Basis of Presentation

The consolidated financial statements as at 31 December 2004 were prepared for the first time in accordance with EC Directive 83/349/EEC (Consolidated Accounts Directive) on the basis of the International Accounting Standards (IASs) and the International Financial Reporting Standards (IFRSs) adopted and published by the International Accounting Standards Board (IASB).

The consolidated financial statements prepared in accordance with IFRSs have an exempting effect under section 292a of the HGB (Handelsgesetzbuch – German Commercial Code). The assessment as to whether the consolidated financial statements and the Group management report comply with the 7th EC Directive follows the interpretation of the German Accounting Standards Board in German Accounting Standard 1 (GAS 1).

As an initial adopter of the IFRSs as defined in IFRS 1, Deutsche EuroShop has elected to apply the following exemption option. The exemption option specifies that a first-time adopter may elect not to apply IFRS 3 “Business Combinations” to business combinations that occurred before the date of transition to IFRSs. In line with this, the relevant consolidation adjustments were taken over from the previous statements prepared in accordance with the Handelsgesetzbuch (HGB – German Commercial Code).

In addition to the consolidated balance sheet and the consolidated profit and loss account, the consolidated financial statements comprise the statement of changes in equity, the cash flow statement and the notes.

Amounts are presented in thousands of € .

The Group parent is Deutsche EuroShop AG, Hamburg, Germany. The Company’s registered office is Oderfelder Strasse 23, 20149 Hamburg, Germany and is entered in the Hamburg commercial register under HRB 91799.

Since it began operating in 2000, Deutsche EuroShop AG has focused on acquiring, managing, using and selling investments of all kinds, and in particular investments in retail properties.

The dates on which IFRSs, IASs, or SIC Interpretations are approved and the dates on which they come into force regularly differ. However, the IASB generally recommends the early adoption of Standards and Interpretations that have been approved but are not yet in force.

The Deutsche EuroShop Group orients its accounting policies on those Standards that have binding force by the date of preparation of the financial statements. The consolidated financial statements for 2004 are based on the following International Financial Reporting Standards (IFRSs) and International Accounting Standards (IASs) that are relevant for the Deutsche EuroShop Group:

IFRS 1 First-time Adoption of International Financial Reporting Standards

IFRS 3 Business Combinations

IAS 1 Presentation of Financial Statements

IAS 7 Cash Flow Statements

IAS 8 Net Profit or Loss for the Period, Fundamental
Errors and Changes in Accounting Policies

IAS 10 Events After the Balance Sheet Date

IAS 12 Income Taxes

IAS 14 Segment Reporting

IAS 16 Property, Plant and Equipment

IAS 18 Revenue

IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 23 Borrowing Costs

IAS 24 Related Party Disclosures

IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries

IAS 28 Accounting for Investments in Associates

IAS 31 Financial Reporting of Interests in Joint Ventures

IAS 32 Financial Instruments: Disclosure and Presentation

IAS 33 Earnings per Share

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets

IAS 39 Financial Instruments: Recognition and Measurement

IAS 40 Investment Property

IAS 1 and IAS 24 were applied in the versions valid as from 1 January 2005.

In addition to the Standards listed, the consolidated financial statements of Deutsche EuroShop applied the German Accounting Standards (GASs) approved by the German Accounting Standards Board and published as at 31 December 2004

Basis of Consolidation and Consolidation Methods

Basis of Consolidation
The consolidated financial statements include all material subsidiaries in which Deutsche
EuroShop AG directly or indirectly holds a majority of voting rights, plus those companies which are joint ventures.

As at 31 December 2004, the basis of consolidation comprised, in addition to the parent company, 10 (previous year: 10) fully consolidated domestic and foreign subsidiaries and 6 (previous year: 3) proportionately consolidated domestic and foreign companies.

The limited property partnership FEZ Harburg, City-Arkaden Klagenfurt KG and EKZ Eins Errichtungs- und Betriebsgesellschaft mbH & Co., OEG, Vienna were proportionately consolidated for the first time in the year under review (2004). In addition, Forum Wetzlar KG was fully consolidated.

