KLEPIERRE Société anonyme with an Executive Board and Supervisory Board and capital stock of 279,258,476 Registered office: 21, avenue Kléber - 75116 PARIS 780 152 914 RCS PARIS REPORT BY THE EXECUTIVE BOARD TO THE COMBINED GENERAL MEETING OF APRIL 10, 2014 To the Shareholders: We have convened you to a Combined General Meeting in accordance with the provisions of the law and the Articles of Association of Klépierre (hereinafter Klépierre or the Company ) for the purpose of considering the following agenda: To be held in ordinary session Reports by the Executive Board, Supervisory Board and Statutory Auditors on operations during the financial year ended December 31, 2013; Approval of the annual financial statements for the financial year ended December 31, 2013; Approval of the consolidated financial statements for the financial year ended December 31, 2013; Appropriation of income for the financial year ended December 31, 2013 and determination of the amount of the dividend; Approval of transactions and agreements referred to in Article L. 225-86 of the French Commercial Code; Reappointment of Mrs. Dominique Aubernon and Mrs. Catherine Simoni as members of the Supervisory Board; Opinion of the ordinary General Meeting on compensation items due or awarded to Mr. Laurent Morel, Chairman of the Executive Board, in respect of the past financial year; Opinion of the ordinary General Meeting on compensation items due or awarded to Mr. Jean- Michel Gault and to Mr. Jean-Marc Jestin, members of the Executive Board, in respect of the past financial year; Determination of the aggregate annual allocation of directors' fees to the Supervisory Board; Delegation of authority to the Executive Board to trade in the Company s stock, to be granted for a period of 18 months. To be held in extraordinary session Delegation of authority to the Executive Board for a period of 26 months to reduce the capital stock through the cancellation of shares held in treasury; 1
Delegation of authority to the Executive Board for a period of 38 months to award performance shares to some or all salaried employees and corporate officers of the Group; Amendment of Article 26 "Access Right - Representation - Quorum" and Article 28 "Voting Right" of the Articles of Association; Powers to carry out formalities. The aim of this report to is provide you with supplemental information about the draft resolutions submitted for your approval. RESOLUTIONS TO BE DELIBERATED ON IN ORDINARY SESSION Approval of the annual and consolidated financial statements for the 2013 financial year (first and second resolutions) Each year, within six months after the financial year-end, the General Meeting must be convened to approve the annual and consolidated financial statements for the past financial year, once it has familiarized itself with the management report of the Executive Board and the reports of the Statutory Auditors. Approval of the company financial statements is a prerequisite to paying out any dividends. Approval of the annual financial statements (first resolution) and approval of the consolidated financial statements (second resolution) are covered by two separate resolutions. The annual and consolidated financial statements for the financial year ended December 31, 2013 respectively show earnings of 75,526,031.90 and 137,020,000.00. For any additional information, we invite you to refer to these documents, which have been made available to you. We propose that you approve the first and second resolutions submitted to you. Proposed appropriation of income for the 2013 financial year (third resolution) After approving the annual financial statements and subject to recognition by the General Meeting of the existence of funds available for distribution, the General Meeting may decide to pay a dividend as compensation to shareholders and/or to appropriate all or part of earnings to reserve accounts or to a retained earnings account. No less than 5% of the earnings for the year, less any retained losses, is set aside to form the legal reserve required by law, until such fund attains one-tenth of the capital stock. The balance, plus any retained earnings, is the distributable earnings, from which are successively subtracted the amounts that the General Meeting, on the recommendation of the Supervisory Board, deems appropriate to be appropriated to one or more optional reserve funds, whether ordinary or extraordinary, with or without any special allocation, or to be carried forward to the next financial year. Klépierre's Articles of Association do not require that the General Meeting set aside an allowance to the so-called "statutory" reserve, in addition to the legal reserve. 2
For the financial year 2013, earnings available for distribution amount to 704,822,136.40. This includes net income of 75,526,031.90 for the year ended December 31, 2013 plus retained earnings of 629,296,104.50. We propose that you appropriate distributable earnings to pay a dividend of 1.55 per share, representing an increase of 3.3% by comparison with 2012. The balance of distributable earnings (adjusted where appropriate as a function of the effective number of shares outstanding and eligible for payment of the dividend) would be appropriated to the "Retained earnings" account, which would then amount to 395,643,109.40. As such, for each Klépierre share they own, the shareholders would receive: 0.93 in respect of real estate business exempt from corporate income tax (dividend resulting from SIIC status). This dividend is not eligible for the 40% rebate provided for in Article 158-3 paragraph 2 of the French General Tax Code; 0.62 in respect of taxable business (dividend not resulting from SIIC status). The dividend not resulting from SIIC status is eligible for the 40% rebate provided for in Article 158-3 paragraph 2 of the French General Tax