Grand City Properties S A : 2021 Solo Annual Accounts

Grand City Properties S.A.

Annual Accounts

For the year ended December 31, 2021

(with the report of the Réviseur d'Entreprises agréé thereon)

Table of contents:	Page
1	Management Report	1-9
2	Report of the Réviseur d´Entreprises Agréé	10-13
3	Balance Sheet	14-18
4	Profit and Loss Account	19-20
5	Notes to the Annual Accounts	21-41

1, Avenue du Bois L-1251 Luxembourg

R.C.S. Luxembourg: B 165.560

Share Capital: EUR 17,618,790

Grand City Properties S.A.

MANAGEMENT REPORT

The management of Grand City Properties S.A. ("the Company", and together with its investees "the Group") presents the Company's audited annual accounts for the year ended December 31, 2021.

DEVELOPMENT AND PERFORMANCE

The Company continued to prove its access to capital markets by placing new bonds via its Euro Medium term Note ("EMTN") programme.

In 2021, the Company issued its largest-ever bond of EUR 1 billion through its Series X issuance, at a record-low coupon rate of 0.125%, with a long maturity period of 7 years and reissued convertible bonds which were held in treasury of approx. EUR 170 million, with a very low coupon of 0.25%. The Company also repurchased approx. EUR 344 million in notional value of Series E notes (due in 2025) with a coupon of 1.5%, approx. EUR 395 million in notional value of Series W notes (due in 2024) with a coupon of 1.7%, while redeeming approx. EUR 135 million in notional value of Series D, Series S and Series T notes, which matured in 2021. For further information see note 9 to the accompanying annual accounts.

CAPITAL STRUCTURE

The Company's shares are listed on the Frankfurt Stock Exchange - Prime Standard. The Company also has Notes and Bonds listed on the Irish Stock Exchange (in particular its EMTN Programme), Swiss Stock Exchange and the Frankfurt Stock Exchange. There are no restrictions on the transfer of the Company's traded securities.

COMPANY'S SHARES

On January 28, 2021 the Board of Directors resolved to utilize the authorization of the Annual General Meeting of June 24, 2020 in order to buy back up to 12,500,000 shares of the Company (corresponding to up to 7.27% of the Company's share capital) by way of a public tender offer with a purchase price in the range of EUR 20.00 to EUR 21.25 per share.

On March 15, 2021 the Board of Directors resolved on share buy-back program on the stock exchange by the Company or a subsidiary of the Company. The volume of the proposed buy-back program amounted to up to EUR 200 million and was limited to a maximum of 10 million shares in the Company. The program started on March 16, 2021 and was valid until December 31, 2021.

As at December 31, 2021, Grandcity Holdings Ltd, one of the Company's subsidiaries holds company's shares with a total amount of 11,225,841 shares which their voting rights are suspended. For further information see note 8 to the accompanying annual accounts.

LIKELY FUTURE DEVELOPMENTS

The Company continues raising capital and borrowings through its EMTN Programme to fund the acquisition and development of the underlying property portfolio of the Group.

A deterioration of the economic environment as a result of evolution of the geopolitical situation around the Russia- Ukraine conflict and the coronavirus pandemic could have an adverse impact on tenants' ability to pay rent, which in turn could be a strain on the Group's performance. However, the Group's diversified portfolio acts as an effective buffer in this scenario along with the fact that the portfolio is under rented and thereby relatively lesser of a burden on tenants. For further information see note 16 and note 20 to the accompanying annual accounts.

FINANCIAL RISK MANAGEMENT

The Company is exposed to liquidity, operating, market risk and other risks. For more information see note 16 to the accompanying annual accounts.

The Company follows its risk management policy to hedge interest rate and foreign currency risks associated with its financial assets and liabilities. For more information see note 11 to the accompanying annual accounts.

ACTIVITIES IN THE FIELD OF RESEARCH AND DEVELOPMENT

Due to the nature of its business, the Company does not engage in any research and development activities.

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Grand City Properties S.A.

MANAGEMENT REPORT (CONTINUED)

BRANCHES OF THE COMPANY

The Company did not operate any branches in 2021.

