plans of the OS business unit issued in the years 2016 and 2017 for

the following years. The respective deviations are presented in the lower section as “Delta”. With

regard to the business plan of the OS business unit drawn up in the year 2016, for example, there

was a positive planning deviation of revenues in the first year of the planning (2017), with the

planning targets being missed by a wide margin in the subsequent two years of the planning. The

same picture applies to adjusted EBITDA and the adjusted EBITDA margin, but more pronounced.

Thus, the original planning target for EBITDA in 2018 was missed by -15% and the planned EBITDA

margin by -2.7 percentage points (“pp”). For the year 2019, the planned adjusted EBITDA was

missed by -57.4% and the planned adjusted EBITDA margin by -9.6 pp.

MTP MTP MTP

2017 2018 2019

Revenue 1,584 1,825 2,211

Adj. EBITDA I 434 492 596

Adj. EBITDA I-Margin 27.4% 27.0% 27.0%

Revenue 1,685 1,725 1,464

Adj. EBITDA I 473 418 254

Adj. EBITDA I-Margin 28.1% 24.2% 17.3%

Revenue 101 -100 -747

Deviation in % 6.4% -5.5% -33.8%

Adj. EBITDA I 39 -74 -342

Deviation in % 9.0% -15.0% -57.4%

Adj. EBITDA I-Margin 0.7 pp -2.7 pp -9.6 pp

Business Unit OS Business Plan 2016

Plan

Actual

Delta

- 42 -

An analysis of these planning deviations for the OS business unit confirms the assessment that

the planning is ambitious.

MTP MTP

2018 2019

Revenue 1,896 2,221

Adj. EBITDA I 515 607

Adj. EBITDA I-Margin 27.2% 27.3%

Revenue 1,725 1,464

Adj. EBITDA I 418 254

Adj. EBITDA I-Margin 24.2% 17.3%

Revenue -171 -757

Deviation in % -9.0% -34.1%

Adj. EBITDA I -97 -353

Deviation in % -18.8% -58.2%

Adj. EBITDA I-Margin -2.9 pp -10.0 pp

Plan

Actual

Delta

Business Unit OS Business Plan 2017

- 43 -

Testing the general plausibility of the business planning

The following summary presents the revenue and earnings projections of the OSRAM Group from

the fiscal year 2019 (actual) through to the years 2020 to 2025 (planned). As the OSRAM Group

has normalized its planning figures by cost category and not by function, the normalizations for

the actual figures in 2019 were not allocated to the corresponding expense items. For the fiscal

year 2019 presented here, it should be noted that according to the explanations of the Neutral

Valuer the shown expenses in some cases slightly differ from those presented in the analysis of

the historical results.

Planning Statements Group Level

FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY19-25

FY as of 30.09 Actual Plan Plan Plan Plan Plan Plan CAGR

mEUR mEUR mEUR mEUR mEUR mEUR mEUR in %

Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%

Cost of goods sold 2,578 2,330 2,313 2,465 2,609 2,821 2,982 2.5%

Gross profit 886 690 885 1,061 1,248 1,389 1,577 10.1%

Research and development costs 403 385 354 311 326 341 363 -1.7%

Marketing, selling & gen. admin. exp. 626 622 618 585 586 600 622 -0.1%

Other operating income 33 66 27 - - - - -100.0%

Other operating expenses 234 3 20 - - - - -100.0%

EBIT -345 -254 -80 165 336 448 591 n/a

Depreciation and amortization 521 397 331 315 310 305 312

EBITDA 176 143 250 480 646 753 903

Capital expenditure 208 99 219 238 271 304 307

Capital expenditure in % of revenue 6.0% 3.3% 6.8% 6.8% 7.0% 7.2% 6.7%

Annual change in revenue in % n/a -12.8% 5.9% 10.3% 9.4% 9.1% 8.3%

in % of revenue

Gross profit 25.6% 22.9% 27.7% 30.1% 32.4% 33.0% 34.6%

Research and development costs 11.6% 12.8% 11.1% 8.8% 8.4% 8.1% 8.0%

Marketing, selling & gen. admin. exp. 18.1% 20.6% 19.3% 16.6% 15.2% 14.2% 13.7%

Other operating income 1.0% 2.2% 0.8% 0.0% 0.0% 0.0% 0.0%

Other operating expenses 6.8% 0.1% 0.6% 0.0% 0.0% 0.0% 0.0%

EBIT-Margin -10.0% -8.4% -2.5% 4.7% 8.7% 10.6% 13.0%

Depreciation and amortization 15.0% 13.2% 10.3% 8.9% 8.0% 7.3% 6.8%

EBITDA-Margin 5.1% 4.7% 7.8% 13.6% 16.7% 17.9% 19.8%

- 44 -

Starting from 2019, the Company is planning rapid compound annual growth in revenues of

around 4.7% for the years 2019 to 2025. In the year 2020, revenue is anticipated to slump by -

12.8%. This decrease is mainly attributable to the effects of the corona pandemic and the trends

in the automotive sector. According to the expectations of the managing board, the effects of the

crisis should peak in the third quarter of 2020. In addition, it is expected that a comparable level

of activity will be reached in Q3 2021 as that seen before the outbreak of the corona pandemic.

Consequently, revenue is projected to increase by 5.9% in fiscal year 2021. Based on the trends in

the preceding quarters, projected revenue for 2021 remains under the level seen in 2019.

The following summary presents the planned development of revenue at the level of the business

units starting from the actual figures for 2019. It should be noted at this point that the following

presentation of the fiscal year 2019 has been adjusted to the new organizational structure of the

fiscal year 2020.

The planning of the OS business unit is based on a bottom-up approach in which the competitive

environment, orders on the books and potential orders in the pipeline are considered after

discussing them with the individual segments and the sales department. A distinction is made in

the OS business unit between the segments of Sensing, Visualization & Laser, Illumination and

Automotive. Due to its business model an annual price erosion of a high single-digit percentage

is expected by the OS business unit, which is to be more than compensated by higher volumes in

the mid to long term. In this context, the OS business unit projects compound annual growth of

8.4% between 2019 and 2025. Based on the revenue of EUR 1,464 million in the year 2019, the

revenue of the OS business unit is projected to rise by roughly EUR 911 million or 62.2% to EUR

2,375 million in the year 2025.

Revenues Business Units




Opto Semiconductors 1,464 1,336 1,425 1,604 1,841 2,102 2,375 8.4%

Automotive 1,781 1,573 1,717 1,787 1,897 1,971 2,021 2.1%

Digital 934 741 811 874 930 992 1,059 2.1%

Reconcil. to cons. fin. statements -715 -630 -755 -739 -811 -855 -897 3.8%

Total Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%

Annual change in revenue in %

Opto Semiconductors -15.6% -8.7% 6.7% 12.5% 14.8% 14.1% 13.0%

Automotive -7.3% -11.7% 9.1% 4.1% 6.1% 3.9% 2.6%

Digital -0.7% -20.7% 9.5% 7.7% 6.5% 6.6% 6.8%

- 45 -

The strong growth will be driven primarily by the Sensing, Illumination and Visualization & Laser

segments. In the Sensing segment, most of the revenue growth will be generated with 3D sensors.

Growth in the Visualization & Laser segment is anticipated from LED projectors with high

luminosity and new products such as LiDAR technology and Near-to-Eye (NTE) projection. LiDAR

technology allows the distance to objects to be measured using light pulses and is expected to

be adopted in the field of self-driving cars. NTE projection technology will be used in augmented

reality applications. In the Illumination segment, a development above the market growth is

planned. The planning projections are based on initiatives for customer-specific developments in

the fields of horticulture, UV-C and LED.

In the Automotive segment, the OS business unit expects a lower compound annual growth rate

compared to the other segments of 4%. It is expected that sales will not pass the level seen in

fiscal year 2019 prior to the corona pandemic until fiscal year 2022. Based on information from

IHS Markit, automobile production is forecast to fall by -21% globally in fiscal year 2020. Long-

term growth in the automotive sector will be attained by steadily growing content per car. It is

expected that this increase in content will come from rising penetration rates in forward lighting

and growing demand for pixelated light sources and ambient lighting in vehicle interiors.

The AM business unit anticipates compound annual revenue growth of approximately 2.1% over

the planning period. Based on the revenue of EUR 1,781 million in the year 2019, the revenue of

the AM business unit is projected to rise to EUR 2,021 million in the year 2025. In fiscal year 2020

a fall in automobile production is expected due to the corona pandemic and the general state of

the automotive sector. This will result in a 11.7% fall in revenue.

On account of the projected decline in sales in the field of traditional automotive lighting

technologies, much lower or even negative growth is projected from fiscal year 2024 onwards.

The long-term market decline expected in traditional automotive lighting technologies, which

comprises both OEM and aftermarket business, can be attributed to the rising penetration of LED

solutions. Nevertheless, the planning is based on the assumption that the Company can prevail

over its main competitors in a contracting market and manage to increase its market share.

The AM business unit expects to see a business related price erosion of a middle to high single-

digit percentage, whereby the erosion of prices is projected to be higher for LED technologies

than for established halogen-based products on account of the greater potential for productivity

gains and more intense competition.

- 46 -

Forecast growth in the AM business unit is primarily attributable to retrofit LED products for the

aftermarket and retrofitting market. With regard to retrofit LED products, the planning statements

are based on the assumption that the necessary regulatory approvals will be issued successively

from country to country starting in 2021 and that OSRAM will be able to maintain its market

leadership in the market for retrofitting and spare parts.

The DI business unit is forecast to enjoy compound annual sales growth of 2.1% between 2019

and 2025, representing a rise in revenue from EUR 934 million to EUR 1,059 million. The DI

business unit is currently confronted by disruptions to its supply chains and restrictions in the

entertainment sector on account of the corona pandemic. In light of the above, revenue is

projected to decrease by approximately -20.7% in fiscal year 2020. In the following fiscal year,

2021, business is expected to return to normal with solid revenue growth of roughly 9.5%. The DI

business unit expects to see a low single-digit per annum erosion in prices.

The revenue growth of the DI business unit over the planning period will be primarily generated

by the strategic focus on light management systems for connected buildings, industrial internet

of things (“IoT”) applications and LED luminaires for horticulture. Due to the lower barriers to entry

and more intensive competition this entails, the Horticulture market segment is assumed to see

less rapid sales growth in comparison to the projected development of the market as a whole.

The Digital Systems segment of the DI business unit is projected to grow by a compound annual

growth rate of 2% from 2019 to 2025. In this connection, it is assumed that the forecast sales will

trend slightly higher than that of the target market defined by OSRAM from fiscal year 2023

onwards. It is assumed that revenue in the lamps business of the Entertainment Lighting division

will decline over the long-term due to the intensive competition.

In addition to the planning projections for the various business units, the business planning of the

Company contains reconciliations for corporate items, consolidated intercompany sales, treasury

activities and other reconciliations. The most significant corporate items are governance functions,

income and expenses from pensions and contract manufacturing for Ledvance. The line item

consolidation, treasury and other items includes the planning projections for treasury activities

and the elimination of intercompany sales of the OS business unit for LED components it supplies

to the AM business unit.

- 47 -

The gross margin in fiscal year 2020 is projected to fall from roughly 26% to approximately 23%.

Thereafter it is projected to rise steadily to roughly 35% in 2025. The positive development in the

gross margin should be primarily attained by productivity measures in the OS business unit. The

productivity measures relate to savings in procurement and efficiency gains, including measures

aimed at increasing value added at the production facilities of the OS business unit. In addition,

improvements in the gross margin will be attained within the automotive business in the field of

sensing, due to cost-savings in the field of 3D sensing and due to business-related fixed cost

degression.

The gross margins of the AM and DI business units are also projected to improve slightly on

account of productivity measures, new product launches and volume effects.

With regard to the individual cost items in the business planning, which has been prepared using

the cost of sales method, the Neutral Valuer illustrates the development of human resources as

this cost factor has comprehensive relevance. The planned development of the headcount is

related to the planned measures to raise productivity. Due to the corona pandemic only a slight

increase in personnel expenses is planned for the fiscal year 2021. From fiscal year 2022 normal

regional increases in personnel expenses are projected and integrated in the expense items in the

business planning. For example, an annual increase of 3% in personnel expenses is assumed for

Germany. A significant reduction in the workforce is planned at group level in fiscal years 2020

and 2021, which will affect all business units and corporate functions. The global headcount will

fall in fiscal year 2020 from 23,486 to 21,714. A further reduction to 20,450 employees is planned

for fiscal year 2021. From fiscal year 2024 the headcount is projected to rise again. In fiscal 2025

a headcount of 20,748 is projected. The development of the headcount and the associated

personnel expenses are reflected in the cost of goods sold and the functional expenses addressed

below.

Research and development expenses are projected to decrease from EUR 403 million in fiscal

year 2019 to EUR 363 million in fiscal year 2025. Research and development expenses are planned

to decline until 2022. The decline is attributed to the current focus on profitability improvement

programs.

Selling and general administrative expenses are forecast to decline slightly in absolute terms

over the planning period. After a decline until the fiscal year 2022, a development with low growth

rates is then assumed. The decline in the ratio of selling and general administrative expenses to

revenue forecast for the planning period is to be achieved by savings in central functions and at

business unit level.

.

- 48 -

Other operating income is expected to increase to EUR 66 million in the fiscal year 2020. This is

primarily due to the release of provisions for contingent considerations related to the acquisitions

of Fluence and Vixar as well as the sale of OLED patents. In addition, other operating income in

the fiscal year 2020 includes the contractual participation in the sales of the subsidiary OSRAM

Continental in the amount of EUR 17 million. In the fiscal year 2021, the contractual participation

is expected to amount to EUR 27 million. No other operating income is projected from the year

2022 onwards, as the OSRAM Continental joint venture is scheduled to be separated on 1 October

2021.

With the exception of fiscal years 2020 and 2021, other operating expenses are budgeted at EUR 0

million. In fiscal year 2021 costs will mainly be incurred in connection with the reversal of the

OSRAM Continental joint venture.

The business planning considers transformation costs which mainly serve to improve

competitiveness and cushion structural market developments. Transformation costs affect the

cost of goods sold, research and development costs and selling and general administrative

expenses. In particular, substantial transformation costs of EUR 97 million and EUR 83 million are

provided for in fiscal years 2020 and 2021. In fiscal year 2020 transformation costs can be allocated

to the performance programs. In fiscal year 2021 the transformation costs are allocable to the AM

business unit with regard to the decline in the traditional business with halogen lights. In addition,

further (restructuring) costs are anticipated in relation to the retransfer strategy pursued with

regard to OSRAM Continental.

The EBIT margin is projected to come to -8.4% in 2020, the first year of the planning period,

slightly above the level of the previous year (-10.0%). A significant improvement is forecast over

the remainder of the planning period. The EBIT margin is projected to rise to 13.0% by fiscal year

2025.

In the first year of the planning period (2020), forecast depreciation and amortization amounts

to roughly 13.2% of revenue. The ratio of depreciation and amortization to revenue is assumed

to decrease to 6.8% by fiscal 2025. As goodwill impairments of roughly EUR 210 million were

incurred in fiscal year 2019, depreciation and amortization in the actual figures for 2019 are not

comparable to the years projected in the planning period. After eliminating these impairment

losses, the ratio of depreciation and amortization to revenue came to roughly 9% in fiscal year

2019, and depreciation and amortization to EUR 311 million in absolute figures. The relative

increase to 13.2% in 2020 is mainly due to the first-time application of IFRS 16. The right-of-use

assets from leasing agreements recognized in the balance sheet lead to an annual depreciation

charge of between EUR 40 million and EUR 47 million over the planning period.

- 49 -

EBITDA is expected to rise sharply over the planning period from EUR 176 million in 2019 to

EUR 903 million in the year 2025. To achieve this, the EBITDA margin is projected to improve

significantly over the course of the planning period to roughly 20% in fiscal year 2025.

In terms of the planned capital expenditures, a successive rise in investment is expected over the

planning period after contracting in 2020 as a result of the impacts of the corona pandemic.

