Dream Gobal REIT
Annual Report 2013

Plain-text annual report

Dundee International REIT 2013 Annual Report Dream 2013 Annual Report 1 Better Communities to Work In We’d like to take the opportunity to thank all our stakeholders for being part of our continued success. Because of all the hard work and dedication to keep doing things better, 2013 was another strong year for us. Dundee International reit has been around since 2011, and we’ve been de di cated to building a diversified, growth-oriented portfolio of commercial properties outside of Canada. This is so we can generate stable and growing cash flows for our investors. And now we’re happy to an nounce that we are moving into a new and exciting time in our bu si ness. We want to let everyone know that starting May 12, 2014, Dundee International reit’s name will be Dream Global reit. This change is exciting for us because we are now bringing more clarity to our sto ry and aligning all our efforts around one core belief — creating better communities to work in — which will result in a better investment for our unit holders. This sums up what we do and why we do it, and we think it’s a bet ter articulation of who we are, which has been such an inte gral part of our cul ture, our work and our company’s ob jectives since the beginning. Starting May 12, 2014, Dundee International reit’s new name will be Dream Global reit. Stock Exchange Listing On or about May 15, 2014, Dream Global REIT’s ticker symbols on the Toronto Stock Exchange will change to: REIT Units: DRG.UN 5.5% Convertible Debentures: DRG.DB 60,000 people working in our European office buildings Letter to unitholders Dundee International REIT had a transformational year in 2013. The opportunity to grow our business was exceptional and resulted in the addition of over $1.0 billion of high-quality real estate in the best locations in Germany. These acquisitions were accretive to the adjusted funds from operations (“AFFO”) and represented a focus on the seven largest (“Big 7”) office markets in Germany. On average, our office buildings were acquired at a capitalization rate of 6.7% and an average borrowing rate and term of 2.6% and 6.6 years, respectively. We have made significant improvements in the quality of our cash flow by focusing on newer properties with a broad tenant mix. We now have two-thirds of our asset value, and 60% of our gross rental income (“GRI”), in the Big 7 office markets in Germany. We ended 2013 with an increase in overall occupancy to 86.4% from 83.2% at the end of 2012. Continued improvements in the Trust’s tenant retention with over 350,000 square feet of renewals contributed to this increase. Year-over-year in-place rents increased to $12.40 (€8.46) in Q4 2013 from $8.20 (€6.25) per square foot in Q4 2012, reflecting the higher quality of the acquired properties. With respect to our operations, our focus will continue to be on increasing occupancy and tenant retention to enhance the value of our portfolio. As a result of the growth of the overall portfolio, we have made good progress in diversifying our tenant base. During the year we reduced the percentage of Dundee International’s GRI received from Deutsche Post, the REIT’s largest tenant, from 65% at the end of 2012, to 37% at the end of 2013. At the same time, we focused on improving the retention rate of this tenant in the space they are currently leasing. Together with Postbank, they renewed approximately 50% of the space, and 53% of the GRI, they were eligible to terminate in June 2014 – an over 300% improvement in retention from their last termination right in June 2012. Unlike in 2012 when the termination decision was already made prior to Dundee International’s acquisition of the portfolio, this time we were able to work closely with the tenant to proactively address their space needs and find solutions that worked for both parties. Our leasing team in Germany continues its focus on leasing the balance of the terminated space, and with robust leasing volume in the first quarter, feels confident about the leasing prospects. We continue to find opportunities in the initial portfolio to enhance value through rezoning or repositioning assets. We are also identifying for severance and sale, land which is excess to our office properties’ needs which can be sold for other uses not core to our business. We continue to improve the quality of the portfolio through dispositions and recycling capital. In 2013 we disposed of 15 properties from the initial portfolio for an aggregate sales price of approximately $23.9 million, which represents 102% of book value for those assets. We will continue our disposition program in 2014, redeploying the proceeds into high-quality office buildings. Over the course of 2013, we further strengthened our relationships with the European lending community. We added additional financial institutions to our pool of mostly German lenders and now have 12 potential lenders for future acquisition financings. We have continued to improve the management platform through the addition of skilled professionals to our leasing, capital enhancement and sales teams, contributing to our drive to maximize value from our buildings. The strengthening euro had a favourable impact on our December 31, 2013 book equity, adding $109 million, or 18%, compared to December 31, 2012. The economy in Germany has continued to improve, an important factor in the overall occupancy of office properties. Germany’s registered unemployment rate remains near a 25-year low at 6.7% at the end of 2013, driving strong user demand across all key office markets. The aggregate vacancy rate in the Big 7 office markets is at its lowest level since 2002 and has been declining year-over- year from 8.8% at the end of 2012 to 8.3% at the end of 2013. In addition, mortgage rates in Germany are among the lowest in the Trust’s history, as increased competition in the German lending market has put pressure on credit spreads. 2013 was a year of progress and transformation of our business through the addition of high-quality assets in the best markets in Germany, strong overall leasing and our active management of the portfolio. This transformation will continue in 2014 to further improve the quality of the long-term cash flow and supports our key objective of providing predictable and sustainable distributions to our investors. In May, we will be introducing our new platform-wide branding and the renaming of our Trust to Dream Global REIT. For a preview, please refer to the insert in the inside front cover of the printed annual report, or visit our website at www.dundeeinternational.com. As we approach the third anniversary of the formation of our Trust, we are no longer a newcomer, but a well regarded and highly recognized participant in the European real estate market. On behalf of our management team and our Board of Trustees, I’d like to thank you for your continued support. P. Jane Gavan President and Chief Executive Officer March 15, 2014 Dream 2013 Annual Report 1 At-a-glance December 31, 2013 15.7 area of ProPerties across GermaNy (millions of square feet) 60%+ PreseNce iN “biG 7” office markets iN GermaNy (% of gross rental income) $2.4B total assets $1.0B 2.6% 33 strateGic acquisitioNs iN 2013 averaGe mortGaGe iNterest rate for 2013 acquisitioNs Number of dedicated real estate ProfessioNals iN euroPe Dundee International REIT is an owner and operator of 15.7 million square feet of office and mixed use space in Germany and provides a unique opportunity to gain exposure to the German real estate market through an established Canadian platform. Geographic Diversification Tenant Diversification City Total GLA (sq. ft.) Total gross rental income (%) Tenant composition Total annualized GRI (%) Berlin Cologne Düsseldorf Frankfurt Hamburg Hannover Munich Nuremberg Stuttgart Other total 674,362 783,967 1,815,847 1,205,885 1,291,504 959,452 633,304 640,567 729,182 6,971,355 5 6 15 10 13 4 8 5 5 29 15,705,425 100 Deutsche Post Freshfields Bruckhaus Deringer ERGO Direkt Imtech Google Germany GmbH AIG Europe Limited BNP Paribas Fortis SA/NV Freistaat Bayern (TU München) Maersk Deutschland A/S & Co. KG Jobcenter Berlin Mitte – Federal Employment Agency Other third-party tenants 37.3 3.2 3.0 2.4 2.1 2.1 2.0 1.7 1.4 1.4 43.4 total 100.0 2 Dream 2013 Annual Report 296 ProPerties Geographic Diversification Gross rental income (%) 13% HAMBURG 4% HANNOVER GERMANY 5% BERLIN 15% DÜSSELDORF 6% COLOGNE 10% FRANKFURT 5% STUTTGART 5% NUREMBERG 8% MUNICH Manageable Lease Expiries % of GRI expiring (Q4/13) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2014 2015 2016 2017 Photos (left to right, top to bottom): Z-UP, Stuttgart; K26, Frankfurt; Cäcilienkloster 2,6,8,10, Cologne; Werfthaus, Frankfurt; Feldmühleplatz 1 + 15, Düsseldorf; ABC Bogen, Hamburg Tenant Diversification Tenant composition Deutsche Post Freshfields Bruckhaus Deringer ERGO Direkt Imtech Google Germany GmbH AIG Europe Limited BNP Paribas Fortis SA/NV Freistaat Bayern (TU München) Maersk Deutschland A/S & Co. KG Jobcenter Berlin Mitte – Federal Employment Agency Other third-party tenants total Total annualized GRI (%) 37.3 3.2 3.0 2.4 2.1 2.1 2.0 1.7 1.4 1.4 43.4 100.0 Dream 2013 Annual Report 3 Table of contents Management’s discussion and analysis Management’s responsibility for financial statements Independent auditor’s report Consolidated financial statements Notes to the consolidated financial statements Trustees and officers Corporate information 1 37 38 39 43 IBC IBC 4 Dream 2013 Annual Report Photos (top to bottom): Karl-Martell-Strasse 60, Nuremberg; Oasis III, Stuttgart; Löwenkontor, Berlin 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     • Acquired   an   office   building   in   Düsseldorf,   Germany   for   approximately   $107.7   million,   the   REIT’s   largest   single   asset   transaction  since  its  inception,  which  had  a  7.6%  capitalization  rate  (“cap  rate”)  and  a  mortgage  interest  rate  of  2.3%;   • Total  assets  acquired  in  2013  exceeded  $1.0  billion  and  had  an  average  cap  rate  of  6.7%  and  an  average  borrowing  rate   of  2.6%;   • Diversified   tenant   profile   with   our   largest   tenant,   Deutsche   Post,   contributing   37%   to   the   overall   gross   rental   income   (“GRI”)  at  the  end  of  2013,  down  from  65%  at  the  end  of  2012;   • Active  leasing  resulted  in  positive  absorption  of  approximately  10,800  square  feet  of  space  in  Q4,  increasing  2013  total   absorption  to  approximately  180,100  square  feet;   • Occupancy  rate  increased  to  86.4%  at  the  end  of  2013  from  83.2%  at  the  end  of  2012.   Three  months  ended  December  31,     (1) (1) 2013 2012 Years  ended  December  31,   (1) (1) 2012 2013 Operations   Occupancy  rate  (period-­‐end)     In-­‐place  rent  per  square  foot  (euros)   Operating  results   Investment  properties  revenue     Net  rental  income       Net  rental  income  –  Initial  Properties     Net  rental  income  –  Acquisition  Properties   Funds  from  operations  (“FFO”)(2)   Adjusted  funds  from  operations  (“AFFO”)(3)   Net  rental  income  –  Acquisition  Properties  (Pro  forma       estimate)(4)   €   $   86.4%   8.46     €   83.2%   6.25     $   62,528   41,872   20,033   21,839   24,235   22,259    $   35,926   22,057   19,262   2,795   12,348   11,887    $   220,220   144,853   79,126   65,727   84,422   78,007   138,661   85,439   78,646   6,793   48,320   46,164   90,000   18,000   Distributions   Declared  distributions  and  interest  on  Exchangeable  Notes   Distributions  paid  and  payable  in  cash  (including  interest       on  Exchangeable  Notes)(5)   $   22,005    $   12,953    $   80,156    $   46,064   18,249   11,888   69,205   44,095   Financing   Weighted  average  interest  rate  (period-­‐end)   Interest  coverage  ratio  ("ICR")(6)   Per  unit  amounts   Basic:(7)   FFO(2)   AFFO(3)   Distribution  rate   Basic  (excluding  impact  of  undeployed  cash):   FFO(2)   AFFO(3)   3.37%   3.41  times   3.98%   3.23  times   3.37%   3.40  times   3.98%   3.03  times   $     $   0.22   0.20   0.20   0.24   0.22    $   0.19   0.19   0.20   0.24   0.24    $   0.85   0.79   0.80   0.94   0.88   0.84   0.80   0.80   0.98   0.94   Weighted  average  number  of  units  outstanding   57,379,400   FFO,  AFFO  and  weighted  average  interest  rate  are  key  measures  of  performance  used  by  real  estate  operating  companies;  however,  they  are  not  defined  under  International  Financial   Reporting  Standards  (“IFRS”),  do  not  have  standard  meanings  and  may  not  be  comparable  with  other  industries  or  income  trusts.   (1) Results  from  operations  were  converted  into  Canadian  dollars  from  euros  using  the  average  exchange  rates  found  on  page  24.   (2) FFO  –  The  reconciliation  of  FFO  to  net  income  can  be  found  on  page  25.   (3) AFFO  –  The  reconciliation  of  AFFO  to  FFO  and  net  income  can  be  found  on  page  25.  The  reconciliation  to  operating  cash  flows  can  be  found  on  page  27.   (4) Pro  forma  estimate  assumes  that  the  acquisitions  were  effective  as  at  January  1  of  the  respective  periods.   (5) Includes  interest  on  Exchangeable  Notes  which  were  fully  exchanged  in  April  and  September  2012.   (6) Interest  coverage  ratio  –  The  calculation  of  ICR  reconciled  to  IFRS  measures  can  be  found  on  page  29.   (7) A  description  of  the  determination  of  basic  and  diluted  amounts  per  unit  can  be  found  on  page  25. 109,482,435   99,335,779   64,064,093   Dundee  International  2013  Annual  Report    |    1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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”,   the   “REIT”   or   the   “Trust”)   should   be   read   in   conjunction   with   the   audited   consolidated   financial  statements  of  the  Trust  for  the  year  ended  December  31,  2013.     The  Trust’s  basis  of  financial  reporting  is  International  Financial  Reporting  Standards  (“IFRS”).     This   management’s   discussion   and   analysis   has   been   dated   as   at   February   26,   2014,   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;     • “GRI”,  meaning  gross  rental  income;   • “Initial  Properties”,  meaning  the  income-­‐producing  properties  we  acquired  on  August  3,  2011;     • “Acquisition  Properties”,  meaning  the  income-­‐producing  properties  acquired  subsequent  to  the  Trust’s  initial  public  offering   on  August  3,  2011;  and   • “Units”,  meaning  the  Units  of  the  Trust.     Certain  information  has  been  obtained  from  CB  Richard  Ellis  Germany  (“CBRE”),  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.   When  we  use  the  terms  such  as  “we”,  “us”  and  “our”,  we  are  referring  to  the  REIT  and  its  subsidiaries.   When  we  refer  to  Deutsche  Post  as  being  the  lessee  or  the  tenant  of  the  Initial  Properties,  we  are  referring  to  Deutsche  Post   Immobilien  GmbH  (“DPI”),  which  is  a  wholly  owned  subsidiary  of  Deutsche  Post.  Deutsche  Post  has  provided  a  letter  of  support   with  respect  to  DPI  and  its  ability  to  carry  out  its  obligations  under  leases  for  the  Initial  Properties.   In  addition,  certain  disclosure  incorporated  by  reference  into  this  report  includes  information  regarding  our  largest  tenants  that   has  been  obtained  from  publicly  available  information.  We  have  not  independently  verified  any  such  information.   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  and  other  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;  the  Trust’s  continued  exemption  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  securities  regulators.   All  forward-­‐looking  information  is  as  of  February  26,  2014,  except  where  otherwise  noted.  Dundee  International  REIT  does  not   undertake  to  update  any  such  forward-­‐looking  information  whether  as  a  result  of  new  information,  future  events  or  otherwise.   Dundee  International  2013  Annual  Report    |    2   Additional  information  about  these  assumptions  and  risks  and  uncertainties  is  contained  in  our  filings  with  securities  regulators.   These  filings  are  also  available  on  our  web  site  at  www.dundeeinternational.com.   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  DREAM   Asset   Management   Corporation   (“DAM”),   formerly   called   Dundee   Realty   Corporation   or   “DRC”,   a   subsidiary   of   DREAM   Unlimited  Corp.  (TSX:  DRM),  which  is  our  asset  manager.  Our  Units  are  listed  on  the  Toronto  Stock  Exchange  under  the  trading   symbol  DI.UN.   As  at  December  31,  2013,  our  portfolio  consisted  of  296  properties,  comprising  approximately  15.7  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  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.     Distributions     We   currently   pay   monthly   distributions   to   unitholders   of   6.667   cents   per   unit,   or   80   cents   per   unit   on   an   annual   basis.   At   December  31,  2013,  approximately  17.4%  of  our  total  Units  were  enrolled  in  the  Distribution  Reinvestment  and  Unit  Purchase   Plan  (“DRIP”).     Annualized  distribution  rate   Monthly  distribution  rate   Period-­‐end  closing  unit  price   Annualized  distribution  yield  on   $   $   $   December  31,     2012     0.80     $   0.0667     $   10.93     $   2013     0.80     $   0.0667     $   8.42     $   September  30,     2012     0.80     $   0.0667     $   11.00     $   2013     0.80     $   0.0667     $   9.41     $   2013     0.80     $   0.0667     $   9.85     $   June  30,     2012     0.80     $   0.0667     $   9.94     $   2013     0.80     $   0.0667     $   10.64     $   March  31,   2012   0.80   0.0667   10.11   closing  unit  price  (%)   9.50%     7.32%     8.50%     7.27%     8.12%     8.05%     7.52%     7.91%   Dundee  International  2013  Annual  Report    |    3                                                                                                       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  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  Initial  Properties,  deep  market  knowledge  and  established  relationships   with   other   market   participants.   Leasing,   capital   expenditure   and   construction   initiatives   are   either   internally   managed   or   overseen   by   us,   while   property   management   services,   including   general   maintenance,   rent   collection   and   administration   of   operating  expenses  and  tenant  leases,  are  carried  out  by  third-­‐party  service  providers.   Diversifying  our  portfolio  to  mitigate  risk       We  continuously  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.  Our  profile  in  Europe,  our  relationships,  our  management  team  in  Germany  and   Luxembourg,   and   the   expertise   of   our   Board   members   and   senior   management   team   are   providing   us   with   opportunities   to   take  advantage  of  real  estate  transactions  available  in  Germany  to  date.   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  within  our  portfolio  of  properties.  The  execution  of  this  strategy  will  be  consistently  reviewed   and  will  also  include  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   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   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  debenture  holders.   OUR  ASSETS   Throughout  this  document,  we  make  reference  to  the  following  two  asset  categories:   Initial  Properties   As  at  December  31,  2013,  this  category  included  272  national  and  regional  administration  offices,  mixed  use  retail,  banking  and   distribution  properties  and  regional  logistics  headquarters  of  Deutsche  Post.  The  properties  are  generally  strategically  located   near  central  train  stations  and  main  retail  areas  and  are  easily  accessible  by  public  transportation.   Acquisition  Properties     As   at   December   31,   2013,   this   category   included   24   office   properties   acquired   in   2012   and   2013.   These   properties   are   high-­‐ quality  office  buildings  located  in  Germany’s  largest  office  markets  and  are  generally  newer  or  recently  refurbished  buildings.     Dundee  International  2013  Annual  Report    |    4       The  majority  of  our  portfolio  is  concentrated  in  Germany’s  largest  office  markets:     City   Berlin   Cologne   Düsseldorf   Frankfurt   Hamburg   Hannover   Munich   Nuremberg   Stuttgart   Other   Total   Total  GLA  (sq.  ft.)    674,362    783,967    1,815,847    1,205,885    1,291,504    959,452    633,304    640,567    729,182    6,971,355    15,705,425   Total  GLA  (%)   4   5   12   8   8   6   4   4   5   44   100   Total  GRI  (%)   5   6   15   10   13   4   8   5   5   29   100   TENANTS   Through  an  active  acquisitions  and  dispositions  program  that  commenced  in  2012,  the  Trust  continued  with  the  diversification   of  its  tenant  base.  The  table  below  highlights  the  diversification  away  from  the  single-­‐tenant  nature  of  the  initial  portfolio.  At   the  end  of  2013,  Deutsche  Post’s  GRI  was  further  reduced  to  approximately  37%  of  the  Trust’s  overall  GRI  compared  to  over   65%  at  the  end  of  2012.   Tenant  composition   Deutsche  Post     Freshfields  Bruckhaus  Deringer     ERGO  Direkt   Imtech   Google  Germany  GmbH   AIG  Europe  Limited   BNP  Paribas  Fortis  SA/NV   Freistaat  Bayern  (TU  München)   Maersk  Deutschland  A/S  &  Co.  KG   Jobcenter  Berlin  Mitte  –  Federal  Employment  Agency   Other  third-­‐party  tenants   Total   Total  annualized  GRI  (%)   37.3   3.2   3.0   2.4   2.1   2.1   2.0   1.7   1.4   1.4   43.4   100.0   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.   Through   its   acquisition   of   DHL   in   2002,   Deutsche   Post   DHL   has   become   a   global   logistics   market   leader.   It   employs   approximately  475,000  people  in  more  than  220  countries  and  territories  and  generated  revenue  of  over  €27  billion  in  the  first   six  months  of  2013  alone.(1)  As  the  only  provider  of  universal  postal  services  in  Germany,  Deutsche  Post  must  provide  certain   minimum  levels  of  service  to  German  residents.     Some  of  the  space  leased  to  Deutsche  Post  is  occupied  by  Postbank,  a  public  company  controlled  by  Deutsche  Bank  and  integral   to   its   retail   banking   business.   Postbank   offers   retail   financial   services   in   its   branches   within   Deutsche   Post’s   network,   which   generates   increased   traffic   through   the   postal   services   offered   in   those   branches.   As   at   December   31,   2013,   our   portfolio   featured  approximately  188  Postbank  branches,  allowing  for  the  delivery  of  integrated  financial  and  postal  services.  Leases  for   14  Postbank  branches  are  direct  leases  and  not  included  in  the  leases  with  Deutsche  Post.  Subsequent  to  year-­‐end,  we  entered   into  37  additional  direct  lease  contracts  with  Postbank  for  approximately  166,000  square  feet  of  space  that  Deutsche  Post  has   terminated  in  connection  with  its  2014  termination  rights.  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.     (1) As  disclosed  at  Deutsche  Post  DHL’s  web  site  at  www.dp.dhl.com   Dundee  International  2013  Annual  Report    |    5                                                                                                                                                                                                         Freshfields  Bruckhaus  Deringer  (“Freshfields”)   Freshfields  is  the  second  largest  tenant  in  our  portfolio  as  measured  by  GRI.  Freshfields  is  an  international  law  firm  with  offices   in   Europe,   Asia,   North   America   and   the   Middle   East.(2)   Freshfields   occupies   71%   of   the   space   in   our   property   located   at   Feldmühleplatz  1  +  15  and  generated  approximately  3.2%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   ERGO  Direkt  Lebensversicherungs  AG  (“ERGO”)   ERGO   is   the   third   largest   tenant   in   our   portfolio   as   measured   by   GRI.   With   approximately   48,000   employees   in   over     30  countries,  ERGO  is  one  of  the  largest  insurance  companies  in  Germany.(3)  ERGO,  which  belongs  to  the  Munich  RE  group  of   companies,   occupies   the   entire   space   in   our   property   located   at   Karl-­‐Martell-­‐Strasse   60   in   Nuremberg,   and   generated   approximately  3.0%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   Imtech   Imtech   Germany   &   Eastern   Europe   is   a   leader   in   the   energy   and   technical   building   equipment   sector   in   Germany,   Poland,   Austria,   Hungary,   Romania,   Russia   and   Switzerland.   Imtech   Germany   &   Eastern   Europe   employs   approximately   5,800   people   and  is  part  of  the  Royal  Imtech  N.V.  Group,  which  is  based  in  the  Netherlands  and  employs  approximately  29,000  people.(4)  This   tenant  occupies  the  entire  space  in  our  property  located  at  Hammer  Strasse  30–34  in  Hamburg,  which  is  Imtech’s  German  head   office,  and  contributed  approximately  2.4%  to  the  REIT’s  overall  GRI  as  at  December  31,  2013.     Google  Germany  GmbH  (“Google”)   Google   is   an   American   multinational   corporation   specializing   in   internet-­‐related   services   and   products   and   employs   over     30,000  people  worldwide.(5)  Google  Hamburg  is  the  company’s  commercial  headquarters  for  Germany,  Austria,  Switzerland  and   the   Nordics   and   occupies   approximately   59%   of   the   GLA   in   ABC   Bogen,   our   property   located   in   the   heart   of   Hamburg   at     ABC  Strasse  19.  Google  generated  approximately  2.2%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   AIG  Europe  Limited  (“AIG”)   AIG   Europe   Limited   is   a   part   of   AIG,   a   leading   international   insurance   company   focused   on   property   casualty   insurance,   life   insurance  and  retirement  services,  mortgage  insurance  and  aircraft  leasing.  AIG  has  clients  in  over  130  countries  and  employs   approximately   63,000   people.(6)   AIG   occupies   approximately   60%   of   the   space   in   Werfthaus,   our   property   located   at   Speicherstrasse  55  in  Frankfurt,  and  generated  approximately  2.1%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.     BNP  Paribas  Fortis     BNP   Paribas   Fortis   is   a   financial   services   provider,   offering   services   to   private   and   professional   clients,   corporate   clients   and   public  entities  through  a  number  of  networks.  The  company  is  owned  approximately  75%  by  the  BNP  Paribas  Group  and  25%  by   the  Belgian  State.(7)  BNP  Paribas  Fortis  occupies  approximately  55%  of  the  space  in  Cäcilienkloster  in  Cologne  as  well  as  8%  in     Z-­‐UP  in  Stuttgart  and  generated  approximately  2.0%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   State  of  Bavaria/Technische  Universität  München       The  Technische  Universität  München  (“TUM”)  is  one  of  Europe’s  top  universities.  TUM  comprises  13  faculties  which  focus  on   engineering,  medicine,  natural  and  life  sciences,  business  and  education.  Approximately  32,500  students  are  currently  enrolled   at  TUM.(8)  TUM’s  School  of  Education  occupies  approximately  48%  of  the  GLA  in  our  property  located  at  Marsstrasse  20–22  in   the  city  centre  of  Munich.  TUM  generated  approximately  1.7%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.     Maersk  Deutschland  A/S  &  Co.  KG  (“Maersk”)     Maersk  is  the  world’s  largest  ocean  carrier  and  operates  mainly  in  two  industries:  shipping  and  oil  and  gas.  Through  its  various   divisions,   the   group   employs   approximately   121,000   people   and   generated   over   US$59   billion   in   revenues   in   2012.(9)   Maersk   occupies   approximately   70%   of   the   GLA   in   Humboldt   House,   our   property   located   at   Am   Sandtorkai   37   in   Hamburg.   Maersk   generated  approximately  1.5%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   (2) As  disclosed  at  Freshfields’  web  site  at  www.freshfields.com   (3) As  disclosed  at  ERGO’s  web  site  at  www.ergo.com   (4) As  disclosed  at  Imtech’s  web  site  at  www.imtech.de   (5) As  disclosed  at  Google’s  web  site  at  www.google.com  and  www.google.ca/about/jobs/locations/hamburg   (6) As  disclosed  at  AIG’s  web  site  at  www.aig.com   (7) As  disclosed  at  BNP  Paribas’  web  site  at  www.bnpparibas.com   (8) As  disclosed  at  Technische  Universität  München’s  web  site  at  www.tum.de/en/homepage   (9) As  disclosed  at  Maersk’s  web  site  at  www.maersk.com   Dundee  International  2013  Annual  Report    |    6       Jobcenter  Berlin  Mitte     Jobcenter  Berlin  Mitte  is  part  of  the  Federal  Employment  Agency,  the  largest  provider  of  labour  market  services  in  Germany.   The  Federal  Employment  Agency  has  a  network  of  more  than  700  agencies  and  branch  offices  nationwide.(10)  Jobcenter  Berlin   Mitte  occupies  approximately  51%  of  the  GLA  in  Löwenkontor,  our  property  located  at  Beuthstrasse  6–8  and  Seydelstrasse  2–5   in  Berlin.  Jobcenter  Berlin  Mitte  generated  approximately  1.4%  of  the  REIT’s  overall  GRI  as  at  December  31,  2013.   (10) As  disclosed  at  Jobcenter  Berlin  Mitte’s  web  site  at  www.arbeitsagentur.de   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  key  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  continues  to  be  the  main  driving  force  of  Europe.  Germany’s  labour  market  is  very  robust  and  its   registered  unemployment  rate  at  6.7%(1)  at  the  end  of  December  2013  remains  near  all-­‐time  lows  since  Germany’s  reunification   in   1989.   