Investments over which Deutsche EuroShop AG does not exercise control are measured at fair value, in line with the provisions of IAS 39. These include the investments in DB Immobilienfonds 12 Main-Taunus Zentrum KG, Hamburg, and Ilwro Joint Venture Sp. zo. o, Warsaw.

Companies with no business operations or with a low volume of business are not included in the consolidated financial statements. Overall, they account for less than 1% of consolidated revenue and earnings. This refers to the investment in City-Point Beteiligungs GmbH, Pöcking.

A detailed list of the companies included in the consolidated financial statements is included as part of the notes. A list of shareholdings in accordance with section 285 no. 11 of the HGB and section 313(2) nos. 1 to 4 and (3) of the HGB are filed with the Hamburg Commercial Register.

The annual financial statements of the consolidated companies were prepared as at 31 December 2004, the reporting date of the consolidated financial statements.

Consolidation Methods

For purchase accounting, the carrying amount of the investment is eliminated against the
parent’s interest in the revalued equity of the subsidiaries at the date of acquisition or initial consolidation. Any remaining excess of cost of acquisition over identified net assets acquired is recognised as goodwill in intangible assets and tested for impairment at least once a year, or whenever there are indications of impairment.

Joint ventures are included proportionately in the consolidated financial statements in accordance with IAS 31. The assets and liabilities as well as the income and expenses of jointly controlled entities are included in the consolidated financial statements according to the interest held in these entities. Proportionate consolidation and accounting for goodwill follows the same principles applied to the consolidation of subsidiaries.

Intragroup transactions are eliminated as part of the consolidation of intercompany balances and of income and expenses.

The minority interest item is used to report minority interests in equity held by third parties. In this context the revised IAS 1, which provides for this item to be reported in equity, was adopted early

Currency Translation

The Group currency is the euro.

Ongoing transactions in foreign currencies are translated at the middle rate on the date of the respective transaction. Realised translation differences are recognised in the profit and loss account.

The companies located outside the European Monetary Union that are included in the consolidated financial statements are treated as foreign entities. Under IAS 21, annual financial statements prepared in foreign currencies are translated using the functional currency method. All assets and liabilities are translated at closing rates. The items in the profit and loss account are measured at average rates.

The resulting difference in balance sheet carrying amounts is taken to equity in the item Change due to currency translation effects.

Unrealised translation gains and losses and differences from the consolidation of intercompany balances and of income and expenses are recognised in profit or loss.

A closing rate of HUF 245.93 (previous year: HUF 262.23) and an average rate of HUF 251.78 (closing rate: HUF 253.65) were used in the translation of the Hungarian single-entity financial statements from forint to euros.

Significant differences between HGB and IFRS
Accounting Principles

In accordance with the reporting requirements of section 292a of the HGB, the accounting policies and consolidation methods applied that differ from those under German law are presented in the following where they are material for the consolidated financial statements.

Deferred taxes (IAS 12): Deferred tax assets may not be recognised for tax loss carryforwards under the HGB, as the expected future tax savings are regarded as not yet realised. Under IFRSs, deferred tax assets must be recognised for all temporary differences between the carrying amount and the tax base of an asset or a liability, to the extent that it is probable that taxable profit will be available against which the temporary difference can be utilised. Deferred tax liabilities must be carried for all taxable temporary differences between the carrying amount and the tax base of an asset and a liability. Deferred taxes are measured at the currently enacted tax rates, and must not be discounted. Deferred taxes are recognised and reversed in the profit and loss account provided that the underlying item was reported in the profit and loss account. However, deferred taxes may not be recognised or reversed in the profit and loss account if the underlying item was eliminated directly against equity.

Foreign currency translation (IAS 21): The two accounting systems differ in their treatment of unrealised gains from the measurement of amounts denominated in foreign currency at closing rates. Only unrealised losses may be accounted for under the HGB, while IFRSs require unrealised gains to be recognised as well.

Discounts (IAS 23): Under the HGB, discounts may be expensed in full in the year in which they arise, to the extent that the subsidiary preparing the annual financial statements is a German commercial asset management partnership. Under IFRSs, they are reversed to income over the term of the loan agreement. In principle, IAS 39 require the effective interest method to be used to amortise discounts. In contrast to this, Deutsche EuroShop AG recognises discounts relating to existing loans raised prior to 31 December 2003 over the agreed amortisation period using the straight-line method.

