.…uuummmmmmmmmw&/ ......IIIIIIIII In.-I II.—_ QUARTERLY FINANCIAL REPORT IMMOBILIEN I7l1lG KEY GROUP FIGURES ACCORDING TO IFRS Unit 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change in % Rental income in EUR k 39,229 32,513 20.7 Net operating income from letting activities (NOI) in EUR k 34,394 28,892 19.0 Disposal profits in EUR k 0 619 – 100.0 Net income for the period in EUR k 15,709 12,888 21.9 Funds from operations (FFO) in EUR k 21,126 17,135 23.3 in EUR 0.29 0.25 16.0 Unit 31/03/2017 31/12/2016 Change in % in EUR k 2,189,403 2,215,228 – 1.2 Results of operations FFO per share 1 Statement of financial position Investment property Cash and cash equivalents in EUR k 184,300 68,415 169.4 Total assets in EUR k 2,452,548 2,344,763 4.6 Equity in EUR k 1,141,621 1,009,503 13.1 in % 46.5 43.1 3.4 pp Liabilities to financial institutions in EUR k 1,022,439 1,040,412 – 1.7 Net debt in EUR k 838,139 971,997 – 13.8 Net LTV² in % 37.5 43.4 – 5.9 pp in EUR k 1,381,463 1,248,259 10.7 in EUR 18.62 18.51 0.6 Unit 31/03/2017 31/12/2016 Change in % in EUR k 2,235,236 2,241,615 – 0.3 Equity ratio EPRA NAV EPRA NAV per share 1 Property value 3 Properties number 390 404 – 14 units Annualised in-place rent 4 in EUR k 156,489 155,276 0.8 In-place rental yield in % 7.0 6.9 0.1 pp EPRA Vacancy Rate in % 3.3 3.8 – 0.5 pp in years 6.1 6.1 0.0 years in EUR/sqm 9.83 9.67 1.7 WALT Average rent Total number of shares as at 31 March 2016: 67.4 m, as at 31 March 2017: 74.2 m. The weighted average number of shares was 67.4 m in the first quarter of 2016 and 71.9 m in the first quarter of 2017. ² C alculation: Net debt divided by property value; for the composition, see page 16. 3 In line with values disclosed according to IAS 40, IAS 2, IAS 16 and IFRS 5 4 The annualised in-place rent is calculated using the annualised rents agreed as at the reporting date – not factoring in rent-free periods. 1 Related links Table of contents Web reference QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Key portfolio performance indicators CONTENTS 02 06 TLG IMMOBILIEN SHARES EPRA KEY FIGURES 10 CONSOLIDATED INTERIM MANAGEMENT REPORT 11 1. COMPANY FUNDAMENTALS 11 2. ECONOMIC REPORT 17 3. REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 18 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 19 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 20 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 21 CONSOLIDATED CASH FLOW STATEMENT 22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 23 CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 23 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN AG 24 B. EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS 24 C. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 25 D. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 26 E. OTHER INFORMATION 28 FINANCIAL CALENDAR – CONTACT – PUBLISHING DETAILS Title illustration: Office building Olof-Palme-Straße 35, Frankfurt/Main TLG IMMOBILIEN SHARES TLG IMMOBILIEN SHARES The stock market performed well in the first quarter of 2017. Its performance was mainly the result of strong improvements in leading indicators around the world and shrinking political risks. The German stock index DAX therefore grew in the first quarter and closed at 12,312.87 points on 31 March. Therefore, the DAX increased by 7.8% over the course of the quarter compared to its opening price on 2 January 2017. The SDAX performed just as well in the first three months of the year, increasing by 6.0% between the beginning of January 2017 and the end of March 2017. In contrast, the performance of German property shares was not quite as positive. The FTSE EPRA/NAREIT Germany Index grew by just 2.5% in the first three months. The FTSE EPRA/NAREIT Europe Index remained steady in the same period. Performance of the shares by index in % 15 10 5 0 – 5 – 10 01/01/2017 TLG IMMOBILIEN AG 05/05/2017 SDAX FTSE EPRA/NAREIT Europe Real Estate FTSE EPRA/NAREIT Germany The shares of TLG IMMOBILIEN made an inconsistent start to 2017 and reached EUR 18.55 on Xetra on 20 February 2017, their highest value on XETRA in the first quarter of 2017. On 31 March 2017, the shares closed the reporting period at EUR 18.27, which represents an increase of 2.1% in the first three months compared to the opening price of EUR 17.90 at the start of the year. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 2 TLG IMMOBILIEN SHARES TLG IMMOBILIEN share data ISIN/WKN Ticker symbol Share capital in EUR Number of shares (no-par-value bearer shares) Indices (selection) Sector/sub-sector Market segment Designated sponsors DE000A12B8Z4/A12B8Z TLG 74,175,558.00 74,175,558 SDAX, EPRA/NAREIT Global Index, EPRA/NAREIT Europe Index, EPRA/NAREIT Germany Index Real estate Regulated market (Prime Standard) Commerzbank AG, ODDO SEYDLER BANK AG Reporting period high on 20/02/2017 (Xetra) in EUR 18.55 Reporting period low on 20/01/2017 (Xetra) in EUR 17.03 Closing price on 31/03/2017 (Xetra) in EUR 18.27 Market capitalisation in EUR m 1,355.2 CAPITAL INCREASE QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG With a view to continuing its successful growth strategy and with the approval of the Supervisory Board, on 30 January 2017, the Management Board approved a capital increase against cash contributions and excluding subscription rights. The approx. 6.7 m new shares (approx. 10% of the share capital) were made available to institutional investors at a placement price of EUR 17.20 per share by means of accelerated book building. The private offering started on 30 January 2017 after the market closed and ended on 31 January 2017. The gross proceeds were around EUR 116.0 m. TLG IMMOBILIEN AG intends to use the net proceeds from the private placement to finance its most recent and future acquisitions of German office and retail properties in line with its stated acquisition criteria, as well as for general business purposes. The new shares are fully entitled to a share of profits in 2016 and were added to the current listing in the section of the regulated market with additional post-admission transparency requirements (Prime Standard) at the Frankfurt Stock Exchange on 7 February 2017. The transaction was closed on 7 February 2017. TABLE OF CONTENTS  3 TLG IMMOBILIEN SHARES Shareholder structure as at 31 March 2017 * 13.33 Government of Singapore 75.74 Free float 10.93 Welwel Investments Ltd. * Data based on the latest voting rights notifications. Government of Singapore: Indirect shareholding as reported for 24 July 2015. The government of Singapore is the majority shareholder of GIC Private Limited which held all of the reported voting rights of the company as at the key date. On that date, the total number of voting rights was 61,302,326. Welwel Investments Ltd.: Indirect shareholding of Welwel Investments Ltd. as at 22 February 2017. Welwel Investments Ltd. is the controlling company of ADAR Capital Partners Ltd. The shares are held by ADAR Macro Fund Ltd. On that date, the total number of voting rights was 74,175,558. Total free float as