2 Responsibility Statement by the Legal Representatives 3 Corporate Governance Report 12 Administrative Board Report

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2 Responsibility Statement by the Legal Representatives 3 Corporate Governance Report

12 Administrative Board Report 14-43 Management Report

16 Operating Environment 18 Business Performance 25 Financial Position and Assets 29 Risk Report

34 Internal Control and Risk Management System 35 Organisation and Corporate Structure 36 Personnel

37 Research and Development

38 Disclosure as per Art. 243a, Sec. 1, Austrian Commercial Code 40 Outlook

42 Outlook for conwert in 2014 43 Events after the Reporting Period 44-100 Financial Statements

50 Notes

100 Auditors’ Report

102-139 Individual Financial Statements

105 Management Report to the Individual Financial Statements 121 Individual Financial Statements

129 Notes to the Individual Financial Statements 139 Auditors’ Report

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2 Annual Financial Repoprt 2013 | Responsibility Statement / Corporate Governance Report “The Executive Directors confirm to the best of their knowledge that

the consolidated financial statements as of 31 December 2013 give a true and fair view of the assets, liabilities, financial position and profit or loss of the group as required by the applicable accounting standards and that the group management report gives a true and fair view of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties the group faces.

the individual financial statements as of 31 December 2013 give a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company as required by the applicable accounting standards and that the management report to the individual financial statements gives a true and fair view of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties the company faces.”

Responsibility Statement

by the Legal Representatives

of conwert Immobilien Invest SE in accordance

with § 82 (4) of the austrian stock exchange act

Vienna, 25 March 2014 The Executive Board of conwert Immobilien Invest SE

The Administrative Board of conwert Immobilien Invest SE Clemens Schneider

Chief Executive Officer

Thomas Doll Chief Financial Officer

Johannes Meran Chair Alexander Tavakoli Deputy Chair Kerstin Gelbmann Member Eveline Steinberger-Kern Member

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Corporate Governance Report

The Administrative and Executive Boards of conwert consider transparent corporate communication to be a key pillar in sustainable value creation. conwert voluntarily committed to compliance with the Austrian Code of Corporate Governance (ACCG) as early as 2005, making it the first Austrian property company to do so. The ACCG provides all listed Austrian companies and listed European companies who are registered in Austria with a framework for the management and control of enterprises; the Code also incorporates international standards for good corporate management. The latest version of the ACCG is available at www.corporate-governance.at.

The July 2012 version of ACCG is applicable for the 2013 financial year and contains a total of 90 rules, divided into L, C and R Rules. L Rules (Legal Requirement) are based on mandatory legal requirements; C Rules (Comply or Explain) are internationally accepted standards. Non-adherence or deviations must be explained and justified. In addition, the ACCG also contains R Rules (Recommendation), which serve as guidelines. conwert has had its compliance with the ACCG Rules externally evaluated by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH.

As conwert is managed as a single-tier Societas Europaea (SE), all of the ACCG Rules relating to the Management Board and Supervisory Board are applied to the Executive Board and Administrative Board in the spirit of the Code. Here, the following additional principles are considered when applying the ACCG to conwert:

+ The application of individual rules relating to the Administrative Board and/or Executive Board must reflect the purpose of the Code, which is applied on the basis of division of responsibilities within the bodies of the SE. + The ACCG rules of conduct for the Supervisory Board must generally be observed by the Administrative Board. + In principle, the ACCG rules of conduct for the Management Board must be observed by the Executive Board,

whereby the Administrative Board is accountable for any responsibilities assigned to it by law or through the Articles of Association.

In the 2013 business year all L Rules were upheld; three explanations were given regarding the C Rules: Explanation regarding C Rules 16 and 17 of the ACCG:

During the period February to September 2013, the Executive Board consisted of two Executive Directors with equal rights and without an appointed Chair or CEO, whereby under the single-tier system resolutions are referred to the Administrative Board in any instances where a vote is tied.

Stavros Efremidis was the company’s Executive Director from February to September 2013. Thomas Doll was the single Executive Director from the termination of Stavros Efremidis until Clemens Schneider took on the role of Executive Director and CEO in February 2014. During the period of strategic repositioning, the important communication tasks were handled by the Administrative Board in order to ensure continuous lines of communication with all stakeholders. The provisions of C Rules 16 and 17 are considered to have been met, as the Administrative Board has far greater influence over the company’s operational affairs in a single-tier SE such as conwert.

Explanation regarding C Rule 27 of the ACCG:

Compensation of the Executive Directors was once again tied to sustainable, long-term performance criteria in 2013. However, owing to the major changes in the composition of the portfolio, multi-year performance criteria were not applied in 2013. Multi-year remuneration has once again been adopted for the coming years and applies to the remuneration of the new Executive Director, Clemens Schneider.

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4 Annual Financial Repoprt 2013 | Corporate Governance Report Shareholders and Annual General Meeting

conwert’s shareholder base is highly diverse. On the basis of the share notification of April 2012, the Haselsteiner Family Private Foundation owns 24.4% of the shares. In October 2013 EARNEST Partners, LLC, announced that it held more than 5% of the shares. In January 2014 FIL Limited (Fidelity) announced that it held more than 4% of shares and as of the announcement in February 2014, Barclays Plc owned a 5.9% stake. As of the reporting date, 3.0% were treasury shares. conwert supports its shareholders in participation at the AGM, so that they are able to exercise their rights as shareholders. In line with the Austrian Stock Corporation Act and the ACCG, general meetings are announced at least four weeks before the AGM and three weeks before an extraordinary general meeting. In 2013 the only general meeting was the AGM on 8 May. Wherever possible, all documents related to the AGM are published on the website at the latest three weeks before the AGM; these and the voting results on the individual agenda items are also available to investors after the AGM.

Cooperation between the Executive Board and the Administrative Board

The Executive Directors and the Administrative Board are involved in open and constructive dialogue both in the course of the regular Executive and Administrative Board meetings and outside these meetings. The Executive Directors report to the entire Administrative Board once a month at the Administrative Board meetings; discussions between the Executive Bodies also take place outside of the meetings, particularly on topics related to profitability and liquidity.

Executive Directors

Thomas Doll and Stavros Efremidis were Executive Directors in 2013. In February 2013 the Administrative Board prematurely extended Thomas Doll’s contract as Executive Director and CFO until the end of June 2017. Stavros Efremidis was appointed as Executive Director and COO for the German business, as well as procurement and sales management, in February 2013. In the course of the takeover of KWG Kommunale Wohnen AG (KWG), he moved from the KWG Executive Board to the conwert Executive Board. After KWG was integrated into the Group, the Administrative Board unanimously terminated the contract with Stavros Efremidis and removed him as Executive Director. The agreement reached reflects the circumstances of the termination as well as the company’s economic state and settles any claim to fixed, variable and other remuneration. Effective 1 February 2014, Clemens Schneider has been appointed Executive Director and CEO. The responsibilities of Stavros Efremidis were assumed by Thomas Doll for the interim period.

Executive Board Responsibilities First appointed End of term

Other functions on Super-visory or Administrative Boards or comparable roles in Austrian or foreign companies not included in the consolidated financial statements Thomas Doll

dob 27/12/1965

Finance, controlling / risk management / ICS, Group accounting and tax, legal affairs and investments, IT and HR; portfolio management, services and sales in Austria and other countries (also for the responsibilities of Stavros Efremidis before and after his term)

September 2010 June 2017 None

Stavros Efremidis dob 27/09/1968

Portfolio management, services, acquisitions and sales in Germany, sales management, procurement

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business year.

