CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER

2 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017 CONTENTS 3.1 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER STATEMENT OF FINANCIAL POSITION STATEMENT OF NET INCOME STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GENERAL PRINCIPLES Accounting standards Estimates and judgements Operating segments IFRS 7 Reference table FINANCIAL RISK MANAGEMENT Marketing risk for properties under development Liquidity risk Interest rate risk Financial counterparty risk Leasing counterparty risk Risks related to changes in the value of the portfolio Exchange rate risk Risks related to changes in the value of shares and bonds Tax environment SCOPE OF CONSOLIDATION Accounting principles applicable to the scope of consolidation Additions to the scope of consolidation Removals from the scope of consolidation Change in holding and/or in consolidation method List of consolidated companies Evaluation of control SIGNIFICANT EVENTS OF THE PERIOD France Offices segment Italy Offices segment Hotels in Europe segment Germany Residential segment France Residential segment NOTES TO THE STATEMENT OF FINANCIAL POSITION Portfolio Financial assets

3 Investments in equity affiliates and joint ventures Deferred tax liabilities on the reporting date Short-term loans and finance lease receivables current portion Inventories and work-in-progress Trade receivables Other receivables Cash and cash equivalents Total shareholders equity Statement of liabilities Provisions for contingencies and losses Other short-term liabilities Recognition of financial assets and liabilities NOTES TO THE STATEMENT OF NET INCOME Accounting principles Operating profit Change in the fair value of assets Income from changes in scope Costs of the net financial debt Net financial income Taxes payable and deferred taxes (including the Exit Tax) OTHER INFORMATION Personnel remuneration and benefits Earnings per share and diluted earnings per share Off-balance sheet commitments Related-party transactions Executive Compensation Statutory Auditors fees Segment reporting Accounting principles as regards operating segments - IFRS Intangible fixed assets Tangible fixed assets Investment properties/assets held for sale Financial assets Inventories and work-in-progress Contribution to shareholders equity Financial liabilities Derivatives Statement of net income by operating segments Subsequent events STATUTORY AUDITORS REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

4 3.1 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER STATEMENT OF FINANCIAL POSITION Assets thousand Note INTANGIBLE FIXED ASSETS 1,2 31-Dec Dec-16 Goodw ill Other intangible fixed assets TANGIBLE FIXED ASSETS 1.2 Operating properties Other tangible fixed assets Fixed assets in progress Investment properties Non-current financial assets Investments in equity affiliates Deferred tax assets Long-term derivatives TOTAL NON-CURRENT ASSETS Assets held for sale Loans & receivables Inventories and w ork-in-progress Short-term derivatives Trade receivables Tax receivables Other receivables Prepaid expenses Cash and cash equivalents Discontinued operations (1) TOTAL CURRENT ASSETS TOTAL ASSETS (1) As at 1 January 2017, following the merger of FEL with Foncière des Régions, the residual logistics operation, not material at the Group level, is no longer included under discontinued operations and have been reclassified under the France Offices sector in the financial statements. 4

5 Liabilities thousand Note Dec Dec-16 Share capital Share premium account Ow n shares Consolidated reserves Net income TOTAL SHAREHOLDERS' EQUITY, GROUP SHARE Non-controlling interests TOTAL SHAREHOLDERS' EQUITY Long-term borrow ings Long-term derivatives Deferred tax liabilities Pension plan and other employee benefit Other long-term liabilities TOTAL NON-CURRENT LIABILITIES Liabilities held for sale 0 0 Trade payables Short-term borrow ings Short-term derivatives Security deposits Advances and pre-payments received Short-term provisions Current tax Other short-term liabilities Deferred income Discontinued operations TOTAL CURRENT LIABILITIES TOTAL LIABILITIES

6 3.1.2 STATEMENT OF NET INCOME thousand Note 31-Dec Dec-16 Rental income Unrecovered rental costs Expenses on properties Net losses on unrecoverable receivables NET RENTAL INCOME Management and administration income Business expenses Overhead Development costs (not capitalised) NET COST OF OPERATIONS Income from other activities Expenses of other activities INCOME FROM OTHER ACTIVITIES Depreciation of operating assets Net allow ances to provisions and other OPERATING PROFIT Proceeds from disposals of trading properties Exit value and/or amortisations of trading properties NET INCOME FROM INVENTORY PROPERTIES Income from asset disposals Carrying value of investment properties sold DISPOSALS OF ASSETS Gains in value of investment properties Losses in value of investment properties NET VALUATION GAINS AND LOSSES INCOME FROM DISPOSAL OF SECURITIES INCOME FROM CHANGES IN SCOPE OPERATING PROFIT (LOSS) AFTER VALUATION IMPACT AND DISPOSALS Income from non-consolidated companies 0-1 Cost of net financial debt Fair value adjustment on derivatives Discounting of liabilities and receivables Net change in financial and other provisions Share in income of equity affiliates PRE-TAX NET INCOME (LOSS) Deferred tax liabilities Recurrent Tax NET INCOME (LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS Profit (loss) after tax of discontinued operations NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME FOR THE PERIOD Net income from non-controlling interests NET INCOME FOR THE PERIOD - GROUP SHARE Group net income per share ( ) ,41 11,57 Group diluted net income per share ( ) ,33 11,50 6

7 3.1.3 STATEMENT OF COMPREHENSIVE INCOME 31-déc déc.-16 NET INCOME FOR THE PERIOD Other items in the comprehensive income statement recognised directly in shareholders equity and: - Destined for subsequent reclassification in the Net income section of the income statement Actuarial losses on employee benefits Effective portion of gains or losses on hedging instruments Tax on other items of comprehensive income Not destined for subsequent reclassification in the Net income section 0 0 OTHER ITEMS OF COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME FOR THE PERIOD TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE To the ow ners of the parent company To non-controlling interests TOTAL COMPREHENSIVE INCOME FOR THE PERIOD * GROUP NET INCOME (LOSS) PER SHARE 12,45 11,66 GROUP DILUTED NET INCOME (LOSS) PER SHARE 12,37 11,59 7

8 3.1.4 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY thousand Share capital Share premium account Treasury shares Reserves and retained earnings Gains and losses recognised directly in shareholders equity Total shareholder s equity, Group share Noncontrolling interests Total shareholder s equity Position at 31 December Distribution of dividends Capital increase Allocation to the legal reserve Other Total comprehensive income for the period Of which actuarial gains and losses on post-employment benefits (IAS 19 revised) Of which effective portion of gains or losses on hedging instruments Of which net income (loss) Impact of change in shareholding/capital increase Impact of conversion of ORNANE-type bonds Shared-based payments Position at 31 December Distribution of dividends Capital increase Allocation to the legal reserve Other Total comprehensive income for the period Of which actuarial gains and losses on post-employment benefits (IAS 19 revised) Of which effective portion of gains or losses on hedging instruments Of which net income (loss) Impact of change in shareholding/capital increase Shared-based payments Position at 31 December Dividends paid in cash during the year amounted to million, including 76.0 million applied to the share premium and merger accounts and million to net income and retained earnings. In 2017, Foncière des Régions undertook capital increases of million ( million net of expenses) from an issue of 5,076,786 new shares in the first half-year, the asset contribution of Foncière Développement Logements shares in exchange for the creation of 916,951 Foncière des Régions shares and the vesting of 78,375 free shares. The increase in minority interests of nearly 640 million resulted from period net income to noncontrolling interests (+ 444 million), capital increases in Foncière des Murs companies (+ 155 million) and Immeo SE (+ 89 million), the division of Central Sicaf (60 % Beni Stabili, 40% other partners) (+ 300 million), the division of the Silex projects (+ 27 million), the buyout of non-controlling interests in Foncière Développement Logements (- 127 million) and Car Parks (- 28 million) and distributions during the period (- 223 million). 8

9 3.1.5 STATEMENT OF CASH FLOWS thousand Note 31-Dec Dec-16 Total consolidated net income of continuing operations Total consolidated net income of discontinued operations Net consolidated income (including minority interests) Net amortisation, depreciation and provisions (excluding provisions relating to current assets) Unrealised gains and losses relating to changes in fair value & Income and expenses calculated on stock options and related share-based payments Other calculated income and expenses Gains or losses on disposals Gains or losses from dilution - accretion Share of income from companies accounted for under the equity method Dividends (non-consolidated securities) 0 0 Cash flow from continuing operations after tax and cost of net financial debt Cash flow from discontinued operations after tax and cost of net financial debt Cash flow after tax and cost of net financial debt Cost of net financial debt Income tax expense (including deferred taxes) Cash flow from continuing operations before tax and cost of net financial debt Cash flow from discontinued operations before tax and cost of net financial debt Cash flow before tax and cost of net financial debt Taxes paid Change in w orking capital requirements on continuing operations (including employee benefits liabilities) NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS NET CASH GENERATED FROM OPERATING ACTIVITIES Impact of changes in the scope of consolidation (1) Disbursements related to acquisition of tangible and intangible fixed assets Proceeds relating to the disposal of tangible and intangible fixed assets Disbursements relating to acquisition of financial assets (non-consolidated securities) Proceeds relating to the disposal of financial assets (non-consolidated securities) Dividends received (companies accounted for under the equity method, non-consolidated securities) Change in loans and advances granted Investment grants received 0 0 Other cash flow from investment activities NET CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS NET CASH FLOW FROM INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS NET CASH FLOW FROM INVESTM ENT ACTIVITIES Impact of changes in the scope of consolidation (2) Amounts received from shareholders in connection w ith capital increases: Paid by parent company shareholders Paid by minority shareholders of consolidated companies Purchases and sales of treasury shares Dividends paid during the reporting period: Dividends paid to parent company shareholders Dividends paid to non-controlling interests of consolidated companies Proceeds related to new borrow ings Repayments of borrow ings (including finance lease agreements) Net interest paid (including finance lease agreements) Other cash flow from financing activities NET CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS NET CASH FLOW FROM FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS NET CASH FLOW FROM FINANCING ACTIVITIES Impact of changes in accounting policies 0 0 CHANGE IN NET CASH OF CONTINUING OPERATIONS CHANGE IN NET CASH OF DISCONTINUED OPERATIONS CHANGE IN NET CASH Opening cash position Closing cash position Change in cash and cash equivalents

10 31-déc déc.-16 Gross cash flow from continuing operations (a) Gross cash flow from discontinued operations (a) 0 55 Debit balances and bank overdrafts from continuing operations (b) Debit balances and bank overdrafts from discontinued operations (b) 0-54 Net cash and cash equivalents (c) = (a)- b) Of which available net cash from continuing operations Of which available net cash from discontinued operations 0 1 Of which unavailable net cash and cash equivalents Gross debt (d) Amortisation of financing costs (e) Net debt (d) - (c) + (e) (1) The impact of changes in the scope of consolidation resulting from investing activities ( 39 of IAS 7) of million mainly concerns outflows for the acquisition of companies in the Germany Residential ( million) and Hotels in Europe sectors ( million). (2) The million impact of changes in the scope of consolidation related to financing activities ( 42A of IAS7) primarily concerns: proceeds related to the sale of the investment in Central Sicaf in the Italy Offices segment ( million net of costs); disbursements related to the acquisition of additional stakes in Foncière Développement Logements ( million). 3.2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GENERAL PRINCIPLES Accounting standards The consolidated financial statements of the Foncière des Régions group at 31 December 2017 were prepared in accordance with the international accounting standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union as of the preparation date. These standards include the IFRS (International Financial Reporting Standards) and their interpretations. The statements were approved by the Board of Directors on 14 February Accounting principles and methods used The accounting principles applied to the consolidated financial statements as at 31 December 2017 are identical to those used for the consolidated financial statements as at 31 December 2016, with the exception of new standards and amendments whose application is mandatory as from 1 January 2017 and which were not applied early by the Group. The new standards subject to mandatory application on or after 1 January 2017 include: amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses, adopted by the European Union on 6 November The amendment provides clarification on how to estimate the existence of future taxable profits; amendments to IAS 7 Disclosure Initiative" adopted by the European Union on 6 November As part of its overall reflection on the presentation of financial statements, the IASB published amendments to IAS 7 Statement of cash flows. Under these amendments, entities must provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, whether or not these changes stem from cash flows. 10

11 New standards awaiting adoption by the European Union, whose application is possible as of 1 January 2017: annual improvements to IFRS ( cycle), published on 8 December 2016; its adoption by the European Union was expected in the second half-year of Early adoption of the IAS 28 Amendment is possible. The new amendments and standards adopted by the European Union whose application was not mandatory at 1 January 2017 and which are not being applied early by the Foncière des Régions group are: IFRS 15 Revenue from Contracts with Customers, adopted by the European Union on 22 September 2016; according to the IASB, the amendments should enter into force on 1 January In May 2014, the IASB and the FASB published IFRS 15, which changes how revenue is recognised and supersedes IAS 18 Revenue and IAS 11 Construction Contracts. IFRS 15 establishes a fundamental principle that requires revenues from contracts with customers to be recognised in a way that reflects the amount to which a seller expects to be entitled when transferring control of a good or service to a customer. For the group, this standard might have an impact on real estate development. The group does not anticipate any on earnings or shareholders equity. On off-plan contracts, the principle of recognising revenue and margin as a percentage of completion is unaffected. However, the calculation of the percentage of completion will incorporate land costs, resulting in higher recognition of revenue and margin at the beginning of the contract than is the current practice; Amendments to IFRS adopted by the European Union on 31 October 2017; according to the IASB, the amendments should enter into force on 1 January Clarifications have been made to IFRS 15 concerning the following: identification of performance obligations, principal versus agent application, licenses, and transitory provisions; IFRS 9 Financial Instruments : Hedge Accounting, adopted by the European Union on 22 November 2016; according to the IASB, the standard should enter into force on 1 January This standard will replace IAS 39 concerning financial instruments. The Group will apply the provisions relating to the classification and assessment of financial instruments and to the impairment of financial assets from 1 January An impact analysis is underway, in particular as regards the treatment of debt renegotiations. The Group has not yet taken a decision to apply the provisions specific to hedge accounting and will continue to apply the provisions of IAS 39 in 2018; IFRS 16 Leases, adopted by the European Union on 31 October 2017; According to the IASB, the amendments should enter into force on 1 January On 13 January 2016, the IASB published IFRS 16, which will supersede IAS 17 Leases, as well as the corresponding interpretations (IFRIC 4, SIC 15 and SIC 27). The most significant change is that all the leases concerned will be recognised on the lessee s balance sheet, providing better visibility on their assets and liabilities. The Group has carried out an initial survey of its leases. At this stage, this primarily involves operating leases for company vehicles, car parks and construction leases. The implications for the group should be limited; Amendments to IFRS 4 "Applying IFRS 9 with IFRS 4 Insurance Contracts", adopted by the European Union on 3 November 2017; according to the IASB, the amendments should enter into force on 1 January They are intended to remedy the temporary accounting consequences of the time-lag between the effective date of IFRS 9 and that of the new standard on insurance contracts replacing IFRS 4 (IFRS 17). 11

12 IFRS standards and amendments published by the IASB but not adopted by the European Union, not yet mandatory for financial years beginning on or after 1 January 2017: Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions, published on 20 June 2016; according to the IASB, the amendments should enter into force on 1 January Its adoption by the European Union is expected in the second half-year of This amendment covers three aspects that concern the following: the effects of vesting conditions on the measurement of cash-settled share-based payments and, share-based payment transactions subject to tax withholding obligations, and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled; Amendments to IAS 40 Transfers of Investment Property, published on 8 December 2016; according to the IASB, the amendments should enter into force on 1 January Its adoption by the European Union is expected in the second half-year of 2018; Amendments to IAS 28 "Investments in associates and joint ventures", published 12 October 2017; Amendments to IFRS 9 "Prepayment features with Negative Compensation", published on 12 October 2017; IFRS 17 "Insurance Contracts", published on 18 May 2017; According to the IASB, the amendments should enter into force on 1 January IFRS 17 lays out the principles as to the recognition, valuation, presentation and disclosures concerning insurance contracts within the scope of application of the standard. This standard has no impact on the financial statements; IFRIC 22 Foreign Currency Transactions and Advance Consideration published 8 December 2016; IFRIC 23 "Uncertainty Over Income Tax Treatments," published in 7 June, 2017; Annual improvements to IFRS ( cycle), published on 12 December 2017; According to the IASB, the amendments should enter into force on 1 January These improvements amend IFRS 3 "Business Combinations", IFRS 11 "Partnerships", IAS 23 "Borrowing Costs" and IAS 12 "Income Taxes" Estimates and judgements The financial statements have been prepared in accordance with the historic cost convention, with the exception of investment properties and certain financial instruments, which were recognised in accordance with the fair value convention. In accordance with the conceptual framework for IFRS, preparation of the financial statements requires making estimates and using assumptions that affect the amounts shown in these financial statements. The significant estimates made by the Foncière des Régions group in preparing the financial statements mainly relate to: the valuations used for testing impairment, in particular assessing the recoverable value of goodwill and intangible fixed assets; measurement of the fair value of investment properties; assessment of the fair value of derivative financial instruments; measurement of provisions. Because of the uncertainties inherent in any valuation process, the Foncière des Régions group reviews its estimates based on regularly updated information. The future results of the transactions in question may differ from these estimates. 12

