Digitale Kopie. Consolidated Financial Statements as of 31 December CG Gruppe AG Berlin. Audit Opinion

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1 Consolidated Financial Statements as of 31 December 2017 CG Gruppe AG Berlin Audit Opinion Mazars GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

2 We have compiled this pdf-file as a digital copy at our client s request. We would like to point out that our original signed audit report and audit certificate are the only relevant sources for our audit. We assume no liability for the substantive accuracy or completeness of the version that you received as a pdf-file. Concerning the disclosure of this file to third parties, we refer to the General Engagement Terms (General Engagement Terms for German Public Auditors and Public Audit Firms as of January 1, 2017) used in this report, which govern our responsibilities.

3 INDEX OF APPENDICES 1. Consolidated financial statements as of 31 December 2017 including o Consolidated statement of comprehensive income 2017 o Consolidated statement of financial position as of 31 December 2017 o Consolidated statement of changes in equity 2017 o Consolidated statement of cash flows 2017 o Notes to the consolidated financial statements Independent Auditor s Report General Engagement Terms

4 CG Gruppe AG Appendix 1 Consolidated Financial Statements as of December 31, 2017 Page 1 CG Gruppe AG CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ending December 31,

5 CG Gruppe AG Appendix 1 Consolidated financial statements as of December 31, 2017 Page 2 Table of contents CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 5 CONSOLIDATED STATEMENT OF CASH FLOWS... 6 Notes General information regarding CG Gruppe AG The consolidated financial statements Accounting policies Fair value measurements Changes in accounting policies Critical judgements and the use of estimates Scope of consolidation Notes to the consolidated statement of comprehensive income Notes to the consolidated statement of financial position Notes to the consolidated statement of cash flows Capital management and financial instruments Related party transactions Shareholdings Contingent liabilities and other financial obligations Events after the balance sheet date

6 CG Gruppe AG Appendix 1 Consolidated financial statements as of December 31, 2017 Page 3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME in keur Note Revenue Change in project related inventory Overall performance Cost of materials 8.3. ( ) ( ) Net income from the remeasurement of investment properties Other operating income Personnel expenses 8.4. (20.435) (12.700) Other operating expenses 8.5. (21.449) (19.088) EBITDA (Earnings before interest, taxes, depreciation and amortisation) Depreciation and amortisation (1.187) (701) EBIT (Earnings before interest and taxes) Financial income Financial expenses 8.6. (95.388) (43.255) EBT (Earnings before taxes) Income tax expenses 8.7. (12.022) (4.505) EAT (Earnings after taxes) Other comprehensive income - - Total comprehensive income Of the consolidated net income for the period, the following is attributable to: Non-controlling interests (680) 185 Shareholders of the parent company

7 CG Gruppe AG Appendix 1 Consolidated financial statements as of December 31, 2017 Page 4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION in keur Note ASSETS Non-current assets Investment property Property, plant and equipement Intangible assets Investments accounted for using the equity method 21 0 Current assets Inventories Trade and other receivables Financial assets Receivables from related parties Income tax receivables Other assets Cash and cash equivalents Total Assets EQUITY AND LIABILITIES Subscribed capital Capital reserves Other reserves Non-controlling interests Total Equity Non-current liabilities Convertible Bond Financing liabilities and other financial liabilities Deferred tax liabilities Current liabilities Convertible Bond Financing liabilities and other financial liabilities Trade payables Liabilities to related parties Income tax payables Other liabilities Total liabilities Total equity and liabilities

8 CG Gruppe AG Consolidated financial statements as of December 31, 2017 Appendix 1 Page 5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in keur Subscribed capital Capital reserves Other reserves Shareholder's Equity NCI Total Equity Note Profit/Loss of the period Total comprehensive income for the period Issue of share capital Others - - (3.696) (3.696) - (3.696) Profit/Loss of the period (679) Total comprehensive income for the period (679) Convertible Bond

9 CG Gruppe AG Consolidated financial statements as of December 31, 2017 Appendix 1 Page 6 CONSOLIDATED STATEMENT OF CASH FLOWS in keur Note OPERATING ACTIVITIES Net profit Tax expense Profit (loss) before tax Adjustments to reconcile profit before tax to net cash flows: Depreciation and impairment of property, plant and equipment Valuation gains on investment property 9.1. (4.918) (3.932) Finance income 8.6. (266) (3.696) Finance expense Other non-cash effects Working capital adjustments: Decrease/ (increase) in rent and other receivables (39.388) (5.108) Decrease/ (increase) in inventories ( ) ( ) (Decrease) / increase in prepayments on construction projects (33.322) (Decrease) / increase in trade, other payables and accruals Adjustment of increase in inventories due to change of scope of consolidation Income tax paid (912) (363) Net cash flow from operating activities 10. ( ) ( ) INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired - (9.410) Purchase of PPE, intangibles and IAS 40 capex (11.718) (4.739) Proceeds from the sale of PPE & intangibles Net cash flow from investing activities 10. (11.640) (13.843) FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings ( ) ( ) Proceeds from issue of share capital Repayments of other shareholders (2.150) - Interest paid (70.802) (63.840) Net cash flow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at 31 December

10 Notes 1. General information regarding CG Gruppe AG 1.1. General information CG Gruppe AG ("the Company", "CG" or "the Parent Company", together with its subsidiaries "the Group") is a public limited company incorporated under the laws of the Federal Republic of Germany. CG Gruppe AG has been founded in 2014 as a shelf company and acquired in August 2015 by some of the current shareholders of the Company. In January 2016 the economic reestablishment was induced. The share capital was increased to keur 22,750 by way of cash contributions, contributions of participation interests in limited partnerships (Kommanditgesellschaft, KG) and companies with limited liability (Gesellschaft mit beschränkter Haftung, GmbH) as well as contributions of further assets. On November 23, 2015, the date of registration in the commercial registry, CG Gruppe AG gained control over the contributed businesses (subsidiaries). Further additions to the scope of consolidation via two contributions of participation interests became effective on December 14, 2015 and on the December 30, 2015 with the registration in the commercial registry. In 2016 and 2017 the scope of consolidation was increased by acquisition and foundation of further entities. The registered address of the Company is Berlin. It is registered under the commercial register number HRB B in the commercial register of the district court of Charlottenburg. The domestic business address is Berlin, Wilmersdorferstr. 39. The company was established for an indefinite period of time. The financial year of the Company covers the period of January 1 to December The consolidated financial statements The consolidated financial statements of CG Gruppe AG for the year ended December 31, 2017 are prepared in accordance with the International Financial Reporting Standards (IFRS) and the interpretations by the IFRS Interpretations Committee (IFRS IC) both announced by the International Accounting Standards Board (IASB), London, Great Britain, as endorsed by the European Union (EU). These consolidated financial statements were submitted to the Supervisory Board for review by the Executive Board on May 22, Business activities CG Gruppe AG is a German project developer with its own construction competence. The company with around 371 employees operates throughout Germany and has been developing, implementing and marketing residential as well as commercial properties for over 20 years. The main business activities of the group include the following: Real Estate Institutional : The Group concentrates on the core business real estate development for institutional investors, i.e. the turnkey construction of residential buildings. 7

