Dream Gobal REIT Annual Report 2011

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DUNDEE INTERNATIONAL REIT

2011 Annual Report

33 Management’s responsibility
for financial statements

Independent auditor’s report

Consolidated financial statements

39 Notes to the consolidated financial statements

Appendix

Trustees and officers

IBC Corporate information

Contents

Letter to unitholders

Management’s discussion and analysis

SECTION I — OVERVIEW AND

FINANCIAL HIGHLIGHTS

Basis of presentation

Background

Our objectives

Our strategy

Our assets

Tenants

Market overview — Germany

Outlook

SECTION II — EXECUTING THE STRATEGY

Our operations

Our resources and ﬁnancial condition

Our capital

Our results of operations

SECTION III — DISCLOSURE CONTROLS

AND PROCEDURES

SECTION IV — RISKS AND OUR STRATEGY

TO MANAGE

SECTION V — CRITICAL ACCOUNTING

POLICIES

Critical accounting estimates and
changes in accounting policies

DUNDEE INTERNATIONAL 2011 Annual Report

Letter to unitholders

I am very pleased to present the ﬁrst annual
report of Dundee International REIT.

Dundee International REIT was created for
the purpose of building an international real
estate business managed by a team with a
strong history, track record and reputation
in the Canadian public markets.

P. JANE GAVAN
President and Chief Executive Ofﬁcer

Dundee Corporation and Dundee Realty, the founders of Dundee International REIT, recognized an
opportunity to export the disciplined REIT structure and management style developed by the same
leadership team to real estate ownership outside of Canada. There is no doubt that returns from Canadian
real estate, as supported by a strong Canadian economy, have been impressive over the last 15 years. As a
result, relative property valuations in Canada as compared to those in Europe have been higher, making
investment opportunities outside of Canada very attractive. Last year, we identiﬁed a portfolio of properties
in Germany, predominantly occupied by Deutsche Post, that we were able to acquire at a reasonable price.
This allowed us to provide our investors with a desirable return, even after paying all of the costs of creating
the business. Since going public in August 2011, the spread in capitalization rates between Canada and
Europe for our target assets has increased while interest rates have continued to decline. As a result, the
opportunities to make attractive investments in Europe are even more compelling now than they were at
the time of our IPO.

The Dundee Group invested $120 million in Dundee International, at the same time and at the same price as
other investors, and our IPO last August was one of the most successful REIT IPOs completed in Canada.
Since then, we have expanded our operating platform in Germany and Luxembourg and made some key
additions to our management team in Germany. We have met with our largest tenant, Deutsche Post, many
times and at various levels of their organization. We continue to make progress in leasing our properties to
new tenants and re-leasing space to Deutsche Post.

In February, we completed the ﬁrst acquisition since the IPO and we are very pleased with the quality of the
asset and the value it brings to the portfolio. We are currently at various stages of due diligence with respect
to a number of property acquisitions that would provide attractive returns to our unitholders.

The goal for 2012 is to diversify our business by properties, by lenders and by tenants in order to enhance
the composition of the entire portfolio and signiﬁcantly reduce our reliance on the initial portfolio of assets.
As we diversify away from the single tenant nature of our portfolio, we believe that our business will become
even more valuable. To achieve this diversiﬁcation, we will continue to lease space within the original
portfolio to tenants other than Deutsche Post, focus on reﬁnancing a portion of our original debt with other

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DUNDEE INTERNATIONAL 2011 Annual Report

lenders, and look for compelling acquisition opportunities — properties with good covenants and staggered
lease terms. We continue to build relationships with new lenders in order to ﬁnance our upcoming
acquisitions and to further diversify our lending pool.

The opportunity to create and grow this business at this time is exceptional. In 2011, Germany had the
highest GDP growth among all the G7 countries. There has been signiﬁcant net absorption of commercial
space throughout the country; however, due to the ﬁnancial crisis and new banking regulations, the market
is currently faced with tremendous de-leveraging. As a result, we believe that property valuations are more
attractive than they otherwise would be, given the economic backdrop of Germany. We believe that the
de-leveraging will continue for some time and, as a result, properties will remain attractively priced.

All of our current growth efforts are focused in Germany, leveraging our strength when it comes to people,
operations and local relationships, combined with the relative strength of the German economy. Once we
have diversiﬁed our business within Germany, we will explore expanding our operations elsewhere.

I would like to thank our Board of Trustees, colleagues, advisors, investors and lenders for helping us create
Dundee International and for demonstrating such great conﬁdence in us. I look forward to your continued
support as we grow our business together.

P. JANE GAVAN
President and Chief Executive Ofﬁcer
March 15, 2012

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DUNDEE INTERNATIONAL 2011 Annual Report

Management’s discussion and analysis
(All dollar amounts in our tables are presented in thousands of Canadian dollars, except rental rates, unit and per unit amounts)

SECTION I — OVERVIEW AND FINANCIAL HIGHLIGHTS

• Solid results in line with expectations
• Active acquisition pipeline with ﬁrst acquisition scheduled to close by the end of February 2012
• Expansion of European management platform with two highly experienced European real estate professionals

joining the team

• Improvements in occupancy to 87.8% from 87.7% in Q3 and from 87.2% at the time of the Trust’s initial public

offering (“IPO”) in August 2011

For the
period from
August 3, 2011 to
December 31, 2011 December 31, 2011 December 31, 2011

Financial forecast
for the three
months ended

For the three
months ended

Financial forecast

(pro-rated)(1)

Operations
Occupancy rate (period-end)
In-place rent per square foot

Operating results
Investment properties revenue
Net rental income
Funds from operations (“FFO”)(2)
Adjusted funds from operations (“AFFO”)(3)

Distributions
Declared distributions and interest

88%
7.13

—
—

31,726
20,969
10,600
10,240

35,482
20,729
11,374
10,694

54,274
34,500
18,100
16,965

57,882
33,676
18,282
17,160

on Exchangeable Notes

10,391

9,400

17,082

15,568

Distributions paid and payable in cash

(including Exchangeable Notes)

10,195

9,400

16,802

15,568

Financing
Coupon interest rate (period-end)
Interest coverage ratio

Per unit amounts(4)

Basic:
FFO(2)
AFFO(3)
Distribution rate
Basic (excluding impact of over-allotment):
FFO
AFFO

4.36%
2.67 times

4.45%
2.39 times

0.20
0.20
0.20

0.23
0.22

0.24
0.22
0.20

0.24
0.22

0.35
0.33
0.33

0.39
0.36

0.38
0.36
0.33

0.38
0.36

FFO and AFFO are key measures of performance used by real estate operating companies; however, they are not deﬁned under IFRS, do not
have standard meanings and may not be comparable with other industries or income trusts.
(1) Financial forecast — Refers to the ﬁnancial forecast for the six-month period ending December 31, 2011 included in our prospectus dated

July 21, 2011; pro-rated to reﬂect our ownership commencing August 3, 2011.

(2) FFO — The reconciliation of FFO to net income can be found on page 24.
(3) AFFO — The reconciliation of AFFO to FFO and net income can be found on page 24.
(4) A description of the determination of basic and diluted amounts per unit can be found on page 24.

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DUNDEE INTERNATIONAL 2011 Annual Report

BASIS OF PRESENTATION
Our discussion and analysis of the ﬁnancial position and results of operations of Dundee International Real
Estate Investment Trust (“Dundee International REIT” or the “Trust”) should be read in conjunction with the
audited consolidated ﬁnancial statements of Dundee International REIT for the period ended December 31, 2011.

The Trust’s basis of ﬁnancial reporting is International Financial Reporting Standards (“IFRS”).

This management’s discussion and analysis has been dated as at January 31, 2012, except where otherwise
noted. For simplicity, throughout this discussion, we may make reference to the following:

• “Debentures”, meaning the 5.5% convertible unsecured subordinated debentures of the Trust due July 31, 2018;
• “Exchangeable Notes”, meaning the Exchangeable Notes, Series A and the Exchangeable Notes, Series B issued

by a subsidiary of Dundee International REIT;

• “GLA”, meaning gross leasable area; and
• “Units”, meaning the units of the Trust.

Certain information has been obtained from Jones Lang LaSalle, Ofﬁce Market Overview Q4 2011, a publication
prepared by a commercial ﬁrm that provides information relating to the German real estate industry. Although
we believe this information is reliable, the accuracy and completeness of this information is not guaranteed.
We have not independently veriﬁed this information and make no representation as to its accuracy.

Certain information herein contains or incorporates comments that constitute forward-looking information
within the meaning of applicable securities legislation. Forward-looking information is based upon a number
of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dundee
International REIT’s control, which could cause actual results to differ materially from those that are disclosed
in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to,
global and local economic, business and government conditions; the ﬁnancial condition of tenants;
concentration of our tenants; our ability to reﬁnance maturing debt; leasing risks, including those associated
with the ability to lease vacant space and the timing of lease terminations; our ability to source and complete
accretive acquisitions; changes in tax laws or the application thereof; and interest and currency rate ﬂuctuations.

Although the forward-looking statements contained in this management’s discussion and analysis are based
upon what we believe are reasonable assumptions, there can be no assurance that actual results will be
consistent with these forward-looking statements. Factors that could cause actual results to differ materially
from those set forth in the forward-looking statements and information include, but are not limited to, general
economic conditions; local real estate conditions, including the development of properties in close proximity
to the Trust’s properties; timely leasing of vacant space and re-leasing of occupied space upon expiration;
dependence on tenants’ ﬁnancial condition; the uncertainties of acquisition activity; the ability to effectively
integrate acquisitions; interest rates; availability of equity and debt ﬁnancing; that the Trust is exempt from the
speciﬁed investment ﬂow-through trust (“SIFT”) rules under the Income Tax Act (Canada); and other risks and
factors described from time to time in the documents ﬁled by the Trust with the securities regulators.

All forward-looking information is as of January 31, 2012, except where otherwise noted. Except as required by
securities law in connection with our ﬁnancial forecast included in our prospectus dated July 21, 2011, Dundee
International REIT does not undertake to update any such forward-looking information whether as a result of
new information, future events or otherwise. Additional information about these assumptions and risks and
uncertainties is contained in our ﬁlings with securities regulators. These ﬁlings are also available on our website
at www.dundeeinternational.com.

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DUNDEE INTERNATIONAL 2011 Annual Report

BACKGROUND
Dundee International REIT is an unincorporated, open-ended real estate investment trust that was formed to
provide investors with the opportunity to invest in real estate exclusively outside of Canada. Dundee
International REIT was founded by Dundee Realty Corporation (“DRC”), which is our asset manager. Our Units
are listed on the Toronto Stock Exchange under the trading symbol DI.UN.

On August 3, 2011, Dundee International REIT completed an IPO of Units and Debentures for aggregate gross
proceeds of $410 million. Concurrently with the IPO, Dundee Corporation and Dundee Realty Corporation
purchased Units at an aggregate price of $120 million. These proceeds (net of issue costs and working capital
requirements), together with approximately €58.6 million ($80 million) of proceeds from the sale of
Exchangeable Notes and €328.5 million ($448 million) in term debt ﬁnancing, were used to fund the amount
payable of $1,007 million for a portfolio of real estate assets located in Germany.

At December 31, 2011, our portfolio consisted of 292 ofﬁce, mixed use and industrial properties comprising
approximately 12.3 million square feet of GLA located in Germany.

We will be exempt from the SIFT rules, taking into account all proposed amendments to such rules, as long as
we comply at all times with our investment guidelines which, among other things, only permit us to invest in
properties or assets located outside of Canada. We do not rely on the REIT exception under the Income Tax
Act (Canada) in order to be exempt from the SIFT rules. As a result, we are not subject to the same restrictions
on our activities as those that apply to Canadian real estate investment trusts that do rely on the REIT
exception. This gives us ﬂexibility in terms of the nature and scope of our investments and other activities.
Because we do not own taxable Canadian property (as deﬁned in the Income Tax Act (Canada)), we are not
subject to restrictions on our ownership by non-Canadian investors.

OUR OBJECTIVES
We are committed to:

• managing our investments to provide stable, sustainable and growing cash ﬂows through investments in

commercial real estate located outside of Canada;

• building a diversiﬁed, growth-oriented portfolio of commercial properties based on an initial portfolio

in Germany;

• capitalizing on internal growth and seeking accretive acquisition opportunities in our target markets;
• growing the value of our assets and maximizing the long-term value of our Units through the active and efﬁcient

management of our assets; and

• providing predictable and growing cash distributions per Unit, on a tax-efﬁcient basis.

OUR STRATEGY
Our core strategy is to invest in income-producing properties outside of Canada that provide stable, sustainable
and growing cash ﬂows. Our methodology to execute our strategy and to meet our objectives includes:

Optimizing the performance, value and long-term cash ﬂow of our properties
We manage our properties to optimize their performance, value and long-term cash ﬂow. We seek to do this
by achieving high occupancy and rental rates. Together with our management team in Canada, we also have
an established management team in Germany and Luxembourg, bringing a history with our properties,
continuity with our major tenant and relationships with other market participants. Leasing, capital expenditure
and construction initiatives are internally managed by us, while an afﬁliate of our major tenant continues to
provide property management services for our properties and is responsible for all day-to-day operations,
including the general maintenance, rent collection and administration of operating expenses and tenant leases.

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DUNDEE INTERNATIONAL 2011 Annual Report

Diversifying our portfolio to mitigate risk
We seek to diversify our portfolio to increase value on a per unit basis, further improve the sustainability of our
distributions and strengthen our tenant proﬁle. We anticipate that our proﬁle in Europe, our relationships,
our management team in Germany and Luxembourg, and the expertise of our board members and senior
management team will provide us with opportunities to take advantage of real estate transactions available in
Germany and other European countries.

Investing in stable income-producing properties outside of Canada
When considering acquisition opportunities, we look for properties with quality tenancies and strong
occupancy, and assess how acquisition opportunities complement our properties and have the potential to
create additional value. We pursue acquisition opportunities independently as well as by partnering with
existing local operators and by growing with Canadian groups as they expand their reach outside of Canada.
In considering future acquisitions, we intend to focus on countries with a stable business and operating
environment, a liquid market for real estate investments, a legal framework that provides adequate rights and
protections for owners of property, and a manageable foreign investment regime. We will consider investment
opportunities in income-producing properties that are accretive, provide stable, sustainable and growing
cash ﬂows and enable us to realize synergies with our portfolio of properties. The execution of this strategy
will be consistently reviewed and will also include engaging in dispositions of properties and optimizing our
capital structure.

Maintaining and strengthening a conservative ﬁnancial proﬁle
We operate our investments in a disciplined manner, with a focus on ﬁnancial analysis and balance sheet
management to ensure that we maintain a prudent capital structure and conservative ﬁnancial proﬁle.
We intend to generate stable cash ﬂows sufﬁcient to fund our distributions while maintaining a conservative
debt ratio. Our preference will be to ultimately stagger our debt maturities to mitigate our interest rate risk
and limit reﬁnancing exposure in any particular period. We have also implemented a foreign exchange
hedging strategy to provide greater certainty regarding the payment of distributions to unitholders and interest
to debentureholders.

OUR ASSETS
Our assets consist of a portfolio of 292 ofﬁce, mixed use and industrial properties, with a small residential
component, comprising approximately 12.3 million square feet of GLA located in Germany. Our properties are
strategically located in major city and town centres, often on a central square in close proximity to the main
train station and/or bus station. The locations typically provide excellent visibility, access to a major street
and proximity to a transportation hub and city centre pedestrian/shopping areas.

Throughout this document, we make reference to the following three asset categories:

Ofﬁce
This category includes regional administration headquarters. The properties contain national and regional
administration ofﬁces and are generally located just outside major city centres and typically have the highest
rental rates of the three asset categories.

Mixed use
This category includes mixed use retail, banking and distribution properties that contain mail and distribution
centres and administration ofﬁces. The properties are generally strategically located near central train stations,
main retail areas and are easily accessible by public transport.

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DUNDEE INTERNATIONAL 2011 Annual Report

Industrial
This category includes regional logistics headquarters. The properties in this category are typically used as
strategic logistics facilities that are critical elements of Deutsche Post’s distribution network. The properties are
mostly located near major cities and have access to signiﬁcant infrastructure, including railways and highways.

The map below shows the locations of our assets in Germany.

Baltic Sea
Baltic Sea

North Sea
North Sea

Bremen

6 properties

Hamburg
7 properties

Kiel

Schleswig-Holstein
11 properties

Hamburg

Schwerin

Mecklenburg-
West Pomerania
2 properties

Bremen

Niedersachsen
41 properties

Hannover

Netherlands
Netherlands

Brandenburg

8 properties

Poland
Poland

Berlin

Magdeburg

Saxony-Anhalt

12 properties

Berlin
2properties

Saxony
16 properties

Dresden

Erfurt

Thuringia

4 properties

Czech Republic
Czech Republic

Bavaria
34properties

Munich

Austria
Austria

Dortmund

Essen

North Rhine–Westphalia
71 properties

Düsseldorf

Cologne

Belgium
m

Rhineland-Palatinate
14 properties

Hesse
14 properties
Frankfurt

Saarland

8 properties

Stuttgart

France
France

Baden-
Württemberg
42 properties

Switzerland
Switzerland

Our properties are located throughout Germany with a heavy concentration in the Western German states of
North Rhine-Westphalia, Baden-Württemberg, Niedersachsen, Bavaria and Hesse. Approximately 60% of our
overall GLA is located in these ﬁve states.

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DUNDEE INTERNATIONAL 2011 Annual Report

The table below highlights the geographic diversiﬁcation of our properties as of December 31, 2011.

States

Baden-Württemberg
Bavaria
Berlin
Brandenburg
Bremen
Hamburg
Hesse
Mecklenburg-West Pomerania
Niedersachsen
North Rhine-Westphalia
Rhineland-Palatinate
Saarland
Saxony
Saxony-Anhalt
Schleswig-Holstein
Thuringia

Total

Total GLA
(sq. ft.)

1,623,262
1,461,345
53,767
141,370
320,886
485,757
1,041,500
101,023
1,590,769
2,760,689
501,281
482,671
643,850
449,226
536,904
127,267

12,321,567

Total GLA Weighted average
occupancy (%)

(%)

13
12
1
1
3
4
8
1
13
22
4
4
5
4
4
1

100

92
87
91
88
83
90
90
87
80
92
86
91
78
85
96
70

A comprehensive list of all properties can be found in the Appendix starting on page 66 of this report.

TENANTS
Deutsche Post
Our properties were formerly owned by Deutsche Post. Deutsche Post contributes at least 90% of the gross
rental income (“GRI”) in 172 of our properties and between 50% and 90% of the GRI in 105 of our properties,
leaving only 15 properties where less than 50% of the GRI is contributed by Deutsche Post.

Deutsche Post is an integral part of the German economy and continues to be an important part of day-to-day
life in Germany. Deutsche Post is Europe’s largest postal company and the only provider of universal postal
services in Germany. Through its acquisition of DHL in 2002, Deutsche Post has become a global logistics
market leader. It employs approximately 470,000 people in more than 200 countries and territories. As the only
provider of universal postal services in Germany, Deutsche Post must provide certain minimum levels of service
to German residents. On a daily basis, it serves two to three million customers through its retail outlets and
delivers 66 million letters and 2.6 million parcels within Germany via mail and parcel sorting facilities.
Its infrastructure network in Germany includes 82 mail centres, 33 parcel centres and 20,000 retail outlets and
points of sale.

As a result of the high barriers to entry, Deutsche Post holds an approximate 87% market share of the
€6.0 billion domestic mail communication market in Germany, in addition to holding an approximate 39%
market share of the €6.8 billion domestic parcel market. Deutsche Post’s position in the parcel market provides
an opportunity for growth as businesses and consumer activities in on-line commerce continue to expand,
thereby increasing non-letter mail volumes.

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DUNDEE INTERNATIONAL 2011 Annual Report

Deutsche Postbank
Pursuant to a private agreement between Deutsche Post and Deutsche Postbank (“Postbank”), 202 of our
properties feature branches of Postbank, allowing for the delivery of integrated ﬁnancial and postal services.
The properties featuring Postbank branches are typically located at ground level with a view to attracting a high
volume of retail and business customers seeking ﬁnancial or postal services. These locations may include retail
space (where consumer staples are offered for sale), a banking or investment advisory area, mailboxes for
rent, an automated postal/banking services station or traditional banking teller service. Many Postbank
branches in our properties have recently undergone refurbishment and now feature contemporary designs,
expanded retail sections, enhanced lighting and automated postal and ﬁnancial services centres. The delivery
of banking and postal services are integrated such that customers can purchase consumer staples, send or
receive mail or parcels and attend to their ﬁnancial services needs, including by making deposits, loans,
transfers, investments and purchasing insurance.

Postbank is a public company controlled by Deutsche Bank and is integral to their retail banking business.
Postbank offers retail ﬁnancial services in their branches within Deutsche Post’s network, which generates
increased trafﬁc through the postal services offered in those branches. There are 4,500 branches of Deutsche
Post in which selected Postbank ﬁnancial services are available. Postbank offers comprehensive ﬁnancial
services as well as postal services in its own 1,100 branches.

With 14 million active domestic customers and over 20,000 employees, Postbank is one of Germany’s major
ﬁnancial services providers. Postbank’s focus is on its retail business with private customers. Postbank has the
densest branch network of any bank in Germany, which makes it conveniently accessible and attractive to its
retail banking customer base.

Deutsche Telekom
After Deutsche Post, Deutsche Telekom is the second-largest tenant in our properties. Deutsche Telekom
occupies approximately 1.4% of the GLA of our properties and currently generates approximately 2.5% of the
portfolio’s overall GRI. The occupied space is mainly used for server and cable rooms, forming an integral part
of Deutsche Telekom’s infrastructure.

Deutsche Telekom is one of the world’s leading telecommunications and information technology service
companies. In 2010, Deutsche Telekom Group generated revenue of approximately €62 billion, and had
approximately 247,000 employees in total as of December 31, 2010.

MARKET OVERVIEW — GERMANY
German economy
The German economy has long been a driver as well as a beneﬁciary of a globalized economy. Germany has
established itself as a vital location for production sites and is a country with a favourable business environment.
Similar to Canada, Germany is a country with a history of political, legal and ﬁnancial stability and provides an
attractive climate for long-term investment.

Recent developments
Overall, the German economy was remarkably strong in 2011 despite the ongoing uncertainty in Europe.
Germany’s GDP growth of 3%(1), which marked the second straight year of annual growth at or above 3%, was
the highest GDP increase in 2011 of all G7 countries. While domestic demand was the main driver of growth,
the country’s export strength also helped to escape the worst effects of Europe’s ongoing debt crisis.
In addition, Germany’s labour market continued to show resilience with an unemployment rate of 6.8%(2) in
December 2011. Economic activity in Germany is expected to remain stable.

(1) Statistisches Bundesamt Deutschland (“Destatis”).
(2) Deutsche Bundesbank.

PAGE 9

DUNDEE INTERNATIONAL 2011 Annual Report

Economic impact on the German real estate sector
The commercial real estate market in Germany performed well in 2011 with prime rents increasing in ﬁve of the
seven German key markets. In addition, at €23 billion, the transaction volume was approximately 22% higher
than in 2010. There is little evidence that the European debt crisis and concerns about a global economic
slowdown negatively impacted the ofﬁce sector in 2011. Demand for space continued to be strong and
vacancies in the ofﬁce markets declined in ﬁve of the seven key markets.

OUTLOOK
Since our IPO in August 2011, we have developed valuable relationships with lenders, vendors and brokers in
Europe and continue to see opportunities for growth despite the ongoing challenging environment. We believe
the economic climate has slowed leasing volumes in our portfolio. In addition, completing transactions in this
environment requires more time.

With respect to the Trust’s capital structure, we continue to focus on strengthening relationships with lenders
and intend to enter into long-term loans at ﬁxed rates when borrowing conditions are favourable. We are
currently in discussions with several lenders in Germany to reﬁnance a signiﬁcant portion of our term loan
credit facility for terms ranging from three to ﬁve years. And while access to debt ﬁnancing is currently
challenging in Germany, interest rates remain at historically low levels and approximately 75 to 100 bps lower
than when we completed our IPO.

