INTERIM FINANCIAL REPORT 30 JUNE 2019 · listing on the vienna and euronext amsterdam stock exchanges under the ticker atrs. ... 02interim financial statements 18 condensed consolidated

INTERIMFINANCIALREPORT 30 JUNE 2019

LEADER IN CENTRAL

EUROPEAN SHOPPING

CENTRES

02 | ABOUT ATRIUM

ABOUT ATRIUM

Atrium is a leading owner and manager of high qualityretail and leisure shopping destinations in growing urbanlocations in Central Europe and a hallmark of a high qualityretail experience for consumers and retailers.

Our portfolio will continue to be focused on primedominant shopping centres that offer higher quality cashflow growth in our core markets of Poland and the CzechRepublic. Organic growth will be driven by pro-active,hands-on asset management, ensuring we uphold our“retail is detail” approach.

Further growth will be achieved through redevelopments,upgrades and extensions to our existing portfolio andthrough the selective acquisition of high quality retailassets in our region.

Our balance sheet will continue to be proactively managedto remain efficient and optimally leveraged.

OUR PROFILE

Atrium Group owns a €2.7 billion1 portfolio of 321 retailproperties which produced €96.52 million of rental incomeduring the first six months of 2019. These properties arelocated predominantly in Poland and the Czech Republic,and, as of today, with the exception of one, are allmanaged by Atrium’s internal team of retail real estateprofessionals.

Atrium is based in Jersey, Channel Islands, and has a duallisting on the Vienna and Euronext Amsterdam StockExchanges under the ticker ATRS.

OUR FOCUS FOR 2019

In a changing retail environment, to continue to improvethe quality of our portfolio through further selectiverotation, driving the operational and financialperformance of our assets and increasing the offer toretailers and consumers through the relevant extensionand renovation of our already stable and successfulinvestments and redevelopments;Strengthen our relationships with tenants and supportnew market entrants;Increase the resilience of the portfolio by meeting theevery-day needs of consumers whilst at the same timebe positioned as an attractive destination location;Maintain financing flexibility and appropriate liquidity;Innovation - anticipating and reacting to increasedcompetition, Omni channel penetration, digitalisationand creating a click and brick synergy.

1 Including a 75% stake in assets held in Joint Ventures and excluding €295.8 million representing two assets in Poland classified as held for sale as at 30 June 2019

2 Including a 75% stake in assets held in Joint Ventures (Arkady Pankrac is managed externally)

03 | KEY HIGHLIGHTS

KEY HIGHLIGHTS

04 | KEY PERFORMANCE INDICATORS

KEYPERFORMANCEINDICATORS

KEY FINANCIAL FIGURES OF THE GROUP Unit 6M 2019 6M 2018 Change % FY 2018Net rental income excl. Russia €’000 74,584 71,717 4.0% 139,805EPRA like-for-like net rental income excl.Russia €’000 40,505 39,924 1.5% 79,024Net rental income €’000 92,412 91,839 0.6% 178,947EPRA like-for-like net rental income €’000 51,503 51,230 0.5% 118,166Operating margin % 95.8 97.3 (1.5%) 96.4EBITDA1 €’000 80,987 80,861 0.2% 149,511Company adjusted EPRA earnings €’000 58,159 58,848 (1.2%) 110,751Regular dividend pay-out ratio % 87.7 86.5 92.2Revaluation of standing investments €’000 7,265 7,309 17,895Revaluation of redevelopments and land €’000 (4,903) (2,125) (19,244)Profit after taxation €’000 56,910 48,500 17.3% 60,627Net cash generated from operating activities €’000 42,533 18,292 132.5% 57,773IFRS Earnings per share €cents 15.1 12.8 18.0% 16.1Company adjusted EPRA earnings per share €cents 15.4 15.6 (1.2%) 29.31 Excluding revaluation, disposals, impairments

FINANCIAL POSITION Unit 30-6-2019 31-12-2018 Change %Standing investments at fair value €’000 2,680,946 2,905,858 (7.7%)Redevelopments and land at fair value €’000 257,984 255,429 1.0%Cash and cash equivalents €’000 27,563 38,493 (28.4%)Equity €’000 1,786,285 1,793,049 (0.4%)Borrowings €’000 1,298,378 1,249,038 4.0%LTV (net) % 39.3 37.9 1.4%IFRS NAV per share € 4.73 4.75 (0.4%)EPRA NAV per share € 5.05 5.03 0.4%

The key performance indicators include a 75% stake in assets held in Joint Ventures.

05 | CONTENTS

CONTENTS

ABOUT ATRIUM 02

KEY HIGHLIGHTS 03

KEY PERFORMANCE INDICATORS 04

01 GROUP MANAGEMENT REPORT 06

GROUP MANAGEMENT REPORT 08

OPERATING ACTIVITIES 10

EPRA PERFORMANCE MEASURES 13

STATEMENT IN ACCORDANCE WITH §125 OF THE AUSTRIAN STOCKEXCHANGE ACT 2018 (BörseG 2018) 15

STATEMENT REGARDING FORWARDLOOKING INFORMATION 16

02 INTERIM FINANCIAL STATEMENTS 18

CONDENSED CONSOLIDATED INTERIMFINANCIAL STATEMENTS 20

NOTES TO THE CONDENSEDCONSOLIDATED INTERIM FINANCIALSTATEMENTS 24

INDEPENDENT REVIEW REPORT TOATRIUM EUROPEAN REAL ESTATELIMITED 33

06 | GROUP MANAGEMENT REPORT

01GROUPMANAGEMENTREPORT



GROUPMANAGEMENTREPORT

BUSINESS REVIEW

OPERATIONAL AND FINANCIAL PERFORMANCE

During the first half of 2019, the Group continued to see thebenefits of our ongoing strategy to reposition our portfoliotowards large, high quality assets, in strong urban locations andcapital cities, that deliver a more robust and sustainable income.

The repositioning continued with the sale of the two Polishshopping centres, Atrium Koszalin, located in Koszalin, and AtriumFelicity in Lublin, for a total of €298 million (completed in July2019). This transaction, which was completed at approximately3% above book value, followed the disposal of a land plot inGdansk in January 2019 for €28 million and the purchase of thec. 7,000 sqm King Cross Shopping Centre in Warsaw for€43 million in June 2019.

In July 2019, Atrium entered into agreement to sell Atrium Dubenshopping centre in Zilina, Slovakia for approximately €37 million,representing its book value as of 30 June 2019, with expectedclosing by end of the year.

The Group NRI grew to €92.4 million. When Russia is excluded,Group NRI increased by 4.0%, or €2.9 million, as higher qualitycash flow generated from our acquisitions and the successfulopening of our three extensions in Warsaw at the end of 2018offset reduced cashflow as a result of our strategic disposal plan,including our exit from Hungary and Romania. As anticipated, theRussian performance was adversely impacted by the decisions ofMediaMarkt and Castorama to withdraw from the country,although our on the ground team continues to actively manageour assets and wider occupier relationships. Occupancy in ourRussian portfolio remains high at 92.4%.

EBITDA remained stable at €81.0 million, with an 88% EBITDAmargin. Company adjusted EPRA earnings per share was €cents15.4, compared to €cents 15.6 in the first six months of 2018.

Profit after tax was 17% higher versus the same period last year,at €56.9 million.

Net cash generated from operating activities was €42.5 millioncompared to €18.3 million for the first six months of 2018. Theincrease was primarily due to the cash payments of €27 million,related to the Austrian legacy legal compensation arrangement,that were paid in the first six months of 2018.

Net LTV was 39.3% as at 30 June 2019 and is expected todecrease to approximately 34% following the disposal of the twoPolish assets.

DIVIDEND

In November 2018, the Company’s Board of Directors approvedan annual dividend of €cents 27 per share for 2019, subject to aquarterly review, to be paid as a capital repayment, in quarterlyinstalments of €cents 6.75 per share at the end of each calendarquarter, commencing at the end of March 2019 (subject to anylegal and regulatory requirements and restrictions of commercialviability). Accordingly, on 29 March 2019 and 28 June 2019respectively, Atrium completed the first and the second dividendpayments of €cents 6.75 each per ordinary share (paid as a capitalrepayment), which amounted to a total of €51.0 million (6 Months2018: €51.0 million3).

As announced on 23 July 2019, in connection with therecommended cash acquisition of the entire issued and to beissued ordinary share capital of the Company, the IndependentCommittee of the Board of Directors has agreed to stop dividendpayments by the Company, as Gazit's offer assumes that nofurther regular dividends will be paid until the completion of thetransaction which is scheduled for 2 January 2020. TheCompany's shareholders are compensated for this through theoffer price. The announcement (and other reference materials) canbe found on the Company’s website at www.aere.com/investors-lobby.aspx .