In 2013 the profit-sharing scheme consisted of the following components and is tied in particular to sustainable, long-term criteria:

Fixed component Variable component Severance Remuneration in kind Total

Thomas Doll 237,650.00 216,500.00 - 7,374.36 461,524.36

Stavros Efremidis (left in September 2013)

236,041.60 - 245,000.00 12,868.50 493,910.10

Total 473,691.60 216,500.00 245,000.00 20,242.86 955,434.46

Remuneration of the Executive Board in 2013 (in €)

+ Severance pay upon premature termination:

Executive Directors are entitled to a maximum of two gross yearly salaries in the case of premature termination, whereby this must be made as a one-off payment without a discount and paid to the terminated Executive Director on the date of leaving the Board. Should an Executive Director leave the Board prematurely by choice, the Director has no claim to severance pay. Special severance rules apply to instances where there is a change of control. Agreements resulting from the premature termination of an Executive Director with regard to severance pay reflect the circumstances of the termination and the economic state of the company. The severance settlement for Stavros Efremidis amounted to €245,000.00, whereby the variable salary component for 2013 and any other claims have Procedures for the Executive Directors

The Executive Directors conduct the business of the company in line with the law, Articles of Association, and Rules of Procedure and, along with the Administrative Board, represent the company externally. There were two Executive Directors for the majority of 2013 – Thomas Doll and Stavros Efremidis. All of Stavros Efremidis’ responsibilities were assumed on an interim basis by Thomas Doll before and after Stavros Efremidis’ appointment and termination until Clemens Schneider took up the post of Executive Director and CEO on 1 February 2014. The Rules of Procedure for the Executive Directors include information and reporting obligations to the Administrative Board as well as cataloguing all measures which require the approval of the Administrative Board. The regular Executive Board meetings in particular serve to ensure the exchange of information and decision making for all corporate affairs which require the approval of the Executive Board.

Remuneration of the Executive Board

The remuneration system for members of the Executive Board involves fixed and variable salary components. No provisions are made for stock options or pensions.

Total remuneration is divided into a fixed salary and a variable component, or profit-sharing plan. A range of qualitative and quantitative criteria is applied to determining the performance-linked component due.

Depending on the extent to which the criteria are met, the variable component can amount to up to €225,000.00 per

(1) Achieving EBT targets (50% profit sharing),

(2) Achieving cross-divisional targets (30% profit sharing),

(3) Achieving individual targets defined by the Administrative Board (20% variable profit sharing)

These variable, performance-linked salary components were re-evaluated in 2011 and were applied in the 2013 business year to the two Executive Directors, Thomas Doll and Stavros Efremidis. The breakdown of the total remuneration of the two Executive Directors is shown in the following table:

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+ The Administrative Board member should not have a business relationship to the company or any of its subsidiaries, the scope of which is considered material, either at present or in the previous business year. This also applies to business dealings with companies in which the Administrative Board member has a significant economic interest. This does not apply to instances where the existence of such a business relationship has been disclosed prior to the member’s appointment. Administrative Board approval of individual transactions as per Article 95 Section 5 Line 12 of the Austrian Stock Corporation Act does not automatically lead to classification as non-independent. + The Administrative Board member must not have audited the company in the past three years, nor been a

share-holder or employee of the company’s current audit firm.

+ The Administrative Board member should not serve on the Management Board or Executive Board of another company in which a member of conwert’s Executive Board is on the Supervisory or Administrative Board. + The Administrative Board member should not be closely related to a member of the Executive Board (direct

descendant, spouse, live-in partner, parent, uncle, aunt, sibling, niece, nephew) or to any person who holds one of the aforementioned positions.

Independence of the Administrative Board members

In accordance with ACCG Rule 53, conwert Immobilien Invest SE has specified the following guidelines for the independence of the Administrative Board members:

A member of the Administrative Board is considered to be independent when he/she has no business or personal relationship to the company or its Executive Board which constitutes a material conflict of interest and is therefore likely to influence the behaviour of the member. The Administrative Board should also adhere to the following guidelines when determining the criteria for evaluating the independence of its members:

Administrative Board Function

First

appointed End of term

Other functions on Supervisory or Administrative Boards or comparable roles in Austrian or foreign companies

Johannes Meran dob 22/02/1972

+ Chair of the Administrative Board + Deputy Chair of the Audit Committee

October 2010 o. AGM 2015*) + Chair of the Supervisory Board of ECO Business-Immobilien AG + Member of the Supervisory Board

of KWG Kommunale Wohnen AG + Deputy Chair of the Supervisory Board of TPI Tourism Properties Invest AG

Franz Pruckner dob 20/05/1956

+ Deputy Chair of the Administrative Board (until end 2013)

+ Chair of the Audit Committee (until end 2013)

+ Finance expert

+ Representative of free float shareholders

October 2010 o. AGM 2015**) + Deputy Chair of the Supervisory Board of ECO Business-Immobilien AG (until end 2013)

Alexander Tavakoli dob 06/08/1969

+ Deputy Chair of the Administrative Board (since 2014)

+ Member of the Audit Committee

May 2011 o. AGM 2016 + Deputy Chair of the Supervisory Board of ECO Business-Immobilien AG (since 2014) Kerstin Gelbmann

dob 30/05/1974

+ Member of the Administrative Board + Chair of the Audit Committee

(since 2014) + Finance expert

May 2011 o. AGM 2016 + Member of the Supervisory Board of ECO Business-Immobilien AG + Member of the Supervisory

Board of STRABAG SE + Member of the Supervisory

Board of TPI Tourism Properties Invest AG

Eveline Steinberger-Kern dob 27/01/1972

+ Member of the Administrative Board + Member of the Audit Committee + Representative of free float shareholders

May 2011 o. AGM 2016 + Member of the Supervisory Board of ECO Business-Immobilien AG

*) At the end of November 2013 Johannes Meran announced that he would leave the Administrative Board at the 13th Annual General Meeting on 7 May 2014 and renounce his mandate. **) Franz Pruckner left the Administrative Board at the end of 2013 for personal reasons.

Administrative Board

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The members of the Administrative Board have committed to ACCG Rule 53 and the guidelines stated above as criteria for their independence. In accordance with this Rule and the ACCG guidelines, the following Administrative Board members have declared themselves to be independent:

+ Johannes Meran + Franz Pruckner + Alexander Tavakoli + Kerstin Gelbmann + Eveline Steinberger-Kern

Administrative Board procedures and committees

The Administrative Board manages the company and rules on the affairs accorded to it by the law, Articles of Association, and Rules of Procedure. In 2013 the Administrative Board consisted of five members, who were appointed by the Annual General Meeting. During 2013 the Administrative Board held twelve ordinary and seven extraordinary meetings. Franz Pruckner left the Administrative Board for personal reasons at the end of 2013. Alexander Tavakoli was elected as the new Deputy Chair of the Administrative Board and Kerstin Gelbmann was elected as the new Chair of the Audit Committee.

In addition to the Audit Committee, which is mandatory by law and which all of the Administrative Board sit on, two further committees were formed – a Personnel Committee and an Internal Audit Committee.

Audit Committee

In 2013 all of the Administrative Board members sat on the Audit Committee.

The Audit Committee discusses the consolidated financial statements and oversees the accounting process and the audit of the individual and consolidated financial statements. It checks and oversees the independence of the auditors and furthermore examines the individual and consolidated financial statements, the management report and group management report, the Executive Board’s proposal for the appropriation of net profit and the corporate governance report. It prepares the approval of the financial statements and informs the Administrative Board of its findings in an audit report, even though the Administrative Board and Audit Committee of conwert comprised exactly the same people in 2013. Furthermore, the Audit Committee prepares the proposal for the appointment of the auditors of the individual and consolidated financial statements.

