2014 Half year report

Transcription

1 2014 Half year report

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3 // Group Figures (IFRS) In EUR thousand H H Change Income statement Revenue 31,671 34, % Total operating revenue 31,826 34, % EBIT 24,724 27, % EBIT margin 77.7 % 79.6 % - Earnings before tax (EBT) 16,152 17, % EBT margin 50.8 % 50.3 % - Consolidated net income 13,574 14, % Earnings per share (undiluted) EUR 0.56* EUR % Balance sheet 31 / 12 / / 06 / 2014 Change Total assets 864, , % Equity 319, , % Equity ratio 37.0 % 37.2 % - Net debt 473, , % Gearing % % - Net asset value (NAV) per share EUR EUR % Other key financials 30 / 06 / / 06 / 2014 Change FFO per share EUR 0.52* EUR % FFO return (as of June 30) 5.28 % 4.19 % - 31 / 12 / / 06 / 2014 Loan-to-value (LTV) ratio 56.6 % 57.2 % - Number of shares 22,151,331 22,151,331 - *Figure of previous year adjusted due to modified average number of shares

4 // Contents To our shareholders 4 Letter to shareholders 6 The VIB Group's real estate portfolio 8 f Overview 8 f Real estate locations 10 f New investments in f Portfolio development 11 f Real estate portfolio financing 11 The share 14 f Key data and share data 14 f Share price performance 14 f Shareholder structure 15 f Analysts' recommendations 16 f Investor relations 16 f Financial calendar 17 f 2014 Annual General Meeting 17 Interim management report 18 Basis of the Group 21 f Business activities, Group structure and participations 21 f Employees 22 f Corporate targets and strategy 22 f Steering system 23 Business report 24 f Market and competitive environment 24 f Business progress 25 f Comments on business results and analysis of results of operations, net assets and financial position 25 Results of operations 25 Net assets 27 Financial position 28 f Overall statement on the company's business position 28

5 Report on events after the balance sheet date 28 Report on outlook, opportunities and risks 28 ffoutlook 28 ffopportunities report 29 ffrisk report 29 Risk management 29 Company risks 29 Summary of risk position 29 Interim financial statements 30 Consolidated income statement (IFRS) 33 Consolidated balance sheet (IFRS) 34 Imprint 36

6 4 // To our shareholders Letter to shareholders 6 The VIB Group's real estate portfolio 8 ffoverview 8 ffreal estate locations 10 ffnew investments in ffportfolio development 11 ffreal estate portfolio financing 11 The share 14 ffkey data and share data 14 ffshare price performance 14 ffshareholder structure 15 ffanalysts' recommendations 16 ffinvestor relations 16 fffinancial calendar 17 ff2014 Annual General Meeting 17

7 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 5

8 6 Holger Pilgenröther Ludwig Schlosser Peter Schropp // Dear shareholders, Once again, VIB Vermögen AG looks back on a successful first half-year. From the end of the first quarter on, we were able to realise attractive investments, transferring two further properties to our real estate portfolio. As expected, our revenue was up by 8.3 % to EUR 34.3 million (H1 2013: EUR 31.7 million), and our EBIT of EUR 27.6 million was 11.6 % higher than in the prior-year comparable period (EUR 24.7 million). As a consequence, we reported further growth in both our revenue and our earnings. When adjusted to reflect positive value changes in investment properties, EBIT amounted to EUR 26.5 million as of June 30, 2014 (June 30, 2013: EUR 23.3 million). With this adjusted EBIT, we are completely within the range of our forecast values for FFO per share an indicator of operating cash inflows grew by 11.5 % to reach EUR 0.58 in the first half of the year (H1 2013: EUR 0.52). NAV per share also registered a gratifying increase to EUR (December 31, 2013: EUR 13.88). Our success does not occur just by chance. Instead, we make recourse to a number of strategic and operational strengths. We have access to an extensive network within our economically strong focus region of Southern Germany. We select our tenants carefully, and particularly prioritise long-term rental agreements that secure plannable income. Moreover, we already oriented our portfolio several years ago more strongly towards the future trend sector of logistics, and thus we are generating attractive returns in this area. Continued high demand for logistics properties and spaces gives us confidence to further continue along this path. Given the extreme shortage of appropriate commercial properties, we particularly regard proprietary developments as a sensible supplement to meet growing demand for such properties. Here, too, we are positioned optimally. We have proved our extensive expertise in this

9 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 7 area with numerous successful development projects such as the "Conti Temic" property in Ingolstadt that was completed in 2012, or our various developments for MAN. As a consequence, we are actively positioning ourselves as a strong partner to the German economy. Our balanced and sustainable financing strategy underpins such growth. We finance ourselves largely through annuity loans with long-term fixed interest arrangements. We can arrange financing facilities on attractive terms in the current interest-rate environment. As of June 30, 2014, the average rate of interest across our entire borrowing portfolio has dropped to 3.91 % (June 30, 2013: 4.14 %). Assuming that the level of interest rates remains favourable, and given the fact that existing fixed interest borrowings are to expire over the coming years, additional opportunities will arise to optimise our overall rate of interest. The price of the VIB share has performed very well since the start of the year (beginning with EUR 11.66), amounting to EUR as of June 30, The discount to NAV (net asset value) per share that existed in the past has been closed as a consequence. The EUR 0.45 per share dividend for the 2013 fiscal year that was approved by the AGM on July 2, 2014 continues to represent good return in relation to the current share price. We aim to continue on our usual, successful path during the second half of the year, and over the coming years. The forecast for the full 2014 year remains unchanged. As already announced, Peter Schropp will leave the company as of September 30, 2014 after more than five years of successful activity on the Managing Board, in order to take on a new career responsibility. Martin Pfandzelter will succeed him on the Managing Board. Mr. Pfandzelter currently holds an appointment at an strong real estate financing company in Germany, and has many years of experience in the real estate area. On the Managing Board, he will be responsible for the real estate area. We would like to convey our special thanks to our staff, whose work has made a decisive contribution to the successful course of the first half of the year. Yours sincerely Neuburg / Danube, August 6, 2014 Ludwig Schlosser (Managing Board Chairman) Holger Pilgenröther (Member of the Managing Board) Peter Schropp (Member of the Managing Board)

