Financial Results of Prestigebidco Gmbh for the Year Ended December 31, 2018

Financial results of PrestigeBidCo GmbH for the year ended December 31, 2018

TABLE OF CONTENTS

Section Page

FORWARD-LOOKING STATEMENTS ...... I PRESENTATION OF FINANCIAL INFORMATION ...... I DEFINITIONS ...... II SUMMARY OVERVIEW OF RESULTS ...... 1 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 5 RISK FACTORS ...... 11 BUSINESS ...... 28 MANAGEMENT ...... 41 SHAREHOLDERS ...... 42 DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS ...... 43 ATTACHMENT: AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PRESTIGEBIDCO GMBH ...... 44 FORWARD-LOOKING STATEMENTS

This Report includes forward-looking statements. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts contained in this Report, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we participate or are seeking to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “plan,” “potential,” “predict,” “projected,” “should,” or “will” or the negative of such terms or other comparable terminology. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that our actual results of operations, including our financial condition and liquidity and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Report. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

PRESENTATION OF FINANCIAL INFORMATION

Financial Information The consolidated financial statements included in this Report have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial information in this Report is based on that of PrestigeBidCo GmbH. In particular, this Report includes the audited consolidated financial statements of PrestigeBidCo GmbH, Aschheim and its subsidiaries (the Group), which comprise the consolidated statements of comprehensive income for the fiscal year from January 1 to December 31, 2018, the consolidated balance sheet as at December 31, 2018, the consolidated statements of cash flows and the consolidated statements of changes in equity for the fiscal year from January 1 to December 31, 2018 and notes to the consolidated financial statements, including a summary of significant accounting policies; and in addition the group management report of PrestigeBiCo GmbH for the fiscal year from January 1 to December 31, 2018. The pro forma PrestigeBidCo figures presented for fiscal year 2017 additionally include S&B Group figures from January 1, 2017 to January 18, 2017. The Audited Consolidated Financial Statements have been audited by Ernst & Young Wirtschaftsprüfungsgesellschaft GmbH (“EY”), in accordance with Section 317 German Commercial Code (Handelsgesetzbuch) (“HGB”), and German generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors (Institut der Wirtschaftsprüfer).

Non-GAAP Financial Measures This Report contains non-GAAP measures and ratios, including EBITDA and Adjusted EBITDA that are not required by, or presented in accordance with, IFRS. Our non-GAAP measures are defined by us as set out below. We define “EBITDA” as net income/loss for the period before income taxes, interest and similar expenses, other interest and similar income and amortization, depreciation and write-downs. We define “Adjusted EBITDA” as EBITDA (i) excluding non-recurring or extraordinary items, (ii) excluding certain non-cash, non-operational items and (iii) adjusting for the pro forma effects of certain cost-savings initiatives undertaken during the period. Non-recurring or extraordinary items include a number of one-off, exceptional items that have been excluded from EBITDA. We present non-GAAP measures because we believe that they are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-GAAP measures may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or be used as a substitute for an analysis of our earnings after taxes as reported under IFRS. Non-GAAP measures and ratios are not measurements of our performance or liquidity under IFRS and should not be considered as alternatives to net income/loss for the period or any other performance measures

i derived in accordance with IFRS or any other generally accepted accounting principles or as alternatives to cash flow from operating, investing or financing activities. Rounding Certain numerical figures set out in this Report, including financial information presented in millions or thousands and percentages, have been subject to rounding adjustments and, as a result, the totals of the data in this Report may vary from the actual arithmetic totals of such information. Percentages and amounts reflecting changes over time periods relating to financial and other information are calculated using the rounded numerical data included in this Report and not the numerical data in each of the Consolidated Financial Statements or PrestigeBidCo’s internal accounting system. With respect to financial information set out in this Report, a dash (“—”) signifies that the relevant figure is not available, while a zero (“0.0”) signifies that the relevant figure is available but is or has been rounded to zero.

DEFINITIONS

Unless otherwise specified or the context requires otherwise in this Report:  “BS GmbH” means Best Secret GmbH, an operating subsidiary of S&B Holding GmbH;  “Group,” “we,” “us” or “our” refer to the Issuer (PrestigeBidco) including S&B Group with respect to the information as of and for the year ended December 31, 2018;  “S&B Group” includes the following entities: S&B Holding, S&B GmbH, BS GmbH, S&B Logistik, S&B Outlet, S&B Wien and SOS;  “Holdco” means PrestigeBidCo Holding GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) incorporated and existing under the laws of Germany with its registered office at Margaretha-Ley-Ring 27, 85609 Aschheim, Germany and registered with the commercial register at the local court (Amtsgericht) of Munich under number HRB 227203;  “Issuer” means PrestigeBidCo GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) incorporated and existing under the laws of Germany with its registered office at Margaretha- Ley-Ring 27, 85609 Aschheim, Germany and registered with the commercial register at the local court (Amtsgericht) of Munich under number HRB 227078;  “Notes” means €260,000,000 6.25% senior secured notes due 2023 and issued pursuant to the offering memorandum dated December 8, 2016;  ‘’PPA” means purchase price allocation;  “Revolving Credit Facility” means the €35.0 million Revolving Credit Facility made available under the Revolving Credit Facility Agreement dated on or prior December 8, 2016. On December 20, 2018, PrestigeBidCo GmbH established an additional Revolving Credit Facility of €15.0 million by way of increase of the existing Facility to €50.0 million;  “Revolving Credit Facility Agreement” means the revolving credit facility agreement dated on or prior December 8, 2016 among, inter alios, the Issuer, as borrower, and Barclays Bank PLC, Goldman Sachs Bank USA and UniCredit Bank AG, London Branch, as lenders, as the same may be further amended from time to time. On December 20, 2018, the Issuer established an additional revolving credit facility of €15.0 million by way of increase of the existing facility to €50.0 million. On January 02, 2019 the lender confirmed the granting of the additional facility. The additional facility lender is UniCredit Bank AG, London Branch;  “S&B GmbH” means Schustermann & Borenstein GmbH, an operating subsidiary of the Issuer;  “S&B Holding” means Schustermann & Borenstein Holding GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) incorporated and existing under the laws of Germany with its registered office at Margaretha-Ley-Ring 27, 85609 Aschheim, Germany and registered with the commercial register at the local court (Amtsgericht) of Munich under number HRB 199965;  “S&B Logistik” means Schustermann & Borenstein Logistik GmbH, an operating subsidiary of the Issuer;  “S&B Outlet” means S&B Outlet GmbH, an operating subsidiary of the Issuer;  “S&B Wien” means Schustermann & Borenstein Wien GmbH, an operating subsidiary of the Issuer; and  “SOS” means Swiss Online Shopping AG, an operating subsidiary of the Issuer.

SUMMARY OVERVIEW OF RESULTS

Results summary Schustermann & Borenstein Group reported EUR 488.3 million of revenues in 2018 (FY 2017: EUR 416.0 million), thereby recording a robust year-on-year sales growth of 17.4%, notwithstanding a very challenging market environment. The growth was driven by an outstanding online business, complemented by a stable offline retail performance. The online e-commerce segment BestSecret reached 25.1% sales growth and contributed EUR 361.9 million or 74.1% to Group revenue (FY 2017: EUR 289.3 million). The positive development was due to a continued strong performance in Germany and an over proportional international growth, both boosted by a further expansion in customer base. The offline segment, which is the stationary business in the S&B retail sites, generated EUR 126.4 million or 25.9% of Group revenue in 2018 which was roughly in line with the previous year’s figure of EUR 126.7 million against the backdrop of a negative market. On the back of the underlying revenue growth of the Group, Earnings before interest, taxes, depreciation and amortization before exceptional items (Adjusted EBITDA) increased by 11.7% to EUR 86.6 million in 2018 (FY 2017: EUR 77.5 million). The Adjusted EBITDA margin of 17.7% for 2018 (FY 2017: 18.6%) was mainly impacted by price reductions and margin investments due to an especially competitive market environment in the fourth quarter 2018. The Group’s net financial debt amounted to EUR 272.5 million as of December 31, 2018 (FY 2017: EUR 291.7 million). The leverage ratio, calculated as net financial debt to LTM Adjusted EBITDA, improved from 3.8x on December 31, 2017 to 3.1x at the end of 2018.

Key Financial and Operating Data For the year ended December 31, 2018 2017 (in € million) (in € million) Revenue ...... 488.3 416.0 thereof from online operations ...... 361.9 289.3 thereof from offline operations ...... 126.4 126.7 Gross profit ...... 228.8 199.7 Gross profit margin ...... 46.9% 48.0% Adjusted EBITDA(1) ...... 86.6 77.5 Adjusted EBITDA margin ...... 17.7% 18.6%

(1) EBITDA is calculated as net income/loss for the period before income taxes, other interest and similar income, interest and similar expenses and amortization, depreciation and write‐downs. Adjusted EBITDA is defined as EBITDA (i) excluding non‐recurring or extraordinary items, (ii) excluding certain non‐cash, non‐operational items and (iii) adjusting for the pro forma effects of certain cost‐savings initiatives undertaken during the period. Non‐recurring or extraordinary items include a number of one‐off, exceptional items that have been excluded from EBITDA. We use Adjusted EBITDA as a measure of our operating cash flow generation and the liquidity of our business. Neither EBITDA nor Adjusted EBITDA is a measure of financial performance calculated in accordance with IFRS and should each be viewed as a supplement to, not a substitute for, our results of operations presented in accordance with IFRS. EBITDA and Adjusted EBITDA should not be considered as alternatives to other indicators of our operating performance, cash flows or any other measure of performance derived in accordance with IFRS. EBITDA and Adjusted EBITDA as presented in this Report may differ from and may not be comparable to similarly titled measures used by other companies. We present EBITDA and Adjusted EBITDA for informational purposes only.

Subsequent events On December 20, 2018, PrestigeBidCo GmbH established an additional revolving credit facility of €15.0 million by way of increase of the existing facility to €50.0 million. The additional facility lender is UniCredit Bank AG, London branch. On January 02, 2019 the lender confirmed the granting of the additional facility. Utilizations under the Additional Facility may only be used for financing or refinancing the working capital requirements and/or general corporate purposes of PrestigeBidCo GmbH and its Restricted Subsidiaries. The term of the Additional Facility is valid until further notice. The additional facility ranks pari passu with the existing facility.

On January 30, 2019, the S&B Group announced Chief Financial Officer Georg Griesemann’s decision to leave the company for personal reasons. From February 2019, Thomas Helmreich, who served as CFO of TAKKO Fashion from 2015 to 2018, has acted as interim CFO of S&B Group.

Thomas Perlitz joined the S&B Group on March 1, 2019 as Chief Human Resources Officer. He is responsible for human resources, recruiting and training. Prior to joining the S&B Group, he was Global Senior Vice President Human Resources and Executive Advisor Global Human Resources at Gerresheimer AG.

On April 10, 2019 a lease agreement was concluded with SBF Poing GmbH & Co. KG for a warehouse in Poing (Poing2), which is still to be built by the landlord. The handover of the warehouse is expected on mid 2020 and the rental period runs until 2030.

A general contractor agreement was signed on April 10, 2019 with Fritz Schäfer GmbH for the planning, delivery, installation and commissioning of te logistics center in Poing. The logistical equipment includes a bag sorter, hanging and conveyor technology as well as necessary controls. Completion is scheduled for October 2020.

No further events occurred between January 1, 2019 and April 18, 2019, that would require adjustments to the amounts recognized in the consolidated financial statements or would need to be disclosed under this heading.

Consolidated Income Statement Information

01.01.2018 - 01.01.2017 – Change 31.12.2018 31.12.2017(1) (in € million) (in € million) %

Revenue ...... 488.3 416.0 17.4 Cost of sales ...... (259.5) (216.3) 20.0 Gross profit ...... 228.8 199.7 14.6 Selling and distribution costs ...... (159.3) (137.6) 15.8 Administrative expenses ...... (43.2) (47.2) (8.5) Other operating income ...... 1.5 1.6 (6.3) Other operating expenses ...... (2.1) (1.3) 61.5 Earnings before interest and taxes (EBIT) .. 25.7 15.2 69.1 Interest and similar income ...... 0.0 0.0 Interest and similar expenses ...... (23.8) (26.7) (10.9) Earnings before taxes (EBT) ...... 1.9 (11.4) > 100 Income taxes ...... 4.9 1.9 > 100 Net income/loss for the period ...... 6.8 (9.7) > 100

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

Consolidated Balance Sheet Information

31.12.2018 31.12.2017 Change (in € million) (in € million) %

Assets Non-current assets Property, plant and equipment ...... 125.6 121.1 3.6 Goodwill ...... 254.4 254.4 0.0 Other intangible assets ...... 417.0 449.3 (7.2) Non-current financial assets ...... 0.5 0.6 (16.7) Total non-current assets ...... 797.5 825.4 (3.4)

Current assets Inventories...... 122.3 124.3 (1.6) Prepayments for inventories ...... 4.7 5.5 (14.5) Trade and other receivables ...... 1.6 1.4 14.3 Other current finacial assets ...... 2.0 1.7 64.7 Income tax receivables ...... 2.8 2.7 (25.9) Other current non-finacial assets ...... 13.6 10.2 33.3 Cash and cash equivalents ...... 67.0 44.9 49.2 Total current assets ...... 214 190.8 12.2 Total assets ...... 1,011.5 1,016.1 (0.5)

Equity Issued capital ...... 0.03 0.03 0.0 Other capital reserves ...... 474.2 474.2 0.0 Foreign currency translation reserve ...... 0.1 (0.2) > 100.0 Retained earnings ...... (8.8) (15.6) (43.6) Total equity ...... 465.5 458.4 1.5

Non-current liabilities Non-current interest-bearing loans and borrowings ...... 253.8 252.9 0.3 Other non-current financial liabilities ...... 80.6 79.5 1.4 Deferred tax liabilities ...... 114.6 130.0 (11.8) Provisions...... 0.5 0.5 0.0 Total non-current liabilities ...... 449.5 462.8 (2.9)

Current liabilities Trade and other payables ...... 14.8 16.7 (11.4) Other current financial liabilities ...... 4.3 3.3 30.3 Income tax payable ...... 8.7 8.1 7.4 Current interest-bearing loans and borrowings ...... 0.8 0.8 0.0 Current non-financial liabilities ...... 62.3 58.6 6.3 Provisions...... 5.6 7.5 (25.3) Total current liabilities ...... 96.5 95.0 1.6 Total equity and liabilities ...... 1,011.5 1,016.1 (0.5)

Cash Flow Statement Information

01.01.2018 – 01.01.2017 – Change 31.12.2018 31.12.2017(1) (in € million) (in € million) %

EBITDA...... 79.5 66.0 20.5 Adjustments to reconcile EBITDA to net cash flow ...... 1.1 (4.2) > 100.0 Change in operating working capital ...... (2.2) (7.4) (70.3) Income tax paid ...... (10.0) (7.8) 28.2 Cash flow from operating activities ...... 68.4 46.6 46.8 CAPEX ...... (20.3) (11.1) 82.9 Acquisition of a subsidiary ...... - (454.3) (100.0) Cash flow from investing activities ...... (20.3) (465.4) (95.6) Payment of transaction costs on issue of SSN ...... - (7.9) (100.0) Payment of finance lease liabilities ...... (9.4) (8.9) 5.6 Cash received from capital contributions ...... - 434.3 (100.0) Repayment of borrowings ...... - (245.7) (100.0) Interests paid ...... (16.8) (17.0) (1.2) Others ...... 0.1 0.1 0.0 Cash flow from financing activities ...... (26.1) 154.9 > (100.0) Net foreign exchange differences 0.1 (0.2) > 100.0

Change in cash and cash equivalents ...... 22.0 (263.9) > 100.0 Cash and cash equivalents at the end of the period ...... 67.0 44.9 49.2

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Macroeconomic and Sector-Specific Environment The euro zone economy experienced an upturn in 2018. GDP rose by 1.8%, compared with 2.3% in the previous year (Eurostat). All countries in the currency area achieved positive growth rates, although regional differences remained very pronounced. Robust consumer spending and brisk construction activity were the main drivers for the overall positive development. Corporate investments provided additional momentum from the middle of the year onwards. The overall macro situation was also supportive for the retail fashion industry which again was driven by the continuing consumer inclination towards online shopping. The European fashion retail sector increased by 2.5% in 2018, while online fashion retail achieved a strong growth of 12.0% (Euromonitor, Europe excl. Russia). The main sales market for the Group is Germany, Austria and Switzerland (DACH). With a GDP growth of 1.6% (previous year: 2.2%), the GDP growth rate in Germany declined in 2018 compared to previous years. The growth rate was driven by consumption and investments into both construction and machinery and equipment. The German fashion retail sector stagnated in 2018 with an estimated growth of 0.0% due to the late onset and long duration of winter in Q1, followed by a long and hot summer in the subsequent two quarters. While stationary sales declined by 2.0% due to deteriorating customer store visit frequency, online fashion retail sales recorded an increase of 5.0% in 2018 (Euromonitor, Europe excl. Russia; Textilwirtschaft).

Factors affecting comparability (acquisition) Due to the acquisition of S&B Group by PrestigeBidCo GmbH as of January 19, 2017 and in order to facilitate better comparability, the pro-forma figures presented for the fiscal year 2017 additionally include S&B Group figures from January 1, 2017 to January 18, 2017. The previous year’s figures are only comparable to a limited extent.

Segments IFRS 8 requires that operating segments be defined on the basis of the internal reports of corporate divisions that are regularly reviewed by the chief operating decision maker (CODM) of the Group for the purpose of making decisions about the allocation of resources and assessing the financial performance of the given segments “Offline” and “Online”. Thus, the internal organizational and management structure and the internal reports submitted to the Management Board form the basis for determining the segment reporting format of the Group. Primary emphasis is placed on the indicators gross profit and gross profit margin. Reporting on the business segments is in line with the internal reporting. There are no intersegment transactions in the internal reporting structure. No information on segment assets or liabilities is available or relevant for decision-making.

Sales channel Total Offline Online

01.01.2018 – 01.01.2017 – 01.01.2018 – 01.01.2017 – 01.01.2018 – 01.01.2017 – 31.12.2018 31.12.2017(1) 31.12.2018 31.12.2017(1) 31.12.2018 31.12.2017(1) (in € million) (in € million) (in € million) (in € million) (in € million) (in € million)

Revenue 126.4 126.7 361.9 289.3 488.3 416.0 Cost of sales (73.0) (70.9) (186.5) (145.5) (259.5) (216.3) Gross profit 53.4 55.8 175.4 143.8 228.8 199.7 Gross margin in % 42.2% 44.0% 48.5% 49.7% 46.9% 48.0%

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

Results of Operations

01.01.2018 - 01.01.2017 – Change 31.12.2018 31.12.2017(1) (in € million) (in € million) %

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

Revenue The Group revenue increased by €72.3 million, or 17.4%, from €416.0 million for the year ended December 31, 2017 to €488.3 million for the year ended December 31, 2018. The increase was primarily driven by the growing online member base both in Germany and internationally. The onlinerevenue increased by €72.6 million, or 25.1%, from €289.3 million for the year ended December 31, 2017 to €361.9 million for the year ended December 31, 2018. Our offline revenue decreased by €0.3 million, or 0.2%, from €126.7 million for the year ended December 31, 2017 to €126.4 million for the year ended December 31, 2018. For the year ended December 31, 2018, 83.9% of the Group’s revenue was generated in Germany, a decrease from 85.2% in the prior year period resulting from further internationalization of the Group.

Cost of sales Cost of sales increased by €43.2 million, or 20.0%, from €216.3 million for the year ended December 31, 2017 to €259.5 million for the year ended December 31, 2018. The increase was primarily due to the overall growth in our business. Cost of sales as a percentage of revenue slighty increased from 52.0% in 2017 to 53.1% in 2018. Expenses for depreciation and costs for the storage of goods are reported in cost of sales.

Selling and distribution costs Selling and distribution costs increased by €21.7 million, or 15.8%, from €137.6 million for the year ended December 31, 2017 to €159.3 million for the year ended December 31, 2018. The increase is mainly driven by the higher business volume, as well as to a minor part higher amortization expenses resulting from the new purchase price allocation as per January 19, 2017. Selling and distribution expenses consist of marketing expenses of €8.8 million, sales expenses of €29.7 million, fulfillment expenses of €70.9 million, depreciation and amortization expenses of €49.8 million.

Administrative expenses Administrative expenses decreased by €4.0 million, or 8.5%, from €47.2 million for the year ended December 31, 2017 to €43.2 million for the year ended December 31, 2018. The decrease of administrative expenses is primarily due to trancaction costs in connection with the acquisition of S&B, which took place as of January 19,

2017. Administrative expenses consist of technology expenses of €7.4 million, general and administrative expenses of €32.8 million and depreciation of €2.9 million.

Other operating income Other operating income decreased by €0.1 million, or 6.3%, from €1.6 million for the year ended December 31, 2017 to €1.5 million for the year ended December 31, 2018.

Other operating expenses Other operating expenses increased by €0.8 million, or 61.5%, from €1.3 million for the year ended December 31, 2017 to €2.1 million for the year ended December 31, 2018. Other operating expenses mainly consist of credit losses, foreign exchange losses and expenses unrelated to the period under review.

Interest and similar expenses Interest and similar expenses decreased by €2.9 million, or 10.9%, from €26.7 million for the year ended December 31, 2017 to €23.8 million for the year ended December 31, 2018. The decrease was primarily due to recorded interest expenses, which became due as of acquisition date in 2017 and related to repayment of existing bank loans.

Income taxes Income taxes increased by €3.0 million from €1.9 million tax income for the year ended December 31, 2017 to €4.9 million tax income for the year ended December 31, 2018. The increase in tax income was primarily due to the reversal of deferred taxes.

Net income for the period Net income for the period amounted to €6.8 million for the year ended December 31, 2018 compared to €9.7 million loss for the year ended December 31, 2017, representing an improvement of €16.1 million. Net loss for 2017 primarily resulted from the recognition of acquisition costs.

EBITDA / Adjusted EBITDA

01.01.2018 – 01.01.2017 – 31.12.2018 31.12.2017(1) (in € million) (in € million)

Net income (loss) for the period ...... 6.8 (9.7) Income taxes ...... (4.9) (1.9) Other interest and similar income ...... (0.0) (0.0) Interest and similar expenses ...... 23.8 26.7 Amortization, depreciation and write-downs ...... 53.8 50.7 EBITDA ...... 79.5 66.0 Restructuring and reorganization (a) ...... 2.5 0.6 New store opening/store extension 2.4 0.2 and logistics/warehouse improvements (b) ...... Introduction/improvement of tools 1.8 1.6 and processess(c) ...... Transaction costs(d) ...... 0.4 9.1 Adjusted EBITDA ...... 86.6 77.5

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

______(a) Represents costs for the restructuring of SOS AG, severance payments, headhunter services and the reorganization of customer services. (b) Represents expenses incurred in connection with a new store opening (marketing costs, agency fees, recruiting, legal and consultancy expenses and additional personnel expenses), the extension of the Vienna store and additional personnel expenses in connection with additional storage requirements. (c) Represents costs for the introduction of a CRM tool, the implementation of a merchandise management system as well as financial reporting advancements. (d) Represents transaction costs for the acquisition of the Group by Permira Funds and bond issuance and M&A related pre-due-diligence costs.

Depreciation and amortization costs increased by €3.1 million from €50.7 million for the year ended December 31, 2017 to €53.8 million for the year ended December 31, 2018. The increase was primarily due to amortization of trademarks and customer relationships resulting from the purchase price allocation for the acquisition of the S&B Group on January 19, 2017. The amortization of the PPA assets trademark and customer relationship amounted to €37.5 million in total. EBITDA increased by €13.5 million, from €66.0 million for the year ended December 31, 2017 to €79.5 million for the year ended December 31, 2018. The increase was driven by a positive development of revenue resulting from an increase in the customer base and recorded transaction costs in 2017. The one-off costs decreased by €4.4 million, from €11.5 million for the year ended December 31, 2017 to €7.1 million for the year ended December 31, 2018. Previous year an amount of 8.8m€ was booked as one-off representing costs for the acquisition of the Group by Permira Funds. Major one-offs in fiscal year 2018 resulted from restructuring & reorganization costs, new store opening and store extension, extension of the logistics and warehouse. Adjusted EBITDA for the year increased by €9.1 million, from €77.5 million for the year ended December 31, 2017 to €86.6 million for the year ended December 31, 2018.

Cash Flows The following table sets forth the principal components of our cash flows for the year ended December 31, 2018 and 2017.

01.01.2018 – 01.01.2017 – Change 31.12.2018 31.12.2017(1) (in € million) (in € million) %

EBITDA...... 79.5 66.0 20.5 Adjustments to reconcile EBITDA to net cash flow ...... 1.1 (4.2) > 100.0 Change in operating working capital ...... (2.2) (7.4) (70.3) Income tax paid ...... (10.0) (7.8) 28.2 Cash flow from operating activities ...... 68.4 46.6 46.8 CAPEX ...... (20.3) (11.1) 82.9 Acquisition of a subsidiary ...... - (454.3) (100.0) Cash flow from investing activities ...... (20.3) (465.4) (95.6) Payment of transaction costs on issue of SSN ...... - (7.9) (100.0) Payment of finance lease liabilities ...... (9.4) (8.9) 5.6 Cash received from capital contributions ...... - 434.3 (100.0) Repayment of borrowings ...... - (245.7) (100.0) Interests paid ...... (16.8) (17.0) (1.2) Others ...... 0.1 0.1 Cash flow from financing activities ...... (26.1) 154.9 > (100.0) Net foreign exchange differences 0.1 (0.2) > 100.0

Change in cash and cash equivalents ...... 22.0 (263.9) 100.0 Cash and cash equivalents at the end of the period ...... 67.0 44.9 49.2

(1) Pro forma figures include S&B Group until January 18, 2017 and PrestigeBidCo Group from January 1, 2017 until December 31, 2017 due to the acquisition by Permira Funds.

Cash flow from operating activities Cash flow from operating activities increased by €21.8 million from €46.6 for the year ended December 31, 2017 to €68.4 million for the year ended December 31, 2018. Cash flow from operating activities was primarily affected by the increase of EBITDA in accordance with the business development and the late onset of the fall/winter season.

Cash flow from investing activities Cash flow used for investing activities decreased by €445.1 million from a net outflow of €(465.4) million for the year ended December 31, 2017 to a net outflow of €(20.3) million for the year ended December 31, 2018. Cash flow used in investing activities for the year ended December 31, 2017 was primarily affected by the acquisition of S&B Group by PrestigeBidCo GmbH net of cash acquired. Investments in property, plant and equipment and IT for the year ended December 31, 2018 amounted to €20.3 million compared to €11.1 million for the year ended December 31, 2017. The increase primarily resulted from the extension of the warehouse and the store in Vienna & IT. IT investments mainly relate to key components of the software used by the Group and the further advancement of the BestSecret platform’s desirability and reliability.

Cash flow from financing activities Cash flow from financing activities decreased by €181.0 million from €154.9 million for the year ended December 31, 2017 to €(26.1) million for the year ended December 31, 2018. The decrease in cash flow in financing activities was primarily due to equity contributions by Permira Funds in order to finance the acquisition of S&B Group and to repay bank liabilities and former shareholder loans of S&B Group as of closing date January 19, 2017.

Operating Net Working Capital

We define our operating net working capital as the sum of the line items (i) inventory, (ii) prepayments for inventory, (iii) trade accounts receivable, (iv) trade accounts payable, (v) accruals for outstanding invoices (inventories), (vi) refund liabilities and assets for the right to recover possession for expected returns. Our operating net working capital shows seasonal patterns with investments in inventory generally reaching a peak in August and September due to purchase of winter merchandise. The development of our operating net working capital is a key factor for our operating cash flow. The following table summarizes our net working capital as at the dates indicated:

31.12.2018 31.12.2017 Change (in € million) (in € million) % Inventories and prepayments for inventories ...... 127.0 129.9 (2.2) Trade receivables...... 1.6 1.4 14.3 Trade payables and similar obligations ...... (21.7) (26.7) (18.7) Others ...... (11.7) (11.3) 3.5 Operating Net Working Capital ...... 95.2 93.3 2.0

Operating net working capital increased slightly by €1.9 million to €95.2 million. The inventory level remained almost at the same level due to sell-off of inventories towards the year end.

Net debt and Other Information As of December 31, 2018 Net debt(1) ...... 272.5 LTM interest expense(2) ...... 23.8 Ratio of net debt to LTM Adjusted EBITDA(3) ...... 3.1x Ratio of LTM Adjusted EBITDA to interest expense ...... 3.6x

(1) Net debt consists of the Notes, accrued interest on the Notes and interest-bearing liabilities which also include recognized lease liabilities less cash and cash equivalents at the balance sheet date. For purposes of this item, cash and cash equivalents are measured as of December 31, 2018.

(2) Interest expense represents the interest expense for the 12 months period ended December 31, 2018. Interest expense has been presented for illustrative purposes only and does not purport to project our interest expense for any future period or our financial condition at any future date.

(3) Under IFRS, the net debt and the corresponding leverage ratio are higher due to the inclusion of the lease liabilities according to IFRS 16. The ratio of net debt to LTM Adjusted EBITDA according to the OM definition (German GAAP) is 2.5x on December 31, 2018.

Employees

2018

Offline sales channel 658 Online sales channel 114 Enabling services (logistics, IT, purchasing and administration) 901

Total 1.673

The annual average number of employees was 1.673.

RISK FACTORS

The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect our business, financial condition and results of operations. If any of the possible events described below were to occur, our business, results of operations and financial condition could be materially and adversely affected. The order in which these risks are presented is not intended to provide an indication of the likelihood of their occurrence or their severity or significance. This Report also contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the risks described below and elsewhere in this Report. Risks related to our business and industry Our business depends on our ability to continuously source a variety and quantity of attractive products from various popular brands at attractive prices that will satisfy our customers’ preferences and demands. The success of our business depends on our ability to continuously source attractive merchandise from a broad selection of high-quality brands at attractive prices and sell the merchandise in a timely manner. If we are unable to maintain our existing relationships or build new relationships with brands on acceptable commercial terms, we may be unable to offer an appropriate selection or quantity of merchandise at discounted prices, which would reduce the appeal of our offering. Only a few of the brand suppliers we work with have a continuing obligation to provide us with merchandise at historical levels or at all. Additionally, our suppliers may not be willing or able to fulfill our product requests due to lack of stock, a change in their supply chain model or aggressive competition from other industry participants, including other off-price retailers bidding against us for the same merchandise. Also, brand suppliers may start managing their product relationships with sellers on a global, rather than local level, which could adversely affect us. Finally, brand suppliers may decide to prevent us from offering particular merchandise for sale through a particular sales channel. If we are unable to secure an appropriate selection and quantity of merchandise on terms and conditions acceptable to us, we may be unable to attract new customers and retain existing customers and consequently increase or maintain sales, which could also diminish the attractiveness of our proposition for suppliers, limiting access to merchandise, any one of which could have a material adverse effect on our business, results of operations and financial condition. We face strong competition in our markets and such competition may intensify further. The markets in which we operate are highly competitive. Our primary competitors are online retailers, including those devoted solely to fashion as well as other types of online retailers, and offline retailers, such as traditional retail stores, brand outlet stores and off-price fashion stores. New competitors who enter our markets, including off-price divisions of international department stores which have indicated an intention to do so, including in Germany, may be successful in attracting customers, including our customers, and thereby capturing market share from us, particularly in Germany, our core market. Some of our competitors may have greater financial, distribution, marketing and other resources than we do. Our competitors may secure more favorable terms from brand suppliers, out-bid us for merchandise we would like to access, acquire more attractive merchandise in greater quantities, adopt more aggressive pricing policies, deliver merchandise more rapidly, or devote more resources to technology, order fulfillment and marketing than we can. The Internet facilitates competitive entry and comparison-shopping and renders e-commerce inherently more competitive than other retail platforms. In addition, new and enhanced technologies, including search services, may favor our competition. Also, alternative business models may emerge that would compete with us or diminish the attractiveness or utility of our business model. If we are unable to compete effectively by attracting our target customers to purchase our merchandise, we could lose market share to our competitors. Furthermore, our plans to expand our business operations into new markets and markets in which we have a relatively small presence may be adversely affected by strong competition. For example, some of our competitors may already have long established brand relationships and operations in these markets, which may put them at a competitive advantage. There can be no assurance that we will be able to compete successfully, and competitive pressures we face may have a material adverse effect on our business, results of operations and financial condition. If competition continues to intensify, we may not have the resources available to respond effectively and in a timely manner, which could adversely affect our business, results of operations and financial condition.