Personnel Committee

The Personnel Committee was composed of Franz Pruckner as Chair, Eveline Steinberger-Kern as Deputy Chair, and Kerstin Gelbmann and Alexander Tavakoli as members.

The Personnel Committee was formed in July 2013 for the selection process to appoint a new Executive Director with the function of CEO. The Personnel Committee made regular reports on its activities to the entire Administrative Board. The Personnel Committee was disbanded at the end of November 2013 following the conclusion of a structured selection process, which was conducted in collaboration with an international recruitment consulting company. Internal Audit Committee

The Internal Audit Committee was composed of Alexander Tavakoli as Chair, Eveline Steinberger-Kern as Deputy Chair, and Franz Pruckner and Kerstin Gelbmann as members.

The Internal Audit Committee was formed in September 2013 in the course of the internal audit in order to evaluate the public allegations against the company and the Chair of the Administrative Board. This process was supported by Audit Partner and external auditors. Audit Partner reached the conclusion that the conwert Boards and Committees and the Chair of the Administrative Board had behaved appropriately. This was also confirmed by the legal firms Dorda Brugger Jordis and P+P Pöllath + Partners. The Internal Audit Committee made regular reports on its activities to the entire Administrative Board. The Internal Audit Committee was dissolved following the conclusion of the audits and evaluations at the end of November 2013.

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Number of meetings of the Administrative Board and its committees and activities in 2013

The Administrative Board held 19 meetings in the 2013 financial year. In 2013 the Administrative Board dealt with all affairs which are within its scope of responsibility and which require the approval of the Administrative Board in addition to that of the Executive Board. There was a particular focus on the Administrative Board’s activities related to property transactions which fell under its remit, as well as approving the budget and overseeing adherence to the corporate strategy and compliance.

In addition to the resolutions passed at the meetings, several Administrative Board resolutions under the aforementioned scope of responsibility were passed using a circular system which does not require Administrative Board members to meet in person.

Beyond that, there were three active committees in 2013. A Personnel Committee and an Internal Audit Committee were formed in 2013 in addition to the Audit Committee; these committees regularly reported to the Administrative Board at the Administrative Board meetings. The Audit Committee and the Internal Audit Committee held three meetings in the 2013 financial year; the Personnel Committee met six times.

Further information on the activities of the Administrative Board and the Audit Committee can be found in the Administrative Board Report and in the notes to the consolidated financial statements.

Remuneration of the Administrative Board

The Annual General Meeting on 26 May 2009 adopted a remuneration system for the Administrative Board; this system was also applied in the 2013 financial year.

Overall every member of the Administrative Board is permitted to draw a maximum surcharge of 50% per business year for participating in committees in addition to his/her fixed remuneration.

Remuneration of the Administrative Board per year (in €)

Function Fixed Attendance fee per meeting

Chair 50,000.00 2,500.00

Deputy Chair 25,000.00 2,500.00

Member 15,000.00 2,500.00

Committee Chair Member Attendance fee per meeting*) in € Audit Committee 50% of fixed

remuneration

25% of fixed remuneration

2,500.00 Remuneration of the Audit Committee

*) unless held on the same day as a plenary meeting of the Administrative Board

Committee Chair Member Attendance fee per meeting*) in € Per committee 25% of fixed

remuneration

12.5% of fixed remuneration

2,500.00 Remuneration of the other committees

*) unless held on the same day as a plenary meeting of the Administrative Board

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Johannes Meran

Kerstin Gelbmann

Eveline

Steinberger-Kern Franz Pruckner Alexander Tavakoli Function + Chair of the

Administrative Board + Deputy Chair of the Audit Committee + Not a member of the Personnel Committee + Not a member of

the Internal Audit Committee + Member of the Administrative Board + Member of the Audit Committee + Finance expert + Member of the Personnel Committee + Member of the Internal Audit Committee + Member of the Administrative Board + Member of the Audit Committee + Deputy Chair of the Personnel Committee + Deputy Chair of the Internal Audit Committee + Deputy Chair of the Administrative Board + Chair of the Audit Committee + Finance expert + Chair of the Personnel Committee + Member of the Internal Audit Committee + Member of the Administrative Board + Member of the Audit Committee + Member of the Personnel Committee + Chair of the Internal Audit Committee Fixed remuneration €50,000.00 €15,000.00 €15,000.00 €25,000.00 €15,000.00

Term of office since October 2010 since May 2011 since May 2011 since October 2010 since May 2011

Remuneration (in €) Total 2013

Fixed remuneration 50,000.00 15,000.00 15,000.00 25,000.00 15,000.00 120,000.00

Audit Committee 12,500.00 3,750.00 3,750.00 12,500.00 3,750.00 36,250.00

Personnel Committee - 937.50 937.50 0*) 937.50 2,812.50

Internal Audit Committee - 937.50 937.50 0*) 937.50**) 2,812.50

Attendance fee 47,500.00 60,000.00 60,000.00 62,500.00 62,500.00 292,500.00

Total 110,000.00 80,625.00 80,625.00 100,000.00 83,125.00 454,375.00

Remuneration of the Administrative Board 2013

*) Regulation on capping surcharges for committee members

**) Regulation on capping surcharges for committee members; this is why Alexander Tavakoli only received the remuneration of an ordinary committee member despite chairing the Internal Audit Committee (remuneration for his position as Chair of the Internal Audit Committee would exceed the limit set by the regulation on capping surcharges for committee members)

Transactions with Administrative Board members which require authorisation

Since 2012 there has been a contract with Alexander Tavakoli, approved by the Administrative Board, relating to consulting services, particularly those related to planning and permit procedures and the development of conwert’s construction/planning department. The contract was terminated by Alexander Tavakoli per end of March 2014 after the Executive Board had been supplemented by Clemens Schneider as CEO in February. It was settled on the basis of daily rates and capped at €100,000 per year. In 2013 Alexander Tavakoli invoiced €49,000.00 under the terms of this contract. Furthermore, facility management contracts were concluded in Austria with STRABAG Property and Facility Services GmbH, a company owned by STRABAG SE, for several properties. These contracts only stipulate a very limited degree of services. In 2013 the payment related to contracts with STRABAG Property and Facility Services GmbH amounted to €246,873.81.

Information on related party transactions as required by IAS can be found in the notes to the consolidated financial statements.

Equal opportunities measures in line with Article 243b Section 2 of the Austrian Commercial Code

As per Article 243b Section 2 Line 2 of the Austrian Commercial Code, a disclosure must be made on the measures to promote women to the Executive Board, the Administrative Board and to leading positions in the company as specified

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Insurance

D&O insurance (directors and officers liability insurance) is in place at conwert to cover the members of its management (Executive Board, Administrative Board, Managing Directors). The company covers the costs of this insurance. Corporate Governance – external evaluation

In line with ACCG Rule 62, conwert had its compliance with the Code Rules evaluated externally in 2013 by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH and commissioned a report for the external evaluation of adherence to the Austrian Code of Corporate Governance. The report is available for download at www.conwert.com under “Investor Relations/Corporate Governance/External Evaluation”.