Code. The dividend, which is payable within nine months following the end of the financial year, will be paid in cash as from April 17, 2014, and the shares will go ex-dividend on April 14, 2014. For any shares sold between the date of the General Meeting and the dividend payment date, dividend rights will accrue to the shareholder owning the shares on the ex-dividend date. We propose that you approve the third resolution submitted to you. Approval of transactions and agreements referred to in Article L. 225-86 of the French Commercial Code (fourth resolution) Related-party agreements are agreements entered into directly or indirectly between the Company and its executive officers, between the Company and a shareholder holding more than 10% of the voting rights, or agreements in which the aforementioned persons are indirectly involved, or between the Company and another company with which, in general, it has common executives, other than those agreements relating to ordinary operations and entered into on an arm's length basis (which are said to be "unrestricted" as they are part of the normal course of the Company's business and are therefore not subject to any specific control procedures). To avoid any conflicts of interest, the law states that related-party agreements are subject to prior authorization by the Supervisory Board. The Chairman of the Supervisory Board then notifies the Statutory Auditor of all authorized agreements, and the Statutory Auditor submits to the General Meeting a special report on these agreements, which is made available to the shareholders and published on the Company's website at least 21 days prior to the date of the Ordinary General Meeting. The General Meeting then votes on the agreements authorized by the Supervisory Board during the financial year. The control procedure is implemented only in the event of new agreements or changes to existing agreements. It is not applicable to agreements entered into and authorized during previous financial years and that remain in effect in subsequent years. Non-approval of an agreement does not render the agreement null and void. However, should such an agreement have harmful consequences for the Company, even in the absence of fraud, the related party and potentially the other members of the Supervisory Board may be held liable for such consequences. 3
The following agreements were authorized by Klépierre's Supervisory Board during the 2013 financial year: Custodian agreement At its meeting on March 22, 2013, the Supervisory Board authorized the signature of a custodian agreement with BNP Paribas Securities Services for the purpose of carrying out the squeeze-out procedure for the shares of Klémurs. The simplified public takeover bid, which enabled the Company to increase its stake in Klémurs from 84.11% to 98.88%, was followed by a squeeze-out procedure for the Klémurs shares not tendered to the bid. The transaction was carried out based on the price used for the simplified public takeover bid, i.e., 24.60 per share. BNP Paribas Securities Services, in its capacity as Custodian, was appointed centralization agent for the compensation transactions for the squeeze-out, in consideration for fees totaling 15,000 excluding taxes. Dealer agreement and agency agreement entered into in connection with the update of the EMTN program At its meeting on March 26, 2010, the Supervisory Board authorized the arrangement of a Euro Medium Term Notes program for an amount not exceeding 5 billion and, at its meeting on April 11, 2013, authorized its extension for a one-year term and the arrangement of new agreements with the BNP Paribas group under the following terms: - The so-called amended and restated dealer agreement signed on April 29, 2013 with BNP Paribas as arranger and placing agent and various other placing agents, pursuant to which the placing agents undertook to place and subscribe the notes issued by Klépierre under the EMTN program. In accordance with the Base Prospectus (approved by the Autorité des Marchés Financiers under number 13-186 on April 29, 2013), the specific attributes of each issue (including the total nominal amount, the issue price, the interest rate) are determined by Klépierre and the placing agents involved at the time the securities are issued, and appear in the final conditions applicable to each issue. Under the terms of this agreement, Klépierre may, at any time, revoke any placing agent active in the EMTN Program or appoint additional placing agents. The Company also undertook to hold the syndicate members harmless from the consequences of any error in one of its disclosures or for failure to meet any of its obligations. Any compensation due under the terms of this agreement is negotiated by Klépierre and the placing agents on a case-by-case basis, for each securities issue. No sums were paid under the terms of this agreement insofar as no securities have been issued since April 29, 2013. - The so-called amended and restated agency agreement signed on April 29, 2013 with BNP Paribas Securities Services, which governs the relationship between Klépierre as issuer, the principal paying agent, which is also the Fiscal Agent, Covenant and Put Agent and Calculation Agent, and any other paying agents. The sums paid under the terms of this agreement amounted to 3,050. Arrangement of a syndicated line of credit At its meetings on March 22, 2013 and May 23, 2013, the Supervisory Board authorized the arrangement of a new syndicated line of credit for an amount not exceeding 750 million. 4