3 Excluding special dividend of €14 cents paid on 29 March 2018, which amounted to a total of €52.8 million.

http://www.aere.com/investors-lobby.aspx



OUR MARKETS

BUSINESS ENVIRONMENT

PolandCzech

Republic Russia Slovakia EU France Germany2018 real GDP growth 5.1% 2.9% 2.3% 4.1% 1.5% 1.5% 1.5%2019f real GDP growth 3.8% 2.9% 1.6% 3.7% 1.5% 1.3% 0.8%2019f unemployment 3.6% 3.1% 4.8% 6.1% 7.3% 8.8% 3.4%2019f inflation 2.3% 2.1% 4.8% 2.2% 1.2% 1.2% 1.6%2019f Retail sales growth 4.7% 4.5% 5.6% 4.7% 1.5% (0.1%) 0.9%

In the first quarter of 2019, GDP growth in our markets continuedto hold up well against previous forecasts. In Poland, our primarymarket where 64.4% of our portfolio by value is located, GDPgrowth was better than forecast at 4.7%, while GDP in the CzechRepublic grew by 2.6%. Only in Russia did growth slow and was at0.5% year on year. Despite Russia’s slowdown in growth, theeconomy continues to defy the negative impact of sanctions.

Uncertainty in Europe, arising from both economic performanceand political issues, is something we remain mindful of. On theeconomic front, the ECB has outlined its intention to cut interestrates and relaunch its asset purchase programme if inflation ratesand market expectations continue to weaken. Politically, the Brexitprocess has no clear resolution in sight, despite fervent promisesfrom UK politicians that they can deliver a solution.

Against this, growth within the CEE is expected to continue in2019, albeit at a slower pace. Whilst a large part of the positiveperformance in these markets is home-grown, the slower andslowing EU economies will have an impact that can only bepartially offset by CEE economic stimulus measures, such asmaintaining low interest rates and government infrastructureinvestment. Poland’s performance was underpinned by a 3%quarter on quarter uplift in production, while in the CzechRepublic production contracted by 0.5%.

The retail sales performance in Poland, the Czech Republic andRussia exceeded GDP figures, driven by low unemployment,inflation and high real wage growth. Polish retail spending in thefirst quarter was, on average, up 4.5% year on year, jumping to11.9% in April, while wages grew by 7.1% year on year. Over thesame period, Czech retail sales were up on average by 4.8% yearon year, with 6.0% real wage growth. In Russia, indications arethat the slowdown in household spending growth may be behindus; the manufacturing Purchasing Managers’ Index has bouncedback since the 2018 trough and, recently, construction confidencehas risen as new orders have increased.

Stronger purchasing power in CEE has led to increased dwellingtimes at shopping centres and at the same time consumerdemand for both “retailtainment” and convenience is increasing;visitors want to be able to shop for basics quickly and efficiently,leaving time for entertainment. Recent research in Poland hasshown that shoppers are inclined towards allocating the greatershare of their salaries on culture and entertainment. Shoppingcentres are therefore having to adjust to changing customerpatterns, providing space for restaurants and entertainment, suchas cinemas, in addition to retail outlets.

Sources: IMF, PMR, Bloomberg, CBRE, Capital Economics, CUS,Trading Economics

OUTLOOK

The outlook for the second half of the year remains positive withcontinued strong growth in the CEE retail sector, arising fromabove inflation GDP increases and low unemployment, which,combined with the continued lower long term interest rateoutlook, is underpinning the supportive investment market.

10 | OPERATING ACTIVITIES

OPERATINGACTIVITIES

THE GROUP'S STANDING INVESTMENT PORTFOLIO PRODUCED THE FOLLOWING RESULTS IN TERMS OFGROSS AND NET RENTAL INCOME, AND EPRA LIKE-FOR-LIKE RENTAL INCOME DURING THE REPORTINGPERIOD:

Gross rental income Net rental income6M 2019 6M 2018 Change 6M 2019 6M 2018 Change

Country €’000 €’000 % €’000 €’000 %Poland 57,414 49,609 15.7% 55,166 47,513 16.1%Czech Republic 9,794 9,729 0.7% 9,730 9,560 1.8%Slovakia 5,597 5,348 4.7% 5,505 5,169 6.5%Russia 18,804 19,392 (3.0%) 17,828 20,122 (11.4%)Hungary - 1,028 (100.0%) - 827 (100.0%)Romania - 4,069 (100.0%) - 3,829 (100.0%)Total 91,609 89,175 2.7% 88,229 87,020 1.4%Investment in Joint Ventures(75%) 4,845 5,160 (6.1%) 4,183 4,819 (13.2%)

Total rental income 96,454 94,335 2.2% 92,412 91,839 0.6%

EPRA like-for-like gross rental income EPRA like-for-like net rental income6M 2019 6M 2018 Change 6M 2019 6M 2018 Change

Country €’000 €’000 % €’000 €’000 %Poland 30,962 31,052 (0.3%) 30,774 30,481 1.0%Czech Republic 9,794 9,565 2.4% 9,731 9,443 3.1%Subtotal 40,756 40,617 0.3% 40,505 39,924 1.5%Russia 11,794 11,197 5.3% 10,998 11,306 (2.7%)Like-for-like rental income 52,550 51,814 1.4% 51,503 51,230 0.5%Remaining rental income 43,904 42,365 3.6% 40,909 40,606 0.7%Exchange rate effect1 - 156 3Total rental income 96,454 94,335 2.2% 92,412 91,839 0.6%1 To enhance comparability of GRI/NRI, prior period values for like-for-like properties have been recalculated using the 2019 exchange rates as per EPRA best practicerecommendations

The Group’s portfolio produced €96.5 million of GRI during theperiod, a 2.2% increase compared to the same period lastyear, with notable gains made in both Poland and Slovakia. Polanddelivered a 15.7% increase in GRI, mainly due to the increase inhigh quality income from the Wars Sawa Junior acquisition andthe redevelopment extensions opened in Warsaw at the end of2018, while in Slovakia GRI increased by 4.7% due to the positiveimpact of the Hypermarket restructuring in 2018. These gainswere offset by the strategic disposal, and associated loss ofincome, of non-core assets to exit the Hungarian and Romanianmarkets in 2018, as well as a temporary decrease in rent atPankrac in the Czech Republic due to redevelopment. GRI inRussia has been impacted by the exit of MediaMarkt andCastorama from the Russian market and the subsequentretenanting required.

Group NRI followed a similar trend to GRI, with the exception ofRussia where the results were affected by a market wide increasein service provider costs.

On a like-for-like basis there were also increases in both GroupGRI and NRI, with EPRA like-for-like NRI increasing by 1.5%,excluding Russia. In our individual primary markets, we achieved a3.1% like-for-like NRI increase in the Czech Republic and a 1.0%uplift in Poland, where the process of repositioning ourportfolio, so that it comprises fewer, higher quality assets in tierone and capital cities, continues.

Overall, the income figures reflect the continued progress beingmade in our strategy of focussing on higher quality assets in primeurban locations, that can deliver stronger and more sustainableincome in the long term.


Our operating margin, whilst remaining above our 95% target,decreased by 1.5% to 95.8% (30 June 2018: 97.3%) mainly dueto the higher service provider costs in Russia in 2019 asmentioned above, and the impact of the redevelopment project atPankrac in the Czech Republic.

As at 30 June 2019, EPRA4 occupancy was 95.2% (31 December2018: 96.6%).

THE COUNTRY DIVERSIFICATION OF THE GROUP'S INCOME PRODUCING PORTFOLIO AS AT 30 JUNE 2019IS PRESENTED BELOW:

Standing investments1 No. ofproperties

Gross lettablearea

Portfolio Market value Portfolio

Country sqm % €’000 %Poland 20 474,500 54.4% 1,727,466 64.4%Czech Republic 2 61,100 7.0% 338,112 12.6%Slovakia 2 68,400 7.8% 161,007 6.0%Russia 7 237,500 27.3% 280,275 10.5%Total 31 841,500 96.6% 2,506,860 93.5%Investment in Joint Ventures (75%) 1 30,000 3.4% 174,086 6.5%Total standing investments 32 871,500 100.0% 2,680,946 100.0%1 Excluding €295.8 million representing two assets in Poland classified as held for sale as at 30 June 2019

The overall market value of the Group’s standing investmentsdecreased from €2,906 million at the 2018 year end to€2,6815 million as at 30 June 2019, largely due to the disposals ofAtrium Koszalin and Atrium Felicity in July 2019 (whichwere classified as held for sale as at 30 June 2019), offset by ouracquisition of King Cross Shopping Centre. The market value ofthe Group’s standing investments in Russia represented 10.5%(31 December 2018: 9.6%) of the total market value of thestanding investments.

Details of the key transactions completed by the Group duringand after the period are listed below:

AQUISITIONS

In June 2019, the Group completed the acquisition of King CrossShopping Centre in Warsaw, a well-connected and establishedretail destination that offers future redevelopment opportunities,for a consideration of €43 million.