10 8 // Real estate portfolio Overview Key data relating to the real estate portfolio Number of properties 99 properties Rentable area approx. 915,000 m² The profitability of a property is one of the most important investment criteria for VIB. Thanks to its sound regional network, the company is also capable of achieving attractive rental yields in an environment where returns on investments are falling. The average rental yield on the total portfolio stood at 7.3 % as of July 1, Only slight differences are observable in relation to the individual asset classes. Rental return by sector (in %) Market value of portfolio Annualised rental income EUR million EUR 61.3 million Vacancy rate 2.5 % Status as of: July 1, 2014 In April 2014, one property with a rentable space of around 630 m² was successfully sold for portfolio optimisation reasons. The disposal price was above its fair value. Including the two newly acquired properties, the real estate portfolio of VIB Vermögen AG (VIB) as of July 1, 2014 now comprises 99 properties with a total rentable space of around 915,000 m². Most of the properties are located in the economically strong region of Southern Germany. Over the past decades, the company has established a powerful network in Bavaria and Baden-Württemberg. Given the high quality of the real estate portfolio and the company's extensive market knowledge, the vacancy rate stands at just 2.5 %, which is low on a sector comparison. VIB maintains close contacts with its tenants, and carries out an active inhouse asset management. As of July 1, 2014, the market value of the real estate portfolio amounted to EUR million (including property under construction). Based on the valuation of the real estate portfolio as of December 31, 2013, this comprises all portfolio changes, with the two purchases being measured in line with standard in-house practice. The properties generated around EUR 61.3 million of net rental income as of July 1, Logistics Retail Industry Status as of: July 1, 2014 Office/ Others Ø rental yield In order to remain largely independent of cyclical trends in individual sectors, VIB sets great store by diversifying its real estate portfolio in relation to asset classes (please see the graph "VIB Group real estate portfolio by net rental revenue per segment"). Along with retail properties, we are focusing to a greater extent on the logistics real estate area. In these areas, VIB is benefiting from the growing importance of e-commerce, global trade interconnections, high demand for logistics spaces arising from the advancing individualisation of products, and continuous growth in purchasing power in Southern Germany.

11 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 9 VIB Group real estate portfolio by net rental revenue per segment (in %) Office/Service/Other Logistics VIB Group's top 10 tenants Tenant Share of total annual net rental income Locations Industry Gartenfachmarkt Dehner % 15 Rudolph Group 7.37 % Retail Geis Industrie- Service GmbH 6.78 % 2 Gillhuber Logistik GmbH 4.37 % 1 Status as of: July 1, 2014 Above and beyond this, VIB minimises its portfolio risks through entering into long-term rental agreements. The average residual term of the rental agreements amounted to 6 years and 8 months as of July 1, 2014, which makes it easier to forecast income, and thereby also forming the basis for the company's attractive dividend policy. Even the very few rental agreements with comparatively short residual terms are cancelled in only the rarest instances. They mostly extend automatically to repeat the originally agreed duration, or are converted into rental contracts of indefinite duration. Before entering into any rental contract, VIB carefully reviews a potential contractual partner in order to secure a solvent and multi-layered tenant structure, and to reduce rental default to a minimum. The company generates more than 10 % of its total net rental income from one individual tenant. Insofar as this relates to the company Dehner, this is an established operator of specialist garden market centres in Germany, which, with its market-leading position, boasts a business model that has been tried and tested over decades. More than half of the tenants comprise either medium-sized industrial and logistics companies, or retail groups with strong credit ratings. Loxxess Group 4.14 % 2 Anylink Systems AG 3.91 % 1 Continental Automotive GmbH 3.76 % 2 Lidl-Schwarz Group 3.27 % 4 LIV Logistikimmobilienvermietung GmbH 2.86 % 3 Distriparts Deutschland GmbH 2.76 % 1 Other % - VIB Group total % - Status as of: July 1, 2014

12 10 Real estate locations Kiel Schleswig- Holstein Hamburg Bremen Niedersachsen Berlin Hannover Potsdam Magdeburg Brandenburg Mecklenburg- Vorpommern Schwerin Nordrhein- Westfalen Sachsen- Anhalt Düsseldorf Sachsen Hessen Erfurt Dresden Thüringen Rheinland- Pfalz Mainz Wiesbaden 1 Saarland Stuttgart Nürnberg Bayern 2 Neuburg a.d. Donau Ingolstadt Regensburg Baden- Württemberg München New Investments Bischberg-Trosdorf (near Bamberg) Nördlingen Ingolstadt Type of use: Retail Art Type der of Liegenschaft: use: Industrie Retail Rental area: 13,770 m² Nutzfläche: Rental area: ,580 m² m² Investment volume: EUR 22.2 million Investitionsvolumen: Investment volume: 27,7 EUR 9.1 Mio. million EUR

