GENEBA PROPERTIES N.V. Annual report and financial statements 2016

Transcription

1 GENEBA PROPERTIES N.V. Annual report and financial statements 2016

2 TABLE OF CONTENTS 1 PROFILE, MISSION & STRATEGY KEY FIGURES KEY EVENTS SHAREHOLDER INFORMATION REPORT OF THE MANAGEMENT BOARD RESPONSIBILITY STATEMENT OF THE MANAGEMENT BOARD IN CONTROL STATEMENT OF THE MANAGEMENT BOARD STATEMENT OF THE DEPOSITARY REPORT OF THE SUPERVISORY BOARD CONSOLIDATED FINANCIAL STATEMENTS COMPANY FINANCIAL STATEMENTS OTHER INFORMATION SUBSIDIARIES INDEPENDENT AUDITOR S REPORT EPRA FIGURES LIST OF DEFINITIONS

3 1 PROFILE, MISSION & STRATEGY 1.1. PROFILE Geneba Properties N.V. ( Geneba or the Company ) is a European commercial real estate investment company based in Amsterdam, the Netherlands. The Company was established on 11 July 2013 and commenced business on 27 March Next to its main office in Amsterdam, Geneba has a local office in Munich, Germany. Ultimo 2016 Geneba had approximately 500 million of Assets under Management, consisting of long-term leased commercial real estate (primarily logistics and light-industrial) located in Germany and the Netherlands. Geneba s real estate portfolio generates at 31 December 2016 an annualised gross rental income of more than 35 million. The real estate portfolio is internally managed by an experienced management team with long-term experience and a strong network in real estate. The shares in Geneba trade at NPEX ( a trading platform for Small and Medium-sized Enterprises (SME s). The Company s main shareholder is Catalyst Coöperatief U.A., based in Amsterdam, through which two Canadian investment funds indirectly hold a 86% stake in Geneba. The funds are managed by The Catalyst Capital Group Inc. ( Catalyst ), based in Toronto, Canada. Geneba was granted a license under the European Alternative Investment Fund Management Directive ( AIFMD ) in March 2014 and is subject to the supervision of the Autoriteit Financiële Markten ( AFM, the Dutch Authority for Financial Markets) and De Nederlandsche Bank ( DNB, the Dutch Central Bank) MISSION AND STRATEGY The strategy of Geneba is focused on excellent stewardship, creating a solid real estate company for investors, tenants and lenders in the long-term. The guiding principles that the Company uses in realising this strategy are to be thorough in its approach, with a realistic market view and a long-term perspective for the Company. The acquisition profile of Geneba is focused on commercial real estate assets which function as an operational base for its tenants. Geneba s mission statement can be summarised in one sentence: We give home to corporate businesses in core Europe. The geographical focus is on commercial real estate assets in Germany and in The Netherlands. We target light industrial and logistics facilities, ideally with a single tenant or selected, strong multi-tenant profiles. Specific attention is directed to the business model, the financial strength and the long-term outlook and prospective of the tenants using the real estate assets for their businesses. The focus is on real asset assets which are mission critical for these tenants. Geneba is fully aware of its responsibilities as a property owner and supports its tenants through local offices and contacts. Geneba works in close cooperation with the tenants and carries out ongoing investments in the maintenance and development of its portfolio. Geneba provides on-site support in its role as a committed owner, investor and as a landlord that acts and thinks with the long-term interests of the tenant in mind. Geneba s strategy is to grow its asset base over the next years. In January 2015 Geneba successfully raised new equity of 207 million through a Rights Issue. The proceeds of the Rights Issue have been fully invested during 2015 and 2016 in property acquisitions in line with our investment focus. With the disposal of the Baltic portfolio completed in March 2016 and the sale of Geneba s 93% equity stake in MoTo Objekt Campeon GmbH & Co. KG end of 2016, Geneba has a focused, diversified and profitable portfolio of logistical and light industrial properties in the Netherlands and Germany leased on a long-term basis to strong corporates and medium-sized companies with solid credit profiles. In acquiring and managing the assets Geneba will respond to the needs of each property and manage these proactively. Geneba focuses on keeping its properties in a state that corresponds to their specific usage environment. The preservation and - more important - the adaptation of each property to its respective purpose and function is a key goal Geneba strives to meet. This will ensure long-term use, sustainable income and solid returns. 3

4 2 KEY FIGURES 2.1. FINANCIAL KEY FIGURES Balance sheet as per 31 December (x 1.000) Investment properties 492, ,336 Capital and reserves attributable to the owners of the company 269, ,443 Long-term debt and shareholder loans 230, ,964 Loan to value ratio (incl. liabilities from acquisitions in 2015) 47% 59% Equity ratio 42% 35% Number of share in issue (at year-end) 97,549,430 85,226,746 Weighted average number of shares 95,662,970 60,700,958 Net asset value (NAV) per share (x ) Income statement for the period* (x 1.000) Operational results from continuing operations Gross rental income (excl. service charges) 66,592 50,269 Cost Ratio (G&A/ Net rental income) (%) 10% 12% Direct investment result from continuing operations, attributable to equity holders 41,197 25,939 Indirect investment result from continuing operations, attributable to equity holders 26,081-3,569 Net result from continuing operations, attributable to equity holders 67,278 22,370 Net result from discontinued operations, attributable to equity holders - 7,865 Net result, attributable to equity holders 67,278 30,235 Net result per share, attributable to equity holders (x ) Direct investment result per share, attributable to equity holders (x ) Other key financials Annualised rental income (x 1.000) 35,404 63,400 Average borrowing rate (%) 2.0% 3.4% Duration of long-term debt (years) ICR (net rental income/net finance costs) Weighted Average Lease Term (WALT)(years) Occupancy rate (%) 97.7% 98.9% 4

5 2.2. PORTFOLIO KEY FIGURES Geneba owns an investment property portfolio of 620 thousand square meters with a fair value of 493 million per 31 December After the successful acquisitions of five logistics and four light-industrial properties in 2015 Geneba added another six properties to its portfolio in 2016 (three logistics and three light industrial). Effectively 29 December 2016 Geneba sold its 93% equity stake in MoTo Objekt Campeon GmbH & Co. KG ( MoTo ) which owns the Infineon headquarter building near Munich. With these transactions ultimo 2016 the portfolio consists of 24 properties (19 in Germany and 5 in The Netherlands). All properties in portfolio as per 31 December 2016 have been valued at fair values derived from external valuations. The external valuations are performed in compliance with the valuation standards in the Red Book of the Royal Institute of Chartered Surveyors (RICS) and the International Valuation Standards of the International Valuation Standard Committee (IVSC) and have been finalised under the rules set forth by Geneba s Policies and Procedures with respect to the AIFMD regulations. Germany The Netherlands Total Number of tenants Occupancy rate at year-end (in %) 97.0% 98.6% 100% 100% 97.7% 98.9% Number of properties Investment properties (in million) Annualised net rental income (in million) Lettable floor area (in sqm.) Weighted average lease term

6 3 KEY EVENTS March 2016 Geneba acquires a 94% majority stake in two separate entities owning two new, high quality logistics assets developed by greenfield development in Nürnberg and Achern, in the south of Germany. 4 March 2016 Geneba acquires a German light industrial portfolio from MetaWerk AG. The purchase agreement of this portfolio was already signed before year-end 2015 and therefore already included in the balance sheet as of 31 December The properties are located in Leipzig, Chemnitz and Amberg and leased to automotive suppliers and logistics enterprises. 23 March 2016 Geneba effectively sells a portfolio of forty-two office buildings located in Lithuania, Latvia and Estonia to Laurus, a Joint Venture between Northern Horizon and clients of Partners Group, Switzerland. The share purchase agreement of this transaction was already signed before year-end and therefore already reflected in the 31 December 2015 financial statements, where the Baltic portfolio was classified under IFRS as discontinued operations. 15 April 2016 Publication of the annual results April 2016 Geneba and LogProject Development GmbH continue to expand their partnership with another new logistics real estate project. Geneba acquires a 94.9% stake in an entity developing a distribution facility in Rheinberg for spare parts logistics of BMW. The construction of the property is successfully completed in September May 2016 Annual General Meeting of Shareholders, in which all agenda items for the meeting were approved. 9 June 2016 Geneba is honoured at the Europe Property Awards, hosted by Properties Investors Europe in London on 7 June The jury awarded Geneba a high commendation in the category Listed Company / REIT of the Year. 24 August 2016 Publication of half year report October 2016 Geneba completes the acquisition of a portfolio consisting of three light industrial properties in Northwest Germany. Two of the three properties, in Münster and Brilon, were already acquired on 2 May 2016, while the third property, in Rastede, was closed 30 September November 2016 Geneba announces that it has sold its stake in MoTo Objekt Campeon GmbH & Co. KG ( MoTo ), Germany, which owns the Infineon headquarter building, to Infineon Technologies AG ( Infineon ). As agreed in the sales agreement the transaction is effectively executed at 29 December December 2016 Geneba announces that it engaged Credit Suisse to explore strategic alternatives. 15 December 2016 Geneba proposes to its Shareholders, taking into account the successful execution of the sale of its MoTo stake on 29 December 2016 an interim distribution for the year 2016 of approximately EUR 112 million, or EUR 1.15 per share, in cash to the holders of Geneba s depositary receipts ("DRs"). 30 December 2016 In the Extraordinary General Meeting of Shareholders the proposed interim distributions is approved. The distribution is paid on 3 January

7 4 SHAREHOLDER INFORMATION 4.1. GENERAL As per 31 December 2016, Geneba had issued 97,549,430 shares of which 339,840 shares were in the process of being cancelled (cancellation formally effective at 27 January 2017). The certificates of the shares of Geneba Properties N.V. are listed at NPEX since 27 March 2014 and traded since 7 July Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year and ordinary shares purchased by the Company or released for cancellation by the Monitor and held as treasury shares during the year. (In Thousands of Euros) Net result attributable to equity holders of the Company 67,278 30,235 Weighted average number of ordinary shares in issue 95,662,970 60,700,958 Basic earnings per share Number of share in issue (at year-end) 97,549,430 85,226,746 NAV per share The following shareholders hold an interest of more than 5% of the Geneba shares: Catalyst Coöperatief U.A. holds 86% as per 31 December 2016 (2015: 84%). Neither the members of the Management Board nor members of the Supervisory Board owned Geneba shares during the reporting period. Samson Bélair/Deloitte & Touche Inc., Canada, ( The Monitor ) was appointed to act as the Monitor in the CCAA (Companies Creditors Arrangement Act (Canada)) proceedings of Homburg Invest Inc. ( HII ). Pursuant to the proceeding the Monitor transferred the initial portfolio of HII to Geneba. In the context of the proceedings the Monitor initially held 7,117,482 shares to be attributed to claim holders in case the claims are successful. In case claims are ultimately rejected the respective portion of shares will be cancelled. After distribution and cancellations of shares in 2015 the Monitor held 628,265 shares per 1 January On 26 February ,071 shares, held by the Monitor were cancelled. As a consequence the Monitor holds 412,194 shares as per 31 December Of these shares 339,840 shares are cancelled with effective date 27 January On 3 December 2014, Geneba announced a Rights Issuance in which it offered a total of 74,397,740 new shares at a price of 2.78 per share. This offering was fully underwritten by Catalyst, acting as a back stopper under a Subscription Agreement agreed on 1 December 2014 between Catalyst and Geneba. This meant that Catalyst committed to exercise all its own rights allocated to Catalyst in this Rights Issuance and that it committed to subscribe for the shares not exercised by other shareholders at any time the Management Board asks to do so in order to fund an investment proposal approved by the Supervisory Board. Under this Rights Issue the company issued 58,242,765 shares at 2.78 per share during the financial year On 2 December 2015, several investment proposals were approved by the Supervisory Board, subject to certain conditions to be fulfilled. These conditions were fulfilled in the first quarter of Based on these approved and committed investment proposals 35 million equity was called at the end of February 2016 which resulted in the issuance of 12,538,755 shares. As a consequence the interest of Catalyst further increased to 86% in

8 4.2. ANNUAL GENERAL MEETING OF SHAREHOLDERS On 17 May 2016 the General Meeting of Shareholders was held. All agenda items were approved. The resolutions which were adopted are: Adoption of the audited annual accounts 2015 including the resolution that no dividend will be paid for 2015; Discharge to the members of the Management Board and Supervisory Board for 2015; Authorisation of the Management Board to repurchase treasury shares; Increase of the number of authorised shares from 105,000,000 to 290,000,000; Designation of the Management Board as the body authorised (subject to Supervisory Board approval) to issue shares and to issue rights to grant rights to subscribe for such shares and to limit or exclude pre-emptive rights upon any issue of shares or granting of rights to subscribe for shares up to and including 17 November 2017; Appointment of PricewaterhouseCoopers Accountants N.V. as the Company's external independent auditor for EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS On 30 December 2016, an Extraordinary General Meeting of Shareholders was held. At this meeting the Management Board proposed, as approved by the Supervisory Board, to the general meeting of shareholders, all in accordance with article 30 of the articles of association, to on-distribute the proceeds of the sale of its 93% stake in MoTo (as successfully executed on 29 December 2016) by declaring an interim-distribution per issued and outstanding share of This distribution is chargeable against the current year profits and, to the extent the current year profits are insufficient, against the Company share premium reserve and/or other reserves. The proposal was adopted by the general meeting of shareholders DIVIDEND POLICY The Management Board decided that next to the interim-distribution of 1.15 per issued and outstanding share no additional dividend distribution will be proposed to the General Meeting of Shareholders. The available cash balance after the interim-distribution on 3 January 2017, will be used for further growth of Geneba s portfolio and, in order to fulfill the requirements of its risk management policy, to maintain appropriate liquidity FINANCIAL CALENDAR March 2017: Publication of Annual Report May 2017: Annual General Meeting in Amsterdam 30 August 2017: Publication Half Year Figures

9 5 REPORT OF THE MANAGEMENT BOARD The following should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended 31 December 2016 of Geneba Properties N.V. ( Geneba or the Company ) prepared under International Financial Reporting Standards as adopted by the European Union ( IFRS EU ) and with Part 9 of Book 2 of the Dutch Civil Code GENERAL Geneba started its business in March 2014 after the partial takeover of the real estate portfolio of the insolvent Canadian company Homburg Invest Inc. Income producing assets were carved-out of the Homburg portfolio and transferred to the newly founded Geneba entity in a cash free transaction. In 2014 important actions were taken which formed the basis for growing and diversifying the portfolio in 2015 and These actions included the hiring of new management, the definition of the Company s strategy, obtaining a AIFM license and listing on NPEX, and last but not least, the preparation for a Rights Issue to further grow the portfolio in line with the newly defined strategy. With the successful placement and closing of the Rights Issue in January 2015, Geneba was able to generate the necessary funds for further growth and diversification of its real estate portfolio in line with the defined investment strategy. Based on the Rights Issue in million new shares were issued, representing an increase in equity of more than 160 million. With these proceeds and with additional mortgage financing during 2015 shareholder loans were redeemed reducing the LTV and new properties for an amount of 262 million (including purchase costs) were acquired in line with the defined strategy. In 2016 further acquisitions for an amount of 91 million were closed. These acquisitions were financed with the issue of 12.5 million new shares under the Right Issued, increasing the equity with 34 million, and with additional mortgage financing and funds generated by the Company s operations. Furthermore the sale of the non-strategic Baltic portfolio, already initiated in 2015, was formally closed in March Another important strategic step was the sale of the 93% stake in MoTo. The equity stake in this entity, owning the Infineon s headquarter/office campus, was sold effectively 29 December 2016 to Infineon Technologies AG, for an amount of 113 million, resulting in a book profit of 21 million. The property leased to Infineon represented a relatively high share of Geneba s portfolio (around 40%). Furthermore, Infineon had the option to purchase the property in 2020 at a value lower than the book value. Because of its relative size and office share in Geneba s portfolio and this purchase option, this property did not fully comply with Geneba's strategy to build a diversified portfolio. The disposal contributed to the further decrease of the LTV and the improved WALT of 9.2 years. With the proceeds from this sale, Geneba was able to deliver immediate value to its shareholders through the payment of an interim-distribution. This distribution was approved by the Extraordinary General Meeting of Shareholders at 30 December 2016 and paid on 3 January Taking into account this interim-distribution, in the Annual General Meeting no additional dividend proposal will be proposed. Last but not least, additional growth in rental income and value was realized by active asset management for the existing portfolio following up on the wishes of our tenants. In close cooperation with these tenants, for several properties build-out programs were initiated and (partly) completed in Further value creating is expected to be realized in Taking the above into account, 2016 was again a very successful year, realizing important strategic objectives, enhancing our growth profile and also generating a healthy profit attributable to the Company shareholders of 67.3 million (2015: 30.2 million). This increase was mainly generated by: 59% a higher direct investment result of 41.2 million sourced by the acquisitions in 2015 and 2016; Positive valuations of the portfolio of 22 million, excluding MoTo and offset by 3.5 million acquisition costs. For a further breakdown of the 2016 net result reference is made to section 5.5. An overview of the implementation of the strategy during 2016 is presented in note

10 5.2. IMPLEMENTATION OF STRATEGIC OBJECTIVES 2016 Based on the defined strategy, several strategic objectives were achieved. In the table below, a summary is provided with an overview of the strategic objectives and the status of their implementation. Strategic objectives Status as per 31 December 2016 Status as of 31 December 2015 Increase the portfolio and tenant base by further acquisitions in line with the defined strategy Further diversification in portfolio Acquisitions in 2016 of six properties for an amount of 91 million in line with the defined strategy. After the disposal of the 93% stake in MoTo, the largest property represents 13% of portfolio. Increase direct investment result/ffo Direct investment result 41.2 million (increase of 59% compared to 2015 annualized) Reduce leverage LTV 47% LTV 59% Disposal of non-strategic assets Diversify debt portfolio Increase rental income and value by active asset management on the standing portfolio Successful closing of the sale of the non-strategic Baltics portfolio in March Furthermore with the sale of the 93% stake in MoTo (owning the Infineon headoffice/campus), the portfolio profile is now almost fully focused on logistical and light industrial properties in line with the defined strategy. The sale contributed to the decreased LTV and increased WALT. New mortgages were concluded amongst others with a German bank new to Geneba Completion of the build-out program in Isenbüttel and upgrade (ledlightning) in Marl. Furthermore a build-out program was started in Gottmadingen and a parking extension is being constructed in Chemnitz. In Mülheim the plot will be further developed with a new building created for an industrial kitchen operator. These projects generate a yield on costs of approximately 8-10% per year. Acquisitions in 2015 of 262 million Investment portfolio grew to 706 million Largest property represents 46% of portfolio Direct investment result 25.9 million (increase of 67% compared to 2014 annualized) SPA for Baltics portfolio signed in December 2015 New mortgages were concluded with five German and Dutch banks new to Geneba 10

