CONSOLIDATED ANNUAL REPORT OF GLOBE TRADE CENTRE S.A. CAPITAL GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 Place and date of publication: Warsaw, 19 March 2020 List of contents: Letter of the Management Board Management Board’s report on the activities of Globe Trade Centre S.A. Capital Group in the financial year ended 31 December 2019 Report on the application of the principles of corporate governance for the financial year ended 31 December 2019 Management Board’s representations Management Board’s information on apoitment of the audit company Supervisory Board’s statement Assessment of the Supervisory Board Consolidated financial statements for the financial year ended 31 December 2019 Independent auditor’s report on the audit of the annual consolidated financial statements 2 Ladies and Gentlemen, 2019 was a rewarding year for the GTC Group. We maintained our well-established position as a leading real estate investor and developer in CEE & SEE. We continued to develop our projects, realized profit by selling two assets, refinanced a number of loans thereby improving the maturity profile and reducing the overall financial costs, and leased a significant space. Our efforts yielded a profit of €75m. Attractive asset portfolio Over the year, our portfolio grew by 80,600 sq m owing to the development of new properties in both the office and retail segments. We currently own five large-scale shopping malls across the region. We put a lot of efforts into enhancing the performance of our retail assets. We are proud to report that the turnover of Galeria Jurajska has improved by 7% over 2018 and that over 60 shops have prolonged their lease, while 15 new shops opened in the mall. The turnover in Galeria Północna, increased by 21% year-on-year. Outside of Poland, Mall of Sofia has maintained a very strong and stable occupancy level at almost 100% and increased in-place rents since the acquisition, while Avenue Mall Zagreb continued with full occupancy and a strong position on the market. Our newest addition, Ada Mall, is practically fully let and its design was recognized with a CIJ Best Retail Development of the Year award. As far as office assets are concerned, we hold 41 properties and managed to sign leases for 202,400 sq m of office space, which improved occupancy to 95% across the board, with the most noticeable improvement noted in Poland. Not only did we improve the occupancy rate but also managed to increase average rental rates in almost all our markets. During the year, GTC decided to dispose of two assets, GTC White House in Budapest and Neptun Office Center in Gdańsk. Both buildings were fully leased and generated both a significant improvement in value and substantial free cash upon sale. Both were sold with impressive profit. On 31 December 2019, the Gross Asset Value (excl. right of use) of our portfolio was approximately €2.2 billion, of which 90% were income-generating and 4% were projects under construction. Unique self-funded development pipeline During 2019, we significantly scaled up our activities in our various geographical markets. First of all, we commissioned 80,600 sq m of commercial space: Green Heart (N1 and N2) in Belgrade, Matrix A in Zagreb, Advance Business Center I in Sofia, Bulgaria and Ada Mall in Belgrade. All the new properties showed a very high pre-lease level at the end of the construction phase, which confirmed the demand in the relevant markets. Moreover our professional approach during the entire investment process starting from acquisition of the land, through the design and construction, ending with the leasing process has resulted in a proven success. Currently, we are developing four office properties in Belgrade, Zagreb, Sofia and Budapest. All of the offices under construction are with a high pre-lease rate and enjoy the interest of large international tenants, including the World Bank, Modis, and Exxon Mobile. Our greatest success on the preleasing front was the leasing of our Pillar office building to Exxon Mobile just after the commencement of its construction. This transaction is the largest lease contract on the Budapest market in the last year. The projects under construction are expected to boost our revenue and generate rent upon completion and stabilization of €12.2m. Moreover, there are four more projects at the planning stage spread throughout the regional capitals. Improvement in key operating indicators In 2019, we kept modernizing some of our assets, refurbishing their common areas and mechanical systems, implementing ecological solutions, and improving the green space in and outside the buildings. All of that, combined with the completion of new attractive buildings, allowed us to lease over 236,000 sq m during 2019, and improve our already high overall occupancy rate to 95%. Finance 2019 was a year of constant growth. We managed to provide value to our shareholders as the result of our self- propelling growth, including the expansion of our portfolio and a strong refinancing activity. Due to the newly completed and acquired properties, our revenues went up to €170m and the gross margin from operations increased from €112m to €128m in 2019. Net profit from revaluation and impairment amounted to €16m following €40m recognized in 2018. We raised a corporate debt of €61m and borrowed €232m in construction and investment loans. We repaid €44m bonds and pay €37m dividend. We secured finance to all projects under construction and we commenced negotiations for a number of refinancing in 2020. All that took place while keeping the overall leverage at a level of approximately 44% at the end of the year. Total financing costs decreased for the four consecutive years to a historic low of 2.6% p.a. (2.7% p.a. in 2018, 2.8% p.a. in 2017). All of the above enabled us to generate €70m of FFO, which is a significant improvement over €61m generated in 2018. Taking into consideration the fragile and challenging market situation we plan to postpone the decision on dividend and make the payment of dividend dependent on market conditions . At the same time, unfortunately while writing this report we are witnessing a growing world-wise slowdown over the Coronavirus pandemic. Companies and banks are restricting travel and sending workers home, and rapidly reducing their expectations for sales almost at any business. Interest rates are cut further and the impact on global economy is growing. GTC’s management observes the situation and prepared contingency plans and financial resources to cope with the toll should the situation will deteriorate. 2020 strategy focused on further sustainable development Alongside with our prime goal to develop the pipeline projects that meet the highest environmental standards, we will continue to emphasize the sustainability value across our portfolio. We are getting closer to fulfilling the ambitious plan to have all our Polish assets eco-certified. In 2019, we achieved a great success with over 87% of our properties certified. We believe that an ecological perspective allows us to secure future growth and deliver superior value appreciation to our stakeholders. Our stakeholders GTC management team is committed to executing the company’s business plan. Summarizing 2019 activities, we would like to sincerely thank our tenants and business partners for their engagement in 2019. We would also like to thank our shareholders for their support and trust in our actions. Finally, we would like to thank our employees, as without them none of our achievements could have been realized. We look forward to another successful year. In 2020, we will make every effort to accelerate the implementation of our growth strategy. Thomas Kurzmann Erez Boniel CEO CFO 2 MANAGEMENT BOARD’S REPORT ON THE ACTIVITIES OF GLOBE TRADE CENTRE S.A. CAPITAL GROUP IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 Table of content Item 1. Introduction .................................................................................................................................................. 4 Item 2. Selected financial data ................................................................................................................................ 6 Item 3. Key risk factors ............................................................................................................................................ 8 Item 4. Presentation of the Group.......................................................................................................................... 29 Item 4.1. General information about the Group ................................................................................................. 29 Item 4.2. Main events of 2019 ........................................................................................................................... 30 Item 4.3. Structure of the Group ........................................................................................................................ 31 Item 4.4. Changes to the principal rules of the management of the Company and the Group .......................... 31 Item 4.5. The Group’s Strategy ......................................................................................................................... 31 Item 4.6. Business overview ............................................................................................................................. 34 Item 4.6.1. Overview of investment portfolio ................................................................................................