Financial Report. Sale of Opernringhof strengthens equity ratio Clearly positive EBIT and profit for the reporting period Stable financing structure

Transcription

1 Q Financial Report Sale of Opernringhof strengthens equity ratio Clearly positive EBIT and profit for the reporting period Stable financing structure

2 Property portfolio Opernringhof sold at 19% over investment cost Completion of development project in Luxembourg Average return of 6.2% excl. redevelopment and Luxembourg Key data Strong improvement in EBIT FFO after interest and taxes positive at EUR 15.5 million Profit for the year remains clearly positive at EUR 9.6 million Capital market IATX reports share price gains of 7.1% ECO share increases 49% in the first six months Takeover bid by conwert at offer price of EUR 7.15 successful; conwert holds approx. 87.2% of ECO after the end of the first acceptance period

3 Contents Highlights 1-6 / Report on the First Six Months as of Revenues and Earnings Balance Sheet and Financing Structure Focus on Redevelopment Projects Risk Report Related Party Transactions Status of the conwert Takeover Outlook and Major Risks for 2010 Segment Report 10 Interim Financial Statements 12 Condensed Consolidated Balance Sheet Condensed Consolidated Income Statement Condensed Consolidated Cash Flow Statement Condensed Statement of Changes in Equity Condensed Consolidated Statement of Non-Current Assets Notes to the Consolidated Interim Financial Statements 22 Statement by the Management Board in accordance with 87 (1) 3 of the Austrian Stock Corporation Act 39 Report on Review of Interim Financial Information 40 The ECO Share 42 Development of the share price Financial Calendar Contact 3

4 Highlights 1-6 / 2010 Company Data (in TEUR) 1-6 / / / 2009 Rental income 22,627 25,825 49,729 Revenues 27,966 31,734 61,370 Earnings before interest, taxes, depreciation, amortisation and changes in the fair value of investment property (EBITDA) 17,053 17,034 29,816 Changes in fair value of investment property 2,814-25,313-17,418 Earnings before interest and taxes (EBIT) 19,850-8,299 12,360 Profit before tax (EBT) 10,027-19,516-9,002 Profit for the year 9,552-14,652-6,869 Cash flow from operating activities 3,662 8,962 16,846 FFO (funds from operations) before interest and taxes 1) 27,196-2,770 11,981 Cash earnings (FFO after interest and taxes) 2) 15,548-14,010-9,013 Equity (incl. non-controlling interests) 357, , ,329 Balance sheet total 797, , ,550 1) EBIT + depreciation and amortisation +/- fair value adjustments +/- impairment charges 2) EBIT + depreciation and amortisation +/- fair value adjustments +/- impairment charges financial results taxes paid Property Data Number of objects (no.) Thereof investment / development (no.) 58 / 1 61 / 2 59 / 2 Rentable space 1) (m²) 518, , ,300 Garage spaces (no.) 2,890 2,870 2,820 Property portfolio (TEUR) 734, , ,746 Thereof construction in progress (TEUR) 17,325 36,256 39,281 1) Rentable space includes garage spaces are at 20 m² each and space under development; rounded to 100 m² Revenues by region 1-6 / 2010 FFO per share Profit for the year in TEUR n Austria n Germany n CEE 1% ,000 10,000 9, ,000 32% 0 0-5,000 67% ,000-15,000-14, / / , / /

5 Highlights from the Property Portfolio Development of the portfolio The ECO property portfolio comprised 59 objects with 518,400 m² of rentable space as of 30 June The development of the portfolio during the second quarter of 2010 was marked by two important events. The Opernringhof was sold for EUR million to a private Austrian investor at a price substantially above the current carrying value and nearly 19% over the total investment cost. In addition, the development project in Luxembourg was completed and transferred to a local broker for rental. ECO closed two sales during the second quarter of 2010, which reduced the property portfolio from 61 objects at the end of 2009 to 59 at the end of the reporting period. These transactions led to a decline in the value of the portfolio from EUR million to EUR million during the first half-year. Portfolio activities concentrated on the realisation of the four redevelopment projects as well as the further rental of space. Preparations were also made for the sale of additional objects during the second half of this year. Since the beginning of 2010, ECO has pursued a strategy that calls for the sale of properties whose development potential has been exhausted and the reinvestment of the proceeds in the optimisation of the portfolio. During the first six months of 2010 occupancy rates changed only slightly in comparison with the levels recorded in The occupancy rates in the investment properties and objects ready for rental (excluding space under renovation) equalled 85%, which is less than the 90% recorded at the end of Average rents remained generally stable, declining slightly in the office sector to EUR 10.2 per m² ( : EUR 10.6 per m²) and remaining constant in the retail sector at EUR 9.4 per m². The core segment of the investment portfolio contained 58 objects as of 30 June The development project in Luxembourg was transferred to the investment portfolio following completion, and the development portfolio now only contains the property in Ukraine. The investment portfolio comprised 98% of property assets and the development portfolio 2% at the end of the reporting period. A regional distribution of the ECO properties by rentable space showed the following picture at the end of the first half-year: 64% of all objects were located in Austria, 30 in Germany, 2% in Western Europe and 4% in CEE. Property Portfolio Overview by Segment / Rentable Offices Retail Vacancy Vacancies ø Rent ø Rent IFRS Return 3) REGION SPACE 1) RATE 2) excl. offices Retail carrying RENOvation value (m 2 ) (%) (%) (%) (%) (EUR/m 2 ) (EUR/m 2 ) (TEUR) (%) Investment Portfolio 504, % 32.1% 23.4% 15.2% , % Austria 332, % 30.9% 30.4% 18.5% , % Germany 154, % 33.7% 4.9% 4.9% , % Other Western Europe 10, % 71.6% 100.0% 100.0% , % CEE region 7, % 100.0% 23.0% 23.0% , % Development Portfolio 13, % 20.0% CEE region 13, % 20.0% Total incl. development projects 518, % 31.8% ,451 Property under construction 17,325 Property portfolio 734,776 1) Rentable space including garage spaces at 20 m² each, rounded to 100 m² 2) Based on total rentable space, including space currently under development 3) Monthly rents annualised on the basis of fair value; development projects on the basis of planned rental income and estimated total costs Property assets (EUR million) Rentable space by region Rentable space by use as of as of n Austria n Germany n Other West n CEE 30% 2% 4% n Office n Retail n Commercial & Logistics n Other space n Garages 11% 4% 14% 39% % 32% 5