DISPOSALS

In July 2019, the Group completed the sale of two Polishshopping centres, Atrium Koszalin, in Koszalin and Atrium Felicity,in Lublin, with a total lettable area of approximately 111,100 sqmfor €298 million, approximately 3% above the book value.

THE YIELD DIVERSIFICATION OF THE GROUP'SINCOME PRODUCING PORTFOLIO AND EPRAOCCUPANCY ARE PRESENTED BELOW:

Standinginvestments1

Net equivalentyield2

EPRA Netinitial yield

Occupancyrate3

(weightedaverage)

(NIY)4

Country % % %Poland 5.8% 5.4% 95.5%Czech Republic 5.3% 5.5% 95.5%Slovakia 6.8% 6.9% 99.0%Russia 12.7% 11.3% 92.4%Average 6.5% 6.1% 95.2%1 The table excludes two assets in Poland classified as held for sale as at

30 June 20192 The net equivalent yield takes into account the current and potential net

rental income, occupancy and the expiry of leases3 The Occupancy rate is defined as 100% less EPRA vacancy4 The EPRA NIY is calculated as the annualised net rental income of theportfolio divided by its market value

At 30 June 2019, the portfolio’s net equivalent yield increased to6.5%, the EPRA net initial yield remained at 6.1% (31 December2018: 6.4% and 6.1%) and the alternative EPRA “topped up” NIYdecreased to 6.5% (31 December 2018: 6.6%) as a result of boththe disposal of non-core assets and the acquisitions within theportfolio.

4 Best practice recommendations provide for a vacancy definition based on ERV of vacant units divided by the ERV of the whole portfolio. The Occupancy rateshown above is therefore defined as 100% less EPRA vacancy

5 Excluding €295.8 million representing two assets in Poland classified as held for sale as at 30 June 2019


REDEVELOPMENTS AND LAND PORTFOLIO

One of the Group’s major strategic focus is to upgrade and extendproven assets, which are already cash generating and where thereis retailer and consumer demand resulting in a lower executionrisk.

As at 30 June 2019, Atrium’s redevelopments and land portfoliowere valued at €258 million compared to €2856 million as at31 December 2018. Of this €180 million is land (31 December2018: €2126 million), which Atrium continues to seek to monetise,mainly through sales, and €78 million is incurred costs, year-to-date, for the future phases of the Promenada and otherredevelopments (31 December 2018: €73 million).

STRATEGIC AND OPERATIONAL RISK FACTORS

The process which the Group follows in order to identify andmitigate its key risks is set out on pages 27 to 28 of the AnnualReport and Financial Statements for the year ended 31 December2018 (the “Annual Report”). The Directors have reviewed the keyrisks and have confirmed that the list as set out in the AnnualReport remains appropriate.

6 Including €29.1 million land in Poland classified as held for sale as at 31 December 2018

13 | EPRA PERFORMANCE MEASURES

EPRAPERFORMANCEMEASURES

EPRA (European Public Real Estate Association) is a commoninterest group for listed real estate companies in Europe. EPRA'sobjective is to encourage greater investment in European listedreal estate companies and to strive for 'best practices' inaccounting and financial reporting in order to provide high-qualityinformation to investors and increase the comparability of

different companies. The best practices also create a frameworkfor discussion and decision-making on the issues that determinethe future of the sector. The Group applies the best practicespolicy recommendations of EPRA for financial reporting and alsofor sustainability reporting.

A. EPRA EARNINGS

6M 2019 6M 2018€‘000 €‘000

Earnings attributed to equity holders of the parent company 56,910 48,500Changes in value of investment properties (2,362) (5,184)Net result on disposals of investment properties 523 (2,732)Amortisation of intangible assets 618 1,102Deferred tax in respect of EPRA adjustments 509 1,705Joint venture interest in respect of the above adjustments - (308)EPRA Earnings 56,198 43,083Weighted average number of shares 377,865,774 377,362,043EPRA Earnings per share (in €cents) 14.9 11.4

Company adjustments1

Foreign exchange differences 108 (257)Deferred tax not related to revaluations 1,323 21,351Non-recurring tax charges - (5,329)Corporate fees and other costs 530 -Company adjusted EPRA earnings 58,159 58,848Company adjusted EPRA earnings per share (in €cents) 15.4 15.61 The “Company adjustments” represent adjustments of other non-recurring items which could distort Atrium’s operating results. Such non-recurring items are

disclosed separately from the operating performance in order to provide stakeholders with the most relevant information regarding the performance of theunderlying property portfolio.

B. EPRA NET ASSET VALUE ("NAV")

30 June 2019 31 December 2018

€’000in € per

ordinary share€’000

in € perordinary share

NAV per the financial statements 1,786,285 4.73 1,793,049 4.75Effect of exercise of options 7,429 8,715Diluted NAV, after the exercise of options 1,793,714 4.72 1,801,764 4.74Fair value of financial instruments 19,700 5,097Deferred tax 104,738 104,530EPRA NAV 1,918,151 5.05 1,911,391 5.03

14 | EPRA PERFORMANCE MEASURES

C. EPRA TRIPLE NAV ("NNNAV")

30 June 2019 31 December 2018

€’000in € per

ordinary share€’000

in € perordinary share

EPRA NAV 1,918,151 1,911,391Fair value of financial instruments (19,700) (5,097)Impact of debt fair value (62,928) (45,818)Deferred tax (104,737) (104,530)EPRA NNNAV 1,730,786 4.56 1,755,946 4.62Number of outstanding shares 377,912,324 377,787,123Number of outstanding shares and options 379,870,902 380,005,341

D. EPRA NIY AND "TOPPED UP" NIY

30 June 2019 31 December 2018€‘000 €‘000

Investment property – wholly owned 2,764,844 3,016,530Investment in Joint Venture (75%) 174,086 173,820Less redevelopments and land (257,984) (284,492)Completed property portfolio 2,680,946 2,905,858Allowance for estimated purchasers’ costs 48,339 52,859Gross up completed property portfolio valuation (B) 2,729,285 2,958,717Annualised cash passing rental income 176,891 190,693Property outgoings (9,114) (9,418)Annualised net rents (A) 167,777 181,275Add: notional rent expiration of rent free periods or other lease incentives 10,960 13,720Topped-up net annualised rent (C) 178,737 194,995EPRA NIY A/B 6.1% 6.1%EPRA "topped up" NIY C/B 6.5% 6.6%

E. EPRA VACANCY RATE

30 June 2019 31 December 2018€‘000 €‘000

Estimated rental value of vacant space 8,313 6,446Estimated rental value of the whole portfolio 171,692 187,233EPRA vacancy rate 4.8% 3.4%

F. EPRA COST RATIO

6M 2019 6M 2018€‘000 €‘000

Administrative expenses 10,835 10,385Exclude non-recurring legacy legal and business restructuring costs (530) -Other depreciation and amortisation 1,423 1,442Costs connected with development 394 475Net property expenses net of service charge income 3,380 2,155Share of Joint Venture’s expenses 662 339EPRA Costs (including direct vacancy costs) (A) 16,164 14,796Direct vacancy cost (2,026) (1,169)EPRA Costs (excluding direct vacancy costs) (B) 14,138 13,627Share of Joint Venture’s income 4,845 5,160Gross rental income 91,609 89,175Total income (C) 96,454 94,335EPRA Costs ratio (including direct vacancy costs) (A/C) 16.8% 15.7%EPRA Costs ratio (excluding direct vacancy costs) (B/C) 14.7% 14.4%

15 | STATEMENT IN ACCORDANCE WITH §125 OF THE AUSTRIAN STOCK EXCHANGE ACT

STATEMENT IN ACCORDANCE WITH§ 125 OF THE AUSTRIAN STOCKEXCHANGE ACT 2018 (BörseG 2018)

With respect to paragraph 125 of the Austrian Stock Exchange Act 2018 (§ 125 BörseG 2018), the directors confirm that to the best oftheir knowledge the condensed consolidated interim financial statements give a true and fair view of the assets, liabilities, financialposition and profit or loss of the Group as required by the applicable accounting standards and that the Group management report gives atrue and fair view of the development including important events and performance of the business and the position of the Group duringthe first six months of the financial year and their impact on the condensed consolidated interim financial statements, together with adescription of the principal risks and uncertainties for the remaining six months of the financial year and of the major related partytransactions to be disclosed.

