Financial Statements SUMMARY Part I. Management report Part II. Declaration letter Part III. Consolidated financial statements Part IV. Report of the Reviseur d’entreprises Agréé Financial Statements Management Report as at 31 December 2012 1 Message from the management .................................................................................................................................... 1 2 2012 and post-closing key events ................................................................................................................................. 2 2.1 Berlin GSG refinancing process finalized .......................................................................................................................................................... 2 2.2 Debt reduction by equitizing OG and OPG bonds ............................................................................................................................................ 2 2.3 Sale of Sky Office .................................................................................................................................................................................................. 3 2.4 Sale of Radio Free Europe Building in Prague .................................................................................................................................................. 3 2.5 Initiation of Bubny master plan change ............................................................................................................................................................. 3 2.6 Sale of stakes in two Office Sub-funds of Endurance Real Estate ................................................................................................................. 4 2.7 Towards the selective launch of new opportunistic development projects .................................................................................................. 4 2.8 Request for arbitration against the State Property Management Agency of the Republic of Croatia ........................................................ 4 3 Group strategy and objectives ...................................................................................................................................... 4 3.1 Strategy update and 2013 outlook. ..................................................................................................................................................................... 4 4 Market environment ........................................................................................................................................................ 5 4.1 Main macro-drivers ............................................................................................................................................................................................... 5 4.2 Global macro-economic conditions .................................................................................................................................................................... 5 4.3 European investment activity and lending market ............................................................................................................................................ 6 4.4 Interest rates and inflation expectations ............................................................................................................................................................ 6 4.5 Cross-border investment activities ..................................................................................................................................................................... 7 4.6 FOREX movements ............................................................................................................................................................................................... 7 4.7 Selected market focus .......................................................................................................................................................................................... 7 5 Portfolio: Gross Asset Value and operational performance .................................................................................... 10 5.1 Total portfolio evolution ..................................................................................................................................................................................... 10 5.2 Property Investments evolution ........................................................................................................................................................................ 12 5.3 Development evolution....................................................................................................................................................................................... 24 6 E-business ..................................................................................................................................................................... 30 6.1 Property investments and development activities .......................................................................................................................................... 30 6.2 Hospitality ............................................................................................................................................................................................................ 30 7 Liabilities and financial profile .................................................................................................................................... 30 7.1 Cash and cash equivalents ................................................................................................................................................................................ 30 7.2 Loan to value ....................................................................................................................................................................................................... 31 7.3 Financial liabilities .............................................................................................................................................................................................. 31 8 EPRA Net Asset Value .................................................................................................................................................. 32 9 Full Year 2012 Financial Results ................................................................................................................................. 34 9.1 Consolidated income statement ........................................................................................................................................................................ 34 9.2 Revenue by Business line .................................................................................................................................................................................. 34 9.3 Balance sheet ...................................................................................................................................................................................................... 39 9.4 Cash flow statement ........................................................................................................................................................................................... 40 Financial Statements 9.5 Annual statutory financial information ............................................................................................................................................................. 41 10 Human resources ......................................................................................................................................................... 41 11 Corporate governance ................................................................................................................................................. 41 11.1 Principles ............................................................................................................................................................................................................. 41 11.2 Board of Directors ............................................................................................................................................................................................... 42 11.3 Committees of the Board of Directors .............................................................................................................................................................. 44 11.4 Description of internal controls relative to financial information processing. ............................................................................................ 46 11.5 Remuneration and benefits ................................................................................................................................................................................ 46 11.6 Corporate Governance rules and regulations ................................................................................................................................................. 46 11.7 Additional information ........................................................................................................................................................................................ 48 11.8 External Auditors ...............................................................................................................................................................................................