Relative to revenue, the level of investment will increase from 3.3% to 6.8% in fiscal 2021. Over

the remainder of the planning period, an investment ratio (relative to revenue) of roughly 7% is

planned. Most of the investments will be made in the OS business unit. To that extent, the rise in

capital expenditure is largely due to the OS business unit where investments of approximately

11% and 12% p.a. relative to sales are expected from the year 2022 onwards. In the AM and DI

business units, the level of investment is assumed to remain relatively stable over the planning

period. The projected level of investment lies below the projected level of depreciation and

amortization over the entire planning period, which implies that non-current assets must decline

over the planning horizon.

- 50 -

Considering synergies in the valuation

As stated in section 4.1, it is advisable in the context of corporate agreements to make a distinction

between synergies prior to the agreement and post-agreement synergies. Pre-contractual

synergies are those that can be generated within the existing structure of the group (Sec. 311 et

seq. AktG), even without any corporate agreement being made (i.e. pseudo synergies/synergies

independent of the structural measure concerned: LG Stuttgart, 17 September 2018, 31 O 1/15,

ratio decidendi, p. 85). By contrast, contractual synergies require additional action to be taken

before they can be realized, whereby such measures can only be effected upon conclusion of a

domination and profit and loss transfer agreement (see Popp/Ruthardt, § 12

Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),

Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.28).

A joint analysis was conducted by ams and OSRAM with regard to potential structural measures

that should be taken into account during the business valuation. In the course of this analysis,

planned integration projects were examined to determine the extent to which they were realizable

even without the corporate agreement and what economic benefits could be realized by such

projects for the companies involved. In addition, it was analyzed to what extent additional effects

arose in this regard, which were not already considered in the planning projections of OSRAM in

the form of efficiency gains and/or intended strategic measures.

In this way, long-term pre-contractual synergies of EUR 54 million p.a. were identified. The

identified precontractual synergies and the associated implementation costs were considered in

addition in the business valuation by the Neutral Valuer. With regard to pre-contractual effects

not clearly attributable to ams or OSRAM in terms of location, the Neutral Valuer, after discussion

with the parties to the contract, assumed a split in half according to the documents available to

us.

Within the course of our audit procedures, we assessed an abundance of qualitative and

quantitative estimates of potential synergies, be they from Bain Capital, the Carlyle Group, Advent

or ams. We assessed the synergies derived and the additional underlying potential measures. In

order to establish a broader foundation for the conceivable synergies from a current perspective,

we extensively discussed the issue of synergies with both the managing board of OSRAM AG and

the management of ams Offer GmbH (see LG Munich I, 27 November 2019, 5 HK O 6321/17, ratio

decidendi, p. 55).

- 51 -

Based on the information provided to us and our findings made in the course of the audit, the

financial planning and the additional precontractual synergies considered by the Neutral Valuer

constitute all suitably substantiated effects that can be expected without the underlying measure

being conducted (i.e. the DPLTA). With regard to the effects that cannot be clearly attributed to

ams or OSRAM in terms of location, we believe that the allocation used by the Neutral Valuer is

appropriate in the given case.

- 52 -

Modified planning statements

The following summary presents the financial planning used by the Neutral Valuer for valuation

purposes taking account of the additional precontractual synergies. In addition, the Neutral Valuer

adjusted the planning statements to eliminate the activities of Fluxunit.

Modified Planning supplemented by pseudo synergies




Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%

Cost of goods sold 2,578 2,330 2,313 2,465 2,609 2,821 2,982 2.5%

Gross profit 886 690 885 1,061 1,248 1,389 1,577 10.1%

Research and development costs 403 385 354 311 326 341 363 -1.7%

Marketing, selling & gen. admin. exp. 626 622 618 585 586 600 622 -0.1%

Elimination gen. admin. costs Fluxunit - 1 1 1 1 1 1 n/a

Other operating income 33 66 27 - - - - n/a

Other operating expenses 234 3 20 - - - - n/a

EBIT -345 -253 -79 166 338 449 592 n/a

Revenue and cost synergies - - 18 50 54 54 54

Expenses related to revenue and cost

synergies- - 4 6 1 - -

EBIT incl. pseudo synergies -345 -253 -65 210 392 504 647 n/a

EBIT incl. pseudo synergies -345 -253 -65 210 392 504 647

Depreciation and amortization 521 397 331 315 310 305 312

EBITDA incl. pseudo synergies 176 144 266 525 701 809 959

Annual change in revenue in % n/a -12.8% 5.9% 10.3% 9.4% 9.1% 8.3%

in % of revenue

Gross profit 25.6% 22.9% 27.7% 30.1% 32.4% 33.0% 34.6%

Research and development costs 11.6% 12.8% 11.1% 8.8% 8.4% 8.1% 8.0%

Marketing, selling & gen. admin. exp. 18.1% 20.6% 19.3% 16.6% 15.2% 14.2% 13.7%

Other operating income 1.0% 2.2% 0.8% 0.0% 0.0% 0.0% 0.0%

Other operating expenses 6.8% 0.1% 0.6% 0.0% 0.0% 0.0% 0.0%

EBIT-Margin incl. pseudo synergies -10.0% -8.4% -2.0% 6.0% 10.2% 12.0% 14.2%

Depreciation and amortization 15.0% 13.2% 10.3% 8.9% 8.0% 7.3% 6.8%

EBITDA-Margin incl. pseudo synergies 5.1% 4.8% 8.3% 14.9% 18.2% 19.2% 21.0%

- 53 -

Market environment

Possible factors affecting the development of the operating business of the OSRAM Group include

macroeconomic developments, the development of the relevant sales markets and the prevailing

competitive environment. In this regard, the Neutral Valuer initially presents the general economic

indicators for the key geographical sales markets of the OSRAM Group. Thereafter, it analyzes the

key market segments based on the structure of the business units. Due to the interdependent

development of the automotive industry and the overall economy, as well as the dependence of

the OSRAM Group on the automotive markets, the development of economic indicators is of

material significance for the future development of the OSRAM Group.

The forecasts of real GDP made by a variety of economic research institutes presented by the

Neutral Valuer consider the effects of the current corona pandemic. Falling rates of GDP are

forecast for the year 2020 for Germany, the euro area, the USA and globally. For China average

growth of 0.2% is forecast. For the year 2021 an economic recovery is forecast in all regions (see

Castedello/Tschöpel, WPg 2020, pp. 914, 917 for the typical evolution of economic crises).

Thereafter it is assumed that real GDP growth will differ from region to region. With regard to the

development of global real GDP, the Neutral Valuer listed average growth rates of -5.0% (2020),

5.0% (2021), 3.9% (2022), 3.4% (2023) and 3.1% (2024) based on forecasts by a variety of economic

research institutes for the years 2020 to 2024. From the year 2022 growth rates below and above

these figures are forecast for the euro area and China respectively.

With regard to the development of the inflation rate, the Neutral Valuer presents forecasts for

Germany, the euro area, China and the global market. After a fall in the inflation rate in 2020 due

to the slump in demand, with a possible knock-on effect in the year 2021, IHS Markit forecasts a

global inflation rate of around 2.4% to 2.5%. For the euro area an inflation rate of 1.7% is

anticipated in the year 2024 based on the above forecasts. This is slightly below the corresponding

inflation forecast for the USA (1.8%).

The Neutral Valuer has also drawn on a variety of market studies of relevance to the business units

and their segments in order to analyze the relevant market trends for the OSRAM Group in more

depth. Most of the market studies presented by the Neutral Valuer do not consider the impacts

of the corona pandemic.

- 54 -

With regard to the OS business unit, the Neutral Valuer presents the forecast for the market of

optoelectronic components provided by Omdia, an information service provider. Optoelectronic

components are components that create an interface between optical and electronic components.

In the wider sense, this includes all products that convert electronically generated data into light.

Based on a market study from Omdia, the market for optoelectronic components can be broken

down into LEDs with frequencies in the visible spectrum, optocouplers, infrared components,

optical switches and LED displays. According to the estimates issued by Omdia in June 2020 the

market for optoelectronic components between 2019 and 2025 will see average annual growth

of 0.7% after taking account of the impacts of the corona pandemic. However, when assessing

these growth projections it should be remembered that the global market for optoelectronic

components is very widely defined and that the relevant market for the OSRAM Group only

represents a section of it.

Due to the products it manufactures, the operating business of the OS business unit is largely

dependent on the development of the markets for automotive lighting technology and

consumer electronics. The development of the market for automotive lighting technology is

discussed in more detail under the AM business unit. With regard to the automotive sector, the

OS business unit focuses on the market segments for LED and laser-based products. Higher

growth rates are forecast for these market segments than for the total market for automotive

lighting solutions as the segments comprising traditional lighting solutions are forecast to decline.

The market segment of consumer electronics includes the market for sensors in the field of

wearables (e.g. smart watches, fitness trackers) and smart phones. According to the market studies

issued by Technavio that were drawn on by the Neutral Valuer from March 2018 and June 2019

forecast average growth of 7.3% p.a. in the mobile and electronics segment for the years 2019 to

2022, before considering the impacts of the corona pandemic. According to the approximate

consideration of the effects of the corona pandemic by the Neutral Value, this would result in

average annual growth of 1.4% for the years 2019 to 2022.

The global market for sensors for smartphones is very competitive and characterized by intensive

price-based competition. Consequently, the focus is on realizing efficiency gains and economies

of scale. Only a few competitors can shield themselves from the price pressure thanks to their

innovative strengths or potential for differentiation.

The development of the AM business unit depends directly on the development of the market

for automotive lighting technology, which, in turn, depends materially on the dynamic of the

automobile industry. Global automobile production is subject to economic cycles and depends

on the general economic development, disposable income and consumer spending and

preferences.

- 55 -

The following summary presents the estimated trends issued by IHS Markit in August 2020 for

global light vehicle production until the year 2025.

Source: IHS Light Vehicle Production, August 2020.

On this basis, a slump in automobile production is forecast for the year 2020. Thereafter, recovery

is expected to set in. Over the full period from 2019 to 2025 the compound annual growth rate is

forecast to come to 0.8%. Production volume is not expected to match the level of 2019 until

2023/2024.

The market for automotive lighting technology is influenced by a number of factors. A

fundamental factor lies in the steady trend towards low-emission intelligent mobility, with

growing demand for lighting systems. Particularly in the field of electromobility, the development

of more energy-efficient lighting systems plays a great role. In light of their low energy

consumption, LEDs are finding ever more frequent use. Other growth factors in the field of

automotive lighting technology could lie in the rising demand for premium vehicles in the APAC

region and the ever more stringent requirements on safety systems, both from customers but also

governments. Material risks arise from a potential stagnation in the production and sales of new

vehicles and the resulting decline in demand for automotive lighting systems. An additional risk

lies in the delay in introducing advanced driver assist systems (ADAS) which could retard the

development of driverless car platforms and can therefore negatively influence the demand for

LED and laser-based intelligent lighting systems.

88.9

70.5

79.585.0

88.390.9

93.5

0

10

20

30

40

50

60

70

80

90

100

2019 2020 2021 2022 2023 2024 2025

in m

illio

n u

nits

Automotive market

Development of global Light Vehicle Production (in million units)

CAGR

0.8 %

- 56 -

The following chart presents the forecast for the automotive lighting market until the year 2024

issued by the research institute Technavio in June 2020.

Source: Technavio, Global Automotive Lighting Market 2020-2024 (June 2020).

On this basis, the automotive lighting systems market is forecast to grow by a compound annual

growth rate of 5.4% in the period from 2019 to 2024 (see Technavio, Global Automotive Lighting

Market 2020-2024, June 2020).

Generally, the global market for automobile lighting systems can be described as diverse. It is

characterized by regional differences in terms of the intensity and dynamics of competition. Due

to the high number of competitors and the associated price-based battle for market share, the

APAC region is seen as the most competitive region. Aside from the OSRAM Group, the world

market is dominated by global players such as Koito Manufacturing Co., Ltd., Tokyo, Japan (“Koito

Manufacturing“) and HELLA GmbH & Co. KGaA, Lippstadt, Germany (“HELLA“), as well as regional

companies.

The DI business unit combines various products and solutions in the field of digital lighting

technology. Digital lighting technology allows lighting to be intelligently controlled in a variety of

applications, such as lighting for agricultural and gardening applications (horticulture), outdoor

illumination for buildings, lighting systems for the entertainment sector and smart home

applications.

15.4 16.3 17.3 18.3 19.5 20.7

6.56.8

7.17.4

7.78.17.1

7.47.7

8.18.5

8.9

0

5

10

15

20

25

30

35

40

2019 2020 2021 2022 2023 2024

in b

illio

n U

SD

Market for automotive lighting

per region in billion USD

APAC EMEA Americas

CAGR

5.4 %

- 57 -

To test the plausibility of the projected development of the DI business unit, the Neutral Valuer

has referred to a number of market studies for general lighting applications, horticulture lighting

and entertainment lighting.

The market for general lighting comprises fixed light sources that have a practical or aesthetic

effect. The products can generally be differentiated between traditional lighting technologies (e.g.

light bulbs, fluorescent lamps) and LED lighting. The LED market is the market segment that is

most relevant to the OSRAM Group. A shift from traditional lighting technologies towards LED

based technologies is expected within the market for general lighting. The main growth drivers of

the global market for general lighting are an increasing focus on energy-efficient technologies

and the associated government incentives and support programs, the rising population and

increasing urbanization.

According to the forecast from Technavio issued in February 2020 for the period from 2019 to

2024 – which does not consider the potential effects of the corona pandemic – forecasts a

compound annual growth rate of 5.5% in the global market for general lighting.

Although the total cost of LEDs is relatively low in comparison to traditional lighting technologies,

the high acquisition costs when making the shift from traditional luminaires to LEDs represents a

barrier to their growth. In this connection, there is a risk that the ban or regulations on traditional

lighting technologies are actually slowing market growth (see Technavio, Global General Lighting

Market 2020-2024, pp. 100-107). As the construction industry is an important customer for LED

products, the LED market is also affected by the economic cycles affecting the construction

industry. There is intensive competition on the market for general lighting solutions. The global

players include widely diversified corporations such as Panasonic Corporation, Osaka, Japan, and

Schneider Electric SE, Ile-de-France, France, through to focused providers such as the OSRAM

Group, Acuity Brands, Inc., Atlanta, USA (“Acuity Brands“), and Signify N.V., Eindhoven,

Netherlands (“Signify“).

- 58 -

The Entertainment Lighting segment comprises solutions for cinemas, theatres, and concert

stages, for example. Before considering the possible impacts of the corona pandemic, Arizton

forecasts a compound annual growth rate of 4.3% for the period from 2019 to 2025 (Arizton,

Stage Lighting Market February 2020, p. 35). Generally, it can be assumed that the entertainment

market – especially with regard to its dependence on large events – is exposed to material

uncertainties from the potential impact of the corona pandemic. According to information

provided by OSRAM, the market for Entertainment Lighting came to a stillstand during the corona

pandemic. Cinemas and theater performances as well as concerts were cancelled or subject to

severe restrictions. Consequently investments in the corresponding lighting systems were cut back

significantly. Currently, it cannot be foreseen when the volume of investment in lighting systems

in the entertainment industry will pick up again or whether the forecast growth trend can be

realized once the corona pandemic is over.

The Horticulture market segment comprises lighting solutions that are used in agriculture,

gardening and the cultivation of cannabis in greenhouses. Here, the increasing use of LED lighting

results in greater energy efficiency compared to conventional lighting systems.

Based on an estimate from BIS Research from September 2019 the “Global LED Grow Lights

Market“ is forecast to see a CAGR of 23.1% between 2019 and 2024, disregarding the effects of

the corona pandemic. The main growth factors are the expected population increase and the

associated rise in demand for food as well as the general scarcity of food. In addition, the market

for medicinal cannabis is viewed as a growth market. A risk factor for the LED growth lights market

lies in the relatively high initial investment, which dampens their appeal in comparison to

traditional lighting solutions. Key competitors in the horticulture segment are Signify and Everlight

Electronics, New Taipei City, Taiwan (“Everlight Electronics“). Competition in this segment is

intensive and technology driven.