Our business may be impacted by negative economic and political developments in Germany and other countries where our customers are from. Our business may be impacted by reductions in discretionary consumer spending, which is affected by, among other factors, negative economic conditions and monetary policy in the Eurozone in connection with the European debt and economic crisis. For example, economic contraction, economic uncertainty and the perception by our customers of weak or weakening economic conditions could cause a decline in the demand for the merchandise we sell. In addition, changes in discretionary consumer spending may be influenced by factors such as unemployment levels, inflation, interest rates, increases in taxes or perceived or actual declines in disposable consumer income and wealth. We currently operate our store sites in Germany and Austria and distribute via our e-commerce channels in Germany, Austria, Switzerland and selected other European countries. Therefore, we may be more affected by economic weakness or uncertainty in such countries and, to a lesser extent, by neighboring countries than some of our competitors with more diversified international operations. A negative development, contraction or lack of growth in the economies of Germany, Austria, Switzerland and selected other European countries, or any other country, where we may operate in the future, and overall macroeconomic conditions could materially adversely affect our business, results of operations and financial condition. In addition, our offline stores sell a considerable amount of merchandise to international tourists (e.g., from Russia, China and the Middle East) visiting the Munich and Vienna sites to whom we offer day passes. Economic weakness or uncertainty in the home countries of these tourist customers may lead to fewer tourists arriving or a lower willingness to purchase our merchandise among those that do visit our stores.

Geopolitical tensions could negatively affect the demand for our merchandise. Furthermore, if the European Monetary Union ceased to exist or one or more countries were to leave the European Monetary Union, the future economic development and consumer spending in general could be adversely affected, which could in turn have a material adverse impact on the European fashion retail market and on our business, results of operations and financial position.

As Terrorist assaults increase globally we may be affected indirectly due to their negative impact on consumer confidence and consumer shopping behavior which may have a decrease in footfall resulting in lower sales and results of operation. Moreover, the instability of the general security-situation could materially negatively affect our business.

Sales of our products are subject to seasonal fluctuations and unfavorable weather. The industry in which we operate is seasonal by nature, and our revenue, profits, liquidity and inventory levels are therefore subject to seasonal fluctuations. For example, we typically experience an increase in sales in the fourth quarter of the year due to the Christmas shopping season. These seasonal influences have a direct impact on our results of operations and overall profitability. Any factors that harm our operating results during these periods, including unfavorable economic conditions affecting consumer spending levels or inclement weather that deters customers from visiting our stores, could have a disproportionate effect on our results of operations for the entire fiscal year. In addition, when the weather is warmer than expected in the autumn and winter months, our customers tend to purchase fewer winter collection items. Similarly, when the weather is cooler than expected in the summer months, our customers tend to purchase fewer summer collection items. During times of such unfavorable weather we may be required to lower our prices, negatively impacting our margins and our profit. If we cannot offset the lower-sales seasons with those having stronger sales, our business, financial condition and results of operations may be adversely affected.

Seasonal fluctuations also impact our working capital, liquidity levels and inventory. We incur additional expenses in the preparation for the increased demand we typically expect leading up to, and around, the Christmas season and other peak selling periods and must carry a significant amount of inventory before such periods, which is also reflected in our liquidity.

Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including unfavorable weather, the timing of new store openings and the revenue contributed by new stores and the age and quantity of inventory at period end. As a result, historical period-to-period comparisons of our results of operations are not necessarily indicative of future period-to-period results. Increasing weather anomalies could complicate forecasting seasonal demand. Natural disasters, such as storms, tornadoes, floods, earthquakes or other major weather disasters may also have a negative impact on

12 our business. Our inability to compensate for seasonal fluctuations and adapt to weather conditions may have a material adverse effect on our business, financial condition and results of operations. If we are unable to manage our inventory or our store network and online presence in line with customer demand, our sales levels and profitability may decline. The merchandise we sell is subject to changing consumer demands and preferences. Our success depends in large part on our ability to gauge, react and adapt to changing consumer demands in a timely manner. Our merchandise must appeal to a broad range of customers whose preferences cannot always be predicted with certainty. There can be no assurances that we will be able to continue to market merchandise that is attractive to customers or that we will successfully meet consumer demands in the future. To be responsive to shifting customer tastes, we must manage our inventory levels closely. If we misjudge, fail to identify or fail to react swiftly to changes in consumer preferences, our sales could decrease and we could see a significant increase in our inventory levels. If we are left with high levels of unsold stock, or if our inventory provisions are inadequate, we could be required to mark down some of our merchandise, which could lower our operating profits and have a significant negative impact on our business, financial condition, results of operations and prospects. Conversely, if we underestimate consumer interest in our merchandise, we may experience inventory shortages, unfulfilled orders, increased distribution costs and lower revenue and profitability than we could otherwise have achieved. Inventory shortages could lead to customer dissatisfaction and adversely impact our reputation and brand image. In addition, certain of our online customers, including online customers in Germany, have statutory rights with respect to the return of merchandise. We offer our online customers free return shipping, depending on their location and membership status. In addition, we may have to bear the risk for damage or loss of the merchandise. As a result, any increase in customer returns of merchandise, particularly from our online business, could result in increasing costs and higher levels of unsold stock. Furthermore, we may not be able to manage our store network and make strategic decisions relating to store openings, closings, refurbishments and our online presence quickly enough or in line with changing customer shopping habits and preferences. Additionally, our store concepts and layouts as well as our online presence may not correspond to customers’ needs and tastes. Failures and delays in optimizing our store network, designs and marketing channels may prevent us from meeting consumer demand and have an adverse effect on our business, results of operations, financial condition and prospects. We depend on a reliable and efficient supply chain, which includes third-party carriers to deliver merchandise to our warehouse and online customers. Capacity constraints, interruptions or other failures in our supply chain could materially and adversely affect our business, results of operations and financial condition. The profitability of our business depends on our ability to successfully process and deliver our customers’ orders. Our ability to process and fill orders accurately and timely depends on the efficient, uninterrupted operation of our leased warehouse and logistics center in Poing, Germany, and our automated warehouse management systems. Our ability to deliver orders to our customers within a time frame that meets their expectations depends on efficient internal processes as well as on third-party delivery companies in each of the countries in which we operate. A number of factors, many of which are beyond our control, could disrupt the operation of our supply chain and jeopardize our ability to receive, process and deliver our customers’ orders. System interruptions in any of our technology platforms could delay or prevent our receipt of customer orders. Fire, flood, earthquake, power loss, telecommunications failure, break-in, human error, strikes, work stoppages and other events could interrupt the operation of our warehouse and warehouse management system in Poing, Germany, jeopardizing our ability to fulfill orders. We also rely on third-party carriers for the delivery of merchandise to our warehouse and logistics center in Poing as well as for delivery to online customers. We are therefore exposed to any failures or shortcomings by these carriers, including delivery delays or the loss or theft of goods. Any breakdown or disruption of the activities of these carriers resulting from, among other things, inclement weather, natural disasters, transportation interruptions, labor shortages, oil price increases or unrest could impair our ability to supply our warehouse and logistics center at current cost levels or at all, make timely deliveries to customers or maintain an appropriate logistics chain and level of inventory, all of which could adversely affect our reputation, business, results of operations and financial condition. The merger, acquisition, insolvency or government regulation or shut-down of any third-party contractors we use in our supply chain could also interrupt order processing, storage and delivery. Additionally, we may be unable to maintain relationships with our current carriers, and we may at any point be required to contract with other carriers at a greater cost.

As our operations expand in size and scope, we will need to continually improve and upgrade the systems and infrastructure that support our supply chain. If the traffic volume on our websites or the number of purchases made by customers substantially increases, our current transaction processing systems, network infrastructure, storage facilities and delivery systems may be unable to accommodate the increased volume. Additionally, we may be unable to accurately forecast these increases or to upgrade our supply chain systems in time to accommodate them. If the manufacturing, delivery or supply chain management processes relating to our merchandise are disrupted for any reason, we may be delayed in restoring our inventory of the affected products and we may experience a significant increase in our cost of sales. Any failure to adequately manage and improve our supply chain could reduce our transaction volume, undermine customer satisfaction, damage our business reputation, limit our competitiveness or otherwise materially and adversely affect our business, results of operations and financial condition. Operational disruptions at our centralized warehouse and logistics center and risks arising from the planned expansion of the warehouse center could have a material adverse effect on our business, results of operations and financial condition. We currently operate one warehouse in Germany, where we store all our inventory. Our warehouse is, therefore, critical to our business. If operations at our warehouse were interrupted due to, but not limited to, natural disasters (such as flooding or fire), man-made disruptions (such as labor strikes), technical defects, accidents or for any other reason, it would have a material adverse effect on our business, results of operations and financial position. In addition, due to the high level of integration between our warehouse and points of sale, any interruption of logistics at our warehouse would also have a significant adverse effect on our ability to supply our customers and could result in customer dissatisfaction and harm to our reputation. Any disruptions at our sites, either because of problems with our supply of merchandise or for any of the other reasons listed above, could also have a material adverse effect on our business, results of operations and financial condition. An expansion of our current warehouse to meet the demands of our growing business is scheduled to be completed by Q4 2020. We may make incorrect assumptions regarding the necessary size, the technical design and the level of automation required of the expansion. Also, our capital and other expenditures may be higher than expected due to cost overruns, unexpected delay or other unforeseen factors. We may also face difficulties in obtaining adequate financing to fund the expansion. Any risks arising from the expansion of the warehouse could have a material adverse effect on our business, results of operations and financial condition. We source the majority of our merchandise on the basis of purchase orders with our suppliers, and the lack of formal supply agreements could impact our ability to maintain these relationships. Consistent with customary practice in our industry, our relationships with many of our suppliers are not based on formalized supply agreements but, rather, the regular submission of purchase orders or price agreements renegotiated periodically between the parties on order forms. Also, we only enter into long-term agreements with suppliers in exceptional cases. Accordingly, we source most of our merchandise on the basis of individual purchase orders with our suppliers. This informal way of working may result in a less precise definition of the parties’ respective rights and may, in the event of a disagreement between them regarding the terms of the purchase and supply of merchandise, result in disputes or conflicts which may adversely impact our ability to continue sourcing a particular brand or from a particular supplier and, in turn, may have an adverse effect on our business, financial condition and results of operations. We are subject to risks in connection with the quality and timely delivery of our private label merchandise and our relationships with the manufacturers of such merchandise. A portion of our sales relate to our private label merchandise, which we source, for example, from suppliers in Turkey and Hong Kong. These suppliers may also manufacture merchandise for our competitors and their suppliers. Our agreements with the manufacturers of our private label merchandise, which set forth the production and delivery of private label merchandise, are typically based on an order-by-order concept for each private label brand rather than long-term supply agreements. In case an agreement with a private label supplier is terminated, there can be no assurance that we will find other suppliers that will be able to produce comparable replacement merchandise for us at competitive prices or at all. Since we only have limited control over manufacturers of our private label merchandise, there is no guarantee that this merchandise will continue to meet our specifications. Furthermore, any breach or perceived breach of relevant laws, regulations, permits or licenses relating to the private label merchandise sold by us, or failure to achieve or maintain particular ethical business practices and standards could also lead to adverse publicity, which could materially adversely affect the reputation of our private label brands, damage our customer relationships and lead to a decline in our sales.

As we are the “responsible person” for our private label merchandise within the context of the applicable regulations on product safety applicable to our merchandise, any quality defect could lead (on the basis of EU law or similar applicable national laws) to customer claims, administrative or criminal proceedings and penalties. We could also face damage to our own private label brands’ reputation. In addition, if the manufacturing, delivery or supply chain management processes relating to our private label or other merchandise are disrupted for any reason, we may be delayed in restoring our inventory of the affected private label or other products and we may experience a significant increase in our cost of sales. We face certain risks in relation to our e-commerce business. We face certain risks in relation to our e-commerce business including the functioning of hardware and software, customer acceptance and the integration with our offline business and logistics infrastructure. We generate a majority of our revenue from sales of merchandise over the internet via our e-commerce platform, BestSecret. Our e- commerce operations are subject to numerous risks, including:  reliance on third parties for computer hardware and software, the need to keep up with rapid technological change and the implementation of new systems and platforms;  the risk that our e-commerce platform may become unstable or unavailable due to necessary upgrades or the failure of our computer systems or the related IT support systems or that customer data may be misappropriated as a result of computer viruses, telecommunication failures, electronic break-ins and similar disruptions, or disruption of internet service, whether for technical reasons or for other causes;  customers finding our e-commerce websites difficult to use or online applications are not compatible with certain electronic devices, being less willing to use our websites than we expect, being unwilling to share personal information online or via our mobile applications, or not being confident that they are secure;  the incurrence of unexpected costs in connection with the maintenance and future development of our e-commerce platform;  liability for online content, security breaches and consumer privacy concerns;  lack of ability to honor our usual delivery terms in case of an unexpected or a higher than expected spike in customer orders or for other reasons that may cause negative reputational consequences;  negative online reviews (including social media posts) from dissatisfied customers which may deter other potential customers from using our e-commerce platform and that may also affect our brands’ reputation and sales in our offline stores;  lack of ability to communicate with our customers using e-mail or other means due to failed or delayed delivery of such e-mails for technical reasons, lack of interest by customers or marking as “spam” or “junk”; in addition, certain customers may be dissatisfied when exposed to too many advertising campaigns or newsletters and to what they may consider to be e-mail or text message “flooding”;  actions by third parties to block, impose restrictions on or charge for the delivery of e-mails or other messages, as well as legal or regulatory changes limiting our right to send such messages or imposing additional requirements on us in connection with them, could impair our ability to communicate with customers;  liability for online credit card fraud and problems adequately securing our payment systems; and  increased competition from other e-commerce providers. Our failure to respond appropriately to these risks and uncertainties could reduce our revenue (in particular, our revenue from our e-commerce operations) as well as damage our reputation and brands, especially since e- commerce is a significant part of our growth strategy. The realization of any of these risks could have a material adverse effect on our business, results of operations and financial condition. Our operations may be interrupted or otherwise adversely affected as a result of failures in our IT systems. Our success depends on the continuous and uninterrupted availability of our IT systems, particularly to process customer transactions and to manage inventory levels, purchases and deliveries of our merchandise. Over the past few years, we have developed a sophisticated IT system which supports our websites and apps, customer service, supplier connectivity, communications, fraud detection and the monitoring of customer sales and improved management of inventories. As our operations grow in size, scope and complexity, we need to continuously improve and upgrade our systems and infrastructure to offer an increasing number of user- enhanced services, features and functionalities, while maintaining or improving the reliability and integrity of our systems and infrastructure.

A range of factors beyond our control, such as telecommunication problems, software errors, inadequate capacity at IT centers, fire, power outages or damage, attacks by third parties, computer viruses and the delayed or failed implementation of new computer systems, could interfere with the availability of our IT systems. Any material disruption or slowdown of our systems could cause information, including data related to purchases of merchandise, to be lost or delayed which could result in delays in the delivery of products to customers or lost sales or impair our ability to manage our inventories. Our existing safety systems, data backup, access protection, user management and IT emergency planning may not be sufficient to prevent information loss or disruptions to our IT systems. In addition, if changes in technology cause our IT systems to become obsolete, or if our IT systems are inadequate to handle our growth, our reputation among our customers may be damaged. Any failure to properly guard against the interruption or malfunctioning of our IT systems could have a material adverse effect on our business, financial condition and results of operations. A failure to adopt and apply technological advances in a timely manner and to successfully expand our multi-channel capabilities could limit our growth and prevent us from maintaining profitability. We face risks in connection with continuous technological development and the shift from traditional sales channels, such as offline stores, to online and mobile-based channels and multi-channel models, both of which can increase competitive pressure. For example, our online and mobile offerings must keep pace with the technological development of the devices used by our customers, the technological progress of our competitors and any consequential new shopping behaviors and trends. Furthermore, our success, in particular with respect to our online sales, depends on our ability to continuously improve our technological platform and to develop new applications in line with the technological development and trends in order to remain competitive. For example, the introduction of new payment solutions may entail substantial costs and effort, and there is no guarantee that such new solutions will be accepted by customers, which may result in fewer purchases from customers and, in turn, lower sales. We may fail to adopt and apply new technological advances in a timely manner, or experience difficulties or compatibility issues. Any such failure to adopt and apply technological advances in a timely and effective manner and to further invest into multi-channel strategies and their implementation could have a material adverse effect on our business, financial position and results of operations. Our strategy to continue to expand our business in Germany and internationally may fail or advance at a slower pace than planned. Part of our growth strategy includes increasing the number of our stores on a low and controlled level through new store openings in Germany. However, we may not be able to implement our growth strategy successfully or at the envisaged pace if we fail to identify and lease attractive store locations on acceptable terms, attract and hire skilled sales staff or implement the required infrastructure. We may also face difficulties in obtaining adequate financing to fund expansion. Consequently, the intended increase of our store business may fail to materialize. The success of new stores may also be affected by our failure to correctly estimate customer demand for store sales.

The success of our online expansion in and into new countries may be affected if we fail to correctly estimate customer demand in local markets or are unable to successfully establish our brands. This risk may be higher in new markets in which we operate, such as Austria, Switzerland and selected other European countries, where our less established position makes it more difficult to assess customer demand and the appeal of our product offering. Our capital and other expenditures may also be higher than expected due to cost overruns, unexpected delay or other unforeseen factors. In addition, if we fail to execute our expansion strategy in a discreet manner, our supplier relationships may deteriorate and we may lose certain of our suppliers. If our expansion strategy is not successful or advances at a slower pace than planned, our competitive position and our profitability and growth may be negatively affected. In addition, any failure by us to anticipate or respond to market demand, control our operating costs or otherwise effectively address any challenges that arise as we attempt to implement our strategy, could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to manage our growing business activities effectively

Our business grew significantly over the last decade and continues to be further expanded also via acquisitions.

Our operating complexity will increase as we implement our growth strategy and will require a continuous expansion and improvement of our operating capabilities and the training and management of our employee base. Developing and refining the appropriate internal management, accounting and book-keeping processes, organizational compliance and risk monitoring structures required for this growth and the complex group

16 structure places high demands on us and our management, as well as on our operational and financial infrastructure, with no assurance that sales and profitability will increase accordingly. As our operations grow further, we will need to continue to improve and upgrade our systems and infrastructure to deal with the greater scale and complexity of operations. Delays in improving these systems and in reaching an appropriate level of staffing may result in business and administrative oversights and errors, which may also lead to higher operating expenses.

In addition, our growth could make it difficult for us to adequately predict the expenditures we will need to make in the future. This growth could also impact the operational flexibility of the supply chain organization and impair our ability to react promptly to changing customer demands and new market trends. If we do not make the necessary capital or other expenditures to accommodate our future growth, we may not be successful in our growth strategy. Continued growth could also strain our ability to maintain reliable service levels for our customers and to develop and improve our internal controls.

We may be unable to accurately anticipate all the demands that our expanding operations will impose on our business, personnel, systems and controls and procedures, and the failure to appropriately address such demands, or the realization of any of the above-mentioned risks, could have a material adverse effect on our business, results of operations and financial position.

Our risk management and internal controls may not prevent or detect violations of law or other inadequate business practices. Our compliance function is carried out by our legal department and our managing directors and is complemented by external law firms in our markets outside of Germany. We do not have formal compliance training for all of our employees in place and our compliance monitoring and internal controls are performed on a case-by-case basis. In addition, our existing compliance processes and internal controls may not be sufficient to prevent or detect inadequate practices, mistakes in our financial reporting and controlling systems, fraud, merchandise theft, misappropriation of funds and other violations of law. Due to our business operations, we are subject to a number of laws and regulations in various European countries. These include, among others, regulations concerning consumer protection, data protection, unsolicited commercial communications, general terms and conditions of contract, tax, child protection and telecommunications. In the event that we or any intermediaries, consultants, sales agents or employees with whom we cooperate either receive or grant inappropriate benefits or generally use corrupt, fraudulent or other unfair business practices, we could be confronted with legal sanctions, penalties and loss of orders and harm to our reputation. We may fail to put in place the requisite level of monitoring and systems of internal control to enable us to detect any such practices or violations of law and any inability to adequately identify or prevent such practices or violations could have a material adverse effect on our results of operations and financial condition. We are subject to numerous laws and regulations with respect to personal data protection and failure to comply with such laws and regulations, may result in litigation and administrative or arbitration proceedings and/or significantly damage our relationship with our customers; and we may also be adversely affected by changes in these laws and regulations

We are subject to local and international laws and regulations governing the collection, use, retention, sharing and security of personal data, in particular to the new regulation on data privacy issued by the European Commission which came into effect on May 25, 2018. The General Data Protection Regulation is a regulation in EU law on data protection and privacy for all individuals within the European Union and the European Economic Area. A failure to comply with applicable laws or regulations could have an adverse impact on our reputation and could lead to us becoming subject to penalties or claims, which could have a material adverse effect on our business and results of operations. The need to comply with data protection legislation is a significant controlling, operational and reputational risk which can affect us in a number of ways including, for example, making it more difficult to maintain and expand our marketing data and also through potential litigation relating to the alleged misuse of personal data. Regulation regarding data collection and data protection may also become stricter in the future. New laws, regulations or developments in this field and changes in consumer behavior could interfere with our strategies to use privacyrelated information for our omni-channel marketing efforts and could also have an adverse effect on our business and results of operations.

Significant modifications in laws or regulations in countries in which we operate may consequently lead to us incurring higher costs or having to change our business practices. Also, compliance will become more complex and involve higher costs and the increasing risk of noncompliance may give rise to civil liability, administrative orders (including injunctive relief), fines or even criminal charges.

We are exposed to the risk that our data could be wrongfully appropriated, lost or disclosed, or processed in breach of data protection regulation, by us or on our behalf. If we or any third-party service providers on which we may rely fail to transmit customer information in a secure manner, or if any such loss of personal customer data were otherwise to occur, we could face liability under data protection laws. This could also result in the loss of our customers’ goodwill and deter new customers.

Our failure to comply with local and international laws governing personal data or if we fail to protect our data from being misappropriated could have a material adverse effect on our business, financial position and results of operations.

We face a risk of theft or misappropriation of funds and products in our stores, our centralized warehouse and logistics center, and we are exposed to a risk of misappropriation of our customer data and other inappropriate behaviour

In the ordinary course of our business, we are exposed to a risk of theft of merchandise in our stores. Merchandise may also be misappropriated during transportation or at our warehouse and logistics center and those of our logistic partners. In addition, we may experience a misappropriation of funds in our stores or at other levels of our business.

Furthermore, we face the risk that customer data that we collect for marketing purposes may be stolen or misappropriated. In this case, customers may be discouraged from providing us with their data or our marketing or reputation could be negatively affected as a result.

Moreover, we have a customer friendly return policy. It cannot be excluded that, in the future, a growing number of customers may abuse our returns policy and, for example, return merchandise bought from other retailers.

Our failure to prevent the theft or misappropriation of customer data or to manage our returns policy could have a material adverse effect on our business, results of operations and financial position.

Our initiatives to support our brands, generate customer traffic and build or retain a loyal customer base, as well as other marketing initiatives may not be effective

In an environment characterized by increasing levels of promotions and customer discounts, the growth of our sales depends on the success of our viral marketing and continued incentive programs for customer referrals from existing customers. We use various tools, such as daily e-mail newsletters, social media and in-store events to support the positioning of our brand, acquire new customers, increase the number of customer visits to our websites, the number of orders and the basket size per order. Our investments in viral marketing, customer acquisition and customer loyalty may prove ineffective.

The operating expenditures to support marketing initiatives may turn out to be higher than estimated and require more management time than planned. There can be no assurance that our assumptions supporting our marketing strategies will prove to be correct and that such expenditures will result in increased sales or increased profitability. In addition, there can be no assurance that expenditures with respect to new concepts and re-branding, or changes and updates to existing concepts, will be met with the expected customer acceptance and lead to the expected results.

In addition, blogging and social media activities can heavily influence our business success, as critique in blogs, forums and social media, based on ecological, ethical or many other considerations, and regardless of whether such critique is reasonable or not, may rapidly spread online. In such cases, a certain merchandise may have to be withdrawn, which may cause damage to our reputation and our brands.

In addition, changes to the terms and conditions of social networking services as well as changes to search algorithms of online search engines could limit our promotional capabilities, and there could be a decline in the use of such social networking services by customers and potential customers in the future.

Failure to implement our marketing initiatives or our customer relationship management system successfully, or their failure to result in improved profitability, could have an adverse effect on our liquidity, financial position and results of operations and on the implementation of our growth strategy.

Failure to sufficiently resolve customer relations issues could negatively impact our ability to continue our expansion. A satisfied, loyal customer base is crucial for our ongoing expansion. Based on our members-only business model, attracting new customers depends on word-of-mouth and the recommendations of existing customers to expand our customer base. We therefore must ensure that existing customers are satisfied with our merchandise services so that those customers continue to recommend us. Should our efforts to satisfy existing customers be unsuccessful, we may fail to continue expanding our business or may be obliged to incur significant marketing and development expenditure to attract new customers. In addition, reliable customer support is vital to ensure that customer complaints are processed within appropriate timeframes and under satisfactory conditions. Any absence of a response or an unsatisfactory response to customer queries or complaints, whether founded or perceived as such, may have a detrimental impact on customer loyalty and satisfaction as well as our reputation, particularly if customers make negative comments on blogs, social media, or through online ratings and reviews. We may not be able to verify or adequately respond to such negative comments, ratings or reviews. An inability to retain customers and earn their loyalty, or to identify, follow up and respond to customer complaints and online comments due to customer service failings, may have a material adverse impact on our business, financial condition and results of operations. We are exposed to risks associated to the payment options we offer. We currently offer different payment methods tailored to meet our customers’ payment preferences, both in our stores and online shop including cash, cards, PayPal, Direct Debit and purchase by invoice. Cards are a preferred payment option by many of our customers and, as a result, accounts for a significant portion of our sales.

We face the risk of operational failures during the check-out process in our e-commerce platform relating to the complexity of certain payment methods. Such difficulties could adversely affect our conversion rate which is the proportion of site visitors that actually complete the purchasing process. We may also become subject to additional or changing regulations regarding certain payment methods, such as the operating rules and certification requirements of payment scheme associations and rules governing electronic funds transfers, which apply to payment cards, whether in general or in a particular country in which we operate. We may also become subject to more stringent or complex compliance requirements, for example with respect to our vouchers. For the processing of all our current payment methods we pay different fees to our payment method providers. It is possible, though unlikely, that some of these fees would increase over time, causing our expenses to rise. A more tangible risk for increased payments expenses is posed by the shifting preference of our customers in terms of payment methods. Invoice Payments and PayPal are by far our most expensive options and should they gain a larger share of our checkout, then our expenses would rise accordingly.

Furthermore, various types of fraud done on the payments side might also increase the overall cost of accepting payments. These methods range from account take-overs, usage of stolen credit cards, fake identities, fake bank accounts, all the way to “almost legal fraud” like voucher abusing or creation of multiple accounts to take advantage of our loyalty system. In the case of invoicing, even though the default risk is with our service provider, a high non-payment rate will lead to either increased costs for us or a lowered acceptance rate for customers using payment method.

In case of excessive fraud events relating to credit card transactions, in addition to the direct losses, we could enter the card schemes’ chargeback monitoring programs, where we could incur extra fees and even lose the right to accept cards altogether.

In general, for online payments, the liability lies with the party with the lowest security standards. In most cases, in practice, it’s the merchant. Direct debits have by design no authorization mechanism, so risk is always with us. And while cards do have strong authentication methods (namely the 3DSecure standards), because using a 2-factor authentication on all transaction would be an obvious hurdle for the customer – and thus diminish the customer experience & conversion – we consciously elect to take the risk and provide the customer with the seamless experience he expects. We do have an anti-fraud system to reduce the risk, however our exposure exists and it could have a material adverse effect on our business, financial position and results of operations.

We depend on qualified personnel, including certain key personnel such as our senior management, and may not be able to retain or replace such personnel. Our success and future growth depend significantly on the performance of our senior management, purchasing managers and qualified personnel in certain functions, including IT and logistics. In the event of departure of one or more of these key and qualified personnel, we may not be able to replace them quickly, which could affect our

19 operational performance. More generally, we may be unable to recruit new personnel whose skills and industry experience are equivalent to those of our key and qualified personnel, or could fail to attract and retain experienced personnel in the future. In addition, should our executives or key employees join a competitor or create a competing business, it could have a negative impact on our operations. Furthermore, many of our procurement employees have good relationships with suppliers, many of which have developed over decades. If we are not able to retain these employees, we may fail to maintain or further develop these relationships with suppliers. These circumstances could have a material adverse effect on our business, financial condition and results of operations. We are exposed to the risk of rising labor costs as well as work stoppages, strikes or other collective actions. Personnel expenses represent a significant part of our cost base. We may face considerable wage increases in the future, for example in connection with statutory minimum wages or otherwise as a result of generally rising wages. If we are not successful in limiting such increases in personnel costs, or if cost increases cannot be passed on to our customers, this may have a material adverse effect on our business, financial position and results of operations. In addition, since the business is labor intensive, maintaining good relationships with our employees is crucial to our operations. While currently none of the Group’s employees are represented by works councils (Betriebsrat) and no supervisory board (Aufsichtsrat) has been established at S&B GmbH, BestSecret and S&B Logistik to date, this may change in the future and our employees may establish works councils and we may be required to implement a supervisory board at S&B GmbH, BestSecret and S&B Logistik according to the German One-Third Participation Act (Drittelbeteiligungsgesetz). As a consequence, we would be required, inter alia, to involve such bodies in certain decision-making processes, which may limit our operational flexibility and our ability to react to corporate developments in a timely manner. Any deterioration of such relationships in the future or any material work stoppages, strikes or other types of conflicts with our employees, could have a material adverse effect on our business, results of operations and financial position. We face certain risks in relation to future acquisitions. We may, from time to time, consider selected acquisition opportunities, including acquiring new online fashion retailers. For example, in 2016 we acquired SOS as part of our expansion into Switzerland, which, at the time of acquisition and during the following months, was generating losses. There can be no assurance that we will be able to identify suitable targets and consummate an acquisition on favorable terms or at all. It is also possible that not all material risks in connection with acquisitions will be identified in the due diligence process and that such risks will not be taken into account in the decision-making process or the respective agreements to a sufficient level or at all. In addition, future acquisitions may also entail financial and tax restructuring measures which, even if designed with the aim of achieving a tax-efficient structure, may expose us to risks, e.g., if the tax authorities were to challenge any of the implemented measures.