Provisions (IAS 37): In the case of provisions, IFRSs apply a different interpretation of the principle of prudence compared with the German HGB. IFRSs impose somewhat higher requirements regarding the probability of the relevant events and the ability to estimate the amount for which a provision may be recognised. At present, the application of this Standard has no effect on Deutsche EuroShop AG.

Non-current financial assets (IAS 39): Non-current financial assets consist of investments in subsidiaries and investments that are not consolidated. These are classified as available for sale and carried at their fair value. Changes in value are recognised in the profit and loss account. Under the HGB, financial instruments must be recognised at the lower of cost or fair value. Unrealised gains are not recognised.

Current financial instruments (IAS 39): Acquired securities are reported as available for sale securities and carried at their fair value. There is an option of recognising changes in value in profit or loss or directly in equity. Deutsche EuroShop AG recognised the change in value between the balance sheet dates in the profit and loss account. Under German accounting principles, securities must be recognised at cost or at the lower fair values. Again, unrealised gains are not recognised.

Investment property (IAS 40): Investment property is carried in the consolidated financial statements at the fair value at the balance sheet date. Under the fair value method, fair value adjustments are recorded in the profit and loss account. In the financial statements in accordance with the HGB, property is recognised at cost less depreciation.

Equity: The effects of initial application are reported in retained earnings.

Accounting Policies

Revenue and expense recognition
Revenue and other operating income is recognised once the relevant service has been rendered or once the risk has passed to the customer. Operating expenses are recognised once the service has been utilised or at the time when they are incurred. Interest income and expense are accrued. Borrowing costs are recognised as an expense in accordance with the benchmark treatment laid down in IAS 27.3.

Intangible assets
Intangible assets relate exclusively to software purchased by Deutsche EuroShop AG. Additions are measured at cost, and the benchmark treatment is applied for subsequent measurement. Under this, the assets are amortised using the straight-line method over the expected useful life of five years. The method of amortisation and the amortisation period are reviewed annually at the end of each financial year.

Property, plant and equipment
Property, plant and equipment is reported at cost less depreciation and, where applicable, impairment losses.

Borrowing costs relating to the financing of property, plant and equipment are capitalised during the construction period. Maintenance measures relating to property, plant and equipment are recognised as an expense in the year in which they occur.

Operating and office equipment comprises office equipment, fittings and technical equipment belonging to Deutsche EuroShop AG, and is depreciated using the straight-line method over 3 to 13 years. The method of depreciation and the depreciation period are reviewed annually at the end of each financial year.

Properties constructed or developed for future use as investment property are initially reported as property, plant and equipment and then, following completion, as investment property. In the year under review, the Phoenix-Center Hamburg, which was completed in September 2004, continued to be reported under property, plant and equipment, as it had not yet been valued.

Investment property
Under IAS 40, investment property must initially be measured at cost at the date of acquisition. Subsequently, all properties must be measured at their fair value, and the annual net changes recognised in income in net finance costs. Investment property is property held to earn rentals or for capital appreciation. Under IAS 40, investment property measured using the fair value model is not depreciated.

The fair values of the property in the period under review were determined by recognised independent external appraisers using the discounted cash flow method.

Financial instruments
Financial assets and liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions governing the financial instrument.

Non-current financial assets
Non-current financial assets are classified as available for sale and consist exclusively of the Other investments item under HGB. Under IAS 39, investments over which Deutsche EuroShop AG does not exercise control are carried at fair value and the measurement gains/losses recognised in income under Fair value gains on investments. The fair value of financial instruments for which there are no quoted market prices is estimated on the basis of the market values of the properties determined by appraisals, less net indebtedness. The determination of fair value assumes the existence of a going concern.

For reasons of materiality no fair value was reported for the investment in City-Point Beteiligungs GmbH, Pöcking, which is carried at cost.

Receivables and other assets
Receivables and other assets are carried at their principal amounts or at cost less write-downs.

