MANAGEMENT REPORT - CPI · EPRA Performance Indicators ... 2015 2016 2017 H1 2017 H1 2018 2015 2016...

MANAGEMENT REPORT

2018As at 30 June 2018unaudited

3CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018

CONTENTS

Quadrio, Prague, Czech Republic

01 KEY FIGURES .......................................................................... 4

02 THE CEO’S MESSAGE ........................................................ 8

03 GROUP OVERVIEW ............................................................ 12 Group Overview ............................................................................................................. 16

Primary Geographies of the Group ....................................................................... 23

04 BUSINESS REVIEW.............................................................. 24 Highlights .......................................................................................................................... 25

Economic Review ........................................................................................................... 29

Business Segments ........................................................................................................ 31

EPRA Performance Indicators .................................................................................. 68

Valuation Summary ....................................................................................................... 73

Finance Review ................................................................................................................ 75

Results and Net Assets ................................................................................................ 86

05 CORPORATE GOVERNANCE ....................................... 88 Corporate Governance ................................................................................................ 89

Management .................................................................................................................... 99

Glossary .............................................................................................................................. 100

06 FINANCIAL STATEMENTS .............................................. 106

FOR

PROVIDINGPEOPLE SPACE

OPPORTUNITYWITH

CONTENTS


KEY FIGURES

01 // KEY FIGURES

During the first half of 2018, CPI PROPERTY GROUP (the “Company,” “CPIPG,” or together with its subsidiaries, the “Group”) benefited from strong performance across our property portfolio and maintained our dominant position in the Czech Republic, Berlin and the CEE region.

CPIPG is an active owner and asset manager. Our focus is to continually improve the performance and quality of our assets through strong local asset management teams. The advantages of this strategy are clear: CPIPG achieved record levels of income during the first half of 2018 and sees a positive/stable future for economic and real estate fundamentals in our core geographies and segments.

The Group’s property portfolio increased primarily due to acquisitions and the revaluation of certain high perform-ing properties. Net LTV declined significantly as CPIPG strengthened our capital structure via hybrid bonds and through continued reinvestment of profit by our share-holder in support of a conservative financial policy. EPRA NAV rose modestly, reflecting the combined effects of our activities during the first half of 2018.

Property portfolio by segments (€ million)

EPRA NAV (€ million)

Gross and net rental income and occupancy rate (€ million and %)

Net business income and EBITDA (€ million)

Net LTV (%)

Czech Republic Berlin Other segments

GRI NRI OccupancyNet business income Consolidated adjusted EBITDA

1,000

0

0

1,000

2,000

3,000

4,000

5,000

70%

75%

80%

85%

90%

95%

35.0

40.0

45.0

50.0

55.0

60.0

2015 2016 2017 H1 2017 H1 2018 H1 2018H1 2017201720162015

H1 2018201720162015

H1 2018201720162015

H1 2018201720162015

2,000

3,000

4,000

5,000

6,000

7,000

58.8%

48.0%44.9%

39.1%

92.7%91.1%

93.5%

90.4%89.2%

238219

272

123

156

226218

262

120147

206 207232

106135

200182

230

101131

0 0

50 50

100 100

150 150

200 200

250 250

300 300

350 350

1,732

2,729

3,934 3,962

3,822

4,865

6,7226,994

1,150

1,458

1,761 1,863

6941,048

1,638 1,683

1,978 2,359 3,323 3,448

KEY FIGURES01

Europeum Shopping Centre, Budapest, Hungary

Our team is delivering superb operational and financial performance.


01 // KEY FIGURES

30 June 2018 30 June 2017 Change

Total revenues € million 245 203 21%

Net business income € million 156 123 26%

Operating result € million 211 321 –34%

Funds from operations (FFO) € million 87 51 70%

Profit before tax € million 185 231 –20%

Interest expense € million 45 47 –5%

Net profit for the period € million 161 190 –15%

30 June 2018 31 December 2017 Change

Total assets € million 8,038 7,529 7%

Property Portfolio € million 6,994 6,722 4%

Gross leasable area sqm 3,363,000 3,329,000 1%

Occupancy % 93.5 92.7 0.8 p.p.

Total number of properties * No 418 420 0%

Total number of residential units No 12,306 12,402 –1%

Total number of hotel beds No 10,488 10,488 0%

EPRA NAV € million 3,962 3,934 1%

30 June 2018 31 December 2017 Change

Total equity € million 3,868 3,315 17%

Equity ratio % 48% 44% 4 p.p.

Net debt € million 2,731 3,015 –9%

Loan to value ratio (Net LTV) % 39.1% 44.9% –5.8 p.p.

Secured consolidated leverage ratio % 23.8% 25.7% –1.9 p.p.

Secured debt as % of total debt % 58.9% 59.0% –0.1 p.p.

Unencumbered assets % 44.9% 42.5% 2.4 p.p.

Net ICR 3.5x 2.6x 0.9x

Performance

Assets

Financing structure

» Property portfolio: € 7 bn

» Net business income: 26% increase vs. H1 2017

» FFO: 70% increase vs. H1 2017

Gateway Office Park, Budapest, Hungary

* Excluding residential properties

THE CEO’S MESSAGE02

Martin Němeček, CEO and Managing Director of CPI Property Group

10 11CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018 CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018

Dear Stakeholders,

I am delighted to report that CPIPG’s achievements during the first half of 2018 reflect the strategies we have dili-gently pursued in recent years: active asset management, a commitment to strong investment grade credit ratings, disciplined acquisitions and an unwavering long-term in-vestment horizon. Our team has carefully built upon our past successes, surpassed all expectations, and believes our portfolio is extremely well-positioned for the future.

Based on all of the factors we observe in the market, CPIPG has the right assets, in the right locations, at the right time. This is clearly shown through like-for-like rental growth, which exceeded 4% for the first half of 2018 and included positive contributions from each geography and sector in our well-diversified portfolio. Total revenues reached EUR 245m, an increase of 21% versus the first half of 2017. As a result, our status as the dominant owner of real estate in the Czech Republic, Berlin and the CEE region has never been stronger. We are focused on the long-term, and be-lieve we have the best assets and people in place to achieve our objectives.

The business environment in Berlin is booming, and our platform as the largest owner of office space in Berlin gives us a competitive edge. Like-for-like rental growth in our Berlin portfolio exceeded 9.5% during the first half of 2018; in certain properties, we increased rents by over 35%. We expect continued strong demand for our unique “red brick buildings” and sought-after locations in Kreuzberg and oth-er areas of West Berlin, which will drive further increases in occupancy and rents. Our targeted redevelopment efforts are exceeding expectations, such as the transformation of our Aqua Höfe building, which has received overwhelming-ly positive responses from tenants.

In the Czech Republic, our Prague office portfolio remains the top choice for regional headquarters of multinational companies like Siemens and WPP who recognise our ability to invest alongside tenants and deliver space which suits their needs. While we acknowledge the potential impact of e-commerce globally, we believe our Czech Republic re-tail portfolio is ideally positioned. Tenants in our dominant regional shopping centres across the Czech Republic are seeing increased turnover, and our investments (such as the redevelopment of IGY Shopping Centre in České Budě-jovice) are focused on creating “experiences” which drive footfall, spending, and long-term value for our tenants. During the first half, CPIPG also acquired Futurum shop-ping centre in Hradec Kralove which added a high-quality, top-performing property that perfectly complements our regional shopping centre portfolio.

Our total assets now exceed EUR 8bn, with our property portfolio reaching a new landmark of EUR 7bn. Together, the Czech Republic and Berlin account for 78% of CPIPG’s property portfolio; we expect these two geographies will always be more than 70% of our portfolio over the long-term even as we explore acquisitions in other CEE coun-tries. CPIPG’s approach is highly disciplined: we will con-tinue to focus primarily on offices and regionally dominant shopping centres and will only invest in properties where we see strong long-term upside potential. CPIPG will also continue to divest assets which no longer fit our portfolio, such as our recent sale of small retail assets in Northern Czech Republic.

Positive economic trends across the CEE region have also created opportunities in our complementary assets portfo-lio. In Hungary, our office and retail properties continue to perform well and our team on the ground continues to im-prove occupancy and rents. In Poland, we further enhanced our portfolio by acquiring two high-quality, well-located office buildings in Warsaw (Atrium Centrum & Atrium Plaza) where we are confident to improve performance through our active asset management strategies and long-term horizon.

Underpinning the performance of our portfolio is CPIPG’s financing strategy, which focuses on maintaining and im-proving our investment grade credit ratings. In March, CPIPG was awarded a new “BBB” credit rating by S&P. At the same time, Moody’s increased the outlook on our “Baa3” credit rating from stable to positive. These positive rating outcomes were a direct result of CPIPG’s operating performance and capital structure transformation during 2017, plus our detailed and well-communicated financial policies which clearly stated our intention to continue re-ducing LTV and secured debt, while increasing unencum-bered assets. In May 2018, we returned to the international capital markets and became the first CEE corporate issuer of undated perpetual “hybrid” bonds, which will allow us to invest in future growth while maintaining our financial policy commitments.

While CPIPG greatly appreciates the support of our bond and hybrid investors, we also continue to selectively utilise bank loans. In March, we signed a EUR 150 million unse-cured revolving credit facility with six international and re-gional banks; we signed another EUR 80 million unsecured revolving credit facility with three other banks in August. During the first half, we also successfully refinanced our flagship Quadrio building in Prague at an extremely attrac-tive rate. Given the quality and location of our assets, we continue to receive attractive secured lending offers from banks, which we have clearly de-prioritized but see as an important alternative source of liquidity.

CPIPG’s combination of superb operating performance and conservative financial policy have positively impacted our credit metrics. During the first half of 2018, CPIPG’s net interest coverage ratio (ICR) increased from 2.6 to 3.5 as we benefited from higher levels of income and refinancing activities which lowered our cost of debt, such as the recent purchase of high-coupon bonds issued by our subsidiary CPI BYTY. Our net loan to value (net LTV) was 39.1% as of 30 June 2018, relative to 44.9% at year-end 2017 and CPIPG’s financial policy which targets a net LTV below 45%. We delivered on our commitment to reduce secured debt, with our secured leverage ratio declining from 26% to 24% and our ratio of unencumbered assets increasing from 43% to 45%. We will continue to selectively pursue debt pre-payment.

Looking to the rest of 2018, CPIPG intends to maintain our current positive trajectory. We do not take the current “good times” for granted: I want to personally thank our team for their efforts to optimise performance and prepare the company to weather any potential market environment. With these guiding principles, I am confident we will con-tinue to deliver positive results for all our stakeholders. Stay tuned!

Sincerely,

THE CEO’S MESSAGE

02 // THE CEO’S MESSAGE 02 // THE CEO’S MESSAGE

“We are focused on the long-term, and have the best assets and people in place to achieve our objectives.”

Martin Němeček

View from Quadrio roof terrace, Prague, Czech Republic


03 // GROUP OVERVIEW


2012 2013 2014 2015 2016 2017 2018

INVESTMENT GRADE RATING AND SENIOR NOTES ISSUESBaa3 rating by Moody’s and issue of inaugural senior unsecured bonds of €825 million

ACQUISITION OF RETAIL PORTFOLIO FROM CBRE GLOBAL INVESTORSThe largest acquisition of the Group: a retail portfolio of 11 shopping centres in the Czech Republic, Hungary, Poland and Romania

2017

LOCAL BOND LEADER Active issuance in local bond markets to capture strong credit appetite, further enhancing our funding profile

2016

FOUNDATION OF CZECH PROPERTYINVESTMENTS A.S. (CPI AS)

1991

FOUNDATION OF GSG BY THE CITY OF BERLIN

1965

POSITIVE RATING DEVELOPMENTSNew BBB rating by S&P and change of Moody’s outlook from stable to positive

HYBRID NOTES ISSUANCEThe Group strengthened its capital structure and became the first corporate issuer of hybrid notes in the CEE region

2018QUADRIO PROJECT COMPLETIONMost significant develop ment completed by CPIPG and our flagship property in Prague

INTEGRATION OF CPI AS & GSG AND ESTABLISHMENT OF CPIPGThis step created an extraordinarily strong Luxembourg-based European property group with a diversified portfolio in the Czech Republic, Berlin and the CEE region

2014

RESIDENTIAL PORTFOLIOACQUIREDPurchase of residential portfo-lios that together make up the current range of 12,500 unitsunder the brand CPI BYTY

1999 – 2003

ISSUANCE OF BONDS IN THE CZECH REPUBLICThe Group moves to the forefront of the most significant Czech real estate investors

2002

EXPANSION ABROADAcquisition of ABLON Group, which owned a significant property portfolio in the CEE region

2013

CPIPG MILESTONES

GROUP OVERVIEW03

IGY Shopping Centre, České Budějovice, Czech Republic


GROUP MANAGEMENT

Zdeněk HavelkaExecutive Director

Tomáš SalajkaDirector of Acquisitions, Asset Management & Sales

Pavel MěchuraGroup Finance Director

David GreenbaumCFO

Martin Němeček CEO

Jan KratinaDirector of CPI Hotels


CPIPG is the largest owner of income-generating real es-tate in the Czech Republic, Berlin and the CEE region. Our property portfolio continues to grow and improve in qual-ity, driven by complementary acquisitions and the positive impact of our asset management strategy. Because of the Group’s long-term time horizon, our teams are able to focus their efforts and expertise on investments and strategies toimprove the performance (rents, occupancy, tenant and lease profile) of each asset in our portfolio.

As of 30 June 2018, 78% of the Group’s property portfolio was located in the Czech Republic and Berlin, unchanged from year-end 2017. While the Group continues to explore acquisitions across all of our core geographies, CPIPG ex-pects that Berlin and the Czech Republic will remain more than 70% of the portfolio over the long-term.

Office and retail (primarily shopping centres) accounted for more than 70% of the Group’s property portfolio as of 30 June 2018. CPIPG will continue to focus on investments and acquisitions in these sectors; however we intend to maintain a diversified portfolio and expect that neither sec-tor would exceed 50% of the portfolio over the long-term.

CPIPG has a positive outlook for our portfolios in Czech Republic residential and hotels & resorts; both are well-po-sitioned and continue to perform well. We will continue to selectively invest in these sectors, but expect each to be maximum 10% of our portfolio over the long-term. Devel-opment will continue to be less than 10% of the Group’s portfolio and is mostly comprised of high-quality land bank which is primarily located in Prague.

GROUP OVERVIEW


Strong locally managed platforms in the Czech Republic, Berlin and the CEE region with a long-term investment horizon.

Growth of the Group’s property portfolio (€ million)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

30 June 2018201720162015

3,822

4,865

6,7226,994

Czech Republic 2,256 2,647 3,652 3,774

Germany 694 1,048 1,638 1,683

Hungary 316 319 561 555

Other CEE 334 487 582 695

Other Western Europe 222 364 289 287

Total 3,822 4,865 6,722 6,994


“Our new food court in Quadrio has come a long way in a short period of time. The gourmet restaurants and variety of dining options have contributed to a large increase in footfall. Quadrio’s unique brands and catering styles provide our customers with shopping centre services at the very highest level.”

Petr Brabec – Head of Shopping Centres


03 // GROUP OVERVIEW03 // GROUP OVERVIEW

CPIPG’s four operating segments are the Czech Republic, Berlin, Hotels & Resorts, and our Complimentary Assets Portfolio. The Czech Republic segment encompasses our retail, office, land bank, residential and other properties. The Berlin segment is comprised of GSG, our office plat-form in Berlin. Hotels & Resorts includes our congress and convention hotels, city hotels, mountain resorts and other hotels. Our Complimentary Assets Portfolio includes most-ly retail and office assets in other countries primarily in the CEE region.

Specialised teams locally and in headquarters work to-gether to optimise the performance of each asset. In each segment, we believe strongly in owning platforms which are able to meet the long-term needs of a diverse range of tenants. We look to expand only in markets we fully un-derstand and focus on acquisitions which complement our existing portfolio. CPIPG has no plans to expand outside our current geographies and sectors.

CPIPG Property Portfolio by segment (€ million)

OUR GROUP OPERATES IN FOUR KEY SEGMENTS

30 June 2018 Share of total 31 December 2017 Share of total

Czech Republic 3,446 49% 3,323 49%

Retail 1,530 22% 1,444 21%

Office 831 12% 817 12%

Land bank 483 7% 472 7%

Residential 429 6% 420 6%

Other 173 2% 170 3%

Berlin 1,683 24% 1,638 24%

Office 1,674 24% 1,629 24%

Other 9 0% 9 0%

Hotels & Resorts 738 11% 728 11%

Complementary Assets Portfolio 1,128 16% 1,033 15%

Retail 528 8% 497 7%

Office 373 5% 300 4%

Land bank 48 1% 49 1%

Other 179 3% 188 3%

Total 6,994 100% 6,722 100%

€ million %Czech Republic 86 56

Germany 32 20

Hungary 18 11

Poland 7 5

Other CEE 8 5

Other WE 4 3

Total 156 100

€ million %Retail 64 41

Office 60 39

Hotels & Resorts 20 13

Other 11 7

Total 156 100

€ million %Office 2,877 41

Retail 2,058 29

Hotels & Resorts 738 11

Land Bank & Development 615 9

Residential 529 8

Other 177 2

Total 6,994 100

€ million %Czech Republic 3,774 54

Germany 1,683 24

Hungary 555 8

Poland 337 5

Other CEE 358 5

Other WE 287 4

Total 6,994 100

Net business income by geographyFirst half ended June 2018

Net business income by sectorFirst half ended June 2018

Property portfolio by geographyas at 30 June 2018

Property portfolio by sectoras at 30 June 2018

20 CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018

The strength of the Group’s property portfolio is reflect-ed in the international nature and diversity of our tenant base. Our offices in the Czech Republic host the regional headquarters of CEZ, Generali and Siemens (lease renego-tiated and extended in H1 2018). Our largest tenant (Ahold Delhaize) accounts for 4.0% of gross rental income, while our top 10 tenants represent 15.5% of gross rental income. In Berlin, our unique office platform continues to meet the needs of more than 1,800 tenants, including the vibrant creative and technology sectors.

The Group’s lease maturity profile is well balanced, with no more than 20% of leases up for renewal in any year and a WAULT of 3.8 years. While the Group prefers lease terms of 5 to 10 years in retail and office, maintaining a slightly shorter WAULT in Berlin (3.4 years as of 30 June 2018) has allowed us to capture rising market rents and should con-tinue to deliver further growth in rental income.

Our asset management teams work actively with our ten-ants to renew contracts or arrange new tenants well before the lease maturity.

OUR TENANTS


Maturity profile of fixed rental agreements (in %)as at 30 June 2018

Top 10 tenants by rental income as at 30 June 2018

0%

5%

10%

15%

20%

25%

2024 +202320222021202020192018

Tenant € million Rent as % of GRI* WAULT (in years)**

12.6 4.0 4.4

6.2 2.0 6.1

6.2 1.9 4.8

4.9 1.5 8.8

4.7 1.5 8.8

3.5 1.1 5.7

3.5 1.1 2.8

2.8 0.9 2.5

2.5 0.8 5.1

2.5 0.8 10.1

Total 49.3 15.5 5.9

Siemens Headquarters at City West, Prague, Czech Republic

* Based on annualized headline rent.** WAULT reflecting the first break option.

Note: Excluding residential properties and reflecting the first break option.

11

20

15

11 11 12

20


The Group operates our portfolio through a combination of headquarters staff focused on asset management and finance, plus a strong local presence in each of our core geographies. Property managers responsible for key as-sets work closely with our asset management teams at headquarters to optimise performance, maintain positive relationships with our tenants, and implement changes to maintain or preferably improve the performance of each asset. Our team collaborates on a highly detailed budgeting process, which gives the Group excellent transparency into the expected future performance of our portfolio.

OUR TEAM


The Group is primarily focused on long-term investments in income generating properties and targets less than 10% of total property portfolio classified as development. De-velopment and land bank comprised less than 9% of our total portfolio as of 30 June 2018, and consists primarily of land bank (87% of total). The largest portion of our land bank is in Prague. Our land bank is both high-quality and unencumbered, and could be considered another potential source of liquidity for the Group. Development primarily includes properties under refurbishment or redevelopment. Developments such as Mayhouse office building in Prague, are undertaken selectively.

DEVELOPMENT AND LAND BANK

CPIPG land bank and development – relative to total property portfolio (€ million and %)

0 0%

5%

10%

100

200

300

400

500

600

700

800

900

1,000

30 June 2018201720162015

8%

84

294

238

Land bank – Prague 48%

Land Bank – other 39%

Development 13%

» Czech Republic and Berlin: 78% of our property portfolio

» Development: 9% of our portfolio, target to remain below 10%

» Attracting and retaining the best people

9% 9% 9%

310

456

612 615 3:30

2:30

1:30

2:00

1:05 1:20

1:10

1:10

1:20

Warsaw

Berlin

Prague

Brno

Bratislava

Budapest

Legend

Capital or other large city

Flight time (hrs)

Drive time (hrs)

Property portfolio value per segment

Office Retail Residential Hotels

CZECH REPUBLIC€ 3,774 m

GERMANY€ 1,683 m

HUNGARY€ 555 m

SLOVAKIA€ 121 m

POLAND€ 337 m

PRIMARY GEOGRAPHIES OF THE GROUP

CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018


23

In this report, we feature some of CPIPG’s management and high-performing individuals. As a market leader, we have been able to attract and retain the best talent.

Mayhouse office development, Prague, Czech Republic


“This year, I had the opportunity to incorporate our new Futurum shopping centre in Hradec Kralove into the consolidation structure of the Group. As we expand, the integrity and quality of our reporting is a top priority!”

Lenka Cepakova – Consolidation Specialist

BUSINESS REVIEW

HIGHLIGHTS

04

04 // BUSINESS REVIEW / HIGHLIGHTS

PORTFOLIO HIGHLIGHTS

Futurum Shopping Centre, Hradec Králové, Czech Republic

Acquisition of Futurum Hradec Králové Shopping CentreIn April 2018, the Group acquired Futurum Hradec Králové Shopping Centre. Futurum Shopping Centre is the domi-nant shopping centre in Hradec Králové, Czech Republic. It opened in 2000 and was substantially extended and modernised in 2012. The centre has a total floor area of 39,000 sqm and 1,350 parking spaces and consists of 110 stores including an anchor Tesco hypermarket and a mul-tiplex cinema.

Acquisition of Atrium Centrum & Atrium Plaza Office buildings in WarsawIn May 2018, the Group acquired Atrium Centrum & Atrium Plaza office buildings in Warsaw, Poland. Atrium Centrum & Atrium Plaza are seven-storey office buildings located in the centre of Warsaw, near the most important trans-portation and business hub of Warsaw – Rondo. The two office buildings have an aggregate GLA of 31,869 sqm and include a medical centre, a restaurant, a bank, a pharmacy, a premium fashion store and 410 parking lots.

Acquisition of retail parks in PolandIn April 2018, the Group acquired a portfolio of five retail parks in Poland. The portfolio, totalling 19,000 sqm of gross leasable area, consists of four existing retail parks and one retail park under development. The retail parks are oper-ated under the HopStop brand and are located in Warsaw and regional cities of Poland.

Disposal of Budaörs Office ParkIn February 2018, the Group disposed of Budaörs Office Park in Hungary. Budaörs Office Park is located near Buda-pest and has 18,512 sqm of gross area and a 23,941 sqm plot.

Disposal of small retail assets in the Czech RepublicIn June 2018, the Group disposed of five small retail prop-erties located in regional cities of northern Czech Repub-lic, totalling approximately 25,700 sqm. The disposal was consistent with the Company’s strategy, which is focused on dominant shopping centres in the Czech Republic and other core CEE countries.

Acquisitions in our core markets plus selected disposals enhance the quality of our market-leading platforms.


04 // BUSINESS REVIEW / HIGHLIGHTS04 // BUSINESS REVIEW / HIGHLIGHTS

Appointment of new Chief Financial OfficerIn February 2018, the Group appointed David Greenbaum to the role of Chief Financial Officer. In this role, David focuses primarily on the Group’s capital structure, external financing, corporate finance and other strategic matters. David joined CPIPG after 15 years at Deutsche Bank, where he was most recently co-head of debt capital markets for the CEEMEA region.

Approval of Share Buyback Programme and repurchase of sharesThe extraordinary general meeting of the shareholders of the Company held on 1 March 2018 (the “2018 EGM“) ap-proved the terms and conditions of a buy-back programme enabling the repurchase by the Company of its own shares and authorised the Company to redeem/repurchase its own shares under the terms and conditions set forth therein. In particular, the 2018 EGM authorised the board of directors of the Company to repurchase, in one or several steps, a maximum one billion (1,000,000,000) shares in the Com-pany from the existing and/or future shareholders of the Company, for a purchase price comprised in the range be-tween one eurocent (EUR 0.01) and five euros (EUR 5), for a period of five (5) years from the date of the 2018 EGM.

On the basis of the authorization by the 2018 EGM, the board of directors has decided on 1 March 2018, to proceed to a buy-back of certain shares of the Company under the buy-back programme, the terms of which are set forth in the buy-back offer published by the Company on 2 March 2018. A total of 724,853,952 Company shares were acquired for the proposed acquisition price of EUR 0.20 per share (representing in aggregate app. EUR 145 million). The shares were bought-back from an entity affiliated with Mr. Rado-van Vitek. At the time of buy-back this represented a direct holding of 7.64% of the Company’s share capital.

The 2018 EGM further resolved to modify, renew and re-place the existing authorised share capital of the Compa-ny and to set it to an amount of five billion euros (EUR 5,000,000,000.-) for a period of five (5) years from the date of the 2018 EGM, which would authorize the issuance of up to forty billion (40,000,000,000) new ordinary shares of the Company and up to ten billion (10,000,000,000) new non-voting shares of the Company.

The 2018 EGM further resolved to authorise the board of directors of the Company to cancel or limit preferential sub-scription rights of the shareholders of the Company upon increases of the share capital of the Company in the frame-work of this new authorised share capital of the Company.The 2018 EGM also approved the modifications of the Com-pany’s articles of association reflecting the above resolu-tions taken during the 2018 EGM.

New capital increaseIn April 2018, the Company issued 250,000,000 new ordi-nary shares for a global subscription price of EUR 50 million.

The new ordinary shares, having a par value of EUR 0.10, were issued at a subscription price of EUR 0.20 per new ordinary share in a reserved capital increase under the Company’s authorized share capital. All the new shares were subscribed by RINDOSTERN S.à r.l., an entity closely associated with Mr. Radovan Vitek. The new shares were fully paid up by a cash contribution further strengthening the Company’s equity.

The corporate share capital of the Company has thus been increased on 10 April 2018 from EUR 948,872,261 represent-ed by 9,488,722,610 ordinary shares to EUR 973,872,261 represented by 9,738,722,610 ordinary shares.

New S&P rating and Moody’s outlook changeIn April 2018, S&P Global Ratings assigned a new “BBB” long-term preliminary issuer credit rating to the Group. Moody’s Investor Service also changed the outlook on CPIPG’s Baa3 rating from stable to positive. These actions reflect CPIPG’s operating performance and capital struc-ture transformation in 2017, along with our commitment to conservative financial policies.

Extraordinary general meeting of shareholders held on 14 May 2018The extraordinary general meeting of shareholders of the Company was held on 14 May 2018 in front of a notary public (the “EGM”).

The EGM resolved to decrease the corporate capital of the Company by the amount of EUR 72,485,395.20 by means of cancellation of 724,853,952 shares held in treasury by the Company. The purpose of this capital decrease was to can-cel the Company shares held in treasury by the Company.

The EGM also approved the modifications of the Com-pany’s articles of association reflecting the above capital reduction decided during the EGM.

The total number of shares comprising the share capital of the Company was 9,013,868,658 as of 14 May 2018.

CORPORATE NEWS

“CPIPG was already a phenomenal company when I joined. I am excited to contribute to CPIPG’s future sucesss by working closely with our banks, bondholders, rating agencies, stakeholders and strategic partners.”

David Greenbaum – CFO


04 // BUSINESS REVIEW / HIGHLIGHTS

EUROPE

The European economy grew more slowly than expected during the first half of 2018. Fundamentals appear to sup-port positive future growth, although trade/tariff issues and market volatility are risks to the forecast. Headline inflation has increased, driven primarily by energy, while relatively low levels of core inflation create uncertainty about the pace of potential monetary policy tightening by the ECB.

BERLIN

Berlin remains one of the best-performing cities in Ger-many and within Europe. The city’s population has grown by about 50,000 per year over the past five years. Despite government cooling measures residential property prices are rising, however prices remain affordable compared to the rest of Europe. The commercial real estate market in Berlin continues to benefit from high levels of job creation, particularly in the technology and creative sectors. Like the rest of Europe, the German economy has grown less than expected in 2018. However, the country continues to benefit from strong fundamentals and remains the largest economy in Europe by a significant margin.

CZECH REPUBLIC

The Czech Republic continues to benefit from strong fun-damentals, including the lowest employment rate among EU states. Household spending and wages have increased significantly, although GDP grew at slower pace in H1 2018 relative to 2017. The Czech Republic has maintained low levels of government debt relative to GDP, as the Czech National Bank (CNB) remains focused on fiscal stability. The CNB forecasts GDP well above 3% over the next three years and modestly higher interest rates. The CNB also calls for a modest strengthening in the Czech Koruna (CZK) over the next three years, although the currency has weakened slightly during the first half of 2018.

CENTRAL AND EASTERN EUROPE

Countries located in the Central and Eastern Europe (CEE) region continue to experience higher GDP growth than the rest of Europe. In general, CEE countries such as Poland, Hungary, the Czech Republic and Slovakia have benefited from young and well-educated labour forces, low levels of unemployment, increasing domestic consumption, and strong levels of local business activity and foreign invest-ment. Along with Germany, CEE countries also benefit from a high degree of fiscal stability, strong and/or improving credit ratings, and proactive central banks. Higher wages have driven consumer spending and investment, although concerns have emerged about possible labour shortages and the potential impact on the pace and sustainability of future growth.

ECONOMIC REVIEW

04 // BUSINESS REVIEW / ECONOMIC REVIEW

Annual general meeting of shareholders held on 31 May 2018The annual general meeting of the shareholders of the Company was held on 31 May 2018 in Luxembourg (the “AGM”). The AGM approved the statutory and consolidated annual accounts, as well as the allocation of financial results for the financial year ending 31 December 2017. The AGM also granted a discharge to the members of the Company’s board of directors and the auditors for the performance of their duties during the financial year ending 31 December 2017.

The AGM further resolved to re-appoint the following per-sons as members of the Company’s board of directors as of the date of the AGM and until the annual general meet-ing of 2019: Edward Hughes, Philippe Magistretti, Martin Nemecek, Tomas Salajka, Oliver Schlink, Radovan Vitek, and Marie Vitkova. Martin Nemecek was also appointed as the Managing Director (administrateur délégué) of the Company. Finally, the AGM approved KPMG Luxembourg as auditors of the Company until the annual general meet-ing of 2019.

Successful issuance of undated subordinated (“hybrid”) notesIn May 2018, the Company issued EUR 550 million of un-dated 4.375% fixed rate resettable subordinated notes (the “Hybrid Notes”). The Hybrid Notes have no fixed maturity date and are callable by the Company from 11 August 2023.

The Hybrid Notes, which were issued under CPIPG’s EUR 3 billion Euro Medium Term Note programme, are listed on the regulated market of Euronext Dublin and will be accounted as equity under IFRS. Both Moody’s Investors Service Limited and S&P Global Ratings have assigned 50% equity credit to the Notes and have rated the Notes Ba2 and BB+, respectively.

Establishment of revolving credit facilitiesIn March 2018, the Company signed a EUR 150 million 2-year unsecured revolving credit facility with a group of leading international and regional banks.

Lenders in the facility were Barclays, Credit Suisse, Deutsche Bank, J.P. Morgan, Komercni banka and UniCredit.

In August 2018, the Company signed a new EUR 80 million 2-year revolving credit facility, bringing the Group’s total revolving credit lines to EUR230 million. Lenders in the new facility were HSBC, Nomura and Raiffeisen.

A stronger capital structureAs of 30 June 2018, the Company’s capital structure is stronger than ever. Net Loan to Value (LTV) declined to 39.1% from 44.9% at December 31, 2017 reflecting the im-pact of the hybrid notes issuance. The company’s secured LTV declined to 24% from 26% at year-end, and the ratio of unencumbered assets increased from 43% to 45%.

Refinancing of QuadrioIn February 2018, the Group agreed with UniCredit Bank on the refinancing of our flagship Quadrio property. The five-year financing totaled EUR 114.8 million at extremely attractive pricing for the Group.

Repurchase of higher-cost senior secured bondsOn 2 August 2018, the Group announced the successful repurchase of approximately CZK 2 billion of senior secured bonds issued by our residential subsidiary, CPI BYTY, a.s. On 28 August 2018, CPI BYTY, a.s. issued a notice of early repayment to all remaining bondholders. In total, CPIPG intends to retire the full CZK 3 billion of bonds issued by CPI BYTY, which will reduce our interest expense and release a significant amount of encumbered assets. Repurchases of CPI BYTY bonds will be funded from cash reserves.

FINANCING ACTIVITY


Source: Eurostat, OECDNote: The table uses June 2018 unemployment rates. An exception is Hungary for which the unemployment rate recorded in May 2018 is presented. GDP growth and annual inflation correspond to Q2 2018 results. Q1 2018 data on Gross public debt as a percentage of GDP has been taken due to data limitations (the corresponding value for Q2 2018 will be available at the end of October 2018 according to Eurostat release calendar).

Growth rate of real GDP (in %)

Annual inflation rate (in %)

Unemployment rate (in %)

Gross public debt (% of GDP)

Poland 5.0 1.9 3.7 51.2

Hungary 4.4 2.7 3.6 73.9

Slovakia 3.9 2.8 6.9 50.8

Czech Republic 2.3 2.3 2.4 35.8

Germany 1.9 2.0 3.4 62.9

EU average 2.2 1.8 6.9 81.5

Key macro figures for group core economies


The Group operates in four segments: Czech Republic, Berlin, Hotels & Resorts and our Complementary Assets Portfolio. In each of these segments, we invest in our as-sets to improve performance and can pursue acquisitions which fit our overall strategy. Where appropriate, we also consider disposals to improve the overall quality and focus of our portfolio.

The value of our property portfolio was €7 billion as of 30 June 2018. The increase was primarily driven by acquisitions and modest valuation increases in our property portfolio, offset by disposals.

» acquisitions of €223 million, including the shopping cen-tre Futurum in Hradec Králové, two office buildings in Warsaw and a portfolio of five retail parks in Poland;

» development costs totalling €8 million;

» additions (improvements, Capital expenditure) of €54 million;

Changes to the total property portfolio value in H1 2018 were as follows:

» disposals of €60 million; primarily small retail assets in the Czech Republic and Budaörs office park in Hungary;

» valuation gain of €112 million on a selected number of high performing assets, of which 58% came from the Czech Republic and 31% from Berlin;

» other movements include non-cash FX translation ad-justments and depreciation.

BUSINESS SEGMENTS

A disciplined approach to acquisitions and divestments, with higher valuations driven by positive performance of our assets.

Property portfolio growth in the first half of 2018 (€ million)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

5,865

Portfolio value31 December 2017

Portfolio value30 June 2018

Other movementsChange in fair valueDisposalsAcquisitions / Additions

04 // BUSINESS REVIEW / ECONOMIC REVIEW 04 // BUSINESS REVIEW / BUSINESS SEGMENTS

285 60 112 65 6,9946,722

Decrease Increase

“Bubenska building is known to many people as the “tile” building. It was built in the early 20th century in functionalistic style and is now protected. We wanted to bring a tenant into the building that would appreciate its unique exterior and interior. WPP Group, operating in advertisement, media and PR, will be the right fit. We look forward to refurbishing the building to serve the needs of their people and clients.”

Jan Samec – Office Project Manager

Kateřina Řeháková – Asset Manager Jan Samec – Office Project Manager


04 // BUSINESS REVIEW / BUSINESS SEGMENTS04 // BUSINESS REVIEW / BUSINESS SEGMENTS

» CZECH REPUBLIC

» #1 retail landlord in the Czech Republic

» #1 office landlord in Prague

» #2 residential landlord in the Czech Republic

» 12.8% market share in Czech Republic shopping centres

» Annual footfall of over 67 million in our shopping centres

» 8.5% market share in the Prague office market

4

11

11

53

33

60

7

4

5

67

2

99

6

15

334

285

145

323

134

23

28

208

1,468

6

132160

186

10

344

190

78

206

43

16

19

306

434

5

5774

77

Prague

Number of properties

Property Portfolio value (in € million)

GLA (k sqm)

CPIPG is the owner of the largest diversified real estate portfolio in the Czech Republic, with a primary strategic focus on office and retail.

CZECH REPUBLIC H1 2018 CZECH REPUBLIC 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)Land area (in k sqm)

No. of properties

PP value (in € million)

GLA (in k sqm)

Occupancy (in %)

Land area (in k sqm)

Retail 236 1,530 728 93.8 –– 244 1,444 730 94.1 ––

Office 26 831 335 98.0 –– 26 817 330 97.5 ––

Development 6 513 –– –– 19,538 6 502 –– –– 19,558

Residential –– 429 705 89.0 –– –– 420 705 89.6 ––

Agriculture –– 98 –– –– 232,510 –– 95 –– –– 232,510

Industry and logistics

13 44 90 93.6 –– 13 45 90 90.5 ––

Total 281 3,446 1,858 94.4 252,049 289 3,323 1,855 94.4 252,068

Czech Republic segment summary

The Group owns the dominant real estate portfolio in the Czech Republic, with leading market positions in the of-fice, retail and residential sectors. We actively manage our portfolio, work closely with our tenants, and have a long history in the market.

Our strategy in each segment is slightly different. In office, CPIPG is focused on Prague where we have a #1 position including headquarters of prominent multinational compa-nies. In retail, we also have a #1 position comprising region-ally dominant shopping centres and convenience shopping

in the Czech Republic. Our future investments will primarily focus on office and retail. The Group is currently the #2 residential landlord in the Czech Republic and will continue to invest in improving our existing platform.

Occupancy across our Czech Republic portfolio was stable as of 30 June 2018 at 94.4%. Like-for-like growth in rents was a steady 1.7% across the entire Czech Republic port-folio, and we continue to see strong tenant demand with fairly limited competing supply.

Zdeněk Havelka – Executive Director



RETAIL MARKET1

Retail markets in the Czech Republic continue to bene-fit from strong economic conditions and a relatively slow pace of new shopping centre development, particularly in regional cities. In Q2 2018, retail trade volume, adjusted for calendar effects, rose by 4.4%, y-o-y. Although the magni-tude of this increase is considerable, it is somewhat smaller compared to the growth achieved in Q2 2017 (6.1%).

By the end of Q1 2018, shopping centre stock in the Czech Republic totalled 2,720,000 sqm. Shopping centres and retail transactions constituted 33% of all investment trans-actions in the first half of 2018; for example, Prague The Style Outlet opened and Galerie Butovice underwent major refurbishment.

1 JLL, Czech Statistical Office, CBRE, BNP Paribas Real Estate

“CPIPG’s redevelopment of IGY shopping centre was a complete success. It was our goal to transform the shopping centre to meet the changing needs of customers and provide more entertainment,

leisure and food experience. Within a year we renovated 29,000 m² of retail space and expanded the centre by more than 30%. IGY now offers 120 stores including a 9-screen multiplex cinema, reinforcing

IGY’s position as the dominant shopping centre in the South Bohemia region.”

Radovan Hlaváček, Head of Retail Development

Retail warehouses include hypermarkets, supermarkets, hobby markets and retail parks. Special assets are generally small convenience properties. While the Group’s high street assets are concentrated in Prague, the remainder of its retail asset portfolio is well diversified across regions.

34

1

2

1

1

1

2

1

1

4

4

7

2

2

3

8

9

4

18

2

Prague

Special

Shopping Mall

Retail Warehouse

High Street

47

155

3

1

1 5

5

4

5

2

Distribution of Czech retail assets


03 // GROUP OVERVIEW04 // BUSINESS REVIEW / BUSINESS SEGMENTS

RETAIL PROPERTIES

Retail occupancy was 93.8% in H1 2018, versus 94.1% in 2017. This figure includes the effect of redevelopments. In Spectrum we vacated the majority of the first floor to pre-pare for redevelopment next year, while Fenix is currently undergoing refurbishment. In Olympia Teplice and Mladá Boleslav we worked closely with our hypermarket tenants to reduce the size of their footprint, providing benefits to our tenant and CPIPG. We were also able to open up space for new tenants and improve the performance of each asset.

Annual turnover in our shopping centres increased by 10.4% on a like-for-like basis, well above the pace of the market. IGY saw increased turnover of 75.4% following the extensive redevelopment that was completed in H1 2018. Footfall on a like-for-like basis increased by 3.3%. Quadrio in Prague keeps showing its potential with an increase in annual footfall by more than 11.1%.

The value of our retail portfolio increased in total by 6% or €85 million. The key driver was the acquisition of Futurum Hradec králové amounting to €121 million.

The Group understands the concerns of some investors regarding the potential impact of e-commerce shopping on shopping centres. Management believes that our retail portfolio in the Czech Republic benefits from good quality, dominant positions, and low levels of competition: in the Czech Republic and across the CEE region, the “density” of retail (as measured by GLA per inhabitants) is far below the level of Western Europe and the United States.

In the Czech Republic, internet shopping has been popu-lar for several years. Based on some estimates, the Czech Republic is the second-most penetrated European country (for internet retail) after the United Kingdom. However,

the Group has not seen a significant impact from online in our shopping centres as our tenants’ turnover continues to grow year-on-year.

Despite our advantages, the Group continues to plan for the future of retail. Recent investments in our shopping centres (such as IGY, Quadrio and Fenix) have focused on food, entertainment, kid zones and other experiences which create a destination for shoppers. CPIPG actively manages our tenant mix to optimise performance of each shopping centre. We have also have undertaken initiatives such as our “CPIPG Tenant Academy” which provides train-ing to tenants on sales and customer service.

PREPARING FOR THE FUTURE OF RETAIL

RETAIL H1 2018 RETAIL 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)

Prague 41 272 96 90.1 41 265 101 86.5

Major cities 34 877 358 94.6 26 754 305 94.2

Other 161 381 274 94.4 177 425 324 98.0

Total 236 1,530 728 93.8 244 1,444 730 94.1

Czech retail summary

Olympia Teplice shopping centre, Teplice, Czech Republic

TENANTS

Our largest tenants in the retail segment are Ahold Del-haize, Tesco and Penny Market. During H1 2018, the Group entered into new rental contracts with well-known tenants and extended a number of rental contracts. New lease agreements were signed with PEPCO, New Yorker and Kaufland. Prolongations were made in the case of contracts with KIK Textil, TAKKO Fashion, Reserved and others.


04 // BUSINESS REVIEW / BUSINESS SEGMENTS

OFFICE MARKET2

The Czech Republic’s office market is concentrated in Prague and Brno. Prague has benefited from continued de-mand from multinational companies for headquarters, while the overall office market has continued to benefit from pos-itive economic conditions and relatively low supply.

In Q2 2018, gross-take up in Prague was well above the five-year average and reached 145,200 sqm of leased office space. Manufacturing companies and firms rendering ad-vertising and media services predominately contributed to gross demand. The yearly take-up in Prague is forecasted to again exceed 300,000 sqm. More than 203,000 sqm is expected to be delivered to the market during this year. CBRE estimates that 290,000 sqm will remain under con-struction at the end of the year if high building activity persists. Due to robust leasing activity, the vacancy rate in Prague fell from 8.6% in Q2 2017 to 6.9% in Q2 2018. The lowest shares of available space were recorded in Prague 2 (3.5%) and Prague 10 (3.9%). During the first half of 2018, prime headline rents in the centre of Prague stayed roughly the same fluctuating between €20.0 and €21.0 sqm/month.

Brno, which is known as the local R&D centre, has the sec-ond largest office market in the Czech Republic. By the end of 2018, six buildings (with approximately 42,000 sqm under construction) are scheduled to be completed. The substantial amount of new supply is likely to result in the vacancy rate rising above 8% in the short-term. The demand is projected to be driven mainly by (i) companies moving into new offices and (ii) companies looking for additional space.

OFFICE PROPERTIES

Our properties continue to outperform the market in terms of occupancy, which increased to 98% versus 97.5% at the end of 2017.

Four of the Group’s largest office assets, Luxembourg Plaza, City West, Quadrio and Pankrác have almost 100% occupancy reflecting increased demand for office spaces in Prague. Outside Prague the demand is also increasing.

The value of our office portfolio increased by 2% on like-for-like basis. The key driver was increase in fair value by €14 million.

TENANTS

Our largest tenants in the Prague office segment are: Česká pojišťovna, Siemens and ČEZ. New lease agreements were signed with 4finance, Group M and WPP (18 years for 16,000 sqm). Prolongations and extensions were made with Siemens (until 2027 for 24,000 sqm), SOTIO, MA-PEI and others. Siemens and WPP were the largest leasing transactions in the Prague office market during the first half of 2018.

OFFICE H1 2018 OFFICE 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)

Prague 21 789 307 98.3 21 775 303 97.7

Major cities 5 41 27 94.4 5 42 27 94.4

Other –– –– –– –– –– –– –– ––

Total 26 831 335 98.0 26 817 330 97.5

Czech office summary

2 JLL, Cushman & Wakefield, CBRE

04 // BUSINESS REVIEW / BUSINESS SEGMENTS “The successful extension of the Siemens lease agreement has been a major victory for the Group. Together with one of our largest tenants, we plan to invest in the innovative know-how of Siemens and renovate their 24,000 m² Prague headquarters. City West building will become state-of-art office space and a building that is environmentally responsible and energy efficient.”

Pavel Hain-Schmiedberský – Senior Asset Manager


RESIDENTIAL MARKET3

In Q2 2018, residential real estate prices increased in all Czech regions. The y-o-y growth of apartment prices con-tinued to exceed 10%. Although land prices were stagnating at the end of 2017, they were consistently rising during the first half of 2018, reaching a 1.9 p.p. and 2 p.p. increase (q-o-q) in Q1 and Q2 2018, respectively. In Q1 2018, the actual average price of apartments ranged from 76,500 Czech crowns per sqm in Prague to 14,700 Czech crowns per sqm in Ústí nad Labem4. During the same period, Prague accounted for 66.4% of apartment sales in the Czech Republic.

RESIDENTIAL PROPERTIES

RESIDENTIAL H1 2018 RESIDENTIAL 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)

Prague 484 73 30 98.9 484 70 30 99.0

Moravian-Silesian region 4,323 163 264 74.7 4,323 168 264 75.3

Ústí nad Labem region 5,390 124 279 97.9 5,486 111 279 100.0

Liberec region 2,018 65 127 91.5 2,019 66 127 89.8

Central Bohemia region 77 4 4 99.5 77 5 5 88.7

Total 12,292 429 705 89.0 12,389 420 705 89.6

Czech residential summary

3 Hypoteční banka, Deloitte4 Only regional capitals are included in the analysis.Březiněves Houses, Prague, Czech Republic


Meteor C Apartments, Prague, Czech Republic

Tomáš Salajka – Director of Acquisitions, Asset Management & Sales

The Group’s portfolio is a stable business with increasing revenues every year. In H1 2018 revenues reached €11 mil-lion (H1 2017: €10 million). The Group sees our residential portfolio as a source of steady cash flow. Prices of residen-tial assets on the Czech market are accelerating and the Group portfolio has benefited, with valuation increasing by 9m during the first half of 2018. The Group will continue to selectively invest in our portfolio.



“Mayhouse is an exciting new development project in a highly sought-after business district of Prague. The building will offer 7,800 m² of new A-class office space located on the city’s main thoroughfare, providing a representative space with exclusive access and visibility for small and large tenants alike.”

Jiří Máca – Project Manager

From left to right: Antonín Spáčil – Head of Office Development, Jiří Máca – Project Manager, Petr Beránek – Development Director, Peter Tresa – Office Asset Manager


Zlatý AndělCountry: Czech RepublicCity: PraguePP value: €122 millionGLA: 21,000 sqm

QuadrioCountry: Czech RepublicCity: PraguePP value: €234 millionGLA: 27,000 sqm


TOP ASSETS IN THE CZECH REPUBLICDEVELOPMENT PROPERTIES

CPIPG is focused on income-generating properties. When we develop, we typically develop to hold. Development properties primarily consist of land bank acquired and held by the Group for future development and assets un-der development. Once work on a development project is commenced, the area is presented either as a future sale (potential gross saleable area) or as a future rental (poten-tial gross leasable area).

In 2018, the Group has continued with the development of office buildings Mayhouse and Bubenská in Prague and Nová Zbrojovka in Brno. The table below demonstrates that pure development assets are a small portion (7% in H1 2018) of development properties. The remainder of our development properties are land bank, the largest segment of which is in Prague.