Compliance

In accordance with the Austrian Stock Exchange Act and the Austrian Regulation on Compliance for Issuers, conwert has implemented compliance guidelines which aim to prevent the misuse and dissemination of insider information and information relevant to compliance.

conwert is classified as a permanent confidentiality sphere and other people who work for conwert, as well as people who have access to insider information through project work, are obliged to observe the compliance guidelines. In order to familiarise managers and people from the confidentiality sphere with the compliance guidelines, as well as to ensure that confidential information is handled responsibly, conwert holds regular training sessions for the relevant employees. Moreover, blackout periods and trading bans are set in the run up to sensitive disclosures (e.g. annual and interim financial results, significant acquisitions), a compliance officer has been appointed and a hotline has been set up to answer any questions on compliance issues.

In line with the ACCG and the Stock Exchange Act, any conwert shares traded by key employees are disclosed on the website and reported to the Financial Market Authority.

Directors’ Dealings

As per Article 48d Section 4 of the Austrian Stock Exchange Act, any financial instrument transactions made by members of the conwert management are published on the company website www.conwert.com under “Investor Relations/ Corporate Governance/Directors’ Dealings” and are reported to the Financial Market Authority. No transactions of this kind were reported in 2013.

The shares directly or indirectly held by members of the Administrative and Executive Boards broke down as follows at the end of 2013:

Name Number as of 31/12/2013*) in %

Administrative Board Members

Johannes Meran -

-Franz Pruckner -

-Eveline Steinberger-Kern -

-Kerstin Gelbmann -

-Alexander Tavakoli -

-Administrative Board total -

-Executive Directors

Thomas Doll 1,175 <0.1

Stavros Efremidis (until end of September 2013) 275,000 0.3

Executive Board total 276,175 0.3

Total 276,175 0.3

*) The shares held by Stavros Efremidis reflect the number of shares reported at the time of his termination as Executive Director in September 2013.

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Vienna, 25 March 2014 The Executive Board of conwert Immobilien Invest SE

Der Verwaltungsrat der conwert Immobilien Invest SE Clemens Schneider CEO Thomas Doll CFO Johannes Meran Chair Alexander Tavakoli Deputy Chair Kerstin Gelbmann Member Eveline Steinberger-Kern Member

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12 Annual Financial Repoprt 2013 | Administrative Board Report

Administrative Board Report

as per Article 41 of the

Austrian Societas Europaea Act

2013 was a busy and successful year for the Administrative Board of conwert Immobilien Invest SE, a year in which it performed its duties in line with the law and the Articles of Association, as well as strategically managing the company. The Administrative Board oversaw the everyday tasks delegated to the Executive Directors, supported and advised the Executive Directors, and passed the budget for the 2013 business year. Furthermore, the Administrative Board received regular and comprehensive written and oral reports from the Executive Directors, both within and outside the Administrative Board meetings. These reports addressed operating activities, the economic state of the company and developments in the Group.

In 2013 the following people sat on the Administrative Board: + Johannes Meran, Chair

+ Franz Pruckner, Deputy Chair + Kerstin Gelbmann, Member + Eveline Steinberger-Kern, Member + Alexander Tavakoli, Member

As of 31 December 2013 the Administrative Board consisted of five members. Franz Pruckner resigned his Administrative Board mandate at the end of 2013 for personal reasons. Alexander Tavakoli was elected as the new Deputy Chair of the Administrative Board effective January 2014.

As in 2012, the entire Administrative Board dealt with all of the matters within its remit. All five Administrative Board members were members of the legally required Audit Committee for the whole of 2013. The Administrative Board and the Audit Committee were therefore once again composed of exactly the same people in 2013. Franz Pruckner chaired the Audit Committee. Kerstin Gelbmann was elected as the new Chair of the Audit Committee upon Franz Pruckner’s departure from the Administrative Board at the end of 2013. In 2013 a Personnel Committee and an Internal Audit Committee were convened in addition to the Audit Committee. The Chair of the Personnel Committee was Franz Pruckner and the Deputy Chair was Eveline Steinberger-Kern; Kerstin Gelbmann and Alexander Tavakoli were both members. The Internal Audit Committee consisted of Alexander Tavakoli as Chair, Eveline Steinberger-Kern as Deputy Chair and Kerstin Gelbmann and Franz Pruckner as members.

In line with the Rules of Procedure, the Administrative Board had to consider every property investment with a value exceeding €3 mn. One particularly noteworthy investment here was the purchase of a residential property portfolio with around 4,000 units in Germany, which was approved by the Administrative Board in August 2013. Furthermore, the work of the Administrative Board in 2013 focused on restructuring the business activities in Germany. A total of 19 Administrative Board meetings were held in 2013.

The Administrative Board formed a Personnel Committee in July 2013 in order to strengthen the Executive Board by appointing a CEO. The Personnel Committee conducted a structured recruitment process in collaboration with an international recruitment consultant. The appointment of Clemens Schneider as the new CEO was announced in November, effective as of February 2014. The Personnel Committee met six times in 2013 and was disbanded after the successful conclusion of the recruitment process.

The Internal Audit Committee was formed in September 2013 in the course of the internal audit in order to evaluate the public allegations against the company and the Chair of the Administrative Board. Audit Partner acted as external auditors in this process. Audit Partner reached the conclusion that the conwert Boards and Committees and the Chair of the Administrative Board had acted appropriately throughout. This was also confirmed by the legal firms Dorda Brugger Jordis and P+P Pöllath + Partners. The Internal Audit Committee met three times and was dissolved following the conclusion of the audits and evaluations.

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The Audit Committee discussed the annual and consolidated financial statements including the management reports and the corporate governance report, as well as the audit reports and the management letter issued by the auditor; the Committee reported to the Administrative Board on these documents. Furthermore, the Audit Committee was responsible for the selection of the auditor and the auditor’s remuneration. The Audit Committee met three times in 2013. The Executive Directors prepared the annual financial statements for the 2013 business year and the management report of conwert Immobilien Invest SE, as well as the consolidated financial statements and the conwert Group management report; these were audited by Ernst & Young Wirtschaftsprüfungsgesellschaft m.b.H. Upon conclusion, this audit did not give rise to any objections. The auditors thereby confirmed that the annual financial statements of conwert Immobilien Invest SE used appropriate accounting policies and fairly presented the financial position, financial performance and cash flows of the Group, and that the management report was consistent with the consolidated financial statements. The consolidated financial statements were audited in line with the International Standards on Auditing of the International Federation of Accountants (IFAC) and were classified as appropriate. The auditor has therefore issued an unqualified audit opinion.

In line with Article 243b of the Austrian Commercial Code, compliance of the corporate governance report was assessed by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH in 2013 and the conclusions did not give rise to any objections.

The conclusion of the Administrative Board’s audit of the individual and consolidated financial statements and the respective management reports and corporate governance report, in line with Article 41 Section 2 of the Austrian Societas Europaea Act, did not give rise to any objections. The Administrative Board thereby approved the individual and consolidated financial statements, which were authorised in line with Article 41 Section 4 of the Austrian Societas Europaea Act.

The Administrative Board would like to thank the Executive Directors and all conwert employees for their dedication and hard work over the past year.

Vienna, 25 March 2014

On behalf of the Administrative Board

Johannes Meran

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“The perfect place for my

daughter to grow up.”

Anett & Luna K.,

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16 Annual Financial Repoprt 2013 | Management Report | Operating Environment Economic backdrop

Europe’s economy continued to suffer from the impact of the economic and financial crisis in 2013. Eurostat reported that eurozone gross domestic product (GDP) fell by 0.4%, although it rose by 0.1% for the EU as a whole. The European economy began to recover over the course of the year and the fourth quarter saw GDP growth reach 0.3% in the eurozone and 0.4% in the EU. This growth was supported by the renewed cut in key interest rates in the eurozone by the European Central Bank, which are now at 0.25%, the lowest rate since the EU was founded. Compared to the rest of Europe, the Austrian and German economies proved robust, as they did in 2012. GDP rose compared to the fourth quarter in 2012 in both countries – by 0.5% and 1.4% respectively -, bucking the European trend.

