alstria office REIT Annual Report 2012

Plain-text annual report

Bäckerbreitergang 75 20355 Hamburg, Germany Phone: +49 (0)40 226341-300 Fax: +49 (0)40 226341-310 www.alstria.com Friedrichstrasse 19 40217 Düsseldorf, Germany Phone: +49 (0)211 301216-600 Fax: +49 (0)211 301216-615 www.alstria.com Points of view Annual Report 2012 Part II/II – Financial Report alstria ofﬁ ce RE alstria ofﬁ ce REIT-AG 53° 33' 13'' N; 9° 58' 54'' E a i r t s l a t r o p e R l i a c n a n F i – I I / I I t r a P 2 1 0 2 t r o p e R l a u n n A alstria ofﬁ ce REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the German Investor Relations Association). Other reports issued by alstria ofﬁ ce REIT-AG are posted on the Company’s homepage. Forward-looking statements This annual report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based not occur, or if risks should arise – as mentioned in the risk report – the actual results could differ materially from the results currently expected. Note This report is published in German (original version) and English (non-binding translation). alstria ofﬁ ce REIT-AG ﬁ ve-year overview according to IFRS EUR k Revenues and earnings Revenues Net rental income Consolidated loss/proﬁ t for the period FFO Earnings per share (EUR) FFO per share (EUR) EPRA1) earnings per share (EUR) 2012 2011 2010 2009 2008 101,286 90,110 39,911 43,571 0.51 0.55 0.55 90,798 80,868 27,448 34,685 0.40 0.48 0.50 89,094 81,759 102,510 91,964 102,055 93,222 206 –79,651 –56,000 27,541 0.00 0.45 0.44 32,690 –1.40 0.58 0.53 39,415 –1.02 0.70 0.68 Balance sheet Investment property Total assets Equity Liabilities NAV per share (EUR) Net LTV G-REIT key ﬁ gures G-REIT ratio Revenues plus other income from investment properties EPRA1) key ﬁ gures Diluted EPRA NAV per share (EUR) EPRA NNNAV per share (EUR) EPRA net initial yield EPRA “topped-up” net initial yield EPRA vacancy rate EPRA cost ratio Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008 1,622,988 1,528,589 1,348,400 1,425,440 1,805,265 1,786,893 1,686,637 1,542,336 1,766,134 1,873,493 829,287 957,606 10.50 47.8% 768,195 918,442 10.71 50.1% 692,408 849,928 11.24 49.8% 634,185 729,667 1,131,949 1,143,826 11.32 57.9% 13.03 59.0% 50.0% 48.7% 49.8% 40.3% 40.3% 100% 100% 100% 100% 100% 10.98 10.50 5.7% 5.7% 8.0% 11.32 10.71 5.8% 5.8% 6.5% 11.68 11.24 5.5% 5.7% 5.1% 12.18 11.32 5.4% 5.4% 3.3% 13.87 13.03 5.2% 5.2% 5.9% 21.4% 24.0% 20.2% 20.9% 20.1% 1) Please refer to EPRA Best Practices Recommendations, ›› www.epra.com. Proﬁ le alstria ofﬁ ce REIT-AG is the leading listed Real Estate Investment Trust (REIT) and the largest listed ofﬁ ce property company by market capitalisation in Germany. The Company is focused on acquiring, owning and managing ofﬁ ce real estate in Germany. alstria was founded in January 2006 and was converted into the ﬁ rst German REIT in October 2007. Its headquarters are in Hamburg. The Company owns a diversiﬁ ed portfolio of proper- ties across attractive German ofﬁ ce real estate markets. Its port- folio as at December 31, 2012 comprises 84 properties with an aggregate lettable space of approx. 929,000 sqm and is valued at approximately EUR 1.6 bn. The alstria ofﬁ ce REIT-AG strat- egy is based on active asset and portfolio management as well as on establishing and maintaining good relationships with key customers and decision makers. alstria focuses on long-term real estate value creation. Contents Group management report (separate content) Economics and strategy (business overview) Financial analysis Report on risks and opportunities Sustainability report Mandatory disclosures Additional Group disclosures Subsequent events and outlook Consolidated ﬁ nancial statements (separate content) Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ﬁ nancial position Consolidated statement of changes in equity Consolidated statement of cash ﬂ ows Notes to the consolidated ﬁ nancial statements Management compliance statement Independent auditors’ report Corporate governance Report of the Supervisory Board Corporate governance statement Remuneration report REIT disclosures REIT declaration REIT memorandum Other information Glossary Events 2013 Contact/Imprint 5 6 11 15 20 20 22 23 25 26 27 28 30 32 34 78 79 80 80 84 90 94 94 95 96 96 99 100 Detail index Group management report Economics and strategy (business overview) Economic conditions Strategy and structure Corporate management Portfolio overview Financial analysis Earnings position Financial and asset position Report on risks and opportunities Risk reporting Opportunities of the Group Sustainability report Mandatory disclosures Additional Group disclosures Employees Remuneration report Subsequent events and outlook Subsequent events Outlook 5 G r o u p m a n a g e m e n t r e p o r t 6 6 7 7 8 11 11 12 15 15 19 20 20 22 22 22 23 23 23 Group management report Economics and strategy (business overview) 6 t r o p e r t n e m e g a n a m p u o r G Economic conditions In 2012, the European debt crisis affected the real economy, which also impacted the German economy. Germany’s GDP increased slightly by 0.7%, while the growth was 3.0% in 2011.* This development also ended the positive trend in the German labour market. The unemployment rate in- creased by 0.1 percentage points to 6.7% in com- parison to 2011.** Despite the European recession the German real estate market developed in a positive manner in 2012. Domestic and international investors seem to prefer the stable German real estate market, which appears to be very attractive in regards to its risk/ return proﬁ le. Some major transactions have driven the volume on the commercial real estate market to more than EUR 25 bn. The total investment volume rose by 8% in comparison to the previous year.*** Overview of the German ofﬁ ce property market Development of ofﬁ ce rents In 2012, ofﬁ ce rents consistently developed in a positive way at the most important commercial real estate sites Berlin, Düsseldorf, Frankfurt/Main, Hamburg, Cologne, Munich and Stuttgart (“Big 7”). On average, the prime rents increased by around 3%. An above av- erage growth was registered in Düsseldorf at 8.3% (EUR 26.00 per sqm). The rents also increased in Munich by 3.3% (EUR 31.00 per sqm), in Stuttgart by 2.8% (EUR 18.50 per sqm), in Cologne and Ber- lin by 2.3% (EUR 22.00 per sqm) and in Hamburg by 2.1% (EUR 24.00 per sqm). The rents remained at the same level (EUR 33.00 per sqm) as in the previous year only in Frankfurt/Main. Take-up in major German cities The vacancy rate of ofﬁ ce properties in German cities decreased from 9.4% in 2011 to 8.8% in 2012, which rep- resents total vacancies of 7.78 million sqm (de- crease of 0.58 million sqm). Comparing the “Big 7”, the highest vacancy rate was noted in Frankfurt (11.9%), followed by Düsseldorf (11.0%), Berlin (8.5%), Munich (8.4%), Hamburg (8.2%), Co- logne (7.9%) and Stuttgart (5.6%). * Federal Statistics Ofﬁ ce (Statistisches Bundesamt). ** Federal Employment Agency (Bundesagentur für Arbeit). *** All numbers referred to in this Section are sourced from Jones Lang Lasalle and BNP Paribas. New lease-up In 2012, new lease contracts for over 3.04 million sqm of ofﬁ ce space have been signed in the seven major German cities. This re- ﬂ ects a decrease of 0.36 million sqm or 11% com- pared to the previous year. Major decreases have been registered in Stuttgart (–32.1%), Cologne (–23.2%) and Munich (–15.0%). However, a positive trend was recorded in Frankfurt at 20.7%. supply In 2012, at approx. New ofﬁ ce 820,000 sqm, the delivery of new ofﬁ ce and com- mercial space was on its lowest level in the past ﬁ ve years, even though the number of completions have increased in Düsseldorf, Cologne and Ham- burg compared to 2011. For 2013, a slightly higher completion volume of approx. 937,000 sqm is fore- casted, of which the predominant part is already pre-rented. Thus, in 2013, the supply of high-quality new ofﬁ ce space will remain too low. Investment markets The positive trend on the investment market continued in the ﬁ scal year 2012. Total investment volume was approx. 8% (around EUR 25.3 bn for commercial assets) above the result of the previous year. In the “Big 7” sites, a transaction volume of around EUR 15.7 bn was recorded. The highest transaction volumes had Ber- lin at EUR 3.95 bn, Munich with EUR 3.86 bn and Frankfurt at EUR 3.25 bn. The investment market has continued to focus on high-quality core properties in premium locations. The average prime yield for commercial ofﬁ ce real estate was at 4.76%. However, in addition to the core real estate, investors are seeking for opportu- nities in the large volume area with the correspond- ing increase in demand for “Value-Add” properties. With regard to the deal structure, approximately 77% of the commercial investment turnover in the ﬁ scal year 2012 related to single deals, whereas the share of portfolio transactions amounted to 23%. Outlook for 2013 Due to the expected down- shift in the worldwide economy and the still ongo- ing European debt crisis, the German government is forecasting a slower growth rate for the German economy of 0.4% in 2013. Still the dynamic of the economic development might accelerate at the end of the next year. Under these circumstances alstria Financial Report 2012 the unemployment rate might remain stable at the current level, the incomes may rise slightly and the inﬂ ation will remain moderate. In combination with more restrictive human re- source policies of many companies, the ofﬁ ce rental market may get under pressure in 2013. Decision processes within the companies might decelerate and the negotiations on conditions might get more intense. On the investment market, the demand for core assets will remain high and will highly exceed the supply. Furthermore, the investors will demand value-add properties. Under these circumstances the transaction volume will remain stable at current level and the prices for B locations will rise. Strategy and structure The alstria Group consists of the parent company alstria ofﬁ ce REIT-AG, a real estate company listed on the Frankfurt stock exchange, and 19 subsidiar- ies, which include nine general partners, nine limit- ed partnerships holding assets and one REIT service company. Operations are made within the parent company. Although the major part of the assets is allocated in the alstria ofﬁ ce REIT-AG, 16 properties are held by nine subsidiaries. alstria is a long-term holder of its real estate port- folio. alstria’s strategy is structured on the follow- ing assumptions: › The German real estate market will offer limited rental or capital value growth in the future. › The overall built environment is sufﬁ cient to host all the existing demand for ofﬁ ce space. › Rental markets are poised to suffer from an over- crowded offer, while tenant space requirement is going down. › The market’s vacancy rates will remain relatively stable. On the back of these assumptions, our strategy consists in owning and managing assets which: › Fit to a speciﬁ c tenant demand in their immediate micro-environment. › Are rented at or below market, or if over-rented are valued as such. › Offer room for value enhancement as they require to be upgraded to new real estate standards. › Have the potential to offer the best value for money to tenants in the micro-location. alstria’s aim is to provide, through active day-to- day management of its portfolio, superior real es- tate returns. alstria Financial Report 2012 7 G r o u p m a n a g e m e n t r e p o r t › alstria has a long-term leased portfolio (around 7.1 years weighted average lease lengths). Some 72% of rental income derives from a small number of high-quality tenants. Around 40% of rental income is generated from public or public-related entities, which are less affected by economic developments. › alstria pursues a non-trading strategy, and focuses on long-term value creation through asset man- agement. Thus alstria is conducting real estate operations (i. e. asset and property management) internally, which differentiate us from the compe- tition in a positive way. › The operating strategy involves helping alstria’s tenants to optimise their real estate operating costs. There is no contradiction in reducing the overall real estate costs of alstria’s tenants and in- creasing the returns of alstria. In fact, the current environment could create opportunities for alstria at a time when most German corporations are looking to reduce costs. Corporate management alstria proactively focuses on the following indica- tors: revenues, FFO or rather cash ﬂ ow, LTV and the G-REIT equity ratio. Returns are realised through the Company’s active asset management model. By proactive management of its balance sheet, al- stria was able to improve its LTV, reducing it from 56.4% on December 31, 2011, down to 55.0% as at year-end 2012. The mid-term target is to reduce the overall LTV down to below 50%. The G-REIT equity ratio was at 50.0% at year-end which compares to 48.7% in the prior year and a legal covenant of 45%. In 2012, alstria agreed terms and conditions for the acquisition of six assets in Düsseldorf, Frank- furt, Neu-Isenburg and Norderstedt (DIVE port- folio). The transfer of beneﬁ ts and burden took place in May 2012. Additionally, four assets have been sold in 2012. While two assets in Hamburg and Nuremberg were transferred in 2012, one other asset in Dresden was transferred on January 1, 2013. Furthermore, one asset in Düsseldorf was transferred on Febru- ary 1, 2013. Further, in March 2012 beneﬁ ts and burden of the asset “Alte Post” in Hamburg, which was sold at the end of 2011, have been transferred. 8 t r o p e r t n e m e g a n a m p u o r G alstria will stay focused on its buy-and-manage strategy and will constantly review growth oppor- tunities if and when they arise. ›› Please refer to the section “recent development and outlook” for further details. In 2012, revenues were up from EUR 90.8 m to EUR 101.3 m and funds from operations (FFO)* were up 25.6%, from EUR 34,685 k in 2011 to EUR 43,571 k. On a per share basis the FFO in- creased from EUR 0.48 to EUR 0.55. The year-on- year increase in revenues and funds from operations was mainly driven by the new acquisitions executed during the ﬁ nancial year 2012. Portfolio overview On December 31, 2012, alstria’s portfolio consisted of 83 ofﬁ ce properties and one retail property with a total of approx. 928,500 sqm of lettable area and a contractual vacancy rate of 11.4%. The portfolio is valued at a yield of 6.5% and the remaining weight- ed average unexpired lease term is approx. 7.1 years. The key metrics for the portfolio1) as at December 31, 2012 Metric Number of properties2) Number of joint venture properties Market value (EUR bn) Contractual rent (EUR m/annum) Valuation yield (contractual rent/OMV) Lettable area (k sqm) Vacancy (% of lettable area)3) WAULT (years) Average rent/sqm (EUR/month) Value 84 1 1.6 105.5 6.5% 929 11.4% 7.1 10.7 1) Includes assets classiﬁ ed under property, plant and equipment. 2) As at reporting date, two assets are classiﬁ ed as “assets held for sale”. 3) Contractual vacancy includes vacancy in assets of the Company development pipeline. EPRA vacancy rate is of 7.97%. Transactions In February 2012, alstria successfully executed a capital increase and placed 7,170,362 new ordi- nary bearer shares, increasing its nominal share capital from EUR 71,703,625 to EUR 78,873,987. The funds raised through the capital increase – af- ter deduction of fees and expenses in connection with the issuance – have been used to ﬁ nance the equity portion of the acquisition of six assets. In February 2012, alstria signed a binding notarised agreement for the acquisition of these six assets, located in Düsseldorf, Frankfurt, Neu-Isenburg and Norderstedt (DIVE portfolio). The transfer of ben- eﬁ ts and burden took place on May 1, 2012. Acquisitions support alstria’s buy-and-manage strategy Acquisitions 2012 Asset Portfolio transaction 1) Incl. acquisition related costs. City Frankfurt/ Düsseldorf/ Others * For further details, please refer to ›› page 11. Number of assets Purchase price1) (EUR k) Annual rent (EUR k) Yield (%) Avg. lease length (years) 6 95,092 8,030 8.4 4.1 Investment decisions at alstria are based on the analysis of the local markets and on adequacy of a building within its local environment in terms of lo- cation, size and quality. alstria’s strategy is to enter new markets and build critical mass through long- term secured assets. In light of this approach alstria added six properties and approx. 71,800 sqm of let- table space to the portfolio which helps to reinforce its position in two of its core markets, namely Ham- burg and Düsseldorf. To maintain an appropriate asset and portfolio management, alstria established an ofﬁ ce in Düsseldorf in July 2012. alstria Financial Report 2012 9 G r o u p m a n a g e m e n t r e p o r t Disposals 2012 Asset Am Gräslein Schopenstehl Zwinglistrasse City Nuremberg Hamburg Dresden Benrather Schlossallee Düsseldorf Number Annual rent (EUR k) Avg. lease length (years) Sales price (EUR k) 1 1 1 1 237 255 203 614 2.8 12.6 2.5 8.5 3,400 5,040 2,640 7,620 alstria signed binding and notarised agreements for four properties during the ﬁ nancial year 2012: › In February 2012, alstria signed a binding and notarised agreement for the sale of one asset in Nuremberg. The transfer of beneﬁ ts and burden took place on April 1, 2012. › In May 2012, alstria signed a binding and nota- rised agreement for the sale of one asset in Ham- burg. The transfer of beneﬁ ts and burden took place on July 1, 2012. › In October 2012, alstria signed a binding and notarised agreement for the sale of one asset in Dresden. The transfer of beneﬁ ts and burden took place on January 1, 2013. › In December 2012, alstria signed a binding and notarised sale agreement for one asset in Düs- seldorf. The transfer of beneﬁ ts and burden took take place on February 1, 2013. Additionally, in November 2011, alstria and its joint venture partners in the joint venture “Alte Post” signed a binding and notarised agreement for the disposal of the “Alte Post” property. This asset was transferred to the new owner in March 2012. Refurbishment projects Considerable progress was also made with alstria’s refurbishment projects. › Steinstrasse 5–7, Hamburg (Bartholomayhaus) The Bartholomayhaus is part of the “Kontorhaus” district in the heart of the city of Hamburg. The new multi-storey car park garage in the inner courtyard contains the original number of parking spaces, but is reduced in its external dimension. The reduction enables daylight and natural ventila- tion to reach the ground and intermediate ﬂ oors of the surrounding main building. In addition, the new car park is equipped with a green roof as well as a charging station for electric vehicles. The retroﬁ tting of the garage started in the second quarter of 2011 and was completed in April 2012. For further information about sustainability at alstria please refer to the sustainability report 2012 ›› www.alstria.com/en/sustainability/sustainability- reports/date/2012/. alstria Financial Report 2012 › Hamburger Strasse 1–15, Hamburg The retroﬁ tting of the landmark Mundsburg Of- ﬁ ce Tower in Hamburg started in early 2010. This building, which was erected in the seventies, had never been upgraded. The main objective of this refurbishment project is to create efﬁ cient ofﬁ ce space and reduce energy consumption and occu- pancy costs for the future tenants. It was therefore one of the ﬁ rst buildings in Germany to be certiﬁ ed as a sustainable building by the DGNB (Deutsche Gesellschaft für nachhaltiges Bauen e. V.) in accord- ance with the new “modernisation of ofﬁ ce and administrative buildings” certiﬁ cation programme. The DGNB silver pre-certiﬁ cate demonstrates the project’s sustainability, particularly with regard to space and energy efﬁ ciency, as well as tenant com- fort. The refurbishment of the Mundsburg Ofﬁ ce Tower was completed in 2012. The building was handed over to its main tenant in January 2013. refurbishment projects. Of In 2012, alstria invested around EUR 12.8 m** in ongoing this EUR 12.8 m, around EUR 8.0 m refers to develop- ment projects. The main part of the 2012 capex investment was linked to the refurbishment of the two Hamburg buildings Bartholomayhaus (Stein- strasse 5–7) and the Mundsburg Ofﬁ ce Tower (Hamburger Strasse 1–15). In the next two years, the Company plans to in- vest between EUR 40 m and EUR 45 m in the portfolio. These investments depend on ongoing lease discussions with existing and potential ten- ants. Major projects are related to the properties Hamburger Strasse 1–15, Mundsburg Center, the Kaiser-Wilhelm-Strasse and Schaartor in Hamburg, as well as the Arndtstrasse in Hanover. This Capex plan is part of alstria’s ongoing asset value en- hancement programme. ** Excluding joint ventures. Lease-ups Leasing activity in 2012 was very successful. In 2012, alstria signed new leases* totalling approx. 44,800 sqm. The increase of the vacancy rate by 280 basis points (bps) to 11.4% or 105,890 sqm is due to the recent acquisitions that incorpo- rated a signiﬁ cant portion of vacancy. Of these 105,890 sqm, 37,400 sqm represents strategic va- cancy (intended vacancy implemented by alstria as part of its repositioning process for certain assets), while the remainder is operational vacancy. From the lease agreements which were due to expire in 2012, over 60% (of lettable area) could be retained during the year. 10 t r o p e r t n e m e g a n a m p u o r G A further key re-letting achievement was the lease-up with one of our key tenants in Hanover, Werner-von-Siemens-Platz. The tenant signed a new contract for the next three years for around 19,400 sqm of ofﬁ ce and ancillary space. In the newly acquired assets, the vacancy was sub- stantially reduced with the lease-up of more than 4,700 sqm. The asset located in Norderstedt is tes- timony of the Company's strong position, as the occupancy rate increased from 62% at acquisition up to 79% at year-end, boosting the rental income by more than 39%. Portfolio valuation alstria’s portfolio was valued in accordance with the RICS** Red Book guidance by Colliers Internation- al at December 31, 2012. The total valuation result on investment properties was EUR 1,623 m. For further information about the valuation of alstria’s portfolio please refer to the valuation cer- tiﬁ cate of Colliers International which is part of the Annual Report ›› Part I/II – Company Report. Tenants Our key focus on a set number of major tenants is still one of the main characteristics of the alstria portfolio. Some 72% of total revenues are generated by alstria’s top ten tenants. The 2012 portfolio also reﬂ ects the clear focus on the ofﬁ ce asset class; 94%*** of the total lettable area is dedicated to ofﬁ ces. Total portfolio by utilisation % of total lettable area Ofﬁ ce Retail Residential Others alstria’s core tenants 2012 % of annual rent City of Hamburg Daimler AG Bilﬁ nger Berger AG Siemens AG Barmer GEK Deutsche Renten- versicherung Bund Rheinmetall Württembergische Lebensversicherung AG HUK-COBURG 94 2 1 3 30 15 6 4 4 3 3 3 2 L`Oréal Deutschland GmbH 2 Third Party 28 Lease expiry proﬁ le % of annual rent 2013 2014 5.7 8.1 8.5 2015 3.4 3.9 as at Dec. 31, 2011 as at Dec. 31, 2012 13.4 * New leases correspond to lease of vacant space. It does not *** Ofﬁ ce and storage. account for any lease renewal, prolongation or tenant exercise of renewal option. ** Royal Institution of Chartered Surveyors. alstria Financial Report 2012 Financial analysis The year 2012 was a busy and successful year for alstria, which was completed with the best op- erational result (FFO) since the foundation. In the ﬁ rst quarter of 2012, alstria successfully executed a capital increase and placed 7,170,362 new or- dinary bearer shares, increasing its nominal share capital from EUR 71,703,625 to EUR 78,873,987. The funds raised through the capital increase – after deduction of fees and expenses in connection with the issuance – have been used to ﬁ nance the eq- uity portion of the acquisition of the DIVE portfolio, which was acquired for EUR 95 m incl. acquisition- related costs in spring 2012. Following the acquisi- tion of the new assets, alstria successfully ﬁ nanced the acquisition with a bullet loan of EUR 42.5 m in the fourth quarter of 2012, which has a maturity of seven years. Earnings position Following the transfer of the newly acquired as- sets in the ﬁ rst half of 2012, revenues increased by 11.6% in comparison to the previous year. Total revenues in this reporting period amounted to EUR 101,286 k (2011: EUR 90,798 k). Real estate operating expenses slightly decreased by 0.2 percentage points to 10.3% of revenues or EUR 10,398 k compared to 10.5% of revenues or EUR 9,506 k in 2011. Net rental income for 2012 was EUR 90,110 k (2011: EUR 80,868 k). The following table shows the key operating ﬁ g- ures of the income statements for the ﬁ nancial years 2012 and 2011: Operational expenses (including administrative and personnel expenses) were EUR 12,571 k for the year, compared to EUR 13,138 k in 2011. Accordingly, total operating expenses represent 12.4% of total revenues. Compared to 2011, the rate could be lowered by 2.1 percentage points. Net other income mainly comprises compensation payments due to the early termination of lease con- tracts (EUR 1,130 k), success fee paid by the joint venture for the disposal of the “Alte Post” asset in Hamburg (EUR 579 k) as well as other income (EUR 1.451 k). On the other hand, it comprises expenses of EUR 1,036 k, which mainly repre- sent allocation to provision for rental guarantees (EUR 895 k) and other expenses (EUR 141 k). 11 G r o u p m a n a g e m e n t r e p o r t alstria closed the ﬁ nancial year 2012 with a net operating result before ﬁ nance costs and taxes of EUR 78,156 k. This compares to EUR 52,990 k for the previous year, which was signiﬁ cantly inﬂ uenced by the better net result on fair value adjustments of investment properties and a higher revenue level. Funds from operations (FFO) per share up 15% (EUR 0.55) EUR k 2012 2011 Pre-tax income (ETB) 39,957 27,448 Net proﬁ t/loss from fair value adjustments on investment property Net proﬁ t/loss from fair value adjustments on ﬁ nancial derivatives Proﬁ t/loss on disposal of investment property Other adjustments 1) 1,876 16,682 1,380 3,247 –369 54 –120 –1,126 673 –11,446 43,571 –3,795 34,685 –1,479 39,776 33,206 EUR k Gross rental income Net rental income 2012 101,286 90,110 2011 90,798 80,868 Fair value and other adjustments in joint ventures Funds from operations (FFO) 2) Operational expenses –12,571 –13,138 Maintenance capex 2,124 79,663 1,822 69,552 Adjusted funds from operations (AFFO) 3) –1,876 –16,682 369 78,156 120 52,990 1) Non-cash income or expenses and non-recurring effects. 2) (A)FFO is not a measure of operating performance or liquidity under generally accepted accounting principles, in particular IFRS, and should not be considered as an alternative to the Company’s income or cash-ﬂ ow measures as determined in accordance with IFRS. Furthermore, no standard deﬁ nition exists for (A)FFO. Thus, the (A)FFO or measures with similar names as presented by other companies, may not necessarily be comparable to alstria’s (A)FFO. 3) The AFFO is equal to the FFO with adjustments made for capital expenditures used to maintain the quality of the underlying investment portfolio. Net other income Operating income Net result from fair value adjustments on investment properties Net result on disposals of investment properties Net operating result alstria Financial Report 2012 Funds from operations amounted to EUR 43,571 k in 2012 as against EUR 34,685 k in 2011. As a re- sult, FFO per share* was EUR 0.55 in the ﬁ nancial year 2011 (2011: EUR 0.48). Financial result The following table shows the ﬁ nancial result for the period January 1 to December 31, 2012: 12 t r o p e r t n e m e g a n a m p u o r G The increase in comparison with 2011 resulted mainly from the growth of revenues after the ac- quisition and transfer of six new assets in 2012. Hedging instruments The change in valuation of the ﬁ nancial derivatives was driven by the development of the yield curve in the year 2012. alstria applies hedge accounting on all qualifying hedges in order to limit the impact on proﬁ t and loss of the volatility of the interest rate markets. This allows the losses or gains on the qualifying part of the derivatives to be recognised under the equity cash ﬂ ow hedge reserve with no effect on income. In line with the Group-wide ﬁ nancing strategy for ﬂ oating interest hedging, new derivative ﬁ nancial instruments were entered into in 2012. In the ﬁ nancial year 2012, the effective devalua- tion in the value of the swaps, which is recorded in equity as “hedging reserve”, was EUR 5,363 k. This change in fair value of effective cash ﬂ ow hedges is therefore not recognised in the income statement. The fair value changes of derivatives not catego- rised as cash ﬂ ow hedges as well as the ineffective part in fair value changes of cash ﬂ ow hedges are recognised in the income statement under “Net re- sult from fair value adjustments on ﬁ nancial deriva- tives”. The interest expenses on swaps and caps are stated in the ﬁ nancial result. The fact that alstria’s main debt exposure is hedged by ﬁ nancial derivatives, the current over- all cost of debt for the existing portfolio amounts to around 4%. An overview of the composition and changes is de- scribed in detail in ›› Section 10.7 of the notes. * Divided by the number of shares at the end of the reporting period (December 31, 2012: 78,933,487; December 31, 2011: 71,703,625). EUR k Financial income Interest expenses syndicated loan Interest expenses other loans Interest result derivatives Other interest expenses 2012 657 2011 959 –14,383 –17,869 –9,385 –12,589 –250 –8,625 –9,611 –7 Financial expenses –36,607 –36,112 Other ﬁ nancial expenses –135 –206 Net ﬁ nancing result –36,085 –35,359 As at December 31, 2012 alstria was not in breach of any of its ﬁ nancial covenants. Net ﬁ nancing costs increased by EUR 726 k to EUR 36,085 k in com- parison with the year 2011. The increase is attribut- able to a higher average loan notional compared to the previous reporting period. For details on the new loans, we refer to the section entitled “ﬁ nancial and asset position” ›› see below. Consolidated net result at EUR 39,911 k The pre-tax result is EUR 39,957 k for the ﬁ nancial year 2012 (2011: EUR 27,448 k). The consolidated net income amounted to EUR 39,911 k for the re- porting period in comparison to EUR 27,448 k in 2011. The reasons for the improvement are mainly driven by the positive developments in revenues and in net result from fair value adjustments on in- vestment properties. REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence, alstria ofﬁ ce REIT- AG has been exempt from income and trade tax with retrospective effect since January 1, 2007. Tax payment obligations of EUR 46 k arose in 2012 on Group level for afﬁ liates serving as a general partner of a partnership or for REIT service companies. Earnings per share were EUR 0.51 for 2012 up by 28% (2011: EUR 0.40). Financial and asset position Financial management alstria’s ﬁ nancial management is carried out at cor- porate level, with individual loans being taken out at property and portfolio level. The main goal of al- stria’s ﬁ nancial policy is the establishment of secured, alstria Financial Report 2012 13 G r o u p m a n a g e m e n t r e p o r t long-term structures to support the development of its business whilst providing the required degree of ﬂ exibility. Corporate management of debt ﬁ nancing forms the basis for optimised capital procurement, proactive management of interest and liquidity risks and efﬁ ciency improvements for the whole Group. In conjunction with the disposal of three assets, EUR 6,619 k of the syndicated loan has been repaid in 2012. Following the acquisition of the DIVE portfolio for EUR 95.1 m (including addi- tional purchase costs) in early 2012, alstria suc- cessfully closed the ﬁ nancing of this transaction with the withdrawal on a new loan at the end of 2012. The bullet loan has a total amount of EUR 42.5 m and a term of seven years. Existing loan agreements as at December 31, 2012 Loan Syndicated loan Non-recourse loan #1 Non-recourse loan #2 Non-recourse loan #3 Non-recourse loan #4 Non-recourse loan #5 Loan #6 Loan #7 Loan #8 Total as at Dec. 31, 2012 Maturity Jul. 20, 2015 Oct. 20, 2015 Dec. 31, 2014 Jun. 30, 2014 Oct. 20, 2014 Jan. 31, 2017 Dec. 31, 2015 Dec. 17, 2018 Sept. 30, 2019 Principal amount outstanding (EUR k) Current LTV (%) LTV covenant (%) 564,721 47,902 42,670 29,568 30,747 71,376 11,500 56,000 42,500 896,984 54.1 70.2 64.9 56.0 55.0 60.2 58.7 48.8 45.6 55.0 70.0 80.0 80.0 60.0 65.0 75.0 75.0 60.0 65.0 alstria’s main ﬁ nancial goal is to establish a sus- tainable long-term ﬁ nance structure. An integral part of this structure is that long-term loans are covered by corresponding hedging instruments, such as swaps and caps. The aim of this strategy Financial debt by maturities1) EUR k 618,600 103,000 2013 5 2) 2014 2015 2016 0 2017 71,300 2018 56,000 2019 42,500 As at Dec. 31, 2012 1) Excluding regular amortisation. 2) Repayment due to disposal of one property in Düsseldorf. alstria Financial Report 2012 is to largely eliminate short-term interest volatil- ity from the income statement. The average debt maturity was at 3.0 years as at December 31, 2012 compared to 3.8 years as at December 31, 2011, whereas the average cost of debt of the Group decreased slightly to around 3.9% (compared to 4.3% p.a. in the previous year). Cash position is EUR 118,548 k Cash ﬂ ows from operating activities for the ﬁ nancial year 2012 amounted to EUR 45,735 k. The signiﬁ - cant increase compared to the reporting period 2011 (EUR 38,457 k) resulted mainly from higher rental revenues and lower payments for interest expenses. The cash ﬂ ow from investing activities is impacted by the cash outﬂ ows resulting from the acquisitions of the DIVE portfolio and investments in existing properties (cash outﬂ ow EUR 107,125 k). Cash in- ﬂ ows of EUR 11,080 k relate to payments received for the sale of investment properties. Proceeds from the equity release of interests in joint ventures gen- erated cash inﬂ ows in an amount of EUR 25,212 k. The fair value of immovable assets is used for the G-REIT equity ratio calculation. 14 t r o p e r t n e m e g a n a m p u o r G The cash ﬂ ows from ﬁ nancing activities mainly re- ﬂ ect the proceeds from shares issued in an amount of EUR 59,756 k net and the dividend payment (EUR 34,705 k). Furthermore, cash outﬂ ows were made for the acquisition or termination of ﬁ nancial derivatives (EUR 10,002 k) and in an amount of EUR 10,317 k for the redemption of loans. As a result, alstria ended the ﬁ nancial year 2012 with a cash position of EUR 118,548 k (2011: EUR 96,009 k). The Group is adequately funded to comply with its ﬁ nancial obligations. Investment properties up by 6.2% Total investment property value amounted to EUR 1,622,988 k in comparison with EUR 1,528,589 k at the beginning of the year. The increase of invest- ment property was particularly based on the acquisi- tion of six assets in Düsseldorf, Frankfurt am Main, Neu-Isenburg and Norderstedt (DIVE portfolio) as well as the capitalisation of modernisation measures. Reclassiﬁ cations of EUR 10,356 k refer to the assets held for sale with EUR 9,750 k of latest appraised value and the area of the property Friedrichstrasse in Düs- seldorf, which has been partially occupied by alstria for its own use since July 2012. The valuation result amounted to EUR –1,876 k and therefore was slightly negative in 2012. Extraordinary burdens of EUR 5 m resulted from the depreciation of acquisition-related costs (DIVE portfolio), EUR 2 m reﬂ ected the increase of transfer tax in the state of Hesse. However, this negative impact was partly compensated by valuation gains resulting from successful asset-management ac- tivities and yield compression. EUR k Investment properties at Dec. 31, 2011 1,528,589 Subsequent acquisition and production costs Acquisitions Disposals Reclassiﬁ cation Revaluations 12,867 101,844 –8,080 –10,356 –1,876 Investment properties at Dec. 31, 2012 1,622,988 Fair value of owner-occupied properties Fair value of property held for sale1) Interests in real estate partnerships 5,923 10,010 18,183 Fair value of immovable assets 1,657,104 1) Incl. valuation gains of EUR 260 k. Equity ratio of 46.4% – G-REIT equity ratio at 50.0% The balance sheet reﬂ ects a total equity position of EUR 829,287 k with an equity ratio of 46.4% (December 31, 2011: EUR 768,195 k, 45.5%). The G-REIT equity ratio, which is deﬁ ned as total equity divided by immovable assets, was 50.0% (Decem- ber 31, 2011: 48.7%). According to the G-REIT Act (REITG), the minimum requirement for compliance is a G-REIT equity ratio of 45% calculated at year-end. NNNAV at EUR 10.50 per share NNNAV (Triple Net Asset Value according to EPRA*) is EUR 10.50 per share (2011: EUR 10.71 per share). Following the capital increase at the end of the ﬁ rst quarter 2012, equity increased compared to De- cember 2011. Due to a decline in fair value of ﬁ - nancial instruments, the hedging reserve decreased by EUR 4,377 k from EUR –17,760 k as at De- cember 31, 2011 to EUR –22,137 k as at Decem- ber 31, 2012. The consolidated proﬁ t for the period resulted in equity growth of EUR 39,911 k. This led to a total increase in equity from EUR 768,195 k to EUR 829,287 k.