6 Report on the First Six Months Q2 as of

7 Report on the First Six Months as of The redimensioning programme carried out in 2009 also provided additional impulses for the development of our business. However, the most significant event of the reporting period was the June announcement by conwert Immobilien Invest SE of its intention to make a voluntary takeover offer to ECO shareholders. Renewed momentum on property markets The first signs of improvement in the economic environment were also reflected in the start of recovery on ECO s core markets. Investments in the Austrian business property market rose by 25% year-on-year to over EUR 1.0 billion for the first half of 2010, while rentals remained at a constant level. An international comparison shows a clear upward trend in property investments, as is illustrated by transactions on the German office and commercial property market. The office market in Vienna is recovering gradually but steadily. Nearly 120,000 m² of space were rented in Austria during the first six months of 2010, which corresponds to the second half of The vacancy rate remained at a stable 4.8% as of the balance sheet date, while top rents in Vienna stagnated at the prior year level of EUR 22.25/m²/month. Report by the Management Board Dear Shareholders, ECO Business-Immobilien AG was able to continue the trend that began in early 2010 and closed the first halfyear with clearly positive net profit of EUR 9.6 million. The sale of the Opernringhof and another property with a combined value of EUR 96.3 million allowed us to reduce net debt and increase the equity ratio to 44.9%. Investments on the Austrian property market amounted to nearly EUR 1.0 billion in the first six months of 2010, with total profit for the period reaching approx. EUR 1.5 to 1.9 billion. These results were mainly attributable to the activities of open German and Austrian property funds as well as Austrian private foundations. Inner city returns reached 5.6% for the first half-year, with the trend pointing slight downward. In other locations outside the inner city of Vienna, returns also fell by only a slight amount. EBIT (TEUR) FFO after interest and taxes (TEUR) 25,000 20,000 19,850 20,000 15,000 15,548 15,000 10,000 10,000 5, ,000-5, ,000-8,299-10,000-15,000-14,010-10, / / , / /

8 8 The investment market for commercial property in Germany was characterised by strong momentum during the first six months of this year. Results exceeded the comparable prior year period by nearly 162%, with an unexpected transaction volume of approx. EUR 8.7 billion. In particular, the market for retail objects started the year at a high pace. This segment was responsible for 48% of the total transaction volume, or EUR 4.1 billion, for the first six months due to several substantial shopping centre transactions. The demand for office properties was also higher in the first half of 2010 than in the comparable prior year period. A total of EUR 2.7 billion was spent in this sector, which represents a 110% increase in the investment volume. The trend in top rents was stable to slightly declining, and returns at all locations fell by only a slight margin. The European market as a whole recorded a strong rise in property investments, which reached approx. EUR 43.8 billion for the first half-year. The respective statistics show a clear increase in the volume per transaction as well as the number of cross-border deals. The average return in the EMEA region equalled 5.7% in the office sector and 5.2% in the retail sector here also with a slight downward trend. Revenues and Earnings ECO recorded revenues of EUR 28.0 million for the first six months of The reduction in property assets led to a decline in rental income below the comparable prior year value (EUR 31.7 million). Income from the disposal of non-current assets rose substantially to EUR 4.1 million (1-6/2009: EUR 0.1 million). This increase was based above all on the sale of the Opernringhof. The valuation of the property portfolio by independent appraisers led to a positive fair value adjustment of EARNINGS PER SHARE (EUR) / / 2010 EUR 2.8 million for the reporting period, which represents 0.4% of total property assets. The first-half of 2009 was marked by impairment charges of EUR 25.3 million that resulted from the unfavourable climate on the business property market and a lack of reference projects. The positive revaluation results and income from the sale of the Opernringhof supported a strong improvement in earnings before interest and taxes (EBIT), which rose from EUR -8.3 million in th comparable prior year period to EUR 19.9 million. A reduction in the volume of financing and the continuing low level of interest rates on the existing liabilities led to an improvement in financial results during the first halfyear. ECO recorded financial results of EUR -9.8 million, compared with EUR million in the first six months of Profit before tax amounted to EUR 10.0 million for the reporting period (1-6/2009: EUR million and profit after tax equalled EUR 9.6 million (1-6/2009: EUR million). The development of FFO after interest and taxes was positive, with an increase from EUR million in the first half of 2009 to EUR 15.5 million. Balance Sheet and Financing Structure The sale of properties during the first half of 2010 reduced the balance sheet total from EUR million at the end of 2009 to EUR million as of 30 June Non-current assets and current assets totalled EUR million and EUR 52.3 million, respectively, as of this date. A reduction in liabilities was reflected in an improvement in the equity ratio, which rose from 41.6% at yearend 2009 to 44.9% as of 30 June Net debt fell from EUR million on 31 December 2009 to EUR million at the end of the first half of The loan-to-value ratio (LTV) was 54.4% at the end of June Non-current liabilities fell from EUR million on 31 December 2009 to EUR million, while current liabilities rose slightly from EUR 48.8 million to EUR 52.3 million during this same period. The remaining refinancing volume of EUR 3.9 million was repaid during July Interest-bearing liabilities totalled EUR million, whereby 86% were hedged against fluctuations in interest rates. The average interest rate, including the cost of hedges, was 4.5% as of 30 June 2010 and the average remaining term of the bank loans was roughly 13 years. The company s financing is therefore secured over the long-term.