13 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 11 Founded in Neuburg / Danube in Upper Bavaria, and with roots in promoting and supporting the regional economy, VIB focuses its investments on the Southern German region. The management's many years of personal contacts that are characterised by mutual trust enable VIB to exploit investment opportunities at an early stage a significant competitive advantage. Southern Germany is also the region in Germany with the strongest growth. It is characterised by a varied economic structure, is located in a favourable transportation position in the centre of Europe, and enjoys a positive sociodemographic forecast for its future compared with the German average. All of these beneficial aspects promote the stability of the value of the real estate portfolio. At the same time, VIB's portfolio also comprises properties located in other parts of Germany. This has occurred mostly where VIB tenants have expanded outside the Southern German region to other regions of Germany, and in doing so have not wished to forego VIB's extensive commercial real estate experience and high degree of reliability as a lessor. Portfolio development At the start of 2014, VIB Vermögen AG again took the opportunity to realise promising and profitable investments, and to thereby further strengthen its portfolio. For example, the company purchased a large shopping centre in Bischberg-Trosdorf near Bamberg in January. This industrial property - with a rentable space of 13,770 m² and a EUR 22.2 million investment volume is already fully rented - generating a 7.4 % annualised rental yield. In February, VIB invested EUR 9.1 million in a modern retail property in Nördlingen, a city that enjoys favourable transportation connections. This property has a 7.2 % rental yield and a rentable space of 8,580 m². These two new properties allowed the company to acquire further tenants with strong credit ratings on the basis of long-term rental agreements (durations of between 5 and 15 years). As the properties in Bischberg- Trosdorf and Nördlingen transferred to the company's real estate portfolio in early March 2014, they have already contributed additional rental income. The very high rental ratio of 97.5 % as of July 1, 2014 (based on rental income) highlights the success of the business operations. When measured in terms of the average rental ratio of the past 12 months, the figure was as well 97.5 %. At the bottom line, the VIB Group as of July 1, 2014 holds a broadly diversified portfolio of high-quality real estate with a total rentable space of around 915,000 m² and an above-average, high rental return of 7.3 %. VIB will continue to strengthen its real estate portfolio through project development and targeted investments. In accordance with its general investment criteria, the company will continue to invest on a solid financial basis. Real estate portfolio financing The sustainable and secure financing of investments has proved critical to the company's success over recent years. This is reflected in a solid equity ratio of around 37.2 % and a healthy relationship between net debt and the market value of the real estate portfolio ("loan to value", LTV). The LTV amounted to 57.2 % as of the halfyear reporting date. In view of this situation, VIB enjoys very good access to favourable financing arrangement that it secures on a long-term basis through close and regular contact with its financing partners frequently local banks and savings banks. Annuity loans form the core of the financing strategy in other words, loans with constant annuity instalments over the entire loan term. The annuity to be paid by the borrower includes both repayment and interest components. As the remaining loan is gradually repaid, the interest portion of the annuity decreases and the loan repayment portion increases. Long-term fixed interest arrangements make it easier to plan expected future cash flows. For this reason, VIB has entered into further long-term fixed interest arrangements over the past six months. VIB has reduced it's interest costs further during the past six months as a result of new interest rate agreements and the currently

14 12 low level of interest rates for short-term fixed interest: the weighted average interest rate for the borrowing portfolio of VIB amounted to 3.91 % as of June 30, 2014 (June 30, 2013: 4.14 %). Change in average interest rate for borrowings portfolio (in %) H H H H H H The portfolio of borrowings of VIB is well structured in terms of fixed interest terms. The interest rates for around 46.9 % of the borrowings are fixed long-term. (Schedule of fixed interest arrangements in the years 2018 to 2024). Fixed interest arrangements end in the years 2016 and 2017 in the case of around 34.2 % of the portfolio of borrowings. The fixed interest borrowings that expire in these two years currently have a balanced average rate of interest of 4.42 % and 4.98 % respectively (please see the graph below). Assuming that the interest rate level remains low, there is potential to reduce the average rate of interest on the overall portfolio in the future. In the case of variable rate borrowings (approximately 16.7 % share of the overall portfolio borrowings), the company benefited from the continued low interest rate level on EURIBOR basis during the period under review, and refinanced itself on attractive terms. The company typically concludes borrowings without covenants further proof of the solidity of the company's financing, and the confidence of its financing partners in VIB. Borrowings by scheduling of fixed interest and average interest rate in EUR million % % 4.42% 3.39% % 3.53% 5.33% 4.59% 3.16% 4.70% 3.66% 4.92% variabel credit volume % = average interest rate of expiring fixed interest rate per respective year Status as of June 30, 2014

15 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 13 The sustainable creation of a valuable real estate portfolio in combination with positive business results, and the accompanying enhancement of equity, fed through to a continuous rise in net asset value (NAV) over recent years. Since 2005, NAV has more than quadrupled from EUR 78.1 million to currently EUR million. As of June 30, 2014, this corresponded to EUR of NAV per share. The company has also been financing itself in 2012 and 2013 through issuing mandatory convertible bonds. This financing form offers two types of benefits: Firstly, the proceeds from mandatory convertible bonds can already be deployed as equity when acquiring real estate; secondly, this allows VIB to broaden its investor base, thereby diversifying its financing sources.