** loans New loan increased ﬁ nancial debt Long-term to EUR 882,105 k in 2012. This is mainly related to the ﬁ nancing of the acquisition of the DIVE portfo- lio with a bullet loan expiring in 2019. increased by 3.2% Increase in current liabilities Current liabilities amounted to EUR 28,101 k, of which EUR 9,986 k were categorised as short- term loans, representing ﬁ nancial liabilities that will be repaid due to the disposal of the property in Düsseldorf (EUR 5,460 k) or were part of sched- uled amortisation in 2012. Other current liabilities amounting to EUR 14,035 k mainly comprised outstanding invoices (EUR 5,071 k), deferred in- come (EUR 1,309 k) and other current liabilities (EUR 7,337 k). Please refer also to the ›› Section 11.4 of the notes for ﬁ nancial year 2012. * EPRA: European Public Real Estate Association, Best Practices Committee, Brussels, Belgium. ** See also the consolidated statement of changes in equity on ›› page 30. alstria Financial Report 2012 Report on risks and opportunities Risk reporting Risk management alstria has implemented a Group-wide structured risk management and an early warning system in accordance with Section 91 (2) of the German Stock Corporation Act (AktG). All risks are recorded, evalu- ated and monitored on at least a quarterly basis. The goal of alstria Group’s risk management strategy is to minimise or, where possible, completely avoid the risks associated with entrepreneurial activity in order to safeguard the Group against potential losses, and against risks to the Company as a going concern. The system of the early detection of risks is in active use. The Company’s risk identiﬁ cation process allows the early identiﬁ cation of sources of any potential new risks on an ongoing basis. Risk mitigation meas- ures are deﬁ ned in order to undertake any necessary steps to circumvent the identiﬁ ed risks, i. e. to insure, diversify, manage or avoid risks. For alstria, risk man- agement means the targeted securing of existing and future potential for success, and improving the quality of the Company’s planning processes. Organisationally, risk management is assigned to the controlling department. A risk report is prepared by the risk manager on a quarterly basis and provided to the Management Board. The bases for the prep- aration of the risk report are the reports from the risk owner responsible for a particular risk area. The risk report presents the organisational measures and regulations that are to be observed with regard to risk identiﬁ cation, assessment, response, reporting and monitoring. At the same time, the comprehen- sive documentation of this report ensures an orderly assessment, which is conducted by the responsible departments and by the Supervisory Board. Risks are assessed according to their likelihood of occurrence and their magnitude of impact. Overall risk is calculated and updated over a speciﬁ c period of time by linking various parameters. By monitor- ing the risk management system, alstria is able to continually advance and adapt its structures and processes. alstria Financial Report 2012 Key characteristics of the accounting-related internal control and risk management system The objective of the control and risk management system regarding the (Group) reporting process is to make sure that the reporting is consistent and in line with the legal requirements, the generally accepted accounting principles and the Interna- tional Financial Reporting Standards (IFRS), as well as internal Group guidelines, so as to give recipients of the annual ﬁ nancial statements true and reliable information. To this end alstria has implemented an internal control and risk manage- ment system that combines all relevant principles, processes and measures. 15 G r o u p m a n a g e m e n t r e p o r t The internal control system consists of two areas, namely control and monitoring. In organisational terms, the treasury, controlling and accounting di- visions are responsible for control. The monitoring measures consist of elements incor- porated in the process and external, independent elements. Among others, the integrated measures include manual controls such as the “dual control principle”, which is applied universally, and tech- nical controls, essentially software-based check- ing mechanisms. In addition, qualiﬁ ed employees with the appropriate expertise as well as specialised Group departments such as controlling, legal and treasury perform monitoring and control functions as part of the various processes. The Management Board and the Supervisory Board (in particular the Audit Committee) as well as a ﬁ rm of auditors are involved in the monitoring system with various checks that are independent of the Company’s processes. For special technical questions and complex report- ing issues Group accounting acts as the central inter- locutor. If required, external experts (auditors, quali- ﬁ ed accounting specialists, etc.) will be consulted. In addition, the accounting-related monitoring is executed by the controlling department of the Company. All items and main accounts of the in- come statement and the balance sheet are reviewed regularly for accuracy and plausibility. This refers both to the consolidated ﬁ nancial statements and to the individual ﬁ nancial statements of the Group’s companies. Accounting-related data is monitored monthly or on a quarterly basis, depending on the frequency of preparation. 16 t r o p e r t n e m e g a n a m p u o r G The accounting-related risk management system forms part of the Group’s risk management system. Risks that are relevant for the accuracy of account- ing-related data are monitored by the risk owner who is responsible for the risk area of ﬁ nance. Risks are identiﬁ ed quarterly, and assessed and docu- mented by the risk management committee. Ap- propriate action is taken in order to monitor and optimise accounting-related risks throughout the alstria Group. indicators to monitor these risks. Rent projections, vacancy analyses, the control of the lease terms and termination clauses, and ongoing insurance checks are designed to help identifying potential dangers and risks. Operational risks that could arise as a result of the ﬁ nancial crisis are viewed mainly in terms of a potential shortfall of payment by a major tenant. Due to the fact that all of alstria’s main ten- ants are public institutions or highly rated, the risk of shortfall in payments is currently limited. Risk areas Within the context of its business activities, the alstria Group faces various risks, which are ex- plained in greater detail below. alstria’s risks are divided into four categories: › strategic risks › operational risks › compliance risks › ﬁ nancial risks All material risks to the future development of the Group’s position and performance are described in this chapter in accordance with alstria’s risk man- agement system. The individual risks described re- late to the planning horizon of 2013 to 2015. Strategic risks Strategic risk management consists mainly of the implementation of guidelines contained in the in- vestment policy, asset management policy and management rules governing the relationship with the Group’s core tenants. Furthermore, risks resulting from the effect of key market dynamics on alstria’s business are catego- rised as strategic risks. In view of the impact of the so-called sovereign debt crisis on the ﬁ nancial markets, consequences on the general strategic risk situation due to the future macroeconomic envi- ronment as compared to the previous year are not evident. As long as there is no material change in the economic environment, alstria’s strategic risk situation will remain stable. Operational risks alstria’s operational risk management refers to property-speciﬁ c risks and general business risks. This includes, among others, vacancy risk, the creditworthiness of tenants and the risk of falling market rents. Personnel-related risks such as loss of know-how and competences are also monitored in this risk area. The Group uses various early warning Refurbishment projects alstria realises refur- bishment projects to a material extent. All risks related to these projects, e. g. risk of not-in-time completion, risk of budget overrun as well as the risk of deﬁ ciencies in the construction, is managed through with the implementation of an extensive project controlling and a budget management pro- cess. Compared to the end of the previous reporting period the risk resulting from refurbishment projects is categorised unchanged at a moderate level. Employees The skills and motivation of alstria’s employees are decisive factors in the Group’s suc- cess. A risk of knowledge loss exists from staff ﬂ uctuations as well as from not recruiting suf- ﬁ ciently qualiﬁ ed experts to ﬁ ll vacancies in the Group in good time. In both cases, this could result in a shortfall of suitable experts and key personal, which could inﬂ uence the competitive advantages on the markets as well as the further growth oppor- tunities for the Group. alstria mitigates these risks by selective, needs-oriented development of skills of the existing staff, strengthening the image as an attractive employer, university marketing, promot- ing employee motivation through strong leadership and corporate culture and proﬁ t-oriented variable remuneration schemes. Overall alstria estimates the described risks to be at a low level, improved com- pared to the previous year. IT security The majority of our business processes are supported by efﬁ cient IT systems. Any fault af- fecting the reliability or security of the IT system could lead to delays or interruptions to operating activities. alstria has protected itself against IT risks by constant examination and enhancement of the information technology deployed, modern hard- ware and software solutions and safeguards against attacks. Structural security measures are in place to protect the computer centre. All data are backed up daily in an internal, and once a week in an exter- nal data depository. Detailed rules on access rights ensure that employees can only access the systems alstria Financial Report 2012 17 G r o u p m a n a g e m e n t r e p o r t they need for their work. Overall, therefore IT risks are assessed to be unlikely and their possible con- sequences are assessed to be moderate, basically unchanged compared to last year’s assessment. Property transactions alstria is exposed to risks related to the acquisition and disposal of real estate properties, such as a lack of revealing all, or the full extent, of the risks and liabilities associated with properties in the due diligence examination carried out or the risk associated with/inherent in the valu- ation method used to appraise the property. In the case of the disposal of real estate assets, alstria will usually give certain warranties to a potential pur- chaser as regards factual and legal matters of the sold property. It cannot be fully excluded that al- stria’s management is not aware of a risk that is covered by certain representation and warranty in the sales agreement. As a result, there will generally be a risk that alstria as seller may be charged by a prospective purchaser for breach of warranty. From a purchasing perspective, alstria is exposed to the risks that hidden deﬁ ciencies on land and/or prop- erty are not observed or unfavourable contractual agreements are transferred to the Company, result- ing into additional future cost. alstria responds to these risks – both in acquisition and selling proceedings – by thorough technical, legal and tax analysis with respect to all relevant property and contractual issues by employing in- ternal and external lawyers, tax advisors, architects, construction engineers and other experts required. Risks relating to transactions of properties are as- sessed to be of a low to moderate level. Environmental risks alstria is exposed to risks arising from environmental liabilities or possible damages resulting from natural events such as ﬁ re or ﬂ ooding. alstria’s buildings may contain unde- tected hazardous materials (such as asbestos) to an unanticipated extent or alstria’s real estate may be contaminated or otherwise affected by envi- ronmental risks or liabilities, such as pre-existing pollution and soil contamination. Risk mitigation is implemented by a due-diligence examination that alstria customarily undertakes when acquiring new properties as well as the warranty issued by the seller. Furthermore, insurances covering the impacts of natural catastrophes are in place. Compliance risks G-REIT legislation alstria is registered in the commercial register as a German REIT-AG (G-RE- IT). The German REIT segment allows alstria to of- fer a high proﬁ le to investors and distinguish itself as a REIT on the capital market. The REIT shares are traded at the Frankfurt Stock Exchange. The G- REIT status does not have any inﬂ uence on the ad- mission on the Regulated Market (Prime Standard). Certain requirements have to be met by the Com- pany in order to qualify for and retain its designa- tion as a G-REIT. The most relevant of these re- quirements are as follows: The G-REIT must be a stock corporation listed on an organised market and its registered seat and management must be in Germany. The registered share capital must amount to at least EUR 15 m, and all shares must be voting shares of the same class. The free ﬂ oat must be at least 15% and no investor may directly hold 10% or more of the shares, or shares that represent 10% or more of the voting rights. Furthermore, at least 75% of assets must consist of real estate and at least 75% of gross income must be generated from real estate. At least 90% of annual proﬁ ts under German GAAP must be distributed to shareholders and the G-REIT’s equity may not fall below 45% of the fair value of its real estate assets as recorded under IFRS. REIT corporations are fully exempted from German corporate income tax (KSt) and German trade tax (GewSt). This tax transparency applied with retro- spective effect starting January 1, 2007. Capital management Capital and investment management activities are designed to maintain the Company’s G-REIT status in order to support its business activities and maximise shareholder value. The alstria Group manages its capital structure and makes adjustments in response to changes in economic conditions. In order to maintain or adjust the capital structure, the Group can issue new shares or make a capital repayment to its shareholders. No changes were made to the aims, guidelines and processes as at December 31, 2012 and December 31, 2011. The capital structure is monitored by the Company using key performance indicators (KPIs) relevant for classiﬁ cation as a G-REIT. The G-REIT equity ratio (the ratio of equity to the fair value of immovable alstria Financial Report 2012 18 t r o p e r t n e m e g a n a m p u o r G assets) is the most important KPI. Under the Group’s strategy, the G-REIT equity ratio must be between 45% and 55%. In particular, the exemption from corporate income tax (KSt) and trade tax (GewSt) would cease at the end of the third ﬁ nancial year if the minimum equity ratio (alstria’s equity must not fall short of 45% of its immovable assets, based on alstria’s consolidated ﬁ nancial statements) has not been satisﬁ ed for three consecutive ﬁ nancial years. The G-REIT equity ratio at the balance sheet date is 50.0%. Accordingly, alstria complied with the minimum G-REIT equity ratio requirement accord- ing to Section 15 G-REIT Act (REITG) calculated at year-end of 45%. Generally, the risk remains that alstria may fail to meet the minimum G-REIT eq- uity ratio of 45% in the following three consecutive years and faces the prospect of losing its status as G-REIT and its tax exemption. Within a three-year forecasting period until December 31, 2015, it is excluded that alstria will lose its G-REIT status by reason of shortfall of the 45% barrier. Compliance risks alstria is dependent on the ob- servance of compliance standards by all employees and management. On the basis of documented poli- cies and procedures as well as applicable law, alstria's business depends on its employees and the mem- bers of the management being in compliance with such laws, policies and procedures. If alstria's senior management fails to document and reinforce the Company's policies and procedures, or employees commit criminal, unlawful or unethical acts (includ- ing corruption), this could have a material adverse effect on alstria's business, ﬁ nancial condition and results of operations, also by harming alstria's repu- tation in the real estate market and thereby nega- tively affecting future business opportunities. alstria has implemented a compliance organisation com- prising adequate and documented compliance rules and regulations as well the training of compliances related topics to all employees. The materialisation of compliance risks is assessed to be unlikely. Legal risks The Company is not subject to ma- jor legal proceedings arising from any individual or other kind of legal dispute outside of its day-to-day business. Financial risks With respect to alstria’s reﬁ nancing strategy, the ﬁ - nancial risk situation proved to be stable as compared to the previous year’s end of the reporting period. The Group normally uses ﬁ nancial instruments such as bank loans and derivative ﬁ nancial instruments. The main purpose of the bank loans is to ﬁ nance alstria’s business activities. Derivative ﬁ nancial in- struments include interest swaps and caps. The purpose of these derivative ﬁ nancial instruments is to hedge against interest risks arising from the Company’s business activities and its sources of ﬁ - nance. The main risks arising from the Group’s ﬁ - nancial instruments are cash ﬂ ow risks, interest rate risks and liquidity risks. alstria’s current debt ratio is approx. 54%. This is a reasonable rate compared to the average leveraging rate of German real estate companies. alstria’s syndicated loan facility agree- ment allows for a loan-to-value ratio (LTV) of up to 70%. After the reﬁ nancing of the main loan in 2010, alstria managed to keep the LTV at 54.1% at the relevant test date. The risk of covenant breach was encountered effectively. The next reﬁ nancing requirement for the main part of alstria’s loans will be effected according to plan in mid-2015, enabling alstria a two and a half year cushion for performing the reﬁ nancing. Thus the risk of reﬁ nancing on unfavourable terms is limited for the time being. The Group is not otherwise exposed to any signiﬁ - cant credit risks. Interest rate risk Interest rate risk results from ﬂ uctuations in market interest rates. These affect the amount of interest expenses in the ﬁ nancial year and the market value of derivative ﬁ nancial instruments used by the Company. alstria’s hedging policy uses a combination of plain vanilla swaps and caps in order to limit the exposure of the Company to interest rate ﬂ uctua- tions, but still provides enough ﬂ exibility to allow the disposal of real estate assets, avoiding any cost linked to an over-hedged situation. The interest base for the ﬁ nancial liability (loan) is the three- month EURIBOR, which is adjusted every three months. A number of different derivative ﬁ nancial instruments were acquired to manage the interest expense. The maturity of the derivative ﬁ nancial instruments is based on the term of the borrow- ings. The derivative ﬁ nancial instruments relate to interest swaps in which the Company agrees to exchange with contracting partners, at speciﬁ ed intervals, the difference between ﬁ xed and variable interest rate amounts calculated by reference to an agreed notional principal amount. Interest caps were also acquired in order to cap the interest at a alstria Financial Report 2012 set maximum. If the maximum interest rate is ex- ceeded, the difference between the actual interest rate and the cap rate will be paid out. Liquidity risk One of alstria’s core processes is cash management. The Company manages its future cash position and monitors progress on a daily basis. A cash-forecasting tool is used to prevent liquidity risk. This liquidity planning tool uses the expected cash ﬂ ows from business activities and the maturity of the ﬁ nancial investments as a basis for analysis. With the reﬁ nancing implemented in 2010, the ma- jor liquidity risk resulting from the balloon repayment on the main syndicated loan facility was successfully averted. Since the new syndicated loan facility will not be due until mid-2015, the liquidity risk resulting from repayment obligations is currently mitigated. Valuation risks The fair value of the real estate properties owned by the Group reﬂ ects the market value as determined by an independent appraiser, and can be subject to change. Generally, the market value of real estate properties depends on a vari- ety of factors, some of which are exogenous and may not be under alstria’s control, such as declin- ing rent levels, decreasing demand or increasing vacancy rates. Many qualitative factors are also decisive in the valuation of a property, including a property’s expected rental stream, its condition and its location. Finally, the particular assessment of the mandated appraiser is, to a certain extent, discre- tionary and may differ from the opinion of another appraiser. Should the factors considered or assump- tions made in valuing a property change, in order to reﬂ ect new developments or for other reasons, sub- sequent valuations of the respective property may result in a decrease in the market value ascribed to such property. If such valuations reveal signiﬁ cant decreases in market value compared to prior valua- tions, the Company would incur signiﬁ cant revalua- tion losses with respect to such properties. By factors such as economic changes, interest rate ﬂ uctuations and inﬂ ation, the value of the proper- ties may be adversely affected. To minimise these risks, a regional diversiﬁ cation of investment port- folios, a consistent focus on the individual needs of tenants and a detailed market research and analysis (broker reports) are used. In addition, the market value of all alstria assets will be determined annually at year-end by independent, internationally recog- nised experts. alstria Financial Report 2012 19 G r o u p m a n a g e m e n t r e p o r t Counterparty risk alstria hedges a portion of its risk by using third-party instruments (interest rate derivatives, property insurances and others). alstria’s counterparties in these contracts are internationally recognised institutions, which are rated by the lead- ing rating agencies. alstria reviews the ratings of its counterparties on a regular basis in order to mitigate any risk of default. The ﬁ nancial crisis has raised doubts as to the reliability of rating agencies’ assess- ments. As a reaction to this objection, alstria started to perform a review of the main counterparties in order to reinforce the rating agencies’ assessments. Overall assessment Compared to the previous year, the overall risk situation of alstria stays unchanged stable. On the one hand, the economic situation in Germany is remaining relatively stable compared to other Eu- ropean economies affected by the sovereign debt crisis. On the other hand, the stable reﬁ nancing po- sition and a solid G-REIT equity ratio allow a solid development of the Company. Sufﬁ cient precau- tions have been taken against identiﬁ able risks. No risk speciﬁ c to the Company that would threaten its continued existence can be identiﬁ ed from past or future events. This applies as well to the single Group companies as to the Group. Opportunities of the Group The reﬁ nancing position of the Group safeguards a stable ﬁ nancial position until at least mid-2015 at fa- vourable interest rates. On the revenue side, alstria beneﬁ ts from long-term rent agreements of approx. 7.1 years’ average lease length and potential rent increases due to consumer price indexation. In addition, the Group possesses a range of proper- ties available for attractive and value-add refurbish- ment opportunities. The alstria portfolio is well balanced and contains many ﬁ rst-class anchor buildings with high-quality tenants. Therefore, alstria is well positioned to continue its buy-and-manage strategy and to beneﬁ t from fu- ture market opportunities using the next growth cycle of the markets. alstria’s core competence is asset management. The asset repositioning and refurbishment alstria is continuously undertaking, both as part of joint ven- tures and on its own, will strengthen the basis for organic value increase across the portfolio. Sustainability report Mandatory disclosures 20 t r o p e r t n e m e g a n a m p u o r G In 2012, alstria published its third sustainability re- port. In this report alstria’s sustainability approach and the stakeholder approach are described. Fur- thermore, it provides information about alstria’s key achievements within the framework and gives the reader a deeper insight into the operational impacts. The key values within the framework ex- pressed for each and every stakeholder group are alstria’s main drivers for the integration of sustain- ability issues into the Company’s daily business de- cisions. The associated operational impacts specify the overall values. For further information on our sustainability en- gagement and targets, please refer to the annual sustainability report 2012, which is available on alstria’s website ›› www.alstria.com/sustainability/ sustainability reports/2012 and/or to ›› Part I/II – Company Report of the annual report 2012. Disclosure requirements in accordance with Section 315 para. 4 of the German Commercial Code (HGB) for the ﬁ nancial year 2012 and the explanatory report of the Management Board Composition of subscribed capital As per the balance sheet date at December 31, 2012, the share capital of alstria amounted to EUR 78,933,487.00, divided into 78,933,487 no par value bearer shares. All shares have equal rights and obligations. Each share entitles the bearer to one vote at general shareholders’ meetings and is decisive for the shareholder’s share in the proﬁ t of the Company. The individual rights and duties of the shareholders result from the provisions of the German Stock Corporation Act (AktG), in particular Sections 12, 53a et seq., 118 et seq. and 186. Restrictions on voting rights or the transfer of shares The exercise of voting rights and the transfer of shares are based on the general statutory require- ments and alstria’s articles of association, which does not restrict either of these activities. Under Section 136 of the German Stock Corporation Act (AktG) the voting right of the affected shares is ex- cluded by law. There are no other restrictions as to voting rights or the transfer of shares, or, as far as they arise from agreements between shareholders, are not known to the Management Board. Shareholdings which exceed 10% of the voting rights As per the balance sheet date at December 31, 2012, alstria was not aware of any shareholders holding di- rectly or indirectly 10% of the voting rights. Shares with special rights alstria has not issued any shares with special rights that grant control rights. Nature of voting rights control if employees have a share in capital and do not directly exercise their right of control The employees, who hold alstria shares, exercise their control rights as other shareholders in ac- cordance with applicable law and the articles of association. alstria Financial Report 2012 Appointment and dismissal of Management Board and amendments to the articles of association alstria’s Management Board consists of one or more members who may be appointed or dismissed by the Supervisory Board in accordance with Sections 84 and 85 of the German Stock Corporation Act (AktG). The articles of association do not contain any special provisions in this respect. Pursuant to Section 84 of the German Stock Corporation Act (AktG), members of the Management Board are appointed for a maximum term of ﬁ ve years. Reap- pointment or extension of the term of ofﬁ ce is per- mitted, in each case for a maximum of ﬁ ve years. Amendments to the articles of association may be made pursuant to Sections 179 and 133 of the Ger- man Stock Corporation Act (AktG). The Supervi- sory Board is also authorised to make changes in, and amendments to, the articles of association that merely affect the wording without a resolution of the shareholders in general meeting, Section 12 para. 2 of the articles of association. Pursuant to Section 15 para. 5 of the articles of association in conjunction with Sections 179 para. 2 and 133 of the German Stock Corporation Act, sharehold- ers may make resolutions regarding such amend- ments at a general meeting with a simple majority of the votes cast and a simple majority of the share capital represented. Insofar as a larger majority is prescribed by law, such majority shall be decisive. The articles of association were last amended by resolution of the Supervisory Board on Septem- ber 19, 2012: Section 5 para. 1, 2 and 7 of the articles of association were formally adapted to a capital increase executed under the employee par- ticipation programme of the Company. Authority of Management Board regarding issuance and buyback of shares 1. Authorised Capital The articles of association authorise the Man- agement Board, with the approval of the Su- pervisory Board, to increase the share capital until October 23, 2013 by issuing new bearer shares against contribution in cash and/or kind once or repeatedly up to a total amount of EUR 39,436,993.00. Further details are gov- erned by Section 5 para. 3 to 4b of the articles of association. 21 G r o u p m a n a g e m e n t r e p o r t 2. Conditional Capital alstria has four conditional capital (pursuant to Sections 192 et seq. of the German Stock Cor- poration Act, AktG), which are regulated in Sec- tions 5 para. 5 to 8 of the Company’s articles of association. a) Conditional Capital 2010 The share capital is conditionally increased by an amount of up to EUR 26,500,000.00 by the is- suance of up to 26,500,000 no par value bearer shares. The Management Board is authorised to stipulate the proﬁ t entitlement for the new shares issued on the basis of the exercise of options or conversion rights or the fulﬁ lment of a conver- sion obligation at variance from Section 60 para. 2 of the German Stock Corporation Act (AktG). The conditional capital increase is only carried out insofar as the holders of option rights or conver- sion rights, or those holders with conversion obli- gations from bonds with warrants or convertible bonds, proﬁ t participation rights or participating bonds issued or guaranteed on the basis of the authorisation resolved by the shareholders in general meeting on June 16, 2010, utilise their option rights or conversion rights or, insofar as such holders have conversion obligations, such holders fulﬁ l their conversion obligations, unless a cash settlement is granted or treasury shares or shares of another listed company are used to fulﬁ l the option rights or conversion rights. b) Conditional Capital II The share capital is conditionally increased by an amount of up to EUR 515,625.00 by the is- suance of up to 515,625 no par value bearer shares. The sole purpose of the conditional capi- tal increase is to grant shares to the holders of subscription rights (stock options) which were issued by alstria in accordance with the authori- sation of the Annual General Meeting held on March 15, 2007. The conditional capital increase is only carried out insofar as the holders exercise their stock options and no treasury shares are used to fulﬁ l the stock options. The new shares shall participate in the Company’s proﬁ ts from the beginning of the ﬁ nancial year in which they come into existence to satisfy the exercise of the stock options. alstria Financial Report 2012 22 t r o p e r t n e m e g a n a m p u o r G c) Conditional Capital III The share capital is conditionally increased by an amount of up to EUR 336,874.00 by the issuance of up to 336,874 no par value bearer shares. The conditional capital increase shall be used solely to grant shares to the holders of convertible proﬁ t participation certiﬁ cates which were issued by the Company until March 14, 2012 in accord- ance with the authorisation of the general meet- ing held on March 15, 2007. The conditional capital increase is only carried out insofar as is- sued convertible proﬁ t participation certiﬁ cates are converted into shares of the Company and no treasury shares are used to satisfy the cer- tiﬁ cates. The new shares shall participate in the Company’s proﬁ ts from the beginning of the ﬁ - nancial year in which they come into existence as a result of the conversion of certiﬁ cates. d) Conditional Capital III 2012 Furthermore, the share capital is conditionally in- creased by an amount of up to EUR 500,000.00 by the issuance of up to 500,000 no par value bearer shares. The conditional capital increase shall be used solely to grant shares to the holders of convertible proﬁ t participation certiﬁ cates which were issued by the Company until April 23, 2017 in accordance with the authorisation of the gen- eral meeting held on April 24, 2012. The condi- tional capital increase is only carried out insofar as issued convertible proﬁ t participation certiﬁ cates are converted into shares of the Company and no treasury shares are used to satisfy the certiﬁ cates. The new shares shall participate in the Company’s proﬁ ts from the beginning of the ﬁ nancial year in which they come into existence as a result of the conversion of certiﬁ cates. 