DEVELOPMENT H1 2018 DEVELOPMENT 2017LAND BANK DEVELOPMENT LAND BANK DEVELOPMENT

Total Area (in k sqm)


Potential GLA

PotentialGSA


Total Area (in k sqm)


Potential GLA

PotentialGSA


Prague 1,313 294 8 22 26 1,313 285 8 22 26

Major cities 401 42 –– –– –– 401 38 –– –– ––

Other 17,825 148 –– –– 4 17,844 148 –– –– 4

Total 19,538 483 8 22 30 19,558 472 8 22 30

Czech development summary

Prague

City WestCountry: Czech RepublicCity: PraguePP value: €82 millionGLA: 29,000 sqm

Olympia TepliceCountry: Czech RepublicCity: TeplicePP value: €71 millionGLA: 32,000 sqm

PankrácCountry: Czech RepublicCity: PraguePP value: €76 millionGLA: 37,000 sqm

Futurum Hradec KrálovéCountry: Czech RepublicCity: Hradec KrálovéPP value: €118 millionGLA: 39,000 sqm

Luxembourg PlazaCountry: Czech RepublicCity: PraguePP value: €68 millionGLA: 23,000 sqm

City ParkCountry: Czech RepublicCity: JihlavaPP value: €113 millionGLA: 29,000 sqm

Olympia PlzeňCountry: Czech RepublicCity: PlzeňPP value: €146 millionGLA: 41,000 sqm

NisaCountry: Czech RepublicCity: LiberecPP value: €102 millionGLA: 50,000 sqm

Nová Zbrojovka development, Brno, Czech republic



» BERLIN

» #1 commercial landlord in Berlin

» Increased occupancy by 10 p.p. since 2012

» Unique, non-replicable platform

» 53 year track record

econoparks

Kreuzberg

Rest-West

Wupperstraße

GERMANY

Ettlingen

BERLINPopulation: 3.5m

“Aqua Höfe is a former production site from the late 19th century of Aqua Butzke – a producer of mountings, fittings and water fountains. GSG Berlin has identified and successfully concluded the creation of more than 5,000 sqm of additional floors and connecting buildings in the very heart of Berlin-Kreuzberg.”

Sebastian Blecke – COO GSG Berlin, Oliver Schlink – CFO GSG Berlin



Our Berlin platform continuesto deliver strong increases inrents and occupancy, with apositive outlook for the future.

BERLIN H1 2018 BERLIN 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy*

(in %)No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy*

(in %)

Kreuzberg 25 627 198 89.0 25 619 198 89.6

Rest-West 16 790 430 94.8 16 753 430 92.4

econoparks 5 235 263 83.4 5 234 263 81.6

Other** 3 32 84 100.0 3 32 84 100.0

Total 49 1,683 975 91.2 49 1,638 975 89.7

Berlin segment summary

Our Berlin subsidiary, GSG, is a leading provider of office and commercial space in Berlin with approximately 975,000 sqm of GLA. GSG was founded by the City of Berlin and has been in operation for more than 50 years. We provide multi-functional premises for all kinds of small and medi-um sized companies, whether from start-up, high-tech or manufacturing industries.

The Berlin portfolio is comprised of three main clusters which form a platform unrivaled in Berlin:

Kreuzberg represents a district which has become a hub for the tech and startup industry over the last years.

Rest-West aggregates assets which are located in several western districts in Berlin. Most of these buildings have served industrial tenants in the past, but there is an in-creasing demand by tenants from service, tech and creative industry.

econoparks cluster is characterised by assets from east-ern parts of Berlin with good inner city connections; with competitively priced space tenants can tailor to meet their business needs and development/growth plans.

Towards the end of 2017, the Group completed the acquisi-tion of two assets which perfectly fit into the Berlin portfo-lio, along with two properties located in Ettlingen which are100% let and can be safely held or disposed over time.

Like-for-like rental growth in our portfolio exceeded 9.5% during the first half of 2018. In certain properties, such as Geneststraße and Helmholtzstraße, we were able to in-crease rents by more than 35%. Based on management analysis in consultation with external advisors, we believe GSG’s overall rental income remains well below market rates and we expect continued positive growth going for-ward.

Oliver Schlink – Chief Financing Officer of GSG since 2010

econopark Pankstraße, Berlin, Germany

“GSG-Hof Reichenberger Straße is among the oldest and most historic properties within the GSG family. World-famous pianos from C. Bechstein were produced here in the 19th and 20th century. Today the asset hosts a broad mixture of tenants from various industries, including a handful of ‘hidden champions’ (Holmberg, we.CONECT ) which are world-market leaders in their segments.”

Wolfgang Falk, Head of Technical Department and his assistant, Natalie Berry

* Occupancy rates based on Estimated Rental Value** “Other” consists of Wupperstraße and Ettlingen


BERLIN MARKETS5

Even as the pace of European and German GDP growth has slowed in 2018 relative to 2017, Berlin’s economic engine continues to be powered by strong levels of population growth and job creation. As a result, Berlin remains the fast-est-growing state among the 16 Federal states of Germany.

Property prices in Berlin have risen across all sectors, but the Group believes our properties are extremely well-po-sitioned in terms of quality, market segment, tenant and lease profile. We see continued upside in our portfolio particularly relating to rental income, but also in terms of valuation.

In H1 2018, demand for office space in Berlin was solid with take-up amounting to 383,500 sqm. The lack of available modern office space, which is becoming pervasive, has pushed vacancy to 2.2% in Berlin. The combination of sta-ble demand and shortage of available space is expected to push prime office rents higher. In the first two quarters of the year, prime yields were 3.1%, unchanged from Q4 2017.

As the Group’s properties are not typical “prime” and offer more unique/creative environments and historical settings, we have been able to achieve yields which are well above prime. While the Group recognizes that the office devel-opment pipeline has grown with more than 1 million sqm under construction, the level of demand for office space, pace of job creation and population growth continue to exceed the speed of completion for new space.

5 Cushman & Wakefield, Company estimates, JLL

2013 2014 2015 2016 2017 30 June 2018

Kreuzberg 91.0% 91.2% 90.2% 90.2% 91.8% 90.4%

Rest West 90.6% 88.2% 89.1% 90.4% 93.1% 94.6%

econoparks 64.5% 67.5% 72.9% 77.1% 80.9% 82.8%

Other 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Total portfolio 83.1% 83.1% 85.1% 86.9% 90.1% 91.0%

2013 2014 2015 2016 2017 30 June 2018

Kreuzberg € 6.10 € 6.59 € 7.22 € 8.00 € 8.58 € 8.98

Rest West € 5.67 € 5.92 € 5.95 € 6.30 € 6.28 € 6.65

econoparks € 4.23 € 4.32 € 4.41 € 4.44 € 4.48 € 4.51

Other € 2.53 € 2.53 € 1.20 € 2.03 € 2.97 € 2.97

Total portfolio € 5.18 € 5.42 € 5.49 € 5.86 € 6.01 € 6.25

Occupancy by Berlin clusters

Average rent per sqm by Berlin clusters

Occupancy in our Berlin portfolio increased by 0.9 p.p. during the first half of 2018, reaching a new high of 91%. Occupancy grew in both our Rest-West and Econoparks segments, while the slight decrease in Kreuzberg relates to one asset which we will completely vacate to do a full modernization and add a building. We expect a positive impact on occupancy over the next six months since the development project Aqua Höfe is nearly finalized and the tenants will move in during Q3 and Q4 2018.

The Group has consistently increased rents per sqm across our portfolio in recent years; in many cases we are proud to have achieved rents higher than the Berlin average and our own estimates. Active asset management, investment into our properties, and strong markets have all contributed to this performance. In aggregate, our average rents still remain well below the Berlin average (above €18/sqm) and Berlin prime (above €30/sqm). We therefore see both the potential to continue increasing rents in coming years, but also expect our space to remain comparatively affordable for tenants and therefore more resilient in the event of a significant change in economic or real estate market conditions.


Geneststraße 5Country: GermanyCity: BerlinPP value: €88 millionGLA: 33,000 sqm

Amperium, Tor 1Gustav-Meyer-Allee 25Country: GermanyCity: BerlinPP value: €90 millionGLA: 75,000 sqm


Schlesische Straße 26Country: GermanyCity: BerlinPP value: €93 millionGLA: 25,000 sqm

TOP ASSETS IN BERLIN

Reuchlinstraße 10Country: GermanyCity: BerlinPP value: €103 millionGLA: 50,000 sqm

Helmholtzstraße 2 – 9Country: GermanyCity: BerlinPP value: €101 millionGLA: 37,000 sqm

Gebauer HöfeFranklinstraße 9 – 15aCountry: GermanyCity: BerlinPP value: €92 millionGLA: 31,000 sqm

Note: Occupancy rates based on GLA; “Other” consists of Wupperstraße and Ettlingen

Note: “Other” consists of Wupperstraße and Ettlingen

Sebastian Blecke – Chief Operating Officer of GSG since 2011



» HOTELS & RESORTS

» #1 congress and convention hotel provider in the Czech Republic

» #1 resort on premier island of Hvar, Croatia

» Three five-star and 21 four-star hotels

» 6% YoY increase in RevPAR in H1 2018

Italy: 634

Czech Republic: 7,250

Hungary: 666

Croatia: 1,646

Poland: 124

NUMBER OF HOTEL BEDS IN EACH COUNTRY

Russia: 168

Amfora Grand Beach Resort, Hvar, Croatia



HOTELS & RESORTS H1 2018 HOTELS & RESORTS 2017

No. of properties


Hotel bedsRevPAR YoY

increase (in %)

ADR YoY increase

(in %)

No. of properties


Hotel bedsRevPAR YoY

increase (in %)

ADR YoY increase

(in %)

Czech Republic 20 328 7,250 4 6 20 330 7,250 9 3

Croatia 7 175 1,646 –13 –6 7 171 1,646 9 4

Hungary 4 52 666 0 –2 4 52 666 8 13

Italy 1 38 634 –– –– 1 38 634 –– ––

Poland 2 26 124 –10 –6 2 26 124 3 5

Russia 1 23 168 18 17 1 23 168 2 –2

Switzerland 1 94 –– –– –– 1 88 –– –– ––

Total 36 738 10,488 6 7 36 728 10,488 7 2

Hotels & resorts segment summary

Our properties are primarily congress and convention ho-tels in the Czech Republic, along with hotels in major CEE region cities. The Group owns and operates our hotels, which we see as a competitive advantage given our local management, local knowledge, and ability to control costs and performance.

Through our subsidiary CPI Hotels, the Group also owns a platform (Sunčani Hvar Hotels) which is the leading owner of hotels on the Croatian resort island of Hvar. The Hotels & resorts segment also includes our investment in the Swiss ski resort of Crans-Montana and our well-positioned con-gress and convention hotel outside of Rome.

Our hotel in Moscow is a four-star property which con-tinues to perform well, but will be considered for disposal over time.

We invest in our hotels, such as the renovations of the lob-by and reception area of Clarion Congress Hotel in Prague, to continually improve guest experience and operational performance. In Hvar, we successfully completed the reno-vations of Adriana and Amfora in H1 2018 and are currently renovating Palace.

HOTEL MARKETS

Prague6 Prague is one of the most popular destinations in Europe and is highly attractive for group and professional travel. In Q1 2018, the number of guests in Prague hotels increased by 8.8%, y-o-y. The total number of overnight stays in Prague grew by 7.7%, y-o-y. Prague is forecasted to have high occupancy across the hotel sector of 81% in 2018 and 82.3% in 2019. Other key performance indicators are ex-pected to rise during 2018, with RevPAR and ADR estimated growth reaching 6.8% and 8.2%, respectively.

Croatia7

The rapidly growing number of tourist arrivals and over-night stays serve as evidence that Croatia’s tourism market is expanding. In 2017, the number of tourist arrivals grew by 12%, y-o-y while the number of overnight stays rose by 10%, y-o-y. Istria, the Split-Dalmatia County, and Pri-morsko- Goranska County recorded the highest number of overnights during this period. Hvar, which is situated in the Split-Dalmatia County, remains a promising tourist destination.

During 2017, occupancy rate in 5-star hotels in Croatia in-creased by 4 pp to 55%. In comparison to 2016, ADR and total revenue per available room in 5-star hotels rose by about 6.5% and 9.6%, respectively. In 2017, occupancy rate in 4-star hotels in Croatia remained at 49% while ADR in-creased by around 13.2%, y-o-y.

Elevated tourist demand in Croatia is expected to boost average hotel prices in 2018. More developers are likely to be attracted to Croatia due to its higher availability of good sea side locations compared to other Mediterranean countries.

Budapest8 Budapest is undoubtedly the most popular tourist desti-nation in Hungary. Due to its reputation of a city with rich and diverse cultural history, Budapest continues to attract numerous tourists what positively affects its local hotel market. In 2017, tourism activity was growing, and guest nights registered in Budapest increased by 6.9% compared to 2016.

In 2017, Budapest hotels attained the occupancy rate of 77.5% and 15.5% net-RevPAR growth rate. The latter rate was the highest amongst Prague, Budapest, Warsaw, and Brati-slava. ADR, which totaled EUR 84.3 in 2017, is expected to grow by 10-15% during 2018-2019. This increase is forecasted to result in rising RevPAR even despite high expected sup-ply of 2,531 hotel rooms between Q2 2018 and Q4 2020.

6 PricewaterhouseCoopers (PwC), Prague City Tourism7 Colliers International8 Colliers International

Pharos Bay Hill Hotel, Hvar, Croatia

“At Clarion Congress Hotel Prague, we have renovated the Hotel lobby and reception area while running the hotel and not impacting our guests. The installation of our new self-check-in service will provide our guests with an improved arrival experience contributing to higher guest satisfaction and increased hotel comfort.”Miroslav Bukva – Hotel Director

56 CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018Mamaison Hotel Riverside, Prague, Czech Republic


HOTEL PROPERTIES

The Group’s hotels continue to perform well by all meas-ures. We believe these results are attributable to strong markets and also to the benefits of being an owner/op-erator. Revenue and net income continued to rise in H1 2018 relative to 2017, RevPAR increased by 6.1% and ADR increased by 6.5% y-o-y.

Our performance is strong, because we are in the right markets. Congress and convention hotels are primarily lo-cated in the Czech Republic, where demand is driven by high tourist demand and strong economic growth. Poland and Hungary are high-performing economies and attractive destinations. Hvar in Croatia has a dominant platform on the island, where we will continue to invest. In theSwiss ski resort of Crans-Montana, we are focused on con-tinuing the positive trajectory of our operations.

Congress and convention hotels ......................... 48%

Resort hotels ................................................................. 24%

Mountain hotels ........................................................... 13%

Suite hotels ...................................................................... 11%

Residential hotels ........................................................... 3%

Spa hotels ........................................................................... 1%

57CPI PROPERTY GROUP MANAGEMENT REPORT I YEAR 2018

Hotels & resorts segment split by type (breakdown by PP value)

350

175

94

84

25 8

Jan Kratina – Director of CPI Hotels


Clarion Congress Hotel OstravaCountry: Czech RepublicCity: OstravaPP value: €23 millionHotel beds: 335


TOP ASSETS HOTELS & RESORTS

Clarion Congress Hotel PragueCountry: Czech RepublicCity: PraguePP value: €97 millionHotel beds: 1,114

Clarion Congress Hotel České BudějoviceCountry: Czech RepublicCity: České BudějovicePP value: €23 millionHotel beds: 407

Amfora Grand Beach ResortCountry: CroatiaCity: HvarPP value: €93 millionHotel beds: 648

Adriana HotelCountry: CroatiaCity: HvarPP value: €23 millionHotel beds: 118

Europeum Marriott CourtyardCountry: HungaryCity: BudapestPP value: €23 millionHotel beds: 468

59CPI PROPERTY GROUP MANAGEMENT REPORT | JUNE 2018Longin building, Prague, Czech Republic



» COMPLEMENTARY ASSETS PORTFOLIO

» Complementary portfolio of assets primarily in neighbouring countries

» Potential to continue building our Hungary and Poland platforms

» 6% increase in GLA due to acquisition of assets in Poland

» Occupancy increase by 1.9 p.p. in H1 2018

Italy: 1

Slovakia: 18

Hungary: 18 Romania: 1

Poland: 13

France: 1

NUMBER OF ASSETS IN EACH COUNTRY

Balázs Simonyi, Leasing Director, Ágnes Vágó-Cseke,

Senior Property Manager, Tibor Papp, Senior Project Manager

“Within two years the successful re-letting project of Quadra resulted in 100% occupancy (from 52%), 12 EUR average rent (from 10.6 EUR) and 10 years WAULT (from less than 3 years) allowing a substantial increase in value of the asset.”

Balázs Simonyi MRICS – Leasing Director, CPI Hungary



COMPLEMENTARY ASSETS PORTFOLIO H1 2018 COMPLEMENTARY ASSETS PORTFOLIO 2017No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)No. of

propertiesPP value

(in € million)GLA

(in k sqm)Occupancy

(in %)

Hungary 18 503 292 94.6 19 509 309 91.8

Poland 13 311 128 92.2 6 206 80 95.2

Slovakia 18 121 93 94.6 18 117 93 86.9

France 1 142 6 –– 1 151 6 ––

Romania 1 38 11 99.9 1 38 11 94.3

Italy 1 12 –– –– 1 12 –– ––

Total 52 1,128 530 94.0 46 1,033 499 92.1

Complementary Assets Portfolio summary

Our complementary assets portfolio primarily consists of the Group’s investments in Hungary, Poland and Slova-kia. We continue to see good opportunities to invest in Hungary and Poland and maintain a local presence in each country. Like-for-like growth in our complementary assets portfolio was strong in H1 2018, with Poland at 8.1% and Hungary at 5.4%. The remaining assets in the portfolio are properties in Romania, France, and Italy which are non-core and will be considered for disposal over time.

Strong economic growth across the CEE region continues to impact demand for offices, while supporting higher levels of consumer spending. As a result, the Group’s properties in the CEE region have benefited from a high level of sta-bility and consistent demand.

Occupancy in the complementary assets portfolio grew to 93.9% during the first half of 2018, versus 92.1% at the end of 2017. This was primarily driven by Hungary and Slo-vakia, offset by Poland where overall occupancy dropped due to the acquisition of Atrium Centrum and Atrium Plaza offices in Warsaw. The Group acquired these properties, with vacancy of 13.1%, because are confident in our ability to improve the performance of the assets. Excluding the acquisition, the occupancy of our existing portfolio in Po-land would be 95.1%.

Note: Occupancy without France

Andrássy Palace, Budapest, Hungary

Arena Corner, Budapest, Hungary



Retail market10

In Q2 2018, Hungary continued to experience solid private consumption growth due to a tight labor market, soaring real earnings, and strong consumer sentiment. During H1 2018, the volume of retail sales (adjusted for calendar ef-fects) increased by 6.9% compared to the corresponding period of 2017.

The Hungarian retail market is concentrated in Budapest due to considerably higher spending power as opposed to the countryside. In addition, around 17% of the national population lives in Budapest attracted by the city’s crucial role in national higher education, traffic infrastructure, and economic opportunities.

As a result of persistently strong occupier demand in Q2 2018, prime Váci-utca rents and rents in Fashion Street units increased by 7.7% and 4.5% q-o-q, respectively. Both high-street yields and prime retail park yields compressed by 25 bps during Q2 2018. Further yield compression and upward pressure on prime high-street rents are anticipated throughout 2018.

Retail propertiesOur occupancy rates improved from already high levels to 97.5% (2017: 96.8%). Part of the improvement is attrib-uted to the increase occupancy level from 95% (Q4 2017) to 100% (H1 2018) in Buy-Way Soroksár. Considering the Hungarian government policy of lowering personal taxes and VAT rates together with a solid macroeconomic per-formance, we expect retail sales to keep already high pace in the coming years.

Our Hungarian largest retail assets PÓLUS and Campona shopping centres both have a footfall of 10 million visitors per a year. The main tenants are Media Markt (3,000 sqm) and Reserved (3,600 sqm).

Balanced portfolio of quality assets focused around retail and office and mainly located in Budapest

10 Cushman & Wakefield, Hungarian Central Statistical Office

Gateway Office Park, Budapest, Hungary

HUNGARY

Office market9

Hungary’s office market is concentrated in the capital city Budapest. In Q2 2018, modern office stock totaled 3,503,170 sqm. During the same period, gross take-up reached 161,550 sqm in Budapest, which represents a 64% improvement on a year-over-year basis. The Váci Corridor submarket record-ed the highest occupational activity, satisfying about 36% of the total demand.

In 2018, the number of new office completions in Budapest is expected to continue rising. In Q2 2018, 57,000 sqm of new space was supplied to the market. During the second half of 2018, 170,000 sqm is scheduled to be handed over; 76% of the new office space that is expected to be delivered throughout this year is already pre-let.

In Q2 2018, office vacancy in Budapest modestly increased to 7.6% from a record level of 7.3% in Q1 2018. The percent-age of vacant units varied vastly from 4.4% in the Non-Cen-tral Pest submarket to 30.0% in the Periphery. In H1 2018, prime office rents remained constant at €22.5 sqm/month.

Our Office propertiesOccupancy levels in our Hungary (Budapest only) offices increased by 7 p.p. to 94%. Our level of vacancy is lower than the market, representing the steady improvement of our occupancy rates through investment and asset man-agement.

In office, our main tenants are Vodafone (13,000 sqm), Citi (14,000 sqm), NSC Global (2,500 sqm) and Magyar Posta.

Hungarian assets: Average rent per sqm (in €) and occupancy (in %)

50%€ 0

60%

€ 5

€ 10

70%

80%

90%

100%

H1 2018H1 2018 20172017 20162016 20152015 20142014

9592

8380

75

6.87.3 7.1

8.0

9.9

9 JLL, Colliers International, Cushman & Wakefield

Mátyás Gereban – Country Manager



Office market11

The undisputed leader of the Polish office market is War-saw. Increasing business activity, improving quality of life, and developing infrastructure contribute to Warsaw’s at-tractiveness. Occupancy in all of Warsaw’s business dis-tricts is high, except for one district (Mokótow) which is suffering from bad connectivity.

Solid economic growth in H1 2018 led to robust demand in Warsaw. Gross take-up amounted to 425,700 sqm and reached the half-year record high. As buoyant demand is expected to outbalance new supply, vacancy rates in Warsaw are likely to decrease in the second half of 2018. Nevertheless, during Q2 2018, the vacancy rate rose to 11.1% (by 0.3 p.p. compared to its value in Q1 2018, which represented the lowest level since mid-2013). This increase probably resulted from supply (150,000 sqm) of new office space in Q2 2018. During the first half of the year, prime rents in Warsaw central locations increased, and the rising trend is forecasted to last till 2020.

The volume of space currently under construction, whose completion is scheduled mostly for 2020, amounted to 739,000 sqm in Q2 2018.

Office properties Our offices are only located in central locations in War-saw. Average occupancy was 88.7% at the end of H1 2018. The decrease compared to Q4 2017 was mainly due to the acquisition of new office assets with an average vacancy level of 13.1%. CPIPG chose to invest in these assets (Atrium Centrum and Atrium Plaza) because we are confident in our ability to improve performance. Without these aquisitions, the original office portfolio would have 91.3% occupancy. This includes contracted, but not occupied areas of vacancy which is only 5.2%.

Retail market12

In Q2 2018, positive development of Polish retail market was driven primarily by high GDP growth, rising wages, and historically low unemployment. During January-June 2018, the volume of retail sales experienced a 6.8% in-crease, y-o-y.

At the end of Q1 2018, the modern retail stock in the War-saw agglomeration reached 1.78 million sqm, whose largest share (ca. 70%) was represented by shopping centres. In the first two quarters of the year, prime yields were 4.75% in Warsaw, which is below regional levels (5.00-5.75%). Substantial volume of space under construction (approxi-mately 193,100 sqm) is scheduled to be completed during 2018-2020.

Retail propertiesThe occupancy level of our Polish retail assets reached 96.4% which is an increase from 95.2% in Q4 2017. The key reason for such increase was signing of new lease contracts.

Galeria Orkana, including contracted, but not yet operating tenants has reached almost full occupancy. Its turnover rose by 7.8% by H1 2018. Ogrody occupancy increased to 98.4% due to churn of smaller tenants and slightly rise of its turnover in H1 2018.

POLAND

11 JLL, Cushman & Wakefield, CBRE, company estimates 12 JLL, Cushman & Wakefield, Poland Quarterly Statistics,

BNP Paribas Real Estate, Central Statistical Office of Poland

TOP ASSETS IN COMPLEMENTARY ASSETS PORTFOLIO

Gateway Office ParkCountry: HungaryCity: BudapestPP value: €74 millionGLA: 36,000 sqm

CamponaCountry: HungaryCity: BudapestPP value: €74 millionGLA: 41,000 sqm

Polus CentreCountry: HungaryCity: BudapestPP value: €86 millionGLA: 41,000 sqm

Atrium CentrumCountry: PolandCity: WarsawPP value: €45 millionGLA: 18,000 sqm

Shopping Centre OgrodyCountry: PolandCity: ElblągPP value: €120 millionGLA: 42,000 sqm

Arena CornerCountry: HungaryCity: BudapestPP value: €62 millionGLA: 30,000 sqm

Central Tower, Warsaw, Poland




04 // BUSINESS REVIEW / EPRA PERFORMANCE INDICATORS04 // BUSINESS REVIEW / EPRA PERFORMANCE INDICATORS

EPRA PERFORMANCE INDICATORS

The following performance indicators have been prepared in accordance with best practices as defined by EPRA (European Public Real Estate Association) in its Best Practices Recommendations guide, available on EPRA’s website (www.epra.com).

A rationale for using EPRA Earnings is that unrealised changes in valuation, gains or losses on disposals of properties and certain other items do not necessarily provide an accurate picture of the company’s underlying operational performance.

EPRA EARNINGS

EPRA Earnings measures the underlying operating perfor-mance of an investment property company excluding fair value gains, investment property disposals, and limited other items that are not considered to be part of the core activity of an investment property company.

EPRA NET ASSET VALUE

EPRA NAV is a measure of the fair value of net assets as-suming a normal investment property company business model. Accordingly, there is an assumption of owning and operating investment property for the long term.

The objective of the EPRA NAV measure is to highlight the fair value of net assets on an ongoing, long-term basis. Assets and liabilities that are not expected to crystallise in normal circumstances such as the fair value of financial derivatives and deferred taxes on property valuation sur-pluses are therefore excluded. Similarly, trading properties are adjusted to their fair value under EPRA’s NAV measure.

H1 2018 H1 2017

Earnings per IFRS income statement 161 190

Adjustments to calculate EPRA Earnings, exclude:

Changes in value of investment properties, development properties held for investment and other interests

95 229

Profits or losses on disposal of investment properties, development properties held for investment and other interests

0 –2

Profits or losses on sales of trading properties including impairment charges in respect of trading properties

1 2

Tax on profits or losses on disposals 0 0

Negative goodwill / goodwill impairment 0 4

Changes in fair value of financial instruments and associated close-out costs 1 6

Acquisition costs on share deals and non-controlling joint venture interests 0 0

Deferred tax in respect of EPRA adjustments –19 –39

Adjustments (i) to (viii) above in respect of joint ventures (unless already included under proportional consolidation)

0 0

Non-controlling interests in respect of the above 0 0

EPRA Earnings 84 –12

Basic number of shares 8,761,566,410 8,217,448,495

EPRA Earnings per Share (EPS) (in €) 0.010 –0.001

Company specific adjustments:

Impairments 4 –1

Amortization, depreciation –15 –14

Net foreign exchange gain - unrealized 0 0

Net foreign exchange loss - unrealized 12 –43

Company specific Adjusted Earnings 83 46

Company specific Adjusted EPS 0.009 0.006

H1 2018 2017

NAV per the financial statements 3,287 3,277

Effect of exercise of options, convertibles and other equity interests (diluted basis) 0 0

Diluted NAV, after the exercise of options, convertibles and other equity interests

3,287 3,277

Include:

Revaluation of investment properties (if IAS 40 cost option is used) 0 0

Revaluation of investment property under construction (IPUC) (if IAS 40 cost option is used)

0 0

Revaluation of other non-current investments 0 0

Revaluation of tenant leases held as finance leases 0 0

Revaluation of trading properties 3 3

Exclude:

Fair value of financial instruments 0 2

Deferred tax –715 –697

Goodwill as a result of deferred tax 43 43

EPRA NAV 3,962 3,934

Fully diluted number of shares 8,761,566,410 9,236,420,362

EPRA NAV per share (in €) 0.452 0.426

EPRA Earnings (€ million)

EPRA Net Asset Value (€ million)

Atrium Centrum, Warsaw, Poland


04 // BUSINESS REVIEW / EPRA PERFORMANCE INDICATORS04 // BUSINESS REVIEW / EPRA PERFORMANCE INDICATORS

EPRA NET INITIAL YIELD AND EPRA “TOPPED-UP” NET INITIAL YIELD EPRA COST RATIO

EPRA VACANCY RATE

The EPRA NIY (Net Initial Yield) is calculated as the an-nualized rental income based on passing cash rents, less non-recoverable property operating expenses, divided by the gross market value of the property. The EPRA “Topped-up” NIY is calculated by making an adjustment to EPRA NIY in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent free periods and step rents).

EPRA NIY and EPRA “topped-up” NIY are aimed at encour-aging the provision of comparable and consistent disclosure of yield measures across Europe. These two yield measures can be clearly defined, widely used by all participants in the direct and indirect European real estate market and should be largely comparable from one company to the next and with market evidence.

EPRA cost ratio is calculated by expressing the sum of property expenses (net of service charge recoveries and third-party asset management fees) and administrative expenses as a percentage of gross rental income.

The EPRA Cost Ratios are aimed at providing a consistent base-line from which companies can provide further infor-mation around costs where appropriate.

The EPRA vacancy rate is calculated by dividing the mar-ket rents of vacant spaces by the market rents of the total space of the whole property portfolio (including vacant spaces).

The rationale for using the EPRA vacancy rate is that it can be clearly defined, should be widely used by all participants in the direct real estate market and comparable from one company to the next.

H1 2018 2017

6,120 5,808

Investment property – share of JVs/Funds 4 5

Trading property (including share of JVs) 48 55

Less: developments 517 517

Completed property portfolio 5,656 5,351

Allowance for estimated purchasers’ costs 0 0

Gross up completed property portfolio valuation 5,656 5,351

Annualised cash passing rental income 300 294

Property outgoings 38 33

Annualised net rents 262 261

Add: notional rent expiration of rent free periods or other lease incentives 18 17

Topped-up net annualised rent 280 278

EPRA NIY 4.62% 4.88%

EPRA “topped-up” NIY 4.95% 5.19%

H1 2018 2017

Estimated rental value of vacant space 21 22

Estimated rental value of the whole portfolio 319 300

EPRA Vacancy Rate 6.5% 7.2%

EPRA NIY and “topped-up” NIY (€ million)

EPRA Cost Ratios (€ million)

EPRA Vacancy Rate (€ million)

H1 2018 H1 2017

Include:

Administrative/operating expense line per IFRS income statement 53 48

Net service charge costs/fees –16 –12

Management fees less actual/estimated profit element 0 0

Other operating income/recharges intended to cover overhead expenses less any related profits

0 0

Share of Joint Ventures expenses 0 0

Exclude (if part of the above):

Investment property depreciation 0 0

Ground rent costs 0 0

Service charge costs recovered through rents but not separately invoiced 0 0

EPRA Costs (including direct vacancy costs) 37 35

Direct vacancy costs 2 2

EPRA Costs (excluding direct vacancy costs) 35 33

Gross Rental Income less ground rents – per IFRS 146 119

Less: service fee and service charge costs components of Gross Rental Income (if relevant)

0 0

Add: share of Joint Ventures (Gross Rental Income less ground rents) 0 0

Gross Rental Income 146 119

EPRA Cost Ratio (including direct vacancy costs)* 0.25 0.30

EPRA Cost Ratio (excluding direct vacancy costs)* 0.24 0.28

* Our EPRA cost ratio is higher than some peers because of CPIPG s consistent reinvestment in our properties to improve rents, occupancy and valuations.


04 // BUSINESS REVIEW / VALUATION SUMMARY04 // BUSINESS REVIEW / VALUATION SUMMARY

VALUATION SUMMARY

PROPERTY VALUATION

The condensed consolidated interim financial statements for the six months ended 30 June 2018 have been prepared in accordance with International Financial Reporting Stand-ards (IFRS) as adopted by European Union, which include the application of the fair value method.

Since the property portfolio owned by the Group must be stated at fair value (present value), the regular valuation of these properties by independent experts is recommend-ed. The Group’s management analysed the situation on the real estate market at the time together with current yields and then applied discount rates and other factors used by independent valuators in their appraisals as of 31 December 2017. As a result, the fair value of the majority of the property portfolio as of 30 June 2018 was determined based on the management’s analysis described above and it does not significantly differ from the fair value as of 31 December 2017.

In instances where there have been indications of signifi-cant changes and therefore with potential impact on the property value during the first half of 2018, the value of the property has been updated based on the external or internal appraisals as of 30 June 2018.

The property portfolio expert valuation was based on re-ports issued by:» Jones Lang LaSalle» Savills» Cushman & Wakefield» RSM TACOMA» CBRE» and other appraisers

The following table summarizes the number and value of the Group’s real estate assets appraised by individual firms as well as the share of the appraised value in the total valu-ation. For the purpose of higher informativeness, individual appraisers‘ workload and valuation results are presented by business cluster.

Split by appraisers and segmentsas at 30 June 2018

Appraisers SegmentsNumber

of propertiesValuation

% of total PP value

Jones Lang Lasalle Czech Republic 109 2,408 34%

Hotels & resorts 3 139 2%

Complementary Assets Portfolio 26 601 9%

Savills Berlin 49 1,674 24%

Cushman & Wakefield Czech Republic 101 551 8%



Tacoma Czech Republic 4 246 4%



CBRE Czech Republic 2 129 2%


BNP Hotels & resorts 1 38 1%


Knight Frank Complementary Assets Portfolio 1 120 2%

Other Czech Republic 65 112 2%

Berlin 0 9 0%



Total 418 6,994 100%

BB Centrum, Prague, Czech Republic


04 // BUSINESS REVIEW / FINANCE REVIEW

FINANCE REVIEW

CPIPG has strengthened our financial profile during 2018. The Group was awarded a new BBB rating from Stand-ard and Poor’s, and Moody’s Investor Service raised the outlook on our Baa3 credit rating from stable to positive. We became the first corporate issuer in the CEE region to issue undated subordinated “hybrid” bonds, reflecting strong support from our bond investors. We signed re-volving credit facilities totalling €230 million in March and August, and refinanced our flagship Quadrio building in Prague at extremely attractive pricing.

All of CPIPG’s actions relate to financial policy. The core fea-tures of this policy are unchanged: CPIPG targets a net loan to value (LTV) below 45% with a continued reduction in secured leverage, a net interest coverage ratio (ICR) above 3x and an increasing level of unencumbered assets. Our div-idend policy is unchanged: CPIPG has no plans to institute a dividend, as our shareholder continues to show strong support by reinvesting profits back into the company.

30 June 2018

31 December 2017

31 December 2016

Financial debts 1,737 1,758 1,876

Bonds issued 1,460 1,489 707

Net debt linked to AHFS 8 7 57

Cash and cash equivalents (473) (239) (305)

Net debt 2,731 3,015 2,335

Total property portfolio 6,994 6,722 4,865

LTV 39.1% 44.9% 48.0%

LTV in period 2015 – 30 June 2018 (%)

35.0

40.0

45.0

50.0

55.0

60.0

30 June 2018201720162015

58.8%

48.0% 44.9%

39.1%

Andrássy Complex, Budapest, Hungary

Pavel Měchura – Group Finance Director

Committed to a strong investment grade credit profile


04 // BUSINESS REVIEW / FINANCE REVIEW04 // BUSINESS REVIEW / FINANCE REVIEW

NEW RECORD LOW LTV

The Group’s net LTV reached a record low of 39.1% as of June 30. Our target net LTV remains 45% or below, although we may consider revising this target lower in the future depending on our performance and level of investment activity. CPI recognizes that a conservative leverage policy is important for our bondholders, lenders, rating agencies and other counterparties.

UNSECURED REVOLVING CREDIT FACILITIES

The Group signed a €150 million 2-year unsecured revolving credit facility in March and a €80 million 2-year unsecured revolving credit facility in August. The Group intends to periodically draw (and repay) the revolving credit facilities for general corporate purposes, including short-term cash needs.

UNDATED SUBORDINATED (“HYBRID”) NOTES ISSUED

In H1 2018, the Group issued 550 million of undated 4.375% fixed rate resettable subordinated “hybrid” notes. The notes were issued under the Group’s €3 billion Euro Medium Term Note programme and are classified as equity under IFRS. Proceeds will mainly be used for general corporate purpos-es including acquisitions in our core markets and sectors.

SHARE OF UNSECURED DEBT REMAINED SIGNIFICANT

In H1 2018, unsecured debt of the Group was 41% of total debt, unchanged from the end of 2017. CPIPG is focused on continuing to simplify our financing structure and reduce our reliance on secured debt.

INCREASED LEVEL OF UNENCUMBERED ASSETS

45% of the Group’s assets were unencumbered as of 30 June 2018, relative to 43% at the end of 2017. Unencum-bered assets primarily consisted of office and retail prop-erties in the Czech Republic, along with land bank and selected assets in Germany and other geographies of the Group. Following our debt repurchase activities in August 2018, we are confident to achieve unencumbered assets above 50% in the near-term.

PROPORTION OF FIXED-RATE DEBT FURTHER INCREASED

The Group’s level of fixed-rate debt in H1 2018 was approxi-mately 84%, relative to 80% at the end of 2017. We target a minimum of 80% fixed-rate debt going forward. As a result, the Group believes we will always have a high degree of protection against interest rate volatility.

EARLY DEBT REPAYMENT

On 2 August 2018, CPIPG announced that the Group had successfully purchased approximately CZK 2 billion of sen-ior secured bonds issued by our residential subsidiary (CPI BYTY). The CPI BYTY bonds were all due or callable in May 2019. On 28 August 2018, CPI BYTY issued a notice of early repayment of all the remaining senior secured bonds of CPI BYTY. Full repayment will occur on 12 September 2018.

These actions are expected to reduce the Group’s interest expense and should positively impact the Group’s interest coverage ratio (ICR). Through the early repayment of the CPI BYTY Bonds, all the assets of CPI BYTY will become unencumbered which will significantly increase the Group’s level of unencumbered assets.

Longin building, Prague, Czech Republic

Business Centre 30, Budapest, Hungary

The Group has no significant debt maturities over the next few years and is confident in our liquidity position. We will continue to explore pre-financing debt maturities and lengthening our maturity profile whenever possible.

Beginning in 2023, the Group’s EUR 550 million hybrid bonds are callable. While the hybrids are classified as eq-uity under IFRS, the Group incorporates the hybrid into our internal financing and refinancing plans and continues to see hybrids as an important part of the Group’s capital structure.

Maturity profile of external debt by type of debt (€ million)as at 30 June 2018

0

200

400

600

800

1,000

1,200

1,400

1,600

2028+2027202620252024202320222021202020192018

Fixed Variable

105114

155

7

128

72

50

26

38

85222

1,134

20

637

322

128

261

108



The Group’s cost of debt declined from 2.6% at the end of 2017 to 2.55% in H1 2018, resulting from further reductions in the cost of both bond financing and bank financing. In the latter case, rates are already extremely attractive given the strength of the Group’s underlying assets and geog-raphies.

The total volume of new financing and refinancing was €115 million in H1 2018. New drawings were more than compen-sated by bank loan repayments of €122 million and repay-ment of bonds in the amount of €29 million.

Structure of external debt, average interest rates and market rates (€ million)

0

500

–1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1,000

1,500

2,000

2,500

3,000

3,500

H1 2018201720162015

Project bonds 160 164 163 158

Corporate bonds 555 543 1,326 1,302

Bank loans 1,598 1,829 1,709 1,698

Avg. bank loan interest rate 2.32% 2.10% 1.96% 1.94%

Avg. bond interest rate 5.46% 4.93% 3.34% 3.28%

Total avg. interest rate 3.29% 2.89% 2.60% 2.55%

Avg. 3m EURIBOR –0.02% –0.27% –0.33% –0.33%

Avg. 3m PRIBOR 0.31% 0.29% 0.41% 0.89%

1,598

1,8291,709 1,698

555

543

1,326 1,302

160

164

163 158

GSG-Hof Helmholtzstraße, Berlin, Germany



Structure of External Financing

Maturity profile of external debt by type of debt (€ million)as at 30 June 2018

Bank loans Bonds Other

2017 30 June 2018

Secured bank loans .............. 53%

CPIPG (unsecured) ................ 41%

Secured bonds ........................... 5%

Other .............................................. 1%

Secured bank loans .............. 53%

CPIPG (unsecured) ................ 41%

Secured bonds ........................... 5%

Other .............................................. 1%

STRUCTURE OF EXTERNAL FINANCING

As of 30 June 2018, the composition of the Group’s external financing was roughly unchanged. 41% of the Group’s bor-rowings are unsecured bonds primarily at the CPIPG level. Our objective is to further increase this percentage over time as we simplify the capital structure. Much progress has already been made following the Group’s Eurobond issuances in 2017: in 2016, the percentage was 21%.

CPIPG’s platform for bond issuance is our Euro Medium Term Note (EMTN) programme. CPIPG also has revolving credit facilities in place (currently undrawn) which provide a high degree of flexibility and attractive pricing.

Other debt comprises bills of exchange, non-bank loans from third parties and financial leases.

External financing during H1 2018 in detail (€ million)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

External financing 30 June 2018

External financing 31 December 2017

Repayments of bonds

Other movements

Decrease Increase

3,257 3,206

New bank loans Repayments of loans

New bonds issued

Change in own bonds

115 12229 15

0

200

400

600

800

1,000

1,200

1,400

1,600

2028+2027202620252024202320222021202020192018

7501

01

01

8142

08

2113

1072

504

1838

197

9

10

5115

473

18

552

285

12496120

€3.25billion

€3.21billion



BANK LOANS

Bank loans represent a significant component of the Group’s financial debts. The bank loans balance (including bank overdrafts and liabilities from assets held for sale) decreased by 1% compared to 31 December 2017.

The main reasons for this slight decline are the following:» loans repaid adding up to €122 million

Other significant H1 2018 changes include:» new loans in the amount of €115 million

The Group’s bank loans are denominated mainly in euros and Czech crowns. In H1 2018, loans drawn in Czech crowns represented 14% of the total, slightly different from their share (16%) at the end of 2017 due to a new euro-denomi-nated loan together with repayment of a few loans denom-inated in Czech crowns and Euros.

Czech Republic ....................... 49%

Germany .................................... 32%

Hungary ...................................... 12%

Poland ............................................ 5%

Slovakia ........................................ 2%

Switzerland .................................. 1%

Berlin Hyp .................................. 30%

UniCredit Group Bank .......... 15%

Helaba Landesbank

Hessen-Thüringen .................. 12%

Československá obchodní

banka ............................................ 10%

Raiffeisen Bank ........................ 10%

Komerční banka ......................... 6%

Erste Group .................................. 5%

K&H Bank ...................................... 3%

Sberbank........................................ 3%

Other (10 various banks) ....... 8%

Secured bank debt by geography (breakdown by principal)as at 30 June 2018

The Group benefits from strong underlying markets in the Czech Republic, Germany, Hungary, and other European countries. The pricing available for secured loans in our key markets remain attractive.

Secured bank debt by bank (breakdown by principal)as at 30 June 2018

82% of outstanding bank loan balance (represented by €1,391 million) is drawn from 6 financing bank groups; in total the Group has secured loans from 19 banks who are active in the CEE region and Germany.

Secured and unsecured financingas at 30 June 2018

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Olympia Teplice shopping centre, Teplice, Czech Republic

UNSECURED DEBT€ 1,319 MILLION 41 %

59 %SECURED DEBT€ 1,887 MILLION

Unsecured bank debt (drawn): € 0 million

Unsecured bonds: € 1,302 million

Secured bank debt: € 1,698 million

Secured bonds: € 158 million


BONDS

The Group has a long track record in the bond markets, beginning many years ago in the local market and contin-uing with our inaugural €825 million international notes offerings in 2017 and our €550 million hybrid offering in 2018. We intend to remain active on the international bond markets, using our Euro Medium Term Note programme as a platform for issuance of both senior and potentially hybrids going forward. In doing so, will continue simpli-fying our financing structure and further concentrate on unsecured funding at the CPIPG level. One of CPIPG’s objectives is to improve the liquidity of our bond offerings. As a result, CPIPG has continued to broad-en our relationships with the banking community and has pursued an active and open dialogue with credit analysts, rating agencies and investors. CPIPG is also interested to diversify our sources of bond funding by tapping new bond markets over time.

During the first half of 2018, the Group issued €550 mil-lion of hybrid notes. Also, during the first half of 2018, the Group repaid €30 million of notes issued by the Group’s subsidiary CPI Finance Slovakia (ISIN: SK4120010653). In August 2018, the Group announced plans to repay all the senior secured notes issued by our residential subsidiary, CPI BYTY.

04 // BUSINESS REVIEW / FINANCE REVIEW

Andel Shopping centre, Prague, Czech Republic

The table above shows that if interest rates on all of our variable borrowings increase by 3 p.p., cost of the Group’s external debt will rise only by 0.32 p.p. In addition to our bonds which carry fixed coupons, many of our loan agree-ments include arrangements which convert the loan to a fixed rate obligation. The Group can also make use of hedging instruments as required to manage the level of fixed and floating rate debt.

Average interest rate sensitivity (% p.a.)as at 30 June 2018*

Average interest rate

Type of liability

Share on external debt

as at 30 June 2018

if market interest rate

+1 p.p.


+2 p.p.


+3 p.p.

Bank loan 53.0% 1.94% 2.04% 2.29% 2.54%

Bonds 45.5% 3.28% 3.28% 3.28% 3.28%

Leasing 0.7% 1.87% 2.00% 2.20% 2.39%

Non bank loan 0.6% 1.54% 1.57% 1.61% 1.65%

Bill of exchange 0.2% 3.49% 3.49% 3.49% 3.49%

Total 100.0% 2.55% 2.60% 2.74% 2.87%

* Includes impact of contracted interest rate swaps


04 // BUSINESS REVIEW / RESULTS AND NET ASSETS04 // BUSINESS REVIEW / RESULTS AND NET ASSETS

RESULTS AND NET ASSETS

€ million30 June

201831 December

2017

NON-CURRENT ASSETS

Intangible assets and goodwill 123 120

Investment property 6,082 5,808

Property, plant and equipment 770 724

Deferred tax assets 142 142

Other non-current assets 93 89

Total non-current assets 7,210 6,883

CURRENT ASSETS

Inventories 80 82

Trade receivables 74 77

Cash and cash equivalents 473 239

Asset held for sale 63 113

Other current assets 138 135

Total current assets 828 646

TOTAL ASSETS 8,038 7,529

EQUITY

Equity attributable to owners of the Company

3,291 3,277

Perpetual notes 538

Non controlling interests 39 38

Total equity 3,868 3,315

NON-CURRENT LIABILITIES

Bonds issued 1,313 1,332

Financial debts 1,581 1,593

Deferred tax liabilities 721 710

Other non-current liabilities 51 50

Total non-current liabilities 3,666 3,685

CURRENT LIABILITIES

Bonds issued 146 158

Financial debts 157 165

Trade payables 75 75

Other current liabilities 126 131

Total current liabilities 504 529

TOTAL EQUITY AND LIABILITIES

8,038 7,529

€ million30 June

201831 December

2017

Gross rental income 147 120

Net service revenue 16 12

Property operating expenses (28) (26)

Net rental income 135 106

Net development income (1) (1)

Hotel revenue 50 47

Hotel operating expenses (36) (33)

Net hotel income 14 14

Revenues from other business operations

24 22

Related operating expenses (16) (18)

Net income from other business operations

8 4

Total revenues 245 203

Total direct business operating expenses

(89) (80)

Net business income 156 123

Net valuation gain on investment property

95 229

Net gain or loss on the disposal of assets

(0) (0)

Amortization, depreciation and impairments

(12) (15)

Other operating income 1 8

Administrative expenses (25) (22)

Other operating expenses (4) (1)

Operating result 211 321

Interest income 7 2

Interest expense (45) (47)

Other net financial result 12 (45)

Net finance costs (25) (90)

Share of profit of equity-accounted investees

(0)

Profit before income tax 185 231

Income tax expense (24) (41)

Net profit from continuing operations

161 190

TOTAL ASSETS AND TOTAL LIABILITIES

Total assets increased by EUR 509 million (7%) and exceeded 8bn for the first time in our history. The increase is primarily connected with our property portfolio which rose by EUR 272 million and the boost in cash and cash equivalents which rose to EUR 473 million. The most significant opposite effect re-flects the fact that the Compa-ny acquired its shares from our major shareholder, resulting in a decrease of equity by EUR 145 million. This was fully offset by the issuance of perpetual notes of EUR 550 million, issuance of new shares of EUR 50 million and a robust result of EUR 161 million for the six-month period ending 30 June 2018.

GRI, NRI

NRI grew by 27% to EUR 135 million, versus EUR 106 million in 2017. The positive develop-ment in NRI was predominantly driven by significant increase in GRI. GRI rose significantly by 23% to €147 million in H1 2018.

This substantial increase primarily reflects our successful acquisitions in 2017 and 2018, most notably the acquisition of shopping centres from CBRE GE in Q2 2017.

Additionally, by consistently realizing the upside within the existing portfolio through continuous operational improvements, we can show a solid increase in rental income on like-for-like basis.

As of June 2018, our total like-for-like rental income growth was 4.2%.

LFL growth on our key markets:» Berlin +9,6% » Czech Republic +1,7% » Hungary +5,4% » Poland +8,1%

NET INCOME FROM OTHER BUSINESS

OPERATIONS

In H1 2018, the Group’s other business operations generated

profit of EUR 8 million com-pared to the profit of EUR 5

million in H1 2017. This positive result is primarily attributable to the significantly improved

performance of Crans-Montana in Switzerland.

