CONSOLIDATED FINANCIAL STATEMENTS

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CONSOLIDATED

FINANCIAL STATEMENTS

201

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(3)

CONTENT

Declaration of the Members of the Board of Directors 2 – 3

Board of Directors‘ Report 4 – 21

Independant auditors’ report 22 – 23

Consolidated statement of comprehensive income 24 – 25

Consolidated statement of financial position 26 – 27

Consolidated statement of changes in equity 28 – 29

Consolidated statement of cash flows 30 – 31

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DECLArATION OF ThE MEMbErS

OF ThE bOArD OF DIrECTOrS

AND ThE COMPANy OFFICIALS

rESPONSIbLE FOr ThE

PrEPArATION OF ThE FINANCIAL

STATEMENTS

In accordance with Article 9 sections (3c) and (7) of the Transparency requirements Law 2007 (‘’the Law’’) we, the members of the board of Directors and the Company official responsible for the drafting of the financial statements of Primecity Investments PLC (the ‘’Company’’) for the year ended December 31, 2014, on the basis of our knowledge, declare that:

(a) The annual financial statements of the Company which are presen-ted on pages 28-59:

(i) have been prepared in accordance with the applicable International Financial reporting Standards as adopted by the European Union and the provisions of Article 9, section (4) of the law, and

(ii) provide a true and fair view of the particulars of assets and liabili-ties, the financial position and profit or loss of Primecity Investments PLC and the subsidiary companies included in the financial statements as a whole (‘’the Group’’) and

(b) The board of Directors’ report provides a fair view of the devel-opments and the performance as well as the financial position of the Company as a whole, together with a description of the main risks and uncertainties which they face.

Philipp von bodman

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KEy FINANCIALS

OPErATIONAL rESULTS

Dec 13 Dec 14 change

5,154

19,765

283%

9,873

25,563

159%

34,260

124,494

263%

7,492

21,736

190%

29,992

103,994

247%

3,026

13,552

348%

0.03

0.14 367%

3,026

36,641

1,111%

rEvENUE

(In thousands of euro)

EbITDA

ADjUSTED EbITDA

NET PrOFIT

CASh FLOw FrOM

OPErATIONS

FFO I

FFO I PEr ShArE

(In euro)

FFO II

0.30

0.97 223%

EPS (bASIC)

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103,044

361,942

251%

*Assuming convertibles conversion. The convertible bond is in the money.

Dec 13 Dec 14 Dec 14 assuming conversion*

32%

40%

18%

Dec 13 Dec 14 Dec 14 assuming conversion*

45%

42%

60%

KEy FINANCE rATIOS

LOAN-TO-vALUE

EqUITy rATIO

Dec 13 Dec 14 apr 15

16

34

42

Dec 13 Dec 14 apr 15

2,700

5,000

6,200

ASSET DATA

hOTEL ASSETS

hOTEL rOOMS

EPrA NAv

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hIGhLIGhTS & AChIEvEMENTS

As of Dec 2014 Dec 2013

In thousands of euro

Cash and liquid assets 63,404 2,707

Total Assets 513,244 186,662

Investment Property 1) _442,128 _156,385

Total Equity 213,079 84,500

EPRA NAV 361,942 103,044

Loans and borrowings 144,544 60,262

Convertible bonds 96,728

-Loan To Value 40% 32%

Loan To value assuming conversion 2) _18% _32%

Equity ratio 42% 45%

Equity ratio assuming conversion 2) _60% _45% Financial position highlights

1) including advanced payment

2) the convertible bond is in the money and has started to be converted

• Total increase of 18 hotel properties in 2014 out of which 12 were acquired since the IPO. The portfolio grew by additional 8 hotel properties until April 2015. 4 hotel properties were sold at the end of the year 2014.

• “run rate” of lease revenue increased to € 36 million as of April 2015 • Issuance of convertible bonds at a principal amount of € 100 million in November 2014, with a tap up of € 50 million in principal amount in February 2015

• Maintaining a conservative capital structure with a LTv of 40% (18% assuming conversion) and an Interest Coverage ratio of 4.2

• Listed on the Euronext Paris Stock Exchange since November 2014

April 2015 42 2013 16 2014 34

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Bremen Stralsund Berlin Dresden Leipzig Bad Reichenhall Kassel Frankfurt Baden-Baden Dessau Potsdam Halle Stuttgart Braunschweig Hanover Bielefeld Osnabrück Hamburg Saarbrücken Dortmund Duisburg Cologne DüsseldorfNeuss Mettmann

Mainz

Mannheim

“Company”) and its investees (the “Group”) board of Directors hereby submits their report as of December 31, 2014.

The figures presented in this board of Direct-ors’ report are based on the consolidated financial statements as of December 31, 2014, unless stated otherwise.

PCI is a specialist hotel investing company focused on investing in and repositioning of underperforming hotel properties in key German locations.

As of April 2015, PCI’s total portfolio includes approximately 6,200 hotel rooms in 42 hotel properties (the “Portfolio”). In December 2014 these amounted to 5,000 and 34 re-spectively.

The hotel properties are located in Ger-man key locations which enjoy high tour-ism, business and exhibitions, such as berlin, Frankfurt, Dresden, Düsseldorf, hamburg, bremen, Mannheim and Leipzig.