- 59 -

Competitive environment

In order to analyze the competitive environment we reviewed the historical figures filed in the

databases of Bloomberg for the years 2012 to 2019 and the financial analyst assessments for the

years 2020 to 2025 (where available) for the peer group companies of OSRAM AG. To allow

comparability we allocated the financial analysts’ assessments and the historical figures for the

peer group to the fiscal years of OSRAM AG.

In addition to the peer group companies presented under 6.3.e) we included Nichia Corp. in the

analysis of the competition for the years 2012 to 2019. No financial analyst assessments were

available for this company owing to the fact that it is not listed on a public exchange.

Generally, we would like to draw attention to the fact that there are indications of a systematic

distortion in analyst assessments (see Ballwieser/Hachmeister, Unternehmensbewertung, 5th

edition 2016, p. 128). At any rate, there are some studies that show that, due to disincentives,

analysts are systematically more optimistic than other market players

(see Jäckel/Kaserer/Mühlhäuser, WPg 2013, p. 365, 382).

The following summary presents the rate of revenue growth for the period from 2012 to 2025

for the peer group companies. In addition, the chart also presents the historical and projected

development of OSRAM AG based on the planning projections.

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Growth of revenue

Lower to upper quartile - Peer group OSRAM AG Mean - Peer Group

- 60 -

With regard to the 2015 figures of OSRAM AG, the sale of the LEDVANCE division was eliminated.

The analysis shows a high degree of volatility in the rate of revenue growth of OSRAM AG for the

years 2012 to 2019. Historically, the rate of revenue growth of OSRAM AG was sometimes above

the mean rate of revenue growth for the peer group, and sometimes below it. In particular, in the

years 2021 to 2025 the growth rates depicted in the planning statements of the OSRAM Group

are significantly above the mean of analyst forecasts for the peer group companies.

In this regard, the rate of revenue growth presented in the planning statements of the OSRAM

Group can be characterized as ambitious.

The following summary presents the trend in the EBITDA margins of the peer group companies

for the period from 2012 to 2025. In addition, the chart also presents the historical and projected

development of OSRAM AG based on the planning projections.

In the past, the EBITDA margin of the OSRAM Group displayed a high degree of volatility. Only in

some years did the EBITDA margin of the OSRAM Group lie above the mean EBITDA margin of

the peer group companies. The EBITDA margin depicted in the corporate planning of the OSRAM

Group (including the forecast synergies) is forecast to rise significantly. The EBITDA margin of the

OSRAM Group (including unreal synergies) projected for the end of the planning horizon lies

significantly above the mean of the peer group, which remains relatively constant over the course

of time.

In this regard, the development of the EBITDA margin shown in the OSRAM Group’s plan can be

characterized as ambitious.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

EBITDA - Margin

Lower to upper quartile - Peer Group OSRAM AG (incl. pseudo synergies)

Mean - Peer Group

- 61 -

Findings of our audit procedures

In the course of our audit procedures we analyzed the planning statements on the basis of

normalized historical figures. We assessed the statements made by the Neutral Valuer on the

development of the relevant markets and the development of competition. In addition, we

discussed the key planning assumptions and the respective markets and competitive

environments in depth with various industry experts from OSRAM AG and the officers responsible

for the planning projections within the OSRAM Group and its respective business units.

Based on the information provided to us and the findings obtained in the course of our audit, we

are of the opinion, in accord with the Neutral Valuer, that the planning statements are ambitious.

Our audit opinion remains unaffected.

The planning statements project a profitable growth. To this extent, there must be both strong

sales growth and a simultaneous improvement in margins. In numerous segments, the planning

statements project a rate of sales growth that is above the assumed growth rates for the respective

markets, which implies that additional market shares must be won. In addition, a key aspect of the

projected revenue growth can be attributed to new products. These are naturally subject to grave

uncertainties in terms of the requirements placed on production, the expected volume of demand

and reactions from competitors (competing products). In some cases there are also uncertainties

from a current perspective related to the regulatory framework, such as for LED retrofits. In

addition, the products offered by OSRAM are generally subject to rapid price erosion. Maintaining

the same margin, or even improving the margin, can only be attained by constant improvements

in productivity or (further) volume growth.

To check the plausibility of the US Dollar/EUR exchange rates assumed in the preparation of the

plan, we have determined forecast rates on the basis of inflation differences (relative purchasing

power parity), forward rates (interest parity) and analysts' estimates. According to our findings,

the exchange rates assumed here do not result in a disadvantage for minority shareholders.

- 62 -

c) Other Planning Components

Financial result

The financial result was calculated by PwC based on the income statement and balance sheet

planning using cash flow planning, taking into account the financial income and expenses

expected by the company and the distribution ratio set for the detailed planning period.

The starting point of the financial planning to determine the financial result were the interest-

bearing receivables and liabilities as at September 30, 2019.

In the course of our audit we assessed the net interest income considered by the Neutral Valuer

in the valuation model based on the current financing structure and conditions, the anticipated

capital requirements for the future and surpluses and the assumed distributions.

In accordance with the valuation date principle, financial surpluses which have already accrued to

the owners of the company or whose use has been determined are no longer to be considered

for the derivation of the company value. According to the information provided to us, it is planned

not to pay a dividend for the financial year 2019/20, so that no accrual issues arise in this respect.

Net interest income has been appropriately calculated.

Corporate taxation

OSRAM AG is subject to tax on the basis of the currently applicable corporate tax legislation. The

income tax burden considers trade tax and corporate income tax as well as the solidarity

surcharge on corporate income tax that is charged on domestic income as well as corporate

taxation charged in other countries as well as withholding taxes.

Existing tax loss carryforwards were taken into account by PwC to reduce current tax expenses. If

unused tax losses are already considered in the integrated calculation of capitalized earnings, they

cannot be considered as a separate asset otherwise they would be double-counted in the

valuation model (see Popp, Berücksichtigung von Steuern, in: Peemöller (publisher),

Praxishandbuch der Unternehmensbewertung, 7th edition, 2019, pp. 1425, 1429).

Deferred taxes are not considered due to the fact that they have no cash impact.

- 63 -

We reviewed the tax rates applied and the calculation of the forecast income tax in the course of

our audit work. The tax expenses considered by the Neutral Valuer in the individual years of the

planning projections and in the terminal value have been correctly derived.

Minority interests in net profit

In keeping with the principle of full consolidation, the projected profits or losses of fully

consolidated entities, in which – from the perspective of OSRAM AG – minority interests hold a

stake, must be considered fully in the consolidated income statement. Consequently, the result

was corrected by the amount allocable to the minority interests to derive the financial surpluses.

The minority interests considered by the Neutral Valuer arise in the years 2020 and 2021 from the

joint venture partner’s participation in OSRAM Contintental, which is fully consolidated.

We verified the calculation used to determine shares in profit attributable to minority interests.

Minority interests in net profit have been correctly considered.

d) Terminal Value and Retained Earnings in the Terminal Phase

The financial surpluses available for distribution can be more plausibly assessed and more reliably

forecasted for a period of time closer to the valuation date than for a more remote future. In

addition, detailed business planning is generally only prepared for a period of three to five years

(detailed planning phase). After this period (inevitably simplified) assumptions must be made on

the financial surpluses to arrive at the financial surpluses that can be expected in the indefinite

future. The level of earnings in the first year of the terminal phase can be reached at the end of

the detailed planning phase or lie higher (or lower). The terminal value can therefore lie below the

earnings of the last year of the planning or individual years in the detailed planning phase. When

setting the terminal value, an assumption is made of an “ideal steady state” in terms of financial

performance, financial position and cash flows.

According to IDW practice statement 2/2017 No. 54, the terminal value must be derived

independently by the Neutral Valuer taking account of his separate analyses. To this extent, the

final year of the detailed planning phase cannot be adopted for the terminal value without further

reflection. The terminal value must consider the realizable returns that can be expected for the

long term. Indicators of the terminal value can be derived from normalized historical earnings and

the detailed planning phase as well as from industry indicators (see IDW practice statement

2/2017, No. 57).

- 64 -

Generally the plausibility of the terminal value is tested on the basis of margins (e.g. EBIT/EBITDA

margins). In particular, a comparison with average margins is suitable for companies that are

exposed to economic cycles on competitive markets and also those companies which report

fluctuating returns due to the nature of their business model and/or accounting. The prevailing

opinion in business theory is that the terminal value should reflect the average earnings for the

indefinite future (for more details see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der

Rechtsprechung in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung,

2nd edition, 2019, Nos. 12.52 et seq.).

The planning may be based on incentives or targets if, assuming continuity in market factors, it

contains a level of earnings that has never before been attained even in the best or worst of times

without any plausible reason given (see OLG Düsseldorf, 17 December 2017, 26 W 8/15, No. 39

(BeckRS)).

The Neutral Valuer derived the revenue considered in the terminal value taking the last year of

the detailed planning phase, 2025, as a point of departure. In addition, effects arising from the

Entertainment Industries and Digital Systems segments were considered in the form of an annuity,

which was rolled forward into the terminal phase.

The Neutral Valuer derived the EBITDA margin in the terminal phase from the average EBITDA

margins of the last three years of the detailed planning phase (2023 to 2025) prior to considering

synergies in the valuation. The impacts on EBITDA in the terminal value from the Entertainment

Industries and Digital Systems segments were considered in the form of an annuity. In sum, this

resulted in a sustainable EBITDA margin prior to synergies of 18.9%.

The sustainable EBITDA margin prior to synergies in the terminal phase was then adjusted

upwards to account for the effect of potential synergies. In conclusion, the Neutral Valuer set the

sustainable EBITDA margin at 20.1%.

The Neutral Valuer set the level of investment in the terminal phase at EUR 329 million based on

a sustainable investment ratio of 7.0% (relative to revenue). When deriving this investment ratio,

the anticipated revolving investments in right-of-use assets arising from leases were considered

in the form of an annuity.

- 65 -

In the course of our audit procedures we verified the calculations and explanations made by the

Neutral Valuer and the parties to the Agreement relating to the calculation of the terminal value

and the level of investment derived for the terminal phase. In conclusion, we are of the opinion

that the EBITDA margin assumed by the Neutral Valuer is ambitious when viewed against the

historical development, the trends and assumptions made for the detailed planning phase and

the EBITDA margins forecast for the peer group by financial analysts. Our audit opinion is not

affected by this.

According to our findings, the level of investment set for the terminal phase has been properly

derived.

In the terminal phase, it is generally assumed that there will be inflation-induced growth. Even if

all financial surpluses are distributed (sometimes referred to as fictitious full distribution) the

capital remaining in the company is subject to inflation-induced growth. Consequently, the assets

and liabilities presented in the final balance sheet of the detailed planning phase are rolled

forward in the terminal phase after considering a growth factor for inflation (see WPH Edition:

Bewertung und Transaktionsberatung, 2018, Chap. A No. 455). To finance growth in the terminal

phase, certain components of the terminal value must definitely be retained otherwise it would

be impossible for the company’s leverage to reach a steady state. This is referred to as growth-

related retention of earnings (see Popp Der Konzern 2019, pp. 105, 108 et seq.). This can already

be deduced from the fact that line items that are driven by purchases or sales (e.g. working capital)

will be subject to rising prices and also replacements of capital goods are subject to inflation. In

other words, the line items of the income statement and the line items of the statement of financial

position are expected to grow each year at the rate of the growth factor assumed for the terminal

phase. An exception are those line items of the balance sheet whose changes do not affect cash,

such as deferred taxes, or when no growth is assumed for them in the terminal phase, e.g.

historical goodwill. From an accounting perspective, growth-related retained earnings can be

calculated from multiplying economic equity with the growth rate at the end of the detailed

planning phase (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung,

in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung, 2nd edition,

2019, No. 12.56).

In order to finance growth in the terminal phase, retained earnings must be considered at a rate

equal to the growth rate related to economic equity as at 30 September 2025 (see OLG Frankfurt

a.M., 17 January 2017, 21 W 37/12, Nos. 91 et seq. (BeckRS); OLG Düsseldorf, 12 November 2015,

26 W 9/14, No. 61 (BeckRS); OLG Stuttgart, 5 June 2013, 20 W 6/10, No. 181 (juris)). When deriving

economic equity those line items which do not affect cash need to be eliminated.

- 66 -

The level of investment assumed for the terminal phase generally lies above the rate of

depreciation and amortization that applies in the terminal phase (see Popp, Der Konzern, pp. 105,

108). By contrast, the Neutral Valuer set the level of investment in the terminal phase at the same

level as depreciation and amortization applying to the terminal value. Consequently, the “cash

flow relevant adjustments” of EUR 4 million presented separately on p. 94 of the valuation report

merely represent the amount necessary to account for the inflation-induced development of

working capital. The retained earnings remain in the business and serve to generate the growth

and the associated rise in the business value after the last year of the detailed planning phase.

e) Discount Rate

The equity value is determined by discounting future distributable earnings to the valuation date.

The discount rate represents the return on an alternative investment that is equivalent in terms of

maturity, risk and taxation to the cash flows originating from an investment in the company being

valued (IDW S1 2008 No. 114).

When identifying the return obtainable on an alternative investment, reference is generally first

made to the returns available on the capital markets for equity investments (in the form of a stock

portfolio). These returns can be split into a risk-free rate and a risk premium expected by the

shareholders for their assumption of entrepreneurial risk.

Risk-free rate

The Neutral Valuer has derived the risk-free rate from the interest curves for German government

bonds, as recommended by the FAUB.

Based on the interest curve data published by Deutsche Bundesbank for the three months period

ending upon completion of our valuation work a risk-free interest rate of 0.0% was derived.

The interest curves published by the Deutsche Bundesbank were chosen as the data source. The

corresponding parameters (time series, “wt3201” to “wt3206”) have been taken from the website

of the Deutsche Bundesbank.

- 67 -

The spot rates for hypothetical zero bonds can be derived from these parameters and the interest

curves for government bonds traded on the market with a residual term of up to 30 years can be

estimated. Based on the observable trends in the parameters used in this estimate, their limited

use for extrapolating the spot rates further into the future becomes apparent. Due to a lack of

available market data for publicly-traded bonds that are needed to estimate the interest rates on

zero bonds in the period beyond the 30-year horizon, and due to the general planning

uncertainty, the FAUB (see IDW-FN 2008, p. 491) is of the opinion that the interest rates on the

zero bonds with the longest available residual terms can be rolled forward for the terminal value.

To smooth out volatility, not only the interest data applying on the valuation date have been used

but also the average values for the three months preceding the valuation date (see OLG Munich,

12 May 2020, 31 Wx 361/18, No. 54 (BeckRS); OLG Frankfurt, 27 September 2019, 21 W 64/14.

ratio decidendi p. 21; LG Munich I, 2 December 2016, 5 HK 5781/15, No. 118 (juris); etc.


Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.70).

This calculation using a three-month period is based on the WpÜG-AngebV in accordance with

Secs. 187 and 188 (2) BGB.

On grounds of practicability, the courts have deemed that the spot rates can be translated into a

uniform equivalent discount rate (see OLG Düsseldorf, 14 December 2017, 26 W 8/15, No. 50

(BeckRS); OLG Stuttgart, 27 July 2015, 20 W 5/14, ratio decidendi p. 29; OLG Munich, 18 February

2014, 31 Wx 211/13, No. 19 (juris)).