11 Real Estate ETW : The Group also conducts real estate development and construction with the focus on sale of apartments to private customers (Real Estate ETW) Construction services: The Group acts as general contractor providing turnkey construction and modernization services to customers Investment properties including apartments that are let to private households and commercial space. 3. Accounting policies 3.1. Basis of preparation of the consolidated financial statements The consolidated financial statements are comprised of the Consolidated Statements of Comprehensive Income, the Consolidated Statements of Financial Position, the Consolidated Statements of Changes in Equity and the Consolidated Statements of Cash Flows. The Company s financial statements and those of its subsidiaries are prepared according to uniform accounting policies. In the process, the principles are consistently applied for all presented periods and reporting dates in the consolidated financial statements. The consolidated financial statements are prepared on the basis of accounting for assets and liabilities at amortized cost, except for valuation of investment property. The Consolidated Financial Statements have been prepared in euro which is the functional currency of the group. All amounts are given in thousands of euros (EUR/ ) unless otherwise stated. Rounding differences may occur in respect of individual amounts or percentages. The statement of comprehensive income is prepared according to the nature of expense method. The preparation of consolidated financial statements in accordance with IFRS involves the management making estimates and judgements that affect the recognition and measurement of items in the balance sheet and/or income statement and of the disclosure of contingent assets or liabilities (see Note 6) Basis of consolidation The consolidated financial statements of the Group contain all the material subsidiaries the Group controls within the meaning of IFRS 10. Subsidiaries are fully consolidated from the date at which the Group first obtains control. Subsidiaries are deconsolidated as soon as the Group ceases to control them. New subsidiaries were founded and acquired by the group in form of business combinations, see Note 7.1 for further information. The acquisition method of accounting is used to account for those business combinations. Changes in the parent s ownership interest in a subsidiary that do not result in losing control of the subsidiary are accounted as equity transactions. The financial statements of subsidiaries are prepared using uniform accounting policies and as at the end of the same reporting period as the Group s financial statements. All intragroup receivables and liabilities, income and expenses and gains and losses from intragroup transactions are eliminated. Non-controlling interests constitute the share of profit or loss and net assets attributed to the parent s shareholders. They are recognized separately and measured at the acquisition date using the proportionate share of the acquired entity s net identifiable assets. 8

12 The Group has no material interest in other companies and does not exercise joint control according to IFRS Summary of significant accounting policies Investment property Properties which are held for the purpose of generating rental income or achieving value appreciation or both have been identified as investment property. As for properties that have not been acquired in the course of a business combination, investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value. IFRS 13.9 defines the fair value 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. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Market values of finished investment properties are determined in accordance with the discounted cash flow method or the German gross rental method ( Deutsches Ertragswertverfahren ).Under the discounted cash flow method, the market value is the sum of discounted cash flows over a specified planning period of ten years and the residual value at the end of the planning period each for the respective property. Under the German gross rental method according to the Immobilienwertermittlungsverordnung (ImmoWertV) the market values of the building and the land are determined separately. The market value of the land is determined under application of the comparative value method. The market value of the building is determined by identifying its capitalized net income. Both valuation methods lead to the same market values. The market values of investment property under construction are determined based on the residual value method. The valuation of investment properties is achieved on the basis of significant unobservable input factors due to limited availability of valuation parameters directly observable on the market (level 3 of the valuation hierarchy of IFRS 13). The valuation input factors include future rental agreements, estimates on vacancy rates, discounted interest rates, capitalization rates and residual values. Fair values are calculated by independent, third-party experts. Costs in connection with the maintenance, extension and replacement of properties are capitalized if they are reliably measurable and if they constitute the replacement of parts of a unit in accordance with the component approach. Prepayments for purpose of acquiring a property are separately disclosed as prepayments for investment property. Investment property is derecognized either when it has been disposed of or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for 9

13 subsequent accounting is the fair value at the date of change in use. Investment property that is likely to be sold within a period of 12 month is recognized under current assets as an asset held for sale according to IFRS 5 and measured according to this accounting policy Property, plant and equipment Property, plant and equipment include other fixtures and fittings, tools and equipment that are measured at acquisition or manufacturing costs less accumulated depreciation. If necessary, accumulated impairment losses are recognized. All assets regarding property, plant and equipment are depreciated over their useful lives. The estimated useful lives are between 4 and 13 years. The depreciation method and the estimated depreciation period are reviewed at least annually at the end of each reporting period and adjusted if necessary Intangible assets Intangible assets acquired include software that is measured at acquisition costs less accumulated amortization. If necessary, accumulated impairment losses are recognized. Such assets are amortized on a straight-line basis over the expected economic life of between 3 and 7 years from the date on which they are provided. The amortization method and the estimated amortization period are reviewed at least annually at the end of each reporting period and adjusted if necessary Inventories Inventories include assets under construction (work in progress) and acquired land and buildings for the purpose of project development. Inventories are recognized at production related full cost, i.e. the cost of inventories includes furthermore a reasonable share of the indirect overhead based on normal production capacity as well as attributable borrowing costs. The costs also comprise costs incurred for acquiring land and buildings. Borrowing costs for inventories that are qualifying assets are capitalized as part of cost. Should the recoverable amount be lower than the capitalized cost at a given balance sheet date, such lower recoverable amount will be recognized. Should the recoverable amount of such inventories subsequently increase, the resulting gain must be recognized. This is done by reducing materials expense Financial instruments General information A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity Financial assets The Group classifies non-derivative financial assets at initial recognition as financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, and availablefor-sale financial assets. Reclassifications between these classifications, if permitted and required, will be made at the end of the reporting period. The financial assets of the Group during the reporting periods ending December 31, 2017 and 2016 include cash and cash equivalents, trade receivables and receivables from related parties and are exclusively allocated to loans and receivables. 10

14 Financial assets are initially measured at fair value. In the case of financial investments that are not classified as at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the assets are also taken into account. Generally, the Group accounts for financial assets on the trading day. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are initially measured at amortized cost using the effective interest method. Using the effective interest method, all directly attributable transaction costs, fees, premiums, discounts, rebates and other payments received or paid, which are an integral part of the effective interest rate, are discounted to the net carrying amount of the financial instrument. Gains and losses from interest on disposal and impairment are recognized in the consolidated statement of comprehensive income. Financial assets measured at fair value through profit or loss are those that represent financial assets held for trading. IFRS classifications of financial assets that are either initially designated at fair value through profit or loss to eliminate mismatches in the balance sheet or those that result from a documented group valuation have not been made. Financial assets are classified as held for trading if they are acquired for the purpose of sale or repurchase in the near future. Changes in the fair value after initial recognition are recognized in the statement of comprehensive income in finance income or finance costs. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payment amounts and due dates if the Group has the intention and ability to hold these instruments to maturity. After initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment losses. Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified as loans or receivables, held-to-maturity investments, or at fair value through profit or loss. Subsequently, available-for-sale financial assets are measured at fair value. Unrealized gains or losses are recognized directly in equity as a reserve of other comprehensive income. The cumulative gain or loss is reclassified to other income on disposal. If an asset is impaired, the cumulative loss is reclassified to financial expense through profit or loss and derecognized from the reserve for available-for-sale financial assets. Interest received on available-for-sale financial assets is recognized as interest income using the effective interest method Financial liabilities Non-derivative financial liabilities are initially measured at fair value less directly attributable transaction costs. Subsequently, these financial liabilities are measured at amortized cost using the effective interest method. Classifications of financial liabilities that are either initially designated at fair value through profit or loss to eliminate mismatches in the balance sheet or those that result from a documented group valuation have not been made. Financial liabilities include puttable shares held by minority interests (IAS 32.AG 29A). They are recognized initially at the present value of the redemption amount (IAS 32.23). Subsequently, they are measured at amortized costs in accordance with IAS 39. The fair value of the liability portion of the convertible bond, issued in 2017 is determined by discounting the fixed interest payments. This amount is recorded under financial liabilities and subsequently recognised on an amortised cost basis until extinguished on conversion or 11

