KLEPIERRE Société Anonyme (joint stock corporation) with an Executive Board and Supervisory Board and capital of 440,098,488.20 Registered office: 26 boulevard des Capucines 75009 PARIS Paris Trade and Companies Register No. 780 152 914 REPORT OF THE EXECUTIVE BOARD COMBINED GENERAL MEETING OF SHAREHOLDERS OF APRIL 19, 2016 Dear Shareholders, We have called this combined General Meeting of Shareholders to submit the following draft resolutions for your approval: Approval of the annual financial statements for the fiscal year ending December 31, 2015; Approval of the consolidated financial statements for the fiscal year ending December 31, 2015; Appropriation of the profit for the fiscal year ending December 31, 2015 and fixing of the amount of the dividend; Approval of the operations and agreements referred to in Article L. 225-86 of the French Commercial Code; Renewal of the term of office as a member of the Supervisory Board of Mrs. Rose-Marie Van Lerberghe; Renewal of the term of office as a member of the Supervisory Board of Mr. Bertrand de Feydeau; Appointment of Mrs. Béatrice de Clermont-Tonnerre as a member of the Supervisory Board; Ratification of the co-optation of Mrs. Florence Von Erb as a member of the Supervisory Board; Consultation of the Ordinary General Meeting of Shareholders on the items of compensation payable or allocated to Mr. Laurent Morel, Chairman of the Executive Board, in respect of the fiscal year ended; Consultation of the Ordinary General Meeting of Shareholders on the items of compensation payable or allocated to Mr. Jean-Michel Gault and to Mr. Jean-Marc Jestin, members of the Executive Board, in respect of the fiscal year ended; Fixing of the amount of directors fees allocated to the members of the Supervisory Board; Renewal of term of Deloitte et Associés as Statutory Auditors; Renewal of Beas Alternate Statutory Auditors; Appointment of Ernst & Young as Statutory Auditors to replace Mazars; Appointment of Picarle & Associés as Alternate Statutory Auditors to replace Mr. Patrick de Cambourg; Delegation of authority to the Executive Board, for a period of 18 months, to deal in the Company s shares; Delegation of authority to the Executive Board, for a period of 26 months, to reduce the authorized share capital by the cancellation of treasury shares; 1
Delegation of authority to the Executive Board, for a period of 38 months, to allocate bonus Company shares, with the cancellation of shareholders' preferential rights; Powers for formalities. RESOLUTIONS TO BE DELIBERATED ON IN ORDINARY SESSION APPROVAL OF THE 2015 FINANCIAL STATEMENTS (THE FIRST TWO RESOLUTIONS) The first two items of the agenda relate to the approval of the corporate financial statements (First Resolution) and consolidated financial statements for fiscal year 2015 (Second Resolution). You are asked to approve the corporate financial statements for the fiscal year ended on December 31, 2015, which show a result of (110,885,970.59), and the consolidated financial statements for the fiscal year ended on December 31, 2015, which show a result of (437,694,875). This consolidated loss solely derives from the technical non recurring impairment of the goodwill recognized as a result of the transaction with Corio, as explained in details in the consolidated accounts (note 4.2 page 160 of the Registration Document). You are further asked to note that the corporate financial statements for the fiscal year ended on December 31, 2015 do not report expenses and charges that are non-deductible for tax purposes as provided in Article 39-4 of the French General Tax Code. Details of the corporate and consolidated financial statements, the Statutory Auditors reports on the 2015 corporate and consolidated financial statements and the 2015 management report by the Executive Board are contained in the Registration Document. We propose to approve the First and Second Resolutions that have been presented to you. ALLOCATION OF PROFIT AND FIXING OF THE AMOUNT OF THE DIVIDEND (THIRD RESOLUTION) The allocation of our Company s profit that you are asked to approve complies with the law and our bylaws. It is also proposed that an amount be taken from Retained earnings and distributed. These proposals for the allocation of profit and distribution of an amount from Retained earnings were submitted to the Supervisory Board at its meeting of February 4, 2016 and approved. Income for 2015 amounted to a distributable profit of 621,381,570.26 euros. This corresponds to retained earnings in the amount of 732,267,540.85, minus the loss of (110,885,970.59) recorded for the 2015 fiscal year. It is proposed that these distributable profit be allocated to the payment of a dividend of 1.70 per share. 2