3. Purchase of treasury shares The shareholders in general meeting on June 8, 2011 authorised the Management Board to ac- quire shares up to a total of 10% of the Com- pany’s share capital at the time of the issuance of the authorisation until June 7, 2016. The ac- quired shares and other treasury shares that are in the possession of, or to be attributed to, alstria pursuant to Sections 71a et seq. of the German Stock Corporation Act (AktG) may at no point in time amount to more than 10% of the share capital. Shares may be purchased through a stock exchange, by means of a public offer to all shareholders or by using derivatives (put or call options or a combination of both). Signiﬁ cant agreements which take effect upon a change of control of the Company A signiﬁ cant syndicate loan agreement of alstria entitles the creditor to declare the loan due for pay- ment after alstria’s shares are no longer admitted for trading on an organised market within the EU and the current majority shareholder at the time of the conclusion of the loan agreement is not in a position to control alstria, or a person other than the then current majority shareholder holds a larger shareholding in alstria than the then current major- ity shareholder. Compensation agreements with Management Board members and e mployees in case of a takeover bid There are no compensation agreements with Man- agement Board members or employees in case of a takeover bid. These provisions comply with statutory require- ments or are reasonable and common practice by comparable publicly listed companies. They are not intended to hinder potential takeover bids. Additional Group disclosures Employees As at December 31, 2012, alstria had 59 employ- ees (December 31, 2011: 50). The annual average number of employees was 55 (2011: 48). These ﬁ g- ures exclude Management Board members. Remuneration report Management Board members’ compensation com- prises a ﬁ xed and a variable component linked to the Company’s operating performance. In addition to the bonus, members of the Management Board received share-based remuneration as a long-term incentive component of remuneration. Members of the Supervisory Board receive ﬁ xed remuneration. The remuneration report ›› appendix to the Group management report pages 90 to 93, containing de- tails of the principles for the deﬁ nition of the Man- agement Board and Supervisory Board remunera- tion, forms an integral part of the audited Group management report. alstria Financial Report 2012 23 G r o u p m a n a g e m e n t r e p o r t Subsequent events and outlook Subsequent events As at October 2012, a binding and notarised agree- ment for the sale of one property located in Dresden was signed. The transfer of beneﬁ ts and burden took place on January 1, 2013. As at December 2012, a binding and notarised agreement for the sale of one property located in Düsseldorf was signed. The transfer of beneﬁ ts and burden took place on February 1, 2013. In February 2013, alstria received from a former ma- jority shareholder EUR 1,800 k as a compensation for expenses relating to certain capital market trans- actions and associated liabilities, which have been recognised at the end of the reporting period 2012 an amount of EUR 1,229 k. Outlook Based on the latest transactions and the contracted rent for 2013, alstria expects revenues of around EUR 103 m and funds from operations of EUR 45 m. This projection could be impacted by changes in in- terest rates and further property acquisitions or dis- posals or other changes of the assumptions in 2013. Since the Company pays out a signiﬁ cant part of its funds from operations as dividends, future external growth largely depends on the Company’s ability to raise additional equity. Consequently, further portfo- lio growth is highly dependent on the development of the global equity markets and is therefore difﬁ cult to predict over a longer period of time. On a like-for- like basis, however, the Company expects revenues and funds from operations to be stable in 2014. Again, these results may be impacted by further ac- quisitions and disposals or interest rate changes. The management report contains statements re- lating to anticipated future developments. These statements are based on current assessments and are, by their very nature, exposed to risks and un- certainty. Actual developments may differ from those predicted in these statements. Hamburg, February 14, 2013 alstria Financial Report 2012 Detail index Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of ﬁ nancial position Consolidated statement of changes in equity Consolidated statement of cash ﬂ ows Notes to the consolidated ﬁ nancial statements Corporate information Basis of preparation Changes in accounting policy and disclosures Basis of consolidation Key judgements and estimates Seasonal or economic effects on business Summary of signiﬁ cant accounting policies Segment reporting Notes to the consolidated income statement 1 2 3 4 5 6 7 8 9 9.1 Revenues 9.2 Income and expenses from passed-on operating expenses 9.3 Real estate operating expenses 9.4 Administrative expenses 9.5 Personnel expenses 9.6 Other operating income 9.7 Other operating expenses 9.8 Financial and valuation result 9.9 9.10 Income taxes 10 Notes to the consolidated statement of ﬁ nancial position – assets Gain or loss on disposal of investment property 10.1 Investment property 10.2 Equity-accounted investment 10.3 Property, plant and equipment 10.4 Intangible assets 10.5 Assets held for sale 10.6 Receivables and other assets 10.7 Derivative ﬁ nancial instruments 10.8 Cash and cash equivalents 26 27 28 30 32 34 34 34 34 38 39 40 40 46 47 47 47 47 47 47 48 48 48 49 49 49 49 50 50 51 51 51 52 54 alstria Financial Report 2012 Consolidated ﬁ nancial statements 11 Notes to the consolidated statement of ﬁ nancial position – equity and liabilities 11.1 Equity 11.2 Financial liabilities 11.3 Other provisions 11.4 Trade payables and other liabilities 11.5 Trust assets and liabilities 11.6 Deferred taxes 12 Other notes 12.1 Compensation of Management Board and Supervisory Board 12.2 Commitments and contingencies 12.3 Consolidated cash ﬂ ow statement 13 Related party relationships 13.1 Preliminary remarks 13.2 Remuneration of key management personnel 13.3 Related party transactions 14 Earnings per share 15 Dividends paid Employees 16 Stock option programme 17 Share-based remuneration 18 Convertible proﬁ t participation rights 19 programme Financial risk management Signiﬁ cant events after the end of the reporting period 20 21 22 U tilisation of exempting provisions 23 Disclosures pursuant to Wertpapierhandels - gesetz [German Securities Trading Act] 23.1 Ad-hoc announcement 23.2 Directors’ dealings 23.3 Voting rights notiﬁ cations 24 Declaration of compliance pursuant to Section 161 AktG [Aktiengesetz: German Stock Corporation Act] 25 Auditor’s fees 26 Management Board 27 Supervisory Board 25 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s 54 54 56 57 58 58 59 59 59 59 60 60 60 60 60 60 61 61 61 62 63 65 71 71 72 72 72 74 76 76 76 76 alstria Financial Report 2012 Consolidated ﬁ nancial statements Consolidated income statement for the period from January 1 to December 31, 2012 EUR k Revenues Income less expenses from passed-on operating expenses Real estate operating expenses Net rental income Administrative expenses Personnel expenses Other operating income Other operating expenses Net loss from fair value adjustments on investment property Gain on disposals of investment property Net operating result Net ﬁ nancial result Share of the result of joint venture accounted for using the equity method Net loss from fair value adjustments on ﬁ nancial derivatives 26 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Pre-tax result (EBT) Income tax expense Consolidated proﬁ t Attributable to: Shareholder Earnings per share in EUR Basic earnings per share Diluted earnings per share Notes 9.1 9.2 9.3 9.4 9.5 9.6 9.7 10.1 9.9 9.8 4 9.8 9.10 2012 101,286 –778 –10,398 90,110 –5,722 –6,849 3,160 –1,036 –1,876 369 78,156 2011 90,798 –424 –9,506 80,868 –6,799 –6,339 3,380 –1,558 –16,682 120 52,990 –36,085 –35,359 –734 –1,380 39,957 –46 39,911 13,064 –3,247 27,448 0 27,448 39,911 27,448 14 14 0.51 0.51 0.40 0.40 alstria Financial Report 2012 Consolidated statement of comprehensive income for the period from January 1 to December 31, 2012 EUR k Consolidated proﬁ t for the period Cash ﬂ ow hedges Reclassiﬁ cation from cash ﬂ ow hedging reserve Other comprehensive income for the period: Total comprehensive income for the period: Total comprehensive income attributable to: Owners of the Company Notes 10.7 10.7 2012 39,911 –5,363 986 –4,377 35,534 2011 27,448 –14,171 1,333 –12,838 14,610 35,534 14,610 27 27 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s alstria Financial Report 2012 Consolidated statement of ﬁ nancial position as at December 31, 2012 Assets EUR k Non-current assets Investment property Equity-accounted investments Property, plant and equipment Intangible assets Derivatives Total non-current assets Current assets Assets held for sale Trade receivables Accounts receivable from joint ventures Derivatives Other receivables Cash and cash equivalents thereof restricted Total current assets 28 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Notes 2012 2011 10.1 10.2 10.3 10.4 10.7 10.5 10.6 10.6 10.7 10.6 10.8 1,622,988 18,183 5,334 467 403 1,528,589 44,128 4,576 450 1,471 1,647,375 1,579,214 10,010 3,656 89 403 6,812 118,548 252 139,518 0 2,449 2,095 0 6,870 96,009 270 107,423 Total assets 1,786,893 1,686,637 alstria Financial Report 2012 Equity and liabilities EUR k Equity Share capital Capital surplus Hedging reserve Retained earnings Total equity Non-current liabilities Long-term loans, net of current portion Derivatives Other provisions Other liabilities Total non-current liabilities Current liabilities Short-term loans Trade payables Proﬁ t participation rights Derivatives Other current liabilities Total current liabilities Total liabilities Notes 11.1 2012 2011 78,933 769,412 –22,137 3,079 829,287 882,105 35,080 5,191 7,129 929,505 9,986 3,735 345 0 14,035 28,101 957,606 29 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s 71,704 751,084 –17,760 –36,833 768,195 854,814 37,553 3,767 989 897,123 4,505 3,201 291 2,479 10,843 21,319 918,442 11.2 10.7 11.3 11.4 11.2 11.4 19 10.7 11.4 Total equity and liabilities 1,786,893 1,686,637 alstria Financial Report 2012 Consolidated statement of changes in equity for the period from January 1 to December 31, 2012 Notes Share capital Capital surplus Hedging reserve Treasury shares Retained earnings Total equity 71,704 751,084 –17,760 0 –36,833 768,195 EUR k As at Jan. 1, 2012 Changes in the ﬁ nancial year 2012 Consolidated proﬁ t 30 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Other comprehensive income Total comprehensive income Payments of dividends Share-based remuneration 15 19 0 0 0 0 –4,377 –4,377 0 0 0 0 0 –34,705 506 Proceeds from shares issued 11.1 7,170 53,778 Transaction costs of issue of shares Conversion of convertible participation rights 11.1 0 –1,310 59 59 As at Dec. 31, 2012 11.1 78,933 769,412 –22,137 0 0 0 0 0 0 0 0 0 0 0 0 0 0 39,911 0 39,911 0 0 0 0 0 39,911 –4,377 35,534 –34,705 506 60,948 –1,310 118 3,079 829,287 alstria Financial Report 2012 for the period from January 1 to December 31, 2011 Notes Share capital Capital surplus Hedging reserve Treasury shares Retained earnings Total equity 61,600 700,036 –4,922 –26 –64,280 692,408 0 0 0 0 0 0 0 0 26 0 27,448 27,448 0 –12,838 27,448 14,610 0 0 0 0 0 0 –31,503 407 95,000 –2,938 208 4 –36,833 768,195 31 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s EUR k As at Jan. 1, 2011 Changes in the ﬁ nancial year 2011 Consolidated proﬁ t Other comprehensive income Total comprehensive income Payments of dividends Share-based remuneration 15 19 0 0 0 0 –12,838 –12,838 0 0 0 0 0 –31,503 407 Proceeds from shares issued 11.1 10,000 85,000 Transaction costs of issue of shares Conversion of convertible participation rights Conversion of treasury shares 11.1 0 –2,938 104 0 104 –22 0 0 0 0 0 0 As at Dec. 31, 2011 11.1 71,704 751,084 –17,760 alstria Financial Report 2012 Consolidated statement of cash ﬂ ows for the year ended December 31, 2012 EUR k 1. Cash ﬂ ows from operating activities Consolidated proﬁ t for the period Unrealised valuation movements Interest income Interest expense Result from income taxes Other non-cash expenses (+) Notes 9.8 9.8 9.10 Gain (–)/loss (+) on disposal of investment properties Depreciation and impairment of ﬁ xed assets (+) 9.9 10.3;10.4 Decrease (+)/increase (–) in trade receivables and other assets that are not attributed to investing or ﬁ nancing activities Decrease (–)/increase (+) in trade payables and other liabilities that are not attributed to investing or ﬁ nancing activities Cash generated from operations 32 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Interest received Interest paid Income taxes paid Net cash generated from operating activities 2. Cash ﬂ ows from investing activities Acquisition of investment properties Proceeds from the sale of ﬁ nancial assets Payment of transaction cost in relation to the sale of investment properties Acquisition of other property, plant and equipment Proceeds from the equity release of interests in joint ventures Proceeds from the repayment of loans granted to joint ventures Net cash used in investing activities 12.3 2012 39,911 3,990 –656 36,741 46 2,530 –369 402 –914 –787 80,894 656 –35,769 –46 45,735 –107,125 11,080 –251 –571 25,212 1,771 –69,884 2011 27,448 6,982 –959 36,318 0 1,590 –138 500 –376 5,135 76,500 959 –39,002 0 38,457 –192,442 2,738 0 –843 1,321 0 –189,226 alstria Financial Report 2012 Notes 2012 2011 95,208 –2,939 4 33 72,887 –31,503 –2,467 –5,051 –149 125,990 –24,779 120,788 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s 61,066 –1,310 0 42,500 –34,705 –10,002 –10,317 –543 46,689 22,539 96,009 118,548 96,009 EUR k 3. Cash ﬂ ows from ﬁ nancing activities Cash received from equity contributions Payment of transaction costs of issue of shares Proceeds from the disposal of own shares Proceeds from the issue of bonds and borrowings Payments of dividends 15 Payments for the acquisition and termination of ﬁ nancial derivatives Payments of the redemption of bonds and borrowings Payments of transaction costs Net cash generated from ﬁ nancing activities 12.3 4. Cash and cash equivalents at the end of the period Change in cash and cash equivalents (subtotal of 1 to 3) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period thereof restricted: EUR 252 k; previous year: EUR 270 k alstria Financial Report 2012 Notes to the consolidated ﬁ nancial statements 34 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 1 Corporate information alstria ofﬁ ce REIT-AG is a listed real estate property corporation within the meaning of the G-REIT Act. Pursuant to Section 2 of its Articles of Association, the Company’s objective is the acquisition, man- agement, operation and sale of owned real estate property, as well as the holding of participations in enterprises, which acquire, manage, operate and sell owned property. All of the aforementioned ob- jectives are subject to the conditions of the G-REIT Act legislation. alstria ofﬁ ce REIT-AG was transformed into a German Real Estate Investment Trust (G-REIT) in the ﬁ nancial year 2007 and was registered as a REIT corporation (hereinafter also referred to as a “REIT-AG”) in the commercial register on October 11, 2007. REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence, alstria ofﬁ ce REIT- AG has been exempt from tax with retrospective ef- fect since January 1, 2007. The Company’s registered ofﬁ ce and address is Bäckerbreitergang 75, 20355 Hamburg, Germany. Registration was made in the commercial register at the local court of Hamburg under HRB No. 99204. The consolidated ﬁ nancial statements of alstria of- ﬁ ce REIT-AG (hereinafter also referred to as the “Company” or “alstria ofﬁ ce REIT-AG”) as at De- cember 31, 2012 were prepared and authorised for issue by resolution of the Company’s Management Board on February 14, 2013. The ﬁ nancial year ends on December 31 of each calendar year. 2 Basis of preparation The consolidated ﬁ nancial statements of alstria of- ﬁ ce REIT-AG and its subsidiaries (together “the Group”) have been prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), including the interpretations of the standards (IFRIC). All IFRS and IFRIC were observed as adopted and prescribed by the EU as of the re- porting date. The consolidated ﬁ nancial statements have been prepared under the historical cost convention method except for investment property (land and buildings) and ﬁ nancial instruments that have been measured at fair value through proﬁ t or loss. The preparation of ﬁ nancial statements in conform- ity with IFRS requires the use of certain critical ac- counting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signiﬁ cant to the consolidated ﬁ nancial statements, are disclosed in ›› Note 5. The consolidated ﬁ nancial statements are presented in euros. All values are rounded to the nearest thou- sand (EUR k) except when otherwise indicated. These consolidated ﬁ nancial statements are ﬁ nan- cial statements for the period from January 1 to December 31, 2012. Items are summarised in the consolidated statement of ﬁ nancial position and income statement and com- mented on in the notes to the ﬁ nancial statements. Assets and liabilities are classiﬁ ed as non-current – for items due in more than one year – or current. 3 Changes in accounting policy and disclosures New and amended IFRS adopted by the Group The following new standards and amendments to standards are mandatory for the ﬁ rst time for the ﬁ nancial year beginning January 1, 2012: EU endorsement until Dec. 31, 2012 Nov. 22, 2011 Standards Content Amendments to IFRS 7 Disclosures: transfer of ﬁ nancial assets Applicable for ﬁ nancial years beginning on/after Effects Jul. 1, 2011 Notes disclosure alstria Financial Report 2012 35 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s › Amendments to IFRS 7 “Financial instruments: Disclosures”, issued October 7, 2010. The amendments are applicable to ﬁ nancial years starting on or after July 1, 2011. The amend- ments require enhanced derecognition disclosures in case of transfer transactions of certain ﬁ nancial assets. As transfer transactions of ﬁ nancial assets are not a normal part of alstria’s business, these amendments have no signiﬁ cant inﬂ uence on al- stria’s ﬁ nancial reporting. The initial application of the newly applied IFRS does not have any material effect on the presentation of the consolidated interim ﬁ nancial statements. New and amended IFRS to existing stand- ards which are not yet effective and have not been early adopted by the Group In its 2012 consolidated ﬁ nancial statements, al- stria ofﬁ ce REIT-AG did not apply the following ac- counting standards or interpretations which have already been adopted by the IASB but were not required to be applied for the ﬁ nancial year 2012: EU endorsement until Dec. 31, 2012 Standards/ interpretations Content Applicable for ﬁ nancial years beginning on/after Effects Not yet endorsed IFRS 9 Financial instruments: Classiﬁ cation and measurement Jan. 1, 2015 No material effects Dec. 11, 2012 IFRS 10 Consolidated ﬁ nancial statements Jan. 1, 2013 Still to be assessed Dec. 11, 2012 IFRS 11 Joint arrangements Jan. 1, 2013 No material effects Dec. 11, 2012 IFRS 12 Disclosure of interests in other entities Jan. 1, 2013 Still to be assessed Dec. 11, 2012 Dec. 11, 2012 IAS 27 IAS 28 Separate ﬁ nancial statements Jan. 1, 2013 Investments in associates and joint ventures Jan. 1, 2013 None None Dec. 11, 2012 IFRS 13 Fair value measurement Jan. 1, 2013 Still to be assessed Dec. 11, 2012 Amendments to IFRS 1 Severe hyperinﬂ ation and removal of ﬁ xed dates for ﬁ rst-time adopters Jul. 1, 2011 None Not yet endorsed Amendments to IFRS 1 Government loans Jan. 1, 2013 None Dec. 13, 2012 Amendments to IFRS 7 Disclosures-offsetting ﬁ nancial assets and ﬁ nancial liabilities Jan. 1, 2013 Notes disclosure Not yet endorsed Amendments to IFRS 7 and IFRS 9 Mandatory effective date and transition disclosure Jan. 1, 2015 None Jun. 5, 2012 Dec. 11, 2012 Jun. 5, 2012 Dec. 13, 2012 Amendments to IAS 1 Presentation of items of other comprehensive income Jul. 1, 2012 No material effects Amendments to IAS 12 Amendments to IAS 19 Amendments to IAS 32 Deferred tax: recovery of underlying assets Jan. 1, 2012 None Amendments to IAS 19, “Employee beneﬁ ts” Jan. 1, 2013 None Offsetting ﬁ nancial assets and ﬁ nancial liabilities Jan. 1, 2014 Notes disclosure Dec. 11, 2012 IFRIC 20 Stripping costs in the production phase of a surface mine Jan. 1, 2013 None Not yet endorsed Improvements to IFRSs Improvements to IFRSs 2009–2011 Jan. 1, 2013 None Not yet endorsed Transition Guidance Not yet endorsed Investment Amendments to IFRS 10, IFRS 11 and IFRS 12 Jan. 1, 2013 No material effects Entities Amendments to IFRS 10, IFRS 12 and IAS 27 Jan. 1, 2013 No material effects alstria Financial Report 2012 36 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C › IFRS 9 “Financial instruments”; new standard originally issued on November 12, 2009. In No- vember 2012 the IASB submitted a further draft concerning the limited amendment of IFRS 9. The standard addresses the classiﬁ cation and meas- urement of ﬁ nancial assets and is likely to affect the Group’s accounting of ﬁ nancial assets. Ap- plication of the standard is not mandatory until January 1, 2015, but subject to EU endorsement, the standard is available for early adoption. The Group has not yet assessed the full impact of IFRS 9. › IFRS 10 “Consolidated ﬁ nancial statements”; new standard issued on May 12, 2011. The objective of IFRS 10 is to establish principles for the pres- entation and preparation of consolidated ﬁ nancial statements when an entity controls one or more other entities. The standard supersedes the guide- lines on consolidation as outlined in the present IAS 27 “Consolidated and Separate Financial Statements’’ and SIC-12 “Consolidation – Special Purpose Entities”. IFRS 10 is applicable to annual reporting periods beginning on or after Janu- ary 1, 2013.* It is not expected that the applica- tion of the new standard will lead to a change in the basis of consolidation of the Group. › IFRS 11 “Joint arrangements”; new standard issued on May 12, 2011. The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations, and accounts for those rights and obligations, in accordance with that type of joint arrangement. The standard su- persedes IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Mon- etary Contributions by Venturers”. IFRS 11 is ap- plicable to annual reporting periods beginning on or after January 1, 2013*. It is not expected that the application of the new standard will lead to a change in the accounting for joint ventures. › IFRS 12 “Disclosures of interests in other entities”; new standard issued on May 12, 2011. The objec- tive of IFRS 12 is to require the disclosure of infor- mation that enables users of ﬁ nancial statements to evaluate the nature of, and risks associated with, the interests in other entities and the ef- fects of those interests on their ﬁ nancial position, ﬁ nancial performance and cash ﬂ ows. IFRS 12 is applicable to annual reporting periods beginning on or after January 1, 2013*. The Group has not yet assessed the full impact of IFRS 12. › IAS 27 “Separate ﬁ nancial statements”; new re- vised standard issued on May 12, 2011. IAS 27 (revised 2011) has the objective of setting stand- ards to be applied in accounting for investments in subsidiaries, joint ventures and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) ﬁ nancial statements. IAS 27 (2011) together with IFRS 10 “Consolidated Financial Statements” supersedes the previous version of IAS 27 (2008) “Consoli- dated and Separate Financial Statements” includ- ing the related interpretation SIC-12 “Consolida- tion – Special Purpose Entities”. IAS 27 (revised 2011) is applicable to annual reporting periods beginning on or after January 1, 2013*. Since none of alstria’s Group companies prepares sin- gle-entity ﬁ nancial statements in accordance with IFRS, no impact on accounting is expected as a result of the revised standard. › IAS 28 “Investments in associates and joint ven- tures”; new standard issued May 12, 2011. The objective of IAS 28 (revised 2011) is to prescribe the accounting for investments in associates, and to set out the requirements for the application of the equity method when accounting for invest- ments in associates and joint ventures. IAS 28 (2011), together with IFRS 12 “Disclosures of in- terests in other entities”, supersedes the previous version of IAS 28 (2008) “Investments in Associ- ates”. IAS 28 (revised 2011) is applicable to ﬁ nan- cial years beginning on or after January 1, 2013*. It is not expected that the application of the new standard will lead to a change in the accounting for joint ventures. › An entity may apply the aforementioned stand- ards IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 “Disclosure of Interests in Other Entities”, IAS 27 (2011) “Sep- arate Financial Statements” and IAS 28 (2011) “In- vestments in Associates and Joint Ventures” to an earlier accounting period, but if it elects to do this prematurely, it must adopt all standards together. › IFRS 13 “Fair value measurement”; new stand- ard issued on May 12, 2011. IFRS 13 establishes a single source of guidance for fair value measure- ments and disclosures about fair value measure- ments. The Standard deﬁ nes fair value, establishes a framework for measuring and requires disclo- sures about fair value measurements. The scope of IFRS 13 is broad; it applies to both ﬁ nancial instrument items and non-ﬁ nancial instrument * Estimated shift of the mandatory application date for EU companies to January 1, 2014. alstria Financial Report 2012 37 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s items for which other IFRSs require or permit fair value measurements or disclosures about fair value measurements, except for share-based payment transactions within the scope of IFRS 2 “Share-based Payment”, leasing transactions within the scope of IAS 17 “Leases”, measure- ments that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 “Inventories”, or value in use in IAS 36 “Impairment of Assets”. IFRS 13 is applicable to annual reporting periods beginning on or after January 1, 2013. The management does not rule out that the application of the new standard may affect certain amounts reported in the ﬁ nancial statements and anticipates a more extensive dis- closure in the ﬁ nancial statements. › Amendments to IFRS 1 “Severe hyperinﬂ ation and removal of ﬁ xed dates for ﬁ rst-time adopt- ers”, issued on December 20, 2010. The amend- ment will be applicable for ﬁ nancial years starting on July 1, 2011 or later. Since alstria has no expo- sure to hyperinﬂ ation markets, the amendments will have no effect on alstria’s ﬁ nancial reporting. › Amendment to IFRS 1 with regard to govern- ment grants with interest rates not in line with market level. The Amendment was published on March 13, 2012 and will give ﬁ rst-time adopters the same relief to recognition and measurement of government grants as existing preparers. The amendment applies to annual periods beginning on or after January 1, 2013 and will have no effect on the Group’s ﬁ nancial reporting. › The IASB has revised the requirements for offset- ting ﬁ nancial assets and ﬁ nancial liabilities and as a result, published on December 16, 2011 amend- ments to IAS 32 “Financial instruments: presenta- tion” and IFRS 7 “Financial instruments: disclo- sure”. The current offsetting model in IAS 32 has been basically maintained and was solely substan- tiated by additional application guidance, which applies to annual periods beginning on or after January 1, 2014. A new feature is the IFRS 7 dis- closure requirements inserted in connection with certain settlement agreements. The amendments to IFRS 7 are to apply retrospectively for annual periods beginning on or after January 1, 2013. Impact from these changes may result in terms of reporting in the event that there is a netting agreement. › Amendments to IFRS 10 “Consolidated ﬁ nancial statements”, IFRS 11 “Joint arrangements” and IFRS 12 “Disclosures of interests in other enti- ties” – Transition Guidance. The amendments will clarify the transition guidance in IFRS 10 and grants additional relief in all three standards. The amendments are applicable – similar to IFRS 10, IFRS 11 and IFRS 12 – to annual periods begin- ning on or after January 1, 2013*. › Amendments to IAS 1 “Presentation of ﬁ nancial statements”. On June 16, 2011, the International Accounting Standards Board (IASB) published amendments to IAS 1. The amendments to IAS 1 retain the “one or two statement” approach at the option of the entity and only revise the way other comprehensive income is presented, requir- ing separate subtotals for those elements which may be “recycled”, and those elements that will not. The amendments are applicable to annual periods beginning on or after July 1, 2012, with early adoption permitted. The amendments are not expected to affect presentation of the Group’s ﬁ nancial statements. › Amendment to IAS 12 “Deferred tax: Recovery of underlying assets”, issued on December 20, 2010. This amendment, which will have no impact on the ﬁ nancial reporting of alstria is generally to apply from January 1, 2012, but to date the en- dorsement by the EU is still pending. › Amendments to IAS 19 “Employee beneﬁ ts”. On June 16, 2011, the IASB published amendments to IAS 19, implementing new reporting proce- dures on employee beneﬁ ts. The amendments are applicable to annual periods beginning on or after January 1, 2013, with early adoption permitted. The amendments are not expected to affect pres- entation of the Group’s ﬁ nancial reporting. › IFRIC 20 “Stripping costs in the production phase of a surface mine”: IFRIC 20 considers when and how to account separately for beneﬁ ts aris- ing from the stripping activities in surface mining operations. IFRIC 20 applies to annual periods beginning on or after January 1, 2013. The inter- pretation has no relevance for the Group. › The International Accounting Standards Board (IASB) issued “Annual Improvements 2009–2011”, a collection of amendments to IFRSs, in response to issues addressed during the 2009–2011 cycle. Five standards (IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34) are primarily affected by the amendments, with consequential amendments to numerous oth- ers. The improvements apply to annual periods be- ginning on or after January 1, 2013 and will be of only minor, if any, relevance for the Group The Group did not early adopt any new or amend- ed standards in 2012. alstria Financial Report 2012 38 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 4 Basis of consolidation The consolidated ﬁ nancial statements comprise the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and its subsidiaries as at December 31, 2012. The ﬁ nancial statements of the subsidiaries are prepared for the same reporting year as for the parent company, us- ing consistent accounting policies. Subsidiaries are entities over which the Group has the power to govern the ﬁ nancial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which the Group obtains control, which generally coincides with the date of acquisition. Inclusion in the consolidated ﬁ nancial statements ends on the date on which the Group ceases to have control. All intra-Group balances, transactions, income and expenses, and proﬁ ts and losses resulting from in- tra-Group transactions are eliminated in full upon consolidation. In accordance with IFRS 3, all business combinations are accounted for using the acquisition method. The recognised assets and the acquired liabilities are measured in full at their fair value regardless of the ownership interest. The carrying values on the date on which control over the subsidiary was obtained are relevant. Any remaining debit difference is rec- ognised as goodwill. After reassessment, any re- maining credit difference is recognised immediately as proﬁ t. In the periods following the business com- bination, the disclosed hidden reserves and charges are carried forward, amortised or released, depend- ing on the treatment of the corresponding assets. The Company generally applies IFRS 3 to account for transactions under common control. However, for transactions under common control, any credit and debit differences resulting from capital consoli- dation are recognised as an increase or decrease in capital surplus. Signiﬁ cant companies where alstria ofﬁ ce REIT-AG is able, directly or indirectly, to signiﬁ cantly inﬂ uence ﬁ nancial and operating policy decisions (associates), or directly or indirectly shares control (joint ven- tures), are accounted for using the equity method. Fully consolidated subsidiaries The following subsidiaries are included in the con- solidated ﬁ nancial statements: Group entity (subsidiaries of alstria ofﬁ ce REIT-AG) alstria Bamlerstrasse GP GmbH, Hamburg alstria Portfolio 1 GP GmbH, Hamburg alstria Gänsemarkt Drehbahn GP GmbH, Hamburg alstria Halberstädter Strasse GP GmbH, Hamburg alstria Hamburger Strasse 43 GP GmbH, Hamburg alstria Englische Planke GP GmbH, Hamburg alstria Ludwig-Erhard-Strasse GP GmbH, Hamburg alstria Mannheim/Wiesbaden GP GmbH, Hamburg alstria ofﬁ ce Bamlerstrasse GmbH & Co. KG, Hamburg alstria ofﬁ ce Englische Planke GmbH & Co. KG, Hamburg alstria ofﬁ ce Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg alstria ofﬁ ce Halberstädter Strasse GmbH & Co. KG, Hamburg alstria ofﬁ ce Hamburger Strasse 43 GmbH & Co. KG, Hamburg alstria ofﬁ ce Insterburger Strasse GmbH & Co. KG , Hamburg alstria ofﬁ ce Ludwig-Erhard-Strasse GmbH & Co. KG, Hamburg alstria ofﬁ ce Mannheim/Wiesbaden GmbH & Co. KG, Hamburg alstria ofﬁ ce Steinstrasse 5 GmbH & Co. KG, Hamburg alstria solutions GmbH, Hamburg alstria Steinstrasse 5 GP GmbH, Hamburg Share in capital (%) 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Two entities – a limited partnership (Kommanditge- sellschaft), alstria ofﬁ ce Portfolio 2 GmbH & Co. KG, Hamburg, and its general partner (Komplementärin), alstria Portfolio 2 GP GmbH, Hamburg – were estab- lished in the ﬁ rst quarter of 2012. As fully owned afﬁ liates of alstria ofﬁ ce REIT-AG, these companies have been consolidated as part of the alstria Group. During the second quarter, a merger agreement be- tween alstria ofﬁ ce REIT-AG and alstria Portfolio 2 GP GmbH was closed, leading to the accretion of the alstria Portfolio 2 GP GmbH on alstria ofﬁ ce REIT-AG by way of an up-stream merger with an effective date of May 1, 2012. The Group of consolidated companies includes 20 companies as well as two joint venture companies accounted for using the equity method. There have been no further changes to the consoli- dated Group since the consolidated ﬁ nancial state- ments as at December 31, 2011. alstria Financial Report 2012 Interests in joint ventures The Group holds interests in two joint ventures re- sulting in a carrying amount at the end of the re- porting period of EUR 18,183 k. alstria ofﬁ ce REIT- AG holds a share of 49% in each of the two joint ventures. The joint ventures are Alstria IV. Hambur- gische Grundbesitz GmbH & Co. KG, Hamburg, and Alstria VII. Hamburgische Grundbesitz GmbH & Co. KG, Oststeinbek. The following carrying amounts are attributable to the Group from its proportionate interest in the joint ventures: EUR k Non-current assets Current assets Non-current liabilities Current liabilities Proﬁ t or loss for the period 2012 30,896 7,417 17,685 4,187 2011 85,159 3,918 45,913 589 –734 13,064 5 Key judgements and estimates The preparation of the consolidated ﬁ nancial state- ments in accordance with IFRS requires assumptions and estimates to be made for various items which have an effect on the amount and disclosure of the assets and liabilities, as well as income and expenses. Actual amounts may differ from these estimates. Judgements In the process of applying the Group’s account- ing policies, management has made the following judgement, apart from those involving estima- tions, which has the most signiﬁ cant effect on the amounts recognised in the ﬁ nancial statements. Operating lease commitments – Group as lessor The Group has entered into commercial property leases on its investment property port- folio. The Group has determined, based on an evaluation of the terms and conditions of the ar- rangements, that it retains all the signiﬁ cant risks and rewards of ownership in these properties and so accounts for the contracts as operating leases. 39 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the end of reporting period that have a signiﬁ cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁ nancial year are discussed below. Estimates are required in particular in order to: › determine the fair value of investment property; › determine the fair value of derivative ﬁ nancial instruments; › determine the fair value of virtual shares granted to management; › determine the fair value of convertible proﬁ t participation certiﬁ cates; and › determine the fair value of other provisions. In particular, in determining the fair value of the investment property, alstria ofﬁ ce REIT-AG must apply and take account of numerous factors. A fair value measurement was performed by an inde- pendent third party (Colliers International UK plc, London; see ›› Note 7). If the future development of these properties differs from the estimate, large- scale losses resulting from the change in the fair value may be incurred. This can have a negative impact on the future results of operations. The external assessors have carried out sensitiv- ity analyses on their fair value assessments, which show the effect of the changes to capitalisation rates on fair market values. Value of the properties (EUR m) Capitalisation rates –0.25% 0.00% 0.25% 2012 1,697 1,622 1,553 2011 1,686 1,529 1,458 A fair value measurement of the derivative ﬁ nan- cial instruments was performed by an independent third party and the market data compiled thereof were included in the standard measurement mod- els. Thus, the usual estimation uncertainties exist regarding possible deviations from the market data used. We consider the models used to be adequate and believe that they do not engender any uncer- tainty as to their applicability. alstria Financial Report 2012 40 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C The fair value of share-based virtual shares granted to the Management Board is measured at each bal- ance sheet date until settlement and is classiﬁ ed as provisions. The expense of the period comprises the addition to, and the reversal of, the provision be- tween two reporting dates and the dividend equiva- lent paid during the period. This valuation requires the Company to make estimates about certain pa- rameters, and hence they are subject to uncertainty. The fair value of the virtual shares granted is allo- cated to the vesting period according to the deter- minations in the underlying share-based incentive plan. The resulting personnel expenses caused an addition to provisions of EUR 563 k (December 31, 2011: EUR 558 k) and a provision in an amount of EUR 1,472 k in the consolidated ﬁ nancial statements as at December 31, 2012. Furthermore, the provi- sions are made up of provisions for rental guarantees in an amount of EUR 3,829 k. The determination of the amount of the provision for rental guarantees is based on the assessment of the possible exercise of the probability of use, which refers to information about the situation of tenants in relation to the pos- sible exercise of the break option. The fair value of convertible proﬁ t participation cer- tiﬁ cates granted to the employees of the Group was estimated at the respective granting dates using a binary barrier option model based on the Black-Sc- holes model; assumptions since the conversion will be affected automatically once the barrier has been reached. The model takes into account the terms and conditions upon which the instruments were granted. This valuation requires the Company to make estimates about these parameters, and hence they are subject to uncertainty. The assets, liabilities and equity instruments stated above, which are particularly exposed to estimation uncertainty, had the following impact on the con- solidated statement of ﬁ nancial position as at the end of the reporting period: EUR k Dec. 31, 2012 Dec. 31, 2011 Investment property 1,622,988 1,528,589 Properties held for sale 10,010 0 Positive fair values of derivatives Negative fair values of derivatives Other provisions Valuation of stock options, convertible proﬁ t participation rights and virtual shares 806 1,471 35,080 5,191 40,032 3,767 –1,174 –1,016 6 Seasonal or economic effects on business The activities of alstria ofﬁ ce REIT-AG (primarily the generation of revenues from investment properties) are not generally affected by seasonal factors. How- ever, the sale of one or more large properties may have a signiﬁ cant impact on revenues and operating expenses. Experience shows that the real estate market tends to ﬂ uctuate as a result of factors such as the net income of consumers or GDP, changes in interest rates, consumer conﬁ dence, and demographic and other factors inherent to the market. The change of the interest rate might lead to a modiﬁ ed valuation of the investment property and derivatives. 