Prospectus. for the public offering. and

Transcription

1 This document constitutes merely a non-binding convenience translation of the German Wertpapierprospekt (the Prospectus ) as approved by the German Financial Supervisory Authority (BaFin) on 23 September 2010 relating to the public offering and listing of new shares of HAMBORNER REIT AG (the New Shares ) in Germany. Only the Prospectus is legally binding in connection with the offering and listing of the New Shares. This document does not constitute an offer to sell nor a solicitation to make an offer to buy any securities in any jurisdiction, in particular not in relation to the New Shares. Investors who consider to purchase New Shares must base their investment decision solely on the Prospectus. This document has been prepared only for information purposes. Prospectus for the public offering and for admission to the regulated market with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange and for admission to the regulated markets of the Stock Exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart of up to 11,350,000 new no-par-value bearer shares (shares without nominal value) from the capital increase against cash contribution from authorized capital with subscription rights of the shareholders of HAMBORNER REIT AG resolved by the Board of Management of the Company on September 23, 2010 with the approval of the Supervisory Board on September 23, 2010 each with a notional interest of EUR 1.00 per share in the share capital and with full dividend rights as of January 1, 2010 of HAMBORNER REIT AG Duisburg International Securities Identification Number (ISIN): DE Wertpapier-Kenn-Nummer (WKN Securities Identification Number): Sole Lead Manager and Sole Bookrunner WestLB AG Co-Lead Managers Berenberg Bank Kempen & Co N.V. September 23, 2010

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3 CONTENTS 1. Summary of the Prospectus Summary of the Business Activities of HAMBORNER Summary of the Offering Selected Financial and Business Information Summary of Risk Factors Risk Factors Market-related Risks Company-related Risks REIT-related Risks Offer-related Risks General Information Responsibility for the contents of the Prospectus Subject matter of the Prospectus Forward-looking statements Availability of the Prospectus Inspection of documents Presentation of currency and financial information Sources of market data and industry information, additional information provided by third parties and numerical data Information on the shares of the Company Important notice regarding the market-value expert opinion The Offering Subject matter of the Offering Timetable for the Offering Subscription Offer Determination of the final issue volume, Subscription Ratio and Subscription and Offer Price; currency of the issue Lock-up agreements Selling restrictions Underwriters, Underwriting Agreement Information on the New Shares offered Interests of persons involved in the Offering Reasons for the Offering and Use of Proceeds Proceeds and costs of the issue Reasons for the offering and use of proceeds Pro Rata Result and Dividend Policy General Rules for Appropriation of Profit and Dividend Payments Special Rules for the Appropriation of Profit and Dividend Payments Capital Endowment and Indebtedness Dilution Selected financial and business information Management s Discussion and Analysis of Financial Condition and Results Of Operations Overview of Business Activities Material Factors affecting results of operations Basis of presentation of financial condition and Results of Operations Results of operations Liquidity and Capital Endowment Asset Situation Explanations on the Annual Financial Statements (German Commercial Code) of HAMBORNER REIT AG for the Financial Year Market Overview and Competition Introduction Overall development in Germany Market Competitive situation i

4 12. Description of the business activity of HAMBORNER Introduction Competitive Strengths Corporate Strategy Business Activities Description of the Property Portfolio Tenant Structure Property and Real Estate Investments Industrial Property Rights Research and Development Employees and Pension Obligations Significant agreements Insurance Policies Significant Legal Disputes Regulatory Environment German REIT Legislation Restrictions in German Tenancy Law Liability for Contamination Regional Planning, Construction Planning and Building Law Heritable Building Rights Architectural Conservation Subsidence Damage Law General Provisions under Civil Law Principal Shareholders Notification of Voting Rights Shareholder Structure Transactions and Legal Relationships with related Parties General Information about the company Foundation and History of the Company Legal Form, Name of the Company, Domicile, Financial Year and Duration of the Company Object of the Company Corporate Structure Auditor Notifications and Paying Agent Specific Provisions of the Articles of Association according to the German REIT Act Description of the Share Capital of the Company Share capital and shares Development of share capital Certification and transferability of the shares Admission to the stock exchange General provisions on the change in the share capital Capital increase with respect to New Shares Authorised capital Convertible bonds and bonds with warrants Stock option plan Authorisation to acquire own shares Own-shares Allocation of profits and payment of dividends General provisions regarding the liquidation of the Company General provisions regarding subscription rights Exclusion of minority shareholders Notice periods for shareholdings Information on the governing bodies of the Company The Management Board Supervisory board Certain information regarding the members of the Management Board and the Supervisory Board ii

5 18.4 General Meeting Corporate governance Taxation in the Federal Republic of Germany REIT Corporation Taxation of the Company Taxation of shareholders Taxation of dividends Taxation of capital gains Special regulations for companies in the financial and insurance sectors Inheritance and gift tax Other taxes Financial Section... F Market Value Report...M Recent Developments and Outlook... A Glossary... G SIGNATURE PAGE... U-1 iii

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7 1. SUMMARY OF THE PROSPECTUS Non-binding convenience translation The following summary is to be understood as an introduction to this prospectus (the Prospectus ). The summary brings together information contained in this prospectus and is supplemented by more detailed information contained elsewhere in the prospectus. Investors should base their investment decision with respect to the shares in HAMBORNER REIT AG described in this prospectus on the considerably more detailed information contained in other parts of this prospectus and on an analysis of the entire prospectus. HAMBORNER REIT AG, Goethestrasse 45, Duisburg, Germany ( HAMBORNER or the Company ) and WestLB AG, Herzogstrasse 15, Dusseldorf (the Sole Lead Manager ) and Joh. Berenberg, Gossler & Co. KG, Neuer Jungfernstieg 20, Hamburg and Kempen & Co N.V., Beethovenstraat 300, 1077 WZ Amsterdam, The Netherlands (together referred to as the Co-Lead Managers and together with the Sole Lead Manager the Underwriters ) hereby assume responsibility in accordance with section 5 (2) sentence 3 no. 4 of the Wertpapierprospektgesetz (WpPG German Securities Prospectus Act) for the contents of this summary. They can be held liable for the contents of the summary, albeit only in cases where the summary is misleading, inaccurate or contradictory when read together with the other parts of the prospectus. Where a claim is brought before a court on the basis of the information contained in this prospectus, the plaintiff investor might, under the relevant national legislation of the individual states of the European Economic Area, have to bear the costs of translating the prospectus before the legal proceedings are initiated. 1.1 Summary of the Business Activities of HAMBORNER Business Activities As a listed stock corporation in the form of a Real Estate Investment Trust (REIT) HAMBORNER REIT AG operates in the real estate sector and has positioned itself as a portfolio holder for high-yielding commercial properties. In the opinion of the Company it holds an attractive diversified property portfolio which consists mainly of large-scale retail properties in frequented areas, commercial buildings in prime locations (so-called high-street-objects) and high quality office buildings in well-established office locations. Despite the historic regional focus in North Rhine- Westphalia the portfolio includes properties across Germany with, according to the Company s view, a high occupancy rate compared to market standards and yielding sustainable rental incomes. HAMBORNER REIT AG stands out due to extensive experience in the German real estate market and the acquisition and managing of commercial properties as well as long-standing capital market expertise. The Company believes to have a balanced tenant structure with comparatively low vacancy rates and partly long-standing business relationships with its tenants. HAMBORNER believes to have a sound financial structure with, according to the Company s own observations, currently comparatively low financing costs; it also enjoys certain benefits from the advantages of the REITstatus, such as exemption from corporation and trade tax. In addition, the Company shows a lean and efficient corporate structure. On the reporting date as at August 31, 2010, HAMBORNER had a property portfolio of 60 portfolio properties in 43 locations in Germany with a fair value of approximately EUR 354,160,000. The properties have a total usable floor space of around 208,070 sqm, of which approximately 198,330 sqm are used commercially and around 9,740 sqm as residential spaces. The economic vacancy rate (taking into account rent guarantees) calculated on the basis of the total rental income of the property portfolio (excluding leaseholds) amounted to 1.18% in total for the period from January 1, 2010 to August 31, The market value appraisal by Jones Lang LaSalle contained in this prospectus reports an economic vacancy rate of 1.38% for the month of August

8 On February 18, 2010, HAMBORNER acquired REIT status retroactively as of January 1, On June 8, 2009, the shares of HAMBORNER REIT AG were listed in the Prime Standard segment of the Frankfurt Stock Exchange and included in the REIT segment of Deutsche Börse AG on February 22, It is the objective of the Company, through investments in selected property assets and through a strategic portfolio management, to realize sustained and yield-orientated growth with property assets that are as balanced as possible, diversified and located in Germany. The Company s objectives are to be met by focusing on large-scale retail properties, commercial buildings in prime locations as well as office buildings in medium sized towns and regions in Germany which have long-term growth prospects. When acquiring new property, the Company s focus is on maintaining a sound financial basis and the ability to continuously pay out an attractive dividend. Competitive strengths HAMBORNER s key strengths include: A major real estate corporation in terms of market capitalization in Germany; Long-term experience in the property sector, in the acquisition and management of real estate property; Strong property portfolio; Sound financial structure; Attractive dividends, stable earnings position and conservative balance sheet preparation by recording adjusted acquisition costs; REIT status (in particular exemption from corporation and trade tax); Transparent and efficient corporate and organisational structure; Long-term capital markets expertise. Strategy The strategic objectives of HAMBORNER are to be achieved by the following specific measures: Focus on large-scale retail properties in busy areas, commercial buildings in prime locations (so-called high street properties) and high quality office buildings; Growth and expansion of its property portfolio; Focus on medium-sized cities and areas in Germany with long-term growth prospects; Use of purchasing opportunities while maintaining a sound financial structure and the continued distribution of an attractive dividend. 1.2 Summary of the Offering Subject matter of the Offering... The Offering relates to up to 11,350,000 new no par value shares of the Company, each with a notional interest of EUR 1.00 in the 2

9 share capital and carrying full dividend rights from January 1, 2010 (the New Shares ). The New Shares will be issued from the capital increase against cash contribution out of authorized capital with subscription rights for shareholders in accordance with Article 3(5) and (6) of the Company s Articles of Association. The Board of Management of the Company resolved on September 23, 2010, when utilizing this authorization, with the approval on the same day of the Supervisory Board, to increase the share capital of the Company from authorized capital by up to EUR 11,350,000 by issuing up to 11,350,000 new no-par value shares against cash contribution (the Utilization Resolution ). Furthermore, the Board of Management of the Company will determine by way of resolution the exact number of New Shares to be issued, the Subscription Ratio and the Offer Price (as defined below) and the Subscription Price (as defined below) for the New Shares; such resolution is expected to be adopted on October 7, 2010, with the approval of the Board of Management of the Company expected on the same day (the Determination Resolution ). The implementation of the capital increase is expected to be registered in the commercial register on October 11, After registration of the capital increase in the Commercial Register, the share capital of the Company will amount to up to EUR 34,120,000. The Offering... Subscription Offer... The New Shares will be offered through a public Subscription Offer (as defined below) in Germany and by way of a Pre-placement (as defined below). A syndicate of banks led by WestLB AG (the Sole Lead Manager ) and Joh. Berenberg, Gossler & Co. KG and Kempen & Co N.V. (collectively the Co-Lead Managers and together with the Sole Lead Manager the Underwriters ) have agreed on the basis of an underwriting agreement (the Underwriting Agreement ), which was entered into on September 23, 2010 between the Company and the Underwriters, to underwrite the New Shares and to offer them to the shareholders by way of indirect subscription rights during the subscription period, in accordance with the Subscription Ratio and at the Subscription Price per New Share (the Subscription Offer ). The Underwriters will subscribe the New Shares. The Subscription Price as well as the amount of the capital increase will be determined based on the results of the bookbuilding procedure for the Pre-placement (as defined below). Subscription Period... The subscription period is expected to run from and including October 12, 2010 to and including October 25, Pre-placement... TheUnderwriters also agreed, on the basis of the Underwriting Agreement, to offer, prior to the commencement of the Subscription Offer, the New Shares in a private placement exclusively to 3

10 institutional investors in Germany and in other countries (other than in the United States of America in accordance with Regulation S of the U.S. Securities Act dated 1933 as amended from time to time) or to other investors on the basis of another exemption from prospectus requirements according to section 3 (2) of the German Securities Prospectus Act, (the Pre-placement ). The Pre-placement will take the form of a bookbuilding procedure. The Offer Price will amount to a maximum of EUR Offer Period... The offer period for the Pre-placement is expected to run from and including October 4, 2010 to and including October 7, 2010 at 2.00 p.m. CET. Assigned Subscription Rights... Theshareholders of HAMBORNER HSH Real Estate AG and its subsidiaries HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH, HSH RE 6. Beteiligungs GmbH, HSH RE 7. Beteiligungs GmbH (jointly referred to as the Assigning Shareholders ) currently hold 12,003,164 no-par value shares of the Company and have subject to a gratuitous waiver (as described below) entered into an agreement (the Assignment Agreement ) with the Sole Lead Manager concerning the assignment and transfer, without consideration, of all their future subscription rights to New Shares (the Assigned Subscription Rights ). The Assigning Shareholders have undertaken to waive in advance, upon request of the Company and the Sole Lead Manager, as many of their subscription rights as required in order to ensure an even Subscription Ratio. The number of Assigned Subscription Rights is reduced to the extent to which the Assigning Shareholders have waived their subscription rights. The assignment of the Assigned Subscription Rights is, amongst others, subject to the condition precedent that the implementation of the capital increase is registered with the Commercial Register and that the Subscription Price corresponds to the Offer Price. The Sole Lead Manager may neither exercise nor dispose of the Assigned Subscription Rights assigned to it. Claw-Back in the Pre-placement... Itispointedouttoinstitutional investors who wish to purchase New Shares in the course of the Pre-placement that the purchase of New Shares under the Pre-placement will partially be subject to the right to rescind, and to this extent such purchase is also subject to a partially deferred settlement. The portion of the New Shares allotted in the course of the Pre-placement subject to the right to rescind (the Claw-Back Shares ) in relation to the total number of New Shares alloted to investors is determined by the claw-back ratio. The claw-back ratio corresponds to the ratio of New Shares, which cannot be attributed to Assigned Subscription Rights, to the total 4

11 number of New Shares which are allocated to investors in the course of the Pre-Placement. To each of these investors, the same claw-back ratio will apply. If and to the extent to which the shareholders of the Company exercise their statutory subscription rights during the Subscription Period, the right to rescind will be exercised vis-à-vis the investors who have been allotted Claw-Back Shares in the course of the Preplacement, pro rata corresponding to the ratio of the total number of New Shares subscribed under the Subscription Offer to the total number of Claw-Back Shares. Termination of Subscription Offer or Pre-placement... The Subscription Offer and the Pre-placement are subject, among other things, to the condition that the Determination Resolution is taken (presumably on October 7, 2010) and that the registration of the implementation of the capital increase is entered into the Commercial Register (presumably on October 11, 2010). Moreover, the Subscription Offer and the Pre-placement may be terminated under certain further circumstances until delivery of the respective New Shares. Offer Price and Subscription Price... Theoffer price per share (the Offer Price ) for the Pre-placement is expected to be determined on October 7, 2010 based on the outcome of the bookbuilding procedure for the Pre-placement. The Subscription Price for the Pre-Placement is also expected to be determined by resolution of the Company s Board of Management on October 7, 2010, with the approval of the Supervisory Board also expected on the same day, based on the outcome of the bookbuilding procedure for the Pre-placement. The Subscription Price will correspond to the Offer Price. The Subscription Price, the Offer Price and the volume of the capital increase are expected to be published as an ad-hoc announcement through an electronic information system and on the Internet page of the Company ( on October 7, The Subscription Price for the Subscription Offer will be included in the Subscription Offer which is expected to be published on October 11, 2010 in the electronic version of the German Federal Gazette (Bundesanzeiger) and in the Börsenzeitung. Exercise of subscription rights... In order to avoid exclusion from participation in the capital increase the shareholders are requested in the Subscription Offer to exercise their subscription rights to the New Shares during the subscription period through their custodial banks at the Subscription Agent during ordinary business hours. Subscription rights which are not exercised within the relevant time limit will expire. Custodial banks are responsible for booking subscription rights to the shareholders securities accounts. 5

12 It is expected that the subscription rights (ISIN DE000A1EYHN6, WKN A1EYHN) which are attributable to the shares of the Company (ISIN DE , WKN ) will automatically be booked on the evening of October 11, 2010 to the custodial banks through Clearstream Banking AG, Neue Börsenstrasse 1, Frankfurt am Main, Germany. Subscription agent... Subscription Agent is WestLB AG, Herzogstraße 15, Dusseldorf. Subscription rights trading... Subscription rights coordinator... Admission and trading of the New Shares... Certification and delivery of New Shares... In connection with the Offering of the New Shares an exchange trading of the subscription rights will occur. The Subscription Rights (ISIN DE000A1EYHN6, WKN A1EYHN) for the New Shares are expected to be traded in the period from October 12, 2010 up to and including October 21, 2010 on the regulated market of the Frankfurt stock exchange. The subscription agent, is prepared to procure purchases and sales of subscription rights on the stock exchange. No compensation will be awarded for subscription rights which are not exercised. As of October 12, 2010, the existing shares of the Company will be listed ex subscription rights. WestLB AG may take measures in order to provide liquidity for orderly subscription rights trading or to perform other activities customary for a subscription rights coordinator, in particular, the buying and selling of subscription rights for New Shares. In this respect, WestLB AG reserves the right to conduct hedging transactions in shares of the Company or corresponding derivatives. Admission of the New Shares to the regulated market of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with additional postadmission obligations (Prime Standard) as well as to the regulated markets of the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart will presumably take place on October 12, 2010 with the application for admission being expected to be filed on September 30, The New Shares will be represented by one global share certificate, which will be deposited with Clearstream Banking AG, Neue Börsenstrassße 1, Frankfurt am Main, Germany. Any right of the shareholders to request certification of their respective individual interests is excluded. The delivery of the New Shares will take place through collective safe custody deposit. New Shares purchased in the Pre-placement which are not Claw- Back Shares are expected to be delivered on October 13,

13 The Claw-Back Shares are, to the extent the Subscription Period is not extended, expected to be delivered on October 28, 2010, if and to the extent the rescission right is not exercised. The New Shares purchased in the Subscription Offer are, to the extent the subscription period is not extended, expected to be delivered on October 28, 2010 as well. Lock-up agreement and selling restrictions... TheCompany has agreed with the Underwriters that, as of the date of the Underwriting Agreement, for the period of six months following delivery of the New Shares acquired in the Subscription Offer and without the prior written consent of the Sole Lead Manager, (A) it will not offer or sell or enter into any obligations in this respect for the sale or disposal of (i) bonds which are convertible into shares of the Company or which can be exchanged for such, (ii) shares of the Company or (iii) other securities convertible into or exchangeable for shares of the Company or with a right to subscribe or receive such shares and (B) it will not enter into any swaps or other agreements under which the economic consequences of ownership of shares of the Company are transferred in whole or in part to another party, regardless of whether the transaction is settled through delivery of securities, in cash or in any other manner. This obligation does not apply to the issuance of the New Shares. The Assigning Shareholders have agreed with the Sole Lead Manager that, as of the date of the Assignment Agreement, for the period of up to 12 months following from the delivery of the New Shares acquired in the Subscription Offer, they will not neither themselves nor, with certain exceptions, through one of their dependent companies without the prior written consent of the Sole Lead Manager, (x) offer or sell or enter into any obligations in this respect for the sale or transfer of shares of the Company (including New Shares) or other securities convertible into or exchangeable for shares of the Company (including New Shares) or with a right to subscribe or receive such shares (including New Shares) or (y) enter into any swaps or other agreements under which the economic consequences of ownership of shares of the Company (including New Shares) are transferred in whole or in part to another party, regardless of whether the transaction is settled through delivery of securities, in cash or in any other manner. The Assigning Shareholders are, however, allowed, following the registration of the implementation of the capital increase with the commercial register, to sell shares without the approval of the Sole Lead Manager outside of the stock exchange, if the purchaser undertakes vis-à-vis the Sole Lead Manager beforehand, in the same manner as the Assigning Shareholders, to comply with the aforementioned limitations with respect to the shares in the Company which are to be acquired until expiry of the 12 month-period. Certain selling restrictions apply to the Offering. 7

14 Use of issue proceeds... ISIN, WKN and stock market symbol of the New Shares and the subscription rights... The net proceeds from the offer of the New Shares are intended to be used to strengthen HAMBORNER s capital base and financial soundness. The Company intends to use the proceeds from the offer to finance the further expansion of HAMBORNER. In particular, it is envisaged to provide financing for the acquisition of additional properties in accordance with HAMBORNER s investment strategy as well as to increase its strategic flexibility with respect to future acquisitions. The following potential uses of the net proceeds, which are consistent with HAMBORNER s strategic objectives, are of particular importance to the Company: (i) growth and expansion of its own property portfolio concentrating on largescale retail properties in frequented locations, business properties in prime locations (so-called high-street-objects) as well as highquality office buildings, (ii) regional diversification with particular emphasis on regions with long-term growth prospects in southern and southwestern Germany, (iii) taking advantage of acquisition opportunities while maintaining a sound financial structure. The Company, moreover, intends to invest the proceeds from the offer in fixed interest rate investments or for general corporate purposes until investments in line with the Company s strategy can be made. International Securities Identification Number (ISIN) For the New Shares: DE For the subscription rights to the New Shares: DE000A1EYHN6 Wertpapier-Kenn-Nummer (WKN Securities Identification Number) For the New Shares: Selected Financial and Business Information For the subscription rights to the New Shares: A1EYHN Stock market symbol of the Company s shares: HAB WKN and ISIN of the New Shares correspond to those of the existing shares. The summarized financial information for the financial years 2009 and 2008 is based on the audited IFRS individual financial statements of HAMBORNER REIT AG for the financial year ending on December 31, 2009, which have been audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf, and received an unqualified auditors opinion while the financial information summarised below for the 2007 financial year is based on the audited IFRS consolidated accounts of HAMBORNER REIT AG for the financial year ending on December 31, 2007 (subject to rounding differences), which were audited by BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Essen branch, and received an unqualified auditors opinion (the IFRS accounts ). The financial information for the income statement for the 8

15 financial year 2007 was adjusted to reflect the new structure shown as applied to the financial years 2008 and 2009 which was changed on the basis of the recommendations of the European Public Real Estate Association (EPRA) and which has been widely adopted by property companies. The financial information summarized below for the first six months of 2010 and 2009 are based on the IFRS interim financial statements of HAMBORNER REIT AG for the half-year ending on June 30, 2010, (the IFRS half-year financial statement ). The IFRS half-year financial statement was subjected to a review by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf, in accordance with section 37w of the German Securities Trading Act ( WpHG ) and received a review report. The IFRS accounts and the IFRS half-year financial statement were prepared on the basis of the International Financial Reporting Standards, as these are to be applied in the European Union ( IFRS ) and are reproduced in section 20. Financial Section of this prospectus. in TEUR Selected Information from the Income Statement of HAMBORNER 1st halfyear 2010 (reviewed) 1st halfyear 2009 (reviewed) 2009 (audited) 2008 (audited) 2007 (unaudited) 1 Income from rents and leases... 11,840 11,076 22,451 19,725 13,318 Income from passed-on incidental costs to tenants... 1,347 1,145 2,419 1,873 1,229 Real estate operating expenses... -1,819-1,675-3,666-3,026-1,860 Property and building maintenance ,264-1,109-1,594 Net rental income... 10,916 10,276 19,940 17,463 11,093 Administrative expenses , Personnel costs... -1,314-1,369-2,740-2,973-2,520 Amortisations of intangible assets, tangible fixed assets and investment property... -3,607-3,195-7,268-10,257-3,177 Other operating income ,128 12,475 1,896 Other operating expenses ,587-1,410-5,377-4,567-9,503-3,384-6,071 Operating result... 5,539 5,709 10,437 14,079 5,022 Result from the sale of investment property ,689 5,621 Result from investments Earnings before interest and taxes (EBIT)... 5,603 5,973 10,884 21,411 11,092 Interest income , Interest expenses... -2,853-2,669-5,508-4,644-1,234 Income from securities, including capital gains Financial result... -2,776-2,315-5,019-2, Earnings before taxes (EBT)... 2,827 3,658 5,865 18,484 11,056 Taxes on income and profit... -2, ,517 6,645 Result from continuing operations... 5,073 16,967 17,701 Result from discontinued operations ,525 Profit for the financial year/period ,316 5,073 17,341 52,226 Retained profits from previous year... 23,844 27,196 35,165 53,922 1,554 2 Dividends... -7,970-7, Transfer to retained earnings , Withdrawal from other retained earnings Net retained profits... 23,890 30,512 32,268 35,165 53,922 Earnings per share (in EUR) thereof from continuing operations thereof from discontinued operations Adjusted to reflect the new structure shown as applied for the financial years 2008 and 2009 which was changed on the basis of the recommendations of the European Real Estate Association (EPRA) and which has been widely adopted by property companies. This relates to (i) the expenses and income from the sale of properties which are now no longer recorded in the income statement under other income but are recorded separately; (ii) administrative expenses which in previous years were recorded in other expenses, (iii) income from rental guarantees, which in previous financial years were recorded in other income, as well as (iv) internally produced and capitalised assets which are no longer separately recorded but instead recorded as other operating income. 2 Retained profits from previous year, the dividends and the transfer into other retained earnings have been included in the item retained profits from previous year, and, shown separately, amount to TEUR 9,497 (retained profits), TEUR -6,138 (dividends) and TEUR -1,112 (transfer). 9

16 Assets in TEUR Selected Information from the Balance Sheet of HAMBORNER Non-binding convenience translation June 30, 2010 (reviewed) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Non-current Assets Intangible assets Tangible fixed assets Investment property , , , ,702 Financial assets Other assets Deferred tax assets... 2,170 1, , , , ,051 Current Assets Trade receivables and other assets... 1, Income tax receivables Bank deposits and cash balances... 6,940 37,942 54,012 6,442 8,059 38,473 55,368 7,863 Non-current assets held for sale... 1, ,813 Assets from discontinued operations... 59,470 9,594 38,473 55,498 87,146 Total assets , , , ,197 Equity and Liabilities in TEUR June 30, 2010 (reviewed) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Equity Subscribed capital... 22,770 22,770 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 2,277 2,277 Other retained earnings , , ,575 76,448 Revaluation reserve ,136-6,594-4, , , ,115 78,815 Net retained profits... 23,890 32,269 35,165 53, , , , ,507 Non-current liabilities and provisions Financial liabilities and derivative financial instruments , ,052 87,350 48,034 Deferred tax liabilities... 14,708 15,188 14,219 Trade accounts payable and other liabilities... 3,961 4,075 3,784 3,860 Provisions for pensions... 5,545 5,603 5,780 5,923 Other provisions , , ,780 72,591 Current liabilities and provisions Financial liabilities and derivative financial instruments... 4,577 4,620 3,754 36,397 Income tax liabilities Trade accounts payable and other liabilities... 3,239 1,877 1,823 18,137 Other provisions... 1,328 2,253 2,279 2,318 9,168 9,152 8,516 56,954 Liabilities from discontinued operations... 5,145 Total equity, liabilities and provisions , , , ,197 10

17 in TEUR Selected Information from the Cash Flow Statement of HAMBORNER Jan 1 to June 30, 2010 (reviewed) Jan 1 to June 30, 2009 (reviewed) Non-binding convenience translation Jan 1, to Dec 31, 2009 (audited) Jan 1 to Dec 31, 2008 (audited) Jan 1 to Dec 31, 2007 (audited) Cash flow from operating activities Earnings before taxes (EBT)... 2,827 3,658 5,865 18, ,433 1 Depreciation, Amortization and Impairments/write-ups (-)... 3,607 3,195 6,002 9,312 3,177 Financial result... 2, ,302 5,006 2,081-1,258 3 Change in provisions , Gain (-) /loss (+) (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale ,741-5,621 Gain (-) /loss (+) (offset) from the disposal of financial assets ,477-32,826 Other non-cash expenses (+) / income (-) ,711-2,004 Change in receivables and other assets ,050 Change in liabilities ,040-1,426 18,855 Dividends received ,313 Interest received , Tax payments ,936-1, ,477-2,086-8,969 6,174 14,129 10,283 23,528 Cash flows from investment activities Investments in intangible assets, tangible fixed assets and investment properties ,128-29,883-39,349-36,309-98,008 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale ,417 17,764 Investments in financial assets ,947 Proceeds from disposals of financial assets ,601 95,087 Net cash outflow of funds due to the disposition of the special share fund Südinvest ,056-28,938-37,686 41,696-73,104 Cash flow from financing activities Dividend payments... -8,425-7,970-7,970-7,970-6,831 Proceeds from borrowings... 22,640 18,400 23,800 37,713 66,308 Repayment of borrowings... -2,004-1,840-3,257-37, Interest outflows... -3,188-2,802-5,086-3, ,023 5,788 7,487-10,998 58,428 Change in cash and cash equivalents ,002-16,976-16,070 40,981 8,852 Cash and cash equivalents as of January ,942 54,012 54,012 13,031 4,179 Bank deposits and cash balances... 37,942 54,012 54,012 13,031 4,175 Near-liquid assets... 4 Cash and cash equivalents as of the end of the period... 6,940 37,036 37,942 54,012 13,031 Bank deposits and cash balances... 6,940 37,036 37,942 54,012 13,031 1 Earnings before taxes (EBT) in the cash flow statement corresponds to the sum total of the earnings before taxes (EBT) and the result from discontinued operations both as shown in the income statement adjusted for tax effects of TEUR 61 in the financial year 2008 and TEUR -148 in the financial year For the first half-year 2010 this figure does not contain income from investments. 3 In the financial year 2007 presented as financial income. 11

18 Selected Key Data Jan 1 to June 30, 2010 (unaudited) Jan 1 to June 30, 2009 (unaudited) Jan 1 to Dec (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) EBITDA in TEUR ,210 9,168 16,886 30,975 46,809 EBDA in TEUR ,653 6,511 11,075 26,673 53,887 REIT equity ratio in % Balance sheet equity capital in % Loan to Value (LTV) in % Profit per share in EUR Funds from Operations (FFO) 5 in TEUR... 6,371 5,325 9,620 8,536 6,037 Funds from Operations (FFO) 5 per share in EUR Dividend per share in EUR Quoted market price per share in EUR (XETRA)... Highest share price Lowest share price Year/period-end share price Dividend yield in relation to the year/period-end share price in % Price/FFO 5 ratio Market capitalisation at the year/period-end , , , , ,564 Net asset value 6 per share in EUR Fair value of the property portfolio in TEUR , , , ,020 Net asset value 6 in TEUR , , , ,618 Number of employees at the relevant calculation date including the Managing Board Earnings before interests, taxes, depreciation and amortization (EBITDA) means the profit for the financial year/period before interest (interest income less interest expenses) before taxes on income and profit, before amortization/write-ups of intangible assets, tangible fixed assets and investment property. 2 Earnings before depreciation and amortization (EBDA) means the profit for the fiscal year/period before amortization/write-ups of intangible assets, tangible fixed assets and investment property. 3 REIT equity ratio corresponds to the equity-to-assets ratio pursuant to Sec. 15 in conjunction with Sec. 12 (1) sentence 2 REIT Act meaning the ratio of the equity (on a fair value basis) to the fair value of immovable assets. The equity (on a fair value basis) is the sum of the balance-sheet equity and the hidden reserves. The immovable assets of the Company consist of the property portfolio and undeveloped land which is predominantly agricultural and forestry land. The fair value of the Company s property portfolio was determined on the basis of the market value appraisals. Thereby, the capital expenditures for properties, which were not yet transferred on the reporting date, were increasingly considered (as at June 30, 2010, TEUR 1,507; as at December 31, 2009, TEUR 517; as at December 31, 2008, TEUR 1,229 and as at December 31, 2007, TEUR 329). The undeveloped land was recognized with the acquisition costs of such a land at approximately EUR 2.6 million, because another value could not be determined in a reliable manner. 4 Loan to Value (LTV) represents the ratio of the Company s financial liabilities to the market value of the Company s property portfolio. The financial liabilities are determined on the outstanding amount of loans due to credit institutions plus interest not due but allocated to the relevant period as at the respective reporting date and which amounted to TEUR 126,451 as at June 30, 2010; TEUR 105,827 as at December 31, 2009; 85,297 as at December 31, 2008 and TEUR 84,227 as at December 31, These financial liabilities are shown in the balance sheet in the item financial liabilities and derivative financial instruments in the aggregate together with derivative financial instruments. By calculating the market value of the immovable assets, only the property portfolio of the Company was considered. The value of the Company s headquarter building in Goethestrasse 45 in Duisburg as well as the undeveloped land of the Company are not considered. 5 Funds from Operations (FFO) is a key financial figure of the operating business of the Company. The FFO is used for the value orientated financial management of the Company to represent the generated financial resources that are available for investments, repayment of debt and dividend payments to the shareholders. The Company calculates FFO according to the following formula: in TEUR Jan 1 to June 30, 2010 (unaudited) Jan 1 to June 30, 2009 (unaudited) Jan 1, to Dec 31, 2009 (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) Net rental income... 10,916 10,276 19,940 17,463 11,093 - Administrative expenses , Personnel costs... -1,314-1,369-2,740-2,973-2,520 +Other operating income adjusted for write-up in respect of previous amortisations and results from the sale of investments Other operating expenses ,587-1,410 + Result from investments and income from securities including capital gains ,103 +Interest income , Interest expenses... -2,853-2,670-5,508-4,644-1,234 FFO before tax... 6,371 5,925 10,756 9,883 7,096 -Taxes on adjusted profit ,136-1,347-1,259 FFO after tax... 6,371 5,325 9,620 8,536 5,837 FFO per share in EUR

19 Taxes on adjusted profit means the hypothetical tax burden which would have existed if the earnings before tax (EBT) corresponded to the FFO. Therefore, the tax effects of the income from the fund were eliminated in the financial year 2007, the tax effects from disposals of investments were eliminated in the financial year 2008 and various tax effects were eliminated in the financial year 2009 (among other things sales of investments, sales of properties, release of reserves) to calculate such a hypothetical tax burden. Due to the REIT status, the Company is exempted from paying the corporate tax so that, for the purposes of calculating the FFO, taxes on adjusted profits no longer apply. 6 Net asset value (NAV) or net tangible value reflects the economic equity of the Company. It is determined by the fair market value of the Company s assets which is essentially the fair market value of the properties minus debt. The Company calculates the NAV according to the following formula: in TEUR Jan 1 to June 30, 2010 (unaudited) Jan 1 to Dec 31, 2009 (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) balance sheet non-current assets without deferred taxes and derivative financial instruments , , , ,895 + Current assets... 8,058 38,473 55,368 7,863 + non-current assets held for sale... 1, ,813 + assets from discontinued operations... 59,470 - non-current liabilities and provisions without deferred taxes and derivative financial instruments , ,597-91,785-58,167 - current liabilities and provisions without deferred taxes and derivative financial instruments... -9,164-9, ,516-56,955 - liabilities from discontinued operations Balance sheet NAV , , , ,724 + Hidden reserves of non-current assets... 63,109 60,388 61,579 83,894 NAV , , , ,618 NAV per share in EUR The current assets include all current assets, except for the non-current assets held for sale and assets from discontinued operations. The hidden reserves represent the difference between the book value and the market value (fair value) of the investment properties and the Company s non-current assets which are held for sale, the latter only to the extent that they consist of immovable assets, on the respective reporting dates. The investment properties of the Company consist of the property portfolio of the Company and undeveloped land. The market value (fair value) of the property portfolio was determined on the basis of market value appraisals. The capital expenditures for properties, which were not transferred on the reporting date, were increasingly considered (TEUR 1,507 as at June 30, 2010; TEUR 517 as at December 31, 2009; TEUR 1,229 as at December 31, 2008; and TEUR 329 as at December 31, 2007). The value of the undeveloped land was determined for the purpose of the NAV-calculation on the basis of the Company s own assumptions, since there is no reliable way to determine the fair value of the undeveloped land. In the case of non-current assets held for sale, only the TEUR 1,535 reported as at June 30, 2010 was considered; the amount of TEUR 130 reported as at December 31, 2008 does not relate to immovable properties. As at all reporting dates (except for December 31, 2007), the calculation of hidden reserves relates exclusively to differences in respect of immovable assets. Other tangible assets and other assets did not include any hidden reserves. Only as at December 31, 2007, the hidden reserves in an amount of TEUR 14,734 were included in the NAV-calculation, representing the difference between the book value and the market value (fair value) of the investment in the Wohnbau Dinslaken GmbH. 7 Adjusted for the capital increase made on August 2, 2007 of EUR 22,770,000.00, divided into 22,700,000 shares with a calculated nominal value of EUR 1.00 each. 8 The presented fair value of the property portfolio refers only to the built-on property portfolio of the Company. The value of the Company s headquarter building in Goethestrasse 45 in Duisburg as well as the undeveloped land belonging to the Company are not included. The calculation of the fair market value of the property portfolio as at June 30, 2009 and 2010, respectively, is based on the values determined for the annual financial statements from the respective preceding financial year, unless there are indications of any significant changes in the market value of the properties since then. As at June 30, 2010 and 2009, respectively, there was no evidence of such changes in value of such properties that had already been held by the Company at such preceding reporting date so that the value of such properties corresponds to the values recognized for the annual financial statements for the respective preceding financial year. As at June 30, 2010 and 2009, respectively, the value of newly acquired properties was determined using an expert opinion on the indicative market value (if available) or the value was determined on the basis of the acquisition/production costs. In case of asset disposals, the value of the property portfolio is reduced by the corresponding fair market value. However, there were no investment disposals during the first half year of As at December 31, 2009, this position includes short-term derivative financial instruments in the amount of TEUR Excluding deferred tax liabilities. Note: The above listed financial key figures EBITDA, EBDA, FFO, LTV and NAV are not defined by IFRS unambiguously. Potential investors should take into consideration that these financial key figures are not applied in a consistent manner or standardized, that their calculation can vary and that these financial key figures by themselves are not a basis to compare different companies. EBITDA and EBDA are furthermore not recognized as financial key figures by IFRS and do not substitute the financial key figures of the income statement and the cash flow statement that were recognized in accordance with IFRS. 13

20 1.4 Summary of Risk Factors Prior to their investment decision, investors should carefully read the following risk factors along with the other information contained in this prospectus and consider them when making their investment decision. The materialization of one or more of these risks can considerably impair the business activities of HAMBORNER REIT AG and have significant negative effects on the net assets, financial position and results of operations of HAMBORNER. The quoted market price of the shares of the Company may fall considerably due to the realization of any of these risks, and investors might lose some or even all of their invested capital. The risks described below are not the only risks to which the Company is exposed. Further risks and uncertainties of which the Company is not currently aware might also impair the business operations of the Company and have considerable negative effects on the Company s business activities and its net assets, financial position and results of operations. The order in which the following risks are listed does not provide any indication of the probability of their occurrence or the extent or significance of the individual risk. The risks referred to may occur individually or cumulatively Market-related Risks Risks from the development of the general business and economic environment and the commercial property market: The German commercial property market is influenced by the overall economic environment, as well as the development of property values in Germany. These developments depend on numerous interdependent factors and are therefore subject to fluctuations on which HAMBORNER has no influence and which can have a considerable negative effect on the business activities of HAMBORNER. Competition risks: In the field of commercial properties HAMBORNER is facing competition for tenants and is competing with other investors for attractive properties. General interest risk: A rise in interest rates may make the financing of the purchase prices for properties, as well as modernization and maintenance measures for properties more expensive. Furthermore, increasing interest rate levels for loans might increase the financing costs of third parties and therefore have a negative effect on the willingness of potential purchasers to buy and the ability of potential tenants to pay an appropriate rent Company-related Risks Dependence of the business activities of HAMBORNER on the acquisition and marketing of suitable commercial properties at reasonable prices: The business activities of HAMBORNER depend on the acquisition and marketing of suitable commercial properties at appropriate prices and conditions. With respect to the adjustment of the property portfolio, HAMBORNER is also exposed to the uncertainty of determining whether sales can be effected at the right time and on suitable conditions. Risk of negative developments of investments in properties: The assumptions made upon the acquisition of property assets may prove to be partly or completely unsuitable or unforeseen problems or unidentified risks may occur in conjunction with the acquired properties which might not have been contractually secured against. Letting and management risk: The economic success of the property investments of HAMBORNER significantly depends on corresponding income being generated from lettings. Rent losses and falling rents or even vacant buildings due to the fact that certain 14

21 properties are difficult to relet may result in rental income losses. HAMBORNER is also subject to risks of material legal risks when letting commercial properties. Concentration and bulk risks: As of August 31, 2010 HAMBORNER generated close to 51% of its rental income from the 10 most important tenants measured according to the rental income generated by them. Due to the historic regional concentration on North Rhine-Westphalia, there is also a dependence on the general macro-economic developments of this region. The loss of important tenants or negative regional developments may result in considerable rental losses on the part of HAMBORNER. Risks from rent review clauses in rental contracts: Rental agreements are generally tied to a reference index, for example the consumer price index, to ensure value stability. If the reference index falls, the corresponding rental income also falls despite any rising costs for the management and maintenance of the properties. It might not always be possible to base rent increases on index changes in accordance with clauses, or rent reviews may only be possible after a delay or not at all. Risks related to maintenance and modernization of real-estate properties: In order to retain the value of its properties, HAMBORNER has to carry out maintenance measures, as well as extensions and adaptations to contemporary requirements (modernization) in order to improve the attractiveness and lettability of the properties. All of these measures may turn out to be extensive, time-consuming and costly. Risks associated with market value assessments as well as other value assessments and changes to the accounting valuation methods in the case of incorrect estimates upon the purchase of property: In addition to the imponderables at the time of initial property valuation, assumptions associated with the valuation may subsequently turn out to be inappropriate and necessitate a re-valuation. HAMBORNER may base its decision to purchase properties on incomplete, incorrect or inappropriate information and estimates, valuation methods may subsequently turn out to be unsuitable and expert reports, financial information or assumptions made with respect to the properties may subsequently be found to be erroneous. Modified framework conditions or the occurrence of unexpected risks can make a revaluation of properties necessary and can result in unscheduled write-downs of assets. Risks owing to existing contamination and other risks relating to the building, soil or environment: Contaminated sites and other soil risks reduce the value of properties and may in individual cases result in them being impossible to let or sell. The remediation and disposal which HAMBORNER may be obliged to carry out frequently entail high expenditure or may even be impossible to perform. There may also be a risk that remediation is not carried out correctly, thereby necessitating subsequent measures or leading to consequential damage. Risks of HAMBORNER associated with the sale of real-estate property: The sale of property is more time-consuming than is the case with more liquid assets. Their sale requires experience of the local markets concerned and is associated with significant costs. Furthermore, the sale of properties is usually associated with the assumption of liability for the presence of certain characteristics. Gaps in insurance coverage: The insurance protection of HAMBORNER may be incomplete, so that as a result damage which has occurred cannot be fully compensated or cases of damage may occur which are not or not sufficiently covered by insurance. 15

22 Dependence on future financing: Borrowed capital may not be available to HAMBORNER to the required amount on economically acceptable conditions and the cost of financing may increase as a result of a rise in interest rates. Due to the financing structure of a REIT company, which is stipulated by REIT Act, further borrowing of capital is coupled to the Company having sufficient levels of equity capital. Risks from the financing of HAMBORNER: The loans required for financing the business activities might not be prolonged, or may only be prolonged on unfavourable conditions. If HAMBORNER is not in a position to retain sufficient liquidity reserves, for example in order to fulfil the REIT conditions, HAMBORNER might get into payment arrears with respect to its payment obligations and be exposed to claims for damages. Due to the restrained granting of loans as a consequence of the recent financial crisis, the banks financing the Company might in the future no longer be available as lenders to HAMBORNER. Risks of a change in general legal conditions and related to changes in tax law: Changes to legal framework conditions might result in increased expenditure for HAMBORNER or limit the ability to let or market the properties which it holds. Changes to the framework conditions under tax law may also have a significant negative effect on the economic success of the property investments of HAMBORNER. Risk from infringements of data protection regulations: Infringements of data protection regulations may lead to claims for damages and the loss of HAMBORNER s good reputation. Reliance on qualified personnel: The success of HAMBORNER to a large extent depends on the successful work of its Management Board, as well as its qualified executives and specialists. There is a risk that qualified executives and specialists cannot be employed in good time and in sufficient numbers by the Company, or that they may be subsequently entised away. Subsidence risks: As a former mining Company in the Ruhr area, HAMBORNER is subject to the compulsory payment of damages for subsidence. Furthermore, there is a subsidence risk for properties owned by HAMBORNER. Tax-related risks: Not yet conducted tax audits can result in back-dated tax liabilities for the Company. The Company may also be subject to payments for back-dated tax liabilities, tax penalties and similar payments if it does not comply with current requirements. Upon transition to its REIT status the Company had to draw up a closing balance sheet and publish its undisclosed reserves, which in particular resulted from the valuation of the property holdings of the Company. The assessment by the tax authorities when determining the taxable profit may be based on a different fair value to that determined by the Company, so that there could be tax burdens as a result of the publishing of further undisclosed reserves REIT-related Risks Restrictions on investment and business activities as a result of REIT Act: With respect to the acquisition of property, HAMBORNER is subject to restrictions resulting from REIT Act, so that in individual cases certain chances or opportunities presented by the property and financing markets can only be taken advantage of to a limited extent, if at all. 16

23 Risks from the non-fulfilment of certain legal requirements placed on a REIT company: In the case of non-fulfilment of the statutory requirements placed on a REIT company, HAMBORNER might lose the resulting tax privileges and again be subjected to the obligation to pay corporation and trade tax, as well as being liable for possible back-taxation. Risks of (penalty) payments in the case of non-compliance with the conditions of the regulations contained in REIT Act: If the REIT company does not fulfil the requirements contained in the REIT Act, it is possible that (penalty) payments may be imposed on the Company by the relevant tax authorities. Risk of a transfer obligation or liability for damages towards the Company: Insofar as a shareholder infringes its obligation to comply with the maximum participation level or minimum free float requirement specified by REIT Act, the shareholder is required to compensate the Company for all of the losses incurred as a result of the infringement. However, such damage claims might not be effective or enforceable. Risk of claims from the shareholders if the REIT status is lost: If the tax exemption status of the Company is terminated, shareholders holding less than 3% of the voting rights can, under certain conditions, demand that their shares be redeemed in return for a redemption fee. Furthermore, in this case, claims for damages could be asserted against the Company. Enforceability of REIT-specific provisions in the Articles of Association of the Company: As a result of the lack of experience with the implementation of the specifications of REIT Act in practice, it cannot be excluded that the provisions of the Articles of Incorporation of the Company are not sufficient to maintain its REIT status and/or their aim cannot be achieved. Risks of a lack of experience of the application of REIT Act by the relevant supervisory and tax authorities: HAMBORNER may be subject to additional costs and unforeseen requirements as a result of the lack of experience of the application of REIT Act, particularly by the relevant supervisory and tax authorities due to a lack of court or official decisions with respect to uncertain areas. Risks resulting from possible changes to REIT Act: The legal environment for REIT Companies might change as a consequence of growing practical experience and corresponding corrections to REIT Act, which might result in tax disadvantages in particular and would force the Company to adapt to the new legal situation. Risk of a dividend payment that is lower than that stipulated in REIT Act: Insofar as the dividend payout ratio of 90% of the net income for the year specified by REIT Act cannot be complied with over a period of three years due to insufficient retained earnings or a lack of liquidity, the Company can lose its REIT status or be subject to compulsory (penalty) payments Offer-related Risks Risks from possible fluctuations in the quoted market price for the shares of the Company: The quoted market price for the shares of the Company has been volatile in the past and may also fluctuate strongly again in the future without this necessarily being due to the business activities or the earnings prospects of HAMBORNER. 17

24 Possible acquisition of New Shares as part of the offer for a higher price than the market price and/or the quoted market price after completion of the offer: It cannot be ruled out that investors may acquire the New Shares of the Company through the Subscription Offer at a price that is higher than what they would have paid by acquiring the shares through the market. Risks from the sale of a considerable number of shares of the Company: Even if shareholders of the Company up to now have subjected themselves to a temporary ban on selling shares, it cannot be ruled out that possible future sales of shares in HAMBORNER will have an adverse effect on the quoted market price of the shares. Risk of dilution of the participation in the share capital of the Company by shareholders who are not participating or only participating in part in this offer: Insofar as shareholders do not take part in the offer or in part only, their interest of the share capital of the Company and the voting rights will be diluted. Risks from future capital measures: Future capital measures by the Company may dilute the interest of the existing shares in the share capital of the Company and correspondingly dilute the voting rights, if these capital measures are carried out without the granting of subscription rights or other buying options or if such rights are not exercised. Risks from termination of the Underwriting Agreement: If the Underwriting Agreement is ineffective, there is no Offering or the Offering terminates and the subscription rights expire or become worthless. Risks from falls in the quoted market price of the shares of the Company for the subscription rights: The value of the subscription rights depends on the quoted market price of the shares of the Company. If the quoted market price falls, in particular in the event of a drop below the Subscription Price, the subscription rights may become worthless. Risks associated with the trade in subscription rights: It is not certain that active trading in the subscription rights will develop and that sufficient liquidity will be available. Furthermore, the quoted market price of the subscription rights may also depend on the development of the quoted market price of the shares of the Company. 18

25 2. RISK FACTORS Prior to their investment decision, investors should carefully read the following risk factors alongwith the other information contained in this prospectus (the Prospectus ) and consider them when making their investment decision. The materialization of one or more of these risks can considerably impair the business activities of HAMBORNER REIT AG, Goethestraße 45, Duisburg ( HAMBORNER or the Company ), and have significant negative effects on the net assets, financial position and results of operations of the Company. The quoted market price of the shares of the Company may fall considerably due to the realization of any of these risks, and investors might lose some or even all of their invested capital. The risks described below are not the only risks to which the Company is exposed. Further risks and uncertainties of which the Company is not currently aware or risks which the Company considers insignificant might also impair the business operations of the Company and have considerable negative effects on the Company s business activities and its net assets, financial position and results of operations. The order in which the following risks are listed does not provide any indication of the probability of their occurrence or the extent or significance of the individual risk. The risks referred to may occur individually or cumulatively. 2.1 Market-related Risks Risks from the development of the general business and economic environment and the commercial property market In conjunction with its business activities the Company acquires, lets, administers and sells commercial properties. The success of the business activities of HAMBORNER is therefore dependent on the development of the market for commercial properties, which in turn is significantly influenced by general economic developments. This market, which in the recent past has in some cases been characterised by high vacancy rates and low transaction volumes with respect to the sale and acquisition of properties, is significantly affected by the general economic environment and the development in the value of properties in Germany. These developments depend on numerous interdependent factors and are therefore subject to fluctuations. The influencing factors include, for example, the availability and good credit rating of tenants and potential investors and their financial means, statutory, regulatory and tax framework conditions, the political environment, the investment activities of companies, general economic developments, interest levels for the financing of property acquisitions, the rate of inflation, the demographic development in Germany, the purchasing power of the population, changes to operating costs, special influences such as natural disasters and other acts of God, as well as the attractiveness of Germany as a location in comparison to other countries and markets. In particular, the demand for commercial properties in individual towns and cities or certain regions may fall due to specific developments and special circumstances in these towns and regions, or may develop differently. It cannot therefore be excluded that as a consequence of negative general economic conditions with, for example, stagnating and falling incomes and profits of potential tenants and purchasers of commercial properties, rising inflation rates, increasing interest levels or higher tax burdens or other effects, that the demand for commercial properties will fall among potential purchasers and tenants and that the purchase and rental prices will drop or that cost increases cannot be off-set by increases in rents. HAMBORNER has no influence on these continuously changing factors. Due to HAMBORNER s focus on commercial properties, there is also no diversification of the risks with other non-commercially used properties. HAMBORNER therefore has to continuously observe the above-mentioned factors, re-evaluate them and take corresponding entrepreneurial decisions. Negative general economic developments and a negative development of the market for commercial properties or a misjudgement with respect to market requirements on the part of HAMBORNER or wrong management decisions could have a significant negative effect on the business activities and therefore the net assets, financial position and results of operations of HAMBORNER. 19

26 2.1.2 Competitive Risks The real estate market, particularly in the field of commercial properties, is characterized by competition for property and solvent tenants and subject to continual fluctuations which are amongst other things influenced by the business cycles, demand preferences of tenants and purchasers, as well as the current situation at the location of the properties. As part of its business activities, HAMBORNER encounters both domestic and foreign competitors. The consequences of increased competition may be price increases with respect to the acquisition of properties or falling rent levels. Some of the current competitors, above all foreign competitors and property companies which are listed on the stock exchange, have a comparatively higher level of awareness, broader market access or considerably greater financial, technical and marketing-specific resources at their disposal. These competitors could increase their presence in the market and enforce a more aggressive pricing policy. A consequence of this may be a general rise in prices for the acquisition of properties, which would make it more difficult for HAMBORNER to achieve its economic goals. In such cases the competitor might be preferred to HAMBORNER as the purchaser of property assets. Furthermore, HAMBORNER is also in competition for tenants and investors. This could lead to decreasing rents and decreasing prices for portfolio properties which are designated to be sold. If HAMBORNER should lose out to its competitors in these fields, this could have a significant negative effect on the business activities and on the net assets, financial position and results of operations of HAMBORNER General Interest Risk HAMBORNER finances its business activities with debt and equity within the limits permitted by the German REIT Act. The interest rates for (property) loans are currently at a relatively low level in Germany. A rise in interest rates might make the financing of purchase prices for properties more expensive. A general rise in interest rates would increase the costs of new loans, thereby reducing profitability of the property portfolio if and to the extent to which such increases in costs cannot be passed on by increases in rents. This might have significant negative effects on the general business activities and the net assets, financial position and results of operations of HAMBORNER. The current and future commercial tenants and the potential purchasers of HAMBORNER s properties are refinancing themselves at least in part by loans. If the interest levels for loans increase in future, this would increase the financing costs of tenants and potential buyers of portfolio properties. This might have a negative effect on the willingness of potential purchasers to buy the properties and the ability of potential tenants to pay an appropriate rent. Furthermore, HAMBORNER will invest parts of its funds which are not invested in properties at least temporarily in interest bearing investments. A fall in the current interest rates would reduce the profits of the Company with respect to interest income. Some of HAMBORNER s existing financing is hedged by derivatives. A revaluation of these derivatives at the respective balance sheet dates could have negative or positive effects on the equity capital depending on the interest rate situation on the capital markets. This could lead to a shift of the debt to equity ratio and possibly to an impaired leverage ratio and equity coverage pursuant to Section 15 of the REIT Act ( REIT-equity-to-assets ratio ). Due to the requirements of REIT Act, a decline of the equity-to-assets ratio could force HAMBORNER to limit its investment activity or to stop investments altogether. A drop of the equity-to-assets ratio under the 45% limit required by REIT Act could entail (penalty) payments or even the loss of the REIT-status. A rise or fall of the market interest rates, through its effect on the discount and equity capital interest rates, affects the fair value valuation of the properties. Thus, a rising interest rate level generally implicates a reduction in valuation results. For this reason, the revaluation of the properties through associated unscheduled depreciations has an immediate influence on HAMBORNER s results of operations. The risks described above could each individually have a significant negative effect on the business activities and the net assets, financial position and results of operations of HAMBORNER. 20

27 2.2 Company-related Risks Dependence of the business activities of HAMBORNER on the acquisition and marketing of suitable commercial properties at reasonable prices The business model of HAMBORNER depends on the Company being able to acquire suitable commercial properties on a continuous basis in economically attractive regions for appropriate prices with solvent tenants, a good location quality and letting ratio, as well as sustainably, achievable high rent levels in the future. Whether such commercial properties can be acquired depends on many factors on which the Company can only have a limited amount of influence, if at all. These include, for example, the general economic conditions with corresponding impacts on the supply and demand situation with respect to new and existing commercial properties, the management costs associated with the properties, the creation of appropriate conditions under building and planning law for the rebuilding or modernization of corresponding commercial properties, as well as the development of the economic situation of the tenants. HAMBORNER finds itself in increasing competition with domestic and foreign investors. As a consequence of the intense competition for commercial buildings which from the point of view of HAMBORNER are suitable for investment, their prices might rise or the Company might not be selected as purchaser for the desired property. In addition to the possibility of acquiring a sufficient number of suitable properties, in the case of sales of portfolio property carried out to streamline the property portfolio HAMBORNER is also exposed to the uncertainty of whether sales can be carried out at the right time and at appropriate conditions. A successful sale depends on various factors, such as the demand for commercial properties, the competitive situation or influences under public law, for example the granting of the necessary building approvals. Risks associated with property sales may result in particular from a general or specific fall in prices, it not being possible to find purchasers for individual properties or misjudgements being made with respect to the usability and lettability of a specific property, as well as its quality and location, so that the property is therefore sold for less than its market value. There is also a risk that the purchase price expected by the Company cannot be achieved and even lies below the valuations stated on HAMBORNER s balance sheet. If it is not possible for HAMBORNER to acquire suitable commercial properties at reasonable prices or carry out planned sales of portfolio property on reasonable conditions in the future, this could have considerable negative effects on the net assets, financial position and results of operations of HAMBORNER Risk of negative developments of investments in property Even if HAMBORNER acquires suitable properties, it is possible that such acquisitions will not be successful. The assumptions made upon the property purchase may turn out to be partly or completely inappropriate, or unforeseen problems or unidentified risks associated with the purchased property may occur which might not have been contractually secured. One or more locations may not develop as expected, rental income might not be generated as expected, value increases might not be achieved as planned, profits from the on-selling might not be realized or the properties might not generate the expected profits. This might cause a considerable deterioration in the net assets, financial position and results of operations of HAMBORNER. 21

28 2.2.3 Letting and management risk The economic success of HAMBORNER s property investments depends significantly on corresponding income being generated from their letting. If tenants do not fulfil their rental obligations in part or in whole, for example in the case of insolvency, or in the case of a significant decline of the income or liquidity situation of the respective commercial tenants, this would result in losses with respect to rental income. This also applies to rent guarantees, if in case of claiming the guarantees, the guarantor is not or not fully meeting its payment obligations. Commercial properties are frequently tailor-made to meet the requirements of a specific tenant or a specific industry. This may result in HAMBORNER becoming dependent on individual tenants or industries. Negative developments in these fields may have a corresponding negative effect on the profit situation of HAMBORNER. The result may be that the subsequent letting of a specific property may not be possible, or only possible on unfavourable conditions, due to the restricted usability of the property. Any extension or change to the usability of the property would lead to costs which might significantly affect the net assets, financial position and results of operations of HAMBORNER. When existing rental contracts come to an end, HAMBORNER is exposed to the risk that its commercial properties cannot be immediately relet after the end of the rental contract and a successor tenant is not found for a prolonged period. Moreover, it cannot be ruled out that with follow-on rental contracts with existing or new tenants, lower rental income levels are achieved than in the past or that rent-free periods must be conceded. In extreme cases there may also be prolonged periods in which properties remain vacant. The income from letting also depends on the skills and success of contracted providers such as estate agents. The success of their attempts to let the properties is influenced in turn by the general developments on the property market. Lettability and the achievable rents depend on a number of factors which the Company is only partly able to influence, if at all; these factors include in particular: the relationship between supply and demand; development of the infrastructure and location conditions; energy efficiency of the properties (e.g. energy pass); (concealed) construction defects or building on third-party land; usability or restrictions on the usability of the commercial property; excessive wear and tear by the tenants, e.g. as a consequence of use by the tenants that is contrary to the provisions of the rental contract; damage to the property, for example as a result of fungal contamination; lack of maintenance; negative development of the economic situation of potential tenants; changes to market conditions or the tax, legal and/or political environment; withdrawal of the authorization for building materials used; discovery of the use of building materials which are cancer-causing or other building materials which are detrimental to health; altered requirements being placed on the layout of the property. 22

29 Furthermore, upon the letting of commercial properties, claims might be asserted against HAMBORNER due to defects in quality or title. This applies in particular to characteristics of the commercial properties for which an undertaking has been warranted and with respect to which a tenant asserts a claim against HAMBORNER. If it is not possible for HAMBORNER to let properties, or only let them on unfavourable conditions, or if it is not possible to generate any rental income, or if tenants assert warranty claims on the basis of rental contracts, or if properties remain vacant after rental contract expiration, this might have considerable negative effects on the revenues and therefore the net assets, financial position and results of operations of HAMBORNER Concentration and bulk risks As at August 31, 2010 HAMBORNER generated close to 51% of its rental income from the ten most important tenants measured according to the rental income generated by them. The most important tenant of HAMBORNER by far at the moment is the Kaufland Group, with which HAMBORNER generated around 18% of its net rental income as at August 31, 2010, as well as the EDEKA Group, with which HAMBORNER generated over 11% of its net rental income as at August 31, Consequently, there is a certain dependency of HAMBORNER on these tenants. If these most important tenants (in terms of rental income) vacate their premises, there is a risk that HAMBORNER might not, or might not be able to promptly compensate for the loss adequately. The rental contracts with the Kaufland Group, the EDEKA Group or other important tenants might be terminated prematurely and successor tenants might only be found on worse conditions, after a delay or not at all, or important tenants might get into payment difficulties, so that HAMBORNER might thereby experience considerable loss of rent. This could have significant negative effects on the general business activities and the net assets, financial position and results of operations of HAMBORNER. The rental income of HAMBORNER s property portfolio is currently concentrated to a level of approximately 46% in the state of North Rhine-Westphalia. Thus, the development in the value of the property portfolio depends considerably on the general local market situation as well as the economic and demographic development in this particular region. The economy and the population of this region might be affected by negative developments to a greater extent than other regions in Germany. Therefore, if the general economic situation and the situation of the population in this particular region worsens, this may increase the number of overdue accounts receivable and the arrears in the payment of rent by tenants, as well as the risk of not being able to find suitable tenants. Due to the concentration of the property portfolio on the state of North Rhine-Westphalia, an economic downturn in this region may impair the general business activities and the net assets, financial position and results of operations of the Company more than if such a concentration did not exist Risks from rent review clauses in rental contracts The rental contracts of HAMBORNER generally contain rent review clauses which couple the level of the rental payments to a reference index, usually the consumer price index for Germany. The rental claims are only adapted to the change in the index if agreed threshold values are exceeded or fallen short of, and then not always in full, not always immediately and sometimes not at all, with adjustment only being possible in some cases after the contract has run for several years with fixed rental payments. Due to this indexing, the development of the inflation rate, in particular, has an influence on the level of the achievable rental income of HAMBORNER. If the reference index falls and the rental payments are adjusted downwards, the corresponding rental income also falls accordingly. If the costs of management and maintenance of the properties rise faster than the rental income, or if the rental income falls due to a fall in the reference index, this would possibly have a considerable negative effect on the return on rents, the valuation of the properties and therefore on the net assets, financial position and results of operations of HAMBORNER. 23

30 2.2.6 Risks related to the maintenance and modernization of real-estate properties After the acquisition of properties, HAMBORNER is obliged to maintain its rental spaces in a condition that is in line with the provisions of the rental contract. For this reason, and also in order to prevent a drop in market value, HAMBORNER has to undertake maintenance measures. Additionally, regular extensions and adaptations to contemporary requirements (modernizations) are required, particularly in the case of retail properties, in order to improve the attractiveness and lettability of the properties. All of these measures may be extensive and therefore costly and time-consuming. Risks may also arise to the effect that maintenance or modernization work involves higher costs than planned or unforeseen additional expenses may occur which cannot be passed on to the tenants. Furthermore, corresponding measures may be delayed, e.g. during bad weather periods, or if the contractual partners commissioned with the work provide poor services or if unforeseen building defects occur. With respect to the modernization of properties it is possible that in the case of an adaptation to contemporary requirements a change of use or reallocation of the previous use may occur which is not approved by the building authorities and/or cannot be carried out due to objections from neighbours. This may result in higher costs or mean that necessary modernizations are not carried out, or extensions and modernizations may be discontinued after significant expenditure has already occurred. The resulting costs or additional costs and the reduction in rents and value of the property resulting from the inability to change its use might considerably affect the net assets, financial position and results of operations of HAMBORNER Risks associated with market value assessments as well as other value assessments and changes to the accounting valuation methods in the case of incorrect estimates upon the purchase of property HAMBORNER s business requires the valuation of land and property-related assets by both in-house and external experts. Relevant valuation data are primarily drawn up upon the acquisition of properties, the sale of properties and the compilation of financial statements. The valuation of land and property-related assets is largely based on national and regional economic conditions and on the subjective appreciation of how these conditions affect the valuation of property. As a matter of principle, valuations and the methodology on which they are based are associated with uncertainties. Furthermore, all property valuations are carried out on the basis of assumptions which may turn out to be inappropriate. In addition to the expected rental payment flows from a property, its condition and its location, many additional factors play a role in the valuation. The valuation of properties is therefore naturally subject to the particular individual features of each and every property. When acquiring a real-estate property, the valuation depends on a variety of factors that may also have subjective components. Hence, it cannot be ruled out that HAMBORNER may base its decision to purchase or sell a real-estate property on false or inaccurate information and assessments, valuation procedures in particular may subsequently prove to be inappropriate, and expert opinions, financial information and assumptions regarding the real estate to be purchased may later prove to be erroneous. Economic conditions are also subject to subsequent changes. Therefore, it cannot be ruled out that HAMBORNER may acquire assets for an excessive price or sell them for a price that is too low. Furthermore, value assessments may have to be amended in the Company s annual financial statements, if valuations subsequently prove to be inaccurate or a change of circumstances or assumptions underlying the valuation necessitate a revaluation. In the event of a negative development of the real estate market or the general economic situation there is a risk that depreciation, valuations of the properties have to be adjusted downwards due to a lower fair values of the properties. Moreover, the necessity of write-downs for impairments or the occurrence of unexpected risks may make it necessary to revalue properties. These revaluations can negatively affect the value of the property portfolio of HAMBORNER as shown in the financial statements and lead to negative impacts on the financial result. 24

31 All imponderables in the valuation and revaluation of properties may therefore have considerable detrimental effects on the general business operations and the net assets, financial position and results of operations of HAMBORNER. The actual market value of the property portfolio of HAMBORNER may fall in the future or change considerably, irrespective of whether it corresponds to the values shown in the market value report of Jones Lang LaSalle. The estimated value of the property portfolio of HAMBORNER can only be used as an indicator of the prices which HAMBORNER might achieve in the case of a sale on the free market, and cannot be drawn upon as the sole indicator for the possible quoted market price of HAMBORNER shares Risks owing to existing contamination and other risks relating to the building, soil or environment There is a risk of the presence of existing contamination, soil pollution or harmful substances on real estate HAMBORNER has acquired or sold. Existing contamination and other soil-related risks reduce real-estate values. They may make it impossible to let or sell the property. Removal is often very expensive or impossible. There is also a risk that removal work may not be carried out properly, making it necessary to carry out additional work or resulting in consequential damages. HAMBORNER might be obliged to remedy existing contamination or pollution of the soil or buildings, or might be held liable for damages by official authorities or private parties. At law, there are limits to the extent to which such liability can be excluded. Even if HAMBORNER is not itself primarily responsible for existing contamination or pollution of the soil or buildings, it might be difficult or impossible, legally and/or practically, to require the primarily responsible parties to remedy the damage or to take recourse against such parties. Previously unknown harmful substances in the soil or buildings, environmental risks and the non-fulfilment of requirements under construction or environmental law might result in additional unanticipated expenses for the Company. If such risks do indeed materialize, this could have a corresponding negative impact on the net assets, financial position and results of operations of HAMBORNER Risks of HAMBORNER associated with the sale of real-estate property HAMBORNER intends to utilize its options under REIT legislation when selling real-estate properties, and, accordingly, to sell properties to third parties that do not fit into the investment profile and whose location do not match the Company s strategy. In principle, properties as an investment form are less liquid in comparison to other assets such as securities. For this reason the sale of properties in which HAMBORNER has invested and will continue to invest is more time-consuming than is the case with more liquid assets. In addition to preparatory measures, the sale of property also requires experience of the local markets concerned and is associated with costs. When selling, HAMBORNER regularly assumes liability vis-à-vis buyers for the existence of certain characteristics, such as the amount of rental income at the time of sale or the size of lettable space, and may in some cases issue assurances and negative declarations, for example regarding existing contamination. If warranted characteristics are not present, or not as warranted, or if, despite declarations to the contrary, certain knowledge exists, HAMBORNER might be vulnerable to claims for damages by the buyers concerned. Difficulties with the sale of properties may impair the ability of HAMBORNER to streamline its portfolio or sell its portfolio in response to changes in the economy, property market or other conditions in part or in whole, on time and for satisfactory prices. Thus, and in addition to that related reserves or payments might have a considerable negative effect on the net assets, financial position and results of operations of HAMBORNER. 25

32 Gaps in insurance coverage HAMBORNER has taken out the customary insurance policies for the Company as well as for its real-estate portfolio, in particular building and fire insurance, insurance against damage by natural forces, liability insurance, insurance against damage arising as a result of terrorist attacks for properties with an insured amount of EUR 10 million or more and loss of rental income insurance in the case of damage to the let properties. Certain insurance policies, such as third party liability insurance, have liability exclusions and restrictions, so potential damage may not result in full compensation. Furthermore, certain risks (e.g. terrorist attacks, flood-water damage) may not be insurable, or only at a disproportionately high cost. If loss events occur that are not, or not adequately, covered by insurance, this might have considerable negative effects on the net assets, financial position and results of operations of HAMBORNER Dependence on future financing The Company has to finance its business activities with debt and equity capital in accordance with the provisions of REIT-Act. There is a risk that HAMBORNER will not always be able to secure the necessary amount of debt capital under economically acceptable conditions. In addition, there is the risk that a rise in the interest level will increase financing expenses. If HAMBORNER were unable to extend existing debts, refinancing or acquisition financing, or were unable to do so to the extent desired or except under economically unattractive conditions, or if loans were to be called due ahead of schedule, which might require the sale of real estate, this might have considerable negative effects on the business activities as well as the net assets, financial position and results of operation of HAMBORNER. Due to the financing structure of a REIT Company provided for in REIT-Act, securing additional debt is linked to the Company having sufficient equity capital. If the Company should not have the required amount of proprietary resources in the future, this might weaken or preclude the Company s financing and growth. This could have a considerable negative impacts on the business activities and the net assets, financial position and results of operations of HAMBORNER Risks from the financing of HAMBORNER In addition to its equity capital financing, HAMBORNER finances itself exclusively with loans. The borrowed funds are presently mortgage secured loans with terms of five or more years with fixed and variable interest rates in respect of which the interest risk is hedged by means of derivative financial instruments. With respect to existing third-party finance which becomes due for repayment, HAMBORNER is reliant on the prolongation or refinancing of these loans. Here there is a risk that the requisite loans are not granted, or only granted on unfavourable conditions. Furthermore, according to Section 15 of the REIT Act, the company is obliged to disclose a REIT equity capital ratio of at least 45% of the value of the immovable assets. Moreover, according to Section 12 of the REIT Act, at least 75% of the balance sheet amount has to be allocated to immovable assets. Accordingly, since acquiring REIT status the Company has been restricted in its capital borrowings, its ability to ameliorate results of operations by external funds (leverage) and in maintaining liquidity reserves. HAMBORNER has also been obliged, since acquiring REIT status to distribute at least 90% of its profit for the financial year determined in accordance with German commercial law principals to its shareholders no later than the end of the following financial year. If the liquidity is not sufficient or it is not possible to borrow third-party capital, or only borrow it on unacceptable conditions, the Company would be obliged to sell property at short notice for unattractive prices which might be below book values in order to maintain the necessary liquidity. 26

33 In order to comply with its payment obligations from current business operations, HAMBORNER therefore has to operate an adequate liquidity management system and maintain sufficient liquidity reserves. If this is not possible, or is only possible to an unsatisfactory extent, HAMBORNER might get into payment arrears and be exposed to claims for damages. As most of its loan agreements are long-term, HAMBORNER assumes that the banks financing the Company will continue to be available to HAMBORNER as lenders in the future. In spite of the in the view of the Company continuing healthy situation with respect to the property market in Germany, the global financial and economic crisis nevertheless has influence on the economic development in Germany. Renowned German financial institutions have experienced liquidity difficulties, and some are even in a crisis situation which threatens their existence. As observed by the Company, this has resulted in financial institutions becoming considerably more reticent in the granting of loans in spite of improving margins. Even if HAMBORNER has only been slightly affected by the recent financial and economic crisis, it can not be excluded in the medium and long term that all or some of these banks will pursue a restrictive credit policy with respect to HAMBORNER. All of the above might have significant negative impacts on the net assets, financial position and results of operations of HAMBORNER Risks of changes in general legal conditions and changes in tax law Insofar as the legal framework conditions are changed due to new laws or other regulations or their amendment, or as a result of changes to their legal application by public authorities or legal rulings, this could have considerable negative effects on the business activities of the Company. This concerns in particular changes to building, building planning and building code regulations, as well as laws relating to rents, properties and the environment. Changes to the legal framework conditions might result in increased expenditure for HAMBORNER or restrict the ability to let, use or liquidate the properties it holds. Thus, changes in tenancy law or the application of the law, for example concerning legal notice periods, could give rise to decreasing rental income, increasing costs or further limitations on the enforceability of rent increases. Furthermore, changes to framework conditions under fiscal law, e.g. loss of the tax privileges enjoyed by REIT corporations, might have considerable negative impacts on the economic success of HAMBORNER. Insofar as the Company does not succeed or does not succeed in due time in adapting its purchasing and sales policy, as well as its letting strategy to possible changes to statutory or fiscal law framework conditions, or if adaptation is not possible, this could have a considerable negative impact on the business activities and therefore the net assets, financial position and results of operations of HAMBORNER Risk from infringements of data protection regulations The use of data by HAMBORNER, particularly the data pertaining to tenants, is subject to the provisions of the German Federal Data Protection Act ( Bundesdatenschutzgesetz ) and similar regulations. If third parties acquired unauthorised access to the data processed by HAMBORNER or HAMBORNER itself infringed data protection regulations, this might result in claims for damages and be detrimental to the reputation of HAMBORNER. Both might have considerable negative effects on the net assets, financial position and results of operations of the company Reliance on qualified personnel The success of HAMBORNER depends to a large extent on the successful work of its Managing Board, as well as its qualified executives and specialists. With the increasing level of competition for executives and specialists in the property market, the risk is growing that qualified 27

34 executives and specialists can no longer be employed by the Company in sufficient numbers and in a timely manner, or that they may be enticed away once they have been recruited. Insofar as specialists or executives cannot be employed as quickly as necessary by HAMBORNER and in sufficient numbers, or if such specialists or executives, including the members of the Managing Board, should leave HAMBORNER and cannot be replaced promptly, this could have significant negative effects on the future development of the net assets, financial position and results of operations of HAMBORNER Subsidence risks HAMBORNER may not only be liable for the payment of damages with respect to subsidence due to its history of mining activities, but may also have its own claims against third parties as the owner of land and property in areas that are susceptible to subsidence. As a former mining company, HAMBORNER is liable for claims for damage for subsidence in those areas in the surroundings in which it or its legal predecessor carried out mining work, although this is restricted to the mines closed down before their incorporation into Ruhrkohle AG. This liability does not have any upper limit according to statutory regulations. On June 30, 2010 HAMBORNER has formed provisions to the amount of TEUR 1,414 for risks associated with liabilities to third parties for subsidence. However, the probability of claims for damages is difficult to predict and the exact amounts cannot be estimated on a reliable basis. Should HAMBORNER as a former mining company be subjected to claims for subsidence and these claims exceed the provisions that have been formed, this could have considerable detrimental effects on the general business activities and the net assets, financial position and results of operations of the Company. Currently the property portfolio of HAMBORNER contains 31 properties in North Rhine- Westphalia, some of which are in areas in which mining used to be carried out, or is still being carried out today. It cannot therefore be ruled out that there may be a risk of subsidence damages for the properties concerned and owned by HAMBORNER. This subsidence risk to properties of the Company, as well as any inadequate rectification of subsidence damage, could impair the Company s ability to sell, let or use the properties as security within the framework of third-party finance. Although the costs of subsidence damage, which in some cases are considerable, as well as any compensation for personal injury and material damage, have to be borne by the mining companies whose mining activities are responsible for the occurrence of the damage or injury the enforceability of such claims is uncertain. To the extent such claims cannot be realized, this could have significant negative effects on the business activities and the net assets, financial position and results of operations of the Company Tax-related risks The Company is subject to regular tax audits. The most recent tax audit of the Company covered up to and including fiscal year For the following years, in particular those during which the reorganization into a REIT Company took place, no tax audits have been carried out so far. It therefore cannot be ruled out that ongoing or future tax audits of the Company may lead to demands for back taxes, tax penalty payments and similar payments. There is a further risk of adjusted taxation and subsequent demands for back taxes due to differing application, interpretation and or valuations of the exit-tax. The Company has obtained a binding statement of a trade tax reduction (so-called extended reduction for real estate companies). The binding statement of the financial authorities sets out certain conditions and requirements. Thus, there is a risk that the Company does not fulfill or only partly fulfills these requirements and that back-dated demands for trade taxes are made in respect of the years 2007 to As a REIT Company, at the beginning of its tax exemption status, the Company had to draw up a closing balance sheet at the end of the fiscal year 2009 and disclose its undisclosed reserves. 28

35 Under certain conditions the taxation of these undisclosed reserves is only 50% (so called Exit Tax). However, the tax burden depends to a decisive degree on the valuation of the individual assets of the Company. In some cases there can be a considerable range when assessing existing real estate values. Accordingly, the financial authorities might apply a different fair value than the Company when determining taxable profit to those determined by the Company. The resulting additional tax payments may represent a considerable additional encumbrance on the Company even after transition to REIT status (e.g. in conjunction with Company audits), as a result of which the net assets, financial position and results of operations of the company could be considerably negatively affected. The Company has formed provisions for certain tax risks. These provisions are continuously reviewed and adjusted. It is, however, possible that the actual claim will be higher than the risk forecast by HAMBORNER and that the provisions will prove to be insufficient. The materialization of the aforementioned risks could have significant negative effects on the general business activities and the net assets, financial position and results of operations of HAMBORNER. 2.3 REIT-related Risks Restrictions on investment and business activities as a result of REIT Act With respect to the acquisition of properties, HAMBORNER is subject to restrictions from the German REIT Act. As a result, the investment object, investment volume and the business activities in particular are restricted or affected by the following regulations: exclusion of the acquisition of existing domestic rented residential property (completion before January 1, 2007); acquisition of shares in corporations dealing in property only under the condition that at least 90% of their total assets consist of investments in real-estate properties and the properties held are all located abroad where they could also be held by a REIT; restrictions on the formation of reserves; only low levels of liquidity formation due to the minimum distribution of 90% of the profit for the financial year determined in accordance with German commercial law principles and at least 75 % of assets have to be real-estate properties; limitation on secondary employment for third parties in sectors similar to property; limitations on property dealings; minimum equity of 45% of the value of the immovable assets. The minimum equity capital requirement of 45% of the immovable assets and the asset structure requirements of Section 12 of the REIT Act may make it impossible for interesting property purchase offers to be taken advantage of due to a lack of liquidity and the restriction on the borrowing of third-party capital. A further increase in equity capital by means of a capital increase against cash contribution based on a decision of the annual General Meeting or out of authorized capital requires a certain period, which may be too long for the prompt acceptance of favourable property offers, so that these may be completed by the competitors. Due to the restrictions imposed by the German REIT Act, it is possible that certain chances or opportunities that present themselves in the property and financing market cannot be taken advantage of, or can only be taken advantage of to an unsatisfactory extent. This and the possible restriction on 29

36 debt financing, as well as the further restrictions on investment and business activities imposed by the German REIT Act, may have considerable negative effects on the net assets, financial position and results of operations of the Company Risks from the non-fulfilment of certain legal requirements of the REIT-Act The fiscal status as a REIT company is tied to certain preconditions, in particular: authorization of the shares for trading on an organized market; only restricted trading with the immovable assets; adherence to a free-floating ratio of at least 15%; compliance with the maximum participation level of less than 10% of the shares or voting rights; minimum equity capital of 45% of the value of the immovable assets; share of the immovable assets of at least 75% of the assets of the Company; at least 75% of the gross earnings must stem from immovable assets; distribution of at least 90% of the net income for the year determined in accordance with German commercial law principles; restrictions on the business purpose according to the Articles of Association A REIT company (although not subsidiary companies) which fulfils the REIT conditions is exempted from corporation and trade tax. It can lose this tax exemption status retrospectively if it infringes the REIT conditions in a fiscal year with respect to listing on the stock exchange and property dealings. Furthermore, the REIT company can also lose this tax exemption status retrospectively if it infringes REIT conditions, such as its shareholder structure, minimum equity capital, dividend distribution ratio and the composition of its assets and income, on three consecutive balance sheet dates. In the case of non-compliance with the above requirements, the Company would again be liable for the payment of corporation and trade tax with certain back-dated taxation obligations. After the loss of tax exemption status, renewed exemption would not be possible for the following four years. The loss of tax exemption and REIT status would not only harm the reputation of the Company, but could also have significant detrimental effects on its net assets, financial position and results of operations Risks of (penalty) payments in the case of non-compliance with the conditions of the regulations contained in REIT Act If the REIT company does not fulfil the requirements laid down in the German REIT Act and the legal consequence of the loss of tax exemption status has not yet come into force, there is a possibility that (penalty) payments might be levied against the Company by the relevant taxation authorities. This is particularly the case if the share of the immovable assets in the total assets of the Company or the share of the gross earnings from properties falls short of the minimum ratio of 75%. The same also applies if the minimum dividend distribution rate of 90% of the net income for the year determined in accordance with German commercial law principles is not reached in a financial year. If the relevant taxation authorities impose corresponding (penalty) payments, this could have a considerable negative effect on the net assets, financial position and results of operations of the Company. 30

37 2.3.4 Risk of a transfer obligation or liability for damages towards the Company Non-binding convenience translation The German REIT Act stipulates in Section 11 (4) that no shareholder may directly hold 10% or more of the shares of the Company such that it has 10% or more of the voting rights in a REIT company ( maximum participation level ). The Articles of Association of the Company also contain a corresponding regulation in Article 6 (4). According to Section 11 (1) of the German REIT Act, at least 15% of the shares of the Company must be free-floating, i.e. held by shareholders whose participation in each case is equivalent to less than 3% of the voting rights ( minimum free float ). Article 6 (3) of the Articles of Association of the Company contains a corresponding stipulation. If during three consecutive fiscal years the regulations concerning the maximum participation level or the minimum free float are infringed, Section 18 (3) of the REIT Act stipulates that the tax exemption status of the REIT comes to an end upon the expiry of the third fiscal year. Due to this maximum participation level, which is difficult for the Company to monitor, and the minimum free float, Article 6 (3) and (5) of the Articles of Association of the Company stipulate that if the maximum participation level is exceeded or the minimum free float not reached, the respective shareholder shall be obliged to transfer enough shares before the end of the following December 31 so that its shareholding no longer results in the maximum participation level being exceeded or again qualifies as a free float. Upon the transfer of the shares the shareholder is obliged to ensure that as a result of the transfer the maximum participation level or the minimum free float is not infringed again. If the shareholder infringes these obligations, it shall compensate the Company for any loss or damage resulting from the infringement (Article 6 (7) of the Articles of Association of the Company). Therefore, in case of infringement there is a risk of damage claims vis-à-vis the Company for shareholders that might even exceed the value of their shareholding. However, the enforceability of HAMBORNER s claims against shareholders is not assured. If the shareholder does not comply with its obligations stipulated in the articles of association and the Company s claims are not enforceable, this could have considerable negative impacts on the net assets, financial position and results of operations of the Company Risk of claims from the shareholders if the REIT status is lost In Article 21 of its Articles of Association, HAMBORNER has provided that in the case of the termination of its tax exemption status due to a qualifying infringement of the free-float of shares of at least 15% and/or the maximum participation ratio of less than 10% during three consecutive fiscal years, all shareholders who have a claim to less than 3% of the voting rights may demand that their shares be cancelled in return for a cancellation fee. Furthermore, it is possible that further claims for damages could be asserted against the Company. Insofar as claims for the cancellation of shares or damages are asserted against the Company, this could have considerable negative effects on the net assets, financial position and results of operations of the Company Enforceability of REIT-specific provisions in the Articles of Association of the Company In its Articles of Association the Company has included a number of regulations which ensure that the specifications of the German REIT Act are complied with. Amongst other things, these refer to the minimum free float requirement of the German REIT Act, as well as the maximum participation level for individual shareholders, the non-allocation of shares held for the account of third parties, the obligation to transfer shares in cases where the maximum participation level of a shareholder is exceeded or the minimum free float is not reached and the obligation to compensate the Company for all losses or damages in connection with non-compliance with this stipulation, as well as the right of the shareholders who hold fewer than 3% of the voting rights of the Company to demand the cancellation of the shares in return for a cancellation fee in the case of the termination of the tax exemption status according to Section 18 (3) of the German REIT Act. As little experience in practice has so far been gained of the implementation of the stipulations of the German REIT Act under company law and its interpretation by public authorities and courts, it cannot be excluded that individual rules and procedures do not conform to stock corporation law or other legal regulations and 31

38 may therefore be invalid or unenforceable in part or in whole. Furthermore, it cannot be ruled out that as a result of these regulations or their application, the intended success, in particular the maintenance of the REIT status of the Company, cannot be achieved. This could result in significant disadvantages for the net assets, financial position and results of operations of the Company Risks of a lack of experience of the application of REIT Act by the relevant supervisory and tax authorities The REIT Act dated May 28, 2007 came into force on June 1, 2007 with retroactive effect as of January 1, For this reason there has so far been little practical experience of dealing with REIT companies which are listed on the stock exchange. There are therefore a number of open questions which relate in particular to the application and interpretation of the REIT Act by the relevant supervisory and tax authorities, especially concerning the asset and income requirements, the distribution of dividends to the investors and the loss of REIT status and tax exemption. No court or official decisions have been taken so far with respect to these areas of uncertainty. Therefore, it cannot be excluded that tax authorities and courts will have different opinions to the Company and its legal advisers or tax consultants on the application and interpretation of the REIT Act. The issuing of administrative guidelines is planned for the future, and court rulings can be issued which may result in a different assessment of these uncertain areas to those currently assumed by the Company. Different opinions concerning the application and interpretation of the REIT Act, as well as the issuing of administrative guidelines may force the Company to adopt certain measures and result in higher expenses for advisers and certified public accountants, which may have a considerable negative effect on the net assets, financial position and results of operations of the Company Risks resulting from possible changes to REIT Act Due to the low level of experience of the practical handling of the REIT Act, it will only be possible in the coming years to determine the consequences of the REIT Act which are not in line with the success of the property sector and the forecast tax revenues aimed for by the legislator. Therefore, it cannot be ruled out that law makers may make changes to the REIT Act as a consequence of practical experience, unintended negative developments or the non-achievement of the targets of the legislative procedure. Such changes might result in disadvantages of a tax nature in particular and force the Company to adapt to the new legal situation. This might be associated with expenses which might have a considerable negative effect on the net assets, financial position and results of operations of the Company Risk of a dividend payment that is lower than that stipulated in REIT Act After achieving REIT status, the Company is obliged to distribute 90% of its distributable profit for the financial year to its shareholders. According to the stipulations of the statutory regulations, particularly those of stock corporation law and commercial law, for the distribution of a dividend the Company requires an unappropriated surplus as well as sufficient liquidity. Therefore, the Company cannot guarantee that such a distributable unappropriated surplus will exist which will provide a distribution of 90% of the net income for the year. Furthermore, there may be other reasons why it is not in a position to comply with the legally stipulated minimum dividend payment. If the distribution ratio of 90% of the net income for the year cannot be complied with over a period of three years, the Company may also lose its REIT status. Even if the infringement occurs only once, it is possible that (penalty) payments may be imposed on the Company. This could have considerable negative effects on the net assets, financial position and results of operations of the Company. 32

39 2.4 Offer-related Risks Risks from possible fluctuations of the quoted market price for the shares of the Company As is the case with the securities markets in general, the quoted price of the Company s shares has been volatile in the past. The stock exchange prices of the shares may also fluctuate strongly and fall in the future. Such developments are determined by the relationship between supply and demand for the shares of the Company, as well as various other factors. These factors include (amongst others): development of the net assets, financial position and results of operations of the Company, deviation of the actual results from the expected results, changes to the profit forecasts, strategy and business prospects of the Company, as well as the assessment of the associated risks, changes to general economic conditions, changes to the shareholders, modification of the statutory framework conditions, changes to the Articles of Association of the Company, developments of the business and the stock market prices of the Company s competitors and the development of sectors which are of importance to the business of the Company, changes to the stock exchange prices in general, as well as the stock exchange environment and mood of the capital market, derivative transactions pertaining to shares of the Company, speculative investment decisions or forecasts of security analysts and investors. HAMBORNER does not have influence on these factors. The above factors may cause considerable volatility with respect to the stock exchange price of the shares of the Company without there necessarily being a reason for the volatility that is associated with the business activities or the income prospects of HAMBORNER. Furthermore, a significant increase in the share capital of the Company from the issue of new shares may result in considerable volatility of the stock exchange price of the Company s shares Possible acquisition of new shares as part of the offer for a higher price than the market price and/or the quoted market price after completion of the offer It cannot be excluded that within the framework of the subscription offer, investors may purchase the New Shares of the Company for a higher price than would be possible if they bought the shares via the market. It cannot be guaranteed that the subscription price for the new shares possibly plus the price for the subscription rights will correspond to the price for which the shares of the Company will be traded after completion of the offer on the stock exchange Risks from the sale of a considerable number of shares of the Company It cannot be predicted with certainty which effects future sales of shares by shareholders may have on the stock market prices of the Company s shares. If major shareholders sell shares of the Company to a significant extent, offer them for sale or market them or if the market expects such actions the stock exchange prices of the shares of the Company might fall. As a result of a fall in the stock exchange prices of the shares it is also possible that additional pressure to sell may result from liquidation of the shares which are held by shareholders who have financed their shares in part or in whole by third-party borrowing or who have concluded derivative transactions with respect to shares of the Company. The shareholders of HAMBORNER who have entered into an agreement with WestLB AG as Sole Lead Manager concerning the assignment and transfer, without cash consideration, of all their future subscription rights to the New Shares (the Assigning Shareholders ) have also entered into a lock-up agreement with the Underwriters resulting from the capital income with respect to all shares which they hold, directly or indirectly, in the Company (including any New Shares acquired by them in the context of the Pre-Placement, if applicable) starting with the date of this Assignment Agreement for the period of 12 months from the delivery of the New Shares subscribed in the Subscription Offer. Lock-up agreements are merely contractual obligations between the parties concerned. Third parties cannot claim any rights from these agreements. As far as such agreements can be breached by the 33

40 obligor or as far as these agreements can be amended or repealed, shareholders have no legal claims against the contracting parties. It cannot therefore be ruled out that a sale of the shares of the Company might occur before the expiry of the time limit agreed in the relevant lock-up agreement. It cannot be ruled out that Assigning Shareholders will sell large numbers of shares after expiry of the lock-up agreement. This especially concerns the HSH Real Estate AG and its affiliated shareholders of the company, who to the knowledge of the Company plan to reduce their equity interest in HAMBORNER in the medium term Risk of dilution of the participation in the share capital of the Company by shareholders who are not participating or only participating in part in this offer After the completion of the capital increase, the ratio of the previous shares in the increased share capital of the Company falls to 66.74%. The share in the share capital is also reduced by the same ratio for those shareholders who do not exercise their subscription rights. If the subscription rights are only exercised in part, the level of dilution is correspondingly smaller. Subscription Rights can only be exercised during the subscription period. Subscription Rights which are not exercised during the subscription period will expire and become worthless. As far as they are not automatically sold by custodial banks in accordance with the custodial conditions the shareholder will not receive any compensation from the liquidation of the subscription rights Risks from future capital measures In order to cover its capital requirements, the Company could in the future issue shares and/or convertible bonds. As a result the stock exchange price of the shares in the Company might fall. The future issue of shares or the exercising of conversion privileges or option rights with respect to the Company s shares, granted by means of bonds to be issued in the future might also dilute the ratio of the previous shares in the share capital of the Company and voting rights if the issue is carried out without the granting subscription rights or other rights granting the subscription, or if such rights are not exercised Risks from termination of Underwriting Agreement The New Shares are being acquired by the Underwriters with the obligation that they offer these prior to the commencement of the Subscription Offer in a Pre-Placement to investors for purchase and then to the shareholders of the Company for subscription. The underwriting is taking place on the basis of an Underwriting Agreement the obligation of which is dependent, among other things, on conditions precedent and which, under certain circumstances, may be terminated up to the point of delivery of the New Shares subscribed in the Subscription Offer or acquired in the Pre-Placement respectively, in particular through withdrawal. If the Underwriting Agreement becomes ineffective or is terminated before implementation of the capital increase, no Offering exists and subscription rights will expire or become worthless. In this case, investors who have acquired Subscription Rights in the secondary market will suffer a corresponding loss as transactions in subscription rights cannot be unwound when the Offering is terminated. If the Underwriting Agreement becomes ineffective or is terminated after implementation of the capital increase, New Shares will be delivered to shareholders who have exercised their subscription rights. Remaining New Shares will be sold at the discretion of the Company. For these shareholders and investors there is a risk of acquiring the New Shares for a price higher than this would be possible when buying shares on the market. This applies in particular in case the termination of the Underwriting Agreement causes a drop of the quoted market price below the Subscription Price. 34

41 2.4.7 Risks from falls in the quoted market price of the shares of the Company for the subscription rights The value of the subscription rights also depends on the stock market price of the shares in the Company. If the stock market price of the shares falls, the value of the subscription rights also falls. In the case of a major fall in the stock market price, particularly to below the subscription price, the subscription rights may become worthless Risks associated with the trade in subscription rights The Company intends to allow the subscription rights to be traded in the period from the beginning of the subscription period to the third stock market trading day before the end of the subscription period (inclusive in each case) on the regulated market of the Frankfurt stock exchange. It is not intended to submit an application for the trading of the subscription rights on another stock exchanges. It is not certain whether active trading in subscription rights will develop on the Frankfurt stock exchange or whether enough liquidity will be available. The stock exchange price of the subscription rights depends amongst other things on the development of the stock exchange price of the shares in the Company, but may also be subject to considerably higher price fluctuations. 35

42 3. GENERAL INFORMATION 3.1 Responsibility for the contents of the Prospectus Non-binding convenience translation HAMBORNER REIT AG, Goethestraße 45, Duisburg, Germany ( HAMBORNER or the Company ) and WestLB AG, Herzogstraße 15, Dusseldorf as Sole Lead Manager (the Sole Lead Manager ) as well as Joh. Berenberg, Gossler & Co KG, Neuer Jungfernstieg 20, Hamburg and Kempen & Co N.V., Beethovenstraat 300, 1077 WZ Amsterdam, Netherlands (together the Co-Lead Managers and together with the Sole Lead Manager the Underwriters ) hereby assume responsibility for the content of this Prospectus in accordance with section 5 (4) of the Wertpapierprospektgesetz (WpPG German Securities Prospectus Act) and declare that to their knowledge the information contained in this Prospectus is correct and that no material information has been omitted, and, having taken due care that such is the case, the information contained in the Prospectus is, to their knowledge, correct and no facts have been omitted, the omission of which could affect the statements made in this Prospectus. Notwithstanding section 16 of the WpPG, neither the Company nor the Underwriters are under any obligation by law to update the Prospectus. 3.2 Subject matter of the Prospectus The subject matter of this Prospectus for the purpose of a public offering and for the purpose of admission to trading to the regulated market of the stock exchange in Frankfurt am Main with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) as well as admission to the regulated markets of the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart are up to 11,350,000 new no-par value shares without nominal value (the New Shares ), each conveying a notional interest of EUR 1.00 in the share capital and with full entitlement to dividends as of January 1, 2010 pursuant to the capital increase resolved by the Board of Managers and the Supervisory Board on September 23, 2010 to be made against cash contributions from authorized capital together with subscription rights. The New Shares are subject to German law. 3.3 Forward-looking statements This Prospectus contains certain forward-looking statements. Forward-looking statements are statements that do not refer to historical facts and events. Any statement containing the words shall, may, will, could, expects, predicts, assumes, supposes, estimates, believes, plans, intends, is of the opinion, to the knowledge of, according to estimates or similar phrases indicate such forward-looking statements. This applies, in particular, to statements in this Prospectus regarding the future financial returns, plans and expectations related to the business and management of the Company, growth and profitability as well as economic and regulatory framework conditions and other factors affecting the Company. Forward-looking statements are based on current estimates and assumptions made by the Company to the best of its knowledge. The occurrence or non-occurrence of an uncertain event could cause the actual results of the Company, including HAMBORNER s net assets, financial position and results of operations, to differ materially from, or fail to meet expectations expressed or implied in the results assumed or described by such forward-looking statements. HAMBORNER s business is subject to a number of risks and uncertainties that could also cause a forward-looking statement, estimate or prediction to become inaccurate. Therefore, investors are strongly advised to read the sections 1. Summary of the Prospectus, 2. Risk Factors, 10. Management s Discussion and Analysis of Financial Condition and Results of Operations, 12. Description of the Business Activities of HAMBORNER and 22. Recent Developments and Outlook, which include a more detailed description of factors that have an impact on HAMBORNER s business development and on the markets in which HAMBORNER operates. 36