13 In addition to the use of estimates, Group management makes use of judgements to define the appropriate accounting treatment of certain business activities and transactions when the IFRS standards and interpretations in effect do not precisely address the accounting issues involved Operating segments The operating segments of the Foncière des Régions group are detailed in paragraph IFRS 7 Reference table Liquidity Risk Financial expense sensitivity Credit Risk Market Risk Sensitivity of the fair value of investment properties Covenants FINANCIAL RISK MANAGEMENT The operating and financial activities of the Company are exposed to the following risks: Marketing risk for properties under development The Group is involved in property development. As such, it is exposed to a number of different risks, particularly risks associated with construction costs, completion delays and the marketing of properties. These risks can be assessed in light of the schedule of properties under development (see ) Liquidity risk Liquidity risk is managed in the medium and long term with multi-year cash management plans and, in the short term, by using confirmed and undrawn lines of credit. At 31 December 2017, Foncière des Regions available cash and cash equivalents amounted to 2,777 million, including 1,321 million in usable unconditional credit lines, 1,296 million in investments and 160 million in unused overdraft facilities. The graph below summarises the maturities of the borrowings (in M), including treasury bills existing as at 31 December 2017: and after Maturity Interests 13

14 2018 maturities include million in treasury bills. The amount of interest payable up to the maturity of the debt, estimated on the basis of the outstanding amount at 31 December 2017 and the average interest rate on the debt, totalled 986 million. Details concerning the debt maturities are provided in Note , and a description of the banking covenants and accelerated payment clauses included in the loan agreements is presented in Note During the year 2017, the Group continued to diversify its sources of finance, reduce the cost of debt and extend its maturity. France Offices: In June 2017, Foncière des Régions successfully completed a 500 million bond issue, maturing in 2027, with a fixed coupon of 1.5%. At the same time, the Group redeemed million. This amount represents 55% of the bond issue maturing in 2021 and bearing interest at the rate of 1.75%. Italy Offices: The quality of its debt has clearly been improved with the obtaining of a BBB- credit rating from Standard & Poor's this year and through 1.2 billion of refinancing and financing. In February 2017, Beni Stabili redeemed its 270 million ORNANE-type bond maturing in April 2019, thus reducing the risk of future dilution. In July 2017 and August 2017, two long-term mortgage financings with maturities of 8.5 and 10 years, totalling 336 million, were partly drawn down. After obtaining its BBB- rating in July 2017, Beni Stabili successfully issued a 300 million seven-year bond (maturing in 2024) with a coupon of 1.625%. Hotels in Europe: In March 2017, Foncière des Murs arranged mortgage financing of 279 million for eight years as part of the acquisition of 17 hotels in Spain. In April and May 2017, it obtained ten-year 105 million financing for the B&B and NH Hotels in Germany portfolios. In May 2017, it also refinanced a portfolio of 166 B&B assets in France in the amount of 290 million for a period of seven years. Germany Residential: During 2017, Immeo SE took out several mortgage loans as part of its acquisitions, including a 10-year 115 mortgage loan to acquire a portfolio of 1,827 units in Berlin, Dresden, Leipzig and a 10-year 176 million mortgage loan to finance acquisitions in Berlin, Dresden and Leipzig and Hamburg. Immeo has also continued to refinance older debts to optimise their maturity and financial conditions. Thus, a total of 165 million was raised long-term (9.9 years on average) backed by portfolios located half in Essen and Duisburg and half in Berlin. 14

15 Interest rate risk The Group s exposure to the risk of changes in market interest rates is linked to its floating rate and long-term financial debt. To the extent possible, bank debt is primarily hedged via financial instruments (see ). At 31 December 2017, after taking interest rate swaps into account, approximately 82% of the Group s debt was hedged, and the bulk of the remainder was covered by interest rate caps, which resulted in the following sensitivity to changes in interest rates: The impact of a 100 bps rate increase as at 31 December 2017 is a loss of 12,764 thousand on the 2018 Group share of recurring net income. The impact of a 50 bps rate increase as at 31 December 2017 is a loss of 5,741 thousand on the 2018 Group share of recurring net income. The impact of a 50 bps rate reduction as at 31 December 2017 is an increase of 4,457 thousand on the 2018 Group share of recurring net income Financial counterparty risk Given Foncière des Régions contractual relationships with its financial partners, the Company is exposed to counterparty risk. If one of its partners is not in a position to honour its undertakings, the Group s net income could suffer an adverse effect. This risk primarily involves the hedging instruments entered into by the Group and which would have to be replaced by a hedging transaction at the current market rate in the event of a default by the counterparty. The counterparty risk is limited by the fact that Foncière des Régions is a borrower, from a structural standpoint. The risk is therefore mainly restricted to the investments made by the Group and to its counterparties in derivative product transactions. The Company continually monitors its exposure to financial counterparty risk. The Company s policy is to deal only with top-tier counterparties, while diversifying its financial partners and its sources of funding. Counterparty risk is included in the measurement of cash instruments. It totalled 1,033 thousand in the 2017 period Leasing counterparty risk Foncière des Régions rental income is subject to a certain degree of concentration, to the extent that the principal tenants (Orange, Telecom Italia, AccorHotels, Suez, B&B and Enedis/EDF) generate the primary annual rental income. It should be noted that in 2017, the Group split up the Telecom Italia portfolio and now holds no more than 60%. The Group made significant investments in Spain and thereby diversified its Hotels lessees. Foncière des Régions does not believe it is significantly exposed to the risk of insolvency, since its tenants are selected based on their creditworthiness and the economic prospects of their market segments. The operating and financial performance of the main tenants is regularly reviewed. In addition, tenants grant the Group financial guarantees when leases are signed. The Group has not recorded any significant overdue payments. 15

16 Risks related to changes in the value of the portfolio Changes in the fair value of investment properties are recognised in the income statement. Changes in property values can thus have a material impact on the operating performance of the Group. In addition, part of the Company s operating income is generated by the sales plan, the income of which is equally dependent on property values and on the volume of possible transactions. Rentals and property values are cyclical in nature, the duration of the cycles being variable but generally long-term. Different domestic markets have differing cycles that vary from each other in relation to specific economic and market conditions. Within each national market, prices also follow the cycle in different ways and with varying degrees of intensity, depending on the location and category of the assets. The macroeconomic factors that have the greatest influence on property values and determine the various cyclical trends include the following: interest rates; the liquidity on the market and the availability of other profitable alternative investments; economic growth. Low interest rates, abundant liquidity on the market and a lack of profitable alternative investments generally lead to an increase in property asset values. Economic growth generally increases demand for leased space and paves the way for rent levels to rise, particularly in the office sector. These two consequences lead to an increase in the price of real estate assets. Nevertheless, in the medium term, economic growth generally leads to an increase in inflation and then an increase in interest rates, expanding the availability of profitable alternative investments. Such factors exert downward pressure on property values. The investment policy of Foncière des Régions is to minimise the impact of the various stages of the cycle by choosing investments that: have long-term leases and high quality tenants, which soften the blow of a reduction in market rental income and the resulting decline in real estate prices; are located in major city centres; have low vacancy rates, in order to avoid the risk of having to re-let vacant space in an environment where demand may be limited. The holding of real estate assets intended for leasing exposes Foncière des Régions to the risk of fluctuation in the value of real estate assets and lease payments. Despite the uncertainty created by the economic downturn, this exposure is limited to the extent that the rentals invoiced are derived from rental agreements, the term and diversification of which mitigate the effects of fluctuations in the rental market. The sensitivity of the fair value of investment properties to changes in capitalisation rates is analysed in Exchange rate risk The Company operates in the Euro zone. It is therefore not exposed to exchange rate risk. 16

17 Risks related to changes in the value of shares and bonds The Group is exposed to risks for two classes of shares (see ). This risk primarily involves listed securities in companies consolidated according to the equity method, which are valued according to their value in use. Value in use is determined based on independent assessments of the real estate assets and financial instruments. In addition, Foncière des Régions and Beni Stabili issued bonds (ORNANE) valued at their fair value in the income statement at each reporting date. The fair value corresponds to the bond's monthly closing price, exposing the Group to changes in the bond value. The specific features of the ORNANE are described in Note Tax environment Changes in the French tax environment The French tax environment has not seen any changes affecting the Group s fiscal situation since 1 January Changes in the Italian tax environment The changes in the Italian tax environment concern the corporation tax rate (IRES by the Italian acronym), which is lowered from 27.5% to 24% as of financial years ending in Changes in the German tax environment The Group has not observed any significant change in the German tax environment Tax risks Given the ongoing changes to tax legislation, the Group is likely to be subject to reassessment proposals from the Tax Administration. If our counsel believes that an adjustment presents a risk of reassessment, a provision is made. The list of the main ongoing proceedings includes the following: Foncière des Régions tax inspection Foncière des Régions accounts were audited for the 2012 and 2013 financial years, which resulted in a reassessment proposal in December 2015 for corporate value added tax (CVAE) and corporate tax generating: a 9.7 million tax impact on the principal, relating to (i) corporation tax, with a correlative increase in deficits on the taxable segment in the amount of 36.6 million and (ii) to the CVAE. This reassessment is being contested and, based on the analysis by the Company s legal counsel, no provision has been recorded to that effect as at 31 December The reassessment proposal concerning a reduction in deficits in the taxable segment of 1 million on a total of 240 million was accepted; a new reassessment proposal concerning the 2014 corporation tax was received as a follow-up to the reassessment made for 2012 and 2013, generating a financial impact of 3.9 million in principal. On the same basis as for the 2012 and 2013 financial years, this reassessment proposal is being contested and, based on the analysis by the Company s legal counsel, no provision was recorded to that effect as at 31 December

18 Foncière Europe Logistique tax audit (merged with and into Foncière des Régions on 31 December 2016) A corporate income tax reassessment proposal was received by Foncière Europe Logistique amounting to 3.2 million for financial years 2007 and 2008, followed by a tax collection procedure and a payment during the first half of Foncière Europe Logistique is nonetheless contesting this reassessment and filed a claim against it. The Tax Administration rejected the claim on the merits but nevertheless granted an abatement of 2.4 million in principal and interest to take into account the fact that the financial consequences were spread out over 2008, 2009, 2010 and The Company therefore paid 0.8 million, which it contests on the merits. The case was referred to the Administrative Court, which rejected Foncière Europe Logistique s application in December The Administrative Court of Appeal of Versailles annulled the judgement of the Court in a ruling of 20 July 2017, which was appealed to the Conseil d Etat and is still pending. Based on the analysis by legal counsel, no provision has been recorded for this dispute as at 31 December An accounting audit pertaining to the 2010 and 2011 financial years took place during the 2013 financial year, which ended in a reassessment proposal on the corporate tax for 3.5 million on the same grounds as the previous reassessment proposal for 2007 and This reassessment was followed by a tax collection procedure and payment. The case was referred to the Administrative Court, which rejected Foncière Europe Logistique s request in June The Administrative Court of Appeal of Versailles annulled the judgement of the Court in a ruling of 29 July 2017, which was appealed to the Conseil d Etat and is still pending. Based on the analysis by legal counsel, no provision has been recorded for this dispute as at 31 December An audit of Foncière Europe Logistique s accounts was conducted covering the 2012 and 2013 financial years, and culminated in a proposed corporate tax reassessment amounting to 1.3 million, on the same merits as the previous reassessment proposal for 2007 to The case was referred to the Administrative Court, which ruled in favour of Foncière Europe Logistique s application in December Foncière des Murs tax audit Foncière des Murs was subject to an accounting audit for the 2010 and 2011 financial years, which resulted in a reassessment proposal for the CVAE in the amount of 2.4 million. This reassessment proposal was confirmed in April 2015 following administrative reviews. It gave rise to a tax collection procedure and payment in the first half of The proposal is being contested in its entirety, and, based on the analysis by the Company s legal counsel, no provision has been recorded to that effect as at 31 December Foncière des Murs accounts were also audited for the 2012, 2013 and 2014 financial years, which resulted in a reassessment proposal in December 2015 for corporate value added tax (CVAE) in the amount of 2.2 million, on the same grounds as the previous reassessment proposal for 2010 and This reassessment proposal was confirmed in May 2016 following administrative reviews. It gave rise to a tax collection procedure and payment in the second half of The dispute is still pending and, based on the analysis by the Company s legal counsel, no provision was recorded to that effect as at 31 December

19 SNC Otello (Foncière des Murs subsidiary) tax audit SNC Otello s accounts were audited for the 2011, 2012 and 2013 financial years, which resulted in a reassessment proposal for the CVAE in the amount of 0.5 million. This reassessment proposal was confirmed in April 2015 following administrative reviews. It gave rise to a tax collection procedure and payment in the first half of This proposal is being contested in its entirety, and, based on the analysis by the Company s legal counsel, no provision has been recorded to that effect as at 31 December The accounts of SNC Otello were also audited for the 2014, 2015 and 2016 financial years, which resulted in a reassessment proposal in November 2017 for corporate value added tax (CVAE) in the amount of 0.2 million, on the same grounds as the previous reassessment proposal for 2011, 2012 and This proposal is being contested in its entirety, and, based on the analysis by the Company s legal counsel, no provision has been recorded to that effect as at 31 December République tax audit République was subject to a tax audit for the 2008, 2009 and 2010 financial years. A tax reassessment proposal for 2008, which has no impact on the corporate income tax owed, was received at the end of December The Administrative Tribunal of Montreuil reached a ruling in the company s favour on 6 June 2017 which has not been appealed by the government. Tax audits of the Germany Residential segment Immeo and all its subsidiaries were subject to a tax audit for the 2011, 2012 and 2013 financial years. These audits are ongoing. No provision has been recorded for these audits as at 31 December Tax audits of the Italy Offices segment: Comit Fund tax dispute Beni Stabili: On 17 April 2012, following a court decision, the Italian tax administration refunded the debt borne by Beni Stabili for the Comit Fund dispute (principal: 58.2 million and interest: 2.3 million). In April 2012, the Tax Administration appealed this decision. The Court of Appeal ruled in favour of the Tax Administration on 18 December The dispute with the Tax Administration was settled with the payment of 55 million. The 56.2 million provision recorded in 2015 was reversed as at 31 December However, Comit Fund and Beni Stabili have not entered a joint agreement to definitively agree that they each will pay an equal share of this adjustment. Civil arbitration proceedings were undertaken by Comit Fund and are still ongoing at 31 December No accounting provision has been recorded for them. Tax audits: Beni Stabili was subject to a tax audit for the 2008, 2009, 2010 and 2011 financial years. The tax administration issued reassessments in the amount of 9.8 million for the principal, which is disputed by the Company in its entirety. An agreement was signed in December 2017 which put an end to the dispute concerning 2008, 2009 and The impact on the income statement was 1.7 million. With regard to 2011, the dispute was still ongoing at 31 December A payment of 1.3 million had to be made pending a decision. No accounting provision has been recorded for this claim. 19

20 Deferred tax liabilities Most of the Group s property companies have opted for the SIIC regime in France, the SIIQ regime in Italy and the SOCIMI regime in Spain. The impact of deferred tax liabilities is therefore essentially related to the Germany Residential segment and to investments in the Hotels in Europe for which the SIIC regime is not applicable (Germany, Spain, Belgium, Netherlands and Portugal). In the case of Spain, all Spanish companies have opted for the SOCIMI regime exemption. However, there are deferred tax liabilities related to assets held by the companies prior to opting for SOCIMI treatment SCOPE OF CONSOLIDATION Accounting principles applicable to the scope of consolidation Consolidated subsidiaries and structured entities IFRS 10 These financial statements include the financial statements of Foncière des Régions and the financial statements of the entities (including structured entities) that it controls and its subsidiaries. The Foncière des Régions group has control when it: has power over the issuing entity; is exposed or is entitled to variable returns due to its ties with the issuing entity; has the ability to exercise its power in such as manner as to affect the amount of returns that it receives. The Foncière des Régions group must reassess whether it controls the issuing entity when facts and circumstances indicate that one or more of the three factors of control listed above have changed. A structured entity is an entity structured in such a way that the voting rights or similar rights do not represent the determining factor in establishing control of the entity; this is particularly the case when the voting rights only involve administrative tasks and the relevant business activities are governed by contractual agreements. If the Group does not hold a majority of the voting rights in an issuing entity in order to determine the power exercised over an entity, it analyses whether it has sufficient rights to unilaterally manage the issuing entity s relevant business activities. The Group takes into consideration any facts and circumstances when it evaluates whether the voting rights that it holds in the issuing entity are sufficient to confer power to the Group, including the following: the number of voting rights that the Group holds compared to the number of rights held respectively by the other holders of voting rights and their distribution; the potential voting rights held by the Group, other holders of voting rights or other parties; the rights under other contractual agreements; the other facts and circumstances, where applicable, which indicate that the Group has or does not have the actual ability to manage relevant business activities at the moment when decisions must be made, including voting patterns during previous shareholders meetings. Subsidiaries and structured entities are fully consolidated. Equity affiliates IAS 28 An equity affiliate is an entity in which the Group has significant control. Significant control is the power to participate in decisions relating to the financial and operational policy of an issuing entity without, however, exercising control or joint control on these policies. 20

