Deutsche EuroShop : Annual Report 2021

RETAILTAINMENT

ANNUAL REPORT ´21

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Deutsche EuroShop / 2021
KEYFIGURES
in € millions / per share in €	+/-
Revenue	-5 %
EBIT	-5 %
Net finance costs (excluding measurement gains / losses 1)	20 %
EBT (excluding measurement gains / losses 1)	-2 %
Measurement gains / losses 1	87 %
Consolidated profit
FFO	-1 %
Earnings
EPRA Earnings	-2 %
Equity 2	3%
Liabilities	-1 %
Total assets	1%
Equity ratio in % 2
Loan to value (LTV) in %
LTV ratio ("look-through") in % 4
Cash and cash equivalents	24 %
Net tangible assets (EPRA)	3%
Net tangible assets per share in € (EPRA)	3%
Dividend per share in €
1,98
2021

231,5

2021	2020
211,8	224,1
152,5	161,2
-26,9	-33,6
125,6	127,6
-54,7	-429,6
59,9	-251,7
1,98	2,00
0,97	-4,07
1,97	2,02
2.377,8	2.314,8
1.901,0	1.922,6
4.278,8	4.237,4
55,6	54,6
30,5	32,9
33,3	35,8
328,8	266,0
2.374,5	2.309,7
38,43	37,38
1,00 3	0,04

• 1 Including the share attributable to equity-accounted joint ventures and associates

• 2 incl. non controlling interests

• 3 proposal

• 4 Ratio of net financial liabilities to long-term assets, calculated on the basis of the group share

REVENUE in € millionEBIT in € million

224,1

197,5

2019

211,8

2020

2021

2019

EBT * in € million

163,1

161,2

152,5

127,6

125,6

2020

2021

2019

2020

2021

* excluding measurement gains / losses

FFO per share in €

2,42

2,00

2019

2020

CONTENTS

CONTENTS

KEY FIGURES 02

COMBINED MANAGEMENT REPORT 02

Basic information about the Group 02

Economic review 04

Report on events after the reporting date 17

Outlook 17

Risk report 19

Opportunity report 25

Acquisition reporting 26 Declaration On Corporate Governance (Section

289f, Section 315d HGB) 26 Reporting on the separate financial statements

of Deutsche EuroShop AG 27

CONSOLIDATED

FINANCIAL STATEMENTS 30

Consolidated balance sheet 30

Consolidated income statement 32

Statement of comprehensive income 33

Consolidated statement of changes in equity 33

Consolidated Cash Flow Statement 34

Notes to the consolidated financial statements 35

RESPONSIBILITY STATEMENT

BY THE EXECUTIVE BOARD 62

INDEPENDENT AUDITOR'S REPORT 63

EPRA REPORTING 70

REPORT OF THE SUPERVISORY BOARD 76

CORPORATE GOVERNANCE 82

REMUNERATION FINANCIAL YEAR 2021 90

INDEPENDENT AUDITOR'S REPORT

ON THE AUDIT OF THE COMPENSATION

REPORT 98

LEGAL 100

DISCLAIMER 100

Deutsche EuroShop / Annual report 2021

COMBINED MANAGEMENT REPORT

The information provided in the combined management report applies to both the Group and Deutsche EuroShop AG, except where otherwise stated. Reporting on the separate financial statements of Deutsche EuroShop AG is provided in a separate section of the com- bined management report.

The remuneration report is no longer part of the combined manage- ment report. It will be published together with the note on the formal audit on the website of Deutsche EuroShop AG no later than the date of publication of the invitation to the Annual General Meeting.

BASIC INFORMATION ABOUT THE GROUP

GROUP BUSINESS MODEL, TARGETS AND STRATEGY

The Group managing company is Deutsche EuroShop AG. It is responsible for corporate strategy, portfolio and risk management, financing and communication. The Deutsche EuroShop Group has a central structure and lean personnel organisation.

Objectives and strategy

The management focuses on investments in high-quality shopping centers in city centers and established locations offering the poten- tial for stable, long-term value growth. A key investment target is the generation of high surplus liquidity from leases in shopping centers, of which a significant part can be paid out to shareholders in the form of an annual dividend. To this end, the Company invests its capi- tal in shopping centers in different European regions in accordance with the principle of risk diversification. Germany is the main focus of investment. Indexed and revenue-linked commercial rents ensure that high earnings targets are achieved.

The Company may invest up to 10% of equity in joint ventures in shopping center projects in the early stages of development.

Deutsche EuroShop is an Aktiengesellschaft (public company) under German law. The Company's registered office is in Hamburg.

Deutsche EuroShop is the only public company in Germany to invest solely in shopping centers in prime locations. A total of 21 shop-ping centers in Germany, Austria, Poland, Hungary and the Czech Republic are held in the real estate portfolio. The Group generates its reported revenue from rental income on the space it lets in the shopping centers.