Accordingly, should the allocation be approved by the General Meeting of Shareholders, for each Klépierre share owned shareholders would receive: 0.50 euro for corporate tax-exempt real estate business (dividend from the SIIC tax regime). This dividend will not benefit from the tax relief of 40% described in Article 158-3-2 of the French General Tax Code; 1.20 euro for business subject to corporate income tax (dividend not from activities that fall under the SIIC tax regime). This dividend, which is not from the SIIC tax regime, will enjoy the tax relief of 40% described in Article 158-3-2 of the French General Tax Code. The dividend, which must be paid within nine months after the balance sheet date for the fiscal year, will go ex-dividend on April 22, 2016 and be paid in cash on April 26, 2016. Should a sale of shares occur between the date of the General Meeting of Shareholders and the payment date, rights to dividends shall be acquired by the shareholder who owns the shares on the day before the detachment date. We propose to approve the Third Resolution that has been presented to you. APPROVAL OF REGULATED AGREEMENTS (FOURTH RESOLUTION) The agenda continues with the approval of the regulated agreements presented in the Statutory Auditors special report, which will be presented to you at this Meeting. You are asked to approve each of the agreements referred to in Article L. 225-86 of the French Commercial Code, which were duly authorized by the Supervisory Board in 2015. Note that only the following new agreements, which were duly authorized by the Supervisory Board in accordance with Article L. 225-68 of the French Commercial Code and entered into over the past year, are subject to the General Meeting s approval: the signing of an amended investment contract and an amended financial services contract with, respectively, BNP Paribas and other permanent dealers and BNP Paribas Securities Services as part of the updated EMTN program on March 24, 2015, intra-group loan agreement granted by Klépierre and APG Strategic Real Estate Pool NV (the parent companies of the shareholders of Nordica Holdco AB) to Nordica Holdco AB for a total amount of 34,076,730 (of which 19,117,045 was lent by Klépierre) for the acquisition of the Oslo center on December 18, 2015, intra-group loan agreement granted by Klépierre and APG Strategic Real Estate Pool NV (the parent companies of the shareholders of Nordica Holdco AB) to Storm Holding Norway AS for a total amount of 68,153,641 (of which 38,324,091 was lent by Klépierre) for the acquisition of the Oslo City center on December 18, 2015. We propose to approve the Fourth Resolution that has been presented to you. TERMS OF OFFICE OF MEMBERS OF THE SUPERVISORY BOARD (FIFTH TO EIGHTH RESOLUTIONS) 3
Pursuant to Article 11 of the bylaws, the term of office of members of the Board is three years. However, the Ordinary General Meeting of Shareholders may, by exception, elect one or more Supervisory Board members for a term of less than three years for the sole purpose of establishing a system of retirement by rotation such that only a proportion of the Supervisory Board members stands for re-election at any one time. You are asked to: renew the term of office as a member of the Supervisory Board of Mrs. Rose-Marie Van Lerberghe for a term of three years; renew the term of office as a member of the Supervisory Board of Mr. Bertrand de Feydeau for a term of one year; appoint Mrs. Béatrice de Clermont-Tonnerre as a member of the Supervisory Board for a term of three years to replace Mr. Bertrand Jacquillat, and ratify the co-optation of Mrs. Florence Von Erb as a member of the Supervisory Board, to replace Mrs. Dominique Aubernon, who resigned, for the remainder of her term, i.e., until the General Meeting of Shareholders convened in 2017 to approve the financial statements for the fiscal year ending on December 31, 2016. In Part 4 of the Registration Document, you will find all information relating to the composition of the Supervisory Board and the expertise of its members. Appointment of Mrs. Béatrice de Clermont-Tonnerre You are asked to appoint Mrs. Beatrice de Clermont Tonnerre to replace Mr. Bertrand Jacquillat for a period of three years expiring at the end of the Ordinary General Meeting of Shareholders convened in 2019 to approve the financial statements for the 2018 fiscal year (Seventh Resolution). Béatrice de Clermont-Tonnerre Business address: 26, boulevard des Capucines, 75009 Paris, France Career Béatrice de Clermont Tonnerre has been Director Southern Europe, Partner Business Solutions at Google since mid-2013. Before that, she was Director of Development at Lagardère Group (2008-2013). At Groupe Canal Plus (2001-2005), she was Director of Interactive Television and Assistant Director of Programs at Canalsatellite. She began her career as a journalist at Radio France International Latin America and Europe 1 before joining the Lagardère Strategy Department in 1995 as an analyst in High Technologies before moving on to the Media Department in 1998. 43 years old graduate of the Institut d'etudes Politiques of Paris (Public Service Section) and the Ecole Supérieure des Sciences Economiques et Commerciales (MBA) - French nationality. Current appointments as per December 31, 2015 Director of Hurriyet (a Turkish listed company) Appointments expired during the last five years Director of LaCie Mrs. Beatrice de Clermont-Tonnerre will be contributing her knowledge of the business and the digital world to the Board. She is considered as independent according to the criteria of the AFEP-MEDEF Code. 4