21 The results and the assets and liabilities of equity affiliates are recognised in these consolidated financial statements according to the equity method. Partnerships (joint control) IFRS 11 Joint control means the contractual agreement to share the control exercised over a company, which only exists in the event where the decisions concerning relevant business activities require the unanimous consent of the parties sharing the control. Joint ventures A joint venture is a partnership in which the parties which exercise joint control over the entity have rights to its net assets. The results and the assets and liabilities of joint ventures are recognised in these consolidated financial statements according to the equity method. Joint operations A joint operation is a partnership in which the parties exercising joint control over the operation have rights to the assets, and obligations for the liabilities relating to it. Those parties are called joint operators. A joint operator must recognise the following items relating to its interest in the joint operation: its assets, including its proportionate share of assets held jointly, where applicable; its liabilities, including its proportionate share of liabilities undertaken jointly, where applicable; the income that it derived from the sale of its proportionate share in the yield generated by the joint operation; its proportionate share of income from the sale of the yield generated by the joint operation; the expenses that it has committed, including its proportionate share of expenses committed jointly, where applicable. The joint operator accounts for the assets, liabilities, income and expenses pertaining to its interests in a joint operation in accordance with the IFRS that apply to these assets, liabilities, income and expenses. No Group company is considered to constitute a joint operation Additions to the scope of consolidation Additions to the scope of consolidation for each business are presented in the scope reporting table detailed by company at the start of each segment. The segments concerned are France Offices, Italy Offices, Hotels in Europe and Germany Residential Removals from the scope of consolidation Removals from the scope of consolidation for each business are presented in the scope reporting table detailed by company at the end of each segment. The segments concerned are France Offices, Italy Offices, Hotels in Europe, Germany Residential and France Residential. 21

22 Change in holding and/or in consolidation method Capital increases of Foncière des Murs Impact on the percentage held During the first 2017 half-year Foncière des Murs undertook several capital increases in the amount of million ( million net of costs) by issuing 13,712,124 new shares, including 4,449,129 shares following the distribution of the extraordinary dividend in shares. As a result of these two capital increases of 28 March and 19 May 2017, Foncière des Régions holds 43,907,732 Foncière des Murs shares, or 50.00% of the equity, versus 49.91% as at 31 December Acquisition of Beni Stabili shares Impact on the percentage held In the second 2017 half-year Foncière des Régions acquired 4,135,341 Beni Stabili shares for a total of 2.8 million. The average acquisition price is 0.68 per share. At 31 December 2017, Foncière des Régions held a 52.43% stake in Beni Stabili versus 52.24% at 31 December Amendment to the Latécoère 2 shareholder agreement Change from equity method to full consolidation Following the amendment to the shareholders agreement in December 2017, Latécoère 2 has been fully consolidated since 31 December Split of the Silex 1 and Silex 2 buildings with Assurances du Crédit Mutuel Impact on the percentage held A partnership agreement was signed in December 2017 between Foncière des Régions and Assurances du Crédit Mutuel to share the Silex 1 asset and the Silex 2 development project. Foncière des Régions maintains 50.1% of the capital and continues to fully consolidate the SCIs of 9 and 15 rue des Cuirassiers. Market exchange offer on Foncière Développement Logements Impact on the percentage held Foncière des Régions initiated an MEO for the shares of Foncière Développement Logements and received 26,302,577 Foncière Développement Logements shares. Following this transaction and the cash purchase of Foncière Développement Logements shares, Foncière des Régions holds 100% of the capital of its subsidiary, as compared to 61.3% at 31 December The company was delisted on 29 December The contribution of Foncière Développement Logements shares was paid by issuing 916,951 shares of Foncière des Régions. Buyback and cancellation of République shares - Impact on the percentage held On 27 November 2017, République undertook a capital reduction not due to losses by buying and cancelling 2,612,234 shares held by Predica (41% of the capital). At 31 December 2017 Foncière des Régions held 100% of the capital of its subsidiary République, as compared to 59.5% at 31 December

23 List of consolidated companies 93 companies in the France Offices segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 Foncière des Régions France Parent company Opco New w ork France FC 100,00 - Le Clos de Chanteloup France FC 100,00 - Bordeaux Lac France FC 100,00 - Sully Chartres France FC 100,00 - Sucy Parc France FC 100,00 - Gambetta Le Raincy France FC 100,00 - Orly promo France FC 100,00 - Silex Promo France FC 100,00-21 Rue Jean Goujon France FC 100,00 - Villouvette Saint-Germain France FC 100,00 - La Mérina Fréjus France FC 100,00 - Normandie Niemen Bobigny France FC 100,00 - Le Printemps Sartrouville France FC 100,00 - Gaugin St Ouen L'aumone France FC 100,00 - SCI du 15 rue des Cuirassiers France FC 50,10 100,00 SCI du 9 rue des Cuirassiers France FC 50,10 100,00 SCI Latécoère 2 France FC 50,10 50,10 SCI Rueil B2 France FC 100,00 100,00 SCI Rueil B3 B4 France FC 100,00 100,00 SCI Factor E France EM/EA 34,69 34,69 SCI Orianz France EM/EA 34,69 34,69 Latepromo France FC 100,00 100,00 SNC Promomurs France FC 100,00 100,00 FDR Participation France FC 100,00 100,00 SCI avenue de la Marne France FC 100,00 100,00 Omega B France FC 100,00 100,00 GFR Ravinelle France FC 100,00 100,00 SCI du 288 rue Duguesclin France FC 100,00 100,00 SCI Fédérimmo France FC 60,00 60,00 Iméfa 127 France FC 100,00 100,00 SCI Atlantis France FC 100,00 100,00 EURL Fédération France FC 100,00 100,00 SCI Raphaël France FC 100,00 100,00 SARL Foncière Margaux France FC 100,00 100,00 SCI du 32 avenue P Grenier France FC 100,00 100,00 SCI du 40 rue JJ Rousseau France FC 100,00 100,00 SCI du 3 place A Chaussy France FC 100,00 100,00 SARL BGA Transactions France FC 100,00 100,00 SCI 35/37 rue Louis Guérin France FC 100,00 100,00 SARL du quai Félix Faure France FC 100,00 100,00 SCI du 10B et 11 A 13 allée des Tanneurs France FC 100,00 100,00 SCI du 125 avenue du Brancolar France FC 100,00 100,00 SCI du 8 rue M Paul France FC 100,00 100,00 SCI du 1 rue de Chateaudun France FC 100,00 100,00 SCI du 1630 Avenue de la Croix Rouge France FC 100,00 100,00 SCI du 682 cours de la Libération France FC 100,00 100,00 SARL du rue des Troënes France FC 100,00 100,00 SCI du 2 rue de L Ill France FC 100,00 100,00 SCI du 20 avenue Victor Hugo France FC 100,00 100,00 SARL du 2 rue Saint Charles France FC 100,00 100,00 SNC Télimob Paris France FC 100,00 100,00 SNC Télimob Nord France FC 100,00 100,00 SNC Télimob Rhône Alpes France FC 100,00 100,00 SNC Télimob Sud Ouest France FC 100,00 100,00 SNC Télimob Est France FC 100,00 100,00 SNC Télimob Paca France FC 100,00 100,00 SNC Télimob Ouest France FC 100,00 100,00 SARL Télimob Paris France FC 100,00 100,00 SNC Latécoère France FC 50,10 50,10 Palmer Plage SNC France FC 100,00 100,00 SCI Palmer Montpellier France FC 100,00 100,00 SCI Dual Center France FC 100,00 100,00 SAS Cœur d Orly Promotion France EM/EA 50,00 50,00 FDR2 France FC 100,00 100,00 23

24 Companies in the France Offices segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 SCI bureaux Cœur d Orly France EM/EA 25,00 25,00 SNC hld Bureaux Cœur d Orly France EM/EA 50,00 50,00 SNC Commerces Cœur d Orly France EM/EA 25,00 25,00 SNC hld Commerces Cœur d Orly France EM/EA 50,00 50,00 FDR 4 France FC 75,00 75,00 OPCI Office CB21 France FC 75,00 75,00 SCI Euromarseille 1 France EM/JV 50,00 50,00 SCI Euromarseille 2 France EM/JV 50,00 50,00 SCI Euromarseille BI France EM/JV 50,00 50,00 SCI Euromarseille BH France EM/JV 50,00 50,00 SCI Euromarseille BL France EM/JV 50,00 50,00 SCI Euromarseille PK France EM/JV 50,00 50,00 SCI Euromarseille Invest France EM/JV 50,00 50,00 SCI Euromarseille H France EM/JV 50,00 50,00 SCI Euromarseille BH2 France EM/JV 50,00 50,00 FDR 7 France FC 100,00 100,00 Technical France FC 100,00 100,00 GFR Kléber France FC 100,00 100,00 Oméga A France FC 100,00 100,00 Oméga C France FC 100,00 100,00 Le Ponant 1986 France FC 100,00 100,00 Ruhl Côte d Azur France FC 100,00 100,00 SCI Pompidou France FC 100,00 100,00 SCI 11 place de l Europe France FC 50,09 50,09 SCI Lenovilla France EM/JV 50,10 50,10 SNC Lenopromo France FC 100,00 100,00 SCI Meudon Saulnier France FC 100,00 100,00 SCI Charenton France FC 100,00 100,00 SCI Euromarseille 3 France Liquidated - 50,00 EURL Languedoc 34 France Merger - 100,00 Foncière Palmer SNC France Merger - 100,00 Palmer Transactions SNC France Merger - 100,00 SARL du 11 rue Victor Leroy France Merger - 100,00 SCI du 11 avenue de Sully France Merger - 100,00 SNC Sup 3 France Merger - 100,00 SCI Euromarseille M France Merger - 50,00 The registered office of the parent company Foncière des Régions is located at 18 avenue François Mitterrand Metz. The other fully consolidated subsidiaries in the France Offices segment have their registered office located at 10 and 30 avenue Kléber Paris. 18 companies in the Italy Offices segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 Beni Stabili S.p.A. SIIQ (parent company) 100% controlled Italy FC 52,43 52,24 Central Società di Investimento per Azioni a capitalo fisso Central SICAF S.p.A. Italy FC 31,46 Revalo S.p.A. Italy FC 52,43 52,24 Investire S.p.A. SGR Italy EM 9,38 9,35 RGD Ferrara 2013 Srl Italy EM 26,21 26,12 Resolution Tech S.r.L. Italy EM 15,73 15,67 Beni Stabili 7 S.p.A. Italy FC 52,43 52,24 Beni Stabili Development S.p.A. Italy FC 52,43 52,24 B.S. Activita commercial 1 S.r.L. Italy FC 52,43 52,24 B.S. Actività commercial 2 S.r.L. Italy FC 52,43 52,24 B.S. Actività commercial 3 S.r.L. Italy FC 52,43 52,24 B.S. Immobiliare 9 SINQ S.p.A. Italy FC 52,43 52,24 RGD Gestioni S.r.L. Italy FC 52,43 52,24 Beni Stabili Retail S.r.l. Italy FC 28,83 28,73 Beni Stabili Real Estate Advisory S.r.L. Italy FC 52,43 52,24 B.S. Engineering S.r.l. Italy FC 52,43 52,24 Imser Securitisation S.r.L.. Italy FC 52,43 52,24 Imser Securitisation 2 S.r.L. Italy FC 52,43 52,24 B.S. Immobiliare 5 S.r.L. Italy Merger - 52,24 Beni Stabili Development Milano Greenway S.p.A. Italy Merger - 52,24 Sviluppo Ripamonti S.r.L. Italy Merger - 52,24 The registered office of the parent company Beni Stabili is located at 38 Via Piemonte Rome. 24

25 126 companies in the Hotels in Europe segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 SCA Foncière des Murs (Parent company) 100% controlled France FC 49,91 49,91 Constance France EM/EA 20,35 - Constance Lux 1 Luxembourg EM/EA 20,35 - Constance Lux 2 Luxembourg EM/EA 20,35 - So Hospitality Luxembourg EM/EA 20,35 - Nice-M France EM/EA 20,35 - H Invest Lux 2 Luxembourg FC 50,00 - Hotel Amsterdam Noord FDM Netherlands FC 50,00 - Hotel Amersfoort FDM Netherlands FC 50,00 - Investment FDM Rocatiera Spain FC 50,00 - Bardiomar Spain FC 50,00 - Trade Center Hotel Spain FC 50,00 - Airport Garden Hotel NV Belgium EM/EA 20,35 20,31 H Invest Lux Luxembourg FC 50,00 49,91 Samoens SAS France FC 12,55 12,53 Foncière B4 Hôtel Invest France FC 25,10 25,05 B&B Invest Espagne SLU Spain FC 50,00 49,91 Rock-Lux Luxembourg EM/EA 20,35 20,31 Société Liloise Investissement Immobilier Hôtelier SA France EM/EA 20,35 20,31 Spiegelrei HLD SA Belgium EM/EA 20,35 20,31 Alliance et Compagnie SAS France EM/EA 20,35 20,31 Spiegelrei SA M&F Belgium EM/EA 20,35 20,31 Résidence Cour Saint Georges SA Belgium EM/EA 20,35 20,31 Hermitage Holdco France EM/EA 20,35 20,31 Berlin I (Propco Westin Grand Berlin) Germany EM/EA 19,31 19,28 Opco Grand Hôtel Berlin Betriebs (Westin berlin) Germany EM/EA 19,31 19,28 Berlin II (Propco Park Inn Alexanderplatz) Germany EM/EA 19,31 19,28 Opco Hôtel Stadt Berlin Betriebs (Park-Inn) Germany EM/EA 19,31 19,28 Berlin III (Propco Mercure Potsdam) Germany EM/EA 19,31 19,28 Opco Hôtel Potsdam Betriebs (Mercure Potsdam) Germany EM/EA 19,31 19,28 Dresden I (Propco Westin Bellevue) Germany EM/EA 19,31 19,28 Opco Hôtel Bellevue Dresden Betriebs (Westein Bellevue) Germany EM/EA 19,31 19,28 Dresden II (Propco Ibis Hôtel Dresden) Germany EM/EA 19,31 19,28 Dresden III (Propco Ibis Hôtel Dresden) Germany EM/EA 19,31 19,28 Dresden IV (Propco Ibis Hôtel Dresden) Germany EM/EA 19,31 19,28 Opco BKL Hotelbetriebsgesellschaft (Dresden II to IV) Germany EM/EA 19,31 19,28 Dresden V (Propco Pullman New a Dresden) Germany EM/EA 19,31 19,28 Opco Hôtel New a Dresden Betriebs (Pullman) Germany EM/EA 19,31 19,28 Leipzig I (Propco Westin Leipzig) Germany EM/EA 19,31 19,28 Opco HotelgesellschaftGeberst, Betriebs (Westin Leipzig) Germany EM/EA 19,31 19,28 Leipzig II (Propco Radisson Blu Leipzig) Germany EM/EA 19,31 19,28 Opco Hôtel Deutschland Leipzig Betriebs (Radisson Blu) Germany EM/EA 19,31 19,28 Erfurt I (Propco Radisson Blu Erfurt) Germany EM/EA 19,31 19,28 Opco Hôtel Kosmos Erfurt (Radisson Blu) Germany EM/EA 19,31 19,28 Foncière Développement Tourisme France FC 25,05 25,00 FDM Management France EM/EA 20,35 20,31 LHM Holding Lux SARL Luxembourg EM/EA 20,35 20,31 LHM ProCo Lux SARL Germany EM/EA 24,49 20,31 SCI Rosace France EM/EA 20,35 20,31 Mo First Five Germany EM/EA 23,02 19,09 Star Budget Hôtel GmbH Germany EM/EA 20,35 20,31 Financière Hope SAS France EM/EA 20,35 20,31 SCI Hôtel Porte Dorée France EM/JV 25,00 24,95 FDM M Lux Luxembourg EM/EA 20,35 20,31 OPCO Rosace France EM/EA 20,35 20,31 Exco Hôtel Belgium EM/EA 20,35 20,31 Invest Hôtel Belgium EM/EA 20,35 20,31 Mo Lux 1 Luxembourg FC 50,00 49,91 Mo Drelinden, Niederrad, Düsseldorf Germany FC 47,00 46,91 Mo Berlin Germany FC 47,00 46,91 Ringer Germany FC 50,00 49,91 B&B Invest Lux 5 Germany FC 46,50 46,41 B&B Invest Lux 6 Germany FC 46,50 46,41 SARL Loire France FC 50,00 49,91 Foncière Otello France FC 50,00 49,91 SNC Hôtel René Clair France FC 50,00 49,91 Foncière Manon France FC 50,00 49,91 Foncière Ulysse France FC 50,00 49,91 Ulysse Belgium Belgium FC 50,00 49,91 Ulysse Trefonds Belgium FC 50,00 49,91 Foncière No Bruxelles Grand Place Belgium FC 50,00 49,91 Foncière No Bruxelles Aéroport Belgium FC 50,00 49,91 Foncière No Bruges Centre Belgium FC 50,00 49,91 Foncière Gand Centre Belgium FC 50,00 49,91 Foncière Gand Opéra Belgium FC 50,00 49,91 Foncière IB Bruxelles Grand-Place Belgium FC 50,00 49,91 Foncière IB Bruxelles Aéroport Belgium FC 50,00 49,91 Foncière IB Bruges Centre Belgium FC 50,00 49,91 Foncière Antw erp Centre Belgium FC 50,00 49,91 Foncière Bruxelles Expo Atomium Belgium FC 50,00 49,91 Murdelux SARL Luxembourg FC 50,00 49,91 Portmurs Portugal FC 50,00 49,91 Beni Stabili Hôtel Luxembourg FC 50,49 50,38 25