Deferred taxes
In accordance with IAS 12, deferred taxes were recognised for all differences between the tax accounts and the IFRS balance sheet, using the currently enacted tax rate. Deutsche EuroShop AG calculates its deferred taxes from the current IFRS profit and loss account. A uniform tax rate of 25% at present plus the solidarity surcharge of 5.5% is used for German companies, and the local tax rates for foreign companies. No deferred tax assets are recognised at present.

Current financial instruments
The securities reported relate to current available-for-sale money market fund shares that are classified as available for sale and carried at their fair value at the balance sheet date in accordance with IAS 39. The resulting gains/losses are recognised in income in the item Other operating income.

Bank loans and overdrafts
Bank loans and overdrafts are reported at their redemption amounts less discounts, which under IAS 39 must be amortised over the term of the loan agreement and recognised annually as an expense.

Other provisions
Under the IFRSs, other provisions may only be recognised if an obligation exists to a third party and settlement is probable. Long-term provisions are discounted.

Liabilities
Trade payables and other liabilities are carried at their redemption amount.

Derivatives and hedging relationships
Deutsche EuroShop AG does not employ any derivatives, so the special hedge accounting provisions of IAS 39 and their disclosure in accordance with IAS 32 do not apply.

Cash and cash equivalents
Cash and cash equivalents include cash and bank balances at their principal amounts.

Other liabilities are carried at their redemption amount.

Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset are included in the cost of that asset until the time at which the asset is largely ready for its intended use. Income from the temporary investment of specifically borrowed funds is deducted from the borrowing costs of these assets to be capitalised until the latter are used to obtain qualifying assets.

All other borrowing costs are recognised in income in the period in which they occur.

Conversion from HGB to IFRSs

In financial year 2004, we converted Deutsche EuroShop’s accounting and reporting to the International Accounting Standards/International Financial Reporting Standards (IASs/IFRSs), the application of which by listed companies has been obligatory since 1 January 2005. This allows us to achieve international comparability of our accounting. However, this conversion resulted in substantial changes to the Company’s revenue and to its net assets, financial position and results of operations. As a result, the figures for 2003 have been adjusted retroactively to the new accounting standards. The principal effects are listed below.

Changes in the consolidated Group
The conversion to IFRSs meant that Altmarkt-Galerie Dresden KG, City-Point Kassel GmbH & Co. KG and Arkaden Pécs KG, which were previously carried as investments, must be consolidated in addition to the eight subsidiaries that were fully consolidated in the past. As a result of Deutsche EuroShop’s interests of 40% (Kassel) and 50% (Dresden and Pécs), these companies were only included in the IFRS consolidated financial statements in the amount of these interests.

Effects on Net Assets - Reconciliation of the Balance Sheet

Hidden reserves realised
The Group’s total assets for financial year 2003 increased by around € 259.8 million to
€ 1,240.5 million as a result of the conversion. The share of this increase accounted for by proportionately consolidated companies amounted to € 109.9 million. The remaining € 149.9 million relates almost exclusively to the realisation of hidden reserves for companies belonging to the old consolidated Group. The hidden reserves resulted from real increases in value and depreciation and amortisation of non-current (fixed) assets charged in previous years in accordance with German commercial law.

Equity and liabilities increase
As a result of the realisation of hidden reserves, equity rose by € 159.6 million as at 31 December 2003 to € 695.3 million, after adjustment for deferred tax liabilities to be recognised. € 11.4 million of this increase is due to proportionate consolidation, and € 148.2 million to the old consolidated Group.

Discounts to be amortised over the term of liabilities
Bank loans and overdrafts were approximately € 72.8 million higher than under the HGB (liabilities to banks). Whereas proportionate consolidation increased this figure by € 93.2 million, liabilities to banks relating to the old consolidated Group fell by € 20.4 million. The reason for this is the different accounting treatment of discounts. Under the HGB, these were recognised as expenses in the period in which they were paid, while under IAS 39, they must be amortised across the entire fixed-interest period and recognised as an interest expense.

The increase in other liabilities of € 27.4 million is primarily due to the adjustment of the provisions for deferred tax liabilities.