11 5.3. DEVELOPMENT IN THE REAL ESTATE PORTFOLIO Market trends in logistic property market in Germany and The Netherlands German Market Based on the market analysis report of Jones Lang LaSalle (JLL) of Q3 2016, financial markets have stabilized again after the Brexit vote. The European Central Bank have almost no other choice than to continue the policy of zero interest rates in order to ensure a certain level of stability and certainty over the next one or two years. Banks however are also increasingly expressing their concerns over the massive impact that the ECB s interest-free era has on their business model. On the other side, the fundamental economic data demonstrates a significantly better and more positive situation, in turn reflected by well-performing rental property markets. This, combined with low interest rates and relatively unattractive alternative investment options, particularly applies to Germany and is a motivating force in the commercial property investment considerations of domestic and foreign players. Though in the first half of the year the overall commercial property investment market decreased from 24 billion in H to 18 billion in H1 2016, a fall of 25%, the logistics and industrial property asset class shows another quarterly rise resulting in a half year increase of 12% (compared to 1.65 billion in H1 2015). This trend continued in Q3 2016: with a total transaction volume of 1.2 billion, the volume is 13% above the Q result. For the second time in succession, the logistics sector has contributed one of the Top 10 transactions in Germany in a first half year (across all asset classes). 11

12 Based on the positive economic conditions and the stable letting market, the German logistics investment market remains attractive. Capital is available from investors, and the pipeline and continuing interest levels point to further portfolio transactions in the next few months. The continuing positive demand for prime properties driven by German and international institutional investors will come up against an ever-diminishing supply. The high demand for logistics properties in Germany and the lack of supply lead to the rapid price growth in the logistics market. An end to the price contest is currently not foreseeable. But the further the yields fall, the more it makes investors keen to watch interest rate developments. There is no clear picture here; the financial markets fluctuate between interest rate rising factors and a new run on security-based investments. This is reflected into the decreasing prime yields. The prime logistical property net yields for the specific Big-5 locations are: Berlin Düsseldorf Frankfurt Hamburg Munich 5.10 % 5.00 % 5.00 % 5.00 % 5.00 % The proportion of single asset and portfolio transactions is similar to both the previous year s level and the 5-year average, at 57% and 43% respectively. There was also a rise in the number of transactions, to over 120 over the first half year. By mid-2016 the performance to date, high level of demand and transaction pipeline all indicate that investors looking to diversify their portfolios and are as active as ever. The principal focus is Core investments and, if those are not available, also the Core Plus segment. The transaction volume could well reach the 4 billion mark over the full year 2016 or go even higher. Developers have also benefited from the level of investor activity and were the second most active group on the sell-side after asset and fund managers. The most active investor group on the buyside was again asset and fund managers, with a 29% share, followed by property companies and REITs with 18% due mainly to the top transactions. The strong investor demand, including interest from international investors, has put significant pressure on the prime yield for logistic properties in the Big 7 cities. Since the second quarter of 2015, this has fallen below 6% in the major city markets to its current level of 5%, with the exception of Berlin. Here, it is 5.10% because sites are available and prices remain at a moderate level. A further fall in prime yield is expected in all markets by the end of the year. Dutch Market The logistics investment market in the Netherlands continues to attract strong demand from international capital, reflected in high transaction volumes reaching of 1.4 billion in 2016, out of which approximately 570 million was realized in the fourth quarter of The industrial investment volume was mainly driven by the logistics sector. Despite the high investment volume, there was a slight decrease (2.7%) compared to The year 2015 was the highest investment volume for the sector on record. The high trading levels can be attributed to strong fundamentals in the occupational market and the availability of core assets. Warehouse split by sub type 1.6 Billions Portfolio and single-asset deals 1.6 Billions '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 YtD Distribution Warehouse Heavy Industrial Light Industrial Other 0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 YtD Single-Asset Deal Portfolio Deal Other Source: JLL (2017) Over the last years most logistics transactions have been within the well-established logistics hubs such as Amsterdam/Schiphol, and the Southern hubs i.e. Roosendaal, Tilburg/Waalwijk and Venlo/Venray. Within these hubs there was a considerable weight of capital looking to invest in the Dutch logistics market with demand continuing to focus on portfolios and large-scale single-asset transactions. We expect investors who have been building pan-european platforms over recent years to increase their exposure in the Netherlands. 12

13 Due to relative low levels of development activity and continued demand from investors, yield compressions continued for core markets. By the end of 2015, in these locations, prime net initial yield were at a level of 5.60% to 6.10%. During 2016 yield contraction continued. Current prime net initial yield is at a level of 5.10% which is a 50 basis point contraction compared to the end of Overview of the Portfolio as per 31 December 2016 Acquiring new assets, active asset management, closing of the sale of the Baltic portfolio and the sale of the Munich asset to Infineon were our main objectives for the financial year 2016, contributing to the strategic goal of further diversification of the asset and tenant base and focus on implementing Geneba s investment strategy. The property acquisitions during 2016 added 105 thousand sqm. (fully occupied), a gross yield of 6.9% and 6.3 million of annualised net rental income. The acquisitions were purchased at 91 million (including purchase costs) and externally valued (after deduction of purchase costs) at 94 million at year-end. The sale of our German, non-strategic asset near Munich resulted in a decrease of our portfolio value of approximately 312 million, 147 thousand sqm of office space and 33 million of rental income. Next to the fact that this office space did not fully fit in our strategy focused on logistical and light industrial assets, also its relative size in our portfolio did not match with our targeted diversified portfolio strategy. Furthermore due to the expected exercise of the purchase option by its tenant in 2020 at a lower determined price, Geneba had to devalue this property annually with 16 million. Consequently this property negatively contribution to our indirect investment result. Including the new acquisitions and excluding the German asset and Baltic portfolio, the portfolio of Geneba consists of 24 properties with a total of 620 thousand sqm., an average occupancy rate of 97.7% and a weighted average lease term of 9.2 years. The total fair value amounted to 493 million as per 31 December A detailed description of Geneba s property portfolio is provided on Geneba s website ( Property portfolio Germany The Netherlands Total Number of tenants Occupancy rate at year-end (in %) 97.0% 98.6% 100% 100% 97.7% 98.9% Number of properties Investment properties (in million) Annualised net rental income (in million) Lettable floor area (in sqm.) Weighted average lease term

14 Acquisitions As part of Geneba s growth strategy, the portfolio was extended with six properties during These acquisitions fit in the investment profile as shown in the table below. Investment profile Sector Geographical Tenant Lease-term Size Asset management Focus Core industrial and logistic properties Core Europe, with focus on Germany and The Netherlands Medium-sized Mittelstand companies and large national and international companies with a proven business model and strong credit profile. Long-term leases providing a stable rental income At least 10 million (preferably not more than 10% of total portfolio) Possibilities to create value by supporting tenants business including redevelopment and on-site extensions During 2016 the Company acquired the following investment properties for a total value of 91 million (including purchase costs): Light industrial property in Munster The Münster property is a modern industrial property constructed in 2009 with a GLA of 12,960 sqm. It is long-term leased to Saurer Components GmbH, a manufacturer of textile machinery. Saurer is part of a leading multinational textile industry group mainly specializing in machinery and components for yarn processing. It is located in North Rhine-Westphalia (Nortwest Germany). Light industrial property in Brilon This modern industrial property is also located in North Rhine-Westphalia and was constructed in The property has a GLA of 13,362 sqm on a site of 29,375 sqm, which offers future extension potential. The property is long-term leased to ABB AG, a Swiss robotics, power and automation technology provider. In Brilon ABB has its competence centre for the construction of power transformers and has heavily invested in the property. Logistical property in Achern This newly constructed high quality logistical property was bought in a share-deal structure from developer greenfield development. It is located in Achern (Baden- Württemberg), south of Karlsruhe. It has a GLA of 12,252 sqm on a site of 26,973 sqm. The asset is directly connected to the A5, which is excellent for supplying the German and French car industry in the region. The asset is leased on a long-term basis to J.H. Ziegler, a German automotive supplier specialised in the productions of fleece materials. Products include car components used in seats, furniture, thermal and acoustic insulation. There are possibilities for the tenant to further expand and extend its production capabilities. 14

15 Logistical property in Nurnberg This newly built logistical property was also bought in a share-deal structure from developer greenfield development. The property is well located in the Nurnberg port, with excellent connections. It consists of a modern logistical building of 22,294 sqm on a site of 75,555 sqm. Part of this transaction is a forward purchase of a comparable building on the remaining space of this site. Construction is expected to start during The current logistical building is long-term leased to two worldwide logistical providers Hellmann and Roman Mayer. Light-industrial property in Rastede The property is a production plant building constructed in 2015/ It is long-term leased to Broetje-Automation GmbH. Altogether the building provides a lettable area of around 11,888 sqm on a plot of 43,966 sqm. The property is located in the North of Germany, close to Bremen and has direct access to the highways A29, A293 and the federal road B211. The tenant, a part of the Broetje-Automation Group, is the world's leading expert for the specialized production processes in the aviation and aerospace industry. Logistic property in Rheinberg This property was acquired in a share-deal with developer LogProject Development and includes a modern, sustainable logistical spare parts facility of 31,957 sqm on a site of 74,993 sqm. The property is long-term leased to BMW. At the time of the acquisition the construction of the logistical property was not yet started. The construction was started in March 2016 with the successful hand-over to the tenant in September Divestments Baltic portfolio The sales agreement for this office portfolio mainly leased to SEB was already signed at the end of 2015 and therefore already reflected in the 2015 financial statements as assets classified as held for sale. The portfolio was considered to be non-strategic because of the limitations under the existing lease agreements with SEB to play an active role on restructuring this portfolio and in view of the specific building characteristics as well as the geographical and geopolitical situation. In March 2016 this sales transaction has been formally completed. Sale of 93% stake in MoTo In November 2016 Geneba signed a sales purchase agreement with Infineon Technologies AG, to sell its 93% equity stake in MoTo. MoTo owns the Infineon s headquarter/office campus. The stake was sold effectively 29 December 2016 to Infineon for an amount of 113 million, resulting in a book profit of 21 million. The sale of our German, nonstrategic asset near Munich resulted in a decrease of our portfolio value of approximately 312 million, 147 thousand sqm of office space and 33 million of rental income. Next to the fact that this office space did not fully fit in our strategy focused on logistical and light industrial assets, also its relative size in our portfolio did not match with our targeted diversified portfolio strategy. Furthermore due to the expected exercise of the purchase option by Infineon in 2020 at a determined purchase price lower than the current book value, Geneba had to devalue this property annually with 16 million. Consequently this property negatively contribution to our indirect investment result. The disposal contributed to the further decreased LTV to 47% and the improved WALT to 9.2 years Value movements All properties have been externally valued in 2016, with valuation date 31 December The external valuations are performed in compliance with the valuation standards in the Red Book of the Royal Institute of Chartered Surveyors (RICS) and the International Valuation Standards of the International Valuation Standard Committee (IVSC) and have been finalised under the rules set forth by Geneba s Policies and Procedures with respect to the AIFMD regulations. The external valuations have been assessed by management and discussed with and approved by the Audit & Valuation Committee of the Supervisory Board. For more details on value movements see

16 5.4. FINANCING In general every property is acquired in a separate legal entity. The properties are financed at the level of the legal entity, with non-recurring mortgage debt with a loan-to-value between 50% and 60%. The remaining is financed by equity and/or a shareholder loan of the (ultimate) parent company, being Geneba Properties N.V. As a general principle there is no cross collateralisation between the different SPV s. The major part of the loans have a fixed interest rate. During 2016 new mortgage loans were obtained to finance new acquisitions. Some newly developed acquisitions were acquired in a share deal transaction, whereby the respective property company (specially incorporated for the respective property development) had already construction loans in place. These construction loans were refinanced by new mortgage loans after the completion of the construction of the property. As a result of these acquisitions new loans were obtained by different German banks for an amount of 71.4 million at fixed interest rates between 1.4% and 2.1%. The duration of these new loans varied between 5 and 10 years. During 2016 some existing loans and obtained construction loans were refinanced for a total amount of 19.3 million. These loans are refinanced at fixed interest rates between 1.4% and 1.8% and a duration between 5-20 years. An existing construction loan that matures in January 2017 has also been successfully refinanced in January 2017 for an amount of 11 million for a duration of 10 years at a fixed interest of 2% per annum. Next to regular periodic redemptions on the existing mortgage loans, the loan portfolio also decreased with 215 million as a result of the sale of the 93% stake in MoTo as of 29 December As the property owned by MoTo was financed at a relatively high LTV, the sale contributed to the decrease in LTV from 59% at the end of 2015 to 47% at 31 December The ICR significantly improved to 7.0 (2015: 3.8). As of 31 December 2016, the Company s subsidiaries complied with all covenants. The average interest rate decreased from 3.4% in 2015 to 2.0% in The table below shows the long-term and short-term portion of the loan portfolio as of 31 December 2016 and the respective parts having fixed or floating interest rates. (in millions) Fixed Floating Total in % of total Long-term debt 205,529 7, , % Short-term debt 8,973 10,136 19, % Total nominal value 214,502 17, ,105 in % of total 92.4% 7.6% As mentioned above a 9.7 million loan expiring in January 2017 with a floating interest rate has been refinanced in January 2017 at a fixed interest rate of 2.1% for 10 years. 16

17 5.5. FINANCIALS RESULTS Direct and indirect result The below statements of direct and indirect result are derived from the consolidated statement of comprehensive income. (In thousands of Euros) Direct investment result Gross rental income, net of service charges 66,592 50,269 Property operating expenses, unrecoverable -3,400-2,061 Net rental income 63,192 48,208 General and administrative expense -6,851-5,926 Finance costs -8,976-12,598 Direct investment result before income tax 47,365 29,684 Current Income tax -4,031-2,150 Direct investment result after income tax 43,334 27,534 Direct investment result attributable to non-controlling interests -2,137-1,595 Direct investment result attributable to Company Shareholders 41,197 25,939 The total direct investment result (calculated as net rental income minus general expenses, finance costs and corporate income tax, minus effect of minority share) over 2016 increased to 41.2 million (2015: 25.9 million). The increase is mainly due to acquisitions in 2015 and Indirect investment result Investment properties 1,972-17,717 Deconsolidation result - 9,621 Result from sale of subsidiary 21,139 - Depreciation Finance costs Indirect investment result before income tax 22,900-8,206 Deferred Income tax movement 2,380 3,979 Indirect investment result after income tax 25,280-4,227 Indirect investment result attributable to non-controlling interests Indirect investment result attributable to Company Shareholders 26,081-3,569 The indirect result (including net adjustments to fair value, result from property disposals and changes in deferred taxes) amounted 26.1 million (2015: 3.6 million negative) amongst others related to the result of the sale of the 93% stake in MoTo resulting in a book profit of 21.1 million (net of costs) and the recognition of a deferred tax asset for compensable tax losses which was a result of the sale of the Baltic portfolio. Net result from continuing operations to Company Shareholders 67,278 22,370 Net result from discontinued operations to Company Shareholders - 7,865 Net result for the period attributable to Company Shareholders 67,278 30,235 17

18 Rental Income and non-recoverable property operating expenses Total gross rental income for the period 1 January 2016 until 31 December 2016 was 66.6 million compared to 50.3 million in The increase is mainly due to the acquisitions during 2015 and 2016 ( 19.0 million) and contractual indexations of rents. The increase was offset by 3.3 million lower rent related to the disposal of a German property in The existing portfolio as of 31 December 2016, after the sale of the German asset, is expected to generate an annualised rental income of 35.4 million. 76% of the rental income is generated from German assets and 24% relates to the rental income from the five Dutch assets. Due to the sale of the German asset in 2016 the concentration risks significantly decreased (in % of rental income related to this asset). 16% of rental income now comes from one German asset (multi tenants), all other assets contribute between 1%-11% to the annualized rental income. The non-recoverable property operating expenses amounted to 3.4 million (5.1% of gross rental income) compared to 2.1 million (4.1% of gross rental income) in The relatively low non-recoverable property operating expenses are due to the fact that a major part of the properties have a double net or even triple net lease agreement (e.g. the lease to Infineon for the property owned by MoTo), which means that almost all property related costs can be charged to the tenant General and Administrative Expense General and administrative expenses were 6.9 million compared to 5.9 million in This includes, amongst others, wages and salaries ( 3.0 million) and professional fees ( 3.2 million) relating to recruitment, legal, tax, audit, depository, external compliance, public relations and other fees. Of the professional fees in million relate to advisory costs made in connection with the decision of the Company and its main shareholder to explore strategic alternatives. The cost ratio (defined as general & administrative expenses divided by net rental income) decreased to 10% (12% for 2015) Finance costs Of the total finance costs of 9.0 million (2015: 12.7 million), interest expense on long-term debts in 2016 was 8.5 million (2015: 12.0 million). The decrease was mainly a result of the lower interest rates Geneba managed to negotiate on the new loan contracts signed for acquisitions in 2015 and 2016 and on renewals of loans. Also lower interest rates were agreed on the loans financing the Munich property. The weighted average interest rate on longterm debts dropped to 2.0% (2015: 3.4%) Income tax expense Total income tax expenses for 2016 amount to 1.7 million (2015: 1.8 million gain). This amount consists of a movement in deferred taxes of 2.3 million (gain) included as part of the indirect result and income taxes of 4.0 million included in direct result. Deferred tax assets have been recorded for tax losses that are expected to be compensated against future tax profits in The Netherlands for a total amount of 6.7 million. The movement compared to 2015 was mainly due to the recognition of compensable losses as a result of the sale of the Baltic portfolio. This positive movement was partly offset with an increased deferred tax liabilities as the difference between commercial and fiscal value of properties increased due to the positive value movements and fiscal depreciation. 18

19 Net adjustments to fair value of properties and net result from sale The fair value adjustments amounted to 2.0 million (2015: 17.7 million negative) and a net result on the sale of the 93% stake in MoTo was realised of 21.1 million. The breakdown is as follows: Negative value movement of 16.5 million of Geneba s largest German asset let to Infineon and owned by MoTo. As per 29 December 2016 this property has been sold. This resulted in a book profit of 21.1 million; Positive value movements of 3.2 million on properties which were owned as of 31 December 2014 (increase of 2.5%). In 2015 these properties showed a revaluation result of 10 million; Positive value movements of more than 12.2 million on properties which were acquired in 2015 (increase of 5.0%). In 2015 these properties showed positive valuations of approximately 2 million which were offset by the write off of transfer taxes and other purchase costs of approximately 14 million; The acquired properties in 2016 showed a positive value movement of 6.4 million. Offset against a write off of transfer taxes and purchase costs of 3.5 million, this resulted in a positive value movement of 2.9 million Net result from discontinued operations The net result from discontinued operations of 7.9 million in 2015 relates to the result from the sale of the Baltic portfolio which transaction formally closed in March

