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DEUTSCHE EUROSHOP INTERIM REPORT 9M 2014 02 MANAGEMENT SYSTEM The Executive Board of Deutsche EuroShop manages the Company in accordance with the provisions of German company law. The Executive Board’s duties, responsibilities and business procedures are laid down in its rules of procedure and in its schedule of respon- sibilities. The management indicators are based on the targets of having shop- ping centers with sustainable and stable value growth and a high liquidity surplus generated by long-term leases. These indicators are revenue, EBT (earnings before taxes) excluding measurement gains/losses and FFO (funds from operations). Economic Review MACROECONOMIC AND SECTOR-SPECIFIC CONDITIONS The economic outlook for Germany has become somewhat gloomier over the course of the year. External factors such as the international crises and the possibility of interest rate hikes in the USA have cre- ated uncertainty. German exports decreased, albeit they remain at a high level, partly due to the sluggish state of the eurozone economy. Retail sales grew in real terms by 1.3% in the first nine months of the year (including online sales). Private consumer spending bolstered the economy, with GfK findings suggesting that propensity to spend remains very strong. Labour market sentiment is also good; unem- ployment fell again in the third quarter, to stand at 6.3% – its lowest level since the end of 2011. Basic Information about the Group GROUP STRUCTURE AND OPERATING ACTIVITIES BUSINESS MODEL Deutsche EuroShop AG is the only public company in Germany to invest solely in shopping centers in prime locations. On 30 Septem- ber 2014, the Company held investments in 19 shopping centers in Germany, Austria, Poland and Hungary. The Group generates its reported revenue from rental income on the space it lets in the shop- ping centers. Due to its lean personnel structure, Deutsche EuroShop Group is centrally organised. The Group managing company is Deutsche EuroShop AG. It is responsible for corporate strategy, portfolio and risk management, financing and communication. The Company’s registered office is in Hamburg. Deutsche EuroShop is an Aktiengesellschaft (public company) under German law. The individual shopping centers are managed as separate companies and, depending on the share of nominal capital owned, are either fully consolidated or accounted for using the equity method. The share capital is €53,945,536, comprised of 53,945,536 no-par- value registered shares. The notional value of each share is €1.00. OBJECTIVES AND STRATEGY The management focuses on investments in high-quality shopping centers in city centers and established locations offering stable long-term value growth. Another key investment target is the gen- eration of high surplus liquidity from long-term leases in shopping centers, which is paid out to shareholders in the form of an annual dividend. In order to achieve these targets, the Company invests its capital in shopping centers in different European regions in accord- ance with the principle of risk diversification. Germany is the main focus for investment. Indexed and turnover-linked commercial rents ensure that we achieve our high earnings targets. The Company may invest up to 10% of equity in joint ventures in shopping center projects in the early stages of development. New investments should be financed through a balanced mix of equity and borrowing, whereby external financing may not exceed 55% of the Group’s total assets 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 duration (average fixed interest period) at over five years. DEUTSCHE EUROSHOP INTERIM REPORT 9M 201402