Effects on Results of Operations - Reconciliation of the Profit and Loss Account

As a result of the expanded consolidated Group, revenue (sales) and other income for financial year 2003 increased by € 8.9 million. However, expenses were € 4.8 million higher than the figure reported under the HGB.

The major difference between the HGB and IFRSs relates to the recognition of the depreciation of properties carried as non-current (fixed) assets. As Deutsche EuroShop’s shopping centers are held to generate income in the long term, the guidance in IAS 40 must be used to measure these properties. According to this, they must be tested annually for impairment. The difference between the old and new fair value must be used to calculate the net income or loss. Depreciation is not permitted under IAS 40. In addition, all capital expenditure that was capitalised under German commercial law is recognised directly as an expense in the profit and loss account.

For 2003, application of this method led to depreciation of € 22.4 million not being charged. The impairment test as at 31 December 2003 resulted in positive fair value adjustments of
€ 5.6 million, taking into account capital expenditure in the financial year.

The net interest expense deteriorated by € 7.6 million, not only due to the expanded consolidated Group, but also to the elimination of discounts paid in the relevant periods.

While the Company generated a consolidated net loss of € 0.5 million for financial year 2003 under the HGB, under IFRSs it recorded a consolidated net profit of € 19.0 million – an improvement of € 19.5 million.

Effects on the Financial Positions – Reconciliation of Cash Flow

The disclosures already provided on the net assets and results of operations reflect the substantially higher cash flow following conversion to IFRSs.

The equity item contains adjustments from initial measurement in accordance with IFRSs recognised directly in equity. Initial measurement of investments in accordance with IAS 39 resulted in an initial application reserve of € 18,964 thousand and from adjustment of discounts results an increase of equity of € 20,081 thousand. Recognition of the properties at fair value resulted in an initial application reserve in the amount of € 68,437 thousand. In addition, a deferred tax liability in the amount of € 22,421 thousand was recognised for the above-mentioned effects.

Consolidated Balance Sheet Disclosures

Non-current assets

1. Intangible assets

Additions relate to purchased consolidation software, which was installed in the parent’s business premises in Hamburg. Amortisation was based on a useful life of 2 to 5 years. It was calculated at 20 to 50% by the day using the straight-line method.

2. Property, plant and equipment

2a. Property, advance payments and assets under construction

Additions relate on the one hand to the completion of the Phoenix Center in Hamburg that opened in September 2004, which is recognised at cost. They also include investments in the Forum Wetzlar and Klagenfurt properties currently under construction, and remaining investments in the Árkád Pécs shopping center property.

The reclassifications relate to the Árkád Pécs shopping center, which was recognised at market value for the first time in accordance with IAS 40.

The total amount includes capitalised interest accrued during construction in the amount of € 9,502 thousand.

2b. Operating and office equipment

The additions relate to fixtures and fittings in Deutsche Euroshop AG’s business premises.

Depreciation was based on a useful life of 3 to 13 years.

3. Investment property

The reclassifications relate to the Árkád Pécs shopping center, which was recognised at market value for the first time in accordance with IAS 40.

This is matched by a disposal from the sale of the Centro Commerciale Friuli shopping center in Italy.

The properties are secured by mortgages. Land charges exist in the amount of € 481,804 thousand (previous year: € 447,894 thousand).

4. Non-current financial assets

Ancillary transaction costs for Ilwro Joint Venture Sp. Zo.o in Warsaw amounted to € 4 thousand. A capital repayment was also made, which is reported as a disposal.

The non-current financial assets contain three investments that are not included in consolidation but that are classified as available for sale in accordance with IAS 39 and recognised at their fair value.

Net impairment losses in the amount of € 2,398 thousand were reversed to income in the year under review for the investments DB Immobilienfonds 12 Main-Taunus-Zentrum Wieland KG and Ilwro Joint Venture Sp. Zo.o.

In addition, the ending balance contains the investment in City-Point Beteiligungs GmbH,
Pöcking. The company’s activities are limited to acting as the general partner of City-Point Kassel KG, Pöcking. It has not been consolidated for reasons of materiality.

Current Assets

5. Trade receivables

Receivables result primarily from rental settlements and oncharged payments for investments. Guarantees, cash security deposits and letters of comfort serve as collateral.