15 maturity of the bond. The remainder of the proceeds is allocated to the conversion option and recognised in shareholders equity, net of income tax, and not subsequently remeasured Offsetting of financial instruments Financial assets and liabilities are only offset and the net amount recognized in the balance sheet if there is a legal right at the present time to offset the recognized amounts and if the intention is to settle on a net basis or to simultaneously realize the respective asset and replace the corresponding liability Fair value of financial instruments The fair value of financial instruments traded on organized financial markets is determined by the market price (bid price) quoted on the balance sheet date. The fair value of financial instruments for which no active market exists is determined using valuation methods. Valuation methods include the use of recent transactions between knowledgeable, willing and independent counterparties, comparison with the current fair value of another substantially identical financial instrument, the use of discounted cash flow methods and other valuation models Impairment of financial instruments At each reporting date, the Group determines whether there are any objective indications for an impairment of a financial asset or a group of financial assets. A financial asset or a group of financial assets is considered impaired only if there are objective indications of impairment as a result of one or more events occurring after the initial recognition of the asset (a "triggering event") and that event has an impact on the expected future cash flows of the financial asset or group of financial assets that can be reliably estimated. There may be evidence of impairment if there are indications that the debtor or a group of debtors are experiencing significant financial difficulties, default or delinquency of interest or principal payments, a high probability of bankruptcy or other reorganization, and observable data indicate a measurable reduction in expected future cash flows, such as changes in backlogs or economic conditions that correlate with failures. If there are objective indications that an impairment has occurred, the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the expected future cash flows (excluding expected future credit losses not yet incurred). In the event of an impairment of loans or receivables, the carrying amount is reduced using an allowance account and the impairment loss is recognized in profit or loss. Interest income continues to be recognized on the reduced carrying amount based on the original effective interest rate of the asset. Receivables, including the related allowance, are derecognized if they are classified as uncollectible and all collateral has been utilized. If the amount of an estimated impairment loss increases or decreases in a subsequent reporting period due to an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or decreased by adjusting the allowance account. If a derecognized receivable is subsequently reclassified as recoverable due to an event occurring after derecognition, the corresponding amount is recognized immediately in profit or loss. 12

16 Derecognition of financial instruments A financial asset is derecognized if one of the following conditions is met: The contractual rights to receive cash flows from a financial asset have expired. The Group has transferred its contractual rights to receive cash flows from the financial asset to third parties or has assumed a contractual obligation to pay the cash flow immediately to a third part under an agreement that meets the conditions in IAS (the Transit Agreement ) and either (a) substantially all the risks and rewards of ownership of the financial asset or (b) substantially none of the risks and rewards of ownership of the financial asset are transferred or retained, but transferring the control over the asset. If the Group transfers its contractual rights to receive cash flows from an asset or enters into a transfer agreement, essentially not transferring or retaining any opportunities and risks associated with ownership of that asset but retaining control over the transferred asset, the Group recognizes an asset to the extent of its continuing involvement. In this case, the Group recognizes a liability. The transferred asset and the liability are measured by taking into account the rights and obligations that the Group retains. If the continuing involvement formally guarantees the transferred asset, then the extent of the continuing involvement is the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group may be required to repay. No dividend or interest income is included in the calculation of the net gain or loss upon disposal of an asset. A financial liability is derecognized if the underlying obligation is settled, canceled or extinguished. If an existing financial liability is exchanged for another financial liability of the same lender with substantially different contractual terms, or if the terms of an existing liability are substantially changed, such exchange or modification is treated as derecognition of the original liability and recognition of a new liability. The difference between the respective carrying amounts is recognized in profit or loss Cash and cash equivalents Cash and cash equivalents include cash on hand, bank deposits and liquid deposits with an original maturity of less than three months. The carrying amounts of the cash and cash equivalents essentially correspond to their fair values due to their short-term maturity Revenue recognition Revenue includes sale of project development and construction contracts, construction services as well as revenue from letting activities. Revenue is measured at the fair value of the consideration received or receivable. The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group s activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. 13

17 The group does not hold any construction contracts in scope of IAS 11. Consequently, revenue regarding the sale of project development and construction contracts is recognized in line with IAS 18 when the risks and rewards of the developed and constructed property have been transferred and the group does not retain either continuing managerial involvement to the degree usually associated with ownership, or effective control over the property sold. This is generally the date when the property in its entirety is accepted by the customer. Revenue relating to work to be performed after this date is only deferred when material. Revenue is measured at the amount receivable under the contract. The amount receivable generally includes both a non-contingent consideration as well as a part that is contingent on future events. Regarding the contingent part revenue is recognized to the extent that the group can determine that there is a probable inflow of economic benefits that can be reliably measured. When measuring the contingent part the group considers historic trends, factors specific to the contract and the uncertainties relating to the contingent consideration. Revenue regarding construction services where the Group acts as general contractor is recognized over the period the related services are rendered. The Group recognizes revenue from letting activities where the property s rental agreement or lease is classified as an operating lease as a straight line over the term of the contract. Rent rebates are considered as reducing total rental income over the tenancy or leasing agreement. The services charges passed on to tenants are generally offset against the corresponding expense and are therefore not recognized as income, as the Group collects these charges on behalf of third parties Borrowing costs Interest on borrowings and other borrowing costs are expensed in the period in which they are incurred. General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. The group capitalizes borrowing costs on qualifying investment properties and inventories (i.e. work-in-progress) Impairment of non-monetary assets The carrying amounts of property, plant and equipment (with the exception of investment properties) and intangible assets are reviewed for indications of impairment at each reporting date (impairment test). If such indicators exist, the recoverable amount is calculated for the asset in question. If the recoverable amount cannot be determined for individual assets, the Group determines the amount on the level of the cash-generating unit (CGU usually a real estate) to which the respective asset is assigned. For intangible assets with indefinite useful lives or those that cannot yet be put into operation, an impairment test is carried out at least once a year and if an impairment indicator exists (triggering event). The recoverable amount corresponds to the higher of the fair value less costs of disposal or the value in use. The value in use is determined by discounting the estimated future cash flows at a pre-tax interest rate. This takes into account both the current market assessment of the time value of 14

18 money and the risks relating to the asset, unless these have already been taken into account in the estimation of the cash flows. The calculations are based on forecasts based on the 3 to 5 year financial plans approved by management, which are also used for internal purposes. The planning horizon reflects the assumptions for short to medium-term market developments. Cash flow forecasts beyond the detailed planning period are calculated on the basis of appropriate growth rates. The risk-adjusted discount rate is determined individually depending on the CGU. The fair value less costs of disposal is determined using an appropriate valuation model (discounted cash flow method (DCF)). The model is based on observable valuation multiples, market prices of exchange-traded shares in subsidiaries or other available indicators of fair value. In addition, the determination of the fair value less costs of disposal takes into account key assumptions made by the management regarding sales development, customer acquisition and costs for the provision of services as well as discount rates. The basis of the cash flow calculation is backed by external sources of information. If the recoverable amount of an asset or CGU is lower than its carrying amount, an impairment loss is recognized immediately in profit or loss except for assets carried at fair value where the impairment loss would reduce the revaluation reserve. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the asset is carried at revalued amount. Goodwill is excluded from a reversal of an impairment loss. The Group has no assets that are subject to an impairment test in accordance with IAS 36. An impairment test was therefore not performed Current and deferred income taxes The income tax expenses represent the total of the current tax expenses and the deferred taxes. The Group recognizes receivables and liabilities for current taxes in the amount in which reimbursements are expected from the tax authority or payments to the tax authority. Current tax expenses are calculated on the basis of the taxable income for the respective year and the respective tax rates and tax laws in those countries where the Group generates taxable income. Current taxes are recognized in profit or loss unless they relate to items that are recognized in other comprehensive income or recognized directly in equity. In this case, the corresponding current and deferred taxes are recognized in other comprehensive income or directly in equity. The Group recognizes deferred tax assets and liabilities arising from temporary differences between the carrying amount of assets and liabilities and their tax value in the tax balance sheet and unused tax losses. The recoverability of these deferred tax assets, insofar as they exceed the amount of the deferred tax liabilities, depends on the future taxable income of the respective company. Accordingly, deferred tax assets are only recognized for the exceeding amounts in the amount in which the realization of these claims is sufficiently assured on the basis of the consolidated corporate planning. Deferred tax liabilities and deferred tax assets are calculated on the basis of the tax rates (and tax legislation) that are expected to be in force when the liability is settled or the asset is realized. 15