16 14 // The share Key data and share data Key data Sector Real estate German Securities Code (WKN) ISIN Ticker symbol DE VIH Initial listing 28 / 11 / 2005 Stock exchanges / market segment Share class Munich / Open market (m:access) Frankfurt / Open market Ordinary bearer shares (no-par value) Key share data Subscribed capital EUR 22,151,331 Notional value per share EUR 1.00 Number of shares in issue (as of June 30, 2014) 22,151,331 NAV per share (as of June 30, 2014) EUR Balance sheet equity (as of June 30, 2014) EUR 333,278 thousand Dividend per ordinary share for the 2013 fiscal year EUR 0.45 Year-end share price (2013) EUR Closing price on June 30, 2014 EUR year-high EUR (June 4, 2014) 2014 year-low EUR (January 14, 2014) Average daily turnover in 2014 Market capitalisation on June 30, ,335 shares EUR million Share price performance since January 1, 2014 EUR % % % % 10.5 EPRA-Index Germany VIB Vermögen AG SDAX DAX 90%

17 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 15 The DAX index of leading German shares performed well during the first six months of 2014, appreciating by 5 % from the 9,400 points that were recorded at the start of the year up to 9,833 points as of June 30, It also breached the 10,000 point mark for the first time in June. The SDAX index, too, which is a good comparable index for the VIB share given the company's size, was registered at 8 % ahead of its year-opening price, having climbed to 7,386 points by June 30, The VIB share started the year at EUR 11.70, reaching its provisional high for the year of EUR on June 4, It ended its second-quarter trading on June 30, 2014 at EUR 13.85, reflecting a market capitalisation of EUR million. With an increase of 18 %, the VIB share also outperformed the EPRA Germany real estate index, which was up by 14 %. Trading volumes in the VIB share (XETRA) amounted to 2.0 million shares during the first half of 2014, significantly higher than the 1.8 million shares during the prior-year comparable period. Accordingly, the average trading volume increased by 1,500 shares to around 16,335 shares per day (H1 2013: 14,900 shares per day). The share price continued to perform well after the end of the reporting period. Change in dividend per share (for the respective fiscal years in EUR) Change in market capitalisation as of year-end (in EUR millions) /06/2014 Shareholder structure Shareholder structure (in %) Supervisory Board Kreissparkasse Biberach Raiffeisenbank-Volksbank Neuburg/Donau eg Status as of: June 30, Management Free Float The shareholder structure of VIB Vermögen AG continues to show a balanced distribution consisting of a majority free float (77.8 %) and a few individual investors who are invested on a long-term basis. Two regional banks founding investor Raiffeisen-Volksbank Neuburg / Donau eg and Kreisparkasse Biberach are invested as anchor shareholders

18 16 Analysts' recommendations As of June 30, 2014, VIB is being regularly covered by 8 analysts. Almost all of the analysts recommend the VIB share as a buy a further confirmation of the company's business model and strategy. VIB Vermögen AG is permitted to make some of these research reports available to its shareholders for downloading at within the "Investor Relations" area. Date Recommendation Share price target (EUR) Baader Bank (André Remke) 25 / 07 / 2014 buy Bankhaus Lampe (Dr. Georg Kanders) 17 / 07 / 2014 buy equinet Bank (Jochen Rothenbacher) 20 / 03 / 2014 accumulate GBC AG (Cosmin Filker) 14 / 03 / 2014 buy Mirabaud (Emmanuel Valavanis) 04 / 03 / 2014 buy Petercam (Herman van der Loos) 06 / 08 / 2014 add SRC Research (Dennis Kuhn) 04 / 07 / 2014 buy Warburg Research (Torsten Klingner) 14 / 05 / 2014 buy Investor relations The listing of the VIB share in the m:access segment of the Munich Stock Exchange, as well as in the Open Market of the Frankfurt Stock Exchange, requires open and comprehensible communication. Irrespective of this, active dialogue with analysts, investors, private investors and the specialist press is very important to the company also, and especially, during periods in which business is occasionally not proceeding quite as positively as at other times. For this reason, VIB places a strong emphasis on prompt and transparent reporting. All publications of relevance to the capital market are published in both German and English, in order to thereby also provide extensive information to international investors. VIB also seeks direct contact with the financial community. The Managing Board conducts regular discussions with analysts, investors and the media. VIB was also present at a large number of capital market conferences during the first half of 2014 (Petercam Real Estate Conference, Fifth Southern German Capital Market Conferences, HSBC Real Estate Conference, MKK Munich), where it presented its strategy, corporate trends and recent business results to a broad audience. At various roadshows both in Germany and abroad (Edinburgh, Frankfurt, Paris, London, Vienna), the company also responded to questions from interested investors and capital market journalists. Finally, the company additionally engaged in dialogue and responded to questions through investor conferences, road-shows, telephone calls and meetings, including at the company's headquarters in Neuburg / Danube, for example.