6. Receivables from affiliated companies

The outstanding obligatory capital contribution by the partner in Einkaufs-Center Arkaden Pecs KG, and the loan receivable from the latter company reported in the previous year were paid in full in the year under review.

7. Other asset

Miscellaneous assets mainly consist of interest and loan receivables, other receivables from tenants and receivables from the settlement of contracts for the sale of land.

8. Current financial instruments

This relates to DWS fund shares carried at cost as at 31 December 2004.

9. Cash

The maturity of all cash items is under one year.

10. Equity and reserves

Changes in equity are given in the statement of changes in equity.

10a. Share capital

The share capital amounts to € 20,000 thousand and is composed of 15,625,000 no-par value registered shares with a notional value of € 1.28 each. The Executive Board is authorized, with the approval of the Supervisory Board, to increase the Company’s share capital by up to a total of € 10,000,000 on one or several occasions until 18 June 2009 by issuing up to 7,812,500 no-par value registered shares against cash or non-cash contributions.

Deutsche EuroShop AG has recorded an unappropriated surplus of € 30,000 thousand. The Executive Board will propose to the Annual General Meeting on 23 June 2005 that the unappropriated surplus be distributed in full. This corresponds to a dividend of € 1.92 per share.

10b. Minority interest
The minority interest contains equalisation items for minority interests held by other shareholders in the capital requiring consolidation and for their shares of the profit and loss.

10c. Retained earnings

Retained earnings comprise the legal reserve and other retained earnings.

The initial measurement reserves were set up to enable the transfer to equity of the initial measurement differences between the IFRSs and the HGB for discounts, properties to be valued and investments.

In the year under review, € 1,687 thousand was recorded as a disposal as a result of the sale of the property in Udine. Other equity items include currency translation diffrences.

11. Bank loans and overdrafts

Bank loans and overdrafts relate to loans raised to finance real property acquisitions and investment measures. Land charges on company properties amounting to € 583,824 thousand (previous year: € 460,776 thousand) serve as collateral.

Properties are primarily financed by non-current bank loans and overdrafts. 91% of the bank loans and overdrafts in the amount of € 604,251 thousand have a residual term of more than 5 years; the effective average rate of interest as at 31 December 2004 amounted to 5.66%. In the case of 71% of the bank loans and overdrafts, the interest rates have been fixed until at least 2013 at an effective interest rate of 5.54%.

Discounts are amortised over the term of the loan. In the year under review, € 4,341 housand (previous year: € 3,958 thousand) was recognised in income.

12. Deferred tax assets

The deferred tax assets were recognised for the current consolidated net profit for the period. Additions for companies in Germany amounted to € 4,545 thousand, and € 3,647 thousand for companies abroad.


13. Trade receivables

14. Tax provisions

Other income taxes relate primarily to the Italian income tax payable on the gain on disposal. Real property tax provisions relate exclusively to companies in Germany.

15. Other provisions

The provisions for maintenance and construction services already performed, but not yet invoiced relate primarily to Forum Wetzlar, which is currently under construction, and the Phoenix-Center Hamburg, which was completed in September 2004.

All provisions have a term of up to one year.

16. Other liabilities

The Miscellaneous item mainly comprises liabilities for supplementary heating and ancillary costs and rental prepayments for the following year.

Other financial Obligations

Contingencies and Commitments

Contingent liabilities under the HGB in the previous year amounted to € 17,855 thousand.

Deutsche Euroshop AG has entered into contingent liabilities in the form of a debtor warrant in the amount of € 1,800 thousand. This relates to a performance-related contingent purchase price consideration to be paid to the seller of of the Árkád Pécs shopping center over a period of up to 10 years.

Other Disclosures

The Group employed three staff as at 31 December 2004.

In accordance with section 160(1) sentence 8 of the AktG (Aktiengesetz – German Public Companies Act), we hereby disclose, as required by the disclosure obligations under the Wertpapierhandelsgesetz (German Securities Trading Act), that the shareholders listed below hold voting rights of Deutsche EuroShop AG of 5% and more:

By reference to section 161 of the AktG, we hereby disclose in accordance with the recommendations of the German Corporate Governance Code (section 6.6) that the Supervisory Board and Executive Board members held the following number of outstanding shares of Deutsche Euro Shop AG (total: 15,625,000) as at 31 December 2004:

Notes to the Consolidated Profit and Loss Account

17. Revenue

Other revenue relates primarily to ancillary costs that were oncharged and compensation for use and settlement payments made to former tenants.