43 In light of these risks, uncertainties and assumptions, it is possible that the future events mentioned in this Prospectus may not occur. Moreover, the forward-looking estimates and forecasts derived from third-party studies reproduced in this Prospectus (see also section 3.7 Sources of market and industrial data, further information in the Prospectus provided by third parties and numerical data ) may prove to be inaccurate. Accordingly, neither the Company, its Board of Management nor the Underwriters can assume responsibility for the future accuracy of the opinions expressed in this Prospectus or as to the actual occurrence of any predicted developments. In addition, it is emphasized that neither the Company nor the Underwriters assume any obligation beyond the legal requirements to update any such forward-looking statements or to adjust them to future events or developments. 3.4 Availability of the Prospectus This Prospectus will be published on the website of the Company at Furthermore, the Prospectus is expected to be available free of charge as of September 23, 2010 during regular business hours from the Company and the Underwriters. 3.5 Inspection of documents For the duration of the validity of this Prospectus, copies of the following documents may be inspected during regular business hours at the offices of HAMBORNER REIT AG, Goethestraße 45, Duisburg, Germany: The Articles of Association of the Company The interim financial statements (IFRS) of HAMBORNER REIT AG as of June 30, 2010, which have been subjected to an review in accordance with section 37w of the WpHG The audited separate financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2009 The audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2008 The audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2007 The audited annual financial statements (HGB) of HAMBORNER REIT AG as of December 31, 2009 Market Value Report by Jones Lang LaSalle GmbH on the valuation of the market value of the HAMBORNER real estate portfolio as at August 31, 2010 Future annual reports and interim reports of the Company will be publicly available on the website of the Company ( and on the website of the electronic Company register ( as well as at the Company and the paying agent referred to in this Prospectus (see section 16.6 Notifications and paying agent ). 3.6 Presentation of currency and financial information The Company s interim financial statements for the six months period ended on June 30, 2010, the individual financial statements for the financial year ended on December 31, 2009 as well as the consolidated financial statements of the Company for the financial years ended December 31, 2008 and December 31, 2007 were prepared by the Company in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS ). In addition, the annual financial 37

44 statements of the Company for the financial year ended on December 31, 2009 were prepared in accordance with German generally accepted accounting principles and German principles of proper accounting. Unless stated otherwise the financial data for the first half of 2010 and 2009 contained in this Prospectus is based on an IFRS interim financial statement of HAMBORNER REIT AG for the six month period ended on June 30, 2010 which was subjected to a review in accordance with section 37w WpHG, and the financial data for financial years 2009 and 2008 contained in this Prospectus, unless stated otherwise, is based on the audited IFRS individual financial statements of HAMBORNER REIT AG for the financial year ended on December 31, Furthermore, the financial data for the financial year 2007 contained in this Prospectus, unless stated otherwise, is based on the audited IFRS consolidated financial statements of HAMBORNER REIT AG for the financial year ended on December 31, The financial data from the IFRS consolidated financial statements for the financial year ended on December 31, 2007 have been rounded up to the decimal place using standard business rounding principles. Any financial data referred to as unaudited in this Prospectus has not been audited or reviewed within the meaning of item 20.6 of Annex I of the European Commission Regulation (EC) No 809/2004. The amounts in this Prospectus in euro, EUR or refer to the legal currency of the Federal Republic of Germany as of January 1, Sources of market data and industry information, additional information provided by third parties and numerical data This Prospectus contains and refers to publicly available numerical data, market data, analyst reports and other publicly available information (partially subject to a fee) as well as estimates of the Company which, in turn, are also usually based on publicly available market data or on numerical data from publicly available sources. When drafting this Prospectus, the following sources were used in particular: BNP PARIBAS Real Estate, Investment Market Report Germany 2010 BNP PARIBAS Real Estate, Office Market Germany 2010 DIP The Alliance of Property Competence, Markt & Fakten, Entwicklungen und Trends am Immobilienmarkt, 2010 DIP The Alliance of Property Competence, Markt und Fakten, Entwicklungen und Trends am Immobilienmarkt, Halbjahresbericht 2009, Der Markt für Büroflächen Bilanz Hahn Gruppe, Retail Real Estate Report Germany, 4. Ausgabe 2009/2010 Hauptverband des Deutschen Einzelhandels ( HDE ), Statement beim Deutschen Handelskongress 2009 The Company believes that its estimates, which are not based on publicly available sources, have been prepared with reasonable care and reflect the underlying information in a non-biased way. The information contained in this Prospectus obtained from publicly available sources or otherwise adopted from third parties has been accurately reproduced indicating its source. As far as the Company is aware and is able to ascertain from publicly available sources or from information communicated by a third party, no facts have been omitted which would render the information reproduced in this Prospectus inaccurate or misleading. This data has been taken from publications of the respective company and its source is indicated. However, investors should consider that market studies are often based on information and assumptions that may not be exact or appropriate and are, by nature, forward-looking and speculative. Moreover, publicly available sources often contain divergent information. 38

45 Information published by third parties has not been verified by the Company. Therefore, the Company cannot assume any responsibility for the accuracy of such data or estimates. Individual figures and financial and market data (including percentages) stated in this Prospectus have been rounded using standard business rounding principles. The totals or interim totals contained in tables may possibly differ from the non-rounded figures contained elsewhere in this Prospectus due to this rounding. Furthermore, figures that have been rounded may not add up to the interim totals or totals contained in tables or stated elsewhere in this Prospectus. A glossary of technical terms and abbreviations used can be found at the end of this Prospectus. 3.8 Information on the shares of the Company The following table contains the closing prices (XETRA) of the no-par value shares of the Company as of June 30, 2010, December 31, 2009, 2008 and 2007 respectively as well as the maximum and minimum stock market price during these periods. First half of 2010 (unaudited) 2009 (unaudited) 2008 (unaudited) (unaudited) Quoted market price (XETRA-closing price) 1 Highest share price Lowest share price Annual-/Periodic closing price Source: Equity Story AG ² Adjusted to the on August 2, 2007 increased share capital of EUR 22,770,000.00, divided into 22,770, no-par value shares without par-value each with a notional interest of EUR 1.00 (see also section 17.2 Development of Share Capital ). On August 31, 2010, the closing price (XETRA) of the Company s no-par value shares on the Frankfurt Stock Exchange was EUR Important notice regarding the market-value expert opinion On September 1, 2010 Jones Lang LaSalle GmbH, Wilhelm-Leuschner-Straße 78 in Frankfurt am Main ( JLL ) prepared a market value expert opinion of HAMBORNER s property portfolio as of August 31, This was at the request of the Company and due to prospectus requirements. The market value expert opinion has been reproduced on pages M-1 ff of this prospectus with JLL s authorization. August 31, 2010 is the reporting date for all market value appraisals that are included in this market value expert opinion. In HAMBORNER s opinion there have been no material changes to the statements contained in this market value expert opinion since the reporting date. The information/data/particulars contained in the market value expert opinion have been reproduced in this prospectus correctly, and no facts were concealed which would which would render the information reproduced inaccurate or misleading. JLL is not a company that is regulated by a supervisory authority. However, it employs publicly appointed and sworn-in experts. 39

46 4.1 Subject matter of the Offering 4. THE OFFERING The Offering relates to up to 11,350,000 new no-par value bearer shares without nominal value of the Company, each with a notional interest of EUR 1.00 in the share capital and carrying full dividend rights from January 1, 2010 (the New Shares ). The New Shares will be issued from the capital increase against cash contribution out of authorized capital with subscription rights for shareholders in accordance with Article 3 (5) and (6) of the Company s Articles of Association and entered into the commercial register of the Local Court of Duisburg (the Commercial Register ) on July 29, The renewal of the authorization was resolved by the Company s general meeting on June 9, 2009 and was entered into the Commercial Register on September 20, In accordance with Article 3 (5) of HAMBORNER s Articles of Association, the Board of Management of HAMBORNER is authorized to increase the share capital at any time prior to June 4, 2013, with the approval of the Supervisory Board, through the issuance of new bearer shares against cash contribution by up to a nominal amount of EUR 2,270, (Authorized Capital I). The authorization can be utilized in several tranches. Moreover, in accordance with Article 3 (6) of the Articles of Association, the Board of Management is authorized to increase the share capital at any time prior to June 4, 2013, with the approval of the Supervisory Board, through the issuance of new no-par value bearer shares against contribution in cash or in kind on one or more occasions by up to a total of EUR 9,080, (Authorized Capital II). The Board of Management is authorized, with the consent of the Supervisory Board, to exclude shareholders statutory subscription rights in the cases described in Article 3 (6) a) c) of the Articles of Association. The Board of Management decides, with the consent of the Supervisory Board, on the further details of the rights attaching to the shares and the conditions applicable to the issuance of the shares. The Board of Management of the Company resolved on September 23, 2010, utilizing this authorization, with the approval on the same day of the Supervisory Board, to increase the share capital of the Company from authorized capital by up to EUR 11,350, by issuing up to 11,350,000 new no-par value shares against cash contribution (the Utilization Resolution ). Furthermore, the Board of Management of the Company will determine by way of resolution the exact number of New Shares to be issued, the Offer Price (as defined below), the Subscription Ratio and the Subscription Price (as defined below) for the New Shares; such resolution is expected to be adopted on October 7, 2010, with the approval of the Supervisory Board of the Company on the same day (the Determination Resolution ). The implementation of the capital increase is expected to be registered in the commercial register on October 11, After registration of the capital increase in the Commercial Register, the share capital of the Company will be increased by the amount determined in the Determination Resolution. If the Determination Resolution provided for the issuance of 11,350,000 New Shares and accordingly a capital increase of EUR 11,350,000.00, the share capital of the Company registered with the Commercial Register upon registration of the implementation of the capital increase would amount to EUR 34,120, The New Shares will be offered by way of a public offering in Germany and in advance through a Pre-placement (as defined below) Subscription Offer A syndicate of banks led by WestLB AG (the Sole Lead Manager ) and Joh. Berenberg, Gossler & Co. KG and Kempen & Co N.V. (collectively the Co-Lead Managers and together with the Sole Lead Manager the Underwriters ) have agreed on the basis of an underwriting agreement (the Underwriting Agreement ), which was entered into on September 23, 2010 between the Company and the Underwriters, to underwrite the New Shares and to offer them to the shareholders by 40

47 way of indirect subscription rights during the Subscription Period, in accordance with the Subscription Ratio and at the Subscription Price per New Share (the Subscription Offer ). The Underwriters will subscribe for the New Shares. The Subscription Price as well as the amount of the capital increase (number of New Shares) will be determined by the Determination Resolution, based on the results of the bookbuilding procedure for the Pre-placement (as defined below). The Subscription Price will correspond to the Offer Price (as defined below). The subscription period is expected to run from and including October 12, 2010 to and including October 25, Pre-placement The Underwriters also agreed, on the basis of the Underwriting Agreement, to offer, prior to the commencement of the Subscription Offer, the New Shares for purchase in a private placement exclusively to institutional investors in Germany and in other countries (other than in the United States of America in accordance with Regulation S of the U.S. Securities Act dated 1933 as amended from time to time (the U.S. Securities Act )) or to other investors on the basis of another exemption from prospectus requirements according to section 3(2) of the German Securities Prospectus Act (the Preplacement ). The Pre-placement will take the form of a bookbuilding procedure. The offer period for the Pre-placement is expected to run from October 4, 2010 to October 7, 2010 (2.00 p.m. CET). The offer price per share (the Offer Price ) for the Pre-placement as well as the amount of the capital increase (number of New Shares) will be determined based on the outcome of the bookbuilding procedure for the Pre-placement. The maximum Offer Price will amount to EUR The shareholders of HAMBORNER HSH Real Estate AG and its subsidiaries HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH, HSH RE 6. Beteiligungs GmbH and HSH RE 7. Beteiligungs GmbH (jointly referred to as the Assigning Shareholders ) currently hold 12,003,164 no-par value shares of the Company and have subject to a gratuitous waiver (as set out below) entered into an agreement (the Assignment Agreement ) with the Sole Lead Manager concerning the assignment and transfer, without consideration, of all their future subscription rights to the New Shares (the Assigned Subscription Rights ). The Assigning Shareholders have undertaken to waive in advance, upon request of the Company and the Sole Lead Manager, as many of their subscription rights as are required in order to ensure an even Subscription Ratio. The number of Assigned Subscription Rights is reduced to the extent to which the Assigning Shareholders have waived their subscription rights. The assignment of the Assigned Subscription Rights is, amongst others, subject to the condition precedent that the implementation of the capital increase is registered with the Commercial Register and that the Subscription Price corresponds to the Offer Price. The Sole Lead Manager shall neither exercise nor dispose of Assigned Subscription Rights assigned to him. It is pointed out to investors who wish to purchase New Shares under the Pre-placement that the purchase of New Shares under the Pre-placement is, partially, subject to the right to rescind, and to this extent, such purchase is also partially subject to a deferred settlement. The portion of New Shares allotted under the Pre-placement subject to the right to rescind (the Claw-Back Shares ) of the total number of New Shares allotted to investors is determined by the claw-back ratio. The claw-back ratio corresponds to the ratio of New Shares, which cannot be attributed to Assigned Subscription Rights, to the total number of New Shares which are allotted to investors under the Pre-Placement. To each of these investors, the same claw-back ratio will apply. If and to the extent to which the shareholders of the Company exercise their subscription rights during the subscription period, the right to rescind will be exercised vis-à-vis the investors who have 41

48 been allotted Claw-Back Shares under the Pre-Placement, pro rata corresponding to the ratio of the total number of New Shares subscribed in the course of the Subscription Offer to the total number of Claw-Back Shares Delivery of New Shares The New Shares allotted in the Pre-placement which are not subject to the right to rescind are expected to be delivered on October 13, The Claw-Back Shares are, provided that the subscription period is not extended, expected to be delivered on October 28, 2010, if and to the extent to which the right to rescind is not exercised. The New Shares subscribed in the course of the Subscription Offer, are, provided that the subscription period is not extended, also expected to be delivered on October 28, Conditions The Subscription Offer and the Pre-placement are, among other things, subject to the condition that the Determination Resolution is adopted (presumably on October 7, 2010) and that the implementation of the capital increase is registered with the Commercial Register (presumably on October 11, 2010). Moreover, the Subscription Offer and the Pre-placement may be terminated, under certain additional circumstances, until delivery of the respective New Shares (see also section 4.3 Subscription Offer Important notices and section 4.7 Underwriters, Underwriting Agreement ). 4.2 Timetable for the Offering The Offering is based on the following prospective timetable: September 23, September 23, September 30, October 4, October 7, October 7, Resolution of the Board of Management that the share capital of the Company is to be increased, subject to the adoption of a further Determination Resolution, and that the New Shares are to be offered by way of the Subscription Offer and the Pre-placement; approving resolution of the Supervisory Board; announcement of the decisions Approval of the Prospectus by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin ); publication of the Prospectus on the Internet page of the Company ( Application for admission of the New Shares to the trading on the regulated market of the Frankfurt Stock Exchange and simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) as well as admission to the regulated markets of the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart. Start of the Pre-placement End of the Pre-placement (2.00 p.m. CET); end of bookbuilding; determination of the Subscription Price and Offer Price Determination Resolution of the Board of Management and approval of the Supervisory Board; publication of the resolutions; allocation under the Pre-placement; announcement of the results of the Pre-placement and of the Subscription and Offer Price 42

49 October 11, October 11, October 12, October 12, October 13, October 13, October 21, October 25, October 26, October 28, Registration of the implementation of the capital increase with the Commercial Register Publication of the Subscription Offer in the electronic version of the Bundesanzeiger (German Federal Gazette) and in the Börsen- Zeitung Decision of the Frankfurt Stock Exchange concerning the admission of the New Shares Commencement of Subscription Period and of the subscription rights trading Inclusion of the New Shares in the existing listing of shares of the Company on the Frankfurt Stock Exchange and on the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart Delivery of the New Shares allotted in the Pre-placement which are attributable to the Assigned Subscription Rights in the collective safe custody system Endofsubscription rights trading EndofSubscription Period Announcement of the results of the Subscription Offer Delivery of the New Shares subscribed in the Subscription Offer and the Claw-Back Shares allotted in the Pre-placement, with respect to which the right to rescind has not been exercised, in the collective safe custody system 4.3 Subscription Offer The Subscription Offer is described below on the assumption that it will be carried out in accordance with the prospective dates and periods set out in the timetable above. Dates which are in the future at the date of this Prospectus, but which will have passed by the time the Subscription Offer is published in the electronic version of the Bundesanzeiger (German Federal Gazette), are therefore described in the past tense. The Subscription Offer, which is expected to be published on October 11, 2010 in the electronic version of the Bundesanzeiger (German Federal Gazette) and on October 11, 2010 in the Börsen-Zeitung, will contain the final capital increase amount, the final issue volume, the Subscription Ratio and the Subscription Price. The relevant sections of text are indicated in the Subscription Offer set out below. It is expected that the information set out below will also be published on October 7, 2010 as an ad hoc announcement over an electronic information system as well as on the website of the Company ( To the extent that there are deviations from the dates set out in the timetable, these will be contained in the Subscription Offer which is expected to be published on October 11, HAMBORNER REIT AG Duisburg, Germany (ISIN DE /WKN ) Subscription Offer By resolution of the General Meeting of HAMBORNER REIT AG (the Company ) of June 5, 2008, amending the Articles of Association and registered in the commercial register of the 43

50 Local Court of Duisburg on July 29, 2008, identically renewed by resolution of the General Meeting of the Company on June 9, 2009 and registered with the commerical register of the Local Court of Duisburg on September 20, 2010, the Board of Management of the Company is authorized, with the approval of the Supervisory Board, to increase the share capital of the Company until June 4, 2013 by issuing new bearer shares against cash contribution, by up to a total of EUR 2,270, (Authorized Capital I). The shareholders are to be granted subscription rights in such issuance (Article 3 (5) of the Articles of Association of the Company). By resolution of the General Meeting of the Company of June 5, 2008 amending the Articles of Association, as entered in the commercial register of the Local Court of Duisburg on July 29, 2008, identically renewed by resolution of the General Meeting of the Company on June 9, 2009, registered with the commercial register of the Local Court of Duisburg on September 20, 2010, the Board of Management is authorized to increase the share capital of the Company until June 4, 2013, with the approval of the Supervisory Board, by issuing new no-par value bearer shares against contributions in cash or in kind on one or more occasions by up to a total of EUR 9,080, (Authorized Capital II). The Board of Management is authorized, with the consent of the Supervisory Board, to exclude shareholders statutory subscription rights in the cases described in Article 3 paragraph 6a) c) of the Articles of Association. The Board of Management, with the consent of the Supervisory Board, is authorized to determine any further rights attached to the shares and the terms and conditions of the share issuance. The Board of Management of the Company resolved on September 23, 2010, when utilizing this authorization, with the approval on the same day of the Supervisory Board, to increase the share capital of the Company from authorized capital by up to EUR 11,350, by issuing up to 11,350,000 new no-par value bearer shares without nominal value, each with a notional interest of EUR 1.00 in the share capital (the New Shares ), thereby granting subscription rights against cash contribution. The New Shares carry full dividend rights from January 1, Furthermore, the Board of Management of the Company determined on October 7, 2010, with the approval of the Supervisory Board on the same day, the number of shares to be issued, the Subscription Price and the Subscription Ratio (these details will be specified in the final Subscription Offer which is expected to be published on October 11, 2010 ). The implementation of the capital increase was registered with the commercial register of the Local Court of Duisburg (Amtsgericht Duisburg) on October 11, A syndicate of several syndicate banks (the Underwriters ) led by WestLB AG ( Sole Lead Manager ) agreed in an underwriting agreement dated September 23, 2010 (the Underwriting Agreement ), subject to certain conditions, including but not limited to the conditions mentioned below under the section Important notices, to underwrite the New Shares and to offer them to the shareholders of the Company for subscription. The New Shares will be offered to the shareholders at the Subscription ratio (the Subscription Ratio will be contained in the Subscription Offer which is expected to be published on October 11, 2010) (the Subscription Ratio ) at the subscription price (the Subscription Price will be contained in the Subscription Offer which is expected to be published on October 11, 2010) (the Subscription Price ). The shareholders of HAMBORNER HSH Real Estate AG and its subsidiaries HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH, HSH RE 6. Beteiligungs GmbH and HSH RE 7. Beteiligungs GmbH (collectively the Assigning Shareholders ) have assigned excluding those Subscription Rights which they have gratuitously waived in order to ensure an even Subscription Ratio any and all subscription rights for New Shares attributable to the shares they hold in the Company to WestLB AG. West LB will neither exercise nor transfer the subscription rights assigned to it. Prior to the commencement of the Subscription Offer, New Shares were tendered in a private placement exclusively to institutional investors in Germany and in other countries (other than the 44

51 United States of America in accordance with Regulation S of the United States Securities Act of 1933 as amended from time to time ( U.S. Securities Act )) or to other investors on the basis of another exemption from prospectus requirements according to Section 3(2) of the German Securities Prospectus Act (the Pre-placement ). In the Pre-placement, the Underwriters ensured by providing for the right to rescind in the allocation, that the New Shares attributable to Subscription Rights which were not assigned to WestLB AG are available for subscription by the shareholders of the Company under this Subscription Offer. It is expected that the subscription rights (ISIN DE000A1EYHN6, WKN A1EYHN) which are attributable to the shares of the Company (ISIN DE , WKN ) will automatically be booked on the evening of October 11, 2010, to the custodial banks through Clearstream Banking AG, Neue Börsenstrasse 1, Frankfurt am Main, Germany. The custodial banks are responsible for booking of the subscription rights to the shareholders securities accounts. We ask our shareholders, in order to avoid exclusion from participation in the capital increase, to exercise their subscription rights to the New Shares during the period from and including October 12, 2010, up to and including October 25, 2010 through their custodial banks at the subscription agent mentioned below during ordinary business hours. Subscription rights which are not exercised within the relevant time limit will expire. Subscription agent is WestLB AG, Herzogstraße 15, Dusseldorf. Subscription Ratio In accordance with the Subscription Ratio (the Subscription Ratio will be contained in the Subscription Offer which is expected to be published on October 11, 2010), on the basis of a certain number of existing shares of the Company (the exact number of existing shares will be contained in the Subscription Offer which is expected to be published on October 11, 2010) a certain number of New Shares (the exact number of New Shares will be contained in the Subscription Offer which is expected to be published on October 11, 2010) can be subscribed at the Subscription Price per New Share. Subscription Price The Subscription Price was determined by the Board of Management with the approval of the Supervisory Board on October 7, 2010, on the basis of the results of the bookbuilding procedure for the Pre-placement. The Subscription Price corresponds to the Offer Price for the Pre-placement. The Subscription Price must be paid by October 25, 2010, the last day of the Subscription Period, at the latest. Subscription rights trading The Subscription Rights (ISIN DE000A1EYHN6, WKN A1EYHN) for the New Shares will be traded in the period from October 12, 2010 up to and including October 21, 2010 in the regulated market of the Frankfurt stock exchange. The subscription agent is prepared to act as brokers in the buying and selling of Subscription Rights on the stock exchange, if possible. No compensation will be awarded for Subscription Rights which are not exercised. After expiration of the subscription period, Subscription Rights which are not exercised will expire and become worthless. As of October 12, 2010, the existing shares of the Company will be listed ex subscription rights. WestLB AG may take measures in order to provide liquidity for orderly subscription rights trading or to perform other activities customary for a subscription rights coordinator, in particular, the 45

52 buying and selling of subscription rights for New Shares. In this respect, WestLB AG reserves the right to conduct hedging transactions in shares of the Company or corresponding derivatives. Important notices Shareholders and investors are advised to read the Prospectus of September 23, 2010 carefully prior to making a decision concerning the exercise, acquisition or sale of subscription rights and, in particular, to consider the risks described in the section Risk Factors of the Prospectus in their decision. The Underwriters are entitled to withdraw from the Underwriting Agreement under certain circumstances. These circumstances include in particular material adverse changes in HAMBORNER s net assets, financial position or result of operations, unless set out in this Prospectus, substantial restrictions on stock exchange trading or banking business in Frankfurt am Main, London or New York; material adverse changes in the national or international financial, political or economic conditions which could have or are expected to have a material adverse effect on the financial markets in the Federal Republic of Germany, Great Britain or the United States of America; the outbreak or escalation of hostilities with the consequence of a national state of emergency or war in the Federal Republic of Germany, Great Britain or the United States of America; or terrorist attacks, other catastrophes, crises or other material adverse changes in the financial, political or economic conditions of the Federal Republic of Germany, Great Britain or the United States of America. Furthermore, the obligation of the Underwriters terminates, if the implementation of the capital increase has not been registered with the commercial register of the Local Court of Duisburg until expiry of October 12, 2010 and the Company and the Underwriters could not agree on a later date. There will also be a right of termination if the New Shares have not been admitted to trading on the stock exchange by October 13, 2010, or a later time agreed between the Company and the Underwriters. In the event of a withdrawal from the Underwriting Agreement prior to registration of the implementation of the capital increase with the Commercial Register, the subscription rights of the shareholders will expire. In such a case, subscription rights trading transactions will not be reversed by the brokers. Investors who acquired the subscription rights through a stock exchange could, in such a case, suffer a total loss of their investment. To the extent the Underwriters terminate the Underwriting Agreement following the registration of the implementation of the capital increase with the Commercial Register, the shareholders who exercised and did not revoke their subscription rights may acquire the New Shares at the Subscription Price. In view of the current high volatility of share prices and the market environment, shareholders should consider information on the current share price of the Company before they exercise their subscription rights at the Subscription Price. Certification and delivery of New Shares The New Shares (ISIN DE /WKN ) will be represented by one global share certificate, which will be deposited with Clearstream Banking AG, Neue Börsenstraße 1, Frankfurt am Main, Germany. Any right of the shareholders to request certification of their respective individual interests is excluded unless such certification is required by the rules of a stock exchange where the shares are listed. The New Shares subscribed under the Subscription Offer are, to the extent the subscription period is not extended, expected to be delivered on October 28, The delivery of the New Shares will take place through collective safe custody deposit. 46

53 Commission The depositary banks will charge customary commissions for the subscription of the New Shares. Trading of New Shares on stock exchanges Admission of the New Shares to the regulated market of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) as well as to the regulated markets of the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart will presumably take place on October 12, All New Shares will presumably be included in the existing listing for the shares of the Company (ISIN DE , WKN ) on October 13, Publication of the Prospectus Following a review of the completeness, including the coherence and comprehensibility, of the information provided, the Prospectus was approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, the BaFin ) on September 23, 2010, and was published by the Company on its website ( Printed copies of the Prospectus are available during ordinary business hours free of charge, among other places, at HAMBORNER REIT AG, Goethestraße 45, Duisburg and WestLB AG, Herzogstraße 15, Dusseldorf. Selling restrictions The New Shares and the subscription rights are not and will not be registered under the U.S. Securities Act, or with the securities supervisory authorities in any of the individual states of the United States of America. The New Shares and Subscription Rights must not be offered, exercised or sold in or delivered directly or indirectly to the United States of America, other than in reliance on an exemption from the registration requirements of the U.S. Securities Act and the securities laws of the relevant individual states of the United States of America. In this regard, subject to such exceptions as expressly approved by the Company from time to time, it will be assumed with respect to each person who acquires the New Shares and/or subscription rights that, in accepting the Prospectus, the New Shares and/or subscription rights, such person has represented and agreed that it is acquiring the New Shares and/or subscription rights in a transaction outside the United States of America (offshore transaction), as defined in Regulation S of the U.S. Securities Act. In order to fall within the application of the exemption from the registration requirements of the U.S. Securities Act under Section 4 (2) thereof, envelopes containing subscription forms must not be postmarked in or otherwise dispatched from the United States of America. Stabilization In connection with the offer of the New Shares, WestLB AG is acting as stabilization manager and may undertake measures, including through companies affiliated with it, with a view to supporting the quoted market or market price of the shares of the Company in order to offset any existing pressure to sell (stabilization measures). In connection with the Subscription Offer and the Pre-placement, WestLB AG may undertake measures outside of the stock exchanges or by other means for the purpose of supporting the market price of the existing shares or the New Shares of the Company at a level higher than it would otherwise be. WestLB AG may take measures in order to provide liquidity for orderly subscription rights trading or to perform other activities customary for a subscription rights coordinator, in particular, the buying and selling of subscription rights for New Shares. In this respect, WestLB AG reserves the right to conduct hedging transactions in shares of the Company or corresponding derivatives. 47

54 The stabilization manager is not obliged to undertake stabilization measures. There is therefore no assurance that stabilization measures will be undertaken at all. If stabilization measures are undertaken, they may be discontinued at any time without prior announcement. Such stabilization measures may be undertaken from the time of publication of the Subscription Price and must end no later than on the 30th calendar day after expiration of the subscription period, i.e. expected to be on November 24, 2010 at the latest (stabilization period). Stabilization measures can result in a quoted market or market price of the shares of the Company or of the subscription rights that is higher than it would be in the absence of such measures. Furthermore, the quoted market or market price may temporarily reach a level that is not maintained permanently. Within one week after the end of the stabilization period, an announcement will be made stating whether or not a stabilization measure was undertaken, the date on which such stabilization began, the date on which the last stabilization measure was undertaken and the price range within which such stabilization was conducted, specifically for each date on which a stabilization measure was undertaken. Duisburg, in October 2010 HAMBORNER REIT AG The Board of Management 4.4 Determination of the final issue volume, Subscription Ratio and Subscription and Offer Price; currency of the issue The Determination Resolution of the Board of Management of the Company with the final determination of the capital increase amount, issue volume, Subscription Ratio, as well as Offer and Subscription Price and the approval resolution of the Supervisory Board are expected to be passed on October 7, The determinations will be based on the results of the bookbuilding procedure for the Pre-placement. The Subscription Price will correspond to the Offer Price for the Pre-placement. The final capital increase amount, the final issue volume, Subscription Ratio and Subscription Price will be included in the Subscription Offer, which is expected to be published on October 11, 2010, in the electronic version of the Bundesanzeiger (German Federal Gazette) and on October 11, 2010, in the Börsen-Zeitung. The final amount of the capital increase, final issue volume, the Offer Price and Subscription Price and the results of the Offer are expected to be published on October 7, 2010 as an ad-hoc announcement through an electronic information system and on the website of the Company ( The Subscription Price and the Offer Price will be determined in euros. 4.5 Lock-up agreements The Company has agreed with the Underwriters that, as of the date of the Underwriting Agreement, for the period of up to six months following delivery of the New Shares acquired under the Subscription Offer and without the prior written consent of the Sole Lead Manager, (A) it will not offer or sell or enter into any obligations in this respect for the sale or disposal of (i) bonds which are convertible into shares of the Company or which can be exchanged for such, (ii) shares of the Company or (iii) other securities convertible into or exchangeable for shares of the Company or with a right to subscribe or receive such shares and (B) it will not enter into any swaps or other agreements under which the economic consequences of ownership of shares of the Company are transferred in whole or in part to another party, regardless of whether the transaction is settled through delivery of securities, in cash or in any other manner. This obligation does not apply to the issuance of the New Shares. The Assigning Shareholders have agreed with the Sole Lead Manager that, as of the date of the, Assignment Agreement, for the period of up to 12 months following delivery of the New Shares subscribed 48

55 under the Subscription Offer, they will not neither themselves nor through one of their dependent companies without the prior written consent of the Sole Lead Manager, (x) offer or sell or enter into any obligations in this respect for the sale or transfer of shares of the Company (including New Shares) or other securities convertible into or exchangeable for shares of the Company (including New Shares) or with a right to subscribe or receive such shares (including New Shares) or (y) enter into any swaps or other agreements under which the economic consequences of ownership of shares of the Company (including New Shares) are transferred in whole or in part to another party, regardless of whether the transaction is settled through delivery of securities, in cash or in any other manner. The Assigning Shareholders are, however, allowed, following the registration of the implementation of the capital increase with the commercial register, to sell shares without the approval of the Sole Lead Manager outside of the stock exchange, if the purchaser undertakes vis-à-vis the Sole Lead Manager, similar to the previous undertaking of the Assigning Shareholders, to comply with the aforementioned limitations with respect to the shares in the Company which are to be acquired until expiry of the 12 months-period. 4.6 Selling restrictions The New Shares and the subscription rights are not and will not be registered under the U.S. Securities Act, or with the securities supervisory authorities in any of the individual states of the United States of America. Except in reliance on an exemption from the registration and notification requirement of the US securities and stock exchange laws and to the extent that any other applicable US regulations are complied with, the New Shares and Subscription Rights must not be offered, exercised or sold in or directly or indirectly delivered to the United States of America. In accordance with the Underwriting Agreement, the Underwriters, and any persons acting on their behalf, are prohibited from having made or engaged in (i) Directed Selling Efforts in the meaning of Regulation S of the United States Securities Act or (ii) General Advertising or General Solicitation, each within the meaning of Regulation D of the U.S. Securities Act, with regard to the New Shares and subscription rights in the United States of America, or from engaging in such activities in the future. The Company does not intend to register the Offering or a part thereof in the United States of America or to conduct a public offering of shares or subscription rights in the United States of America. There are also selling restrictions in the United Kingdom. Each of the Underwriters has represented to the Company that (i) (ii) they will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (FSMA)), or do so in the future, in connection with the issue or sale of any New Shares in circumstances in which Section 21(1) of the FSMA does not apply to the Company; and that they have complied and will comply with all applicable provisions of the FSMA with respect to anything done by them in relation to the New Shares in, from, or otherwise involving the United Kingdom. The Underwriters have further warranted and undertaken in the Underwriting Agreement that they have not and will not publicly offer the New Shares in any of the Member States of the European Economic Area (EEA) which have implemented the Prospectus Directive (Directive 2003/71/EC) from the date of the implementation of the Prospectus Directive, unless (i) a prospectus for the New Shares has been previously published which was approved by the competent authority in such Member State or was approved in another Member State of the EEA which has implemented the Prospectus Directive and the responsible authority in the Member State in which the offer takes place has been informed thereof in compliance with the Prospectus Directive; (ii) the Offering is extended to legal entities which with respect to their activity are admitted to the financial markets or are supervised or, in the 49

56 event they are not admitted or supervised, whose sole corporate purpose is to invest in securities; (iii) the Offering is extended to companies that fulfill at least two of the following three criteria according to their latest annual financial statements or consolidated financial statements: (x) an average number of employees in the last fiscal year of 250 or more, (y) total assets of more than EUR 43,000, and (z) total net sales revenue of more than EUR 50,000,000.00; or (iv) the Offering takes place under other circumstances in which the publication of a prospectus by the Company is not required under Section 3 of the German Securities Prospectus Act (Wertpapierprospektgesetz, WpPG ) in connection with Article 3 of the Prospectus Directive. 4.7 Underwriters, Underwriting Agreement The Underwriters coordinating the Offering are WestLB AG, Joh. Berenberg, Gossler & Co. KG and Kempen & Co N.V. On September 23, 2010, the Company and the Underwriters entered into an Underwriting Agreement. In this Underwriting Agreement, the Underwriters agreed to underwrite all New Shares and to offer them for subscription to the shareholders of the Company. The following table lists the proportion of New Shares which the relevant Underwriter has agreed to underwrite in the Underwriting Agreement: Underwriter Underwriting commitment WestLB AG... 55% Joh. Berenberg, Gossler & Co. KG... 15% Kempen & Co N.V % New Shares not subscribed under the Subscription Offer will be offered for sale in the Pre-Placement by the Underwriters prior to the commencement of the Subscription Offer. In accordance with the Underwriting Agreement, the Company is required to pay the Underwriters commissions of in total up to EUR 4.0 million based on the assumption that the maximum number of New Shares will be sold at the maximum Subscription Price and that the additional incentive fee which is payable at the discretion of the Company is fully paid. The commissions to be paid will be lower to the extent to which the Subscription Price is lower than the maximum Subscription Price and/or to which the actual number of New Shares is lower than the maximum number of New Shares and/or to which the additional incentive fee is not or not fully paid. The Underwriters are entitled to terminate, under certain circumstances, the Underwriting Agreement. These circumstances include in particular material adverse changes in HAMBORNER s net assets, financial position or result of operations, unless set out in this Prospectus, substantial restrictions on stock exchange trading or banking business in Frankfurt am Main, London or New York; material adverse changes in the national or international financial, political or economic conditions which could have or are expected to have a material adverse effect on the financial markets in the Federal Republic of Germany, Great Britain or the United States of America; the outbreak or escalation of hostilities with the consequence of a national state of emergency or war in the Federal Republic of Germany, Great Britain or the United States of America; or terrorist attacks, other catastrophes, crises or other material adverse changes in the financial, political or economic conditions of the Federal Republic of Germany, Great Britain or the United States of America. Furthermore, the obligation of the Underwriters terminates, if the implementation of the capital increase has not been entered into the commercial register of the Local Court of Duisburg until expiry of October 12, 2010 and the Company and the Underwriters could not agree on a later date. The shareholders who have exercised and not revoked their subscription rights may acquire the New Shares at the Subscription Price if the Underwriters terminate the Underwriting Agreement following the registration of the implementation of the capital increase with the commercial register. 50

57 If the Underwriting Agreement was terminated following the delivery of the New Shares which have been allotted to investors under the Pre-Placement, such termination would only relate to the Claw Back Shares. Investors who have been allotted Claw Back Shares under the Pre-Placement can acquire these shares upon their request against payment of the Offer Price, irrespective of the termination of the Underwriting Agreement, if and to the extent the right to rescind has not been exercised for the reason that shareholders have exercised and not revoked their subscription rights and have obtained the respective New Shares. The right to terminate the Underwriting Agreement can also be exercised following the inclusion of the New Shares in the current listing. For more information regarding the possibility of the withdrawal of the Underwriters from the Underwriting Agreement see section 4.3 Subscription Offer Important notices. 4.8 Information on the New Shares offered Form, voting rights The New Shares of the Company will be issued in the form of no-par value bearer shares with a notional interest of EUR 1.00 in the Company s share capital. Each share confers one vote. For a detailed description of the share capital and of the shares of the Company see section 17.1 Share capital and shares Dividend rights, and participation in liquidation proceeds The New Shares carry full dividend rights from January 1, 2010, i.e. for the entire financial year 2010 and for all subsequent financial years. In accordance with the Articles of Association of the Company, dividend rights of shares that are issued in a capital increase may also diverge from the provisions of the German Stock Corporation Act. The New Shares participate in any liquidation proceeds in accordance with their notional share in share capital Stock exchange admission, certification, delivery It is expected that application will be made on September 30, 2010 for the admission of the New Shares to trading on the regulated market of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) as well as on the stock markets in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart. The admission is expected to take place on October 12, It is expected that application will be made for the inclusion of the New Shares in the existing listing of the shares of the Company on September 30, 2010, and that such inclusion will take place on October 13, The management of the respective stock exchange will decide on the admission and the inclusion of the New Shares. The New Shares will be made available to the purchasers as co-ownership interests in one global share certificate, which will be deposited with Clearstream Banking AG, Neue Börsenstrasse 1, Frankfurt am Main, Germany, in the collective safe custody system. The shareholders have no entitlement to demand the issuance of individual share certificates for their New Shares. The delivery of the New Shares will take place through collective safe custody deposit. The purchasers will become aware of the allocation through the booking of the New Shares in their securities deposit. The beginning of trading is not dependent hereon. The New Shares acquired in the Pre-placement which are attributable to the Assigned Subscription Rights are expected to be delivered on October 13, The New Shares acquired under the Subscription Offer, as well as the New Shares allotted in the Pre-Placement which are subject to the right to rescind and which rights have not been exercised, are, provided that the subscription period is not extended, expected to be delivered on October 28,

58 4.8.4 ISIN, WKN, stock market symbol International Securities Identification Number (ISIN): For the New Shares: DE For the subscription rights to the New Shares: DE000A1EYHN6 Wertpapier-Kenn-Nummer (WKN Securities Identification Number) For the New Shares: For the subscription rights to the New Shares: A1EYHN Stock market symbol of the Company s shares: HAB WKN and ISIN of the New Shares are the same as of the old shares Transferability, selling restrictions The New Shares are freely transferable. There are no legal restrictions to trading in them other than those mentioned under sections 4.6 Selling restrictions and 4.5 Lock-up agreements Announcements The Articles of Association provide that announcements of the Company will be made in the electronic version of the Bundesanzeiger (German Federal Gazette). The announcements relating to shares of the Company will also be made in the electronic version of the Bundesanzeiger (German Federal Gazette) and in a pan-regional official journal of the stock exchanges in Frankfurt am Main and the stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart. The publications required under stock exchange regulations will be made in a pan-regional official journal of the stock exchanges in Frankfurt am Main, Berlin, Dusseldorf, Hamburg, Munich and Stuttgart and, to the extent necessary, in the Bundesanzeiger (German Federal Gazette) Paying agent and registrar The paying agent and registrar for the shares of the Company is Commerzbank AG, Theodor- Heuss-Allee 44-46, Frankfurt am Main, Germany. 4.9 Interests of persons involved in the Offering The Underwriters have a contractual relationship with the Company in relation to the Offering and the admission of the New Shares of the Company to the stock exchanges. WestLB AG, Joh. Berenberg, Gossler & Co. KG and Kempen & Co N.V. were mandated by the Company as Underwriters for the Offering. The Underwriters will receive a commission if the transaction is completed successfully. The Underwriters or their respective affiliated companies may, from time to time, enter into business relations with HAMBORNER or may render services to it in the ordinary course of HAMBORNER S business. The Underwriters, or their respective affiliated companies, are currently engaged in various business relationships with HAMBORNER. 52

59 5. REASONS FOR THE OFFERING AND USE OF PROCEEDS 5.1 Proceeds and costs of the issue In connection with the Offering, the Company receives the net amount of the proceeds that corresponds to the gross proceeds from the sale of the New Shares less the total issue-related expenses to be borne by the Company. The amount of gross proceeds from the sale of the New Shares depends on the number of New Shares actually sold and the specified Subscription Price. Assuming the sale of the maximum number of New Shares at the maximum subscription price, the gross proceeds before deduction of expenses and commissions or fees will amount to approximately EUR million. The total costs to be borne by the Company consist of the Underwriters commissions or fees and other expenses associated with the issue of the New Shares, e.g. fees for legal services, printing and translation of the Prospectus, marketing activities and fees for the Prospectus approval and admission of the New Shares to trading on the stock exchange etc. On the assumption of the placement of the maximum number of New Shares at the maximum Subscription Price, the Company estimates the total expenses associated with the public offering and admission to trading of the New Shares (including commissions and fees of the banks in full) to be approximately EUR 4.9 million. Assuming the sale of the maximum number of New Shares (11,350,000 shares) at the maximum Subscription Price of EUR 10.00, the net proceeds for the Company will amount to approximately EUR million. In this event, the commissions of the banks would amount to up to approximately EUR 4.0 million. In the event the final Subscription Price is below the maximum subscription price of EUR per New Share or the number of New Shares actually sold is lower than the maximum number of 11,350,000 New Shares, the gross proceeds, underwriting commissions and other issue-related expenses and the net proceeds shall be calculated on the basis of such lower final subscription price or lower issue volume and reduced accordingly. For illustrative purposes: If the maximum number of all New Shares is placed, on the assumption of a final Subscription Price of EUR 7.85 (corresponding to the XETRA closing price of shares on August 31, 2010), the gross proceeds expected would amount to approximately to EUR 89.1 million, the total issue-related expenses would be expected to amount to approximately EUR 4.0 million and the net proceeds would be expected to amount to approximately EUR 85.1 million. In this event, the commissions of the banks would amount to up to EUR 3.1 million. 5.2 Reasons for the offering and use of proceeds The net proceeds from the offer of the New Shares are intended to be used to strengthen HAMBORNER s capital base and financial soundness. The Company intends to use the proceeds from the offer to finance the further planned expansion of HAMBORNER. In particular, it is envisaged to provide financing for the acquisition of additional properties in accordance with HAMBORNER s investment strategy as well as to increase its strategic flexibility with respect to future acquisitions (including the property purchases described but not yet completed or notarized in Section 12.8 Investments and 22. Recent Developments and Outlook ). The following potential uses of the net proceeds, which are consistent with HAMBORNER s strategic objectives, are of particular importance to the Company: Growth and expansion of its own property portfolio concentrating on large-scale retail properties in busy locations, business properties in prime locations (so-called highstreet-objects) as well as high-quality office buildings; Regional diversification with particular emphasis on regions with long-term growth potential in southern and southwestern Germany; Flexibility in taking advantage of acquisition opportunities while maintaining a sound financial structure; The Company moreover intends to invest the net proceeds from the offer in fixed interest rate investments pending investments in accordance with its investment strategy or for general corporate purposes. 53

60 6. PRO RATA RESULT AND DIVIDEND POLICY 6.1 General Rules for Appropriation of Profit and Dividend Payments Non-binding convenience translation The new shares have a full entitlement to a share in the profits for the financial year beginning on January 1, 2010 and for all of the following financial years of the Company. The dividend for the last financial year is proposed jointly by the Managing Board and Supervisory Board of the Company and a decision on its payment adopted by the shareholders at the annual General Meeting during the following financial year. Dividends with respect to which a decision is taken at the annual General Meeting become due for payment on the first business day after the annual General Meeting, unless the dividend decision stipulates otherwise. The claim to the payment of dividends will lapse after three years. In the case of a lapse of dividend entitlement, the dividend claim lapses and the dividend remains with the Company. The paying agent for the dividends of the Company is Commerzbank AG, Theodor-Heuss-Allee 44-46, Frankfurt am Main, Germany. Details of the dividends are published in the electronic Federal Gazette and in at least one multiregional stock exchange gazette. Dividends may only be distributed from the unappropriated surplus of the Company in accordance with its annual financial statements. These annual financial statements are, in addition to the IFRS separate annual financial statements, set up in accordance with the German Commercial Code (HGB). There are differences between the accounting rules of the German Commercial Code and the IFRS. In order to determine the unappropriated surplus available for the distribution of the dividend, the net profit or loss for the period is corrected for profits/losses carried forward from the previous year, as well as for withdrawals from or transfers into other retained earnings. Certain reserves have to be formed by law and have to be deducted when calculating the unappropriated surplus available for the dividend distribution. The dividends are in principle paid with a deduction of 25% for capital gains tax, as well as the solidarity surcharge of 5.5% that has to be paid on the capital gains tax (see also sections 19.2 Taxation of the Shareholders and 19.3 Taxation of Dividends ). The following table presents the results of HAMBORNER according to the IFRS and the results of the annual financial statements of HAMBORNER according to the German Commercial Code, as well as the corresponding result per share each as at December 31, 2009, 2008 and Moreover, the table contains details of the dividends paid per share of the Company: January 1 to December (audited) 2008 (audited) 2007 (audited) Profit after tax of HAMBORNER REIT AG according to the IFRS... 5,073 17,341 52,226 per no-par-value share (in EUR) per no-par-value after capital increase (unaudited) 1 (in EUR) Profit for the financial year of HAMBORNER REIT AG according to German Commercial Code (in TEUR)... 7,076 56,258 7,828 Number of no-par value shares (in thousands) on Dec ,770 22,770 22,770 Dividend paid out per no-par value share (in EUR) Assuming that the capital increase as proposed by the Prospectus is made for the full number of New Shares of 11,350,000. The ability of the Company to pay a dividend in future years fundamentally depends on the level of the distributable unappropriated surplus. The Company is not able to make any statement on the level of future unappropriated surpluses or provide any undertaking that unappropriated surpluses will be generated in the future. It can therefore not guarantee that dividends will be paid in future years. Furthermore, dividends paid in the past do not provide any indications whatsoever of the level of future dividends. 54

61 6.2 Special Rules for the Appropriation of Profit and Dividend Payments Non-binding convenience translation In the case of public limited companies which are listed on the stock exchange, the distribution of dividends is governed by the provisions of section 174 (1) of the German Stock Corporation Act (AktG) in conjunction with section 158 (1) No. 5 of the German Stock Corporation Act. Accordingly, only the unappropriated surplus can be distributed as a dividend to shareholders. The unappropriated surplus is made up of the net income for the year after adjustment for profit/loss carried forward from the previous year, as well as withdrawals from or transfers to capital and retained earnings. For public limited companies which are listed on the stock exchange with REIT status, section 13 (1) REIT Act also applies in relation to the distribution of dividends. According to this, the Company is obliged to distribute at least 90% of its profit for the financial year determined in accordance with German commercial law principles within the meaning of section 275 of the German Commercial Code reduced if applicable by the allocation or increased by the release of the so-called reinvestment reserve according to section 13 para 3 REIT Act, as well as reduced by any loss carried forward from the previous year by the end of the following financial year to the shareholders as a dividend. The distribution is specifically not based on the IFRS individual financial statements, but instead on the annual financial statements drawn up in accordance with German commercial law principles. For the determination of the distributable net income for the year, section 13 para 2 REIT Act stipulates that, irrespective of any requirement of extraordinary depreciation, planned depreciation (taking into account the remaining use period) may only be calculated in equal annual instalments. Accordingly, there may be deviations between the profit for the financial year that is to be distributed and the unappropriated surplus. For the taxation of the distribution of dividends see section 19.3 Taxation of Dividends. 55

62 7. CAPITALIZATION AND INDEBTEDNESS Non-binding convenience translation The following tables present the capitalization, the net financial debt and the contingent liabilities as at June 30, 2010 of HAMBORNER. The capitalization of HAMBORNER will change after the offer according to the extent of the capital increase. For details of the proceeds from the offer, please see section 5 Reasons for the offering and use of proceeds. The information provided in the following tables is based on the IFRS half-year financial statement of HAMBORNER for the half-year ending on June 30, 2010, which has been subjected to a review in accordance with section 37w of the German Securities Trading Act and set up on the basis of the International Financial Reporting Standards as they are to be applied in the European Union ( IFRS ) and printed in section 20 Financial Section of this prospectus, and should be read in connection with the IFRS half-year financial statement which has been subject to a review in accordance with section 37w of the German Securities Trading Act and the accompanying explanations. Capitalization The following table presents the capitalization of HAMBORNER as at June 30, The information included in the middle column shows the hypothetical adjustment of the capital endowment as of June 30, 2010 based on the assumption that the maximum number of New Shares, i.e. 11,350,000 New Shares, will be placed at the maximum subscription price of EUR with associated net proceeds from the issue of approximately EUR million. For the purpose of illustration, the information contained in the right-hand column shows the hypothetical adjustment of the capitalization as at June 30, 2010 under the assumption of the complete placement of the maximum number of New Shares at the closing price (XETRA) on August 31, 2010 of EUR 7.85 with associated net proceeds from the issue of EUR 85.1 million. As of June 30, 2010 before execution of the offer (unaudited) As of June 30, 2010 after execution of the offer (based on the maximum number of new shares and the maximum subscription price of EUR 10.00) (unaudited) in TEUR As of June 30, 2010 after execution of the offer (based on the maximum number of new shares and closing price (XETRA) on August 31, 2010 of EUR 7.85) (unaudited) Short-term financial debt , ,577 4,577 thereof from guaranteed by third parties... thereof from collateralised by third parties... thereof from collateralised by own assets... 3,796 3,796 3,796 thereof from not collateralised/not guaranteed Other current liabilities , ,591 4,591 thereof from guaranteed by third parties... thereof from collateralised by third parties... thereof from collateralised by own assets... thereof from not collateralised/not guaranteed... 4,591 4,591 4,591 Long-term financial debts , , ,013 thereof from guaranteed by third parties... thereof from collateralised by third parties... thereof from collateralised by own assets , , ,177 thereof from not collateralised/not guaranteed ,836 24,836 24,836 Other non-current liabilities , ,220 10,220 thereof from guaranteed by third parties... thereof from collateralised by third parties... thereof from collateralised by own assets... thereof from not collateralised/not guaranteed... 10,220 10,220 10,220 Equity capital , , ,455 Subscribed capital... 22, ,120 34,120 Capital reserve... 97,278 73,729 Retained earnings , ,716 95,716 Net retained profits , ,890 23,890 Total , , ,856 1 Corresponds to the balance sheet item current financial liabilities and derivative financial instruments. 2 Consists of the balance sheet items current income tax liabilities, current trade accounts payable and other liabilities as well as current other provisions. 3 Corresponds to the balance sheet item non-current financial liabilities and derivative financial instruments. 56

63 4 Including a loan of EUR 13.7 Mio. the mortgage of which has not been entered into the register of real estate as at June 30, Consists of the balance sheet items non-current trade accounts payable and other liabilities, provisions for pensions and non-current other provisions. 6 Consists of the balance sheet items legal reserve, other retained earnings and revaluation reserve. 7 Consists of the balance sheet items retained profit from previous years and profit for the period. 8 Corresponds to the balance sheet total. 9 Extracted from the reviewed half-year financial statements as of June 30, Computed value on the basis of the reviewed half-year financial statements as of June 30,2010. Net financial debt The following table presents the net financial debt of HAMBORNER as at June 30, The information included in the middle column shows the hypothetical adjustment of the net financial debt as of June 30, 2010 based on the assumption that the maximum number of New Shares, i.e. 11,350,000 New Shares, will be placed at the maximum subscription price of EUR with associated net proceeds from the issue of approximately EUR million. For the purposes of illustration, the information contained in the right-hand column shows the hypothetical adjustment of the net financial debt as of June 30, 2010 under the assumption of the complete placement of the maximum number of New Shares at the closing price (XETRA) on August 31, 2010 of EUR 7.85 with associated net proceeds from the issue of EUR 85.1 million. As of June 30, 2010 before execution of the offer (unaudited) As of June 30, 2010 after execution of the offer (based on the maximum number of new shares and the maximum subscription price of EUR 10.00) (unaudited) in TEUR As of June 30, 2010 after execution of the offer (based on the maximum number of new shares and closing price (XETRA) on August 31, 2010 of EUR 7.85) (unaudited) Cash and cash equivalents Bank balances... 6, ,558 92,009 Securities... Liquidity , ,568 92,019 Current financial receivables... Current liabilities to banks Current contingent of the non-current liabilities to banks... -3,796-3,796-3,796 Other current financial debts... Short-term financial debt , ,577-4,577 Short-term net financial debt... 2, ,991 87,442 Non-current financial receivables Long-term liabilities to banks , , ,013 Borrowings... Other long-term financial debt... Long-term financial debt , , ,013 Long-term net financial debt , , ,981 Total net financial debt ,618-21,990-45,539 1 Corresponds to the balance sheet item bank deposits and cash balances. 2 Corresponds to the balance sheet item current financial liabilities and derivative financial instruments. 3 Corresponds to the balance sheet item non-current financial assets. 4 Corresponds to the balance sheet item non-current financial liabilities and derivative financial instruments. 5 Extracted from the reviewed half-year financial statements as of June 30, Contingent liabilities No contingent liabilities of the Company exist as at June 30, No significant negative changes In the period from June 30, 2010 up to the date of this prospectus there were no significant changes with respect to the net assets, financial position and results of operations of HAMBORNER. Declaration on working capital The Company is of the opinion that from the current perspective it has enough working capital at its disposal in order to comply with its payment obligations over the next twelve months. 57

64 8. DILUTION The book value of the balance sheet equity of HAMBORNER according to IFRS as at June 30, 2010 was TEUR 142,376 and therefore EUR 6.25 per share, with 22,770,000 shares as at June 30, 2010 being used for this calculation. In connection herewith it should be noted that the Company values its properties held for investment purposes at the purchase/production costs taking into account their straight-line depreciation and not in accordance with the Fair Value Method, see section (significant accounting principles). If the maximum number of New Shares to which this prospectus refers had been issued on June 30, 2010 for an issue price of EUR for each New Share (maximum subscription price), the book value of the balance sheet equity of HAMBORNER according to IFRS at this time after the deduction of fees and commissions of the Underwriters and other costs associated with the offer and the listing of the New Shares of about EUR 4.9 million incurred by the Company in conjunction with the performance of the capital increase on this basis would have totalled TEUR 251,004 million or about EUR 7.36 per share (calculated on the basis of the total maximum number of outstanding 34,120,000 shares in the Company after complete implementation of the capital increase). For investors who acquire New Shares without having held participations in the Company previously this means, with an assumed subscription price of EUR per new share (maximum subscription price), a direct loss in book value of EUR 2.64 or 26.4% per no-par value share, as the book value of the balance sheet equity of HAMBORNER according to IFRS falls below the assumed subscription price of each New Share by this value. This corresponds to an increase in the book value of the balance sheet equity of the Company of EUR 1.11 or 17.8% per share for the existing shareholders. If the actual subscription price achieved should be lower than the maximum subscription price, the book value of HAMBORNER s balance sheet equity and its dilution would have to be calculated on the basis of the actual subscription price achieved. For the purposes of illustration: if the actual subscription price achieved would be EUR 7.85 (which is the XETRA closing price of the no-par value shares on August 31, 2010), this would result in a book value of the balance sheet equity of HAMBORNER according to IFRS totalling TEUR 227,455 million or EUR 6.67 per no-par value share and accordingly an increase in the book value of the balance sheet equity of the Company of EUR 0.42 or 6.7% per share for the existing shareholders, as well as a direct decrease in book value of EUR 1.18 or 15.0% for the new shareholders. After the execution of the capital increase with the maximum amount of EUR 11,350,000.00, the 22,770,000 no-par value shares in the Company available as at June 30, 2010 would only represent 66.74% of the share capital with at that time 34,120,000 outstanding shares. Shareholders in the Company who do not take part in the capital increase would therefore suffer a dilution of their portion of the share capital and the dividends of the Company of 33.26%. As according to Article 17 (1) of the Articles of Association of the Company every no-par value share is equivalent to one vote at the annual General Meeting, the dilution of the voting rights corresponds to the dilution of the share capital. 58

65 9. SELECTED FINANCIAL AND BUSINESS INFORMATION The summarized financial information for the financial years 2009 and 2008 is based on the audited IFRS individual financial statements of HAMBORNER REIT AG for the financial year ending on December 31, 2009, which have been audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf, and received an unqualified auditors opinion, while the financial information summarised below for the 2007 financial year is based on the audited IFRS consolidated accounts of HAMBORNER REIT AG for the financial year ending on December 31, 2007 (subject to rounding differences), which were audited by BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Essen branch, and received an unqualified auditors opinion (the IFRS accounts ). The financial information for the income statement for the financial year 2007 was adjusted to reflect the new structure shown as applied to the financial years 2008 and 2009 which was changed on the basis of the recommendations of the European Public Real Estate Association (EPRA) and which has been widely adopted by property companies. The financial information summarized below for the first six months of 2010 and 2009 are based on the IFRS interim financial statements of HAMBORNER REIT AG for the half-year ending on June 30, 2010, (the IFRS half-year financial statement ). The IFRS half-year financial statement was subjected to a review by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Düsseldorf, in accordance with section 37w of the German Securities Trading Act ( WpHG ) and received a review report. The IFRS accounts and the IFRS half-year financial statement were prepared on the basis of the International Financial Reporting Standards, as these are to be applied in the European Union ( IFRS ) and are reproduced in section 20. Financial Section of this prospectus. 59

66 in TEUR Selected Information from the Income Statement of HAMBORNER 1st halfyear 2010 (reviewed) Non-binding convenience translation 1st halfyear 2009 (reviewed) 2009 (audited) 2008 (audited) 2007 (unaudited) 1 Income from rents and leases... 11,840 11,076 22,451 19,725 13,318 Income from passed-on incidental costs to tenants... 1,347 1,145 2,419 1,873 1,229 Real estate operating expenses... -1,819-1,675-3,666-3,026-1,860 Property and building maintenance ,264-1,109-1,594 Net rental income... 10,916 10,276 19,940 17,463 11,093 Administrative expenses , Personnel costs... -1,314-1,369-2,740-2,973-2,520 Amortisations of intangible assets, tangible fixed assets and investment property... -3,607-3,195-7,268-10,257-3,177 Other operating income ,128 12,475 1,896 Other operating expenses ,587-1,410-5,377-4,567-9,503-3,384-6,071 Operating result... 5,539 5,709 10,437 14,079 5,022 Result from the sale of investment property ,689 5,621 Result from investments Earnings before interest and taxes (EBIT)... 5,603 5,973 10,884 21,411 11,092 Interest income , Interest expenses... -2,853-2,669-5,508-4,644-1,234 Income from securities, including capital gains Financial result... -2,776-2,315-5,019-2, Earnings before taxes (EBT)... 2,827 3,658 5,865 18,484 11,056 Taxes on income and profit... -2, ,517 6,645 Result from continuing operations... 5,073 16,967 17,701 Result from discontinued operations ,525 Profit for the financial year/period ,316 5,073 17,341 52,226 Retained profits from previous year... 23,844 27,196 35,165 53,922 1,554 2 Dividends... -7,970-7, Transfer to retained earnings , Withdrawal from other retained earnings Net retained profits... 23,890 30,512 32,268 35,165 53,922 Earnings per share (in EUR) thereof from continuing operations thereof from discontinued operations Adjusted to reflect the new structure of items shown as applied for the financial years 2008 and 2009 which was changed on the basis of the recommendations of the European Real Estate Association (EPRA) and which has been widely adopted by property companies. This relates to (i) the expenses and income from the sale of properties which are now no longer recorded in the income statement under other income but are recorded separately; (ii) administrative expenses which in previous years were recorded in other expenses, (iii) income from rental guarantees, which in previous financial years were recorded in other income, as well as (iv) internally produced and capitalised assets which are no longer separately recorded but instead recorded as other operating income. 2 Retained profits from previous year, the dividends and the transfer into other retained earnings have been included in the item retained profits from previous year, and, shown separately, amount to TEUR 9,497 (retained profits), TEUR -6,138 (dividends) and TEUR -1,112 (transfer). 60

67 Assets in TEUR Selected Information from the Balance Sheet of HAMBORNER Non-binding convenience translation June 30, 2010 (reviewed) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Non-current Assets Intangible assets Tangible fixed assets Investment property , , , ,702 Financial assets Other assets Deferred tax assets... 2,170 1, , , , ,051 Current Assets Trade receivables and other assets... 1, Income tax receivables Bank deposits and cash balances... 6,940 37,942 54,012 6,442 8,059 38,473 55,368 7,863 Non-current assets held for sale... 1, ,813 Assets from discontinued operations... 59,470 9,594 38,473 55,498 87,146 Total assets , , , ,197 Equity and Liabilities in TEUR June 30, 2010 (reviewed) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Equity Subscribed capital... 22,770 22,770 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 2,277 2,277 Other retained earnings , , ,575 76,448 Revaluation reserve ,136-6,594-4, , , ,115 78,815 Net retained profits... 23,890 32,269 35,165 53, , , , ,507 Non-current liabilities and provisions Financial liabilities and derivative financial instruments , ,052 87,350 48,034 Deferred tax liabilities... 14,708 15,188 14,219 Trade accounts payable and other liabilities... 3,961 4,075 3,784 3,860 Provisions for pensions... 5,545 5,603 5,780 5,923 Other provisions , , ,780 72,591 Current liabilities and provisions Financial liabilities and derivative financial instruments... 4,577 4,620 3,754 36,397 Income tax liabilities Trade accounts payable and other liabilities... 3,239 1,877 1,823 18,137 Other provisions... 1,328 2,253 2,279 2,318 9,168 9,152 8,516 56,954 Liabilities from discontinued operations... 5,145 Total equity, liabilities and provisions , , , ,197 61

68 in TEUR Selected Information from the Cash Flow Statement of HAMBORNER Jan 1 to June 30, 2010 (reviewed) Jan 1 to June 30, 2009 (reviewed) Non-binding convenience translation Jan 1, to Dec 31, 2009 (audited) Jan 1 to Dec 31, 2008 (audited) Jan 1 to Dec 31, 2007 (audited) Cash flow from operating activities Earnings before taxes (EBT)... 2,827 3,658 5,865 18, ,433 1 Depreciation, Amortization and Impairments/write-ups (-)... 3,607 3,195 6,002 9,312 3,177 Financial result... 2, ,302 5,006 2,081-1,258 3 Change in provisions , Gain (-) /loss (+) (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale ,741-5,621 Gain (-) /loss (+) (offset) from the disposal of financial assets ,477-32,826 Other non-cash expenses (+) / income (-) ,711-2,004 Change in receivables and other assets ,050 Change in liabilities ,040-1,426 18,855 Dividends received ,313 Interest received , Tax payments ,936-1, ,477-2,086-8,969 6,174 14,129 10,283 23,528 Cash flows from investment activities Investments in intangible assets, tangible fixed assets and investment properties ,128-29,883-39,349-36,309-98,008 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale ,417 17,764 Investments in financial assets ,947 Proceeds from disposals of financial assets ,601 95,087 Net cash outflow of funds due to the disposition of the special share fund Südinvest ,056-28,938-37,686 41,696-73,104 Cash flow from financing activities Dividend payments... -8,425-7,970-7,970-7,970-6,831 Proceeds from borrowings... 22,640 18,400 23,800 37,713 66,308 Repayment of borrowings... -2,004-1,840-3,257-37, Interest outflows... -3,188-2,802-5,086-3, ,023 5,788 7,487-10,998 58,428 Change in cash and cash equivalents ,002-16,976-16,070 40,981 8,852 Cash and cash equivalents as of January ,942 54,012 54,012 13,031 4,179 Bank deposits and cash balances... 37,942 54,012 54,012 13,031 4,175 Near-liquid assets... 4 Cash and cash equivalents as of the end of the period... 6,940 37,036 37,942 54,012 13,031 Bank deposits and cash balances... 6,940 37,036 37,942 54,012 13,031 1 Earnings before taxes (EBT) in the cash flow statement corresponds to the sum total of the earnings before taxes (EBT) and the result from discontinued operations both as shown in the income statement, adjusted for tax effects of TEUR 61 in the financial year 2008 and TEUR -148 in the financial year For the first half-year 2010 this figure does not contain income from investments. 3 In the financial year 2007 presented as financial income. 62

69 Selected Key Data Jan 1 to June 30, 2010 (unaudited) Jan 1 to June 30, 2009 (unaudited) Jan 1 to Dec (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) EBITDA in TEUR ,210 9,168 16,886 30,975 46,809 EBDA in TEUR ,653 6,511 11,075 26,673 53,887 REIT equity ratio in % Balance sheet equity capital in % Loan to Value (LTV) in % Profit per share in EUR Funds from Operations (FFO) 5 in TEUR... 6,371 5,325 9,620 8,536 6,037 Funds from Operations (FFO) 5 per share in EUR Dividend per share in EUR Quoted market price per share in EUR (XETRA)... Highest share price Lowest share price Year/period-end share price Dividend yield in relation to the year/period-end share price in % Price/FFO 5 ratio Market capitalisation at the year/period-end , , , , ,564 Net asset value 6 per share in EUR Fair value of the property portfolio in TEUR , , , ,020 Net asset value 6 in TEUR , , , ,618 Number of employees at the relevant calculation date including the Managing Board Earnings before interests, taxes, depreciation and amortization (EBITDA) means the profit for the financial year/period before interest (interest income less interest expenses) before taxes on income and profit, before amortization/write-ups of intangible assets, tangible fixed assets and investment property. 2 Earnings before depreciation and amortization (EBDA) means the profit for the financial year/period before amortization/write-ups of intangible assets, tangible fixed assets and investment property. 3 REIT equity ratio corresponds to the equity-to-assets ratio pursuant to Sec. 15 in conjunction with Sec. 12 (1) sentence 2 REIT Act meaning the ratio of the equity (on a fair value basis) to the fair value of immovable assets. The equity (on a fair value basis) is the sum of the balance-sheet equity and the hidden reserves. The immovable assets of the Company consist of the property portfolio and undeveloped land which is predominantly agricultural and forestry land. The fair value of the Company s property portfolio was determined on the basis of the market value appraisals. Thereby, the capital expenditures for properties, which were not yet transferred on the reporting date, were increasingly considered (as at June 30, 2010, TEUR 1,507; as at December 31, 2009, TEUR 517; as at December 31, 2008, TEUR 1,229 and as at December 31, 2007, TEUR 329). The undeveloped land was recognized with the acquisition costs of such a land at approximately EUR 2.6 million, because another value could not be determined in a reliable manner. 4 Loan to Value (LTV) represents the ratio of the Company s financial liabilities to the market value of the Company s property portfolio. The financial liabilities are determined on the outstanding amount of loans due to credit institutions plus interest not due but allocated to the relevant period as at the respective reporting date and which amounted to TEUR 126,451 as at June 30, 2010; TEUR 105,827 as at December 31, 2009; 85,297 as at December 31, 2008 and TEUR 84,227 as at December 31, These financial liabilities are shown in the balance sheet in the item financial liabilities and derivative financial instruments in the aggregate together with derivative financial instruments. By calculating the market value of the immovable assets, only the property portfolio of the Company was considered. The value of the Company s headquarter building in Goethestrasse 45 in Duisburg as well as the undeveloped land of the Company are not considered. 5 Funds from Operations (FFO) is a key financial figure of the operating business of the Company. The FFO is used for the value orientated financial management of the Company to represent the generated financial resources that are available for investments, repayment of debt and dividend payments to the shareholders. The Company calculates FFO according to the following formula: in TEUR Jan 1 to June 30, 2010 (unaudited) Jan 1 to June 30, 2009 (unaudited) Jan 1, to Dec 31, 2009 (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) Net rental income... 10,916 10,276 19,940 17,463 11,093 - Administrative expenses , Personnel costs... -1,314-1,369-2,740-2,973-2,520 +Other operating income adjusted for write-up in respect of previous amortisations and results from the sale of investments Other operating expenses ,587-1,410 + Result from investments and income from securities including capital gains ,103 +Interest income , Interest expenses... -2,853-2,670-5,508-4,644-1,234 FFO before tax... 6,371 5,925 10,756 9,883 7,096 -Taxes on adjusted profit ,136-1,347-1,259 FFO after tax... 6,371 5,325 9,620 8,536 5,837 FFO per share in EUR

70 Taxes on adjusted profit means the hypothetical tax burden which would have existed if the earnings before tax (EBT) corresponded to the FFO. Therefore, the tax effects of the income from the fund were eliminated in the financial year 2007, the tax effects from disposals of investments were eliminated in the financial year 2008 and various tax effects were eliminated in the financial year 2009 (among other things sales of investments, sales of properties, release of reserves) to calculate such a hypothetical tax burden. Due to the REIT status, the Company is exempted from paying the corporate tax so that, for the purposes of calculating the FFO, taxes on adjusted profits no longer apply. 6 Net asset value (NAV) or net tangible value reflects the economic equity of the Company. It is determined by the fair market value of the Company s assets which is essentially the fair market value of the properties minus debt. The Company calculates the NAV according to the following formula: in TEUR Jan 1 to June 30, 2010 (unaudited) Jan 1 to Dec 31, 2009 (unaudited) Jan 1 to Dec 31, 2008 (unaudited) Jan 1 to Dec 31, 2007 (unaudited) balance sheet non-current assets without deferred taxes and derivative financial instruments , , , ,895 + Current assets... 8,058 38,473 55,368 7,863 + non-current assets held for sale... 1, ,813 + assets from discontinued operations... 59,470 - non-current liabilities and provisions without deferred taxes and derivative financial instruments , ,597-91,785-58,167 - current liabilities and provisions without deferred taxes and derivative financial instruments... -9,164-9, ,516-56,955 - liabilities from discontinued operations Balance sheet NAV , , , ,724 + Hidden reserves of non-current assets... 63,109 60,388 61,579 83,894 NAV , , , ,618 NAV per share in EUR The current assets include all current assets, except for the non-current assets held for sale and assets from discontinued operations. The hidden reserves represent the difference between the book value and the market value (fair value) of the investment properties and the Company s non-current assets which are held for sale, the latter only to the extent that they consist of immovable assets, on the respective reporting dates. The investment properties of the Company consist of the property portfolio of the Company and undeveloped land. The market value (fair value) of the property portfolio was determined on the basis of market value appraisals. The capital expenditures for properties, which were not transferred on the reporting date, were increasingly considered (TEUR 1,507 as at June 30, 2010; TEUR 517 as at December 31, 2009; TEUR 1,229 as at December 31, 2008; and TEUR 329 as at December 31, 2007). The value of the undeveloped land was determined for the purpose of the NAV-calculation on the basis of the Company s own assumptions, since there is no reliable way to determine the fair value of the undeveloped land. In the case of non-current assets held for sale, only the TEUR 1,535 reported as at June 30, 2010 was considered; the amount of TEUR 130 reported as at December 31, 2008 does not relate to immovable properties. As at all reporting dates (except for December 31, 2007), the calculation of hidden reserves relates exclusively to differences in respect of immovable assets. Other tangible assets and other assets did not include any hidden reserves. Only as at December 31, 2007, the hidden reserves in an amount of TEUR 14,734 were included in the NAV-calculation, representing the difference between the book value and the market value (fair value) of the investment in the Wohnbau Dinslaken GmbH. 7 Adjusted for the capital increase made on August 2, 2007 of EUR 22,770,000.00, divided into 22,700,000 shares with a calculated nominal value of EUR 1.00 each. 8 The presented fair value of the property portfolio refers only to the built-on property portfolio of the Company. The value of the Company s headquarter building in Goethestrasse 45 in Duisburg as well as the undeveloped land belonging to the Company are not included. The calculation of the fair market value of the property portfolio as at June 30, 2009 and 2010, respectively, is based on the values determined for the annual financial statements from the respective preceding financial year, unless there are indications of any significant changes in the market value of the properties since then. As at June 30, 2010 and 2009, respectively, there was no evidence of such changes in value of such properties that had already been held by the Company at such preceding reporting date so that the value of such properties corresponds to the values recognized for the annual financial statements for the respective preceding financial year. As at June 30, 2010 and 2009, respectively, the value of newly acquired properties was determined using an expert opinion on the indicative market value (if available) or the value was determined on the basis of the acquisition/production costs. In case of asset disposals, the value of the property portfolio is reduced by the corresponding fair market value. However, there were no investment disposals during the first half year of As at December 31, 2009, this position includes short-term derivative financial instruments in the amount of TEUR Excluding deferred tax liabilities. Note: The above listed financial key figures EBITDA, EBDA, FFO, LTV and NAV are not defined by IFRS unambiguously. Potential investors should take into consideration that these financial key figures are not applied in a consistent manner or standardized, that their calculation can vary and that these financial key figures by themselves are not a basis to compare different companies. EBITDA and EBDA are furthermore not recognized as financial key figures by IFRS and do not substitute the financial key figures of the income statement and the cash flow statement that were recognized in accordance with IFRS. 64

71 10. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Investors should read the following discussion of HAMBORNER REIT AG s financial condition and results of operations in conjunction with the sections 12. Description of the Business Activities of HAMBORNER, 2. Risk Factors, the corresponding financial statements and the explanations accompanying these, as well as the other financial information contained in this prospectus. Unless otherwise stated, the financial information contained in the tables in this section and in this prospectus for the first half-year of 2010 and 2009 has been derived from the interim financial statements of HAMBORNER for the half-year ending on June 30, 2010, which has been subjected to a review in accordance with section 37w WpHG (German Securities Trading Act), for the financial years 2009 and 2008 unless otherwise indicated from the audited IFRS separate financial statements of HAMBORNER for the financial year ended December 31, 2009 and for the financial year 2007 unless otherwise stated and subject to roundings from the audited IFRS consolidated financial statements of HAMBORNER for the financial year ended December 31, 2007 (together the IFRS financial statements ). The IFRS financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS ). IFRS deviates in certain important aspects from German Generally Accepted Accounting Principles ( German GAAP ). The audited annual financial statements of HAMBORNER for the financial year ended December 31, 2009 were prepared in accordance with German GAAP and German principles of proper accounting (the HGB annual financial statements ). The audited or subjected to a review in accordance with section 37w WpHG IFRS financial statements and the audited HGB annual financial statements are reproduced in section 20. Financial Section of this Prospectus. For an overview of selected key financial information, see also section 9. Selected Financial and Business Information. The following discussion contains forward-looking statements and forecasts. These are subject to risks, unknowns and other factors which can lead to the actual results deviating considerably from the results contained or implied in the forward-looking statements and forecasts. See sections 3. General Information and 2. Risk Factors. Due to the presentation of figures in thousands of EUR (TEUR) and the application of standard commercial rounding principles resulting in whole numbers, the figures presented may not add up to the totals shown in all cases. As a matter of principle, investments in shares entails risks. This also applies to the shares of HAMBORNER. Certain risks are presented in section 2. Risk Factors Overview of Business Activities HAMBORNER REIT AG is a listed corporation in the form of a Real Estate Investment Trust ( REIT ) operating in the real estate sector and is positioned as a portfolio holder for high-yielding commercial properties. The Company believes it holds an attractive diversified property portfolio which consists mainly of large-scale retail properties in busy areas, commercial buildings in prime locations (so-called high-street-objects) and high quality office buildings in well-established office locations. Despite the historic regional focus in North Rhine-Westphalia the portfolio includes properties across Germany which the Company views as having attractive occupancy rates compared to market standards, yielding sustainable rental incomes. HAMBORNER REIT AG stands out due to extensive experience in the German real estate market and the acquisition and managing of commercial properties as well as long-standing capital market expertise. The Company believes it has a balanced tenant structure with low vacancy rates and to some extent long-standing business relationships with its tenants. HAMBORNER can build on a sound financial structure and in the Company s view presently has currently comparatively low financing costs and benefits from several advantages of the REIT-status, such as exemption from corporation and trade tax. In addition, the Company shows a lean and efficient corporate structure. 65

72 On the reporting date as at August 31, 2010, HAMBORNER had a property portfolio of 60 portfolio properties in 43 locations in Germany with a fair value of approximately EUR 354,160,000. The properties have a total usable floor space of around 208,070 sqm, of which approximately 198,330 sqm are used commercially and around 9,740 sqm as residential spaces. The economic vacancy rate (taking into account rent guarantees) calculated on the basis of the total rental income of the property portfolio (excluding leaseholds) amounted to 1.18% in total for the period from January 1, 2010 to August 31, The market value appraisal by Jones Lang LaSalle contained in this prospectus reports an economic vacancy rate of 1.38% for the month of August On February 18, 2010, HAMBORNER acquired REIT status retroactively as of January 1, On June 8, 2009, the shares of HAMBORNER REIT AG were listed in the Prime Standard segment of the Frankfurt Stock Exchange and included in the REIT segment of Deutsche Börse AG on February 22, It is the objective of the Company, through current investments in selected property assets and through strategic portfolio management, to realize sustained and yield-orientated growth with property assets that are as balanced as possible, diversified and located in Germany. The Company s objectives are to be met by focusing on large-scale retail properties, commercial buildings in prime locations as well as office buildings in medium sized towns and regions in Germany which have long-term growth prospects. When pursuing purchase opportunities, the focus shall always be placed on maintaining a sound financing structure and the continuous ability to pay an attractive dividend. The Company operates in one market segment (real estate) and in one geographic segment (Germany) only and therefore does not prepare segment reports. The Company has no equity interests and pursues no business activities abroad Material Factors affecting results of operations The following section discusses the market-related external factors and factors resulting from the operating activities of the Company that the Company believes materially affect its income and expenses and that had a material effect on HAMBORNER s business development in the first half-year of the financial year 2010, the financial years 2009, 2008 and 2007, as well as up to the date of this Prospectus, and may continue to have such an effect in the future. (For the influence of special factors see section Comparability of prior-year figures ). On the revenue side the most significant aspect of the income situation is the rental and sales revenues from portfolio properties. The most important aspect on the expenses side are the maintenance and modernization expenses, the operational costs for generating the rental income and the costs of financing. Moreover, the profit situation is also affected by the regular re-valuation of the properties in accordance with IAS 40. General economic and financial framework conditions in the market for commercial properties The level of the rents that can be achieved for new or successor tenants of commercial properties, as well as the sales revenues from the sale of properties and the current market values for commercial properties, depend on the prevailing general economic and financial conditions in the market for commercial properties, such as demographic developments, population migration to or away from the area, changes to interest or price levels, the inflation rate or tax and legal framework conditions, the supply and demand for commercial properties and the general attractiveness of Germany as a commercial location compared to other countries. Additionally, special regional factors in the local commercial properties markets, such as regional or local economic developments, unemployment trends and the development of infrastructure, also play a major role for the profit situation of HAMBORNER. Political and regulatory factors Political and legal decisions have a decisive influence on the development of the market for commercial properties in Germany and the business activities of 66

73 HAMBORNER. For example, changes to the building and environmental laws, as well as changes to tax law particularly real estate tax and real estate transfer tax have a considerable influence on the development of the market for commercial properties in Germany and therefore on the profit situation of HAMBORNER. Competition in the German commercial properties market and availability of properties HAMBORNER s business model is based on the premise that in the future it will continue to be in a position to significantly expand its portfolio of commercial properties through corresponding additions in the coming years and lease the acquired commercial properties at economically attractive conditions. The acquisition price of real estate property depends on the supply and demand situation in the commercial real estate market. HAMBORNER is therefore in competition with numerous domestic and foreign property investors who also deal in the acquisition and administration of properties. The expansion of the commercial property portfolio of HAMBORNER therefore depends on the commercial property market continuing to provide a sufficient supply of suitable properties at economic price levels and the Company being able to maintain its access to corresponding suppliers. Amortization and depreciation of properties For the properties which it holds the Company accounts according to the cost model, in which the properties are depreciated according to a schedule in equal remaining amounts over their period of use and shown according to their depreciated purchase or production costs. The fair current market values of the developed Investment Properties (as defined below) are determined at regular intervals. If the current market value of a property is below the book value, this reduction in value amounting to the difference between the book value and fair value is taken into account by means of an impairment charge. Write-ups are carried out if it is ascertained on the reporting dates that an impairment loss which was recorded in previous periods for the respective property no longer exists or has been reduced. The increased book value of an item of property resulting from a write-up must not exceed the book value which would have been determined if planned depreciation had been taken into account and in the previous periods no impairment loss had been recorded. These write-ups and write-downs are posted via the income statement and can therefore have a positive or negative effect on the profit situation. Income from the leasing of properties The level of income from the leasing of its investment properties is an important factor for the income of HAMBORNER. Many rental contracts entered into by HAMBORNER in the past or in the future (will) contain rent review clauses aimed at maintaining value which connect the level of the rental payments to a reference index usually the consumer price index for Germany although the rental claims can only be asserted if agreed threshold levels are exceeded or fall short and the central payments do not necessarily change at 100% in proportion to the change in the index. In some cases these cannot be asserted immediately or at all, and sometimes an adjustment can only be carried out after a term of several years with fixed rental payments. Due to this indexing, the development in the inflation rate has a particular effect on the level of the achievable rental income of HAMBORNER. In the case of new and successor tenants the level of the rental income essentially depends on the general rental price level, the location and size of the corresponding properties or other property-specific reasons, as well as the prevailing vacancy rate at the time of leasing. Operating expenses for generating rental income The level of profit generated from the leasing of investment properties corresponds to the income from the leasing of the properties minus the operating expenditures for achieving rental income, and is therefore influenced by the level of the operating expenditures for achieving rental income for the respective properties. Expenditures consist mainly of the operating costs of the properties and the remuneration for service agreements (e.g. facility management, general administration, consulting). Maintenance and modernization The level of maintenance and modernization costs that have to be paid for by HAMBORNER has a direct influence on the level of the operating expenditures for achieving rental income. Particularly in conjunction with the subsequent leasing of commercial properties 67

74 after the expiry of the corresponding rental contracts, HAMBORNER may in future be forced, due to the ageing process of individual properties, technological changes, altered market expectations and legal requirements or the contemporary demands of tenants to carry out extensive renovations to certain properties in order that these can subsequently be re-leased on appropriate economic terms. Cost of financing The costs of third-party financing for the acquisition of properties have a significant influence on the profit situation of the Company. Any increase or reduction in the general interest level may result in a rise or fall in the refinancing costs of the Company Basis of presentation of financial condition and Results of Operations Significant accounting principles In some cases assessments and assumptions of the Company management have been incorporated into the preparation of the IFRS accounts. The assessment and evaluation of assets and liabilities, as well as the income and expenses contained in the income statement, are affected by these assessments and assumptions. The actual valuations may deviate from the assessments made by the Board of Management of the Company. Below you will find a list of the accounting and valuation principles for the application of which the Board of Management of the Company has had to take discretionary decisions and make certain assumptions, as the underlying facts are by their nature uncertain, so that any changes to these facts can have a significant influence on the results of the IFRS annual financial statements. Recognition of expenses and earnings In principle, sales revenues and other operating income are recorded according to when the services were provided or when, in the case of sales transactions, all important risks and opportunities associated with ownership were transferred to the purchaser. Operating expenses are recorded as expenses upon receipt of the service or on the date incurred. Investment property The investment properties held as a financial investment are valued according to IAS 40 (30) in conjunction with (56) depreciated purchase or production costs by means of straight-line depreciation and not by using the fair value method. The term investment properties is used to describe all undeveloped and developed land, as well as buildings and parts of buildings, which are retained in order to generate future rental income, achieve profits from increases in value and/or for uses which are currently undefined. They are not intended for use for administration purposes or for short-term dealings as part of standard business activities. The planned depreciation is recorded based on the straight-line method over the economic life. The profit from the sale of investment property is shown as a separate item in the income statement. In order to determine the fair value, which according to IAS 40 has to be stated in the notes, HAMBORNER has its property portfolio valued regularly, last on December 31, 2009 by the independent authorized experts Jones Lang LaSalle. With regard to the capital increase effective on August 31, 2010 described in this Prospectus Jones Lang LaSalle prepared another market value report, which is presented in section 21. Market Value Report on pages M-1 et seq. of this prospectus. Jones Lang LaSalle s definition of fair value is the estimated value at which a property should be sold in the usual course of business on the evaluation date to a willing purchaser by a willing seller, after a reasonable marketing period, where each party was dealing with due skill and care and without coercion. The price evaluation is conducted in accordance with customary international valuation practices, amongst others, using the Discounted Cashflow (DCF) method, taking into account current and sustainable rental revenues. This method calculates the value of an investment property on the basis of the capitalized returns, that are estimated to be generated by the given property. The contractually guaranteed annual rents, which are also included in the valuation report by Jones Lang LaSalle, are defined as: the actual current existing income from the property, (i) not 68

75 taking into account extraordinary revenue or deductions that arise from the property, and (ii) not taking into account VAT or other taxes (income tax and interest on equity or financial indebtedness). In determining the cash value of the return, market standard capital interest rates are applied. These were in the ranges of 4.85% to 8.5% for 2010, 5.1% to 8.35% for 2009, 5.1% to 10.25% in 2008 and 5.3% to 10.0% in Properties which do not comprise buildings are recorded at their historic purchase costs. Due to the agricultural and forestry use of these properties another value cannot be safely attributed to them. Available-for-Sale noncurrent financial assets A noncurrent financial asset is defined as available-for-sale, if the relevant book value is predominantly realized through sale and not by continuous utilization. For this to be the case, the asset must in its present condition, be ready for immediate sale at common market terms and conditions and such a sale must be very likely. Available-for-sale noncurrent financial assets are not subject to depreciation. Unplanned write-downs and write-ups on intangible assets, tangible fixed assets and investment property In the case of all intangible assets, tangible fixed assets and investment property, the book value of the amounts recognised on the balance sheet is checked at regular intervals. Furthermore, there is also a check of the valuations if events or changes to circumstances indicate that the book value shown on the balance sheet no longer appears to be achievable. Insofar as the achievable amount for these assets falls significantly short of the book value on the reporting date, this is taken into account by means of an impairment charge. In order to determine the achievable amount, the net realizable value derived from an active market or if higher the cash value of the estimated future cash flow resulting from use is considered. In the case of investment property, the market value determined by the expert assessors forms the measure for the use value. Insofar as the reasons for the unplanned write-downs performed in the previous years no longer exist, write-ups are recorded up to the depreciated book values. The unplanned write-downs are shown in the income statement under the items Amortization of intangible assets, tangible fixed assets and investment property, while write-ups are recorded in the Other operating income. Financial instruments Financial instruments are contracts which result in a financial asset for one company and a financial liability or equity instrument for another company. According to IAS 39, financial instruments are valued upon their initial assessment at the fair value, taking into account the transaction costs upon acquisition. The subsequent valuation is carried out according to which category a financial asset is allocated. Loans and accounts receivable are valued at amortised acquisition costs. Any discernible individual risks are accounted for by value adjustments if necessary. The financial assets retained until maturity are valued at amortised acquisition costs or at the lower market value. The other loans contained therein have a fixed term and are valued using the effective interest rate method. The available-for-sale financial assets, except for the previously held but now liquidated investments are recorded at their fair value. The investments were accounted for at historical cost, as their fair value could not be determined on a reliable basis. Unrealized gains are as far as equity instruments are concerned recognized in a separate position under equity until realization (revaluation reserve) taking into account deferred taxes. If the market value falls below the original cost, changes of the market value are directly recognized in the income statement. Impairment charges which were recorded in the income statement are no longer reversed. These items will be shown on the balance sheet for the first time on the trading day. 69

76 Derivative financial instruments HAMBORNER uses derivative financial instruments in the form of interest rate swaps in order to hedge future cash flows ( hedged items ). The derivative financial instruments are shown on the balance sheet for the first time on the trading day. In the case of cash flow hedges which serve the purpose of securing risks that affect the amounts or the sequence of future funding, market value changes are recorded in the equity capital reserve (revaluation reserve). Positive market values of the derivative financial instruments are shown under other assets, while negative values are recorded under financial liabilities. The precondition for the financial accounting of hedging relationships according to the rules of so-called hedge accounting is that the clear hedge accounting relationship between the underlying transactions and the hedging instrument is documented and the effectiveness of such instruments is demonstrated both prospectively and retrospectively. The valuation of interest derivative transactions which do not fulfill the preconditions of hedge accounting are recorded at market values. The profits and losses resulting from the market value changes to these financial instruments are shown in the income statement within the financial results. The interest rate derivatives, other than one derivative expiring on December 31, 2010, fulfill the requirements of hedge accounting and are therefore recognized in equity. Deferred taxes For the accounts up to December 31, 2009 tax accruals and deferrals were recorded with temporary deviations between the valuations of the assets and equity and liabilities in the tax balance sheet and their book values in the IFRS balance sheet (so-called liability method) and shown as deferred tax assets and liabilities. The deferred taxes are determined on the basis of the tax rates and tax regulations applicable to HAMBORNER on the reporting date. The consequences of the REIT transformation were only recorded on the balance sheet for the first time at the time of the change of status with the registration as a REIT AG in the financial year Accordingly, in order to determine the tax burdens to be expected in the future, the tax rates are used which would be expected in the case of the reversal of the temporary deviations and applicability of the effective tax payable according to the tax status as of the reporting date. Deferred taxes are recorded as tax benefits or tax expenses in the income statement, unless they relate to items recorded directly in equity which do not affect net income. In this case the deferred taxes are also recorded in equity and do not affect net income. Deferred tax assets are recognised to the extent to which it would be probable, according to the tax status on the financial statement reporting date, that a taxable income will become available for which the deductible temporary difference could be used. Provisions for pensions The actuarial valuation of the pension provisions is based on the projected unit credit method stipulated in IAS 19 for defined benefit promises of retirement pensions. In this method, not only the pensions and acquired pension rights known on the balance sheet date are taken into account, but also the increases in salaries and pensions expected in the future. For actuarial profits and losses, the corridor method permitted by IAS 19 is used. According to this, actuarial profits and losses are distributed over the average remaining working lives of the pension scheme members, provided that they exceed 10% of the benefit obligations. The service costs and the actuarial profits/losses to be recorded for the current year are shown within personnel costs, while the interest portion of the pension costs is shown within interest expenses. Expenditures for defined contribution schemes are recorded as an expense and shown in personnel costs. 70

77 Other provisions According to IAS 37, provisions are recorded insofar as a current obligation exists with respect to third parties from a past event which in the future will probably result in the outflow of resources and whose level can be reliably estimated. The short-term provisions are recorded in the amount of their anticipated settlement (best estimate) without discounting and take into account all of the discernible obligations on the respective balance sheet date which are based on business transactions or events in the past and whose level and/ or due date is uncertain. The only third-party obligations which are taken into account are those where it is probable that they will result in an outflow of assets. Provisions for obligations which will not result in an outflow of resources in the following year are recorded based on the level of the cash value of the expected asset out flow Comparability of Prior Year Figures Influence of special factors The results of the first half-year 2010 as well as of the financial years 2009, 2008 and 2007 were affected by various special factors. The financial year 2007 was materially affected by the liquidation of the special share fund Südinvest 107 which provided revenues of TEUR 34,525 and was shown in the income statement as a result from discontinued operations. Furthermore the sale of eight portfolio properties generated income of TEUR 5,621 for the financial year In addition, the deferred taxes as of December 31, 2007 were adjusted for the revised tax rates applied as a result of the German corporate tax reform of This generated a non-cash one off tax income of TEUR 10,454. The revenue for the financial year 2008 was, amongst others, affected by the sale of properties in Osnabrück and Oldenburg as well as a residential property portfolio with sale proceeds of TEUR 6,689. The sale of the shareholding in Wohnbau Dinslaken GmbH generated further proceeds of TEUR 11,223. Another special item in the result from discontinued operations in the amount of TEUR 374 was generated by the liquidation of the special share fund Südinvest 107. To adjust the residual book value of investment property as of December 31, 2008 to the fair market value, a non-scheduled depreciation of TEUR 4,717 was recorded. In the financial year 2009 profit of TEUR 434 was generated from the sale of a property in Bad Oeynhausen as well as a plot of land. Income of TEUR 677 was generated by the sale of an investment in Montan GmbH Assekuranz Makler and a deferred purchase price payment for Wohnbau Dinslaken GmbH. With attaining REIT-status, the Company is exempted from corporation and trade tax as of January 1, Upon attaining REIT-status, the Company had to disclose its hidden reserves as at December 31, 2009 and subject them to an exit tax charge. The IFRS accounts for the first half-year of 2010 recorded the resulting tax effect of TEUR 16,577 which could be effectively offset against deferred taxes of TEUR 13,778 accumulated so that the net effect on the first half-year 2010 results was TEUR 2,799. Deferred taxes will no longer be relevant in the future as long as the Company retains it REIT-status. Changes in the basis of consolidation The consolidated entity of the IFRS financial statements for the financial years 2008 and 2007 included not only the Company, but also the firm Hambornberg Immobilien- und Verwaltungs-GmbH and up to its dissolution on February 6, 2008 the special share fund Südinvest 107, in which the Company directly held 100% of the voting rights and shares. Upon the merger of Hambornberg Immobilien- and Verwaltungs-GmbH with the Company effective October 1, 2009, there is no longer any obligation to prepare consolidated accounts. However, as a corporation listed on the stock exchange, HAMBORNER voluntarily prepares and publishes separate financial statements in accordance with the regulations of the IFRS pursuant permitted by and section 325 (2a) of the German Commercial Code. 71

78 Changed application of accounting methods and changes in presentation In the financial year 2009 the following presentation changes were made to the comparative figures that are included in the IFRS financial statement for the fiscal year 2009, for the financial year 2008 in the IFRS accounts of the Company, but not for the financial year 2007: On the basis of the widely-used classification proposals of the European Public Real Estate Association (EPRA) for property companies, the income statement was adapted to include comparative figures for the financial year 2008 in order to provide a better depiction of the profit situation in the financial year 2009, with additional items being included in the income statement and reclassifications being recorded between individual items. The expenses and income from the sale of properties are no longer recorded under other operating income/other operating expenses in the income statement, but are shown separately. This leads to the following adjustments of the comparative figures for the financial year 2008: Adjustments for the financial year 2008 in TEUR (audited) Other operating income... -6,737 Other operating expenses Result from the sale of investment property... 6,689 Administrative expenses, which in the previous years were included in the other operating expenses, are now shown separately. This lead to the following adjustments of the comparative figures for the financial year 2008: Adjustments for the financial year 2008 in TEUR (audited) Other operating expenses... 1,042 Administrative expenses... -1,042 A further adjustment concerns the income from rent guarantees, which were recorded under other operating income in previous years. The following adjustments of comparative figures for the fiscal year 2008 were made: Adjustments for the financial year 2008 in TEUR (audited) Income from rents and leases Other operating income The data presented for the financial year 2007 in the tables in sections 1.3 Selected financial and business information, 9. Selected financial and business information and under Comparison of the financial years 2009, 2008 and 2007 of this prospectus have, for the purposes of assisting the comparison, been adjusted as follows: Adjustments for the financial year 2007 in TEUR (unaudited) Other operating income... -5,699 Income from rents and leases Result from the sale of investment property... 5,621 Administrative expenses Other operating expenses Other capitalised services Other operating income According to the requirements of the revised IAS 1 Presentation of the accounts, the IFRS accounts for the financial year 2009 contain not only the income statement, but also a statement of income and accumulated earnings. This compilation of the income and expenses recorded throughout the entire financial year shows not only the annual profit or loss, but also changes to equity that do not affect net income. 72

79 All other mandatory standards applicable from January 1, 2009 onwards have no material effect on the IFRS financial statements of the Company for the fiscal year In the view of the Company, no material effects on the net assets, financial condition and results of operation are to be expected in the future from the application of standards and interpretations published on the balancesheet date Results of operations The items presented below compare the results of operations of HAMBORNER for the first half-years of the 2010 and 2009 financial years, which ended on June 30, 2010 and 2009, as well as for the financial years 2009, 2008 and 2007, which ended on December 31 of each year Comparison of the first Half-Year of the Financial Years 2010 and 2009 The figures presented below compare the results of operations of HAMBORNER for the first half years of the financial years 2010 and 2009, both of which ended on June 30. The following table shows the important items from the income statement of the Company for the first half-year of the financial years 2010 and 2009, which ended on June 30 in each case, on the basis of an IFRS interim financial statement for the first half of 2010, which has undergone a review according to section 37w of the German Securities Trading Act: in TEUR 1st half-year 2010 (reviewed) 1st half-year 2009 (reviewed) Income from rents and leases... 11,840 11,076 Income from passed-on incidental costs to tenants... 1,347 1,145 Real estate operating expenses... -1,819-1,675 Property and building maintenance Net rental incomes... 10,916 10,276 Administrative expenses Personnel costs... -1,314-1,369 Amortisation of intangible assets, tangible fixed assets and investment property... -3,607-3,195 Other operating income Other operating expenses Operating result... 5,539 5,709 Result from the sale of investment property Result from investments Earnings before interest and taxes (EBIT)... 5,603 5,973 Interest income Interest expenses... -2,853-2,669 Financial result... -2,776-2,315 Earnings before taxes (EBT)... 2,827 3,658 Taxes on income and profit... -2, Result for the period ,316 Retained profits from previous year... 23,844 27,196 Net retained profits... 23,890 30,512 Earnings per share (in EUR) Rental and leasing income The rental and leasing income from investment property according to IAS 40 accounted for TEUR 11,840 in the first half-year 2010 and therefore exceeded the first halfyear 2009 amount of TEUR 11,076 by TEUR 764 or 6.9%. This increase is primarily due to the rental income of TEUR 973 generated from properties purchased during 2009 and the first half-year This trend is supported by the low vacancy rate, not taking into account rental guarantees, that mainly apply to newer properties, which was 2.29% for the first half-year 2010 (first half-year 2009: 3.70%). Taking into account rental guarantees, the vacancy rate for the first half-year 2010 was 1.15% (first half-year 2009: 0.95%). 73