This new loan, entered into on June 3, 2013 with a pool of 16 international banks including BNP Paribas (acting with Barclays Bank as Mandated Lead Arranger and Bookrunner), has a 5-year term and a margin of 130 bps over 3-month Euribor based on a rating matrix. The arrangers were selected following an invitation to bid sent to several banks. The margin and commissions were determined at the end of the syndication process and set de facto at market rates. The loan was used to partially repay two bilateral undrawn lines of credit granted by BNP Paribas in 2012: - one, due in March 2016, for an initial amount of 500 million, was reduced to 125 million - the other, due in March 2018, for an initial amount of 500 million, was reduced to 125 million. The amounts paid to BNP Paribas under this contract came to 600,000 ( 525,000 in participation and arrangement fees, 50,000 in coordination fees and 25,000 in agent fees). The related-party agreements entered into during previous financial years and which remained in effect during 2013 are covered in the Statutory Auditors' special report, which is included in the Annual Report. The Statutory Auditors will discuss these agreements during their presentation to the General Meeting. We propose that you approve the fourth resolution submitted to you. Renewal of the terms in office of Mrs. Dominique Aubernon and Mrs. Catherine Simoni as Supervisory Board members (fifth and sixth resolutions) The aim of these proposed resolutions is to renew the terms in office of Mrs. Dominique Aubernon (fifth resolution) and Mrs. Catherine Simoni (sixth resolution) for three years, until the close of the ordinary General Meeting to be called in 2017 to approve the financial statements for the 2016 financial year. The Supervisory Board exercises permanent control over the management of the Company by the Executive Board, whose members it appoints, including the chairman, and whose compensation it sets. At any time of the year, the Supervisory Board carries out those verifications and controls that it deems appropriate and it may request all documents it deems necessary to fulfill its mission. Klépierre's Articles of Association require authorization from the Supervisory Board prior to entering into certain transactions (Articles 16 of the Company's Articles of Association). The Supervisory Board of Klépierre, which consists of no fewer than three members and no more than twelve members appointed by the Ordinary General Meeting of Shareholders, must include at least 20% women at the close of this General Meeting and at least 40% at the close of the first Ordinary General Meeting held after January 1, 2017 (Act 2011-103 of January 27, 2011). The AFEP-MEDEF Code recommends that these percentages be reached one year before these dates. We propose that you approve the fifth and sixth resolutions submitted to you. 5
Consultation of shareholders on compensation items due or awarded to Mr. Laurent Morel, Chairman of the Executive Board, and to Mr. Jean-Michel Gault and Mr. Jean-Marc Jestin, members of the Executive Board, in respect of the 2013 financial year (seventh and eighth resolutions) In its June 2013 revision, the AFEP-MEDEF Code recommends that listed companies submit executive compensation items in respect of the previous financial year to the shareholders for an advisory vote. In this respect, the AFEP-MEDEF Code recommends that one resolution be submitted to the shareholders for the Chairman of the Executive Board (proposed seventh resolution) and one resolution be submitted for the other members of the Executive Board (proposed eighth resolution). This is a vote a posteriori on the amount or the value of the items of compensation due or awarded during the past financial year, which is recommended, and not a vote a priori on compensation policy for the current financial year. Information on compensation items due or awarded in respect of the past financial year to each corporate officer appears in section 4.2.2 of the Registration Document. The Supervisory Board and the Nomination and Compensation Committee will pay close attention to the outcome of voting by shareholders and give the Board an opportunity to debate any negative vote and the action it should take with regard to the future compensation policy for the Chairman and members of the Executive Board. We propose that you vote in favor of compensation items for Executive Board members as set out in the seventh and eighth resolutions. Determination of the aggregate annual allocation of directors' fees to the Supervisory Board (ninth resolution) The aim of this resolution is to set at 300,000 the aggregate annual allocation of directors' fees awarded to the Supervisory Board per financial year. The same amount will be applicable in future financial years, unless decided otherwise. As such, there is no call to include a proposed resolution for this purpose on the agenda of each annual General Meeting of Klépierre, but only when it is deemed necessary to change the aggregate amount of directors' fees. The law gives the Supervisory Board all powers to distribute directors' fees among its members at its discretion, up to the maximum aggregate annual amount set by the General Meeting. We propose that you approve the ninth resolution submitted to you. Delegation of authority to the Executive Board to trade in the Company s stock, to be granted for a period of 18 months (tenth resolution) You are asked to renew the authorization granted in 2013 for a further period of eighteen months from the date of this General Meeting. Under this authorization, the Company may purchase or arrange for the purchase of its own shares to allocate them to the purposes authorized by European regulations (cancellation of shares in an amount up to 10% of the capital stock per 24-month period, covering commitments to deliver shares, e.g. as part of issues of securities granting access to the capital stock or to award options to buy existing 6