9 Report on the First Six Months as of Cash and cash equivalents rose from EUR 16.0 million on 31 December 2009 to EUR 40.2 million as of 30 June The continuation of the re-dimensioning programme and further property sales led to an increase in net asset value (NAV) per share, which rose from EUR as of 30 June 2009 to EUR on 30 June Adjusted NAV amounted to EUR per share ( : EUR 10.03). Focus on Redevelopment Projects The ECO property portfolio comprised 59 objects with approx. 518,400 m² of rentable space as of 30 June Management s strategy for the second half of this year includes continuation of the four projects currently under redevelopment, the profitable sale of further objects and completion of the development project in Ukraine as well as the reinvestment of proceeds from the sale of objects with low development potential. Risk Report The methods used to manage risk and the major business risks to which the company is exposed have not changed since the publication of the 2009 annual report. ECO therefore refers to the respective information on risks and risk management in the annual financial statements as of 31 December Related Party Transactions Detailed information on transactions with related parties is provided in the notes to the interim financial statements. on 3 November Up to that date the remaining ECO shareholders have an opportunity to voluntarily accept the conwert offer of EUR 7.15 per share. Outlook and Major Risks for 2010 The further optimisation of the investment portfolio also has high priority for ECO during the second half of this year. The best possible utilisation of each object and the continuous optimisation of the properties in the redevelopment portfolio should safeguard rental income. Property sales that were prepared in earlier periods and are scheduled for closing during the second half-year will provide a good basis to further strengthen the equity ratio. Due to the still tense market situation and the concentration on the investment portfolio, no major development projects will be targeted for the remainder of this year. Plans call for completion of the property in Ukraine during the second half of ECO will continue to remain active in the core markets of Austria and Germany. The second half-year should bring a further strengthening of the equity ratio as well as an improvement in financial results due to the substantially reduced volume of financing. With respect to the risk of rising interest rates, the Management Board assumes the relevant rates will remain stable at a low level during the last six months of this year. Occupancy rates and rental income are expected to remain stable this year. ECO s solid property portfolio forms a sound basis for the further development of the company. Vienna, August 2010 Status of the conwert Takeover On 15 June 2010 conwert Immobilien Invest SE announced its intention to make a voluntary takeover offer to ECO shareholders. The final offer was published on 2 July 2010 after review by the Austrian Takeover Commission and included an offer price of EUR 7.15 per ECO share. The first phase of the takeover process took place from 2 to 30 July 2010, and the results were announced on 2 August By the end of the first acceptance period, the holders of 21,236,065 ECO shares (approx. 62.3% of share capital) had accepted the offer. That gave conwert a holding of approx. 87.2% in ECO before the end of the second acceptance period The Management Board Wolfgang Gössweiner Speaker of the Management Board Frank Brün FRICS Member of the Management Board 9

10 Investment Portfolio ECO continued to work on its redevelopment projects during the first half of These projects represented 5.1% of total property assets as of 30 June The insolvency-related exit by Cosmos from the location in Brunn am Gebirge raised the vacancy rate by 4.8% over the first three months of 2010 to 73.1% as of 30 June However, the rental of the available space is proceeding well and vacancies as a per cent of the total space in the redevelopment objects subsequently fell by 8.3% in comparison with the first quarter of Redevelopment Projects IFRS Property IFRS + Total Rentable Vacancy Share of carrying under construc- share space (excl. rate vacancies value CONSTRUCTION TON GARAGES) As of (TEUR) (TEUR) (TEUR) (%) (m²) (%) (%) Brunn am Gebirge, Wiener Strasse , , % 10, % 7.5% Graz, Euroshopping 13, , % 21, % 13.7% Vösendorf, Marktstrasse 6 6, , % 24, % 13.7% Vienna, Rampengasse 3-5 4, , % 7, % 6.9% TOTAL 37, , % 63, % 41.7% Active management allowed the occupancy rates and average rents in the investment portfolio to remain relatively stable during the first half of The vacancy rate, excl. space under renovation, rose slightly from 13.6% as of 30 June 2009 to 15.2%. Revenues also remained constant, totalling EUR 28.0 million for the reporting period ( : EUR 31.7 million). These revenues were generated with property assets that were nearly EUR million lower in relation to the comparable period of Property assets in the investment portfolio declined by EUR 59.0 million to EUR million during the first half of the reporting year ( : EUR million), above all due to the sale of the Opernringhof. EBIT generated by the investment portfolio amounted to EUR 9.4 million for the first six months of 2010, compared with EUR -7.7 million as of 30 June Key Data on the Investment Portfolio Number of objects (no.) Total rentable space 1) (m²) 504, , ,400 Garage spaces (no.) 2,800 2,770 2,720 Vacancy rate excl. space under renovation (%) 15.2% 13.6% 10.3% Property portfolio (TEUR) 718, , ,821 Thereof properties under construction (TEUR) 1,425 2,532 1,452 Revenues (TEUR) 14,324 31,734 61,370 Rental income (TEUR) 11,592 25,825 49,729 Changes in the fair value of investment property (TEUR) 1,210-25,313-15,418 Gain on the disposal of non-current assets (TEUR) EBIT (TEUR) 9,386-7,715 15,320 1) Garage spaces were included at 20 m² each / Asset-based figures are calculated at the last day of the reporting period, revenue-based figures over the entire period. Square metre amounts were rounded to 100 m². 10