20 Balance sheet (In Thousands of Euros) Investment properties 492, ,336 Net asset value 269, ,443 Long-term debt and shareholder loans 230, ,964 Loan to value ratio (incl. liabilities from acquisitions) 47% 59% Equity ratio 42% 35% Number of share in issue (at year-end) 97,549,430 85,226,746 Weighted average number of shares 95,662,970 60,700,958 NAV per share For an explanation on investment properties reference is made to section 5.3. Development of Real Estate Portfolio of the Management Board Report Equity As part of the Rights Issue the equity further increased in the first quarter of 2016 with 34.7 million (issuance of shares at 2.78 each). As a consequence total outstanding shares amount to per 31 December On 30 December 2016 the General Meeting of Shareholders approved a distribution out of the capital and result 2016 of Geneba to its Shareholders of 1.15 per share, resulting in a total net distribution of million. As a consequence of the above and other movements as specified in the consolidated financial statements, the total net asset value per share as of 31 December 2016 decreased with 15.9% to 2.76 (2015: 3.28). The equity ratio improved to 42% as per 31 December 2016 (2015: 35%) Long-term debt For an explanation on the long-term debt reference is made to section 5.4. Financing. 20

21 5.6. RISK MANAGEMENT AND COMPLIANCE Risk management fulfils an important place in Geneba s internal control system. Geneba pursues an active policy in the area of assessing and, if necessary, taking appropriate action regarding the risks that are associated with investing in investment property. The mix of assets is closely monitored, with a view to risk diversification, future lease contract expirations, property yields and trends in the property market Risk and control framework Geneba has an adequate risk management and internal control system in place. An important element of the internal control system is a management structure that enables effective decision-making. In 2016 an assessment was made of the main internal procedures, the procedure manual was updated and appropriate actions were discussed with the Management Board and Supervisory Board. Within the organization the following main procedures are in place. For monthly-, quarterly and annual reporting procedures have been set-up. Annual budgets and forecasts are prepared and approved by the Management Board and Supervisory Board. Monthly reports are monitored by the Management Board and monthly meetings are held between finance and asset management to follow-up on variances between actuals and budget and other outstanding items. On quarterly basis a financial and property report is prepared which is also discussed in the quarterly meetings with the Supervisory Board. All important decisions with regard to acquisitions, redevelopments and divestments of properties are discussed within the supervisory board meetings. For investments above 100 thousand pre-approval from the Supervisory Board is required. Geneba uses an integrated ERP system, Yardi Voyager, which has been updated during With this update Geneba managed to further implement checks and balances and to incorporate internal procedures, such as checks and authorization of expenses, within the ERP system. The system is designed to safeguard the integrity, availability and verifiability of the automated data processing and data storage. An adequate back-up and recovery procedure is in place. External reviews and audits are being held. The findings of the half-year review and year-end audit are discussed between the external auditor and the Audit Committee. Findings, recommendations and follow-up actions on the internal control environment are part of the reporting of the external independent auditor to the Management Board and Audit Committee. Geneba s risk management procedures fall under the responsibility of the CFRO. The CFRO s variable remuneration is not based on the results of the company. A quarterly risk report is prepared and reported to the Management Board and Supervisory Board. The quarterly risk reporting is also shared with the depository, the external compliance officer and external independent auditor Risk appetite and strategic risks It can be concluded that Geneba managed to further decrease its risks by the disposal of the Baltic portfolio and sale of the MoTo asset in Especially as a result of these disposals the concentration risk has been decreased compared to prior periods and the portfolio is now clearly focused on logistics and light industrial properties in Germany and The Netherlands. Within the framework Geneba is prepared to take risk in a responsible way in order to meet its clear strategy of creating a solid real estate company for its investors, tenants and lenders on the long-term. Nevertheless the risk appetite is that Geneba is conservative in taking risks. This is, amongst others, supported by the following strategic choices: 1. Geographical focus on commercial real estate assets in Germany and The Netherlands, which are strong economies within Europe; 21

22 2. Target on light-industrial and logistics facilities, ideally with a single tenant or selected, strong multi-tenant profile; 3. Loan to value below 60%; 4. Diversified portfolio both geographically as well as with respect to tenant spread over respective industries such as transportation, food, automotive, manufacturing; 5. Long-term financing with fixed interest rates. Geneba s strategy is to further grow the portfolio. In the current market there is a lot of interest from all type of investors in real estate, which results in a risk that Geneba is not able to acquire the properties in line with its investment strategy. This risk is mitigated by the fact that Geneba has built an extensive network with developers, corporate real estate owners and SME companies, which will enable Geneba to be aware of potential acquisitions. Furthermore Geneba has built up a reliable reputation in the ability to close deals in a timely and efficient way. Moreover Geneba thinks that especially with respect to logistical and light industrial buildings the market is quite deep. A lot of medium sized and large companies in Germany and the Netherlands have a relative high share of property ownership compared to e.g. the US and the UK. Geneba sees opportunities to assist these companies in optimizing their use of capital in a sale and leaseback transaction and to build a relationship with the tenant to optimize and expand their property needs Operational risks Operational risks are risks that arise from possibly inadequate processes, people, systems and/or events. The risks are mitigated by clear internal procedures and by hiring qualified staff and consultants. Some important operational risks are described below. Acquisitions (Impact: medium to high) An important operational risk relates to the acquisition process. Careful acquisition procedures are in place to mitigate this risk. During the acquisition process special attention is paid to the quality of the tenant, the location, the mission critical nature of the property for the tenant, the building/technical quality of the building, the permits and fire safety measures, the lease contract etc. An extensive due diligence to assess the technical, legal, financial and tax aspects of the property is performed assisted by external advisors. For each acquisition an external valuation is performed. Internally standard formats for investment proposals are used. All acquisitions are reviewed by the investment committee and have to be approved by the Management Board and Supervisory Board. Leasing and debtor risks (Impact: low to medium) Most properties are leased to single tenants. Geneba focuses on properties which are mission critical to the tenant. This mission critical aspect can be related to location of the property (close to a factory, or railroad connection, harbour, clients, labour force etc.) and also to the fact that the tenant invested a significant amount in the property. In the acquisition process and also during the investment period Geneba aims to understand and monitor the business model of the tenant and also monitors the credit quality of the tenant. In order to manage these risks Geneba is in close contact with its tenants and monitors credit risks with help of rating agencies (Moody s, Standard Poor, Graydon, Crediform Group). Furthermore it aims to reduce the concentration risk by diversifying its portfolio. Due to new acquisitions in 2015 and 2016, the sale of the German asset and the effective disposal of the Baltic portfolio Geneba significantly reduced the concentration risk. As per 31 December 2016 concentration risk for total annualized rental income and property value can be summarized as follows: (in % of total existing portfolio) Rental income Property value Largest asset (Germany)* 16% 13% Second largest asset (The Netherlands) 11% 12% < 10% of portfolio 73% 75% *Relates to a property in Germany, which is leased to different tenants. Currently we have no material accounts receivable outstanding and we have not identified any material credit risks with our major tenants. 22

23 Valuation risks (Impact: medium) The valuation of the portfolio is an important factor in decision making and also in the reporting of our results. To mitigate this risk Geneba prepares property valuations in accordance with strict internal valuation policies. The properties are valued twice a year by independent, internationally reputed external appraisers in accordance with International Valuation Standards Financial risks The main financial risks relate to the interest rate, refinancing risk, liquidity and financial reporting. Interest rate risk (Impact: medium) The properties are financed by mortgages with fixed and floating interest rates. Changes in interest rates will have an impact on the earnings of Geneba. Increases in interest rates generally cause a decrease in demand for properties and might affect the property valuations. Geneba closely monitors the developments of interest changes and performs sensitivity analyses on valuation and results of Geneba. As of year-end % of the outstanding loans had a fixed interest rate with an average duration of 6 years. If interest rates had been 100 basis points higher as per 31 December 2016, with all other variables held constant, net result before tax for the year would have been 0.2 million lower. If interest rates had been 100 basis points lower with all other variables held constant, net result before tax for the year would have been 0.2 million higher. The interest rate risks was further mitigated in 2016 as new loans have fixed interest rates. The following table classifies the loans based on floating and fixed interest rates: (In Thousands of Euros) Value as per 31 December 2016 Value as per 31 December 2015 Floating interest rate 17,603 21,265 Fixed interest rate 214, ,696 Total nominal value loans 232, ,961 The effective average interest rate in 2016 amounted to 2.0% (2015: 3.4%). A loan expiring in January 2017 with a floating interest rate has been refinanced in January 2017 at a fixed interest rate of 2.1%. (Re)financing risks (Impact: medium) This risk relates to the fact that Geneba is not able to attract sufficient equity or (long-term) debt to finance its operations and growth and it relates to the risk that agreed debt covenants are breached. To mitigate this risk Geneba s loan portfolio is financed at a conservative leverage of 47% with different banks and with an average duration of 6 years. The properties are financed on an SPV level with individual mortgage loans at the SPV level. The covenants of these loans are constantly monitored. These covenants mainly relate to LTV and ICR minimum requirements which need to be reported to the banks on a quarterly basis. All covenants were met as of 31 December Geneba focuses on maintaining strong relationships with its financing banks. Part of the risk management procedure is to formulate a funding plan by the Management Board in order to be able to finance the growth of the portfolio. In December 2016 the decision was made to engage Credit Suisse to explore strategic alternatives, including options for further growth. 23

24 Liquidity risks (Impact: medium) The liquidity risk is the risk that insufficient means are available for daily payment obligations. Due to the dynamic nature of the underlying businesses, Geneba aims to maintain flexibility in funding by keeping a minimum level of cash. Risk control measures are set and implemented, and mainly consist of the elaboration of a financing strategy and bank policy by the Management Board and detailed cash flow projections including the finance requirements. Geneba s liquidity position is monitored on a weekly basis by the management and is reviewed on a monthly basis by the Management Board and reported quarterly to the Supervisory Board. Financial reporting risk (Impact: low) The financial report risk relates to the impact of incorrect, incomplete information for internal decision-making and reporting to external parties. This risk is mitigated by a system of internal control procedures, an integrated ERP system Yardi and several check and balances implemented in the reporting process (monthly reporting and meetings in which operations are discussed, results are compared with budget/prognoses) Compliance risks These risks are associated with non-compliance or inadequate compliance with law and regulations or unethical actions. Law and regulatory risk (Impact: medium) Regulatory risk is the risk that being not compliant with (changed) laws and regulations will materially impact Geneba, its assets or the market in which it operates. Geneba has set up written policies and procedures required under the AIFMD licence to mitigate these risks. An external compliance officer has been instructed and reports to the management board and supervisory board on a quarterly basis. Furthermore the company makes use of reputable legal and tax advisors who inform Geneba on a regular basis on changes in laws and regulations and are involved in legal matters with respect to acquisitions, disposals, lease negotiations, build-out programs, building permits, environmental matters and other corporate matters. Geneba has a code of conduct and incidents scheme. The code of conduct also includes regulations on how to act in case of potential conflict of interest. Employees are explicitly asked to sign for compliance with this code once a year. The external compliance manager also reviews the execution of certain procedures mentioned in the code. Tax law risk (Impact: medium) Geneba holds its properties through a number of subsidiaries and other investment vehicles and has structured its investments in a way that is designed to be tax efficient, in particular with respect to the structuring of acquisitions, distribution of funds by its subsidiaries and by its shareholders. Amongst others, a fiscal unity was formed for the Dutch entities and a transfer pricing policy is implemented for the management of the real estate portfolio consisting of asset management and property management fees. Geneba monitors the risks relating to its tax positions. In this context Geneba makes use of reputable external tax advisors to assist in the preparation and filing of Dutch and German tax returns SUSTAINABILITY Management acknowledges the importance of sustainability for Geneba and regularly discusses this topic with its tenants. Sustainability is also a selection criteria and specific point of attention during the due diligence of new investments and during extensions of existing properties. Some of the roofs of our properties are covered with solar panels to generate renewable energy. We will further analyse these type of sustainable investment possibilities and further develop and implement our sustainability policy in the coming period. 24

25 5.8. STAFF Geneba s organisation consists of a team of 15 Dutch and German professionals with extensive experience in real estate. The team is led from the Amsterdam office by two statutory directors, being the CEO and CFRO and consists of three departments being Asset Management, Acquisition and Finance & Control. Next to informal consultations, the communication is guaranteed by periodic meetings at different levels within and between team members of the respective departments. The culture of Geneba can be characterized as informal and transparent, where each individual can make the difference by showing commitment and responsibility with a hands-on mentality. The real estate portfolio is internally managed. Technical management of the properties is outsourced to external managers. As of 31 December 2016 the composition of the team in number of people can be shown as follows: Management Board (CEO and CFRO) 2 Asset Management 4 Acquisition 3 Finance & Control 4 Office management 2 Total 15 During 2016, IT, compliance, audit, depository, tax, PR and legal services were provided to Geneba through service contracts with third parties. A permanent education policy is in development for both staff, Management Board and Supervisory Board and staff is encouraged to attend external trainings and courses to further develop their skills and know-how CORPORATE GOVERNANCE Geneba Properties N.V. (the Company or Geneba ), is a public company incorporated under the laws of the Netherlands (naamloze vennootschap), having its official seat in Amsterdam, the Netherlands, and its registered office address at Apollolaan 153, 1077 AS, Amsterdam, the Netherlands. Geneba was incorporated on 11 July 2013 and operates under licence and supervision of the Authority for the Financial Markets ( AFM ) and the Netherlands Central Bank ( DNB ) as closed-end property investment company without a separate manager (beleggingsmaatschappij zonder aparte beheerder). This licence has been issued by the AFM on March 7, The shares of the Company are traded at NPEX. The Company started its business at the Plan Implementation Date ( PID ) on 27 March The Company has a two-tier board structure consisting of a Management Board (Raad van Bestuur) (the Management Board ), which will manage its business and a Supervisory Board (Raad van Commissarissen) (the Supervisory Board ), which will supervise and advise the Management Board. The Management Board and Supervisory Board bring together people with diverse experiences, skills and knowledge appropriate for the market Geneba is in. The Management Board is composed of the following members: Name Nationality, Gender, Age Position Member Since Term Wulf Meinel German, male, 55 Chief Executive Officer 27 March years 1 Tom de Witte Dutch, male, 50 Chief Financial and Risk Officer 24 November years 1 The contract was extended to 31 December

26 The Supervisory Board is composed of the following members: Name Nationality, Gender, Age Position Member Since Term Gabriel de Alba American, male, 44 Chairman of the Supervisory Board (as of Incorporation at 11 4 years 24 November 2015), Steering & July 2013 Remuneration Committee and Asset Management Committee Marian Hogeslag Dutch, female, 51 Member of the Supervisory Board and Steering & Remuneration Committee. Incorporation at 11 July years Gerrit Littel Dutch, male, 67 Vice-chairman of the Supervisory Board and chairman of the Audit & Valuation Committee 27 March years Jochen Scharpe German, male, 58 Member of the Supervisory Board, Steering & Remuneration Committee and Asset Management Committee Joern Stobbe German, male, 51 Member of the Supervisory Board and Audit & Valuation Committee Incorporation at 11 July years 27 March years Mr G. de Alba is Managing Director and Partner at The Catalyst Capital Group Inc., Canada. Catalyst manages its holding in Geneba through Catalyst Coöperatief U.A., Canada. As per 31 December 2015 Catalyst hold an 86% stake in Geneba. As a consequence Mr G. de Alba is not an independent member of the Supervisory Board within the meaning of the Articles of Association. The business address of all members of the Management Board and Supervisory Board is Apollolaan 153, 107 AS Amsterdam, The Netherlands. The Supervisory Board is divided into committees, focusing on specific aspects of the Company s operations: Steering and Remuneration Committee, which is entrusted with the supervision and advice on strategic decision-making and remuneration for the members of the Management Board; Audit & Valuation Committee, which is entrusted with supervision and advice on primarily financial matters, reporting obligations and valuations; Asset Management Committee is entrusted with the supervision and advice on, amongst others, in- and divestments decision making and performance of the investments. Each committee reports its findings to the full Supervisory Board. For the activities of the Supervisory Board and its subcommittees in 2016 reference is made to the Report of the Supervisory Board. As of 1 January 2013 the Act on Management and Supervision ( Wet Bestuur en Toezicht ) came into effect. This Act introduced statutory provisions to ensure a balanced representation of men and women in management boards and supervisory boards of companies governed by this Act. Balanced representation of men and women is deemed to exist if at least 30% of the seats are filled by men and at least 30% are filled by women. Supervisory Board and Management Board members were selected on the basis of wide ranging experience, background, skills, knowledge and insights. The Supervisory Board strived for more diversity in both Supervisory Board and Management Board. Geneba is aware that females are underrepresented in both the Management Board and the Supervisory Board. More information on the Company s structure, history and team can be found on the website ( Although the Dutch Corporate Governance Code does not apply to Geneba because its shares are not admitted to trading on a multilateral trading facility or regulated market within the meaning of Act on Financial Supervision ( Wet Financieel Toezicht), Geneba highly values good corporate governance. Its internal Policies & Procedures are based on the requirements of the AIFMD. 26

27 Since 2015 Geneba is a member of the Initiative Corporate Governance der Deutschen Immobilienwirtschaft ev ( ICG ), which promotes Corporate Governance Standards and Compliance Systems for real estate companies active in Germany. The company regularly reports to shareholders, its compliance is continuously and closely assessed by its Supervisory Board, external compliance management (Charco & Dique) and Geneba s depositary (Vistra Netherlands). The financial statements are audited and the half year financial statements are reviewed by PricewaterhouseCoopers Accountants N.V OUTLOOK From the start in March 2014 Geneba successfully implemented its investment management strategy, realizing growth at attractive returns. The 2016 financial statements show a solid balance sheet with a Loan-to-Value of 47% and strong results with a significantly higher direct investment result of 41.2 million. Our portfolio is well diversified with quality properties long-term leased to creditworthy tenants. Our team is well equipped for further disciplined growth. With this solid basis, Geneba is well positioned to further implement its strategic goals and deliver sustainable results. In this context in December 2016 Geneba engaged Credit Suisse to explore strategic alternatives, including options to obtain additional capital which is necessary to fund further growth with new acquisitions. Geneba gives home to corporate tenants. Consequently pro-active asset management of the property portfolio is a key driver of success. Next to growing its turnover by new acquisitions, Geneba realized growth by active asset management improving the net results on its property portfolio with a hands on approach. In this context Geneba began in 2016 several initiatives to invest in several existing properties to create additional income and shareholder value. These initiatives will be further implemented during 2017 and are expected to positively contribute to the 2017 results. In this context we will execute in 2017 build-out programs for our property In Chemnitz (parking extension) and the property in Gottmadingen (additional GLA of 3,500 sqm). Another important project will be executed in Mulheim, where we develop an empty plot on which a kitchen facility will be constructed. We concluded a 15 years lease with the kitchen operator, servicing hospitals and senior living facilities in the Rhein-Rhur region. These projects are the result of active asset management and the close relationship we have with our tenants. The disposal of our stake in MoTo in December 2016 and the distribution of its proceeds to our shareholders will - ceteris paribus - reduce the 2017 direct investment result. Geneba will continue to use various sources of capital, including possible new equity and debt issuances, as appropriate, to fund new acquisitions in line with the corporate strategy. With interest rates still low, the environment for investments remains attractive. It is expected that in 2017, demand of both domestic and international market players will remain high. With an established network consisting of developers, private equity companies, Mittelstand companies and banks, we believe there will be a number of investment opportunities the assets we focus on: light industrial and logistical properties in Germany and the Netherlands which are mission critical to the tenants. On 1 December 2016 Geneba announced that it engaged Credit Suisse to explore strategic alternatives, which could include, amongst others, an initial public offering, capital increase, merger, sale or other possible transactions. We are considering these alternatives in close cooperation with the Supervisory Board and our main shareholder, represented by Catalyst Capital Group Inc. At the date of this annual report, the process is ongoing and we look forward to updating shareholders in due course on our efforts to maximize value. 27