In accordance with the recommendation of the FAUB (see IDW-FN 2005, pp. 555 et seq.; IDW-LIFE

2016, pp. 731 et seq.) the uniform risk-free rate under 1.0% has been rounded to the nearest 1/10

percentage point. Such rounding (relating to the corresponding rounding to the nearest 1/4

percentage point for rates higher than 1.0%) has been approved by the courts (see OLG Munich,

12 May 2020, 31 Wx 361/18, No. 61 (BeckRS); OLG Munich, 6 August 2019, 31 Wx 340/17, Nos. 50

et seq. (BeckRS); OLG Karlsruhe, 1 April 2015, 12a W 7/15, No. 80 (juris)). The claim that such

rounding results in “suppression of precise knowledge” (see Knoll/Kruschwitz/Löffler, RWZ 2019,

pp. 139, 143) is countered primarily by technical reasons inherent to the process of compiling or

auditing a business valuation, particularly for all those business valuations where the end of the

valuation or audit work lies before the actual date of the general meeting (see Popp, WPg 2016,

pp. 926, 928). The OLG Munich has explicitly raised this point and stated that rounding essentially

serves the purpose of facilitating planning certainty and legal assurance and serves the

information needs of the minority shareholders (see OLG Munich, 12 May 2020, 31 Wx 361/18,

No. 64 (BeckRS)).

The risk-free rate is adjusted to account for typified income tax (25.0% plus the 5.5% solidarity

surcharge). The tax-adjusted risk-free rate thus comes to approximately 0.0%.

- 68 -

We have verified the calculations and come to the conclusion that a risk-free rate of 0.0% applies

to the three months period ending upon conclusion of our audit work. We are of the opinion that

a pre-tax risk-free rate of 0.0%, or 0.0% after tax respectively, is appropriate. Please see the next

section on the risk premium for a discussion of the consequences of the historically low interest

rates for the required return on equity.

With regard to the review of the risk-free rate, we refer, as a purely precautionary measure, to the

fact that the risk-free rate refers to an indicator that relates to the respective cut-off date but is

not an indicator for a (single) cut-off date (see LG Hamburg, 29 June 2015, 412 HKO 178/12, No.

102 (justizportal Hamburg); LG Munich I, 14 February 2014, 5 HKO 16505/08, ratio decidendi p.

33). Moreover, the three-month period preceding the extraordinary general meeting ends on 3

November 2020 (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 59 (BeckRS); OLG Frankfurt,

26 January 2015, 21 W 26/13, No. 42 (juris)). When an annual general meeting is convened in the

morning, it is unavoidable that parameters such as share prices or interest curves measured and

published at the end of trading for that date cannot be considered in the valuation.

Risk premium

When deriving the risk premium used to determine an objectified business value, the subjective

risk appetite of individual shareholders is not the relevant parameter, but the general patterns on

the market. It may be assumed that investors accept a particular risk when investing in companies

(investor risk). The risk premium can be derived empirically from equity yields obtainable on the

capital markets by using capital asset pricing models (CAPM, tax-CAPM). The capital asset pricing

model enjoys extraordinarily high acceptance in both national and international valuation practice

and is therefore justifiably considered to be state of the art (see, as representative of all sources:

van Rossum, Münchener Kommentar zum Aktiengesetz, 5th edition 2020, § 305 No. 147).

The use of the CAPM or the tax-CAPM is viewed by the majority of courts and the general opinion

found in the professional literature as the prevailing method for deriving an objectified risk

premium (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chapter C, No. 123;

Dörschell et al, Der Kapitalisierungszinssatz in der Unternehmensbewertung, 2nd edition, 2012, pp.

27 et seq.). The use of CAPM and tax-CAPM corresponds to the rulings handed down by the

higher regional courts (see OLG Munich, 30 July 2018, 31 Wx 122/161, ratio decidendi p. 21; OLG

Munich, 30 July 2018, 31 Wx 136/16, ratio decidendi, p. 9; OLG Frankfurt, 17 January 2017, 21 W

37/12, No. 105 (BeckRS); Ruthardt/Popp, AG 2019, pp. 196, 200).

- 69 -

Where isolated criticism has been made of CAPM, it generally refers to the fact that CAPM also

uses a number of parameters that have to be assumed by the independent valuer. This applies to

all other capital market models, regardless of their complexity. However, the advantage of CAPM

lies in the fact that the relevant parameters have been clearly identified and thoroughly discussed

in the professional research and also in practice and in court judgments. For this reason alone, the

use of CAPM is preferable to a mere ad-hoc estimate without any theoretical foundation. It can

also be confirmed that as of today, no other capital market model exists that is superior to CAPM

(for a critical view see Arbitrage Pricing Theory und dem Mehrfaktorenmodell from Fama/French:

LG Munich I, 28 March 2014, 5 HK O 18925/08, ratio decidendi pp. 44 et seq.; LG Munich I, 14

February 2014, 5 HKO 16505/08, ratio decidendi pp. 43 et seq., and on the Dividend Discount

Model: OLG Frankfurt, 30 August 2008, 21 W 14/11, Nos. 64 et seq.).

Because equity yields and risk premiums are fundamentally affected by income taxes, tax-CAPM

offers a more real explanation of empirically observed equity yields as it extends CAPM to consider

the explicit effect of personal income taxes. In particular, the model considers the different

taxation treatment of interest income, dividends and capital gains.

According to tax-CAPM, the discount rate is composed of a risk-free rate that has been reduced

by a standard income tax rate and the after-tax risk premium identified using tax-CAPM. The

complex character of a company’s specific risk premium is split into two empirically observable

factors: the market risk premium and the beta factor.

When it comes to deriving the after-tax market risk premium various concepts are available. As

far as is apparent, the study from Stehle in the year 2004 (half-income method) is the only study

to date on historical market risk premiums after personal tax. When calculating implied after-tax

market risk premiums, Beumer links a capitalized earnings model to market capitalizations and

analyst estimates to derive anticipated earnings and cash flows (see Beumer, CF 2015, pp. 330 et

seq.) Finally, financial models can be drawn on to derive the after-tax market risk premium from

the before-tax market risk premium (see IDW S1 2005, WPg 2005, pp. 1303 et seq.). Generally,

after-tax market risk premiums can be derived using the tax-CAPM considering the respective tax

regime and the interaction of stock yields, assumptions on the normal duration of shareholdings,

pay-out ratios and last, but not least, the respective level of the risk-free rate (see Popp, WPg

2020, pp. 836 et seq.).

- 70 -

Market risk premium

The courts generally refer to the statement of the BGH by which “that method that is recognized

by professional practice and customary in practice” is decisive (for example, see OLG Stuttgart, 20

August 2018, 20 W 2/13, No. 61 (BeckRS); BGH, 29 September 2015, II ZB 23/14, Nos. 33, 42 (juris);

BGH, 12 January 2016, II ZB 25/14, No. 21 (juris)). The same principle has to apply to the

parameters used when applying the valuation method; i.e. also the market risk premium.

Consequently, the methodology used to derive the parameters and the aspects of the individual

parameters must be recognized by the profession and customary in practice. However, based on

the state of the art, one single empirically accurate market risk premium that applies no matter

what conditions prevail on the capital markets cannot be determined (see OLG Düsseldorf, 14

December 2017, 26 W 8/15, No. 52 (BeckRS)).

At least, it cannot be the role of the courts to develop a valuation methodology that resolves the

differences in opinion in the profession, particularly not for the market risk premium, when there

is a range of different studies and publications with various motivations, calculation methods,

databases and quality. In practice, the acknowledged expert opinion (OLG Düsseldorf, 10 April

2019, 26 W 6/17, No. 55 (BeckRS)) is found in the recommended ranges published by the FAUB,

which are consequently regularly referred to by the courts as a proper foundation for assessing

the market risk premium in accordance with Sec. 287 (2) ZPO (see OLG Bremen, 29 March 2019, 2

W 68/18, ratio decidendi p. 14; OLG Stuttgart, 26 June 2019, 20 W 27/18, ratio decidendi p. 22; OLG

Düsseldorf, 5 September 2019, 26 W 8/17, ratio decidendi p. 23; OLG Frankfurt, 27 September

2019, 21 W 64/14, ratio decidendi p. 22; OLG Frankfurt, 26 January 2017, 21 W 75/15, No. 73

(BeckRS)).

In its publication from October 2012, the FAUB decided in favor of a higher range of 5.0% to 6.0%

for the after-tax market risk premium compared to previous recommendations (an after-tax

market risk premium of 4.0% to 5.0%). In more recent rulings handed down by the various higher

regional courts on valuation dates covered by this recommended range, the mean of 5.5% is

regularly accepted as appropriate (see Ruthardt/Popp, AG 2020, pp. 322, 326 et seq.; OLG

Stuttgart, 4 May 2020, 20 W 3/19; OLG Stuttgart, 3 April 2020, 20 W 2/17; OLG Bremen, 15 May

2020, 2 W 47/19; OLG Schleswig, 9 March 2020, 9 W 169/15 (6.0%); OLG Düsseldorf, 30 April 2018,

26 W 4/16; OLG Dresden, 16 August 2017, 8 W 244/17; OLG Frankfurt, 26 January 2017, 21 W

75/15; OLG Celle, 17 June 2016, 9 W 42/16).

- 71 -

In a number of rulings from the OLG Munich in the years 2018 and 2019 for valuation dates in the

years 2013 and 2014, the court has been more reticent towards applying the mean of the range

recommended by the FAUB in September 2012 for the market risk premium after personal income

tax of 5.5% and rather confirmed the opinion of the LG Munich I for a market risk premium after

personal tax of 5.0%. Nevertheless, in its ruling dated 12 May 2020, the OLG Munich decided in

favor of applying the mean of the range recommended by the FAUB of 5.5% for a valuation date

lying in March 2016 (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 66 (BeckRS)).

The FAUB constantly monitors developments on the capital markets to review whether it should

adjust its recommended range. To this end, it takes a pluralistic approach, drawing on historical

stock yields and market risk premiums, long-term real stock yields and ex-ante analyses of implied

market risk premiums (for a detailed justification of this pluralistic approach see Castedello et al.,

WPg 2018, pp. 806, 806-825). The recommended range is nevertheless not based solely on the

returns expected by players on the capital markets without any connection to the realities existing

on the capital markets. Nor does it pursue another conceivable approach, one favored by the

Austrian auditing profession, of setting a range of stock yields from which the market risk

premium can be inferred by deducting the current risk-free rate applying on the valuation date.

The recommendation of the Austrian working group on business valuations of the Fachsenat für

Betriebswirtschaft der Kammer der Wirtschaftsprüfer issued on 17 October 2017 is based solely

on the implied costs of capital, from which a range for the total stock yield of between 7.5% and

9.0% has been derived (see Bertl, WPg 2018, p. 805; Rabel, BewP 2018, p. 2).

The latest analyses from the FAUB indicate a slight decrease in total stock yields (prior to personal

taxes) over the course of time – particularly in the short period since 2012/13. However, this

decrease does not in any way reflect the decrease in the risk-free rate (i.e. the return on German

government bonds). Total stock yields therefore lie in a range between 7% and 9% (before

personal tax). In this regard, the focus of the new recommended range for the costs of capital

does not lie at the lower end of the range. Due to the fact that the recommended range to date

(with a maximum market risk premium of 7.0% before tax) does not result in costs of capital that

match those empirically observed on the capital market, on account of the current situation on

the capital markets, the upper limit of the recommended range was lifted to a market risk premium

of 8.0% before tax. When it comes to setting the lower end of the range, the FAUB

recommendation states that it has taken account of the possibility that the observed total stock

yields on the capital markets could slip downwards slightly over the course of time (see FAUB,

IDW Life 2019, pp. 818, 819). The lower end of the range for the pre-tax market risk premium of

5.5% was revoked and set at an amount of 6.0% (see Popp, WPg 2020, pp. 836, 847). Before this

backdrop, the FAUB passed a resolution at its meeting on 22 October 2019 to adjust the

recommended range for the after-tax market risk premium slightly upwards to a range of 5.0% to

6.5% (see IDW Life 2019, pp. 818 et seq.).

- 72 -

For valuation purposes, the range recommended by the FAUB must be condensed to a single

point. In our experience, the range is generally be condensed to the mean of the range for the

after-tax market risk premium, an approach confirmed by the courts. The reasons for choosing a

market risk premium at the higher end of the range might be founded in the higher level of

uncertainty recently observed on the capital markets and the associated risk aversion, as was the

case underlying the recommendations of the FAUB dated 10 January 2012 in reaction to the

situation on the capital markets at the time when calculating the discount rate (see IDW

Fachnachrichten: 2/201, p. 122; OLG Schleswig-Holstein, 9 March 2020, 9 W 169/15, ratio

decidendi p. 18). Arguments in favor of choosing a market risk premium at the lower end of the

range could, by the same reasoning, lie in a lower level of uncertainty on the capital markets and

waning risk aversion (see also: Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th

edition, 2016, p. 250).

The Neutral Valuer, PwC set the market risk premium after personal taxes at 5.75%. As a result,

the range recommended by the FAUB has been condensed to the mean market risk premium

after personal taxes. We are of the opinion that this estimate is appropriate.

In addition, we would like to point out that, based on the total expected stock yields described

above of 7.0% to 9.0% (prior to personal taxes) recommended by the FAUB, the OLG Munich used

a total stock yield lying in a range of between 5.62% and 7.22% after personal tax as a reference,

i.e. a mean of 6.42% after personal tax (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 72

(BeckRS)). The reconciliation performed by the OLG Munich is based on the following calculation:

Source: own presentation

The total stock yield prior to personal tax of between 7.00% and 9.00% was broken down assuming

a typical distribution ratio of 50% for the market into a dividend yield and, secondly, the return

on the stock attributable to rises in the price of the stock. Dividends are burdened by the full rate

of capital gains tax plus the solidarity surcharge (26.375% in sum) and the share of the total stock

yield attributable to a rise in stock prices at half this rate. In sum, one arrives at a mean total stock

yield of 6.42% after personal tax.

Reconciliation OLG Munich

from to Mean from to Mean

Expected total return 7.00% 9.00% 8.00% 5.62% 7.22% 6.42%

Payout ratio 50.0%

thereof dividend yield 3.50% 4.50% 2.58% 3.31%

thereof price yield 3.50% 4.50% 3.04% 3.91%

Before pers. taxes After pers. taxes

- 73 -

Using the mean total stock yields stated by OLG Munich and applying the risk-free rate of 0.0%

applied by PwC in the valuation results arithmetically in a market risk premium (MRP) after

personal tax of 6.42%, i.e. at the upper end of the range currently recommended by the FAUB.

Beta factor

Within the framework of (tax-)CAPM, the beta measures the idiosyncratic risk inherent to a

particular share which cannot be avoided by diversification and is seen as a measure of the entity’s

specific risk profile (see OLG Frankfurt, 17 June 2010, 5 W 39/98, No. 46 (juris)). Any deviations in

the actual future cash flows from the expected cash flows represents a risk for the owners (see

Franken/Schulte, BewP 2012, pp. 92, 93). The beta is not a value that can be empirically measured

from historical figures, but is rather an estimate pertaining to future values (see OLG Stuttgart,

17 March 2011, 20 W 9/08, AG 2010, p. 510; OLG Frankfurt, 2 May 2011, 21 W 3/11, AG 2011,

p. 828).

According to the CAPM, it is assumed that the investors are able to spread their risks by acquiring

investments in a number of different companies (“diversification”). For this reason, a distinction is

made between the systematic risk, which cannot be reduced by diversification and the

diversifiable non-systematic risk. For this reason, the risk premiums derived using the CAPM only

contain a compensation for the systematic risk that cannot be further diversified and this is

reflected in the beta factor.

Systematic risk, which is relevant for valuation purposes can be further broken down into

operative risk, i.e. the risk inherent to operating activities, and capital structure risks. The latter is

founded on the fact that the volatility of the cash flows paid to the owners increases as leverage

rises.

In practice, the point of departure for estimating the beta are historical stock yields and this is

commonly applied by the courts. Consequently, beta is derived by linear regression of the entity’s

specific stock yield (the dependent variable) to the yield obtained from a stock index (the

independent variable). In the past, the informative value of the beta was tested using statistical

criteria (coefficient of determination, t-test). A prerequisite for an informative beta is that the stock

yields and the underlying share prices move in objective relation to changes in the economic

environment without distortion. For this reason, there is a trend towards relying on the liquidity

of the stock (in addition) to determining how suitable the calculated beta will be for a forecast.