(Sources: Eurostat: Flash Estimate for the Fourth Quarter 2013, press release dated 14 February 2014; Destatis: Gross domestic product up 0.4% in fourth quarter 2013, press release 14 February 2014)

Operating environment Austria Investment market

Transaction volumes for investments in Austrian property amounted to around €1.7 bn in 2013; a 6% decrease on 2012. In contrast to the previous year, office properties were the most popular asset class, accounting for a share of 32%. These were followed by retail properties and residential real estate, with a share of 23% and 15% respectively. More

than 70% of the total volume came from Austrian investors, who played a more dominant role on the market than in 2012. Non-German-speaking investors had almost no impact on the Austrian market in 2013.

(Source: CBRE Austria Investment Market Report Q4 2013) Vienna housing market

Demand for residential property in Vienna remained high in 2013, leading to another increase in the price of freehold flats. Older properties cost between €2,000 and €4,000/sqm depending on the location and condition. Prime locations in the first district commanded prices of up to €16,000/sqm. New apartments were sold for between €3,000 and €5,000/sqm. In the year under review apartments for rent in Vienna went for an average of €8 to €10/sqm/m, newly built flats were rented for between €10 and €12/sqm/m.

(Source: ÖVI: Austrian Property Market – Outlook 2014) Vienna apartment building market

Vienna apartment buildings remained Austria’s most sought-after property investment. The ever decreasing supply could not, however, keep pace with the strong demand. The reasons for this include buildings being split into freehold apartments and existing buildings being torn down. This led to a 25% fall in transaction volumes on the Viennese apartment building market to around €1.1 bn. The number of transactions also decreased. Top returns declined once again and stood at 2.5% to 2.9%.

(Source: EHL Latest Report on the Vienna Apartment Building Market 2014) Commercial property market

Demand for space in prime locations on Vienna’s high streets continues to be unwaveringly strong, leading top retail rents to reach a new record value of €310/sqm/m in the second half of 2013, compared to the €300/sqm/m at the end of 2012. Prices of up to €350/sqm/m were paid in smaller spaces in prime locations in the first district.

Top rents in shopping centres rose slightly from €101 to €105/sqm/m. Top rents for space in specialist retail centres increased from €12.5 to €13.5/sqm/m. The high level of market saturation means that only a few new projects are planned or under construction in these two segments and numerous older centres are being refurbished or modernised to meet demand.

(Source: CBRE Austria Retail Market Autumn 2013)

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Office property market

In 2013 take-up for rented office space in Vienna was around 295,000 sqm, representing a 14.5% decrease on the previous year. A total of 153,000 sqm of new office space came onto the market, significantly less than in 2012. Combined with stable demand, this led to vacancy rates at year end of 6.6%, a similar level to the year before. In contrast, top rents at the end of 2013 were around 2% higher than the previous year, amounting to €25.25/sqm/m, although rents in good and medium office sites were unchanged.

(Source: CBRE Vienna Office Market Q4 2013)

Operating environment Germany Housing market

Around €13.8 bn was invested in German residential property portfolios in the year under review. This marks an increase of almost 23% on the previous year and is the highest volume since 2006. Over 216,000 residential units were traded in total. However, supply in major cities could not keep pace with investor demand, with interest increasingly turning towards alternative locations such as the Ruhr region or Saxony. The purchase factors for packages for institutional core products in the investment centres rose to 16 to 18 times the actual rent. Once again, listed property companies were the most important players on the market.

(Source: CBRE Run on German residential packages continues unabated, press release dated 6 January 2014) Regional housing markets

Berlin and Potsdam

Approximately €6.8 bn was invested in residential property portfolios in Berlin and the neighbouring area in 2013, making it Germany’s most important regional market by some margin.

Freehold flats in good locations in Berlin and Potsdam were on the market for €1,900 to €3,200/sqm, while rents for older buildings in good locations in Berlin fluctuated between €8.0 and €13.0/sqm/m in the year under review. Apartments in Potsdam were somewhat cheaper at €7.5 to €10.0/sqm/m.

Dresden and Leipzig

In 2013 people paid between €1,200 and €1,600/sqm for freehold flats in older buildings in Leipzig, with prices in Dresden of up to €2,000/sqm. Rents for older apartments in comparable locations were €5.5 to €8.0/sqm/m in Leipzig and €6.5 to €8.5/sqm/m in Dresden, still relatively cheap compared to Germany as a whole.

North Rhine-Westphalia

In Essen prices for freehold flats in good locations were between €2,500 and €3,500/sqm; Wuppertal was significantly cheaper at €1,200 to €1,800/sqm. This was partially reflected in rents: while tenants paid between €7.0 and €10.0/sqm/m in Essen, rents in Wuppertal were between €7.5 and €9.0/sqm/m.

(Sources: JLL The German Investment Market Q4 2013; Capital Property Compass) Investment market – commercial property

The highest revenues since the onset of the financial crisis were achieved on the German investment market for commercial property, with transaction volumes exceeding €30.4 bn. This represents a plus of 21% on 2012. Office properties were once again the most popular asset class, with €15 bn or 50% of total invested capital going here. Retail property accounted for 28.5% of total volumes, while logistics and industrial property were responsible for around 7%. In the period under review, investor interest focused on Germany’s top five locations Berlin, Düsseldorf, Frankfurt, Hamburg and Munich. These cities accounted for around 55% of the total transaction volumes with €16.8 bn. Broken down by city, Munich took first place with €4.7 bn (+33% against 2012), followed by Frankfurt (€3.6 bn or +19%) and Berlin (€3.3 bn or -22%).

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18 Annual Financial Repoprt 2013 | Management Report | Business Performance

Business

Performance

Business developments

Property portfolio and assets

The ongoing positive market environment in Austria and Germany enabled conwert to achieve strong business growth in the residential property sector. The market environment for commercial property and in the CEE remained challenging, whereby conwert exploited the ongoing demand, particularly in Vienna and Austria, to sell off additional properties and apartments. Here, in 2013 commercial property with a total value of €103.4 mn was sold at a margin of 4.5% above the IFRS carrying amount. Sales activities, which benefited from the renewed strong demand in property investments in Austria and Germany by private and institutional investors, as well as the achievement of rental targets, are also reflected in the positive change in vacancy rates.

At 31 December 2013 the conwert property portfolio consisted of a total of 2,603,466 sqm space (31/12/2012: 1,924,433 sqm). The increase in total usable space is due to the comprehensive purchases completed in the year under review and the subsequent significant increase in the German portfolio, which compensated for the sales-related decline in Austria and other countries several times over. As a result, the number of rental units also rose sharply in 2013 to 32,120 (31/12/2012: 20,479). In total there were 27,861 units in the residential property sector (31/12/2012: 16,279) and 3,678 units in the commercial property sector (31/12/2012: 3,721). The number of parking spaces amounted to 14,187 (31/12/2012: 10,795) and the number of other units stood at 581 (31/12/2012: 479). The residential segment accounted for 70.1% of usable space as of the reporting date. At 31 December 2013 conwert’s property assets amounted to €2,868.1 mn (31/12/2012: €2,510.7 mn). This increase primarily resulted from the comprehensive acquisitions in Germany in the year under review, as is the case with most of the other property figures reported.