We recently entered into an agreement to acquire a 211,000 square foot ofﬁce building in the city of Hannover,
Germany. The acquisition is scheduled to close by the end of February 2012 at a capitalization rate accretive
to the overall AFFO of the Trust. In addition, we are actively pursuing acquisition opportunities in Germany.
Overall, the acquisition pipeline remains very active.

We are an active asset manager and continuously review our existing portfolio for opportunities to sell or
reposition assets where we can add the most value or redeploy proceeds more accretively. In addition, we are
proactively working with our largest tenant, Deutsche Post, not only to lease back space in the 17 properties
previously terminated by Deutsche Post, but also to anticipate and accommodate their future space requirements.

In order to set the stage for growth, two senior real estate professionals in Germany have joined our team to
focus on asset management and acquisitions. With their extensive relationships and on-the-ground experience
in European commercial real estate, operations, asset and property management, and acquisitions, these two
executives will be instrumental in optimizing the portfolio, pursuing our growth strategy and further enhancing
our European management platform.

PAGE 10

DUNDEE INTERNATIONAL 2011 Annual Report

SECTION II — EXECUTING THE STRATEGY

OUR OPERATIONS
The following key performance indicators related to our operations inﬂuence the cash generated from
operating activities.

Performance indicators

Occupancy rate(1)
In-place rental rates
Tenant maturity proﬁle — average term to maturity(2)

(1) Includes in-place occupancy at December 31, 2011.
(2) Includes termination notice received in June 2011 in respect of 17 properties.

December 31, 2011

88%
7.13
5.9 years

Occupancy
The overall weighted average occupancy rate across our portfolio remained stable at 87.8% at December 31,
2011, compared to 87.7% at the end of the third quarter, and increased from the weighted average occupancy
rate of 87.2% at the time of our initial investment. Overall occupied space remained unchanged at 10.8 million
square feet compared with the end of the third quarter and increased slightly from 10.7 million square feet at
the time of our initial investment out of a total GLA of 12.3 million square feet.

Vacancy schedule
The tables below highlight our leasing activity. During the fourth quarter, we reduced our overall vacancy
by 16,072 square feet to 1,519,971 square feet as at December 31, 2011. During the quarter, approximately
25,941 square feet expired or were terminated, offset by 17,292 square feet of new leases and 3,258 square feet
of renewals. For the period from August 3 to December 31, 2011, approximately 77,768 square feet expired or
were terminated, offset by 98,271 square feet of new leases and 40,876 square feet of renewals. Of the vacant
space at the end of the year, approximately 19,484 square feet were committed for future leases, leaving
approximately 1,500,487 square feet available for lease.

(in square feet)

Ofﬁce

Mixed use

Industrial

Total

For the three months ended December 31, 2011

Vacant space — October 1, 2011
Vacancy committed for future leases

Available for lease
Remeasurements
Expiries
Early terminations and bankruptcies
New leases
Renewals

Vacant space — December 31, 2011
Vacancy committed for future leases

141,124
—

141,124
—
—
—
(2,148)
—

138,976
—

1,099,358
(15,276)

1,084,082
(1,764)
7,407
15,537
(11,141)
(2,289)

1,091,832
(17,380)

295,561
(4,423)

291,138
—
2,997
—
(4,003)
(969)

289,163
(2,104)

1,536,043
(19,699)

1,516,344
(1,764)
10,404
15,537
(17,292)
(3,258)

1,519,972
(19,484)

Available for lease — December 31, 2011

138,976

1,074,452

287,059

1,500,487

PAGE 11

DUNDEE INTERNATIONAL 2011 Annual Report

Vacant space — August 3, 2011
Remeasurements
Expiries
Early termination and bankruptcies
New leases
Renewals

Vacant space — December 31, 2011
Vacancy committed for future leases

For the period August 3, 2011 to December 31, 2011

Ofﬁce

Mixed use

Industrial

Total

141,380
—
—
—
(2,404)
—

138,976
—

1,141,229
528
44,720
19,211
(83,401)
(30,455)

1,091,832
(17,380)

297,548
665
12,449
1,388
(12,466)
(10,421)

289,163
(2,104)

1,580,157
1,193
57,169
20,599
(98,271)
(40,876)

1,519,971
(19,484)

Available for leases — December 31, 2011

138,976

1,074,452

287,059

1,500,487

In-place rental rates
The following table and chart provide a comparison between
in-place rents and market rents in our portfolio. Market rents are
management’s estimates of rental rates that could be achieved
for space in our properties. In-place rents in each of our
segments are below market rents, allowing for rental uplifts as
space gets renewed or re-leased. Current market rents are
approximately 14% above in-place rents.

Since the Trust’s IPO, renewals have been completed at
approximately 8.5% above expiring rents. On a euro basis, both
in-place rents and market rents are consistent with the rents
at acquisition. The impact of the depreciation of the euro is
mitigated by our active hedging program.

$12.00

9.00

6.00

3.00

IN-PLACE
RENT AND
MARKET RENT
COMPARISON

IN-PLACE RENT
MARKET RENT

€

7.56
5.38
4.67

5.40

In-place rent

€

9.98
7.10
6.16

7.13

€

Office Mixed

Industrial Total

use

December 31, 2011

Market rent

8.08
6.14
5.45

6.15

10.66
8.10
7.19

8.11

Ofﬁce
Mixed use
Industrial

Overall

PAGE 12

DUNDEE INTERNATIONAL 2011 Annual Report

Leasing and tenant proﬁle
At December 31, 2011, the weighted average remaining term of all leases was approximately 5.9 years, which
factors in the termination of 17 leases in June 2012 by Deutsche Post pursuant to its termination rights.
As there is a rent guarantee in place for these leases until June 2014, these leases are reﬂected as June 2014
expiries in the schedule below.

Ofﬁce
Mixed use
Industrial

Overall

December 31, 2011

Average remaining lease term (years)

5.07
5.83
6.27

5.86

Lease rollover proﬁle
The following table outlines our lease maturity proﬁle by asset type as at December 31, 2011. In 2012,
178,130 square feet of our leases expire, accounting for approximately 1.4% of the overall space.

(in square feet)

Ofﬁce
Mixed use
Industrial

Total

Current Month-to-
month
vacancy

2012

2013

2014

2015

2016 to
2026

Total

138,976
1,074,452
287,059

44,436
321,586
73,081

26,123
146,435
5,572

10,225
181,251
89,128 954,909
23,221
12,578

17,009 472,802 890,822
92,127 6,508,276 9,186,913
42,967 1,799,354 2,243,832

1,500,487 439,103

178,130

111,931

1,159,381

152,103 8,780,432 12,321,567

Deutsche Post leases
The leases with Deutsche Post, which generally expire on June 30, 2018 (many of which provide Deutsche
Post with an option to extend the term until June 30, 2023), comprise approximately 75% of the GLA and
account for more than 85% of the portfolio’s GRI.

Termination rights and rent guarantee
In general, the Deutsche Post leases have a ﬁxed term of ten years, expiring on June 30, 2018. 129 of the leases
entitle Deutsche Post to terminate space in June 2012, 2014 and 2016, subject to certain limitations and
requirements, including that Deutsche Post provide 12 months’ prior written notice to us. On June 30, 2011,
Deutsche Post gave notice to terminate 17 leases with respect to the 2012 termination rights, comprising
approximately 13% of the GRI and a GLA of approximately 1.1 million square feet, and waived its second
termination right in respect of 21 leases (effective June 30, 2014). We are currently in discussions with Deutsche
Post and Postbank regarding leasing back up to 20% of the GLA of the properties in respect of which Deutsche
Post has exercised its termination right for an average lease term of approximately 3.5 years. However,
Deutsche Post is a sophisticated, ﬂexible organization and there can be no assurance that these discussions will
result in a deﬁnitive agreement or, if they do, what the terms (including the amount of GLA and term) of any
such leasing arrangements will be. Based on our discussions to date with Deutsche Post and Postbank,
of the 17 terminated properties, we understand that Postbank wishes to remain in 12 of the 15 properties that
feature Postbank branches and Deutsche Post wishes to lease space in nine of the 17 properties, six of
which feature Postbank branches. To the extent that Deutsche Post does not exercise all of its early termination
rights with respect to any particular effective termination date, the unused portion may be carried forward.
This means that Deutsche Post has the right to terminate up to 91 leases in 2014 and up to 112 leases in 2016,
subject to certain limitations.

PAGE 13

DUNDEE INTERNATIONAL 2011 Annual Report

In light of the 2012 terminations, the vendor of the properties had agreed to pay us an amount equal to the lost
gross rent resulting from all 2012 terminations for the period commencing on July 1, 2012, to and including
June 30, 2014, provided that the amount payable by the vendor would be reduced: (i) in the event of a sale of
a terminated property, by the amount which would otherwise have been payable by the vendor in respect
of such property, and (ii) in respect of a new lease in a terminated property, by the amount of rental income
achievable from such new lease. We recently renegotiated this arrangement with the vendor such that the
vendor of the properties has agreed to pay us the full amount of €17,329,135 plus all interest accrued thereon,
regardless of whether we sell, or re-lease space in, any terminated properties. This amount has been set aside
by the vendor in a bank account out of which we will be paid on a monthly basis (or otherwise as we request),
starting from July 1, 2012 (or such earlier date as we may determine), the net rent plus prepayments of operating
costs which would otherwise have been payable under the Deutsche Post leases in respect of all 2012
terminations. For a more detailed description of the Deutsche Post leases and termination rights, please refer
to our prospectus dated July 21, 2011, which is available on SEDAR at www.sedar.com.

OUR RESOURCES AND FINANCIAL CONDITION
Investment properties
The fair value of our investment property portfolio at December 31, 2011, was $941.4 million, representing an
average Cap Rate of 8.5% for the portfolio. We acquired our properties on August 3, 2011 for $997.8 million,
representing a Cap Rate of approximately 8.2%. Since acquisition, our properties decreased in value by
$56.4 million, of which $33.7 million is attributable to the weakening of the euro against the Canadian dollar
and $23.1 million is mostly attributable to an increase in Cap Rates and the impact of an increase in German real
estate transaction taxes.

Fair values were determined using the direct capitalization method. The direct capitalization method applies
a capitalization rate to stabilized NOI and incorporates allowances for vacancy and management fees. The
resulting capitalized value was further adjusted for extraordinary costs to stabilize income and non-recoverable
capital expenditures, where applicable.

Building improvements
Building improvements represent investments made in our rental properties to ensure our buildings are
operating at an optimal level.

Initial direct leasing costs and lease incentives
Initial direct leasing costs include leasing fees and related costs, and broker commissions incurred in negotiating
and arranging tenant leases. Lease incentives include costs incurred to make leasehold improvements to tenant
spaces and cash allowances. Initial direct leasing costs and lease incentives are dependent on asset type, lease
terminations and expiries, the mix of new leasing activity compared to renewals, portfolio growth and general
market conditions. Short-term leases generally have lower costs than long-term leases.

For the period from August 3, 2011 to December 31, 2011, we leased or renewed approximately 139,147 square
feet of space for which we incurred $1.2 million of leasing costs.

Commitments and contingencies
We are contingently liable with respect to litigation and claims that may arise from time to time. In the opinion
of management, any liability that may arise from such contingencies would not have a material adverse effect
on our consolidated ﬁnancial statements.

PAGE 14

DUNDEE INTERNATIONAL 2011 Annual Report

Dundee International REIT’s future minimum commitments under operating and ﬁnance leases, including equity
accounted investments, are as follows:

Less than 1 year
1–5 years
Longer than 5 years

Total

December 31, 2011

Operating lease payments

365
1,458
365

2,188

During the period the Trust paid $0.2 million in minimum lease payments, which have been included in
comprehensive income for the period.

On March 17, 2011, the previous owner of the portfolio entered into agreements with Imtech Contracting GmbH
(“Imtech”) under which Imtech provides the entire energy requirements (cooling, air, light and electricity) for
the properties, unless there are existing obligations. As part of the contract, Imtech leases the central heating
room and the energy supply facilities at the properties, and may lease the roof area on selected buildings for
installation of solar panels. The term of the contract, which commenced on July 1, 2011, is 15.5 years. Imtech has
guaranteed savings in heating costs of 5% of the actual 2008 base costs within three years.

In addition, the previous owner had entered into two energy supply agreements with GDF SUEZ Energie
Deutschland AG and Watt Deutschland GmbH to purchase all the electricity requirements of the properties,
each of which has a term expiring on December 31, 2012.

OUR CAPITAL
Liquidity and capital resources
Dundee International REIT’s primary sources of capital are cash generated from operating activities, credit
facilities, and equity and debt issues. Our primary uses of capital include the payment of distributions, costs of
attracting and retaining tenants, recurring property maintenance, major property improvements, debt interest
payments, and property acquisitions. We expect to meet all of our ongoing obligations through current cash
and cash equivalents, cash ﬂows from operations, debt reﬁnancings and, as growth requires and when
appropriate, new equity or debt issues.

We currently have $87.9 million of cash available. After reserving for current payables and operating
requirements, approximately $71.6 million is available for acquisitions. Our debt-to-book value is 56%, which
is well within our target range.

Financing activities
On August 3, 2011, we completed an IPO of 27 million Units and $140 million principal amount of Debentures
for aggregate gross proceeds of $410 million. Concurrent with the offering, Dundee Corporation and DRC
purchased 12 million Units at an aggregate price of $120 million. These proceeds (net of issue costs and working
capital requirements), together with $80 million (€58.6 million) of proceeds from the sale of Exchangeable
Notes and additional debt ﬁnancing, were used to fund the purchase price for a portfolio of real estate assets
located in Germany. On August 29, 2011, pursuant to the over-allotment option provided to the underwriters
in connection with the offering, we issued an additional 4.05 million Units and $21 million principal amount of
Debentures for aggregate gross proceeds of $61 million.

Concurrent with the closing of the IPO, we obtained a term loan credit facility (the “Facility”) from a syndicate
of German and French banks for gross proceeds of $448.4 million (€328.5 million) for a term of ﬁve years.
We entered into arrangements with an arm’s length counterparty in order to hedge a substantial portion of the
Facility by entering into an interest rate swap. Pursuant to these arrangements, we exchanged 80% of our

PAGE 15

DUNDEE INTERNATIONAL 2011 Annual Report

variable rate interest obligations for ﬁxed rate interest obligations for ﬁve years. We also hedged an additional
10% of our variable rate interest with a cap not to exceed 5% per annum (excluding the margin). Our executive
committee reviews our interest rate hedging strategy from time to time and makes recommendations to our
Board of Trustees.

On November 8, 2011, the Trust entered into an interest rate swap to pay a ﬁxed rate of 3.38% on the variable
rate portion of the Facility comprising 20% of the overall loan for one year, effective as of December 30, 2011.
Essentially, under the Facility, we will pay a blended ﬁxed rate of 3.91% in 2012.

In conjunction with the closing of the offering, a subsidiary of the Trust issued Exchangeable Notes for gross
proceeds of €58.6 million (the euro equivalent of $80 million based on the same exchange rate as the proceeds
of the offering were converted into euros). Each €7.326 principal amount of Exchangeable Notes (the euro
equivalent of $10.00, based on the same exchange rate as the proceeds of the offering, was converted into
euros) is exchangeable for one Unit, subject to customary anti-dilutional adjustments. The Exchangeable Notes
and corresponding Special Trust Units together have economic and voting rights equivalent in all material
respects to the Units.

Debt
Debt strategy
Our debt strategy is to obtain secured mortgage ﬁnancing on a ﬁxed rate basis, with a term to maturity that
is appropriate in relation to the lease maturity proﬁle of our portfolio. Our preference is to have staggered
debt maturities to mitigate interest rate risk and limit reﬁnancing exposure in any particular period. We also
intend to enter into long-term loans at ﬁxed rates when borrowing conditions are favourable. This strategy
will be complemented with the use of unsecured convertible debentures and ﬂoating rate credit facilities.
We intend to target a debt level in a range of 55% to 60% of the historical purchase price of properties including
convertible debentures. In the future, as we secure mortgages on individual properties in excess of this range,
we will be in a position to accumulate unencumbered properties. These properties will provide added ﬂexibility
to our capital structure as we will be able to place ﬁnancing on them to take advantage of a buying opportunity
or to replace expiring debt when reﬁnancing options are limited or expensive.

The key performance indicators in the management of our debt are:

Financing activities
Average coupon interest rate(1)
Level of debt (debt-to-book value)(2)
Interest coverage ratio(3)
Debt-to-EBITDFV (years)(4)
Proportion of total debt due in current year
Debt — average term to maturity (years)
Variable rate debt as percentage of total debt

December 31, 2011

4.36%
56%
2.67 times
8.0
—%
5.1
15%

(1) Average interest rate is calculated as the weighted average interest rate of all interest bearing debt.
(2) Debt-to-book value is determined as total debt divided by total assets.
(3) The interest coverage ratio for the quarter is calculated as net rental income plus interest and fee income, less portfolio management and

general and administrative expenses, divided by interest expense.

(4) Debt-to-EBITDFV is calculated as total debt divided by annualized EBITDFV for the current quarter. EBITDFV is calculated as net income

less non-cash items included in revenue plus interest expense, depreciation, fair value adjustments and acquisition related costs.

We currently use cash ﬂow performance and debt level indicators to assess our ability to meet our ﬁnancing
obligations. Our current interest coverage ratio is 2.67 times, and reﬂects our ability to cover interest expense
requirements. We also monitor our debt-to-EBITDFV ratio to gauge our ability to pay off existing debt.

PAGE 16

DUNDEE INTERNATIONAL 2011 Annual Report

Our current debt-to-EBITDFV ratio is 8.0 years and reﬂects the approximate amount of time to pay off all
debt. After accounting for market adjustments and ﬁnancing costs, the weighted average effective interest
rate is 4.86%.

Term loan credit “Facility”(1)
Debentures

Total

Percentage

December 31, 2011

Variable

Fixed

Total

$ 86,469
—

$ 345,879
146,658

$ 432,348
146,658

$ 86,469

$ 492,537

$ 579,006

15%

85%

100%

(1) The portion of the Facility subject to the interest rate swap has been presented as ﬁxed rate debt in this table.

Amounts recorded as at December 31, 2011, for the Debentures are net of $7.7 million of premiums allocated
to their conversion features on issuance. The premiums are amortized to interest expense over the term to
maturity of the related debt using the effective interest rate method.

Term loan credit facility
The term of the Facility is ﬁve years with a two-year renewal option. Variable rate interest is payable quarterly
under the Facility at a rate equal to the three-month EURIBOR, plus margin and agency fees of 200 and 10 basis
points (“bps”), respectively. As discussed under “Financing activities”, pursuant to the requirements of the
Facility, we entered into an interest rate swap to ﬁx 80% of the interest payments at 1.89% plus margin and
agency fees and purchased an instrument to cap 10% of the Facility, such that interest does not exceed 5%.
Concurrent with entering into the interest rate swap, the Trust received $9.5 million (€7 million) from the
vendor of the properties and used the proceeds to buy down the swap rate by 54 bps to reﬂect the difference
between the cost of the Facility and the negotiated cost. We have accounted for this receipt as an increase to
the Facility, which is recognized as a reduction to interest expense over the term of the Facility. Costs relating
to the Facility are $10.8 million and are charged directly to the Facility. Effective December 30, 2011 we entered
into an interest rate swap to ﬁx the remaining 20% of the interest payments under the Facility at 3.38%. The
weighted average rate of the Facility is 3.98%. Including costs, net of the payment received from the vendor,
the effective interest rate under the Facility is 4.04%.

The Facility requires that at each interest rate payment date the debt service coverage ratio is equal to or
above 145% and that the loan-to-value does not exceed 59% during the ﬁrst three years the loan is outstanding
and 54% during the ﬁnal two years. As at December 31, 2011, we were in compliance with these covenants.

We are required to repay €100 million plus an applicable prepayment premium of 15% through dispositions or
reﬁnancings of a portion of the portfolio within the ﬁrst two years following the closing of the ﬁnancing, failing
which we will be required to pay additional interest of 1% on the portion of the €100 million not repaid by the
second anniversary of the closing. We are currently in discussions with various banks in respect of reﬁnancing
portions of the Facility for terms ranging from three to ﬁve years and in some cases even longer. Although there
is currently limited access to debt ﬁnancing in Germany, interest rates in Germany remain at historically low levels.

Convertible debentures
As at December 31, 2011, the total principal amount of Debentures outstanding was $161.0 million, convertible
into an aggregate of 12,384,619 Units. The Debentures bear interest at 5.5% per annum, are payable
semi-annually on July 31 and January 31 each year, and mature on July 31, 2018. Each Debenture is convertible
at any time by the holder thereof into 76.9231 Units per one thousand dollars of face value, representing a
conversion price of $13.00 per Unit. On or after August 31, 2014, and prior to August 31, 2016, the Debentures
may be redeemed by the holders thereof, in whole or in part, at a price equal to the principal amount plus
accrued and unpaid interest on not more than 60 days’ and not less than 30 days’ prior written notice, provided
the weighted average trading price for the Units for the 20 consecutive trading days, ending on the ﬁfth trading

PAGE 17

DUNDEE INTERNATIONAL 2011 Annual Report

day immediately preceding the date on which notice of redemption is given, is not less than 125% of the
conversion price. On or after August 31, 2016, and prior to July 31, 2018, the maturity date, the Debentures may
be redeemed by the Trust at a price equal to the principal amount plus accrued and unpaid interest.

An amount of $8.1 million has been allocated to the conversion feature to reﬂect its fair value at the date of
issuance. Costs relating to the issuance of Debentures, including underwriters’ fees, are $6.9 million and are
charged to the Debentures. Including costs and the amount allocated to the conversion feature, the effective
interest rate is 7.31%. The conversion feature of the Debentures is remeasured in each reporting period to fair
value, with changes in fair value being recorded in comprehensive income. During the period, the fair value
attributed to the conversion feature decreased by $1.5 million.

The table below highlights the maturity and interest rate proﬁle of our debt:

Scheduled
principal
repayments on
non-matured
debt

Debt
maturities

— $
—
—
—
427,624
161,000

— $
—
1,164
2,873
1,729
—

Total

—
—
1,164
2,873
429,353
161,000

2012
2013
2014
2015
2016
2017 and thereafter

Total

$ 588,624 $

5,766

594,390

Fair value adjustments
Transaction costs

Total

(7,741)
(7,643)

$ 579,006

Weighted
Weighted
average
average
face rate on
interest rate on
balance due at balance due at
maturity (%)

maturity (%)

—
—
—
—
4.04
7.31

4.93

—
—
—
—
3.98
5.5

4.39

—
—
0.2
0.5
72.2
27.1

100

Equity
Our discussion of equity is inclusive of Exchangeable Notes, which are economically equivalent to our Units.
In our consolidated ﬁnancial statements the Exchangeable Notes are classiﬁed as a liability under IFRS because
of the redemption feature upon the exchange for a Unit.

Units
Add: Exchangeable Notes

Total

Unitholders’ equity

December 31, 2011

Number of Units

Amount

43,872,316
8,000,000

$ 346,671
80,000

51,872,316

$ 426,671

Units
Our Declaration of Trust authorizes the issuance of an unlimited number of two classes of units: Units and
Special Trust Units. The Special Trust Units may only be issued to holders of securities exchangeable for Units,
are not transferable, and are used to provide holders of such securities with voting rights with respect to
Dundee International REIT. Each Unit and Special Trust Unit entitles the holder thereof to one vote for each Unit
at all meetings of unitholders of the Trust.