In   addition,   the   Ifo   Business   Climate   Index   improved   for   the   third   month   in   a   row   in   January   2014   and   reached   its   highest  level  since  June  of  2012,  an  indicator  of  satisfaction  with  the  current  business  situation  in  Germany.(2)   Economic  impact  on  the  German  real  estate  sector     Germany  is  one  of  the  most  highly  sought-­‐after  real  estate  investment  markets  in  Europe,  benefiting  from  strong  domestic  and   international   investor   demand.   A   positive   economic   outlook   and   a   strong   labour   market   are   key   factors   for   the   continued   demand  in  this  market.  In  2013,  the  total  investment  volume  for  commercial  real  estate  reached  over  €30  billion.     The  office  sector  remains  the  dominant  asset  class  for  investments,  with  over  50%  of  all  transactions  during  2013  taking  place  in   this  category.  In  total,  over  €15  billion(3)  was  invested  in  German  office  properties  in  2013.  The  five  largest  real  estate  markets  in   Germany   continue   to   account   for   the   majority   of   the   overall   investment   volume,   with   more   than   half   of   all   the   transactions   taking  place  in  Berlin,  Düsseldorf,  Frankfurt,  Hamburg  and  Munich.(3)   The  underlying  fundamentals  in  the  office  sector  remain  strong.  The  stability  in  the  office  market  is  supported  by  a  relatively   moderate  degree  of  new  space  coming  to  market  and  take-­‐up  for  the  redevelopment  of  vacant  office  space  for  alternative  use.   Overall   office   vacancies   in   the   seven   largest   markets   declined   year-­‐over-­‐year   from   8.8%   at   December   31,   2012   to   8.3%   as   at   December  31,  2013.(4)   (1) Destatis,  Germany’s  Federal  Statistical  Office   (2) Ifo  Business  Survey  for  January  2014   (3) CBRE  MarketView,  Germany  Investment  Quarterly  Q4  2013   (4) Jones  Lang  LaSalle   Dundee  International  2013  Annual  Report    |    7         FINANCIAL  OVERVIEW   Our   results   for   the   fourth   quarter   were   solid   with   FFO   and   AFFO   increasing   to   $24.2   million   and   $22.3   million,   respectively,   reflecting  the  impact  from  positive  absorption  of  space  as  well  as  completed  acquisitions.  On  a  per  unit  basis,  FFO  and  AFFO   were   22   cents   and   20   cents,   respectively.   Over   the   course   of   the   quarter,   we   had   on   average   approximately   $79   million   of   excess   undeployed   cash.   Excluding   the   impact   of   undeployed   cash,   FFO   and   AFFO   per   unit   would   have   been   24   cents   and   22  cents,  respectively.   During  Q4  2013,  we  continued  to  make  progress  in  transforming  our  portfolio.  The  Trust’s  focus  on  asset  management  through   its   local   operations   team   in   Europe   is   highlighted   by   continued   occupancy   improvements   during   the   quarter.   We   recorded   positive   absorption   of   approximately   10,800   square   feet   in   Q4,   increasing   our   year-­‐to-­‐date   total   absorption   to   approximately   180,100  square  feet.  Overall  occupancy  increased  to  86.4%  at  December  31,  2013  from  83.2%  at  the  beginning  of  the  year,  due   to  positive  absorption  in  our  Initial  Properties  as  well  as  higher  in-­‐place  occupancy  rates  in  our  Acquisition  Properties.     Year-­‐over-­‐year,  in-­‐place  rents  increased  from  $8.20  (€6.25)  per  square  foot  to  $12.40  (€8.46)  in  Q4  2013,  largely  due  to  high-­‐ quality  acquisitions.  At  $12.68  per  square  foot,  average  market  rents  in  our  portfolio  remain  approximately  2.3%  above  in-­‐place   rents.     On  a  year-­‐over-­‐year  basis,  our  FFO  and  AFFO  on  a  per  unit  basis  were  85  cents  and  79  cents,  respectively,  for  2013,  compared  to   84  cents  and  80  cents  for  2012.  The  FFO  and  AFFO  numbers,  which  are  comparable  to  the  prior  year,  reflect  the  impact  from   dilution  and  the  increase  in  the  number  of  units  outstanding.  The  full  impact  from  the  completed  2013  acquisitions  will  not  be   reflected  until  2014.     The   Trust   continued   to   be   active   on   the   financing   front,   leading   to   further   decreases   in   the   Trust’s   average   interest   rate   to   3.37%   at   the   end   of   2013,   from   3.98%   at   the   end   of   2012.   The   average   term   to   maturity   of   the   Trust’s   debt   increased   to   4.6  years  at  December  31,  2013  from  4.4  years  at  December  31,  2012,  and  its  interest  coverage  ratio  increased  from  3.0  times   at  the  end  of  2012  to  3.4  times  at  the  end  of  2013,  mainly  reflecting  lower  interest  rates  on  new  mortgages.  Our  leverage  stood   at  54%  (net  of  cash)  at  December  31,  2013,  an  increase  from  45%  (net  of  cash)  at  the  end  of  2012.     The  increase  in  our  leverage  ratio  is  largely  due  to  new  mortgage  financings  placed  on  acquisitions  completed  in  2013  at  higher   debt-­‐to-­‐book  value  than  our  portfolio  at  the  beginning  of  the  year.  We  operate  in  the  range  of  50%  to  60%  debt-­‐to-­‐book  value   and  target  55%  (net  of  cash).     On  an  overall  basis,  the  Trust  performed  in  line  with  management’s  expectations  for  the  quarter. OUTLOOK   With  the  completion  of  the  acquisition  of  Feldmühleplatz  1  +  15  in  Q4,  our  acquisitions  for  2013  exceeded  $1  billion,  making  the   Trust   one   of   the   most   active   investors   in   office   properties   in   Germany   in   2013.   Since   our   IPO,   we   have   acquired   high-­‐quality   properties  totalling  $1.3  billion.  With  these  acquisitions,  we  have  made  significant  improvements  in  the  quality  of  our  cash  flow   by  focusing  on  newer  properties  with  a  broader  tenant  mix  in  the  seven  largest  office  markets  (“Big  7”)  in  Germany.   On  average,  the  properties  we  acquired  since  the  IPO  are  12  years  old,  have  a  weighted  average  lease  term  of  6.3  years  and  an   average  occupancy  rate  of  95%  and  account  for  approximately  53%  of  our  annual  GRI.  Further,  we  now  have  two-­‐thirds  of  our   asset  value  and  60%  of  our  GRI  in  the  Big  7  office  markets  in  Germany.   We   are   pleased   with   the   outcome   of   our   discussions   with   Deutsche   Post   in   2013.   Together   with   Postbank,   they   renewed   approximately  50%  of  the  space  and  53%  of  the  GRI  they  were  eligible  to  terminate  for  a  lease  term  of  ten  years  at  rates  that   are   approximately   19%   higher   than   the   current   rates.   Our   leasing   team   in   Germany   is   focused   on   leasing   the   balance   of   the   terminated  space.     We  enter  2014  with  strong  leasing  momentum  as  the  economic  metrics  in  Germany  remain  positive.  Our  focus  will  continue  to   be  on  tenant  retention  as  well  as  new  leasing  to  enhance  value.  We  will  continue  to  explore  redevelopment  and  intensification   opportunities   within   our   Initial   Properties.   At   the   same   time,   we   will   be   opportunistic   in   disposing   of   non-­‐core   assets   and   recycling  the  capital  to  further  enhance  the  quality  of  our  cash  flows.     Dundee  International  2013  Annual  Report    |    8         SECTION  II  –  EXECUTING  THE  STRATEGY   OUR  OPERATIONS     Occupancy   Overall   occupancy   rates   increased   from   83.2%   at   the   end   of   2012   to   86.4%   at   the   end   of   2013.   On   average,   Acquisition   Properties   have   higher   occupancy   rates   compared   to   our   Initial   Properties.   Due   to   our   leasing   efforts   throughout   2013,   the   occupancy  in  our  Initial  Properties  increased  from  82.1%  at  the  end  of  2012  to  83.2%  at  the  end  of  2013.         The   table   below   details   the   percentage   of   occupied   and   committed   space   for   the   total   portfolio   as   well   as   the   comparative   portfolio.  The  comparative  portfolio  comprises  properties  owned  by  the  Trust  at  December  31,  2012  and  December  31,  2013,   and  excludes  properties  that  were  acquired  or  sold  during  2013.   (percent)   Initial  Properties   Acquisition  Properties   Total   December  31,   2013(1)   83.2         96.3   86.4   Total  portfolio     December  31,   2012(1)   82.1       94.5           83.2           December  31,     2013(1)   Comparative  portfolio     December  31,     2012(1)   83.2   96.7     84.4   82.4   94.5   83.4   (1)  Space  for  which  the  Trust  receives  head  lease  payments  is  reflected  as  vacant  space.   Vacancy  schedule   The  tables  below  highlight  our  leasing  activity  for  the  three-­‐month  and  twelve-­‐month  periods  ended  December  31,  2013.  During   2013,   our   overall   space   available   for   lease   decreased   by   117,397   square   feet   to   2,128,127   square   feet.   The   Trust   recorded   positive   absorption   of   10,796   square   feet   during   the   quarter,   increasing   absorption   for   the   full   year   2013   to   180,128   square   feet.  The  primary  drivers  of  the  positive  absorption  results  were  our  continued  focus  on  tenant  retention  as  well  as  leasing.     For  the  three  months  ended  December  31,  2013   (in  square  feet)   Available  for  lease  –  October  1,  2013   Change  in  vacancy  due  to  dispositions   Remeasurements   Subtotal  –  Available  for  lease   Expiries   Early  termination  and  bankruptcies   New  leases   Renewals   Future  leases   Available  for  lease  –  December  31,  2013   Initial  Properties       Acquisition  Properties   1,984,395   (5,562)   3,250   1,982,083   65,792   2,489   (30,474)   (15,584)   (20,121)   1,984,185     156,449   -­‐   391   156,840   102,962   -­‐   (4,811)   (100,330)   (10,719)   143,942     Total   2,140,844   (5,562)   3,641   2,138,923   168,754   2,489   (35,285)   (115,914)   (30,840)   2,128,127   Dundee  International  2013  Annual  Report    |    9                                                                                                                                                                                         (in  square  feet)   Available  for  lease  –  January  1,  2013   Change  in  vacancy  due  to  acquisitions   Change  in  vacancy  due  to  dispositions   Remeasurements   Subtotal  –  Available  for  lease   Expiries   Early  termination  and  bankruptcies   New  leases   Renewals   Future  leases   Available  for  lease  –  December  31,  2013   For  the  year  ended  December  31,  2013   Initial  Properties       Acquisition  Properties    2,182,694   -­‐   (90,657)   16,021   2,108,058   354,602   27,030   (131,852)   (195,097)   (178,556)   1,984,185      62,830   148,771   -­‐   (11,404)   200,197   170,042   5,454   (33,312)   (149,784)   (48,655)   143,942     Total    2,245,524   148,771   (90,657)   4,617   2,308,255   524,644   32,484   (165,164)   (344,881)   (227,211)   2,128,127   In-­‐place  rental  rates   The  following  table  provides  a  comparison  between  in-­‐place  rents  and  market  rents  in  our  portfolio  as  at  December  31,  2013.   Market  rents  are  management’s  estimates  of  rental  rates  that  could  be  achieved  for  space  in  our  properties.  In-­‐place  rents  have   increased  from  approximately  $8.20  per  square  foot/year  at  the  end  of  2012  to  approximately  $12.40  at  December  31,  2013,   largely  due  to  acquisitions  completed  in  2013.  The  majority  of  the  leases  in  the  Acquisition  Properties  include  rent  adjustment   clauses   linked   to   an   increase   in   the   consumer   price   index   (“CPI”).   Overall,   average   market   rents   for   our   portfolio   remain   approximately  2.3%  above  in-­‐place  rents  at  December  31,  2013.    The  2.3%  difference  between  in-­‐place  rents  and  market  rents   at  December  31,  2013  is  lower  than  the  3.4%  reported  in  Q3,  2013,  primarily  as  a  result  of  the  acquisition  of  Feldmühleplatz     1  +  15  in  Q4.  This  particular  property  has  above-­‐market  rents,  which  were  taken  into  consideration  in  arriving  at  the  purchase   price  at  the  time  of  the  acquisition.   For  acquisitions  completed  in  2012  and  2013,  where  in-­‐place  rents  exceeded  market  rents,  the  purchase  price  was  adjusted  at   the  time  of  underwriting  these  acquisitions  to  reflect  such  above-­‐market  rents.       (per  square  foot/year)   Initial  Properties  –  Deutsche  Post     Initial  Properties  –  Third  party   Total  Initial  Properties   Acquisition  Properties   Overall   In-­‐place  vs.  market  rents  at  December  31,  2013   In-­‐place  rent     $      8.17         8.08   8.15   23.59   $  12.40   Market  rent     $      8.97         9.33   9.04   22.28   $  12.68   In-­‐place  rent     €    5.57     5.51   5.56   16.10   €    8.46   Market  rent     €    6.12   6.37   6.17   15.20   €    8.65   At   December   31,   2013,   the   weighted   average   remaining   lease   term   (“WALT”)   of   all   leases   was   approximately   4.8   years.   The   WALT  of  the  Acquisition  Properties  was  6.0  years.  The  decrease  in  the  WALT  of  the  Initial  Properties  reflects  the  Deutsche  Post   termination  notices,  which  are  effective  July  1,  2014.   (years)   Initial  Properties  –  Deutsche  Post     Initial  Properties  –  Third  party   Total  Initial  Properties   Acquisition  Properties   Overall   (1)   WALT  at                 December  31,  2013   WALT  at   December  31,  2012   4.1  (1)   5.1   4.3   6.0   4.8   5.6   4.3   5.3   7.4   5.5   WALT  at  December  31,  2013  reflects  a  shortened  lease  term  for  properties  for  which  the  Trust  received  termination  notices  in  connection  with  Deutsche   Post’s  2014  termination  rights.     Dundee  International  2013  Annual  Report    |    10                                                                                                                                                                         Leasing  and  tenant  profile   Lease  rollover  profile   The  following  table  outlines  our  lease  maturity  profile  by  asset  type  as  at  December  31,  2013.     Current   vacancy   1,984,185   143,  942   2,128,127   Month-­‐to-­‐ month   345,112   16,137   361,249   2014      1,299,762     127,495    1,427,257   2015     252,025   335,590   587,615   2016     141,214     507,411     648,625   2017     192,973   389,812   582,785   2018  to   2039     7,590,211     2,379,556     9,969,767   Total   11,805,481   3,899,944   15,705,425   (in  square  feet)   Initial  Properties   Acquisition  Properties       Total     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   50%   of   the   portfolio’s   GLA   and   account   for   37%   of   the   portfolio’s  GRI.   Rent  adjustment   The  rents  under  the  Deutsche  Post  leases  are  subject  to  automatic  adjustments  (up  or  down)  in  relation  to  the  CPI  for  Germany.   If   the   consumer   price   index   for   Germany   changes   by   more   than   4.7   index   points   as   compared   to   the   index   at   the   commencement   of   the   applicable   lease   or   the   previous   rent   adjustment,   the   rent   payable   under   the   Deutsche   Post   leases   is   automatically  adjusted  by  100%  of  the  index  change  of  4.7  points,  with  effect  as  of  the  time  of  the  index  change.  Based  on  the   index  at  the  last  CPI  adjustment  date,  the  index  will  have  to  reach  107.6  index  points  before  the  next  adjustment  will  become   effective.  CPI  numbers  from  December  2013  indicate  that  the  CPI  has  reached  106.5  index  points.   Termination  rights  and  head  lease     In  general,  the  Deutsche  Post  leases  have  a  fixed  term  of  ten  years,  expiring  on  June  30,  2018.  Certain  leases  entitle  Deutsche   Post  to  terminate  space  in  2012,  2014  and  2016,  subject  to  certain  limitations  and  requirements.  The  rights  of  Deutsche  Post  to   terminate  a  Deutsche  Post  lease  is  limited  by  various  tests  which  apply  collectively  to  the  Deutsche  Post  leases  and  the  leases  in   respect   of   the   remaining   properties   forming   the   portfolio   that   the   vendor   acquired   from   Deutsche   Post   in   July   2008   (the   “Caroline  DP  Leases”),  considered  as  a  whole.  Deutsche  Post  exercised  their  termination  rights  with  respect  to  2012  and  2014.   Deutsche  Post  may  terminate  Deutsche  Post  leases  and  Caroline  DP  Leases  aggregating  no  more  than  10%  of  the  total  annual   Reference  Rent  payable  under  all  of  the  Deutsche  Post  leases  and  Caroline  DP  Leases  on  June  30,  2016.  The  “Reference  Rent”   for  a  lease  is  an  amount  set  out  in  a  specified  notarial  deed  and  may  differ  from  the  actual  rent  payable  under  the  lease.  To  the   extent  that  Deutsche  Post  does  not  exercise  all  of  its  available  early  termination  rights  with  respect  to  any  particular  effective   termination   date,   the   unused   portion   may   be   carried   forward,   provided   that   Deutsche   Post   cannot   terminate   Deutsche   Post   leases  and  Caroline  DP  Leases  aggregating  more  than  20%  of  the  total  Reference  Rent  of  all  Deutsche  Post  leases  and  Caroline   DP  Leases,  considered  as  a  whole,  during  any  lease  year.     Deutsche  Post’s  2014  termination  rights  comprised  approximately  1.9  million  square  feet,  or  8.8%  of  the  REIT’s  current  GRI.  The   tenant  exercised  such  right  in  respect  of  1.1  million  square  feet,  or  approximately  5.1%  of  the  REIT’s  current  GRI  and  committed   to  remain  in  approximately  0.8  million  square  feet  of  space.  Of  this  space,  leases  for  over  0.6  million  square  feet  were  amended   by   extending   the   term   for   five   years   commencing   July   1,   2014,   and   the   termination   rights   were   waived   with   respect   to   the   balance  of  the  space  of  approximately  0.2  million  square  feet.  As  part  of  the  lease  extensions,  we  agreed  to  provide  Deutsche   Post   with   an   annual   rent   reduction   of   €1.7   million   per   year,   effective   as   of   July   1,   2014.   Based   on   recent   inflation   rates   in   Germany,   we   anticipate   that   at   some   point   during   2014,   this   reduction   in   annual   rent   will   be   substantially   offset   by   CPI   rent   adjustments   provided   in   the   terms   of   the   Deutsche   Post   leases.   In   addition,   the   REIT   will   reimburse   Deutsche   Post   up   to     €1.45  million  to  be  used  to  improve  the  buildings  and  the  tenant’s  space.   Dundee  International  2013  Annual  Report    |    11                                                               OUR  RESOURCES  AND  FINANCIAL  CONDITION   Investment  properties     Balance  at  beginning  of  year   Additions     Acquisitions     Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Amortization  of  lease  incentives   Disposals   Reclassified  to  assets  held  for  sale   Fair  value  adjustments   Foreign  currency  translation   Balance  at  end  of  year   For  the  year     ended     December  31,       2013      1,182,757    $   For  the  year   ended   December  31,     2012    941,442    1,075,558    5,821    8,246    (616)    (23,943)    (21,147)    (59,223)    222,791    2,390,244    $    270,661    2,391    1,011    (17)    (7,415)    -­‐    (23,349)    (1,967)    1,182,757   $   $   The  fair  value  of  our  investment  property  portfolio  at  December  31,  2013  was  $2.4  billion.  Since  December  31,  2012,  the  value   of   our   investment   properties   increased   by   $1.2   billion.   The   largest   item   contributing   to   the   increase   in   the   value   is   the   acquisition  of  18  properties  for  $1.1  billion  (including  transaction  costs).   During  the  year  ended  December  31,  2013,  we  also  invested  $14.1  million  in  building  improvements,  lease  incentive  and  initial   direct  leasing  costs.     During  the  same  period,  we  disposed  of  15  properties  which  had  a  fair  value  of  $23.9  million  and  have  entered  into  agreements   to   dispose   of   six   more   properties,   all   considered   to   be   non-­‐core   holdings   with   a   total   fair   value   of   $21.1   million.   As   at     December  31,  2013,  these  six  properties  have  been  reclassified  as  assets  held  for  sale  on  the  balance  sheet  and  excluded  from   the  value  of  investment  properties,  as  the  REIT  had  committed  to  a  plan  for  sale  for  these  properties.     The  change  in  fair  value  of  investment  properties  comprises  of  the  following:   Increase  in  fair  value  as  a  result  of  valuation  update   Building  expenditures  capitalized  during  the  year   Leasing  expenditures  capitalized  during  the  year   Transaction  costs  capitalized  on  acquisition   Straight-­‐line  rent,  amortization  of  lease  incentives  and  other   Total     14,436     $    (5,562)      (8,246)      (59,126)      (725)      (59,223)     $   $   $   Initial     Properties     4,841     $    (5,015)      (6,543)      -­‐      (286)      (7,003)     $   Acquisition   Properties    9,595    (547)    (1,703)    (59,126)    (439)    (52,220)   The   fair   value   of   the   Initial   Properties   increased   by   $4.8   million   based   on   external   appraisals   obtained   from   an   independent   third-­‐party  appraisal  firm.  The  increase  is  mainly  attributable  to  leasing  in  these  properties.  The  Acquisition  Properties  increased   by   $9.6   million   based   on   internal   appraisals   and   reflect   a   slight   cap   rate   compression   for   these   properties.   We   incurred     $59.1  million  of  transaction  costs  relating  to  properties  acquired  during  the  year,  which  were  subsequently  written  off  under   the  fair  value  model  used  for  investment  properties.  Similarly,  we  incurred  $5.6  million  of  building  expenditures  and  $8.2  million   of  leasing  costs,  primarily  related  to  the  Initial  Properties  that  were  written  off  under  the  fair  value  model.   As  a  result  of  the  increase  in  value  of  the  euro,  the  investment  properties  increased  in  value  by  $222.8  million  in  2013.   Dundee  International  2013  Annual  Report    |    12                                                                                                                                                                                                               The  table  below  highlights  the  impact  of  our  acquisitions  and  dispositions  on  our  portfolio:     Initial  Properties   2012  Acquisitions   Comparative  properties(1)   2013  Acquisitions   Dispositions   Properties  held  for  sale   Total  portfolio   (1)  Comparative  properties  are  properties  owned  by  the  Trust  at  December  31,  2013  and  December  31,  2012.   $   $   December  31,     2013    1,006,359      304,956      1,311,315      1,100,076      -­‐      (21,147)      2,390,244     December  31,     2012    896,987      262,943      1,159,930      -­‐      22,827      -­‐      1,182,757     $   $   Change    109,372    42,013    151,385    1,100,076    (22,827)    (21,147)    1,207,487   $   $   The  REIT’s  management  is  responsible  for  determining  fair  value  measurements  included  in  the  financial  statements,  including   fair  values  of  investment  properties,  which  are  valued  on  a  highest  and  best  use  basis.  Fair  values  for  investment  properties  are   calculated  using  both  the  direct  income  capitalization  and  discounted  cash  flow  (“DCF”)  methods.  A  description  of  the  critical   accounting   judgments   relating   to   the   valuation   of   investment   properties   can   be   found   in   Note   4   to   the   audited   consolidated   financial  statements.  A  description  of  valuation  techniques  underlying  management’s  estimates  of  fair  value  and  the  valuation   processes  can  be  found  in  Note  7  to  the  audited  consolidated  financial  statements.       Acquisitions     During   2013,   we   completed   18   office   property   acquisitions   for   approximately   $1.0   billion   (excluding   transaction   costs),   comprising  2.8  million  square  feet  of  office  space.   Office  property     Hammer  Strasse  30–34,  Hamburg   Neue  Mainzer  Strasse  28  (K26),  Frankfurt   Dillwächterstrasse  5  and  Tübinger  Strasse  11,  Munich   Schlossstrasse  8a–8g,  Hamburg   ABC-­‐Strasse  19  (ABC  Bogen),  Hamburg   Moskauer  Strasse  25,  27,  Düsseldorf   Cäcilienkloster  2,  6,  8,  10,  Cologne   Vordernbergstrasse  6/Heilbronner  Strasse  35  (Z-­‐UP),  Stuttgart   Bertoldstrasse  48,  50/Sedanstrasse  7,  Freiburg   Lörracher  Strasse  16–16a,  Freiburg   Westendstrasse  160,  162/Barthstrasse  24,  26,  Munich   Am  Stadtpark  2/Bayreuther  Str.  33  (Parcside),  Nuremberg   Speicherstrasse  55  (Werfthaus),  Frankfurt   Reichskanzler-­‐Müller-­‐Strasse  21,  23,  25,  Mannheim   Löwenkontor,  Berlin   Marsstrasse  20–22,  Munich   Leitzstrasse  45  (Oasis  lll),  Stuttgart   Feldmühleplatz  1  +  15,  Düsseldorf   Total   (1)   Excludes  transaction  costs.   Acquired  GLA   (sq.  ft.)     172,300     123,300     81,900     165,200     158,400     217,200     200,900     88,600     121,100     56,000     122,200     94,600     151,800     100,500     258,000     238,700     170,000     246,000     2,766,700     Occupancy  at   acquisition  (%)   100   90     99     85     96     95     100     84     100     100     82     99     100     95     95     95     100     100   96   $   Purchase  price(1)     56,328     82,351     24,579     42,885     93,585     62,350     95,820     38,354     40,251     10,699     30,619     33,308     81,113     29,984     54,960     86,296     43,430   107,710     $   1,014,622       Date  acquired   January  31,  2013   February  15,  2013   March  2,  2013   March  12,  2013   March  12,  2013   March  12,  2013   March  12,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  14,  2013   March  14,  2013   April  30,  2013   June  28,  2013   September  30,  2013   November  29,  2013   On  February  14,  2014,  the  Trust  acquired  an  office  building,  located  at  Werner-­‐Eckert-­‐Straße  8,  10,  12  in  München,  Germany,   for  approximately  $22.1  million.   On   February   11,   2014,   the   Trust   entered   into   a   purchase   and   sale   agreement   for   a   fully   leased   multi-­‐tenant   office   property   located  in  a  desirable  location  in  Hamburg,  Germany,  for  an  approximate  purchase  price  of  €60.5  million  ($[91.1]  million).   Dundee  International  2013  Annual  Report    |    13                                                                                                       Dispositions   The   REIT   completed   the   sale   of   15   properties   in   2013,   for   an   aggregate   sales   price   of   approximately   $23.9   million,   which   represented  102%  of  their  book  value.  Part  of  the  net  proceeds  of  $14.0  million  was  used  to  reduce  our  term  loan  credit  facility.     As  at  December  31,  2013,  the  REIT  had  committed  to  a  plan  of  disposition  for  properties  and  thereby  reclassified  six  properties   from  the  Initial  Properties  with  a  total  fair  value  of  $21.1  million  as  assets  held  for  sale.       Building  improvements   Building  improvements  represent  investments  made  in  our  rental  properties  to  ensure  our  buildings  are  operating  at  an  optimal   level.  During  the  three  and  twelve  months  ended  December  31,  2013,  we  spent  $2.1  million  and  $5.8  million,  respectively,  in   building  improvements.  In  general,  building  improvements  are  non-­‐recoverable  from  the  tenants  unless  specifically  provided  for   in  the  lease  agreement.   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.     During  the  three  and  twelve  months  ended  December  31,  2013,  we  incurred  $1.8  million  and  $4.6  million,  respectively,  of  lease   incentives  and  $1.2  million  and  $3.6  million,  respectively,  of  initial  direct  leasing  costs.  Included  in  the  initial  direct  leasing  costs,   $0.7   million   and   $2.2   million   represented   internal   leasing   staff   costs   capitalized,   for   the   three   and   twelve   months   ended   December  31,  2013,  respectively.  As  at  December  31,  2013,  we  had  outstanding  leasing  cost  commitments  of  $5.8  million.     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.   As  at  December  31,  2013,  the  REIT’s  future  minimum  commitments  under  operating  leases  are  as  follows:   Less  than  1  year   1–5  years   Longer  than  5  years   Total   $   Operating  lease  payments   762   1,722   0   2,484   $   During  the  three-­‐  and  twelve-­‐month  periods  ended  December  31,  2013,  the  Trust  paid  $0.2  million  and  $0.7  million  in  minimum   lease  payments,  respectively,  which  have  been  included  in  comprehensive  income  for  the  period.   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.   As   at   December   31,   2013,   we   had   $106.3   million   of   cash   on   hand.   After   reserving   for   current   payables   and   operating   requirements,   approximately   $80   million   is   available   for   general   purposes.   Our   debt-­‐to-­‐book   value   at   December   31,   2013   is   56%.  Excluding  our  convertible  debentures,  our  debt-­‐to-­‐book  value  is  48%.     Dundee  International  2013  Annual  Report    |    14                     Financing  activities   We   finance   our   ownership   of   assets   using   equity   as   well   as   conventional   mortgage   financing,   term   debt,   floating   rate   credit   facilities  and  convertible  debentures.   