shares or bonus shares, awards to employees) or one or more market practices allowed by the Autorité des Marchés Financiers as of this date (practices involving investments in acquisitions and establishing a "liquidity contract" with an independent investment services provider), or subsequently, and, more generally, to allocate such shares to carrying out any transaction in compliance with applicable regulations. The Company must immediately allocate the purchased shares to an authorized purpose. It may subsequently hold, sell, transfer or cancel the shares, in keeping with the authorized purposes determined by the Company, or reallocate them to one of the other purposes indicated. The list of purposes of the share buyback program appears in proposed tenth resolution. This authorization would cancel and supersede the authorization granted by the eighth resolution adopted by the General Meeting on April 11, 2013. This authorization would be granted to the Executive Board, with the authority to further delegate as provided by law. Shares may be acquired, sold or transferred at any time (including during a pre-offer period, but not during a public offering). The number of shares in the Company that may be purchased under the program is subject to the ceilings indicated below. At the date of each buyback, the total number of shares purchased by the Company since the beginning of the buyback program may not exceed 5% of the shares that make up the Company's capital stock and the number of shares that the Company would hold at any time whatsoever may not exceed 10% of the shares that make up the Company's capital stock on the date considered. The maximum purchase price per share would be 45. Accordingly, the aggregate amount allocated to the share buyback program may not exceed 448,808,265. The resolution proposes the grant of powers to the Executive Board, with the option to delegate them as provided for by law, to adjust the aforementioned maximum purchase price to take into account the impact on the value of the share of certain transactions affecting the capital stock. This authorization is requested for a period of eighteen months and would render null and void from the day on which it is granted any as yet unused portion of any prior authorizations with the same purpose. We propose that you approve the tenth resolution submitted to you. RESOLUTIONS TO BE DELIBERATED ON IN EXTRAORDINARY SESSION Delegation of authority to the Executive Board for a period of 26 months to reduce the capital stock through the cancellation of shares held in treasury (eleventh resolution) The aim of this resolution is to authorize the Executive Board, with an option to delegate these powers as provided for by law, to reduce the capital stock on one or more occasions by cancelling any number of shares held in treasury, within the limits stipulated by law. Cancellation of shares held in treasury by the Company may be effected for various financial purposes, such as active capital management, balance sheet optimization or offsetting dilution resulting from capital increases. The number of shares in the Company that may be cancelled would be subject to the ceiling set out below. At the date of each cancellation, the maximum number of shares that may be cancelled by the 7
Company during a period of twenty-four months preceding such cancellation, including the shares covered by the said cancellation, may not exceed ten percent (10%) of the shares making up the Company s capital stock at that date. This authorization is requested for a period of twenty-six months and would render null and void from the day on which it is granted any as yet unused portion of the prior authorization granted to the Executive Board by the ninth resolution adopted by the General Meeting on April 11, 2013. We propose that you approve the eleventh resolution submitted to you. Delegation of authority to the Executive Board for a period of 38 months to award performance shares to some or all salaried employees and corporate officers of the Group (twelfth resolution) The aim of this resolution is to authorize the Executive Board, in accordance with the provisions of Articles L.225-197-1 et seq. of the French Commercial Code, with an option to delegate these powers and subject to the prior authorization of the Supervisory Board, to award bonus shares, on one or more occasions, in the form of existing shares or newly-issued shares, to salaried employees or executives of the Company or of companies belonging to the Klépierre Group. Awards of bonus shares (also called "performance shares" if they are subject to meeting performance criteria) are used as an incentive for employees and corporate executive officers, both French and foreign, and as a tool for cultivating their loyalty by giving them a stake in their company's performance and thereby aligning their own interests with those of the shareholders. Supervisory Board members may not receive bonus shares and all awards to Executive Board members are subject to meeting performance criteria. The General Meeting votes on the Executive Board's report and on the Statutory Auditors' special report. If the bonus shares awarded are newly-issued shares, the proposed authorization would entail, as the said shares become vested, capital increases by capitalization of reserves, earnings or share premiums in favor of the beneficiaries of the said shares. Any increase in the capital stock in cash leads to granting the shareholders a preemptive subscription right, which can be detached and traded during the subscription period. All shareholders are entitled to subscribe for a number of shares in proportion to their interest in the capital stock during a minimum period of at least five stock market sessions with effect from the beginning of the subscription period. In the case of a bonus share award in the form of newly-issued shares, this authorization shall also entail, by virtue of the law, the concurrent waiver by the shareholders of their preemptive right to subscribe for such shares in favor of the beneficiaries of the said shares and to the part of reserves, earnings or share premiums to be capitalized in respect of such vested shares. Naturally, this authorization would not be unlimited. First, it would be given for a period limited to thirty-eight months. Furthermore, the Executive Board would have the right to exercise this option only up to a fixed ceiling, above which the Executive Board would be required to convene a new meeting if it wished to award additional bonus shares. These ceilings are shown below. The existing shares or newly-issued shares shall not amount to more than 0.5% of the capital stock at the date on which the decision to award such shares is made by the Executive Board; the total number of bonus shares awarded under this authorization would count 8