11 Segment Report Development Portfolio Following the completion of the project in Luxembourg, the development portfolio included only the property in Ukraine at the end of the reporting period. No new projects were started during the first half of 2010, as ECO is continuing to focus on redevelopment. As soon as these improvement measures are concluded and sustainable recovery has taken hold in the property markets, ECO will utilise selected development opportunities and launch appropriate activities. The development project in Zaporizhzhya, Ukraine, is scheduled for completion by the end of This object has 11,600 m² of rentable space, respectively 13,400 m² including garages, and an investment volume of approx. EUR 20.8 million. The development portfolio had a value of EUR 16.0 million as of 30 June 2010, which represents 2.2% of ECO s property assets. Key Data on the Development Portfolio Number of objects (no.) Total rentable space 1) (m²) 13,400 20,900 20,900 Garage spaces (no.) Investment volume (TEUR) 20,807 54,231 52,337 Rental income after completion (per year) (TEUR) 2,802 4,945 4,945 Return after completion (%) 13.5% 9.1% 9.1% Property assets (TEUR) 16,015 39,826 43,925 Thereof property under construction (TEUR) 15,901 33,724 37,829 1) Garage spaces were included at 20 m² each / Asset-based figures are calculated at the last day of the reporting period, revenue-based figures over the entire period. Square metre amounts were rounded to 100 m². 11

12 Interim Financial Statements Q2 12

13 Condensed Consolidated Balance Sheet as of 30 June 2010 Based on International Financial Reporting Standards. The presentation in TEUR can lead to rounding differences. ASSETS Notes Non-current assets Intangible assets Property, plant and equipment Investment properties 4 717, ,465 Other tangible assets Construction in progress 5 17,325 39, , ,999 Deferred tax assets 9,845 10,993 Other receivables and assets , ,149 Current assets Receivables arising from the sale of assets 9 1, Other receivables and assets 9 10,442 8,897 Cash and cash equivalents 40,179 15,998 52,329 25,401 Total Assets 797, ,550 EQUITY AND LIABILITIES Notes Equity and reserves Issued capital , ,000 Capital reserves 43,411 43,411 Retained earnings -27,064-27,916 Equity attributable to shareholders of the parent company 357, ,494 Non-controlling interests , ,329 Non-current liabilities Loans from banks 8 309, ,079 Other loans 8 37,015 38,277 Finance lease liabilities 10 13,188 13,504 Deferred tax liabilities 1,586 5,572 Other non-current liabilities 26,502 12, , ,400 Current liabilities Provisions 1,584 1,593 Overdrafts and current portion of loans from banks 8 36,983 33,746 Current portion of other loans 8 3,089 3,085 Finance lease liabilities Trade accounts payable 1, Liabilities arising from the acquisition of investment properties Other current liabilities 7,636 8,386 52,253 48,822 Total Equity and Liabilities 797, ,550 Contingent liabilities due to subsidiaries 0 10,000 The following selected explanatory notes to the financial statements form an integral part of this condensed consolidated balance sheet. 13

14 Condensed Consolidated Income Statement for the period from 1 January to 30 June 2010 Based on International Financial Reporting Standards (all amounts in TEUR). The presentation in TEUR can lead to rounding differences. a) Condensed consolidated income statement Notes 1-6/ / / / / Revenues a) Rental income 22,627 11,035 25,825 12,381 49,729 b) Owner s operating costs charged on 5,340 2,608 5,909 2,829 11,641 27,966 13,642 31,734 15,210 61, Changes in fair value of investment property 2,814 1,604-25,313-10,425-17, Other operating income a) Gain on disposal of non-current assets 4,121 4, b) Miscellaneous ,389 3, Owner s operating costs -9,278-4,746-9,271-4,498-18, Depreciation and amortisation Other operating expenses -6,024-3,855-5,661-2,548-13, Earnings before interest and taxes 1 19,850 10,615-8,299-2,106 12, Finance revenue Finance costs -9,930-5,109-11,710-5,139-21, Financial results -9,822-5,072-11,217-4,730-21, Profit before tax 10,027 5,543-19,516-6,837-9, Income tax expense -1,825-1, Deferred tax expense 2 1,438 2,451 4,834 2,026 1, ,810 2,013 1, Profit for the period 9,641 6,179-14,706-4,824-7,019 Thereof attributable to Equity holders of the parent company 9,552 6,137-14,552-4,724-6,869 Non-controlling interests ,641 6,179-14,706-4,824-7,019 Earnings per share in EUR (0.43) (0.14) (0.20) Weighted average number of shares 34,100,000 34,100,000 34,100,000 34,100,000 34,100,000 b) Reconciliation from the condensed consolidated income statement to the statement of comprehensive income Profit for the period 9,641 6,179-14,706-4,824-7,019 Changes in the fair value of interest rate hedges -13,534-5,599-3,514 3,605-5,302 Deferred taxes on changes in the fair value of interest rate hedges 3,206 1, ,128 Currency translation adjustment 1,747 1, ,059 3,011-18,024-1,653-11,685 Thereof attributable to Equity holders of the parent company 970 2,969-17,870-1,553-11,534 Non-controlling interests ,059 3,011-18,024-1,653-11,685 The following selected explanatory notes to the financial statements form an integral part of this condensed consolidated statement of comprehensive income. 14