Equity  issues   On   March   5,   2013,   we   completed   a   public   offering   of   23,230,000   Units,   including   an   over-­‐allotment   option,   at   a   price   of   $10.90  per  unit.     On  June  6,  2013,  we  completed  a  public  offering  of  11,700,000  Units  at  a  price  of  $10.70  per  unit.  On  June  24,  2013,  the  Trust   issued  an  additional  1,445,000  Units  at  a  price  of  $10.70  per  unit  pursuant  to  the  exercise  by  the  underwriters  of  a  portion  of   their  over-­‐allotment  option.   New  debt   During  the  year  ended  December  31,  2013,  we  obtained  the  following  new  mortgages:   Property     Mortgage   ($000s)   Mortgage   (€000s)   Face  rate   Date  of  funding   Date  of  maturity   Hammer  Strasse  30–34,  Hamburg   $   33,797   €   Neue  Mainzer  Strasse  28  (K26),  Frankfurt   Dillwächterstrasse  5  and  Tübinger  Strasse  11,  Munich   Schlossstrasse  8  and  ABC  Bogen   Moskauer  Strasse  25,  27  and  Cäcilienkloster  2,  6,  8,  10   Werfthaus  and  Reichskanzler-­‐Müller-­‐Strasse  21,  23,  25   Z-­‐UP,  Bertoldstrasse  48,  50,  Lörracher  Strasse  16,       Westendstrasse  160,  162  and  Parcside   Löwenkontor,  Berlin   Marsstrasse  20–22,  Munich   Leitzstrasse  45  (Oasis  lll),  Stuttgart   Feldmühleplatz  1  +  15,  Düsseldorf   Total   50,725   14,693   80,373   98,597   68,455   95,109     36,611     53,409   26,502   67,546    24,900    37,700    11,000    60,200    73,850    51,400    71,500    27,600    38,000    18,800    46,500   2.41%   2.92%   2.68%   2.32%   2.08%   3.32%   2.63%   2.37%   2.69%   2.73%   2.32%   January  31,  2013   January  31,  2018   February  15,  2013   December  31,  2022   March  2,  2013   February  29,  2020   March  12,  2013   March  12,  2018   March  12,  2013   March  7,  2018   March  14,  2013   March  14,  2023   March  13,  2013   March  31,  2021   April  30,  2013   March  29,  2018   August  26,  2013   June  30,  2020   November  15,  2013   October  31,  2018   December  23,  2013   November  26,  2018   $   625,817   €    461,450   On   November   15,   2013,   the   Trust   drew   down   a   mortgage   with   a   principal   balance   of   €18.8   million   ($26.5   million)   at   a   fixed   interest  rate  of  2.73%  per  annum  for  a  term  of  five  years  in  connection  with  its  acquisition  of  Oasis  III  in  Stuttgart.  The  Trust   used  cash  on  hand  at  September  30,  2013  to  close  the  acquisition.     On   November   29,   2013,   the   Trust   finalized   the   terms   of   a   mortgage   agreement   with   a   principal   balance   of   €46.5   million   ($67.5  million)   at   a   fixed   interest   rate   of   2.32%   per   annum   for   a   term   of   five   years   in   connection   with   its   acquisition   of   Feldmühleplatz  1  +  15  in  Düsseldorf.     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  operate  within  a  debt-­‐to-­‐book  value  range  of  50%  to  60%  and  target  55%  (net   of  cash).   Dundee  International  2013  Annual  Report    |    15                                                                   The  key  performance  indicators  in  the  management  of  our  debt  are:   December  31,   December  31,   2013     2012   Financing  activities   Weighted  average  interest  rate(1)   Level  of  debt  (debt-­‐to-­‐book  value,  net  of  cash,  net  of  convertible  debentures)(2)   Level  of  debt  (debt-­‐to-­‐book  value,  net  of  cash)(2)   Interest  coverage  ratio(2)   Debt-­‐to-­‐EBITDFV  (years)(2)(3)   Proportion  of  total  debt  due  in  current  year   Debt  –  average  term  to  maturity  (years)   Variable  rate  debt  as  percentage  of  total  debt   (1) Average  interest  rate  (face  rate)  is  calculated  as  the  weighted  average  interest  rate  of  all  interest  bearing  debt.   (2) Level   of   debt,   interest   coverage   ratio   and   debt-­‐to-­‐EBITDFV   are   non-­‐GAAP   measures.   Calculations   for   each   reconciled   to   IFRS   balances   can   be   found   3.37%   48%   54%   3.40  times    8.7   1.4%    4.6   5%   3.98%   33%   45%   3.03  times    8.5   0.4%    4.4   11%   commencing  on  page  29.   (3) Calculated  as  total  debt  divided  by  adjusted  EBITDFV.   The  higher  debt-­‐to-­‐book  value  ratio  at  December  31,  2013  reflects  the  increase  in  mortgages  in  2013  related  to  acquisitions,  as   well  as  a  lower  level  of  cash  on  hand  compared  to  December  31,  2012.     We  currently  use  cash  flow  performance  and  debt  level  indicators  to  assess  our  ability  to  meet  our  financing  obligations.  Our   current  interest  coverage  ratio  for  the  year  is  3.4  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.  Our  current  debt-­‐to-­‐EBITDFV  ratio  is  8.7  years   and  reflects  the  approximate  amount  of  time  to  pay  off  all  debt.     Term  loan  credit  facility(2)   Mortgage  debt(2)   Debentures(2)   Total   $   $   Variable      64,368    -­‐    -­‐    64,368     $     $   Fixed      384,604  (1)   $    825,014    150,326    1,359,944   December  31,  2013   Total   448,972   825,014   150,326   1,424,312     $     $     $   Variable     82,512    -­‐    -­‐   82,512     $     $   Fixed     344,028  (1)   $    151,862    148,428   644,318   December  31,  2012   Total    426,540    151,862    148,428    726,830     $   Percentage   100%   (1)  As  at  December  31,  2013,  86%  of  the  term  loan  credit  facility  is  subject  to  an  interest  rate  swap  in  place  until  August  3,  2016  pursuant  to  the  term  loan  credit   100%     95%     89%     11%     5%     facility  agreement  and  has  been  presented  as  fixed  rate  debt.   (2)  Balance  shown  is  net  of  deferred  financing  costs  and  mark-­‐to-­‐market  adjustments.   Amounts   recorded   as   at   December   31,   2013   for   the   Debentures   are   net   of   $5.8   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     Concurrent  with  the  closing  of  our  initial  public  offering,  we  obtained  a  term  loan  credit  facility  (the  “Facility”)  from  a  syndicate   of  German  and  French  banks  for  gross  proceeds  of  €328.5  million  ($448.4  million).  During  the  year  ended  December  31,  2013,   we   repaid   $16.8   million   (€12.1   million),   consisting   of   $14.0   million   (€10.1   million)   in   connection   with   the   disposition   of   15  properties  and  a  lump  sum  repayment  of  $2.8  million  (€2.0  million)  in  August  2013.  As  at  December  31,  2013,  the  remaining   principal  balance  on  the  term  loan  credit  facility  was  $459.8  million  (€313.7  million),  of  which  $10.1  million  (€6.9  million)  has   been  allocated  to  assets  held  for  sale.  The  initial  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  a  margin  of  200  basis  points   and  agency  fees  of  10  basis  points.  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  the  interest  rate  does  not  exceed  5%  on  that  portion.   As   at   December   31,   2013,   as   a   result   of   the   REIT’s   commitment   to   dispose   of   six   properties   from   the   Initial   Properties   and   thereby  reclassifying  those  properties  to  assets  held  for  sale,  the  related  portions  of  the  Facility  secured  by  these  six  properties,   valued  at  $10.1  million  (€6.9  million),  were  also  reclassified  as  liabilities  related  to  assets  held  for  sale.   Dundee  International  2013  Annual  Report    |    16                                                                                                                                                                     As  at  December  31,  2013,  the  weighted  average  rate  of  the  Facility  was  4.09%.  Including  financing  costs,  the  effective  interest   rate   under   the   Facility   was   4.13%.   At   December   31,   2012,   the   weighted   average   rate   was   3.91%   and   the   effective   rate     was  3.98%.     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  ratio  does  not  exceed  59%  during  the  first  three  years  the  loan  is  outstanding  and  54%  during  the  final  two   years.  As  at  December  31,  2013,  we  were  in  compliance  with  these  covenants.   Under  the  terms  of  the  Facility,  we  are  required  to  pay  additional  interest  of  1%  per  annum  beginning  on  August  3,  2013  on   €100   million   plus   a   15%   prepayment   amount,   less   any   amounts   repaid.   Mandatory   repayments   of   between   110%   and   125%   (with  the  average  being  115%)  of  the  principal  allocated  to  a  particular  Initial  Property  are  required  for  any  Initial  Property  sold   or   refinanced   by   the   Trust.   Since   the   initial   public   offering,   the   Trust   has   repaid   $20.2   million   (€14.8   million)   in   principal   payments  including  prepayment  amounts  on  various  property  dispositions.  Opportunities  to  repay  the  balance  of  €100.2  million   will  come  from  maximizing  the  leverage  on  new  acquisitions  and  from  additional  dispositions  of  non-­‐core  properties.   Revolving  credit  facility   On   October   9,   2013,   the   Trust   entered   into   an   agreement   with   a   Canadian   bank.   Under   the   agreement,   the   revolving   credit   facility   stands   at   €25   million.   The   interest   rate   on   Canadian   dollar   advances   is   prime   plus   200   basis   points   and/or   bankers’   acceptance  rates  plus  300  basis  points.  The  interest  rate  for  euro  advances  is  300  basis  points  over  the  three-­‐month  EURIBOR   rate.  The  revolving  credit  facility  has  a  term  of  two  years.     Convertible  debentures   As  at  December  31,  2013,  the  total  principal  amount  of  Debentures  outstanding  was  $161  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   $1,000   principal   amount   of   the   Debentures   is   convertible   at   any   time   by   the   holder   into   76.9231   Units,   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  Trust,  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  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   conversion   feature   of   the   Debentures   is   remeasured   in   each   reporting   period   to   fair   value,   with   changes   in   fair   value   recorded   in   comprehensive   income.   During   the   three-­‐   and   twelve-­‐month   periods   ended   December   31,   2013,   the   fair   value   attributed  to  the  conversion  feature  increased  by  $0.4  million  and  decreased  by  $3.8  million,  respectively.   The  table  below  highlights  our  debt  maturity  profile:   €   Scheduled  principal   repayments  on     non-­‐matured  debt    13,890    17,880    14,747    10,833    6,151    13,573    77,074   €   Total    13,890    32,216    309,027    72,840    344,381    214,226    986,580   €   €   2014   2015   2016   2017   2018   2019  and  thereafter   Total   €   Debt  maturities    -­‐    14,336    294,280    62,007    338,230    200,653    909,506   €   Dundee  International  2013  Annual  Report    |    17                                         Equity   The  table  below  highlights  our  outstanding  equity:     Units   Units   December  31,  2013     Unitholders’  equity   December  31,  2012   Number  of  Units    109,698,977     $   Amount    1,034,005     Number  of  Units    72,232,494     $   Amount    596,078   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.   The  Trust  has  a  Deferred  Unit  Incentive  Plan  (“DUIP”)  that  provides  for  the  grant  of  deferred  trust  units  and  income  deferred   units  to  trustees,  officers,  employees,  affiliates  and  their  service  providers,  including  DAM,  our  asset  manager.   The  following  table  summarizes  the  changes  in  our  outstanding  equity:   Total  Units  outstanding  on  December  31,  2012   Units  issued  pursuant  to  public  offerings   Units  issued  pursuant  to  the  DUIP   Units  issued  pursuant  to  the  DRIP(1)   Total  units  outstanding  on  December  31,  2013   Units  issued  pursuant  to  the  DRIP  on  January  15,  2014   Total  units  outstanding  on  January  31,  2014   (1)   Distribution  Reinvestment  and  Unit  Purchase  Plan.   Units    72,232,494    36,375,000    17,632    1,073,851    109,698,977    151,411    109,850,388   On  March  5,  2013,  the  Trust  completed  a  public  offering  of  Units  pursuant  to  which  the  Trust  issued  23,230,000  Units  at  a  price   of  $10.90  per  unit  for  total  gross  proceeds  of  $253.2  million.     On  June  6,  2013,  the  Trust  completed  a  public  offering  of  11,700,000  Units  at  a  price  of  $10.70  per  unit.  On  June  24,  2013,  the   Trust  issued  an  additional  1,445,000  Units  at  a  price  of  $10.70  per  unit  pursuant  to  the  exercise  by  the  underwriters  of  a  portion   of  their  over-­‐allotment  option.  Total  gross  proceeds  amounted  to  $140.7  million.   For  the  year  ended  December  31,  2013,  17,632  Units  were  issued  pursuant  to  the  Deferred  Unit  Incentive  Plan  (December  31,   2012  –  12,875  Units)  to  senior  management.   Distribution  policy   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.   In   order   to   manage   the   exposure   to   currency   risk   of   unitholders  and  holders  of  Debentures,  the  Trust  has  entered  into  foreign  exchange  forward  contracts.     For  the  quarter  ended  December  31,  2013,  distributions  declared  amounted  to  $21.9  million.  Of  this  amount,  $3.7  million  was   reinvested  in  additional  Units  pursuant  to  the  DRIP,  resulting  in  a  cash  payout  ratio  of  83.3%.  Distributions  declared  for  the  year   ended  December  31,  2013  were  $79.8  million.  Of  this  amount,  $10.6  million  was  reinvested  in  additional  Units  pursuant  to  the   DRIP,  resulting  in  a  cash  payout  ratio  of  86.7%.     Dundee  International  2013  Annual  Report    |    18                                       2013  distributions     Paid  in  cash  or  reinvested  in  Units   Payable  at  December  31,  2013   Total  distributions     2013  reinvestment   Reinvested  to  December  31,  2013   Reinvested  on  January  15,  2013   Total  distributions  reinvested   Distributions  paid  in  cash   Reinvestment  to  distribution  ratio   Cash  payout  ratio   Three  months  ended  December  31,  2013     Year  ended  December  31,  2013   Declared   amounts   4%  bonus   distribution    95    -­‐    95    95    51    146     $     $     $     $   $   $   $   $   $     $     $     $     $    14,596    7,314    21,910    2,388    1,273    3,661   18,249   16.7%   83.3%   Total    14,691    7,314    22,005    2,483    1,324    3,807     $     $     $     $     $   Declared   amounts   4%  bonus   distribution    372    -­‐    372    372    51    423     $     $     $     $     $     $     $     $    72,470    7,314    79,784    9,306    1,273    10,579   69,205   13.3%   86.7%   Total    72,842    7,314    80,156    9,678    1,324    11,002   We   currently   pay   monthly   distributions   to   unitholders   of   $0.06667   per   unit,   or   $0.80   per   unit   on   an   annual   basis.   At   December  31,  2013,  approximately  17.4%  of  our  total  Units  were  enrolled  in  the  DRIP.   Foreign  currency  contracts   At   December   31,   2013,   we   had   various   currency   forward   contracts   in   place   to   sell   euros   for   Canadian   dollars   for   the   next     30  months.  On  settlement  of  a  contract,  we  realize  a  gain  or  loss  on  the  difference  between  the  forward  rate  and  the  spot  rate.   We  also  mark  the  contracts  to  market  quarterly  and  recorded  an  unrealized  loss  of  $8.0  million  and  $16.0  million  for  the  three-­‐   and  twelve-­‐month  periods  ended  December  31,  2013,  respectively.  The  Trust  currently  has  foreign  exchange  forward  contracts   to   sell   €5.6   million   each   month   from   January   2014   to   June   2014,   €5.2   million   each   month   from   July   2014   to   May   2015,     €3.9   million   in   June   2015,   €2.4   million   each   month   from   July   2015   to   September   2015,   €2.1   million   each   month   from     October  2015  to  May  2016,  and  €1.8  million  in  June  2016,  at  an  average  exchange  rate  of  $1.334  per  euro.   Other   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  income  (loss)   Cash  flow  from  operating  activities   Distributions  paid  and  payable   Surplus  of  cash  flow  from  operating  activities  over  distributions   $   paid  and  payable   Shortfall  of  net  income  (loss)  over  distributions  paid  and  payable     Three  months  ended  December  31,     2012    (8,687)    16,712    12,953   2013    15,230    29,798    21,910     $     $   Years  ended  December  31,   2012   2013    10,916    22,765    52,320    85,228    46,064    79,784     $    7,888    (6,680)    3,759    (21,640)    5,444    (57,019)    6,256    (35,148)   Cash  flow  from  operations  exceeded  distributions  paid  and  payable  by  $5.4  million  for  the  year  ended  December  31,  2013,  and   distributions   paid   and   payable   exceeded   net   income   by   $57.0   million   for   the   same   period.   This   compares   to   a   surplus   of   $6.3  million  of  cash  flow  from  operations  over  distributions  paid  and  payable  and  a  shortfall  of  $35.1  million  of  net  income  over   distributions  paid  and  payable  for  the  respective  period  in  2012.     The   increase   in   cash   flow   from   operating   activities   in   2013,   both   for   the   quarter   and   the   year,   reflects   the   acquisitions   completed  in  2012  and  2013.  The  shortfall  of  net  income  for  each  period  reflects  fair  value  adjustments  to  financial  instruments   and  investment  properties.  These  adjustments  are  non-­‐cash  items  and  are  not  considered  in  our  distribution  policy.   Dundee  International  2013  Annual  Report    |    19                                                                                                                                                                                                                                                                                                                     Cash  flow  from  operating  activities  exceeded  distributions  paid  and  payable  for  the  three  months  ended  December  31,  2013  by   $7.9  million  and  distributions  paid  and  payable  exceeded  net  income  by  $6.7  million  for  the  same  period.  This  compares  to  a   surplus   of   $3.8   million   of   cash   flow   from   operations   over   distributions   paid   and   payable   for   the   three   months   ended   December  31,   2012   and   a   shortfall   of   $21.6   million   of   net   income   over   distributions   paid   and   payable   for   the   same   period   in   2012.   The   shortfall   in   net   income   for   each   period   reflects   fair   value   adjustments   to   financial   instruments   and   investment   properties.   These   non-­‐cash   items   do   not   impact   cash   flows   and   are   not   considered   in   our   distribution   policy.   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.     Asset  management  fee   On   August   3,   2011,   DAM   elected   to   receive   the   base   asset   management   fees   payable   on   the   Initial   Properties   acquired   on   August  3,  2011  by  way  of  deferred  trust  units  under  the  Asset  Management  Agreement  for  up  to  $3.5  million  per  year  for  the   next  five  years.  These  deferred  trust  units  vest  20%  annually,  commencing  on  the  fifth  anniversary  date  of  being  granted.  On   termination  of  the  Asset  Management  Agreement,  unvested  trust  units  will  vest  immediately.   During  the  three-­‐  and  twelve-­‐month  periods  ended  December  31,  2013,  asset  management  expenses  pertaining  to  the  Initial   Properties  were  $0.5  million  and  $2.1  million,  respectively.  A  total  of  83,665  and  373,160  deferred  units  were  granted  during   the   respective   periods   as   compensation   for   the   fees.   An   additional   34,031   deferred   units   were   granted   on   January   1,   2014   pertaining  to  the  asset  management  fee  for  the  month  of  December  2013.  As  at  January  1,  2014,  912,078  unvested  deferred   and  income  deferred  units  were  outstanding  with  respect  to  the  Asset  Management  Agreement.  The  asset  management  fees   were  recorded  based  on  the  fair  value  of  the  deferred  units  issued,  with  an  appropriate  discount  applied  to  reflect  the  restricted   period  of  exercise.   In  addition,  the  Trust  paid  an  asset  management  fee  of  $1.1  million  and  $3.3  million,  respectively,  for  the  three-­‐  and  twelve-­‐ month  periods  ended  December  31,  2013,  for  properties  acquired  since  the  acquisition  of  our  Initial  Properties.  It  further  paid  a   financing  fee  of  $0.3  million  and  $0.5  million  related  to  new  equity  offerings  in  each  of  the  three-­‐  and  twelve-­‐month  periods,   and  acquisition  fees  of  $0.9  million  and  $5.9  million  related  to  properties  acquired  during  the  three-­‐  and  twelve-­‐month  periods,   respectively.   Dundee  International  2013  Annual  Report    |    20   OUR  RESULTS  OF  OPERATIONS   Three  months  ended  December  31,   2012(1)    35,926    13,869    22,057   2013(1)    62,528    20,656    41,872     $   Years  ended  December  31,   2012(1)    138,661    53,222    85,439   2013(1)    220,220    75,367    144,853     $   $     $   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   Depreciation  and  amortization   Loss  on  sale  of  investment  properties   Share  of  income  from  equity  accounted  investment   Interest  and  other  income   Interest  expense   Fair  value  adjustments  to  financial  instruments   Income  (loss)  before  income  taxes   Income  taxes   Current  income  taxes  (recovery)   Deferred  income  taxes  (recovery)   Provision  for  (recovery)  of  income  taxes   Net  income  (loss)     Foreign  currency  translation  adjustment   $   Comprehensive  income   (1)   Results  from  operations  were  converted  into  Canadian  dollars  from  euros  using  the  following  average  exchange  rates:  the  three-­‐month  and  twelve-­‐month    (3,173)    (12,226)    (59,223)    (88)    (1,142)    28    1,547    (38,506)    (11,450)    20,620    (409)    (3,332)    212    (16)    (550)    10    352    (11,288)    (9,460)    17,391    (1,019)    (1,638)    (16,870)    (7)    (258)    11    289    (6,100)    (6,736)    (10,271)    689    (2,834)    (2,145)    22,765    109,133    131,898    84    (1,668)    (1,584)    (8,687)      20,758      12,071      142    2,019    2,161    15,230      57,950      73,180      (4,201)    (6,579)    (23,349)    (53)    (320)    21    503    (27,379)    (15,214)    8,868    226    (2,274)    (2,048)    10,916    (4,388)    6,528     $   $   $   periods  ended  December  31,  2013  were  converted  at  $1.4296:€1  and  $1.3688:€1,  respectively;  for  2012,  the  three-­‐month  and  twelve-­‐month  periods  ended   December  31,  2012  were  converted  at  $1.2861:€1  and  $1.285:€1,  respectively.   Statement  of  comprehensive  income  results   Net  rental  income   Initial  Properties   Acquisition  Properties   Net  rental  income   $   $   Three  months  ended  December  31,   2012   19,262   2,795   22,057   2013   20,033   21,839   41,872     $     $     $     $   Years  ended  December  31,   2013   2012   78,646   79,126   6,793   65,727   85,439   144,853     $     $   For  the  three  months  ended  December  31,  2013,  net  rental  income  was  $41.9  million,  representing  an  increase  of  $19.8  million   compared   to   the   same   quarter   in   2012.   Excluding   the   $4.2   million   positive   impact   of   a   stronger   euro,   net   rental   income   increased  by  $15.6  million  compared  to  the  same  quarter  last  year,  of  which  $16.9  million  is  attributable  to  properties  acquired   since   October   2012,   partially   offset   by   a   $1.2   million   decrease   related   to   property   dispositions   pertaining   to   the   Initial   Properties.   For   the   year   ended   December   31,   2013,   net   rental   income   was   $144.9   million,   representing   an   increase   of   $59.4  million  compared  to  2012.  Excluding  the  $8.9  million  positive  impact  of  a  stronger  euro,  net  rental  income  increased  by   $50.5  million   compared   to   the   same   quarter   last   year,   of   which   $54.9   million   is   attributable   to   properties   acquired   since   January  2012,  partially  offset  by  a  $4.4  million  decrease  related  to  property  dispositions  pertaining  to  the  Initial  Properties.   The  table  below  summarizes  our  revenue  and  operating  expenses  in  euros:   Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income   Three  months  ended  December  31,     2012    27,934      10,784      17,150     2013    43,738     €    14,449      29,289     €   €   €   €   €   Dundee  International  2013  Annual  Report    |    21   Years  ended  December  31,   2012   2013    107,907    160,885     €    41,418    66,489    105,824     €    55,061                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Portfolio  management     Our  portfolio  management  team  comprises  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.     Portfolio   management   expense   was   $0.4  million   for   the   three-­‐month   period   ended   December   31,   2013,   a   decrease   of   approximately   $0.6  million   compared   to   the   same   period   in   2012.   For   the   year   ended   December   31,   2013,   an   expense   of   $3.2  million  was  recorded,  representing  a  decrease  of  approximately  $1.0  million  compared  to  2012.  A  total  of  $1.1  million  and   $2.6  million   of   leasing   staff   costs   incurred   during   the   three-­‐month   and   twelve-­‐month   periods   ended   December   31,   2013,   respectively,   have   been   capitalized   as   initial   leasing   costs   of   the   respective   properties   to   be   consistent   with   our   accounting   policies   to   capitalize   internal   leasing   costs.   No   leasing   staff   costs   were   capitalized   during   the   three-­‐month   and   twelve-­‐month   periods  in  2012  as  the  REIT  mostly  engaged  external  brokers  for  new  leasing.  Excluding  the  impact  of  leasing  costs  capitalized  in   2013,  portfolio  management  expense  increased  by  $0.5  million  and  $1.6  million,  reflecting  increases  in  asset  management  and   leasing  staff  necessary  to  support  the  growth  of  our  business.     General  and  administrative   General   and   administrative   expenses   totalled   $3.3   million   and   $12.2   million   for   the   three   and   twelve   months   ended     December  31,  2013,  respectively,  representing  increases  of  $1.7  million  and  $5.6  million  over  the  same  periods  last  year.  The   increases   resulted   from   asset   management   fees   increasing   by   $0.9   million   and   $3.2   million   for   the   three   and   twelve   months   ended   December  31,   2013,   respectively,   and   higher   regulatory   and   corporate   compliance   costs   associated   with   the     new  acquisitions.       Fair  value  adjustment  to  investment  properties   For  the  three-­‐month  period  ended  December  31,  2013,  a  gain  of  $0.2  million  was  recognized  compared  to  a  loss  of  $16.9  million   in  the  comparative  quarter  last  year.  For  the  year  ended  December  31,  2013,  a  loss  of  $59.2  million  was  recognized  compared   to  a  loss  of  $23.3  million  in  2012.  The  increase  in  2013  over  2012  is  primarily  due  to  the  write-­‐off  of  transaction  costs  capitalized   on   completed   acquisitions.   The   following   table   summarizes   the   components   of   the   fair   value   adjustment   to   investment   properties  for  the  years  ended  December  31,  2013  and  2012:   Increase  (decrease)  in  fair  value  as  a  result  of  valuation  updates   Write-­‐off  of  building  expenditures  capitalized   Write-­‐off  of  leasing  expenditures  capitalized   Write-­‐off  of  transaction  costs  capitalized  on  acquisition   Straight-­‐line  rent,  amortization  of  lease  incentives  and  other   For  the  year     ended     December  31,       2013      14,436     $    (5,562)      (8,246)      (59,126)      (725)      (59,223)     $   For  the  year   ended   December  31,     2012    (8,365)    (2,391)    (1,011)    (11,582)   -­‐    (23,349)   $   $   Dundee  International  2013  Annual  Report    |    22                                             Interest  expense   Interest  expense  was  $11.3  million  for  the  three-­‐month  period  ended  December  31,  2013,  an  increase  of  $5.2  million  compared   to  the  same  quarter  last  year.  Excluding  the  unfavourable  exchange  rate  impact  of  $0.8  million,  interest  expense  increased  by   $4.3   million   as   a   result   of   new   mortgage   debt   placed   on   properties   we   acquired   in   2012   and   2013.   In   addition,   included   in   interest   is   increased   interest   expense   related   to   the   term   credit   facility   reflecting   the   additional   1%   interest   payable   on   $100  million  principal  effective  August  2013  offset  by  lower  floating  rate  interest.           Interest  expense  was  $38.5  million  for  the  year  ended  December  31,  2013,  an  increase  of  $11.1  million  compared  to  the  same   period  last  year.  Excluding  the  unfavourable  exchange  rate  impact  of  $1.8  million,  interest  expense  increased  by  $9.3  million,  of   which  $13.6  million  was  a  result  of  new  mortgage  debt  placed  on  properties  we  acquired  in  2012  and  2013.  Offsetting  this  was   a  decrease  in  interest  payable  on  Exchangeable  Notes  to  $nil  in  the  current  year,  compared  to  $2.6  million  in  the  prior  year.  