80 This is contrasted by lost rental revenue of TEUR 28 for properties sold during the financial year The rental revenues generated from properties continuously within the portfolio since January 1, 2009 have, due to continuing market pressure, decreased in the first half-year 2010 as compared to the first half-year 2009 by TEUR 181 or 1.9%. Income from passed-on incidental costs to tenants The income from the passing-on of incidental costs to tenants under the existing rental agreements was TEUR 1,347 for the first half-year 2010 and thereby exceeded the amount of TEUR 1,145 for the first half-year 2009 by TEUR 202 or 17.6%. This increase to the comparison period is mainly due to the expansion of the property portfolio. Real estate operating expenses The real estate operating expenses for running and managing HAMBORNER s properties were TEUR 1,819 for the first half-year 2010 and thereby exceeded the TEUR 1,675 for the first half-year 2009 by TEUR 144 or 8.6%. This development is mainly due to the expansion of the Company s property portfolio. Property and building maintenance The expenditure for the property and building maintenance was TEUR 452 for the first half-year 2010 and thereby exceeded the TEUR 270 for the first half-year 2009 by TEUR 182 or 67.4%. This increase is mainly due to the refurbishment works in the amount of TEUR 92 undertaken in conjunction with a new lease for property in Münster commenced in the second quarter of Administrative expenses Administrative expenses were TEUR 428 for the first half-year 2010 and thereby exceeded, albeit being in the same region, the TEUR 413 for the first half-year 2009 by TEUR 15 or 3.6%. Personnel costs Personnel costs were TEUR 1,314 for the first half-year 2010 and thereby lower than the TEUR 1,369 for the first half-year 2009 by TEUR 55 or 4.0%. The cancellation of provisions made for bonus payments was offset by increased pension costs. The cancellation of provisions for bonus payments was made in respect of provisions made for bonus payments which were not made in the preceding year. The increase in the pension costs was mainly due to actuarial losses which had to be accounted for in the first half-year 2010 for the current period. Amortization of intangible assets, tangible fixed assets and investment property- The amortization of intangible assets, tangible fixed assets and investment property was TEUR 3,607 for the first half-year 2010 and thereby exceeded the TEUR 3,195 for the first half-year 2009 by TEUR 412 or 12.9%. This increase is mainly due to the larger property portfolio for the comparison period which resulted in higher planned amortization. Other operating income The other operating income was TEUR 307 for the first half-year 2010 and thereby lower than the TEUR 796 for the first half-year 2009 by TEUR 489 or 61.4%. The other operating income mainly contains reversals of provisions, building cost contributions by tenants received for building conversions of their respective rental spaces as well as damage and compensation payments. Damage payments of TEUR 44 resulted from an early rental termination and compensation payments of TEUR 75 were received for due diligence costs incurred by the Company in conjunction with a planned property purchase which did not proceed. The reduction in comparison to the comparison period is mainly attributable to the fact that the other operating income for the first half-year 2009 was influenced by the gain on the sale of the investment in Montan GmbH Assekuranz Makler and the deferred purchase price payment received for the sale of the investment in Wohnbau Dinslaken GmbH which was already finalised in 2008 which had a combined effect of TEUR 677. Other operating expenses The other operating expenses were TEUR 335 for the first half-year 2010 and thereby lower than the TEUR 386 for the first half-year 2009 by TEUR 51 or 13.2%. The reduction is mainly attributable to the decrease in legal and advisory costs of TEUR 180 by comparison to the comparison period. This reduction was in part offset by the general increase of various other business expenses. 74

81 Result from the sale of investment property The result from the sale of investment property was TEUR 64 for the first half-year 2010 and thereby lower than the TEUR 250 for the first half-year 2009 by TEUR 186 or 74.4%. The reduction is mainly attributable to the fact that during the first half-year of 2010 only land plots were sold whereas during the comparison period an agriculturally used built-on plot was sold. Result from investments Following the conversion of the Company into a Real Estate Investment Trust (REIT) and the associated sale of all investments, the Company no longer records a result from investments in Financial result The financial result was TEUR -2,776 for the first half-year 2010 and thereby lower than the TEUR -2,315 for the first half-year 2009 by TEUR 461 or 19.9%. This reduction can mainly be attributed to the increase in financial indebtedness for the financing of new property investments and the resulting increase in interest expenses. At the same time, interest income was reduced to TEUR 77 for the first half-year 2010 which was lower by TEUR 277 in comparison to the comparison period as a result of the continuing low interest rate levels and the reduction in the cash reserves as a result of investments and tax payments made. Taxes on income and profit The taxes on income and profit were TEUR 2,781 for the first half-year 2010 and thereby exceeded the TEUR 342 for the first half-year 2009 by TEUR 2,439. This increase in the tax burden was mainly due to the step-up in the tax bases for all properties after the Company attained REIT-status and which resulted in an exit tax being levied on this step-up in value. With the attainment of the REIT-status, the Company will in the future be exempt from corporation and trade tax. The additional tax payment of TEUR 16,577 recorded in the first half-year of 2010 could be effectively offset by the Company against deferred taxes of TEUR 13,778 accumulated so that the net effect on the first half-year 2010 results was TEUR 2,

82 Comparison of the Financial Years 2009, 2008 and 2007 The figures presented below compare the operating result of HAMBORNER for the financial years 2009, 2008 and 2007, each of which ended on December 31. The following table shows the important items from the income statement of the Company for the financial years ending as of December 31, 2009 and 2008 on the basis of the audited IFRS separate financial statements for the 2009 financial year and for the financial year ending on December 31, 2007 on the basis of the audited IFRS consolidated accounts for the 2007 financial year (subject to rounding differences): in TEUR 2009 (audited) 2008 (audited) (unaudited) Income from rents and leases... 22,451 19,725 13,318 Income from passed-on incidental costs to tenants... 2,419 1,873 1,229 Real estate operating expenses... -3,666-3,026-1,860 Property and building maintenance... -1,264-1,109-1,594 Net rental incomes... 19,940 17,463 11,093 Administrative expenses , Personnel costs... -2,740-2,973-2,520 Amortisation of intangible assets, tangible fixed assets and investment property... -7,268-10,257-3,177 Other operating income... 2,128 12,475 1,896 Other operating expenses ,587-1,410-9,503-3,384-6,071 Operating result... 10,437 14,079 5,022 Result from the sale of investment property ,689 5,621 Result from investments Earnings before interest and taxes (EBIT)... 10,884 21,411 11,092 Interest income , Interest expenses... -5,508-4,644-1,234 Income from securities, including capital gains Financial result... -5,019-2, Earnings before taxes (EBT)... 5,865 18,484 11,056 Taxes on income and profit ,517 6,645 Result from continuing operations... 5,073 16,967 17,701 Result from discontinued operations ,525 Profit for the financial year... 5,073 17,341 52,226 Retained profits from previous year... 35,165 53,922 1,554 2 Dividends... -7,970-7, Transfer to other retained earnings , Withdrawals from other retained earnings Net retained profits... 32,268 35,165 53,922 Earnings per share (in EUR) thereof from continuing operations thereof from discontinued operations Adjusted to take account of the new indexing structure applied for the financial years 2009 and 2008, in application of the indexing structure proposed by the European Public Real Estate Association (EPRA) and widely adopted for property companies. This applied (i) to the expenditure and income of the sale of properties which are now no longer recorded in the income statement under other income but are recorded separately; (ii) administrative expenses which in previous years were recorded in other expenses, (iii) income from rental guarantees, which in previous financial years were recorded in other income, as well as (iv) other activated services provided by the Company which are no longer separately recorded but instead recorded as other operating income. 2 Retained profits from previous year, the dividends and the transfer to other retained earnings have been recorded under the item Profit carried forward from the previous year and offset and amount to TEUR 9,497 (retained profits), TEUR -6,831 (dividends) and TEUR -1,112 (transfer) upon release. Rental and leasing income The rental and leasing income from investment property according to IAS 40 increased from TEUR 19,725 in the financial year 2008 by TEUR 2,726 or 13.8% to TEUR 22,451 in the financial year 2009, after they had already risen from TEUR 13,318 in the financial year 2007 by TEUR 6,407 or 48.1% to TEUR 19,725 in the financial year The rise in rental and leasing income in the financial year 2009 compared to 2008 essentially result from the sum of the property additions in the fiscal years 2009 and 2008 of TEUR 3,178, rental 76

83 losses as a consequence of property sales of TEUR 485, other falls in rental revenue of TEUR 372 and increased income from rental guarantees of TEUR 405. The reduction in the rental income of properties that remained in the portfolio throughout the financial years 2009 and 2008 can be attributed to the difficult rental market environment. The rise in the financial year 2008 compared to 2007 is essentially made up as follows: property additions of the financial years 2008 and 2007 of TEUR 6,730 property sales with reduced income of TEUR 675 rental increases on the basis of index or graduated rental agreements of TEUR 244 and rent losses, rent reductions in the case of a change of tenant and rent abatements granted in order to avoid vacancies of TEUR 101 as well as increased income from rental guarantees of TEUR 210. The supplemental table below shows the distribution of the rental and leasing income according to the respective property types and from rental guarantees: in TEUR 2009 (audited) 2008 (audited) (unaudited) Retail trade spaces... 14,205 13,233 9,567 Office spaces and medical practices... 6,176 4,636 2,019 Manufacturing and other industrial areas Homes Garages / car parking spaces Other lettings and leasings (agricultural leasing, licensing agreements etc.) Income from rent guarantees Total... 22,451 19,725 13,318 1 Adjusted to take account of the new indexing structure applied for the financial years 2009 and 2008, in application of the indexing structure proposed by the European Public Real Estate Association (EPRA) and widely adopted for property companies. This applies to revenues from rental guarantees which were recorded as other operating income in previous years. Income from passed-on incidental costs to tenants The income from the passing on of incidental costs to tenants mainly comprise heating costs, real estate levies and other ancillary rental costs which are apportionable according to the rental contract agreements, and which rose from TEUR 1,873 in the financial year 2008 by TEUR 546 or 29.2% to TEUR 2,419 in the financial year 2009, after they had already risen from TEUR 1,229 in the financial year 2007 by TEUR 644 or 52.4% to TEUR 1,873 in the financial year The increase in the income from passed on incidental costs in the financial year 2009 compared to 2008 (or in the financial year 2008 compared to 2007) amounted to TEUR 564 (TEUR 660) due to the change of the property portfolio, while the income from passed-on incidental costs for the other properties remaining in the portfolio decreased by a total of TEUR 18 (TEUR 16). The decrease in these two years results from the adjustment of advance payments and various due-up adjustments associated with the individual properties. Real estate operating expenses The real estate operating expenses comprise amongst other things expenses for energy, real estate levies, insurance premiums, ground rent and real estate taxes and can mostly be passed on to the tenants as part of the rental contract agreements. They rose from TEUR 3,026 in the financial year 2008 by TEUR 640 or 21.2% to TEUR 3,666 in the financial year 2009, after they had risen from TEUR 1,860 in the financial year 2007 by TEUR 1,166 or 62.7% to TEUR 3,026 in the financial year The increase in the financial year 2009 compared to 2008 is essentially due to the additions of new properties in the year 2008, amongst some of which the operating costs (in particular heating and electricity costs) are considerable due to the size of the properties. In the case of these properties the tenants had agreed relatively low advance payment amounts with the previous owner. The increase in the operating costs from the financial year 2007 to 2008 is essentially based on the addition of the Kaufland portfolio at the end of The disproportionate rise in income from passed-on incidental costs to tenants is mainly attributable to the fact that the operating costs resulting from the acquisition had a full negative effect on profit for the first time in the 2008 financial year and are in part not capable of being passed on. 77

84 The following supplemental table shows the distribution of the real estate operating expenses according to the various types of expenditure: in TEUR 2009 (audited) 2008 (audited) 2007 (unaudited) Energy, water and the like.... 1,451 1, Property levies Land taxes Ground rents Insurance premiums Rents and leases for third-party land Other Total... 3,666 3,026 1,860 Property and building maintenance The expenses for property and building maintenance rose from TEUR 1,109 in the financial year 2008 by TEUR 155 or 14.0% to TEUR 1,264 in the financial year 2009, after they had fallen from TEUR 1,594 in the financial year 2007 by TEUR 485 or 30.4% to TEUR 1,109 in the financial year The rise in the financial year 2009 compared to 2008 essentially results from the refurbishment expenses for a property in Sankt Augustin in the year 2009 (TEUR 320) and the expenses reduction of expenses for two properties in Leverkusen and Erfurt in the year 2008 TEUR 170. The fall from the financial year 2007 to 2008 is mainly attributable to the reduction of expenses in 2007 on an office building located in Hamburg. Administrative expenses The administrative expenses contain the costs of the annual General Meeting, Supervisory Board and auditor of the annual accounts, as well as the actual costs of administration. This was reduced from TEUR 1,042 in the financial year 2008 by TEUR 291 or 27.9% to TEUR 751 in the financial year 2009, after it had risen from TEUR 860 in the financial year 2007 by TEUR 182 or 21.2% to TEUR 1,042 in the financial year The reduction in administrative expenses from the financial year 2008 to 2009 mainly resulted from a reduction in the Supervisory Board remuneration and the costs of the annual General Meeting, a large part of which depend on the operating result. In contrast, the rise in administrative expenses in the financial year 2008 compared to 2007 is partly attributable to an TEUR 84 increase in the costs associated with the annual General Meeting, which essentially comprise legal costs. The cost for the auditors, especially for auditing and tax advisory work, were TEUR 221 for the financial year 2009, TEUR 157 for the financial year 2008 and TEUR 181 for the financial year Personnel costs The personnel costs comprise wages and salaries, social security contributions and benefits, as well as expenses for pensions. The personnel costs were reduced from TEUR 2,973 in the financial year 2008 by TEUR 233 or 7.8% to TEUR 2,740 in the financial year 2009, after they had risen from TEUR 2,520 in the financial year 2007 by TEUR 453 or 18.0% to TEUR 2,973 in the financial year The following supplemental table shows the distribution of personnel costs according to the respective types of expense: in TEUR 2009 (audited) 2008 (audited) 2007 (unaudited) Wages and salaries... 2,306 2,599 2,199 Social security and other pension costs Expenses for pension scheme/pension costs Total... 2,740 2,973 2,520 The wages and salaries fell from the financial year 2008 to 2009 by TEUR 293 or 11.3% while they rose by TEUR 400 or 18.2% from the financial year 2007 to The main reason for the 78

85 change is compensation paid to a retired member of the Managing Board in the fiscal year In addition, the change in head count, due to usual employee rotation, for the financial year 2007 was fully realized in the financial year 2008 for the first time and resulted in the increase in costs in Excluding the members of the Managing Board, the yearly average number of employees at HAMBORNER was 23 in the year 2009, 24 in the year 2008 and 22 in the year Amortisation of intangible assets, tangible fixed assets and investment property Amortisation was reduced from TEUR 10,257 in the financial year 2008 by TEUR 2,989 or 29.1% to TEUR 7,268 in the financial year 2009, after it had risen from TEUR 3,177 in the financial year 2007 by TEUR 7,080 or 222.9% to TEUR 10,257 in the financial year In the financial year 2009 the useful lifes for investment property were 33 to 50 years for commercial and office buildings, 33 to 40 years for superstores and 40 to 50 years for other commercial properties. The amortization of the management premises of the Company is based on an estimated useful life of 50 years with 10 years remaining as of December 31, The office and business equipment has a remaining useful life of 3 to 15 years. The amortisation in the financial year 2009 amounted to TEUR 7,228 (2008: TEUR 10,215; 2007: TEUR 3,140) related to investment property. These include impairments in the amount of TEUR 714 for the financial year 2009 (2008: TEUR 4,717; 2007: TEUR 370) as a result of the adjustment of the residual book values shown at the end of the business year to the fair market values determined by an external expert valuation report. In comparison, the impairment reversals in the financial year 2009 were TEUR 1,266 (2008: TEUR 945; 2007: TEUR 1,516), which are shown in the other operating income. The impairments for the financial year 2008 in the amount of TEUR 4,717 were attributable to the adjustment of the residual book values as of December 31, 2008 to the fair market values for a total of eight portfolio properties. In the financial years 2007 and 2009 the adjustment requirement due to the external evaluation was considerably lower. Other operating income The other operating income is composed of earnings from the disposal of investments, impairment reversals, write-ups of discounted residential building loans and the remaining other operating income and was reduced from TEUR 12,475 in the financial year 2008 by TEUR 10,347 or 82.9% to TEUR 2,128 in the financial year 2009, after it had risen from TEUR 1,896 in the financial year 2007 by TEUR 10,579 or 558.0% to TEUR 12,475 in the financial year The following supplemental table shows the distribution of the other operating income according to the respective types of income: in TEUR 2009 (audited) 2008 (audited) 2007 (unaudited) Income from the disposal of investments ,223 0 Reversal of impairment adjustment... 1, ,516 Write-ups of discounted housing loans Remaining other operating income Receipt of indemnifications and reimbursements Release of provisions Charges passed on to tenants and leaseholders Pension liability insurance Other Subtotal Total... 2,128 12,475 1,896 The earnings from the disposal of investments in the financial year 2009 is made up of a subsequent purchase price payment in the amount of TEUR 548 for the sale of shares in Wohnbau 79

86 Dinslaken GmbH, which was completed in 2008, as well as from the sale of shares in Montan GmbH Assekuranz Makler in the amount of TEUR 129. The difference between the book value and the fair market value was already recorded in the revaluation reserve in the previous year. The impairment reversal in the amount of TEUR 1,266 results from the adjustment of properties subject to impairment charges in the previous years to the current market values determined by the expert report as of December 31, The earnings from the disposal of investments in the financial year 2008 in the amount of TEUR 11,223 resulted from the sale of shares in Wohnbau Dinslaken GmbH. The impairment reversal results from the adjustment of properties depreciated in the previous years at the lower fair value to the current market values determined by the expert report as of December 31, The impairment reversal in the financial year 2007 results from the adjustment of properties subject to impairment charges in previous years to the current market values as of December 31, 2007 on the basis of the market expert report obtained. Other operating expenses Other operating expenses decreased from TEUR 1,587 in the financial year 2008 by TEUR 715 or 45.1% to TEUR 872 in the financial year 2009, after it had risen from TEUR 1,410 in the financial year 2007 by TEUR 177 or 12.6% to TEUR 1,587 in the financial year This decrease in the financial year 2009 compared to 2008 mainly results from a reduction in legal and consulting costs incurred in the previous year for special transactions in the amount of TEUR 594 which arose in conjunction with the auditing of a transaction for the acquisition of a major property portfolio, as well as the reduced accrual expenses for mining damages compared to the previous year by TEUR 174. In contrast, the rise from the financial year 2007 to 2008 was essentially attributable to the fact that the Company had made TEUR 155 of additional accruals for mining damages in Furthermore, the other operating expenses for the financial year 2008 included consultancy fees in the amount of TEUR 1,179. Overall these are consistent with the financial year 2007 (TEUR 1,162). Result from the sale of investment property Result from the sale of investment property fell from TEUR 6,689 in the financial year 2008 by TEUR 6,255 or 93.5% to TEUR 434 in the financial year 2009, after it had risen from TEUR 5,621 in the financial year 2007 by TEUR 1,068 or 19.0% to TEUR 6,689 in the financial year While it was possible in the financial year 2008 to sell two existing properties and a residential portfolio consisting of four properties, the sales in the financial year 2009 only comprised one existing property, as well as minor disposals of undeveloped land. In the financial year 2007 eight existing properties were sold, one agricultural homestead and an undeveloped plot of land. Result from investments Result from investments decreased from TEUR 643 in the financial year 2008 by TEUR 630 or 98.0% to TEUR 13 in the financial year 2009, after they had risen from TEUR 449 in the financial year 2007 by TEUR 194 or 43.2% to TEUR 643 in the financial year Result from investments in the financial years 2008 and 2007 essentially contain the income from investment in Wohnbau Dinslaken GmbH. The decrease in the financial year 2009 compared to the previous years resulted from the elimination of the dividend of Wohnbau Dinslaken GmbH after the sale of its investment by the Company. Financial result Financial result relative to the result from continuing operations decreased from TEUR -2,927 in the financial year 2008 by TEUR 2,092 or 71.5% to TEUR -5,019 in the financial year 2009, after it had already decreased from TEUR -36 in the financial year 2007 by TEUR 2,891 to TEUR -2,927 in the financial year

87 The following table shows the individual items of the financial result broken down into total financial result and financial results of activities to be continued and discontinued: in TEUR Total 2009 (audited) Activities to be discontinued 2009 (audited) Activities to be continued 2009 (audited) Total 2008 (audited) Activities to be discontinued 2008 (audited) Activities to be continued 2008 (audited) Total 2007 (audited) Activities to be discontinued 2007 (audited) Activities to be continued 2007 (audited) Income from securities including capital gains ,566 34, Capital losses and written off financial investments ,426-1,426 0 Other interest and similar income , ,717 1, Interest and similar charges... -5,508-5,508-4,644-4,644-1, ,234 Financial result... -5,019-5,019-2, ,927 34,425 34, After the sale of the special share fund Südinvest 107 at the beginning of 2008, the financial result for the financial year 2009 only contains interest income and interest expenses. The interest income consists mainly of day deposit or fixed term deposit interest for financial investments with various banks. The decrease of TEUR 1,430 in the financial year 2009 compared to 2008 is essentially attributable to the generally lower interest level, the lower level of liquidity of the Company due to the property investments carried out, as well as the dividend paid for the financial year The rise in interest expenses from the financial year 2008 to 2009 by TEUR 864 is mainly attributable to the property investments carried out in 2009 and results from the interest expenses being recorded in full as expenses for the property loans taken out in 2008 and the pro rata interest expenses for those taken out in Interest expenses contain cash outflows from executed interest hedges in the amount of TEUR 2,499. In the financial year 2008 the income from securities, including the capital gains, dropped to TEUR 277 from TEUR 35,566 in the financial year The difference related to TEUR 34,912 for interest, investment and income from the sale of the special share fund Südinvest 107 and were shown under the income as being from activities to be discontinued. The losses from sales in the business years 2008 (TEUR 20) and 2007 (TEUR 1,426) were also shown under activities to be discontinued and related to losses from sales from the special share fund Südinvest 107. The increase in interest earnings in the financial year 2008 compared to 2007 by TEUR 400 is essentially attributable to the investment of additional funds in time deposits. The additional funds mainly result from capital gains generated from the sale of the shares in the special stock fund Südinvest 107, from tangible and financial asset retirements, as well as from the sale of the participation in Wohnbau Dinslaken GmbH and two properties and a residential portfolio. The increase in interest expenses from the financial year 2007 to 2008 is mainly attributable to increased loan financing of the property investments. Furthermore, interest expense in the financial year 2008 contained interest in the amount of TEUR 50 for the supplemental tax payment expected as a result of a Company audit. Taxes on income and profit Taxes on income and profit decreased from TEUR 1,517 in the financial year 2008 by TEUR 725 or 47.8% to TEUR 792 in the financial year 2009, after it had risen from tax revenue in the amount of TEUR 6,645 in the financial year 2007 by TEUR 8,162 or 122.8% to a tax burden in the amount of TEUR 1,517 in the financial year The following table shows the composition of taxes on income and profit: in TEUR 2009 (audited) 2008 (audited) 2007 (audited) Current income tax charge... 1,204 5,998 1,678 Deferred taxes ,475-8,323 Foreign withholding tax Total ,517-6,645 81

88 Current income tax expense includes the corporation and trade income tax of the Company. The higher current income tax expense in the financial year 2008 compared to the financial years 2009 and 2007 is essentially attributable to the final tax assessment shown in the financial year 2008 for the gain from the sale of the special share fund Südinvest 107. Furthermore, in the financial year 2008 tax expense of TEUR 500 for previous years was recorded as a consequence of a fiscal Company audit for the years 2001 to 2006 and tax revenue in the amount of TEUR 400 from the adjustment to the corporation tax provision for In the financial year 2009 the Company s tax rate to be applied to the profit before income taxes was 15.8% (2008: 15.8%; 2007: 26.4%). In order to determine the deferred taxes, the tax rate in effect on the respective balance sheet date was used. The recorded deferred taxes (active and passive) for the financial year 2007 were adjusted in accordance with the new tax rates resulting from changes made to the corporation tax law on January 1, 2008 as a result of the German corporation tax reform. This resulted in a one off benefit of EUR 10.5 million (offset). The exit tax for the liquidation of the special share fund Südinvest 107 was levied in the financial year As a result, deferred taxes accumulated in prior periods were reversed which resulted in deferred tax income of EUR 4.5 million in The deferred taxes for the financial year 2009 did not contain any special items Liquidity and Capital Endowment Cash Flow Statement In the cash flow statement the payment flows are explained separately according to cash inflows and outflows from the operational business activities, from the investment and financing activities, irrespective of the breakdown on the balance sheet. The HAMBORNER cash flow statement is set up in accordance with the rules of IAS 7. HAMBORNER is not affected by changes to the exchange rates or the consolidated entity. 82

89 Comparison of the first half-year of the 2010 and 2009 financial years Non-binding convenience translation The following table shows the cash flow statement of the Company for the first half-years ending on June 30, 2010 and 2009 of the financial years 2010 and 2009 on the basis of an IFRS interim financial statement for the first half-year of 2010 which has been subjected to a review in accordance with section 37w of the German Securities Trading Act: in TEUR 1st halfyear 2010 (reviewed) 1st halfyear 2009 (reviewed) Cash flow from operating activities Earnings before taxes (EBT)... 2,827 3,658 Depreciation, Amortization and Impairments/write-ups (-)... 3,607 3,195 Net interest and investment income... 2, ,302 Change in provisions ,066 Gain (-) / loss (+) (offset) from the disposal of tangible fixed assets, investment property and non-current assets held for sale Gain (-) / loss (+) (offset) from the disposal of financial assets Other non-cash expenditure (+) / income (-) Change in receivables and other assets Change in liabilities Dividends received Interest received Tax payments ,936-1,055-8,969 6,174 Cash flow from investment activities Investments in intangible assets, tangible fixed assets and investment property ,128-29,883 Proceeds from disposals of tangible fixed assets, investment property and non-current assets held for sale Proceeds from disposals of financial assets ,056-28,938 Cash flow from financing activities Dividend payments... -8,425-7,970 Proceeds from borrowings... 22,640 18,400 Repayment of borrowings... -2,004-1,840 Interest outflows... -3,188-2,802 9,023 5,788 Change in cash and cash equivalents ,002-16,976 Cash and cash equivalents as of January ,942 54,012 Bank deposits and cash balances... 37,942 54,012 Cash and cash equivalents as of June ,940 37,036 Bank deposits and cash balances... 6,940 37,036 1 For the first half-year 2010 this figure does not contain income from investments. The cash flow statement shows the development of the cash movements divided into cash inflows and cash outflows from operating activities, investment activities and financing activities. Cash flow from operating activities The cash flow statement is based on the consolidated earnings before taxes (EBT). The cash flow from operating activities was reduced from TEUR 6,174 in the first half-year 2009 by TEUR 15,143 to TEUR -8,969 in the first half-year This can mainly be attributed to the negative impact of TEUR 16,577 in the first half-year 2010 resulting from the exit tax being levied on the uncovered hidden reserves upon the Company attaining REIT-status. Cash flow from investment activities The cash flow from investment activities comprises not only investments in intangible assets, tangible fixed assets, investment property and financial assets but also revenues from retirements of tangible fixed assets, investment property, non-current assets for disposal and financial assets. The cash outflow from the cash flow from investment activities increased from TEUR 28,938 for the financial half-year 2009 by TEUR 2,118 or 7.3% to TEUR 31,056. The cash flow from 83

90 investment activities mainly comprises of TEUR 31,128 (first half-year 2009: TEUR 29,883) for the investment in new properties. When calculating cash flow from investment activities, the cash inflows were reduced by the amount of investments which had not yet generated a cash outflow, which mainly arose in conjunction with yet undue property transfer tax payments and retained purchase price payments in relation to the acquisition of properties. Cash flow from financing activities The cash flow from financing activities includes not only cash outflows from dividend payments, the redemption of financial liabilities and interest outflows, but also additions from the financial liabilities entered into. The cash flow from financing activities increased from TEUR 5,788 in the financial half-year 2009 by TEUR 3,235 or 55.9% to TEUR 9,023. The cash flow from financing activities for the first half-year 2010 comprised as for the comparison period TEUR 22,640 of cash inflows (first halfyear 2009: TEUR 18,400) from new financial indebtedness incurred for the purpose of acquiring new properties and TEUR 3,188 (first half-year 2009: TEUR 2,802) of cash outflows for interest payments as well as TEUR 2,004 (first half-year 2009: TEUR 1,840) for scheduled redemption payments. In addition a dividend of TEUR 8,425 was distributed to the shareholders in the first half-year 2010 (first half-year 2009: TEUR 7,970). 84

91 Comparison of the financial years 2009, 2008 and 2007 The following table shows the cash flow statement of the Company for the financial years ending as of December 31, 2009 and 2008 on the basis of the audited IFRS separate financial statements for the financial year 2009 and for the financial year ending as of December 31, 2007 on the basis of the audited IFRS consolidated accounts for the financial year 2007 (subject to rounding differences): in TEUR 1 st Jan to 31 st Dec 2009 (audited) 1 st Jan to 31 st Dec 2008 (audited) 1 st Jan to 31 st Dec 2007 (audited) Cash flow from operating activities Earnings before taxes (EBT)... 5,865 18, ,433 1 Depreciation, Amortization and Impairments/write-ups (-)... 6,002 9,312 3,177 Net interest and investment income... 5,006 2,081-1,258 2 Change in provisions Gain(-)/(+)loss (offset) from the disposal of tangible fixed assets, investment property and non-current assets held for sale ,741-5,621 Gain(-)/(+)loss (offset) from the disposal of financial assets ,477-32,826 Other non-cash expenditure (+) / income (-) ,711-2,004 Change in receivables and other assets ,050 Change in liabilities... -1,040-1,426 18,855 Dividends received ,313 Interest received , Tax payments ,477-2,086 14,129 10,283 23,528 Cash flow from investment activities Investments in intangible assets, tangible fixed assets and investment property ,349-36,309-98,008 Proceeds from disposals of tangible fixed assets, investment property and non-current assets held for sale ,417 17,764 Investments in financial assets ,947 Proceeds from disposal of financial assets ,601 95,087 Net cash outflow of funds due to the discontinuation of the special share fund Südinvest ,686 41,696-73,104 Cash flow from financing activities Dividend payments... -7,970-7,970-6,831 Proceeds from borrowings... 23,800 37,713 66,308 Repayment of borrowings... -3,257-37, Interest outflows... -5,086-3, ,487-10,998 58,428 Change in cash and cash equivalents ,070 40,981 8,852 Cash and cash equivalents as of January ,012 13,031 4,179 Bank deposits and cash balances... 54,012 13,031 4,175 Near-liquid assets... 4 Cash and cash equivalents as of December ,942 54,012 13,031 Bank deposits and cash balances... 37,942 54,012 13,031 1 Earnings before taxes (EBT) in the cash flow statement corresponds to the sum total of the earnings before taxes (EBT) shown in the income statement and the result from discontinued operations, adjusted for tax effects of TEUR 61 in the financial year 2008 and TEUR -148 in the financial year In fiscal year 2007 presented as financial income. Cash flow from operating activities The cash flow statement is based on the earnings before taxes (EBT), taking into account the result from discontinued operations. The earnings before taxes (EBT) for the financial year 2008 was TEUR 18,919 and exceeded the EBT for the financial year 2009 of TEUR 5,865 by TEUR13,054 mainly as a result of the disposal of the shareholding in Wohnbau Dinslaken GmbH in The exit tax levied in conjunction with the disposal of the investment in the special share fund Südinvest 107 gave rise to a higher tax burden in the financial year 2008 as compared to the financial year 2009 in the amount of TEUR 4,

92 The cash flow from the operating activities decreased from TEUR 23,528 in the financial year 2007 by TEUR 13,245 or 56.3% to TEUR 10,283 in the fiscal year The book profit of TEUR 11,477 from the sale of financial assets is essentially attributable, in an amount of TEUR 11,223 to the sale of the investments in Wohnbau Dinslaken GmbH and was eliminated from the cash flow of the operational result. The value in the financial year 2007 in the amount of TEUR 32,826 results from the book profit generated from the regrouping carried out in the special share fund Südinvest 107. All of the shares of the fund owned were sold and reinvested in investment shares and fixed-interest securities. The expenses essentially result from the change to deferred taxes of TEUR 4,470, as well as interest expenses and income of TEUR -731, which did not result in any cash outflow or inflow in the financial year Cash flow from investment activities After a cash inflow in the amount of TEUR 41,696 in the fiscal year 2008, the cash flow from investment activities decreased by TEUR 79,382 or 190.4% to a cash outflow in the amount of TEUR 37,686 in the financial year While the cash flow in the fiscal year 2008 was essentially affected by the sale of the special share fund Südinvest 107 and the participation in Wohnbau Dinslaken GmbH, the cash flow for the financial year 2009 is marked by the further expansion of the property portfolio of the Company and the associated payments. After a cash outflow in the amount of TEUR 73,104 in the financial year 2007, the cash flow from investment activities rose in the financial year 2008 by TEUR 114,800 or 157.0% to a cash inflow in the amount of TEUR 41,696 for the financial year The main reason for this change was the cash inflow of TEUR 50,785 from the sale of the special share fund Südinvest 107 and TEUR 11,800 from the sale of the participation in Wohnbau Dinslaken GmbH. The cash outflow from investments in 2008 mainly results from the payment of a purchase price liability from the financial year 2007, as well as from the cash outflow for two newly acquired properties. Cash flow from financing activities The cash flow from financing activities, after a cash outflow in the amount of TEUR 10,998 in the financial year 2008, rose by TEUR 18,485 or 168.1% to a cash inflow in the amount of TEUR 7,487 in the financial year The cash flow for the financial year 2009 essentially resulted from taking out loans for the properties acquired in 2009 in the amount of TEUR 23,800, taking into account interest payments and planned redemption payments. Moreover, in the financial year 2008, approximately TEUR 7,970 were distributed as a dividend to the shareholders of the Company. After a cash inflow in the amount of TEUR 58,428 in the financial year 2007, the cash flow from financing activities fell by TEUR 69,426 or 118.8% to a cash outflow in the amount of TEUR 10,998 in the financial year The cash outflow in the financial year 2008 resulted from the planned repayment of loans and the redemption of short-term interim property financing, for the refinancing of which a long-term loan was taken out. Furthermore, use was made of a facility that was granted in 2007 for the financing of a property. Finally, in the financial year 2008 TEUR 7,970 TEUR 1,139 more than in the financial year 2007 was distributed as dividend to the shareholders of the Company. The cash inflow in the financial year 2007 resulted from taking out loans in conjunction with the acquisition of new properties Refinancing and other sources of liquidity The total level of indebtedness (sum total of long and short-term liabilities and provisions) of the Company as of June 30, 2010 was: TEUR 152,401 (December 31, 2009: TEUR 143,292), of which TEUR 143,233 (December 31, 2009: TEUR 134,140) related to long-term and TEUR 9,168 (December 31, 2009: TEUR 9,152) to short-term liabilities. By contrast, the total indebtedness of the Company as of December 31, 2008 was TEUR 121,296 (December 31, 2007: TEUR 129,545), of which TEUR 112,780 (December 31, 2007: TEUR 72,591) were long-term liabilities and TEUR 8,516 (December 31, 2007: TEUR 56,954) were short-term liabilities. 86

93 The following table contains an overview of the long and short-term liabilities of the Company as of December 31, 2009, 2008 and 2007, and as of June 30, 2010: in TEUR Jun 30, 2010 (unaudited) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) long-term short-term long-term short-term long-term short-term long-term short-term Financial liabilities ,877 4, ,218 4,609 81,543 3,754 47,830 36,397 Derivative financial instruments... 11, , , Total ,013 4, ,052 4,620 87,350 3,754 48,034 36,397 Long-term financial liabilities and derivative financial instruments are those with a remaining term of more than one year and short-term financial liabilities and derivative financial instruments are those with a term remaining of up to one year. Working capital lines or other similar financing do not exist. The Company, with the exception of its property financings, funds itself exclusively from operating cash flow. The Company makes use of property financing funds from various banks. The financing funds are annuity loans tied to specific properties with first ranking land charge rights as collateral. As of June 30, 2010 the land charge rights recorded against the Company amounted to EUR million. According to the loan agreements, the repayments are made as applicable, every three, six or twelve months respectively. The following table contains an overview of the due date of the contractually agreed amortisation payments as of December 31, 2009, 2008 and 2007, and as of June 30, 2010: in TEUR Jun 30, 2010 (unaudited) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Financial liabilities of which... payable within one year... 4,574 4,620 3,754 36,397 payable within 2 to 5 years... 27,520 27,235 12,153 8,396 payable after 5 years... 94,357 81,817 69,390 39,433 Total , ,672 85,297 84, : The following table contains a summary of the liabilities to financial institutions as of June 30, Initial loan volume in TEUR (unaudited) Position (unaudited) Interest rate in % Fixed rate agreed until Loan ,972 3, % Loan ,420 2, % Loan ,000 8, % Loan ,400 37, % Loan ,000 29, % Loan ,400 12, % Loan ,000 4, % Loan ,400 5, % Loan ,940 8, % Loan ,700 13, % , ,451 The property loans are based both on long-term fixed interest agreements and in order to achieve greater flexibility interest agreements based on EURIBOR. In the latter cases the interest change risk was eliminated by the execution of interest rate swaps according to which the Company receives EURIBOR and pays a fixed interest rate agreed over the term of the swap. The term of the derivatives end according to the underlying loan transactions. Additionally, the Company has been 87

94 holding another financial derivative since the year 2000 with no hedging relationship with a credit transaction. The term of the contract with a hedging volume of only EUR 0.1 million as of 30 June, 2010 ends in : The following table contains an overview of the interest derivatives existing as of June 30, Ser. No. Type Term until Nominal value as of Jun 30, 2010 in EUR millions (unaudited) Fair current market value as of Jun 30, 2010 in TEUR (unaudited) 1 Interest rate swap April ,607 2 Interest rate swap April ,888 3 Interest rate swap Dec Interest rate swap Dec Interest rate swap Oct , ,136 6 Interest rate swap Dec Total , Credit, Liquidity and Market risks The risks resulting from the use of these derivative financial instruments are subject to risk management and control. The risks resulting from the financial instruments relate to credit, liquidity and market risks. Credit risks exist in the form of risks of default with respect to financial assets. This risk exists up to the maximum book values of the financial assets. For derivatives this is the sum total of all positive market values, and for the originated financial instruments the sum total of the book values. Insofar as there are risks of default, these are taken into account by means of value adjustments. Liquidity risks represent refinancing risks and therefore risks of the punctual fulfilment of existing payment obligations. In order to identify the future liquidity situation at an early stage, the strategy and the results of the planning process are taken as a basis. In the mid-term planning, which comprises a period of five years, the expected liquidity requirements are planned on the basis of daily, weekly and monthly planning calculations. The current liquidity requirements are adjusted to the actual data. In the case of the market risks, the interest change risks resulting from changes to the market interest levels are of great relevance to the Company. In order to manage these risks, sensitivity analysis are carried out which highlight the effects of changes to the market interest level on interest payments, interest expenses and income as well as on equity. Here the following premises apply: original financial instruments with a fixed interest rate are only subject to interest risks if they are valued at the fair market value. Financial instruments which are valued at acquisition costs are not subject to any interest change risks. In the case of cash flow hedges used to secure interest-related payment fluctuations, changes to the market interest level affect the reserve in the equity capital. For this reason these financial instruments are taken into account in the sensitivity analysis. Similarly, original financial instruments with a variable interest rate are subjected to a sensitivity analysis, as they are also susceptible to a market interest change risk. In a sensitivity analysis an indicative valuation on the basis of the market value is calculated taking into account the accrued interest on a given valuation date. 88

95 The following table contains the sensitivity analysis with respect to interest changes as of December 31, 2009, 2008 and 2007 (no sensitivity analysis was prepared as of June 30, 2010): in TEUR Jun 30, 2010 (unaudited) Dec 31, 2009 (audited) Dec 31, 2008 (audited) Dec 31, 2007 (audited) Market value of financial instruments on a floating rate basis ,139-7,845-5, Change in the revaluation reserve Interest + 1%... 3,908 4,492 1,861 Interest - 1%... -4,272-4,879-1,861 Income statement Interest + 1% Interest 1% Provisions for pensions Provisions for pension obligations are based on old-age and surviving dependants pension benefits schemes. The payments made by HAMBORNER usually depend on the period of employment and the level of remuneration of the employees. For the Company retirement pension plan, the Company has both contribution-based and benefit commitments. In the contribution-based commitments (defined contribution plans) the Company pays contributions into the statutory pension insurance scheme, direct insurance policies and a reinsured provident fund on the basis of statutory or contractual provisions or on a voluntary basis. With the payment of the contributions there are no further payment obligations for the Company. The current contribution payments are shown in personnel costs of the respective financial year. The pension provisions for benefit-related commitments (defined benefit plans) are determined in accordance with IAS 19 using the standard international projected unit credit method. Thereby, the future commitments are evaluated on the basis of the pro rata benefit claims acquired as of the balance sheet date. The evaluation takes into account trend assumptions for the relevant variables which affect the level of benefit. Actuarial profits or losses result from portfolio changes and deviations from the actual trends (for example income and pension increases, changes to interest rates) compared to the assumptions used in the calculation. The expenses associated with the commitments are distributed according to an actuarial expert report over the period of service of the employees and consists of the service cost and the actuarial profits or losses recorded for the current year, which are shown under personnel costs, as well as interest expense, which is included in financial result. In order to avoid major volatilities, any actuarial losses which have not yet been recorded on the respective balance sheet date are ignored in the allocation of the pension provisions in accordance with the corridor method permitted by IAS 19. If the corridor method is applied, these losses are only taken into account if the limits to the corridor defined in IAS 19 (10% of the actual pension commitment Actual Defined Benefit Obligation ) are exceeded. Any amounts by which the corridor is exceeded are distributed over the expected average remaining working lives of the beneficiaries. According to IAS 19, this pro rata loss which has still not been taken into account is only to be offset in the subsequent period. The following table shows the development of the pension provision for benefit-based commitments in the financial years 2009, 2008 and 2007: in TEUR 2009 (audited) 2008 (audited) 2007 (audited) Balance sheet value on January ,780 5,923 6,140 Ongoing work service costs Interest expenses Actuarial profits/losses entered for the current year Pension payments Balance sheet value on 31 December... 5,603 5,780 5,923 Actuarial losses not recorded... 1,380 1,060 1,174 Defined benefit obligation (DBO) at the year-end... 6,983 6,840 7,097 Experience-based adjustment of plan liabilities

96 Actuarial losses of TEUR 1,380 as of December 31, 2009 which have not so far been recorded have not been taken into account. The corridor threshold as of December 31, 2009 was TEUR 698 which has resulted in a corridor excess of TEUR 682 for the financial year 2009 which is to be apportioned to the expected remaining time of employment of the beneficiaries. For the financial year 2010, this will mean TEUR 179 will have to be recorded. The exceeding of the corridor threshold in the financial year 2008 have given rise to an actuarial loss in the financial year 2009 of TEUR Contingent liabilities and other financial obligations Other financial obligations of the Company comprise four long term lease holds with the following details as of December 31, 2009: Contracted term until Payment obligations in TEUR p.a. (audited) Payment obligations passed on to tenants in TEUR p.a. (audited) December 31, March 31, June 30, June 30, Total The subject property will transfer to the full ownership of the Company on June 30, 2012 against a contractually agreed payment of EUR 3.2 million. As of June 30, 2010 additional financial obligations of TEUR 43,192 exist as a result of contracts entered into but not yet completed for property purchases. No additional potential contingent or substantial liabilities of the Company exist. 90

97 10.6 Asset Situation Comparison of the first half-year of the financial years 2010 and 2009 The following illustration compares selected aspects of the asset situation of HAMBORNER as of June 30, 2010 and December 31, The following table shows the important items of the balance sheet of the Company as of June 30, 2010 and December 31, 2009 on the basis of the IFRS interim financial statements for the first half-year of 2010, which have been subjected to a review in accordance with section 37w of the German Securities Trading Act: Assets in TEUR June 30, 2010 (reviewed) December 31, 2009 (audited) Non-current assets Intangible assets Tangible fixed assets Investment property , ,386 Financial assets Other assets Deferred tax assets... 2, , ,116 Current assets Trade accounts receivables and other assets... 1, Income tax receivables Bank deposits and cash balances... 6,940 37,942 8,059 38,473 Non-current assets held for sale... 1,535 9,594 38,473 Total assets , ,589 Equity and Liabilities in TEUR June 30, 2010 (reviewed) December 31, 2009 (audited) Equity Subscribed capital... 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 Other retained earnings , ,575 Revaluation reserve ,136-6,594 95, ,258 Net retained profits... 23,890 32, , ,297 Non-current liabilities and provisions Financial liabilities and derivative financial instruments , ,052 Deferred tax liabilities... 14,708 Trade accounts payable and other liabilities... 3,961 4,075 Provisions for pensions... 5,545 5,603 Other provisions , ,140 Current liabilities and provisions Financial liabilities and derivative financial instruments... 4,577 4,620 Income tax liabilities Trade accounts payable and other liabilities... 3,239 1,877 Other provisions... 1,328 2,253 9,168 9,152 Total equity, liabilities and provisions , ,589 Investment property The investment property valued at TEUR 284,620 on June 30, 2010 and thereby exceeded the TEUR 257,386 value as at December 31, 2009 by TEUR 27,234 or 10.6%. 91

98 The increase is the sum of the acquired properties of TEUR 32,365, the reclassification of properties from properties held for sale to non-current assets held for sale of TEUR 1,535 as well as disposals and amortization for the reporting period of TEUR 3,596. The disposals of TEUR 2 comprise the sale of a plot of land. The amortization for the first half-year 2010 comprise scheduled amortization of TEUR 3,594. Bank deposits and cash balances The bank deposits and cash balances were TEUR 6,940 as of June 30, 2010 and thereby below the TEUR 37,942 as at December 31, 2009 by TEUR 31,002 or 81.7%. This cash flow outflow is mainly attributable to property acquisitions (TEUR 8,447), cash outflows due to the exit tax charge levied upon the Company attaining REIT-status (TEUR 16,577) and the payment of a dividend for the financial year 2009 (TEUR 8,425) Non-current assets held for sale The non-current assets held for sale comprised TEUR 1,535 as of June 30, As of December 31, 2009 no non-current assets held for sale were recorded. This item comprises the fair value of the properties (built on and vacant) identified for disposal as of June 30, With notarial deed dated May 18, 2010 a commercial and residential property was sold in Hamm. The realized sale proceeds were EUR 1 million. The ownership of the property was transferred to the buyer on July 1, Following this disposal, the remaining TEUR 539 of this item are attributable to agricultural and forestry land exclusively held for the purpose of a sale. Financial liabilities and derivative financial instruments The financial liabilities and derivative financial instruments were TEUR 137,590 as of June 30, 2010 and thereby exceeded the TEUR 113,672 as at December 31, 2009 by TEUR 23,918 or 21.0%. Long-term financial liabilities and derivative financial instruments are those with a remaining term of more than one year. Short-term financial liabilities and derivative financial instruments are those with a remaining term of up to one year. The increase was due to drawings on long-term property financings of TEUR 22,640 for newly acquired properties as well as in the amount of TEUR 3,294 to the revaluation of interest rate derivatives as of June 30, 2010 (see further section Refinancing and other sources of liquidity ). On the other hand loans of TEUR 2,004 were repaid during the first half-year Trade accounts payable and other liabilities The accounts payable and other liabilities amounted to TEUR 7,200 as of June 30, 2010 and thereby exceeded the TEUR 5,952 as at December 31, 2009 by TEUR 1,248 or 21.0%. This increase resulted from liabilities for real estate transfer tax for property acquisitions not yet finalised and property fees due for payment at the middle of the year which relate to the first half-year 2010 as well as purchase price retentions for property acquisitions as security for finalised building guarantees and missing property documents. 92

99 Comparison of the financial years ending December 31, 2009, 2008 and 2007 The following illustration compares selected aspects of the asset situation of HAMBORNER as of December 31, 2009, 2008 and The following table shows the important items of the balance sheet of the Company as of December 31, 2009 and 2008 on the basis of the audited IFRS separate financial statements for the financial year 2009, and as of December 31, 2007 on the basis of the audited IFRS consolidated financial statements for the financial year 2007 (subject to any rounding differences): Assets in TEUR December 31, 2009 (audited) December 31, 2008 (audited) December 31, 2007 (audited) Non-current assets Intangible assets Tangible fixed assets Investment property , , ,702 Financial assets Other assets Deferred tax assets... 2,170 1, , , ,051 Current assets Trade accounts receivables and other assets Income tax receivables Bank deposits and cash balances... 37,942 54,012 6,442 38,473 55,368 7,863 Non-current assets held for sale ,813 Assets from discontinued operations... 59,470 38,473 55,498 87,146 Total assets , , ,197 Equity and Liabilities in TEUR December 31, 2009 (audited) December 31, 2008 (audited) December 31, 2007 (audited) Equity Subscribed capital... 22,770 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 2,277 Other retained earnings , ,575 76,448 Revaluation reserve... -6,594-4, , ,115 78,815 Net retained profits... 32,269 35,165 53, , , ,507 Non-current liabilities and provisions Financial liabilities and derivative financial instruments ,052 87,350 48,034 Deferred tax liabilities... 14,708 15,188 14,219 Trade accounts payable and other liabilities... 4,075 3,784 3,860 Provisions for pensions... 5,603 5,780 5,923 Other provisions , ,780 72,591 Current liabilities and provisions Financial liabilities and derivative financial instruments... 4,620 3,754 36,397 Income tax liabilities Trade accounts payable and other liabilities... 1,877 1,823 18,137 Other provisions... 2,253 2,279 2,318 9,152 8,516 56,954 Liabilities from discontinued operations... 5,145 Total equity, liabilities and provisions , , ,197 Investment property The investment property increased from TEUR 223,342 in the fiscal year 2008 by TEUR 34,044 or 15.2% to TEUR 257,386 in the fiscal year 2009, after it had already increased from TEUR 201,702 in the fiscal year 2007 by TEUR 21,640 or 10.7% to TEUR 223,342 in the financial year

100 In the fiscal year 2009 the investment property included additions of TEUR 40,558, which consisted of TEUR 40,545 for the properties acquired in the fiscal year 2009 and the associated downpayments and TEUR 13 for the additional capital expenditures related to existing properties. Besides minor sales of undeveloped land, one item of property was sold in the third quarter in Bad Oeynhausen with a profit of TEUR 23. In order to adjust the depreciated acquisition and production costs shown on the balance sheet as of December 31, 2009 to the applicable current market values, the result was reduced by means of an impairment charge in the amount of TEUR 714. On the other hand, an impairment reversal of TEUR 1,266 was recorded with respect to properties subjected to impairment charges in previous years. The additions in the fiscal year 2008 related to TEUR 17,363 for the existing properties acquired in the fiscal year 2008 and the associated down-payments, as well as TEUR 1,994 for the additional capital expenditures for property additions from the fiscal year Of the Non-current assets held for sale shown on the balance sheet for the fiscal year 2007 and amounting to TEUR 19,813, properties with a book value of TEUR 8,259 were sold in the fiscal year 2008, after another property with a book value of TEUR 4,975 (which was sold in October 2008) was reclassified during the year from investment property to the non-current assets held for sale. The properties remaining as of December 31, 2008 in the non-current assets held for sale were reallocated to investment property, as on the balance sheet date the marketing of these properties no longer appeared to be very likely. On balance, the reclassifications of the properties results in a book value addition to investment property of TEUR 11,553. In order to adjust the depreciated acquisition and production costs shown as of December 31, 2008 to the applicable current market values, the group result was reduced by an impairment charges in the amount of TEUR 4,717. On the other hand, an impairment reversal of TEUR 945 was recorded in the fiscal year 2008 for properties which had been subjected to impairment charges in previous years. Bank deposits and cash balances The bank deposits and cash balances decreased from TEUR 54,012 in the financial year 2008 by TEUR 16,070 or 29.8% to TEUR 37,942 in the financial year 2009, after they had risen from TEUR 6,442 in the fiscal year 2007 by TEUR 47,570 or 738.4% to TEUR 54,012 in the fiscal year The decrease in the fiscal year 2009 compared to 2008 mainly resulted from the outflow of own funds used for property investments and the payout of the dividend for the fiscal year The increase in liquid funds in the fiscal year 2008 compared to 2007 essentially stems from the cash inflows generated from the sale of the special share fund Südinvest 107, the investment in Wohnbau Dinslaken GmbH and properties. By contrast, the assets from discontinued operations were reduced from TEUR 59,470 in the financial year 2007 and were without record in the fiscal year Non-current assets held for sale The non-current assets held for sale comprised TEUR 130 in the fiscal year 2008 and were without record in the fiscal year 2009, after they had decreased from TEUR 19,813 in the fiscal year 2007 by TEUR 19,683. The disclosure of the non-current assets held for sale in the fiscal year 2008 corresponded to the investment book value of Montan GmbH Assekuranz Makler, which was sold in January Insofar as the properties reclassified on the balance sheet of the fiscal year 2007 in noncurrent assets held for sale were not sold in the fiscal year 2008, they were again allocated as of December 31, 2008 to investment properties. Due to the situation on the property and financial markets at the time, a sale no longer appeared to be very likely. In the course of this reclassification the planned amortisation of the properties which had not been recorded due to them having been classified as held for sale were recorded in the amount of TEUR 467. As of December 31, 2008 the item which was held for sale represented the investment in Montan GmbH Assekuranz Makler. 94

101 Financial liabilities and derivative financial instruments The financial liabilities increased from TEUR 91,104 in the fiscal year 2008 by TEUR 22,568 or 24.8% to TEUR 113,672 in the fiscal year 2009, after they had already increased from TEUR 84,431 in the fiscal year 2007 by TEUR 6,673 or 7.9% to TEUR 91,104 in the financial year The increase in the fiscal year 2009 compared to 2008 is the total result of additional loans for financing property investments, market value changes to the interest hedge derivatives and planned redemption payments. The loans were valued as of December 31, 2009 at EUR million. At TEUR 5,602 the increase in the fiscal year 2008 compared to 2007 related mainly to the addition of financial derivatives and the market value change of existing derivatives. The growth of the property portfolio which occurred in the two fiscal years of 2008 and 2007 was partly financed by loans with a nominal amount of EUR 86.8 million. As of December 31, 2008 these loans had a value of EUR 84.5 million after EUR 83.8 million as of December 31, Trade accounts payable and other short-term liabilities Trade accounts payable and other short-term liabilities decreased from TEUR 18,137 in the fiscal year 2007 by TEUR 16,314 or 89.9% to TEUR 1,823 in the fiscal year 2008, while they remained more or less unchanged in the financial year 2009 compared to 2008 at TEUR 1,877. The significant decrease from the fiscal year 2007 to 2008 is mainly attributable to the payment of various liabilities which were shown on the previous year s balance sheet in conjunction with property transactions. The other short-term liabilities of the fiscal year 2007 included EUR14.9 million for a purchase price liability for a property in Bremen and EUR 2.1 million for real estate transfer tax liabilities and residual purchase price liabilities for various property additions. The liabilities were settled in the year Explanations on the Annual Financial Statements (German Commercial Code) of HAMBORNER REIT AG for the Fiscal Year 2009 The annual financial statements of HAMBORNER REIT AG for the fiscal year 2009 were set up according to the accounting regulations of the German Commercial Code and the German Stock Corporation Act. The revenues of the Company from building and land management amounted to TEUR 24,176 in the fiscal year 2009 and were TEUR 2,867 or 13.5% higher than in the fiscal year 2008 (TEUR 21,309). The expenses for building and land management increased by TEUR 793 to TEUR 5,051 (TEUR 4,258 in the fiscal year 2008). The reason for the increase in revenues and the management costs was the expansion of the property portfolio. With TEUR 5,730 the other operating income was 92.4% below that of the previous fiscal year 2008 (TEUR 75,909), mainly due to the elimination of the revenues from the sale of the share certificates of the special share fund Südinvest 107 and also due to the decrease in property sales. The operating result decreased as a consequence to TEUR 13,271 (2008: TEUR 64,559). Reduced liquidity and the decrease in the general interest level resulted in a reduction in the general interest income by TEUR 1,256 compared to the financial year At the same time the expenses for interest on borrowings, including interest for interest hedges, increased by TEUR 1,010. For these reasons the financial result was TEUR -5,006 compared to TEUR -2,898 in the financial year The overall result from the ordinary business activities of the Company decreased in the financial year 2009 by TEUR 54,025 or 86.7% to TEUR 8,279 (2008: TEUR 62,304). After the deduction of taxes, the profit for the financial year 2009 was TEUR 7,076 (2008: TEUR 56,258). The taxes on revenues and profits were TEUR 1,203 and hence reduced by TEUR 4,843 compared to the financial year Taxes on profits for the proceeding year were affected by the taxation of the sale of the shares in the special share fund Südinvest 107 as well as the provisions made for back-dated taxes done pursuant to a concluded tax audit. 95

102 The balance sheet total of the Company as of December 31, 2009 was TEUR 300,357 (December 31, 2008: TEUR 283,931). The fixed assets as of the balance sheet date were TEUR 261,519, and TEUR 33,612 or 14.7% higher than as of December 31, The level of the accounts receivable, including other assets in the amount of TEUR 402 as of December 31, 2009 (December 31, 2008: TEUR 1,507), correspond to a reduction of TEUR 1,105 or 73.3%, contrasted with liquid funds (cash on hand and bank balances) of TEUR 37,942 (December 31, 2008: TEUR 54,011). The equity (including 2/3 of the stated special reserves with an equity portion) decreased by TEUR 3,009 or 2.0% to TEUR 148,503. The equity ratio (i.e. the equity including 2/3 of the stated special reserves with an equity portion in relationship to the balance sheet total) declined as of December 31, 2009 to 49.4% (December 31, 2008: 53.4%). 96

103 11. MARKET OVERVIEW AND COMPETITION Non-binding convenience translation 11.1 Introduction The real-estate market in Germany is influenced by numerous factors. In addition to the overall economic development and the demographic factors, a further aspect which is particularly important is the confidence of investors and consumers in the economy and the country s political development Overall development in Germany According to the Bundesbank the German economy is gradually recovering from the most severe economic slump in the post-war period. The economic data for the first six months of 2010 shows that Germany s economy is again developing in a stable manner. In the first quarter of 2010 the gross domestic product ( GDP ) grew by 0.2% after 0.2% in the previous quarter (source: Statistisches Bundesamt). Increasing orders received from home and abroad are resulting in a rise in production and contributing towards improving the utilization of capacities. The labor market has so far proven to be extremely robust in the crisis. Despite the good figures for the 2 nd quarter of 2010, the Company is doubtful as to whether this positive trend will continue. The developments in the labor market are no longer determined exclusively by special effects, but are now based on a real growth in employment. The average level of unemployment in Germany in 2009 was 3.42 million, while in June 2010 there were around 3.15 million jobless persons. The unemployment rate of 7.5% was therefore approximately 0.6 percentage points lower than in June 2009 (source: Bundesagentur für Arbeit). According to the Federal Statistical Office, consumer prices in Germany in December 2009 were 0.9% higher than in the previous year. By contrast, the average price rise in 2009 was only around 0.4%. Over the course of the year the significant price reductions for fuels, light heating oil and food in combination with a moderate increase in prices in the services sector resulted in low inflation rates for the individual months of the year As a result, 2009 had the lowest inflation rate since the German reunification. However, the debt crises of individual countries are resulting in feelings of uncertainty on the financial markets and are having a negative effect on economic growth. Although there is increasing demand on the part of investors for properties, this is offset by continuing restrictions on the granting of financing by banks Market Overview In contrast to other countries such as France or the United Kingdom, Germany is not a centralized country in which the market for commercial real estate is concentrated on a few centers, but consists of a large number of individual regional and local markets. This is also reflected in the portfolio of HAMBORNER, which is regionally diversified albeit that it has a historic focus on North Rhine-Westphalia. A regional breakdown of the turnover is not meaningful for the Company due to the spread and size of the portfolio. Within the individual markets there are various types of use. Overall the number of insolvencies in the retail sector increased by only around 9% in 2009, far less than in other sectors which had high double-figure increases (source: HDE statement 2009). The discussion of the importance of general and specialized department stores has flared up again as a result and will cause real estate companies to have to face up to new challenges, while at the same time offering new opportunities. Many well-positioned suppliers are taking advantage of the current phase of the market to optimize their locations. Several internationally established groups accessed the German market in Not only textile and shoe discount stores, but also the food trade benefit from new inner-city concepts and the good rental opportunities they present in medium-sized and small towns. 97

104 Investment Market The general economic situation in Germany has had direct impacts on the investment market. After the transaction volumes fell dramatically in the period from autumn 2008 to summer 2009, the investment market has been recovering since then (source: DIP, Markt und Fakten 2010). The investment turnover in real estate recorded throughout Germany in 2009 was EUR 41.6 billion and therefore EUR 10.7 billion (21%) lower than in the previous year, although in the last quarter of 2009 the highest level of turnover was registered with a share of 38%. The main share of this was made up by the residential property category with a level of 51% of the total transaction volume (source: DIP, Markt und Fakten 2010). If one considers the market for commercial properties, with an investment turnover recorded throughout Germany of EUR billion in 2009 the main focus was on both office properties with a total turnover of a around EUR 3.7 billion (around 35%) and retail properties, which attracted aggregate investment of around EUR 3.3 billion (around 31%). About 7% of the transaction volume related to logistics properties (source: BNP PARIBAS Real Estate, Investment Market Report 2010). Only 12% of the total turnover was accounted for by portfolios as against 36% the year before, (source: BNP PARIBAS Real Estate, Investment Market Report Gerrmany 2010). In the opinion of the Company this shows that buyers are again concentrating more strongly on the quality of the properties and that the approach of purchasing as much volume as possible has been pushed into the background. In the seven major German investment locations of Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart a transaction volume of around EUR 6 billion was registered. This means that around 36% of the nationwide transaction volume was ascribed to these cities. This corresponds to a fall of around 26% compared with 2008, with the fall resulting in particular from the lack of large-volume individual and portfolio transactions. The locations with the highest turnovers in 2009 were Berlin with a transaction volume of around EUR 1.3 billion, Hamburg with around EUR 1.2 billion and Munich with around EUR 1.0 billion (source: DIP, Markt und Fakten 2010). In the field of single investments, retail properties and commercial buildings were the most sought-after property categories. The main purchasers are strategic equity investors such as closed-end funds and open-ended funds, family offices and private individuals. The dominance of domestic investors is again considerably more pronounced at a level of over 80% (source: BNP PARIBAS Real Estate, Investment Market Report 2010). The net prime yields for core German office properties stabilized in 2009 at a level of 5% to 5.5%, and eased again slightly in the fourth quarter at some locations. The increased interest in sustainably let core properties is resulting in greater competition (source: BNP PARIBAS Real Estate, Investment Market Report 2010). For the average initial yields weighted according to turnover for retail and office properties in inner-city locations, an increase of 30 basis points to 6.2% was recorded in With levels of 5.3% and 5.5%, Munich and Stuttgart display a relatively low but stable rate of return. These are followed by Frankfurt am Main, Hamburg and Nuremberg with an average initial yield of around 5.6% (source: DIP, Markt und Fakten 2010) Market for Retail Properties The framework conditions for the retail trade are directly affected by the general economic growth prospects. As a result, according to current estimates of the Federal Statistical Office, turnover in the retail trade fell in real terms by around 1.8% in 2009 compared to the previous year. In the view of the Company the market for retail properties is undergoing a phase of restructuring. The large department stores in prime locations are becoming less important, the growth in sales areas resulting above all from new shopping centers is being maintained, the trend towards large areas continues unabated, the concentration of commercial enterprises continues to increase, while discount and chain stores are becoming increasingly dominant in the urban landscape. 98

105 In the last few years there has been a shift in retail spaces to the inner cities, with the highly frequented inner-city locations benefiting in particular from expanding chain store operators and foreign chains. In prime locations this has resulted in a rise or in times of economic difficulties at least stabilization of prime rents (source: DIP, Markt und Fakten 2010). The growth in the areas available to the retail trade slowed in 2008 in comparison to the previous year. In 2008 the increase was around 1.3 million sqm, while in the previous year this was 1.6 million sqm (source: Hahn Gruppe, Retail Real Estate Report Germany, 2009/2010). According to the Company, the vacancy rates in second rate locations and subcenters, as well as in prime locations of towns and cities with poor infrastructure, continued to rise. In prime locations of towns and cities with overall positive future prospects there were greater fluctuations due to tenant insolvencies. As the areas which became vacant were absorbed by the market relatively quickly, rental performance and rents in prime locations in 2009 can be considered as being stable to slightly regressive. However, many of the department store spaces which may become vacant have not yet been put on offer and it therefore remains to be seen how the rental market will develop in the next few years Market for Office Properties The economic and financial crisis had a severe impact on the German office markets in At the seven most important German office locations of Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart, around 2.3 million sqm of office space was turned over in 2009, approximately 28% less than in 2008, and therefore the lowest turnover since 2004 (source: DIP, Markt und Fakten 2010). The amount of office space available increased in 15 of the markets analyzed by DIP in 2009 by around 350,000 sqm to 9.8 million sqm, so that the average vacancy rate increased from 9.1% to 9.3% (source: DIP, Markt und Fakten 2010). With the exception of Leipzig (space turnover around 110,000 sqm, +24%) the turnover in other locations dropped sharply. In spite of a significant decline, the greatest turnover was again generated in Munich with around 540,000 sqm (-31%), followed by Frankfurt am Main with around 422,000 sqm (-29%) and Berlin with around 414,000 sqm (-12%). With around 220,000sqm (-48%) Dusseldorf registered the greatest losses. The way in which vacancy rates developed in 2009 varied substantially. These ranged from just a moderate climb, such as in Munich (+4%) to very extensive increases, as in Essen (+22%) and Hamburg (+23%) (source: BNP PARIBAS Real Estate, Office Market Germany 2010). With the exception of Hanover and Leipzig, the prime rents fell last year on average by around 7.5%. The greatest drop was registered in Cologne with around 11% (source: DIP, Markt und Fakten 2010). At the same time an increase in rental incentives was observed by the Company and in some cases the effective rents are up to 15% below nominal contract rents Competitive position In an international comparison the German real estate market continues to feature high returns on rent and investment-friendly market structures, giving rise to a high level of interest among a large number of investors and owners, particularly foreign investors and owners. According to her own analysis of the competitive situation, HAMBORNER faces, according to its own analysis, intense competition both in real estate investments and in letting Investment Competition HAMBORNER is often in competition with other prospective buyers when purchasing real estate properties. In general, the competitive situation in the commercial real estate segment is highly heterogeneous. 99

106 The competitive structure is dependent on the investment volume and the characteristics of real estate properties. The intensity of the competition varies, and it is difficult to make comparisons owing to differing strategies in terms of location, market knowledge, and buyer structure. As a general rule, the barriers to entry for real estate investments are low. For the most part they are limited to the availability of capital, real estate expertise in the relevant segment, and access to sales offers. The investment market in mid-size cities however is intransparent, since no market surveys are available for this sector. Investors have to rely on their own local market expertise or that of third parties. Without this expertise, entry barriers to the investment market in mid-size cities are high. HAMBORNER seeks in particular to acquire real estate properties with a medium investment volume in mid-size cities. The main competitors for the acquisition of individual commercial properties in these locations are initiators of both open-ended and closed-end real estate funds, institutional investors such as insurance companies and pension funds, real estate investors with a regional focus, as well as real estate companies having local or regional orientations and private investors. Furthermore, major international property finance investors (private equity companies) and listed property companies (including REIT corporations) also compete for these properties. Based on HAMBORNER s many years of experience in the acquisition of such properties, the strong relationships of its management with potential sellers and its organizational structure, which is designed to enable quick reaction times, HAMBORNER believes to have a good competitive position as far as the purchase of individual properties or portfolios of commercial properties is concerned. Such properties are often not sold at auction; instead, they are offered exclusively or to a small circle of potential investors. In so far as HAMBORNER competes for large individual projects and/or real estate portfolios in Germany s major cities and commercial centers in the future, its primary competitors would be international financial investors, listed property companies including REIT corporations providers of open-ended property funds, and other German institutional investors. These competitors mainly concentrate on cities with more than 500,000 inhabitants, towns with 100,000 to 500,000 inhabitants and outskirts, whereas small and medium-sized towns are of no interest to the majority of these investors (source: Hahn Gruppe, Retail Real Estate Report Germany, 2009/2010). In these real estate transactions, which often take the form of auctions, the intensity of competition and the professionalism of competitors are often higher than in the case of smaller individual properties and portfolios. At present, however, HAMBORNER does not intend to focus on real estate transactions of this nature due to the competition and the, in the view of the Company, associated high prices with the corresponding negative impact on the returns on investment achievable by these means. Insofar as HAMBORNER enters the market as a seller of properties, the Company also faces competition in these areas. This competition is primarily dependent on what other comparable properties are available for sale and how much demand exists in the respective locations and in the respective segments Landlord Competition When, the need to re-let portfolio properties arises as part of the portfolio management HAMBORNER competes with other investors offering their properties for letting. These include both national institutional investors and regional, private and institutional investors. In general, owner competition is highly atomized. HAMBORNER believes that in medium-sized towns the competitive situation is, according to the experience of the Company, currently more intense than in the major cities and commercial centers due to the low level of new construction activity in comparison to the respective market as a whole. The competitive situation with respect to large-scale retail properties is characterized by a small supply of suitable properties due to a restrictive building permit situation for such large projects. At the same time alternative usability of these properties is limited due to typical retail layout and specific requirements as to building legislation. 100

107 12.1 Introduction 12. Description of the business activity of HAMBORNER Non-binding convenience translation As a listed stock corporation in the form of a Real Estate Investment Trust (REIT) HAMBORNER REIT AG operates in the real estate sector and has positioned itself as a portfolio holder for high-yielding commercial properties. In the opinion of the Company it holds an attractive diversified property portfolio which consists mainly of large-scale retail properties in busy areas, commercial buildings in prime locations (so-called high-street-objects) and high quality office buildings on well-established office sites. Despite the historic regional focus in North Rhine- Westphalia the portfolio includes properties across Germany with, according to the Company s view, a high occupancy rate compared to market standards and yielding sustainable rental incomes. HAMBORNER REIT AG stands out due to extensive experience in the German real estate market and the acquisition and managing of commercial properties as well as long-standing capital market expertise. The Company believes to have a balanced tenant structure with comparatively low vacancy rates and partly long-standing business relationships with the tenants. HAMBORNER believes to have a sound financial structure with, according to the Company s own observations, currently comparatively low financing costs; it also enjoys certain benefits from the advantages of the REIT-status, such as exemption from corporation and trade tax. In addition, the Company shows a lean and efficient corporate structure. On the reporting date as at August 31, 2010, HAMBORNER had a property portfolio of 60 portfolio properties in 43 locations in Germany with a fair value of EUR 354,160,000. The properties have a total usable floor space of around 208,070 sqm, of which approximately 198,330 sqm are used commercially and around 9,740 sqm as residential spaces. The economic vacancy rate (taking into account rent guarantees) calculated on the basis of the total rental income of the property portfolio (excluding leaseholds) amounted to 1.18% in total for the period from January 1, 2010 until August 31, The market value appraisal by Jones Lang LaSalle contained in this prospectus reports an economic vacancy rate of 1.38% for the month of August On February 18, 2010, HAMBORNER acquired REIT status retroactively as of January 1, On June 8, 2009, the shares of HAMBORNER REIT AG were listed in the Prime Standard segment of Frankfurt Stock Exchange and included in the REIT segment of Deutsche Börse AG on February 22, It is the objective of the Company, through investments in selected property assets and through strategic portfolio management, to realize sustainable and yield-orientated growth with property assets that are as balanced as possible, diversified and located in Germany. Thus, the Company will focus on large-scale retail properties, commercial properties in prime locations and office buildings in mid-size cities and regions in Germany that promise long term growth perspective. When acquiring new property, the Company s focus is on maintaining a sound financial basis and the ability to continuously pay out an attractive dividend Competitive Strengths HAMBORNER s key strengths include: A leading real estate Company in Germany With a market value for the property portfolio of EUR 354,160,000 as at August 31, 2010, HAMBORNER is, according to its own knowledge, one of the major listed real estate companies in Germany. In addition, according to own calculations, as at August 31, 2010 HAMBORNER is, in terms of market capitalisation, the second-largest out of currently three German REITs. Many years of experience in the real estate sector and with the purchase and management of real estate property HAMBORNER has a successful history over many years of purchasing, managing 101

108 as well as selling of commercial properties. Within the context of focusing on the real estate business as from the year 2007 on, HAMBORNER has in terms of fair value more than doubled its property portfolio since A milestone in this regard was, inter alia, the acquisition of the so-called Kaufland portfolio in 2007 with a total purchase price of approximately EUR 66 million including transaction costs. Since the beginning of 2009, HAMBORNER has been able to acquire properties and/or notarize sales agreements with a total investment volume of about EUR 130 million, of which around EUR 90 million alone since the start of This performance is supported by an experienced management with many years of expertise, not just in the real estate industry, but also on the capital market. Substantial property portfolio HAMBORNER has a balanced property portfolio with a focus on large-scale retail properties in busy areas, commercial buildings in prime locations (so-called highstreet-objects) and high quality office buildings on selected sites mainly in mid-size cities in Germany. The existing portfolio is characterized by a high occupancy rate, long-term lease contracts and stable capital flows. The tenant structure essentially boasts financially strong tenants (e.g. Kaufland, EDEKA, Areva, the German Federal Employment Agency, Nordsee, Douglas). Sound financing structure The balance sheet equity ratio of HAMBORNER amounted to 48.3% as at June 30, 2010 and the REIT equity ratio was 58.0%. Moreover, at 37.2% as at 30 June 2010, HAMBORNER has, to the knowledge of the Company, a low loan-to-value ratio in the sectoral comparison. As a result, there is currently further capacity for acquisitions in addition to the investments already made in properties in 2010, which should increase significantly due to the capital increase. Attractive dividend payments, stable earnings position and conservative accounting policies The company paid EUR 0.35 for the fiscal year 2007, EUR 0.35 for the fiscal year 2008 and EUR 0.37 for the fiscal year 2009 as dividend per share to shareholders. In relation to the annual closing prices, this corresponded to a dividend yield of 3.91% (2007 closing price of EUR 8.94), 6.09% (2008 closing price of EUR 5.75) and 4.55% (2009 closing price of EUR 8.14). The Funds from Operations (FFO) per share were EUR 0.27, EUR 0.37 and EUR 0.42 for the financial years 2007, 2008 and 2009 respectively. In the balance-sheet, properties are shown conservatively at acquisition and production cost less annual depreciation and if required write-downs for impairment. REIT status Due to the REIT status, HAMBORNER benefits from corporate and trade tax exemption as from 2010; taxation takes place on shareholders level instead. Generally, this allows for higher dividend payments as a result. Also, as the sale of properties that have been held in the portfolio for less than ten years is facilitated by the fact that the restrictions which applied to such sale under the extended cut in trade tax are to the greatest extent no longer applicable, there is increased flexibility for optimizing the property portfolio. This facilitation was made possible by Section 14 (2) REIT Act, which put an end to the limitations formerly imposed on these sales by the extended trade tax reduction. Furthermore, insurance companies and pension funds attribute REIT shares to the lower risk real estate quota rather than the share quota. Transparent and efficient corporate and organisational structure The Company pursues its business activities in flat hierarchical and efficient structures. HAMBORNER always holds its properties directly at a 100% (except for a few co-ownership shares in garages and leaseholds) thus boasting as a sole Company a simple and consequently low-cost corporate structure. The Company has immediate access to the cash flows of the properties and, due to the flat corporate hierarchy, can make decisions quickly, based on facts and without any reliance on third parties for the purchase, management and sale of property with comparatively small administrative effort. With only two directors and currently 22 employees the Company shows an efficient and lean organizational set up. Many years of capital market expertise HAMBORNER is listed since 1954 and therefore disposes of long-term capital market expertise. Shares of the Company are liquid and fungible due to the daily stock exchange trade. In addition, listing confers high transparency and corporate governance standards. 102

109 12.3 Corporate Strategy The corporate strategy of HAMBORNER is geared to value-creating growth through yieldorientated expansion of the existing commercial property portfolio in the sectors large-scale retail, business properties in prime locations and office with simultaneous regional diversification. The profitability of the property portfolio is to be increased further by the acquisition of additional, disproportionately high-yielding properties. In addition, to increase profitability, properties with a considerably below-average absolute fair value or properties in less promising locations are to be sold and replaced by properties with a higher fair value and significantly better cost/earnings structures. With this objective the Company intends to generate a higher yield in the long-term, as well as reduce portfolio risks also in order to be able to pay out ongoing and attractive dividends in the future. More specifically, the strategic objectives of HAMBORNER are to be achieved through the following measures: Concentration on large-scale retail properties in busy locations, commercial buildings in prime locations (so-called high-street-objects) and high quality office buildings HAMBORNER concentrates its property portfolio on a balanced mix of the following three real estate categories: large-scale retail properties in busy locations, which offer the tenants the possibility to build a prominent market position, commercial buildings in prime locations (so-called high-street-properties), situated in pedestrian zones of cities with a high purchasing power, as well as high-quality office buildings. Large-scale retail properties provide a constant cash flow and form the basis of continuous dividend payments. High-street-objects in prime locations have the potential for further value enhancement. Office buildings in turn provide increased protection against possible inflation on account of the mainly indexed rents. Growth and expansion of its property portfolio The Company plans a continuous expansion of the property portfolio through the purchase of further commercial properties. In the case of future investments, the investment volume for an individual commercial property should be in a range between EUR 5 million and EUR 30 million with regard to large-scale retail properties and commercial buildings in prime locations and between EUR 10 million and EUR 30 million with regard to office properties. In addition, the Company plans to implement selective measures for portfolio optimisation. To increase profitability, properties in the portfolio with a low fair value or in less promising locations are to be sold. This essentially involves properties with a fair value of less than EUR 3 million in each case, which cause disproportionate costs compared to their rental incomes. The aim is to replace these properties by properties with a higher fair value and in attractive locations with considerably better cost/earnings structures. In justified individual cases, the Company will make opportune acquisitions of properties, even though they are contrary to their strategy. This active portfolio and acquisition management is confined solely to the Company s own portfolio. Separate project development is not a component of the business strategy and similarly no services are provided for third parties. Purchases of commercial property portfolios are not the focus of HAMBORNER s strategy, as the composition of these portfolios is always too heterogeneous with regard to the quality of the properties and does not fully satisfy the Company s investment criteria. The Company does, however, not exclude that property portfolios will also be acquired in the future when opportunities with appropriate quality present themselves. Focus on medium-sized cities and areas in Germany with long-term growth opportunities HAMBORNER s strategy provides for commercial properties to be held across Germany. There are no 103

110 plans presently to accumulate assets abroad. Starting with a property portfolio of which approximately 46% is still located in North Rhine-Westphalia (in relation to the rental income) as at August 31, 2010, the Company plans commercial property acquisitions mainly in south and south-west Germany in the future, as these areas promise long-term growth, and in order to further diversify the portfolio regionally. Investments in the Eastern German states will only be selective and also limited to metropolitan areas. With regard to the size categories of cities, the focus lies on large scale retail properties and on high street properties in cities with over 60,000 inhabitants, and with respect to office buildings on cities with over 100,000 inhabitants. The concentration on property assets in cities of intermediate size has the advantage in the view of the Company that market prices in these areas are less volatile and show generally higher yields than in the conurbations. In the opinion of the Company there is also a better choice of suitable properties and generally a lower degree of competition, as large and professional competitors in particular are only active in the market occasionally and as a result influences on market prices are low. In this way, the trends in market prices, the capital flows from the letting and the achievable yields in these target markets are more stable overall and better predictable in the opinion of the Company. The Company does not categorically preclude the possibility to acquire commercial properties in the large German conurbations if and when suitable opportunities arise. Use of buying opportunities while maintaining the sound financing structure and the continual payment of an attractive dividend As a REIT stock corporation, HAMBORNER is obliged, inter alia, to pay out 90% of the respective profit for the fiscal year under the German Commercial Code and to comply with a REIT equity ratio of 45%. In addition, the management of the Company aligns the management with a view to the key figures of Funds from Operations (FFO) and Net Asset Value (NAV) per share. HAMBORNER s sound financing structure with a low LTV and a high equity ratio facilitates the use of buying opportunities in the current market environment. As surpluses have to be distributed for the most part in a REIT corporation, the Company plans to finance the future growth of the property portfolio with a balanced mix of equity capital and borrowed funds. Thereby, the Company intends to moderately increase the historically low proportion of borrowed capital, where appropriate, both with respect to future acquisition financing and with respect to existing financing in order to optimise profitability. The Company is aiming to keep the REIT equity ratio above the legallyprescribed level of 45% in the long-term at approximately 50% Business Activities The business activities of HAMBORNER with regard to investment activities and portfolio management are further set out below Investment profile and investment process Investment profile HAMBORNER continuously monitors the German market for commercial properties. In this regard it focuses on the acquisition of large-scale retail properties, commercial buildings in prime locations and office buildings. Due to the expertise of its management, its networks with other market participants, such as project developers, investors or brokers, as well as its long-standing market presence, HAMBORNER has access to suitable investment opportunities which match the investment profile described below. Sectoral focus HAMBORNER invests in properties in the sectors of the large-scale retail properties as well as commercial buildings in prime locations and office buildings. The reason for focusing on these sectors is a balanced yield/risk profile in accordance with the corporate strategy. 104

111 Regional focus HAMBORNER s investments are to be made in growth regions across Germany, whereby the focus primarily lies on cities with over 60,000 inhabitants and, with respect to office properties on cities with over 100,000 inhabitants. Basically, investments are to be made with a preference for the growth regions in south and south-west Germany. The concentration on properties in cities of intermediate size has the advantage, in the view of the Company, that market prices in these areas are less volatile than in large cities and that the yields are generally greater than in the conurbations. Furthermore, in the opinion of the Company, there is a better choice of suitable and potentially profitable property investments in medium-sized cities. There are generally not so many large property projects which have an impact on market prices and rents, as it is often the case in the conurbations. In this way, the market prices and rents in its target markets are more stable overall and can be planned more easily in the opinion of the Company. The Company expects to generate a higher yield in the long-term and reduce portfolio risks with this objective. Planned investment volumes The planned investment volumes of individual transactions should generally be in the range from EUR 5 million to EUR 30 million in the case of large-scale retail properties and commercial buildings in prime locations and in the range from EUR 10 million to EUR 30 million in the case of office properties. On the one hand, the majority of private investors are, in the opinion of the Company, no longer active in these ranges and, on the other hand, many of the large (international) institutional investors do not yet appear on this market. Moreover, the risks from investments of this magnitude can be diversified over a greater number of investment properties in the overall portfolio, whereas investments with greater volumes are mainly associated with increased cluster risks. Location The requirements of HAMBORNER with respect to the location of the investments are determined by the individual types of usage. Commercial buildings in prime locations must be situated in the most frequented part of the pedestrian zone and large-scale retail trade properties in optimally accessible locations in terms of infrastructure. Office properties should be located in central inner-city sites with good transport connections or in well-developed enterprise zones. Rental profile In the case of investment properties, the crucial arguments for HAMBORNER for buying are, with respect to the rental profile, long-term rental agreements with reputable tenants of good creditworthiness at a rent level in line with market conditions. The cash flow from the properties must be secured over a long period with a low default risk. In addition to the indexation of rents, it is also sought that preferably all incidental costs and maintenance obligations should be transferred to the tenants in all rental agreements. Multi-tenant properties are preferred by HAMBORNER due to the spreading of risk. Single-tenant properties are only considered with particularly good creditworthiness of the tenants and ongoing rental agreements for the long term. Property profile When buying, HAMBORNER takes care above all to purchase properties of a more recent year of construction in a good state of repair with an adequate number of parking spaces and low administrative intensity. The leased areas should be furnished in a modern way and flexibly divisible. Locations in demand and marketable area sizes should minimise the re-letting risk. Profitability Finally, the gross initial returns for properties meeting the investment criteria outlined above should be around 7% with respect to large-scale retail and office buildings and around 6% with respect to commercial buildings in prime locations. Investment process When a commercial property is bought, the investment property goes through the investment process described below, which can be subdivided into the following stages: Pre-selection The investment process mostly starts either by an approach on the part of a seller or intermediary, but also by HAMBORNER contacting potential sellers. The information regarding the investment property up for sale is collected centrally in a database at HAMBORNER. 105

112 The Real Estate Manager at HAMBORNER makes a pre-selection of the investment properties after the identification of acquisition opportunities and requests further information from the seller for the purpose of evaluating the investment property. If the investment property matches the investment profile, the Real Estate Manager submits the investment opportunity to the Managing Board for examination. In the event of a positive decision, the Real Estate Manager inspects the property and HAMBORNER submits an indicative offer to buy as a basis for a due diligence and for the future contractual negotiations. The indicative offer to buy generally includes a confidentiality agreement between the parties, an indicative purchase price as well as the agreement of an exclusivity period for both parties. Due diligence review In the subsequent course of the investment decision, an economic, technical and legal due diligence of the investment property is carried out. This due diligence is carried out by HAMBORNER itself, in some cases, as well as by external advisors in the case of larger investment properties or portfolios when there is a requirement for specific expertise. The focal point of the economic due diligence is the analysis of the long-term value potential of the respective investment property. For this, the macro and micro situation, the terms of the rental agreements, which are already in existence or still being negotiated, as well as their relation to current market conditions at the time for comparable properties, the creditworthiness of tenants, the general possibilities of equity capital and borrowed funds financing, the future earnings potential as well as possibilities for the attainment of additional earnings or of additional exploitation of the plot of land in question are investigated. The tax and actuarial factors are also analysed in this connection. The technical land and building inspection is an integral part of a due diligence. It is attached great importance both when portfolio properties and new construction properties are purchased. The central point in this regard, in addition to the technically proper structural design, is compliance with the requirements in terms of fire protection, as well as possible specifications and requirements from the planning permission documents. Added to this to an increasing extent in the case of portfolio properties are also a qualitative examination of the building fabric as well as a check for contaminated building waste (e.g. asbestos or PCBs) as well as for contaminated waste from the building land on the basis of the existing technical expert reports. In particular, the rental agreements in existence or to be concluded, the land register, the register of construction encumbrances, relevant contracts (e.g. urban development contracts, neighbourhood agreements), if they exist, the register of contaminated sites and the situation under construction planning legislation as well as, where appropriate, the seller s purchase agreement are examined within the framework of the legal due diligence. Contractual negotiation After conclusion of the due diligence or in the case of time-critical acquisitions already during the due diligence, HAMBORNER enters into contractual negotiations with the seller of an investment property regarding important components of the purchase agreement. The indicative offer to buy forms the basis of the negotiations. The results of the due diligence influence the evaluation of the investment property for the finding of an appropriate purchase price. At this stage further purchase price negotiations take place with the seller if the due diligence has produced results which justify a reduction in the purchase price. Investment decision The Management Board of the Company makes the decision about the further pursuit of an investment opportunity on the basis of a decision paper. In addition to a description and evaluation of the investment property based on the due diligence that has been carried out, such decision papers include information on the opportunities and risks of the investment measure as well as possible alternative courses of action and the significant key points of the purchase agreement. If the transaction volume exceeds an amount of EUR 5 million within the approved budget, the decision also requires the approval of the Supervisory Board in accordance with the procedural rules of the Managing Board. 106

113 Conclusion and execution of the purchase agreement After the approval of the Managing Board and if required of the Supervisory Board has been obtained, the purchase agreement is definitively negotiated and concluded. HAMBORNER is only obliged to take over the investment property and to pay the agreed purchase price, once all contractually agreed maturity requirements are fulfilled. These may be, for example, a property s release from encumbrances, the carrying out of expert reports, examinations of the soil and hand-over of relevant documents (e.g. securities) or the conclusion of important rental agreements Portfolio management HAMBORNER s portfolio management comprises the commercial and technical property management. Commercial property management Portfolio management, asset management and commercial property management are the core tasks of commercial property management. Portfolio management entails the ongoing analysis and performance-orientated management of the real estate portfolio and updating of the portfolio strategy, as well as risk management, accompanied by the ongoing monitoring of relevant markets. The most important activities in the area of asset management are property analysis, the development of property strategies, the letting of vacant spaces and the purchase/sale of properties. In addition, it includes the selection, management, monitoring and quality control of external service providers in the areas of letting, purchase/sale and valuation as well as the involvement in, authorisation and monitoring of strategically relevant decisions in property and technical management in the context of the letting activity. Commercial property management at HAMBORNER comprises in particular, rental agreement administration, servicing of tenants, rent collection, preparation of statements of account for incidental expenses and the management of service providers (e.g. caretakers, cleaning) and supply agreements. Technical property management The technical property management primarily entails the planning, management and monitoring of ongoing maintenance and of renovation/modernisation work, as well as technical property servicing. Activities of the technical management that are labour-intensive but characterised by low strategic relevance, such as the servicing and maintenance of technical equipment, are outsourced to external service providers Description of the Property Portfolio Overview As at August 31, 2010, HAMBORNER has a property portfolio of 60 properties. The properties are predominantly in large and medium-sized cities at 43 different locations in Germany and have a total usable floor space of approximately 208,070 sqm, of which approximately 198,330 sqm are used commercially and around 9,740 sqm as residential space. 107

114 The following presentations and tables provide an overview regarding HAMBORNER s property portfolio as at August 31, 2010, in each case. The Company has direct ownership of the respective properties. The following map graphically shows the regional focal points of the present investment activities: 108

115 Significant key figures for the property portfolio HAMBORNER s 60 properties as at August 31, 2010 consist of 46 retail properties (largescale retail properties and commercial buildings in prime locations with residential units) (approximately 77%), 11 office buildings (approximately 18%) and 3 other commercial properties (approximately 5%). As at August 31, 2010, the properties have a total net floor area of approximately 208,070 sqm, of which approximately 59% are attributable to retail spaces, approximately 33% to office spaces, including medical practices, approximately 3% to production areas and other commercial premises and approximately 5% to residential spaces (these figures include storage spaces). The economic vacancy rate (taking into account rent guarantees) from January 1, 2010 to August 31, 2010 calculated on the basis of total rental revenues of the property (excluding revenue from leaseholds) amounted to 1.18%. All of HAMBORNER s properties generate annualized rental incomes (including rent guarantees and excluding turnover rents and revenue from heritable building rights) of EUR 25,418,418 as at August 31, Approximately 64% of the rental income is generated by retail spaces, around 30% by office spaces and medical practices, about 2% by manufacturing and other industrial areas, around 2% by residential units (these figures partially include rent for parking areas) and around 2% by garages, car parking spaces and other rents (e.g. licensing agreements). HAMBORNER s real estate portfolio comprises in addition around 4.5 Mio. sqm of mainly agricultural areas and woodlands acquired during the former mining business of the Company. These mainly undeveloped lands are mostly located in the northern area of Duisburg and the neighbouring towns of Dinslaken and Hünxe. Due to the location on the periphery there is little prospect in the long-run for these undeveloped outskirt areas to be rededicated to commercial or residential building sites. On the balance-sheet, the undeveloped real estate is stated at historic acquisition and production costs. The aforementioned agricultural estates and woodlands generated an annual rental income of approximately TEUR 138 as at August 31, In August 2010, HAMBORNER signed purchasing agreements for about 2.06 million sqm of these areas which will be transferred to the purchasers probably in the fourth quarter of The properties in Solingen, Friedenstraße 64, Gütersloh, Berliner Straße 29-31, Geldern, Bahnhofstraße 8 and Freiburg, Robert-Bunsen-Straße 9a are heritable building rights properties; these sites are not or only partially in the ownership of HAMBORNER. The heritable building rights agreement for the property in Solingen terminates on December 31, 2034, for the property in Gütersloh on March 31, 2060, for the property in Geldern on December 31, 2102 and for the property in Freiburg on June 30, The ownership in the leasehold property with respect to the object in Geldern will be transferred to HAMBORNER in 2012 against payment of a purchase price. The remaining three leasehold agreement provide for unilateral extension rights of the term in favour of HAMBORNER, so that HAMBORNER s long-term use of these properties is secured. As at June 30, 2010, mortgages amounting to EUR million were registered on the Company s real estate to secure property financing. 109

116 The following table shows the significant key figures for HAMBORNER s properties for the three property categories: Large-scale retail trade Commercial properties (with residential units) 2 Office/commercial Total Number of properties in units Contractual leasing spaces in sqm, approximately... 95,620 43,411 69, ,070 Vacancies in % Annualized contractual rent in thousand EUR(including rent guarantees, excluding turnover rents and revenue from leaseholds)... 9,668 7,760 7,990 25,418 Weighted remaining lease term in years Market value in TEUR , , , ,160 Gross rate of return in % % 6.6% 7.2% 7.2% 1 Economic vacancies after rent guarantees from January 1, 2010, to August 31, Predominantly retail, properties also have a small proportion of office sites and residential units. 3 Annualized contractual rent per year divided by fair value Regional distribution of the property portfolio Based on the annualized rental income (including rent guarantees, excluding turnover rents and revenue from leaseholds) and the market values of the properties, HAMBORNER s real estate portfolio as at August 31, 2010, was distributed between the individual federal states as follows: Federal state Number of properties Share of the rental income in the total portfolio in % Share of the fair value in the total portfolio in % North Rhine-Westphalia Baden-Württemberg Lower Saxony Bremen Hesse Bavaria Hamburg Saxony Rhineland-Palatinate Thuringia Berlin Total Breakdown of the property portfolio by types of usage Based on the annualized rental income (including rent guarantees, excluding turnover rents and revenue from leaseholds) and usable space of the properties, HAMBORNER s real estate portfolio is distributed between the various use categories as at August 31, 2010, as follows: Rentable space by category of usage 3% 5% 33% 59% Industry/other commercial Residential Office Retail 110

117 Rental income by category of usage 2% 2% 2% 30% 64% Residential (partly incl. rental income from parking spaces) Garages, parking spaces and other rents Office (partly incl. rental income from parking spaces) Retail Industry/other commercial 12.6 Tenant Structure Overview The following table shows the tenant structure of HAMBORNER s property portfolio as at August 31, 2010 (in order of year of purchase): No. City Address Year of Purchase Type of Usage Annualized rent (exkl. turnover rent and Fair value revenue according to from fair value leaseholds) report Main tenants Occupancy rate from January 1 to August 31, 2010 (in relation to rent including rent guarantees) Occupancy rate as at August 31, 2010 (in relation to sqm) 1 Stuttgart Stammheimer Str G 1,200,000 16,840,000 EDEKA 100% 100% 2 Hilden Westring G 898,978 11,930,000 OBI 100% 100% 3 Kamp-Lintfort Moerser Str G 250,397 3,390,000 C&A, dm 100% 100% 4 Erlangen Wetterkreuz B 1,079,501 15,360,000 AREVA 100% 100% 5 Münster Martin-Luther-King Weg B 1,688,103 22,090,000 Bundesagentur für Arbeit, IHK 100% 99% 6 Hamburg Fuhlsbüttler Str G/B/W 465,042 6,900,000 Budnikowsky, Commerzbank 100% 100% 7 Hamburg Ziethenstr Gew/B/W 170,181 1,970,000 Riba Edelstahl 100% 100% 8 Duisburg Albertstraße 2-10 (Kaßlerfelder-Kreisel) 2009 G 659,159 8,940,000 Welkes Mega-Pet, Netto, dm, Kik 100% 100% 9 Rheine Emsstr G/B/W 334,102 5,260,000 Rossmann 100% 93% 10 Bremen Hermann-Köhl-Str B 614,433 9,700,000 Flyline 89% 88% 11 Osnabrück Sutthauser Straße 285/ B 480,162 6,840,000 Hochtief, PBR, ProOffice 96% 96% 12 Bremen Linzer Str. 7, 9, 9a 2008 B 1,161,735 16,000,000 OAS, Universität Bremen, O 2 100% 100% 13 Herford Bäckerstr G 274,800 4,220,000 Mayersche Buchhandlung, Rossmann 100% 100% 14 Freiburg Robert-Bunsen-Str. 9a 2008 G 930,210 7,570,000 EDEKA 100% 100% 15 Münster Johann-Krane-Weg B 1,050,987 14,770,000 Fachhochschule Münster 99% 84% 16 Neuwied Allensteiner Str. 61/61a 2007 G 297,696 4,740,000 dm, Fressnapf, Takko, Kik 81% 71% 17 Freital Wilsdruffer Str G 738,453 10,080,000 Kaufland 100% 100% 18 Geldern Bahnhofstr G 813,615 8,290,000 Kaufland 100% 100% 19 Lüneburg Am Alten Eisenwerk G 428,790 5,910,000 Kaufland 100% 100% 20 Meppen Am Neuen Markt G 949,040 13,490,000 Kaufland 100% 100% 21 Mosbach Hauptstr G 603,825 8,430,000 Kaufland 100% 100% 22 Villingen- Schwenningen Auf der Steig G 320,340 3,820,000 EDEKA 100% 100% 111

