the theme of this year’s Annual Report is “The Art of Shopping”. This art is by no means an unprofitable activity for Deutsche EuroShop. On the contrary: increased revenue, a further improvement in earnings and the growth in value of our properties showed once again in 2004 that we are on the right track.

Our conversion to the International Financial Reporting Standards (IFRSs) made our success even more apparent. We are now complying with the legal requirements and in particular with the demands of the international capital markets ahead of schedule. We have described the effects in detail in the Notes to the Consolidated Financial Statements.

We can definitely be extremely satisfied with financial year 2004, given our 6.1% increase in revenue from 57.9 million to € 61.4 million. We generated a 46% increase in consolidated net profit from € 19 million to € 27.7 million. This amounts to earnings per share of € 1.78, as against € 1.22 in the previous year. € 1.32 per share of this amount resulted from operating activities and € 0.46 from the revaluation of the shopping centers.

There were a number of changes in our portfolio in 2004. Our newly opened shopping centers in Pécs, Hungary and in Hamburg contributed to earnings for the first time. The Árkád in Pécs opened on schedule and fully leased on 31 March, followed by the Phoenix-Center in Hamburg on 29 September. In mid-July 2004, we sold the Centro Commerciale Friuli shopping center in Udine, Italy. We were able to reinvest approximately half of the sales proceeds at the beginning of August when Deutsche EuroShop entered the Austrian market for the first time by acquiring a 50% share in the City-Arkaden shopping center in Klagenfurt. This complex is set to open in early 2006 and is already 65% leased – around one year prior to the planned opening.

We are well positioned with our portfolio of 14 shopping centers in six countries. The properties are fully leased and long-term income is secured. When making further investments – we currently have over € 30 million in liquid assets at our disposal – we will maintain our strategy (see page 7 f.). As a value-driven company, quality and return are more important to us than our rate of growth. We will remain focused on opportunities, risk-averse and dividend-oriented: We will again be proposing a dividend of € 1.92 per share for 2004 to the Annual General Meeting. This represents the equivalent of a comparatively high dividend yield of 5.0% at the end of 2004.

We have repeatedly emphasised our wish to provide capital market players with the greatest possible transparency. In line with this, we have appointed recognised experts for retail locations and well-known appraisers to rate our shopping center portfolio and to calculate its market value. In turn, this forms the basis for calculating the net asset value of our equity interests. We presented the results for the first time at the beginning of March 2004: Our Company’s net asset value as at 31 December 2003 was € 682.5 million. It had risen again in 2004 to € 686.8 million. This corresponds to a net asset value per share of € 43.96.

The capital markets rewarded our transparency and investor relations efforts: our share price did well over the course of the year to close at € 38.51 on 31 December 2004, up 14.1% on the 2003 year-end closing price. Together with the dividend of € 1.92 per share paid in June 2004, this resulted in an overall performance of nearly 20%, up from around 15% in the previous year.

We were extremely pleased to be admitted to the MDAX in September 2004. This means that we achieved one of our most important medium-term goals just 18 months after joining the Prime Standard. We are proud to be one of the 100 largest listed companies in Germany. In addition, we offer one of the highest dividend yields on the German trading floor – and one that remains tax-free as well.

In 2005, we are expecting a further increase in revenue to at least € 68 million, and currency-adjusted earnings before interest and taxes (EBIT) of over € 53 million. We are therefore expecting to be able to pay an attractive dividend again in financial year 2005.

We would like to take this opportunity to thank you for your confidence in our artistry.

Hamburg, April 2005

Claus-Matthias Böge