Renewal of term of Mrs. Rose-Marie Van Lerberghe You are asked to renew the term of Mrs. Rose-Marie Van Lerberghe as a member of the supervisory Board for a period of three years expiring at the end of the Ordinary General Meeting of Shareholders convened in 2019 to approve the financial statements for the fiscal year 2018 (Fifth Resolution). Mrs. Rose-Marie Van Lerberghe is considered to be independent according to the criteria of the AFEP-MEDEF Code of Corporate Governance. The biography of Mrs. Rose-Marie Van Lerberghe is given on page 61 of the Registration Document. Renewal of term of Mr. Bertrand de Feydeau In light of the changes that will occur in the composition of the Supervisory Board and its committees following the resignation of Mrs. Dominique Aubernon in December 2015 and the expiration of the term of Mr. Bertrand Jacquillat, in order to ensure a smooth transition in the conduct of the work of the Supervisory Board and of the committees, you are asked to renew the term Mr. Bertrand de Feydeau as a member of the Supervisory Board for a limited period of one year expiring at the end of the Ordinary General Meeting of Shareholders convened in 2017 to approve the financial statements for the 2016 fiscal year (Sixth Resolution). The biography of Mr. Bertrand de Feydeau is given on page 59 of the Registration Document. Co-optation of Mrs. Florence Von Erb In light of the resignation of Mrs. Dominique Aubernon from her position as a member of the Supervisory Board on December 14, 2015, on February 17, 2016, the Board decided to co-opt Mrs Florence Von Erb as a member of the Supervisory Board. Consequently, in accordance with the law, the General Meeting of Shareholders is asked to ratify the co-optation of Mrs Florence Von Erb for the remainder of the term of Mrs. Dominique Aubernon, i.e., until the General Meeting of Shareholders convened in 2019 to approve the financial statements for the 2018 fiscal year (Eighth Resolution). The biography of Mrs. Florence Von Erb is given on page 62 of the Registration Document. Accordingly, should the General Meeting of Shareholders adopt all of the abovementioned resolutions, the Supervisory Board would include, at the end of the Meeting, four women, representing a percentage of 40%, in accordance with the recommendations of the AFEP- MEDEF Code, and more than 50% of its members would be independent. We propose to approve the Fifth to Eighth Resolutions that have been presented to you. CONSULTATION ON THE ITEMS OF COMPENSATION PAYABLE OR ALLOCATED IN RESPECT OF FISCAL YEAR 2015 (NINTH AND TENTH RESOLUTIONS) Since its redesign of June 2013, the AFEP-MEDEF Code has invited listed companies to consult shareholders regarding the items of compensation of the members of the Executive 5
Board in respect of the fiscal year ended. In this regard, the AFEP-MEDEF Code recommends that a resolution on the Chairman of the Executive Board (Ninth Resolution) and one on the other members of the Executive Board (Tenth Resolution) be submitted for shareholder approval. This vote should be on the recommended amount or valuation of the items of compensation payable or allocated during the most recent fiscal year ended, not on the compensation policy for the current fiscal year. Information on the items of compensation payable or allocated during the fiscal year ended to each Member of the Executive Board is given in Part 4 of the Registration Document. We propose to approve the Ninth and Tenth Resolutions that have been presented to you. ATTENDANCE FEES ALLOCATED TO THE SUPERVISORY BOARD (ELEVENTH RESOLUTION) In order to benefit from the best experience and expertise available, especially since the company joined the CAC 40, you are asked to increase the annual amount of the directors' attendance fees allocated to the Supervisory Board from 400,000 to 700,000 euros to bring the total annual amount of directors' fees in line with comparable companies. Note that the resulting increase will occur gradually, by 150,000 euros in 2016, and 150,000 euros in 2017. You are asked to approve the Eleventh Resolution that has been presented to you. TERMS OF STATUTORY AUDITORS (TWELFTH TO FIFTEENTH RESOLUTIONS) The Twelfth to Fifteenth Resolutions concern the terms of the Statutory Auditors. Since the terms of all Statutory Auditors are set to expire at the end of this meeting, the Supervisory Board