28 Finally we would like to thank our shareholders, tenants, financing banks, advisors and other stakeholders for their support and trust in the implementation of Geneba s strategy. We also like to thank our colleagues for their hard work and dedication during the past year to realise the results we have accomplished in Amsterdam, 29 March 2017 Management Board Geneba Properties N.V. Original has been signed by: Dr. Wulf A. Meinel, CEO Mr. Drs. Tom M. de Witte RA, CFRO 28

29 6 RESPONSIBILITY STATEMENT OF THE MANAGEMENT BOARD In line with Article 5.25c of the Act on Financial Supervision, the Board of Management declares to the best of its knowledge that insofar as it can be expected to be known: the 2016 consolidated financial statements give a true and fair view of the assets and liabilities, the financial position and the result of Geneba and its consolidated subsidiaries; the additional information set out in this annual report gives a true and fair view of the state of affairs as at the balance sheet date and the course of events during the financial year of Geneba and its consolidated subsidiaries; the material risks to which Geneba is exposed are set out in the annual report; as regards financial reporting risks the management board states that the internal risk management and control systems regarding financial reporting risks worked properly in the year under review and provide a reasonable assurance that the financial reporting does not contain any errors of material importance. 7 IN CONTROL STATEMENT OF THE MANAGEMENT BOARD We have a description of the organisation of the business operations (documented in our Policies and Procedures ), which complies with the requirements of the Act on Financial Supervision (Wet Financieel Toezicht, WFT ) and the Decree on Supervision of Market Conduct of Financial Firms (Besluit Gedragstoezicht Financiële Ondernemingen, Bgfo ). We have assessed different aspects of the Policies and Procedures during the reporting period. During our assessment, nothing came to our attention on the basis of which we would have to conclude that the description as referred to in article 115 of the Bgfo does not meet the requirements as set out in the WFT and related regulations. On this basis, we declare as Management Board of Geneba Properties N.V. that we have a description of the organisation of the business operations referred to in article 115 Bgfo, which meets the requirements of the Bgfo. We are not aware of any indication that the organisation of the business operations was ineffective or materially deviated from the description. Therefore we declare with a reasonable degree of certainty that the organisation of the business operations during the reporting period has operated effectively and in accordance with its description. Amsterdam, 29 March 2017 Management Board Geneba Properties N.V. Original has been signed by: Dr. Wulf A. Meinel, CEO Mr. Drs. Tom M. de Witte RA, CFRO 29

30 8 STATEMENT OF THE DEPOSITARY Considering that Vistra Management Services (Netherlands) B.V. ( the Depositary, formally known as Orangefield (Netherlands) B.V.) is appointed to act as depositary of Geneba Properties N.V. ( the Fund ) in accordance with section 21(1) of the Alternative Investment Fund Managers Directive (2011/61/EU) (the AIFM Directive ); Such appointment and the mutual rights and obligations of the Fund and the Depositary of the Fund have been agreed upon in the Depositary Agreement dated 25 March 2014 between such parties, including the schedules to that agreement (the Depositary Agreement ); and The Depositary issues this statement exclusively to the board of the Fund in relation to its regulatory oversight and monitoring duties and relates to the period January 1, 2016 up to and including 31 December 2016, ( the Period ). Responsibilities of the Depositary The Depositary acts as a depositary within the meaning of the AIFM Directive and provides its services in accordance with the AIFM Directive, the Delegated Regulation supplementing the AIFM Directive, applicable Dutch laws and regulations the policy rules issued by the European Securities and Market Authority and the policy rules of the Dutch Financial Markets Authority. The responsibilities of the Depositary have been described in the Depositary Agreement and include, in addition to the safekeeping, recordkeeping and ownership verification tasks (as defined in article 21(8) AIFM Directive), several monitoring and oversight tasks (as defined in article 21(7) and 21(9) AIFM Directive): Monitoring of the Fund s cash flows, including identification of significant and inconsistent cash flows and reconciliation of the cash flows with the Fund s administration; Ensuring that the sale, issue, re-purchase, redemption, cancellation and valuation of units or shares of the Fund are carried out in accordance with the applicable national law and the Fund documentation; Ensuring that in transactions involving the Fund s assets any consideration is remitted to the Fund within the usual time limits; Ensuring that the Fund s income is applied in accordance with the applicable national law and the Fund documents; and Checking if the Fund is managed in compliance with the investment restrictions and leverage limits as defined in the Fund documentation. Statement of the Depositary The Depositary has carried out such activities during the Period as considered necessary to fulfil its responsibilities as Depositary of the Fund. The Depositary has not identified any matters that require escalation to the Fund / Manager pursuant to the depositary agreement. Disclaimer This statement does not create, and is not intended to create, any right for a person or an entity that is not a party to the Depositary Agreement, and it does not override the Depositary Agreement. For completeness sake, the responsibility for compliance with the regulatory and statutory obligations of the Fund / Manager lies with the board of directors of the Fund / Manager. Amsterdam, March 28, 2016 Original has been signed by Vistra Management Services (Netherlands) B.V. 30

31 9 REPORT OF THE SUPERVISORY BOARD 9.1. GENERAL In 2016 Geneba finalized the final steps to a fully repositioned company compared to the start of business in March The portfolio was extended with six new industrial and logistical properties in Germany in line with the company s investment strategy. All properties are long-term leased to strong tenants for which these properties are critical in their business operations. With these acquisitions modern, mostly newly built properties were added to the portfolio increasing its diversification profile both in geographical and industry spread. Further diversification in the portfolio was realised by the disposal of the Infineon headquarter/office campus. This disposal was closed in December 2016 by the sale of Geneba s 93% equity stake in its subsidiary MoTo. This office property represented as of year-end % of the portfolio. After the disposal, the largest property in the portfolio at the end of 2016 represents 13% of the portfolio, creating a much more diversified portfolio, fully focused on logistical and light industrial properties. The portfolio has now a size of almost 500 million, generating an annual gross rental income of 35.4 million with a WALT of more than 9 years. Asset management actions have been initiated in 2016 to generate additional rental income and value out of the existing portfolio in As a result of the abovementioned actions, the year 2016 shows strong results with a direct investment result of 41.2 million and an indirect result of 26.1 million, resulting in a total result attributable to Geneba shareholders of 67.3 million. Given the success in 2016, Geneba was able to propose an interim-distribution of 1.15 per share (before dividend tax) at the end of 2016 to its shareholders, which proposal was approved by the shareholders meeting at 30 December With the reposition being completed, Geneba has now a focused portfolio of quality commercial properties and a significant market opportunity going forward. With this being realised, the Supervisory Board and Management Board agreed to engage Credit Suisse to explore strategic options for further evolution of Geneba and to maximize value for all shareholders. At the date of this report this process is ongoing and we look forward to updating our stakeholders shortly on the efforts to maximize value ACTIVITIES OF THE SUPERVISORY BOARD IN 2016 During 2016 there were nine meetings of the Supervisory Board, which were, except for one meeting, also attended by the members of the Board of Management. Four meetings were held by a conference call. Except for one meeting, all Supervisory Board members attended the meetings or participated in the calls. During one meeting, one member could not join because of illness. In the context of making sound decisions, the Management Board always kept the Supervisory Board supplied with sufficient information in time. The Supervisory Board was kept informed about the activities, financial performance and other relevant aspects related to the business and the Company. In preparation for these meetings, various relevant memoranda and/or presentations were provided by the Management Board. For some topics, these documents were first discussed separately in the various subcommittees of the Supervisory Board. The chairman of these committees reported on these discussions in the meetings of the plenary Supervisory Board. Among the topics discussed in the Supervisory Board meetings were recurring items as strategy and risks, property and financial markets, the operational and financial performance, valuations, the annual report and half-year financial statements, press releases, dividend policy, funding, organisation and internal controls, corporate governance and remuneration levels. In addition, a number of other important non-recurring items were discussed during these meetings as described below. Minutes of all meetings were compiled by an attorney of Nauta Dutilh, signed by the chairman and approved by all members in the next meeting. 31

32 Between these meetings there was regular contact between the individual Supervisory Board members and the members of the Management Board. The chairman of the Supervisory Board acts as the initial point of contact within the Supervisory Board. The Chairman and the members of the Management Board regularly discusses the Company s state of affairs. The chairman of the Audit & Valuation Committee was also in contact with the CFRO on several occasions. Key topics in 2016 In March a conference call was held with main topic to discuss an extension possibility on the Mulheim site. The project includes the construction of a kitchen/catering facility based on a long-term lease contract with a creditworthy, professional service provider. This investment proposal was approved by the Supervisory Board. In the April meeting, in addition to the PwC report on the audit of the 2015 financial statements, the approval of the annual report and the budget 2016 and other usual items, the potential disposal of the stake in MoTo, follow-up on acquisitions and the acquisition pipeline was discussed. It was agreed that the Management Board would continue discussions with potential buyers for MoTo. In May, next to the Q1 figures, the quarterly property report and other regular items, a follow-up discussion was held on the sale of the stake in MoTo and strategic options were discussed for further growth. In the August meeting, next to the PwC report on the review of the semi-annual figures 2016, the approval of the halfyear financial information and other usual items, the sale of the stake in MoTo to its tenant was discussed. In November a call was scheduled in which the sale of MoTo to Infineon was approved. Furthermore during the November meeting Q3 figures were discussed next to other regular items. Also discussions were held between the Supervisory Board and Management Board on options to further grow the portfolio. Based on this it was decided to appoint Credit Suisse to explore strategic alternatives. In December some calls were held on the interim distribution. Furthermore some potential acquisitions were discussed and approved. In the year under review no business transactions took place in which conflicts of interest could have played a role. In case of a conflict of interest, the respective supervisory board member abstains and does not vote on the respective transaction. The Supervisory Board took also the opportunity to meet in the absence of the Management Board to discuss its own functioning and that of the Board of Management. The Supervisory Board was also periodically informed by the Company about national and international property developments and on a frequent basis about developments relating to corporate governance. During 2015 the profile of the Supervisory Board was discussed. The Supervisory Board concluded that the Board in its current composition has the required diversity based on age, expertise, experience and background. In accordance with Dutch law, Geneba aims to have a least 30% of the positions on the Supervisory Board held by women. At present, 20% consists of women. Partly depending on the profile of the members to step down in the future, an assessment will be carried out to determine the required profile of the new members. Naturally the diversity targets, including balance distribution between men and women, will be a factor in such considerations. Under the current rotation scheme, members of the Board are appointed for four years, with possibly extension for another period of four years. The rotation scheme for the coming years is as follows: 2017: Mr. G. de Alba, Ms. M. Hogeslag and Dr. J. Scharpe; 2018: Mr. G. Littel, Mr. J. Stobbe. 32

33 9.3. ACTIVITIES OF THE SUBCOMMITTEES IN 2016 The Supervisory Board has incorporated three subcommittees that prepare subjects delegated to them for decision making in the plenary Supervisory Board: Steering & Remuneration Committee, Asset Management Committee and Audit & Valuation Committee. Activities of the Steering & Remuneration Committee A bonus proposal in line with the company s Remuneration Report was made to the Supervisory Board. Furthermore it was proposed to extend the term of the contract with the CEO to 31 December Activities of the Asset Management Committee This committee advised the Management Board and Supervisory Board on the investment proposals made by the Management Board. Activities of the Audit & Valuation Committee During 2016 seven meetings/calls were held. During these meetings/calls the following regular topics were discussed: the (interim) financial statements, budget, IFRS developments, risk management and cost control, financing and liquidity, the fiscal and legal position, internal control and administrative organisation, integrity, compliance and IT risks. Also the audit and review reports were discussed with PWC. The Committee was furthermore actively involved in the evaluation of the external valuation of the property portfolio. The Chairman of the Audit & Valuation Committee met the audit partner without the presence of the members of the Management Board FINANCIAL STATEMENTS 2016 We are pleased to present the Annual Report of Geneba Properties N.V. for the financial year 2016, as prepared by the Management Board. The auditors PricewaterhouseCoopers Accountants N.V. have audited the financial statements and will issue an unqualified opinion thereon. We recommend the Annual General Meeting of shareholders to adopt the financial statements in accordance with article 28 of the articles of association of the Company. After adoption of the financial statements, we advise the shareholders meeting to discharge the members of the Management Board for the management provided during 2016 and to discharge the members of the Supervisory Board for the supervision of the management exercised during The members of the Supervisory Board have endorsed the 2016 financial statements on the basis of the statutory obligations pursuant to Book 2, article 101 (2) of the Netherlands Civil Code INTERIM DISTRIBUTION AND DIVIDEND PROPOSAL In December 2016 the proposal to make an interim distribution of 1.15 per share was approved by Extraordinary Shareholders Meeting, which was paid out in January We support the proposal of the Management Board that taking this interim-distribution into account, no further dividend will be paid to the shareholders for the financial year At the Annual General Meeting of shareholders Geneba will put this proposal to the shareholders for approval. 33

34 9.6. STAFF Finally we would like to take this opportunity to express our appreciation and gratitude to the Management Board and Geneba s staff for their efforts and dedication during the year. Amsterdam, 29 March 2017 Supervisory Board Geneba Properties N.V. Original has been signed by: Mr. G. de Alba Ms. J.M. Hogeslag Mr. G. Littel Dr. J. Scharpe Mr. J.G.H.W. Stobbe 34

35 10 CONSOLIDATED FINANCIAL STATEMENTS

36 Consolidated statement of financial position As at 31 December (In Thousands of Euros) Note Assets Non-current assets Investment properties 9 490, ,838 Lease incentives 9 1, , ,336 Intangible assets Property, plant and equipment Deferred income tax assets 18 7,278 3, , ,501 Current assets Trade and other receivables 11 2,214 2,083 Cash and cash equivalents ,135 8,568 Assets classified as held for sale 13-96, , ,107 Total Assets 635, ,608 Equity Share capital 14 1,951 1,705 Share premium , ,554 Retained earnings 49,157 23,185 Capital and reserves attributable to the owners of the company 269, ,443 Non-controlling interests 2,713 7,876 Total equity 272, ,319 Non-current liabilities Long-term debt , ,680 Deferred income tax liabilities 18 10,642 9, , ,999 Current liabilities Trade and other payables ,432 9,292 Liabilities from acquisitions - 32,008 Shareholder s loans 15-1,665 Current portion of long-term debt 15 19,109 17,619 Income tax payable Liabilities classified as held for sale 13-96, , ,290 Total liabilities 363, ,288 Total equity and liabilities 635, ,608 Notes are an integral part of these consolidated financial statements. 36

37 Consolidated statement of comprehensive income For the year ended 31 December (In Thousands of Euros) Note Gross Rental income 20 66,592 50,269 Service charges invoiced 20 5,577 2,522 72,169 52,791 Property operating expenses (incl. service charges incurred) 21-8,977-4,583 Net rental income 63,192 48,208 Net adjustment to fair value of: Investment properties 9 1,972-17,717 Result from sale 25 21,139 - Deconsolidation result 9-9,621 Total net adjustments 23,111-8,096 General and administrative expense 22-6,952-5,926 Net operational expenses -6,952-5,926 Operational result 79,351 34,186 Finance income Finance costs 24-9,185-12,759 Net finance costs -9,086-12,708 Net result before income tax 70,265 21,478 Income tax expense 18-1,650 1,829 Net result from continuing operations 68,615 23,307 Net result from discontinued operations 13-7,865 Net result for the period 68,615 31,172 Total comprehensive income (loss) for the period 68,615 31,172 Net result and total comprehensive income (loss) attributable to: Equity holders of the Company 67,278 30,235 Non-controlling interest 1, Basic and diluted earnings per share from continuing and discontinued operations, attributable to the equity holders of the Company, based on weighted average number of shares From continuing operations ( ) From discontinued operations ( ) From net result for the period ( ) Notes are an integral part of these consolidated financial statements

38 Consolidated statement of changes in equity (In Thousands of Euros) Note Share capital Share premium Retained Earnings Attributable to shareholders Non- Controlling interest Total Equity As at 1 January ,452-7,120 87,943 7,859 95,802 Issuance of new shares 14 1, , , ,915 Cost of issue of new shares Cancellation of shares Acquisition of subsidiary Dividend payments ,056-1,056 Net result for the period ,234 30, ,171 Other comprehensive income As at 31 December , ,554 23, ,443 7, ,319 As at 1 January , ,554 23, ,443 7, ,319 Issuance of new shares ,608-34,858-34,858 Cost of issue of new shares Cancellation of shares Acquisition of subsidiaries , Cost of capital distributions Net result for the period ,278 67,278 1,337 68,615 Sale of participation ,471-6,471 Distributions / dividend payments - -70,594-41, ,791-1, ,922 Other comprehensive income As at 31 December , ,289 49, ,397 2, ,110 Notes are an integral part of these consolidated financial statements. 38

39 Consolidated statement of cash flows For the year ended 31 December (In Thousands of Euros) Note Cash flow from continuing operations Cash flows from operating activities Net result before income tax 70,265 21,478 Adjustments for: - Loss/(gain) from fair value change on investment properties 9-1,972 17,717 - Result from sale of subsidiary 25-21, Lease incentives 9-1, Deconsolidation result ,621 - Amortisation of long-term debt Depreciation of (in)tangible fixed assets Net finance costs 22 9,086 12,708 Change in working capital and other 11/17-3, Cash generated from operations 50,726 42,719 Interest paid -10,123-14,582 Income tax paid -2,965-2,867 Net cash generated from /(used in) operating activities 37,638 25,270 Cash flows from investing activities Acquisitions of subsidiaries, net of cash acquired 7-13,438-13,283 Purchase of investment properties 9-41, ,700 Investments in investment properties 9-3,416 - Investments in (in)tangible fixed assets Sale of subsidiary (net of cash) 111,592 - Net cash generated from /(used in) investing activities 52, ,132 Cash flows from financing activities Repayment of long-term debts 15-25, ,525 Proceeds from new long-term debts / shareholder loans 15 65, ,025 Received from issuance of shares, net of costs 14 27, ,930 Liabilities from acquisitions -32,008 32,008 Dividend to non-controlling interest -1,131-1,055 Capital distribution (net of costs) Sale to minority shareholder Net cash generated from /(used in) financing activities 33, ,383 Change in cash flows from continuing operations 124,567-9,479 Cash flow from discontinued operations ,992 Notes are an integral part of these consolidated financial statements. 39