15 Condensed Consolidated Cash Flow Statement for the period from 1 January to 30 June 2010 Based on International Financial Reporting Standards (all amounts in TEUR). The presentation in TEUR can lead to rounding differences. Notes 1-6/ / /2009 Net cash flow from operating activities 3,876 8,962 16,846 Payments for the acquisition of properties ,538-13,462 Payments for properties under construction -4,391-8,225-16,675 Acquisition of subsidiaries 0 0-1,574 Proceeds from the disposal of properties 1,396 1,619 18,968 Proceeds from the disposal of subsidiaries 36,407 79,281 98,767 Other net cash flows ,985-5,968 Net cash flow from investing activities 12 31,962 58,151 80,056 Transaction costs relating to capital increases Changes in loans from banks -11,447-74,344-95,484 Other net cash flows Net cash flow from financing activities 12-11,657-74,428-95,550 Change in cash and cash equivalents 24,181-7,315 1,351 Cash and cash equivalents at the beginning of the period 15,998 14,647 14,647 Cash and cash equivalents at the end of the period 40,179 7,332 15,998 Change 24,181-7,315 1,351 The following selected explanatory notes to the financial statements form an integral part of this cash flow statement. 15

16 Notes Balance on Income and expense recognised for the period Changes in the consolidation range Other changes Balance on Balance on Income and expense recognised for the period Changes in the consolidation range Other changes Balance on

17 Condensed Statement of Changes in Equity for the period from 1 January to 30 June 2010 Based on International Financial Reporting Standards (all amounts in TEUR). The presentation in TEUR can lead to rounding differences. Attributable to shareholders of the parent company Issued Capital Retained Reserve for Currency Total CAPITAL RESERves earnings derivatives translation ADjustment Noncontrolling interests Total equity and reserves 341,000 43,411-6,146-5,986-4, ,196 6, , ,552-2, , , ,600-4, ,000 43,411-20,915-8,775-4, ,108 2, , ,000 43,411-13,182-10,161-4, , , ,552-10,328 1, , ,000 43,411-3,747-20,489-2, , ,638 The following selected explanatory notes to the financial statements form an integral part of this condensed consolidated statement of changes in equity. 17

18 NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investment property Other tangible assets Properties under construction Total Non-Current Assets Total Intangible assets Property, plant and equipment Investment property Other tangible assets Properties under construction Total Depreciation and AMORTISATION 18

19 Condensed Consolidated Statement of Non-Current Assets as of 30 June 2010 Based on International Financial Reporting Standards (all amounts in TEUR). The presentation in TEUR can lead to rounding differences. Acquisition Costs Carrying Amount Additions Reclassification Additions through Disposals Revaluations BUSINESS COMBINATIONS , , ,345 2, , , , ,281 6,469-27, ,325 17,325 39, ,844 7, ,918 2, , , , ,156 7, ,918 2, , , , ,156 7, ,918 2, , , ,999 Accumulated Depreciation and Amortisation Additions Reclassification Additions through Disposals BUSINESS COMBINATIONS

20 NON-CURRENT ASSETS Intangible assets Property, plant and equipment Investment property Other tangible assets Properties under construction Total Non-Current Assets Properties held for sale Total Intangible assets Property, plant and equipment Investment property Other tangible assets Properties under construction Total Depreciation and AMORTISATION 20

21 Condensed Consolidated Statement of Non-Current Assets as of 30 June 2009 Based on International Financial Reporting Standards (all amounts in TEUR). The presentation in TEUR can lead to rounding differences. Acquisition Costs Carrying Amount Additions Reclassification Additions through Disposals Revaluations BUSINESS COMBINATIONS ,890 7, , ,745-25, , , , ,421 8, , ,256 36,256 40,421 1,022,625 16, , ,419-25, , ,606 1,022,518 1,022,938 16, , ,419-25, , ,811 1,022,734 51, , ,881 1,074,819 16, , ,300-25, , ,811 1,074,615 Accumulated Depreciation and Amortisation Additions Reclassification Additions through Disposals BUSINESS COMBINATIONS