In   addition,  interest  on  our  term  credit  facility  decreased  by  $2.3  million  as  the  underlying  three-­‐month  EURIBOR  rates  dropped  to   an  average  of  0.210%  in  2013  from  0.762%  in  2012.     We  currently  have  interest  rate  swaps  in  place  that  fix  the  interest  rate  payable  on  €262.8  million  at  a  rate  of  1.89%.  The  REIT   does  not  apply  hedge  accounting  in  relation  to  these  swaps  and,  as  a  result,  their  impact  is  not  included  in  interest  expense  but   accounted  for  through  the  fair  value  adjustments  as  described  below.  During  the  quarter,  $1.6  million  of  swap  settlements  were   settled  compared  to  $1.7  million  in  the  same  quarter  last  year,  reflecting  the  reduction  in  the  underlying  interest  rates.  During   the  year  ended  December  31,  2013,  $6.2  million  of  interest  swap  settlements  were  settled  compared  to  $4.3  million  in  the  prior   year,   reflecting   the   reduction   in   the   underlying   interest   rates.   Including   the   swaps   and   the   additional   1%   on   the   Facility,   the   actual  weighted  average  interest  rate  on  the  Facility  as  at  December  31,  2013  is  4.09%.  On  an  effective  interest  rate  basis,  the   rate   is   4.13%.   Any   adjustments   arising   from   the   interest   rate   swaps   are   reflected   in   the   fair   value   adjustments   to   financial   instruments  and  not  in  interest  expense.     Fair  value  adjustment  to  financial  instruments   For   the   three   months   ended   December   31,   2013,   we   incurred   an   unrealized   loss   in   the   fair   value   of   financial   instruments   of   $9.5  million   compared   to   a   loss   of   $6.7   million   in   the   comparative   period.   The   fair   value   adjustments   in   the   quarter   mainly   comprise  the  following  components:   • a  $1.1  million  loss  recognized  on  the  fair  value  change  in  the  interest  rate  swaps  and  cap  as  a  result  of  the  settlement  of  one   contract   in   the   quarter   for   $1.6   million   and   a   decrease   in   the   forward   price   of   interest   rates.   A   $2.0   million   loss   was   recognized  in  the  comparative  quarter  last  year  due  to  a  decrease  in  the  forward  price  of  interest  rates;     • a   $0.4   million   fair   value   loss   recognized   on   the   conversion   feature   of   the   convertible   debentures   mainly   reflecting   an   increase  in  the  market  price  of  our  Units,  compared  to  a  loss  of  $0.7  million  in  the  same  period  in  2012;   • an  unrealized  loss  of  $8.0  million  was  recognized  related  to  our  foreign  currency  forward  contracts  due  to  an  appreciation  of   the  euro  compared  to  the  Canadian  dollar,  versus  a  $4.0  million  unrealized  loss  during  the  comparative  quarter  due  to  an   appreciation  of  the  euro  compared  to  the  Canadian  dollar;  and     • a   $0.1   million   loss   was   recognized   related   to   our   DUIP   mainly   reflecting   an   increase   in   the   market   price   of   our   Units,   compared  to  a  loss  of  $0.1  million  in  the  same  period  in  2012.   For  the  year  ended  December  31,  2013,  we  incurred  an  unrealized  loss  in  the  fair  value  of  financial  instruments  of  $11.5  million   compared  to  an  unrealized  loss  of  $15.2  million  in  2012.  The  fair  value  adjustments  in  the  year  mainly  comprise  the  following   components:   • a  $0.2  million  gain  recognized  on  the  fair  value  change  in  the  interest  rate  swaps  and  cap  as  a  result  of  the  settlement  of  four   contracts   in   the   period   for   $6.2   million   and   an   increase   in   the   forward   price   of   interest   rates.   A   $15.5   million   loss   was   recognized  in  the  prior  year  due  to  a  decrease  in  the  forward  price  of  interest  rates;   • a  $3.8  million  fair  value  gain  recognized  on  the  conversion  feature  of  the  convertible  debentures  mainly  reflecting  a  decline   in  the  market  price  of  our  Units,  compared  to  a  gain  of  $2.4  million  in  2012;   • an  unrealized  loss  of  $16.0  million  was  recognized  related  to  our  foreign  currency  forward  contracts  due  to  an  appreciation   of  the  euro  compared  to  the  Canadian  dollar,  versus  a  $0.5  million  unrealized  gain  during  the  comparative  period  due  to  a   depreciation  of  the  euro  compared  to  the  Canadian  dollar;     Dundee  International  2013  Annual  Report    |    23       • a   $0.6   million   gain   was   recognized   related   to   our   DUIP   mainly   reflecting   a   decrease   in   the   market   price   of   our   Units,   compared  to  a  loss  of  $0.3  million  in  the  same  period  in  2012  reflecting  an  increase  in  the  market  price  of  our  Units;  and   • a   $2.3   million   loss   in   the   prior   year   on   the   fair   value   adjustment   on   the   Exchangeable   Notes,   which   were   fully   settled   in   September  2012.   Income  taxes   We   recognized   a   current   income   tax   expense   of   $0.1   million   and   $0.7   million,   respectively,   for   the   three-­‐   and   twelve-­‐month   periods  ended  December  31,  2013,  compared  to  current  income  tax  expenses  of  $0.1  million  and  $0.2  million,  respectively,  for   the  comparative  periods  in  2012.  The  increase  in  2013  is  mainly  a  result  of  current  income  taxes  related  to  new  acquisitions.     We   also   recognized   a   deferred   income   tax   expense   of   $2.0   million   and   a   deferred   income   tax   recovery   of   $2.8   million,   respectively,  for  the  three-­‐  and  twelve-­‐month  periods  ended  December  31,  2013,  compared  to  deferred  income  tax  recoveries   of   $1.7   million   and   $2.3   million,   respectively,   for   the   comparative   periods   in   2012.   The   differences   are   mainly   a   result   of   the   deferred  income  tax  impact  associated  with  the  loss  carry-­‐forwards,  fair  value  adjustments  related  to  investment  properties  net   of  tax  depreciation,  and  fair  value  changes  related  to  financial  instruments. Impact  of  foreign  exchange   Exchange  rate  fluctuations  between  the  Canadian  dollar  and  the  euro  impact  the  Trust’s  reported  revenues,  expenses,  income,   cash  flows,  assets  and  liabilities.  The  table  below  summarizes  changes  in  the  exchange  rates.   Average  exchange  rate   (Cdn  dollars  to  one  euro)   Exchange  rate  at  period-­‐end   (Cdn  dollars  to  one  euro)   Three  months  ended  December  31,     Change     2012   2013   2013   Year  ended  December  31,   Change   2012   1.430   1.286   11.2%   1.369   1.285   6.5%   1.466   1.312   11.7%   1.466   1.312   11.7%   Comprehensive  income  was  impacted  by  a  foreign  currency  translation  gain  of  $58.0  million  and  $109.1  million,  respectively,   for   the   three-­‐   and   twelve-­‐month   periods   ended   December   31,   2013.   The   exchange   rates   increased   from   $1.3118:€1   as   at   December  31,  2012  to  $1.4655:€1  as  at  December  31,  2013.  The  quarterly  results  of  our  euro-­‐denominated  operations  included   in   net   income   were   translated   at   an   average   exchange   rate   of   $1.4296:€1   compared   to   $1.2861:€1   in   the   same   quarter   last   year.  For  the  year  ended  December  31,  2013,  results  were  translated  at  an  average  exchange  rate  of  $1.3688:€1  compared  to   $1.2850:€1  in  the  prior  year.       Dundee  International  2013  Annual  Report    |    24                                         Funds  from  operations  and  adjusted  funds  from  operations   Net  income     Add  (deduct):   Depreciation  of  fixtures  and  computer  equipment   Share  of  net  losses  from  equity  accounted  investments   Amortization  of  lease  incentives   Interest  expense  on  Exchangeable  Notes   Loss  on  sale  of  investment  property   Tax  on  gains  on  sale  of  investment  property   Deferred  income  taxes   Term  debt  swap  settlement   Gain  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   Accretion  of  debenture  conversion  feature   Amortization  of  fair  value  adjustment  of  assumed  debt   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   $   $   $   $   Three  months  ended  December  31,     2012      (8,687)   2013      15,230     $   Years  ended  December  31,   2013     2012    10,916    22,765     $     $    -­‐    3    259    -­‐    550    (33)    2,019    (1,585)    (1,456)    (212)    9,460    24,235    794    260    (92)    313    539    (440)    25,609     $     $    (1,884)    (1,466)    22,259     $    9    -­‐    9    -­‐    258    -­‐    (1,668)    (1,660)    481    16,870    6,736    12,348    366    240    (26)    138    502    (56)    13,512   (1,025)   (600)   11,887    -­‐    3    616    -­‐    1,142    62    (2,834)    (6,179)    (1,826)    59,223    11,450    84,422    2,651    1,008    (402)    1,313    2,113    (1,510)    89,595     $     $     $     $   (6,518)   (5,070)   78,007     $     $    69    -­‐    17    2,558    320    -­‐    (2,274)    (4,255)    2,406    23,349    15,214    48,320    1,183    930    (206)    628    1,907    (98)    52,664   (4,100)   (2,400)   46,164   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  includes  all  Units.  For  the  three-­‐   and   twelve-­‐month   periods   ended   December   31,   2012,   the   outstanding   Units   also   include   the   aggregate   number   of   Units   issuable   upon   the   exchange   of   Exchangeable   Notes.   All   Exchangeable   Notes   were   exchanged   in   2012.   The   diluted   weighted   average  number  of  Units  assumes  the  conversion  of  the  Debentures  and  incremental  unvested  deferred  trust  units  related  to   the   Deferred   Unit   Incentive   Plan   represented   by   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   and   AFFO   calculations  for  the  three  and  twelve  months  ended  December  31,  2013  are  noted  in  the  table  below.  Diluted  FFO  and  AFFO   includes  interest  and  amortization  adjustments  related  to  the  Debentures  of  $2.7  million  and  $10.8  million  for  the  three  and   twelve  months  ended  December  31,  2013,  respectively.   Weighted  average  Units  outstanding  for  basic  per  unit  amounts     Weighted  average  Units  outstanding  for  diluted  per  unit  amounts     Three  months  ended  December  31,     2012     64,064,093     77,017,591     2013     109,482,435     123,028,441     Years  ended  December  31,   2012   2013     57,379,400   99,335,779     70,201,374   112,691,725     Over  the  course  of  the  quarter,  the  REIT  had  approximately  $79.4  million  on  average  of  excess  undeployed  cash  available  for   acquisitions.   Over   the   course   of   the   year,   the   REIT   had   approximately   $91.1   million   of   cash   available   for   acquisitions.   We   estimate   that   these   funds,   if   invested,   would   generate   a   return   on   equity   of   approximately   10.0%,   which   is   consistent   with   historic  returns  for  acquired  investment  properties,  and  would  have  contributed  $2.0  million  for  the  quarter  and  $9.1  million  for   the  year  ended  December  31,  2013,  respectively,  to  FFO  and  AFFO.   Dundee  International  2013  Annual  Report    |    25                                                                                                                                                                                                                                                                                                                                                                                                                                               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  net  income  or  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  undeployed  cash:   FFO  per  unit  –  basic   FFO  per  unit  –  diluted   $   $   $   $   $   Three  months  ended  December  31,     2012      12,348    0.19    0.19   2013      24,235    0.22    0.22     $     $     $   Years  ended  December  31,   2013     2012    48,320    84,422    0.84    0.85    0.84    0.84     $     $     $     $     $     $    0.24      0.24     $   $    0.24      0.24     $   $    0.94    0.93     $     $    0.98    0.95   Total  FFO  for  the  quarter  was  $24.2  million,  an  increase  of  $11.9  million  or  96.3%  over  the  prior  year  comparative  quarter  (year   ended  December  31,  2013  –  $84.4  million,  an  increase  of  $36.1  million  or  74.7%  over  the  prior  year),  reflecting  the  impact  of   acquisitions  completed  in  2012  and  2013.  FFO  on  a  per  unit  basis  increased  to  $0.22  per  unit  from  $0.19  per  unit  over  the  prior   year  comparative  quarter  (year  ended  December  31,  2013  –  an  increase  from  $0.84  per  unit  to  $0.85  per  unit  over  the  prior   year).  Diluted  FFO  on  a  per  unit  basis  increased  to  $0.22  per  unit  from  $0.19  per  unit  over  the  prior  year  comparative  quarter   (year   ended   December   31,   2013   –   remained   consistent   with   the   prior   year   at   $0.84   per   unit).   Assuming   this   excess   cash   had   been  invested,  diluted  FFO  per  unit  would  have  been  $0.24  per  unit  for  the  quarter  and  $0.93  per  unit  for  the  year.   Adjusted  funds  from  operations   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.   AFFO     AFFO  per  unit  –  basic   Excluding  the  impact  of  undeployed  cash:   AFFO  per  unit  –  basic   $   $   $   Three  months  ended  December  31,     2012      11,887   2013      22,259     $     $   0.20     $     $   0.19   Years  ended  December  31,   2013     2012    46,164    78,007     $     $   0.79   0.80   0.22     $   0.24     $   0.88     $   0.94   Total   AFFO   for   the   quarter   was   $22.3   million,   an   increase   of   $10.4   million   or   87.3%   over   the   prior   year   comparative   quarter   (year  ended  December  31,  2013  –  $78.0  million,  an  increase  of  $31.8  million  or  69.0%  over  the  prior  year),  reflecting  the  impact   of   acquisitions   completed   in   2012   and   2013.   AFFO   on   a   per   unit   basis   increased   to   $0.20   per   unit   from   $0.19   per   unit   (year   ended  December  30,  2013  –  a  decrease  from  $0.80  per  unit  to  $0.79  per  unit  over  the  prior  year).  Assuming  this  excess  cash   had  been  invested,  AFFO  per  unit  would  have  been  $0.22  per  unit  for  the  quarter  and  $0.88  per  unit  for  the  year.   Our   calculation   of   AFFO   includes   an   estimated   amount   of   normalized   non-­‐recoverable   capital   expenditures,   as   well   as   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  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.   Dundee  International  2013  Annual  Report    |    26                                                                                                                                                 FFO  and  AFFO  are  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):     Change  in  non-­‐cash  working  capital     Share  of  general  and  administrative  expenses  from  equity   accounted  investments     Unrealized  loss  on  settlement  of  foreign  exchange  contracts     Tax  on  gains  on  sale  of  investment  property   Investment  in  lease  incentives  and  initial  direct  leasing  costs     Normalized  leasing  costs  and  tenant  incentives     Normalized  non-­‐recoverable  recurring  capital  expenditures   AFFO   $   $   Three  months  ended  December  31,     2012      16,712   2013      29,798     $   Years  ended  December  31,   2012   2013      52,320    85,228     $     $    (6,704)    (3,488)    (2,568)    (287)    (3)    (519)    (33)    3,070    (1,884)    (1,466)    22,259     $    13    (248)    -­‐    523    (1,025)    (600)    11,887     $    (57)    (1,316)    62    8,246    (6,518)    (5,070)    78,007     $    37    (417)    -­‐    1,011    (4,100)    (2,400)    46,164   SELECTED  ANNUAL  INFORMATION   The  following  table  provides  selected  information  for  the  past  three  years:   Revenues   Net  income  (loss)   Total  assets   Debt   Distributions  declared       REIT  Units   Exchangeable  Notes   For  the  year   ended   December  31,   2013      220,220     $    22,765      2,558,674      1,424,312     $    80,173     $    109,698,977      -­‐     For  the  year   ended   December  31,   2012    138,661     $    10,916      1,400,269      726,830     $    43,568     $   72,232,494      -­‐     For  the  period   August  3,  2011   to  December   31,  2011    54,274    (23,201)    1,039,340    579,006    14,441    43,872,316    8,000,000   $   $   $   Dundee  International  2013  Annual  Report    |    27                                                                                                                                                                                                                   QUARTERLY  INFORMATION   The  following  tables  show  quarterly  information  since  January  1,  2012:   REVENUES   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   Amortization  and  depreciation   Loss  on  sale  of  investment  property   Share  of  net  losses  from  equity  accounted  investments   Acquisition  related  gain,  net   Interest  and  other  income   Interest  expense   Fair  value  adjustments  to  financial  instruments   Income  (loss)  before  taxes   Current  income  taxes   Deferred  income  taxes   NET  INCOME  (LOSS)   Add  (deduct):   Depreciation  of  property  and  equipment   Share  of  net  losses  from  equity     accounted  investments   Amortization  of  lease  incentives   Interest  on  Exchangeable  Notes   Acquisition  related  gain,  net   Loss  on  sale  of  investment  property   Tax  on  gains  on  sale  of  investment  property   Deferred  income  taxes   Term  debt  swap  settlement   Deferred  gain/loss  on  settlement  of  Forex  contracts   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   FFO   FFO  per  unit  –  basic   FFO  per  unit  –  diluted   Funds  from  operations   Add  (deduct):   Amortization  of  financing  costs   Accretion  of  debenture  conversion  feature   Amortization  of  FV  adjustment  of  debt   Deferred  compensation  expense   Deferred  asset  management  expense   Straight-­‐line  rent     Deduct:   Normalized  leasing  costs  and  tenant  incentives   Normalized  non-­‐recoverable  recurring     capital  expenditures   AFFO   AFFO  per  unit  –  basic   AFFO  per  unit  –  diluted     Weighted  average  number  of  Units:   Basic     Diluted   Quarterly  average  exchange  rate  ($:€1)     Q4  2013       Q3  2013       Q2  2013       Q1  2013       Q4  2012       Q3  2012       Q2  2012       Q1  2012   $   62,528     $   20,656       41,872       56,915     $   17,436       39,479       54,413     $   18,222       36,191       46,364     $   19,053       27,311       35,926     $   13,869       22,057       33,765     $   12,024       21,741       34,896     $   13,992       20,904       (409)       (3,332)       212       (16)       (550)       10       0       352       (11,288)       (9,460)       17,391       142       2,019       15,230     $   (1,006)       (3,399)       (4,487)       (33)       (79)       (2)       0       351       (10,441)       (1,808)       18,575       (100)       983       17,692     $   (882)       (3,045)       (8,726)       (24)       (252)       13       0       446       (9,700)       (4,570)       9,451       316       128       9,007     $   (876)       (2,450)       (46,222)       (15)       (261)       7       0       398       (7,077)       4,388       (24,797)       331       (5,964)       (19,164)     $   (1,019)       (1,638)       (16,870)       (7)       (258)       11       0       289       (6,100)       (6,736)       (10,271)       84       (1,668)       (8,687)     $   (1,096)       (1,856)       (2,574)       (35)       (62)       (13)       0       59       (6,531)       (5,950)       3,683       77       (57)       3,663     $   (1,051)       (1,598)       (3,010)       (11)       0       12       0       63       (6,629)       130       8,810       29       (334)       9,115     $   $   34,074   13,337   20,737   (1,035)   (1,487)   (895)   0   0   11   0   92   (8,119)   (2,658)   6,646   36   (215)   6,825   0       0       0       0       9       38       16       6   3       259       0       0       550       (33)       2,019       (1,585)       (1,456)       (212)     9,460     0       108       0       0       79       (126)       983       (1,574)       (456)       4,487     1,808     $   $   $   24,235     $   0.22     $   0.22     24,235     $   23,001     $   0.21     $   0.21     23,001     $   794       260       (92)       313       539       (440)       25,609       744       254       (88)       356       529       (268)       24,528       0       112       0       0       252       79       128       (1,533)       52       8,726       4,570       21,393     $   0.22     $   0.21     21,393     $   666       250       (84)       378       523       (623)       22,503       0       137       0       0       261       142       (5,964)       (1,487)       34       46,222     (4,388)     15,793     $   0.20     $   0.20     15,793     $   447       244       (138)       266       522       (179)       16,955       0       9       0       0       258       0       (1,668)       (1,660)       481       16,870     6,736     0       8       406       0       62       0       (57)       (1,155)       954       2,574     5,950     12,348     $   0.19     $   0.19     12,348     $   12,443     $   0.22     $   0.21     12,443     $   366       240       (26)       138       502       (56)       13,512       279       235       (76)       180       504       (78)       13,487       0       0       632       0       0       0       (334)       (1,038)       496       3,010     (130)     11,767     $   0.21     $   0.21     11,767     $   273       230       (78)       158       488       18       12,856       0   0   1,520   0   0   0   (215)   (402)   475   895   2,658   11,762   0.23   0.22   11,762   265   225   (26)   152   413   18   12,809   (1,884)       (1,776)       (1,629)       (1,229)       (1,025)       (1,025)       (1,025)       (1,025)   $   $   (1,466)       22,259     $   0.20     $   0.20     (1,381)       21,371     $   0.20     $   0.20     (1,267)       19,607     $   0.20     $   0.20     (956)       14,770     $   0.19     $   0.19     (600)       11,887     $   0.19     $   0.19     (600)       11,862     $   0.21     $   0.21     (600)       11,231     $   0.20     $   0.20     (600)   11,184   0.22   0.21   109,482,435     123,028,441     1.430       109,116,985     122,552,770     1.376     99,037,061     112,358,396     79,267,113     92,382,159     64,064,093     77,017,591     57,795,412     70,666,219     1.337       1.332       1.286       1.245       55,697,600     68,474,767     1.296       51,882,467   64,565,100   1.313   Dundee  International  2013  Annual  Report    |    28                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             NON-­‐GAAP  MEASURES   The  following  additional  non-­‐GAAP  measures  are  important  measures  used  by  management  in  evaluating  the  Trust’s  underlying   operating  performance  and  debt  management.  These  non-­‐GAAP  measures  are  not  defined  by  IFRS,  do  not  have  a  standardized   meaning  and  may  not  be  comparable  with  similar  measures  presented  by  other  income  trusts.   Level  of  debt  (debt-­‐to-­‐gross  book  value)   Management   believes   this   non-­‐GAAP   measurement   is   an   important   measure   in   the   management   of   our   debt   levels.   Level   of   debt  as  shown  below  is  determined  as  total  debt,  divided  by  total  assets.   $   Non-­‐current  debt(1)   Current  debt   Total  debt   Unamortized  discount  component  of  convertible  debentures   Total  adjusted  debt   Less  cash   Total  adjusted  debt,  net  of  cash   Total  assets   Less  cash   Total  assets,  net  of  cash   Debt-­‐to-­‐gross  book  value   Debt-­‐to-­‐gross  book  value,  net  of  cash   Debt-­‐to-­‐gross  book  value,  net  of  cash,  net  of  convertible  debentures   (1)  Non-­‐current  debt  includes  convertible  debentures  valued  at  $150,326  and  $148,428  at  December  31,  2013  and  2012,  respectively.   $   December  31,     2013      1,403,956     $    20,356      1,424,312      5,803      1,430,115      106,292      1,323,823      2,558,674      106,292      2,452,382     $   56%     54%     48%     December  31,   2012    724,119    2,711    726,830    6,810    733,640    181,619    552,021    1,400,269    181,619    1,218,650   52%   45%   33%   Interest  coverage  ratio   Management   believes   this   non-­‐GAAP   measurement   is   an   important   measure   in   determining   our   ability   to   cover   interest   expense  based  on  our  operating  performance.  Interest  coverage  ratio  as  shown  below  is  calculated  as  net  rental  income  plus   interest  and  fee  income,  less  general  and  administrative  expenses  and  portfolio  management  expenses,  all  divided  by  interest   expense  on  total  debt.   Net  rental  income   Add:  Interest  and  other  income   Less:  General  and  administrative  expenses   Less:  Portfolio  management  expenses   Interest  expense   Less:  Interest  on  Exchangeable  Notes   Total  adjusted  interest  expense   Interest  coverage  ratio   $   December  31,     2013      144,853     $    1,547      12,226      3,173      131,001      38,506      -­‐      38,506      3.40     December  31,   2012    85,439    503    6,579    4,201    75,162    27,379    2,558    24,821    3.03   Dundee  International  2013  Annual  Report    |    29                                                                                                       Debt-­‐to-­‐EBITDFV     Management  believes  this  non-­‐GAAP  measurement  is  an  important  measure  in  determining  the  time  it  takes  the  Trust,  based   on  its  operating  performance,  to  repay  our  debt.  Debt-­‐to-­‐EBITDFV  as  shown  below  is  calculated  as  total  debt  divided  by  the  sum   of  net  income  for  the  quarter  adjusted  for  fair  value  adjustments  to  investment  properties  and  financial  instruments,  gain/loss   on  sale  of  investment  properties,  interest  expense,  depreciation  and  income  taxes.  A  further  adjustment  is  made  for  properties   acquired  during  the  quarter  to  reflect  net  rental  income  as  if  the  properties  were  held  for  the  full  quarter.   Non-­‐current  debt   Current  debt   Total  debt   Net  income  (loss)  for  the  quarter   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Loss  on  sale  of  investment  property   Depreciation  and  amortization   Interest  expense   Provision  for  income  taxes   Adjusted  net  rental  income  of  properties  acquired  in  the  quarter   EBITDFV   EBITDFV  –  adjusted  for  foreign  exchange   Debt-­‐to-­‐EBITDFV  (three  months  ended)   Debt-­‐to-­‐EBITDFV  (years)  annualized   $   December  31,     2013      1,403,956     $    20,356      1,424,312      15,230      (212)      9,460      550      16      11,288      2,161      1,296      39,789      40,788      34.9      8.7     December  31,   2012    724,119    2,711    726,830    (8,687)    16,870    6,736    258    7    6,100    (1,584)    1,185    20,885    21,302    34.1    8.5   Dundee  International  2013  Annual  Report    |    30                                                                   SECTION  III  –  DISCLOSURE  CONTROLS  AND  PROCEDURES  AND  INTERNAL  CONTROLS     OVER  FINANCIAL  REPORTING   For   the   December   31,   2013   financial   year-­‐end,   the   Chief   Executive   Officer   and   the   Chief   Financial   Officer   (the   “Certifying   Officers”),  together  with  other  members  of  management,  have  evaluated  the  design  and  operational  effectiveness  of  Dundee   International  REIT’s  disclosure  controls  and  procedures,  as  defined  in  National  Instrument  52-­‐109,  “Certification  of  Disclosure  in   Issuers’   Annual   and   Interim   Filings”   (“NI   52-­‐109”).   The   Certifying   Officers   have   concluded   that   the   disclosure   controls   and   procedures   are   adequate   and   effective   in   order   to   provide   reasonable   assurance   that   material   information   has   been   accumulated  and  communicated  to  management,  to  allow  timely  decisions  of  required  disclosures  by  Dundee  International  REIT   and  its  consolidated  subsidiary  entities,  within  the  required  time  periods.     Dundee  International  REIT’s  internal  control  over  financial  reporting  (as  defined  in  NI  52-­‐109)  is  designed  to  provide  reasonable   assurance   regarding   the   reliability   of   financial   reporting   and   the   preparation   of   financial   statements   for   external   purposes   in   accordance  with  generally  accepted  accounting  principles  (“GAAP”).  Using  the  framework  established  in  “Risk  Management  and   Governance:   Guidance   on   Control   (COCO   Framework)”,   published   by   The   Canadian   Institute   of   Chartered   Accountants,   the   Certifying   Officers,   together   with   other   members   of   management,   have   evaluated   the   design   and   operation   of   Dundee   International  REIT’s  internal  control  over  financial  reporting.  Based  on  that  evaluation,  the  Certifying  Officers  have  concluded   that  Dundee  International  REIT’s  internal  control  over  financial  reporting  was  effective  as  at  December  31,  2013.     There  were  no  changes  in  Dundee  International  REIT’s  internal  control  over  financial  reporting  during  the  financial  year  ended   December   31,   2013   that   have   materially   affected,   or   are   reasonably   likely   to   materially   affect,   Dundee   International   REIT’s   internal  control  over  financial  reporting.   