PAGE 18

DUNDEE INTERNATIONAL 2011 Annual Report

On April 21, 2011, 800,000 Units were issued to DRC for $0.4 million. On August 3, 2011, the Trust completed
an IPO of 27 million Units at a price of $10.00 per unit for gross proceeds of $270.0 million. Concurrent with
the offering, Dundee Corporation and its subsidiaries (including DRC) purchased an aggregate of 12 million
Units at a price of $10.00 per Unit. On August 29, 2011, pursuant to the over-allotment option provided to the
underwriters, the Trust issued an additional 4.05 million Units at a price of $10.00 per Unit. Costs related to the
IPO totalled $24.1 million and were charged directly to unitholders’ equity.

The Trust has a Deferred Unit Incentive Plan (“DUIP”) that provides for the grant of deferred trust units and
income deferred trust units to trustees, ofﬁcers, employees, afﬁliates and their service providers, including
DRC, the Trust’s asset manager. On August 3, 2011, DRC elected to receive the base asset management fees
payable on the properties acquired on August 3, 2011 by way of deferred trust units under the Asset
Management Agreement for the next ﬁve years. The deferred trust units granted to DRC vest 20% annually,
commencing on the ﬁfth anniversary date of being granted. On termination of the Asset Management
Agreement, unvested trust units granted to DRC vest immediately.

The following table summarizes the changes in our outstanding equity:

Units issued upon formation of the Trust
Units issued to Dundee Corporation and DRC, concurrently with IPO
Units issued pursuant to the IPO and over-allotment
Units issued pursuant to the DRIP(1)

Total Units outstanding on September 30, 2011
Units issuable upon exchange of Exchangeable Notes

Total Units outstanding (on a fully exchanged basis) on December 31, 2011
Units issued pursuant to the DRIP on January 15, 2012

Total Units outstanding (on a fully exchanged basis) on January 31, 2012

(1) Distribution Reinvestment and Unit Purchase Plan.

Units

800,000
12,000,000
31,050,000
22,316

43,872,316
8,000,000

51,872,316
6,540

51,878,856

Distributions
Our Declaration of Trust provides our trustees with the discretion to determine the percentage payout of
income that would be in the best interest of the Trust. Amounts retained in excess of the declared distributions
are used to fund leasing costs and capital expenditure requirements. Given that working capital tends to
ﬂuctuate over time and should not affect our distribution policy, we disregard it when determining our
distributions. We also exclude the impact of leasing costs, which ﬂuctuate with lease maturities, renewal terms
and the type of asset being leased. We evaluate the impact of leasing activity based on averages for our
portfolio over a two- to three-year time frame. We exclude the impact of transaction costs expensed on
business combinations as these are considered to be non-recurring. Additionally, we exclude the impact of
the amortization of deferred ﬁnancing costs and non-recoverable costs that were incurred prior to the
formation of the Trust, but deduct amortization of non–real estate assets such as software and ofﬁce equipment
incurred after the formation of the Trust.

In order to ensure the predictability of distributions to our unitholders and debentureholders, we have
established an active foreign exchange hedging program on a rolling 24-month period. The average exchange
rate on these 24 contracts is 1.368 as at December 31, 2011.

PAGE 19

DUNDEE INTERNATIONAL 2011 Annual Report

Asset management fee
On August 3, 2011, DRC elected to receive the base asset management fees payable on the properties acquired
on August 3, 2011 by way of deferred trust units under the Asset Management Agreement for the next ﬁve
years. The deferred trust units granted to DRC vest 20% annually, commencing on the ﬁfth anniversary date
of being granted. On termination of the Asset Management Agreement, unvested trust units granted to DRC
vest immediately.

During the period from August 3, 2011 to December 31, 2011, $841 of asset management fees were recorded
and included in general and administrative expenses. They were settled by the grant of 117,188 deferred
units during the period and 29,348 deferred units on January 15, 2012. At December 31, 2011, 147,717 unvested
deferred and income deferred units were outstanding with respect to the asset management fee.

Distributions and Exchangeable Notes interest
Exchangeable Notes are economically equivalent to our Units in all material respects. Interest payable to the
holder of Exchangeable Notes is therefore included in the table below.

For the period from August 3, 2011 to December 31, 2011

2011 distributions and interest expense
Paid in cash or reinvested in Units
Payable at December 31, 2011

Total distributions and interest expense

2011 reinvestment
Reinvested to December 31, 2011
Reinvested on January 13, 2012

Total distributions reinvested

Distributions and interest paid in cash

Reinvestment to distribution ratio

Cash payout ratio

Declared
amounts

4% bonus
distributions

8
—

13,623
3,451

17,074

209
63

272

16,802

1.6%

98.4%

Total

13,631
3,451

17,082

217
63

280

Distributions declared and interest expensed on the Exchangeable Notes for the period from August 3, 2011,
to December 31, 2011, were $17,074. Of these amounts approximately $272, or 1.6%, were reinvested in additional
Units pursuant to the DRIP resulting in a cash payout ratio of 98.4%.

During the fourth quarter, we declared distributions and interest expenses for the Exchangeable Notes of
$10,383 of which $188 were reinvested in additional Units resulting in a cash payout ratio of 98.2%.

On closing of the offering, in order to provide more certainty regarding distribution and interest payments to
holders of Units and Debentures, we entered into a series of foreign currency contracts to sell €2.6 million
each month at a rate of 1.3639 for an initial period of 24 months. On settlement of a contract, we realize a gain
or loss on the difference between the forward rate and the spot rate; this amounted to a loss of $0.1 million in
the quarter. We also mark the contracts to market quarterly and realized a gain of $1.8 million during the period
of our ownership. As we settle each contract, we enter into a new contract; consequently we entered into
contracts to sell €2.6 million in each of September, October, November and December of 2013. The average
rate of the contracts in place as at December 31, 2011 is 1.368.

We currently pay monthly distributions to unitholders of $0.06667 per Unit, or $0.80 per Unit on an annual
basis. At December 31, 2011, approximately 2.1% of our total Units were enrolled in the DRIP.

PAGE 20

DUNDEE INTERNATIONAL 2011 Annual Report

As required by National Policy 41-201, “Income Trusts and Other Indirect Offerings”, the following table outlines
the differences between cash ﬂow from operating activities and cash distributions, as well as the differences
between net income and cash distributions in accordance with the guidelines.

Net loss
Cash ﬂow from operating activities
Distributions paid and payable (including Exchangeable Notes)
Excess of cash ﬂow from operating activities

For the
period from
August 3, 2011, to
December 31, 2011 December 31, 2011

For the three
months ended

$ (25,976)
10,803
10,195

$ (23,201)
22,611
16,802

over distributions paid and payable

608

5,809

Cash ﬂow from operations exceeded distributions paid and payable for the quarter by $0.6 million and for the
period from August 3, 2011 to December 31, 2011 by $5.8 million. The cash ﬂow from operating activities includes
changes in non-cash working capital. Distributions paid and payable exceeded net loss by $36.2 million for
the quarter and by $40.0 million for the period from August 3, 2011, to December 31, 2011, mainly as a result
of fair value adjustments to ﬁnancial instruments and investment properties. In establishing distribution
payments, we do not take ﬂuctuations in working capital into consideration and we use a normalized amount
as a proxy for leasing and building improvement costs.

OUR RESULTS OF OPERATIONS

For the period
from
months ended August 3, 2011, to
December 31, 2011 December 31, 2011 December 31, 2011 December 31, 2011(1)

Financial forecast
for the three

For the three
months ended

Financial forecast
for the
period from
August 3, 2011, to

Investment properties revenue
Investment properties operating expenses

Net rental income

Portfolio management
General and administrative
Fair value adjustments to investment properties
Interest expense
Interest and other income
Share of net losses from equity

accounted investments

Transaction costs
Fair value adjustments to ﬁnancial instruments

Income (loss) before income taxes
Deferred income taxes

Net income (loss)
Foreign currency translation adjustment

31,726
10,757

20,969

(894)
(2,253)
(31,704)
(8,591)
122

32
(467)
(8,557)

(31,343)
5,367

(25,976)
(20,342)

35,482
14,753

20,729

(1,194)
(943)
—
(8,974)
—

—
—
—

9,618
(954)

8,664
—

54,274
19,774

34,500

(1,566)
(3,114)
(23,147)
(13,856)
132

7
(7,853)
(14,567)

(29,464)
6,263

(23,201)
(18,558)

Comprehensive income (loss) for the period

$ (46,318)

8,664

$ (41,759)

(1) Pro-rated to reﬂect our ownership commencing August 3, 2011.

57,882
24,206

33,676

(1,960)
(1,548)
—
(14,690)
—

—
(6,389)

—

9,089
(1,579)

7,510
—

7,510

PAGE 21

DUNDEE INTERNATIONAL 2011 Annual Report

Statement of comprehensive income results
Net rental income
For the period from August 3 to December 31, 2011, net rental income increased by approximately $0.8 million
compared to the pro-rated forecast due to a slight increase in occupancy, a favourable exchange rate for
the reporting period compared to the forecast and overall lower level of property operating expenses. For
similar reasons, net rental income for the quarter ended December 31, 2011 also increased by approximately
$0.2 million compared to forecast.

Portfolio management
Portfolio management expenses decreased by approximately $0.4 million and $0.3 million compared to the
pro-rated forecast for the period August 3, 2011 to December 31, 2011 and for the quarter ended December 31,
2011, respectively, mainly due to the reclassiﬁcation of certain costs to general and administrative expenses.

General and administrative
General and administrative expenses increased by approximately $1.6 million and $1.3 million for the period
August 3, 2011 to December 31, 2011 and for the quarter ended December 31, 2011, respectively. An increase
in the valuation of deferred units granted to DRC for payment of asset management fees accounted for
$0.6 million and $0.7 million of the increase, respectively. The ﬁxed nature of certain annual expenses and
reclassiﬁcation of costs from portfolio management accounted for the remaining variance.

Fair value adjustment to investment properties
The unrealized loss on the change in the fair value of investment properties amounted to $23.1 million for the
period August 3, 2011 to December 31, 2011 and $31.7 million for the quarter ended December 31, 2011. The fair
value of our investment property portfolio at December 31, 2011, was $941.4 million, representing, a
capitalization rate of 8.5% for the portfolio. We acquired our properties on August 3, 2011 for $1,006.3 million,
representing a capitalization rate of approximately 8.2%. Since acquisition, our properties decreased in value
by $56.3 million of which $33.7 million is attributable to the weakening of the euro against the Canadian dollar
and $23.1 million attributable to an increase in Cap Rates and the impact of an increase in German real estate
transaction taxes.

Interest expense
Interest expense decreased by $0.8 million and $0.4 million, respectively, compared to the pro-rated forecast
for the period August 3, 2011 to December 31, 2011 and for the quarter ended December 31, 2011, mainly due to
a reduction in the realized interest rate on the credit facility partially offset by additional interest related to the
over-allotment of the Debentures and appreciation of the euro compared to the forecast. The actual weighted
average interest rate realized on the Facility for the period August 3, 2011 to December 31, 2011 and for the
quarter ended December 31, 2011, was 3.97% and 3.98%, respectively, compared to 4.10% that we expected to
realize in the forecast. Additionally, on an effective interest rate basis, we realized a rate of 4.02% for the
period August 3, 2011 to December 31, 2011 and 4.04% for the quarter ended December 31, 2011, compared to
4.60% in the forecast, mainly reﬂecting the receipt of $9.5 million from the vendor for the purchase of an
in-the-money swap. This increase was partially offset by additional interest related to $21 million of Debentures
issued pursuant to the over-allotment.

Transaction costs
Transaction costs of $7.9 million were incurred for the period from August 3, 2011 to December 31, 2011. During
the quarter, we incurred $0.5 million of transaction costs. Transaction costs mainly represent legal, accounting
and tax advisory fees in relation to the purchase of our properties. The forecast anticipated transaction costs
of $6.4 million.

PAGE 22

DUNDEE INTERNATIONAL 2011 Annual Report

Fair value adjustment to ﬁnancial instruments
For the period from August 3, 2011 to December 31, 2011, we incurred an unrealized net loss on the change in
the fair value of ﬁnancial instruments of $14.6 million. The net loss is composed of a $17.9 million loss related
to the fair value change in the interest rate swap and cap as a result of a signiﬁcant decrease in the forward
price of interest rates since acquiring the in-the-money swap on August 3, 2011. The loss was partially offset
by unrealized fair value gains of approximately $1.8 million related to our foreign currency forward contracts
due to a depreciation of the euro compared to the Canadian dollar and by an unrealized gain of $1.5 million
related to the conversion feature of the Debentures.

For the quarter, we incurred an unrealized net loss on the change in the fair value of ﬁnancial instruments of
$8.6 million. The net loss is composed of the following: a $4.7 million loss related to the fair value change in
the interest rate swap and cap that were entered into pursuant to the requirements of our credit facility as a
result of a signiﬁcant decrease in the forward price of interest rates since September 30, 2011; an unrealized
loss of $5.7 million related to the conversion feature of the Debentures; and an unrealized loss of $2.5 million
related to a fair value change on the Exchangeable Notes. The losses were partially offset by unrealized fair
value gains of approximately $4.3 million related to our foreign currency forward contracts due to a
depreciation of the euro compared to the Canadian dollar.

Income taxes
We recognized a deferred income tax recovery of $6.3 million and $5.4 million, respectively, for the period
August 3, 2011 to December 31, 2011 and for the quarter ended December 31, 2011, respectively, compared to
a deferred tax expense of $1.6 million and $1.0 million for the respective forecast periods. The difference is
mainly as a result of the tax impact associated with the fair value change related to investment properties and
ﬁnancial instruments.

Impact of foreign exchange
There was a foreign currency translation loss of $18.6 million and $20.3 million for the period August 3, 2011 to
December 31, 2011 and for the quarter ended December 31, 2011, respectively. The exchange rates decreased
from 1.365 at the time of acquisition to 1.3193 as at the end of December 2011.

Net rental income

Ofﬁce
Mixed use
Industrial

Net rental income

For the
period from
August 3, 2011, to
December 31, 2011 December 31, 2011

For the three
months ended

1,888
15,620
3,461

3,144
25,962
5,394

$ 20,969

$ 34,500

Our portfolio management team is comprised of the employees of our advisory subsidiaries in Germany and
Luxembourg who are responsible for providing asset management services for the investment properties,
including asset strategy and leasing activities. The costs of these activities are not allocated to net rental income.

PAGE 23

DUNDEE INTERNATIONAL 2011 Annual Report

Funds from operations and adjusted funds from operations

NET INCOME
Add (deduct):

Amortization related to investment in joint ventures
Interest expense on Exchangeable Notes
Transaction costs
Deferred income taxes
Term debt swap settlement
Loss on settlement of foreign currency contracts
Fair value adjustments to investment properties
Fair value adjustments to ﬁnancial instruments

FFO

Add (deduct):

Amortization of ﬁnancing costs
Deferred unit compensation expense
Deferred asset management fees
Straight-line rent

Deduct:

Normalized leasing costs and tenant incentives
Normalized non-recoverable recurring capital expenditures

AFFO

For the
period from
August 3, 2011, to
December 31, 2011 December 31, 2011

For the three
months ended

$ (25,976)

$ (23,201)

7
1,609
467
(5,367)
(317)
(84)
31,704
8,557

13
2,641
(7,853)
(6,263)
(573)
(84)
23,147
14,567

10,600

18,100

488
88
831
(142)

790
88
841
(187)

11,865

19,632

(1,025)
(600)

(1,682)
(985)

10,240

16,965

Funds from operations and adjusted funds from operations per Unit amounts
The basic weighted average number of Units outstanding used in the FFO and AFFO calculations include all
Units and the aggregate number of Units issuable upon the exchange of Exchangeable Notes. The diluted
weighted average number of Units assumes the conversion of the Debentures. The incremental unvested
deferred trust units represent the potential Units that would have to be purchased in the open market to fund
the unvested obligation. The weighted average number of Units outstanding for basic and diluted FFO
calculations for the period from August 3, 2011 to December 31, 2011 is 51,160,834 and 63,363,664, respectively.
The weighted average number of Units outstanding for the basic and diluted FFO calculation for the quarter
ended December 31, 2011 is 51,862,716 and 64,396,562, respectively. Diluted FFO includes interest and
amortization adjustments related to the Debentures of $4.3 million for the quarter.

To allow a better comparison with the ﬁnancial forecast, the impact of the over-allotment was excluded.
Excluding proceeds of $40.5 million received for Units and $21.0 million for Debentures, the weighted average
number of units outstanding for basic and diluted FFO per unit calculation for the period August 3 to
December 31, 2011 is 47,808,185 and 58,673,776, respectively. The weighted average number of units
outstanding for basic and diluted FFO per unit calculation for the quarter ended December 31, 2011 is 47,812,716
and 58,731,177, respectively. In calculating basic FFO, $0.4 million and $0.3 million were added back to FFO for
the interest paid on the over-allotment of Debentures for the period August 3 to December 31, 2011 and the
quarter ended December 31, 2011, respectively. Diluted FFO includes interest and amortization adjustments
related to the Debentures of $3.9 million and $2.4 million for the period August 3, 2011 to December 31, 2011
and for the quarter ended December 31, 2011, respectively.

PAGE 24

DUNDEE INTERNATIONAL 2011 Annual Report

Funds from operations
Management believes FFO is an important measure of our operating performance. This non-IFRS measurement
is a commonly used measure of performance of real estate operations; however, it does not represent cash
ﬂow from operating activities as deﬁned by IFRS and is not necessarily indicative of cash available to fund
Dundee International REIT’s needs.

FFO

FFO per unit — basic

FFO per unit — diluted

Excluding the impact of uninvested over-allotment proceeds:

FFO per unit — basic

FFO per unit — diluted

Adjusted funds from operations

AFFO

AFFO per unit — basic

For the three

For the
period from
months ended August 3, 2011, to
December 31, 2011 December 31, 2011

10,600

0.20

0.23

0.22

18,100

0.35

0.39

0.37

For the three

For the
period from
months ended August 3, 2011, to
December 31, 2011 December 31, 2011

10,240

0.20

16,965

0.33

Excluding the impact of uninvested over-allotment proceeds:

AFFO per unit — basic

0.22

0.36

AFFO is an important measure of our economic performance and is indicative of our ability to pay distributions.
This non-IFRS measurement is commonly used for assessing real estate performance; however, it does not
represent cash ﬂow from operating activities as deﬁned by IFRS and is not necessarily indicative of cash
available to fund Dundee International REIT’s needs.

Our calculation of AFFO includes an estimated amount of normalized non-recoverable maintenance capital
expenditures, initial direct leasing costs and tenant incentives that we expect to incur based on our current
portfolio and expected average leasing activity. Our estimates of initial direct leasing costs and lease incentives
are based on the average of our expected leasing activity over the next two to three years and multiplied by
the average cost per square foot that we expect to incur. Our estimates of normalized non-recoverable capital
expenditures are based on our expected average expenditures for our current property portfolio. This estimate
will differ from actual experience due to the timing of expenditures and any growth in our business resulting
from property acquisitions.

PAGE 25

DUNDEE INTERNATIONAL 2011 Annual Report

AFFO is not deﬁned by IFRS and therefore may not be comparable to similar measures presented by other real
estate investment trusts. In compliance with the Canadian Securities Administrators Staff Notice 52-306
(Revised), “Non-GAAP Financial Measures”, the table below reconciles AFFO to cash generated from
operating activities.

Cash generated from operating activities
Add (deduct):

Transaction costs on acquired properties
Change in non-cash working capital
Share of general and administrative expenses from equity

accounted investments

Deferred gain/loss on settlement of foreign exchange contracts
Investment in lease incentives and initial direct leasing costs
Normalized leasing costs and lease incentives
Normalized non-recoverable recurring capital expenditures

For the three

For the
period from
months ended August 3, 2011, to
December 31, 2011 December 31, 2011

10,803

22,611

467
477

39
32
47
(1,025)
(600)

7,853
(10,931)

20
32
47
(1,682)
(985)

AFFO

10,240

16,965

SECTION III — DISCLOSURE CONTROLS AND PROCEDURES

In accordance with section 3.3(1)(c) of National Instrument 51-109, the Chief Executive Ofﬁcer and Chief
Financial Ofﬁcer have limited the scope of our design of Disclosure Controls and Procedures and Internal
Controls over Financial Reporting to exclude controls, policies and procedures related to the portfolio of
properties we acquired on August 3, 2011, as they form the business that we acquired less than 365 days before
our ﬁnancial year-end. The results of the acquired business, which forms our entire business, are included in our
consolidated ﬁnancial statements for the period ended December 31, 2011. We intend to complete our design
of Disclosure Controls and Procedures and Internal Controls over Financial Reporting by the end of our ﬁrst
quarter in 2012. Subject to the above limitation, the Chief Executive Ofﬁcer and Chief Financial Ofﬁcer have
evaluated our Disclosure Controls and Procedures and our Internal Controls over Financial Reporting, and in
each case concluded they were effective as at December 31, 2011.

Internal controls over ﬁnancial reporting
The REIT’s Chief Executive Ofﬁcer and Chief Financial Ofﬁcer are designing the REIT’s internal control over
ﬁnancial reporting (as deﬁned by National Instrument 52-109, “Certiﬁcation of Disclosure in Issuers’ Annual
and Interim Filings”) to provide reasonable assurance regarding the reliability of ﬁnancial reporting and the
preparation of ﬁnancial statements for external purposes in accordance with IFRS.

PAGE 26

DUNDEE INTERNATIONAL 2011 Annual Report

SECTION IV — RISKS AND OUR STRATEGY TO MANAGE

We are exposed to various risks and uncertainties, many of which are beyond our control. The following is a
review of the material risks and uncertainties that could materially affect our operations and future
performance. A more detailed description of our business environment and the risks and uncertainties that
could affect our operations and future performance are contained in our prospectus dated July 21, 2011, which
is available at www.sedar.com.

Real estate ownership
Real estate ownership is generally subject to numerous factors and risks, including changes in general economic
conditions (such as the availability, terms and cost of mortgage ﬁnancings and other types of credit), local
economic conditions (such as an oversupply of ofﬁce and other commercial properties or a reduction in
demand for real estate in the area), the attractiveness of properties to potential tenants or purchasers,
competition with other landlords with similar available space, and the ability of the owner to provide adequate
maintenance at competitive costs.

An investment in real estate is relatively illiquid. Such illiquidity will tend to limit our ability to vary our portfolio
promptly in response to changing economic or investment conditions. In recessionary times it may be difﬁcult
to dispose of certain types of real estate. The costs of holding real estate are considerable and during an
economic recession we may be faced with ongoing expenditures with a declining prospect of incoming
receipts. In such circumstances, it may be necessary for us to dispose of properties at lower prices in order to
generate sufﬁcient cash for operations and making distributions and interest payments.

Certain signiﬁcant expenditures (e.g., property taxes, maintenance costs, mortgage payments, insurance costs
and related charges) must be made throughout the period of ownership of real property, regardless of whether
the property is producing sufﬁcient income to pay such expenses. In order to retain desirable rentable space
and to generate adequate revenue over the long term, we must maintain or, in some cases, improve each
property’s condition to meet market demand. Maintaining a rental property in accordance with market
standards can entail signiﬁcant costs, which we may not be able to pass on to our tenants. Numerous factors,
including the age of the relevant building structure, the material and substances used at the time of
construction, or currently unknown building code violations, could result in substantial unbudgeted costs for
refurbishment or modernization. In the course of acquiring a property, undisclosed defects in design or
construction or other risks might not have been recognized or correctly evaluated during the pre-acquisition
due diligence process. These circumstances could lead to additional costs and could have an adverse effect
on our proceeds from sales and rental income of the relevant properties.

Rollover of leases
Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced.
Furthermore, the terms of any subsequent lease may be less favourable than those of the existing lease. Our
cash ﬂows and ﬁnancial position would be adversely affected if our tenants were to become unable to meet
their obligations under their leases or if a signiﬁcant amount of available space in our properties could not be
leased on economically favourable lease terms. In the event of default by a tenant, we may experience delays
or limitations in enforcing our rights as lessor and incur substantial costs in protecting our investment.
Furthermore, at any time, a tenant may seek the protection of bankruptcy, insolvency or similar laws which
could result in the rejection and termination of the lease of the tenant and, thereby, cause a reduction in the
cash ﬂows available to us.