19 The Group is lessee: Leasing Assets carried as finance leases are measured at the beginning of the (lease) contract at the lower of the present value of the minimum lease payments and the fair value of the leased object, and in the following periods less accumulated depreciation and other accumulated impairment losses. Payment obligations resulting from future lease payments are discounted and disclosed under financing liabilities. Lease payments are divided into interest expenses and the principal portion of the residual liability, resulting in a constant interest rate on the remaining lease liability. Financing costs are recognized immediately in profit or loss. Capitalized leased assets are fully depreciated over the shorter of the two periods from the lease term or useful life. The basis for so-called rental purchases are the estimated useful life. Assets of the Group are derecognized when all material risks and rewards of ownership are transferred to a lessee. In 2016 and 2017 the group did not recognize any material finance leases. All other leases are classified as operating leases. Lease payments for operating leases are recognized on a straight-line basis over the term of the lease as operating leases / expenses in the statement of comprehensive income. Operating lease agreements mainly relate to lease of vehicles and buildings. The Group is lessor: Properties leased out under operating leases are included in investment property in the consolidated statement of financial position. See Note regarding recognition of rental income. 4. Fair value measurements The application of some of the Group's accounting policies and accompanying notes requires determination of the fair value of financial assets and financial liabilities, as well as non-financial assets and liabilities. The fair value is defined as the price that could be received when selling an asset or has to be paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value of assets and liabilities, the Group, if available, uses directly observable market data. If no observable market data is available, fair values are determined using valuation techniques. The fair value hierarchy categorizes the inputs used in valuation techniques into three levels, based on their proximity to the market: Level 1: The (unadjusted) quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly (i.e. the price) or indirectly (i.e. derived from the price) Level 3: Measurement parameters based on unobservable inputs for the asset or liability 16

20 If the inputs used to measure the fair value are categorized into different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety in the level of the lowest level input that is significant to the entire measurement. 5. Changes in accounting policies 5.1. Accounting policies applied for the first time in 2017 Amendments to IAS 7 Disclosure Initiative The amendments aim to improve the information provided about changes to an entity s liabilities arising from financing activities. They specify that an entity must disclose changes to financial liabilities and related financial assets for which payments received and payments made are shown under cash provided by/used in financing activities in the statement of cash flows. See Note 10 for debt reconciliation reporting IFRS not yet to be considered The IASB has published the following IFRSs that are not yet effective, and that will be relevant for the Group. The possibility of early adoption is not used by the Group. IFRS 9 Financial Instruments (on/after January 1, 2018) In July 2014, the final version of IFRS 9 Financial Instruments has been publicized by the IASB, replacing IAS 39. IFRS 9 contains revised requirements for the classification and measurement of financial assets and a new loss allowance model, also taking expected losses in the calculation of loss allowances into account. It contains the new hedge accounting regulations published in November The standard replaces all prior published versions of IFRS 9 and is effective for the first time for reporting periods beginning on or after January 1, It was endorsed by the EU in November The adoption of IFRS 9 is expected to have a minor effect on the Group s consolidated financial statements. The group will apply the new rules retrospectively from 1 January 2018, with the practical expedients permitted under the standard. Comparatives for 2017 will not be restated. IFRS 15 Revenue from Contracts with Customers (on/after January 1, 2018) In May 2014, the IASB issued the new standard IFRS 15 Revenue from Contracts with Customers. The goal of the new standard on revenue recognition is to compile the currently existing guidance and interpretations into a uniform model of revenue recognition. IFRS 15 must be applied for reporting periods beginning on or after January 1, The following impacts are expected: Revenue regarding the sale of property development and construction contracts is currently recognized when the risks and rewards of the developed and constructed property have been transferred and the group does not retain either continuing managerial involvement to the degree usually associated with ownership, or effective control over the property sold. This is generally the point in time when the property in its entirety is accepted by the customer. Those property development and construction contracts for which the criteria of IFRS (b) and/or (c) are fulfilled will be subject to revenue recognition over time under IFRS 15. IFRS 15 disclosures will include qualitative and quantitative information about the Group`s contracts with customers, significant judgements made, changes in those judgements, and contract cost. The group intends to adopt IFRS 15 using the modified retrospective approach which means that the cumulative impact of the adoption will be recognized in retained earnings as of 1 January 2018 and that comparatives will not be restated. 17

21 IFRS 16 Leases (on/after January 1, 2019) IFRS 16 Leases was published in January 2016 and applies in principle to all leases and involves recognizing a right of use and associated leasing liability on the lessee s balance sheet, as well as extensive disclosures in the notes. The impact on the Group s financial statements is currently examined. The Group expects the first-time application of IFRS 16 to lead to a slight balance sheet extension as well as a minor change in EBIT. The Group does not expect material changes for lease agreements in which the Group acts as the lessor. The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. The IASB has also revised, amended or issued further standards and interpretations that must be applied in future periods. However, these will have no material effect on the Group s consolidated financial statements. 6. Critical judgements and the use of estimates The preparation of IFRS consolidated financial statements requires assumptions and estimates affecting the carrying amounts of the assets and liabilities recognized, income and expenses and the disclosure of contingent liabilities. The assumptions and estimates are based on parameters that existed at the time the consolidated financial statements were prepared. Judgments, estimates and assumptions for future periods and actual future results may differ from those anticipated in the consolidated financial statements and have effects that will be reflected in future consolidated financial statements. Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors. Information about significant areas of estimation uncertainty and critical assessments in the application of the accounting principles are particularly important if they have a significant impact on the amounts included in the financial statements. The Group acknowledges the following areas: The fair value of investment properties is determined by using valuation techniques. Further details of the judgements and assumptions made are included in Note Significant judgements relating to revenue recognition are included in Note A degree of uncertainty about the estimates relating to the impairment testing of work in progress and property development is inherent in the Company s operations, particularly as regards the expected costs to complete the work and future sales prices. The assessment of whether or not deferred tax assets can be recognized is based on the likelihood that future tax advantages can be realized. However, the actual amount of taxable income in future periods and the actual usefulness of deferred tax assets might deviate from expectations as at the date on which the deferred taxes were capitalized. 7. Scope of consolidation 7.1. Changes in the Group In 2016 and 2017 the number of entities to be fully consolidated changed as follows: Number of fully consolidated companies as of Additions Disposals/Merges 1 - as of

22 In 2016 eight entities were founded and two entities were acquired via share deal. In 2017 eleven entities were founded and two entities were acquired via share deal. 8. Notes to the consolidated statement of comprehensive income 8.1. Revenue in keur Revenues from property development 183,588 56,739 thereof Real Estate "Institutional" 161,450 46,988 thereof Construction & other services 22,138 9,752 Revenue from letting activities of investment properties 21,609 17,840 Total Revenues 205,197 74,579 Revenue in total is attributable to the operating business of the Group in Germany. In 2016 revenue from sale of development and construction projects relates to the transfer of of Carré Charlotte II - Neubau, a property in Berlin, and Weißeritz Gärten, a property in Dresden to the investors. In 2017 revenue from sale of development and construction projects relates to the transfer of the following projects to investors: Schumann s Gärten : a commercial and apartment building in Leipzig Feuerlandhöfe (new building block): an apartment building in Berlin Carré Charlotte II Altbau (old building): an apartment building in Berlin Veltmannplatz : a commercial and apartment building in Aachen Furthermore the revenues include the sale of undeveloped property regarding a part of the UpperNord Quarter in Dusseldorf to an investor Other operating income in keur Insurance indemnifications 1,361 - Derecognition of liabilities 3,199 - Income from prior years 1,900 - Other operating income 693 3,768 Total 7,153 3,768 Other operating income from derecognition of liabilities in 2017 results from the purchase of a group liability below its carrying value. In 2016 other operating income mainly relates to a debt waiver debt waiver of the seller of the shares in an entity in the amount of keur 1,010 and an indemnity payment in the amount of keur 1,160 relating to the early termination of a lease agreement. 19