defined by Deutsche Börse. The diagram shows the voting rights last disclosed by shareholders according to § 21 and § 22 of the German Securities Trading Act (WpHG), based on the share capital of TLG IMMOBILIEN AG at the time. Please note that the last disclosed number of voting rights might since have changed within the thresholds without the shareholders being obliged to inform the company. Coverage by analysts Bank Target price in EUR Rating Analyst Date Kempen & Co. 18.50 Neutral Remco Simon 08/05/2017 Bankhaus Lampe 22.00 Buy Georg Kanders 05/05/2017 M.M.Warburg 21.30 Buy J. Moritz Rieser 05/05/2017 VictoriaPartners 19.50 – 21.30 n/a Bernd Janssen 02/05/2017 Deutsche Bank 21.50 Buy Markus Scheufler 17/04/2017 NORD/LB 18.00 Hold Michael Seufert 30/03/2017 J.P. Morgan 21.00 Overweight Tim Leckie 29/03/2017 Kepler Cheuvreux 22.00 Buy Thomas Neuhold 13/03/2017 UBS 18.50 Neutral Osmaan Malik 24/01/2017 Berenberg 22.00 Buy Kai Klose 28/11/2016 HSBC 22.00 Buy Thomas Martin 22/11/2016 Source: Bloomberg (as at 08/05/2017) and broker research A new bank, M.M.Warburg, started covering the shares of TLG IMMOBILIEN AG in the first quarter of 2017. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 4 TLG IMMOBILIEN SHARES INVESTOR RELATIONS ACTIVITIES TLG IMMOBILIEN AG attended the following national and international conferences in the first quarter of 2017: ODDO & Cie – ODDO FORUM, Lyon J.P. Morgan – European Real Estate CEO Conference, London UniCredit Kepler Cheuvreux – German Corporate Conference, Frankfurt am Main Bankhaus Lampe – German Equity Forum, London ODDO SEYDLER – Small and Mid Cap Conference 2017, Frankfurt am Main Kempen & Co – European Property Seminar, New York Commerzbank – German Real Estate Forum, London QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG The figures for 2016 were published on 9 March 2017 and discussed with investors and analysts in a teleconference. A recording of the teleconference and the report documents are available in the Investor Relations section of our website, www.tlg.eu. TABLE OF CONTENTS  5 EPRA KEY FIGURES EPRA KEY FIGURES TLG IMMOBILIEN AG has been a member of EPRA since November 2014 and, as a company listed on a stock exchange, publishes the key figures in line with the best-practices recommendations of EPRA for the sake of transparency and comparability. Overview of key EPRA figures 31/03/2017 31/12/2016 Change Change in % EPRA NAV 1,381,463 1,248,259 133,204 10.7 EPRA NNNAV 14.9 in EUR k 1,140,057 992,496 147,561 EPRA Net Initial Yield (NIY) in % 5.7 5.7 0.0 pp EPRA “topped-up” Net Initial Yield in % 5.8 5.7 0.1 pp EPRA Vacancy Rate in % 3.3 3.8 – 0.5 pp 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change Change in % 17,983 16,762 1,221 7.3 EPRA Cost Ratio (including direct vacancy costs) in % 26.1 27.8 – 1.7 pp EPRA Cost Ratio (excluding direct vacancy costs) in % 25.1 25.4 – 0.3 pp in EUR k EPRA Earnings The increase in the EPRA NAV was essentially the result of the increase in equity which in turn was due primarily to the capital increase against cash contributions carried out on 31 January 2017 which generated gross proceeds of EUR k 115,984. The reduction of the EPRA Vacancy Rate for the portfolio as a whole from 3.8% as at 31 December 2016 to 3.3% as at 31 March 2017 is due primarily to the reduction of vacancy rates in the office asset class. QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 6 TABLE OF CONTENTS EPRA KEY FIGURES  7 The reconciliation of the individual EPRA key figures is as follows: EPRA Earnings 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change Net income for the period 15,709 12,888 2,821 21,9 Result from the remeasurement of investment property – 1,536 – 665 – 871 131.0 in EUR k Change in % Result from the disposal of investment property 0 – 612 612 – 100.0 Result from the disposal of real estate inventories 0 – 7 7 – 100.0 Tax on profits or losses on disposals 0 0 0 0.0 – 586 1,123 – 1,709 n/a 30 0 30 n/a 4,366 4,073 293 7.2 Gain/loss from the remeasurement of derivative financial instruments Acquisition costs of share deals Deferred and actual taxes in respect of EPRA adjustments Non-controlling interests EPRA Earnings Average number of shares outstanding in thousands  1 EPRA Earnings per share in EUR 1 0 – 38 38 – 100.0 17,983 16,762 1,221 7.3 71,928 67,432 0.25 0.25 Total number of shares as at 31 March 2016: 67.4 m, as at 31 March 2017: 74.2 m. The weighted average number of shares was 67.4 m in the first quarter of 2016 and 71.9 m in the first quarter of 2017. EPRA Net Asset Value (EPRA NAV) in EUR k Equity 31/12/2016 Change Change in % 1,141,621 1,009,503 132,118 13.1 Fair value adjustment of fixed assets (IAS 16) 5,083 5,327 – 244 – 4.6 Fair value adjustment of real estate inventories (IAS 2) 1,443 1,443 0 0.0 14,184 18,089 – 3,905 – 21.6 – 1,583 – 2,652 1,069 – 40.3 221,879 217,713 4,166 1.9 Fair value of derivative financial instruments QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 31/03/2017 Deferred tax assets Deferred tax liabilities Goodwill EPRA Net Asset Value (EPRA NAV) Number of shares in thousands EPRA NAV per share in EUR – 1,164 – 1,164 0 0.0 1,381,463 1,248,259 133,204 10.7 74,176 67,432 18.62 18.51 TABLE OF CONTENTS 8 EPRA KEY FIGURES EPRA Triple Net Asset Value (NNNAV) in EUR k EPRA Net Asset Value (EPRA NAV) Fair value of derivative financial instruments Fair value adjustment of liabilities to financial institutions Deferred tax assets Deferred tax liabilities EPRA Triple Net Asset Value (EPRA NNNAV) 31/03/2017 31/12/2016 Change Change in % 1,381,463 1,248,259 133,204 10.7 – 14,184 – 18,089 3,905 – 21.6 – 6,926 – 22,613 15,687 – 69.4 1,583 2,652 – 1,069 – 40.3 – 221,879 – 217,713 – 4,166 1.9 147,561 14.9 1,140,057 992,496 Number of shares in thousands 74,176 67,432 EPRA NNNAV per share in EUR 15.37 14.72 31/03/2017 31/12/2016 Change Change in % 2,189,403 2,215,228 – 25,825 – 1.2 1,103 1,103 0 0.0 EPRA Net Initial Yield (EPRA NIY) and EPRA “topped-up” NIY in EUR k Investment property Inventories Properties classified as held for sale Property portfolio (net) 38,469 19,174 19,295 100.6 2,228,975 2,235,505 – 6,530 – 0.3 Estimated transaction costs 159,629 160,047 – 418 – 0.3 Property portfolio (gross) 2,388,604 2,395,552 – 6,948 – 0.3 154,446 154,511 – 65 0.0 Annualised cash passing rental income Property outgoings Annualised net rents Notional rent for ongoing rent-free periods – 17,994 144 – 0.8 136,517 79 0.1 2,041 764 1,277 167.1 1.0 138,637 137,281 1,356 EPRA Net Initial Yield (NIY) in % 5.7 5.7 0.0 pp EPRA “topped-up” Net Initial Yield in % 5.8 5.7 0.1 pp QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Annualised “topped-up” net rent – 17,850 136,596 TABLE OF CONTENTS EPRA KEY FIGURES  9 EPRA Vacancy Rate in EUR k Market rent for vacant properties Total market rent EPRA Vacancy Rate in % 31/03/2017 31/12/2016 Change Change in % 5,213 6,052 – 839 – 13.9 158,529 159,728 – 1,199 – 0.8 3.3 3.8 – 0.5 pp 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change Change in % 12,160 8,595 3,565 41.5 2,900 2,854 46 