118 No. City Address Year of Purchase Type of Usage Annualized rent (exkl. turnover rent and revenue from leaseholds) Fair value according to fair value report Non-binding convenience translation Main tenants Occupancy rate from January 1 to August 31, 2010 (in relation to rent including rent guarantees) Occupancy rate as at August 31, 2010 (in relation to sqm) 23 Krefeld Hochstr G 503,873 8,310,000 Douglas 100% 100% 24 Minden Bäckerstr G/W 295,122 4,780,000 Jeans Fritz, Tally Weijl 100% 100% 25 Oldenburg Achternstr. 47/ G 240,000 4,160,000 E-Plus 100% 100% 26 Leverkusen Wiesdorfer Platz G/W 149,414 2,510,000 NORDSEE 92% 75% 27 Düren Wirtelstr G/W 181,095 1,920,000 Xanaka (demnächst Tchibo) 100% 100% 28 Osnabrück Große Str. 82/ G 306,000 5,620,000 Mexx 100% 100% 29 Hamburg An der Alster B 237,840 3,730,000 Rechtsanwalt Rasch 99% 100% 30 Gütersloh Berliner Str G/W 343,356 3,680,000 Telekom, Deichmann 99% 93% 31 Dinslaken Klosterstr. 8-10/ Neustr. 60, G/B/W 168,154 2,220,000 TARGOBANK 100% 100% 32 Kaiserslautern Fackelstr G/B/W/U 427,271 7,090,000 Wissmach, O 2, Six 99% 96% 33 Kassel Quellhofstr G 182,310 1,820,000 SPAR 100% 100% 34 Augsburg Bahnhofstr G/B/W 459,123 6,910,000 Orsay, TARGOBANK 100% 100% 35 Duisburg Fischerstr G/W 47, ,000 Kamps 90% 79% 36 Hannover Karmarschstr G/B/W 261,055 4,560,000 NORDSEE 100% 100% 37 Berlin Schloßstr G/W 212,160 3,930,000 NORDSEE 100% 100% 38 Erfurt Marktstr G/B/W 143,469 1,950,000 Machleit Spezialschuhhaus 92% 75% 39 Erfurt Marktstr G/B/W 89,923 1,240,000 Klepp Handel 100% 100% 40 Oberhausen Marktstr. 116 / Nohlstr. 56, G/W 105,679 1,390,000 NKD 91% 84% 41 Dortmund Königswall G/B/W 314,405 4,320,000 ver.di Dienstleistungsgewerkschaft 100% 100% 42 Erfurt Neuwerkstr G/B/W 182,896 2,160,000 ReSales 100% 100% 43 Duisburg Fischerstr G/W 83,201 1,000,000 KODI 100% 100% 44 Dortmund Westfalendamm B/W 281,610 3,910,000 Progas 100% 100% 45 Wuppertal Turmhof G/B/W 247,206 3,310,000 Stadtwerke Wuppertal 100% 100% 46 Lüdenscheid Wilhelmstr G 66, ,000 The Phone House 100% 100% 47 Oberhausen Marktstr G/W 115,627 1,130,000 Telekom 98% 83% 48 Frankfurt am Main Königsteiner Str. 69a / G 325,767 4,380,000 REWE 100% 100% 49 Solingen Kirchstr. 14, 16 / Eiland 19, 21 / 1985 G/W 283,502 4,110,000 dm 94% 74% Linkgasse 2, 4 50 Frankfurt am Steinweg G/B/W 313,710 5,770,000 Bailly Textil, Mandarina Duck 100% 100% Main 51 Wiesbaden Kirchgasse G/W 534,300 11,060,000 Deichmann, O 2 100% 93% 52 Moers Homberger Straße G/W 212,820 2,760,000 Vestino 100% 100% 53 Duisburg Rathausstr G/B/W 181,592 2,120,000 Netto Marken-Discount 100% 96% 54 Frankfurt am Cronstettenstr B 356,389 5,790,000 Keil u. Schaafhausen 100% 100% Main 55 St. Augustin Einsteinstr G 300,000 3,660,000 MAN 100% 100% 56 Krefeld Emil-Schäfer-Str G 162,677 1,530,000 HPZ Krefeld 100% 100% 57 Essen Hofstr G/B 282,090 3,510,000 EDEKA 100% 100% 58 Köln Von-Bodelschwingh G 296,746 3,720,000 REWE 100% 100% Str Krefeld Krützpoort B 91, ,000 Grönheit & Weigel 85% 100% 60 Solingen Friedenstr G 1,023,408 15,000,000 Kaufland 100% 100% TOTAL 25,418, ,160,000 99% 97% B: Office spaces G: Commercial spaces (retail, catering) Gew: Other commercial and manufacturing spaces L: Storage areas W: Residential units U: Undeveloped reserve lands 112

119 As at August 31, 2010, about 41.4% of the total market value of HAMBORNER s real estate portfolio is attributable to the ten properties with the highest market value Main tenants The following table shows the ten largest tenants in terms of annualized rental income of HAMBORNER s property portfolio as of August 31, Annualized contractual rent in EUR Share in the total rent p.a. (including rent guarantees) in % Kaufland Group ,557, % EDEKA²... 2,830, % Areva , % OBI , % Telefónica O , % German Federal Employment Agency , % REWE , % Nordsee , % Douglas , % Flyline , % Total... 13,058, % 1 excluding leasehold revenue ² excluding turnover rent Remaining lease terms The following table shows the remaining lease terms of HAMBORNER s property portfolio as at August 31, 2010: Year Rental agreement expiries (according to current contractual actual rent, including rent guarantees) % % % % % 2015 et seq % unlimited... 4% The weighted remaining term of rental agreements for large scale retail is around 10.2 years, for commercial buildings around 4.4 years and for offices and other commercial premises around 3.7 years Rental and leasing income as well as vacancy rates The annualized rental income (including rent guarantees, excluding turnover rents and revenue from leaseholds) amounted to around EUR 25,418,418 as at August 31, Leasing income in the amount of TEUR 138 adds to the income. The above mentioned turnover rents are additional rents from retail tenants which are usually due in the following year, and which are calculated on the basis of a contractually agreed percentage of the tenant s turnover in the property and which only becomes due if the calculated turnover rent is over and above the minimum rent (the minimum rent is fixed irrespective of the turnover). With respect to the annualized rent, revenues from leaseholders, that are passed on to the tenants, are not taken into account. The vacancy rate, i.e. the target rent for the vacant spaces in relation to the total target rent, amounted to around 2.27% for the period from January 1, 2010 to August 31, On August 31, 2010, approximately 5,800 sqm were vacant in total. The economic vacancy rate amounted to approximately 1.18% for the period from January 1 to August 31, The market value appraisal of 113

120 Jones Lang LaSalle contained in this prospectus reports for the month of August 2010 an economic vacancy rate of 1.38%. In the calculation of the economic vacancy rate, the rent losses for the vacant spaces are adjusted by contractually established lease guarantee claims Property and Real Estate With the exception of its property portfolio (see section 12.5 Description of the property portfolio in this section) including its head office in Goethestraße 45 in Duisburg, the Company had no other significant tangible assets as at June 30, 2010, and in the previous fiscal years 2009, 2008 and Investments The main investments of HAMBORNER in the fiscal years 2007, 2008, 2009, the investments made until now in fiscal year 2010 as well as the most important current and future investments of HAMBORNER are described below Investments in fiscal year 2007 In 2007, investments of approximately EUR 114 million (including transaction costs) were made overall. A package of five Kaufland hypermarkets and two EDEKA cash & carry markets with a total lettable area of more than 54,000 sqm, which were purchased from the Kaufland Group, made up the largest share of the investment volume, whereby possession of one of the EDEKA cash & carry markets in Freiburg was only transferred to HAMBORNER in In addition, a retail centre in Neuwied was purchased in the large-scale retail trade sector. A further focus of the investment activities in the 2007 financial year was on office properties. HAMBORNER has concentrated on new properties in medium-sized cities in this respect. Two office properties were acquired in Bremen. A property directly next to the Leonardo-Campus of the university/university of applied science was purchased in Münster and a new construction project in Osnabrück. In the high street property sector, the Company was able to acquire a property in Rheine in More specifically, the following investments were closed (i.e. possession was transferred) in the financial year 2007: City Address Usage Main tenant (position at: Aug 31, 2010) Usable floor space sqm Münster... Johann-Krane-Weg Office Fachhochschule Münster 9,424 GeBioM Hamburg Mannheimer Kaufland portfolio: Freital... Wilsdruffer Straße 52 Trade Kaufland 7,940 Geldern... Bahnhofstraße 8 Trade Kaufland 8,749 Lüneburg... AmAlten Eisenwerk 2 Trade Kaufland 4,611 Meppen... AmNeuen Markt 1 Trade Kaufland 10,205 Mosbach... Hauptstraße 96 Trade Kaufland 6,493 Villingen-Schwenningen... AufderSteig 10 Trade EDEKA 7,270 Neuwied... Allensteiner Straße 61/61a Trade dm Fressnapf 3,548 Rheine... Emsstraße Trade/ office/ residential Dirk Rossmann Akademie Überlingen Bremen... Hermann-Köhl-Straße 3 Office Flyline Maxima 7,157 Osnabrück... Sutthauser Straße 285/ Office Hochtief 3, Projektentwicklung ProOffice PBR Planungsbüro Bremen... Linzer Straße 9, 9a Office Bremen University O 2 OAS 9,034 The investments were financed to a level of approximately 40% from own funds and for the rest through the raising of bank loans. 2,

121 Investments in the fiscal year 2008 In the financial year 2008, investments, including transaction costs, in the total amount of EUR 16.1 million were made. Already in 2007, purchase agreements were notarized for an EDEKA supermarket in Freiburg (integral part of the Kaufland portfolio), an additional office building in Bremen technology park and an office building in the pedestrian zone of Herford. All properties were transferred into the Company s ownership in More specifically, the following investments were made, including the transfer of ownership, in the financial year 2008: City Address Usage Main tenant (position at: 31 Aug 2010) Usable floor space sqm Bremen... Linzer Straße 7 Office OAS 1,107 Freiburg... Robert-Bunsen- Trade Edeka 9,253 Straße 9a Herford... Bäckerstraße Trade Mayersche Buchhandlung Dirk Rossmann 1,787 These investments were financed to a level of around 40% from own funds and for the rest through the raising of bank loans Investments in the 2009 fiscal year In the financial year 2009, investments, including transaction costs, in the amount of EUR 40.0 million were made. This includes purchase agreements already notarized in 2008 for two mixed-usage properties in Hamburg and a further office building in Münster. All properties were transferred into the Company s ownership at the start of Furthermore, a recently constructed retail centre with longterm rental agreements was purchased in the second half of the year at the Duisburg location. Transfer of ownership was in August More specifically, the following investments were made, including transfer of ownership, in the financial year 2009: City Address Usage Main tenant Usable floor space in sqm Hamburg... Fuhlsbüttler Straße Office/trade/residential Iwan Budnikowsky 2,960 Kamps AOK Rheinland/Hamburg Hamburg... Ziethenstraße 10 Office/manufacturing/ residential Riba Edelstahl 2,095 Münster... Martin-Luther-King-Weg Office German Federal Employment Agency Chamber of Industry and Commerce NRW con terra Duisburg... Albertstraße 2-10 Trade Welkes Mega-Pet Netto dm These investments were financed to the level of approximately 40% from own funds and for the rest through the raising of bank loans Investments in the financial year 2010 In accordance with its investment strategy HAMBORNER was able to make four acquisitions in the current year In addition to an office property in Erlangen, an OBI market in Hilden, a high street property in Kamp-Lintfort and an EDEKA market in Stuttgart were purchased. The total investment volume for these properties was EUR 46.8 million. In addition, purchase agreements for an EDEKA market in Freiburg and an office building in a prime location in the pedestrian zone of Bad Homburg v.d.h., an office building in Ingolstadt and a high-street-object in Lemgo for a total purchase price of EUR 43.0 million were notarized. The property in Freiburg will probably be transferred after completion in mid 2012, the properties in Bad Homburg v.d.h., Ingolstadt and Lemgo probably until the end of In the case of the property in Bad Homburg v.d.h. HAMBORNER has a right of withdrawal if, amongst others, the vendor does not carry out certain construction work prior to the transfer ,799 5,119

122 City Address Usage Main tenant Non-binding convenience translation Usable floor space in sqm Erlangen... Wetterkreuz 15 Office AREVA 7,343 Hilden.... Westring 5 Retail OBI 10,845 Kamp-Lintfort.... Moerser Str. 247 Retail C&A, dm 2,093 Stuttgart... Stammheimer Str. 2 Retail EDEKA 6,395 Lemgo... Mittelstr Retail Hennes & Mauritz, C&A 4,600 Freiburg... Lörracher Str. 8 Retail EDEKA 4,000 Bad Homburg v.d.h.... (confidential) Retail/Office confidential (confidential) Ingolstadt... Despagstr. 3 Office Kaspersky 5,600 The volume of investment for the four already executed acquisitions was financed to a level of about 40% with own funds and for the rest through the raising of bank loans. The financing of the purchase price for the other four properties, for which purchase agreements have been signed but where the transfer has not yet happened, is also to be financed to the level of 40% from own funds and for the rest through bank loans. If the proceeds from the capital increase are available before the payment date, they will transitionally be used in first place Future investments and investment pipeline At present, HAMBORNER is according to its investment profile (see section Investment Profile and Investment Process ) considering the acquisition of eight properties with an investment volume of about EUR 121 million. HAMBORNER has made indicative purchasing offers or has signaled buying interest. In the case of a property in Saxony a purchase agreement has already been notarized but the Company can still exercise its right of rescission. The investment pipeline is shown in the table below: Federal state Usage Usable space in sqm (estimated) Investment volume in EUR million (estimated) Baden-Württemberg... Office 4, Baden-Württemberg... Retail (High Street) 3, Bavaria... Office /Retail 11, Bavaria... Commercial (medical practice) 8, Bavaria... Office/Commercial 6, North Rhine-Westphalia... Retail park 7, North Rhine-Westphalia... Office 6, Saxony... Retail 11, A statement as to the probability of realization cannot be made at this point of the investment process. The Company believes that (with the exception of the already notarized purchase agreement for the property in Saxony) about half of the contracts for the properties can be notarized in the fourth quarter of 2010 and in the first quarter of The transfer of the properties could be effected in At present, the Company believes that, as before, the investments can be financed up to a level of 60% through banking loans in accordance with the provisions of the REIT Act. The realization of the acquisition of properties in the investment pipeline and other properties therefore depends, amongst others, on the realization of the planned capital increase Industrial Property Rights The Company is owner of the following Internet domains: and HAMBORNER has no trademarks or other industrial property rights Research and Development HAMBORNER conducts no research and development due to the object of its business. 116

123 12.11 Employees and Pension Obligations As of June 30, 2010, HAMBORNER had 22 employees and two members on the Board of Management. The number of employees has not changed since then. There is no employee bonus scheme or stock option plan. The following table contains an overview of the annual average number of employees in different areas: Commercial property management Technical property management Administration Total HAMBORNER has pension obligations with regard to current and former employees on the basis of corporate pension scheme commitments. The eligible individuals as at June 30, 2010, are one active employee, ten direct pensioners and five widows of former employees. Provisions for pensions amounted to TEUR 5,545 as at June 30, In this respect see also the section Provisions for pensions Significant agreements Significant agreements in which the Company is a contracting party are summarized below: Tenancy agreements The following table shows the tenancy agreements of HAMBORNER s portfolio as at August 31, 2010, with a total annual rental income of at least EUR 750,000 per tenant: Annualized contractual rent (excl. turnover rents, revenue from leaseholds) in EUR, approx. Share of total rent per year (incl. rent gurantees, excl. turnover rents, revenue from leaseholds in % EDEKA, Stuttgart... 1,200, % Kaufland, Solingen... 1,023, % Kaufland, Meppen , % EDEKA, Freiburg , % OBI, Hilden , % Kaufland,Geldern , % AREVA,Erlangen , % Finance agreements For the financing of its business activity, the HAMBORNER has entered into the following finance agreements: HAMBORNER utilizes property financing of various banks in the amount of approximately TEUR 126,451 as at June 30, These financing instruments are exclusively property-linked annuity loans, which are secured by HAMBORNER by means of first ranking mortgages. Some of these loan agreements contain, in accordance with standard banking terms and conditions, extraordinary termination rights of the lending banks in the event of a significant deterioration in the financial circumstances of HAMBORNER as the borrower. The pegging of interest rates of the finance agreements expires within the years 2013 to 2020, so that HAMBORNER has to undertake refinancing in these years. 117

124 The following table shows the liabilities vis-à-vis banks as at June 30, 2010: Non-binding convenience translation Initial loan volume in TEUR (unaudited) As at in TEUR (unaudited) Interest rate in % Fixed rate of interest until Loan ,972 3, % Loan ,420 2, % Loan ,000 8, % Loan ,400 37, % Loan ,000 29, % Loan ,400 12, % Loan ,000 4, % Loan ,400 5, % Loan ,940 8, % Loan ,700 13, % , ,451 With respect to the financing of the Company see also the section Refinancing and other liquidity sources Insurance Policies For the limitation of risks, HAMBORNER concluded customary insurance policies, especially liability insurance policies for personal injury, property damage and financial losses, as well as buildings insurance policies (fire, tap water, storm and natural hazards), including an insurance policy against loss of rent for damage to leased properties and an insurance policy against losses from terrorist attacks for properties with an insurance sum of more than EUR 10 million. In addition, the Company has concluded a so-called D&O liability insurance policy (third-party liability insurance for executive bodies and managers) for the members of the Management Board and the Supervisory Board for the breach of their obligations associated with their work for the respective executive body. The sums insured amount to EUR 5 million per occurrence, and a maximum of EUR 5 million per insurance year. Since December 1, 2009, in accordance with section 93 (2) of the German Stock Corporation Act and article 3.8 of the German Corporate Governance Code, a deductible for the members of the Management Board and the Supervisory Board members in the amount of at least 10% of the damages up to at least the amount of one-and-a-half times the fixed annual compensation of the relevant member of the governing body has been agreed. In the opinion of the Company the insurance policies concluded and their respective terms and conditions (sums insured, premiums, limitations of liability and liability exclusions, deductibles etc.) are customary in this industry and ensure adequate and appropriate protection, considering the costs and potential risks. The insurance protection is regularly reviewed and adjusted if necessary. It can, however, not be excluded that the Company will incur losses or that claims will be brought against the Company which go beyond the nature and scope of the existing insurance protection Significant Legal Disputes As is the case with other companies, the Company was and is also involved in legal disputes, arbitration proceedings and official proceedings in the context of its business activities. Such legal disputes and proceedings may arise in particular in relation to tenants, suppliers, buyers and sellers of properties, employees or authorities. This may entail payment or other obligations for the Company. To the extent possible, reasonable and economically sensible, as at June 30, 2010, provisions have been made in the amount of TEUR 741 in order to cover these risks. However, as some risks are only assessable to a limited extent, it cannot be excluded that nevertheless losses may occur which are not covered by the reserved amounts. The Company is currently not exposed to any state interventions and is not involved in administrative, legal or arbitration proceedings which could have a substantial impact on the financial 118

125 position or the profitability of the Company, or have had such an impact in recent times. Such proceedings are neither threatened or expected, according to the Company s knowledge, nor have been pending or concluded in the past twelve months. Furthermore, the proceedings described below do not have such serious impact in the judgement of the Company. HAMBORNER is involved in legal action against Lubis Grundbesitzverwaltung GmbH & Co. KG before the Regional Court of Heilbronn with respect to the rectification of defects of one property with an amount in dispute of TEUR 100. According to a transcript dated October 15, 2009, out-of-court negotiations are in progress with regard to rehabilitation of the property. A suspension of the proceedings was ordered for this reason. In addition, there has been knowledge since 2007 of a possible claim of the City of Duisburg against various companies in a total amount of EUR 1.3 million for compensation of subsidence damages resulting from a disused coal field, for which HAMBORNER, as a former co-owner, is jointly liable to an extent of 50%. Provisions have been made in the amount of TEUR 700 as of June 30, The City of Duisburg has not asserted any claims against HAMBORNER up to now. In addition, an action for annulment against the resolutions of the ordinary general meeting of June 5, 2008, on the capital increase and against the resolution of that general meeting on the formal approval of the acts of the executive bodies was instituted with the Regional Court of Duisburg. Another shareholder has joined this action for annulment as an intervenor. The Company immediately announced the filing of the action in the electronic German Federal Gazette in accordance with section 246 (4) of the German Stock Corporation Act. The amendment to the Articles of Association (capital increase) was entered into the Commercial Register on July 16, By court order dated March 27, 2009, the Regional Court of Duisburg granted the application for release by HAMBORNER and by judgement dated April 24, 2009, it dismissed the action for annulment. The opponent lodged an immediate appeal against the order in the release proceedings. He lodged an appeal against the judgement in the annulment proceedings. By order dated July 3, 2009, the Higher Regional Court of Dusseldorf dismissed the opponent s immediate appeal against the verdict of the Regional Court of Dusseldorf in the release proceedings with regard to the capital increase approved at the general meeting The opponent withdrew the appeal lodged against the ruling in the annulment proceedings in August With respect to the property in St. Augustin, HAMOBORNER still has an unsettled claim for transfer of property against the city St. Augustin. Back at the time when the city sold the property to the previous owner, the city believed that it had acquired ownership of all lots and that it could resell them. However, until now the transfer of ownership failed with respect to two parcels. Both parcels are still in the ownership of a community of heirs. As some of the heirs are deceased or missing, the city has not yet succeeded in acquiring all shares in the community of heirs. In coordination with the city St. Augustin, a public notice procedure in accordance with section 927 of the German Civil Code has been initiated and HAMBORNER believes that, in 2011, the ownership will be allotted to HAMBORNER. 119

126 13.1 German REIT Legislation 13. REGULATORY ENVIRONMENT Non-binding convenience translation The law for the creation of German real estate public limited companies with stock exchangelisted shares ( REIT-G or REIT Act ) was announced on June 1, 2007 in the German Federal Law Gazette. It thus came into effect retroactively as of January 1, The legislator has therefore created a new asset class within the framework of a tax-exempt real estate corporation commensurate with the model of the United States of America and of other countries in Europe. The REIT Corporation is exempt from corporation and trade tax after the attainment of REIT status if it satisfies the requirements of a REIT Company. These requirements are essentially: the status of a corporation domiciled in Germany (registered office and executive management); restriction of the object of the company to the acquisition, holding, administration and sale of: (i) properties (including all assets necessary for the use and administration of such properties in accordance with Section 3 (7) REIT Act) but excluding existing residential properties and foreign properties which may not be owned by REITs in the country they are located in (existing residential properties are such domestic properties which are used mainly for residential purposes and which were completed before January 1, 2007); (ii) shares in property partnerships; (iii) shares in companies which offer services to REITs; (iv) shares in foreign property companies; (v) participations in companies limited by shares which are shareholders with personal liability in property partnerships and which do not have an asset interest in such companies. The REIT Company may only provide paid services to third parties through the medium of a REIT service company; the corporation may not engage in any commercial property dealing; the shares of the corporation must be listed on a regulated exchange within the meaning of Section 2 (5) of WpHG in a member state of the EU or EEA; must have a minimum share capital of EUR 15 million; no shareholder may have a share in the corporation of 10% or more directly or via a trustee (maximum participation limit); at least 15% of the shares, 25% in the event of Initial Public Offering, must be in free float. Free float is constituted by shares of those shareholders to whom less than 3% of the voting rights are due directly or indirectly (free-float ratio); the corporation must provide for indemnification for the free float shareholders in its Articles of Association in the event of the termination of the tax exemption status due to breaches of the maximum participation limit and of the free float ratio; at least 90% of the profit for the financial year must be distributed to the shareholders (minimum payout); the reported equity capital of the corporation may not fall below 45% of the amount at which the immovables are valued in the individual or consolidated financial statements in accordance with Section 12 (1) REIT Act; at least 75% of the assets of the corporation must rank among the immovables (including investments in property companies) (asset structure); 120

127 at least 75% of the turnover must originate from immovables (turnover structure). the total turnover of companies which offer services to REIT s, which are included in the consolidated financial statement of the corporation must not exceed 20% of the aggregate turnover of the group. For a detailed summary of the requirements for a REIT Corporation and its tax free status see section Qualification of a REIT Corporation. The introduction of the REIT Company was promoted by a so-called exit tax (preferential tax treatment for the disclosure of undisclosed reserves), on the basis of which companies that realise a profit from the sale of properties (real estate and buildings) effected before January 1, 2010 to a German REIT or to a so-called Pre-REIT only pay tax on half of this profit under certain conditions. The same applies to companies on the attainment of REIT status in respect of the required disclosure of undisclosed reserves in qualifying property assets i.e. property assets of the REIT Company that were acquired or constructed before January 1, 2005 and the taxation of these undisclosed reserves (see section 19 Taxation in the Federal Republic of Germany REIT Corporation on this subject) provided that the final taxation happens before January 1, The corporate name of the REIT Corporation should be registered with the competent court with the designation REIT Aktiengesellschaft or REIT-AG for entry in the Commercial Register after stock exchange listing on a regular market in the EU or in the European Economic Area ( EEA ). These designations enjoy designation protection in the same manner as designations in which the term Real Estate Investment Trust or the abbreviation REIT is found on its own or in conjunction with other words, i.e. they may only be used in the corporate name or in addition to the corporate name of companies that have their registered office in the purview of the German REIT Act and that are REIT public limited companies within the meaning of the German REIT Act. The REIT Act provides for sanctions in the event of non-compliance with the requirements of a REIT Company: The tax free status of a REIT Company will be terminated if: it loses its listing; it trades in immovable assets, i.e. if it generated income from the sale of property assets within the last five years that exceeds half of the aggregate of its property assets for such five year period; the free float is less that 15% during three consecutive financial years of the REIT Company or if an investor holds 10% or more of the shareholding of the REIT Company during three consecutive financial years; the minimum share capital requirement is not met during three consecutive financial years; the REIT Company repeatedly and on a permanent basis breaches the requirements relating to its asset structure, turnover structure or minimum distributions; or the requirements for a REIT Company are not or are no longer met. If a REIT Company breaches the requirements relating to its asset structure, turnover structure or minimum distributions or breaches the prohibition on it carrying out paid for ancillary services, the tax competent authority will impose sanction payments against the REIT Company. The amount of the 121

128 sanction payments will vary depending on the severity and, as applicable, frequency of any breaches during prior financial years. Sanction payments will be calculated as follows: violation of the required asset structure: 1% to 3% of the amount by which the immovable asset value is less than the required 75%; violation of the required turnover structure: 10% to 20% of the amount by which the gross rental and lease income or the gross sale proceeds of immovable assets is less than the required 75%; violation of the 90% distribution requirement: 20% to 30% of the amount by which the actual distribution is less than the required 90%; violation of the prohibition on carrying out paid for ancillary services: 20% to 30% of the turnover generated thereby. Cumulative sanction payments are possible Restrictions in German Tenancy Law Requirement for the written form It generally applies in German tenancy law that rental agreements that provide for a term of more than one year must be concluded in written form. The requirements to comply with the written form have been specified by comprehensive case law. However, the rental agreement in question is not invalid in the event of an infringement of the requirement for the written form. Rather, it is deemed to have been concluded for an indefinite period with the consequence that it can be terminated at the earliest at the end of one year after handover of the leased property to the tenant subject to the statutory notice period (i.e. six months to the end of the quarter minus three days in the case of rental agreements for commercial premises). Against the background of the case law enacted in recent years on the formal invalidity of rental agreements, the risk exists that rental agreements that were originally compliant with the written form no longer satisfy the requirements currently applicable and regardless of the agreed fixed term can be terminated at short notice. Operating costs In the area of the operating costs of commercial tenancies, virtually all the ongoing costs of the property accruing to the landlord are essentially apportionable to the tenants. A restriction exists firstly for the costs of maintenance and repairs to the roof and structures, which are not apportionable in agreements that are subject to the provisions regarding general terms and conditions ( General Terms and Conditions agreements ), and secondly for the costs of the maintenance and repair of common areas located in the let property. Regarding the latter, case law in the case of General Terms and Conditions Agreements requires a contractual restriction of the amount apportioned. Beyond that, however, no trend is currently discernible to the effect that case law will impose further restrictions in this regard. Cosmetic repairs, final decorative repairs Responsibility for the maintenance and repair of let properties may generally only be transferred to the tenants in commercial rental agreements. On the other hand, expenses for cosmetic repairs may in principle be passed on to the tenants both in commercial tenancies and in residential tenancies, provided that the execution of the cosmetic repairs is not linked to rigid deadlines or combined with a final decorative repair clause or the tenant in cases of General Terms and Conditions Agreements is not otherwise unfairly disadvantaged by them. A trend in the case law of the German Federal Court of Justice is discernible to the effect that restrictions originally developed for residential tenancy law are increasingly being transferred to commercial tenancies. This may result in provisions contained in commercial rental agreements for cosmetic repairs and final decorative repair obligations, but also for maintenance and repair, no longer being enforceable against tenants in the future under certain circumstances and the costs of follow-up 122

129 refurbishment or possibly also ongoing maintenance and repair measures having to be borne by the landlord. The same could apply to measures carried out by tenants if they claim back refurbishment costs paid by them based on a future adjustment of case law. As a further point, the legislation on energy saving in buildings for instance in the German Energy Saving Regulation ( EnEV ) could change in the future. It is to be expected that the EnEV and comparable regulations will be modified further and place increasing requirements on energy consumption by buildings, particularly in the case of new buildings and modernisations. This situation is already taken into account in long term planning, so that significant changes are not expected as a result of any tightening of the legal framework Liability for Contamination HAMBORNER, as a property company, is subject to public law and civil law regulations on contaminated waste and detrimental soil pollution. In contrast to the guarantees under civil law, the former cannot be excluded by agreements under civil law. Responsibility for contaminated waste in accordance with the German Federal Soil Protection Act (BBodSchG) affects inter alia the party causing the contamination, its legal successors, the former owner of the contaminated land if its ownership was transferred after March 1, 1999 and the owner knew of or should have known of the contamination, as well as the holder of actual authority over the plot of land. Disciplinary powers based on the German Federal Soil Protection Act may relate to risk assessments, orders for investigations, cleanup orders and other necessary measures to protect against harmful soil changes or contaminated waste. Regardless of an official claim, there is a legal claim for compensation between the liable parties in accordance with the German Federal Soil Protection Act which is proportionate to the respective causal contributions. The claim for compensation may be waived by means of an explicit contractual agreement. Civil liability for contaminated waste may arise either from contractual warranty entitlements or statutory entitlements. Warranty entitlements may essentially be waived or restricted by means of contractual provisions. Statutory entitlements may oblige the party causing soil contamination to the payment of compensation or to remove the contamination and its consequences. The Company may be exposed to such liability for compensation or elimination if effects, adversely affecting the property of third parties, emanate from a plot of land which is or has been owned/possessed by the Company. This civil liability exists irrespective of an official claim in accordance with the provisions of the German Federal Soil Protection Act. The Company is not aware of any contamination being present on any property assets held by it Regional Planning, Construction Planning and Building Law HAMBORNER is subject to the provisions of public regional planning, construction planning and building law in its business activities. Regional planning, construction planning and building law is executed in two steps, namely the passing of a local development plan by the municipality, which the construction plan then follows. Whereas the local development plan determines space utilisation by means of overriding planning objectives and the needs of the respective municipality, the construction plan defines the permitted use of certain areas within the local development plan. Therefore, the construction plan makes stipulations regarding the permitted usages for buildings to be constructed, their height and the construction concentration. In the construction plan, certain areas may also be determined for special purposes such as infrastructure, undeveloped areas, green areas, conservation areas and social housing. The local development plan, as well as the construction plan, can therefore restrict the use of land. In fact, communities have considerable discretionary powers in terms of preparation, but statutory provisions must be complied with and the interests of the landowners and the higher planning objectives should be taken into account. 123

130 If a plot of land is not located in the area of a construction plan, the permissibility of the construction and use of buildings within built-up districts (the so-called unplanned inner area) are covered by the provisions of the German Federal Building Code. Here the nature and extent of the structural use, as well as the method of construction and the built-over land area, must essentially be adapted to the characteristic features of the closer surroundings and the development (including connection to services) must be secured. If there is no construction plan the surroundings of the plot of land, to be developed will therefore have to be considered in any development to be undertaken. If the characteristic feature of the closer surroundings effectively corresponds to a development area covered by the German Land Use Ordinance (BauNVO), the permissibility of the plan should be assessed in accordance with Section 34 (2) of the German Federal Building Code (BauGB) as to whether it would be permitted in the area according to that Ordinance. German building law establishes rules for the individual construction of buildings. It is very detailed and makes provisions, for example, regarding permitted building materials, minimum clearances, proper construction, fire prevention regulations, ventilation and noise protection Heritable Building Rights In HAMBORNER s property portfolio there are four heritable building rights properties, with the full ownership in one passing to the Company in Overall, a heritable building right gives the owner of the heritable building right the same rights of use as an owner of a plot of land. However, a periodic ground rent has to be paid. Moreover, the heritable building right is only assigned for a certain period and the buildings on the plot of land will transfer to the owner of the plot of land upon expiry of the heritable building right. In this case, just as in the case of reversion (i.e. early termination of the heritable building right by the landowner, for instance caused by a breach of obligations of the heritable building right agreement), a claim for compensation of the holder of the heritable building right arises with respect to any buildings. In addition, the heritable building right is only marketable to a limited extent. Thus, it may be that a sale or an encumbrance with land charges or mortgages is only permitted with the prior agreement of the owner. However, this must be explicitly agreed. Furthermore, if an encumbrance is possible, it may for the most part not be effected to the full extent of the value, but merely up to approximately 80% of the value of the heritable building right Architectural Conservation Several buildings or parts of buildings in the ownership/possession of HAMBORNER are classified as a historic buildings on the basis of law or registration in a list of protected buildings. Protected buildings are objects, pluralities of objects or parts of objects in which there is a collective public interest in their conservation and use. As a result, ownership is subject to public law restrictions. Specific obligations arise under the historic buildings protection laws of the individual German federal states, for instance for the maintenance, repair, appropriate management and protection of historic buildings. In addition, changes to historic buildings or their removal are not permitted if significant conservation reasons exist in favour of maintaining the building s condition unchanged. Conservation legislation related matters should also be complied with in the context of planning permission processes, for instance for a change of use or for alterations, and may result in the required permits being refused Subsidence Damage Law In Germany, the German Federal Mining Act ( BBergG ) of August 13, 1980 regulates legal issues on the subject of subsidence damages. According to this, the party responsible for the subsidence damages is liable for compensation in accordance with the rules of the German Civil Code, whereby this liability is unlimited. Furthermore, Section 120 of the German Federal Mining Act results in a shift of the burden of proof for underground exploration or extraction within the framework of strict liability, i.e. the mining operation has to prove, in cases of doubt, that subsidence is not involved. A subsidence damage is a damage, mostly at buildings and real estate, caused by mining activities. 124

131 HAMBORNER is possibly also entitled to subsidence damage claims against third parties for its own plots of land and real estate. Presently, 31 properties of HAMBORNER s property portfolio are in North Rhine-Westphalia and some of these are in areas in which mining was formerly carried out by third parties or is still carried out today. It should not be ruled out, therefore, that there is a subsidence damage risk for affected properties owned by HAMBORNER. On the other hand as a former mining company, HAMBORNER is liable for compensation for subsidence damage for those areas in the vicinity of which it or its predecessor in title carried out mining activities, but restricted to mines discontinued before its integration into Ruhrkohle AG. In the event of the sale or leasing of plots of land that are located in areas in which mining activities were carried out by third parties, HAMBORNER is only responsible for referring the buyer or leaseholder to potential subsidence damage risks General Provisions under Civil Law In the context of HAMBORNER s business activities, e.g. the buying and selling of plots of land, the letting of commercial properties and the appointment of third parties for the construction of buildings, the provisions under civil law for sales, tenancy and contract law under the German Civil Code (BGB) apply, as well as special laws that have also been enacted. 125

132 14.1 Notification of Voting Rights 14. PRINCIPAL SHAREHOLDERS Non-binding convenience translation The following table contains the names of the legal and natural persons who directly or indirectly hold voting rights in the Company as at the date of this Prospectus. The information is based on the notifications of the registrants to the Company in accordance with Sections 21 et seq. of the German Securities Trading Act. According to this, the following registrants hold more than 3% of the Company s no-par-value shares carrying voting rights. Registrant The Company has received the following voting rights registrations: Residence or location Number of voting rights Directly held Allocation Total HSH Real Estate AG 1... Hamburg % 50.15% (as well as its shareholder: HSH Nordbank AG 1 and its shareholders:... Hamburg 50.15% 50.15% Free and Hanseatic City of Hamburg... Hamburg 52.71% 52.71% HSH Finanzfonds AöR... Hamburg 52.71% 52.71% State of Schleswig-Holstein)... Kiel 52.71% 52.71% HSH RE 2. Beteiligungs GmbH... Hamburg % HSH RE 3. Beteiligungs GmbH... Hamburg % HSH RE 4. Beteiligungs GmbH... Hamburg % HSH RE 5. Beteiligungs GmbH... Hamburg % HSH RE 6. Beteiligungs GmbH... Hamburg % HSH RE 7. Beteiligungs GmbH... Hamburg % Siegert, Prof. Dr. Theo 1... Germany % 10.37% de Haen-Carstanjen & Söhne GmbH... Dusseldorf % SIEGERT & CIE Gesellschaft mit beschränkter Haftung... Dusseldorf % 1 Amount according to notification, amount increases due to allocation and time sequence of the notification of voting rights Shareholder Structure According to the Company s information, the Company s shareholder structure is as follows: HSH Real Estate AG, Hamburg, directly holds 2.39% of the shares in the Company and indirectly holds additional 50.32% of the shares in the Company through its subsidiaries HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH, HSH RE 6. Beteiligungs GmbH and HSH RE 7. Beteilgungs GmbH. Prof. Dr. Siegert, Dusseldorf, indirectly holds 11.60% of the shares in the Company through de Haen-Carstanjen & Söhne GmbH, Dusseldorf, and SIEGERT & CIE GmbH, Dusseldorf. The voting rights of the principal shareholders of the Company do not differ from the voting rights of the remaining shareholders % of the shares in the Company are free float. 126

133 15. TRANSACTIONS AND LEGAL RELATIONSHIPS WITH RELATED PARTIES According to International Accounting Standard 24 (IAS 24), entities and persons are considered to be related to a Company if the entity or the person: is controlled by this Company or has an interest in this Company which provides significant influence on this Company, or has joint control over the Company; is associated with this Company within the meaning of IAS 28 or a joint venture in which the Company is a venturer within the meaning of IAS 31; is a member of the Management Board or Supervisory Board of that Company, or a close family member of this member; is an entity that is controlled by a member of the Management Board or the Supervisory Board of this Company or by a close family member of this member, is significantly influenced by these persons, or directly or indirectly holds a significant share of the voting rights in this Company; or is a pension fund established for the benefit of the employees of this Company or for the benefit of an entity related to that Company for payments after termination of the employment relationship. Material transactions and legal relationships which existed between the Company and the above-mentioned related persons and entities in the financial years 2007 to 2009, as well as in the financial year 2010 up to and including the date of this Prospectus, are set out below. The principal shareholders of the Company (see section 14 Principal Shareholders ), including until January 22, 2007 the Familie Julius Thyssen Verwaltungsgesellschaft mbh, Mühlheim an der Ruhr, since then HSH Real Estate AG, Hamburg, a 100% subsidiary of HSH Nordbank AG belong to the persons and entities related to the Company. In accordance with the requirements of German stock corporation law, dependent companies must prepare a report on their relationships with affiliated entities on an annual basis (Section 312 of the German Stock Corporation Act) (the Dependent Company Report ). The Dependent Company Report must be audited by the auditor. If no objections are raised after completion of the audit, the auditor must confirm that the actual disclosures in the Dependent Company Report are accurate, that the consideration paid by the Company for the transactions listed in the Dependent Company Report was not inappropriately high or that any disadvantages were compensated, and that no circumstance relating to the measures listed in the Dependent Company Report indicate an assessment which is substantially different from the assessment by the Board of Management. The Supervisory Board must review the Dependent Company Report and report to the annual General Meeting on the results of its review, including the results of the audit by the independent auditor. The Company prepared Dependent Company Reports for the financial year 2007 for the reason that it was controlled by the Familie Julius Thyssen Verwaltungsgesellschaft mbh and HSH Real Estate AG, and for the financial years 2009 and 2008 for the reason that it was controlled by HSH Real Estate AG. These Reports were audited by the auditor of the Company. The audits did not result in any objections. In 2008, the Company reimbursed costs and expenses in an amount of TEUR 11 plus VAT incurred in connection with a consultancy agreement concluded in September 2008 with HSH Real Estate AG regarding the potential acquisition of a portfolio. As the acquisition did not take place, the contractually agreed success fee did not have to be paid. In February 2008, a procurement agreement regarding the acquisition of a real estate portfolio was concluded between the Company and HSH Capitalpartners GmbH, a 100% subsidiary of HSH 127

134 Real Estate AG. Costs and expenses in the amount of TEUR 17 plus VAT incurred by HSH Capitalpartners GmbH were reimbursed in The agreed fee of TEUR 100 plus VAT was only paid at the beginning of 2009 due to a delay of the transfer of possession. A further consultancy agreement between the Company and HSH Real Estate AG dated 2007 related to the support of the Company with respect to the marketing of a varied real estate portfolio scattered nationwide. Upon notarization or signing of another binding declaration with respect to a transaction within a defined period of time, as well as upon reaching or exceeding of certain rent multipliers on limited surcharges, HSH Real Estate AG was entitled to a success fee in the amount of 1.5% of the transaction volume. The transaction was not completed successfully. The agreement has been terminated in the meantime. In the financial year 2007, only third-party and travelling costs as well as expenses in the amount of TEUR 20.8 plus VAT were reimbursed from the Company to HSH Real Estate AG. A further agreement on consulting services relating to the acquisition of seven properties from the Kaufland-group was concluded with HSH Capitalpartners GmbH in the middle of A success fee in the amount of 1.6% of the net purchase price was agreed, which became due and payable upon signing of a notarized purchase agreement. Beginning of August 2007, the Company entered into a notarized purchase agreement on the acquisition of seven properties for a total purchase price of EUR 66.4 million. The purchase agreement provided for the right to retain a part of the purchase price, for as long as the conditions for the transfer of the seven properties had not been met. Therefore, and in accordance with the agreement, the Company initially paid EUR 55.9 million of the total purchase price of EUR 66.4 million. According to the consultancy agreement and the verbal agreements with HSH Capitalpartners GmbH, in 2007 further TEUR of the agreed fee in the amount of EUR 1.06 million were due and paid. The remaining amount of TEUR plus VAT was paid upon the transfer of possession of the last property in November In March 2007, a consultancy agreement between the Company and HSH Real Estate AG was concluded regarding the preparation of an analysis of a portfolio, the compilation and documentation of a portfolio and business strategy as well as the development and preparation of an integrated planning model. The agreed flat-rate fee amounted to TEUR 245 plus VAT and was paid in 2007 except for a remainder of TEUR 20 for pending work. The remainder plus additional costs invoiced in the amount of TEUR 6 was paid in In addition, from March 13, 2007 to February 26, 2010 the Company had a bank giro account with HSH Nordbank AG, which was closed on February 26, 2010 with a credit balance of EUR In the financial years 2009, 2008 and 2007, the Company rented office buildings to Progas GmbH & Co. KG, Dortmund, a 100% subsidiary of the Familie Julius Thyssen Beteiligungsgesellschaft mbh. In 2007, the yearly rent amounted to EUR 276,702 plus VAT. In addition to the indexed rent, running costs are passed on to Progas GmbH & Co. KG in accordance with the rental agreement. Until his retirement on March 31, 2007, a member of the board of management also was involved in the management of Familie Julius Thyssen Verwaltungsgesellschaft mbh, Thyssen sche Handelsgesellschaft m.b.h., Thyssenhandel Beteiligungsgesellschaft mbh and of TH Immoblilien Verwaltungsgesellschaft mbh. Therefore, the claim for remuneration of this member of the board of management was reduced accordingly. The members of the Board of Management and the Supervisory Board do not have a conflict of interest or a potential conflict of interest between their obligations vis-á-vis the issuers and their private interests or other obligations. The Company did not grant loans to the members of the Management Board. No member of the Managing Board received benefits or corresponding commitments from a third party in the past financial year with regard to his activity as a member of the Management Board. 128

135 16. GENERAL INFORMATION ABOUT THE COMPANY 16.1 Foundation and History of the Company 1953 The Company was founded on June 18, 1953 under the name of Hamborner Bergbau Aktiengesellschaft with registered office in Duisburg. In accordance with the Articles of Association, the object of the Company was: Coal mining and processing of its products, including the refinement and conversion of the coal and coal chemicals as well as the marketing of these products; the execution of associated transactions of any kind The Company is listed on the stock exchange since In 1969, the Company contributed its mining activities into the former Ruhrkohle AG. Liabilities connected with the mining activities that had not come into existence until that date were only transferred insofar as provisions had not been made. Liabilities in connection with possible subsidence damages, which exceeded the provisions in the contribution balance sheet in the amount of, at that time, around DM 5 million, remained with the Company. As of June 30, 2010, the provisions made for that amounted to TEUR 1, In 1990, the shares which had directly been held by the Company were brought into the special stock fund Südinvest 107. The regrouping took place following the amendment of the German Investment Companies Act (Gesetz über Kapitalanlagegesellschaften) as of March 1, 1990, with which the purpose limitation of special funds was revoked. Profits resulting from the regrouping which were made after the contribution into the fund remained tax free at the level of the shareholder for as long as the profits were reinvested in the fund. This special fund was terminated in 2007 and the shares returned In 1991, the Company changed its name to Hamborner Aktiengesellschaft In the context of a voluntary takeover offer in accordance with the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz), subsidiaries of the former HSH N Real Estate AG (now HSH Real Estate AG) acquired, at the beginning of 2007, 50.47% of the share capital in the Company, in particular from the then principal shareholder Thyssen schen Handelsgesellschaft mbh, as well as from other shareholders. 2008/ 2009 In the following period the Company focused on its conversion into a REIT stock corporation and divested itself of all activities that were not compatible with the REIT status or its REIT strategy. Therefore, it returned its shares in the special stock fund Südinvest 107. Subsequently, a minor portfolio consisting of residential properties, as well as the shares in Wohnbau Dinslaken GmbH and in Montan GmbH Assekuranz Makler were sold On June 9, 2009, the general meeting of the Company resolved all amendments to the Articles of Association required for the conversion into a REIT Corporation, subject to the condition that the prerequisites for the conversion into a REIT were only created in 2010 and that the amendments to the Articles of Association were only entered into the Commercial Register upon expiry of December 31, On December 16, 2009 the merger of Hambornberg Immobilien- und Verwaltungs-GmbH with registered office in Duisburg into the Company was registered with the Commercial Register. Since then, the Company has no longer any group companies. On June 8, 2009, the shares in HAMBORNER were admitted to Prime Standard The Company s new name HAMBORNER REIT AG was registered with the Commercial Register on February 18, The Company obtained REIT status, which applies retroactively as of January 1, On February 22, 2010, the Company was admitted to the REIT segment of Deutsche Börse AG. 129

136 16.2 Legal Form, Name of the Company, Domicile, Financial Year and Duration of the Company The Company is a REIT stock corporation established under German law and is, in addition to other German legislative provisions, subject to the provisions of the German Stock Corporation Act as well as the law on German Real Estate Public Limited Companies with listed shares ( REIT Act ) (see also the section 13.1 German REIT Legislation ). The Company is registered with the Commercial Register of the local court of Duisburg under HRB 4. The Company s registered name is HAMBORNER REIT AG. It uses the commercial name HAMBORNER. The Company has its registered office in Duisburg-Hamborn. The Company s business address is: Goethestraße 45, Duisburg (telephone: ). The Company s financial year is the calendar year. The Company is established for an indefinite term Object of the Company In accordance with its REIT status, the object of the Company according to Section 2 of the Articles of Association of the Company reads as follows: 1) The object of the Company is limited to: (a) ownership of or easement rights to (i) (ii) (iii) domestic immovables within the meaning of Section 3 (8) REIT Act with the exception of existing residential rental properties within the meaning of Section 3 (9) REIT Act, foreign immovables within the meaning of Section 3 (8) REIT Act, provided that, in the state of location, these may be held by a REITcorporation, -partnership or -estate or by a corporation, partnership or estate comparable to a REIT, and acquire, hold, manage in the context of renting, leasing, including necessary real estate-related auxiliary services within the meaning of Section 3 (4) and (6) REIT Act, and sell other assets within the meaning of Section 3 (7) REIT Act, (b) (c) acquire, hold, manage and sell shares in property partnerships within the meaning of Section 3 (1) REIT Act, REIT service companies within the meaning of Section 3 (2) REIT Act and foreign property companies within the meaning of Section 3 (3) REIT Act, acquire, hold, manage and sell shares in corporations which are the general partner of a property partnership within the meaning of Section 3 (1) REIT Act and which do not hold an equity interest in the partnership. 2) If legally permitted and consistent with the status of a REIT corporation within the meaning of the German REIT Act, the Company is authorized to carry out all actions and measures that appear suitable to serve the object of the Company. 3) The Company is authorised to acquire companies, or shares in them, to enter into enterprise agreements or to put companies under common management, provided that this activity is not contrary to Section 2 (1). 130

137 4) The Company may not trade with its immovables. Such trading may only take place if, in the last five financial years, the Company and its subsidiaries to be included in the consolidated financial statements have generated proceeds from the sale of immovables that amount to more than half of the value of the average portfolio of immovables within the same period. For the determination of the average portfolio, the assets are taken into account which are shown in the individual or consolidated financial statements of the Company in accordance with Section 12 (1) German REIT Act at the end of the financial years that are included in the five-year period. If the Company has not yet existed for five years, the individual or consolidated financial statements of the previous financial years should be taken into account. 5) The Company may only provide non gratuitous ancilliary activities for third parties through a REIT service company Corporate Structure The Company does not hold participations in other companies Auditor The auditor of the Company is Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Schwannstrasse 6, Dusseldorf, Germany ( Deloitte & Touche ). Deloitte & Touche has audited the financial statements of the Company prepared in accordance with IFRS for the financial year 2009, the annual financial statements of the Company prepared in accordance with the German Commercial Code for the financial year 2009, as well as the consolidated financial statements of the Company prepared in accordance with IFRS for the financial year 2008, and, in each case, issued an unqualified audit opinion. The consolidated financial statements prepared in accordance with IFRS for the financial year 2007 were audited by BDO AG Wirtschaftsprüfungsgesellschaft (previously BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft), Max-Keith-Straße 66, Essen, ( BDO ). Deloitte & Touche and BDO are members of the German Chamber of Public Accountants. For the financial year 2010, Deloitte & Touche has again been appointed as auditor of the Company Notifications and Paying Agent In accordance with Section 5 (1) of the Articles of Association of the Company, the Company s announcements are published in the electronic German Federal Gazette, unless otherwise stipulated by law. Notifications relating to the approval of this Prospectus or of supplements to this Prospectus are made in the form specified in this Prospectus in compliance with the provisions of the German Securities Prospectus Act (Wertpapierprospektgesetz), i.e. in particular by means of publication on the Company s website. Printed copies of the Prospectus can be obtained from HAMBORNER REIT AG, Goethestraße 45, Duisburg, Germany and WestLB AG, Herzogstraße 15, Dusseldorf, Germany. The paying agent is Commerzbank AG, Theodor-Heuss-Allee 44-46, Frankfurt am Main, Germany. 131

138 16.7 Specific Provisions of the Articles of Association according to the German REIT Act In addition to the REIT-specific corporate name (section 1) and the restriction to the object of the Company as per Section 2 of the Articles of Association, the Company s Articles of Association contain the following specific provisions according to the German REIT Act: Free Float and maximum participation limit Section 6 (2) to (7) of the Articles of Association of the Company contains the following provisions on the free float and on the maximum participation limit: 2) At least 15% of the shares in the Company must be held by shareholders, each having less than three per cent of the voting rights in the Company ( Free Float ). The calculation is made according to Sections 22 and 23 German Securities Trading Act. The Company must notify the Free Float ratio of its shareholders to the German Federal Financial Supervisory Authority annually as of December 31. 3) The Company will inform the respective shareholder, if the acquisition of shares results in a breach of the Free Float ratio according to Sections 11 (1) German REIT Act. The notification of voting rights in accordance with Sections 21 German Securities Trading Act is decisive for the determination of a breach of the Free Float ratio. The notification is sent to the address of the shareholder indicated in the notification of voting rights and is deemed to be received on the third day after the day of mailing. Upon receipt of the notification, the shareholder is obliged to transfer, before expiry of the following December 31, as many of his shares as are required to ensure that his share ownership, including the shares attributable to him, is Free Float again. To the extent possible, the shareholder must ensure, particularly in the case of a transfer outside the stock exchange, that the Free Float ratio is not breached again due to the transfer. 4) No shareholder may directly hold 10% or more of the shares in the Company or shares to an extent that he has 10% or more of the voting rights. Shares that are held on behalf of a third party are deemed to be held by the third party. 5) If a shareholder directly holds 10% or more of the shares or voting rights in the Company within the meaning of Section 6 (4), the shareholder is obliged to transfer, before expiry of the following 31 December, as many of his shares as required to no longer infringe Section 6 (4) with his share ownership. To the extent possible, the shareholder must ensure, particularly in the event of transfer outside the stock exchange, that no infringement of Section 6 (4) occurs due to the transfer. 6) For monitoring the compliance with the threshold values in accordance with Section 6 (2) and Section 6 (4), the Management Board is authorised to request from each shareholder, within a deadline of five stock market trading days, the notification of the number of shares and voting rights that are held by the shareholder at the time of the request from the Management Board. 7) A shareholder who contravenes the provisions of Section 6 (3) and (5) of the Articles of Association is obliged to reimburse the Company for all losses arising from the contravention. In addition, Section 3 (4) of the Articles of Association of the Company allows for an exclusion of the subscription rights in the case of a capital increase from authorised capital in order to protect the Free Float ratio: 4) If the Management Board is authorised, with the approval of the Supervisory Board, to exclude the subscription right in the case of a capital increase from authorised capital, 132

139 use may always be made of this authorisation with the objective of maintaining or restoring the prerequisites of Section 6 (2) Clause 1 of these Articles of Association Further REIT-specific provisions Section 18 of the Articles of Association of the Company stipulates that the financial circumstances of the Company must be in accordance with statutory requirements, particularly the German REIT Act. According to Section 19 of the Articles of Association of the Company, the Management Board must, in the first three months of a financial year, prepare the annual balance and the profit and loss statement (annual financial statements) as well as the annual report for the past financial year and submit them to the auditors. Section 20 of the Articles of Association of the Company contains the following stipulations with respect to the appropriation of profits: 1) The general meeting resolves on the distribution of the balance-sheet profit. 2) The shareholders participate in the profit according to their share in the share capital. 3) In the event of an increase of the share capital, the profit participation of the new shares may be determined in deviation from Section 60 (2) German Stock Corporation Act. 4) The balance-sheet profit is determined according to statutory law, particularly the German REIT Act. 5) The general meeting may also resolve on a non-cash distribution. The Management Board is authorised to pay, with the approval of the Supervisory Board, an instalment of the anticipated balance-sheet profit to the shareholders upon expiry of the financial year, to the extent permitted by law. In the event of a termination of the Company s tax exemption according to Section 18 (3) German REIT Act, shareholders having less than 3% of the voting rights at the time of the termination may request, within three months, the redemption of their shares by the Management Board, and the redemption shall be deemed to have been ordered. The Management Board decides on the redemption together with the determination of the consideration to be paid to the affected shareholders for the redemption. The redemption consideration per share corresponds to the volume-weighted three-month average price before the day on which the event triggering the termination of the tax exemption according to Section 18 (3) of the German REIT Act became public. The Management Board must forward a copy of the resolution on the redemption to the affected shareholders and must apply for registration of the reduction in the share capital caused by the redemption with the Commercial Register. The consideration for the redemption should be paid six months after the application for registration of the capital reduction. The consideration for redemption becomes due and payable six months after the application for registration of the capital reduction. If the financial circumstances of the Company require so, the Managing Board may decide, with the approval of the Supervisory Board, that the consideration for the redemption should be paid in two equal instalments after the expiry of six and twelve months (Section 21 of the Articles of Association of the Company). 133

140 17. DESCRIPTION OF THE SHARE CAPITAL OF THE COMPANY 17.1 Share capital and shares The share capital of the Company amounts to EUR 22,770,000 and is divided into 22,770,000 no-par-value bearer shares and is fully paid up. Each no-par share represents a notional value of EUR 1.00 of the share capital. Holders of shares have property- and administrative-rights. The property rights include, in particular, the right to participate in profits and liquidation proceeds, as well as in subscription rights in the event of a capital increase. Administrative rights include the right to speak at a General Meeting, to ask questions, to propose motions and to exercise the voting right. Shareholders can enforce these rights in particular through actions seeking disclosure, actions for avoidance and actions for annulment. In accordance with Article 17 (1) of the Articles of Association of the Company, each share carries one voting right at the General Meeting. The General Meeting resolves, in particular, on the use of net profits, on the formal approval of the actions of the Management Board and the Supervisory Board, on the election of the auditor and on other particular measures of fundamental importance such as corporate actions and enterprise agreements (see also section 18.4 General Meeting ). In accordance with Article 17 (2) of the Articles of Association of the Company, all resolutions of the General Meeting require a simple majority of the share capital represented at the time the resolution is adopted, unless statutory law requires a different majority. With respect to further rights of the shareholders in connection with the General Meeting please refer to section 18.4 General Meeting below Development of share capital The initial share capital of the Company amounted to DEM 69 million. On November 27, 1970, the General Meeting of the Company resolved to reduce the share capital from DEM 69 million to DEM 34.5 million. The capital reduction was entered into the commercial register on January 4, On July 8, 1977, the General Meeting of the Company resolved to increase the share capital to DEM million by converting a portion of statutory reserves into share capital. The capital increase was entered into the commercial register on July 13, On June 15, 1999, the General Meeting of the Company resolved to convert the share capital to euros and to increase the share capital with company funds without issuing new shares from EUR 19,403, to EUR 19,430, These changes to the Articles of Association of the Company were entered into the commercial register on June 23, On June 5, 2007, the General Meeting of the Company resolved to increase the share capital with company funds to EUR 22,770, At the same time, the share capital, which was divided into 7,590,000 no-par shares each representing a notional value of EUR 2.56 of the share capital, was redistributed into 22,770,000 no-par shares each representing a value of EUR 1.00 of the share capital. These changes to the Articles of Association were entered into the commercial register on August 2, Certification and transferability of the shares The Management Board decides, with the approval of the Supervisory Board, on the form of share certificates and the dividend coupons and the renewal talons. 134

141 The right of a shareholder to request certification of its interest is excluded, unless such certification is required by the rules of a stock exchange where the shares are listed. Global share certificates may be issued. The shares are freely transferable. The shares of the Company are represented by global share certificates. The global share certificates are deposited at Clearstream Banking AG, Neue Börsenstraße 1, Frankfurt am Main, Germany Admission to the stock exchange All shares of the Company have been admitted to exchange trading at the regulated market and, with simultaneous admission to the sub-segment of the regulated market with additional post admission duties (Prime Standard) at the Frankfurt Stock Exchange as well as to the regulated market on stock exchanges in Berlin, Dusseldorf, Hamburg, Munich and Stuttgart. The no-par shares of the Company have been assigned the German Securities Identification number (WKN) and the International Securities Identification Number (ISIN) DE respectively General provisions on the change in the share capital Capital increase According to the German Stock Corporation Act, the share capital of a stock corporation (Aktiengesellschaft) can be increased by a shareholder resolution, which requires a majority of at least three-quarters of the share capital represented at the time the resolution is adopted. Authorised capital Furthermore, according to the German Stock Corporation Act, the General Meeting may, in principle, adopt a resolution, with a majority of at least three-quarters of the share capital represented at the time the resolution is adopted, to issue authorised capital, which authorises the Management Board to issue shares within a period of not more than five years following the registration of the amendment of the Articles of Association. The nominal value of the authorised capital may not exceed half of the share capital existing at the time of the authorisation. Contingent capital The General Meeting may also resolve to issue contingent capital for the purpose of issuing shares to the holders of convertible bonds or other securities which grant a subscription right, or for the purpose of issuing shares that serve as consideration for a merger with another company, or for the purpose of issuing shares which are to be offered to executive managers and employees. According to the German Stock Corporation Act, such resolution of the General Meeting generally requires a majority of three-quarters of the share capital represented at the time the resolution is adopted. The nominal value of the contingent capital may not exceed one tenth of the share capital existing at the time of the resolution if the contingent capital is created to issue shares to executive managers and employees; in all other cases, it may not exceed half of the share capital existing at the time the resolution is adopted. Capital reduction In accordance with the German Stock Corporation Act, a reduction of the share capital may be resolved. In general, the German Stock Corporation Act stipulates that such a resolution requires a majority of three-quarters of the share capital represented at the resolution. The articles of association may provide for a larger majority and other requirements. 135

142 17.6 Capital increase with respect to New Shares The New Shares, which are offered as set forth in this Prospectus and which are subject to German law, are being issued from the authorised and unissued capital which was created by resolution of the General Meeting on June 5, Authorized capital The Company s authorized capital amounts to a total of EUR 11,350,000 as at the date of this Prospectus. The authorized capital was created by two authorization resolutions passed on June 5, 2008, and which were entered into the commercial register on July 29, Precautionary, the general meeting of the Company also resolved on June 9, 2009, to approve and to renew the Authorization Resolutions with the same content. This renewal was entered into the commercial register of the Company on September 20, Authorised capital according to Article 3, (5) of the Articles of Association According to Article 3, (5) of the Articles of Association of the Company, the Management Board is authorized, until June 4, 2013, to increase, with the approval of the Supervisory Board, the share capital by up to a nominal amount of EUR 2,270,000, by issuing new bearer shares against cash contribution (Authorised Capital I). The authorisation may be exercised in part. Shares should be subscribed by credit institutions together with the obligation to offer the shares to shareholders. The Management Board is authorised, with the approval of the Supervisory Board, to decide on the further details of the rights attached to the shares and on the conditions applicable to the issuance of the shares, as well as to use any residual amounts thereby excluding the subscription rights of shareholders Authorised capital according to Section 3 (6) of the Articles of Association According to Section 3 (6) of the Articles of Association of the Company, the Management Board is authorised, until June 4, 2013, with the approval of the Supervisory Board, to increase the share capital, in part or in whole, by up to a nominal amount of EUR 9,080,000, by issuing new no-par bearer shares against cash contribution or contribution in kind (Authorised Capital II). The Management Board is authorised to exclude, with the approval of the Supervisory Board, the statutory subscription right of shareholders for residual amounts, if the capital increase is made against cash contribution and if the proportion of the share capital represented by the new shares, for which subscription rights are excluded, does not exceed 10% of the share capital at the time the shares are issued and if the issue price is not significantly lower than the stock market price. This authorisation is subject to the condition that the shares issued under exclusion of subscription rights in accordance with Section 186 (3) of German Stock Corporation Act do not exceed 10% of the share capital, neither at the time this authorisation becomes effective nor at the time it is used. The sale of own shares counts against this limitation to 10% of the share capital, if the sale is effected on the basis of an authorisation, valid at the time when this authorisation becomes effective, to sell own shares in accordance with Section 186 (3) of the German Stock Corporation Act, or on the basis of an authorisation replacing the other one and under which subscription rights are excluded. Shares which are issued to serve convertible and/or warrant bonds, or which are to be issued, provided that the bond was issued, in accordance with Section 186 (3) sentence 4 of the German Stock Corporation Act applied analogously, on the basis of an authorisation valid at the time when this authorisation becomes effective, or on the basis of an authorisation replacing the other one and under which subscription rights are excluded, equally count against the limitation to 10% of the share capital; in the case of a capital increase against contribution in kind in order to issue shares for the purpose of acquiring companies, parts thereof or participations in companies, including the increase of existing participations, or other assets contributable connected to the intended acquisition, including claims against the Company. 136

143 The Management Board is authorised, with the approval of the Supervisory Board, to decide on the further details of the rights attached to the shares and the conditions applicable to the issuance of the shares. The authorizations expire after the utilization of the full amount of the authorized capital Convertible bonds and bonds with warrants At present, the Management Board of the Company is not authorized to issue convertible and/ or warrant bonds Stock option plan The Company does not have a stock option plan Authorisation to acquire own shares The Company does not have an authorisation to acquire own shares Own-shares The Company does not hold own shares Allocation of profits and payment of dividends In accordance with Section 20 (1) of the Articles of Association of the Company, the General Meeting resolves on the allocation of balance sheet profit. Shareholders participate in the profits according to their share in the share capital. In the event of a capital increase, the participation in profits of new shares can be determined in deviation from Section 60 (2) of the German Stock Corporation Act. The balance sheet profit is determined according to statutory law, in particular the German REIT Act (please see the remarks in the section 6.2 Special rules for profit allocation and dividend payments ). The General Meeting may also resolve on the payment of a dividend in kind. The Management Board is authorised to pay, with the approval of the Supervisory Board, an instalment of the anticipated balance sheet profit to the shareholders upon expiry of the financial year, to the extent permitted by law General provisions regarding the liquidation of the Company Apart from liquidation as a result of insolvency proceedings, the Company can only be liquidated by resolution of the General Meeting General provisions regarding subscription rights According to the German Stock Corporation Act, in principle, each shareholder has the right to subscribe new shares issued in connection with a capital increase, except in the case of a contingent capital increase. The same applies to convertible bonds, warrant bonds, profit participation rights or participation bonds. Concrete subscription rights are freely transferable, so that they can be traded on the German stock exchanges during the subscription period until a fixed date prior to the expiration of this period, provided that a trade in subscription rights has been established. Generally, there is no right to demand the establishment of such a trade in subscription rights. If the Articles of Association do not require a larger capital majority, the General Meeting may, in the determination resolution or, in the case of contingent capital, in the authorization resolution, with a majority of three-quarters of the share capital represented at the resolution, resolve to completely or partially exclude subscription rights or, in the case of contingent capital, authorise the Management Board to do so. 137

144 A valid exclusion of subscription rights further requires a report by the Management Board and an objective justification. With respect to the objective justification for the exclusion of the subscription rights, the report of the Management Board must show that the interest of the Company in excluding subscription rights outweighs the interest of the shareholders in retaining their subscription rights. According to Section 186 (3) sentence 4 of the German Stock Corporation Act (so-called simplified exclusion of subscription rights), the exclusion of subscription rights is in particular admissible if the capital increase is made against cash contribution, the amount by which the capital is increased does not exceed 10% of the existing share capital and the issue price of the new shares is not significantly less than the stock market price. Subscription rights are not considered to have been excluded if, according to the resolution, the new shares are subscribed by a credit institute or an enterprise, active in the banking sector in accordance with Section 53 (1) sentence 1 or Section 53b (1) sentence 1 or Section 53b (7) of the German Banking Act (Gesetzes über das Kreditwesen), with the obligation to offer them to shareholders (Section 186 (5), sentence 1 of the German Stock Corporation Act, so-called indirect subscription right) Exclusion of minority shareholders Shareholder squeeze out According to Sections 327a et seq. of the Stock Corporation Act (so-called stock corporation law squeeze out), the General Meeting of a stock corporation may, upon the request of a shareholder, holding 95% of the Company s share capital (the majority shareholder), resolve that the shares held by the other shareholders (minority shareholders) are transferred to the majority shareholder against payment of an adequate cash compensation. Takeover Squeeze out According to Sections 39a et seq. of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, so-called takeover law squeeze out), the remaining voting shares must, upon request of a bidder holding at least 95% of the voting share capital of the target company after a takeover or mandatory bid, by court order, be transferred to the bidder against payment of an adequate cash compensation. An application to transfer the shares must be filed within three months following the expiration of the acceptance period. The district court of Frankfurt am Main has exclusive jurisdiction. The type of compensation must correspond to the compensation of the takeover or mandatory bid. Cash payment always have to be offered as an alternative. Integration According to Sections 319 et seq. of the German Stock Corporation Act (Integration), the General Meeting of a stock corporation can resolve on the integration of the company into another stock corporation with registered seat in Germany (the principle company), provided that the prospective principle company holds all the shares in the Company or shares representing 95% of the Company s share capital. The former shareholders of the integrated company are entitled to an adequate compensation. The compensation should, generally, be granted in the form of shares in the principle company. If shares in the principle company are granted, the compensation is generally considered adequate if the shares are granted in the ratio in which shares in the principal company would have needed to be granted for a share in the Company in the event of a merger; residual amounts may be compensated in cash Notice periods for shareholdings Notification of voting rights Due to the admittance of its shares for trading in the regulated market of German stock exchanges, the Company is, amongst others, subject to the terms of the German Securities Trading Act 138

145 (Wertpapierhandelsgesetz, WpHG) regarding disclosure requirements in connection with voting rights attached to the shares in the Company. This means that every German share issuer must disclose the total number of voting rights at the end of each calendar month in which there has been either an increase or a decrease in voting rights. Furthermore, anyone who reaches, exceeds or falls below 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the voting rights in a listed company either through acquisition, sale or by any other means, must immediately, in any event within four days of trading, inform both the share issuer and the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht BaFin) (so-called notification of voting rights). With respect to a REIT stock corporation according to Section 11, paragraph 5 of the German REIT Act, the stipulations of the Securities Trading Act are supplemented by notification obligations at the thresholds of 80% and 85%. For the determination whether a voting right threshold has been reached, exceeded or fallen below, the Securities Trading Act contains various stipulations, which should ensure that voting rights are allocated to the individual, who has, or may in an abstract case have, influence on the voting rights attached to the shares. For example, shares held by one company are allocated to another company if, amongst others, one company controls the other. The same applies to shares which are held by a company on account of another or which are held on behalf of a company controlled by another. Upon receipt of a notification of voting rights, the German share issuer must immediately, at the latest within three trading days following receipt of the notification, publicly disclose the notification in the media, including media of which it can be assumed that it will distribute the information throughout the entire European Union and the other member states within the European Economic Area (EEA). If a registrant, having own voting rights, or to whom voting rights of a subsidiary or of a third party are allocated, or who is holding voting rights on account of the registrant, does not comply with the notification obligation, all rights attached to these shares (including voting rights and rights to dividends; however, the right to dividends is only suspended if the notification has intentionally not been made and also not been made at a later date) are suspended for the period of omission. If the number of voting rights is concerned, the period extends to six months in the case of intentional or gross negligent breach of the notification obligations. The Federal Financial Supervisory Authority (BaFin) may impose a fine upon the breach of the obligation to notify voting rights, irrespective of the applicable allocation rule. Notification requirements for holders of financial instruments Direct or indirect holders of financial instruments that are, by means of a legally binding agreement, unilaterally entitled to acquire voting shares already issued by a person originating from the Federal Republic of Germany, must immediately inform both the issuer and the Federal Authority once a level of 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of voting rights has been reached, exceeded or fallen below. They are then added to shareholdings which are subject to the notification obligation. With respect to a REIT stock corporation according to Section 11 (5) of the German REIT Act, the stipulations of the German Securities Trading Act are supplemented by notification obligations at the thresholds of 80% and 85%. Notification of director s dealings Individuals performing executive functions within the meaning of the Securities Trading Act for an issuer of shares, must notify both the issuer and the Federal Authority within five business days about own transactions regarding shares of the issuer or related financial instruments, in particular derivatives. This obligation also applies to persons having a close relationship with such individual, as defined in the Securities Trading Act. Notification requirement of those holding significant shareholdings Anyone reaching or exceeding a threshold of 10% of voting shares, or a higher threshold, must, in principal, inform the issuer originating from the Federal Republic of Germany of the goals 139

146 pursued with the acquisition of the voting rights as well as the source of the financial means used for the acquisition within 20 trading days of reaching or exceeding the threshold in question. A change in goals must also be disclosed within 20 trading days. Notification of gaining control Moreover, anyone gaining direct or indirect control of a company listed in Germany is obliged to immediately, at the latest within seven calendar days, disclose this fact, including the share of voting rights held. The Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz WpÜG) defines control as the holding of at least 30% of the voting rights in a company listed in Germany. Subsequently, a mandatory offer must be made to all shareholders of the company for the acquisition of their shares, unless the Federal Financial Supervisory Authority (BaFin) has granted a release from this requirement. As with respect to the notification requirements, the Securities Acquisition and Takeover Act also contains rules on attribution. Notification requirements under the articles of association In order to monitor compliance with the thresholds according to Section 6 (2) of the Articles of Association (free float ratio) and Section 6 (4) (maximum participation limit) of the Articles of Association, the Management Board is authorised to request from each shareholder, within a deadline of five stock market trading days, the notification of the number of shares and voting rights held by that shareholder at the time of the request. 140

147 18. INFORMATION ON THE GOVERNING BODIES OF THE COMPANY The governing bodies of the Company are the Management Board, the Supervisory Board and the General Meeting. The responsibilities of these bodies are primarily governed by the German Stock Corporation Act, the Articles of Association of the Company and the Rules of Procedure for the Management Board and the Supervisory Board, each in their current version. Provisions relating to both the Management Board and the Supervisory Board The members of the Management Board and the Supervisory Board owe loyalty and duty of care to the Company. In this context, the members of these governing bodies must take into account a broad spectrum of interests, in particular, those of the Company, its shareholders, its employees and its creditors. The Management Board must further take into account the rights of shareholders to equal treatment and equal information. Members of the Management Board or the Supervisory Board that breach any of their duties, are jointly and severally liable to the Company for the damages incurred. The members of the Management Board and the Supervisory Board of the Company are, up to a certain limit of indemnity, covered for breaches of their duties as board members by a D&O insurance policy (directors and officers liability insurance). This covers financial damages resulting from activities of the members of the governing bodies of the Company. The limit of liability is EUR 5 million per occurrence, and a maximum of EUR 5 million in each insurance year. Since December 1, 2009, in accordance with Section 93 (2) of the Stock Corporation Act and article 3.8 of the German Corporate Governance Code, a deductible for the members of the Management Board and the Supervisory Board members in the amount of at least 10% of the damages up to at least the amount of one-and-a-half times the fixed annual compensation of the relevant member of the governing body has been agreed. The insurance does not provide any cover in the event of intent, so that if such intent is determined (even at a later date), insurance coverage may be revoked retroactively and payments must be reimbursed to the insurance. Currently, the annual insurance rate amounts to TEUR 11.4 plus insurance tax. If members of the Management Board or the Supervisory Board breached their duties towards the Company and if the Company suffers a damage, the Company may enforce its damage claims in court against the members of the Management Board or the Supervisory Board. In the event of claims against members of the Supervisory Board, the Company will be represented by the Management Board, and in the event of claims against members of the Management Board it will be represented by the Supervisory Board. According to a decision of the Federal Court of Justice (Bundesgerichtshof), the Supervisory Board is required to enforce damage claims against the Management Board, if they appear to be enforceable, unless significant grounds relating to the welfare of the Company exist and speak against such action, provided that these grounds prevail or are at least equivalent to the grounds in favour of enforcing the damage claim. If the relevant governing body decides not to pursue damage claims, the damage claims of the Company against members of the Management Board or the Supervisory Board must be enforced if the General Meeting passes a corresponding resolution with a simple majority; the General Meeting can appoint a special representative to enforce the claims. Shareholders, whose combined shareholdings represent one tenth of the share capital or a share capital of EUR 1 million, may request the court to appoint a special representative to enforce the damage claim, who will, in case of his appointment, be competent for enforcing the claim instead of the governing bodies of the Company. If there are facts providing a strong suspicion that the Company has suffered damages due to dishonesty or gross breaches of duty, shareholders whose combined shareholdings represent one hundredth of the share capital or a share capital of TEUR 100, may, under certain conditions, be permitted by the competent court to enforce the damage claims against the members of the governing bodies of the Company in their own names on behalf of the Company. Such a claim becomes inadmissible, if the Company itself files a damage claim. The Company may only waive or settle any damage claims against members of the governing bodies three years after the claim came into existence, and only if the shareholders, in the General Meeting, pass a corresponding resolution with simple majority, unless a minority of shareholders whose combined shareholdings represent one tenth of the share capital raises an objection for record. 141

148 Under German law, individual shareholders, as well as any other persons, are prohibited from exerting their influence on the Company and causing a member of the Management Board or the Supervisory Board to take an action detrimental to the Company. Shareholders with a controlling influence, may not use their influence to cause a controlled stock corporation, with which no domination agreement exists, to take any action, which is detrimental to the Company, or to take or refrain from taking any measures that are detrimental to the Company, unless the disadvantages are compensated. Any person who intentionally, exerting its influence on a company, causes a member of the Management Board or the Supervisory Board, an authorized signatory or an authorized agent to act to the detriment of the Company or its shareholders, must compensate the Company for all damages resulting thereof. In addition, the members of the Management Board and the Supervisory Board are jointly and severally liable if they have acted in breach of their duties The Management Board Legal position within the organisational structure of the Company Composition of the Management Board and appointment of its members The Management Board is, in accordance with Section 7 (1) of the Articles of Association of the Company, composed of various members, the exact number of which is determined by the Supervisory Board. As at the date of this Prospectus, the Management Board consists of two members. The members of the management board are appointed by the Supervisory Board for a maximum term of five years. The reappointment or extension of the term is permissible, in each case for a maximum of five years. The Supervisory Board can revoke the appointment of a member of the Management Board before expiration of the term of appointment for good cause, e.g. for gross breach of duties, or if the General Meeting declares it has no confidence in the member of the Management Board, unless the vote of no confidence is based on obviously unobjective grounds. The Supervisory Board is also responsible for entering into, amending and terminating employment contracts with the members of the Management Board. Assignment of responsibilities and internal structure The Management Board conducts the business of the Company in accordance with statutory law, the Articles of Association of the Company and the Rules of Procedure of the Management Board. The Management Board manages the Company under its own responsibility. The Rules of Procedure of the Management Board, established in accordance with Article 7 (2) of the Articles of Association of the Company, contain, in addition to the Articles of Association and the German Stock Corporation Act, basically the following provisions: All members of the Management Board have equal rights, each member of the Management Board is personally responsible for the management of the entire business. Notwithstanding this personal responsibility, the primary competence, the primary responsibility and the mutual substitution of single members of the Management Board is set out in a schedule of responsibilities, which forms part of the rules of procedure. Within their respective area of responsibility, each member of the Management Board takes decisions under its own responsibility, provided that statutory law, the Articles of Association or the Rules of Procedure do not require a decision of the entire Management Board. They represent their area of responsibility in the Management Board as well as in negotiations with third parties related to their area of responsibility and are required to comply with the Rules of Procedure as well as to report adequately to the other members of the Management Board. 142

149 According to the schedule of responsibilities, area of responsibility 1, headed by Mr Schmitz, is responsible for: legal, human resources, corporate governance, investor relations/public relations and insurance. According to the schedule of responsibilities, area of responsibility 2, headed by Dr Mrotzek, is responsible for: finance and accounting, controlling, tax, property/real estate, technology/ maintenance, IT organisation/internet, risk management and risk controlling as well as investments. Currently, board resolutions must be passed unanimously, as the Management Board has two members. If there is a tied vote, the chairman of the Management Board may, at the request of a member of the Supervisory Board, be asked to conciliate in the matter. A board resolution is required for: (a) (b) (c) (d) Matters, which, according to statutory law, the Articles of Association or the Rules of Procedure of the Management Board, require a Management Board resolution, Matters, which, according to statutory law, the Articles of Association, the Rules of Procedure of the Management Board, or direction of the Supervisory Board, require the approval of the Supervisory Board or the approval of a committee of the Supervisory Board, Matters of fundamental or extraordinary importance, Matters, for which a member of the Management Board requests a decision of the entire Management Board or the submission to the Supervisory Board. According to its Rules of Procedure, the Management Board requires the prior approval of the Supervisory Board for the following transactions: (a) (b) The acquisition or sale of real estate property, rights equivalent to real estate property and right in real estate properties, provided that the transaction value exceeds EUR 5 million in each case; The acquisition, establishment and sale of companies and interests in other companies, as well as the opening and closing of branches; (c) The construction of new buildings, if the individual investment sum exceeds EUR 2 million, in each case, as well as reinvestments or supplemental investments in existing property, if the individual investment sum exceeds EUR 1 million, in each case; (d) (e) (f) The obtaining or granting of loans or shareholder loans, respectively, which exceed an amount of EUR 5 million, in each case, as well as the granting or procurement of suretyships, guarantees, security transfers or similar liabilities, encumberances on buildings, real estate property, rights equivalent to real estate property, rights in property, shares and other assets as well as subordination agreements, provided that these transactions have not already been approved in connection with an investment which had a finance volume or financial commitment consisting of the purchase price, asset exposures/grants/assumed liabilities and/or guarantees/liability agreements requiring approval; Initiating or terminating legal disputes or arbitration procedures with an amount in dispute of more than TEUR 50, Entering into consultancy or similar service contracts with an agreed remuneration of more than TEUR 250. If the contracts provide for annual renewal, the contracts must be submitted for approval of the renewal each year; 143

150 (g) (h) (i) Entering into, amending or terminating/cancelling of employment contracts which provide for a fixed annual salary of more than TEUR 100, or which provide for pension obligations and their increase (with the exception of general adjustments); Entering into, amending, cancelling or terminating enterprise agreements within the meaning of Sections 291 et seq. of the German Stock Corporation Act, Speculative trading, especially currency swaps and commodity futures deals, if they do not serve as congruent hedging transaction for closed deals. Annual budgets and medium-term planning must be submitted to the Supervisory Board, at the latest, in the last meeting of the Supervisory Board of the year. The Supervisory Board may, at any time, extend the scope of transactions, which require its approval, or determine approval requirements in the individual case. According to Article 8 of the Articles of Association of the Company, the Company is legally represented by two members of the Management Board or by one member of the Management Board together with an authorized signatory. The Management Board must ensure that an adequate risk management and risk control system is established within the Company so that developments which may jeopardize the existence of the Company can be recognised at an early stage Members of the Management Board The names of the members of the Management Board of the Company, their age, the year of first appointment and the areas for which they are responsible are listed in the following overview. Name Age in years Year of first appointment Area of responsibility Dr Rüdiger Mrotzek Finance/accounting, controlling, tax, property/real assets technique/maintenance, IT/Internet, risk management/control as well as participations Hans Richard Schmitz Legal, personnel, corporate governance, investor relations/public relations, insurance Dr Rüdiger Mrotzek Dr Rüdiger Mrotzek is a board member of the Company since March 8, 2007, and his term of appointment expires on March 7, Dr Mrotzek is a graduate in economics from the Ruhr University in Bochum and was awarded a doctorate in this field in Afterwards, he worked, in various executive and managing positions with VEBA AG (now E.ON AG), VEBA Immobilien AG, Viterra Wohnen AG, WohnBau Rhein- Main AG, WBRM-Holding GmbH, Deutschbau Wohnungsgesellschaft mbh and Deutschbau Immobilien-Dienstleistungen GmbH. From January 2002 to March 2006, Dr Mrotzek was managing director of Deutschbau Immobilien Dienstleistungen GmbH (since January 9, 2006 Deutsche Annington Dienstleistungen GmbH). During this time, he was also managing director of Deutschbau Wohnungsgesellschaft mbh, until the company s merger into Viterra GmbH. Furthermore, from July 2003 to March 2006, he was managing director of DEUTSCHBAU Immobilien Verwaltungs GmbH. Hans Richard Schmitz Hans Richard Schmitz is a board member of the Company since December 1, 2008, and his term of appointment expires on December 31,

151 Mr Schmitz is a qualified banker and studied law at the University of Hanover. From 1985 to 1991, he worked as managing director of Deutsche Schutzvereinigung für Wertpapierbesitz e.v. in Dusseldorf. Afterwards, he was, amongst others, engaged as Head of Investor Relations at RWE AG and subsequently at Deutsche Post AG. Furthermore, Mr Schmitz was for ten years, two of which he served as president, a member of the Management Board of DIRK e.v. (Deutscher Investor Relations Verband). Since 1987, Mr Schmitz is admitted as a lawyer with a focus on capital market and stock corporation law. From April 2003 to March 2007, Mr Schmitz was a member of the Supervisory Board (chairman) at CAMELOT tele-communication-online.ag i.l. The members of the Management Board can be contacted at the business address of the Company, Goethestrasse 45, Duisburg (Tel: +49 (203) ). Overview of further activities of the members of the Management Board The following overview contains, for the members of the Management Board of the Company who are in office as at the date of this Prospectus, a list of all entities and companies, at which the members of the Management Board were members of the administrative, management or supervisory bodies or were partners during the last five years; not all of the subsidiaries of HAMBORNER at which the relevant member of the Management Board was a member of the administrative, management or supervisory body are listed. Name Activity Dr Rüdiger Mrotzek Managing director of Deutschbau Wohnungsgesellschaft mbh (until February 2006) Managing director of Deutschbau Immobilien-Dienstleistungen GmbH (until March 2006) Managing director of DEUTSCHBAU Immobilien Verwaltungs GmbH (until March 2006) Member of the Supervisory Board of WRW Wohungswirtschaftliche Treuhand Rheinland-Westfalen GmbH (until June 2006) Member of the Supervisory Board of Wohnbau Dinslaken GmbH (until December 2008) Hans Richard Schmitz Chairman of the Supervisory Board of CAMELOT tele-communicationonline.ag i.l. (until March 2007) Compensation of members of the Management Board The following overview shows the compensation of the members of the Management Board of the Company, who are in office as at the date of this Prospectus, in the financial year in THOUSANDS OF EUROS (audited) Fixed Variable Other 1 Total Dr. Rüdiger Mrotzek Hans Richard Schmitz Total Other remuneration includes non-cash benefits such as the private use of the company car and insurance contributions. In the event of an prematurely termination of their employment contracts, both board members are entitled to severance payments in the amount of the cash value of their fixed compensation payable until the regular expiration of the contract. In accordance with recommendations of the German Corporate Governance Code, severance payments are limited to a maximum of two years compensation, including fringe benefits. From the financial year 2010 onwards, the performancerelated (variable) compensation elements due to the Management Board, which are paid out annually as a management bonus, will primarily be based on the long-term development of the FFO, as recommended by the German Corporate Governance Code. Furthermore, the development of the NAV 145

152 and the achievement of individually agreed goals will also be taken into account when determining variable compensation elements. The Supervisory Board regularly reviews the Management Board compensation system. The total compensation of former members of the Management Board of the Company amounted to TEUR 431 in the year This includes a residual management bonus paid to a former board member for the financial year Pension reserves made for former members of the Management Board amount to TEUR 3,547. The current members of the Management Board participate as of January 1 or March 1, 2010, respectively, for the term of the employment contracts, in a company pension scheme in the form of a employer-financed, contribution-related, performance commitment by reinsured supportive fund. Stock option plans or compensation models based on stocks, such as phantom stocks, do not exist for members of the Management Board Shares held by members of the Management Board Dr Rüdiger Mrotzek holds 11,500 shares and Hans Richard Schmitz holds 4,000 shares in the Company Supervisory board Legal status within the organisational structure of the Company Composition of the Supervisory Board and appointment of its members In accordance with Section 9 (1) of the Articles of Association of the Company, the Supervisory Board consists of nine members, of which currently eight have been elected or appointed, respectively. The members of the Supervisory Board are elected, unless the General Meeting expressly resolves on a shorter term, for a term that expires upon the close of the General Meeting that resolves on the formal approval of the actions of the member for the fourth financial year after the beginning of their term of office, without including the financial year in which the term commences. By-elections are for the remainder of the term of the resigning member. Duties of the Supervisory Board The Supervisory Board appoints the members of the Management Board and is authorised to remove them for cause. The Supervisory Board advises the Management Board on managing the Company and supervises its conduct of business. For this purpose, the Supervisory Board may request special reports from the Management Board at any time. Furthermore, the Management Board is obliged to report regularly to the Supervisory Board about the Company s business and fundamental matters of business planning. Internal organisation and committees In accordance with the German Stock Corporation Act, the Supervisory Board elects a chairman and a deputy chairman for the respective term of office. If the chairman or his deputy resigns before expiration of the term of office, the Supervisory Board must, without undue delay, conduct new elections to replace the resigning member for the remainder of its term. According to the Articles of Association of the Company, declarations of intent by the Supervisory Board, are made by the chairman of the Supervisory Board on its behalf. According to Section 11 (5) of the Articles of Association of the Company, the Supervisory Board may form committees for specific functions from among its own members. At present, the 146

153 Supervisory Board has formed the following committees: the presiding, the audit and the nomination committee. The presiding committee has, in particular, the function to prepare the resolutions of the Supervisory Board and to decide on contractual matters regarding the Management Board. The Supervisory Board decides, however, on the total compensation of the individual members of the Management Board. At present, the members of the presiding committee are: Dr. Eckart John von Freyend (Chairman), Dr. David Mbonimana and Robert Schmidt. The audit committee prepares the consultation and resolutions of the Supervisory Board on accounting matters. This includes, in particular, the approval of the annual financial statements of HAMBORNER, questions regarding accounting and risk management, especially reviewing the risk monitoring systems with respect to compliance issues, and the requisite independence of the auditor as well as the engagement of an auditor for the audit of the year-end and review of the half-year financial statements including determining the focus of the audit and agreeing on fees. The Supervisory Board may assign further functions to the audit committee. At present, the members of the audit committee are: Dr. David Mbonimana (Chairman), Robert Schmidt, Hans-Bernd Prior and Christel Kaufmann-Hocker. The function of the nomination committee is to suggest suitable candidates to the Supervisory Board for its proposal for election to the General Meeting. At present, the members of the nomination committee are: Dr. Eckart John von Freyend (Chairman), Volker Lütgen and Dr. David Mbonimana. Meetings and adoption of resolutions Generally, the Supervisory Board should hold quarterly meetings. In the financial year 2009, the Supervisory Board held five meetings; in addition, with respect to three urgent matters, the Supervisory Board passed resolutions outside of formal meetings. In the financial year 2010, until the date of this Prospectus, the Supervisory Board held five meetings. According to the Articles of Association of the Company, meetings of the Supervisory Board are convened by the chairman. There is no special form for convening a meeting. The agenda should be included in the convening. The chairman decides on the place and time of the Supervisory Board meeting. According to Section 11 (3) sentence 4 of the Articles of Association of the Company, the Supervisory Board has a quorum only if at least half of its members participate in the adoption of the resolution. The chairman in office decides on the form of the meeting and on the type of voting in the Supervisory Board and its committees. Resolutions of the Supervisory Board require a majority of votes cast, unless otherwise provided by the Articles of Association or by law. Abstentions do not count as votes cast. If there is a tie vote of the Supervisory Board, then the matter must be dealt with again in the next meeting of the Supervisory Board. A member of the Supervisory Board, who is unable to attend a meeting of the Supervisory Board or of its committees, is entitled to have his/her written votes on individual items of the agenda, submitted by another member. The Supervisory Board has established its own Rules of Procedure. Accordingly, amongst others, the following applies: At the time of the election to the Supervisory Board, a member should not be older than 75 years. Not more than two former members of the Management Board should be members of the Supervisory Board. Members of the Supervisory Board should not be a member of the governing bodies or serve as a consultant of an important competitor. The Supervisory Board elects a chairman and one or two deputies from amongst its own members. The election is supervised by the oldest member of the Supervisory Board, unless that member is up for election. If the chairman or one of his deputies resigns from the Supervisory Board during the term of office, new elections must be held without undue delay to replace the member who resigned. 147

154 Meetings of the Supervisory Board are headed by the chairman or, in the event of his/her absence, by a deputy. The Supervisory Board has a quorum if, after invitation of all the members, at least half of its members participate in the adoption of the resolution. Resolutions of the Supervisory Board are passed by simple majority, unless otherwise provided by law or the Articles of Association. This also applies to elections. The chairman decides on the type of voting. However, if a member of the Supervisory Board requests secret voting, then voting must be secret. The members of the Management Board attend the meetings of the Supervisory Board and its committees, unless the Supervisory Board decides otherwise. The Supervisory Board forms the committees required by statutory law and other committees. The chairman of the Supervisory Board coordinates the work of the committees. A committee should comprise at least three members. The election of deputies is permitted for the event that a member of the committee is unable to participate. The presiding, audit and nomination committees should be formed regularly. The approval of the Supervisory Board is required for the matters set out in the Rules of Procedure of the Management Board, valid at that time. In addition, the Supervisory Board may decide that certain transactions may only be carried out with its approval. The Supervisory Board may resolve by simple majority to deviate from its Rules of Procedure in individual cases Members of the Supervisory Board The following overview contains the names of the members of the Supervisory Board of the Company as well as all entities and companies at which the members of the Supervisory Board were members of the administrative, management or supervisory bodies or were partners during the last five years. Name, position, experience Dr. Eckart John von Freyend (Chairman) Shareholder of Gebrüder John von Freyend Verwaltungs- und Beteiligungsgesellschaft m.b.h. Date membership began Expiration of current term of membership Further activities February 16, Chairman of the Supervisory Board of Finum Finanzhaus AG (until April 2010) Member of the Supervisory Board of Hahn-Immobilien Beteiligungs AG (continuing) Member of the Supervisory Board of IVG Immobilien AG (until April 2010) Member of the Supervisory Board of Konzeptplus AG (until March 2009) Member of the Supervisory Board of VNR Verlag für die Deutsche Wirtschaft AG (continuing) Member of the Supervisory Board of Investment AG für langristige Investoren TGV (continuing) Member of the Supervisory Board of Litos AG (until March 2009) Chairman of the Supervisory Board of Finum AG (until November 2009) Chairman of the Supervisory Board of GSW Immobilien AG (continuing) Member of the administrative board of FMS Wertmanagement AöR (continuing) Chairman of the Supervisory Board of Infopark Fejlesztési rt. (until April 2008) Vice chairman of the Supervisory Board of Gerling Lebensversicherung AG (until June 2006) 148

155 Name, position, experience Robert Schmidt Managing director of Evonik Immobilien Gesellschaft Volker Lütgen Managing director of HSH Capitalpartners GmbH, Area manager acquisition and sale/ asset management of HSH Real Estate AG Christel Kaufmann-Hocker Management consultant Dr. David Mbonimana Management board of HSH Real Estate AG Date membership began Expiration of current term of membership Further activities Vice chairman of the Supervisory Board of OIK Oppenheim Immobilien- Kapitalanlagegesellschaft mbh (until December 2006) Chairman of the Supervisory Board of Polar Kiinmteistöt Oyi (until June 2006) Chairman of the Supervisory Board of Stodjek Europa Immobilien AG (until December 2006) General partner of the John von Freyend Future KG June 2, Member of the advisory board of THS GmbH (continuing) Member of the Supervisory Board of Wohnbau Dinlaken GmbH (continuing) Member of the advisory board of EBV GmbH (until December 2007) Member of the Supervisory Board of Wohnen Datteln mbh (until October 2007) Member of the Supervisory Board of HSH Real Estate AG (until October 2009) Member of the Supervisory Board of Lüener Wohnungs- und Siedlungsgesellschaft mbh (until February 2007) Member of the advisory board of Montan- Grundstücksgesellschaft mbh (until march 2008) Member of the advisory board of Rhein-Lippe Wohnen GmbH (until February 2007) Member of the Supervisory Board of Wohnbau Westfalen GmbH (until February 2007) Member of the Supervisory Board of Wohnungsbaugesellschaft mbh Glückauf (until February 2007) February 16, Managing director of HSH Real Estate management Kft. (Hungary) (continuing) Managing director of TERRANUM Gewerbebau- Verwaltungs-GmbH (continuing) June 24, August 31, Member of the Supervisory Board of LB Immo Invest GmbH (continuing) 149

156 Name, position, experience Date membership began Expiration of current term of membership Further activities Edith Dützer Commercial employee at HAMBORNER REIT AG Hans-Bernd Prior Laboratory assistant at HAMBORNER REIT AG Mechthild Dordel Commercial employee at HAMBORNER REIT AG June 8, June 2, June 24, Member of the Supervisory Board of Larus Asset Management GmbH (continuing) Member of the control committee of investor s council H/H Stadtwerkefonds KGaA, SICAR (continuing) Member of the Management Board of HSH Corporate Finance A/S, Denmark (until July 2010) Member of the Management Board of HSH Corporate Finance AB, Sweden (until October 2008) Member of the Management Board of HSH Corporate Finance Oy (until December 2007) Dr. Josef Pauli is honory chairman of the Supervisory Board who has, however, neither been elected by the General Meeting nor appointed by the court as a member of the Supervisory Board and therefore does not have any statutory or statutable functions within the Supervisory Board. The members of the Supervisory Board can be contacted at the business address of the Company, Goethestrasse 45, Duisburg (Tel: +49 (203) ) Compensation of the members of the Supervisory Board According to Section 13 of the Articles of Association of the Company, members of the Supervisory Board receive the following compensation each financial year, in addition to reimbursement of their expenses: A fixed compensation of TEUR 15, payable after the end of the financial year. A variable compensation of EUR for every EUR 0.01 by which the undiluted earnings per share exceed the amount of EUR The variable compensation is limited to the double of the fixed compensation and is payable the day after the General Meeting resolved on the allocation of net profits for the relevant financial year. The chairman of the Supervisory Board receives the double and his/her deputies one-and-a-half times the amount of the fixed and variable compensation. Supervisory board members belonging to one of the three committees receive an additional compensation of TEUR 2 each financial year. Members of the supervisory board who are only appointed to the Supervisory Board or a committee for a fraction of the financial year, receive a compensation pro rata temporis. 150