23 8.3. Cost of materials in keur Acquisition costs for property (152,513) (225,316) Construction costs (48,706) (95,334) Administrative & Agency cost (27,276) (15,988) Others (435) (17,123) Total (228,930) (353,761) 8.4. Personnel expenses in keur Wages and salaries (16,707) (10,625) Social contributions (3,728) (2,075) Total (20,435) (12,700) 8.5. Other operating expenses in keur Bank fees (7,085) (5,237) Marketing expenses & Consulting expenses (9,106) (5,351) Travel & Car expenses (2,686) (1,776) Audit fees (255) (140) Others (2,316) (6,584) Total (21,449) (19,088) Within other operating lease expenses totaling to keur (2016: keur 1.246) had been recognized Finance income and finance expenses in keur Other financial income 266 3,696 Total financial income 266 3,696 Interest expenses from loans (95,388) (43,255) Total financial expenses (95,388) (43,255) Financial result (95,122) (39,558) 8.7. Income taxes Income tax expense and income is broken down by origin as follows: in keur Current income taxes for the period (14.515) (4.610) Deferred taxes Tax result (12.022) (4.505) 20

24 The following table shows a reconciliation of the tax expenses expected in the respective period, which is calculated using the effective tax rate of 30%, to the actual tax expense or income: in keur IFRS net consolidated income before taxes Consolidated tax rate in % 30% 30% Expected income taxes (7.151) (5.012) special regulations regarding commercial tax (649) (631) Actual taxes related to prior years (1.276) - Other tax effects (2.945) Effective taxes on income and earnings (12.022) (4.505) Effective tax rate in % 50% 27% Deferred tax assets and liabilities result from temporary differences between the IFRS and tax carrying amounts and tax loss carryforwards and are broken down as follows: in keur - reconciliation DTA DTL Inventories & IAS Financing liabilites 563 Deferred taxes on temporary differences Losses carried forward Sum deferred taxes before netting Netting Balance sheet presentation after netting in keur - reconciliation DTA DTL Inventories IAS 40 real estate - 41,701 Financing liabilites Deferred taxes on temporary differences - 42,362 Losses carried forward 6,403 - Sum deferred taxes before netting 6,403 42,362 Netting 6,403 6,403 Balance sheet presentation after netting - 35,959 Income tax losses carryforward within CG Group amount to keur and in 2016: keur The deferred taxes from non-current assets and non-current liabilities are expected to reverse after more than twelve months after the end of the reporting period. The expected reversal of deferred taxes is broken down as follows: in keur DTA - - to be realized after more than 12 months Total DTA DTL - - to be realized after more than 12 months Total DTL The following table shows the development of individual components of deferred taxes: in keur Carrying value of DTL as at changes recognized through profit and loss (2.493) (106) changes due to consolidation scope Carrying value of DTL as at

25 9. Notes to the consolidated statement of financial position 9.1. Investment property The carrying amounts of investment properties developed as follows: in keur - IAS 40 Investment Property (finished) Carrying value as at , ,252 Capitalisation from construction activities and modernisation cost 10,812 3,477 Fair value adjustments (117) (993) Carrying value as at , ,735 in keur - IAS 40 under construction Carrying value as at ,429 61,054 Capitalisation from construction activities and modernisation cost 14,785 7,450 Fair value adjustments 5,035 4,925 Carrying value as at ,250 73,429 The Group has no restrictions on the disposability of investment property. There are also no contractual obligations for repairs, maintenance or improvements. In the case of sale, the Company is entitled to a share of the profits of a related party (see section 12). Please refer to section 14 for contractual obligations for the purchase of investment property. Supplementary to the calculation of the market values, two sensitivity analyses were carried out. The analysis for investment properties valued under application of the Discounted Cash Flow Method ( finished ) and residual value method ( under construction ) shows how market values would have fluctuated, if the two main input factors discount rate and capitalization rate would have been increased or decreased by a certain percentage as of December 31, If the discount rate and capitalization rates on which the measurement of the properties was based on had increased or decreased by 0.25 percentage points the values as at December 31, of the respective period would have been the following: As of in keur Net Sales Price Project development costs -10% 0% + 10% -10% 0% + 10% Investment Property (under construction) As of in keur Capitalisation rate Market Rent + 50 bps 0 bps - 50 bps -10% 0% + 10% Investment Property (finished) As of in keur Net Sales Price Project development costs -10% 0% + 10% -10% 0% + 10% Investment Property 59,087 73,429 87,860 82,304 73,429 64,396 The material valuation parameters for the investment properties (level 3) are as follows as of December 31, of the respective period, for properties valued under application of the Discounted Cash Flow Method: 22

26 Valuation parameters Level Regarding IAS 40 "under construction" Net Sales Price 222, ,823 Project development costs 125, ,731 Capitalisation rate (avg) 6.13% n/a Discount rates (avg) 7.00% n/a Regarding IAS 40 "finished" Total rental space (in sqm) 146,232 n/a Vacancy rate, weighted average (in %) 9.31 n/a Market rent, weighted average (EUR per sqm p.a.) 66 n/a WALT, weighted average (years) 4.41 n/a CAPEX, weighted average (EUR per sqm) n/a Gross multiplier on market rent, weighted average n/a Land value in % of total market value, weighted average n/a n/a Discount rate 7.1% n/a Capitalisation rate 6.3% n/a The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows: in keur Minimum lease receivables from uncanceable leasing agreements up to one year 8,848 5, years 14,755 17,604 - over 5 years 6,683 8,709 30,286 31, Property, plant and equipment and intangible assets The development of property, plant and equipment is shown in the following consolidated statement of changes in assets. 23

27 in keur Intangible Assets Property, plant and Equipment Total ACQUISITION COST as of ,750 1,759 Additions 558 2,254 2,812 Disposals - (306) (306) as of ,697 4,265 ACCUMULATED AMORTIZATION & DEPRECIATION as of Additions (103) (597) (701) Disposals as of (103) (432) (535) Net Book Value as at ,750 1,759 Net Book Value ,265 3,730 ACQUISITION COST as of ,697 4,265 Additions 2,424 2,605 5,030 Disposals (0) (223) (223) as of ,992 6,080 9,072 - ACCUMULATED AMORTIZATION & DEPRECIATION - as of (103) (432) (535) Additions (208) (979) (1,187) Disposals as of (311) (1,209) (1,520) Net Book Value as at ,265 3,730 Net Book Value ,681 4,871 7,552 Property, plant and equipment and intangible assets are not subject to any restrictions. There are neither contractual obligations to acquire property, plant and equipment nor intangible assets. There are no impairment losses and reversals regarding intangible assets and property, plant and equipment recognized in 2016 and Financial assets The carrying amount of financial assets comprises as follows: in keur Carrying amount before impairment Impairment Residual carrying amount Trade and other receivables (183) thereof from Real estate "Institutional" thereof from construction services (183) thereof others Receivables from related entities Other financial assets Total as of (183) Trade and other receivables receivables thereof from Real estate "Institutional" thereof from construction services thereof others Other financial assets Total as of