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COMPANy STrATEGy

repositioning unDerperForming hotel properties in attractive locations in germany

PCI targets its investments in underperforming assets which are locat-ed in touristic and commercially attractive locations in Germany. These markets offer favorable fundamentals that will support profits and growth in the foreseeable future. The Portfolio is located in more than 20 attractive tourism and business locations such as berlin, hamburg, bremen, Mannheim, Frankfurt, Dresden, Düsseldorf and Leipzig. PCI be-lieves its business platform profits from its skilled personnel and relia-ble practices that enarelia-ble the Company to continue to perform strongly and to further expand in the hotel property market. The Company also thinks that the business environment will provide abundant acquisition opportunities in the attractive markets it targets, to support its external growth strategy in the medium to long term.

PCI positions itself as an expert for optimizing the value chain - start-ing from the acquisition stage, whereby it benefits from strong con-nections to deal sources, through forming the most advantageous management and operational structure for each hotel asset individu-ally. PCI is an asset owner and does not participate in the daily oper-ations of hotels.

Deal Sourcing and Acquisition

The Company has established a strong deal sourcing network, based on over 11 years’ experience and the reputation of a reliable deal maker, from more than 120 turnaround cases. The sourcing network includes

among others, banks, investment funds, brokers and other real estate companies seeking to remove underperforming hotels from their portfolio. Over the years of activity in the market, the Company has positioned itself as a preferred buyer, resulting in a vivid and diverse deal flow of off market deals. The Company has developed the ability to identify and cherry pick the properties with the highest potential in the market.

For its acquisitions the Company is applying the following specific cri-teria structure:

• Low acquisition price • Significant upside potential • high cash flow generation • repositioning potential • branding opportunities

Due Diligence and Execution

As part of the due diligence phase, the Company measures and ana-lyzes the compatibility of the potential acquisition with the entire portfolio and seeks synergy effects. In parallel, the due diligence team examines both the financial and legal aspects of the deal carefully and thoroughly. Once the deal is approved, PCI has the capability to exe-cute rapidly and smoothly. PCI is not bound by any investment man-dates or multi-step decision processes. Thus, PCI has established itself as a reliable deal partner with a proven track-record.

Deal sourcing

Continuous through

various channels

Asset “cherry-picking”

Execution

Attractive financing

due to track-record

and relationships

Due diligence

Assessment of all

value drivers

Careful analysis of

opportunities

Turnaround process

Repositioning of product

Optimal branding

Asset & portfolio

management

Benefit from

high-yielding property

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After the takeover stage, the Company repositions the asset, by fit-ting each property with a detailed tailor-made business plan. PCI has a strong expertise in modernisation application and optimal brand repositioning. Thus the turnaround process starts with selecting the ideal market position such as the brand and star category, in view of a comprehensive demand and supply analysis of the specific location. The turnaround includes targeted capex and refurbishment activities, which on one hand support implementation of the repositioning plan and on the other enables reduction of non-recoverable costs in the future.

During the positioning phase, PCI integrates the asset into its network with advanced in-house proprietary IT software and marketing sys-tems, which were developed to adapt to every asset’s specific needs. The unique platform is a deciding component in enabling the tenant to exceed market averages in cost savings, revenue generation and thus profitability.

The turnaround process is achieved through the access of synergies from extensive accumulated experience and market knowledge with regards to high-potential underperforming properties, which is the Company’s most unique sustainable competitive advantage.

After the repositioning process the Company leases out the hotel to external partners. The hotel operators are carefully selected according to their capabilities and track record, and PCI customarily cooperates with stable and experienced operators.

An integral component of the business plan is a long term fixed rental lease, which increases the cash flow visibility and decreases the de-pendency on the operational business.

PCI keeps supporting the operator with cost saving measures, mainly derived from economy of scale benefits and bargaining power of the Company.

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COMPANy STrATEGy

a unique value creation approach

PCI creates value through a repositioning process based on proprietary market intelligence and tacit industry knowledge built up over 11 years. The repositioning process involves influencing many different value creation levers.

PCI’s area of expertise and operational focus is in responding to the growing demand for hotels of 3 to 4 star categories, by efficiently util-izing abundantly available distressed and underperforming properties, from all brands and star categories. These properties attract little in-vestor attention because of the profound know-how and experience required to correctly address their unique challenges.

The Company’s management believes it is well positioned in this ex-clusive niche, benefitting from the demand gap, where it can most efficiently tap into its strongest competitive advantages.

The Company produces significant value throughout the turnaround process, reflecting the stabilizations and high cash flow yields of the repositioned properties.

The Company’s abilities enable it to crystalize value in hotel assets by achieving the optimal positioning based on proprietary market intel-ligence.

going ForwarD with both holD anD sell strategies once properties potential is realizeD

The Company will hold onto properties where it believes it can create more value with further asset management. Once the property has been stabilized, PCI has the ability to choose whether to hold an asset as a “cash cow” and benefit from a stabilized high yield, or to sell as-sets on an opportunistic basis.

In 2014 alone, PCI has disposed and signed disposal agreements with an average Equity Irr of over 60%.

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Optimal brand

✓

Optimal operator

✓

Upgraded marketing platform

✓

Proprietary Market Intelligence

✓

Optimal size and room count

✓

Optimal category

✓

Reduced cost structure

2

Cost and top line synergies from network integration

3

Repositioning of asset 1

Initial capex & re-branding

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hIGhLy DIvErSIFIED

POrTFOLIO wITh

SIGNIFICANT

rEPOSITIONING

POTENTIAL

The current Portfolio enables the Company on one hand to benefit from economy of scale and on the other provides a diverse and well allocated portfolio throughout Germany with different branding and operators.

PCI‘s assets are branded with international brands such as wyndham, radisson blu and Mercure, and the majority consists of 4 star hotels, responding to the highest demand market of star category.