These are held by independent companies, with Deutsche EuroShop holding stakes of 100% in twelve of them and between 50% and 75% in the other nine. Further information on the incorporation of these companies into the consolidated annual results is provided in the notes to the consolidated financial statements.

New investments should be financed from a balanced mix of sources, and external financing may not account for more than 55% of financ- ing across the Group over the long term. As a general rule, long-term interest rates are fixed when loans are taken out or renewed, with the goal of keeping the term (average fixed interest period) at over five years.

Diversified shopping center portfolio

Deutsche EuroShop has a balanced and diversified portfolio of German and European shopping centers. The management focuses on investments in prime (1a) locations in cities with a catchment area of at least 300,000 residents that bring a high level of investment security.

02

COMBINED MANAGEMENT REPORT

Basic information about the Group

Seizing opportunities and maximising value

In line with the buy & hold strategy, the management is increas-ingly concentrating on shopping center quality and returns rather than rapid portfolio growth. It continuously monitors the market and makes portfolio adjustments through acquisitions and sales when economically attractive opportunities arise.

Rapid decision-making chains as well as considerable flexibility regarding potential investments and financing structures allow Deutsche EuroShop to react to very wide-ranging competitive situations. At the same time, the Group's management focuses on optimising the value of the existing portfolio of properties.

Tailored rent structure

One key component of the rental model is a tailored rent structure.

While city center property owners often focus on obtaining the high- est possible rents for their properties - creating a monolithic retail offering - Deutsche EuroShop's management uses a calculation combining a range of factors to create an attractive sector mix and optimise long-term rental income. Rental partners pay rents that are customary in this sector and regularly consist mainly of a minimum rent linked to the consumer price index and a revenue-linked rent.

The shopping experience concept

Deutsche EuroShop has outsourced center management to an expe- rienced external partner: ECE Marketplaces GmbH & Co. KG (ECE), based in Hamburg. The ECE Group has been designing, planning, building, letting and managing shopping centers since 1965. The Company is currently the European market leader, with some 200 shopping centers under management. Deutsche EuroShop views professional center management as the key to successful shopping centers. In addition to guaranteeing standard opening hours and a consistently friendly, bright, safe and clean shopping environment, the center management can make use of unusual displays, promo- tions and exhibitions to turn shopping into an experience. Before the outbreak of the coronavirus pandemic, each day an average of 500,000 to 600,000 shoppers visited the 21 Deutsche EuroShop centers, where they were impressed not only by the range of sectors represented, but also by promotional activities including car, talent and fashion shows as well as a wide variety of attractions for chil- dren. As a result, the shopping centers become marketplaces where there is always something new and spectacular on offer. We are con- fident that once the pandemic has subsided we will once again be able to welcome a comparable average number of visitors to our centers.

MANAGEMENT SYSTEM

The Executive Board of Deutsche EuroShop AG manages the Group in accordance with the provisions of German company law and with its rules of procedure. The Executive Board's duties, responsibilities and business procedures are laid down in its rules of procedure and in its schedule of responsibilities.

The management indicators (performance indicators) are based on the targets of having shopping centers with sustainable and stable value growth and generating a high liquidity surplus from their long- term leases. These indicators are revenue, EBIT (earnings before interest and taxes), EBT (earnings before taxes) excluding mea- surement gains / losses and FFO (funds from operations). Due to the higher rent defaults and arrears as a result of the coronavirus, these management metrics currently have only limited information value in some cases, so the collection ratio will be used for management purposes as a supplement until further notice. The collection ratio measures the ratio of incoming payments to rent and ancillary cost receivables from tenants.

Based on three-year medium-term planning for each shopping center, aggregated Group planning is drawn up once a year and the management indicator targets are established. Throughout the year, current performance is periodically (quarterly) compared against these targets and current projections. In addition, the value drivers behind the management indicators, such as rental income, visitor numbers, re-letting statistics and collection ratios, are monitored in monthly controlling reports. This allows any urgent measures required to be taken immediately.

The Supervisory Board supervises and advises the Executive Board in its management activities in accordance with the provisions of German company law and its rules of procedure. It appoints the members of the Executive Board, and significant transactions by the Executive Board are subject to its approval. The Supervisory Board comprises nine members, all of whom are elected by the Annual General Meeting.

Members of the Executive Board are appointed and dismissed on the basis of Sections 84 and 85 of the Aktiengesetz (AktG - German Pub- lic Companies Act). Changes to the Articles of Association are made in accordance with Sections 179 and 133 AktG, and the Supervisory Board is also authorised, without a resolution of the Annual General Meeting, to adapt the Articles of Association to new legal provisions that become binding on the Company, as well as to resolve changes to the Articles of Association that only relate to the wording.

More information about the Executive Board and the Supervisory Board can be found in the declaration on corporate governance.