40 (In Thousands of Euros) Note Net (decrease) / increase in cash and cash equivalents 124,567-11,471 Cash, beginning of period 8,568 26,359 Cash, end of period 133,135 14,888 Presentation in the statement of financial position Cash and cash equivalents 133,135 8,568 Cash and cash equivalents classified as held for sale - 6,320 Total cash as per 31 December 133,135 14,888 Investing and financing transactions that did not require the use of cash and cash equivalents are excluded from the cash flow statement. The group did not enter into such transactions during 2016 or Notes are an integral part of these consolidated financial statements. 40

41 Notes to the consolidated financial statements 1. GENERAL INFORMATION Geneba Properties N.V. ( Geneba or the Company ) was incorporated in the Netherlands by Stichting Oprichting Geneba Properties under the laws of the Netherlands on 11 July The corporate seat of the Company is in Amsterdam, the Netherlands and its registered office is at Apollolaan 153, 1077 AS in Amsterdam, the Netherlands. Geneba operates and leases logistic, light-industrial and office properties located in Germany and the Netherlands. As per 27 March 2014, the Company acquired business from Homburg Invest Inc. ( HII ) and in exchange shares of Geneba were issued to the former bondholders of HII and to the Catalyst Group. The shares are traded at NPEX in The Hague. The Company is a closed-end investment institution licensed under the Dutch Financial Markets Supervision Act and domiciled in Amsterdam, the Netherlands. The consolidated financial statements have been prepared by the Management Board and are authorised for publication by the Supervisory Board on 29 March The shareholders have the power to amend the consolidated financial statements after issue. These consolidated financial statements have been audited. 2. BASIS OF PREPARATION The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. STATEMENT OF COMPLIANCE The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( EU IFRS ), and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code. INCOME AND CASH FLOW STATEMENT Geneba has elected to present a single statement of comprehensive income, presents its expenses by nature. Geneba reports cash flows from operating activities using the indirect method. Interest received and paid is presented within operating cash flows. The acquisitions of investment properties are disclosed as cash flows from investing activities because this most appropriately reflects the Company s business activities. BASIS OF MEASUREMENT The consolidated financial statements have been prepared on a going concern basis, applying a historical cost convention, except for the measurement of investment property at fair value; financial assets and liabilities (including derivative instruments) at fair value through income statement, which are recognised at fair value. Unless otherwise stated, the figures are presented in thousands of euros rounded to one decimal place. 41

42 SALE OF GERMAN ASSET On 29 December 2016 Geneba successfully solds its stake (93,37%) in MoTo Objekt Campeon GmbH & Co. KG ( MoTo ), which holds the Infineon headquarters building in Munich, to Infineon Technologies AG. The results of MoTo have been included in the consolidated financial statements of Geneba until the date of sale in accordance with IFRS 10. DISPOSAL OF THE BALTIC PORTFOLIO The Baltic portfolio was mainly let to and financed by the Swedish Bank SEB. The portfolio was considered to be nonstrategic because of the limitations under the existing agreements with SEB to play an active role on restructuring this portfolio. The Company managed to sign a sale and purchase agreement with an investor for the sale of the Baltic portfolio in December Geneba obtained the necessary approval of SEB for this sale as part of the change of control clause in the financing agreement. In March 2016 this sales transaction has been completed. As a consequence the Baltic activities were reported as discontinued operations in the Consolidated Statement of comprehensive income and as assets and liabilities classified as held for sale in the Consolidated Statement of Financial Position as of 31 December Further details relating to the discontinued Baltic portfolio is presented in note 13. FUNCTIONAL AND PRESENTATION CURRENCY Items included in the financial statements of each of Geneba s entities (together the Group ) are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The financial information is presented in euros, which is the Company s functional currency and the Group s presentation currency. USE OF ESTIMATES AND ASSUMPTIONS The preparation of the consolidated financial statements in accordance with EU IFRS requires management to make judgements, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and related assumptions are based on historical experience and various other factors considered appropriate. Actual results may differ from these estimates. The estimates and underlying assumptions are constantly reviewed. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The estimates, assumptions and management judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period relate to The fair value of the investment property; The valuation of income taxes; The valuation of deferred tax assets and liabilities. 42

43 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION Subsidiaries are all entities (including structured entities) over which Geneba has control ( the Group ). The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date of which control is gained. They are deconsolidated from the date that control ceases. A list of subsidiaries is included in chapter 13 of these financial statements. All the Group companies have 31 December as their year-end. Consolidated financial statements are prepared using uniform accounting policies. TRANSACTIONS ELIMINATED ON CONSOLIDATION Intragroup balances and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. ACQUISITIONS Acquisitions can be either qualified as asset acquisition falling under IAS 40, or business combinations, falling under IFRS 3. The assessment is made based on whether a set of activities is taken over (business combination) or primarily investment property (asset acquisition). BUSINESS COMBINATIONS Geneba applies the acquisition method to account for business combinations. The consideration for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred from the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, at the noncontrolling interest s proportionate share of the recognised amounts of acquiree s identifiable net assets. Acquisition related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is re-measured to fair value at each new acquisition date; any gains or losses arising from such re-measurement are recognised in the income statement. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. ASSET ACQUISITIONS For acquisition of a subsidiary not meeting the definition of a business, Geneba allocates the cost between the individual identifiable assets and liabilities in the Group based on their relative fair values at the date of acquisition. Such transactions or events do not give rise to goodwill. 43

44 DISPOSAL OF SUBSIDIARIES When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. OPERATING SEGMENTS Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision makers are the chief executive officer (CEO) and chief financial and risk officer (CFRO) of the Company. TRANSACTIONS AND BALANCES Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss for the year. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented net in the income statement within finance costs and finance income respectively. All other foreign exchange gains and losses are presented net in the statement of comprehensive income. INVESTMENT PROPERTY Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the Group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, Investment property is carried at fair value. Investment property under construction is measured at fair value if the fair value is considered to be reliably determinable. The fair value of investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Subsequent expenditure is capitalised to the asset s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Changes in fair values are recognised in the income statement. Investment properties are derecognised when they have been disposed. Where the Group disposes of a property at fair value in an arm s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement within net gain from fair value adjustment on investment property. Gains and losses arising from changes in fair value are recognised in income statement. The portfolio is appraised every six months (30 June and 31 December) by external valuator who hold a recognised and relevant professional qualification and have experience relating to the location and category of the property being appraised. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market values have been determined on the evidence of recent market transactions for similar properties in similar locations to the Group s investment property. Appraisals require the use of both the conventional method and the net present value method. The conventional method involves valuation based on capitalisation at net initial yields for similar transactions. The net present value method gives an amount derived from the projected cash flows for at least the next ten years and end after ten years an exit value based on a yield. Estimated costs a purchaser will necessarily incur to acquire the property are deducted from the property value. Investment properties that are expected to be sold and that are in very advanced stage of negotiation are valued 44

45 at the expected selling price. A number of inputs to the valuation process are not directly observable in the market and significantly impact the valuation. Therefore valuations are considered to be Level 3 in the fair value hierarchy. Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to held for sale. A property s deemed cost for subsequent accounting as held for sale is its fair value at the date of change in use. Acquisitions and disposals of property available for letting are included in the balance sheet as property or designated as sold at the time when the obligation to buy or sell is entered into by means of a signed agreement, at which time the conditions of the transaction can be identified unequivocally and any contingent conditions included in the agreement can no longer be invoked, or the chance that they will be invoked is small, the material risks and benefits associated with the ownership of the property have been transferred and the actual control over the property has been acquired or has been transferred. Upon first recognition, the property is recognised at acquisition price plus costs attributable to the acquisition, including property transfer tax, property agency fees, due diligence costs, and legal and civil-law notary costs, and is recognised at fair value on subsequent balance sheet dates. INVESTMENT PROPERTIES UNDER CONSTRUCTION Property that is being constructed for use as investment property is classified as investment property under construction ( IPUC ). IPUC projects are initially valued at historical cost, and are subsequently valued at fair value. Fair value measurement on IPUC is only applied if the fair value is considered to be reliably measurable. In cases where no reliable measurement is possible IPUC is valued at initial cost, including subsequent investments and capitalisation of financing costs and less any impairments. The fair value of development is determined on an identical basis as investments properties, with the understanding that the capitalisation factor is adjusted for reflect development risks. Fair value changes and impairment losses are recognised in the income statement as valuation result. IPUC s are transferred to investment properties on the date of delivery. INTANGIBLE FIXED ASSETS Intangible assets relate to software, which have finite useful lives and are measured at cost less accumulated amortisation and accumulated impairment losses. When software is recognised initially, they are measured at cost. Software is generally amortised on a straight line basis over a period of three years. Amortisation is recognised within the income statement. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of office equipment and computer equipment. Valuation is made at historical cost, after application of depreciation and any impairment losses. Historical cost includes expenditures that is directly attributable to the acquisition of the items and where applicable borrowing costs. Depreciation is applied on a linear basis to profit and loss on the basis of expected length of use and the residual value of the asset concerned. Depreciation is provided from the date the asset come into use. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at least at each financial year-end. The applied methodology of depreciation, length of use and the residual value is assessed at the end of every book year and adapted if necessary. The estimated useful life of the assets is 3-5 year. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the income statement. 45

46 IMPAIRMENT OF NON-FINANCIAL ASSETS Intangible assets that have an indefinite useful life are not subject to amortisation and depreciation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. LEASES Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to income statement on a straight-line basis over the period of the lease. Properties leased out under operating leases are included in investment properties. FINANCIAL ASSETS Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-tomaturity financial assets and available-for-sale financial assets, as appropriate. The Group determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Financial assets are derecognised only when the contractual rights to the cash flows from the financial asset expire or the Group transfers substantially all risks and rewards of ownership. The Groups financial assets consist of loans and receivables and available for sale financial assets. Financial assets recognised in the consolidated statement of financial position as trade and other receivables are classified as receivables. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Cash and cash equivalents are subsequently measured at amortised cost. Cash and cash equivalents include cash on hand and balances with banks, net of bank overdrafts with a right of offset, and highly liquid temporary money market instruments with original maturities of three months or less. Bank borrowings are considered to be financing activities. IMPAIRMENT OF FINANCIAL ASSETS The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument s fair value using an observable market. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement. 46

47 FINANCIAL LIABILITIES Liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss or other liabilities, as appropriate. Financial liabilities consist of trade payables and other payables and corporate income taxes payable. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. All loans and borrowings are classified as long-term debt except if the due date is less than one year. Initial recognition is at fair value less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. Certain Group companies obtain deposits from tenants as a guarantee for returning the property at the end of the lease term in a specified good condition or for the lease. Such deposits are treated as financial assets in accordance with IAS 39, and they are initially recognised at fair value. The deposit is subsequently measured at amortised cost. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and balances with banks, net of bank overdrafts with a right of offset, and highly liquid temporary money market instruments with original maturities of three months or less. Bank borrowings are considered to be financing activities. EQUITY Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividend distribution to the Company s shareholders is recognised as a liability in the consolidated financial statements in the period in which the dividends are approved. The Company measures the non-controlling interest at the non-controlling interest s proportionate share of the acquiree s identifiable assets and liabilities. LONG-TERM DEBTS Long-term debt is initially recognised at fair value less directly attributable transaction costs. After initial recognition, long-term debt is subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the consolidated statement of comprehensive income when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR calculation. The amortisation is included in interest expense in the combined statement of earnings and comprehensive earnings. Long-term debts are classified as current liabilities unless Geneba has an unconditional right to defer settlement of the liability for at least 12 months after the date of the statement of financial position. CURRENT AND DEFERRED INCOME TAX The tax expenses comprises current and deferred tax. Tax is recognised in the income statement, expect to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case the tax is also recognised in other comprehensive income or equity. The income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Group operates. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 47

48 The Group follows the tax liability method for determining income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the carrying amounts and tax bases of specific balance sheet items, especially the valuations of the properties. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except: When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax liabilities are recognised for all taxable temporary differences, except: When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured based on enacted or substantively enacted tax rates and laws at the date of the financial statements for the years in which these temporary differences are expected to reverse, and adjustments are recognised in earnings as they occur. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same tax authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. EMPLOYEE BENEFITS DEFINED CONTRIBUTION PLANS Geneba only has a defined contribution plan for three of its employees as per year-end (2015: three). Other employees do not have a pension scheme. A defined contribution plan is a pension plan under which Geneba pays fixed contributions into a separate entity. Geneba has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. For the defined contribution plan, Geneba pays contributions to a privately administered pension insurance plan on a contractual basis. Geneba has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. 48

49 PROVISIONS Provisions for legal claims are recognised when: The Group has a present legal or constructive obligation as a result of past events; It is probable that an outflow of resources will be required to settle the obligation; and The amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost. Where the Group, as lessee, is contractually required to restore a leased property to an agreed condition prior to release by a lessor, provision would be made for such costs as they are identified. This was not applicable in 2015 and REVENUE RECOGNITION Revenue includes rental income, and service charges and management charges from properties. The Group s management has determined that all leases with its various tenants are operating leases. Rental income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives is recognised over the lease term, on a straight-line basis, as a reduction of rental income. Revenue from service and management charges is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Services and management charges are recognised in the accounting period in which the services are rendered.. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income. Incentives for lessees to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the directors are reasonably certain that the tenant will exercise that option. Amounts received from tenants to terminate leases or to compensate for overdue maintenance are recognised in the statement of comprehensive income when the right to receive them arises. PROPERTY EXPENSES Property expenses consist of operational cost for the account of Geneba attributable to the accounting period, such as: Maintenance Property tax Insurance premiums Property management and Utilities GENERAL AND ADMINISTRATIVE EXPENSES Expenses include legal, accounting, auditing and other fees. They are recognised in profit or loss in the period in which they are incurred (on an accruals basis). 49

50 FINANCE INCOME AND EXPENSE Interest income and expense are recognised within `finance income and `finance costs in profit or loss using the effective interest rate method (EIR), except for borrowing costs relating to qualifying assets, which are capitalised as part of the cost of that asset. The Group has chosen to capitalise borrowing costs on all qualifying assets irrespective of whether they are measured at fair value or not. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, Geneba estimates cash flows considering all contractual terms of the financial instrument (for example, pre-payment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. NON-CURRENT ASSTES (OR DISPOSAL GROUPS) HELD FOR SALE Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell unless the assets are investment properties measured at fair value or financial assets in the scope of IAS 39 in which case they are measured in accordance with those standards. 50

51 4. CHANGES IN ACCOUNTING POLICIES The preparation of consolidated financial statements in conformity with EU-IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the assumptions changed. (A) CHANGES IN ACCOUNTING POLICIES Geneba did not change its accounting policies. The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December (B) NEW AND AMENDED STANDARDS ADOPTED BY GENEBA Amendments to IFRS 10, IFRS 12 and IAS 28. The amendments concern the consolidation of or by an investment entity and the application of the equity method by a non-investment entity to an investment entity. These amendments did not affect the presentation, notes or financial results of the Group. Amendments to IAS 16 and IAS 38. The amendments concern the supplementary guidelines for including acceptable depreciation and amortisation methods. The amendments do not have any impact on the presentation, notes or financial results of the Group. Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2016 are not applicable to the Group. (C) NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT YET ADOPTED BY GENEBA A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of Geneba. IFRS 9, released in July 2015, replaces the current accounting standard IAS 39 Financial instruments: Recognition and Measurement. IFRS 9 'Financial Instruments' includes the standards regarding classification and measurement, hedge accounting and impairment. IFRS 9 introduces a new expected credit loss impairment model and changes to the classification and measurement for financial assets. The impairment model is based on the notion of providing for expected losses at inception of a contract. IFRS 9 is effective for periods beginning on or after January 1, 2018 and has been endorsed by the EU. IFRS 15, 'Revenue from contracts with customers', deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted, subject to EU adoption. IFRS 16, Leases, introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognises a right of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases Incentives and 51

52 SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after 1 January Early adoption is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. IAS 7, The amended IAS 7 will require disclosure of a reconciliation of movements in liabilities arising from financing activities. The Group will comply with this disclosure in the 2017 financial statements. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. 52

53 5. FINANCIAL RISK MANAGEMENT The risk management function within the Group is carried out in respect of financial risks. Financial risks are risks arising from financial instruments to which the Group is exposed during or at the end of the reporting period. Financial risk comprises market risk (including valuation risk and interest rate risk), credit risk and liquidity risk. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. Risk management is carried out by the Management Board as part of the Policies & Procedures of the Company approved by the Supervisory Board. The Management Board provides written principles for overall risk management, as well as written policies covering specific areas, such as, interest rate risk, credit risk and investing excess liquidity. Risks are constantly monitored and quarterly risks reports are prepared by the Management Board and discussed with the Supervisory Board MARKET RISKS Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group s market risks mainly arise from price risks (valuation risks) and risks due to interestbearing assets and liabilities, to the extent that these are exposed to general and specific market movements. Management sets limits on the exposure to interest rate risk that may be accepted, which are monitored on a quarterly basis. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Sensitivities to market risks are based on a change in one factor while holding all other factors constant. In practice, this is unlikely to occur, and changes in some of the factors may be correlated - for example, changes in interest rate and changes in valuations INTEREST RATE RISKS The assets and liabilities of the Group (including the mortgages secured by the Group s properties) have fixed and floating interest rate components resulting in an exposure to interest rate fluctuations. These fluctuations in interest rates will have an impact on the earnings of the Group. Increases in interest rates generally cause a decrease in demand for properties. Higher interest rates and more stringent borrowing requirements, whether mandated by law or required by banks, could have a significant negative effect on the Group s ability to sell any of the Group s properties. As a result, the Group s financial results and condition or operating results could be materially adversely affected. As part of the risk management procedures Geneba implemented strict monitoring of the interest rate movements by the finance director and quarterly reporting in order to manage positions for short- and long-term financing. Management analyses the Group s interest rate exposure on a dynamic basis. Various scenarios are simulated, taking into consideration refinancing, renewal of existing positions and alternative financing sources. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. The simulation is done on a quarterly basis to verify that the maximum potential loss is within the limits set by management. If interest rates had been 100 basis points higher as per 31 December 2016, with all other variables held constant, net result before tax for the year would have been 0.2 million lower. If interest rates had been 100 basis points lower with all other variables held constant, net result before tax for the year would have been 0.2 million higher. Reference is made to note