28 Trade and other receivables mainly relate to trade receivables in both 2016 and There are no material allowances on trade receivables. Trade receivables mainly relate to sales of real estate properties to institutional investors with low default risk. Other financial assets consist of the following assets: in keur Deposits 65 2,050 Redemption policy 1,305 1,215 Other financial assets 2,810 1,738 Total other financial assets 4,180 5, Inventories The following table shows the split of inventories as of year-end, regarding further explanations of the business activities, please refer to Note 2: in keur Real Estate "Institutional" 833, ,189 Real Estate "Parking" 17,404 - Real Estate "ETW" 222, ,670 Construction services 20,555 16,765 Prepayments for incidental rental costs 2,314 3,631 less prepayments received (111,938) (145,260) Inventories as at , ,996 in keur Carrying amount of inventories as at which are planned to be sold within the next 12 month 29,451 22,432 - thereof Real Estate "Institutional" 77,925 86,714 - thereof Construction services 10,705 4,239 - thereof prepayments for incidental rental costs 2,314 3,631 less prepayments received (61,494) (72,151) in keur Other disclosures for IAS 2 & IAS 23 Amount of inventories recognized as an expense during the period (135,540) (40,087) Carrying amount of inventories pledged as security for liabilities 1,095, ,256 Borrowing Costs capitalized during the period 79,387 40, Other assets in keur Prepayments made 3,163 3,163 Acquisition rights for property 7,166 7,821 Total 10,329 10, Cash and cash equivalents Cash and cash equivalents consist mainly of balances with domestic banks. in keur Bank deposits & Cash at Hand 33,032 28,432 Cash and cash equivalents 33,032 28,432 - thereof restricted 29,766 26,595 25

29 9.7. Equity The change in equity components is shown in the consolidated statement of changes in equity Subscribed capital As as of December 31, ,000,000 shares are outstanding. Each share has a nominal value of EUR 1. In addition a conditional capital increase of keur was authorized by the general meeting in connection with the issuing of the convertible bond (see Note 9.8) Capital reserves In case the net asset values of the contributed participation interests exceed the nominal values of the share capital issued the share premium is paid into the capital reserve. The capital reserves increased in 2017 due to the convertible bond issued by CG Gruppe AG. The amount shown in equity (keur 62,887) relates to the value of the conversion right. Please see Note 9.8 for more information on the convertible bond Other reserves Other reserves include the results of the companies included in the consolidated financial statements, retained by the shareholders' meeting, insofar as they were not distributed Non-controlling interests Shares of non-controlling shareholders result from minority shareholding in several subsidiaries, please refer to the list of shareholdings. None of these non-controlling interests are material from a group perspective. In 2016 and 2017 no dividends were not paid to non-controlling interests Financial liabilities and trade payables in keur Financing liabilities thereof Bonds thereof Liabilities to Banks thereof Financing liabilities to other third parties Other financial liabilities thereof liabilities for puttable instruments of NCI's Carrying amount of financial liabilities as at Trade payables mainly comprise operational obligations resulting from the purchase of material within the course of property development. Liabilities from puttable instruments of NCI s comprise non-controlling interests of subsidiaries that are recognized as liability according to IAS 32. CG Gruppe AG issued % convertible notes for EUR nominal value each on October 27, 2017 to Aggregate Holdings S.A. against a cash contribution of keur and contribution in kind in form of loan receivables in the amount of keur to the Group and CONSUS Real Estate AG for a cash contribution of keur The notes are exclusively held by CONSUS Real Estate AG and are convertible into non-par shares of CG Gruppe AG. 26

30 The initial conversion rate is EUR per share. In case the notes are not converted until the end of the five years term until November 1, 2022, they are automatically converted into new shares of CG Gruppe AG at the respective price valid at this point in time. The convertible notes are presented in the balance sheet as follows: in keur Face Value of bond issued 100,000 - Interest expense Carrying amount of equity share 62,887 - Carrying amount of liability 37,810 - thereof current 10,000 - thereof non-current 27, Other liabilities in keur Total other liabilities thereof accrued Liabilities thereof other taxes (VAT) thereof liabilities towards employees thereof other liabilities Tax payables Tax liabilities relate exclusively to the tax assessment of the group companies for the current and previous periods. 27

31 10. Notes to the consolidated statement of cash flows Cash and cash equivalents are solely in euro and consist of daily deposits with domestic banks. No credit lines exist. The convertible loan was issued by CG Gruppe AG against a cash contribution in the amount of keur 10,955 and a contribution in kind (loan receivables) in the amount of keur 70,545 provided by Aggregate Deutschland S.A. and against a cash contribution of keur 18,500 by CONSUS Real Estate AG. There were no other significant non-cash transactions. The following section sets out an analysis of net debt and the movements in net debt for each of the periods presented: in keur Cash and cash equivalents 33,032 28,432 Financing liabilities - repayable within one year (558,807) (379,113) Financing liabilities - repayable after one year (433,891) (376,762) Net Debt (959,665) (727,443) - Cash and cash equivalents 33,032 28,432 Gross debt - fixed interest rates (876,169) (628,915) Gross debt - variable interest rates (116,528) (126,960) Net Debt (959,665) (727,443) Liabilities from financing activities Financing liabilities - repayable within one year Financing liabilities - repayable after one year in keur Cash and cash equivalents Total Net Debt as at ,432 (379,113) (376,762) (727,443) Cash Flows 4,601 (154,890) (50,313) (200,603) Other non-cash movements (24,803) (6,816) (31,619) Net Debt as at ,032 (558,807) (433,891) (959,665) 28

32 11. Capital management and financial instruments Capital management The aim of the Group's capital management is to secure sufficient economic equity and working capital and to ensure its creditworthiness in order to secure the further growth of the Group. The economic equity of the Group consists exclusively of the balance sheet equity. CG Group is subject to covenants. The compliance with covenants is ensured by the interaction of the legal department, controlling and by the board of directors. The legal department is involved in the preparation and conclusion of loan contracts and monitors the adherence of deadlines. in keur Equity Liabilities Equity as % of Liabilities 15,4% 11,2% Risks associated with financial instruments The only significant risk associated with financial instruments, is the market risk regarding borrowings with variable interest rates. The following table illustrates the effects of a potential change in EURIBOR: 2017 Effect on Comprehensive income in keur Carrying value as at bp - 50 bp Bank Loans 116, (583) Total 116, Effect on Comprehensive income in keur Carrying value as at bp - 50 bp Bank Loans 126, (635) Total 126, Carrying amounts and fair values of the financial instruments The carrying amounts are a reasonable approximation of fair value of the financial instruments reported in the balance sheet. Financial instruments at fair value through profit or loss The Group does not have any financial assets or financial liabilities that are classified as at fair value through profit or loss in the financial year or the previous year. In addition, the Group has not classified any financial instruments at fair value through profit or loss on initial recognition in order to eliminate accounting mismatches. Likewise, no classifications were made as part of a documented group assessment. The Group did not enter into any interest rate swaps, currency hedges or other derivatives in the financial year. Reclassification of financial instruments There was no reclassification of financial instruments to another category of financial instrument in the financial year or the previous year. 29

