ORCO PROPERTY GROUP

GSG GROUP
Société Anonyme
40, rue de la Vallée, L-2661 Luxembourg
R.C.S. Luxembourg B 102254
(hereinafter the "Company” or “GSG Group”)
REPORT OF THE BOARD OF DIRECTORS OF THE COMPANY ESTABLISHED ACCORDING TO
ARTICLE 10 (5) OF THE LUXEMBOURG LAW DATED 19 MAY 2006 ON TAKEOVER BIDS
AND
STATEMENT OF THE BOARD OF DIRECTORS OF THE COMPANY PURSUANT TO SEC. 27 (1) OF THE
GERMAN SECURITIES ACQUISITION AND TAKEOVER ACT
REGARDING THE MANDATORY OFFER
of
Materali, a.s.
Vladislavova 1390/17,
Nové Město, 110 00 Prague 1,
Czech Republic
to the shareholders of GSG Group regarding the acquisition of their shares in GSG Group
Shares of GSG Group:
Listed Ordinary Bearer Shares
ISIN: LU0251710041 (WKN: A0JL4D) ("Listed GSG-Shares")
Unlisted Ordinary Bearer Shares
ISIN: LU1082864585 (WKN: A1161G) ("Unlisted GSG-Shares")
Tendered GSG-Shares:
Listed GSG-Shares
ISIN: LU1086904296 (WKN: A117KN) ("Tendered Listed GSG-Shares")
Unlisted GSG-Shares
ISIN: LU1086905939 (WKN: A117KR) ("Tendered Unlisted GSG-Shares")
***
MANDATORY PUBLICATION PURSUANT TO SEC. 27 (3) SENTENCE 1, 14 (3) SENTENCE 1 OF THE
GERMAN SECURITIES ACQUISITION AND TAKEOVER ACT
The board of directors of the Company (the "Board" or the “Board of Directors”) presents its opinion (avis motivé)
in accordance with the Article 10 (5) of the Luxembourg law dated 19 May 2006 transposing Directive 2004/25/EC
of the European Parliament and of the Council of 21 April 2004 on takeover bids, as amended ("Luxembourg
Takeover Act") and at the same time its statement of comment (Stellungnahme) according to Sec. 27 (1) of the
German Takeover Act (Wertpapiererwerbs- und Übernahmegesetz; "WpÜG"), setting out the opinion of the Board
of Directors on the mandatory public takeover offer (Pflichtangebot) of 23 July 2014 (taking into account potential
amendments, the "Offer" or the "Mandatory Offer") by Materali, a.s., a joint stock company organized under
Czech law with registered office at Vladislavova 1390/17, Nové Město, 110 00 Prague 1, Czech Republic,
registered in the Companies Register at the Municipal Court in Prague with the company identification number
289 60 998 and file no. B 15557 (hereinafter the "Bidder") to the shareholders of GSG Group (the “Report”).
I.
Publication
This Report as well as all further statements or amendments of this Report will be published on the Company's
website http://www.gsg-group.de under the section "Investors – Shareholder Corner - Mandatory Offer of Materali,
a.s." and may further be obtained free of charge from the Company under the following address:
GSG GROUP (formerly named ORCO Germany S.A.)
40, rue de la Vallée
L-2661 Luxembourg
Copies may also be ordered via phone (+352 264 767-1), fax (+352 264 767 67) or email ([email protected]).
The internet address under which publication is made and the place where this Report is available free of charge
will also be published in the Bundesanzeiger (Federal Gazette).
This Report is published only in the English language.
II.
Own Responsibility of the Shareholders
The statements made herein are not meant to be a complete summary of the Offer Document. The contents and
performance of the Offer is in the sole responsibility of the Bidder. Each shareholder is responsible for reviewing
the Offer Document and taking any measures deemed appropriate by such shareholder.
The Board would like to point out that the statements made herein are not binding for the shareholders and the
shareholders need to take their own independent decision whether or not to accept the Offer based upon the
statements made in the Offer Document and any other sources of information available to them (including
obtaining professional advice) and taking into account their individual tax and other concerns.