1.6 142 143 – 1 – 0.7 2,156 2,426 – 270 – 11.1 – 6,723 – 4,781 – 1,942 40.6 – 366 – 165 – 201 121.8 – 15 – 18 3 – 16.7 – 2 – 2 0 0.0 10,252 9,052 1,200 13.3 EPRA Cost Ratio in EUR k Costs pursuant to the consolidated statement of comprehensive income under IFRS Expenses relating to letting activities Personnel expenses Depreciation and amortisation Other operating expenses Income from recharged operating costs Income from other goods and services Other operating income from reimbursements Ground rent EPRA costs (including direct vacancy costs) Direct vacancy costs EPRA costs (excluding direct vacancy costs) Rental income – 406 – 808 402 – 49.8 9,846 8,244 1,602 19.4 39,229 32,513 6,716 20.7 26.1 27.8 – 1.7 pp 25.1 25.4 – 0.3 pp QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG EPRA Cost Ratio (including direct vacancy costs) in % EPRA Cost Ratio (excluding direct vacancy costs) in % TABLE OF CONTENTS CONSOLIDATED INTERIM MANAGEMENT REPORT TABLE OF CONTENTS CONSOLIDATED INTERIM MANAGEMENT REPORT 11 1. COMPANY FUNDAMENTALS 11 1.1 BUSINESS MODEL OF THE GROUP 11 1.1.1 Organisational structure 11 2. ECONOMIC REPORT 11 2.1 GENERAL ECONOMIC CONDITIONS AND REAL ESTATE MARKETS 11 2.1.1 General economic conditions 11 2.1.2 Economic situation in the sectors 12 2.1.3 Development of the office property market 12 2.1.4 Development of the retail property market 12 2.1.5 Development of the hotel property market 12 2.2 12 2.2.1 Course of business 13 2.2.2 Financial performance 14 2.2.3 Cash flows 14 2.2.4 Financial position 15 2.2.5 Financial performance indicators 17 3. REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 17 3.1 RISK REPORT 17 3.2 OPPORTUNITY REPORT 17 3.3 FORECAST REPORT POSITION OF THE COMPANY QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 10 TABLE OF CONTENTS CONSOLIDATED INTERIM MANAGEMENT REPORT COMPANY FUNDAMENTALS – ECONOMIC REPORT 1. COMPANY FUNDAMENTALS 1.1 BUSINESS MODEL OF THE GROUP 1.1.1 Organisational structure The business model and the corporate strategy of TLG IMMOBILIEN are based on the following pillars: Strategic portfolio management Thanks to a deep understanding of local markets and real estate, strategic services such as strategic portfolio management and monitoring, valuation and portfolio planning are rendered centrally. Asset and property management TLG IMMOBILIEN covers significant links in the real estate value chain internally. Its various branches bear a decentralised responsibility for technical and commercial management of properties, including tenant relations. Acquisitions and sales With its many years of expertise, TLG IMMOBILIEN is exceptionally well connected in its core markets. This generates attractive opportunities for the company to grow and chances to sell properties for the best possible prices in line with its portfolio optimisation strategy. 2. ECONOMIC REPORT QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 2.1 GENERAL ECONOMIC CONDITIONS AND REAL ESTATE MARKETS 2.1.1 General economic conditions In the first quarter of 2017, the German Institute for Economic Research (DIW Berlin) expects Germany’s GDP to grow at an above-average rate and close the year a slight 0.6% higher than in the final quarter of the previous year. The experts at DIW Berlin also expect a moderate upswing in services over the next few months. However, the fact that prices have risen somewhat more steeply recently could hamper purchasing power. They believe that the weak levels of retail turnover in recent periods and the somewhat foreboding mood amongst consumer-oriented service providers in particular are indications that private consumption will not match the considerable increases of the two previous years. Considerable risks are also abound on the international stage: In light of the uncertainty surrounding US economic policy, the rise in popularity of Eurosceptic parties in the run-up to elections in major European countries and the upcoming Brexit negotiations, investments in businesses can be expected to be rather conservative. 2.1.2 Economic situation in the sectors According to German Property Partners, the volume of transactions on the commercial real estate investment markets in the top seven German cities was around EUR 4.9 bn in the first quarter of 2017. This represents an increase of 17% compared to the same period in the previous year. As a result, the market enjoyed a much more active start to the new year than in the previous four years, even if there are significant regional differences. TABLE OF CONTENTS   11 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT 2.1.3 Development of the office property market According to Savills, the volume of transactions in the German office property investment market totalled approx. EUR 4.6 bn in the first quarter of 2017, which represents a 22% increase over the first quarter of the previous year. The consistently high level of interest in German office properties was met with a larger supply due to profit-taking and portfolio adjustments. Risk-averse core investors primarily preferred individual transactions and homogeneous portfolios. The combination of healthy demand for space and falling vacancy rates in the major German metropolises is stimulating interest amongst investors who see potential for increases in rent and property value. 2.1.4 Development of the retail property market According to Savills, the volume of transactions in the retail property market increased to EUR 2.8 bn in the first three months of 2017, which corresponds to an 8% increase compared to the previous year. In this regard, at 181% investments in special retail centres increased particularly sharply whereas department stores were significantly less in demand. Shopping centres also experienced a decline in turnover due to the low supply of core properties in this segment. Savills attributes the exceptional attractiveness of special retail centres to investors to the high proportion of food retailers, on which basis investors consider the properties particularly resistant to the effects of online retail. The share of A-rated cities in the volume of investments increased by 6% compared to the same period in the previous year. 2.1.5 Development of the hotel property market According to the German Federal Statistical Office, 25.8 m overnight stays were registered in Germany in February 2017, which represents a decrease of 2% compared to February 2016. However, at 50.1 m the total number of overnight stays from January to February 2017 was 1% higher than in the same period in the previous year. According to CBRE, the volume of transactions in the German hotel investment market in the first quarter of 2017 totalled EUR 1.2 bn, a new record for the start of a year. This represents an increase of 55% compared to the previous year. Although the number of portfolio transactions increased dramatically, at 69% the vast majority of turnover was attributable to individual transactions. The 90% increase in the volume of turnover generated outside of the top seven cities was remarkable. 