SECTION  IV  –  RISKS  AND  OUR  STRATEGY  TO  MANAGE   We  are  exposed  to  various  risks  and  uncertainties,  many  of  which  are  beyond  our  control.  For  a  full  list  and  explanation  of  our   risks  and  uncertainties,  please  refer  to  our  2012  Annual  Report  or  our  Annual  Information  Form  dated  April  1,  2013,  filed  on   SEDAR  (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   for   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.     Dundee  International  2013  Annual  Report    |    31       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  21%  of  the  Trust’s  GLA  at  December  31,  2013.   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,  these  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;   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  for  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   the   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.     Dundee  International  2013  Annual  Report    |    32       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.  As  a  result  of  legislation  passed  on  November  29,  2013,  certain  of  our  subsidiaries  are  subject  to  German   corporate   income   tax   on   their   net   rental   income   and   capital   gains   from   the   sale   of   properties.   Although   we   have   previously   structured  our  tax  affairs  on  the  assumption  that  those  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   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  the  event  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.     Dundee  International  2013  Annual  Report    |    33       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   Initial   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   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.     Dundee  International  2013  Annual  Report    |    34       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.       New  properties  acquired  by  the  Trust  are  held  through  Luxembourg  limited  liability  entities  outside  of  the  Lorac  arrangement.     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.     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.   Dundee  International  2013  Annual  Report    |    35       SECTION  V  –  CRITICAL  ACCOUNTING  POLICIES   CRITICAL  ACCOUNTING  JUDGMENTS,  ESTIMATES  AND  ASSUMPTIONS  IN  APPLYING  ACCOUNTING  POLICIES     Preparing   the   consolidated   financial   statements   requires   management   to   make   judgments,   estimates   and   assumptions   that   affect   the   reported   amounts   of   assets,   liabilities,   revenue   and   expenses,   and   the   disclosures   of   contingent   liabilities.   Management  bases  its  judgments  and  estimates  on  historical  experience  and  other  factors  it  believes  to  be  reasonable  under   the   circumstances,   but   that   are   inherently   uncertain   and   unpredictable,   the   result   of   which   forms   the   basis   of   the   carrying   amounts  of  assets  and  liabilities.  However,  uncertainty  about  these  assumptions  and  estimates  could  result  in  outcomes  that   could  require  a  material  adjustment  in  the  future  to  the  carrying  amounts  of  the  asset  or  liability  affected.  Dundee  International   REIT’s  critical  accounting  judgments,  estimates  and  assumptions  in  applying  accounting  policies  are  described  in  Note  4  to  the   consolidated  financial  statements.   CHANGES  IN  ACCOUNTING  ESTIMATES  AND  CHANGES  IN  ACCOUNTING  POLICIES     Accounting  policy  changes     Dundee   International   REIT’s   future   accounting   policy   changes   are   described   in   Note   5   to   the   audited   consolidated   financial   statements.   Additional   information   relating   to   Dundee   International   REIT,   including   our   Annual   Information   Form   dated   April   1,   2013,   is   available  on  SEDAR  at  www.sedar.com.   Dundee  International  2013  Annual  Report    |    36       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   comprises   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   Toronto,  Ontario,  February  26,  2014   Rene  D.  Gulliver   Chief  Financial  Officer     Dundee  International  2013  Annual  Report    |    37               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   sheets   as   at   December   31,   2013   and   December   31,   2012   and   the   consolidated   statements   of   net   income   and   comprehensive   income,   changes   in   equity   and   cash   flows   for   the   years   ended   December  31,  2013  and  December  31,  2012,  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  audits.  We  conducted  our   audits  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  in  our  audits  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,   2013   and   December   31,   2012,   and   their   financial  performance  and  their  cash  flows  for  the  years  ended  December  31,  2013  and  December  31,  2012  in  accordance  with   International  Financial  Reporting  Standards.   Chartered  Professional  Accountants,  Licensed  Public  Accountants   Toronto,  Ontario,  February  26,  2014     Dundee  International  2013  Annual  Report    |    38           Consolidated  balance  sheets   (in  thousands  of  Canadian  dollars)   Assets   NON-­‐CURRENT  ASSETS   Investment  properties   Amount  in  escrow   Deferred  income  tax  assets   Other  non-­‐current  assets   CURRENT  ASSETS   Amounts  receivable   Prepaid  expenses   Amount  in  escrow   Cash   Assets  held  for  sale   Total  assets   Liabilities   NON-­‐CURRENT  LIABILITIES   Debt   Deferred  rent   Deposits   Derivative  financial  instruments   Deferred  Unit  Incentive  Plan   CURRENT  LIABILITIES   Debt   Amounts  payable  and  accrued  liabilities   Income  tax  payable   Deferred  rent   Derivative  financial  instruments   Distributions  payable   Liabilities  related  to  assets  held  for  sale   Total  liabilities   Equity   Unitholders’  equity   Deficit   Accumulated  other  comprehensive  income  (loss)   Total  equity   Total  liabilities  and  equity   December  31,   December  31,   Note   2013   2012   $   $   $   7   8   20   9   10   8   17   11   8   12   13   11   14   8   12   15   17   16   $    2,390,244    -­‐    12,313    2,288    2,404,845    18,149    1,962    6,220    106,292    132,623    21,206    2,558,674    1,403,956    -­‐    1,900    16,299    6,306    1,428,461    20,356    32,940    523    6,220    13,772    7,314    81,125    15,083    1,524,669    1,075,520    (127,702)    86,187    1,034,005    2,558,674     $     $     $    1,182,757    5,568    8,491    548    1,197,364    4,822    4,354    12,110    181,619    202,905    -­‐    1,400,269    724,119    5,568    895    18,635    3,629    752,846    2,711    26,863    404    12,110    4,441    4,816    51,345    -­‐    804,191    689,318    (70,294)    (22,946)    596,078    1,400,269     $   See  accompanying  notes  to  the  consolidated  financial  statements.   On  behalf  of  the  Board  of  Trustees  of  Dundee  International  Real  Estate  Investment  Trust:   MICHAEL  J.  COOPER     Trustee     P.  JANE  GAVAN   Trustee   Dundee  International  2013  Annual  Report    |    39                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Consolidated  statements  of  net  income  and  comprehensive  income     (in  thousands  of  Canadian  dollars)   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   Depreciation  and  amortization   Loss  on  sale  of  investment  properties   Share  of  income  from  equity  accounted  investment   Interest  and  other  income   Interest  expense   Fair  value  adjustments  to  financial  instruments   Income  before  income  taxes   Current  income  taxes   Deferred  income  taxes  recovery   Recovery  of  income  taxes   Net  income     Foreign  currency  translation  adjustment   Comprehensive  income     See  accompanying  notes  to  the  consolidated  financial  statements.   Note     $   Years  ended  December  31,     2012   2013      138,661    220,220     $    53,222    75,367      85,439    144,853      (3,173)      (12,226)      (59,223)      (88)      (1,142)      28      1,547      (38,506)      (11,450)      20,620      689      (2,834)      (2,145)      22,765      109,133      131,898     $    (4,201)    (6,579)    (23,349)    (53)    (320)    21    503    (27,379)    (15,214)    8,868    226    (2,274)    (2,048)    10,916    (4,388)    6,528   7     7     18     19     20     $   Dundee  International  2013  Annual  Report    |    40                                                                                                                                                                                                                                                       Consolidated  statements  of  changes  in  equity     Attributable  to  unitholders  of  the  Trust   (in  thousands  of  Canadian  dollars,   except  number  of  Units)   Balance  at  January  1,  2013   Net  income  for  the  year   Distributions  paid   Distributions  payable   Public  offering  of  Units   Distribution  Reinvestment  Plan   Unit  Purchase  Plan   Deferred  Unit  Incentive  Plan   Issue  costs   Foreign  currency  translation  adjustment   Balance  at  December  31,  2013   (in  thousands  of  Canadian  dollars,   except  number  of  Units)   Balance  at  January  1,  2012   Net  income  for  the  year   Distributions  paid   Distributions  payable   Public  offering  of  Units   Distribution  Reinvestment  Plan   Unit  Purchase  Plan   Deferred  Unit  Incentive  Plan   Issue  costs   Foreign  currency  translation  adjustment   Balance  at  December  31,  2012   Note     15     15     16     16     16     16     Note     15     15     16     16     16     Number     of  Units    72,232,494    -­‐    -­‐    -­‐    36,375,000    1,066,792    7,059    17,632    -­‐    -­‐    109,698,977     Unitholders’     equity    689,318    -­‐    -­‐    -­‐    393,859    10,145    72    164    (18,038)    -­‐    1,075,520     $     $   Number     of  Units    43,872,316    -­‐    -­‐    -­‐    28,186,500    157,432    3,371    12,875    -­‐     $     Unitholders’     equity    407,009    -­‐    -­‐    -­‐    290,436    1,644    36    138    (9,945)    -­‐     $     $     $     $     Accumulated   other     comprehensive   income  (loss)    (22,946)    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    109,133    86,187     $   Deficit    (70,294)    22,765    (72,859)    (7,314)    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    (127,702)   Total    596,078    22,765    (72,859)    (7,314)    393,859    10,145    72    164    (18,038)    109,133    1,034,005     $     $   Attributable  to  unitholders  of  the  Trust     $     $     Accumulated   other   comprehensive   loss    (18,558)    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    (4,388)   Deficit    (37,642)    10,916    (38,752)    (4,816)    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐   Total    350,809    10,916    (38,752)    (4,816)    290,436    1,644    36    138    (9,945)    (4,388)    72,232,494     $    689,318     $    (70,294)     $    (22,946)     $    596,078   See  accompanying  notes  to  the  consolidated  financial  statements.   Dundee  International  2013  Annual  Report    |    41                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Consolidated  statements  of  cash  flows   (in  thousands  of  Canadian  dollars)   Generated  from  (utilized  in)  operating  activities   Net  income     Non-­‐cash  items:   Share  of  income  from  equity  accounted  investment     Deferred  income  taxes  recovery     Amortization  of  lease  incentives     Amortization  of  financing  costs     Amortization  of  fair  value  adjustment  on  acquired  debt     Amortization  of  initial  discount  on  convertible  debentures   Loss  on  sale  of  investment  properties     Depreciation  and  amortization     Deferred  unit  compensation  expense  and  asset  management  fees   Straight-­‐line  rent  adjustment   Fair  value  adjustments  to  financial  instruments   Fair  value  adjustments  to  investment  properties   Cash  settlement  on  foreign  exchange  contracts   Interest  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   Prepaid  transaction  costs  on  investment  properties   Proceeds  from  disposal  of  investment  properties   Generated  from  (utilized  in)  financing  activities   Mortgages  placed   Financing  costs  on  debts  placed   Mortgage  principal  repayments   Lump  sum  repayment   Draw  on  revolving  credit  facility   Revolving  credit  facility  repayments   Units  issued  for  cash   Unit  issue  costs   Distributions  paid  on  Units   Interest  on  Exchangeable  Notes   Increase  (decrease)  in  cash   Effect  of  exchange  rate  changes  on  cash   Cash,  beginning  of  period     Cash,  end  of  period   See  accompanying  notes  to  the  consolidated  financial  statements.   Note     Years  ended  December  31,     2012   2013     $    22,765     $    10,916    (28)      (2,834)      616      2,651      (402)      1,008      1,142      88      3,426      (1,510)      11,450      59,223      (510)      -­‐      (6,179)      (8,246)      2,568      85,228      (5,821)      (1,080,279)      -­‐      22,801      (1,063,299)      625,817      (9,305)      (11,197)      (16,779)      35,925      (36,810)      393,931      (18,604)      (67,530)      -­‐      895,448      (82,623)      7,296      181,619      106,292     $   $    (21)    (2,274)    17    1,183    (206)    930    320    53    2,535    (98)    15,214    23,349    2,822    2,558    (4,255)    (1,010)    287    52,320    (2,391)    (241,032)    (2,969)    7,095    (239,297)    130,889    (2,330)    (908)    (3,426)    -­‐    -­‐    208,142    (8,961)    (40,033)    (2,558)    280,815    93,838    (126)    87,907    181,619   13     19     18     7     22     7     6     15     18     Dundee  International  2013  Annual  Report    |    42                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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   year   ended   December   31,   2013   were   authorized   for   issue   by   the   Board   of   Trustees   on   February   26,   2014,   after   which   date   the   consolidated  financial  statements  may  only  be  amended  with  Board  approval.   Note  2   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES   Statement  of  compliance   These   consolidated   financial   statements   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,  financial  derivatives,  which  are  measured  at  fair  value,  and  the  Deferred  Unit   Incentive  Plan,  which  is  measured  at  amortized  cost  impacted  by  the  fair  value  of  the  Trust’s  units.   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  over  the  entity,  has  exposure  to  variable   returns   from   its   involvement   with   the   entity   and   has   the   ability   to   use   its   power   over   the   investee   to   affect   its   returns.   All   intercompany   balances,   income   and   expenses,   and   unrealized   gains   and   losses   resulting   from   intercompany   transactions   are   eliminated  in  full.   Equity  accounted  investments   Equity   accounted   investments   are   investments   over   which   the   Trust   has   significant   influence,   but   not   control.   Generally,   the   Trust   is   considered   to   exert   significant   influence   when   it   holds   more   than   a   20%   interest   in   an   entity.   However,   determining   significant  influence  is  a  matter  of  judgment  and  specific  circumstances  and,  from  time  to  time,  the  Trust  may  hold  an  interest   of  more  than  20%  in  an  entity  without  exerting  significant  influence.  Conversely,  the  Trust  may  hold  an  interest  of  less  than  20%   and   exert   significant   influence   through   representation   on   the   Board   of   Trustees,   direction   of   management   or   through   contractual  agreements.       The  financial  results  of  the  Trust’s  equity  accounted  investments  are  included  in  the  Trust’s  consolidated  financial  statements   using  the  equity  method,  whereby  the  investment  is  carried  on  the  consolidated  balance  sheets  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   earnings   from   equity   accounted   investments   in   the   consolidated  statements  of  comprehensive  income.     Dundee  International  2013  Annual  Report    |    43         At   each   reporting   date,   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.     Where  the  Trust  transacts  with  its  equity  accounted  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  sheets.   Joint  arrangements   The   Trust   enters   into   joint   arrangements   via   joint   operations   and   joint   ventures.   A   joint   arrangement   with   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   arrangement   require   the   unanimous   consent   of   the   parties   sharing   control   is   referred   to   as   a   joint   operation.   Joint   arrangements   that   involve   the   establishment   of   a   separate   entity   in   which   each   venture   has   rights   to   the   net   assets   of   the   arrangements   are   referred   to   as   joint  ventures.  In  a  co-­‐ownership  arrangement  the  Trust  owns  jointly  one  or  more  investment  properties  with  another  party  and   has  direct  rights  to  the  investment  property,  and  obligations  for  the  liabilities  relating  to  the  co-­‐ownership.   The   Trust   reports   its   interests   in   joint   ventures   using   the   equity   method   of   accounting   as   described   under   “Equity   accounted   investments”   above.   The   Trust   reports   its   interests   in   co-­‐ownerships   by   accounting   for   its   share   of   the   assets,   liabilities,   revenues  and  expenses.  Under  this  method,  the  Trust’s  consolidated  financial  statements  reflect  only  the  Trust’s  proportionate   share  of  the  assets,  its  share  of  any  liabilities  incurred  jointly  with  the  other  venturers  as  well  as  any  liabilities  incurred  directly,   its  share  of  any  revenues  earned  or  expenses  incurred  by  the  joint  venture  and  any  expenses  incurred  directly.   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   including   related   transaction   costs   in   connection   with   asset   acquisitions,   except  if  acquired  in  a  business  combination,  in  which  case  they  are  initially  recorded  at  fair  value,  and  include  primarily  office   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   to  use  the  income  approach.  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  properties  and  are  amortized  on  a  straight-­‐line   basis  over  the  term  of  the  lease  as  a  reduction  of  investment  properties  revenue.   Dundee  International  2013  Annual  Report    |    44       Fair  value  hierarchy   Fair  value  measurements  recognized  in  the  statement  of  financial  position  or  disclosed  in  the  Trust’s  financial  statements  for   financial   or   non-­‐financial   assets   and   liabilities   are   categorized   by   level   in   accordance   with   the   significance   of   the   observable   market  inputs  used  in  making  the  measurements,  as  follows:   • 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;  and   • Level  3  –  use  of  a  model  with  inputs  that  are  not  based  on  observable  market  data.   Non-­‐controlling  interest     Non-­‐controlling   interest   represents   equity   interests   in   subsidiaries   owned   by   outside   parties.   The   share   of   net   assets,   net   earnings   and   other   comprehensive   income   of   subsidiaries   attributable   to   non-­‐controlling   interest   is   determined   to   be   insignificant.   Assets  held  for  sale     Assets   and   liabilities   are   classified   as   held   for   sale   when   their   carrying   amount   is   to   be   recovered   principally   through   a   sale   transaction  and  a  sale  is  considered  highly  probable.  Investment  properties  and  assets  held  for  sale  continue  to  be  measured  at   fair  value.   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   37%   of   the   gross   rental   income   generated   by   the   Trust’s  properties  for  the  year  ended  December  31,  2013  (December  31,  2012  –  65%).     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  statements  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  statements  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   all  resulting  exchange  differences  are  recognized  in  other  comprehensive  income.   (iii) 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  statements  of  income  as  part  of  the  gain  or  loss  on  sale.   Dundee  International  2013  Annual  Report    |    45       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.   Other  non-­‐current  assets   Other   non-­‐current   assets   include   equity   accounted   investments,   office   furniture   and   computer   equipment,   and   straight-­‐line   rent   receivables.   Office   furniture   and   computer   equipment   are   stated   at   cost   less   accumulated   depreciation   and   impairment   losses.  Depreciation  of  office  furniture  and  computer  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  office  furniture  and  computer  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  recognized  and  the  contractual   amount   received.   Recoveries   from   tenants   are   recognized   as   revenues   in   the   period   in   which   the   corresponding   costs   are   incurred  and  collectability  reasonably  assured.  Other  revenues  are  recorded  as  earned.   Business  combinations   The  purchase  method  of  accounting  is  used  for  acquisitions  meeting  the  definition  of  a  business.  The  cost  of  an  acquisition  is   measured   as   the   fair   value   of   the   assets   given,   equity   instruments   issued,   and   liabilities   incurred   or   assumed   at   the   date   of   exchange.  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  as  an  increase  to  the  deficit.   Dundee  International  2013  Annual  Report    |    46       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  year  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  asset  and  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.     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  expense.  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   DREAM   Asset   Management   Corporation   (“DAM”),   formerly   called   Dundee   Realty  Corporation  or  “DRC”,  for  payment  of  asset  management  fees  are  included  in  general  and  administrative  expense  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  being  recognized  in  comprehensive  income  as  fair  value  adjustment  to  financial  instruments.   Dundee  International  2013  Annual  Report    |    47       Cash     Cash  excludes  cash  subject  to  restrictions  that  prevent  its  use  for  current  purposes.  Excluded  from  cash  are  amounts  held  for   repayment  of  tenant  security  deposits  as  required  by  various  lending  agreements.     Financial  instruments   Designation  of  financial  instruments   The  following  summarizes  the  Trust’s  classification  and  measurement  of  financial  assets,  liabilities  and  financial  derivatives:   Financial  assets   Amounts  receivable   Cash     Financial  liabilities   Mortgage  debt   Term  loan  credit  facility   Convertible  debentures  –  host  instrument   Deposits   Deferred  Unit  Incentive  Plan   Amounts  payable  and  accrued  liabilities   Distributions  payable   Income  taxes  payable   Classification   Measurement   Loans  and  receivables   Loans  and  receivables   Amortized  cost   Amortized  cost   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Amortized  cost   Amortized  cost   Amortized  cost   Amortized  cost   Amortized  cost   Amortized  cost   Amortized  cost   Amortized  cost   Financial  derivatives   Derivative  assets   Derivative  liabilities   Conversion  feature  of  the  convertible  debentures     Fair  value  through  profit  and  loss   Fair  value  through  profit  and  loss   Fair  value  through  profit  and  loss   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,  financial  assets  are  measured  at  amortized  cost.   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   statements   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  the  statement  of  net  income  and  comprehensive  income.   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  profit  and  loss  or  other  liabilities   measured   at   amortized   cost.   Financial   liabilities   classified   as   other   liabilities   are   initially   recognized   at   fair   value   (net   of   transaction   costs)   and   are   subsequently   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.   Dundee  International  2013  Annual  Report    |    48                                                                       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  debenture   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  liabilities  recorded  in   comprehensive  income.     The  Trust  considers  interest  expense  on  the  Exchangeable  Notes  to  be  a  financing  activity  in  the  statements  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.     The  Trust  has  not  designated  any  derivatives  as  hedges  for  accounting  purposes.   Interest   Interest   on   debt   includes   coupon   interest   on   term   loans   and   mortgage   debt,   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  net  settlement  of  financial  interest  rate  derivatives  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,  notwithstanding  the  fact  that  the  Trust’s  Units  meet  the  definition  of  a  financial  liability.   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   presented   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.   Dundee  International  2013  Annual  Report    |    49   • 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  are  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.   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:   Valuation  of  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.   Judgment   is   also   applied   in   determining   the   extent   and  frequency  of  independent  appraisals.     The   determination   of   fair   values   requires   management   to   make   estimates   and   assumptions   that   affect   the   values   presented,   such   that   actual   values   in   sales   transactions   may   differ   from   those   presented.   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  regional,  national  or  international  economic   conditions,  the  fair  value  of  investment  properties  may  change  materially.   The  REIT  determines  the  fair  value  of  an  investment  property  at  the  end  of  each  reporting  period  using  the  following  methods:   • External  appraisals  –  by  an  independent  appraisal  firm,  according  to  professional  appraisal  standards  and  IFRS.   • Internal   valuation   –   performed   by   management   using   the   income   approach   and   primarily   consisting   of   reviewing   the   key   assumptions  from  previous  appraisals  and  updating  the  value  for  changes  in  the  property  cash  flow,  physical  condition  and   changes   in   market   conditions.   In   applying   the   income   approach   to   valuation,   management   may   use   the   direct   income   capitalization   method   or   the   discounted   cash   flow   method,   both   of   which   are   consistent   with   professional   appraisal   standards  and  IFRS.   The  selection  of  the  method  for  each  property  is  made  based  upon  the  following  criteria:   • Regulatory   requirements   –   the   Initial   Properties   are   held   indirectly   through   regulated   entities   that   require   an   external   appraisal  annually.   • Property   type   –   this   includes   an   evaluation   of   a   property's   complexity,   time   since   acquisition,   and   other   specific   opportunities  or  risks  with  properties.  Recently  acquired  properties  will  generally  receive  a  value  update.   Dundee  International  2013  Annual  Report    |    50   • Market  risks  –  specific  risks  in  a  region  may  warrant  a  full  external  appraisal  for  certain  properties.   • Changes   in   overall   economic   conditions   –   significant   changes   in   overall   economic   conditions   may   increase   the   number   of   external  appraisals  performed.   • Business  needs  –  financings  or  acquisitions  and  dispositions  may  require  an  external  appraisal.   In   general,   properties   are   selected   for   external   appraisal,   taking   into   account   factors   such   as   property   size,   local   market   conditions   and   geography.   The   Initial   Properties   are   subject   to   regulatory   requirements   that   require   an   external   appraisal   annually.  Investment  properties  acquired  during  2012  were  subject  to  an  internal  valuation  in  response  to  property  and  market   changes   since   acquisition.   For   investment   properties   acquired   in   2013,   management   assessed   whether   any   of   the   criteria     above   had   changed   significantly   since   acquisition   and   determined   that   the   valuations   completed   at   the   dates   of   acquisition   remained  valid.   The  REIT  makes  no  adjustments  for  portfolio  premiums  and  discounts,  nor  for  any  value  attributable  to  the  REIT's  management   platform.   Investment   properties   are   appraised   at   highest   and   best   use,   primarily   based   on   stabilized   cash   flows   from   tenancies,   since   purchasers  typically  focus  on  expected  income.  External  appraisals  conduct  and  place  reliance  on  both  the  direct  capitalization   method  and  the  discounted  cash  flow  method  (including  the  estimated  proceeds  from  a  potential  future  disposition).  