157 The following table provides an overview of the compensation of the six members of the Supervisory Board of the Company officiating in the financial year 2009: in TEUR (unaudited) Fixed Variable Total Dr. Eckart John von Freyend Dr. Marc Weinstock Robert Schmidt Volker Lütgen Edith Dützer Hans-Bernd Prior Total Shares held by and share options of members of the Supervisory Board The member of the Supervisory Board Dr Eckart John von Freyend, holds directly respectively indirectly through the John von Freyend Future KG, 5,000 shares in the Company Certain information regarding the members of the Management Board and the Supervisory Board In the last five years, no current member of the Management Board or the Supervisory Board has been convicted of criminal acts of fraud. Likewise, no public accusations and/or sanctions have been imposed by statutory or regulatory authorities on the members of the Management Board or the Supervisory Board. Except for Hans Richard Schmitz who was, for the purpose of restructuring, chairman of the Supervisory Board of CAMELOT tele-communication-online AG in liquidation until March 2007, no current member of the Management Board or the Supervisory Board has been involved in insolvency, receivership or liquidation proceedings in their capacity as a member of an administrative, management or supervisory body or as a member of management during the last five years. No current member of the Management Board or the Supervisory Board has ever been ordered by a court to be disqualified from being a member of an administrative, management or supervisory body or from acting in the management or from managing the business of an issuer. As at the date of this Prospectus, there are no family relationships amongst the members of the Management Board nor between the members of the Management Board and the members of the Supervisory Board. With the exception of the benefits described in the section Compensation of members of the Management Board, there are no service contracts between the Company and members of the Management Board or the Supervisory Board, which provide for benefits at the end of the service contract General Meeting Convening meetings and announcement of the agenda The General Meeting is convened by the Management Board and, in the cases prescribed by law, by the Supervisory Board, accompanied by the announcement of the agenda. The annual General Meeting must take place within the first eight months of the financial year. It is held at the place of the registered office of the Company or of the German government or in any other city in the Federal Republic of Germany with more than 100,000 inhabitants. A General Meeting of shareholders must also be convened if the welfare of the Company requires so or if shareholders whose combined shareholdings amount to 5% of share capital demand a meeting in writing, accompanied by a statement of the purpose and the reasons for the meeting. 151

158 A General Meeting of shareholders must be convened at least 30 days before the date on which the deadline for registration of shareholders expires. The agenda must be announced together with the convening of the General Meeting; with respect to items of the agenda announced at a later date, resolutions may not be passed. This does not apply to items which have been placed on the agenda and made public upon demand of a minority according to Section 122 (2) or (3) of the German Stock Corporation Act after the convening of a General Meeting. With respect to these items, resolutions may only be passed, regardless of the majority required to adopt such resolution, if the items (including the explanatory statement or proposed resolution) are received by the Company at least 30 days prior to the General Meeting. The day of receipt is not to be included in the calculation. Responsibility and resolutions The General Meeting adopts resolutions regarding, in particular, the distribution of balance sheet profit, the payment of a compensation to the members of the Supervisory Board, the formal approval of the actions of the Management Board and the Supervisory Board, the election of members of the Supervisory Board, the election of the auditor and, in the cases prescribed by law, the approval of the annual financial statements. Unless otherwise required by mandatory law, resolutions of the General Meeting are adopted by simple majority of the share capital represented at the time the resolution is adopted, unless mandatory law requires a different majority. According to the German Stock Corporation Act, resolutions of fundamental importance require, in addition to a majority of the shareholders present, a majority of at least three-quarters of the share capital represented at the time the resolution is adopted. Resolutions of fundamental importance include, in particular: Amendments to the Articles of Association, Measures of capital increase or reduction, The entering into enterprise agreements (e.g. domination and profit and loss transfer agreements), Mergers, demergers and changes of corporate form according to the German Reorganization Act (Umwandlungsgesetz), and Liquidation of the Company. Right to participate in the General Meeting and shareholder rights at the General Meeting According to Section 15 (2) of the Articles of Association of the Company, only those shareholders who have registered in writing or by fax, have the right to participate in the General Meeting and to exercise their voting right. Registration must be received by the Company at the address indicated in the invitation at least seven days prior to the General Meeting. For the rest, Section 121 (7) of the German Stock Corporation Act applies. Furthermore, the shareholders must be able to prove their right to participate in the General Meeting and to exercise their voting right by submitting a proof of share ownership issued by the depositary institution in text form (Section 126b of the German Civil Code) in German or in English. The proof must relate to the beginning of the 21 st day before the General Meeting and must be received by the Company at the address indicated in the invitation at least seven days prior to the General Meeting. For the rest, Section 121 (7) of the Stock Corporation Act applies. 152

159 Each no-par value bearer share carries one voting right in the General Meeting. The Company is not entitled to any voting rights for own shares. Each shareholder has the right to speak and to ask questions in the General Meeting which is subject to certain restrictions, in particular with respect to confidentiality concerns of the Company and an orderly and expeditious course of the General Meeting. According to Section 16 (3) of the Articles of Association of the Company, the chairman of the General Meeting is authorised to impose reasonable time restrictions on the shareholders right to speak and to ask questions. In doing so, the chairman of the General Meeting should be guided by the goal of completing the General Meeting within a reasonable and appropriate period of time Corporate Governance The Government Commission on the German Corporate Governance Code, appointed by the Federal Ministry of Justice in September 2001, adopted the German Corporate Governance Code (the Code ) on February 26, 2002, and, most recently on May 26, 2010, adopted various amendments to the Code. The Code provides recommendations and suggestions on managing and supervising German listed companies. It is based on nationally and internationally recognised standards regarding good and responsible corporate practice. The Code is intended to make the German corporate governance system transparent and comprehensible. The Code contains recommendations and suggestions on corporate governance with respect to shareholders and the General Meeting, the Management Board and the Supervisory Board, transparency, accounting and the annual audit. The Code can be downloaded at There is no obligation to comply with the recommendations or suggestions of the Code. The stock corporation law only requires the Management Board and the Supervisory Board of a listed company annually either to declare that the company has and will comply with the recommendations of the Code or to declare which recommendations were or will not be applied and why. The declaration is to be made permanently available on the website of the Company and is to be included in the management report as part of the statement on corporate governance. A company may deviate from the suggestions contained in the Code without public disclosure. In December 2009, the Management Board and the Supervisory Board of the Company, lastly issued the legally required declaration of compliance with the Code, in accordance with Section 161 of the German Stock Corporation Act, as follows: The Management Board and the Supervisory Board of Hamborner AG declare that, since the last declaration of compliance in December 2008, Hamborner AG has complied with the recommendations of the Government Commission on the German Corporate Governance Code (the Code ) in the version dated June 6, 2008, except for the recommendation in clause sentence 1. In the future, Hamborner AG will comply with the Code in the version dated June 18, 2009, except for the recommendation in clause sentence 1. Explanation: clause of the Code recommends that the Management Board should have a chairman or spokesperson. A chairman or spokesperson has not and will not be appointed as the Management Board only consists of two members. The content of the declaration of conformity of the Company as of December 2009 remains valid, already taking into account the stipulations amended by the revised version of the Code as of May 26, 2010, which were published in the electronic version of the German Federal Gazette on July 2, 2010, except for the recommendation in clause The Company has not yet decided, to what extent the revised recommendation in clause should be complied with. 153

160 19. TAXATION IN THE FEDERAL REPUBLIC OF GERMANY REIT CORPORATION The following section summarizes certain major taxation principles which are or may be relevant in connection with the acquisition, holding or transfer of the shares and subscription rights of a REIT Corporation ( REIT Share, REIT Subscription Right ). The information herein does not purport to be exhaustive and does not provide a complete explanation of all possible tax relevant issues. The summary is based on current German tax law, including typical provisions from double taxation treaties ( DTTs ) concluded between the Federal Republic of Germany and other states. It should be considered that provisions may under certain circumstances even retroactively be changed. If the Company should lose the tax privilege of a REIT Company, the general principles of taxation would apply to both taxation for the Company and the shareholders. Furthermore, that could trigger a significant tax burden for the Company and/or the shareholders. However, as the Company does currently meet the requirements for the preferential REIT taxation status, only those principles of taxation connected to a REIT Company have been outlined below. Potential investors should consult their tax advisor on the tax implications of acquiring, purchasing, holding, selling, gifting or inheriting shares and subscription rights, in particular REIT Shares and REIT Subscription Rights, as well as on any possible tax implications resulting from a loss of the Company s tax exemptions. The same applies to rules regarding a potential refund of German withholding tax (Kapitalertragsteuer). The characteristics of each shareholder in relation to taxation can only be given sufficient consideration in the context of an individual professional tax advice. Due to the fact that the German REIT Act is new and no precedent has been set with respect to its construction and interpretation by the financial authorities and courts, it cannot be ruled out that its actual application may differ in questions of doubt in some areas Taxation of the Company REIT companies which are subject to unlimited domestic corporate income tax that are not deemed to be domiciled in another country for purposes of a double-taxation treaty and that meet the conditions of Sections 8 15 REIT Act enjoy full exemption from corporate income and trade tax. However, the exemption of a REIT company does not extend to subsidiaries, in particular not to commercial or deemed commercial real-estate partnerships. While the income at the level of a subsidiary partnership is determined at the partnership level for reasons of fiscal transparency before being attributed to its partners, (such income is tax-exempt for corporate income tax purposes of the level of the REIT company), it should be noted that the subsidiary partnership is an independent taxable entity for trade tax purposes, to the effect that a liability for trade tax may arise for the subsidiary real-estate partnership due to its commercial character. By contrast, a REIT Company is subject to, inter alia, real estate transfer tax and land tax as well as to value added tax. To that extent, REIT Act does not provide for exceptions, so that the respective legal regulations apply fully to a REIT company without limitations Qualifications for a REIT Status REIT companies are corporations whose type of business is restricted under the REIT Act to so-called real estate-related activities. Essentially, REIT companies are permitted to acquire, hold, manage and sell property and rights in rem in the form of or with regard to the following assets: domestic real estate, except rental properties of predominantly residential use (Bestandsmietwohnimmobilien), 154

161 foreign immovable property to the extent that such assets may be held as part of REIT corporate bodies, associations or estates or any REIT-comparable corporate body under the laws of the country where such assets are situated, as well as other assets required to manage immovable assets, as well as credit balances, money market instruments, receivables and payables originating from the use or sale of immovable assets or held, entered into or set up for the purposes of the capital preservation, management or inventory change of these assets. REIT companies may further acquire, hold, manage and sell interests in real-estate partnerships (without limitation as to the amount of participation), shares in REIT service companies (only at 100%), shares in foreign property companies (only at 100%) as well as shares in corporations (Komplementärkapitalgesellschaften) that are general partners of real-estate partnerships without a financial stake. The qualification of a REIT company is particularly subject to the following requirements: Legal requirements The REIT Corporation must have its domicile and management in Germany. The share capital must have a nominal value of at least EUR 15 million. The REIT corporation must be admitted to a regulated market in either an EU or an EEA member state. At least 25% of the REIT Company s shares must be free float at the time of listing. Thereafter, the free float ratio must be at least 15%. Free float refers to those shares attributable to shareholders with less than 3% of the company s voting rights. In addition, no investor may hold 10% or more of the REIT shares directly. The free float rate must be reported annually and demonstrated upon request on December 31 to the Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority) ( BaFin ) Requirements as to assets and earnings of operations The tax exemption for the REIT Company will only be granted if the structural conditions in relation to the composition of the assets and total sales revenues (plus any other revenues from immovable assets), as provided for in the REIT Act, have been met. A decision will be made about whether or not these requirements have been met on the basis of the IFRS consolidated financial statement. As a rule, the REIT Corporation will be required to prepare consolidated financial statement. If this is not the case in exceptional circumstances, the preparation of an IFRS individual financial statement is mandatory. With respect to the composition of the assets, the following criteria must be met at the end of any given fiscal year: At least 75% of the total assets must consist of immovable assets, after the deduction of dividend payment commitments (see also the explanation in the following subsection Dividend payments to investors ) and the reinvestment reserve for capital gains made in the current or previous fiscal year, and a maximum of 20% of the reported assets may come from REIT service companies Dividend payments to investors Aside from the satisfaction of the requirements as to asset and revenue structure, the REIT company s exemption from corporate income and trade tax is contingent on its making dividend payments to a specific degree. 155

162 By the end of the following fiscal year, the REIT corporation is required to pay out at least 90% of its annual net accounting profit within the meaning of Section 275 of the German Commercial Code ( HGB ), less the allocation of the reinvestment reserve and any losses carried forward from the previous year, plus the dissolution of the reinvestment reserve. When determining the annual net profit, depreciation is only permitted in equal annual instalments. Up to half of the capital gains from the sale of immovable assets can be allocated into a reinvestment reserve. This reserve has to be dissolved until the end of the second financial year following the year of its accumulation, insofar as it has not been previously deducted from the costs of purchased or manufactured immovable assets Other requirements The REIT Corporation must not engage in any kind of trading with its immovable assets. Such trading would be deemed to have occurred whenever the REIT Company (and, if applicable, its subsidiaries) realized revenues from the sale of real estate within the past five years exceeding 50% of the average portfolio of immovable assets over the same period. The amount of equity capital for a REIT corporation (i.e. equity reported according to Section 12 (1) German REIT Act at the end of a financial year as part of IFRS individual or consolidated financial statements) must not full below 45% of its immovable assets at the end of any given financial year (minimum equity capital). The REIT Corporation may acquire equity interests in so-called REIT service companies. REIT service companies are corporations wholly owned by a REIT company and whose purpose is limited to providing against remuneration real estate-related services for third parties on behalf of the REIT corporation. Thus, a REIT Corporation can also carry out via the REIT service company such real estate-related activities which are beyond its own property portfolio. The value of its equity in a REIT service company must not exceed 20% of the total assets of the REIT Corporation (see above). The total revenues (plus other revenues from immovable assets) of REIT service companies must not exceed 20% of the total revenues (plus other revenue from immovable assets) of the consolidated IFRS annual financial statements for the REIT Corporation. The REIT corporation is permitted to acquire, hold, manage and sell equity interests in real estate partnerships. There is no minimum rate of equity interest. Therefore, it is possible to hold less than 100% of as well as minority interests in real estate partnerships. Holding an indirect equity interest in a real estate partnership via a direct equity interest (so-called two-tier interests) is also possible. The real estate partnership may hold assets in the same way as a REIT corporation, with the exception of participations in foreign real estate holding entities and REIT service companies Beginning and end of tax exemption The tax exemption will come into effect at the beginning of the fiscal year in which the REIT Corporation is registered in the commercial register as a REIT. Upon the transition of a taxable real estate corporation to the tax-exempt REIT status, any hidden reserves in the assets must be disclosed. The tax exemption for a REIT Corporation will in particular end, if it loses its listing; it engages in real estate trading-activities; for three consecutive fiscal years, less than 15% of the shares of the REIT Company are in free float or if, for three consecutive fiscal years, a single investor holds 10% or more of the REIT corporation s shares; the minimum requirements as to equity capital have not been met for three consecutive fiscal years; 156

163 under certain terms and conditions, the net assets and revenue requirements, as well as the minimum dividend payments of 90%, have not been met; or the terms and conditions for a REIT Company are no longer fulfilled. Once the tax exemption has been lost, a further and/or new tax exemption for the company as a REIT Corporation can only be resumed or recommence after a period of at least four years Sanctions In the event that a REIT corporation fails to satisfy the requirements as to asset composition, revenue, minimum dividend payment or prohibition to render services to third parties against remuneration, the relevant financial authorities imposes penalty payments against the REIT company. The penalty payments depend on the nature of the violation and the incidence and frequency of violations of previous fiscal years. The penalty payments are calculated as follows: Violation of the required composition of assets: 1% to 3% of the amount by which the share of the immovable assets falls short of 75%. Violation of the required composition of revenues: 10% to 20% of the amount by which the gross revenue from leasing or sale of immovable assets is below the target of 75%. Violation of the 90 % distribution requirement: 20% to 30% of the amount by which the actual dividend payment is below 90%. Violation of the prohibition on providing real estate-related services for third parties: 20% to 30% of the revenue obtained. These sanctions can also be imposed cumulatively Taxation of shareholders With respect to the taxation of shareholders, a distinction has to be made between the taxation in connection with the holding of REIT shares (taxation of dividends), the sale of REIT shares and subscription rights (capital gains tax) and the gratuitous transfer of REIT shares and subscription rights (taxation of inheritance and gifts). With effect for the tax assessment period 2009, taxation of shareholders has been changed fundamentally by introduction of the so-called Flat Tax (Abgeltungsteuer) as well as by other related substantial changes in the German income tax law. Compared to the general tax provisions, certain peculiarities resulting from the REIT Act, are applied to REIT companies, like the Company. The following section describes the tax law applicable to REIT shares or subscription rights acquired in the tax assessment period Taxation of dividends Withholding tax The Company is required to withhold and remit for account of the shareholders a withholding tax (Kapitalertragsteuer) in the amount of 25% on its dividends distribute, as well as the solidarity surcharge of 5.5% on the amount of the withholding tax (combined tax rate of %). Where applicable, due church tax is withheld and remitted upon application of the individual taxpayer (generally) to the Domestic Paying Agent (inländische Zahlstelle) by the Domestic Paying Agent (as defined in Taxation of capital gains Domestic-resident shareholders Shares/subscription rights held as private assets (acquired after 31 Dec 2008). The assessment basis for the withholding tax is the dividend resolved by the General Shareholders Meeting. 157

164 The withholding tax is in principle withheld irrespective of whether and to what extent the dividend is tax exempt at the level of the shareholder and whether the shareholder is a tax resident in Germany or abroad. Due to the participation maximum limit of less than 10% and the associated exclusion of the use of any rights from a higher level of participation, no waiver will be granted in respect of withholding capital gains tax (tax exemption), even for dividends distributed to a company based in another member state of the European Union in the sense of Article 2 of the so- called Parent Subsidiary Directive (Council Directive) 90/435/EEC of 23 July 1990 in its currently applicable version ( P-S Directive ) i.e. to the parent company Taxation of shareholders resident in Germany REIT shares held as private assets In the case of individuals who are subject to unlimited taxation (unbeschränkte Steuerpflicht) in Germany and hold shares as private assets (Privatvermögen), dividends are subject to individual income tax as capital income at a special flat tax rate of 25% plus a solidarity surcharge of 5.5%, i.e. a total of % (Abgeltungsteuer) (the Flat Tax ) and, where applicable, church tax. In principle, the Flat Tax on the dividends is deducted by the Company from the taxable investment income by way of withholding tax. By this withholding, usually, the income tax on the dividends is deemed to be covered, i.e. such income does not need to be filed in the personal income tax return of the shareholder subject to certain declaration obligations regarding church taxes (see subsection 19.7 Other taxes ). If the investment income has been subject to the withholding tax, the shareholder may upon application declare such income in his income tax return, e.g. in order to utilize unused amounts of the general saver s allowance (Sparer-Pauschalbetrag) or a loss carry forward, credit foreign taxes or to avoid the application of the withholding tax based on a lump sum substitute basis (Ersatz- Bemessungsgrundlage). In cases where such income is declared and transferred into the assessment procedure the income tax will still be applied at the special tax rate of the Flat Tax and church tax if applicable, but not at the individual, progressive income tax rate. In the tax assessment procedure and, upon request, vis-à-vis the Domestic Paying Agent in the withholding procedure as well, a saver s allowance in the amount of EUR 801 (or EUR 1,602 for married couples filing jointly) per calender year can be deducted from the investment income. Expenses actually incurred to generate the income (Werbungskosten) cannot be deducted. The shareholder can apply for a so-called most-favored-test (Günstigerprüfung) and thus achieve that the investment income is not subject to the tax rate of the Flat Tax, but to the individual progressive income tax rate, if this leads to a lower tax burden regarding the investment income. Regarding such an application, further details need to be taken into consideration. Furthermore, upon application, the Flat Tax will not be applied to dividends received by a shareholder, who holds directly or indirectly at least 25% of the registered share capital of the Company or holds directly or indirectly at least 1% of the registered share capital of the Company and is simultaneously an employee of the Company; regarding the period of validity of such application further details need to be taken into consideration. If the Flat Tax is not applicable due to the reasons mentioned in the paragraph above, dividends are fully taxable, as they are being paid by a REIT Company. They are subject to the individual progressive income tax rate (up to the maximum rate of 45%) plus solidarity surcharge in 158

165 the amount of 5.5% (at the present maximum rate of 45% that would result in a combined maximum rate of rounded 47,475%) as well as any applicable church taxes. At the same time, any expenses economically related to such dividends are fully tax deductible. The saver s (tax-free) allowance is not granted additionally. As far as in these cases in which the Flat Tax is not applicable the dividends of the REIT Corporation come from so-called pre-taxed profits, only 60% of the dividends are subject to taxation (Teileinkünfteverfahren). These 60% of the dividends are subject to the individual progressive income tax rate and church tax, if applicable. Similarly, expenses actually incurred to generate the income (Werbungskosten) are deductible only at 60% of these expenses. Pre-taxed profits are any profits made by the REIT corporation that are subject to at least 15% of the German corporate income tax rate or a similar foreign income tax for the relevant tax assessment period. A number of additional restrictions apply when determining the income tax rate for these profits and the temporal proximity to the dividend REIT shares held as business assets If the REIT shares are held as business assets, taxation depends on whether the shareholder is a corporation, a sole proprietor, a commercial or deemed commercial partnership (Mitunternehmerschaft). Withholding taxes amounting to % (including solidarity surcharge) withheld and remit by the Company will be credited against the respective individual income or corporate income tax liability of the shareholder or refunded to the extent of a potential overpayment. The Flat Tax rate is not applicable in the assessment procedure. (i) Corporations Dividends received by corporations resident in Germany are in deviation from the usual 95% economic exemption from corporate income tax and solidarity surcharge fully taxable and therefore subject to the full corporate income tax rate (in addition to the solidarity surcharge), i.e. a 15% corporate income tax rate plus 5.5% for solidarity surcharge, making a total of %. Business expenses actually incurred in connection with the dividends should be fully deductible. The dividends are also fully subject to trade tax. The economic exemption of 95% of the dividends from purposes tax can only be applied insofar as the dividends from the REIT Company come from pre-taxed portions of the profits (see also subsection Shares held as private assets ) 5% of these dividends are deemed to be non-deductible business expenses and are thus subject to corporate income tax. This is true except for certain exemptions for enterprises of the financial and insurance sectors (see subsection 19.5 Special rules for companies from the finance and insurance sector ). The participation exemption for trade tax purposes for so-called inter-company dividends cannot be applied, as the shareholder can only derive the rights from participation corporate income of less than 10%. Thus, the dividends are also fully subject to trade tax. (ii) Sole proprietors (individuals) If the REIT shares are held as business assets of a sole proprietor, the full amount of the dividends is considered as income for the purposes of income taxation and are subject to the individual income tax rate (including solidarity surcharge approx. up to 47,475% and plus church tax, if applicable). Business expenses economically related to such dividends are fully tax deductible as well. In addition, the dividends are fully subject to trade tax if the shares are attributable to a permanent establishment of a commercial business in Germany. In principle, trade tax will be credited against the shareholder s individual income tax on a lump sum basis. 159

166 Insofar as portions of the dividends from the REIT Company are pre-taxed profits (see subsection Shares held as private assets ), only 60% of the dividends are considered as income for the purposes of income taxation (Teileinkünfteverfahren). Accordingly, business expenses economically related to such dividends are deductible only at 60%. The participation exemption for trade tax purposes for so-called inter-company dividends cannot be applied, for as the shareholder can only derive the rights from an participation of less than 10%. Thus, the dividends are also subject to the maximum amount of trade tax. (iii) Partnerships (Mitunternehmerschaft) If the shareholder is a partnership, individual income or corporate income tax, as the case may be, is levied only at the level of each respective partner of the partnership. The taxation of each partner depends on whether the partner is a corporation or an individual. If the partner is a German resident corporation the dividend is fully subject to corporation income tax (see also subsection Corporations ) and/or subject to income tax, if the partner is a German tax resident (see also subsection Sole proprietors ) (as well as solidarity surcharge each and church tax if necessary). If the shares are held as business assets in a permanent establishment in the partnership in Germany, the dividend income is in general fully subject to trade tax irrespective of whether corporations or individuals are involved as partners. The relevant exemption from trade tax for so-called inter-company dividends cannot be applied, as the shareholder can at most derive the rights from an equity interest of less than 10%. Insofar as the dividend from the REIT Company comes from pre-taxed profits, (see also subsection Shares held as private assets ) and the shareholder is a corporation resident in Germany economically 95% of dividends are exempt from taxation. The 40% exemption from income tax (Teileinkünfteverfahren) is applicable insofar as the dividend from the REIT Corporation comes from pre-taxed profits (see also subsection Shares held as private assets ) and the shareholder is an individual residing in Germany. The participation exemption for trade tax purposes for so-called inter-company dividends cannot be claimed, as the shareholder can only derive the rights for an equity interest of less than 10%. Thus the dividends are also fully subject to the full amount of tax at the partnership level. If the shareholder of the partnership is an individual a full or partial credit trade against their individual income tax liability on a lump-sum tax basis will be granted for any trade tax incurred by the partnership, if and to the extent the trade tax is attributable to such partner. Special regulations for credit institutions, financial service providers, financial enterprises, as well as life-insurance and health-insurance companies and pension funds are described in section 19.5 Special rules for companies in the finance and insurance sectors below Taxation of non-resident shareholders Shareholders (individuals or corporations) resident outside of Germany holding their REIT shares as business assets in, a permanent establishment or fixed place of business in Germany or as business asset for which a permanent representative has been appointed in Germany, are subject to German taxation on their individual income. The above statements with respect to German residents holding the REIT shares as business assets insofar apply accordingly. If non-resident shareholders subject to limited tax liability in Germany hold the REIT shares neither as business assets of a permanent establishment or fixed base in Germany, nor as business assets for which a permanent representative has been appointed in Germany, a potential German tax liability will be deemed settled by way of withholding tax. 160

167 If the shareholder is a corporation subject to the non-resident limited tax liability, two-fifths of the withheld and remitted withholding tax and the solidarity surcharge for dividends will be refunded by the German Federal Central Tax Office (Bundeszentralamt für Steuern) upon request, under an officially provided form whereas further details need to be considered with respect to the application. The refund requires that the shareholder does not fall within the scope of the anti-abuse rule as set out in Section 50d(3) of the Einkommensteuergesetz (EStG German Income Tax Act). The withholding tax rate for distributions to such non-resident shareholders may be reduced in accordance with the provisions of a potentially applicable double tax treaty provided the DTT of 10% or more as condition for reduction is not required. The P-S Directive will not be applied to dividends from a REIT Company. Any additional reductions applicable in accordance with any applicable DTT in connection with a participation of 10% or more of the shares in the REIT Company are excluded, as the REIT Act provides that a shareholder can only derive those rights for an equity interest of less than 10%. In principle, a withholding tax reduction is granted in such a manner that the difference between the total amount withheld including the solidarity surcharge, and the withholding tax which is actually due in accordance with the applicable DTT (normally 15%) is refunded, upon application, by the German tax authorities (Bundeszentralamt für Steuern, Bonn). Forms for the refund procedure can be obtained from the Bundeszentralamt für Steuern (German Federal Central Tax Office, as well as from German embassies and consulates. In particular the refund will require that non-resident shareholders do not fall within the scope of the anti-abuse provision set out in Section 50d (3) of the German Income Tax Act ( EStG ) Taxation of capital gains Shareholders resident in Germany REIT shares/subscription rights held as private assets (acquisition after 31 st Dec 2008) Capital gains derived from the sale of (REIT-) shares (acquired after 31 st Dec 2008) constitute investment income and thus are fully subject to taxation, irrespective of any holding period. A sale in this sense encompasses also redemption, repayment, assignment or hidden contribution of (REIT-) shares into a corporation. If the (REIT-) shares are held in custody or administered by a domestic credit institution, domestic financial services provider, domestic broker or a domestic securities trading bank (including domestic branches of such foreign institutions) or the sale of the shares is conducted by such institutions which credits or disburses the proceeds from the sales to the shareholder (the Domestic Paying Agent ), the Domestic Paying Agent has to withhold the Flat Tax (including solidarity surcharge) and if applicable upon application by the shareholder also the church tax from the capital gains by way of withholding tax from the taxable investment income. Regarding the withholding mechanism and the applicable tax rate the corresponding information regarding withholding tax on dividends as discussed in subsection Shares held private assets apply accordingly. In general in this case once the tax has been deducted income tax on the capital gains shall always be deemed as having been paid. This means that these components shall no longer have to be declared in the individual tax declaration of the shareholder the income tax for investment income is generally deemed to be settled with the withholding of tax, subject to any possible declaration obligations regarding church tax (see subsection 19.7 Other Taxes ). The possibility to transfer investment capital income upon application into the assessment procedure as well as the possibility for a most-favored-test (Günstigerprüfung) corresponds to those set out above in connection with dividends (see subsection Shares held as private assets ). If the (REIT-) shares are held in the custody of a foreign paying agent and no withholding tax on capital gains is applied, capital gains earned must be declared in the tax return filing and assessment process. 161

168 The above guiding principles also apply to the sale of subscription rights. The acquisition costs of the subscription rights are taken into account upon the sale generally at EUR 0 and the Flat Tax will be determined based on the proceeds from the sale. From the total amount of investment income (dividends, interest, certain liquidation proceeds, revenue from silent partnerships, capital gains etc.) a saver s allowance (Sparer-Pauschbetrag) can be deducted in the amount of EUR 801 (or EUR 1,602 for married couples jointly) which is assessed per year; the deduction of actual expenses actually incurred (tatsächliche Werbungskosten) is excluded. As in the case of all shares, losses from the sale of REIT-shares may solely be off-set against capital gains from the sale of shares in stock corporations (including REIT shares), but not against other investment income e.g. dividends, and also not against income of any other kind (limitation of loss utilization, Verlustverrechnungsbeschränkung). Losses from the sale of (REIT) shares in stock corporations not yet off-set can only be carried forward to future tax periods but not carried back to preceding tax periods. These amounts need to be assessed separately Losses from the sale of subscription rights may only be off-set against investment income, e.g. received dividends, but not against income from of any other kind. Losses from capital income not yet off-set, e.g. losses from the sale of subscription rights may only be carried forward to future tax assessment periods but not, carried back to preceding tax periods. The amounts need to be assessed separately. With regard to subscription rights, the German tax authorities assume that they are acquired at the same time as the old (REIT) shares underlying them. If the old (REIT) shares underlying the subscription rights have been acquired by the shareholder before 1st Jan 2009 and hence prior to the regime of Flat Tax, the capital gain from the sale of the subscription rights (as well as the sale of such (REIT) shares) would be tax exempt, as the sale would occur out of the one-year holding period has closed. The German tax authorities do not consider the exercise of subscription rights which are held in private assets as a sale. At the time of exercising the subscription right the New (REIT) Shares are purchased at Subscription Price. The Flat Tax does not apply to capital gains realized on a sale of REIT-shares or subscription rights if the shareholder (natural person) or in the case of gratuitous transfer his/her legal predecessor, respectively if the shares have been gratuitously transferred several times consecutively, one of his/her legal predecessors directly or indirectly held at least 1 % of the share capital of the Company at any time during the five years preceding the sale. The obligation of the Domestic Paying Agent to withhold the withholding tax (plus the solidarity surcharge and if applicable upon application also church tax) remains unaffected by this. If the Flat Tax does not apply due to a significant participation (see above paragraph), the capital gains or losses from the sale of REIT-shares shall be fully subject to tax or deductible respectively. Corresponding principles should also apply with respect to capital gains from the sale of subscription rights. Taxation is implemented on the basis of the personal progressive income tax rate (for tax rates see subsection Shares held as private assets ) REIT shares/subscription rights held as business assets If the REIT shares or subscription rights are held as business asset, taxation depends on whether the shareholder is a corporation, sole proprietor or partnership (Mitunternehmerschaft). (i) Corporate entities Capital gains (sale price reduced by tax book value and business expenses of the sale) from the sale of REIT-shares by taxable persons that are subject to corporate income tax are completely subject to trade tax and corporate income tax (including the solidarity surcharge). The 95 % economic 162

169 exemption for trade tax and corporate income tax purposes including solidarity surcharge, whereby a 5% lump-sum of the capital gain is considered a non-deductible business expenses, does not apply to REIT shares. Capital gains from the sale of subscription rights are fully subject to corporate income tax (plus solidarity surcharge) and trade tax as well. As a consequence, losses from the sale of subscription rights and other profit reductions in this connection should generally be fully tax deductible. The exercise of subscription rights is not considered by the German tax authorities to be a sale of the subscription rights. An existing Domestic Paying Agent is generally exempt from its obligation to withhold tax from the capital gain. (ii) Sole proprietors (individuals) Capital gain from the sale of shares held as business assets by a sole proprietor, who is subject to unrestricted taxation in Germany, is subject to individual income tax and solidarity surcharge (plus church tax, if applicable) and also to trade tax if the (REIT-) shares are allocated to a permanent establishment of a commercial business in Germany. When (REIT) shares are sold the capital gains are fully subject to income tax. Economically related business expenses are also fully tax deductible. Losses from the sale of REIT shares and any other profit reductions related to such sales may be taken into account in tax assessments. However, such losses in business assets and business expenses economically related to REIT shares may only be off-set against increase business assets and business income resulting from the sale of REIT shares or participations in other REIT corporations, REIT associations or REIT assets. The partial income system (Teileinkünfteverfahren, only 60 % subject to tax) is not applicable with regard to capital gains from REIT shares. Taxation applies at the individual progressive income tax rate. Likewise, capital gains resulting from the sale of subscription rights should be completely subject to income tax (plus solidarity surcharge and if applicable also church tax) and trade tax. Correspondingly, losses realized from the sale of subscription rights and other related reductions in profits would also be fully tax deductible. The tax authorities do not consider the exercise of subscription rights as a sale of subscription rights. In principle, trade tax is fully or partially credited as a lump sum deduction against the shareholder s individual income tax liability. The Domestic Paying Agent is released from its obligation to withhold tax on capital gains, if the sole proprietor declares, using an official form, vis-à-vis the Domestic Paying Agent that the (REIT-) shares are held as German business assets. If withholding tax and solidarity surcharge are withheld, these do not have any settling effect on the (REIT-) shares or subscription rights held as business assets: instead they are credited against the individual income tax liability and the solidarity surcharge of the seller, or refunded to the extent of a potential overpayment. (iii) Partnerships (Mitunternehmerschaft) If the shareholder is a partnership, individual income and/or corporate income tax, as the case may be, is levied only at the level of each partner. The taxation depends on whether the partner is a corporation or individual. Irrespective of whether the partner is a corporation and/or an individual residing in Germany, capital gains from the sale of shares are fully subject to corporate income tax or individual income tax (and in each case also solidarity surcharge and if applicable church tax) (see above subsection corporations and sole proprietors ). The exemptions otherwise granted for capital gains from 163

170 shares which are not REIT shares (95% economic exemption for corporate entities and 40% for individuals in the case of operational participations) do not apply to capital gains from REIT shares. Losses from the sale of shares and any other profit reductions related to such sold REIT shares may be taken into account in tax assessments. However, such losses in business assets and business expenses economically related to REIT shares may only be off-set against increase business assets and business income resulting from the sale of REIT shares or participations in other REIT corporations, REIT associations or REIT assets. Furthermore, if REIT shares are attributable to a German permanent establishment of a commercial business of the partnership, the capital gain from the sale is fully subject to trade tax at the level of the partnership. For purposes of trade tax, losses and other profit reductions connected to the disposed shares are also completely taken into consideration. Insofar as the partners are individuals, all or part of the trade tax the partnership pays is generally credited as a lump-sum against the individual partners individual income tax liability. Insofar as the partner is a corporation, capital gains realized from the sale of subscription rights are fully subject to taxation, i.e. corporate income tax (plus solidarity surcharge) (see the section Corporations above) and individual income tax (plus solidarity surcharge and if applicable church tax), insofar as the partner is an individual person (see section Sole proprietors (individuals) ). Hence connected losses or reductions in profits should be completely tax deductible. Moreover, capital gains are subject to trade tax. The tax authorities do not consider the exercise of subscription rights a sale of subscription rights. The Domestic Paying Agent is released from its obligation to retain withholding tax on capital gains if the partnership as the creditor of the capital gains declares on an official form vis-à-vis the Domestic Paying Agent, that the REIT shares are held as German business assets. If withholding tax and solidarity surcharge are withheld, these do not have any settling effect on the (REIT) shares or subscription rights held as business assets; instead they are credited against the individual income tax respectively the corporate income tax liability and the solidarity surcharge of the seller, or refunded to the extent of a potential overpayment Shareholders resident outside Germany If the REIT-shares or subscription rights are sold by an individual tax resident outside Germany, who (i) holds the REIT-shares or subscription rights as business assets of a permanent establishment or fixed place of business in Germany or as business asset for which a permanent representative is appointed in Germany, or who (ii) himself/herself or in case of a gratuitous transfer of REIT shares his/her legal predecessors held directly or indirectly at least 1% of the share capital of the Company at any time during the five years preceding the sale of such REIT-shares, the capital gains derived in Germany are fully subject to income tax plus 5.5% solidarity surcharge on the income tax liability and also trade tax if the shares are attributable to a German commercial permanent establishment. The partial income system (Teileinkünfteverfahren) whereby only 60% of income is subject to tax is not applicable to capital gains from REIT-shares. If the capital gains in the cases (i) and (ii) cited in the above paragraph are earned by a corporation foreign tax resident, these gains are also completely subject to corporate income tax and, if applicable, trade tax. Sales losses and other reductions in profits related to the REIT shares sold are tax deductible. However, if REIT shares are attributable to German business assets, they may only be balanced against increased business assets and business income resulting from the sale of REIT shares or participations in other REIT corporations, REIT associations or REIT assets or in all other cases with income resulting from the sale of REIT shares or in all other cases from the capital gains from REIT shares. 164

171 Regarding the above-mentioned scenario (i) in the event of a Domestic Paying Agent being involved, this agent is released from its obligation to retain withholding tax on capital gains if the shareholder declares on an official form vis-à-vis the Domestic Paying Agent, that the (REIT-) shares are held as German business assets. If withholding tax and solidarity surcharge are withheld, these do not have any settling effect on the (REIT-) shares or subscription rights held as business assets; instead they are credited against the individual income tax liability and the solidarity surcharge of the seller, or refunded to the extent of a potential overpayment. However, regarding the above-mentioned scenario (ii), most DTTS provide for an exemption from German taxation. According to the tax authorities, in case (ii) a Domestic Paying Agent has no obligation to retain withholding tax on capital gains Special regulations for companies in the financial and insurance sectors Insofar as the 95% economic exemption from corporate income tax and the partial income system for income tax (in each case including solidarity surcharge) as well as the trade tax if applicable in each respective case are to be applied at all (dividends from pre-taxed profit of the REIT corporation; see subsection REIT share held as private assets ), these exemptions do not apply insofar as credit institutions (Kreditinstitute) or financial services providers (Finanzdienstleistungsinstitute) hold REIT shares that are allocable to their trading book (Handelsbuch) according to Section 1(1a) of the KWG. The same applies to REIT-shares that are acquired by a financial enterprise (Finanzunternehmen) within the meaning of the KWG for purposes of realising short-term gains for their own account. The preceding sentence applies accordingly to credit institutions, financial services providers and financial companies residing in another Member State of the European Union or another contracting state to the EEA Agreement. The 95% economic exemption from the corporation income tax and if applicable trade tax also does not apply to dividends from REIT-shares which are attributable to the investments of life insurance and health insurance companies. The same applies to pension funds Inheritance and gift tax In principle, a transfer of REIT shares or subscription rights to another person by way of gift or due to death is subject to German gift or inheritance tax only if: (i) the testator, donator, heir, donee, or other acquirer at the time the transfer was effected had his place of residence or ordinary residence in Germany, or held the German citizenship and had not lived abroad for a continuous period of more than 5 years without having a domicile in Germany; or (ii) the REIT-shares or subscription rights belonged to the testator s or donator s business assets, for which a permanent establishment was maintained in Germany or a permanent representative was appointed, or (iii) at the time of death or transfer by way of gift, the testator, or donator alone, or jointly with other persons closely related to him, held a direct or indirect participation in the share capital of the in Germany based Company of at least 10%. The few inheritance tax double tax treaties currently in effect in Germany typically provide that German gift or inheritance tax is only payable under the circumstances specified under (i) and, with certain limitations, under the circumstances specified under (ii) above. Special regulations apply to certain German citizens living outside Germany and former German citizens. 165

172 19.7 Other taxes The purchase, sale or other disposition of (REIT-) shares or subscription rights is not subject to a German capital transfer tax, value added tax, stamp duty, or similar tax. However, under certain circumstances enterprises may opt for value added tax in cases that would otherwise be exempt from value added tax. Presently a wealth tax is not levied in Germany. Since the 2009 tax assessment period a shareholder subject to church tax who holds (REIT-) shares as private assets may upon application in writing vis-à-vis the Domestic Paying Agent arrange that the Domestic Paying Agent will withhold the amount of church tax applicable on the capital gains of the shareholder (Kirchensteuerabzug church tax deduction). Further details must be taken into consideration for the application. With the withholding of the church tax, the church tax on the capital gain will be deemed to be settled. The church tax paid in such withholding scenario cannot be deducted as a special expense (Sonderausgabe) in the course of the tax assessment. As a compensation, the Flat Tax will be reduced by % of the church tax due on the investment income. 166

173 20. FINANCIAL SECTION Non-binding convenience translation Interim financial statements (IFRS) reviewed in accordance with section 37w WpHG of HAMBORNER REIT AG as of June 30, F-2 Audited separate financial statements (IFRS) of HAMBORNER REIT AG as of December 31, F-13 Audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, F-52 Audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, F-90 Audited annual financial statements (HGB) of HAMBORNER REIT AG as of December 31, F-137 F-1

174 Interim financial statements (IFRS) reviewed in accordance with section 37w WpHG of HAMBORNER REIT AG as of June 30, 2010 F-2

175 Interim financial statements of HAMBORNER REIT AG as of 30 June 2010 Income Statement in TEUR Income from rents and leases... 11,840 11,076 6,025 5,630 Income from passed-on incidental costs to tenants... 1,347 1, Real estate operating expenses... -1,819-1, Property and building maintenance Net rental income... 10,916 10,276 5,608 5,313 Administrative expenses Personnel costs... -1,314-1, Amortisation of intangible assets, depreciation of tangible fixed assets and investment property... -3,607-3,195-1,836-1,633 Other operating income Other operating expenses ,377-4,567-2,749-2,025 Operating result... 5,539 5,709 2,859 3,288 Result from the sale of investment property Result from investments Earnings before interest and taxes (EBIT)... 5,603 5,973 2,859 3,288 Interest income Interest expenses... -2,853-2,669-1,443-1,397 Financial result... -2,776-2,315-1,414-1,260 Earnings before taxes (EBT)... 2,827 3,658 1,445 2,028 Taxes on income and profit... -2, Profit for the period ,316 1,433 1,908 Earnings per share (in EUR) F-3

176 Statement of income and expense recognised in equity Non-binding convenience translation in TEUR Profit for the period ,316 1,433 1,908 Adjustment of the revaluation reserve due to the sale of investments Unrealised profits/losses (-) from the revaluation of derivative financial instruments... -3,302-1,350-1,548 1,051 Release of deferred taxes on derivative financial instruments... -1, Income/Expense (-) recognised in equity... -4,542-1,479-1,548 1,051 Total comprehensive income for the period... -4,496 1, ,959 The expenses recorded directly in the equity relate to value changes from interest rate swaps, which are used for the management of risks from interest rate fluctuations. Corresponding market value changes are entered in the equity (revaluation reserve) without affecting the operating result, where adequate risk limitation efficiency is available and documented. In the half-year under review, the deferred taxes set-up for this in the past were released as a result of the use of the tax exemption and were also recorded in the revaluation reserve without affecting the profit. F-4

177 Assets in TEUR June 30, 2010 Dec 31, 2009 Non-current assets Intangible assets Tangible fixed assets Investment property , ,386 Financial assets Other assets Deferred tax assets , , ,116 Current assets Trade receivables and other assets... 1, Income tax receivables Bank deposits and cash balances... 6,940 37,942 8,059 38,473 Non-current assets held for sale... 1, ,594 38,473 Total assets , ,589 F-5

178 Equity and liabilities in TEUR June 30, 2010 Dec 31, 2009 Equity Subscribed capital... 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 Other retained earnings , ,575 Revaluation reserve ,136-6,594 Net retained profits Retained profit from previous years... 23,844 27,196 Profit for the period ,073 23,890 32, , ,297 Non-current liabilities and provisions Financial liabilities and derivative financial instruments , ,052 Deferred tax liabilities ,708 Trade accounts payable and other liabilities... 3,961 4,075 Provisions for pensions... 5,545 5,603 Other provisions , ,140 Current liabilities and provisions Financial liabilities and derivative financial instruments... 4,577 4,620 Income tax liabilities Trade accounts payable and other liabilities... 3,239 1,877 Other provisions... 1,328 2,253 9,168 9,152 Total equity, liabilities and provisions , ,589 F-6

179 Cash flow statement in TEUR Cash flow from operating activities Earnings before taxes (EBT)... 2,827 3,658 Depreciation, amortization and impairments/write-ups (-)... 3,607 3,195 Financial result... 2,776 2,302 Change in provisions ,066 Gain (-)/Loss (+) (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale Gain (-)/Loss (+) (offset) from the disposal of financial assets Other non-cash expenses (+) / income (-) Change in receivables and other assets Change in liabilities Dividends received Interest received Tax payments ,936-1,055-8,969 6,174 Cash flow from investment activities Investments in intangible assets, tangible fixed assets and investment properties ,128-29,883 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale Proceeds from disposals of financial assets ,056-28,938 Cash flow from financing activities Dividend payments... -8,425-7,970 Proceeds from borrowings... 22,640 18,400 Repayment of borrowings... -2,004-1,840 Interest outflows... -3,188-2,802 9,023 5,788 Changes in cash and cash equivalents ,002-16,976 Cash and cash equivalents as of 1 January... 37,942 54,012 Bank deposits and cash balances... 37,942 54,012 Cash and cash equivalents as of 30 June... 6,940 37,036 Bank deposits and cash balances... 6,940 37,036 F-7

180 Statement of changes in equity Non-binding convenience translation in TEUR Retained earnings Net retained profits Subscribed capital Other retained earnings Revaluation reserve Legal Carryforward Total reserve Surplus equity Balance as of 1 January ,770 2, ,575-4,737 17,824 17, ,050 Carry-forward to new account... 17,341-17,341 0 Distribution of profit for ,969-7,969 Income/Expenses directly recognized in equity... -1,479-1,479 Profit for the period ,316 3,316 Comprehensive income for the period ,479 3,316 1,837 Balance as of 30 June ,770 2, ,575-6,216 27,196 3, ,918 Income/Expenses directly recognized in equity Profit for the period ,757 1,757 Comprehensive income for the period ,757 1,379 Balance as of 31 Dec ,770 2, ,575-6,594 27,196 5, ,297 Carry-forward to new account... 5,073-5,073 0 Distribution of profit for ,425-8,425 Income/Expenses directly recognized in equity... -4,542-4,542 Profit for the period Comprehensive income for the period , ,496 Balance as of 30 June ,770 2, ,575-11,136 23, ,376 F-8

181 Information on HAMBORNER Notes to the interim financial statements Non-binding convenience translation HAMBORNER REIT AG is a stock exchange-listed corporation (Security Identification Number ) with its registered office in Duisburg, Germany. The present interim report of HAMBORNER REIT AG for the first half-year 2010 was published on 12 August The interim financial statements are prepared in euro (EUR), whereby all amounts unless otherwise stated are shown in thousands of euro (TEUR). Minor differences may arise with computations of totals and percentage figures due to rounding. Fundamental principles of reporting This interim report of HAMBORNER REIT AG as of 30 June 2010 is consistent with International Financial Reporting Standards (IFRS), as adopted by the European Union. It was prepared in compliance with the provisions of International Accounting Standard 34 on interim reporting in particular as well as the requirements of German Accounting Standard No. 16 of the Accounting Standards Committee of Germany (DRSC, Deutsches Rechnungslegungs Standards Committee e.v.) on interim reporting and takes into account the requirements of Arts. 37w and 37x of the German Securities Trading Act (WpHG). It contains a reduced scope of report compared with the separate financial statements. The interim financial statements as of 30 June 2010 are based on the same recognition and measurement methods and accounting principles as the separate financial statements as of 31 December The income statement had already been adjusted in the separate financial statements for the financial year 2009 for better presentation on the basis of the presentation recommendations customary for real estate companies of the European Public Real Estate Association (EPRA). Therefore, in the present interim report, the figures of the corresponding period were adjusted to the current itemisation method. The fair values of our properties determined by an expert as of 31 December 2009 were subjected to a critical review by us as of 30 June The value-influencing factors forming the basis of the valuation on the last balance sheet date have not significantly changed overall according to the outcome of this review in the 1st half-year The maintenance of the values determined as of 31 December 2009 therefore appears justified to us from today s perspective. The Managing Board is confident that the interim report contains all significant information required to fully explain the changes in the results of operations, financial position and net assets of HAMBORNER REIT AG since the last balance sheet date. The present half-yearly financial report has been subjected to a review. Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Dusseldorf was commissioned with this, commensurate with the resolution of the general shareholders meeting on 10 June Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft has issued an appropriate review report on the result of the review, which is published with this report. Significant transactions with closely associated companies and persons Transactions subject to a reporting requirement have not occurred in the first half-year Explanatory notes for the income statement 1 January 30 June 2010 Net rental income amounted to 10,916 TEUR and therefore increased by 640 TEUR compared to the comparative value of the previous period. This corresponds to a percentage increase of 6.2%. Administrative expenses amounted to 428 TEUR. The item increased slightly by 15 TEUR compared to the comparative figure for the previous year. F-9

182 Personnel costs decreased by a total of 55 TEUR in the 1st half-year 2010 and amount to 1,314 TEUR (1st half-year 2009: 1,369 TEUR). Property additions increased the amortisations of intangible assets, depreciation of tangible fixed assets and investment properties to 3,607 TEUR (1st half-year 2009: 3,195 TEUR). The other operating income amounted to 307 TEUR after 796 TEUR as of 30 June The difference resulted mainly from the discontinuation of proceeds from investment sales, which affected the result in the corresponding period last year positively. The operating result amounted to 5,539 TEUR and decreased by 170 TEUR. We achieved a result of 64 TEUR (1st half-year 2009: 250 TEUR) in the 1st half-year 2010 from the sale of properties. Whereas only undeveloped plots of land were sold in the reporting period, a developed plot of land used for agricultural purposes was sold in the corresponding period of the previous year. Income from investments no longer accrues since we divested existing investments due to the fulfilment of the REIT requirements. The financial result amounted to -2,776 TEUR and was thus below the financial result of the 1st half-year 2009 by -461 TEUR. The decrease resulted mainly from the increased interest expenses as a result of the higher borrowed funds due to business expansion. The earnings before taxes of the 1st half-year 2010 amounted to 2,827 TEUR and was thus below the comparative value of the previous year by 830 TEUR. After deduction of the taxes on income and profit of -2,781 TEUR (1st half-year 2009: -342 TEUR), the profit for the period amounted to 46 TEUR after 3,316 TEUR in the corresponding period of the previous year. The income tax burden of the 1st half-year 2010 resulted quite predominantly from the final levying of taxes after admission of the Company to its REIT status. Explanatory notes to the balance sheet as of 30 June 2010 Significant changes in the balance sheet items as of 30 June 2010 compared with the balance sheet on the reporting date of the previous financial year (31 December 2009) are explained below. The change to the item Investment properties amounting to EUR 27.2 million resulted as the balance from additions of EUR 32.4 million, the reclassification to the item Non-current assets held for sale amounting to EUR 1.5 million as well as disposals and depreciation in the reporting period amounting to EUR 3.6 million. The privilege of tax exemption for HAMBORNER REIT AG is associated with attainment of REIT status. As a result, the existing deferred taxes were offset against the tax burden from the final levying of taxes or released against the revaluation reserve without affecting the operating result. In the area of current assets, the trade receivables and other assets increased by 586 TEUR and amounted to 1,073 TEUR. The change resulted mainly from the accrual of payments made in advance for ground rents and interest on loans, as well as insurance premiums. Bank deposits and cash balances as of 30 June 2010 decreased by EUR 31 million and amount to EUR 6.9 million, essentially due to the outflow of equity used for property investments, the outflow of liquidity for exit tax and the disbursement of the dividend for the financial year The Non-current assets held for sale shown on 30 June 2010 related to the fair value of developed and undeveloped plots of land intended for sale. By notarial deed dated 18 May 2010, the commercial and residential building in Hamm from this item was sold. The achieved sale price F-10

183 amounts to EUR 1 million. The property transferred into the ownership of the buyer on 1 July An amount of 539 TEUR still remains in this item after disposal, which relates to undeveloped plots of land up for sale with agricultural and silvicultural use. The revaluation reserve changed by -4,542 TEUR compared with 31 December 2009, mainly as a result of the revaluation of interest rate derivatives, and amounts to -11,136 TEUR. A dividend of 8,425 TEUR was distributed from the retained profit from the previous year by resolution of the general shareholders meeting of 10 June The net retained profits to the extent of 23,890 TEUR arise, taking into account a surplus for the period for the 1st half-year 2010 amounting to 46 TEUR. Non-current and current financial liabilities and derivative financial instruments rose by EUR 23.9 million. The increase resulted from the disbursement of long-term property financing amounting to EUR 22.6 million for the current property additions and from the revaluation of interest rate derivatives as of 30 June 2010 at EUR 3.3 million. On the other hand, redemption payments amounting to EUR 2.0 million were made in the half-year under review. Non-current and current trade accounts payable and other liabilities rose by 1,248 TEUR to 7,200 TEUR. The increase resulted from land transfer tax liabilities for land purchases not yet executed, from property levies for the 1st half-year 2010 payable at mid-year and from purchase price retentions in connection with property acquisitions. The payment of tax liabilities of previous assessment periods resulted in a decrease in the liabilities from taxes on income by 378 TEUR to 24 TEUR as of 30 June The decrease in the non-current and current other provisions was based essentially on the change in provisions for bonus payments, for legal and consultancy costs, Supervisory Board remuneration and auditors fees, as well as for outstanding invoices. Explanatory notes to the cash flow statement The development of cash flows is shown in the cash flow statement, separated according to cash inflows and cash outflows from the operating activities, the investment activities and the financing activities. The cash flow from the operating activities showed a negative amount mainly due to the payments for the exit tax in the 1st half-year In the calculation of the cash flow from the investment activities, the additions in the tangible fixed assets were reduced by the investments not yet impacting on cash flow, which essentially result from payments not yet due for land transfer tax and from purchase price retentions. The cash flow from the financing activities amounting to EUR 9.0 million essentially resulted from the borrowing for the properties purchased in the 1st half-year 2010, taking into account interest payments and scheduled redemption payments. In addition, approximately EUR 8.4 million were distributed to the shareholders of the Company in the reporting period. F-11

184 Review Report To the HAMBORNER REIT AG, Duisburg We have reviewed the interim financial statements comprising the income statement and the statement of income and expense recognised in equity, the balance sheet, the cash flow statement, the statement of changes in equity and selected explanatory notes together with the interim management report of the HAMBORNER REIT AG, Duisburg, for the period from January 1 to June 30, 2010, that are part of the semi annual financial report pursuant to Article 37w paragraph 2 WpHG (Wertpapierhandelsgesetz: German Securities Trading Act). The preparation of the interim financial statements in accordance with those International Financial Reporting Standards (IFRS) applicable to interim financial reporting as adopted by the European Union (EU), and of the interim management report in accordance with the requirements of the WpHG applicable to interim management reports, is the responsibility of the Company s management. Our responsibility is to issue a report on the interim financial statements and on the interim management report based on our review. We conducted our review of the interim financial statements and of the interim management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the review such that we can preclude through critical evaluation, with a certain level of assurance, that the interim financial statements have not been prepared, in material respects, in accordance with those IFRS applicable to interim financial reporting as adopted by the EU, and that the interim management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditor s report. Based on our review no matters have come to our attention that cause us to presume that the interim financial statements have not been prepared, in material respects, in accordance with those IFRS applicable to interim financial reporting as adopted by the EU, or that the interim management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim management reports. Dusseldorf, August 12, 2010 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Harnacke) Wirtschaftsprüfer (German Public Auditor) (Lüdke) Wirtschaftsprüfer (German Public Auditor) F-12

185 Audited separate financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2009 F-13

186 Income statement for the period from 1 January to 31 December 2009 Non-binding convenience translation in TEUR Notes Income from rents and leases... 22,451 19,725 Income from passed-on incidental costs to tenants... 2,419 1,873 Real estate operating expenses... -3,666-3,026 Property and building maintenance... -1,264-1,109 Net rental income... (1) 19,940 17,463 Administrative expenses... (2) ,042 Personnel costs... (3) -2,740-2,973 Amortisation of intangible assets, depreciation of tangible fixed assets and investment property... (4) -7,268-10,257 Other operating income... (5) 2,128 12,475 Other operating expenses... (6) ,587-9,503-3,384 Operating result... 10,437 14,079 Result from the sale of investment property... (7) 434 6,689 Result from investments... (8) Earnings before interest and taxes (EBIT)... 10,884 21,411 Interest income ,717 Interest expenses... -5,508-4,644 Financial result... (9) -5,019-2,927 Earnings before taxes (EBT)... 5,865 18,484 Taxes on income and profit... (10) ,517 Result from continuing operations... 5,073 16,967 Result from discontinued operations... (11) Profit for the financial year... 5,073 17,341 Retained profits from previous year... 35,165 53,922 Dividends... -7,970-7,970 Transfer to retained earnings ,128 Net retained profits... 32,268 35,165 Earnings per share (in EUR)... (12) thereof from continuing operations thereof from discontinued operations F-14

187 in TEUR Statement of income and expense recognised in equity Non-binding convenience translation Notes Jan 1. to Dec 31, 2009 Jan 1. to Dec 31, 2008 Profit for the financial year... 5,073 17,341 Market price adjustment of securities from securities fund Fair value adjustments of investments Adjustment of the revaluation reserve due to the sale of investments... (5) Unrealised profits/losses (-) from the revaluation of derivative financial instruments... (20) -1,728-4,739 Income/expense (-) recognised in equity... -1,857-4,827 Total comprehensive income... 3,216 12,514 F-15

188 Assets in TEUR Notes Dec 31, 2009 Dec 31, 2008 Non-current assets Intangible assets... (13) 6 12 Tangible fixed assets... (13) Investment property... (14) 257, ,342 Financial assets... (15) Other assets... (16) Deferred tax assets... (16) 2,170 1, , ,848 Current assets Trade receivables and other assets... (16) Income tax receivables... (16) Bank deposits and cash balances... (17) 37,942 54,012 38,473 55,368 Non-current assets held for sale... (18) ,473 55,498 Total assets , ,346 F-16

189 Equity and liabilities in TEUR Notes Dec 31, 2009 Dec 31, 2008 Equity (19) Subscribed capital... 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 Other retained earnings , ,575 Revaluation reserve... -6,594-4, , ,115 Net retained profits... 32,269 35, , ,050 Non-current liabilities and provisions Financial liabilities and derivative financial instruments... (20) 109,052 87,350 Deferred tax liabilities... (21) 14,708 15,188 Trade accounts payable and other liabilities... (23) 4,075 3,784 Provisions for pensions... (24) 5,603 5,780 Other provisions... (25) , ,780 Current liabilities and provisions Financial liabilities... (20) 4,620 3,754 Income tax liabilities... (22) Trade accounts payable and other liabilities... (23) 1,877 1,823 Other provisions... (25) 2,253 2,279 9,152 8,516 Total equity liabilities and provisions , ,346 F-17

190 in TEUR Cash flow statement Notes Jan 1 to Dec 31, 2009 Jan 1 to Dec 31, 2008 Cash flow from operating activities... (28) Earnings before taxes (EBT)... 5,865 18,919 Depreciation, Amortization and Impairments/write-ups (-)... 6,002 9,312 Financing costs... 5,006 2,081 Change in provisions Gain/Loss (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale ,741 Gain/Loss (offset) from the disposal of financial assets ,477 Other non-cash expenses (+) / income (-) ,711 Change in receivables and other assets Change in liabilities... -1,040-1,426 Dividends received Interest received ,720 Tax payments ,477 14,129 10,283 Cash flow from investment activities... (29) Investments in intangible assets, tangible fixed assets and investment properties ,349-36,309 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale ,417 Investments in financial assets Proceeds from disposals of financial assets ,601 Net cash outflow of funds due to the disposition of the special share fund Südinvest ,686 41,696 Cash flow from financing activities... (30) Dividend payments... -7,970-7,970 Proceeds from borrowings... 23,800 37,713 Repayment of borrowings... -3,257-37,027 Interest outflows... -5,086-3,714 7,487-10,998 Change in cash and cash equivalents ,070 40,981 Cash and cash equivalents as of January ,012 13,031 Bank deposits and cash balances... 54,012 13,031 Cash and cash equivalents as of December ,942 54,012 Bank deposits and cash balances... 37,942 54,012 F-18

191 Statement of changes in equity Non-binding convenience translation in TEUR Retained earnings Net retained Profits Subscribed capital Legal reserve Other retained earnings Revaluation reserve Carryforward Surplus Appropriation of profits Total equity Balance as of 1 January ,770 2,277 76, ,554 52, ,506 Carry-forward to new account... 52,226-52,226 0 Distribution of profit for , ,970 Transfer to retained earnings... 28,128-28,128 0 Income/Expenses directly recognised in equity... -4,827-4,827 Profit for the financial year Jan 1 Dec 31, ,341 17,341 Comprehensive income Jan 1 Dec 31, ,827 17, ,514 Balance as of 31 December ,770 2, ,575-4,737 17,824 17, ,050 Carry-forward to new account... 17,341-17,341 0 Distribution of profit for ,969-7,969 Income/Expenses directly recognised in equity... -1,857-1,857 Profit for the financial year Jan 1 Dec 31, ,073 5,073 Comprehensive income Jan 1 Dec 31, ,857 5,073 3,216 Balance as of 31 December ,770 2, ,575-6,594 27,196 5, ,297 F-19

192 Fixed asset movement schedule Non-binding convenience translation in TEUR Acquisition and construction costs Balance as of Jan 1, 2009 Additions Disposals Balance as of Dec 31, 2009 Intangible assets Tangible fixed assets Investment property ,883 40,558 1, ,647 Financial assets... Other loans Overall ,831 40,586 1, ,584 F-20

193 Balance as of Jan 1, 2009 Measurement adjustments Additions (depreciation for the financial year) Write-ups Disposals Balance as of Dec 31, 2009 Residual book values Balance as of Dec 31, 2008 Balance as of Dec 31, ,541 7,228 1,266 1,242 54, , , ,263 7,268 1,266 1,262 55, , ,581 F-21

194 Notes to the financial statements Principles for the preparation of the financial statements General principles Non-binding convenience translation In implementation of the resolutions of the general shareholders meeting dated 8 June 2009, HAMBORNER AG was converted into a REIT company effective 1 January 2010 by registration in the commercial register on 18 February 2010 and now operates under the name HAMBORNER REIT AG. The Company had already been registered as a Pre-REIT with the German Federal Central Tax Office since 29 June 2009, but in this regard was not yet deemed to be a REIT company within the meaning of Art. 1 of the German REIT Act. HAMBORNER REIT AG acquires ownership or easement rights for German and foreign immovable property within the meaning of Art. 3 of the German REIT Act for use, management or realisation, with the exception of existing German residential properties. Investments in partnerships and public limited companies within the meaning of Art. 3 of the German REIT Act may also be acquired, held, managed and realised. The registered office of the Company is in Duisburg (Germany). It is entered in the Commercial Register at Duisburg County Court (Amtsgericht) under HRB 4. The obligation for the preparation of consolidated financial statements stopped with the result of the merger of the subsidiary Hambornberg Immobilien- und Verwaltungs GmbH with the parent Company effective 1 October However, as a stock exchange-listed corporation, HAMBORNER REIT AG voluntarily prepares and publishes separate financial statements according to the requirements of IFRS in accordance with Art. 325 Para. 2a of the German Commercial Code [HGB]. The management report in accordance with Art. 289 HGB is disclosed with the separate IFRS financial statements. The separate financial statements as of 31 December 2009 were prepared in accordance with International Financial Reporting Standards (IFRS) applicable on the balance sheet date, as they are to be applied in the European Union, and with the provisions under commercial law to be observed in addition in accordance with Art. 325 Para. 2a HGB. IFRS comprises the IFRSs issued by the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), the interpretations of the International Financial Reporting Committee (IFRIC) as well as those of the Standing Interpretations Committee (SIC). All standards and interpretations issued by the International Accounting Standards Board (IASB) and applicable at the time of preparation of the financial statements are applied, provided that they have been adopted by the EU (endorsement). The separate financial statements of the Company comply with IFRS in this respect. The financial statements were prepared in Euro (EUR). All amounts are shown in thousands of Euro (TEUR) unless otherwise stated. Minor differences may arise with computations of totals and percentage figures due to rounding. The Managing Board prepared the financial statements at 31 December 2009 and the management report for the year 2009 on 19 February 2010 and released them for submission to the Supervisory Board. The present separate financial statements as of 31 December 2009 are based essentially on the same recognition and measurement methods and accounting rules as the consolidated financial statements in the previous year. For the purposes of the first-time preparation of the separate IFRS financial statements, the previous balance sheet preparation for the IFRS consolidated financial statements was continued and the amounts indicated as comparable figures of the previous year. The balance sheet as of 31 December 2009 is classified by maturities in accordance with IAS 1 (51). In order to improve the clarity of the presentation, various items of the balance sheet and income statement have been summarised and explained in the notes to the financial statements. The income statement was F-22

195 adjusted for better presentation of the earnings situation on the basis of the presentation recommendations customary for real estate companies of the European Public Real Estate Association (EPRA). Additional items were included in the income statement or a reclassification between individual items were made for the improvement of the presentation. The expenses and income from the sale of properties are no longer presented under the other operating income in the income statement, but are presented separately. This resulted in the following adjustments of the comparable figures for the previous year: Adjustments for the previous year TEUR Other operating income... -6,737 Other operating expenses Result from the sale of properties... 6,689 Administrative expenses that were included in the other operating expenses in previous years are shown separately. The following adjustments of the comparable figures of the previous year were made: Adjustments for the previous year TEUR Other operating expenses... 1,042 Administrative expenses... -1,042 A further adjustment relates to the income from rent guarantees, which were entered under other operating income in previous years. The following adjustments of the comparable figures for the previous year were made: Adjustments for the previous year TEUR Income from rents and leases Other operating income The separate financial statements according to the provisions of IFRS in accordance with Art. 325 Para. 2a HGB are also filed with the operator of the electronic German Federal Gazette, as are the annual financial statements under commercial law. The IFRS financial statements are then published there. The financial statements are available for download on the internet site In addition, they may be requested from HAMBORNER REIT AG, Goethestraße 45, Duisburg. The Company is included in the consolidated financial statements of HSH Nordbank AG and HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest and HSH Real Estate AG, Hamburg for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG and HSH Real Estate AG are published in the electronic German Federal Gazette. Revised or new IFRSs and disclosure, approach or valuation changes arising therefrom Compared with the consolidated financial statements as of 31 December 2008, the standards and interpretations specified below have changed or were applied for the first time due to their subsequent assumption into EU legislation or expected adoption of the regulation: Amendment of IAS 1: Presentation of financial statements Amendment of IAS 23: Borrowing costs Amendments to IAS 32: Financial instruments: presentation and IAS 1: Presentation of financial statements Amendments to IAS 39: Financial instruments: recognition and measurement and IFRIC 9: Reassessment of embedded derivatives F-23

196 * already adopted into EU law Non-binding convenience translation Collective standard to amend various International Financial Reporting Standards ( ) Amendments to IFRS 1: First-time adoption of the International Financial Reporting Standards and IAS 27: Consolidated and separate individual financial statements in accordance with IFRS Amendments to IFRS 2: Share-based payment Amendments to IFRS 7: Financial instruments: disclosures IFRS 8: Operating segments IFRIC 13: Customer loyalty programmes The separate financial statements include a statement of income and expense recognized in equity in addition to the income statement, commensurate with the requirements of the revised IAS 1, Presentation of financial statements. Both the year-end result and the profit-neutral statement of changes in the equity are shown in this statement for all the earnings and expenses entered in the financial year. In the annual improvements project, small, non-urgent but necessary amendments are consolidated in a collective standard for amendments to various IFRSs. A significant part relates to changes in the presentation, recording and valuation of financial statement items. A smaller part merely represents editorial changes, which have hardly any consequences for the balance sheet preparation. The segment reporting in accordance with IFRS 8 is based on the approach of the management and thus follows the management and reporting of the existing segments used in the Company. As HAMBORNER only operates in one business sector and in just one geographical segment, no segment reporting was prepared, as in previous years. All the other standards to be applied compulsorily as from 1 January 2009 have no significant repercussions for the separate financial statements of HAMBORNER. The following revised or reissued standards and interpretations already adopted by the IASB were not yet effective in the financial year 2009: Amendments to IFRS 1: (restructured version): First-time adoption of the International Reporting Standards * Amendments to IFRS 2: Share-based payment Amendments to IFRS 3: Business combinations * IFRS 9: Financial instruments Amendments to IAS 24: Related party disclosures Amendments to IAS 27: Consolidated and separate individual financial statements in accordance with IFRS * Amendments to IAS 32: Financial instruments: presentations Amendments to IAS 39: Financial instruments: recognition and measurement * Collective standard to amend various Inter- national Financial Reporting Standards ( ) F-24

197 IFRIC 12: Service concession arrangements * Amendments to IFRIC 14: IAS 19 the limitation of a performance-related asset, minimum funding requirements and their interaction IFRIC 15: Agreements for the construction of real estate * IFRIC 16: Hedges of a net investment in a foreign business operation * IFRIC 17: Distributions of non-cash assets to owners * IFRIC 18: Transfers of assets from customers * IFRIC 19: Extinguishing financial liabilities with equity instruments No use was made of the possibility of applying the standards and interpretations ahead of time, which had already been incorporated into EU legislation on the balance sheet date. HAMBORNER anticipates that no significant effects on the net worth, financial position and earnings will arise in the future from the application of the standards and interpretations issued on the balance sheet date. Recognition and measurement methods Intangible assets Intangible assets are measured at acquisition cost, reduced by scheduled linear depreciation. The depreciation correspond to the economic life, which amounts to three to eight years. Tangible fixed assets Tangible fixed assets are measured at acquisition or construction cost, reduced by scheduled linear depreciation. Results from the disposal of tangible fixed assets (sales revenue less book value and less cost to sell) are, in the case of the sale of investment property, presented in a separate line item in the income statement. We present proceeds from asset retirements under the other operating income (profits) or the other operating expenses (losses). Investment property Investment property are measured, by exercising the option in accordance with IAS 40 (30) in conjunction with (56), amortised acquisition or construction costs, taking into account linear depreciation. All undeveloped and developed properties as well as buildings and parts of buildings which are held for the attainment of future rental income, for the attainment of profits from appreciations in value and/or for an as yet undetermined use, are regarded as investment properties. They are not intended for administrative purposes or for short-term trade in the context of normal business activity. Scheduled depreciation is recorded on a linear basis over the economic life. The result from the sale of the properties held as financial investments is presented in the income statement in a separate item. For calculation of the fair value to be disclosed in the notes to the financial statements in accordance with IAS 40, we had our property portfolio valued by an independent expert at the end of 2009 in accordance with internationally recognised standards. Calculation of the property market values was carried out by means of the discounted cash flow (DCF) method. The cash flows to be expected in each case for the respective property were determined for a consideration period of eleven years 2010 to 2020 within the DCF process. The market value of properties results from the sum of the discounted cash flows of the overall planning period before tax plus the residual value also discounted on the valuation date. Risk-adjusted interest rates of 5.1 % to 8.35 % were applied for the discounting. Please refer to the section Performance of the portfolio in the management report for further information. * already adopted into EU law F-25

198 Impairment and write-ups of intangible assets, tangible fixed assets and investment property The recoverability of the amounts stated in the balance sheet is evaluated in sequence in the case of all intangible assets, tangible fixed assets and properties held as a financial investment. In addition, an evaluation of assigned values is carried out if events or changes to circumstances indicate that the book value shown in the balance sheet no longer appears recoverable. Where the recoverable amount of these assets significantly falls below the book value on the financial statement date, this is taken into account by means of an impairment charge. The net sales proceeds derived from an active market or if higher the present value of estimated future cash flows from use is taken for the measurement of the recoverable amount. In the case of investment properties, the market value determined by an expert constitutes the yardstick for the value in use. If the reasons for an impairment recorded in previous years no longer exist, writeups are applied up to the book values. Impairment charges are presented under the item Amortisation of intangible assets, tangible fixed assets and investment property. Write-ups are presented in other operating income. The annual profit of the financial year was reduced by impairment charge of 714 TEUR to adjust the reported residual book values to the fair values applicable as of Dec 31, On the other hand, a reversal of impairment adjustment for 1,266 TEUR was made for properties subjected to an impairment in previous years. Financial assets Financial assets are measured at the fair value in their initial measurement, in conformity with IAS 39, which takes into account the transaction costs on acquisition. The subsequent measurement depends on the category to which a financial asset is allocated. Loans and receivables are measured at amortised acquisition cost. Where necessary, identifiable individual risks are appropriately taken into account by means of value adjustments. Financial assets held until final maturity are measured at amortised acquisition cost or at the lower market value. The other loans included therein have a fixed term and are therefore measured applying the effective interest method. Derivative financial instruments HAMBORNER is using derivative financial instruments in the form of interest rate swaps for the management of risks from interest rate fluctuations. Derivative financial instruments are recognized on the balance sheet on the trading day. The measurement of interest rate derivative transactions which do not satisfy the requirements of hedge accounting are recorded at market values. The profits and losses resulting from changes in market value are recognized in the income statement within the financial result. In the case of cash flow hedges that are used for the hedging of risks that have an impact on the amounts or the timeframe of future cash flows, changes in market value are recorded in equity (revaluation reserve) without affecting the operating result and take into account deferred taxes, with presentation and documentation of adequate risk limitation efficiency. In the reporting year, changes in market value of -1,729 TEUR were entered directly in equity. The efficiency of cash flow hedges was determined in accordance with the dollar-offset method. As a result, the determination resulted in it being possible to take into account the changes to the values in equity. Positive market values of derivative financial instruments are shown under other assets, negative market values under financial liabilities. F-26

199 The market values notified by the banks are calculated by discounting the expected future cash flows over the residual term of the contracts on the basis of current market interest rates or yield curves. The valuation of derivatives is carried out as per stage 2. That means that factors flow into the underlying valuation models which are directly (i.e. as prices) or indirectly (i.e. in derivation from prices) monitored on active markets. Non-current assets held for sale We have divested existing investments due to the implementation of the strategic reorientation of the Company. The book value of the investment in Montan GmbH, Assekuranz-Makler, Dusseldorf, was shown under this heading as of December 31, The investment was sold on January 29, Provisions Provisions are classified as long-term and short-term, due to the maturity breakdown required by IFRS standards. Provisions for pensions Pension provisions are calculated in accordance with the projected unit credit method, taking into account future remuneration and pension adjustments. The corridor approach permitted in accordance with IAS 19 is used for actuarial profits and losses. According to this, actuarial profits and losses if they exceed 10% of the extent of the pension obligation are allocated over the average remaining service period of the future claimants. The service costs and the actuarial profits/losses to be recorded for the current year are shown within the personnel costs, whereas the interest costs included in the pension costs is shown within interest charges. The pension obligations are determined taking into account the biometric calculation bases in accordance with Prof. Dr. Klaus Heubeck s 2005 G actuarial tables. The following parameters form the basis of the calculations: Parameter p. a. in % Actuarial interest rate Remuneration trend Pension trend Average fluctuation costs. Expenses for defined contribution plans are recognized as expenses and shown in personnel Other provisions The short-term provisions have been recorded to the extent of the estimated utilisation (best estimate) without discounting and take into account all obligations identifiable on the balance sheet date which are based on business transactions or past events and the extent and/or maturity of which is uncertain. Only third-party obligations are taken into account for which an outflow of assets is probable. Provisions for liabilities that do not result in an outflow of assets in the subsequent year are recorded to the extent of the present value of the anticipated outflow of assets. Liabilities Liabilities are assessed at their fair value in the initial valuation. The subsequent assessment is recorded at amortised acquisition cost. The book values of liabilities which are recorded in the balance sheet at amortised acquisition cost constitute an appropriate approximate value for the fair value. F-27

200 Liabilities are classified as long-term if the contract provides for redemption after twelve months. Deferred taxes Tax deferrals are recorded in the IFRS balance sheet on temporary differences between the assigned values of the assets and liabilities in the tax balance sheet and their book values (liability method) and shown as deferred tax assets or liabilities. When determining the deferred taxes, the tax rates and tax regulations applicable to HAMBORNER on the financial statement reporting date are taken as a basis. The consequences of the REIT conversion are reflected in the balance sheet in the financial year 2010 on the date of the change of status with the registration as a REIT AG. Accordingly, for determination of the tax charges anticipated in the future, tax rates are enlisted that would be expected in the event of discontinuation of the temporary deviations and entry of the actual amount payable according to the tax status on the financial statement reporting date. Deferred taxes are recorded in the income statement as tax income or expense, unless they relate to items directly recorded in equity, which do not affect the operating result. In this case, the deferred taxes are also recorded in equity without affecting the operating result. Deferred tax assets are recognised to the extent that it would be probable, according to the tax status on the financial statement reporting date, that a taxable income will become available for which the deductible temporary difference can be used. Expenses and revenue recognition The recording of revenue and other operating income essentially reflects when the services are rendered or, in the case of sale transactions, when all the relevant rewards and risks in connection with ownership were transferred to the buyer. Operating expenses are recorded when services are received as an expense on the date incurred. Explanatory notes on the income statement (1) Net rental income The income from rents and leases of the properties shown in the balance sheet in accordance with IAS 40 amounts to 22,451 TEUR in the reporting year. An increase of 2,726 TEUR resulted overall year-over-year, which arises as the difference from the property acquisitions of the current year and of the previous year (3,178 TEUR), from rent losses as a result of property sales ( 485 TEUR), from other rent decreases ( 372 TEUR) and from increased income from rent guarantees (405 TEUR). F-28

201 Passed-on incidental costs to tenants mainly entail heating costs, property levies and other incidental rental costs which are apportionable in accordance with the arrangements under leasing contract laws. The corresponding income increased by 546 TEUR in the reporting year. The increase in the income from passed-on costs amounting to 564 TEUR arises as a balance from the change in the property portfolio, whereas the income from the passing on of incidental costs decreased by 18 TEUR overall in the case of the other properties remaining in the portfolio. in TEUR Income from rents and leases Retail trade spaces... 14,205 13,233 Office spaces and medical practices... 6,176 4,636 Manufacturing and other industrial areas Residentials Garages/car parking spaces Other lettings and leasings (agricultural leasings, licensing agreements etc.) Income from rent guarantees Subtotal... 22,451 19,725 Income from passed-on incidental costs to tenants... 2,419 1,873 Total... 24,870 21,598 Real estate operating expenses... -3,666-3,026 Property and building maintenance... -1,264-1,109 Net rental income... 19,940 17,463 We presented an outline of the ten largest tenants in the management report on page million of the revenue from rents and leases are apportionable to the Kaufland-group. The real estate operating expenses entail inter alia the expenses for energy, property levies, insurance premiums, ground rents and land taxes and may mainly be passed on to the tenants within the framework of arrangements under leasing contract laws. They increased by 640 TEUR as a result of the growth in the property portfolio and amount to 3,666 TEUR. The expenses for property and building maintenance amount to 1,264 TEUR after 1,109 TEUR in the previous year. in TEUR Real estate operating expenses Energy, water and the like... 1,451 1,235 Property levies Land taxes Ground rents Insurance premiums Rents and leases for third-party land Other Subtotal... 3,666 3,026 Property and building maintenance... 1,264 1,109 Total... 4,930 4,135 (2) Administrative expenses The item includes the Articles of Association-attributable costs for the general shareholders meeting, Supervisory Board and statutory auditor as well as relevant costs of administration. It decreased year-over-year by a total of 291 TEUR and amounts to 751 TEUR. The reduction arises mainly due to a decrease in the Supervisory Board remuneration, which depends to a substantial amount on the company s earnings, and to the costs of the general shareholders meeting. F-29

202 The following fees for the appointed statutory auditor were recorded as expenses in the financial year: in TEUR Audit of financial statements Other confirmation services Tax consultancy services Other services Total (3) Personnel costs/employees Personnel costs decreased by 233 TEUR compared with the previous year. Whereas wages and salaries decreased by 293 TEUR, social security contributions and expenses for the pension scheme increased by 60 TEUR. The main reason for the decrease in salary expenses is a lump-sum settlement to a retired member of the Managing Board included in the previous year. in TEUR Wages and salaries... 2,306 2,599 Social security and other pension costs Expenses for pension scheme/pension costs Total... 2,740 2,973 (4) Amortisation of intangible assets, depreciation of tangible fixed assets and investment property Amortisation and depreciation in 2009 was below the value for the previous year by 2,989 TEUR and amounted to 7,268 TEUR. Of this amount, 7,228 TEUR is apportionable to investment property. This includes impairment charges amounting to 714 TEUR due to the adjustment of the residual book values shown as of Dec 31, 2009 to the applicable fair values. (5) Other operating income in TEUR Income from the disposal of investments ,223 Reversal of impairment charges... 1, Write-ups of discounted housing loans Remaining other operating income Receipt of indemnifications and reimbursements Release of provisions Charges passed on to tenants and leaseholders Pension liability insurance Other Subtotal Total... 2,128 12,475 The income from the disposal of investments in the reporting year consists of an earnout amounting to 548 TEUR for the sale completed in 2008 of our shares in Wohnbau Dinslaken GmbH as well as from the sale of shares in Montan GmbH amounting to 129 TEUR. The difference between book value and fair value was already recorded in the revaluation reserve in the previous year. The reversal of impairment charges arises from the adjustment of properties subjected to a non-scheduled depreciation in previous years to the fair values determined by an expert as of Dec 31, (6) Other operating expenses The other operating expenses amount to 872 TEUR and are 715 TEUR below the value for the previous year. This decrease results mainly from a reduction in the legal and consultancy costs affected by special transactions in the previous year to the extent of 594 TEUR as well as from the lower allocation to the mining damage provision by 174 TEUR year-over-year. F-30

203 (7) Result from the sale of properties The result from the sale of properties amounts to 434 TEUR in the reporting year after 6,689 TEUR in the previous year. Whereas it was possible to sell two portfolio properties and one residential portfolio consisting of a total of seven properties in the previous year, sales in the year 2009 are limited to just one stock property and to smaller disposals from our undeveloped land ownership and existing holding. (8) Results from investments This item includes income from the investment in Montan GmbH Assekuranz-Makler for the financial year 2007/2008. The decrease year-over-year results from the discontinuation of the dividend of Wohnbau Dinslaken GmbH after sale of the investment. (9) Financial result After the sale of the special securities fund Südinvest 107 at the start of 2008 the financial result only includes interest income and expenses. The interest income mainly consists of interest on overnight money or fixed-term deposits for investments with various banks. The large decrease in the general interest rate level, as well as the decrease in our liquidity after the outflow of the equity used for the property investments and the disbursement of the dividend for the year 2008, resulted in a decrease in this income relative to the result from continuing activities by 1,228 TEUR. Interest expenses increased by a total of 864 TEUR in the 2009 financial year as a result of the interest payments recognised as an expense in full in the reporting year for the property loans raised in the previous year and the pro rata interest expense for the loans added in the reporting year. The interest expenses included cash flows from interest rate hedging transactions with a net effect of 2,499 TEUR. The payments made by us on the basis of firmly-agreed interest rates with quarterly or half-yearly settlement amount to 3,924 TEUR in the reporting year (previous year: 3,204 TEUR). The increase is attributable to the fact that the interest rate hedging transactions entered into in the previous year were utilised for a full year in the 2009 financial year for the first time and the interest rate hedges entered into in 2009 were taken into account on a pro rata basis. In return, we received variable interest in accordance with the agreements on the basis of the 3- or 6-month EURIBOR amounting to 1,425 TEUR (previous year: 3,165 TEUR). Here, the decrease is mainly due to the general decline in the short-term interest rates. For further details and information on the interest rate hedging transactions we refer to the section Financial liabilities and derivative financial instruments. in TEUR Total 2009 Discontinued operations 2009 Continuing operations 2009 Total 2008 Discontinued operations 2008 Continuing operations 2008 Income from securities including capital gains Capital losses and amortization on financial investments Interest income , ,717 Interest expenses... -5, ,508-4, ,644 Financial result... -5, ,019-2, ,927 (10) Taxes on income and profit in TEUR Current income tax charge... 1,204 5,998 Deferred taxes ,475 Foreign withholding tax Total ,517 F-31

204 a) Income tax charge The current income tax charge includes the corporation tax and business tax of the Company for the financial year. The special transactions taken into account in the previous year have not recurred in the reporting year. This resulted in a decrease in the income tax burden by 725 TEUR to 792 TEUR. The tax rates and tax regulations applicable on the balance sheet date are used for determining of the deferred taxes. The corporate tax rate to be applied to the result before taxes on income amounts to 15.8% in the reporting year (previous year: 15.8%). The expected tax charge by applying the Company s corporate tax rate can be recorded to the actual tax expenses as follows: in TEUR Result of the business activity from activities to be continued... 5,866 18,484 Tax rate in % Anticipated tax charge ,925 +/- Tax effects from previous years Effect from tax-free income ,586 + Effect from non-deductible expenses /- Effect from the income portions subject to trade tax (currently and deferred) /- Other effects Taxes on income and profit ,517 Rate of taxation in % b) Deferred taxes The (credited) deferred taxes charged to equity relate to the market valuation of the derivative financial instruments. The development of the deferred tax assets and deferred tax liabilities is represented as follows in the reporting year: Deferred tax assets TEUR Derivative financial instruments Other provisions Other Write-down to the going concern value of investment properties Balance as of 1 January ,914 Reduction/increase in the profit for the financial year Reclassification into equity Balance as of 31 December , ,170 Total Deferred tax liabilities TEUR Accelerated tax write-downs Pension provisions Other Total Balance as of 1 January , ,188 Reduction/increase in the profit for the financial year Balance as of 31 December , ,708 F-32

205 (11) Result from discontinued operations No result from discontinued operations is shown for the reporting year. The figures for the previous year relate to the income and expenses from our special securities fund Südinvest 107 up to its termination and break down as follows: in TEUR Other operating expenses Realised exchange gains Interest income Earnings before taxes Taxes on income Result after tax (12) Earnings per share A profit of 5,073 TEUR was achieved in the reporting year, which was lower by 12,268 TEUR compared with the previous year, primarily due to the discontinuation of the extraordinary income realised in the previous year through divestment and due to a decrease in property sales. Earnings per share are determined in compliance with IAS 33. According to this, the earnings per share are derived by the result for the period apportionable to the shares being divided by the weighted average number of shares. A dilution does not apply, e.g. through stock options or convertible bonds, as HAMBORNER has set up no such programmes. The diluted and undiluted earnings per share are therefore identical Number of shares in circulation... Thsd. units 22,770 22,770 Profit for the financial year... TEUR 5,073 17,341 Dividend per share... EUR Earnings per share as per IAS EUR thereof continuing operations... EUR thereof discontinued operations... EUR Explanatory notes to the balance sheet (13) Intangible assets and tangible fixed assets Intangible assets entail exploitation rights for systems and applications software acquired against payment, which are measured at acquisition cost and are depreciated on a straight-line basis over a useful life of three to eight years. This decrease in value is presented under the item Amortisation of intangible assets, depreciation of tangible fixed assets and investment properties. Impairment adjustments (reductions and increases) were not necessary in We present the Company s administrative building in Duisburg and the fixtures and equipment under tangible fixed assets. The calculation of the depreciation for the administrative building assumes a total useful life of 50 and a remaining useful life on the balance sheet date of 10 years as a basis. The fixtures and equipment have an average useful life between 3 and 15 years. (14) Investment property In the case of investment property, additions of 40,558 TEUR were recorded in the financial year, which relates to the properties acquired in the reporting year and prepayments on account for 40,545 TEUR and to capitalized post-acquisition expenses for portfolio properties of 13 TEUR. F-33

206 In addition to smaller sales of undeveloped land from the existing portfolio, one property in Bad Oeynhausen was sold in the third quarter. The following useful life ranges were applied in the reporting year: Useful life ranges of non-current assets Years Business and office buildings... 33to50 Other commercial constructions... 40to50 Self-service markets... 33to40 To adjust the amortised acquisition and construction costs presented in the balance sheet as of Dec 31, 2009 to the applicable fair values, we recorded impairment charges amounting to 714 TEUR. On the other hand, we reversed an impairment adjustment of 1,266 TEUR for properties subjected to an impairment in previous years. Investment properties developed as presented below in the reporting year: in TEUR Balance as of 1 January , ,702 + Additions as a result of purchase... 40,028 16,133 + Additions as a result of prepayments ,230 + Additions as a result of subsequent investments ,994 40,558 19,357 Disposals as a result of sales Disposals as a result of reclassifications ,976 + Additions as a result of reclassifications , ,553 + Reversal of impairment adjustment... 1, Depreciation and impairment charges for the financial year... -7,228-10,215 Balance as of 31 December , ,342 The direct operating charges from leased and vacant investment properties amount to 4,930 TEUR (previous year: 4,135 TEUR) in the reporting year. The entire inventory was leased out on the balance sheet date apart from temporary partial vacancies in individual properties. Of this amount, 107 TEUR (previous year: 79 TEUR) relates to vacant spaces in the reporting year, including the undeveloped property holdings not leased out. The expenses relating to the unlet spaces are determined according to the weighted percentage ratio, which is allocated to the vacancies in relation to the total leased area. Our commercial property portfolio was also valued by independent experts as of December 31, 2009 according to internationally acknowledged standards. Taking into account the purchases and sales of the reporting year, a fair value of our developed property portfolio of 307,940 TEUR resulted as of December 31, 2009 (previous year: 273,100 TEUR). The property portfolio is valued in accordance with the discounted cash flow process. For further details on the valuation of our properties, we refer to the section Performance of the portfolio in the management report. From one notarial deed of sale concluded in the reporting year, the transfer of ownership of a property was still outstanding on the balance sheet date, as the prerequisites for transfer were still not fully completed. Purchase price payments amounting to EUR 14.8 million in total were payable on transfer of ownership, which took place in the middle of February The undeveloped property is shown in the balance sheet at the historical acquisition cost. A different value is not reliably determinable due to its structure (areas used for agricultural and silvicultural purposes). F-34

207 (15) Financial assets The other loans comprise predominantly long-term interest-free housing loans, which were assessed at cash value, and other loans to staff. Additions of 20 TEUR are offset by scheduled redemptions and repayments of 21 TEUR in the 2009 financial year. (16) Trade receivables and other assets, deferred tax assets, income tax receivables All receivables and other assets are shown in the balance sheet at the nominal value or at the lower fair value. Individual value adjustments for doubtful receivables were recorded in the amount of 14 TEUR. We do not make general value adjustments. The other non-current assets primarily include development costs paid for the leasehold property in Solingen of 253 TEUR (previous year: 264 TEUR) and the capitalised actuarial reserve for claims from pension liability insurance policies for pension obligations (111 TEUR, previous year: 99 TEUR). The existing pension liability insurance policies are not considered plan assets as per IAS 19. The deferred tax claims essentially result from valuation differences with interest rate derivatives, investment properties and other provisions. The item increased by 256 TEUR year-over-year to 2,170 TEUR. Whereas the share in the deferred tax assets relating to valuation differences for interest rate derivatives increased by 325 TEUR, the deferred tax portion relating to the valuation differences of investment properties decreased by 72 TEUR. The receivables and other current assets break down as follows: in TEUR Dec 31, 2009 Dec 31, 2008 Trade receivables Other Total Trade receivables relate without exception to receivables due from tenants and leaseholders. As of December 31, 2008, the balance included an indemnity claim amounting to 155 TEUR, which has been payable and collected in the meantime on account of early termination of a tenancy. The other current assets essentially decreased due to the reduced accrued interest for receivables and swap interest in the amount 192 TEUR. The trade receivables shown were all due on the financial statements date and are thus overdue within less than 30 days following the balance sheet date. The profit of the reporting year was reduced by the write-off of receivables in the amount 36 TEUR (previous year: 70 TEUR). In the same period, we collected written-off receivables amounting to less than 1 TEUR (previous year: 11 TEUR). Income tax receivables amount to 44 TEUR (previous year: 557 TEUR). They relate to reimbursement claims for the assessment period The item decreased by 513 TEUR due to collection of the reimbursement claims shown in the previous year for the assessment periods 2007 and (17) Bank deposits and cash balances in TEUR Dec 31, 2009 Dec 31, 2008 Bank deposits... 37,937 54,010 Cash balances Total... 37,942 54,012 F-35

208 The cash fund was reduced by 16,070 TEUR due mainly to the outflow of equity used for the property investments and the disbursement of the dividend for the financial year (18) Non-current assets held for sale The previous year s amount reflects the book value of the investment in Montan GmbH Assekuranz-Makler, Dusseldorf. The investment was sold in January (19) Equity The development of equity from 1 January 2008 until 31 December 2009 is shown in the statement of changes in equity. The subscribed capital amounts to EUR million and is divided into 22,770,000 no-par-value shares made out to bearer. The legal reserve amounts to 2,277 TEUR. The Managing Board was authorised, through the resolutions of the general shareholders meeting on 5 June 2008, to increase the share capital of the Company with the agreement of the Supervisory Board as follows: 2,270 TEUR (Authorised Capital I) 9,080 TEUR (Authorised Capital II). Authorised allotments of 11,350,000 shares result from the authorised capital, which can be issued to the shareholders as no-par-value shares. The authorisation applies until 4 June The issued shares in the Company would increase to 34,120,000 units in the event of full implementation of the authorised capital measures. The Company shows a net retained profit amounting to 32,269 TEUR (previous year: 35,165 TEUR) as of 31 December The Managing Board will propose a dividend distribution amounting to 8,424,900 EUR at the general shareholders meeting for the 2009 financial year. This corresponds to a dividend of EUR 0.37 per no-par- value share. The dividend proposal is based on the net retained profit of the Company under commercial law amounting to 27,237 TEUR. The other retained earnings comprise the earnings achieved in the past in so far as they were not distributed or carried forward and amount to 104,575 TEUR. The revaluation reserve includes the fair value changes from the valuation of derivatives in connection with hedging transactions (cash flow hedges), in so far as they were recognized without affecting the result. The objectives of our capital management are to secure the Company s continuation, the adequate return on capital and the maintenance of the debt repayment capability. The control measure here is essentially the equity ratio, which also constitutes an acknowledged key corporate figure with investors, analysts and banks TEUR 2008 TEUR Change in % Equity , , Balance sheet total , , Balance sheet equity ratio % 56.9% -8.6 F-36

209 In addition, compliance with the degree of equity coverage codified in accordance with Art. 15 of the German REIT Act is greatly important for the Company for the maintenance of status as a Real Estate Investment Trust and is therefore subject to regular monitoring. The ratio amounted to 67.2 % as of 31 December 2009 (previous year: 77.1 %). The Loan-to-Value (LTV) constitutes a key ratio in connection with the debt repayment capability. This indicator defines the relationship between mortgaging and the established value of our properties and was determined by us to be 34.3 % (previous year: 31.1 %) on the balance sheet date. Company law provisions essentially form the framework for the capital management, within which management of the capital structure is carried out, e.g. through a capital increase. The capital management targets were achieved in the financial year. (20) Financial liabilities and derivative financial instruments Financial liabilities increased by 22,568 TEUR to 113,672 TEUR. The increase resulted from the raising of further loans for the financing of our property investments, through market value changes to the interest rate hedging derivatives executed and due to scheduled redemption payments. The loans amounted to EUR 105 million on the balance sheet date. Both fixed-interest agreements over many years and for the attainment of greater flexibility interest rate agreements based on EURIBOR underlie the existing property loans. The interest rate risk was eliminated in the latter instances by executing interest rate swaps, with which we obtain the EURIBOR and, on the other hand, pay an agreed fixed-rate interest over the swap term. The notional hedging volume resulting from this amounted to EUR 85.5 million on the balance sheet date and the market value for the interest rate hedging transactions executed was EUR 7.8 million. The term of the derivatives ends between 2013 and 2018 depending on the underlying loan transactions. A decrease in the revaluation reserve, by EUR 1.7 million, resulted from the change in the market values of these interest rate swaps from EUR 2.1 million taking into account deferred taxes of 325 TEUR. In addition, the Company has held two other financial derivatives since the year 2000, with which a hedging relationship with a loan transaction is not established. The notional hedging volume of these derivatives was approximately EUR 0.4 million on the balance sheet date. The term of the agreements ends in Liabilities were shown in the reporting year in the amount of 11 TEUR for possible risks that may arise from these derivatives. From the change in the market valuation of these interest rate swaps, income amounting to 16 TEUR (previous year: expense of 8 TEUR) arose in the reporting year, which is included in interest income (previous year: interest expenses). Serial number Type Term until Notional value Dec 31, 2009 EUR million Fair value TEUR 1 Interest rate swap Apr ,868 2 Interest rate swap Apr ,352 3 Interest rate swap Dec Interest rate swap Dec Interest rate swap Oct , ,834 6 Interest rate swap Jun Interest rate swap Dec Total ,845 Land charges in the amount of EUR million chargeable to the Company were recorded on December 31, F-37

210 The Company had a line of credit amounting to EUR 3 million up to December 31, 2009, which was secured by an additional land charge. The credit line arrangement expired on December 31, The land charge certificate has been returned to us in the meantime. in TEUR December 31, 2009 December 31, 2008 long-term short-term long-term short-term Financial liabilities ,218 4,609 81,543 3,754 Derivative financial instruments... 7, ,807 0 Total ,052 4,620 87,350 3,754 The financial liabilities bear interest at interest rates of between 4.41% and 5.21%. The redemptions are made quarterly, half-yearly or annually in accordance with the loan agreements. Contractually agreed redemption payments: in TEUR Dec 31, 2009 Dec 31, 2008 Financial liabilities of which payable within one year... 4,620 3,754 payable within two to five years... 27,235 12,153 payable after five years... 81,817 69,390 Total ,672 85,297 HAMBORNER is exposed to various risks due to its business activity. The risk report, which is part of the management report, includes a detailed presentation of these risks and their management. Derivative financial instruments in the form of interest rate swaps are used primarily for the management of interest rate risks. The risks resulting in connection with the use of these derivative financial instruments are the subject of risk management and control. The risks resulting from the financial instruments relate to credit, liquidity and market risks. Credit risks exist in the form of risks of default for financial assets. This risk is limited to the extent of the book values of the financial assets as a maximum. For derivatives, this is the total of all the positive market values and, for primary financial instruments, the total of the book values. If risks of default exist, they are taken into account by means of value adjustments. Liquidity risks constitute refinancing risks and thus risks of a fulfilment of existing obligations to pay when due. The strategy and the results of the planning process are taken as a basis for the early identification of the future liquidity situation. The expected liquidity requirements are scheduled in the medium-term plan, which covers a period of five years. The current liquidity requirements are compared with the actual data by means of daily, weekly and monthly budgetary accounts. Sensitivity analyses are required for the presentation of market risks in accordance with IFRS 7. Both influences on the result as well as on equity are to be shown through hypothetical changes in risk variables orientated to the past. Interest rate risks in particular are relevant for HAMBORNER in this regard. Interest rate risks result from changes in the level of market interest rates. We limit such risks through the use of interest rate swaps. Sensitivity analyses, which show the consequences of changes in the level of market interest rates on interest payments, interest expenses and income as well as on equity, are carried out in compliance with IFRS 7. The following assumptions apply to this end: Primary financial instruments with a fixed interest rate are only subject to interest rate risks if they are assessed at fair value. Financial instruments that are valued at acquisition cost are not subject F-38

