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DES GB2013 E

DEUTSCHEEUROSHOPANNUALREPORT2013/GROUPMANAGEMENTREPORT 119 MANAGEMENT SYSTEM, RESEARCH AND DEVELOPMENT The Executive Board of Deutsche EuroShop manages the Company in accordance with the provisions of German company law and with its rules of procedure. The Executive Board’s duties, responsibilities and business procedures are laid down in its rules of procedure and in its schedule of responsibilities. The management indicators are based on the targets of having shop- ping centers with sustainable and stable value growth and a high liquidity surplus generated by long-term leases. The indicators are revenue, EBT excluding valuation gains/losses and FFO. The Supervisory Board supervises and advises the Executive Board in its management activities in accordance with the provisions of Ger- man company law and the rules of procedure. It appoints the mem- bers of the Executive Board and significant transactions by the Exec- utive Board are subject to its approval. The Supervisory Board comprises nine members, all of whom are elected by the Annual General Meeting. Members of the Executive Board are appointed and dismissed on the basis of sections 84 and 85 of the Aktiengesetz (AktG – German Public Companies Act). Changes to the Articles of Association are made in accordance with sections 179 and 133 of the AktG. The Supervisory Board is also authorised to amend the Articles of Association in line with new legal provisions that become binding on the Company, as well as to resolve changes to the Articles of Association that only relate to the wording without a resolution of the Annual General Meeting. More information about the Executive Board and the Supervisory Board can be found in the declaration on corporate governance. A research and development (R&D) report is not required as part of the Management Report because Deutsche EuroShop does not need or pursue any research and development in connection with its pri- mary business. Economic review MACROECONOMIC AND SECTOR-SPECIFIC CONDITIONS Germany’s gross domestic product (GDP) rose by 0.4% in 2013, according to the German Federal Statistical Office’s calculations. The German economy continued to benefit from strong foreign trade and stable domestic demand. The labour market remained strong in the year under review. On average, 2.95 million people were registered as unemployed during the year, putting the unemployment rate at 6.9%. Consumer prices in Germany rose by an average of 1.5% versus 2012. Domestic demand was mainly driven by private household spending, which rose for the third year in a row. In 2013, gross pay per employee rose by 1.3% according to the German Federal Statistical Office. In an environment marked by high employ- ment and low interest rates, the propensity to consume continued to rise, and the savings rate dropped to 10.0% of disposable income in 2013 (2012: 10.3%). The last time the savings rate was lower was in 2001 (9.5%). Private consumer spending, which accounted for 57.5% of GDP, rose by a nominal 2.5% in 2013 (real: +0.9%). We anticipate a similar trend in 2014. The federal government forecasts that the Ger- man economy will grow by 1.8% in 2014. According to provisional calculations from the German Federal Sta- tistical Office, German retail sales posted nominal growth of 1.4% and real growth of 0.1% year-on-year. The German Retail Federation (HDE) forecasts that retail sales will increase by 1.5% in Germany in 2014. After price adjustments, this amounts to a stagnation, with prices on a par with 2013. The expansion of online trading remains the main focus of attention in terms of sales growth in the stationary retail sector. According to fig- ures from the German Retail Federation (HDE), online sales grew a further above-average 12% to around €33.1 billion. HDE anticipates that online sales will continue to climb in 2014, rising to €38.7 billion – an increase of approximately 17% year-on-year. Competition with online retailers is already intensifying in some sectors. For example, online transactions accounted for well over one quarter of total Christ- mas sales from consumer electronics, toys and books in 2013.

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