Internal   valuations  for  investment  properties  acquired  in  2012  use  the  direct  capitalization  method.   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.   Income  tax  treatment   The   REIT   indirectly   owns   a   majority   of   its   properties   through   fifteen   FCPs   (fonds   communs   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.   On  November  29,  2013,  the  German  federal  government  approved  an  Investment  Tax  Act  reform  bill.  Based  on  the  bill,  foreign   investment  funds  such  as  the  FCPs  or  the  FCP  unitholders  will  become  subject  to  corporate  income  tax  in  Germany.  Further,  the   REIT   believes   that   the   consequences   of   the   bill   would   be   the   same   from   a   German   corporate   tax   perspective   irrespective   of   whether  it  is  the  FCPs  or  the  FCP  unitholders  that  are  determined  to  be  the  taxpayer.   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;   • 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.     Dundee  International  2013  Annual  Report    |    51         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.   When   determining   whether   the   acquisition   of   an   investment   property   or   a   portfolio   of   investment   properties   is   a   business   combination  or  an  asset  acquisition,  the  Trust  applies  judgment  when  considering  the  following:     • whether  the  investment  property  or  properties  are  capable  of  producing  outputs   • whether  the  market  participant  could  produce  outputs  if  missing  elements  exist   In  particular,  the  Trust  considers  the  following:   • whether  employees  were  assumed  in  the  acquisition   • whether  an  operating  platform  has  been  acquired   Currently,  when  the  Trust  acquires  properties  or  a  portfolio  of  properties  and  does  not  take  on  or  assume  employees  or  does   not  acquire  an  operating  platform,  it  classifies  the  acquisition  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  financial  instruments   The   Trust   makes   estimates   and   assumptions   relating   to   the   fair   value   measurement   of   the   Deferred   Unit   Incentive   Plan,   the   convertible  debenture  conversion  feature,  derivative  instruments,  and  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.   Note  5       FUTURE  ACCOUNTING  POLICY  CHANGES   The  following  are  future  accounting  policy  changes  to  be  implemented  by  the  Trust  in  future  years:   Financial  instruments     IFRS  9,  “Financial  Instruments”  (“IFRS  9”),  was  issued  by  the  IASB  on  November  12,  2009,  and  upon  adoption  will  replace  IAS  39,   “Financial   Instruments:   Recognition   and   Measurement”   (“IAS   39”).   IFRS   9   provides   guidance   on   the   classification   and   measurement   of   financial   assets   and   financial   liabilities   and   the   derecognition   of   financial   instruments.   The   Trust   is   currently   assessing  the  impact  on  the  consolidated  financial  statements  upon  the  adoption  of  IFRS  9.   Financial  instruments:  presentation     IAS   32,   “Financial   Instruments:   Presentation”   (“IAS   32”),   has   been   amended   to   clarify   requirements   for   offsetting   financial   assets   and   financial   liabilities.   The   Trust   will   start   the   application   of   this   amendment   on   January   1,   2014,   and   will   report   the   required  disclosures  on  the  consolidated  financial  statements.   Dundee  International  2013  Annual  Report    |    52         Impairment  of  assets  (limited  scope  amendments  to  disclosure  requirements)   IAS   36,   “Impairment   of   assets”,   has   been   amended   to   change   the   disclosure   requirements   when   the   recoverable   amount   is   determined   based   on   fair   value   less   costs   of   disposal.   The   amendment   is   effective   for   annual   periods   beginning   on   or   after   January  1,  2014  and  should  be  applied  retrospectively.     Accounting  for  levies  imposed  by  governments   IFRIC  21,  “Levies”,  addresses  the  accounting  for  a  liability  to  pay  a  levy  recognized  in  accordance  with  IAS  37,  “Provisions”,  and   the  liability  to  pay  a  levy  whose  timing  and  amount  is  certain.  IFRIC  21  clarifies  that  the  obligating  event  giving  rise  to  a  liability   to  pay  a  levy  is  the  event  identified  in  the  relevant  legislation  that  triggers  the  obligation  to  pay  the  levy.  IFRIC  21  is  effective  for   annual  periods  beginning  on  or  after  January  1,  2014  and  should  be  applied  retrospectively.  The  Trust  is  currently  assessing  the   impact  on  the  consolidated  financial  statements.   Note  6   PROPERTY  ACQUISITIONS   Detailed  below  are  the  acquisitions  completed  during  the  year  ended  December  31,  2013:   For  the  year  ended  December  31,  2013   Hammer  Strasse  30–34,  Hamburg   Neue  Mainzer  Strasse  28  (K26),  Frankfurt   Dillwächterstrasse  5  and  Tübinger  Strasse  11,  Munich   Schlossstrasse  8a–8g,  Hamburg   ABC-­‐Strasse  19  (ABC  Bogen),  Hamburg   Moskauer  Strasse  25,  27,  Düsseldorf   Cäcilienkloster  2,  6,  8,  10,  Cologne   Vordernbergstrasse  6/Heilbronner  Strasse  35  (Z-­‐UP),  Stuttgart   Bertoldstrasse  48,  50/Sedanstrasse  7,  Freiburg   Lörracher  Strasse  16–16a,  Freiburg   Westendstrasse  160,  162/Barthstrasse  24,  26,  Munich   Am  Stadtpark  2/Bayreuther  Str.  33  (Parcside),  Nuremberg   Speicherstrasse  55  (Werfthaus),  Frankfurt   Reichskanzler-­‐Müller-­‐Strasse  21,  23,  25,  Mannheim   Löwenkontor,  Berlin   Marsstrasse  20–22,  Munich   Leitzstrasse  45  (Oasis  lll),  Stuttgart   Feldmühleplatz  1  +  15,  Düsseldorf   Greifswalder  Str.  154–156  and  Erich-­‐Weinert-­‐Str.  145  (Goldpunkt-­‐Haus),   Berlin  –  additional  purchase  price  adjustment   Other  prior  year  acquisitions  cost  adjustments   Total   (1)    Includes  transaction  costs.   Property  type   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   office   Interest   acquired       100%     $   100%       100%       100%       100%       100%       100%       100%       100%       100%       100%       100%       100%       100%       100%     100%       100%       95%       Purchase   price(1)    59,788    86,298    25,920    45,606    99,479    66,705    102,527    40,998    43,015    11,516    32,301    35,175    86,778    32,101    58,258    90,331    46,509    109,632   Date  acquired   January  31,  2013   February  15,  2013   March  2,  2013   March  12,  2013   March  12,  2013   March  12,  2013   March  12,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  13,  2013   March  14,  2013   March  14,  2013   April  30,  2013   June  28,  2013   September  30,  2013   November  29,  2013   100%       100%         $    2,074    547    1,075,558   On  January  31,  2013,  the  REIT  acquired  Hammer  Strasse  30–34,  an  office  property  located  in  Hamburg,  Germany,  for  $59,788.   The  acquisition  was  partially  financed  by  a  new  mortgage  of  $33,069,  net  of  financing  costs  of  $728.   On   February   15,   2013,   the   REIT   acquired   Neue   Mainzer   Strasse   28,   an   office   property   located   in   Frankfurt,   Germany,   for   $86,298.  The  acquisition  was  partially  financed  by  a  new  mortgage  of  $49,892,  net  of  financing  costs  of  $833.     On   March   2,   2013,   the   REIT   acquired   Dillwächterstrasse   5   and   Tübinger   Strasse   11,   an   office   property   located   in   Munich,   Germany,  for  $25,920.  The  acquisition  was  partially  financed  by  a  new  mortgage  of  $14,489,  net  of  financing  costs  of  $204.     From  March  12  to  March  14,  2013,  the  REIT  acquired  the  SEB  Portfolio,  comprising  11  office  properties,  located  in  various  major   cities  in  Germany,  for  $596,201.  The  acquisition  was  partially  financed  by  11  new  mortgages  totalling  $337,901,  net  of  financing   costs  of  $4,633.     Dundee  International  2013  Annual  Report    |    53                                                                     On  April  30,  2013,  the  REIT  acquired  Löwenkontor,  an  office  property  located  in  Berlin,  Germany,  for  $58,258.  The  acquisition   was  partially  financed  by  a  new  mortgage  of  $35,933,  net  of  financing  costs  of  $678.     On   June   28,   2013,   the   REIT   acquired   Marsstrasse   20–22,   an   office   property   located   in   Munich,   Germany,   for   $90,331.   The   acquisition   was   partially   financed   by   a   new   mortgage   of   $52,735,   net   of   financing   costs   of   $674.   The   REIT   drew   on   the   new   mortgage  on  August  27,  2013,  before  any  commitment  fee  became  payable.     On   September   30,   2013,   the   REIT   acquired   Oasis   III,   an   office   property   located   in   Stuttgart,   Germany,   for   $46,509.   The   acquisition   was   partially   financed   by   a   new   mortgage   of   $26,024,   net   of   financing   costs   of   $478.   The   REIT   drew   down   the   mortgage  on  November  15,  2013.   On  November  29,  2013,  the  REIT  acquired  a  94.9%  interest  in  Feldmühleplatz  1  +  15,  an  office  property  located  in  Düsseldorf,   Germany.   The   acquisition   cost   for   the   property   was   $109,632.   The   acquisition   was   partially   financed   by   a   new   mortgage   of   $66,675,  net  of  financing  costs  of  $871.  The  REIT  drew  down  the  mortgage  on  December  23,  2013.   Pursuant  to  the  terms  of  the  purchase  and  sale  agreement  related  to  the  acquisition  of  Greifswalder  Str.  154–156  and  Erich-­‐ Weinert-­‐Str.   145   (Goldpunkt-­‐Haus),   Berlin   on   December   7,   2012,   the   REIT   was   obligated   to   pay   purchase   price   adjustments   contingent  upon  successful  leasing  of  vacant  space  by  the  vendor  over  a  two-­‐year  period.  On  December  7,  2013,  the  REIT  paid   $2,074  for  leasing  completed  during  the  first  year.  Subject  to  additional  new  leasing  completed  by  the  vendor  by  December  7,   2014,  the  REIT  may  be  obligated  to  an  additional  contingent  payment  up  to  a  maximum  of  $1,972.   Detailed  below  are  the  acquisitions  during  the  year  ended  December  31,  2012:   For  the  year  ended  December  31,  2012   Grammophon  Büropark,  Hannover   Karl-­‐Martell-­‐Strasse  60,  Nuremberg   Derendorfer  Allee  4–4a  (doubleU),  Düsseldorf   Greifswalder  Str.  154–156  and  Erich-­‐Weinert-­‐Str.  145          (Goldpunkt-­‐Haus),  Berlin   Am  Sandtorkai  37  (Humboldt-­‐Haus),  Hamburg   Leopoldstrasse  252,  252a  and  252b  (Leo252),  Munich   Total   (1)  Includes  transaction  costs.   Property  type   office   office   office   office   office   office   Interest   acquired     100%   100%     100%     100%     100%     100%     Purchase   price(1)    35,632    65,935    56,620    39,570    37,074    35,830    270,661     $   $   Date  acquired   February  29,  2012   April  26,  2012   July  19,  2012   December  7,  2012   December  31,  2012   December  31,  2012   The  assets  acquired  and  liabilities  assumed  in  the  transactions  were  allocated  as  follows:   For  the  year   For  the  year   ended   ended   December  31,   December  31,   2013   $   $    1,075,558    1,075,558     $     $   2012    270,661    270,661   $   $    1,080,279    763    -­‐    (5,484)    1,075,558     $     $    241,032    812    21,803    7,014    270,661   Investment  properties(1)   Total  purchase  price   The  consideration  paid  consists  of:   Cash   Working  capital  adjustments   Fair  value  of  mortgage  debt  assumed   Net  transaction  costs   Total  consideration   (1)  Includes  transaction  costs.   Dundee  International  2013  Annual  Report    |    54                                                                                                                                         Note  7   INVESTMENT  PROPERTIES   Balance  at  beginning  of  year   Additions:     Acquisitions     Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Amortization  of  lease  incentives   Disposals   Reclassified  to  assets  held  for  sale   Fair  value  adjustments   Foreign  currency  translation   Balance  at  end  of  year   For  the  year     ended     December  31,       2013      1,182,757     $   For  the  year   ended   December  31,     2012    941,442   $    1,075,558      5,821      8,246      (616)      (23,943)      (21,147)      (59,223)      222,791      2,390,244     $    270,661    2,391    1,011    (17)    (7,415)    -­‐    (23,349)    (1,967)    1,182,757   $   The  REIT  has  determined  that  it  has  two  asset  classes  of  investment  properties  reflecting  their  distinct  nature,  characteristics   and  risks.     Initial  Properties   The  Initial  Properties  consist  of  the  properties  that  were  acquired  on  August  3,  2011.  These  properties  consist  of  national  and   regional   administration   offices,   mixed   use   retail,   banking   and   distribution   properties   and   regional   logistics   headquarters   of   Deutsche  Post.  The  properties  are  generally  situated  in  city  centres  and  geographically  dispersed  throughout  Germany  and  are   smaller  and  older  than  the  properties  acquired  in  2012  and  2013.   Acquisition  Properties   These   investment   properties   were   acquired   during   2012   and   2013   and   consist   of   high-­‐quality   office   buildings   located   in   Germany’s  largest  office  markets  and  are  generally  newer  or  recently  refurbished  buildings.   Balance  as  at  January  1,  2013   Purchase  of  investment  properties:     Acquisitions  of  properties   Subsequent  expenditure  on  investment  property   Lease  incentives  and  initial  direct  leasing  costs   Total  additions  to  investment  properties   Disposals  of  investment  properties:   Sales  of  investment  properties   Transfers  to  disposal  groups  classified  as  held  for  sale   Total  disposals  of  investment  properties   Gains  and  losses  included  in  net  income:     Change  in  fair  value  of  investment  properties     Amortization  of  initial  direct  leasing  costs   Total  losses  included  in  net  income   Gains  and  losses  included  in  other  comprehensive  income:   Foreign  currency  translation  gain   Total  gains  included  in  other  comprehensive  income   Balance  as  at  December  31,  2013   Changes  in  unrealized  losses  included  in  net  income  for  the  year  ended     December  31,  2013:     Change  in  fair  value  of  investment  properties   $   $   Dundee  International  2013  Annual  Report    |    55   Total      1,182,757     $   $   Initial   Properties    919,814     $   Acquisition   Properties    262,943    1,075,558      5,821      8,246      1,089,625      (23,943)      (21,147)      (45,090)      (59,223)      (616)      (59,839)      -­‐      5,057      6,543      11,600      (23,943)      (21,147)      (45,090)      (7,003)      (530)      (7,533)      1,075,558    764    1,703    1,078,025    -­‐    -­‐    -­‐    (52,220)    (86)    (52,306)    222,791      222,791      2,390,244     $    106,421      106,421      985,212     $    116,370    116,370    1,405,032    (59,365)     $    (7,145)     $    (52,220)                                                                                                                                                                                                                                                                                                                     Straight-­‐line   rent   receivable,   which   resulted   from   free   rents   and   rent   step-­‐ups   accrued   to   rental   revenue,   of   $1,896   (December  31,  2012  –  $278),  has  been  included  in  other  non-­‐current  assets.   During   the   year   ended   December   31,   2013,   18   investment   properties   were   acquired   for   $1,075,558   (including   transaction   costs);  refer  to  Note  6  for  details  of  the  acquisitions.   During  the  year  ended  December  31,  2013,  the  REIT  disposed  of  15  investment  properties  valued  at  $23,943.  These  properties   were  acquired  in  2011  as  part  of  the  Initial  Properties.  Net  proceeds  of  $22,801  (December  31,  2012  –  $7,070)  were  received  on   these  sales  and  a  loss  of  $1,142  (December  31,  2012  –  $320)  was  recorded  in  connection  with  transaction  costs.       As   at   December   31,   2013,   273   of   the   Initial   Properties   were   valued   by   external   appraisers   using   the   discounted   cash   flow   method,  representing  42%  of  the  fair  value  of  investment  properties.  In  relation  to  the  Acquisition  Properties,  management  has   reviewed  key  assumptions  and  circumstances  underlying  the  appraisals  at  the  date  of  acquisition.  As  a  result,  the  six  properties   that   were   acquired   in   2012   were   subject   to   a   valuation   performed   by   management   internally   using   the   direct   capitalization   method,  representing  13%  of  the  fair  value  of  the  portfolio  at  the  end  of  2013.  The  key  assumptions  and  circumstances  relating   to  properties  acquired  during  2013  were  determined  to  be  valid  and  no  changes  were  made  to  the  values  on  acquisition.   The  change  in  fair  value  of  investment  properties  comprises  the  following:   Increase  in  fair  value  as  a  result  of  valuation  update   Building  expenditures  capitalized  during  the  year   Leasing  expenditures  capitalized  during  the  year   Transaction  costs  capitalized  on  acquisition   Straight-­‐line  rent,  amortization  of  lease  incentives  and  other   Total   14,436     $    (5,562)      (8,246)      (59,126)      (725)      (59,223)     $   $   $   Initial   Properties   4,841     $    (5,015)      (6,543)      -­‐      (286)      (7,003)     $   Acquisition   Properties    9,595    (547)    (1,703)    (59,126)    (439)    (52,220)   As   at   December   31,   2013,   the   REIT   has   entered   into   binding   purchase   and   sale   agreements   to   sell   six   properties   valued   at   $21,842.  After  adjusting  for  costs  to  sell  of  $695,  $21,147  has  been  classified  as  assets  held  for  sale  (Note  17).   Future  minimum  contractual  rent  (excluding  service  charges)  under  current  operating  leases  is  as  follows:   Less  than  1  year   1–5  years   Longer  than  5  years   Total   (1)  Includes  income  from  head  lease.   December  31,   2013(1)    174,549    498,837    205,825    879,211   $   $   Dundee  International  2013  Annual  Report    |    56                                                                       Fair  value  hierarchy   Investment   properties   measured   at   fair   value   in   the   statement   of   financial   position   are   categorized   by   level   according   to   the   significance  of  the  inputs  used  in  making  the  measurements.   Recurring  measurements   Investment  properties   Initial  Acquisitions   Acquisition  Properties   Total   Non-­‐recurring  measurements   Properties  reclassified  to  assets  held  for  sale   Quoted  prices   in     active  markets   for   identical     instruments     (Level  1)     Significant   other   observable     inputs     (Level  2)     Significant   unobservable     inputs   (Level  3)    -­‐     $    -­‐      -­‐      -­‐     $    -­‐     $    -­‐      -­‐      985,212    1,405,032    2,390,244    -­‐     $    21,842   December  31,       2013     $    985,212     $    1,405,032      2,390,244     $    21,147     $   The   REIT’s   policy   is   to   recognize   transfers   into   and   transfers   out   of   fair   value   hierarchy   levels   as   of   the   date   of   the   event   or   change   in   circumstances   that   caused   the   transfer.   There   were   no   transfers   in   or   out   of   Level   3   fair   value   measurements   for   investment  properties  during  the  period.     Valuation  techniques  underlying  management’s  estimates  of  fair  value   Fair   values   for   investment   properties   are   calculated   using   both   the   direct   income   capitalization   and   discounted   cash   flow   method,  which  results  in  these  measurements  being  classified  as  Level  3  in  the  fair  value  hierarchy.  The  REIT’s  management  is   responsible   for   determining   fair   value   measurements   included   in   the   financial   statements,   including   Level   3   fair   value   of   investment   properties.   Investment   properties   are   valued   on   a   highest   and   best   use   basis.   For   all   of   the   REIT’s   investment   properties,  the  current  use  is  considered  to  be  the  highest  and  best  use.   Investment   properties   with   a   fair   value   of   $1,405,032   (Acquisition   Properties)   have   been   valued   using   the   direct   income   capitalization  method.  In  applying  this  method,  the  stabilized  net  operating  income  (“NOI”)  of  each  property  is  divided  by  an   appropriate  capitalization  rate.  The  following  are  the  significant  assumptions  used  in  determining  the  value:   Capitalization  rate   based   on   actual   location,   size   and   quality   of   the   property   and   taking   into   account   any   available   market  data  at  the  valuation  date.     Stabilized  NOI   revenue  less  property  operating  expenses  adjusted  for  items  such  as  new  leasing,  average  lease  up   costs,  long-­‐term  vacancy  rates,  non-­‐recoverable  capital  expenditures,  management  fees,  straight-­‐line   rents  and  other  non-­‐recurring  items.   Generally,  an  increase  in  stabilized  NOI  will  result  in  an  increase  in  the  fair  value  of  an  investment  property.  An  increase  in  the   capitalization   rate   will   result   in   a   decrease   in   the   fair   value   of   an   investment   property.   The   capitalization   rate   magnifies   the   effect  of  a  change  in  stabilized  NOI,  with  a  lower  capitalization  rate  resulting  in  a  greater  impact  of  a  change  in  stabilized  NOI   than  a  higher  capitalization  rate.   Investment  properties  with  a  value  of  $985,212  (Initial  Properties)  were  valued  using  the  discounted  cash  flow  (“DCF”)  method.     In  applying  this  method,  the  income  and  expenditures  of  a  specific  property  are  projected  assuming  a  10-­‐year  hold  period  plus   the  forecasted  net  proceeds  from  the  re-­‐sale  of  the  property  at  the  end  of  the  hold  period  using  a  discount  rate  reflecting  the   risks  of  the  property  being  valued.  The  most  significant  assumptions  incorporated  into  the  DCF  analysis  include  growth  rates,   exit  capitalization  rates  and  discount  rates:   Discount  rate   reflects  the  internal  rate  of  return  of  a  specific  property.  The  discount  rate  is  determined  by  analyzing   sales   of   similar   properties   and   yields   of   alternative   investments.   Consideration   is   given   to   10-­‐year   bond   yields   and   yields   of   high-­‐quality   corporate   bonds   to   which   an   upward   adjustment   is   made   to   reflect  the  increased  risk  associated  with  real  estate  investments  and  the  specific  risk  associated  with   each  asset.       Dundee  International  2013  Annual  Report    |    57                                                                                                                                                                                                                   Exit  capitalization  rate   based  on  the  initial  rate  of  return  applicable  to  a  property  adjusted  slightly  upward  to  reflect  the  risk   in  negotiating  new  leases,  older  building  age  and  the  risk  associated  with  a  future  sale.     Growth  rate   based   on   the   average   increase   in   the   consumer   price   index   for   Germany   over   the   past   three   years   and   ranges   from   1.5%   to   2.1%.   The   weighted   average   growth   rate   used   for   the   Initial   Properties     is  2.0%.   Valuation  processes   Initial  Properties   At  December  31,  2013  and  2012,  the  REIT  obtained  external  valuations  for  the  Initial  Properties  including  assets  held  for  sale,   representing  approximately  42%  of  the  investment  property  portfolio.  In  2013,  properties  with  a  value  of  $1,006,359  (€686,700)   were   valued   externally   (2012   –   $919,814   (€701,185)).   The   external   valuations   are   prepared   by   independent   professionally   qualified  appraisers  who  hold  a  recognized,  relevant  professional  qualification  and  have  recent  experience  in  the  location  and   category  of  the  respective  property.  For  properties  subject  to  an  independent  valuation  report,  the  management  team  verifies   all  major  inputs  to  the  valuation  and  reviews  the  results  with  the  independent  appraisers.   Significant  unobservable  inputs  in  Level  3  valuations  related  to  the  Initial  Properties  including  assets  held  for  sale  are  as  follows:   Valuation  method   Discounted  cash  flow   Input   Discount  rate   Exit  capitalization  rate   Cash  flow   Range   5.9%–10.8%   5.1%–9.3%   n/a   December  31,  2013   Average   8.3%   7.2%   $67,414   If   both   the   discount   rate   and   exit   capitalization   rate   were   to   increase   by   25   bps,   the   value   of   the   Initial   Properties   would   decrease  by  $19,109.  If  both  the  discount  rate  and  exit  capitalization  rate  were  to  decrease  by  25  bps,  the  value  of  the  Initial   Properties  would  increase  by  $19,562.   Acquisition  Properties   At  December  31,  2013  and  2012,  the  REIT  performed  internal  valuations  for  the  Acquisition  Properties.  In  2013,  properties  with   a  value  of  $1,405,032  (€958,739)  were  subject  to  internal  valuations  (2012  –  $262,943  (€200,444)).  The  valuations  are  prepared   by   management   with   inputs   based   on   market   observations   and   corroborated,   in   specific   cases,   through   discussions   with   professionally  qualified  appraisers.       Significant  unobservable  inputs  in  Level  3  valuations  related  to  the  Acquisition  Properties  are  as  follows:   Valuation  method   Direct  income  capitalization   Input   Capitalization  rate   Stabilized  NOI   Range   5.8%–8.3%   n/a   December  31,  2013   Weighted  average   6.7%   $94,480   If   the   capitalization   rate   were   to   increase   by   25   bps,   the   value   of   Acquisition   Properties   would   decrease   by   $50,800.   If   the   capitalization  rate  were  to  decrease  by  25  bps,  the  value  of  Acquisition  Properties  would  increase  by  $54,786.   Note  8   AMOUNT  IN  ESCROW  AND  DEFERRED  RENT   Amount  in  escrow   Less:  Current  portion   Non-­‐current  portion   Deferred  rent     Less:  Current  portion   Non-­‐current  portion   Dundee  International  2013  Annual  Report    |    58   December  31,     December  31,     2013      6,220      6,220      -­‐      6,220      6,220      -­‐     $   $   $   $   2012    17,678    12,110    5,568    17,678    12,110    5,568   $   $   $   $                                                                         On  July  1,  2012,  Deutsche  Post  terminated  17  leases  with  respect  to  its  2012  termination  rights.  In  light  of  these  terminations,   the  vendor  of  the  properties  entered  into  a  lease  agreement  with  the  Trust  for  the  space  and  has  paid  an  amount  of  $22,372   (€17,329)   plus   all   interest   accrued   thereon   for   the   rent   covering   the   period   commencing   on   July   1,   2012   to,   and   including,   June  30,  2014.  This  amount  was  set  aside  by  the  vendor  in  a  bank  account  out  of  which  the  REIT  has  been  and  will  be  paid  on  a   monthly  basis,  since  July  1,  2012,  amounts  representing  the  net  rent  payable  for  two  years  plus  prepayments  of  operating  costs.   On  July  1,  2013,  Deutsche  Post  terminated  one  additional  lease,  pursuant  to  its  2012  termination  rights.  This  termination,  for   which  the  Trust  received  an  additional  payment  from  the  vendor  of  approximately  $218  (€169),  became  effective  as  at  July  1,   2013.  During  the  year  ended  December  31,  2013,  the  Trust  has  received  $12,614  out  of  escrow.   Note  9   OTHER  NON-­‐CURRENT  ASSETS   Equity  accounted  investment   Fixtures  and  computer  equipment   Straight-­‐line  rent  receivable   Total   December  31,     2013      240    152    1,896    2,288   $   $     $     December  31,     2012    192    78    278    548     $   Equity  accounted  investment   The   Trust   participates   in   a   jointly   controlled   corporate   entity   (the   “joint   venture”)   with   other   parties   and   accounts   for   its   interests  using  the  equity  accounting  method.     Details  of  the  Trust’s  joint  venture  are  as  follows:   Name   Lorac  Investment  Management  S.à  r.l.   Note  10   AMOUNTS  RECEIVABLE     Trade  receivables   Less:  Provision  for  impairment  of  trade  receivables   Trade  receivables,  net   Other  amounts  receivable     Total   Principal  activity   Investment  management   Location   Luxembourg   Ownership  interest  at   December  31,  2013   50%   $   December  31,     2013      8,071    (655)    7,416    10,733     $   $    18,149     $   December  31,   2012    247    (239)    8    4,814    4,822   As   at   December   31,   2013,   other   amounts   receivable   include   amounts   receivable   from   tenants   regarding   operating   cost   recoveries  of  $7,358.   The  carrying  amount  of  amounts  receivable  approximates  fair  value  due  to  their  current  nature.  