PCI hotels are branded with 6 leading franchising partners offering several subbrands, which provides PCI with economy of scale as well as flexibility and bargaining power with each franchisor. The choice of franchisor plays an integral part in the turnaround success of the assets. Thus PCI chooses franchisors with strong brands, a competitive booking platform and a large scale of categories which provides a high flexibility for PCI’s assets branding.

KEy STrENGThS

: V V LOGO alidation DA/DC alidation Client Date : 31/05/11 Nº dossier : 20110049E 10083 0 22 10 25 25 40 4 Stars 80% 3 Stars 16% 2 Stars 4%

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ACqUISITION,

OPPOrTUNITIES AND

DEAL FLOw

PCI’s established reputation in various local markets as well as on the national level provides access to multiple investment opportunities often before they are widely promoted or publicized, and frequently at appealing conditions, reflecting the Company’s perceived quality as counterparty and its proven track-record and reputation. The advan-tage has also extended to improved access to financing and helped creating strong relationships with debt providers. PCI is uniquely po-sitioned in Europe as no listed pure play hotel investment company exists, enabling the Company to grow quickly with low competition on a national level.

UNIqUE bUSINESS

PLATFOrM SUPPOrTS

INTErNAL AND

ExTErNAL GrOwTh

PCI’s business platform provides efficient in-house asset management of its existing portfolio while supporting the Company’s strategy for further growth. In particular, its advanced proprietary IT software sys-tem enables the Company’s management to closely monitor its port-folio’s performance and the performance of the operators and wheth-er they follow the business plan set forth, as well as to constantly analyze growth opportunities in different schemes.

Management believes that the Portfolio has the capacity to grow its operations at marginal costs to the platform, and further create econ-omies of scale. The integrated nature of its platform also means that PCI is well positioned to make business decisions swiftly, responding efficiently to market opportunities.

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STrONG TrACK

rECOrD OF vALUE

CrEATION AND

rEPOSITIONING

ASSETS

PCI has steadily demonstrated its skill in acquiring properties with sig-nificant potential, and in designing and implementing specific strate-gies for each asset. PCI’s continuous asset management efforts result not only in improved portfolio yields, but also in tangible long term value creation that is immediately captured in PCI’s financial perfor-mance. Moreover, PCI has proven its ability to realize capital gains and provide shareholders with high returns.

hEALThy CAPITAL

STrUCTUrE

PrOvIDING FINANCIAL

FLExIbILITy FOr

FUTUrE GrOwTh

PCI’s ability to finance its assets, which either were distressed or could not be refinanced under the previous management, with favourable conditions demonstrates the Company’s competitive strength. PCI has established a strong financing network and its Portfolio is currently financed by 7 different banks through 16 separate loans. All loans are non-recourse, non-cross collateral and non-cross-default.

PCI constructs a specific financing structure for each property fitting to the property’s business plan. The financial conditions are based on a stable and operational asset with a long term fixed lease agreement, providing a low cost of debt. PCI’s cost of bank debt is 3% and 90% of the debt is hedged against interest rate risks, bringing volatility and uncertainty to a minimum.

In November 2014, PCI issued a convertible bond (ISIN: xS1137260086) with a principle amount of€ 100 million and a 5 year maturity which is listed on the Frankfurt Stock Exchange. The convertible bond is in the money and has started to be converted into equity. In February 2015, PCI tapped up its convertible bond by an additional € 50 million, which increases the fully diluted basic shares to 150 million.

The current loan to value ratio of 40% and an Interest Coverage ra-tio of 4.2 reflect PCI’s conservative leverage with a high headroom and financial flexibility for further external growth. The LTv financial headroom on each loan increases over time with the continuous value creation.

TrACK rECOrD

OF rAPID DEAL

ExECUTION

Certainty of execution guaranteed through a solid funding structure and extensive execution experience provide PCI a competitive advan-tage in the distressed deal market. The seller and the bank are look-ing to execute the deals as fast as possible and a liquidity injection is needed in a short time. rapid and effective execution capabilities enable PCI to avoid public auctions and bid up costs to reach attrac-tive prices.

Additionally, PCI’s reputation and track record has rooted the Compa-ny’s connection to the strongest international hotel brands, enabling PCI to select the most suitable brand for each asset.

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rEvENUE

revenue increased in 2014 by 159% to € 25.6 million from € 9.9 million in 2013.

The substantial increase results mainly from the additional lease reve-nue of newly acquired assets and the initial consolidation of two com-panies held previously as joint ventures as well as from rent increase of existing properties. As the disposals of assets occurred at the end of 2014 the revenue was hardly offset by less rental income.

As most of the newly acquired properties in 2014 have been acquired in the second half of 2014 and thus did not contribute to PCI’s revenue on a full year basis the year-end revenue does not reflect the cur-rent portfolios’ full potential. Due to further acquisitions in 2015 the lease revenue run rate (monthly annualized) as of April 2015, reflecting the full effect of the April portfolio, excluding any rent increases, in-creased to € 36 million.

CAPITAL GAINS,

PrOPErTy

rEvALUATIONS AND

OThEr INCOME

for the year ended Dec 31

2014 2013

Total 102,758 26,768

All property valuations have been determined by independent exter-nal, market leading valuators.

The capital gains, property revaluations and other income increased in 2014 by 284% to € 102.8 million. The increase derives mainly from the substantial increase in profit arising from business combination reflecting the demonstrated ability of Primecity to acquire attractive properties at under market prices resulting in bargain purchases. Profit arising from business combination occurs through a share deal in business acquisitions if the fair value of the total identifiable net assets exceeds the purchase price.

Furthermore, the capital gains, property revaluations and other income have increased as result of investment property revaluation derived from property improvements and from the value creation process.