26 Companies in the Hotels in Europe segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 Sunparks de Haan Belgium FC 50,00 49,91 Sunparks Oostduinkerke Belgium FC 50,00 49,91 Foncière Vielsam Belgium FC 50,00 49,91 Sunparks Trefonds Belgium FC 50,00 49,91 Foncière Kempense Meren Belgium FC 50,00 49,91 FDM Gestion Immobilière France FC 50,00 49,91 Iris Holding France France EM/EA 9,95 9,93 OPCI Iris Invest 2010 France EM/EA 9,95 9,93 Foncière Iris SAS France EM/EA 9,95 9,93 Sables d Olonne SAS France EM/EA 9,95 9,93 Iris investor Holding GmbH Germany EM/EA 9,95 9,93 Iris General Partner GmbH Germany EM/EA 5,00 4,99 Iris Berlin GmbH Germany EM/EA 9,95 9,93 Iris Bochum & Essen GmbH Germany EM/EA 9,95 9,93 Iris Frankfurt GmbH Germany EM/EA 9,95 9,93 Iris Verw altungs GmbH & co KG Germany EM/EA 9,95 9,93 Iris Nurnberg GmbH Germany EM/EA 9,95 9,93 Iris Stuttgart GmbH Germany EM/EA 9,95 9,93 Narcisse Holding Belgique Belgium EM/EA 9,95 9,93 Foncière B3 Hôtel Invest France FC 25,10 25,05 B&B Invest Lux 4 Germany FC 50,00 49,91 NH Amsterdam Center Hotel HLD Netherlands FC 50,00 49,91 Hotel Amsterdam Centre Propco Netherlands FC 50,00 49,91 Foncière Bruxelles Tour Noire Belgium EM/EA 9,95 9,93 Foncière Louvain Belgium EM/EA 9,95 9,93 Foncière Malines Belgium EM/EA 9,95 9,93 Foncière Bruxelles Centre Gare Belgium EM/EA 9,95 9,93 Foncière Namur Belgium EM/EA 9,95 9,93 Tulipe Holding Belgique Belgium EM/EA 9,95 9,93 Iris Tréfonds Belgium EM/EA 9,95 9,93 Foncière Louvain Centre Belgium EM/EA 9,95 9,93 Foncière Liège Belgium EM/EA 9,95 9,93 Foncière Bruxelles Aéroport Belgium EM/EA 9,95 9,93 Foncière Bruxelles Sud Belgium EM/EA 9,95 9,93 Foncière Bruge Station Belgium EM/EA 9,95 9,93 B&B Invest Lux 1 Germany FC 50,00 49,91 B&B Invest Lux 2 Germany FC 50,00 49,91 B&B Invest Lux 3 Germany FC 50,00 49,91 OPCI Camp Invest France EM/EA 9,95 9,93 Campeli France EM/EA 9,95 9,93 Dahlia France EM/EA 10,00 9,98 Foncière B2 Hôtel Invest France FC 25,10 25,05 OPCI B2 Hôtel Invest France FC 25,10 25,05 Murdespagne SLU Spain Merger - 49,91 The registered office of the parent company Foncière des Murs and of all of its fully consolidated French subsidiaries is located at 30 avenue Kléber, Paris. 94 companies in the Germany Residential segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 Immeo SE (parent company) 99.74% controlled Germany FC 61,70 60,98 Immeo Rehbergen Germany FC 65,57 - Immeo Handlesliegenschaften Germany FC 65,57 - Immeo Alexandrinenstrasse Germany FC 65,57 - Immeo Spree Wohnen 1 Germany FC 65,53 - Immeo Spree Wohnen 2 Germany FC 65,53 - Immeo Spree Wohnen 6 Germany FC 65,53 - Immeo Spree Wohnen 7 Germany FC 65,53 - Immeo Spree Wohnen 8 Germany FC 65,53 - Nordens Immobilien III Germany FC 65,53 - Montana-Portfolio Germany FC 65,53 - Immeo Cantianstrasse 18 Grundbesitz Germany FC 65,53 - Immeo Konstanzer Str.54/ Zahringerstr.28, 28a Grundbesitz. Germany FC 65,53 - Immeo Mariend.Damm28/Markgrafenstr.17 Grundbesitz Germany FC 65,53 - Immeo Markstrasse 3 Grundbesitz Germany FC 65,53 - Immeo Schnellerstrasse 44 Grundbesitz Germany FC 65,53 - Immeo Schnönw alder Str.69 Grundbesitz Germany FC 65,53 - Immeo Schulstrasse 16/17.Grundbesitz Germany FC 65,53 - Immeo Sophie-Charlotten Strasse 31,32 Grundbesitz Germany FC 65,53 - Immeo Yorckstrasse 60 Grundbesitz Germany FC 65,53 - Immeo Zelterstrasse 3 Grundbesitz Germany FC 65,53 - Immeo Zinshäuser Alpha Germany FC 65,53 - Immeo Zinshäuser Gamma Germany FC 65,53 - Second Ragland Germany FC 65,53-26

27 Companies in the Germany Residential segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 FDR Zehnte GmbH Germany FC 100,00 98,02 IW-FDL Beteiligungs GmbH & Co KG Germany FC 100,00 98,12 FDR Lux Luxembourg FC 100,00 100,00 Immeo Berolina Verw altungs GmbH Germany FC 63,66 62,98 Residenz Berolina GmbH & Co KG Germany FC 65,51 64,87 Immeo Quadrigua IV GmbH Germany FC 63,66 62,97 Real Property Versicherungsmakler GmbH Germany FC 61,70 62,97 Immeo Quadrigua 15 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 45 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 36 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 46 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 40 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 47 GmbH Germany FC 65,51 64,86 Immeo Quadrigua 48 GmbH Germany FC 65,51 64,86 Immeo Fischerinsel GmbH Germany FC 65,57 64,93 Immeo Berlin Home GmbH Germany FC 65,57 64,93 Immeo Berolina Fischenrinsel GmbH & Co KG Germany FC 65,57 65,93 Amber Properties Sarl Germany FC 65,53 64,89 Immeo Gettmore Germany FC 65,53 64,89 Saturn Properties Sarl Germany FC 65,53 64,89 Venus Properties Sarl Germany FC 65,53 64,89 Immeo Vinetree Germany FC 65,53 64,89 Acopio Facility GmbH & Co KG Germany FC 65,53 64,89 Immeo Planungs- und Projektsteuerungsgesellschaft mbh Germany FC 31,47 31,10 Immeo Berlin Prime SarL Germany FC 48,99 48,42 Berlin Prime Commercial SarL Germany FC 58,56 57,87 Acopio GmbH Germany FC 100,00 100,00 Immeo Hambourg Holding ApS Denmark FC 65,57 64,93 Immeo Hambourg 1 ApS Germany FC 65,57 64,93 Immeo Hambourg 2 ApS Germany FC 65,57 64,93 Immeo Hambourg 3 ApS Germany FC 65,57 64,93 Immeo Hambourg 4 ApS Germany FC 65,57 64,93 Immeo North ApS Germany FC 65,57 64,93 Immeo Arian Germany FC 65,53 64,89 Immeo Bennet Germany FC 65,53 64,89 Immeo Marien-Carré Germany FC 65,57 64,93 Immeo Berlin IV ApS Germany FC 61,70 60,98 Imméo Wohnen Verw altungs GMBH Germany FC 61,70 60,98 Imméo Grundstücks GMBH Germany FC 61,70 60,98 Imméo Grundvermögen GMBH Germany FC 61,70 60,98 Immeo Wohnen Service GMBH Germany FC 61,70 60,98 Immeo SE & CO KG 1 Germany FC 61,70 60,98 Immeo SE & CO KG 2 Germany FC 61,70 60,98 Immeo SE & CO KG 3 Germany FC 61,70 60,98 Immeo SE & CO KG 4 Germany FC 61,70 60,98 FDL Wohnen GmbH Germany FC 61,70 60,98 RRW FDL Wohnen GmbH Germany FC 64,00 63,33 Immeo Gesellschaft für Wohnen Datteln mbh Germany FC 61,84 61,13 Immeo Stadthaus GmbH Germany FC 61,84 61,13 Imméo Wohnbau GMBH Germany FC 62,07 61,36 Immeo Wohnungsgesellechaft GMBH Dümpten Germany FC 62,07 61,36 Immeo GFR GmbH Germany FC 61,70 60,98 Immeo Lux Germany FC 61,82 61,10 Berolinum 1 Germany FC 61,82 61,10 Berolinum 2 Germany FC 61,82 61,10 Berolinum 3 Germany FC 61,82 61,10 FDR Remscheid Germany FC 61,82 61,10 Immeo Valore 4 Germany FC 61,82 61,11 Valore 6 Germany FC 61,82 61,11 Immeo SE&Co Residential KG Germany FC 61,70 60,98 Immeo Berlin 67 GmbH Germany FC 64,00 63,33 Immeo Berlin 78 GmbH Germany FC 64,00 63,33 Immeo Berlin 79 GmbH Germany FC 64,00 63,33 Immeo Dresden GmbH Germany FC 63,66 62,98 Immeo Berlin I SARL Germany FC 63,66 62,97 Immeo Berlin V SARL Germany FC 63,85 63,17 Immeo Berlin C GmbH Germany FC 63,66 62,97 Immeo Dansk Holding Aps Denmark FC 61,70 60,98 FC Immeo Dasnk L Aps Germany FC 63,66 62,97 Immeo Rew o Holding GmbH Germany FC 100,00 100,00 IW Verw altungs GmbH Germany Merger - 100,00 RRW Verw altungs GmbH Germany Merger - 100,00 Immeo Stadtw ohnung GmbH Germany Merger - 60,98 The registered office of the parent company Immeo SE is at Kleplerstrasse Essen. 27

28 20 companies in the France Residential segment Country Consolidation method in 2017 Percentage held in 2017 Percentage held in 2016 Foncière Développement Logements (Parent company) 100% controlled France FC 100,00 61,25 Iméfa 97 France FC 100,00 61,25 Bagatelle Courbevoie France FC 100,00 61,25 Iméfa 65 France FC 100,00 61,25 Iméfa 71 France FC 100,00 61,25 Iméfa 93 France FC 100,00 61,25 Iméfa 88 France FC 100,00 61,25 Iméfa 46 France FC 100,00 61,25 Iméfa 95 France FC 100,00 61,25 Suresnes 2 France FC 100,00 61,25 25 rue Abbé Carton France FC 100,00 61,25 40 rue Abbé Groult France FC 100,00 61, rue Duranton France FC 100,00 61,25 25 rue Gutenberg France FC 100,00 61,25 Montrouge 3 France FC 100,00 61,25 SCI Le Chesnay 1 France FC 100,00 61,25 Rueil 1 France FC 100,00 61,25 Saint Maurice 2 France FC 100,00 61,25 SCI Dulud France FC 100,00 61,25 Batisica Luxembourg FC 100,00 61,25 SCI Saint Jacques France Merger - 61,25 The registered office of the parent company Foncière Développement Logements and of all its fully consolidated French subsidiaries is located at 30 Avenue Kléber Paris. 10 other companies (Car Parks, Services) Country Consolidation method in 2017 Percentage held in 2017 Percentage held in Car Park companies: SAS Republique (Parent company) 100% controlled France FC 100,00 59,50 SNC Comédie France FC 100,00 59,54 SNC Gare France FC 50,80 30,23 Trinité France FC 100,00 59,50 SCI Esplanade Belvédère II France FC 100,00 100,00 SCI Gespar France FC 50,00 50,00 4 Services companies: FDM Gestion France FC 100,00 100,00 FDR Property SNC France FC 100,00 100,00 FDR Développement France FC 100,00 100,00 Foncière des Régions SGP France FC 100,00 100,00 FC: Full Consolidation. EM/EA: Equity Method Associates. EM-JV: Equity Method Joint Ventures. N.C. Not Consolidated. PC: Proportionate Consolidation. There are 361 companies in the Group, including 268 fully consolidated companies and 93 equity affiliates Evaluation of control SCI 11 place de l Europe (consolidated structured entity) As at 31 December 2017, SCI 11 place de l Europe was 50.1% held by Foncière des Régions and fully consolidated. The partnership with the Crédit Agricole Assurances group (49.9%) was established as of 18 December 2013 as part of the Campus Eiffage project. Considering the rules of governance conferring on Foncière des Régions powers that give it the ability to affect asset yields, the company is fully consolidated. SCIs of 9 and 15 rue des Cuirassiers (consolidated structured entities) At 31 December 2017 the SCIs 9 and 15 rue des Cuirassiers were 50.1% held by Foncière des Régions and fully consolidated. The partnership with Assurances du Crédit Mutuel (49.9%) was created in early December 2017 as part of the Silex 1 and Silex 2 office projects in Lyon, Part-Dieu. Considering the rules of governance conferring on Foncière des Régions powers that give it the ability to affect asset yields, the company is fully consolidated. 28

29 SCI Latécoère 2 (change from joint venture to consolidated structured entity) Latécoère 2 is 50.10% held by Foncière des Régions at 31 December 2017 and has been fully consolidated since 31 December 2017, whereas it was consolidated according to the equity method at 31 December The partnership with the Crédit Agricole Assurances group (49.90%) was established starting in June 2015 as part of the Extension Dassault project in Vélizy. The shareholder agreement was amended in December Considering the rules of governance that confer on Foncière des Régions powers that give it the ability to affect asset yields, the company is fully consolidated. SCI Lenovilla (joint venture) As at 31 December 2017, Lenovilla was 50.09% held by Foncière des Régions and is consolidated according to the equity method. The partnership with the Crédit Agricole Assurances Group (49.91%) was established in January 2013 as part of the New Vélizy (Campus Thalès) project. The shareholder agreement stipulates that decisions be made unanimously. The parties exercising joint control have rights to the net assets of the partnership arrangement. The partnership meets the criteria for joint ventures and is consolidated according to the equity method. SAS FDM Management (equity affiliate) FDM Management was 40.7% held by Foncière des Murs at 31 December 2017 and is consolidated according to the equity method. Strategic decisions are adopted by a two-thirds majority, and major decisions are made by a threequarters majority. SCI Porte Dorée (joint venture) SCI Porte Dorée was 50% held by Foncière des Murs at 31 December 2017 and is consolidated according to the equity method. The partnership with the Caisse des Dépôts et Consignations group (50%) was established starting in December 2015 as part of the Motel One hotel development project. The shareholder agreement stipulates that decisions be made unanimously. The parties exercising joint control have rights to the net assets of the partnership arrangement. The partnership meets the criteria for joint ventures and is consolidated according to the equity method. SAS Samoëns (consolidated structured entity) and Foncière Développement Tourisme SAS Samoëns was 25.10% held by Foncière des Murs at 31 December 2017 and is fully consolidated. The partnership with OPCI Lagune (49.9%) and Foncière Développement Tourisme (50.1%) was established as of October 2016 as part of the project to develop a Club Med holiday village in Samoëns. As manager of Samoëns, Foncière des Murs has the widest powers to act in the name and on behalf of the company in all circumstances, in keeping with its corporate purpose. Considering the rules of governance that confer on Foncière des Murs powers that give it the ability to affect asset yields, the company is fully consolidated. 29

30 3.2.4 SIGNIFICANT EVENTS OF THE PERIOD The significant events of the period are the acquisitions representing over 1.4 billion and the asset disposals of nearly 1.1 billion, excluding splitting Central SICAF (60 % Beni Stabili) which holds a portfolio of assets leased to Telecom Italia of about 1.5 billion. By segment, the significant events of the period were as follows France Offices segment Disposals ( 300 million - profit or loss on disposals: + 5 million) and assets under preliminary agreement ( 112 million) During the period, Foncière des Régions disposed of assets for a total sale price of 300 million, including 2 assets portfolios leased to Orange ( 77.7 million) and the Issy-les-Moulineaux-V. Hugo asset ( 38 million), 3 Logistics assets ( 33.5 million), the Chevilly asset ( 30.3 million) and Saint Germain en Laye Winchester asset ( 22.7 million). As at 31 December 2017, assets under preliminary agreement amounted to million Development portfolio The asset development programme is presented in Note saw the delivery of six projects in the pipeline representing 489 million: - in January 2017, Silex 1, a 10,586 m² building located in the heart of the Part-Dieu business district of Lyon, was delivered. This office building is spread over 9 levels and also boasts 615 m² of retail, 610 m² of green space and two landscaped patios of 100 m²; - the Thaïs office building of 5,468 m² in Levallois-Perret was delivered in April Ideally located and fully served by public transport, this building has large office floors offering maximum flexibility as well as many accessible gardens and terraces making a total of 1,200 m² of green space in the city centre; - in June 2017, the Nancy O rigin building of 6,331 m² was also delivered. With easy access to the Nancy TGV train station, this operation is truly a gateway to the future "Green Wharf" located in Nancy's Grand Cœur section; - in July 2017, the EDO building was also delivered. Located in the heart of the 3rd largest office centre in Paris Region, this office building of 10,760 m², enjoys all the advantages of an attractive and dynamic city such as Issy-les-Moulineaux. It boasts a garden, terraces and modular and creative spaces with a view of Paris; - in August 2017, the first phase of the New Saint Charles building of 10,282 m² in Reims was delivered. This asset is 100% leased to Enedis; - lastly, in November 2017, the Art&Co building (13,433 m²), located in front of the Gare de Lyon station in Paris, was delivered. Already fully pre-let, the building will constitute one of the first sites for the Group's new flexible office and co-working activity (5,210 m²). 30