19 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 17 Financial calendar September 10, 2014 September 22, 2014 September 24, 2014 SRC Forum, Frankfurt Berenberg and Goldman Sachs Corporate Conference, Munich Baader Investment Conference, Munich November 12, 2014 Publication of second 2014 interim report November 13, 2014 Commerzbank German Commercial Property Forum, London 2014 Annual General Meeting At the 2014 AGM which was held on July 2, 2014 in Ingolstadt, VIB Vermögen AG gave an insight into the past year's business trends, and explained its strategy and business model to its shareholders. A total of 47.3 % of the voting-entitled share capital was present. As in the past, shareholder approval of the agenda items was again very high. Four agenda items were approved with at least % of the votes: For example, the AGM approved the increase in the dividend from EUR 0.40 to EUR 0.45 for the 2013 fiscal year. This dividend was distributed to shareholders on July 3, The meeting also approved the discharge of the Managing and Supervisory boards, as well as the Supervisory Board's proposal for the auditor for the 2014 fiscal year. Finally, the AGM authorised the Managing Board with % of the voting-entitled shares present to issue convertible bonds and / or bonds with warrants in a total nominal amount of up to EUR 39 million, to exclude subscription rights, and to also create Conditional Capital 2014 in an amount of EUR 2,215,133.

20 18 // Interim management report Basis of the Group 21 ffbusiness activities, Group structure and participations 21 ffemployees 22 ffcorporate targets and strategy 22 ffsteering system 23 Business report 24 ffmarket and competitive environment 24 ffbusiness progress 25 ffcomments on business results and analysis of results of operations, net assets and financial position 25 Results of operations 25 Net assets 27 Financial position 28 ffoverall statement on the company's business position 28 Report on events after the balance sheet date 28 Report on outlook, opportunities and risks 28 ffoutlook 28 ffopportunities report 29 ffrisk report 29 Risk management 29 Company risks 29 Summary of risk position 29

21 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 19

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23 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 21 // Basis of the Group 1. Business activities, Group structure and participations VIB Vermögen AG (also referred to below as the "VIB Group" or "VIB") is a medium-sized company that specialises in commercial real estate management and development. The investment focus is on commercial properties in the high-growth economic region of Southern Germany. Founded as an unincorporated firm in 1993, it was converted into a public stock corporation in VIB's shares have been listed on the stock exchanges of Munich (m:access) and Frankfurt (Open Market) since A "develop-or-buy-and-hold" strategy forms the core of the business model. The company acquires portfolio properties or develops properties for its own portfolio in order to then hold them over the long term. VIB also holds investments in companies with real estate assets. In total, the VIB Group portfolio as of June 30, 2014 comprise 99 attractive logistics properties, industrial buildings, shopping and specialist market centres, as well as commercial and service centres with a total rentable space of around 915,000 m². The real estate portfolio is managed both by VIB Vermögen AG itself and its whollyowned subsidiary Merkur GmbH. Overview of participating interests as of June 30, % % % % % VIB Vermögen AG % Merkur GmbH % KHI Immobilien GmbH RV Technik s.r.o. CZ IPF 1 GmbH IPF 2 GmbH BBI Bürgerliches Brauhaus Immobilien AG % BHB Brauholding Bayern-Mitte AG ISG Infrastrukturelle Gewerbeimmobilien GmbH % Interpark Immobilien GmbH % VSI GmbH % IVM Verwaltung GmbH % VIMA Grundverkehr GmbH In 2006, VIB Vermögen AG acquired a majority interest in BBI Immobilien AG. This interest currently amounts to %. VIB Vermögen AG currently indirectly holds 32.3 % of the shares of the subsidiary of BBI Immobilien AG, BHB Brauholding Bayern-Mitte AG, which was founded in November A profit transfer agreement was concluded between VIB Vermögen AG and BBI Immobilien AG on May 6, Accordingly, VIB Vermögen AG has undertaken to pay the free float shareholders of BBI Immobilien AG reasonable monetary compensation (a guaranteed dividend) of EUR 0.64 (gross) per ordinary share for the duration of this agreement as a repeat annual payment. As an alternative to paying compensation, VIB Vermögen AG undertakes, upon request by the shareholder, to acquire their ordinary shares in BBI Immobilien AG at a conversion ratio of 8.02 to 11.62, in other words, against compensation in shares in the amount of 1.45 ordinary shares in VIB Vermögen AG