CONSOLIDATED

PrOFIT AND LOSS –

KEy FIGUrES

2014 2013

Revenue 25,563 9,873

Capital gains, property revaluations and other

income 102,758 26,768

Property operating

expenses (1,854) (1,262)

Administrative & other

expenses (1,973) (1,119)

Operating profit 124,494 34,260

Adjusted EBITDA 21,736 7,492

Finance expenses (5,287) (3,770) Other financial results (5,789) (76)

Current tax (2,897) (696)

Deferred tax (6,527) 274

Profit for the year 103,994 29,992

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PrOPErTy OPErATING

ExPENSES

2014 2013

Purchased services (999) (248)

Maintenance and

refurbishment (745) (427)

Other operating costs (46) (38)

One-time expenses (64) (549)

Total (1,854) (1,262)

Property operating expenses increased in 2014 by 47% to € 1.9 million, or 151% excluding one-time expenses, in rate with the revenue increase of 159%.

The increase in property operating expenses derives mainly from an in-crease in purchased services and maintenance expenses and was offset in part by a decrease in one-time expenses.

Purchased services, the largest portion of the operating expenses, are ancillary costs which are related to the property operating income. Thus, these expenses naturally increase with portfolio growth and are covered by the tenants.

Maintenance and refurbishment expenses increased also with the growth of the portfolio. The expenditures are kept low as significant investments are already included in the acquisition price and executed in the turnaround and repositioning stage. Furthermore, as part of the lease agreement with the operator, the vast of the ongoing mainte-nance expenses is paid directly by the tenant.

ADMINISTrATIvE &

OThEr ExPENSES

2014 2013

In thousands of euro Payroll and administrative

expenses (1,608) (1,050)*

year end closing, accounting and audit

expenses (210) (50)

Legal and professional

fees (66) (7)

Marketing and other

expenses (89) (12)

Total (1,973) (1,119)

* reclassified

Administrative and other expenses are costs related to personnel ex-penses, management’s IT system, legal and professional fees and mar-keting expenses. Administrative & other expenses have increased in 2014 by 76% to € 2.0 million from € 1.1 million in 2013. The increase is due to external growth from acquisition of properties.

Administrative expenses tend to have more fixed nature items, and are therefore less correlated with the portfolio growth than the property operating expenses, increasing efficiency and economies of scale, thus creating an operational profit leverage as Primecity’s portfolio grows further. Primecity believes that the current platform has the ability to support further portfolio growth at marginal costs.

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PrOFIT FOr ThE yEAr

2014 2013

basic earnings per share 0.97 0.30 Diluted earnings per share 0.93 0.30 weighted average basic

shares 100,008 100,000

weighted average basic

shares (diluted) 104,396 100,000 Fully diluted basic shares 133,333 100,000 The profit for 2014 has increased by € 74 million to € 104 million, re-flecting an increase of 247% compared to 2013. The net profit result is mainly driven by significant increases in revenues and capital gains, property revaluations and other income – a combined result of the growth of the Company, the successful materializing of turnover of its assets and improved profitability.

CASh FLOw

2014 2013

Net cash provided by

operating activities 19,765 5,154

Net cash used in investing

activities (67,083) (29,430)

Net cash provided by

financing activities 50,891 25,377

Net increase in cash and

cash equivalents 3,573 1,101

Cash and cash equivalents have increased in 2014 by € 3.6 million. The increase results mainly from the strong increase of over 280%, which amounts to € 14.61 million, in net cash provided by operating activities while in line with Primecity’s growth strategy investments stayed strong with an increase in net cash used in investing activities

NET FINANCE

ExPENSES

2014 2013

Finance expenses (5,287) (3,770) Other financial results (5,789) (76)

Total (11,076) (3,846)

The net finance expenses increased from 2013 to 2014 by € 7.2 million. The increase derives mainly from the increase in other financial results, largely due to a non-cash effect of negative results of derivative finan-cial instruments as well as non-recurring provisions and fees.

The increase in finance expenses of 40% is an effect of the growth of the Company and results from a greater amount of bank loans and the issuance of the convertible bond.

TAxATION

2014 2013

Deferred tax (6,527) 274

Total (9,424) (422)

The increase in tax expenses in 2014 compared to 2013 results mainly from the increase in deferred taxes, a non-cash result accompanying the profit from revaluations of investment property.

Current taxes, comprised of corporation and property tax, have in-creased in line with the growth of the Company’s portfolio.

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LIAbILITIES

December 2014 December 2013 In thousands of euro

Loans and borrowings 137,689 57,309

Convertible bonds 96,728

-Deferred tax liabilities 46,614 15,448 Other long term liabilities 6,338 25,300 Current liabilities 12,796 4,105

Total 300,165 102,162

The increase in liabilities is attributed mainly to the increase in bank loans and the issuance of the convertible bonds in November 2014. The additional raised funds were used to finance the Company’s growth. The increase in the bank loans during 2014 is due to financing received on existing assets of the Company, on newly acquired assets as well as from the consolidation of two assets held previously as joint ventures. The issuance of the convertible bonds allows for a better di-versification of the Company’s debt and demonstrates the Company’s access to public capital. Despite this substantial growth in liabilities, Primecity improved its conservative capital structure, illustrated by its LTv of 40%.

Primecity’s deferred tax liabilities rose in line with acquisitions and re-flect the Company’s conservative stance, assuming property disposals through asset deals with a full German real estate tax effect of 15.825%. The convertible bond is in the money and first conversions have be-gun in 2014. Further conversions were made in 2015 and therefore the instrument has equity characteristics.