2.2 POSITION OF THE COMPANY 2.2.1 Course of business The properties were as follows in the reporting period: Key figures Total Office Retail Hotel Others 2,235,236 1,005,603 888,482 272,363 68,788 156,489 66,795 68,546 16,314 4,833 In-place rental yield (%) 7.0 6.7 7.7 5.9 6.8 EPRA Vacancy Rate (%) 3.3 4.0 2.6 1.8 8.7 WALT (years) 6.1 5.0 5.5 12.8 7.8 Property value (EUR k)  1 Annualised in-place rent (EUR k) 2 Properties (number) 390 60 267 7 56 Lettable area (sqm) 1,400,215 603,256 584,492 109,488 102,979 1 2 In line with values disclosed according to IAS 40, IAS 2, IAS 16 and IFRS 5 The annualised in-place rent is calculated using the annualised rents agreed as at the reporting date – not factoring in rent-free periods. The property portfolio of TLG IMMOBILIEN comprises the office, retail, hotel and other asset classes. As at 31 March 2017, the portfolio contains 390 properties (31/12/2016: 404) with a property value (IFRS) of around EUR 2.235 bn (31/12/2016: around EUR 2.242 bn). The slight 0.3% decrease in the value of the property portfolio is due primarily to disposals of properties. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 12 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT 2.2.2 Financial performance In the first quarter of 2017, TLG IMMOBILIEN generated net income for the period of EUR k 15,709. The EUR k 2,821 increase compared to the same period in the previous year is due primarily to higher rental income. The table below presents the financial performance: 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change Change in % Net operating income from letting activities 34,394 28,892 5,502 19.0 Result from the remeasurement of investment property in EUR k 1,536 665 871 131.0 Result from the disposal of investment property 0 612 – 612 – 100.0 Result from the disposal of real estate inventories 0 7 – 7 – 100.0 Other operating income Personnel expenses Depreciation and amortisation 520 425 95 22.4 – 2,900 – 2,854 – 46 1.6 – 142 – 143 1 – 0.7 Other operating expenses – 2,156 – 2,426 270 – 11.1 Earnings before interest and taxes (EBIT) 31,252 25,178 6,074 24.1 Financial income Financial expenses Gain/loss from the remeasurement of derivative financial instruments 23 70 – 47 – 67.1 – 9,113 – 5,808 – 3,305 56.9 586 – 1,123 1,709 n/a Earnings before taxes 22,748 18,316 4,432 24.2 Income taxes – 7,039 – 5,428 – 1,611 29.7 Net income for the period 15,709 12,888 2,821 21.9 2,807 – 2,638 5,445 n/a 18,516 10,250 8,266 80.6 Other comprehensive income (OCI) Total comprehensive income for the period Compared to the same period in the previous year, the net operating income from letting activities of EUR k 34,394 increased by EUR k 5,502, mainly as newly acquired properties were placed under management. QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Other operating income was EUR k 520 and was therefore slightly higher than in the same period in the previous year. In particular, it comprises income from the reversal of impairments of receivables totalling EUR k 249. Other operating expenses decreased by EUR k 270 to EUR k 2,156 compared to the previous period, due primarily to lower expenses in connection with legal disputes and offices. In the reporting period, financial expenses increased by EUR k 3,305 to EUR k 9,113 compared to the same period in the previous year. The main cause of this was expenses of EUR k 1,800 for the repayment of loans in connection with the refinancing of loans totalling EUR k 80,798 in the first quarter. Additionally, interest expenses will be higher due to the increased amount of loans. The tax expenses in the first quarter comprise ongoing income taxes of EUR k 2,673 and deferred taxes of EUR k 4,366. TABLE OF CONTENTS   13 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT 2.2.3 Cash flows The following cash flow statement was generated using the indirect method under IAS 7. In the first quarter of 2017, the cash flows resulted in an increase in cash and cash equivalents, due primarily to the capital increase against cash contributions carried out on 31 January 2017 which generated gross proceeds of EUR k 115,984. in EUR k 1. Net cash flow from operating activities 2. Cash flow from investing activities 3. Cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Change Change in 12,280 10,905 1,375 12.6 7,223 – 89,152 96,375 n/a 96,381 – 5,710 102,091 n/a 115,885 – 83,957 199,842 n/a 68,415 183,736 – 115,321 – 62.8 184,300 99,779 84,521 84.7 In the reporting period, the cash flow from operating activities increased by EUR k 1,375 compared to the same period in the previous year. Besides other effects, this was due primarily to higher income from letting activities. The positive cash flow from investing activities of EUR k 7,223 essentially reflects the cash received from the disposal of properties. In the previous period, the most significant effect was from the cash paid for the acquisition of the Blue Five portfolio. The higher cash flow from financing activities is due to the capital increase in exchange for cash contributions carried out on 31 January 2017. A loan of EUR k 80,798 was obtained as part of the refinancing of loans. In particular, loan repayments totalling EUR k 92,750 had the opposite effect. By refinancing its loans, TLG IMMOBILIEN will be able to secure lower interest rates in the long term. The cash and cash equivalents consist entirely of liquid funds. 2.2.4 Financial position The following table represents the condensed assets and capital structure. Liabilities and receivables due in more than one year have all been categorised as long term. in EUR k Investment property/advance payments Deferred tax assets Other non-current assets Financial assets Cash and cash equivalents Other current assets Total assets Equity Non-current liabilities 31/12/2016 Change Change in % 2,189,505 2,215,321 – 25,816 – 1.2 1,583 2,652 – 1,069 – 40.3 17,925 18,067 – 142 – 0.8 4,806 4,800 6 0.1 184,300 68,415 115,885 169.4 54,429 35,508 18,921 53.3 2,452,548 2,344,763 107,785 4.6 1,141,621 1,009,503 132,118 13.1 955,438 1,009,406 – 53,968 – 5.3 Deferred tax liabilities 221,879 217,713 4,166 1.9 Current liabilities 133,610 108,141 25,469 23.6 2,452,548 2,344,763 107,785 4.6 Total equity and liabilities TABLE OF CONTENTS 31/03/2017 QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 14 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT The assets side is dominated by investment property including advance payments. Compared to 31 December 2016, the proportion of investment property in the total assets decreased from 94% to 89%, due in particular to the increase in cash and cash equivalents following the capital increase as well as the disposal of properties (see the disclosures in the notes). The equity of the Group was EUR k 1,141,621 and increased by EUR k 132,118, due in particular to the capital increase against cash contributions carried out on 31 January 2017 which generated gross proceeds of EUR k 115,984, as well as the total comprehensive income for the period. Compared to 31 December 2016, the equity ratio increased by 3.4 percentage points to 46.5%. 