Total usable space by segment (in 1,000 sqm) Austria Germany Other countries Total 2012 2013 658 578 1,178 1,941 88 84 1,924 2,603

Property assets by segment (in 1,000 sqm) Austria Germany Other countries Total 2012 2013 1,095 1,288 968 1,795 127 105 2,511 2,868

Space by usage type (in 1,000 sqm) Residential Commercial Total 2012 2013 1,125 799 1,826 1,924 778 2,603

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Performance of rents and vacancy rates

conwert’s rental business recorded a stable performance in 2013. Average residential rents stood at €5.33/sqm/m at the end of 2013 (31/12/2012: €5.43/sqm/m) and average commercial rents excluding miscellaneous were at €8.12/sqm/m (31/12/2012: €8.41/sqm/m).

As of the reporting date, the overall vacancy rate was 10.1%, representing a renewed decrease on the previous year (31/12/2012: 10.7%). This is equivalent to a decline of 5.6%. There was a significant improvement in the strategic vacancy rate from 3.0% to 1.6% thanks to the conclusion of renovation work and development measures. The actual vacancy rate was up slightly on last year to 8.5% (31/12/2012: 7.7%) owing to properties placed on the market and in view of the consolidation of two portfolios with above-average vacancy rates in Germany. On a like-for-like basis, there was a 6.7% decline in vacancy rates.

Average rents (in €/sqm) 2013 2012 Change Residential 5.33 5.43 -1.8% Commercial 8.12 8.41 -3.4% Property services

Further structural optimisations were implemented in the service sector in 2013. In Germany alt+kelber Immobilienvertrieb GmbH and alt+kelber Immobilienmanagement GmbH were incorporated into conwert Deutschland GmbH, while the property management company alt+kelber Immobilienverwaltung GmbH remains in place as a subsidiary.

All conwert management services made an exceptional contribution once again in 2013, whereby 1,300 individual units and 76 properties with 1,711 units were sold and 5,283 units were rented out. Rental services for third parties accounted for 49.0% of the total volume

Space managed by segment (in 1,000 sqm) 2012 2013 2011 1,262 1,083 3,407 3,300 4,669 4,383 415 2,678 3,093 Austria Germany Total

Internal/external space managed (in 1,000 sqm) 2012 2013 2011 1,906 1,755 2,763 2,664 4,669 4,419 2,124 969 3,093 conwert Third parties Total Vacancy rates

Vacant space (in sqm)

2012 2013 119,087 Purchased (50,923) Sold (10,138) Organic +/-1.6 10.1 3.0 205,109 263,135 10.7

Strategic vacancy rates (in %) Total vacancy rates (in %)

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20 Annual Financial Repoprt 2013 | Management Report | Business Performance Revenues

At the reporting date conwert revenues totalled €516.4 mn (2012: €625.1 mn). This decrease was due in particular to the reduction in sales volumes on the previous year, as well as lower revenue from third-party services. Sales revenue amounted to €273.9 mn, following on from €409.6 mn in 2012. Rental income rose by 20.8% in the same period from €188.1 mn to €227.3 mn.

Total revenues

Rental income

In 2013 conwert’s rental income increased by 20.8% to €227.3 mn, particularly because of the integration of KWG Kommunale Wohnen AG (KWG), as well as the purchase of a portfolio from GE Capital Real Estate Deutschland (GE portfolio) and the significant subsequent increase in the share of the German property portfolio. NRI rose sharply from €110.5 mn to €141.4 mn; the NRI margin increased to 62.2% (2012: 58.7%). The net initial yield was 6.2% following on from 5.7% at the end of 2012.

Revenue (in € mn)

Rental income Sales proceeds Service revenue Total

2012 188.1 409.6 27.3 625.1 2013 227.3 273.9 15.2 516.4 Revenue by segment (in € mn) 2013 2012 Austria Germany Other countries Group

eliminations Group Group Change

Rental income 65.9 155.7 8.4 (2.7) 227.3 188.1 20.8%

Sales revenue 148.7 118.8 6.4 0.0 273.9 409.7 -33.1%

Service revenue 22.7 36.9 1.2 (47.1) 15.2 27.3 -44.3%

Total revenue 237.3 311.4 16.0 (49.8) 516.4 625.1 -17.4%

Rental income by segment before eliminations (in %) 2013 2012 Austria 65.9 76.2 Germany 155.7 105.6 Other countries 8.4 6.6 NRI by region (in € mn) 2013 2012 Austria 42.2 41.7 Germany 88.4 59.0 Other countries 6.1 3.9 Group eliminations 4.7 5.9 Group 141.4 110.5

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Proceeds from sale of properties

Proceeds from the sale of properties fell by 33.1% to €273.9 mn (2012: €409.6 mn). The focus of sales activities was once again on Austria, despite the significant year-on-year decrease in proceeds from sale of properties; sales revenue here totalled €148.7 mn. Properties in Germany with a total value of €118.8 mn were sold, almost the same level as the previous year. Sales revenue of €6.4 mn in other countries marked a return to somewhat higher proceeds from sale, following on from the previous year when sales practically came to a standstill. The IFRS profit margin for all property assets sold came to 11.1% and the IFRS profit on all properties sold in 2013 amounted to €27.3 mn. In total 2,127 residential and commercial units and 630 parking spaces were sold.

Revenues from property services

Revenues from external property services generated by providing services to third parties amounted to €15.2 mn, representing a decrease of 44.3% on the same period in the previous year; this was caused by the concentration on selected service contracts such as the three DWS residential property funds. Internal revenues from property services generated €47.1 mn. The reduction in internal revenues reflects the streamlined corporate structure in Germany, whereby effects include the invoicing of lower internal commissions.

Sales revenue by segment (in %)

2013 2012

Austria 54.3 70.3

Germany 43.4 29.3

Other countries 2.3 0.4

Sales revenue margins (in %)

Investment property Properties held for sale IFRS margin

2011 2.4 19.8 8.7 2012 3.9 21.6 9.2 2013 4.3 18.5 11.1 Property services (in € mn) Third-party revenues Internal revenues Total service revenues before eliminations 2011 29.5 64.9 94.4 2012 27.3 60.6 87.9 2013 15.2 47.1 62.3

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22 Annual Financial Repoprt 2013 | Management Report | Business Performance EBIT (in € mn) 2012 2013 EBT (in € mn) Financial performance

Rental income exceeded expectations – not least because of the significant increase in the property portfolio – and this, along with a reduction in vacancy rates and the positive development of the sales business, has led to a noticeable rise in the operating results. However, conwert’s overall results were also burdened by multiple one-off effects such as the cost of integrating KWG. Earnings before tax, depreciation and amortisation (EBITDA) amounted to €116.8 mn in 2013 (2012: €97.2 mn). Earnings before interest and tax (EBIT), which reflect the operating performance of the Group and were negative in the previous year, were clearly in the black even in light of the integration of KWG and amounted to €123.4 mn as of the reporting date. Earnings before tax (EBT), which had also been negative in the previous year, stood at €48.7 mn and at €54.5 mn after adjustments of one-off items.