54 The following table classifies the loans based on floating and fixed interest rates: (In Thousands of Euros) Value as per 31 December 2016 Value as per 31 December 2015 Floating interest rate 17,603 21,265 Fixed interest rate 214, ,696 Total nominal value loans 232, ,961 The effective average interest rate in 2016 amounted to 2.0% ( %). A loan expiring in January 2017 with a floating interest rate has been refinanced in January 2017 at a fixed interest rate of 2.1% PRICE RISKS (VALUATION RISKS) The Group has no exposure to price risks of equity securities or commodities. It is exposed to property price risk or property valuation risk. Reference is made to note 6 and note CAPITAL RISKS Geneba s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders; and to maintain an optimal capital structure to reduce the cost of capital. Part of the risk management procedure is to formulate a funding plan by the Management Board in order to be able to finance the growth of the portfolio. Geneba monitors capital on the basis of loan to value ( LTV ) and the gearing ratio. The LTV decreased from 59% in 2015 to 47% in This decrease was mainly due to the disposal of the Baltic portfolio and sale of the stake in MoTo. New acquisitions have been financed at an LTV of 50%-60%. The gearing risk ratio is calculated as net debt divided by total capital. Net debt is calculated by Geneba as total borrowings less cash and cash equivalents. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus net debt. The gearing ratios at 31 December 2016 and at 31 December 2015 were as follows: (In Thousands of Euros) Total borrowings (net of finance charges) 230, ,964 Liabilities from acquisitions - 32,008 Less: cash and cash equivalents (adjusted for shareholder distribution) -21,344-8,568 Net debt 209, ,404 Total equity 269, ,443 Total capital 478, ,847 Gearing ratio 43.7% 59.3% For the borrowings from third parties covenants are in place which are constantly monitored by the management of the Group. These covenants mainly relate to LTV and Interest Coverage Ratio ( ICR ) minimum requirements which need to be reported to the banks on a quarterly basis. As per 31 December 2016 all covenants are met. 54

55 5.5. CREDIT AND CONCENTRATION RISKS Concentration of tenants may adversely affect Geneba s financial performance. If for any reason Geneba is unable to collect rents from one or more of its key tenants, Geneba s revenues and its ability to pay the property costs associated with the relevant property and the valuation of the related property could be materially adversely affected. Due to new acquisitions in 2015 and 2016, the sale of the German asset and the effective disposal of the Baltic portfolio Geneba significantly reduced the concentration risk. As per 31 December 2016 concentration risk for total annualized rental income and property value can be summarized as follows: (in% of total existing portfolio) Rental income Property value Largest asset (Germany)* 16% 13% Second largest asset (The Netherlands) 11% 12% < 10% of portfolio 73% 75% *Relates to a property in Germany, which is leased to different tenants. In order to manage these risks Geneba is in close contact with its tenants and monitors credit risks with help of rating agencies (Moody s, Standard Poor, Graydon, Crediform Group) and tries to reduce the concentration risk by diversifying its portfolio. The Group has policies in place to ensure that rental contracts are entered into only with lessees with an appropriate credit history. Currently we have no material accounts receivable outstanding and we have not identified any material credit risks with our major tenants. Geneba s maximum exposure to credit risk by class of financial asset other than derivatives and rental guarantee is as follows: (In Thousands of Euros) Rent receivables Other financial assets 1, Cash and cash equivalents 133,135 8,568 Of the total cash and cash equivalents million was paid out to shareholders om 3 January The Group holds a majority of its cash accounts in a single financial institution. However as this financial institution has a credit rating of Aa2 (Moody s), the credit risk is considered limited LIQUIDITY RISKS Liquidity risk mainly relates to the possibility of insufficient debt and equity available to refinance the current and longterm debts as they come due and to fund, the future growth of Geneba. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Geneba aims to maintain flexibility in funding by keeping a minimum level of cash or committed credit lines equal to one year of operating costs available. Risk control measures are set and implemented, and mainly consist of the elaboration of a financing strategy and bank policy by the Management Board and detailed cash flow projections including the finance requirements. 55

56 Geneba liquidity position is monitored on a weekly basis by the management and is reviewed quarterly by the Management Board and reported to the Supervisory Board. A summary table with maturity of financial assets and liabilities is presented below. As at 31 December 2016 (In Thousands of Euros) No maturity < 1 month 1 < 3 months 3 < 12 months 1 < 2 years 2 < 5 years > 5 years Total Assets Trade and other receivables - 2, ,214 Cash and cash equivalents 133, ,135 Liabilities Loans (excl. borrowing costs) - 10,262 1,948 6,899 9, ,811 80, ,105 Trade and other payables - - 9, ,641 Distribution to shareholders - 111, ,791 Included in the loan amounts due within one month is a construction loan of 9.7 million, which is successfully refinanced in January The remaining amount of repayments on loans relate to regular amortisation according to the repayment schedules. As at 31 December 2015 (In Thousands of Euros) No maturity < 1 month 1 < 3 months 3 < 12 months 1 < 2 years 2 < 5 years > 5 years Total Assets Trade and other receivables - - 2, ,083 Cash and cash equivalents 8, ,568 Assets classified as held for sale , ,456 Liabilities Loans (excl. borrowing costs) ,427 12,967 17, ,601 41, ,299 Shareholder loans - 1, ,665 Liabilities from acquisitions , ,008 Trade and other payables - - 9, ,292 Liabilities classified as held for sale , ,706 The following cash positions are not freely available: Germany 1.7 million thousand (2015: 338 thousand); Netherlands 440 thousand (2015: 440 thousand); Cash available for distribution to shareholders million, paid on 3 January

57 6. FAIR VALUE ESTIMATIONS The table below analyses investment property and financial instruments carried at fair value, by valuation method. The different levels are defined as follows: Level 1: Level 2: Level 3: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The Group investments and financial assets and liabilities as of 31 December 2016 are classified as follows: Level 1 Level 2 Level 3 Investment properties ,604 The Group investments and financial assets and liabilities as of 31 December 2014 are classified as follows: Level 1 Level 2 Level 3 Investment properties ,336 There were no transfers between level 1, 2 and 3 during the year. The investment properties are all included in Ievel 3. Specific valuation techniques used to value financial instruments include: The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; Other techniques, such as discounted cash flow analysis, are used to determine fair value for the investment properties in level 3. Reference is made to note 9. 57

58 7. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS Acquisition of Greenfield Logistikpark Nürnberg GmbH As per 2 March 2016 Geneba RE 16 B.V. purchased 94% shares of Greenfield Logistikpark Nürnberg GmbH which is the owner of a logistic investment property in Nürnberg. The Company is a legal entity incorporated under German law. The total purchase consideration amounted to cash is 5.9 million. Acquisition of Greenfield Logistikpark Achern GmbH As per 2 March 2016 Geneba RE 17 B.V. purchased 94% shares of Greenfield Logistikpark Achern GmbH which is the owner of a logistic investment property in Achern. The Company is a legal entity incorporated under German law. The total purchase consideration amounted to cash is 1.6 million. Acquisition of LogProject Rheinberg I GmbH As per 2 May 2016 Geneba RE 18 B.V. purchased 94.9% shares of LogProject Rheinberg I GmbH which is the owner of a logistic investment property in Rheinberg. The Company is a legal entity incorporated under German law. The total purchase consideration amounted to cash is 6.4 million. Management considers these acquisitions as asset/investment property acquisitions rather than business combinations as defined in IFRS 3 as no set of activities have been acquired. The consideration paid for the shares is equal to the equity amount presented in the below table. The measurement of the assets and liabilities have been determined based on the same accounting principles as applied by Geneba and its subsidiaries in this report. In 2016 there were no acquisitions which are classified as business combinations as defined in IFRS 3. The assets and liabilities recognised in the consolidated statement of financial position on the dates of the acquisitions during 2016 and 2015 were: (In Thousands of Euros) Asset acquisitions Asset acquisitions Investment properties 48,936 37,769 Cash and cash equivalents Trade and other receivables Borrowings -30,746-21,064 Trade and other payables -4,844-3,863 Fair value of acquired interests 14,732 13,655 Minority share Total purchase consideration 13,909 13,655 Less: Cash and cash equivalents Net (in)-/outflow of cash and cash equivalents on acquisition 13,438 13,284 58

59 8. SEGMENTED INFORMATION The operating performance is evaluated by the Management Board primarily based on the net operating income of completed investment properties, which is defined as rental incomes less property operating expenses, aggregated into operating segments with similar economic characteristics represented by the following geographical areas Germany and The Netherlands. Centrally managed expenses such as interest, amortisation, and general and administrative costs are included in the corporate segment. The Management Board also regularly reviews the carrying value of investment properties, on a property by property basis and also on an aggregated basis by geographical operating segment. Operating segment liabilities, which are regularly reviewed by the Management Board on an aggregated basis by geographical operating segment, include mortgages and mortgage bonds payable to the extent these can be allocated to specific geographical operating segments. In 2015 the Baltic States segment is classified as held for sale and discontinued operations, reference is made to note 13. The segment information for the operating segments for the year ended 31 December 2016 is as follows: Geographical segment information 2016 (In Thousands of Euros) Corporate Germany Netherlands Total Gross Rental income - 58,347 8,245 66,592 Service charges - 5, ,577-63,806 8,363 72,169 Property operating expenses (incl. intercompany charges) 2,875* -10,361-1,491-8,977 Fair value changes properties - -6,037 8,009 1,972 Result from sale of subsidiary - 21,139-21,139 Net property result from continuing operations 2,875 68,547 14,881 86,303 *Relates to charges from the head-office to the property companies Reconciliation to the net result 2016 is provided as follows (In Thousands of Euros) Corporate Germany Netherlands Net property result from continuing operations 2,875 68,547 14,881 86,303 General and administrative expense -6, ,952 Net finance income (cost) ,748-1,199-9,086 Net result before income tax -4,216 60,799 13,682 70,265 Income tax 4,810-3,514-2,946-1,650 Net result for the period from continuing operations ,285 10,736 68,615 Total 59

60 Geographical segment Balance sheet information 2016 (In Thousands of Euros) Corporate Germany Netherlands Total Investment properties - 376, , ,604 Cash and cash equivalents ,312 2, ,135 Deferred income tax assets 6, ,278 Other segment assets 603 1, ,535 Long-term debts - 182,246 48, ,495 Deferred income tax liabilities - 7,350 3,292 10,642 Other liabilities 114,233 7, ,305 The segment information for the operating segments for the year ended 31 December 2015 is as follows: Geographical segment information 2015 (In Thousands of Euros) Corporate Germany Netherlands Total Gross Rental income - 46,928 3,341 50,269 Service charges - 2, ,522-49,286 3,505 52,791 Property operating expenses (incl. intercompany charges) 1,583* -5, ,583 Fair value changes properties - -10,156-7,561-17,717 Deconsolidation result - 9,621-9,621 Net property result from continuing operations 1,583 43,291-4,762 40,112 *Relates to charges from the head-office to the property companies Reconciliation to the net result 2015 is provided as follows (In Thousands of Euros) Corporate Germany Netherlands Net property result from continuing operations 1,583 43,291-4,762 40,112 General and administrative expense -5, ,926 Net finance income (cost) 2,933-14,428-1,213-12,708 Net result before income tax -1,396 28,852-5,978 21,478 Income tax 1,875-1,069 1,023 1,829 Net result for the period from continuing operations ,783-4,955 23,307 Total 60

61 Geographical segment Balance sheet information 2015 (In Thousands of Euros) Corporate Germany Netherlands Baltic States Total Investment properties - 598, , ,336 Cash and cash equivalents ,255-8,568 Deferred income tax assets 1, ,247-3,792 Other segment assets 715 1, ,456 Assets classified as held for sale ,456 96,456 Long-term debts - 326,983 54, ,299 Shareholder loans 1, ,665 Deferred income tax liabilities - 7,643 1,676-9,319 Liabilities from acquisitions - 32, ,008 Other liabilities 1,634 6,187 1,471-9,292 Liabilities classified as held for sale ,706 96,706 During 2016 and 2015 recharges were made in respect to (asset)management fees and interest on intercompany loans, from the corporate segment to the country segments (Germany and The Netherlands). Revenue is derived from a large number of tenants. As per 31 December 2016 no single tenant or group under common control contributes more than 10% of the Groups revenues. 61

62 9. INVESTMENT PROPERTIES (In Thousands of Euros) Germany Netherlands Baltics Total Balance, as at 1 January ,286 32,300 86, ,622 Acquired through asset acquisitions 14,449 23,320-37,769 Investments (direct acquisitions) 164,801 59, ,183 Capital expenditures Divestments Fair value adjustment -10,156-7, ,717 Transfer to assets classifies as held for sale (note 13) ,852-85,852 Deconsolidation of German legal entity -9, ,500 Balance, as at 31 December , , ,838 Investments (direct acquisitions) 41, ,757 Investments through asset acquisitions (note 7) 48, ,936 Capital expenditures 3, ,416 Fair value adjustment -6,037 8,009-1,972 Divestments -311, ,122 Balance, as at 31 December , , ,797 Lease incentives, as at 1 January Movement lease incentives ,309 Lease incentives, as at 31 December ,807 Fair value, as at 31 December , , ,604 The sale of participation relate to the sale of the MoTo stake, owning the Munich property, in December Reference is made to note 25. The investment properties were financed by mortgages from third parties with a current outstanding debt balance of 232 million. Under the mortgage agreements, the related investment property serve as collateral to financiers. Information about fair value measurements using significant unobservable inputs (Level 3) for 2016: Germany Netherlands Total Level Level 3 Level 3 Valuation technique All countries: Comparative method, Rental value capitalisation method, Discounted cash flow (DCF) method Rental value (x 1.000) 27,085 8,387 35,472 Discount rate (%) 6.2%-8.8% 6.4%-8.0% Capitalisation rate for terminal value (%) 5.3%-7.5% % Market value per external valuation report (x 1.000) 374, , ,200 62

63 Information about fair value measurements using significant unobservable inputs (Level 3) for 2015: Germany Netherlands Total Level Level 3 Level 3 Valuation technique All countries: Comparative method, Rental value capitalisation method, Discounted cash flow (DCF) method Rental value (x 1.000) 54,911 8,310 63,221 Discount rate (%) 6.1%-8.0% 5.9%-7.8% Capitalisation rate for terminal value (%) 5.4%-7.8% 6.9%-10.0% Market value per external valuation report (x 1.000) 597, , ,421 Sensitivity analyses in discount rates and terminal values Geneba utilised the following weighted average rates and has determined that an increase (decrease) in the applied rate of 0.5% in any geographical segments would result in an increase or decrease in the fair value of the investment properties as follows: Sensitivity analyses as per 31 December 2016 Average discount rate Impact of 0.5% change Increase (+0.5%) Decrease (-0.5%) Germany 7.25% -24,116 27,686 The Netherlands 7.03% -7,718 8,900 Total -31,834 36,586 Average capitalisation rate Impact of 0.5% change Increase (+0.5%) Decrease (-0.5%) Germany 6.06% -28,505 33,632 The Netherlands 7.01% -7,740 8,929 Total -36,245 42,561 Sensitivity analyses as per 31 December 2015 Average discount rate Impact of 0.5% change Increase (+0.5%) Decrease (-0.5%) Germany 6,75% -41,232 47,833 The Netherlands 6,49% -7,713 9,001 Total -48,945 56,834 Average capitalisation rate Impact of 0.5% change Increase (+0.5%) Decrease (-0.5%) Germany 6,45% -42,994 50,220 The Netherlands 7,80% -6,497 7,338 Total -49,491 57,558 63

64 Valuation processes Investment properties are stated at fair value. All properties were valued by external appraisers at 31 December The valuations have been performed by independent professionally qualified valuators who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. For all investment properties, their current use equates to the highest and best use. The finance director (FD) reviews the valuations performed by the independent valuator for financial reporting purposes. The FD reports directly to the chief financial risk officer (CFRO) and the audit & valuation committee (A&VC). Discussions of valuation processes and results are held between the FD, CFRO and A&VC at least two times per year (half-year and year-end), in line with the Geneba Policy & Procedures. At each financial year end the finance department: verifies all major inputs to the independent valuation report; assesses property valuation movements when compared to the prior year valuation report; assesses the competence and qualification of the independent appraiser; holds discussions with the independent appraiser. Valuation techniques underlying management's estimation of fair value For all properties, the valuation was determined using discounted cash flow ( DCF ) projections based on unobservable inputs. These inputs include: Future (rental) cash inflows: based on the actual location, type and quality of the properties and supported by the terms of any existing lease, other contracts or external evidence such as current market rents for similar properties; Discount rates: reflecting current market assessments of the uncertainty in the amount and timing of cash flows; Estimated vacancy rates: based on current and expected future market conditions after expiry of any current lease; Maintenance costs: including necessary investments to maintain functionality of the property for its expected useful life; Capitalisation rates: based on actual location, size and quality of the properties and taking into account market data at the valuation date; Terminal value: taking into account assumptions regarding maintenance costs, vacancy rates and market rents. There were no changes to the valuation techniques during the year. 64

65 10. INTANGIBLE ASSETS AND PROPERTY PLANT AND EQUIPMENT In Thousands of Euros Software Other Software Other Costs Accumulated amortisation and depreciation Book value, as at 1 January Movements: Investments Desinvestments (at costs) Desinvestments (accumulated amortisation and depreciation) Amortisation and depreciation Total movements Costs Accumulated amortisation and depreciation Book value, as at 31 December Depreciation rate 33% 20-33% 33% 20-33% Other consists of IT- hardware and furniture and fixture of the Company offices in Amsterdam and Munich. The amortisation and depreciation is included as part of the General and Administrative expenses. There were no impairment charges in 2016 and

66 11. TRADE AND OTHER RECEIVABLES In Thousands of Euros 31 December December 2015 Value added tax receivable Prepaid expenses Rent receivables from lessees Service charge settlements Receivable from minority shareholder Prepaid insurance Receivable from lender - 1,031 Income tax receivable - 10 Other receivables ,214 2,083 Less: Provision for impairment of trade receivables - - Total 2,214 2,083 The estimated fair values of receivables are the discounted amount of the estimated future cash flows expected to be received and approximate their carrying amounts. Expected cash flows are discounted at current market rates to determine fair values. No provisions for impairment of trade receivables were considered necessary. There is no significant concentration of credit risk with respect to the trade receivables. 12. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash at different banks. Cash is measured at fair value (Level 1). The following cash positions are not freely available: Germany 1.7 million (2015: 338 thousand); Netherlands 440 thousand (2015: 440 thousand); Cash available for distribution to shareholders million, paid on 3 January

67 13. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS The divestment of the Baltic portfolio has been classified as held for sale and a discontinued operations in line with IFRS 5, based on the decision that the Baltic portfolio is non-strategic and that the sale of the portfolio is in advanced stage as per 31 December The sale of this portfolio has been finalised in March The assets and liabilities comprising the disposal group classified as held for sale are as follows: (In Thousands of Euros) 31 December 31 December Assets classified as held for sale Investment property - 89,895 Trade receivables Other receivables - 90 Cash and cash equivalents - 6,320 Total assets classified as held for sale - 96,456 (In Thousands of Euros) Liabilities classified as held for sale 31 December December 2015 Long-term loans - 75,813 Short-term loans - 3,270 Other payables - 4,270 Derivative - 13,353 Total liabilities classified as held for sale - 96,706 The consolidated statement of comprehensive income below presents the discontinued operations on a stand-alone basis. (In Thousands of Euros) 1 January March January December 2015 Gross rental income 3,107 12,483 Property operating expenses -1,078-3,919 Net rental income 2,029 8,564 Net adjustment to fair value of: Investment properties 3,113 4,044 Derivative financial instruments -1,746 1,937 Result on sale of property Total net adjustments 1,367 5,930 Operational result 3,396 14,299 Net finance costs -3,396-6,316 Net result before income tax - 7,983 Income tax expense Net result for the period / Total comprehensive income - 7,865 There is no income or expense recognised in equity relating to the disposal group classified as held for sale. 67