ADMINISTRATIVE EXPENSES

Administrative expenses increased to EUR 25 million. The

increase reflects the Group’s greater requirements for finan-

cial and other advisory services. Administrative expenses also in-

clude certain one-off expenses connected with acquisitions.

INTEREST EXPENSE

The effect of massive refinanc-ing in Q4 2017 is clearly visible

in 2018. Despite the slight increase in our total indebted-ness (by 4% compared to June 2017), we were able to reduce our total interest expenses by

4%, from EUR 47 million to EUR 45 million.

FURTHER INCREASE OF OUR PROPERTY

PORTFOLIO

Our property portfolio rose by 4% from €6,7 billion in 2017 to

€7 billion in H1 2018.

Sound acquisitions and im-proved performance reflected

in a higher value of assets.

The key strategic acquisition, in H1 2018:

Shopping centre in Hradec Kralove, Czech Republic

for €120 million

Two office buildings in CBD Warsaw

for €77 million

Six retail parks in Poland

for €22 million

OTHER NET FINANCIAL RESULT

Change in other net financial result between 2017 and 30 June 2018 is primarily attributable to

a stable/slightly weaker CZK/EUR exchange rate, relative to the significant strengthening

of CZK/EUR witnessed during 2017. Movements in CZK/EUR

exchange rates have a non-cash effect on the Group’s results.

NAV AND EPRA NAV

Total equity increased by 17% to €3,868 million as at 30 June 2018. The main elements with positive impact on equity were:

» Profit of €161 million

» Issuance of new shares of EUR 50 million

» Issuance of hybrid notes with impact on total equity of EUR 538 million as at 30 June 2018

On the contrary, in H1 2018 the Group recognized the following transactions which led to decrease in equity

» a decrease by €45 million in translation reserve, reflecting primarily CZK depreciation towards EUR

» acquisition of shares from our major shareholder of EUR 145

EPRA NAV (for the calculation refer to chapter EPRA indi-cators)

EPRA NAV totals €3,962 million as of 30 June 2018, a modest increase from December 2017

VALUATION GAIN

Net valuation gain of EUR 95 million results principally from the valuation gain on the office portfolio in Berlin and Prague plus, the residential portfolio in the Czech Republic. The gain was driven primarily by the overall performance improve-ment of the projects.

Moreover, our key portfolio is concentrated primarily in markets characterized by strong economic fundamentals and high investor demand, so we benefit from positive market value trends and developments

Valuation gain per country:» Czech Republic 58% » Germany 31% » Other 11%

Valuation gain per segment:» Office 59% » Retail 17% » Other 24%

OPERATING RESULT

Operating result declined during the first half of 2018, primarily due to a lower level of property revaluation gains. For the half year, the Group only revalues a selected number of high performing properties.


CORPORATE GOVERNANCE

05 // CORPORATE GOVERNANCE

PRINCIPLES

CPIPG believes that good corporate governance safeguards the interests of our stakeholders including shareholders, bondholders, lenders, tenants and employees. Our objec-tives are excellence and transparency in our management controls, corporate reporting and internal procedures. We believe this supports a corporate culture which is balanced between entrepreneurial spirit and the identification, con-trol and prevention of risk.

CPIPG continually reviews and implements industry best practices with respect to corporate governance and has adjusted our internal practices to meet international stand-ards. CPIPG aims to communicate regularly with our share-holders and stakeholders regarding corporate governance and to provide regular updates on our website.

CPIPG’s equity and debt securities are listed on several regulated European exchanges including Frankfurt, Lux-embourg, Dublin, Prague, Warsaw, and Bratislava. In each listing venue, we comply with the applicable disclosure and governance rules. However, CPIPG’s general approach to corporate governance primarily follows the Ten Principles of Corporate Governance of the Luxembourg Stock Ex-change (“The X Principles”)17.

The X Principles provide companies with guidance in the application of corporate governance rules, and have evolved over time in line with changes in regulations and market practices. The X Principles are based on Luxem-bourg legislation regarding commercial companies, and specifically, on the financial regulations that are applicable to companies listed on the Luxembourg Stock Exchange (and in general, to all companies listed in the EU). The X Principles can be summarized as follows:

Principle 1: Corporate governance frameworkThe Company has adopted the X Principles as its main corporate governance framework. The Board of Directors considers corporate governance as vital for the Company’s operation and progress. The Board regularly reviews the governance policies, works of its committees and commu-nication with shareholders and investors. The Company publishes the statement on corporate governance in its annual report.

Principle 2: The Board of Directors’ remitThe Board is responsible for the management and super-vision of the Group. It acts in the best corporate interest of the Company, its shareholders and other stakeholders. The key goal of the Board is to ensure the long-term success of the Company.

The Board takes into account Group’s corporate social re-sponsibility and the interests of all stakeholders in Board’s deliberations. During its meetings, the Board regularly evaluates its conduct and operation and the relations with the management.

Principle 3: Composition of the Board of Directors and of the special committeesThe Board of the Company is composed of highly experi-enced and qualified real estate and finance professionals with an excellent track record and thorough knowledge of the Group and its business. The Board is composed of executive directors, independent director and also non-ex-ecutive directors representing shareholders. The Board es-tablished the Audit Committee and the Remuneration and Related Party Transaction Committee (the “Remuneration Committee”) with specific roles and responsibilities.

Principle 4: Appointment of members of the Board of DirectorsThe composition of the Board has been stable given their conduct and the Company’s performance. The candidates for the appointment to the Board are carefully evaluated. The Board, before submitting candidates to shareholders’ general meeting for voting, conducts interviews and evalu-ations, such that all prospective candidates are competent, honest, and qualified persons with relevant professional background and experience.

Principle 5: Professional ethicsThe Board as a governing body as well as each of the di-rectors exercises their respective mandates with integrity and commitment. The Board represents the shareholders as a whole and makes decisions in the Company’s interest. A director who has a direct or indirect conflict between his interests and those of the Company in any business or matter to be resolved upon by the Board (i) must promptly inform the Board of such potential conflict; (ii) must re-

The Group has high standards, and will continue to review and implement best practices in corporate governance.

17 https://www.bourse.lu/documents/legislation-GOVERNANCE-ten_principles-EN.pdf

CORPORATE GOVERNANCE05

Business Centre 99, Budapest, Hungary


05 // CORPORATE GOVERNANCE05 // CORPORATE GOVERNANCE

The Company is administered and supervised by the Board of Directors appointed as a collegiate body by the general meeting of shareholders. The Board of Directors represents the shareholders as a group and acts in the best interests of the Company. Board of Directors meetings are held as often as deemed necessary or appropriate at the request of the Chairman. All members, and in particular the inde-pendent and non-executive members, are guided by the interests of the Company’s stakeholders including share-holders, bondholders, creditors, tenants, and employees.

Appointment of Directors The members of the Board of Directors are elected by the general meeting of shareholders for a period not exceed-ing six years. They are eligible for re-election and may be removed at any time, by a resolution adopted by a simple majority of votes of the general meeting of shareholders. The Directors may be either natural persons or legal enti-ties. In the event of a vacancy on the Board of Directors, the remaining members may co-opt a new member.

Powers of the Board of Directors The Board of Directors is empowered to perform any acts necessary or useful in achieving the Company’s objectives. All matters not expressly reserved to the general meeting by law or by Company’s articles of association are within the competence of the Board of Directors.

In particular, the Board of Directors has the following tasks and competencies, without such list being exhaustive:

» Setting the objectives and management policies of the Company;

» Preparing the annual operating and financing plans;» Managing the Company’s business affairs and perform-

ing all the acts and operations relating to the corporate purpose that do not fall within the duties attributed to other bodies of the Company;

» Representing the Company in or out of court;» Acquiring or selling real estate;» Incorporating companies;» Adopting resolutions regarding the issuance of bonds,

or borrowings;» Approving issuance of new shares pursuant to the au-

thorised share capital.

DeliberationsThe Board of Directors may designate at the time of each meeting one of its members who shall preside over that Board meeting.

Meetings of the Board of Directors may be convened by any Director. The Board of Directors may validly debate and take decisions at a Board meeting without complying with all or any of the convening requirements and formali-ties if all the Directors have waived the relevant convening requirements and formalities either in writing or, at the relevant Board meeting, in person or by an authorised representative.

The Board can validly deliberate and act only if the ma-jority of its members are present or represented, a proxy between Directors, which may be given by letter, telegram, telex, telefax, email, electronic signature or any other se-cured means, being permitted. In case of emergency, Di-rectors may vote by letter, telegram, telex, telefax, email, electronic signature or any other secured means.

Resolutions require a majority vote. In the case of an equal-ity of votes, the chairman of the meeting (if designated) will have a second or casting vote.

Resolutions signed by all the members of the Board of Di-rectors shall be just as valid and enforceable as those taken at the time of a duly convened and held meeting of the Board of Directors.

A Director or his Director‘s representative may validly par-ticipate in a Board meeting through the medium of vid-eo-conferencing equipment or telecommunication means allowing the identification of each participating Director. These means must have technical features which ensure an effective participation in the meeting allowing all the persons taking part in the meeting to hear one another on a continuous basis and allowing an effective participation of such persons in the meeting. A person participating in this way is deemed to be present in person at the meeting and shall be counted in the quorum and entitled to vote. All business transacted in this way by the Directors shall, for the purposes of these articles of association, be deemed to be validly and effectively transacted at a Board meeting, notwithstanding that fewer than the number of directors (or their representatives) required to constitute a quorum are physically present in the same place. A meeting held in this way is deemed to be held at the registered office of the Company.

The minutes of a Board meeting shall be signed by and extracts of the minutes of a Board meeting may be certified by any Director present at the meeting.

BOARD OF DIRECTORSquest that it is stated in the minutes of the Board meeting; and (iii) cannot take part in such deliberations nor vote in relation to the matter in which such director is conflicted.

Principle 6: Executive ManagementThe Company has become a very successful real estate group, which has experienced significant growth in recent years. A swift decision-making process and co-operative atmosphere are among the Company’s core competitive advantages. To ensure a seamless continuation of this suc-cess, the Company has formally established an Executive Board comprised of its top executives. The Executive Board reports to the Board of Directors, receives instructions therefrom and is responsible for managing all day-to-day matters of the Group.

In order to streamline the decision-making process and clar-ify responsibilities, the members of the Executive Board have been assigned divisions and departments under their direct responsibilities and reporting lines. The co-ordina-tion and communication among various divisions and de-partments and principally the people themselves are vital for the Company’s success and have the full support of management.

Principle 7: Remuneration policyThe Directors and the members of the Company’s Execu-tive Board are remunerated in a manner that is compatible with the long-term interests of the Company.

Principle 8: Financial reporting, internal control and risk managementThe Company has established set of rules and procedures designed to protect the Group’s interests in the areas of financial reporting, internal control and risk management.

Principle 9: Corporate social responsibility (CSR)The Company is reviewing its corporate social responsibility policy with respect to social and environmental aspects so as to implement it carefully. Environmental criteria are one of the main aspects of the Group’s development and con-struction projects. Quadrio project in Prague won multiple real estate awards and also obtained Leadership in Energy and Environmental Design Silver certification and helped to overall revitalization of its neighborhood in Prague. GSG Berlin portfolio is managed towards increased environmen-tal sustainability, including a solar energy platform, bee col-onies on rooftops and electric cars charger stations.

Principle 10: ShareholdersThe Company’s primary purpose is the creation of value for its shareholders. The Company respects the rights of its shareholders and ensures that they treated equally. The Company constantly improves our communication with shareholders and the transparency of our reporting.




FINANCIAL REPORTING, INTERNAL CONTROL AND RISK MANAGEMENT

THE BOARD OF DIRECTORS COMMITTEES

Delegation of PowersThe Board of Directors may delegate all or part of its pow-ers concerning the day-to-day management and the rep-resentation of the Company in connection therewith to one or more Directors, corporation’s directors, chief operating officers, chief executive officers, managers or other officers, who need not to be shareholders of the Company. Currently, Martin Němeček, has been appointed as the Company’s Managing Director.

Current Board of Directors As at 30 June 2018, the Board of Directors consisted of the following members:» Edward Hughes, Chairman of the Board;» Philippe Magistretti;» Martin Němeček, Managing Director;» Tomáš Salajka;» Oliver Schlink; » Radovan Vítek; and» Marie Vítková.

The Board of Directors is comprised of:» 4 executive members representing the management of

the Company: Martin Němeček, CEO, Tomáš Salajka, Di-rector of Acquisitions, Asset Management & Sales, Oliver Schlink, CFO of Company’s subsidiary GSG Berlin, and Philippe Magistretti, president of CMA S.A.(Crans-Mon-tana ski resort);

» 1 independent, non-executive member: Edward Hughes;» 2 non-executive member representing shareholders: Ra-

dovan Vítek and Marie Vítková.

The current Board members were appointed during the Company’s annual general meeting of 2018 and their term expires at the annual general meeting of 2019 concerning the approval of the annual accounts of the Company for the financial year ending 31 December 2018. During the first half of 2018 the Board of Directors met 8 times.

Audit Committee The Audit Committee review’s the Company’s accounting policies and the communication of financial information. In particular, the Audit Committee follows the auditing process, reviews and enhances the Company’s reporting procedures by business lines, reviews risks factors and risk control procedures. During the first half of 2018 the Audit Committee met twice.

The Audit Committee is comprised of the following members:» Edward Hughes;» Philippe Magistretti;» Iveta Krašovicová.

Remuneration and Related Party Transaction CommitteeThe Remuneration and Related Party Transaction Commit-tee presents proposals to the Board of Directors concern-ing the remuneration and incentive programs to be offered to the management and the Directors of the Company. The Remuneration Committee also deals with the related party transactions.

The Remuneration Committee is comprised of the following members:» Radovan Vítek;» Martin Němeček;» Edward Hughes.

During the first half of 2018 the agenda of the Remunera-tion Committee has been assumed by the Board in order to enhance decision making process in relation to remunera-tion and related party transaction to the Board of Directors.

Executive ManagementThe Company has formally established an Executive Board comprised of the following members:» Martin Němeček, Chief Executive Officer;» Zdeněk Havelka, Executive Director; » Tomáš Salajka, Director of Acquisitions, Asset Manage-

ment & Sales.

The Executive Board reports to the Board of Directors and is responsible for managing all day-to-day matters of the Group. In order to streamline the decision-making process and clarify responsibilities, members of the Executive Board have been assigned divisions and departments under their direct responsibilities and reporting lines. The co-ordination and communication among various divisions and depart-ments and principally the people themselves are vital for the Company’s success and receives the full support of management.

The management of the Group has an average of 14 years of experience in the property industry mainly in the CEE region and Berlin, with expertise in asset and property management, finance, leasing and development. The Group benefits from strong local knowledge and expertise of our regional managers and other professionals.

The Company has organized our internal control environ-ment by identifying the main risks to which we are ex-posed, determining the level of control over these risks, and strengthening the reliability of our financial reporting and communication processes.

The Group‘s overall approach to risk is conservative. There are inherent risks determined by the nature of our business, such as fluctuations in the value of assets, vacancies, vola-tility in market rents or risks associated with development activities. Key risks are assessed by ranking exposure on the basis of probability and magnitude and are closely man-aged. Analysis of sensitivity to these key risks is conducted at Group level.

The Group’s management structure is designed to ena-ble effective decision making. The periodical reviews of key performance indicators are conducted: retail tenants‘ turnovers, vacancies, rent collection, arrears and doubtful debtors, and review of performance against budgets are schedules. An internal audit and cost control functions are regularly performed. Strict procedures are also observed for the periodic production of quarterly and annual figures on the basis of the adopted policies. There are clearly defined guidelines and approval limits for capital and operating expenditure and other key business transactions and de-cisions. The internal management reporting system is de-signed to identify fluctuations in the value of investments,

income and expenses. Capital projects, major contracts and business property acquisitions are reviewed in detail and approved by the Board of Directors where appropriate.

Financial riskThe Group maintains a prudent financial policy. Foreign exchange risks are effectively managed by shifting risks associated with movements in exchange rates to its ten-ants in most of its Euro-denominated contracts in order to hedge exposure to currency risks in its loans; it uses interest rate swaps to hedge against interest rate risks and uses a credit rating scorecard to manage credit risk associ-ated with its tenants.

The Group is also able to draw on a diverse range of capital and liquidity sources including domestic international cap-ital market bonds issued under the Company’s EMTN pro-gramme, bonds in the Czech Republic and Slovakia, secured loans from its relationship banks and equity investment from its majority shareholder.

The Group has strong credit metrics, which management believes provide it with the capacity to further de-lever.

For financial risk, comprising of credit risk, liquidity risk and market risk (including currency risk, interest rate risk and price risk) please refer to Note 7 in Consolidated financial statements as of 31 December 2017.




ENVIRONMENTAL, SOCIAL AND ETHICAL MATTERSInformation technology risks The Group developed a strong information technology team, with dedicated information security specialists. The threat of data breach and loss or cyberattacks are taken very seriously. The IT systems used across the Group are designed and developed in order to provide maximum se-curity. The information security risk is carefully monitored and information security policy is regularly monitored. Em-ployees are regularly guided to be aware of potential IT and cyber security related risks.

The Group makes use of electronic data processing within automated information systems. Offsite data back-up and recovery measures are in place.

Legal riskThe Group has established a legal team at the central and local level to ensure proper implementation of legal ser-vices and compliance with applicable laws and regulations. Internal legal teams support the management in the daily operation with respect to ongoing transactions and legal relationships with clients, customers, banks, suppliers, ad-ministrative and governmental bodies, as well as courts. The legal teams monitor legislative changes and regulatory changes to minimise associated legal risks.

Complex transactions, litigations as well as certain legal services are outsourced to reputable law firms to ensure obtaining of the highest standards of legal services and minimization of legal risks.

Local legal departments provide regular litigation reports to the general counsel who reports directly to the CEO. Legal reports, including litigation updates, are provided to the Board on quarterly basis, with major legal issues being reported immediately.

Development, construction and refurbishment projectsThe Group employs construction and development exerts and skilled project managers for its construction and re-furbishment projects. The suppliers of architectural, per-mitting, construction and refurbishment works are always tendered from reputable companies with relevant experi-ence and financial capacity.

Project timing, progress and budgets are carefully moni-tored, mostly with the support of external project monitor-ing organizations. Health, safety and environmental risks are monitored before and during the construction.

Transaction and asset management risk Acquisitions of new assets are carefully examined through a detailed financial, legal, and operational evaluation prior to Board approval. Reputable external advisors are engaged to assist with acquisition processes starting from evalu-ation, due diligence process, transaction negotiation and implementation.

Asset management initiatives are carefully scrutinized be-fore implementation, taking costs benefits into account. An experienced asset management team evaluates mar-ket pricing of lease transactions and also assist acquisition processes.

An experienced property management team monitors retail tenants‘ turnovers, vacancies, rent collection, arrears and doubtful debtors. Rent collection is closely monitored and enforced in cooperation with legal team. The tenant base is well diversified and there is small exposure to individual tenants.

Asset protection/insuranceThe Group insures all income-producing properties with all-risk property insurance at reinstatement cost, business interruption (revenues for 24 months) and third party lia-bility insurance. Some properties are also insured against terrorist acts. Properties under development have con-struction all-risk insurance. Insurance is contracted from reputable international insurers.

The Audit Committee and the Remuneration Committee have specific duties in terms of internal control.

Subsequent eventsPlease refer to Note 12 of the Condensed Consolidated In-terim Financial Statements as at 30 June 2018.

Financial risks exposureFor detail description of the principal risks and uncertain-ties, please refer to Note 2 Basis of Preparation of the Consolidated Financial Statements as at 31 December 2017.

The Group is committed to high standards in environmen-tal, social and ethical matters. Our staff receive training on our policies in these areas, and are informed when chang-es are made to the policy. Our environmental policy is to comply with all applicable local regulations, while pursuing energy-efficient solutions and green / LEED certification wherever possible. Ethical practice is a core component of our corporate philosophy; we have achieved top-quality standards in reporting and communications, and have in-vested in the best professionals. From a social perspective, we care deeply about all our stakeholders. Our corporate culture is centered around respect and professionalism, and we believe in giving back to our community.

Environmental mattersThe Group follows a pragmatic approach to environmental aspects of its business. Environmental criteria are one of the main aspects of the Group’s development and con-struction projects.

Before each potential asset investment, the Group exam-ines the environmental risks. Project timing, progress and budgets are carefully monitored, mostly with the support of external project monitoring advisors. Health, safety and environmental risks are monitored before and during con-struction.

Health and safety, as well as the technical and security installations are periodically inspected for checking of their status and the conformity with applicable legislation and local regulation.

As a priority item for apartment building renovations, the Group replaces older heating systems with natural gas systems, and seeks to improve the overall level of thermal insulation in its buildings. A number of buildings is also equipped with solar panels, namely assets in Berlin port-folio. Quadrio project in Prague won multiple real estate awards and also obtained Leadership in Energy and Envi-ronmental Design Silver certification and helped to overall revitalization of its neighborhood in Prague.

Social mattersThe Group aims to promote personal development of its employees. The Group provides a work environment that is motivating, competitive and reflects the needs of the employees. The Group promotes diversity and equal op-portunity in the workplace. Employees of the Group conduct annual reviews with their managers, covering also the relationships of the employees with their work and working place, as well as the Group in general.

Ethical mattersThe Group has policies addressing conduct, including con-flicts of interest, confidentiality, abuse of company property and business gifts.




REQUIRED INFORMATION (e) The system of control of any employee share scheme where the control rights are not exercised directly by the employees:

The Company has no employee share scheme.

(f) Any restrictions on voting rights, such as limitation on the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the Company’s cooperation, the financial rights attaching to securities are separated from the holding of securities:

There no restriction on voting rights of the securities issued by the Company, except for the own shares held by the Company.

g) Any agreements between shareholders which are known to the company and may result in restrictions on the transfer of securities and/or voting rights within the meaning of Directive 2001/34/EC:

In relationship to mandatory public takeover offer (the „Mandatory Offer“) to the shareholders of the Compa-ny by Materali, a.s. and according to the related offer document Materali, a.s. and Deutsche Bank AG entered into non-tender agreements with each of Orco Proper-ty Group S.A., Brillant 1419. GmbH & Co. Verwaltungs KG and Linkskaters Limited (the “Major Shareholders”) under which the Major Shareholders have undertaken not to tender a total of 137,464,693 Company shares held by the Major Shareholders into the Mandatory Of-fer or to exercise their right to tender. Furthermore, in July 2014, Materali, a.s. and Deutsche Bank AG entered into security blockage agreements with each of the Major Shareholders and their depositary banks (except for Brillant 1419. GmbH & Co. Verwaltungs KG and its depositary bank) in order to ensure that the depositary banks do not without the Materali, a.s.’ and Deutsche Bank AG’s consent (i) transfer the Major Shareholder’s Company shares to any other securities or sub-secu-rities account, (ii) deliver the Majority Shareholder’s Company shares to the Major Shareholders or to any third party, (iii) execute any sales orders regarding the Majority Shareholder’s Company shares or (iv) assist, carry out or otherwise support the transfer or other disposition of any of the Major Shareholder’s Company shares.

To the knowledge of the Company, there are no share-holder or other agreements entered into by and be-tween shareholders that are in effect as of the date of this report with similar effects.

(h) The rules governing the appointment and replacement of board members and the amendment of the articles of association:

The Company is managed by Board of Directors ap-pointed as a collegiate body by the general meeting of shareholders. The Board of Directors shall be composed of the number of members determined by the general meeting of the shareholders, and shall amount to at least three members. The Directors are elected by the general meeting of shareholders for a period of maxi-mum six years. The directors are eligible for re-election and may be removed with or without cause at any time by decision of the general meeting of shareholders by simple majority vote. In the event of a vacancy in the Board of Directors, the remaining members may co-opt a new member. The articles of association may be modified by an extraordinary general meeting of the shareholders, deliberating with a quorum of at least half of the corporate capital and deciding by a vote of at least a two-thirds majority of the votes cast.

(i) The powers of board members, and in particular the power to issue or buy back shares:

Please refer to the paragraph Board of Directors in this chapter.

The 2018 EGM held on 1 March 2018 resolved to mod-ify, renew and replace the existing authorised share capital of the Company and to set it to an amount of five billion euros (EUR 5,000,000,000.-) for a peri-od of five (5) years from the date of the 2018 EGM, which would authorize the issuance of up to forty billion (40,000,000,000) new ordinary shares of the Company and up to ten billion (10,000,000,000) new non-voting shares of the Company.

The 2018 EGM further resolved to authorise the Board of Directors of the Company to cancel or limit pref-erential subscription rights of the shareholders of the Company upon increases of the share capital of the Company in the framework of this new authorised share capital of the Company.

The 2018 EGM also approved the modifications of the Company’s articles of association reflecting the above resolutions taken during the 2018 EGM.

As at 30 June 2018, the authorised share capital of the Company amounts to EUR 4,975,000,000, which would authorize the issuance of up to 39,750,000,000 new ordinary shares and up to 10,000,000,000 new non-voting shares in addition to the shares currently outstanding.

In reference to the information required by paragraphs (a) to (k) of Article 11(1) of the Law of 19 May 2006 transposing Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, the Board of Directors states the following elements:

(a) The structure of the capital, including securities which are not admitted to trading on a regulated market in a Member State, where appropriate with an indication of the different classes of shares and. for each class of shares, the rights and obligations attaching to it and the percentage of total share capital that it represents:

The share capital of the Company is represented by 9,013,868,658 ordinary shares of one class, out of which 230,056,445 shares (approximately 2.55% of the total number of shares), registered under ISIN code LU0251710041 are admitted to trading on the regulated market of the Frankfurt Stock Exchange in the General Standard segment. The remaining 8,783,812,213 Compa-ny shares (approximately 97.45% of the total number of shares) are currently not listed and are non-tradeable on a regulated market.

The Extraordinary General Meeting of the shareholders of the Company held on 26 June 2017 (the “2017 EGM”) decided to introduce the possibility to create and issue up to ten billion (10,000,000,000) non-voting shares, having a par value of ten eurocents (EUR0.10) each, which (i) shall be entitled to receive, out of the net prof-its of the Company, a preferred dividend per non-vot-ing share amounting to six point nine percent (6.90 %) of the subscription price of the non-voting share, the remainder of such net profits to be shared between all the shares issued by the Company (excluding the non-voting shares), (ii) carry a right to reimbursement of the contribution (including any premium paid) cor-responding to the non-voting shares on a preferential basis out of the net proceeds of the liquidation and (iii) be entitled to receive a preferential liquidation dividend amounting to six point nine percent (6.90 %) of the par value of the non-voting shares in case of dissolution and liquidation of the Company. Such shares have not been issued by the Company yet.

The 2017 EGM also decided to introduce the possibility for the board of directors of the Company to create and issue up to ten billion (10,000,000,000) beneficiary shares without any voting rights and being under reg-istered form only, to be paid up by contribution in cash, in kind or in services, each beneficiary share entitling its holder to receive, subject to the existence of dis-tributable amounts at the level of the Company within

the meaning of the law and the decision of the gener-al meeting of the shareholders to operate a dividend distribution to the holders of the beneficiary shares, a dividend per beneficiary share amounting to six point nine percent (6.90 %) of the issue price of each of the beneficiary shares per financial year of the Company. The 2017 EGM granted to the board of directors of the Company all powers to create and issue beneficiary shares with no voting rights and to further determine and set forth the terms and conditions of such bene-ficiary shares with no voting rights in their respective issue documentation. Such shares have not been issued by the Company yet.

(b) Any restrictions on the transfer of securities, such as limitations on the holding of securities or the need to obtain the approval of the company or other holders of securities, without prejudice to Article 46 of Directive 2001/34/EC:

There are no restrictions on the transfer of Company’s securities. 230,056,445 shares (approximately 2.55% of the total number of shares), registered under ISIN code LU0251710041 are admitted to trading on the regulated market of the Frankfurt Stock Exchange in the General Standard segment. The remaining 8,783,812,213 Compa-ny shares (approximately 97.45% of the total number of shares) are currently not listed and are non-tradeable on a regulated market. There are no particular restrictions on the transfer of securities issued by the Company.

(c) Significant direct and indirect shareholdings (including indirect shareholdings through pyramid structures and cross shareholdings) within the meaning of Article 85 of Directive 2001/34/EC:

Based on the latest shareholders’ declarations received as at 31 December 2017, the following table sets out information regarding the ownership of the Company s shares:

Radovan Vítek and entities controlled by Mr. Vítek

7,986,189,994 88.60%

Others 775,376,416 8.60%

Treasury shares held by ORCO PROPERTY GROUP

252,302,248 2.80%

Total 9,013,868,658 100.00%

(d) The holders of any securities with special control rights and a description of those rights:

None of the Company’s principal shareholders has voting rights different from any other holders of the Company’s shares. The Company respect the rights of its shareholders and ensure they receive equitable treatment. The Company has established a policy of active communication with the shareholders.



The 2018 EGM also approved the terms and conditions of a buy-back programme enabling the repurchase by the Company of its own shares and authorised the Company to redeem/repurchase its own shares under the terms and conditions set forth therein. In particu-lar, the 2018 EGM authorised the board of directors of the Company to repurchase, in one or several steps, a maximum one billion (1,000,000,000) shares in the Company from the existing and/or future shareholders of the Company, for a purchase price comprised in the range between one eurocent (EUR 0.01) and five euros (EUR 5), for a period of five (5) years from the date of the 2018 EGM.

On the basis of the authorization by the 2018 EGM, the board of directors has decided on 1 March 2018, to pro-ceed to a buy-back of certain shares of the Company under the buy-back programme, the terms of which are set forth in the buy-back offer published by the Com-pany on 2 March 2018. A total of 724,853,952 Company shares were acquired for the proposed acquisition price of EUR 0.20 per share (representing in aggregate app. EUR 145 million). At the time of buy-back this represent-ed a direct holding of 7.64% of the Company’s share capital. The shares were bought-back from an entity affiliated with Mr. Radovan Vitek.

As at 30 June 2018 the Company is authorised to re-deem/repurchase up to 275,146,048 own shares under the buy-back programme approved by the 2018 EGM.

(j) Any significant agreements to which the company is a party and which take effect, alter or terminate upon a change of control of the company following a takeover bid, and the effects thereof, except where their nature is such that their disclosure would be seriously preju-dicial to the company; this exception shall not apply where the company is specifically obliged to disclose such information on the basis of other legal require-ments:

The base prospectus dated 20 April 2018, prepared in connection with the EUR 3,000,000,000 Euro Me-dium Term Note Programme (the “Programme”) es-tablished by the Company (as an update to the base prospectus of 18 September 2017) contains a change of control put clause, i.e. redemption at the option of the noteholders upon a change of control, provided certain other criteria defined in the Programme occur. Change of control event pursuant to the Programme occurs in case any person or any persons acting in con-cert (other than Mr Radovan Vítek, any member of his immediate family or any entity directly or indirectly controlled by him or them) shall acquire a controlling interest in (A) more than 50 per cent., of the issued or allotted ordinary share capital of the Issuer or (B) shares

in the issued or allotted ordinary share capital of the Issuer carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of the Issuer. For exact terms please refer to Condition 7.6. of the base prospectus of the Programme.

Similar changes of control provisions are stipulated in the Revolving Credit Facility agreements entered into by the Company in 2018.

Certain credit facility documentation with financing banks of the Group contain market standard change of control clauses.

(k) Any agreements between the company and its board members or employees providing for compensation if they resign or are made redundant without valid reason or if their employment ceases because of a takeover bid:

Not applicable as of 31 December 2017.

Directors’ compensationPlease refer to Note 10 of the Consolidated Financial State-ments as at 31 December 2017.

Other informationThe Group does not have any activities in research and development. The Company does not have any branch.

MARTIN NĚMEČEKChief Executive Officer

Martin Němeček was appointed CEO of CPI Property Group in March 2014. Martin is responsible for the Group’s corporate strategy, business development and legal matters. He led the integra-tion of CPI and GSG into CPIPG in 2014, managed the foreign expansion of the Group and has completed acquisitions with a total value exceeding €2.5bn. Martin has 17 years of real estate experience with a 10-year legal background for Linklaters and Dentons law firms.

ZDENĚK HAVELKAExecutive Director

Zdeněk Havelka was appointed Executive Director of CPI Property Group in June 2014. Zdeněk is responsible for the Group’s property management, operational risk management, commu-nications and information technology. Zdeněk has 15 years of real estate experience in CPIPG, working as Chief Financial Officer as well as Chief Executive Officer.

TOMÁŠ SALAJKADirector of Acquisitions, Asset Management & Sales

Tomáš Salajka was appointed Director of Acquisitions, Asset Management & Sales of CPI Prop-erty Group, in June 2014. Tomáš is responsible for asset management of the Group’s portfolio, including all the transactions and platforms in Germany, Poland and Hungary. Tomáš has 17 years of real estate experience, with 4 years at CPIPG, previously working for GE Real Estate CEE/Germany and ČSOB for 10 years.

DAVID GREENBAUMChief Financial Officer

David Greenbaum was appointed CFO of CPI Property Group in February 2018. David is respon-sible for the Group’s capital structure, external financing, corporate finance and other strategic matters. David joined CPIPG after 15 years at Deutsche Bank, where he was most recently co-head of debt capital markets for the CEEMEA region.

PAVEL MĚCHURAGroup Finance Director

Pavel Měchura was appointed Group Finance Director of CPI Property Group in February 2018. Pavel is responsible for the Group’s accounting and reporting, consolidation, valuations, and strategic planning. Pavel has 11 years of real estate experience, 8 years at CPIPG and 6 years with KPMG.

JAN KRATINADirector of CPI Hotels

Jan Kratina has served for more than 12 years as Chief Executive Officer and 9 years as Chairman of the Board of CPI Hotels. He is responsible for strategic development of the Group’s hotel portfolio including key projects such as entering into Slovakia, Poland, Hungary, Russia and Croatia in 2014. Jan has over 20 years of experience in hospitality.

MANAGEMENT

THE MEMBERS OF THE MANAGEMENT ARE:


GLOSSARY

Alternative performance measures Definition Rationale

Consolidated adjusted EBITDA

Net business income as reported deducted by admin-istrative expenses as reported.

This is an important economic indicator showing a business’s operating efficiency comparable to other companies, as it is unrelated to the Group’s depreciation and amortization policy and capital structure or tax treatment. It is one of the fundamental indicators used by companies to set their key financial and strategic objectives.

EPRA Cost Ratios Administrative & operating costs (including & exclud-ing costs of direct vacancy) divided by gross rental income.

A key measure to enable meaningful meas-urement of the changes in a company’s operating costs.

EPRA Earnings Earnings from operational activities. A key measure of a company’s underlying operating results and an indication of the extent to which current dividend payments are supported by earnings.

EPRA NAV Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model.

Makes adjustments to IFRS NAV to provide stakeholders with the most relevant infor-mation on the fair value of the assets and liabilities within a true real estate invest-ment company with a long-term investment strategy.

EPRA Net Initial Yield (NIY)

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recovera-ble property operating expenses, divided by the mar-ket value of the property, increased with (estimated) purchasers’ costs.

A comparable measure for portfolio valua-tions.

EPRA 'topped-up' NIY

This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).

This measure should make it easier for investors to judge themselves, how the valuation of portfolio X compares with portfolio Y.

EPRA Vacancy Rate

The EPRA vacancy rate is calculated by dividing the market rents of vacant spaces by the market rents of the total space of the whole portfolio (including vacant spaces).

The rationale for using the EPRA vacancy rate is that it can be clearly defined, should be widely used by all participants in the direct real estate market and comparable from one company to the next.

Equity Ratio It is calculated as total equity as reported divided by total assets as reported.

Provides a general assessment of financial risk undertaken.

Alternative performance measures Definition Rationale

Funds from operations or FFO

It assumes net income (computed in accordance with IFRS), excludes non-recurring (non-cash) items like gains (or losses) from sales of property and inventory, impact of derivatives revaluation and impairment transactions. Calculation excludes accounting ad-justments for unconsolidated partnerships and joint ventures.

Funds from operations provide an indica-tion of core recurring earnings.

Loan-to-Value or LTV

It is calculated as Net Debt divided by fair value of Property Portfolio.

Loan-to-Value provides a general assess-ment of financing risk undertaken.

Secured debt as of total debt

It is calculated as a sum of secured bonds and se-cured financial debts as reported divided by a sum of bonds issued and financial debts as reported.

This measure is an important indicator of a firm s financial flexibility and liquidity. Lower levels of secured debt typically also means lower levels of mortgage debt - properties that are free and clear of mort-gages are sources of alternative liquidity via the issuance of property-specific mortgage debt, or even sales.

Unencumbered assets

It is calculated as total assets as reported less a sum of encumbered assets as reported divided by total assets as reported.

This measure is an important indicator of a commercial real estate firm s liquidity and flexibility. Properties that are free and clear of mortgages are sources of alternative liquidity via the issuance of property-spe-cific mortgage debt, or even sales. The larger the ratio of unencumbered assets to total assets, the more flexibility a company generally has in repaying its unsecured debt at maturity, and the more likely that a higher recovery can be realized in the event of default.

Net ICR It is calculated as Consolidated adjusted EBITDA divided by a sum of interest income as reported and interest expense as reported.

This measure is an important indicator of a firm s ability to pay interest and other fixed charges from its operating performance, measured by EBITDA.

Consolidated adjusted total assets

Consolidated adjusted total assets is total assets as reported deducted by intangible assets and goodwill as reported.

Secured consolidated leverage ratio

Secured consolidated leverage ratio is a ratio of a sum of secured financial debts and secured bonds to Consolidated adjusted total assets.

This measure is an important indicator of a firm s financial flexibility and liquidity. Lower levels of secured debt typically also means lower levels of mortgage debt - properties that are free and clear of mort-gages are sources of alternative liquidity via the issuance of property-specific mortgage debt, or even sales.

GLOSSARYGLOSSARY


Alternative performance measures not used anymore Last definition

Reason that this APM no longer provides relevant information

Consolidated Coverage Ratio

Consolidated Coverage Ratio is a ratio of Consolidat-ed adjusted EBITDA to interest expense as reported.

Related to covenant calculation of one bond issue, might be confusing for the reader

Consolidated Leverage Ratio

Consolidated Leverage Ratio is a ratio of a sum of financial debts as reported and bonds issued as reported to Consolidated Adjusted Total Assets.

Related to covenant calculation of one bond issue, might be confusing for the reader

Non-financial definitions Definition

Company CPI Property Group S.A.

Property Portfolio value or PP value The sum of value of Property Portfolio owned by the Group

Gross Leasable Area or GLA Gross leasable area is the amount of floor space available to be rented. Gross leasable area is the area for which tenants pay rent, and thus the area that produces income for the property owner.

Group CPI Property Group S.A. together with its subsidiaries

Net Debt Net Debt is borrowings plus bank overdraft less cash and cash equivalents.

Occupancy Occupancy is a ratio of estimated rental revenue regarding occupied GLA and total estimated rental revenue, unless stated otherwise.

Property Portfolio Property Portfolio covers all properties held by the Group, independent of the balance sheet classification, from which the Group incurs rental or other operating income.

Potential Gross Leasable Area Potential Gross Leasable Area is the total amount of floor space and land area being developed which the Group is planning to rent after the development is complete.

Potential Gross Saleable Area Potential Gross Saleable area is the total amount of floor space and land area being developed which the Group is planning to sell after the development is complete.

Item per Consolidated financial statementsas of 30 June 2018 H1 2018

A Total assets 8,038

B Total equity 3,868

B/A Equity ratio 48%

Item per Consolidated financial statements as at 30 June 2018 H1 2018

A Bonds collateral 493

B Bank loans collateral 3,933

Investment property 3,482

Property, plant and equipment 334

Trade receivables 40

Bank accounts 78

C Total assets 8,038

(C-A-B)/C Unencumbered assets ratio 45%

Item per Consolidated financial statements as at 30 June 2018 H1 2018

A Secured bonds 158

B Secured financial debts 1,729

C Total debts 3,197

Bonds issued 1,460

Financial debts 1,737

(A+B)/C Secured debt as of Total debt 59%

Equity ratio reconciliation (€ million)

Unencumbered assets reconciliation (€ million)

Secured debt as of Total debt reconciliation (€ million)

GLOSSARYGLOSSARY


GLOSSARYGLOSSARY


A Interest income 7

B Interest expense 45

C Consolidated adjusted EBITDA 131

C/(B-A) Net ICR 3.5

H1 2018

Investment property – Office 2,848

Investment property – Retail 2,027

Property, plant and equipment – Hospitality 644

Investment property – Residential 524

Investment property – Land bank 503

Property, plant and equipment – Mountain resorts 94

Investment property – Agriculture 88

Investment property – Industry and logistics 78

Inventories – Development 77

Assets held for sale 60

Investment property – Development 14

Property, plant and equipment – Office 11

Property, plant and equipment – Agriculture 9

Share of profit of equity-accounted investees 4

Inventories – Agriculture 1

Other 11

Total 6,994


A Net business income 156

B Administrative expenses 25

A-B Consolidated adjusted EBITDA 131


A Secured bonds 158

B Secured financial debts 1,729

C Consolidated adjusted total assets 7,916

Total assets 8,038

Intangible assets and goodwill 123

(A+B)/C Secured consolidated leverage ratio 24%

Net interest coverage ratio reconciliation (€ million) Property portfolio reconciliation (€ million)

Consolidated adjusted EBITDA reconciliation (€ million)

Secured Consolidated Leverage Ratio (€ million)

FINANCIAL STATEMENTS06

Longin building, Prague, Czech Republic

1

CPI Property Group Société anonyme 40, rue de la Valleé, L‐2661, Luxembourg R.C.S. Luxembourg: B102254 CEE Office: QUADRIO Building, Purkyňova 2121/3, Praha 1, 110 00 T: +420 281 082 110,115 E: [email protected] www.cpipg.com

DECLARATION LETTER

INTERIM FINANCIAL REPORT

AS AT 30 JUNE 2018

1.1. Person responsible for the Semi - Annual Financial Report Mr. Martin Němeček, acting as Chief Executive Officer and Managing Director of the Company, with professional address at 40 rue de la Vallee, L-2661 Luxembourg, Grand-Duchy of Luxembourg, [email protected].

1.2. Declaration by the persons responsible for the Semi - Annual Financial Report The undersigned hereby declares that, to the best of its knowledge:

- the condensed consolidated interim financial statements of the Company as at 30 June 2018,

prepared in accordance with the International Accounting Standards (“IFRS”) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and result of the Company and its subsidiaries included in the consolidation taken as a whole; and

- the Management report as at 30 June 2018, provides a fair view of the development and performance of the business and the position of the Company and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

Approved by the Board of Directors and signed on its behalf by Mr. Martin Němeček.

Luxembourg, 31 August 2018

Mr. Martin Němeček CEO & Managing Director

1

CPI Property Group Société anonyme 40, rue de la Valleé, L‐2661, Luxembourg R.C.S. Luxembourg: B102254 CEE Office: QUADRIO Building, Purkyňova 2121/3, Praha 1, 110 00 T: +420 281 082 110,115 E: [email protected] www.cpipg.com

DECLARATION LETTER

INTERIM FINANCIAL REPORT

AS AT 30 JUNE 2018

1.1. Person responsible for the Semi - Annual Financial Report Mr. Martin Němeček, acting as Chief Executive Officer and Managing Director of the Company, with professional address at 40 rue de la Vallee, L-2661 Luxembourg, Grand-Duchy of Luxembourg, [email protected].

1.2. Declaration by the persons responsible for the Semi - Annual Financial Report The undersigned hereby declares that, to the best of its knowledge:

- the condensed consolidated interim financial statements of the Company as at 30 June 2018,

prepared in accordance with the International Accounting Standards (“IFRS”) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and result of the Company and its subsidiaries included in the consolidation taken as a whole; and

- the Management report as at 30 June 2018, provides a fair view of the development and performance of the business and the position of the Company and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

Approved by the Board of Directors and signed on its behalf by Mr. Martin Němeček.

Luxembourg, 31 August 2018

Mr. Martin Němeček CEO & Managing Director

CPI PROPERTY GROUP CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX‐MONTH PERIOD ENDED 30 JUNE 2018 (UNAUDITED) CPI PROPERTY GROUP´s Board of Directors has approved the condensed consolidated interim financial statements for the six‐month period ended 30 June 2018 on 29 August 2018. All the figures in this report are presented in thousands of Euros, except if explicitly indicated otherwise.

06 // FINANCIAL STATEMENTS


109

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME The accompanying notes form an integral part of these consolidated financial statements. 6 month period ended Note 30 June 2018 30 June 2017 Gross rental income 6.1 146,922 119,679 Service revenue 6.1 5,798 5,171 Net service charge income 6.2 10,238 7,231 Property operating expenses 6.3 (28,357) (26,291) Net rental income 134,601 105,790 Development sales 6.4 7,913 1,900 Cost of goods sold 6.4 (7,351) (68) Development operating expenses 6.4 (2,278) (2,614) Net development income (1,716) (782) Hotel revenue 6.5 49,935 46,763 Cost of goods sold 6.5 (112) (107) Hotel operating expenses 6.5 (35,488) (32,925) Net hotel income 14,335 13,731 Revenue from other business operations 6.6 24,068 22,395 Cost of goods sold 6.6 (1,087) (1,069) Related operating expenses 6.6 (14,643) (16,611) Net income from other business operations 8,338 4,715 Total revenues 244,874 203,139 Total direct business operating expenses (89,316) (79,685) Net business income 155,558 123,454 Net valuation gain 6.7 95,125 229,221 Net loss on the disposal of investment property 6.8 (16) (211) Net loss on disposal of subsidiaries (70) (1,736) Amortization, depreciation and impairments 6.9 (11,652) (14,748) Other operating income 6.10 812 8,059 Administrative expenses 6.11 (24,824) (21,963) Other operating expenses 6.12 (4,106) (1,465) Operating result 210,827 320,611 Interest income 6.13 7,252 2,487 Interest expense 6.14 (44,883) (46,733) Other net financial result 6.15 12,227 (45,397) Net finance costs (25,404) (89,643) Share of profit of equity‐accounted investees (net of tax) (362) ‐‐ Profit before income tax 185,061 230,968 Income tax expense 6.16 (24,248) (40,822) Net profit from continuing operations 160,813 190,146 Items that may or are reclassified subsequently to profit or loss Foreign currency translation differences ‐ foreign operations (44,584) 62,023 Effective portion of changes in fair value of cash flow hedges (10,755) 13,665 Income tax on other comprehensive expense 2,047 (2,442)

Items that will not be reclassified subsequently to profit or loss Revaluation of property, plant and equipment 7.3 8,680 (5,932) Income tax on other comprehensive expense (1,460) 1,050

Other comprehensive income for the period, net of tax (46,072) 68,364 Total comprehensive income for the period 114,741 258,510

Profit attributable to:

Non‐controlling interests 1,466 1,398 Owners of the Company 155,419 188,748 Perpetual notes investors 3,928 ‐‐

Profit for the period 160,813 190,146

Total comprehensive income attributable to: Non‐controlling interests 1,466 1,398 Owners of the Company 109,347 257,112 Perpetual notes investors 3,928 ‐‐

Total comprehensive income for the period 114,741 258,510 Earnings per share 7.13

Basic earnings in EUR per share 0.02 0.02 Diluted earnings in EUR per share 0.02 0.02



110

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION The accompanying notes form an integral part of these consolidated financial statements.

Note 30 June 2018 31 December 2017 NON‐CURRENT ASSETS Intangible assets and goodwill 7.1 122,522 120,316 Investment property 7.2 6,082,115 5,807,947 Property, plant and equipment 7.3 769,765 723,664 Hotels 640,336 598,906 Other property, plant and equipment 129,429 124,758 Biological Assets 7.4 2,384 2,099 Equity accounted investees 7.5 4,205 4,568 Other investments 580 1,037 Derivative instruments 4,938 5,383 Loans provided 7.6 77,181 71,638 Trade and other receivables 7.7 3,443 4,193 Deferred tax asset

142,376 142,375

Total non‐current assets

7,209,509 6,883,220

CURRENT ASSETS

Inventories 7.8 80,280 81,793 Biological Assets 7.4 4,752 4,117 Current income tax receivables 7,421 4,709 Trade receivables 7.7 74,378 76,513 Derivative instruments 118 119 Loans provided 7.6 65,323 72,088 Cash and cash equivalents 7.9 473,396 238,907 Other financial current assets 7.10 15,367 15,408 Other non‐financial current assets 7.11 44,255 39,713 Assets held for sale 7.12 63,372 112,645 Total current assets 828,662 646,012 TOTAL ASSETS 8,038,171 7,529,232 EQUITY

Equity attributable to owners of the Company 7.13 3,286,883 3,277,449 Perpetual notes 7.13 541,798 ‐‐ Non‐controlling interests 39,186 37,720 Total equity 3,867,867 3,315,169 NON‐CURRENT LIABILITIES

Bonds issued

7.14 1,313,496 1,331,671 Financial debts

7.15 1,580,621 1,593,027

Derivative instruments

4,755 2,602 Deferred tax liabilities

721,161 710,035

Provisions

9,115 14,235 Other non‐current liabilities

7.16 37,454 33,756

Total non‐current liabilities

3,666,602 3,685,326

CURRENT LIABILITIES

Bonds issued

7.14 146,039 157,523 Financial debts

7.15 156,777 164,724

Trade payables

7.17 75,437 74,822 Advance payments

7.18 59,391 60,703

Derivative instruments

307 624 Other financial current liabilities

7.19 27,372 26,648

Other non‐financial current liabilities

7.20 26,501 27,769 Liabilities linked to assets held for sale 7.12 11,878 15,924 Total current liabilities

503,702 528,737

TOTAL EQUITY AND LIABILITIES 8,038,171 7,529,232



111

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY The accompanying notes form an integral part of these consolidated financial statements.