2011

2012 2013

2011

2013 2012 Change

Rental income € mn 227.3 188.1 20.8%

Proceeds from sale of properties € mn 273.9 409.7 -33.1%

Revenues from property services € mn 15.2 27.3 -44.2%

Total revenues € mn 516.4 625.1 -17.4%

Property expenses € mn (85.9) (77.6) 10.7%

Expenses from the sale of properties € mn (246.6) (375.1) -34.3%

Other operating income € mn 10.2 6.1 67.5%

Personnel expenses € mn (32.3) (35.8) -9.9%

Other operating expenses € mn (45.0) (45.5) -1.0%

EBITDA € mn 116.8 97.2 20.2%

Net income from fair value adjustments € mn 9.1 (27.3) -Negative fair value adjustments for

properties held for sale

€ mn (2.6) (9.9) -73.9%

Depreciation, amortisation and impairment € mn (1.0) (118.5) -99.2%

EBIT € mn 123.4 (58.5)

-Net finance costs € mn (74.7) (96.1) -22.3%

EBT € mn 48.7 (154.6)

-Profit/loss € mn 13.3 (172.1)

-Profit after non-controlling interests € mn 7.5 (167.8) -Funds from Operations before sales income

and one-off items (FFO I) *)

€ mn 36.2 22.4 61.6%

Cash profit **) € mn 43.3 37.6 15.2%

Net Rental Income (NRI) € mn 141.4 110.5 28.0%

Earnings per share € mn 0.09 (2.06)

-Diluted earnings per share € mn 0.18 (1.47)

-FFO I/share € 0.44 0.27 63.0%

FFO II ***)/share 0.63 0.52 21.2%

Overview of selected financial performance indicators

*) FFO I: Earnings before tax (EBT) – difference between sales and carrying amount of sold properties + operating expenses of sales income -/+ revaluation gains/losses + depreciation and value adjustments + non-cash components of financial income and other non-cash costs not including non-controlling interests + restructuring costs/one-off costs **) Cash profit: FFO II – actual income taxes paid

***) FFO II: FFO I + difference between sales and carrying amount of sold properties – sales income expenses

119.8 123.4

(58.5)

23.6

48.7

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Revaluation gains/losses

Net revaluation gains/losses for conwert resulted in net gains of €6.5 mn, despite the fact that this included significant negative fair value adjustments for ECO and CEE properties. The challenging backdrop on the commercial property markets and the CEE markets in particular led to negative fair value adjustments of €16.0 mn net for ECO properties and €11.1 mn for properties in other countries, of which €2.3 mn was for ECO properties. The goal of the conwert management remains the timely disposal of both portfolios (ECO and CEE), as conwert lacks the critical mass needed for profitable growth, particularly in CEE. The revaluation of the Austrian portfolio resulted in fair value adjustment gains of €1.9 mn net; if the fair value adjustment of the ECO portfolio in Austria had not been included at a rate of €(6.5) mn, net revaluation gains would have been significantly higher at €8.4 mn. Fair value adjustment of the German portfolio amounted to €18.4 mn net, even though the ECO portfolio in Germany also included negative fair value adjustments of €(7.1) mn net.

The fair value of investment property, determined by an independent expert, must always be taken into account in line with IAS 40. Revaluation gains and losses must be reported in the balance sheet and the income statement, and clearly visible in net gains/losses from fair value adjustments. The portfolio of “properties held for sale” always needs to take into account lower values than the acquisition cost or fair value. This means that revaluation gains above the acquisition cost are not possible, although revaluation losses are recognised in full in the balance sheet. Revaluation losses for the portfolio of “properties held for sale” amounted to €2.6 mn (2012: €9.9 mn).

Fair value adjustments 2013 by segment

Austria Germany Other countries Group*)

Net gain/loss from fair value adjustments € mn 1.9 18.4 (11.1) 9.1

Property assets from investment property € mn 799.3 1,719.2 98.1 2,616.6

Negative value adjustments for property held for sale

€ mn (1.2) (0.1) (1.3) (2.6)

Total value adjustments € mn 0.7 18.3 12.4 6.5

Property assets as at 31/12/2013 € mn 968.2 1,795.2 104.7 2,868.1

Property assets per sqm residential**) 1,639 865 1,068 956

Property assets per sqm commercial**) 1,696 1,290 1,378 1,511

*) following consolidation **) by predominant usage type

Depreciation, amortisation and impairment

Depreciation, amortisation and other impairment charges, which had amounted to €118.5 mn in 2012 – particularly because of depreciation on goodwill – stood at €1.0 mn in the 2013 business year.

Personnel expenses

In 2013 personnel expenses fell by 9.9% from €35.8 mn to €32.3 mn. One key reason for this was the completed integration of KWG and the synergy effects resulting from this. Personnel expenses were also affected by the one-off impact related to the restructuring in Germany, along with redundancy payments to various managers who left the company. Another factor which must be considered is that the comparative value from the previous year does not include personnel expenses from KWG; if these had been included, personnel expenses in the previous year would have amounted to around €38.8 mn.

Other operating expenses

In the 2013 business year other operating expenses amounted to €(45.0) mn (2012: €(45.5) mn). These include one-off impacts, which were also necessitated in the course of integrating KWG. If the relevant administrative expenses of KWG were included, other operating expenses for conwert in the 2012 business year would amount to €(49.0) mn on a

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24 Annual Financial Repoprt 2013 | Management Report | Business Performance / Financial Position and Assets Net finance costs

Net finance costs improved as a result of rising financial income, which offset an increase in finance costs, from €(96.1) mn to €(74.7) mn. Restructuring the swaps and the slight increase in interest rates observed from the second quarter onwards had a particular impact here. Income tax expense

Tax expenses stood at €(35.4) mn in the reporting period, following on from €(17.5) mn the year before; the increase was due to value adjustments for deferred tax assets.

Profit and earnings per share

At 31 December 2013 conwert achieved profits after income tax and non-controlling interest of €7.5 mn, following on from the loss of €167.8 mn in the previous year. Basic earnings per share after non-controlling interest stood at €0.09 in the reporting period (2012: €(2.06)). Funds from Operations (FFO) and cash profit

The strong rental business in 2013 led to a 61.6% rise in Funds from Operations before sales income and one-off items (FFO I) to €36.2 mn (2012: €22.4 mn). FFO II (FFO I including sales income) amounted to €52.1 mn (2012: €42.5 mn) and was therefore up by 22.6% on the 2012 figures, despite a 33.1% reduction in sales revenue. The cash profit (FFO II less cash taxes) stood at a solid €43.3 mn, representing an increase of 15.2% (2012: €37.6 mn). FFO I per share rose sharply in the reporting period and was up 63.0% to €0.44 (2012: €0.27). Correspondingly, FFO II per share also increased to €0.63 (2012: €0.52).

The FFO II return in relation to the share price*) was at a high 6.7% on the effective date 30 December 2013 . The FFO I return was also pleasing at 4.7%.

FFO I (in € mn) 2012 2013 FFO II (in € mn) 2011 2012 2013 2011 19.0 36.2 22.4 46.9 52.1 42.5

*) The share price of conwert shares stood at €9.329 on 30 December 2013.

4.7

%

FFO I RETURN

6.7

%

FFO II RETURN

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Balance sheet structure (in € mn) Equity & Liabilities Assets

Financial Position

and Assets

Analysis of financial position

As at 31 December 2013 conwert had total assets of €3,165.7 mn (31/12/2012: €2,870.1 mn). The 10.3% increase in total assets was primarily caused by the consolidation of KWG and the purchase of the GE portfolio, along with the loan funding taken on in relation to this transaction. As a consequence, there was also a significant increase in the item “investment property”, which amounted to €2,616.6 mn at the end of the year under review, following on from €2,207.4 mn in 2012. It therefore continues to be the largest item on conwert’s balance sheet by some margin, whereby its share of total assets increased sharply once again to 82.7% (31/12/2012: 76.9%). At the reporting date the item “properties held for sale” of €251.5 mn were recognised in the balance sheet. At 31 December 2013 current assets totalled €499.3 mn.