68 The cash flows from discontinued operations are as follows: (In Thousands of Euros) Cash flows from discontinued operations 1 January March January December 2015 Net cash (used in) / from operation activities 1,179 3,696 Net cash (used in) / from investing activities Net cash (used in) / from financing activities -2,726-5,872 Net cash flows for the year from discontinued operations -1,580-1,992 There is no income or expense recognised in equity relating to the disposal group classified as held for sale. At 31 December 2015 the cash and cash equivalents of 6.3 million from the Baltic portfolio was not freely available to the Group. Details of the sale of the portfolio (in Euros) 1 January March January December 2015 Consideration in cash 10 - Carrying amount of assets sold 10 - Result on sale after tax SHARE CAPITAL (In Thousands of Euros) Number of shares (thousands) Share capital (Euros) Share Premium (Euros) Total (Euros) As at 1 January , ,452 95,063 Share premium contribution 58,243 1, , ,267 Share capital and share premium distribution -3, As at 31 December ,227 1, , ,259 Issuance of shares 12, ,462 34,712 Cancellation of shares Capital distributions ,594-70,594 As at 31 December ,549 1, , ,440 As per 31 December 2016 the authorised capital comprises 97,549,430 ordinary shares each with a nominal value of 0.02 per share (total: 1,950,989). As per 31 December 2015 the authorised capital comprises 85,226,746 ordinary shares each with a nominal value of 0.02 per share (total: 1,704,535). The total distribution amounted million, of which 41.2 million has been paid out from retained earnings and 70.6 million from the share premium reserve. As per 31 December 2016, Geneba had issued 97,549,430 shares of which 339,840 shares were in the process of being cancelled (cancellation officially effective at 27 January 2017). 68

69 The certificates of the shares of Geneba Properties N.V. are listed at NPEX since 27 March 2014 and traded since 7 July The following shareholders hold an interest of more than 5% of the Geneba shares: Catalyst Coöperatief U.A. holds 86% as per 31 December 2016 (2015: 84%). Neither the members of the Management Board nor members of the Supervisory Board owned Geneba shares during the reporting period. Samson Bélair/Deloitte & Touche Inc., Canada, ( The Monitor ) was appointed to act as the Monitor in the CCAA (Companies Creditors Arrangement Act (Canada)) proceedings of Homburg Invest Inc. ( HII ). Pursuant to the proceeding the Monitor transferred the initial portfolio of HII to Geneba. In the context of the proceeding the Monitor initially held 7,117,482 shares to be attributed to claim holders in case the claims are successful. In case claims are ultimately rejected the respective portion of shares will be cancelled. As per 1 January 2016 the Monitor held 628,265 shares. Of these shares 216,071 shares are cancelled in February Another portion of 339,840 shares are cancelled with effective date of 27 January Consequently the remaining part of shares held by the Monitor is 72,354. On 3 December 2014, Geneba announced a Rights Issuance in which it offered a total of 74,397,740 new shares at a price of 2.78 per share. This offering was fully underwritten by Catalyst, acting as a backstopper under a Subscription Agreement agreed on 1 December 2014 between Catalyst and Geneba. This meant that Catalyst committed to exercise all its own rights allocated to Catalyst in this Rights Issuance and that it committed to subscribe for the shares not exercised by other shareholders at any time the Management Board asks to do so in order to fund an investment proposal approved by the Supervisory Board. On 26 February 2016, the company issued 12,538,755 new shares for a price of 2,78 (total 34,9 million). After this date no more shares will be issued under the Right Issuance. 15. LONG-TERM DEBT AND SHAREHOLDER LOAN (In Thousands of Euros) Nominal value loans, as at 1 January 383, ,035 New loans 59, ,525 New shareholder loans 5,636 22,500 New loans through asset acquisition (note 7) 30,746 21,064 Deconsolidation of German legal entity (note 9) - -19,884 Transfer to classified as liabilities held for sale (note 13) - -79,083 Sale of subsidiary -214,993 - Repayments of loans (excl. shareholder loans) -25,912-40,063 Repayment of shareholder loans - -68,796 Conversion of shareholder loan -7,300-10,337 Subtotal loans 232, ,961 Less: current portion -19,109-19,284 Total nominal value long-term loans 212, ,677 Deferred finance charges -1, Fair market value adjustment loans Balance, as at 31 December 211, ,680 The nominal value of the loans as per 31 December 2016 is 232 million (2014: 383 million). 69

70 The investment properties were financed by mortgages from third parties with a current outstanding debt balance of 232 million. Under the mortgage agreements, the related investment properties serve as collateral to financiers (note 9). All loans are denominated in euros. The Company has no undrawn borrowing facilities as per 31 December 2016 and 31 December The following schedule shows the repayments of the long-term loans (based on maturity dates): (In Thousands of Euros) < 1 month 1 < 3 months 3 < 12 months 1 < 2 years 2 < 5 years > 5 years Total Loans 10,262 1,948 6,899 9, ,811 80, ,105 The current portion of long-term debts falling due within one year is 19.1 million. This amount consists of: 1. Repayment of a construction loan of 9.7 million in January This loan is refinanced with a new loan of 11.1 million in January million of periodic repayments according to the loan agreements with external parties. The following table classifies the loans based on floating and fixed interest rates: (In Thousands of Euros) Value as per 31 Value as per 31 December 2016 December 2015 Floating interest rate 17,603 21,265 Fixed interest rate 214, ,696 Nominal value loans 232, ,961 The effective average interest rate in 2016 amounted to 2.0% ( %). A loan expiring in January 2017 with a floating interest rate has been refinanced in January 2017 at a fixed interest rate of 2.1%. 16. DERIVATIVE FINANCIAL INSTRUMENTS As per 29 December 2014 the Company entered into an agreement with Nord-Deutsche Landesbank Girozentrale to limit the risks on an increase of the floating interest rate on one of the loans for an amount of 8.2 million, effective as per 2 January 2015 until 31 December The limit is set to an interest rate of 4%. 70

71 17. TRADE AND OTHER PAYABLES In Thousands of Euros 31 December December 2015 Financial liabilities: Distributions to shareholders 109,537 - Dividend tax on capital distribution 2,254 - Accrued property expenses 2, Accrued advisory costs (audit, tax, valuations, legal, etc.) 1, Accrued acquisitions cost (transfer tax, notary, legal and tax advice, etc.) 1,359 3,199 Value added taxes Personnel expenses Trade payables 902 1,418 Received advance rent payments Security deposits Payable to minority shareholder Social security and wage taxes Accrued interest on loans Supervisory board expenses Other Total 121,432 9,292 The distribution of capital was approved in the general meeting of shareholders on 30 December 2016 and was paid out on 3 January The estimated fair values of the above financial liabilities are the discounted amounts of the estimated future cash flows expected to be received and approximate their carrying amounts. 18. INCOME TAXES In Thousands of Euros Germany Netherlands Total Deferred tax assets from loss compensation - - 6,704 1,875 6,704 1,875 Deferred tax assets from temporary differences , ,917 Current tax -1, Deferred tax liabilities from temporary differences -7,350-7,643-3,292-1,676-10,642-9,319 Total -7,881-7,004 3,644 1,487-4,237-5,517 Deferred income tax assets and liabilities from temporary differences represents the difference between the tax basis of assets and liabilities and the carrying amount of assets and liabilities for financial reporting purposes and are all classified as long-term (to be recovered after more than 12 months). Deferred tax assets from loss compensation represent taxable losses that are expected to be compensated in the near future with taxable profits in the Netherlands. 71

72 The tax on the Group s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate on the applicable profits on the consolidated companies as follows: In Thousands of Euros Germany Netherlands Total Nominal tax rate 15,825% 20-25% Profit (loss) before tax 56,968 13,297 70,265 Tax effect on: Not subject to tax - fair value movements properties 6,037-8,009-1,972 Not subject to tax - Result from sale of participation (excl. expenses) -21, ,517 Not subject to tax - amortisation long-term debt Not subject to tax - movements lease incentives -1, ,886 Expenses Rights Issue booked through equity Expenses distributions booked through equity Fiscal depreciation of properties -15,896-2,136-18,032 Non-deductible expenses Adjustment minority share -1, ,299 Other adjustments Total taxable result 23,116 1,366 24,482 Tax losses carried forward Total taxable result (based on 100%) 23,775 1,373 25,148 Tax charge (against nominal rates) (Geneba share) 3, ,071 Reconciliation tax position income statement 2016 Germany Netherlands Total Tax charge (against nominal rates) 3, ,071 Adjustment previous periods Subtotal income tax through income statement 3, ,031 Movement deferred tax assets (through income statement) 96-3,800-3,704 Movement deferred tax liabilities (through income statement) ,616-1,323 Subtotal deferred tax through income statement ,184-2,381 Total tax income statement 3,533-1,883 1,650 The companies that are part of the fiscal unity Geneba Properties N.V. in 2015 are Geneba RE 3 B.V. (as per 25 March 2014), Geneba RE 4 B.V. (as per 1 January 2015), Geneba RE 5 B.V. (as per 1 January 2015), Geneba RE 6 B.V. (as per 28 October 2014), Geneba RE 7 B.V. (as per 17 November 2014), Geneba RE 8 B.V. (25 February 2015), Geneba RE 9 B.V. (25 February 2015), Geneba RE 10 B.V. (25 February 2015), Geneba RE 11 B.V. (19 May 2015), Geneba RE 12 B.V. (19 May 2015), Geneba RE 13 B.V. (19 May 2015), Geneba RE 14 B.V. till Geneba RE 22 B.V. (30 September 2015), Geneba RE 23 B.V. (17 December 2015), Geneba RE 24 B.V. till Geneba RE 26 B.V. (from incorporation). Companies included in the fiscal unity are jointly and severally liable for the income tax liability. The total tax losses available for compensation amount to approximately 26.8 million as per 31 December 2016 which mainly relates to tax losses as a result of the sale of the Baltic portfolio. The Company expects to compensate this tax losses with future tax profits. Consequently a deferred income tax asset has been recorded at a nominal rate of 25%. 72

73 As required by IAS 12 Income taxes the Group has not recognised a cumulative deferred tax liability in the amount of 5.4 million relating to acquisitions of subsidiaries, which were accounted for as acquisitions of group assets. As the acquisitions are not accounted for as business combinations, and affected neither accounting nor taxable profit at the point of acquisition, the initial recognition exemption in IAS 12 applies. The Group does not recognise deferred tax that would otherwise have arisen on temporary differences associated with the acquired assets and liabilities at initial recognition. The current income tax as a percentage of net result before tax amounted 5.8% in The movement in deferred tax liabilities is as follows: In Thousands of Euros Germany Netherlands Total Deferred taxes (net), 1 January ,992-1,514-9,506 Movements of deferred tax assets (in income statement) 670 3,122 3,792 Movements of deferred tax liabilities (in income statement) Deferred taxes (net), 31 December ,973 1,446-5,527 Movements of deferred tax assets (in income statement) -96 3,800 3,704 Movements of deferred tax liabilities (in income statement) 293-1,616-1,323 Movements to current-tax position Deferred taxes (net), 31 December ,776 3,412-3,364 Except for the deferred tax assets and liabilities mentioned, there are no other significant unrecognised deferred tax asset and liabilities. 19. FINANCIAL INSTRUMENTS Geneba does not acquire, hold or issue derivative financial instruments for trading purposes. The following table presents the classification, subsequent measurement, carrying values and fair values (where available) of financial assets and liabilities. In Thousands of Euros Classification Held for trading Subsequent Measurement Fair value 31 December 2016 Carrying Value 31 December 2016 Cash and cash equivalents (a) Fair value 133, ,135 Loans and receivables Receivables and others (b) Amortised cost 2,214 2,214 Other financial liabilities measured at amortised costs Trade and other payables (b) Amortised cost 121, ,432 Long-term debt (c) Amortised cost 212, ,386 Current portion of long-term debt (c) Amortised cost 19,109 19,109 (a) (b) (c) Cash and cash equivalents and derivative instrument liabilities are classified as assets at fair value through profit and loss and carried at their fair values. Geneba s short-term financial instruments comprising trade receivables, trade payables, liabilities from acquisitions, and security deposits are carried at amortised cost. The carrying value of short-term financial assets, due to their short-term nature, approximates their fair value. Long- and short-term financial instruments include mortgages and (long-term) payables. The fair values of these financial instruments approximated their carrying value at the date of the consolidated statement of financial positions. 73

74 20. RENTAL INCOME UNDER OPERATING LEASES In Thousands of Euros Rental income 66,592 50,269 Service charges invoiced 5,577 2,522 Total 72,169 52,791 Geneba s operations include leasing commercial real estate. The following is a schedule of minimum future gross rental income on non-cancellable operating leases (of the existing portfolio as per 31 December 2016) having initial terms in excess of one year: In Thousands of Euros Future minimum rental income 35,274 34,776 34,776 30,647 29, PROPERTY OPERATING EXPENSES Property operating expenses consist of 5.6 million (2015: 2.5 million) of recoverable costs and 3.4 million (2015: 2 million) of non-recoverable costs. The non-recoverable costs consist, amongst others, of 0.7 professional fees, 0.2 million management fees, 0.3 million maintenance expenses, 0.2 million ground leases, 0.2 million taxes and 0.3 million of non-recoverable expenses due to vacancy. 22. GENERAL EXPENSES The general expenses of 7.0 million (2015: 5.9 million), mainly consist of employee benefit expenses of 2.7 million (2015: 2.3 million), 0.3 million costs of Supervisory Board and professional fees of 3.2 million (2015: 2.7 million), relating to expenses related to the exploration of future alternatives legal and tax advice, audit, depositary, compliance and public relations. 23. EMPLOYEE BENEFIT EXPENSE In Thousands of Euros Salaries and other short-term employee benefits 2,161 1,679 Remuneration Supervisory Board Pension expenses Social security expenses Other personnel expenses Total 3,039 2,304 The salaries include an amount of 451 thousand for bonus payments (2015: 427 thousand). 74

75 24. FINANCE INCOME AND EXPENSE In Thousands of Euros Interest expense on mortgage loans 8,466 11,993 Amortization of deferred finance costs Penalties Fair value movement loans Financing costs on shareholder loans Interest expense on shareholders loans Other interest expenses Total finance expenses 9,185 12,759 Other interest income Total finance income Total 9,086 12, SALE OF PARTICPATION On 29 December 2016 Geneba successfully solds its stake (93,37%) in MoTo Objekt Campeon GmbH & Co. KG ( MoTo ), which holds the Infineon headquarters building in Munich, to Infineon Technologies AG. Profits or losses on the sale of an investment property are recognised in the period the sale occurs as the difference between the net sales proceeds and the fair value determined by Geneba at the moment of sale of the property. The result from the sale are summarized below. In Thousands of Euros 2016 Net sales proceeds 113,000 Sales costs -597 Net sale price 112,403 Bookvalue -91,264 Net result from sale 21,139 75

76 26. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year and ordinary shares purchased by the Company or released for cancellation by the Monitor and held as treasury shares during the year. The Company did not have dilutive potential ordinary shares Net result attributable to equity holders of the Company (in 67,278 30,235 thousands) Weighted average number of ordinary shares in issue 95,622,970 60,700,958 Basic and dilutes earnings per share (in ) As per 31 December 2016, Geneba had issued 97,549,430 shares of these shares 339,840 shares are cancelled in January RELATED PARTY TRANSACTIONS Geneba has one large shareholder, the Catalyst Group, which owns 86.3% of the shares as of 31 December The remaining 14% shares are held by the Monitor of HII (0.4%) and former bondholders of HII (13.3%). All shares are listed at the trading platform NPEX in The Hague. For a short-term loan facility granted by the Catalyst Group as a bridge finance loan total finance costs of 127 thousand have been paid. Between Geneba Properties N.V. and its subsidiaries intercompany receivables and payables exists. On these positions an interest of 6% is calculated. For consolidation purposes these positions and interest amounts have been eliminated. Geneba Properties N.V. charges asset- and property management fees to its subsidiaries, based on contractual agreements. For consolidation purposes these positions and interest amounts have been eliminated. 76

77 28. KEY MANAGEMENT COMPENSATION The Management Board is considered to be key management. Its compensation is disclosed in note 40 of the Company accounts. 29. CONTINGENCIES AND COMMITMENTS Geneba holds two properties in Rotterdam which are subject to leasehold. The ground lease of Benthemstraat is a perpetual right (end date ) which has been bought off until 2047 and will be extended at that time. The ground lease of Energieweg is a perpetual right (end date , which will be extended at that time) with a fixed annual payment of 57 thousand (CPI indexation). Contracts are signed with tenants to build or extend the current investment properties with a current value of approximately 22 million. These expansions are expected to be completed in the course of These are partly financed with additional mortgage debts. The companies that are part of the fiscal unity Geneba Properties N.V. in 2015 are Geneba RE 3 B.V. (as per 25 March 2014), Geneba RE 4 B.V. (as per 1 January 2015), Geneba RE 5 B.V. (as per 1 January 2015), Geneba RE 6 B.V. (as per 28 October 2014), Geneba RE 7 B.V. (as per 17 November 2014), Geneba RE 8 B.V. (25 February 2015), Geneba RE 9 B.V. (25 February 2015), Geneba RE 10 B.V. (25 February 2015), Geneba RE 11 B.V. (19 May 2015), Geneba RE 12 B.V. (19 May 2015), Geneba RE 13 B.V. (19 May 2015), Geneba RE 14 B.V. till Geneba RE 22 B.V. (30 September 2015), Geneba RE 23 B.V. (17 December 2015), Geneba RE 24 B.V. till Geneba RE 26 B.V. (from incorporation). Companies included in the fiscal unity are jointly and severally liable for the income tax liability. The Company has the following commitments: (In Thousands of Euros) term < 1 year 1 5 year > 5 year Rent offices, Amsterdam Rent offices, Munich Lease Company cars Property management contracts The leases are usually concluded for a period of five years in The Netherlands and three years in Germany, the tenant having one or more options to extend the lease by five years. Annual rent adjustments are based on the cost-of-living index. 30. SUBSEQUENT EVENTS On 1 December 2016 Geneba announced that it engaged Credit Suisse to explore strategic alternatives, which could include, amongst others, an initial public offering, capital increase, merger, sale or other possible transactions. We are considering these alternatives in close cooperation with the Supervisory Board and our main shareholder, represented by Catalyst Capital Group Inc. At the date of this annual report, this process in ongoing. On 28 February 2017 Geneba acquired two properties in Zeewolde and Tilburg, adding sqm to the portfolio. The assets are long-term leased to Bakker Logistiek Groep B.V. The acquisition has been financed by a long-term mortgage loan, a corporate loan and available cash. The Monitor initially held 7,117,482 shares to be attributed to claim holders in case the claims are successful. In case claims are ultimately rejected the respective portion of shares will be cancelled. Consequently the NAV per share will increase. As per 31 December 2016 in this context the Monitor still held 412,194 shares. Of these shares 339,840 shares were cancelled in January