The majority of the Deutsche Post leases expire in 2018. Deutsche Post has early termination rights entitling it
to terminate certain leases prior to their expiry upon 12 months’ prior notice. As of the date hereof, these
termination rights pertain to approximately 30% of Deutsche Post’s GLA.

PAGE 27

DUNDEE INTERNATIONAL 2011 Annual Report

Concentration of properties and tenants
Currently, all of our properties are located in Germany and as a result are impacted by economic and other
factors speciﬁcally affecting the real estate markets in Germany. These factors may differ from those affecting
the real estate markets in other regions. Due to the concentrated nature of our properties, a number of our
properties could experience any of the same conditions at the same time. If real estate conditions in Germany
decline relative to real estate conditions in other regions, our cash ﬂows and ﬁnancial condition may be more
adversely affected than those of companies that have more geographically diversiﬁed portfolios of properties.

We derive a signiﬁcant portion of our rental income from Deutsche Post. Consequently, our revenues are
dependent on the ability of Deutsche Post to meet its rent obligations and our ability to collect rent from
Deutsche Post.

Financing
We require access to capital to maintain our properties as well as to fund our growth strategy and signiﬁcant
capital expenditures. There is no assurance that capital will be available when needed or on favourable terms.
Our access to third-party ﬁnancing will be subject to a number of factors, including general market conditions;
the market’s perception of our growth potential; our current and expected future earnings; our cash ﬂow and
cash distributions and cash interest payments; and the market price of our Units.

A signiﬁcant portion of our ﬁnancing is debt. Accordingly, we are subject to the risks associated with debt
ﬁnancing, including the risk that our cash ﬂows will be insufﬁcient to meet required payments of principal and
interest, and that on maturities of such debt we may not be able to reﬁnance the outstanding principal under
such debt or that the terms of such reﬁnancing will be more onerous than those of the existing debt. If we are
unable to reﬁnance debt at maturity on terms acceptable to us or at all, we may be forced to dispose of one
or more of our properties on disadvantageous terms, which may result in losses and could alter our
debt-to-equity ratio or be dilutive to unitholders. Such losses could have a material adverse effect on our
ﬁnancial position or cash ﬂows.

The degree to which we are leveraged could have important consequences to our operations. A high level of
debt will: reduce the amount of funds available for the payment of distributions to unitholders and interest
payments on our Debentures; limit our ﬂexibility in planning for, and reacting to, changes in the economy and
in the industry and increase our vulnerability to general adverse economic and industry conditions; limit our
ability to borrow additional funds, dispose of assets, encumber our assets and make potential investments;
place us at a competitive disadvantage compared to other owners of similar real estate assets that are less
leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent
us from pursuing; make it more likely that a reduction in our borrowing base following a periodic valuation
(or redetermination) could require us to repay a portion of then outstanding borrowings; and impair our ability
to obtain additional ﬁnancing in the future for working capital, capital expenditures, acquisitions, general trust
or other purposes.

Tax matters
Although we have been structured with the objective of maximizing after-tax distributions, tax charges and
withholding taxes in various jurisdictions in which we invest will affect the level of distributions made to us by
our subsidiaries. No assurance can be given as to the level of taxation suffered by us or our subsidiaries.
Currently, our revenues are derived from our investments located in Germany. It is possible that certain of our
subsidiaries could be subject to German corporate income tax on their net rental income and capital gains
from the sale of properties. Although we have managed our tax affairs on the assumption that certain of our
subsidiaries will be subject to German corporate income tax (with a view to minimizing, to the extent possible,
the amount of taxable income from operations in Germany), there is no certainty that we will not pay German
corporate income tax. In addition, German real estate transfer tax (“RETT”) is triggered when among other

PAGE 28

DUNDEE INTERNATIONAL 2011 Annual Report

things there is a transfer of legal title of properties from one legal person to another. In the case of the initial
reallocation of our properties, legal title was not transferred and, consequently, no RETT should be payable in
connection therewith. However, if, unexpectedly, RETT does become payable as a result of the reallocation of
our properties, we will be required to pay 50% of such RETT.

Our debt ﬁnancing agreements with third parties and afﬁliates require us to pay principal and interest. Several
rules in German tax laws restrict the tax deductibility of interest expenses for corporate income and municipal
trade tax purposes. Such rules have been changed considerably on several occasions in the recent past.
As a result, major uncertainties exist as to the interpretation and application of such rules, which are not yet
clariﬁed by the tax authorities and the tax courts. Accordingly, there is a risk of additional taxes being triggered
on the rental income and capital gains in case the tax authorities or the tax courts adopt deviating views on
such rules.

We have structured our affairs to ensure that none of the Luxembourg entities through which we hold our
real property investment in Germany (our “FCPs”) has a permanent establishment in Germany, which is relevant
for determining whether they would also be liable to municipal trade tax. If it is determined that any of our
subsidiaries does have a permanent establishment in one or more German municipalities, the overall rate of
German income tax applicable to taxable income could materially increase.

Changes in law
We are subject to applicable federal, state, municipal, local and common laws and regulations governing the
ownership and leasing of real property, employment standards, environmental matters, taxes and other matters.
It is possible that future changes in such laws or regulations or changes in their application, enforcement or
regulatory interpretation could result in changes in the legal requirements affecting us (including with
retroactive effect). In addition, the political conditions in the jurisdictions in which we operate are also subject
to change. Any changes in investment policies or shifts in political attitudes may adversely affect our
investments. Any changes in the laws to which we are subject in the jurisdictions in which we operate could
materially affect our rights and title in and to the properties and the revenues we are able to generate from
our investments.

Foreign exchange rate ﬂuctuations
Substantially all of our investments and operations will be conducted in currencies other than Canadian dollars;
however, we pay distributions to unitholders and interest payments on our Debentures in Canadian dollars.
We also raise funds primarily in Canada from the sale of securities in Canadian dollars and invest such funds
indirectly through our subsidiaries in currencies other than Canadian dollars. As a result, ﬂuctuations in such
foreign currencies against the Canadian dollar could have a material adverse effect on our ﬁnancial results,
which will be denominated and reported in Canadian dollars, and on our ability to pay cash distributions to
unitholders and cash interest payments on our Debentures. We have implemented active hedging programs
in order to offset the risk of revenue losses and to provide more certainty regarding the payment of
distributions to unitholders and interest payments on our Debentures if the Canadian dollar increases in value
compared to foreign currencies. However, to the extent that we fail to adequately manage these risks, including
if any such hedging arrangements do not effectively or completely hedge changes in foreign currency rates,
our ﬁnancial results, and our ability to pay distributions to unitholders and cash interest payments on our
Debentures, may be negatively impacted. Hedging transactions involve the risk that counterparties, which are
generally ﬁnancial institutions, may be unable to satisfy their obligations. If any counterparties default on their
obligations under the hedging contracts or seek bankruptcy protection, it could have an adverse effect on our
ability to fund planned activities and could result in a larger percentage of future revenue being subject to
currency changes.

PAGE 29

DUNDEE INTERNATIONAL 2011 Annual Report

Interest rates
When entering into ﬁnancing agreements or extending such agreements, we depend on our ability to agree
on terms for interest payments that will not impair our desired proﬁt and on amortization schedules that do
not restrict our ability to pay distributions on our Units and interest payments on our Debentures. In addition
to existing variable rate portions of our ﬁnancing agreements, we may enter into future ﬁnancing agreements
with variable interest rates. An increase in interest rates could result in a signiﬁcant increase in the amount
paid by us to service debt, which could limit our ability to pay distributions to unitholders and could impact
the market price of the Units and/or the Debentures. We have implemented an active hedging program in
order to offset the risk of revenue losses and to provide more certainty regarding the payment of distributions
to unitholders and cash interest payments under the Debentures should current variable interest rates increase.
However, to the extent that we fail to adequately manage these risks, including if any such hedging
arrangements do not effectively or completely hedge increases in variable interest rates, our ﬁnancial results,
and our ability to pay distributions to unitholders and cash interest payments under our ﬁnancing arrangements,
the Debentures and future ﬁnancings may be negatively affected. Hedging transactions involve inherent risks.
Increases in interest rates generally cause a decrease in demand for properties. Higher interest rates and more
stringent borrowing requirements, whether mandated by law or required by banks, could have a signiﬁcant
negative effect on our ability to sell any of our properties. See “Foreign exchange rate ﬂuctuations” above.

Environmental risk
We are subject to various laws relating to environmental matters. Our properties may contain ground
contamination, hazardous substances, wartime relics or other residual pollution and environmental risks.
Buildings and their ﬁxtures might contain asbestos or other hazardous substances above the allowable or
recommended thresholds, or the buildings could bear other environmental risks. Actual and contingent liabilities
may be imposed on us under applicable environmental laws to assess and, if required, undertake remedial
action on contaminated sites and in contaminated buildings. These obligations may relate to sites we currently
own or operate, sites we formerly owned or operated, or sites where waste from our operations has been
deposited. Furthermore, actions for damages or remediation measures may be brought against us, including
under the German Federal Soil Protection Act (Bundesbodenschutzgesetz). According to this Act, not only
the polluter but also its legal successor, the owner of the contaminated site and certain previous owners may
be held liable for soil contamination. The costs of any removal, investigation or remediation of any residual
pollution on such sites or in such buildings, as well as costs related to legal proceedings, including potential
damages, regarding such matters, may be substantial, and it may be impossible, for a number of reasons, for
us to have recourse against a polluter and/or former seller of a contaminated site or building or the party that
may otherwise be responsible for the contamination. Furthermore, the discovery of any residual pollution on
the sites and/or in the buildings, particularly in connection with the lease or sale of properties or borrowing
using the real estate as security, could trigger claims for rent reductions or termination of leases for cause, for
damages or other breach of warranty claims against us. Environmental laws may also impose liability on us for
the release of certain materials into the air or water from a property, including asbestos, and such release
could form the basis for liability to third persons for personal injury or other damages.

Organizational structure
We hold a 50% equity interest in Lorac, which is the manager of our FCPs and the registered owner on title to
our properties. Lorac is also the manager of another fund and the registered owner on title to a portfolio of
properties on behalf of that other fund. We and the owner of the remaining Lorac shares have entered into a
shareholders’ agreement, which provides us with the right to appoint three of the six directors of Lorac. In
addition, the directors of Lorac have adopted governance rules pursuant to which, subject to applicable law,
our appointed directors generally have responsibility for matters relating to our properties, and the other three
directors, who are nominated by the other owner of the Lorac shares, generally have responsibility for matters

PAGE 30

DUNDEE INTERNATIONAL 2011 Annual Report

affecting other properties of which Lorac is the registered owner on title. Pursuant to such shareholders’
agreement and the governance rules, certain matters such as ﬁling tax returns and shared employee matters
will require the approval of a majority of the directors. Each of the directors has a ﬁduciary duty to act in the
best interests of Lorac and Lorac has a duty to manage our FCPs and the other fund in the best interests of
the respective unitholders. However, it is possible that we will need the approval of a majority of the directors
of Lorac with respect to certain matters involving our properties and there can be no assurance that such
matters will be approved at all or on the terms requested. Any matter with respect to which our appointed
directors and those appointed by the other owner of the Lorac shares cannot agree will be submitted to the
Lorac shareholders. However, since we have only 50% of the voting shares of Lorac, there can be no assurance
that any such matter will be approved in the manner in which we would hope. Such dispute could have a
material and adverse effect on our cash ﬂows, ﬁnancial condition and results of operations, and on our ability
to make distributions on the Units or cash interest payments on the Debentures.

As manager of the other fund since 2008, Lorac has incurred and will continue to incur liabilities as a result of
managing that other fund and its assets. To the extent that the other fund is unable to satisfy such liabilities,
a third party could seek recourse against Lorac. If Lorac is unable to satisfy such liabilities, Lorac could be
required to seek protection from creditors under applicable bankruptcy or insolvency legislation. Taking such
steps could result in Lorac being replaced as the manager of our FCPs with the result that legal title to our
properties would be required to be transferred to a new manager. This would result in the payment of RETT
in Germany. The amount of such taxes could have a material and adverse effect on our cash ﬂows, ﬁnancial
condition and results of operations. We have negotiated certain limited indemnities from the other fund in
connection with any prior existing liabilities of the other fund and with those that may arise as a result of
actions or omissions of the other fund. In addition to the foregoing, we have been advised by our Luxembourg
counsel that creditors of the other fund could only seek recourse against the assets of the other fund and
could not seek recourse against the assets of our FCPs regardless of the fact that Lorac may have entered
into the contract on behalf of the other fund or our FCPs creating such right to a claim.

Competition
The real estate market in Germany is highly competitive and fragmented and we compete for real property
acquisitions with individuals, corporations, institutions and other entities that may seek real property
investments similar to those we desire. An increase in the availability of investment funds or an increase in
interest in real property investments may increase competition for real property investments, thereby increasing
purchase prices and reducing the yield on them. If competing properties of a similar type are built in the area
where one of our properties is located or if similar properties located in the vicinity of one of our properties
are substantially refurbished, the net operating income derived from and the value of such property could
be reduced.

Numerous other developers, managers and owners of properties will compete with us in seeking tenants.
To the extent that our competitors own properties that are better located, of better quality or less leveraged
than the properties owned by us, they may be in a better position to attract tenants who might otherwise
lease space in our properties. To the extent that our competitors are better capitalized or stronger ﬁnancially,
they will be better able to withstand an economic downturn. The existence of competition for tenants could
have an adverse effect on our ability to lease space in our properties and on the rents charged or concessions
granted, and could materially and adversely affect our cash ﬂows, operating results and ﬁnancial condition.

PAGE 31

DUNDEE INTERNATIONAL 2011 Annual Report

Insurance
We carry general liability, umbrella liability and excess liability insurance with limits that are typically obtained
for similar real estate portfolios in Germany and otherwise acceptable to our trustees. For the property risks,
we carry “All Risks” property insurance including, but not limited to, ﬂood, earthquake and loss of rental income
insurance (with at least a 24-month indemnity period). We also carry boiler and machinery insurance covering
all boilers, pressure vessels, HVAC systems and equipment breakdown. However, certain types of risks
(generally of a catastrophic nature such as from war or nuclear accident) are uninsurable under any insurance
policy. Furthermore, there are other risks that are not economically viable to insure at this time. We partially
self-insure against terrorism risk for our entire portfolio. We have insurance for earthquake risks, subject to
certain policy limits, deductibles and self-insurance arrangements. Should an uninsured or underinsured loss
occur, we could lose our investment in, and anticipated proﬁts and cash ﬂows from, one or more of our
properties, but we would continue to be obligated to repay any recourse mortgage indebtedness on such
properties. We do not carry title insurance on our properties. If a loss occurs resulting from a title defect with
respect to a property where there is no title insurance or the loss is in excess of insured limits, we could lose
all or part of our investment in, and anticipated proﬁts and cash ﬂows from, such property.

SECTION V — CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING ESTIMATES AND CHANGES IN ACCOUNTING POLICIES
Management of Dundee International REIT believes that certain policies may be subject to estimation and
management’s judgment. For a list and explanation of these policies refer to Note 4 of the consolidated ﬁnancial
statements.

For a list and explanation of future accounting policy changes, refer to Note 5 of the ﬁnancial statements.

Additional information relating to Dundee International REIT is available on SEDAR at www.sedar.com.

PAGE 32

DUNDEE INTERNATIONAL 2011 Annual Report

Management’s responsibility for financial statements

The accompanying consolidated ﬁnancial statements, the notes thereto and other ﬁnancial information
contained in this Annual Report have been prepared by, and are the responsibility of, the management of
Dundee International Real Estate Investment Trust. These ﬁnancial statements have been prepared in
accordance with International Financial Reporting Standards, using management’s best estimates and
judgments when appropriate.

The Board of Trustees is responsible for ensuring that management fulﬁlls its responsibility for ﬁnancial
reporting and internal control. The audit committee, which is comprised of trustees, meets with management
as well as the external auditors to satisfy itself that management is properly discharging its ﬁnancial
responsibilities and to review its consolidated ﬁnancial statements and the report of the auditors. The audit
committee reports its ﬁndings to the Board of Trustees, which approves the consolidated ﬁnancial statements.

PricewaterhouseCoopers LLP, the independent auditors, have audited the consolidated ﬁnancial statements in
accordance with Canadian generally accepted auditing standards. The auditors have full and unrestricted
access to the audit committee, with or without management present.

P. JANE GAVAN
President and
Chief Executive Ofﬁcer

DOUGLAS P. QUESNEL
Chief Financial Ofﬁcer

Toronto, Ontario, February 23, 2012

PAGE 33

DUNDEE INTERNATIONAL 2011 Annual Report

Independent auditor’s report

To the Unitholders of Dundee International Real Estate Investment Trust
We have audited the accompanying consolidated ﬁnancial statements of Dundee International Real Estate
Investment Trust and its subsidiaries, which comprise the consolidated balance sheet as at December 31, 2011
and the consolidated statements of comprehensive loss, changes in equity and cash ﬂows for the period from
April 21, 2011 to December 31, 2011, and the related notes, which comprise a summary of signiﬁcant accounting
policies and other explanatory information.

Management’s responsibility for the consolidated ﬁnancial statements
Management is responsible for the preparation and fair presentation of these consolidated ﬁnancial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated ﬁnancial statements that are free from
material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated ﬁnancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated ﬁnancial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated ﬁnancial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated ﬁnancial statements.

We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our
audit opinion.

Opinion
In our opinion, the consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial position
of Dundee International Real Estate Investment Trust and its subsidiaries, as at December 31, 2011 and their
ﬁnancial performance and their cash ﬂows for the period from April 21, 2011 to December 31, 2011 in accordance
with International Financial Reporting Standards.

CHARTERED ACCOUNTANTS,
LICENSED PUBLIC ACCOUNTANTS

Toronto, Ontario, February 23, 2012

PAGE 34

DUNDEE INTERNATIONAL 2011 Annual Report

Note

December 31, 2011

Consolidated balance sheet

(in thousands of Canadian dollars)

Assets
NON-CURRENT ASSETS
Investment properties
Deferred income tax assets
Other non-current assets

CURRENT ASSETS
Amounts receivable
Prepaid expenses
Cash

Total assets

Liabilities
NON-CURRENT LIABILITIES
Debt
Exchangeable Notes
Deposits
Derivative ﬁnancial instruments
Deferred Unit Incentive Plan

CURRENT LIABILITIES
Amounts payable and accrued liabilities
Distributions payable

Total liabilities

Equity
Unitholders’ equity
Deﬁcit
Accumulated other comprehensive loss

Total equity

Total liabilities and equity

See accompanying notes to the consolidated ﬁnancial statements

7
19
8

10
11

12
13

14
15

On behalf of the Board of Trustees of Dundee International Real Estate Investment Trust:

MICHAEL J. COOPER
Trustee

P. JANE GAVAN
Trustee

$ 941,442
7,034
364

948,840

2,010
583
87,907

90,500

$ 1,039,340

$ 579,006
80,000
481
11,754
945

672,186

13,420
2,925

16,345

688,531

407,009
(37,642)
(18,558)

350,809

$ 1,039,340

PAGE 35

DUNDEE INTERNATIONAL 2011 Annual Report

Consolidated statement of comprehensive loss

(in thousands of Canadian dollars)

Note

Investment properties revenue
Investment properties operating expenses

Net rental income
Other income and expenses
Portfolio management
General and administrative
Fair value adjustments to investment properties
Transaction costs
Interest expense
Share of income from equity accounted investments
Interest and other income
Fair value adjustments to ﬁnancial instruments

Loss before income taxes
Recovery of taxes

Net loss
Foreign currency translation adjustment

Comprehensive loss

See accompanying notes to the consolidated ﬁnancial statements

7
6
17
8

For the period from
April 21, 2011, to
December 31, 2011

54,274
19,774

34,500

(1,566)
(3,114)
(23,147)
(7,853)
(13,856)
7
132
(14,567)

(29,464)
6,263

(23,201)
(18,558)

$ (41,759)

PAGE 36

DUNDEE INTERNATIONAL 2011 Annual Report

Consolidated statement of changes in equity

(in thousands of Canadian dollars,
except number of Units)

Note

Number
of Units

Unitholders’
equity

Attributable to unitholders of the Trust

Accumulated
other
Retained
earnings comprehensive
loss
(deﬁcit)

Total

Balance at April 21, 2011
Units issued on formation
Net loss for the period
Distributions paid
Distributions payable
Public offering of Units
Distribution reinvestment plan
Issue costs
Foreign currency

translation adjustment

— $

15
15
16
16
16

800,000
—
—
—
43,050,000
22,316
—

400
—
—
—
430,500
217
(24,108)

— $
—
(23,201)
(11,516)
(2,925)
—
—
—

— $
—
—
—
—
—
—
—

—
400
(23,201)
(11,516)
(2,925)
430,500
217
(24,108)

—

(18,558)

Balance at December 31, 2011

43,872,316 $ 407,009 $ (37,642) $

(18,558) $ 350,809

See accompanying notes to the consolidated ﬁnancial statements

PAGE 37

DUNDEE INTERNATIONAL 2011 Annual Report

Consolidated statement of cash flows

(in thousands of Canadian dollars)

Note

7
6

Generated from (utilized in) operating activities
Net loss
Non-cash items:

Share of income from equity accounted investment
Deferred income taxes
Amortization of ﬁnancing costs
Amortization of initial discount on convertible debentures
Deferred unit compensation expense and asset management fees
Settlement on foreign exchange contracts
Straight-line rent adjustment
Fair value adjustments to ﬁnancial instruments
Fair value adjustments to investment properties

Interest paid on Exchangeable Notes
Cash settlement on interest rate swap
Lease incentives and initial direct leasing costs
Change in non-cash working capital

Generated from (utilized in) investing activities
Investment in building improvements
Acquisition of investment properties

Generated from (utilized in) ﬁnancing activities
Purchase of derivative instruments
Proceeds from vendor for ﬁnancing charges
Issue of convertible debentures, net of costs
Proceeds of term debt, net of costs
Issue of Exchangeable Notes
Units issued for cash, net of costs
Distributions paid on Units
Interest paid on Exchangeable Notes

Increase in cash

Effect of exchange rate changes on cash

Cash, end of period

See accompanying notes to the consolidated ﬁnancial statements

PAGE 38

For the period from
April 21, 2011, to
December 31, 2011

$ (23,201)

(7)
(6,263)
424
366
929
(116)
(187)
14,567
23,147
2,641
(573)
(47)
10,931

22,611

(488)
(998,266)

(998,754)

(9,986)
9,555
154,069
438,163
80,000
407,062
(11,299)
(2,641)

1,064,923

88,780

(873)

87,907

DUNDEE INTERNATIONAL 2011 Annual Report

Notes to the consolidated financial statements
(All dollar amounts in thousands of Canadian dollars, except unit or per unit amounts)

Note 1
ORGANIZATION
Dundee International Real Estate Investment Trust (the “REIT” or the “Trust”) is an open-ended investment
trust created pursuant to a Declaration of Trust dated April 21, 2011, under the laws of the Province of Ontario,
and is domiciled in Ontario. The consolidated ﬁnancial statements of the REIT include the accounts of the REIT
and its consolidated subsidiaries. The REIT’s portfolio comprises ofﬁce, industrial and mixed use properties
located in Germany.

The address of the Trust’s registered ofﬁce is 30 Adelaide Street East, Suite 1600, Toronto, Ontario, Canada
M5C 3H1. The Trust is listed on the Toronto Stock Exchange under the symbol “DI.UN”. The Trust’s consolidated
ﬁnancial statements for the period ended December 31, 2011, were authorized for issue by the Board of Trustees
on February 23, 2012, after which date the consolidated ﬁnancial statements may only be amended with
Board approval.

At December 31, 2011, Dundee Corporation, the majority shareholder of Dundee Realty Corporation (“DRC”),
directly and indirectly through its subsidiaries held 12,800,000 Units.