211 to interest rate risks. In the case of cash flow hedges for the hedging of interest-induced payment fluctuations, changes in the level of market interest rates have consequences on the equity reserve. Therefore, these financial instruments are taken into account in the sensitivity analysis. Primary financial instruments with a variable interest rate should also be subjected to a sensitivity analysis, as they too are subject to a risk of a change in the market interest rate. In the sensitivity analysis, the indicative valuation was calculated as of the balance sheet date on the basis of the market value, taking into account accrued interest. Sensitivity analysis in TEUR Dec 31, 2009 Dec 31, 2008 Market value of financial instruments on a floating-rate basis... -7,845-5,807 Change in the revaluation reserve Interest rate + 1%... 3,908 4,492 Interest rate 1%... -4,272-4,879 Income statement Interest rate + 1% Interest rate 1% Other information on financial instruments As a result of the anticipated sale, the investment in Montan GmbH Assekuranz-Makler, Dusseldorf was reclassified from the item Investments into the Non-current assets held for sale as of December 31, The valuation under the current assets was carried out at the market value. The investment was sold in January For short-term financial assets and liabilities that are not derivatives, the respective book value constitutes an appropriate approximation of the fair value within the meaning of the IFRS. F-39

212 Additional details on financial instruments in TEUR Dec 31, 2009 Measurement in accordance with IAS 39 Fair value available for sale/ derivatives Continuing activities, loans and receivables Continuing activities held until final maturity Measurement in accordance with other standards Fair value Continuing activities Assets Intangible assets Tangible fixed assets Investment property , ,386 Financial assets Long-term other assets Deferred tax assets... 2,170 2,170 Short-term trade receivables and other assets Income tax receivables Bank deposits and cash balances... 37,942 37, , , ,757 Liabilities Equity , ,297 Long-term financial liabilities and trade accounts payable and other liabilities ,128 7,834* 103,712 1,582 Deferred tax liabilities... 14,708 14,708 Provisions for pensions... 5,603 5,603 Other long-term provisions Short-term financial liabilities and trade accounts payable and other liabilities... 6, , Income tax liability Other short-term provisions... 2, , ,589 7, , ,442 * Derivatives in TEUR Dec 31, 2008 Measurement in accordance with IAS 39 Fair value available for sale/ derivatives Continuing activities, loans and receivables Continuing activities held until final maturity Measurement in accordance with other standards Fair value Continuing activities Assets Intangible assets Tangible fixed assets Investment property , ,342 Financial assets Long-term other assets Deferred tax assets... 1,914 1,914 Short-term trade receivables and other assets Income tax receivables Bank deposits and cash balances... 54,012 54,012 Non-current assets held for sale and assets from discontinued operations , , ,001 Liabilities Equity , ,050 Long-term financial liabilities and trade accounts payable and other liabilities... 91,134 5,807* 83,575 1,752 Deferred tax liabilities... 15,188 15,188 Provisions for pensions... 5,780 5,780 Other long-term provisions Short-term financial liabilities and trade accounts payable and other liabilities... 5,577 4, Income tax liability Other short-term provisions... 2, , ,346 5,807 88, ,111 * Derivatives F-40

213 The net result (profit +/loss -) from financial assets and liabilities is made up as follows: in TEUR Available for sale ,078 Derivatives Liabilities at amortised acquisition cost... -4,607-2,343 (21) Deferred tax liabilities Deferred tax liabilities amount to 14,708 TEUR following 15,188 TEUR in the previous year. They relate predominantly to the special account with reserve characteristics under commercial and tax law. The decrease arises essentially from the change to this special account. (22) Income tax liabilities Liabilities from taxes on income decreased by 258 TEUR to 402 TEUR. They relate to business taxes for the year 2008 amounting to 160 TEUR as well as expected additional payments for corporation tax and solidarity surcharges amounting to 242 TEUR for the year 2009 totally. (23) Trade accounts payable and other liabilities The trade accounts payable and other liabilities amount to a total of 5,953 TEUR as of December 31, Of this, 1,877 TEUR is payable within the next 12 months. The amount increased by 344 TEUR overall compared with last year. The increase resulted from the net effect of changes in various single items. There are trade accounts payable amounting to 68 TEUR on the balance sheet date. The value is thus around 538 TEUR below the value for the previous year. The decrease is mainly attributable to the settlement of outstanding invoices for consultation services, which were shown under the trade accounts payable as of December 31, (24) Provisions for pensions There are occupational pension scheme commitments for eligible current and former employees and surviving dependents. These commitments are defined benefit commitments in accordance with IAS 19. The Projected Unit Credit Method is the basis of the valuation of the provision. It is not just the pensions and purchased pension rights recorded on the balance sheet date that are taken into account with the project unit credit method, but also increases in salaries and pensions expected in the future. A normal retirement age of 62 or 63 years forms the basis for the determination of the provision. Expenses from the commitments are recorded over the length of service of employees in accordance with an expert actuarial opinion and consist of the service costs and the actuarial gains or losses recorded for the current year, which are shown under personnel costs, as well as the interest expense, which has an impact on the financial result. Interest expenses from pension obligations amounted to 381 TEUR in 2009 (previous year: 375 TEUR). Actuarial losses not yet recorded as of the balance sheet date amounting to 1,380 TEUR are disregarded for the avoidance of greater volatility in compliance with the corridor approach permitted in accordance with IAS 19 with the funding of pension provisions. These losses are only taken into account in application of the corridor approach, in so far as they exceed the thresholds of the corridor defined in IAS 19 (10% of the actual defined pension obligation ). The corridor threshold represents 698 TEUR on the balance sheet date. A corridor breach of 682 TEUR occurred for the year 2009, which should be recorded over the expected average remaining working period of the beneficiaries. This pro rata loss, which is still not taken into account, should only be offset in the associated period in each case, in accordance with IAS 19. From this, an amount of 179 TEUR will be taken into account in Actuarial losses amounting to 80 TEUR have had an impact in the reporting year from the corridor breach during the year F-41

214 Development of pension provisions in the reporting year: in TEUR Balance sheet value on 1 January... 5,780 5,923 6,140 6,330 6,415 Ongoing service costs Interest expense Actuarial gains/losses recorded for the current year Pension payments Balance sheet value on 31 December... 5,603 5,780 5,923 6,140 6,330 Actuarial losses not recorded... 1,380 1,060 1, Defined Benefit Obligation (DBO) at the year-end... 6,983 6,840 7,097 6,917 7,000 Experience-based adjustment of plan liabilities The movements in the present value of the benefit projected obligation include the following: in TEUR Cash value on 1 January (Defined Benefit Obligation)... 6,840 7,097 6,917 7,000 6,938 Service costs Interest expense Actuarial gains/losses Pension payments Cash value on 31 December (Defined Benefit Debentures)... 6,983 6,840 7,097 6,917 7,000 HAMBORNER paid contributions of 143 TEUR (previous year: 145 TEUR) to the statutory pension insurance in the reporting year, which is treated as a defined contribution pension scheme. In addition, contributions to direct insurance policies amounting to 11 TEUR (previous year: 12 TEUR) were made by the Company. The Company assumes no additional obligations beyond the settlement of contribution payments with defined contribution schemes. Charges are recorded in personnel costs. Pension payments amounting to 649 TEUR are expected in the 2010 financial year. (25) Other provisions The maturities of the other provisions are as follows: Jan 1, 2009 Dec 31, 2009 of which in TEUR Overall Charges Claim Releases Overall long-term short-term Provisions for Bonuses Mining damage... 1, , Provisions linked to the Articles of Association and legal form Legal and consultancy expenses Outstanding invoices Other Total... 2,957 1,540 1, , ,253 The provisions for bonus obligations are around 45 TEUR below the value for the previous year and amount to 514 TEUR. The decrease is mainly attributable to employee fluctuation within the group of people eligible for a bonus. The provisions for mining damage relate to the potential risks from our former mining activity, which continue to a limited extent. In this respect we refer to the more comprehensive explanations in the risk report, which is an integral part of the integrated management report. Mining-related provisions are long-term provisions that are shown in the balance sheet at their settlement value discounted on the balance sheet date. A rate of interest of 6.0% (previous year: 6.0%) with a residual term of up to 22 years (previous year: 23 years) is taken as a basis here as the discount factor. The charge recorded in the reporting year amounts to 37 TEUR and arises from the termdependent compounding of the provision. The 14 TEUR shown as a claim relates to expenses for shaft protection measures and for the management of the affected pits and coal fields. F-42

215 The provisions for obligations linked to the Articles of Association and legal form include remunerations for the Supervisory Board and statutory auditor fee. We refer to marginal number (2) for further details on the statutory auditor fee within the meaning of Art. 314 Para. 1 No. 9 of the German Commercial Code. The provisions for outstanding invoices increased by 54 TEUR year-over-year and amount to 331 TEUR. Amounts for maintenance expenses not yet invoiced and for operating costs were deferred, in so far as they relate to the year (26) Contingent liabilities and financial obligations The other financial obligations after the balance sheet date result from four long-term leasehold contracts and include the following: Agreement term up to Payment obligation (in TEUR p.a.) Charge passed on to tenants (in TEUR p.a.) 31 December March June 2012* June Total * The heritable building right transfers to our ownership on June 30, 2012 against payment of EUR 3.2 million on the basis of contractual agreements. There are no further contingent liabilities, third-party liabilities or other financial obligations. (27) Leasing relationships All rental agreements that HAMBORNER has executed with its tenants are classified as operating leases in accordance with IFRS, as all rewards and risks associated with the ownership remain with the Company. Accordingly, HAMBORNER is the lessor in all operating leasing relationships (tenancies) of varied construction for investment properties. Within the framework of operating leases, investment properties with a book value of EUR million (previous year: EUR million) were leased out as of December 31, HAMBORNER will receive the following minimum lease payments from existing non-cancellable operating leasing relationships from commercial letting: in TEUR up to one year... 18,425 18,377 longer than one year up to five years... 61,055 58,104 over five years... 50,362 45, , ,888 The minimum lease payments comprise rent income up to the agreed expiration of the contract or up to the earliest possible termination date of the lessee (tenant), regardless of whether a termination or non-utilisation of an extension option is actually to be expected. There were conditional rent payments in the reporting period only to an insignificant extent. Explanatory notes to the cash flow statement The development of cash flows is shown in the cash flow statement, separated according to cash inflows and cash outflows from the operating activities, the investment activities and the financing activities. F-43

216 The cash and cash-equivalents comprises cash balances and bank deposits. There are time deposits amounting to EUR 19.0 million invested, which are payable by March 2010 at the latest. As of the reporting date, the cash and cash-equivalents of HAMBORNER were EUR 16.1 million lower as compared with the previous year s balance of EUR 37.9 million. The cash flow statement was prepared in accordance with the provisions of IAS 7. There are no influences from exchange rate movements or from changes in the consolidation scope at HAMBORNER. (28) Cash flow from operating activities The cash flow statement is based on the year-end earnings before taxes (EBT). As in previous years, HAMBORNER achieved a high positive cash flow of EUR 14.1 million from its operating activities. The book profits from the sale of tangible and financial fixed assets were eliminated from the cash flow from operating activities. Operating cash flow per share is calculated as below: Number of shares in circulation... Thsd. units 22,770 22,770 Operating cash flow... TEUR 14,129 10,283 Operating cash flow per share... EUR (29) Cash flow from investment activities The disbursements for investments in tangible fixed assets and in intangible fixed assets or the payments received from corresponding sales do not correspond to the additions or disposals shown in the development of fixed assets. They also include the investments and disposals which have not yet impacted cash flow. The investments not impacting cash flow result essentially from purchase price retentions and a payment of land transfer tax not yet due. The cash flow from investment activity resulted in a cash outflow of EUR 37.7 million in the current financial year (in the previous year a cash inflow of EUR 41.7 million). Whereas the cash flow of the previous year was essentially impacted by the sale of the special securities fund and the investment in Wohnbau Dinslaken GmbH, the cash flow of the current year is characterised by the further expansion of the property portfolio of the Company and the disbursements associated with that. (30) Cash flow from financing activities The cash flow from the financing activities amounted to EUR 7.5 million arises primarily from borrowing for the properties acquired in 2009 amounting to EUR 23.8 million taking into account interest payments and scheduled loan repayments. In addition, approximately EUR 8.0 million was distributed to the shareholders of the company, as in the previous year. (31) Cash flow from discontinued operations The cash flow statement for the previous year also includes cash inflows and outflows of the securities fund Südinvest 107 shown in the income statement and in the balance sheet as discontinued operations. The resulting cash flows break down as follows: in TEUR Cash flow from operating activities ,405 Cash flow from investment activities ,784 Cash flow from financing activities Cash flow from discontinued operations ,189 F-44

217 Other notes and compulsory details Events after the balance sheet date On January 4, 2010 the REIT Articles of Association approved by the general shareholders meeting in June 2009 were filed with the Duisburg County Court for registration. Registration ensued on February 18, As a result, HAMBORNER is a REIT AG retroactively as of January 1, 2010 with appropriate Articles of Association and the full business name of HAMBORNER REIT AG. On December 22, 2009 a notarial deed of sale was executed for an office property in Erlangen. The property transferred to our ownership in the middle of February Purchase price payments of EUR 14.8 million are payable for this purchase. Assumptions and estimates In the preparation of the annual financial statements, assumptions have been made and estimates used which have had an impact on the recognition and measurement of the assets, liabilities, income and expenses. These assumptions and estimates essentially relate to the determination of useful life ranges, the retention of value of properties and buildings, receivables and investments, the recognition and the measurement of provisions as well as the realisability of deferred tax assets. Actual values may deviate from the assumptions and estimates made in individual cases. Changes are taken into account at the time of better knowledge with an effect on the operating result. Employees The number of employees (excluding the Managing Board) amounted on an annual average of: Commercial property management Technical property management Administration Total Corporate governance In December 2009, the Managing Board and Supervisory Board submitted an updated declaration of compliance and made it publicly accessible on the Internet at in the section Investor Relations/Corporate Governance. The declaration of compliance is also published in the present annual report 2009 with full wording. Notification regarding the existence of an investment According to Art. 11 Para. 4 of the German REIT Act, no investor may directly hold 10 % or more of the shares or shares to an extent that he has 10 % or more of the voting rights. On the balance sheet date on December 31, 2009 no shareholders were known to the company whose direct shareholding exceeded 10 % of the share capital. There are indirect investment in the capital of the company which indirectly attain or exceed 10 % of the voting rights, as follows: The State of Schleswig Holstein and the Free and Hanseatic City of Hamburg jointly hold an investment of % (12,003,164 voting rights) in the voting capital of the company indirectly via HSH Finanzfonds AöR according to notifications dated June 30, 2009/July 1, Of this, all voting rights of the following subsidiaries are attributable to them in accordance with Art. 22 Para. 1 Clause 1 No. 1 of the German Securities Trading Act: HSH Nordbank AG F-45

218 HSH Real Estate AG HSH RE Beteiligungs GmbHs (consisting of six companies) The investments were effected on the basis of a capital increase at HSH Nordbank AG, which was registered on 25 June 2009 and through which the registrants have acquired a dominant position in HSH Nordbank. According to notifications dated July 20, 2009 in accordance with Art. 27a of the German Securities Trading Act, the attainment of the majority shareholding pursues no strategic objectives with regard to the issuer and was effected only by allocation of the investment of HSH Nordbank AG in accordance with Art. 22 Para. 1 Clause 1 No. 1, Para. 3 of the German Securities Trading Act. HSH RE recently informed us on December 16, 2009 that the voting rights share of HSH RE Beteiligungs GmbH in HAMBORNER Aktiengesellschaft had fallen below the threshold of 50 % on December 15, 2009 and amounted to 0 % (0 voting rights) on that day. The respective voting rights share of the companies HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH and HSH RE 6. Beteiligungs GmbH on December 15, 2009 each exceeded the thresholds of 3 % and 5 % and amounts to 9 % (2,049,300 voting rights) per company on that day. On that day 5.32 % of the voting rights (1,211,019 voting rights) is attributable to HSH RE 7. Beteiligungs GmbH with a breach of the corresponding thresholds. All the companies are subsidiaries of HSH Real Estate AG, which thus indirectly holds a shareholding of % of the shares (11,457,519 voting rights). In addition, we have had notifications in accordance with Art. 21 Para. 1 of the German Securities Trading Act since 6 February 2009, according to which Professor Dr. Theo Siegert of Dusseldorf has indirectly held 6.15 % (1,400,000 units in absolute terms) of the voting rights since November 28, 2008 via de Haen Carstanjen & Söhne GmbH, Dusseldorf. Furthermore, 5.45 % (1,240,000 units in absolute terms) of the shares in the voting capital of our company are attributable to him indirectly via SIEGERT & CIE GmbH, Dusseldorf, as from 18 December Overall, he therefore indirectly holds a participation that, at 11.6 % (2,640,000 votes in absolute terms), exceeds the threshold of 10 % of the voting rights shares. HAMBORNER is included in the consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest group of companies and HSH Real Estate AG, Hamburg, prepares the consolidated financial statements for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG are published in the electronic German Federal Gazette. Relationships with related companies and persons in the 2009 financial year The company has a current account at HSH Nordbank AG, which showed a balance of EUR in our favour on December 31, Other transactions subject to disclosure have not arisen in the 2009 financial year. Customary market conditions and terms formed the basis for all supply and service relationships with related companies and persons. The remuneration to individuals in key positions of our company, which is declarable in accordance with IAS 24, entails the remuneration of the Managing Board and Supervisory Board. Members of the Managing Board were remunerated as follows in the 2009 financial year: in TEUR Payments due in the short term Payments after termination of the employment relationship Payments on the occasion of the termination of employment Total F-46

219 In addition, contributions amounting to 57 TEUR accrued for the pension scheme, health and nursing care insurance as well as remunerations in kind in the form of the use of company cars. The previous year s valuation included the one-off remuneration to be paid contractually to a retired member of the Managing Board. The present financial statements take into account payments due in the short term to the active members of the Supervisory Board amounting to 159 TEUR (previous year: 354 TEUR). Remuneration of the Managing Board and Supervisory Board The remuneration of the Managing Board and Supervisory Board, as well as the principles of the remuneration system, are presented in detail in the remuneration report, which is a component of the management report. The total remuneration of the active Managing Board amounted to 635 TEUR in the reporting year. Former members of the Managing Board and their surviving dependents received compensation amounting to 431 TEUR. The pension provisions recorded for this group of people amounted to 3,547 TEUR. The compensation of the members of the Supervisory Board amounted to 159 TEUR for the financial year. F-47

220 Executive bodies of the company and their mandates Supervisory Board Dr. jur. Josef Pauli, Essen Honorary Chairman Dr. rer. pol. Eckart John von Freyend, Bad Honnef Chairman Shareholder of Gebrüder John von Freyend Verwaltungs- und Beteiligungsgesellschaft m.b.h. External mandates: Finum AG* (chairmanship) (until Nov 26, 2009) Finum Finanzhaus AG* (chairmanship) (as from Nov 27, 2009) Hahn-Immobilien-Beteiligungs AG* IVG Immobilien AG* (as from Oct 15, 2009) Konzeptplus AG* (chairmanship until March 26, 2009) Litos AG* (until March 26, 2009) VNR Verlag für die Deutsche Wirtschaft AG* Investment AG für langfristige Investoren TGV* (as from March 30, 2009) Dr. rer. pol. Marc Weinstock, Kelkheim-Fischbach Deputy Chairman Chairman of the Managing Board of HSH Real Estate AG External mandates: LB Immo Invest GmbH** (Deputy Chairman as from May 6, 2009) DSK Deutsche Stadt- und Grundstücksentwicklungsgesellschaft mbh** (Chairman) BIG BAU-INVESTITIONSGESELLSCHAFT mbh** (Deputy Chairman) Pirelli RE Asset Management Deutschland GmbH** H/H-Capital Management GmbH** BIT Beteiligungs- & Investitions- Treuhand AG* (as from Aug 21, 2009) Volker Lütgen, Wentorf Managing Director of HSH Capitalpartners GmbH Robert Schmidt, Datteln Managing Director Evonik Immobilien GmbH External mandates: HSH Real Estate AG* (until Oct 31, 2009) THS GmbH** Wohnbau Dinslaken GmbH** (Deputy Chairman) F-48

221 Edith Dützer***, Moers Clerical employee Hans-Bernd Prior***, Dinslaken Technician Committees of the Supervisory Board Executive Committee Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Audit Committee Dr. rer. pol. Marc Weinstock (Chairman) Robert Schmidt Edith Dützer Nominating Committee Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Managing Board Dr. Rüdiger Mrotzek, Hilden Director for finance/accounting, taxes, properties, EDP, risk management/monitoring Hans Richard Schmitz, Bonn Director for legal matters, personnel, investor relations/public relations, corporate governance, insurance Duisburg, 19 February 2010 The Managing Board Dr. Rüdiger Mrotzek Hans Richard Schmitz * Membership of other Supervisory Boards to be constituted by law ** Membership of comparable domestic and foreign monitoring bodies *** Member of the Supervisory Board for employees F-49

222 Declaration of the Board of Management Non-binding convenience translation We declare, to the best of our knowledge, that the individual financial statements give a true and fair view of the net assets, financial position and results of operations of the company corresponding to the actual circumstances in accordance with the accounting principles to be applied and that, in the management report, the course of business including the operating results and the position of the company are portrayed in such a way that a picture corresponding to the actual circumstances is conveyed and the significant opportunities and risks for the probable development of the company are described. Duisburg, 19 February 2010 The Managing Board Dr. Rüdiger Mrotzek Hans Richard Schmitz F-50

223 The following auditors report (Bestätigungsvermerk) has been issued in accordance with section 322 German Commercial Code (Handelsgesetzbuch) in German language on the German version of the separate financial statements of the HAMBORNER REIT AG (formerly: HAMBORNER Aktiengesellschaft), Duisburg, as of and for the period from January 1, 2009 to December 31, Independent Auditors Report To the HAMBORNER REIT AG (formerly: HAMBORNER Aktiengesellschaft), Duisburg We have audited the separate financial statements comprising the income statement, the statement of income and expense recognized in equity, the balance sheet, the cash flow statement, the statement of changes in equity, the fixed asset movement schedule and the notes to the financial statements together with the bookkeeping system, and the management report of the HAMBORNER REIT AG (formerly: HAMBORNER Aktiengesellschaft), Duisburg, for the business year from January 1, 2009 to December 31, The maintenance of the books and records and the preparation of the separate financial statements and management report in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and the additional requirements of German commercial law pursuant to section 325 Abs. 2a HGB ( German Commercial Code ) are the responsibility of the Company s management. Our responsibility is to express an opinion on the separate financial statements, together with the bookkeeping system, and on the management report based on our audit. We conducted our audit of the separate financial statements in accordance with section 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the separate financial statements in accordance with the applicable financial reporting framework and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the separate financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the separate financial statements and management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the separate financial statements of the HAMBORNER REIT AG (formerly: HAMBORNER Aktiengesellschaft), Duisburg, comply with IFRS, as adopted by the EU, the additional requirements of German commercial law pursuant to section 325 Abs. 2a HGB and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with these requirements. The management report is consistent with the separate financial statements and as a whole provides a suitable view of the Company s position and suitably presents the opportunities and risks of future development. Dusseldorf, March 1, 2010 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Harnacke) Wirtschaftsprüfer (German Public Auditor) (Lüdke) Wirtschaftsprüfer (German Public Auditor) F-51

224 Audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2008 F-52

225 Consolidated income statement For the period from 1 January to 31 December 2008 Non-binding convenience translation Notes Income from the management of properties and buildings... (1) Income from rents and leases... 19,437 13,239 Income from passed-on incidental costs to tenants... 1,873 1,229 21,310 14,468 Other own work capitalised... (2) 0 27 Other operating income... (3) 19,500 7,568 Total operating income... 40,810 22,063 Expenses for management of properties and buildings... (4) Real estate operating expenses... -3,026-1,859 Property and building maintenance... -1,109-1,594-4,135-3,453 Personnel costs... (5) Wages and salaries... -2,599-2,199 Social security, pensions and other benefits ,973-2,520 Amortisation of intangible assets, tangible fixed assets and investment property... (6) -10,257-3,177 Other operating expenses... (7) -2,677-2,271 Total operating expenses ,042-11,421 Operating result... 20,768 10,642 Result from investments... (8) Financial result... (9) Income from securities including capital gains Other interest and similar income... 1, Interest and similar expenses... -4,644-1,234-2, Result on ordinary activities... 18,484 11,056 Taxes on income and profit... (10) -1,517 6,645 Result from continuing operations... 16,967 17,701 Result from discontinued operations... (11) ,525 Consolidated surplus... 17,341 52,226 Retained profits from previous year... 53,922 1,554 Dividends... -7,970 0 Transfer to retained earnings ,128 0 Transfer from retained earnings Consolidated net retained profits... 35,165 53,922 Earnings per share (in EUR)... (12) thereof from continuing operations thereof from discontinued operations F-53

226 Consolidated balance sheet Non-binding convenience translation Assets Notes Dec 31, 2008 Dec 31, 2007 Non-current assets Intangible assets... (13) Tangible fixed assets... (13) Investment property... (14) 223, ,702 Financial assets... (15) Investments Other loans Other assets... (16) Deferred tax assets... (16) 1, , ,051 Current assets Trade receivables and other assets... (16) Income tax receivables... (16) Bank deposits and cash balances... (17) 54,012 6,442 55,368 7,863 Non-current assets held for sale and discontinued business lines... Non-current assets held for sale... (18) ,813 Assets from discontinued operations... (19) 0 59, ,283 55,498 87,146 Total assets , ,197 F-54

227 Equity and Liabilities Notes Dec 31, 2008 Dec 31, 2007 Equity... (20) Subscribed capital... 22,770 22,770 Retained earnings Legal reserve... 2,277 2,277 Other retained earnings ,575 76,448 Revaluation reserve... -4, ,115 78,815 Consolidated net retained profits... 35,165 53, , ,507 Non-current liabilities and provisions Financial liabilities and derivative financial instruments... (21) 87,350 48,034 Deferred tax liabilities... (22) 15,188 14,219 Trade accounts payable and other liabilities... (24) 3,784 3,860 Provisions for pensions... (25) 5,780 5,923 Other provisions... (26) ,780 72,591 Current liabilities and provisions Financial liabilities... (21) 3,754 36,397 Income tax liabilities... (23) Trade accounts payable and other liabilities... (24) 1,823 18,137 Other provisions... (26) 2,279 2,318 8,516 56,954 Liabilities from discontinued operations... (19) 0 5,145 8,516 62,099 Total equity, liabilities and provisions , ,197 F-55

228 Consolidated cash flow statement Non-binding convenience translation Notes to (in TEUR) to (in TEUR) Cash flow from operating activities... (29) Consolidated earnings before taxes (EBT)... 18,919 45,433 Depreciation, Amortization and Impairments/write-ups (-)... 9,312 3,177 Financial income... 2,081-1,258 Change in provisions Gain/loss (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale... -6,741-5,621 Gain/loss (offset) from the disposal of financial assets ,477-32,826 Other non-cash expenses (+) / income (-)... 3,711-2,004 Change in receivables and other assets and deferred income ,050 Change in liabilities and deferred income... -1,426 18,855 Dividends received ,313 Interest received... 1, Tax payments... -5,477-2,086 10,283 23,528 Cash flow from investment activities... (30) Investments in intangible assets, tangible fixed assets and investment properties ,309-98,008 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale... 15,417 17,764 Investments in financial assets ,947 Proceeds from disposals of financial assets... 62,601 95,087 Net cash outflow due to the disposition of the special share fund Südinvest ,696-73,103 Cash flow from financing activities... (31) Dividend payments... -7,970-6,831 Proceeds from borrowings... 37,713 66,308 Repayment of borrowings , Interest outflows... -3, ,998 58,428 Change in cash and cash equivalents... 40,981 8,852 Cash and cash equivalents as of January ,031 4,179 Bank deposits and cash balances*... 13,031 4,175 Near-liquid investments Cash and cash equivalents as of December ,012 13,031 Bank deposits and cash balances... 54,012 13,031 * Including liquid funds of 6,589 TEUR contained in the Assets from discontinued activities as of F-56

229 Consolidated statement of changes in equity Subscribed capital Legal reserve Retained earnings Other retained earnings (in TEUR) Revaluation reserve Non-binding convenience translation Consolidated net retained profits Carryforward (in TEUR) Profit Appropriation of profits (in TEUR) Total equity Balance as of 1 January ,430 1,943 79,151 26,204-1,780 11, ,226 Carry-forward to new account... 11,277-11,277 Capital increase from company funds... 3, ,674 Distribution of profit for ,831-6,831 Transfer into other retained earnings... 1,112-1,112 Transfer from other retained earnings Price adjustment of securities from securities fund ,988-25,988 Revaluation of derivative financial instruments Total of the income and expenses directly recognised in equity ,114-26,114 Consolidated surplus ,226 52,226 Consolidated Comprehensive income ,114 52,226 26,112 Balance as of 31 December ,770 2,277 76, ,554 52, ,507 Carry-forward to new account... 52,226-52,226 Distribution of profit for , ,970 Transfer to retained earnings... 28,128-28,128 Price adjustment of securities from securities fund Adjustment of book values of investments to the fair value Revaluation of derivative financial instruments... -4,739-4,739 Total of the income and expenses directly recognised in equity... -4,827-4,827 Consolidated surplus ,341 17,341 Consolidated Comprehensive income ,827 17,341 12,513 Balance as of 31 December ,770 2, ,575-4,737 17,824 17, ,050 F-57

230 Consolidated fixed asset movement schedule Balance (in TEUR) Additions (in TEUR) Disposals (in TEUR) Non-binding convenience translation Acquisition and construction costs Fair value adjustments (with no impact on profit) Reclassification as per IFRS 5 Balance (in TEUR) Intangible assets Tangible fixed assets Investment property ,040 19, , ,883 Financial assets Investments Other loans Overall ,605 19, , ,831 F-58

231 Balance (in TEUR) Additions (depreciation for the financial year) Provisions Write-ups (in TEUR) Disposals (in TEUR) Reclassification as per IFRS 5 Balance (in TEUR) Residual book values Balance (in TEUR) Balance (in TEUR) ,338 10, ,933 49, , , ,075 10, ,933 50, , ,568 F-59

232 Notes to the consolidated financial statements Principles for the preparation of the financial statement General principles Non-binding convenience translation HAMBORNER AG acquires, manages and utilizes property and other assets. The headquarters of the Company is in Duisburg-Hamborn, Germany. It is entered in the Commercial Register at Duisburg County Court, Germany, under HRB The consolidated financial statements as of 31 December 2008 of HAMBORNER AG, Duisburg- Hamborn were prepared in accordance with International Financial Reporting Standards (IFRS) valid on the balance sheet date, as applicable in the European Union, and with the additional provisions under commercial law to be observed in accordance with Art. 315 of the German Commercial Code and Art. 315a Para. 1 of the German Commercial Code. IFRS comprises the IFRSs issued by the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as well as those of the Standing Interpretations Committee (SIC). All standards and interpretations issued by the International Accounting Standards Board (IASB) and applicable at the time of preparation of the consolidated financial statements are applied, provided that they have been adopted by the EU (endorsement). To this extent the consolidated financial statements of HAMBORNER AG comply with IFRS. The consolidated financial statements of HAMBORNER AG were prepared in euro (EUR). All amounts are shown in thou- sands of euro (TEUR) unless otherwise stated. Minor differences may arise with computations of totals and percentage figures due to rounding. The Managing Board prepared the consolidated financial statements at 31 December 2008 and the consolidated management report for the year 2008 on 24 February 2009 and approved them for submission to the Supervisory Board. The present consolidated financial statements as of 31 December 2008 are based on the same recognition and measurement methods and accounting rules as in the previous year. The balance sheet as of 31 December 2008 is broken down by maturities in accordance with IAS 1(51). In order to improve the clarity of the presentation, various items of the consolidated balance sheet and consolidated income statement have been summarised and explained in the notes. The income statement was structured according to the total cost format. The consolidated financial statements as well as the annual financial statements of HAMBORNER AG are filed with the operator of the electronic Federal Gazette and then announced there. They are available for download on the website In addition, they may be requested from HAMBORNER AG, Goethestrasse 45, Duisburg. HAMBORNER AG is included in the consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest group of companies and HSH Real Estate AG, Hamburg, prepares the consolidated financial statements for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG are filed with the County Courts in Hamburg (HRB 87366) and Kiel (HRB 6127). The consolidated financial statements of HSH Real Estate are lodged at Hamburg County Court under HRB F-60

233 Revised or new IFRS and disclosure, approach or valuation changes arising therefrom Compared with the consolidated financial statements as of 31 December 2007, the standards and interpretations specified below have changed or were applied for the first time due to their subsequent assumption into EU legislation or the expected adoption of the regulation: IFRS 7: Financial instruments: Specifications IAS 39: Financial instruments: Recognition and measurement IFRIC 11: IFRS 2 Group and treasury share transactions These rules are not relevant for HAMBORNER AG at present. As such, there were no resultant effects. The following new or amended standards and interpretations were published by the IASB or IFRIC up to the balance sheet date, but their application only becomes compulsory in future reporting periods or they have not yet been incorporated into EU legislation: IFRS 1: First-time adoption of International Financial Reporting Standards IFRS 2: Share-based payment IFRS 3: Business combinations IFRS 5: Non-current assets held for sale and discontinued operations IFRS 7: Financial instruments: Disclosures IFRS 8: Operating segments IAS 1: Presentation of financial statements IAS 2: Inventories IAS 7: Cash flow statements IAS 8: Accounting policies, changes in accounting estimates and errors IAS 10: Events after the reporting period IAS 16: Property, plant and equipment IAS 19: Employee benefits IAS 20: Accounting for Government Grants and Disclosure of Government Assistance IAS 23: Borrowing costs IAS 27: Consolidated and separate financial statements IAS 28: Investments in associates IAS 29: Financial reporting in hyperinflationary economies IAS 31: Interests in joint ventures F-61

234 IAS 32: Financial instruments: Specifications and presentation IAS 34: Interim financial reporting IAS 36: Impairment of assets IAS 38: Intangible assets IAS 39: Financial instruments: Recognition and measurement IAS 40: Investment property IAS 41: Agriculture IFRIC 12: Service concession arrangements IFRIC 13: Customer loyalty programmes defined Non-binding convenience translation IFRIC 14: IAS 19 The limit on a benefit asset, minimum funding requirements and their interaction IFRIC 15: Agreements for the construction of real estate IFRIC 16: Hedges of a net investment in a foreign operation IFRIC 17: Distribution of non-cash assets to owners IFRIC 18: Transfers of assets from customers No use was made of the possibility to apply those standards and interpretations already incorporated into EU legislation on the balance sheet date ahead of time. HAMBORNER AG anticipates that there will be no significant impact on the net worth, financial position and earnings in the future arising out of the application of the standards and interpretations issued on the balance sheet date, but not yet incorporated into EU legislation. Consolidation group and principles Consolidation group Hambornberg Immobilien und Verwaltungs-GmbH, Duisburg- Hamborn as well as the special share fund Südinvest 107, Unterföhring, Munich until its termination on , are included in the consolidated financial statements unchanged on the previous year, in addition to HAMBORNER AG, as HAMBORNER AG directly holds or held 100% of the voting rights or shares. Principles of consolidation The financial statements included in the consolidated financial statements are prepared in accordance with uniform accounting and valuation principles. Capital consolidation is effected through the offsetting of the book value of participations of Hambornberg Immobilien- und Verwaltungs- GmbH with the corresponding proportionate equity at the time of the first inclusion in the consolidated financial statements. The consolidation group has changed compared with the last consolidated financial statements through the termination of the securities fund Südinvest 107 and, as of December 31, 2008, only consists of HAMBORNER AG and Hambornberg Immobilien- und Verwaltungs- GmbH. This capital consolidation has not given rise to any differential amounts on the assets or liabilities side. F-62

235 Revenues, income and expenses as well as receivables and liabilities between the included companies are eliminated (where they accrue). Recognition and measurement methods Intangible assets Intangible assets are measured at acquisition cost, reduced by scheduled straight-line depreciation. The depreciation correspond to the economic life, which amounts to three to eight years. Tangible fixed assets Tangible fixed assets are measured at acquisition or construction cost, reduced by scheduled straight-line depreciation. Earnings from investment disposals (proceeds from disposals less residual book values) are shown in the income statement under other operating income (gains) or other operating expenses (losses). Investment Property Investment properties are valued by exercising the option in accordance with IAS 40 (30) in conjunction with (56) amortised acquisition or construction costs, taking into account straight-line depreciation. All undeveloped and developed properties as well as buildings and parts of buildings which are held for the attainment of future rental income, for the attainment of profits from appreciations in value and/or for an as yet undetermined use, are regarded as investment properties. They are not intended for administrative purposes or for short-term trade in the context of normal business activity. Scheduled depreciation is recorded out on a straight-line basis over the given property s economic life. In order to calculate the fair value to be disclosed in the notes in accordance with IAS 40, we had our property port- folio valued by independent experts at the end of 2008 in accordance with internationally recognised standards. The property market values were calculated using the discounted cash flow (DCF) method. The cash surpluses (cash flows) to be expected in each case for the respective property were determined for a consideration period of eleven years 2009 to 2019 within the DCF process. The market value of properties results from the sum of the discounted cash flows of the overall planning period before tax plus the residual value also discounted on the valuation date. Risk-adjusted interest rates of 5.1% to 10.25% were applied for the discounting. Please refer to the section Performance of the portfolio in the management report for further information. Impairment and write-ups of intangible assets, tangible fixed assets and investment property In the case of all intangible assets, tangible fixed assets and investment properties, the recoverability of the amounts stated in the balance sheet is regularly evaluated, if events or changes in circumstances indicate that the book value shown in the balance sheet may no longer recoverable. Where the recoverable amount of these assets falls significantly below the book value on the financial statement date, this is taken into account by means of an impairment. The net sales proceeds derived from an active market or if higher the present value of estimated future cash flows from use is referred to for the measurement of the recoverable amount. If the grounds for an impairment undertaken in previous years no longer exist, write-ups are applied up to the book values. Impairment charges are presented under the item Amortisation of intangible assets, tangible fixed assets and investment property. Write-ups are presented in other operating income. The consolidated annual profit of the financial year was reduced in the reporting year to adjust the reported residual book values to the fair values applicable as of December 31, 2008 through non-scheduled depreciations amounting to TEUR. On the other hand, a reversal of impairment an adjustment of 945 TEUR was made for properties subjected to an impairment in previous years. F-63

236 Financial assets Financial assets are measured at the fair value in their initial measurement, in conformity with IAS 39, which takes into account the transaction costs on acquisition. The subsequent measurement depends on the category to which a financial asset is allocated. Loans and receivables are measured at amortised acquisition cost. Where necessary, identifiable individual risks are appropriately taken into account by means of value adjustments. Financial assets held until final maturity are measured at amortised acquisition cost or at the lower market value. The other loans included therein have a fixed term and are therefore measured applying the effective interest method. The financial assets available for sale are measured at the fair value. Derivative financial instruments HAMBORNER AG is using derivative financial instruments in the form of interest rate swaps for the management of risks from interest rate fluctuations. Derivative financial instruments are recognized on the balance sheet on the trading day. The measurement of interest rate derivative transactions which do not satisfy the requirements of hedge accounting are recorded at market values. The profits and losses resulting from changes in market value are recognized in the income statement within the financial result. In the case of cash flow hedges used for the hedging of risks that have an impact on the amounts or the timeframe of future cash flows, changes in market value are recorded in equity (revaluation reserve) without affecting the operating result and take deferred taxes into account, with presentation and documentation of adequate risk limitation efficiency. In the reporting year, -4,739 TEUR was recorded for this directly in equity. The efficiency of cash flow hedges was determined in accordance with the dollar-offset method. As a result, the determination resulted in it being possible to take into account changes to assigned values in equity. Positive market values of derivative financial instruments are shown under other assets, negative market values under financial liabilities. The market values notified by the banks are calculated by discounting the expected future cash flows over the residual term of the contracts on the basis of current market interest rates or yield curves. Deferred income Payments that were paid or collected for agreed future liabilities are deferred at the time of the cash flow and released over the term of the agreements with an effect on the operating result. Non-current assets held for sale and discontinued operations Non-current assets that are intended for sale are shown in the balance sheet as Non-current assets held for sale in accordance with IFRS 5. The acquisition or construction costs of these assets as well as the accumulated depreciation apportionable to them are shown in the consolidated fixed asset movement schedule under disposals. The valuation is measured at the lower value of the book value and fair value less selling costs. F-64

237 From the date of the reclassification, no further scheduled depreciation are carried out. Furthermore, in accordance with IFRS 5, business lines to be discontinued are to be shown separately. A business line to be discontinued refers to a significant business area or a part of a business that is held for disposal. For discontinued business lines, separate disclosure requirements apply to the income statement and the cash flow statement. In implementing the strategic decision to discontinue investment in securities, we show the assets and the liabilities of the special share fund Südinvest 107 in the prior year s balance sheet and the corresponding profit positions in the income statement under separate items in each case. The fund shares were sold on February 6, Provisions Due to the maturity breakdown required by IFRS standards, the provisions are classified into long-term and short-term and shown accordingly. Provisions for pensions Pension provisions are calculated in accordance with the project unit credit method, taking into account future remuneration and pension adjustments. The corridor approach permitted in accordance with IAS 19 is used for actuarial profits and losses. According to that, where actuarial profits and losses exceed 10% of the extent of the pension obligation, they are allocated over the average remaining period of the future beneficiaries. The service costs and the actuarial profits/losses to be recorded for the current year are shown within the personnel costs and the interest expenses included in the pension costs is included within interest expenses. The pension obligations are determined taking into account the biometric calculation principles in accordance with Prof. Dr. Klaus Heubeck s 2005 G actuarial tables. The following parameters form the basis of the calculations: Parameter p.a Actuarial interest rate % 5.5% Remuneration trend % 2.5% Pension trend % 2.0% Average fluctuation % 0.0% The expenses for defined contribution plans are recognized as expenses and shown in personnel costs. Other provisions The short-term provisions have been recorded to the extent of the estimated utilisation (best estimate) without discounting and take into account all liabilities identifiable on the balance sheet date which are based on business transactions or past events, the extent and/or maturity of which is uncertain. Only third-party obligations are taken into account, for which an outflow of assets is probable. Provisions for liabilities that do not result in an outflow of assets in the subsequent year are recorded to the extent of the present value of the anticipated outflow of assets. Liabilities Liabilities are assessed at their fair value in the initial valuation. The subsequent valuation is carried out at amortised acquisition cost. Liabilities are classified as long-term where the contract provides for redemption after twelve months. F-65

238 Deferred taxes Tax deferrals are recorded in the IFRS balance sheet on temporary differences between the values of the assets and liabilities in the tax balance sheet and their book values (liability method) and shown as deferred tax assets or liabilities. The tax rates that are expected at reversal of temporary differences and payment of the actual amount payable are considered in order to determine the deferred tax expense. Deferred taxes are recorded in the income statement as tax income or expenses, unless they relate to items directly recorded in equity which do not affect the operating result. In this case, the deferred taxes are also recorded in equity without affecting the operating result. Deferred tax assets are recognised to the extent that it would be probable that a taxable income will become available, for which the deductible temporary difference can be used. Expenses and revenue recognition On principle, the recording of revenue and other operating income corresponds with when services are rendered or, in the case of sale transactions, when all the relevant rewards and risks in connection with the ownership were transferred to the buyer. Operating expenses are recorded with take-up of the payment or as expense on the date incurred. Explanatory notes on the income statement (1) Revenue from the management of properties and buildings In the reporting year, we achieved total revenues of 21,310 TEUR from the letting and leasing of the properties shown in the balance sheet in accordance with IAS 40. Of this sum, 19,437 TEUR is apportionable to revenue from rents and leases. An increase of 6,198 TEUR overall resulted year-over-year, mainly from the property acquisitions of the current and previous year, which have had an impact of 6,730 TEUR. On the other hand, property sales resulted in a decrease in revenue of 675 TEUR. The remaining rent increases of approximately 244 TEUR arising from indexed or graduated rent arrangements were reduced by a total of 101 TEUR of rent losses, rent reductions in the case of a change of tenant and rent rebates granted for the avoidance of vacancies. Charges for incidental costs passed on to tenants mainly entail heating costs, property levies and other incidental rental costs, which are apportionable under the terms of the respective lease agreements. The revenues in this regard increased by 644 TEUR in the reporting year. The increase of the changes passed on resulted in an amount of 660 TEUR due to the net effect of the change in the property portfolio. Whereas in relation to the remaining properties in the portfolio, revenue from passed-on incidental costs decreased by -16 TEUR overall Revenue from rents and leases Retail space... 13,233 9,567 Office space and medical practices... 4,636 2,019 Manufacturing and other industrial areas Residentials Garages/car parking spaces Other lettings and leasings (agricultural leasings, licensing agreements etc.) Subtotal... 19,437 13,239 Income from passed-on incidental costs to tenants... 1,873 1,229 Total... 21,310 14,468 F-66

239 (2) Other own work capitalised No own work to be capitalised accrued in the reporting year. The valuation of the previous year related to in-house engineering work and construction overhead charges in connection with alterations to be capitalised to our office building in Hamburg. (3) Other operating income Income from the sale of Investment property and of Non-current assets held for sale... 6,737 5,621 Income from to the disposal of investments... 11,224 0 Reversal of impairment changes ,516 Write-ups of discounted housing loans Remaining other operating income Receipt of indemnifications and reimbursements Release of provisions Charges passed on to tenants and leaseholders Pension liability insurance Other Subtotal Total... 19,500 7,568 The income from investment disposals results mainly from the sale of two portfolio properties and a residential portfolio consisting of four properties. The income from the disposal of investments results from the sale of our shares in Wohnbau Dinslaken GmbH. The reversal of impairment changes arises from the adjustment of properties depreciated to the lower fractional value in previous years to the fair values determined by an expert as of December 31, (4) Expenses for management of properties and buildings Overall, administrative costs increased by 682 TEUR year-over-year and amount to 4,135 TEUR. Ongoing operating expenses increased by 1,167 TEUR, mainly as a result of property acquisitions. This item essentially includes expenses for energy, property levies, ground rents, insurance premiums and land taxes, which we predominantly pass on to our tenants under the terms of the respective lease agreements. Maintenance expenditures decreased by 485 TEUR and amount to 1,109 TEUR. The decrease is based essentially on the discontinuation of the measures performed in the previous year on our Hamburg office property Real estate operating expenses Energy, water and similar... 1, Property levies Land taxes Ground rents Insurance premiums Rents and leases for third-party properties Other Subtotal... 3,026 1,859 Building and property maintenance... 1,109 1,594 Total... 4,135 3,453 F-67

240 (5) Personnel costs/employees Personnel costs rose by a total of 453 TEUR compared with the previous year. Whereas social security contributions and expenses for the pension scheme rose only slightly by 53 TEUR, wages and salaries increased by 400 TEUR. The personnel changes of the previous year, which were recognised as an expense in full for the first time in the reporting year, played a key role. The severance settlement paid to the departing spokesperson of the Managing Board also increased personnel costs for the reporting year Wages and salaries... 2,599 2,199 Social security and other pension costs Expenses for pension scheme/ pension costs Total... 2,973 2,520 The average number of employees (excluding the Managing Board) in the reporting year added as follows: 2008 (Number) 2007 (Number) Employees outside the collective agreement Pay-scale employees Total (6) Amortisation of intangible assets, tangible fixed assets and investment property Amortisation and depreciation in 2008 was approximately 7,080 TEUR larger than the previous year and amounted to 10,257 TEUR. Of this amount, 10,215 TEUR is apportionable to Investment property. Included in this are impairment charges amounting to 4,717 TEUR due to the adjustment of the residual book values shown as of December 31, 2008 to the applicable fair values. (7) Other operating expenses The item breaks down as follows: General management and Articles of Association-related expenses... 1, Remaining other operating expenses... 1,635 1,410 Total... 2,677 2,271 The general management and Articles of Association-related expenses increased by 181 TEUR year-over-year and amount to 1,042 TEUR. This is attributable to increases in the costs in connection with the general shareholders meeting (84 TEUR) amongst other factors. The remaining other operating expenses increased by 225 TEUR to 1,635 TEUR. This increase results essentially from the allocation to the mining damage provision, which is 155 TEUR higher than in the previous year. The remaining other operating expenses of the financial year include consultancy fees of 1,179 TEUR. Overall, these are at about the same level as the previous year (1,162 TEUR). Where related parties were included in the consultancy services, we refer to the additional explanatory notes in the section Relationships with closely associated companies and persons in the financial year The following statutory auditors fees were recorded as expenses in the financial year: 2008 BDO D & T 2007 Audit of financial statements Tax consultancy services Other services Total F-68

241 (8) Result from investments The result from investments includes distributions of profit of Wohnbau Dinslaken GmbH and Montan GmbH Assekuranz-Makler Wohnbau Dinslaken GmbH, Dinslaken Montan GmbH Assekuranz-Makler, Dusseldorf Total (9) Financial result The income from securities including the capital gains of the reporting year amount to 277 TEUR following 35,566 TEUR in the previous year. This amount relates to interest, investment and gains from the securities fund Südinvest 107 and is shown under the proceeds from Discontinued operations. Capital losses of 20 TEUR (previous year: 1,426 TEUR) accrued to the fund. They are also shown under the discontinued operations. Due to the investment of the capital gains realised from the sale of the fund shares and disposals of tangible fixed assets and financial fixed assets as time deposits, interest and similar income increased by 400 TEUR year-over-year. Of this, 202 TEUR is related to discontinued operations (previous year: 974 TEUR). Total Activities to be discontinued Activities to be continued Total Activities to be discontinued Activities to be continued Income from securities including capital gains ,566 34, Capital losses and amortization on financial investments ,426-1,426 0 Other interest and similar income... 1, ,717 1, Interest and similar charges... -4, ,644-1, ,234 Financial result... -2, ,927 34,425 34, Interest and similar charges: Interest element of allocations to pension provisions Interest rate hedging transactions Interest on loans... -4, Other interest and similar charges Interest for provision of security on account of Münster Total... -4,644-1,234 Interest and similar charges rose by 3,410 TEUR year-over-year to 4,644 TEUR, essentially due to the increase in the credit financing for our property investments. The other interest expense of the reporting year includes interest amounting to 50 TEUR for tax arrears payments anticipated following an audit. The interest rate hedging transactions involve interest rate swaps of varying terms. Payment is agreed on the basis of fixed interest rates and quarterly or half-yearly accounting. In turn, we receive a variable interest rate based on the 3-month or 6-month EURIBOR. You will find further information on the interest rate swaps in the section Financial liabilities and derivative financial instruments. (10) Taxes on income and profit Current income tax charge... 5,998 1,678 Deferred taxes... -4,475-8,323 Foreign withholding tax Total... 1,517-6,645 F-69

242 a) Income tax charge The current income tax charge includes the corporation tax and business tax of HAMBORNER AG. Other items taken into consideration mainly involve a tax charge for previous years of 500 TEUR arising from a tax audit for the years 2001 to 2006 as well as tax proceeds in the amount of 400 TEUR from the adjustment of the provision for corporation tax for taxes. The tax rate that was effective on the balance sheet date is used to determine the deferred The consolidated tax rate to be applied to earnings before taxes on income amounts to 15.8% in the reporting year (previous year: 26.4%). The reduction is based on the amendment of the German Corporation Tax Act by the corporate tax reform that was effective on January 1, The anticipated tax charge arising from applying HAMBORNER AG s consolidated tax rate can be reconciled to the actual tax charge as follows: Result of the business activity from activities to be continued... 18,484 11,056 Consolidated tax rate % 26.4% Anticipated tax charge... 2,925 2,917 +/- Tax effects from previous years /- Effect from the alteration of tax rates ,449 - Effect from tax-free income... -1, Effect from non-deductible expenses /- Effect from the parts of income subject to trade tax (current and deferred) /- Value adjustment/resolution or cessation of deferred tax claims /- Other effects Taxes on income... 1,517-6,645 Consolidated tax ratio % -60.1% b) Deferred taxes The (credited) deferred taxes charged to equity relate to the market valuation of the securities and derivative financial instruments. The development of deferred taxes on both the assets and the liabilities side is represented as follows in the reporting year: Deferred tax assets Revaluation/ market valuation Pension provisions Derivative financial instruments Other provisions Other Write-down to the going concern value of invest. prop. Total Balance as of 1 January Reduction/increase in profit for the financial year Reclassification into equity Balance as of 31 December Deferred tax liabilities Special tax write-downs Pension provisions (in TEUR) Revaluation/ market valuation Other Total Balance as of 1 January , , ,169 Reduction/increase in profit for the financial year , ,981 Balance as of 31 December , ,188 F-70

243 (11) Result from discontinued operations The result from discontinued operations includes the income and expenses from our special securities fund Südinvest 107 until its termination and breaks down as follows: Other operating income Other operating expenses Dividend earnings ,314 Realised share price gains ,598 Realised share price losses ,418 Write-downs of securities Interest income Earnings before taxes ,377 Taxes on income Result after tax ,525 Interest and investment proceeds of 202 TEUR and capital gains (offset with capital losses and depreciation) of 257 TEUR were achieved in the fund in the reporting year. (12) Earnings per share A consolidated profit of 17,341 TEUR, which is lower by 34,885 TEUR year-over-year, is shown in the reporting year mainly due to the discontinuation of the extraordinary income realised in the previous year through the termination of the securities fund Südinvest 107 as well as a one-off tax effect arising from adjustment of the deferred taxes to the tax rates applicable from Earnings per share are determined in compliance with IAS 33. According to this, the earnings per share are derived from the net result apportionable to the shares being divided by the weighted average number of shares. A dilution, e.g. through stock options or convertible bonds, does not apply as HAMBORNER has issued no such programmes. The diluted and undiluted earnings per share are therefore identical Number of shares in circulation... Thsd. units 22,770 22,770 Net result/consolidated surplus... TEUR 17,341 52,226 Dividend per share... EUR Earnings per share as per IAS EUR thereof from continuing operations... EUR thereof from discontinued operations... EUR Explanatory notes to the balance sheet (13) Intangible assets and tangible fixed assets Intangible assets entail usage rights for system and application software acquired against payment, valued at acquisition cost and depreciated on a straight-line basis over a useful life of three to eight years. This decrease in value is presented under the item Amortisation of intangible assets, tangible fixed assets and investment property. Non-scheduled value adjustments (reductions and increases) were not necessary in We show the Company s administrative building in Duisburg and the fixtures and equipment under tangible fixed assets. The depreciation calculation for the administrative building is based on a total useful life of 50 years and a residual useful life on the balance sheet date of 11 years. The fixtures and equipment have an average useful life of between 3 and 15 years. (14) Investment property The additions in the case of investment properties are apportionable to the portfolio properties acquired in the reporting year and prepayments on account were 17,363 TEUR and post-capitalisations to additions from the previous year were 1,994 TEUR. F-71

244 Of the Non-current assets held for sale shown with a value of 19,813 TEUR in the prior year s balance, properties with a book value of 8,259 TEUR were sold in the reporting year, after another property from the investment property was reclassified during the year into the non-current assets held for disposal. Since it no longer appeared highly likely on the balance sheet date that the properties remaining as of December 31, 2008 would be marketed, in accordance with IFRS 5.26 they were reallocated to the investment properties to be shown in the balance sheet in accordance with IAS 40. A book value addition to the investment properties of 11,553 TEUR resulted from the reclassifications of the properties. The following useful life ranges were applied in the reporting year: Useful life ranges of non-current assets Years Business and office buildings... 33to50 Other commercial buildings... 40to50 Self-service stores... 33to40 To adjust the amortised acquisition and construction costs presented as of December 31, 2008 to the applicable fair values, we recorded impairment charges amounting to 4,717 TEUR. On the other hand, reversed an impairment adjustment in the amount of 945 TEUR for properties subjected to an impairment in previous years. The development during the reporting year of the investment property is as follows: Balance as of 1 January , ,782 + Additions as a result of purchase... 16, ,204 + Additions as a result of prepayments... 1, Additions as a result of subseq. inv.... 1, , ,925 - Disposals as a result of sales Disposals as a result of reclassifications... -4,976-19,813 + Additions as a result of reclassifications... 16, ,553-20,382 + Reversal of impairment adjustment ,516 - Depreciation for the financial year ,215-3,139 Balance as of 31 December , ,702 The direct operating expenses from leased and vacant investment properties amount to 4,135 TEUR in the reporting year (previous year: 3,453 TEUR). All properties, with the exception of temporary partial vacancies in individual properties, were leased on the balance sheet date. Expenses relating to vacant spaces in the reporting year, including unlet and undeveloped property holdings, amount to 79 TEUR (previous year: 251 TEUR). The expenses relating to the unlet spaces are determined according to the weighted percentage ratio which is allocated to the vacancies in relation to the total leased area. Our commercial property portfolio was also valued by independent experts as of December 31, 2008 according to internationally acknowledged standards. Taking into account the purchases and sales in the reporting year, the fair value of our developed property portfolio was as follows: Investment property , ,610 Non-current assets held for sale ,410 Total , ,020 F-72

245 Five of the 16 properties reclassified into the current assets in the prior year s balance sheet in accordance with the provision of IFRS 5 were sold in the reporting year. The remaining 11 properties were reallocated to the item Investment property as of December 31, 2008, as the marketing of these properties no longer appeared highly likely on the balance sheet date. The property portfolio is valued in accordance with the discounted cash flow process. For further details on the valuation of our properties, we refer to the section Performance of the portfolio in the management report. Arising out of two notarial deeds of sale entered into in the reporting year, the transfer of ownership of three properties in total was still outstanding on the balance sheet date, as the prerequisites for transfer had not yet been completely fulfilled. Purchase price payments of EUR 30.5 million in total were payable on transfer of ownership, which took place at the beginning of February The undeveloped property is shown in the balance sheet at the historical acquisition cost. A different value cannot be reliably ascertained due to its structure (areas used for agricultural and silvicultural purposes). (15) Financial assets Other loans predominantly include long-term interest-free housing loans and other loans to staff, which were valued at cash value. They decreased by 16 TEUR to 38 TEUR through scheduled redemptions and repayments. The investments shown under the item in the previous year were sold in the reporting year or at the beginning of Where the shares were not yet transferred on December 31, 2008, we report them under the Non-current assets held for disposal. (16) Trade receivables and other assets, deferred tax assets, income tax receivables All receivables and other assets are shown in the balance sheet at the nominal value or at the lower fair value. Individual value adjustments for doubtful receivables were not necessary in General value adjustments are not made. The other non-current assets primarily include development costs of 264 TEUR (previous year: 274 TEUR) paid for the leasehold property in Solingen, and the capitalised actuarial reserve for claims from pension liability insurance policies for pension obligations (99 TEUR, previous year: 87 TEUR). The existing pension liability insurance policies are not considered to be plan assets as per IAS 19. The deferred tax claims essentially result from valuation differences for interest rate derivatives, investment properties and other provisions. The item increased by 1,758 TEUR year-over-year to 1,914 TEUR. At 855 TEUR, the biggest part of the increases related to the interest rate derivatives. The deferred tax claims from the market valuation of the securities fund amounting to 407 TEUR, presented under the assets from discontinued operations in the previous year, were released with an effect on earnings in the reporting year due to the sale of the fund. The receivables and other current assets break down as follows: Trade receivables Other Total Trade receivables relate almost exclusively to receivables due from tenants and leaseholders. As of December 31, 2008, the item includes an indemnity claim amounting to 155 TEUR, which was payable due to early termination of a tenancy. The other receivables and current assets decreased by F-73

246 326 TEUR and amount to 602 TEUR, mainly due to the receipt of a purchase price claim recorded in the previous year. The trade receivables shown were all due on the financial statement date and are thus overdue within less than 30 days following the balance sheet date. The profit of the reporting year was reduced by 70 TEUR (previous year: 11 TEUR) due to the write-off of receivables; written off receivables amounting to 11 TEUR (previous year: 1 TEUR) have been received in the same period. Income tax receivables amount to 557 TEUR (previous year: 454 TEUR) and relate to reimbursement claims for the assessment periods 2007 and (17) Bank deposits and cash balances (cash fund) The receivables and other current assets break down as follows: (in TEUR) (in TEUR) Bank deposits... 54,010 6,438 Cash balances Total... 54,012 6,442 The increase in liquid funds by 47,570 TEUR mainly results from the cash inflows gained from the sale of the special securities fund, the shareholding in Wohnbau Dinslaken GmbH, the properties in Oldenburg and Osnabrück and the residential portfolio. (18) Non-current assets held for sale Where the properties reclassified into the short-term category in the prior year s balance sheet were not sold in the reporting year, they have been reallocated to Investment property as of December 31, This change in presentation was carried out in compliance with IFRS In view of the current situation in the property and financial markets, sale no longer appears highly likely. The omitted scheduled depreciation of properties was corrected in the amount of 467 TEUR in the course of the reclassification for the period while the assets were classified as held for sale. The item from the shareholding in Montan GmbH Assekuranz Makler, Dusseldorf continues to exist as of December 31, The Company shares were sold by notarial deed dated January 28, (19) Assets and liabilities from discontinued operations The breakdown of assets and liabilities from discontinued business lines prescribed in accordance with IFRS 5 lapses with the discontinuation of our involvement in securities in February The prior year s balance sheet contains the following information on this: Securities ,715 Deferred tax assets Receivables and other current assets ,448 Bank deposits and cash balances ,589 Income tax receivables Assets from discontinued operations ,470 Deferred tax liabilities ,950 Other current liabilities Liabilities from discontinued operations ,145 F-74

247 (20) Equity The development of equity from January 1, 2007 until December 31, 2008 is shown in the statement of changes in equity. The subscribed capital amounts to EUR million and is divided into 22,770,000 no-par-value shares made out to bearer. The legal reserve amounts to 2,277 TEUR. Both items relate to HAMBORNER AG. After resolutions approved by the general shareholders meeting on 5 June 2008, the Managing Board was authorised to increase the share capital of the Company with the agreement of the Supervisory Board as follows: 2,270 TEUR (Authorised Capital I) 9,080 TEUR (Authorised Capital II). Authorised allotments of 11,350,000 shares result from the authorised capital which can be issued to the shareholders as no-par-value shares. The authorisation is valid until 4 June The issued shares in the Company would increase to 34,120,000 units in the event of full implementation of the authorised capital measures. The HAMBORNER Group has a net retained profit amounting to 35,165 TEUR (previous year: 53,922 TEUR) as of 31 December 2008 after the transfer of 28,128 TEUR into other retained earnings. The Managing Board will propose a total dividend payout of EUR 7,969,500 at the general shareholders meeting for the financial year This corresponds to a dividend of EUR 0.35 per no-par-value share. The dividend proposal is based on the net retained profit of HAMBORNER AG under commercial law amounting to 28,130 TEUR. The other retained earnings include the earnings achieved in the past by the companies included in the consolidated financial statements, in so far as they were not distributed and amount to 104,575 TEUR. They increased by 28,127 TEUR year-over-year. The revaluation reserve includes the fair value changes from the valuation of derivatives in conjunction with hedging transactions (cash flow hedges), in so far as they were recorded without affecting the operating result, as well as the profit-neutral adjustment of the book value of participations of Montan GmbH Assekuranz-Makler to the fair value. The objectives of our capital management are to secure both the Company s continuing existence and an adequate return on capital. The provisions of Company law form the basic framework for capital management. Where compliance with further regulatory or contractual provisions is required, equity is additionally controlled in accordance with such provisions. In instances in which no compliance with separate provisions is required, the equity to be controlled consists of the balance sheet equity. Otherwise, the balance sheet equity is always adjusted to the regulatory and contractual requirements. (21) Financial liabilities and derivative financial instruments Financial liabilities increased by 6,673 TEUR to 91,104 TEUR. The bulk of this increase, 5,807 TEUR, predominantly relates to the addition of financial derivatives and the change in market value of existing derivatives. The growth in the property division effected in the two previous years was financed in part by the raising of loans in the amount of a notional EUR 86.8 million. These loans amounted to EUR 84.5 million on the balance sheet date. Other loans with a value of EUR 18.4 million for notarised property purchases have been applied for and authorised, but had not yet been disbursed on the balance sheet date. Both long-term fixed-interest agreements and for greater flexibility interest rate agreements based on EURIBOR underlie the disbursed property loans. The interest rate risk was eliminated in the latter instances by concluding EURIBOR-based interest rate swaps and, on F-75

248 the other hand, by paying an agreed fixed-rate interest over the swap term. The notional hedging volume resulting from this amounted to EUR 89.8 million on the balance sheet date and the market value for the interest rate hedging transactions executed was -5,780 TEUR. The term of the derivatives ends in 2017 or in 2018 depending on the underlying loan transactions. In addition, the Company has held two further financial derivatives since 2000 for which no hedging relationship with a loan transaction exists. The notional hedging volume was approximately EUR 0.9 million on the balance sheet date. The term of the interest rate hedging transactions ends in Liabilities of 26 TEUR were shown in the reporting year for possible risks that may arise from these derivatives. A change in the market valuation resulted in expenses of 8 TEUR (previous year: an income of 33 TEUR) in the reporting year, which are included in the interest expenses (previous year: interest income). On December 31, 2008, land charges of EUR 90.4 million were entered in the land register. Furthermore, to safeguard a line of credit of EUR 3 million, the identical amount was guaranteed to a bank in the form of a mortgage on one of our properties. A temporary current account overdraft amounting to EUR 34 million, used until the disbursement of the requested long-term loans of EUR 31 million, was repaid in February Long-term Dec 31, 2008 Dec 31, 2007 Short-term Long-term Short-term Financial liabilities... 81,543 3,754 47,829 36,397 Derivative financial instruments... 5, Total... 87,350 3,754 48,034 36,397 The financial liabilities bear interest at rates of between 4.41% and 5.21%. The redemptions are made quarterly, half- yearly or annually in accordance with the loan agreements. Contractually agreed redemption payments Financial liabilities of which payable within one year... 3,753 36,397 payable within two to five years... 12,154 8,396 payable after five years... 69,390 39,433 Total... 85,297 84,226 HAMBORNER AG is exposed to various risks due to its business activity. The risk report, which is part of the management report, includes a detailed presentation of these risks and their management. Derivative financial instruments in the form of interest rate swaps are used primarily for the management of interest rate risks. The risks resulting in connection with the use of these derivative financial instruments are subject to HAMBORNER AG s risk management and control. The risks resulting from the financial instruments relate to credit, liquidity and market risks. Credit risks exist in the form of risks of default for financial assets. Maximum risk exposure amount to the book values of the financial assets. For derivatives, this is the total of all the positive market values and, for primary financial instruments, the total of the book values. If risks of default exist, they are taken into account by means of value adjustments. Liquidity risks constitute refinancing risks and thus the risks of failure to meet existing obligations when they fall due. The strategy and the results of the planning process are taken as a basis F-76

249 for the early identification of the future liquidity situation. The expected liquidity requirements are scheduled in the medium-term plan, which covers a period of five years. The current liquidity requirements are compared with the actual data by means of daily, weekly and monthly budgetary accounts. Sensitivity analyses are required for the presentation of market risks in accordance with IFRS 7. Hypothetical changes in risk variables based on past experience should demonstrate both influences on the result as well as on the equity capital. Interest rate risks in particular are relevant for HAMBORNER AG in this regard. Interest rate risks result from changes in market interest rates. We limit such risks through the use of interest rate swaps. Sensitivity analyses, which show the consequences of changes in market interest rates on interest payments, interest expenses and income as well as on equity, are carried out in compliance with IFRS 7. The following assumptions apply to this end: primary financial instruments with a fixed interest rate are only subject to interest rate risks where they are assessed at fair value. Financial instruments that are valued at acquisition cost are not subject to interest rate risks. In the case of cash flow hedges for the hedging of interest-induced payment fluctuations, changes in the market interest rates have consequences on the equity reserve. Therefore, these financial instruments are taken into account in the sensitivity analysis. Primary financial instruments with a variable interest rate should also be subjected to a sensitivity analysis, as they too are subject to a risk of a change in the market interest rate. In the sensitivity analysis, the indicative valuation was calculated as of the balance sheet date on the basis of the market value, taking accrued interest into account. Sensitivity analysis Market value of financial instruments on a floating-rate basis... -5, Change in hedging reserve Interest rate + 1%... 4,492 1,861 Interest rate - 1%... -4,879-1,861 Income statement Interest rate + 1% Interest rate - 1% Other information on financial instruments As a result of the forthcoming sale, our shareholding in Montan GmbH Assekuranz-Makler, Dusseldorf was reclassified from Investments to Non-current assets held for sale as of December 31, The valuation under the current assets is now recorded at market value. For short-term financial assets and liabilities that are not derivatives, the respective book value constitutes an appropriate approximation of the fair value within the meaning of the IFRS. The net profit from financial assets which are assessed at the fair value with an effect on the operating result amounts to 0 TEUR (previous year: 4.9 TEUR) in the reporting year. F-77

250 Additional details on financial instruments (2008) (in TEUR) Measurement in accordance with IAS 39 Measurement in accordance with IAS 39 Measurement in accordance with other standards Continuing activities available for disposal Fair value available for disposal / derivatives Continuing activities Loans and receivables Continuing activities held until final maturity Continuing activities Fair value Continuing activities Assets Intangible assets Tangible fixed assets Investment property , ,342 Financial assets Long-term other assets Deferred tax assets... 1,914 1,914 Short-term trade receivables and other assets Income tax receivables Bank deposits and cash balances... 54,012 54,012 Non-current assets held for sale and assets from discontinued operations , , ,001 Liabilities Equity , ,050 Long-term trade accounts payable and other liabilities... 91,134 5,807 * 83,575 1,753 Deferred tax liabilities... 15,188 15,188 Provisions for pensions... 5,780 5,780 Other long-term provisions Short-term trade accounts payable and other liabilities... 5,577 4, Income tax liabilities Other short-term provisions... 2, ,002 Liabilities from discontinued operations , ,807 88, ,112 * Derivatives F-78

251 Additional details on financial instruments (2007) (in TEUR) Measurement in accordance with IAS 39 Measurement in accordance with IAS 39 Measurement in accordance with other standards Continuing activities available for disposal Fair value available for disposal / derivatives Continuing activities Loans and receivables Continuing activities held until final maturity Continuing activities Fair value Continuing activities Assets Intangible assets Tangible fixed assets Investment property , ,702 Financial assets Long-term other assets Deferred tax assets Short-term trade receivables and other assets Income tax receivables Bank deposits and cash balances... 6,442 6,442 Non-current assets held for sale and assets from discontinued operations... 79,283 50,715 8, , , ,715 15, ,321 Liabilities Equity , ,507 Long-term trade accounts payable and other liabilities... 51, * 49,765 1,924 Deferred tax liabilities... 14,219 14,219 Provisions for pensions... 5,923 5,923 Other long-term provisions Short-term trade accounts payable and other liabilities... 54,534 52,135 2,399 Income tax liabilities Other short-term provisions... 2, ,953 Liabilities from discontinued operations... 5,145 5, , , ,173 * Derivatives F-79

252 The net result (profit +/loss -) from financial assets and liabilities is made up as follows: Available for disposal... 1,078 34,826 Held until final maturity Derivatives Liabilities at amortised acquisition cost... -4, (22) Deferred tax liabilities Deferred tax liabilities amount to 15,188 TEUR following 14,219 TEUR in the previous year. They predominantly relate to the special account with reserve characteristics under commercial law. The increase is derived primarily from the change in the special account with reserve characteristics. (23) Liabilities from taxes on income Liabilities from taxes on income increased by 558 TEUR to 660 TEUR. They relate to business taxes for the year 2008 amounting to 160 TEUR as well as the probable additional payment amounts as established by a tax field audit. (24) Trade accounts payable and other liabilities The trade accounts payable and other liabilities amount to a total of 5,607 TEUR as of December 31, Of this amount 1,823 TEUR is payable within the next 12 months. The item decreased by 16,390 TEUR compared with the previous year. The decrease is mainly accounted for by the outflow of various liabilities in connection with property transactions that were shown in the prior year s balance sheet. There were trade accounts payable amounting to 606 TEUR on the balance sheet date. At 58 TEUR, the figure was marginally below the value for the previous year. (25) Provisions for pensions Occupational pension scheme commitments exist for eligible current and former employees and surviving dependants. These are project benefit commitments in accordance with IAS 19. The Projected Unit Credit method is the basis of the valuation of the provision. It is not only pensions and purchased pension entitlements recorded on the balance sheet date that are taken into account with this project unit credit method, but also increases in salaries and pensions expected in the future. Furthermore, a pensionable age of 63 years is assumed. Expenses from these commitments are recorded over the length of service of employees in accordance with expert actuarial opinion and consist of the work service costs and the actuarial gains or losses recorded for the current year, which are shown under personnel costs, as well as the interest expense, which has an impact on the financial result. Interest expenses from pension obligations amounted to 375 TEUR in 2008 (previous year: 317 TEUR). In compliance with the corridor approach included in accordance with IAS 19, actuarial losses not yet recorded on the balance sheet date, amounting to 1,060 TEUR, were disregarded in the calculation of pension provisions to prevent greater volatility. These losses are only taken into account with application of the corridor approach in so far as they exceed the thresholds of the corridor defined in IAS 19 (10% of the actual defined benefit obligation). The corridor threshold represents 684 TEUR on the balance sheet date. In 2008, the corridor threshold was exceeded by 376 TEUR which will be recorded over the expected average remaining working period of the beneficiaries. This pro rata loss, which has not yet been taken into account, should only be offset in the subsequent period in each case, in accordance with IAS 19. As such, an amount of 80 TEUR will be taken into account in The overstepping of the corridor threshold in 2007 has given rise to actuarial losses of 83 TEUR in the reporting year. F-80

253 Development of pension provisions in the reporting year: Balance sheet value on 1 January... 6,415 6,330 6,140 5,923 Ongoing service costs Interest expenses Actuarial gains/losses recorded for the current year Pension payments Balance sheet value on 31 December... 6,330 6,140 5,923 5,780 Actuarial losses not recorded ,174 1,060 Defined Benefit Obligation (DBO) at the year-end... 7,000 6,917 7,097 6,840 Experience-based adjustment of plan liabilities The movements in the present value of the projected benefit obligation include the following: Cash value on 1 January (Defined Benefit Obligation)... 6,938 7,000 6,917 7,097 Service costs Interest expenses Actuarial profits/losses Pension payments Cash value on 31 December (Defined Benefit Obligation)... 7,000 6,917 7,097 6,840 During the reporting year HAMBORNER paid contributions of 145 TEUR (previous year: 131 TEUR) into statutory pension insurance, which should be regarded as a defined contribution pension scheme. In addition, contributions to direct insurance policies or pension funds of 12 TEUR (previous year: 13 TEUR) were made by the Company. With regard to defined contribution schemes, the Company assumes no additional obligations beyond the settlement of contribution payments. Charges are recorded in personnel costs. Pension payments of 649 TEUR are expected in the financial year (26) Other provisions The maturities of the other provisions are as follows: thereof Overall Charges Utilisation Releases Overall Long-term Short-term Provisions for Bonus Ratingen lease guarantee Mining damage... 1, , Provisions linked to the Articles of Association and legal form Legal and consultancy expenses Outstanding invoices Other Total... 2,873 1,792 1, , ,279 Bonus provisions increased by 109 TEUR in the reporting year to 559 TEUR. The increase is mainly attributable to the fact that remunerations granted only pro rata in the previous year are recognised in full as an expense in the reporting year. The lease guarantee granted in connection with the sale of the Ratingen property and limited to 24 months expired in the reporting year. In 2008, we received a claim of 264 TEUR arising out of the guarantee. The provisions for mining damage relate to the potential risks from our former mining activity, which persist to a limited extent. In this connection, we refer to the more comprehensive explanations in the report on opportunities and risks which is an integral part of the consolidated management report. F-81

254 Mining-related provisions are long-term provisions that are shown in the balance sheet at their settlement value discounted on the balance sheet date. A rate of interest of 6.0% (previous year: 6.0%) with a residual term of up to 23 years (previous year: 24 years) is taken as a basis here as the discount factor. A charge of 189 TEUR was made in the reporting year to adjust the provision amount to the fair value. An amount of 23 TEUR resulted from the addition of accrued interest. The 2 TEUR shown under utilisation relates to expenses for management of the pits and coalfields concerned. The provisions for obligations linked to the Articles of Association and legal form include remunerations for the Supervisory Board and statutory auditor fee. We refer to foot note (7) for further information on the statutory auditor fee within the meaning of Art. 314 Para. 1 No. 9 in conjunction with Art. 315a Para. 1 of the German Commercial Code. The provisions for outstanding invoices decreased by 89 TEUR year-over-year and amount to 276 TEUR. (27) Contingent liabilities and financial obligations One guarantee in connection with three compulsory shares in a housing association is not shown in the balance sheet. The amount remains unchanged with 0.8 TEUR. The other financial obligations after the balance sheet date result from four long-term leasehold contracts and are constituted as follows: Contract term until Payment obligation (in TEUR p.a.) Charge passed on (in TEUR p.a.) 31 December March June 2012* June Total * The leasehold expires on The encumbered property transfers into our ownership on that date on the basis of contractual agreements. There are no further contingent liabilities, third-party liabilities or other financial obligations. (28) Leasing relationships All leases that HAMBORNER has executed with its tenants are classified as operating leasing in accordance with IFRS, as all rewards and risks associated with ownership remain with the Group. Accordingly, HAMBORNER is the lessor in all operating lease relationships (tenancies), of varied structure, for investment properties. Within the framework of operating leases, investment properties with a book value of EUR million (previous year: EUR million) were leased as of HAMBORNER will receive the following minimum leasing payments from existing non-terminable operating leasing relationships from commercial leasing: up to one year... 18,377 17,401 longer than one year up to five years... 58,104 56,173 more than five years... 45,407 48, , ,515 The minimum lease payments include net rents up to the agreed expiry of the contract or up to the earliest possible termination date of the lessee (tenant), irrespective of whether a termination or non-utilisation of an extension option is actually expected. Conditional rent payments had no significant impact in the reporting period. F-82

255 Explanatory notes to the cash flow statement The consolidated cash flow statement was prepared in accordance with the provisions of IAS 7 and subdivides the cash flows of the financial year into cash flows from operating, investment and financing activities. HAMBORNER is not subject to influences from exchange rate movements or changes in the consolidation scope. The cash flows from dividends, interest and tax payments received are always shown separately in the presentation of the cash flow statement. (29) Cash flow from operating activities The cash flow statement is based on the consolidated earnings before taxes (EBT), taking into account the result from discontinued operations. The book profit from the disposal of financial assets results mainly from the sale of our participation in Wohnbau Dinslaken GmbH amounted to EUR 11.2 million and was eliminated from the cash flow of operating income. The value for the previous year of EUR 32.8 million results from the switches made in the special securities fund Südinvest. Non-cash expenses arise primarily from the change of 4,470 TEUR in deferred taxes affecting net income as well as interest expenses and income of TEUR, which resulted in no outflow or inflow of funds in the reporting year. Operating cash flow per share is calculated as below: Number of shares in circulation... Thsd. units 22,770 22,770 Operating cash flow... TEUR 10,283 23,528 Operating cash flow per share... EUR (30) Cash flow from investment activities The cash flow from investment activity resulted in a cash inflow of 41,696 TEUR overall in the past financial year (cash outflow of 73,103 TEUR in the previous year). The main reason for these changes was the cash inflow of EUR 62.6 million from the sale of both the special securities fund and our shareholding in Wohnbau Dinslaken GmbH. The cash outflow from investments in the reporting year mainly results from a payment of a purchase price liability from the previous year as well as from the cash outflow for the properties purchased in Herford, Bäckerstr and Freiburg, Robert-Bunsen-Str. 9a. (31) Cash flow from the financing activities In the financial year 2008, approximately EUR 8.0 million was distributed to the shareholders of the Company and thus EUR 1.1 million more than in the previous year. The cash outflow of the reporting year results from the scheduled loan repayment as well as the redemption of short-term property bridge financing, for the refinancing of which a long-term loan was utilised. In addition, a funding arrangement already provided in the previous year was utilised for the financing of the Freiburg property. F-83

256 (32) Cash flow from discontinued operations The present cash flow statement also includes the cash inflows and outflows of the securities fund Südinvest 107 shown in the income statement and in the balance sheet as discontinued operations. The cash flows from the fund included in the consolidated cash flow statement break down as follows: Cash flow from operating activities... 1, Cash flow from investment activities... 50,784 5,716 Cash flow from the financing activities ,046 Cash flow from discontinued operations... 52,189 4,115 Other notes and compulsory details Events after the balance sheet date On February 6, 2008, a deed of sale for an office building in Fuhlsbüttler Straße and an office property with storage areas in Ziethenstraße in Hamburg was notarised. Both properties transferred to the ownership of HAMBORNER AG at the beginning of February An office property in Münster also passed to our ownership in February The notarial deed of sale for this was executed on Purchase price payments of EUR 30.5 million in total were payable for these property acquisitions, and have been made in the meantime. In keeping with the Company s strategic reorientation into a pure property corporation, we initiated measures in the reporting year to divest ourselves of our partial investments in Montan GmbH Assekuranz Makler in Dusseldorf and Gesellschaft für Stromwirtschaft mbh in Mülheim an der Ruhr. The sale of our shareholding in Montan GmbH was contractually executed on with economic effect on the date of notarisation. The purchase price of 130 TEUR has since been received. Assumptions and estimates In the preparation of the consolidated financial statements, assumptions have been made and estimates used which have had an impact on the recognition and measurement of the assets, liabilities, income and expenses. These assumptions and estimates essentially relate to the determination of useful life ranges, the retention of value of properties and buildings, receivables and investments, the recognition and the measurement of provisions as well as the realisability of deferred taxes on the assets side. In individual cases actual values may deviate from the assumptions and estimates made. Changes are taken into account at the time of a better cognizance with an effect on the operating result. Employees In addition to the two directors, HAMBORNER AG had 24 (previous year: 22) employees on average in the reporting year, 23 of which (previous year: 21) were salaried employees and 1 (previous year: 1) was a wage-earning employee. Corporate governance In December 2008, the Managing Board and Supervisory Board submitted an updated declaration of compliance and made it permanently available to shareholders online. The declaration of compliance is also published in full in the annual report 2008 of HAMBORNER AG. Notification regarding the existence of an interest HSH Nordbank AG, Hamburg indirectly holds more than 50% of the voting rights and thus an interest that exceeds 10% of the voting rights via the participations of its Group companies, HSH Real Estate AG and HSH-RE Beteiligungs GmbH, which are attributable to it in accordance with Art. 22 Para. 1 Clause 1 No. 1 of the German Securities Trading Act [WpHG]. F-84

257 HSH-RE Beteiligungs GmbH most recently informed us, on May 13, 2008, that the voting rights share of HSH-RE Beteiligungs GmbH (formerly Mustaphar 5. Verwaltungs GmbH) in HAMBORNER Aktiengesellschaft still exceeded the threshold of 50% on February 5, 2008 and amounted to 50.32% (11,457,519 voting rights) on that day. In addition, we were notified on 6 February 2009 in accordance with Art. 21 Para. 1 of the German Securities Trading Act, that Professor Dr. Theo Siegert, Dusseldorf has indirectly held 6.15% (1,400,000 units in absolute terms) of the voting rights since November 28, 2008 via de Haen Carstanjen & Söhne GmbH, Dusseldorf. Furthermore, 5.45% (1,240,000 units in absolute terms) of the shares in the voting capital of our Company are attributed to him indirectly via SIEGERT & CIE GmbH, Dusseldorf, Germany as of 18 December Overall, he thus indirectly holds an interest that, at 11.6% (2,640,000 votes in absolute terms), exceeds the threshold of 10% of the voting rights shares. HAMBORNER AG is included in the consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest group of companies and HSH Real Estate AG, Hamburg, prepares the consolidated financial statements for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG are filed with the County Courts in Hamburg (HRB 87366) and Kiel (HRB 6127). The consolidated financial statements of HSH Real Estate AG are filed with Hamburg County Court under HRB Relationships with closely related companies and persons in the financial year 2008 Payments amounting to 26 TEUR were transferred to the contracting partners in the reporting year due to a consultancy agreement dated March 28, 2007 between HAMBORNER AG and HSH Real Estate AG, which had already been the subject of the dependent Company report in The payments involved services the provision of which only concluded fully in On 25./ , an intermediary agreement for the acquisition of a property portfolio was concluded between HAMBORNER AG and HSH Capitalpartners GmbH. HAMBORNER was able to purchase two properties in Hamburg using Capitalpartners existing contacts with the seller. In accordance with the agreement, a purchase fee of 100 TEUR plus statutory value-added tax to be paid by HAMBORNER AG is due to Capitalpartners on conclusion of a notarised deed of sale. A corresponding liability with regard to HSH Capitalpartners GmbH was shown in Q1/2008 on notarisation of the deed of sale. As the transfer of ownership of the properties was delayed due to official permits not being available, the liability was not discharged by the financial statement reporting date. The purchase fee is an incidental purchase expense to be capitalised, which, where apportionable to the building acquisition costs will be allocated over the useful life of the property. In addition, we have reimbursed to our contractual partner incidental costs and expenses amounting to 17 TEUR plus statutory value-added tax incurred in connection with the intermediary agreement. On 02./ , HAMBORNER AG signed another agreement with HSH Real Estate AG, under which HSH Real Estate AG would provide consultancy services to HAMBORNER AG in the event of a possible portfolio acquisition. The agreement foresees a success fee based on a percentage of the purchase price, payable on realisation of the transaction. In addition to this fee, the agreement provides for the reimbursement of more specifically defined incidental costs and expenses incurred by HSH Real Estate AG. Because the transaction did not go through, HSH Real Estate AG had no fee entitlement. In accordance with the agreement, we reimbursed incidental costs and expenses of 11 TEUR plus value-added tax incurred in connection with this project. HAMBORNER AG has a current account at HSH Nordbank AG, which shows a balance of EUR in our favour on December 31, The standard market conditions and terms were agreed for all supply and service relationships with related companies and persons. F-85

258 Fees to persons in key positions of the HAMBORNER Group, which are declarable in accordance with IAS 24, entail the remuneration of the Managing Board and Supervisory Board. Members of the active Managing Board were remunerated as follows in the financial year 2008: Payments due in the short-term Payments after termination of the employment relationship Payments on the occasion of the termination of the employment relationship Total ,175 In addition, 48 TEUR was incurred for contributions for pension schemes, health and nursing care insurance as well as remunerations in kind in the form of use of company cars. The present consolidated financial statements take into account payments due in the short-term to the active members of the Supervisory Board amounting to 354 TEUR (previous year: 267 TEUR). Remuneration of the Managing Board and Supervisory Board The remuneration of the Managing Board and Supervisory Board as well as the principles underlying the remuneration system are presented in detail in the remuneration report, which is a component of the management report. The total remuneration of the active Managing Board amounted to 595 TEUR in the reporting year. Former members of the Managing Board and their surviving dependants received compensation amounting to 665 TEUR. The pension provisions recorded for this group of people amounted to 3,646 TEUR. The compensation of the members of the Supervisory Board amounted to 354 TEUR for the financial year. F-86

259 Executive bodies of the Company and their mandates Supervisory Board Dr. jur. Josef Pauli, Essen Honorary Chairman Dr. rer. pol. Eckart John von Freyend, Bad Honnef Chairman Shareholder of Gebrüder John von Freyend Verwaltungs- und Beteiligungsgesellschaft mbh External mandates: Finum AG *1 ) (chairmanship) Hahn Immobilien-Beteiligungs AG *1 ) Infopark Fejlesztési Rt, Budapest, Hungary *2 ) (until ) IVG Immobilien AG *1 ) Konzept plus AG *1 ) (chairmanship) Litos AG *1 ) VNR Verlag für die Deutsche Wirtschaft AG *1 ) Investment AG für langfristige Investoren TGV *1 ) (Chairman since ) Dr. rer. pol. Marc Weinstock, Kelkheim-Fischbach Deputy Chairman Chairman of the Managing Board of HSH Real Estate AG External mandates: LB Immo Invest GmbH *2 ) DSK Deutsche Stadt- und Grundstücksentwicklungsgesellschaft mbh *2 ) ((Chairman as from ) BIG BAU-INVESTITIONSGESELLSCHAFT mbh *2 ) (Deputy Chairman) GEHAG GmbH *2 ) (until ) Landgesellschaft Schleswig-Holstein mbh *2 ) (Deputy Chairman until ) Pirelli RE Asset Management Deutschland GmbH *2 ) (from ) H/H-Capital Management GmbH *2 ) Deutsche PPP Holding GmbH *2 ) (Chairman until ) Volker Lütgen, Wentorf Managing Director of HSH Capitalpartners GmbH Robert Schmidt, Datteln Managing Director of Evonik Immobilien GmbH External mandates: HSH Real Estate AG *1 ) (from ) RAG Montan Immobilien GmbH *2 ) (until ) (formerly Montan-Grundstücksgesellschaft mbh) THS GmbH *2 ) (from ) Wohnbau Dinslaken GmbH *2) (Deputy Chairman) Edith Dützer *3 ), Moers Clerical employee F-87

260 Hans-Bernd Prior *3 ), Dinslaken Technician Committees of the Supervisory Board Executive Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Audit Committee Members of the Committee: Dr. rer. pol. Marc Weinstock (Chairman) Robert Schmidt Edith Dützer Nominating Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Managing Board Dr. Rüdiger Mrotzek, Hilden Director for finance/accounting, taxes, properties, EDP, risk management/controlling External mandates: Wohnbau Dinslaken GmbH *2 ) (until ) Hans Richard Schmitz, Bonn (from ) Director for legal matters, personnel, investor relations/public relations, corporate governance, insurance Roland J. Stauber, Essen (until ) Spokesperson, director for properties, legal matters, personnel, corporate governance, public relations, insurance External mandates: Wohnbau Dinslaken GmbH *2 ) (until ) VBW Bauen und Wohnen GmbH *2 ) *1) Membership of other Supervisory Boards to be constituted by law *2) Membership of comparable domestic and foreign monitoring bodies *3) Employee representative on the Supervisory Board Duisburg-Hamborn, 24 February 2009 The Managing Board Dr. Rüdiger Mrotzek Hans Richard Schmitz F-88

261 The following auditors report (Bestätigungsvermerk) has been issued in accordance with section 322 German Commercial Code (Handelsgesetzbuch) in German language on the German version of the consolidated financial statements of the HAMBORNER Aktiengesellschaft, Duisburg- Hamborn, as of and for the period from January 1, 2008 to December 31, Independent Auditors Report We have audited the consolidated financial statements prepared by the HAMBORNER Aktiengesellschaft, Duisburg-Hamborn, comprising the income statement, the balance sheet, the cash flow statement, the statement of changes in equity, the fixed asset movement schedule and the notes to the consolidated financial statements and the management report combined with the group management report for the business year from 1 January 2008 to 31 December The preparation of the consolidated financial statements and the group management report in accordance with IFRS, as adopted by the European Union (EU), and the additional requirements of German commercial law pursuant to section 315a Abs. 1 HGB ( German Commercial Code ) are the responsibility of the parent Company s Managing Board. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with section 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements of the HAMBORNER Aktiengesellschaft, Duisburg-Hamborn, comply with IFRS, as adopted by the EU and the additional requirements of German commercial law pursuant to section 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the group s position and suitably presents the opportunities and risks of future development. Dusseldorf, 25 February 2009 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Harnacke) Wirtschaftsprüfer [German Public Auditor] (Lüdke) Wirtschaftsprüfer [German Public Auditor] F-89

262 Audited consolidated financial statements (IFRS) of HAMBORNER REIT AG as of December 31, 2007 F-90

263 Consolidated income statement For the period from 1 January to 31 December 2007 Non-binding convenience translation Notes Income from the management of properties and buildings... (1) Income from rents and leases... 13, ,597.0 Income from the passed-on incidental costs to tenants... 1, , , ,017.9 Other own work capitalised... (2) Other operating income... (3) 7, ,919.9 Total operating income... 22, ,971.4 Expenses for management of properties and buildings... (4) Real estate operating expenses... -1, ,205.1 Property and building maintenance... -1, , , ,264.4 Personnel costs... (5) Wages and salaries... -2, ,284.8 Social security, pensions and other benefits , ,581.0 Amortisation and depreciation of intangible assets, tangible fixed assets and investment property... (6) -3, ,562.5 Other operating expenses... (7) -2, ,489.5 Total operating expenses , ,897.4 Operating results... 10, ,074.0 Results from participations... (8) Financial result... (9) Income from securities including capital gains Write-down of securities and capital losses Other interest and similar income Interest and similar expenses... -1, Result on ordinary activities... 11, ,422.1 Taxes on income and profit... (10) 6, ,503.8 Result from continuing operations... 17, ,918.3 Result from discontinued operations... (11) 34, ,358.9 Consolidated profit... 52, ,277.2 Retained profit from previous year... 1, ,050.9 Distribution ,831.0 Transfer from other retained earnings Consolidated net retained profits... 53, ,497.1 Earnings per share (in EUR)... (12) of which from continuing operations of which from discontinued operations F-91

264 Consolidated balance sheet Non-binding convenience translation Assets Notes Dec. 31, 2007 Dec. 31, 2006 Non-current assets Intangible assets... (13) Tangible fixed assets... (13) Investment property... (14) 201, ,782.2 Financial assets... (15) Participations Securities ,394.0 Other loans ,045.7 Other assets... (16) Deferred tax assets... (16) , ,239.4 Current assets Trade receivables and other assets... (16) Income tax receivables... (16) Bank deposits, near-liquid investments and cash balances... (17) 6, , , ,351.7 Non-current assets held for sale... (18) 19, ,558.9 Assets for discontinued operations... (19) 59, , , ,341.3 Total assets , ,932.4 F-92

265 Equity and liabilities Dec 31, 2007 Dec 31, 2006 Notes Equity (20) Subscribed capital... 22, ,430.4 Retained earnings... Legal reserve... 2, ,943.0 Other retained earnings... 76, ,150.8 Revaluation reserve , , ,298.1 Consolidated net retained earnings... 53, , , ,225.6 Non-current liabilities and provisions Financial liabilities and derivative financial instruments... (21) 48, Deferred tax liabilities... (22) 14, ,842.3 Trade accounts payable and other liabilities... (24) 3, ,258.3 Provisions for pensions... (25) 5, ,140.3 Other provisions... (26) , ,149.8 Current liabilities and provisions Financial liabilities... (21) 36, ,280.0 Income tax liabilities... (23) Trade accounts payable and other liabilities... (24) 18, Other provisions... (26) 2, , , ,381.5 Liabilities from discontinued operations... 5, ,175.5 Total equity, liabilities and provisions , ,932.4 Contingent liabilities and financial obligations... (27) Warranties F-93

266 Consolidated cash flow statement Non-binding convenience translation Notes to to Cash flow from operating activities (28) Consolidated earnings before taxes (EBT)... 45, ,781.1 Depreciation, Amortization and Impairments... 3, ,562.5 Financial income... -1, ,265.4 Change in provisions ,265.4 Gains/losses (offset) from the disposal of tangible fixed assets, investment properties and non-current assets held for sale... -5, ,676.6 Gains/losses (offset) from the disposal of financial assets , ,132.0 Other cash expenditure (+) / income (-)... -2, Change in receivables and other assets and deferred income... -1, Change in liabilities and deferred income... 18, Dividends received... 1, ,320.0 Interest received Tax payments... -2, , , ,152.3 Cash flow from investment activities (29) Investments in intangible assets, tangible fixed assets and investment properties , ,376.6 Proceeds from disposals of tangible fixed assets, investment properties and non-current assets held for sale... 17, ,055.5 Investments in financial assets , ,167.3 Proceeds from disposals of financial assets... 95, , , ,278.7 Cash flow from financing activities (30) Dividend payments... -6, ,831.0 Net outflow/inflow of funds from financial liabilities and derivative financial instruments... 65, Interest outflows , ,280.9 Changes in cash and cash equivalents... 8, ,407.3 Cash and cash equivalents as of January , ,586.6 Bank deposits and cash balances... 4, ,281.7 Near-liquid investments Cash and cash equivalents as of December , ,179.3 Bank deposits and cash balances... 13, ,175.4 Near-liquid investments F-94

267 Consolidated statement of changes in equity Subscribed capital Statutory reserve Retained earnings Other retained earnings Revaluation reserve Non-binding convenience translation Consolidated net retained profit Carryforward Profit Appropriation of profits Total Equity Balance at 31 December , , , , , , ,856.3 Carry-forward to new account... 6, , Consolidated surplus... 11, ,277.2 Market value adjustment of the securities of the FAV from non-realised profits and losses... 4, ,923.1 Distribution of profit for , ,831.0 Balance at 31 December , , , , , , ,225.6 Capital increase from company funds... 3, , Transfer into other retained earnings... 1, , Carryforward to new account... 11, , Consolidated surplus , ,225.9 Price adjustment of securities from security fund , ,987.8 Revaluation of the Eurohypo swap Distribution of profit for , ,831.0 Transfer from other retained earnings Balance at 31 December , , , , , ,506.4 F-95