The liquidity of a stock is measured using, for example, the spread between asking and bidding

rates or trading volume. As of today, there are no generally accepted methods and thresholds to

measure “liquid stocks” under the individual measurement concepts (for more details see

Ruthardt/Popp, AG 2020, pp. 322, 328 et seq.).

- 74 -

When assessing how up-to-date and statistically significant the beta is, it is necessary to set the

period in which the beta is calculated. A larger sample increases the accuracy of the result from a

statistical perspective. In practice, a period of five years with monthly intervals and a period of two

years with weekly intervals between returns are mainly applied (OLG Frankfurt, 30 August 2012,

21 W 14/11, No. 80 (juris); OLG Frankfurt, 20 December 2010, 5 W 51/09, No. 63 (juris)).

Generally, a shorter period, such as two years, will be more up-to-date (see OLG Stuttgart, 5 June

2013, 20 W 6/10, No. 214 (juris); OLG Frankfurt, 30 August 2012, 21 W 14/11, No. 80 (juris); LG

Frankfurt, 2 September 2010, 3-5 O 279/08, ratio decidendi p. 27). Longer periods in which

abnormal fluctuations in shares prices occur due to structural changes, such as an IPO or a

squeeze-out, are not suitable for determining the beta (see OLG Stuttgart, 4 May 2011, 20 W

11/08, No. 204 (juris)).

Original beta of OSRAM AG

For publicly listed companies like OSRAM AG, a historical beta factor can be derived directly from

capital market data. Corresponding to the time limits set for the share price, the OLG Stuttgart is

of the opinion (see the ruling dated 18 December 2009, 20 W 2/08, 4th Guiding principle and ratio

decidendi No. 239; BGH, 19 July 2010, AG 2010, pp. 629 et seq.) that the company’s inherent beta

should not be calculated using data from the period after such structural measures have been

announced. On the contrary, the period used to measure the company's beta must end on the

day on which the measures are announced (supported by OLG Karlsruhe, 13 May 2013, 12 W

77/07 (13), No. 36 (juris); LG Düsseldorf, 3 September 2014, 33 O 55/07, No. 145 (juris)).

The intention to enter into a domination and profit and loss transfer agreement was announced

on 10 February 2020. For this reason, the following chart presents the beta of OSRAM AG based

on the stock returns at weekly intervals over a two-year observation period related to the date on

which the intention to enter into a domination and profit and loss transfer agreement was

announced.

Source: Bloomberg, own calculations.

In addition to ams AG, a number of market players attempted to take over OSRAM AG by

acquiring its shares, such as Bain Capital in conjunction with the Carlyle Group and the Advent

Group. For this reason, it is possible that the development of the share price over time and the

beta of OSRAM AG was already distorted at an earlier point in time.

Beta factor of OSRAM AG as of 7 February 2020

Name Return observations Index R²

OSRAM AG 2 years weekly CDAX Index 0.17 1.32 1.22

Levered Beta

raw

Unlevered

Beta

- 75 -

The Neutral Valuer derived and analyzed the beta of OSRAM AG on the basis of data from S&P

Global Market Intelligence LLC (formerly S&P Capital IQ), a company held by S&P Global Inc., New

York City, USA (“S&P Global Market Intelligence“). PwC found that the historical share price of

OSRAM AG has decoupled from general market trends. This can be attributed to speculations on

the capital market, which cannot be ruled out, and the exercise of put options in the course the

takeover bid from ams Offer GmbH. In conclusion, it is not possible to derive an informative

undistorted beta from the days on which shares in OSRAM AG were traded. As a result, the Neutral

Valuer refrained from using the beta of OSRAM AG to derive the risk premium.

- 76 -

A prerequisite for an informative beta is that the stock yields move in objective relation to changes

in the economic environment without distortion. In the following presentation of the development

of the share price of OSRAM AG up until 7 February 2020 (last day of trading prior to

announcement of the intention to enter a domination and profit and loss transfer agreement),

indexed to 1 August 2018 and compared to the CDAX, it is apparent that the share price moves

relatively in parallel to the CDAX until November 2018.

Source: Bloomberg, ad hoc notifications from OSRAM AG and ams AG, own calculations and research.

27.11.2018

03.07.2019

11.08.2019

27.09.2019

18.10.2019

40.0

60.0

80.0

100.0

120.0

140.0

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20

Price development of OSRAM AG shares compared to the CDAX

OSRAM AG CDAX Index

Date Description

27.11.2018Information about Bain Capital's consideration of a takeover offer to the

shareholders of OSRAM AG becomes known

03.07.2019OSRAM AG confirms receipt of a binding takeover bid from Bain Capital and the

Carlyle Group for EUR 35.00 per share

11.08.2019ams AG submits a proposal for a takeover bid to OSRAM AG at EUR 38.50 per

share

27.09.2019Increase of the takeover bid of ams AG due to the acquisition of 100 OSRAM shares

by ams AG at a purchase price of EUR 41.00 per share

18.10.2019

Announcement of the intention of a second voluntary public takeover offer on the

part of ams AG by ams Offer GmbH

Abandonment of the intention of the Advent Group and Bain Capital to submit a

public takeover bid for all outstanding shares of OSRAM AG

- 77 -

There was a sharp day-to-day rise of 14.7% in the share price on 27 November 2018 after the first

information on the review of the takeover bid received from Bain Capital/Carlyle was announced

to the shareholders of OSRAM AG. Other changes in the share prices in the ensuing period that

bear no relation to the development of the CDAX can be attributed to expectations of a takeover.

The above chart has selected examples of days on which a marked change in the share price can

be correlated to the publication of information on takeover bids. In addition, there was hardly any

change in the share price of OSRAM AG in the period from 18 October 2019 to 27 November

2019, the period starting on the date when the second public takeover bid from ams AG via ams

Offer GmbH was announced and ending upon the expiry of the offer. In conclusion, it can be

assumed that the share price of OSRAM AG was already affected by expectations of a takeover

well before 7 February 2020.

In addition, the following chart presents the development of the unlevered beta of OSRAM AG

over time in comparison to the arithmetic mean and median of the betas of the peer group (more

on this below) derived by the Neutral Valuer for the period from 23 November 2018 to 4

September 2020. The betas presented here were determined over an observation period of two

years using weekly intervals for the stock returns. The grey space indicates the upper and lower

quartiles of the betas derived for the peer group.


07.02.2020

0.30

0.60

0.90

1.20

1.50

1.80

Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20

Unle

vere

d B

eta

Development Unlevered Beta of OSRAM AG compared to the average of the

Peer Group from 23 November 2018 to 4 September 2020

Lower to upper quartile - Peer Group OSRAM AG

Mean - Peer Group Median - Peer Group

- 78 -

At the beginning of the observation period, the unlevered beta of OSRAM AG lies at a comparable

level to the average beta of the peer group companies. With an increasing number of share prices

entered into the beta calculations over the period in which the takeover bids were received, there

is an increasing discrepancy between the beta of the peer group and the beta of OSRAM AG. After

the announcement of the intention of OSRAM AG to enter into a domination and profit and loss

transfer agreement with ams AG, the discrepancy continues to grow over time. The fall in the beta

factors over the observation period illustrates how decoupled the share price of OSRAM AG was

from the general market trend.

In conclusion, due to the factors presented above, we are of the opinion that the approach

taken by the Neutral Valuer to determine the beta on the basis of the peer group is the correct

approach.

Beta factors of the peer group

In accordance with customary professional practice used to determine the operative risk of the

company being valued, the Neutral Valuer relied on a peer group of listed companies. Referring

to the betas of the peer group is also accepted by the courts (see OLG Düsseldorf, 15 August

2016, 26 W 17/13, No. 56 (juris); OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 51f. (juris); OLG

Karlsruhe, 22 June 2015, 12a W 5/15, No. 60 (juris)). This also applies with regard to the inclusion

of foreign entities (see OLG Hamburg, 18 September 2015, 13 W 44/14, ratio decidendi p. 12, OLG

Düsseldorf, 4 July 2012, 26 W 8/10, No. 64 (juris); OLG Stuttgart, 19 January 2011, 20 W 2/07, No.

224; OLG Düsseldorf, 27 May 2009, 26 W 5/07, ratio decidendi p. 43).

To select the peer group, the Neutral Valuer examined the main fields of activity and major

influences on the business model of OSRAM AG. Using S&P Global Market Intelligence LLC

(“Capital IQ“) an initial long list of potential peer group companies in related industries was

selected. In the process, the Neutral Valuer relied on information in the annual report of the

OSRAM Group, information provided by the Company on its markets and competitive

environment at the level of the business units and also external market studies. In order to reduce

the long list, the Neutral Valuer identified buzzwords indicative of the product and market

structure of OSRAM AG in the descriptions of the various companies to identify potential peers.

In light of the need to source the relevant capital market data, only publicly-listed companies with

active operations were chosen. To exclude small niche providers, any companies that generated

revenue of less than EUR 250 million in the prior twelve months were struck from the list.

- 79 -

Thereafter, the Neutral Valuer reduced the long list by matching the companies to the most

important sales industries of the OSRAM Group. The remaining short list was then analyzed by

the Neutral Valuer in terms of the comparability of the various companies’ historical EBITDA

margins to those of the OSRAM Group and also the product portfolio. To further aid the selection,

analyses of trading volume in the companies’ securities, the share spreads, and information on

the shares of the peer group in free float were drawn on. In addition, the comparability of the

identified short-list of peer group companies was discussed with representatives from the OSRAM

Group in terms of their regional sales structure, value chains and the technological and qualitative

requirements placed on their products.

After the peer group was finalized, the Neutral Valuer obtained the observed betas using weekly

intervals for stock returns over an observation period of two years and also for an observation

period of five years using monthly intervals. The MSCI World and broad local stock market indexes

were used as benchmarks. The reliability of the betas determined by PwC was tested using

statistical criteria and liquidity observations (bid ask spreads, trading volume and shares in free

float).

To eliminate the effects from the financing structure of the companies in the peer group from the

specific beta factors of each company, it is generally customary professional practice to convert

the historical beta factors of indebted (levered) companies into beta factors for unlevered

companies (a process known as “unlevering”) to obtain comparative figures for the operative risk

profile of the valuation object (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 58 (juris); OLG

Düsseldorf, 4 July 2012, 26 W 8/10, No. 63 (juris); OLG Stuttgart, 19 January 2011, 20 W 3/09, AG

2011, pp. 205, 209; OLG Frankfurt, 20 December 2010, 5 W 51/09, No. 60 (juris); OLG Stuttgart, 18

December 2009, 20 W 2/08, No. 86 (juris)).

The Neutral Valuer converted the levered betas into unlevered betas using a formula and

assuming an uncertain tax shield and the risk of default on debt (“debt beta”).

We assessed the selection of the peer group companies and the methodical approach taken by

the Neutral Valuer in the course of our audit of the beta factor. We tested the selection of peer

group companies taking account of the key operating activities and factors influencing the

OSRAM Group on the basis of the documents and information provided to us in the course of our

audit and supplemented these with our own research and analyses. We verified the plausibility of

the betas derived for the peer group by the Neutral Valuer using data obtained from Bloomberg,

the financial information service provider.

Based on our findings made in the course of our audit, the unlevered beta identified by the Neutral

Valuer of 1.25 is an appropriate indication of the systematic risk of the OSRAM Group for the

future.

- 80 -

f) Growth Factor

Within the framework of calculating the capitalized earnings value a growth factor has to be set

for the terminal value. The Neutral Valuer set the growth factor at 1.0%.

In advance, we would also like to refer to the following matter:

If growth is measured on the basis of the increase in nominal earnings indicators, basic experience

has shown that companies that retain a portion of their earnings as a source of internal finance

will, all other things being equal, report a higher net profit in the following year than those

companies that distribute their entire earnings to their shareholders.

As a source of growth, financial surpluses can be broken down into real growth drivers measured

as trends (both positive and negative) in the performance indicators in the sense of operative

growth (expansions of capacity) and merely nominal trends, i.e. due to changes in prices

(inflation-induced growth). In addition, tax effects, e.g. due to the different taxation levied on

retained earnings and profit distributions, need to be considered separately (see WPH Edition:

Bewertung und Transaktionsberatung, 2018, Chap. A, Nos. 441 et seq.).

For the purpose of deriving the terminal value, there are two models available. Under the dividend

discount model, the nominator is constituted by the distributions or dividends, which are

discounted using the cost of capital. In contrast to the capitalized earnings method, the share of

net profit that is not distributed to shareholders is not considered in the nominator. The remaining

portion is used as an internal source of finance for the company and delivers additional growth.

If – which is not readily apparent in valuation practice – only a portion of the net profit is

capitalized in the terminal phase, namely, the dividend portion, then the additional growth driven

by retaining earnings would need to be considered in the form of a relatively high growth factor.

By contrast, in the capitalized earnings method it is assumed that all net distributable earnings

will be distributed (one can see this as the value added from distributions plus the value added

from retained earnings).

- 81 -

In this regard, rolling forward the profit projected in the detailed planning phase to the terminal

phase is only possible if investments made to expand capacity are funded from retained earnings.

Assuming that such factors are in balance in the terminal phase, i.e. the company being valued

can, in a sustained fashion, service the costs of the capital needed to cover the company’s risk and

financing structure, then the future distributions originating solely from operating growth

correspond to the value added by retained earnings (sustained value added). However, it should

be considered in this regard that when using the capitalized earnings method pursuant to IDW

S1 2008 the net earnings to be discounted include not only the value of profit distributions but

also the value of retained earnings. Given that the value added from retaining earnings fully covers

the future dividend growth originating from retaining these earnings, the growth rate of

distributions reflected in the growth factor primarily represents inflation-related changes in value

that can be attributed to the specific price-induced growth rate of the company being valued.

According to the relationship published in WPH Edition: Bewertung und Transaktionsberatung,

2018, Chap. A, No. 467 the following applies:

𝑤 = (1 − 𝑞𝑒𝑓𝑓.) ∗ 𝑅𝐸𝐾𝑣𝑆𝑡 + 𝑞 ∗ 𝜋

with

𝑤 = total growth rate, 𝑞eff. = effective distribution ratio, 𝑅𝐸𝐾𝑣𝑆𝑡 = levered cost of capital before tax

and 𝜋 = company-specific growth factor.

The levered cost of capital before tax can be roughly calculated from the risk-free rate before tax

of 0.0%, a market risk premium before tax slightly above 7.0% and a levered beta of around 1.26,

resulting in 8.96%. In this case, the effective distribution ratio amounts to roughly 50.0%.

Translating this to the data of the OSRAM Group results in the following approximation of the

growth rate:

4.98% = (1 - 50%) * 8.96% + 50% * 1.0%

To this extent, an assumed growth factor of 1.0% used in the business valuation of the OSRAM

Group represents a total growth rate of 4.98% in the terminal phase.

- 82 -

We examined the growth factor chosen by the Neutral Valuer on the basis of price indexes issued

by the Federal Office of Statistics and forecasts of the consumer price index in Germany made by

bank analysts as well as the International Monetary Fund.

Ø

Change

August 2017 102.6

August 2018 104.5

August 2019 106.0

August 2020 106.0 1.1%

Ø

Change

2020

Lower boundary of estimates -0.1%

Upper boundary of estimates 1.2% 0.6%

2021

Lower boundary of estimates -0.4%


2022

Lower boundary of estimates 0.6%


Ø

Change

2020 0.3%

2021 1.2%

Expectation

10-year government bonds 0.8%

25-year government bonds 1.2%

German Office of Statistics -

Consumer Price Index Germany (Basis 2015 =100)

Estimates by Bank Analysts -

Change Consumer Price Index Germany

Estimates by the International Monetary Fund -

Change Consumer Price Index Germany

Inflation Expectations Inferred from the Interest Yields on Inflation

Protected German Government Bonds

- 83 -

Averaging the development of consumer prices over the past three years results in an average

annual inflation rate of 1.1%. According to a summary prepared by Bloomberg of the estimated

change in the consumer price index made by bank analysts for the years 2020 to 2022, the inflation

rate ranges between -0.4% and 2.8%. For the years 2020 and 2022, the International Monetary

Fund is forecasting an increase in consumer prices of 0.3% and 1.2% respectively. According to

the IMF, no forecasts can be made for the development of consumer prices in Germany beyond

the year 2021 on account of the uncertainties caused by the development of the corona

pandemic. The returns on long-term German government bonds, which are protected from

inflation, indicate that an inflation rate of approximately 1.2% can be expected.