Note 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These consolidated ﬁnancial statements of the Trust have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Basis of presentation
The consolidated ﬁnancial statements are prepared on a going concern basis and have been presented in
Canadian dollars, which is also the Trust’s functional currency. All ﬁnancial information has been rounded to the
nearest thousand except when otherwise indicated. The accounting policies set out below have been applied
consistently in all material respects. Certain new accounting standards and guidelines relevant to the Trust
that were issued at the date of approval of the ﬁnancial statements but not yet effective for the current
accounting period are described in Note 5.

The consolidated ﬁnancial statements have been prepared on the historical cost basis except for investment
properties, the conversion feature of the convertible debentures, Exchangeable Notes, ﬁnancial derivatives, and
the Deferred Unit Incentive Plan, which are measured at carrying values impacted by fair values.

Basis of consolidation
The consolidated ﬁnancial statements comprise the ﬁnancial statements of the REIT and its subsidiaries.
Subsidiaries are fully consolidated from the date of acquisition, which is the date on which the Trust obtains
control, and continue to be consolidated until the date that such control ceases. Control exists when the Trust
has the power, directly or indirectly, to govern the ﬁnancial and operating policies of an entity so as to obtain
beneﬁt from its activities. All intercompany balances, income and expenses, and unrealized gains and losses
resulting from intercompany transactions are eliminated in full.

Joint arrangements
A joint venture is a contractual arrangement pursuant to which the Trust and other parties undertake an
economic activity that is subject to joint control whereby the strategic ﬁnancial and operating policy decisions
relating to the activities of the joint venture require the unanimous consent of the parties sharing control.
Joint venture arrangements that involve the establishment of a separate entity in which each venture has an
interest are referred to as jointly controlled entities.

PAGE 39

DUNDEE INTERNATIONAL 2011 Annual Report

The Trust reports its interests in jointly controlled entities using the equity method of accounting. Under the
equity method, equity accounted investments are carried on the consolidated balance sheet at cost, adjusted
for the Trust’s proportionate share of post-acquisition proﬁts and losses, and for post-acquisition changes in
excess of the Trust’s carrying amount of its investment over the net assets of the equity accounted investments,
less any identiﬁed impairment loss. The Trust’s share of proﬁts and losses is recognized in the share of net
income/loss from equity accounted investments in the consolidated statement of comprehensive income. At
each period-end, the Trust evaluates whether there is objective evidence that its interest in an equity accounted
investment is impaired. The entire carrying amount of the equity accounted investment is compared to the
recoverable amount, which is the higher of the value in use or fair value less costs to sell. The recoverable
amount of each investment is considered separately. When the Trust’s share of losses of an equity accounted
investment equals or exceeds its interest in that investment, the Trust discontinues recognizing its share of
further losses. Any additional share of losses is provided for and a liability is recognized only to the extent
that the Trust has incurred legal or constructive obligations to fund the entity or made payments on behalf of
that entity. Accounting policies of equity accounted investments have been changed where necessary to
ensure consistency with the policies adopted by the Trust.

Where the Trust transacts with its equity investments, unrealized proﬁts and losses are eliminated to the extent
of the Trust’s interest in the investment. Balances outstanding between the Trust and equity accounted
investments in which it has an interest are not eliminated in the consolidated balance sheet.

Note 3
ACCOUNTING POLICIES SELECTED AND APPLIED FOR SIGNIFICANT
TRANSACTIONS AND EVENTS
The signiﬁcant accounting policies used in the preparation of these consolidated ﬁnancial statements are
described below:

Investment properties
Investment properties are initially recorded at cost, except if acquired in a business combination, in which case
they are initially recorded at fair value, and include ofﬁce, industrial and other commercial properties held to
earn rental income and/or for capital appreciation. Investment properties are subsequently measured at fair
value, determined based on available market evidence, at the consolidated balance sheet date. Related fair
value gains and losses are recorded in comprehensive income in the period in which they arise. The fair value
of each investment property is based on, among other things, rental income from current leases and
assumptions about rental income from future leases reﬂecting market conditions at the consolidated balance
sheet date, less future estimated cash outﬂows in respect of such properties. To determine fair value, the Trust
ﬁrst considers whether it can use current prices in an active market for a similar property in the same location
and condition, and subject to similar leases and other contracts. The Trust has concluded there is insufﬁcient
market evidence on which to base investment property valuation using this approach, and has therefore
determined that the use of the income approach is more appropriate. The income approach is one in which the
fair value is estimated by capitalizing the net operating income that the property can reasonably be expected
to produce over its remaining economic life. The income approach is derived from two methods: the overall
capitalization rate method whereby the net operating income is capitalized at the requisite overall capitalization
rate; and/or the discounted cash ﬂow method in which the income and expenses are projected over the
anticipated term of the investment plus a terminal value discounted using an appropriate discount rate.
Valuations of investment properties are most sensitive to changes in discount rates and capitalization rates.

Initial direct leasing costs incurred in negotiating and arranging tenant leases are added to the carrying amount
of investment properties. Lease incentives, which include costs incurred to make leasehold improvements to
tenants’ space and cash allowances provided to tenants, are added to the carrying amount of investment

PAGE 40

DUNDEE INTERNATIONAL 2011 Annual Report

properties and are amortized on a straight-line basis over the term of the lease as a reduction of investment
properties revenue.

Segment reporting
The Trust owns and operates investment properties located in Germany. In measuring performance, the Trust
does not distinguish or group its operations on a geographic or any other basis and, accordingly, has a single
reportable segment for disclosure purposes.

The Trust’s major tenant is Deutsche Post, accounting for approximately 85% of the gross rental income
generated by the Trust’s properties for the period ended December 31, 2011.

Foreign currency translation
Functional and presentation currency
Items included in the ﬁnancial statements of each of the group’s entities are measured using the currency of
the primary economic environment in which the entity operates (“the functional currency”). The functional
currency of the REIT’s operating subsidiaries is euros. The consolidated ﬁnancial statements are presented in
Canadian dollars, which is the group’s presentation currency.

Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of such transactions, and from the translation at period-end exchange rates
of monetary assets and liabilities denominated in foreign currencies, are recognized in the statement of
comprehensive income except when deferred in other comprehensive income as qualifying cash ﬂow hedges
and qualifying net investment hedges.

Foreign exchange gains and losses are presented in the consolidated statement of comprehensive income.

Group companies
The results and ﬁnancial position of all the group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:

(i)

(ii)

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;

income and expenses for each statement of comprehensive income are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and

(iii) all resulting exchange differences are recognized in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations,
and of borrowings and other currency instruments designated as hedges of such investments, are taken to other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were
recorded in equity are recognized in the consolidated statement of income as part of the gain or loss on sale.
For accounting purposes, the Trust has not entered into any qualifying hedges.

Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.

PAGE 41

DUNDEE INTERNATIONAL 2011 Annual Report

Other non-current assets
Other non-current assets include property and equipment and straight-line rent receivables as well as an equity
accounted investment. Property and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses. Depreciation of property and equipment is calculated using the straight-line
method to allocate their cost, net of their residual values, over their expected useful lives of three to ten years.
The residual values and useful lives of all assets are reviewed and adjusted, if appropriate, at least at each
ﬁnancial year-end. Cost includes expenditures that are directly attributable to the acquisition and expenditures
for replacing part of the property and equipment when that cost is incurred, if the recognition criteria are met.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Trust and the
cost of the item can be measured reliably. All other repairs and maintenance are charged to comprehensive
income during the ﬁnancial period in which they are incurred.

Other non-current assets are derecognized upon disposal or when no future economic beneﬁts are expected
from their use or disposal. Any gain or loss arising on derecognition of an asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in comprehensive income
in the year the asset is derecognized.

Provisions
Provisions for legal claims are recognized when the Trust has a present legal or constructive obligation as a
result of past events, it is probable that an outﬂow of resources will be required to settle the obligation, and
the amount has been reliably estimated. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a rate that reﬂects current market assessments of the time value of money and the risk speciﬁc
to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

Revenue recognition
The Trust accounts for leases with tenants as operating leases, as it has retained substantially all of the risks
and beneﬁts of ownership of its investment properties. Revenues from investment properties include base
rents, recoveries of operating expenses including property taxes, lease termination fees, parking income and
incidental income. Revenue recognition under a lease commences when the tenant has a right to use the leased
asset. The total amount of contractual rent to be received from operating leases is recognized on a straight-line
basis over the term of the lease; a straight-line rent receivable, which is included in other non-current assets,
is recorded for the difference between the rental revenue earned and the contractual amount received or
receivable. Recoveries from tenants are recognized as revenues in the period in which the corresponding costs
are incurred. Other revenues are recorded as earned.

The Trust makes judgments with respect to whether lease incentives provided in connection with a lease enhance
the value of the leased space, which determines whether or not such amounts are treated as tenant
improvements and added to investment property. Lease incentives, such as cash, rent-free periods and lessee
or lessor owned improvements, may be provided to lessees to enter into an operating lease. Lease incentives
that do not provide beneﬁts beyond the initial lease term are included in the carrying value of investment
properties and are amortized as a reduction of rental revenue on a straight-line basis over the term of the lease.

PAGE 42

DUNDEE INTERNATIONAL 2011 Annual Report

Business combinations
The purchase method of accounting is used for acquisitions meeting the deﬁnition of a business. The
consideration transferred in a business combination is measured at fair value, which is calculated as the sum
of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer
to former owners of the acquiree, and the interests issued by the acquirer.

Identiﬁable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their acquisition date fair values irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the Trust’s share of the identiﬁable net assets acquired
is recorded as goodwill. If the cost of acquisition is less than the fair value of the Trust’s share of the net assets
acquired, the difference is recognized directly in comprehensive income for the year as an acquisition gain.
Any transaction costs incurred with respect to the business combination are expensed in the period incurred.

Distributions
Distributions to unitholders are recognized as a liability in the period in which the distributions are approved
by the Board of Trustees and are recorded in retained earnings (deﬁcit).

Income taxes
The REIT is taxed as a mutual fund trust under the Income Tax Act (Canada). The REIT is not a speciﬁed
investment ﬂow-through trust (“SIFT”), and will not be, provided that the REIT complies at all times with its
investment restrictions which preclude the REIT from investing in any entity other than a portfolio investment
entity or from holding any non-portfolio property. The Trust intends to distribute all taxable income directly
earned by the REIT to unitholders and to deduct such distributions for income tax purposes. The tax
deductibility of the REIT’s distributions to unitholders represents, in substance, an exception from current
Canadian tax, and from deferred tax relating to temporary differences in the REIT, so long as the REIT continues
to expect to distribute all of its taxable income and taxable capital gains to its unitholders. Accordingly, no net
current Canadian income tax expense or deferred income tax assets or liabilities have been recorded in these
consolidated ﬁnancial statements.

The tax expense related to non-Canadian taxable subsidiaries for the period comprises current and deferred
taxes. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the balance sheet date where the subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁnancial statements. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the
balance sheet date, and are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is
probable that future taxable proﬁt will be available against which the temporary differences can be utilized.

The REIT indirectly owns its properties through several FCPs (fonds commun de placement). The income tax
treatment of non-German residents, such as the FCP unitholders indirectly owned by the REIT, is not entirely
clear and is subject to signiﬁcant judgment, and accordingly it is not currently possible to determine with
certainty whether the FCP unitholders will or will not be taxable in Germany on their net rental income and
capital gains. In light of this uncertainty, the REIT has structured its affairs assuming that the FCP unitholders
would be subject to corporate income tax in Germany, and has prepared these consolidated ﬁnancial
statements on that basis.

PAGE 43

DUNDEE INTERNATIONAL 2011 Annual Report

Unit-based compensation plan
The Trust has a Deferred Unit Incentive Plan (“DUIP”), as described in Note 16, that provides for the grant of
deferred trust units and income deferred trust units to trustees, ofﬁcers, employees, afﬁliates and their service
providers (including the asset manager). Unvested deferred trust units are recorded as a liability and
compensation expense and, where applicable, asset management expense. Grants to trustees, ofﬁcers and
employees are recognized as compensation expense and included in general and administrative expenses.
They are recognized over the vesting period at the amortized cost based on the fair value of the units. Once
vested, the liability is remeasured at each reporting date at amortized cost based on the fair value of the
corresponding Units, with changes in fair value being recognized in comprehensive income, as a fair value
adjustment to ﬁnancial instruments. Deferred units granted to DRC for payment of asset management fees
are included in general and administrative expenses during the period for accounting purposes as they relate
to services provided during the period and the units and fees are initially measured by applying a discount to
the fair value of the corresponding Units. The discount is estimated by applying the Black-Scholes model,
taking into consideration the volatility of the Canadian REIT equity market and the German real estate industry.
Once recognized, the liability is remeasured at each reporting date at a discount to the fair values of the
corresponding Units, with the change in value being recognized in comprehensive income as fair value
adjustment to ﬁnancial instruments.

Cash and cash equivalents
Cash and cash equivalents include all short-term investments with an original maturity of three months or less,
and exclude cash subject to restrictions that prevent its use for current purposes. Excluded from cash and
cash equivalents are amounts held for repayment of tenant security deposits as required by various lending
agreements. Deposits are included in other non-current assets.

Financial instruments
Designation of ﬁnancial instruments
The following summarizes the Trust’s classiﬁcation and measurement of ﬁnancial assets, liabilities and ﬁnancial
derivatives:

Classiﬁcation

Measurement

Loans and receivables
Loans and receivables

Amortized cost
Amortized cost

Financial assets
Amounts receivable
Cash and cash equivalents

Financial liabilities
Term loan credit facility
Convertible debentures – host instrument
Exchangeable Notes
Deposits
Deferred Unit Incentive Plan
Amounts payable and accrued liabilities
Distributions payable

Other liabilities
Other liabilities
Fair value through proﬁt and loss
Other liabilities
Other liabilities
Other liabilities
Other liabilities

Financial derivatives
Derivative assets
Derivative liabilities
Convertible debentures — conversion feature

Fair value through proﬁt and loss
Fair value through proﬁt and loss
Fair value through proﬁt and loss

Amortized cost
Amortized cost
Fair value
Amortized cost
Amortized cost
Amortized cost
Amortized cost

Fair value
Fair value
Fair value

Financial assets
The Trust classiﬁes its ﬁnancial assets upon initial recognition as loans and receivables. All ﬁnancial assets are
initially measured at fair value, less any related transaction costs. Subsequently, loans and receivables are
measured at amortized cost.

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DUNDEE INTERNATIONAL 2011 Annual Report

Amounts receivable are initially measured at fair value and are subsequently measured at amortized cost less
provision for impairment. A provision for impairment is established when there is objective evidence that
collection will not be possible under the original terms of the contract. Indicators of impairment include
delinquency of payment and signiﬁcant ﬁnancial difﬁculty of the tenant. The carrying amount of the asset is
reduced through an allowance account, and the amount of the loss is recognized in the consolidated statements
of comprehensive income within investment property operating expenses. Bad debt write-offs occur when the
Trust determines collection is not possible. Any subsequent recoveries of amounts previously written off are
credited against investment property operating expenses in the consolidated statement of comprehensive income.
Trade receivables that are less than three months past due are not considered impaired unless there is evidence
that collection is not possible. If in a subsequent period the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its
amortized cost at the reversal date. Any subsequent reversal of an impairment loss is recognized in income or loss.

Financial assets are derecognized only when the contractual rights to the cash ﬂows from the ﬁnancial asset
expire or the Trust transfers substantially all risks and rewards of ownership.

Financial liabilities
The Trust classiﬁes its ﬁnancial liabilities upon initial recognition as either fair value through income and loss
or other liabilities measured at amortized cost. Financial liabilities are initially recognized at fair value (net of
transaction costs if measured at amortized cost). Financial liabilities classiﬁed as other liabilities are measured
at amortized cost using the effective interest rate method. Under the effective interest rate method, any
transaction fees, costs, discounts and premiums directly related to the ﬁnancial liabilities are recognized in
comprehensive income over the expected life of the debt. The Trust’s ﬁnancial liabilities that are classiﬁed as
fair value through income and loss are initially recognized at fair value and are subsequently remeasured at fair
value each reporting period, with changes in the fair value recognized in comprehensive income.

Term loans are initially recognized at fair value less attributable transaction costs, or at fair value when assumed
in a business or asset acquisition. Subsequent to initial recognition, term loans are recognized at amortized cost.

Upon issuance, convertible debentures are separated into two ﬁnancial liability components: the host instrument
and the conversion feature. This presentation is required because the conversion feature permits the holder to
convert the Debentures into Units that, except for the available exemption under IAS 32, “Financial Instruments:
Presentation” (“IAS 32”), would normally be presented as a liability because of the redemption feature attached
to the Units. Both components are measured based on their respective estimated fair values at the date of
issuance. The fair value of the host instrument is net of any related transaction costs. The fair value of the host
instrument is estimated based on the present value of future interest and principal payments due under the terms
of the debenture using a discount rate for similar debt instruments without a conversion feature. Subsequent to
initial recognition, the host instrument is accounted for at amortized cost. The conversion feature is accounted
for at fair value with changes in fair value recognized in comprehensive income each period. When the holder of
a convertible debenture converts its interest into Units, the host instrument and conversion feature are reclassiﬁed
to unitholders’ equity in proportion to the units converted over the total equivalent units outstanding.

The DUIP is measured at amortized cost because it is settled in Units, which in accordance with IAS 32 are
liabilities. Consequently, the DUIP is remeasured each period based on the fair value of Units, with changes in
the liability recorded in comprehensive income. The Exchangeable Notes contain certain embedded derivatives,
the fair value of which cannot be reliably measured. Accordingly, the Exchangeable Notes are classiﬁed as at
fair value through proﬁt and loss, with fair value based upon the fair value of the Units that the notes are
exchangeable into and changes in the liability are recorded in comprehensive income. Distributions paid on
Exchangeable Notes are recorded as interest expense in comprehensive income.

PAGE 45

DUNDEE INTERNATIONAL 2011 Annual Report

The Trust considers interest expense on the Exchangeable Notes to be a ﬁnancial activity in the statement of
cash ﬂows.

A ﬁnancial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.

Financial derivatives
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.

Derivative instruments are recorded in the consolidated balance sheet at fair value. Changes in fair value of
derivative instruments that are not designated as hedges for accounting purposes are recognized in fair value
adjustments to ﬁnancial instruments in the statement of comprehensive income.

The Trust has not designated any derivatives as hedges for accounting purposes.

Interest
Interest on debt includes coupon interest on term loans, amortization of premiums allocated to the conversion
features of the convertible debentures, amortization of ancillary costs incurred in connection with the
arrangement of borrowings and interest on Exchangeable Notes. Finance costs are amortized to interest
expense unless they relate to a qualifying asset.

Equity
The Trust classiﬁes the Units as equity. Under IAS 32 the Units are considered a puttable ﬁnancial instrument
because of the holder’s option to redeem Units, generally at any time, subject to certain restrictions, at a
redemption price per unit equal to the lesser of 90% of a 20-day weighted average closing price prior to the
redemption date or 100% of the closing market price on the redemption date. The total amount payable by the
REIT in any calendar month shall not exceed $50 unless waived by the REIT’s trustees at their sole discretion.
The Trust has determined that the Units can be classiﬁed as equity and not ﬁnancial liabilities because the
Units have the following features, as deﬁned in IAS 32 (hereinafter referred to as the “puttable exemption”):
• Units entitle the holder to a pro rata share of the Trust’s net assets in the event of the Trust’s liquidation.

The Trust’s net assets are those assets that remain after deducting all other claims on its assets.

• Units are the class of instruments that are subordinate to all other classes of instruments because they have no
priority over other claims to the assets of the Trust on liquidation, and do not need to be converted into another
instrument before they are in the class of instruments that is subordinate to all other classes of instruments.
• All instruments in the class of instruments that are subordinate to all other classes of instruments have

identical features.

• Apart from the contractual obligation for the Trust to redeem the Units for cash or another ﬁnancial asset, the
Units do not include any contractual obligation to deliver cash or another ﬁnancial asset to another entity, or
to exchange ﬁnancial assets or ﬁnancial liabilities with another entity under conditions that are potentially
unfavourable to the Trust, and it is not a contract that will or may be settled in the Trust’s own instruments.
• The total expected cash ﬂows attributable to the Units over their life is based substantially on the proﬁt or loss,
the change in the recognized net assets and unrecognized net assets of the Trust over the life of the Units.

In addition to the Units meeting all of the above criteria, the REIT has determined it has no other ﬁnancial
instrument or contract that has total cash ﬂows based substantially on the proﬁt or loss, the change in the
recognized assets, or the change in the fair value of the recognized and unrecognized net assets of the REIT.
The REIT also has no other ﬁnancial instrument or contract that has the effect of substantially restricting or
ﬁxing the residual return to unitholders.

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DUNDEE INTERNATIONAL 2011 Annual Report

Units are initially recognized at the fair value of the consideration received by the Trust. Any transaction costs
arising on the issue of Units are recognized directly in unitholders’ equity as a reduction of the proceeds received.

Note 4
CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS IN APPLYING
ACCOUNTING POLICIES
The preparation of the consolidated ﬁnancial statements requires management to make judgments, estimates
and assumptions that affect the amounts reported. Management bases its judgments and estimates on
experience in the industry and other various factors it believes to be reasonable under the circumstances, but
which are inherently uncertain and unpredictable, the result of which forms the basis of the carrying values of
assets and liabilities. However, uncertainty about these assumptions and estimates could result in outcomes
that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Critical accounting judgments
The following are the critical judgments made in applying the Trust’s accounting policies that have the most
signiﬁcant effect on the amounts in the consolidated ﬁnancial statements:

Investment properties
Critical judgments are made by the Trust in respect of the fair values of investment properties. The fair value
of these investments is reviewed regularly by management with reference to independent property valuations
and market conditions existing at the reporting date, using generally accepted market practices. The
independent valuators are experienced and nationally recognized and qualiﬁed in the professional valuation of
ofﬁce, industrial and other commercial buildings in the geographic areas of the properties held by the Trust.
Judgment is also applied in determining the extent and frequency of independent appraisals.

Judgment is also applied in determining whether certain costs are additions to the carrying amount of the
investment property or are of a repair and maintenance nature.

Leases
In applying the revenue recognition policy, the Trust makes judgments with respect to whether tenant
improvements provided in connection with a lease enhance the value of the leased space, which determines
whether or not such amounts are treated as additions to the investment property.

The Trust also makes judgments in determining whether certain leases, in particular those with long contractual
terms where the lessee is the sole tenant in a property and those long-term ground leases where the Trust is
lessor, are operating or ﬁnance leases. The Trust has determined that all of its leases are operating leases.

Income tax treatment
The REIT indirectly owns the properties through several FCPs (fonds commun de placement). The income tax
treatment of non-German residents, such as the FCP unitholders indirectly owned by the REIT, is not entirely
clear and is subject to signiﬁcant judgment, and accordingly it is not currently possible to determine with
certainty whether the FCP unitholders will or will not be taxable in Germany on their net rental income and
capital gains. In light of this uncertainty, the REIT has structured its affairs assuming that the FCP unitholders
would be subject to corporate income tax in Germany.

The Trust computes current and deferred income taxes included in the consolidated ﬁnancial statements based
on the following:

• The rate of corporate tax payable on German taxable income is 15.825%, including a 5.5% solidarity surcharge;
• Taxable income for German corporate income tax purposes is determined by deducting certain expenses
incurred in connection with the acquisition and ownership of real property as well as certain operating
expenses, provided that the costs are incurred under arm’s length terms;

PAGE 47

DUNDEE INTERNATIONAL 2011 Annual Report

• Buildings can generally be amortized on a straight-line basis at a rate of 2% to 3% depending on the age of the

property; and

• The deduction of interest expense, which must reﬂect arm’s length terms, is generally restricted by the so-called
“interest capping rules”. These rules apply to limit the deduction of all interest expense incurred up to a
maximum of 30% of the taxable earnings before interest, tax, depreciation and amortization. However, an
exception is available when annual interest expense is less than €3,000 for each taxpayer. For this purpose,
each FCP Unitholder is a separate taxpayer and therefore the total interest deductible under the current
structure is approximately $59,369.