268 Consolidated fixed asset movement schedule Balance at Additions Acquisition and construction costs Value adjustments Residual book value Disposals Changes in value due to revaluation Balance at Balance at Additions (depreciations for the financial year) Disposals Balance at Balance at Balance at Intangible assets Tangible fixed assets Investment property , , ,486.4 * , , , ,620.6 ** 29, , ,702.3 Financial assets Investments Other loans In total , , , , , , , , , ,530.2 * of which: reclassification into the item Non-current assets held for disposal = 32,905.5 TEUR ** of which: reclassification into the item Non-current assets held for disposal = 13,092.9 TEUR F-96

269 Notes to the consolidated financial statements Principles for the preparation of the financial statement General principles Non-binding convenience translation HAMBORNER AG acquires, manages and realises property and other assets. The headquarters of the company is in Duisburg-Hamborn, Germany. It is entered in the Commercial Register at Duisburg County Court, Germany, under HRB The consolidated financial statements as of 31 December 2007 of HAMBORNER AG, Duisburg-Hamborn were prepared in accordance with the International Financial Reporting Standards (IFRS) applicable on the balance sheet date, as they should be applied in the European Union, and with the provisions under commercial law to be observed in addition in accordance with Art. 315 of the German Commercial Code and Art. 315a, Para. 1 of the German Commercial Code. The IFRS entail the IFRS recently issued by the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), the interpretations of the International Financial Reporting Committee (IFRIC) as well as those of the Standing Interpretations Committee (SIC). All standards and interpretations issued by the International Accounting Standards Board (IASB) and applicable at the time of preparation of the consolidated financial statements are applied, provided that they have been adopted by the EU (endorsement). The consolidated financial statements of HAMBORNER AG comply with the IFRS in this respect. The consolidated financial statements of HAMBORNER AG were prepared in euro (EUR). All amounts are shown in thousands of euro (TEUR) unless otherwise stated. Minor differences may arise with computations of totals and percentage figures due to rounding. The Managing Board prepared the consolidated financial statements at 31 December 2007 and the consolidated management report for the year 2007 on 20 February 2008 and released them for submission to the Supervisory Board. The present consolidated financial statements as of 31 December 2007 are based on the same recognition and measurement methods and accounting rules as in the previous year. The balance sheet as of 31 December 2007 is broken down by maturities in accordance with IAS 1 (51). In order to improve the clarity of the presentation, various items of the consolidated balance sheet and consolidated income statement have been summarised and explained in the notes. The income statement was structured according to the total cost format. The consolidated financial statements as well as the annual financial statements of HAMBORNER AG are filed with the operator of the electronic Federal Gazette and then announced there. They are available for download on the website In addition, they may be requested from HAMBORNER AG, Goethestrasse 45, Duisburg or examined at the offices of the company. HAMBORNER AG is included in the consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest group of companies and HSH Real Estate AG, Hamburg, prepares the consolidated financial statements for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG are filed at the County Courts in Hamburg (HRB 87366) and Kiel (HRB 6127). The consolidated financial statements of HSH Real Estate AG are kept at the Hamburg County Court under HRB F-97

270 Revised or new IFRS and disclosure, approach or valuation changes arising therefrom Compared with the consolidated financial statements as of 31 December 2006, the standards specified below have changed or were applied for the first time due to their subsequent incorporation into EU legislation or the coming into effect of the regulation: IFRS 7 Financial Instruments: Disclosures Amendments to IAS 1 Capital Disclosures IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment As IFRS 7 and the Amendments to IAS 1 involve regulations that exclusively deal with reporting issues and notes, no effects resulted from the first application. The provisions of IFRIC 7, IFRIC 8 and IFRIC 9 are not relevant for HAMBORNER AG at the moment. Consequences amounting to 1,185.2 TEUR resulted in the quarterly financial statements from the first application of IFRIC 10. No effects resulted in the consolidated financial statements as of 31 December 2007, as all securities held by the special share fund Südinvest (financial investments in equity capital instruments), for which write-downs were carried out in the previous quarters, were sold in the 3rd quarter. The following standards and interpretations were published by the IASB or IFRIC up to the balance sheet date, but must only be compulsorily applied in future reporting periods or have not been incorporated into EU legislation as yet: IAS 1 Presentation of Financial Statement: A Revised Presentation IAS 23 Borrowing Costs IAS 27 Consolidated and Separate Financial Statements IFRS 3 Business Combinations IFRS 8 Operating Segments IFRIC 11 IFRS 2 Group and Treasury Share Transactions IFRIC 12 Service Concession Arrangements IFRIC 13 Customer Loyalty Programmes IFRIC 14 IAS 10 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction No use was made of the possibility to apply ahead of time the standards and interpretations which had already been incorporated into EU legislation on the balance sheet date. HAMBORNER AG anticipates that there will be no significant impact on the net worth, financial position and earnings in the future arising out of the application of the standards and interpretations issued on the balance sheet date, but not yet incorporated into EU legislation. F-98

271 Consolidation group and principles Consolidation group Hambornberg Immobilien- und Verwaltungs-GmbH, Duisburg- Hamborn and the special share fund Südinvest 107, Unterföhring, Munich, are included in the consolidated financial statements unchanged on the previous year, in addition to HAMBORNER AG, as HAMBORNER AG directly has 100% of the voting rights or shares. Principles of consolidation The financial statements included in the consolidated financial statements are prepared in accordance with uniform accounting and valuation principles. Capital consolidation is effected through the offsetting of the book value of participations of Hambornberg Immobilien- und Verwaltungs- GmbH or the shares in the fund assets with the corresponding proportionate equity capital at the time of the first inclusion in the consolidated financial statements. No differential amounts on the assets side or on the liabilities side result from the capital consolidation. Revenues, income and expenses as well as receivables and liabilities between the included companies are eliminated (where they accrue). Recognition and measurement methods Intangible assets Intangible assets are measured at acquisition cost, reduced by scheduled linear depreciations. The depreciations correspond to the economic life, which amounts to three to eight years. Tangible fixed assets Tangible fixed assets are measured at acquisition or construction cost, reduced by scheduled linear depreciations. [sentence to come] Earnings from investment disposals (proceeds from disposals less residual book values) are shown in the income statement under other operating income (profits) or other operating charges (losses). Investment property Investment property are valued by exercising the option in accordance with IAS 40 (30) in conjunction with (56) for amortised acquisition or construction costs, taking into account linear depreciations. All undeveloped and developed properties as well as buildings and parts of buildings, which are held for the attainment of future rental income, for the attainment of profits from appreciations in value and/or for an as yet undetermined use, are regarded as investment properties. They are not intended for administrative purposes or for short-term trade in the context of normal business activity. Scheduled depreciations are carried out on a linear basis over the economic life. In order to calculate the fair value to be disclosed in the notes in accordance with IAS 40, we had our property portfolio valued by independent experts at the end of 2007 in accordance with internationally recognised standards. Calculation of the property market values was carried out by means of the discounted cash flow (DCF) method. The cash surpluses (cash flows) to be expected in each case for the respective property were determined for a consideration period of eleven years 2008 to 2018 within the DCF process. The market value of properties results from the sum of the discounted cash flows of the overall planning period before tax plus the residual value also discounted on the valuation date. Risk-adjusted interest rates of 5.3% to 10% were applied for the discounting. Please refer to the section Performance of the portfolio in the management report for further information. F-99

272 Impairment and write-ups of intangible assets, tangible fixed assets and investment property In the case of all intangible assets, tangible fixed assets and investment properties, the retention of value for the amounts stated in the balance sheet is regularly checked, if events or changes in the circumstances indicate that the book value shown in the balance sheet appears to be no longer achievable. Where the achievable amount of these assets significantly falls below the book value on the financial statement date, this is taken into account by means of an impairment. The net sales proceeds derived from an active market or if higher the present value of estimated future cash flows from use is referred to for the measurement of the recoverable present amount. If the reasons for an impairment undertaken in previous years no longer exist, write-ups are applied up to the book values. Impairment charges are presented under the item Amortisations of intangible assets, tangible fixed assets and investment property. Write-ups are entered in the other operating income. The consolidated annual profit of the financial year was reduced in the reporting year to owing to the adjustment of the reported residual book values to the fair market values applicable as of through non-scheduled depreciations amounting to approximately 370 TEUR. On the other hand, a reversal of impairment adjustment to the extent of approximately 1,516 TEUR was applied for properties subjected to an impairment in the years 2003 and Financial assets Financial assets are measured at the fair value in their first measurement, in conformity with IAS 39, which takes into account the transaction costs on acquisition. The subsequent measurement depends on the category to which a financial asset is allocated. Loans and receivables are measured at amortised acquisition cost. Where necessary, identifiable individual risks are appropriately taken into account by means of value adjustments. Financial assets held until final maturity are measured at amortised acquisition cost or at the lower market value. The other loans included therein have a fixed term and are therefore measured applying the effective interest method. The financial assets available for sale are measured in the balance sheet at their fair value. Unrealised profits if equity capital instruments are involved are entered in a separate item in the equity capital (revaluation reserve) until their realisation, taking into account deferred taxes. In the event of a fall in the fair value below the acquisition cost, the changes in fair value are directly entered in the income statement with an effect on the operating result. Reductions in value entered with an effect on the operating result are no longer attributed with an effect on earnings. The first balance sheet is drawn up on the trading day. The participations shown under financial assets in Wohnbau Dinslaken GmbH, Dinslaken, Montan GmbH Assekuranz-Makler, Dusseldorf, and Gesellschaft für Stromwirtschaft mbh, Mülheim an der Ruhr, were measured at the original acquisition cost ( at cost ). It was not possible to obtain a reliable determination of the fair value, as the information necessary to do so was not available. Derivative financial instruments HAMBORNER AG utilises derivative financial instruments in the form of interest rate swaps for the management of risks from interest rate fluctuations. F-100

273 Derivative financial instruments are recognised on the balance sheet on the trading day. The measurement of interest rate derivative transactions which do not comply with the requirements for hedge accounting was carried out at market values which were disclosed by the appropriate banks on the balance sheet date. The profits and losses resulting from changes in market value is always recognised in the income statement within the financial result. In the case of cash flow hedges are used for the hedging of risks that have an impact on the amounts or the timeframe of future cash flows, changes in market value are entered in equity (revaluation reserve) without affecting the operating result and taking into account deferred taxes, with presentation and documentation of adequate risk limitation efficiency. In the reporting year, TEUR was recorded for this directly in equity. The efficiency of the cash flow hedge was determined according to the dollar-offset method and resulted in an unqualified effectiveness. Positive market values of derivative financial instruments are shown under other assets, negative market values under financial liabilities. Deferrals Payments that were paid or collected for agreed future liabilities are deferred at the time of the cash flow and released over the term of the agreements with an effect on the operating result. Non-current assets held for sale and discontinued operations Non-current assets that are intended for sale are shown in the balance sheet as Non-current assets held for sale in accordance with IFRS 5. The acquisition or construction costs of these assets as well as the accumulated depreciations apportionable to them are shown in the consolidated fixed asset movement schedule under disposals. The valuation is carried out at the lower value of the book value and fair value less selling costs. From the date of reclassification, no further scheduled depreciations are carried out. Furthermore, in accordance with IFRS 5, business lines not to be continued are to be shown separately. A business line not to be continued refers to a significant business area or a part of a business that is held for disposal. For discontinued business lines, separate disclosure requirements apply in addition for the income statement and the cash flow statement. In keeping with the strategic decision to discontinue investment in securities, we show the assets and the liabilities of the special share fund Südinvest 107 in the balance sheet and the corresponding profit positions in the income statement under separate items in each case. The figures for the previous year were adjusted accordingly. Provisions The provisions were subdivided into long-term and short-term, due to the maturity breakdown required by IFRS standards, and shown accordingly. Provisions for pensions Pension provisions are calculated in accordance with the project unit credit method, taking into account future remuneration and pension adjustments. The corridor approach permitted in accordance with IAS 19 is used for actuarial profits and losses. According to that, actuarial profits and losses, if they exceed 10% of the extent of the pension obligation, are allocated over the average remaining period of the future claimants. The service costs and the actuarial profits/losses to be entered for the current year are shown within the personnel costs, the interest costs included in the pension costs within the interest expenses. The pension obligations are determined taking into account the biometric calculation bases in accordance with Prof. Dr. Klaus Heubeck s 2005 actuarial tables. F-101

274 The following parameters form the basis of the calculations: Non-binding convenience translation Parameter p.a Actuarial interest rate % 4.75% Remuneration trend % 2.10% Pension trend % 1.60% Average fluctuation % 4.00% The expenses for defined contribution plans are recognised as expenses and shown in the personnel costs. Other provisions The short-term provisions have been formed to the extent of the estimated utilisation (best estimate) without discounting and take into account all obligations identifiable on the balance sheet date, which are based on business transactions or past events the extent and/or maturity of which is uncertain. Only third-party obligations should be taken into account, for which an outflow of assets is probable. Provisions for liabilities that do not result in an outflow of assets in the subsequent year are formed to the extent of the present value of the anticipated outflow of assets. Liabilities Liabilities are assessed at their fair value in the first valuation. The subsequent assessment is carried out at amortised acquisition cost. Liabilities are classified as long-term if the contract provides for redemption after twelve months. Deferred taxes Tax deferrals are carried in the IFRS balance sheet on temporary differences between the assigned values of the assets and liabilities in the tax balance sheet and their book values (liability method) and shown as deferred tax assets or liabilities. The current tax rates which are expected with removal of the temporary differences and inflow of the actual amount payable, are referred to for determination of the expected tax charges in the future. Deferred taxes are entered in income statement as tax income or expenses, unless they relate to items directly entered in the equity which do not affect the operating result. In this case, the deferred taxes are also entered in the equity without affecting the operating result. Deferred tax assets are recognised to the extent that it would be probable that a taxable income will become available, for which the deductible temporary difference can be used. Expenses and revenue recognition On principle, the recording of revenue and other operating income corresponds with when the services are rendered or, in the case of sale transactions, when all the relevant rewards and risks in connection with the ownership were transferred to the buyer. Operating expenses are recorded with take-up of the payment or as expense on the date incurred. F-102

275 Contingencies Contingencies are shown below the balance sheet. These relate to possible or existing obligations arising from past events and from which an outflow of assets is not probable. The obligations reported correspond to the scope of liability. Explanatory notes on the income statement (1) Revenue from the management of properties and buildings The turnover results from the letting and leasing of the properties shown in the balance sheet in accordance with IAS 40 and IFRS 5. It increased by TEUR year-on-year. The increase mainly results from property acquisitions in the current year and previous year, which had an impact of approximately 2,000 TEUR. On the other hand, property sales resulted in decreases in revenues of approximately 1,300 TEUR. The remaining rent increases arising from indexed or graduated rent arrangements amounting to approximately 100 TEUR were more than compensated by rent reductions in the case of a change of tenant and due to rent rebates granted for the avoidance of vacancies to the extent of approximately 157 TEUR in total. Charges for incidental costs passed on to tenants mainly entail heating costs, property levies and other incidental costs, insofar as they are apportionable under the provisions of the lease agreements. The income in this regard decreased by TEUR in the reporting year Income from rents and leases Retail trade space... 9, ,533.3 Office space and medical practices... 2, ,037.7 Logistics space Manufacturing and other industrial space Residential Garages/car parking space Other lettings and leasings (agricultural leasings, licensing agreements etc.) Sub-total... 13, ,597.0 Income from the passed-on incidental costs to tenants... 1, ,420.9 Total... 14, ,017.9 The reduction in the income from passing on costs amounting to TEUR arises as the balance from property disposals and acquisitions and 45.4 TEUR from the increase in income from passing costs from the properties remaining in the portfolio. (2) Other own work capitalised The own work capitalised relates to in-house engineering work and construction overhead charges in connection with alterations to be capitalised at our office building in Hamburg. (3) Other operating income Income from the sale of investment property and from Non-current assets held for sale... 5, ,676.6 Reversal of impairment charges... 1, Write-ups of discounted housing loans Remaining other operating income Receipt of indemnifications and reimbursement ,046.1 Release of provisions Charges passed on to tenants and leaseholders Personnel and administrative costs passed on Pension liability insurance Others Sub-total ,241.5 Total... 7, ,919.9 F-103

276 The income from investment disposals results from the sale of a total of eight portfolio properties, an undeveloped plot of land and an agricultural croft house. (4) Expenses for management of properties and buildings Ongoing operating expenses decreased by TEUR in the reporting year. They largely comprise expenditure for power, property levies, ground rents, insurance premiums and land taxes, which we predominantly pass on to our tenants under the terms of the lease agreements. Maintenance expenses increased by TEUR. Of this, TEUR alone is apportionable to the revitalisation work to our Hamburg office building Real estate operating expenses Power, water et al Property levies Land taxes Ground rents Insurance premiums Rents and leases for third-party properties Rest Sub-total... 1, ,205.1 Building and property maintenance... 1, ,059.3 Total... 3, ,264.4 (5) Personnel costs/employees Personnel costs decreased overall by 60.7 TEUR. Whereas social security contributions and expenses for the pension scheme increased slightly by 24.9 TEUR, wages and salaries fell by 85.6 TEUR Wages and salaries... 2, ,284.8 Social security and other pension costs Expenses for pension scheme/pension costs Total... 2, ,581.0 The average number of employees (excluding the Managing Board) added up as follows: 2007 Number 2006 Number Employees outside the collective agreement Pay-scale employees Total (6) Amortisation and depreciation of intangible assets, tangible fixed assets and investment property Amortisation and depreciation in 2007 was approximately TEUR greater than the previous year and amounted to 3,176.9 TEUR. Of this amount, 3,139.5 TEUR is apportionable to Investment property. The consolidated result for the reporting year was reduced due to adjustment of the residual book values shown as of to the applicable fair market values by means of impairment charges amounting to TEUR. F-104

277 (7) Other operating expenses The item breaks down as follows: General administrative and Articles of Association-related expenses ,484.2 Remaining other operating expenses... 1, ,005.3 Total... 2, ,489.5 The general management and Articles of Association-related expenses decreased by TEUR year-on-year and amount to TEUR. This is mainly attributable to the cessation of the allocation expenses for the provision formed in the previous year for the rent guarantees assumed in connection with the sale of the Ratingen property. The remaining other operating expenses increased by TEUR to 1,410.1 TEUR. The increase essentially arises as the difference from the loss of the non-scheduled allocation made in the previous year to the extent of 700 TEUR for the provision for mining damage and, on the other hand, from the increase by TEUR in expenses for advice on legal, personnel, strategy and acquisition matters. The consultancy fees taken into account as an expense for the financial year in this regard are made up as follows: 2007 Advice on the portfolio and strategy Advice on acquisition of properties Personnel advice Property valuation Court costs etc Other legal and consultancy costs Total... 1,162.2 Where closely associated companies were included in the consultancy services, we refer to the additional explanatory notes in the section Relationships with closely associated companies and persons in the financial year The following auditor s fees were recorded as expenses in the financial year: Fees for Audit of annual and consolidated financial statements Advice in connection with IFRS issues Advice in connection with the special securities fund Südinvest Advice in connection with trade tax issues Other advice Total (8) Results from investment The result from investment include distributions of profit of Wohnbau Dinslaken GmbH and Montan GmbH Assekuranz-Makler Wohnbau Dinslaken GmbH, Dinslaken Montan GmbH Assekuranz-Makler, Dusseldorf Total (9) Financial result The income from securities including capital gains in the reporting year amount to 35,565.5 TEUR following 5,021.0 TEUR in the previous year. Of this, 34,912.0 TEUR (previous year: 4,976.7 TEUR) relates to dividend and disposal proceeds from the securities fund Südinvest 107 and is F-105

278 shown among the proceeds from discontinued operations. The TEUR remaining in 2007 results from the sale of a further shareholding held outside the share fund, which had already been sold at the beginning of the year 2007 independently of the decision to discontinue our involvement in securities. A dividend of 44.2 TEUR accrued to us in the previous year from these shares. Capital losses and amounts written off financial investments of 1,425.6 TEUR (previous year: TEUR) accrued in the reporting year. They relate exclusively to share portfolios of Südinvest 107 and are thus shown under discontinued operations. Interest and similar income increased by 1,142.5 TEUR year-on-year, primarily due to the reinvestment of capital gains realised in the fund in priceindependent bonds as well as the investment in time deposits of liquid funds created from the property sales. Of this, TEUR is apportionable to discontinued operations (previous year: 54.1 TEUR). Total Activities to be discontinued Activities to be cont. Total Activities to be discontinued Activities to be cont Income from securities including capital gains... 35, , , , Capital losses and amortization on financial investments... -1, , Other interest and similar income... 1, Interest payable and similar charges... -1, , Financial result... 34, , , , Interest payable and similar charges: Interest element of allocations to pensions provisions Interest rate hedging transactions Interest on loans Other interest and similar charges Interest for provision of security on account of Münster Total... 1, Interest and similar charges increased year-on-year by TEUR to 1,233.6 TEUR due to increased utilisation of bank loans for the financing of our property investments. Interest rate hedging transactions involve two interest rate swaps with a term until Payment is agreed on the basis of fixed interest rates and half-yearly accounting. In turn, we receive a variable interest rate based on the 6-month EURIBOR. The nominal hedging volume reduced by approximately EUR 0.5 million in the reporting year. You will find further information on the two interest rate swaps in the section Financial liabilities and derivative financial instruments. The interest rate hedging agreement concluded at the end of the year did not result in expenditure in (10) Taxes on income and profit Current income tax charge... 1, ,008.8 Deferred taxes... -8, Foreign withholding tax Total... -6, ,503.9 a) Income tax charge AG. The current income tax charge includes the corporation tax and business tax of HAMBORNER The deferred taxes take into account the tax rates applicable from 2008 due to the corporate tax reform. We have undertaken a revaluation of the deferred taxes shown in the balance sheet on the assets side and on the liabilities side on this basis as of A non-cash one-off tax effect of F-106

279 approximately EUR 10.5 million in total results from this for the reporting year, which has an almost complete impact on earnings. Of this, an amount of 1,004.8 TEUR is apportionable to the result from activities not to be continued. The consolidated tax rate to be applied to the earnings before taxes on income amounts to 26.4% in the reporting year (previous year: 26.4%). The anticipated tax charge arising from applying HAMBORNER AG s consolidated tax rate can be reconciled to the actual tax charge as follows: Result of business activity from activities to be continued... 11, ,422.1 Anticipated tax charge... 2, , /- Tax effects of previous years /- Effect from the alteration of tax rates... -9, /- Effect from tax-free incomes /- Effect from non-deductible expenses /- Value adjustment/resolution or cessation of deferred tax claims Taxes on income... -6, ,503.8 Tax rate % The fund included in the Group of HAMBORNER AG, Südinvest 107, enjoys a special tax status (no direct tax charges) arising from the German Investment Tax Act [Investmentsteuergesetz]. The parent company uses its actual tax rate as a basis for internal purposes and has also applied it in the tax reconciliation. b) Deferred taxes The (credited) deferred taxes charged to the equity capital relate to the market valuation of the securities and derivative financial instruments. The development of the deferred taxes on the assets side and on the liabilities side is represented as follows in the reporting year as a whole: Deferred tax assets Revaluation/ market valuation Pension provisions Derivative financial instruments Others Write-down to the going concern value of investment property Total Balance as of 1 January Reduction/increase in profit for the financial year Reclassific. into the equity capital Balance as of 31 December Deferred tax liabilities Accelerated tax write-down Revaluation/ market valuation Other provisions Total Position at 1 January , , ,837.4 Reduction/increase in profit for the financial year... -8, ,172.1 Reclassification into the equity capital Balance as of 31 December , , ,169.3 F-107

280 (11) Result from discontinued operations The result from discontinued operations includes the income and expenses from our special securities fund Südinvest 107 and breaks down as follows: Other operating income Other operating expenses Dividend earnings... 1, ,321.6 Realised share price gains... 33, ,655.1 Realised share price losses... -1, Write-downs of securities Interest income Earnings before taxes... 34, ,359.0 Taxes on income Result after tax... 34, ,358.9 The figures for last year were correspondingly adjusted in the income statement. The result from discontinued operations was considerably influenced by the sales of securities in the reporting year. All the share portfolios of the fund were sold in the first three quarters in the wake of the strategic reorientation of the company and the associated discontinuation of the involvement in securities. The revenues realised in the process were reinvested within the fund up to the final closure in investment trust units and fixed-interest securities. The securities still in the portfolio on show non-realised share price gains of 220 TEUR, which are shown in the revaluation reserve taking into account deferred tax liabilities (3.5 TEUR). Non-realised losses accrued in the financial year, amounting to 7.6 TEUR, are shown as write-downs of securities. Reduced deferred tax expenses amounting to 1,003.9 TEUR result in the calendar year 2007 due to the corporate tax reform Net tax proceeds of TEUR arise taking into account the current tax burden in 2007 of TEUR. (12) Earnings per share The consolidated profit increased by 40,948.9 TEUR in the reporting year to 52,225.9 TEUR. On 27 August 2007, the company s share capital was increased from 19,430.4 TEUR to 22,770 TEUR from company funds by resolution of the general shareholders meeting on 5 June At the same time, a share split was carried out in the ratio 1:3. Earnings per share are determined in compliance with IAS 33. According to this, the earnings per share are derived from the net result apportionable to the shares being divided by the weighted average number of shares. A dilution does not apply, e.g. through stock options or convertible bonds, as HAMBORNER has issued no such programmes. The diluted and undiluted earnings per share are therefore identical. According to IAS 33.64, the retroactive adjustment of the number of issued shares is necessary with the execution of a share split. The figures for the previous year were therefore adjusted Number of shares in circulation... Thsd. units 22,770 22,770 Net result/ consolidated surplus... TEUR 52, ,277.0 Dividend per share... EUR Earnings per share as per IAS 33, of which... EUR from continuing operations... EUR from discontinued operations... EUR F-108

281 Explanatory notes to the balance sheet (13) Intangible assets and tangible fixed assets Intangible assets entail exploitation rights for systems and applications software acquired against payment, which are valued at acquisition cost and are depreciated on a straight-line basis over a useful life of three to eight years. This decrease in value is presented under the item Amortisations of intangible assets, tangible fixed assets and investment property. Non-scheduled value adjustments (reductions and increases) were not necessary in We show the company s administrative building in Duisburg and the fixtures and equipment under tangible fixed assets. The depreciation calculation for the administrative building uses a total useful life of 50 years and a remaining useful life of 12 years as a basis. The fixtures and equipment have an average useful life of between 3 and 15 years. (14) Investment property The additions in the case of Investment properties are apportionable to the portfolio properties acquired in the reporting year and prepayments on account at 114,349.0 TEUR and to postcapitalisations for three properties of our portfolio at TEUR. In addition, TEUR was expended for a usufructuary right to 17 underground parking spaces. The disposals in the reporting year mainly consist of the sale of eight properties already notarised in the previous year, which were transferred to the buyer at the start of An undeveloped spare plot of land, which belonged to our office building in Hamburg, and an agricultural croft house in Dinslaken were also sold. We recorded disposals of investment properties in the reporting year amounting to 33,486.4 TEUR (at acquisition and construction costs) in the consolidated fixed asset movement schedule. Of this, 32,905.5 TEUR is reclassified into the item Non-current assets held for sale. This reclassification relates to the planned sale on the balance sheet date of several properties, which are to be sold in 2008 in the wake of the strategic reorientation of the company and the associated concentration on the core areas of retail trade and offices. On the other hand, disposals of value adjustments amounting to 13,092.9 TEUR counterbalance this disposal at book value. The following useful life ranges were applied in the reporting year: Useful life ranges of non-current assets Years Business and office buildings... 33to50 Other commercial constructions... 40to50 Residential buildings... 40to50 Self-service markets... 33to40 To adjust the amortised acquisition and construction costs presented as of to the applicable fair values, we recorded impairment charges amounting to TEUR. On the other hand, we reversed an impairment adjustment in the amount of 1,515.6 TEUR for properties subject to an impairment in the years 2003 and F-109

282 Investment property developed as presented below in the reporting year: Non-binding convenience translation (in ŢEUR) Balance as of 1 January , , Additions as a result of purchase , , Additions as a result of subsequent investments , , Disposals as a result of sales , Disposals as a result of reclassifications , , , , Reversal of impairment adjustment... 1, Depreciations for the financial year... -3, ,527.0 Balance as of 31 December , ,782.2 Borrowed funds were raised in the reporting year to the extent of EUR 82.9 million for the financing of the increased growth in the properties segment. Of this, EUR 57.9 million was secured by land registry charge on the balance sheet date. For a further EUR 31 million, the entry of first-ranking land charges was applied for on Until the disbursement of the requested long-term borrowed funds, property investments were financed in the interim via a short-term current account advance to the extent of EUR 34 million. Shares in our securities fund Südinvest 107 were assigned to the lending bank as collateral to the corresponding extent. There is a non-encumbrance agreement and a restriction on disposal to the detriment of the property in Oldenburg, Achternstraße in connection with a property loan already raised in For the safeguarding of a line of credit amounting to EUR 3 million, a land charge of an equivalent amount was granted to a bank on one of our properties. The fair value of the portfolio properties shown in the balance sheet after the explained reclassification of 16 properties into the current assets amounts to 247,610 TEUR (previous year: 168,852.3 TEUR) as of of the reporting year. For the undeveloped property shown in the balance sheet at historical acquisition cost, a different value is not reliably identifiable due to its structure (agricultural and silvicultural areas). The direct operating charges from leased and vacant investment properties amount to 3,453.0 TEUR (previous year: 3,264.4 TEUR) in the reporting year. All properties were let on the balance sheet date apart from temporary partial vacancies in some properties. 251 TEUR (previous year: 226 TEUR) is apportionable to vacant spaces in the reporting year, including the unlet undeveloped property. The expenses apportionable to the unlet spaces are divided here according to the weighted percentage ratio, which is apportionable to the vacancies in relation to the total leased area. Our commercial property portfolio was valued by independent experts as of according to internationally acknowledged standards. Taking into account the purchases and sales in the reporting year, the market value of our developed property portfolio including the residential properties was as follows: Investment property , ,852.3 plus reclassification into Non-current assets held for sale... 33, ,844.1 Total , ,696.4 The reclassification made into the current assets was carried out for 16 properties (previous year: 8 properties) in accordance with the provision of IFRS 5, as purchase agreements had already been concluded (one property) on the balance sheet date or the sale of these properties had been approved by board resolution. F-110

283 The discounted cash flow process is applied for the valuation of the properties. For further details on the valuation of our properties, we refer to the section Performance of the portfolio in the management report. We have committed ourselves to the acquisition of a property used for retail trade by means of a notarised purchase agreement. As the prerequisites for transfer did not yet exist on the balance sheet date, the agreement is provisionally invalid. Once all requirements pertaining to the purchase agreement and transfer of ownership have been fulfilled, we will be obliged to meet the purchase price of EUR 10.5 million. (15) Financial assets The participations include our 14.1% share in Wohnbau Dinslaken GmbH. The company is a former non-profit-making residential construction company with a regional focus of activity in the Dinslaken area, which constructs homes and privately-owned flats for owner-occupiers and investors and lets approximately 5,500 residential units. The municipalities of Dinslaken, Duisburg, Hünxe and Voerde have a majority holding in the share capital of EUR 6 million. The participation was capitalised at acquisition cost in the consolidated financial statements. In addition, this balance sheet item includes our shares in the nominal capital of Montan GmbH Assekuranz-Makler, Dusseldorf (0.71%) and in Gesellschaft für Stromwirtschaft mbh, Mülheim/Ruhr (1%), also shown at acquisition cost. The other loans predominantly include long-term interest-free housing loans and other loans to staff, which were valued at cash value. They decreased by 19.6 TEUR to 54.3 TEUR through scheduled redemptions and repayments. (16) Trade receivables and other assets, deferred tax assets All receivables and other assets are shown in the balance sheet at the nominal value or at the lower fair value. Individual value adjustments for doubtful receivables were again not necessary in General value adjustments are not made. The other non-current assets primarily include development costs paid for the leasehold property in Solingen amounting to TEUR (previous year: TEUR) and the capitalised actuarial reserve for claims from pension liability insurance policies for pension obligations (87.5 TEUR, previous year: TEUR). The amount stated in the balance sheet decreased by TEUR year-on-year due to the expiry or termination of insurance policies because of the early retirement of the persons insured. The existing pension liability insurance policies do not involve plan assets as per IAS 19. The deferred tax claims essentially result from valuation differences or interest rate derivatives and pensions provisions. They decreased by TEUR year-on-year to TEUR. The receivables and other current assets break down as follows: Trade receivables Other Total Trade receivables relate almost exclusively to receivables due from tenants and leaseholders. The other receivables and current assets increased by 817 TEUR year-on-year and amount to TEUR. The increase essentially results from an outstanding purchase price claim from a property sale amounting to 416 TEUR, from costs of TEUR paid in advance, which only become expenditure in 2008, and from input tax amounts not yet payable of TEUR. F-111

284 The trade receivables shown were all due on the respective financial statement date and are thus overdue within less than 30 days following the balance sheet date. Charges of 0.8 TEUR (previous year: 3.2 TEUR) have accrued in the reporting year in connection with the write-off of receivables; no income has accrued in the same period (previous year: 0.6 TEUR) from the receipt of monies from receivables written off. Income tax receivables amount to TEUR (previous year: TEUR) and relate to reimbursement claims for the reporting year (previous year: 2005 and 2006). (17) Bank deposits, near-liquid investments and cash balances (cash fund) Bank deposits... 6, ,701.0 Near-liquid investments Cash balances Total... 6, ,705.5 Near-liquid investments in the previous year include immediately disposable short-term investments. (18) Non-current assets held for sale In compliance with IFRS 5, non-current assets that are intended for sale are shown as Noncurrent assets held for sale. As of , therefore, we reclassified a total of 16 properties in the short-term range. A purchase agreement was already concluded in the reporting year for one of these properties. The transfer of ownership to the buyer took place on For the remaining 15 properties, board resolutions have been passed aimed at selling these investment properties in the wake of the strategic reorientation of the company and the associated concentration on the core areas of retail trade and offices. In accordance with the resolutions passed, the sale is to be realised in a package or individually, as far as possible in (19) Assets and liabilities from discontinued operations In accordance with IFRS 5, the following assets and liabilities should be shown separately in the wake of the discontinuation of the involvement in securities: Securities... 50, ,797.6 Deferred tax assets Receivables and other current assets... 1, Bank deposits, near-liquid investments and cash balances... 6, ,473.9 Income tax receivables Assets from discontinued operations... 59, ,782.4 Deferred tax liabilities... -4, ,995.2 Other current liabilities Liabilities from discontinued operations... -5, ,175.5 (20) Equity The development of the equity from 1 January 2006 until 31 December 2007 is shown in the statement of changes in the equity. The subscribed capital and the legal reserve relate to HAMBORNER AG. The subscribed capital was increased from company funds as of 27 August 2007 from 19,430.4 TEUR to 22,770.0 TEUR. At the same time, a share split was carried out in the ratio 1:3. As a result, the F-112

285 company has 22,770,000 no-par-value shares made out to bearer in circulation. The legal reserve was also adjusted from company funds by 334 TEUR to 2,277 TEUR. The other retained earnings reduced on balance from 79,150.8 TEUR to 76,447.4 TEUR through these measures and through transfer from the profit brought forward. Hitherto non-realised share price gains were realised through the outright sale of the shares within our special share fund Südinvest 107. The revaluation reserve fell as a result from 26,204.3 TEUR in the previous year to 90.2 TEUR at the end of the reporting year. The HAMBORNER Group has net retained profit amounting to 53,921.9 TEUR (previous year: 9,497.1 TEUR) as of 31 December In light of good business development, the Managing Board will propose a dividend distribution amounting to 7,969.5 TEUR to the general shareholders meeting for the financial year This corresponds to a dividend of 0.35 EUR per no-par-value share. The dividend proposal is based on the net retained profit of HAMBORNER AG under commercial law amounting to 7,827.7 TEUR. For the distribution of a dividend amounting to 7,969.5 TEUR, this amount is to be supplemented by a transfer from other retained earnings. The retained earnings include the earnings achieved in the past of the companies included in the consolidated financial statements, in so far as they were not distributed. The revaluation reserve includes the fair value changes from the valuation of derivatives in connection with hedging transactions (cash flow hedges) and from the valuation of financial instruments available for sale, which were handled without affecting the operating result. The objective of our capital management is the securing of the company s continuation and an adequate return on capital. Company law provisions essentially form the framework for capital management. Where compliance with further regulatory or contractual provisions is required, equity is additionally controlled in accordance with such provisions. In instances in which no compliance with separate provisions is required, the equity to be controlled consists of the balance sheet equity. Otherwise, the balance sheet equity would always be adjusted to the regulatory and contractual requirements. (21) Financial liabilities and derivative financial instruments Financial liabilities increased considerably by 82,946.6 TEUR to 84,226.6 TEUR due to the increased use of borrowed funds for our property investments. Loans secured by land registry charge were concluded, both with pegging of interest rates for 10 years and for attainment of greater flexibility loan agreements with interest rate agreements based on the 3-month EURIBOR. The interest rate risk was eliminated in these instances by concluding interest rate swaps, with which we obtain the 3-month EURIBOR and, on the other hand, pay an agreed fixed-rate interest over the 10-year swap term. The nominal hedging volume resulting from this amounted to EUR 40.4 million on the balance sheet date. The market value for the interest rate hedging transaction concluded in 2007 amounted to TEUR on the balance sheet date. The term for the derivative ends on On , land charges were entered in the land register to the extent of EUR 57.9 million. Entry of a further EUR 31.0 million was initiated on the balance sheet date. A current account advance for interim financing was used in 2007 prior to the disbursement of the requested long-term loans of EUR 31 million. The securing of this current account was achieved through assignment of fund units in our securities fund Südinvest 107 in favour of the lending bank. HAMBORNER AG has held two financial derivatives since the year 2000 for the hedging of the interest rate level for the deployment of borrowed funds in property acquisitions. The swaps were mainly utilised for the financing of the property in Oldenburg, Achternstraße. The nominal hedging volume stood at approximately EUR 1.4 million on the balance sheet date. The terms for the interest rate hedging transactions end on 30 June and 29 December 2010 respectively. Fixed half-yearly F-113

286 interest payments of 5.5% and 5.29% respectively are contractually agreed, each due on 29 June and 29 December, as well as a variable interest rate based on the 6-month EURIBOR. Liabilities were shown in the reporting year to the extent of 18.0 TEUR for possible risks that may arise from these derivatives. Income amounting to 32.9 TEUR (previous year: 88.0 TEUR) resulted in the reporting year from the change in the market valuation, which is shown under the interest income. An obligation for the non-encumbrance of the property and a restriction on disposal exist in connection with the credit financing for the property in Oldenburg, Achternstraße 47/ December December 2006 Long-term Short-term Long-term Short-term Financial liabilities... 47, , ,280.0 Derivative financial instruments Total... 48, , ,280.0 The financial liabilities bear interest at interest rates of between 4.36% and 5.21%. The redemptions are effected quarterly, half-yearly or annually in accordance with the loan agreements. Contractually agreed redemption payments Financial liabilities of which... 84, ,280.0 payable within one year... 36, payable within two to five years... 8, payable after five years... 39, HAMBORNER AG is exposed to various risks due to its business activity. A detailed presentation of these risks and their management is shown in the risk report, which is part of the management report. Derivative financial instruments in the form of interest rate swaps are used in the main for the management of interest rate risks. The risks resulting in connection with the use of these derivative financial instruments are the subject of HAMBORNER AG s risk management and control. The risks resulting from the financial instruments relate to credit, liquidity and market risks. Credit risks exist in the form of risks of default for financial assets. This risk subsists to the extent of the book values of the financial assets as a maximum. For the derivatives, this is the total of all the positive market values and, for the primary financial instrument, the sum of the book values. Where risks of default exist, they are taken into account by means of value adjustments. Liquidity risks constitute refinancing risks and thus risks to the due payment of existing obligations. The strategy and the results of the planning process are taken as a basis for the early identification of the future liquidity situation. The expected liquidity requirements are scheduled in the medium-term plan, which covers a period of five years. The current liquidity requirements are compared with the actual data by means of daily, weekly and monthly budgetary accounts. Sensitivity analyses are required for the presentation of market risks in accordance with IFRS 7. Both influences on the result as well as on the equity capital should be shown through hypothetical changes in risk variables orientated to the past. It is above all interest rate risks which are relevant for HAMBORNER AG in this regard. Interest rate risks result from changes in the level of market interest rates. We limit such risks through the use of interest rate swaps. Sensitivity analyses, which show the consequences of changes in the level of market interest rates on interest payments, interest expenses and income as well as on equity, are carried out in compliance with IFRS 7. The following assumptions apply to this end: primary financial instruments with a fixed interest rate are only subject to interest rate risks if they are F-114

287 assessed at the fair value. Financial instruments that are valued at acquisition cost are not subject to interest rate risks. In the case of cash flow hedges for the hedging of interest-induced payment fluctuations, changes in the level of market interest rates have consequences on the equity reserve. Therefore, these financial instruments are taken into account in the sensitivity analysis. Primary financial instruments with a variable interest rate should also be subjected to a sensitivity analysis, as they too are subject to a risk of a change in the market interest rate. In the sensitivity analysis, the indicative valuation was calculated as of the balance sheet date on the basis of the market value, taking into account accrued interest. Sensitivity analysis Market value of financial instruments on a floating-rate basis Change in hedging reserve Interest rate + 1%... 1, Interest rate - 1%... -1, Income statement Interest rate + 1% Interest rate - 1% Other information on financial instruments A reclassification of financial assets into another valuation category of IAS 39 was not carried out in the reporting year. For short-term financial assets and liabilities that are not derivatives, the respective book value constitutes an appropriate approximation of the fair value within the meaning of the IFRS. The net profit from financial assets, which are assessed at the fair value with an effect on the operating result, amounts to 4.9 TEUR (previous year: 4.0 TEUR) in the reporting year. F-115

288 Additional details of financial instruments (2007) Measurement in accordance with IAS 39 Continuing activities available for sale Fair value available for sale/ derivatives Assets Intangible assets Tangible fixed assets Investment property ,702.3 Financial assets Long-term receivables and other assets Deferred tax assets Trade receivables and other assets Income tax receivables Liquid funds... 6,442.3 Non-current assets held for sale and assets from discontinued operations... 79, , , ,715.2 Equity and liabilities Equity ,506.5 Long-term liabilities... 51, * Deferred tax liabilities... 14,218.8 Provisions for pensions... 5,923.1 Other long-term provisions Current liabilities... 54,534.2 Income tax liabilities Other short-term provisions... 2,318.0 Liabilities from discontinued operations... 5, , * Derivatives F-116

289 Measurement in accordance with IAS 39 Measurement in accordance with other standards Continuing activities, loans and receivables Continuing activities held until final maturity Continuing activities Fair value Continuing activities , , , , , , , , , , , , , , , , ,172.6 F-117

290 Additional details on financial instruments (2006) Measurement in accordance with IAS 39 Fair value Continuing activities available for disposal available for disposal/ derivatives Assets Intangible assets Tangible fixed assets Investment property ,782.2 Financial assets... 2, ,394.0 Long-term receivables and other assets Deferred tax assets Trade receivables and other assets Income tax receivables Liquid funds... 1,705.5 Non-current assets held for sale and assets from discontinued operations... 64, , , ,191.6 Equity and liabilities Equity ,225.6 Long-term liabilities... 2, * Deferred tax liabilities... 22,842.3 Provisions for pensions... 6,140.3 Other long-term provisions Current liabilities... 1,983.6 Income tax liabilities Other short-term provisions... 2,397.9 Liabilities from discontinued operations... 6, , *Derivatives F-118

291 Measurement in accordance with IAS 39 Measurement in accordance with other standards Continuing activities loans and receivables Continuing activities held until final maturity Continuing activities Fair value Continuing activities , , , , , , , , , , , , , , ,202.2 F-119

292 The net result (profit +/loss -) from financial assets is made up as follows: Non-binding convenience translation Available for sale... 34, ,771.5 Held until final maturity Derivatives Liabilities at amortised acquisition cost (22) Deferred tax liabilities Deferred tax liabilities amount to 14,218.8 TEUR following 22,842.3 TEUR in the previous year. They relate quite predominantly to the special account with reserve characteristics under commercial law. The decrease year-on-year essentially arises from the revaluation of deferred tax liabilities to take account of the tax rates applicable from the year 2008 due to the corporate tax reform. (23) Income tax liabilities Income tax liabilities relate to business taxes for the year 2007 on the basis of provisional tax computations. (24) Trade accounts payable and other liabilities As of , we show purchase price liabilities and other liabilities in connection with property purchases for the reporting year amounting to EUR 18.9 million under trade accounts payable and other liabilities. Of this, EUR 17.1 million is payable within the next 12 months. There were trade accounts payable amounting to TEUR on the balance sheet date. The value was thus around TEUR above the previous year s valuation and, as of , includes broker fees of TEUR as well as the liability for the valuation of our property portfolio amounting to TEUR. (25) Provisions for pensions Occupational pension scheme commitments exist for eligible current and former employees and surviving dependants. These are project benefit commitments in accordance with IAS 19. The Projected Unit Credit Method is the basis of the valuation of the provision. It is not only the pensions and purchased pension entitlements recorded on the balance sheet date that are taken into account with this project unit credit method, but also increases in salaries and pensions to be expected in the future. Furthermore, a pensionable age of 63 years in the case of men and 60 or 63 years with women is usually assumed. Expenses from the commitments are recorded over the length of service of employees in accordance with expert actuarial opinion and consist of the work service costs and the actuarial gains and losses recorded for the current year, which are shown under personnel costs, and of the interest expense, which has an impact on the financial result. Interest expenses from pension obligations amounted to TEUR in 2007 (previous year: TEUR). In compliance with the corridor approach included in accordance with IAS 19, actuarial gains and losses not yet recorded on the balance sheet date, amounting to -1,174.4 TEUR, were disregarded in the calculation of pensions provisions to prevent greater volatility. The limits of the corridor defined in IAS 19 were exceeded as a result in the financial year This amounts to 10% of the actual defined pension obligation. The actuarial loss exceeding the corridor and not yet taken into account amounts to TEUR at the end of the reporting year. This amount should be apportioned over the expected average remaining working period of the beneficiaries. As this pro rata loss, which is still not taken into account, is always to be considered only in the associated period in accordance with IAS 19, we will record an expense from this situation amounting to 82.8 TEUR in the consolidated financial statements F-120

293 Development of pensions provisions in the reporting year: Non-binding convenience translation Balance sheet value 1 January... 6, , , ,488.7 Ongoing service costs Interest expense Actuarial gains/losses recorded for the current year Pension payments Position at 31 December... 5, , , ,414.6 Actuarial losses not recorded... 1, DBO at the year-end... 7, , , ,937.9 Experience-based adjustment of plan liabilities HAMBORNER paid contributions of TEUR (previous year: TEUR) to the statutory pension insurance in the reporting year, which should be regarded as a defined contribution pension scheme. In addition, contributions to direct insurance policies or pension funds of 13.0 TEUR (previous year: 11.9 TEUR) were made by the company. The company assumes no additional obligations beyond the settlement of contribution payments with defined contribution schemes. Expenses are recorded in personnel costs. Pension payments of TEUR are expected in the financial year (26) Other provisions The maturities of the other provisions are as follows: of which In total Allocations Utilisation Releases In total Long-term Short-term Provisions for... Bonus Lease guarantee for Ratingen Mining damage... 1, , Provisions linked to the Articles of Association and legal form Legal and consultancy expenses Outstanding invoices Other Total... 3, , , ,318.0 The bonus provisions decreased by TEUR in the reporting year due to the discontinuation of a supplementary bonus for a departed member of the Managing Board agreed under the service contract and recognised as an expense in the previous year. As part of the sale of the Ratingen logistics property, we have granted rent guarantees to the buyer for 24 months. In the reporting year, it was possible to release TEUR from the established provision, as the circumstances agreed for the guarantee-activating event have lapsed. A claim for TEUR was made against us under the terms of the guarantee in The provisions for mining damage relate to the potential risks from our former mining activity, which continue to a limited extent. In this connection we refer to the more comprehensive explanations in the report on opportunities and risks. Mining-related provisions are long-term provisions that are shown in the balance sheet at their settlement value discounted on the balance sheet date. The discount factor is based on a rate of interest of 6.0% (previous year: 6.0%) with a residual term of up to 24 years (previous year: 25 years). The allocation made in the reporting year, 21.5 TEUR, takes into account the increase in the discounted amount that has occurred due to the passage of time. 1.6 TEUR shown under consumption relates to expenses for management of the pits concerned. F-121

294 In February 2007, the company gained cognizance of possible claims for compensation amounting to approximately EUR 1.3 million against the current owners of a coal field located in Duisburg due to mining damage. Since as the former co-owner of the coal field in question HAMBORNER AG is liable for claims from the old mining industry to an extent of 50%, a future pro rata claim cannot be ruled out. Therefore, a further provision amounting to EUR 0.7 million was created in the previous year as a precaution, which will be retained to the end of the reporting year, as there have been no developments in proceedings thus far. The provisions for obligations linked to the Articles of Association and legal form include remunerations for the Supervisory Board and auditor fees. We refer to foot note (7) for further details on the auditor fees within the meaning of Art. 285, Clause 1, No. 17 of the German Commercial Code. The increase in the provision for outstanding invoices of TEUR year-on-year is essentially connected with maintenance measures not yet finally accounted, amounting to TEUR, which were undertaken and concluded in the reporting year. Furthermore, the item includes as yet unaccounted notarial charges for services already provided amounting to 73.6 TEUR in connection with the property acquisitions for the reporting year. (27) Contingent liabilities and financial obligations Warranties relate to three compulsory shares in a housing association and amounts to an unchanged 0.8 TEUR. The other financial obligations after the balance sheet date result from three long-term leasehold contracts and are constituted as follows: Contract term until Payment Obligation (in TEUR p.a.) Charge passed on (in TEUR p.a.) 31 December March June Total On the basis of contractual agreements the leasehold which is time-limited until 30 June 2012 will transfer into our ownership on that date. Explanatory notes to the cash flow statement The consolidated cash flow statement was prepared in accordance with the provisions of IAS 7 and accordingly breaks down the cash flows from the operating, investment and financing activities. The determination of cash flows from operating activities is carried out by the indirect method. There are no influences from exchange rate movements or from changes in the consolidation scope at HAMBORNER. (28) Cash flow from operating activities The cash flow statement is based on the consolidated earnings before tax (EBT). When determining the cash flow from operating activities, cash flows from dividends to be received, interest inflows and tax disbursements are always shown separately. In this respect, the cash flow statement deviates from the previous year in its presentation. The values for the previous year were correspondingly adjusted. Due to the switches made in the special securities fund Südinvest, book profits from the disposal of financial assets increased from 3,132.0 TEUR to 32,826.1 TEUR and were eliminated from the operating income. An opposite effect resulted from the change in liabilities, which essentially increased by 18,721.0 TEUR year-on-year due to liabilities for agreed purchase price payments. F-122

295 Operating cash flow per share developed as below: Number of shares in circulation... Thsd. units 22,770 22,770 Operating cash flow... TEUR 23, ,152.3 Operating cash flow per share... EUR (29) Cash flow from investment activities Investment activities resulted in a net outflow of funds of 73,103.4 TEUR (previous year: 2,278.7 TEUR) in the reporting year. The main reason for these changes was the increase in investment activities in investment property. The outflow of funds from investments in financial assets was 83,779.8 TEUR greater than the value for the previous year. It corresponds to the proceeds from the disposal of financial assets, which increased by 89,877.4 TEUR in the reporting year to 95,087.1 TEUR. The background for this was the sales made within our special securities fund in the reporting year of securities dependent on the market value and the temporary reinvestment in annuity-like securities and near money market funds. (30) Cash flow from financing activities In the financial year 2007 as in the previous year 6,831 TEUR was exclusively distributed to the shareholders of the company. The cash inflow from the financial liabilities and derivative financial instruments is based essentially on the inflow of borrowed funds for property investments. (31) Cash flows from discontinued operations The present cash flow statement also includes the cash inflows and outflows of the securities fund Südinvest 107 shown in the income statement and in the balance sheet as discontinued operations. The cash flows from the fund included in the consolidated cash flow statement break down as follows: Cash flow from operating activities ,288.6 Cash flow from investment activities... 5, ,042.4 Cash flow from financing activities... -2, ,225.7 Cash flow from discontinued operations... 4, ,105.3 Other notes and compulsory details Events after the balance sheet date The commercial building in Oldenburg, Lange Straße 74, which was sold to a German investor in 2007, transferred into the buyer s ownership on , on the day of receipt of the purchase price by HAMBORNER. With regard to the purchase agreement notarised in December 2007 regarding the property in Bremen, Linzer Straße 7, the certifying notary informed us in January 2008 that the requirements for execution have been fulfilled. The property transferred into our ownership on , on the day of the purchase price payment. On , a purchase agreement was notarised regarding a commercial building in Fuhlsbüttler Straße in Hamburg and a commercial property with storage areas in Ziethenstraße in Hamburg. The anticipated transfer of ownership will be , depending on the fulfilment of the requirements for the due date and agreement from the monopolies authority. F-123

296 The closure of our special securities fund was effected as of A part of the liquidity gained from this was used for the repayment of current liabilities in connection with the financing of our new acquisitions. Assumptions and estimates In the preparation of the consolidated financial statements, assumptions have been made and estimates used, which have had an impact on the recognition and measurement of the assets, liabilities, income and expenses. These assumptions and estimates essentially relate to the determination of useful lifetimes, the assumptions with regard to the retention of value of properties and buildings, receivables and participations, the recognition and the measurement of provisions as well as the realisability of deferred tax assets. Actual values may deviate from the assumptions and estimates made in individual cases. Changes are taken into account at the time of a better cognizance with an effect on the operating result. Contingencies, contingent liabilities and other financial obligations There are no additional contingencies, contingent liabilities or other financial obligations above and beyond the circumstances listed under item (27). Employees In addition to the two directors, HAMBORNER AG employed 22 (previous year: 20) employees on average in the reporting year, of whom 21 (previous year: 19) were salaried employees and 1 (previous year: 1) was a wage-earning employee. Corporate Governance In November 2007, the Managing Board and Supervisory Board released an updated declaration of compliance with the recommendations of the Government Commission for the German Corporate Governance Code in accordance with Art. 161 of the German Stock Company Act and Art. 15 of the Introductory Act to the German Stock Company Act and made it permanently available to the shareholders on the internet at the website The full wording of the declaration of compliance is also reproduced in the present annual report. Segment reporting In view of the strategic decision not to continue investing in securities, we show the special share fund Südinvest 107 as a discontinued business line on the balance sheet date as of The financial investments segment lapses as a consequence. HAMBORNER is now solely focused on the properties business line and therefore currently has only the properties segment. Shareholders By an agreement dated 14 December 2006, the shares of our company hitherto held by Thyssen schen Handelsgesell-schaft m.b.h. were transferred in a package sale to HSH Real Estate AG via its subsidiaries HSH-RE Beteiligungs GmbH & Co. KG (formerly Mustaphar 5. Verwaltungsgesell-schaft mbh until ) and Endor 5. Beteiligungsge-sellschaft mbh & Co. KG. The agreement was executed on 22 January HSH Real Estate AG indirectly held 50% plus 1 share in the voting capital of HAMBORNER AG on the basis of this agreement. At this time, HSH Real Estate AG directly holds 1.16% of our shares. On , HSH-RE Beteiligungs GmbH & Co. KG, Hamburg informed us, for Endor 5. Beteiligungsgesellschaft mbh & Co. KG, Hamburg, in accordance with Articles 21 Para. 1 in conjunction with 24 of the German Securities Trading Act, that the voting rights shares of Endor 5. Beteiligungsgesellschaft mbh & Co. KG were transferred by the latter to HSH-RE Beteiligungs GmbH & Co. KG with effect from The thresholds of 5% and 3%, which are subject to disclosure in accordance with Art. 21 of the German Securities Trading F-124

297 Act, were undershot at Endor 5. Beteiligungsgesellschaft mbh & Co. KG by the transfer. Due to the assumption of the voting rights share of Endor 5. Beteiligungsgesellschaft mbh & Co. KG, HSH-RE Beteiligungs GmbH & Co. KG holds a total of 50.32% of the voting rights shares of our company. Thresholds subject to disclosure within the meaning of Art. 21, Para. 1 of the German Securities Trading Act have not been exceeded through the assumption by HSH-RE Beteiligungs GmbH & Co. KG. The voting rights of HSH-RE Beteiligungs GmbH & Co. KG are attributable to HSH Real Estate AG in accordance with Art. 22, Para. 1, No. 1 of the German Securities Trading Act, so that HSH Real Estate AG directly and indirectly holds a total of 51.48% plus 1 share in the voting capital of our company since 31 December In addition, we are in possession of a notification in accordance with Art. 41, Para. 2, Art. 21, Para. 1 of the German Securities Trading Act, according to which the voting rights share of Professor Dr. Theo Siegert, Dusseldorf, in HAMBORNER AG has amounted to 10.37% since 1 April The company de Haen-Carstanjen & Söhne GmbH advised us at the end of 2004, in accordance with Art. 21, Para. 1, Clause 1 of the German Securities Trading Act, that its share in the voting capital of our company had exceeded the threshold of 10% since 22 December 2004 and amounted to 10.09% from that date. Relationships with closely related companies and persons in the financial year 2007 Standard market conditions and terms were agreed for all supply and service relationships with closely related companies and persons. The Managing Board has prepared a report, in accordance with Art. 312 of the German Stock Company Act, on the relationships with our former principal shareholder, Familie Julius Thyssen Verwaltungsgesellschaft mbh and the companies related with it, as well as on the relationships with our current main shareholder, HSH Real Estate AG, and its subsidiaries. The report contains the following information on legal matters and measures: Until his departure from the company on 31 March 2007, a member of the Managing Board simultaneously carried out functions in the company management of Familie Julius Thyssen Verwaltungsgesellschaft mbh, Thyssen sche Handelsgesellschaft m.b.h., Thyssenhandel Beteiligungsgesellschaft mbh and TH Immobilien Verwaltungsgesell-schaft mbh. The remuneration entitlements of this member of the Managing Board at HAMBORNER AG were therefore reduced accordingly. In the reporting year, HAMBORNER AG let office accommodation to Progas GmbH & Co. KG in Dortmund, a 100% subsidiary of Familie Julius Thyssen Beteiligungsgesells-chaft mbh. The annual rent amounted to 276,702 EUR plus value-added tax and corresponds to conditions prevailing in the market. In addition to the index-linked rent, accruing operating costs within the framework of the arrangements under leasing contract laws are passed on in full to Progas GmbH & Co. KG. A consultancy agreement was concluded between HAMBORNER AG and HSH Real Estate AG on The substance of the agreement is assistance with the preparation of a portfolio analysis, formulation and documentation of a portfolio and corporate strategy as well as development and formulation of an integrated planning model. A flat-rate fee amounting to 245 TEUR plus value-added tax was agreed for the services to be provided. All consultancy services, except for insignificant residual work on a scoring model, were concluded and invoiced in the financial year The consultancy expenses were fully recognised as an expense in the reporting year. As a result of residual work still outstanding, 20 TEUR plus value-added tax was only remitted to the contracting partner in A further agreement was concluded with HSH Capitalpartners GmbH between and in connection with consultancy services in the acquisition of a property portfolio. HSH Capitalpartners GmbH is a 100% subsidiary of HSH Real Estate AG. The object of the consultancy agreement included the establishment of the opportunity for HAMBORNER AG to participate in the F-125

298 limited bidding process initiated by the seller of the properties. In addition, the agreement included advice with valuation of the properties and the due diligence carried out as well as attendance at the contractual negotiations. An acquisition fee amounting to 1.6% of the net purchase price was agreed with HSH Capitalpartners GmbH, which was only payable in the event of the realisation of a notarial purchase agreement. In the event of success, the costs of the due diligence and the external advisors involved are borne by HSH Capitalpartners GmbH. On 01./ , HAMBORNER AG concluded the notarial purchase agreement for the acquisition of seven properties at a total purchase price of EUR 66.4 million. The arrangements under the purchase agreement provide for the right to retention of a part of the purchase price, until the requirements for the transfer of all seven properties are satisfied. The agreement of a leasehold owner for the sale and encumbrance of one of the properties was still outstanding on the balance sheet date and remains so at present, which is why the transfer of ownership has not yet resulted for this property. In this respect, in accordance with the agreement we have so far paid only EUR 55.9 million of the agreed total purchase price of EUR 66.4 million. According to the consultancy agreement and the arrangements with HSH Capitalpartners GmbH, only a pro rata amount of TEUR plus value-added tax was initially payable out of the agreed total fee of EUR 1.06 million, and this amount was paid in 2007 after invoicing. The balance of TEUR plus value-added tax is only payable with transfer of ownership of the last property. Out of the fee paid to HSH Capital-partners GmbH amounting to TEUR, only an amount of 89.4 TEUR is recognised as an expense. The remaining amount of TEUR should be capitalised as incidental acquisition costs and where it is to be attributed to the buildings apportioned over the useful life of the properties. A further consultancy agreement was concluded between our company and HSH Real Estate AG on The object of this agreement is support for the company with the marketing of a mixed property portfolio dispersed nationwide, consisting of eleven commercial/mixed usage business/ residential properties. With notarial authentication or signature of another binding declaration regarding a transaction within specific deadlines, the contractor has an entitlement to a bonus amounting to 1.5% of the transaction volume as well as to limited supplements on attainment or surpassing of specific rent multipliers. A successful conclusion of the transaction is not foreseeable at present, so that given the current status of proceedings no fee payment as yet needs to be made. In addition to the aforementioned consultancy fees, external costs and travel expenses as well as disbursements to the extent of 20.8 TEUR plus value-added tax were contractually reimbursed to HSH Real Estate AG. HAMBORNER AG has a current account at HSH Nordbank AG, which shows a balance of EUR in our favour on The fee to persons in key positions of the HAMBORNER Group, which is declarable in accordance with IAS 24, entails the remuneration of the Managing Board and Supervisory Board. Members of the Managing Board were remunerated as follows in the financial year 2007: Payments due in the short-term Payments after termination of the employment relationship Payments on the occasion of the termination of the employment relationship Total... 1, Active members of the Supervisory Board received payments due in the short-term amounting to TEUR (previous year: TEUR). An individual breakdown of the emoluments and further details on the remuneration system can be found in the following remuneration report. F-126

299 Remuneration report As a stock exchange-listed company, for us Corporate Governance and transparent company management also mean reporting comprehensively on the emoluments of the Managing Board and Supervisory Board. The remuneration report summarises the principles that apply when determining the remuneration of the Managing Board of HAMBORNER AG and explains the extent and structure of the Managing Board s emoluments. The principles and extent of the remuneration of the Supervisory Board are also described. The remuneration report conforms with the recommendations of the German Corporate Governance Code and includes details in accordance with the requirements of German commercial law, as extended by the German Disclosure of Managing Board Remuneration Act (VorstOG), a component part of the notes in accordance with Art. 285 of the German Commercial Code and of the notes to the consolidated accounts in accordance with Art. 314 of the German Commercial Code or of the management report in accordance with Art. 289 of the German Commercial Code and of the consolidated management report in accordance with Art. 315 of the German Commercial Code. Remuneration of the Managing Board Until the establishment of an Executive Committee on , the Personnel Committee of the Supervisory Board was responsible for determining the Managing Board remuneration. The functions previously incumbent on the Personnel Committee were allocated to the recently established Executive Committee with effect from , by a corresponding Supervisory Board resolution, which has thus been responsible for determining the Managing Board remuneration since then. The level of the Managing Board remuneration at HAMBORNER AG is geared to the size of the company, its economic and financial situation and to the success of the company. The remuneration of the Managing Board is performance-related and takes into account the functions and the contribution of the respective member of the Managing Board. The remuneration for members of the Managing Board consists of non-profit-related and profit-related components. The non-profit-related parts consist of a fixed sum and additional benefits (e.g. a company car) as well as pension commitments for the director departing in the reporting year. The fixed sum is paid as basic remuneration in the form of a monthly salary. In addition to this fixed sum, each member of the Managing Board receives an annual profit-related bonus, which is based on individual achievement and the success of the company. There are still no plans for any additional variable remuneration component geared to the long-term for instance, within the framework of a share option programme. In the wake of the replacement of the company management carried out with the change of the main shareholder, a non-recurring pro rata bonus payment was guaranteed for the year 2007 to the members of the Managing Board reappointed for periods of less than a year, in addition to the fixed current remuneration with entry into the company. For the years subsequent to the appointment, the contractual salary provisions are restricted to the fixed sum agreed as a basic remuneration and paid monthly as a salary, the incidental benefits and bonus payments solely related to results. In the event of early termination of the employment contract caused by revocation of the appointment, the member of the Managing Board affected receives, as recompense for the early termination of the contract, the cash value of the gross annual fixed salary that would have been due up to the normal termination of the appointment period. Furthermore, where the removal does not coincide with the end of the financial year, the respective member of the Managing Board receives a pro rata profit-related bonus up to the date of the removal. The structure of the Managing Board remuneration is subject to a periodic review by the Supervisory Board. F-127

300 The Chairman of the Supervisory Board explained the structure of the remuneration system in the general shareholders meeting The explanations relate both to the members of the Managing Board reappointed in March and May, Dr. Rüdiger Mrotzek and Mr. Roland J. Stauber, and also to the provisions for the former members of the Managing Board departing through resignation, Mr. Krull and Mr. Heite. The remuneration report contains information relating to the corresponding periods of duty. In this connection it should be noted that in the wake of the replacement of the Managing Board of the company, the pension commitment granted previously to the spokesperson of the Managing Board, Mr. Krull, was not granted to the reappointed members of the Managing Board. By resolution of the Supervisory Board dated 27 March 2007, an agreement was concluded with Mr. Karl-Hermann Krull on the termination of his employment relationship with effect from 30 April It was agreed therein that Mr. Krull would receive a lump sum settlement amounting to 833 TEUR due to the early termination of his contract. The entitlement to a supplementary bonus arising in connection with the share transfer by Thyssen sche Handelsgesellschaft to the new majority shareholder carried out on 22 January 2007 was offset with this lump sum settlement. In addition, the agreement to terminate the contract contains a settlement clause, whereby all reciprocal entitlements from the employment are deemed to be satisfied with payment of this lump sum settlement, including possible variable bonus entitlements (contractual bonus) of the director for the year Therefore, the total remuneration of Mr. Krull amounting to TEUR is derived essentially from the payment of the balance from offsetting the lump sum settlement through to the supplementary bonus amounting to TEUR and the fixed sum to be paid for the period January to April. The bonus provision for Mr. Krull created in the last calendar year, consisting of the contractual and supplementary bonuses, was released increasing profit by TEUR. Mr. Heite left the employ of the company as of 31 March 2007 under the terms of an agreement to terminate the contract dated 27 March He received the contractually agreed fixed sum amounting to 1.8 TEUR each month up to the end of his employment relationship. An existing entitlement to a pro rata bonus, amounting to 5.3 TEUR was allocated to the provisions. The remuneration of the active and departing members of the Managing Board amounts to TEUR overall for the financial year. Of this total amount, 1,095.8 TEUR is apportionable to the fixed sum and a negative amount of TEUR, created due to the release of bonus provisions, to the variable components. Remuneration of the Managing Board in 2007 (individually) Fixed remuneration (TEUR) Variable remuneration (TEUR) Total TEUR Karl-Hermann Krull (spokesperson of the Managing Board until ) Jürgen Heite (director until ) * 5.3 * 10.6 Roland J. Stauber (spokesperson of the Managing Board since ) Dr. Rüdiger Mrotzek (director since ) Total... 1, *) Mr. Heite s fixed and variable remuneration at HAMBORNER AG was reduced pro rata temporis in view of his activity as Managing Director of the former principal shareholder. In addition to the aforementioned emoluments, members of the Managing Board received remunerations in kind essentially in the form of use of company cars and subsidies for exempt life insurance, health and nursing care insurance. These subsidies each correspond in their extent to half of the amounts paid by the member of the Managing Board, but at most to the maximum amount of the employer s percentage for pension, health and nursing care insurance due by law, always taking into account the contribution assessment ceilings applicable at the time. The additional emoluments amounted to 43.7 TEUR in total in the reporting year. F-128

301 Pension commitments The former spokesperson of the Managing Board, Mr. Krull, received a pension commitment from the company commensurate with the benefit payment rules of the Bochumer Verband. The annual emoluments amount to approximately 84 TEUR p.a. on termination of employment as of The company has formed provisions for these future pension entitlements. The DBO value of the pension provision formed for Mr. Krull increased by TEUR in the reporting year. No pension commitment on the part of HAMBORNER AG exists for the other member of the Managing Board, Mr. Heite. Nor do pension commitments exist with regard to the reappointed members of the Managing Board. The total remunerations of former members of the Managing Board and their surviving dependants amounted to TEUR. The DBO value of the pension provision formed for this group of people amounts to 4,420.0 TEUR. Other matters No loans were granted to members of the Managing Board by the company. No member of the Managing Board received benefits or corresponding commitments from a third party in the past financial year with regard to his activity as a member of the Managing Board. The company concluded a pecuniary loss liability insurance policy for members of the Managing Board and for members of the Supervisory Board. This covers pecuniary losses arising out of activity as a member of the executive bodies and supervisory bodies of HAMBORNER AG. Furthermore, the officers of Hambornberg Immobilien- und Verwaltungs-GmbH are insured persons (insurance protection relates here to the Managing Directors of the private limited company). The sums insured amount to EUR 5 million per insurance claim, but a maximum of EUR 5 million per insurance year. Appropriate deductibles have been agreed. The insurance cover lapses in the event of wilful intent, so that any cover previously granted lapses retroactively in the event of (subsequent) discovery and benefits provided are to be refunded to the insurer. The annual insurance premium currently amounts to approximately 12.5 TEUR plus insurance tax. Remuneration of the Supervisory Board The remuneration of the Supervisory Board was redetermined in 2007 by the general shareholders meeting at the suggestion of the Managing Board and Supervisory Board. It is regulated accordingly in Art. 12 of the Articles of Association. Supervisory Board remuneration is geared to the size of the company, the functions and the responsibility of the members of the Supervisory Board and is quite significantly dependent on the economic success of the company. Chairmanship, deputy chairmanship and membership of committees of the Supervisory Board are also remunerated. The amendment to the Articles of Association with regard to the change to Supervisory Board remuneration, which was approved by the general shareholders meeting on 5 June 2007 and became effective with entry in the Commercial Register on , is contained in Art. 12 of the Articles of Association. The company s current Articles of Association may be viewed on the website under the path Company/Corporate Governance/Articles of Association. In accordance with Art.12 of the Articles of Association, the fixed remuneration amounts to EUR 15,000 and the variable remuneration EUR 500 per euro cent by which the undiluted consolidated result per share (earnings per share) exceeds the amount of EUR Variable remuneration is limited to twice the fixed remuneration. The Chairman of the Supervisory Board receives twice the remuneration, his deputy one and a half times. Members of the Supervisory Board, who have only belonged to the Supervisory Board during part of the financial year, are entitled to the remuneration pro rata temporis. Members of the Supervisory Board, who belong to one of the committees formed, receive an additional remuneration of EUR 2,000 per financial year. Twice the remuneration is due to the respective committee chairmen. Three committees exist at the moment: the Executive Committee, the Audit Committee and the Nominating Committee. F-129

302 The relevant remuneration of the Supervisory Board for the financial year 2007 taking into consideration the change in the remuneration rules undertaken during the year and the pro rata temporis membership of certain individuals is as follows: Remuneration of the Supervisory Board in 2007 (individually) Fixed remuneration (TEUR) Variable remuneration (TEUR) Total TEUR Dr. Eckart John von Freyend (since , Chairman since ) Achim Breidenstein (Chairman until ) Dr. Marc Weinstock (since , Deputy Chairman since ) Dr. Henner Puppel (1st Deputy Chairman until ) Robert Schmidt Volker Lütgen (since ) Edith Dützer Stephan Krauskopf (until ) Hans-Bernd Prior Total In addition to the aforementioned emoluments, members of the Supervisory Board receive reimbursement of their cash expenses and a meeting fee per attendance for the period before entry into force of the new arrangements for Supervisory Board remuneration approved by the general shareholders meeting on 5 June Meeting fees amounting to a total of 0.9 TEUR were paid to Supervisory Board members for the financial year Cash expenses have not accrued in the reporting year. Furthermore, members of the Supervisory Board received no additional remunerations or benefits in the reporting year for services personally provided, particularly consultancy and mediation services. However, reference is made once again in this connection to the consultancy contracts with HSH Real Estate AG and HSH Capitalpartners GmbH respectively, which were respectively submitted to and approved by the Supervisory Board. The members of the Supervisory Board Dr. Marc Weinstock and Volker Lütgen were each engaged in executive body duties at that time, as a member of the Managing Board of HSH Real Estate AG and Managing Director of HSH Capitalpartners GmbH respectively. Please refer to the statements in the Corporate Governance report and the explanatory notes to the dependent company report with regard to the respective subject matters and the consultancy fees paid. Members of the Supervisory Board receive no loans or advances from the company. F-130

303 Supervisory Board (until 15 February 2007) Dr. jur. Josef Pauli, Essen Honorary Chairman Ass. jur. Achim Breidenstein, Essen Chairman Executive bodies of the company and their mandates Member of the management of Familie Julius Thyssen Verwaltungsgesellschaft mbh Thyssen sche Handelsgesellschaft m.b.h. Thyssenhandel Beteiligungsgesellschaft mbh TH Immobilien Verwaltungsgesellschaft mbh External mandates: Progas GmbH & Co. KG *2) (Chairman) Zentraleuropa LPG Holding GmbH *2) (Chairman) OBI AG *1) OBI Real Estate AG *1) Olympics Baumarkt Holding GmbH (OBI Group) *2) Deutsche Heimwerkermarkt Holding GmbH (OBI Group) *2) Dr. jur. Henner Puppel, Essen 1st Deputy Chairman Spokesperson of the Managing Board of National-Bank AG (until ) External mandates: ALLBAU AG *1 ) (until ) Falke Bank AG in liquidation *1) HANSAINVEST Hanseatische Investment-GmbH *1) Rheinisch-Westfälische Sterbekasse Lebensversicherung AG *1) Altstadt-Baugesellschaft mbh & Co. KG *2) (until ) Essener Wirtschaftsförderungsgesellschaft mbh *2) IKB Autoleasing GmbH *2) IKB Leasing GmbH *2) IKB Leasing Berlin GmbH *2) Liquiditäts- und Konsortialbank GmbH *2) (until ) Dipl.-Kfm. Robert Schmidt, Datteln 2nd Deputy Chairman Member of the management of Evonik Immobilien GmbH External mandates: EBV GmbH *2) Gesellschaft für Wohnen Datteln mbh *2) (Chairman) Lünener Wohnungs- u. Siedlungsgesellschaft mbh *2) (Deputy Chairman) Montan-Grundstücksgesellschaft mbh *2) Rhein Lippe Wohnen GmbH *2) F-131 Non-binding convenience translation

304 Wohnbau Dinslaken GmbH *2)) (Deputy Chairman) Wohnbau Westfalen GmbH *2) Wohnungsbaugesellschaft mbh Glückauf *2) (Deputy Chairman) Stephan Krauskopf, Düsseldorf Lawyer Edith Dützer *3), Moers Clerical employee Hans-Bernd Prior *3), Dinslaken Technician Committees of the Supervisory Board Executive Committee and Personnel Committee Members of both committees (until 15 February 2007): Chairman of the Supervisory Board and both deputies Managing Board Dipl.-Betriebsw. Karl-Hermann Krull, Dinslaken (until ) Spokesperson External mandates: Wohnbau Dinslaken GmbH *2) Dipl.-Kfm. Jürgen Heite, Meerbusch (until ) Member of the management of Familie Julius Thyssen Verwaltungsgesellschaft mbh Thyssen sche Handelsgesellschaft m.b.h. Thyssenhandel Beteiligungsgesellschaft mbh TH Immobilien Verwaltungsgesellschaft mbh External mandates: Wohnbau Dinslaken GmbH *2) Progas GmbH & Co. KG *2) F-132

305 Supervisory Board (since 16 February 2007) Dr. jur. Josef Pauli, Essen Honorary Chairman Dr. rer. pol. Eckart John von Freyend, Bonn Managing shareholder of Gebrüder John von Freyend Verwaltungs- und Beteiligungsgesellschaft m.b.h. External mandates: Finum AG) *1) (chairmanship) (as from ) Hahn Immobilien-Beteiligungs AG *1) Infopark Fejlesztési Rt *1) IVG Immobilien AG *1) Konzept plusag *1) (chairmanship) (as from ) Litos AG *1) (as from ) Swiss Lake AG *1) (until ) VNR Verlag für die Deutsche Wirtschaft AG *1) Dr. rer. pol. Marc Weinstock, Hattersheim Chairman of the Managing Board of HSH Real Estate AG External mandates: LB Immo Invest GmbH *2) DSK Deutsche Stadt- und Grundstücksentwicklungsgesellschaft mbh *2) (Chairman as from ) BIG BAU-INVESTITIONSGESELLSCHAFT mbh *2) GEHAG GmbH *2) (until ) Landgesellschaft Schleswig-Holstein mbh *2) (Deputy Chairman as from ) Deutsche PPP Holding GmbH *2) (Chairman as from ) Volker Lütgen, Wentorf Managing Director of HSH Capitalpartners GmbH Dipl.-Kfm. Robert Schmidt, Datteln Managing Director of Evonik Immobilien GmbH External mandates: EBV GmbH *2) Gesellschaft für Wohnen Datteln mbh *2) (Chairman) (until 10/2007) Lünener Wohnungs- u. Siedlungsgesellschaft mbh *2) (Deputy Chairman) (until 02/2007) Montan-Grundstücksgesellschaft mbh *2) Rhein Lippe Wohnen GmbH *2) (until 02/2007) Wohnbau Dinslaken GmbH *2) ) (Deputy Chairman) Wohnbau Westfalen GmbH *2) (until 02/2007) Wohnungsbaugesellschaft mbh Glückauf *2) (Deputy Chairman) (until 02/2007) F-133

306 Edith Dützer *3), Moers Clerical employee Hans-Bernd Prior *3), Dinslaken Technician Committees of the Supervisory Board Executive Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend Dr. rer. pol. Marc Weinstock Volker Lütgen Dipl.-Kfm. Robert Schmidt Audit Committee Members of the Committee: Dr. rer. pol. Marc Weinstock Dipl.-Kfm. Robert Schmidt Edith Dützer Nominating Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend Dr. rer. pol. Marc Weinstock Volker Lütgen Dipl.-Kfm. Robert Schmidt Managing Board Dipl.-Kfm. Roland J. Stauber, Duisburg (as from 05/2007) Spokesperson External mandates: Wohnbau Dinslaken GmbH *2) VBW Bauen und Wohnen GmbH *2) Dr. Rüdiger Mrotzek, Hilden (as from 03/2007) External mandates: Wohnbau Dinslaken GmbH *2) *1) Membership of other Supervisory Boards to be constituted by law *2) Membership of comparable domestic and foreign monitoring bodies *3) Member of the Supervisory Board, employee representative Duisburg-Hamborn, 20 February 2008 The Managing Board Stauber Dr. Mrotzek F-134

307 Statement of the Managing Board Non-binding convenience translation The Managing Board of HAMBORNER AG is responsible for the preparation, completeness and accuracy of the consolidated financial statements and consolidated management report as well as the other information given in the annual report. The consolidated financial statements were prepared using the International Financial Reporting Standards (IFRS), as applicable in the European Union. The consolidated management report of HAMBORNER AG and of the Group contains an analysis of the net worth, financial position and earnings as well as additional explanatory notes, which are provided in accordance with the provisions of the German Commercial Code. Where required, appropriate estimates were made; these are based on the information currently available. Where assumptions taken as a basis are incorrect or only partially correct, deviations may occur. An effective internal management and control system exists to ensure the reliability and completeness of the data for preparation of the consolidated financial statements and report on the position of the company and Group (consolidated management report) as well as the internal reporting. Moreover, a comprehensive risk management system was implemented commensurate with the requirements of the Federal Act on Corporate Governance and Transparency [KonTraG]. As a result, the Managing Board is able to identify significant risks at an early stage and, where appropriate, to initiate necessary preventive measures. BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Essen has audited the present consolidated financial statements and the consolidated management report and granted an unqualified audit certificate. The Managing Board Roland J. Stauber Dr. Rüdiger Mrotzek F-135

308 The following auditors report (Bestätigungsvermerk) has been issued in accordance with 322 German Commercial Code (Handelsgesetzbuch) in German language on the German version of the consolidated financial statements of the HAMBORNER Aktiengesellschaft, Duisburg-Hamborn, as of and for the period from January 1, 2007 to December 31, Independent Auditor s Report We have audited the consolidated financial statements prepared by the HAMBORNER Aktiengesellschaft, Duisburg-Hamborn, comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the management report combined with the group management report for the business year from January 1, 2007 to 31 December, The preparation of the consolidated financial statements and the management report combined with the group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. [paragraph] 1 HGB are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the management report combined with the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the management report combined with the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the management report combined with the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the management report combined with the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The management report combined with the group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Essen, 21 February 2008 BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Rittmann Wirtschaftsprüfer [German Public Auditor] p.p. Goldner Wirtschaftsprüfer [German Public Auditor] F-136

309 Audited annual financial statements (HGB) of HAMBORNER REIT AG as of December 31, 2009 F-137

310 BALANCE SHEET AS OF 31 DECEMBER 2009 Non-binding convenience translation Assets Notes Fixed assets Intangible fixed assets... (1) Licences and similar rights Tangible fixed assets... (2) Land, land rights and buildings, including buildings on third-party land , ,682 Other equipment, operating and office equipment , ,745 Financial assets... (3) Shares in affiliated companies Other investments Other loans , ,907 Current assets Receivables and other assets... (4) Trade receivables Receivables from affiliated companies thereof 0 TEUR with a remaining term of more than one year (previous year: 292 TEUR) thereof 0 TEUR trade receivables (previous year 292 TEUR) Other assets thereof 114 TEUR with a remaining term of more than one year (previous year: 102TEUR) , ,507 Cash-in-hand, bank balances... (5) thereof affiliated companies 0 TEUR (previous year: 1 TEUR)... 37,942 54,011 38,344 55,518 Prepaid expenses... (6) Total assets , ,931 F-138

311 Equity and Liabilities Notes Equity... (7) Subscribed capital... 22,770 22,770 Revenue reserves... Legal reserve... 2,277 2,277 Other revenue reserves... 34,610 34,610 36,887 36,887 Net retained profits Retained profits... 20,161 0 Net income... 7,076 56,258 Appropriation to other revenue reserves ,128 27,237 28,130 86,894 87,787 Special tax-allowable reserve... (8) Untaxed reserves in accordance with Art. 6 b of the German Income Tax Act [EStG] Tax provisions for tangible fixed assets... 92,413 94,977 92,413 95,588 Provisions... (9) Provisions for pensions... 5,701 5,847 Provisions for taxes Provision for mining damage... 1,402 1,378 Other provisions... 1,766 1,768 9,272 9,778 Liabilities... (10) Liabilities to banks ,827 85,298 Trade payables Liabilities to other long-term investees and investors thereof 0 TEUR trade payables (previous year 119 TEUR) Other liabilities thereof 965 TEUR from taxes (previous year: 564 TEUR)... 3,932 2, ,827 88,756 Deferred income... (11) 1,951 2,022 Total equity and liabilities , ,931 F-139

312 Assets analysis Balance Acquisition and construction costs Provisions Residual book values Additions Disposals Balance Balance Additions (Depreciation for the financial year) Disposals Balance Balance Balance Intangible fixed assets Licences and similar rights Tangible fixed assets ,286 40,958 1, ,432 45,541 6,913 1,487 50, , ,465 Land, land rights and buildings, including buildings on third-party land ,951 40,952 1, ,109 45,269 6,890 1,469 50, , ,419 Other equipment, operating and office equipment Financial assets Shares in affiliated companies Other investments Other loans Total ,534 40,980 1, ,579 45,627 6,921 1,488 51, , ,519 F-140

313 INCOME STATEMENT for the period from 1 January to 31 December Notes Revenue from the management of properties and buildings... (12) Revenue from rents and leases... 21,758 19,436 Revenue from passed on incidental costs to tenants... 2,418 1,873 24,176 21,309 Other own work capitalised... (13) 15 0 Other operating income... (14) Income from the disposal of fixed assets... 1,126 18,008 Income from the sale of securities classified as current assets ,687 Income from the release of the special tax-allowable reserve... 3,401 11,031 Other... 1,203 1,183 5,730 75,909 Total operating income... 29,921 97,218 Expenses for management of properties and buildings... (15) Real estate operating expenses... -3,666-3,024 Property and building maintenance... -1,385-1,234-5,051-4,258 Personnel expenses... (16) Wages and salaries... -2,306-2,599 Social security, pensions and other benefits thereof for pension benefits: 252 TEUR (previous year 333 TEUR) ,820-3,190 Amortisations of intangible fixed assets and depreciation of tangible fixed assets... (17) -6,921-5,593 Other operating expenses... (18) Appropriation to special tax-allowable reserve ,937 Other... -1,631-2,681-1,858-19,618 Total operating expenses ,650-32,659 Operating result... 13,271 64,559 Result from investments... (19) Income from investments Financial result... (20) Other interest and similar income thereof from affiliated companies: 12 TEUR (previous year: 24 TEUR) ,741 Expense from loss absorption Interest and similar expenses thereof to affiliated companies: 3 TEUR (previous year: 5 TEUR)... -5,463-4,596-5,006-2,898 Result from ordinary activities... 8,279 62,304 Taxes on income... (21) -1,203-6,046 Net income... 7,076 56,258 Retained profits from previous year... 20,161 0 Appropriation to other revenue reserves ,128 Net retained profits... 27,237 28,130 F-141

314 NOTES FOR THE FINANCIAL YEAR 2009 Non-binding convenience translation General principles In implementing the resolutions of the general shareholders meeting of 8 June 2009 HAMBORNER AG was changed into a REIT company with effect as of 1 January 2010 and from this time was called HAMBORNER REIT AG. Since 29 June 2009 the company had already been registered with Vor-REIT status (intermediate legal form between the foundation of a corporation and listing as a REIT on the stock exchange) at the Bundeszentralamt für Steuern (Federal Central Tax Office), but insofar had not yet attained the status of a REIT company in the sense of Art. 1 of the German REIT Act (REIT Act). Insofar as the statements and information relate to business transactions of the report year from 1 January until 31 December 2009, the report still uses the company name HAMBORNER AG, since the company did not yet attain REIT status until 31 December HAMBORNER REIT AG acquires ownership or real utilisation rights to movable or immovable domestic and foreign assets in the sense of Art. 1 of the German REIT Act (REIT Act) with the exception of portfolio rented residential properties for utilisation, administration or realisation. Participations in partnerships and companies limited by shares in the sense of Art. 1 of the German REIT Act (REIT Act) may also be acquired, held, administrated and realised. The headquarters of the company is in Duisburg/Deutschland. It is entered in the Commercial Register at Duisburg County Court under HRB 4. The annual financial statements of HAMBORNER are presented to the operator of the electronic German Federal Gazette. They are available for download on the company s website at or may be requested from HAMBORNER REIT AG, Goethestraße 45, Duisburg. Following the merger of our subsidiary Hambornberg Immobilien- und Verwaltungs- GmbH with HAMBORNER AG with effect as of 1 October 2009 we are no longer obliged to prepare consolidated financial statements. However, as a corporation listed on the stock exchange HAMBORNER REIT AG voluntarily prepares and publishes an individual company financial statement based on the requirements of the IFRS in accordance with Art. 325, Para. 2a of the German Commercial Code (HGB). The management report in accordance with Art. 289 of the German Commercial Code (HGB) is presented with the separate IFRS company financial statements. These annual financial statements are prepared in euro (EUR) in accordance with the accounting principles under commercial law and the requirements under company law. All other amounts are indicated in thousands of euro (TEUR) unless otherwise stated. Minor differences may arise with computations of totals and percentage figures due to roundings. The balance sheet and income statement comply with the provisions of commercial law in layout and structure. Individual items are subdivided further and designated according to their content. The balance sheet and income statement include figures, under which more detailed explanations of the respective items are to be found in the notes. The income statement has been prepared in total cost method. These annual financial statements as of 31 December 2009 are based on the same accounting and valuation methods and calculation rules as in the previous year. F-142

315 Accounting and valuation methods Intangible fixed assets are valued at acquisition cost less scheduled amortization. Tangible fixed assets are shown at acquisition and construction costs less the scheduled and, where applicable, non-scheduled depreciations under commercial law. Special tax depreciations going beyond that (e.g. in accordance with Art. 6b of the German Income Tax Act) are shown on the liabilities side, in accordance with Art. 281, Para. 1, Clause 1 of the German Commercial Code, as a provision for fixed assets under the special account with reserve characteristics. Depreciations are carried out pro rata temporis on additions of movable property of the fixed assets commensurate with the tax requirements. Other loans primarily involve interest-free housing loans, which are written down on the assets side in full or discounted at 5.5% in accordance with the tax requirements. The items of the current assets are recognized at nominal values. Identifiable risks are appropriately taken into account by creation of provisions. Uncollectible receivables are written off to the full extent. The prepaid expenses include payments for agreed future liabilities of the company. They are deferred at the time of the cash flow and released over the term of the agreements with an effect on the operating result. Depreciations that are only permitted under fiscal law are shown separately on the liabilities side from depreciations under commercial law as a special account with reserve characteristics in accordance with Art. 281, Para. 1 of the German Commercial Code. Provisions for pensions are recorded with their fractional value according to actuarial calculations, in accordance with Art. 6a of the German Income Tax Act, taking as a basis a rate of interest of 6.0%. They are determined on the basis of actuarial tables 2005 G compiled by Prof. Dr. Klaus Heubeck. risks. The funding for mining damage and other provisions is commensurate with all identifiable Liabilities to banks and other liabilities are valued at their nominal or repayment amounts. A pension obligation assumed in connection with the acquisition of a property was discounted at 6.0% on the cash value. We show rent prepayments received and building cost subsidies obtained as deferred income at nominal amounts, which will become income only in periods after the financial statement reporting date. Explanatory notes to the balance sheet Fixed assets The development of the individual fixed asset items is portrayed in the assets analysis. (1) Intangible fixed assets The licences and similar rights solely entail rights of use acquired against payment for system and application software for our EDP equipment. In the reporting year new licence rights were purchased for a total value of 2 TEUR. F-143

316 (2) Tangible fixed assets The acquisition costs for properties acquired in the reporting year, including purchase price prepayments and capitalisation of post-acquisition expenses for portfolio properties, amounted to EUR 41.0 million overall. The book value of sold properties amounts to EUR 0.3 million. Through additions amounting to 6 TEUR and taking into account depreciation of 23 TEUR in the financial year the value of operating and office equipment on the balance decreased by 17 TEUR. Provisions entail scheduled straight-line depreciations and non-scheduled depreciations. Special tax depreciations are shown on the liabilities side of the balance sheet under the special-tax allowable reserve. The amortisations of intangible assets and depreciation on tangible fixed assets break down as follows: 2009 TEUR 2008 TEUR Release to the extent of the ordinary depreciation under commercial law charged for the financial year... 2,809 2,824 Non-scheduled depreciation in connection with the new valuation of our portfolio property Other ordinary depreciations... Intangible fixed assets Tangible fixed assets... 3,871 2,760 3,879 2,769 Total... 6,921 5,593 Depreciations amounting to 2,809 TEUR (previous year: 2,824 TEUR) were neutralised in the financial year 2009 through release of the special tax-allowable reserves. Tax provisions on the liabilities side of 92,413 TEUR counterbalanced the tangible fixed assets shown on the assets side amounting to 261,465 TEUR. (3) Long-term financial assets Hambornberg Immobilien- und Verwaltungsgesellschaft mbh was merged with HAMBORNER AG with effect as of 1 October Consequently on the balance sheet date the company no longer had any shares in affiliated companies. The share in the nominal capital of Montan GmbH Assekuranz-Makler / Dusseldorf which remained in the item Other investments on 31 December 2008 was sold in As of 31 December 2009 the company no longer has any investments. The long-term, interest-free residential construction and employee loans shown under Other loans remained almost unchanged compared to the previous year at 48 TEUR. The additions of 20 TEUR were set off by scheduled redemptions and repayments of 21 TEUR. (4) Receivables and other assets Trade receivables (77 TEUR) exist with regard to tenants and leaseholders. Other assets are made up as follows as of 31 December 2009: TEUR TEUR Capitalised actuarial reserve for claims from the pension liability insurance for pension obligations Tax refund claims Other Total ,018 The remaining other assets include accrued interest on overnight and fixed-term deposits amounting to 31 TEUR. F-144

317 (5) Cash in hand, cash in banks As of 31 December 2009 liquid funds amount to 37,942 TEUR (previous year: 54,011 TEUR). The decrease results mainly from the outflow of own funds invested in property and payment of dividends for the financial year Approximately EUR26.3 million from the bank deposits was invested as fixed-term deposits or at overnight terms on the balance sheet date. (6) Prepaid expenses This item essentially comprises accrued development costs for a leasehold property, which are apportioned over the remaining term of the leasehold, and interest on loans paid in advance for periods in 2010 due to contractual agreements. (7) Equity As of 31 December 2009 the subscribed capital amounts to an unchanged EUR million and is divided into 22,770,000 no-par-value shares made out to bearer. By means of the resolutions of the general shareholders meeting of 5 June 2008, the Managing Board was authorised to increase the share capital, with the agreement of the Supervisory Board, once only or several times by up to 2,270 TEUR nominally, by issuing new no-par-value shares made out to bearer (Authorised Capital I). The new shares are to be offered to shareholders for subscription. Furthermore, the Managing Board was authorised to increase the share capital of the company, with the agreement of the Supervisory Board, by a further amount to the extent of 9,080 TEUR (Authorised Capital II), once only or several times by the issuing of new no-par-value shares made out to bearer, and to exclude the subscription right of shareholders for the Approved Capital II under certain conditions with the agreement of the Supervisory Board. The Managing Board s authorisation for the capital increase is valid only until 4 June 2013 in both cases. The Articles of Association of the company were correspondingly amended. An action to contest the resolutions of the General Shareholders Meeting of 5 June 2008 regarding an increase in capital and against the ratification by this General shareholders Meeting of the actions of these executive bodies was brought before Duisburg Regional Court. Another shareholder has joined this legal action as an intervening party. In accordance with Art. 246, Para. 4 of the German Stock Corporation Act (AktG), the company immediately announced the filing of this legal action in the electronic German Federal Gazette. The amendment to the Articles of Association (increase in capital) was entered in the commercial register on 16 July In its decision of 27 March 2009 Duisburg Regional Court authorised the HAMBORNER AG s application for release and in its decision of 24 April 2009 rejected the legal action. The petitioner immediately appealed against the decisions in the release procedure. The petitioner appealed against the decision in the contesting process. In its decisions of 3 July 2009 Dusseldorf Higher Regional Court rejected the immediate appeal of the petitioner against the decision of Duisburg Regional Court in the release procedure regarding the resolution to increase capital in the General Shareholders Meeting In August 2009 the petitioner withdrew the appeal lodged against the decision in the legal process. (8) Special tax-allowable reserve This item breaks down as follows: TEUR TEUR Untaxed reserves in accordance with Art. 6b of the German Income Tax Act Tax provisions for tangible fixed assets in accordance with Art. 6b of the German Income Tax Act... 89,540 92,004 Art. 4 of the German Development Areas Act [Fördergebietsgesetz]... 2,601 2,679 R6.6 of the German Income Tax Act Subtotal... 92,413 94,977 Total... 92,413 95,588 F-145

318 Development of the special account in detail: Untaxed reserves in accordance with Art. 6b of the German Income Tax Act (EStG) TEUR Tax provisions for tangible fixed assets TEUR Untaxed reserves in accordance with Art. 6b of the German Income Tax Act (EStG) TEUR Tax provisions for tangible fixed assets TEUR Balance as of 1 January , ,709 + Transfer of book profits , Conversion from untaxed reserves in accordance with Art. 6b of the German Income Tax Act in tax provisions for additions to tangible fixed assets Direct transfer in accordance with Art. 6b of the German Income Tax Act to addition to assets of the reporting year ,235 14,235 - Release to the extent of the ordinary depreciation under commercial law charged for the financial year ,809-2,824 Release to the extent of the non-scheduled depreciation charged for the financial year Reversal of impairment adjustment ,092 - Release arising from disposals of tangible fixed assets in the reporting year ,207 Balance as of 31 December , ,977 (9) Provisions Provisions for pensions amount to 5,701 TEUR on the balance sheet date; they decreased by 146 TEUR year-over-year. Provisions for taxes decreased by 382 TEUR year-over-year and amount to 403 TEUR. This involves provisions for taxes on income for the years 2008 and The decrease results from the balance remaining after paying tax liabilities arising from an investigation from the tax authorities and making provisions for the year Provisions for mining damage increased by approximately 24 TEUR year-on-year to TEUR. Other provisions are made up of the following: TEUR TEUR Provisions for personnel expenses Maintenance provisions Articles of Association-related and statutory obligations (Supervisory Board remuneration, audit expenses, etc.) Legal and consultancy expenses Outstanding invoices Other Total... 1,766 1,768 Provisions for Articles of Association-related and statutory obligations include statutory auditor fees to the extent of 51 TEUR, which were recorded as expenses in the financial year. The amount relates to the statutory audit of the annual financial statement and the separate financial statement based on the requirements of the IFRS. The Supervisory Boards remuneration primarily based on the profit amounts to 159 TEUR in the reporting year compared to 355 TEUR the previous year. The provision for outstanding invoices amounts to 332 TEUR and increased by 56 TEUR year-over-year. It results mainly from maintenance measures which were carried out in 2009, but which were not yet invoiced on the balance sheet date. Another considerable amount relates to invoices still outstanding for operating expenses in the reporting year. F-146