24 22 per ordinary share in BBI Immobilien AG. A resolution by the General Meeting on June 25, 2008 created conditional capital of up to EUR 1,356, for this share swap. As of June 30, 2014, this conditional capital still amounted to EUR 603, as a result of the shares exchanged. The deadline for acceptance of the settlement offer (exchange of shares) is generally two months after the settlement offer is published. The settlement offer was published on March 3, As far as pending lawsuits against VIB Vermögen AG relating to the level of the exchange ratio and the guaranteed dividends are concerned, the relevant court passed a ruling on February 14, Accordingly, the guaranteed dividend was set at EUR 0.74 (gross) per ordinary share. As a consequence, all shareholders in BBI Immobilien AG are entitled to supplementary compensation of EUR 0.10 (gross) per ordinary share. This is applicable for each year in which they have held the BBI share on the payment date for the guaranteed dividend. Pursuant to the court's ruling, the ratio to exchange shares in BBI Immobilien AG into shares of VIB Vermögen AG remained unchanged. This ruling has not yet become legally effective, as the opposing party has raised objections. The exchange offer ends two months after the announcement of the legally effective conclusion of these legal proceedings. The end of the exchange period has not yet been determined as a consequence. The number of companies in which VIB Vermögen AG held direct or indirect interests as of the balance sheet date amounted to twelve (excluding subsidiaries of BHB Brauholding Bayern-Mitte AG). Two of these companies are not fully consolidated because of the level of interests held. 2. Employees Besides the three Managing Board members, VIB Vermögen AG employed a total of 27 commercial staff as of June 30, 2014 (previous year: 23) and 8 industrial staff (previous year: 12). In relation to the net rents (excluding heating) generated, management costs continue to be lower than the sector average. The industrial employees are mostly caretakers and cleaners (mainly part-time employees), who are hired to manage individual properties. The resulting personnel expenses are charged on to the respective tenants as part of the settlement of incidental costs. During the period under review, the Managing Board comprised Ludwig Schlosser (Chairman / CEO), Holger Pilgenröther and Peter Schropp. 3. Corporate targets and strategy VIB's aim is to continuously enhance its company value through growing its high-yield commercial real estate portfolio. This is to be achieved through selected and targeted investments in the high-growth economic region of Southern Germany outside major conurbation areas. VIB focuses its investment activities on the future trend sectors of logistics and retail. VIB identifies further potential in the logistics properties area due to the growing importance of e-commerce, global trade interconnections, and high demand for logistics spaces arising from the advancing individualisation of products. Continuous growth in purchasing power in Southern Germany is a critical factor, among others, that is driving VIB's investments in the retail sector. VIB is also investing in industrial and office premises in order to achieve a diversified and balanced structure of the overall portfolio. Along with acquiring real estate, VIB is also focusing increasingly on developing its own properties, which it will rent long-term once they have been completed. In this way, the company is boosting its profitability, and loyalising its customers as a result of its extensive project know-how. The cost-efficient and sustainable management of properties by the company's own staff comprises a decisive success factors in contrast with cost-intensive management by third parties. Long-term rental to solvent individual tenants additionally reduces management expenditure and related costs. As far as its financing strategy is concerned, VIB pursues a long-term approach insofar as it predominately arranges annuity loans. Firstly, agreements

25 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 23 comprising constant instalments over the duration of borrowings make it very easy to plan future cash flows. Secondly, potential refinancing risks are excluded such as when final maturity loans expire. 4. Steering system The Managing Board of VIB Vermögen AG steers the company using key financial indicators whose changes impact the company's value in various ways. They are constantly monitored and form part of monthly and quarterly reporting to the Managing Board. The steering system ensures that any deviations from plan are quickly disclosed, allowing adequate measures to be adopted immediately. Target / actual analyses help to develop action options. Further specific analyses are performed if required. The relevant key indicators of VIB's competitors are also analysed regularly. The financial steering indicators that VIB utilises and their calculation methodologies are presented in the following table. Residual terms and tenant structure are also analysed regularly in order to be able to correctly appraise the trend in the real estate portfolio. Steering indicators Key figure Calculation methodology Value as of June 30, 2014 Value as of June 30, 2013 Key earnings indicators Revenue EBIT EBT Revenue as reported in the income statement EUR million EUR million Earnings before interest and tax (excluding valuation result) EUR million EUR million Earnings before tax (excluding valuation result and one-off effects) EUR million EUR million Other key indicators Vacancy rate based on effective annual net rent 2.5 % 1.8 % Average interest rate on borrowing portfolio % 4.14 %

26 24 // Business report 1. Market and competitive environment MACROECONOMIC TRENDS: After the German economy made an energetic start to 2014 with gross domestic product up by 0.8 % compared with the previous quarter, growth during the second quarter 2014 is set to amount to between 0.2 % and 0.4 %, according to the German economic research institutions. The domestic economy has become increasingly important to production growth over recent months. Exports have played a lesser role for economic growth than before, with external trade making no net contribution to growth during the second quarter. Capital goods spending increased by 1.0 %, according to data from the German Institute for Economic Research (DIW), while construction investments fell by 1.5 %. Given the continued low unemployment rate of 6.5 % in June (previous year: 6.6 %) and the positive trend in wages, private consumption increased by 0.2 %. Purchasing power also affects private consumption. Along with the level of wages in income, it depends on the trend in the level of prices. Inflation in Germany has fallen from 1.5 % on average during 2013 to 1.0 % in June 2014, according to the German Federal Statistical Office. Although level of prices in absolute terms has risen further, purchasing power per inhabitant in Germany will rise in 2014, according to data from GfK. In a comparison across Germany in 2014 the Southern German states of Bavaria (EUR 23,168) and Baden- Württemberg (EUR 22,760) have the highest rankings after Hamburg (EUR 23,469). Starting from a high level, purchasing power growth in 2014 compared with 2013 in Bavaria and Baden-Württemberg was in the upper third on a comparison across the whole of Germany, at 2.9 % each. SECTOR TRENDS: In June 2014, the European Central Bank implemented a further reduction to its benchmark interest rate to 0.15 %. Given this low interest-rate level, real estate continued to play a major role as an asset class during the first half of 2014 including international investors. The environment for buyers remained correspondingly challenging according to property experts at Jones Lang LaSalle. Although transaction volumes fell slightly during the second quarter of 2014, the value of investments on the commercial real estate market for the entire first half of 2014 of EUR 16.9 billion was around 29 % ahead of the figure in the prior-year period. Office properties, at 40 %, continued to enjoy the strongest demand as an asset class, although they fell slightly compared with the previous-year period (H1 2013: 43 %). The share of retail properties in terms of purchases and sales was unchanged year-on-year at 29 %. Demand for logistics and industrial properties at 11 % (H1 2013: 8 %) as well as other properties such as hotels at 13 % (H1 2013: 10 %) registered a slight increase, while mixed use properties at 7 % (H1 / 2013: 10 %) were less important than in the first half of Sentiment on the real estate investment market remained positive overall, according to Jones Lang LaSalle: a transaction volume of between EUR 35 billion and EUR 40 billion, the highest level since 2007, is deemed probable for Demand for logistics properties, one of the investment focal points for VIB AG, has increased continuously over the past years, as shown in the graph depicting warehouse space turnover in Germany. Jones Lang LaSalle believes that it is likely that turnover over the full course of 2014 will exceed the previous year's level of 5.0 million m². Most of the demand derives from companies from the sectors of freight, transportation and warehousing (please refer to the graph). Wholesalers and retailers, as well as industrial companies, continue to comprise a large proportion of transactions, however.