Total bank debt 144,544 60,263

Cash and liquid assets 63,404 2,707

Total net debt without

convertible bond 81,140 57,556

Convertible bond 96,728

-Total net debt with

convertible bond 177,869 57,556

ASSETS

December 2014 December 2013 In thousands of euro Non-current assets 448,174 183,210 Investment property* 442,128 156,385 Current assets 65,070 3,452 Total assets 513,244 186,662

*including advanced payments for investment properties

The total assets as of year-end 2014 amount to € 513.2 million, com-pared to EUr 186.7 million at year-end 2013. The total assets have in-creased by € 327 million over the past year, reflecting a 175% increase in comparison to December 2013.

The increase reflects the growth of the Company, seen in the growth in investment property of 183% to € 442 million as well as the con-solidation of two assets held previously as joint ventures. In addition, the current assets as of year-end 2014 include a considerable amount of cash and liquid assets, the excess amount of the convertible bond issuance in q4 2014 and the disposals in December 2014.

EPrA NAv

Total Equity 213,079 84,500

Fair value measurements of derivative financial

instruments 4,995 3,096

Deferred tax liabilities 46,614 15,448

Convertible bond* 97,254

-EPRA NAV 361,942 103,044

*the convertible bond is in the money. The amount includes accrued interest.

The EPrA NAv rose in 2014 to € 362 million from € 103 million in De-cember 2013, an increase of 251%. The rise is primarily attributed to the € 104 million profit generated in 2014, additional deferred tax liabilities of € 31 million created due to the initial consolidation, capital gains results and the inclusion of the convertible bonds, which are in the money.

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NOTES ON bUSINESS PErFOrMANCE

FFO (FUNDS FrOM

OPErATIONS) AND

ADjUSTED EbITDA

FFO for the year 2014 amounts to € 13.6 million, an increase of 348% compared to 2013. The result reflects the operational growth of an adjusted EbITDA of 190% from acquisitions alongside the outcome of the successful turnaround of PCI’s properties.

As finance expenses increased less than the operational results the FFO growth exceeds the growth of the adjusted EbITDA.

2014 2013

EBITDA 124,494 34,260

Capital gains, property revaluations and other

income (102,758) (26,768)

Adjusted EBITDA 21,736 7,492

Finance Expense (5,287) (3,770)

FFO I 13,552 3,026

FFO I per share 0.14 0.03

LOAN-TO-vALUE

2014 2013 In thousands of euro Investment property* 442,128 156,385 Equity accounted investees - 25,372 Total Debt 241,272 60,263

Cash and liquid assets 63,404 2,707

LTV 40% 32%

*including advanced payments for investment properties

Total Debt without

convertible bond 144,544 60,263

LTV assuming conversion 18% 32%

The low loan-to-value (“LTv”) demonstrates the Company’s conserva-tive approach on financial leverage and indicates the scope of Prime-city’s ability to raise further debt going forward. As of December 2014 the LTv was 40%, indicating a continuously strong financing compo-sition. Assuming conversion of the convertible bond, which is in the money, the ratio is 18%.

The Loan-to-value (“LTv“) is computed by subtracting cash and liquid

FFO II

2014 2013

FFO I 13,552 3,026

result from disposal gain* 23,089

-FFO II 36,641 3,026

FFO II per share 0.37 0.03

*) the excess amount of the sale price to the cost price of the properties

FFO II amounted to € 37 million in 2014. This strong result mirrors PCI’s sourcing abilities as well as its conservative valuation stance and also reflects the Company’s opportunistic disposal strategy. FFO II is com-puted by adding gains from the disposal of investment property and inventories to FFO I.

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DISCLAIMEr

The financial data and results of the Group are affected by financial and operating results of its subsidiaries. Significance of the information presented in this report is examined from the perspective of the Company including its portfolio with the joint ventures. In several cases, addi-tional information and details are provided in order to present a comprehensive representation of the subject described, which in the Group’s view is essential to this report.

by order of the board of Directors, Larnaca, Cyprus, March 31, 2015

Elena Koushos Director

Philipp von bodman Director, CEO

jelena Afxentiou Director

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rEPOrT ON ThE

CONSOLIDATED

FINANCIAL

STATEMENTS

we have audited the accompanying consolidated financial state-ments of Primecity Investment PLC (“the Company”) and its subsid-iaries (together with the Company, “the Group”) on pages 24 to 55 which comprise the consolidated statement of financial position as at December 31, 2014, and the consolidated statements of compre-hensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

boarD oF Directors’ responsibility For the consoliDateD Financial statements

The board of Directors is responsible for the preparation of consoli-dated financial statements that give a true and fair view in accordance with International Financial reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the board of Directors deter-mines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

auDitors’ responsibility

Our responsibility is to express an opinion on these consolidated fi-nancial statements based on our audit. we conducted our audit in accordance with International Standards on Auditing. Those Stan-dards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstate-ment.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judg-ment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or er-ror. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit pro-cedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriate-ness of accounting policies used and the reasonableappropriate-ness of account-ing estimates made by the board of Directors as well as evaluataccount-ing the overall presentation of the consolidated financial statements. we believe that the audit evidence we have obtained is sufficient and

opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at December 31, 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.

report on other legal requirements

Pursuant to the requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009, we report the following:

• we have obtained all the information and explanations we consid-ered necessary for the purposes of our audit.

• In our opinion, proper books of account have been kept by the Company.

• The consolidated financial statements are in agreement with the books of account.

• In our opinion and to the best of the information available to us and according to the explanations given to us, the consolidated financial statements give the information required by the Cyprus Companies Law, Cap. 113, in the manner so required.