INFORMATION ACCORDING TO ARTICLE 11(2) OF THE LUXEMBOURG TAKEOVER LAW

The following disclosure is provided pursuant to article 11 of the Luxembourg law of May 19, 2006 transposing Directive 2004/25/EC of the European Parliament and of the Council of April 21, 2004 on takeover bids, as amended (the "Takeover Law"):

1. With regard to article 11 (1) (a) and (c) of the Takeover Law (capital structure), the relevant information is available on page 8 and note 8 on page 28 - 29 to the accompanying annual accounts. In addition, the Company's shareholding structure showing each shareholder owning 5% or more of the Company's share capital is available below and on the Company's website, where the shareholding structure is updated monthly.
2. With regard to article 11 (1) (b) of the Takeover Law, the ordinary shares issued by the Company are admitted to trading on the regulated market of the Frankfurt Stock Exchange (Prime Standard) and are freely transferable according to the Company's articles of association (the "Articles of Association").
3. In accordance with the requirements of Article 11 (1) c of the Takeover Law, the following significant shareholdings were reported to the Company, as of December 31, 2021:

Shareholder name	Numbers of shares	Percentage of voting rights
Edolaxia Group Ltd	80,502,297	46 %
Grandcity Holdings Ltd	11,225,841	(*) 6%

Total number of Grand City Properties S.A. shares as of December 31 2021: 176,187,899

1. 1. Company's shares voting right held by Grandcity Holdings Ltd. are suspended (see note 8 to the accompanying annual accounts).
2. With regard to article 11 (1) (d) of the Takeover Law, each ordinary share of the Company gives right to one vote according to article 8 of the Articles of Association. There are no special control rights attaching to the shares.
3. With regard to article 11 (1) (e) of the Takeover Law, control rights related to the issue of shares are directly exercised by the relevant employees. The key terms and conditions in relation to the Company's incentive share plan are described in note 8a Share-based payment agreements to the accompanying annual accounts.
4. With regard to article 11 (1) (f) of the Takeover Law, the Articles of Association impose no voting rights limitations. However, the sanction of suspension of voting rights automatically applies, subject to the Luxembourg law of January 11, 2008 on transparency requirements for issuers, as amended (the "Transparency Law") to any shareholder (or group of shareholders) who has (or have) crossed the thresholds set out in the
5. 
   Transparency Law but have not notified the Company accordingly. In this case, the exercise of voting rights relating to the shares exceeding the fraction that should have been notified is suspended. The suspension of the exercise of voting rights is lifted the moment the shareholder makes the notification.
6. With regard to article 11 (1) (g) of the Takeover Law, as of December 31, 2021, the Company was not aware of any agreements between shareholders that would lead to a restriction on the transfer of shares or voting rights.

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Grand City Properties S.A.

MANAGEMENT REPORT (CONTINUED)

1. With regard to article 11 (1) (h) of the Takeover Law, according to article 9 of the Articles of Association, the members of the Board of Directors of the Company (the "Board") shall be elected by the shareholders at their
   Annual General Meeting by a simple majority vote of the shares present or represented. The term of the office of the members of the Board shall not exceed six years, but they are eligible for re-election after such term. Any member of the Board may be removed from office with or without specifying a reason at any time. In the event of a vacancy in the office of a member of the Board because of death, retirement or otherwise, this vacancy may be filled out on a temporary basis until the next meeting of shareholders, by observing the applicable legal prescriptions. Further details on the rules governing the appointment and replacement of a member of the Board are set out in pages 4 - 7 to the accompanying Corporate Governance Statement. According to article 18 of the Articles of Association, any amendment to the Articles of Association made by the general meeting of shareholders shall be adopted with a quorum and majority pursuant to article 450-3 of the law of August 10, 1915 on commercial companies, as amended (the "1915 Law").
   With regard to article 11 (1) (i) of the Takeover Law, the Board of Directors is endowed with wide-ranging powers to exercise all administrative tasks in the interest of the Company including the establishment of an Advisory Board, an Audit Committee, a Risk Committee, a Remuneration Committee and a Nomination Committee. Further details on the powers of the Board are described on page 4 - 7 to the to the accompanying Corporate Governance Statement. According to article 5.1 of the Articles of Association, the Company may redeem its own shares to the extent and under the terms permitted by law. The shareholders' meeting held on June 24, 2020 authorised the Board with the option to delegate, to buy back, either directly or through a subsidiary of the Company, shares of the Company for a period of five (5) years not exceeding 20% of the aggregate nominal amount of the Company's issued share capital. Share buy back program pursuant to articles 430-15 (1) of the 1915 Law. Further details on the Company's share buy back program are described on page 28 to the accompanying annual accounts.
2. With regard to article 11 (1) (j) of the Takeover Law, the Company's convertible bond, hybrid bonds and security issuances under the EMTN programme (listed on page 31 - 33 to the accompanying annual accounts) contain change of control provisions that provide noteholders with the right to require the Company to repurchase their notes upon a change of control of the issuer. The Company's ISDA master agreement securing derivate transactions with regard to its listed debts contains a termination right if the Company is financially weaker after a takeover.
3. With regard to article 11 (1) (k) of the Takeover Law, there are no agreements between the Company and members of the Board or employees according to which, in the event of a takeover bid, the Company may be held liable for compensation arrangements if the employment relationship is terminated without good reason or due to a takeover bid.