Treatment of Units
The Trust has considered the criteria in IAS 32 and has presented the Units as equity because of the
puttable exemption.

Treatment of Exchangeable Notes
The Trust has considered the criteria in IAS 32; the Exchangeable Notes are classiﬁed as liabilities because
they do not have identical features to Units, and are not the most subordinated instrument.

Business combinations
Accounting for business combinations under IFRS 3, “Business Combinations” (“IFRS 3”), only applies if it is
considered that a business has been acquired. Under IFRS 3, a business is deﬁned as an integrated set of
activities and assets conducted and managed for the purpose of providing a return to investors or lower costs
or other economic beneﬁts directly and proportionately to the Trust. A business generally consists of inputs,
processes applied to those inputs, and resulting outputs that are, or will be, used to generate revenues. In the
absence of such criteria, a group of assets is deemed to have been acquired. If goodwill is present in a
transferred set of activities and assets, the transferred set is presumed to be a business.

The Trust applies judgment in determining whether property acquisitions qualify as a business combination in
accordance with IFRS 3 or as an asset acquisition.

Impairment
The Trust assesses the possibility and amount of any impairment loss or write-down as it relates to amounts
receivable and other assets.

Estimates and assumptions
The Trust makes estimates and assumptions that affect carrying amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and the reported amount of other comprehensive income for the period.
Actual results could differ from estimates. The estimates and assumptions critical to the determination of the
amounts reported in the consolidated ﬁnancial statements relate to the following:

Valuation of investment property
The Trust’s critical assumptions relating to the estimates of fair values of investment properties include the
receipt of contractual rents, expected future market rents, renewal rates, maintenance requirements, discount
rates that reﬂect current market uncertainties, capitalization rates, and current and recent property investment
prices. If there is any change in these assumptions or in regional, national or international economic conditions,
the fair value of investment properties may change materially.

Valuation of ﬁnancial instruments
The Trust makes estimates and assumptions relating to the fair value measurement of the Exchangeable Notes,
the Deferred Unit Incentive Plan, the convertible debenture conversion feature, derivative instruments, and

PAGE 48

DUNDEE INTERNATIONAL 2011 Annual Report

the fair value disclosure of the convertible debentures, mortgages and term loans. The critical assumptions
underlying the fair value measurements and disclosures include the market price of Units, market interest rates
for debt and interest rate derivatives, unsecured debentures and foreign currency derivatives.

For certain ﬁnancial instruments, including cash and cash equivalents, amounts receivable, amounts payable
and accrued liabilities, and distributions payable, the carrying amounts approximate fair values due to their
immediate or short-term maturity. The fair value of term loans is determined based on discounted cash ﬂows
using discount rates that reﬂect current market conditions for instruments with similar terms and risks. The fair
value of convertible debentures uses quoted market prices from an active market.

Note 5
FUTURE ACCOUNTING POLICY CHANGES
Financial instruments
IFRS 9, “Financial Instruments” (“IFRS 9”), was issued by the International Accounting Standards Board (“IASB”)
on November 12, 2009, and will replace IAS 39, “Financial Instruments: Recognition and Measurements”
(“IAS 39”). IFRS 9 provides guidance on the classiﬁcation and measurement of ﬁnancial assets and ﬁnancial
liabilities. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. The Trust is currently
evaluating the impact of IFRS 9 on its consolidated ﬁnancial statements.

Income taxes
In December 2010, the IASB made amendments to IAS 12, “Income Taxes” (“IAS 12”), that are applicable to
the measurement of deferred tax liabilities and deferred tax assets where investment property is measured using
the fair value model in IAS 40, “Investment Property”. The amendments introduce a rebuttable presumption
that, for purposes of determining deferred tax consequences associated with temporary differences relating to
investment properties, the carrying amount of an investment property is recovered entirely through sale. This
presumption is rebutted if the investment property is held within a business model whose objective is to
consume substantially all of the economic beneﬁts embodied in the investment property over time, rather
than through sale. The amendments to IAS 12 are effective for annual periods beginning on or after January 1,
2012. The Trust does not expect any impact on its consolidated ﬁnancial statements as a result of the
amendment to IAS 12.

Joint arrangements
On May 12, 2011, the IASB issued IFRS 11, “Joint Arrangements” (“IFRS 11”). This new standard replaces IAS 31,
“Interests in Joint Ventures” (“IAS 31”). The new standard eliminates the option to proportionately consolidate
interests in certain types of joint ventures. IFRS 11 is effective from January 1, 2013. The Trust is currently
evaluating the impact of this standard on the consolidated ﬁnancial statements.

Financial instruments: Disclosures, amendment regarding disclosures on transfer of
ﬁnancial assets
IFRS 7, “Financial Instruments: Disclosures, Amendment regarding Disclosures on Transfer of Financial Assets”
(“IFRS 7”), requires that the Trust provides the disclosures for all transferred ﬁnancial assets that are not
derecognized and for a continuing involvement in a transferred ﬁnancial asset existing at the reporting date,
irrespective of when the related transfer transaction occurred.

In addition IFRS 7 requires that the Trust provides disclosures related to offsetting ﬁnancial assets and liabilities.
The Trust will start the application of this amendment January 1, 2013. The Trust is currently evaluating the
impact of IFRS 7 on its consolidated ﬁnancial statements.

PAGE 49

DUNDEE INTERNATIONAL 2011 Annual Report

Consolidated ﬁnancial statements
IFRS 10, “Consolidated Financial Statements” (“IFRS 10”), replaces the current IAS 27, “Consolidated and
Separate Financial Statements” (“IAS 27”). The standard identiﬁes the concept of control as the determining
factor in whether an entity should be included within the consolidated ﬁnancial statements of the parent
company. The Trust will start the application of IFRS 10 in the ﬁnancial statements effective January 1, 2013.
The Trust is currently evaluating the impact of IFRS 10 on its consolidated ﬁnancial statements.

Disclosure of interests in other entities
IFRS 12, “Disclosure of Interests in Other Entities” (“IFRS 12”), requires disclosures relating to an entity’s
interests in subsidiaries. The Trust will start the application of IFRS 12 in the ﬁnancial statements effective
from January 1, 2013. The Trust is currently evaluating the impact to the consolidated ﬁnancial statements as
a result of adopting this standard.

Fair value measurements
IFRS 13, “Fair Value Measurements” (“IFRS 13”), deﬁnes fair value, provides guidance on its determination, and
introduces consistent requirements for disclosures on fair value measurements. The Trust will start the
application of IFRS 13 in the consolidated ﬁnancial statements effective January 1, 2013. The Trust has not yet
evaluated the impact on the consolidated ﬁnancial statements.

Presentation of items of other comprehensive income
Amendments to IAS 1, “Presentation of Items of Financial Statements” (“IAS 1”), provide guidance on the
presentation of items contained in other comprehensive income (“OCI”) and their classiﬁcation within OCI.
The Trust will start the application of this amendment in the consolidated ﬁnancial statements effective from
January 1, 2013. The Trust is currently evaluating the impact to the consolidated ﬁnancial statements as a result
of adopting this standard.

Note 6
BUSINESS COMBINATIONS
On August 3, 2011, the REIT indirectly, through a wholly owned subsidiary, acquired 292 commercial properties
(the “properties”) located in Germany. Costs relating to the acquisition were $7,853 and were charged directly
to comprehensive income as acquisition related costs. The acquisition was ﬁnanced by way of net proceeds
from the offering of Units, a term loan credit facility and Units issued to DRC and Dundee Corporation, and the
issuance of Exchangeable Notes, Series A and Exchangeable Notes, Series B (“Exchangeable Notes”).

The following are the recognized amounts of identiﬁable assets acquired and liabilities assumed, measured at
their respective fair values:

Investment properties
Vendor payment for capital costs

Equity Investments
Working capital adjustments

Cash

Fair value of consideration transferred

$ 1,006,334
(8,557)

997,777
221
268

998,266

$ 998,266

In conjunction with the acquisition, the REIT received payment from the vendor totalling $8,557 which related to
adjustments for capital costs at certain properties. The accounting treatment of the payment received for capital
costs reduced the fair value of the investment properties below the appraised value on acquisition.

PAGE 50

DUNDEE INTERNATIONAL 2011 Annual Report

The initial accounting for the assets and liabilities recognized with respect to the acquisition of the properties
has been completed provisionally and has not been ﬁnalized, and is therefore subject to adjustment.

Note 7
INVESTMENT PROPERTIES

Balance at beginning of period
Acquisitions through business combination
Building improvements
Initial direct leasing costs
Fair value adjustment
Foreign currency translation

Balance at period-end

For the period
April 21, 2011, to
December 31, 2011

—
997,777
488
47
(23,147)
(33,723)

$ 941,442

Investment properties have been reduced by $177 related to straight-line rent receivable, which has been
reclassiﬁed to other non-current assets.

Investment properties with an aggregate fair value of $941,442 at December 31, 2011, were valued by
qualiﬁed valuation professionals. The investment properties were acquired on August 3, 2011, for $1,006,334
representing a capitalization rate of approximately 8.2%. An amount of $8,557 received from the vendor at
the time of closing for capital costs reduced the acquisition price by the same amount resulting in investment
property amounting to $997,777 being acquired. As at December 31, 2011, the value decreased by $33,723
attributable to the weakening of the euro against the Canadian dollar and $23,147 attributable to an increase
in Cap Rates and the impact of an increase in German real estate transaction taxes.

The valuation methodology adopted in the calculation of fair values of investment properties is European-based
and is different from the methodology adopted in North America. The methodology commonly used by
European valuators is a net basis whereas in North America a gross basis is used. The primary difference in
approaches is the adjustment to values for transaction costs including real estate transfer taxes, which results
in a lower valuation under a net basis. In measuring fair value, it is appropriate to use the valuation approach
used in the market where the real estate is located rather than the method practised in the market where the
entity reports. The cost adjustments that brought the value of investment properties to a net basis amounted
to $63,739 at December 31, 2011.

Fair values at December 31, 2011 were determined using the direct capitalization method. The direct
capitalization method applies a capitalization rate to stabilized NOI and incorporates allowances for vacancy
and management fees. The resulting capitalized value was further adjusted for extraordinary costs to stabilize
income and non-recoverable capital expenditures, where applicable. Individual properties were valued using
an average Cap Rate of 8.5% for the portfolio.

All investment properties with a fair value of $941,442 are pledged as ﬁrst-ranking mortgages on the term
loan credit facility.

The Trust has entered into commercial property leases with its tenants typically for a period between three-
and ten-year terms. They include clauses for periodic upwards revisions of rental charges according to
prevailing market conditions. Some leases contain options to break before the end of the term.

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DUNDEE INTERNATIONAL 2011 Annual Report

Future minimum rentals (excluding service charges) under current operating leases are as follows :

Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years

Total

Note 8
OTHER NON-CURRENT ASSETS

Equity accounted investment
Computer equipment
Straight-line rent receivable

Total

December 31, 2011

74,948
264,687
106,411

$ 446,046

December 31, 2011

173
14
177

364

Investment in joint ventures
The Trust participates in a jointly controlled corporate entity (the “joint ventures”) with other parties and
accounts for its interests using the equity accounting method.

Details of the Trust’s joint ventures:

Name

Principal activity

Location

Ownership interest (%)
December 31, 2011

Lorac Investment Management S.à r.l.

Investment management

Luxembourg

50.00

The following amounts represent the proportionate share of assets, liabilities, revenues and expenses of the
joint venture.

Non-current assets
Equipment

Current assets
Prepaid expenses
Cash and cash equivalents

Total assets

Current liabilities
Amounts payable and accrued liabilities

Net assets

PAGE 52

December 31, 2011

131

3
37

171

(2)

173

Other income and expenses
General and administrative
Amortization expense

Income

Note 9
AMOUNTS RECEIVABLE

Trade receivables
Less: Provision for impairment of trade receivables

Trade receivables, net
Other amounts receivable

DUNDEE INTERNATIONAL 2011 Annual Report

For the period
from April 21, 2011, to
December 31, 2011

19
(12)

December 31, 2011

1,607
(76)

1,531
479

2,010

The carrying amount of amounts receivable approximates fair value due to their current nature.

Note 10
DEBT

Convertible debentures
Term loan credit facility

Total

December 31, 2011

$ 146,658
432,348

$ 579,006

The term loan credit facility is secured by ﬁrst-ranking mortgages on all of the investment properties.

On August 3, 2011, the Trust issued $140,000 principal amount of convertible unsecured subordinated
debentures (the “Debentures”). On August 29, 2011, the Trust issued an additional $21,000 principal amount
of Debentures. The Debentures bear interest at 5.5% per annum, payable semi-annually on July 31 and
January 31 each year, and mature on July 31, 2018. Each Debenture is convertible at any time by the
debentureholder into 76.9231 Units, per one thousand dollars of face value, representing a conversion price of
$13.00 per Unit. On or after August 31, 2014, and prior to August 31, 2016, the Debentures may be redeemed
by the debentureholders, in whole or in part, at a price equal to the principal amount plus accrued and unpaid
interest on not more than 60 days and not less than 30 days prior to written notice, provided the weighted
average trading price for the Trust’s Units for the 20 consecutive trading days, ending on the ﬁfth trading day
immediately preceding the date on which notice of redemption is given, is not less than 125% of the conversion
price. On or after August 31, 2016, and prior to July 31, 2018, the maturity date, the Debentures may be
redeemed by the Trust at a price equal to the principal amount plus accrued and unpaid interest. The
Debentures were initially recorded on the consolidated balance sheet as debt of $152,894 less costs of $6,931.
The Trust has allocated $8,106 to the conversion feature that will be accreted to the principal portion of the
Debenture over its term along with costs of $6,931. As at December 31, 2011, the outstanding principal amount
is $161,000.

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DUNDEE INTERNATIONAL 2011 Annual Report

On August 3, 2011, the Trust obtained a term loan credit facility (the “Facility”) for gross proceeds of €328,500.
Costs relating to the Facility are $10,832. These costs have been reduced by proceeds received from the vendor
to compensate the Trust for higher than expected ﬁnancial costs on closing in the amount of $9,555. The
Facility has a term of ﬁve years, which may be extended for a further two years, subject to the satisfaction of
certain conditions precedent at the time of the extension. Variable rate interest is calculated and payable
quarterly under the Facility at a rate equal to the aggregate of the three-month EURIBOR plus a margin of
200 basis points (the “margin”) and an agency fee of 10 basis points. Pursuant to the Facility, the Trust was
required to enter into an interest rate swap that ﬁxed 80% of the variable interest rate payable under the
Facility at a ﬁxed interest rate not to exceed 3.5%, excluding the margin, and was required to purchase a cap
instrument to cover 10% of the variable rate interest payable so that such interest rate does not exceed 5%
(excluding the margin). The remaining 10% of interest payable would continue to be calculated quarterly on a
variable rate basis. To comply with the Facility’s requirement, on the day of closing, the Trust entered into an
interest rate swap to pay a ﬁxed rate of 4.05% on 80% of the Facility and an interest rate cap of 5.00% on 10%
of the Facility at a cost of $9,986. As at December 31, 2011, the Trust paid a ﬁxed rate of 4.05% on 80% and a
variable rate of 3.69% on the remaining 20% of the Facility. To further take advantage of the current interest
rate environment, the Trust entered into another interest swap to pay a ﬁxed rate of 3.38% on the 20% variable
portion of the Facility in 2012. As a result, the Facility will pay a blended ﬁxed rate of 3.91% in 2012.

No amortization of principal under the term loan credit facility is required during the ﬁrst three years after
closing. Thereafter, interest together with amortization of principal equal to 2% per annum of the initial loan
amount will be payable on a quarterly basis (including the extension term, if any). In addition, the Trust is
required to repay up to €100 million plus an applicable prepayment premium of 15% through dispositions or
reﬁnancings of a portion of the investment properties within the ﬁrst two years following closing. If the full
€100 million is not repaid by the second anniversary of the closing, the Trust will be required to pay additional
interest of 1% on the portion of this €100 million that has not been repaid, starting on the second anniversary
of the closing.

The Facility requires that all net rental income from the properties be paid into a rent collections account that
the Trust established, to be released only after budgeted non-recoverable operating expenses (including an
agreed property and asset management fee) are paid.

The Facility includes default and cash trap covenants requiring the Trust to maintain certain loan-to-value
and debt service coverage ratios, each of which will be tested on a quarterly basis. If these ratios are not met
at any time, the lenders may withhold 50% of the excess cash ﬂow on a monthly basis as additional security
for the Facility until such time as the ratios are once again satisﬁed. Upon satisfaction of the relevant ratio, the
excess cash ﬂow may again be distributed to the Trust; however, any cash previously trapped will not be
released and will be used at the time of each future quarterly testing date until the ratio is satisﬁed for two
consecutive quarters.

In addition, the Facility requires that DRC and Dundee Corporation combined maintain at least $120,000 of
equity in the REIT for a two-year period from closing and at least $48,000 of equity for the remainder of the
term of the Facility. As at December 31, 2011, the Trust is in compliance with its loan convenants.

PAGE 54

DUNDEE INTERNATIONAL 2011 Annual Report

The weighted average interest rates for the ﬁxed and ﬂoating components of debt are as follows:

FIXED RATE
Term loan credit facility(1)
Convertible debentures

Total ﬁxed rate debt
VARIABLE RATE
Term loan credit facility

Total variable rate debt

Total debt

Face interest rates

Weighted
average effective
interest rates

Debt amount

Maturity

December 31, 2011

dates December 31, 2011

4.05%
5.50%

4.48%

3.69%

4.36%

4.11%
7.31%

5.06%

3.75%

4.86%

2016
2018

$ 345,879
146,658

2016

492,537

86,469

$ 579,006

(1) The portion of the Facility subject to the interest rate swap outstanding during the year has been presented as ﬁxed rate debt in this table.

The scheduled principal repayments and debt maturities are as follows:

2012
2013
2014
2015
2016
2017 and thereafter

Fair value adjustments
Transaction costs

Note 11
EXCHANGEABLE NOTES
The Trust has the following Exchangeable Notes outstanding:

As at August 3, 2011

Ending balance

Term debt

—
—
1,164
2,873
429,353
—

Convertible
debentures

—
—
—
—
—
161,000

$ 433,390

$ 161,000

Total

—
—
1,164
2,873
429,353
161,000

$ 594,390
(7,741)
(7,643)

$ 579,006

For the period from
April 21, 2011, to
December 31, 2011

$ 80,000

In conjunction with the initial public offering (the “Offering”), a subsidiary of the Trust issued Exchangeable Notes
for gross proceeds of $80,000. Each €7.326 (the euro equivalent of $10.00 based on the same exchange rate as
the proceeds of the Offering were converted into euros) principal amount of Exchangeable Notes is exchangeable
by the holder for one Unit, subject to customary anti-dilutive adjustments. The holder of Exchangeable Notes is
committed not to exercise the right of exchange within six months from the date of issuance. The Exchangeable
Notes and corresponding Special Trust Units (see Note 16) together have economic and voting rights equivalent
in all material respects to the Units. The Exchangeable Notes mature on August 5, 2021. On the maturity date,

PAGE 55

DUNDEE INTERNATIONAL 2011 Annual Report

the Trust may elect to redeem the Exchangeable Notes in whole or in part, in cash or in Trust Units, pursuant to
the terms of the agreement. The Trust may require the holder of the Exchangeable Notes to exchange all of the
Exchangeable Notes for Units in limited circumstances pursuant to the exchange agreement.

Interest is payable at an amount per month equal to the product of the aggregate number of units for which
the outstanding Exchangeable Notes are exchangeable multiplied by the Currency Adjusted Equivalent Amount
of any cash distribution paid on units in such month. During the period from August 3, 2011, to December 31,
2011, the Trust incurred $2,641 in interest on the Exchangeable Notes, which is included as interest expense in
comprehensive loss.

Note 12
DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate swaps (Note 24)
Interest rate cap (Note 24)
Foreign exchange forward contracts (Note 24)
Conversion feature of the Debentures

Total

December 31, 2011

7,204
(97)
(1,942)
6,589

11,754

The movement in the conversion feature on the convertible debentures for the period was as follows:

As at August 3, 2011
Remeasurement of conversion feature

Ending balance

Note 13
DEFERRED UNIT INCENTIVE PLAN
The movement in the Deferred Unit Incentive Plan balance was as follows:

Opening liability at August 3, 2011
Compensation during the period
Asset management fees during the period
Remeasurements of carrying value

Total liability at December 31, 2011

For the period from
April 21, 2011, to
December 31, 2011

8,106
(1,517)

6,589

Deferred trust and
income units

—
88
841
16

945

On August 3, 2011, DRC elected to receive the ﬁrst $3,500 of the base asset management fees payable on the
properties acquired on August 3, 2011, by way of deferred trust units under the Asset Management Agreement
in each year for the next ﬁve years. The deferred trust units granted to DRC vest annually over ﬁve years,
commencing on the ﬁfth anniversary date of being granted.

On termination of the Asset Management Agreement, unvested trust units granted to DRC vest immediately.

During the period from August 3, 2011, to December 31, 2011, $841 of asset management fees were recorded
based upon the fair value of the deferred units issued with an appropriate discount to reﬂect the restricted

PAGE 56

DUNDEE INTERNATIONAL 2011 Annual Report

period of exercise and were included in general and administrative expenses. They were settled by the grant
of 117,188 deferred units during the period and 29,348 deferred units on January 15, 2012. At December 31, 2011,
147,717 unvested deferred trust units and income deferred units were outstanding with respect to the asset
management fee.

On November 8 and December 8, 2011, 87,000 and 33,784 deferred trust units were granted to senior
management and trustees, respectively. Of the 87,000 units granted, 66,000 relate to key management
personnel. The 33,784 deferred trust units were granted to trustees who elected to receive their 2011 and 2012
annual retainer in the form of deferred trust units rather than cash. The grant date value of these deferred
trust units was $9.65 and $9.84, respectively.

Note 14
AMOUNTS PAYABLE AND ACCRUED LIABILITIES

Trade payables
Accrued liabilities and other payables
Accrued interest

Total

December 31, 2011

2,675
6,555
4,190

13,420

Note 15
DISTRIBUTIONS
The following table breaks down distribution payments for the period ended December 31, 2011:

Paid in cash
Paid by way of reinvestment in Units
Plus: Payable at December 31, 2011

Total

Distribution

11,299
217
2,925

14,441

The distribution for the month of December in the amount of $0.06667 per unit, declared on December 31, 2011,
and payable on January 15, 2012, amounted to $2,925. The amount payable at December 31, 2011, was satisﬁed
on January 15, 2012, by $2,862 in cash, and $63 through the issuance of 6,540 Units. The distributions for the
month of January 2012 and February 2012 were declared in the amount of $0.06667 per unit per month,
payable on February 15, 2012, and March 15, 2012, respectively.

The REIT’s Declaration of Trust endeavours to maintain monthly distribution payments to unitholders payable
on or about the 15th day of the following month. The Declaration of Trust provides the trustees with the
discretion to determine the percentage payout of income that would be in the best interest of the Trust.
Amounts retained in excess of the declared distributions are used to fund the leasing costs and capital
expenditure requirements. Given that working capital tends to ﬂuctuate over time and should not affect the
REIT’s distribution policy, the REIT disregards it when determining its distributions. The REIT also excludes
the impact of leasing costs, which ﬂuctuate with lease maturities, renewal terms and the type of asset being
leased. The REIT evaluates the impact of leasing activity based on averages for its portfolio over a two- to
three-year time frame. The REIT excludes the impact of transaction costs expensed on business combinations
as these are considered to be non-recurring. Additionally, the REIT deducts amortization of non–real estate
assets such as software and ofﬁce equipment incurred after the formation of the Trust. The Trust declared
distributions of $0.06237 per Unit for the month of August and $0.06667 per Unit per month for the months
of September to December, or $14,441 in 2011.