7 Summary of signiﬁ cant accounting policies The following accounting and valuation methods have been used to prepare the consolidated ﬁ nan- cial statements of alstria ofﬁ ce REIT-AG. Investment property Investment property comprises all property that is held in order to generate rental income or long- term value increases in assets and is used neither in production nor for administrative purposes. It is recognised at acquisition costs at the time of addi- tion. The costs include the transaction costs which have to be capitalised (particularly real estate transfer tax). In accordance with IAS 40.17, costs incurred subsequently for dismantling, replacing in parts or maintenance of property are also included. Costs of debt which can be directly allocated to the acquisition or production of investment property are capitalised in the year in which they arise. alstria Financial Report 2012 For subsequent measurement, the Company uses the fair value model according to IAS 40.33 et seq., which reﬂ ects market conditions at the end of re- porting period. › non-allocable operating costs in the amount of 5% of rental income p. a.; and › the net selling price. 41 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Group 2 is for properties with anchor leases that are leased on a long-term basis to tenants with strong credit ratings: Hard-core and top-slice method, tak- ing account of: › the contractual rent for the remaining term of the lease; › re-lets at market rents (accounting for the differ- ence between market rent and contractual rent); › the capitalisation rates reﬂ ecting the individual risk of the property as well as market activity (compa- rable transactions); › non-allocable operating costs in the amount of 5% of rental income p. a.; and › the net selling price. Gains or losses arising from changes in the fair val- ues of investment property are disclosed in the item “Net gain/loss from fair value adjustments on in- vestment property” in the income statement in the year in which they arise. Investment properties are derecognised when ei- ther they have been disposed of or when the in- vestment property is permanently withdrawn from use and no future economic beneﬁ t is expected from its disposal. Any gains or losses on the retire- ment or disposal of an investment property are rec- ognised in proﬁ t or loss in the year of retirement or disposal. Leases The lessee is considered to be the beneﬁ cial owner of leased assets when the lessee bears all of the risks and rewards incidental to the assets (ﬁ nance lease) in accordance with IAS 17. If the lessee is deemed the beneﬁ cial owner, the leased asset is recognised at fair value or the lower present value of the mini- mum lease payments at the inception of the lease. The corresponding leasing liability against the les- sor is disclosed as lease commitment under other non-current liabilities. The resulting lease payments are separated into an interest and an amortising part. In the reporting period, the Group acquired a property lease for which the terms of IAS 17 apply. The property lease is categorised as ﬁ nancial lease and the leasehold rent as lease payments. All market values were determined by Colliers In- ternational UK plc, London, a renowned appraiser and brokerage ﬁ rm, as at December 31, 2012. The basis for deriving the fair values as deﬁ ned by IAS 40.33 should be, where possible, prices in an active market for similar property (IAS 40.45). An analysis showed that there was not a sufﬁ - cient number of ofﬁ cial comparable transactions to derive any market values. In accordance with IAS 40.46, therefore, the fair value was determined on the basis of an income approach. The method used is a hard-core and top-slice method, whereby rental income is horizontally seg- mented, with the hard-core portion representing the prevailing contractual rent. The top slice repre- sents the difference between market rent and con- tractual rent. This method fulﬁ ls the requirements of the Red Book, a set of international valuation standards set forth by the Royal Institution of Char- tered Surveyors. The method used by Colliers Inter- national UK plc is also appropriate and suitable for determining market values in accordance with the provisions of the International Valuation Standards (IVS, or the White Book). In order to derive the fair value, the properties were divided into two groups and valued accord- ingly. Group 1 contained properties with anchor lease terms of ﬁ ve years or less and Group 2 held properties with anchor lease terms of more than ﬁ ve years. Group 1 is for properties with leases set to expire in ﬁ ve years or less: Hard-core and top-slice method, taking account of: › the contractual rent for the remaining term of the lease; › a vacancy period of at least 18 months following expiry of the lease; › the necessary maintenance costs to re-let the properties at a comparable rent level; › re-lets at market rents; › the capitalisation rates reﬂ ecting the individual risk of the property as well as market activity (comparable transactions); alstria Financial Report 2012 Operating leases Lease agreements that alstria ofﬁ ce REIT-AG has entered into with commercial tenants are classi- ﬁ ed as operating leases under IFRS. Accordingly, alstria ofﬁ ce REIT-AG is lessor in numerous differ- ent types of operating lease agreements for invest- ment properties. These leases generate the majority of proceeds and income for alstria ofﬁ ce REIT-AG. Moreover, alstria ofﬁ ce REIT-AG is, to a limited ex- tent, lessee within the scope of operating leases. 42 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Impairment of assets Intangible assets with indeﬁ nite useful lives are not amortised; they are tested for impairment on an annual basis. Assets that are amortised are tested for impairment whenever triggering events or changes in circum- stances indicate that the carrying amount may no longer be recoverable. An impairment loss is charged in the amount of the excess of the carrying amount over the recoverable amount. If the reasons for an impairment loss cease to apply, the impairment loss is reversed as appro- priate. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impair- ment losses. Such cost includes the cost of replac- ing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. All other repair and maintenance costs are recognised in proﬁ t or loss as incurred. Depreciation of plant and equipment is calculated on a straight-line basis over the useful life of the asset (three to 15 years). The useful life of own oc- cupied property is estimated at 50 years. While the building is depreciated on a scheduled basis, the land is not part of a scheduled depreciation. An item of property, plant and equipment is derec- ognised upon disposal or when no future economic beneﬁ ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net dis- posal proceeds and the carrying amount of the as- set) is included in proﬁ t or loss in the year the asset is derecognised. The assets’ residual values, useful lives and meth- ods of depreciation are reviewed, and adjusted if appropriate, at each ﬁ nancial year end. Cost of debt items which can be directly allocated to the acquisition or production of property, plant and equipment are capitalised in the year in which they arise. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is reﬂ ected in proﬁ t or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either ﬁ nite or indeﬁ nite. Intangible assets with ﬁ nite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a ﬁ nite useful life are reviewed at least at each ﬁ nan- cial year end. Changes in the expected useful life or the expected pattern of consumption of future economic beneﬁ ts embodied in the asset are accounted for by chang- ing the amortisation period or method, as appro- priate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with ﬁ nite lives is recognised in proﬁ t or loss in the expense category consistent with the function of the intangible asset. Depreciation of licences is calculated on a straight- line basis over the useful life of the asset (three to eight years). alstria Financial Report 2012 Currently, the Company does not have intangible assets with indeﬁ nite useful lives. Gains or losses arising from derecognition of an intangible asset are measured as the difference be- tween the net disposal proceeds and the carrying amount of the asset and are recognised in proﬁ t or loss when the asset is derecognised. Taxes Current tax assets and liabilities for the current and prior periods are measured at the amount ex- pected to be recovered from or paid to the taxa- tion authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period. There are no deferred taxes because, according to the REIT status, alstria ofﬁ ce REIT-AG is tax trans- parent and exempt from income taxation. Financial instruments Pursuant to IAS 39, a ﬁ nancial instrument is any con- tract that gives rise to both a ﬁ nancial asset to one entity and a ﬁ nancial liability or equity instrument to another entity. Financial assets comprise in par- ticular cash and cash equivalents, trade receivables, as well as other loans and receivables originated by the enterprise, held-to-maturity investments and original and derivative ﬁ nancial assets held for trad- ing. Financial liabilities frequently underlie a claim to their return in cash or another ﬁ nancial asset. These include in particular liabilities to banks and other creditors, trade payables and derivative ﬁ nancial li- abilities. Financial assets and liabilities are generally not offset. Financial assets The recognition and measurement of ﬁ nancial as- sets are subject to the provisions of IAS 39. De- pending on the classiﬁ cation prescribed by IAS 39: › held-to-maturity; › measured at fair value through proﬁ t or loss; › available-for-sale; or › loans and receivables ﬁ nancial assets are either measured at amortised cost or at fair value and recognised as at the end of the reporting period. The fair value of quoted investments is based on current bid prices. If the market for a ﬁ nancial as- set is not active (and for unlisted securities), the alstria Financial Report 2012 43 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Group determines fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash ﬂ ow analyses and option pricing models, making maximum use of market inputs and relying as little as possible on entity-speciﬁ c inputs. When ﬁ nancial assets are recognised initially, they are measured at fair value plus transaction costs for all ﬁ nancial assets not carried out at fair value through proﬁ t or loss. Management decides on the classiﬁ cation of ﬁ nancial assets on initial recogni- tion and reviews the classiﬁ cation at the end of each reporting period. A ﬁ nancial asset is derecog- nised when the entity loses control of the contrac- tual rights that comprise the ﬁ nancial instrument. All regular way purchases and sales of ﬁ nancial as- sets are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. A purchase or sale of ﬁ nancial assets is customary when it requires the delivery of assets within the period generally established by regula- tion or convention in the marketplace. Financial assets measured at fair value through proﬁ t or loss are ﬁ nancial assets held for trading. A ﬁ nan- cial asset is classiﬁ ed in this category if it is acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Derivative ﬁ nancial instruments which are not part of an effective hedge pursuant to IAS 39 must be classiﬁ ed as held for trading and recognised in proﬁ t or loss at fair value. If their fair value is negative, the instruments are disclosed under ﬁ nancial liabilities. Available-for-sale ﬁ nancial assets are non-deriva- tives that are either designated in this category or not classiﬁ ed in any of the other categories. They are included in non-current assets unless the invest- ment matures or management intends to dispose of it within twelve months of the end of the re- porting period, or unless the maturity at the end of reporting period is less than twelve months. The available-for-sale ﬁ nancial assets are initially rec- ognised at fair value and subsequently carried at fair value. Changes in the fair value of ﬁ nancial as- sets classiﬁ ed as available for sale are recognised in equity; when they are sold or impaired their accu- mulated fair value adjustments are included in the income statement. The Group holds no ﬁ nancial assets which are clas- siﬁ ed as held to maturity according to the classi- ﬁ cation prescribed by IAS 39 classiﬁ ed as held to maturity. exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recog- nised in proﬁ t or loss. 44 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Financial assets have not been designated as “at fair value through proﬁ t or loss”. Receivables Receivables are classiﬁ ed as loans and receivables as deﬁ ned by IAS 39 and measured initially at fair value and subsequently at amortised cost, if neces- sary after deduction of any impairment. Amortised costs are computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or dis- count on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. Within the scope of the measurement of trade re- ceivables, a solvency check was performed on the tenants (risk associated with the legal validity of re- ceivables) and certainty gained that there were no reasons for a rent reduction (delcredere risk). This is done for each individual property and portfolio basis, respectively. Non-interest bearing receivables due in more than one year are discounted. Gains and losses are recognised in proﬁ t or loss when the receivables are derecognised or impaired as well as through the amortisation process. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s car- rying amount and the present value of estimated future cash ﬂ ows discounted at the ﬁ nancial asset’s original effective interest rate (i. e. the effective in- terest rate computed at initial recognition). The car- rying amount of the asset is reduced directly. The amount of the loss is recognised in proﬁ t or loss. If, in a subsequent period, the amount of the im- pairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously rec- ognised impairment loss is reversed to the extent that the carrying value of the receivable does not Provision for impairment is made when there is objective evidence (such as the probability of in- solvency or signiﬁ cant ﬁ nancial difﬁ culties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced directly. Impaired assets are derecognised when they are assessed as uncollectable. Derivative ﬁ nancial instruments and hedge accounting The Group uses derivative ﬁ nancial instruments such as interest rate swaps and caps to hedge its risks associated with interest rate ﬂ uctuations. Such derivative ﬁ nancial instruments are initially recog- nised at fair value on the date on which a deriva- tive contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabili- ties when the fair value is negative. The instruments were measured as at Decem- ber 31, 2012 by an independent third party. The fair value of derivative ﬁ nancial instruments is de- termined by discounting the expected future cash ﬂ ows over the remaining life of the agreement based on current market rates or term structures of interest rates. The Group assesses whether embedded derivatives are required to be separated from host contracts when the Group ﬁ rst becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that signiﬁ cantly modiﬁ es the cash ﬂ ows that would otherwise be required. The method used for recording gains and losses depends upon whether the derivative was assigned to an underlying transaction as a hedge. To this end, ﬁ nancial management deﬁ nes the hedge re- lationship between the hedging instrument and the hedged item and the aim of the risk management measure and underlying strategy when concluding the hedge transaction. alstria Financial Report 2012 Any gains or losses arising from changes in fair value on derivatives during the period that do not qualify for hedge accounting are recognised imme- diately in proﬁ t or loss. For the purpose of hedge accounting, hedges are classiﬁ ed as cash ﬂ ow hedges when hedging expo- sure to variability in cash ﬂ ows is attributable to a particular risk associated with a recognised liability. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objec- tive and strategy for undertaking the hedge. The documentation includes identiﬁ cation of the hedg- ing instrument, the hedged item, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s cash ﬂ ows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving off- setting changes in fair value or cash ﬂ ows, and are assessed on an ongoing basis to determine their ef- fectiveness throughout the ﬁ nancial reporting peri- ods for which they were designated. Cash ﬂ ow hedges which meet the strict criteria for hedge accounting are accounted for as follows: › The effective portion of the gain or loss on the hedging instrument is recognised directly in eq- uity, while any ineffective portion is recognised immediately in proﬁ t or loss. › Amounts taken to equity are transferred to proﬁ t or loss when the hedged transaction affects proﬁ t or loss, such as when the hedged ﬁ nancial income or ﬁ nancial expense is realised. The Group uses no ﬁ nancial derivatives that qualify for the hedging of the fair value of recognised as- sets or liabilities or a ﬁ rm commitment (fair value hedges), nor such ﬁ nancial derivatives that qualify for the hedging of a net investment in a foreign operation (net investment hedge). Cash and cash equivalents Cash and short-term deposits in the consolidated statement of ﬁ nancial position comprise current bank balances. 45 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s For the purposes of the consolidated cash ﬂ ow statement, cash and cash equivalents include the cash and cash equivalents deﬁ ned above, other short-term highly liquid investments with original maturities of three months or less, and bank over- drafts. Current bank balances are recognised in the nomi- nal amount. Treasury shares Company equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised in proﬁ t or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Liabilities Financial liabilities, in particular trade payables, are stated at the amount repayable and are, if non-cur- rent and non-interest bearing, discounted. The fair values are determined by discounting the future contractually agreed cash ﬂ ows at the interest rates from the term structure of interest rates to the end of the reporting period. The recognition and measurement of ﬁ nancial liabili- ties is subject to the provisions of IAS 39. Depending on the classiﬁ cation prescribed by IAS 39: › at amortised cost or › measured at fair value through proﬁ t or loss ﬁ nancial liabilities are either measured at amortised cost or at fair value and recognised as at the end of reporting period. All loans and borrowings are initially recognised at fair value less directly attributable transaction costs, and have not been designated as “at fair value through proﬁ t or loss”. After initial recognition, interest-bearing loans and borrowings are subse- quently measured at amortised cost using the effec- tive interest method. Gains and losses are recognised in proﬁ t or loss when the liabilities are derecognised as well as through the amortisation process. alstria Financial Report 2012 46 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C The component of the convertible proﬁ t participa- tion rights (Wandelgenussrechte) which exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs. On issuance of the jouissance shares, the fair value of the liability component is determined using a mar- ket rate for an equivalent non-convertible bond, and this amount is classiﬁ ed as a ﬁ nancial liability meas- ured at amortised cost until it is extinguished on con- version or redemption. A ﬁ nancial liability is derecognised when the obliga- tion underlying the liability is discharged or cancelled or expires. When an existing ﬁ nancial liability is re- placed with another liability from the same lender under substantially different terms, or the terms of an existing liability are substantially modiﬁ ed, such an exchange or modiﬁ cation is treated as a derec- ognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in proﬁ t or loss. Provisions Provisions are recognised where a present obliga- tion exists to third parties as a result of a past event, where a future outﬂ ow of resources is probable and where a reliable estimate of that outﬂ ow can be made. Provisions are measured, taking account of all risks, at the best estimate of future cash outﬂ ows required to meet the obligation, and – if non-cur- rent – are discounted. Provisions are not offset with reimbursements. Share-based payment transactions Share-based payment comprises cash-settled liabil- ity awards and equity-settled equity awards. Further details on the share-based payment schemes are given in ›› Notes 17, 18 and 19, and in the remuneration report, respectively. Revenue recognition Revenue is recognised to the extent that it is prob- able that the economic beneﬁ ts will ﬂ ow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consid- eration received, excluding discounts, rebates and other sales taxes or duty. The following speciﬁ c rec- ognition criteria must also be met before revenue is recognised: Rental income Rental income arising from oper- ating leases on investment properties is accounted for on a straight-line basis over the lease terms. Interest income Revenue is recognised as interest accrues (using the effective interest rate that is the rate that discounts estimated future cash receipts through the expected life of the ﬁ nancial instru- ment to the net carrying amount of the ﬁ nancial asset). Income taxes REIT-AGs are fully exempt from German corporate income tax and trade tax. Hence, alstria ofﬁ ce REIT- AG has been exempt from tax with retrospective effect since January 1, 2007. 8 Segment reporting IFRS 8 requires a “management approach”, under which segment information is presented on the same basis as that used for internal reporting pur- poses. The fair value of equity awards is generally deter- mined by using a modiﬁ ed Black-Scholes option pricing model at the grant date and represents the total payment expense to be recognised during the service period with a corresponding increase in eq- uity (paid-in capital). As the type of services offered by alstria ofﬁ ce REIT- AG is comprised exclusively of lessor activities for commercial property tenants in Germany, accord- ing to IFRS 8, a single reporting segment can be identiﬁ ed that is comprised of the Groups’ total operations. Liability awards are measured at fair value at each balance sheet date until settlement and are clas- siﬁ ed as provisions. The expense of the period comprises the addition to, and the reversal of, the provision between two reporting dates and the dividend equivalent paid during the period. This reporting segment is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief oper- ating decision-maker is the person or group that al- locates resources to, and assesses the performance of, the operating segments of an entity. The chief operating decision-maker has been identiﬁ ed as the Management Board. alstria Financial Report 2012 Revenues are generated by a larger number of tenants. Of total revenues of EUR 101,286 k (previous year: EUR 90,798 k) EUR 31,127 k and EUR 15,671 k relate to leases with the two largest customers of the Group. No other single customer has, neither in the ﬁ nancial year 2011 nor in the ﬁ nancial year 2012, contributed with 10% or more to the consolidated revenues. 9 Notes to the consolidated income statement 9.1 Revenues 9.3 Real estate operating expenses EUR k Maintenance and refurbishment Vacancy Running repairs Property management Tax on land and building Brokerage fees Other 2012 4,900 3,166 1,203 427 50 0 652 2011 3,932 2,297 1,293 566 190 598 630 10,398 9,506 EUR k 2012 2011 9.4 Administrative expenses Revenues from investment property 101,286 90,798 Revenues from investment property chieﬂ y include rental income from investment property. 9.2 Income and expenses from passed-on operating expenses EUR k 2012 2011 EUR k Legal and consulting fees Communication and marketing Depreciation IT maintenance Audit fee (audit and audit-related services) Travel expenses Supervisory Board compensation Income from passed-on operating expenses Income from passed-on operating expenses related to the prior year 15,967 13,257 Insurances Leasing costs 434 1,333 Recruitment 16,401 14,590 Sustainability expenses Expenses from passed-on operating expenses Expenses from passed-on operating expenses related to the prior year –15,967 –13,257 –1,212 –1,757 Other Income less expenses from passed-on operating expenses –778 –424 EUR k –17,179 –15,014 9.5 Personnel expenses 47 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s 2012 1,754 2011 3,193 607 471 377 330 318 302 179 158 110 54 1,062 5,722 548 401 259 362 376 290 122 162 114 66 906 6,799 2012 3,625 524 2011 3,225 457 1,228 1,204 1,174 1,016 Salaries and wages Social insurance contribution Bonuses Expenses for share-based compensation thereof relating to virtual shares 564 558 thereof relating to the convertible proﬁ t participation certiﬁ cates 610 458 Amounts for retirement provisions and disability Management Board Other 186 112 183 254 6,849 6,339 The expenses from passed-on operating expenses which are directly attributable to investment prop- erty include, in particular, operating costs, mainte- nance and property-based taxes. alstria Financial Report 2012 48 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Convertible proﬁ t participation rights granted to em- ployees entitle not only a conversion when the con- ditions apply, but also an annual payment equivalent to the dividend per share. Therefore, expenses for share-based compensation resulting from the con- vertible proﬁ t participation rights are to be recog- nised in equity (for the conversion right) as well as against liabilities (for the dividend entitlement). Out of the EUR 610 k expense in relation to the proﬁ t participation rights, EUR 506 k was recognised in equity (2011: EUR 407 k), while EUR 104 k was re- ﬂ ected in the liabilities (2011: EUR 51 k). 9.7 Other operating expenses EUR k Allocation to provision for rental guarantees Impairment on trade receivables Other 2012 2011 895 64 77 870 117 571 1,036 1,558 Explanation of the allocation to provision for rental guarantees can be found in ›› Note 11.3. Within the course of 2012 the Group had 55 em- ployees on average (2011: 48). 9.8 Financial and valuation result The ﬁ nancial result breaks down as follows: 9.6 Other operating income EUR k Financial income 2012 657 2011 959 EUR k 2012 2011 Interest expenses syndicated loan –14,383 –17,869 Compensation payment for the early termination of leases Success fee Income from the reversal of accrued liabilities Income in relation to development projects Property management services Payments on provisions on doubtful debts Car use Other 1,130 579 600 0 387 431 326 110 80 52 156 161 302 40 496 3,160 1,690 3,380 The success fee relates to the procurement of a property transaction. Income in relation to development projects relates to compensation received from tenants in individu- al cases for the restructuring of leased premises and can vary each year. Among last year’s other operating income of EUR 1,690 k an amount of EUR 1,229 k is included for charges passed on to a former majority share- holder. These are expenses that have been incurred in connection with the placement of shares of that shareholder in the capital market. Interest expenses other loans –9,385 –8,625 Interest result derivatives –12,589 –9,611 Other interest expenses Financial expenses –250 –7 –36,607 –36,112 Expense resulting from net present value adjustments due to the discount of provisions Commitment fees Other –76 –18 –41 –159 –23 –24 Other ﬁ nancial expenses –135 –206 Net ﬁ nancing result –36,085 –35,359 Total interest income and expenses for ﬁ nancial assets and liabilities which are not ﬁ nancial de- rivatives were EUR 657 k (interest income; 2011: EUR 959 k) and EUR 24,018 k (interest expenses; 2011: EUR 26,494 k), respectively. Total interest expenses calculated using the ef- fective interest method for ﬁ nancial liabilities that are not recognised at fair value through proﬁ t or loss were EUR 1,700 k (interest expenses; 2011: EUR 1,555 k). Within the two former ﬁ nancial years, the Group did not hold ﬁ nancial assets available for sale. Therefore, the net result from the disposal of ﬁ - nancial assets available for sale amounted, as in the previous year, to EUR 0. alstria Financial Report 2012 49 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s The net loss from the fair value loss from the fair value adjustments on ﬁ nancial derivatives is shown below: Minor tax payment obligations may arise on a Group level for afﬁ liates serving as a general partner of a partnership or REIT service companies. EUR k 2012 2011 Transfer of cumulated loss from cash ﬂ ow hedge reserve to income statement Ineffective change of the fair value of cash ﬂ ow hedges Change in fair value of ﬁ nancial derivatives not qualifying as a cash ﬂ ow hedge Net loss from fair value adjustments on ﬁ nancial derivatives –1,380 –3,247 675 857 Deferred income tax Due to the REIT tax ex- emption, there were no impacts on proﬁ t and loss, the ﬁ nancial statements, or equity or proﬁ t and loss in 2011 and 2012. –986 –1,333 –1,069 –2,770 10 Notes to the consolidated statement of ﬁ nancial position – assets 10.1 Investment property This item, which comprises all investment properties held by the Company, breaks down as follows: In 2012, EUR 986 k relates to cumulative loss in the fair value of cash ﬂ ow hedge derivatives which was reported in equity and for which a forecast transac- tion is no longer expected to occur. Further details and explanation on derivatives are shown under ›› Note 10.7. EUR k Fair values As at Jan. 1 Property acquisition Capital expenditure Disposals 2012 2011 1,528,589 1,348,400 101,844 169,200 12,867 26,309 –8,080 –2,100 9.9 Gain or loss on disposal of investment property EUR k 2012 2011 Investment property disposal proceeds Carrying value of investment property disposals Valuation result of held-for-sale properties 8,189 2,820 –8,080 –2,700 260 369 0 120 The loss from objects and portfolios sold below their carrying value amounts to EUR 146 k in 2012 and EUR 18 k in 2011. 9.10 Income taxes Because of obtaining the G-REIT status, alstria ofﬁ ce REIT-AG was subject to ﬁ nal taxation on the effec- tive date of the transfer into a G-REIT in 2007 and is tax-exempt with regard to corporate tax and trade tax effective as of January 1, 2007. alstria Financial Report 2012 Reclassiﬁ cation to investment property Reclassiﬁ cation from investment property Transfers to held for sale Net result from the adjustment of the fair value of investment property As at Dec. 31 0 3,462 –606 –9,750 0 0 –1,876 –16,682 1,622,988 1,528,589 alstria ofﬁ ce REIT-AG uses the fair value model pursu- ant to IAS 40.33 et seq. for subsequent measurement of investment property. External appraisals were ob- tained for measurement. For a detailed description of the valuation of assets, please see ›› Note 7. In February 2012, alstria concluded a binding and notarised sales agreement for the acquisition of a property portfolio with six ofﬁ ce properties. The transfer of beneﬁ ts and burden of the properties took place in the second quarter of 2012. The invest- ment for the portfolio amounted to EUR 95,092 k. One land asset of the portfolio is owned through a leasehold which was taken over by alstria. The fair value of the leasehold liability at the transfer date was EUR 6,752 k. The fair value of the leasehold as at December 31, 2012 amounted to EUR 7,130 k. Capital expenditure (EUR 12,867 k) is made up of subsequent acquisition and production costs in re- lation to property acquisitions and refurbishment projects. In the ﬁ nancial year 2012, alstria ofﬁ ce REIT-AG sold two ofﬁ ce properties with a transaction price of EUR 8,440 k. In the ﬁ nancial year 2012, alstria ofﬁ ce REIT-AG concluded two further binding and notarised sale agreements for the disposal of two investment prop- erties. The assets have been reclassiﬁ ed to “held for sale” at the end of the reporting period. The proper- ties were transferred to the buyer in the ﬁ rst quarter of 2013. Borrowing costs that would have to be capitalised as construction cost of an asset were not incurred dur- ing the reporting period (2011: EUR 0 k). Expenses/income disclosed in the income statement pursuant to IAS 40.75 (f): › EUR 101,286 k (2011: EUR 90,798 k) rental income from investment property; › EUR 7,232 k (2011: EUR 7,209 k) operating expenses (including repairs and maintenance) directly allocable to investment property from which rental income was generated during the period under review; and › EUR 3,166 k (2011: EUR 2,297 k) operating ex- penses (including repairs and maintenance) arising from investment property which did not generate rental income during the period under review. Investment properties (including held-for-sale in- vestment properties) have been used as security for bank loans in the amount of EUR 1,632,998 k (2011: EUR 1,528,589 k). 10.2 Equity-accounted investment At the end of the reporting period, two companies in which alstria ofﬁ ce REIT-AG holds a share of 49% were treated as joint ventures and accounted for us- ing the equity method. The carrying amount of the joint ventures at the end of the reporting period was EUR 18,183 k (December 31, 2011: EUR 44,128 k). For further information please refer to ›› Note 4. 50 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 10.3 Property, plant and equipment EUR k Acquisition and production cost As at Jan. 1, 2012 Additions Transfer out of investment property Disposals As at Dec. 31, 2012 Accumulated amortisation, depreciation and write-downs As at Jan. 1, 2012 Additions As at Dec. 31, 2012 Net book values as at Dec. 31, 2012 Furniture and ﬁ xtures Own occupied property Plant Total 2012 1,150 19 0 0 1,169 1,117 17 1,134 35 625 259 0 –1 883 223 95 318 565 4,343 6,118 70 606 0 348 606 –1 5,019 7,071 202 83 285 4,734 1,542 195 1,737 5,334 alstria Financial Report 2012 51 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s EUR k Acquisition and production cost As at Jan. 1, 2011 Additions Transfer to investment property As at Dec. 31, 2011 Accumulated amortisation, depreciation and write-downs As at Jan. 1, 2011 Additions Disposals As at Dec. 31, 2011 Net book values as at Dec. 31, 2011 Furniture and ﬁ xtures Own occupied property Plant Total 2011 1,101 49 0 1,150 1,010 107 0 1,117 33 562 63 0 625 142 81 0 223 402 7,513 388 –3,558 4,343 199 99 –96 202 4,141 9,176 500 –3,558 6,118 1,351 287 –96 1,542 4,576 The useful life of the assets is estimated to be be- tween three to 15 years for plant, furniture and ﬁ x- tures and 33.33 to 50 years for the own occupied properties used by the Group. The plants consist of miscellaneous items such as ﬁ re extinguishers or a control panel for a closed- circuit television system. alstria ofﬁ ce REIT-AG occupies areas in two of its ofﬁ ce buildings in Hamburg and Düsseldorf for its own use. Therefore, the owner-occupied part of the properties are categorised as “property, plant and equipment” according to IAS 16. In order to secure Group liabilities, the properties are pledged with land charges as security. 10.4 Intangible assets Licences The useful life of the intangible assets is estimated to be between three to eight years. The intangible assets consist of software licences and licences to other rights in an amount of EUR 266 k and EUR 201 k, respectively. 10.5 Assets held for sale Assets held for sale as presented in the consolidated statement of ﬁ nancial position refer exclusively to investment properties which have been transferred to the buyer until the issue date of these consoli- dated ﬁ nancial statements. The disposal of the two properties resulted in a disposal gain in an amount of EUR 260 k ›› Note 9.9. 