Overview of balance sheet

2013 2012 Change

Total non-current assets € mn 2,666.4 2,282.6 16.8%

Investment property € mn 2,616.6 2,207.4 18.5%

Investments in associates € mn 15.6 14.3 8.8%

Financial assets € mn 7.8 4.9 58.9%

Total current assets € mn 499.3 587.5 -15.0%

Properties held for sale € mn 251.5 303.3 -17.1%

Cash and cash equivalents € mn 128.6 137.2 -6.3%

Total assets € mn 3,165.7 2,870.1 10.3%

Total equity € mn 1,128.6 1,025.0 10.1%

Non-controlling interests € mn 61.9 6.6 >100%

Total non-current liabilities € mn 1,532.3 1,440.3 6.4%

Non-current interest bearing loans and borrowings

€ mn 1,081.6 921.1 17.4%

Bond liabilities € mn 64.7 64.6 0.1%

Convertible bonds € mn 205.2 223.1 -8.0%

Total current liabilities € mn 504.9 404.8 24.7%

Current interest bearing loans and borrowings

€ mn 378.0 308.0 22.7%

Total equity and liabilities € mn 3,165.7 2,870.1 10.3%

EPRA NAV (basic) per share € 15.40 15.79 -2.5%

Equity ratio *) % 35.7 35.7

-Gearing **) % 154.2 146.9 5.0%

Net debt € mn 1,740.6 1,505.7 15.6%

*) equity including non-controlling interests **) total net debt/total equity

Equity

The Group’s equity increased by 10.1% on the previous year to €1,128.6 mn (31/12/2012: €1,025.0 mn). The equity ratio remained unchanged at 35.7% (31/12/2012: 35.7%). At the reporting date gearing stood at 154.2% (31/12/2012: 148.9%).

3,165.7 3,165.7 499.3 2,666.4 504.9 1,128.6 1,532.3 Current assets Non-current assets Current liabilities Non-current liabilities Equity

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26 Annual Financial Repoprt 2013 | Management Report | Financial Position and Assets Authorised and contingent capital

As per the applicable statutes, the Administrative Board is authorised as of 4 July 2013 to carry out a capital increase of up to an additional €213,398,180 by issuing up to 42,679,636 new no-par value bearer shares. In cases where the share capital is increased against contribution in kind, the Administrative Board is authorised to exclude shareholders’ pre-emptive rights up to a nominal amount of €85,359,273 (20%). However, the Administrative Board did not exercise this right in the year under review.

In addition, the Group has access to contingent capital amounting to €384,116.700 (45%), which can be used to service convertible bonds. No rights of exchange or subscription were exercised by the holders of convertible bonds in 2013.

In order to provide the greatest transparency and basis for comparison with market participants, conwert reported both diluted and basic EPRA NAV (Net Asset Value of the European Public Real Estate Association) at the end of 2013. EPRA NAV is primarily used as an indicator of the long-term fair value of equity. It is calculated on the basis of equity (before non-controlling interests), adjusted for the impact of exercising options, convertible bonds and other equity instruments, as well as adjustment of the market value of derivative financial instruments and deferred taxes, i.e. adjusting items which have no impact on the company’s long-term performance.

Basic EPRA NAV per share declined from €15.79/share by 2.5% to €15.40/share, mainly as a result of lower negative market values of interest-rate hedges, as well as an adjustment in the sell portfolio and its valuation. At the end of the 2013 business year, diluted EPRA NAV stood at €14.98/share (31/12/2012: €15.44/share).

Non-current and current liabilities

At 31 December 2013 conwert’s financing volumes totalled €1,751.7 mn, whereby the takeover of KWG and the acquisition of the GE portfolio led to a 15.1% increase. Non-current loans and borrowings amounted to €1,081.6 mn (31/12/2012: €921.1 mn), while current loans and borrowings accounted for €378.0 mn (31/12/2012: €308.0 mn). Interest-bearing loans and borrowings of €41.0 mn were recognised in current liabilities as of 31 December 2013, owing to the contractual agreement for either party to be able to cancel them at any time. However, the loan agreements and the banks’ internal credit approval of these loan liabilities have a long-term profile running until between 2021 and 2033. In practice and in view of the parties’ intentions and the respective economic status of the financing, the company assumes a probable term of just €2.9 mn within one year, €10.9 mn in one to five years and €27.2 mn with a term of over 5 years. The three existing convertible bonds are shown with their maturity date, regardless of any possible rights of cancellation.

NAV breakdown*)

(in € mn unless otherwise indicated)

31/12/2013 31/12/2012 Change

Equity 1,128.6 1,025.0 10.1%

No. of shares as of reporting date less treasury shares 82,782,809 81,495,309 1.6%

Equity attributable to conwert shareholders 1,066.6 1,018.4 4.7%

Revaluation of sell portfolio 26.3 53.5 -50.8%

Fair value financial instruments 112.3 175.3 -35.9%

Long-term financing from tenants 11.4 13.2 -13.6%

Deferred taxes 86.5 70.1 23.4%

Basic EPRA NAV/share (in €) 15.40 15.79 -2.5%

*) determined on the basis of EPRA criteria

EPRA NAV/share (in €)

31/12/2011

18.35 17.03

15.79 15.44 15.40 14.98

Basic EPRA NAV Diluted EPRA NAV

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Nominal interest rate (in %) Effective interest, weighted (in %) Average term, weighted (in years) Carrying amount (in € mn) Convertible bonds Maturity 2014 1.5% 3.2% 0.9 22.2 Maturity 2016 5.3% 5.4% 2.1 130.4 Maturity 2018 4.5% 4.7% 4.7 74.8 Bond liabilities Maturity 2017 5.8% 5.9% 3.5 64.7

Loans and borrowings at variable interest rates

Maturity 2014 2.1% 2.6% 0.7 158.0

Maturity 2015-2018 1.7% 1.8% 3.6 422.1

Maturity after 2018 1.8% 1.9% 13.9 473.1

Loans and borrowings at fixed interest rates

Maturity 2014 4.5% 4.6% 0.3 11.3 Maturity 2015-2018 4.0% 4.1% 2.3 119.4 Maturity after 2018 3.9% 3.9% 14.8 238.0 Finance leases Maturity after 2018 1.5% 1.5% 16.1 37.7 Total 1,751.7

At 31 December 2013 the average remaining financing term was 7.79 years (31/12/2012: 8.84 years). From the total financing volumes, 62.3% was at variable interest rates and 37.7% was subject to fixed interest. At the reporting date 81.1% of financial liabilities had been hedged against interest rate risks. The effective interest rate of the financing volume was 2.80% p.a. before hedging costs and 4.34% p.a. after hedging costs. Liabilities in Euros accounted for over 99% as of the reporting date; the remainder were in Czech koruna. The sensitivity analysis related to interest rates in note 8 of the notes contains further details on financing. As a large percentage of financial liabilities are hedged against interest-rate risks, an increase in interest rates by 100 basis points as of the reporting date would only lead to additional financial expenses of around €3.6 mn. At the same time, the increase in the interest curve would have a positive effect on the market value of conwert’s derivatives.

In addition to ordinary interest expense, net finance costs of €(74.7) mn also contain significant extraordinary items, some of which are non-cash items, which mostly result from the impact of convertible bonds of €(3.6) mn, IFRS financing costs of €(4.3) mn and derivative restructuring and value adjustments of €5.8 mn net.

Maturity of interest-bearing loans and borrowings (before deduction of transaction costs, excluding working capital line) (in € mn) Extension volumes 2014 148.7 2015 81.6 2016 120.6 2017 214.6 2018 122.6 2019 33.9 2020 38.6

Figure

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References