proposes that you, having received the approval of the Audit Committee, and given how long Mazars has served as the Statutory Auditors of the Company: renew, for a period of six years, the terms of: (i) Deloitte et Associés as Statutory Auditors, (ii) Beas as alternate Statutory Auditors. appoint, for a period of six years: (i) Ernst & Young as Statutory Auditors to replace Mazars, (ii) Picarle & Associés as alternate Statutory Auditors to replace Mr. Patrick de Cambourg. We propose to approve the Twelfth to Fifteenth Resolutions that have been presented to you. AUTHORIZATION FOR THE COMPANY TO BUY BACK ITS OWN SHARES (SIXTEENTH RESOLUTION) Since the existing authorization expires in October 2016 (purchases made during 2015 can be found in Part 1.11.1 of the Registration Document), you are asked to renew the authorization 6
granted in 2015 for another period of eighteen months from this General Meeting of Shareholders, with the understanding that the Executive Board will not make use of this option during the offer period in the event of a takeover bid initiated by a third party for the shares of the Company without prior authorization of the General Meeting of Shareholders. This authorization allows the Company to buy back or make arrangements for the buyback of its shares with the following objectives: cancellation of shares comprising up to 10% of capital in a 24-month period, coverage of the commitment to deliver shares, for example, as part of issues of securities giving access to the capital or the granting of stock options or existing bonus shares, allocations to employees, external growth operations, establishment of a liquidity agreement by an investment services provider acting independently, and retention and payment or exchange of shares in the context of a merger, spin-off or asset transfer. Purchases, sales or transfers of such shares may be carried out by any means, on one or more occasions, on the market or over-the-counter, including in whole or in part, through the acquisition, sale, exchange or transfer of blocks of shares. These means include, where appropriate, the use of all forward financial instruments. The number of the Company's shares that may be bought back in this manner would be subject to the following caps: on the date of each buyback, the total number of shares purchased by the Company since the start of the buyback program cannot exceed 10% of the shares comprising the Company's capital and the number of shares that the Company will own at any time cannot exceed 10% of the shares comprising the Company s capital on the date in question. The maximum purchase price per share would be 55 euros. Consequently, the total amount allotted to the share buyback program could not exceed 1,728,958,330 euros. We propose to approve the Sixteenth Resolution that has been presented to you. RESOLUTIONS TO BE DELIBERATED ON IN EXTRAORDINARY SESSION DELEGATION OF AUTHORITY TO REDUCE SHARE CAPITAL BY CANCELING TREASURY SHARES (SEVENTEENTH RESOLUTION) Further to the item relating to the cancellation of shares mentioned in the Sixteenth Resolution, you are asked to authorize the Executive Board, with the power to sub-delegate, as permitted under the conditions provided by law and in the bylaws, to reduce the share capital on one or more occasions through the cancellation of any amount of treasury shares to the extent permitted by law. The cancellation of the Company's treasury shares may be in response to various financial objectives, such as, for example, active capital management, balance sheet optimization, or an offsetting of a dilution resulting from a capital increase. 7
The number of the Company's shares that may canceled would be subject to the following caps: on the date of each cancellation, the maximum number of shares canceled by the Company during the twenty-four-month period preceding that cancellation, including the shares canceled on that occasion, may not exceed ten percent (10%) of the shares comprising the Company s capital on that date. This authorization is sought for a period of twenty-six months and would supersede the authorization granted at the 2015 General Meeting of Shareholders. During 2015, there were no capital reductions. We propose to approve the Seventeenth Resolution that has been presented to you. AUTHORIZATION TO ISSUE BONUS SHARES (EIGHTEENTH RESOLUTION) You are asked to authorize the Executive Board to award performance shares to employees and executive corporate officers of the Company and of Group companies under the new favorable corporate and tax regime established by Law No. 2015-990 of August 6, 2015 for growth, business activity, and equal economic opportunity. The vesting period would be three years and the holding period would be two years for French beneficiaries, and the vesting period would be four years with no holding period for foreign beneficiaries. The Supervisory Board