The Board also points out that only the terms of Offer Document are binding and controlling for the conditions for
accepting the Offer and the performance of the Offer.
III.
General Information concerning the Offer
The Mandatory Offer, made by the Bidder, is a mandatory public takeover offer to the shareholders of GSG Group
within the meaning of Sec. 35 para. (2) of the German WpÜG.
The Mandatory Offer by the Bidder, contained in the offer document of 23 July 2014 published on the internet at
http://www.materali.cz (the "Offer Document"), refers to the acquisition of all shares (together the "GSG-Shares"
and individually a "GSG-Share") in GSG Group for a purchase price of EUR 0.53 in cash per GSG-Share.
The Offer is addressed to all holders of GSG-Shares (together the "GSG-Shareholders" and individually a "GSGShareholder"). The Offer can be accepted in accordance with the terms and conditions set forth in the Offer
Document.
IV.
Legal basis
The Mandatory Offer is issued under the laws of the Grand Duchy of Luxembourg and the Federal Republic of
Germany, in particular the Luxembourg Takeover Act and the WpÜG, as well as the related regulations.
As GSG Group is a target company with its registered office in Luxembourg and the listed GSG-Shares are
exclusively admitted to trading on a regulated market in Germany, the provisions of the WpÜG apply in relation
to the consideration, contents of the Offer Document and the offer procedure, which are assessed by German
Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) ("BaFin").
Corporate law matters, in particular the percentage of voting rights which confers control and exemptions from
the obligation to launch a takeover offer, as well as the admissibility of any action of GSG Group which might
result in the frustration of the takeover offer, are governed by Luxembourg law, in particular the Luxembourg
Takeover Act.
This Report setting out the opinion of the Board of Directors on the Mandatory Offer is governed by the
Luxembourg law, in particular Article 10 (5) of the Luxembourg Takeover Act. Pursuant to said provision, the
Board “… shall draw up and make public a document setting out its opinion of the bid and the reasons on which
it is based, including its views on the effects of implementation of the bid on all the company’s interest and
specifically employment, and on the offeror’s strategic plans for offeree company and their likely repercussions
on employment and location of the company’s places of business as set out in the offer document...”
Pursuant to Article 6 (1) of the Luxembourg Takeover Act “…The decision to make a bid shall be made public by
the offeror immediately after the decision has been taken by the offeror ... As soon as the bid has been made
public, the boards of the offeree company and of the offeror shall inform the representatives of their respective
employees or, where there are no such representatives, the employees themselves....”
Section 27 of the German WpÜG, which is also applicable to this Report, provides:
"(1) The management board and the supervisory board of the target company must prepare a reasoned
comments statement to the offer and each of its amendments. The comments statement must in particular
discuss:
1. The type and amount of the offered consideration,
2. the expected consequences of a successful offer for the target company, the employees and employee
representative bodies, the conditions of employment and the locations of the target company,
3. the goals pursued by the bidder,
4. the intentions of the members of the management and supervisory boards, to the extent that they are
holders of securities of the target company, to accept the offer.
(2) If the competent works council, or, if none exists, the employees directly transmit a comments statement
to the offer to the management board, the management board must, irrespective of its own obligation in
accordance with para. 3 sentence 1, attach such statement to its own statement.
(3) The management board and the supervisory board of the target company must publish the statement of
comments without undue delay after transmission of the offer document and its amendments by the bidder
in accordance with Sec. 14 para. 3 sentence 1. They must also transmit the comments statement
simultaneously to the competent works council or, if none exists, directly to the employees. The management
board and the supervisory board of the target company must communicate the publication of the comments
statement pursuant to sec. 14 para. 3 sentence 1 to the Federal Authority."
The Bidder published that it had acquired control over GSG Group on 13 June 2014. The publication is available
on the internet at http://www.materali.cz.