31 During the 2017 financial year, occured saw the deliveries of the Hermione and Floréal office buildings as part of the completion of the Euromed Centre project in Marseille. These assets, held by equity affiliates, were sold at the beginning of October Refinancing and redemption On 2 January 2017, the balance of the 2011 ORNANE-type bonds was fully redeemed in the amount of 79.7 million (928,197 bonds). In June 2017, Foncière des Régions placed a 2027 bond issue of 500 million at 1.5% and at the same time repurchased and cancelled 55% ( million) of the 2021 bond at 1.75% Italy Offices segment Disposals ( 206 million) and assets under preliminary agreement ( 22 million) In 2017, 11 assets were sold for a total price of 206 million, including an asset located in Piazza San Nicolao, Milan for 114 million. As at 31 December 2017, assets under preliminary agreement amounted to 22.5 million Acquisitions ( 189 million) Assets located in Milan were acquired during the period for million. This involved 4 transactions: - a group of 18 properties for million; - an asset on Via Marostica for 24.7 million; - an asset to be redeveloped on Via Principe Amedeo for 41.9 million, before deducting a 5 million advance payment made in 2015; - additional space in the Symbiosis development project for 9.3 million Partnership Central Sicaf, Crédit Agricole Assurances and EDF Invest A partnership was signed between Beni Stabili, Crédit Agricole Assurances and EDF Invest to share a portfolio of 145 real estate assets in Italy and leased to Telecom Italia for a firm average residual maturity of 12.9 years as at 31 December The transfer of these assets and the associated debt was made in an unlisted regulated fund, Central SICAF, in which Crédit Agricole Assurances and EDF Invest each invested 20%. Beni Stabili retains 60% of the equity and continues to fully consolidate Central Sicaf Redemption of the 2019 ORNANE bond and refinancing Beni Stabili purchased the 2019 ORNANE-type bonds at the face value of 270 million for a total of million (costs and premiums included) at the same time as setting up a corporate financing of 250 million. This corporate borrowing was redeemed in full in October 2017 and refinanced by the subscription of two mortgage loans for 336 million with an average maturity of nine years. In October 2017, Beni Stabili placed an inaugural issue (rating BBB-) of 300 million at a fixed rate of 1.625% and maturing in

32 Hotels in Europe segment Disposals ( 138 million) and assets under preliminary agreement ( 207 million) During the 2017 financial year, Foncière des Murs sold 33 Quick properties for a total of million, four Accorhotels hotels for 16.5 million, a portion of the Sunparks Vielsalm cottages for 12.6 million, three Jardiland assets for 5.3 million and a Health asset at Colombes for 1.7 million. At 31 December 2017, preliminary sales agreements stood at million, including preliminary sales agreements on 48 Quick assets signed on 16 November for million, preliminary sales agreements on 5 Jardiland assets signed on 22 November for 22.5 million and preliminary sales agreement on one AccorHotel asset signed on 28 July for 18 million Acquisitions ( 673 million) During the period, Foncière des Murs exercised the call options on 5 four-star hotels leased to NH for 70.9 million (a 58.1 million down payment made in 2016). These assets are located in Stuttgart, Oberhausen, Frankfurt, Nuremberg and Düsseldorf. In Spain, 17 hotels were acquired early in the year for 578 million (after accounting for lease payments at 1 January 2017), including 2 share-deal assets for million. The transaction was made with a deferred payment, maturing in September 2018 and February 2019 and discounted to 54 million. In October Foncière des Murs acquired call options on the shares of two Dutch companies (owning two NH hotels) for 21.1 million and on an NH hotel in Berlin for 3.5 million. The transaction will unwind in financial years 2018 and Development portfolio 2017 saw the delivery of 3 developments: the Samoens Club Med and two B&B hotels in Nanterre and Lyon Berthelot Financing In March 2017, Foncière des Murs took mortgage financing of million for 8 years as part of the acquisition of 17 hotels in Spain. The B&B debt (OPCI B2HI) was refinanced in May for 290 million (7 years maturity) Germany Residential segment Asset disposals ( 251 million - profit or loss on disposals: + 30 million) million of disposals were made during At 31 December 2017, the amount of assets under agreement totalled million (net of costs). 32

33 Acquisitions (shares: 489 million/assets: 92 million) In 2017 Immeo SE acquired several companies holding assets located mostly in Berlin, Potsdam, Dresden and Leipzig ( 489 million). Other acquisitions included a directly held portfolio of assets in Berlin, Potsdam and Dusseldorf for 92.4 million, after deduction of the 9 million advance payment paid in Advance payments were made of 124 million for the acquisition of shares, a transaction that will unwind in France Residential segment Asset disposals In France, Foncière Développement Logements continued its sales plan and made disposals for a sale price of million (net of costs). At 31 December 2017, the amount of assets under agreement totalled 39.5 million (net of costs) NOTES TO THE STATEMENT OF FINANCIAL POSITION Portfolio Accounting principles applicable to tangible and intangible fixed assets Intangible fixed assets Identifiable intangible fixed assets are amortised on a straight line basis over their expected useful lives. Intangible fixed assets acquired are recorded on the balance sheet at acquisition cost. They primarily include entry fees (long-term leases conferring ad rem rights and occupancy rights for car parks) and computer software. Intangible fixed assets are amortised on a straight-line basis, as follows: Software: over a period of one to three years; Occupancy rights: 30 years. Fixed assets in the concession segment - Concession activity The Foncière des Régions group has applied IFRIC 12 to the consolidated financial statements since 1 January An analysis of the Group s concession agreements results in classifying agreements as intangible assets as the Group is paid directly by users for all car parks operated without a subsidy from public authorities. These concession assets are assessed at historical cost less accumulated depreciation and any impairment. Note that the Group no longer has wholly owned car parks; accordingly it no longer has Car Parks tangible assets. 33

34 Business combinations (IFRS 3) An entity must determine whether a transaction or event constitutes a business combination within the meaning of the definition of IFRS 3, which stipulates that a business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors in the form of dividends, lower costs or other economic advantages. In this case, the acquisition cost is set at the fair value on the date of the exchange of the assets and liabilities and equity instruments issued for the purpose of acquiring the entity. Goodwill is recognised as an asset for the surplus of the acquisition cost on the portion of the buyer s interest in the fair value of the assets and liabilities acquired, net of any deferred taxes. Negative goodwill is recorded in the income statement. To determine whether a transaction constitutes a business combination, the Group considers whether an integrated set of businesses is acquired in addition to real estate. The criteria the Group uses may be the number of assets and the existence of a process such as asset management or sales and marketing units. Related acquisition costs are recognised in expense in accordance with IFRS 3 under Income from changes in consolidation scope in the income statement. If the Group concludes that the transaction is not a business combination, then it recognises the transaction as an acquisition of assets and applies the standards appropriate to acquired assets. Investment properties (IAS 40) Investment properties are real estate properties held for purposes of leasing within the context of operating leases or long-term capital appreciation (or both). Investment properties represent the majority of the Group s portfolio. The buildings occupied by the Foncière des Régions group are recognised as operating properties (corporate headquarters, office buildings occupied by employees and spaces operated for its own account as co-working spaces.) Under the option offered by IAS 40, investment properties are assessed at their fair value. Changes in fair value are recorded in the income statement. Investment properties are not depreciated. Valuations are carried out in accordance with the Code of Conduct applicable to SIICs and the Charter of Property Valuation Expertise, the recommendations of the COB/CNCC working group chaired by Mr Barthès de Ruyter and the International Plan in accordance with European TEGoVA standards and those of the Red Book of the Royal Institution of Chartered Surveyors (RICS). The real estate portfolio directly held by the Group was appraised in full on 31 December 2017 by independent real estate experts including BNP Real Estate, JLL, DTZ, CBRE, Cushman, Yard Valltech, CFE, MKG, VIF, REAG and Christie & Co. The assets were estimated at values excluding and/or including duties, and rents at market value. Estimates were made using the comparative method, the rent capitalisation method and the discounted future cash flows method. The assets are recognised at their net market value. 34

35 For France Offices and Italy Offices, the valuations are primarily performed according to two methods: o the yield (or income capitalisation) method: This approach consists of capitalising an annual income, which, in general, is rental income from occupied assets, with the possible impact of a reversion potential, and market rent for vacant assets, taking into account the time needed to find new tenants, any renovation work and other costs; o the discounted cash flow (DCF) method: This method consists of determining the useful value of an asset by discounting the forecast cash flows that it is likely to generate over a given time frame. The discount rate is determined on the basis of the risk-free rate plus a risk premium associated with the asset and defined by comparison with the discount rates applied to cash flows generated by similar assets. For Hotels in Europe, the methodology changes according to the type of assets: o the rent capitalisation method is used for restaurants, garden centres and Club Med holiday villages; o the DCF method is used for hotels (including the revenue forecasts determined by the appraiser) and Sunparks holiday villages. For the Residential segment, the methodology changes according to the type of asset: The assets are recognised at their net fair value. The fair value is determined based on: o a block value for assets for which no sales strategy has been developed or which have not been marketed; o an occupied retail value for assets on which at least one offer has been made before the reporting date. The following valuation methods were used: o for assets located in France: the leasing revenue discount method and the comparison method; o for assets located in Germany: the Discounted Cash Flow method. The resulting values are also compared with the initial rate of return and the monetary values per square metre of comparable transactions and transactions carried out by the Group. IFRS 13 Fair Value Measurement establishes a fair value hierarchy that categorises the inputs used in valuation techniques into three levels: level 1: the valuation refers to quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; level 2: the valuation refers to valuation methods using inputs that are observable for the asset or liability, either directly or indirectly, in an active market; level 3: the valuation refers to valuation methods using inputs that are unobservable in an active market. The fair value measurement of investment properties requires the use of different valuation methods using unobservable or observable inputs to which some adjustments have been applied. Accordingly, the Group s portfolio is mainly categorised as level 3 according to the IFRS 13 fair value hierarchy. 35

36 Assets under development (revised IAS 40) Since 1 January 2009, in accordance with amended IAS 40, assets under construction are recognised according to the general fair-value principle, except where it is not possible to determine this fair value on a reliable and ongoing basis. In such cases, the asset is carried at cost. As a result, development programmes and extensions or remodelling of existing assets that are not yet commissioned are recognised at their fair value, and are treated as investment properties whenever the administrative and technical fair-value reliability criteria i.e. administrative, technical and commercial criteria are met. In accordance with revised IAS 23, the borrowing cost during a period of construction and renovation is included in the cost of the assets. The capitalised amount is determined on the basis of fees paid for specific borrowings and, where applicable, for financing from general borrowings based on the weighted average rate of the particular debt. Tangible fixed assets (IAS 16) Pursuant to the preferred method proposed by IAS 16, operating assets (occupied or operated by Group employees) and wholly-owned car parks are carried at historical cost less accumulated depreciation and any potential impairment. Non-current assets held for sale (IFRS 5) In accordance with IFRS 5, when Foncière des Régions decides to dispose of an asset or group of assets, it classifies it or them as an asset or assets held for sale if: the asset or group of assets is available for immediate sale in its current condition, subject only to normal and customary conditions for the sale of such assets; its or their sale is likely within one year and marketing for the property has been initiated. For the Foncière des Régions group, only assets corresponding to the above criteria and included in a planned sales programme drawn up by the Board of Directors are classified as assets held for sale. The conditions for valuing these assets are identical to those expressed above for investment properties if no sale commitment has been signed. If a sale commitment exists on the account closing date, the price of the commitment net of expenses constitutes the fair value of the asset held for sale. 36

37 Table of changes in fixed assets thousand 31-Dec-16 Change in scope and interest rates Increase/ Allocation Disposal/ Recovery Change in fair value Transfers 31-Dec-17 Goodw ill Intangible fixed assets (1) Gross amounts Depreciation Tangible fixed assets Operating properties (2) Gross amounts Depreciation Other tangible fixed assets Gross amounts Depreciation (4) Fixed assets in progress Gross amounts (3) Depreciation Investment properties Operating properties (5) (6) Properties under development Assets held for sale Assets held for sale (7) Total (*) (*) Including Re-consolidation ( 60.7 million) of the residual logistics segment at 1 January 2017 not material at the Group level. (1) The intangible fixed assets line includes 22.1 million in Car Park assets held under concession. (2) Including 111 million of investment property transferred into operating property following the decision to operate as own spaces for co-working (The Line and Art&Co) (3) Including works done on the co-working asset The Line ( 5.1 million) and on an operating property ( 4.7 million) Instalments on a call option to purchase a hotel in Berlin ( 3.5 million) and on asset acquisitions in Germany ( 3.6 million) (4) Use of a 58.1 million advance payment following the exercise of purchase options on 5 NH hotels, 9.0 million following the acquisition of buildings in Germany and 5 million following the acquisition of the asset located in Milan on Via Principe Amedeo. (5) Corresponds to Share deals transactions, including: - the acquisition of companies that own assets located in Berlin, Potsdam and Leipzig for million; - the acquisition of companies (Trade Centre Hotel and Bardiomar) owning 2 hotels in Spain for million (Gran Marina and AC Forum); - the full consolidation of the Dassault Systèmes extension for 86.4 million. (6) The acquisitions in asset deals are detailed in Investment properties. (7) The decreases are detailed in Investment properties The Disbursements related to the acquisition of tangible and intangible fixed assets line item on the statement of cash flows ( 1,114.3 million) refers to increases in the table of changes in the portfolio excluding the effect of depreciation ( 1,178.6 million), to changes in inventories of the property dealer ( 7.1 million) and adjusted for change in trade payables for fixed assets ( million). 37

38 The Proceeds relating to the disposal of tangible and intangible fixed assets line item in the statement of cash flows ( 1,066.7 million) primarily corresponds to income from disposals as presented in the net income statement ( 1,055.6 million), proceeds from the disposal of assets in inventory ( 6.1 million), less asset disposal costs ( million), and restated for the reduction from receivables from asset disposals ( 24.7 million) Investment properties thousand 31-déc.-16 Change in scope and interest rates Increase Disposal Change in fair value Transfers 31-Dec-17 Investment properties Operating properties France Offices (1) Italy Offices (2) Hotels in Europe (3) Germany Residential (4) France Residential Properties under development France Offices Italy Offices Hotels in Europe Assets held for sale Assets held for sale France Offices (5) Italy Offices (6) Hotels in Europe (7) Germany Residential France Residential Total (1) Refers to the acquisition of an office asset located in Paris (VTA Orange) for 3.0 million and to works done in the amount of 35.4 million. (2) Acquisition of a group of 18 assets for million and of the asset Via Marostica for 24.7 million, both in Milan, and works done for 17.2 million. (3) Acquisition of 15 hotels in Spain for million, exercise of five options on NH hotels in Germany for 70.9 million and works done during the period of 41.5 million. (4) Acquisition of assets located in Berlin, Potsdam and Düsseldorf for 92.4 million and capex done during the period totalling 69.6 million. (5) Including assets disposal of Issy-Les-Moulineaux/Victor Hugo ( 32.5 million), Chevilly ( 30 million), Saint Germain en Laye Winchester ( 21.9 million) and 3 logistics assets ( 35.9 million). (6) Including the disposal of three assets located in Milan: Piazza San Nicolao ( million), Via Verri 4 ( 34 million) and Via Durini ( 27 million), (7) Including the disposal of 33 Quick assets ( 98 million) The amounts in the Disposals column correspond to the appraisal figures published on 31 December

39 Consolidated portfolio of assets at 31 December 2017 by business segment (in m): Others 279 Germany Residential France Offices ,938 Hotels in Europe Italy Offices The Group has not identified the best use of an asset as being different from its current use. Consequently, the application of IFRS 13 did not lead to a modification of the assumptions used for the valuation of the portfolio. In accordance with IFRS 13, the tables below provide details of the ranges of unobservable inputs by business segment (level 3) used by the real estate appraisers: France Offices, Italy Offices and Hotels In Europe Grouping of similar assets Level Portfolio in M Yield rate (excluding duties) Yield rate (excluding duties, w eighted average) Discounted cash flow rate Discounted cash flow rate (w eighted average) Paris Centre West Level % - 7.8% 4,2% 4.0% - 7.0% 4,9% Paris North East Level % - 8.3% 5,3% 4.5% - 6.8% 5,7% Paris South Level % - 5.7% 3,9% 4.5% - 6.5% 4,6% Western Crescent Level % - 7.5% 5,3% 4.5% - 7.3% 5,0% Inner suburbs Level % - 6.9% 5,2% 4.5% - 8.0% 5,3% Outer suburbs Level % % 8,4% 4.5% % 6,2% Total Paris region % % 4.0% % Major Regional Cities Level % - 8.4% 5,4% 4.5% % 5,8% Other French regions Level % % 8,9% 4.5% % 6,7% Total Regions % % 4.5% % Total Logistics assets 23 Total France Offices % % 4.0% % Milan Level % % 4,5% 4.5% - 7.0% 5,3% Rome Level % % 5,3% 4.5% % 6,3% Other Level % % 6,8% 5.0% - 9.0% 6,9% Total in operation % % 4.5% % Development portfolio Level % % Total Italy Offices % % 4.5% % Hotels Level % - 6.4% 5,4% 4.0% - 7.9% 6,0% Retail Level % - 6.8% 6,9% 6.2% - 8.3% 7,0% Total in operation % - 6.8% 4.0% - 8.3% Development portfolio Level % - 7.0% Total Hotels in Europe % - 6.8% 4.0% - 8.3% 39