However, when measuring the growth factor, the circumstances of the particular company must

also be considered. To this extent, the growth rates in the financial surpluses of different

companies can and will differ from one another by nature. According to research by

Widmann/Schieszl/Jeromin (FB 2003, pp. 800 et seq.) the average growth in profits is

approximately 45% to 50% of the average general inflation rate, independent of the economic

cycle.

This lower growth in profits has been confirmed in research by Stellbrink (“Der Restwert in der

Unternehmensbewertung”, 2005, pp. 125 et seq.). The opinion that the growth factor should be

generally lower than the inflation rate is mirrored in the prevailing opinion in the technical

literature (see Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th edition, 2016,

p. 267; WPH Edition: Bewertung und Transaktionsberatung, 2018, Chap. C No. 127; for a view

contrary to the other studies, see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 63 (juris); OLG

Frankfurt, 30 August 2012, 21 W 14/11, No. 114 (juris); OLG Stuttgart, 8 July 2011, 20 W 14/08,

No. 279 et seq. (juris)). This is also partly due to the fact that an investment in a company is not

totally immune from the effect of inflation (see OLG Munich, 18 February 2014, 31 Wx 211/13, No.

26 (juris); OLG Düsseldorf, 11 April 1988, 19 W 32/86, WM 1988, pp. 1052, 1059, 31; OLG

Düsseldorf, 12 February 1992, 19 W 3/91, AG 1992, pp. 200, 204). The purpose of the growth factor

is not to offset inflation at all costs (see OLG Stuttgart, 12 September 2017, 12 W 1/17, Tz 83

(BeckRS), OLG Stuttgart, 19 March 2008, 20 W 3/ 06, AG 2008, pp, 510, 515).

In light of the above expectations for the average inflation rate, an initial indication of the growth

factor is that it lies below 1.0%.

- 84 -

In addition to the general development of the sales markets, the competitive position of the

OSRAM Group must also be considered when assessing its growth prospects. Due to the fact that

the growth factor shows the expected average increase in the future profits, the expected growth

of results within the detailed planning phase cannot be simply transferred over to the terminal

growth factor (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 62 (juris)). With regard to the

business model of the OSRAM Group it can be stated that the products offered are regularly

exposed to quite substantial price erosion. To compensate for these effects, efficiency gains and

rising volumes must be generated in the detailed planning phase already. In addition, the

Company is exposed to increasingly fierce competition on a range of different markets.

Before this backdrop, we are of the opinion that the growth factor set by the Neutral Valuer for

the terminal phase of 1.0% is appropriate.

The growth factor set by the Neutral Valuer lies in a range that is frequently applied by the

valuation profession and regularly viewed as appropriate by the courts (see Popp/Ruthardt,

Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),

Rechtshandbuch Unternehmensbewertung, 2nd edition, 2019, No. 12.130).

When deriving the business value, inflation-induced gains on sale are considered when deriving

net income as a matter of course (see section 6.3 h). Alternatively, this can be modeled

mathematically – the approach taken by the Neutral Valuer – by reducing the growth factor in the

denominator (see Tschöpel/Wiese/Willershausen, WPg 2010, 349, 356; Jonas/Wieland-Blöse,

Berücksichtigung von Steuern, in: Fleischer/Hüttemann, Rechtshandbuch

Unternehmensbewertung, 2nd edition 2019, Fn. 1 to No. 17.41; Raths, Restwertermittlung in der

Unternehmensbewertung, 2018, p. 89 f.; Dierkes/Sümpelmann, BewP 2019, p. 66, 68 f; Wollny, Der

objektivierte Unternehmenswert, 3rd edition, 2018, Fn. 708 on p. 141).

From an arithmetic perspective, the Neutral Valuer has correctly derived a growth rate after

personal tax of 0.87% (wnSt) by burdening the growth rate before personal tax of 1.0 % (wvSt) with

half the rate of capital gains tax (13.19 %). Arithmetically, the following applies:

𝑤𝑛𝑆𝑡 = 0,87 % = 1,0 % ∗ (1 − 13,19 %)

- 85 -

g) Derivation of the Discount Rate

The discount rate used in the detailed planning phase and for the terminal phase has been

properly derived. We are satisfied that the financial-mathematical calculations are accurate.

As a purely precautionary measure we would like to point out that a change in individual values

for the risk-free rate, the market risk premium, the beta factor or the growth rate, any of which

might be reasonable in isolation, can in aggregate lead to an unrealistic figure for the discount

rate and therefore an unrealistic value for the fair compensation (see OLG Frankfurt, 24 November

2011, 21 W 7/11, No. 40 (juris)). Moreover, there is no need under the constitution to grant the

highest benefit for individual inputs of the capitalized earnings method, as described by the

Higher Regional Court of Stuttgart (see 17 October 2011, 20 W 7/11, No. 188 (juris)). Otherwise,

this would result in an accumulation of beneficial decisions which would no longer accurately

reflect the “actual” value (see OLG Munich, 20 March 2019, 31 Wx 185/17, No. 28 (BeckRS)).

h) Calculation of Equity Value Using the Capitalized Earnings Approach

If a specific distribution policy is in place, the distribution volume is modeled as the "value added

by distributions". If the net profit for the year is retained (or a portion thereof) without there being

any specific plans for its use, this is customarily treated as an economically sensible reinvestment

exhibiting the same rate of return as the cost of capital used within the framework of the

capitalized earnings model. The fictitious investment of these amounts at the level of the company

results in additional income in the years following their initial retention Using the assumption that

these funds are reinvested at the same rate of return (see IDW S1 2008, No. 37), the funds, which

are not actually distributed, can be modeled by a fictitious direct allocation to the shareholders

and constitute the value added by retained earnings.

- 86 -

Based on the financial planning explained in the valuation report, the equity value has been

derived as follows:

Distribution ratio and taxation of dividends

The distribution ratio needs to be determined to be used as a basis to calculate the taxation on

dividends paid to the shareholders of OSRAM AG. The Neutral Valuer has not considered any

distributions in the first years of the detailed planning phase of 2020 and 2021 which is in line

with the assumptions made by the OSRAM Group. Over the later years of the detailed planning

phase, a mean distribution ratio of 40.0% has been set based on the planned mid-range

distribution policy of the OSRAM Group. The retained earnings are required to fund planned

investments in the future and finance any changes in net working capital. As there are no legal

restrictions on such a distribution policy, no objection is made to assuming the planned

distribution policy.

The distribution ratio set by the Neutral Valuer for the terminal phase lies at 50.0%, i.e. in the

middle of the range of average market distribution patterns (see WPH Edition, Bewertung und

Transaktionsberatung, 2018, Chap. A. No. 280; which refers to an average distribution ratio of

between 40% and 60%; OLG Munich, 2 September 2019, 31 Wx 358/16, No. 99 (BeckRS) [50%];

OLG Frankfurt, 17 January 2017, 21 W 37/12, No. 87 (BeckRS)). In this approach, the distribution

patterns of the company being valued are reflected in a way that is equivalent to the distributions

of an alternative investment (see OLG Düsseldorf, 11 May 2015, 26 W 2/13, No. 47 (juris); OLG

Frankfurt, 26 January 2015, 21 W 26/13, No. 37 (juris)). The amounts that are not distributed are

considered as value added by retained earnings after deducting the retained earnings needed to

fund growth.

Overall, the distribution ratios and dividend pay-outs applied by PwC are appropriate in our

opinion. The value added by distributions has been properly derived from the sum of dividends

and adjusted to deduct capital gains tax of 25.0% plus the 5.5% solidarity surcharge.

Capital gains tax upon disposal

From the year 2009 the impact of the tax on capital gains upon disposal needs to be considered.

The effective capital gains tax depends both on the assumed duration of the holding, the

development of the business value due to the retention of earnings by the company, as well as

the alternative investment (see Wiese, WPg 2007, pp. 368, 375). The figures need to be

standardized in order to account for the timing of the sales that trigger capital gains tax and the

resulting average capital gains tax (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 29 (juris)).

- 87 -

In valuation practice, and acknowledged by the courts, a standardized effective capital gains tax

of 12.5% plus the solidarity surcharge (13.1875% in total) is assumed (see Popp, Berücksichtigung

von Steuern, in: Peemöller (publisher); Praxishandbuch der Unternehmensbewertung, 7th edition,

2019, p. 1425, 1436, etc.; OLG Düsseldorf, 28 October 2019, 26 W 3/17, No. 56 (BeckRS); OLG

Munich, 26 June 2018, 312 Wx 382/15, No. 90 (BeckRS); OLG Frankfurt, 5 February 2016, 21 W

69/14, No. 85 (BeckRS)). Consequently, the Neutral Valuer burdened the retained earnings in the

terminal value at an effective tax rate of 13.1875% instead of the nominal tax rate of 25% plus the

solidarity surcharge.

Moreover, the inflation-induced gains on sale need to be considered when deriving the net

proceeds (see Popp, Der Konzern 2019, p. 149 et seq.; Ruthardt/Popp, AG 2019, p. 196, 200). This

is based on the fact that gains on sale are subject to tax. On grounds of materiality, they are

generally only considered in the terminal value. From a purely mathematical perspective, the

business value rises year for year in the terminal phase at the rate of the company’s specific

inflation rate; this also applies assuming a fictitious distribution of all projected financial surpluses.

If it is typically assumed that a shareholder will not hold the shares indefinitely, the inflation-

induced gains in the price of the share will be realized after the typified duration of the

shareholding and then be subject to the effective capital gains tax plus solidarity surcharge (for

more examples see WPH Edition: Bewertung und Transaktionsberatung, 2018, Chap. A No. 453 et

seq.). Alternatively, this can be modeled mathematically by reducing the growth factor in the

denominator (see Tschöpel/Wiese/Willershausen, WPg 2010, 349, 356; Jonas/Wieland-Blöse,

Berücksichtigung von Steuern, in: Fleischer/Hüttemann, Rechtshandbuch

Unternehmensbewertung, 2nd edition 2019, Fn. 1 to No. 17.41; Raths, Restwertermittlung in der

Unternehmensbewertung, 2018, p. 89 f.; Dierkes/Sümpelmann, BewP 2019, p. 66, 68 f; Wollny, Der

objektivierte Unternehmenswert, 3rd edition, 2018, Fn. 708 on p. 141).

- 88 -

Within the framework of tax-CAPM, the market risk premium is derived from the total market

returns on shares. This is derived in turn from the long-term nominal (i.e. affected by inflation)

increase in stock indexes. The annual change in the index consists of the returns on the stocks

obtained from dividend yields and the rise in the stock prices of the shares included in the index.

When deriving the after-tax return on shares from the pre-tax return on shares (see WPH Edition:

Bewertung und Transaktionsberatung, 2018, Chapter A No. 396) the amount attributable to the

dividend yield is subject to the nominal rate of capital gains tax. The difference between the total

return on the stock and the dividend yield can be attributed to changes in the price of the stock.

The developments of stock prices historically observed on the market therefore constitute

nominal indicators. To this extent, inflation-induced rises in the stock price are already priced into

the indicator (for an analysis of real returns after adjusting for inflation see Castedello et al., WPg

2018, pp. 806, 812 et seq.). If the return on the stock attributable to rising stock prices is now

reduced by the effective capital gains tax when calculating the market risk premium after income

tax within the framework of tax-CAPM, the inflation-induced changes in the share prices or capital

gains will be implicitly included when calculating the discount rate. As the reconciliation of stock

returns before tax to after tax is performed using tax-CAPM, the specific way the market risk

premium is derived (either based on historical figures or future forecasts) is not relevant, as all

stock returns entered into the tax-CAPM model are subject to tax in their entirety (see Popp, Der

Konzern 2019, p. 149, 154; Ruthardt/Popp, AG 2019, p. 196, 200 f.). To ensure equivalence between

the company being valued and an alternative investment for tax purposes, and in terms of

availability, the effective tax on gains on sale due to inflation alone must be included in the

measurement of the equity value.

- 89 -

The practice of considering the effective capital gains tax on inflation-induced gains in value is

common in professional valuation practice and was confirmed as the proper treatment or at least

not objected in court cases brought under the SpruchG (see OLG Bremen, 15 May 2020, 2 W

47/19; OLG Schleswig, 9 March 2020, 9 W 169/15; OLG Munich , 6 August 2019, 31 Wx 340/17;

OLG Stuttgart, 26 June 2019 20 W 27/18; OLG Munich, 13 November 2018, 31 Wx 372/15; OLG

Hamburg, 8 October 2018, 13 W 20/16; OLG Hamburg, 30 June 2016, 13 W 75/14; LG Stuttgart,

1 October 2019, 31 O 36/16; LG Hamburg, 26 September 2019, 412 HKO 156/16; LG Stuttgart, 13

August 2019, 31 O 50/15; LG Frankfurt, 25 April 2019, 3-05 O 45/16; LG Bremen, 7 February 2019,

11 O 231/15; LG Frankfurt, 4 February 2019, 3-05 O 68/17; LG Stuttgart, 18 November 2018, 31 O

130/15; LG Stuttgart, 17 September 2018, 31 O 1/15; LG Gera, 25 June 2018, 11 HK O 55/16; LG

Stuttgart, 3 April 2018, 31 O 138/15; LG Düsseldorf, 15 January 2018, 31 O 5/13; LG Koblenz, 7

August 2017, 4 HK O 79/14; LG Munich I, 30 June 2017, 5 HK 13182/15; LG Stuttgart, 12 May 2017,

31 O 61/13; LG Munich I, 28 April 2017, 5 HKO 26513/11; LG Munich I, 25 April 2016, 5 HK

20672/14; LG Hamburg, 15 October 2015, 403 HKO 42/14; LG Koblenz, 10 September 2015, 4 HKO

166/12; LG Munich I, 21 August 2015, 5 HK O 1913/14; LG Kiel, 21 April 2015,16 O 75/12; LG

Hamburg, 26 September 2014, 403 HKO 19/13; for a contrary view: LG Munich I, 26 July 2019, 5

HK O 13831/17; LG Munich I, 16 April 2019, 5 HK O 14963/17; LG Munich I, 29 August 2018, 5 HK

16585/15, LG Dortmund, 26 August 2019, 20 O 4/12).

The Neutral Valuer PwC has correctly deducted capital gains tax when deriving the growth factor

for the terminal phase.

Discounting of net cash flows

We assessed the discounting of the projected dividend distributions on the one hand and the

fictitious direct allocation of the value added by retained earnings on the other.

In order to discount the annual dividend distributions, the Neutral Valuer assumed that the

distributions will be made at year end. Consequently, the distributions were discounted in the

valuation model from the end of the respective fiscal year to the technical valuation date of 30

September 2019 and thereafter compounded to the proper valuation date.

We are of the opinion that the two phase model has been applied correctly. After checking the

accuracy of the mathematical calculation of the equity value using the capitalized earnings

method, we are satisfied that the results are correct.

- 90 -

6.4. Separately-Valued Assets

The Neutral Valuer has identified a building in Traunreut and a property in Berlin as non-operating

assets and valued them separately. Based on external appraisals, the Neutral Valuer considered a

value of EUR 17.5 million and EUR 33.3 million for the properties in Traunreut and Berlin, taking

into account tax effects.

Furthermore, the Neutral Valuer has considered a number of equity investments as separately-

valued assets. These investments are consolidated using the equity method pursuant to IFRS 9

and are therefore not fully consolidated. The Neutral Valuer has recognized a total amount of

EUR 81.0 million for these investments.

In addition, the Neutral Valuer considered the shares held in the two venture capital funds,

Unternehmertum VC Fonds II GmbH & Co. KG, Garching (“UVC Fonds II“), and Partech Partners

S.A.S., Paris, France (“Partech Entrepreneur III“), valued at a total value of EUR 5.1 million as

separately-valued assets.