18. Other operating income

19. Other operating expenses

20. Net finance costs

Income from investments primarily comprises distributions from investments.

An amount of € 2,398 thousand was added to the investments in DB Immobilienfonds 12,
Main-Taunus Zentrum KG and Ilwro Joint Venture Sp. Zo.o.

Investments during the current financial year amounting to € 3,803 thousand comprise additions to property assets previously capitalised under German commercial law. As a result of the recognition of the fair value of properties, the investments are recognised in full as a current expense in the year in which they arose.

21. Income taxes

In measuring deferred taxes, the tax rates applicable in accordance with IAS 12 are the ones valid under current legislation at the date at which the temporary differences will probably reverse. In 2004, a tax rate of 25% for deferred taxes was calculated for companies in Germany. In addition, a solidarity surcharge of 5.5% on calculated corporation tax was recognised. The respective local tax rates were recognised for companies abroad.

22. Other taxes

Real property tax relates to amounts not allocable to tenants.

Disclosures on the Consolidated Cash Flow Statement

Disclosures on the consolidated cash flow statement
The cash flow statement has been prepared in accordance with IAS 7 and is broken down into operating cash flow and cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities. Cash and cash equivalents consist of cash, cheques and DWS fund shares.

Operating cash flow
After adjustment of the net profit for the period, the operating cash flow amounts to € 21,688 thousand. All changes to cash flows from net finance costs (interest income, remeasurement gains and income and expense from investments) are allocated to operations.

Cash flow from operating activities
Changes in receivables, provisions and liabilities are allocated to cash flow from operating activities.

Cash flow from investing activities
The sale of Centro Commerciale Friuli in Italy resulted in the disposal of the shopping center as at 31 December 2004 and proceeds of € 62,000 thousand.

Cash flow from financing activities
In financial year 2004, a dividend in the amount of € 36,031 thousand was paid to minority shareholders.

Changes in the consolidated Group
The sale of Centro Commerciale Friuli in Italy along with other changes resulted in a non-cash effect of € 1,386 thousand at the balance sheet date.

Earnings per Share

In accordance with IAS 33, earnings per share are calculated by dividing the consolidated net profit for the period by the weighted average number of shares in issue. This ratio can be diluted by potential ordinaryshares (convertible bonds and stock options). The Deutsche Euroshop Group has not concludedany dilutive stock acquisition agreements. As a result, the diluted and basic earnings per share are the same.

Segment Reporting

As a holding company, Deutsche Euroshop AG holds investments in German and foreign shopping centers as a single business segment; no segment reporting is therefore presented. Revenue is generated exclusively from rental and lease income.

Related Parties in Accordance with IAS 24

Deutsche EuroShop AG’s investments as well as the members of its Executive Board and the Supervisory Board are regarded as related parties in accordance with IAS 24. In the ordinary course of business, the Company maintained relationships involving the provision of goods and services with this group of persons and companies; the relevant terms and conditions fulfil the criteria for arm’s length transactions.

Income of € 2,507 thousand was generated in the financial year from the Douglas Group under existing rental contracts. Deutsche EuroShop AG Supervisory Board member Dr. Jörn Kreke is Chairman of the Supervisory Board of the Douglas Group.

Fees for service contracts amounting to € 24,545 thousand were paid to the ECE Group, of which Deutsche EuroShop AG Supervisory Board member Mr. Alexander Otto is Managing Director. € 15,121 thousand of this amount related to properties under construction, and € 9,424 thousand to operational properties.