THE BOARD OF DIRECTORS

CHAIM KATZMANChairman of the Board

MICHAEL ERRICHETTI NEIL FLANZRAICHDirector Director

SIMON RADFORD ANDREW WIGNALLDirector Director

LUCY LILLEYDirector

16 | STATEMENT REGARDING FORWARD LOOKING INFORMATION

STATEMENTREGARDINGFORWARDLOOKINGINFORMATION

This Interim Financial Report includes statements that are, or maybe deemed to be, “forward looking statements”. These forwardlooking statements can be identified by the use of forward lookingterminology, including the terms “believes”, “estimates”,“anticipates”, “expects”, “intends”, “may”, “will”, “should”, “could”,“assumes”, “plans”, “seeks” or “approximately” or, in each case,their negative or other variations or comparable terminology.These forward looking statements include all matters that are nothistorical facts. They appear in a number of places throughout thisInterim Financial Report and include statements regarding theintentions, plans, objectives, beliefs or current expectations ofAtrium. By their nature, forward looking statements involve risksand uncertainties because they relate to events and depend oncircumstances that may or may not occur in the future. Forwardlooking statements are not guarantees of future performance.

You should assume that the information appearing in this InterimFinancial Report is up to date only as of the date of this InterimFinancial Report. The business, financial conditions, results ofoperations and prospects of Atrium or the Group may change.Except as required by law, Atrium and the Group do notundertake any obligation to update any forward lookingstatements, even though the situation of Atrium or the Groupmay change in the future.

All of the information presented in this Interim Financial Report,and particularly the forward looking statements, are qualified bythese cautionary statements.

This Interim Financial Report and the documents available forinspection should be read in their entirety and with theunderstanding that the actual future results of Atrium or theGroup may be materially different from what Atrium or the Groupexpects.

17 | STATEMENT REGARDING FORWARD LOOKING INFORMATION

18 | INTERIM FINANCIAL STATEMENTS

02INTERIMFINANCIALSTATEMENTS

19 | INTERIM FINANCIAL STATEMENTS

20 | CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

CONDENSED CONSOLIDATEDINTERIM FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30 June 2019 31 December 2018Note €’000 €’000 €’000 €’000

(Unaudited) (Unaudited) (Audited) (Audited)ASSETSNon-current assetsStanding investments 2.4 2,506,860 2,732,038Redevelopments and land 2.5 257,984 255,429Equity-accounted investment in joint ventures 178,667 177,909Other non-current assets 17,822 13,675

2,961,333 3,179,051Current assetsCash and cash equivalents 27,563 38,493Other current assets 48,629 33,304Financial assets at FVOCI 12,976 13,425Assets held for sale 2.6 301,122 29,063

390,290 114,285TOTAL ASSETS 3,351,623 3,293,336

EQUITY AND LIABILITIESEquity 2.7 1,786,285 1,793,049Non-current liabilitiesLong term borrowings 2.8 1,052,808 1,186,060Derivatives 2.9 19,700 5,097Other non-current liabilities 2.10 139,281 152,426

1,211,789 1,343,583Current liabilitiesShort term borrowings 2.8 245,570 62,978Other current liabilities 2.11 82,304 85,809Liabilities held for sale 2.6 19,201 1,165Provisions 2.12 6,474 6,752

353,549 156,704TOTAL EQUITY AND LIABILITIES 3,351,623 3,293,336

The Group management report and the condensed consolidated interim financial statements were approved and authorised for issue bythe Board of Directors on 30 July 2019 and were duly signed on the Board’s behalf by Chaim Katzman, Chairman of the Board, NeilFlanzraich, Chairman of the Audit Committee and Liad Barzilai, Group Chief Executive Officer.


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

Six months ended30 June 2019


(Unaudited) Note €’000 €’000 €’000 €’000Gross rental income 91,609 89,175Service charge income 33,267 34,040Net property expenses (36,647) (36,195)Net rental income 88,229 87,020Net result on disposals (523) 2,732Costs connected with developments (394) (475)Revaluation of standing investments, net 7,265 7,309Revaluation of redevelopments and land, net (4,903) (2,125)Other depreciation, amortisation andimpairments (1,423) (1,442)

Administrative expenses (10,835) (10,385)Share of profit of equity-accounted investmentin joint ventures 3,987 5,006

Net operating profit 81,403 87,640Interest expenses, net (19,304) (16,704)Foreign currency differences (108) 257Other financial expenses, net (2,006) (1,956)Profit before taxation 59,985 69,237Taxation credit/(charge) for the period 2.13 (3,075) (20,737)Profit after taxation for the period 56,910 48,500Basic and diluted earnings per share in €centsattributable to shareholders 15.1 12.8

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVEINCOME



(Unaudited) €’000 €’000 €’000 €’000Profit for the period 56,910 48,500Items that will not be reclassified to the statement of profit orloss:Movement in financial assets at FVOCI reserve (449) (3,430)Items that are or may be reclassified to the statement of profitor loss:Exchange differences arising on translation of foreign operations 5 (53)Movements in hedging reserves (net of deferred tax) (12,667) (529)Amounts reclassified to profit or loss in respect of exchangedifferences on translation of foreign operations disposed duringthe period

- (2,776)

Total comprehensive income for the period 43,799 41,712


CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six monthsended

30 June 2019

Six monthsended

30 June 2018(Unaudited) €’000 €’000

Cash flows from operating activitiesProfit before taxation 59,985 69,237Adjustments for:Other depreciation, amortisation and impairments 1,423 1,442Results from listed equity securities, net (547) (392)Revaluation of standing investments, net (7,265) (7,309)Revaluation of redevelopments and land, net 4,903 2,125Foreign exchange differences 108 (257)Change in legal provisions, net of amounts paid (278) (27,540)Share based payment expenses 163 253Share of profit of equity-accounted investments in joint ventures (3,987) (5,006)Net result on disposals 523 (2,732)Finance lease interest expense 1,772 1,393Interest expense 19,355 16,820Interest income (51) (116)Operating cash flows before working capital changes 76,104 47,918Increase in trade, other receivables and prepayments (19,869) (4,554)Decrease in trade, other payables and accrued expenditure, net (7,040) (6,056)Cash generated from operations 49,195 37,308Decrease in restricted cash related to legacy legal claims arrangement 3,755 112Interest paid (11,987) (17,287)Interest received 52 183Dividend received (mainly dividend from Joint Ventures) 3,710 392Corporation taxes paid, net (2,192) (2,416)Net cash generated from operating activities 42,533 18,292Cash flows from investing activitiesPayments related to investment properties and other assets (76,137) (38,846)Proceeds from the disposal of investment properties 27,303 65,173Proceeds from loans granted - 1,087Net cash generated from/(used in) investing activities (48,834) 27,414Net cash flow before financing activities (6,301) 45,706Cash flows from financing activitiesProceeds from issuance of share capital - 579Repayment of long term borrowings (2,088) (680)Utilisation of a revolving credit facility 51,000 15,845Repayments of lease liabilities (435) (101)Dividends paid (51,000) (103,803)Net cash used in financing activities (2,523) (88,160)Net decrease in cash and cash equivalents (8,824) (42,454)Cash and cash equivalents at the beginning of period 38,493 71,920Cash and cash equivalents classified as held for sale (2,583) (88)Effect of exchange rate fluctuations on cash held 477 (1,022)Cash and cash equivalents at the end of period 27,563 28,356


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2019

Statedcapital

Sharebased

paymentreserve

Hedgingreserve

Financialassets

atFVOCIreserve

Retainedearnings/(deficit)

Currencytranslation

reserve

Currencytranslationreserve for

disposalgroup held

for sale

Equityattributable

to theowners of

the Company

(Unaudited) Note €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000Balance as at1 January 2019 2,117,380 1,211 (4,454) (8,503) (236,370) (76,215) - 1,793,049

Profit for the period - - - - 56,910 - - 56,910Other comprehensive income(expense) - - (12,667) (449) - 5 (13,111)

Total comprehensive income(expense) - - (12,667) (449) 56,910 5 - 43,799

Transaction with owners of the CompanyShare based payment 163 - - - - - 163Issue of no par value shares 412 (138) - - - - - 274Dividends 2.7 (51,000) - - - - - - (51,000)Disposal groupheld for sale - - - - - (282) 282 -

Balance as at30 June 2019 2,066,792 1,236 (17,121) (8,952) (179,460) (76,492) 282 1,786,285

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2018

Statedcapital

Sharebased

paymentreserve

Hedgingreserve

Financialassets

atFVOCIreserve

Retainedearnings/(deficit)

Currencytranslation

reserve

Currencytranslationreserve for

disposalgroup held

for sale

Equityattributable

to theowners of

the Company

(Unaudited) Note €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000Balance as at1 January 2018 2,269,199 3,267 (1,030) (1,967) (296,997) (81,588) 2,776 1,893,660

Profit for the period - - - - 48,500 - - 48,500Other comprehensive income(expense) - - (529) (3,430) - (53) (2,776) (6,788)

Total comprehensive income(expense) - - (529) (3,430) 48,500 (53) (2,776) 41,712

Transaction with owners of the CompanyShare based payment 253 - - - - - 253Issue of no par value shares 2,799 (2,220) - - - - - 579Dividends 2.7 (103,803) - - - - - - (103,803)Disposal groupheld for sale - - - - - 3,528 (3,528) -

Balance as at30 June 2018 2,168,195 1,300 (1,559) (5,397) (248,497) (78,113) (3,528) 1,832,401

24 | NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTES TO THE CONDENSEDCONSOLIDATED INTERIM FINANCIALSTATEMENTS

[UNAUDITED]

2.1 REPORTING ENTITY

Atrium European Real Estate Limited is a company incorporatedand domiciled in Jersey, and whose shares are publicly traded onboth the Vienna Stock Exchange and the Euronext AmsterdamStock Exchange under the ticker ATRS. Its registered office is11-15 Seaton Place, St. Helier, Jersey, Channel Islands and itsbusiness address in Jersey is 4th Floor, Channel House, GreenStreet, St Helier, Jersey, Channel Islands.