As  at  December  31,  2013,  trade   receivables   of   approximately   $916   (December   31,   2012   –   $nil)   were   past   due   but   not   considered   impaired   as   the   Trust   has   ongoing  relationships  with  these  tenants  and  the  aging  of  these  trade  receivables  is  not  indicative  of  expected  default.   Dundee  International  2013  Annual  Report    |    59                                                                                                 Note  11   DEBT   Mortgage  debt   Convertible  debentures   Term  loan  credit  facility   Total   Less:  Current  portion   Non-­‐current  debt   December  31,     December  31,     $     $   2013    825,014    150,326    448,972    1,424,312    20,356   2012    151,862    148,428    426,540    726,830    2,711   $    1,403,956     $    724,119   First-­‐ranking  mortgages  on  all  of  the  investment  properties  have  been  provided  as  security  for  either  the  mortgage  debt  or  the   term  loan  credit  facility.   Mortgage  debt   On   January   31,   2013,   the   Trust   obtained   a   mortgage   with   a   principal   balance   of   €24,900   ($33,797)   at   a   fixed   interest   rate   of   2.41%  per  annum,  maturing  on  January  31,  2018,  in  connection  with  the  acquisition  of  Hammer  Strasse  30–34,  Hamburg.  The   mortgage  requires  quarterly  repayments  with  a  principal  amortization  of  2.0%  per  annum  of  the  initial  loan  amount.     On  February  15,  2013,  the  Trust  obtained  a  mortgage  with  a  principal  balance  of  €37,700  ($50,725)  at  a  fixed  interest  rate  of   2.92%  per  annum,  maturing  December  31,  2022,  on  the  newly  acquired  property,  Neue  Mainzer  Strasse  28  (K26),  Frankfurt.  The   mortgage  requires  quarterly  repayments  with  principal  amortization  of  1.7%  based  on  an  annuity  payment  plan.     On  March  2,  2013,  the  Trust  obtained  a  mortgage  with  a  principal  balance  of  €11,000  ($14,693)  at  a  fixed  interest  rate  of  2.68%   per  annum,  maturing  February  29,  2020,  on  the  newly  acquired  property,  Dillwächterstrasse  5  and  Tübinger  Strasse  11,  Munich.   The  mortgage  requires  monthly  repayments  with  principal  amortization  of  2.5%  per  annum  throughout  the  term.     From  March  12  to  March  14,  2013,  the  Trust  obtained  11  mortgages  with  a  total  principal  balance  of  €256,950  ($342,534)  at  a   weighted  average  fixed  rate  of  2.54%  per  annum,  maturing  from  March  7,  2018  to  March  14,  2023,  on  acquisition  of  the  SEB   Portfolio  of  properties.  The  mortgage  requires  quarterly  payments  with  principal  repayments  of  1.5%  to  2.5%  per  annum  of  the   initial  loan  amount.     On   April   30,   2013,   the   Trust   obtained   a   mortgage   with   a   principal   balance   of   €27,600   ($36,611)   at   a   fixed   rate   of   2.37%   per   annum,   maturing   March   29,   2018,   on   the   newly   acquired   property,   Löwenkontor,   Berlin.   The   mortgage   requires   quarterly   repayments  with  principal  amortization  of  2.0%  per  annum  on  the  initial  loan  amount.     On  August  26,  2013,  the  Trust  drew  on  a  mortgage  with  a  principal  balance  of  €38,000  ($53,409)  at  a  fixed  rate  of  2.69%  per   annum,  maturing  on  June  30,  2020,  in  connection  with  the  acquisition  of  Marsstrasse  20–22,  Munich.  The  mortgage  requires   quarterly  repayments  with  principal  amortization  of  2%  per  annum  throughout  the  term.       On  November  15,  2013,  the  Trust  drew  on  a  mortgage  with  a  principal  balance  of  €18,800  ($26,502)  at  a  fixed  rate  of  2.73%  per   annum,  maturing  on  October  31,  2018,  in  connection  with  the  acquisition  of  Leitzstrasse  45  (Oasis  III),  Stuttgart.  The  mortgage   requires  quarterly  repayments  with  principal  amortization  of  2%  per  annum  throughout  the  term.       On  December  23,  2013,  the  Trust  drew  on  a  mortgage  with  a  principal  balance  of  €46,500  ($67,546)  at  a  fixed  rate  of  2.32%  per   annum,   maturing   on   November   26,   2018,   in   connection   with   the   acquisition   of   Feldmühleplatz,   Düsseldorf.   The   mortgage   requires  quarterly  repayments  with  principal  amortization  of  1.5%  per  annum  throughout  the  term.       Dundee  International  2013  Annual  Report    |    60                                                         Convertible  debentures   On   August   3,   2011,   the   Trust   issued   a   $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   debenture   holder   into   76.9231   Units   per   one   thousand   dollars   of   face   value,   representing   a   conversion   price   of   $13.00   per   REIT   Unit.   On   or   after   August   31,   2014,   and   prior   to   August   31,   2016,   the   Debentures  may  be  redeemed  by  the  Trust,  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   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.  In  addition,  the  Trust  allocated  $8,106  to  the  conversion  feature  upon  initial  recognition,  which  was  deducted   from   the   principal   balance   and   will   be   accreted   to   the   principal   amount   of   the   Debenture   over   its   term.   As   at   December   31,   2013,  the  outstanding  principal  amount  is  $161,000  (December  31,  2012  –  $161,000).   Term  loan  credit  facility   On  August  3,  2011,  the  Trust  obtained  a  term  loan  credit  facility  (the  “Facility”)  for  gross  proceeds  of  €328,500  ($448,395).  Costs   relating  to  the  Facility  were  $10,896.  These  costs  were  reduced  by  proceeds  of  $9,555  received  from  the  vendor  to  compensate   the  Trust  for  higher  than  expected  financing  costs.  The  Facility  initially  had  a  term  of  five  years,  which  could  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   (the   “Fixed   Rate   Portion”)  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,  2013,  the  Trust  paid   a   rate   of   4.24%   (December   31,   2012   –   4.05%)   on   the   fixed   portion   of   the   Facility   and   a   rate   of   3.37%   (December   31,   2012   –   3.37%)   on   the   variable   portion   of   the   Facility,   resulting   in   a   blended   rate   of   4.09%   as   at   December   31,   2013   (December   31,     2012  –  3.91%).   No  amortization  of  principal  under  the  Facility  is  required  during  the  first  three  years  of  the  Facility  term.  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).  Effective  August  3,  2013,  the  Trust  is  required  to  pay  the  additional  interest  of  1%  on  the   portion  of  the  €100,000  plus  a  15%  prepayment  amount,  less  any  amounts  repaid.  The  applicable  prepayment  fee  decreases  to   0.6%  for  repayments  made  prior  to  August  3,  2014,  0.25%  for  repayments  made  prior  to  August  3,  2015  and  no  repayment  fee   for   repayments   made   in   the   final   year   of   the   Facility.   During   the   year   ended   December   31,   2013,   the   Trust   repaid   €10,115   ($14,007)  in  connection  with  the  disposition  of  15  properties  including  prepayment  amounts,  in  accordance  with  the  terms  of   the   Facility.   In   addition,   on   August   16,   2013,   the   Trust   made   a   lump   sum   repayment   of   €2,000   ($2,772).   For   the   year   ended   December  31,  2012,  the  Trust  repaid  €2,665  ($3,426)  in  connection  with  the  disposition  of  five  properties.  As  a  result  of  these   dispositions,   the   €100,000   plus   15%   prepayment   portion   has   been   reduced   to   €100,221   as   at   December   31,   2013,   of   which   €49,300  ($72,249)  was  allocated  to  the  Fixed  Rate  Portion  of  the  Facility  and  the  remainder  was  allocated  to  the  variable  rate   portion  of  the  debt.  Factoring  the  additional  1%  the  Trust  has  to  pay  on  the  €100,221  ($146,874),  the  Trust  paid  a  rate  of  4.24%   on   the   fixed   rate   portion   of   €262,800   and   a   rate   of   3.37%   on   the   €50,921   variable   portion   of   the   Facility   as   at     December  31,  2013.       As  at  December  31,  2013,  €6,908  ($10,123)  of  the  variable  rate  portion  of  the  Facility  (net  of  deferred  financing  costs  –  €6,896   ($10,106))  has  been  allocated  to  liabilities  related  to  assets  held  for  sale.  The  REIT  had  identified  six  properties  as  held  for  sale,   thereby  the  allocated  amounts  of  the  Facility  secured  by  those  properties  were  reclassified  as  liabilities  related  to  assets  held   for  sale  (Note  17).   The  Facility  requires  certain  bank  accounts  to  be  pledged,  and  that  all  net  rental  income  from  the  Initial  Properties  be  paid  into   a   rent   collections   account   established   by   the   Trust,   to   be   released   only   after   budgeted   non-­‐recoverable   operating   expenses   (including  an  agreed  property  and  asset  management  fee)  are  paid.   Dundee  International  2013  Annual  Report    |    61   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  are  calculated  on  a  quarterly  basis.  The  Facility  agreement  requires  the  debt  service  coverage   ratio   to   be   equal   to   or   above   145%   at   each   interest   payment   date.   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  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.  As  at  December  31,  2013,  the  Trust  was  in  compliance  with  its  loan  covenants.     In  addition,  the  Facility  requires  that  DAM  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,  2013,  the  Trust  is  in  compliance  with  the  requirements.   Revolving  credit  facility   On   October   10,   2013,   the   REIT   entered   into   an   agreement   with   a   Canadian   bank.   Under   the   agreement,   the   revolving   credit   facility   stands   at   €25,000.   The   interest   rate   on   any   Canadian   dollar   advances   is   prime   plus   200   basis   points   and/or   bankers’   acceptance   rates   plus   300   basis   points.   For   euro   advances,   the   rate   is   300   basis   points   over   the   three-­‐month   EURIBOR   rate.   Total  financing  costs  incurred  amounted  to  $543  as  at  December  31,  2013.  The  revolving  credit  facility  agreement  requires  the   Trust  to  maintain  a  debt-­‐to-­‐book  value  rating  not  to  exceed  0.6:1;  a  minimum  interest  coverage  ratio  of  2:1;  and  a  minimum  net   worth  of  $700,000.  The  agreement  also  required  the  REIT  to  provide  a  pledge  of  10%  of  outstanding  equity  of  a  subsidiary  as   collateral.   The   revolving   credit   facility   has   a   term   of   two   years,   expiring   September   25,   2015.   As   at   December   31,   2013,   the   outstanding   balance   of   the   credit   facility   was   $nil   and   the   Trust   is   in   compliance   with   the   covenants   of   the   revolving   credit   facility.     The  weighted  average  interest  rates  for  the  fixed  and  floating  components  of  debt  are  as  follows:   Face  interest  rates     Weighted  average     effective  interest  rate     December  31,   December  31,   2012   2013     December  31,   December  31,   2012   2013   Maturity     dates     December  31,     2013     Debt  amount   December  31,     2012   Fixed  rate   Mortgage  debt   Term  loan  credit  facility(1)   Convertible  debentures   Total  fixed  rate  debt   Variable  rate    82,512   Term  loan  credit  facility    82,512   Total  variable  rate  debt    726,830   Total  debt   (1)  As  at  December  31,  2013,  86%  of  the  term  loan  credit  facility  is  subject  to  an  interest  rate  swap  in  place  until  August  3,  2016,  pursuant  to  the  term  loan  credit    825,014   $    384,604    150,326    1,359,944    64,368    64,368    1,424,312   $    151,862    344,028    148,428    644,318   2015–2023   2016   2018   2.84%   4.28%   7.31%   3.74%   2.57%   4.24%   5.50%   3.37%   2.69%   4.12%   7.31%   4.52%   2.66%   4.05%   5.50%   4.05%   3.40%   3.40%   3.72%   3.37%   3.37%   3.37%   3.37%   3.37%   3.98%   3.43%   3.43%   4.39%   2016     $     $   facility  agreement,  and  has  been  presented  as  fixed  rate  debt.   The  scheduled  principal  repayments  and  debt  maturities  are  as  follows:   2014   2015   2016   2017   2018   2019  and  thereafter   Acquisition  date  fair  value  adjustments   Transaction  costs   Mortgages    16,431    37,584    16,797    106,747    343,690    313,948    835,197    $    $   $   $   Term  debt    3,925    9,628    436,081    -­‐    -­‐    -­‐    449,634     $     $   Convertible   debentures    -­‐    -­‐    -­‐    -­‐    161,000    -­‐    161,000   Total    20,356    47,212    452,878    106,747    504,690    313,948    1,445,831    (5,387)    (16,132)    1,424,312     $     $     $   Dundee  International  2013  Annual  Report    |    62                                                                                                                                                                                                                                                                                                                                                                                                                     Note  12   DERIVATIVE  FINANCIAL  INSTRUMENTS   Interest  rate  swaps  (Note  25)   Interest  rate  cap  (Note  25)   Foreign  exchange  forward  contracts  (Note  25)   Conversion  feature  of  the  Debentures  (Notes  11  and  25)   Total   Less:  Current  portion   Non-­‐current  portion   The  movement  in  the  conversion  feature  on  the  convertible  debentures  was  as  follows:   Balance  at  beginning  of  period   Remeasurement  of  conversion  feature   Balance  at  end  of  period   December  31,     2013   December  31,     2012   $    13,764     $    18,513    (18)    15,941    384    30,071    13,772    16,299     $    (11)    429    4,145    23,076    4,441    18,635   $   For  the  year   ended   December  31,   2013     $     $    4,145    (3,761)    384   The  Trust  currently  has  foreign  exchange  forward  contracts  to  sell  €5,622  each  month  from  January  2014  to  June  2014,  €5,222   each  month  from  July  2014  to  May  2015,  €3,922  in  June  2015,  €2,372  each  month  from  July  2015  to  September  2015,  €2,050   each  month  from  October  2015  to  May  2016  and  €1,800  in  June  2016,  at  an  average  exchange  rate  of  $1.334  per  euro.   Note  13   DEFERRED  UNIT  INCENTIVE  PLAN   The  movement  in  the  Deferred  Unit  Incentive  Plan  balance  (see  Note  16)  was  as  follows:   As  at  January  1,  2012   Compensation  during  the  period   Asset  management  fees  during  the  period   Issue  of  deferred  units   Remeasurements  of  carrying  value   As  at  December  31,  2012   Compensation  during  the  period   Asset  management  fees  during  the  period   Issue  of  deferred  units   Remeasurements  of  carrying  value   As  at  December  31,  2013   $   $    945    628    1,907    (138)    287    3,629    1,313    2,113    (164)    (585)    6,306   On   August   3,   2011,   DAM   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  DAM  vest  annually  over  five  years,  commencing  on  the  fifth  anniversary  date  of   the  units  being  granted.   On  termination  of  the  Asset  Management  Agreement,  unvested  trust  units  granted  to  DAM  vest  immediately.   Dundee  International  2013  Annual  Report    |    63                                                                                                                                             Deferred  units  granted  to  DAM  for  payment  of  asset  management  fees  are  initially  measured,  and  subsequently  remeasured  at   each  reporting  date,  at  fair  value.  The  deferred  units  are  considered  to  be  restricted  stock,  and  the  fair  value  is  estimated  by   applying  a  discount  to  the  market  price  of  the  corresponding  Units.  The  discount  is  estimated  based  on  a  hypothetical  put-­‐call   option,  valued  using  a  Black  Scholes  option  pricing  model,  which  takes  into  consideration  the  volatility  of  the  Canadian  REIT  and   the  German  real  estate  equity  markets,  the  respective  holding  period  of  the  deferred  units,  and  the  risk-­‐free  interest  rate.  The   carrying  value  of  the  deferred  units  granted  to  DAM  is  most  sensitive  to  changes  in  volatility  and  the  relative  weighting  of  the   put  option  and  call  option  values.   During   the   year   ended   December   31,   2013,   $2,113   of   asset   management   fees   were   recorded   (December   31,   2012   –   $1,907)   based  on  the  fair  value  of  the  deferred  units  issued,  with  an  appropriate  discount  to  reflect  the  restricted  period  of  exercise,   and   are   included   in   general   and   administrative   expenses.   The   fees   were   settled   by   the   grant   of   373,160   deferred   trust   units   during  the  period  (December  31,  2012  –  330,423)  and  34,031  deferred  trust  units  granted  on  January  1,  2014  (January  1,  2013  –   26,747).  As  at  January  1,  2014,  912,078  unvested  deferred  trust  units  and  income  deferred  units  (January  1,  2013  –  504,887)   were  outstanding  with  respect  to  the  asset  management  fee.  Compensation  expense  of  $1,313  for  the  period  (December  31,   2012  –  $628)  was  also  included  in  general  and  administrative  expenses.   On  November  8,  2011  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,   63,000   relate   to   trustees   and   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   values   for   the   deferred   units   of   the   two   grants   were   $9.65   and   $9.84,   respectively.   On   February   21,   2013,   174,500   deferred   trust   units   were   granted   to   senior   management   and   trustees.   Of   the   174,500   units   granted,   102,000   relate   to   trustees   and   key   management   personnel.   The   grant   date   value   for   the   deferred   trust   units   of   the   grant  was  $11.04.   On  May  9,  2013,  25,347  deferred  trust  units  were  granted  to  trustees  who  elected  to  receive  their  2013  annual  retainer  in  the   form  of  deferred  units  rather  than  cash.   Note  14   AMOUNTS  PAYABLE  AND  ACCRUED  LIABILITIES   Trade  payables   Accrued  liabilities  and  other  payables   Accrued  interest   Total   Note  15   DISTRIBUTIONS   The  following  table  breaks  down  distribution  payments  for  the  year  ended  December  31:   Paid  in  cash   Paid  by  way  of  reinvestment  in  Units   Less:  Payable  at  December  31,  2012  (December  31,  2011)   Plus:  Payable  at  December  31,  2013  (December  31,  2012)   Total   $   $   $   December  31,     December  31,   2013    9,447    19,589    3,904    32,940     $     $   2012    7,398    15,551    3,914    26,863     $   2013    67,530    10,145    (4,816)    7,314   $    80,173     $   2012    40,033    1,644    (2,925)    4,816    43,568   The   distribution   for   the   month   of   December   2013   in   the   amount   of   $0.0667   per   unit,   declared   on   December   18,   2013   and   payable  on  January  15,  2014,  amounted  to  $7,314.  The  amount  payable  as  at  December  31,  2013  was  satisfied  on  January  15,   2014   by   $6,041   cash   and   $1,273   through   the   issuance   of   145,291   Units.   The   distribution   for   the   month   of   January   2014   was   declared  in  the  amount  of  $0.0667  per  unit,  payable  on  February  15,  2014.   The  Trust  declared  distributions  of  $0.0667  per  unit  per  month  for  the  months  from  January  2013  to  December  2013.   Dundee  International  2013  Annual  Report    |    64                                                                                   Note  16   EQUITY   Total   December  31,  2013     December  31,  2012   Number  of  Units     109,698,977     $   Amount    1,034,005     Number  of  Units   72,232,494     $   Amount    596,078   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.   Public  offering  of  REIT  Units   On  March  5,  2013,  the  REIT  completed  a  public  offering  of  23,230,000  Units,  including  an  over-­‐allotment  option,  at  a  price  of   $10.90  per  unit.  The  Trust  received  gross  proceeds  of  $253,207.  Costs  related  to  the  offering  totalled  $11,218  and  were  charged   directly  to  unitholders’  equity.   On  June  6,  2013,  the  Trust  completed  a  public  offering  of  11,700,000  Units  at  a  price  of  $10.70  per  unit.  On  June  24,  2013,  the   Trust  issued  an  additional  1,445,000  Units  at  a  price  of  $10.70  per  unit  pursuant  to  the  exercise  by  the  underwriters  of  a  portion   of   their   over-­‐allotment   option.   The   Trust   received   gross   proceeds   of   $140,652.   Costs   related   to   the   offering   totalling   $6,648   were  charged  directly  to  unitholders’  equity.     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   is   typically   on   or   about   the   15th   day   of   the   month   following   the   declaration.   For   the   year   ended   December   31,   2013,   1,066,792   Units   were   issued   pursuant   to   the   DRIP   for   $10,145   (December  31,  2012  –  157,432  Units  for  $1,644).   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.   For   the   year   ended   December  31,  2013,  7,059  Units  were  issued  under  the  Unit  Purchase  Plan  for  $72  (December  31,  2012  –  3,371  Units  for  $36).   Deferred  Unit  Incentive  Plan   The  Deferred  Unit  Incentive  Plan  (“DUIP”)  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   trust   units   granted   to   DAM   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.   For   the   year   ended   December   31,   2013,   17,632   Units   were   issued   to   officers   and   employees   pursuant   to   the   Deferred   Unit   Incentive  Plan  for  $164  (December  31,  2012  –  12,875  Units  for  $138).   Dundee  International  2013  Annual  Report    |    65                                                           Note  17   ASSETS  HELD  FOR  SALE   As  at  December  31,  2013,  the  Trust  classified  six  properties  as  held  for  sale.  As  at  December  31,  2013,  management  had   committed  to  a  plan  of  sale,  and  therefore  the  properties  have  been  reclassified  as  current  assets  held  for  sale.       Investment  properties   Other  non-­‐current  assets   Prepaid  expenses  and  other  assets   Assets  held  for  sale   Debt   Amounts  payable  and  accrued  liabilities   Liabilities  related  to  assets  held  for  sale   Net  assets   Note  18   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   Interest  on  mortgage  debt   Interest  on  bank  indebtedness   Amortization  of  financing  costs,  discounts  and  fair  value  adjustments  on  acquired  debt   Interest  on  Exchangeable  Notes   Interest  expense   Note  19   FAIR  VALUE  ADJUSTMENTS  TO  FINANCIAL  INSTRUMENTS   Fair  value  gain  (loss)  on  interest  rate  swaps  and  cap   Fair  value  gain  on  conversion  feature  of  convertible  debentures   Fair  value  gain  (loss)  on  Deferred  Unit  Incentive  Plan   Fair  value  loss  on  Exchangeable  Notes   Fair  value  gain  (loss)  on  foreign  exchange  forward  contracts   December  31,   2013    21,147    13    46    21,206    (10,106)    (4,977)    (15,083)    6,123   $   $   $   $   $   Years  ended  December  31,   2013    10,940    8,862    15,114    333    3,257    -­‐    38,506     $     $   2012    12,348    8,887    1,551    128    1,907    2,558    27,379   Years  ended  December  31,     $   2013    226    3,761    585    -­‐    (16,022)   2012    (15,493)    2,444    (287)    (2,330)    452   $    (11,450)     $    (15,214)   Dundee  International  2013  Annual  Report    |    66                                                                                                                                                                       Note  20   INCOME  TAXES   Reconciliation  of  tax  expense   Income  before  income  taxes   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     Tax  benefits  not  previously  recognized     Other  items   Recovery  of  taxes   Deferred  income  tax  assets  consist  of  the  following:   Deferred  tax  asset  related  to  difference  in  tax  and  book  basis  of  investment  properties   Deferred  tax  asset  related  to  difference  in  tax  and  book  basis  of  financial  instruments   Deferred  tax  asset  related  to  tax  loss  carry-­‐forwards   Deferred  tax  asset  related  to  differences  in  tax  and  book  basis  of  financing  costs   Total  deferred  income  tax  assets   $   $   $   $     $   Years  ended  December  31,   2013   2012    8,868    20,620    1,403    3,263    -­‐    -­‐    424    369    (119)    (546)    (3,473)    (5,286)    (220)    (33)   33    (8)    (2,048)    (2,145)     $   December  31,     December  31,     2013      1,813    3,001    6,744    755    12,313     $     $   2012    1,812    4,045    1,603    1,031    8,491   Note  21     RELATED  PARTY  TRANSACTIONS  AND  ARRANGEMENTS     The  REIT  entered  into  an  asset  management  agreement  with  DAM  (“Asset  Management  Agreement”)  pursuant  to  which  DAM   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.   DAM   did   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  DAM  in  supplying  services  relating  to  financing  transactions.  DAM  did  not  receive   a  financing  fee  in  respect  of  the  acquisition  of  the  Initial  Properties.   Dundee  International  2013  Annual  Report    |    67                                                                                                                                       Pursuant   to   the   Asset   Management   Agreement,   DAM   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  DAM  will  be  calculated  by  dividing  the  fees  payable  to  DAM  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   DAM  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  the  corresponding  expense  is  recognized  during  the  period.  DAM  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.   Deferred   units   granted   to   DAM   for   payment   of   asset   management   fees   are   included   in   general   and   administrative   expense   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  being  recognized  in  comprehensive  income  as  a  fair  value  adjustment  to  financial  instruments.   During  the  year  ended  December  31,  2013,  the  REIT  recognized  $5,438  (year  ended  December  31,  2012  –  $2,251)  in  relation  to   asset   management   fees   under   the   Asset   Management   Agreement   with  DAM,   which   is   included   in   general   and   administrative   expenses.  Of  this  total,  $2,113  (year  ended  December  31,  2012  –  $1,907)  was  payable  in  deferred  trust  units  and  $3,325  (year   ended  December  31,  2012  –  $344)  was  payable  in  cash.  As  at  January  1,  2014,  912,077  (January  1,  2013  –  504,887)  deferred   trust   units   and   income   deferred   trust   units   were   granted   under   this   agreement   and   remained   unvested.   The   REIT   also   paid   $5,892   for   asset   acquisition   fees   incurred   on   acquisitions   completed   in   the   year   ended   December   31,   2013   (year   ended   December   31,   2012   –   $2,430),   which   were   capitalized   as   acquisition   costs   and   then   written   off   on   remeasurement   of   the   investment  properties.  The  REIT  also  incurred  $518  in  financing  fees  related  to  the  March  and  June  2013  equity  offerings  (year   ended   December   31,   2012   –   $358).   The   fees   were   charged   to   equity   as   equity   issue   costs.   The   REIT   also   reimbursed   DAM   acquisition  related  travel  and  legal  costs,  equity  issue  costs  and  general  and  administrative  expenses  in  the  amount  of  $480  for   the  year  ended  December  31,  2013.   Included  in  amounts  payable  as  at  December  31,  2013,  is  $2,523  (December  31,  2012  –  $490)  related  to  the  Asset  Management   Agreement  with  DAM.   Shared  Services  and  Cost  Sharing  Agreement   The  Trust  entered  into  a  shared  services  and  cost  sharing  agreement  with  DAM  on  December  1,  2013.  The  agreement  is  for  a   one-­‐year  term  and  will  be  automatically  renewed  for  further  one-­‐year  terms  unless  and  until  the  agreement  is  terminated  in   accordance  with  its  terms  or  by  mutual  agreement  of  the  parties.  Pursuant  to  the  agreement,  DAM  will  be  providing  additional   administrative  and  support  services  in  order  to  expand  and  improve  DAM’s  service  capability  in  connection  with  the  provision  of   its   asset   management   services.   DAM   will   receive   an   annual   fee   sufficient   to   reimburse   it   for   all   the   expenses   incurred   in   providing  these  additional  administrative  and  support  services.  Additionally,  the  Trust  will  also  reimburse  DAM  in  each  calendar   year  for  its  share  of  costs  incurred  in  connection  with  certain  business  transformation  services  provided  by  DAM.   During   the   year   ended   December   31,   2013,   the   Trust   paid   $nil   to   DAM   pursuant   to   the   shared   services   and   cost   sharing   agreement.  There  are  no  amounts  due  to  DAM  as  at  December  31,  2013  pertaining  to  this  agreement.   The  Trust’s  future  commitment  under  the  Shared  Services  and  Cost  Sharing  Agreement  over  the  next  seven  years  is  $1,400.   