Upon making acquisitions, our performance will depend, in part, on our ability to successfully integrate the acquired businesses in an efficient manner. Such integration may be a complex, time-consuming and expensive process and will likely involve a number of risks, including the costs and expenses associated with unexpected difficulties, initial or ongoing losses in periods following the acquisition, the diversion of management’s attention from our daily operations, additional demands on management related to the increase in the size and scope of our operations following an acquisition and any undisclosed liabilities of an acquired company. Even if we are able to successfully integrate newly-acquired businesses, this integration may not result in the realization of the synergies, cost savings, revenue and cash flow enhancements, operational efficiencies and other benefits that we expect. We may also incur unexpected liabilities in connection with such acquisitions. If these liabilities are significant or if we fail to integrate a new acquisition effectively, this could have a material adverse impact on our business, financial condition and results of operations. Our intangible assets, such as goodwill and trademarks, are subject to the risk of impairment. Our intangible assets, primarily consisting of goodwill, trademarks, licenses and software, are regularly reviewed on the basis of certain assumptions, including cash-flow and growth rate estimates and will be reviewed in connection with the Transactions. As of December 31, 2018, our goodwill amounted to €254.4 million and our other intangible assets (mainly customer relationships and trademarks) amounted to €417.0 million. We may be unable to protect our trademarks, domain names and other intellectual property rights and may infringe the intellectual property rights of third parties. We own a number of intellectual property rights, including trademarks and trade names, which, along with related Internet domain names, are important to our business. We regularly register our trademarks and trade names in Europe and other markets. However, registration can be a lengthy process. Registration of intellectual property rights, especially trademarks, which we have applied for or intend to apply for in the future may be denied in countries where

20 we consider registration necessary or desirable. As a result, we may be unable to prevent third parties from using the same or similar intellectual property rights. Same or similar third party trademarks and internet domain names may already exist in jurisdictions where we operate or intend to operate and we may be restricted from using the relevant trademark or internet domain name in the respective jurisdiction. Our registered intellectual property rights, especially trademarks, may be subject to cancellation and as a result third parties would be free to use such intellectual property rights. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our trademarks, domain names and other proprietary rights. We may be required to spend significant amounts of economic and human resources in order to acquire desirable domain names or protect our intellectual property in the future. Third parties may infringe our intellectual property and enforcement of our intellectual property may require significant financial investment. We may not, for factual or legal reasons, be able to prevent such infringements. This may, inter alia, lead to a weakening of the goodwill that is associated with our brands and may undermine our reputation. If we are unable to obtain sufficient protection for our intellectual property and defend it against third parties, we may not be able to advance our business. This could affect our competitive position and any resulting decrease in revenues could have a material adverse effect on our business, financial condition and results of operations. We have, in the past, been subject to claims of infringement of third parties’ intellectual property rights. Infringement of third parties’ intellectual property rights could subject us to significant liability for damages. In addition, even if we prevail, any litigation could be expensive and could result in the diversion of our management’s time and attention. Moreover, infringement of third parties’ intellectual property rights may result in limitations on our ability to use the intellectual property or in the prohibition of using the intellectual property at all, subject to the respective claims, unless we are able to enter into agreements with the intellectual property owners. We use third party software on the basis of software license agreements. We may not have sufficient licenses to cover the actual scope of use of such software in our business operations, which may require us to pay compensation to, and to acquire further licenses from, the owners of the rights in the relevant software. In addition, we may be required to obtain further licenses to enhance our business operations, and we may also be required to change the current software providers and enter into agreements with new software providers with less favorable terms. This may have a material adverse effect on our business, financial condition and results of operations. We may incur liabilities that are not covered by insurance. We carry insurance of various types, including general business interruption and third-party liability, property damage, electronic damage, transportation damage and directors’ and officers’ liability insurance. Furthermore, we carry insurance covering cyber risks. Cyber risks are insured up to €15 million. We may not always be able to accurately foresee all situations in order to ensure that they are fully covered by the terms of our insurance policies and, as a result, we may not be covered by insurance in specific instances. While we believe we maintain appropriate levels of insurance consistent with industry practice, we may experience incidents of a nature that are not covered by insurance. Furthermore, the occurrence of several events resulting in substantial claims for damages within a given year may have an adverse effect on our insurance premiums. In addition, our insurance costs may increase over time in response to any negative development in our claims history or due to material price increases in the insurance market in general. We may not be able to maintain our current insurance coverage or do so at a reasonable cost, which may have an adverse effect on our business, results of operations, financial condition and prospects. Many of our suppliers rely on credit insurance to protect their receivables, and any changes to, or slow adjustments or withdrawals of, such credit insurance might cause suppliers to seek to reduce their credit exposure to us

We believe that many of our suppliers have traditionally taken out credit insurance to protect their receivables against the risk of bad debt, insolvency or protracted default of their buyers, including us. Credit levels available to us from our suppliers remain dependent on the general economic environment and our financial position. If there is a significant decrease in the availability of credit insurance to our suppliers, or if an increase in credit levels is administered too slowly or such insurance is withdrawn in its entirety, and if such suppliers are unwilling or unable to take credit risk themselves or find alternative credit sources, they may choose to reduce their credit exposure to us, for example by seeking to change their credit terms vis-à-vis our Group. Any such actions could have a material adverse effect on our cash position, lead to an increase in our indebtedness or have a negative impact on our product offerings and, thus, on our sales. This could have a material adverse effect on our business, financial position and results of operations.

We may be subject to claims based on unfair commercial practices which could have a material adverse effect on our business, financial condition and results of operations. Marketing activities are significant for the success of our business and our expansion. We cannot exclude that we may breach laws governing marketing conduct, in particular the German Act on Unfair Commercial Practices (Gesetz gegen den unlauteren Wettbewerb). Any perceived or actual breach of such laws could subject us to litigation and may prevent us from certain marketing conduct or may require us to change existing advertising campaigns, for example with respect to e-mail advertising or the use of certain advertising claims. We may have to expend significant financial and human resources to defend such claims and adjust our internal processes. Restrictions on our current or planned marketing activities could affect our competitive position and any resulting decrease in revenues could have a material adverse effect on our business, financial condition and results of operations. Our competitors may use certain marketing activities to attract customers who may be in breach of laws governing marketing conduct. We may, for factual or legal reasons, not be able to prevent such breaches which may lead to a loss of customers and a decrease in revenue. This could have a material adverse effect on our business, financial condition and results of operations. We are exposed to risks related to conducting operations in several different countries. We are an international business and have incurred, and expect to continue to incur, significant expenses in developing operations in the markets in which we operate. We face a variety of risks generally associated with doing business in multiple markets. Such risks relate to the following matters, among others:  multiple, conflicting and changing consumer, tax and other laws and regulations, including potential complications due to unexpected changes in legal and regulatory requirements;  challenges caused by distance, linguistic and cultural differences;  the need to adapt our websites and the merchandise we sell to local tastes;  difficulties enforcing our existing intellectual property rights and obtaining necessary third-party intellectual property rights;  difficulties in maintaining a system of effective internal controls and managing the accounting and tax complexities of an international business;  foreign tax consequences;  foreign exchange issues that may make repatriating income costly or impossible;  fluctuations in currency exchange rates;  economic, legal and political instability;  increased transportation and shipping costs;  staffing difficulties, regional or national labor strikes or other labor disputes;  tariffs, quotas, taxes, price controls and other market barriers; and  longer payment cycles in some markets. Our failure to successfully manage any of such risks could materially and adversely affect our business, financial condition and results of operations. We are subject to consumer protection laws and other regulatory requirements which may change, resulting in additional costs. We are subject to different time, manner, place and content restrictions in the various regulatory environments in which we operate, compliance with which can be difficult and costly. Even within a single jurisdiction, we are often subject to various laws and regulations relating to consumer protection, data protection, unsolicited commercial communications, general terms and conditions of contract, tax, child protection and telecommunications, as well as other restrictions on the transmission of certain content, which may impede our efforts to improve, license or distribute our products. Because we operate in different countries, we could face difficulties and increased costs relating to compliance with numerous different regulatory regimes and monitoring ongoing regulatory action. Regulatory changes may put us at a competitive disadvantage, causing us to lose customers and income. Our failure to comply with applicable regulations could result in fines and exposure to potential liability claims from customers or third parties. Additionally, the global nature of the Internet and telecommunications technology can make it difficult to ensure that our websites, advertisements and content remain within the scope of their intended audience. Moreover,

22 despite our efforts to comply with local regulatory requirements, our websites and advertisements could be made available by third parties in areas where their dissemination violates local requirements, and we could face penalties and damage to our reputation. Finally, certain jurisdictions may attempt to levy novel sales, income or other taxes on our Internet-based activities. New taxes could increase our cost of doing business and expose us to penalties. Any such increased costs, penalties, reputational damage or increased costs associated with maintaining compliance in different regulatory environments could have a material adverse effect on our business, results of operations or financial condition. We are subject to risks from legal and arbitration proceedings, which may adversely affect our financial results and position. In the ordinary course of our business, we may, from time to time, become involved in various claims, lawsuits, investigations, arbitration and administrative proceedings, such as, for instance, labor, intellectual property or tax proceedings, which may involve substantial claims for damages or other payments. Adverse judgments or determinations in one or more of these proceedings may require us to change the way we do business or use substantial resources in adhering to settlements or pay fines or other penalties. The costs related to such proceedings may be significant, and, even if there is a positive outcome, we may still have to bear part or all of our advisory and other costs to the extent they are not reimbursable by other litigants, insurance or otherwise. Any such proceedings, even if we are successful, could divert management resources, incur certain expenses and cause damage to our reputation. The involvement in any such litigation, administrative and arbitration proceedings as well as the outcome of such litigation and proceedings, which cannot be predicted and may not be in accordance with our assessments, may have a material adverse effect on our business, financial position and results of operations.

We are currently not subject to any pending material litigation proceedings. We use standardized sales, purchase and supply agreements, as well as standardized terms and conditions, which increase the potential that all contract terms used therein, may be invalid or unenforceable if any clause is held to be void

We entertain legal relationships with a large number of persons, primarily suppliers, manufacturers of our private label merchandise, our employees and customers. In this context we use standardized documents, standard- form contracts and standardized terms and conditions. If such documents, contracts or terms and conditions turn out to contain provisions that are disadvantageous to us, or if clauses in such documents or contracts are declared invalid and thus displaced by statutory provisions which are unfavorable to us, a large number of standardized documents, contracts or terms and conditions could be affected, which could have a material adverse effect on our business, financial position and results of operations.

Additionally, standardized contractual terms under German law (Allgemeine Geschäftsbedingungen) have to comply with the statutory law on general terms and conditions, which means they are subject to rigid fairness controls by the courts regarding their content and the way they, or legal concepts described therein, are presented to the other contractual party by the person using them. The standard is even stricter if they are used vis-à-vis consumers, which is the case of the vast majority of our customers. As a general rule, standardized terms are invalid if they are not transparent, clearly worded, or if they are unbalanced or discriminate against the other party inappropriately. Due to the frequent changes to the legal framework, particularly with regard to court decisions relating to general terms and conditions, we cannot fully protect ourselves against risks arising from the use of such standardized contractual terms. Even if documents, contracts and terms and conditions are prepared with legal advice, it is not impossible to avoid all potential risks from the outset or in the future, as the changes may continue to occur in the legal framework, particularly through case law. A change in the legal framework could have a material adverse effect on our business, financial position and results of operations.

Application of international tax laws on our international operations may expose us to potentially adverse tax consequences. As a result of our international operations and business, we are subject to tax laws in several jurisdictions, in particular, Germany and selected other European countries. We are also subject to transfer pricing laws, including those relating to the flow of funds among our companies pursuant to, for example, purchase, logistics, distribution or commission agreements or other arrangements. Adverse developments in these laws or regulations, or any change in position by the relevant authority regarding the application, administration or interpretation of these laws or regulations in any applicable jurisdiction, could adversely affect our business, financial condition and results of operations.

Pending and future tax audits within our Group and changes in fiscal regulations could lead to additional tax liabilities. We are subject to routine tax audits by local tax authorities. Tax audits for periods or jurisdictions not yet subject to a tax audit may lead to higher taxation in the future. Any additional tax payments could have a material adverse effect on our business, financial condition and results of operations. Due to restrictions on the deduction of interest expenses under German tax laws or forfeiture of interest carry-forwards under German tax laws, we may be unable to fully deduct interest expenses on our financial liabilities. Interest payments on our debt may not be fully deductible for tax purposes, which could adversely affect our financial results. Subject to certain prerequisites, the German interest barrier rules (Zinsschranke) impose certain restrictions on the deductibility of interest for tax purposes. Since 2008, the German interest barrier rules in general have disallowed the deduction of net interest expenses exceeding 30% of the tax-adjusted EBITDA. For purposes of the interest barrier rules, all businesses belonging to the same tax group (Organschaft) for corporate income and trade tax purposes are treated as one single business. Such consolidation is, inter alia, relevant for the calculation of tax- adjusted EBITDA. The Issuer has been part of the tax group since March 1, 2017. We expect the 30% of tax-adjusted EBITDA 2018 to cover the net interest expenses and to lead to a deduction for tax purposes. There are certain exemptions from the restrictions of the German interest barrier rules allowing for a tax deduction of the entire annual interest expenses. Any non-deductible amount of interest expenses is carried forward and may, subject to the interest barrier rules, be deductible in future fiscal years. The interest carry forward will be forfeited in full in connection with a change of the ownership structure. To date there is no interest carry forward for the German tax group. S&B Holding fully deducted its interest expenses in the previous fiscal years, due to applying for the escape clause exception; i.e., we use an exception from the restrictions of the German interest barrier rule, the so-called “equity escape” (Eigenkapitalvergleichsmethode). So far, the tax authorities have agreed with the application of the equity escape until the fiscal year 2013. However, if the exemption is not accepted by the tax authorities or if the equity escape does not apply due to changes in the structure or for other reasons, the application of the German interest barrier rules may have a material adverse effect on our business, financial condition and results of operations. Starting 2017 PrestigeBidCo is in the lead for tax matters applying the “30% adjusted EBITDA rule” with regard to interest deductibility. Moreover, there is a risk that expenses from bank charges may be requalified as interest expenses for the purpose of the German interest barrier rule and respectively added-back for trade tax purposes, resulting in a material adverse effect on our business, financial condition and results of operations. Use of loss carry-forwards to set off future gains In Switzerland, tax losses can be carried forward for seven fiscal years (not calendar years). In future years, such tax loss carry forwards might be forfeited without having reduced the gains in the respective fiscal years or may be otherwise unavailable to offset gains. Since SOS has completely transferred its business there should be no further significant gains to be offset. Conseuently, most of the existing loss carry forward may dilute within next years.

Risks Related to Our Financial Profile Our substantial leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Note Guarantees. We are highly leveraged and the issuance of the Notes increased our leverage significantly. As of December 31, 2018, we had total financial indebtedness of €260.0 million including indebtedness under the Notes. The degree to which we will be leveraged following the issuance of the Notes could have important consequences to holders of the Notes offered hereby, including, but not limited to:  making it difficult for us to satisfy our obligations with respect to the Notes;  making us vulnerable to, and reducing our flexibility to respond to, general adverse economic and industry conditions;  requiring the dedication of a substantial portion of our cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing the availability of such cash flow to fund new debt portfolio purchases, working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes;

 limiting our flexibility in planning for, or reacting to, changes in our business and the competitive environment and the industry in which we operate;  placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged; and  limiting our ability to borrow additional funds and increasing the cost of any such borrowing. Any of these or other consequences or events could have a material adverse effect on our ability to satisfy our debt obligations, including the Notes. Despite our substantial leverage, we may still be able to incur substantially more debt in the future, which may make it difficult for us to service our debt, including the Notes, and impair our ability to operate our business. The terms of the Indenture permit the Issuer and its restricted subsidiaries to incur substantial additional indebtedness, including in respect of committed borrowings of up to €35 million under the Revolving Credit Facility Agreement (which was increased by an additional €15 million on January 2, 2019) and additional Notes by the Issuer. The new debt that we incur in the future, including, for example, in connection with acquisitions, may rank pari passu with, be structurally senior to, or be secured by assets that do not form part of the Collateral for, the Notes and the Note Guarantees. Any such additional indebtedness could mature prior to the Notes. We may also enter into qualified receivables financing programs, pursuant to which we would pledge receivables that either do not form part of the Collateral or would be released from the Collateral in connection with any such program. Although the Indenture contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. In addition, the Revolving Credit Facility Agreement and the Indenture do not prevent us from incurring obligations that do not constitute indebtedness under those agreements. Furthermore, if we are able to designate some of our restricted subsidiaries under the Indenture as unrestricted subsidiaries, those unrestricted subsidiaries would be permitted to borrow beyond the limitations specified in the Indenture and engage in other activities in which Restricted Subsidiaries may not engage. If new debt is added to our and our subsidiaries’ existing debt levels, the related risks that we now face would increase. We are subject to restrictive debt covenants that may limit our ability to finance future operations and capital needs and to pursue business opportunities and activities. The Indenture restricts, among other things, our ability to:  incur or guarantee additional indebtedness and issue certain preferred stock;  create or incur certain liens;  make certain payments, including dividends or other distributions, with respect to the shares of such entity;  prepay or redeem subordinated debt or equity;  make certain investments;  create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to, and on the transfer of, assets to such entity;  sell, lease or transfer certain assets, including stock of restricted subsidiaries;  engage in certain transactions with affiliates;  consolidate or merge with other entities; and  impair the security interests for the benefit of the holders of the Notes. All of these limitations are subject to significant exceptions and qualifications. Despite these exceptions and qualifications, the covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest. In addition, we are subject to the affirmative and negative covenants in the Revolving Credit Facility Agreement, which are similar to the covenants included in the Indenture. A breach of any of those covenants or the occurrence of certain specified events will, subject to applicable cure periods and other limitations, result in an event of default under the Revolving Credit Facility Agreement. Upon the occurrence of any event of default under the Revolving Credit Facility Agreement, the Majority Lenders (being, subject to certain limitations, lenders under the Revolving Credit Facility Agreement whose commitments thereunder 2 aggregate at least 66 ⁄3% of the total commitments thereunder) could, while such event of default remains

25 unremedied or unwaived, cancel the availability of the Revolving Credit Facility Agreement and elect to declare all amounts outstanding under the Revolving Credit Facility Agreement, together with accrued interest, immediately due and payable. In addition, a default or event of default under the Revolving Credit Facility Agreement could lead to an event of default and acceleration under other debt instruments that contain cross-default or cross-acceleration provisions, including the Indenture. If our creditors, including the creditors under the Revolving Credit Facility Agreement, accelerate the payment of amounts owing to them under such other debt instruments, there can be no assurance that our assets and the assets of our subsidiaries would be sufficient to repay in full those amounts, to satisfy all other liabilities of our subsidiaries which would be due and payable and to make payments to enable us to repay the Notes, in full or in part. In addition, if we are unable to repay those amounts, our creditors could proceed against any security interests granted to them to secure repayment of those amounts. We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to meet our obligations under our indebtedness, which may not be successful. We have significant debt service obligations. Our ability to make principal or interest payments when due on our indebtedness, including our drawings under the Revolving Credit Facility Agreement and our obligations under the Notes, and to fund our ongoing operations, will depend on our future performance and our ability to generate cash, which, to a certain extent, is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors, many of which are beyond our control. See “Risk Factors—Risks Related to Our Business and Industry.” Our Revolving Credit Facility and the Notes will mature in 2023. At the maturity of loans outstanding under the Revolving Credit Facility and of the obligations under the Notes and any other debt which we incur, if we do not have sufficient cash flows from operations and other capital resources to pay our debt obligations, or to fund our other liquidity needs, or we are otherwise restricted from doing so due to corporate, tax or contractual limitations, we may be required to refinance our indebtedness. If we are unable to refinance all or a portion of our indebtedness or obtain such refinancing on terms acceptable to us, we may be forced to reduce or delay our business obligations, activities or capital expenditures, sell assets, raise additional debt or equity financing in amounts that could be substantial, or restructure or refinance all or a portion of our debt, including the Notes, on or before maturity. We cannot guarantee that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all, or that those actions would secure sufficient funds to meet our obligations under our indebtedness. In particular, our ability to restructure or refinance our debt will depend in part on our financial condition at such time as well as on many factors outside of our control, including then prevailing conditions in the international credit and capital markets. Any refinancing of our debt could be at higher interest rates than our current debt and may require us to comply with more onerous covenants. The terms of existing or future debt instruments and the Indenture and the Revolving Credit Facility Agreement may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest or principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of operating results and resources sufficient to service our indebtedness we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The terms of our indebtedness, including the terms of the Indenture and the Revolving Credit Facility Agreement, will restrict our ability to transfer or sell assets and the use of proceeds from any such disposal. We may not be able to carry out certain disposals or to obtain the funds that we could have realized from the proceeds of such dispositions, and any proceeds we do realize from asset dispositions may not be adequate to meet any of our debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our debt service obligations. Market perceptions concerning the instability of the euro, the potential re-introduction of individual currencies within the Eurozone, or the potential dissolution of the euro entirely, could have adverse consequences for us with respect to our outstanding euro-denominated debt obligations. As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility (the “EFSF”) and the European Financial Stability Mechanism (the “EFSM”) to provide funding to Eurozone countries in financial difficulties that seek such support. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the Euro and the suitability of the Euro as a single currency given the diverse economic and political circumstances in individual Member States. These and other concerns could lead to the re-introduction of individual currencies in one or more Member States or, even possibly, the dissolution of the Euro entirely. Should the Euro dissolve entirely, the legal and contractual consequences for holders of euro-dominated obligations and for parties subject to other contractual provisions referencing the Euro such a supply contracts would be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues could have adverse consequences

26 for us with respect to our outstanding debt obligations that are Euro-denominated, such as the Notes, and, as we have a substantial amount of debt denominated in Euro, our financial condition may be materially affected.

Furthermore, the Revolving Credit Facility Agreement and the Indenture contain covenants restricting our and our subsidiaries’ corporate activities. See “—Risks Related to Our Financial Profile—We are subject to restrictive debt covenants that may limit our ability to finance future operations and capital needs and to pursue business opportunities and activities.” Certain such covenants impose limitations based on euro amounts (e.g., the amount of additional indebtedness we or our subsidiaries may incur). As such, if the euro were to significantly decrease in value, the restrictions imposed by these covenants would become tighter, further restricting our ability to finance our operations and conduct our day-to-day business. Drawings under the Revolving Credit Facility will bear interest at floating rates that could rise significantly, increasing our costs and reducing our cash flow. The drawings under the Revolving Credit Facility will, and future indebtedness that we may incur could, bear interest at floating rates of interest per annum equal to EURIBOR as adjusted periodically, plus a spread. These interest rates could rise significantly in the future. Although we may enter into certain hedging arrangements designed to fix a portion of these rates, there can be no assurance that hedging will be available or continue to be available on commercially reasonable terms. To the extent that interest rates or any drawings were to increase significantly, our interest expense would correspondingly increase, reducing our cash flow.

BUSINESS

Overview

Founded in 1924 and headquartered in Munich, Schustermann & Borenstein is the leading members-only omni- channel fashion retailer in the off-price fashion retail market. With a strong focus on premium brands, the Group offers over 3,000 designer brands at attractive prices for men, women and children through online and offline sales channels. With its online brand “BestSecret”, the company also has a presence in major European countries. The offline business includes three large-scale retail sites (two in Munich and one in Vienna) with a total net sales area of over 25,000 square meters.

History

S&B was founded in Munich in 1924 by Herman Schustermann as a wholesale business providing tailors and homemakers with fabrics. In 1951, S&B entered into a partnership with Philip Hilsenrath, whose interest was acquired by Benno Borenstein in 1960, marking the beginning of Schustermann & Borenstein and the combination of two textile trading companies with regional customer bases in the vicinity of Munich, Germany. Prior to 2007, the S&B Group’s business operations were limited to its offline stores in Munich. In 2007, the S&B Group launched its online business platform BestSecret. In 2012, the S&B Group’s founding families sold a majority stake of 61% in the business to Ardian. In 2014, construction commenced on the new centralized warehouse and logistics center in Poing, Germany (near Munich), which became operational in early 2016 and consolidated our then existing seven warehouses. Later in 2014, the S&B Group expanded its offline footprint through the opening of a new store in Vienna, Austria. Most recently, in April 2016, the S&B Group acquired SOS, a leading off-price online retailer in Switzerland, to further expand its online presence in the DACH region. In January 2017, funds owned and managed by Permira acquired a majority stake in the S&B Group.

Competitive Strengths

Distinctive business model creating value for customers and suppliers. We have a distinctive multi-channel, invitation-only business model offering customers a permanent collection and wide assortment of off-price premium and affordable luxury fashion merchandise at discounts typically ranging from 20% to 80% of the recommended retail price (RRP). Our multi-channel proposition provides customers the convenience of multi-device online shopping and an exclusive and stylish shopping experience in our stores that is similar to high-street retailers. Customers gain access to our products through an invitation- only membership model. Our products include in-season and off-season merchandise from premium and affordable luxury fashion brands complemented by merchandise from our private labels.

We provide suppliers with an efficient, preferred partner to manage their overstock in a discreet and controlled environment. Our exclusive, invitation-only membership model creates the opportunity for suppliers to ensure that their overstock is sold in a discreet manner, protecting their retail pricing strategies and the desirability of their brands and allowing them to maximize value for their overstock. We have the ability to purchase large quantities of merchandise, including mixed “lots,” which are lots that do not contain a typical distribution of sizes and colors, increasing our value as counterparty to our suppliers, making us the “port of first call” and reinforcing our customer proposition by giving us access to desirable merchandise.

We believe that our business model differentiates us from other players in the industry both from the perspective of the customers and the suppliers. Our relationships with suppliers allow us to provide a more consistent and relevant assortment to our customers compared to other off-price retailers while our retail proposition gives our suppliers a channel to manage their overstock in a manner that is consistent with their brand strategy.

Leading player in a growing market with attractive characteristics and well-positioned to capture further growth in online sales. We operate in the off-price fashion retail market, which is a segment of the broader fashion market, and focus primarily on the premium and affordable luxury segments of that market. We believe that we are the market leader in the premium off-price fashion market in Germany and that our relevant market is sizable and has substantial potential for growth.

Our revenue from online operations experienced 25.1% growth in the year ended December 31, 2018 and accounted for 74.1% of revenue, compared to €289.3 million and 69.5% of our revenue in the year ended December 31, 2017. We believe that there will continue to be a shift to purchasing merchandise through online channels and, as the German market leader in the online off-price fashion market, we believe that we are particularly well-positioned to benefit from this shift. We believe that potential new entrants to the market would have to invest substantially to build comparable clearance channels that protect the integrity of the brands that they sell, whereas we already have mature, developed sales channels and established relationships with high- quality suppliers. Further, we believe that the German off-price fashion market is underpenetrated in comparison to other Western European countries, and that this offers further room for growth. We believe that our addressable customer base will increase as penetration increases based on our referral system.

From a supplier’s perspective, our addressable market is premium and affordable luxury overstock, which excludes unbranded apparel in the mass/value segment and carry-over items that full price retailers can continue to sell for multiple seasons. One of the growth drivers in this market is the prevalence of a “buy-now” concept, where brands sell merchandise immediately after introducing it to the market at fashion shows, which removes the chance to receive feedback from the market and results in production planning inefficiencies that contribute to the supply of overstock. Other structural trends driving the growth of supply in the off-price fashion segment include a shorter collection cycle, resulting in supply of overstock as suppliers have to change collections more frequently, and increasing customer affinity for off-price merchandise.

Large, growing and diversified portfolio with low supplier dependency and direct access to leading international brands creating an attractive assortment for our customers. We currently purchase merchandise from a large and diversified supplier base of over 2,900 suppliers. This has contributed to the breadth of our product portfolio and ensures that we are not reliant on any single supplier, brand or fashion trend. In 2018, no single supplier accounted for more than 5% of our revenue, and our top 10 suppliers accounted for under 20% of our revenue. We experience limited supplier attrition and we actively manage our growing supplier base in order to focus on the most profitable suppliers with the most popular merchandise.

Our ability to differentiate ourselves from other fashion clearance channels such as online shopping clubs, factory outlet centers or other retail wholesalers has made us an attractive partner for suppliers and facilitates our direct access to high quality inventory. Our business model allows us to purchase large lots of unsold merchandise and place it with minimal publicity, which is appealing to suppliers seeking to efficiently manage their overstock and brand image. As a result, we often receive early, direct access to unsold merchandise at discounts of up to 90% compared to RRP from suppliers and have the opportunity to purchase an attractive assortment of merchandise at favorable prices.

We offer our customers an attractive assortment of merchandise because we are able to purchase in-season merchandise in addition to the off-price overstock that we purchase out of season. The ability to offer a selection of in-season merchandise at a discount to RRP, combined with our private label offerings and our off-price off- season overstock, has the effect of creating a permanent, full assortment of merchandise for our customers. We believe that this differentiates us from our competitors and that our premium in-season merchandise attracts customers to our online and offline shops leading to add-on purchases and, thus, added revenue.

Loyal, engaged and affluent customer base resulting in frequent customer purchases and driving low marketing expenses. We have a very loyal, engaged and affluent customer base. We also have a very high referral rate among our members which contributes significantly to our ability to grow our customer base without incurring substantial marketing expenses. For the year ended December 31, 2018, our advertising costs as percentage of revenue were 1.8%.

The way in which our customers utilize our online site demonstrates their high level of engagement. Compared to other online off-price players, we enjoy leading customer engagement metrics including the length of time spent on the site and the number of page views while on the site. We believe that the engagement of our customers in our offline stores is further enhanced by our policy that customers have to spend a minimum of €250 per annum to retain their membership. In addition, we also incentivize spending and customer engagement through our gold, silver and bronze memberships for online members, attained on the basis of the amount that customers spend online and offline.

Distinctive multi-channel distribution capabilities driving industry leading sell-through rates. Whereas other off-price players typically depend on one channel only, we operate both online and offline channels through our website “BestSecret” and our three “Schustermann & Borenstein” stores. We sell in- season and off-season merchandise, in a full range of sizes and category assortments, through our first clearance level both online (typically offering discounts in a range of 20% to 80% of RRP) and in our fashion stores (typically offering discounts in a range of 20% to 55% of RRP). Unsold merchandise is subsequently sold through the second clearance level in our “second season” stores, which are focused on a value-centric proposition with typically greater discount levels of 40% to 80% of RRP. Special events (including our semi- annual “family and friends” events) at our offline stores allow us to sell further stock and increase our sell- through rates by clearing off-season merchandise at larger discounts of typically 30% to 90% of RRP depending on the event. Our combination of different sales channels allows us to optimize our gross margin by testing different pricing levels for each product at each clearance level. Our ability to achieve high sell-through rates of approximately 90 to 95% also enhances our purchasing abilities as it gives us more flexibility to acquire unsorted lots and negotiate more attractive pricing or assortments of merchandise.

Our multi-channel distribution capabilities also offer a range of benefits for customers. We are able to achieve synergies in the interplay between our online and offline channels, such as our service points through which we offer our multi-channel customers in-store pick-up for online orders and allow returns of merchandise ordered online by our multi-channel customers in our stores. Customers are offered a tailored user experience through the opportunity to choose delivery times and payment methods and also through receiving personalized suggestions for clothes and editorial content. Our online channel offers convenience by providing our customers with a multi-device platform to shop from and a 1-3-day delivery time whereas our offline channel provides a destination for our customers that offers a premium, exclusive shopping experience. The combination of our online and offline expertise has resulted in an increase of multi-channel customers, which benefits our overall financial performance as multi-channel customers have an above average spend.

Proprietary and scalable IT and logistics infrastructure. Our membership-based business model provides us with significant volumes of customer information and buying patterns that allow us to take an analytical approach to managing the business. To ensure this, we continuously invest in our back-end and front-end IT capabilities and in our state-of-the-art and scalable IT platform, which consists of e-commerce, retail, logistics, enterprise resource planning (ERP), and business intelligence systems. Through the combination of leading commercial solutions and proprietary in-house developed software, we own and control our business processes and the value-chain from end to end. Our IT organization consisting of software engineering, product management and operations support teams is based in our Munich headquarter as well as in our IT branch office in Granada (Spain).

In 2016, we opened our modern centralized warehouse and logistics center in Poing near Munich.At this facility, we have approximately 107,000 square meters of warehouse space and 78 packing stations, which enables us to process approximately 7,500 items per hour. We have been able to reduce the time until merchandise is available for sale and we believe the centralized warehouse and logistics center provides a platform that is commensurate with our needs for our anticipated growth phase. Additionally, we have integrated our logistics processes with the purchasing department, which will enable us to lower procurement related costs. An expansion of our current warehouse to meet the demands of our growing business is scheduled to commence in 2019 and to be completed by Q4 2020.