22 Notes to the Consolidated Q2 Interim Financial Statements 22

23 Notes SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF 30 June 2010 ECO Business-Immobilien AG is a joint stock company incorporated under the laws of the Republic of Austria, which is engaged in the acquisition, sale, development and rental of real estate. PRESENTATION OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS These consolidated interim financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, in accordance with IAS 34. All amendments to the Standards that took effect as of 1 January 2010 were applied in preparing the interim financial statements as of 30 June The accounting and valuation principles applied by the Group remain unchanged from the consolidated financial statements as of 31 December The consolidated interim financial statements are presented in thousand Euro ( TEUR ), which can lead to rounding differences. The majority of the Group s transactions are concluded in Euro. Numerous amounts and percentage rates presented in these consolidated interim financial statements were rounded. The income and expenses of the Group are only subject to immaterial seasonal fluctuations. The consolidated interim financial statements were prepared in keeping with the principle of historical purchase and production costs, as modified by the fair value measurement of land and buildings in accordance with IAS 40 as well as the fair value measurement of certain financial instruments. Additional information on the accounting and valuation principles applied by the ECO Group is provided in the consolidated financial statements as of 31 December As indicated in the last consolidated financial statements, management believes that valuation, and above all the valuation of investment properties, is connected with significant judgments and estimates. The valuation of properties is dependent on the valuation method used. Although expert opinions on the objects owned by the Group reflect international standards, it cannot be excluded that another valuation method would lead to a different and possibly lower valuation for these properties. In addition to rental payments and the stability of these payment flows over the long-term, the valuation of properties is based on the condition and location of the objects as well as other qualitative factors and assumptions. It cannot be excluded that the negative development of one of these factors or assumptions would lead to a decline in the value of a property, and thereby have a negative influence on the financial position and on the results of operations and the cash flows of the Group. The Management Board has also made important forward-looking assumptions concerning the collectability of receivables from the sale of properties. 23

24 A. SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT 1. Earnings before interest and taxes (EBIT) Revenues recorded by the ECO Group comprise the following: TEUR TEUR Rental income 22,627 25,825 Operating costs charged on 5,340 5,909 Total 27,966 31,734 Of the total income generated by rentals, TEUR 18,528 (1-6/2010: TEUR 21,951) were recorded in Austria and TEUR 9,438 (1-6/2009: TEUR 9,783) in other countries. Changes in the fair value of investment property resulted in a net gain of TEUR 2,814 for the reporting period (1-6/2009: TEUR -25,313). The disposal of non-current assets generated book gains totalling TEUR 4,121 (1-6/2009: TEUR 119), which consist of the following items: TEUR TEUR Proceeds on sale 103, ,178 Book value of the disposals -96, ,472 Selling expenses -2,719-2,676 Working capital 0 90 Total 4, Earnings before interest and taxes (EBIT) improved from TEUR -8,299 (1-6/2009) to TEUR 19,850, or by TEUR 28,149. Selling expenses include TEUR 572 (1-6/2009: TEUR 105) for properties under construction. 2. Income tax expense The provisions for taxes shown on the balance sheet are the result of temporary differences between the carrying amount of an asset or liability in the consolidated interim financial statements and the relevant tax base. The calculation of these provisions was based on a tax rate of 25% or the applicable local tax rate in the relevant foreign country. Current income tax expense is contrasted by the use of deferred taxes arising on loss carryforwards. Tax losses that have not yet been recognised are also included under current tax expense. Deferred taxes remain nearly unchanged in comparison with 31 December 2009, above all due to the recognition in equity of deferred tax assets from the swap measurement. 3. Earnings per share TEUR TEUR Profit for the period 9,552-14,552 Number of shares 34,100,000 34,100,000 Earnings per share in EUR No dividends were paid during the reporting period and no distributions are planned. 24

25 Notes b. SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED BALANCE SHEET 4. Investment property Investment property was measured at fair value. These fair values are generally based on the updated opinions prepared by independent property experts in July 2010 as of the balance sheet date on 30 June 2010; these experts have no relationship to the ECO Group. The Group has pledged most of the investment properties as collateral for loans. This item also includes land to be used in development projects, which is carried at cost. No investment property was acquired during the first half of 2010, with the exception of a property that was previously used by the Group for a fee in accordance with development rights. The ECO Group sold two investment properties during the first six months of 2010, whereby one sale took the form of a share deal. All objects classified as investment property are rented through operating leases. Since the Group is active exclusively in the rental of properties, income and expenses are generated by the properties held. The Group is entitled to receive income from the rental of investment properties beginning on the date of acquisition. 5. Properties under construction Properties under construction are carried on the balance sheet at acquisition cost. Of the total properties under construction as of 30 June 2010, TEUR 1,425 ( : TEUR 2,532) are related to objects in the investment portfolio and TEUR 15,901 ( : TEUR 33,724) to development projects. The development projects are listed below: Project location Land recognised as of Property under construction recognised as of TEUR TEUR Zaporizhzhya, UA ,901 Total ,901 The statement of non-current assets is attached as an appendix to these notes. The forecasted costs for the development project in Ukraine amount to approx. EUR 18 million. The office property in Luxembourg was completed during April 2010 and is carried at fair value. The project in Zaporizhzhya (Ukraine) was included in the financial statements by applying the exchange rate in effect on 30 June The foreign exchange differences for this project equalled TEUR 2,696 ( : TEUR 4,233) and were recorded under reserves without recognition through profit or loss. 25

