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Management ReportDeutsche EuroShop 2 Interim report Q1 2015 1% increase in EBIT Earnings before interest and taxes (EBIT) in- creased by just under 1% or €0.4 million, from €44.2 million to €44.6 million. Financial result improves The financial result rose from €-13.8 million to €-12.9 million. This was largely due to the posi- tive valuation effects recognised in equity from the swap for financing the Altmarkt-Galerie Dresden, which was up by €0.9 million on the previous year. In contrast, interest expense and the contribution to earnings from equity-accounted companies were in line with the previous year. The profit at- tributable to third-party shareholders also rose by €0.1 million, from €4.1 million to €4.2 million. Valuation gains/losses The measurement loss was €0.5 million (previous year: loss of €1.1 million) and included investment costs incurred by our portfolio properties. Adjusted EBT excluding measurement gains / losses up nearly 5% Earnings before taxes (EBT) rose €2.0 million, from €29.3 million to €31.3 million. After ad- justment for valuation gains, the increase was from €30.4 million to €31.8 million (+4.6%). Income taxes Taxes on income and earnings came to €6.0 mil- lion (previous year: €6.7 million). €1.3 million of this (previous year: €1.2 million) was attribut- able to taxes to be paid and €4.7 million (previous year: €5.5 million) to deferred taxes. 12% increase in consolidated profit At €25.3 million, consolidated profit was up €2.7 million compared with the previous year (€22.6 million). Undiluted earnings per share increased from €0.42 to €0.47 (+12%). EPRA earnings per share rose 9%, from €0.44 per share to €0.48. Basic Information about the Group Group structure and operating activities Business model Deutsche EuroShop AG is the only public limited company in Germany to invest solely in shopping centers in prime locations. On 31 March 2015, the Company held investments in 19 shopping centers in Germany, Austria, Poland and Hun- gary. The Group generates its reported revenue from rental income on the space it lets in the shopping 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 Ham- burg. Deutsche EuroShop is an Aktiengesellschaft (public company) under German law. The indi- vidual shopping centers are managed as separate companies and, depending on the share of nomi- nal 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 generation 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 cent- ers in different European regions in accordance with the principle of risk diversification. Germa- ny 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, where- by external financing may not exceed 55% of the Group’s total assets over the long term. As a gen- eral rule, long-term interest rates are fixed when loans are taken out or renewed with the goal of keeping the duration (average fixed interest pe- riod) at over five years. Management system The Executive Board of Deutsche EuroShop manages the Company in accordance with the provisions of German company law. The Execu- tive Board’s duties, responsibilities and business procedures are laid down in its rules of procedure and in its schedule of responsibilities. The management indicators are based on the tar- gets of having shopping centers with sustainable and stable value growth and a high liquidity sur- plus generated by long-term leases. These indi- cators are revenue, EBT (earnings before taxes) excluding valuation gains / losses and FFO (funds from operations). Economic Review Macroeconomic and sector-specific conditions The outlook for a robust labour market, subdued inflation and very low interest rates is enabling consumer spending in Germany to stay at a high level. The unemployment rate at the end of March 2015 stood at 6.8%. Consumer spending contin- ues to be a cornerstone of the German economy. German retail sales (including online sales) rose in the first three months by 3.6% in real terms year-on-year. The weak euro is ensuring full or- der books for export-oriented companies. Results of operations Revenue up 1.2% Revenue for the reporting period came in at €50.6 million. This is 1.2% higher on a comparable ba- sis than in the same period of the previous year (€50.0 million). Operating and administrative costs for property: 8.9% of revenue Center operating costs were €4.5 million in the reporting period, compared with €4.4 million in the same period of the previous year. Costs there- fore stood at 8.9% of revenue (year-on-year: 8.7%) Other operating expenses of €2.1 million Other operating expenses amounted to €2.1 mil- lion, €0.6 higher than the previous year’s level (€1.5 million), as the very sound performance of the share price meant that a sharp increase in pro- visions for the long-term incentive, which expires in June 2015, was necessary. EPRA EARNINGS 31.03.2015 31.03.2014 in € thousand per share in € in € thousand per share in € Consolidated profit 25,319 0.47 22,591 0.42 Valuation gains/losses 451 0.01 1,054 0.02 Valuation gains/losses for equity-accounted companies 7 0 10 0 Deferred taxes -74 0 -238 0 EPRA earnings 25,703 0.48 23,417 0.44 Weighted number of shares 53,945,536 53,945,536 Diluted EPRA earnings 0.45 0.41 Weighted number of shares 57,007,385 56,904,991 EPRA EARNINGS 31.03.201531.03.2014 Consolidated profit 25,3190.4722,5910.42 Valuation gains/losses 4510.011,0540.02 Valuation gains/losses for equity-accounted companies 70100 Deferred taxes -740 -2380 EPRA earnings 25,7030.4823,4170.44 Weighted number of shares 53,945,53653,945,536 Diluted EPRA earnings 0.450.41 Weighted number of shares 57,007,38556,904,991