Profitable and resilient business model with a strong track record of growth. Our business exhibits high growth and cash conversion. In 2018 we recorded revenues of €488.3 million, which represents an increase of 17.4% over the prior year figure of €416.0 million. During the same period, our IFRS Adjusted EBITDA increased by 11.7% from €77.5 to €86.6 million. We are able to convert our profitable growth into attractive cash flows due to our efficient working capital management and the limited maintenance capital expenditure requirements of our business model. For the twelve months ended December 31, 2018, maintenance and other capital expenditures were 4.2% of revenue and for 2017 2.7% of revenue. Our efficient inventory management has kept the number of days that inventories are outstanding stable at 204 days on December 31, 2018.

The segment of the market in which we operate exhibits attractive resilience from a supply and demand perspective through the economic cycle due to the value that it offers consumers and the attractive procurement opportunities in an economic downturn when suppliers are under greater pressure to sell overstock. Even from 2008 to 2010, in the context of an overall economic contraction, we exhibited stable gross margins and achieved organic growth in revenue with minimal capital expenditures. Over the last ten years, we have also managed to achieve consistent revenue growth and stable gross margins.

Strong and committed management team. We have an experienced management team led by Daniel Schustermann, Amir Borenstein, Marian Schikora. We believe that the management team enjoys especially strong proven and trusted relationships with suppliers and has significant experience in sourcing and purchasing merchandise. Management has already led the business under previous private equity ownership and during that time they have expanded the business internationally, transformed the business from a pure-play offline retailer into a multi-channel retailer and established a new IT and logistics infrastructure to enable the business to continue growing.

The management team has affirmed its long-term commitment to the business and reinvested alongside Permira as part of the Transactions. Management and members of the founding families (some of whom are members of management) hold voting rights (excluding the management equity participation plan) of approximately 9% in PTGMidco S.à r.l., an indirect parent company of the Issuer.

Strategy

Expand our strong online presence in existing markets and pursue selective acquisitions in new markets. We plan to continue to expand our market leading online position by way of targeted membership growth in Germany through viral marketing and continued incentive programs for customer referrals from existing customers. We believe that we can utilize our online channel to establish a footprint in other regions in Germany where we are currently underrepresented and leverage that footprint to open additional offline site locations with an intention to convert online customers to multi-channel customers similar to our recent achievements in Vienna, Austria. Currently, one new store opening is planned in Frankfurt for the third quarter 2019. Potential initiatives for continuing to build our online business include developing strategies to improve basket sizes by data-driven customer insights and continuing to personalize our online experience, further optimizing our loyalty program with special treatment of high-value customers in order to maximize revenue and to develop value- based customer segmentation with personalized communication strategies.

We intend to assess opportunities for international expansion on a case-by-case basis and to target opportunities in high growth markets that do not have a dominant incumbent player. We believe that our expertise in fashion procurement and sales can be successfully adapted to address the local market. We use a “quali-quantitative model” when targeting international markets to assess the attractiveness of the market based on the forecasted market growth, the market size and the current competition in the market. We also consider the potential partnership prospects with local management in the country, general market economics and conditions and whether we believe that our product mix will be attractive in the country. Over the past four years, we entered the Swedish, French and Dutch online markets, and our acquisition of SOS has strengthened and accelerated our growth in Switzerland. We also intend to continue to strengthen our growth in Austria, both online and offline, and we will assess entry opportunities in other European markets in the future.

Strengthen our multi-channel proposition. We plan to strengthen our multi-channel proposition through various initiatives. We have enhanced integration of the offline shopping experience with our online channel, including the introduction of online terminals to our stores, the creation of in-store app features and virtual shelf extension, which is the ability to scan items in a store and check availability across our entire online and offline platform. Additionally, we have introduced a voluntary-paid premium membership program that offers enhanced benefits to customers, including discounts, concierge services, gift wrapping and personal shopping. We have also increased the revenue generated by our online channel through the introduction of targeted marketing campaigns to drive buyer activity among existing customers and provided payment by invoice to our customers as a convenient payment method that enhances the overall shopping experience. We also intend to use enhanced data analytics, including analyzing customer data on purchases, products viewed and items on a wish list, to further customize and tailor displayed content in line with our customers’ individual shopping behavior and brand preferences. In addition, through personalization of our online platform for customers, we intend to connect customers with the most relevant assortment categories and brands for them. Finally, we believe that we can use experience gained from our successful ramp-up of our store in Vienna to strengthen the performance of our other offline stores as well as to successfully open additional offline site locations.

Focusing on operational excellence and efficiency gains. While we currently achieve strong gross margins, we intend to focus on operational excellence and efficiency gains through ongoing initiatives in order to maintain and increase our profitability. We believe that we will continue to experience an increase in productivity due to our centralized warehouse and logistics center and that logistics costs will decline due to lower variable costs and the decrease of fixed costs for logistics. We have also invested in administration, IT and procurement personnel in order to enable us to scale our business and we have implemented a system architecture that provides management with more transparent data to aid in steering the business. We believe that the personnel we have added and the system architecture we have put in place will allow for future growth with an underlying cost structure that will grow more slowly than the overall performance of the business.

Product Offerings and Sales Channels We offer privileged access to a broad and permanent assortment of off-price premium and affordable luxury fashion merchandise through two primary sales channels: our online platform BestSecret and our offline stores. Customers gain access to our products through an exclusive invitation-only membership model, creating high desirability for both customers and suppliers. We offer a broad assortment, with good size availability, of menswear, womenswear, young fashion, shoes, sportswear and accessories from a large variety of brands at discounts typically ranging from 20 to 80% of the recommended retail price. For the twelve months ended December 31, 2018, our revenue by product category were 28% womenswear, 18% menswear, 16% young fashion, 15% shoes, 8% sportswear and 15% accessories and other merchandise (including children’s clothes, bags, jewelry and scarves, among others). In addition, to ensure certain product categories are generally available and kept in stock, we offer a portfolio of over 50 private label brands (including fashion, decorative home merchandise and various supplementary products) alongside our premium suppliers’ products.

Online/E-commerce In 2007, we launched our online shop BestSecret in the German market, transitioning from a pure offline player to a multi-channel fashion retailer. In 2011, we entered the Austrian market, setting the first milestone for our international expansion strategy. Since then, we have continued our online expansion path into four additional countries with the launch of our online presence in the United Kingdom (2013), Sweden (2015), Switzerland (2015), France (2016) and, most recently, The Netherlands (2018).

Our BestSecret customers enjoy access to a multi-device shopping experience from their desktop computers, tablet or mobile phone to allow for high convenience and an on-the-go shopping experience. Our technology supports all major online and mobile platforms, including dedicated iOS and Android applications for both smartphones and tablets. We strive to update our applications on a monthly basis to offer customers new features in addition to the daily new themes and product offerings we share through our individualized newsletters.

In early 2015, we introduced our customer loyalty program SecretClub to foster online active customer engagement and retention. The loyalty program includes three levels of status based on a point system: Bronze (more than 300 points), Silver (more than 1,500 points) and Gold (more than 2,500 points). Members collect points for each online purchase, with €1 spent translating into one status point, as well as for recommending new active customers and other activities (e.g., newsletter subscriptions or special sales events), which we promote regularly. Based on their status, our members enjoy certain benefits, including commissions in the form of vouchers for referrals of new active customers, opportunities to create a wish list for out-of-stock items, reservations on items for a limited period of time and reduced minimum order values. Silver and Gold status members also receive admission to our offline stores in Munich and Vienna and can take advantage of FittingClub, our curated shopping service. Gold status members further enjoy free priority shipping and sneak previews of new merchandise before other active customers.

In April 2016, we acquired Swiss Online Shopping AG (“SOS”), a leading online fashion retailer in Switzerland that operated the online shops FashionFriends, Brandstore and Stromberg. FashionFriends is a widely recognized brand in the Swiss market through its online “flash sales” in Switzerland. After the acquisition, the FashionFriends website was switched to the BestSecret webshop system under the FashionFriends branding. The Brandstore and Stromberg websites were terminated and redirected to FashionFriends. During the course of 2018 we gradually rebranded the FashionFriends website. We have now completed the rebranding to BestSecret and we serve the customers through our operations in Germany.

Offline/Stores Our store portfolio primarily comprises three free-standing sites, each including multiple stores, with a total net selling area of more than 25,000 square meters. Two sites are located in Munich, Germany, and a third site is located in Vienna, Austria. Each of our sites is situated on the periphery of the city center (i.e., off high street locations) which translates into higher sales density, significantly lower rent expenses and attractive cost-margin advantages.

Each of our three sites utilizes a multi-store concept, including, among others, a premium and affordable luxury fashion store and a “second season” store. Our premium and affordable luxury fashion stores offer primarily in- season brand collections at considerable discounts to the recommended retail price, with products typically arranged by key brands and presented, in some cases, in dedicated brand areas. Our second season stores offer discounted merchandise from prior seasons and unsold merchandise from our premium and affordable luxury fashion stores and from the BestSecret online platform with a more economical retail store layout and product presentation as compared to the higher end premium layout and product presentation in our premium fashion stores. While access to our three stores is limited to offline members, day passes are available for tourists and Silver and Gold status online members on a limited basis.

Our Munich sites are further complemented by separate special event stores for temporary sales events, such as sportswear sales, traditional costume sales days and family and friends days. The family and friends sales events, for example, take place twice each year for a four-week period and offer unsold merchandise from our online platform and stores at discounts of typically up to 80% off the recommended retail price to our offline members and their accompanying friends and family. The traditional costumes special event sale, which is also open to non-members, is organized around the annual Oktoberfest in Munich and features a large selection of traditional costumes.

Our Vienna store offers a similar concept to our Munich stores. However, the premium and affordable luxury fashion area and second season area are located in the same building and are not physically separated by different floors or entrances as is the case at our Munich sites. The Vienna store was expanded in 2018 by adding a new first floor and thereby doubling the floor space.

The table below includes an overview of our three sites:

Gross Sales Net Sales Floor Space Floor Space Site Location (sqm rounded) (sqm rounded) Use ––––––––––––– ––––––––––––––– ––––––––––––––– ––––––––––––––––––––––––––– Member Stores Munich, Germany ...... 8,000 6,400 Flagship store (including premium, second season and special event stores) Aschheim-Dornach, Germany (in the vicinity of Munich) . . . . . 7,000 5,400 Flagship store (including premium, second season and special event stores) Vösendorf, Austria (in the vicinity of Vienna) ...... 10,400 6,400 Flagship store (selling both premium and second season items) ––––––––––––––– ––––––––––––––– Total ...... 25,400 18,200 ––––––––––––––– –––––––––––––––

In addition to the sites in the table above, we also operate two small stores in the Munich area. These stores do not have membership restrictions and are not branded as S&B stores. Revenue generated from these small stores is insignificant for the S&B Group.

We also continue to engage in limited wholesale textile trading. Revenue generated from these trading activities is insignificant for the S&B Group.

Payment Methods We offer different payment methods tailored to meet our members’ payment preferences, both in our stores and online shop including cash, cards, PayPal, Direct Debit and purchase by invoice. Cards are a preferred payment option by many of our customers and, as a result, accounts for a significant portion of our sales. We believe that offering a wide array of payment methods enhances customer satisfaction and improves our check-our conversion with respect to our online sales.

Customers We actively manage and control access to our online and offline shopping platforms via an exclusive membership system comprising three different membership categories: full memberships, second season-only store memberships and BestSecret online-only memberships. In addition, we also have relationships with corporate customers to whom we extend memberships. The acceptance of new members, or customers, is by invitation only, with admission of new members to our offline stores being more restrictive than admission to our online shop. New customers in Munich and Vienna, are typically only admitted as members from a waitlist of individuals that fulfil certain criteria and have been recommended by existing members or have applied for membership, with growth in our Munich and Vienna offline membership largely coming from our corporate memberships and in Munich also from our second season-only memberships. Offline memberships require a minimum annual spend of €250 to retain active membership. Online members do not have a minimum spend requirement, although online memberships may be deactivated after a prolonged period of inactivity if reactivation measures, such as vouchers, are not successful. In this way, we are able to control the volume of members in our sales channels to ensure a discreet shopping experience for offline active customers and retain customer desirability of our online platform.

Our product offering and exclusive shopping experience attract an affluent as well as highly engaged and loyal customer base with high levels of recommendation. This enables us to achieve customer base growth with minimum marketing spend. Moreover, we believe that our active customers spend a significant portion of their total annual spending on fashion in our online or offline stores.

Marketing and Customer Relationship Management (CRM) The growth of our sales depends on the success of our viral marketing and continued incentive programs for customer referrals from existing members. We use various tools, such as daily e-mail newsletters, social media and in-store events to support the positioning of our brand, acquire new members and retain existing customers, as well as increase the number of customer visits to our websites, the number of their orders and their basket size per order.

Managing and maintaining the relationship that we have with our customers is an important part of our business. In this regard, we view our customer service as an important part of our strategy, as it provides direct feedback from our customer base and helps to interpret customers’ satisfaction with our merchandise and service and customers’ needs. A systematic customer lifecycle management with dedicated measures to first win new customers, secondly activate, retain and develop existing customers, and, if necessary, re-activate and win back former customers is the key aspect of our customer relationship management strategy. We also inceasingly use enhanced data analytics, including analyzing customer data on purchases, products viewed and items on a wish list, to further customize and tailor displayed content in line with our customers’ individual shopping behavior and brand preferences. In addition, through personalization of our online platform for customers, we intend to connect customers with the most relevant assortment categories and brands for them.

Procurement/Sourcing and Merchandising We source a wide range of well-known premium brands through a centralized and joint procurement process. We employ a mixed sourcing strategy for our online and offline businesses and typically purchase merchandise in large unsorted lots. When purchasing large unsorted lots, we benefit from our multi-channel approach. While pure online retailers cannot sell certain merchandise if only limited size and color options are available, we have the flexibility of selling these at our offline sites. A significant majority of our sourcing relates to the purchase of in-season and off-season overstock merchandise from numerous suppliers. The remaining sourcing is split roughly evenly between (i) pre-season orders of in-season merchandise and (ii) private label merchandise sourced, for example, from Turkey and Hong Kong. A significant majority of merchandise is purchased in euro, while purchases in U.S. dollar have accounted for only a small portion of our total merchandise sourcing in the past.

In 2018, our supplier base increased from a total of 2,731 suppliers in 2017 to 2,940 suppliers. Due to our diverse and extensive supplier base, we are not dependent on any single supplier. For the year ended December 31, 2018, our largest supplier accounted for approximately 4% of total purchasing volumes, with nearly all other suppliers accounting for less than 1% of total purchasing volumes in the same period. We actively manage our supplier base in order to continuously optimize the assortment and volumes of merchandise we require for our business. We maintain long-standing relationships with many of our suppliers and believe that we are the partner-of-choice for many premium brands for the clearance of overstock in the off-price retail market in Germany.

Sourcing for both the online and offline businesses is managed centrally at the level of S&B GmbH. S&B GmbH has entered into a very limited number of long-term supplier framework agreements with individual suppliers, some of which maintain minimum purchase agreements. As a result, most merchandise is sourced on the basis of individual orders consistent with the general practice in the off-price fashion retail market.

Our purchasing managers are dedicated to specific assortment categories, such as womenswear, menswear, young fashion, shoes, sports and accessories. Our merchandising team, which was introduced in 2016, provides crucial support to our procurement with the aim of driving sales and profit by managing inventory investment and driving efficiency in the purchasing process. Key elements of this new integrated approach are financial planning, assortment planning, open-to-buy-management, merchandise allocation to our online and offline distribution channels and management of initial and markdown pricing to enhance gross margin and improve inventory quality.

Logistics In January 2016, we commenced operations at our new leased centralized logistics center in Poing, Germany, located in the vicinity of Munich. Prior to the construction of the centralized logistics center, we operated seven different warehouses for merchandise. The logistics center has approximately 107,000 square meters and combines multi-channel logistics and order fulfillment processes for both our offline and online business. It also allows us to accelerate our process of receiving merchandise through increased automation (and shorter lead times with respect to deliveries through enhanced software), which reduces the time until stock is available for sale. In addition to operational and efficiency improvements, we believe that the logistics center enables us to realize the scalability required to meet further international expansion.

The utilization level of ourlogistics center fluctuates with the seasonality of the business and the growth of our operations. As expected, our growing business has led to increasing levels of utilization and we therefore intend to expand the center by approximately 70,000 square meters by Q4 2020 to provide us with additional flexibility and to address further future growth.

Information Technology (IT) Our business depends significantly on our ability to process transactions on secure information systems and to store, retrieve, process and manage information. Our IT systems are managed in-house by a team of IT professionals who are supported by third parties for certain cloud services, maintenance and software development services. In the years ended December 31, 2017 and 2018, we invested €6.1 million and €9.9 million, respectively, in IT-related capital expenditures to strengthen our IT capabilities and in-house excellence. Our primary front-office IT systems are used to market products to end customers, and to manage, track and deliver orders, monitor stock and interface with suppliers and other business relations. For example, we developed a family of applications for our e-commerce platform, with special versions of iPad, iPhone and Android devices. We have significantly invested in the overall user-experience of our customer- facing systems, as well as in marketing and analytics capabilities to boost the acquisition of new customers, increase sales conversion, and manage churn. The online platform supports multiple currencies and is available in multiple languages, and we have expanded the platform’s payment capabilities to provide better and more flexible options for different customer needs, such as pay-by-invoice or regionally popular payment options, and more. In addition, we have made significant investments into the scalability of the IT architecture across systems and processes, to support future growth of the business and to manage orders more efficiently. We also rely on licensed software for back-office operations, including managing financial and human resources activities. We regularly monitor and update our IT systems and processes to ensure reliability, business continuity and performance. Key IT systems are replicated and stored at an external site, with data systematically backed up daily. Various business continuity plans have been created to respond to possible incidents. These plans are regularly reviewed, tested and updated.

Intellectual Property As of December 31, 2018, we owned or had the right to use 49 trademarks (including 11 German, 21 EU and 15 Swiss trademarks) as well as related tradenames and logos. We also have a portfolio of approximately 80 domain names, notably for our BestSecret, FashionFriends, MySecretShop and FashionClub websites. We believe that our trademarks and tradenames are of value to our business, in particular our BestSecret trademark.

Employees For the twelve months ended December 31, 2018, we had 1,673 employees. The S&B Group and, in particular, S&B Logistik GmbH use temporary employees (Leiharbeitnehmer). The number of such employees fluctuates throughout the year and is typically higher in the second half of the year, particularly in the period leading up to the holiday season.

We believe that our relationships with our employees are good. We have not suffered any disruptions to our business as a result of work stoppages or strikes in recent years. None of the S&B Group’s employees are represented by works councils (Betriebsrat), and, except for S&B Wien, none of the S&B Group’s subsidiaries is bound by any collective bargaining agreements (Tarifverträge) or is a member of an employer association (Arbeitgeberverband). Due to mandatory membership in the Austrian Chamber of Commerce (Wirtschaftskammer), S&B Wien is bound by two collective bargaining agreements for employees and apprentices in commercial operations (Kollektivvertrag für Angestellte und Lehrlinge in Handelsbetrieben and Kollektivvertrag für Handelsarbeiter). None of the companies of the S&B Group has currently established a supervisory board (Aufsichtsrat). According to the German One-Third Participation Act (Drittelbeteiligungsgesetz), we may be required to implement a supervisory board with an employee representative at the levels of S&B GmbH and S&B Logistik in the future.

Litigation We have been, and may from time to time be, party to various claims and legal proceedings arising in the ordinary course of our business, such as employee claims, and intellectual property disputes, among others. We have not been within the past twelve months, and we are not currently a party to any governmental, legal, administrative, arbitration or dispute proceedings, either individually or in the aggregate, that has had, or is expected to have, a material adverse effect on our financial position and results of operations.

Insurance We maintain insurance against various risks related to the ordinary operations of our business, including general business interruption insurance and third-party liability, property damage, electronic damage, transportation damage and directors’ and officers’ liability insurance. We conduct periodic reviews of our insurance coverage, both in terms of coverage limits and deductibles. We believe that the types and amounts of insurance coverage that we maintain are consistent with customary industry standards. However, no assurances can be given that this coverage will be sufficient to cover the cost of defense or damages in the event of a significant claim.

Environmental, Health and Safety Matters Our products, and the third-party manufacturers who supply them, are subject to various supranational, national and local environmental laws and regulations. We believe that we are currently in substantial compliance with all applicable environmental and health and safety laws and regulations. Although our management systems and practices are designed to ensure compliance with applicable laws and regulations, future developments and increasingly stringent regulation could require us to make additional unforeseen environmental, health and safety expenditures to maintain compliance or meet new compliance standards. See also “—Regulatory Environment” and “Risk Factors—Risks Related to Our Business and Industry”.

Real Estate and Leases We do not own any real estate. Our corporate headquarters and all of our stores are leased pursuant to commercial lease agreements.

Lease agreements for our stores are generally long-term leases with an initial fixed term of up to 10 years and the option to extend the lease on one or more occasions for an additional period of time up to five years. All lease agreements have been entered into by S&B GmbH with the exception of our site in Vienna, which is leased by S&B Wien. A number of our lease agreements provide for the right to sublet the leased premises with the prior consent of the lessor. Our lease agreements for the two sites in Munich expire in 2027, and our lease agreement for our site in Vienna expires in 2024.

In September 2015, we entered into a lease agreement relating to our logistics center in Poing, Germany, for a fixed 10-year term. The lease agreement also includes the option to extend the lease agreement twice for an additional five years each. In addition, in June 2016, we entered into an amendment agreement in relation to the existing lease agreement regarding our lease at Margaretha-Ley-Ring in Aschheim-Dornach where we moved our corporate headquarters in the first half year of 2017. Most of our lease agreements for retail space in Germany are with entities controlled by the Schustermann and Borenstein families, and the limited partners of the lessor under the lease agreement relating to the Poing facility also include certain individuals from the Schustermann and Borenstein families. In general, the amount of rent payable under our lease agreements is fixed upon the signing of the relevant lease agreement. Certain of our lease agreements provide for rent adjustments based on consumer price indices or provide for step ups of rent amounts every several years, and the lease agreement for the designer outlet store in Zweibrücken, Germany, provides for a rent amount based, in part, on turnover.

Regulatory Environment Our business is subject to various regulatory requirements. Laws and regulations applicable to our operations may differ due to different national and local laws. Applicable regulatory requirements relate, in particular, to our dealing with customers as well as laws and regulations relating to consumer protection and the processing of customer data. The following section provides a brief description of the primary German legislation and regulations which are applicable to our business. Similar laws and regulations also apply to our business in other jurisdictions in which we operate.

Data Protection The processing of personal data by companies established in Germany is governed by the Federal Data Protection Act (Bundesdatenschutzgesetz) and the Telemedia Act (Telemediengesetz) to the extent a service qualifies as electronic information and communication service within the meaning of section 1 of the German Telemedia Act. The provisions of the Telemedia Act (to the extent applicable) supersede, in part, the provisions of the Federal Data Protection Act within its scope. Generally, personal data – in the absence of consent obtained by the data subject – may only be collected, processed, stored and used for legitimate purposes (also taking into account the overriding interests of the data subject to refuse any such collection, processing, storage or usage of data). Furthermore, data subjects need to be notified about the storage and the collection of their personal data and certain limitations for the storage period apply. Under the Federal Data Protection Act, data subjects are also entitled to request information inter alia as to which data is collected or stored, for which purposes such storage or collection has taken place, what is shared and with whom. The Telemedia Act requires, inter alia, that service providers within its scope provide certain information, such as name and address, contact details and registration details to the respective users.

We are subject to the supervision of local data protection authorities (“DPA”) in Germany. To comply with regulatory requirements imposed on us, we have established data protection processes, including, without limitation, appointing data protection officers, where required, and have implemented protection policies for all employees dealing with personal data.

Data subjects, DPAs and competitors, as well as consumer associations, and other authorized associations may pursue claims against us for breach of the Federal Data Protection Act.

On May 24, 2016, the EU Data Protection Regulation (Datenschutzgrundverordnung) was adopted and became effective on May 25, 2018. The Data Protection Regulation provides for a number of changes to the EU data protection regime, which might entail a partial replacement of current national data protection laws by an EU regulation. The EU Data Protection Regulation further strengthens individuals’ rights and impose stricter requirements on companies with respect to the processing (including storage) of personal data. Among the primary requirements set out in the EU Data Protection Regulation, fines of up to €20 million, or 4% of global turnover on a group basis, whichever is greater and depending on the respective breach, may be imposed for breaches of the EU Data Protection Regulation. Other provisions include stricter requirements and internal processes for the transparency of processed data of individuals, heightened requirements on computer safety measures and controls, increased rights of individuals to demand the deletion of processed data and obligations to demonstrate compliance with the EU Data Protection Regulation, including the obligation to submit data breach notifications to the relevant DPA and data subjects.

Consumer Protection Laws Laws and regulations applying to businesses generally and, in particular, to businesses operating on the Internet affect us. Although there is no specific legal framework governing transactions conducted via the Internet in Germany, as the growth in Internet commerce continues, the number of laws and regulations relating to online business operations is increasing and includes areas such as privacy, content, advertising and information security. For example, in Germany, we are subject to various laws concerning the protection of consumers. In particular, the German Civil Code (Bürgerliches Gesetzbuch) regulates distance selling contracts (Fernabsatzgeschäft), with a view to rendering such sales more transparent for consumers. The consumer benefits, among other things, from a statutory right of withdrawal from a distance selling contract within a period of 14 days after the consumer has received the respective goods and has been informed about his right of withdrawal in a manner compliant with the statutory requirements. During this time, a purchase may be cancelled without any specific reason. The right of withdrawal expires twelve months and 14 days after receipt of goods even if the consumer has not been properly informed about his/her statutory right of withdrawal. If customers exercise their right of withdrawal, we may have to bear the costs for the return of goods and the risk for damage or loss. The German Civil Code, in connection with the Introductory Law to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch), also provides that certain mandatory information must be provided to the consumer, including material characteristics of the purchased goods, the identity of the seller, terms of payment, delivery and/or service, price and payment details and the statutory right of withdrawal. In addition, in accordance with the German Price Indication Regulation (Preisangabeverordnung), retailers must ensure, among other things, that the price of each product is displayed clearly, precisely and legibly and shall be accessible, legible and intelligible on websites.

We are also subject to rules and regulations relating to unfair competition in the jurisdictions in which we operate. In particular, in Germany, competitors, consumer associations (Verbraucherverbände) and other authorized associations may seek to enforce alleged violations of, or the failure to comply with, the Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb). Based on the Act Against Unfair Competition, unfair commercial practices are illegal. Unfair commercial practices include, inter alia, commercial practices which are misleading, which constitute an unreasonable nuisance, which make use of harassment, coercion or undue influence, as well as unsolicited marketing (including unsolicited email marketing).

Foreign Trade and Customs Law We source many of our products within the European Union. Within the European internal market, the principle of free movement of goods applies. With respect to import and export of goods from countries which are not members of the EU, we must comply with national and European foreign trade and customs regulations. At the EU level our relevant regulatory framework is based on the Union Customs Code (Regulation (EU) 952/2013). In Germany, the Foreign Trade and Payments Act (Außenwirtschaftsgesetz) and the Ordinance on the Foreign Trade and Payments Act (Außenwirtschaftsverordnung) constitute additional regulations which, inter alia, set forth rules of procedure. Infringements of customs or foreign trade regulations may be sanctioned with an administrative fine (Bußgeld) if categorized as administrative offenses or with a fine (Geldstrafe) or custodial sentence (Freiheitsstrafe) if categorized as criminal acts. Depending on the extent and nature of the underlying administrative offense, the respective fine may amount to up to €30,000 for violations of procedural regulations and up to €500,000 for violations of other regulations of the Foreign Trade and Payments Act. The authorities may from time to time undertake external audits (Außenwirtschaftsprüfung) to assess whether we have complied with the regulations of the Foreign Trade and Payments Act and the pertaining ordinances.

Whereas imports and exports within the EEA are in principle not liable to customs duty, the movement of goods beyond the frontiers of the Economic Area may be subject to customs. The customs control charges, inter alia, statutory import duties (Einfuhrabgaben). Customs offices may from time to time initiate customs inspections (Zollprüfung) to assess whether customs regulations have been infringed. Infringements may result in a fine of up to €50,000.

The countries belonging to the EEA may charge customs duties if products are exported into such non-EEA countries. We also distribute our products in Switzerland (which does not belong to the EEA). Switzerland, however, is party to a preferential agreement (Präferenzabkkommen), such agreements being concluded with the European Union and certain other countries in order to facilitate the exchange of goods. The rate of customs duty for goods exported into countries which are parties to the preferential agreement is considerably lower than the regular customs duty rate. The customs administration assesses in a preference inspection (Präferenzprüfung) in accordance with the Commission Implementing Regulation (EU) 2015/2447, which applies from May 1, 2016, whether the requirements and conditions set forth in the preferential agreement are complied with.

Product Liability and Textile Labeling Law In Germany, we are in general subject to liability under the Product Liability Act (Produkthaftungsgesetz) which is based on European Directive 85/374/EEC. Under this act, we are liable, regardless of fault, for damage to life, body, health and property caused by defective products to the extent we are seen as manufacturer of such products according to the Product Liability Act. Furthermore, although there is no coherent legal framework for trade in textiles in Germany, certain laws and regulations may apply to us. For example, the German Food, Consumer Goods and Feed Act (Lebensmittel-, Bedarfsgegenstände- und Futtermittelgesetzbuch) and the German Ordinance on Consumer Goods (Bedarfsgegenständeverordnung) include special regulations which aim at preventing possible damage to human health caused by textiles, especially due to toxic substances or contamination. Similarly, the German Chemicals Prohibition Ordinance (Chemikalienverbotsverordnung) prohibits the placing on the market of certain substances and preparations as well as products containing such substances or preparations as listed in detail therein. Furthermore, textiles may only be made available on the German market if they comply with the German Product Safety Act (Produktsicherheitsgesetz). We are further subject to the European Regulation 1007/2011/EU pursuant to which textiles may only be made available on the European market if they are labeled or marked with certain information, in particular regarding textile fibers. Depending on the implementing laws of the EU Member States, infringements of the textile labeling requirements may constitute administrative offenses.

Regulations on Shop Closing Time Most European countries have regulations on shop closing times based on employees’ protection and immission control. This particularly applies to shop closing times on weekends and holidays. Regulations on shop closing times during night hours on working days were recently suspended by several European countries as respective regulations were no longer required following the implementation of Directive 2003/88/EC concerning certain aspects of the organization of working time. In Germany, shop closing times are regulated by regulations at the Federal States level (Ladenschlussrecht) with the exception of Bavaria where the former German Federal Act on Shop Closing still applies. The city retail businesses occasionally make use of prolonged shopping hours. Based on these regulations, the opening of shops on Sundays and holidays is principally prohibited in Germany. However, there are occasional exceptions with respect to Sunday opening hours. Similar to Germany, Austria has enacted strict regulations on shop closing times with only occasional exceptions.

Regulations on Cyber Security On July 6, 2016, the European Directive (EU) 2016/1148 of the European Parliament and of the Council concerning measures for a high common level of security of network and information systems across the Union (the “NIS Directive”) was adopted, which became effective on August 8, 2016. The NIS Directive provides for inter alia security requirements and incident-related notification obligations applying to digital service providers, e.g. online-marketplaces. The member states of the European Union are required to implement the regulations provided by the NIS Directive by May 9, 2018. Therefore, it is not possible to assess the full impact of the NIS Directive on our business in the future. However, in Germany some provisions of the NIS Directive have already been implemented prematurely by the IT Security Act (IT-Sicherheitsgesetz), which entered into force on July 25, 2015 and that modified inter alia the Telemedia Act (Telemediengesetz) which requires us to comply with certain technical and organizational requirements in order to protect our customers’ data and IT systems which our customers use.

MANAGEMENT

PrestigeBidCo

PrestigeBidCo GmbH, as the Issuer of the Senior Secured Notes is a company with limited liability (Gesellschaft mit beschränkter Haftung). The current managing directors (Geschäftsführer) of the Issuer are Daniel Schustermann, Amir Borenstein and Marian Schikora.

The business address of the managing directors is Margaretha-Ley-Ring 27, 85609 Achheim, Germany.