2.2.5 Financial performance indicators FFO development in EUR k Net income for the period Income taxes EBT Result from the disposal of investment property Result from the disposal of real estate inventories 01/01/2017  – 31/03/2017 01/01/2016 – 31/03/2016 Change Change in % 15,709 12,888 2,821 21.9 7,039 5,428 1,611 29.7 22,748 18,316 4,432 24.2 0 – 612 612  – 100.0 0 – 7 7 – 100.0 – 1,536 – 665 – 871 131.0 Gain/loss from the remeasurement of derivative financial instruments – 586 1,123 – 1,709 n/a Other effects 1 1,982 335 1,647 491.6 FFO before taxes 22,608 18,490 4,118 22.3 Income taxes – 7,039 – 5,428 – 1,611 29.7 Deferred taxes 4,366 4,073 293 7.2 Result from the remeasurement of investment property Correction of tax effects from transaction costs and previous-period effects 1,191 0 1,191 0.0 FFO after taxes 21,126 17,135 3,991 23.3 Average number of shares outstanding in thousands 2 71,928 67,432 0.29 0.25 0.04 16.0 FFO per share in EUR The other effects include (a) the depreciation of IAS 16 property (owner-occupied property) (EUR k 28; previous year EUR k 42), (b) personnel restructuring expenses (EUR k 124; previous year EUR k 293), (c) transaction costs (EUR k 30; previous year EUR k 0), (d) refinancing costs / repayment of loans (EUR k 1,800; previous year EUR k 0). 2 Total number of shares as at 31 March 2016: 67.4 m, as at 31 March 2017: 74.2 m. The weighted average number of shares was 67.4 m in the first quarter of 2016 and 71.9 m in the first quarter of 2017. QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 1 Funds from operations (FFO) are a key performance indicator for the TLG IMMOBILIEN Group. Funds from operations, adjusted for significant unsustainable effects and effects not affecting liquidity, totalled EUR k 21,126 in the reporting period. The considerable increase in FFO by 23.3%, or EUR k 3,991, compared to the same period in the previous year is due predominantly to the higher net operating income from letting activities. The higher financial expenses had the opposite effect. FFO per share was EUR 0.29 and therefore higher than in the same period in the previous year despite the increased number of shares resulting from the capital increase in January 2017. TABLE OF CONTENTS   15 CONSOLIDATED INTERIM MANAGEMENT REPORT ECONOMIC REPORT Net Loan to Value (Net LTV) in EUR k Investment property (IAS 40) Advance payments on investment property (IAS 40) Owner-occupied property (IAS 16) Non-current assets classified as held for sale (IFRS 5) Inventories (IAS 2) Real estate Liabilities to financial institutions 31/03/2017 31/12/2016 Change Change in % 2,189,403 2,215,228 – 25,825 – 1.2 102 93 9 9.6 6,260 6,109 151 2.5 38,469 19,174 19,295 100.6 1,103 1,103 0 0.0 2,235,337 2,241,708 – 6,371 – 0.3 1,022,439 1,040,412 – 17,973 – 1.7 Cash and cash equivalents 184,300 68,415 115,885 169.4 Net debt 838,139 971,997 – 133,858 – 13.8 37.5 43.4 – 5.9 pp Net Loan to Value (Net LTV) in % As a ratio between net debt and real estate assets, the Net LTV is a key performance indicator for the company. It was 37.5% in the Group as at the reporting date. It therefore decreased by 5.9 percentage points compared to 31 December 2016, due primarily to increase in cash following the capital increase against cash contributions. EPRA Net Asset Value (EPRA NAV) in EUR k Equity 31/03/2017 31/12/2016 Change Change in % 1,141,621 1,009,503 132,118 13.1 Fair value adjustment of fixed assets (IAS 16) 5,083 5,327 – 244 – 4.6 Fair value adjustment of real estate inventories (IAS 2) 1,443 1,443 0 0.0 Fair value of derivative financial instruments 14,184 18,089 – 3,905 – 21.6 Deferred tax assets – 1,583 – 2,652 1,069 – 40.3 221,879 217,713 4,166 1.9 – 1,164 – 1,164 0 0.0 1,381,463 1,248,259 133,204 10.7 74,176 67,432 18.62 18.51 Deferred tax liabilities Goodwill EPRA Net Asset Value (EPRA NAV) Number of shares in thousands EPRA NAV per share in EUR The EPRA Net Asset Value (EPRA NAV) is another key performance indicator of TLG IMMOBILIEN and was EUR k 1,381,463 as at 31 March 2017. Compared to 31 December 2016, the EPRA NAV increased by EUR k 133,204, due primarily to the changes in equity following the capital increase against cash contributions. The EPRA NAV per share was EUR 18.62, compared to EUR 18.51 as at 31 December 2016. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 16 CONSOLIDATED INTERIM MANAGEMENT REPORT REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 3. REPORT ON RISKS, OPPORTUNITIES AND FORECASTS 3.1 RISK REPORT TLG IMMOBILIEN AG is exposed to constantly changing general economic, technical, political, legal and societal conditions that could impede its achievement of its targets, the implementation of its long-term strategies or its financial performance, financial position and cash flows. These risks are described in detail in the 2016 Group annual report. There have been no major changes in the risk situation since 31 December 2016. The existence of the company is currently not considered to be at risk. 3.2 OPPORTUNITY REPORT The opportunities to which TLG IMMOBILIEN has access did not change significantly in the first quarter of 2017. We therefore refer to the disclosures in the opportunity report in the consolidated financial statements of 31 December 2016. 3.3 FORECAST REPORT The expected development of TLG IMMOBILIEN AG in 2017 was described in detail in the consolidated management report of 31 December 2016. QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG The expectations with regard to the business development of TLG IMMOBILIEN have not changed since the publication of the consolidated financial statements for 2016. TABLE OF CONTENTS   17 CONSOLIDATED INTERIM FINANCIAL STATEMENTS TABLE OF CONTENTS CONSOLIDATED INTERIM FINANCIAL STATEMENTS 19 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 20 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 21 CONSOLIDATED CASH FLOW STATEMENT 22 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 23 CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 23 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN AG 23 A.1 INFORMATION ON THE COMPANY 23 A.2 FUNDAMENTALS OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 24 B. EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS 24 C. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 24 C.1 INVESTMENT PROPERTY 25 C.2 EQUITY 25 D. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 25 D.1 NET INTEREST 25 D.2 INCOME TAXES 26 D.3 EARNINGS PER SHARE 26 E. OTHER INFORMATION 26 E.1 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS 26 E.2 RELATED COMPANIES AND PARTIES 27 E.3 SUBSEQUENT EVENTS 27 E.4 RESPONSIBILITY STATEMENT QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 18 TABLE OF CONTENTS CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME   19 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Net operating income from letting activities 34,394 28,892 Income from letting activities 46,554 37,487 39,229 32,513 6,723 4,781 in EUR k a) Rental income b) Income from recharged operating costs c) Income from other goods and services Expenses relating to letting activities d) Expenses from operating costs e) Maintenance expenses f) Other services Result from the remeasurement of investment property 602 193 – 12,160 – 8,595 – 10,138 – 7,074 – 984 – 978 – 1,038 – 543 1,536 665 Result from the disposal of investment property 0 612 Result from the disposal of real estate inventories 0 7 a) Proceeds from the disposal of real estate inventories 0 8 b) Carrying amount of real estate inventory disposed 0 – 1 520 425 – 2,900 – 2,854 – 142 – 143 Other operating income Personnel expenses Depreciation and amortisation Other operating expenses – 2,156 – 2,426 Earnings before interest and taxes (EBIT) 31,252 25,178 23 70 – 9,113 – 5,808 586 – 1,123 22,748 18,316 Financial income Financial expenses Gain/loss (–) from the remeasurement of financial instruments Earnings before taxes Income taxes – 7,039 – 5,428 Net income for the period 15,709 12,888 2,807 – 2,638 18,516 10,250 Other comprehensive income (OCI): Thereof will be reclassified to profit or loss Gain/loss from remeasurement of derivative financial instruments in hedging relationship, net of taxes Total comprehensive income for the period QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Of the net income for the period, the following is attributable to: Non-controlling interests 0 38 15,709 12,850 Earnings per share (basic) in EUR 0.21 0.19 Earnings per share (diluted) in EUR 0.21 0.19 The shareholders of the parent company Of the total comprehensive income for the period, the following is attributable to: Non-controlling interests The shareholders of the parent company 0 38 18,516 10,212 TABLE OF CONTENTS KONZERNABSCHLUSS for the period from 1 January to 31 March 2017 20 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 March 2017 Assets 31/03/2017 31/12/2016 2,213,819 2,240,840 2,189,403 2,215,228 102 93 Property, plant and equipment 6,496 6,672 Intangible assets 1,498 1,413 Other non-current financial assets 4,806 4,800 Other assets 9,931 9,982 Deferred tax assets 1,583 2,652 in EUR k A) Non-current assets Investment property Advance payments on investment property B) Current assets 238,729 103,923 Inventories 1,103 1,103 Trade receivables 5,479 5,997 Receivables from income taxes 1,170 1,239 Other current financial assets 839 864 Other receivables and assets 7,369 7,131 184,300 68,415 38,469 19,174 2,452,548 2,344,763 31/03/2017 31/12/2016 1,141,621 1,009,503 74,176 67,432 Capital reserves 547,004 440,267 Retained earnings 530,924 515,094 Other reserves – 10,483 – 13,290 Cash and cash equivalents Assets classified as held for sale Total assets A) Equity Subscribed capital Equity attributable to the shareholders of the parent company 1,141,621 1,009,503 B) Liabilities 1,310,927 1,335,260 I.) Non-current liabilities 1,177,317 1,227,119 925,272 975,164 8,305 8,347 16,456 20,370 Non-current liabilities to financial institutions Pension provisions Non-current derivative financial instruments Other non-current liabilities 5,405 5,525 Deferred tax liabilities 221,879 217,713 II.) Current liabilities 133,610 108,141 Current liabilities due to financial institutions 97,167 65,248 Trade payables 18,319 21,178 Other current provisions 1,660 1,828 Tax liabilities 4,703 4,512 Other current liabilities Total equity and liabilities TABLE OF CONTENTS 11,761 15,375 2,452,548 2,344,763 QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Equity and liabilities in EUR k CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT   21 CONSOLIDATED CASH FLOW STATEMENT for the period from 1 January to 31 March 2017 in EUR k 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 22,748 18,316 1. Cash flow from operating activities Net income for the period before taxes Depreciation of property, plant and equipment and amortisation of intangible assets Result from the remeasurement of investment property 142 143 – 1,536 – 665 Gain/loss from the remeasurement of derivative financial instruments – 586 1,123 Increase/decrease (–) in provisions – 210 512 Other non-cash income/expenses 1,027 201 Gain (–)/loss from disposal of property, plant and equipment and intangible assets 0 – 613 Increase (–)/decrease in inventories 0 1 Financial income – 23 – 70 Financial expenses 9,113 5,808 Increase (–)/decrease in trade receivables and other assets 2,012 7,663 Increase/decrease (–) in trade payables and other liabilities – 8,854 – 6,212 Cash flow from operating activities 23,833 26,207 23 70 Interest received – 10,155 – 8,257 Income tax paid/received Interest paid – 1,543 – 7,115 Net cash flow from operating activities 12,158 10,905 11,929 16,486 2. Cash flow from investing activities Cash received from disposals of investment property Cash received from disposals of property, plant and equipment 0 202 – 3,818 – 105,763 Cash paid for acquisitions of property, plant and equipment – 749 – 40 Cash paid for investments in intangible assets – 139 – 37 Cash paid for acquisitions of investment property Change in scope of consolidation Cash flow from investing activities 122 0 7,345 – 89,152 113,292 0 80,798 0 3. Cash flow from financing activities Cash received from equity contributions Cash received from bank loans QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Repayments of bank loans – 97,709 – 5,710 96,381 – 5,710 115,885 – 83,957 68,415 183,736 184,300 99,779 Cash 184,300 99,779 Cash and cash equivalents at end of period 184,300 99,779 Cash flow from financing activities 4. Cash and cash equivalents at end of period Net change in cash and cash equivalents (subtotal of 1 – 3) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 5. Composition of cash and cash equivalents TABLE OF CONTENTS 22 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period from 1 January to 31 March 2017 Other comprehensive income (OCI) in EUR k 01/01/2016 Subscribed capital Capital reserves Retained earnings Reserve hedge accounting Actuarial gains/ losses Noncontrolling interests Equity 967,874 67,432 439,510 469,369 – 9,347 – 1,899 2,809 Net income for the period 0 0 12,850 0 0 37 12,887 Other comprehensive income (OCI) 0 0 0 – 2,638 0 0 – 2,637 Total comprehensive income for the year 0 0 12,850 – 2,638 0 37 10,250 Capital contribution in connection with share-based remuneration 0 201 0 0 0 0 201 Change during the period 0 201 12,850 – 2,638 0 37 10,451 31/03/2016 67,432 439,711 482,220 – 11,985 – 1,899 2,846 978,325 01/01/2017 67,432 440,267 515,094 – 11,128 – 2,162 0 1,009,503 Net income for the period 0 0 15,709 0 0 0 15,709 Other comprehensive income (OCI) 0 0 0 2,807 0 0 2,807 Total comprehensive income for the year 0 0 15,709 2,807 0 0 18,516 Change in scope of consolidation 0 0 122 0 0 0 122 6,744 109,240 0 0 0 0 115,984 Transaction costs associated with the share capital increase, after taxes 0 – 2,692 0 0 0 0 – 2,692 Capital contribution in connection with share-based remuneration 0 189 0 0 0 0 189 6,744 106,737 15,831 2,807 0 0 132,118 74,176 547,004 530,924 – 8,321 – 2,162 0 