27 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 25 Trend in warehouse space turnover in Germany (in m²) 3,251,300 4,318,400 5,864,100 4,721,300 5,017,500 2,555, H Source: Jones Lang LaSalle 2013, 2014 Warehouse space turnover by sector (in %)* Industry Freight, transportation, warehousing 44 Wholesale/retail * Turnover above 5,000 m²; excluding Berlin, Düsseldorf, Frankfurt, Hamburg and Munich Source: Jones Lang LaSalle Business progress During the first two months of 2014, VIB Vermögen AG deployed some of the emission proceeds from the mandatory convertible bond that it issued last year to realise targeted investments. For example, the company purchased a large shopping centre in Bischberg-Trosdorf near Bamberg in January. This industrial property with a rentable space of 13,770 m² and a EUR 22.2 million investment volume is already fully rented, generating a 7.4 % annualised rental yield. In February, VIB invested EUR 9.1 million in a modern retail property in Nördlingen, a city that enjoys favourable transportation connections. This property has a 7.2 % rental yield and a rentable space of 8,580 m². The properties in Bischberg-Trosdorf and Nördlingen already generated additional rental income during the first half of One property in VIB's portfolio was rented to the insolvent DIY chain "Praktiker". During the first half of 2014, the vacancy had no notable impact on the results of operations, net assets and financial position. The company is confident that it can return to use the property until spring The real estate portfolio, which focuses on the growth sector of logistics and the retail sector, which is enjoying strong demand, was composed of 99 high-quality properties as of June 30, 2014 (December 31, 2013: 98), with a total rentable space of around 915,000 m² (December 31, 2013: approximately 893,100 m²). The surveyed vacancy rate stood at just 2.5 % as of the reporting date, with the average rental yield amounting to 7.3 %. The annualised net rental income for the rented spaces totalled EUR 61.3 million (December 31, 2013: EUR 59.6 million). The market value of the total portfolio increased further to EUR million (December 31, 2013: EUR million). 3. Comments on business results and analysis of results of operations, net assets and financial position RESULTS OF OPERATIONS Due to additional rental income as a result of the investments of the end of the first quarter 2014 and during the second half of the previous year, VIB Vermögen AG grew its revenue by 8.3 % year-on-year, from EUR 31.7 million in the prior-year period to EUR 34.3 million in the year under review, as expected. The missing rental income from the properties that were sold in the previous year was more than offset. Total operating revenue grew to EUR 34.6 million (H1 / 2013: EUR 31.8 million). Due to the measurement through profit or loss of the properties in Bischberg and Nördlingen that were newly transferred to the portfolio, EUR 1.1 million of positive

28 26 valuation changes to investment properties were reported in the first half of 2014 (H1 / 2013: EUR 1.4 million). Profitability also improved further thanks to lower operating costs. Expenses for investment properties, which predominantly comprise operating costs for properties and renovation maintenance costs, amounted to EUR 5.9 million (previous year: EUR 6.2 million). Other operating costs fell to EUR 740 thousand, especially as result of a lower level of legal and consulting expenses (H1 / 2013: EUR 969 thousand). By contrast, personal expenses of EUR 1.5 million were somewhat greater than the previous year due to a higher number of staff (H1 / 2013: EUR 1.3 million). After deducting depreciation on other property, plant and equipment, the company generated earnings before interest and tax (EBIT) of EUR 27.6 million a considerable increase of 11.6 % compared with the previous year's EUR 24.7 million. Accordingly, the EBIT margin increased further to 79.6 % (H1 / 2013: 77.7 %). EBIT adjusted for valuation effects on investment properties stood at EUR 26.5 million (H1 / 2013: EUR 23.3 million). The positive result from investments measured at equity amounted to EUR 218 thousand in the period under review, compared with a loss of EUR 57 thousand in the prioryear period. The expense arising from the measurement of financial derivatives deriving from the adjustment to the pending loss provision for a CHF swap for the subsidiary BBI Immobilien AG stood at EUR 36 thousand (H1 / 2013: gain of EUR 307 thousand). Given the acquisitions during the current year, the net interest result (expense) increased slightly to EUR million (H1 / 2013: EUR -9.7 million). After deducting the expense arising from the guaranteed dividend, the company generated earnings before tax (EBT) of EUR 17.4 million, reflecting a slight increase of 7.8 % compared with the first half of 2013 (H1 / 2013: EUR 16.2 million). After adjusting for valuation effects and extraordinary items, EBT stood at EUR 16.4 million, compared with EUR 13.4 million in the first half of In line with the aforementioned positive trend, consolidated net income was also up by 7.6 % to EUR 14.6 million, compared with EUR 13.6 million in the prior-year reporting period. Basic and diluted earnings per share amounted to EUR 0.56 and EUR 0.55 respectively (H1 / 2013: EUR 0.56 and EUR 0.55 respectively). Due to the 2013 / 15 mandatory convertible bond that was newly issued at the end of the previous year, the average number of shares, as the calculation basis for basic earnings per share, increased to 25,227,231 (weighted average). VIB AG also reported the growth in its FFO (funds from operations). Compared with EUR 12.0 million in the first half of 2013, it increased to EUR 14.6 million, equivalent to EUR 0.58 of FFO per share (H1 / 2013: EUR 0.52). Results of operations In EUR thousand H H Change Revenue 34,315 31, % Total operating revenue 34,637 31, % EBIT 27,584 24, % EBIT margin 79.6 % 77.7 % - Earnings before tax (EBT) 17,409 16, % Consolidated net income 14,610 13, % Earnings per share (undiluted) EUR 0.56 EUR 0.56* 0.0 % Earnings per share (diluted) EUR 0.55 EUR % *Figure of previous year adjusted due to modified average number of shares