Prestige BidCo GmbH

The managing directors of PrestigeBidCo are responsible for managing the day-to-day business of PrestigeBidCo in accordance with applicable German law and its articles of association (Satzung) (the “Articles of Association”). In addition, the managing directors must ensure appropriate control of risk within PrestigeBidCo and its subsidiaries so that any developments jeopardizing its future as a going concern may be identified at an early stage. The managing directors legally represent PrestigeBidCo in dealings with third parties and in court. Currently, PrestigeBidCo has also established an advisory board (Beirat) (the “Advisory Board”) in accordance with its Articles of Association. The Advisory Board may not exercise management functions, it advises the managing directors on the management of PrestigeBidCo and monitors its conduct of business.

The managing directors are responsible for managing the business of PrestigeBidCo in accordance with the German Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG), its Articles of Association and the rules of procedure (Geschäftsordnung) for the board of managing directors of PrestigeBidCo. Members of the managing directors are usually appointed for an indefinite period, but the Advisory Board may revoke the appointment of each managing director at any time.

The managing directors have overall responsibility for PrestigeBidCo’s business. Managing directors may not deal with, or vote on, measures relating to proposals, arrangements or contracts between himself or herself and PrestigeBidCo.

PrestigeBidCo’s Articles of Association provide that it can only be legally represented by two managing directors or by one managing director in conjunction with an authorized signatory who holds a power of attorney (Prokurist).

Managing Directors of the Group

Daniel Schustermann (Chief Executive Officer) joined the S&B Group in 2011 and is responsible for procurement, merchandise management and value creation. Prior to joining the S&B Group, he worked as a consultant for CMI Munich. Mr. Schustermann holds a bachelor degree from the European Business School.

Josef Amir Borenstein (Chief Product Officer) joined the S&B Group in 1987. He has been part of the management team since 1992 and is responsible for key account management and the private label business. Prior to joining the S&B Group, he worked for the import and fashion agency Horvath&Maille (Toronto).

Marian Schikora (Chief Customer Officer) joined the S&B Group in 2000 and is responsible for customer service, content production, CRM, data, international business, marketing, payment and retail. He has headed BestSecret since 2007, the establishment of which he led within the S&B Group. Prior to joining the S&B Group, Mr. Schikora worked with DataDesign AG as project manager.

Thomas Perlitz (Chief Human Resources Officer) joined the S&B Group in 2019. He is responsible for human resources, recruiting, training and communications. Prior to joining the S&B Group, he was Global Senior Vice President Human Resources and Executive Advisor Global Human Resources at Gerresheimer AG. Before that he held various humans resources positions at Henkel, Ingram Micro Holding GmbH and Siemens Nixdorf.

Frank Stehle (Chief Supply Chain Officer) joined the S&B Group in 2018 from Zalando, where he was Head of Logisitcs Operations. He is responsible for logistics.

Thomas Helmreich (Interim Chief Financial Officer) joined the S&B Group in 2019 and is responsible for finance, business & sales analysis, controlling, commercial management, legal & compliance, investor relations and IT. He previously served as CFO of TAKKO Fashion from 2015 to 2018.

Advisory Board

The Advisory Board may comprise up to ten members, which are appointed by the shareholders of PrestigeBidCo Shareholders’ Meeting.

The current members of the Advisory Board are:

• David Haines (Chairman of the Advisory Board), Luzern, Switzerland; • Jörg Rockenhäuser, c/o Permira Beteiligungsberatung GmbH, Frankfurt a.M., Germany; • Michala Rudorfer, c/o Permira Beteiligungsberatung GmbH, Frankfurt a.M., Germany; • Cheryl Potter, c/o Permira Advisers LLP, London, United Kingdom; • Anat Fuchs-Borenstein, Munich, Germany

Unless otherwise required by its rules of procedure, resolutions of the Advisory Board are passed by a simple majority of the members of the Advisory Board. In order to constitute a quorum, at least three Permira-Members of the Advisory Board must participate in the voting. The Advisory Board is required to meet at least once per month.

While the Shareholder’s Meeting of PrestigeBidCo may resolve to shift further responsibilities to or to withdraw single or all competencies from the Advisory Board, the Advisory Board is, subject to certain exceptions, responsible for (i) advising the board of managing directors of PrestigeBidCo; (ii) appointment, dismissal and discharge of the managing directors of PrestigeBidCo; (iii) granting and withdrawal of proxies (Prokuren) and general powers of attorney (General- und Handlungsvollmachten); (iv) review and approval of annual budgets or business plans; (v) determination and appointment of the auditor for the financial statements and the group financial statements and (vi) approval of the annual financial statements and of the consolidated financial statements.

SHAREHOLDERS

Funds managed by Permira, management and family investors have beneficial ownership, directly or indirectly through intermediate holding companies of the Issuer.

DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS

Senior Secured Notes due 2023 PrestigeBidCo GmbH, a company with limited liability (Gesellschaft mit beschränkter Haftung) incorporated and existing under the laws of Germany (the “Issuer”), offered €260,000,000 aggregate principal amount of 6.250% Senior Secured Notes due 2023 (the “Notes”) as part of the financing for the acquisition of Schustermann & Borenstein Holding GmbH by funds managed by Permira.

The Notes will mature on December 15, 2023. The Issuer pays interest on the Notes semi-annually on each June 15 and December 15. Prior to December 15, 2019, the Issuer will be entitled, at its option, to redeem all or a portion of the Notes by paying the relevant applicable premium. Some or all of the Notes may also be redeemed at any time on or after December 15, 2019 at certain redemption prices. In addition, prior to December 15, 2019, the Issuer may redeem at its option up to 40% of the aggregate principal amount of the Notes with the net proceeds from certain equity offerings at a certain redemption price, provided that at least 60% of the aggregate principal amount of the Notes remains outstanding. Upon the occurrence of certain events constituting a change of control, the Issuer may be required to make an offer to repurchase all of the Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. However, a change of control will not be deemed to have occurred if the Issuer’s consolidated net leverage ratio is less than certain specified levels at the time of such event. In addition, the Issuer may redeem all, but not less than all, of the Notes upon the occurrence of certain changes in applicable tax law.

Revolving Credit Facility Agreement In December 2016, PrestigeBidCo GmbH (as original borrower and original guarantor), Barclays Bank PLC, Goldman Sachs Bank USA and UniCredit Bank AG, London Branch (as lenders), UniCredit Bank AG, London Branch (as facility agent) and UniCredit Bank AG, London Branch (as security agent), among others, entered into a revolving credit facility agreement providing for borrowings up to an aggregate principal amount of €35.0 million on a committed basis (the “Revolving Credit Facility”). The Revolving Credit Facility may be utilized by any current or future borrower under the Revolving Credit Facility in euro, Swiss francs, US dollars, Pounds Sterling or certain other currencies (if agreed) by the drawing of cash advances, the issue of Letters of Credit (upon the appointment of an Issuing Bank) and by way of any Ancillary Facilities that may be made available thereunder (each as defined in the Revolving Credit Facility Agreement). Subject to certain exceptions, loans may be borrowed, repaid and re-borrowed at any time. Borrowings are available to be used for (i) general corporate and working capital purposes of the Group (as defined in the Revolving Credit Facility Agreement) including, without limitation, for payment of interest under the Notes.

PrestigeBidCo GmbH established an additional revolving credit facility of €15.0 million by way of increase of the existing facility to €50.0 million. The additional facility lender is UniCredit Bank AG, London branch. On January 02, 2019 the lender confirmed the granting of the additional facility. Utilizations under the Additional Facility may only be used for financing or refinancing the working capital requirements and/or general corporate purposes of PrestigeBidCo GmbH and its Restricted Subsidiaries. The term of the Additional Facility is valid until further notice. The additional facility ranks pari passu with the existing facility.

ATTACHMENT: AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PRESTIGEBIDCO GMBH

Audited IFRS Consolidated Financial Statements of PrestigeBidCo GmbH for the financial year from January 1 to December 31, 2018

Consolidated statement of comprehensive income

KEUR Notes 2018 2017

Revenue 4.1, 6.3 488,289 398,384 Cost of sales 4.6, 6.3 -259,542 -207,742 Gross profit 6.3 228,747 190,642

Selling and distribution costs 4.6 -159,261 -131,942 Administrative expenses 4.6 -43,185 -45,536 Other operating income 4.2 1,536 1,488 Other operating expenses 4.3 -2,050 -1,199

Earnings before interest and taxes (EBIT) 25,787 13,453

Financial income 4.5 33 39 Financial expenses 4.4 -23,828 -22,953

Earnings before taxes (EBT) 1,992 -9,461

Income taxes 5.15 4,864 1,984

Net income for the period 6,856 -7,477

Other comprehensive income

Currency translation difference 231 -155

Comprehensive profit/loss 7,087 -7,632

Consolidated statement of financial position

KEUR ASSETS Notes 31-Dec-18 31-Dec-17

Non-current assets Property, plant and equipment 5.1 125,565 121,064 Goodwill 5.2 254,394 254,394 Other intangible assets 5.3 416,998 449,331 Non-current financial assets 5.4 491 578 Total non-current assets 797,448 825,367

Current assets Inventories 5.5 122,256 124,346 Prepayments for inventories 5.5 4,724 5,505 Trade and other receivables 5.6 1,576 1,357 Income tax receivable 5.15 2,822 2,690 Other current financial assets 5.4 2,045 1,744 Other current non-financial assets 5.7 13,573 10,242 Cash and cash equivalents 5.9 66,951 44,888 Total current assets 213,947 190,772

TOTAL ASSETS 1,011,395 1,016,139

KEUR EQUITY AND LIABILITIES Notes 31-Dec-18 31-Dec-17

Equity Issued capital 5.10 25 25 Other capital reserves 5.10 474,177 474,177 Foreign currency translation reserve 76 -155 Retained earnings -8,774 -15,630 Total equity 465,504 458,417

Non-current liabilities Non-current interest bearing loans and borrowings 5.12 253,762 252,864 Other non-current financial liabilities 5.8 80,614 79,511 Deferred tax liabilities 5.15 114,556 129,960 Provisions 5.11 465 454 Total non-current liabilities 449,397 462,789

Current liabilities Trade and other payables 5.13 14,763 16,693 Other current financial liabilities 5.8 4,308 3,342 Income tax payable 5.15 8,746 8,083 Current interest bearing loans and borrowings 5.12 810 804 Current non-financial liabilities 5.14 62,271 58,561 Provisions 5.11 5,596 7,450 Total current liabilities 96,494 94,933

TOTAL EQUITY AND LIABILITIES 1,011,395 1,016,139

Consolidated statement of cash flows

KEUR Notes 2018 2017

Earnings before tax 1,992 -9,461 Adjustments to reconcile profit before tax to net cash flows: Depreciation of property,plant and equipment 5.1 11,837 9,825 Amortisation of intangible assets 5.3 41,927 39,006 Net foreign exchange differences 4.2, 4.3 399 154 Gain on disposal of property, plant and equipment -19 -27 Financial income 4.5 -33 -39 Financial expenses 4.4 23,828 22,953 Movements in other liabilities 3,351 1,910 Movements in other assets -555 -1,134 Release of other provisions -2,100 - Working capital adjustments: Increase in trade and other receivables -217 -514 Increase in inventories, prepayments made for inventories and similar assets -195 -29,211 +/- Increase/decrease in trade and similar liabilities -1,801 26,805 78,414 60,267 Income tax paid -10,038 -7,750 Net cash flows from operating activities 68,376 52,517

Investing activities Purchase of property, plant and equipment -10,670 -5,572 Purchase of intangible assets -6,226 -3,009 Development expenditures -3,368 -1,889 Acquisition of a subsidiary - -454,265 Cash acquired - 11,365 Net cash flows used in investing activities -20,264 -453,370 Financing activities Payment of transaction costs on issue of senior secured notes - -7,931 Proceeds from lease receivables 111 101 Payment of finance lease liabilities -9,399 -8,296 Proceeds from borrowings - - Cash received from capital contributions 5.10 - 434,271 Repayment of borrowings - -215,679 Interest received 2 8 Interest paid -16,818 -16,599 Net cash flow from/(used in) financing activities -26,104 185,875 Net change in cash and cash equivalents 22,008 -214,978 Net foreign exchange differences 55 -158 Cash and cash equivalents at 1 January* 5.9 44,888 260,024 Cash and cash equivalents at 31 December 5.9 66,951 44,888

Reconciliation of financial liabilities: 2018 2017

At January, 01 336,521 252,561 Changes from financing cash flows -26,217 -240,574 Changes arising from obtaining control of subsidiaries - 302,355 Changes in lease contracts 5,650 -752 Interest relating to IFRS 16 lease liabilities 5,810 5,334 Interest expense financial liabilities 17,721 17,597 At December, 31 339,494 336,521

Consolidated statement of changes in equity

Foreign Issued Capital currency Retained Total capital reserves translation earnings reserve (Note KEUR (Note 5.10) 5.10) As at January 01, 2018 25 474,177 -155 -15,630 458,417

Profit for the period 0 0 0 6,856 6,856

Other comprehensive income 0 0 231 0 231

Capital contribution 0 0 0 0 0

As at December 31, 2018 25 474,177 76 -8,774 465,504

Foreign Issued Capital currency Retained Total capital reserves translation earnings reserve (Note KEUR (Note 5.10) 5.10) As at January 01, 2017 25 0 0 -8,153 -8,128

Profit for the period 0 0 0 -7,477 -7,477

Other comprehensive income 0 0 -155 0 -155

Capital contribution* 0 474,177 0 0 474,177

As at December 31, 2017 25 474,177 -155 -15,630 458,417

*thereof non-cash contribution 39,906 kEUR

Notes to the consolidated financial statements as of December 31, 2018

Content 1. Company information ...... 1 2. General principles ...... 1 2.1 General information and application of IFRS ...... 1 2.2 New accounting standards ...... 2 2.3 Principles of consolidation ...... 4 2.3.1 Basis of consolidation and Group information ...... 4 2.3.2 Methods of consolidation ...... 5 2.4. Use of estimates and assumptions ...... 5 2.4.1 Impairment of non-financial assets...... 6 2.4.2 Assessment of realizability of deferred tax assets on loss carryforwards and ...... tax provision ...... 6 2.4.3 Determination of provisions for restorations expenses and other provisions ...... 6 2.4.4 Calculation of returns and unredeemed gift vouchers ...... 7 2.4.5 Inventory valuation ...... 7 2.4.6 Segment reporting ...... 7 2.4.7 Assessment of the necessity and amount of allowances on receivables...... 7 2.4.8 Interest rate in connection with IFRS 16 ...... 7 2.5 Business combinations and goodwill ...... 8 2.6 Current and non-current portions ...... 8 2.8 Revenue recognition ...... 9 2.9 Taxes ...... 10 2.10 Foreign currencies ...... 12 2.11 Intangible assets ...... 12 2.12 Property, plant and equipment ...... 13 2.13 Inventory ...... 14 2.14 Impairment of non-financial assets ...... 14 2.15 Cash and cash equivalents ...... 14 2.16 Lease ...... 14 2.17 Trade receivables ...... 15 2.18 Other financial assets ...... 15 2.19 Financial liabilities ...... 16

2.20 Provisions ...... 16 2.21 Share-based payment ...... 17 2.22 Significant events after the reporting date ...... 17 3. Capital management ...... 18 4. Notes to the statement of comprehensive income ...... 19 4.1 Revenue ...... 19 4.2 Operating expenses ...... 20 4.3 Other operating income ...... 20 4.4 Other operating expenses ...... 21 4.5 Financial expenses ...... 21 4.6 Financial income ...... 21 5. Notes to the consolidated statement of financial position ...... 22 5.1 Property, plant and equipment ...... 22 5.2 Goodwill ...... 23 5.3 Intangible assets ...... 26 5.4 Financial assets ...... 27 5.5 Inventories and prepayments ...... 27 5.6 Trade receivables ...... 28 5.7 Non-Financial assets ...... 29 5.8. Lease ...... 29 5.9 Cash and cash equivalents ...... 30 5.10 Equity ...... 31 5.11 Other provisions ...... 31 5.12 Loans and borrowings ...... 32 5.13 Trade payables ...... 33 5.14 Other non-financial liabilities ...... 33 5.15 Taxes ...... 34 5.16 Additional disclosures regarding financial instruments and risk management ...... 38 6. Other explanatory notes ...... 42 6.1 Contingencies and other financial obligations ...... 42 6.2 Related party disclosures ...... 42 6.3 Additional disclosures on the consolidated statement of comprehensive income ...... 43

Notes to the consolidated financial statements as of December 31, 2018

1. Company information

The consolidated financial statements for the period ended December 31, 2018 of PrestigeBidCo GmbH and its subsidiaries (collectively, the Group) were authorized by the Management Board by the signed financials dated March 21, 2019. The registered office of PrestigeBidCo GmbH (the parent) is located at Margaretha-Ley-Ring 27, Aschheim, Germany. The company is registered with the Munich Registry Court (record HRB 227078). Based on a frame agreement signed October 24, 2016, PrestigeBidCo GmbH acquired Schustermann & Borenstein Holding GmbH and all its subsidiaries (S&B Group) with an effective date as basis for consolidation as of January 19, 2017. Prior to the acquisition of Schustermann & Borenstein Holding GmbH, PrestigeBidCo GmbH issued a Bond as of December 20, 2016 in the amount of KEUR 260,000 with a maturity of seven years. Schustermann & Borenstein Holding GmbH is the parent of the Schustermann & Borenstein Group, which is a members-only, online and offline, off-price fashion retailer with a strong focus on selling premium and luxury brands. PrestigeBidCo GmbH is a wholly owned subsidiary of PrestigeBidCo Holding GmbH. PrestigeBidCo GmbH publishes consolidated financial statements in accordance with Section 291 HGB and voluntarily in accordance with International Financial Reporting Standards (IFRS). Due to the acquisition of S&B Group by PrestigeBidCo GmbH as of January 19, 2017 the previous year figures include S&B Group from January 19, 2017 and PrestigeBidCo GmbH as parent from January 1, 2017. The previous year’s figures in the consolidated financial statements are only comparable to a limited extent.

2. General principles

2.1 General information and application of IFRS

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and the interpretations of the IFRS Interpretations Committee (IFRS IC) as adopted in the European Union (EU). A Group management report and the obligatory disclosures to be made under German commercial law pursuant to Section 315e (1) HGB were added to the consolidated financial statements.

The consolidated financial statements have been prepared on a historical cost basis.

To improve the clarity of presentation, various items in the consolidated statement of financial position and consolidated statement of comprehensive income have been summarized. These items are shown separately and explained in the notes to the consolidated financial statements.

The presentation and the components of the consolidated financial statements is conformant with the provisions of IAS 1.10. The consolidated statement of comprehensive income is prepared based on the nature of expense method. The consolidated statement of cash flows is prepared based on IAS 7.

As a rule, the Group classifies assets in accordance with IAS 1.60 ff. as current if they are expected to be recovered within twelve months from the reporting date. Conversely, all assets that will remain within the Group for longer than one year are classified as non-current assets. In accordance with IAS 1.68, inventories and trade receivables are always presented as current assets. Deferred tax assets, by contrast, are always presented as non-current assets.

In accordance with IAS 1.69 liabilities are classified as non-current if the Company has the right to defer settlement beyond one year. Deferred tax liabilities are classified as non-current liabilities in accordance with IAS 1.56.

The consolidated financial statements are prepared based on historical cost on the reporting date, December 31, 2018. Historical costs are generally based on the fair value of the consideration paid in exchange for the asset. The fair value is the price that would be received in orderly transactions between market participants on the measurement date for the sale of an asset or paid for the transfer of liabilities. This applies regardless of whether the price can be directly observed or is estimated using a measurement method.

The consolidated financial statements are presented in euros (EUR) and all values are rounded to the nearest thousand (KEUR), except when otherwise indicated. Rounding differences may occur.

The financial year corresponds to the calendar year. The separate financial statements of the companies included in the scope of consolidation are prepared as of the same reporting date as the consolidated financial statements.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires Management to exercise its judgment in the process of applying the Group’s accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in section 2.4 of the Notes.

The management prepared the consolidated financial statements on a going concern basis.

2.2 New accounting standards The Group applied all standards and interpretations (including amendments) as adopted by the EU in its consolidated financial statements, which are mandatory for financial years starting on or after January 1, 2018. New standards are IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with customers” which were already adopted as of January 01, 2017 by the Group. Amendments that are mandatory as of January 01, 2018 relate to minor changes of IFRS 1, IFRS 12 and IAS 28 (Annual Improvements 2014-2016) as well as to IFRS 2, IFRS4, IFRS 15 and IAS 40.

Furthermore, the Group respectively the parent entity has early adopted IFRS 16 “Leases” which is mandatory as of January 01, 2019. The standard was adopted in 2017.

The following accounting standards, relevant for the Group, had already been issued by the IASB as of the time of the consolidated financial statements were authorized for issue, but their adoption is not yet mandatory and they have not yet been adopted by the Group and do not have any material impact on the Group’s financial performance and position.

Standard / Impending change Effective Date / Anticipated Effects Interpretation EU Endorsed Amendments to Addresses the definition of a business 01/01/2020 Application has minor IFRS 3- aimed at resolving the difficulties that impact on the arise when an entity determines whether consolidated financial Business No Combinations it has acquired a business or a group of statements assets. Amendments to Change of existing requirements in 01/01/2019 No significant impact on IFRS 9- IFRS 9 regarding termination rights in the consolidated financial order to allow measurement at amortized statements expected Financial Instruments cost even in case of negative compensation payments. Yes Annual Minor amendments to four IFRSs 01/01/2019 No significant impact on Improvements to (IFRS 3, IAS 12, IAS 23 & IFRS 11) the consolidated financial

IFRS Standards statements expected 2015-2017 Cycle No Amendments to Following the issue of the revised 01/01/2020 No significant impact on References to Conceptual Framework for Financial the consolidated financial the Conceptual statements expected Reporting in 2018 the amendments No framework in revise footnotes or references in several IFRS Standards standards to quote the revised or newly added definitions from the 2018 Conceptual Framework. Amendments to The clarifications relates to whether the 01/01/2019 No significant impact on IAS 28 - measurement, in particular relating to the consolidated financial Long-term impairment, of long term interests in statements expected Yes Interests in associates and joint ventures that, in Associates and substance, form a part of the ´net Joint Ventures investment´ in the associate or joint venture should be governed by IFRS 9,IAS 28 or a combination of both.

IFRIC 23 - The clarification relates to the 01/01/2019 Possible impact in terms Uncertainty over determination of taxable profit (tax loss), of reclassification for Income Tax tax bases, unused tax losses, unused tax provisions Yes Treatments credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

IFRS 17 - The standard establishes principles for 01/01/2021 No significant impact on Insurance the recognition, measurement, the consolidated financial Contracts presentation and disclosure of Insurance statements expected No contracts.

Amendments to The amendments address the accounting 01/01/2019 No significant impact on IAS 19 - when a plan amendment, curtailment or the consolidated financial Employee settlement occurs during a reporting statements expected period. Yes Benefits

Amendments to Definition of material was changed 01/01/2020 No significant impact on IAS 1 and IAS 8 considering new aspects such as the consolidated financial obscuring material information that could statements expected reasonably be expected to influence decisions that primary users make. No

2.3 Principles of consolidation

2.3.1 Basis of consolidation and Group information The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at December 31, 2018. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

· Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee), · Exposure, or rights, to variable returns from its involvement with the investee, · The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement with the other vote holders of the investee, · Rights arising from other contractual arrangements, · The Group’s voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non- controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

As a general rule, subsidiaries are included in the consolidated financial statements by way of full consolidation from the time when the Group obtained control over or the ability to control the subsidiary. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

The consolidated financial statements of the Group include:

Equity stake in % Company name Business as of activity Location December 31, 2018

PrestigeBidCo GmbH Parent Company Aschheim Schustermann & Borenstein Holding GmbH Holding Aschheim 100 Schustermann & Borenstein GmbH Retail Aschheim 100 Best Secret GmbH Retail Aschheim 100 S&B Outlet GmbH Retail Aschheim 100 Schustermann & Borenstein Logistik GmbH Logistic Poing 100 Swiss Online Shopping AG (Switzerland) Retail Langenthal 100 Schustermann & Borenstein Wien GmbH (Austria) Retail Vienna 100

The holding company

The next senior holding companies of PrestigeBidCo GmbH are PrestigeBidCo Holding GmbH and PTG Lux S.a.r.l (Luxembourg). The ultimate holding company of PrestigeBidCo GmbH is Permira Holdings LLP (England and Wales).

2.3.2 Methods of consolidation Capital consolidation is performed by offsetting the acquisition costs against the Group share of the fair value of the net assets of the consolidated subsidiaries at the time of acquisition. At this juncture the purchase method is used. Receivables and corresponding liabilities of consolidated companies were offset against each other. Significant interim results from intra-Group service transactions were eliminated in the consolidated financial statements. Sales and other income from intragroup supply and service relationships were offset against the corresponding expenses. The financial statements of all subsidiaries included in the consolidated financial statements are prepared as of December 31, 2018.

2.4. Use of estimates and assumptions The preparation of consolidated financial statements in accordance with IFRS requires management to make assumptions and estimates that have effects on the amounts carried and the related disclosures. Although these estimates, to the best of management‘s knowledge, are based on the current events and measures, there may be deviations between estimated and actual results. Significant estimates and assumptions have been used for the following matters in particular: Ø Impairment of non-financial assets Ø Determination and assessment of the realizability of deferred tax assets (DTA) on loss carryforwards and tax provision Ø The determination of provisions for restoration expenses and other provisions Ø Assumptions for the calculation of returns and unredeemed coupons Ø Inventory valuation Ø Segment reporting Ø Assessment of the necessity and amount of allowances on receivables Ø Interest rate in connection with IFRS 16 These key forward-looking assumptions and estimates, which involve a significant risk of changing the carrying amounts of assets and liabilities within the next financial year, are discussed below.

2.4.1 Impairment of non-financial assets At the end of each reporting period the Group assesses whether there is any indication that an asset may be impaired. This assessment implies significant judgment and estimates. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amount is sensitive to the discount rate used for the DCF model that is the basis for the calculation of the fair value less costs of disposal used as well as the expected future cash flows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill. The key assumptions used to determine the recoverable amount for the goodwill, including a sensitivity analysis, are disclosed and further explained in note 5.2. No impairment loss has been recognized as of 31 December 2018.

2.4.2 Assessment of realizability of deferred tax assets on loss carryforwards and tax provision Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities. The level of provisions is formed based on various factors like experiences in past with external tax audits and different treatment of tax regulations by tax authorities.

Deferred tax assets are recognized to the extent that it is probable that they will be recovered, which is dependent on the generation of sufficient future taxable profit. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These judgments and estimates are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognized at the reporting date. In such circumstances, some, or all, of the carrying amount of recognized deferred tax assets and liabilities may require adjustment, resulting in corresponding credit or charge to the income statement.

2.4.3 Determination of provisions for restorations expenses and other provisions The determination of provisions for restoration expenses requires assumptions and estimates regarding the discount rates, expected costs and timing of these costs. If the interest effect resulting from the discounting is significant, provisions are discounted at a pre-tax interest rate that reflects the risks specific to the liability.

Provisions mainly comprise provisions for restoration expenses and provisions for tax risks. Whether a present obligation is probable or not requires judgement. The nature and type of risks for these provisions differ and management’s judgement is applied regarding the nature and extent of obligations in deciding if an outflow of resources is probable or not.

As at December 31, 2018, long-term provisions were discounted at an interest rate of 7.3% (previous year: 7.3%). In the case of discounting, timing-related interest effects are recognized as finance costs. Further details are described in Note 5.11.

2.4.4 Calculation of returns and unredeemed gift vouchers

Returns

For transactions which do have a legal 14-day refund policy, the company calculates the amount of the expected returns as of the balance sheet date based on historical return rates under consideration of the actual returns until the date of preparing the consolidated financial statements, which are taken into account in order to reduce revenue. As of December 31, 2018, deferred sales amounted to KEUR 22,709 (previous year: KEUR 19,085). The right to recover possession of expected returns is reported under other non-financial assets.

Unredeemed gift vouchers

From the sale of vouchers, the acquiring customer arises a claim for fulfillment up to a limitation period of 3 years. If vouchers sold are not redeemed within this limitation period, the Group realizes the revenue from the voucher sale. Liabilities from the sale of gift vouchers are recognized under other non- financial liabilities and amounted as of December 31, 2018 to KEUR 1,628 (previous year: KEUR 1,342).

2.4.5 Inventory valuation As part of the inventory valuation, the net selling price must be determined for testing inventories of lower of cost or market value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated necessary selling expenses. Estimates are necessary to determine the sales proceeds that can be achieved in the normal course of business. Further details are given in Note 5.5.

2.4.6 Segment reporting IFRS 8 requires that operating segments be defined on the basis of the internal reports of corporate divisions that are regularly reviewed by the chief operating decision maker (CODM) of the Group for the purpose of making decisions about the allocation of resources and assessing the financial performance of the given segments “Offline” and “Online”. Thus, the internal organizational and management structure and the internal reports submitted to the Management Board form the basis for determining the segment reporting format of the Group. Primary emphasis is placed on the indicator Gross Profit and Gross Profit Margin. The recognition and measurement methods of the reportable segments correspond to the consolidated recognition and measurement methods described in Note 6.3. The Group applies IFRS 8 voluntarily.

2.4.7 Assessment of the necessity and amount of allowances on receivables The determination of necessity and allowances on receivables requires assumptions and estimates regarding the credit risk and applied time intervals. In the case of a return debit, the company informs the customer and prolongs the payment term for a week. When the defined time period elapsed written warnings are sent to the customers. Further details are given in Note 5.6 and Note 5.16.

The Group uses a provision matrix to calculate expected credit losses for receivables. The provision rates are based on days past due and Group’s historical observed default rates. The default rates are evaluated based on the expectations regarding the collectability of the receivables.

2.4.8 Interest rate in connection with IFRS 16 The interest rate in connection with IFRS 16 was determined considering the debt structure of the Group and the useful life time of the leased assets.

2.5 Business combinations and goodwill Business combinations are accounted for using the acquisition method according to IFRS 3. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests over the net identifiable assets acquired and liabilities assumed.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. More detailed information on impairment testing can be found under 5.2.

2.6 Current and non-current portions The group classifies its assets and liabilities in the statement of financial position as current and non- current assets or liabilities. An asset is classified as current when:

· it is expected to be realized, or intended to be sold or consumed, within the normal operating cycle,

· it is expected to be realized within 12 months after the reporting period or · it is cash or a cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for a period of at least 12 months. All other assets are classified as non-current.

A liability is classified as current if: · it is expected to be settled within the normal operating cycle, · it is expected to be realized within 12 months of the end of the reporting period or · the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current assets or liabilities.

2.7 Fair value measurement

The group applies measurement techniques that are appropriate under the respective circumstances and for which sufficient data is available for fair value measurement. In the process, observable market inputs are to be preferred to non-observable inputs. Assets and liabilities measured or presented at fair value in the consolidated financial statements are classified on the basis of the following fair value hierarchy. The classification uses the input parameters of the lowest category that is material to the fair value measurement. · Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities · Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly · Level 3: Unobservable inputs for the assets and liabilities

2.8 Revenue recognition The Group recognizes revenue according to IFRS 15 at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods to the customers, net of taxes and duties, and taking into account agreed payment terms. Net sales are reported net of discounts, rebates, taxes and returns. Since the Group has price discretion in its sales transactions and also bears the inventory and credit risk, the Group generally acts as a principal and is therefore the principal party of all sales transactions. In addition, the Group purchases some products such as jewellery on a commission basis, acts as an agent but the Group is free in formation of the prices. The revenue is recognized net of commissions earned.

The revenue recognition requires the fulfillment of the following recognition criteria:

Sale of goods and products

The Group’s contracts with customers for the sale of merchandise generally include one performance obligation. The Group has concluded that revenue from sale of merchandise should be recognized at the point in time when control of the asset is transferred to the customer. The realization of revenue therefore takes place with handover of the goods in the offline business and with delivery of the goods to the customer in online trading.