1,141,621 Share capital increase Change during the period QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 31/03/2017 TABLE OF CONTENTS CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN AG CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT 31 MARCH 2017 A. GENERAL INFORMATION ON THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF TLG IMMOBILIEN AG A.1 INFORMATION ON THE COMPANY TLG IMMOBILIEN AG, Berlin, is an Aktiengesellschaft (stock corporation) in Germany with its headquarters at Hausvogteiplatz 12, 10117 Berlin, entered in the commercial register of Berlin under the number HRB 161314 B, and is – together with its subsidiaries, the TLG IMMOBILIEN Group (short: TLG IMMOBILIEN) – one of the largest providers of commercial real estate in Germany. The main activities consist of the operation of real estate businesses and transactions of all types in connection with this, as well as the letting, management, acquisition, disposal and development of office, retail and hotel properties, either itself or via companies of which the company is a shareholder. QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG A.2 FUNDAMENTALS OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS The consolidated interim financial statements of TLG IMMOBILIEN AG were prepared in condensed form in accordance with IAS 34 (Interim Financial Reporting) and the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB), as adopted by the European Union. The consolidated interim financial statements were prepared in accordance with the rulings of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards. The requirements of IAS 34 (Interim Financial Reporting) were adhered to. The notes are presented in condensed form on the basis of the option provided by IAS 34.10. These condensed consolidated interim financial statements have not been audited or subjected to a review. The consolidated interim financial statements are comprised of the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated cash flow statement, the consolidated statement of changes in equity and the notes to the consolidated financial statements. Besides the consolidated interim financial statements, the interim report contains the interim group management report and the responsibility statement. The currency of the consolidated interim financial statements is the euro. Unless stated otherwise, all amounts are given in thousands of euros (EUR k). In tables and references – for reasons of calculation – there can be rounding differences to the mathematically exactly determined figures. One company has been deconsolidated from the scope of consolidation since 31 December 2016. There have been no other changes to the scope of consolidation since 31 December 2016. TABLE OF CONTENTS   23 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS – SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION B. EXPLANATION OF ACCOUNTING AND MEASUREMENT METHODS The accounting and measurement methods applied in these consolidated interim financial statements are identical to the methods presented in the IFRS consolidated financial statements as at 31 December 2016. These consolidated interim financial statements should therefore be read in conjunction with the consolidated financial statements of TLG IMMOBILIEN of 31 December 2016. As at 31 December 2016, the investment property had been subjected to a detailed external valuation by Savills Advisory Services Germany GmbH & Co. KG and recognised at fair value. An external expert carries out a valuation every six months and the most recently recognised fair values are valued internally on the other reporting dates. The TLG IMMOBILIEN Group has fully applied all new mandatory standards and interpretations as at 1 January 2017. There were no major effects on the consolidated financial statements as a result. C. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION C.1 INVESTMENT PROPERTY The carrying amount of the investment property had developed as follows as at the reporting date: in EUR k Carrying amount as at 01/01 Acquisitions Capitalisation of construction activities and modernisation expenses Reclassification as assets held for sale Reclassification from property, plant and equipment Fair value adjustments Carrying amount as at 31/03/2017 and 31/12/2016 2017 2016 2,215,228 1,739,474 630 442,998 3,233 18,543 – 31,224 – 28,857 0 3,211 1,536 39,860 2,189,403 2,215,228 The portfolio strategy of TLG IMMOBILIEN stipulates the concentration on the asset classes of office and retail, as well as hotels with long-term leases in certain top central locations. While the office portfolio is to be largely limited to promising A and B-rated locations, the retail portfolio – which is characterised by neighbourhood shopping centres specialising in the food retail segment – is more widely distributed. Decisions on acquisitions, sales and pending investments are subject to the named principles of the portfolio strategy. In the first quarter of 2017, the changes in the fair value of the portfolio were due primarily to EUR k – 31,224 in reclassifications as assets held for sale. The total value of EUR k – 28,857 in the previous year was therefore slightly surpassed. Of the reclassifications, 86% are attributable to the disposal of two retail packages with 30 properties in total, mostly discounters. The capitalisation of construction activities totalling EUR k 3,233 is almost entirely attributable to the office, retail and hotel asset classes. Of this amount, 52% is attributable to development measures mainly concerning retail properties and 20% is attributable to renovations for tenants as part of new rental agreements. The fair value adjustment of EUR k 1,536 essentially concerns properties that have already been disposed of but for which the transfer of benefits and encumbrances has not yet taken place as at the reporting date. The parameters and asset classes on which the calculation is based have not changed significantly since 31 December 2016. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 24 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION – SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME C.2 EQUITY As at the reporting date, the subscribed capital of the company was EUR k 74,176 (previous year EUR k 67,432). The share capital is fully paid-in. There are no other share types. Following the cash capital increase on 30 January 2017, with the approval of the Supervisory Board and making partial use of the Authorised Capital 2016, the company’s share capital of EUR k 67,432, divided into 67,432,326 ordinary bearer shares with a theoretical par value of EUR 1.00, was increased by EUR k 6,743 to EUR k 74,176 by the issue of 6,743,232 no-par bearer shares. The shares issued in January 2017 have a theoretical par value of EUR 1.00 and entitlement to dividends from 1 January 2016. The gross proceeds were approximately EUR k 115,984. The capital reserve amounts to EUR k 547,004 (previous year EUR k 440,267). The changes (EUR k 106,737) are due essentially to a contribution of EUR k 106,548 to the capital reserve as part of the cash capital increase and a contribution of EUR k 189 to the capital reserve from share-based remuneration. The other changes in the components of Group equity are detailed in the consolidated statement of changes in equity. D. SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME D.1 NET INTEREST The net interest is characterised by special items totalling EUR k 1,800 resulting from the refinancing in the first quarter. D.2 INCOME TAXES The tax expenses/income can be broken down as follows: 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Current income tax 2,673 1,355 Deferred taxes 4,366 4,073 Tax expenses/income 7,039 5,428 QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG in EUR k TLG IMMOBILIEN discloses income taxes on the basis of the expected average effective Group tax rate. A change in the tax rate compared to the previous period can be the result of various factors, especially changes in the recognition of loss carryforwards/carried interest, the accrual of tax-free income and expenses and previous-period tax effects. TABLE OF CONTENTS   25 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS SELECTED NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME – OTHER INFORMATION D.3 EARNINGS PER SHARE The earnings per share are calculated by dividing the net income for the period attributable to the shareholders of the parent company by the weighted average number of shares outstanding. 01/01/2017 – 31/03/2017 01/01/2016 – 31/03/2016 Net income for the period attributable to the shareholders of the parent company in EUR k 15,193 12,850 Weighted average number of shares outstanding in thousands 71,928 67,432 0.21 0.19 108 66 72,036 67,498 0.21 0.19 in EUR k Basic earnings per share in EUR Potential diluting effect of share-based remuneration in thousands Number of shares with a potential diluting effect in thousands Diluted earnings per share in EUR The share-based payments to the Management Board and some employees have a diluting effect based on employee services already received. The number of shares on the reporting date would increase by around 108,000 shares. E. OTHER INFORMATION E.1 DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS With the exception of derivatives recognised at fair value, all assets and liabilities have been measured at amortised cost. With regard to the assets and liabilities measured at amortised cost, the carrying amounts of the financial assets and liabilities on the statement of financial position are good approximations of fair value, with the exception of liabilities due to financial institutions. The fair values of the liabilities due to financial institutions correspond to the present values of the payments associated with the liabilities, with consideration for the current interest parameters as at the reporting date (level 2 according to IFRS 13), and were EUR k 1,029,365 as at 31 March 2017 (31 December 2016: EUR k 1,063,025). The derivative financial instruments recognised in the statement of financial position have been measured at fair value. They are all interest rate hedges. The measurement methods have not changed since 31 December 2016. E.2 RELATED PARTIES There were no significant transactions with related companies or parties in the first three months of the 2017 financial year. Effective as of 10 February 2017, Frank D. Masuhr has been appointed to the Supervisory Board of TLG IMMOBILIEN AG until the end of the 2017 annual general meeting. Frank D. Masuhr is taking over from Alexander Heße who stepped down from his position on the Board in 2016. TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG 26 CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS OTHER INFORMATION E.3 SUBSEQUENT EVENTS On 10 May 2017, the Company’s Management Board and Supervisory Board have resolved to offer to the shareholders of WCM Beteiligungs- und Grundbesitz-Aktiengesellschaft to acquire their no-par value bearer shares by way of a voluntary public takeover offer. Subject to the final determination of the minimum prices and the offer conditions in the offer document, the Company intends to offer one new no-par value bearer share of the Company with a notional value of EUR 1.00 as consideration in exchange for each 5.75 tendered shares of WCM Beteiligungs- und Grundbesitz-Aktiengesellschaft. The new shares of the Company will carry dividend rights from January 1, 2017. The final terms and further provisions regarding the public takeover offer will be determined in the offer document and will be disclosed once its publication will have been approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). E.4 RESPONSIBILITY STATEMENT To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the consolidated interim financial statements of TLG IMMOBILIEN AG of 31 March 2017 give a true and fair view of the financial performance, financial position and cash flows of the Group, and the consolidated interim management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Berlin, 11 May 2017 Niclas Karoff Member of the Management Board QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG Peter Finkbeiner Member of the Management Board TABLE OF CONTENTS   27 28 FINANCIAL CALENDAR – CONTACT – IMPRINT FINANCIAL CALENDAR 23 MAY 2017 Annual general meeting 11 AUGUST 2017 Publication of quarterly financial report Q2/2017 9 NOVEMBER 2017 Publication of quarterly financial report Q3/2017 CONTACT PUBLISHER: TLG IMMOBILIEN AG Hausvogteiplatz 12 10117 Berlin, Germany Investor Relations Sven Annutsch Phone: + 49 30 2470 6089 Fax: + 49 30 2470 7446 E-mail: ir@tlg.de Internet: www.tlg.eu CONCEPT, PROJECT MANAGEMENT AND DESIGN: GFD – Gesellschaft für Finanzkommunikation mbH, Frankfurt/Main, Germany www.gfd-finanzkommunikation.de Ligaturas – Reportdesign, Berlin, Germany www.ligaturas.de TABLE OF CONTENTS QUARTERLY FINANCIAL REPORT AS AT 31 MARCH 2017 OF TLG IMMOBILIEN AG PUBLISHING DETAILS The greatest of care was taken during the preparation of this report. Nevertheless, rounding, transmission, typographical and printing errors cannot be ruled out. This is a translation of the original German text. In cases of doubt, the German version takes precedence. This publication contains forward looking statements based on current opinions and assumptions of the management of TLG IMMOBILIEN AG made to the best of their knowledge. Forward looking statements are subject to known and unknown risks, uncertainties and other factors that can lead to the turnover, profitability, target achievement and results of TLG IMMOBILIEN AG differing greatly from those named or described expressly or implicitly in this publication. Due to this, those who come into possession of this publication should not trust in such forward looking statements. TLG IMMOBILIEN AG accepts no liability and gives no guarantee for the correctness of such forward looking statements and will not adjust them to future results and developments. 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