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Grand City Properties S.A.

MANAGEMENT REPORT (CONTINUED)

CORPORATE GOVERNANCE STATEMENT

CORPORATE GOVERNANCE

The Company emphasizes the importance of corporate governance with a high standard of transparency, executed by the Board of Directors with a majority of independent directors and the management. The Company directs its efforts in maintaining the high trust it receives from its shareholders and bondholders. The Company is proud of the high confidence of its investors, which is reflected in the impressive placement of funds by major global investment banks. The Company's shares and bonds are regularly placed with international leading institutional investors and major global investment and sovereign funds.

In order to maintain high corporate governance and transparency standards, the Company has implemented the Advisory Board, the Risk Committee, the Audit Committee, the Nomination Committee and the Remuneration Committee.

Furthermore, the Company ensures that its Board of Directors and its senior executives have vast experience and skills in the areas relevant to its business. The Company has quarterly reporting standards and updates its corporation rate presentation on a regular basis.

The Company has a very strict Code of Conduct which applies to all business partnerships as well as employees. The Code of Conduct addresses issues related to corruption, conflicts of interest, bribery, human rights abuse as well as discrimination based on range of factors such as age, gender, ethnicity, race, coulter, religion, ideology, sexual identity, physical disabilities among others. The Code also clearly lays down a reporting framework for any violations. Additionally, it also provides for investigations and disciplinary measures as may be required in case of violations. The Code has been recently updated with a focus on improved transparency in its reporting lines, which are now supported by the Compliance Department and the whistleblower system. The Company's Code of Conduct is also available in a specific section on the Company's website.

The Company is not subject to any compulsory corporate governance code of conduct or respective statutory legal provisions. In particular, the Company is currently not required to adhere to the "Ten Principles of Corporate Governance" of the Luxembourg Stock Exchange or to the German corporate governance regime, the latter which are only applicable to listed companies incorporated in Germany.

Nevertheless, the Company intends to voluntarily comply with the "Ten Principles of Corporate Governance" of the Luxembourg Stock Exchange in the future and is currently evaluating the necessary measures to implement the principles and recommendations of the "Ten Principles of Corporate Governance" of the Luxembourg Stock Exchange and continues to take steps to implement environmental, social and corporate governance best practices throughout its business.

ANNUAL GENERAL MEETING

The Annual General Meeting ("AGM") of the shareholders of Grand City Properties S.A. was held on June 30, 2021 in Luxembourg. All of the items on the agenda were carried by a great majority, including the approval of the statutory annual accounts of the Company and the consolidated financial statements of the Group for the year ended December 31, 2020. The AGM approved the distribution of a dividend in the amount of Euro 0.8232 (gross) per share for the holders of record in the security settlement systems on July 2, 2021.

The AGM for 2022 will take place on June 29, 2022 in Luxembourg. The meeting will resolve on, among others, the amount of the dividend for the 2021 fiscal year to be distributed to shareholders of the Company.

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