Note Share capital Share

premium Translation reserve Legal

reserve Hedging reserve Other

reserves* Retained earnings

Equity attributable to shareholders of the Company

Equity attributable to

perpetual notes investors

Equity attributable to shareholders of the

Company and perpetual notes

investors

Non

controlling interests

Total equity

Balance at 1 January 2018 (audited) 923,642 1,060,744 46,803 5,836 13,311 271,169 955,940 3,277,449 ‐‐ 3,277,449 37,720 3,315,169 Adjustment on initial application of IFRS 9 (net of tax)

‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (4,942) (4,942) ‐‐ (4,942) ‐‐ (4,942)

Adjusted balance at 1 January 2018 923,642 1,060,744 46,803 5,836 13,311 271,169 950,998 3,272,507 ‐‐ 3,272,507 37,720 3,310,227 Comprehensive income: Profit for the period ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 155,419 155,419 3,928 159,347 1,466 160,813

Total comprehensive income ‐‐ ‐‐ (44,584) ‐‐ ‐‐ -- ‐‐ (44,584) ‐‐ (44,584) ‐‐ (44,584) Net changes in fair value of cash flow FX hedges ‐‐ ‐‐ ‐‐ ‐‐ (8,456) ‐‐ ‐‐ (8,456) ‐‐ (8,456) ‐‐ (8,456)

Related income tax on other comprehensive expense

‐‐ ‐‐ ‐‐ ‐‐ 1,611 ‐‐ ‐‐ 1,611 ‐‐ 1,611 ‐‐ 1,611

Net changes in fair value of cash flow IRS hedges ‐‐ ‐‐ ‐‐ ‐‐ (2,299) ‐‐ ‐‐ (2,299) ‐‐ (2,299) ‐‐ (2,299) Related income tax on other comprehensive

expense

‐‐ ‐‐ ‐‐ ‐‐ 436 ‐‐ ‐‐ 436 ‐‐ 436 ‐‐ 436 Revaluation of property, plant and equipment 7.3 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 8,680 ‐‐ 8,680 ‐‐ 8,680 ‐‐ 8,680

Related deferred tax effect ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (1,460) ‐‐ (1,460) ‐‐ (1,460) ‐‐ (1,460) Total comprehensive income / (expense) ‐‐ ‐‐ (44,584) ‐‐ (8,709) 7,220 ‐‐ (46,072) ‐‐ (46,072) ‐‐ (46,072) Total comprehensive income for the period ‐‐ ‐‐ (44,584) ‐‐ (8,709) 7,220 155,419 109,347 3,928 113,275 1,466 114,741 Contributions by and distributions to owners of the Company

Capital increase 7.13 25,000 25,000 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 50,000 ‐‐ 50,000 ‐‐ 50,000 Share buy‐back 7.13 (72,485) (72,485) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (144,971) ‐‐ (144,971) ‐‐ (144,971)

Total contributions by and distributions to owners of the Company

(47,485) (47,485) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (94,971) ‐‐ (94,971) ‐‐ (94,971)

Total transactions with owners of the Company (47,485) (47,485) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (94,971) ‐‐ (94,971) ‐‐ (94,971) Other movements Issuance of perpetual notes 7.13 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ -- ‐‐ ‐‐ 537,870 537,870 ‐‐ 537,870 Total other movements ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 537,870 537,870 ‐‐ 537,870 Balance at 30 June 2018 876,157 1,013,258 2,219 5,836 4,602 278,390 1,106,420 3,286,883 541,798 3,828,681 39,186 3,867,867

* Other Reserves are created from accumulated profits and losses and other equity operations, such as scope variations or revaluation of assets. These reserves may be subject to the distribution of dividends. This item also includes measurements of post‐employment defined benefit obligation.



112

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (CONTINUED) The accompanying notes form an integral part of these consolidated financial statements.

Note Share capital Share

premium Translation reserve Legal

reserve Hedging reserve Other

reserves* Retained earnings

Equity attributable to owners

of the Company

Non

controlling interests

Total equity

Balance at 1 January 2017 770,245 1,060,744 (47,970) 5,845 (18,388) 223,058 265,226 2,258,760 29,707 2,288,467 Comprehensive income: Profit for the period ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 188,748 188,748 1,398 190,146

Total comprehensive income ‐‐ ‐‐ 62,023 ‐‐ ‐‐ ‐‐ ‐‐ 62,023 ‐‐ 62,023 Net changes in fair value of cash flow FX hedges ‐‐ ‐‐ ‐‐ ‐‐ 10,559 ‐‐ ‐‐ 10,559 ‐‐ 10,559

Related income tax on other comprehensive expense ‐‐ ‐‐ ‐‐ ‐‐ (1,880) ‐‐ ‐‐ (1,880) ‐‐ (1,880) Net changes in fair value of cash flow IRS hedges ‐‐ ‐‐ ‐‐ ‐‐ 3,106 ‐‐ ‐‐ 3,106 ‐‐ 3,106

Related income tax on other comprehensive expense ‐‐ ‐‐ ‐‐ ‐‐ (563) ‐‐ ‐‐ (563) ‐‐ (563) Revaluation of property, plant and equipment 7.3 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (5,932) ‐‐ (5,932) ‐‐ (5,932)

Related deferred tax effect ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,050 ‐‐ 1,050 ‐‐ 1,050 Total comprehensive income/(expense) ‐‐ ‐‐ 62,023 ‐‐ 11,223 (4,882) ‐‐ 68,364 ‐‐ 68,364 Total comprehensive income for the period ‐‐ ‐‐ 62,023 ‐‐ 11,223 (4,882) 188,748 257,112 1,398 258,510 Contributions by and distributions to owners of the Company

Capital increases 51,500 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 51,500 ‐‐ 51,500 Total contributions by and distributions to owners of the Company 51,500 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 51,500 ‐‐ 51,500 Disposal of subsidiaries ‐‐ ‐‐ ‐‐ (8) ‐‐ ‐‐ ‐‐ (8) ‐‐ (8) Total changes in ownership interests in subsidiaries ‐‐ ‐‐ ‐‐ (8) ‐‐ ‐‐ ‐‐ (8) ‐‐ (8) Total transactions with owners of the Company 51,500 ‐‐ ‐‐ (8) ‐‐ ‐‐ ‐‐ 51,492 ‐‐ 51,491 Balance at 30 June 2017 821,745 1,060,744 14,053 5,837 (7,165) 218,177 453,974 2,567,367 31,105 2,598,472

* Other Reserves are created from accumulated profits and losses and other equity operations, such as scope variations or revaluation of assets. These reserves may be subject to the distribution of dividends. This item also includes measurements of post‐employment defined benefit obligation.



113

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT The accompanying notes form an integral part of these consolidated financial statements.

6 month period ended Note 30 June 2018 30 June 2017

PROFIT BEFORE INCOME TAX 185,061 230,968 Adjusted by:

Net valuation gain 6.7

(95,125)

(229,221) Loss on the disposal of investment property 6.8

16

211

Depreciation/amortisation of tangible and intangible assets 6.9

15,404

13,834 Impairment of assets/(Reversal of impairment of assets) 6.9

(3,751)

914

Loss on the disposal of subsidiaries

70

1,736 Net finance costs 6.13,6.14

41,325

49,847

Share of profit of equity accounted investees 362 ‐‐ Bargain purchase ‐‐ (4,118) Exchange rate differences

(12,017)

43,168

Profit before changes in working capital and provisions

131,344 107,339 Decrease/ (increase) in inventories

1,544 (1,207)

Decrease in trade receivables

438 20,925 Decrease in trade payables

(10,853) (5,962)

Changes in provisions

(4,840) (1,106) Income tax paid

(6,089) (850)

NET CASH FROM OPERATING ACTIVITIES 111,546 119,139 Acquisition of subsidiaries, net of cash acquired

3.2

(155,318)

(131,161)

Acquisition of investment property

7.2

(42,275)

(22,093) Expenditure on investment property under development

7.2

(1,748)

(4,917)

Proceeds from sale of investment property

6.8

4,442

1,086 Proceeds from sale of property, plant and equipment

83

36

Proceeds from disposals of subsidiaries, net of cash disposed

21,552

26,068 Acquisition of property, plant and equipment

(11,702)

(11,478)

Acquisition of intangible assets

(553)

(195) Loans provided

7.6

(77,137)

(34,472)

Loans repaid 7.6 3,205 4,580 Interest received

7,182

2,730

NET CASH USED IN INVESTING ACTIVITIES (252,270) (169,816) Proceeds from issue of share capital

7.13

50,000

51,500

Share buy‐back (144,970) ‐‐ Proceeds from perpetual notes investors, net 537,870 ‐‐ Proceeds from bond issued 7.14 ‐‐ 93,984 Repayment of bonds issued 7.14 (30,000) (74,708) Drawdowns of loans and borrowings 133,372 179,440 Repayments of loans and borrowings (129,848) (217,100) Interest paid

(36,846)

(50,593)

Drawdowns/(repayment) of finance lease liabilities

(4,708)

(502) NET CASH FROM / (USED IN) FINANCING ACTIVITIES 374,871 (17,979) NET INCREASE/(DECREASE) IN CASH 234,147 (68,656) Cash and cash equivalents at the beginning of the year

238,908

303,733

Effect of movements in exchange rates on cash held

(10)

24 Less: Cash and cash equivalents reclassified to asset held for sale 351 ‐‐ CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 473,396 235,101



114

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 GENERAL INFORMATION CPI PROPERTY GROUP S.A. (hereinafter also the ”Company” or “CPI PG”, and together with its subsidiaries as the “Group”) is a real estate group founded in 2004 as ORCO Germany S.A. Since its foundation it has been operating in Germany and concentrated mainly on commercial property, project development and asset management, principally in Berlin. With its subsidiary Gewerbesiedlungs‐Gesellschaft (GSG), the Group is the largest lessor of commercial property in the Berlin area. After the incorporation into CPI in 2014, the Group has expanded into a number of CEE countries and significantly extended its current Berlin portfolio.

The Group focuses on investment properties, realizes development potentials and offers full‐service asset management for third parties.

CPI PROPERTY GROUP is the parent company of the Group. The Company is a Luxembourg based Société Anonyme, whose shares registered under ISIN code LU0251710041 are listed on the regulated market of the Frankfurt Stock Exchange in the General Standard segment.

The registered office of the Company is located at 40, rue de la Vallée, L‐2661 Luxembourg, Grand Duchy of Luxembourg. Description of the ownership structure As at 30 June 2018, Radovan Vítek indirectly owns 88.60% of CPI PROPERTY GROUP (91.15% voting rights).

For the list of shareholders as at 30 June 2018 refer to note 7.13.

Change in the Board of Directors and the management Board of Directors

Board of Directors as at 30 June 2018 Board of Directors as at 31 December 2017 Chairman Chairman

Edward Hughes Edward Hughes CEO & Managing Director CEO & Managing Director

Martin Němeček Martin Němeček Members Members

Philippe Magistretti Philippe Magistretti Tomáš Salajka Tomáš Salajka Oliver Schlink Oliver Schlink Radovan Vítek Radovan Vítek Marie Vítková Marie Vítková

Change in the Board of Directors

The Annual General Meeting held on 31 May 2018 in Luxembourg resolved to re‐appoint all Board members for another year, until the annual general meeting of 2019 concerning the approval of the annual accounts for the financial year ending 31 December 2018.



115

The management

The management team of the Company is comprised of the following members: Martin Němeček, CEO; Zdeněk Havelka, Executive Director; Tomáš Salajka, Acquisitions, Asset Management and Sales Director; David Greenbaum, CFO; Pavel Měchura, Group Finance Director; Pavel Semrád, Asset and Letting Director; Petr Beránek, Construction Director and Martin Matula, General Counsel.

Employees

The Group has 3,928 employees as at 30 June 2018 (as at 31 December 2017 – 3,920 employees).



116

2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The condensed consolidated interim financial statements have been prepared on a historical cost basis except for the following material items in the condensed consolidated interim statement of financial position, which are measured as indicate below at each reporting date:

• investment property is measured at fair values; • property, plant and equipment is measured at fair values (only applicable for Group´s hotel portfolio

– asset type Hospitality); • biological assets are measured at net realisable value; • derivative financial instruments are measured at fair value; • non‐derivative financial instruments at fair value through profit or loss are measured at fair value; • contingent consideration assumed in a business combinations is measured at fair value.

Basis of preparation

The condensed consolidated interim financial statements for the six month period ended 30 June 2018 have been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual consolidated financial statements as at 31 December 2017. The same accounting policies and methods of computation are followed in the condensed consolidated interim financial statements for the six month period ended 30 June 2018 as compared with the consolidated financial statements for the year ended 31 December 2017. The condensed consolidated interim financial statements are presented in thousands of Euros and all values are rounded to the nearest thousand except when otherwise indicated. The Group’s objectives and policies for managing capital, credit risk and liquidity risk were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017. The Group’s operations are predominantly not subject to seasonal fluctuations. These condensed consolidated interim financial statements have not been audited. The condensed consolidated interim financial statements were authorized for the issue by the Board of Directors on 29 August 2018.

Changes in accounting policies

Except as described below, and apart from the new accounting policy applied in respect of the issuance of perpertual notes (refer to 7.13), the accounting policies applied in preparing these condensed consolidated interim financial statements are consistent with those used to prepare the financial statements for the year ended 31 December 2017. The changes in accounting policies are also expected to be reflected in the Group´s consolidated financial statements as at and for the year ending 31 December 2018. New accounting standards and amendments For the preparation of these condensed consolidated interim financial statements, the following new or amended standards and interpretations are mandatory for the first time for the financial year beginning



117

1 January 2017 (the list does not include new or amended standards and interpretations that affect first‐time adopters of IFRS or not‐for‐profit and public sector entities since they are not relevant to the Group). The nature and the impact of each new standard/amendment are described below:

IFRS 15, 'Revenue from contracts with customers' provides a framework that replaces existing revenue recognition guidance in IFRS.

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards.

The new standard establishes a five‐step model to determine when to recognise revenue, and at what amount. The new model specifies that revenue should be recognised when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognised:

over time, in a manner that depicts the entity’s performance; or

at a point in time, when control of the goods or services is transferred to the customer.

IFRS 15 also establishes the principles that an entity shall apply to provide qualitative and quantitative disclosures which provide useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.

The clarifications to IFRS 15 clarify some of the standard’s requirements and provide additional transitional relief for companies that are implementing the new standard.

The Group adopted the standard in the annual period beginning 1 January 2018.

The Group adopted IFRS 15 using the cumulative effect method (under this method the cumulative effect of initially applying the new standard is recorded as an adjustment to the opening balance of equity at the date of initial application and comparative period amounts were not restated).

The Group analyzed the impact of IFRS 15 application on entities revenue streams and based on disclosure of comparable under both standards, the Group does not identified any material impact neither to the opening balance of equity nor on the Group´s interim financial statements (interim statement of cash flows, interim statement of financial position, interim statement of profit or loss and OCI).

Under IFRS 15, revenue is recognised, when a customer obtains control of the goods/services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement.

The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group´s various goods and services are set out below:



118

Gross rental revenue Revenue stream Conclusion

The largest portion of revenue is generated from rental of Group’s investment property. Currently all of the rental revenue is from operating leases. Rental revenue is recognized as revenue on a straight‐line basis over the term of the operating lease. Lease incentives granted are recognized as an integral part of the total rental revenue, over the term of the lease.

These revenues represent rental income, which is not in scope of IFRS 15 and is treaded according to IAS 17/ IFRS 16.

Service revenue Revenue stream Conclusion

The Group contains service entities which provide services to other entities within the Group or to third parties. The services provided are accounting and advisory services or facility management. Revenue from such services is recognized in profit or loss by reference to the stage of completion, i.e. revenue is recognized in the accounting periods in which the services are rendered.

Under IFRS 15 the first condition of IFRS15 par. 35 is fulfilled (the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs) and therefore the over the time recognition is allowed.

Other service revenues include revenues from services provided by the Group. The Group provides additional maintenance to tenants or other third parties based on their orders. Currently the revenues are recognized in profit or loss by reference to the stage of completion, i.e. revenue is recognized in the accounting periods in which the services are rendered.

According to IFRS 15 each order will be considered as a separate performance obligation. Often the services will be simultaneously received and consumed by the customer (IFRS 15.35 criterion 1) or the entity’s performance enhances an asset that the customer controls as the asset is created or enhanced (IFRS 15.35 criterion 2). If one of these criteria is fulfilled, then the revenue shall be recognized over time. The amount and timing of the revenue recognized according to IFRS 15 is consistent with the Group´s practice.

Net service charge income Revenue stream Conclusion

In addition to the lease payments, tenants are charged for maintenance, utilities, cleaning etc. Such income is commonly referred to as service charge income. In some premises the service charges are direct reinvoicing of the provided services (e.g. electricity). The customer pays advances which are settled on annual basis based on the actual expense. In this case the amount due from the tenant as well as the amount due to the supplier of such service is recorded only to the balance sheet. However, tenants at certain premises pay flat monthly fee for service charges and such fee is recognized as a revenue based on issued invoices and accruals. The service charge income and revenues from sales of electricity are presented together with service charge expenses and cost of sales – electricity in the financial statement line Net service charge income. The Group assessed that the services provided to the tenants under the lease agreement shall be considered one or multiple performance obligations. The service charge covers services such as maintenance, cleaning, utilities etc. Group provides a significant service of integrating the services into a bundle that represents the combined output for the tenant. In simple terms, the tenants expects certain level of services (running water, working heating and electricity, cleaning etc.) and the value to the tenants is in the package of the services rather than in each service individually. Therefore, it can was concluded that these non‐lease services are a single performance obligation within the terms of the lease agreements. Certain non‐lease services are directly reinvoiced based on the suppliers’ invoices, therefore the Group considers the price for the service charge to be at the stand‐alone selling price level. For the services charged at monthly fee, the calculation of the monthly fee is done in a way to at least cover the related expenses. The Group commonly does not give discounts on the services. The prices for the lease component are always considered to be the market price at the date of the agreement. Therefore, the allocation of the price between lease and non‐lease component according to IFRS 15 would not differ to the prices set in the contract.

The amount and timing of the revenue recognized according to IFRS 15 is consistent with the Group´s practice.



119

Development sales Revenue stream Conclusion

Apart from the main activity (rent and related services) the Group also undertakes real estate development projects. In past years such projects included luxury apartments in Nice, France, villas in Sardegna, Italy or residential homes in Březiněves, Czech Republic. Generally, revenue from the sale of trading property is recognized in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, usually on the date on which the application is submitted to the land registry for transfer of legal ownership title. The property has to be completed and the apartments are ready for sale, including the necessary regulatory permissions. Under IFRS 15, Step 2 is one of the key considerations whether the sale of building included elements, which could be separate performance obligation (such as property management service). This assessment can have an impact in the timing of revenue recognition as different performance obligations may be transferred to customer in different time. No such good or service was identified among the Group´s contracts, each one included only one performance obligation. Group assesses this on the contract by contract basis. Other important consideration is in the Step 5, when IFRS 15 requires an entity to recognize revenues progressively over time if criteria of IFRS 15.35 are met. Generally, second criterion is met for construction element of real estate development when land is a separate performance obligation transferred at point in time before the start of construction. The construction work is then an enhancement of asset controlled by customer. Third criterion is most relevant for multi‐unit residential developments, as title to the land and building elements of contract generally transfer on completion of construction. In such case the Group needs to assess whether its performance does not create an asset with an alternative use to the entity and the Group has an enforceable right to payment for performance completed to date.

The timing of the revenue recognized according to IFRS 15 related to the selected contract shall be consistent with the current practice. However, each contract needs to be treated separately, particularly in cases where contract is in place prior the construction is finished, where the contract contains multiple performance obligations or there is a variable component to the price.

Hotel revenue Revenue stream Conclusion

The Group provides accommodation services. Commonly, hotel guests pay advances for the reservations. Such payments are booked as liabilities and recognized as revenue together with the remaining balance over the time when the service is provided. Room rentals are an example of services which are consumed as the services are performed and therefore the revenue shall be recognized over time (IFRS 15.35a).


The Group and travel agencies agree a set room rate to which the travel agencies add their margin. The Group collects only the set price (without the travel agency margin) and records this amount as revenue. If certain sales volumes are reached, the travel agencies are entitles to a retrospective volume discount (approximately 2‐6%). This bonus is calculated and invoiced as credit note annually and the amount is recorded as an expense.

The Group should determine the transaction price with respect to the retrospective discount. The discount should not be booked as expense, but as reduction of revenue recognized and liability for the discount amount should be created. However, the Group analyzed, that the volume of discount granted to travel agencies in 2016 and 2017 were around EUR 120 thousand (i.e. according to IFRS, the hotel revenue for 2016 and 2017 should have been lower by this amount, as well as the expense). Considering the hotel revenue of the Group for 2017 amounted to EUR 112.2 million, such amount was considered to be immaterial, and therefore no adjustment has been made to the opening statement of equity.

When the booking is done through a reservation portal (e.g. booking.com), the portals charge the Group a commission (e.g. 15% of the room rate). The commission fee is recognized as an expense. The commission fee may with its character represent so called cost of obtaining a contract. The new standard includes specific guidance on when these costs should be capitalized. However, if the expected period of amortization for the incremental costs of obtaining contract is a year or less, capitalization is not required and the costs are accounted for as an expense. Since the commission applies on one certain stay in the hotel which is not expected to be longer than one year, this practical expedient applies.




120


Customer loyalty programs: 1) Choice Privileges: The Group participate in a bonus point program called “Choice Privileges”, which is offered by Choice Privileges hotels around the world, thus not only the Group. This program applies only within the Clarion hotels. Customer earns points for booking a hotel stay (10 points per dollar for up to four rooms per night) or a meeting room (4 points per dollar spent). The customer is eligible to exchange the points for different services, such as travel rewards, dining rewards, airline miles as well as free nights at the Choice Privileges hotels. The points expire after 2 years if a program member is inactive. Customers participating in this program can spend their points on free nights at Clarion hotels (or other hotels within the Choice Privileges network). No other benefits besides free nights are provided by the Group. At the time when points are earned, the Group doesn’t record any liability. As the award bonus points are redeemed by a customer the Group recognizes costs related to the free night. The Group also obtains 25 EUR as a compensation for these reservations from Choice hotels, which is recorded as revenue. This represents about one third of a normal price charged for night. If the hotel has 100% occupancy in given time period, then Choice pays 90% of the rate. The Group issues an invoice and Choice hotels pay the invoice in a standard way. The benefits from the loyalty program are considered customers’ options to acquire additional goods or services for free (or at a discount) and IFRS 15 provides a guideline how to treat such options to customers. Due to the fact that the customer acquires additional service/good (e.g. free nights), which he would not receive without entering into the contract, the option provides material right and shall be accounted for a separate performance obligation. Additionally, the price that the customers pay on the exercise of the points on the future purchase is not the stand‐alone selling price of those items (e.g. the stays are free of charge). Thus the customer paid for the points when purchasing goods or services and the selling price of the loyalty points should be determined based on the likelihood of redemption. The revenue from royalty points shall be booked at the point of redemption.

Application of the new standard requires to estimate the redemption rate of the loyalty points. As the points represent material right, they are considered a separate performance obligation. The customer paid for the points when purchasing the accommodation. In determining the stand‐alone selling price of loyalty points the Group should considered the likelihood of redemption. Transaction price shall be allocated between the accommodation and points on the relative stand‐alone selling price basis. The revenue for accommodation will be recognized over the stay period and the revenue from redeemed points will be deferred until the redemption date. The extent of this impact can be assessed through the historical use of free nights at Clarion through this program. Over the years, the number of redeemed free nights wasn’t significant and further, the Group is compensated for 33‐90% of the night rate. As such, the impact on the consolidated financial statements has been considered to be immaterial.

2) CPI bonus program: The Group also provide bonus program when customers have the eleventh night for free in any of the following hotels: Hotel Fortuna City, Hotel Fortuna West and Hotel Černigov. The eleventh night is paid by voucher – a card filled in with 10 stamps. The period within the customers have to use this voucher is not limited. During 2017 customers utilized approximately 30 free nights through this program. Under IFRS 15 this falls under the category customer option for additional services. As mentioned above the entity shall account for customer option as a performance obligation if the option provides material right to the customer. In this case the entity grants the customer an option to acquire additional service, which he would not receive without entering into the initial sale agreement. The option does give the customer the right to acquire additional service at a price which does not reflect the stand‐alone selling price of the service (e.g. the stay is for free). Similarly to Choice Privileges program, the option rises a performance obligation and the entity must estimate stand‐alone selling price. However, since the amount of revenues generated from these free nights would be about CZK 30 thousand (app. EUR 1 thousand) and the Group plans to close these hotels in the near future, this impact is deemed to be immaterial.

According to the new standard, the Group shall estimate the redemption rate of the program. The payment for each night shall be split between revenue of accommodation and deferred revenue for the free night option (or alternative way to describe this is that the revenue for the accommodation shall be reduced by the value allocated to the free night option). The revenue of the option will be recognized at the time of redemption. However, since the amount of revenues generated from these free nights would be about CZK 30 thousand (app. EUR 1 thousand) and the Group plans to close these hotels in the near future, this impact is deemed to be immaterial.



121


3)„The Club“ and „ The BGIP“ bonus program: All Czech Group hotels provide bonus programs for business partners. Program “The Club” is used for Czech partners and “The BGIP” for foreign partners. The program is based on collection of points for nights in hotels, when 1 nights equals to 10 points. The points can be then exchanged for vouchers, the minimum amount of points for exchange is 200 points. The points expire each year (everyone has zero balance of points every January). The partners have the chance to collect their vouchers until February. CPI keeps track of points and every quarter sends emails to partners with the information how many points they have and that are eligible to exchange them for vouchers. The vouchers are not automatically generated, the partners must send the request for issuing the voucher. The voucher then expires after a year. Under IFRS 15 this will as well falls under the category customer option for additional services, as mentioned above. Partners option represents separate performance obligation if the option provides material right to the partner. The vouchers can be also viewed as additional service, which is provided at a price which does not reflect the stand‐alone selling price of the service. Similarly to programs above, the option rises a performance obligation and the entity must estimate stand‐alone selling price. Throughout 2017, the total amount of collected points were 278 200 from which 168 270 was converted to vouchers. Consider the minimum amount of points for one voucher, these points would transfer to 841 vouchers. This vouchers allow customers to use services in amount of CZK 320 thousand (app. EUR 12.5 thousand) (at cost). Such amount is considered immaterial from the Group’s perspective.

According to the new standard, the Group shall estimate the usage rate of vouchers. The payment for each night shall be split between revenue of accommodation and deferred revenue for the additional service (voucher). The revenue of the option will be recognized at the time of redemption. Considering the total amount of points collected in 2017 and the overal impact on the Group consolidated financial statements, the amount converted to vouchers is not material for the Group and the financial statements have not been adjusted in this regards.

Food and beverage sales: The Group offers to its customers food and beverages in hotel rooms as well as in hotel restaurants. Revenues are recognized when services are provided. According to IFRS 15 each order is considered as a separate performance obligation and should be recognized at point in time.


Services: The Group also offer wellness, fitness, car rental, taxi, concierge etc. to their hotel customers. While at some hotels these services may be provided directly by the hotel, it often is a service provided by some other company (e.g. taxi operator) and the Group acts as intermediary in providing these services. In such cases the Group receives a commission and do not influence the price of the service. The current practice is that the Group recognizes the consideration received from a customer as revenue (price of the service plus the commission) and record an expense and liability to the service provider.

The fact that the price cannot be influenced and the service is fully under the control of 3rd party, indicates that the Group may be acting as an agent in certain types of transactions. Therefore revenues from such transactions should be reported net of related expenses. CPI thus shall present as the revenue only the commission received and should not present the revenues and expenses on gross basis. According to the Group findings, account 518100 includes services for which the Group act as an agent most often (sightseeing, bus, taxi). For the period ending 31 December 2017 this account included approximately EUR 100 thousand worth of expenses which should be reported as a deduction of revenue. However, with the hotel revenue of EUR 112.2 million, such amount has been considered as immaterial.

Further the Group recognize revenues from conferences – such revenue will include rent of premises, rent of technology and catering. The customers often pay advances, however these payments are booked as liability and revenues are recognized at the time when services are provided. According to IFRS 15, the question rises whether the contract with a customer contains one or more performance obligations. In light of IFRS 15.27a) it can be concluded that the customer can benefit from each of the services separately (catering, rental of the meeting rooms, etc.). On the other hand, the Group provides a significant service of integrating the services into a bundle that represents the combined output for the customer. In other words, the customer orders a bundle of services and the value to the customer is in the package of the services rather than in each service individually. Therefore, it was concluded that the conference services are a single performance obligation within one contract or an order. Conference services are an example of services which are consumed as the services are performed and therefore the revenue shall be recognized over time (IFRS 15.35a).




122

Revenue from other business operations Revenue stream Conclusion

Sales of animals: Contracts for sale of animals are concluded through an open tender. In the tender the customers offer a price per kilogram and the best price wins the tender. Tenders are usually carried out once a year. Sales are typically organized once a year (in autumn), or if needed twice a year (in autumn and spring). The winner of the tender pays an advance (approximately 40%) and this payment is initially booked as liability. Revenues are realized at the date of delivery and the remaining payment is due within 14 days from the date of delivery. According to IFRS 15 the control of the goods (in this case animals) is transferred at point of time. There is no variable component to the price and no options are granted to the customers.


Government grants: The Group receives government support through the use of European Union grants. The unconditional grant related to a biological asset is recognized in profit or loss when the grant becomes receivable. Other government grants are initially recognized as deferred income at fair value if there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant; they are then recognized in profit or loss on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognized in profit of loss on a systematic basis in the periods in which the expenses are recognized.

These transactions are not in the scope of IFRS 15 and are treated within the scope of IAS 20 or IAS 41.

Slaughterhouse ‐ turnover bonuses to customers: Turnover bonuses are provided to customers and evaluated either quarterly or annually. The discount applies retrospectively to all purchases once a certain threshold is achieved. Currently Farms do not create any provision for rebate throughout the period. They evaluate the bonuses at the end of the period and either issue credit note, which is recorded as reduction of revenues, or in some cases customer prepares and sends invoice for turnover bonus; the bonus is then recorded as an expense. If a discount applies retrospectively, the IFRS 15, par. 51 states that these bonuses should be accounted for as a variable part of consideration (Step 3). The entity, thus should estimate the transaction price and update the estimation throughout the term of the contract in order to recognize the revenue and, if needed, reduce it by creating rebate liability.

The Group analyzed, that the turnover bonus for 2016 and 2017 was 0.4% and 0.2% of total turnover, respectively. The revenue of farms for the year ending 31 December 2017 was EUR 9 463 thousands (excluding grants), hence the turnover bonus was approximately EUR 19 thousands. Such amount is considered inconsequential from the Group perspective. For 2018, there is only one customer remaining with a right to a turnover bonus, so the impact is expected to be even lower for 2018.

Farms recognize revenue also from the following activities: • sale of eight or nine years old cattle (proceeds from sale of fixed assets – Czech account 641); • sale of material ‐ large‐scale production of hay for maximum self‐sufficiency and production of milk; • cattle breeding and field works. Revenues are realized at the date of delivery and no bonus is offered by the Group.

According to IFRS 15 each order will be considered as a separate performance obligation and the revenue shall be recognized when the control is transferred to the customer, i.e. at the date of delivery. The amount and timing of the revenue recognized according to IFRS 15 is consistent with the Group´s practice.

Operation of ski lifts: Remontées Mécaniques operates ski lifts and provides 3 types of ski passes. The key consideration for the seasonal passes under IFRS 15 is Step 5 ‐ revenue recognition. The entity evaluates whether it transfers control of the good or services over time, or at point in time. The criteria for recognition of revenue progressively over time are mentioned in the section 2.5. Step 5. In this case the first criterion applies, when the customer simultaneously receives and consumes the benefits provided by the entity´s performance as the entity performs. For the short‐term ski‐passes the Group records the revenue at the date of sale – e.g. the first day of the validity of the pass. Since the passes are of a short‐term nature (maximum a week) recognizing revenue at the point of time shall not yield into consequential differences compared to over the time method.


The Group also operates restaurants and parking at the CMA ski resort. Parking is usually daily parking but there is also possibility of seasonal parking. Revenues are recognized when services are provided. The total revenue for parking is approximately CHF 550 thousand and only small portion of this amount relates to seasonal passes. The revenue from seasonal parking passes is not recognized over time as it was considered immaterial in past. If this assumption is still valid, then the same treatment may be accepted for IFRS 15.

According to IFRS 15 each order or parking stay is considered as a separate performance obligation and it shall be recognized at point in time. The amount and timing of the revenue recognized according to IFRS 15 shall be consistent with the Group´s practice.

Grants from municipalities: CMA ski resort also receives grants from municipalities. These transaction are not in the scope of IFRS 15 and are treated within the scope of IAS 20.

Not within IFRS 15 scope.



123

Other operating income Revenue stream Conclusion

Revenues from technical improvement of assets: Revenues are recognized from the technical improvements that tenants make to the lease property before cancelling the leasing. After the tenant moves out of the CPI premises, CPI performs evaluation of the property and includes the technical improvements into their assets against revenues.

IAS 16 and IAS 40 shall be applied on the revenue from technical improvement. Therefore the recognition of revenue is not in the scope of IFRS 15.

Compensation for construction: CPI as landlord carries out premises modification, according to instructions of the lessee, at his own expense. The tenant then pays the lessor additional rent in connection with the increased standard of premises. Such payments are received monthly together with the lease payment. The revenue is recognized monthly when the payment is made.

Due to the fact that no goods or service is transferred, we consider that this payment should be recognized together with the lease payment under IAS17 / IFRS16, which is consistent with current practice.

Management fee: In some of the rented properties the Group charges its tenants management fee. Fee represents a contribution to management costs of the property and is paid together with leasing installment. Revenue is booked monthly. Since the contract contains a lease coupled with a non‐lease component, the non‐lease component is identified separately from the lease component under IFRS 15. Landlords are required to apply IFRS 15 for allocation of consideration between the non‐lease and lease component generally on the basis of stand‐alone selling prices. The stand‐alone selling price is the price at which the entity would sell the promise service to customer separately. In the case of management fee this price is set in the contract. The service is consumed by the customer throughout each month (over‐time), thus also the revenue should be recognized accordingly.


As required for the condensed interim financial statements, the Group disaggregated revenue recognised from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Group also disclosed information about the relationship between the disclosure of disaggregated revenue and revenue information disclosed for each reportable segment. Refer to note 5 for the disclosure on disaggregated revenue. IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. The significant change with an impact for the Group is a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The Group adopted the standard in the annual period beginning 1 January 2018 and used the cumulative effect method.

The Group recorded the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity at the date of initial application. The comparative period amounts were not restated and are continue to be reported under the accounting standards in effect for those periods. The following table summarizes the impact, net of tax, on transition to IFRS 9 on the opening balance of retained earnings:

1 January 2018 Impairment ‐ loans and interest (7.6) (6,777) TOTAL ASSETS (6,777) Retained earnings from previous periods (4,942) TOTAL EQUITY (4,942) Decrease of deferred tax liabilities (1,835) Non‐current liabilities (1,835) TOTAL EQUITY AND LIABILITIES (6,777)

The impact, net of tax, of transition to IFRS 9 on the opening balance of equity is EUR 4.9 million.



124

A/ Classification and measurement of financial assets and financial liabilities

IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through OCI (FVOCI) and fair value through P&L (FVTPL). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

‐ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

‐ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

‐ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

‐ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment‐by‐investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. The following accounting policies apply to the subsequent measurement of financial assets: Financial assets at FVTPL: these assets are subsequently measured at fair value. Net gain and losses including any interest or dividend income, are recognised in profit or loss. Financial assets at amortised cost: These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Debt investments at FVOCI: These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment recognised in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. Equity investments at FVOCI: These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.



125

The following table and the accompanying notes below explain the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group´s financial assets as at 1 January 2018:

Financial assets

Note Original classification

under IAS 39 New classification

under IFRS 9

Original carrying amount under

IAS 39

New carrying amount under

IFRS 9

Derivatives (used for hedging)

Fair value ‐ hedging instrument

Fair value ‐ hedging instrument 4,628 4,628

Derivatives (other) Financial assets at FVTPL

Financial assets at FVTPL 874 874

Other investments Available for sale Debt investments at FVOCI 1,037 1,037

Loans provided a) Loans and receivables Amortised cost 143,726 136,949 Trade and other receivables Loans and receivables Amortised cost 4,193 4,193 Trade receivables Loans and receivables Amortised cost 76,513 76,513 Cash and cash equivalents Loans and receivables Amortised cost 238,907 238,907 Other financial current assets Loans and receivables Amortised cost 15,408 15,408 Total financial assets 485,286 478,509 a) Loans provided that were classified as loans and receivables under IAS 39 are now classified at amortised cost. On transition to IFRS 9, an allowance for impairment of EUR 6.8 million was recognised as a decrease in opening retained earnings as at 1 January 2018. B/ Impairment of financial assets IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. Under IAS 39, credit losses were taken into account when the loss occurred, hence the term ‘incurred loss‘. IFRS 9 requires to follow a forward‐looking ECL model. Under IFRS 9, loss allowances are measured on either of the following bases:

‐ 12‐month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date;

‐ Lifetime ECLs: these are ECLs hat result from possible default events over the expected life of a financial instrument.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group´s historical experience and informed credit assessment and including forward‐looking information.

The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39. The financial assets at amortised cost consist of trade receivables, cash and cash equivalents and loans provided. At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit impaired. A financial asset is ‘credit impaired’ when one or more events that have detrimental impact on the estimated future cash flows of the financial assets have occurred. Presentation of impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of reducing the carrying amount of the asset.



126

Impairment methodology IFRS 9 outlines a “three‐stage” model for impairment based on changes in credit quality since initial recognition: Stage 1: includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12‐months ECL are recognized and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 12‐month ECL are the expected credit losses that result from default events that are possible within 12‐months after the reporting date. It is not the expected cash shortfalls over the 12‐month period but the entire credit loss on an asset weighted by the probability that the default will occur in the next 12 months. Stage 2: includes financial instruments that have had a significant increase in credit risk since initial recognition, but that are not credit impaired. For these assets, lifetime ECL are recognized, but interest revenue is still calculated on the gross carrying amount of the asset. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the financial instrument. Expected credit losses are the weighted average credit losses with the probability of default (‘PD’) as the weight. Stage 3: includes financial assets are credit imapired at the reporting date. For these assets, lifetime ECL are recognized and interest revenue is calculated on the net carrying amount (that is, net of credit allowance). IFRS 9 requires Management, when determining whether the credit risk on a financial instrument has increased significantly, to consider reasonable and supportable information available, in order to compare the risk of a default occurring at the reporting date with the risk of a default occurring at initial recognition of the financial instrument. The Group applied a definition of default that is consistent with the definition used for internal credit risk management purposes for the relevant financial instrument, and the Group considers qualitative factors (for example, financial covenants), where appropriate. However, there is a rebuttable presumption that default does not occur later than when a financial asset is 90 days past due, unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. The most common approach is to calculate the impairment value as EL=PD (‘Probability of Default’)*LGD (‘Loss Given Default’)*EAD (‘Exposure At Default’) and discount the result using effective interest rate. The Group adopted basic principles of this approach and derived respective IFRS 9 parameters respectively. Loans provided: In general, annual interest rate of any loan covers cost of the funding, liquidity, credit risk and other risks. Therefore rough estimation of the credit spread (and consequently probability of default) can be estimated as:

PD (“Probability of Default”) represents an estimate of the likelihood of default over a given time horizon; LGD (“Loss Given Default”) represents an estimate of the loss arising on default; EAD (“Exposure At Default“): represents an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities. As the loans do not show any significant risk increase and they are not considered defaulted nor credit impaired, the EL is estimated for 1year period and discounted by the original EIR.



127

The effect of the initial application of IFRS 9, in respect of the loans provided, represent impairment of EUR 6.8 million as at 1 January 2018 and additional EUR 0.4 million recognized in profit or loss for the six months period of 2018 (note 6.9 and 7.6 respectively).

For bank exposures (e.g. the Group´s deposits at bank accounts) the Group uses similar methodology as in case of the loans provided. Probability of Default (PD) was derived from individual banks rating according to Moody´s rating. The total impact on the opening balance of equity as at 1 January 2018 calculated using the above mentioned methodology would have been approximately EUR 171 thousand, which was considered as immaterial with respect to the total balance of cash and cash equivalents (EUR 238.9 million as at 31 December 2017), which is why the Group decided not to reflect this adjustment into the interim consolidated financial statements of the Group as at 30 June 2018. Regarding trade and other receivables, if the receivable is past due, Probability of Default (PD) is estimated as a ratio of (past due amount >=180) / total yearly income, that reflects debtors ability to repay outstanding debt within one year. If the receivable is not past due PD was set to 0.35%. Exposure at Default is balance (both not past due and past due) of the trade and other receivables, no discounting is used as total impact of EL to trade and other receivables is negligible. The total impact on the opening balance of equity as at 1 January 2018 calculated using the above mentioned methodology would have been approximately EUR 483 thousand, which was considered as immaterial with respect to the total balance of trade and other financial receivables (EUR 96 million as at 31 December 2017), which is why the Group decided not to reflect this adjustment into the interim consolidated financial statements of the Group as at 30 June 2018.

C/ Hedge accounting

IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. Extensive additional disclosures regarding an entity’s risk management and hedging activities are required.

IFRS 9 provides an accounting policy choice: entities can either continue to apply the hedge accounting requirements of IAS 39 until the macro hedging project is finalised, or they can apply IFRS 9. This accounting policy choice will apply to all hedge accounting and cannot be made on a hedge‐by‐hedge basis. The Group elected to follow the IAS 39 requirements in respect of hedge accounting.



128

New standards and interpretations not yet adopted The following new standards, new interpretations and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018 and have not been early adopted by the Group:

IFRS 16, 'Leases' effective for reporting periods ending 31 December 2019 (early application is permitted), will replace the actual IAS 17 ‘Leases’. Under IFRS 16, companies will recognise new assets and liabilities, bringing added transparency to the balance sheet. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on‐balance sheet finance leases and off‐balance sheet operating leases. There will be a single, on‐balance model for both finance and operating leases. The Group is currently assessing the impact of IFRS 16.

The Group has estimated the impact of the implementation of the other new standards and amendments not early adopted as non‐significant. The Group refers to the endorsement status of the new IFRS standards and amendments to standards and interpretations as they are published by the European Union.

Estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, internal calculations and various other factors that the management believes to be reasonable under the circumstances, the results of which form the basis of judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.



129

3 GROUP STRUCTURE Control of the Group CPI Property Group is the Group’s ultimate parent company. As at 30 June 2018 the Group is formed by parent company, 364 subsidiaries controlled by the parent company (at 31 December 2017 ‐ 357 subsidiaries) and three joint ventures. For list of subsidiaries and joint venture refer to Appendix I.

Changes in the Group in 2018

During six months of 2018, the Group has acquired/founded the following entities:

Entity Change Share owned by the Group in %

Date of acquisition/foundation

Zgorzelec Property Development sp. z o.o. Acquisition 100.00% 10 January 2018 Gewerbehöfe Services GmbH Acquisition 100.00% 07 March 2018 Atrium Complex sp. z o.o. (1) Acquisition 100.00% 21 March 2018 MB Futurum HK s.r.o. Acquisition 100.00% 06 April 2018 HopStop 6 sp. z o.o. Acquisition 100.00% 17 April 2018 Zamość Property Development sp. z o.o. (2) Acquisition 100.00% 17 April 2018 HopStop Zamość 2 sp. z o.o. Acquisition 100.00% 17 April 2018 RT Development sp. z o.o. Acquisition 100.00% 17 April 2018 Sint Maarten sp. z o.o. Acquisition 100.00% 24 April 2018 Ekofarma Postřelná, s.r.o. Founded 100.00% 25 January 2018 Farma Liščí, s.r.o. Founded 100.00% 25 January 2018 Farma zelená sedma, s.r.o. Founded 100.00% 25 January 2018 Jizerská farma, s.r.o. Founded 100.00% 25 January 2018 Statek Petrovice, s.r.o. Founded 100.00% 25 January 2018 Zákupská farma, s.r.o. Founded 100.00% 25 January 2018 CPI Hotels Catering, s.r.o. (3) Founded 100.00% 14 February 2018 CPI Hotels Italy Sarl Founded 100.00% 13 March 2018

(1) Changed its name from Montserrat sp. z o.o. to Atrium Complex sp. z o.o. with the effective date of 27 April 2018. (2) Changed its name from HopStop Zamość 1 sp. z o.o. to Zamość Property Development sp. z o.o. with the effective date of 24 May 2018. (3) Changed its name from CPI Catering, s.r.o. to CPI Hotels Catering, s.r.o. with the effective date of 20 February 2018.

The following entities were either disposed of or liquidated in the first six months of 2018:


Date of disposal/liquidation

Budaörs Office Park Kft. Disposal 100.00% 31 January 2018 Český Těšín Property Development, a.s. Disposal 100.00% 02 May 2018 Trutnov Property Development, a.s. Disposal 100.00% 21 June 2018 R40 Real Estate Kft. Disposal 100.00% 27 June 2018 Orco Project Limited Liquidation 97.31% 28 January 2018 Mondello, a.s. Liquidation 100.00% 14 May 2018



130

Property asset acquisitions

Acquisition of retail parks in Poland (“HopStop portfolio”)

On 17 April the Group acquired as share deal 4 existing retail parks in Poland. The retail parks are operated under HopStop brand and are located in Warsaw and regional cities of Poland with totalling 19,000 sqm of gross leasable area from Polish developer, Katharsis Development. HopStop is a genuinely Polish project of retail parks chain with comfortable parking places, with separated supply zone, representing simple, esthetic and modern architecture. Some of the projects are also enriched with petrol stations and car washes, offering customers wide scope of services.

Retail park HopStop Zamość 1

The acquisition was carried out through the purchase of 100% stake in Zamość Property Development sp. z o.o. (former HopStop Zamość 1 sp. z o.o.) for the consideration paid of EUR 1.2 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 6,383 Total non‐current assets 6,383 Trade receivables 62 Cash and cash equivalents 658 Other non‐financial current assets 20 Total current assets 740 Identifiable acquired assets 7,123 Financial debts (5,652) Other non‐current liabilities (66) Total non‐current liabilities (5,718) Trade payables (32) Other financial current liabilities (90) Other non‐financial current liabilities (35) Total current liabilities (157) Identifiable acquired liabilities (5,874) Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 1.2 million.

Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.6 million. The net cash outflow connected with the acquisition amounted to EUR 0.6 million.



131

Retail park HopStop Zamość 2

The acquisition was carried out through the purchase of 100% stake in HopStop Zamość 2 sp. z o.o. for the consideration paid of EUR 1.4 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 8,419 Total non‐current assets 8,419 Current income tax receivables 18 Trade receivables 98 Cash and cash equivalents 366 Other non‐financial current assets 90 Total current assets 573 Identifiable acquired assets 8,991 Financial debts (7,084) Other non‐current liabilities (22) Total non‐current liabilities (7,106) Trade payables (29) Other financial current liabilities (346) Other non‐financial current liabilities (56) Total current liabilities (431) Identifiable acquired liabilities (7,537) Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 1.4 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.3 million. The net cash outflow connected with the acquisition amounted to EUR 1.1 million.



132

Retail park HopStop Rembertów

The acquisition was carried out through the purchase of 100% stake in HopStop 6 sp. z o.o. for the consideration paid of EUR 54 thousand. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 4,185 Total non‐current assets 4,185 Trade receivables 43 Cash and cash equivalents 824 Other financial current assets 148 Other non‐financial current assets 26 Total current assets 1,041 Identifiable acquired assets 5,226 Financial debts (5,102) Other non‐current liabilities (12) Total non‐current liabilities (5,114) Trade payables (56) Other non‐financial current liabilities (2) Total current liabilities (58) Identifiable acquired liabilities (5,172)

Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 54 thousand. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.8 million. The net cash outflow connected with the acquisition amounted to EUR ‐0.8 million.



133

Retail park Hop Stop Radom

The acquisition was carried out through the purchase of 100% stake in RT Development sp. z o.o. for the consideration paid of EUR 1.3 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 2,615 Total non‐current assets 2,615 Current income tax receivables 6 Trade receivables 27 Cash and cash equivalents 159 Other non‐financial current assets 7 Total current assets 199 Identifiable acquired assets 2,814 Financial debts (1,465) Other non‐current liabilities (14) Total non‐current liabilities (1,480) Trade payables (5) Other financial current liabilities (45) Other non‐financial current liabilities (14) Total current liabilities (64) Identifiable acquired liabilities (1,544) Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 1.3 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.2 million. The net cash outflow connected with the acquisition amounted to EUR 1.1 million.



134

Zgorzelec retail Park, Poland

On 10 January 2018, the Group acquired the company Zgorzelec Property Development sp. z o.o., being the owner of the retail park in Zgorzelec, in Poland. This acquisition was recognized as a property asset acquisition as the company do not consists of business as defined by IFRS. Consideration paid for 100% stake amounted to PLN 2.94 million (approximately EUR 0.7 million). The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 2,322 Total non‐current assets 2,322 Trade receivables 23 Cash and cash equivalents 25 Other financial current assets 148 Total current assets 196 Identifiable acquired assets 2,518 Financial debts (605) Total non‐current liabilities (605) Financial debts (932) Trade payables (270) Total current liabilities (1,202) Identifiable acquired liabilities (1,807) Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 0.7 million.

Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 25 thousand. The net cash outflow connected with the acquisition amounted to EUR 0.7 million.



135

Atrium Complex

On 21 March 2018 the Group acquired 100% share of Atrium Complex sp. z o.o. (formerly Montserrat sp. z o.o.) for the purchase price of 9,000 PLN (app. EUR 2,155). The entity had no assets at the time of acquisition.

During May 2018 the Group acquired Atrium Centrum & Atrium Plaza office buildings in Warsaw, Poland. Atrium Centrum & Atrium Plaza are seven‐storey office buildings located in the centre of Warsaw, near the most important transportation and business hub of Warsaw – Rondo. The two office buildings have an aggregate GLA of 31,869 sqm and include a medical centre, a restaurant, a bank, a pharmacy, a premium fashion store and 410 parking lots.

Consideration paid for two office buildings amounted to PLN 331 million (approximately EUR 78.1 million). This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Investment property 78,129 Total non‐current assets 78,129 Cash and cash equivalents 2 Total current assets 2 Identifiable acquired assets 78,131 Identifiable acquired liabilities ‐‐

Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 78.1 million.

Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 2 thousand. The net cash outflow connected with the acquisition amounted to EUR 78.1 million.



136

MB Futurum HK s.r.o.

On 26 March 2018, the Group acquire Futurum Hradec Králové Shopping Centre which was opened in 2000 and modernised in 2012 with a total floor area 39,000 sqm and 1,350 parking spaces. Shopping Centre is the Group´s first prime shopping centre in the north‐eastern part of Czechia and total purchased value is EUR 121 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows: Intangible assets and goodwill 6 Investment property 121,000 Total non‐current assets 121,006 Trade receivables 2,405 Cash and cash equivalents 3,104 Other financial current assets 132 Other non‐financial current assets 431 Total current assets 6,072 Identifiable acquired assets 127,078 Financial debts (48,317) Deferred tax liabilities (672) Other non‐current liabilities (1,108) Total non‐current liabilities (50,097) Financial debts (1,080) Trade payables (880) Derivative instruments (219) Other financial current liabilities (964) Other non‐financial current liabilities (356) Total current liabilities (3,499) Identifiable acquired liabilities (53,596)

Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 73.5 million.




137

Business combinations in 2018

On 13 March 2018, the Group founded CPI Hotels Italy Sarl. At the end of June 2018, CPI Hotels Italy purchased the hotel operator of Holiday Inn hotel in Rome. The acquisition of the hotel operator is therefore treated as a business combination under IFRS 3.

As Holiday Inn Rome was already being owned by the Group, the Group became both owner and operator of this hotel, which is why as at 30 June 2018, the hotel has been transferred from investment property to property plant and equipment (note 7.2 and 7.3).

The purchase price amounted to EUR 4.16 million.

The fair value of the identifiable assets and liabilities at the date of acquisition based on the preliminary valuations was as follows: Intangible assets 7 Property, plant and equipment 64 Other investments 16 Total non‐current assets 88 Inventories 21 Trade receivables 169 Total current assets 190 Identifiable acquired assets 278 Other non‐financial current liabilities (204) Total current liabilities (204) Identifiable acquired liabilities (204)

Based on the preliminary acquisition figures, as a result of this business combination, the Group recognized goodwill in the amount of 4.1 million (note 7.1). The Group is currently still assessing the acquisition difference which arised as a result of the purchase price and net identifiable assets, as it is highly probable that the recognized goodwill will be either partially or completely eliminated due to the subsequent recognition and valuation of other identifiable intangible asset(s) acquired. Further identification or substantial revaluation of other assets/liabilities is not expected.

If the acquisition had occurred on 1 January 2018 with all other variables held constant, the Group total revenues for the six months of 2018 would have been EUR 249.04 million and net profit from continuing operations would have been EUR 160.7 million.

Disposal of subsidiaries in 2018

The Group decided to proceed with this disposal of the following subsidiaries, since they were considered as a non‐core assets:

the disposal of Budaörs Office Park property in Hungary was completed on 31 January 2018. The disposal was structured as a share deal transaction and the counterparty was a Hungarian real estate fund. Budaörs Office Park represents an office complex near Budapest. The sales price amounted to EUR 9.4 million;

on 2 May 2018, disposal of Český Těšín Property Development for final selling price of CZK 54.2 million (approximately EUR 2.1 million);

the Group disposed five small retail properties located in regional cities of northern Czechia, totalling approximately 25,700 sqm. The deal was completed on 21 June 2018 with the selling price of CZK 138 million (approximately EUR 5.3 million);

on 27 June 2018, disposal of R40 Real Estate Kft. to GRANDHOTEL ZLATÝ LEV a.s. with final selling price of EUR 918.



138

Changes in the Group in 2017

During 2017, the Group has acquired/founded the following entities:


Date of acquisition/foundation

Brno Property Development, a.s. Acquisition 86.56% 17 January 2017 REZIDENCE MASARYKOVA 36, s.r.o. Acquisition 100.00% 07 March 2017 Andrássy Real Kft. Acquisition 100.00% 29 March 2017 CAMPONA Shopping Center Kft. Acquisition 100.00% 29 March 2017 Centrum Ogrody sp. z o.o. Acquisition 100.00% 29 March 2017 Centrum Olympia Plzeň s.r.o. Acquisition 100.00% 29 March 2017 City Gardens sp. z o.o. Acquisition 100.00% 29 March 2017 FELICIA SHOPPING CENTER SRL Acquisition 100.00% 29 March 2017 IS Nyír Kft. Acquisition 100.00% 29 March 2017 IS Zala Kft. Acquisition 100.00% 29 March 2017 Nisa OC s.r.o. Acquisition 100.00% 29 March 2017 PFCE Prague investments, s.r.o. Acquisition 100.00% 29 March 2017 Pólus Shopping Center Zrt. Acquisition 100.00% 29 March 2017 Polus Társasház Üzemeltető Kft. Acquisition 100.00% 29 March 2017 Cordonier & Valério Sàrl Acquisition 51.04% 17 July 2017 KOENIG, s.r.o. (1) Acquisition 100.00% 26 July 2017 Tepelné hospodářství Litvínov, s.r.o. Acquisition 100.00% 07 August 2017 GSG Europa Beteiligungs GmbH Acquisition 99.75% 29 September 2017 Kolín Centrum, a.s. Acquisition 100.00% 17 October 2017 MQM Czech, a.s. Acquisition 99.26% 15 November 2017 Polygon BC, a.s. Acquisition 99.26% 15 November 2017 PROJECT FIRST a.s. Acquisition 86.56% 13 December 2017 HOTEL U PARKU, s.r.o. Acquisition 86.56% 13 December 2017 Armo Verwaltungsgesellschaft mbH Acquisition 94.66% 21 December 2017 LES TROIS DILAIS Acquisition 100.00% 31 December 2017 Rezidence Jančova, s.r.o. Founded 100.00% 27 February 2017 Rezidence Malkovského, s.r.o. Founded 100.00% 27 February 2017 Tepelná Litvínov, s.r.o. Founded 100.00% 27 February 2017 CPI Retail One Kft. Founded 100.00% 04 April 2017 CPI Retail Store Kft. Founded 100.00% 06 April 2017 CPI Retail Two Kft. Founded 100.00% 06 April 2017 CPI Kappa, s.r.o. Founded 100.00% 26 May 2017 Nový Projekt CPI, s.r.o. Founded 100.00% 26 May 2017 CPI Finance CEE, a.s. Founded 100.00% 29 May 2017 CPI Blatiny, s.r.o. Founded 100.00% 23 June 2017 Outlet Arena Moravia, s.r.o. Founded 100.00% 03 November 2017 Statek Blatiny, s.r.o. Founded 100.00% 16 November 2017 Brillant 2800. GmbH Founded 99.75% 06 December 2017 Labská Property, s.r.o. Founded 100.00% 07 December 2017 BAYTON ONE, s.r.o. Founded 86.56% 13 December 2017 BAYTON TWO, s.r.o. Founded 86.56% 13 December 2017

(1) Changed its name from Bainbridge Czech Republic Brno Královo Pole Holding s.r.o. to KOENIG, s.r.o. with the effective date of 26 July 2017.

The following entities were disposed or liquidated in 2017:



New Field Kft. Disposal 100.00% 19 January 2017 Capellen S.A. Disposal 97.31% 25 January 2017 CPI Rhea, s.r.o. Disposal 100.00% 9 February 2017 NERONTA, a.s. Disposal 100.00% 28 February 2017 Office Center Purkyňova, a.s. Disposal 100.00% 07 March 2017 Týniště Property Development, s.r.o. Disposal 100.00% 01 April 2017 VM Property Development, a.s. Disposal 100.00% 01 April 2017 Žďár Property Development, a.s. Disposal 100.00% 01 April 2017 Quadrio Residence, s.r.o. Disposal 100.00% 16 June 2017 M3 BC Kft. Disposal 100.00% 29 June 2017



139



Arkáda Prostějov, s.r.o. Disposal 100.00% 02 August 2017 First Site Kft. Disposal 100.00% 01 September 2017 Insite Kft. Disposal 100.00% 01 September 2017 ORCO Hotel Management Kft. Disposal 100.00% 07 September 2017 Fogarasi 3 BC Kft. Disposal 100.00% 27 September 2017 STRM Delta, a.s. Disposal 97.31% 07 November 2017 VRL Heli, s.r.o. Disposal 100.00% 09 November 2017 Development Pražská, s.r.o. Disposal 97.31% 13 December 2017 CPI Blue, s.r.o. Disposal 100.00% 14 December 2017 GLOBAL INVESTMENT Kft. Disposal 100.00% 20 December 2017 Orco Hotel Project sp. z o.o. Liquidation 100.00% 13 January 2017 Orco Germany Sp. z o.o. Liquidation 100.00% 23 January 2017 Ekodružstvo Severozápad a.s. Liquidation 100.00% 24 February 2017 Orco Hotel Development sp. z o.o. Liquidation 100.00% 21 March 2017 ABLON sp.z o.o. Liquidation 100.00% 30 September 2017



140

Property asset acquisitions / Common control transactions in 2017

Portfolio acquired from CBRE Global Investors (“CBRE GI portfolio”)

On 29 March 2017, the Group has successfully acquired the high‐quality retail portfolio of predominantly shopping centres located in the Czech Republic, Hungary, Poland and Romania with a total leasable area of approximately 280 thousand sqm from two funds managed by CBRE Global Investors. The acquired portfolio primarily consists of: Regionally dominant shopping centres: Olympia shopping centre (Plzeň, Czech Republic) Nisa shopping centre (Liberec, Czech Republic) Ogrody shopping centre (Elblag, Poland) Felicia shopping centre (Iasi, Romania) Pólus shopping centre (Budapest, Hungary) Campona shopping centre (Budapest, Hungary) Mix of prime high‐street and office space: Zlatý Anděl (Prague, Czech Republic) Andrássy Complex (Budapest, Hungary) Retail warehouses: Interspar (Zalaegerszeg, Hungary) Interspar (Nyíregyháza, Hungary)



141

Olympia shopping centre

Olympia Plzeň was completed in 2004. It is designated as a retail shopping centre with cinema and extensive outdoor and indoor parking. The property offers 40,790 sqm of retail area distributed over two above ground floors. The acquisition also comprises a single storey retail park comprising of two buildings with gross lettable area of 8,155 sqm and car park with 426 parking spaces. Internally the property currently provides 11 retail units. The acquisition was carried out through the purchase of 100% stake in Centrum Olympia Plzeň s.r.o. for the consideration paid of EUR 64.7 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Intangible assets and goodwill 3 Investment property 133,825 Property, plant and equipment 19 Total non‐current assets 133,846 Inventories 7 Trade receivables 28 Cash and cash equivalents 969 Other non‐financial current assets 2,254 Total current assets 3,259 Identifiable acquired assets 137,105 Financial debts (66,398) Other non‐current liabilities (1,132) Total non‐current liabilities (67,530) Financial debts (3,683) Trade payables (339) Advance payments (29) Derivative instruments (667) Other financial current liabilities (95) Other non‐financial current liabilities (96) Total current liabilities (4,908) Identifiable acquired liabilities (72,439) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 64.7 million.




142

Nisa shopping centre

Nisa represents a modern shopping centre with associated parking, constructed in 1999 and extended in 2008. It offers 49,931 sqm of lettable area. It is constructed over two or three above ground floors and is of rectangular layout. The upper floor accommodates cinema, casino and restaurant. The ground and first floor levels include retail units. Internally the property currently provides 160 retail units. The acquisition was carried out through the purchase of 100% stake in Nisa OC s.r.o. for the consideration paid of EUR 10.9 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Intangible assets and goodwill 2 Investment property 81,510 Total non‐current assets 81,512 Inventories 1 Trade receivables 409 Cash and cash equivalents 2,957 Other non‐financial current assets 2,040 Total current assets 5,407 Identifiable acquired assets 86,919 Financial debts (69,320) Other non‐current liabilities (1,260) Total non‐current liabilities (70,580) Financial debts (2,578) Trade payables (525) Advance payments (313) Other financial current liabilities (1,456) Other non‐financial current liabilities (523) Total current liabilities (5,394) Identifiable acquired liabilities (75,974) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 10.9 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 3 million. The net cash outflow connected with the acquisition amounted to EUR 8 million.



143

Ogrody shopping centre

Ogrody shopping center is located approximately 3.5 km to the north of Elblag city center. It was constructed in 2002 and its reconstruction was completed in March 2015. It provides a total gross lettable area of approximately 41,931 sqm with ca. 1,250 parking spaces. The shopping centre provides in total 127 retail units with most of them being located on the ground and first floor. The acquisition was carried out through the purchase of 100% stakes in City Gardens sp. z o.o. and Centrum Ogrody sp. z o.o. for the consideration paid of EUR 2.2 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 111,811 Total non‐current assets 111,811 Trade receivables 661 Cash and cash equivalents 1,828 Other financial current assets 150 Other non‐financial current assets 72 Total current assets 2,711 Identifiable acquired assets 114,522 Financial debts (107,036) Other non‐current liabilities (306) Total non‐current liabilities (107,342) Financial debts (4,067) Trade payables (410) Advance payments (54) Other financial current liabilities (70) Other non‐financial current liabilities (422) Total current liabilities (5,023) Identifiable acquired liabilities (112,365) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 2.2 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 1.8 million. The net cash outflow connected with the acquisition amounted to EUR 0.4 million.



144

Felicia shopping centre

Felicia shopping centre is located south‐east of Iasi city, within the industrial district. Commercial gallery spread on ground level, part of a traditional medium shopping centre of approximately 26,500 sqm of gross lettable area, anchored by Carrefour hypermarket. The property also includes shopping gallery, part of common areas and office space located at first floor. The acquisition was carried out through the purchase of 100% stake in FELICIA SHOPPING CENTER SRL for the consideration paid of EUR 6 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Intangible assets and goodwill 1 Investment property 24,991 Total non‐current assets 24,992 Inventories 9 Trade receivables 660 Cash and cash equivalents 738 Other non‐financial current assets 94 Total current assets 1,501 Identifiable acquired assets 26,493 Financial debts (18,982) Trade payables (161) Advance payments (165) Other financial current liabilities (582) Other non‐financial current liabilities (600) Total current liabilities (20,491) Identifiable acquired liabilities (20,491) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 6 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.7 million. The net cash outflow connected with the acquisition amounted to EUR 5.3 million.



145

Polus shopping centre

Polus shopping center represents a shopping centre development with associated parking and office accommodation completed in 1996. It extends to a total lettable area of approximately 40,274 sqm with 2,500 car parking spaces. The acquisition was carried out through the purchase of 100% stakes in Pólus Shopping Center Zrt. and Polus Társasház Üzemeltető Kft. for the consideration paid of EUR 1.8 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 75,091 Property, plant and equipment 1 Trade and other receivables 444 Total non‐current assets 75,536 Trade receivables 324 Cash and cash equivalents 3,061 Other non‐financial current assets 719 Total current assets 4,104 Identifiable acquired assets 79,640 Financial debts (74,917) Other non‐current liabilities (812) Total non‐current liabilities (75,729) Trade payables (1,925) Other financial current liabilities (14) Other non‐financial current liabilities (168) Total current liabilities (2,108) Identifiable acquired liabilities (77,837) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 1.8 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 3.1 million. The net cash inflow connected with the acquisition amounted to EUR 1.3 million.



146

Campona shopping centre

Campona shopping centre was constructed in two phases between 1997 and 2000. The first phase consists of the retail units in a two‐storey shopping centre while the second phase consists of the Tropicarium and the cinema. There is and open parking house in a separate building providing about 2,000 parking spaces on three floors. The acquisition was carried out through the purchase of 100% stake in Campona Shopping Center Kft. for the consideration paid of EUR 2.2 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 66,249 Trade and other receivables 319 Total non‐current assets 66,568 Trade receivables 557 Cash and cash equivalents 1,495 Other financial current assets 231 Other non‐financial current assets 1,325 Total current assets 3,608 Identifiable acquired assets 70,176 Financial debts (64,915) Other non‐current liabilities (934) Total non‐current liabilities (65,849) Trade payables (1,139) Advance payments (5) Other financial current liabilities (691) Other non‐financial current liabilities (285) Total current liabilities (2,120) Identifiable acquired liabilities (67,969) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 2.2 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 1.5 million. The net cash outflow connected with the acquisition amounted to EUR 0.7 million.



147

Zlatý Anděl

Zlatý Anděl represents a modern office development with associated parking, storage and retail accommodation. The building was constructed in 1999 and well maintained with last renovation in 2016. It extends to a total lettable area of 20,997 sqm and offers 218 car parking spaces. The property benefits from high levels of foot fall and perfect visibility. The acquisition was carried out through the purchase of 100% stake in PFCE Prague investments s.r.o. for the consideration paid of EUR 49.1 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 101,423 Total non‐current assets 101,423 Inventories 6 Current income tax receivables 58 Trade receivables 442 Cash and cash equivalents 1,490 Other non‐financial current assets 1,578 Total current assets 3,575 Identifiable acquired assets 104,998 Financial debts (50,182) Other non‐current liabilities (562) Total non‐current liabilities (50,744) Financial debts (2,788) Trade payables (422) Derivative instruments (505) Other financial current liabilities (1,234) Other non‐financial current liabilities (166) Total current liabilities (5,115) Identifiable acquired liabilities (55,859) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 49.1 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 1.5 million. The net cash outflow connected with the acquisition amounted to EUR 47.6 million.



148

Andrássy Complex

Andrássy Complex represents a modern office development with associated parking and storage accommodation extending to a total lettable area of 8,637 sqm with 161 parking spaces. The project includes two office buildings. The parking facility is located on four underground floors of a separate residential building. The acquisition was carried out through the purchase of 100% stake in Andrássy Real Kft. for the consideration paid of EUR 4.1 million. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 16,308 Trade and other receivables 10 Total non‐current assets 16,318 Trade receivables 258 Cash and cash equivalents 209 Other financial current assets 1 Other non‐financial current assets 59 Total current assets 526 Identifiable acquired assets 16,843 Financial debts (12,365) Other non‐current liabilities (114) Total non‐current liabilities (12,479) Trade payables (259) Other non‐financial current liabilities 31 Total current liabilities (228) Identifiable acquired liabilities (12,708) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 4.1 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 0.2 million. The net cash outflow connected with the acquisition amounted to EUR 3.9 million.



149

Interspar Zala

Interspar Zalaegerszeg represents a retail warehouse development with associated office, parking, storage and loading areas delivered to the market in 1999. It extends to a total lettable area of approximately 9,082 sqm with 308 surface parking spaces. The property is constructed over two above ground floors including ground floor and partially first floor for offices. The property is currently undergoing refurbishment. The acquisition was carried out through the purchase of 100% stake in IS Zala Kft. for the consideration paid of EUR 164 thousand. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 8,843 Trade and other receivables 783 Total non‐current assets 9,627 Trade receivables 50 Cash and cash equivalents 111 Other non‐financial current assets 1 Total current assets 163 Identifiable acquired assets 9,789 Financial debts (8,787) Total non‐current liabilities (8,787) Trade payables (75) Other non‐financial current liabilities (763) Total current liabilities (838) Identifiable acquired liabilities (9,625) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 164 thousand. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 111 thousand. The net cash outflow connected with the acquisition amounted to EUR 53 thousand.



150

Interspar Nyír

Interspar Nyíregyháza represents a retail warehouse development with associated office, parking, storage and loading areas completed in 1999. It extends to a total lettable area of approximately 8,723 sqm with 280 surface parking spaces. The subject property is constructed over three above ground floors including ground floor used as parking area, upper ground floor and partially first floor for offices. The acquisition was carried out through the purchase of 100% stake in IS Nyír Kft. for the consideration paid of EUR 543 thousand. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 3,613 Total non‐current assets 3,613 Trade receivables 2 Cash and cash equivalents 188 Other financial current assets 2 Total current assets 192 Identifiable acquired assets 3,805 Financial debts (3,136) Total non‐current liabilities (3,136) Trade payables (32) Other financial current liabilities (2) Other non‐financial current liabilities (92) Total current liabilities (126) Identifiable acquired liabilities (3,262) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 543 thousand. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 188 thousand. The net cash outflow connected with the acquisition amounted to EUR 355 thousand.



151

Hotel Vladimír, Ústí nad Labem

On 7 March 2017, the Group acquired 100% stake of REZIDENCE MASARYKOVA 36, s.r.o. company owning and operating Hotel Vladimír in Ústí nad Labem. As at 31 December 2017 the operation of this hotel has already been secured by CPI Hotels a.s., operator of the majority of the Group´s hospitality portfolio. This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. Consideration paid for 100% stake amounted to CZK 62.5 million (approximately EUR 2.3 million). The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 2,531 Total non‐current assets 2,531 Trade receivables 22 Total current assets 22 Identifiable acquired assets 2,553 Deferred tax liabilities (238) Total non‐current liabilities (238) Trade payables (2) Other non‐financial current liabilities (2) Total current liabilities (4) Identifiable acquired liabilities (242) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 2.3 million.

Due to the acquisition, the Group acquired no cash and cash equivalents. The net cash outflow connected with the acquisition amounted to EUR 2.3 million.



152

Královo Pole Shopping Centre, Brno

On 26 July 2017, the Group acquired 100% stake in KOENIG, s.r.o. The company owning Královo Pole Shopping Centre located in Brno, Czechia. Královo Pole Shopping Centre comprises a two‐level gallery with 78 shops and a food court with a total of 26,500 sqm gross leasable area and 900 parking spaces.

Consideration paid for 100% stake amounted to CZK 924.6 million (app. EUR 35.5 million).

This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS.

The fair value of the identifiable assets and liabilities at the date of acquisition was as follows:

Intangible assets and goodwill 5 Investment property 59,000 Loans provided 2,259 Deferred tax asset 21 Total non‐current assets 61,285 Trade receivables 155 Loans provided 95 Cash and cash equivalents 1,692 Other financial current assets 2,656 Other non‐financial current assets 335 Total current assets 4,933 Identifiable acquired assets 66,218 Financial debts (27,069) Other non‐current liabilities (856) Total non‐current liabilities (27,925) Financial debts (1,560) Trade payables (353) Other financial current liabilities (342) Other non‐financial current liabilities (584) Total current liabilities (2,839) Identifiable acquired liabilities (30,764) The net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 35.5 million. Due to the acquisition, the Group acquired cash and cash equivalents in the amount of EUR 1.7 million. The net cash outflow connected with the acquisition amounted to EUR 33.8 million.

Kolín Centrum a.s.

On 17 October 2017, the Group acquired 100% stake in company Kolín Centrum a.s. for the purchase price of CZK 50 million (app. EUR 1.9 million). This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. As at the date of acquisition, the identifiable assets of the acquired company represent investment property in the amount of EUR 1.9 million and cash and cash equivalents acquired in the amount of EUR 7 thousand. The net identifiable assets of subsidiary acquired at the date of acquisition amounted of EUR 1.9 million. The net cash outflow connected with the acquisition amounted to EUR 1.9 million.



153

Land bank projects, Czech Republic

On 15 November 2017 the Group acquired two real estate projects that can be used for future residential developments. These acquisitions were recognized as a property asset acquisitions as the acquired companies do not constitute business as defined by IFRS. The first project, with land plots of approximately 55.8 thousand sqm, is located in an attractive part of Prague 9. The 100% stake in company Polygon BC, a.s. was acquired for the purchase price of CZK 956 million (app. EUR 37.2 million). The company was acquired from companies controlled by the major shareholder of the Company and the acquisition is accounted for as a common control transaction. As at the date of acquisition, the identifiable assets of the acquired company represent investment property in the amount of EUR 37.3 million, cash and cash equivalents acquired in the amount of EUR 8 thousand and other non‐financial current assets acquired in the amount of EUR 4 thousand. The carrying value of the identifiable liabilities at the date of acquisition represents other both financial and non financial current liabilities in the amount of EUR 49 thousand. The net identifiable assets of subsidiary acquired at the date of acquisition amounted of EUR 37.2 million. The net cash outflow connected with the acquisition amounted to EUR 37.2 million. The second project, with land plots of approximately 395 thousand sqm, is located in Řitka, approximately 30 kilometers southwest of Prague. The Group acquired 100% stake in company MQM Czech, a.s. the company was acquired for the purchase price of CZK 352 million (app. EUR 13.7 million). The company was acquired from companies controlled by the major shareholder of the Company and the acquisition is accounted for as common control transaction. As at the date of acquisition, the identifiable assets of the acquired company represent investment property in the amount of EUR 13.7 million and cash and cash equivalents in the amount of EUR 8 thousand. Net identifiable assets of subsidiary acquired at the date of acquisition amounted of EUR 13.7 million. The net cash outflow connected with the acquisition amounted to EUR 13.7 million.

On 17 January 2017, the Group acquired 100% stake in Brno Property Development, a.s. The acquired entity owns land bank of approximately 5,358 sqm. The consideration paid amounted to CZK 32 million (app. EUR 1.2 million).

This acquisition was recognized as a property asset acquisition as the acquired company do not constitute business as defined by IFRS. As at the date of acquisition, the identifiable assets of the acquired company represent investment property in the amount of EUR 2.8 million. The carrying value of the identifiable liabilities at the date of acquisition represents financial debts in the amount EUR 1.6 million and other non‐financial current liabilities in the amount of EUR 18 thousand. The net identifiable assets of the subsidiary acquired at the date of acquisition amounted to EUR 1.2 million. The net cash outflow connected with the acquisition amounted to EUR 1.2 million.



154

Merlég office building, Budapest

On 13 December 2017 the Group acquired a unique building located downtown Budapest. The building directly neighbors with the Starlight Hotel owned by the Group. The building currently serves as an office building but the Group intends to refurbish it together with the Starlight Hotel into a 3 star hotel.

This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. The value of the property amounted to EUR 9.2 million as at 31 December 2017.

Future boutique hotel in Český Krumlov, Czech Republic

On 13 December 2017, the Group acquired a historical building located in Český Krumlov, Czech Republic. The building is situated in the heart of this medieval town inscribed on the UNESCO World Heritage List, within walking distance to all major tourist attractions. The property will be completely reconstructed into a four star boutique hotel with approximately 30 rooms. The hotel is expected to open in mid‐2019.

The 100% stake in PROJECT FIRST a.s. was acquired for the purchase price of CZK 109 million (app. EUR 4.3 million).

This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS. As at the date of acquisition, the identifiable assets of the acquired company represent investment property in the amount of EUR 4.3 million, cash and cash equivalents in the amount of EUR 1 thousand and other non‐financial current assets in the amount of EUR 2 thousand. The carrying value of the identifiable liabilities at the date of acquisition represents trade payables in the amount of EUR 1 thousand.

The net identifiable assets of subsidiary acquired at the date of acquisition amounted of EUR 4.3 million. The net cash outflow connected with the acquisition amounted to EUR 4.3 million.

Ibis hotel, Olomouc

On 13 December 2017, the Group acquired IBIS hotel, located in Olomouc, Czech Republic. The hotel is located in proximity of the historic old town with the UNESCO monuments and city parks. The hotel, operated under ibis brand, offers 90 rooms, 5 fully equipped conference rooms and onsite parking.

The 100% stake in HOTEL U PARKU s.r.o. was acquired for the purchase price of CZK 23.67 million (app. EUR 1 million).

This acquisition was recognized as a property asset acquisition as the acquired company does not constitute business as defined by IFRS.

As at the date of acquisition, the identifiable assets of the acquired company represent intangible assets and goodwill in the amount of EUR 4 thousand, investment property in the amount of EUR 5.3 million, inventories in the amount of EUR 14 thousand, trade receivables in the amount of EUR 33 thousand, cash and cash equivalents in the amount of EUR 0.4 million, other financial current assets in the amount of EUR 5 thousand and other non‐financial current assets in the amount of EUR 0.3 million. The carrying value of the identifiable liabilities at the date of acquisition represents financial debts in the amount of EUR 4.6 million and other both current and non‐current liabilities in the amount of EUR 0.4 million. The net identifiable assets of subsidiary acquired at the date of acquisition amounted of EUR 1 million. The net cash outflow connected with the acquisition amounted to EUR 0.6 million.



155

Acquisition through business combinations

Tepelné hospodářství Litvínov s.r.o.

On 7 August 2017, the Group acquired 100% stake in company Tepelné hospodářství Litvínov s.r.o. for the purchase price of CZK 170.5 million (app. EUR 6.5 million). The carrying value of the identifiable assets and liabilities at the date of acquisition was as follows:

Property, plant and equipment 8,003 Total non‐current assets 8,003 Trade receivables 3,018 Cash and cash equivalents 5 Other financial current assets 9 Other non‐financial current assets 261 Total current assets 3,293 Identifiable acquired assets 11,296 Deferred tax liabilities (922 Total non‐current liabilities (922) Financial debts (312) Trade payables (70) Advance payments (3,399) Other financial current liabilities (85) Total current liabilities (3,866) Identifiable acquired liabilities (4,788) Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 6.5 million. Neither goodwill, nor bargain purchase was recognized as a result of this business combination.

Due to the business combination, the Group acquired cash and cash equivalents in the amount of EUR 5 thousand. The net cash outflow connected with the acquisition amounted to EUR 6.5 million. The post‐acquisition profit from date of acquisition until 31 December 2017 amounted to EUR 0.068 million and the post‐acquisition total revenues amounted to EUR 0.7 million. If the acquisition had occurred on 1 January 2017 with all other variables held constant, Group total revenues for 2017 would have been EUR 439.0 million and net profit from continuing operations would have been EUR 694.8 million.



156

GSG Berlin portfolio extension

On 21 December 2017 the Group acquired 94.9% stake in “ARMO Verwaltungsgesellschaft mit beschrankter Haftung” (hereinafter “ARMO”), company owning four high quality commercial assets. Two assets are situated in Berlin with a total GLA of approximately 76,100 sqm and two assets are located close to Karlsruhe (Baden‐Württemberg) with a total GLA of approximately 31,500 sqm. This transaction strengthens the position of GSG Berlin as one of Berlin’s largest commercial real estate owners with a portfolio close to 1 million sqm. Consideration paid for 94.9% stake amounted to EUR 112.3 million. The carrying value of the identifiable assets and liabilities at the date of acquisition was as follows:

Investment property 167,670 Property, plant and equipment 23 Total non‐current assets 167,693 Trade receivables 206 Cash and cash equivalents 6,736 Other financial current assets 143 Other non‐financial current assets 603 Total current assets 7,688 Identifiable acquired assets 175,381 Deferred tax liabilities (26,038) Provisions (6,560) Total non‐current liabilities (32,598) Trade payables (541) Other financial current liabilities (262) Total current liabilities (803) Identifiable acquired liabilities (33,401)

Net identifiable assets of subsidiary acquired at the date of acquisition amounted to EUR 142 million. As a result of this business combination, the Group recognized a bargain purchase in the amount of EUR 22.5 million.

The agreed purchase price for the acquired stake of 94.9 % in ARMO reflected the result of business negotiations between the Group and the Swiss individuals. It also reflected the short time frame for the closing of the transaction, as well as the nature of the sale (share‐deal), both preferred by the counterparty. The value of the acquired property is consistent with the appraisal value from an independent and reputable valuation expert. This value is included as the acquisition amounts in the Group’s accounting. As a result of the lower purchase price, and following a review of the assets acquired, the Group deems that no intangible assets of any value have been acquired. Due to the business combination, the Group acquired cash and cash equivalents in the amount of EUR 6.7 million. The net cash outflow connected with the acquisition amounted to EUR 105.5 million. Although the acquisition became effective on 21 December 2017, the financial statements have been prepared using the financial information of ARMO as of 31 December 2017. The difference between these dates is not deemed to be material. Therefore, the company has no post‐acquisition profit and no post‐acquisition total revenues from date of acquisition until 31 December 2017.

If the acquisition had occurred on 1 January 2017 with all other variables held constant, Group total revenues for 2017 would have been EUR 444.7 million and net profit from continuing operations would have been EUR 693.5 million.



157

4 SEGMENT REPORTING For all asset types, discrete financial information is provided to the Board of Directors, which is the chief operating decision maker, on an individual entity (subsidiary) basis. The information provided are revenues (consisting of sale of goods, rental activities, services and net service charge income), net gain/loss from fair value adjustment on investment property, cost of goods sold, impairments, amortization and other operating result which altogether form the operating result. The individual entities are aggregated into reportable segments with similar economic characteristics for the purposes of consolidated reporting. The structure of operating segments remains unchanged in 2018 compared to the financial statements as at 31 December 2017.

Income generating rental properties

Within the segment “Income generating rental properties” the Group is considered to have six types of assets as at 30 June 2018, as follows:

• Retail – acquires, develops and leases shopping malls • Office – acquires, develops and leases offices • Logistics – acquires, develops and leases warehouses and factories • Residential – rents residential property • Hotels – acquires, develops and leases hotels to operators (due to the acquisition of CPI Hotels Italy, note

3.3, no asset is recognized within this segment as at 30 June 2018) • Other – primarily includes intergroup service and financing entities

Income generating operational properties The segment includes properties which primarily generate income from other than rental activities. As at 30 June 2018 the segment includes three types of assets:

• Hospitality – operates hotel premises as hotel operator • Agriculture – operates farmland and produces the high‐quality organic food • Mountain resorts – operates ski resort, rents restaurants and owns land bank designated for future

development

Development Covers all real estate assets under construction or designated for future development in order to be sold to a third party or to be transferred to the Income generating rental properties operating segment.

Land bank Acquires and retains lands for further Group’s utilization. The segment also includes building which are intended for future redevelopment and do not generate any rental income.



158

As at 30 June 2018 Consolidated profit or loss Income generating ‐ rental properties Income generating ‐ operational properties

Land bank

Development

Total

consolidated 30 June 2018 Office Retail Residential Industry and

Logistics Other Agriculture Hospitality Mountain

resorts

Gross rental income 63,286 68,308 10,675 3,484 116 ‐‐ 288 ‐‐ 755 10 146,922 Service revenue 570 538 ‐‐ 1 4,689 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,798 Net service charge income 7,996 791 24 169 1,445 ‐‐ (96) ‐‐ (91) ‐‐ 10,238 Property operating expenses (11,650) (5,199) (5,650) (493) (3,825) ‐‐ (981) ‐‐ (512) (47) (28,357) Net rental income 60,202 64,438 5,049 3,161 2,425 ‐‐ (789) ‐‐ 152 (37) 134,601 Development sales 53 ‐‐ 48 ‐‐ ‐‐ ‐‐ 47 ‐‐ 97 7,668 7,913 Cost of goods sold ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (7) (7,344) (7,351) Development operating expenses ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (2,278) (2,278) Net development income 53 ‐‐ 48 ‐‐ ‐‐ ‐‐ 47 ‐‐ 90 (1,954) (1,716) Hotel revenue ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 49,935 ‐‐ ‐‐ ‐‐ 49,935 Cost of goods sold ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (112) ‐‐ ‐‐ ‐‐ (112) Hotel operating expenses ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (35,488) ‐‐ ‐‐ ‐‐ (35,488) Net hotel income ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 14,335 ‐‐ ‐‐ ‐‐ 14,335 Revenue from other business operations ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,030 ‐‐ 18,038 ‐‐ ‐‐ 24,068 Cost of goods sold ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (92) ‐‐ (995) ‐‐ ‐‐ (1,087) Related operating expenses ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (4,308) ‐‐ (10,335) ‐‐ ‐‐ (14,643) Net income from other business operations ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,630 ‐‐ 6,708 ‐‐ ‐‐ 8,338 Total revenues 71,905 69,637 10,747 3,654 6,354 6,030 50,070 18,038 761 7,678 244,874 Total direct business operating expenses (11,651) (5,199) (5,650) (493) (3,925) (4,400) (36,481) (11,330) (519) (9,669) (89,316) Net business income 60,255 64,438 5,097 3,161 2,429 1,630 13,589 6,708 242 (1,991) 155,558 Net valuation gain or loss 55,954 16,232 17,727 ‐‐ ‐‐ 5,212 ‐‐ ‐‐ ‐‐ ‐‐ 95,125 Net gain or loss on the disposal of investment property 3 (890) 16 ‐‐ 388 ‐‐ (2) ‐‐ 471 ‐‐ (16) Net gain or loss on disposal of subsidiaries (192) 150 ‐‐ ‐‐ (28) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (70) Amortization, depreciation and impairments (761) (1,059) (30) ‐‐ (3,209) 106 (7,433) 733 2 (1) (11,652) Other operating income 261 196 199 36 80 ‐‐ 14 ‐‐ 26 ‐‐ 812 Administrative expenses (6,555) (1,517) (619) (37) (14,879) ‐‐ (619) ‐‐ (433) (167) (24,824) Other operating expenses 440 (392) (74) (18) (2,516) (14) (1,403) (44) (67) (18) (4,106) Operating result 109,405 77,158 22,317 3,143 (17,179) 6,936 4,146 7,397 238 (2,177) 210,827 Interest income 95 143 ‐‐ 7 7,050 4 (47) ‐‐ ‐‐ ‐‐ 7,252 Interest expense (7,760) (9,718) (2,865) (88) (23,029) (366) (921) (120) (16) ‐‐ (44,883) Other net financial result 6,523 (515) (1) 775 5,683 92 (4,564) (68) 4,202 101 12,227 Net finance income/(costs) (1,142) (10,090) (2,866) 694 (10,296) (270) (5,532) (188) 4,186 101 (25,404) Share of profit or loss of entities accounted for using equity method ‐‐ ‐‐ ‐‐ ‐‐ (362) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (362) Profit/(loss) before income tax 108,263 67,068 19,451 3,837 (28,393) 6,666 (1,386) 7,209 4,424 (2,076) 185,061 Income tax expense (20,193) 5,773 (4,214) (382) (2,065) (1,109) (1,665) (1,043) 643 7 (24,248) Net profit/(loss) from continuing operations 88,070 72,841 15,237 3,455 (30,458) 5,557 (3,049) 6,166 5,067 (2,069) 160,813



159

As at 30 June 2017 Consolidated profit or loss

Income generating ‐ rental properties Income generating ‐ operational properties

Land bank

Development

Total

consolidated 30 June 2017

Office

Retail

Residential

Industry and

Logistics Hotels

Other

Agriculture

Hospitality Mountain

resorts

Gross rental income 55,818

49,671

9,674

3,351

360

(71)

‐‐

‐‐

‐‐

876

‐‐

119,679 Service revenue 403

191

4

1

‐‐

4,566

‐‐

‐‐

‐‐

6

‐‐

5,171

Net service charge income 7,121

(663)

8

(196)

‐‐

1,109

‐‐

‐‐

‐‐

(147)

‐‐

7,231 Property operating expenses (11,306)

(4,232)

(5,650)

(382)

(420)

(3,511)

‐‐

‐‐

‐‐

(756)

(34)

(26,291)

Net rental income 52,036

44,967

4,036

2,774

(60)

2,093

‐‐

‐‐

‐‐

(21)

(34)

105,790 Development sales 54

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

1,846

‐‐

1,900

Cost of goods sold ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

(68)

‐‐

(68) Development operating expenses 13

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

(1,490)

(1,137)

(2,614)

Net development income 67

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

288

(1,137)

(782) Hotel revenue ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

46,763

‐‐

‐‐

‐‐

46,763


‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

(107)

‐‐

‐‐

‐‐

(107) Hotel operating expenses ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

(32,925)

‐‐

‐‐

‐‐

(32,925)

Net hotel income ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

13,731

‐‐

‐‐

‐‐

13,731 Revenue from other business operations ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

6,324

‐‐

16,071

‐‐

‐‐

22,395


‐‐

‐‐

‐‐

‐‐

‐‐

(70)

‐‐

(999)

‐‐

‐‐

(1,069) Related operating expenses ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

(3,982)

‐‐

(12,629)

‐‐

‐‐

(16,611)

Net income from other business operations ‐‐

‐‐

‐‐

‐‐

‐‐

‐‐

2,272

‐‐

2,444

‐‐

‐‐

4,715 Total revenues 63,396

49,199

9,686

3,156

360

5,604

6,324

46,763

16,071

2,581

‐‐

203,139

Total direct business operating expenses (11,293)

(4,232)

(5,650)

(382)

(420)

(3,511)

(4,052)

(33,032)

(13,628)

(2,314)

(1,171)

(79,685) Net business income 52,103

44,967

4,036

2,774

(60)

2,093

2,272

13,731

2,444

267

(1,171)

123,454

Net valuation gain 15,753

89,936

53,721

‐‐

‐‐

‐‐

367

‐‐

‐‐

69,444

‐‐

229,221 Net gain or loss on the disposal of investment property (8)

(357)

283

(5)

‐‐

(53)

‐‐

(2)

‐‐

(69)

‐‐

(211)

Net gain or loss on disposal of subsidiaries 15,844

‐‐

(119,116)

(5,329)

(7,398)

113,944

‐‐

‐‐

‐‐

319

‐‐

(1,736) Amortization, depreciation and impairments (618)

(647)

13

(30)

‐‐

1,020

(521)

(9,529)

(4,782)

234

112

(14,748)

Other operating income 2,029

4,977

59

50

‐‐

786

‐‐

99

3

56

‐‐

8,059 Administrative expenses (5,184)

(1,609)

(604)

(78)

(8)

(12,940)

‐‐

(494)

(743)

(243)

(60)

(21,963)

Other operating expenses 11

(795)

(82)

(64)

(151)

(137)

6

2,010

173

(1,976)

(461)

(1,465) Operating result 79,930

136,472

(61,690)

(2,682)

(7,617)

104,713

2,124

5,815

(2,905)

68,032

(1,580)

320,611

Interest income ‐‐

317

43

7

26

1,346

‐‐

748

‐‐

‐‐

‐‐

2,487 Interest expense (11,967)

(10,223)

(3,592)

(449)

‐‐

(16,761)

(276)

(2,893)

(493)

250

(329)

(46,733)

Other net financial result (3,053)

(11,977)

(62)

(47)

(277)

(24,506)

588

(2,154)

(35)

(4,033)

159

(45,397) Net finance income/(costs) (15,020)

(21,883)

(3,611)

(489)

(251)

(39,921)

312

(4,299)

(528)

(3,783)

(170)

(89,643)

Profit/(loss) before income tax 64,910 114,589 (65,301) (3,171) (7,868) 64,792 2,436 1,516 (3,433) 64,249 (1,750) 230,968 Income tax expense (8,608) (12,527) (10,426) (56) ‐‐ 1,212 (120) 877 229 (11,432) 29 (40,822) Net profit/(loss) from continuing operations 56,302 102,062 (75,727) (3,227) (7,868) 66,004 2,316 2,393 (3,204) 52,817 (1,721) 190,146



160

As at 30 June 2018 Statement of financial position Income generating ‐ rental properties Income generating ‐ operational properties

Land bank

Development

Total consolidated 30 June 2018 Office Retail Residential Industry and

Logistics Other Agriculture Hospitality Mountain

resorts

Gross assets value 2,859,031 2,027,716 524,430 78,255 10,286 98,392 645,522 94,455 502,709 91,364 6,932,160 Investment Property 2,847,797 2,027,005 524,378 78,255 ‐‐ 88,063 ‐‐ ‐‐ 502,607 14,010 6,082,115 Property, plant and equipment 11,184 666 4 ‐‐ 10,182 9,344 643,923 94,051 68 343 769,765 Inventories 50 45 48 ‐‐ 104 985 1,599 404 34 77,011 80,280

Biological assets ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,117 ‐‐ ‐‐ 19 ‐‐ 7,136 Other assets non‐current 52,973 5,051 3,861 601 216,305 10,275 59,072 7,156 1,201 2,540 359,035 Other assets current 53,728 73,645 22,747 857 73,086 8,054 13,835 2,562 12,769 5,161 266,444 Cash and cash equivalents 80,279 114,222 3,583 2,892 242,632 2,005 20,812 3,263 2,634 1,074 473,396 Total Assets 3,046,011 2,220,634 554,621 82,605 542,309 125,843 739,241 107,436 519,332 100,139 8,038,171 Other payables non‐current 454,106 125,455 73,513 5,562 4,323 15,676 45,644 9,041 37,591 1,575 772,486 Finance debts non‐current 787,896 629,243 51 5,799 13,731 31,000 88,192 22,003 2,706 ‐‐ 1,580,621 Bonds issued non‐current ‐‐ ‐‐ 30,315 ‐‐ 1,283,181 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,313,496 Other payables current 56,955 46,524 26,366 1,313 19,171 4,452 22,263 9,348 4,061 10,433 200,886 Finance debts current 100,683 34,899 ‐‐ 840 6,809 1,589 6,599 4,792 566 ‐‐ 156,777 Bonds issued current ‐‐ 43,428 84,127 ‐‐ 18,484 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 146,039 Total Liabilities 1,399,640 879,549 214,372 13,514 1,347,647 52,717 162,698 45,184 44,924 12,008 4,172,253

As at 31 December 2017

Consolidated statement of financial position Income generating – rental properties Income generating – operational properties

Land bank

Development

Total

consolidated

31 December 2017 Office Retail Residential Industry and

Logistics Hotels Other Agriculture Hospitality Mountain

resorts

Gross assets value 2,716,538 1,873,745 513,698 78,471 38,230 10,041 94,990 603,403 88,620 504,602 91,066 6,613,404 Investment Property 2,705,380 1,872,782 511,309 78,471 38,230 ‐‐ 84,864 ‐‐ ‐‐ 504,384 12,527 5,807,947 Property, plant and equipment 11,112 945 2,388 ‐‐ ‐‐ 9,999 8,827 602,218 87,938 198 38 723,664 Inventories 46 18 1 ‐‐ ‐‐ 42 1,300 1,185 682 19 78,501 81,793

Biological assets ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,193 ‐‐ ‐‐ 23 ‐‐ 6,216 Other assets non‐current 53,053 7,031 4,219 611 19 204,935 10,406 57,309 8,907 452 2,568 349,510 Other assets current 67,381 111,839 18,126 1,102 2,421 80,331 6,741 13,074 3,812 12,667 3,701 321,195 Cash and cash equivalents 76,053 67,092 4,326 1,670 155 55,825 2,958 23,431 2,923 1,564 2,910 238,907 Total Assets 2,913,025 2,059,707 540,369 81,854 40,825 351,132 121,288 697,217 104,262 519,308 100,245 7,529,232 Other payables non‐current 443,200 125,793 71,013 5,817 2,472 3,104 15,030 42,469 9,680 38,231 3,819 760,628 Finance debts non‐current 777,698 641,902 57 6,110 ‐‐ 16,133 33,013 92,065 23,237 2,812 ‐‐ 1,593,027 Bonds issued non‐current ‐‐ 43,648 ‐‐ ‐‐ ‐‐ 1,288,023 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,331,671 Other payables current 68,322 49,019 22,519 1,996 1,458 15,872 1,274 20,349 12,449 3,060 10,172 206,490 Finance debts current 104,992 35,665 ‐‐ 845 ‐‐ 8,378 2,011 6,619 5,654 560 ‐‐ 164,724 Bonds issued current ‐‐ 403 118,911 ‐‐ ‐‐ 38,209 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 157,523 Total Liabilities 1,394,212 896,430 212,500 14,768 3,930 1,369,719 51,328 161,502 51,020 44,663 13,991 4,214,063



161

As at 30 June 2018

Consolidated profit or loss 30 June 2018

Czech Republic Slovak

Republic Germany Hungary Poland Romania France Luxembourg Italy Russia Switzerland Croatia Monaco

Other*

Total

consolidated

Gross rental income 84,674 4,109 31,491 17,400 7,667 1,523 42 16 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 146,922 Service revenue 4,921 ‐‐ 544 178 8 129 ‐‐ 18 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,798 Net service charge income 1,992 (207) 7,194 1,508 (348) 99 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 10,238 Property operating expenses (16,045) (426) (7,236) (3,586) (457) (45) (61) ‐‐ (169) ‐‐ ‐‐ ‐‐ (332) ‐‐ (28,357) Net rental income 75,542 3,476 31,993 15,500 6,870 1,706 (19) 34 (169) ‐‐ ‐‐ ‐‐ (332) ‐‐ 134,601 Development sales 647 ‐‐ ‐‐ ‐‐ 6 ‐‐ 7,260 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,913 Cost of goods sold (7) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (7,344) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (7,351) Development operating expenses (4) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (735) ‐‐ (1,539) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (2,278) Net development income 636 ‐‐ ‐‐ ‐‐ 6 ‐‐ (819) ‐‐ (1,539) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (1,716) Hotel revenue 31,264 331 ‐‐ 5,450 2,237 ‐‐ ‐‐ ‐‐ 710 2,219 ‐‐ 7,724 ‐‐ ‐‐ 49,935 Cost of goods sold (101) ‐‐ ‐‐ (8) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (3) ‐‐ ‐‐ (112) Hotel operating expenses (22,490) (260) ‐‐ (3,418) (1,621) ‐‐ ‐‐ ‐‐ (576) (1,223) ‐‐ (5,900) ‐‐ ‐‐ (35,488) Net hotel income 8,673 71 ‐‐ 2,024 616 ‐‐ ‐‐ ‐‐ 134 996 ‐‐ 1,821 ‐‐ ‐‐ 14,335 Revenue from other business operations 6,030 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 18,038 ‐‐ ‐‐ ‐‐ 24,068 Cost of goods sold (92) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (995) ‐‐ ‐‐ ‐‐ (1,087) Related operating expenses (4,308) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (10,335) ‐‐ ‐‐ ‐‐ (14,643) Net income from other business operations 1,630 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,708 ‐‐ ‐‐ ‐‐ 8,338 Total revenues 129,529 4,233 39,229 24,536 9,570 1,751 7,302 34 710 2,219 18,038 7,724 ‐‐ ‐‐ 244,874 Total direct business operating expenses (43,047) (686) (7,236) (7,012) (2,078) (45) (8,140) ‐‐ (2,284) (1,223) (11,330) (5,903) (332) ‐‐ (89,316) Net business income 86,482 3,547 31,993 17,524 7,492 1,706 (838) 34 (1,574) 996 6,708 1,821 (332) ‐‐ 155,558 Net valuation gain or loss 55,392 4,390 29,580 2,322 5,794 ‐‐ (72) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (2,281) ‐‐ 95,125 Net loss on the disposal of investment property (16) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (16) Net gain or loss on disposal of subsidiaries 110 ‐‐ ‐‐ (182) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 2 (70) Amortization, depreciation and impairments (6,258) (2) (458) (560) (841) (1) (30) (1,517) (6) 386 733 (3,097) (1) ‐‐ (11,652) Other operating income 344 12 174 87 86 (51) ‐‐ (1) ‐‐ ‐‐ ‐‐ ‐‐ 161 ‐‐ 812 Administrative expenses (10,473) (96) (5,941) (2,812) (818) (229) (209) (1,888) (274) (124) ‐‐ (54) (284) (1,622) (24,824) Other operating expenses (964) 3 601 (547) 323 (74) (19) (2,153) (1,248) 12 (44) 20 (9) (7) (4,106) Operating result 124,617 7,854 55,949 15,832 12,036 1,351 (1,168) (5,525) (3,102) 1,270 7,397 (1,310) (2,746) (1,627) 210,827 Interest income 449 ‐‐ 23 7 ‐‐ 1 ‐‐ 6,766 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6 7,252 Interest expense (23,464) (5,217) (3,294) (3,152) (842) (2) 4 (8,787) ‐‐ ‐‐ (120) ‐‐ ‐‐ (9) (44,883) Other net financial result 75,735 (67) (256) 10,815 (3,443) 364 (8) (68,856) (1) (1,688) (68) 109 18 (426) 12,227 Net finance income/(costs) 52,720 (5,284) (3,527) 7,670 (4,285) 363 (4) (70,877) (1) (1,688) (188) 109 18 (429) (25,404) Share of profit or loss of entities accounted for using equity method ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (362) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (362) Profit/(loss) before income tax 177,337 2,570 52,422 23,502 7,751 1,714 (1,172) (76,764) (3,103) (418) 7,209 (1,201) (2,728) (423) 185,061 Income tax expense (1,740) (1,374) (13,032) (2,047) (2,550) (162) 12 (1,815) ‐‐ (167) (1,043) 279 (406) (204) (24,248) Net profit/(loss) from continuing operations 175,597 1,196 39,390 21,455 5,201 1,552 (1,160) (78,579) (3,103) (585) 6,166 (922) (3,134) (627) 160,813

*Other countries includes operations in Netherland, Ireland, Cyprus, British Virgin Islands and Guernsey.