In addition, the income arising from the sale and liquidation of equity investments generated in

fiscal year 2020 was considered at a sum of EUR 10.2 million. This includes an amount of EUR 8.0

million from the sale of Siteco GmbH.

In sum, separately-valued assets come to a total of EUR 147.2 million.

We verified the derivation of the separately-valued assets and are of the opinion that their values

are appropriate.

Other separately-valued assets

According to the managing board of OSRAM AG and based on the findings of our audit, we are

of the opinion that there are no indications of any other non-operating assets.

Capital gains tax on separately-valued assets

If it is assumed that the proceeds from the (fictitious) sale of non-operating assets or any non-

essential liquidity are distributed to the owners, this normally entails consideration of the

(standardized) personal income taxes of the shareholders in the valuation model (see


Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd edition. 2019, No. 12.156;

Popp, Der Konzern 2020, p. 177, 179 with additional comments).

- 91 -

The Neutral Valuer has opted not to burden separately-valued assets with the shareholders’

personal income tax. Our audit opinion remains unaffected.

6.5. Business Value

Based on the presentations made in the valuation report, the business value of OSRAM AG as at

the valuation date of 3 November 2020, derived from its equity value and consideration of

separately-valued assets, amounts to approximately EUR 4,205 million. This corresponds to an

value per share of EUR 44.65.

We have assessed the calculation of the value per share. It has been derived correctly.

6.6. Price on the Stock Exchange

Calculation of the average three-month share price

In its ruling dated 19 July 2010 (II ZB 18/09, AG 2010, p. 629 ff., “Stollwerk”) the Federal Court of

Justice ruled that the market price of the share on the stock exchange that is used to derive a fair

cash compensation must be measured on the average market value over a three-month period

prior to announcement of the structural measures.

In its deliberations, the Federal Court of Justice states that if the share price is taken from the

period after the structural measures are announced and this “... is included in the reference period,

the share price no longer reflects, as required, the price which the shareholder could have

expected without the intervention of the majority shareholder, who is duty bound to pay

compensation, or without the structural measure having occurred. Thus the share price does not

reflect the business value expected by the market on the basis of the supply and demand

mechanism but the price which can be obtained precisely because of the structural measure.

[...] However, such market demand has nothing to do with the fair value of the share which the

minority shareholder should receive as compensation for losing his status as a shareholder, in

other words to recompense him for the position he would be in had the structural measure not

occurred (BVerfGE 100, 289, 305; BVerfG, ZIP 2007, 175 Rn. 16).” The selection of a reference period

also serves to prevent any conscious manipulation. Abuse by either side should be ruled out. In

the opinion of the Federal Court of Justice, the minority shareholders are protected from

manipulation by the majority shareholder choosing a particularly favorable date, by stating that

the fair compensation may never be lower than the share of the minority shareholder in the

business value.

- 92 -

This interpretation is also reflected in Sec. 5 (1) of the bidding regulations for the WpÜG-AngebV

which determines that the offered amount in the case of a takeover bid must at least correspond

to the volume-weighted average market price of the shares in the target for the three months

prior to the decision to make a bid.

On 10 February 2020 ams AG announced its “firm intention” to enter into a domination and profit

and loss transfer agreement with its wholly-owned subsidiary, ams Offer GmbH and OSRAM AG.

It should be noted that, in light of the necessary 75% majority in the voting rights at the general

meeting it is not necessary, based on a ruling from the LG Munich I for the corporate agreement

to be actually executed (see LG Munich I, 28 November 2019, 5 HK O 6321/14, ratio decidendi p.

47).

Corresponding to the approach described on the internet site of the BaFin, the Neutral Valuer

referred to the three month period ending on the last day (of trading) prior to the public

announcement of the intention to enter into a domination and profit and loss transfer agreement

to calculate the price of the stock on the exchange. As a result, the three-month reference period

ends on 9 February 2020, and, considering that this falls on a Sunday, on the last day of trading

on Friday, 7 February 2020. We believe that this approach is appropriate.

Averaging

According to Sec. 5 (1) WpÜG-AngebV, the volume-weighted average price of the stock is to be

based on the price of the stock determined by the BaFin. According to the letter from BaFin dated

6 March 2020, the applicable minimum price for shares in OSRAM AG on the cut-off date of 9

February 2020 (inclusive) calculated by the BaFin in accordance with Sec. 31 (1) and (7) WpÜG in

conjunction with Sec. 5 WpÜG-AngebV, comes to

EUR 42.20.

For comparative purposes we determined the trading volume-weighted share price using market

data from Bloomberg. The resulting share price matches the calculations performed by the BaFin.

As a result, the three-month average share price of EUR 42.20 per share lies below the business

value of OSRAM AG determined using the capitalized earnings method of EUR 44.65 per share.

- 93 -

The following summary presents the development of the share price and the trading volume of

shares in OSRAM AG until the end of our audit work. The three-month period prior to

announcement (on 7 February 2020) of the intention to enter into a domination and profit and

loss transfer agreement is highlighted yellow. Moreover, the three-month average share price as

at 9 February 2020 of EUR 42.20 is also presented.


Longer period and extrapolation of the share price

According to the Federal Court of Justice, the share price must be “extrapolated” to the valuation

date if a “longer period” lies between the date on which the announcement is made and the date

of the general meeting if there are “general or sector-specific” trends on the exchange that

indicate that an adjustment is necessary.

In its Stollwerck ruling, the Federal Court of Justice assumed that a “longer period” involved seven-

and-a-half months between announcement of the structural measure and the general meeting

passing the resolution on it. In the professional literature a period of up to six months is not

considered to constitute a “longer period”. In some cases a period of up to seven-and-a-half

months – i.e. exactly the same duration as in the Stollwerck ruling of the Federal Court of Justice –

is not considered to qualify as a “longer period” (for references to the literature, see

Popp/Ruthardt, WPg 2017, pp. 1222, 1223).

0

2,500,000

5,000,000

7,500,000

10,000,000

12,500,000

15,000,000

17,500,000

20,000,000

0.0

10.0

20.0

30.0

40.0

50.0

60.0

01.09.2018 01.03.2019 01.09.2019 01.03.2020 01.09.2020

Tra

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me i

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Share

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Price and trading volume of the OSRAM AG share

Trading volume Share price of OSRAM AG Average share price

- 94 -

The term “longer period” is interpreted restrictively by the courts and such an extrapolation is

reserved for “unusual” cases. A period of up to six months between announcement of the

corporate measure and the date of the general meeting is deemed to be “normal” or “customary”

as generally six months are required, in normal times, for the business valuation, its audit and the

preparatory work for the general meeting (see, for example, OLG Stuttgart, 24 July 2013, 20 W

2/12, No. 174 (juris)). To this extent, there are only isolated cases where the share price has been

extrapolated for the purposes of determining a fair compensation. However, there is no apparent

uniformity in the interpretation of a “longer period” or the methodology to be used to extrapolate

the share price (for details on “longer period” and alternative extrapolation methods, see

Popp/Ruthardt, WPg 2017, pp. 1222 ff.).

LG Munich I has recognized a period of roughly eight-and-a-half months as a “longer period” (see

LG Munich I 30 November 2016, 5 HK 22066/02, ratio decidendi pp. 55 et seq.). In its ruling from

the year 2019, LG Frankfurt a.M. confirmed that a period of seven months (to be precise, seven

months and eight days) constituted a “longer period” (see LG Frankfurt a.M., 4 February 2019,

3-05 O 68/17). The OLG Frankfurt a.M. confirmed this estimation and nevertheless refrained from

extrapolation (see 27 August 2020, 21 W 59/19, resolution text p. 12).

There will be a period of eight-and-a-half months between announcement of the intention to

enter into the Domination and Profit and Loss Transfer Agreement and the date of the general

meeting on 3 November.

As a precautionary measure, we “extrapolated the exchange price” of OSRAM AG to the end of

our audit work. In conclusion, no extrapolation relevant to the compensation was presented as at

the end of our audit work.

6.7. Comparative Valuations

In addition to capital value-based valuations, business valuation practice also uses multiples of

various indicators to estimate preliminary business values, set a range of values or to test

plausibility. Like the capitalized earnings method, multiples-based valuations are also based on

earnings. However, enterprise value in this case is determined by multiplying earnings or the

assets base by an indicator. The multiples method is based on a comparative valuation in the

sense that the suitable multiple is derived from capital market data of listed peer group companies

or transactions and then applied to the company to be valued.

Such multiples-based valuations only constitute a simplified valuation but can be used to test the

plausibility of other methods (see IDW S1 2008, No 143).

- 95 -

We assessed the comparative valuations performed by PwC on the basis of data obtained from

Bloomberg. Our analysis did not reveal any indications that the fundamental business value

derived using the capitalized earnings method is too low.

6.8. Sensitivity Analysis

As a precaution, we draw attention to the fact that the following sensitivity analyses and the

resulting values are only provided for the purpose of informing minority shareholders and the

regional court commissioning this report. The resulting values should not be interpreted as an

indication of a fair compensation and do not therefore contradict our audit opinion.

In the following table, we have varied the unlevered beta factor within a range of 1.15 to 1.35 and

the market risk premium after personal taxes within a range of 4.75 % and 6.75 %.

6.9. Particular Difficulties in the Valuation

On the basis of our knowledge of the relevant parts of the joint report, the information provided

to us, our meetings with the managing board of OSRAM AG, the management of ams Offer GmbH,

our meetings with the representatives of the audit firm engaged by the two parties to the

corporate agreement to assist with determining the business value, our review of the planning

projections underlying the calculation of the business value, and other documents, we have come

to the conclusion that no special difficulties arose during the business valuation of OSRAM AG in

the sense of Sec. 293e (1) sent. 3 No. 3 AktG.

Sensitivity analysis

Value per share in EUR Beta factor

0 1.15 1.20 1.25 1.30 1.35

Market risk premium 4.75% 65.54 61.78 58.37 55.27 52.43

5.25% 57.03 53.74 50.76 48.04 45.54

5.75% 50.22 47.30 44.65 42.23 40.00

6.25% 44.65 42.02 39.64 37.45 35.45

6.75% 40.00 37.62 35.45 33.47 31.64

- 96 -

7. Calculation of the Fair Compensation and Guaranteed Dividend

7.1. Calculation of the Fair Compensation pursuant to Sec. 305 AktG

The figures taken to derive the proposed fair compensation are presented in detail in the valuation

report attached to the joint report.

Based on a business value of approximately EUR 4,205 million, the Neutral Valuer derived a value

per share of EUR 44.65 after rounding.

The volume-weighted average share price over the relevant three-month period ending on

9 February 2020 comes to EUR 42.20.

In light of the above, the parties to the Agreement have set the fair compensation at

EUR 44.65

per share.

In our opinion, the compensation is fair.

7.2. Calculation of the Guaranteed Dividend pursuant to Sec. 304 AktG

In terms of the amount of the guaranteed dividend, Sec. 304 (2) sentence 1 AktG states that the

guaranteed dividend must at least ensure an annual payment that is commensurate to the

prospective average share in profits allocable to the individual share on the basis of past earnings

and its future earnings prospects, after taking account of appropriate depreciation, amortization

and impairments but disregarding other revenue reserves. This law ensures that minority

shareholders receive a guaranteed dividend that corresponds to the dividends that they would

have received without the corporate agreement (see BGH, 21 July 2003, II ZB 17/01, BGHZ 156,

pp. 57, 61; OLG Munich, 17 July 2007, 31 Wx 60/06, No. 48 (juris)).

The guaranteed dividend is customarily derived by converting the equity value into an annuity

(see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:

Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung 2nd edition 2020, No. 12.201;

Veil/Preissner, in Spindler/Stilz, Aktiengesetz, 4th edition 2019, § 304 AktG No. 54; BGH, 12 January

2016, II ZB 25/14, AG 2016, p. 359; OLG Düsseldorf, 12 November 2015, 26 W 9/14, No. 65

(BeckRS); OLG Frankfurt a.M., 28 March 2014, 21 W 15/11, No. 230 (juris)).

- 97 -

The Neutral Valuer has derived the guaranteed dividend by converting the business value of the

OSRAM Group on 30 September 2020, i.e. including the separately-valued assets, into an annuity.

We are of the opinion that this approach is appropriate.

Rate of return on the annuity

Economically, the rate of return on the annuity is an expression of the return from an alternative

investment that is equivalent to the guaranteed dividend. To this extent, it should match the risk

profile of the guaranteed dividend. In professional practice two different approaches are used to

derive the rate of return on the annuity: the mean value approach or the credit-spread approach.

In the mean value approach the risk-free rate is increased by adding half of the risk premium used

in the capitalized earnings method whereas, in the credit-spread approach, the risk-free rate is

increased by adding a premium for the parent company’s risk of default.

If a corporate agreement contains a clause that foresees revival of the offer to pay compensation,

the credit-spread approach is used. By contrast, if there is no such clause for the revival of the

offer to pay compensation, the mean value approach is the approach taken (see LG Munich I,

31 July 2015, 5 HKO 16371/13, No. 391 ff. (juris); LG Berlin, 23 April 2013, 102 O 134/06; and for

the use of the credit spread approach in the case of revival see OLG Düsseldorf, 25 May 2016,

26 W 2/15, No. 77 (BeckRS)).

The Neutral Valuer applied the mean value approach to derive the rate of return on the annuity.

This approach is the proper approach in this case.

The interest rate used to calculate the annuity is not to be reduced by a growth factor (see OLG

Düsseldorf, 25 May 2016, 26 W 2/15, No. 78 (BeckRS) etc.; OLG Karlsruhe, 13 May 2013,

12 W 77/08 (13), No. 106 (juris); OLG Munich, 17 July 2007, 31 Wx 60/06, No. 52 (juris)).

Effects of capital gains tax

When setting the guaranteed dividend, the Neutral Valuer has correctly considered that cash flows

from a guaranteed dividend should be treated as dividends and are therefore subjected to capital

gains tax of 25.0% plus the solidarity surcharge.

For this purpose, the after-tax value was annuitized using an after-tax interest rate. After that the

after-tax annual rent was translated to the pre-tax rent by adding the typified tax burden (see OLG

Stuttgart, 5 June 2013, 20 W 6/10, No. 258 (juris), LG Stuttgart, 5 November 2012, 31 O 55/08,

ratio decidendi p. 62).

- 98 -

Calculation of the guaranteed dividend

The point of departure for deriving the guaranteed dividend is the value per share derived from

the business value as at 30 September 2020 of EUR 44.32.

The appropriate guaranteed dividend was calculated as follows:

In a first step, the annual rent after income tax (“ESt”) is to be determined, which results from the

interest on the value per share (EUR 1.65). Then the value is to be determined which is necessary

before ESt in order to receive a rent inflow after ESt in this amount. The necessary compensation

payment before ESt is thus EUR 2.24.

Modification of the annual compensation payment in accordance with the ruling from the

Federal Court of Justice

In its Ytong ruling, the Federal Court of Justice ruled that the guaranteed dividend must amount

to the prospective distributable gross earnings per share less the german corporate income tax

to be paid by the company at the applicable tax rate. Consequently, adjustments to the corporate

income tax rate could lead to an adjustment of the guaranteed dividend as, in the opinion of the

Federal Court of Justice, the “corporate income tax cannot be influenced by the company itself,

but merely represents an outflow of the profit it has generated” (BGH. 21 July 2003, II ZB 17/01,

WM 2003, p. 1859, 1859 ff.; for a critical view: Popp, WPg 2008, pp. 23, 25).

