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FINANCIAL STATEMENT PREPARATION PROCESS Preparation of the financial statement is a further important part of the internal control system and is monitored and controlled at the level of the Group holding company. Internal regulations and guide- lines ensure the conformity of the annual financial statements and the consolidated financial statements. The decentralised preparation of Group-relevant reports by the ser- vice provider is followed by the aggregation and consolidation of the individual annual financial statements and the preparation of the information for reporting in the notes and Management Report in the accounting department of the holding company with the aid of the consolidation software Conmezzo. This is accompanied by manual process controls such as the principle of dual control by the employees charged with ensuring the regularity of financial report- ing and by the Executive Board. In addition, within the scope of his auditing activities, the auditor of the consolidated financial state- ments performs process-independent auditing work, also with respect to financial reporting. ADVICE ON LIMITATIONS By virtue of the organisational, control and monitoring measures laid down in the Group, the internal control and risk management system enables the full recording, processing and evaluation of Company- related facts as well as their proper presentation in Group financial reporting. Decisions based on personal judgment, flawed controls, criminal acts or other circumstances cannot be entirely ruled out, however, and may limit the effectiveness and reliability of the internal control and risk management system that is in use such that the application of the systems used cannot guarantee absolute certainty in respect of the correct, complete and timely recording of facts in Group finan- cial reporting. The statements made relate solely to those subsidiaries included in the consolidated financial statements of Deutsche EuroShop for which Deutsche EuroShop is in a position, directly or indirectly, to dictate their financial and operating policies. PRESENTATION OF MATERIAL INDIVIDUAL RISKS CYCLICAL AND MACROECONOMIC RISKS The German economy suffered a setback at the end of 2012: The price-, seasonally- and calendar-adjusted gross domestic product (GDP) declined by 0.6% compared to the previous quarter, which was primarily attributable to a weakening of foreign trade. Private consumer spending, on the other hand, was a driving force both in comparison with the third quarter (+0.1%) as well as the same quar- ter of the previous year. Measured in terms of GDP, the German economy saw growth of 0.7% for the whole of 2012 (after price, seasonal and calendar adjustments: +0.9%). This is a considerable slowdown compared to the previous year, when GDP had climbed to 3.0% (adjusted: +3.1%). The German Bundesbank expects Ger- many’s GDP to rise by around 0.4% in 2013 (0.5% after calendar adjustments). The European Central Bank (ECB) reports that real GDP at Euro- pean level experienced a downward trend in the eurozone in 2012 and that economic activities got off to a weak start at the beginning of 2013. According to the ECB, this development is attributable to low consumer and investor confidence. Brightening sentiment on financial markets, a stabilisation of business and consumer confidence as well as an upturn in exports due to a global increase in demand mean that gradual recovery should kick in during 2013. The ECB expects real GDP to grow by an average of -0.9% to 0.3% over the course of the year. The prices of all goods and services for private consumption were on average 2.0% higher in 2012 than in the previous year (2011: +2.3%). The German Bundesbank expects 2013 to bring another decrease in inflation to 1.5%. Consumer prices in the eurozone rose 2.2% in 2012. The ECB predicts an increase of 1.1% to 2.1% in the harmonised consumer price index in 2013. Deutsche EuroShop AG is not as strongly affected by short-term economic developments as other sectors are in terms of its business model – long-term, inflation-proofed letting of retail space – and the associated risks. Past experience has demonstrated that by locat- ing our shopping centers in prime locations and by ensuring broad sector diversification within the centers, we can achieve commercial success even during periods of stagnation. GROUP MANAGEMENT REPORT { 134 } DES ANNUAL REPORT 2012 Risks and opportunities management, internal control system

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