162

As at 30 June 2017

Consolidated profit or loss 30 June 2017

Czech Republic Slovak

Republic Germany Hungary Poland Romania France Luxembourg Italy Russia Switzerland Croatia Monaco

Other*

Total consolidated

Gross rental income 71,353 3,915 26,081 12,532 4,611 759 42 26 360 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 119,679 Service revenue 4,557 68 365 74 91 12 4 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,171 Net service charge income 623 (211) 6,862 516 (570) 12 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,231 Property operating expenses (15,204) (401) (6,179) (3,571) (85) (6) (97) ‐‐ (443) ‐‐ ‐‐ ‐‐ (305) ‐‐ (26,291) Net rental income 61,329 3,371 27,129 9,551 4,047 777 (51) 26 (83) ‐‐ ‐‐ ‐‐ (305) ‐‐ 105,790 Development sales 1,873 ‐‐ ‐‐ 27 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,900 Cost of goods sold (59) ‐‐ ‐‐ (7) (2) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (68) Development operating expenses (1,489) ‐‐ ‐‐ ‐‐ (1) ‐‐ ‐‐ ‐‐ (1,124) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (2,614) Net development income 325 ‐‐ ‐‐ 20 (3) ‐‐ ‐‐ ‐‐ (1,124) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (782) Hotel revenue 29,777 291 ‐‐ 4,940 2,423 ‐‐ ‐‐ ‐‐ ‐‐ 2,175 ‐‐ 7,157 ‐‐ ‐‐ 46,763 Cost of goods sold (103) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (4) ‐‐ ‐‐ (107) Hotel operating expenses (20,744) (268) ‐‐ (3,068) (1,571) ‐‐ ‐‐ ‐‐ ‐‐ (1,454) ‐‐ (5,820) ‐‐ ‐‐ (32,925) Net hotel income 8,930 23 ‐‐ 1,872 852 ‐‐ ‐‐ ‐‐ ‐‐ 721 ‐‐ 1,333 ‐‐ ‐‐ 13,731 Revenue from other business operations 6,324 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 16,071 ‐‐ ‐‐ ‐‐ 22,395 Cost of goods sold (69) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (1,000) ‐‐ ‐‐ ‐‐ (1,069) Related operating expenses (3,966) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (12,644) ‐‐ ‐‐ ‐‐ (16,611) Net income from other business operations 1,641 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,075 ‐‐ ‐‐ ‐‐ 4,715 Total revenues 113,859 4,063 33,308 18,089 6,555 783 46 26 360 2,175 16,719 7,157 ‐‐ ‐‐ 203,139 Total direct business operating expenses (41,634) (669) (6,179) (6,646) (1,659) (6) (97) ‐‐ (1,567) (1,454) (13,644) (5,824) (305) ‐‐ (79,685) Net business income 72,225 3,394 27,129 11,443 4,896 777 (51) 26 (1,207) 721 3,075 1,333 (305) ‐‐ 123,454 Net valuation gain 193,624 ‐‐ ‐‐ 24,395 5,575 5,627 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 229,221 Net loss on the disposal of investment property (200) ‐‐ ‐‐ (11) ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (211) Net gain or loss on disposal of subsidiaries 4,532 (5,329) ‐‐ 13,355 ‐‐ ‐‐ ‐‐ 1,054 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ (15,348) (1,736) Amortization, depreciation and impairments (6,105) ‐‐ (555) (487) (1,332) (10) ‐‐ 1,119 ‐‐ 390 (4,782) (2,986) ‐‐ ‐‐ (14,748) Other operating income 2,892 2 1,102 2,331 464 1,199 ‐‐ 57 ‐‐ ‐‐ 3 ‐‐ ‐‐ 9 8,059 Administrative expenses (8,122) (180) (4,486) (2,561) (539) (46) (28) (1,615) (50) (53) (743) (117) (243) (3,180) (21,963) Other operating expenses (1,485) (12) 677 (538) 2,055 (20) (469) (64) (151) 9 173 112 (8) (1,745) (1,465) Operating result 257,361 (2,125) 23,867 47,927 11,119 7,527 (548) 577 (1,408) 1,067 (2,274) (1,658) (556) (20,264) 320,611 Interest income 1,393 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 43 661 26 ‐‐ ‐‐ ‐‐ ‐‐ 364 2,487 Interest expense (29,918) (5,367) (5,153) (372) (1,353) 37 (401) (2,283) ‐‐ ‐‐ (493) (756) (670) (4) (46,733) Other net financial result (20,663) (56) 162 (2,234) 2,045 (456) 6 (22,445) (277) (1,474) (35) 288 (51) (207) (45,397) Net finance income/(costs) (49,188) (5,423) (4,991) (2,606) 692 (419) (352) (24,067) (251) (1,474) (528) (468) (721) 153 (89,643) Profit/(loss) before income tax 208,173 (7,548) 18,876 45,321 11,811 7,108 (900) (23,490) (1,659) (407) (2,802) (2,126) (1,277) 517 230,968 Income tax expense (34,556) (417) (4,945) (2,093) 542 (1,712) ‐‐ 1,694 ‐‐ 237 229 269 ‐‐ (70) (40,822) Net profit/(loss) from continuing operations 173,617 (7,965) 13,931 43,228 12,353 5,396 (900) (21,796) (1,659) (170) (2,573) (1,857) (1,277) 447 190,146

*Other countries includes operations in Netherland, Ireland, Cyprus, British Virgin Islands and Guernsey.



163

As at 30 June 2018

Consolidated statement of financial position Czech Republic Slovak

Republic Germany Hungary Poland Romania France Luxemburg Italy Russia Switzerland Croatia

Monaco Other* Total consolidated

30 June 2018 Gross assets value 3,753,202 121,412 1,682,995 555,778 333,013 35 52,393 ‐‐ 50,157 23,187 94,455 175,641 89,881 11 6,932,160

Investment Property 3,377,828 121,391 1,672,670 502,904 306,958 1 10,486 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 89,877 ‐‐ 6,082,115 Property, plant and equipment 350,084 19 10,275 52,755 26,000 4 ‐‐ ‐‐ 38,301 23,061 94,051 175,211 4 ‐‐ 769,765 Inventories 25,290 2 50 119 55 30 41,907 ‐‐ 11,856 126 404 430 ‐‐ 11 80,280

Biological assets 7,136 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,136 Other assets non‐current 94,292 3 49,953 652 39 ‐‐ 2,666 197,199 4,134 5 7,156 75 2,842 19 359,035 Other assets current 115,964 1,211 17,561 5,317 7,970 40,160 7,521 59,754 3,477 160 2,562 3,252 191 1,344 266,444 Cash and cash equivalents 289,353 5,439 27,474 28,752 9,346 37 363 99,751 1,153 531 3,263 3,002 812 4,120 473,396 Total Assets 4,259,947 128,065 1,777,983 590,499 350,368 40,232 62,943 356,704 58,921 23,883 107,436 181,970 93,726 5,494 8,038,171 Other payables non‐current 325,243 12,565 367,923 23,008 14,447 11 228 1,485 2,472 122 9,041 12,903 3,038 ‐‐ 772,486 Finance debts non‐current 709,792 36,809 540,789 194,979 76,249 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 22,003 ‐‐ ‐‐ ‐‐ 1,580,621 Bonds issued non‐current 352,287 147,636 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 813,573 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,313,496 Other payables current 123,951 801 25,827 12,252 5,631 2,222 7,122 1,762 1,011 1,280 9,348 7,076 1,294 1,309 200,886 Finance debts current 120,698 2,736 10,426 13,410 4,423 408 ‐‐ (168) ‐‐ ‐‐ 4,792 ‐‐ ‐‐ 52 156,777 Bonds issued current 130,956 2,139 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 12,944 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 146,039 Total Liabilities 1,762,927 202,686 944,965 243,649 100,750 2,641 7,350 831,544 3,483 1,402 45,184 19,979 4,332 1,361 4,172,253

*Other countries includes assets and liabilities in Netherland, Ireland, Cyprus, British Virgin Islands and Guernsey.


Consolidated statement of financial position Czech Republic Slovak

Republic Germany Hungary Poland Romania France Luxemburg Italy Russia Switzerland

Croatia

Monaco Other* Total consolidated

31 December 2017 Gross assets value 3,594,847 116,652 1,638,006 551,209 228,368 ‐‐ 59,838 ‐‐ 49,901 23,208 88,620 171,219 91,526 10 6,613,404

Investment Property 3,224,738 116,646 1,627,600 498,639 202,368 ‐‐ 10,486 ‐‐ 38,230 ‐‐ ‐‐ ‐‐ 89,240 ‐‐ 5,807,947 Property, plant and equipment 350,407 2 10,360 52,485 25,942 ‐‐ 102 ‐‐ ‐‐ 23,061 87,938 171,081 2,286 ‐‐ 723,664 Inventories 19,702 4 46 85 58 ‐‐ 49,250 ‐‐ 11,671 147 682 138 ‐‐ 10 81,793

Biological assets 6,216 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,216 Other receivables non‐current 96,037 3 49,942 1,095 (23) ‐‐ 2,654 187,522 46 4 8,907 83 3,239 1 349,510 Other receivables current 152,404 1,396 15,765 17,258 6,274 40,622 5,794 70,883 4,793 160 3,812 675 152 1,207 321,195 Cash and cash equivalents 140,419 4,359 39,880 21,356 4,309 14 314 15,756 170 174 2,923 3,950 228 5,055 238,907 Total Assets 3,989,923 122,410 1,743,593 590,918 238,928 40,636 68,600 274,161 54,910 23,546 104,262 175,927 95,145 6,273 7,529,232 Other payables non‐current 324,012 11,015 363,139 22,272 11,354 11 228 400 2,472 449 9,680 12,559 3,037 ‐‐ 760,628 Finance debts non‐current 690,730 38,137 541,014 222,372 77,359 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 23,237 180 ‐‐ (2) 1,593,027 Bonds issued non‐current 371,151 147,316 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 813,204 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,331,671 Other payables current 125,539 997 29,573 14,307 3,793 2,236 7,279 1,716 1,475 860 12,449 4,193 807 1,266 206,490 Finance debts current 126,135 2,705 10,464 14,991 4,122 405 ‐‐ ‐‐ ‐‐ ‐‐ 5,654 ‐‐ ‐‐ 248 164,724 Bonds issued current 122,828 30,430 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,265 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 157,523 Total Liabilities 1,760,395 230,600 944,190 273,942 96,628 2,652 7,507 819,585 3,947 1,309 51,020 16,932 3,844 1,512 4,214,063

*Other countries includes assets and liabilities in Netherland, Ireland, Cyprus, British Virgin Islands and Guernsey.



164

5 REVENUES The Group’s operations and main revenue streams are those described in note 2.2. The nature and effect of initially applying IFRS 15 on the Group’s interim financial statements are disclosed in 2.2.

In the following tables, revenue is disaggregated by the major revenue streams (as described in note 2.2): Income generating ‐ rental properties Income generating ‐ operational properties

Land bank

Development

Total consolidated 30 June 2018 Office Retail Residential Industry and

Logistics Other Agriculture Hospitality Mountain resorts

Advisory and accounting services 73 242 ‐‐ 1 4,618 -- -- -- -- -- 4,934 Other services 497 296 ‐‐ ‐‐ 71 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 864 Service revenue 570 538 ‐‐ 1 4,689 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,798 Net service charge income 7,996 791 24 169 1,445 ‐‐ (96) ‐‐ (91) ‐‐ 10,238 Development sales 53 ‐‐ 48 ‐‐ ‐‐ ‐‐ 47 ‐‐ 97 7,668 7,913 Room rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 31,313 ‐‐ ‐‐ ‐‐ 31,313 ‐ room rentals ‐ accommodation ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 15,140 ‐‐ ‐‐ ‐‐ 15,140 ‐ room rentals ‐ travel agencies ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,392 ‐‐ ‐‐ ‐‐ 6,392 ‐ room rentals ‐ reservation portals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 9,781 ‐‐ ‐‐ ‐‐ 9,781 Services ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,207 ‐‐ ‐‐ ‐‐ 3,207 Food and beverage sales ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 13,356 ‐‐ ‐‐ ‐‐ 13,356 Conferences ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 2,059 ‐‐ ‐‐ ‐‐ 2,059 Hotel revenue ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 49,935 ‐‐ ‐‐ ‐‐ 49,935 Sales of animals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 717 ‐‐ ‐‐ ‐‐ ‐‐ 717 Slaughterhouse ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,015 ‐‐ ‐‐ ‐‐ ‐‐ 1,015 Other agricultural services ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 518 ‐‐ ‐‐ ‐‐ ‐‐ 518 Government grants ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,780 ‐‐ ‐‐ ‐‐ ‐‐ 3,780 Revenues attributable to farms ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,030 ‐‐ ‐‐ ‐‐ ‐‐ 6,030 Operation of ski lifts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 12,911 ‐‐ ‐‐ 12,911 Ski equipment and rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 591 ‐‐ ‐‐ 591 Restaurants and parking ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,536 ‐‐ ‐‐ 4,536 Revenues attributable to mountain resorts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 18,038 ‐‐ ‐‐ 18,038 Revenues from other business operations ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,030 ‐‐ 18,038 ‐‐ ‐‐ 24,068 Income from penalties 19 21 20 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 60 Insurance claims 47 36 5 1 (73) ‐‐ 7 ‐‐ 10 ‐‐ 33 Other – other operating income 195 139 174 35 153 ‐‐ 7 ‐‐ 16 ‐‐ 719 Other operating income 261 196 199 36 80 ‐‐ 14 ‐‐ 26 ‐‐ 812



165

Income generating ‐ rental properties Income generating ‐ operational properties Land bank

Total consolidated

30 June 2017 Office Retail Residential Industry and Logistics Other Agriculture Hospitality Mountain

resorts

Advisory and accounting services 87 18 ‐‐ 1 4,559 ‐‐ ‐‐ ‐‐ 6 4,671 Other services 316 173 4 ‐‐ 7 ‐‐ ‐‐ ‐‐ ‐‐ 500 Service revenue 403 191 4 1 4,566 ‐‐ ‐‐ ‐‐ 6 5,171 Net service charge income 7,121 (663) 8 (196) 1,109 ‐‐ ‐‐ ‐‐ (147) 7,231 Development sales 54 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,846 1,900 Room rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 32,544 ‐‐ ‐‐ 32,544 ‐ room rentals ‐ accommodation ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 11,777 ‐‐ ‐‐ 11,777 ‐ room rentals ‐ travel agencies ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,150 ‐‐ ‐‐ 5,150 ‐ room rentals ‐ reservation portals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 15,617 ‐‐ ‐‐ 15,617 Services ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 2,357 ‐‐ ‐‐ 2,357 Food and beverage sales ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 10,099 ‐‐ ‐‐ 10,099 Conferences ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,763 ‐‐ ‐‐ 1,763 Hotel revenue ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 46,763 ‐‐ ‐‐ 46,763 Sales of animals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 784 ‐‐ ‐‐ ‐‐ 784 Slaughterhouse ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,094 ‐‐ ‐‐ ‐‐ 1,094 Services to third parties ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 622 ‐‐ ‐‐ ‐‐ 622 Government grants ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,824 ‐‐ ‐‐ ‐‐ 3,824 Revenues attributable to farms ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,324 ‐‐ ‐‐ ‐‐ 6,324 Operation of ski lifts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 11,347 ‐‐ 11,347 Ski equipment and rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 823 ‐‐ 823 Restaurants and parking ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,901 ‐‐ 3,901 Revenues attributable to mountain resorts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 16,071 ‐‐ 16,071 Revenues from other business operations ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,324 ‐‐ 16,071 ‐‐ 22,395 Income from penalties 11 67 44 ‐‐ 431 ‐‐ ‐‐ ‐‐ ‐‐ 553 Insurance claims 42 44 8 47 14 ‐‐ 29 ‐‐ ‐‐ 184 Other – other operating income 1,976 395 7 3 341 ‐‐ 70 3 56 2,851 Gain on bargain purchase relating to business combination

‐‐ 4,471 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,471

Other operating income 2,029 4,977 59 50 786 ‐‐ 99 3 56 8,059



166

Czech

Republic Slovak Republic Germany Hungary Poland Romania France Luxembourg Italy Russia Switzerland Croatia Monaco

Total consolidated

30 June 2018 Advisory and accounting services 4,849 ‐‐ 50 14 3 ‐‐ ‐‐ 18 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,934 Other services 72 ‐‐ 494 164 5 129 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 864 Service revenue 4,921 ‐‐ 544 178 8 129 ‐‐ 18 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,798 Net service charge income 1,992 (207) 7,194 1,508 (348) 99 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 10,238 Development sales 647 ‐‐ ‐‐ ‐‐ 6 ‐‐ 7,260 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,913 Room rentals 18,445 290 ‐‐ 4,271 1,641 ‐‐ ‐‐ ‐‐ 710 1,811 ‐‐ 4,146 ‐‐ 31,314 ‐ room rentals ‐ accommodation 8,872 136 ‐‐ 1,904 544 ‐‐ ‐‐ ‐‐ 710 1,136 ‐‐ 1,839 ‐‐ 15,141 ‐ room rentals ‐ travel agencies 4,981 2 ‐‐ 524 35 ‐‐ ‐‐ ‐‐ ‐‐ 43 ‐‐ 807 ‐‐ 6,392 ‐ room rentals ‐ reservation portals 4,592 152 ‐‐ 1,843 1,062 ‐‐ ‐‐ ‐‐ ‐‐ 632 ‐‐ 1,500 ‐‐ 9,781 Services 2,185 19 ‐‐ 223 131 ‐‐ ‐‐ ‐‐ ‐‐ 12 ‐‐ 635 ‐‐ 3,205 Food and beverage sales 9,065 22 ‐‐ 847 465 ‐‐ ‐‐ ‐‐ ‐‐ 392 ‐‐ 2,565 ‐‐ 13,356 Conferences 1,569 ‐‐ ‐‐ 109 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4 ‐‐ 378 ‐‐ 2,060 Hotel revenue 31,264 331 ‐‐ 5,450 2,237 ‐‐ ‐‐ ‐‐ 710 2,219 ‐‐ 7,724 ‐‐ 49,935 Sales of animals 717 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 717 Slaughterhouse 1,015 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,015 Services to third parties 518 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 518 Government grants 3,780 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,780 Revenues attributable to farms 6,030 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,030 Operation of ski lifts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 12,911 ‐‐ ‐‐ 12,911 Ski equipment and rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 591 ‐‐ ‐‐ 591 Restaurants and parking ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,536 ‐‐ ‐‐ 4,536 Revenues attributable to mountain resorts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 18,038 ‐‐ ‐‐ 18,038 Revenues from other business operations 6,030 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 18,038 ‐‐ ‐‐ 24,068 Income from penalties 58 ‐‐ ‐‐ 1 ‐‐ 1 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 60 Insurance claims (29) 7 55 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 33 Other – other operating income 315 5 119 86 86 (52) ‐‐ (1) ‐‐ ‐‐ ‐‐ ‐‐ 161 719 Other operating income 344 12 174 87 86 (51) ‐‐ (1) ‐‐ ‐‐ ‐‐ ‐‐ 161 812



167

Czech

Republic Slovak Republic Germany Hungary Poland Romania France

Russia Switzerland Croatia Other*

Total consolidated Luxembourg

30 June 2017 Advisory and accounting services 4,539 68 49 ‐‐ 3 12 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,671 Other services 18 ‐‐ 316 74 88 ‐‐ 4 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 500 Service revenue 4,557 68 365 74 91 12 4 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 5,171 Net service charge income 623 (211) 6,862 516 (570) 12 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 7,231 Development sales 1,873 ‐‐ ‐‐ 27 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,900 Room rentals 17,685 253 ‐‐ 3,902 1,760 ‐‐ ‐‐ ‐‐ 1,789 ‐‐ 7,157 ‐‐ 32,546 ‐ room rentals ‐ accommodation 8,503 118 ‐‐ 1,617 623 ‐‐ ‐‐ ‐‐ 918 ‐‐ ‐‐ ‐‐ 11,778 ‐ room rentals ‐ travel agencies 4,503 4 ‐‐ 553 35 ‐‐ ‐‐ ‐‐ 54 ‐‐ ‐‐ ‐‐ 5,149 ‐ room rentals ‐ reservation portals 4,679 131 ‐‐ 1,732 1,102 ‐‐ ‐‐ ‐‐ 817 ‐‐ 7,157 ‐‐ 15,618 Services 1,946 17 ‐‐ 225 150 ‐‐ ‐‐ ‐‐ 19 ‐‐ ‐‐ ‐‐ 2,357 Food and beverage sales 8,470 21 ‐‐ 733 513 ‐‐ ‐‐ ‐‐ 360 ‐‐ ‐‐ ‐‐ 10,097 Conferences 1,676 ‐‐ ‐‐ 80 ‐‐ ‐‐ ‐‐ ‐‐ 7 ‐‐ ‐‐ ‐‐ 1,763 Hotel revenue 29,777 291 ‐‐ 4,940 2,423 ‐‐ ‐‐ ‐‐ 2,175 ‐‐ 7,157 ‐‐ 46,763 Sales of animals 784 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 784 Slaughterhouse 1,094 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,094 Services to third parties 622 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 622 Government grants 3,824 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,824 Revenues attributable to farms 6,324 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 6,324 Operation of ski lifts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 11,347 ‐‐ ‐‐ 11,347 Ski equipment and rentals ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 823 ‐‐ ‐‐ 823 Restaurants and parking ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 3,901 ‐‐ ‐‐ 3,901 Revenues attributable to mountain resorts ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 16,071 ‐‐ ‐‐ 16,071 Revenues from other business operations 6,324 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 16,071 ‐‐ ‐‐ 22,395 Income from penalties 501 ‐‐ ‐‐ ‐‐ 52 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 553 Insurance claims 150 1 33 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 184 Other – other operating income 1,331 1 1,069 (31) 412 ‐‐ ‐‐ 57 ‐‐ 3 ‐‐ 9 2,851 Gain on bargain purchase relating to business combination

910 ‐‐ ‐‐ 2,362 ‐‐ 1,199 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 4,471

Other operating income 2,892 2 1,102 2,331 464 1,199 ‐‐ 57 ‐‐ 3 ‐‐ 9 8,059 *Other countries includes operations in Netherland, Ireland, Cyprus, British Virgin Islands and Guernsey.



168

6 CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME Gross rental income

6 month period ended 30 June 2018 30 June 2017 Gross rental income (1) 146,922 119,679 Service revenue (2) 5,798 5,171 Total gross rental income 152,720 124,850

(1) Increase in rental income is generally attributable to the Group´s expansion in 2018 and 2017. The main favourable impact represents the acquisition of CBRE GI portfolio in March 2017 leading to a net increase of EUR 16.4 million. Gross rental income in 2018 includes 6 months operations of GSG ARMO (acquired in December 2017) with net increase of EUR 2.9 million and 6 months operations of Královo Pole shopping centre (acquired in July 2017) with net increase of EUR 2.2 million. Due to the acquisition of MB Futurum HK (in April 2018) the gross rental income increased by EUR 1.1 million.

Rental income is derived from a large number of tenants and no single tenant or group of tenants contribute more than 10 % to the Group’s rental income.

(2) Service revenue includes main advisory and accounting services, which relate to service provided to non‐consolidated entities. These services derive directly from rental activities performed by the Group so they are disclosed as a part of service income.

Net service charge income

6 month period ended 30 June 2018 30 June 2017

Service charge income 30,259 28,148 Service charge expenses (22,464) (21,934) Total 7,795 6,214 Revenues from sales of electricity and heat 6,796 2,580 Cost of sales – electricity and heat (4,353) (1,562) Total 2,443 1,018 Total net service charge income 10,238 7,231

Increase in the net service charge income in 2018 relates to the Hungarian portfolio (net increase of EUR 1 million). Profit from sale of energies (the Group has license for the purchase and its further distribution) increased mainly due to the acquisition of Tepelné hospodářství Litvínov in August 2017 (net increase of EUR 0.8 million).

Property operating expenses


Building maintenance (1) (12,779) (10,798) Personnel expenses (6.3.2) (4,164) (3,706) Other property related expenses (2,941) (4,703) Utility services (6.3.1) (2,928) (2,263) Real estate tax (2,422) (1,733) Facility management (1,178) (1,554) Letting fee, other fees paid to real estate agents (1,060) (713) Leases and rents (474) (498) Insurance (411) (324) Total property operating expenses (28,357) (26,291)

(1) Increase of building maintenance expenses relates mainly to the German and Czech part of the Group´s portfolio (net increase of EUR 1.4 million).

Property operating expenses also include Group´s expenses related to vacant premises.



169

6.3.1 Utility services


Energy consumption (1,413) (1,103) Material consumption (710) (562) Waste management (143) (98) Security services (455) (359) Cleaning services (207) (141) Total utility services (2,928) (2,263)

6.3.2 Personnel expenses

6 month period ended 30 June 2018 30 June 2017 Wages and salaries (3,097) (2,694) Social and health security contributions (969) (860) Other social expenses (98) (151) Total personnel operating expenses (4,164) (3,706) Personnel administrative expenses Wages and salaries (8,869) (6,442) Social and health security contributions (2,139) (1,701) Other social expenses (937) (172) Total personnel administrative expenses (11,945) (8,315) Personnel expenses ‐ hotel operations Wages and salaries (10,559) (9,554) Social and health security contributions (2,943) (2,669) Other social expenses (163) (199) Total personnel expenses ‐ hotel operations (13,665) (12,422) Personnel expenses ‐ other business operations Wages and salaries (7,021) (7,134) Social and health security contributions (1,358) (1,434) Other social expenses (181) (107) Total personnel expenses ‐ other business operations (8,560) (8,676)

Total personnel expenses (38,334) (33,119)

Significant increase in personnel administrative expenses relates to increase of number of employees, mainly due to the acquisitions made in H2 2017 and 2018. An increase in personnel expenses from hotel operations relates primarily to the increase of number of employees of CPI Hotels (comparison with June 2017) with net effect of EUR 1 million.

Net development income

6 month period ended 30 June 2018 30 June 2017 Development sales (1) 7,913 1,900 Cost of goods sold (7,351) (68) Development operating expenses (2) (2,278) (2,614) Total net development income (1,716) (782) (1) Development sales in 2018 represent primarily sale of two apartments in France (EUR 7.3 million). (2) Development operating expenses cover all property operating expenses occurred in connection with

development (utility services, real estate agents services, maintenance etc.). Development expenses relate solely to development projects in Italy (EUR 1.5 million) and in France (EUR 0.7 million).

Net hotel income

6 month period ended 30 June 2018 30 June 2017 Hotel revenue 49,935 46,763 Cost of goods sold (112) (107) Personnel expenses (6.3.2) (13,665) (12,422) Other hotel expenses (21,823) (20,503) Total net hotel income 14,335 13,731



170

Net income from other business operations

6 month period ended 30 June 2018 30 June 2017 Revenue from other business operations (1) 24,068 22,395 Cost of goods sold (1,087) (1,069) Personnel expenses (6.3.2) (8,560) (8,676) Related operating expenses (6,083) (7,935) Net income from other business operations (2) 8,338 4,715

(1) In 2018, revenue from other business operations in the amount of EUR 18 million relates to the mountain resort operations (net increase of EUR 1.8 million compared to June 2017). Revenues from agricultural activities remain stable (EUR 6 million).

(2) Net income from other business operations in 2018 relates to the mountain resort operations (EUR 6.7 million) and agriculture activities (EUR 1.6 million).

Net valuation gain

Investment properties, Hotels and significant part of other property, plant and equipment are stated at fair value as at 31 December 2017 based on external valuations performed by professionally qualified valuers, except for minor part of portfolio valued by internal expert. The Group utilizes independent professionally qualified valuers, who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. For all these properties, their current use equates to the highest and best use. The Group’s finance department includes a team that reviews the valuations performed by the independent valuers for financial reporting purposes. Biological assets are stated at fair value less cost to sell based on internal valuations performed by the Group on quarterly basis. For the determination of the fair value as at 30 June 2018 the Group’s management analysed the situation on the real estate market at the time together with current yields and then applied discount rates and other factors used by independent valuators in their appraisals as of 31 December 2017. As a result, the fair value of the majority of the property portfolio as of 30 June 2018 was determined based on the management’s analysis described above and it does not significantly differ from the fair value as of 31 December 2017. In instances where there have been indications of significant changes and therefore with potential material impact on the property value during the first half of 2018, the value of the property has been updated based on the external or internal appraisals as of 30 June 2018.


Valuation gains Office 55,954 16,366 Retail 20,531 90,084 Residential 20,111 53,721 Agriculture 5,212 682 Land bank ‐‐ 69,444 Total valuation gains 101,808 230,297 Valuation losses Retail (4,299) (148) Residential (2,384) ‐‐ Agriculture ‐‐ (315) Office ‐‐ (614) Total valuation losses (6,683) (1,076) Net valuation gain 95,125 229,221

Major part of the revaluation gain relates to office segment. Valuation gain in office segment relates to revaluation of Geneststrasse 5 & Helmholzstrasse 2‐9 Buildings, Germany (EUR 29.6 million) and to revaluation of office part of QUADRIO shopping center (EUR 20.2 million).



171

Valuation gain in retail segment relate mainly to the revaluation of selected shopping centres located in the Czech Republic, Hungary, Poland and Slovak Republic. Major part of the revaluation gain relates to the revaluation of QUADRIO shopping center in Prague (EUR 10.2 million).

The current situation on the residential market reports strong increase of selling prices within the whole Czech Republic. Based on that indication the Group revalued internally the residential portfolio using the comparable method based on the most recent transactions of apartments in same localities. The information on the most recent transactions was obtained from cadastral office. Revaluation in residential segment relates to the portfolio of CPI BYTY, a.s. (gain of EUR 20.1 million).

For the assumptions the professional valuators used for the preparation of appraisals as at 30 June 2018 refer to note 8.2.1.

Net loss on the disposal of investment property

6 month period ended 30 June 2018 30 June 2017 Proceeds from disposal of investment property 4,441 1,086 Carrying value of investment property disposed of and related cost (4,457) (1,297) Total loss on the disposal of investment property (16) (211)

Disposals of investment property in 2018 represent mainly sale of three retail properties from the portfolio of CPI Reality, a.s. (carrying value of EUR 1.5 million) and sale of retail park in Český Těšín (carrying value of EUR 1.4 million).

Amortization, depreciation and impairments

6 month period ended 30 June 2018 30 June 2017 Depreciation and amortization ‐ rental (1,864) (5,587) Depreciation and amortization ‐ hotel (8,908) (4,004) Depreciation and amortization ‐ other business operations (4,631) (4,242) Total impairment of assets (6.9.1) 3,751 (914) Total depreciation, amortization and impairments (11,652) (14,748)

6.9.1 Impairment of assets/Reversal of impairment of assets


(Impairment) / Reversal of impairment of property, plant and equipment

7,441

(2,039) Reversal of impairment of other intangible assets

‐‐

112

Reversal of impairment of trading property

2

473 (Impairment) / Reversal of impairment of other receivables

(649)

1,381

Impairment of trade receivables

(1,226)

(1,959) Impairment of provided loans (1)

(1,817)

1,118

Total impairments/reversal of impairments 3,751 (914)

(1) Impairment in the amount of EUR 0.4 in 2018 million relates to the application of the new impairment model (ECL) as required by IFRS 9, refer to note 2.2 for more information.

Other operating income


Gain on bargain purchase relating to business combinations (1) ‐‐ 4,472 Income from penalties 61 554 Insurance claims 32 184 Other 713 2,849 Expense from sale of PPE 6 ‐‐ Total other operating income 812 8,059

(1) Gain on bargain purchase in first half of 2017 relates to the preliminary acquisition accounting in respect of the CBRE GI portfolio acquisition.



172

Administrative expenses


Personnel expenses (11,945) (8,315) Audit, tax and advisory services (3,814) (5,115) Legal services (2,711) (3,194) Other administrative expenses (1,635) (1,186) Advertising expenses (1,120) (1,039) Lease and rental expenses (823) (661) IT expenses (764) (343) Valuation services (488) (212) Telecommunication, internet and software related expenses (343) (759) Material consumption (296) (246) Other insurance expenses (290) (428) Representation expenses (280) (207) Repairs and maintenance (272) (250) Energy consumption (43) (6) Total administrative expenses (24,824) (21,963)

Total administrative expenses increase mainly due to personnel expenses, for more detail refer to note 6.3.2.

Other operating expense

Interest income

6 month period ended 30 June 2018 30 June 2017 Bank interest income 7 6 Interest income on bonds 2 2 Interest income on loans and receivables (1) 7,190 2,321 Interest income on bills of exchange 53 158 Total interest income 7,252 2,487

(1) Interest income on loans and receivables increased mainly due to loans provided to entities controlled by the major shareholder of the Group (net increase of EUR 4.6 million) and due to new drawdowns of loans provided to the major shareholder in December 2017 (net effect of EUR 1.1 million).


Penalties (58) (84) Tax non‐deductible VAT expenses (380) (564) Taxes and fees (681) (647) Loss on assignment of receivables (1,158) (58) Gifts (190) 23 Change in provisions 551 877 Other (2,190) (972) Expense from sale of PPE ‐‐ (40) Total other operating expenses (4,106) (1,465)



173

Interest expense

6 month period ended 30 June 2018 30 June 2017 Interest expense related to bank and non‐bank loans (1) (18,042) (25,890) Interest expense on bonds issued (2) (26,436) (19,593) Interest expense related to finance leases (234) (236) Interest expense on other non‐current liabilities (24) 15 Interest expense on bills of exchange (147) (1,029) Total interest expense (44,883) (46,733)

(1) Interest expense related to bank and non‐bank loans decreased mainly due to change in the financing strategy (repayment of bank loans in Q4 2017 following new Eurobonds issued) of the Group, which has led to decline in bank loans (net effect of EUR 7.7 million), refer to note 7.15.

(2) Interest expense on bonds issued increased mainly due to new Eurobonds (ISIN XS1693959931) issued by the Company on 4 October 2017 (note 7.14).

Other net financial results


Change in fair value and realized result on derivative instruments 659 6,328 Other net financial results (3,531) (3,065) Net foreign exchange gain/(loss) (1) 15,923 (46,124) Bank charges (824) (2,536) Total other net financial results 12,227 (45,397)

(1) Significant part of the foreign exchange gain/loss represents unrealised valuation gains/losses (gain of EUR 58.5 million for six months of 2018) from the revaluation of the Group´s property portfolio as major part of the Czech, as well as Hungarian and Polish, portfolio is based on EUR valuation reports, i.e. the appraisal is not based on the functional currency of respective SPV´s.

Foreign exchange gain on property portfolio, recognized for the six months of 2018, was partially offsetted by unrealized foreign exchange loss of EUR 46.3 million in 2018. As there have been many financing transactions between Group entities with different functional currencies, and due to the fact that major part of the outstanding external financial debts is still EUR denominated, following the appreciation of EUR, the Group recorded foreign exchange loss primarily on Hungarian and Polish entities.

Income tax expense

Tax recognized in profit or loss

6 month period ended 30 June 2018 30 June 2017 Current income tax expense Current year (6,318) ‐‐ Adjustment for prior years 105 (5,634) Total (6,213) (5,634)

Deferred income tax expense Origination and reversal of temporary differences (18,035) (35,188) Total (18,035) (35,188)

Income tax from continuing operations recognised in profit and loss (24,248) (40,822) Total income tax recognised in profit or loss (24,248) (40,822)

Tax expense for the six month period ended 30 June 2018 is recognized based on management´s best estimate of the effective tax rate for full financial year 2018. The Company´s effective tax rate in respect of continuing operations for the six month period ended 30 June 2018 was approximately 17.45 %.



174

7 CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION Intangible assets and goodwill

Reconciliation of carrying amount Goodwill

Cost Balance at 1 January 2018 108,677 Additions 4,084 Effect of movements in exchange rates (1,007) Balance at 30 June 2018 111,754

Impairment losses Balance at 1 January 2018 2,014 Amortisation for the period (+) 572 Balance at 30 June 2018 2,586

Carrying amounts Balance at 1 January 2018 106,663 Balance at 30 June 2018 109,168

Goodwill Cost Balance at 1 January 2017 105,649 Effect of movements in exchange rates 3,028 Balance at 31 December 2017 108,677

Impairment losses Balance at 1 January 2017 2,014 Goodwill written off ‐‐ Effect of movements in exchange rates ‐‐ Balance at 31 December 2017 2,014

Carrying amounts Balance at 1 January 2017 103,635 Balance at 31 December 2017 106,663

Goodwill Opening balance of goodwill consists of:

goodwill recognized as result of the combination of CPI and CPI PG in June 2014. The goodwill allocated to CPI PG cash‐generating unit amounts to EUR 42.6 million and reflects the original goodwill recognized in CPI PG prior the acquisition. This goodwill relates to deferred tax liabilities recognized at CPI PG level that are not expected to crystalize in future years;

amount of EUR 8.8 million relates to goodwill recognized at acquisition of Hospitality Group (Mamaisons brand hotels) in 2014;

in connection with acquisition of Spojené farmy Group in 2014, goodwill in the amount of EUR 6.5 million was recognized;

goodwill of EUR 1.8 million was recognized by the Group in 2013. The goodwill relates to acquisition of former ABLON Group on 30 June 2013. Goodwill is allocated to retail segment;

in 2016, due to the acquisition of CPI Hotels, the Group recognized a goodwill in the amount of EUR 43.5 million. Goodwill is allocated to the Income generating operational properties segment, asset type hospitality.

In 2018, due to the acquisition of hotel operator (acquired by CPI Hotels Italy Sarl), the Group recognized a goodwill in the amount of EUR 4.1 million (refer to note 3.3). Goodwill is allocated to the Income generating operational properties segment, asset type hospitality.

None of the goodwill recognized is expected to be deductible for tax purposes.



175

Impairment of goodwill/trademark The Group performed its annual impairment tests in December 2017. The recoverable amounts of CGUs as of 31 December 2017, have been primarily determined based on a value‐in‐use calculation using cash flow projections from financial budgets approved by the senior management covering a five‐year period. The key assumptions used in the estimation of the recoverable amount are described in the annual financial statements of the Group as at 31 December 2017. As at 30 June 2018 there are no indicators for goodwill impairment.



176

Investment property

Income Generating ‐ Rental properties Subtotal ‐ rental

properties

Income Generating ‐ operation properties Land

bank

Development

Total

Office Retail Residential

Industry and

logistics Hotels Other

Agriculture

Balance at 1 January 2017 1,973,333 1,079,717 390,257 73,171 38,000 ‐‐ 3,554,478 69,683 346,105 7,430 3,977,696 Investments/acquisitions 220,368 639,566 2,356 ‐‐ 2,531 ‐‐ 864,821 ‐‐ 55,736 4,266 924,823 Transfers 19,123 12,602 (3,160) ‐‐ (2,599) (13) 25,953 ‐‐ (11,687) (19,230) (4,964) Development costs ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 11,427 11,427 Additions 37,581 25,937 4,896 1,614 352 164 70,544 629 9,185 ‐‐ 80,358 Disposals (533) (13,397) (224) (494) ‐‐ 1 (14,647) (80) (7,326) ‐‐ (22,053) Valuation gain/(loss) 459,101 154,777 97,319 3,138 (122) (152) 714,061 9,519 102,862 7,789 834,231 Transfers in/from assets held for sale (28,303) (67,587) ‐‐ ‐‐ ‐‐ ‐‐ (95,890) ‐‐ (3,834) ‐‐ (99,724) Translation differences 24,710 41,167 19,865 1,042 68 ‐‐ 86,852 5,113 13,343 845 106,153 Balance at 31 December 2017 2,705,380 1,872,782 511,309 78,471 38,230 ‐‐ 5,206,172 84,864 504,384 12,527 5,807,947 Investments/acquisitions 78,129 144,924 ‐‐ ‐‐ ‐‐ ‐‐ 223,053 ‐‐ ‐‐ ‐‐ 223,053 Transfers ‐‐ ‐‐ 2,383 ‐‐ (38,230) ‐‐ (35,847) ‐‐ ‐‐ ‐‐ (35,847) Development costs ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 1,748 1,748 Additions 21,842 14,340 1,063 41 ‐‐ ‐‐ 37,286 249 4,740 ‐‐ 42,275 Disposals (147) (3,754) (74) ‐‐ ‐‐ ‐‐ (3,975) (2) (558) ‐‐ (4,535) Valuation gain 55,954 19,744 17,728 ‐‐ ‐‐ ‐‐ 93,426 5,159 ‐‐ ‐‐ 98,585 Translation differences (13,361) (21,031) (8,031) (257) ‐‐ ‐‐ (42,680) (2,207) (5,969) (265) (51,111) Balance at 30 June 2018 2,847,797 2,027,005 524,378 78,255 ‐‐ ‐‐ 5,477,435 88,063 502,607 14,010 6,082,115



177

Investments/acquisitions 2018 In 2018 the Group acquired investment property in total value of EUR 223.1 million. The most significant items of investment property were acquired in the following transaction (note 3.2):

in 2018 the Group acquired MB Futurum HK s.r.o. in total value of EUR 121 million;

acquisition of retail parks in Poland in total value of EUR 21.6 million;

acquisition of Atrium Complex in Poland in total value of EUR 78.1 million.

2017 In 2017 the Group acquired investment property in total value of EUR 924.8 million. The most significant items of investment property were acquired in the following transactions (note 3.5 and 3.6):

in May 2017 the Group acquired CBRE GI portfolio, high‐quality retail portfolio with predominantly 11 shopping centers in Europe in total value of EUR 625.2 million;

acquisition of new GSG portfolio in total value of EUR 167.7 million;

acquisition of three land bank projects in the Czech Republic in total value of EUR 53.8 million;

acquisition of Královo Pole Shopping Centre in Brno with the acquisition value of EUR 59 million;

acquisition of Merlég office building in Budapest with fair value of EUR 9.2 million;

in March 2017 the Group acquired Hotel Vladimír in Ústí nad Labem in total value of EUR 2.3 million. Development costs Development costs in the amount of EUR 1.8 million (EUR 11.5 million in 2017) relate to the construction of office building Mayhouse, located in Prague. Additions 2018 Capital expenditure in office segment relate primarily to German portfolio (EUR 15.5 million). Additions in the retail segment represent mainly to capital expenditures in connection with refurbishment of Olympia Teplice (EUR 3.9 million), IGY in České Budějovice (EUR 1.4 million) and Galerie Fénix in Prague (EUR 1.6 million). Capital expenditures in segment land bank in the amount of EUR 3.3 million relate to the revitalization of Nová Zbrojovka in Brno. 2017 Capital expenditure in segment office relate the German portfolio (EUR 15.9 million) and Hungarian portfolio (EUR 6.8 million). Additions in the retail segment represent mainly to capital expenditures in the amount of EUR 11.5 million retail park IGY in České Budějovice and also expenditures connected with the refurbishment of retail part of “QUADRIO” project (EUR 2.4 million). Addition in the residential segment relate to capital expenditures in the amount of EUR 3.3 million in connection with French villas located in Monaco. Capital expenditures in segment industry and logistics relate to logistic park in Brandýs nad Labem in the amount of EUR 1.5 million. In 2017, the increase of land bank is due to the purchase of new land plots, mainly in the Czech Republic (EUR 7.1 million).



178

Disposals 2018 The Group sold department store in Znojmo (EUR 1.5 million) and retail park in Český Těšín (EUR 1.4 million). 2017 Disposal of land bank relates to the sale of STRM Delta, a.s. (decrease of EUR 7.3 million). Disposal of Group´s retail portfolio relates to the sale of Arkáda Prostějov Shopping Centre in the amount of EUR 9.7 million. Investment property (asset type Retail) in the amount of EUR 1.1 million was disposed of due to sale department store in Neratovice. Valuation gain/loss Refer to 6.7. Transfer from investment property to property, plant and equipment 2018 In 2018, Holiday Inn hotel in Rome (EUR 38.2 million) was transferred to property, plant and equipment as the Group became the operator of this hotel (note 3.3). 2017 In March 2017, the Group acquired Hotel Vladimír in Ústí nad Labem. As at the acquisition date, in accordance with IAS 40, this hotel was recognized as investment property. During Q2 2017, the Group became the operator of this hotel, which is why this hotel was transferred to Hotels Transfers in/from assets held for sale In 2017, investment property in the amount of EUR 99.7 million was transfer from investment property to assets held for sale. Part of the property (EUR 8.1 million) transferred to assets held for sale in 2016 was not sold during 2017 and remained disclosed as assets held for sale as of 31 December 2017.

No assets have been transferred from investment property to assets held for sale during the first six months of 2018.

Translation differences Translation differences related to investment property arise primarily in connection with translation of financial information of subsidiaries having other currency than EUR as functional currency to presentation currency of consolidated financial statements (EUR).