The principal activities of the Group are the ownership,management and operation of commercial real estate in the retailsector.

The Group operates in Poland, the Czech Republic, Slovakia andRussia.

2.2 BASIS OF PREPARATION

The unaudited condensed consolidated interim financialstatements have been prepared in accordance with IAS 34, InterimFinancial Reporting as endorsed by the EU.

The unaudited condensed consolidated interim financialstatements do not include all of the information required for fullannual consolidated financial statements and should be read inconjunction with the consolidated annual financial statements ofthe Group as at and for the year ended 31 December 2018. Theydo not include all of the information required for a complete setof IFRS financial statements. However, selected explanatory notesare included to explain events and transactions that are significantto an understanding of the changes in the Group’s financialposition and performance since the last annual financialstatements.

The annual consolidated financial statements of the Group areprepared in accordance with International Financial ReportingStandards (IFRS) as endorsed by the EU.

This is the first set of the Group’s financial statements in whichIFRS 16 has been applied. Changes to accounting policies aredescribed in Note 2.3.

The financial statements are presented in thousands of Euros(“€’000”), rounded off to the nearest thousand, unless statedotherwise.

The preparation of interim financial statements requiresmanagement to make judgements, estimates and assumptionsthat affect the application of accounting policies and the reportedamounts of assets and liabilities, income and expenses. Actualresults may differ from these estimates.

In preparing these condensed consolidated interim financialstatements, the significant judgements made in applying theGroup’s accounting policies and the key sources of estimationuncertainty were the same as those that applied to theconsolidated financial statements as at and for the year ended31 December 2018.

2.3 CHANGES IN ACCOUNTINGPOLICIES

New standards that are effective and have been adoptedby the Group as of 1 January 2019

In January 2016, the IASB published a new standard, IFRS 16Leases which is also endorsed by EU. The new standard bringsmost leases on-balance sheet for lessees under a single model,eliminating the distinction between operating and finance leases.Lessor accounting however remains largely unchanged and thedistinction between operating and finance leases is retained. IFRS16 supersedes IAS 17 Leases and related interpretations and iseffective for periods beginning on or after 1 January 2019. Asexplained below, the Group has adopted IFRS 16 Leases with adate of initial application of 1 January 2019.

The requirements of IFRS 16 represent a significant change fromIAS 17 Leases. The application of the standard results in changesto the accounting treatment of the operating leases where theGroup acts as a lessee such as office rentals, car leases and officeequipment, however the impact of the new standard on theGroup results and balances is not material.

As permitted by the transitional provisions of IFRS 16, the Grouphas elected a simplified approach and the comparative figureshave not been restated. The cumulative effect of initially applyingIFRS 16 as an adjustment to the carrying amounts of lease assetsare recognized against the carrying amounts of lease liabilities asat 1 January 2019.


The Group applies the recognition exemptions permitted by thestandard and, hence, does not apply the standard to leases of alow value, such as leases applicable to specific office equipment.

Lessor’s accounting

According to the new standard, the guidance for the lessor, theowner of an asset that is leased under an agreement to a lessee,remains substantially unchanged compared to the prior leasestandard (IAS 17).

Lessors continue to account for the leases as operating or financelease under the new standard which is in-line with its predecessor,IAS 17.

Lessee’s accounting

IFRS 16 removes the current dual accounting model for lesseeswhich distinguishes between on-balance sheet finance leases andoff-balance sheet operating lease. Instead, there is a single, on-balance sheet accounting model that is similar to current financelease accounting. Lessees are permitted to make an accountingpolicy election not to recognize lease assets and lease liabilitiesfor leases with a lease term of 12 months or less (i.e., short-termleases). Lessees also are permitted to make an election, on a lease-by-lease basis, to apply a method similar to current operatinglease accounting to leases for which the underlying asset is of lowvalue (i.e. low-value assets).

Initial measurement

The Group recognizes a right-of-use asset and a lease liability atthe initial application date. The right-of-use asset is initiallymeasured at the amount of the lease liability, adjusted for leaseprepayments, lease incentives received, the lessee’s initial directcosts (e.g., commissions) and an estimate of restoration, removaland dismantling costs. The assets are depreciated to the earlier ofthe end of the useful life of the right-of-use asset or the leaseterm using the straight-line method as this most closely reflectsthe expected pattern of consumption of the future economicbenefits.

The lease liability is initially measured at the present value of thelease payments that are not paid at the initial application date,discounted using the interest rate implicit in the lease or, if thatrate cannot be readily determined, the Group’s incrementalborrowing rate. Generally, the Group uses its incrementalborrowing rate as the discount rate.

Subsequent measurement

The right-of-use asset is depreciated in accordance with thedepreciation requirements of IAS 16 Property, Plant and Equipmentor subsequently measured in accordance with IAS 40 InvestmentProperty. Right-of-use asset which depreciated on a straight-linebasis, the aggregate of interest expense on the lease liability anddepreciation of the right-of-use asset generally results in highertotal periodic expense in the earlier periods of a lease. The Groupapplies the fair value model to any right-of-use assets that areinvestment properties.

The Group accretes the lease liability to reflect interest andreduce the liability to reflect lease payments made. The Group

remeasures the lease liability upon the occurrence of certainevents (e.g., change in the lease term, change in variable rentsbased on an index or rate), which is generally recognised as anadjustment to the right-of-use asset. The Group appliesalternative subsequent measurement bases for the right-of-useasset under certain circumstances in accordance with IAS 16Property, Plant and Equipment and IAS 40 Investment Property.Right-of-use assets are subject to impairment testing under IAS36 Impairment of Assets.

Transition

On adoption of IFRS 16, the Group recognised lease liabilities inrelation to leases which had previously been classified as‘operating leases’ under the principles of IAS 17 Leases. Theseliabilities were measured at the present value of the remaininglease payments, discounted using the lessee’s incrementalborrowing rate as of 1 January 2019.

For leases previously classified as finance leases the entityrecognised the carrying amount of the lease asset and leaseliability immediately before transition as the carrying amount ofthe right of use asset and the lease liability at the date of initialapplication. The measurement principles of IFRS 16 are onlyapplied after that date.

At the initial application date, the Group recognises in the openingbalances of financial year 2019 a tangible assets and a leaseliability of €3.0 million as a transition adjustment.

The following table summarizes the impact of transition on thelease liabilities in the consolidated balance sheet at 1 January2019:

Lease liabilities

Impact of adoptingIFRS 16 as at 1 January

2019€’000

Current lease liabilities 877Non-current lease liabilities 2,118Opening balance under IFRS 16 2,995

The following table presents the total lease liabilities including thefinance lease liabilities recognised as at 31 December 2018 as at1 January 2019:

Lease liabilities1 January

2019€’000

Operating lease commitments discounted using thelessee’s incremental borrowing rate at the date ofinitial application 2,995Add: finance lease liabilities recognised as at31 December 2018 47,567Lease liabilities recognisedas at 1 January 2019 50,562Current lease liabilities 3,876Non-current lease liabilities 46,686

Right-of use assets were measured at the amount equal to thelease liability, adjusted by the amount of any prepaid or accruedlease payments relating to that lease recognised in the balance


sheet as at 31 December 2018. There were no onerous leasecontracts that would have required an adjustment to the right-of-use assets at the date of initial application.

The recognised right-of-use assets relate to the following types ofassets:

Right of-use- assetsImpact of adopting

IFRS 16 at 1 January 2019€’000

Investment properties 637Office rentals 1,686Car rentals 246Other property rentals 426Total 2,995

Presentation of IFRS 16 in the condensed consolidatedinterim financial statements

The right-of-use assets that are investment properties areclassified to standing investments and the other right-of-useassets are part of the other non-current assets. Long-term leaseliabilities are part of the other non-current liabilities and short-term lease liabilities are part of the other current liabilities in theconsolidated balance-sheet.