Dundee  International  2013  Annual  Report    |    68   Note  22   SUPPLEMENTARY  CASH  FLOW  INFORMATION   Increase  in  amounts  receivable   Decrease  (increase)  in  prepaid  expenses  and  other  assets   Increase  in  amounts  payable  and  accrued  liabilities   Increase  in  tenant  deposits   Change  in  non-­‐cash  working  capital   The  following  amounts  were  paid  on  account  of  interest:   Debt   Exchangeable  Notes   $   $   $     $   Years  ended  December  31,   2012   2013    (2,622)    (1,701)    (440)    2,365    3,057    899    292    1,005    287    2,568     $   Years  ended  December  31,   2012   2013    35,306    -­‐     $    22,663    3,084   Note  23     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,  2013,  the  REIT’s  future  minimum  commitments  under  operating  leases  are  as  follows:   Less  than  1  year   1–5  years   Longer  than  5  years   Total   Operating  lease  payments   $   $    762    1,722    -­‐    2,484   During  the  period,  the  Trust  paid  $654  in  minimum  lease  payments,  which  have  been  included  in  comprehensive  income  for     the  period.   The  REIT  also  has  commitments  for  lease  incentives  and  initial  direct  leasing  costs  of  approximately  $5,781.   Note  24     CAPITAL  MANAGEMENT   The  primary  objective  of  the  Trust’s  capital  management  is  to  ensure  that  it  remains  within  its  quantitative  banking  covenants.     At  December  31,  2013,  the  Trust’s  capital  consists  of  debt  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  and  debt-­‐to-­‐book  value  ratios.  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.     Dundee  International  2013  Annual  Report    |    69                                                                                                         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   expenditures   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  year  ended  December  31,  2013,  the  REIT’s  debt  service  coverage  ratio  was  303%  and  therefore  in   compliance  with  the  term  loan  credit  facility’s  requirement.   Note  25     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.  The  Trust   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  12-­‐month  period.  A  1%  change  is  considered  a  reasonable  level  of  fluctuation  on  variable  rate  assets   and  debts.     Financial  assets   Cash(1)   Amount  in  escrow   Financial  liabilities   Term  loan  credit  facility   Carrying     amount   Income   -­‐1%     Equity   Income    106,292    6,220     $    (1,063)    (62)     $    (1,063)    (62)     $     $    1,063    62   1%   Equity    1,063    62   Interest  rate  risk    64,368     $    644     $    644     $    (644)     $    (644)   $   $   (1)   Cash  excludes  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   Trust   currently   has   foreign   exchange   forward   contracts   to   sell   €5,622   each   month   from   January   2014   to   June   2014,   €5,222   each   month  from  July  2014  to  May  2015,  €3,922  in  June  2015,  €2,372  each  month  from  July  2015  to  September  2015,  €2,050  each   month  from  October  2015  to  May  2016  and  €1,800  in  June  2016,  at  an  average  exchange  rate  of  $1.334  per  euro.   Dundee  International  2013  Annual  Report    |    70                                                                                                                         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  by  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.     Interest  rate  derivatives   The  following  table  provides  details  on  interest  rate  derivatives  outstanding  as  at  December  31,  2013:   Interest  rate  swaps   Interest  rate  cap   Notional    385,133    48,142    433,275   $   $   Rate   4.05%   5.00%   Maturity   2016   2016   Carrying  value    13,764    (18)    13,746     $   $   Foreign  currency  derivatives   The  following  table  provides  details  on  foreign  currency  forward  contracts  outstanding  as  at  December  31,  2013  and   December  31,  2012:   Hedging  currency   Euro   Notional  amount  of   future  contracts     Blended  exchange  rate   Forward  contracts     start  date   Forward  contracts     end  date     Carrying  value    120,412      1.334     January  15,  2014     June  15,  2016   $    (15,941)   For  the  year  ended  December  31,  2013   Hedging  currency   future  contracts     Blended  exchange  rate     Notional  amount  of   For  the  year  ended  December  31,  2012   Forward  contracts     start  date     Forward  contracts     end  date     Carrying  value   Euro    106,800    1.327   January  12,  2013   December  15,  2015   $    (429)   Fair  value  measurements   The  following  tables  summarize  fair  value  measurements  recognized  in  the  statement  of  financial  position  or  disclosed  in  the   Trust’s  financial  statements  by  class  of  asset  or  liability  and  categorized  by  level  according  to  the  significance  of  the  inputs  used   in  making  the  measurements.   Recurring  measurements   Financial  liabilities   Interest  rate  derivatives   Foreign  currency  derivatives     Conversion  feature  on  the  convertible  debentures   Fair  values  disclosed     Mortgage  debt     Convertible  debenture  excluding  conversion  feature   Carrying  value  as  at     December  31,  2013   Level  1   Fair  value  as  at  December  31,  2013   Level  3   Level  2   $   $   $    (13,746)      (15,941)      (384)      (825,014)      (150,326)     $    -­‐      -­‐      -­‐      -­‐      -­‐     $   $   $    (13,746)      (15,941)      -­‐      -­‐    -­‐    (384)    -­‐      -­‐     $    (827,471)    (158,201)   Dundee  International  2013  Annual  Report    |    71                                                                                                                                                                                                                                                                                                                     Recurring  measurements   Financial  liabilities   Interest  rate  derivatives   Foreign  currency  derivatives     Conversion  feature  on  the  convertible  debentures   Fair  values  disclosed     Mortgage  debt     Convertible  debenture  excluding  conversion  feature   Carrying  value  as  at       December  31,  2012     Level  1   Fair  value  as  at  December  31,  2012   Level  3   Level  2   $   $   $    (18,502)      (429)      (4,145)      (151,862)      (148,428)     $    -­‐    -­‐    -­‐    -­‐    -­‐     $     $     $    (18,502)    (429)    -­‐    -­‐    -­‐    (4,145)    -­‐    -­‐     $    (152,012)    (161,573)   Amounts  receivable,  cash,  the  Deferred  Unit  Incentive  Plan,  deposits,  amounts  payable  and  accrued  liabilities,  and  distributions   payable  are  carried  at  amortized  cost,  which  approximates  fair  value  due  to  their  short-­‐term  nature.  The  carrying  value  of  the   term  loan  credit  facility  approximates  fair  value  due  to  the  short-­‐term  nature  of  its  rates,  which  are  reset  every  three  months.     Transfers  between  levels  in  the  fair  value  hierarchy  are  recognized  as  of  the  date  of  the  event  or  change  in  circumstances  that   resulted  in  the  transfer.  There  were  no  transfers  in  or  out  of  Level  3  fair  value  measurements  during  the  period.     Valuation  processes   The  REIT’s  management  is  responsible  for  determining  fair  value  measurements  included  in  the  financial  statements,  including   Level  3  fair  values.  The  inputs,  processes  and  results  for  recurring  measurements,  including  those  valuations  calculated  by  an   independent  consultant,  are  reviewed  each  quarter  by  senior  management  to  ensure  conformity  with  IFRS.     The  Trust  uses  the  following  techniques  to  determine  the  fair  value  measurements  categorized  in  Level  2:   Interest  rate  derivatives   The   fair   value   of   interest   rate   derivatives   was   calculated   as   the   present   value   of   the   estimated   future   cash   flows   based   on   observable  yield  curves.       Foreign  currency  derivatives   The  fair  value  of  foreign  currency  derivatives  was  determined  using  forward  exchange  rates  at  the  measurement  date,  with  the   resulting  value  discounted  back  to  present  value.     The  Trust  uses  the  following  techniques  to  determine  the  fair  value  measurements  categorized  in  Level  3:   Convertible  debentures   The  convertible  debentures  have  two  components  of  value  –  a  conventional  bond  and  a  call  on  the  equity  of  the  Trust  through   conversion.   Based   on   its   terms,   the   conversion   feature   is   an   embedded   derivative   and   has   been   separated   from   the   host   contract  and  classified  as  a  financial  liability  through  profit  and  loss.   Effective   April   1,   2013,   the   Trust   has   utilized   a   valuation   technique   based   on   the   paper   by   K.   Tsiveriotis   and   C.   Fernandes   to   determine   the   fair   value   of   the   conversion   feature.   This   model   uses   significant   unobservable   inputs;   therefore   the   resulting   valuation  is  classified  as  Level  3.  In  this  model,  a  convertible  bond  consists  of  two  components,  an  equity  component  and  a  debt   component,   and   these   components   have   different   default   risks.   The   equity   component   is   discounted   at   the   risk-­‐free   interest   rate.  The  equity  component  has  no  default  risk  since  the  Trust  can  always  issue  its  own  units.  The  debt  component  is  discounted   at  the  risk-­‐free  interest  rate  plus  a  credit  spread.   The  fair  value  measurement  of  the  interest  rate  swaps  was  valued  by  a  qualified  independent  valuation  professional.  The  fair   value  measurement  of  the  conversion  feature  of  the  convertible  debentures  was  valued  by  a  qualified  independent  valuation   consultant.   Dundee  International  2013  Annual  Report    |    72                                                                                                                                                     The  significant  unobservable  inputs  used  in  the  fair  value  measurement  of  the  conversion  feature  of  the  convertible  debentures   as  at  December  31,  2013  are  the  following:   • Volatility:  Expected  volatility  as  at  December  31,  2013  was  derived  from  the  historical  prices  of  Dundee  International  REIT.   Historical  prices  were  not  available  for  a  term  equal  to  the  term  to  maturity  of  the  debenture;  as  such,  the  consultant  used   the  entire  historical  data  up  until  December  31,  2013.  The  volatility  used  was  17.455%.   • Credit   spread:   The   credit   spread   of   the   convertible   debentures   was   imputed   from   the   traded   price   of   the   convertible   debenture  as  at  December  31,  2013.  The  credit  spread  used  was  3.8440%.   A   higher   volatility   will   increase   the   value   of   the   conversion   feature.   A   lower   credit   spread   will   decrease   the   value   of   the   conversion  feature.     The  following  table  shows  the  changes  in  fair  value  of  the  conversion  feature  of  the  convertible  debentures  from  a  5%  increase   or  decrease  in  volatility  and  a  1%  increase  or  decrease  in  credit  spread,  all  other  inputs  being  constant:   Increase/decrease  in  fair  value  as  at  December  31,  2013   $    1,034     $    (358)     $   Impact  of  change  to  volatility     Decrease  -­‐5%   Increase  +5%   Increase  +1%   Impact  of  change  in  credit  spread     Decrease  -­‐1%    (1,452)    121     $   The  Trust  also  used  the  following  techniques  in  determining  the  fair  values  disclosed  for  the  following  financial  liabilities   classified  as  Level  3:   Mortgage  debt   The  fair  value  of  the  mortgage  debt  as  at  December  31,  2013  has  been  calculated  by  discounting  the  expected  cash  flows  of   each   debt,   using   discount   rates   ranging   from   1.284%   to   3.829%.   The   discount   rates   are   determined   using   the   vdp   Mortgage   Pfandbrief  curve  for  instruments  of  similar  maturity  adjusted  for  the  REIT’s  specific  credit  risk.  In  determining  the  adjustment   for  credit  risk,  the  REIT  considers  market  conditions,  the  value  of  the  properties  that  the  mortgages  are  secured  by  and  other   indicators  of  the  REIT’s  creditworthiness.   Note  26     SUBSEQUENT  EVENTS   On  February  14,  2014,  the  REIT  acquired  an  office  building,  located  at  Werner-­‐Eckert-­‐Straße  8,  10,  12  in  Munich,  Germany,  for   $22,120  (€14,715).     Dundee  International  2013  Annual  Report    |    73                             Appendix (unaudited) Address Acquisition Properties Karl-Martell-Straße 60 Beuthstraße 6–8/Seydelstraße 2–5 Feldmühleplatz 1+15 Greifswalder Str. 154–156 Marsstraße 20–22 Moskauer Str. 25–27 Podbielskistraße 158–168 Cäcilienkloster 2, 6, 8, 10 Hammer Str. 30–34 Oasis III Schlossstr. 8 ABC-Str. 19 Leopoldstr. 252 Speicherstr. 55 Derendorfer Allee 4 Neue Mainzer Str. 28 Westendstr. 160–162/Barthstr. 24–26 Bertoldstr. 48/Sedanstr. 7 Am Sandtorkai 37 Reichskanzler-Müller-Str. 21–25 Am Stadtpark 2 Vordernbergstr. 6/Heilbronner Str. 35 Dillwächterstr. 5/Tübinger Str. 11 Lörracher Str. 16/16a total acquisition properties Initial 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 Kurfürstenallee 130 Gradestr. 22 Karlstal 1–21/Werftstr. 201 Franz-Zebisch-Str. 15 Überseering 17/Mexikoring 22 Am Neumarkt 40/Luetkensallee 49 Bahnhofstr. 82–86 E.-Kamieth-Str. 2b Czernyring 15 Marienstr. 80 Rüppurrer Str. 81, 87, 89/Ettlinger 67 Gerokstr. 14–20 Zimmermannstr. 2/Eisenstr. Hindenburgstr. 9/Heeserstr. 5 Saalburgallee 19 Friedrich-Karl-Str. 1–7 Blücherstr. 12 Kaiserstr. 24 Klubgartenstr. 10 Bahnhofsplatz 2, 3, 4, Pepperworth 7 Pausaer Str. 1–3 Am Hauptbahnhof 2 Bahnhofstr. 33 Kapellenstr. 44 Berliner Platz 35–37 Husemannstr. 1 Kommandantenstr.43–51 Stresemannstr. 15 Bahnhofsring 2 Heinrich-von-Bibra-Platz 5–9 Bahnhofplatz 10 City Nürnberg Berlin Düsseldorf Berlin München Düsseldorf Hannover Köln Hamburg Stuttgart Hamburg Hamburg München Frankfurt Düsseldorf Frankfurt München Freiburg Hamburg Mannheim Nürnberg Stuttgart München Freiburg Dortmund Saarbrücken Darmstadt Regensburg Mannheim Bremen Hannover Kiel Weiden Hamburg Hamburg Gießen Halle Heidelberg State Bavaria Berlin Nordrhein-Westfalen Berlin Bavaria Nordrhein-Westfalen Niedersachsen Nordrhein-Westfalen Hamburg Baden-Württemberg Hamburg Hamburg Bavaria Hessen Nordrhein-Westfalen Hessen Bavaria Baden-Württemberg Hamburg Baden-Württemberg Bavaria Baden-Württemberg Bavaria Baden-Württemberg Nordrhein-Westfalen Saarland Hessen Bavaria Baden-Württemberg Bremen Niedersachsen Schleswig-Holstein Bavaria Hamburg Hamburg Hessen Sachsen-Anhalt Baden-Württemberg Offenbach am Main Hessen Karlsruhe Dresden Marburg Siegen Baden-Württemberg Sachsen Hessen Nordrhein-Westfalen Frankfurt am Main Hessen Oberhausen Koblenz Gütersloh Goslar Hildesheim Plauen Mülheim Böblingen Einbeck Münster Gelsenkirchen Duisburg Wuppertal Leer Fulda Fürth Nordrhein-Westfalen Rheinland-Pfalz Nordrhein-Westfalen Niedersachsen Niedersachsen Sachsen Nordrhein-Westfalen Baden-Württemberg Niedersachsen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Niedersachsen Hessen Bavaria Dundee International 2013 Annual Report | 74 GLa (sq. ft.) OCCupanCy at DeCember 31, 2013 268,936 257,369 246,376 241,972 238,724 217,282 211,870 200,915 172,306 170,105 165,224 158,434 154,678 151,822 142,227 123,288 122,156 121,135 113,391 100,501 94,652 88,633 81,907 56,041 3,899,944 299,567 290,901 230,874 230,602 227,298 200,102 195,783 180,837 166,601 160,785 160,397 156,378 152,824 133,909 114,114 111,778 110,434 99,751 100,773 98,224 97,606 94,569 94,488 87,460 87,150 85,443 84,303 82,628 81,206 80,975 80,591 80,122 79,215 78,259 77,606 78,856 100% 99% 100% 94% 95% 96% 90% 100% 100% 100% 85% 96% 99% 95% 100% 95% 87% 100% 99% 95% 99% 84% 99% 100% 96.3% 100% 92% 52% 85% 96% 84% 4% 96% 100% 93% 89% 77% 12% 90% 96% 97% 87% 98% 91% 96% 74% 68% 61% 51% 23% 76% 81% 100% 67% 92% 94% 100% 100% 80% 100% 53% Address Kaiser-Karl-Ring 59–63/Dorotheenstr Bürgerreuther Str. 1 77er Str. 54 Logenstr. 37 Wiener Str. 43 Bahnhofsplatz 1 Bahnhofstr. 9 Rathausplatz 2 Auhofstr. 21 Joachim-Campe-Str. 1.3/5/7, Postho Bahnhofstr. 40 Niemeyerstr. 1 Möhringer Landstr. 2/Emilienstr. 30 Heinrich-von-Stephan-Str. 8–10 Am Bahnhof 5 Friedrich-Ebert-Str. 28 Paulinenstr. 52 Postplatz 3 Poststr. 2 U 3 Ostbahnstr. 5 Poststr. 5–7 Bahnhofsplatz 9 Mayenner Str. 63 Kavalierstr. 30–32 Friedrich-Ebert-Str. 75–79 Hainstr. 5A Baarstr. 5 Europaplatz 17 Rathausplatz 4 Marktstr. 9 Zuffenhäuser Kelterplatz 1 Unter den Zwicken 1–3 Stadtparkstr. 2 Schützenstr. 17, 19 Willy-Brandt-Str. 6 Bahnhofstr. 2 Theodor-Heuss-Platz 13 Stembergstr. 27–29 Poststr. 14 Bahnhofplatz 3, 5 Poststr. 2 Königstr. 12 Möllner Landstr. 47–49/Reclamstr 20 Lutherplatz 5 Lippertor 6 Münchener Str. 1 Martinistr. 19 Bahnhofstr. 169 Vegesacker Heerstr. 111 Palleskestr. 38 Südbrede 1–5 Koblenzer Str. 67 Kardinal-Galen-Ring 84/86 Kalkumer Str. 70 Ehrenfeldgürtel 125 Robert-Wahl-Str. 7/7a Poststr. 2 Falkenbergstr. 17–23 Balhornstr. 15, 17/B.Köthenbürger-Str August-Bebel-Str. 6 Cavaillonstr. 2 Steinerother Str. 1 U 1a Hauptstr. 279/Hommelstr. 2 Stuttgarter Str. 5, 7 City Bonn Bayreuth Celle Kaiserslautern Stuttgart Schweinfurt Ingolstadt Wilhelmshaven Aschaffenburg Salzgitter Flensburg Hannover Stuttgart Leverkusen Zwickau Pinneberg Detmold Bautzen Helmstedt Landau Heide Emden Waiblingen Dessau Bremerhaven Bad Hersfeld Iserlohn Bad Kreuznach Lüdenscheid Völklingen Stuttgart Halberstadt Schwabach Peine Auerbach Cham Neuss Arnsberg Rastatt Heidenheim Gummersbach Rottweil Hamburg Nordhausen Lippstadt Bad Kissingen Recklinghausen Bietigheim-Bissingen Bremen Frankfurt am Main Ahlen Bonn Rheine Düsseldorf Köln Balingen Deggendorf Norderstedt Paderborn Torgau Weinheim Betzdorf Idar-Oberstein Fellbach State GLa (sq. ft.) OCCupanCy at DeCember 31, 2013 Nordrhein-Westfalen Bavaria Niedersachsen Rheinland-Pfalz Baden-Württemberg Bavaria Bavaria Niedersachsen Bavaria Niedersachsen Schleswig-Holstein Niedersachsen Baden-Württemberg Nordrhein-Westfalen Sachsen Schleswig-Holstein Nordrhein-Westfalen Sachsen Niedersachsen Rheinland-Pfalz Schleswig-Holstein Niedersachsen Baden-Württemberg Sachsen-Anhalt Bremen Hessen Nordrhein-Westfalen Rheinland-Pfalz Nordrhein-Westfalen Saarland Baden-Württemberg Sachsen-Anhalt Bavaria Niedersachsen Sachsen Bavaria Nordrhein-Westfalen Nordrhein-Westfalen Baden-Württemberg Baden-Württemberg Nordrhein-Westfalen Baden-Württemberg Hamburg Thüringen Nordrhein-Westfalen Bavaria Nordrhein-Westfalen Baden-Württemberg Bremen Hessen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Baden-Württemberg Bavaria Schleswig-Holstein Nordrhein-Westfalen Sachsen Baden-Württemberg Rheinland-Pfalz Rheinland-Pfalz Baden-Württemberg 75,815 75,534 73,942 72,198 72,192 67,503 67,432 64,970 64,264 61,887 61,826 61,692 61,194 61,011 60,738 59,218 57,614 57,571 53,468 53,401 53,363 53,327 53,220 52,206 51,781 51,207 51,027 50,635 50,050 49,577 47,552 47,145 46,877 46,801 46,512 46,129 46,128 45,820 45,659 45,656 45,558 45,494 45,371 44,699 44,341 43,971 43,807 43,620 43,484 43,409 44,130 42,774 42,191 41,781 41,645 41,487 41,378 41,249 40,927 40,745 40,540 39,972 39,041 38,288 100% 100% 78% 6% 92% 87% 100% 97% 96% 63% 98% 74% 93% 89% 64% 100% 77% 73% 52% 94% 92% 98% 100% 83% 98% 100% 86% 38% 42% 9% 82% 76% 80% 91% 56% 61% 95% 99% 92% 83% 98% 88% 90% 82% 93% 74% 93% 99% 90% 64% 91% 100% 91% 52% 99% 94% 97% 98% 93% 86% 91% 89% 10% 96% Dundee International 2013 Annual Report | 75 Address Bismarckstr. 21–23 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 Ölmühlweg 12 Heinzelmannstr. 1/Hauberrisserstr. Bahnhofsplatz 10, 12, 14 Goethestr. 2–6 Im Bungert 6–8 Gerstenstr. 5 Gustav-König-Str. 42 Kieler Str. 501 Große Str. 29–33 Worthingtonstr. 15 Zwieseler Str. 27–29 Hellersdorfer Str. 78 Markendorfer Str. 10 Kreuzstr. 20–24 Bahnhofstr. 6/Luisenstr. 4–5 Poststr. 30 Tunnelweg 1 Volksdorfer Str. 5/Wohld. Str. 6 Waschgrabenallee 3–5 Poststr. 26 Von-Lassaulx-Str. 14–18 Bahnhofsplatz 2 König-Heinrich-Str. 11 Poststr. 24–26 Konrad-Adenauer-Str. 49–51 Feldschlößchenstr./Kunadstr. o. Nr. 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 Poststr. 48 Ruthenstr. 19/21 Bahnhofstr. 2 Bahnhofanlage 2–4 Königswiese 1 Saßstr. 12 Wilhelmstr. 11/Kamperdickstr. 29 Kaiserstr. 140 Goldbacher Str. 74 Klosterstr. 6–10 In der Trift 10/12 Bahnhofstr. 6 Zwickauer Str. 438 Asselheimer Str. 26/Mörikestr. 1–3 Alleestr. 6 State GLa (sq. ft.) OCCupanCy at DeCember 31, 2013 City Bünde Naumburg Bocholt Delmenhorst Hof Bad Oldesloe Hamburg Neunkirchen Castrop-Rauxel Eschwege Nienburg Lünen Leipzig Nordhorn Königstein Kaufbeuren Kleve Duisburg Bergisch Gladbach Neubrandenburg Sonneberg Hamburg Rotenburg Crailsheim Regen Berlin Nordrhein-Westfalen Sachsen-Anhalt Nordrhein-Westfalen Niedersachsen Bavaria Schleswig-Holstein Hamburg Saarland Nordrhein-Westfalen Hessen Niedersachsen Nordrhein-Westfalen Sachsen Niedersachsen Hessen Bavaria Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Mecklenburg-Vorpommern Thüringen Hamburg Niedersachsen Baden-Württemberg Bavaria Berlin Frankfurt an der Oder Brandenburg Bonn Villingen-Schwenningen Albstadt Husum Hamburg Neustadt Meißen Remagen Herborn Merseburg Ratingen Tübingen Dresden Alsfeld Meppen Lehrte Heilbad Heiligenstadt Einbeck Stuttgart Pirna Wittenberg Korbach St Ingbert Hameln Gifhorn Schwetzingen Gelsenkirchen Leipzig Kamp-Lintfort Radevormwald Aschaffenburg Annaberg-Buchholz Olpe Quakenbrück Chemnitz Grünstadt Neustadt Nordrhein-Westfalen Baden-Württemberg Baden-Württemberg Schleswig-Holstein Hamburg Schleswig-Holstein Sachsen Rheinland-Pfalz Hessen Sachsen-Anhalt Nordrhein-Westfalen Baden-Württemberg Sachsen Hessen Niedersachsen Niedersachsen Thüringen Niedersachsen Baden-Württemberg Sachsen Sachsen-Anhalt Hessen Saarland Niedersachsen Niedersachsen Baden-Württemberg Nordrhein-Westfalen Sachsen Nordrhein-Westfalen Nordrhein-Westfalen Bavaria Sachsen Nordrhein-Westfalen Niedersachsen Sachsen Rheinland-Pfalz Bavaria Dundee International 2013 Annual Report | 76 38,276 37,612 37,512 37,266 36,687 36,290 36,273 35,971 35,795 35,433 35,313 35,290 35,234 35,189 34,984 34,894 34,871 34,839 34,737 34,347 33,959 33,511 33,240 33,136 32,676 32,296 32,330 32,253 32,191 31,263 31,116 31,068 30,188 30,101 29,819 29,746 29,472 29,445 29,341 29,236 29,125 29,056 28,764 28,205 27,793 27,775 27,771 27,658 27,502 27,051 26,895 26,894 26,658 26,468 26,214 25,973 25,653 25,153 25,084 24,894 24,446 23,640 23,560 23,495 96% 91% 93% 99% 16% 15% 97% 100% 90% 53% 79% 100% 97% 77% 100% 90% 100% 88% 100% 100% 46% 81% 94% 100% 89% 75% 97% 99% 97% 14% 89% 91% 94% 78% 76% 91% 83% 100% 98% 100% 74% 94% 93% 70% 80% 93% 67% 78% 100% 96% 93% 86% 100% 100% 79% 94% 74% 95% 85% 98% 97% 77% 66% 100% Address Uferstr. 2 Lindenstr. 11 Bahnhofsplatz 8 Bahnhofstr. 32 Bahnhofstr. 46 Stadtgraben 13 Poststr. 19–23 Bahnhofsplatz o. Nr. Breitestr. 62–66 Bahnhofstr. 27 Brückenstr. 26 Ringstr. 22/Dr. Bachl-Str. Lindenstr. 15 Lindenstr. 42 Hörder Semerteichstr. 175 Am Plärrer 11 Innungsstr. 57–59 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 Poststr. 12 Neugr. Bahnhofstr. 26/Scheideholzw. Speckweg 24–26 Marktplatz 5 Kasseler Str. 1–7 Poststr. 5 Bahnhofstr. 58/Giselbertstr. 6 Lindauer Str. 34 Lübecker Str./Wedringer Str. o. Nr. Ooser Karlstr. 21/23/25 Güterstr. 2–4 Eisenbahnstr. 15 Konrad-Adenauer-Str. 10 Poststr. 6 Bismarckstr. 12/Fr.Hoffmann-Str. Lagerstr. 1 Bahnhofstr. 3 Bahnhofstr. 43 Bahnhofstr. 33 U. 33 A Friedrichstr. 2 Königstr. 20 Kornmarkt 15 Marktstr. 51 Bahnhofstr. 18a Übacher Weg 4 Trierer Str. 4–6 Niederwall 3 Hochstr. 31/Postgasse 5 Sattigstr. 33 Robert-Koch-Str. 3 Kaiserstr. 35 Poststr. 28 Bahnhofstr. 33 Bahnhofstr. 8–10 Am Bahnhof 2 Melanchthonstr. 96 Hauptstr. 141 State GLa (sq. ft.) OCCupanCy at DeCember 31, 2013 City Höxter Bitterfeld Nordrhein-Westfalen Sachsen-Anhalt Marktredwitz Sulzbach-Rosenberg Bavaria Bavaria Unna Pfaffenhofen Hilden Oranienburg Andernach Öhringen Miltenberg Pfarrkirchen Landstuhl Grevenbroich Dortmund Lauf Berlin Ibbenbüren Papenburg Emmerich Köln Hattingen Selb Norden Pulheim Fürstenwalde Saarbrücken Schmölln Hamburg Mannheim Nordenham Warburg Walsrode Buxtehude Wangen Magdeburg Baden-Baden Bitburg Tuttlingen Langenhagen Beckum Steinfurt Meschede Osterburken Riesa Stendal Monheim Brilon Osterode Essen Wedel Alsdorf Heusweiler Lübbecke Bochum Görlitz Laatzen Minden Hemer Sulz Borken Meldorf Bretten Rheda-Wiedenbrück Nordrhein-Westfalen Bavaria Nordrhein-Westfalen Brandenburg Rheinland-Pfalz Baden-Württemberg Bavaria Bavaria Rheinland-Pfalz Nordrhein-Westfalen Nordrhein-Westfalen Bavaria Berlin Nordrhein-Westfalen Niedersachsen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Bavaria Niedersachsen Nordrhein-Westfalen Brandenburg Saarland Thüringen Hamburg Baden-Württemberg Niedersachsen Nordrhein-Westfalen Niedersachsen Niedersachsen Baden-Württemberg Sachsen-Anhalt Baden-Württemberg Rheinland-Pfalz Baden-Württemberg Niedersachsen Nordrhein-Westfalen Nordrhein-Westfalen Nordrhein-Westfalen Baden-Württemberg Sachsen Sachsen-Anhalt Nordrhein-Westfalen Nordrhein-Westfalen Niedersachsen Nordrhein-Westfalen Schleswig-Holstein Nordrhein-Westfalen Saarland Nordrhein-Westfalen Nordrhein-Westfalen Sachsen Niedersachsen Nordrhein-Westfalen Nordrhein-Westfalen Baden-Württemberg Nordrhein-Westfalen Schleswig-Holstein Baden-Württemberg Nordrhein-Westfalen Dundee International 2013 Annual Report | 77 23,240 23,183 22,710 22,634 22,627 22,513 22,454 22,153 22,119 22,027 22,017 21,980 21,709 21,668 21,659 21,603 21,187 21,031 20,950 20,942 20,742 20,681 20,681 20,668 20,517 20,437 20,433 20,403 20,213 20,128 20,109 19,985 19,967 19,800 19,510 19,454 19,444 19,340 19,047 18,892 18,831 18,800 18,683 18,498 18,275 18,200 18,156 17,733 17,690 17,661 17,020 16,991 16,867 16,563 16,359 16,279 16,126 16,043 15,782 15,774 15,893 15,549 15,501 15,178 79% 86% 99% 76% 100% 88% 87% 76% 88% 95% 89% 88% 99% 71% 96% 100% 100% 100% 88% 100% 100% 100% 78% 81% 91% 59% 92% 88% 81% 90% 100% 86% 94% 96% 97% 100% 93% 99% 97% 100% 100% 100% 100% 100% 90% 93% 100% 76% 100% 100% 94% 100% 92% 100% 100% 100% 100% 82% 100% 82% 98% 97% 90% 100% Address Republikstr. 34 Poststr. 1/2 Im Kusterfeld 1 Herrlichkeit 7 Grenzstr. 24 Mercedesstr. 5 Am Buchhorst 35 Bahnhofstr. 41 Berliner Str. 4 Kolpingstr. 4 Münchner Str. 50 Schönbornstr. 1 Potsdamer Str. 9 Langener Landstr. 237–239 Löbauer Str. 63 Fritz-Brandt-Str. 25 Dahmestr. 17 Bünder Str. 36 Berliner Freiheit 8 Albert-Steiner-Str. 10 Poststr. 1 Heidering 23 Gorsemannstr. 22 Bahnhofstr. 11 Märkische Str. 58 Mönchenstr. 15–18 Poststr. 3–5 Prochaskaplatz 7 Kürbsweg 9 Bahnhofstr. 49/49a Gutachstr. 56 Unterstr. 14 Am Markt 4 Hauptstr. 40 Sandstr. 4 Rensefelder Str. 2 Langfuhren 9 Weinbergstr. 50 De-Lenoncourt-Str. 2 Rosenstr. 1/Fünfhausenstr. 19/21 Elisabeth-Anna-Str. 11 Melcherstätte 8 Alte Amberger Str. 28 Wetterstr. 20/Poststr. 2 total initial properties total portfolio State GLa (sq. ft.) OCCupanCy at DeCember 31, 2013 14,985 14,763 14,634 14,560 14,533 14,504 14,042 13,936 13,816 13,725 13,326 13,117 12,885 12,803 12,686 12,654 12,631 12,625 12,553 12,667 12,498 12,494 12,379 12,112 11,997 11,731 11,597 11,334 11,175 11,050 10,813 10,732 10,324 10,315 10,132 9,777 9,717 9,023 8,995 8,881 8,382 8,196 7,980 7,702 11,805,481 15,705,425 71% 80% 99% 94% 100% 100% 100% 100% 92% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 79% 100% 94% 100% 100% 100% 100% 100% 95% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 83.2% 86.4% City Schönebeck Spremberg Backnang Syke Halle Hannover Potsdam Eberbach Albstadt Georgsmarienhütte Fürstenfeldbruck Geisenheim Ludwigsfelde Bremerhaven Bautzen Zerbst Mittenwalde Löhne Bremen Herzogenrath Erftstadt Hannover Bremen Alpirsbach Düsseldorf Jüterbog Barsinghausen Dannenberg Seevetal Aalen Titisee-Neustadt Bochum St. Georgen Porta Westfalica Germersheim Bad Schwartau Bad Säckingen Sachsen-Anhalt Brandenburg Baden-Württemberg Niedersachsen Sachsen-Anhalt Niedersachsen Brandenburg Baden-Württemberg Baden-Württemberg Niedersachsen Bavaria Hessen Brandenburg Bremen Sachsen Sachsen-Anhalt Brandenburg Nordrhein-Westfalen Bremen Nordrhein-Westfalen Nordrhein-Westfalen Niedersachsen Bremen Baden-Württemberg Nordrhein-Westfalen Brandenburg Niedersachsen Niedersachsen Niedersachsen Baden-Württemberg Baden-Württemberg Nordrhein-Westfalen Baden-Württemberg Nordrhein-Westfalen Rheinland-Pfalz Schleswig-Holstein Baden-Württemberg Bad Neuenahr-Ahrweiler Rheinland-Pfalz Dillingen Springe Wangerooge Stuhr Grafenwöhr Herdecke Saarland Niedersachsen Niedersachsen Niedersachsen Bavaria Nordrhein-Westfalen Dundee International 2013 Annual Report | 78 Trustees Detlef Bierbaum 1, 2, 5 Köln, Germany Corporate Director Michael J. Cooper 2 Toronto, Ontario Vice Chairman, Dundee International REIT Brydon Cruise 1, 3, 4 Toronto, Ontario President and Managing Partner, Brookfield Financial P. Jane Gavan 2 Utah, United States of America President and Chief Executive Officer, Dundee International REIT Corporate information Head office duNdee iNterNatioNal 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 enquiries) 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 Duncan Jackman 1, 3, 4 Toronto, Ontario Chairman, President and CEO, E-L Financial Corporation Limited Johann koss Toronto, Ontario Chief Executive Officer, Right to Play John sullivan Toronto, Ontario President and Chief Executive Officer, Cadillac Fairview Corporation Limited Auditors PriceWaterHousecooPers llP 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 ended December 31, 2013 are taxed as follows: Foreign business income: 47.6% Return of capital: 52.4% Management estimates that 45%–55% of the distributions to be made by the REIT in 2014 will be tax-deferred. The actual deferral rate is heavily dependent on the euro/CAD exchange rates. Stock exchange listing tHe toroNto stock eXcHaNGe Listing symbols: REIT Units: DI.UN 5.5% Convertible Debentures: DI.DB Annual meeting of unitholders Wednesday, May 7, 2014 at 4:00 pm (EST) St. Andrew’s Club and Conference Centre Main Dining Room 150 King Street West Toronto, Ontario, Canada Officers Detlef Bierbaum Chairman Michael J. Cooper Vice Chairman P. Jane Gavan President and Chief Executive Officer rene d. Gulliver 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 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. For more information please visit 5 Dream 2013 Annual Report www.dundeeinternational.com 1 Dream 2013 Annual Report 

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