179

Property, plant and equipment

a) Hotels For the measurement of property, plant and equipment from the income generating operational properties operating segment, asset type hospitality (i.e. for hotels operated by the Group), revaluation model is used. In accordance with IAS 16, the Group uses revaluation model for the measurement of property, plant and equipment from the income generating operational properties operating segment, asset type hospitality (i.e. for hotels owned and operated by the Group). As at 30 June 2018

Hotels Fair value Balance at 1 January 2018 639,869 Additions 4,214 Other disposals (317) Transfer from/to investment property 38,230 Effect of movements in exchange rates (2,522) Valuation Gain/Loss through other comprehensive income 8,680 Balance at 30 June 2018 688,154

Accumulated depreciation and impairment losses Balance at 1 January 2018 40,963 Depreciation for the period 8,509 Impairment loss/(reversal of impairment loss) (1,719) Other disposals (264) Effect of movements in exchange rates 329 Balance at 30 June 2018 47,818 Carrying amounts At 31 December 2017 598,906 At 30 June 2018 640,336


Hotels Fair value Balance at 1 January 2017 550,094 Acquisitions 5,253 Additions 5,096 Other disposals (1,819) Transfer from/to investment property 2,599 Transfer 1,124 Effect of movements in exchange rates 19,658 Valuation Gain/Loss through other comprehensive income 57,864 Balance at 31 December 2017 639,869

Accumulated depreciation and impairment losses Balance at 1 January 2017 12,557 Depreciation for the period 15,810 Impairment loss/ (reversal of impairment loss) 13,768 Other disposals (1,494) Effect of movements in exchange rates 322 Balance at 31 December 2017 40,963 Carrying amounts At 31 December 2016 537,537 At 31 December 2017 598,906

Transfers from investment property to property, plant and equipment 2018 In 2018, the Group became the operator of Holiday Inn hotel in Rome, which is why this hotel was transferred to Hotels in the amount of EUR 38.2 million.



180

2017 In March 2017, the Group acquired Hotel Vladimír in Ústí nad Labem. As at the acquisition date, in accordance with IAS 40, this hotel was recognized as investment property. During Q2 2017, the Group became the operator of this hotel, which is why this hotel was transferred to Hotels. Acquisitions 2017 Increase of balance of property, plant and equipment in 2017 relates to the acquisition of Ibis hotel in Olomouc. Valuation gain/loss through OCI The Group´s hotel portfolio has not been revalued as of 30 June 2018. The Group’s management analysed the situation on the real estate market at the time together with current yields and then applied discount rates and other factors used by independent valuators in their appraisals as of 31 December 2017. As a result, the fair value of the majority of the property portfolio as of 30 June 2018 was determined based on the management’s analysis described above and it does not significantly differ from the fair value as of 31 December 2017. Increase of the valuation surplus (EUR 57.9 million recognized as at 31 December 2017) in the amount of EUR 8.7 million reflects primarily the significant change in exchange rate CZK/EUR, in case of entities having the functional currency CZK and the valuation appraisal as at 31 December 2017 in EUR. If Hotels were measured using the cost model, the carrying amounts would be EUR 574,721 thousand as at 30 June 2018 (EUR 538,263 thousand as at 31 December 2017). Impairment losses 2017 Impairment loss in the amount of EUR 13.8 million relates to the revaluation of Hotels as at 31 December 2017. b) Other property, plant and equipment Other property, plant and equipment, except hotels from hospitality segment, is valued using cost model. The major part of property, plant and equipment represents portfolio of CMA Group acquired in 2015 (asset type ‐ mountain resorts; operating segment ‐ income generating operational properties) with value as at 30 June 2018 EUR 93.2 million (as at 31 December 2017 of EUR 87.9 million).

Biological assets

Biological assets 30 June 2018 31 December 2017 Non‐current 2,384 2,099 Current 4,752 4,117 Total biological assets 7,136 6,216

Biological assets are measured at fair value less cost to sell. Fair value of biological assets at the end of the reporting period is based on internal valuations performed by the Group.

Equity accounted investees

Equity accounted investment in the amount of EUR 4.2 million (EUR 4.7 million as at 31 December 2017) represents investment in Uniborc S.A. Uniborc S.A is a joint venture constituted in 2013 with Unibail Rodamco aimed at developing a shopping center in the Bubny area, Prague. The Group’s shareholding is 35%.



181

Loans provided

Non‐current 30 June 2018 31 December 2017

Loans provided ‐ related parties and joint ventures (1) 80,988 62,994 Loans provided ‐ third parties 3,388 4,810 Bills of exchange ‐ third parties ‐‐ 3,834 Total non‐current loans provided 84,376 71,638 Impairment to non‐current loans provided to third parties (2) (7,195) ‐‐ Total non‐current loans provided net of impairment 77,181 71,638

Current

30 June 2018 31 December 2017 Loans provided ‐ related parties (1) 58,092 68,843 Loans provided ‐ third parties 204 60 Bills of exchange ‐ third parties 7,027 3,185 Total current loans provided 65,323 72,088 Impairment to current loans provided to third parties ‐‐ ‐‐ Total current loans provided net of impairment 65,323 72,088

(1) Loans provided increased mainly due to the new drawdowns of loan provided by the Company to related party in the amount of EUR 7 million.

(2) Impairment to provided loans relates to the ECL model (IFRS 9). Impairment of EUR 6.8 million relates to its initial application (affecting the opening balance of equity, while not affecting the comparative amounts), note 2.2, and additional impairment of EUR 0.4 million was recognized for the six‐months period ended 2018 (note 6.9).

Balances of non‐current loans include loan principal and unpaid interest that are expected to be settled more than 12 months after the reporting period. Balances of current loans include loan principal and unpaid interest that are due to be settled within 12 months after the reporting period. Current loans provided to third parties were impaired to reflect the recoverable amount.

Trade and other receivables

Non‐current 30 June 2018 31 December 2017 Advances paid due from related parties ‐‐ 36 Advances paid 765 908 Advances paid for financial investments (1) 2,429 3,022 Other receivables due from third parties 152 140 Other items of trade and other receivables 97 87 Total non‐current trade and other receivables 3,443 4,193

Current 30 June 2018 31 December 2017 Trade receivables due from related parties 2,294 458 Trade receivables due from third parties 85,952 90,513 Impairment to trade receivables due from third parties (13,868) (14,458) Total current trade and other receivables 74,378 76,513

(1) In 2017, advances paid for financial investments represented advance payments made by the Group in connection with the acquisition of one Czech and one Polish entity. Decrease in advances paid for financial investments relates to the acquisition of retail park Zgorzelec.



182

Major part of the trade receivables represents trade receivables from tenants and receivables from invoicing of utilities. Receivables from invoicing of utilities will be settled against advances received from tenants when final amount of utilities consumption is known and final utilities invoicing is performed. Significant part of impairment to trade receivables due from third parties is created for trade receivables from tenants overdue more than 181 days. Creation of adjustments for receivables is recognized in statement of comprehensive income as impairment loss.

Inventories

30 June 2018 31 December 2017 Projects and property for resale (1) 72,569 80,035 Impairment of projects and property for resale (1) (24,438) (24,438) Projects under development (2) 29,300 22,915 Other inventory 2,849 3,281 Total inventories 80,280 81,793

(1) Projects and property for resale primarily relates to “Palais Maeterlinck project” in total amount of EUR 41.9 million (2017: EUR 49.3 million). Due to the sale of two apartments, the value of the projects decrease compared to 31 December 2017 (note 6.4).

(2) Increase in the amount of projects under development in the amount of EUR 4.4 million relates to the new development project “Rodinné domy Březiněves” and residential project Křivoklátská in the amount EUR 3.4 million. Projects under development include also development project in Italy in the total amount EUR 11.9 million.

Cash and cash equivalents

30 June 2018 31 December 2017 Bank balances 472,583 237,772 Cash on hand 813 1,135 Total cash and cash equivalents 473,396 238,907

Other financial current assets

30 June 2018 31 December 2017 Other receivables due from related parties 4,667 5,252 Other receivables due from third parties 8,735 7,697 Other items of trade and other receivables 1,058 820 Impairment ‐ other receivables due from other parties (1,867) (819) Receivables from receivables cession 1,874 1,550 Receivables due from employees 896 906 Interest to debentures issued by third parties 4 2 Total other financial current assets 15,367 15,408

Other non‐financial current assets

30 June 2018 31 December 2017 Other advances paid to third parties 8,838 6,775 Value added tax receivables 5,236 5,873 Other tax receivables (excl. CIT and VAT) 2,206 237 Agricultural subsidies (1) 7,310 5,739 Prepaid expenses 20,665 21,089 Total other non‐financial current assets 44,255 39,713

(1) Mercuda a.s. (Spojené farmy a.s.) obtains agricultural subsidies paid to farmers and agriculture businesses to supplement their income.



183

Assets/Liabilities linked to assets held for sale

The following table summarizes the effect of the reclassification made in connection with projects to assets held for sale and related liabilities:

30 June 2018 31 December 2017 NON‐CURRENT ASSETS

Investment property

60,246

107,687 CURRENT ASSETS

Inventories 30 36 Current income tax receivables 7 125 Trade receivables

1,391

1,550

Cash and cash equivalents

1,540

2,810 Other financial current assets ‐‐ 6 Other non‐financial current assets

158

431

Assets held for sale 63,372 112,645 NON‐CURRENT LIABILITIES

Financial debts

(8,808)

(9,209) Deferred tax liabilities (1,361) (4,262) Other non‐current liabilities

‐‐

(131)

CURRENT LIABILITIES

Financial debts

(526)

(634)

Trade payables

(246)

(451) Advance payments

(276)

(474)

Other financial current liabilities

(538)

(536) Other non‐financial current liabilities

(123)

(227)

Liabilities linked to assets held for sale (11,878) (15,924)

Due to the management´s intention to dispose some projects in 2018, the respective assets and liabilities were classified as Assets held for sale/Liabilities linked to assets held for sale in accordance with IFRS 5 “Non‐current Assets Held for Sale and Discontinued Operations”. 2018 The following projects are disclosed as held for sale as at 30 June 2018:

‐ one retail project in Romania – with total fair value of property of EUR 30.7 million as at 30 June 2018; ‐ one office project in Czech Republic – with total fair value of property of EUR 18.1 million as at

30 June 2018 (the project was sold on 30 August 2018, refer to 12.2); and ‐ land bank projects in Romania and Poland – with total fair value of properties of EUR 11.5 million as at

30 June 2018.

Budaörs Office Park (Hungarian office project disclosed as held for sale as at 31 December 2017) was sold on 31 January 2018. The sales price amounted to EUR 9.4 million (note 3.4). Retail park Český Těšín (disclosed as held for sale as at 31 December 2017) was sold on 2 May 2018 (note 3.4). Five small retail properties located in regional cities of northern Czechia (disclosed as held for sale as at 31 December 2017), were disposed in June 2018. Disposal of these projects is consistent with the Group´s strategy, which is focused on dominant shopping centres in the Czech Republic and other core CEE countries.

2017 The following projects were disclosed as held for sale as at 31 December 2017:

‐ two retail projects in Czech Republic and one in Romania – with total fair value of properties of EUR 67.6 million;

‐ two office projects (one in the Czech Republic and the other in Hungary) – with total fair value of properties of EUR 28.3 million;



184

‐ land bank projects in Romania and Poland – with total fair value of properties of EUR 11.8 million as at 31 December 2017.

The remaining balances of assets held for sale (EUR 5 million) and liabilities from assets held (EUR 15.9 million) as at 31 December 2017 represent other non‐core assets and liabilities related to these projects.



185

Equity

Changes in equity The condensed consolidated interim statement of changes in equity is presented on the face of the condensed consolidated interim financial statements. Share capital and share premium As of 30 June 2018 the share capital of the Company amounts to EUR 901,386,866 and is represented by 9,013,868,658 ordinary fully paid shares with a nominal value of EUR 0.10 each. To the best of Company’s knowledge, the following table sets out information regarding the ownership of the Company´s shares as at 30 June 2018: Shareholder Number of shares Share held Voting rights

Radovan Vítek and entities controlled by Mr. Vítek 7,986,189,994 88.60% 91.15% Others 775,376,416 8.60% 8.85% Treasury shares held by the Group 252,302,248 2.80% 0.00% Total 9,013,868,658 100.00% 100.00%

The share premium opening balance of 2018 comprised the amount received in excess of the nominal value of the shares issued by way of subsequent issue of ordinary shares.

Number of shares Share Capital

(in TEUR) Share premium

(in TEUR) Balance at 31 December 2017 9,488,722,610 923,642 1,060,744 Share buy‐back ‐ 12 March 2018 ‐ treasury shares held by the Group ‐‐ (72,485) (72,485) Capital increase of 10 April 2018 250,000,000 25,000 25,000 Cancellation of treasury shares on 14 May 2018 (724,853,952) ‐‐ ‐‐ Balance at 30 June 2018 9,013,868,658 876,157 1,013,258

Authorised capital not issued The extraordinary general meeting of the shareholders of the Company held on 1 March 2018 (the “2018 EGM”) resolved to modify, renew and replace the existing authorised share capital of the Company and to set it to an amount of five billion euros (EUR 5,000,000,000) for a period of five (5) years from 1 March 2018, which would authorise the issuance of up to forty billion (40,000,000,000) new ordinary shares and up to ten billion (10,000,000,000) new non‐voting shares of the Company. The 2018 EGM approved the report issued by the board of directors relating to the possibility for the board of directors of the Company to cancel or limit preferential subscription rights of the shareholders of the Company upon increases of share capital in the framework of the authorised share capital of the Company. As at 30 June 2018, the authorized share capital of the Company amounts to EUR 4,975,000,000, which would authorize the issuance of up to 39,750,000,000 new ordinary shares and up to 10,000,000,000 new non‐voting shares in addition to the shares currently outstanding.

Share buy‐back program The 2018 EGM approved the terms and conditions of a buy‐back programme of the Company enabling the repurchase by the Company of its own shares and authorised the Company to redeem/repurchase its own shares under the terms and conditions set forth therein. In particular, the EGM authorised the board of directors of the Company to repurchase, in one or several steps, a maximum number of one billion (1,000,000,000) shares in the Company from the existing and/or future shareholders of the Company, for a purchase price comprised in the range between one eurocent (EUR 0.01‐) and five euros (EUR 5.‐), for a period of five (5) years from the date of



186

the 2018 EGM. The 2018 EGM further resolved to grant power to the board of directors of the Company (i) to proceed with the payment of the relevant repurchase price out of the Company's available funds, (ii) to take all required actions to complete any repurchase of shares and (iii) to verify that the process of share repurchase is made in compliance with the legal provisions. On the basis of the authorization by the 2018 EGM, the Board has decided on 1 March 2018, to proceed to a buy‐back of certain shares of the Company under the buyback programme, the terms of which are set forth in the buy‐back offer published by the Company on 2 March 2018. A total of 724,853,952 shares in the Company with a par value of EUR 0.10 each have been acquired for the proposed acquisition price of EUR 0.20 per share (representing in aggregate app. EUR 145 million). At the time of buy‐back this represented a direct holding of 7.64% of the Company’s share capital. The shares were bought‐back from an entity affiliated with the major shareholder. The bought‐back shares were cancelled by the extraordinary general meeting of shareholders of the Company on 14 May 2018. As at 30 June 2018 the Company is authorised to redeem/repurchase up to 275,146,048 own shares under the buy‐back programme approved by the 2018 EGM. For further terms and conditions of buy‐back please refer to the buy‐back programme of the Company (https://www.cpipg.com/shareholder‐corner‐en).

Mandatory takeover bid for Orco Property Group S.A. shares On 8 June 2016 the Company’s fully owned subsidiary Nukasso Holdings Limited directly and indirectly acquired approximately 97.31% of shares in ORCO Property Group. As a consequence, Nukasso Holdings Limited became obliged to launch a mandatory takeover bid to purchase any and all of the ordinary shares of ORCO Property Group (the “Mandatory Takeover Offer”). On 22 August 2016, the Czech Office for the Protection of Competition granted the merger clearance for the acquisition of ORCO Property Group by the Group, whereas its decision became final and binding on 23 August 2016. On 8 December 2017 the CSSF published press releases in which it stated, inter alia, that it has decided not to approve the offer document in the Mandatory Takeover Offer as a consequence of the existence of an undisclosed concert action with respect to ORCO Property Group. On 15 March 2018 the CSSF published a press release informing that the decisions detailed in the above‐mentioned CSSF press releases of 8 December 2017 have been challenged before the Luxembourg administrative courts. As of the date of this report, the Company has not received any formal decision in relation to the Mandatory Takeover Offer.

Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations from their functional to the presentation currency. Hedging reserve The Group maintains several interest rate swaps for hedging of future interest payments on liabilities. These are swaps where the Group pays a fixed interest rate and receives a floating rate. Since January 2011 the Group applies hedge accounting in respect of foreign currency risks and interest rates risk in selected subsidiaries. The hedging reserve includes effective portion of the fair value changes of hedging instruments designated as a cash flow hedge. Ineffective portion of cash flow hedges represents part of finance costs or income.



187

Other reserves Other reserves are created from other equity operations, such as scope variations or revaluation of assets (revaluation reserve). Revaluation reserve comprises gains and losses from the revaluation of hotels (property, plant and equipment). These reserves may not be subject to the distribution of dividends.

Retained earnings Retained earnings are created from accumulated profits and losses and these reserves may be subject to the distribution of dividends. Perpetual notes On 9 May 2018, the Company issued EUR 550 million of undated 4.375% fixed rate resettable subordinated notes (the “Perpetual Notes”). The Perpetual Notes have no fixed maturity date and are callable by the Company from 11 August 2023. The Perpetual Notes, which were issued under CPIPG’s EUR 3 billion Euro Medium Term Note programme, are commonly known as “hybrids,” and contain features of both debt and equity. The Perpetual Notes are listed on the regulated market of Euronext Dublin and are accepted for clearance through Euroclear and Clearstream, Luxembourg. Both Moody’s Investors Service Limited and S&P Global Ratings have assigned 50% equity credit to the Notes and have rated the Notes Ba2 and BB+, respectively. Based on the analysis of the Perpetual Notes characteristics, the financial instrument is within the scope of IAS 32 ‘Financial Instruments: Presentation’ and shall be applied in order to assess the nature of the Notes. Perpetual Notes are presented as equity attributable to its holders, which is part of the total equity of the Group. Contributions to perpetual notes are recorded through changes in equity and not as a financial expense in the statement of comprehensive income. The Company may, at its sole discretion, elect to defer any payment of interest on the Perpetual Notes, in whole but not in part. The interest shall be recognized directly in the equity attributable to the Perpetual Notes holders. For terms and conditions of the Perpetual Notes please refer to: https://www.cpipg.com/uploads/e8b75080a0aaff00279f3505d72aa8f3c69b409b.pdf



188

Earnings per share 30 June 2018 30 June 2017 At the beginning of the period 9,236,420,362 7,702,448,495 Shares issued 9,488,722,610 7,795,617,846 Treasury shares held by the Group (252,302,248) (93,169,351) Weighted average movements 112,500,000 515,000,000 Issue of new shares 366,198,883 515,000,000 Treasury shares held by the Group (253,698,883) ‐‐ Weighted average outstanding shares for the purpose of calculating the basic earnings per share 9,348,920,362 8,217,448,495

Weighted average outstanding shares for the purpose of calculating the diluted earnings per share 9,348,920,362 8,217,448,495

Net profit attributable to the Equity holders of the Company 155,419 188,748

Net profit attributable to the Equity holders of the Company after assumed conversions/exercises 155,419 188,748

Total Basic earnings in EUR per share 0.02 0.02 o/w discontinued operations ‐‐ ‐‐

Diluted earnings in EUR per share 0.02 0.02 o/w discontinued operations ‐‐ ‐‐

Basic earnings per share (EPS) is calculated by dividing the profit/(loss) attributable to the Group by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and held as treasury shares. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.



189

Bonds issued

7.14.1 Non‐current bonds issued

Czech Property Investment, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI 5.10/21 2,000,000,000 76,864 2,000,000,000 78,309

Less: transaction costs ‐‐ (185) ‐‐ (356) CPI 5.10/21 2,000,000,000 76,679 2,000,000,000 77,953 Proceeds from issued bonds ‐ CPI II 4.65/22 1,000,000,000 38,432 1,000,000,000 39,154

Less: transaction costs ‐‐ (754) ‐‐ (816) CPI II 4.65/22 1,000,000,000 37,678 1,000,000,000 38,338 Proceeds from issued bonds ‐ CPI III 4.65/22 1,000,000,000 38,432 1,000,000,000 39,154

Less: transaction costs ‐‐ (792) ‐‐ (816) CPI III 4.65/22 1,000,000,000 37,640 1,000,000,000 38,338 Proceeds from issued bonds ‐ CPI IV 4.65/22 1,000,000,000 38,432 1,000,000,000 39,154

Less: transaction costs ‐‐ (735) ‐‐ (816) CPI IV 4.65/22 1,000,000,000 37,697 1,000,000,000 38,338 Proceeds from issued bonds ‐ CPI I 4.75/42 1,000,000,000 38,432 1,000,000,000 39,154

Less: transaction costs ‐‐ (707) ‐‐ (726) CPI I 4.75/42 1,000,000,000 37,725 1,000,000,000 38,428 Proceeds from issued bonds ‐ CPI V 4.85/42 1,000,000,000 38,432 1,000,000,000 39,154

Less: transaction costs ‐‐ (708) ‐‐ (726) CPI V 4.85/42 1,000,000,000 37,724 1,000,000,000 38,428 Proceeds from issued bonds ‐ CPI 4.75/19 150,000 57,648 150,000 58,731

Less: transaction costs ‐‐ (819) ‐‐ (1,051) CPI 4.75/19 150,000 56,829 150,000 57,680 Subtotal ‐ bonds issued by Czech Property Investments, a.s. 7,000,150,000 321,972 7,000,150,000 327,503 CPI BYTY, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI BYTY 5.80/21 (CZ0003510703) 800,000 30,746 ‐‐ ‐‐

Less: transaction costs ‐‐ (431) ‐‐ ‐‐ Subtotal bonds ‐ CPI BYTY, a.s. 800,000 30,315 ‐‐ ‐‐

CPI Retail Portfolio I, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI Retail Portfolio I 5.00/19 ‐‐ ‐‐ 112,500 44,049

Less: transaction costs ‐‐ ‐‐ ‐‐ (401) Subtotal bonds ‐ CPI Retail Portfolio I, a.s. ‐‐ ‐‐ 112,500 43,648

CPI Finance Slovakia, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI 5.00/2020 50,000 50,000 50,000 50,000

Less: transaction costs ‐‐ (442) ‐‐ (533) Subtotal bonds ‐ CPI Finance Slovakia, a.s. 50,000 49,558 50,000 49,467

CPI Finance Slovakia II, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI 5.00/2022 100,000 100,000 100,000 100,000

Less: transaction costs ‐‐ (1,922) ‐‐ (2,151) Subtotal bonds ‐ CPI Finance Slovakia II, a.s. 100,000 98,078 100,000 97,849

CPI Property Group, S.A. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds (ISIN XS1693959931) 825,000 819,899 825,000 819,952

Less: transaction costs ‐‐ (6,326) ‐‐ (6,748) Subtotal bonds ‐ CPI Property Group, S.A. 825,000 813,573 825,000 813,204

7.14.2 Current bonds issued

CPI BYTY, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI BYTY 1.85/19 (CZ0003516551) 530,000 20,369 530,000 20,752 Proceeds from issued bonds ‐ CPI BYTY 2.25/19 (CZ0003516569) 270,000 10,377 270,000 10,572 Proceeds from issued bonds ‐ CPI BYTY 4.80/19 (CZ0003510695) 900,000 34,589 900,000 35,239 Proceeds from issued bonds ‐ CPI BYTY 4.80/19 (CZ0003511412) 500,000 19,216 500,000 19,577 Proceeds from issued bonds ‐ CPI BYTY 5.80/21 (CZ0003510703) ‐‐ ‐‐ 800,000 31,323

Less: transaction costs ‐‐ (1,185) ‐‐ (1,918) Subtotal bonds ‐ CPI BYTY, a.s. 2,200,000 83,366 3,000,000 115,545

Total non‐current bonds 1,313,496 1,331,671



190

CPI Finance Slovakia, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI 5.85/2018 ‐‐ ‐‐ 30,000 30,000

Less: bonds owned by Group ‐‐ ‐‐ (2,000) (2,000) Less: transaction costs ‐‐ ‐‐ ‐‐ (69)

Subtotal bonds ‐ CPI Finance Slovakia, a.s. ‐‐ ‐‐ 28,000 27,931

CPI Retail Portfolio I, a.s. 30 June 2018 31 December 2017 No. of bonds issued Value No. of bonds issued Value Proceeds from issued bonds ‐ CPI 5.85/2018 112,500 43,236 ‐‐ ‐‐

Less: transaction costs ‐‐ (653) ‐‐ ‐‐ Subtotal bonds ‐ CPI Retail Portfolio I, a.s. 112,500 42,583 ‐‐ ‐‐

Accrued interest on bonds 20,090 14,047

Total current bonds 146,039 157,523

Total bonds 1,459,535 1,489,194

Changes in the six months period ended 30 June 2018 CPI 5.85/2018 (ISIN SK4120010653) On 16 April 2018 emission CPI 5.85/2018 was repaid. The total nominal value amounted to EUR 30 million.

Covenants Issued bonds CPI 5.10/2021, CPI II 4.65/22, CPI III 4.65/22, CPI IV 4.65/22, CPI I 4.75/42, CPI V 4.85/42, CPI 4.75/19, CPI Retail Portfolio I 5.00/2019, CPI 5.00/2020, CPI Property Group and CPI 5.00/2022 are subject to a number of covenants. All covenant ratios were met as at 30 June 2018.

Structure of bond financing As at 30 June 2018, total value of unsecured bonds amounts to EUR 1,301.7 million (EUR 1,326.2 million as at 31 December 2017). Bonds in the amount of EUR 158 million (EUR 163 million as at 31 December 2017) represent secured financing.



191

Financial debts

30 June 2018 31 December 2017 Loans from related parties 259 256 Loans from third parties 12,832 13,889 Bank loans (1) 1,544,916 1,550,497 Finance lease liabilities 22,610 23,978 Bills of exchange (2) 4 4,407 Total non‐current financial debts 1,580,621 1,593,027

30 June 2018 31 December 2017 Loans from third parties 5,264 6,309 Bank loans including overdraft (1) 143,681 149,021 Finance lease liabilities 2,525 2,656 Bills of exchange (2) 5,307 6,738 Total current financial debts 156,777 164,724

(1) In 2018, the Group agreed with UniCredit Bank on five year financing of QUADRIO shopping centre amounting to EUR 114.8 million. On the contrary, the pace of debt refinancing, in order to optimize the capital structure of the Group continued also during the first half of 2018.

(2) Bills of exchange decreased mainly due to repayment of bills of exchange in the amount of EUR 5.8 million.

As at 30 June 2018, total value of unsecured financial debts amounts to EUR 17.8 million (EUR 23.3 million as at 31 December 2017). Financial debts in the amount of EUR 1,179.6 1 million (EUR 1,734.5 million as at 31 December 2017) represent secured financing.

Other non‐current liabilities

30 June 2018 31 December 2017 Advances received 1,476 1,624 Trade payables due to third parties 244 1,067 Tenant deposits (1) 26,915 21,331 Payables from retentions 2,916 3,478 Other payables due to third parties 5,903 6,256 Total other non‐current liabilities 37,454 33,756

(1) Tenant deposits increased predominantly because of the acquisition in first half year 2018 in total amount of EUR 2 million – mainly acquisition MB Futurum HK s.r.o. in the amount of EUR 1 million. Deposits from tenants represent payables of the Group from received rental related deposits. Its classification corresponds to terms in rental contracts with respect of the termination options of the tenants.

Trade payables

1 Does not include financial debts attributable to projects dislosed as held for sale as at 30 June 2018.

30 June 2018 31 December 2017 Trade payables due to related parties 27 34 Trade payables due to third parties 75,410 74,788 Total trade payables 75,437 74,822



192

Advance payments 30 June 2018 31 December 2018 Advances received from related parties 26 ‐‐ Advances received from third parties 36,377 41,191 Tenant deposits (1) 22,988 19,512 Total advance payments 59,391 60,703

(1) Advances received from tenants represented payments received from tenants for utilities that will be settled against trade receivables when final amount of utilities consumption is known and final respective invoicing is performed.

Other financial current liabilities

30 June 2018 31 December 2017 Deferred income/revenue and accrued liabilities (1) 12,125 10,035 Payables from unpaid capital contributions 114 ‐‐ Other payables due to related parties 1,429 1,090 Other payables due to third parties 13,704 15,523 Total other financial current liabilities 27,372 26,648

(1) The main increase in deferred income/revenue relates to the acquisition in first half year 2018 (increase of EUR 1.8 million). Other non‐financial current liabilities

30 June 2018 31 December 2017 Current income tax liabilities 4,484 12,354 Value added tax payables 7,737 6,732 Other tax payables (excl. CIT and VAT) 1,338 396 Payables due to employees, SHI, employees income tax 7,889 6,310 Provisions 1,697 1,977 Liabilities from grants (1) 3,356 ‐‐ Total other non‐financial current liabilities 26,501 27,769

(1) Liabilities from grants relates to Mercuda, a.s. (Spojené farmy a.s.) in the amount of EUR 3.4 million.



193

8 FAIR VALUE MEASUREMENT Fair value of financial instruments

Fair value measurements of financial instruments reported at fair value are classified by level of the following measurement hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly (that

is, as prices) or indirectly (that is, derived from prices); Level 3: Inputs for the asset or liability that are not based on observable market data (that is,

unobservable inputs).

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, trading securities and financial assets at fair value through profit or loss) is based on quoted market prices at the reporting date. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group is using a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long‐term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. Valuations are performed regularly on the basis of the management best estimates of the credit risk of the Group or of the specific entity concerned in the light of existing, available and observable market data:

for the derivatives (interest rate swaps, options and forwards) the valuation is provided by the Group’s banks;

for the other investments and for the bonds, the fair values as of 30 June 2018 have been determined in accordance with generally accepted pricing models based on the discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.

The fair value of financial instruments reflects, inter alia, current market conditions (interest rates, volatility and share price). Changes in fair values are recorded in the consolidated income statement under the “other net financial results” line.



194

Accounting classification and fair values The following tables show the carrying amounts at fair value of financial assets and liabilities, including their level in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

30 June 2018 Fair value ‐

hedging instruments

Mandatorily at FVTPL ‐

others

FVOCI ‐ debt instruments

Financial assets at amortised

cost

Other financial liabilities

Total carrying amount

Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS MEASURED AT FAIR VALUE Derivative instruments (used for hedging) ‐ non‐current 4,149 ‐‐ ‐‐ ‐‐ ‐‐ 4,149 ‐‐ 4,149 ‐‐ 4,149 Derivative instruments (other) ‐ non‐current ‐‐ 789 ‐‐ ‐‐ ‐‐ 789 ‐‐ 789 ‐‐ 789

Non‐current ‐ derivative instruments 4,149 789 ‐‐ ‐‐ ‐‐ 4,938 Derivative instruments (used for hedging) ‐ current 116 ‐‐ ‐‐ ‐‐ ‐‐ 116 ‐‐ 116 ‐‐ 116 Derivative intruments (other) ‐ current ‐‐ 2 ‐‐ ‐‐ ‐‐ 2 ‐‐ 2 ‐‐ 2

Current ‐ derivative instruments 116 2 ‐‐ ‐‐ ‐‐ 118 FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE

Long‐term Equity investments ‐‐ ‐‐ 470 ‐‐ ‐‐ 470 470 ‐‐ ‐‐ 470 Debentures issued by third parties ‐‐ ‐‐ 110 ‐‐ ‐‐ 110 110 ‐‐ ‐‐ 110

Other investments ‐‐ ‐‐ 580 ‐‐ ‐‐ 580 Advances paid ‐‐ ‐‐ ‐‐ 3,194 ‐‐ 3,194 ‐‐ ‐‐ ‐‐ ‐‐ Loans provided ‐‐ ‐‐ ‐‐ 77,181 ‐‐ 77,181 ‐‐ ‐‐ 96,398 96,398 Other non‐current receivables ‐‐ ‐‐ ‐‐ 249 ‐‐ 249 ‐‐ ‐‐ 249 249

Non‐current financial assets at amortised cost ‐‐ ‐‐ ‐‐ 80,624 ‐‐ 80,624 Trade and other receivables ‐‐ ‐‐ ‐‐ 74,378 ‐‐ 74,378 ‐‐ ‐‐ ‐‐ ‐‐ Loans provided ‐‐ ‐‐ ‐‐ 58,296 ‐‐ 58,296 ‐‐ ‐‐ 67,150 67,150 Bills of exchange ‐‐ ‐‐ ‐‐ 7,027 ‐‐ 7,027 ‐‐ ‐‐ 7,148 7,148 Other current financial assets ‐‐ ‐‐ ‐‐ 15,367 ‐‐ 15,367 ‐‐ ‐‐ ‐‐ ‐‐ Cash and cash equivalent ‐‐ ‐‐ ‐‐ 473,396 ‐‐ 473,396 ‐‐ ‐‐ ‐‐ ‐‐

Current financial assets at amortised cost ‐‐ ‐‐ ‐‐ 628,464 ‐‐ 628,464 FINANCIAL LIABILITIES MEASURED AT FAIR VALUE

Derivative instruments (other) ‐ non‐current ‐‐ 4,755 ‐‐ ‐‐ ‐‐ 4,755 ‐‐ 4,755 ‐‐ 4,755 Non‐current ‐ derivative instruments ‐‐ 4,755 ‐‐ ‐‐ ‐‐ 4,755

Derivative intruments (other) ‐ current ‐‐ 307 ‐‐ ‐‐ ‐‐ 307 ‐‐ 307 ‐‐ 307 Current ‐ derivative instruments ‐‐ 307 ‐‐ ‐‐ ‐‐ 307 FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE

Bonds ‐‐ ‐‐ ‐‐ ‐‐ 1,313,496 1,313,496 1,351,705 ‐‐ ‐‐ 1,351,705 Financial debt (floating rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 1,162,945 1,162,945 ‐‐ ‐‐ 1,162,945 1,162,945 Financial debt (fixed rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 381,971 381,971 ‐‐ ‐‐ 365,336 365,336 Financial debt (other borrowings) ‐‐ ‐‐ ‐‐ ‐‐ 35,705 35,705 ‐‐ ‐‐ 35,636 35,636

Non‐current financial liabilities ‐‐ ‐‐ ‐‐ ‐‐ 2,894,117 2,894,117 Bonds ‐‐ ‐‐ ‐‐ ‐‐ 125,949 125,949 127,591 ‐‐ ‐‐ 127,591 Financial debt (floating rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 135,496 135,496 ‐‐ ‐‐ 135,496 135,496 Financial debt (fixed rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 8,185 8,185 ‐‐ ‐‐ 13,629 13,629 Financial debt (other borrowings) ‐‐ ‐‐ ‐‐ ‐‐ 13,096 13,096 ‐‐ ‐‐ 13,355 13,355 Advanced payments ‐‐ ‐‐ ‐‐ ‐‐ 59,391 59,391 ‐‐ ‐‐ ‐‐ ‐‐ Trade payables ‐‐ ‐‐ ‐‐ ‐‐ 75,437 75,437 ‐‐ ‐‐ ‐‐ ‐‐ Other financial current liabilities ‐‐ ‐‐ ‐‐ ‐‐ 27,372 27,372 ‐‐ ‐‐ ‐‐ ‐‐ Liabilities linked to assets held for sale ‐‐ ‐‐ ‐‐ ‐‐ 11,878 11,878 ‐‐ ‐‐ 11,878 11,878

Current financial liabilities ‐‐ ‐‐ ‐‐ ‐‐ 456,804 456,804



195

31 December 2017 Fair value ‐

hedging instruments

Mandatorily at FVTPL ‐

others

Available for sale

Loans and receivables

Other financial liabilities

Total carrying amount

Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS MEASURED AT FAIR VALUE Derivative instruments (used for hedging) ‐ non‐current 4,628 ‐‐ ‐‐ ‐‐ ‐‐ 4,628 ‐‐ 4,628 ‐‐ 4,628 Derivative instruments (other) ‐ non‐current ‐‐ 755 ‐‐ ‐‐ ‐‐ 755 ‐‐ 755 ‐‐ 755

Non‐current ‐ derivative instruments 4,628 755 ‐‐ ‐‐ ‐‐ 5,383 Derivative intruments (other) ‐ current ‐‐ 119 ‐‐ ‐‐ ‐‐ 119 ‐‐ 119 ‐‐ 119

Current ‐ derivative instruments ‐‐ 119 ‐‐ ‐‐ ‐‐ 119 FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE

Long‐term Equity investments ‐‐ ‐‐ 927 ‐‐ ‐‐ 927 927 ‐‐ ‐‐ 927 Debentures issued by third parties ‐‐ ‐‐ 110 ‐‐ ‐‐ 110 110 ‐‐ ‐‐ 110

Financial assets available‐for‐sale ‐‐ ‐‐ 1,037 ‐‐ ‐‐ 1,037 Advances paid ‐‐ ‐‐ ‐‐ 3,966 ‐‐ 3,966 ‐‐ ‐‐ ‐‐ ‐‐ Loans provided ‐‐ ‐‐ ‐‐ 67,804 ‐‐ 67,804 ‐‐ ‐‐ 74,875 74,875 Bills of exchange ‐‐ ‐‐ ‐‐ 3,834 ‐‐ 3,834 ‐‐ ‐‐ 3,871 3,871 Other non‐current receivables ‐‐ ‐‐ ‐‐ 227 ‐‐ 227 ‐‐ ‐‐ 227 227

Non‐current loans and receivables ‐‐ ‐‐ ‐‐ 75,831 ‐‐ 75,831 Trade and other receivables ‐‐ ‐‐ ‐‐ 76,513 ‐‐ 76,513 ‐‐ ‐‐ ‐‐ ‐‐ Loans provided ‐‐ ‐‐ ‐‐ 68,903 ‐‐ 68,903 ‐‐ ‐‐ 79,212 79,212 Bills of exchange ‐‐ ‐‐ ‐‐ 3,185 ‐‐ 3,185 ‐‐ ‐‐ 3,240 3,240 Other current financial assets ‐‐ ‐‐ ‐‐ 15,408 ‐‐ 15,408 ‐‐ ‐‐ ‐‐ ‐‐ Cash and cash equivalent ‐‐ ‐‐ ‐‐ 238,907 ‐‐ 238,907 ‐‐ ‐‐ ‐‐ ‐‐

Current financial assets ‐‐ ‐‐ ‐‐ 402,916 ‐‐ 402,916 FINANCIAL LIABILITIES MEASURED AT FAIR VALUE

Derivative instruments (other) ‐ non‐current ‐‐ 2,602 ‐‐ ‐‐ ‐‐ 2,602 ‐‐ 2,602 ‐‐ 2,602 Non‐current ‐ derivative instruments ‐‐ 2,602 ‐‐ ‐‐ ‐‐ 2,602

Derivative intruments (other) ‐ current ‐‐ 624 ‐‐ ‐‐ ‐‐ 624 ‐‐ 624 ‐‐ 624 Current ‐ derivative instruments ‐‐ 624 ‐‐ ‐‐ ‐‐ 624 FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE

Bonds ‐‐ ‐‐ ‐‐ ‐‐ 1,331,671 1,331,671 1,370,688 ‐‐ ‐‐ 1,370,688 Financial debt (floating rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 1,165,503 1,165,503 ‐‐ ‐‐ 1,165,503 1,165,503 Financial debt (fixed rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 384,994 384,994 ‐‐ ‐‐ 363,244 363,244 Financial debt (other borrowings) ‐‐ ‐‐ ‐‐ ‐‐ 42,530 42,530 ‐‐ ‐‐ 40,672 40,672

Non‐current financial liabilities ‐‐ ‐‐ ‐‐ ‐‐ 2,924,698 2,924,698 Bonds ‐‐ ‐‐ ‐‐ ‐‐ 143,476 143,476 147,206 ‐‐ ‐‐ 147,206 Financial debt (floating rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 140,708 140,708 ‐‐ ‐‐ 140,708 140,708 Financial debt (fixed rate bank debts) ‐‐ ‐‐ ‐‐ ‐‐ 8,313 8,313 ‐‐ ‐‐ 13,811 13,811 Financial debt (other borrowings) ‐‐ ‐‐ ‐‐ ‐‐ 15,703 15,703 ‐‐ ‐‐ 15,995 15,995 Advanced payments ‐‐ ‐‐ ‐‐ ‐‐ 60,703 60,703 ‐‐ ‐‐ ‐‐ ‐‐ Trade payables ‐‐ ‐‐ ‐‐ ‐‐ 74,822 74,822 ‐‐ ‐‐ ‐‐ ‐‐ Other financial current liabilities ‐‐ ‐‐ ‐‐ ‐‐ 26,648 26,648 ‐‐ ‐‐ ‐‐ ‐‐ Liabilities linked to assets held for sale ‐‐ ‐‐ ‐‐ ‐‐ 15,924 15,924 ‐‐ ‐‐ 15,924 15,924

Current financial liabilities ‐‐ ‐‐ ‐‐ ‐‐ 486,297 486,297 ‐‐ ‐‐ ‐‐



196

Valuation technique used for measurement of fair value of derivatives Liabilities from derivative are measured by discounted cash flow method. Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk of various counterparties.

Fair value measurement of investment property/hotels/biological assets

The Group’s investment properties, hotels and biological assets were valued at 31 December 2017 in accordance to the Group’s accounting policies. The Group utilizes independent professionally qualified valuers, who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. For all these properties, their current use equates to the highest and best use.

The Group’s finance department includes a team that reviews the valuations performed by the independent valuers for financial reporting purposes. The independent valuer provides appraisal of the Group´s property portfolio annually. The fair value of the majority of the property portfolio as of 30 June 2018 was determined based on the management’s analysis described in note 6.7 and it does not significantly differ from the fair value as of 31 December 2017. In instances where there have been indications of significant changes and therefore with potential impact on the property value during the first half of 2018, the value of the property has been updated based on the external or internal appraisals as of 30 June 2018. At 1 January 2018 the fair value measurement for investment property of EUR 5,807.9 million has been categorized as Level 3 recurring fair value based on the inputs to the valuation technique used in accordance with IFRS 13. There were no transfers between Levels during the first half of 2018. 8.2.1 Main observable and unobservable inputs

The table below presents the fair value hierarchy of the valuation, the valuation method, the key observable and unobservable inputs for the respective part of each class of property, which has been revaluated as at 30 June 2018.

30 June 2018

Asset Type

Valuation technique

Fair value

hierarchy

Significant unobservable inputs

Weighted average

Min. Max. Avg.

Czech Republic ‐ Shopping Centres and Galleries Retail

Income capitalisation Level 3

Estimated rental value per sqm

‐ (669 EUR/sqm)

Net current income per sqm ‐ (619 EUR/sqm)

Equivalent yield ‐ (3.50%)

Vacancy rate

‐ (4.24%)

Fair value 138 MEUR Czech Republic ‐ Shopping Centres and Galleries Retail DCF Level 3


159 EUR/sqm ‐ 241 EUR/sqm (208 EUR/sqm)

Net current income per sqm 145 EUR/sqm ‐ 218 EUR/sqm (188 EUR/sqm)

Discount Rate 6.00% ‐ 6.25% (6.11%)

Exit Yield 5.75% ‐ 6.00% (5.89%)

Vacancy rate 1.20% ‐ 27.23% (10.81%)

Level 3 Fair value ‐ 206 MEUR



197

30 June 2018

Asset Type

Valuation technique

Fair value

hierarchy


Weighted average

Min. Max. Avg.

Hungary ‐ Retail Warehouse Retail DCF Level 3


54 EUR/sqm ‐ 108 EUR/sqm (90 EUR/sqm)

ary ‐ Retail Warehouse Retail

Income capitalisation


Discount Rate 8.75% ‐ 9.50% (9.07%)

Exit Yield 8.40% ‐ 8.90% (8.57%)

Vacancy rate

0.00% ‐ 7.99% (2.30%)

Fair value 25 MEUR

Hungary ‐ Shopping Centres and Galleries Retail DCF Level 3

Estimated rental value per sqm 159 EUR/sqm ‐ 192 EUR/sqm (177 EUR/sqm)


Discount Rate 8.25% ‐ 8.50% (8.38%)

Exit Yield ‐ (7.95%)

Vacancy rate 1.61% ‐ 3.45% (2.46%)

Fair value 160 MEUR

Slovak Republic ‐ Retail Warehouse Retail DCF Level 3



Discount Rate 7.50% ‐ 9.00% (7.80%)

Exit Yield 7.15% ‐ 8.00% (7.30%)

Vacancy rate 0.00% ‐ 84.57% (4.38%)

Fair value 118 MEUR

Remaining part Retail Fair value ‐ 1,334 MEUR

Czech Republic Office Income capitalisation Level 3

Estimated rental value per sqm ‐ (256 EUR/sqm)



Vacancy rate

‐ (9.37%)

Fair value 95 MEUR

Germany Office DCF Level 3 Estimated rental value per sqm

142 EUR/sqm ‐ 185 EUR/sqm

(162 EUR/sqm)

Gross current income per sqm

103 EUR/sqm ‐ 115 EUR/sqm

(109 EUR/sqm)

Discount rate 5.00% ‐ 5.50% (5.23%)

Exit Yield 5.00% ‐ 5.25% (5.12%)

Vacancy rate

1.37% ‐ 4.56% (2.85%)

Fair value 189 MEUR

Hungary Office DCF Level 3 Estimated rental value per sqm 155 EUR/sqm ‐ 187 EUR/sqm (161 EUR/sqm)

Gross current income per sqm 147 EUR/sqm ‐ 201 EUR/sqm (158 EUR/sqm)

Discount rate 7.70% ‐ 7.75% (7.74%)

Exit Yield 7.25% ‐ 7.50% (7.45%)

Vacancy rate 0.00% ‐ 7.04% (5.56%)

Fair value 93 MEUR



198

30 June 2018

Asset Type

Valuation technique

Fair value

hierarchy


Weighted average

Min. Max. Avg.

Poland Office Income capitalisation Level 3



Discount rate 7.44% ‐ 7.75% (7.58%)

Exit Yield 7.75% ‐ 8.00% (7.86%)

Vacancy rate 12.61% ‐ 19.52% (16.48%)

Fair value 81 MEUR

Remaining part Office Fair value 2,313 MEUR

Czech Republic Residential Comparable Level 3 Fair value per sqm

334 EUR/sqm ‐ 2,861 EUR/sqm

(1,886 EUR/sqm)

Fair value 176 MEUR

Remaining part Residential Fair value 341 MEUR

Czech Republic Agriculture Comparable Level 3 Fair value per sqm

0.43 EUR/sqm ‐ 0.74 EUR/sqm (0.72 EUR/sqm)

Fair value 96 MEUR

Remaining part Agriculture Fair value 88 MEUR

Hospitality Fair value 644 MEUR

Industry and Logistic Fair value 78 MEUR

Land Bank Fair value 499 MEUR

Development Fair value 97 MEUR

Asset Held For Sale Fair value 60 MEUR

The table below presents the fair value hierarchy of the valuation, the valuation method, the key observable and unobservable inputs for each class of property owned by the Group, used by the valuators as at the end of 31 December 2017.

31 December 2017

Asset Type Valuation

technique Fair

value hierarchy

Significant unobservable

inputs

Weighted average

Min. Max. Avg.

Czech Republic Industry and Logistic



20 EUR/sqm ‐

81 EUR/sqm (50 EUR/sqm)

Net current income per sqm 17 EUR/sqm ‐


Equivalent yield 7.65% ‐ 12.00% (8.20%)

Vacancy rate

0.00% ‐ 35.12% (3.51%)

Fair value 45 MEUR

Hungary Industry and Logistic


Estimated rental value per sqm 39 EUR/sqm ‐





Vacancy rate

0.00% ‐ 17.27% (6.68%)

Fair value 24 MEUR

Germany Industry and Logistic DCF Level 3



Discount rate ‐ (5.00%)

Exit yield (4.75%)

Vacancy rate

‐ (0.00%)

Fair value 9 MEUR



199

31 December 2017


technique Fair

value hierarchy


inputs

Weighted average

Min. Max. Avg.

Czech Republic ‐ Retail Warehouse Retail







Vacancy rate

0.00% ‐ 47.91% (3.05%)

Fair value 125 MEUR

Czech Republic ‐ Retail Warehouse Retail DCF Level 3





Discount Rate 7.00% ‐ 8.50% (7.67%)

Exit Yield 7.00% ‐ 8.00% (7.42%)

Vacancy rate

0.00% ‐ 18.52% (0.99%)

Fair value 220 MEUR Czech Republic ‐ Shopping Centres and Galleries Retail



131 EUR/sqm ‐





Vacancy rate

0.00% ‐ 4.93% (1.51%)

Fair value 207 MEUR Czech Republic ‐ Shopping Centres and Galleries Retail DCF Level 3


127 EUR/sqm ‐


Net current income per sqm

101 EUR/sqm ‐


Discount Rate 5.50% ‐ 7.75% (6.38%)

Exit Yield 5.50% ‐ 7.00% (5.96%)

Vacancy rate

0.00% ‐ 27.23% (7.74%)

Fair value 773 MEUR Czech Republic ‐ So‐called special properties Retail







Vacancy rate

0.00% ‐ 100.00% (16.07%)

Fair value 70 MEUR Czech Republic ‐ So‐called special properties Retail Comparable Level 3

Fair value per sqm

259 EUR/sqm ‐


Fair value 12 MEUR

Hungary ‐ Retail Warehouse Retail



54 EUR/sqm ‐





Vacancy rate

0.00% ‐ 6.76% (3.47%)

Fair value 37 MEUR



200

31 December 2017


technique Fair

value hierarchy


inputs

Weighted average

Min. Max. Avg.