10.6 Receivables and other assets Due to the speciﬁ c nature of the business, the Group considers receivables due up to one year to be current. The following table presents an over- view on the receivables of the Group: EUR k 2012 2011 Acquisition and production cost EUR k Dec. 31, 2012 Dec. 31, 2011 As at Jan. 1 Additions As at Dec. 31 Accumulated amortisation, depreciation and write-downs As at Jan. 1 Additions As at Dec. 31 Net book values as at Dec. 31 1,192 288 1,480 742 271 1,013 467 849 343 1,192 530 212 742 450 Trade receivables Rent receivables Accounts receivable from afﬁ liates Other receivables “ Rent-free period” receivables Deposit account Prepayments Receivables and other assets Other receivables 3,656 2,449 89 2,095 2,998 1,624 142 2,048 6,812 3,461 1,586 154 1,669 6,870 alstria Financial Report 2012 All receivables except EUR 1,624 k receivables (De- cember 31, 2011: EUR 1,586 k) against an escrow holder are due within one year from the end of the reporting period. The fair value of all receivables is equal to their carrying amount in the balance sheet. To secure the loans of the Group, all receiv ables from rental and property sale agreements, as well as insurance receivables and derivative ﬁ - nancial instruments, were assigned to the lenders ›› Note 11.2. Trade receivables were written down by EUR 64 k (2011: EUR 117 k) due to rent payments in arrears. Other receivables, other than trade receivables, were not impaired. A total of EUR 2,998 k of the other receivables is made up of accruals resulting from the recognition of total rental revenues on a straight-line basis over the term of the lease agreements (rent smoothing). As at December 31, 2012, trade receivables of EUR 1,343 k (2011: EUR 818 k) were past due but not impaired. These relate to a number of independ- ent customers for whom there is no recent history of default. The ageing analysis of these trade receiv- ables is as follows: Among the receivables and other assets of EUR 2,048 k an amount of EUR 1,229 k of receiv- ables is included for charges passed on to a former majority shareholder. These are expenses that have been incurred in connection with the placement of shares of that shareholder in the capital market. EUR k Dec. 31, 2012 Dec. 31, 2011 Trade receivables Up to 3 months 3 to 6 months Over 6 months Total 820 103 420 1,343 508 91 219 818 10.7 Derivative ﬁ nancial instruments The following derivative ﬁ nancial instruments existed as at the end of reporting period or have been ter- minated during the reporting period: 52 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Product Cap Cap1) Cap Swap Interest rate derivatives – held for trading 2) Cap Cap Cap Cap Swap1) Swap Swap Strike p.a. (%) Maturity date 3.0000 Sept. 30, 2019 4.6000 Oct. 20, 2015 4.9000 Dec. 20, 2012 4.1160 Jul. 10, 20134) 3.0000 Dec. 17, 2018 3.2500 Dec. 31, 2015 3.3000 Oct. 20, 2014 3.3000 Oct. 20, 2014 4.6000 Oct. 20, 2015 Dec. 31, 2012 Dec. 31, 2011 Notional (EUR k) Fair value (EUR k) Notional (EUR k) Fair value (EUR k) 42,500 47,902 0 0 42,500 56,000 11,500 22,876 7,871 0 395 8 0 0 403 395 5 2 1 0 0 0 75,000 47,902 122,902 56,000 11,500 23,630 8,130 95,000 37,283 0 0 0 –2,479 –2,479 1,421 35 11 4 –6,921 –1,234 2.1940 Dec. 31, 2014 37,283 –1,632 2.9900 Jul. 20, 2015 472,500 –33,448 472,500 –29,398 Interest rate derivatives – cash ﬂ ow hedges3) Total2) 608,030 –34,677 609,043 –36,082 650,530 –34,274 731,945 –38,561 1) Not effective before July 10, 2013. 2) Notional excluding the EUR 47,902 k not effective before July 10, 2013. 3) Notional excluding the EUR 95,000 k not effective before July 10, 2013. 4) Terminated as at December 28, 2012. alstria Financial Report 2012 The changes of the derivatives result from various effects. The following table shows the changes of alstria ofﬁ ce REIT-AG’s ﬁ nancial instruments since December 31, 2011 by category: Changes in ﬁ nancial derivatives Financial derivatives Financial assets Financial liabilities EUR k Hedging instruments as at Dec. 31, 2011 Effective change in fair values cash ﬂ ow hedges Ineffective change in fair values cash ﬂ ow hedges Net result from fair value changes in ﬁ nancial derivatives not qualifying for cash ﬂ ow hedging Reclassiﬁ cation of cumulated loss from equity to income statement Changes in accrued interests concerning ﬁ nancial derivatives Acquisitions Disposals Hedging instruments as at Dec. 31, 2012 Cash ﬂ ow hedge reserve Non-current –17,760 1,471 –5,363 0 0 0 986 0 0 0 –1,068 0 0 0 0 0 Current Non-current Current Total 0 0 0 –193 0 0 596 0 –37,553 –2,479 –38,561 –5,363 –1 0 0 –204 0 8,041 0 0 –5,363 –1,069 868 675 0 246 0 0 42 596 1,365 9,406 53 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s –22,137 403 403 –35,080 0 –34,274 The notional amount of the ﬁ nancial derivatives, which includes cash ﬂ ow hedges and derivatives not qualifying for cash ﬂ ow hedging, effective at the end of the reporting period is EUR 650,530 k (December 31, 2011: EUR 731,945 k). One cap with a notional amount of EUR 47,902 will not become effective before July 10, 2013. Derivatives with a notional amount of EUR 47,902 k (Decem- ber 31, 2011: EUR 122,902 k) are not designated as a cash ﬂ ow hedge. A decrease of EUR 5,363 k in fair values of de- rivatives effective in a cash ﬂ ow hedge has been recognised in the hedging reserve in 2012 (2011: decrease of EUR 14,171 k). The ineffective portion recognised in proﬁ t or loss that arises from cash ﬂ ow hedges amounted to a fair value loss of EUR 1,069 k (2011: gain of EUR 2,770 k). Further gains totalling EUR 675 k (2011: gain of EUR 857 k) due to the market valuation of deriva- tives not included in hedge accounting were re- corded in the income statement 2012. A loss of EUR 986 k (2011: EUR 1,333 k) relates to cumulative losses from cash ﬂ ow hedges for which the forecast transaction is no longer expected to occur due to premature repayment of the loans. Together, this results in a loss of EUR 1,380 k (2011: loss of EUR 3,247), which is shown as “net result from fair value adjustments on ﬁ nancial de- rivatives”. In line with alstria’s hedging strategy, the Group entered into a new interest rate forward cap with a notional amount of EUR 47,902 k and a strike of 4.6000%. The cap will become effective on July 10, 2013 and expires on October 20, 2015. This transaction became effective as at June 12, 2012. alstria Financial Report 2012 The interest rate forward cap agreement partially replaced a so far existing interest rate forward swap with a notional amount of EUR 95,000 k, a swap rate of 4.6000% and an initial maturity between July 10, 2013 and October 20, 2015. The forward interest rate swap agreement was terminated in the total notional amount of EUR 95,000 k with effect from June 14, 2012. A second ﬁ nancial derivative in the form of an inter- est rate cap was entered into on December 13, 2012. The interest rate cap with a notional amount of EUR 42,500 k and a strike of 3.0000%, became ef- fective on December 28, 2012 and is scheduled to expire on September 30, 2019. The cap is not desig- nated into a cash ﬂ ow hedge relationship. Additionally an existing interest rate swap with a notional amount of EUR 47,902 k, a swap rate of 4.1160% and an initial maturity date of July 10, 2013 was terminated with an effective date of December 28, 2012. 10.8 Cash and cash equivalents 54 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C EUR k Bank balances Dec. 31, 2012 Dec. 31, 2011 118,548 96,009 Bank balances earn interest at ﬂ oating rates based on daily bank deposit rates. As at the end of the reporting period, EUR 252 k (December 31, 2011: EUR 270 k) of the cash and cash equivalents was restricted. The amount corresponds to accrued in- terest obligations and amounts on other bank ac- counts for which the Company does not have free disposition. 11 Notes to the consolidated statement of ﬁ nancial position – equity and liabilities 11.1 Equity For detailed information on equity we refer to the consolidated statement of changes in consolidated equity. Share capital Thousand Dec. 31, 2012 Dec. 31, 2011 Ordinary share of EUR 1 each 78,933 71,704 The issue of 7,170,362 new shares for cash in- creased the share capital of alstria ofﬁ ce REIT-AG by EUR 7,170,362. The share capital increased from EUR 71,703,625 to EUR 78,873,987. This capital increase was registered in the commercial register (Handelsregister) on February 23, 2012. The conversion of proﬁ t participation rights ›› Note 12 in the second quarter of 2012 resulted in the issue of 59,500 new shares by using the con- ditionally increased capital provided for such pur- poses (Conditional Capital III). On December 31, 2012 alstria ofﬁ ce REIT-AG’s share capital amounted to EUR 78,933,487, repre- sented by 78,933,487 non-par value bearer shares. The majority of the shares in the Company are in free ﬂ oat. The following table shows the reconciliation of the number in shares outstanding: Number of shares 2012 2011 alstria’s shares at Jan. 1 71,703,625 61,599,999 Treasury shares at Jan. 1 0 –2,374 Shares outstanding at Jan. 1 71,703,625 61,597,625 Issue of new shares 7,170,362 10,000,000 Conversion of convertible participation rights 59,500 103,626 Disposal of treasury shares 0 2,374 As at Dec. 31 78,933,487 71,703,625 alstria Financial Report 2012 Capital surplus The capital reserve changed as follows during the ﬁ nancial year: An increase of EUR 506 k (2011: EUR 407 k) re- sulted from the vesting of the convertible proﬁ t participation certiﬁ cates granted to employees of the Group. EUR k As at Jan. 1 2012 2011 751,084 700,036 Contributions to capital surplus 53,778 85,000 Transaction costs of issue of shares –1,310 –2,938 Payment of dividends –34,705 –31,503 Share-based payments Conversion of convertible participation rights Conversion of treasury shares 506 59 0 407 104 –22 In the course of dividend payments, in 2012 totalling the Company distributed dividends EUR 34,705 k (EUR 0.44 per outstanding share) out of the capital reserve to its shareholders. Hedging reserve EUR k Dec. 31, 2012 Dec. 31, 2011 55 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s As at Dec. 31 769,412 751,084 Hedging reserve – 22,137 –17,760 The new shares generated from the capital increase were offered and sold at a price of EUR 8.50 per share. The issue proceeds by which the nominal share capital increase was exceeded amounted to EUR 53,778 k and were recognised as capital re- serve. The share placement resulted in an overall increase in the capital reserve of EUR 52,468 k, based on contributions of EUR 53,778 k and ex- penses of EUR 1,310 k. For further details on the change in hedging reserve please refer to ›› Note 10.7. Treasury shares As at December 31, 2012, the Company held no treasury shares. By resolution of the Annual General Meeting held on June 8, 2011, the Company’s authorisation to acquire treasury shares was renewed. According to the resolution, alstria ofﬁ ce REIT-AG is author- ised to acquire up to 10% of the capital stock until June 8, 2016. There is no intention to make use of this authorisation at present. Retained earnings Retained earnings as at December 31, 2012 showed an amount of EUR 3,079 k. Since the pay- ment of the dividend could not be generated from positive retained earnings at the time the dividend was paid, the amount of the dividend pay-outs in 2012 was paid from the capital reserve. alstria Financial Report 2012 56 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 11.2 Financial liabilities EUR k Loans Syndicated loan Other loans Total EUR k Loans Syndicated loan Other loans Total Non-current 555,610 326,495 882,105 Non-current 566,507 288,307 854,814 The table shows the long-term loans, net of the current portion as stated under non-current liabili- ties and the current amount that is due within one year, and shown as short-term loans under current liabilities. As at December 31, 2012, the notional amount of the loans used by alstria ofﬁ ce REIT-AG (December 31, 2011: is EUR 896,984 k EUR 864,801 k). The lower carrying amount of EUR 892,091 k (EUR 882,105 k non-current and EUR 9,986 k current) takes into account interest liabilities and transaction costs to be allocated un- der the effective interest method upon the raising of liabilities. Financial liabilities with a maturity of up to one year are recognised as current loans. alstria successfully reﬁ nanced its main credit facility on July 20, 2010. A syndicate consisting of ﬁ ve banks has provided a credit facility totalling EUR 630 m (“syndicated loan”). Out of this nominal amount, EUR 564,721 k had been drawn as of December 31, 2012 (December 31, 2011: EUR 571,339 k). The carrying amount was EUR 561,070 k as of Decem- ber 31, 2012 (December 31, 2011: EUR 566,507 k). The difference between the notional amount and the carrying amount is due to the allocated transac- tion costs accounted under the effective interest rate method. Current Accrued interest Total Total current Dec. 31, 2012 26 379 405 5,486 4,500 9,986 561,096 330,995 892,091 Current Accrued interest Total Total current Dec. 31, 2011 92 715 807 92 4,413 4,505 566,599 292,720 859,319 Loan 5,460 4,121 9,581 Loan 0 3,698 3,698 The loan agreement has a maturity of ﬁ ve years until July 20, 2015. The syndicated loan was arranged by UniCredit Bank AG and underwritten by Berlin-Han- noversche Hypothekenbank AG, Hypothekenbank Frankfurt AG (formerly: Eurohypo Aktiengesell- schaft), HSH Nordbank AG and Natixis S. A. In rela- tion to the disposal of three ofﬁ ce buildings, alstria repaid EUR 6,619 k on its syndicated loan in the re- porting period 2012. To secure the liabilities of the syndicated loan, receivables from rental and property purchase agreements as well as insurance receivables and derivative ﬁ nancial instruments were assigned to the lenders, liens were granted on bank accounts and the registration of land charges was agreed ›› Note 10.6. alstria ofﬁ ce REIT-AG entered into a new ﬂ oating rate loan in March 2011 in relation to the acquisi- tion of two ofﬁ ce buildings. The interest rate on this loan is based on the three-months EURIBOR rate plus a spread of 180 basis points. The loan facility, of which EUR 11,500 k has been drawn, amounts to EUR 14,000 k and matures at the end of 2015. alstria Financial Report 2012 Two other new ﬂ oating rate loans were closed in November 2011, both with an interest rate based on the three-months EURIBOR rate plus a spread of 135 basis points and a maturity until December 17, 2018. The loans serve to reﬁ nance a newly acquired portfolio of six investment properties and were drawn in an amount of EUR 56,000 k as at December 31, 2012. In the third quarter of 2012 a loan agreement for a credit facility of EUR 42,500 k was closed. The ﬂ oating rate loan, based on the three-months EURIBOR rate plus a spread of 180 basis points has a maturity until Sep- tember 30, 2019 and was paid out to the Group on December 28, 2012. The current portion of the loan concerns scheduled repayments and accrued interest on the loans. The variable interest of the loans is payable on a quarterly basis, with the standard margin and bor- rowing costs for the market added to the respective EURIBOR rate. Due to the variable interest rate, there are no sig- niﬁ cant differences between the carrying amounts and fair value with the exception of transaction costs. A total of EUR 100,945 k (December 31, 2011: EUR 103,629 k) in ﬁ nancial liabilities from non-re- course loans relates to two ﬁ xed interest rate loans. As at the end of the reporting period, these loans had a fair value of EUR 102,906 (December 31, 2011: EUR 104,587 k). As at December 31, 2012, loans were reduced by transaction costs of EUR 5,418 k (December 31, 2011: EUR 6,289 k). The average debt maturity as at the end of the re- porting period decreased to 3.0 years compared to 3.8 years as at December 31, 2011. The average interest rate of the Group's loans amounted to a rate of 3.9% at the end of the re- porting period. 57 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s The carrying amounts of the loans are all denomi- nated in euros; the fair value of all ﬁ nancial liabili- ties, with the exception of the transaction cost and the ﬁ xed interest rate loan, approximates their nominal value at the end of the reporting period. The liabilities exposed to an interest rate risk are due as follows: EUR k Up to 1 year More than 1 year Total Dec. 31, 2012 Dec. 31, 2011 6,646 789,393 796,039 1,014 720,336 721,350 The following loans are secured by land charges: EUR k Dec. 31, 2012 Dec. 31, 2011 Financial liabilities secured by land charges thereof on investment property 892,091 859,319 887,357 855,178 11.3 Other provisions In respect of the sale of properties, the Group has accepted the commitment to compensate the buyer for possible rent income shortfalls in case of non- extension of rental agreements existing with certain tenants at the disposal date. A provision amount of EUR 3,829 k was calculated as the net present value of possible cash outﬂ ow due to this rental guarantee for which a realisation is expected more likely than not. The commitment relates to a six- year rental period starting in 2014. The same cir- cumstances led to contingent liabilities ›› Note 12.2. At December 31, 2011, the provision for the rental guarantees amounted to EUR 2,858 k. The increase in this provision in an amount of EUR 76 k results from the change in the net present value due to the time shift and discount rate changes. The remaining EUR 895 k increase in the provision for rental guar- antee is based on the modiﬁ cation in the expectation of realisation, which takes into account new infor- mation of the tenants’ situation with regard to its claiming on using the possible break option. In addition EUR 1,472 k (December 31, 2011: EUR 909 k) is recognised as provision for awarding the Long- and Short-Term Incentive Plan ›› Note 18. alstria Financial Report 2012 11.4 Trade payables and other liabilities EUR k Trade payables Trade payables Other current liabilities Property lease liability Outstanding invoices Advance disposal price payments received Advance rent payments received Accrued bonuses Customers with credit balances Received deposits Value added tax liabilities Supervisory Board compensation Auditing costs Consultancy costs Miscellaneous other liabilities 58 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Due Up to 1 year In more than 1 year Total Due Dec. 31, 2012 Up to 1 year In more than 1 year Total Dec. 31, 2011 3,735 3,735 361 5,071 2,640 1,309 1,210 1,103 758 561 302 286 18 416 0 0 6,387 0 0 0 0 0 742 0 0 0 0 0 3,735 3,735 6,748 5,071 2,640 1,309 1,210 1,103 1,500 561 302 286 18 416 3,201 3,201 0 5,566 0 2,292 1,140 0 640 0 268 167 48 722 0 0 0 0 0 0 0 0 3,201 3,201 0 5,566 0 2,292 1,140 0 989 1,629 0 0 0 0 0 0 268 167 48 722 14,035 7,129 21,164 10,843 989 11,832 The disclosed carrying amounts approximate their fair values. The following table presents the future minimum lease payments as per end of the reporting period and their discounted values for future periods: Trade payables relate to operating costs not yet invoiced of EUR 2,492 k (December 31, 2011: EUR 1,669 k), liabilities from project development, rental activities and third-party real estate manage- ment services of EUR 1,243 k (December 31, 2011: EUR 1,119 k). The property lease liability resulted from property leasehold acquired within the ﬁ nancial year. The property lease matures in December 2088. The an- nual lease payment rate is EUR 381 k and its de- velopment is attached to the development of the annual average consumer price index in Germany. The fair value of the property lease as at Decem- ber 31, 2012 amounted to EUR 7,130 k. Minimum lease payments Discounted value of minimum lease payments 381 1,523 27,035 28,939 361 1,263 5,124 6,748 EUR k Maturity property lease <1 year 1–5 years >5 years Total Less: Future ﬁ nancing costs 22,191 Discounted value of minimum lease payments 6,748 11.5 Trust assets and liabilities As at the end of the reporting period, alstria of- ﬁ ce REIT-AG had trust assets worth an amount of EUR 1,624 k (December 31, 2011: EUR 1,586 k) and liabilities of EUR 758 k (December 31, 2011: EUR 640 k), in particular from rent deposits. alstria Financial Report 2012 11.6 Deferred taxes According to its REIT status, alstria ofﬁ ce REIT-AG has been fully tax transparent for income taxes starting from January 1, 2007. Therefore, at the end of reporting period, as well as at the end of the prior years’ reporting period, deferred taxes do not exist. 12 Other notes 12.1 Compensation of Management Board and Supervisory Board In 2012, the overall com- Management Board pensation of the members of the Management Board totalled EUR 2,221 k (2011: EUR 2,260 k). As at the reporting date, liabilities for the compen- sation of the members of the Management Board amounted to EUR 360 k (2011: EUR 360 k). Un- der the stock option programme of alstria ofﬁ ce REIT-AG, members of the Management Board held non-transferable stock options for 375,000 shares of alstria ofﬁ ce REIT-AG as at December 31, 2012 and 2011, respectively. The stock options had been granted under the regime of the meanwhile ter- minated stock option programme implemented in 2007. Details of the stock option programme are also included in these notes ›› Note 17. Out of the subsequent cash-settled share-based incentive plan implemented in 2010, 292,294 virtual shares were granted to the members of the Management Board as at December 31, 2012 ›› Note 18. Supervisory Board Pursuant to the articles of association, Supervisory Board members’ ﬁ xed annual payment amounted to EUR 302 k (2011: EUR 290 k). Further information on disclosures according to Section 314 para. 1 no. 6a HGB (German Com- mercial Code) and IAS 24.16 is provided in the remuneration report see ›› appendix to the Group management report pages 90 to 93. 59 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s 12.2 Commitments and contingencies Other ﬁ nancial obligations from refurbishment projects and ongoing maintenance amounted to EUR 6,481 k (2011: EUR 9,377 k). In respect of the sale of properties, at the dis- posal date the Group accepted the commitment to compensate the buyer for possible rent income shortfalls in case rental agreements existing with certain tenants are not extended. Contingencies out of this commitment amounted to EUR 670 k (December 31, 2011: EUR 5,094 k). The commit- ment relates to a six-year rental period starting in 2014. According to the details of the rental guar- antees and the lettability of the objects, the Com- pany does not expect a claim to come out of the rental guarantees. The same circumstances led to provisions for rental guarantees ›› Note 11.3. The decrease in this commitment from EUR 5,094 k to EUR 670 k is based on the renewal of the lease length of a part of the rental areas in question, re- sulting in the termination of the rental guarantee originally granted for these areas. As at December 31, 2012, there was no rental agree- ment for the administrative premises with a mini- mum lease length. Out of other leasing agreements, future ﬁ nancial obligations arose in an amount of EUR 248 k. EUR 128 k of which has a residual matu- rity up to one year and the remainder, EUR 120 k, a remaining maturity of one to ﬁ ve years. Annual lease payments in an amount of currently EUR 381 k are to be paid for an existing property lease. The development of the lease payment rate is attached to the development of the annual aver- age consumer price index in Germany. Operating lease commitments – Group as lessor The Group has entered into commercial property leases on its investment property port- folio, consisting of the Group’s surplus ofﬁ ce and manufacturing buildings. These non-cancellable leases have remaining terms of between one and 23 years. Most leases include an indexation clause, i. e. the rental charges may be raised an- nually according to prevailing market conditions. alstria Financial Report 2012 Future minimum rental charges receivable under non-cancellable operating leases are as follows: The cash and cash equivalents in the cash ﬂ ow statement relate to all cash disclosed in the bal- ance sheet, i. e. cash on hand and bank balances. EUR k Within 1 year Dec. 31, 2012 Dec. 31, 2011 98,079 89,826 After 1 year but not longer than 5 years More than 5 years 296,037 314,741 708,857 286,454 379,458 755,738 60 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 12.3 Consolidated cash ﬂ ow statement The cash ﬂ ow statement shows how the cash and cash equivalents of the Group changed in the course of the ﬁ nancial year as a result of cash re- ceived and paid. In accordance with IAS 7, a dis- tinction is made between cash ﬂ ows from operat- ing activities and cash ﬂ ows from investing and ﬁ nancing activities. The cash ﬂ ows from investing and ﬁ nancing ac- tivities are calculated on the basis of payments, whereas the cash ﬂ ows from operating activities are derived indirectly based on the consolidated proﬁ t for the year. Cash ﬂ ows from operating activities for the ﬁ nan- cial year 2012 amounted to EUR 45,735 k. The signiﬁ cant increase compared to the reporting pe- riod 2011 (EUR 38,457 k) resulted mainly from higher rental revenues and lower payments for interest expenses. The cash ﬂ ow from investing activities is impacted by the cash outﬂ ows resulting from the acquisi- tions of the DIVE portfolio and investments in existing properties (cash outﬂ ow EUR 107,125 k). Cash inﬂ ows of EUR 11,080 k relate to payments received for the sale of investment properties. Pro- ceeds from the equity release of interests in joint ventures generated cash inﬂ ows in an amount of EUR 25,212 k. The cash ﬂ ows from ﬁ nancing activities mainly re- ﬂ ect the proceeds from shares issued in an amount of EUR 59,756 k net and the dividend payment (EUR 34,705 k). Furthermore, cash outﬂ ows were made for the acquisition or termination of ﬁ nan- cial derivatives (EUR 10,002 k) and in an amount of EUR 10,317 k for the redemption of loans. 13 Related party relationships 13.1 Preliminary remarks Related parties are members of the management of alstria ofﬁ ce REIT-AG (Management Board and Supervisory Board) and close family members of these persons. Related parties also include entities with controlling inﬂ uence over the Group and enti- ties with joint control over, or signiﬁ cant inﬂ uence on, alstria ofﬁ ce REIT-AG. The majority of alstria ofﬁ ce REIT-AGs shares are in free ﬂ oat. No person or entity has a controlling inﬂ uence over the Company. alstria ofﬁ ce REIT-AG is the ultimate parent company of the Group. Joint ventures in which alstria ofﬁ ce REIT-AG has joint control over are also related parties. In the view of alstria ofﬁ ce REIT-AG’s management, all transactions with related parties, entered into in the ﬁ nancial year 2012, were effected on arm’s length terms or under conditions in alstria ofﬁ ce REIT-AG’s favour. 13.2 Remuneration of key management personnel For a detailed description of the remuneration of key management personnel, please refer to ›› Note 12.1 and the remuneration report ›› see appendix to the Group management report. 13.3 Related party transactions At the end of the reporting period, the Group had receivables of EUR 89 k (December 31, 2011: EUR 2,095 k) against the joint ventures. Further- more, alstria ofﬁ ce REIT-AG received EUR 701 k (2011: EUR 317 k) from the joint venture as com- pensation for services connected to real estate. Further transactions with related parties did not arise during the reporting period. 14 Earnings per share Basic earnings per share are calculated as the quo- tient of the proﬁ t attributable to the shareholders and the weighted average number of shares out- standing during the ﬁ nancial year – except for the average number of treasury shares held by the Company itself. alstria Financial Report 2012 Diluted earnings per share amounts are calculated by dividing the proﬁ t attributable to ordinary own- ers of the parent company by the weighted aver- age number of ordinary shares outstanding during the year – except for the treasury shares held by the Company itself – plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reﬂ ects the income and share data used in the earnings per share computations: Proﬁ t attributable to the shareholders (EUR k) Average number of shares outstanding (thousands) Basic earnings per share (EUR per share) 2012 2011 39,911 27,448 77,848 69,245 0.51 0.40 There were no dilution effects resulting from the granted stock options or the convertible proﬁ t par- ticipation rights during the period under review, as the related vesting conditions were not satisﬁ ed as at the end of the reporting period. For further information concerning granted stock options and convertible proﬁ t participation rights, please see ›› Notes 17 and 19. There have been no other transactions involving ordinary shares or potential ordinary shares be- tween the reporting date and the date of comple- tion of these ﬁ nancial statements. alstria ofﬁ ce REIT-AG is authorised to issue up to EUR 27,912 k shares as conditional capital. These contingently issuable shares could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share because they are non-dilutive for the period presented. 15 Dividends paid EUR k 2012 2011 Equity dividends on ordinary shares1) not recognised as a liability as at Dec. 31 Dividend per share (without treasury shares) 34,705 31,503 0.44 0.44 1) Refers to all shares except treasury shares at the dividend payment date. The annual general meeting of alstria ofﬁ ce REIT- AG held on April 24, 2012, resolved to distribute dividends totalling EUR 34,705 k (EUR 0.44 per outstanding share). The dividend was distributed on April 25, 2012. The dividends paid out in 2011 totalled EUR 31,503 k (EUR 0.44 per share out- standing). 16 Employees During the period from January 1 to Decem- ber 31, 2012, the Company had an average of 55 employees (January 1 to December 31, 2011: on average 48 employees). The average was calcu- lated by the fourth part of the total of employed people at the end of each quarter. On Decem- ber 31, 2012, 59 people (December 31, 2011: 50 people) were employed at alstria ofﬁ ce REIT-AG, excluding the Management Board. 17 Stock option programme On March 27, 2007, the Supervisory Board of the Company resolved to establish a stock option pro- gramme for the members of the Management Board. The Supervisory Board ﬁ xed the details of the stock option programme in accordance with the authorisation granted by the general meeting of shareholders of March 15, 2007, and granted a ﬁ rst tranche of stock options to the Management Board. 61 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s alstria Financial Report 2012 62 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C The main terms of the stock option programme resolved by the Supervisory Board can be summa- rised as follows: Expected volatility is based on the historical vola- tility of comparative listed companies and was cal- culated as an average of these comparables. Under the stock option programme, up to 2,000,000 options entitling to the subscription of a maximum of 2,000,000 shares of the Company with a total nominal value of EUR 2,000 k may be granted to members of the Management Board. The stock op- tions will be granted in annual tranches. The ﬁ rst tranche was granted by the Supervisory Board in 2007, subject to the conditions below. The exer- cise price for the stock options granted in 2007 is EUR 16. In 2010, the stock option programme was replaced by a new long-term incentive plan that is described in detail in ›› Note 18. The stock options granted in 2007 under the terminated stock option program stay unaffected. At the beginning of the reporting period, 515,625 stock options outstanding existed. Therefore, the amount of stock options outstanding as at the end of reporting period remained unchanged. None of these stock options are exercisable. The personnel expenses resulting from the allocation of the fair val- ues of the stock options at the granting date over the vesting period amounted to EUR 0 k in 2012 and 2011. The fair values of the options outstanding were estimated at the respective granting dates using a Black-Scholes model and partial-time barrier op- tions, taking into account the terms and conditions upon which the instruments were granted. The fol- lowing table lists the inputs to the model used for the determination of the fair value of the stock op- tions granted: Fair value of stock options granted on Dividend yield (%) Risk-free interest rate (%) Expected volatility (%) Expected life of option (years) Exercise share price (EUR) Labour turnover rate (%) Stock price as at valuation date (EUR) Estimated fair value of one stock option at the granting date (EUR) Mar. 27, 2007 Sept. 5, 2007 3.60 4.21 30.00 4.50 16.00 0.00 3.60 4.29 30.00 4.50 16.00 0.00 16.00 13.93 3.17 2.28 The term of each stock option is seven years be- ginning with the respective issue date. The stock options may only be exercised if the current stock exchange price of the Company’s shares exceeds the stock exchange price of the Company’s shares on the issue date by 20% or more for at least seven non-subsequent trading days of the Frank- furt Stock Exchange prior to the commencement of the respective exercise period. The stock op- tions may only be exercised after the expiration of a vesting period of two years, and then during the four exercise periods each year. Each exercise period lasts 30 days, commencing with the day of announcement of the results for the ﬁ rst, second and third quarters, and the day of the Company’s Annual General Meeting. There are no cash settle- ment alternatives. 18 Share-based remuneration On March 2, 2010, the Company’s Supervisory Board established a new share-based remunera- tion system as part of the success-based remunera- tion for members of the Management Board. The share-based remuneration is made up of a long- term component, the Long-Term Incentive Plan (LTIP), and a short-term component, the Short- Term Incentive Plan (STIP). The remuneration type is a cash-settled and share-based payment transac- tion, respectively. Under the LTIP, alstria ofﬁ ce REIT-AG grants virtual shares, which give an entitlement to conversion into cash payments after four years. The amount of the conversion payment is based on the number of virtual shares, multiplied by the average stock market price of alstria’s shares on the Frankfurt Stock Exchange during the last 60 trad- ing days prior to the relevant maturity date, plus an amount equal to the sum of the dividend per share paid by the Company to its shareholders be- tween the grant date and the maturity date, but in no event higher than 250% of the average stock market price of alstria’s shares on the Frankfurt Stock Exchange in the last 60 trading days prior to the relevant grant date, multiplied by a speciﬁ ed discretionary factor. alstria Financial Report 2012 The discretionary factor is a multiplier that can vary between 0.8 and 1.2, and is subject to the indi- vidual performance of each participant during the respective holding period. The determination of virtual shares will depend in equal amounts on the absolute return of the alstria share price (absolute total shareholder return) and on the relative performance of alstria's share in re- lation to the EPRA Index Continental Europe (rela- tive total shareholder return). Since payment per vested virtual share depends on the average 60 trading days quoted price of al- stria's shares, the quoted average price of the last 60 trading days prior to the end of the reporting period essentially represents the fair value of each virtual share. Virtual shares under the short-term variable remu- neration (STIP) were granted for the ﬁ rst time on March 3, 2011. The virtual shares resulting from the STI are subject to a minimum vesting period of two years. The virtual STI shares will be converted into a cash amount after the expiry of the vesting period. This cash amount is calculated on the basis of the number of virtual shares, multiplied by the share price of one alstria share at that time, and is calculated on the basis of a reference period. 19 Convertible proﬁ t participation rights programme On September 5, 2007, the Supervisory Board of the Company resolved the issuance of convertible proﬁ t participation certiﬁ cates (“certiﬁ cates”) to employ- ees of the Company and to employees of companies in which alstria ofﬁ ce REIT-AG, directly or indirectly, holds a majority interest. Members of alstria ofﬁ ce REIT-AG’s Management Board are not considered employees of the Company in terms of this convert- ible proﬁ t participation rights programme. With its resolution, the Supervisory Board ﬁ xed the details of the convertible proﬁ t participation rights programme in accordance with an authorisation granted by the general meeting of shareholders of March 15, 2007. The convertible proﬁ t participation rights pro- gramme was renewed by the Supervisory Board with minor modiﬁ cations in 2012 in accordance with an authorisation granted by the general meeting of shareholders of April 24, 2012. The main terms of the programme can be summa- rised as follows: The nominal amount of each certiﬁ cate is EUR 1.00 and is payable upon issuance. Under the cur- rent programme, starting in 2012, a maximum of 500,000 certiﬁ cates in an aggregate nominal amount of up to EUR 500 k may be issued. 