26 6. Investments in other companies The parent company of the Group held shares in the following subsidiaries as of 30 June 2010 Shares in subsidiaries Stake Consolidation Primary business Founding / ACTIvity acquisition IN 2010 Austria ECO Business-Immobilien-Beteiligungen GmbH 100% Full consolidation holding company EBI Beteiligungen GmbH 100% Full consolidation holding company ECO Eastern Europe Real Estate AG 100% Full consolidation holding company ECO CEE & Real Estate Development GmbH 100% Full consolidation holding company Immobilien-Allianz Holding GmbH 100% Full consolidation holding company ECO Finance Holding GmbH 100% Full consolidation holding company PI Immobilien GmbH 100% Full consolidation holding company PI Beteiligungen GmbH 100% Full consolidation holding company Kapital & Wert Immobilienbesitz AG 99.32% Full consolidation Rental of properties Brunn am Gebirge Realbesitz GmbH 99.33% Full consolidation Rental of properties St. Magdalen Projektentwicklungs- und Verwertungsgesellschaft m.b.h. 100% Full consolidation Rental of properties MEZ Vermögensverwaltungs Gesellschaft m.b.h. 100% Full consolidation Rental of properties ECO GmbH & Co Horn, Wilhelm-Miklas-Platz 1 OG 100% Full consolidation Rental of properties TPW Immobilien GmbH 100% Full consolidation Rental of properties EB Immobilien Invest GmbH 100% Full consolidation Rental of properties EBI Beteiligungen GmbH & Co, 1190 Vienna, Rampengasse 3-5 KEG 100% Full consolidation Rental of properties EBI Beteiligungen GmbH & Co, 1110 Vienna, Simmeringer Hauptstrasse 24 KEG 100% Full consolidation Rental of properties ECO Rechenzentren Vermietungs GmbH & Co KEG 100% Full consolidation Rental of properties ECO KB GmbH 100% Full consolidation Rental of properties GETINA Immobilien-Management GmbH 100% Full consolidation Rental of properties ECO Treasury GmbH 100% Full consolidation Administration ECO Immobilien Verwertungs GmbH 100% Full consolidation Rental of properties PI Fleischmarkt 19 GmbH 100% Full consolidation Rental of properties PI Marktstrasse 6 GmbH & Co OG 100% Full consolidation Rental of properties PI Grabmayr-Strasse 4 GmbH & Co OG 100% Full consolidation Rental of properties PI Stubenring 2 GmbH & Co OG 100% Full consolidation Rental of properties PI Aspernbrückengasse 2 GmbH & Co OG 100% Full consolidation Rental of properties PI Eggenberger Allee 49 GmbH & Co OG 100% Full consolidation Rental of properties PI Gudrunstrasse 124 / Keplerplatz 14 GmbH & Co OG 100% Full consolidation Rental of properties ECO Beteiligungen Holding GmbH & Co KG 100% Full consolidation holding company campus21 GmbH 100% Full consolidation Rental of properties 26

27 Notes Shares in subsidiaries Stake Consolidation Primary business Founding / ACTIvity acquisition IN 2010 Germany ECO Business-Immobilien Deutschland GmbH 100% Full consolidation Rental of properties DINAMI GmbH 100% Full consolidation Rental of properties ECO Einkaufszentrum Meitingen GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Fachmarktzentren GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Büroimmobilien GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Fachmarktzentrum Pocking GmbH & Co KG 94.8% Full consolidation Rental of properties ECO Real Estate Deutschland GmbH 100% Full consolidation Rental of properties Projektgesellschaft Kreiller Strasse 215 mbh 100% Full consolidation Rental of properties ECO Fachmarktzentrum Geiselhöring GmbH & Co KG 94.8% Full consolidation Rental of properties ECO Fachmarktzentrum Tittling GmbH 100% Full consolidation Rental of properties ECO Fachmarktzentrum Naabtalcenter GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Business-Immobilie Saarbrücken GmbH & Co. KG 100% Full consolidation Rental of properties ECO Büroimmobilie Darmstadt GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Büroimmobilie Starnberg Percha GmbH & Co. KG 94.8% Full consolidation Rental of properties ECO Büroimmobilie Starnberg Petersbrunner Strasse GmbH & Co. KG 94.8% Full consolidation Rental of properties Projektgesellschaft Nymphe 82 mbh 100% Full consolidation Rental of properties Luxembourg ECO Real Estate Luxembourg S.à.r.l. 100% Full consolidation Project development Hungary My-Box Debrecen Ingatlan-Fejlesztö kft 100% Full consolidation Rental of properties Cyprus Graforco Investments Limited 100% Full consolidation holding company Ukraine Ukrainska Comertsiina Nerukhomist 100% Full consolidation Project development 27

28 A total of 75,000 shares (1-6/2009: 460;000 shares) in ECO Eastern Europe Real Estate were purchased during the first half of These additions were included in the condensed statement of changes in equity without recognition through profit or loss. No companies were founded or acquired during the first six months of Three companies (in Hungary) were liquidated and one company was sold. The following table shows the effects of these transactions on the ECO Group: Sale of subsidiaries in 2010 ECO BIB Opernringhof OEG Date of deconsolidation: Net assets sold: Property 73,905 Adjustment of fair value 20,495 Fair value 94,400 Other assets 658 Bank liabilities -56,715 Selling costs 2,099 Working capital 0 Other liabilities -29,511 10,931 Amounts earmarked for loan repayment 28,847 Book gains 3,929 Total return consideration 43,706 Special loan repayments -5,672 Outstanding purchase price -1,628 Net cash inflow from sale of the subsidiary 36,407 Net cash inflow from the transaction: Settlement through cash payment -43,711 Bank deposits surrendered 5-43,706 Special loan repayments 5,672 Outstanding purchase price 1,628 Net cash inflow from sale of the subsidiary -36,407 ECO acquired a 51.48% stake in a project company in Germany during the first half of the reporting year, and purchased the remaining shares in August This project company was included in the Group financial statements through full consolidation. In addition, the Group purchased the remaining 60% of a project company in Debrecen (Hungary). A total of 10 fully consolidated companies, eight of which were fully consolidated as of 31 December 2008, were sold during the first six months of 2009 (PI Fleischmarkt 1, 3-5 GmbH & Co OG, PI Wohllebengasse GmbH & Co OG, ECO Hotel und Fachmarktzentrum Ansfelden GmbH, Diak-Nd Pflege-Altenheime Besitz GmbH, Winetzhammerstraße Verwaltungs GmbH, MSU Immobilientreuhand GmbH, PI Theobaldgasse 19 GmbH & Co OG, PI Praterstraße GmbH & Co OG). The reporting period sales also covered 12 companies included as of 31 December 2008 through proportionate consolidation. Two fully consolidated companies were founded and subsequently sold during the first half of 2009 (Theobaldgasse Beteiligungs GmbH and Theobaldgasse 19 Real Beteiligungs GmbH). 28