• In our opinion, the information given in the report of the board of Directors is consistent with the consolidated financial statements.

other matter

This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 34 of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009 and for no other purpose. we do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

Antoniades Panicos, FCCA

Certified Public Accountant and registered Auditor for and on behalf of

KPMG Limited

Certified Accountants and registered Auditors Larnaca, March 31, 2015

INDEPENDENT AUDITOrS’ rEPOrT

TO ThE MEMbErS OF PrIMECITy INvESTMENT PLC

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For the year ended December 31,

2014 2013

Note In thousands of euro

Revenue 25,563 9,873

Capital gains, property revaluations and other income 5 102,758 26,768

Property operating expenses 6 (1,854) (1,262)

Administrative and other expenses 7 (1,973) (1,119)

Operating profit 124,494 34,260

Finance expenses 8a (5,287) (3,770)

Other financial results 8b (5,789) (76)

Net finance expenses (11,076) (3,846)

Profit before tax 113,418 30,414

Current tax expenses 9b (2,897) (696)

Deferred tax expenses 9c (6,527) 274

Tax and deferred tax expenses (9,424) (422)

Other comprehensive income for the year -

-Total comprehensive income for the year 103,994 29,992

Profit attributable to:

Owners of the Company 96,832 29,937

Non-controlling interests 7,162 55

103,994 29,992

Net earnings per share attributable to the owners of the Company (in euro):

basic earnings per share 10a 0.97 0.30

Diluted earnings per share 10b 0.93 0.30

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OF FINANCIAL POSITION

As at December 31,

2014 2013

Assets Note In thousands of euro

Equipment and intangible assets 4,479

-Investment property 11 421,995 152,870

Advanced payment for investment property 20,133 3,515

Equity-accounted investees 12 - 25,372

Deferred tax assets 9C 902 678

Other long term financial assets 665 775

Non-current assets 448,174 183,210

Cash and cash equivalents 4,692 1,119

Short term deposits 1,718 1,588

Trade securities at fair value through profit and loss 56,994

-Trade and other receivables 13 1,090 (*) 694

Other financial assets 576 (*) 51

Current assets 65,070 3,452

Total assets 513,244 186,662

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As at December 31,

2014 2013

Equity Note In thousands of euro

Share capital 14 1,002 9

Premium and other capital reserves 14 1,747

-retained earnings 176,625 78,319

Equity attributable to the owners of the Company 179,374 78,328

Non-controlling interests 33,705 6,172

Total equity 213,079 84,500

Liabilities

Loans and borrowings 15 137,689 57,309

Convertible bonds 15b 96,728

-Derivative financial instruments 16 4,995 3,096

Deferred tax liabilities 9C 46,614 15,448

Other long term liabilities 1,343 (*) 22,204

Non-current liabilities 287,369 98,057

Current portion of long term loans 15 6,855 2,953

Trade and other payables 17 3,313 892

Provisions and current liabilities 2,628 260

Current liabilities 12,796 4,105

Total liabilities 300,165 102,162

Total equity and liabilities 513,244 186,662

The board of Directors of Primecity Investment PLC authorized these consolidated financial statements for issuance on March 31, 2015

Elena Koushos Director

Philipp von bodman Director, CEO

jelena Afxentiou Director

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Attributable to the owners of the Company Share capital Premium and other capital reserves Retained earnings Total Non- controlling interests Total equity In thousands of euro Balance as at December 31, 2013 9 - 78,319 78,328 6,172 84,500

Profit for the year - - 96,832 96,832 7,162 103,994

Other comprehensive income for the year - - -

-Total comprehensive income for the year - - 96,832 96,832 7,162 103,994 Non-controlling interests arising from initially

consolidated companies and other transactions - - 1,474 1,474 20,371 21,845 Issuance of shares and changing nominal par

value 991 - - 991 - 991

Equity component related to convertible bonds - 1,067 - 1,067 - 1,067 Issuance of shares related to conversion of

convertible bonds 2 680 - 682 - 682

Balance as at December 31, 2014 1,002 1,747 176,625 179,374 33,705 213,079

Balance at December 31, 2012 9 - 48,382 48,391 1,635 50,026

Profit for the year - - 29,937 29,937 55 29,992

Other comprehensive income for the year - - -

-Total comprehensive income for the year - - 29,937 29,937 55 29,992 Non-controlling interests arising from initially

consolidate companies - - - - 4,482 4,482

Balance as at December 31, 2013 9 - 78,319 78,328 6,172 84,500

ChANGES IN EqUITy

FOr ThE yEAr ENDED DECEMbEr 31, 2014

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For the year ended December 31,

2014 2013

CASh FLOwS FROm OPERATINg ACTIVITIES

Profit for the year 103,994 29,992

Adjustments for the profit:

Capital gains, property revaluations and other income (102,758) (26,768)

Finance expenses, net 11,076 3,846

Tax and deferred tax expenses 9,424 422

21,736 7,492

Changes in:

Trade and other receivables 1,052 (364)

Trade and other payables (1,441) (1,262)

Provisions for other liabilities and charges 275 (15)

21,622 5,851

Tax paid (1,857) (697)

Net cash provided by operating activities 19,765 5,154

CASh FLOwS FROm INVESTINg ACTIVITIES

Proceeds from disposal of (investments in) investment property, net 35,491 (3,788) Acquisition of subsidiaries, net of cash acquired (41,608) (24,070) Proceeds from / (purchase of) investment in trade securities and other financial assets (60,966) (1,572)

Net cash used in investing activities (67,083) (29,430)