40 Germany Residential and France Residential: Grouping of similar assets Level Portfolio in M Yield rate (*) Yield rate (*) Total portfolio Block valued properties Discounted cash flow rate Average value (in /m²) Great East Level % - 6.5% n.a. n.a Provence-Alpes-Côte d Azur region Level % - 6.5% 3.5% - 6.0% n.a Paris-Neuilly Level % - 4.0% 5,0% n.a Rest of Paris region Level % - 5.5% n.a. n.a Rhône-Alpes region Level % - 6.0% n.a. n.a South West-Great West Level % - 7.0% n.a. n.a Total France Residential % - 7.0% 3.5% - 6.0% n.a Duisburg Level % - 5.8% 4.3% - 5.8% 4.8% % Essen Level % - 6.8% 4.0% - 6.8% 4.0% - 7.6% Mülheim Level % - 6.3% 4.0% - 6.3% 4.4% - 8.6% Oberhausen Level % - 8.0% 4.5% - 8.0% 5.2% - 8.1% 991 Datteln Level % - 5.8% 3.5% - 5.8% 4.4% - 7.8% 921 Berlin Level % - 5.8% 3.0% - 5.8% 1.5% - 7.7% Düsseldorf Level % - 4.5% 3.5% - 4.5% 3.6% - 5.2% Dresden Level % - 5.3% 3.8% - 5.3% 4.4% - 6.4% Leipzig Level % - 6.0% 3.5% - 6.0% 4.2% - 6.9% Hamburg Level % - 5.0% 3.8% - 5.0% 4.0% - 7.2% Other Level % - 5.8% 4.3% - 5.8% 4.8% - 9.3% Total Germany Residential % - 8.0% 3.0% - 8.0% 1.5% % (*) Yield rate: France Residential: Potential yield rate excluding taxes (potential rents calculated by the appraiser/appraisal values excluding taxes determined by the appraiser) Germany Residential: Potential yield rate assumed excluding taxes (actual rents/appraisal values excluding taxes) Impact of changes in the yield rate on changes in the fair value of real estate assets, by operating segment million Yield** Yield rate -50 bps Yield rate +50 bps France Offices* 5,2% 583,6-480,4 Italy Offices 5,5% 375,2-312,8 Hotels in Europe* 5,5% 387,1-321,9 Germany Residential 4,7% 588,2-475,1 France Residential 3,9% 40,7-31,5 Total* 5,1% 1 974, ,7 *including assets held by equity affiliates (excluding FDM Management). **Return on operating portfolio excluding duties. If the yield rate excluding taxes drops 50 bps (-0.5 point), the market value excluding taxes of the real estate assets will increase by 1,974.9 million. If the yield rate excluding taxes increases 50 bps (+0.5 point), the market value excluding taxes of the real estate assets will decrease by 1,621.7 million Properties under development Properties under development relate to building or redevelopment programmes that fall within the application of IAS 40 (revised). thousand 31-déc.-16 Acquisitions and works Capitalised interest Change in fair value Transfers and disposals 31-Dec-17 France Offices (1) Italy Offices (3) (2) Hotels in Europe (4) (5) Total (1) Assets Thaïs (Levallois-Perret), Art&Co (Paris), New Saint Charles (Reims), Edo (Issy-Les- Moulineaux), Silex 1 (Lyon) and O Rigin (Nancy) were delivered (reclassification as investment properties in the amount of million and as operating properties in the amount of million) 40

41 (2) Delivery of the Via Cernaia asset in Milan ( million) and transfer of the deposit of 5 million paid upon acquisition of Principe Amedeo in Milan. (3) Including one new project in development (Principe Amedeo) located in Milan, acquired for 41.9 million before deduction of the deposit paid in 2016 (- 5 million), an additional parcel of land in Milan on the Symbiosis project ( 9.3 million) and works for 55.9 million (4) Corresponds to the following disbursements: million for the construction of a Club Med in Samoëns; - works on four B&B hotels in France ( 15.1 million); - works on 2 Meininger hotels, one in Paris ( 4.3 million) and the other in Lyon ( 5.7 million); - works on the two development projects in Germany ( 15.1 million). (5) Including delivery of the Club Med Samoens asset ( million) and two B&B assets in France ( million) The list of projects in development is presented in Part 1 of this Reference Document (cf 1.2) Financial assets Accounting principles Other financial assets Other financial assets consist of investment-fund holdings, which cannot be classified as cash or cash equivalents. These securities are recognised upon acquisition at cost plus transaction costs. They are then recognised at fair value in the income statement on the reporting date. The fair value is arrived at on the basis of recognised valuation techniques (reference to recent transactions, Discounted Cash Flows, etc.). Some securities that cannot be reliably measured at fair value are recognised at acquisition cost. Securities available for sale of listed and not consolidated companies are recorded at their stock-market price with an offsetting entry in share-holders equity in accordance with IAS 39. Dividends received are recognised when they have been approved by vote. Loans At each reporting date, loans are recorded at their amortised cost. Moreover, impairment is recognised and recorded on the income statement when there is an objective indication of impairment as a result of an event occurring after the initial recognition of the asset. 41

42 Table of financial assets 31-Dec-16 thousand Increase Decrease Change in fair value Change in scope Transfers 31-Dec-17 Ordinary loans(1) Total loans and current accounts Advances and pre-payments on acquisition of shares Securities at historic cost Subscribed capital not paid up Total other financial assets(2) Finance-lease receivables Total finance-lease receivables Receivables on financial assets Total receivables on financial assets Total Depreciation and amortisation(3) NET TOTAL (1) Ordinary loans include receivables from equity investments held in equity affiliates. (2) Total other financial assets are broken down as follows: - Advances and deposits made to acquire shares of companies: In Germany, an advance payment of million made to acquire shares of companies that will be consolidated and 13.4 million of used to acquire the shares of companies. A deposit of 21 million was paid for the acquisition of shares in 2 companies that own NH hotels in the Netherlands; - Securities at historic cost: The investments held by Beni Stabili in property funds ( 30.5 million) are valued at their historical cost. Potential impairments are recorded in the income statement. - Share capital of Foncière Développement Tourisme subscribed by the Caisse des Dépôts et Consignations and not paid-up ( 20 million). (3) Includes impairment losses on securities at historical cost held by Beni Stabili ( 25.1 million) and impairment losses on receivables for disposals of more than one year ( 3.3 million) and for receivables related to financial assets ( 2.3 million) Investments in equity affiliates and joint ventures Accounting principles Investments in equity affiliates and joint ventures are recognised by the equity method. According to this method, the Group s investment in the equity affiliate or the joint venture is initially recognised at cost, increased or reduced by the changes, subsequent to the acquisition, in the share of the net assets of the affiliate. The goodwill related to an equity affiliate or joint venture is included in the book value of the investment, if it is not impaired. The share in the earnings for the period is shown in the line item Share in income of equity affiliates. The financial statements of associates and joint ventures are prepared for the same accounting period as for the parent company, and adjustments are made, where relevant, to adapt the accounting methods to those of the Foncière des Régions group. 42

43 Table of investments in equity affiliates and joint ventures thousand % held Operating segment Country 31-Dec Dec-17 Change Of w hich share of net income Of w hich distribution and change in scope Latécoère 2 (DS Campus extension) * 50,10% France Offices France SCI Factor E and SCI Orianz 34,69% France Offices (Properties under development) France Lenovilla (New Vélizy) 50,10% France Offices France Euromarseille (Euromed) 50,00% France Offices France Cœur d Orly (Askia) 25,00% France Offices France Investire Immobiliare and others Italy Offices Italy Iris Holding France 19,90% Hotels in Europe Belgium, Germany OPCI IRIS Invest ,90% Hotels in Europe France OPCI Camp Invest 19,90% Hotels in Europe France Dahlia 20,00% Hotels in Europe France SCI Porte Dorée 50,00% Hotels in Europe (Assets under development) France FDM Management 40,70% Hotels in Europe France and Germany Total *Fully consolidated at 31 December 2017 follow ing amendment of the shareholders agreement The investments in equity affiliates as at 31 December 2017 amounted to million, compared with million as at 31 December The change over the period ( million) was the result of the net income of the period ( million), the allocation of Cœur d Orly losses to the partners (+ 5.2 million) and dividend distributions ( million) Breakdown of shareholdings in the main equity affiliates and joint ventures Ow nership Cœur d Orly Euromed Group SCI Lenovilla (New Vélizy) SCI Factor E / SCI Orianz (Bordeaux Armagnac) Foncière des Régions 25% 50% 50,09% 34,69% Non-group third parties 75% 50% 49,91% 65,31% Altaréa 25% Crédit Agricole Assurances 50% 49,91% Aéroport de Paris 50% ANF Immobilier 65,31% Total 100% 100% 100% 100% Indirect ow nership Iris Holding France OPCI Iris Invest 2010 OPCI Campinvest SCI Dahlia FDM Management SCI Porte Dorée Foncière des Murs 19,9% 19,9% 19,9% 20,0% 40,70% 50,00% Non-group third parties 80,1% 80,1% 80,1% 80,0% 59,30% 50,00% Crédit Agricole Assurances 80,1% 80,1% 68,8% 80,0% 11,63% Pacifica 11,3% Cardif Assurance Vie 11,63% Assurances du Crédit Mutuel Vie 11,63% SOGECAP 11,63% Caisse des Dépôts et Consignations 11,63% 50,00% Maro Lux 1,15% Total 100% 100% 100% 100% 100% 100% 43

44 Key financial information on equity affiliates and joint ventures thousand Asset name Total balance sheet Total noncurrent assets Cash Total noncurrent liabilities excluding financial debt Total current liabilities excluding financial debt Financial debt Rental income Cost of net financial debt Consolidated net income Cœur d Orly (Askia) Cœur d Orly Lenovilla (New Vélizy) New Vélizy and extension Euromarseille (Euromed) Euromed Center SCI Factor E and SCI Orianz Iris Holding France OPCI IRIS Invest 2010 Bordeaux Armagnac AccorHotels Hotels AccorHotels Hotels OPCI Camp Invest Campanile Hotels Dahlia FDM Management SCI Porte Dorée AccorHotels Hotels Hotels and Services Motel One Porte Dorée hotel Deferred tax liabilities on the reporting date thousand DTA Balance sheet at 31-Dec-16 Increases First time By net income consolidations for the year Shareholder s equity Other changes and transfers By net income for the year Decreases Effect of foreign tax rates Shareholder s equity Balance sheet at 31 Dec-17 Losses carried forward Fair value of properties Derivatives Temporary differences DTA/DTL offset TOTAL DTA thousand DTL Balance sheet at 31-Dec-16 Increases First time By net income consolidations for the year Shareholder s equity Other changes and transfers By net income for the year Decreases Effect of foreign tax rates Shareholder s equity Balance sheet at 31-Dec-17 Fair value of properties Derivatives Temporary differences DTA/DTL offset TOTAL DTL NET TOTAL Total impact on the income statement: At 31 December 2017, the consolidated deferred tax position showed a deferred tax asset of 6 million (versus 11 million as at 31 December 2016) and a deferred tax liability of 551 million (versus 410 million as at 31 December 2016). The primary contributors to the net balance of deferred taxes are: Germany Residential: million Hotels in Europe: million Italy Offices: 2.7 million The impact on net income is detailed in paragraph

45 In accordance with IAS 12, deferred tax assets and liabilities are offset for each tax entity when they involve taxes paid to the same tax authority. The non-recognised tax loss carryforwards, calculated at the standard rate, amounted to 884 million, as detailed below: thousand Nonrecognised DTA Nonrecognised tax loss carryforw ards France offices Italy offices Hotels in Europe Germany Residential France Residential Car Parks Total for continuing operations Short-term loans and finance lease receivables current portion thousand 31-Dec-16 Change in Increase Decrease Transfers 31-Dec-17 scope Short-term loans Finance-lease receivables Total Amortisations and provisions NET TOTAL Inventories and work-in-progress Accounting principles applicable to inventories The inventories held by the Foncière des Régions group relate mainly to Beni Stabili s Trading portfolio and the Germany Residential segment. They are intended to be sold during the normal course of business. They are recorded at acquisition price and, as applicable, are depreciated in relation to the sale value (independent appraisal value) Inventories and work-in-progress at 31 December 2017 The Inventories and work-in-progress line item on the balance sheet primarily consists of trading inventories in Italy Offices ( 22.6 million), Germany Residential ( 6.6 million) and France Residential ( 1.7 million). In addition, this item includes assets intended for future real estate developments in the France Offices segment ( 12.3 million) Trade receivables Accounting principles applicable to trade receivables Trade receivables consist mainly of operating and finance lease receivables. These items are measured at amortised cost. In the event that the recoverable value is lower than the net book value, the Group may be required to account for an impairment charge through profit or loss. 45

46 Receivables from operating lease transactions For operating-lease receivables, a provision is made at the first non-payment. The impairment rates applied by Foncière des Régions are as follows: no provision is recorded for existing or vacated tenants whose receivables are less than three months overdue; 50% of the total amount of receivables for existing tenants whose receivables are between three and six months overdue; 100% of the total amount of receivables for existing tenants whose receivables are more than six months overdue; 100% of the total amount of receivables for vacated tenants whose receivables are more than three months overdue. The receivables and theoretical provisions arising from the rules above are reviewed on a caseby-case basis in order to factor in any specific situations. Finance lease receivables The receivables are recognised at their amortised value. When the financial position of the debtor gives grounds for the likelihood of non-recovery, a provision is made. Provisions for doubtful unpaid receivables in relation to financial contracts are made for at least the interest billed according to the terms of the contract. Termination fees are recognised when invoiced. Given the significant possibility of non-recovery, these revenues are generally depreciated by an identical amount. Moreover, finance-lease assets related to doubtful contracts manifesting termination risks that are considered significant are independently appraised at market value. When these valuations, net of transfer taxes, and line-by-line, are lower than the net financial value, an impairment provision equal to the difference is recognised Trade receivables thousand 31-Dec Dec-16 Change Expenses to be reinvoiced to tenants Rent-free periods Trade receivables Total trade receivables Impairment of receivables Net total trade receivables The balance of net trade receivables includes mainly expenses to be invoiced to tenants for 141 million, net trade receivables for 27.6 million and receivables related to the linearisation of relief granted on rent for million. The line item Expenses to be re-invoiced to tenants is best understood in connection with the liability item Advances and deposits received ( 166 million), referring to claims for projected expenses incurred with tenants. 46

47 The line Change in working capital requirements on continuing operations on the cash flow statement consists of: thousand 31-Dec-17 Impact of changes in inventories and work in progress -8 Impact of changes in trade & other receivables Impact of changes in trade & other payables Change in w orking capital requirements on continuing operations (including employee benefits liabilities) Other receivables thousand 31-Dec Dec-16 Change Government receivables Other receivables Security deposits received Current accounts Total million in government receivables comprise 35.6 million for France Offices, 18.9 million for Italy Offices, 15.1 million for Hotels in Europe and 1.6 million for Corporate. The receivables are mainly VAT and government receivables following the payment of tax adjustments recognised and for which no provision is recorded, amounting to 34.7 million (cf ). Note that in 2017 we recognised the reclassification of receivables from the State related to tax audits of our Logistics division, presented in Discontinued operations as at 31 December 2016" (+ 5.7 million). The change in receivables from disposals comes from France Residential ( million), Germany Residential (- 2 million), France Offices (- 2 million) and Car Parks (- 0.8 million) Cash and cash equivalents Accounting principles applicable to cash and cash equivalents Cash and cash equivalents include cash, short-term deposits, and money-market funds. These are short-term, highly liquid assets that are easily convertible into a known cash amount, and for which the risk of a change in value is negligible Table of cash and cash equivalents thousand 31-Dec Dec-16 Money-market securities available for sale Cash at bank Total At 31 December 2017, the portfolio of money market securities available for sale consisted mainly of traditional money market funds (Level 2). Level 1 of the portfolio corresponds to instruments whose price is listed on an active market for an identical instrument. 47