319 (10) Liabilities Total liabilities amounting to 109,827 TEUR had the following remaining terms on the balance sheet date of 31 December 2009: Total TEUR Up to one year TEUR Two to five years TEUR More than five years TEUR Liabilities to banks ,827 4,609 26,575 74,643 (previous year)... (85,298) (3,754) (12,154) (69,390) Trade payables (previous year)... (487) (472) (15) (0) Liabilities to other long-term investees and investors (previous year)... (119) (119) (0) (0) Other liabilities... 3,932 1,447 2,485 0 (previous year)... (2,852) (829) (2,023) (0) Total ,827 6,107 29,077 74,643 (previous year)... (88,756) (5,174) (14,192) (69,390) Liabilities to banks relate solely to loans that were raised for the financing of our property investments. The reported liabilities to banks were secured in full by means of first-rate mortgages on the balance sheet date. The other liabilities of 2,834 TEUR mainly comprise purchase price retentions, which secure existing rent guarantees and are used for alteration and extension obligations, surety amounts and tax liabilities to the extent of 965 TEUR. Of these 517 TEUR are for the property acquisition tax for a property transaction registered in 2009, for which the transfer of ownership will first take place in (11) Deferred income This item essentially includes advanced payments on a tenancy agreement, which are to be apportioned over the agreed term of the contract and rent payments received in December 2009 for the month January Explanatory notes on the income statement (12) Revenue from the management of properties and buildings The revenue from rents and leases amounts to 21,758 TEUR and is thus 2,322 TEUR above the value for the previous year. The increase mainly results from property acquisitions in the current and previous year, which had an impact of approximately 3,178 TEUR. On the other hand property sales resulted in a decrease in revenues of approximately 485 TEUR. The remaining rent increases, for instance, arising from indexed or graduated rent arrangements amounting to 144 TEUR were balanced out through vacancies that occurred, through rent losses, through rent reductions in the case of a change of tenant and due to rent rebates granted for the avoidance of vacancies to the extent of 515 TEUR in total. The revenue from passed on incidental costs to tenants increased by 545 TEUR year-over-year and amounts to 2,418 TEUR. The increase, of approximately 563 TEUR, results from the change in property portfolio. In the case of the other properties remaining in the portfolio, the income from passed on incidental costs decreased by 18 TEUR. (13) Other own work capitalised Own work capitalised in the previous year involved in-house engineering work and construction overhead charges in connection with alterations to be capitalised at our local shopping amenities in Cologne. F-147

320 (14) Other operating income The income from the disposal of fixed assets decreased by 16,882 TEUR to 1,126 TEUR in the previous financial year. The income from the previous year amounting to EUR 11.2 million was essentially influenced by the sale of the investments in Wohnbau Dinslaken GmbH. Furthermore, the revenue was reduced through a drop in property sales in the reporting year. In the previous year a special effect also had to be reported. At the beginning of 2008 we sold our shares in the special fund SÜDINVEST 107. This brought us income of EUR45.7 million from the sale of securities classified as current assets. The income from the normal release of the special tax-allowable reserve amounted to 2,809 TEUR in the reporting year. It relates solely to tax provisions for tangible fixed assets. Furthermore, the special items were reduced by 52 TEUR in the reporting year in connection with a non-scheduled depreciation under commercial law. In addition further income of 540 TEUR results from the release of unused Art. 6b reserves in connection with sold property. The remaining other operating income amounts to 1,203 TEUR in the previous financial year and breaks down as follows: 2009 TEUR 2008 TEUR Reversal of impairment adjustment Release of provisions Receipt of indemnifications and reimbursements Personnel and administration expenses passed on Charges passed on to tenants and leaseholders Pension liability insurance Other Total... 1,203 1,183 The reversal of impairment adjustment arises from the adjustment of property values, which underwent non-scheduled depreciation in previous years, to the fair market values determined by an expert as of 31 December (15) Expenses for management of properties and buildings This item increased by a total of 793 TEUR compared to the previous year. The ongoing operating expenses increased by 642 TEUR to 3,666 TEUR mainly as a result of the property acquisitions. They include, amongst other factors, the expenses for energy, property levies, insurance premiums, ground rents and land taxes (642 TEUR; previous year 573 TEUR). Expenses are largely passed on to our tenants on the basis of existing lease agreements. Expenses for property and building maintenance increased marginally by 151 TEUR in the previous financial year and amounts to 1,385 TEUR. (16) Personnel costs Personnel expenses amount to a total of 2,820 TEUR and decreased by 370 TEUR year-over-year. Wages and salaries decreased by 293 TEUR and amount to 2,306 TEUR. The decrease arises mainly because this year there is no lump sum settlement paid to the outgoing spokesman of the Managing Board as was the case in the previous year. Social security, pensions and other benefits also decreased by 77 TEUR compared with the previous year. The decrease is mainly due to less expenses for pension provision through a higher amount of releases due to the reduction in pension provisions. F-148

321 (17) Amortisations of intangible fixed assets and depreciation of tangible fixed assets Depreciation expenses rose by 1,328 TEUR to 6,921 TEUR in the reporting year. The increase in depreciation expenses relates to property acquisitions in the reporting year and the previous year. (18) Other operating expenses The expense for the appropriation to special tax-allowable reserve decreased by 16,710 TEUR to 227 TEUR in the financial year The allocation of the reporting year relates to the full amount of the reversal of impairment adjustments. The remaining other operating expenditure primarily relates to expenses for administration and Articles of Association-related tasks. Primarily through cutting the consultancy expenses and the remuneration for the Supervisory Board the item was reduced by 1,050 TEUR in the reporting year. The Articles of Association-attributable and other operating expenses include fees for the statutory auditor in accordance with the following schedule: 2009 TEUR 2008 TEUR Audit of financial statements Other certification services Tax consultancy services Other services Total (19) Result from investments This includes the income from investments from the Montan GmbH Assekuranz-Makler for the financial year 2007/2008. The reduction of 629 TEUR compared to the previous year is in connection with the sale of the shares in Wohnbau Dinslaken GmbH. (20) Financial result Other interest and similar income mainly comprises interest on overnight and fixed-term deposits from investments with various banks, interest income from swap transactions as well as income from the interest of land purchase prices deferred to our subsidiary until the merger. Our average stock of liquid assets decreased due to outflows of equity used for the property investments and the payment of dividends for the financial year This, together with the strong reduction of the general interest rate led to a 1,256 TEUR drop in the interest income compared to the previous year. Breakdown of interest and similar expenses: 2009 TEUR 2008 TEUR Interest element of allocations to pensions provisions Interest on loans, including interest for interest rate hedging transactions... 5,077 4,067 Interest to affiliated companies Other Total... 5,463 4,596 Due to interest expenses for the loans for property taken out the previous year becoming fully effective in the reporting year and the time-proportionate interest expenses for the additional loans taken out in 2009, the item increased by 1,010 TEUR. In contrast the other interest expenses were reduced by 143 TEUR, since the expense of the previous year was influenced by one-off special transactions. A loss amounting to 28 TEUR was accrued at our subsidiary Hambornberg Immobilien- und Verwaltungsgesellschaft mbh in 2009 until its merger, which was compensated by the parent company on the basis of the profit and loss transfer agreement in force. F-149

322 (21) Taxes on income Taxes on income amount to 1,203 TEUR, representing a reduction of 4,843 TEUR income compared to the previous year. The taxes on income for the previous year were decisively influenced by the final levying of taxes resulting from the sale of the securities special fund SÜDINVEST 107 and through reserve allocations for tax arrears payments due to an already completed tax audit. Other explanatory notes and compulsory details Other financial obligations In relation to a land purchase agreement notarially concluded in the reporting year, the transfer of ownership of the purchased property was still outstanding on the balance sheet date. A purchase price payment of EUR 14.8 million in total is payable on transfer of ownership in February Other financial obligations after the balance sheet date result from four long-term leasehold contracts and are constituted as follows: Contract term until Payment obligations (in TEUR p.a.) Charge passed on (in TEUR p.a.) 31 December March June 2012* June Total * The leasehold expires on on the basis of contractual agreements and ownership is transferred to our company for a payment of EUR 3.2 million. Result-influencing factors within the meaning of Art. 285 No. 5 of the German Commercial Code The year-end result after deduction of taxes on income has been reduced by approximately 191 TEUR (corresponding to 2.7 %) through utilisation of tax options, in particular the creation of a special tax-allowable reserve in accordance with Art. 6 b of the German Income Tax Act. On the other hand profit for the financial year was increased by 2,863 TEUR (corresponding to 40.5 %) after deduction of taxes on income, as a result of the release of the special tax-allowable reserve, largely associated with sales in the reporting year and the depreciation of properties. The future income tax burden from hitherto utilised special depreciations, discretionary valuations and tax-free reserves is 1.6 % of the gross fixed assets portrayed in the assets analysis on 31 December Remuneration of the Managing Board and Supervisory Board Remuneration of the Managing Board The determination of the Managing Board remuneration is carried out by the entire Supervisory Board on the suggestion of the Executive Committee. The extent of the Managing Board remuneration is geared to the size of the company, its economic and financial situation and to the long-term success of the company. The remuneration of the Managing Board is performance-related and takes into account the functions and the contribution of the respective member of the Managing Board. The remuneration for members of the Managing Board consists of fixed and result-related components. The non-profit-related parts consist of a fixed allowance and additional payments (e.g. company car). The fixed allowance is paid monthly as a salary as a basic remuneration. F-150

323 The remuneration of active members of the Managing Board for the financial year 2009 is made up as follows on the basis of the existing service contracts and the associated, separately concluded results-related bonus arrangements: Fixed remuneration TEUR Variable remuneration TEUR Other*) TEUR Total TEUR Dr. Rüdiger Mrotzek Hans Richard Schmitz Total *) Other emoluments include monetary benefits from the personal use of company cars and contributions to insurance policies A lump-sum settlement, at the level of the cash value of the fixed remunerations to be paid up to the normal expiration of the contract, is due to both members of the Managing Board in the event of an early termination of service contracts. According to the recommendations of the German Corporate Governance Code, the indemnifications are limited to a maximum of two annual remuneration packages including additional payments. With agreements from July 2009, an occupational pension scheme was granted to the directors, with effect from and respectively, in the form of an employer-financed defined benefit based on contributions on the implementation path of the covered benevolent fund. The commitment applies for the duration of the service contracts with a monthly amount of EUR 1,250 each. Following the recommendations of the German Corporate Governance Code, the profit-related (variable) remuneration due to the Managing Board, which is paid out once a year as a bonus, is primarily dependent on the long-term development of the FFO from the financial year In addition, the development of the NAV and the attainment of individually agreed targets go into the calculation. The structure of the Managing Board remuneration is subject to a periodic review by the Supervisory Board. The total remunerations of former members of the Managing Board of the company amount to 431 TEUR in the reporting year. This includes a residual bonus for the financial year 2008 paid to a departed member of the Managing Board. The pensions provisions formed for this group of people amount to 3,547 TEUR. Loans were not granted to members of the Managing Board by the company. No member of the Managing Board received benefits or corresponding commitments from a third party in the past financial year with regard to his activity as a member of the Managing Board. Remuneration of the Supervisory Board The remuneration of the Supervisory Board is regulated in Section 13 of the Articles of Association. Supervisory Board remuneration is geared to the size of the company, the functions and the responsibility of the members of the Supervisory Board and is quite significantly dependent on the economic success of the company. The fixed remuneration amounts to EUR 15,000 and the variable remuneration to EUR 500 per euro cent, by which the undiluted earnings per share exceeds the amount of EUR The variable remuneration is limited to twice the fixed remuneration. The Chairman of the Supervisory Board receives twice the remuneration, his deputies one and a half times. Members of the Supervisory Board, who have only belonged to the Supervisory Board during part of the financial year, are entitled to the remuneration pro rata temporis. Members of the Supervisory Board, who belong to one of the three committees formed, receive an additional remuneration of EUR 2,000 per financial year. Twice this remuneration is due to the respective committee chairmen. Three committees exist at the moment: the Executive, Audit and Nominating Committees. The members of the Nominating Committee waive the remuneration due to them, as long as the committee does not meet. F-151

324 The relevant remuneration of the Supervisory Board for the financial year 2009 results as follows: Fixed remuneration TEUR Variable remuneration TEUR Total TEUR Dr. Eckart John von Freyend Chairman Dr. Marc Weinstock Deputy Chairman Robert Schmidt Volker Lütgen Edith Dützer Hans-Bernd Prior Total Furthermore, members of the Supervisory Board received no additional remunerations or benefits in the reporting year for services personally provided, particularly consultancy and mediation services. Members of the Supervisory Board receive no loans or advances from the company. D & O insurance The company concluded a pecuniary loss liability insurance policy (D & O insurance) for members of the Managing Board and for members of the Supervisory Board. This covers pecuniary losses from the activity as a member of the executive bodies and supervisory bodies of the company. Insured persons in addition were the officers of Hambornberg Immobilien- und Verwaltungsgesellschaft mbh up to its merger (insurance protection related here to the Managing Directors of the GmbH company). The sums insured amount to EUR 5 million per insurance claim, but a maximum of EUR 5 million per insurance year. As from , deductibles for Members of the Managing Board and Supervisory Board have been agreed as well, in compliance with Section 93 Para. 2 of the German Stock Corporation Act and Section 3.8 of the German Corporate Governance Code, amounting to at least 10% of the claim and up to at least the level of one and a half times the annual fixed remuneration of the officer. The insurance protection lapses in the event of wilful intent, so that protection previously granted, where applicable, lapses retroactively in the event of (subsequent) discovery and benefits provided are to be reimbursed to the insurer. The annual insurance premium currently amounts to 11.4 TEUR plus insurance tax. Number of employees The average number of employees in the reporting year was: 2009 TEUR 2008 TEUR Commercial property management Technical property management Administration Total Derivative financial instruments No. The company holds the derivative financial instruments listed below: Type Nominal value million EUR Fair value TEUR 1... Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap Interest rate swap F-152

325 The valuation of interest rate derivatives was carried out at market values, which were reported by the appropriate bank on the balance sheet date. They were determined by applying recognised mathematical methods on the basis of the continuously changing market data available on the calculation date and give an account of the assessment of the market circumstances on the calculation date. For the interest rate swap agreements shown at 6 and 7 above, a provision for impending losses from uncompleted transactions was created amounting to 11 TEUR, which is shown under Other Provisions. Shareholdings The 100% subsidiary of HAMBORNER, Hambornberg Immobilien- und Verwaltungs-GmbH, Duisburg-Hamborn, was merged with the parent company with effect as of 1. October The group relationship that existed up until that point in time no longer exists. Hambornberg Immobilien- und Verwaltungs-GmbH made a loss of 28 TEUR (previous year: 43 TEUR) up until the merger: this loss was assumed by our company on the basis of the control and profit and loss agreement in force. Notification regarding the existence of investments According to Art. 11, Para. 4 of the German REIT Act, no investor is allowed to directly hold 10 % or more of the shares or hold shares to such an extent as to secure more than 10 % or more of the voting rights. On the balance sheet date of 31 December 2009 the company was not aware of any shareholder whose direct share exceeded 10 % of the share capital. There are the following indirect shares in the company s capital which directly achieve or exceed 10 % of the voting rights: According to notifications from 30 June 2009/1 July 2009, the Land Schleswig Holstein and the Free and Hansa City of Hamburg indirectly hold a % stake (12,003,164 voting rights) in the company s share capital via HSH Finanzfonds AöR. All of these voting rights are attributable to them through the following subsidiaries in accordance with Art. 22, Para. 1, Clause 1, No. 1 of the German Securities Trading Act (WpHG): HSH Nordbank AG, HSH Real Estate AG, HSH RE Beteiligungs GmbHs (comprised of six companies) The participations are based on an increase in capital at HSH Nordbank AG, which was registered on 25 June 2009 giving the parties obligated to report a controlling position at HSH Nordbank. According to notifications issued on 20 July 2009 in accordance with Art. 27a of the German Securities Trading Act (WpHG), the securing of majority conditions does not pursue any strategic objectives regarding the issuer, and was implemented only through allocation of the participation of HSH Nordbank AG in accordance with Art. 22, Para. 1, Clause 1 No. 1, Para. 3 of the German Securities Trading Act (WpHG). Recently on 16 December 2009 HSH Real Estate AG notified us that on 15 December 2009 the voting right share of HSH RE Beteiligungs GmbH in HAMBORNER Aktiengesellschaft was below 50% and on this day amounted to 0% (0 voting rights). On 15 December 2009 the respective voting right share of the companies HSH RE 2. Beteiligungs GmbH, HSH RE 3. Beteiligungs GmbH, HSH RE 4. Beteiligungs GmbH, HSH RE 5. Beteiligungs GmbH and HSH RE 6. Beteiligungs GmbH, each exceeded the thresholds of 3% and 5% and on this day the company holds 9% (2,049,300 voting rights). On this day with the exceeding of the respective threshold, HSH RE 7. Beteiligungs GmbH has 5.32% of the voting rights (1,211,019 voting rights). All companies are subsidiaries of HSH Real Estate AG, which consequently indirectly holds 50.32% of the shares (11,457,519 voting rights). F-153

326 In addition, we were notified on 6 February 2009 in accordance with Art. 21 Para. 1 of the German Securities Trading Act, that Professor Dr. Theo Siegert, Dusseldorf has indirectly held 6.15% (1,400,000 units in absolute terms) of the voting rights since via de Haen Carstanjen & Söhne GmbH, Dusseldorf. Furthermore, 5.45 % (1,240,000 units in absolute terms) of the shares in the voting capital of our company are attributed to him indirectly via SIEGERT & CIE GmbH, Dusseldorf, Germany as from 18 December Overall, he thus indirectly holds an interest that, at 11.6 % (2,640,000 votes in absolute terms), exceeds the threshold of 10% of the voting rights shares. HAMBORNER is included in the consolidated financial statements of HSH Nordbank AG and of HSH Real Estate AG. HSH Nordbank AG, Hamburg/Kiel, prepares the consolidated financial statements for the largest group of companies and HSH Real Estate AG, Hamburg, prepares the consolidated financial statements for the smallest group of companies. The consolidated financial statements of HSH Nordbank AG and the consolidated financial statements of HSH Real Estate AG are published in the electronic German Federal Gazette. Business transactions with related companies and persons in financial year 2009 The company has a current account at HSH Nordbank AG. On 31 December 2009 the company s account had a credit balance of EUR. No other transactions subject to notification obligations occurred in the financial year All trade and service relations with related companies and persons were in line with market requirements and conditions. Declaration on the recommendations of the Government Commission for the German Corporate Governance Code in accordance with Art. 161 of the German Stock Corporation Act In December 2009 the Managing Board and Supervisory Board presented an updated declaration of compliance and made it permanently accessible on the Internet at Relations/Corp.Governance/Entsprechenserklaerung gem. Art. 161 AktG. The declaration of compliance is published in full in the annual report 2009 of HAMBORNER. F-154

327 Executive bodies of the company and their mandates Supervisory Board Dr. jur. Josef Pauli, Essen Honorary Chairman Dr. rer.pol. Eckart John von Freyend, Bad Honnef Chairman Shareholder of Gebrüder John von Freyend Verwaltungs- und Beteiligungsgesellschaft m.b.h. External mandates: Finum AG *1) (chairmanship) (until ) Finum Finanzhaus AG *1) (chairmanship) (from ) Hahn-Immobilien-Beteiligungs AG *1) IVG Immobilien AG *1) (from ) Konzept plus AG *1) (chairmanship until ) Litos AG *1) (until ) VNR Verlag für die Deutsche Wirtschaft AG *1) Investment AG für langfristige Investoren TGV (from ) *1) Dr. rer.pol. Marc Weinstock, Kelkheim-Fischbach Deputy Chairman Chairman of the Managing Board of HSH Real Estate AG External mandates: LB Immo Invest GmbH *2) (Deputy Chairman since ) DSK Deutsche Stadt- und Grundstücksentwicklungsgesellschaft mbh *2) (Chairman) BIG BAU-INVESTITIONSGESELLSCHAFT mbh *2) (Deputy Chairman) Pirelli RE Asset Management Deutschland GmbH *2) H/H-Capital Management GmbH *2) BIT Beteiligungs- & Investitions-Treuhand AG *1) (since ) Volker Lütgen, Wentorf Managing Director of HSH Capitalpartners GmbH Robert Schmidt, Datteln Managing Director of Evonik Immobilien GmbH External mandates: HSH Real Estate AG *1) (until ) THS GmbH *2) Wohnbau Dinslaken GmbH *2) (Deputy Chairman) Edith Dützer *3), Moers Clerical employee Hans-Bernd Prior *3), Dinslaken Technician *1) Membership of other Supervisory Boards to be constituted by law *2) Membership of comparable domestic and foreign monitoring bodies *3) Supervisory Board member of employees F-155

328 Committees of the Supervisory Board Executive Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Audit Committee Members of the Committee: Dr. rer. pol. Marc Weinstock (Chairman) Robert Schmidt Edith Dützer Nominating Committee Members of the Committee: Dr. rer. pol. Eckart John von Freyend (Chairman) Dr. rer. pol. Marc Weinstock Volker Lütgen Robert Schmidt Managing Board Dr. Rüdiger Mrotzek, Hilden Director for finance/accounting, taxes, properties, EDP, risk management/controlling Hans Richard Schmitz, Bonn Director for legal matters, personnel, investor relations/public relations, corporate governance, insurance Duisburg, 19 February 2010 The Managing Board Dr. Rüdiger Mrotzek Hans Richard Schmitz F-156

329 The following auditors report (Bestätigungsvermerk) has been issued in accordance with section 322 German Commercial Code (Handelsgesetzbuch) in German language on the German version of the annual financial statements of the HAMBORNER REIT AG (formerly: HAMBORNER Aktiengesellschaft), Duisburg, as of and for the period from January 1, 2009 to December 31, Independent Auditors Report We have audited the annual financial statements comprising the balance sheet, the income statement and the notes to the financial statements together with the bookkeeping system, and the management report of the HAMBORNER REIT AG (previously: HAMBORNER Aktiengesellschaft), Duisburg, for the business year from 1 January to 31 December The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with German commercial law are the responsibility of the Company s Managing Board. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and on the management report based on our audit. We conducted our audit of the annual financial statements in accordance with section 317 HGB ( German Commercial Code ) and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the Managing Board, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the annual financial statements of the HAMBORNER REIT AG (previously: HAMBORNER Aktiengesellschaft), Duisburg, comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with German principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the Company s position and suitably presents the opportunities and risks of future development. Dusseldorf, 1 March 2010 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Harnacke) Wirtschaftsprüfer [German Public Auditor] (Lüdke) Wirtschaftsprüfer [German Public Auditor] F-157

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331 HAMBORNER REIT AG Goethestraße Duisburg WestLB AG Herzogstr Dusseldorf Kempen & Co. NV Beethovenstraat 300 NL-1077 WZ Amsterdam Berenberg Bank Joh. Berenberg, Gossler & Co. KG Neuer Jungfernstieg Hamburg Dear Sirs and Madams Valuation of the HAMBORNER REIT AG portfolio 1 Introduction In accordance with our engagement letter (the Engagement Letter ) with HAMBORNER REIT AG (the Company ), we, Jones Lang LaSalle GmbH, have considered the real estate assets (the Properties ) referred to in the attached property schedule (the Schedule ) in order to advise you of our opinion of the Market Value, as at 31 st August 2010, of the freehold or leasehold interests (as appropriate) in each of the Properties. This report is dated 1 st September Compliance with Appraisal and Valuation Standards We confirm that the valuations have been made in accordance with the appropriate sections of the current Practice Statements ( PS ) contained within the Royal Institute of Chartered Surveyors ( RICS ) Appraisal and Valuation Standards, 6th Edition (the Red Book ). This is an internationally accepted basis of valuation. Jones Lang LaSalle GmbH International Real Estate Consultants Sitz: Frankfurt am Main HRB NR Zertifiziert nach ISO 9001 CEO: Andreas Quint M-1

332 Page 2 of our letter dated Status of Valuer and Conflicts of Interest We confirm that we have undertaken the valuations acting as External Valuers, as defined in the RICS Red Book, qualified for the purpose of the valuation. As you are aware, we have already regularly valued a part of the portfolio owned by HAMBORNER REIT AG for the accounting purposes of the company. 4 Purpose of the Valuation Report We understand that this valuation report (the Valuation Report ) and Schedule are required firstly, to confirm the Market Value of the Properties as at 31 st August 2010 for the Board of the Company and secondly, for inclusion in a stock exchange prospectus (the Prospectus ) concerning the capital increase of the Company (the Offer ). Investors will rely on the Prospectus in making their decision to invest in the Company. 5 Analysis of the Portfolio 5.1 Property Categories** The subject portfolio comprises 60 properties at date of valuation. The portfolio can be categorized into the following main use types: 31 high street properties, 15 large-scale retail units, 11 office properties and 3 industrial or other commercial properties. Contractual Rent by Property Type * 2% Market Value by Property Type 2% 38% 29% 36% 29% Office High Street Large-scale Retail Industrial/ Other Commercial Properties 31% 33% * excluding Turnover Rents ** rounded Figures M-2

333 5.2 Distribution by Federal State Market Value Distribution by Federal State* 45% 3% 3% 2% 10% 6% 1% 7% 4% 8% Baden-Würtemberg Bayern Berlin Bremen Hamburg Hessen Niedersachsen Nordrhein-Westfalen Rheinland-Pfalz Sachsen Thüringen * rounded Figures 11% Contractual Rent Distribution by Federal State* 46% 3% 3% 2% 12% 6% 1% 7% 3% 7% Baden-Würtemberg Bayern Berlin Bremen Hamburg Hessen Niedersachsen Nordrhein-Westfalen Rheinland-Pfalz Sachsen Thüringen * excluding Turnover Rents; rounded Figures 10% 5.3 Lettable Area Based on Main Use Type Lettable Area Based on Main Use Type * 3% 5% 33% Office Retail 59% Industrial Residential * The designated usable areas are based on a schedule provided by HAMBORNER REIT AG, which comprises the lettable areas that have been agreed to in the lease agreements. In some cases, the areas listed in the lease agreements may differ with the subsequent measurement of the lettable areas; the discrepancy, however, is not significant at the individual property level and represents no material change on the portfolio level (i.e. under 1%). * excluding Parking Facilities, Antennas, Outdoor Retail Kiosks and Advertising Boards * rounded Figures M-3

334 5.4 Anchor Tenants listed by Contractual Rent No. Tenant Main Type of Use Contractual Rent p.a. Percentage of Total Contractual Rent 1 Kaufland Gruppe* Retail 4,557, % 2 EDEKA-Gruppe** Retail 2,830, % 3 AREVA NP GmbH Office 978, % 4 OBI Retail 889, % 5 Telefonica O2 Office 789, % 6 Bundesagentur für Arbeit Office 772, % 7 REWE Retail 622, % 8 NORDSEE Retail 547, % 9 Douglas Holding Retail 544, % 10 Flyline Office 526, % Total 13,058, % * excluding Ground Rents ** excluding Turnover Rents 5.5 Unexpired Lease Contract Terms Unexpired Lease Terms in EUR per month* Expiry after % 1,266,126 Expiry in % 192,699 Expiry in % 325,014 Expiry in % 152,861 Expiry in % 77,641 Expiry in ,431 1% unlimited 4% 78, , , ,000 1,000,000 1,250,000 1,500,000 * including Rental Guaranties; excluding Turnover Rents 5.6 Vacancy Rate (August 2010) Vacancy Rate based on Market Rent Vacancy Rate based on letable area Industrial/ Other Commercial Properties 0.00% 0.00% Large-scale Retail 0.34% 0.50% High Street 0.53% 0.90% Office 0.51% 1.39% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% M-4

335 6 Inspection of the Properties We inspected the following Properties in the 40 th calendar week of 2009: Freiburg i. Br. Robert-Bunsen-Straße 9a Berlin -Steglitz Schloßstraße. 23 Frankfurt/Main Cronstettenstraße 66 Frankfurt/Main Steinweg 8 We inspected the following Property in the 41 st calendar week of 2009: Düren Wirtelstraße 30 We inspected the following Properties in the 42nd calendar week of 2009: Leverkusen Wiesdorfer Platz 33 Gütersloh Berliner Straße We inspected the following Properties in the 43 rd calendar week of 2009: Dortmund Westfalendamm Dortmund Königswall 36 Hamburg An der Alster 6 Hamburg Fuhlsbüttler Straße Hamburg Ziethenstraße 10 Münster Johann-Krane-Weg Münster Martin-Luther-King-Weg Osnabrück Sutthauser Straße 285/ 287 We inspected the following Property in the 41 st calendar week of 2009: Wiesbaden Kirchgasse 21 We inspected the following Properties in the 29 th calendar week of 2010: Frankfurt/Main Neuwied Königsteiner Straße 73-77/ 69a Allensteiner Straße 61/ 61a M-5

336 We inspected the following Properties in the 30 th calendar week of 2010: Bremen Hermann-Köhl-Straße 3 Bremen Linzer Straße 7, 9 und 9a Duisburg Albertstraße 2-10 Essen Hofstraße Hilden Westring 5 Kaiserslautern Fackelstraße Köln Von-Bodelschwing-Straße 6 Lüdenscheid Wilhelmstraße 9 Oberhausen Marktstraße 69 Oberhausen Marktstraße 116/ Nohlstr St. Augustin Einsteinstraße 26 Wuppertal Turmhof 6 Duisburg Rathausstraße Duisburg Fischerstraße 91 Duisburg Fischerstraße 93 Krefeld Krützpoort 1 Krefeld Emil-Schäfer-Straße Krefeld Hochstraße Moers Homberger Straße 41 Stuttgart Stammheimer Straße 2 Villingen-Schwenningen Auf der Steig 10 Augsburg Bahnhofstraße 2 Dinslaken Neustraße 60-62/ Klosterstraße 8-10 Kassel Quellhofstraße 22 Erfurt Neuwerkstraße 2 Erfurt Marktstraße 2 Erfurt Marktstraße 7-9 We inspected the following Properties in the 34 th calendar week of 2010: Erlangen Wetterkreuz 15 Freital Wilsdruffer Straße 52 Mosbach Hauptstraße 96 Solingen Friedenstraße 64 Solingen Kirchstraße 14+16/ Eiland 19+21/ Linkgasse 2+4 Hannover Karmarschstraße 24 Lüneburg Am Alten Eisenwerk 2 Oldenburg Achternstraße 47/48 Osnabrück Große Straße 82/83 Geldern Bahnhofstraße 8 Herford Bäckerstraße Kamp-Lintfort Moerser Straße 247 Meppen Am Neuen Markt 1 Minden Bäckerstraße 8-10 Rheine Emsstraße M-6

337 7 Basis of Valuation and Contractually Secured Annual Rent 7.1 Market Value The value of each of the Properties has been assessed in accordance with the relevant parts of the Red Book. Under these provisions, the Market Value represents The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. In undertaking our valuations on the basis of Market Value, we have considered the comments made by the International Valuation Standards Committee, which are included in the Red Book standards. The RICS is of the opinion that the application of the Market Value definition provides the same result as the Open Market Value, a basis of value supported by previous editions of the Red Book. 7.2 Contractually Secured Annual Rent incl. Rental Guarantee The contractually secured net annual rent (initial monthly income x12) for each of the Properties is referred to in the Schedule. Annual Rent is defined for the purposes of this transaction as The current income generated by the properties (i) (ii) ignoring any special receipts or deductions arising from the property; excluding Value Added Tax and before taxation (including tax on profits and any allowances for interest on capital or loans); and The Schedule also includes the respective Market Rent of each of the Properties. The Market Rent is assessed in accordance with PS 3.3, which has been approved by the International Valuation Standards Committee. Under these provisions, the Market Rent represents The estimated amount for which a property or space within a property could be let on the date of valuation, between a willing lessor and a willing lessee on appropriate lease terms in an arm s-length transaction after proper marketing, wherein the parties had acted knowledgeably, prudently and without compulsion. In accordance with the above, where the Properties or parts thereof are vacant at the date of valuation, the rental value reflects the rent that we consider obtainable on an open market letting as at the date of valuation. In relation to indexed rents, we have relied on the information provided to us by the Company. 7.3 Taxation and Costs We have not made any adjustments to reflect any liability to taxation that may arise on disposal nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise upon disposals. However, we have made deductions to reflect appropriate purchasers acquisition costs suitable for each individual property. M-7

338 Page 8 of our letter dated Value Added Tax The Market Values and Market Rents listed in this Valuation Report do not include the relevant Value Added Tax at the prevailing rate. 9 Assumptions and Sources of Information An assumption is defined in the Glossary to the Red Book to be a supposition taken to be true ( assumption ). Assumptions are Facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, need not be verified by a valuer as part of the valuation process. In undertaking our valuations, we have made a number of assumptions and have relied on certain sources of information. Where appropriate, we let the Company or the Company s advisers confirm that our assumptions are correct to the best of their knowledge. In the event that any of these assumptions prove to be incorrect, then our valuations would require to be reviewed. The assumptions we have made for the purposes of our valuations are referred to below: 9.1 Title We have made the assumption that the Properties have good and marketable freehold or leasehold title in each case and that the Properties are free from any depreciating rights of way or easements, restrictive covenants, disputes or onerous or unusual outgoings. We have also assumed that the Properties are free from mortgages, charges or other encumbrances. 9.2 Condition of Structure and Services, Deleterious Materials, Plant and Machinery and Goodwill We have not been provided with copies of condition surveys for the Properties. Unless otherwise informed by the Company or its advisers, we have made the assumption that the Properties are free from any mildew, infestation, adverse toxic chemical treatments, and structural or design defects. We have not investigated whether high alumina cement, calcium chloride additive or any other deleterious materials have been used in the construction or any alterations of any of the Properties. For the purposes of this valuation, unless otherwise informed by the Company or its advisers, we have made the assumption that any such investigation would not reveal the presence of such materials in any adverse condition. No mining, geological or other investigations have been undertaken to certify that the foundations of the Properties are free from any defect. Unless otherwise informed by the Company or its advisers, we have made the assumption that the load bearing qualities of the sites of the Properties are sufficient to support the buildings constructed thereon. We have also made the assumption that there are no abnormal ground conditions, nor archaeological remains present, which might adversely affect the present or future occupation, development or value of any of the Properties. No tests have been carried out as to electrical, electronic, heating, plant and machinery equipment or any other services, nor have the drains been tested. Unless otherwise informed by the Company or its advisers, we have made the assumption that all services to the Properties are functioning satisfactorily. M-8

339 Page 9 of our letter dated No allowance has been made in these valuations for any items of plant or machinery not forming part of the service installations of the Properties. We have specifically excluded all items of plant, machinery and equipment installed wholly or primarily in connection with the occupants businesses. We have also excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. Furthermore, no account has been taken in our valuations of any goodwill that may arise from the present occupation of the Properties. It is a condition of Jones Lang LaSalle GmbH or any related Company or any qualified employee providing advice and opinions as to value, that the client and/or third parties (whether notified to us or not) accept that the Valuation Report in no way relates to or gives warranties as to the condition of the structure, foundations, soil and services. 9.3 Environmental matters No environmental reports for the subject properties have been made available to us. However, we have not undertaken nor been instructed to conduct a formal environmental assessment, and have not carried out any investigation into past uses, either of the Properties or any adjacent land to establish whether there is any potential for contamination from such uses or sites. We have assumed that there are no abnormal ground conditions or contamination, which are sufficient to affect value or adversely affect the present or future occupation or development of the Property. If these assumptions were to prove invalid, then the value would fall by an unspecified amount. 9.4 Areas We have not measured the Properties, but have applied floor areas provided by the Company or its advisers. We have assumed that these areas have been measured and calculated in accordance with the current market practice in the relevant country in which the Properties are located. 9.5 Statutory requirements and planning We have made the assumption that the buildings have been constructed in full compliance with valid local planning and building regulations, that all necessary certifications are existent and that there are no outstanding statutory notices as to their construction, use or occupation. We have made a further assumption that the existing uses of the Properties are duly authorised or established, and that no adverse planning conditions or restrictions apply. 9.6 Leasing We do not normally read leases or documents of title. Where these have been provided to us, we are not liable for the accurate interpretation of the content, if the items have not been verified by your lawyers. We have made the assumption that copies of all relevant documents have been made available to us and that they are complete, correct and up to date. We have not undertaken investigations into the financial strength of the tenants. Unless we have become aware by general knowledge or we have been specifically advised to the contrary, we have made the assumption that the tenants are financially in a position to meet their obligations. Unless otherwise advised, we have also made the assumption that there are no material arrears of rent or service charges, breaches of covenants or current or anticipated tenant disputes. M-9

340 Page 10 of our letter dated However, our valuation reflects the type of tenants currently letting the properties or responsible for meeting lease commitments or likely to let vacant spaces, and the market s general perception of their creditworthiness. We have also made an assumption that wherever rent reviews or lease renewals are pending or impending, all notices have been served legally within the appropriate time limits. 9.7 Information We have made the assumption that the information the Company and its professional advisers have supplied to us in respect to the Properties is complete, correct and up to date. This means that we have also made the assumption that the Company and its advisers have provided us with all details regarding matters likely to affect value, such as prospective lettings, rent reviews, outstanding legal requirements and planning decisions, and that the information supplied is up to date. 10 Confidentiality and Disclosure The contents of this Valuation Report and Schedule may be used only for the purpose of this Valuation Report. Before this Valuation Report, or any part thereof, is reproduced or referred to in any other document, circular or statement and before its contents (other than as contemplated in the Engagement Letter), or any part thereof, are otherwise disclosed verbally or otherwise to a third party, the valuer s written approval as to the form and context of such publication or disclosure must be first obtained. For the avoidance of doubt, such approval is required whether or not Jones Lang LaSalle GmbH is referred to by name and whether or not the contents of our Valuation Report are combined with others. 11 Valuation Results HAMBORNER REIT AG Portfolio We are of the opinion that the aggregate of the Market Values as at the effective date of valuation, 31 st August 2010, of the freehold or leasehold interests in the subject Properties described in the Schedule, subject to the assumptions and comments in this Valuation Report, was as follows: 354,160,000 (in words: THREE HUNDRED FIFTY-FOUR MILLION, ONE HUNDRED AND SIXTY THOUSAND EURO) The above figure is rounded and derived trough the deduction for land transfer tax, legal costs and agent s fees normally incurred by the purchaser. It represents the figure a seller would receive in the event of a potential sale; no allowance has been made for any expenses of realisation or for taxation, which may arise in the event of a disposal. Yours faithfully Andrew M. Groom MRICS European Director Head of Valuation and Transaction Advisory Jones Lang LaSalle GmbH Ralf Kemper National Director Valuation and Transaction Advisory Jones Lang LaSalle GmbH M-10

341 Property Schedule HAMBORNER REIT AG Valuation Date: 31. August 2010 Nr Address Location Description Property Description and Tenure Letting status (on the basis of m²) Lettable area* according to HAMBORNER REIT AG (excluding parking spaces, antennas, advertising panels and miscellaneous areas) Contractually secured annual rent including rental guarantees (month 1x12), excluding turnover rents and ground rent Market Rent (p.a.) Market Value m² EURO EURO EURO 1 Friedenstraße Solingen Solingen is a city located in the south-west of the federal state of North Rhine-Westphalia near Wuppertal (approx. 13 km), Bergisch-Gladbach (approx. 20 km), Dusseldorf (approx. 22 km) and Cologne (approx. 27 km). The subject property is located along the Friedenstraße in an area mainly characterised by commercial and residential use, approx. 5 km from the nearest access to the federal motorway A3. Due to its location directly along the street, the property is easily accessible by car and has good visibility. The property is a single-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 7,933 m² and offers sufficient parking spaces in a car park in front of the building. The building consists of a reinforced concrete structure with a trapezoidal sheet metal façade. The property is held leasehold. The property is currently 100% let to one tenant. The tenant is: Kaufland. 7,933 1,023, ,930 15,000,000 2 Von-Bodelschwingh-Straße Köln Cologne is a city located in the south-west of the federal state of North Rhine-Westphalia near Bonn (approx. 25 km) and Dusseldorf (approx. 35 km). The subject property is located along the street Berliner Straße (B51) at the junction to Am Flachsrosterweg in an area mainly characterised by retail and residential use, approx. 600 m from the nearest federal motorway, the A3. Due to its location along a major street, the property is easily accessible by car and has good visibility. The property is a single-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 2,630 sqm and offers sufficient parking spaces in a car park in front of the building. The building consists of a solid masonry construction with a trapezoidal sheet metal façade. The property is held freehold. The property is currently 100% let to one tenant. The tenant is: REWE. 2, , ,842 3,720,000 3 Cronstettenstraße Frankfurt The financial metropolis Frankfurt am Main is located in the south of the federal state of Hesse. The subject property is located north of the city centre in the city district of Holzhausenviertel, bordering on the districts of Nordend and Westend. The surrounding area is mainly characterised by residential and office use. Cronstettenstraße intersects Eschersheimer Landstraße, which functions as a main arterial road to the north, approx. 100 m from the subject site. The district is well connected to the public transport network. The property is a six-storey freestanding office building, constructed in It comprises a total lettable area of approx. 1,828 sqm and offers 17 parking spaces in an underground parking garage. The building consists of a reinforced concrete structure with a trapezoidal sheet metal façade. The property is held freehold. The property is currently 100% let to three tenants. The tenants are: Keil und Schaafhausen, Competition Partner and Mekat/Wolicki, as well as two antennas belonging to E-Plus and Vodafone. 1, , ,776 5,790,000 4 Einsteinstr St. Augustin St. Augustin is a city located in the south-west of the federal state of North Rhine-Westphalia near Bonn (approx. 8 km) and Cologne (approx. 25 km). The subject property is located on the street Einsteinstraße approx. 800 m from the access to the nearest federal motorway (A560), in an area mainly characterised by commercial use. Due to the property s location directly along the street, it is easily accessible by car and has good visibility. The property is a two-storey freestanding office building with an adjacent repair shop for heavygoods vehicles and was constructed in It comprises a total lettable area of approx. 2,417 sqm and offers sufficient parking spaces for clients in a car park in front of the building as well as a parking lot located at the back, which offers parking spaces for heavy-goods vehicles. The building consists of a reinforced concrete structure with a trapezoidal sheet metal façade. The property is currently 100% let to one tenant. The tenant is: MAN. 2, , ,040 3,660,000 The property is held freehold. M-11

342 5 Königsteiner Str. 69a/ Frankfurt 6 Wilhelmstraße Lüdenscheid 8 Krützpoort Krefeld 9 Emil-Schäfer-Str Krefeld The financial metropolis Frankfurt is located in the south of the federal state of Hesse. The subject property is located in the city district of Unterliederbach in the Königsteiner Straße, which is the main arterial road. The surrounding area is mainly characterised by residential use. The motorway A66 can be easily accessed from the district. The city centre of Frankfurt, located to the east, can be reached within 15 minutes by car. Frankfurt has an excellent public transport network, to which the district is connected via bus and train services. Lüdenscheid is situated in north-western Sauerland in the federal state of North Rhine-Westphalia. The subject property is located in the city centre of Lüdenscheid in the middle of the high street, Wilhelmstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Sinn Leffers, Douglas and the shopping centre Stern Center. Krefeld is situated in the federal state of North Rhine-Westphalia and ranks as the sixth largest city in the administrative region of Dusseldorf. The major cities of Dusseldorf and Duisburg are located approx. 17 km from Krefeld. Four federal motorways can be reached within a distance of 10 km: the A40, A44, A52 and A57. The closest connections to the ICE high-speed train network are located in Dusseldorf and Duisburg. The nearest passenger airport, Dusseldorf International Airport, is located approx. 15 km from Krefeld. Due to its location on a corner plot in a commercial area the subject property is highly visible and well connected to the transport network. The surrounding area is characterised by industrial and commercial uses. Krefeld is situated in the federal state of North Rhine-Westphalia and ranks as the sixth largest city in the administrative region of Dusseldorf. The major cities of Dusseldorf and Duisburg are located approx. 17 km from Krefeld. Four federal motorways can be reached within a distance of 10 km: the A40, A44, A52 and A57. The closest connections to the ICE high-speed train network are located in Dusseldorf and Duisburg. The nearest passenger airport, Dusseldorf International Airport, is located approx. 15 km from Krefeld. Due to its location in a commercial area, the subject property is well connected to the transport network. The surrounding area is characterised by industrial and commercial uses. The property consists of two one-storey freestanding retail buildings (supermarket and drinks cash-andcarry), constructed in 1977 (supermarket) and 1999 (drinks cash-and-carry). It comprises a total lettable area of approx. 2,639 m² and offers sufficient parking spaces in front of the building as well as at the rear of the property. The building consists of a reinforced concrete framework construction with a trapezoidal sheet metal façade. The property is held freehold. The property is a four-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 425 m² and offers no parking spaces on site. Due to the fact that the access to the stairway was closed off some years ago, the upper floors can only be accessed from the neighbouring property. For this reason, these areas are currently not lettable. The building is a solid masonry construction with a historic façade. The property is held freehold. The property is a stepped five-storey freestanding office building, constructed in It comprises a total lettable area of approx. 1,407 sqm and offers 18 external parking spaces. The building is a solid construction with a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is a freestanding industrial building with two storeys in the front section and a production area in the rear section, and was constructed in 1980/1998. It comprises a total lettable area of approx. 2,793 sqm and offers 14 parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is currently 100% let to one tenant. The tenant is: REWE. The property is currently 100% let to one tenant. The tenant is: The Phone House. The property is currently 100% let to four tenants. The tenants are: Pflege Optimal, Grönheit & Weigel, Bak, Marius and Thiel, Harro. The property is currently 100% let to two tenants. The tenants are: Forbo Siegling and HPZ Krefeld. Non-binding convenience translation 2, , ,039 4,380, ,000 60, ,000 1,407 91,557 84, ,000 2, , ,461 1,530,000 M-12

343 10 Kirchgasse Wiesbaden 11 Homberger Str Moers 12 Steinweg Frankfurt 13 Hofstr Essen 14 Rathausstr Duisburg Wiesbaden is located in the southwest of the federal state of Hesse near Frankfurt (approx. 37 km). The subject property is located in the city centre of Wiesbaden in the middle of the high street, Kirchgasse. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Kaufhof, Hunkemöller and H&M. Moers is located in the west of the Ruhr Area in the federal state of North Rhine-Westphalia. The subject property is located in the city centre of Moers on an extension of the high street, Homberger Straße. The surrounding area is an average shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Saturn as well as several local retailers. The financial metropolis Frankfurt is located in the south of the federal state of Hesse near Wiesbaden (approx. 37 km). The subject property is located in the city centre of Frankfurt in the middle of the high street, Steinweg. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential or office use on the upper floors. Nearby retailers include Hugendubel, River Woods and Marc O Polo. Essen is an independent urban district located in the centre of the Ruhr Area in the federal state of North Rhine-Westphalia. The subject property is located in Kupferdreh, the southern-most suburb in Essen. The commercial building is situated across from the local marketplace area (Marktplatz) on Hofstraße. Hofstraße connects to the main shopping street Kupferdreher Straße, which is currently the main through road for the suburb. Additionally, a bus stop and suburban railway station are located within walking distance from the property. Duisburg is situated on the banks of the Lower Rhine River in the federal state of North Rhine-Westphalia. The subject property is located in the suburb of Hamborn, a green city district situated in northern Duisburg. The property is located in Rathausstraße, which lies just 200 m from the marketplace area Hamborner Altmarkt. Jägerstraße, the main shopping street in Hamborn, is located in the vicinity. The pedestrian zone in Hamborn primarily offers convenience goods and is characterised by a high proportion of regional retailers. The property is a four-storey mixed-use (retail and residential) building, constructed around 1900 and also reconstructed after WWII. It comprises a total lettable area of approx. 1,202 sqm and offers no parking spaces on site. The building consists of a solid masonry construction with a plaster façade. The property is held freehold. The property is a five-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 2,079 sqm and offers 10 parking spaces at the rear of the building. The building is a solid masonry construction with a rendered façade. The property is held freehold. The property is a six-storey mixed-use (retail, office and residential) building, constructed around It comprises a total lettable area of approx. 607 sqm and offers no parking spaces on site. The building consists of a solid masonry construction with a stone façade. The property is held freehold. The property is a four-storey mixed-use building (retail and office), constructed in It comprises a total lettable area of approx. 2,266 sqm and offers 23 parking spaces at the rear of the property. The building is a solid construction with masonry and has a rendered façade. The property is held freehold. The property is a freestanding stepped five-storey mixed-use building (retail, office and residential), constructed in It comprises a total lettable area of approx. 2,310 sqm and offers sufficient parking spaces at the rear of the property. The building is a solid masonry construction with a clinker façade. The property is held freehold. The property is currently approx. 93% let to three tenants. The tenants are: Deichmann, Telefónica o2 as well as one residential tenant, who has an indefinite lease contract. Two residential units are currently vacant. The property is currently 100% let to five retail and 18 residential tenants. The tenants are: Vestino, Reformhaus Gillhaus, Haase Fachmarkt, Erdem Onat Telekommunikationsartikel and KMS- Group, as well as 18 residential tenants, who have indefinite lease terms. The property is currently 100% let to six tenants. The tenants are: Bally Textil, Mandarina Duck, MainLiving, Rechtsanwälte Doyuran & Pfetzing, Marwitz, Petra and Kerst-Würkner, as well as one residential tenant who has an indefinite lease term. The property is currently 100% let to nine tenants. The tenants are: EDEKA, Apotheke Ohlmeier, Dr. Goldkuhle/Spitz, Dr.Strobl/Reuschel, Dr. Beck, Oliver Mobers, Dr. Bach, Christian Pollender and Dr. Pott. The property is currently approx. 96% let to 11 tenants (three office, five residential and three retail tenants). The tenants are: Netto Marken-Discount, Mehmet Topan, Zahide Töle, Mieterbund Rhein- Ruhr, Dr. Piecha and RA Meier, as well as five residential tenants, who have indefinite lease terms. One office unit is currently vacant. Non-binding convenience translation 1, , ,873 11,060,000 2, , ,707 2,760, , ,772 5,770,000 2, , ,282 3,510,000 2, , ,823 2,120,000 M-13

344 15 Kirchstraße 14+16/ Eiland 19+21/ Linkgasse Solingen 16 Marktstraße Oberhausen 17 Westfalendamm Dortmund 18 Turmhof Wuppertal 19 Fischerstr Duisburg Solingen is a city located in the south-west of the federal state of North Rhine-Westphalia near Wuppertal (approx. 13 km), Bergisch-Gladbach (approx. 20 km), Dusseldorf (approx. 22 km) and Cologne (approx. 27 km). The subject property is located at the corner of Kirchstraße, Linkgasse and Eiland, adjacent to the prime retail area of Solingen. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Due to its location in the pedestrian area and close to the bus station, the property is easily accessible by foot as well as by public transport, and has good visibility. Oberhausen is situated in the administrative region of Dusseldorf in the federal state of North Rhine- Westphalia. The subject property is situated on Marktstraße, which is the high street in the city centre of Oberhausen. The street is designated as a central pedestrian zone and mainly home to retailers. Wellknown national and international retailers situated in the vicinity include dm, Woolworth, Bonita and Engbers as well as telecommunications shops. Dortmund is situated in the centre of the federal state of North Rhine- Westphalia. The subject property is situated within the city district of Körne, approx. 2 km southeast of the Dortmund city centre. The property is located on the arterial road Westfalendamm, which is a part of the federal road B1. The street is highly frequented and westwardly leads to the city centre. In the opposite direction, Westfalendamm leads out of town and serves as an access way to the motorway A1. The next motorway can be reached within a 12 km distance. The surrounding area is mainly characterised by residential and office use. Wuppertal is located in the federal state of North Rhine-Westphalia. The subject property is situated along the street Turmhof, which is near the prime retail location in Wuppertal s city centre and links to the main shopping street. Furthermore, it is the city centre s pedestrian zone and mainly occupied by retailers. Well-known national and international chains such as H&M, Tchibo, Bonita, Sinn & Leffers and Orsay as well as telecommunication shops are located in the surrounding area. The main bus station is located in the vicinity of Turmhof, which provides a good connection to the public transport network. Duisburg is situated on the banks of the Rhine River in the federal state of North Rhine-Westphalia. The subject property is situated within the city district of Duisburg-Wanheimerort, approx. 3.5 km south of the Duisburg city centre. The property is located in a pedestrian zone, directly opposite a REWE supermarket and a dm drugstore. The direct vicinity is characterised by small, local retail use. The central station is situated approx. 3 km north of the property. A tram stop can be reached in a distance of approx. 650 m from the subject site. The property is a five-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 3,059 sqm and offers only a limited number of parking spaces in the courtyard. The building is a solid construction with a plaster façade. The property is held freehold. The property is a four-storey mixed-use building (retail, office and residential), reconstructed ca and with the façade refurbished in2002. It comprises a total lettable area of approx. 522 sqm and offers no parking spaces on site. The building is a solid construction with a sheet metal façade. The property is held freehold. The property is mainly five-storey freestanding office building, constructed in One residential unit is located in the annex of the building. The property comprises a total lettable area of approx. 2,633 sqm and offers 25 parking spaces. The building consists of a reinforced concrete structure with a sheet metal façade (rear side thermal insulation composite system). The property is held freehold. The property is a five-storey mixed-use building (retail, office and residential) and was rebuilt after WWII, with additional stories added in It comprises a total lettable area of approx. 1,324 sqm and offers no parking spaces on site. The building is a solid masonry construction. The façade consists of different materials. The property is held freehold. The property is a four-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 625 sqm and offers no parking spaces on site. The building is a solid masonry construction. The façade consists of different materials. The property is held freehold. The property is currently approx. 74% let to twentytwo tenants. The tenants are: dm, Christian Wette, Rheinische Post, as well as nineteen residential tenants, who have indefinite lease terms. Four residential units and one retail unit are currently vacant. The property is currently approx. 83% let to three tenants. The tenants are: Deutsche Telekom, as well as two residential tenants, who have indefinite lease terms. One office unit is currently vacant. The property is currently 100% let to two tenants. The tenants are: Progas, as well as one residential tenant, who has an indefinite lease term. The property is currently 100% let to six tenants. The tenants are: WSW, Peter von Thun, Stoyanova, Praxis Tinn a Re and solicitor Mann, as well as one residential tenant, who has an indefinite lease term. The property is currently 100% let to four tenants. The tenants are: KODI as well as three residential tenants, who have indefinite lease terms. Non-binding convenience translation 3, , ,674 4,110, ,627 87,740 1,130,000 2, , ,834 3,910,000 1, , ,624 3,310, ,201 80,013 1,000,000 M-14

345 21 Marktstr. 116/ Nohlstr Oberhausen 22 Königswall Dortmund 23 Neuwerkstraße Erfurt 24 Marktstraße Erfurt 25 Marktstraße Erfurt 28 Schlossstraße Berlin-Steglitz Oberhausen is situated in the administrative region of Dusseldorf in the federal state of North Rhine- Westphalia. The subject property is situated on Marktstraße, a shopping street in the city centre of Oberhausen. Marktstraße is designated as the pedestrian zone of the city centre and is mainly home to retailers. Well-known national and international retailers situated in the vicinity include dm, Woolworth, Bonita and Engbers as well as telecommunications shops. Dortmund is situated in the centre of the federal state of North Rhine-Westphalia. The subject property is situated within the city centre along the ring road Königswall. The street Königswall is a highly frequented arterial road. The city centre is well connected to the public transport network. The main station is approx. 300 m away. The high street, Westenhellweg, is also located within a distance of approx. 300 m. The next motorway can be reached in a distance of approx. 5 km. The surrounding area is mainly characterised by office properties, with partly retail use on the ground floor and partly residential use on the upper floors. Erfurt is located in the centre of the federal state of Thuringia. The subject property is located in the city centre of Erfurt along the street Neuwerkstraße, which is adjacent to the high street Am Anger. The surrounding area is a shopping location, characterised by retail use on the ground floor with residential and office use on the upper floors. Nearby retailers include Christ Juweliere, Mango and tegut. Erfurt is located in the centre of the federal state of Thuringia. The subject property is located in the city centre of Erfurt on Marktstraße. The surrounding area is a secondary shopping location, characterised by retail use on the ground floor with mainly residential or office use on the upper floors. Nearby retailers are mostly local or regional. Erfurt is located in the centre of the federal state of Thuringia. The subject property is located in the city centre of Erfurt on Marktstraße. The surrounding area is a secondary shopping location, characterised by retail use on the ground floor with mainly residential or office use on the upper floors. Nearby retailers are mostly local or regional. Berlin is a city-state and Germany s capital. The subject property is located in the centre of the district Berlin-Steglitz in the middle of the high street, Schlossstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Salamander, The Body Shop and McPaper. The property is a four-storey mixed-use building (retail and residential), constructed in 1930/1966. It comprises a total lettable area of approx. 1,339 sqm and offers no parking spaces on site. The building is a solid construction with a rendered/ tiled façade. The property is held freehold. The property is a six-storey building, with mainly office use. It is also equipped with some retail and residential units. The property comprises a total lettable area of approx. 2,846 sqm and offers sufficient parking spaces in the annexed parking garage. The building is a solid concrete framework construction with a façade made of sheet metal and rendered elements. The property is held freehold. The property is a five-storey mixed-use building (retail, office and residential), constructed in 1920 and modernized in It comprises a total lettable area of approx. 2,231 sqm and offers no parking spaces on site. The building consists of a solid masonry construction with a plaster façade. The property is held freehold. The property is a four-storey mixed-use building (retail, office and residential), constructed around 1900 and modernized in It comprises a total lettable area of approx. 1,371 sqm and offers no parking spaces on site. The building consists of a solid masonry construction with a brick/rendered façade. The property is held freehold. The property is a four-storey mixed-use building (retail, office and residential), rebuilt after WWII and modernized in It comprises a total lettable area of approx. 566 sqm and offers two parking spaces. The building consists of a solid masonry construction with a rendered façade. The property is held freehold. The property is a four-storey mixed-use building (retail and residential), constructed around 1900 and modernized in It comprises a total lettable area of approx. 542 sqm and offers no parking spaces on site. The building consists of a solid masonry construction and has a rendered façade. The property is held freehold. The property is currently approx. 84% let to eight tenants. The tenants are: NKD as well as seven residential tenants, who have indefinite lease terms. Three residential units are currently vacant. The property is currently 100% let to six main tenants. The tenants are: ver.di, DGB-Reisen, Transnet Gewerkschaft, as well as three residential tenants, who have indefinite lease terms. The parking spaces are let to several tenants. The property is currently 100% let to sixteen tenants. The tenants are: ReSales, Dr. Eismann, Dr. Weisflog, Dr. Winkelmann, as well as twelve residential tenants, who have indefinite lease terms. The property is currently approx. 75% let to eight tenants. The tenants are: Machleit Spezialschuhhaus, Evelyn Zimmert, Diana Mischek, as well as five residential tenants who have indefinite lease terms. In addition, an antenna of O 2 is located on the roof. Two office units are currently vacant. The property is currently 100% let to four tenants. The tenants are: Klepp Handel and Grieneisen, as well as two residential tenants, who have indefinite lease terms. The property is currently 100% let to four tenants. The tenants are: Nordsee, as well as three residential tenants, who have indefinite lease terms. Non-binding convenience translation 1, , ,635 1,390,000 2, , ,453 4,320,000 2, , ,861 2,160,000 1, , ,919 1,950, ,923 92,155 1,240, , ,229 3,930,000 M-15

346 29 Fischerstr Duisburg 30 Karmarschstraße Hanover 31 Bahnhofstraße Augsburg 32 Neustr / Klosterstr Dinslaken 33 Fackelstraße Kaiserslautern Duisburg is situated on the banks of the Rhine River in the federal state of North Rhine-Westphalia. The subject property is situated within the city district of Duisburg-Wanheimerort, approx. 3.5 km south of the Duisburg city centre. It is located in a pedestrian zone, directly opposite a REWE supermarket and a dm drugstore. The direct vicinity is characterised by local and national retailers. The central station is situated approx. 3 km north of the property. A tram stop can be reached in a distance of approx. 650 m. Hanover is the capital of the federal state of Lower Saxony and is located near Braunschweig (approx. 55 km), Salzgitter (approx. 45 km) and Hildesheim (approx. 28 km). The subject property is located in the city centre of Hanover in the high street, Karmarschstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Douglas, Vero Moda/ Jack Jones and Peek & Cloppenburg. Augsburg is located in the west of the federal state of Bavaria near Munich. The subject property is located in the city centre of Augsburg along Bahnhofstraße, adjacent to the prime retail area of Augsburg. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Kaufhof, Karstadt and Deutsche Bank. Dinslaken is situated on the banks of the Rhine River in the federal state of North Rhine- Westphalia. The subject property is located in the city centre of Dinslaken in the pedestrian zone Neustraße, just 350 m from the city hall. The vicinity is characterised by retail use on the ground floor and residential use on the upper floors. Nearby stores include Bonita, S.Oliver and WMF. The property is well connected to the public transport network; several bus stops can be reached within walking distance. The train station and central bus station are located approx. 550 m from the site. Kaiserslautern is located in the south of the federal state of Rhineland-Palatinate. The subject property is located in the city centre of Kaiserslautern in the high street, Fackelstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Peek & Cloppenburg, H&M and Thalia. The property is a four-storey mixed-use building (retail and residential), constructed in 1900/1998. It comprises a total lettable area of approx. 433 sqm and offers no parking spaces on site. The building is a solid construction with a rendered façade. The property is held freehold. The property is a five-storey mixed-use building (retail, office and residential), constructed in It comprises a total lettable area of approx. 831 sqm and offers no parking spaces on site. The building is a solid construction with a predominantly metal façade. The property is held freehold. The property is a five-storey mixed-use building (retail, office and residential), constructed in It comprises a total lettable area of approx. 1,438 sqm and offers no parking spaces on site. The building consists of a solid masonry construction with a rendered façade. The property is held freehold. The property is a four-storey mixed-use building (retail, office and residential), constructed in It comprises a total lettable area of approx. 1,210 sqm and offers no parking spaces on site. The building is a solid construction with a clinker/ rendered façade. The property is held freehold. The property is a four-storey mixed-use building (retail, office and residential), constructed in It comprises a total lettable area of approx. 1,423 sqm and offers seventeen parking spaces on the owner s neighbouring site. The building consists of a solid construction with a predominantly sheet metal façade. The property is held freehold. The property is currently approx. 79% let to three tenants. The tenants are: Kamps, as well as two residential tenants, who have indefinite lease terms. One residential unit is currently vacant. The property is currently 100% let to four tenants. The tenants are: Nordsee and Dipl. med. Muller, as well as two residential tenants, who have indefinite lease terms. The property is currently 100% let to five main tenants. The tenants are: Orsay GmbH, Targobank and Kunzmann & Weigel, as well as two residential tenants, who have indefinite lease terms. In addition, an antenna is located on the roof. The property is currently 100% let to twelve tenants. The tenants are: Targobank, Vodafone D2 and Dr. Marina Härter, as well as nine residential tenants, who have indefinite lease terms. The property is currently approx. 96% let to nine main tenants. The tenants are: Brezelbäckerei Ditsch, Wissmach, O 2, beeline, Cafe-Restaurant Urban, Gmunder Ersatzkasse GEK and Wagner Dauvermann, as well as two residential tenants, who have indefinite lease terms, and several additional tenants of the parking spaces. One residential unit is currently vacant. Non-binding convenience translation ,520 49, , , ,361 4,560,000 1, , ,666 6,910,000 1, , ,891 2,220,000 1, , ,922 7,090,000 M-16

347 34 Berliner Straße Gütersloh 35 Quellhofstraße Kassel 36 An der Alster Hamburg 37 Wirtelstraße Düren 38 Große Straße 82/ Osnabrück Gütersloh is a city located in the north-east of the federal state of North Rhine-Westphalia near Osnabrück (approx. 47 km), Paderborn (approx. 34 km), Munster (approx. 53 km) and Dortmund (approx. 78 km). The subject property is located in the city centre of Gűtersloh in the high street, Berliner Straße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Bonita, o2, Douglas, Only und Tchibo. Kassel is situated in the north of the federal state of Hesse. The subject property is set back on Quellhofstraße in the city district of Kassel-North. Quellhofstraße runs parallel to Holländische Straße, which is a large arterial road in the north of the city. The motorway A7 can be accessed in a distance of approx. 5 km. Residential areas mainly surround the subject property. Commercial properties are increasingly located in the direction of Holländische Straße, where a connection to the city centre is provided via bus or tram. The city centre is located approx. 4 km south of the property. The Hanseatic city of Hamburg is a city-state and Germany s second largest city by population. The subject office property is located on the street An der Alster, about 2 km north of the city centre, directly along the Alster River. The immediate vicinity is characterised by office buildings with sporadic residential and hotel use. The central train station can be reached in a distance of approx. 1 km. Several bus stops and a subway station are located within walking distance. The B75 federal road can be accessed about 750 m from the subject property, providing a link to the federal motorway network. Düren is located in the south-west of the federal state of North Rhine-Westphalia near Cologne. The subject property is located in the city centre of Düren in the high street, Wirtelstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Forever 18, Pimkie and Tchibo. Osnabrück is located in the south of the federal state of Lower Saxony near Bielefeld (approx. 45 km), Dortmund (approx. 95 km), Paderborn (approx. 80 km) and Bremen (approx. 100 km). The subject property is located in the city centre of Osnabrück in the high street, Große Straße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Zara, S.Oliver, Only and Saturn. The property is a three-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 1,292 sqm and offers no parking spaces on site. The building is a solid construction with a clinker façade. The property is held leasehold. The property is a mainly one-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 1,992 sqm and offers sufficient parking spaces at the front of the building. The building is a solid construction and has a partially rendered façade. The property is held freehold. The property is a five-storey office building, which was extensively refurbished in It comprises a total lettable area of approx. 1,323 sqm. The landlord has the right to use 17 parking spaces in an underground car park adjacent the subject property. The building is a solid construction with a rendered façade. The property is held freehold. The property is a four-storey mixed-use building (retail and residential), constructed in It comprises a total lettable area of approx. 518 sqm and offers no parking spaces on site. The building consists of a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is a three-storey retail building, constructed in It comprises a total lettable area of approx. 750 sqm and offers no parking spaces on site. The building is a solid construction with a predominantly metal façade. The property is held freehold. The property is currently approx. 93% let to seven tenants. The tenants are: Telekom, Deichmann, Buddelei, Hussel, as well as three residential tenants, who have indefinite lease terms. One residential unit is currently vacant. The property is currently 100% let to one tenant. The tenant is: SPAR. There are also three billboards belonging to Deutsche Städte Reklame. The property is sublet to the tenant Lidl. The property is currently almost 100% let to two tenants. The tenants are: Clemens Rasch and Kurt Hauke KG. The parking spaces are let to the office tenants. Three parking spaces are currently vacant. The property is currently 100% let to three tenants. The tenants are: Xanaka (soon Tchibo), as well as two residential tenants, who have indefinite lease terms. The property is currently 100% let to one tenant. The tenant is: MEXX. The property is sublet to the tenant Esprit. Non-binding convenience translation 1, , ,160 3,680,000 1, , ,836 1,820,000 1, , ,746 3,730, , ,465 1,920, , ,877 5,620,000 M-17

348 39 Wiesdorfer Platz Leverkusen 40 Achternstraße 47/ Oldenburg 41 Hochstr Krefeld 42 Backerstraße Minden 43 Johann-Krane-Weg Münster Leverkusen is located in the south of the federal state of North Rhine-Westphalia near Cologne. The subject property is located in the city centre of Leverkusen in the high street, Wiesdorfer Platz. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly residential use on the upper floors. Nearby retailers include Orsay, Deichmann and Wehmeyer. Oldenburg is a city located in the north of the federal state of Lower Saxony near Bremen (approx. 50 km), Bremerhaven (approx. 70 km) and Osnabrück (approx. 112 km). The subject property is located in the city centre of Oldenburg in the high street, Achternstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Douglas, Vodafone, H&M and New Yorker. Krefeld is situated in the federal state of North Rhine-Westphalia and ranks as the sixth largest city in the administrative region of Dusseldorf. The subject property is located in the high street, Hochstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor and some residential use on the upper floors. Nearby stores include Ansons, H&M and Bonita. Minden is a city located in the north-east of the federal state of North Rhine-Westphalia near Hanover (approx. 57 km), Osnabrück (approx. 60 km) and Paderborn (approx. 65 km). The subject property is located in the city centre of Minden in the high street, Backerstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Bonita, Bijou Brigitte, H&M and New Yorker. Münster is an independent urban district located in the federal state of North Rhine-Westphalia. Nearby cities include Dortmund (approx. 50 km), Osnabrück (approx. 45 km) and Essen (approx. 71 km). The subject property is located approx. 2 km north-west of the city centre of Münster. The surrounding area is classified as a commercial area with mainly office use. Johann-Krane-Weg intersects the federal road B54 about 200 m from the subject property. The B54 is a frequented main arterial road to the north, which provides access to the motorway A1. The connection to the public transport network is good; there are bus stops located within walking distance. The central station is located approx. 3.5 km away. The property is a four-storey mixed-use building (retail and residential), constructed around It comprises a total lettable area of approx. 588 sqm and offers eight parking spaces. The building consists of a solid masonry construction with a rendered façade. The property is held freehold. The property is a three-storey retail building, constructed in It comprises a total lettable area of approx. 847 sqm and offers no parking spaces on site. The building is a solid masonry construction with a rendered façade. The property is held freehold. The property is a four-storey retail building, constructed in It comprises a total lettable area of approx. 3,457 sqm. There is one parking garage on site. The building is a solid construction. The façade consists of different materials. The property is held freehold. The property consists of two four-storey mixed-use buildings (retail and residential), constructed around It comprises a total lettable area of approx. 1,007 sqm and offers 6 parking spaces on site. The building is a solid construction with a rendered façade. The property is held freehold. The property is a four-storey office building, constructed in It comprises a total lettable area of approx. 9,424 sqm and offers sufficient parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is currently approx. 75% let to four main tenants. The tenants are: Nordsee, as well as three residential tenants, who have indefinite lease terms. The parking spaces are let to several tenants. Three residential units are currently vacant. The property is currently 100% let to one tenant. The tenant is: E-Plus. The areas are partly sublet to promod. The property is currently 100% let to two tenants. The tenants are: Douglas, as well as an electrical substation (Transformatorenstation) in the basement belonging to Stadtwerke Krefeld. One retail unit is sublet to the tenant KULT by Douglas. The property is currently 100% let to seven main tenants. The tenants are: Tally Weijl, Jeans Fritz, as well as five residential tenants and several parking space tenants, who have indefinite lease terms. The property is currently approx. 84% let to 25 tenants. The main tenants are: ERGO, Fachhoschule Munster and GeBioM. Five office units and some parking spaces are currently vacant. Non-binding convenience translation , ,051 2,510, , ,171 4,160,000 3, , ,476 8,310,000 1, , ,655 4,780,000 9,424 1,050,987 1,023,242 14,770,000 M-18

349 44 Allensteiner Straße 61/61a Neuwied 45 Wilsdruffer Straße Freital 46 Bahnhofstraße Geldern 47 Am Alten Eisenwerk Lüneburg 48 Am Neuen Markt Meppen Neuwied is a city located in the south-west of the federal state of Rhineland-Palatinate near Bonn (approx. 45 km) and Limburg (approx. 45 km). The subject property is located on the street Allensteiner Straße at the intersection of Breslauer Straße. It is situated in an area mainly characterised by commercial use, directly next to the federal roads B42 and B256. Due to its corner location, the property is highly visible. Freital is a city located in the east of the federal state of Saxony near Dresden (approx. 10 km) and Chemnitz (approx. 73 km). The subject property is located along the Wilsdruffer Straße in an area mainly characterised by commercial and residential use, approx. 5 km from the nearest access to the federal motorway A17. Due to its location right along a major street, the property is easily accessible by car as well as by public transport, and has good visibility. Geldern is located in the west of the federal state of North Rhine-Westphalia near Essen (approx. 49 km), Dusseldorf (approx. 46 km) and Duisburg (approx. 23 km). The subject property is located along the Bahnhofstraße in the city centre. The area is mainly characterised by commercial and residential use, approx. 10 km from the nearest access to the federal motorway A57. Due to its location right along a major street, the property is easily accessible by car as well as by public transport, and has good visibility. Lüneburg is a city located in the north of the federal state of Lower Saxony near Schwerin (approx. 80 km), Lübeck (approx. 72 km) and Hamburg (approx. 45 km). The subject property is located along the streets Am Alten Eisenwerk and Hamburger Straße, in an area mainly characterised by commercial and residential use, approx. 2.5 km from the nearest access to the federal motorway A250. Due to its location right along two major streets, the property is easily accessible by car as well as by public transport, and has good visibility. Meppen is a city located in the west of the federal state of Lower Saxony near Osnabrück (approx. 70 km) and Bremen (approx. 110 km). The subject property is located along the street Am Neuen Markt, close to the major street, An der Bleiche, in an area mainly characterised by commercial and residential use, approx. 9.5 km from the nearest access to the federal motorway A31. Due to its location close to a major street, the property is easily accessible by car as well as by public transport, and has good visibility. The property is a one to two-storey free-standing retail complex, constructed in It comprises a total lettable area of approx. 3,548 sqm and offers sufficient parking spaces in a car park in front of the building. The building consists of a prefabricated reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is a one to two-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 7,940 sqm and offers sufficient parking spaces on a parking lot in front of the building. The building consists of a reinforced concrete structure with a façade comprising prefabricated concrete elements. The property is held freehold. The property is a two-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 8,749 sqm and offers sufficient parking spaces in the parking garage on the ground floor. The building consists of a reinforced concrete structure with a façade comprising prefabricated concrete elements. The property is held leasehold. The property is a single-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 4,611 sqm and offers sufficient parking spaces in a car park in front of the building. The building consists of a reinforced concrete structure with a façade comprising prefabricated concrete elements. The property is held freehold. The property is a three-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 10,205 sqm and offers sufficient parking spaces in the underground car park and a parking lot in front of the building. The building consists of a reinforced concrete structure with a predominantly clinker façade. The property is held freehold. The property is currently approx. 71% let to seven tenants, with one unit newly rented in the interim. The tenants are: dm, KiK, Freßnapf, Hermes Fleischwaren, Takko, Martin Walter Hoffmann and Bäckerei Heinz-Willi- Grund. Furthermore, there is additional income generated by Obstbau Häger. One retail unit is currently vacant. The property is currently 100% let to one tenant. The tenant is: Kaufland. The property is currently 100% let to one tenant. The tenant is: Kaufland. The property is currently 100% let to one tenant. The tenant is: Kaufland. The property is currently 100% let to one tenant. The tenant is: Kaufland. Non-binding convenience translation 3, , ,932 4,740,000 7, , ,275 10,080,000 8, , ,861 8,290,000 4, , ,621 5,910,000 10, , ,654 13,490,000 M-19

350 49 Hauptstraße Mosbach 50 Auf der Steig Villingen- Schwenningen 51 Emsstraße Rheine 52 Sutthauser Straße 285/ Osnabrück 53 Hermann-Köhl-Straße Bremen Mosbach is a city located in the north of the federal state of Baden-Wuerttemberg near Heilbronn (approx. 35 km) and Heidelberg (approx. 58 km). The subject property is located in the city centre, along the Hauptstraße. The area is mainly characterised by commercial and residential use, and approx. 26 and 30 km from the nearest access to the federal motorways A81 and A6. Due to its location right along the street, the property is easily accessible by car as well as by public transport, and has good visibility. Villingen-Schwenningen is a city located in the south-west of the federal state of Baden- Wurttemberg near Reutlingen (approx. 75 km) and Freiburg (approx. 50 km). The subject property is located on the street Auf der Steig, in an area mainly characterised by industrial use, approx. 1.2 km from the closest federal road. The property is located in a side street in an industrial area, is not easily accessible by public transport and has only limited visibility. Rheine is located in the north-west of the federal state of North Rhine-Westphalia near Osnabrück (approx. 45 km) and Münster (approx. 50 km). The subject property is located in the city centre of Rheine in the high street, Emsstraße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use in the upper floors. Nearby retailers include H&M, The Phone House, Orsay and Bonita. Osnabrück is an independent urban district located in the federal state of Lower-Saxony. Nearby cities include Münster (approx. 45 km) and Gütersloh (approx. 50 km). The subject office property is situated on the south-western edge of Osnabrück, approx. 3 km from the city centre. The site is situated on Sutthauser Straße, a frequented arterial road. The motorway A30 can be accessed from this street within one minute. The property is located in the commercial area named Burenkamp, mainly containing office buildings, a petrol station and car dealerships. The connection to the public transport network is good; there is a bus stop located within walking distance. The central station is located approx. 3 km away. The Hanseatic city of Bremen is a city-state and Germany s tenth largest city by population. The subject office property is located on the road Herman-Köhl-Straße, near the international airport of Bremen. The site is situated approx. 3 km southwest of the city centre. The direct vicinity is characterised by office buildings. The central train station can be reached within 3.5 km. A bus stop and a tram stop are located within walking distance. An access point to the federal road B6 can be reached within 1 km of the subject property, providing a link to the federal motorway network. The property is a single-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 6,493 sqm and offers sufficient parking spaces in a car park located in front of the building. The building consists of a reinforced concrete structure with a rendered façade. The property is held freehold. The property is a one to two-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 7,270 sqm and offers sufficient parking spaces in a car park in front of the building. The building consists of a prefabricated reinforced concrete structure with a façade made of prefabricated concrete elements. The property is held freehold. The property is a four to five-storey mixed-use building (retail, office and residential). It comprises a total lettable area of approx. 2,308 sqm and offers no parking spaces on site. The building is a solid construction with a predominantly metal façade. The property is held freehold. The property is a four-storey office building, constructed in It comprises a total lettable area of approx. 3,833 sqm and offers sufficient parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is a four-storey office building, constructed in It comprises a total lettable area of approx. 7,157 sqm and offers sufficient parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of clinker brick. The property is held freehold. The property is currently 100% let to one tenant. The tenant is: Kaufland. The property is currently 100% let to one tenant. The tenant is: EDEKA. The property is currently approx. 93% let to eight tenants. The tenants are: Rossmann, Buntstift, Bäckerei Heinrich Trifferer, Randstad, Dr.Osthues, REDUMED, Akademie Überlingen, as well as one residential tenant, who has an indefinite lease term. One office unit is currently vacant. The property is currently approx. 96% let to twelve tenants. The main tenants are: PBR Planungsbüro, HOCHTIEF Projektentwicklung and pro office. One office unit is currently vacant. The Property is currently approx. 88% let to two tenants. The tenants are: FLYLINE and maxima. One office unit is currently vacant. Non-binding convenience translation 6, , ,303 8,430,000 7, , ,960 3,820,000 2, , ,895 5,260,000 3, , ,700 6,840,000 7, , ,492 9,700,000 M-20

351 54 Linzerstraße 7, 9, 9a Bremen 55 Bäckerstraße Herford 56 Robert-Bunsen-Straße 9a Freiburg 57 Fuhlsbütteler Straße Hamburg 58 Ziethenstraße Hamburg The Hanseatic city of Bremen is a city-state and Germany s tenth largest city by population. The subject office property is situated in the city district of Horn-Lehe. The area is part of the Technology- Park. The vicinity can be classified as a commercial area, mainly used by office tenants and the University of Bremen. The Technology-Park is connected to the motorway A27. A bus stop is located in the vicinity of the property. The site lies approx. 5 km north-east of the city centre. The central train station is located approx. 4 km from the subject site. Herford is a city located in the north-east of the federal state of North Rhine-Westphalia near Bielefeld (approx. 15 km), Bad Oeynhausen (approx. 18 km), Gütersloh (approx. 42 km) and Osnabrück (approx. 54 km). The subject property is located in the city centre of Herford in the high street, BackerstraBe. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include New Yorker, Vodafone, Fielmann and Ulla Popken. Freiburg is a city located in the south-west of the federal state of Baden-Wurttemberg near Basel (approx. 55 km) and Straßburg (approx. 70 km). The subject property is located on the street Robert- Bunsen-Straße in an area mainly characterised by industrial use, approx. 800 m from the closest federal road. Due to its location on a side street in an industrial area, the property is not easily accessible by public transport and only has limited visibility. The Hanseatic city of Hamburg is a city-state and Germany s second largest city by population. The property is situated within the city district of Barmbeck, approx. 5.5 km north-west of Hamburg s city centre. The subject property is located in a pedestrian zone, directly opposite a Penny Discounter and a McDonald s restaurant. The direct vicinity is characterised by retailers on the ground floor and office or residential use on the upper floors. The central station is situated approx. 5 km away. An underground stop and bus stop are located across the street. The Hanseatic city of Hamburg is a city-state and Germany s second largest city by population. The subject property is situated within the city district of Marienthal, approx. 7.5 km north-east of Hamburg s city centre. The vicinity can be classified as residential. The motorway A24 can be reached within approx. 10 minutes by car. The federal road B75, leading to the city centre, can be reached in approx. 300 m. No connections to the public transport network are located in the direct vicinity. The central station is situated 7 km away. The property is a two to four-storey office building, constructed in three phases between 1988 and It comprises a total lettable area of approx. 10,141 sqm and offers sufficient parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of clinker brick. The property is held freehold. The property is a five-storey retail building. It comprises a total lettable area of approx. 1,787 sqm and offers no parking spaces on site. The building is a solid construction with a rendered façade. The property is held freehold. The property is a single-storey freestanding retail building. It comprises a total lettable area of approx. 9,253 sqm and offers sufficient parking spaces in a car park in front of the building. The building consists of a prefabricated reinforced concrete structure with a façade made of metal and prefabricated concrete elements. The property is held leasehold. The property is a three to four-storey mixed-use building (retail, office and residential). It comprises a total lettable area of approx. 2,960 sqm and offers 19 parking spaces in a parking garage. The building is a solid construction with a rendered façade. The property is held freehold. The property is a one to three-storey building, which is mainly used as an industrial property. One office unit and one flat are also located within the property. The property comprises a total lettable area of approx. 2,095 sqm. There are some parking spaces located on site. The building is a solid construction with a clinker brick façade. The property is held freehold. The property is currently almost 100% let to three tenants. The tenants are: OAS, Telefónica o2 and the University of Bremen, as well as one antenna of DFMG Deutsche Funkturm. Several parking spaces are currently vacant. The property is currently 100% let to three tenants. The tenants are: Mayersche Buchhandlung, Rossmann as well as Adem Uysal. The property is currently 100% let to one tenant. The tenant is: EDEKA. The property is currently 100% let to eleven tenants. The main tenants are: Iwan Budnikowsky, Commerzbank, Kamps, AOK and Anita Brüche. The property is currently 100% let to three tenants. The tenants are: Riba Edelstahl, Docuserve, as well as one residential tenant, who has an indefinite lease term. Non-binding convenience translation 10,141 1,161,735 1,150,998 16,000,000 1, , ,951 4,220,000 9, , ,011 7,570,000 2, , ,041 6,900,000 2, , ,270 1,970,000 M-21

352 59 Albertstraße Duisburg 60 Martin-Luther-King-Weg Münster 61 Wetterkreuz Erlangen 62 Moerser Straße Kamp-Lintfort 63 Westring Hilden Duisburg is situated on the banks of the Lower Rhine River in the federal state of North Rhine- Westphalia. The subject retail park is situated within the city district of Duisburg-Kaßlerfeld, approx. 1.5 km north of the Duisburg city centre. The direct vicinity is characterised by a commercial area to the north, east and west and a residential area to the south. The central station is situated approx. 3.5 km south-east of the property. A tram stop is located opposite of the retail park and can be reached within approx. 200 m. Access to the federal motorway is possible within 1 km. Münster is an independent urban district located in the federal state of North Rhine-Westphalia. Nearby cities include Dortmund (approx. 50 km), Osnabrück (approx. 45 km) and Essen (approx. 71 km). The subject property is located approx. 3.5 km south of the city centre. The surrounding area is characterised as a commercial area predominantly with office use. The federal road B54 can be reached within 2 km. The B54 is a frequented main arterial road, which serves as an access to the motorway A1. The connection to the public transport network is good; a bus stop is located within walking distance. The central station is located approx. 3.5 km away. Erlangen is located in the centre of the federal state of Bavaria. The city belongs to the economic region of Nuremberg-Fürth-Erlangen. The subject property is located approx. 5.5 km south of the city centre of Erlangen and close to the Nuremberg airport. The surrounding area is characterised as a commercial area predominantly with office and industrial use. The street Wetterkreuz intersects the federal road B4 in a distance of approx. 400 m. The B4 is a frequented main arterial road, which provides access to the nearby motorway A3. The connection to the public transport network is good; a bus stop is located within walking distance. The central station is located approx. 6.5 km away. Kamp-Lintfort is a city located in the west of the federal state of North Rhine-Westphalia near Moers (approx. 12 km), Duisburg (approx. 24 km) and Wesel (approx. 24 km). The subject property is located in the city centre of Kamp-Lintfort in the high street, Moerser Straße. The surrounding area is a prime shopping location, characterised by retail use on the ground floor with mainly office and residential use on the upper floors. Nearby retailers include Bonita, Deichmann, Tchibo and Jeans Fritz. Hilden is a city located in the centre of the federal state of North Rhine-Westphalia near Dusseldorf (approx. 12 km) and Leverkusen (approx. 15 km). The subject property is located on the street Westring in a commercial area mainly characterised by industrial use, approx. 1.4 km from the closest federal road. The property consists of one one-storey and one two-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 5,119 sqm and offers sufficient parking spaces between the buildings. The building is a solid construction. The façade consists of different materials. The property is held freehold. The property consists of three detached office buildings. All buildings have four storeys. The property comprises a total lettable area of approx. 13,799 sqm and offers sufficient parking spaces on site. The building is a solid construction with a reinforced concrete structure. The façade consists of different materials. The property is held freehold. The property is a four-storey freestanding office building, constructed in It comprises a total lettable area of approx. 7,343 sqm and offers approx. 256 parking spaces on site. The building consists of a solid reinforced concrete structure with a façade consisting of different materials. The property is held freehold. The property is a two-storey retail building, constructed in It comprises a total lettable area of approx. 2,093 sqm. The building is a solid construction with a clinker façade. The property is held freehold. The property is a one to two-storey freestanding retail building, constructed in It comprises a total lettable area of approx. 10,845 sqm and offers sufficient parking spaces in front of the building. The building consists of a prefabricated reinforced concrete structure. The façade consists of aerated concrete and glass elements. The property is held freehold. The property is currently 100% let to five tenants. The tenants are: Welkes Mega-Pet, KIK, Großbäckerei Karl Brinker, dm and Netto Marken-Discount. The property is currently approx. 99% let to 15 tenants. The main tenants are: Bundesagentur für Arbeit, Industrie- und Handelskammer Nord Westfalen and con terra. One office unit and several parking space are currently vacant. The property is currently 100% let to two tenants. The tenants are: AREVA NP and GRR Real Estate. The property is currently 100% let to two tenants. The tenants are: C & A and dm. The property is currently 100% let to one tenant. The tenant is: OBI. In addition, an antenna is located on the roof, which is let to Vodafone D2. Non-binding convenience translation 5, , ,603 8,940,000 13,799 1,688,103 1,544,381 22,090,000 7,343 1,079,501 1,041,455 15,360,000 2, , ,603 3,390,000 10, , ,435 11,930,000 M-22

353 64 Stammheimer Straße Stuttgart Stuttgart is a city located in the centre of the federal state of Baden-Wurttemberg near Heilbronn (approx. 43 km) and Karlsruhe (approx. 62 km). The subject property is located on the street Stammheimer Straße in an area mainly characterised by residential and commercial use, approx. 100 m from the nearest federal road. The property is easily accessible by public transport and has good visibility. The property is a five-storey freestanding retail building (2 retail levels and 3 parking levels), constructed in It comprises a total lettable area of approx. 6,395 sqm and offers sufficient parking spaces on three parking decks. The building consists of a prefabricated reinforced concrete structure with a façade made of prefabricated concrete elements. The property is held freehold. The property is currently 100% let to one tenant. The tenant is: EDEKA. 6,395 1,200,000 1,074,360 16,840,000 Total 208,070 25,418,418 25,100, ,160,000 * The designated usable areas are based on a schedule provided by HAMBORNER REIT AG, which comprises the lettable areas that have been agreed to in the lease agreements. In some cases, the areas listed in the lease agreements may differ with the subsequent measurement of the lettable areas; the discrepancy, however, is not significant at the individual property level and represents no material change on the portfolio level (i.e. under 1%). M-23

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355 22. RECENT DEVELOPMENTS AND OUTLOOK Non-binding convenience translation HAMBORNER is a REIT corporation since the beginning of It is the Company s objective to implement its strategy in accordance with the REIT requirements, in particular with regard to real estate investments and dividend policy. In line with its investment strategy HAMBORNER was able to make four acquisitions already in the current year In addition to an office property in Erlangen, an OBI market in Hilden, a high street property in Kamp-Lintfort and an EDEKA market in Stuttgart were purchased. The total investment volume for these properties was EUR 46.8 million. In addition, purchase agreements for an EDEKA-market in Freiburg, an office building in a prime location in the pedestrian zone of Bad Homburg v.d.h., an office building in Ingolstadt and a high-street-object in Lemgo for a total purchase price of EUR 43.0 million was notarized. The property in Freiburg will probably be transferred after completion in mid 2012, the properties in Bad Homburg v.d.h., Ingolstadt and Lemgo probably within the current financial year. In the case of the property in Bad Homburg v.d.h. the Company has a right to cancel the contract if, amongst others, the vendor does not carry out certain construction work prior to the transfer. At present, the Company is considering the acquisition of eight properties with an investment volume of about EUR 121 million. HAMBORNER has made indicative purchase offers or has signaled buying interest. In the case of a property in Saxony a purchase agreement has already been notarized but the Company can still cancel it. HAMBORNER also plans to sell properties that are not in compliance with its investment profile. It is, for example, envisaged to sell properties in locations that do not meet the strategic location requirements. HAMBORNER will contemplate individual transactions as well as portfolio transactions for this purpose, provided that the market re-opens for such portfolio transactions. In the current fiscal year proceeds from rent or lease payments have developed positively until today. The vacancy rate has also improved and amounted to 2.27% for the time from January 1, 2010 until August 31, This year, HAMBORNER managed to let vacant areas in newer portfolio properties which were supported by rent guarantees. These efforts shall be continued. For the financial year 2010 the Company expects a further increase in rental and lease income and a still low vacancy rate. For the second half of 2010 HAMBORNER expects an overall stable operative business development and the Company intends to increase the FFO in the current financial year by about 10% compared to the previous year. However, due to planned work on certain portfolio properties the maintenance costs will be higher than in the first six months, so that the FFO as at June 30, 2010 cannot be used as basis for a forecast for the entire financial year. The profit for the period of the first half year of the current financial year decreased compared to the previous year period from EUR 3.3 million to TEUR 46 although the rental and lease income rose from EUR 11.1 Mio. to 11.8 Mio. This decrease mainly resulted from the transition to the REIT status which is accompanied by a taxation of the hidden reserves (Exit Tax) leading to an impact on the profit of 2.8 million in the first half year of In addition, amortisations increased in the first half of 2010 by EUR 0.4 million and the financial results decreased by EUR 0.5 million. The tax burden will have an impact on the profit for the whole year. A positive effect will probably be the result of the re-evaluation of the properties. Due to the re-evaluation as at August 31, 2010 there will be an additional amortisation of TEUR 294; on the other hand, there are write-ups for properties that had been amortised in previous years amounting to TEUR 1,169. Therefore, as a result of the re-evaluation there is a positive effect on the profit in an amount of to TEUR 875 as at August 31, Additionally, HAMBORNER will continue to make use of debt to finance its investments. The increase of debt will result in an increase of interest expenses and, as a consequence, continue to A-1

356 adversely affect the financial results in the future. In the long run, the Company intends to maintain a REIT equity capital ratio above the statutory limit of 45% at about 50%. Economic data of the first half year of 2010 show positive economic trends in Germany. The Company believes that this trend will continue throughout the current financial year and will also have an effect on the market for commercial properties, both on the investment and the rental market. At present, the Company s Board of Management expects that HAMBORNER will continue with its current dividend policy and will, within the scope of statutory provisions, pay out an attractive dividend to its shareholders for the fiscal year A-2

357 23. GLOSSARY Aktiengesetz Balance Sheet Equity Ratio Corporate Governance Cashflow DCF-procedure Declaration of compliance Derivative EBDA EBIT Aktiengesetz German Stock Corporation Act. The equity capital (including special items) of the balance sheet in relation to the balance sheet total. Guiding principles of responsible company control and monitoring aimed at long-term value added. Payment-effective balance of inflow and outflow of liquid funds in a period. Discounted Cashflow Procedure Valuation procedure, inter alia for the fair value of immovable property. It is based on the mathematic concept of discounting cashflows to determine the net present value. Declaration by Managing Board and Supervisory Board in accordance with Art. 161 of the German Stock Corporation Act on implementation of the recommendations of the government commission German Corporate Governance Code. Financial instrument, whose value is primarily derived from the price, the price fluctuations and the price expectations of an underlying basic value, for instance shares, interest-bearing securities or foreign currencies; often used as a hedging instrument. Earnings before depreciation and amortisation Means the profit for the financial year/period before amortization of intangible assets, tangible fixed assets and investment property. Earnings before interests and taxes. EBITDA Earnings before interests, taxes, depreciation and amortisation Means the profit for the financial year/period before interest (interest income less interest expenses) before taxes on income and profit, before amortization/write-ups of intangible assets, tangible fixed assets and investment property. EPRA Exit Tax Fair Value FFO European Public Real Estate Association European association of real estate companies listed on the stock exchange. Apart from companies, financial analysts, investors, auditors and consultants are represented in this organisation. Preferential tax treatment with respect to the disclosure of undisclosed reserves at specific immovables and REIT Corporations. Market Value time value, at which amount experts, transacting and independent parties would be willing to exchange an asset or settle a liability under normal market conditions. Funds From Operations Is a key financial figure of the operating business of the Company. The FFO is used for the value G-1

358 orientated financial management of the Company to represent the generated financial resources that are available for investments, repayment of debt and dividend payments to the shareholders. GDP German Commercial Code Gross Initial Return IFRS Investment Properties Deferred Taxes LTV Market Capitalisation Market Value Gross Domestic Product Measurement of economic performance of a national economy, i.e. combined value of all goods and services earned within the country within a certain period. Handelsgesetzbuch German Commercial Code. The annual agreed rent of an immovable property divided by the acquisition price for the immovable property. International Financial Reporting Standards Issued by the International Accounting Standards Board (IASB). They are mandatory for capital market-oriented companies and groups and are designed to enable better comparability in the international business environment. All developed and undeveloped land as well as buildings and parts of buildings which are held for achieving future rental earnings, for profits from increases in value and/or for a currently undetermined purpose. They are not held for administration purposes or short-term trading within the framework of usual business activities. Asset and/or liability items for balancing the difference between the actual assessed tax debt and the economic tax burden on the basis of balancing in accordance with the provisions of German commercial law. Loan To Value Represents the ratio of the Company s financial liabilities to the market value of the Company s property portfolio. The financial liabilities are determined on the outstanding amount of loans due to credit institutions plus interest not due but allocated to the relevant period as at the respective reporting date and which amounted to TEUR 126,451 as at June 30, 2010; TEUR 105,827 as at December 31, 2009; 85,297 as at December 31, 2008 and TEUR 84,227 as at December 31, These financial liabilities are shown in the balance sheet in the item financial liabilities and derivative financial instruments in the aggregate together with derivative financial instruments. By calculating the market value of the immovable assets, only the property portfolio of the Company was considered. The value of the Company s headquarter building in Goethestrasse 45 in Duisburg as well as the undeveloped land of the Company are not considered. Stock market value of a corporation. Current share price multiplied by number of shares. See Fair Value. G-2

359 NAV REIT REIT Equity Ratio Risk Management Securities Trading Act Stock Corporation Act Vacancy Rate Volatility VorstOG WpHG WpPG Net Asset Value Reflects the economic equity of the Company. It is determined by the fair market value of the Company s assets which is essentially the fair market value of the properties minus debt. Real Estate Investment Trust Company listed on the stock exchange which exclusively invests in real estate. Enables the investor to indirectly invest in property by buying shares. Most of the profit is paid out, and taxation is exclusively at the investor level (tax transparency). Corresponds to the equity-to-assets ratio pursuant to Sec. 15 in conjunction with Sec. 12 (1) sentence 2 REIT Act meaning the ratio of the equity (on a fair value basis) to the fair value of immovable assets. The equity (on a fair value basis) is the sum of the balance-sheet equity and the hidden reserves. The immovable assets of the Company consist of the property portfolio and undeveloped land which is predominantly agricultural and forestry land. The fair value of the Company s property portfolio was determined on the basis of the market value expert appraisals. Thereby, the capital expenditures for properties, which were not yet transferred on the reporting date, were increasingly considered (as at June 30, 2010, TEUR 1,507; as at December 31, 2009, TEUR 517; as at December 31, 2008, TEUR 1,229 and as at December 31, 2007, TEUR 329). The undeveloped land was recognized with the acquisition costs of such a land at approximately EUR 2.6 million, because another value could not be determined in a reliable manner. Systematic process designed to identify potential risks in the company at an early stage, to evaluate them and if applicable introduce necessary counter measures. Wertpapierhandelsgesetz German Securities Trading Act. Aktiengesetz German Stock Corporation Act. The Company determines its vacancy rate as the relationship between target rent for the vacant spaces and the aggregate target rent. For determination of the economic vacancy rate, loss of rent for vacant spaces is adjusted by contractual existing rent guarantee claims. Statistical measure for the margin of fluctuations of a rate or price, in particular securities or foreign currencies. German law on the disclosure of managing board remuneration. Wertpapierhandelsgesetz German Securities Trading Act. Wertpapierprospektgesetz German Securities Prospectus Act. G-3

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361 24. SIGNATURE PAGE Non-binding convenience translation Duisburg, Dusseldorf, Hamburg and Amsterdam, in September 2010 HAMBORNER REIT AG Signed Dr. Rüdiger Mrotzek Signed Hans Richard Schmitz WestLB AG Signed Maren Lorth Signed Stephan Averdung Joh. Berenberg, Gossler & Co. KG Kempen & Co N.V. Signed Maren Lorth Signed Stephan Averdung Signed Maren Lorth Signed Stephan Averdung U-1

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