Supervisory Board and Executive Board

Supervisory Board
a) Membership of other statutory supervisory boards
b) Membership of comparable German and foreign supervisory bodies of business enterprises

Manfred Zaß, Königstein im Taunus, Chairman
Banker

a) Deutsche Börse AG, Frankfurt am Main (Deputy Chairman)

Dr. Michael Gellen, Cologne, Deputy Chairman
Lawyer

a) Deutsche Wohnen AG, Eschborn (Deputy Chairman)
Deutschbau Immobilien Dienstleistungen GmbH, Düsseldorf (until 31 January 2004)

b) Deutschbau Holding GmbH, Düsseldorf (until 29 February 2004)
Deutschbau Wohnungsgesellschaft mbH, Berlin (until 31 January 2004)
Deutsche Bank Realty Advisors, Inc., New York (until 31 January 2004)

Thomas Armbrust, Hamburg
Member of the management of KG CURA Vermögensverwaltung G.m.b.H. & Co., Hamburg

a) C.J. VOGEL AKTIENGESELLSCHAFT für BETEILIGUNGEN, Hamburg (Chairman)
TransConnect Unternehmensberatungs- und Beteiligungs AG, Munich (Chairman)
Verwaltungsgesellschaft Otto mbH, Hamburg
Platinum AG, Hamburg (Chairman)

b) ECE Projektmanagement G.m.b.H. & Co. KG, Hamburg (Deputy Chairman)
Spiegel Holdings, Inc., Chicago/USA

Dr. Tessen von Heydebreck, Frankfurt am Main (until 17 June 2004)
Member of the Board of Managing Directors of Deutsche Bank AG, Frankfurt am Main

a) BASF AG, Ludwigshafen
BVV Versicherungsverein des Bankgewerbes a.G., Berlin
Deutsche Bank Privat- und Geschäftskunden AG, Frankfurt am Main
DWS Investment GmbH, Frankfurt am Main
Dürr AG, Stuttgart
Gruner & Jahr AG, Hamburg

b) Deutsche Bank Luxembourg S.A., Luxembourg (Chairman)
Deutsche Bank Polska S.A., Warsaw (Chairman)
Deutsche Bank 000, Moscow (Chairman)
Deutsche Bank Rt., Budapest (Chairman)
EFG Eurobank Ergasias S.A., Athens
Deutsche Bank Trust Corporation, New York
Deutsche Bank Trust Company America, New York

Dr. Jörn Kreke, Hagen
Businessman

a) Douglas Holding AG, Hagen (Chairman)

Alexander Otto, Hamburg
CEO of ECE Projektmanagement G.m.b.H. & Co. KG, Hamburg

a) HSH Nordbank AG, Hamburg
Verwaltungsgesellschaft Otto mbH, Hamburg
British American Tobacco (Industrie) GmbH, Hamburg
British American Tobacco (Germany) GmbH, Hamburg
BATIG Gesellschaft für Beteiligungen, Hamburg

Dr. Bernd Thiemann, Frankfurt am Main (from 17 June 2004)
Banker

a) Celanese AG, Kronberg (Chairman)
EM.TV AG, Munich (Chairman)
Berentzen Gruppe AG, Haselünne (Deputy Chairman)
M.M. Warburg & Co. KGaA Holding, Hamburg (Deputy Chairman)
Bankhaus Hallbaum AG & Co., Hanover
Thyssen Krupp Steel AG, Duisburg
VHV Vereinigte Hannoversche Versicherung a.G., Hanover

b) Rothschild GmbH, Frankfurt (Chairman)
Fraport AG, Frankfurt
Würth Group, Künzelsau (Deputy Chairman)

Executive Board
Claus-Matthias Böge, Hamburg (spokesman of the Executive Board)
Dirk Hasselbring, Hamburg

The remuneration of the members of the Supervisory Board amounted to E131 thousand in the year under review, and is broken down as follows:

No advances or loans were granted to the members of the Supervisory Board.

The remuneration of the Executive Board amounted to € 544 thousand, and is broken down as follows:

No advances or loans were granted to the members of the Executive Board.

The Company has not entered into any contingencies or commitments in favour of these persons.

In addition, the Declaration of Conformity with the German Corporate Governance Code required by section 161 of the AktG has been issued, and was made available to shareholders via publication on the Internet (www.deutsche-euroshop.de) in November 2004.

Hamburg, 24. March 2005 Deutsche EuroShop AG The Executive Board