PAGE 57

DUNDEE INTERNATIONAL 2011 Annual Report

Note 16
EQUITY

Total

December 31, 2011

Number of Units

Amount

43,872,316 $ 350,809

REIT Units
The REIT is authorized to issue an unlimited number of Units and an unlimited number of Special Trust Units.
The Special Trust Units may only be issued to holders of Exchangeable Notes.

Special Trust Units are issued in connection with Exchangeable Notes. The Special Trust Units are not
transferable separately from the Exchangeable Notes to which they relate and will be automatically redeemed
for a nominal amount and cancelled upon settlement, surrender or exchange of such Exchangeable Notes.
Each Special Trust Unit entitles the holder to the number of votes at any meeting of unitholders that is equal
to the number of Units that may be obtained upon the surrender or exchange of the Exchangeable Notes to
which they relate. At December 31, 2011, 8 million Special Trust Units were issued and outstanding.

On April 21, 2011, 800,000 Units were issued to DRC for $400 cash.

Public offering of Units
On August 3, 2011, the Trust completed a public offering of 27 million Units at a price of $10.00 per unit for gross
proceeds of $270,000. On August 29, 2011, the Trust issued an additional 4.05 million Units at a price of $10.00
per unit. Costs related to the offering totalled $24,078 and were charged directly to unitholders’ equity. In
addition to the initial public offering, 10 million Units were purchased by Dundee Corporation at the offering
price and 2 million Units were purchased by DRC at the offering price.

Distribution Reinvestment and Unit Purchase Plan
The Distribution Reinvestment Plan (“DRIP”) allows holders of Units, other than unitholders who are resident
of or present in the United States of America, to elect to have all cash distributions from the REIT reinvested
in additional Units. Unitholders who participate in the DRIP receive an additional distribution of Units equal to
4% of each cash distribution that was reinvested. The price per unit is calculated by reference to a ﬁve-day
weighted average closing price of the Units on the Toronto Stock Exchange preceding the relevant distribution
date, which typically is on or about the 15th day of the month following the declaration. For the period from
August 3, 2011, to December 31, 2011, 22,316 Units were issued pursuant to the DRIP for $217.

The Unit Purchase Plan feature of the DRIP facilitates the purchase of additional Units by existing unitholders.
Participation in the Unit Purchase Plan is optional and subject to certain limitations on the maximum number
of additional Units that may be acquired. The price per unit is calculated in a similar manner to the DRIP.
No commission, service charges or brokerage fees are payable by participants in connection with either the
reinvestment or purchase features of the DRIP. No Units were issued under the Unit Purchase Plan during the
period to December 31, 2011.

Deferred Unit Incentive Plan
The Deferred Unit Incentive Plan provides for the grant of deferred trust units to trustees, ofﬁcers and
employees as well as afﬁliates and their service providers, including the asset manager. Deferred trust units are
granted at the discretion of the trustees and earn income deferred trust units based on the payment of
distributions. Once issued, each deferred trust unit and the related distribution of income deferred trust units
vest evenly over a three- or ﬁve-year period on the anniversary date of the grant, except for certain deferred

PAGE 58

DUNDEE INTERNATIONAL 2011 Annual Report

trust units granted to DRC under the Asset Management Agreement. Subject to an election option available
for certain participants to postpone receipt of units, such units will be issued immediately upon vesting. Up to
a maximum of 2,074,000 deferred trust units are issuable under the Deferred Unit Incentive Plan.

Note 17
INTEREST EXPENSE
Interest on debt
Interest on debt incurred and charged to comprehensive income is recorded as follows:

Interest on term loan credit facility
Interest on convertible debentures
Amortization of ﬁnancing costs and discounts
Interest on Exchangeable Notes

Interest expense

For the period from
April 21, 2011, to
December 31, 2011

6,840
3,585
790
2,641

13,856

Interest on Exchangeable Notes
Interest payments on the Exchangeable Notes charged to comprehensive income for the period from
August 3, 2011, to December 31, 2011, comprise:

Paid in cash
Plus: Payable at December 31

Total

Note 18
FAIR VALUE ADJUSTMENTS TO FINANCIAL INSTRUMENTS

Fair value adjustment on interest rate swaps and cap
Fair value adjustment on conversion feature of convertible debentures
Fair value adjustment on Deferred Unit Incentive Plan
Fair value adjustment on foreign exchange forward contracts

For the period from
April 21, 2011, to
December 31, 2011

2,115
526

2,641

For the period from
April 21, 2011, to
December 31, 2011

(17,895)
1,517
(16)
1,827

$ (14,567)

PAGE 59

DUNDEE INTERNATIONAL 2011 Annual Report

Note 19
INCOME TAXES
Reconciliation of tax expense

Net loss before tax

Tax calculated at the German corporate tax rate of 15.825%
Increase (decrease) resulting from:
Expenses not deductible for tax
Effect of different tax rates in countries in which the group operates
Income distributed and taxable to unitholders
Other items

Income taxes (recovery of taxes)

Deferred income tax assets consist of the following:

Deferred asset liability related to difference in tax and book basis of investment properties
Deferred asset liability related to difference in tax and book basis of Exchangeable Notes
Deferred tax asset related to difference in tax and book basis of ﬁnancial instruments
Deferred tax asset related to tax loss carry-forwards
Deferred asset liability related to differences in tax and book basis of deferred ﬁnancing costs

Total deferred income tax assets

For the period from
April 21, 2011, to
December 31, 2011

$ (29,464)

(4,662)

81
(93)
(1,528)
(61)

(6,263)

December 31, 2011

2,065
771
2,537
319
1,342

7,034

Note 20
RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
Asset Management Agreement
The REIT entered into an asset management agreement with DRC (“Asset Management Agreement”) pursuant
to which DRC provides certain asset management services to the REIT and its subsidiaries. The Asset
Management Agreement provides for a broad range of asset management services for the following fees:
• base annual management fee calculated and payable on a monthly basis, equal to 0.35% of the historical

purchase price of the properties;

• incentive fee equal to 15% of the REIT’s adjusted funds from operations per Unit in excess of $0.93 per Unit;
increasing annually by 50% of the increase in the weighted average consumer price index (or other similar
metric as determined by the trustees) of the jurisdictions in which the properties are located;

• capital expenditures fee equal to 5% of all hard construction costs incurred on each capital project with costs

in excess of $1,000, excluding work done on behalf of tenants or any maintenance capital expenditures;

• acquisition fee equal to: (a) 1.0% of the purchase price of a property on the ﬁrst $100,000 of properties in
each ﬁscal year; (b) 0.75% of the purchase price of a property on the next $100,000 of properties acquired in
each ﬁscal year, and (c) 0.50% of the purchase price on properties in excess of $200,000 in each ﬁscal year.
DRC will not receive an acquisition fee in respect of the acquisition of the initial properties; and

• ﬁnancing fee equal to 0.25% of the debt and equity of all ﬁnancing transactions completed on behalf of the REIT
to a maximum of actual expenses incurred by DRC in supplying services relating to ﬁnancing transactions.
DRC will not receive a ﬁnancing fee in respect of the acquisition of the initial properties.

PAGE 60

DUNDEE INTERNATIONAL 2011 Annual Report

Pursuant to the Asset Management Agreement, DRC may elect to receive all or part of the fees payable to it
for its asset management services in deferred trust units under the Deferred Unit Incentive Plan. The number
of deferred trust units issued to DRC will be calculated by dividing the fees payable to DRC by the fair value
for this purpose on the relevant payment date of the Units. Fair value for this purpose is the weighted average
closing price of the Units on the principal market on which the Units are quoted for trading for the ﬁve trading
days immediately preceding the relevant payment date. The deferred trust units will vest on a ﬁve-year
schedule, pursuant to which one-ﬁfth of the deferred trust units will vest, starting on the sixth anniversary date
of the grant date for deferred trust units granted during the ﬁrst ﬁve years of the Asset Management
Agreement and starting on the ﬁrst anniversary date of the grant date thereafter. Income deferred trust units
will be credited to DRC based on distributions paid by the Trust on the Units and such income deferred trust
units will vest on the same ﬁve-year schedule as their corresponding deferred trust units. For accounting
purposes, the deferred units relate to services provided during the period and, accordingly, the corresponding
expense is recognized during the period. DRC has irrevocably elected to receive the ﬁrst $3,500 of the fees
payable to it in each year for the ﬁrst ﬁve years for its asset management services in deferred trust units.

During the period ended December 31, 2011, the REIT recognized $841 in general and administrative expense
in relation to asset management fees under the Asset Management Agreement with DRC. As at January 15,
2012, 147,717 deferred trust and income units were granted under this agreement and remained unvested.

Compensation of key management personnel for the period ended December 31 is as follows :

Salary(1)
Unit-based awards(2)

Total compensation

For the period from
April 21, 2011, to
December 31, 2011

150
21

171

(1) Represents the portion of salary paid by Dundee Realty Corporation attributable to time spent on the activities of Dundee International REIT.
(2) Deferred trust units granted vest over a ﬁve-year period with one-ﬁfth of the deferred trust units vesting each year. Amounts are determined

based on the grant date fair value of deferred trust units multiplied by the number of deferred trust units granted in the year.

Note 21
SUPPLEMENTARY CASH FLOW INFORMATION

Increase in amounts receivable
Increase in prepaid expenses
Increase in amounts payable and accrued liabilities

Change in non-cash working capital

The following amounts were paid on account of interest:

Debt
Exchangeable Notes

December 31, 2011

(1,276)
(583)
12,790

10,931

December 31, 2011

$
$

6,641
2,115

PAGE 61

DUNDEE INTERNATIONAL 2011 Annual Report

Note 22
COMMITMENTS AND CONTINGENCIES
The REIT and its operating subsidiaries are contingently liable under guarantees that are issued in the normal
course of business and with respect to litigation and claims that arise from time to time. In the opinion of
management, any liability that may arise from such contingencies would not have a material adverse effect on
the consolidated ﬁnancial statements of the REIT.

As at December 31, 2011, the REIT’s future minimum commitments under operating leases are as follows:

Years ending December 31

No longer than 1 year
1–5 years
Longer than 5 years

Total

Operating lease payments

365
1,458
365

2,188

During the period the Trust paid $237 in minimum lease payments, which have been included in comprehensive
income for the period.

Note 23
CAPITAL MANAGEMENT
The primary objective of the Trust’s capital management is to ensure that it remains within its quantitative
banking covenants and maintains a strong credit rating.

The Trust’s capital consists of debt, Exchangeable Notes, and unitholders’ equity. The Trust’s objectives in
managing capital are to ensure adequate operating funds are available to maintain consistent and sustainable
unitholder distributions and to fund leasing costs and capital expenditure requirements.

Various debt, equity and earnings distribution ratios are used to ensure capital adequacy and monitor capital
requirements. The primary ratios used for assessing capital management are the interest coverage ratio and
debt-to-book value. Other signiﬁcant indicators include weighted average interest rate, average term to
maturity of debt, and variable debt as a portion of total debt. These indicators assist the Trust in assessing that
the debt level maintained is sufﬁcient to provide adequate cash ﬂows for unitholder distributions and capital
expenditures, and for evaluating the need to raise funds for further expansion.

The Trust’s equity consists of Units, in which the carrying value is impacted by earnings and unitholder
distributions. The Trust endeavours to make annual distributions of $0.80 per unit. Amounts retained in excess
of the distributions are used to fund leasing costs, capital expenditure and working capital requirements.
Management monitors distributions through various ratios to ensure adequate resources are available. These
include the proportion of distributions paid in cash, DRIP participation ratio, total distributions as a percentage
of distributable income, and distributable income per unit.

The Trust monitors capital primarily using a debt-to-book value ratio, which is calculated as the amount of
outstanding debt divided by total assets. During the period the Trust did not breach any of its loan covenants,
nor did it default on any other of its obligations under its loan agreements.

The term loan credit facility agreement requires the debt service coverage ratio to be equal to or above 145%
at each interest rate payment date. For the quarter ended December 31, 2011, the REIT’s debt service coverage
ratio was 267% and therefore in compliance with the term loan credit facility requirement.

PAGE 62

DUNDEE INTERNATIONAL 2011 Annual Report

Note 24
FINANCIAL INSTRUMENTS
Risk management
IFRS 7, “Presentation of Financial Statements” (“IFRS 7”), places emphasis on disclosures about the nature
and extent of risks arising from ﬁnancial instruments and how the Trust manages those risks, including market,
credit and liquidity risk.

Market risk is the risk that the fair value or future cash ﬂows of a ﬁnancial instrument will ﬂuctuate because of
changes in market prices. Market risk consists of interest rate risk, currency risk and other market price risk.
The Trust has exposure to interest rate risk primarily as a result of its term loan credit facility which has a
variable rate of interest. In order to manage exposure to interest rate risk, the Trust endeavours to maintain an
appropriate mix of ﬁxed and ﬂoating rate debt, manage maturities of ﬁxed rate debt and match the nature of
the debt with the cash ﬂow characteristics of the underlying asset. Additionally, the Trust has entered into
interest rate swaps and caps to economically hedge the variable rate debt and has entered into foreign
exchange forward contracts to manage its currency risk from paying distributions and debt servicing in
Canadian dollars. The Trust is also exposed to interest rate risk on its derivatives.

The following interest rate sensitivity table outlines the potential impact of a 1% change in the interest rate on
variable rate assets and liabilities for a prospective twelve-month period. A 1% change is considered a
reasonable level of ﬂuctuation on variable rate assets and debts.

Carrying amount

Income

Financial assets
Cash and cash equivalents(1)
Financial liabilities
Term loan credit facility

87,907

$ 86,469

(879)

867

-1%

Equity

(879)

867

Interest rate risk

Income

879

(867)

Equity

879

(867)

(1) Cash and cash equivalents include short-term investments with an original maturity of three months or less, and exclude cash subject to
restrictions that prevent its use for current purposes. These balances generally receive interest income at bank prime less 1.85%. Cash and
cash equivalents are short term in nature and the current balance may not be representative of the balance for the rest of the year.

The Trust is exposed to currency risk. The Trust’s functional and presentation currency is Canadian dollars.
The Trust’s operating subsidiaries’ functional currency is the euro; accordingly the assets and liabilities are
translated at the prevailing rate at period-end, and comprehensive income is translated at the average rate for
the period. In order to manage the exposure to currency risk of unitholders and holders of Debentures, the Trust
has entered into foreign exchange forward contracts. The term of the contracts is for 24 months whereby the
Trust is required to sell €2,600 per month at an average rate of €1.368 per Canadian dollar.

The Trust is exposed to credit risk from its leasing activities and from its ﬁnancing activities and derivatives.
The Trust manages credit risk by requiring tenants to pay rents in advance and monitoring the credit quality
of the tenants on a regular basis. The Trust monitors tenant payment patterns and discusses potential tenant
issues with property managers on a regular basis. Credit risk with respect to ﬁnancing activities and derivatives
is managed by entering into arrangements with highly reputable institutions.

The Trust does not use derivatives for speculative purposes.

Liquidity risk is the risk that the Trust will encounter difﬁculty in meeting obligations associated with the
maturity of ﬁnancial obligations. The Trust manages maturities of its debts, and monitors the repayment dates
to ensure sufﬁcient capital will be available to cover obligations.

PAGE 63

DUNDEE INTERNATIONAL 2011 Annual Report

Interest rate derivatives
The following table provides details on interest rate derivatives outstanding as at December 31, 2011:

Hedging item

Interest rate swap
Interest rate swap
Interest rate cap

Notional

$ 346,712
86,678
43,339

$ 476,729

Rate

4.05%
3.38%
5.00%

Maturity

Carrying value

2016
2012
2016

(7,065)
(139)
97

(7,107)

Foreign currency derivatives
The following table provides details on foreign currency hedging (foreign currency forward contracts)
outstanding as at December 31, 2011:

Hedging currency

Notional amount

Exchange rate

Option start date

Option end date

Carrying value

October 1, 2012

January 3, 2012
February 1, 2012
March 1, 2012
April 2, 2012
May 2, 2012
June 1, 2012
July 3, 2012
August 1, 2012

January 13, 2012
February 15, 2012
March 15, 2012
April 13, 2012
May 15, 2012
June 15, 2012
July 13, 2012
August 15, 2012
September 4, 2012 September 14, 2012
October 15, 2012
November 1, 2012 November 15, 2012
December 3, 2012 December 14, 2012
January 15, 2013
February 15, 2013
March 15, 2013
April 15, 2013
May 15, 2013
June 14, 2013
July 15, 2013
August 15, 2013
September 3, 2013 September 13, 2013
October 15, 2013
November 1, 2013 November 15, 2013
December 2, 2013 December 16, 2013

January 2, 2013
February 1, 2013
March 1, 2013
April 2, 2013
May 2, 2013
June 3, 2013
July 2, 2013
August 1, 2013

October 1, 2013

115
110
106
102
98
93
90
85
81
77
73
70
66
62
59
56
53
50
47
45
123
136
90
22

1,909
33

1,942

Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro

€

2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600
2,600

1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.3639
1.4005
1.4079
1.3880
1.3577

Cash settlement on foreign exchange contracts

€ 62,400

PAGE 64

DUNDEE INTERNATIONAL 2011 Annual Report

Fair value of ﬁnancial instruments

Financial assets
Amounts receivable
Cash and cash equivalents

December 31, 2011

Carrying value

Fair value

2,010
87,907

Financial liabilities
Convertible debentures including conversion feature
Term loan credit facility
Exchangeable Notes
Derivative ﬁnancial instruments, excluding conversion feature of the Debentures
Deferred Unit Incentive Plan
Deposits
Amounts payable and accrued liabilities
Distributions payable

153,247
432,348
80,000
5,165
945
481
13,420
2,925

157,394
432,348
80,000
5,165
945
481
13,420
2,925

Fair value hierarchy
The following table shows an analysis of the fair values of ﬁnancial instruments recognized in the consolidated
balance sheet at fair value by level of fair value hierarchy.

Financial instruments
Exchangeable Notes
Interest rate derivatives
Foreign currency derivatives
Conversion feature of Debentures

Level 1

Level 2

Level 3

December 31, 2011

—
—
—
—

$ (80,000)
(7,107)
1,942
(6,589)

—
—
—
—

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;

Level 2 — Use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly
observable market data;

Level 3 — Use of a model with inputs that are not based on observable market data.

PAGE 65

DUNDEE INTERNATIONAL 2011 Annual Report

Appendix

December 31, 2011

Office properties
Gradestr. 22

Kurfürstenallee 130

Überseering 17/Mexikoring 22

Zimmermannstr. 2/Eisenstr.

Saalburgallee 19

Wiener Str. 43

Koblenzer Str. 67

Ölmühlweg 12

Total office

Mixed use properties
Grüne Str. 6-8/Kurfürstenstr. 2

Am Hauptbahnhof 16-18

Poststr. 4-6, Göbelstr. 30, Bismarckstr.

Bahnhofstr. 16

H-v-Stephan-Str. 1-15/W-Brandt-Pl.13

Bahnhofstr. 82-86

E.-Kamieth-Str. 2 b

Marienstr. 80

Rüppurrer Str. 81,87,89/Ettlinger 67

Gerokstr. 14-20

Hindenburgstr. 9/Heeserstr. 5

Kaiserstr. 24

Klubgartenstr. 10

Bahnhofsplatz 2,3,4, Pepperworth 7

Am Hauptbahnhof 2

Pausaer Str. 1-3

Bahnhofstr. 33

Husemannstr. 1

Berliner Platz 35-37

Stresemannstr. 15

Heinrich-von-Bibra-Platz 5-9

Bahnhofsring 2

Kaiser-Karl-Ring 59-63/Dorotheenstr.

Bürgerreuther Str. 1

Bahnhofplatz 10

Logenstr. 37

Bahnhofsplatz 1

Bahnhofstr. 9

Mecklenburgstr. 4-6

Rathausplatz 2

Niemeyerstr. 1

Bahnhofstr. 40

Möhringer Landstr. 2/Emilienstr. 30

Heinrich-von-Stephan-Str. 8-10

Joachim-Campe-Str. 1.3/5/7, Posthof

Friedrich-Ebert-Str. 28

Paulinenstr. 52

Postplatz 3

Poststr. 2 U 3

Ostbahnstr. 5

Kavalierstr. 30-32

Bahnhofsplatz 9

Friedrich-Ebert-Str. 75-79

Baarstr. 5

Hainstr. 5 A

Europaplatz 17

Rathausplatz 4

Marktstr. 9

Zuffenhäuser Kelterplatz 1

Unter den Zwicken 1-3

PAGE 66

CITY

STATE

GLA

OCCUPANCY

Hannover

Bremen

Hamburg

Marburg

Frankfurt am Main

Stuttgart

Bonn

Königstein

Dortmund

Saarbrücken

Darmstadt

Regensburg

Mannheim

Gießen

Halle

Niedersachsen

Bremen

Hamburg

Hesse

Baden-Württemberg

North Rhine-Westphalia

Hesse

North Rhine-Westphalia

Saarland

Hesse

Bavaria

Baden-Württemberg

Hesse

Saxony-Anhalt

Offenbach am Main

Hesse

Karlsruhe

Dresden

Siegen

Gütersloh

Goslar

Hildesheim

Mülheim

Plauen

Böblingen

Gelsenkirchen

Münster

Wuppertal

Fulda

Leer

Bonn

Bayreuth

Fürth

Kaiserslautern

Schweinfurt

Ingolstadt

Schwerin

Wilhelmshaven

Hannover

Flensburg

Stuttgart

Leverkusen

Salzgitter

Pinneberg

Detmold

Bautzen

Helmstedt

Landau

Dessau

Emden

Bremerhaven

Iserlohn

Bad Hersfeld

Bad Kreuznach

Lüdenscheid

Völklingen

Stuttgart

Halberstadt

Baden-Württemberg

Saxony

North Rhine-Westphalia

Niedersachsen

North Rhine-Westphalia

Saxony

Baden-Württemberg

North Rhine-Westphalia

Hesse

Niedersachsen

North Rhine-Westphalia

Bavaria

Rhineland-Palatinate

Bavaria

Mecklenburg-West Pomerania

Niedersachsen

Schleswig-Holstein

Baden-Württemberg

North Rhine-Westphalia

Niedersachsen

Schleswig-Holstein

North Rhine-Westphalia

Saxony

Niedersachsen

Rhineland-Palatinate

Saxony-Anhalt

Niedersachsen

Bremen

North Rhine-Westphalia

Hesse

Rhineland-Palatinate

North Rhine-Westphalia

Saarland

Baden-Württemberg

Saxony-Anhalt

195,783

187,940

159,174

99,751

98,224

72,192

42,774

34,984

890,822

299,567

290,901

230,943

230,845

227,298

156,378

152,661

114,114

111,413

110,434

98,647

94,488

87,460

85,895

84,303

83,867

82,628

80,141

79,702

79,185

77,606

77,022

75,815

75,534

74,816

72,198

67,503

67,432

66,676

64,970

61,884

61,826

61,194

61,011

60,012

59,218

57,614

57,007

53,468

53,401

52,206

52,195

51,727

51,472

51,207

50,704

50,050

49,577

47,552

47,145

72%

73%

88%

98%

96%

88%

100%

84%

100%

92%

89%

75%

96%

88%

83%

96%

93%

86%

89%

61%

64%

75%

95%

71%

100%

88%

86%

100%

91%

100%

95%

87%

100%

80%

97%

73%

98%

93%

89%

56%

100%

75%

67%

52%

94%

90%

91%

97%

78%

100%

91%

95%

73%

80%

76%

DUNDEE INTERNATIONAL 2011 Annual Report

December 31, 2011

CITY

STATE

GLA

OCCUPANCY

Mixed use properties (continued)
Stadtparkstr. 2

Schützenstr. 17,19

Bahnhofstr. 2

Theodor-Heuss-Platz 13

Poststr. 14

Bahnhofplatz 3,5

Stembergstr. 27-29

Poststr. 2

Willy-Brandt-Str. 6

Königstr. 12

Möllner Landstr. 47-49/Reclamstr. 20

Lutherplatz 5

Münchener Str. 1

Martinistr. 19

Bahnhofstr. 169

Vegesacker Heerstr. 111

Südbrede 1-5

Kardinal-Galen-Ring 84/86

Kalkumer Str. 70

Ehrenfeldgürtel 125

Poststr. 2

Robert-Wahl-Str. 7/7a

Bahnhofplatz 1

Balhornstr. 15,17/B.Köthenbürger-Str.