The Bidder has published the Offer Document in German on 24 July 2014, by (i) announcement on the internet
at http://www.materali.cz and (ii) keeping available copies of the Offer Document for distribution free of charge at
Deutsche Bank AG, ICSS, Issuer Services, Post-IPO Services, Taunusanlage 12, 60325 Frankfurt am Main,
Germany (order by fax at + 49 69 910 38794 or e-mail [email protected] stating a complete mail
address). The announcement of (i) the internet address under which the Offer Document is published and (ii) the
availability of the Offer Document at Deutsche Bank AG was published in the Federal Gazette (Bundesanzeiger)
on 24 July 2014.
BaFin has reviewed the Offer Document in the German language and has approved its publication on 24 July
2014. There are no other documents that are part of the Mandatory Offer.
Furthermore, on 24 July 2014, a non-binding English translation of the Offer Document not reviewed by BaFin
has been made available on the Bidder’s website http://www.materali.cz.
The Company was notified by the Bidder about the publication of the Offer Document and launching of the
Mandatory Offer on 24 July 2014. The Company published an Ad-hoc announcement towards this end on 24
July 2014.
While GSG Group itself has no employees, the Board distributed the Offer Document to the employees of the
Company’s subsidiaries on 25 July 2014. As of the date hereof, no feedback from the employees was provided.
It is reminded that during the period of the Mandatory Offer, the Bidder can – directly or indirectly – acquire
additional GSG-Shares or enter into corresponding acquisition agreements for GSG-Shares in a different manner
than as part of the Mandatory Offer. These transactions can be made on the stock exchange or over-the-counter
insofar as this takes place in accordance with the applicable legal provisions, especially the WpÜG. To the extent
that the Bidder has an obligation under Luxembourg or German law, information about such acquisitions or
acquisition agreements will be published on the Internet at http://www.materali.cz.
V.
Summary of the Offer
The summary of the Offer set forth below is taken from the Offer Document, which was prepared and published
by the Bidder and not by the Company. The Company is reproducing this part of the Offer Document prepared
by the Bidder as a basic overview for the ease of the reference for the readers of this Report. This summary does
not contain all relevant information and the GSG-Shareholders are advised to read the whole Offer Document.
Bidder:
Materali, a.s. Vladislavova 1390/17, Nové Město, 110 00
Prague 1, Czech Republic
Target company:
GSG GROUP (previously ORCO Germany S.A.), 40, rue de
la Vallée, L-2661 Luxembourg
Subject matter of the Offer:
Acquisition of all bearer shares of GSG Group (ISIN:
LU0251710041 (WKN: A0JL4D), LU1082864585 (WKN:
A1161G)) and Registered GSG-Shares to which no ISIN has
been assigned, each with a nominal value of EUR 0.10 per
share including all ancillary rights existing at the time of
settlement of the Offer, in particular profit participation rights.
Consideration:
EUR 0.53 per share.
Acceptance Period:
Start:
24 July 2014
End (subject to an extension):
21 August 2014, 24:00 hrs (local time Frankfurt am Main)
ISIN:
GSG-Shares:
Listed Ordinary Bearer Shares
ISIN: LU0251710041 (WKN: A0JL4D) ("Listed GSG-Shares")
Unlisted Ordinary Bearer Shares
ISIN: LU1082864585 (WKN: A1161G)
("Unlisted GSG-Shares")
Tendered GSG-Shares:
Listed GSG-Shares
ISIN: LU1086904296 (WKN: A117KN),
("Tendered Listed GSG-Shares")
Unlisted GSG-Shares
ISIN: LU1086905939 (WKN: A117KR)
("Tendered Unlisted GSG-Shares")
Acceptance of the Offer:
The acceptance of the Offer must be declared during the
Acceptance Period. As regards the Bearer Book-Entry GSGShares (Listed GSG-Shares and Unlisted GSG-Shares), the
acceptance of the Offer must be declared in writing to the
Custodian Bank (as defined in the Offer Document) of the
respective GSG-Shareholder and the declaration of
acceptance will only become valid upon a timely re-booking of
the Tendered GSG-Shares at Clearstream Banking AG to
ISIN LU1086904296 (WKN: A117KN) or LU1086905939
(WKN: A117KR). Until settlement of the Offer, the Bearer
Book-Entry GSG-Shares for which the declaration of
acceptance became valid, remain in the securities deposit
account of the accepting GSG-Shareholder. As regards the
Registered GSG-Shares, the acceptance of the Offer must be
declared to the Bidder by submission of an executed Share
Transfer Declaration.