Treatment of returns in the online business

Under IFRS 15, the consideration received from the customer is variable because the contract allows the customer to return the products. The Group uses the expected value method to estimate the merchandise that will be returned because this method predicts the best the amount of variable consideration to which the Group will be entitled. The Group applies the requirements in IFRS 15 on constraining estimates of variable consideration such as return rate to determine the amount of variable consideration that can be included in the transaction price. The Group presents a refund liability (other non–financial liabilities) and an asset (other non-financial assets) for the right to recover products from a customer separately in the statement of financial position, taking into account the costs incurred for processing the return and the losses resulting from disposing of these goods. The Group presents the expected returns of goods on a gross basis in the statement of comprehensive income and reduces revenue by the full amount of sales that it estimates to be returned. The dispatch of goods that is recorded in full upon dispatch of the goods is then corrected by the estimated amount of returns. Generally, the Group allows the right to return the goods within a period of 14 days after receipt of the goods.

Friends recommend friends – loyalty program

The Group has implemented a recommendation program for customers. Every time the “new” or recommended customer places an order the “old” customer receives an one-time 10% commission voucher and a 5% voucher based on the total purchases of the “new” customer within a period of 12 months. According to IFRS 15, both vouchers represent a payment to customers and therefore a revenue reduction when exercising by customer.

2.9 Taxes

Current income taxes

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognized directly in equity is also recognized in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

For the purpose of measuring current German taxes, a uniform corporate income tax rate of 15% is applied to distributed and retained earnings and a solidarity surtax rate of 5.5% is applied to that amount. That yields a tax rate of 15.83%. In addition, the German trade tax is imposed on profits earned in Germany. The trade tax is based on the assessment rates of the various municipalities and the basic federal rate, which is a flat rate of 3.5% according to the business tax reform of 2008 in Section 11 (2) GewStG. The trade tax varies, depending on the different assessment rates of the municipalities, but a flat rate of 11.91% is applied in the consolidated financial statements of the Group.

The profits earned by the non-German Group companies are calculated on the basis of the national tax laws applicable in each country and taxed at the tax rates in effect in those countries. The country- specific tax rates range from 21 to 25%. The Group tax rate is 27.74%. Current tax expenses are calculated on the basis of the taxable income for the year. Taxable income differs from the net profit presented in the consolidated statement of comprehensive income as a result of the expenses and income that will not be taxable or tax-exempt in later years, or ever. The Group’s liability for current taxes is calculated on the basis of the tax rates currently in effect or to be in effect in the near future.

Deferred taxes

Deferred taxes are provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

· Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and · In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized except:

· Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and · In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at the end of each reporting period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted at the end of the reporting period.

Deferred income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or directly in equity and not in the profit or loss.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognized subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognized in profit or loss.

Value-added taxes

Revenues, expenses and assets are recognized net of the amount of Value-added tax (“VAT”) except:

· If VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case VAT is recognized as part of the cost of acquisition of the asset or as part of expense item as applicable; and · Where receivables, payables and finance lease liabilities are stated with the amount of VAT included. The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.

2.10 Foreign currencies The Group’s consolidated financial statements are presented in Euros, which is also the parent company’s functional currency. That is the currency of the primary economic environment in which the Group operates. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Foreign currency transactions and balances Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date of the transaction. In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Group initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of advance consideration. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

Foreign operations The Group has analyzed the group companies and concluded that for each company the currency of origin represents the functional currency. During consolidation, all assets and liabilities of group companies denominated in foreign currencies are translated into Euros at the closing rate. Assets and liabilities are translated at the exchange rate on the respective reporting date, while equity is translated at historical exchange rates. Income and expenses are translated at average exchange rates. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognized in profit or loss.

2.11 Intangible assets Intangible assets acquired in the context of a business combination under IFRS 3 are recognized separately from goodwill and measured at fair value at the acquisition date. This includes: Customer relationships and trademarks. They are recognized as an intangible asset according to IAS 38, measured at fair value and amortized over their expected useful lives.

An intangible asset is derecognized upon disposal or when no further economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognized. Intangible assets which are not acquired as part of a business combination as purchased licenses are initially recognized at cost.

Intangible assets with a finite useful life are amortized on a straight-line basis over their economic useful life. Intangible assets with finite useful lives are reviewed for possible impairment if there are indications of impairment at the balance sheet date. The remaining useful life and the amortization method for intangible assets with a finite useful life are reviewed at least at the end of a reporting period. If the reasons for impairment have been eliminated, a reversal to a maximum of the historic acquisition or production costs is made as the upper limit. Required changes in amortization period and method are treated as changes in estimates. Impairment losses on intangible assets e.g. customer relationships and trademarks with finite useful lives are included in depreciation within selling expenses.

Useful lives Years Software 3-7 Licenses 3-7 Trademark „Schustermann & Borenstein“ 30 Trademark „BestSecret“ 20 Customer relationship „Schustermann & Borenstein“ 20 Customer relationship „BestSecret“ 8

In the case of internally generated intangible assets, IAS 38 makes a distinction between the research phase and the development phase. Costs incurred during the research phase may not be capitalized but must be charged to expense. On the other hand, costs incurred during the development phase must be capitalized, provided that the reporting entity demonstrably fulfills all six objectification criteria set out in IAS 38.57 ff.

2.12 Property, plant and equipment Property, plant and equipment are recognized at cost and depreciated in accordance with their expected useful life using the straight-line method. The Group treats changes in the residual values or useful lives that arise during use as a change in estimates. Depreciation is charged over the following useful lives.

Useful lives Years Leasehold improvements 6-20 Plant and machinery 5-14 Furniture, fixtures and office equipment 5-15

An item of property, plant and equipment is derecognized upon disposal or when no further economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognized. The residual values, useful lives, and methods of depreciation of property, plant and equipment are reviewed at the end of each fiscal year and adjusted prospectively, if appropriate. If the carrying amount of a tangible asset exceeds the recoverable amount, an impairment loss is recognized, in addition to systematic depreciation, in order to lower the carrying amount to the recoverable amount. The recoverable amount is the higher of the fair value less costs to sell (net selling price) and the present value of the net cash flows expected to result from the continued use of the asset. Whenever possible, the net selling price is derived from the most recently observed market transactions.

2.13 Inventory Merchandise and advance payments on merchandise accounted for as inventories are recognized at cost pursuant to IAS 2. Cost is calculated on the basis of an item-by-item measurement, factoring in the additions from the point of view of the sourcing market or on the basis of the moving average price of the goods. Incidental acquisition costs are measured on a general monthly basis. Supplier payments that are to be classified as a reduction of cost reduce the carrying amount of inventories. Consumption of inventories is recognized within the items of costs of goods sold in the statement of comprehensive income.

Merchandise as of the reporting date is measured at the lower of cost or net realizable value. The net realizable value is the expected selling price less the costs necessary to make the sale. Adequate write- downs to net realizable value were made to allow for all risks from slow-moving goods and / or reduced salability. When the circumstances that previously caused merchandise to be written down below cost no longer exist, the write-down is reversed.

2.14 Impairment of non-financial assets The group assesses at each reporting date whether there is any indication that a non-financial asset reported in the statement of financial position may be impaired. If any indication exists, or when annual impairment testing is required, the group carries out an impairment test. Further details are given in Note 5.2.

2.15 Cash and cash equivalents Cash and cash equivalents, which include cash accounts and short-term cash deposits at banks, are measured at amortized cost. For the purposes of the cash flow statement, cash and cash equivalents comprise the cash and cash equivalents and short-term deposits less utilized overdrafts.

2.16 Lease The Group as a lessee The group leases various properties, equipment and cars. Rental contracts are typically made for periods of 2 to 22 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Leases are recognized as a right-of-use asset and corresponding liability at the date of which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: · fixed payments (including in-substance fixed payments), less any lease incentives receivable · renewal options · variable lease payment that are based on an index or a rate · amounts expected to be payable by the lessee under residual value guarantees · the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and · payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the group’s incremental borrowing rate.

Right-of-use assets are measured at cost comprising the following: · the amount of the initial measurement of lease liability · any lease payments made at or before the commencement date · any initial direct costs, and · restoration costs.

Payments associated with short-term leases (lease term of 12 months or less) and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. The Group recognizes leases which fulfill both conditions within the category low-value asset.

The Group as lessor The group sub-leases office and retail space. In case of finance leases rental income is recognized on an effective interest method over the term of the sub-leases and reported under interest income. Received payments from operating subleases are recognized within other operating income.

2.17 Trade receivables Trade receivables are initially recognized at the settlement day at fair value and subsequently measured at amortized cost, which is usually the original invoice value less an allowance for expected impairment losses. The allowance for trade receivables is determined based on lifetime expected credit losses, which are calculated as the present value of expected cash shortfalls. Changes are recognized as other operating expenses in the consolidated statement of comprehensive income.

The Group offers for its online customers the option to purchase on account. In connection with this payment option the Group works with a factoring provider, transferring substantially all risks and rewards resulting from the receivables to the factoring company and derecognizing receivables in the statement of financial position.

2.18 Other financial assets Other financial assets are initially recognized at the settlement day. The Group classifies its financial assets as “at amortized cost”. No financial assets are held “at fair value through profit or loss” or “at fair value through other comprehensive income (OCI)” on the reporting date. At initial recognition, financial assets are measured at fair value plus transaction costs that are directly attributable to the acquisition of the asset.

Financial assets that are held for collection of contractual cash flows, where those cash flows represent solely repayments of principal and interest on the principal amount, are measured “at amortized cost”. A gain or loss on such instrument subsequently measured at amortized cost is recognized in profit or loss when the asset is sold or impaired. Interest income from this type of financial asset is included in the income statement using the effective interest rate method.

Credit risks related to debt instruments at amortized cost held by the Group at the balance sheet date are considered to be low. Therefore, the regular approach in accordance with IFRS 9 requires the Group to determine, at inception as well as on an ongoing basis during the lifetime of the debt instrument, the impairment provision as the credit losses expected in the next twelve months. If the credit risk were to increase and no longer be regarded as low-risk, lifetime expected credit losses would have to be recognized. The Group considers credit risk as significantly increased if debt instruments are past due for more than 30 days. For trade receivables a separate approach is applied for measuring impairment (refer to 5.16).

Other financial assets are included in other current assets, except for maturity dates more than twelve months after the balance sheet date, in which case they are presented as other non-current assets. 2.19 Financial liabilities Financial liabilities are recognized when a Group company is a contractual party to a financial instrument at the settlement day. Financial liabilities are recognized initially at fair value, net of transaction costs incurred. Financial liabilities are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the duration of the obligation using the effective interest rate method. The effective interest method is used to calculate the amortized cost of a financial liability and to allocate interest expenses to the respective periods. The effective interest rate is the interest rate that is necessary to discount the estimated future cash outflows, including all fees and remuneration paid and received that are an integral component of the effective interest rate, transaction costs and other premiums or discounts, through the expected life of the financial instrument, or a shorter period to equal the net carrying amount upon initial recognition. The embedded prepayment option for the Bond is considered to be closely related to the host contract according to IFRS 9. The Group defines “closely related” up to a 5% difference between amortized cost and redemption price as of redemption date.

Other financial liabilities, for instance loans accepted, trade payables, and other liabilities, are measured at amortized costs. Trade payables are amounts owed as consideration for goods or services provided to the company in the normal course of business. In the normal business cycle, all liabilities are due in one year or less and are therefore classified as current; otherwise, they are presented as non-current liabilities. For current liabilities, that means they are measured at their repayment or settlement amount, while non-current liabilities and long-term debts are measured at amortized cost in accordance with the effective interest method. Non-interest-bearing or low-interest-bearing financial liabilities are measured at their settlement value or nominal value.

The Group writes off a financial liability when the related obligation has been paid, cancelled, or has expired. The difference between the carrying amount of the financial liability written off and the consideration received or to be received is recognized in the statement of comprehensive income.

2.20 Provisions Provisions are recognized in accordance with IAS 37 when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Furthermore, in prior year contingent liabilities have been recognized in accordance with IFRS 3 as part of the purchase price allocation.

A best estimate is made of the amount of the provisions taking into consideration all the discernible risks arising from the obligation. This refers to the amount that is most likely needed to settle the liability. Provisions with a residual term of more than one year are discounted on the reporting date.

Provisions for restoration expenses

The group recognizes provisions for restoration expenses for leasehold improvements in the leased warehouses and office buildings. The provision is recognized at an amount equivalent to the present value of the estimated future restoration obligations. The restoration obligations are recognized as part of the cost of the leasehold improvements for the corresponding amount. The estimated cash flows are discounted using a discount rate that is commensurate to the maturity and risk profile. The unwinding of the discount is expensed as incurred and recognized as an interest expense in the statement of comprehensive income.

2.21 Share-based payment Certain managers and board members of the Group ("Managers") were given the opportunity to invest in different German limited partnerships which indirectly owns interests of approximately 5% in the group. The subscription price for the partnership interests subscribed by the Managers in the limited partnership corresponded to their fair value at grant date.

The acquisition qualifies as a Share Based Payment under IFRS 2, the manager’s interests in the partnership are recognized as an equity-settled share-based payment arrangement in the financial statements of the Group. As the investments in the partnership were acquired at fair value, no expense will be recognized as a result of this transaction. The participation rights in form of partnership interest were acquired from an entity outside the Group and the Group has no obligation to make any payments on the partnership interests to the Managers. The share-based payment arrangements are fully vested at grant date. The exit constitutes a performance vesting condition which is considered non-market performance condition. If the service condition is met, then the Manager can exercise his option at the market value per share. The investment program provides different industry-standard cancellation and settlement events.

2.22 Significant events after the reporting date

PrestigeBidCo GmbH established an additional facility of KEUR 15,000 by way of increase of the existing facility to KEUR 50,000. The additional facility lender is UniCredit Bank AG, London branch. On January 02, 2019 the lender confirmed the granting of the additional facility. Utilizations under the Additional Facility may only be used for financing or refinancing the working capital requirements and/or general corporate purposes of PrestigeBidCo GmbH and its Restricted Subsidiaries. The term of the Additional Facility is valid until further notice. The additional facility ranks pari passu with the existing facility.

As part of the growth strategy the Group’s management decided to rebrand Schustermann & Borenstein stores as BestSecret/Schustermann& Borenstein stores. The goal of the rebranding (dual branding) is to emphasize our common identity and validate the business development strategy exclusively under a combined brand name to reflect the omni-channel character.

3. Capital management

The Group analyses its capital based on the equity attributable to the equity holders of the parent, including all components of equity as shown on the face of the consolidated statement of financial position. The primary objective of the Group’s capital management is to maximize the value of the Group.

It is the objective of the capital management of the Group to ensure amongst other things that it meets the financial covenants attached to the Senior Secured Notes (see Note 5.12) that define leverage ratio thresholds. Breaches in meeting the financial covenant would permit the banks to immediately call loans and borrowings. The Group manages its capital structure and makes adjustments in light of changes in economic conditions. The Group monitors capital using both a leverage ratio and an interest ratio, which is Adjusted EBITDA/Net Debt* and EBITDA/interest expense as of particular effective date. According to the Offering Memorandum Agreement, the Group’s policy is to keep the leverage ratio fairly below the level 1:5, the interest ratio fairly above 2:1 and to reduce the leverage ratio over time.

No changes were made in the objectives, policies or processes for managing capital during the year ended December 31, 2018.

* Net debt consists of the Notes, accrued interest on the Notes and interest-bearing liabilities which also include recognized lease liabilities less cash and cash equivalents at the balance sheet date.

4. Notes to the statement of comprehensive income

4.1 Revenue In the reporting period 2018, the Group generated revenues of KEUR 488,289 (previous year: KEUR 398,384).

Thereof KEUR 361,918 (previous year: KEUR 277,281) were attributable to online trade and KEUR 126,371 (previous year: KEUR 121,103) to the offline channel.

Revenue per Segment 2018 KEUR Segments Online Offline Total Type of goods or service Sale of merchandise 361,918 126,371 488,289 Total revenue from contracts with customers 361,918 126,371 488,289 Geographical markets Germany 409,828 Foreign countries 78,461 Total revenue from contracts with customers 361,918 126,371 488,289 Timing of revenue recognition Goods transferred at a point in time 361,918 126,371 488,289 Total revenue from contracts with customers 361,918 126,371 488,289

Revenue per Segment 2017 KEUR Segments Online Offline Total Type of goods or service Sale of merchandise 277,281 121,103 398,384 Total revenue from contracts with customers 277,281 121,103 398,384 Geographical markets Germany 339,326 Foreign countries 59,058 Total revenue from contracts with customers 277,281 121,103 398,384 Timing of revenue recognition Goods transferred at a point in time 277,281 121,103 398,384 Total revenue from contracts with customers 277,281 121,103 398,384

4.2 Operating expenses

KEUR 2018 Selling and Cost of Administrative distribution sales expenses expenses

Material expenses -255,623 -4,209 0 Personnel expense -2,896 -60,992 -23,577 Depreciation and Amortization -1,023 -12,280 -2,945 Amortization of PPA Assets 0 -37,516 0 Other expenses 0 -44,264 -16,663 Total expenses -259,542 -159,261 -43,185

KEUR 2017 Selling and Cost of Administrative distribution sales expenses expenses

Material expenses -204,899 -2,917 0 Personnel expense -1,883 -48,901 -21,813 Depreciation and Amortization -960 -10,093 -2,077 Amortization of PPA Assets 0 -35,701 0 Other expenses 0 -34,330 -21,646 Total expenses -207,742 -131,942 -45,536

Selling and distribution costs mainly consist of fulfillment costs in the amount of KEUR 75,580 (previous year: KEUR 55,950), selling costs in the amount of KEUR 74,836 (previous year: KEUR 69,256) which include the amortization of trademarks and customer relationships and marketing costs of KEUR 8,845 (previous year: KEUR 6,736).

The Group carried out development work to create software and app solutions. All non-capitalizable development costs are recognized as expenses under Administrative expenses in the reporting period they incurred. In 2018, this expense amounted to KEUR 4,943 (previous year: KEUR 4,468).

4.3 Other operating income

KEUR 2018 2017

Income relating to other periods 364 219 Damage compensation 251 251 Foreign exchange gains 244 273 Reimbursement of legal costs 141 144 Income from sublease 102 102 Reversal of provisions 0 91 Miscellaneous other 434 408 Total 1,536 1,488

Miscellaneous other income mainly comprises reversal of credit loss (bad debt) provisions.

4.4 Other operating expenses

KEUR 2018 2017 Foreign exchange losses -643 -427 Credit loss -492 -458 Expenses from other periods -305 -5 Restructuring expense -177 0 Miscellaneous others -433 -309 Total -2,050 -1,199

Miscellaneous other expenses mainly comprise charges for severely handicapped persons and charitable donations.

4.5 Financial expenses

KEUR 2018 2017

Interest expense financial liabilities non-current -17,158 -17,099 Interest expense financial liabilities current -851 -520 Total interest expenses -18,009 -17,619

Interest relating to IFRS 16 leasing liabilities -5,819 -5,334 Total financial expenses -23,828 -22,953

4.6 Financial income

KEUR 2018 2017

Sublease 31 31 Other 2 8 Total financial income 33 39

5. Notes to the consolidated statement of financial position

5.1 Property, plant and equipment

Statement of Movements of Property, Plant and Equipment 2018

Other KEUR Right-of- Plant and equipment, Prepayments use Total machinery furniture assets* and fixtures Cost At January 01, 2018 38,482 7,196 96 85,016 130,790 Additions 1,091 2,262 7,317 5,933 16,603 Disposals 0 0 0 -529 -529 Transfer 4,263 1,905 -6,168 0 0 At December 31, 2018 43,836 11,363 1,245 90,420 146,864

Depreciation / Impairment At January 01, 2018 2,996 1,675 0 5,055 9,726 Depreciation for the year 3,547 1,999 0 6,291 11,837 Disposals 0 0 0 -264 -264 At December 31, 2018 6,543 3,674 0 11,082 21,299

Net book value At January 01, 2018 35,486 5,521 96 79,961 121,064 At December 31, 2018 37,293 7,689 1,245 79,338 125,565

* The right-of-use assets refer to leased assets recognized in the balance sheet according to IFRS 16. Please refer to Note 2.16 for the lease accounting policy. The right-of-use assets mainly arises from leases of rented space (KEUR 78,690) and leased company cars (KEUR 648) as of December 31, 2018.

All property, plant and equipment assets are pledged as security for the Senior Secured Notes as of balance sheet date at their respective carrying amounts.

Statement of Movements of Property, Plant and Equipment 2017

Other KEUR Right-of- Plant and equipment, Prepayments use Total machinery furniture assets* and fixtures Cost At January 01, 2017 0 0 0 0 0 Additions 1,274 1,621 2,677 665 6,237 Acquisition of a subsidiary 33,955 5,319 928 85,948 126,152 Disposals 0 -1 0 -1,598 -1,599 Transfer 3,253 257 -3,510 0 0 At December 31, 2017 38,482 7,196 96 85,016 130,790

Depreciation / Impairment At January 01, 2017 0 0 0 0 0 Depreciation for the year 2,996 1,675 0 5,154 9,825 Disposals 0 0 0 -99 -99 At December 31, 2017 2,996 1,675 0 5,055 9,726

Net book value At January 01, 2017 0 0 0 0 0 At December 31, 2017 35,486 5,521 96 79,961 121,064

* The right-of-use assets mainly arised from leases of rented space (KEUR 79,219) and leased company cars (KEUR 420) as of December 31, 2017.

5.2 Goodwill

2018 in KEUR Goodwill

Cost At January 01, 2018 254,394 Impairment 0 At December 31, 2018 254,394

2017 in KEUR Goodwill

Cost At January 01, 2017 0 Acquisition of a subsidiary 254,394 Impairment 0 At December 31, 2017 254,394

Goodwill acquired through business combinations is allocated to the cash generating units (CGUs) online and offline sales channels, which are also operating and reportable segments.

Goodwill is allocated as follows:

KEUR Online Offline Total

Goodwill 203,548 50,846 254,394

Total 203,548 50,846 254,394

Goodwill is tested for impairment at least once a year by comparing the carrying amounts of the CGUs to which goodwill is allocated with their fair value less cost to sell (2% of fair value), applying the third valuation level. Fair value less cost to sell is determined using the discounted cash flow method based on the current three year planning for the CGU concerned.

The major planning assumptions are:

- Revenue/EBITDA Margin - Discount Rates - Growth rate, which was used for the extrapolation of the cash-flow forecasts outside the financial planning period

Revenue/EBITDA-Margin – The budgeted revenues and results for each CGU are based on freely available economic and industry specific data and take into account past trends and occurrences alongside current market forecasts. Discount Rates – The underlying discount rates reflect the current market forecasts with regards to the CGU specific risks, including interest rate and asset specific risks, for which no adjustments regarding the forecasted future cash flows were done.

The applied assumptions of the impairment test performed are stated for each CGU in the table below. No impairment had to be recognized since the fair value less cost to sell exceed the carrying amounts of the respective CGUs.

Online Offline Post-tax WACC 8.8% (PY: 8.6%) 4.6% (PY: 4.6%) Long-term growth 2.0% (PY:2.0) 1.5% (PY:1.5%)

Revenue Growth Solid Growth Solid Growth

EBIT Growth Solid Growth Solid Growth

For conducting the Impairment test, the total carrying amount of the group of cash-generating units are checked against the recoverable amount. The recoverable amount is calculated as the fair value less costs to sell, based on discounted future cash flows. Expected cash flows are based on a qualified planning process, with due consideration given to internal experience values and external macroeconomic data. The detailed planning period covers three years, as a general rule. Generally, a growth rate between 1.5% and 2.0% is applied for the time after the three-year period. As a general rule, the discount factor is calculated as the weighted average cost of capital (WACC) by application of the capital asset pricing model. For this purpose, an individual group of comparison companies (“peer group”) is applied for all groups of cash-generating units operating in the same business segment. The individual business risk is reflected through the use of specific beta-factor. The beta-factor is calculated annually based on freely available market data.

Furthermore, the discount factors are determined on the basis of the following exemplary assumptions: a base interest rate of 1.0% (PY: 1.25%) and a market risk premium of 6.50% (PY: 6.50%) at December 31, 2018 for a term of 25 years in Germany. Country-typical risk premiums are applied to both the equity capital cost rate and the debt capital cost rate, based on the credit rating of the respective country.

For purposes of estimating the development of revenues, EBIT and the EBIT margin, specific growth rates were assumed in conducting the Impairment test of the respective CGUs. The calculation of sustainably attainable earnings is based on assumptions regarding various cost reduction measures. Furthermore, customary market EBIT margins were assumed for calculating the sustainably attainable earnings. In addition to the Impairment test, two sensitivity analyses were conducted. For the first sensitivity analysis, the discount factor was increased by 0.5% (PY:0.5%) for each group of cash- generating units. For the second sensitivity analysis, a flat-rate deduction of 10% (PY: 10%) was applied to the assumed EBIT in perpetuity. These changes in the underlying assumptions would also not result in a need to recognize impairments. The recoverable amount for the Offline CGU exceeds the carrying amount by KEUR 34,363. The solid headroom corresponds to 18% of the carrying amount. A possible increase outside of the framework of the sensitivity analysis in the applied discount factor by 0.54%, after incorporating any consequential effects of that change on the other variables used to measure recoverable amount, would equal recoverable amount with carrying amount.

5.3 Intangible assets

Statement of Movements of Intangible Assets 2018 Purchased KEUR Internally franchises,

generated industrial and

industrial and similar rights and Prepayments Total

similar rights assets, and

and assets licenses in such

rights and assets Cost At January 01, 2018 2,291 486,037 9 488,337 Additions (internal) 3,368 3,368 Additions (acquired) 5,778 448 6,226 Reclassifications 0 31 -31 0 At December 31, 2018 5,659 491,846 426 497,931

Amortisation / Impairment At January 01, 2018 329 38,677 0 39,006 Amortisation for the year 964 40,963 0 41,927 At December 31, 2018 1,293 79,640 0 80,933

Net book value At January 01, 2018 1,962 447,360 9 449,331 At December 31, 2018 4,366 412,206 426 416,998

Statement of Movements of Intangible Assets 2017 Purchased KEUR Internally franchises,

generated industrial and

industrial and similar rights and Prepayments Total

similar rights assets, and

and assets licenses in such

rights and assets Cost At January 01, 2017 0 0 0 0 Additions (internal) 1,889 1,889 Additions (acquired) 2,949 60 3,009 Acquisition of a subsidiary 437 482,966 36 483,439 Reclassifications -35 122 -87 0 At December 31, 2017 2,291 486,037 9 488,337

Amortisation / Impairment At January 01, 2017 0 0 0 0 Amortisation for the year 329 38,677 0 39,006 At December 31, 2017 329 38,677 0 39,006

Net book value At January 01, 2017 0 0 0 0 At December 31, 2017 1,962 447,360 9 449,331

The purchased franchises, industrial and similar rights and assets mainly relate to PPA assets acquired via business combination. Further details with regard to the useful lives are given in Note 2.11. As of December 31, 2018 the carrying amount for the Schustermann & Borenstein trademark is KEUR 26,178 (previous year: KEUR 27,112), for the BestSecret trademark KEUR 153,953 (previous year: KEUR 162,483), for the Offline customer relationship KEUR 79,684 (previous year: KEUR 84,099) and for the Online customer relationship KEUR 142,969 (previous year: KEUR 166,606).

5.4 Financial assets

December 31, December 31, KEUR 2018 2017 Non-current Receivables from subleases 482 566 Rental deposits 9 12 491 578

Current Receivables from subleases 84 80 Creditors with debit accounts 1,869 1,592 Other 92 72 Total 2,045 1,744

The amount of the sublease receivables (>5 years) is KEUR 99 (previous year: KEUR 279).

5.5 Inventories and prepayments Inventories of merchandise, mainly consisting of the product groups textiles and shoes, are recognized at an amount of KEUR 122,256 (previous year: KEUR 124,346).

As of December 31, 2018, allowances of KEUR 4,290 (previous year: KEUR 4,769) were recognized on inventories. Change in inventory allowance came to KEUR 479 (previous year: KEUR 457) in the reporting year within cost of sales. Further details on material expenses are given in Note 4.6.

All inventory is pledged as security for the Senior Secured Notes as of balance sheet date at its respective carrying amount. Prepayments pertain to prepayments for merchandise and amounted to KEUR 4,724 (previous year: KEUR 5,505).

5.6 Trade receivables Trade receivables amounted KEUR 1,576 (previous year: KEUR 1,357) as at December 31, 2018. Trade receivables are non-interest bearing and are generally due for immediate payment.

As at December 31, 2018 trade receivables of an initial value of KEUR 1,050 (previous year: KEUR 2,871) (including VAT) were subject to enforcement measures and were fully impaired. See below for the movements in the provision for impairment of receivables.

Impairment of Receivables 2018 KEUR Individually Collectively Total impaired impaired

At January 01, 2018 1,563 455 1,991 Charge for the year 471 0 471

Utilized -1,343 -236 1,579

At December 31, 2018 664 219 883

Impairment of Receivables 2017 KEUR Individually Collectively Total impaired impaired

At January 01, 2017 0 0 0

Acquisition of a subsidiary 1,498 455 1,953 Charge for the year 38 15 53 Utilized -15 -15 At December 31, 2017 1,536 455 1,991

Aging Analysis as at December 31, 2018 KEUR Past due but not impaired

Neither past < 30 30-60 60-90 90-120 >120 Total due nor days days days days days impaired

1,576 449 470 296 158 30 173

Aging Analysis as at December 31, 2017 KEUR Past due but not impaired

Neither past < 30 30-60 60-90 90-120 >120 Total due nor days days days days days impaired

1,357 416 467 165 23 14 272

See Note 5.16 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired. All trade receivables are pledged as security for the Senior Secured Notes as of balance sheet date at their respective carrying amounts.

5.7 Non-Financial assets

KEUR December 31, December 31, 2018 2017 Current Right to recover possession of inventory 10,977 7,908 Other 2,596 2,334 13,573 10,242

5.8. Lease

December 31, December 31, KEUR 2018 2017

Income Statement Disclosures Depreciation of ROU assets 6,291 5,154 Interest on lease liabilities 5,819 5,334 Short term lease expense 417 363 Low-value asset lease expense 1,345 646

December 31, December 31, KEUR 2018 2017

Cash Flow Statement Disclosures Total cash flow for leases 11,161 9,305 Balance Sheet Disclosures Carrying amount of Property ROU assets 79,338 79,961 Lease Liabilities 84,921 82,853

KEUR Maturity as of December 31, 2018

Less than 1 to 5 5 to 10 10 to 15 More than 15 Lease Liability 12 months years years years years

4,308 15,526 20,450 26,585 18,052

KEUR Maturity as of December 31, 2017

Less than 1 to 5 5 to 10 10 to 15 More than 15 Lease Liability 12 months years years years years

3,341 13,099 17,851 24,579 23,983

Leases not yet commenced to which the Group is committed amounted as of December 31, 2018 KEUR 10,048 (previous year: KEUR 11,093).

5.9 Cash and cash equivalents Cash and cash equivalents comprise the categories as presented in the following table:

December 31, December 31, KEUR 2018 2017

Cash in bank 37,652 27,305 Cash in transit 29,220 17,518 Cash on hand 79 65 Total 66,951 44,888

The maximum default risk corresponded to the carrying value as of the balance sheet date. As of December 31, 2018, the Group had unutilized credit lines with banks in the amount of KEUR 35,000 (previous year: KEUR 35,000).

5.10 Equity Capital stock

PrestigeBidCo GmbH was founded with a capital stock of KEUR 25 paid in cash. Fully paid ordinary shares carry one vote per share and carry a right to dividends as and when declared by the Group. At the reporting date PrestigeBidCo Holding GmbH holds 100% of the shares of the PrestigeBidCo GmbH.

Capital reserves

The capital reserves of KEUR 474,177 (previous year: KEUR 474,177) consist of the contribution performed by the parent PrestigeBidCo Holding GmbH. Thereof KEUR 39,906 relate to a non-cash contribution of Schustermann & Borenstein Holding GmbH shareholders as part of the purchase price.