EUR return EUR return

Business Value per share 30.09.2020 44.32 44.32

Riskfree rate after income tax 0.00%

Half risk surcharge 3.724%

Interest rate after income tax 3.724%

Annuity rate after income tax 3.724%

Perpetuity before income tax 2.24 5.057%

Income tax (26.375%) -0.59

Perpetuity after income tax 1.65 3.724% 1.65 3.724%

Compensation payments (before income tax) 2.24

OSRAM AG stock portfolio

- 99 -

In order to consider possible changes in the corporate income tax burden on the amount of the

guaranteed dividend in the sense of the ruling of the Federal Court of Justice from 21 July 2003,

whereby a (fixed) guaranteed dividend in the sense of Sec. 304 (1) sentence 1 AktG and Sec. 304

(2) sentence 1 AktG must equate with the prospective average distributable share of gross profit

allocable to the share less the associated corporate income tax (upon distribution) at the

applicable tax rate, it is necessary to fix the tax base for measuring corporate income tax and the

solidarity surcharge (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 76 (juris); OLG Stuttgart,

5 June 2013, 20 W 6/10, No. 254 (juris); BayObLG, 28 October 2005, 3Z BR 071/00, AG 2006, pp.

41, 45, LG Munich I, 31 July 2015, 5 HKO 16371, No. 403 (juris)).

The calculation of the guaranteed dividend is made by deducting the current corporate income

tax rate plus solidarity surcharge (EUR 0.33) from the pre-tax guaranteed dividend derived from

the equity value (EUR 2.57).

On this basis, the fair guaranteed dividend pursuant to Sec. 304 AktG amounts to EUR 2.57 per

no-par value share (pre-tax earnings per share) less the amount of corporate income tax to be

transferred to the tax office by OSRAM AG. This amount is to be calculated from the share in the

profit contained in the pre-tax earnings per share of EUR 2.08 arising from profits of OSRAM AG

that are subject to German corporate income tax taking account of the applicable corporate

income tax rate for the year concerned. The corporate income tax rate plus solidarity surcharge

applying on the date on which the contract will be concluded amounts to 15.825%. This results in

a corporate income tax deduction of EUR 0.33 from the share in profit that is subject to German

corporate income tax.

Assuming that there is no change in the corporate income tax rate of 15.0 % and a solidarity

surcharge of 5.5 % the guaranteed dividend per no-par value share amounts to EUR 2.24.

Gross

compensation./. KSt+SolZ

Compensation

payment

EUR EUR EUR

Pro rata compensation from profits subject

to german corporate income tax and

solidarity surcharge 2.08 0.33 1.75

Pro rata compensation from profits not

subject to german corporate income tax

and solidarity surcharge 0.49 0.00 0.49

Total compensation 2.57 0.33 2.24

SolZ = Solidarity surcharge

KSt = Corporate income tax

- 100 -

8. Concluding Declaration of the Fairness of the Compensation

and Guaranteed Dividend

“Based on our findings, the compensation to be paid to the minority shareholders of OSRAM Licht

AG, Munich, pursuant to Sec. 305 AktG as a consequence of the company entering into a

domination and profit and loss transfer agreement with ams Offer GmbH, Ismaning, of EUR 44.65

per no-par value registered share is fair.

The fair guaranteed dividend per share pursuant to Sec. 304 AktG amounts to EUR 2.57 (share in

pre-tax earnings per share) less the amount of German corporate income tax to be transferred to

the tax office by OSRAM AG. This amount is to be calculated from the share in the profit contained

in the pre-tax profits per share of EUR 2.08 arising from profits of OSRAM AG that are subject to

corporate income tax taking account the applicable corporate income tax rate for the year

concerned. Applying the corporate income tax rate of 15.825% (including solidarity surcharge) on

the date on which the corporate agreement is entered into, the deduction comes to EUR 0.33 and

therefore results in a guaranteed dividend of EUR 2.24 per share.”

Stuttgart, 23 September 2020

Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Dr. Matthias Popp Dr. Frederik Ruthardt

Wirtschaftsprüfer Wirtschaftsprüfer

[German Public Auditor] [German Public Auditor]

Exhibit 1

[Translator's notes are in square brackets]

General Engagement Termsfor

Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften[German Public Auditors and Public Audit Firms]

as of January 1, 2017

1. Scope of application

(1) These engagement terms apply to contracts between German PublicAuditors (Wirtschaftsprüfer) or German Public Audit Firms(Wirtschaftsprüfungsgesellschaften) – hereinafter collectively referred to as”German Public Auditors” – and their engaging parties for assuranceservices, tax advisory services, advice on business matters and otherengagements except as otherwise agreed in writing or prescribed by amandatory rule.

(2) Third parties may derive claims from contracts between German PublicAuditors and engaging parties only when this is expressly agreed or resultsfrom mandatory rules prescribed by law. In relation to such claims, theseengagement terms also apply to these third parties.

2. Scope and execution of the engagement

(1) Object of the engagement is the agreed service – not a particulareconomic result. The engagement will be performed in accordance with theGerman Principles of Proper Professional Conduct (Grundsätze ord-nungsmäßiger Berufsausübung). The German Public Auditor does notassume any management functions in connection with his services. TheGerman Public Auditor is not responsible for the use or implementation ofthe results of his services. The German Public Auditor is entitled to makeuse of competent persons to conduct the engagement.

(2) Except for assurance engagements (betriebswirtschaftliche Prüfungen),the consideration of foreign law requires an express written agreement.

(3) If circumstances or the legal situation change subsequent to the releaseof the final professional statement, the German Public Auditor is not obli-gated to refer the engaging party to changes or any consequences result-ing therefrom.

3. The obligations of the engaging party to cooperate

(1) The engaging party shall ensure that all documents and further infor-mation necessary for the performance of the engagement are provided tothe German Public Auditor on a timely basis, and that he is informed of allevents and circumstances that may be of significance to the performanceof the engagement. This also applies to those documents and furtherinformation, events and circumstances that first become known during theGerman Public Auditor’s work. The engaging party will also designatesuitable persons to provide information.

(2) Upon the request of the German Public Auditor, the engaging partyshall confirm the completeness of the documents and further informationprovided as well as the explanations and statements, in a written statementdrafted by the German Public Auditor.

4. Ensuring independence

(1) The engaging party shall refrain from anything that endangers theindependence of the German Public Auditor’s staff. This applies throughoutthe term of the engagement, and in particular to offers of employment or toassume an executive or non-executive role, and to offers to accept en-gagements on their own behalf.

(2) Were the performance of the engagement to impair the independenceof the German Public Auditor, of related firms, firms within his network, orsuch firms associated with him, to which the independence requirementsapply in the same way as to the German Public Auditor in other engage-ment relationships, the German Public Auditor is entitled to terminate theengagement for good cause.

5. Reporting and oral information

To the extent that the German Public Auditor is required to present resultsin writing as part of the work in executing the engagement, only that writtenwork is authoritative. Drafts are non-binding. Except as otherwise agreed,oral statements and explanations by the German Public Auditor are bindingonly when they are confirmed in writing. Statements and information of theGerman Public Auditor outside of the engagement are always non-binding.

6. Distribution of a German Public Auditor‘s professional statement

(1) The distribution to a third party of professional statements of the Ger-man Public Auditor (results of work or extracts of the results of work wheth-er in draft or in a final version) or information about the German PublicAuditor acting for the engaging party requires the German Public Auditor’swritten consent, unless the engaging party is obligated to distribute orinform due to law or a regulatory requirement.

(2) The use by the engaging party for promotional purposes of the GermanPublic Auditor’s professional statements and of information about theGerman Public Auditor acting for the engaging party is prohibited.

7. Deficiency rectification

(1) In case there are any deficiencies, the engaging party is entitled tospecific subsequent performance by the German Public Auditor. Theengaging party may reduce the fees or cancel the contract for failure ofsuch subsequent performance, for subsequent non-performance or unjusti-fied refusal to perform subsequently, or for unconscionability or impossibil-ity of subsequent performance. If the engagement was not commissionedby a consumer, the engaging party may only cancel the contract due to adeficiency if the service rendered is not relevant to him due to failure ofsubsequent performance, to subsequent non-performance, to unconscion-ability or impossibility of subsequent performance. No. 9 applies to theextent that further claims for damages exist.

(2) The engaging party must assert a claim for the rectification of deficien-cies in writing (Textform) [Translators Note: The German term “Textform”means in written form, but without requiring a signature] without delay.Claims pursuant to paragraph 1 not arising from an intentional act expireafter one year subsequent to the commencement of the time limit under thestatute of limitations.

(3) Apparent deficiencies, such as clerical errors, arithmetical errors anddeficiencies associated with technicalities contained in a German PublicAuditor’s professional statement (long-form reports, expert opinions etc.)may be corrected – also versus third parties – by the German PublicAuditor at any time. Misstatements which may call into question the resultscontained in a German Public Auditor’s professional statement entitle theGerman Public Auditor to withdraw such statement – also versus thirdparties. In such cases the German Public Auditor should first hear theengaging party, if practicable.

8. Confidentiality towards third parties, and data protection

(1) Pursuant to the law (§ [Article] 323 Abs 1 [paragraph 1] HGB [GermanCommercial Code: Handelsgesetzbuch], § 43 WPO [German Law regulat-ing the Profession of Wirtschaftsprüfer: Wirtschaftsprüferordnung], § 203StGB [German Criminal Code: Strafgesetzbuch]) the German PublicAuditor is obligated to maintain confidentiality regarding facts and circum-stances confided to him or of which he becomes aware in the course of hisprofessional work, unless the engaging party releases him from this confi-dentiality obligation.

(2) When processing personal data, the German Public Auditor will observenational and European legal provisions on data protection.

9. Liability

(1) For legally required services by German Public Auditors, in particularaudits, the respective legal limitations of liability, in particular the limitationof liability pursuant to § 323 Abs. 2 HGB, apply.

(2) Insofar neither a statutory limitation of liability is applicable, nor anindividual contractual limitation of liability exists, the liability of the GermanPublic Auditor for claims for damages of any other kind, except for dam-ages resulting from injury to life, body or health as well as for damages thatconstitute a duty of replacement by a producer pursuant to § 1 ProdHaftG[German Product Liability Act: Produkthaftungsgesetz], for an individualcase of damages caused by negligence is limited to € 4 million pursuant to§ 54 a Abs. 1 Nr. 2 WPO.

(3) The German Public Auditor is entitled to invoke demurs and defensesbased on the contractual relationship with the engaging party also towardsthird parties.

Lizensiert für/Licensed to: Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft |4385435

Exhibit 2

(4) When multiple claimants assert a claim for damages arising from anexisting contractual relationship with the German Public Auditor due to theGerman Public Auditor’s negligent breach of duty, the maximum amountstipulated in paragraph 2 applies to the respective claims of all claimantscollectively.

(5) An individual case of damages within the meaning of paragraph 2 alsoexists in relation to a uniform damage arising from a number of breaches ofduty. The individual case of damages encompasses all consequences froma breach of duty regardless of whether the damages occurred in one yearor in a number of successive years. In this case, multiple acts or omissionsbased on the same source of error or on a source of error of an equivalentnature are deemed to be a single breach of duty if the matters in questionare legally or economically connected to one another. In this event theclaim against the German Public Auditor is limited to € 5 million. Thelimitation to the fivefold of the minimum amount insured does not apply tocompulsory audits required by law.

(6) A claim for damages expires if a suit is not filed within six monthssubsequent to the written refusal of acceptance of the indemnity and theengaging party has been informed of this consequence. This does notapply to claims for damages resulting from scienter, a culpable injury to life,body or health as well as for damages that constitute a liability for replace-ment by a producer pursuant to § 1 ProdHaftG. The right to invoke a pleaof the statute of limitations remains unaffected.

10. Supplementary provisions for audit engagements

(1) If the engaging party subsequently amends the financial statements ormanagement report audited by a German Public Auditor and accompaniedby an auditor's report, he may no longer use this auditor’s report.

If the German Public Auditor has not issued an auditor's report, a referenceto the audit conducted by the German Public Auditor in the managementreport or any other public reference is permitted only with the GermanPublic Auditor’s written consent and with a wording authorized by him.

(2) lf the German Public Auditor revokes the auditor's report, it may nolonger be used. lf the engaging party has already made use of the auditor'sreport, then upon the request of the German Public Auditor he must givenotification of the revocation.

(3) The engaging party has a right to five official copies of the report.Additional official copies will be charged separately.

11. Supplementary provisions for assistance in tax matters

(1) When advising on an individual tax issue as well as when providingongoing tax advice, the German Public Auditor is entitled to use as acorrect and complete basis the facts provided by the engaging party –especially numerical disclosures; this also applies to bookkeeping en-gagements. Nevertheless, he is obligated to indicate to the engaging partyany errors he has identified.

(2) The tax advisory engagement does not encompass procedures requiredto observe deadlines, unless the German Public Auditor has explicitlyaccepted a corresponding engagement. In this case the engaging partymust provide the German Public Auditor with all documents required toobserve deadlines – in particular tax assessments – on such a timely basisthat the German Public Auditor has an appropriate lead time.

(3) Except as agreed otherwise in writing, ongoing tax advice encompassesthe following work during the contract period:

a) preparation of annual tax returns for income tax, corporate tax andbusiness tax, as well as wealth tax returns, namely on the basis of theannual financial statements, and on other schedules and evidencedocuments required for the taxation, to be provided by the engagingparty

b) examination of tax assessments in relation to the taxes referred to in(a)

c) negotiations with tax authorities in connection with the returns andassessments mentioned in (a) and (b)

d) support in tax audits and evaluation of the results of tax audits withrespect to the taxes referred to in (a)

e) participation in petition or protest and appeal procedures with respectto the taxes mentioned in (a).

In the aforementioned tasks the German Public Auditor takes into accountmaterial published legal decisions and administrative interpretations.

(4) If the German Public auditor receives a fixed fee for ongoing tax advice,the work mentioned under paragraph 3 (d) and (e) is to be remuneratedseparately, except as agreed otherwise in writing.

(5) Insofar the German Public Auditor is also a German Tax Advisor andthe German Tax Advice Remuneration Regulation (Steuerberatungsvergü-tungsverordnung) is to be applied to calculate the remuneration, a greateror lesser remuneration than the legal default remuneration can be agreedin writing (Textform).

(6) Work relating to special individual issues for income tax, corporate tax,business tax, valuation assessments for property units, wealth tax, as wellas all issues in relation to sales tax, payroll tax, other taxes and duesrequires a separate engagement. This also applies to:

a) work on non-recurring tax matters, e.g. in the field of estate tax, capitaltransactions tax, and real estate sales tax;

b) support and representation in proceedings before tax and administra-tive courts and in criminal tax matters;

c) advisory work and work related to expert opinions in connection withchanges in legal form and other re-organizations, capital increasesand reductions, insolvency related business reorganizations, admis-sion and retirement of owners, sale of a business, liquidations and thelike, and

d) support in complying with disclosure and documentation obligations.

(7) To the extent that the preparation of the annual sales tax return isundertaken as additional work, this includes neither the review of anyspecial accounting prerequisites nor the issue as to whether all potentialsales tax allowances have been identified. No guarantee is given for thecomplete compilation of documents to claim the input tax credit.

12. Electronic communication

Communication between the German Public Auditor and the engagingparty may be via e-mail. In the event that the engaging party does not wishto communicate via e-mail or sets special security requirements, such asthe encryption of e-mails, the engaging party will inform the German PublicAuditor in writing (Textform) accordingly.

13. Remuneration

(1) In addition to his claims for fees, the German Public Auditor is entitled toclaim reimbursement of his expenses; sales tax will be billed additionally.He may claim appropriate advances on remuneration and reimbursementof expenses and may make the delivery of his services dependent upon thecomplete satisfaction of his claims. Multiple engaging parties are jointly andseverally liable.

(2) If the engaging party is not a consumer, then a set-off against theGerman Public Auditor’s claims for remuneration and reimbursement ofexpenses is admissible only for undisputed claims or claims determined tobe legally binding.

14. Dispute Settlement

The German Public Auditor is not prepared to participate in dispute settle-ment procedures before a consumer arbitration board (Verbraucherschlich-tungsstelle) within the meaning of § 2 of the German Act on ConsumerDispute Settlements (Verbraucherstreitbeilegungsgesetz).

15. Applicable law

The contract, the performance of the services and all claims resultingtherefrom are exclusively governed by German law.

Lizensiert für/Licensed to: Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft |4385435