August-Bebel-Str. 6

Cavaillonstr. 2

Steinerother Str. 1 U 1a

Bismarckstr. 21-23

Stuttgarter Str. 5,7

Heinrich-von-Stephan-Platz 6

Hindenburgstr. 8/Hohenstauf 9,17,19

Mühlenstr. 5-7

Alsenberger Str. 61

Lübecker Str. 23-25

Apostelweg 4-6

Brückenstr. 21

Lönsstr. 20-22

Friedrich-Wilhelm-Str. 52 U. 54

Verdener Str. 9

Kurt-Schumacher-Str. 5

Lilienstr. 3

Stadtring 3-5

Heinzelmannstr. 1/Hauberrisserstr.

Bahnhofplatz 4

Bahnhofsplatz 10,12,14

Goethestr. 2-6

Gustav-König-Str. 42

Zwieseler Str. 27-29

Lotzbeckstr. 4

Bahnhofsplatz 4

Große Str. 29-33

Worthingtonstr. 15

Kieler Str. 501

Hellersdorfer Str. 78

Kreuzstr. 20-24

Schwabach

Peine

Cham

Neuss

Rastatt

Heidenheim

Arnsberg

Gummersbach

Auerbach

Rottweil

Hamburg

Nordhausen

Bad Kissingen

Recklinghausen

Bavaria

Niedersachsen

Bavaria

North Rhine-Westphalia

Baden-Württemberg

North Rhine-Westphalia

Saxony

Baden-Württemberg

Hamburg

Thuringia

Bavaria

North Rhine-Westphalia

Bietigheim-Bissingen

Baden-Württemberg

Bremen

Ahlen

Rheine

Düsseldorf

Köln

Deggendorf

Balingen

Freising

Paderborn

Torgau

Weinheim

Betzdorf

Bünde

Fellbach

Naumburg

Bocholt

Delmenhorst

Hof

Bad Oldesloe

Hamburg

Neunkirchen

Bremen

North Rhine-Westphalia

Bavaria

Baden-Württemberg

Bavaria

North Rhine-Westphalia

Saxony

Baden-Württemberg

Rhineland-Palatinate

North Rhine-Westphalia

Baden-Württemberg

Saxony-Anhalt

North Rhine-Westphalia

Niedersachsen

Bavaria

Schleswig-Holstein

Hamburg

Saarland

Castrop-Rauxel

North Rhine-Westphalia

Eschwege

Nienburg

Lünen

Leipzig

Nordhorn

Kaufbeuren

Traunstein

Kleve

Duisburg

Sonneberg

Regen

Lahr

Homburg

Rotenburg

Crailsheim

Hamburg

Berlin

Bonn

Hesse

Niedersachsen

North Rhine-Westphalia

Saxony

Niedersachsen

Bavaria

North Rhine-Westphalia

Thuringia

Bavaria

Baden-Württemberg

Saarland

Niedersachsen

Baden-Württemberg

Hamburg

Berlin

North Rhine-Westphalia

Hauptstr. 279/Hommelstr. 2

Idar-Oberstein

Bahnhofstr. 6/Luisenstr. 4-5

Villingen-Schwenningen

Baden-Württemberg

Münchener Str. 38

Poststr. 30

Tunnelweg 1

Neuburg

Albstadt

Husum

Bavaria

Baden-Württemberg

Schleswig-Holstein

46,799

46,527

46,129

46,128

45,659

45,656

45,600

45,558

45,504

45,494

45,371

44,699

43,971

43,807

43,620

43,484

43,382

42,191

41,771

41,645

41,640

41,487

41,139

40,927

40,745

40,540

39,972

39,041

38,276

38,093

37,612

37,512

37,266

36,294

36,290

36,273

35,971

35,580

35,433

35,313

35,290

35,234

34,960

34,894

34,887

34,871

34,839

33,959

33,800

33,511

33,241

33,240

33,136

32,937

32,580

32,253

32,191

31,486

31,263

31,116

77%

91%

61%

95%

92%

86%

97%

84%

53%

88%

90%

82%

74%

82%

99%

92%

83%

100%

97%

96%

94%

95%

84%

86%

91%

89%

96%

88%

96%

91%

93%

98%

77%

100%

97%

100%

86%

53%

80%

100%

97%

83%

90%

63%

100%

85%

46%

90%

70%

100%

94%

100%

92%

85%

99%

97%

70%

84%

89%

PAGE 67

DUNDEE INTERNATIONAL 2011 Annual Report

December 31, 2011

CITY

STATE

GLA

OCCUPANCY

Mixed use properties (continued)
Volksdorfer Str. 5/Wohld. Str. 6

Bahnhofplatz 4

Poststr. 26

Bahnhofsplatz 2

Waschgrabenallee 3-5

König-Heinrich-Str. 11

Poststr. 24-26

Ludwigsplatz 1

Bahnhofstr. 29

Poststr. 12

Petristr. 26

Dr.-Friedrich-Uhde-Str. 18

Augsburger Str. 380

Gartenstr. 29/30

Wilhelm-Weber-Str. 1

Poststr. 1-3

Berliner-Tor-Platz 1

Poststr. 48

Bahnhofstr. 2

Bahnhofanlage 2-4

Königswiese 1

Wilhelmstr. 11/Kamperdickstr. 29

Kaiserstr. 140

In der Trift 10/12

Klosterstr. 6-10

Bahnhofstr. 6

Asselheimer Str. 26/Mörikestr. 1-3

Alleestr. 6

Uferstr. 2

Gartenstr. 16

Bahnhofsplatz 8

Bahnhofstr. 32

Bahnhofstr. 46

Stadtgraben 13

Bahnhofsplatz o. Nr.

Breitestr. 62-66

Bahnhofstr. 27

Brückenstr. 26

Ringstr. 22/Dr. Bachl-Str.

Lindenstr. 42

Hörder Semerteichstr. 175

Am Plärrer 11

Wilhelmstr. 5

Am Stadtpark 5

Geistmarkt 17

Lyoner Passage 14

Moltkestr. 6

Martin-Pöhlmann-Str. 5/Friedrich-e

Am Markt 4-5

Steinstr. 6

Leistikowstr. 19

Saarbrücker Str. 292-294

Ziegelstr. 15, 15 A

Poststr. 12

Neugr. Bahnhofstr. 26/Scheideholzw.

Speckweg 24-26

Marktplatz 5

Kasseler Str. 1-7

Bahnhofstr. 58/Giselbertstr. 6

Poststr. 5

PAGE 68

Hamburg

Berchtesgaden

Meißen

Herborn

Neustadt

Merseburg

Ratingen

Alsfeld

Meppen

Lehrte

Hamburg

Bavaria

Saxony

Hesse

Schleswig-Holstein

Saxony-Anhalt

North Rhine-Westphalia

Hesse

Niedersachsen

Heilbad Heiligenstadt

Thuringia

Einbeck

Stuttgart

Pirna

Wittenberg

Korbach

Wesel

St Ingbert

Gifhorn

Schwetzingen

Gelsenkirchen

Kamp-Lintfort

Radevormwald

Olpe

Niedersachsen

Baden-Württemberg

Saxony

Saxony-Anhalt

Hesse

North Rhine-Westphalia

Saarland

Niedersachsen

Baden-Württemberg

North Rhine-Westphalia

Annaberg-Buchholz

Saxony

Quakenbrück

Niedersachsen

Grünstadt

Neustadt

Höxter

Sindelfingen

Marktredwitz

Sulzbach-Rosenberg

Unna

Pfaffenhofen

Oranienburg

Andernach

Öhringen

Miltenberg

Pfarrkirchen

Grevenbroich

Dortmund

Lauf

Ibbenbüren

Papenburg

Emmerich

Köln

Hattingen

Selb

Norden

Pulheim

Fürstenwalde

Saarbrücken

Ravensburg

Schmölln

Hamburg

Mannheim

Nordenham

Warburg

Buxtehude

Walsrode

Rhineland-Palatinate

Bavaria

North Rhine-Westphalia

Baden-Württemberg

Bavaria

North Rhine-Westphalia

Bavaria

Brandenburg

Rhineland-Palatinate

Baden-Württemberg

Bavaria

North Rhine-Westphalia

Bavaria

North Rhine-Westphalia

Niedersachsen

North Rhine-Westphalia

Bavaria

Niedersachsen

North Rhine-Westphalia

Brandenburg

Saarland

Baden-Württemberg

Thuringia

Hamburg

Baden-Württemberg

Niedersachsen

North Rhine-Westphalia

Niedersachsen

31,068

31,007

30,101

29,746

29,739

29,472

29,445

29,125

29,056

28,764

28,205

27,793

27,775

27,771

27,658

27,463

27,052

26,975

26,894

26,658

26,468

25,973

25,653

25,414

25,336

24,446

23,560

23,495

23,240

23,121

22,710

22,634

22,627

22,513

22,153

22,119

22,027

22,017

21,980

21,668

21,659

21,603

21,031

20,950

20,942

20,742

20,681

20,668

20,517

20,437

20,433

20,420

20,403

20,213

20,128

20,109

19,985

19,800

19,697

91%

42%

78%

91%

90%

83%

100%

62%

94%

93%

68%

72%

93%

73%

78%

88%

100%

87%

92%

100%

81%

74%

88%

75%

97%

66%

100%

79%

100%

99%

76%

100%

88%

76%

88%

92%

89%

86%

83%

87%

100%

88%

100%

81%

100%

59%

92%

90%

88%

81%

90%

100%

86%

94%

93%

DUNDEE INTERNATIONAL 2011 Annual Report

December 31, 2011

CITY

STATE

GLA

OCCUPANCY

Mixed use properties (continued)
Lindauer Str. 34

Eisenbahnstr. 15

Konrad-Adenauer-Str. 10

Poststr. 6

Lagerstr. 1

Bahnhofstr. 3

Bahnhofstr. 43

Friedrichstr. 2

Bahnhofstr. 18 a

Königstr. 20

Kornmarkt 15

Marktstr. 51

Übacher Weg 4

Karl-von-Hahn-Str. 1

Kaiserstr. 35

Niederwall 3

Bahnhofstr. 8-10

Hochstr. 31/Postgasse 5

Robert-Koch-Str. 3

Hauptstr. 141

Poststr. 28

Lindenstr. 9

Am Bahnhof 2

Melanchthonstr. 96

Republikstr. 34

Poststr. 1/2

Herrlichkeit 7

Luitpoldstr. 13 u 13 b

Bahnhofstr. 41

Kolpingstr. 4

Schönbornstr. 1

Potsdamer Str. 9

Langener Landstr. 237-239

Bünder Str. 36

Berliner Freiheit 8

Albert-Steiner-Str. 10

Poststr. 1

Gorsemannstr. 22

Mönchenstr. 15-18

Fritz-Brandt-Str. 25

Bahnhofstr. 11

Märkische Str. 58

Poststr. 3-5

Prochaskaplatz 7

Kürbsweg 9

Hauptstr. 40

Bahnhofstr. 49/49a

Steinweg 5

Am Markt 4

Sandstr. 4

Rensefelder Str. 2

Bahnhofstr. 12

Rosenstr. 1/Fünfhausenstr. 19/21

De-Lenoncourt-Str. 2

Elisabeth-Anna-Str. 11

Melcherstätte 8

Alte Amberger Str. 28

Eichendorffstr. 14

Wetterstr. 20/Poststr. 2

Total mixed use

Wangen

Tuttlingen

Langenhagen

Beckum

Meschede

Osterburken

Riesa

Monheim

Wedel

Brilon

Osterode

Essen

Alsdorf

Freudenstadt

Minden

Lübbecke

Borken

Bochum

Laatzen

Baden-Württemberg

Niedersachsen

North Rhine-Westphalia

Baden-Württemberg

Saxony

North Rhine-Westphalia

Schleswig-Holstein

North Rhine-Westphalia

Niedersachsen

North Rhine-Westphalia

Baden-Württemberg

North Rhine-Westphalia

Niedersachsen

Rheda-Wiedenbrück

North Rhine-Westphalia

Hemer

Daun

Meldorf

Bretten

Schönebeck

Spremberg

Syke

Dinkelsbühl

Eberbach

North Rhine-Westphalia

Rhineland-Palatinate

Schleswig-Holstein

Baden-Württemberg

Saxony-Anhalt

Brandenburg

Niedersachsen

Bavaria

Baden-Württemberg

Georgsmarienhütte

Niedersachsen

Geisenheim

Ludwigsfelde

Bremerhaven

Löhne

Bremen

Herzogenrath

Erftstadt

Bremen

Jüterbog

Zerbst

Alpirsbach

Düsseldorf

Barsinghausen

Dannenberg

Seevetal

Hesse

Brandenburg

Bremen

North Rhine-Westphalia

Bremen

North Rhine-Westphalia

Bremen

Brandenburg

Saxony-Anhalt

Baden-Württemberg

North Rhine-Westphalia

Niedersachsen

Porta Westfalica

North Rhine-Westphalia

Aalen

Weiden

St. Georgen

Germersheim

Bad Schwartau

Pfullendorf

Springe

Dillingen

Wangerooge

Stuhr

Grafenwöhr

Traunreut

Herdecke

Baden-Württemberg

Bavaria

Baden-Württemberg

Rhineland-Palatinate

Schleswig-Holstein

Baden-Württemberg

Niedersachsen

Saarland

Niedersachsen

Bavaria

North Rhine-Westphalia

19,510

19,047

18,892

18,831

18,683

18,498

18,275

18,156

17,771

17,733

17,690

17,661

16,870

16,699

16,624

16,563

16,385

16,359

16,126

16,082

15,782

15,689

15,549

15,501

14,985

14,763

14,560

14,421

13,936

13,725

13,117

12,885

12,803

12,625

12,553

12,538

12,498

12,379

12,128

12,117

12,112

11,997

11,597

11,334

11,175

11,133

11,050

10,974

10,324

10,132

9,777

9,720

8,881

8,705

8,382

8,196

7,980

7,711

7,702

9,186,913

97%

66%

100%

90%

100%

94%

68%

100%

92%

80%

100%

87%

90%

71%

80%

99%

98%

100%

80%

100%

98%

100%

95%

100%

90%

100%

88%

PAGE 69

DUNDEE INTERNATIONAL 2011 Annual Report

CITY

STATE

GLA

OCCUPANCY

Kiel

Weiden

Hamburg

Heidelberg

Oberhausen

Koblenz

Einbeck

Duisburg

Osnabrück

Celle

Aschaffenburg

Zwickau

Heide

Waiblingen

Lippstadt

Schleswig-Holstein

Bavaria

Hamburg

Baden-Württemberg

North Rhine-Westphalia

Rhineland-Palatinate

Niedersachsen

North Rhine-Westphalia

Niedersachsen

Bavaria

Saxony

Schleswig-Holstein

Baden-Württemberg

North Rhine-Westphalia

Frankfurt am Main

Hesse

Norderstedt

Schleswig-Holstein

Bergisch Gladbach

North Rhine-Westphalia

Neubrandenburg

Mecklenburg-West Pomerania

Frankfurt an der Oder

Brandenburg

Remagen

Tübingen

Dresden

Hameln

Leipzig

Aschaffenburg

Chemnitz

Bitterfeld

Hilden

Landstuhl

Berlin

Magdeburg

Baden-Baden

Bitburg

Traunstein

Stendal

Heusweiler

Steinfurt

Vilshofen

Görlitz

Sulz

Backnang

Halle

Hannover

Potsdam

Titisee-Neustadt

Albstadt

Fürstenfeldbruck

Bautzen

Mittenwalde

Hannover

Bonn

Bochum

Rhineland-Palatinate

Baden-Württemberg

Saxony

Niedersachsen

Saxony

Bavaria

Saxony

Saxony-Anhalt

North Rhine-Westphalia

Rhineland-Palatinate

Berlin

Saxony-Anhalt

Baden-Württemberg

Rhineland-Palatinate

Bavaria

Saxony-Anhalt

Saarland

North Rhine-Westphalia

Bavaria

Saxony

Baden-Württemberg

Saxony-Anhalt

Niedersachsen

Brandenburg

Baden-Württemberg

Bavaria

Saxony

Brandenburg

Niedersachsen

North Rhine-Westphalia

Bad Säckingen

Baden-Württemberg

Bad Neuenahr-Ahrweiler

Rhineland-Palatinate

181,004

166,601

160,720

133,909

97,606

94,569

81,206

80,122

77,515

73,423

64,264

60,738

53,363

53,220

44,341

43,409

41,249

34,737

34,347

32,330

29,825

29,341

29,236

26,895

26,214

25,153

24,422

23,183

22,454

21,709

21,187

19,454

19,444

19,340

18,488

18,200

16,867

16,666

16,619

16,279

15,774

14,634

14,533

14,504

14,042

13,955

13,816

13,326

12,686

12,631

12,494

12,311

10,732

9,717

9,023

2,243,832

12,321,567

96%

100%

88%

80%

74%

68%

67%

100%

51%

78%

94%

59%

95%

100%

64%

98%

100%

97%

63%

98%

100%

93%

79%

95%

78%

86%

87%

99%

100%

93%

99%

98%

93%

92%

100%

69%

100%

76%

99%

100%

94%

100%

94%

100%

87%

88%

December 31, 2011

Industrial properties
Karlstal 1-21/Werftstr. 201

Franz-Zebisch-Str. 15

Am Neumarkt 40/Luetkensallee 49

Czernyring 15

Friedrich-Karl-Str. 1-7

Blücherstr. 12

Kapellenstr. 44

Kommandantenstr. 43-51

Dammstr. 2, Frankenstr. 21, 25a

77er Str. 54

Auhofstr. 21

Am Bahnhof 5

Poststr. 5-7

Mayenner Str. 63

Lippertor 6

Palleskestr. 38

Falkenbergstr. 17-23

Im Bungert 6-8

Gerstenstr. 5

Markendorfer Str. 10

Von-Lassaulx-Str. 14-18

Konrad-Adenauer-Str. 49-51

Feldschlößchenstr./Kunadstr. o. Nr.

Ruthenstr. 19/21

Saßstr. 12

Goldbacher Str. 74

Zwickauer Str. 438

Lindenstr. 11

Poststr. 19-23

Lindenstr. 15

Innungsstr. 57-59

Lübecker Str./Wedringer Str. o. Nr.

Ooser Karlstr. 21/23/25

Güterstr. 2-4

Chiemseestr. 25

Bahnhofstr. 33 U. 33 A

Trierer Str. 4-6

Bismarckstr. 12/Fr.Hoffmann-Str.

Aidenbacher Str. 41

Sattigstr. 33

Bahnhofstr. 33

Im Kusterfeld 1

Grenzstr. 24

Mercedesstr. 5

Am Buchhorst 35

Gutachstr. 56

Berliner Str. 4

Münchner Str. 50

Löbauer Str. 63

Dahmestr. 17

Heidering 23

Fraunhoferstr. 10

Unterstr. 14

Langfuhren 9

Weinbergstr. 50

Total industrial

TOTAL

PAGE 70

DUNDEE INTERNATIONAL 2011 Annual Report

Trustees and officers

Trustees

Ofﬁcers

Detlef Bierbaum1, 2, 5
KÖLN, GERMANY

P. Jane Gavan2
UTAH, UNITED STATES OF AMERICA

Detlef Bierbaum
CHAIRMAN

Member of the Supervisory Board,
Sal Oppenheim KAG

President and Chief Executive Ofﬁcer,
Dundee International REIT

Olivier Brahin3, 4
LONDON, ENGLAND

Ned Goodman2
INNISFIL, ONTARIO

Senior Managing Director,
Head of European Real Estate Investments,
Lone Star Management Europe Limited

President and Chief Executive Ofﬁcer,
Dundee Corporation

Michael J. Cooper2
TORONTO, ONTARIO

Vice Chairman,
Dundee International REIT

Brydon Cruise1, 3, 4
TORONTO, ONTARIO

President and Managing Partner,
Brookﬁeld Financial

Duncan Jackman1, 3, 4
TORONTO, ONTARIO

Chairman, President and CEO,
E-L Financial Corporation Limited

John Sullivan
TORONTO, ONTARIO

President and Chief Executive Ofﬁcer,
Cadillac Fairview Corporation Limited

Michael J. Cooper
VICE CHAIRMAN

P. Jane Gavan
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Douglas P. Quesnel
CHIEF FINANCIAL OFFICER

1 Member of the Audit Committee
2 Member of the Executive Committee
3 Member of the Compensation Committee
4 Member of the Governance and Environmental Committee
5 Chairman of the Board of Trustees

PAGE 71

DUNDEE INTERNATIONAL 2011 Annual Report

Notes

PAGE 72

Corporate information

Head ofﬁce

Auditors

Annual meeting of unitholders

DUNDEE INTERNATIONAL

PRICEWATERHOUSECOOPERS LLP

Wednesday, May 2, 2012, at 4:00 p.m. (EST)

REAL ESTATE INVESTMENT TRUST

State Street Financial Centre

30 Adelaide Street East, Suite 1600

Toronto, Ontario M5C 3H1

Phone: (416) 365-3535

Fax: (416) 365-6565

Investor relations

Phone: (416) 365-3538

Toll free: 1 877 365-3535

From Germany: 0 800 189-0344
E-mail: info@dundeeinternational.com
Web site: www.dundeeinternational.com

Transfer agent
(for change of address, registration

or other unitholder inquiries)

COMPUTERSHARE

TRUST COMPANY OF CANADA

100 University Avenue, 9th Floor

Toronto, Ontario M5J 2Y1

Phone: (514) 982-7555 or

1 800 564-6253

Fax: (416) 263-9394 or

1 888 453-0330
E-mail: service@computershare.com

PwC Tower

18 York Street, Suite 2600

Toronto, Ontario M5J 0B2

Corporate counsel

OSLER, HOSKIN & HARCOURT LLP

Box 50, 1 First Canadian Place, Suite 6100

Toronto, Ontario M5X 1B8

Taxation of distributions

Distributions paid to unitholders in respect

of the tax year ending December 31, 2011,

are taxed as follows:

Foreign business income: 44.9%

Return of capital: 55.1%

Management estimates that 55% of the

distribution to be made by the REIT in

2012 will be tax deferred.

Stock exchange listing

THE TORONTO STOCK EXCHANGE

Listing symbols:

REIT Units: DI.UN

5.5% Convertible Debentures: DI.DB

Sovereign Ballroom

The King Edward Hotel

37 King Street East

Toronto, Ontario, Canada

Distribution Reinvestment
and Unit Purchase Plan

The purpose of our Distribution Reinvestment

and Unit Purchase Plan (“DRIP”) is to provide

unitholders with a convenient way of investing

in additional units without incurring transaction

costs such as commissions, service charges or

brokerage fees. By participating in the Plan, you

may invest in additional units in two ways:

Distribution reinvestment: Unitholders

will have cash distributions from Dundee

International REIT reinvested in additional

units as and when cash distributions are made.

Cash purchase: Unitholders may invest in

additional units by making cash purchases.

If you register in the DRIP you will also

receive a “bonus” distribution of units equal

to 4% of the amount of your cash distribution

reinvested pursuant to the Plan. In other words,

for every $1.00 of cash distributions reinvested

by you under the Plan, $1.04 worth of units

will be purchased.

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DUNDEE INTERNATIONAL REIT

State Street Financial Centre
30 Adelaide Street East, Suite 1600
Toronto, Ontario M5C 3H1