Retained earnings

The legal and contractual obligations of the Group - mainly based on the Senior Secured Notes - include restrictions with regards to dividend distributions by several ratios, thresholds and preconditions. The Group is monitoring all existing and agreed ratios, thresholds and required qualifications prior to distributing any profits.

5.11 Other provisions

Movements in other provisions in 2018

KEUR Provisions for Miscellaneous Total restoration other provisions expenses At January 01, 2018 347 7,557 7,904 Acquisition of a subsidiary 0 0 0 Arising during the period 0 246 246 Released 0 -2,100 -2,100 Compound interest effects 11 0 11 At December 31, 2018 358 5,703 6,061

Movements in other provisions in 2017

KEUR Provisions for Miscellaneous Tota restoration other provisions

expenses

At January 01, 2017 0 0 0 Acquisition of a subsidiary 325 7,697 8,022 Arising during the period 0 0 0 Utilized 0 -140 -140 Compound interest effects 22 0 22 At December 31, 2017 347 7,557 7,904

Provisions for restoration expenses are recognized for the leasehold improvements in the leased warehouse in Poing. Miscellaneous other provisions mainly comprise provisions for tax risks in the amount of KEUR 5,596 (previous year: KEUR 5,350).

5.12 Loans and borrowings

The Group’s debt financing at December 31, 2018 is based on the following components:

Carrying amounts of loans and borrowings at December 31, 2018

Non- Effective current Current Total Component interest rate Maturity (KEUR) (KEUR) (KEUR)

Senior Secured Notes 6.76% 15/12/2023 253,762 810 254,572

Total 253,762 810 254,572

Carrying amounts of loans and borrowings at December 31, 2017

Non- Effective current Current Total Component interest rate Maturity (KEUR) (KEUR) (KEUR)

Senior Secured Notes 6.76% 15/12/2023 252,864 804 253,668

Total 252,864 804 253,668

Senior Secured Notes

PrestigeBidCo GmbH has issued KEUR 260,000 aggregate principal amount of 6.250% Senior Secured Notes due 2023 (the “Notes”) as of December 15, 2016 as part of the financing for the acquisition of Schustermann & Borenstein Holding. The Notes are measured at amortized cost and will mature on December 15, 2023. The Issuer pays interest on the Notes semi-annually on each June 15 and December 15. Prior to December 15, 2019, the Issuer will be entitled, at its option, to redeem all or a portion of the Notes by paying the relevant applicable premium. Some or all of the Notes may also be redeemed at any time on or after December 15, 2019 at certain redemption prices. In addition, prior to December 15, 2019, the Issuer may redeem at its option up to 40% of the aggregate principal amount of the Notes with the net proceeds from certain equity offerings at a certain redemption price, provided that at least 60% of the aggregate principal amount of the Notes remains outstanding. Upon the occurrence of certain events constituting a change of control, the Issuer may be required to make an offer to repurchase all of the Notes at a redemption price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any. However, a change of control will not be deemed to have occurred if the Issuer’s consolidated net leverage ratio is less than certain specified levels at the time of such event. In addition, the Issuer may redeem all, but not less than all, of the Notes upon the occurrence of certain changes in applicable tax law.

Revolving Credit Facility Agreement

In December 2016, PrestigeBidCo GmbH (as original borrower and original guarantor), Barclays Bank PLC, Goldman Sachs Bank USA and UniCredit Bank AG, London Branch (as lenders), UniCredit Bank AG, London Branch (as facility agent) and UniCredit Bank AG, London Branch (as security agent), among others, entered into a revolving credit facility agreement providing for borrowings up to an aggregate principal amount of KEUR 35,000 on a committed basis (the “Revolving Credit Facility”). The Revolving Credit Facility may be utilized by any current or future borrower under the Revolving Credit Facility in euro, Swiss francs, US dollars, Pounds Sterling or certain other currencies (if agreed) by the drawing of cash advances, the issue of Letters of Credit (upon the appointment of an Issuing Bank) and by way of any Ancillary Facilities that may be made available thereunder (each as defined in the Revolving Credit Facility Agreement). Subject to certain exceptions, loans may be borrowed, repaid and re-borrowed at any time. Borrowings are available to be used for general corporate and working capital purposes of the Group (as defined in the Revolving Credit Facility Agreement) including, without limitation, for payment of interest under the Notes. In addition, PrestigeBidCo GmbH may elect to request additional facilities either as a new facility or as additional tranches of an existing facility under the Revolving Credit Facility Agreement (the “Additional Facility Commitments”) in amounts up to KEUR 15.000. PrestigeBidCo GmbH and the lenders may agree to certain terms in relation to the Additional Facility Commitments, including the margin, the termination date and the availability period (each subject to parameters as set out in the Revolving Credit Facility Agreement). There are certain limitations (including as to maximum amount) on the ability to incur Additional Facility Commitments and no additional facility will have the right to receive mandatory prepayments in priority to the Revolving Credit Facility by virtue of any mandatory prepayment waterfall set out in the Revolving Credit Facility Agreement but will instead be permitted to benefit on a pro rata or junior basis.

5.13 Trade payables Trade payables amounted KEUR 14,763 as at December 31, 2018 (previous year: KEUR 16,693).

For explanations on the Group’s liquidity risk management processes refer to Note 5.16.

5.14 Other non-financial liabilities

KEUR December 31, December 31, 2018 2017 Current Contract liability (Prepayments received) 6,568 6,746 Refund liability (Accrual for returns) 22,709 19,085 Accrual for outstanding invoices 12,289 15,176 Accrual for personnel expenses 5,383 5,251 VAT liability 11,560 9,564 Other 3,762 2,739 Total 62,271 58,561

5.15 Taxes The major components of income tax expense for the period ended December 31, 2018 are:

KEUR 2018 2017

Current income tax expense -10,540 -5,888

Deferred tax income 15,404 7,872 Income tax expense reported in 4,864 1,984 profit or loss

Reconciliation of tax expense and the accounting profit for the period ended December 31, 2018:

2018

Profit/ loss before income tax 1,992

Anticipated tax (tax rate 27.74%) - 552

Effects resulting from trade tax -615 tax rate changes 3,554 non deductible expenses - 104 - 13 dividend taxation in group

primary formation deferred taxes 1,318 taxes prior periods 1,075 other events 201 Tax income reported in profit or loss -244.24% 4,864

2017 Profit/loss before income tax -9,464

Anticipated tax (tax rate of 28.52%) 2,699 effects resulting from trade tax -670 non deductible expenses -2,943 income acquired as of closing date 1,629 losses -719 taxes prior periods -335 tax rate changes 2,323 Tax income reported in profit or loss 20.97% 1,984

The Group tax rate of 27.74% (previous year: 28.52%) reflects corporate income tax plus surcharges as follows: 2018 corporate income tax rate 15.00% solidarity surtax rate (5.5% on 15.0%) 0.83% trade tax rate 11.91% Total group income tax rate 27.74%

The Groups deferred tax assets and liabilities at December 31, 2018 are based on the following components:

Deferred Tax Assets and Liabilities 2018 KEUR Deferred tax Deferred tax Net balance assets liabilities At December 31, 2018 2018 2018 2018

Intangible assets 1,318 -112,943 -111,625 Property, plant and equipment 0 -22,008 -22,008 Inventories 28 -2,657 -2,629

Other non-current financial assets 0 -134 -134 Other current finacial assets 0 -23 -23

Other non-current financial liabilities 22,362 0 22,362 Other current financial liabilities 1,195 0 1,195

Non-current interest bearing loans and 0 -1,731 -1,731 borrowings Current non financial liabilities 37 0 37

Total deferred taxes 24,940 -139,496 -114,556

Offset DTA/DTL -24,940 24,940 0

Total recognized deferred tax assets 0 -114,556 -114,556 and liabilities

Deferred Tax Assets and Liabilities 2017 KEUR Deferred tax Deferred tax Net balance assets liabilities At December 31, 2017 2017 2017 2017

Intangible assets 0 -126,134 -126,134 Property, plant and equipment 0 -22,811 -22,811 Inventories 71 -2,567 -2,496

Other current finacial assets 0 -23 -23

Other non-current financial liabilities 22,745 -161 22,584 Other current financial liabilities 891 0 891

Non-current interest bearing loans and 0 -2,035 -2,035 borrowings Current non financial liabilities 64 0 64

Total deferred taxes 23,771 -153,731 -129,960

Offset DTA/DTL -23,771 23,771 0

Total recognized deferred tax assets 0 -129,960 -129,960 and liabilities

Change in 2018 in KEUR deferred tax liability

At January 01, 2018 129,960 temporary differences -15,404 At December 31, 2018 114,556

Change in 2017 in KEUR deferred tax liability

At January 01, 2017 -1,042 Net deferred tax liability at the date of acquisition 138,734 temporary differences -11,045 tax losses 3,313 At December 31, 2017 129,960

No deferred taxes were established on tax loss carryforwards of 10,548 kCHF as well as on further tax loss carryforwards of low extent.

The Group offsets tax assets and liabilities if, and only if, it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.

Deferred tax assets have not been recognized in case it is not likely that the company will be able to create enough taxable profits during the planning period and in case of implementation of a tax group with a freeze of tax loss carry-forwards.

There are no temporary differences associated with investments in subsidiaries. Accordingly, no deferred tax liability has been recognized.

5.16 Additional disclosures regarding financial instruments and risk management

The following table shows the carrying amounts of all financial instruments recognized in the consolidated statement of financial position by category:

Financial instruments as of December 31, 2018 KEUR

Reported on Carrying amount balance sheet at on balance sheet amortized cost ASSETS Trade receivables 1,576 1,576 Financial assets 2,536 2,536 Cash at bank and in hand 66,951 66,951 Total of financial assets 71,063 71,063

LIABILITIES Trade payables 14,763 14,763 Senior Secured Note 254,572 254,572 Lease liabilities 84,921 84,921 Total of financial liabilities 354,256 354,256

KEUR Financial instruments as of December 31, 2017

Reported on Carrying amount ASSETS balance sheet at on balance sheet amortized cost

Trade receivables 1,357 1,357 Financial assets 2,322 2,322 Cash at bank and in hand 44,888 44,888 Total of financial assets 48,567 48,567

LIABILITIES Trade payables 16,693 16,693 Senior Secured Note 253,668 253,668 Lease liabilities 82,853 82,853 Total of financial liabilities 353,214 353,214

The carrying amounts of trade receivables, financial assets and cash and cash equivalents as well as trade payables equal their fair values as they are mainly short term. The fair value of the Senior Secured Notes is disclosed separately in the table below.

The fair value hierarchy reflects the significance of the inputs used to determine fair values. Financial instruments with fair value measurement based on quoted prices in active markets are disclosed in Level 1. In Level 2 determination of fair values is based on observable inputs, e.g. foreign exchange rates. Level 3 comprises financial instruments for which the fair value measurement is based on unobservable inputs.

2018 in KEUR Fair value measurement using Quoted Significant Significant prices in active observable unobservable Total markets inputs inputs (Level 1) (Level 2) (Level 3)

Senior Secured Notes 267,202 267,202 - -

2017 in KEUR Fair value measurement using Quoted Significant Significant prices in active observable unobservable Total markets inputs inputs (Level 1) (Level 2) (Level 3)

Senior Secured Notes 276,614 276,614 - -

No financial instruments were set off and no enforceable master netting arrangements or similar agreements are in place as of December 2018.

The following table shows net losses from financial instruments by measurement categories:

December 31, December 31, KEUR 2018 2017

Financial assets measured at amortized cost (Trade receivables) -471 -38

Financial liabilities measured at amortized cost -904 -1,052

Net losses under “financial assets measured at amortized cost” and “financial liabilities measured at amortized cost” mainly comprise allowance and interest based on effective interest method.

Nature and extent of risks arising from financial instruments

The Group’s principal financial liabilities comprise Senior Secured Notes, trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group’s principal financial assets include trade and other receivables as well as cash and cash equivalents that derive directly from its operations.

The Group is exposed to market risk, credit risk and liquidity risk. The group treasury oversees these risks. The Group’s senior management is supported by group treasury that advises on financial risks for the Group. The Management Board reviews and agrees policies for managing each of these risks, which are summarized below.

Market risk

Market risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk.

The sensitivity analyses in the following sections relate to the position as at December 31, 2018. The sensitivity analyses have been prepared on the basis that the amount of net liabilities, the ratio of fixed to floating interest rates of the liabilities and the proportion of financial instruments in foreign currencies are all constant. The analyses exclude the impact of movements in market variables on: the carrying values of pension and other post-retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.

The sensitivity analyses demonstrate how profit or loss items are affected by the assumed changes in respective market risks. Based on the position as at December 31, 2018, there is no sensitivity of equity.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As of December 31, 2018 there are no financial instruments affected by floating interest rates. The Group does not enter into interest rate derivatives.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates is insignificant.

Credit risk & risk concentration

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

Concentration risks arising from the delivery of goods to major customers are subject to a special credit watch. In the case of a return debit, the Group informs the customer and prolongs the payment term for a week. When the defined time period elapsed written warnings are sent to the customers. Default risk is taken into account by valuation allowances (100%) by handover to the law firm. The maximum exposure to credit risk of financial assets, without taking account of any collateral, is represented by their carrying amount. The Group offers under certain conditions purchase on account. Due to the introduction of non-recourse factoring, there is no exposure to credit risk.

The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions. The Group does not hold collateral as security. There were no significant credit risks or concentration risk as of December 31, 2018.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Management Board on an annual basis and may be updated throughout the year subject to approval of the Group’s Finance Committee. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to make payments.

Liquidity risk

The Group provides sufficient liquidity for each individual entity by cash pooling. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. Approximately 8.0% (previous year: 8.0%) of the Group’s debt will mature in less than one year at December 31, 2018 based on the carrying value of borrowings reflected in the consolidated financial statements. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Group has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders. The Group has access to take up a short term loan with an amount of KEUR 35,000, of which KEUR 35,000 are undrawn at the reporting date.

The following table shows future undiscounted cash outflows from financial liabilities based on contractual agreements:

At December 31, 2018 KEUR Less than 1 to More than 12 months 5 years 5 years Senior Secured Notes 16,250 325,000 - Trade payables 14,763 - - Lease liability 9,987 35,616 97,482 Total 41,000 360,616 97,482

At December 31, 2017 KEUR Less than 1 to More than 12 months 5 years 5 years Senior Secured Notes 16,250 65,000 276,250 Trade payables 16,693 - - Lease liability 8,885 33,471 102,898 Total 41,828 98,471 379,148

As of December 31, 2018 KEUR 93,218 (previous year: KEUR 96,462) of contractual lease liabilities relate to related parties.

6. Other explanatory notes

6.1 Contingencies and other financial obligations

Short-term lease payments

As of December 31, 2018 the Group has short-term obligations not recognized as liabilities on balance sheet amounting KEUR 153 (previous year: KEUR 1,679).

Pending disputes

As of December 31, 2018 the Group is not involved in any significant court cases or threatened legal disputes.

Contingent liabilities

As of December 31, 2018 the Group has a contingent liability to third parties in the amount of KEUR 25 (previous year: KEUR 25) resulting from a rent guarantee.

6.2 Related party disclosures The Group identified related parties (key management personnel, members of the board and parent companies) in accordance with IAS 24. The Group had transactions with related parties in the reporting period in the ordinary course of business. The transactions were carried out in accordance with the arm’s length principle. Following business transactions have been identified as related party transactions. Further details on the share-based payment are given in Note 2.21.

Lease Agreements

The Group has entered into several lease agreements regarding the renting of business premises from external parties. Some of the lease agreements entered into by the Group are concluded with private partnerships in which certain Sellers from the Schustermann and Borenstein families as well as certain members of the board or close family members of those related parties are partners. Further details on outstanding lease payments are given in Note 5.16.

In fiscal year 2018 total expenses amounted to KEUR 6,330 (previous year: KEUR 6,027).

Commission Agreement

For US Brands the Group entered into a commission agreement with the US Brands Agency which beneficiary is a related family member of one member of key management personnel. In 2018 total expenses amounted to KEUR 11 (previous year: KEUR 45).

Expenses for remuneration to corporate management in 2018 amounted to KEUR 2,053 (previous year: KEUR 2,581) and for termination benefits KEUR 321 (previous year: KEUR 553). Expenses for the coverage of travel expenses for the management of parent companies amounted to KEUR 134 (previous year: KEUR 228).

During the period ended December 31, 2018 no related party was indebted to the Group. During the period ended December 31, 2018, the Group has not been a party to any other material transaction, or proposed transactions, in which any related party had or was to have a direct or indirect material interest.

6.3 Additional disclosures on the consolidated statement of comprehensive income

Segment reporting Reporting on the business segments is in line with the internal reporting. The reporting to the top body of management of the Group for purposes of internal control fundamentally corresponds to the principles of financial reporting described in Note 2.4.7 in accordance with IFRS.

The Group’s internal reporting structure is based on a sales channel-related perspective of online and offline sales.

The Management Board measures the performance of the segments on the basis of the Gross Profit and Gross Margin calculated in accordance with IFRS. There are no intersegment transactions in the internal reporting structure. No information on segment assets or liabilities is available or relevant for decision-making.

Segment Reporting 2018 Offline Online Total KEUR Sales Channel Sales Channel 2018

Revenue 126,371 361,918 488,289 Cost of sales -73,093 -186,449 -259,542 Gross profit 53,278 175,469 228,747 Gross margin in % 42.2% 48.5% 46.9% Selling and distribution costs -159,261 Administrative expenses -43,185 Other operating income 1,536 Other operating expenses -2,050 Earnings before interest and taxes (EBIT) 25,787

Segment Reporting 2017 Offline Online Total KEUR Sales Channel Sales Channel 2017

Revenue 121,103 277,281 398,384 Cost of sales -67,734 -140,008 -207,742 Gross profit 53,369 137,273 190,642 Gross margin in % 44.1% 49.5% 47.8% Selling and distribution costs -131,942 Administrative expenses -45,536 Other operating income 1,488 Other operating expenses -1,199 Earnings before interest and taxes (EBIT) 13,453

Additional information on the personnel expenses

KEUR 2018 2017

Wages and salaries 57,266 47,755 Social security taxes 10,447 8,527 Total 67,713 56,282

The statutory pension insurance amounted to KEUR 2,037 in 2018.

Annual average number of employees

2018 2017

Offline sales channel 658 649 Online sales channel 114 111 Enabling Services (logistics, IT, purchasing and administration) 901 805 Total 1,673 1,565

Due to minor changes in the cost center structure, the previous year figures were slightly adjusted disclosing administrative staff fully under “enabling services”.

Auditor’s services Auditors’ fees and services recognized as expense are categorized as follows:

KEUR 2018 2017

Audit services 340 731 Tax services 102 577 Other services 412 439 Total 854 1,747

Disclosure exemption In accordance with Section 264 (3) HGB, the following subsidiaries are exempt from the requirement to disclose their financial statements and to prepare notes to the financial statements and a management report. In accordance with the provisions of Section 264 (3) HGB Schustermann & Borenstein Holding GmbH, Schustermann & Borenstein GmbH, Best Secret GmbH, S&B Outlet GmbH and Schustermann & Borenstein Logistik GmbH are exempt from the requirement to disclose their financial statements and to prepare notes to the financial statements and a management report.

Aschheim, March 21, 2019

PrestigeBidCo GmbH

______

Daniel Schustermann Amir Borenstein

______

Marian Schikora

PrestigeBidCo GmbH, Aschheim Group management report for the fiscal year 2018

1. Background to the Group and business model Founded in 1924 and headquartered in Munich, Schustermann & Borenstein is the leading members only omni‐channel retailer in the off‐price fashion retail market. With a strong focus on premium and luxury brands, the Group offers over 3,000 designer brands at attractive prices for men, women and children through online and offline sales channels. With its online brand “BestSecret”, the company has a presence in major European countries. The offline business mainly includes three largescale retail sites (two in Munich and one in Vienna) with a total net sales area of over 19,500 square meters.

1.1 Group companies and organizational structure of the Group PrestigeBidCo GmbH, Aschheim has acquired the Schustermann & Borenstein Group (comprising the seven companies mentioned below) on January 19, 2017. The consolidated financial statements of PrestigeBidCo GmbH include the following companies:

- PrestigeBidCo GmbH, Aschheim - Schustermann & Borenstein Holding GmbH, Aschheim - Schustermann & Borenstein GmbH, Aschheim - Best Secret GmbH, Aschheim - S&B Outlet GmbH, Aschheim - Schustermann & Borenstein Wien GmbH, Vienna, Austria - Schustermann & Borenstein Logistik GmbH, Poing - Swiss Online Shopping AG, Langenthal, Switzerland

PrestigeBidCo was the acquisition vehicle of the Schustermann & Borenstein Group. Due to the fact that the acquisition took place as of January 19, 2017, the figures in 2018 are comparably with previous year to only a limited extent.

The management of the PrestigeBidCo GmbH has the overall responsibility for the Schustermann & Borenstein Holding GmbH and subsidiaries. Furthermore, PrestigeBidCo has an advisory board that exercises both an advisory and a control function.

Schustermann & Borenstein GmbH, Best Secret GmbH, S&B Outlet GmbH, Schuster- mann & Borenstein Wien GmbH and Schustermann & Borenstein Logistik GmbH all have active business operations. The business operations of Swiss Online Shopping AG in Switzerland were taken over by Best Secret GmbH as of July 1, 2018.

1.2 Group activities The PrestigeBidCo Group (the Group) activities focus on retail trading and wholesale in textiles as well as fashion exports.

Schustermann & Borenstein GmbH has sales permises in Munich. Moreover, the Group operates internet portals via its subsidiaries at the Dornach location (Best Secret), an outlet in Zweibrücken (S&B Outlet GmbH) and a store in Vienna (Schustermann & Boren- stein Wien GmbH).

1.3 Group objectives The principal objective of the Group’s entrepreneurial activity is profitable growth. The implemented planning and management systems are coordinated to manage the online and offline business segments. The Group analyzes current business performance at the level of the individual segments as well as the overall Group level.

1.4 Development activities The development area mainly comprises capitalizable development costs for the Best- Secret website and mobile app software for services that are rendered by both Group employees based in Aschheim, Germany and Granada, Spain as well as by external services providers. The capitalization ratio in 2018 was 61.9% (previous year: 52.9%).

2. Economic developments 2.1 Macroeconomic and sector-specific environment The euro zone economy experienced an upturn in 2018. GDP rose by 1.8%, compared with 2.3% in the previous year (Eurostat). All countries in the currency area achieved positive growth rates, although regional differences remained very pronounced. Robust consumer spending and brisk construction activity were the main drivers for the overall positive development. Corporate investments provided additional momentum from the middle of the year onwards.

The overall macro situation was also supportive for the retail fashion industry which again was driven by the continuing consumer inclination towards online shopping. The European fashion retail sector increased by 2.5% in 2018, while online fashion retail achieved a strong growth of 12.0% (Euromonitor, Europe excl. Russia).

The main sales markets for the Group are Germany, Austria and Switzerland (DACH).

With a GDP growth of 1.6% (previous year: 2.2%), the GDP growth rate in Germany declined in 2018 compared to previous years. The growth rate was driven by consumption and investments into both construction and machinery and equipment.

The German fashion retail sector stagnated in 2018 with an estimated growth of 0.0% due to the late onset and long duration of winter in Q1, followed by a long and hot summer in the subsequent two quarters. While stationary sales declined by 2.0% due to deteriorating customer store visit frequency, online fashion retail sales recorded an increase of 5.0% in 2018 (Euromonitor, Europe excl. Russia; Textilwirtschaft).

2.2 Business environment The Group attributes a large part of its success to the development of confidence-building measures with manufacturers. After decades of diligent fashion marketing, the Group has an excellent reputation with national and international manufacturers, which is of great advantage when developing new business relationships.

On January 19, 2017 PrestigeBidCo GmbH acquired 100% of the shares of the Schus- termann & Borenstein Holding GmbH and its six subsidiaries.

In 2018 the management of the Group initiated a number of programs to strengthen the Group’s position in the market, such as customer-relationship-management and merchandise management.

The consolidated financial statements for the fiscal year from January 1 to December 31, 2018, were compiled in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU as of reporting date. The consolidated financial statements give a true and fair view of the group’s financial performance and position.

Financial performance indicators

In the fiscal year 2018 revenues reached mEUR 488.3 (previous year: mEUR 398.4), which was mainly driven by viral growth of the online customer base. The strong performance of the online segment was complemented by the positive development of the stationary store in Vienna. Since the opening in 2014, the stationary store in Vienna has developed positively and did so again in 2018. In 2018 the gross sales floor space in Vienna was increased from 5,900 square meters to 10,400 square meters.

The encouraging group performance in the first two quarters was followed by a challenging environment in the third quarter due to unusual warm temperatures, in particular, in September 2018 and the delayed sale of winter merchandise. The fourth quarter continued to be the strongest quarter in terms of revenue but it was characterized by substantial price reductions in the industry and caused a slightly lower gross margin compared to previous year. Despite the difficult market environment, the substantial underlying growth in revenues, a slightly lower gross margin and scaling effects in operational expenditures (OPEX) resulted in an EBITDA of mEUR 79.5 which increased by 27.6% compared to the previous year with mEUR 62.3 which included 8.1 mEUR non – operational acquisition costs. Our targets for 2018 were met in terms of increase of the customer base and revenue growth.

The Group monitors capital using both a leverage ratio and an interest ratio, which is Adjusted EBITDA/Net Debt and EBITDA/interest expense as of a particular effective date.

Financial position

The following table shows a condensed statement of the financial position of the Group.

Assets In mEUR 31 Dec 2018 31 Dec 2017 Non-current assets 797.5 78.9% 825.4 81.2% Current assets 213.9 21.1% 190.8 18.8% Total assets 1,011.4 100.0% 1,016.1 100.0%

Equity and Liabilities In mEUR 31 Dec 2018 31 Dec 2017 Equity 465.5 46.0% 458.4 45.1% Non-current liabilities 449.4 44.4% 462.8 45.5% Current liabilities 96.5 9.6% 94.9 9.3% Total equity and liabilities 1,011.4 100.0% 1,016.1 100.0%

In fiscal year 2018, total assets amounted to mEUR 1,011.4 (previous year: mEUR 1,016.1). The statement of financial position is dominated by Goodwill in the amount of mEUR 254.4 (previous year: mEUR 254.4), other intangible assets (trademark, customer relationship), the right of use asset under IFRS 16 in the amount of mEUR 79.3 (previous year: mEUR 80.0) as well as working capital, cash and cash equivalents, equity and the senior secured notes of mEUR 253.8 (previous year: mEUR 252.9). Goodwill and other intangible assets relate to the acquisition of the Schustermann & Borenstein Group on January 19, 2017. The intangible assets as of year end mainly represent the trademark BestSecret of mEUR 154.0 (previous year: mEUR 162.5) and trademark Schustermann & Borenstein of mEUR 26.2 (previous year: mEUR 27.1) as well as the online and offline customer relationship of mEUR 143 (previous year: mEUR 166.6) and mEUR 79.7 (previous year mEUR 84.1) respectively. The change in intangible assets mainly relates to annual amortization. The right of use assets mainly remained stable due to an additional sales area as well as an additional warehouse.

In the year under review, investments in intangible assets amounted to mEUR 9.6 (previous year: mEUR 4.9), mainly for capitalizable development costs and purchases of software in connection with customer relationship managements and merchandise systems as well as investments in the homepage and app. Investments in property, plant and equipment totaled mEUR 16.6 (previous year: mEUR 6.3), primarily for the extension of the warehouse as well as fittings of the offline stores and the extension of the store in Vienna.

Our IT department enables us to develop key components of the software (Homepage and App) used by the Group. This gives us a strategic advantage and enables us to align the software with the operating processes. In 2018, the Group recognized development costs of mEUR 3.4 (previous year: mEUR 1.9). Development costs contributed mEUR 1.0 (previous year: mEUR 0.3) to the Group’s amortization in fiscal year 2018.

Inventories on stock in the amount of mEUR 122.3 (previous year: mEUR 124.3) represent goods for the online and offline business. The Group performs a write-down on inventories to a sufficient extent. The level of inventories decreased due to good sales through rates in fourth quarter resulting from price reductions according to market demands. Generally, a high level of inventories in stock increases the availability and thus customer satisfaction.

Trade and other receivables as reported on December 31, 2018 in the amount of mEUR 1.6 (previous year: mEUR 1.4) are all current.

The equity ratio as of December 31, 2018 was 46.0% (previous year: 45.1%).

The non-current liabilities mainly include the senior secured notes of mEUR 253.8 (previous year: mEUR 252.9, mEUR 260.0 nominal value), financial liabilities from leasing contracts under IFRS 16 of mEUR 80.6 (previous year: mEUR 79.5) and deferred tax liabilities of mEUR 114.6 (previous year: mEUR 130.0) mainly belonging to the acquired intangible assets in connection with the purchase price allocation (trademark and customer relationship) and the right of use assets from leasing contracts. The deferred tax liabilities decreased due to the amortization of the PPA assets. They were recognized based on a Group tax rate of 28% (previous year: 29%)

The bond was issued on December 19, 2016 with a 6.250% coupon and a maturity date of 2023.

It was part of the financing structure within the acquisition of Schustermann & Boren- stein Holding GmbH and its subsidiaries.

The finance lease liabilities under IFRS 16 mainly represent rental contracts for the two stores in Munich and the store in Vienna, as well as the logistics center in Poing and the office areas.

Current non-financial liabilities of mEUR 62.3 (previous year: mEUR 58.6) mainly include liabilities for outstanding invoices of mEUR 12.3 (previous year: mEUR 15.2) as well as a refund liability of mEUR 22.7 (previous year: mEUR 19.1). The increase of the refund liability mainly results from an expansion of the business volume.

Net working capital amounted to mEUR 65.1 (previous year: mEUR 66.2) as of December 31, 2018 and consists of inventories and trade and other receivables less trade payables and similar liabilities.

Liquidity

Management focuses on ensuring adequate liquidity due to the Group’s business model (lot purchasing) and the required flexibility with respect to the purchase of attractive merchandise. Given its good liquidity situation, the Group can procure merchandise using its operating cash flow, providing it with the necessary flexibility. Together with the bond issued on December 19, 2016 the Group has implemented a Revolving Credit Facility (RCF) as a flexible financing possibility up to an aggregate principal amount of mEUR 35. In addition, PrestigeBidCo GmbH may elect to request additional facilities either as a new facility or as additional tranches of an existing facility under the Revolv- ing Credit Facility Agreement (the “Additional Facility Commitments”) in amounts up to mEUR 15. PrestigeBidCo entered together with its subsidiaries into the RCF agreement with Goldman Sachs International, Barclays Bank PLC and UniCredit Bank AG in an amount of mEUR 35m. The RCF enables the company to finance working capital needs. The RCF was partly drawn during the fiscal year 2018 to finance the stock for autumn/winter. At year end 2018 the RCF was fully repaid.

The following table shows the financial development in liquidity of the Group:

Consolidated Statement of Cash Flow In mEUR Jan 1- Dec 31, Jan 1- Dec 31, 2018 2017 Cash flow from operating activities 68.4 52.5 Cash flow from investing activities -20.3 -453.4 Cash flow from financing activities -26.1 185.9 Change in Cash and Cash equivalents 22.0 -215.0 Cash and cash equivalents at the beginning 44.9 260.0 of the period Cash and cash equivalents as of 66.9 44.9 December, 31

The cash flow from operating activities increased by mEUR 15.9, from mEUR 52.5 to mEUR 68.4 as a consequence of the positive development of the Group’s operating business.

The cash outflow for investing activities of mEUR -20.3 (previous year: mEUR -453.4) is mainly driven by investments in the extension of the Vienna offline store and the warehouse in Poing. Investments in intangible assets mostly comprise the purchase of software for customer relationship management and merchandise systems. A minor part relates to investments in self-development of IT software for the homepage and app. The previous year figure includes the acquisition costs of the Schustermann and Borenstein Group and is therefore only comparable to a limited extent to the cash outflow for investing activities in 2018.

Cash from financing activities of mEUR -26.1 (previous year: 185.9) mainly represents interests for the senior secured notes and the RCF. The interest paid amounted to mEUR 16.8 (previous year: mEUR 16.6). Furthermore, the cash flow for financing activities included mEUR 9.4 (previous year mEUR 8.3) for the payment of financial lease liabilities. The positive cash flow from financing in the previous year included a capital contribution of mEUR 434.3.