63 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s The development of the virtual shares until Decem- ber 31, 2012 is shown in the following table: The certiﬁ cates are issued as non-transferable rights and are neither sellable nor pledgeable or otherwise chargeable. Number of virtual shares Dec. 31, 2012 Dec. 31, 2011 The maximum term of each certiﬁ cate is ﬁ ve years. LTIP STI LTIP STI Jan. 1 175,711 11,718 99,009 0 Granted in the reporting period 91,954 12,911 76,702 11,718 Dec. 31 267,665 24,629 175,711 11,718 In 2012, the LTI and the STI generated remunera- tion expenses amounting to EUR 563 k (2011: re- muneration expenses of EUR 558 k) and provisions amounting to EUR 1,472 k (December 31, 2011: EUR 909 k). The Group recognises the liabilities arising from the vested virtual shares under other provisions. During its term, each certiﬁ cate entitles the holder to a preferred disbursement from the Company’s an- nual net proﬁ t. The proﬁ t share corresponds to the dividend per share of the Company for a full business year of the Company. For certiﬁ cates held by a ben- eﬁ ciary for less than a full business year of the Com- pany, the proﬁ t share is reduced pro rata temporis. Each certiﬁ cate shall be converted into one non- par-value bearer share of the Company on the sec- ond, third, fourth or ﬁ fth anniversary date of the issue date if the then current stock exchange price of the Company’s shares has exceeded the stock exchange price of the Company’s shares on the issue date by 5% or more on at least seven non- subsequent trading days (market condition). For the 86,000 certiﬁ cates issued on June 18, 2012, this market condition was fulﬁ lled until the end of the ﬁ nancial year 2012. alstria Financial Report 2012 64 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Upon conversion of a certiﬁ cate, the beneﬁ ciary shall pay an additional conversion price to the Company for each certiﬁ cate to be converted. The conversion price shall be the aggregate proportion- ate amount in the Company’s share capital of the shares each certiﬁ cate entitles the holder to sub- scribe for and shall be payable in addition to the offer price. The fair values of the inherent options for con- version were estimated at the respective granting dates using a binary barrier option model based on the Black-Scholes model, since the conversion will be affected automatically once the barrier has been reached. The model takes into account the terms and conditions upon which the instruments were granted. The following share-based payment agreements under the employee proﬁ t participation programme were in existence during the year: Granting date of tranche Jan. 1, 2012 Expired due to time lapse Expired due to termination of employment Converted Granted Dec. 31, 2012 Sept. 6, 2007 2,200 –2,200 0 0 0 0 Jun. 6, 2008 36,000 0 –500 0 0 35,500 Jun. 17, 2010 59,500 0 0 –59,500 0 0 Jun. 9, 2011 80,000 0 –7,000 0 0 73,000 Jun. 18, 2012 0 0 0 0 86,000 86,000 Total 177,700 –2,200 –7,500 –59,500 86,000 194,500 Total expenses relating to convertible proﬁ t partici- pation rights were EUR 610 k in 2012 ›› Note 9.5. The following table lists the inputs to the model used for the determination of the fair value of the options for conversion: Granting date of tranche Sept. 6, 2007 Jun. 6, 2008 Jun. 17, 2010 Jun. 9, 2011 Jun. 18, 2012 Dividend yield (%) Risk-free interest rate (%) Expected volatility (%) Expected life of option (years) Exercise share price (EUR) Labour turnover rate (%) Stock price as at valuation date (EUR) Estimated fair value of one option for conversion at the granting date 3.70 4.20 30.00 2.00 2.00 10.00 13.18 4.70 4.65 35.00 2.00 2.00 10.00 11.03 6.06 0.47 58.00 2.00 2.00 10.00 8.25 4.23 1.67 47.00 2.00 2.00 10.00 10.40 5.76 0.04 38.00 2.00 2.00 10.00 7.64 10.77 8.76 6.19 8.25 5.45 alstria Financial Report 2012 Expected volatility is based on the historical volatil- ity of alstria and comparative listed companies and was calculated as an average of these comparable ﬁ gures. 20 Financial risk management The ﬁ nancial instruments chieﬂ y used by the Group are bank loans and derivative ﬁ nancial instruments. The main purpose of the bank loans is to ﬁ nance the business activities of alstria ofﬁ ce REIT-AG. The Company also has various ﬁ nancial assets, such as cash and short-term deposits, which arise directly from business activities. Derivative ﬁ nancial instruments include interest swaps and caps. The purpose of these derivative ﬁ - nancial instruments is to hedge against interest risks arising from the Company’s business activities and its sources of ﬁ nancing. The main risks arising from the Group’s ﬁ nancial in- struments are cash ﬂ ow interest rate risks and liquid- ity risks. The Group is not exposed to any signiﬁ cant credit risks. The amount that best presents the maxi- mum credit risk is the carrying amount of ﬁ nancial assets. The Management Board decides on strate- gies and processes for managing speciﬁ c risk types. These are presented on the following pages. Risks that could arise as a result of the ﬁ nancial crisis are seen mainly in a potential default of pay- ment by a major tenant. Due to the fact that all of the Company’s main tenants are public institutions or still highly rated, the risk of default of payments is currently limited. alstria ofﬁ ce REIT-AG’s syndicated loan facility agreement allows for a loan to value (LTV) ratio of up to 70%. The Company managed to keep the LTV ratio for the syndicated loan on the relevant test date at 54.1%. The risk of a breach of cov- enant is effectively countered. The following table presents the single LTV ratios and covenants for the Group loans as at the end of the reporting period: 65 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Existing loan agreements as at December 31, 2012 Loan Syndicated loan Non-recourse loan #1 Non-recourse loan #2 Non-recourse loan #3 Non-recourse loan #4 Non-recourse loan #5 Loan #6 Loan #7 Loan #8 Total as at Dec. 31, 2012 Maturity Jul. 20, 2015 Oct. 20, 2015 Dec. 31, 2014 Jun. 30, 2014 Oct. 20, 2014 Jan. 31, 2017 Dec. 31, 2015 Dec. 17, 2018 Sept. 30, 2019 Principal amount outstanding (EUR k) Current LTV (%) LTV covenant ( %) 564,721 47,902 42,670 29,568 30,747 71,376 11,500 56,000 42,500 896,984 54.1 70.2 64.9 56.0 55.0 60.2 58.7 48.8 45.6 55.0 70.0 80.0 80.0 60.0 65.0 75.0 75.0 60.0 65.0 Apart from this, the Group is not exposed to any commodity or currency risks. alstria Financial Report 2012 Interest rate risk The following table sets out the carrying amount, by maturity, of the Group’s ﬁ nancial instruments which are exposed to interest rate risk: EUR k < 1 year 1–2 years 2–3 years 3– 4 years > 4 years Total Financial year as at Dec. 31, 2012 Variable interest Syndicated loan Other loans Total 5,460 1,186 6,646 0 559,261 72,576 72,576 59,057 618,318 0 0 0 0 564,721 98,500 98,500 231,319 796,040 66 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C EUR k < 1 year 1–2 years 2–3 years 3– 4 years > 4 years Total Financial year as at Dec. 31, 2011 Variable interest Syndicated loan Other loans Total 0 1,014 1,014 0 1,186 1,186 0 571,339 0 571,339 72,576 72,576 59,057 630,396 56,000 56,000 189,833 761,172 Due to the extensive portfolio of non-current ﬁ nan- cial liabilities with a variable interest risk, alstria of- ﬁ ce REIT-AG is exposed to risks from ﬂ uctuations in market interest rates. The interest base for the ﬁ nan- cial liability (loan) is the three-month EURIBOR rate, which is adjusted every three months. A number of different derivative ﬁ nancial instruments were ac- quired to manage the interest expense. The deriva- tive ﬁ nancial instruments relate to interest swaps in which the Company agrees to exchange with con- tracting partners, at speciﬁ ed intervals, the difference between ﬁ xed and variable interest rate amounts calculated by reference to an agreed-upon notional principal amount. In addition, interest caps were acquired; that is, the interest is capped at a prede- termined maximum. If the maximum interest rate is exceeded, the difference between the actual interest rate and the cap rate is paid out. The derivative ﬁ nancial instruments of alstria ofﬁ ce REIT-AG are presented below: Product Cap Cap1) Cap Swap Interest rate derivatives – held for trading 2) Cap Cap Cap Cap Swap1) Swap Swap Strike p.a. (%) Maturity date 3.0000 Sept. 30, 2019 4.6000 Oct. 20, 2015 4.9000 Dec. 20, 2012 4.1160 Jul. 10, 2013 4) 3.0000 Dec. 17, 2018 3.2500 Dec. 31, 2015 3.3000 Oct. 20, 2014 3.3000 Oct. 20, 2014 4.6000 Oct. 20, 2015 Dec. 31, 2012 Dec. 31, 2011 Notional (EUR k) Fair value (EUR k) Notional (EUR k) Fair value (EUR k) 42,500 47,902 0 0 42,500 56,000 11,500 22,876 7,871 0 395 8 0 0 403 395 5 2 1 0 0 0 75,000 47,902 122,902 56,000 11,500 23,630 8,130 95,000 37,283 0 0 0 –2,479 –2,479 1,421 35 11 4 –6,921 –1,234 2.1940 Dec. 31, 2014 37,283 –1,632 2.9900 Jul. 20, 2015 472,500 –33,448 472,500 –29,398 Interest rate derivatives – cash ﬂ ow hedges3) Total2) 608,030 –34,677 609,043 –36,082 650,530 –34,274 731,945 –38,561 1) Not effective before July 10, 2013. 2) Notional excluding the EUR 47,902 k not effective before July 10, 2013. 3) Notional excluding the EUR 95,000 k not effective before July 10, 2013. 4) Terminated as at December 28, 2012. alstria Financial Report 2012 Liquidity Risk The Company continually moni- tors the Group-wide risk of potential liquidity bot- tlenecks using a liquidity planning tool, which uses the expected cash ﬂ ows from business activities and the maturity of the ﬁ nancial liabilities as a basis for analysis. The long-term reﬁ nancing strategy of the Group ensures the medium and long-term liquidity requirements. Such forecasting takes into consid- eration the Group’s debt ﬁ nancing plans, covenant compliance, compliance with internal balance sheet targets and, if applicable, external regulatory or legal requirements – for example, G-REIT equity ratio. As at the end of the reporting period, the nominal ﬁ nancial liabilities had the following maturities in line with their contractual maturity (the basis is the three-month EURIBOR as at December 31, 2012 plus the weighted average margin of 152 basis points for the Group’s loans). 67 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s These interest rate swaps and interest rate caps are used to hedge the obligation underlying the loans. The following table shows the sensitivity of the Company’s loans on consolidated proﬁ t or loss and equity accordingly to a reasonably possible change in the interest rates (due to the effect on the ﬂ oat- ing interest loans). All variables remain constant; the effects from the derivative ﬁ nancial instruments were not factored into this calculation. Interest expenses p. a. EUR k + 100 bps – 50 bps 2012 7,116 2011 7,719 –3,558 –3,860 The fair market value of derivative ﬁ nancial instru- ments is also subject to interest rate risks. A change in the interest rate would give rise to the following changes of the respective fair market values: a) Impact on equity Financial derivatives qualifying for cash ﬂ ow hedge accounting EUR k + 100 bps – 50 bps 2012 13,205 –3,397 2011 18,025 –9,383 b) Impact on income statement Financial derivatives not qualifying for cash ﬂ ow hedge accounting EUR k + 100 bps – 50 bps 2012 1,254 –263 2011 2,985 –1,391 alstria Financial Report 2012 The following chart shows the related future undis- counted cash ﬂ ows of ﬁ nancial liabilities: EUR k < 1 year 1–2 years 2–3 years 3– 4 years 4–5 years > 5 years Total Financial year as at Dec. 31, 2012 Interests Loans 18,346 18,502 12,814 9,461 102,911 620,236 Financial derivatives 14,220 13,464 6,555 Trade payables Other current liabilities 3,735 9,180 0 7 0 7 5,887 2,009 0 0 7 3,581 5,026 64,156 63,867 98,500 896,984 0 0 8 0 0 34,239 3,735 6,713 15,922 54,942 134,884 639,612 7,903 67,456 110,239 1,015,036 EUR k < 1 year 1–2 years 2–3 years 3– 4 years 4–5 years > 5 years Total Financial year as at Dec. 31, 2011 Interests Loans Financial derivatives Trade payables Other current liabilities 26,795 26,690 25,680 15,386 3,698 9,421 3,201 7,858 4,001 102,911 632,315 10,335 11,432 6,669 0 0 0 0 0 0 4,875 2,009 3,911 103,337 119,867 864,801 0 0 0 0 0 0 37,857 3,201 7,858 50,973 41,026 140,023 654,370 6,884 123,778 1,017,054 68 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C The most signiﬁ cant liability consists of a syn- dicated loan provided by ﬁ ve banks with an amount of EUR 564,721 k (December 31, 2011: EUR 571,339 k). The second major part of liabilities is made up of loans entered into with several banks as a result of the Group’s reﬁ nancing strategy, with an amount of EUR 332,264 k (December 31, 2011: EUR 289,764 k). To secure these liabilities, receiva- bles from rental and property purchase agreements as well as insurance receivables and derivative ﬁ - nancial instruments were assigned to the lenders; liens were granted on bank accounts and charges on the land registered. The obligations arising from the ﬂ oating interest bank loans were fully secured. Land charges for real estate property with a carry- ing amount of EUR 1,638,921 k were furnished as security. Capital management Capital management ac- tivities are aimed at maintaining the Company’s clas- siﬁ cation as a REIT in order to support its business activities and maximise shareholder value. The Company manages its capital structure and makes adjustments in response to changes in eco- nomic conditions. In order to maintain or adjust the capital structure, the Group can make a capital repayment to its shareholders or issue new shares. No changes were made to the aims, guidelines and processes as at December 31, 2012, and at Decem- ber 31, 2011. The capital structure is monitored by the Company using the key performance indicators (KPIs) rel- evant for classiﬁ cation as a REIT. The REIT equity ratio, being the ratio of equity to immovable assets, is the most important KPI. According to the Group’s strategy, the REIT equity ratio shall be between 45% and 55% within the relevant term provided by the REIT law. The G-REIT status is unaffected as long as the G-REIT ratio at the end of the busi- ness year is not below 45% for three consecutive business years. alstria Financial Report 2012 69 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Total Fair value 3,656 3,656 89 806 89 806 3,814 3,814 The following KPIs are also used to manage capital: KPIs according to G-REIT law % 2012 2011 G-REIT covenant Equity ratio acc. to G-REIT law Immovable assets Revenues gained from immovable assets Income gained from disposal of immovable assets 50.04 92.74 48.68 93.56 > 45 > 75 100.00 100.00 > 75 20.99 20.62 < 501) 1) Within ﬁ ve years based on the average property value during this period. Fair value The following table shows the carrying amount and fair value of all ﬁ nancial instruments disclosed in the consolidated ﬁ nancial statements: Carrying amount Non-ﬁ nancial assets Financial assets Assets as per balance sheet (EUR k) as at Dec. 31, 2012 Trade receivables 3,656 Accounts receivable from joint ventures Derivatives Receivables and other assets Cash and cash equivalents Total 89 806 118,548 129,911 Assets at fair value through proﬁ t and loss 0 0 Loans and receivables 3,656 89 0 0 0 0 Derivative hedge accounting Available for sale 0 0 403 403 0 0 0 0 0 0 0 0 6,812 2,998 3,814 0 118,548 0 118,548 118,548 2,998 126,107 403 403 0 126,913 126,913 Carrying amount Non-ﬁ nancial liabilities Financial liabilities Liabilities as per balance sheet (EUR k) as at Dec. 31, 2012 Long-term loans Derivatives Short-term loans Trade payables Other liabilities Total Liabilities at fair value through proﬁ t and loss 0 0 0 0 0 0 882,105 35,080 9,986 3,735 21,164 952,070 0 0 0 0 3,949 3,949 Other liabilities 882,105 Derivative hedge accounting Total Fair value 0 882,105 889,484 0 35,080 35,080 35,080 9,986 3,735 17,215 0 0 0 9,986 3,735 9,986 3,735 17,215 17,215 913,041 35,080 948,122 955,501 alstria Financial Report 2012 70 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Carrying amount Non-ﬁ nancial assets Assets as per balance sheet (EUR k) as at Dec. 31, 2011 Trade receivables 2,449 2,095 3,566 Accounts receivable from joint ventures Derivatives Receivables and other assets Cash and cash equivalents Total Loans and receivables 0 0 0 2,449 2,095 0 Financial assets Assets at fair value through proﬁ t and loss Derivative hedge accounting Available for sale 0 0 3,566 0 0 0 0 0 0 0 Total Fair value 2,449 2,449 2,095 3,566 2,095 3,566 3,461 3,461 96,009 96,009 3,566 0 107,580 107,580 0 0 0 0 0 0 6,870 3,409 3,461 96,009 110,989 0 96,009 3,409 104,014 Carrying amount Non-ﬁ nancial liabilities Financial liabilities Liabilities as per balance sheet (EUR k) as at Dec. 31, 2011 Long-term loans Derivatives Short-term loans Trade payables Other liabilities Total Liabilities at fair value through proﬁ t and loss Other liabilities Derivative hedge accounting Total Fair value 854,814 40,032 4,505 3,201 11,832 914,384 0 0 0 0 9,817 9,817 0 793,603 0 793,603 793,603 2,479 0 37,553 40,032 40,032 0 0 0 4,505 3,201 2,015 0 0 0 4,505 3,201 2,015 4,505 3,201 2,015 2,479 803,324 37,553 843,356 843,356 The fair value of the derivative ﬁ nancial instru- ments and the loans was determined by an inde- pendent expert by discounting the expected future cash ﬂ ows at prevailing market interest rates. Net losses during the reporting period resulted from valuation losses and, in the case of loans and re- ceivables, from the write-down on trade receivables. Net gains and losses from ﬁ nancial instruments are as follows: EUR k 2012 2011 Financial instruments at fair value through proﬁ t or loss Loans and receivables Total –1,380 –3,247 –64 –117 –1,444 –3,364 Fair value estimation Financial instruments which are measured in the balance sheet at fair value require the disclosure of fair value measure- ments by level of the following fair value measure- ment hierarchy: › quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) › inputs other than quoted prices included within level 1 which are observable for the asset or liabil- ity, either directly (i. e. as prices) or indirectly (i. e. derived from prices) (level 2) › inputs for the asset or liability which are not based on observable market data (that is, unobservable inputs) (level 3) alstria Financial Report 2012 All of the Group’s ﬁ nancial instruments which are measured in the balance sheet at fair value are val- ued using the level 2 valuation measurement ap- proach. This only applies to the Group’s ﬁ nancial derivatives, as there are no other ﬁ nancial instru- ments that are measured in the balance sheet at fair value. 22 Utilisation of exempting provisions The following German subsidiaries included in the consolidated ﬁ nancial statements of alstria ofﬁ ce REIT-AG have made use of the exemption granted in Section 264b HGB: › alstria ofﬁ ce Bamlerstrasse GmbH & Co. KG, The fair value of ﬁ nancial instruments that are not traded in an active market (for example, over-the- counter derivatives) is determined by using valua- tion techniques. These valuation techniques max- imise the use of observable market data where it is available and rely as little as possible on entity- speciﬁ c estimates. If all signiﬁ cant inputs required to ascertain the fair value of an instrument are ob- servable, the instrument is included in level 2. Hamburg › alstria ofﬁ ce Englische Planke GmbH & Co. KG, Hamburg › alstria ofﬁ ce Gänsemarkt Drehbahn GmbH & Co. KG, Hamburg › alstria ofﬁ ce Halberstädter Str. GmbH & Co. KG, Hamburg › alstria ofﬁ ce Hamburger Str. 43 GmbH & Co. KG, Hamburg › alstria ofﬁ ce Insterburger Strasse GmbH & Co. KG, Hamburg 21 Signiﬁ cant events after the end › alstria ofﬁ ce Ludwig-Erhard-Strasse GmbH & Co. of the reporting period KG, Hamburg The two properties classiﬁ ed as held for sale at the end of the reporting period were transferred to the buyer in the ﬁ rst quarter of the year 2013. › alstria ofﬁ ce Mannheim/Wiesbaden GmbH & Co. KG, Hamburg › alstria ofﬁ ce Steinstrasse 5 GmbH & Co. KG, Hamburg 71 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s In February 2013, alstria received from a former majority shareholder EUR 1,800 k as a compensa- tion for expenses relating to certain capital market transactions and associated liabilities, which have been recognised at the end of the reporting period 2012 an amount of EUR 1,229 k. alstria Financial Report 2012 23 Disclosures pursuant to Wert- papierhandelsgesetz [German Securities Trading Act] 23.1 Ad-hoc announcement The following table summarises the announcements pursuant to Section 15 para. 1 German Securities Trading Act (WpHG) as published by the Company in the reporting year: 72 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Date Topic Feb. 21, 2012 Acquisition of a real estate portfolio and capital increase of up to 7,170,362 new shares Feb. 22, 2012 alstria ofﬁ ce REIT-AG successfully executed capital increase 23.2 Directors’ dealings The following table summarises the transactions reported to the Company pursuant to Section 15a para. 1 WpHG during the reporting period: Name of person subject to the disclosure requirement Function Classiﬁ cation of the ﬁ nancial instrument ISIN Alexander Stuhlmann Member of the Supervisory Board Olivier Elamine Olivier Elamine Member of the Management Board Member of the Management Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Alexander Stuhlmann Member of the Supervisory Board Share Share Share Share Share Share Share Share Share Share Share Share Share Share Share Share Share Share DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 DE000A0LD2U1 alstria Financial Report 2012 Trans action Place Trans action date (EUR) Number of shares Price per share Buy Buy Buy Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell Sell XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA XETRA Feb. 27, 2012 May 18, 2012 May 21, 2012 Aug. 15, 2012 Aug. 15, 2012 Aug. 15, 2012 Aug. 15, 2012 Aug. 15, 2012 Sept. 14, 2012 Sept. 14, 2012 Sept. 14, 2012 Sept. 14, 2012 Sept. 14, 2012 Sept. 27, 2012 Sept. 27, 2012 Sept. 27, 2012 Sept. 27, 2012 Sept. 27, 2012 8.440 7.84 7.73 9.044 9.033 9.031 9.025 9.020 9.380 9.373 9.370 9.365 9.360 9.226 9.224 9.223 9.222 9.210 1,000 2,500 500 1,750 681 1,048 1,228 293 1,900 650 1,200 1,100 750 1,169 1,500 1,400 82 249 73 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Deal volume (EUR) 8,440.00 19,600.00 3,867.00 15,827.00 6,151.47 9,464.49 11,082.70 2,642.86 17,822.00 6,092.45 11,244.00 10,301.50 7,020.00 10,785.19 13,836.00 12,912.20 756.20 2,293.29 alstria Financial Report 2012 23.3 Voting rights notiﬁ cations Information according to Section 160 para. 1 No. 8 German Stock Corporation Act (AktG): As per balance sheet date 2012, the following share holdings in the Company existed that were communicated to us pursuant to Section 21 para. 1 WpHG and published pursuant to Sec- tion 26 para. 1 WpHG: No. Shareholders, registered ofﬁ ce Voting rights (new) (%) Strike threshold (%) 74 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Stichting Pensioenfonds ABP, Heerlen, Netherlands APG Groep N.V., Heerlen, Netherlands APG Algemene Pensioen Groep N.V., Heerlen, Netherlands Morgan Stanley International Limited, London, United Kingdom Morgan Stanley Group (Europe), London, United Kingdom Morgan Stanley Investments (UK), London, United Kingdom Morgan Stanley Investment Management Limited, London, United Kingdom Grove International Partners LLP, New York, USA CGI Partners L.P., New York, USA Cypress Grove International Associates LLC, New York, USA Cypress Grove International D L.P., New York, USA Shamrock Cedobar Limited, Dublin, Ireland Cohen & Steers Inc., New York, USA Morgan Stanley Bank AG, Frankfurt, Germany Morgan Stanley International Holdings Inc, Delaware, USA CG Delaware Malta Limited, Valetta, Malta CG Delaware Apellas Limited, Valetta, Malta Morgan Stanley, Delaware, USA BPCE S.A., Paris, France Natixis S.A., Paris, France Natixis Alternative Assets S.A., Luxembourg, Luxembourg RECM S.à r.l., Luxembourg, Luxembourg Captiva Capital (Luxembourg) S.à r.l., Luxembourg, Luxembourg Captiva Capital (Luxembourg) Partners II S.C.A., Luxembourg, Luxembourg FTW II S.à r.l., Luxembourg, Luxembourg CNP Assurances, Paris, France PGGM Coöperatie U.A., Zeist, Netherlands PGGM N.V., Zeist, Netherlands PGGM Fondsenbeheer B.V., Zeist, Netherlands Stichting PGGM Depositary, Zeist, Netherlands 1) Attribution pursuant to Section 22 para. 1 sentence 1 No. 1 WpHG. 2) Attribution pursuant to Section 22 para. 1 sentence 1 No. 5 WpHG. 3) Attribution pursuant to Section 22 para. 1 sentence 1 No. 6 WpHG. 4) Attribution in connection with Section 22 para. 1 sentence 2 WpHG. 5) Attribution in connection with Section 22 para. 1 sentence 3 WpHG. 3.45 3.45 3.45 4.95 4.95 4.95 4.95 7.87 7.87 7.87 7.87 7.87 2.85 0.00 4.28 0.00 7.15 4.94 4.80 4.80 4.55 4.55 0.00 0.00 0.00 5.14 2.85 2.85 2.85 2.85 3 3 3 5 5 5 5 5, 3 5, 3 5, 3 5, 3 5, 3 3 5, 3 10, 5 5, 3 5, 3 5 5 5 5 5 3 3 3 5 3 3 3 3 alstria Financial Report 2012 Date of change Attribution of voting rights Apr. 1, 2011 Yes 1) Apr. 1, 2011 Yes 1) Apr. 1, 2011 No Jun. 24, 2011 Yes 3), 4) Jun. 24, 2011 Yes 3), 4) Jun. 24, 2011 Yes 3), 4) Jun. 24, 2011 Yes 3) Jun. 30, 2011 Yes 1) Jun. 30, 2011 Yes 1) Jun. 30, 2011 Yes 1) Jun. 30, 2011 Yes 1) Jun. 30, 2011 No Jan. 19, 2012 Yes 3), 4), 5) Feb. 27, 2012 No Feb. 27, 2012 Yes 3), 4) Aug. 3, 2012 No Aug. 3, 2012 Yes 1) Contains 3% or more of voting rights from APG Groep N.V., APG Algemene Pensioen Groep N.V. APG Algemene Pensioen Groep N.V. – – – – – CGI Partners L.P., Cypress Grove International Associates LLC, Cypress Grove International D L.P., CG Delaware Malta Limited, Shamrock Cedobar Limited Cypress Grove International Associates LLC, Cypress Grove International D L.P., CG Delaware Malta Limited, Shamrock Cedobar Limited Cypress Grove International D L.P., CG Delaware Malta Limited, Shamrock Cedobar Limited CG Delaware Malta Limited, Shamrock Cedobar Limited – – – – – Shamrock Cedobar Limited 75 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Aug. 31, 2012 Yes 2), 3), 4) – Dec. 7, 2012 Yes 1) Dec. 7, 2012 Yes 1) Natixis S.A., Natixis Alternative Assets S.A., RECM S.à r.l. Natixis Alternative Assets S.A., RECM S.à r.l. Dec. 7, 2012 Yes 1) RECM S.à r.l. Dec. 7, 2012 Dec. 7, 2012 Dec. 07, 2012 Dec. 07, 2012 Dec. 07, 2012 No No No No No Dec. 21, 2012 Yes 3), 4) Dec. 21, 2012 Yes 3), 4) Dec. 21, 2012 Yes 3) Dec. 21, 2012 No – – – – – – – – – alstria Financial Report 2012 24 Declaration of compliance pursuant to Section 161 AktG [Aktiengesetz: German Stock Corporation Act] The declaration of compliance required by Sec- tion 161 AktG regarding the recommendations of the German Corporate Governance Code de- veloped by the government commission has been submitted by the Management Board and the Su- pervisory Board and is made permanently available to the public on alstria ofﬁ ce REIT-AG’s website ›› www.alstria.com. It is included in the declara- tion of corporate management according to Sec- tion 289a HGB. 25 Auditor’s fees On April 24, 2012, the general meeting elected Deloitte & Touche GmbH Wirtschaftsprüfungsge- sellschaft, Dammtorstraße 12, Hamburg, to audit the separate and consolidated ﬁ nancial statements for the ﬁ nancial year 2012. The fee expenses for audit services in 2012 amounted to EUR 255 k. Other consulting services accounted for expenses of EUR 75 k. 26 Management Board During the ﬁ nancial year, the Company’s members of the Management Board were: 76 s t n e m e t a t s l a i c n a n ﬁ d e t a d i l o s n o C Mr Olivier Elamine Chief Executive Ofﬁ cer (CEO) Mr Alexander Dexne Chief Financial Ofﬁ cer (CFO) The attached remuneration report contains details of the principles for the deﬁ nition of the Management Board’s and Supervisory Board’s remuneration. 27 Supervisory Board Pursuant to the Company’s articles of association (Section 9), the Supervisory Board consists of six members, which are elected by the general meet- ing of shareholders. The expiration of the term of ofﬁ ce is identical for all members, i. e. the close of the Annual General Meeting of shareholders in the year 2015. During the ﬁ nancial year 2012, the members of the Supervisory Board were: Alexander Stuhlmann (Chairman) Hamburg, Germany Management consultant; Manager of Alexander Stuhlmann GmbH › Capital Stage AG, Vice-Chairman of the Supervisory Board › Euro-Aviation Versicherungs AG, Chairman of the Supervisory Board › Frank Beteiligungsgesellschaft mbH, Chairman of the Advisory Board › HASPA Finanzholding, Member of the Board of Trustees › HCI Capital AG, Member of the Supervisory Board › LBS Bausparkasse Schleswig-Holstein- Hamburg AG, Member of the Supervisory Board › Ludwig Görtz GmbH, Member of the Administrative Board › until September 30, 2012: Otto Dörner GmbH & Co. KG, Chairman of the Advisory Board › Siedlungsbaugesellschaft Hermann und Paul Frank mbH & Co. KG, Chairman of the Advisory Board › Studio Hamburg Berlin Brandenburg GmbH, Member of the Advisory Board Dr Johannes Conradi (Vice-Chairman) Hamburg, Germany Lawyer and Partner at Freshﬁ elds Bruckhaus Deringer LLP › Freshﬁ elds Bruckhaus Deringer LLP, Global Head of Real Estate, Member of the German Management Group, › EBS Universität für Wirtschaft und Recht – Real Estate Management Institute, Member of the Board of Trustees › Elbphilharmonie Hamburg Bau GmbH & Co. KG, Member of the Supervisory Board Benoît Hérault from April 24, 2012 Uzès, France, Managing Director at Chambres de l'Artémise S.á r.l. alstria Financial Report 2012 Mr Daniel Quai resigned from his ofﬁ ce as member of the Company’s Supervisory Board as at March 31, 2012. Ms Marianne Voigt was appointed as member of the Supervisory Board by court in Oc- tober 2011. By resolution of the Annual General Meeting held on April 24, 2012, Mr Benoît Hérault and Ms Mari- anne Voigt were elected as members of the Super- visory Board of alstria ofﬁ ce REIT-AG. Hamburg, February 14, 2013 The Management Board Olivier Elamine CEO Alexander Dexne CFO 77 C o n s o l i d a t e d ﬁ n a n c i a l s t a t e m e n t s Roger Lee Paris, France Director and Real Estate Investment Manager at Captiva Capital Management Ltd. › Captiva Capital Management Ltd., Director › Caposition SARL, Director › Captiva Capital Management GmbH, Director › Captiva International Partners LLP, Partner Richard Mully Cobham (Surrey), United Kingdom Director, Investment Advisor and Manager at Starr Street Limited › Starr Street Limited, Director › from April 23, 2012: Aberdeen Asset Management PLC, Director › Hansteen Holdings PLC, Director › from August 8, 2012: ISG plc, Director Marianne Voigt Berlin, Germany Businessman, Managing Director at bettermarks GmbH Daniel Quai until March 31, 2012 Crans, Switzerland, Partner at Captiva International Partners LLP › Captiva International Partners LLP, Partner › CDS Costruzioni SpA, Director › CDS Holdings SpA, Director › Mercurio Asset Management SGR SpA, Director › Natixis Capital Partners Ltd, Director alstria Financial Report 2012 Management compliance statement “We confirm that, to the best of our knowledge, the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group, and the Group manage- ment report gives a true and fair view of the business performance including the results of operations and the situation of the Group, and describes the main opportunities and risks and anticipated development of the Group in accordance with the applicable fi- nancial reporting framework.” Hamburg, February 14, 2013 The Management Board Olivier Elamine CEO Alexander Dexne CFO 78 t n e m e t a t s e c n a i l p m o c t n e m e g a n a M alstria Financial Report 2012 Independent auditors' report We have audited the consolidated ﬁ nancial state- ments prepared by alstria ofﬁ ce REIT-AG, Ham- burg/Germany, – comprising the income statement and statement of comprehensive income, state- ment of consolidated ﬁ nancial statements, cash ﬂ ow statement, statement of changes in equity and the notes to the consolidated ﬁ nancial statements – and the group management report for the busi- ness year from January 1 until December 31, 2012. The preparation of the consolidated ﬁ nancial state- ments and the group management report in ac- cordance with IFRS, as adopted by the European Union (EU), and the additional requirements of German commercial law pursuant to § 315a (1) HGB (“German Commercial Code”) are the re- sponsibility of the Parent Company’s Management Board. Our responsibility is to express an opinion on the consolidated ﬁ nancial statements and on the group management report based on our audit. We conducted our audit of the consolidated ﬁ nan- cial statements in accordance with § 317 HGB and German generally accepted standards for the audit of ﬁ nancial statements promulgated by the Insti- tut der Wirtschaftsprüfer. Those standards require that we plan and perform the audit such that mis- statements materially affecting the presentation of the net assets, ﬁ nancial position and results of op- erations in the consolidated ﬁ nancial statements in accordance with the applicable ﬁ nancial reporting framework and in the group management report are detected with reasonable assurance. Knowl- edge of the business activities and the economic and legal environment of the Group and expecta- tions as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related inter- nal control system and the evidence supporting the disclosures in the consolidated ﬁ nancial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual ﬁ nancial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and con- solidation principles used and signiﬁ cant estimates made by the Management Board, as well as evalu- ating the overall presentation of the consolidated ﬁ nancial statements and the group management report. We believe that our audit provides a rea- sonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the ﬁ ndings of our audit, the consolidated ﬁ nancial statements of alstria ofﬁ ce REIT-AG, Hamburg/Germany, comply with IFRS, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a (1) HGB and give a true and fair view of the net assets, ﬁ nan- cial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated ﬁ nancial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of fu- ture development. Hamburg/Germany, February 15, 2013 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft 79 I n d e p e n d e n t a u d i t o r s ' r e p o r t sgd. Gerald Reiher Wirtschaftsprüfer (German Public Auditor) sgd. p.p. Annika Deutsch Wirtschaftsprüferin (German Public Auditor) alstria Financial Report 2012 Corporate governance Report of the Supervisory Board 80 e c n a n r e v o g e t a r o p r o C Supervision and advising of the Company’s management During the reporting year, the Supervisory Board advised and supervised the Management Board of the Company in accordance with the statutory pro- visions and the Company’s articles of association. The Supervisory Board was intensively involved in matters of material importance to the Company. During the meetings of the Supervisory Board and its committees, the Management Board reported regularly, promptly and in detail on the develop- ment of the business and ﬁ nancial situation of the Company, on planning, important business events and on current risks, risk management and on the Company’s compliance. The Management Board and Supervisory Board cooperated to set the stra- tegic direction of the Company. Between meetings, the Management Board further informed the Su- pervisory Board orally and in writing of important events. The Chairman of the Supervisory Board regularly met with the Management Board to ex- change information and advice on matters of the strategy, the planning, the business development, the current risks, the risk management and the compliance of the Company. The Management Board consulted the Supervisory Board intensively on all transactions requiring its approval. After careful examination and consulta- tion, the Supervisory Board voted on all matters brought to its attention as the law, the articles of association or rules of procedure of either the Man- agement Board or the Supervisory Board dictated. This included the Company’s budget planning. In the ﬁ nancial year 2012, the Supervisory Board had six ordinary and two extraordinary meetings. All members of the Supervisory Board were present at almost every meeting of the Supervisory Board or participated in the meetings by telephone con- ference. Only in two meetings of the Supervisory Board respectively one member was absent and each was excused for a good cause. In one case the excused member of the Supervisory Board handed in a written vote. In 2013 one additional meeting of the entire Supervisory Board took place prior to the ﬁ nalisation of this report. The situation and development of the Company, the business performance, the market, the development of risks were discussed with the Management Board during all ordinary meetings of the Supervi sory Board. With exception of the meetings in March and April 2012 the ﬁ nancial results of the Company (quarterly and half-year ﬁ nancial reports, ﬁ nancial statements of alstria ofﬁ ce REIT-AG and the consoli- dated ﬁ nancial statements) were discussed in every ordinary meeting of the Supervisory Board. Focal points of discussion In addition to the regularly recurring topics, the Su- pervisory Board and its committees focused in the ﬁ nancial year 2012 in particular on the reappoint- ment of both members of the Management Board, the successfully executed capital increase in spring 2012 and the acquisition of a real estate portfolio as well as the conclusion of a bank loan. In the extraordinary meeting in January 2012, the Supervisory Board and Management Board con- sulted on matters of strategy and approved the conclusion of a loan agreement for ﬁ nancing an acquisition. Based on the respective recommenda- tion of the nomination and remuneration commit- tee, the Supervisory Board resolved upon the re- appointment of the members of the Management Board as well as on the (remuneration-related) basic points of the new service contracts for the members of the Management Board and author- ised the nomination and remuneration committee to negotiate and conclude respective contracts. Furthermore, the Supervisory Board resolved upon the appointment of the members of the Manage- ment Board as Managing Directors of a subsidiary. In February 2012, the Supervisory Board and the Management Board consulted in an extraordinary meeting on the ﬁ nancing of an acquisition and the Supervisory Board approved the conclusion of all necessary advisory and service contracts in con- nection with a