33 Offset of financial instruments As at the balance sheet dates December 31, 2017 and 2016 no financial instruments were offset in the consolidated financial statements. Notwithstanding the foregoing, receivables and payables against one related party are presented on a net basis. Collateral The following Group assets are pledged as securities as of the balance sheet date: in keur ASSETS Pledged non-current assets 221, ,164 Investment property 213, ,164 Pledged current assets 1,071, ,222 Inventories 984, ,996 Trade and other receivables 54,019 14,631 Financial assets 4,180 0 Cash and cash equivalents 29,766 26,595 Total pledged assets 1,293,859 1,001,387 Pledges mainly result from senior debt financing secured by ways typical for the real estate industry such as mortgages and land charges on the underlying assets that are being financed Classification of financial instruments The Group holds trade and other receivables, other financial assets as well as cash and cash equivalents as financial instruments. These balance sheet items are valued at acquisition cost and belong to the category "Loans and Receivables (LaR)". Their carrying amounts reported as at the balance sheet date is a reasonable approximation of their fair values. No material impairments were made. The Group recognizes deposits as available for sale financial assets (AfS). Trade payables, financing liabilities and other financial liabilities are reported as financial instruments. They are classified as financial liabilities at amortized cost (FLaC) and are carried at amortized cost. Their carrying amounts reported as at the balance sheet date is a reasonable approximation of their fair values. The liability share of convertible notes are classified as (FLaC). For each valuation category, the net financial result in 2016 and 2017 is as follows: in keur Loans and receivables (LaR) 266 3,696 Financial liabilities at cost (FLaC) (95,388) (43,255) Total (95,122) (39,558). 30

34 CG Gruppe AG Appendix 1 Consolidated financial statements as of December 31, 2017 Page in keur Category acc. to IAS 39 Carrying value as at Nominal value Amortized cost Fair value as at Securities AfS 65 - Receivables from related parties LaR Trade receivables LaR Other current financial assets LaR Cash and cash equivalents LaR Total financial assets Financing liabilities FLaC Convertible Bond FLaC Trade payables FLaC Liabilities to shareholders FLaC Other financial liabilities, incl. accrued liabilities FLaC Total financial liabilities in keur Category acc. to IAS 39 Carrying value as at Nominal value Amortized cost Fair value as at Securities AfS 2, Trade receivables LaR 14,631 14,631-14,631 Other current financial assets LaR 2,953 2,953-2,953 Derivatives FAHfT Cash and cash equivalents LaR 28,432 28,432-28,432 Total financial assets 48,065 46, ,015 Fair value level Fair value level Financing liabilities FLaC 755, , ,904 Trade payables FLaC 43,583 43,583-43,583 Liabilities to shareholders FLaC 60,661-60,678 60,678 Other financial liabilities, incl. accrued liabilities FLaC 12,386-12,386 12,386 Total financial liabilities 872,504 43, , ,550 31

35 Appendix Objectives and methods of financial risk management Credit risk Credit risk is the risk that a counterparty will fail to meet its obligations under a financial instrument. Such a failure leads to a financial loss. To date, the Group has only been exposed to default risks in connection with its financing activities, including deposits with banks and financial institutions as well as trade receivables. The carrying amount of the financial assets corresponds to the maximum default risk to which the Group is exposed at the end of the reporting period. The impairment of trade receivables and receivables from related parties is based on empirical values and individual risk assessments, possible default risks are recognized using appropriate impairment taking into consideration net cash flows. Objective indications of the materialization of an impairment loss could be the following: indications of financial difficulties at a customer or group of customers, default or delay in paying, a heightened probability of insolvency or observable data that point to a quantifiable contraction in estimated future cash flows. In the case of general valuation allowances the Group uses historical information on the timing of payments and the extent of losses occurring, adjusted by the management in case higher or lower losses would have been expected, based in current information. Financial assets that are neither past due nor impaired are considered recoverable. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. The impact of market risks in the Group that arise from interest rate risks is explained in paragraph Liquidity risk Besides traditional methods of provisioning capital the Group additionally employs alternative methods such as raising mezzanine capital or the issue of secured bearer debentures and bonds. The financing structure of the Group is therefore composed of a combination of bank borrowings, mezzanine financing and shareholder loans. The contractually agreed maturities of each financing is aligned with the development and execution of the constructions of each respective project. Frequently purchasers in the core business institutional supply prepayments of the purchase price according to a fixed payment schedule what constitutes another substantial financing instrument for the Group. In accordance with legal regulation (Verordnung über die Pflichten der Makler, Darlehensvermittler, Bauträger und Baubetreuer, MaBV) prepayments are made according to individual construction progress as well as after the completion of construction with the final invoice. The group is subject to external covenants, a breach of such covenants bears a significant liquidity risk. The Group does not have a working capital loan or similar credit lines in keur Carrying value as at < 1 year 1-5 years > 5 years Financing liabilities and other financial liabilities Convertible Bond Trade payables Liabilities to related companies Accrued liabilities Total

36 2016 in keur Carrying value as at < 1 year 1-5 years > 5 years Financing liabilities and other financial liabilities 760, , ,346 - Trade payables 43,583 43, Liabilities to related companies 60,661 65, Accrued liabilities 7,774 7, Total 872, , , Related party transactions General As part of its normal business activities, the Group also exchanges services with related parties. Related parties include the members of the Supervisory Board and the Executive Board (see also paragraph 16) of the Company, including their close family members, as well as those companies over which Board members or their close relatives can exercise significant influence or in which they hold a significant share of the voting rights. In addition, related parties include those companies with which the Company forms a group or in which it holds an investment, which gives the Company significant influence over the business policy of the investee and the principal shareholders of the Company, including affiliated companies. In 2016 the two main shareholders of the Company are ultimately Mr. Christoph Gröner (at the same time management board member and managing director of the parent company) and Pebble Investment GmbH, both with a share of 50% of the parent companies registered share capital. In 2017 CONSUS Real Estate AG acquired all limited liability shares in Pebble Investment GmbH. The acquisition was financed through the issuance of new registered shares (via a CIK) as well as the partial debenture to be granted to Aggregate Deutschland S.A with a nominal amount totaling EUR Through this transaction, CONSUS Real Estate AG acquired a 50% shareholding in CG Gruppe AG. Subsequently, CG Gruppe AG issued mandatory convertible bond reflecting about 4.09% of its shares even when fully converted. All notes were subscribed by Consus Real Estate AG. CONSUS Real Estate AG acquired indirectly over its 100 % subsidiary Pebble Investment GmbH in addition 5.0% of the shares from the Gröner Group entities against a consideration of keur Christoph Gröner is the founder of CG and is member of the management board as well as managing director of CG Gruppe AG, and a major shareholder in CG Gruppe. As of December 21, 2017, CG Gruppe AG is included in CONSUS Real Estate AG s consolidated financial statements. The main shareholder of CONSUS Real Estate AG is ultimately Aggregate Holdings S.A. The remaining shares are held by various companies under the control of Christoph Gröner, the founder/initiator of CG Gruppe AG Related parties other than members of the Supervisory and Management Board The Group had transactions with the following related parties in 2016 and The transactions are described in Note

37 Entities, which are significantly influenced by related persons significant influence at Gröner Unternehmensbeteiligungen GmbH yes yes Gröner Unternehmensgruppe GmbH (vormals CG Unternehmensbeteiligungen GmbH) yes yes CG Services GmbH yes yes Südcenter GmbH & Co. KG yes yes AID Allgemeiner Immobiliendienst GmbH yes yes Gröner GbR yes yes CG Wirtschaftsberatung e.k. yes yes Mayersche Lochfabrik Sanierung und Verwaltung GmbH & Co. KG yes yes Chateau9 GmbH yes yes DIPLAN Gesellschaft für digitales Planen und Bauen GmbH yes yes CG Bürger-Initiativ GmbH yes yes Hostel9-Management GmbH yes yes EMC European Modular Constructions GmbH yes yes Gröner Verwaltungs GmbH yes yes Gröner Immobilien GmbH & Co. KG n/a yes Gröner Dienstleistungen GmbH n/a yes Entities, which have significant influence on the company Transactions with related parties significant inluence at Pebble Investment GmbH GmbH, Deutschland yes yes Aggregate Deutschland S.A. yes yes CONSUS Real Estate AG yes no Related Parties Expense (+)/ Income (-) from construction services Finance Result Interest expense (+)/ income (-) Liabilities (+)/ Assets (-) Loans to (+)/ from (-) Management in key positions/ Entities, which are significantly influenced by related persons (19,875) 6,828 (27,696) - Entities, which have significant influence on the company - 4,502-41,742 Total (19,875) 11,329 (27,696) 41, Related Parties Expense (+)/ Income (-) from construction services Finance Result Interest expense (+)/ income (-) Liabilities (+)/ Assets (-) Loans to (+)/ from (-) Management in key positions/ Entities, which are significantly influenced by related persons (5,760) 8,488 (4,774) (52,292) Entities, which have significant influence on the company (12,627) Total (5,714) 8,615 (4,258) (64,919) Income and receivables from transactions with related parties mainly result from construction services provided by group companies. Furthermore Christoph Gröner guaranteed for several loans of CG Group. The corresponding remuneration is disclosed under financial expense towards related parties. Assets and liabilities are mainly resulting from financing activities. Furthermore CG Gruppe AG issued a convertible bond to Aggregate Deutschland S.A. and CONSUS Real Estate AG and received cash contribitions and a contribution in kind in form of loan receivables (please see Note 9.8 for more information). 34