48 Level 2 corresponds to instruments whose fair value is determined using data other than the prices mentioned for level 1 and observable directly or indirectly (i.e. price-related data). Foncière des Régions holds no investments subject to capital risk Total shareholders equity Accounting principles applicable to equity Own shares If the Group buys back its own equity instruments (treasury shares), these are deducted from shareholders equity. No profit or loss is recognised in the income statement when Group equity capital instruments are purchased, sold, issued or cancelled Statement of changes in shareholders equity The capital of Foncière des Régions totaled million as at 31 December In 2017 Foncière des Régions undertook capital increases of million ( million net of costs) with the issue of 6,072,112 new shares including 5,076,786 shares as part of the addition to equity, the contribution of Foncière Développement Logements shares (916,951 Foncière des Régions shares) and the allocation of 78,375 vested free shares. Reserves correspond to parent company retained earnings and reserves, together with reserves from consolidation. As at 31 December 2017, the share capital broke down as follows: Number of authorised shares: 74,829,964 Number of shares issued and fully paid-up: 74,829,964 Number of shares issued and not fully paid-up: 0 Par value of shares: 3.00 Share classes: none Restriction on payment of dividends: none Shares held by the Company or its subsidiaries: 56,006 Changes in the number of shares during the period Date Transaction Shares issued Own shares Shares outstanding 31-Dec Capital increase delivery of bonus share plan Capital increase - cash issue Increase in capital - contribution of FDL shares Ow n shares liquidity agreement Ow n shares employee aw ard Dec The statement of changes in shareholders equity is presented in Note

49 Statement of liabilities Accounting principles applicable to debt Financial liabilities include borrowings and other interest-bearing debt. At initial recognition, financial liabilities are measured at fair value, minus the transaction costs directly attributable to the issue of the liability. They are then recognised at amortised cost based on the effective interest rate. The effective rate includes the nominal rate and actuarial amortisation of issue expenses and issue and redemption premiums. Financial liabilities of less than one year are posted under Current financial liabilities. Convertible bonds (ORNANE-type) issued by the Foncière des Régions group are either (i) recognised at fair value in the income statement or (ii) recognised separately as a financial liability at amortised cost and an embedded derivative measured at fair value in the income statement. For Foncière des Régions, the fair value is determined according to the closing bond price. In the case of financial liabilities resulting from the recognition of finance lease agreements, the financial liability recognised against the tangible fixed asset is initially recognised at the leased asset s fair value, or if lower, at the discounted value of the minimum lease payments. Tenants security deposits The Foncière des Régions group discounts security deposits at the average financing rate of the structure and over the average remaining term of the leases determined for each type of asset. Derivatives and hedging instruments The Foncière des Régions group uses derivatives to hedge its floating rate debt against interest rate risk (hedging of future cash flows). Derivative financial instruments are recorded on the balance sheet at fair value. The fair value is calculated using valuation techniques that use mathematical calculations based on recognised financial theories and parameters that incorporate the prices of market-traded instruments. This valuation is carried out by an external service provider. The Group has been applying IFRS 13 since 1 January This standard requires accounting for counterparty risk (i.e. the risk of a counterparty defaulting on its commitments) in the assessment of the fair value of financial assets and liabilities. The majority of the financial instruments in the Italy Offices segment qualify for hedge accounting as defined by IAS 39. In this case, changes in the fair value of the effective portion of the hedge are recognised net of tax in shareholders equity until the hedged transaction occurs. The ineffective portion is recorded in the income statement. Only Beni Stabili used hedge accounting as at 31 December In other cases, given the characteristics of its debt, as of 1 January 2007 the Foncière des Régions group no longer qualifies for hedge accounting under IAS 39. All derivative instruments are therefore recognised at their fair value, and changes are reflected in the income statement. 49

50 Table of debt thousand 31-Dec-16 Increase Decrease Change in scope Other changes 31-Dec-17 Bank borrow ings Other borrow ings Treasury bills Securitised loans Non-convertible bonds Convertible bonds (1) Subtotal interest-bearing loans Accrued interest Deferral of loan expenses Creditor banks Total borrow ings (LT/ST) excl. FV of ORNANE-type bonds of w hich Long-term of w hich Short-term Valuation of financial instruments Convertible bond derivatives Total derivatives of w hich Assets of w hich Liabilities Total bank debt (1) Convertible bond movements are presented in Convertible bonds The new financing taken out during the year is presented in Liquidity risk and in Bank borrowings. Debt by type as at 31 December 2017 (in M) Convertible bonds 545 Non-convertible bonds ,106 Bank borrowings Treasury bills 777 Other 122 The Proceeds relating to new borrowings line item of the statement of cash flows (+ 2,432.6 million) refers to: increases in interest-bearing borrowings (+ 2,461.8 million); less new debt issuance costs ( million). The Repayments of borrowings line item of the statement of cash flows (- 2,226.8 million) corresponds to decreases in interest-bearing borrowings. 50

51 Bank borrowings The table below outlines the characteristics of the borrowings taken out by Foncière des Régions and the amount of the associated guarantees (principal amount over 100 million): In thousand France Offices Debt Appraisal values at 31-December (1) Outstanding debt 31-December Date of signature Initial amount of debt Maturity 29/07/ /07/ M (2015) and 145 M (2015) Tour CB21 and Carré and > 100 M #REF! and and Suffren /12/ /11/2023 > 100 M M (2015) DS Campus #REF! /03/ /04/ M (2016) Orange #REF! /02/ /02/26 > 100 M < 100 M Total France Offices Italy Offices > 100 M 252 M (2015) Europe /06/ /06/25 Hotels in Europe 760 M (2016) Central /09/ /09/24 > 100 M < 100 M Total Italy Offices > 100 M 447 M (2013) /10/ /01/23 > 100 M 255 million (2012) Covered bonds /11/ /11/21 > 100 M 350 M (2013) /07/ /07/ M (2017) Rocca /03/ /03/25 > 100 M 290 M (2017) OPCI B2 HI (B&B) /05/ /05/24 > 100 M < 100 M Total Hotels in Europe Germany Residential > 100 M Lyndon Immeo /12/ /12/21 TOTAL COLLATERISED > 100 M Refinancing of Indigo, Eagle, Faust, Berlinum /03/ /03/22 > 100 M Cornerstone /10/ /09/24 > 100 M Refinancing Wohnbau/Dümpten/ Aurélia/Duomo /01/ /01/25 > 100 M Refinancing Amadeus/Herbstlaub/Valore/Valartis/Sunflow er /10/ /04/26 > 100 M Quadriga /06/ /06/25 > 100 M Golddust /03/ /01/24 > 100 M Lego /06/ /03/24 > 100 M Lyndon Immeo /01/ /01/27 > 100 M < 100 M Total Germany Residential France Offices 345 M (2013) ORNANE /11/ /04/ M (2012) Bonds /10/ /01/18 Treasury bills BT/BMTN M (2013) Private placement /03/ /04/ M (2014) Bonds /09/ /09/ M (2016) Green bond /05/ /05/ M (2017) Bonds /06/ /06/27 > 100 M < 100 M 0 Total France Offices Italy Offices 350 M (2014) Bonds /01/ /01/18 Hotels in Europe Outstanding debt (> or < 100 M) 250 M (2014) Bonds /03/ /04/ M (2015) Bonds /03/ /03/ M (2015) Convertible bonds /08/ /01/ M (2017) Bonds /10/ /10/24 > 100 M < 100 M Total Italy Offices M (2015) Private placement /05/ /05/23 > 100 M < 100 M Total Hotels in Europe France Residential < 100 M Total France Residential Germany Residential < 100 M Total Germany Residential Car Parks Total Corporate Total unencumbered Other debt GRAND TOTAL (1) The portfolio includes the fair value of occupied assets and real estate inventories (trading, development) 51

52 The borrowings are valued after their initial recognition at cost, amortised based on the effective interest rate. The average interest rate on Foncière des Régions consolidated debt stood at 1.87 % as at 31 December Breakdown of borrowings at their nominal value according to the time left to maturity and by interestrate type: (in K) Balance as at 31 december 2017 Maturity in < 1 year Balance as at 31 december 2018 Maturity from 2 to 5 years Outstanding at 31 December 2022 (over 5 Fixed-rate financial liabilities France Offices Bank borrow ings France Offices Ornane* France Offices Other Italy Offices Bank borrow ings Italy Offices Convertible bonds* Hotels in Europe - Bank borrow ings Hotels in Europe - Other Germany Residential Bank borrow ings Germany Residential Other Total borrow ings and convertible bonds France Offices Bonds France Offices Treasury bills Italy Offices Bonds Italy Offices Securitisation Hotels in Europe - Bonds Total debts represented by securities Floating-rate financial debt France Offices Bank borrow ings Italy Offices Bank borrow ings Hotels in Europe - Bank borrow ings France Residential Bank borrow ings Germany Residential Bank borrow ings Total borrow ings and convertible bonds France Offices Treasury bills Total debts represented by securities Total (*) The ORNANE bonds are presented at nominal value. Debt by operating segment as at 31 December 2017 (in M) Germany Residential Others 40 France Offices ,106 Hotels in Europe Italy Offices

53 Convertible bonds France Offices: The characteristic features of these convertible bonds are as follows: Features ORNANE-type bonds France Offices ORNANE-type bonds France Offices Issue date 24/05/ /11/2013 Issue amount ( M) Issue price ( ) 85,86 84,73 Conversion rate 1,18 1,11 Nominal rate 3,34% 0,88% Maturity 01/01/ /04/2019 Number of convertible bonds issued Number of convertible bonds as at 31 December Number of bonds redeemed at maturity on 2 January Number of convertible bonds as at 31 December Number of potential shares (maximum) Amount of the issue after redemption and conversion ( M) On 2 January 2017, the remainder of 928,197 ORNANE-type bonds issued in 2011 entailed a final payment of 79.7 million. The interest is payable half-yearly on 1 April and 1 October for the ORNANE-type bonds issued in Based on the quoted price on 31 December 2017, the fair value of the 2019 ORNANE-type bonds is , giving a fair value of million at 31 December 2017 (4,071,757 bonds). Bond holders will have the option to convert their bonds either into cash and existing and/or new shares, or only into shares, based on the stock market prices over a determined period, at the Company s discretion. Italy Offices: In accordance with paragraph 11A of IAS 39, the Italy Offices ORNANE-type bonds are hybrid instruments and are recognised as a Host contract (debt at amortised cost) and as an embedded derivative (financial instrument at fair value through the income statement). In February 2017, the 2,700,000 ORNANE-type bonds issued in October 2013 were entirely redeemed for million (costs and incentive premium included). At 31 December 2017, the ORNANE derivative maturing in 2021 of Beni Stabili was valued at 17.7 million. The characteristic features of these convertible bonds are as follows: Features ORNANE-type bonds Italy Offices ORNANE-type bonds Italy Offices Issue date 01/10/ /08/2015 Issue amount ( M) Issue price ( ) Conversion rate 151, ,492 Nominal rate 2,625% 0,875% Maturity 01/03/ /02/2021 Number of convertible bonds issued Number of convertible bonds as at 31 December Number of bonds redeemed in February Number of convertible bonds as at 31 December Number of potential shares

54 Derivatives Derivative instruments consist mainly of rate hedging instruments put in place as part of the Group s interest rate hedging policy. Fair value of net derivative instruments: thousand 31-Dec-17 Net 31-Dec-16 Net France Offices Italy Offices Hotels in Europe Germany Residential France Residential Total financial instruments France Offices Italy Offices Total derivatives of convertible borrow ing Total Of w hich counterparty risk The total impact of the value adjustments on the derivatives on the income statement was 0.1 million. It primarily consists of changes in the value of the cash instruments ( million), and the change in the value of the ORNANE-type bonds ( million). In accordance with IFRS 13, the fair values include the counterparty default risk ( 1.0 million). The Unrealised gains and losses relating to changes in fair value line item in the statement of cash flows ( million), which makes it possible to calculate cash flows from operating activities, mainly incorporates the impact of changes in the value of cash instruments ( million), the change in the value of the ORNANE-type bonds ( million) and the change in the value of the portfolio ( million). Breakdown of hedging instruments by maturity of notional values thousand At 31- December-17 less than one year from 1 to 5 years over 5 years Fixed hedge Fixed rate payer sw ap Fixed rate receiver sw ap Total sw aps Optional hedge Purchase of fixed rate payer sw aption Sale of fixed rate borrow er sw aption CAP purchase FLOOR purchase FLOOR sale Total Balance as at 31 December 2017 thousand Fixed rate Floating rate Financial liabilities (including creditor banks) Net financial liabilities before hedging Sw aps Caps Total hedges

55 Banking covenants Excluding debts raised without recourse to the Group s property companies, the debts of Foncière des Régions and its subsidiaries generally include bank covenants (interest coverage ratio (ICR) and loan to value (LTV)), applying to the borrower s consolidated financial statements. If these covenants are breached, early debt repayment may be triggered. These covenants were established in Group share for Foncière des Régions on a consolidated or Group-share basis depending on the seniority of the debt with respect to Foncière des Murs, Foncière Développement Logements and Beni Stabili (if their debts include them). With respect to Immeo, for which the debt raised is non-recourse debt, there are no consolidated covenants associated with portfolio financing. The most restrictive consolidated LTV covenants at 31 December 2017 were 60% for Foncière des Régions, Foncière des Murs and Foncière Développement Logements. Lastly, a limited portion of Beni Stabili financing included a consolidated LTV covenant (Beni Stabili scope), the most restrictive level of which was also 60%. The threshold for the consolidated ICR covenants differs from one REIT to another, depending on the type of assets, and may be different from one debt to another even for the same REIT, depending on debt seniority. Lastly, only a portion of the Beni Stabili loans has a consolidated ICR covenant. The most restrictive ICR consolidated covenants applicable to the REITs are as follows: for Foncière des Régions: 200%; for Foncière des Murs: 200%; for Foncière Développement Logements: 150%; for Beni Stabili: 150%. All these LTV or ICR covenants were in strict compliance as at 31 December Concerning Foncière des Régions, the bank consolidated leverage ratios at 31 December 2017 were 44.2% for the LTV in Group share and 436% for the ICR in Group share (compared to 49.5% and 360% respectively at the end of 2016). Another type of covenant was added to the consolidated LTV and ICR Group share covenants of Foncière des Régions as part of the corporate loans taken out by Foncière des Régions: an assetsecured debt covenant (100% scope), the cap on which is set at 25% and which measures the ratio of secured debt (or debt with guarantees of any nature) to asset value. This covenant was fully complied with as at 31 December No loan has an accelerated payment clause contingent on Foncière des Régions rating, which is currently BBB, stable outlook (Standard & Poor s rating). 55

56 Covenant LTV Company Scope Agreed threshold Ratio 300 M (2016) Orange Foncière des Régions France Offices 60% In compliance 350 M (2013) Foncière des Murs Hotels in Europe 60% In compliance 447 M (2013) Foncière des Murs Hotels in Europe 60% In compliance 208 M (2014) Foncière des Murs Hotels in Europe 60% In compliance 255 M (2012) Covered bonds Foncière des Murs Hotels in Europe 65% In compliance 200 M (2015) Private placement Foncière des Murs Hotels in Europe 60% In compliance 279 M (2017) - Roca Foncière des Murs Hotels in Europe < 60% In compliance 254 M (2015) Europe Beni Stabili Italy Offices 60% In compliance Consolidated ICR Company Scope Agreed threshold Ratio 300 M (2016) Orange Foncière des Régions France Offices 200% In compliance 350 M (2013) Foncière des Murs Hotels in Europe > 200% In compliance 447 M (2013) Foncière des Murs Hotels in Europe > 200% In compliance 208 M (2014) Foncière des Murs Hotels in Europe > 200% In compliance 255 M (2012) Covered bonds Foncière des Murs Hotels in Europe 200% In compliance 200 M (2015) Private placement Foncière des Murs Hotels in Europe 200% In compliance 279 M (2017) - Roca Foncière des Murs Hotels in Europe > 200% In compliance 254 M (2015) Europe Beni Stabili Italy Offices > 150% In compliance These covenants, moreover, most often include specific covenants for the scopes financed. The purpose of these covenants, generally scope LTV, is mainly to limit the use of financing lines by correlating it with the value of the underlying assets provided as collateral Provisions for contingencies and losses Accounting principles applicable to provisions for contingencies and losses Retirement commitments The retirement commitments are recognised in accordance with revised IAS 19. Provisions are recorded on the balance sheet for the liabilities arising from defined benefits pension schemes for existing staff at the reporting date. They are calculated according to the projected credit units method based on valuations made at each reporting date. The past service cost corresponds to the benefits granted, either when the Company adopts a new defined benefits scheme, or when it changes the level of benefits of an existing scheme. When new benefits are granted upon adoption of a new scheme or change in an existing scheme, the past service cost is immediately recognised in the income statement. Conversely, when the adoption of a new scheme or change in an existing scheme gives rise to the vesting of benefits after its implementation date, the past service cost is recognised as an expense on a straight-line basis over the average remaining period until the benefits become fully vested. Actuarial gains and losses result from the effects of changes in actuarial assumptions and experience adjustments (differences between actuarial assumptions and what has actually occurred). The change in these actuarial gains and losses is recognised in Other items of comprehensive income. The expense recognised in operating income includes the cost of the services rendered during the year, amortisation of past service costs and the effects of any reduction or liquidation of the scheme; the cost of discounting is recognised in net financial income. The valuations are made taking into account the Collective Agreements applicable in each country and in keeping with the various local regulations. For each employee, the retirement age is the social security eligibility age. 56