possible capital increase against cash contribution of up to 10% of the share capi- tal using the Company’s authorised capital under the exclusion of subscription rights. In this context the Supervisory Board formed a special committee, which was authorised to issue all necessary approv- als and all declarations within the framework of the execution of the capital increase. alstria Financial Report 2012 During its balance sheet meeting in February 2012, the Supervisory Board dealt with the consolidated ﬁ nancial statements and the ﬁ nancial statements as at December 31, 2011, the management reports and the report on relationships with afﬁ liated com- panies for the period running from January 1 until March 30, 2011, and discussed them with the audi- tors. The Supervisory Board approved the ﬁ nancial statements of alstria ofﬁ ce REIT-AG as well as the consolidated ﬁ nancial statements as at Decem- ber 31, 2011, and after careful examination and due consideration joined the proposal of the Man- agement Board regarding the proﬁ t appropriation. During its meeting on March 1, 2012, the Superviso- ry Board and Management Board discussed the uti- lisation of the placement proceeds from the capital increase. The Supervisory Board decided on its reso- lution proposals and its report to the Annual General Meeting for the ﬁ nancial year 2011 and on the cor- porate governance statement including the declara- tion of compliance with the recommendations of the German Corporate Governance Code. On the basis of the nomination and remuneration committee’s recommendation, the Supervisory Board discussed and resolved upon the amount of the short-term variable remuneration of the members of the Man- agement Board for the ﬁ nancial year 2011 consid- ering their individual performance. It also discussed the variable remuneration of the members of the Management Board for the ﬁ nancial year 2012. During its meeting subsequent to the Annual Gen- eral Meeting in April 2012, the Supervisory Board approved the conclusion of a loan agreement as well as the conditions of the new Employee Participation Program as resolved by the Annual General Meet- ing. It resolved on the personnel composition of the audit committee, substantiated the conditions of the long-term variable remuneration element of the members of the Management Board (long-term in- centive plan) and made editorial amendments to the Company’s articles of association. In its meeting in June 2012, the Supervisory Board amended the rules of procedure for the nomina- tion and remuneration committee and the invest- ment committee and approved the Company’s budget for the ﬁ nancial year 2012, which has been adapted during the year with regard to acquisitions and disposals. Furthermore, employees of the ﬁ rst management level below the Management Board and the departments they manage have been in- troduced to the Supervisory Board. alstria Financial Report 2012 During the Supervisory Board’s meeting in Sep- tember 2012, the Supervisory Board approved the cancellation of a loan agreement, which had been concluded to ﬁ nance an acquisition and that had not been drawn down due to the successful execu- tion of the capital increase. The Supervisory Board dealt with the current amendments of the German Corporate Governance Code and adapted the rules of procedure for the audit committee accordingly. Moreover, the formal adaption of the Company’s articles of association to the execution of a capi- tal increase by EUR 59,500.00 in the course of the Company’s Employee Participation Program has been resolved on by the Supervisory Board. After intensive discussion with the Management Board, the Supervisory Board resolved on the busi- ness and budget planning for the ﬁ nancial year 2013 in its meeting in November 2012. The Su- pervisory Board dealt with the composition of the permanent Supervisory Board committees and re- solved on the amendment of the personnel com- position of the audit committee and investment committee as at January 1, 2013. The Supervisory Board reviewed the objectives for its composition as they were determined last in November 2011 (Diversity Statement) and adapted these to the current amendments of the German Corporate Governance Code. The current diversity statement and the status of its implementation are published in the Company’s corporate governance report. Fi- nally, the Supervisory Board discussed the positive results of the review of the efﬁ ciency of its work, which was carried out by the members of the Su- pervisory Board on the basis of a questionnaire. In its balance sheet meeting in February 2013, the Supervisory Board dealt with the consolidated ﬁ - nancial statements and the ﬁ nancial statements for the year ending December 31, 2012, as well as with the Management Board’s recommendation for the proﬁ t appropriation, and resolved upon its report for the ﬁ nancial year 2012 to the Annual General Meeting and the corporate governance re- port. The Supervisory Board dealt with the variable remuneration for the members of the Management Board. Committees of the Supervisory Board To increase the efﬁ ciency of its work, the six-person Supervisory Board formed three permanent com- mittees, each composed of three members. To the extent permitted by law, the committees have been given decision-making powers in some cases, and 81 C o r p o r a t e g o v e r n a n c e 82 e c n a n r e v o g e t a r o p r o C in some cases they prepare the resolutions of the Supervisory Board by making proposals. During the Supervisory Board’s meetings, the committee’s chairmen reported on the result of their commit- tees’ work. In the ﬁ nancial year 2012, the audit committee had four meetings, which were always attended by the Chief Financial Ofﬁ cer. In the course of auditing the accounts of the Company, the audit committee dealt with the consolidated ﬁ nancial statements and the ﬁ nancial statements as at De- cember 31, 2011 and the management reports. It discussed these with the independent auditors and carried out a respective preliminary examination of these documents and the Management Board’s rec- ommendation for the proﬁ t appropriation. Further topics were the recommendation to the Supervi- sory Board regarding the proposed resolution to the Annual General Meeting for the choice of the audi- tors, the review of the independency of the audi- tors, as well as the additional services performed by the auditors, granting the audit contract to Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Hamburg branch, and the engagement agreement, setting the key audit areas and the discussion of the accounting process, the risk management system and the included main risks, the effectiveness of the internal controlling and audit system and the com- pliance system. Finally the audit committee exam- ined the efﬁ ciency of its own work. The evaluation revealed consistently good efﬁ ciency. Management Board on the new service contracts for the members of the Management Board and it dealt with the appropriateness of the remuneration for the members of the Supervisory Board. Before the authority for these resolutions was transferred to the investment committee, the nomination and remuneration committee in addition dealt in two cases with its approval of advisory services by the law ﬁ rm Freshﬁ elds Bruckhaus Deringer LLP, of which the member of the Supervisory Board, Dr Johannes Conradi, is a partner. In the ﬁ nancial year 2012, the investment commit- tee had two meetings and made one decision in writing after circulation of detailed documents to the members. It gave its approval for the acquisi- tion of a real estate portfolio and advisory services by the law ﬁ rm Freshﬁ elds Bruckhaus Deringer LLP. In addition, in the ﬁ nancial year 2012 the Super- visory Board established a special committee that was authorised to issue all necessary approvals and declarations in the course of the execution of a capital increase against cash contribution of up to 10% of the share capital using the Company’s au- thorised capital under the exclusion of subscription rights. The special committee met in February 2012 twice, discussed matters of the execution of the capital increase under the exclusion of subscription rights with the Management Board and approved the capital increase against cash contribution and all related actions and resolutions. The nomination and remuneration committee, which also carries out the tasks of a nomination committee, met three times during the ﬁ nancial year 2012 and made one decision in writing after circulation of detailed documents to the members. The nomination and remuneration committee dis- cussed the amount of the variable remuneration of the members of the Management Board for the ﬁ nancial year 2011, considering their individual performance, the parameters for the variable remu- neration of the Management Board members for the ﬁ nancial year 2012, the proposed resolution of the Supervisory Board to the Annual General Meet- ing on the election of Supervisory Board members and the objectives for the composition of the Su- pervisory Board. The nomination and remuneration committee provided the Supervisory Board with corresponding resolution proposals. The nomina- tion and remuneration committee resolved on the basis of the authorisation given by the Supervisory Board in the course of the reappointment of the No member of the committees participated in less than half of the respective committee’s meetings. Audit of the annual ﬁ nancial statements and consolidated ﬁ nancial statements Deloitte & Touche GmbH Wirtschaftsprüfungs- gesellschaft, Hamburg branch, audited the ﬁ nancial statements and the management report of alstria ofﬁ ce REIT-AG, as well as the consolidated ﬁ nan- cial statements, including the management report of the Group for the ﬁ nancial year running from January 1 until December 31, 2012, all prepared by the Management Board, and issued its unqualiﬁ ed opinion on these documents. The ﬁ nancial statements and the management report of alstria ofﬁ ce REIT-AG, the consolidated ﬁ nancial statements including the management report of the Group as well as the Management Board’s recommendation for the appropriation of alstria Financial Report 2012 Changes in the Supervisory Board Mr Daniel Quai resigned from the Supervisory Board as at March 31, 2012. He has been a member of the Company’s Supervisory Board since 2006. The Supervisory Board would like to thank Mr Quai for many years of valuable contribution to the Company. During the Annual General Meeting 2012, Mr Benoît Hérault and Ms Marianne Voigt, who had al- ready been appointed as member of the Supervisory Board by court since October 2011, were elected as members of the Supervisory Board. The Supervisory Board would like to thank the Management Board and all employees for their dedication and their successful work in the ﬁ nancial year 2012. Hamburg, February 2013 Alexander Stuhlmann Chairman of the Supervisory Board 83 C o r p o r a t e g o v e r n a n c e the annual net proﬁ t were immediately presented to the members of the Supervisory Board after be- ing prepared, as was the auditors’ report. The Su- pervisory Board examined the documents provided by the Management Board in detail, both in its audit committee and at a plenary meeting. In the meet- ing of the audit committee, the auditors reported on the material ﬁ ndings of their audit (including the audit of the internal control and risk management system) and were available for questions. The audit committee prepared the examination of the Super- visory Board and, in the presence of the auditors of the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and the consolidated ﬁ nancial statements, reported to the plenary session. The attendees of the ple- nary meeting examined and discussed both the annual ﬁ nancial statements of the Company and consolidated ﬁ nancial statements prepared by the Management Board and the ﬁ ndings of the audi- tors. There were no objections to the ﬁ nal results of the review by the Supervisory Board. The Super- visory Board approved the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and the consolidated ﬁ nan- cial statements. Thus the ﬁ nancial statements are conﬁ rmed. The Supervisory Board also shared the Management Board’s recommendation for the ap- propriation of the balance sheet proﬁ t. Corporate Governance During the reporting period the Supervisory Board also dealt with the issue of alstria ofﬁ ce REIT-AG fulﬁ lling the recommendations of the German Cor- porate Governance Code. The Management Board and the Supervisory Board last issued the annual declaration of compliance with the German Corpo- rate Governance Code in February 2013, in accord- ance with Section 161 AktG; it was subsequently made permanently available to shareholders on the Company’s website. In their declaration, the Man- agement Board and Supervisory Board explained that most of the recommendations of the German Corporate Governance Code have been, or will be, implemented, as well as which recommendations were, or will not be, followed, and the reasons why they will not be followed. In the ﬁ nancial year 2012, conﬂ icts of interest for Dr Johannes Conradi arose in two approvals per- taining to the commissioning of the law ﬁ rm Fresh- ﬁ elds Bruckhaus Deringer LLP, of which Dr Johan- nes Conradi is a partner. In June 2012, for practical reasons the respective authority for approval was transferred to the investment committee, of which Dr Johannes Conradi is not a member. Since then no conﬂ icts of interest occurred. alstria Financial Report 2012 Corporate governance statement The Management Board and Supervisory Board of alstria ofﬁ ce REIT-AG (“alstria”) are conscious of their responsibility for the corporate governance of the Company, which is undertaken with due regard to the Company’s shareholders, employees and tenants. This sense of responsibility is expressed, among other ways, in transparent corporate gov- ernance with the aim of facilitating the conﬁ dence of alstria’s shareholders, employees, tenants and the public in the management and supervision of the Company. In this statement, the Management Board and Supervisory Board report on alstria’s cor- porate governance according to Section 3.10 of the German Corporate Governance Code (“Code”) and Section 289a para. 1 of the German Commercial Code (HGB). This statement includes the declaration of compliance according to Section 161 of the Ger- man Stock Corporation Act, the relevant information on corporate governance practices, a description of the operating principles and the composition of the Management Board and Supervisory Board as well as corporate governance structures. German Corporate Governance Code and declaration of compliance Many of the principles of the most recent ver- sion of the German Corporate Governance Code (dated May 15, 2012) have already become part of alstria's value-oriented corporate management, which are therefore stricter than the legal require- ments. The principles and recommendations of the Government Commission appointed by the German Federal Ministry of Justice contain inter- nationally and nationally recognised standards for effective and responsible corporate management. The Company's declaration of compliance with the recommendations of the German Corporate Governance Code is published on alstria’s website ›› www.alstria.com. After careful consideration, al- stria chose not to follow the recommendations of the Code in regard to a few points. These points and the reasons for nonconformity are detailed in the declaration of compliance issued by the Man- agement Board and the Supervisory Board on Feb- ruary 28, 2013: Declaration of compliance dated February 28, 2013 “The recommendations of the ‘Government Com- mission German Corporate Governance Code’ as amended on May 15, 2012 were complied with since the prior declaration of compliance dated March 1, 2012 with the following exceptions. The Company intends to continue to comply with the recommendations of the Code as amended on May 15, 2012 to the same extent. Deductible for D&O insurance for the Supervisory Board, Section 3.8 The D&O insurance for the Supervisory Board of alstria ofﬁ ce REIT-AG does not include a deductible. The Management Board and Supervisory Board be- lieve that the members of the Supervisory Board carry out their duties responsibly without any such deductible. Change of performance targets for variable remuneration elements, Section 4.2.3 The short-term incentive of the Management Board is mainly based on the achievement of a funds from operations (“FFO”) target. In the event the FFO achieved in a ﬁ nancial year was positively and mate- rially impacted by new acquisitions, the Supervisory Board adjusts the FFO target accordingly. In doing so, the Supervisory Board is making sure that the Management Board is not incentivised to do acquisi- tions for short-term personal beneﬁ t. The impact of any acquisition on the management remuneration is solely linked to the multi-year remuneration ele- ments, therefore aligning the interest of the Man- agement Board with those of the Company and its shareholders. Vice versa, the Supervisory Board in- tends to also adapt the FFO target to disposals. Discussion of the half-year and quarterly ﬁ nancial reports between the Supervisory Board or its audit committee and the Management Board prior to publication, Section 7.1.2 Prior to their publication, the half-year and quarter- ly ﬁ nancial reports will be made available to the Su- pervisory Board. Furthermore, the ﬁ nancial reports will be discussed with the Supervisory Board in de- tail soon after their publication. In the event that there are considerable differences to the budget or business plan authorised by the Supervisory Board, 84 e c n a n r e v o g e t a r o p r o C alstria Financial Report 2012 the Supervisory Board will have the opportunity to discuss the ﬁ gures with the Management Board be- fore they are published. The Management Board and Supervisory Board consider this approach ap- propriate and adequate.” All other recommendations of the German Corpo- rate Governance Code dated May 15, 2012 have been, or will be, fully implemented. alstria has ap- pointed a corporate governance ofﬁ cer within the Company, who will report any changes of the Code to the Management Board and the Supervisory Board at least once per year and whenever nec- essary. In this way, alstria ensures consistent com- pliance with these principles. Analysis, supervision and transparency are the tools with which alstria lays the foundation for fair and efﬁ cient corporate management. They will also remain the key criteria in future. Working methods of the Management Board and the Supervisory Board The Management Board and the Supervisory Board cooperate closely with conﬁ dence in the interest of the Company. The Chairman of the Supervisory Board has regular contact with the Management Board. The Management Board has two members: Olivier Elamine as the Chief Executive Ofﬁ cer and Alexan- der Dexne as the Chief Financial Ofﬁ cer. The Man- agement Board is responsible for running alstria in the interest of the Company with the aim of sus- tainably increasing the Company’s value. It sets the business goals and – in conjunction with the Super- visory Board – the strategic direction of the Com- pany. The work of the Management Board and the allocation of responsibilities between the individual members of the Management Board are stipulated in the rules of procedure and the role sort for the Management Board. The members of the Manage- ment Board are obligated to immediately disclose any conﬂ icts of interest to the Supervisory Board. The members of the Management Board may only conduct secondary activities, particularly member- ship in the Supervisory Boards of companies not afﬁ liated with the Group, with the approval of the Supervisory Board. The members of alstria’s Management Board had no conﬂ icts of interest in the reporting year. The members of the Man- agement Board serve on no Supervisory Boards of listed companies outside of the Group or in Super- visory Boards of companies with comparable re- quirements. Major business transactions between the Company and members of the Management alstria Financial Report 2012 Board, or with any persons or companies in close association with them, require the approval of the Supervisory Board. All such business transactions must be concluded at standard commercial con- ditions. There were no such contracts during the reporting period. The Management Board pays at- tention to diversity in ﬁ lling its management posi- tions and aims to adequately consider women for these positions. As at December 31, 2012, 44.44% of the management positions at alstria were held by female employees. The Supervisory Board appoints the members of the Management Board and monitors and advises the Management Board on management issues. The Management Board involves the Supervisory Board in any decisions of fundamental importance for the Company. The rules of procedure for the Supervisory Board stipulate that certain, signiﬁ cant business transactions by the Company are subject to the approval of the Supervisory Board, for exam- ple acquiring or disposing real estate property for a consideration of more than EUR 30 m, entering ﬁ nancing agreements with a volume of more than EUR 30 m, entering or prematurely terminating leasing contracts with an annual consideration of more than EUR 2 m, or investing in Company as- sets (modernisation measures) with an annual total sum of more than EUR 2 m when such investments were not already included in the budget approved by the Supervisory Board. The Supervisory Board reports on its activity in the ﬁ nancial year 2012 in its report to the general meeting on ›› pages 80 to 83 of the annual report. Composition of the Supervisory Board In accordance with the articles of association, the Supervisory Board is composed of six members. The Supervisory Board currently consists of Alex- ander Stuhlmann (Chairman), Dr Johannes Conradi (Vice-Chairman), Benoît Hérault, Roger Lee, Rich- ard Mully and Marianne Voigt. The periods of ofﬁ ce of all supervisory members expire at the end of the Annual General Meeting in which the shareholders resolve to discharge them in respect to their activi- ties for ﬁ nancial year 2015. The following changes took place in the composition of the Supervisory Board in 2012: Daniel Quai resigned from ofﬁ ce as at March 31, 2012. Benoît Hérault and Marianne Voigt have been appointed as members of the Su- pervisory Board by the shareholders in the Annual General Meeting for ﬁ nancial year 2012. Marianne Voigt had already been judically appointed as Su- pervisory Board member in October 2011. 85 C o r p o r a t e g o v e r n a n c e No former members of the Management Board sit on the Supervisory Board. The Supervisory Board is composed of members who have the necessary knowledge, competence and professional experi- ence to properly carry out their duties. The Super- visory Board of alstria ofﬁ ce REIT-AG ﬁ rst speciﬁ ed the goals for its composition in November 2010. In November 2012, the Supervisory Board recently reviewed and revised its goals for its composition, in particular with regard to the new recommenda- tion of the German Corporate Governance Code that the Supervisory Board shall now stipulate the number of independent Supervisory Board mem- bers according to No. 5.4.2 of the Code, when naming the objectives for its composition. Further- more, the term of independency has been speci- ﬁ ed effective as of May 15, 2012. The Supervisory Board agreed on a complete adaption of the deﬁ ni- tion of independency of Supervisory Board mem- bers in the objectives for the composition of the Supervisory Board to the term of independency ac- cording to No. 5.4.2 of the Code. With due consideration of the speciﬁ c situation of the Company, the Supervisory Board of alstria thus speciﬁ ed the following goals for the composition of the Supervisory Board in November 2012, which are to be considered in its nominations to the share- holders in general meeting: › Diversity The members of the Supervisory Board shall have the knowledge, skills and expert experience re- quired to successfully complete their tasks, espe- cially in the capital market and the German real estate market. › Women At least one member of the Supervisory Board shall be female. › Experience abroad At least two members of the Supervisory Board shall have acquired reasonable international ex- perience. › Independence At least three members of the Supervisory Board shall have no business or personal relations, which could cause a substantial and not temporary con- ﬂ ict of interest, with the Company, its executive bodies, a controlling shareholder or an enterprise associated with the latter. › Independent ﬁ nancial expert At least one independent member of the Super- visory Board shall have expertise in accounting or audit of annual statements. › Other conﬂ icts of interest At least three members of the Supervisory Board shall not have any consulting or representation duties with main tenants, lenders or other busi- ness partners of the Company. › Age limit Members of the Supervisory Board shall not be older than 70 years of age. All of these goals are currently met. Supervisory Board committees The Supervisory Board has formed three standing committees. Each committee has its own rules of procedure to specify the concerns and tasks of the committee. The audit committee monitors the Company’s ﬁ - nancial reporting process, engages the independent auditors to prepare audit reports, determines the key audit areas and the independent auditors’ com- pensation, and is responsible for issues surrounding risk management, internal control, internal audit and compliance. Until March 31, 2012, the audit committee consisted of Dr Johannes Conradi, as Chairman, as well as Roger Lee and Daniel Quai. Marianne Voigt replaced the resigning member Daniel Quai on the committee on April 24, 2012. Effective as of January 1, 2013, Marianne Voigt took over the chairmanship of the audit commit- tee, from this day on Dr Johannes Conradi sits on the audit committee as ordinary member. The investment committee decides whether the Supervisory Board will approve the acquisition or disposal of real estate property or other assets worth between EUR 30 m and EUR 100 m. Trans- actions of a value greater than this amount are to be presented to the entire Supervisory Board for approval. The investment committee further- more decides on the approval of the Supervisory Board regarding the conclusion, renewal or early termination of lease agreements with third par- ties with a total annual consideration of more than EUR 2 m, as well as regarding contracts with Supervisory Board members according to Section 114 German Stock Corporation Act (Ak- 86 e c n a n r e v o g e t a r o p r o C alstria Financial Report 2012 tiengesetz, AktG). Up until December 31, 2012, the investment committee consisted of Richard Mully, as chair, as well as Roger Lee and Alexander Stuhlmann. Benoît Hérault was elected as member of the investment committee replacing Roger Lee effective as of January 1, 2013. The nomination and remuneration committee, which also carries out the function of a nomina- tion committee, prepares resolutions of the entire Supervisory Board for the appointment and dis- missal of members of the Management Board, for the Management Board’s compensation system and for the total remuneration of individual mem- bers of the Management Board, the resolution of, or amendments to, the rules of procedure for the Management Board, as well as the approval of certain other activities and primary contracts of members of the Management Board. The nomina- tion and remuneration committee decides on the conclusion, amendment, extension and termination of contracts with Management Board members, as well as on the content of such contracts except for compensation. Finally, the nomination and remu- neration committee prepares the resolutions of the Supervisory Board regarding the proposal of the appointment of suitable Supervisory Board mem- bers at Annual General Meetings. The nomination and remuneration committee consists of Alexander Stuhlmann, as Chairman, as well as Dr Johannes Conradi and Richard Mully. In February 2012, the Supervisory Board addition- ally formed a special committee in the course of the execution of a capital increase consisting of Dr Johannes Conradi as Chairman and Roger Lee and Richard Mully as additional members. The Supervisory Board reports on the activities of the committees of the Supervisory Board during the ﬁ - nancial year 2012 in its report to the Annual General Meeting on ›› pages 80 to 83 of the annual report. Remuneration of the Management Board and Supervisory Board The compensation system for the Management Board and the Supervisory Board is laid out in the remuneration report for the ﬁ nancial year 2012. The remuneration of each member of the Manage- ment Board and the Supervisory Board is also bro- ken down there for the ﬁ nancial years 2011 and 2012. By way of resolution of the shareholders in general meeting on June 16, 2010, the shareholders approved the remuneration system for the members of the Management Board with a large majority. Stock option program and similar securities-oriented incentive systems Stock option program and long-term incentive plan In March 2007, the Supervisory Board adopted a stock option program for the members of the Man- agement Board and issued a ﬁ rst and only tranche of stock option rights to the Management Board pursuant to the authorisation granted by the share- holders in general meeting on March 15, 2007. The stock option program was replaced in March 2010 by a long-term incentive plan as a new long-term remuneration component, but the program contin- ues in the scope of the tranche granted in 2007. The term of the stock options granted ends in ﬁ nancial year 2014. Within the framework of the long-term incentive plan, the members of the Management Board will be issued virtual shares with a four-year term each year starting in the ﬁ nancial year 2010. The stock option program and long-term incentive plan are described in the remuneration report on ›› pages 90 to 93 of the annual report. Employee participation program Pursuant to the authorisation granted by the share- holders in general meeting on March 15, 2007, the Management Board was authorised up until March 15, 2012 to issue up to a total of 500,000 con- vertible proﬁ t participation certiﬁ cates with a total nominal value of EUR 500,000 to alstria employees and employees of companies directly or indirectly controlled by alstria within the framework of an employee proﬁ t participation program. Members of the Management Board are not considered em- ployees for the purposes of this plan. After expiration of the aforementioned authorisa- tion, the annual general meeting on April 24, 2012 again authorised the Management Board up until April 23, 2017 to issue up to a total of 500,000 convertible proﬁ t participation certiﬁ cates to alstria employees and employees of companies directly or indirectly controlled by alstria within the framework of an employee proﬁ t participation program. Each convertible proﬁ t participation certiﬁ cate is- sued under the employee participation programs can be converted into an alstria bearer share once the share price exceeds the price on the day the certiﬁ cate was issued by 5% or more on at least 87 C o r p o r a t e g o v e r n a n c e alstria Financial Report 2012 seven non-consecutive trading days. Conversion is only carried out on predeﬁ ned dates and only when the subscriber pays the conversion price and is still employed at alstria or one of its subsidiaries on the date of conversion. The maximum term for a con- vertible proﬁ t participation certiﬁ cate is ﬁ ve years. A total of 300,100 certiﬁ cates was issued in the course of this now expired employee proﬁ t par- ticipation program 2007 of which, so far, a total of 165,500 convertible proﬁ t participation rights were converted into shares of the Company. In the course of the new employee proﬁ t participation program 2012, 86,000 proﬁ t participation certiﬁ - cates were issued. Directors' Dealings – Securities transactions subject to reporting requirement The Management Board and Supervisory Board of alstria ofﬁ ce REIT-AG, as well as related par- ties (family members), are required, pursuant to Section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG), to notify the Company of their own transactions involving Com- pany shares. In addition to the acquisition and sale of alstria shares, every buy or sale transaction related to alstria shares (e. g. the purchase or sale of options on alstria shares) has to be reported. The Company must be informed of such transactions within ﬁ ve working days and publish them immediately. This only applies when the total of the transactions is EUR 5,000 or more within one calendar year. All transactions reported to alstria have been duly pub- lished in the relevant media throughout Europe and can be found on our website ›› www.alstria.com. Relationship to the shareholders of the Company alstria ofﬁ ce REIT-AG respects the rights of its share- holders and makes best efforts to guarantee the ex- ercise of those rights to the extent stipulated by law or the bylaws. In particular, these include the right to freely purchase and sell shares, appropriate access to information, an adequate number of voting rights per share (one share – one vote) and participation in our Annual General Meeting. Shareholders have the option of exercising their voting rights personally or by an authorised representative at the general meet- ing, or sending voting instructions to their proxies. The invitation to the general meeting includes an ex- planation of how voting instructions can be issued. The articles of association currently do not stipulate an option to vote by mail. Shareholders already have the option of voting before the general meeting by authorising a proxy that the additional option of vot- ing by mail would not facilitate the exercise of the shareholders’ rights. Since the shareholders in general meeting in 2008 approved the provision of transmitting information to shareholders electronically, it is now possible to send invitations and documents for shareholders’ general meetings to shareholders electronically upon request. The invitation and the documents to be made available for viewing prior to the upcoming general meetings in accordance with the provisions of law will be published together with additional documents pursuant to Section 124a of the German Stock Corporation Act (Aktiengesetz, AktG) and the agenda on the Company website. The results of the votes will likewise be published on the website of the Company following the general meeting. Communication with the public In sharing information with people outside of the Company, the Management Board follows the principles of transparency, promptness, openness, clarity and equal treatment of shareholders. In par- ticular, alstria informs its shareholders and the in- terested public about the situation of the Company and signiﬁ cant business events through ﬁ nancial reports, analyst and press conferences, press and ad-hoc announcements and the general meeting. The website of alstria includes information on the Company and its shares, especially the ﬁ nancial reports, share price tracking and announcements about the acquisition or disposal of Company shares or related ﬁ nancing instruments pursuant to Section 15a WpHG. Moreover, alstria’s ﬁ nancial reports and website include a ﬁ nancial calendar which indicates all dates of importance to share- holders. All announcements and information are additionally published in English. Financial reporting and auditing During the ﬁ nancial year, alstria regularly informs shareholders and third parties by publishing its consolidated, half-year and quarterly ﬁ nancial statements. The consolidated ﬁ nancial statements are prepared in accordance with the International Financial Reporting Standards (IFRS). For legal reasons (calculating dividends, creditor protec- tion), ﬁ nancial statements for alstria ofﬁ ce REIT-AG are also prepared in accordance with the German Commercial Code (HGB). 