Other new standards, interpretations and amendments effective,and endorsed by the EU, as of 1 January 2019, did not have amaterial impact on the Group's condensed consolidated interimfinancial statements. The Group has not early adopted anystandard, interpretation or amendment that has been issued butnot yet effective.

2.4 STANDING INVESTMENTS

The current portfolio of standing investments of the Groupconsists of 317 properties (31 December 2018: 33).

A roll forward of the total standing investments portfolio isprovided in the table below:

Standing investments 30 June2019

31 December2018

€’000 €’000Balance as at 1 January 2,732,038 2,408,992Additions - new properties 50,938 283,324Additions - technicalimprovements, extensions 11,134 29,808Movements - financial leases 835 9,214Transfers from redevelopmentsand land 1,023 129,035Transfer to redevelopments andland - (27,672)Transfer to assets held for sale (295,750) -Revaluation of standinginvestments 7,265 17,224Disposals (623) (117,887)Balance at the end of the period 2,506,860 2,732,038

AQUISITIONS AND DISPOSALS DURING THEPERIOD

In May 2019, the Group entered into an agreement to sell twoPolish shopping centres, Atrium Koszalin, in Koszalin and AtriumFelicity, in Lublin, with a total lettable area of approximately111,100 sqm for €298 million. The sale was completed in July2019.

In June 2019, the Group completed the acquisition of King Crossshopping centre in Warsaw for a consideration of €43 million.

2.5 REDEVELOPMENTS AND LAND

The current portfolio of redevelopments and land of the Groupcomprises €78 million (31 December 2018: €73.2 million)redevelopments and €180 million land (31 December 2018:€182.2 million) .

Redevelopments and land30 June

201931 December

2018€’000 €’000

Balance as at 1 January 255,429 345,331Additions - cost of land andconstruction 5,371 58,018Additions - new properties 2,155 -Movements - financial leases (135) 1,280Transfer from standinginvestments - 27,672Transfer to standing investments (1,023) (129,035)Transfer (to)/from assets held forsale 28,988 (29,063)Disposals (27,898) -Interest capitalised - 470Revaluation of redevelopmentsand land (4,903) (19,244)Balance at the end of the period 257,984 255,429

In January 2019, the Group Completed the disposal of a land plotin Gdansk for €27.9 million.

In October 2018, the Group completed the second stage of theredevelopment project of Atrium Promenada and the extension ofAtrium Targowek. Both projects were transferred fromredevelopments and land to the standing investments portfolio.Conversely, areas where construction works commenced inPromenada were transferred from standing investments toredevelopments and land.

In November 2018, a 2,700 sqm cinema and a 1,500 sqm fitnessarea were opened to the visitors in Reduta and transferred thevalue of that extension from redevelopments and land to standinginvestment portfolio.

7 Excluding two assets in Poland classified as held for sale as at 30 June 2019


2.6 ASSETS AND LIABILITIES HELDFOR SALE

As at 30 June 2019, the assets and liabilities held for saleincluded two assets in Poland, Atrium Koszalin and Atrium Felicitywith a lettable area of 111,100 sqm and a total value of€296 million, which were sold in July 2019.

As at 31 December 2018, the assets and liabilities held for saleincluded Gdansk land plot in Poland with a total value of€29.1 million. The land was sold in January 2019.

The major classes of assets and liabilities of subsidiaries which arepresented as held for sale at the end of the reporting period areas follows:

30 June2019

31 December2018

€’000 €’000Non-current assetsStanding investments 295,750 -Redevelopments and land - 29,063Other assets 110 -Current assets 5,262 -Assets held for sale 301,122 29,063Non-current liabilitiesDeferred tax liabilities 15,399 -Other non-current liabilities 977 1,083Current liabilities 2,825 82Liabilities held for sale 19,201 1,165Net assets directly associatedwith disposal groups 281,921 27,898

Amounts included in accumulated other comprehensiveincome:Foreign currency translationreserve 282

Reserve of disposal groupsclassified as held for sale 282

2.7 EQUITY

As at 30 June 2019, the total number of shares issued was377,912,324 (31 December 2018: 377,787,123 shares). Duringthe six-month period ended 30 June 2019, Atrium paid a dividendof €cents 13.5 (6M 2018: €cents 27.5) per share as a capitalrepayment, which amounted to a total of €51.0 million (6M 2018:€103.8 million). The dividend paid in the six months of 2018included recurring dividends of €cents 13.5 and a special dividendof €cents 14 per share.

2.8 BORROWINGS

Borrowings 30 June 2019 31 December 2018Net book

valueFair value

Net bookvalue

Fair value

€’000 €’000 €’000 €’000Bonds 886,597 949,693 886,246 931,901Bank loan 300,781 300,909 302,792 302,951Short termcredit 111,000 111,000 60,000 60,000Total 1,298,378 1,361,602 1,249,038 1,294,852

The borrowings are repayable as follows:

Borrowings total 30 June 2019 31 December 2018Net book value Net book value

€’000 €’000Short term credit 111,000 60,000Current maturitiesof long termborrowings 134,570 2,978Due within oneyear 245,570 62,978Due in secondyear 1,694 134,023Due within third tofifth year inclusive 466,812 466,235Due after fiveyears 584,302 585,802Total 1,298,378 1,249,038

The fair values of loans and bonds were determined by anexternal appraiser using discounted cash flow models, zero-costderivative strategies for fixing the future values of marketvariables.

Fair values have been determined with reference to market inputs,the most significant of which are:

- Quoted EUR yield curve;

- Volatility of EUR swap rates;

- Fair values of effected market transactions.

Fair value measurements used for bonds and loans arecategorised within Level 2 of the fair value hierarchy as defined inIFRS 13.

REVOLVING CREDIT FACILITY

In May 2018, the Group signed a net increase of €75 million andextended its revolving credit facility to 2023. The total value ofthe revolving credit facilities is €300 million with an expiry date in2023. As at 30 June 2019, the Group utilised €111 million of thisfacility.


2.9 DERIVATIVES

The Group entered into two interest rate swap contracts (“IRSs”)in connection with secured bank loans (see note 2.8). Theseswaps replaced floating interest rates with fixed interest rates. Thefloating rate on the IRSs is the three month Euribor and the fixedrate is 0.826% on the loan obtained in November 2017 and0.701% on the loan obtained in November 2018. The swaps havesimilar critical terms as the hedged item, such as reference rate,reset dates, payment dates, maturities and notional amount andare included in cash flow hedges to reduce the Group's cash flowvolatility due to variable interest rates on the bank loans. Aneconomic relationship between the hedging instrument and thehedged item exists; the hedging instrument and the hedged itemhave values that move in the opposite direction and offsets eachother. The interest rate risk associated with the floating debtinstruments are hedged entirely with having 1:1 hedge ratio. TheIRSs are measured at fair value using the discounted future cashflow method.

The fair value measurement of the IRSs are derived from inputsother than quoted prices in active markets. The inputs used todetermine the future cash flows are the 3-month Euribor forwardcurve and an appropriate discount rate. The inputs used arederived either directly or indirectly. Therefore, these IRSs areclassified as a Level 2 fair value measurement under IFRS 13.

Interest rate swaps30 June

201931 December

2018€’000 €’000

Carrying amount (liability) 19,700 5,097Notional amount 302,345 303,875Change in fair value of outstandinghedging instruments since 1 January 14,603 4,067

The fair value loss during the six month period ended 30 June2019 is mainly due to a decrease in forward interest rates of theEuribor.

2.10 OTHER NON-CURRENTLIABILITIES

30 June2019

31 December2018

€’000 €’000Deferred tax liabilities 80,148 93,679Long term lease liabilities 46,750 44,569Other long term liabilities 12,383 14,178Total 139,281 152,426

2.11 OTHER CURRENT LIABILITIES

30 June2019

31 December2018

€’000 €’000Trade and other payables 21,509 26,559Accrued expenditure 48,687 48,284Short term lease liabilities 3,971 2,998Income tax payable 5,824 5,317VAT payables 2,313 2,651Total 82,304 85,809

2.12 PROVISIONS

ProvisionsLegacylegal

provision

Otherlegal

provision

Total

€’000 €’000 €’000Balance as at 1 January 2019 5,453 1,299 6,752Additions to/(releases of)provision in the period, net (228) 446 218Amounts paid during the period (496) - (496)Balance as at 30 June 2019 4,729 1,745 6,474Of whichCurrent portion 4,729 1,745 6,474Non-current portion - - -Total provisions 4,729 1,745 6,474


2.13 TAXATION CHARGE FOR THEPERIOD

Taxation charge for theyear

Six months ended 30 June

2019 2018€’000 €’000

Current period corporateincome tax expense (3,031) (2,856)Deferred tax credit/(charge) (1,832) (23,056)

Adjustments to corporateincome tax prior periods 1,788 5,175

Tax credit/(charge) (3,075) (20,737)

The main driver of the deferred tax charge in the first half of 2018is the impact of the foreign currencies on the tax base ofinvestment properties.