29 TO OUR SHAREHOLDERS INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS 27 NET ASSETS Due to the expansion of the real estate portfolio at the start of the year, the total assets of VIB Vermögen AG amounted to EUR million as of the half-year reporting date compared with EUR million as of December 31, Given the acquisitions during the period under review, the value of the investment properties increased to EUR million (December 31, 2013: EUR million). Cash and cash equivalents stood at EUR 21.7 million as of the balance sheet date (December 31, 2013: EUR 25.5 million). Equity grew to EUR million as a result of the net profit that was generated during the period under review (December 31, 2013: EUR million). This corresponds to an equity ratio of 37.2 % (December 31, 2013: 37.0 %), reflecting the sustainable business model of VIB Vermögen AG. As a consequence of the acquisitions during the current year and the related drawing down of further borrowings, non-current financial liabilities of EUR million were somewhat higher than as of December 31, 2013 (EUR million). Noncurrent liabilities consequently rose by EUR 21.0 million, from EUR million (December 31, 2013) to EUR million. By contrast, current liabilities fell to EUR 48.2 million (December 31, 2013: EUR 50.4 million). Due to the continued positive business progress and the related increasing equity, the company's net asset value (NAV) improved further to EUR million as of June 30, 2014 (December 31, 2013: EUR million). In relation to the 22,151,331 shares in issue as of June 30, 2014, this corresponds to EUR of NAV per share (December 31, 2013: EUR 13.88) an increase of EUR 0.70 per share. Key balance-sheet figures In EUR thousand 30 / 06 / / 12 / 2013 Change Total assets 896, , % Equity 333, , % Equity ratio 37.2 % 37.0 % -- Net debt 498, , % Gearing 169 % 170 % -- NAV per share (undiluted) EUR EUR %

30 28 FINANCIAL POSITION The operating cash inflow of VIB Vermögen AG in the first half of 2014 of EUR 21.4 million was at a similar level to the previous-year period (H1 / 2013: EUR 21.1 million). Given the brisk investment activity, the cash outflow from investing activities of EUR 34.4 million was significantly above the previous year's level, by contrast (H1 / 2013: EUR 10.4 million). By contrast with the prior-year period, VIB Vermögen AG enjoyed a cash inflow from financing activities of EUR 9.2 million during the first half of 2014 (H1 / 2013: cash outflow of EUR -6.5 million). At the bottom line, the cash and cash equivalents of VIB Vermögen AG stood at EUR 21.7 million as of June 30, 2014 (December 31, 2013: EUR 25.5 million), which fell primarily as a consequence of the new real estate purchases. The VIB Group had access to unutilised credit and overdraft lines of EUR 5.2 million as of June 30, 2014 (December 31, 2013: EUR 7.4 million). 4. Overall statement on the company's business position The Managing Board of VIB Vermögen AG is very satisfied with the trend in the net assets, financial position and results of operations during the first half of the year. The company reported a further significant increase in revenue and earnings. Starting from a high level, the equity ratio was improved further, highlighting the company's sustainable financing position. The value of the real estate portfolio, the net asset value (NAV), and the FFO an indicator of operating cash inflows grew further during the first half of Moreover, VIB Vermögen AG has sufficient liquid funds to continue with the success of the first six months of 2014, and with a view to the company's development. // Report on events after the balance sheet date No further events occurred after the end of the first half of the 2014 fiscal year that had a material impact on the net assets, financial position or results of operations. // Report on outlook, opportunities and risks 1. Outlook Targeted investments to strengthen the real estate portfolio, combined with ongoing portfolio optimisation, will continue to form the core of the operating activities of VIB Vermögen AG during the second half of The Managing Board expects that the sector will continue to report a positive trend, although property prices are continuing to register increases, with returns consequently trending down. For the full 2014 year, the Managing Board of VIB Vermögen AG continues to anticipate revenue of between EUR 69.0 million and EUR 72.0 million, earnings before interest and tax (EBIT) of between EUR 50.5 million and EUR 52.0 million, and earnings before tax (EBT) of between EUR 29.0 million and EUR 30.5 million in each case before valuation effects and extraordinary items. This forecast is based on the assumption that macroeconomic conditions do not change. A change to the general interest-rate level, as well as acquisitions or disposals of properties, can affect this forecast.