against the ceiling of 1% of the capital stock provided in the twelfth resolution adopted at the General Meeting on April 12, 2012 related to stock option programs. Moreover, the AFEP-MEDEF Code recommends setting a maximum percentage of performance shares that may be awarded to members of the Executive Board and that this percentage be mentioned in the form of a sub-ceiling in the resolution submitted to the General Meeting for approval. As such, it is proposed that the total number of shares awarded to the Company's corporate officers, which will count against the aforesaid ceiling of 0.5%, shall not represent more than 0.2% of the Company's capital stock at the date on which the Executive Board decides to award them. The acquisition of bonus shares by the Company's corporate officers after the vesting period shall be contingent upon meeting performance criteria. The Executive Board shall be granted the powers to determine the date on which the shares will be fully vested by their beneficiaries, i.e., for all or part of the shares awarded: - either at the end of a minimum vesting period of four years, - or at the end of a minimum vesting period of two years. The shares will be subject to a mandatory minimum holding period of two years after the end of the vesting period. However, this mandatory holding period may be waived for shares subject to a minimum vesting period of four years. In any event, regardless of the vesting period set by the Executive Board, should the beneficiary become disabled, such vesting period shall end early, if statutory conditions are met, and the shares shall then be freely assignable. All powers shall also be granted to the Executive Board for the following purposes: - to determine whether the bonus shares awarded shall be newly-issued shares or existing shares; - to identify the beneficiaries, or the categories of beneficiaries ; - to set the conditions and, where applicable, the criteria for award of the shares, the duration of the vesting period and the holding period required for each beneficiary, under the conditions set out above, it being specified that with respect to bonus shares awarded to corporate officers, the Supervisory Board shall either (a) decide that the bonus shares awarded may not be sold by the recipients until they leave their office; or (b) set the number of bonus shares granted that they are required to hold in registered form until they leave their office. This authorization would be granted for a period of thirty-eight months. It would render null and void from the day on which it is granted any as yet unused portion of any prior authorizations with the same purpose. We propose that you approve the twelfth resolution submitted to you. Amendment of Article 26 "Access Right - Representation - Quorum" and Article 28 "Voting Right" of the Articles of Association (thirteenth resolution) The aim of this resolution is to amend Articles 26 and 28 of the Company's Articles of Association on representation and the voting right at the Company's General Meetings so as to set out the terms and conditions for voting electronically. We propose adding to Article 26 certain statutory provisions applying to the terms and conditions under which the Company's shareholders may vote or send a proxy remotely before the General Meeting and potentially participate in the meeting and vote remotely, namely by videoconferencing. Furthermore, in anticipation of the enactment (which will depend on an equivalent harmonization framework at the European level) of a new Article L.211-17-1 II paragraph 2 of the French Monetary 9
and Financial Code, which would provide for a change in the deadline for unwinding trades and simultaneous book entry of shares and would therefore lead to a change in the deadline for evidencing a shareholder's status as such in order to participate in General Meetings (the "record date"), and the change in the maximum number of days before the General Meeting that shareholders' ballots must be received by the Company (at the moment, in both cases, three days before the meeting), it is also proposed that you approve the deletion from Klépierre's Articles of Association of the deadlines indicated and replace them with a reference to the articles of the French Commercial Code containing the applicable provisions (Articles R.225-77 and R.225-85 of the French Commercial Code). We also propose that Article 28 be amended accordingly, to reflect the proposed changes to Article 26. We propose that you approve the thirteenth resolution submitted to you. Powers to carry out formalities (fourteenth resolution) The Executive Board requests the powers necessary to carry out all publication and registration formalities associated with holding this General Meeting. We propose that you approve the fourteenth resolution submitted to you. * Please read the draft resolutions submitted to you by the Executive Board, approve them and trust in the Board to take all requisite measures to execute each of the decisions or to make use of the authorizations requested. 10