Cost of acceptance:
Any fees of the Custodian Banks and further costs and
expenses have to be borne by the GSG-Shareholder who
accepts the Offer. The Bidder does not pay any fees to the
Custodian Banks.
Stock exchange trading with Tendered
Listed GSG-Shares:
The Tendered Listed GSG-Shares (ISIN LU1086904296
(WKN: A117KN)) can presumably be traded as of the third
Stock Exchange Trading Day after publication of the Offer
Document until the end of the last day of the Acceptance
Period in accordance with the more detailed provisions of
Section [10.7] of this Offer Document under ISIN
LU1086904296 (WKN: A117KN) on the regulated market
(General Standard) of the Frankfurt Stock Exchange. The
Tendered Unlisted GSG-Shares and Registered GSG-Shares
cannot be traded on the stock exchange.
Publications:
The Offer Document, which has been approved by German
Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) ("BaFin") on 23 July 2014, is
published on the internet at http://www.materali.cz. Copies of
the Offer Document will be made available free of charge at
Deutsche Bank AG, ICSS, Investor Services, Post-IPO
Services, Taunusanlage 12, 60325 Frankfurt am Main,
Germany (order by fax at +49 69 910 38794 or e-mail
[email protected] stating a complete mail address).
The announcement of (i) the internet address under which the
Offer Document is published and (ii) the availability of the
Offer
Document
at
Deutsche
Bank
AG
under
the
aforementioned contact details free of charge was published
in the Federal Gazette (Bundesanzeiger) on 24 July 2014. All
communications and announcements of the Bidder required
under the WpÜG in connection with the Mandatory Offer will
be published on the internet at http://www.materali.cz, and, to
the extent required under the WpÜG, also in the Federal
Gazette. Furthermore, a non-binding English translation of the
Offer Document that has not been reviewed by BaFin, will be
made available at http://www.materali.cz.
Settlement:
With respect to the GSG-Shares tendered during the
Acceptance Period, payment of the Offer Price will be made
promptly after the end of the Acceptance Period but by no later
than the eighth Banking Day (as defined in the Offer
Document) after the end of the Acceptance Period.
VI.
The Bidder and parties acting in concert with the Bidder
According to the Offer Document prepared by the Bidder, the share capital of the Bidder amounts to CZK
2,000,000. The Bidder was registered with the commercial register on 15 September 2009. The business purpose
of the Bidder is the letting of real estate, flats and non-residential premises. According to the Offer Document the
Bidder is engaged in the real estate sector. It is a holding company, without employees, undertaking real estate
investment through the acquisition of participations in companies owning real estate. The Bidder belongs to the
investment portfolio of Mr. Radovan Vítek, with business address at Václavské náměstí 1601/47, PSČ 110 00
Prague 1, Czech Republic ("Mr. Vítek"), a Czech national with long-standing experience with real-estate
investments in Central Europe.
The Bidder was a dormant company until the beginning of 2014 and has therefore not conducted any operational
business activities in the financial year 2013.
The members of the board of directors of the Bidder are Mr. Vítek and Ms. Kristína Magdolenová. The sole
member of the supervisory board of the Bidder is Mr. Milan Trněný. The sole shareholder of the Bidder is Mr.
Vítek.
Pursuant to Article 2 of the Luxembourg Takeover Act …”“persons acting in concert” shall mean natural or legal
persons who cooperate with the offeror or the offeree company on the basis of an agreement, either express or
tacit, either oral or written, aimed either at acquiring control of the offeree company or at frustrating the successful
outcome of a bid“ and „persons controlled by another person within the meaning of Directive 2004/109/EC shall
be deemed to be persons acting in concert with that other person and with each other.“
On 12 June 2014, Mr. Vítek acquired indirectly (via the Bidder, as its sole shareholder) control over GSG Group
within the meaning of Article 5 (3) of the Luxembourg Takeover Act. With the consent of Mr. Vítek, the Offer
Document has also been made with exempting effect on behalf of Mr. Vítek, and Mr. Vítek will therefore not
publish a separate mandatory offer for the GSG-Shares.