As a result, cash and cash equivalents increased by mEUR 22.0 (previous year: decrease of mEUR 215.0) in fiscal year 2018.

For further details, see the cash flow statement (exhibit 3).

Financial Performance of the Group

The consolidated income statement for 2018 shows strong revenue performance with high profitability.

Consolidated Income Statement 2018 Jan 1 - As % of Jan 1 - A s % of In mEUR Dec 31, revenues Dec 31, revenues 2018 2017 Revenue 488.3 100.0% 398.4 100.0% Cost of sales -259.5 -53.1% -207.7 -52.1% Gross Profit 228.7 46.8% 190.6 47.8% Selling and distribution costs -159.3 -32.6% -131.9 -33.1% Administrative expenses -43.2 -8.8% -45.5 -11.4% Other operating income 1.6 0.3% 1.5 0.4% Other operating expenses -2.0 -0.4% -1.2 -0.3% Earnings before interest and taxes 25.8 5.3% 13.5 3.4% (EBIT)

Our most important performance indicators are revenue, gross margin and EBITDA followed by capital expenditures (CAPEX) and cash.

Other Consolidated Financial Information Jan 1 - Jan 1 - In kEUR Dec 31, Dec 31, 2018 2017 EBIT margin (as % of revenue) 5.3% 3.4% EBITDA margin (as % of revenue) 16.3% 15.6%

The Group is an online and offline fashion retailer. Whilst the online platform BestSecret has a presence in several European countries, the vast majority of the online revenues are made in the DACH region. The offline business comprises two stores in Munich and one in Vienna. In fiscal year 2018, the Group realized revenues of mEUR 488.3 (previous year mEUR 398.4) of which mEUR 361.9 (previous year: mEUR 277.3) were online and mEUR 126.4 (previous year: mEUR 121.1) offline. The positive development was mainly driven by an expanded customer base and continued a geographically strong performance in Germany.

In 2018, the Group recorded an EBITDA of mEUR 79.5 (previous year: mEUR 62.3), representing an EBITDA margin of 16.3% (previous year: 15.6%). The EBITDA development was mainly driven by a stable revenue increase and a scalable OPEX structure. Furthermore, the EBITDA in 2017 was affected by costs in connection with the acquisition of Schustermann & Borenstein Group.

The cost of sales amounted to mEUR 259.5 (previous year: mEUR 207.7), which represents 53,1% (previous year: 52.1%) of the Group revenues. Due to the challenging environment in the industry, the Group gave higher discounts to customers on older and autumn/winter merchandise in order to optimize stock levels and support revenue growth.

Selling and distribution costs came to mEUR 159.3 (previous year: mEUR 132.0). Selling and distribution costs mainly consist of fulfillment of mEUR 75.6 (previous year: mEUR 56.0), marketing of mEUR 8.8 (previous year: mEUR 6.7) and rental costs, personnel costs of the stores and payments costs in total of mEUR 28.2 (previous year: mEUR 25.5), as well as depreciation and amortization mainly of trademark and customer relationship of mEUR 49.8 (previous year: mEUR 45.8). Marketing costs of fiscal year 2018 represent 1,8% (previous year 1.7%) of revenues. Marketing costs remained low due to the strong viral growth which generally allows an increase in customer base at low cost.

The fulfillment cost ratio before depreciation as a percentage of revenues was 14.5% (previous year: 13.2%). The ratio increased mainly due to a lower average price per item of the spring/ summer merchandise over a prolonged period.

Administration costs amount to mEUR 43.2 (previous year: mEUR 45.5) for fiscal year 2018 and include costs for the administrative as well as the purchase and IT department. In 2017, acquisition costs of mEUR 8.1 were recognized as administrative costs. Eliminating the effects of the acquisition, the administration costs increased by mEUR 5.8 mainly due to an increasing number of employees in the Group resulting in higher total salaries as well as more expenses for personnel recruitment.

The EBIT margin of 5.3% (previous year: 3.4%) of revenues is affected by amortization costs for the trademarks and customer relationships resulting from the purchase price allocation for the acquisition on January 19, 2017 and non – operational acquisition costs in 2017. Eliminating these effects, the operative EBIT margin represents 13.0% (previous year: 14.4%) of revenues. The decrease in operative EBIT-Margin mainly stemmed from slightly lower gross margin due to substantial price reductions in the fourth quarter.

Results by segment

As an omni-channel fashion retailer, the Group operates both an online e-commerce website and offline retail stores. The results of the two segments can be summarized as follows:

Consolidated Segment Results Jan 1 - Jan 1 - In mEUR Dec 31, Dec 31, 2018 2017 Revenues 488.3 398.4 Online 361.9 277.3 Offline 126.4 121.1 Gross Profit 228.7 190.6 Online 175.4 137.3 Offline 53.3 53.3 Gross Profit Margin 46.8% 47.8% Online 48.5% 49.5% Offline 42.2% 44.0%

Overall Assessment

The management of the Group views the business development in 2018 as positive taking into account the general business development in the industry. The Group focused on profitable customer growth and made further strategic investments in people and processes.

2.3 Non-financial performance indicators The management of the Group has identified the customer base, market profile in the online shopping business as material non-financial performance indicators.

The customer base and its moderate expansion are important factors affecting the ability to achieve current and future revenue targets. The closed member system, in both the online and stationary business, ensures exclusivity.

3. Subsequent events PrestigeBidCo GmbH established a revolving credit facility of KEUR 15,000 by way of increase of the existing facility to KEUR 50,000. The additional facility lender is UniCredit Bank AG, London branch. On January 02, 2019 the lender confirmed the granting of the additional facility. Utilizations under the Additional Facility may only be used for financing or refinancing the working capital requirements and/or general corporate purposes of PrestigeBidCo GmbH and its Restricted Subsidiaries. The term of the Additional Facility is valid until further notice. The additional facility ranks pari passu with the existing facility.

As part of the growth strategy the Group’s management decided to rebrand Schuster- mann & Borenstein stores as BestSecret/Schustermann& Borenstein stores. The goal of the rebranding (dual branding) is to emphasize our common identity and validate the business development strategy exclusively under a combined brand name to reflect the omni-channel character.

Forecast, opportunities and risks

The management of the Group has implemented controls as part of its corporate planning in order to identify significant risks in the Group. These are high-level controls, such as monthly reports and business analyses.

According to the information currently available, all known risks are adequately accounted for by means of allowances on the relevant assets and the recognition of respective provisions. There are currently no discernible risks that would jeopardize the Company’s ability to continue as a going concern.

With the acquisition of the Schustermann & Borenstein Group the business of the PrestigeBidCo GmbH is not comparable on a year to year basis.

Given the wide scope and complexity of the Group’s business, the risks were not quan- tified.

Earnings/financing risks and opportunities

Apart from the customary risk that merchandise may be ordered that does not satisfy the customers’ fashion tastes, there are to the best of knowledge no identifiable risks that could significantly impact earnings. Thanks to strong earnings power and financing by equity and a long-term debt, there are currently no identifiable risks that could impact the Group’s financing.

In addition to conventional fashion retailing, online shopping in particular offers significant growth opportunities owing to the shift in consumer behavior away from traditional stationary retail to online purchasing seen in the last few years.

To safeguard growth opportunities in the online segment, we continually invest in the appropriate technology.

Market price risk, credit risk and liquidity risk

The Group is not exposed to market price or credit risk since it has not concluded any short- or long-term contract manufacturing or medium- or long-term supply agreements, nor does it sell merchandise on credit terms. The risk of bad debts is therefore low.

The Group offers for its online customers the option to purchase on account. In connection with this payment option the Group works with a factoring provider, transferring substantially all risks and rewards resulting from the receivables to the factoring company.

Currency risk

On the procurement side, the Group is exposed to the risk that the euro may depreciate against the US dollar or other currencies, resulting in higher procurement prices. This is an industry risk facing all fashion retailers. The Group expects to pass on the increased procurement prices to customers, so that this risk is also relatively low.

Personnel-related risks and opportunities

The Group’s employees are a significant success factor. The Group therefore has invested in employee training and development for many years, allowing it to maintain the high level of its employees’ qualifications and excellent customer service focus. The Group has offered training to junior employees for many years to counter the risk of employee turnover.

Key roles are held by employees who have worked in the Group for many years. Fur- thermore, many procurement employees have good relationships with suppliers, many of which have been developed over decades. If the Group retains these employees, it will be able to further develop these contacts. To achieve this, it offers incentives, such as company cars and bonuses. In this way it endeavors to keep employee turnover as low as possible, which in turn means that employee know-how remains in the Group.

Weather-related risks and opportunities

Weather-related risk is a key factor in retail trading. If a winter is too warm, fewer winter garments, e.g., coats and hats, are sold. If there is little snow, sales of winter sports goods, such as ski jackets, are slow. Generally, the number of store visitors also closely correlates with weather conditions. Fewer customers visit our sales premises on hot summer days. By contrast, bad weather encourages purchases of affordable sales stock.

The proximity of the central warehouse to the sales premises is therefore of pivotal importance and makes it possible to deliver items from the entire range to the individual shops on a just-in-time basis. This allows management to mitigate weather-related risk at least to some extent.

Expansion risks and opportunities The Group will expand further in the future. However, in doing so, it faces the risk that the individual measures (e.g., advertising, direct marketing) do not have the desired impact.

The Group also plans to continue to expand in the international online business. Online sales will be expanded on the basis of the BestSecret platform. In this context, the image and customers’ acceptance of the concept and safeguarding exclusivity play a decisive role.

Tax risks

In the reporting period, the Group recognized appropriate tax provisions for tax risks.

Given the complexity of tax rules and regulations, the Group is exposed to risks that may nonetheless affect its net assets, financial position and results of operations.

Risk relating to financial covenants

We are subject to covenants that may limit to a certain extent our ability to finance future operations and capital needs and to pursue business opportunities and activities. We cannot incur any indebtedness if on the date of such incurrence, after giving pro forma effect to the incurrence of such indebtedness, (1) the fixed charge coverage ratio (the ratio of (x) the aggregate amount of Consolidated EBITDA for the period of the four most recent fiscal quarters to (y) the Fixed Charges for such four fiscal quarters) would not have been at least 2.0 to 1.0 and (2) to the extent that the indebtedness is senior secured indebtedness, the consolidated senior secured net leverage ratio (the ratio of (x) the Consolidated Senior Secured Net Leverage at such date to (y) the aggregate amount of Consolidated EBITDA for the period of the four most recent fiscal quarters ending prior to the date of such determination for which internal consolidated financial statements are available) would have been no greater than 5.0 to 1.0.

Non-financial performance indicators

Management considers the Company’s market profile in the form of brand awareness and customer awareness as significant non-financial performance indicators. As part of the purchase price allocation, the Schustermann & Borenstein and the BestSecret brands, the Group’s online customer base and the Group’s offline customer base was revalued. Therefore, brand awareness must be heightened by achieving greater market penetration as part of expansion and the customer base must be retained and expanded.

The risk is that expansion and broadening of the customer base may harm the exclusivity of the business. However, this exclusivity may be safeguarded through appropriate new customer selection.

Other risks

Additional risks that the Group may face include:

· The dependency on our ability to continuously source a variety and quantity of attractive products from various popular brands at attractive prices that will satisfy our customers’ preferences and demands.

· The strong competition in our markets which may intensify further.

· Our business may be impacted by negative economic and political developments in Germany and other countries where our customers are from.

· Our ability to manage our inventory or our store network and online presence in line with customer demand.

· We depend on a reliable and efficient supply chain, which includes third-party carriers to deliver merchandise to our warehouse and online customers. Capacity constraints, interruptions or other failures in our supply chain could materially and adversely affect our business, results of operations and financial condition.

· Operational disruptions at our centralized warehouse and logistics center could have a material adverse effect on our business, results of operations and financial condition.

· We source the majority of our merchandise on the basis of purchase orders with our suppliers, and the lack of formal supply agreements could impact our ability to maintain these relationships.

· Risks in connection with the quality and timely delivery of our private label merchandise and our relationships with the manufacturers of such merchandise.

· Risks in relation to our e-commerce business.

· The ability to adopt and apply technological advances in a timely manner and to successfully expand our multi-channel capabilities.

· Our risk management and internal controls may not prevent or detect violations of law or other inadequate business practices.

· Our operations may be interrupted or otherwise adversely affected as a result of failures in our IT systems.

· We are subject to numerous laws and regulations with respect to personal data protection and failure to comply with such laws and regulations, may result in litigation and administrative or arbitration proceedings and/or significantly damage our relationship with our customers. We may also be adversely affected by changes in these laws and regulations.

· We face a risk of theft or misappropriation of funds and products in our stores, our centralized warehouse and logistics center, and we are exposed to a risk of misappropriation of our customer data and other inappropriate behavior.

· Our initiatives to support our brands, generate customer traffic and build or retain a loyal customer base, as well as other marketing initiatives may not be effective.

· Failure to sufficiently resolve customer relations issues could negatively impact our ability to continue our expansion.

· We are exposed to risks associated to the payment options we offer.

· We are exposed to the risk of rising labor costs as well as work stoppages, strikes or other collective actions.

· We face certain risks in relation to future acquisitions.

· Our intangible assets, such as goodwill and trademarks, are subject to the risk of impairment.

· We may be unable to protect our trademarks, domain names and other intellectual property rights and may infringe the intellectual property rights of third parties.

· We may incur liabilities that are not covered by insurance.

· Many of our suppliers rely on credit insurance to protect their receivables, and any changes to, or slow adjustments or withdrawals of, such credit insurance might cause suppliers to seek to reduce their credit exposure to us.

· We may be subject to claims based on unfair commercial practices which could have a material adverse effect on our business, financial condition and results of operations.

· We are exposed to risks related to conducting operations in several different countries.

· We are subject to consumer protection laws and other regulatory requirements which may change, resulting in additional costs.

· We are subject to risks from legal and arbitration proceedings, which may adversely affect our financial results and position.

· We use standardized sales, purchase and supply agreements, as well as standardized terms and conditions, which increase the potential that all contract terms used therein, may be invalid or unenforceable if any clause is held to be void.

· Our substantial leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Note Guarantees.

· Despite our substantial leverage, we may still be able to incur substantially more debt in the future, which may make it difficult for us to service our debt, including the Notes, and impair our ability to operate our business.

· We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to meet our obligations under our indebtedness, which may not be successful.

· Market perceptions concerning the instability of the euro, the potential re-introduction of individual currencies within the Eurozone, or the potential dissolution of the euro entirely, could have adverse consequences for us with respect to our outstanding euro-denominated debt obligations.

· Drawings under the Revolving Credit Facility will bear interest at floating rates that could rise significantly, increasing our costs and reducing our cash flow.

Overall risk and opportunities

The overall risk for 2019 largely relates to the possibility that the planned expansion (new customers in online shopping, the internationalization of BestSecret and the offline expansion) will not materialize. As a result, revenue and EBITDA would not develop as forecasted. Another risk is inappropriate merchandise management, i.e., whether customers will still be able to order high-quality merchandise. However, if several positive factors materialize, it is likely that our EBITDA and revenue targets will be surpassed.

Forecast

If the economic forecasts predicting economic growth materialize and there are no major changes in the industry and business environment, management expects that the Group will continue revenue growth in 2019 followed by an almost constant gross margin and EBITDA growth.

Aschheim, March 21, 2019

Daniel Schustermann Marian Schikora

Amir Borenstein

„Bestätigungsvermerk des unabhängigen Abschlussprüfers

An die PrestigeBidCo GmbH

Prüfungsurteile

Wir haben den Konzernabschluss der PrestigeBidCo GmbH, Aschheim, und ihrer Tochtergesellschaften (der Konzern) – bestehend aus der Konzerngesamtergebnis‐rechnung für das Geschäftsjahr vom 1. Januar 2018 bis zum 31. Dezember 2018, der Konzernbilanz zum 31. Dezember 2018, der Konzernkapitalflussrechnung und der Konzerneigenkapitalveränderungs‐ rechnung für das Geschäftsjahr vom 1. Januar 2018 bis zum 31. Dezember 2018 sowie dem Konzernanhang, einschließlich einer Zusammenfassung bedeutsamer Rechnungslegungs‐ methoden – geprüft. Darüber hinaus haben wir den Konzernlagebericht der PrestigeBidCo GmbH für das Geschäftsjahr vom 1. Januar 2018 bis zum 31. Dezember 2018 geprüft.

Nach unserer Beurteilung aufgrund der bei der Prüfung gewonnenen Erkenntnisse

• entspricht der beigefügte Konzernabschluss in allen wesentlichen Belangen den IFRS, wie sie in der EU anzuwenden sind, und den ergänzend nach § 315e Abs. 1 HGB anzuwendenden deutschen gesetzlichen Vorschriften und vermittelt unter Beachtung dieser Vorschriften ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens‐ und Finanzlage des Konzerns zum 31. Dezember 2018 sowie seiner Ertragslage für das Geschäftsjahr vom 1. Januar 2018 bis zum 31. Dezember 2018 und

• vermittelt der beigefügte Konzernlagebericht insgesamt ein zutreffendes Bild von der Lage des Konzerns. In allen wesentlichen Belangen steht dieser Konzernlagebericht in Einklang mit dem Konzernabschluss, entspricht den deutschen gesetzlichen Vorschriften und stellt die Chancen und Risiken der zukünftigen Entwicklung zutreffend dar.

Gemäß § 322 Abs. 3 Satz 1 HGB erklären wir, dass unsere Prüfung zu keinen Einwendungen gegen die Ordnungsmäßigkeit des Konzernabschlusses und des Konzernlageberichts geführt hat.

Grundlage für die Prüfungsurteile

Wir haben unsere Prüfung des Konzernabschlusses und des Konzernlageberichts in Über‐ einstimmung mit § 317 HGB unter Beachtung der vom Institut der Wirtschaftsprüfer (IDW) festgestellten deutschen Grundsätze ordnungsmäßiger Abschlussprüfung durchgeführt. Unsere Verantwortung nach diesen Vorschriften und Grundsätzen ist im Abschnitt „Verantwortung des Abschlussprüfers für die Prüfung des Konzernabschlusses und des Konzernlageberichts“ unseres Bestätigungsvermerks weitergehend beschrieben. Wir sind von den Konzernunternehmen unabhängig in Übereinstimmung mit den deutschen handelsrechtlichen und berufsrechtlichen Vorschriften und haben unsere sonstigen deutschen Berufspflichten in Übereinstimmung mit diesen Anforderungen erfüllt. Wir sind der Auffassung, dass die von uns erlangten Prüfungs‐ nachweise ausreichend und geeignet sind, um als Grundlage für unsere Prüfungsurteile zum Konzernabschluss und zum Konzernlagebericht zu dienen.

Sonstige Informationen

Die gesetzlichen Vertreter sind für die sonstigen Informationen verantwortlich. Die sonstigen Informationen, die uns nach Erteilung des Bestätigungsvermerks voraussichtlich zur Verfügung gestellt werden, umfassen folgende, für den Annual Bond Report 2018 vorgesehene Bestandteile: Forward‐looking statements, presentation of financial information, definitions, summary overview of results, management discussion and analysis of financial condition and results of operation, risk factors, business, management, shareholders, description of certain financing agreements.

Unsere Prüfungsurteile zum Konzernabschluss und zum Konzernlagebericht erstrecken sich nicht auf die sonstigen Informationen, und dementsprechend geben wir weder ein Prüfungsurteil noch irgendeine andere Form von Prüfungsschlussfolgerung hierzu ab.

In Zusammenhang mit unserer Prüfung haben wir die Verantwortung, die sonstigen Informationen zu lesen und dabei zu würdigen, ob die sonstigen Informationen

• wesentliche Unstimmigkeiten zum Konzernabschluss, zum Konzernlagebericht oder zu unseren bei der Prüfung erlangten Kenntnissen aufweisen oder

• anderweitig wesentlich falsch dargestellt erscheinen.

Verantwortung der gesetzlichen Vertreter für den Konzernabschluss und den Konzernlagebericht

Die gesetzlichen Vertreter sind verantwortlich für die Aufstellung des Konzernabschlusses, der den IFRS, wie sie in der EU anzuwenden sind, und den ergänzend nach § 315e Abs. 1 HGB anzuwendenden deutschen gesetzlichen Vorschriften in allen wesentlichen Belangen entspricht, und dafür, dass der Konzernabschluss unter Beachtung dieser Vorschriften ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens‐, Finanz‐ und Ertragslage des Konzerns vermittelt. Ferner sind die gesetzlichen Vertreter verantwortlich für die internen Kontrollen, die sie als notwendig bestimmt haben, um die Aufstellung eines Konzernabschlusses zu ermöglichen, der frei von wesentlichen – beabsichtigten oder unbeabsichtigten – falschen Darstellungen ist.

Bei der Aufstellung des Konzernabschlusses sind die gesetzlichen Vertreter dafür verantwortlich, die Fähigkeit des Konzerns zur Fortführung der Unternehmenstätigkeit zu beurteilen. Des Weiteren haben sie die Verantwortung, Sachverhalte in Zusammenhang mit der Fortführung der Unternehmenstätigkeit, sofern einschlägig, anzugeben. Darüber hinaus sind sie dafür verantwortlich, auf der Grundlage des Rechnungslegungsgrundsatzes der Fortführung der Unternehmenstätigkeit zu bilanzieren, es sei denn, es besteht die Absicht den Konzern zu liquidieren oder der Einstellung des Geschäftsbetriebs oder es besteht keine realistische Alternative dazu.

Außerdem sind die gesetzlichen Vertreter verantwortlich für die Aufstellung des Konzernlageberichts, der insgesamt ein zutreffendes Bild von der Lage des Konzerns vermittelt sowie in allen wesentlichen Belangen mit dem Konzernabschluss in Einklang steht, den deutschen gesetzlichen Vorschriften entspricht und die Chancen und Risiken der zukünftigen Entwicklung zutreffend darstellt. Ferner sind die gesetzlichen Vertreter verantwortlich für die Vorkehrungen und Maßnahmen (Systeme), die sie als notwendig erachtet haben, um die Aufstellung eines Konzernlageberichts in Übereinstimmung mit den anzuwendenden deutschen gesetzlichen Vorschriften zu ermöglichen, und um ausreichende geeignete Nachweise für die Aussagen im Konzernlagebericht erbringen zu können.

Verantwortung des Abschlussprüfers für die Prüfung des Konzernabschlusses und des Konzernlageberichts

Unsere Zielsetzung ist, hinreichende Sicherheit darüber zu erlangen, ob der Konzernabschluss als Ganzes frei von wesentlichen – beabsichtigten oder unbeabsichtigten – falschen Darstellungen ist, und ob der Konzernlagebericht insgesamt ein zutreffendes Bild von der Lage des Konzerns vermittelt sowie in allen wesentlichen Belangen mit dem Konzernabschluss sowie mit den bei der Prüfung gewonnenen Erkenntnissen in Einklang steht, den deutschen gesetzlichen Vorschriften entspricht und die Chancen und Risiken der zukünftigen Entwicklung zutreffend darstellt, sowie einen Bestätigungsvermerk zu erteilen, der unsere Prüfungsurteile zum Konzernabschluss und zum Konzernlagebericht beinhaltet.

Hinreichende Sicherheit ist ein hohes Maß an Sicherheit, aber keine Garantie dafür, dass eine in Übereinstimmung mit § 317 HGB unter Beachtung der vom Institut der Wirtschaftsprüfer (IDW) festgestellten deutschen Grundsätze ordnungsmäßiger Abschlussprüfung durchgeführte Prüfung eine wesentliche falsche Darstellung stets aufdeckt. Falsche Darstellungen können aus Verstößen oder Unrichtigkeiten resultieren und werden als wesentlich angesehen, wenn vernünftigerweise erwartet werden könnte, dass sie einzeln oder insgesamt die auf der Grundlage dieses Konzernabschlusses und Konzernlageberichts getroffenen wirtschaftlichen Entscheidungen von Adressaten beeinflussen.

Während der Prüfung üben wir pflichtgemäßes Ermessen aus und bewahren eine kritische Grundhaltung. Darüber hinaus

• identifizieren und beurteilen wir die Risiken wesentlicher – beabsichtigter oder unbeabsichtigter – falscher Darstellungen im Konzernabschluss und im Konzern‐ lagebericht, planen und führen Prüfungshandlungen als Reaktion auf diese Risiken durch sowie erlangen Prüfungsnachweise, die ausreichend und geeignet sind, um als Grundlage für unsere Prüfungsurteile zu dienen. Das Risiko, dass wesentliche falsche Darstellungen nicht aufgedeckt werden, ist bei Verstößen höher als bei Unrichtigkeiten, da Verstöße betrügerisches Zusammenwirken, Fälschungen, beabsichtigte Unvollständigkeiten, irreführende Darstellungen bzw. das Außerkraftsetzen interner Kontrollen beinhalten können;

• gewinnen wir ein Verständnis von dem für die Prüfung des Konzernabschlusses relevanten internen Kontrollsystem und den für die Prüfung des Konzernlageberichts relevanten Vorkehrungen und Maßnahmen, um Prüfungshandlungen zu planen, die unter den gegebenen Umständen angemessen sind, jedoch nicht mit dem Ziel, ein Prüfungsurteil zur Wirksamkeit dieser Systeme abzugeben;

• beurteilen wir die Angemessenheit der von den gesetzlichen Vertretern angewandten Rechnungslegungsmethoden sowie die Vertretbarkeit der von den gesetzlichen Vertretern dargestellten geschätzten Werte und damit zusammenhängenden Angaben;

• ziehen wir Schlussfolgerungen über die Angemessenheit des von den gesetzlichen Vertretern angewandten Rechnungslegungsgrundsatzes der Fortführung der Unternehmenstätigkeit sowie, auf der Grundlage der erlangten Prüfungsnachweise, ob eine wesentliche Unsicherheit im Zusammenhang mit Ereignissen oder Gegebenheiten besteht, die bedeutsame Zweifel an der Fähigkeit des Konzerns zur Fortführung der Unternehmenstätigkeit aufwerfen können. Falls wir zu dem Schluss kommen, dass eine wesentliche Unsicherheit besteht, sind wir verpflichtet, im Bestätigungsvermerk auf die dazugehörigen Angaben im Konzernabschluss und im Konzernlagebericht aufmerksam zu machen oder, falls diese Angaben unangemessen sind, unser jeweiliges Prüfungsurteil zu modifizieren. Wir ziehen unsere Schlussfolgerungen auf der Grundlage der bis zum Datum unseres Bestätigungsvermerks erlangten Prüfungsnachweise. Zukünftige Ereignisse oder Gegebenheiten können jedoch dazu führen, dass der Konzern seine Unternehmenstätigkeit nicht mehr fortführen kann;

• beurteilen wir die Gesamtdarstellung, den Aufbau und den Inhalt des Konzernabschlusses einschließlich der Angaben sowie ob der Konzernabschluss die zugrunde liegenden Geschäftsvorfälle und Ereignisse so darstellt, dass der Konzernabschluss unter Beachtung der IFRS, wie sie in der EU anzuwenden sind, und der ergänzend nach § 315e Abs. 1 HGB anzuwendenden deutschen gesetzlichen Vorschriften ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens‐, Finanz‐ und Ertragslage des Konzerns vermittelt;

• holen wir ausreichende, geeignete Prüfungsnachweise für die Rechnungslegungs‐ informationen der Unternehmen oder Geschäftstätigkeiten innerhalb des Konzerns ein, um Prüfungsurteile zum Konzernabschluss und zum Konzernlagebericht abzugeben. Wir sind verantwortlich für die Anleitung, Überwachung und Durchführung der Konzernabschlussprüfung. Wir tragen die alleinige Verantwortung für unsere Prüfungsurteile;

• beurteilen wir den Einklang des Konzernlageberichts mit dem Konzernabschluss, seine Gesetzesentsprechung und das von ihm vermittelte Bild von der Lage des Konzerns;

• führen wir Prüfungshandlungen zu den von den gesetzlichen Vertretern dargestellten zukunftsorientierten Angaben im Konzernlagebericht durch. Auf Basis ausreichender geeigneter Prüfungsnachweise vollziehen wir dabei insbesondere die den zukunftsorientierten Angaben von den gesetzlichen Vertretern zugrunde gelegten bedeutsamen Annahmen nach und beurteilen die sachgerechte Ableitung der zukunftsorientierten Angaben aus diesen Annahmen. Ein eigenständiges Prüfungsurteil zu den zukunftsorientierten Angaben sowie zu den zugrunde liegenden Annahmen geben wir nicht ab. Es besteht ein erhebliches unvermeidbares Risiko, dass künftige Ereignisse wesentlich von den zukunftsorientierten Angaben abweichen.

Wir erörtern mit den für die Überwachung Verantwortlichen unter anderem den geplanten Umfang und die Zeitplanung der Prüfung sowie bedeutsame Prüfungsfeststellungen, einschließlich etwaiger Mängel im internen Kontrollsystem, die wir während unserer Prüfung feststellen.“

München, den 21. März 2019

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Räpple Hohenegg Wirtschaftsprüfer Wirtschaftsprüfer

Translation from the German language

“Independent auditor’s report

To PrestigeBidCo GmbH

Opinions

We have audited the consolidated financial statements of PrestigeBidCo GmbH, Aschheim and its subsidiaries (the Group), which comprise the consolidated statements of comprehensive income for the fiscal year from January 1 to December 31, 2018, the consolidated balance sheet as at December 31, 2018, the consolidated statements of cash flows and the consolidated statements of changes in equity for the fiscal year from January 1 to December 31, 2018 and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of PrestigeBidCo GmbH for the fiscal year from January 1 to December 31, 2018.

In our opinion, on the basis of the knowledge obtained in the audit,

• the accompanying consolidated financial statements comply, in all material respects, with the IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB [“Handelsgesetzbuch”: German Commercial Code] and, in compliance with these requirements, give a true and fair view of the assets, liabilities and financial position of the Group as at December 31, 2018 and of its financial performance for the fiscal year from January 1 to December 31, 2018, and

• the accompanying group management report as a whole provides an appropriate view of the Group’s position. In all material respects, this group management report is consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development.

Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.

Basis for the opinions

We conducted our audit of the consolidated financial statements and of the group management report in accordance with Sec. 317 HGB and in compliance with German Generally Accepted

Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements and of the group management report” section of our auditor’s report. We are independent of the Group entities in accordance with the requirements of German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions on the consolidated financial statements and on the group management report.

Other information

The executive directors are responsible for the other information, which propably will be provided after the issuance of our audit opinion. The other information comprises the following parts of the Annual Bond Report 2018: Forward‐looking statements, presentation of financial information, definitions, summary overview of results, management discussion and analysis of financial condition and results of operation, risk factors, business, management, shareholders, description of certain financing agreements.

Our opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an opinion or any other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information

• is materially inconsistent with the consolidated financial statements, with the group management report or our knowledge obtained in the audit, or

• otherwise appears to be materially misstated.

Responsibilities of the executive directors for the consolidated financial statements and the group management report

The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB [“Handelsgesetzbuch”: German Commercial Code] and, that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets,

liabilities, financial position and financial performance of the Group. In addition, the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group’s ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting, unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.

Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group’s position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.

Auditor’s responsibilities for the audit of the consolidated financial statements and of the group management report

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group’s position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that includes our opinions on the consolidated financial statements and on the group management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sec. 317 HGB will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.

We exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements and of the group management report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems.

• Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.

• Conclude on the appropriateness of the executive directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the group management report or, if such disclosures are inadequate, to modify our respective opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to be able to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and financial performance of the Group in compliance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Sec. 315e (1) HGB [“Handelsgesetzbuch”: German Commercial Code].

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express opinions on the consolidated financial statements and on the group management report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.

• Evaluate the consistency of the group management report with the consolidated financial statements, its conformity with German law, and the view of the Group’s position it provides.

• Perform audit procedures on the prospective information presented by the executive directors in the group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective information, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a separate opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.”

Munich, 21 March 2019

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Räpple Hohenegg Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]