57 Provisions thousand 31-Dec-16 Change in scope Charges Transfer Change in actuarial gains and losses Reversal of provision Used Unused 31-Dec-17 Other provisions for disputes Provisions for guarantees Provisions for taxes Provisions for renovating sites Other provisions Provision subtotal current liabilities Provisions for retirement benefit Provisions for long-service aw ards Provision subtotal non-current liabilities Total provisions The provisions for litigation are broken down into 1.3 million for France Offices, 0.3 million for Italy Offices and 0.3 million for France Residential. Provisions for taxes concern only the Italy Offices segment, in the amount of 0.5 million. Other provisions consist primarily of the following: provisions for losses on contracts: 4.0 million; other provisions for contingencies and losses: 4.0 million; provisions relating to grantor rights (Car Parks): 0.2 million. The provision for retirement benefits totalled 46.3 million at 31 December 2017 (including 43.5 million for the Germany Residential segment). The main actuarial assumptions used to estimate the commitments of Foncière des Régions in France were as follows: rate of pay increase: managers 4%, non-managers 3%; discounting rate: 1.11% (TEC 10 n +50 bps). The main actuarial assumptions used to estimate the commitments in Germany were as follows: Assumptions used in calculating provisions for retirement benefit obligations in Germany 31-Dec Dec-16 Discount rate 2,1% 1,9% Annual w age grow th 2,5% 2,5% Rate of social security charges 1%/2% 1,0% IMPACT OF PROVISIONS FOR RETIREMENT BENEFITS ON THE INCOME STATEMENT ( K) Cost of services rendered during the year Financial cost Effects of plan reductions/settlements TOTAL IMPACT ON THE INCOME STATEMENT If the discount rate increases by 50 bps (it is presently 2.1%), the provision will be lowered, down to 40.3 million. Conversely, if its decreases 50 bps, the provision will increase, up to 46.8 million. 57

58 Other short-term liabilities thousand 31-Dec Dec-16 Change Social debt Tax debt Current accounts liabilities Dividends to be paid Other debt Total The change in tax liabilities was 3.9 million (including 2.7 million of change for Hotels in Europe, 0.7 million for Offices France and 0.5 million for Offices Italy). The change in other liabilities includes 55 million of deferred payment on the acquisition of hotels in Spain, for which payment is planned late in Recognition of financial assets and liabilities IAS 39 categories 31-Dec-17 Net ( thousand) Amortised cost Fair value through shareholders equity Fair value through profit or loss Assets at amortised cost Non-current financial assets Loans and receivables Non-current financial assets Subscribed capital not paid up Non-current financial assets Total non-current financial assets Loans and receivables Trade receivables (1) Assets at fair value through profit or loss Derivatives at fair value through profit or loss Assets at fair value through profit or loss Cash and cash equivalents Total financial assets Liabilities at fair value through profit or loss ORNANE-type bonds Liabilities at amortised cost Financial debt (2) Liabilities at fair value through profit or loss Financial instruments (excluding ORNANE) Liabilities at amortised cost Security deposits Liabilities at amortised cost Trade payables Total financial liabilities (1) Excluding rent-free periods. Line item in statement of financial position (2) The difference betw een the net book value and the fair value of the fixed rate debt is 44,780 thousand. Amount show n in the statement of financial position measured at: Fair Value ( thousand) Breakdown of financial assets and liabilities at fair value: The table below presents the financial instruments at fair value broken down by level: Level 1: financial instruments listed in an active market; Level 2: financial instruments whose fair value is evaluated through comparisons with observable market transactions on similar instruments or based on an evaluation method whose variables include only observable market data; Level 3: financial instruments whose fair value is determined entirely or partly by using an evaluation method using an estimate that is not based on market transaction prices on similar instruments. 58

59 thousand Level 1 Level 2 Level 3 Total Derivatives at fair value through profit or loss Money-market securities available for sale Total financial assets ORNANE-type bonds Derivatives at fair value through profit or loss Total financial liabilities NOTES TO THE STATEMENT OF NET INCOME Accounting principles Rental income According to the presentation of the income statement, rental income is treated as revenues. Car park receipts, disposals of assets in inventory and service charges are now shown in specific lines of the income statement below net rental income. As a general rule, invoicing is quarterly. The rental income of investment properties is recognised on a straight-line basis over the term of the ongoing leases. Any benefits granted to tenants (rent-free periods, step rental leases) are amortised on a straight-line basis over the duration of the lease agreement, in compliance with SIC 15. Share-based payments (IFRS 2) The application of IFRS 2 has resulted in the recognition of an expense for benefits granted to employees as share-based payments. This expense is recorded in income for the year. Free shares are valued by Foncière des Régions at the date of their award according to a binomial valuation model. This model takes into account the features of the plan (price and exercise period), market data upon award (risk free rate, share price, volatility and expected dividends), and assumptions of beneficiary behaviour. The benefits thus granted are recognised as expenses over the vesting period, and offset by an increase in the consolidated reserves Operating profit Rental income thousand 31-Dec Dec-16 Change ( thousand) Change (%) France Offices ,0% Italy Offices ,6% Total Offices rental income ,5% Hotels in Europe ,6% Germayn Residential ,3% France Residential ,7% TOTAL RENTAL INCOME ,9% The rental income consists of rental and similar income (e.g. occupancy fees and entry rights) invoiced for investment properties during the period. Rent exemptions, step rental schemes and entry rights are spread out over the fixed term of the lease. Rental income amounted to million as at 31 December 2017, versus million at 31 December 2016, up by 34.7 million. 59

60 The changes by asset-type break down as follows: a decrease in rental income at France Offices (-1.0%) attributable primarily to the effect of asset disposals (- 8.4 million) and assets made vacant for renovation (- 3.4 million), less the delivery of assets under development in 2016 and 2017 (+ 5.4 million) and acquisitions (+ 3.6 million); an increase in Italy Offices rents (+2.6%) due to acquisitions (+ 7.9 million), as well as the arrival of new tenants and renewals of leases (+ 3.7 million) minus the effect of disposals (- 4.7 million) and asset vacancies (- 2.9 million); an increase in rental income at Hotels in Europe (+9.6%) principally as a result of acquisitions ( million), increased rents at AccorHotels (+ 2.8 million) and the deliveries of assets under development in France and Germany (+ 1.5 million) and rent indexing (+ 0.8 million), less the effect of disposals in the hotel segment ( million), the retail segment (- 2.2) and the healthcare segment (- 9.7 million); an increase in rental income from the Germany Residential segment (+8.3%) following acquisitions (+ 23 million), rent indexing (+ 7 million), less the impact of disposals (- 13 million); a 24.7% decrease in the France Residential segment due to disposals and assets made vacant for their disposal. Note that the tenant Telecom Italia accounts for 48% of total revenues in the Italy Offices segment ( 98.9 million) rental income by operating segment in millions: Germany Residential 230 Others 11 France Offices Hotels in Europe 209 Italy Offices

61 Real estate expenses thousand 31-Dec Dec-16 Change ( thousand) Change (%) Rental income ,9% Unrecovered rental costs ,7% Expenses on properties ,0% Net losses on unrecoverable receivables ,0% Net rental income ,2% Rate for property expenses -8,3% -8,7% Unrecovered rental costs: These expenses are net of re-invoicing to tenants, and basically correspond to charges on vacant premises. The change in the period (- 1.2 million) is due mainly to the effects of land taxes on the developments of France Offices (- 2.3 million), the reconsolidation of Logistics (- 0.7 million) and the effect of acquisitions in Spain (- 2.0 million), offset by a decline in Germany Residential (+ 2.4 million) and gains from the decline in rents in France Residential (+ 1.2 million.) Expenses on properties: These consist of rental expenses that are borne by the owner, expenses related to works and expenses related to property management. Net losses on unrecoverable receivables: These consist of losses on unrecoverable receivables and net provisions on doubtful receivables Net cost of operations These consist of head office expenses and operating costs net of revenues from management and administration activities. thousand 31-Dec Dec-16 Change ( thousand) Change (%) Management and administration income ,1% Business expenses ,6% Overhead ,2% Development costs (not capitalised) n.a. TOTAL NET OPERATING COSTS ,3% Management and administration income rose by 4.1 million. These primarily include the consolidation of Revalo in Italy, a company specialising in the management of real estate portfolios, for 4.6 million. Overheads rose by 7.5 million, particularly for payroll following the increase in headcount in Italy (Revalo) and Germany. Development costs relate to various discontinued projects in the France Offices segment (- 3 million) and Germany Residential segment (- 1 million.) Results from other activities The net income from other activities declined by 6.9 million. This change is attributable to lower earnings in Car Park companies (- 3.2 million) and by lower earnings from real estate development in the France Offices segment ( 2.4 million) at 31 December 2017 versus ( 5.5 million) at 31 December

62 Change in the fair value of assets thousand 31-Dec Dec-16 Change in thousand France Offices Italy Offices Hotels in Europe Germany Residential France Residential Total Change In Fair Value of Properties At France Offices, the fair value is driven by creating value in the assets delivered in 2017 (+28% on average). In Hotels in Europe, value creation depends largely on the acquisition of the Spanish portfolio acquisition in early 2017 (+7.2%). At Germany Residential, the asset values benefited from indexing and the compression of present-value discount rates, particularly in Berlin, Dresden and Leipzig (yield rate on the total portfolio at 31 December 2017 was 4.7% versus 5.4% at 31 December 2016) Income from changes in scope A loss of 3.3 million was recognised under income from changes in consolidation scope, primarily due to acquisitions of shares in the Germany Residential segment (- 3.1 million). In accordance with IFRS3R, this must be recognised in profit or loss Costs of the net financial debt thousand 31-Dec Dec-16 Change ( thousand) Change (%) Interest income on cash transactions ,2% Interest expense on financing operations ,7% Net expenses on hedges ,2% Net Financing Cost ,3% Excluding costs to repurchase fixed-rate debt and penalties ( 58.3 million at 31 December 2017 versus 27.3 million at 31 December 2016), the cost of debt declined by 30 million, under the effect of refinancings and restructured hedges Net financial income thousand 31-Dec Dec-16 Change in thousand Change in % Cost of net financial debt ,3% Positive changes in the fair value of financial instruments Negative changes in the fair value of financial instruments Changes in the fair value of financial instruments ,6% Financial income from discounting Financial expenses from discounting Discounting ,1% Impact of discounting and changes in fair value ,2% Expenses net of financial provisions and other ,9% TOTAL NET FINANCIAL INCOME ,6% 62

63 The net financial provisions and other expenses improved by 29.5 million. They mainly reflect the deferral of loan issue costs for million (of which million was extraordinary amortisation after the refinancings) versus million at 31 December Note that this item was impacted in 2016 by the redemption penalties in France Offices of million Taxes payable and deferred taxes (including the Exit Tax) Accounting principles applicable to current and deferred taxes SIIC tax regime (French companies) Opting for the SIIC tax regime involves the immediate liability for an exit tax at the reduced rate of 19% on unrealised capital gains relating to assets and securities of entities not subject to corporation tax. The exit tax is payable over four years, in four instalments, starting with the year the option is taken up. In return, the Company is exempted from income tax on the SIIC business and is subject to distribution obligations. (1) Exemption of SIIC revenues The revenues of the SIIC are exempt from taxes concerning: income from the leasing of assets; capital gains realised on asset disposals, investments in companies having opted for the tax treatment or companies not subject to corporation tax in the same business, as well as the rights under a lease contract and real estate rights under certain conditions; dividends of SIIC subsidiaries. (2) Distribution obligations The distribution obligations associated with exemption profits are the following: 95% of the earnings derived from asset leasing; 60% of the capital gains from disposals of assets and shares in subsidiaries having opted for the tax treatment or subsidiaries not subject to corporation tax with a SIIC corporate purpose for two years; 100% of dividends from subsidiaries that have opted for the tax treatment. The Exit Tax liability is discounted on the basis of the initial payment schedule determined from the first day the relevant entities adopted SIIC status. The liability initially recognised is discounted and an interest charge is applied at each closing, allowing the liability to reflect the net discounted value as at the closing date. The discount rate used is based on the yield curve, given the deferred payment. Ordinary law regime and deferred taxes Deferred taxes result from temporary differences in taxation or deduction and are calculated using the liability method, and on all temporary differences in the Company financial statements, or resulting from consolidation adjustments. The valuation of the deferred tax assets and liabilities must reflect the tax consequences that would result from the method by which the Company seeks to recover or settle the book value of its assets and liabilities at year-end. Deferred taxes are applicable to Foncière des Régions entities that are not eligible for the SIIC tax regime. 63

64 A deferred tax asset is recognised in the case of deferrable tax losses in the likely event that the entity in question, not eligible for the SIIC regime, will have taxable future profits against which the tax losses may be offset. In the case where a French company intends to opt directly or indirectly for SIIC tax treatment in the near future, an exception under the ordinary law regime is applied by anticipating the application of the reduced rate (Exit Tax) in the valuation of deferred taxes. SIIQ tax regime (Italian companies) Opting for the SIIQ tax regime triggers immediate liability for exit tax at a reduced 20% tax rate on the unrealised capital gains relating to the assets eligible for SIIQ tax treatment. The exit tax is payable over a maximum of five years. Note that in 2014, a new decree was enacted (Law Decree No. 133/2014). Previously, the Company was exempted from tax on the SIIQ revenues ( rental asset rental income and dividends of subsidiaries subject to the tax regime) on condition of an 85% distribution ceiling. This ceiling has now been lowered to 70%. Moreover, the decree requires that 50% of the capital gains on the disposal of assets eligible for the SIIQ regime be distributed within two years following their recognition. In compensation, no tax is payable on capital gains from asset disposals and earnings from this business activity. SOCIMI tax regime (Spanish companies) The Spanish companies held by Foncière des Murs opted for the SOCIMI tax regime, effective 1 January Opting for SOCIMI does not trigger an exit tax upon making the option. However, the capital gains on the period outside of the SOCIMI regime during which assets were held are taxable when disposing of said assets. The rental income from the leasing of assets and proceeds from disposals of assets held under the SOCIMI regime are exempt, provided 80% of rental profits and 50% of asset disposal profits are distributed. These capital gains are determined by allocating the taxable gains to the period outside the SOCIMI regime in a linear basis, over the total holding period Taxes and theoretical tax rate by geographical area thousand Taxes payable Deferred tax liabilities Total Deferred tax rate France ,43% Italy ,90% Germany ,83% Belgium ,58% Luxembourg ,00% Netherlands ,00% Portugal ,00% Spain ,00% Total (-) corresponds to a tax expense; (+) corresponds to a tax income. Income taxes payable in France relate to the 3% contribution on dividends paid for the 2016 reporting period (- 1 million) and the source withholding paid on the Beni Stabili dividend (- 2 million), less the rebates on the 3% tax requested for fiscal years 2013 to 2016 (+ 4 million). Taxes payable on disposals were 6.3 million, including ( 2.7 million) on Italy Offices, ( 2.8 million) on Germany Residential and ( 0.8 million) on Hotels in Belgium. 64

65 Impact of deferred taxes on income thousand 31-Dec Dec-16 Change France Offices Italy Offices Hotels in Europe Germany Residential Corporate and not attributable Total The deferred tax income of Italy Offices equals a downward adjustment of the deferred tax liability after the asset disposals and moving assets under development into the SIIQ regime as of 1 January Note that the deferred tax expense of the Italy Offices segment for the 2016 fiscal year is mainly due to a decrease in the deferred tax assets following the use of tax credits. The deferred tax charge of the Hotels in Europe segment is largely due to the increases in value of assets in Portugal, the Netherlands and Germany, offset by a decrease in the amount of deferred tax liability on assets in Belgium following a reduction in the deferred tax rate from 33.99% to 29.58%. The deferred tax expense of the Germany Residential segment mainly relates to an increase in the value of assets Tax proof The management companies that opted for the SIIC/SIIQ/SOCIMI tax regime in previous years do not pay corporate income tax, except for those that also have a taxable business activity. Net income before taxes and before income of equity affiliates is neutralised, including for their taxable activities and their transparent taxable subsidiaries. Accordingly, the tax proof is required solely for taxable French and international companies. BREAKDOWN OF TAX BY TAXABLE SEGMENT Breakdown of tax by taxable segment (in thousand) France (SIIC) Italy (SIIQ) Spain (SOCIMI) France Common law Outside France Common law 31-Dec-2017 Net income before tax, before income of equity affiliates Income tax expense recorded The actual tax income recognised in the SIIC/SIIQ/SOCIMI tax segment is detailed in paragraph

66 thousand 31-Dec-17 Net income before tax Share of income from equity affiliates Goodw ill 0 Net income before tax, before income of equity affiliates of w hich SIIC/SIIQ/SOCIMI companies of which companies subject to tax Theoretical tax rate of 34.43% (a) Impact of rate differentials Impact of tax credits and fixed tax rates -283 Impact of permanent differences Charged to prior year losses w ithout DTA Tax losses for the year w ithout DTA Total tax impacts for the period (b) Impact of tax audits and taxes on prior years c) Income tax expense recorded (a)+(b)+(c) Overall effective tax rate 15,83% The actual income tax expense recognised relates mainly to the Germany Residential segment OTHER INFORMATION Personnel remuneration and benefits Personnel expenses At 31 December 2017, personnel expenses amounted to 65.6 million, compared with 63.9 million at 31 December This increase is mostly attributable to adding personnel in Germany Residential and Italy Offices (consolidation of Revalo in December 2016.) Headcount At 31 December 2017, the headcount of fully consolidated companies was 827. Headcount by country in number of employees Italy 148 Spain 1 Luxembourg 1 France 268 Germany 409 The average headcount for 2017 was 811 employees. 66