Hungary ‐ Shopping Centres and Galleries Retail



101 EUR/sqm ‐



124 EUR/sqm ‐



Vacancy rate

2.17% ‐ 4.33% (3.24%)

Fair value 178 MEUR

Slovak Republic ‐ Retail Warehouse Retail







Vacancy rate

0.00% ‐ 100.00% (8.41%)

Fair value 109 MEUR

Poland ‐ Retail Warehouse Retail DCF Level 3




Exit Yield (8.75%)

Vacancy rate

‐ (0.00%)

Fair value 3 MEUR

Poland ‐ Shopping Centres and Galleries Retail





Vacancy rate

‐ (3.93%)

Fair value 120 MEUR

Poland ‐ Shopping Centres and Galleries Retail DCF Level 3




Exit Yield (7.5%)

Vacancy rate

‐ (7.50%)

Fair value 19 MEUR

Czech Republic Office Income capitalisation Level 3


130 EUR/sqm ‐





Vacancy rate

0.00% ‐ 21.07% (2.16%)

Fair value 167 MEUR



201

31 December 2017


technique Fair

value hierarchy


inputs

Weighted average

Min. Max. Avg.

Czech Republic Office DCF Level 3





Discount rate 5.75% ‐ 8.75% (6.86%)

Exit Yield 5.00% ‐ 8.50% (6.34%)

Vacancy rate

0.00% ‐ 31.79% (1.88%)

Fair value 594 MEUR

Czech Republic Office

Office ‐ Development Appraisal Level 3 Total EMRV

144 EUR/sqm ‐


Gross development value

2,426 EUR/sqm ‐

3,570 EUR/sqm (3,191 EUR/sqm)

Development margin 13.00% ‐ 20.00% (15.32%)

Fair value 35 MEUR

Germany Office DCF Level 3



Gross current income per sqm 23 EUR/sqm ‐


Discount rate 4.24% ‐ 6.25% (5.25%)

Exit Yield 3.75% ‐ 8.00% (4.94%)

Vacancy rate

0.00% ‐ 64.31% (9.78%)

Fair value 1,619 MEUR

Hungary Office Income capitalisation Level 3


104 EUR/sqm ‐





Vacancy rate

0.00% ‐ 41.68% (9.12%)

Fair value (213 MEUR)

Hungary Office Comparable Level 3 Fair value per sqm

‐ (1,945 EUR/sqm)

Fair value 9 MEUR

Poland Office DCF Level 3


153 EUR/sqm ‐



130 EUR/sqm ‐


Discount rate 7.50% ‐ 8.50% (8.28%)

Exit Yield 7.25% ‐ 8.25% (8.09%)

Vacancy rate

0.00% ‐ 8.48% (7.65%)

Fair value 60 MEUR

Slovak Republic Office Income capitalisation Level 3


Slovak Republic Office Income capitalisation


Slovak Republic Office Income capitalisation Equivalent yield ‐ (8.60%)

Slovak Republic Office Income capitalisation Vacancy rate

‐ (10.80%)

Fair value 7 MEUR



202

31 December 2017


technique Fair

value hierarchy


inputs

Weighted average

Min. Max. Avg.

Czech Republic Residential Comparable Level 3 Fair value per sqm

61 EUR/sqm ‐

6,355 EUR/sqm (787 EUR/sqm)

Fair value 408 MEUR

France Residential Income capitalisation Level 3


‐ (1,025 EUR/sqm)


‐ (495 EUR/sqm)

Initial yield

‐ (2.16%)

Vacancy rate

‐ (0.00%)

Fair value 4 MEUR

France Residential Comparable Level 3 Fair value per sqm

6,438 EUR/sqm ‐

30,000 EUR/sqm (19,427 EUR/sqm)

Fair value

94 MEUR

Italy ‐ 4* hotel Hotel DCF Level 3 Rate per key ‐ (120,599 EUR/key)


Exit yield ‐ (9.00%)

Discount rate

‐ (9.00%)

Fair value 38 MEUR

Czech Republic Land Bank Comparable Level 3 Fair value per sqm

3 EUR/sqm ‐

3,293 EUR/sqm (486 EUR/sqm)

Fair value 478 MEUR

Hungary Land Bank Comparable Level 3 Fair value per sqm

56 EUR/sqm ‐


Fair value 37 MEUR

France Land Bank Comparable Level 3 Fair value per sqm

‐ (18 EUR/sqm)

Fair value 2 MEUR

Czech Republic Development Development Appraisal Level 3

Total EMRV per sqm

‐ (152 EUR)

Gross development value per sqm ‐ (2,752 EUR)

Development margin

‐ (15.00%)

Fair value 8 MEUR

Czech Republic Agriculture Comparable Level 3 Fair value per sqm

0.43 EUR/sqm ‐

0.74 EUR/sqm (0.72 EUR/sqm)

Fair value 85 MEUR

Czech Republic ‐ 3* hotel Hospitality DCF Level 3 Rate per key

17,223 EUR/key ‐

60,917 EUR/key (46,107 EUR/key)

Exit yield

5.53% ‐ 7.25% (6.31%)

Discount rate

5.53% ‐ 8.75% (7.05%)

Fair value 38 MEUR

Czech Republic ‐ 3* hotel Hospitality Comparable Level 3 Rate per key

‐ (58,333 EUR/key)

Fair value 5 MEUR


21,370 EUR/key ‐

182,333 EUR/key (133,526 EUR/key)

Exit yield 5.53% ‐ 7.50% (6.35%)

Discount rate

5.53% ‐ 9.00% (6.93%)

Fair value 250 MEUR



203

31 December 2017


technique Fair

value hierarchy


inputs

Weighted average

Min. Max. Avg.


‐ (533,568 EUR/key)

Exit yield

‐ (4.25%)

Discount rate

‐ (5.25%)

Fair value 19 MEUR

Czech Republic ‐ Hostel Hospitality DCF Level 3 Rate per key

‐ (18,239 EUR/key)

Exit yield

‐ (8.25%)

Discount rate

‐ (9.75%)

Fair value

16 MEUR

Hungary ‐ 4* hotel Hospitality DCF Level 3 Rate per key 101,325

EUR/key ‐ 212,632 EUR/key (145,020 EUR/key)

Hungary ‐ 4* hotel Hotel DCF Exit yield 7.00% ‐ 7.50% (7.27%)

Hungary ‐ 4* hotel Hotel DCF Discount rate

9.00% ‐ 10.00% (9.61%)

Fair value 52 MEUR

Poland ‐ 4* hotel Hospitality DCF Level 3 Rate per key ‐ (216,444 EUR/key)

Poland ‐ 4* hotel Hotel DCF Exit yield ‐ (7.25%)

Poland ‐ 4* hotel Hotel DCF Discount rate

‐ (9.25%)

Fair value

10 MEUR

Poland ‐ 5* hotel Hospitality DCF Level 3 Rate per key ‐ (262,459 EUR/key)

Poland ‐ 5* hotel Hotel DCF Exit yield ‐ (7.00%)

Poland ‐ 5* hotel Hotel DCF Discount rate

‐ (9.00%)

Fair value 16 MEUR

Russia ‐ 5* hotel Hospitality DCF Level 3 Rate per key ‐ (274,286 EUR/key)

Russia ‐ 5* hotel Hotel DCF Exit yield ‐ (8.50%)

Russia ‐ 5* hotel Hotel DCF Discount rate

‐ (11.50%)

Fair value 23 MEUR

Croatia Hospitality DCF Level 3 Rate per key 18,033

EUR/key ‐ 372,881 EUR/key (227,807 EUR/key)

Croatia ‐ n/a Hotel DCF Exit yield 7.25% ‐ 9.50% (7.76%)

Discount rate

9.00% ‐ 11.00% (9.51%)

Fair value 171 MEUR

Assets Held For Sale

Valued on transaction basis

108 MEUR

Discounted cash flow method (DCF) – application guidance provided by IVSC, www.ivsc.org Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. As an accepted method within the income approach to valuation, the DCF method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, an appropriate, market‐derived discount rate is applied to establish the present value of the income stream associated with the real property.



204

The duration of the cash flow and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related lease up periods, re‐letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. In the case of investment properties, periodic cash flow is typically estimated as gross income less vacancy, non recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating incomes, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted. Market comparable method – application guidance provided by IVSC, www.ivsc.org Under the market comparable method (or market comparable approach), a property’s fair value is estimated based on comparable transactions. The market comparable approach is based upon the principle of substitution under which a potential buyer will not pay more for the property than it will cost to buy a comparable substitute property. In theory, the best comparable sale would be an exact duplicate of the subject property and would indicate, by the known selling price of the duplicate, the price for which the subject property could be sold. The unit of comparison applied is the price per square metre (sqm). Income capitalisation method ‐ application guidance provided by IVSC, www.ivsc.org Under the income capitalisation method, a property´s fair value is estimated based on the normalised net operating income generated by the property, which is divided by the capitalisation rate (the investor´s rate of return). The difference between gross and net rental income includes expense categories such as vacancy, non recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. When using the income capitalisation method, the mentioned expenses have to be included on the basis of a time weighted average, such as the average lease up costs. Under the income capitalisation method, over (above market rent) and under‐rent situations are separately capitalised.



205

9 CONTINGENCIES AND LITIGATIONS CPI PG has guaranteed certain debt of Orco Property Group (“OPG") On 7 November 2014, the Company entered into a trust deed (the “Orco Trust Deed”) pursuant to which it unconditionally and irrevocably guaranteed the due and punctual payment of all sums from time to time payable by Orco Property Group (“OPG”) in relation to its notes (New Notes) registered under ISIN code XS0820547742, which were issued on 4 October 2012 (and amended and restated pursuant to the Orco Trust Deed). The Company has also undertaken in the Orco Trust Deed to be bound by certain limitations on its activities and to maintain certain financial ratios. On 7 November 2017, OPG has redeemed all of the outstanding New Notes. Following the redemption, all the New Notes were canceled. There have been no claims against the Company in relation to the Orco Trust Deed or the New Notes. For more details about the New Notes please refer to Orco Trust Deed available at www.orcogroup.com. The Company agreed to guarantee certain warranties given by OPG to the buyer of Capellen building in Luxembourg. The guaranteed warranties related to pending claims in relation to the building and are limited to EUR 250,000. The duration of the guarantee is 24 months from 25 January 2017. Kingstown dispute The Company announced that on 20 January 2015 it was served with a summons containing petition of the three companies namely Kingstown Partners Master Ltd. of the Cayman Islands, Kingstown Partners II, LP of Delaware and Ktown LP of Delaware (together referred to as „Kingstown“), claiming to be the shareholders of OPG, filed with the „Tribunal d´Arrondissement de et a Luxembourg“. The petition seeks condemnation of the Company together with OPG and certain members of OPG´s board of directors as jointly and severally liable to pay damages in the amount of EUR 14,485,111.13 and compensation for moral damage in the amount of EUR 5,000,000. According to Kingstown´s allegation the claimed damage has arisen as a consequence of inter alia alleged violation of OPG´s minority shareholders rights. To the best of Company´s knowledge, Kingstown was not at the relevant time (and is not up to now) a shareholder of the Company. Therefore and without any assumption regarding the possible violation, the Company believes that it cannot be held liable for the violation of the rights of the shareholders of another entity. The Management of the Company has been taking all available legal actions to oppose these allegations in order to protect the corporate interest as well as the interest of its shareholders. Accordingly, the parties sued by Kingstown raised the exceptio judicatum solvi plea, which consists in requiring the entity who initiated the proceedings and who does not reside in the European Union or in a State which is not a Member State of the Council of Europe to pay a legal deposit to cover the legal costs and compensation procedure. The Luxembourg District Court rendered on 19 February 2016 a judgement, whereby each claimant has to place a legal deposit in the total amount of 90,000 EUR with the “Caisse de Consignation” in Luxembourg in order to continue the proceedings. Kingstown paid the deposit in January 2017 and the litigation, currently being in a procedural stage, is pending.



206

Disputes related to warrants issued by OPG The Company’s subsidiary OPG was sued by holders of the warrants holders of 2014 Warrants registered under ISIN code XS0290764728 (the “2014 Warrants“). The first group of the holders of the Warrants sued OPG for approximately EUR 1.2 million in relation to the Change of Control Notice published by OPG, notifying the holders of the 2014 Warrants that the Change of Control, as defined in the Securities Note and the Summary for the 2014 Warrants, occurred on 8 June 2016. The second holder of the 2014 Warrants sued OPG for approximately EUR 1 million in relation to the alleged change of control which allegedly occurred in 2013. OPG will defend itself against these lawsuits. It is reminded that in accordance with the judgement of the Paris Commercial Court (the “Court”) pronounced on 26 October 2015 concerning the termination of the OPG’s Safeguard Plan, liabilities that were admitted to the Safeguard, but are conditional or uncalled (such as uncalled bank guarantees, conditional claims of the holders of 2014 Warrants registered under ISIN code XS0290764728, provided that they were admitted to the Safeguard plan), will be paid according to their contractual terms. Pre‐Safeguard liabilities that were not admitted to the OPG’s Safeguard will be unenforceable. As such, only claims of holders of the 2014 Warrants, whose potential claims were admitted to the OPG’s Safeguard Plan, could be considered in respect of the present Change of Control. Claims of holders of the 2014 Warrants that were not admitted to the OPG’s Safeguard will be unenforceable against OPG. To the best of Company’s knowledge, none of the holders of the 2014 Warrants who sued OPG filed their claims 2014 Warrants‐related claims in the OPG’s Safeguard Plan. HAGIBOR OFFICE BUILDING dispute In March 2016, the insolvency administrator of the OPG's subsidiary HAGIBOR OFFICE BUILDING ("HOB"), filed a lawsuit, requesting that the OPG returns to HOB in aggregate USD 16.49 million, paid by HOB to OPG in 2012. OPG is of the opinion that the lawsuit has no merit given that in 2012 HOB duly repaid its loan to OPG. OPG will defend itself against this lawsuit. In August 2016, the litigation has been stayed until litigation concerning the ownership of the Radio Free Europe building is resolved. In December 2016 OPG filed a lawsuit claiming the non‐existence of pledges registered on the Radio Free Europe building in favor of the financing bank. A hearing on the matter of the non‐existence of pledges is expected in September 2018 As at the date of the publication of the consolidated financial statements, the Group does not have evidence of any other contingent liabilities except those mentioned above. No legal proceeding is currently active the result of which would influence the consolidated financial statements.



207

10 CAPITAL AND OTHER COMMITMENTS Capital commitments

The Group has capital commitments of EUR 50 million in respect of capital expenditures contracted for at the date of the statement of financial statements (EUR 29.9 million in 2017). There are no other commitments except as disclosed above.

11 RELATED PARTY TRANSACTIONS The Group has a related party relationship with its members of Board of Directors (current and former) and executive management (key management personnel), shareholder and companies in which these parties held controlling or significant influence or are joint ventures. Key management personnel and members of Board of Directors The remuneration of key management personnel and members of Board of Directors are summarized in following table. TEUR 30 June 2018 31 December 2017

Remuneration paid to key management personnel and members of Board of Directors 327 379 Total remuneration 327 379

Breakdown of balances and transactions between key management personnel and members of Board of Directors and the Group is as follows:

Balances at 30 June 2018 31 December 2017

Loans provided 103 102 Trade receivables 9 36 Other receivables 20 20 Impairment of other receivables ‐‐ (23) Advances received 26 ‐‐ Bonds issued 331 338 Transactions 30 June 2018 30 June 2017 Interest income and other revenues 34 5 Energy consumption (17) ‐‐ Legal services ‐‐ (4) Audit, tax and advisory services (576) ‐‐ Other cost (30) ‐‐ Other related parties Entities over which the sole shareholder has control Balances at 30 June 2018 31 December 2017 Loans provided 96,572 89,246 Trade receivables 2,154 295 Other receivables 11 ‐‐ Loans received 259 256 Trade payables 16 ‐‐ Transactions 30 June 2018 30 June 2017 Interest expense on bonds issued ‐‐ ‐‐ Interest income 4,712 126 Rental income and other services 5 ‐‐ Lease and rental expenses ‐‐ (136) Joint ventures Balances at 30 June 2018 31 December 2017 Loans provided 10,780 10,428 Transactions 30 June 2018 30 June 2017 Interest income 353 184



208

Close family members/entities controlled by close family members Balances at 30 June 2017 31 December 2017 Trade receivables ‐‐ 28 Other payables 807 807 Entities controlled by members of Board of Directors Balance at 30 June 2018 31 December 2017 Trade receivables 52 18 Other receivables 10 ‐‐ Loans provided 4,753 4,709 Trade payables 11 34 Advances paid ‐‐ 36 Impairment of trade receivables and other receivables (27) (9) Transactions 30 June 2018 30 June 2017 Lease and rental expenses ‐‐ (125) Interest expense ‐‐ (8) Interest income on loans 130 8 Advisory and accounting services ‐‐ 69 Proceeds from sale of subsidiaries ‐‐ 68 Letting fee ‐‐ (3) Impairments (4) ‐‐ Rental income and other services ‐‐ 1 Major shareholder of CPI PG Balance at 30 June 2018 31 December 2017 Loans provided 26,872 27,352 Trade receivables 79 80 Other receivables and other items 4,627 5,077 Other payables 622 283 Transactions 30 June 2018 30 June 2017 Interest income and other revenues 1,286 386

Main selected transactions with other related parties

Shares In March 2018, as part of its share buy ‐back, the Company acquired 724,853,952 Company shares an entity affiliated with the major shareholder. In April 2018, the Company issued 250,000,000 new shares to an entity controlled by the major shareholder for a global subscription price of EUR 50 million. During 2017, the Company issued 1,515,000,000 new shares to an entity controlled by the major shareholder. The Company also issued 159,132,897 new shares to ORCO Property Group and 18,971,867 to top management. Transactions connected with the major shareholder of the Company

Loan provided by/to the Company

In 2017, the Company provided loans to company which is controlled by the major shareholder of the Group. The loan matures on 31 December 2021 and bears a fix interest of 10 % p.a. The total nominal value of the loan, including accrued interest, amounted to EUR 42 million as at 30 June 2018.

On February 2017, the Company and the major shareholder entered into the credit facility agreement. The Company has committed to provide the loan up to the amount of EUR 40 million. The loan matures on 31 December 2020 and bears a fix interest of 10 % p.a. The outstanding amount due from major shareholder as at 30 June 2018 amounts to EUR 12.6 million (includes accrued interest).



209

In the second half year 2017 OPG assigned receivables to company which is controlled by the major shareholder of the Group. These receivables are bear fix interest of 10 % p.a. and mature on 30 June 2018. The total value of loans, including accrued interest, amounted to EUR 54.6 million as at 30 June 2018. Bonds issued by the Group As at 30 June 2018, the management of the Company holds bonds issued by the Group in overall nominal amount of CZK 8.6 million (app. EUR 0.331 million), as at 31 December 2017, the management held bonds issued in nominal amount of CZK 8.6 million (app. EUR 0.338 million). In August 2018, the Group acquired approximately CZK 2 billion (app. EUR 76.9 million) of CPI BYTY bonds from the major shareholder (refer 12.1). Perpetual Notes On 9 May 2018, the Company issued Perpetual Notes and the management of the Group holds these notes in the amount of EUR 0.2 million as at 30 June 2018, for more information about Perpetual Notes refer to note 7.13.



210

12 EVENTS AFTER THE REPORTING PERIOD

Early repayment of CPI BYTY bonds

At the beginning of August 2018, Company’s subsidiary ORCO PROPERTY GROUP successfully acquired approximately CZK 2 billion (app. EUR 76.9 million) of bonds issued by CPI BYTY, a.s. The acquired bonds, issued under the bond programme of CPI BYTY, a.s., were due (or callable) in May 2019.

On 28 August 2018, following the bondholders meeting, the Group announced, that all tranches of CPI BYTY bonds programme will be early repaid on 12 September 2018. The nominal value of bonds issued as part of CPI BYTY bond programme amount to CZK 3,000 million (app. EUR 115.3 million).

Disposal of office building in Prague

On 30 August 2018, the Group disposed of an office building located in Prague. The building, with approximately 10,000 sqm of usable space, serves as the headquarters of Nestlé for the Czech and Slovak Republics. The buyer is a local real estate investment group.

Signing of new EUR 80 million unsecured revolving credit facility

On 30 August 2018, the Company signed a new EUR 80 million facility. The new facility is structured to fully align with the EUR 150 million facility signed with six banks in March 2018, and also aligns with CPIPG’s Euro Medium Term Note (EMTN) programme. Lenders in the new facility are HSBC Bank Plc, Nomura International Plc, and Raiffeisen Bank International. Raiffeisen Bank International AG acted as mandated lead arranger and facility agent for the revolving credit facility.



211

APPENDIX I – LIST OF GROUP ENTITIES Subsidiaries fully consolidated

Company

Country

30 June 2018 31 December 2017 "Diana Development" sp. z o.o. Poland 100.00% 100.00% Agrome s.r.o. Czech Republic 100.00% 100.00% Airport City Kft. Hungary 100.00% 100.00% Airport City Phase B Kft. Hungary 100.00% 100.00% ALAMONDO LIMITED Cyprus 100.00% 100.00% Andrássy Real Kft. Hungary 100.00% 100.00% Angusland s.r.o. Czech Republic 100.00% 100.00% Arena Corner Kft. Hungary 100.00% 100.00% Armo Verwaltungsgesellschaft mbH Germany 94.66% 94.66% Aspley Ventures Limited British Virgin Islands 100.00% 100.00% Atrium Complex sp. z o.o. (1) Poland 100.00% ‐‐ AVACERO LIMITED Cyprus 100.00% 100.00% AVIDANO LIMITED Cyprus 100.00% 100.00% Balvinder, a.s. Czech Republic 100.00% 100.00% Baudry Beta, a.s. Czech Republic 100.00% 100.00% Baudry, a.s. Czech Republic 100.00% 100.00% BAYTON Alfa, a.s. Czech Republic 100.00% 100.00% BAYTON Gama, a.s. Czech Republic 86.56% 86.56% BAYTON ONE, s.r.o. Czech Republic 86.56% 86.56% BAYTON TWO, s.r.o. (11) Czech Republic 86.56% 86.56% BC 30 Property Kft. Hungary 100.00% 100.00% BC 91 Real Estate Kft. Hungary 100.00% 100.00% BC 99 Office Park Kft. Hungary 100.00% 100.00% Beroun Property Development, a.s. Czech Republic 100.00% 100.00% Best Properties South, a.s. Czech Republic 100.00% 100.00% Biochov s.r.o. Czech Republic 100.00% 100.00% Biopark s.r.o. Czech Republic 100.00% 100.00% Biopotraviny s.r.o. Czech Republic 100.00% 100.00% Blue Yachts d.o.o. Croatia 67.50% 67.50% BPT Development, a.s. Czech Republic 100.00% 100.00% Brandýs Logistic, a.s. Czech Republic 100.00% 100.00% BREGOVA LIMITED Cyprus 100.00% 100.00% Brillant 1419 GmbH & Co. Verwaltungs KG Germany 97.31% 97.31% Brillant 2800. GmbH Germany 99.75% 99.75% Brno Property Development, a.s. Czech Republic 86.56% 86.56% Březiněves, a.s. Czech Republic 100.00% 100.00% Bubenská 1, a.s. Czech Republic 97.31% 97.31% Bubny Development, s.r.o. Czech Republic 99.26% 97.31% Budaörs Office Park Kft. Hungary ‐‐ 100.00% Buy‐Way Dunakeszi Kft. Hungary 100.00% 100.00% Buy‐Way Soroksár Kft. Hungary 100.00% 100.00% BYTY PODKOVA, a.s. Czech Republic 97.31% 97.31% CAMPONA Shopping Center Kft. Hungary 100.00% 100.00% Camuzzi, a.s. Czech Republic 97.31% 97.31% Carpenter Invest, a.s. Czech Republic 100.00% 100.00% CB Property Development, a.s. Czech Republic 100.00% 100.00% CD Property s.r.o. Czech Republic 97.31% 97.31% CENTRAL TOWER 81 sp. z o.o. Poland 100.00% 100.00% Centrum Ogrody sp. z o.o. Poland 100.00% 100.00% CEREM S.A. Luxembourg 97.31% 97.31% City Gardens sp. z o.o. Poland 100.00% 100.00%



212

Company

Country

30 June 2018 31 December 2017 CM Hôtels SA Switzerland 100.00% 100.00% CMA Immobilier SA Switzerland 85.07% 85.07% CMA Services S.à.r.l. Switzerland 85.20% 85.20% CODIAZELLA LTD Cyprus 100.00% 100.00% Conradian, a.s. Czech Republic 100.00% 100.00% Cordonier & Valério Sàrl Switzerland 51.04% 51.04% CPI ‐ Bor, a.s. Czech Republic 100.00% 100.00% CPI ‐ Horoměřice, a.s. Czech Republic 86.56% 86.56% CPI ‐ Krásné Březno, a.s. Czech Republic 97.31% 97.31% CPI ‐ Land Development, a.s. Czech Republic 97.31% 97.31% CPI ‐ Orlová, a.s. Czech Republic 86.56% 86.56% CPI ‐ Real Estate, a.s. Czech Republic 100.00% 100.00% CPI ‐ Štupartská, a.s. Czech Republic 100.00% 100.00% CPI ‐ Zbraslav, a.s. Czech Republic 100.00% 100.00% CPI Alberghi HI Roma S.r.l. Italy 100.00% 100.00% CPI Alfa, a.s. Czech Republic 100.00% 100.00% CPI Beet, a.s. Czech Republic 100.00% 100.00% CPI Beta, a.s. Czech Republic 100.00% 100.00% CPI Blatiny, s.r.o. Czech Republic 100.00% 100.00% CPI BYTY, a.s. Czech Republic 100.00% 100.00% CPI CYPRUS LIMITED Cyprus 100.00% 100.00% CPI Delta, a.s. Czech Republic 100.00% 100.00% CPI East, s.r.o. Czech Republic 100.00% 100.00% CPI Energo, a.s. (2) Czech Republic 100.00% 100.00% CPI Epsilon, a.s. Czech Republic 100.00% 100.00% CPI Facility Management Kft. Hungary 100.00% 100.00% CPI Facility Slovakia, a.s. Slovak Republic 100.00% 100.00% CPI FINANCE (BVI) LIMITED British Virgin Islands 100.00% 100.00% CPI Finance CEE, a.s. Czech Republic 100.00% 100.00% CPI Finance Ireland II Limited Ireland 100.00% 100.00% CPI Finance Ireland III Limited Ireland 100.00% 100.00% CPI Finance Ireland Limited Ireland 100.00% 100.00% CPI Finance Netherlands B.V. Netherland 100.00% 100.00% CPI Finance Netherlands II B.V. Netherland 100.00% 100.00% CPI Finance Netherlands III B.V. Netherland 100.00% 100.00% CPI Finance Slovakia II, a. s. Slovak Republic 100.00% 100.00% CPI Finance Slovakia, a.s. Slovak Republic 100.00% 100.00% CPI Flats, a.s. Czech Republic 100.00% 100.00% CPI France, a SASU France 100.00% 100.00% CPI Group, a.s. Czech Republic 100.00% 100.00% CPI Hotels Catering, s.r.o. (3) Czech Republic 100.00% ‐‐ CPI Hotels Hungary Kft. Hungary 100.00% 100.00% CPI Hotels Italy S.r.l. Italy 100.00% ‐‐ CPI HOTELS POLAND sp. z o.o. Poland 100.00% 100.00% CPI Hotels Properties, a.s. Czech Republic 100.00% 100.00% CPI Hotels Slovakia, s.r.o. Slovak Republic 100.00% 100.00% CPI Hotels, a.s. Czech Republic 100.00% 100.00% CPI Hungary Kft. Hungary 100.00% 100.00% CPI IMMO, S.a.r.l. France 100.00% 100.00% CPI Jihlava Shopping, a.s. Czech Republic 100.00% 100.00% CPI Kappa, s.r.o. (4) Czech Republic 100.00% 100.00% CPI Lambda, a.s. Czech Republic 100.00% 100.00% CPI Management, s.r.o. Czech Republic 100.00% 100.00% CPI Meteor Centre, s.r.o. Czech Republic 100.00% 100.00% CPI Národní, s.r.o. Czech Republic 100.00% 100.00% CPI North, s.r.o. Czech Republic 100.00% 100.00%



213

Company

Country

30 June 2018 31 December 2017 CPI Office Prague, s.r.o. Czech Republic 100.00% 100.00% CPI Palmovka Office, s.r.o. Czech Republic 100.00% 100.00% CPI Park Mlýnec, a.s. Czech Republic 100.00% 100.00% CPI Park Žďárek, a.s. Czech Republic 97.25% 97.25% CPI PG Management, S.á r.l Luxembourg 100.00% 100.00% CPI Poland sp. z o.o. Poland 100.00% 100.00% CPI Property a Facility, s.r.o. (5) Czech Republic 100.00% 100.00% CPI Reality, a.s. Czech Republic 100.00% 100.00% CPI Residential, a.s. Czech Republic 100.00% 100.00% CPI Retail MB s.r.o. Czech Republic 100.00% 100.00% CPI Retail One Kft. Hungary 100.00% 100.00% CPI Retail Portfolio Holding Kft. Hungary 100.00% 100.00% CPI Retail Portfolio I, a.s. Czech Republic 100.00% 100.00% CPI Retail Portfolio II, a.s. Czech Republic 100.00% 100.00% CPI Retail Portfolio III, s.r.o. Czech Republic 100.00% 100.00% CPI Retail Portfolio IV, s.r.o. Czech Republic 100.00% 100.00% CPI Retail Portfolio V, s.r.o. Czech Republic 100.00% 100.00% CPI Retail Portfolio VI, s.r.o. Czech Republic 100.00% 100.00% CPI Retail Portfolio VII, s.r.o. Czech Republic 100.00% 100.00% CPI Retail Portfolio VIII s.r.o. Czech Republic 100.00% 100.00% CPI Retail Store Kft. Hungary 100.00% 100.00% CPI Retail Two Kft. Hungary 100.00% 100.00% CPI Retails ONE, a.s. Czech Republic 100.00% 100.00% CPI Retails ROSA s.r.o. Slovak Republic 100.00% 100.00% CPI Retails THREE, a.s. Slovak Republic 100.00% 100.00% CPI Retails TWO, a.s. Czech Republic 100.00% 100.00% CPI Romania S.R.L. Romania 100.00% 100.00% CPI Services, a.s. Czech Republic 100.00% 100.00% CPI Shopping MB, a.s. Czech Republic 100.00% 100.00% CPI Shopping Teplice, a.s. Czech Republic 100.00% 100.00% CPI South, s.r.o. Czech Republic 97.58% 97.58% CPI West, s.r.o. Czech Republic 100.00% 100.00% Czech Property Investments, a.s. Czech Republic 100.00% 100.00% Čadca Property Development, s.r.o. Slovak Republic 100.00% 100.00% Čáslav Investments, a.s. Czech Republic 100.00% 100.00% Českolipská farma s.r.o. Czech Republic 100.00% 100.00% Českolipská zemědělská a.s. Czech Republic 100.00% 100.00% Český Těšín Property Development, a.s. Czech Republic ‐‐ 100.00% Darilia, a.s. Czech Republic 99.26% 97.31% Děčínská zemědělská a.s. Czech Republic 100.00% 100.00% DERISA LIMITED Cyprus 100.00% 100.00% Development Doupovská, s.r.o. Czech Republic 72.98% 72.98% Diana Property sp. z o.o. Poland 97.31% 97.31% Dienzenhoferovy sady 5, s.r.o. Czech Republic 100.00% 100.00% DORESTO LIMITED Cyprus 100.00% 100.00% Družstvo Land (9) Czech Republic 97.27% 97.27% Ekofarma Postřelná s.r.o. Czech Republic 100.00% ‐‐ EMH South, s.r.o. Czech Republic 100.00% 100.00% Endurance Hospitality Asset S.á r.l. Luxembourg 100.00% 100.00% Endurance Hospitality Finance S.á r.l. Luxembourg 100.00% 100.00% Endurance Real Estate Management Company Luxembourg 97.31% 97.31% ES Bucharest Development S.R.L. Romania 100.00% 100.00% ES Bucharest Properties S.R.L. Romania 100.00% 100.00% ES Hospitality S.R.L. Romania 100.00% 100.00% Estate Grand, s.r.o. Czech Republic 97.31% 97.31% Europeum Kft. Hungary 100.00% 100.00%



214

Company

Country

30 June 2018 31 December 2017 Farhan, a.s. Czech Republic 100.00% 100.00% Farma Javorská, a.s. Czech Republic 100.00% 100.00% Farma Krásný Les, a.s. Czech Republic 100.00% 100.00% Farma Liščí, s.r.o. Czech Republic 100.00% ‐‐ Farma Ploučnice a.s. Czech Republic 100.00% 100.00% Farma Poustevna, s.r.o. Czech Republic 100.00% 100.00% Farma Radeč, a.s. Czech Republic 100.00% 100.00% Farma Svitavka s.r.o. Czech Republic 100.00% 100.00% Farma Valteřice, a.s. Czech Republic 100.00% 100.00% Farma zelená sedma, s.r.o. Czech Republic 100.00% ‐‐ Farmy Frýdlant a.s. Czech Republic 100.00% 100.00% FELICIA SHOPPING CENTER SRL Romania 100.00% 100.00% Fetumar Development Limited Cyprus 100.00% 100.00% FL Property Development, a.s. Czech Republic 86.56% 86.56% GADWALL, sp. z o.o. Poland 100.00% 100.00% GARET Investment sp. z o.o. Poland 100.00% 100.00% GATEWAY Office Park Kft. Hungary 100.00% 100.00% Gebauer Höfe Liegenschaften GmbH Germany 94.74% 94.74% Gewerbehöfe Services GmbH Germany 100.00% ‐‐ Gewerbesiedlungs‐Gesellschaft GmbH Germany 99.75% 99.75% GOMENDO LIMITED Cyprus 100.00% 100.00% GORANDA LIMITED Cyprus 100.00% 100.00% GSG 1. Beteiligungs GmbH Germany 99.75% 99.75% GSG Asset GmbH & Co. Verwaltungs KG Germany 99.75% 99.75% GSG Berlin Invest GmbH Germany 94.66% 94.66% GSG Europa Beteiligungs GmbH Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 1. GmbH & Co. KG Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 2. GmbH & Co. KG Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 3. GmbH & Co. KG Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 4. GmbH & Co. KG Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 5. GmbH & Co. KG Germany 99.75% 99.75% GSG Gewerbehöfe Berlin 6. GmbH & Co. KG Germany 99.75% 99.75% GSG Mobilien GmbH Germany 99.75% 99.75% GSG Solar Berlin GmbH Germany 99.75% 99.75% GSG Wupperstraße GmbH Germany 99.75% 99.75% HAGIBOR OFFICE BUILDING, a.s. Czech Republic 97.31% 97.31% HD Investment s.r.o. Czech Republic 100.00% 100.00% Hightech Park Kft. Hungary 100.00% 100.00% Hofnetz und IT Services GmbH Germany 99.75% 99.75% HopStop 6 sp. z o.o. (10) Poland 100.00% ‐‐ HopStop Zamość 2 sp. z o.o. Poland 100.00% ‐‐ Hospitality Invest Sàrl Luxembourg 100.00% 100.00% Hotel Andrássy Zrt. Hungary 100.00% 100.00% Hotel Lucemburská, s.r.o. Czech Republic 100.00% 100.00% Hotel Pokrovka , org. Unit Russia 100.00% 100.00% Hotel Sirena d.o.o. Croatia 96.43% 96.43% HOTEL U PARKU, s.r.o. Czech Republic 86.56% 86.56% Hraničář, a.s. Czech Republic 100.00% 100.00% IGY2 CB, a.s. Czech Republic 100.00% 100.00% Industrial Park Stříbro, s.r.o. Czech Republic 97.31% 97.31% IS Nyír Kft. Hungary 100.00% 100.00% IS Zala Kft. Hungary 100.00% 100.00% Isalotta GP GmbH & Co.Verwaltungs KG Germany 94.99% 94.99% ISTAFIA LIMITED Cyprus 100.00% 100.00% ITL Alfa, s.r.o. Czech Republic 100.00% 100.00% IVRAVODA LIMITED Cyprus 100.00% 100.00%



215

Company

Country

30 June 2018 31 December 2017 Jagapa Limited Cyprus 100.00% 100.00% JAGRA spol. s r.o. Czech Republic 100.00% 100.00% Janáčkovo nábřeží 15, s.r.o. Czech Republic 100.00% 100.00% Janovická farma, a.s. Czech Republic 100.00% 100.00% Jeseník Investments, a.s. Czech Republic 100.00% 100.00% Jetřichovice Property, a.s. Czech Republic 86.56% 86.56% JIHOVÝCHODNÍ MĚSTO, a.s. Czech Republic 97.31% 97.31% Jizerská farma, s.r.o. Czech Republic 100.00% ‐‐ JONVERO LIMITED Cyprus 100.00% 100.00% Karviná Property Development, a.s. Czech Republic 97.31% 97.31% Kerina, a.s. Czech Republic 100.00% 100.00% KOENIG, s.r.o. (6) Czech Republic ‐‐ 100.00% Kolín Centrum a.s. (4) Czech Republic ‐‐ 100.00% Komárno Property Development, a.s. Slovak Republic 100.00% 100.00% Labská Property, s.r.o. Czech Republic 100.00% 100.00% LD Praha, a.s. Czech Republic 100.00% 100.00% LE REGINA WARSAW sp. z o.o. Poland 100.00% 100.00% Leriegos Kft. Hungary 100.00% 100.00% LERIEGOS LIMITED Cyprus 100.00% 100.00% LES TROIS DILAIS Monaco 100.00% 100.00% Levice Property Development, a.s. Slovak Republic 100.00% 100.00% Limagro s.r.o. Czech Republic 100.00% 100.00% Liptovský Mikuláš Property Development, a.s. Slovak Republic 100.00% 100.00% LN Est‐Europe Development SRL Romania 100.00% 100.00% Lockhart, a.s. Czech Republic 100.00% 100.00% Lucemburská 46, a.s. Czech Republic 100.00% 100.00% Malerba, a.s. Czech Republic 100.00% 100.00% Marissa Gama, a.s. Czech Republic 100.00% 100.00% Marissa Kappa, a.s. Czech Republic 100.00% 100.00% Marissa Omikrón, a.s. Czech Republic 100.00% 100.00% Marissa Tau, a.s. Czech Republic 100.00% 100.00% Marissa Théta, a.s. (7) Czech Republic 100.00% 100.00% Marissa West, a.s. Czech Republic 100.00% 100.00% Marissa Yellow, a.s. Czech Republic 100.00% 100.00% Marissa Ypsilon, a.s. Czech Republic 100.00% 100.00% Marissa, a.s. Czech Republic 100.00% 100.00% Marki Real Estate sp. z o.o. Poland 97.31% 97.31% Mařenická farma, a.s. Czech Republic 100.00% 100.00% MB Futurum HK s.r.o. Czech Republic 100.00% ‐‐ MB Property Development, a.s. Czech Republic 100.00% 100.00% Mercuda, a.s. Czech Republic 100.00% 100.00% MESARGOSA LIMITED Cyprus 100.00% 100.00% MH Bucharest Properties S.R.L Romania 88.00% 88.00% Michalovce Property Development, a.s. Slovak Republic 100.00% 100.00% MMR Russia S.à r.l Luxembourg 100.00% 100.00% Modřanská Property, a.s. Czech Republic 100.00% 100.00% Mondello, a.s. Czech Republic ‐‐ 100.00% MQM Czech, a.s. Czech Republic 99.26% 99.26% MUXUM, a.s. Czech Republic 100.00% 100.00% Na Poříčí, a.s. Czech Republic 100.00% 100.00% New Age Kft. Hungary 100.00% 100.00% NOVÁ ZBROJOVKA, s.r.o. Czech Republic 97.31% 97.31% Nový Projekt CPI, s.r.o. (6) Czech Republic 100.00% 100.00% NUKASSO HOLDINGS LIMITED Cyprus 100.00% 100.00% Nupaky a.s. Czech Republic 97.31% 97.31% Nymburk Property Development, a.s. Czech Republic 100.00% 100.00%



216

Company

Country

30 June 2018 31 December 2017 OC Nová Zdaboř a.s. Czech Republic 100.00% 100.00% OC Spektrum, s.r.o. Czech Republic 100.00% 100.00% OFFICE CENTER HRADČANSKÁ, a.s. Czech Republic 100.00% 100.00% Office Center Poštová, s.r.o. Slovak Republic 100.00% 100.00% Olomouc City Center, a.s. Czech Republic 100.00% 100.00% Olomouc Office, a.s. Czech Republic 100.00% 100.00% Orco Immobilien GmbH Germany 100.00% 100.00% Orco Pokrovka Management o.o.o. Russia 100.00% 100.00% Orco Project Limited Guernsey ‐‐ 97.31% Orco Property Group S.A. Luxembourg 97.31% 97.31% OSMANIA LIMITED Cyprus 100.00% 100.00% Outlet Arena Moravia, s.r.o. Czech Republic 100.00% 100.00% Ozrics, Kft. Hungary 100.00% 100.00% Parco delle Case Bianche SRL Italy 100.00% 100.00% Pastviny a.s. Czech Republic 100.00% 100.00% Pelhřimov Property Development, a.s. Czech Republic 100.00% 100.00% Platnéřská 10 s.r.o. Czech Republic 100.00% 100.00% Pólus Shopping Center Zrt. Hungary 100.00% 100.00% Polus Társasház Üzemeltető Kft. Hungary 100.00% 100.00% Polygon BC, a.s. Czech Republic 99.26% 99.26% Považská Bystrica Property Development, a.s. Slovak Republic 100.00% 100.00% Prievidza Property Development, a.s. Slovak Republic 100.00% 100.00% PRINGIPO LIMITED Cyprus 100.00% 100.00% Pro Tower Development S.R.L. Romania 100.00% 100.00% PROJECT FIRST a.s. Czech Republic 86.56% 86.56% Projekt Nisa, s.r.o. Czech Republic 100.00% 100.00% Projekt Zlatý Anděl, s.r.o. Czech Republic 100.00% 100.00% Prosta 69 sp. z o.o. Poland 100.00% 100.00% Příbor Property Development, s.r.o. Czech Republic 100.00% 100.00% PTR PRIME TOURIST RE SORTS (CYPRUS) LIMITED Cyprus 100.00% 100.00% PV ‐ Cvikov s.r.o. Czech Republic 100.00% 100.00% R40 Real Estate Kft. Hungary ‐‐ 100.00% Remontées Mécaniques Crans Montana Aminona (CMA) SA Switzerland 85.33% 85.33% Residence Belgická, s.r.o. Czech Republic 100.00% 100.00% Residence Izabella, Zrt. Hungary 100.00% 100.00% Rezidence Jančova, s.r.o. Czech Republic 100.00% 100.00% Rezidence Malkovského, s.r.o. Czech Republic 100.00% 100.00% REZIDENCE MASARYKOVA 36, s.r.o. (7) Czech Republic ‐‐ 100.00% Rezidence Pragovka, s.r.o. Czech Republic 97.31% 97.31% RL ‐ Management s.r.o. Czech Republic 100.00% 100.00% RSL Est‐Europe Properties SRL Romania 100.00% 100.00% RSL Real Estate Development S.R.L. Romania 100.00% 100.00% RT Development sp. z o.o. (13) Poland 100.00% ‐‐ SASHKA LIMITED Cyprus 100.00% 100.00% SCI MAS CANTAGRELI France 100.00% 100.00% SCP AILEY Monaco 100.00% 100.00% SCP CAYO Monaco 100.00% 100.00% SCP CISKEY Monaco 100.00% 100.00% SCP KANDLER Monaco 100.00% 100.00% SCP MADRID Monaco 100.00% 100.00% SCP NEW BLUE BIRD Monaco 100.00% 100.00% SCP PIERRE CHARRON Monaco 100.00% 100.00% SCP VILLA DE TAHITI Monaco 100.00% 100.00% SHAHEDA LIMITED Cyprus 100.00% 100.00% Sint Maarten sp. z o.o. (12) Poland 100.00% ‐‐ Spišská Nová Ves Property Development, a.s. Slovak Republic 100.00% 100.00%



217

Company

Country

30 June 2018 31 December 2017 Spojené farmy a.s. Czech Republic 100.00% 100.00% ST Project Limited Guernsey 100.00% 100.00% Statek Blatiny, s.r.o. Czech Republic 100.00% 100.00% Statek Mikulášovice, s.r.o. Czech Republic 100.00% 100.00% Statek Petrovice, s.r.o. Czech Republic 100.00% ‐‐ Statenice Property Development, a.s. Czech Republic 100.00% 100.00% Strakonice Property Development, a.s. Czech Republic 97.31% 97.31% STRM Alfa, a.s. Czech Republic 99.26% 99.26% STRM Beta, a.s. Czech Republic 97.31% 97.31% STRM Gama, a.s. Czech Republic 97.31% 97.31% Sunčani Hvar d.d. Croatia 96.43% 96.43% Svitavy Property Alfa, a.s. Czech Republic 100.00% 100.00% Svitavy Property Development, a.s. Czech Republic 97.31% 97.31% Šenovská zemědělská, s.r.o. Czech Republic 100.00% 100.00% Tarnów Property Development sp. z o.o. Poland 100.00% 100.00% Telč Property Development, a.s. Czech Republic 86.56% 86.56% Tepelná Litvínov, s.r.o. Czech Republic 100.00% 100.00% Tepelné hospodářství Litvínov s.r.o. Czech Republic 100.00% 100.00% Trebišov Property Development, s. r. o. Slovak Republic 100.00% 100.00% Trutnov Property Development, a.s. Czech Republic ‐‐ 100.00% Třinec Investments, s.r.o. Czech Republic 100.00% 100.00% Třinec Property Development, a.s. Czech Republic 100.00% 100.00% TUNELIA LIMITED Cyprus 100.00% 100.00% Tyršova 6, a.s. Czech Republic 100.00% 100.00% U svatého Michala, a.s. Czech Republic 100.00% 100.00% Valdovská zemědělská, a.s. Czech Republic 100.00% 100.00% Valkeřická ekologická, a.s. Czech Republic 100.00% 100.00% Verneřický Angus a.s. Czech Republic 100.00% 100.00% Vigano, a.s. Czech Republic 100.00% 100.00% Vinohrady s.a.r.l. France 97.31% 97.31% VOLANTI LIMITED Cyprus 100.00% 100.00% Vyškov Property Development, a.s. Czech Republic 100.00% 100.00% Wertpunkt Real Estate Experts GmbH Germany 99.75% 99.75% Zákupská farma, s.r.o. Czech Republic 100.00% ‐‐ Zamość Property Development sp. z o.o. (8) Poland 100.00% ‐‐ Zelená farma s.r.o. Czech Republic 100.00% 100.00% Zelená louka s.r.o. Czech Republic 100.00% 100.00% Zelená pastva s.r.o. Czech Republic 100.00% 100.00% ZEMSPOL s.r.o. Czech Republic 100.00% 100.00% Zgorzelec Property Development sp. z o.o. Poland 100.00% ‐‐ ZLATICO LIMITED Cyprus 100.00% 100.00% Ždírec Property Development, a.s. Czech Republic 100.00% 100.00%

Joint ventures

Company Country 30 June 2018 31 December 2017 Beta Development, s.r.o. Czech Republic 34.06% 34.06% Brillant 1419. Verwaltungs GmbH Germany 47.68% 47.68% Uniborc S.A. Luxembourg 34.06% 34.06% 1) Montserrat sp. z o.o. changed its name to Atrium Complex sp. z o.o. with the effective date of 27 April 2018. 2) CPI – Facility, a.s. changed its name to CPI Energo, a.s. with effective date of 12 February 2018. 3) CPI Catering, s.r.o. changed its name to CPI Hotels Catering, s.r.o. with effective date of 20 February 2018. 4) Kolín Centrum a.s. has merged with CPI Kappa, s.r.o. (the "successor company”) with the effective date of

30 June 2018. All assets and liabilities of Kolín Centrum a.s. passed to the successor company.



218

5) CPI Property, s.r.o. changed its name to CPI Property a Facility, s.r.o. with effective date of 12 February 2018. 6) KOENIG, s.r.o. has merged with Nový Projekt CPI, s.r.o. (the "successor company”) with the effective date of

30 June 2018. All assets and liabilities of KOENIG, s.r.o. passed to the successor company. Nový Projekt CPI, s.r.o. changed its name to KOENIG Shopping, s.r.o. with effective date of 9 July 2018.

7) REZIDENCE MASARYKOVA 36, s.r.o. has merged with Marissa Théta, a.s. (the "successor company”) with the effective date of 31 March 2018. All assets and liabilities of REZIDENCE MASARYKOVA 36, s.r.o. passed to the successor company.

8) HopStop Zamość 1 sp. z o.o. changed its name to Zamość Property Development sp. z o.o. with effective date of 24 May 2018. 9) Družstvo Land changed its name to Land Properties, a.s. with effective date of 1 July 2018. 10) HopStop 6 sp. z o.o. changed its name to Rembertów Property Development sp. z o.o. with effective date of 12 July 2018. 11) BAYTON TWO, s.r.o. changed its name to Byty Lehovec, s.r.o. with effective date of 1 August 2018. 12) Sint Maarten sp. z o.o. changed its name to CPI Property Development sp. z o.o. with effective date of 17 August 2018. 13) RT Development sp. z o.o. changed its name to Radom Property Development sp. z o.o. with effective date of 20 August 2018.

MANAGEMENT REPORT - CPI · EPRA Performance Indicators ... 2015 2016 2017 H1 2017 H1 2018 2015 2016...

Documents

Transcript of MANAGEMENT REPORT - CPI · EPRA Performance Indicators ... 2015 2016 2017 H1 2017 H1 2018 2015 2016...