CASh FLOwS FROm FINANCINg ACTIVITIES

Proceeds from issuance of convertible bonds, net 98,218

-Amortization of loans from financial institutions (9,091) (2,358)

repayment of loans from financial institutions (34,816)

-Proceeds of loans from related companies and shareholders, net 1,482 27,666

Finance expenses paid, net (4,902) 69

Net cash provided by financing activities 50,891 25,377

Increase in cash and cash equivalents 3,573 1,101

Cash and cash equivalents at the beginning of the year 1,119 18

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FINANCIAL STATEMENTS

FOr ThE yEAr ENDED DECEMbEr 31, 2014

1. GENErAL

(a) incorporation anD principal activities

Primecity Investment PLC (“the Company”) (ex: “Primecity Investment Limited”) was incorporated on August 10, 2004 as a private limited li-ability company under the Cyprus Companies Law, Cap. 113. Its regis-tered Office is at Faros Avenue, Spyros Thalassines Alkyonides, Pervolia 7560, Larnaca, Cyprus.

On june 18, 2014, the company’s name was changed from “Stileforce Enterprises Limited” to “Primecity Investment Limited”. Following that, on September 16, 2014, the name of the Company was changed to “Primecity Investment PLC”.

The Company is a holding company which holds, together with its investees (hereinafter “the Group”) real estate properties in Germany. Its vision is buying, redeveloping, turning around and optimizing the real estate properties. As of December 31, 2014 the Group’s portfolio consists of more than 5,000 hotel rooms.

These consolidated financial statements for the year ended December 31, 2014 consist of the financial statements of the Group.

(b) listing on the paris stock exchange

On October 31, 2014, the Company was listed on the NySE Euronext Paris Stock Exchange in the Marché Libre - xMLI stock market segment. The Company registered 200,000,000 ordinary shares with a par value of euro 0.01 per share, out of which 100,000,000 and an additional amount from converted bond units were fully paid.

(c) capital anD bonDs increases

In july 2014, the Company increased its registered and fully paid share capital from 5,000 shares of euro 1.71 to euro 100,000,000 shares of euro 0.01 per share (see note 14).

On November 13, 2014, the Company successfully completed the placement of convertible bonds, convertible into ordinary shares of the Company for an aggregate principal amount of euro 100 million (see note 15b).

(D) DeFinitions

In these financial statements:

2. bASIS OF

PrEPArATION

(a) statement oF compliance

These consolidated financial statements have been prepared in ac-cordance with the International Financial reporting Standards as adopted by the European Union (IFrS).

Certain balance sheet items related to the year ended December 31, 2013 have been reclassified to enhance comparability with 2014 figures

(b) basis oF measurement

The consolidated financial statements have been prepared on a going concern basis, applying the historical cost convention, except for the measurement of the following:

• Investment properties are measured at fair value; • Investments in equity accounted investees; • Trade securities at fair value through profit and loss; • Derivative financial instruments;

• Deferred tax assets and liabilities.

The Company Primecity Investment PLC

The group The Company and its investees

Subsidiaries Companies that are controlled by the Company (as defined in IFrS 10) and whose financial statements are consolidated with those of the Company

Associates Companies over which the Company has

signif-icant influence (as defined in IAS 28) and that are not subsidiaries. The Company’s investment therein is included in the consolidated financial statements of the Company using equity method of accounting

Investees Subsidiaries, jointly controlled entities and associates

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2. bASIS OF

PrEPArATION

(c) use oF estimates anD juDgments

The preparation of consolidated financial statements in accordance with IFrS requires from Management the exercise of judgment, to make estimates and assumptions that influence the application of accounting principles and the related amounts of assets and liabili-ties, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on current knowledge available at that time. Actual results may deviate from such estimates.

The estimates and underlying assumptions are revised on a regular basis. revisions in accounting estimates are recognized in the period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revi-sion affects the present as well as future periods.

In particular, information about significant areas of estimation, uncer-tainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognized in the consoli-dated financial statements are described below:

• Fair value of investment property

The fair value measurement of investment property requires valuation experts and the Company’s management to use certain assumptions regarding rates of return on the Group’s assets, future rent, occupancy rates, contract renewal terms, the probability of leasing vacant are-as, asset operating expenses and the implications of any investments made for future development purposes in order to assess the future expected cash flows from the assets. Any change in the assumptions used to measure the investment property could affect its fair value. The Group uses external valuation reports issued by independent professionally qualified valuers to determine the fair value of its in-vestment properties. Changes in their fair value are recognized in the consolidated statement of comprehensive income.

• Impairment of investments in associates

The Group periodically evaluates the recoverability of investments in associates whenever indicators of impairment are present. Indicators of impairment include such items as declines in revenues, earnings or cash flows or material adverse changes in the economic or political stability of a particular country, which may indicate that the carrying amount of an asset is not recoverable. If facts and circumstances indi-cate that investment in associates may be impaired, the estimated fu-ture undiscounted cash flows associated with these associates would be compared to their carrying amounts to determine if a write down to fair value is necessary.

• Tax and deferred tax expenses

Significant judgment is required in determining the provision for in-come taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax au-dit issues based on estimates of whether adau-ditional taxes will be due. where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

• Impairment of intangible asset

Intangible assets are initially recorded at acquisition cost and are amortized on a straight line basis over their useful economic life. In-tangible assets that are acquired through a business combination are initially recorded at fair value at the date of acquisition. Intangible as-sets with an indefinite useful life are reviewed for impairment at least once per year. The impairment test is performed using the discounted cash flows expected to be generated through the use of the intangible assets, using a discount rate that reflects the current market estima-tions and the risks associated with the asset. when it is impractical to estimate the recoverable amount of an asset, the Group estimates the recoverable amount of the cash generating unit in which the asset belongs to.

• Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of the Group on which the goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash generating units using a suitable discount rate in order to cal-culate present value.

• Legal claims

In estimating the likelihood of outcome of legal claims filed against the Company and its investees, the Group relies on the opinion of their legal counsel. These estimates are based on the legal counsel’s best professional judgment, taking into account the stage of proceed-ings and historical legal precedents in respect of the different issues. Since the outcome of the claims will be determined in courts, the results could differ from these estimates.

• Provisions

Provisions are recognized when the Group has a present legal or con-structive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a re-liable estimate of the amount can be made. where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.

• Fair value hierarchy

Please see note 11(b) and 19(iv).

(D) Functional anD presentation currency

The consolidated financial statements are presented in euro, rounded to the nearest thousand (euro ‘000), except when otherwise indicated.

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3. SIGNIFICANT

ACCOUNTING

POLICIES

(a) basis oF consoliDation

The Group’s consolidated financial statements comprise the financial statements of the parent company, Primecity Investment PLC and the financial statements of its subsidiaries. Subsidiaries are entities con-trolled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the en-tity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Intra-group balances and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the in-vestee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied by all entities in the Group.

where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those of the Group.

Changes in the group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non controlling interests are adjusted to re-flect the changes in their relative interests in the subsidiaries. Any dif-ference between the amount by which the non controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity attributed to owners of the Company. when the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non con-trolling interests. when assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by appli-cable IFrS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: recognition and Measurement.

Accounting for business combinations under IFrS 3 only applies if it is considered that a business has been acquired. The Group may invest in subsidiaries that hold properties but do not constitute a business. Those transactions are therefore treated as asset acquisitions rather than business combinations. The Group allocates the cost between the individual identifiable assets and liabilities in the Group based on their relative fair values at the date of acquisitions.

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3. SIGNIFICANT

ACCOUNTING

POLICIES

(CONTINUED)

(b) business combinations

Acquisitions of businesses are accounted for using the acquisition method, i.e. when control is transferred to the Group. The consider-ation transferred in a business combinconsider-ation is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.

At the acquisition date, the identifiable assets acquired and the liabil-ities assumed are recognized at their fair value at the acquisition date, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in ac-cordance with IAS 12 Income Taxes and IAS 19 Employee benefits respectively;

• liabilities or equity instruments related to share based payment ar-rangements of the acquiree or share based payment arar-rangements of the Group entered into to replace share based payment arrange-ments of the acquiree are measured in accordance with IFrS 2 Share based Payment at the acquisition date; and

• Assets (or disposal groups) that are classified as held for sale in ac-cordance with IFrS 5 Non-current Assets held for Sale and Discon-tinued Operations are measured in accordance with that standard. Goodwill is initially measured as the excess of the sum of the consid-eration transferred, the fair value of any non controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immedi-ately in the consolidated income statement as a bargain purchase gain.

title their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recog-nized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction by transaction basis. Other types of non controlling interests are measured at fair value or, when applicable, on the basis specified in another IFrS.

when the consideration transferred by the Group in a business com-bination includes assets or liabilities resulting from a contingent con-sideration arrangement, the contingent concon-sideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjust-ments are adjusted retrospectively, with corresponding adjustadjust-ments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measure-ment period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the con-tingent consideration that do not qualify as measurement period ad-justments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not re-meas-ured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classi-fied as an asset or a liability is re-measured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Lia-bilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in consolidated income statements. when a business combination is achieved in stages, the Group’s previ-ously held equity interest in the acquiree is re-measured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive in-come are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the ac-counting is incomplete. Those provisional amounts are adjusted dur-ing the measurement period (see above), or additional assets or liabil-ities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

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3. SIGNIFICANT

ACCOUNTING

POLICIES

(CONTINUED)

(c) investments in associates anD equity – accounteD investees

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Signifi-cant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A jointly controlled entity is an entity in which two or more parties have interest.

The results and assets and liabilities of associates and equity accounted investees are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accord-ance with IFrS 5 Non-current Assets held for Sale and Discontinued Operations. Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the consolidated income statements and other comprehensive income of the associate. when the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long term in-terests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the invest-ment. Any excess of the Group’s share of the net fair value of the identi-fiable assets, liabilities and contingent liabilities over the cost of acqui-sition, after reassessment, is recognized immediately in profit or loss. The requirements of IAS 36 are applied to determine whether it is nec-essary to recognize any impairment loss with respect to the Group’s in-vestment in an associate. when necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accord-ance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount; any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that im-pairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

(D) revenue recognition

revenue is recognized in the consolidated statement of comprehen-sive income when it can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the trans-action can be measured reliably.

• Rental income

rental income from investment properties are recognized as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental operating income, over the term of the lease.

(e) net Finance expenses

• Finance income and expenses

Finance income comprises interest income on funds invested. Finance expenses comprise interest expense on loans and borrowings, bonds and loans from third parties.

• Other financial results

Other financial results represent changes in the time value of provi-sions, changes in the fair value of traded securities, profit or losses on derivative financial instruments, borrowing and redemption costs, loan arrangement fees and other one-time payments.

Net finance expenses are recognized as they accrue in the statement of comprehensive income, using the effective interest method.

(F) DeFerreD tax, income tax anD property taxes

Tax expense comprises current and deferred tax. Current tax and de-ferred tax is recognized in profit or loss except to the extent that it re-lates to a business combination, or items recognized directly in equity or in other comprehensive income.

Deferred tax assets and liabilities are offset if there is a legally enforce-able right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be real-ized simultaneously.

(g) current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.