38 12.4. Remuneration of the Supervisory Board and Management Board The Supervisory Board is composed as follows: Norbert Kickum (Vorsitzender), Dipl.-Kaufmann (since December 24, 2015) Friedrich Scheck, Wirtschaftsprüfer, Steuerberater (until February 16, 2018) Dr. Ulrich Metz, Executive MBA (since February 16, 2018) Jaroslaw Pawel Konieczka, Dipl.-Ökonom (since February 23, 2016) Dr. Jürgen Büser, Kaufmann (until February 28, 2018) Dr. Peter Haueisen, Dipl.-Kaufmann (since August 1, 2017) Franz-Josef Schmitz, Groß- und Außenhandelskauffmann (until October 31, 2017) Prof. Dr. Andreas Steyer, Dipl.-Kaufmann (since February 16, 2018) Hans-Joachim Rühlig, Dipl.-Kaufmann (until July 31, 2017) Members of the supervisory board received a compensation of a total of keur 170 (2016: keur 161). The management Board includes the following persons: Christoph Gröner, Ingenieur (since August 20, 2015) Jürgen Kutz, Dipl.-Kaufmann (since August 20, 2015) Bernd Krüger, Dipl.-Kaufmann (since October 1, 2016) Members of the management board received a compensation of a total of keur (2016: keur 792). 13. Shareholdings All material subsidiaries are fully consolidated. In accordance with 313 (2) HGB, the following table shows a summary of the fully consolidated subsidiaries: 35

39 Consolidated entities Interest Company APARTes Gestalten GmbH 100% 100% Artist Living Verwaltung 100% 94% Artists Commercial Berlin-ST GmbH & Co. KG 94% 94% Artists Living Berlin-ST GmbH & Co. KG 94% 94% Artists Living Berlin Xberg Tower GmbH & Co. KG 94% 94% Artists Living Berlin-PB GmbH & Co. KG 94% 94% Artists Living Dresden PP GmbH & Co. KG 94% 94% Artists Living Frankfurt Com GmbH & Co. KG 94% 94% Artists Living Frankfurt Dev GmbH & Co. KG 94% 94% Artists Living Frankfurt SSc GmbH & Co. KG 94% 94% Artists Living Köln StG GmbH & Co. KG 94% 94% Artists Living Leipzig GmbH & Co. KG (VauVau) (vormals: Artists Living Leipzig GmbH & Co. KG (Wohnen)) 94% 94% Artists Parking Berlin-ST GmbH & Co. KG 94% 94% CG & KW Feuerlandhöfe GmbH & Co. KG 0% 75% CG & KW Feuerlandhöfe Verwaltungs GmbH 100% 75% CG Bauprojekte GmbH 100% 100% CG Billwerder Neuer Deich GmbH & Co. KG 100% 0% CG Böblinger City Quartier GmbH & Co. KG 100% 0% CG City Leipzig Nord GmbH & Co. KG 100% 100% CG Denkmalimmobilien GmbH 94% 94% CG Deutsche Wohnen GmbH 94% 94% CG Estate & Hostel GmbH & Co. KG 100% 0% CG Frankfurt Ostend GmbH & Co. KG 100% 100% CG Gruppe IT-Service GmbH 51% 0% CG Immobilien GmbH 100% 100% CG Netz-Werk GmbH 75% 0% CG Neuländer Quarree GmbH & Co. KG 100% 0% CG Real Estate GmbH 100% 100% Arnulf Projektgesellschaft mbh & Co.KG (vormals: CG Salzufer GmbH & Co. KG ) 100% 100% City-Hausverwaltung GmbH 100% 100% Cologneo Estate GmbH & Co. KG 95% 0% Cologneo I GmbH & Co. KG (vormals: Euroforum Nord GmbH & Co. KG) 95% 95% Cologneo III GmbH & Co. KG 100% 0% CREATIVes Bauen GmbH 100% 100% DGI Deutsche Grundstücks- und Immobiliengesellschaft mbh 90% 90% E.-Reuter-Platz Residenz GmbH & Co. KG 94% 94% Glück-Auf-Haus GmbH & Co. KG 90% 90% Günther Fischer Gesellschaft für Projektentwicklung mbh 80% 80% Innenstadt Residenz Dresden GmbH & Co. KG 94% 94% LEA Grundstücksverwaltungs GmbH 94% 94% Lebens(t)raum Ges.f.modernes Wohnen mbh 90% 90% Alter Leipziger Postbahnhof Süd GmbH & Co.KG (vormals: Mariannenpark GmbH & Co. KG) 90% 90% Mariannenpark II (Zweite) GmbH & Co. KG 100% 90% OSA II Verwaltungs GmbH 100% 100% Ostplatz Leipzig Mensa GmbH & Co. KG (vormals: Artists Living Leipzig GmbH & Co. KG (Mensa)) 94% 94% Ostplatz Leipzig Work & Life GmbH & Co. KG (vormals: Artists Living Leipzig GmbH & Co. KG (Work+Life)) 94% 94% Plagwitzer Immobiliengesellschaft mbh 94% 94% Raimar Carré Verwaltungs GmbH 100% 100% Residenz Dreseden an der Elbe GmbH & Co. KG 100% 0% RVG Real Estate Vertriebs GmbH 51% 51% Steglitzer Kreisel Parkhaus GbR 94% 0% Steglitzer Kreisel Sockel GbR (vormals: Steglitzer Kreisel GbR) 94% 94% Steglitzer Kreisel Turm GbR 94% 0% Upper Nord Hotel GmbH & Co. KG 100% 100% Upper Nord Quarter GmbH & Co. KG 100% 100% Upper Nord Tower GmbH & Co. KG (vormals: Upper Düsseldorf I GmbH & Co. KG (VauVau)) 94% 94% CG City Leipzig West GmbH & Co. KG 100% 0% 36

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41 Appendix 2 Independent Auditor s Report To CG Gruppe AG, Berlin: We have audited the consolidated financial statements prepared by CG Gruppe AG, Berlin comprising the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and notes to the consolidated financial statements for the business year from 1 January 2017 to 31 December The preparation of consolidated financial statements in accordance with the IFRS as adopted by the EU are the responsibility of the company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW) [Institute of Public Auditors in Germany]. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable accounting standards are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in the consolidation, the determination of entities to be included in the consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with the IFRS as adopted by the EU and give a true and fair view of the net assets, financial position and results of operations of the group. Berlin, 18 May 2018 Mazars GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft Kleinmann Wirtschaftsprüfer [German Public Auditor] Kaufhold Wirtschaftsprüferin [German Public Auditor]

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