AMENDMENT TO THE POLISH CORPORATEINCOME TAX LAW

In November 2017, an amendment to the Polish corporateincome tax law, effective from 1 January 2018, was published.The amendment includes, among others things, the introductionof an alternative minimum tax, resulting in a minimum levy oninvestment properties owners at the level of 0.42% per year onthe tax value of the property.

On 4 July 2018, the Alternative minimum tax act was published inthe official state gazette (“Dziennik Ustaw”). Subject to certain taxcontrols, the act allows tax payers to apply to the tax authority fora refund of any excess minimum tax paid over the statutorycorporate income tax. Before the refund is granted, intercompanytransactions are subject to a tax control. On the basis of theformally published legislation, Atrium has classified minimum taxpaid in excess of the corporate income tax as financial receivablespending a refund from the Polish tax authorities in the amount of€6.6 million.

Income generated by non-tax residents from a transfer of sharesin a company, with assets comprising at least directly or indirectly50% (rights to) real estate located in Poland, shall be deemedPolish income and therefore subject to 19% capital gains tax inPoland, unless otherwise provided in the respective double taxtreaty between Poland and the country of the seller of shares .


2.14 SEGMENT REPORTING

Reportable segmentsFor the period ended 30 June 2019

Standing investmentsegment

Developmentsegment

Reconcilingitem

Total

€’000 €’000 €’000 €’000Gross rental income 96,454 - (4,845) 91,609Service charge income 34,353 - (1,086) 33,267Net property expenses (38,395) - 1,748 (36,647)Net rental income 92,412 - (4,183) 88,229Net result on disposals - (523) - (523)Costs connected with developments - (394) - (394)Revaluation of investment properties 7,265 (4,903) - 2,362Other depreciation, amortisation and impairments (914) - (509) (1,423)Administrative expenses (6,735) (301) (3,799) (10,835)Share of profit of equity-accounted investment in joint ventures - - 3,987 3,987Net operating profit/(loss) 92,028 (6,121) (4,504) 81,403Interest expenses, net (17,984) (1,013) (307) (19,304)Foreign currency differences (274) (106) 272 (108)Other financial expenses (1,732) (52) (222) (2,006)Profit/(loss) before taxation for the period 72,038 (7,292) (4,761) 59,985Taxation credit/(charge) for the period (1,793) 11 (1,293) (3,075)Profit/(loss) after taxation for the period 70,245 (7,281) (6,054) 56,910Investment properties 2,976,6961 258,059 (174,086)2 3,060,669Additions to investment properties 62,906 7,391 - 70,297Segment assets 3,048,669 258,284 44,670 3,351,623Segment liabilities 1,405,174 68,479 91,685 1,565,3381 Including €295.8 million classified as held for sale as at 30 June 20192 Adjusted for our 75% share of investment property held in a joint venture

Reportable segmentsFor the period ended 30 June 2018

Standing investmentsegment

Developmentsegment

Reconcilingitem

Total

€’000 €’000 €’000 €’000Gross rental income 94,334 - (5,159) 89,175Service charge income 35,012 - (972) 34,040Net property expenses (37,521) - 1,326 (36,195)Net rental income 91,825 - (4,805) 87,020Net result on disposals 2,732 - - 2,732Costs connected with developments - (475) - (475)Revaluation of investment properties 7,618 (2,126) (308) 5,184Other depreciation, amortisation and impairments (1,404) - (38) (1,442)Administrative expenses (6,828) (513) (3,044) (10,385)Share of profit of equity-accounted investment in joint ventures - - 5,006 5,006Net operating profit/(loss) 93,943 (3,114) (3,189) 87,640Interest expenses, net (14,662) (1,828) (214) (16,704)Foreign currency differences 1,943 1,409 (3,095) 257Other financial expenses (1,375) (104) (477) (1,956)Profit/(loss) before taxation for the period 79,849 (3,637) (6,975) 69,237Taxation credit/(charge) for the period (19,914) 144 (967) (20,737)Profit/(loss) after taxation for the period 59,935 (3,493) (7,942) 48,500Investment properties 2,592,2621 372,435 (172,598)2 2,792,099Additions to investment properties 13,922 27,385 - 41,307Segment assets 2,631,319 375,427 50,205 3,056,951Segment liabilities 1,089,045 96,379 39,126 1,224,5501 Including €106.6 million classified as held for sale as at 30 June 20182 Adjusted for our 75% share of investment property held in a joint venture


2.15 TRANSACTIONS WITHRELATED PARTIES

In January 2019, the Company issued 17,016 shares to itsdirectors, Andrew Wignall (8,508 shares) and Simon Radford(8,508 shares).

In March 2019, the Company issued 81,945 shares to KeyEmployees in accordance with an Employee Share ParticipationPlan and 169,667 shares will be issued to Group ExecutiveManagement and other Key Employees at a later stage.

In April 2019, the Company issued 17,493 and 8,747 shares to itsGroup CEO and Group CFO, respectively, as part of their annualremuneration.

2.16 CONTINGENCIES

The circumstances of the acquisition of 88,815,500 AustrianDepositary Certificate (“ADCs”) representing shares of Atriumannounced in August 2007 (the “ADC Purchases”), securityissuances and associated events have been subject to regulatoryinvestigations and other proceedings that continue in Austria. In2012, following an investigation, the Jersey Financial ServicesCommission reconfirmed its conclusions that the ADC Purchasesinvolved no breach of the Companies (Jersey) Law 1991 and thatits investigation had concluded without any finding of wrongdoing.

With regard to the Austrian proceedings and investigations,Atrium continues to be subject to certain claims submitted byADC holders alleging losses derived from price fluctuations in2007 and associated potential claims. As at 30 June 2019 theaggregate amount claimed in 3 separate proceedings to whichAtrium was then a party in this regard was approximately €192.4thousand. The number of claims and amounts claimed areexpected to fluctuate over time as proceedings develop, aredismissed, withdrawn, settled or otherwise resolved. The claimsare at varying stages of development and are expected to beresolved over a number of years.

In January 2016, the Company announced the establishment ofan arrangement to create a compensation fund through which toresolve the Austrian proceedings as well as submissions byindividuals to join pending criminal proceedings referred to below.The period for participation in the arrangement expired on15 October 2016. Final submissions were processed and thearrangement concluded earlier this year.

Because the Company believes it is important to supportreasonable efforts to help bring final resolution to theselongstanding issues, in addition to the 2016 arrangement, theCompany has continued to explore other possible settlements asa means to put legacy issues behind it and so address a source ofsignificant demands on management time and associated legalfees and costs, which are detrimental to its shareholders. To thatend, in March 2017, the Company also announced it had reachedan agreement with AdvoFin Prozessfinanzierung AG and SalburgRechtsanwalts GmbH which establishes a mechanism by whichAdvoFin and Salburg clients who are ADC investors who brought

claims or made submissions to join pending criminal proceedingsreferred to below can resolve their claims and potential claimsagainst the Company. The maximum payment by Atrium underthe Agreement with AdvoFin and Salburg in the event that alleligible AdvoFin and Salburg clients opt to participate would be€44 million, of which the Company has paid approximately€42.6 million as at 30 June 2019. The actual level of participationand compensation will be determined over time. For those whochoose to push forward with litigation against the Company tiedto these legacy issues, the Company has confirmed that it rejectsthe claims against it and that it will continue to defend itselfvigorously in all proceedings.

Based on current knowledge and management's assessment inrespect of the actual outcome of claims to date in the Austrianproceedings, the terms of and methodologies adopted in thecompensation arrangements in 2016, and with AdvoFin andSalburg in March 2017, the expected cost and implications ofimplementing those arrangements, a total provision of €4.7 millionhas been estimated by the Company. Certain further informationordinarily required by IAS 37, ‘Provisions, contingent liabilities andcontingent assets’, has not been disclosed on the grounds that todo so could be expected to seriously prejudice the resolution ofthese issues, in particular certain details of the calculation of thetotal provision and the related assumptions. The criminalinvestigations pending against Mr. Julius Meinl and others relatingto events that occurred in 2007 and earlier remain ongoing. Inconnection with this, law firms representing various Atriuminvestors, who had invested at the time of these events, havealleged that Atrium is liable for various instances of fraud, breachof trust and infringements of the Austrian Stock Corporation Actand Austrian Capital Market Act arising from the same events. Thepublic prosecutor directed Atrium to reply to the allegations andstarted criminal investigation proceedings against Atrium based onthe Austrian Corporate Criminal Liability Act. It is uncertainwhether this legislation, which came into force in 2006, isapplicable to Atrium. In any event, Atrium believes a finding ofliability on its part would be inappropriate and, accordingly,intends to actively defend itself.