believes that these three criteria comply with the specific requirements of the group and are sufficiently strict, as all of the Company's shares can be allocated only in the event that Klépierre shares outperform these three criteria, thus confirming the particularly high bar set for the performance conditions. If this resolution is approved, any allocations of bonus shares will be decided, as applicable, by the Supervisory Board or the Executive Board, on the basis of the proposals of the Nomination and Compensation Committee. In accordance with the recommendations of the AFEP-MEDEF Code, the final allocation of all performance shares will be subject to service and performance conditions for all beneficiaries. The Supervisory Board will renew the performance conditions of the most recent plan implemented by the Company for 2015, which are considered relevant as they allow (i) to assess the return for the shareholder based on stock price performance and dividends received, and (ii) to compare this return with the return of peer companies. In addition to these two criterion, it is envisaged to add a third operational criteria, directly linked to the business of the Company, which will measure the Company s performance based on the evolution of net rental income. Accordingly, the allocations of stock that would be carried out on the basis of the Eighteenth Resolution would be subject to three performance conditions, which would be assessed over a period of three years: 8
One condition linked to the absolute performance of the company, calculated with regard to the rate of return on Klépierre shares (total shareholder return or TSR: price + dividend); this criterion would affect 30% of shares; A second condition linked to the relative performance of Klépierre shares in comparison with the FTSE EPRA EURO ZONE index; this criterion would affect 50% of shares. An internal performance condition based on an operational criterion directly linked to the Company's business activity, i.e., the average change over three years in net rental income, net of indexation (average calculation to be made based on the annual change in net rental income disclosed by the group in the annual consolidated accounts for the three fiscal year preceding the reference date); this criterion would affect 20% of shares. As a result, barring changes in economic conditions or exceptional circumstances, the assessment of these three criteria would be as follows: Absolute performance: 30% Relative performance: 50% Internal performance: 20 % weighting weighting Weighting Performance % of shares Performance % of shares Performan % of shares delivered delivered ce delivered 16.5% 0% Index - 1% 0% < 1% 0% 20% 33.3% Index 33.3% 1% 30% 22.5% 50% Index + 1% 50% 3% 100% 25% 66.70% Index + 2% 66.7% 27.5% 83.30% Index + 3% 100% 30% 100% Accordingly, with respect to absolute performance, the percentage of shares allocated is zero since the increase in the TSR is less than or equal to 16.5%. Achievement of the maximum target implies TSR growth of 30% or more. With respect to the second criterion (relative performance), even if Klépierre share performance is equal to the index, only 33.3% of the shares will be obtained. To achieve the maximum target, the share would have to perform at a rate 3% above the index. With respect to the third criterion (internal performance), even if the performance of net rental income is equal to 1%, only 30% of the shares will be obtained. To achieve the maximum target, the increase would have to be above or equal to 3%. Finally, the assessment period for bonus share performance would be equal to three years, in accordance with investor expectations. The existing shares or shares to be issued that are allocated under this authorization cannot represent more than 0.5% of the share capital on the day of the decision by the Executive Board. Furthermore, the number of shares allocated to corporate officers cannot represent more than 0.2% of the share capital at the date of the decision to allocate. This amount will be imputed to the total cap of 0.5% of the share capital referred to above. The members of the Executive Board will be required to retain in registered form the equivalent in shares of 50% of the gain on acquisition net of taxes and charges calculated at the delivery of the shares allocated to them, which will be permanently allocated to them as bonus shares, until they cease to hold office. 9
This authorization would be granted for a period of 38 months from the date of the Meeting. We propose to approve the Eighteenth Resolution that has been presented to you. POWERS FOR FORMALITIES (NINETEENTH RESOLUTION) You are asked to grant the Executive Board the powers necessary to accomplish all publication and filing formalities resulting from the holding of this Meeting. We propose to approve the Nineteenth Resolution that has been presented to you. 10