29 Notes Sale of subsidiaries in 2009 Sale of subsidiaries PI Fleisch- PI Wohl- winetz- PI Prater- PI Theobald- Theobald- MARKT 1, 3-5 lebeng. hammerstr. strasse gasse gasse Beteil GmbH Date of deconsolidation TEUR TEUR TEUR TEUR TEUR TEUR Net assets sold Property 58,365 10,646 2,440 24,989 16,674 0 Adjustment of fair value 40, Fair value 98,366 9,850 2,319 24,000 16,200 0 Other assets Bank liabilities -33,451-7,044-1,101-16, Selling costs 1, Working capital Other liabilities -17,431-2,851-1,818-8, , ,136-2 Amounts earmarked for additional loan repayments 23,534 2, , Book gains Total return consideration 73,761 2, ,130 16,128-2 Net cash inflow from the transactions Cash payments -73,833-2, ,139-16, Bank deposits surrendered ,761-2, ,130-16,128 2 Carryfoward: Sale of subsidiaries Theobald- MSU Ansfelden Diak - ND Trading- Total GASSE 19 Portfolio Real Beteil. GmbH 50% Date of deconsolidation TEUR TEUR TEUR TEUR TEUR TEUR Net assets sold Property 0 2,271 8,299 24,447 49, ,485 Adjustment of fair value ,526 40,080 Fair value 0 2,449 8,700 23,800 51, ,565 Other assets , ,172 15,632 Bank liabilities 0-1,300-5,460-16,241-34, ,017 Selling costs ,088 Working capital Other liabilities ,627-7,998-24,641-71, ,368 67,690 Amounts earmarked for additional loan repayments ,634 Book gains Total return consideration ,443 98,444 Net cash inflow from the transactions Cash payments ,621-98,840 Bank deposits surrendered ,443-98,444 29

30 The fair value of properties sold also includes EUR 5.9 million from purchases made during the first six months of Of the agreed return compensation totalling EUR 98.4 million, EUR 79.3 million were due and payable as of 30 June Two property companies were acquired during the first half of The following table shows the effects of these transactions on the ECO Group: Acquisition of subsidiaries in Debrecen Nymphe Total Date of initial consolidation TEUR TEUR TEUR Acquired net assets Property 8,634 6,954 15,588 Adjustment of fair value 1,333 2,820 4,153 Fair value 9,967 9,774 19,741 Other assets Bank liabilities -6,304-7,530-13,835 Other liabilities -3, , ,203 2,621 Difference Total return consideration 417 2,203 2,621 Net cash outflow from the transactions Settlement through cash payment ,626-3,197 Bank deposits acquired ,203-2, Derivative financial instruments and the recognition of hedges The Group uses interest rate swaps and interest rate caps to hedge the financial risk arising from changes in interest rates. The ECO Group does not use any derivative financial instruments for speculative purposes. The effective portion of the changes in the fair value of derivative financial instruments that are used to hedge future cash flows is recorded directly in equity; the ineffective portion is recognised immediately to the income statement. For interest rate caps, only the underlying value is used as a hedge. During the period from January to June 2010, TEUR -10,328 (1-6/2009: TEUR -2,789) was recorded under equity without recognition through profit or loss. Retained earnings totalled TEUR -20,489 as of 30 June 2010 ( : TEUR -8,775). 30

31 Notes 8. Loans from banks and other loans The fair value of non-current liabilities is based on the actual interest rates for liabilities with the same term. The fair value of non-current bank loans with variable interest rates generally reflects the carrying amount of these items. The carrying amount represents the estimated fair value of the financial instruments held by the Group. Management considers the risk arising from changes in the interest rates of financial assets and other liabilities to be immaterial. Bank loans declined from EUR million as of 31 December 2009 to EUR million as of 30 June 2010 following scheduled repayments of EUR 4.4 million and repayments of EUR 62.4 million connected with the sale of a property (Opernringhof). As of 30 June 2010 a loan of EUR 3.9 million was due for repayment in This loan was repaid in full during August This item also include miscellaneous loans of EUR 39.5 million ( : EUR 42.1 million) granted by insurance companies as well as the remaining EUR 0.6 million balance ( : EUR 11.1 million) of a loan granted by the conwert Group. 9. Receivables Receivables from the sale of properties include TEUR 110 ( : TEUR 75) related to sales in earlier years. Other receivables include current settlements with tenants and facility management companies totalling EUR 4.1 million ( : EUR 3.3 million) and EUR 4.3 million ( : EUR 3.3 million) of settlements with taxation authorities. Other non-current receivables include TEUR 65 ( : TEUR 188) of accruals from the market valuation of derivatives. 10. Finance lease liabilities The finance lease liabilities were created by the acquisition of a shopping centre in Germany and a specialty shopping centre in Austria. The average lease term equals 10.5 years. The fair value of investment property obtained through finance leases totalled TEUR 23,311 as of 30 June 2010 ( : TEUR 21,339). The lease obligations are denominated in Euro. The fair value of lease obligations held by the Group approximates the carrying amount of these items. 31