There is continuing uncertainty in the various economies andjurisdictions in which the Group has its operations and assets.These uncertainties relate to the general economic andgeopolitical environment in such regions and to changes orpotential changes in the legal, regulatory and fiscal frameworksand the approach taken to enforcement which may includeactions affecting title to the Group’s property or land and changesto the previously accepted interpretation of fiscal rules andregulations applied by the authorities to the Group’s fiscal assetsand liabilities.

From 2015 onwards, the Polish Ministry of Finance and Polishregulatory authorities have published several draft bills and haveimplemented several legislative changes that signify thegovernment’s intent to realize significant changes to theregulatory and fiscal environment in which the Group operatesincluding regulation of trading hours, imposition of an industryspecific retail tax and changes in the interpretation of rules aroundsales and transfer taxes applicable on the purchase and sale ofassets. For more information on the amendment to the Polishcorporate income tax law refer to note 2.13.


Certain Russian and Polish subsidiaries within the Atrium Groupare, or have been, involved in legal and/or administrativeproceedings involving the tax authorities. These past and presentproceedings create uncertainty around tax policies in matterspreviously regarded as established but which are now subject torevised interpretation by the tax authorities. The Company cancurrently not reliably estimate the potential amount of anyadditional taxation and associated costs, but the impact may besignificant.

2.17 EVENTS AFTER THE PERIOD

In May 2019, Atrium entered into agreement to sell two assets inPoland, Atrium Koszalin, in Koszalin and Atrium Felicity, in Lublin,with a total lettabale area of approximately 111,100 sqm for€298 million. The transaction was subject to the fulfilment ofcertain conditions precedent which were completed in July 2019.

Rachel Lavine, Vice-Chariman and Director, did not stand for re-election and retired from the Board of Directors with effect from24 July 2019.

In July 2019, Atrium entered into agreement to sell Atrium Dubenshopping centre in Zilina, Slovakia for approximately €37 million,representing its book value as of 30 June 2019, with expectedclosing by end of the year.

RECOMMENDED CASH ACQUISITION BY GAZIT-GLOBE LTD. ('GAZIT') ON 23 JULY 2019

The Independent Committee of the Board of Directors of theCompany and the Board of Directors of Nb (2019) B.V. (“Bidco”),which is an indirect wholly-owned subsidiary of Gazit, on 23 July2019 announced that they have reached an agreement on theterms and conditions of a recommended cash acquisition (the“Acquisition”) of the entire issued and to be issued ordinary sharecapital of the Company that is not already owned directly orindirectly by Gazit or its affiliates (including, in particular, GazitGaia Limited (“Gaia”) or Gazit Midas Limited (“Midas”)). It isintended that the Acquisition will be implemented by means of acourt-sanctioned scheme of arrangement under Article 125 of theJersey Companies Law. At the date of the Announcement, Gazitand its affiliates Gaia and Midas together owned approximately60.1% of the Company's issued share capital. The announcement(and other reference materials) can be found on the Company’swebsite at www.aere.com/investors-lobby.aspx .


33 | INDEPENDENT REVIEW REPORT TO ATRIUM EUROPEAN REAL ESTATE LIMITED

INDEPENDENTREVIEW REPORTTO ATRIUMEUROPEAN REALESTATE LIMITED

OUR CONCLUSION

We have reviewed the accompanying condensed consolidatedinterim financial information of Atrium European Real EstateLimited (the “Company”) and its subsidiaries (together the"Group") as of 30 June 2019. Based on our review, nothing hascome to our attention that causes us to believe that theaccompanying condensed consolidated interim financialinformation is not prepared, in all material respects, in accordancewith International Accounting Standard 34, ‘Interim FinancialReporting’, as adopted by the European Union.

WHAT WE HAVE REVIEWED

The accompanying condensed consolidated interim financialinformation comprise:

the condensed consolidated statement of financial position asof 30 June 2019; the condensed consolidated statement of profit or loss for thesix-month period then ended;the condensed consolidated statement of other comprehensiveincome for the six-month period then ended;the consolidated statement of changes in equity for the six-month period then ended;the condensed consolidated cash flow statement for the six-month period then ended; andthe notes, comprising a summary of significant accountingpolicies and other explanatory information.

The condensed consolidated interim financial information hasbeen prepared in accordance with International AccountingStandard 34, ‘Interim Financial Reporting’, as adopted by theEuropean Union.

OUR RESPONSIBILITIES AND THOSE OF THEDIRECTORS

The Directors are responsible for the preparation andpresentation of this condensed consolidated interim financialinformation in accordance with International Accounting Standard34, ‘Interim Financial Reporting’, as adopted by the EuropeanUnion.

Our responsibility is to express a conclusion on this condensedconsolidated interim financial information based on our review.This report, including the conclusion, has been prepared for andonly for the Company for the purpose of complying with theterms of our engagement and for no other purpose. We do not, ingiving this conclusion, accept or assume responsibility for anyother purpose or to any other person to whom this report isshown or into whose hands it may come save where expresslyagreed by our prior consent in writing.

SCOPE OF REVIEW

We conducted our review in accordance with InternationalStandard on Review Engagements 2410, 'Review of interimfinancial information performed by the independent auditor of theentity' issued by the International Auditing and AssuranceStandards Board. A review of interim financial information consistsof making inquiries, primarily of persons responsible for financialand accounting matters, and applying analytical and other reviewprocedures.

A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing andconsequently does not enable us to obtain assurance that wewould become aware of all significant matters that might beidentified in an audit. Accordingly, we do not express an auditopinion.

We have read the other information contained in the InterimFinancial Report and considered whether it contains any apparentmisstatements or material inconsistencies with the information inthe condensed consolidated interim financial information.

34 | INDEPENDENT REVIEW REPORT TO ATRIUM EUROPEAN REAL ESTATE LIMITED

OTHER MATTERS – STATEMENT ON THE GROUPMANAGEMENT REPORT FOR THE SIX-MONTHPERIOD ENDED 30 JUNE 2019 AND ON THEDIRECTOR’S STATEMENT IN ACCORDANCE WITH§125 BÖRSEGESETZ

We have read the Group management report and evaluatedwhether it contains any apparent inconsistencies with thecondensed consolidated interim financial information. Based onour review, we have nothing to report.

The Interim Financial Report contains the statement by directorsin accordance with section 125 par. 1 subpar. 3 of the AustrianStock Exchange Act 2018.

PricewaterhouseCoopers CI LLPChartered AccountantsJersey, Channel Islands30 July 2019

The maintenance and integrity of the Atrium European RealEstate Limited website is the responsibility of the directors; thework carried out by the auditors does not involve considerationof these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to thefinancial statements since they were initially presented on thewebsite.Legislation in Jersey governing the preparation anddissemination of financial statements may differ from legislationin other jurisdictions.

35 | DIRECTORS, PROFESSIONAL ADVISORS AND PRINCIPAL LOCATIONS

DIRECTORS, PROFESSIONALADVISORS AND PRINCIPALLOCATIONS

DIRECTORS

Chaim KatzmanMichael ErichettiNeil FlanzraichLucy LilleySimon RadfordAndrew Wignall

ADMINISTRATOR AND REGISTRAR

Aztec Financial Services (Jersey) Limited11-15 Seaton PlaceSt HelierJerseyJE4 0QH

INDEPENDENT AUDITORS

PricewaterhouseCoopers CI LLPChartered Accountants37 EsplanadeSt HelierJerseyJE1 4XA

MEDIA RELATIONS ADVISOR

FTI Consulting200 Aldersgate, Aldersgate StreetLondon, EC1A 4HD, UK

REGISTERED OFFICE

11-15 Seaton PlaceSt HelierJerseyJE4 0QH

BUSINESS ADDRESS

4th Floor, Channel HouseGreen StreetSt HelierJersey

PRINCIPAL LOCATIONS

PolandAtrium Poland Real Estate Management Sp. z o.o.Ostrobramska 75C, Staircase no 2, 4th floor, 04-175WarsawCzech RepublicAtrium Czech Real Estate Management s.r.o.Vinohradská 2828/151, 130 00Praha 3- ŽižkovPragueThe NetherlandsAtrium Group Services B.V.World Trade Center, I tower, Strawinskylaan 19591077 XX AmsterdamRussiaOOO Manhattan Real Estate ManagementJAVAD Business Centre, The Triumph PalaceChapaevskiy pereulok, Building 3, RU-125057Moscow

HOW TO CONTACT US

Website: www.aere.comAnalysts & Investors : [email protected]: [email protected] enquiries: [email protected]

Cover photo: Wars Sawa Junior, Warsaw, Poland

http://www.aere.com

mailto:[email protected]



Documents

INTERIM FINANCIAL REPORT 30 JUNE 2019 · listing on the vienna and euronext amsterdam stock exchanges under the ticker atrs. ... 02interim financial statements 18 condensed consolidated