88 e c n a n r e v o g e t a r o p r o C alstria Financial Report 2012 Violations of the code of conduct will not be toler- ated; they will be fully investigated and the viola- tors punished. This can be anything from discip- linary measures to dismissal, a claim for damages or even prosecution. Hamburg, February 2013 The Management Board The Supervisory Board 89 C o r p o r a t e g o v e r n a n c e The consolidated ﬁ nancial statements and the ﬁ - nancial statements of alstria ofﬁ ce REIT-AG are audited by both the independent auditor selected by the shareholders in general meeting, and by the Supervisory Board. The audit committee of the Supervisory Board appoints an external auditing ﬁ rm, after examining its independence, to audit the ﬁ nancial statements and negotiates the audit- ing fees. Deloitte & Touche GmbH Wirtschaftsprü- fungsgesellschaft, Hamburg branch, was appointed to audit the annual and half-year ﬁ nancial state- ments of alstria ofﬁ ce REIT-AG and of the Group for the ﬁ nancial year 2012. The auditors partici- pate in the meetings of the audit committee and the Supervisory Board in plenum to advise on the consolidated ﬁ nancial statements and the ﬁ nancial statements of alstria ofﬁ ce REIT-AG and to present the key ﬁ ndings of the audit. Compliance In accordance with Section 4.1.3 of the German Corporate Governance Code, the Management Board is responsible for ensuring compliance with the legal provisions and Company guidelines throughout all of the Group companies. The good reputation of alstria and the trust of its sharehold- ers, tenants and employees depend crucially on the behaviour of each individual employee. For this reason, alstria drew up a code of conduct, listing guidelines for behaviour and orientation for resolving conﬂ icts (e. g. conﬂ icts of interest), there- by serving as a model of correct behaviour for all employees of the Group. The code of conduct is published on our website ›› www.alstria.com. alstria set up a compliance organisation to commu- nicate the values inherent in the code of conduct and Company guidelines, and to monitor compli- ance with these values. The compliance ofﬁ cer is responsible for communicating these values by answering questions on the implementation of the code and by in-house training for all employees. Compliance is monitored through colleagues, su- pervisors and the compliance ofﬁ cer, as well as via regular investigation by auditors. alstria has also set up a hotline through which employees can anony- mously report any violations of the code of conduct or the Company-internal guidelines. Furthermore, the Management Board regularly discusses Com- pany compliance with the Supervisory Board’s audit committee. alstria Financial Report 2012 90 e c n a n r e v o g e t a r o p r o C Remuneration report* Remuneration of the Management Board members The remuneration system for the members of the Management Board is determined by the Supervi- sory Board and is reviewed regularly. In the ﬁ nancial year 2010, the Supervisory Board adapted the re- muneration system to the new legal requirements of the German Act on Appropriateness of the Manage- ment Board Compensation (VorstAG) in accordance with the recommendations of an independent ex- ternal remuneration expert. The Supervisory Board is of the opinion that this remuneration system still provides adequate remuneration for the members of the Management Board, which is based on custom- ary market terms and conditions and, in particular, also takes account of the lasting success of the Com- pany. The remuneration system for the members of the Management Board described below was ap- proved by the shareholders in general meeting for the ﬁ nancial year 2009 by a large majority (98.11% of votes in favour) and has been incorporated into the new Management Board service contracts, which apply to the new appointment of the Man- agement Board members since January 1, 2013. In the remuneration system, the criteria for deter- mining the appropriateness of the remuneration of the members of the Management Board are the du- ties of each individual Management Board member, his or her personal performance, the ﬁ nancial situa- tion, the success and future prospects of the Com- pany, as well as the customary practice regarding remuneration relative to its peer companies and the remuneration structure of the Company. 1. Structure of the Management Board remuneration The remuneration consists of a ﬁ xed basic salary, a short-term and a long-term variable component and ancillary beneﬁ ts (beneﬁ ts in kind) for each Management Board member. The majority of the remuneration is made up of the variable compo- nents which are primarily based on several years of assessment. Limits were introduced for extraordi- nary developments. The ﬁ xed remuneration is a basic salary independ- ent of performance which is paid as salary on a prorated basis each month. The ﬁ xed remuneration amounts to approx. 40% of the designated total remuneration without ancillary beneﬁ ts. * This remuneration report forms an integral part of the audited Group management report or notes to the annual ﬁ nancial statements. The short-term variable remuneration (Short-Term Incentive or STI) is determined for each year on the basis of a performance target, the Budgeted Funds from Operations (FFO). The amount of the Short- Term Incentive depends on the degree to which the target is reached, whereby the target value must be met by at least 50% for the incentive to be paid out and by no more than a maximum of 150% (cap). The individual performance of each Man- agement Board member is taken into account in a multiplier (0.8 to 1.2). The maximum amount to be paid is limited by a cap. Only 75% of the perform- ance incentive will be paid to a Management Board member in cash. A total of 25% of the performance incentive will be converted to virtual shares, which are subject to a vesting period of two years. The number of virtual shares granted is calculated from the amount corresponding to 25% of the Short- Term Incentive divided by the share price of one alstria share at the time, which is calculated on the basis of one reference period. The virtual shares will be converted into a cash amount after the expiry of the vesting period. This cash amount is calculated based on the number of virtual shares multiplied by the share price of one alstria share at the time and is calculated on the basis of a reference period. The Short-Term Incentive amounts to approx. 20% of the planned total remuneration without ancillary beneﬁ ts. As a long-term variable remuneration component, virtual shares with a four year term are issued to the members of the Management Board each year within the framework of a performance share plan (Long-Term Incentive Plan or LTI Plan). The number of virtual shares to be granted results, in principle, from a target value divided by the share price of one alstria share upon the issue of the virtual shares (calculated on the basis of a reference period). The amount of virtual shares issued from the LTI Plan will be adjusted at the end of each performance pe- riod depending on the degree to which the target is met. A total of 50% of the performance targets de- termined by the Supervisory Board is the absolute total shareholder return derived from the Weighted Average Cost of Capital (WACC) and 50% is the relative total shareholder return calculated on the basis of the reference index EPRA NAREIT Europe Ex UK. The virtual shares will be converted into a one-time cash payment after the expiry of the term. The amount will be calculated by the number of virtual shares after adjustment multiplied by the share price of one alstria share at the time (calcu- lated on the basis of a reference period) and a mul- tiplier (0.8 to 1.2) which takes into consideration alstria Financial Report 2012 the individual performance of the Management Board member. Just as with the Short-Term Incen- tive, a certain degree of the target must be reached in order for a payment to be made. Furthermore, the amount of the payment is also limited by a cap in the LTI Plan. The Long-Term Incentive amounts to approximately 40% of the prescribed total re- muneration without ancillary beneﬁ ts. The members of the Management Board, further- more, receive ancillary beneﬁ ts in the form of ben- eﬁ ts in kind which essentially consist of insurance premiums, pension beneﬁ ts and the private use of a company car. As a component of remuneration, each individual member of the Management Board is to pay taxes on such ancillary beneﬁ ts. Each member of the Management Board is, in principle, equally entitled to such ancillary beneﬁ ts though the amount varies in accordance with each per- sonal situation. 2. Remuneration of the Management Board in the ﬁ nancial year 2012 The total remuneration for the members of the Man- agement Board in the last ﬁ nancial year amounted to EUR 2,221 k. The individual remuneration of the members of the Management Board for the ﬁ nancial years 2012 and 2011 is composed as follows: Individual Management Board remuneration 2012 EUR k Member of the Management Board Fixed amount Short-term variable remuneration 1) Long-term variable remuneration Ancillary beneﬁ ts 4) Total remuneration Paid-out component Deferred component 2) Paid-out component Deferred component 3) Olivier Elamine, Chief Executive Ofﬁ cer Alexander Dexne, Chief Financial Ofﬁ cer Total 440 360 800 185 151 336 62 50 112 0 0 0 440 360 800 96 77 173 1,223 998 2,221 1) For performance in 2011. 2) Allotment of virtual shares with speciﬁ ed fair value with deferred cash payment after two years' vesting period. 3) Allotment of virtual shares with speciﬁ ed target value with deferred cash payment after four years' vesting period. 4) Includes beneﬁ ts for company car, insurance and pension. 91 C o r p o r a t e g o v e r n a n c e Individual Management Board remuneration 2011 EUR k Member of the Management Board Fixed amount Short-term variable remuneration 1) Long-term variable remuneration Ancillary beneﬁ ts 4) Total remuneration Cash component Deferred component 2) Cash component Deferred component 3) Olivier Elamine, Chief Executive Ofﬁ cer Alexander Dexne, Chief Financial Ofﬁ cer Total 440 360 800 200 164 364 67 55 122 0 0 0 440 360 800 95 79 174 1,242 1,018 2,260 1) For performance in 2010. 2) Allotment of virtual shares with speciﬁ ed fair value with deferred cash payment after two years' vesting period. 3) Allotment of virtual shares with speciﬁ ed target value with deferred cash payment after four years' vesting period. 4) Includes beneﬁ ts for company car, insurance and pension. alstria Financial Report 2012 The individual Management Board remuneration for the ﬁ nancial year 2012 presented in the table above shows a short-term variable remuneration compo- nent for performances in the ﬁ nancial year 2011. The structure of this short-term variable remunera- tion component (STI) is described above in more detail. The target value for the ﬁ nancial year 2011 amounted to EUR 220 k for Mr Olivier Elamine and to EUR 180 k for Mr Alexander Dexne. The actual amount of the STI for the Management Board as de- scribed above is mainly based on the achievement of a funds from operations target. As the FFO achieved in ﬁ nancial year 2011 was posi- tively and materially impacted by new acquisitions, the Supervisory Board has changed the FFO target by increasing it with regard to acquisitions that be- came effective during 2011. In doing so, the Super- visory Board made sure that the Management Board is not incentivised to do acquisitions for short-term personal beneﬁ t. As a result of the adjustment, the short-term incentive awarded to the Management Board for ﬁ nancial year 2011 was lower than what it would have been if the FFO target had not been adjusted. The impact of any real estate transaction on the management remuneration is solely linked to the multi-year remuneration elements, therefore align- ing the interest of the Management Board with those of the Company and its shareholders. The Supervisory Board intends to also adapt the FFO target in future ﬁ nancial years accordingly in order to limit the performance measure to operational result, excluding any real estate transaction impact. 25% of the short-term incentive for the ﬁ nancial year 2011 was paid out in virtual shares of the Com- pany, whereby Mr Elamine was allotted 7,101 vir- tual shares with the fair value speciﬁ ed above and Mr Dexne received 5,810 virtual shares with the fair value speciﬁ ed above. The individual Management Board remuneration for the ﬁ nancial year 2012 presented in the table above shows a long-term variable remuneration component. The structure of this long-term vari- able remuneration component is described above in more detail. In the ﬁ nancial year 2012, virtual shares with a target value in total of EUR 800 k and a four years vesting period were granted in the course of the long-term variable remuneration component. The target value for the long-term var- iable remuneration component in the ﬁ nancial year 2012 amounted for Mr Elamine to EUR 440 k and for Mr Dexne to EUR 360 k. Thus, Mr Elamine was granted 50,575 virtual shares valued at EUR 8.70 each and Mr Dexne was granted 41,379 virtual shares valued at EUR 8.70 each. Both will vest after four years subject to certain relative and absolute share price performance. The ancillary beneﬁ ts shown in the table above for 2012 and 2011 include payments for private pen- sion plans for Mr Olivier Elamine in the amount of EUR 75 k and for Mr Alexander Dexne in the amount of EUR 50 k. No advance remuneration payments were made to members of the Management Board in the ﬁ nancial year 2012, nor were any loans granted or conﬁ rma- tions of pension entitlements issued. No salary was paid to former members of the Management Board in the ﬁ nancial year 2012. No provisions needed to be set aside for former members of the Manage- ment Board. 3. Other mandatory disclosures Beneﬁ ts upon premature termination of Management Board duties If membership of the Management Board is ter- minated, members have agreed to a post-con- tractual non-compete agreement of up to twelve months, which may be waived by alstria with a six months’ notice period. As long as alstria exercises this post-contractual non-compete obligation, the members of the Management Board shall receive a compensation payment for this period equiva- lent to their last ﬁ xed salary. In the event of an early termination of a Management Board service contract by mutual agreement, the members of the Management Board are still entitled to their remuneration claims during the remaining term of the service contract, however, no more than the value of two years’ remuneration. Beneﬁ ts to be paid by the Company if the appointment is termi- nated by the death of the board member amount to the ﬁ xed salary for the month in which the member died and for the following three months. The incentive payment for this period shall be paid pro rata up to and including the month of death. The Management Board contracts do not include any change of control clauses. 92 e c n a n r e v o g e t a r o p r o C alstria Financial Report 2012 Additional information on share-based remuneration components The long-term variable remuneration component was implemented in 2010 and thereby replaced the Company’s stock option program 2007. The mem- bers of the Management Board were granted a single tranche of stock options in the course of the stock option program 2007 in ﬁ nancial year 2007. The term for these stock options ends in ﬁ nancial year 2014. No expenses arose in the ﬁ nancial year 2012 from the stock options granted in the ﬁ nan- cial year 2007. The details of the stock option program 2007 are as follows: The term of the stock options is seven years from the time they are granted. The options may only be exercised if the current share price of the Company exceeds the exercise price by 20% or more on at least seven non-consecutive trad- ing days of the Frankfurt Stock Exchange before the start of the respective exercise period. The stock options may only be exercised after expiry of a vesting period of two years and during one of the four exercise periods of each year. Each exer- cise period amounts to 30 days beginning on the date of publication of the Company’s results for the ﬁ rst, second and third quarters and the date of the Company’s Annual General Meeting. There are no cash settlement alternatives. The exercise price for the stock options granted in 2007 is EUR 16.00. The performance target for the 2007 stock options amounts to EUR 19.20 and their term ends in ﬁ - nancial year 2014. Remuneration of the Supervisory Board members 1. Structure of the Supervisory Board remuneration The members of the Supervisory Board each re- ceive an annual ﬁ xed remuneration in the amount of EUR 40 k. The Chairman of the Supervisory Board also receives an additional annual amount of EUR 20 k and the Vice-Chairman receives an ad- ditional amount of EUR 10 k. Members who only sit on the Supervisory Board for part of a year re- ceive pro rata remuneration. Membership of the audit committee entails separate remuneration of EUR 10 k and the chair of the audit committee re- ceives EUR 15 k. Membership in other committees does not give entitlement to any additional remu- neration. 2. Remuneration of the Supervisory Board in the ﬁ nancial year 2012 The total remuneration for the Supervisory Board in 2012 amounted to EUR 301.86 k. The individual remuneration of the members of the Supervisory Board for the ﬁ nancial year 2012 and 2011 is com- posed as follows: EUR k Supervisory Board member Supervisory Board membership Audit committee membership Remuneration for 2011 Remuneration for 2012 93 C o r p o r a t e g o v e r n a n c e Alexander Stuhlmann Chairman Dr Johannes Conradi Vice-Chairman Roger Lee Richard Mully Daniel Quai Member Member Member until March 31, 2012 Marianne Voigt Member n/a Chairman Member n/a Member until March 31, 2012 Member since April 24, 2012 Benoît Hérault John van Oost Total Member since April 24, 2012 Vice-Chairman until June 8, 2011 n/a n/a 60.00 60.67 50.00 40.00 50.00 7.56 n/a 21.78 290.01 60.00 65.00 50.00 40.00 12.43 46.89 27.54 n/a 301.86 No advance remuneration payments were made to members of the Supervisory Board in the ﬁ nancial year 2012, nor were any loans granted. No remu- neration was paid out for individual services. alstria Financial Report 2012 REIT disclosures REIT declaration Statement of the Management Board In relation with our ﬁ nancial statements according to Section 264 of the German Commercial Code (Han- delsgesetzbuch, HGB) and our consolidated ﬁ nan- cial statements according to Section 315a HGB as at December 31, 2012, the Management Board issues the following declaration regarding compliance with the requirements of Sections 11 to 15 of the Ger- man Real Estate Investment Trust Act (REIT-Gesetz, REITG) and regarding the calculation of the compo- sition of income subject to and not subject to income tax for the purpose of Section 19 para. 3 REITG in conjunction with Section 19a REITG: 1. As per the balance sheet date, 73.80% of alstria’s shares were free ﬂ oat according to Section 11 para. 1 REITG. This was disclosed to the German Federal Financial Supervisory Authority (BaFin). 2. In accordance with Section 11 para. 4 REITG, as per the balance sheet date, no shareholder owned directly 10% or more of our shares or shares of such an amount that he holds 10% or more of the voting rights. 3. In relation to the sum of the assets pursuant to the consolidated statements less the distribution obligation and the reserves pursuant to Sec- tion 12 para. 2 REITG a) as per the balance sheet date the immovable assets amounted to EUR 1,657,104 k which equals to 92.74% of the assets, therefore at least 75% of the assets belong to the immov- able assets; b) the assets belonging to the property of REIT service companies as per balance sheet date which were included in the consolidated statements amount to a maximum of 20%, namely EUR 390 k and therefore 0.02%. 4. In relation to the sum of the entire sales revenue plus the other earnings from immovable assets pursuant to the consolidated statements accord- ing to Section 12 para. 3 and 4 REITG a) for the ﬁ nancial year 2012, the entire sales rev- enues of the Group plus other earnings from immovable assets amounted to EUR 99.0 m. This equals 100% of total revenues plus other earnings from immovable assets; 94 s e r u s o c s i d l T I E R b) the sum of the sales revenue plus the other earnings from immovable assets of REIT serv- ice companies amounted to EUR 204 k in the ﬁ nancial year 2012. This equals 0.21% of to- tal revenue plus other earnings from immov- able assets. 5. In the ﬁ nancial year 2012, a dividend payment of EUR 34,705 k for the prior ﬁ nancial year was distributed to the shareholders. The ﬁ nancial year 2011 did not result in a net income according to commercial law pursuant to Section 275 HGB. 6. alstria ofﬁ ce REIT-AG’s dividend does not derive from already taxed parts of the proﬁ t. 7. Since 2008, the Group has realised 20.99% of the average portfolio of its immovable assets and therefore did not trade with real estate according to Section 14 REITG. 8. On the balance sheet date the Group’s eq- uity as shown in the consolidated statements according to Section 12 para. 1 REITG was EUR 829.3 m. This equals to 50% of the value of the immovable assets which are shown in the consolidated statements in conformance with Section 12 para. 1 REITG. alstria ofﬁ ce REIT-AG Hamburg, February 14, 2013 Olivier Elamine CEO Alexander Dexne CFO alstria Financial Report 2012 REIT memorandum We summarised the result of our audit in an au- ditor’s memorandum according to Section 1 (4) Clause 5 of the Act on German Real Estate Stock Corporations with listed Shares: Auditor’s memorandum according to Section 1 (4) of the Act on German Real Estate Stock Corporations with listed Shares (REIT Act) To alstria ofﬁ ce REIT-AG, Hamburg As auditor of the annual ﬁ nancial statements and the consolidated ﬁ nancial statements of alstria of- ﬁ ce REIT-AG, Hamburg, for the ﬁ nancial year from January 1 to December 31, 2012, we have audited the information given in the attached declaration of the Management Board members for the compli- ance with the requirements of Section 11 to 15 of the REIT Act and the composition of the proceeds concerning the pre-taxation of proceeds accord- ing to Section 19 (3) and Section 19a REIT Act as of December 31, 2012 (hereinafter referred to as “REIT declaration”). The information given in the REIT declaration is in the responsibility of the Man- agement Board of the Company. Our responsibility is to express an opinion on the information given based on our audit. We conducted our audit considering the audit guidance promulgated by the Institut der Wirt- schaftsprüfer (Institute of Public Auditors in Ger- many) (IDW): Particularities concerning the audit of a REIT stock corporation according to Section 1 (4) REIT Act, a pre-REIT stock corporation accord- ing to Section 2 Clause 3 REIT Act and the audit according to Section 21 (3) Clause 3 REIT Act (IDW PH 9.950.2). Therefore we have planned and per- formed our audit to make a judgement with rea- sonable assurance if the free ﬂ oat ratio and the maximum stock ownership per shareholder accord- ing to Section 11 (1) and (4) REIT Act agrees with the announcements due to Section 11 (5) REIT Act as of December 31, 2012, and if the provided information concerning the requirements of Sec- tion 12 to 15 REIT Act and the composition of the proceeds concerning the pre-taxation of proceeds according to Section 19a REIT Act is appropriate. alstria Financial Report 2012 It was not part of our engagement to fully assess the companie's tax assessments or position. Within our audit procedures we compared the information concerning the free ﬂ oat ratio and the maximum stock ownership per shareholder according to Sec- tion 11 (1) and (4) REIT Act provided within the REIT declaration with the announcements due to Section 11 (5) REIT Act as of December 31, 2012 and agreed the provided information concerning the requirements of Section 12 to 15 REIT Act with the information disclosed in the annual ﬁ nancial statements and the consolidated ﬁ nancial state- ments of the Company. Furthermore, we tested the adjustments made to the valuation of immovable assets held as investment for their compliance with Section 12 (1) REIT Act. We believe that our audit provides a reasonable basis for our opinion. In our opinion based on the ﬁ ndings of our audit, the information given in the REIT declaration con- cerning the free ﬂ oat ratio and the maximum stock ownership per shareholder due to Section 11 (1) and (4) REIT Act agrees with the announcements made according to Section 11 (5) REIT Act as of December 31, 2012 and the information provided concerning the compliance with Section 12 to 15 REIT Act and the composition of the proceeds con- cerning the pre-taxation of proceeds according to Section 19a REIT Act are appropriate. This memorandum is solely provided for submis- sion to the tax authorities of the city of Hamburg within the tax declaration according to Section 21 (2) REIT Act. Hamburg/Germany, February 15, 2013 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft 95 R E I T l d i s c o s u r e s sgd. Gerald Reiher Wirtschaftsprüfer (German Public Auditor) sgd. p.p. Annika Deutsch Wirtschaftsprüferin (German Public Auditor) Other information Glossary AFFO (adjusted funds from operations) The AFFO is equal to the FFO (funds from opera- tions) with adjustments made for capital expendi- tures used to maintain the quality of the underlying investment portfolio. Annual ﬁ nancial statements The annual ﬁ nancial statements include the balance sheet and the proﬁ t and loss account of a company. In respect of a joint stock company, these are pre- pared by the Management Board, audited by a char- tered accountant for compliance and checked by the Supervisory Board. Annual General Meeting At least once a year the shareholders of a joint stock company convene for the Annual General Meeting. This meeting elects the Supervisory Board and the balance sheet auditor. It passes resolutions on the appropriation of the annual proﬁ t shown, on mea- sures for raising capital, on changes to the articles of association and other fundamental issues; it is the only body which can approve the decisions made by the Supervisory Board and the Management Board. Asset management Value-driven management and/or optimisation of real estate investments through letting management, re- furbishment, repositioning and tenant management. Cash ﬂ ow Indicator that shows the net inﬂ ow of cash from sales activities and other current activities during a given period. CO2 Carbon dioxide, a gas produced primarily through the combustion of fossil fuels. It is believed to be the main cause of climate change. Consolidated statement of ﬁ nancial position Balancing assets against liabilities, that is, “debits“ and “credits”, at the end of the ﬁ nancial year. As a result one can see the net asset position of the joint stock company. A component part of the annual ﬁ nancial statements. 96 n o i t a m r o f n i r e h t O Contractual rent At a given date, the contractual rent reﬂ ects the total annualised rent taking into consideration all signed rental contracts. Contractual vacancy rate Contractual vacancy rate is the amount of space as a per cent of the total area of the portfolio on which there is no current or future signed lease contract. CRESS (Construction and Real Estate Sector Supplement) Supplement to the GRI guidelines for the special disclosure requirements of companies from the real estate and construction sector. DAX The German Share Index (DAX) reﬂ ects the value trend of the 30 most important German shares. In addition to the market prices, the dividend payments are also included here. DAX began at the end of 1987 with a value of 1,000. DGNB (Deutsche Gesellschaft für Nachhaltiges Bauen) The German Sustainable Building Council establishes a system for the assessment and the certiﬁ cation of sustainable buildings. EPRA (European Public Real Estate Association) The EPRA index is the well-known international index which tracks the performance of the largest Euro- pean and North American listed property companies. The European Public Real Estate Association (EPRA) is an organisation that represents the interests of the major European property management companies and supports the development and market presence of European public property companies. Its members include companies such as alstria ofﬁ ce REIT-AG, ﬁ nancial analysts, investors, advisors and auditors. Fair value (or open market value [OMV]) The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transac- tion after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value for alstria’s investment properties is reviewed regularly by external appraisers. alstria Financial Report 2012 FFO (funds from operations) alstria calculates FFO as EBT, decreased/increased by the net gain/loss from fair value adjustment on investment property, decreased/increased by the net gain/loss from fair value adjustment on ﬁ nan- cial derivatives, increased/reduced by the proﬁ t/ loss on disposal of investment property, decreased/ increased by the net gain/loss from fair value ad- justments on investment property of joint ventures, decreased/increased by non-recurring items, plus non-cash-expenses and less cash taxes paid. G-REIT Real Estate Investment Trusts are public listed com- panies, fully tax transparent, which solely invest in properties. IFRS IFRS are adopted by the International Accounting Standards Board (IASB). The objective is to achieve uniformity and transparency in the accounting principles that are used by companies and other organisations worldwide for ﬁ nancial reporting. IFRS have applied to listed companies since Janu- ary 1, 2005. Investment property Property, land and buildings, which are held as ﬁ nancial investments to earn rents or for growth, and not used for the Company’s own purpose. The value of the investment property is determined ac- cording to IAS 40. Joint venture Legally independent entity formed between two or more parties to undertake economic activity to- gether. It is jointly controlled by the parties under a contractual arrangement whereby decisions on ﬁ nancial and operating policies essential to the operation, performance and ﬁ nancial position of the venture require each party’s consent. LTV (loan to value) alstria calculates loan to value (LTV) by dividing the total loans outstanding to ﬁ nance investment properties by the value of all mortgaged investment properties. The calculation of alstria’s net LTV also deducts the available non-restricted cash on the respective balance sheet date, which is deducted from the gross debt amount. NAV (net asset value) Reﬂ ects the economic equity of the Company. It is calculated from the value of assets less debt. NNNAV (triple net asset value) The Company computes NNNAV as total equity as reported in the IFRS consolidated statement of ﬁ nan- cial position, which accounts for the carrying amount and the fair value of ﬁ nancial instruments and ﬁ nan- cial liabilities, adjusted for hidden reserves and hidden losses in immovable assets and ﬁ nancial liabilities. Ofﬁ ce building Property where at least 75% of the lettable area is destined to ofﬁ ce use (disregarding potential ground ﬂ oor retail). Passing rent Annual gross rental income as per a certain date, excluding the net effects of straight-lining for lease incentives. Property management Property management is the management of real es- tate assets including the processes, systems and man - power required to manage the life cycle of a building. 97 O t h e r i n f o r m a t i o n Road shows Corporate presentations to institutional investors. Sale-and-leaseback transaction Form of arrangement in which one party sells an asset to another party in exchange for cash and contracts to lease the asset for a speciﬁ ed term. alstria Financial Report 2012 SDAX Small Cap Index; it contains, with variable weight- ing, the prices of the 50 most important, in terms of market capitalisation and turnover, German joint stock companies which are not included in DAX or MDAX. In addition to dividend payments, subscrip- tion right proceeds are also included when calculat- ing the index. Share The term share describes both the membership rights (holding in the joint stock company) and the security which embodies these rights. The holder of a share (shareholder) is a “sharer” in the assets of the joint stock company. Their rights are protected by the regulations contained in the Companies Act. Share buy back A process whereby a joint stock company buys its own shares and thus allows capital to ﬂ ow back to the shareholders. No rights are conceded to the company from these shares (voting right, dividend entitlement, subscription right, etc.). 98 n o i t a m r o f n i r e h t O Share capital The capital stipulated in a corporation’s articles of association. The articles also specify the number of shares into which the share capital is divided. The company issues shares in the amount of its share capital. Stakeholder An individual, community or organisation that af- fects or is affected by some aspect of an organisa- tion’s products, operations, markets, industries and outcomes. Stock exchange The stock exchange is the market (meeting place for supplies and demands) for securities. Stock ex- change dealing takes place in the Federal Republic of Germany in certain places and at certain times. The German stock exchanges are subject to state control. The Stock Exchange Commission decides which persons are authorised to deal on the stock exchanges. A listing committee supervised by the federal state decides on the admission of securities for stock exchange dealing. There are various sub- markets on the German stock exchanges which are also called trading or market segments. Purchase and sales contracts for securities which are not ad- mitted to any of the market segments may not be accepted or negotiated in the dealing room during trading hours. Supervisory Board The Supervisory Board is one of the three execu- tive bodies of a joint stock company: Annual Gen- eral Meeting, Management Board and Supervisory Board. The Supervisory Board appoints the Manage- ment Board and provides supervision and advice regarding management of the company’s business. Sustainability Alignment of an organisation’s products and services with stakeholder expectations, thereby adding eco- nomic, environmental and social value. Transparency A principle that allows those affected by adminis- trative decisions, business transactions or charitable work to know not only the basic facts and ﬁ gures but also the mechanisms and processes. It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably. Vacant space Vacant space refers to the sum of all lettable space that at the end of a calendar year is unoccupied or offered for lease. Valuation yield Key performance indicator, which is determined at a given date by the contractual rent in relation to the fair value of the property. alstria Financial Report 2012 Events 2013 Special dates you should note ... March 27 Publication of the annual report 2012 Financial report (Hamburg) May 7 Publication of Q1 report Interim report (Hamburg) May 29 Annual General Meeting Hamburg August 6 Publication of Q2 report Half-year interim report (Hamburg) November 5 Publication of Q3 report Interim report (Hamburg) Publication of the sustainability report 2013 alstria Financial Report 2012 99 O t h e r i n f o r m a t i o n Contact Imprint Concept, design and realisation Kirchhoff Consult AG Herrengraben 1 20459 Hamburg, Germany alstria ofﬁ ce REIT-AG Bäckerbreitergang 75 20355 Hamburg, Germany Phone › +49 (0)40 226341-300 www.alstria.com www.alstria.blogspot.com www.twitter.com/alstria_REIT Investor Relations Ralf Dibbern Phone › +49 (0)40 226341-329 Fax › +49 (0)40 226341-310 E-mail › rdibbern@alstria.de alstria ofﬁ ce REIT-AG is a member of DIRK (Deutscher Investor Relations Verband, the German Investor Relations Association). Other reports issued by alstria ofﬁ ce REIT-AG are posted on the Company’s homepage. Forward-looking statements This annual report contains forward-looking statements. These statements represent assessments which we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based not occur, or if risks should arise – as mentioned in the risk report – the actual results could differ materially from the results currently expected. Note This report is published in German (original version) and English (non-binding translation). alstria ofﬁ ce REIT-AG ﬁ ve-year overview according to IFRS EUR k Revenues and earnings Revenues Net rental income Consolidated loss/proﬁ t for the period FFO Earnings per share (EUR) FFO per share (EUR) EPRA1) earnings per share (EUR) 2012 2011 2010 2009 2008 101,286 90,110 39,911 43,571 0.51 0.55 0.55 90,798 80,868 27,448 34,685 0.40 0.48 0.50 89,094 81,759 102,510 91,964 102,055 93,222 206 –79,651 –56,000 27,541 0.00 0.45 0.44 32,690 –1.40 0.58 0.53 39,415 –1.02 0.70 0.68 Balance sheet Investment property Total assets Equity Liabilities NAV per share (EUR) Net LTV G-REIT key ﬁ gures G-REIT ratio Revenues plus other income from investment properties EPRA1) key ﬁ gures Diluted EPRA NAV per share (EUR) EPRA NNNAV per share (EUR) EPRA net initial yield EPRA “topped-up” net initial yield EPRA vacancy rate EPRA cost ratio Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008 1,622,988 1,528,589 1,348,400 1,425,440 1,805,265 1,786,893 1,686,637 1,542,336 1,766,134 1,873,493 829,287 957,606 10.50 47.8% 768,195 918,442 10.71 50.1% 692,408 849,928 11.24 49.8% 634,185 729,667 1,131,949 1,143,826 11.32 57.9% 13.03 59.0% 50.0% 48.7% 49.8% 40.3% 40.3% 100% 100% 100% 100% 100% 10.98 10.50 5.7% 5.7% 8.0% 11.32 10.71 5.8% 5.8% 6.5% 11.68 11.24 5.5% 5.7% 5.1% 12.18 11.32 5.4% 5.4% 3.3% 13.87 13.03 5.2% 5.2% 5.9% 21.4% 24.0% 20.2% 20.9% 20.1% 1) Please refer to EPRA Best Practices Recommendations, ›› www.epra.com. Bäckerbreitergang 75 20355 Hamburg, Germany Phone: +49 (0)40 226341-300 Fax: +49 (0)40 226341-310 www.alstria.com Friedrichstrasse 19 40217 Düsseldorf, Germany Phone: +49 (0)211 301216-600 Fax: +49 (0)211 301216-615 www.alstria.com Points of view Annual Report 2012 Part II/II – Financial Report alstria ofﬁ ce RE alstria ofﬁ ce REIT-AG 53° 33' 13'' N; 9° 58' 54'' E a i r t s l a t r o p e R l i a c n a n F i – I I / I I t r a P 2 1 0 2 t r o p e R l a u n n A

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