78 11 COMPANY FINANCIAL STATEMENTS

79 Company balance sheet As at 31 December after appropriation of the result for the period (In Thousands of Euros) Note Assets Non-current assets Participations in group companies , ,513 Intangible assets Other tangible assets Deferred income tax assets 6,708 1, , ,724 Current assets Trade and other receivables 1, Receivables from group companies , ,027 Income tax receivable Cash and cash equivalents , ,621 Total Assets 391, ,345 Equity and liabilities Equity Share capital 36 1,951 1,705 Share premium , ,554 Revaluation reserves 36 26,935 17,006 Retained earnings 36 22,222 6,178 Total equity , ,443 Current liabilities Trade and other payables (incl. distribution to shareholders) 114,230 2,237 Liabilities to group companies 35 7,953 - Shareholder loan 38-1, ,183 3,902 Total liabilities 122,183 3,902 Total equity and liabilities 391, ,345 79

80 Company profit and loss account For the year ended 31 December (In Thousands of Euros) Note Interest from group companies 7,050 3,052 Management fees 2,842 1,554 Net income 9,892 4,606 Wages and salaries -2,237-2,079 Social charges Amortisation of intangible assets Depreciation of tangible assets Other expenses -4,397-3,581 Total operational expenses -7,003-5,881 Finance costs Net result before income tax 2,752-1,460 Income tax expenses 4,833 2,117 Expenses related to participations Result from participations in group companies 34 60,315 18,415 Net result 67,278 19,072 80

81 Notes to the company financial statements 31. GENERAL INFORMATION Geneba Properties N.V. ( Geneba or the Company ) was incorporated in the Netherlands by Stichting Oprichting Geneba Properties under the laws of the Netherlands on 11 July The corporate seat of the Company is in Amsterdam, the Netherlands and its registered office is at Apollolaan 153, 1077 AS in Amsterdam, the Netherlands. The company financial statements are part of the 2016 financial statements, which also include the consolidated financial statements. The company has availed itself of the provisions of Section 379 (5) of Book 2 of the Netherlands Civil Code. The list as referred to in this article has been filed with the offices of the Commercial Register in Rotterdam. 32. PRINCIPLES FOR THE VALUATION OF ASSETS AND LIABILITIES AND THE DETERMINATION OF THE RESULT The company financial statements have been prepared in accordance with Part 9, Book 2 of the Netherlands Civil Code. In the preparation of the company financial statements, the provisions of Section 362(8) of Book 2 of the Netherlands Civil Code have been used. The valuation principles for assets and liabilities and the method of determining the result are identical to those used in the consolidated financial statements except for investments in group companies which are valued at net asset value. Reference is therefore made to the notes to those statements. 33. INVESTMENTS IN GROUP COMPANIES Investments in group companies, comprised of investments in subsidiary companies, are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group s share of net assets of the group company since the acquisition date. Goodwill relating to the group company is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The participations in group companies have been stated at net asset value except for those entities which have a negative net asset value and for which the company does not bear any responsibility. These participations with a negative net asset value are valued at zero. 81

82 34. PARTICIPATIONS IN GROUP COMPANIES In Thousands of Euros Balance, as at 1 January 127, ,277 (Des)Investments in subsidiaries ,753 Share in investments results 60,315 29,578 Adjustment for share in result Geneba Baltic S.a.r.l - -7,599 Adjustment for share in result Valbonne Real Estate 2 B.V. - -3,564 Total adjustments on net result - -11,163 Total net result 60,315 18,415 Dividends from participations -112,182 - Conversion of shareholder loans 52,635 - Adjustment for share in result Geneba Baltic S.a.r.l* Adjustment for share in result Valbonne Real Estate 2 B.V.* - -8,409 Total adjustment through equity - -8,932 Balance, as at 31 December 128, ,513 *The participations in group companies have been stated at net asset value except for those entities which have a negative net asset value and for which the company does not bear any responsibility. These participations with a negative net asset value are valued at zero. In 2015 the participations in the Baltics and Bochum are revalued to 1 due to a probable sale of the Baltic portfolio and deconsolidation of a German entity. For a list of subsidiaries reference is made to section RECEIVABLES AND LIABILITIES FROM GROUP COMPANIES An interest of 4%-6% is calculated over the outstanding amounts. 82

83 36. EQUITY As per 31 December 2016 the authorised capital comprises 97,549,430 ordinary shares each with a nominal value of 0.02 per share (total: 1,950,989). As per 31 December 2015 the authorised capital comprises 85,226,746 ordinary shares each with a nominal value of 0.02 per share (total: 1,704,535). As per 31 December 2016, Geneba had issued 97,549,430 shares of which 339,840 shares were in the process of being cancelled (cancellation officially effective at 27 January 2017). The certificates of the shares of Geneba Properties N.V. are listed at NPEX since 27 March 2014 and traded since 7 July The following shareholders hold an interest of more than 5% of the Geneba shares: Catalyst Coöperatief U.A. holds 86% as per 31 December 2016 (2015: 84%). Neither the members of the Management Board nor members of the Supervisory Board owned Geneba shares during the reporting period. Samson Bélair/Deloitte & Touche Inc., Canada, ( The Monitor ) was appointed to act as the Monitor in the CCAA (Companies Creditors Arrangement Act (Canada)) proceedings of Homburg Invest Inc. ( HII ). Pursuant to the proceeding the Monitor transferred the initial portfolio of HII to Geneba. In the context of the proceeding the Monitor initially held 7,117,482 shares to be attributed to claim holders in case the claims are successful. In case claims are ultimately rejected the respective portion of shares will be cancelled. As per 1 January 2016 the Monitor held 628,265 shares. Of these shares 216,071 shares are cancelled in February Another portion of 339,840 shares are cancelled with effective date of 27 January Consequently the remaining part of shares held by the Monitor is 72,354. On 3 December 2014, Geneba announced a Rights Issuance in which it offered a total of 74,397,740 new shares at a price of 2.78 per share. This offering was fully underwritten by Catalyst, acting as a backstopper under a Subscription Agreement agreed on 1 December 2014 between Catalyst and Geneba. This meant that Catalyst committed to exercise all its own rights allocated to Catalyst in this Rights Issuance and that it committed to subscribe for the shares not exercised by other shareholders at any time the Management Board asks to do so in order to fund an investment proposal approved by the Supervisory Board. On 26 February 2016, the company issued 12,538,755 new shares for a price of 2,78 (total 34,9 million). 83

84 The movements in equity are as follows: Share capital In Thousands of Euros Share premium Revaluation reserve Retained earnings Total Equity As at 1 January ,452 10,156 2, ,038 Issue of new shares 1, , ,915 Cost of issue of new shares Cancellation of shares Adjustment for negative NAV of participations (note 32) ,932-8,932 Earnings for the period ,072 19,072 Movement revaluation reserve - - 6,850-6,850 - As at 31 December , ,554 17,006 6, ,443 As at 1 January , ,554 17,006 6, ,443 Issue of new shares , ,858 Cost of issue of new shares Cancellation of shares Cost of capital distributions Adjustment for negative NAV of participations (note 32) Earnings for the period ,278 67,278 Adjustments to minority shares Movement revaluation reserve - - 9,929-9,929 - Distribution / dividend payments - -70, , ,791 As at 31 December , ,289 26,935 22, ,397 The Board of Management proposes to add the net result to the other reserves of the company. This is already reflected in the financial statements. The differences between group- and company equity are explained in note

85 A revaluation reserve is recorded for all properties that are valued above the original cost price. The total cost price and fair value can be summarised as follows: 31 December 2016 Above cost Below cost Cost price of properties (including(des)investments) 285, ,197 Fair value of properties 317, ,812 Revaluation 32,438-42,385 Tax effect (against rates of 15.82% or 25%) -5,503 n/a Revaluation reserve 26,935 n/a 31 December 2015 Above cost Below cost Cost price of properties (including(des)investments) 107, ,241 Fair value of properties 127, ,506 Revaluation 20,571-82,736 Tax effect (against rates of 15.82% or 25%) -3,565 n/a Revaluation reserve 17,006 n/a 37. DIFFERENCES BETWEEN GROUP- AND COMPANY EQUITY The difference between the group equity/company equity and group result/company result, can be summarised as follows: In Thousands of Euros Group equity (refer to consolidated financial statements) 269, ,443 Adjustments to minority shares - - Company equity (note 35) 269, ,443 Group net-result 67,278 30,235 Adjustment for share in result of participations with negative NAV (note 33) - -11,163 Company net-result 67,278 19, SHAREHOLDER LOANS In Thousands of Euros Balance, as at 1 January 1,665 58,298 New shareholder loans 5,636 22,500 Repayments on shareholder loans -7,301-68,796 Conversion of shareholder loans - -10,337 Balance, as at 31 December - 1,665 85

86 39. AUDIT FEES The company paid the following fees in respect to audit- and other services: (In Thousands of Euros) PricewaterhouseCoopers Accountants N.V., The Netherlands audit of group financial statements PricewaterhouseCoopers Accountants N.V., The Netherlands - review of group interim financial statements PricewaterhouseCoopers Accountants N.V., The Netherlands - other audit services 4 - Other PricewaterhouseCoopers offices (Baltics / Germany) audit of group financial - 35 statements Other PricewaterhouseCoopers offices (Baltics / Germany) review of group interim - 33 financial statements Other PricewaterhouseCoopers offices (Baltics / Germany) local audits for statutory - 17 purposes REMUNERATION OF MANAGEMENT AND SUPERVISORY BOARD Management Board (In Thousands of Euros) Management board member salary social security allowances bonus total Wulf Meinel (CEO) Tom de Witte (CFRO) Total The Management Board did not receive any post-employment benefits, other long-term benefits, and share-based payments. 50% of the bonus amount is deferred over three years as described in the remuneration report. 86

87 Supervisory Board (In Thousands of Euros) Supervisory board member Base remuneration Committee remuneration Total Jochen Scharpe Gerrit Littel Gabriel de Alba Marian Hogeslag Joern Stobbe Total EMPLOYEES The average number of employees in 2016 is 10.5 fte (2015: 10.9 fte) 42. COMMITMENTS The companies that are part of the fiscal unity Geneba Properties N.V. in 2015 are Geneba RE 3 BV (as per 25 March 2014), Geneba RE 4 BV (as per 1 January 2015), Geneba RE 5 BV (as per 1 January 2015), Geneba RE 6 BV (as per 28 October 2014), Geneba RE 7 BV (as per 17 November 2014), Geneba RE 8 B.V. (25 February 2015), Geneba RE 9 B.V. (25 February 2015), Geneba RE 10 B.V. (25 February 2015), Geneba RE 11 B.V. (19 May 2015), Geneba RE 12 B.V. (19 May 2015), Geneba RE 13 B.V. (19 May 2015), Geneba RE 14 B.V. till Geneba RE 22 B.V. (30 September 2015), Geneba RE 23 B.V. (17 December 2015). Companies included in the fiscal unity are jointly and severally liable for the income tax liability. The Company has the following commitments: (In Thousands of Euros) term < 1 year 1 5 year > 5 year Rent offices, Amsterdam Lease Company cars Amsterdam, 29 March 2017 Management Board Geneba Properties N.V. Original has been signed by: Dr. Wulf A. Meinel, CEO Mr. Drs. Tom M. de Witte RA, CFRO 87

88 12 OTHER INFORMATION INDEPENDENT AUDITOR S REPORT Reference is made to the independent auditor s report as included hereinafter. DISTRIBUTION OF NET RESULT In accordance with the Company s articles of association, the profit is placed at the disposal of the General Meeting of Shareholders. The Company may only make distributions to shareholders insofar as Geneba shareholders equity exceeds the sum of the capital paid-up and called augmented by the reserves required to be maintained by law. 88

89 13 SUBSIDIARIES Name Note Country of incorporation Ownership 31/12/16 Ownership 31/12/15 Geneba Properties N.V. Ultimate parent The Netherlands Geneba Deutschland Advisory GmbH Germany 100,00% 100,00% Geneba RE 1 Wolvega B.V. The Netherlands 100,00% 95,21% Geneba RE 1 B.V.* /*** The Netherlands 94,89% 94,89% Geneba RE 1 GmbH held through Geneba RE 1 B.V. Germany 100,00% 100,00% Geneba RE 1 Schwerte-Marl GmbH & Co KG held through Geneba RE 1 B.V. Germany 100,00% 100,00% Geneba RE 1 Hassmersheim GmbH & Co KG held through Geneba RE 1 B.V. Germany 100,00% 100,00% Valbonne Real Estate 2 B.V. In liquidation per 1 December 2015 The Netherlands 94,89% 94,89% Geneba RE 3 B.V. * The Netherlands 100,00% 100,00% Geneba RE 4 B.V. The Netherlands 100,00% 99,98% Geneba RE 5 B.V. The Netherlands 100,00% 99,98% Geneba RE 6 B.V.* The Netherlands 100,00% 100,00% LogProject Isenbüttel GmbH Held through Geneba Real Estate 6 B.V. Germany 94,80% 94,80% Geneba RE 7 B.V.* The Netherlands 100,00% 100,00% Greenfield Logistikpark Vaihingen-Ost GmbH Held through Geneba Real Estate 7 B.V. Germany 94,00% 94,00% Geneba RE 8 B.V. The Netherlands 100,00% 100,00% Geneba RE 9 B.V. The Netherlands 100,00% 100,00% Geneba RE 10 B.V.* The Netherlands 100,00% 100,00% SMR 2 Verwaltungs GmbH Held through Geneba RE 10 B.V. Germany 94,90% 94,90% Geneba RE 11 B.V. The Netherlands 100,00% 100,00% Geneba RE 12 B.V. The Netherlands 100,00% 100,00% Geneba RE 13 B.V. The Netherlands 100,00% 100,00% Geneba RE 14 B.V. The Netherlands 100,00% 100,00% Geneba RE 15 B.V. The Netherlands 100,00% 100,00% Geneba RE 16 B.V.* The Netherlands 100,00% 100,00% Greenfield Logistikpark Nürnberg GmbH Held through Geneba RE 16 B.V. Germany 94,00% 0% Geneba RE 17 B.V.* The Netherlands 100,00% 100,00% Greenfield Logistikpark Achern GmbH Held through Geneba RE 17 B.V. Germany 94,00% 0% Geneba RE 18 B.V.* The Netherlands 100,00% 100,00% LogProject Rheinberg I GmbH Held through Geneba RE 18 B.V. Germany 94,90% 0% Geneba RE 19 B.V. The Netherlands 100,00% 100,00% Geneba RE 20 B.V. The Netherlands 100,00% 100,00% Geneba RE 21 B.V. The Netherlands 100,00% 100,00% Geneba RE 22 B.V. The Netherlands 100,00% 100,00% Geneba RE 23 B.V. Previously known as DSV Solutions 3 B.V. The Netherlands 100,00% 100,00% Geneba RE 24 B.V. The Netherlands 100,00% 0,00% Geneba RE 25 B.V. The Netherlands 100,00% 0,00% Geneba RE 26 B.V. The Netherlands 100,00% 0,00% Geneba Baltic S.à.r.l* Liquidated per 18 October 2016 Luxembourg 0% 100,00% GRF 86 Holding B.V.* Merged with Geneba Properties N.V. in 2016 The Netherlands 0% 100,00% GRF 87 Holding B.V.* Merged with Geneba Properties N.V. in 2016 The Netherlands 0% 100,00% 89

90 MoTo Objekt Campeon GmbH & Co KG Held through Geneba Real Estate 3 B.V., sold per 29 December 2016 Germany 0% 93,37% Homburg Invest Inc**('HII') Canada 100,00% 100,00% * Sub holding Company ** Following its emergence from CCAA protection, HII will remain a distinct entity from Geneba and will be controlled by the Plan Administrator (Deloitte) for the sole purpose of selling off remaining assets in order to repay creditors. Despite owning the shares of HII, Geneba has no control of HII and no entitlement to any proceeds from the disposition of its assets. Consequently HII is not consolidated, nor included as an investment entity. ***The Company fully consolidates the interest of Stichting Coeval and does not recognise a separate non-controlling interest for it. 90

91 14 INDEPENDENT AUDITOR S REPORT To: the general meeting and supervisory board of Geneba Properties N.V. Report on the financial statements Our opinion In our opinion: the accompanying consolidated financial statements give a true and fair view of the financial position of Geneba Properties N.V. as at 31 December 2016 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code; the accompanying company financial statements give a true and fair view of the financial position of Geneba Properties N.V. as at 31 December 2016 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. What we have audited We have audited the accompanying financial statements 2016 of Geneba Properties N.V., Amsterdam ( the company ). The financial statements include the consolidated financial statements of Geneba Properties N.V. and its subsidiaries (together: the group ) and the company financial statements. The consolidated financial statements comprise: the consolidated statement of financial position as at 31 December 2016; the following statements for 2016: the consolidated statement of comprehensive income, changes in shareholders equity and cash flows; the notes, comprising a summary of significant accounting policies and other explanatory information. The company financial statements comprise: the company balance sheet as at 31 December 2016; the company profit and loss account for the year then ended; the notes, comprising a summary of the accounting policies and other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for the company financial statements. The basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the section Our responsibilities for the audit of the financial statements of our report. Independence We are independent of Geneba Properties N.V. in accordance with the Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 91

92 Our audit approach Overview and context Geneba Properties N.V. is an investor in commercial real estate that is held to generate rental income or value, or a combination of both. The group comprises several components and therefore we considered our group audit scope and approach as set out in the section The scope of our group audit. We paid attention to the areas that are related to the specific activities of the group. In the following paragraphs we explain the key audit matter we have identified as a result. We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at areas which require a high level of judgement by the management board, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. On pages 42 and 57 of the financial statements the management board describes the areas of judgement in applying accounting policies and the key sources of estimation uncertainty. Given the significant estimation uncertainty in the valuation of investment properties, we considered this to be a key audit matter as set out in the key audit matters section of this report. More information can be found in the section Key audit matters. Besides the above mentioned key audit matter, other areas of focus during our audit were the purchases and sales of investment properties, the rights issue, the accurate and complete accounting of rental income, the valuation of the deferred tax assets and the compliance with bank covenants. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the management board that may represent a risk of material misstatement due to fraud. We ensured that the audit team included the appropriate skills and competences which are needed for the audit of a real estate company. We therefore included real estate valuation experts. The outlines of our audit approach were as follows: Materiality Overall materiality: 2,350,000, based on 5% of the profit before tax of continuing operations, adjusted for the result on the sale of investment properties and unrealised changes in the fair value of investment properties. Audit scope We conducted audit work centrally from one location, given the fact that the group audit team was able to conduct all audit procedures from the perspective of the consolidated financial statements from this location. Key audit matter Valuation of investment property. 92