Furthermore, on 16 and 17 June 2014, Mr. Vitek participated in capital increases of GSG Group, whereby Mr.
Vítek acquired in four tranches a total of 2,466,902,565 new GSG-Shares (the "New GSG-Shares") against the
contribution in kind of 100% shares in Czech Property Investments, a.s., a joint stock company organized under
Czech law with registered office at Vaclavske namesti 47/1601, 110 00 Prague 1, Czech Republic, registered in
the Companies Register at the Municipal Court in Prague with the company identification number 42 716 161 and
file no. B 1115 ("CPI") into GSG Group.
Subsequently, Mr. Vítek contributed the New GSG-Shares to his directly or indirectly held holding entities, namely
Rivaroli, a.s., Lavagna, a.s., Mondello, a.s. and Zacari, a.s. According to the Offer Document, with the consent
of Mr. Vítek, Rivarolli, a.s., Lavagna a.s., Mondello, a.s., and Zacari, a.s., the Offer has also been made with
exempting effect on their behalf, and Mr. Vítek, Rivarolli, a.s., Lavagna a.s., Mondello, a.s., and Zacari, a.s., will
not publish a separate mandatory offer for the GSG-Shares.
Furthermore, the Bidder sold 44,289,242 GSG-Shares to NÁŠ PRVÝ REALITNÝ fond o.p.f. - PRVA PENZIJNA
spravcovska spolocnost Postovej banky, a.s. (a company neither affiliated with the Bidder nor Mr. Vítek).
Following these operations Mr. Vítek indirectly holds 2,746,212,226 GSG-Shares representing 94.02% of the
shares and voting rights in the Company. The persons acting in concert with the Bidder and Mr. Vítek are their
affiliated entities defined in Section 5.3 and Appendix 1 of the Offer (the “Controlling Persons”).
In July 2014, the Bidder and Deutsche Bank AG entered into non-tender agreements with each of Orco Property
Group S.A., Brillant 1419. GmbH & Co. Verwaltungs KG and Linkskaters Limited (the "Major Shareholders")
under which the Major Shareholders have undertaken not to tender a total of 137,464,693 GSG-Shares held by
the Major Shareholders into the Mandatory Offer or to exercise their Right to Tender (the "Non-Tender
Agreements").
Given that 2,746,212,226 GSG-Shares are already held by the Bidder, Mr. Vítek and the Controlling Persons and
the 137,464,693 GSG-Shares are held by the Major Shareholders which are subject to Non-Tender Agreements,
only 37,146,985 GSG-Shares representing approximately 1.27% of the shares and voting rights in the Company
can be potentially tendered by the GSG-Shareholders into the Mandatory Offer.
VII. GSG Group
GSG Group is a joint stock company, established and existing under the laws of the Grand-Duchy of Luxembourg,
registered with the Registre de Commerce et des Sociétés of Luxembourg under number B 102254. The
registered office is located at 40, rue de la Vallée, 2661 Luxembourg, Grand-Duchy of Luxembourg.
The share capital of GSG Group is EUR 292,082,390.40, represented by 2,920,823,904 shares with nominal
value of EUR 0.10 each. 230,056,445 of the Bearer Book-Entry GSG-Shares are admitted to trading on the
regulated market of the Frankfurt Stock Exchange (General Standard) under ISIN: LU0251710041 (WKN:
A0JL4D). The remaining 2,690,767,459 GSG-Shares are not admitted to trading on any stock exchange.
The extraordinary general meeting of the Company’s shareholders held on 13 May 2014 in Luxembourg resolved
to amend and approve the authorized share capital of the Company and to set it to an amount of EUR 400,000,000
in addition to the then existing issued share capital. Following the implementation of the capital increases of 16
and 17 June 2014 with Mr. Vítek, the authorized capital of GSG Group still amounts to EUR 153,309,743.50 as
of the date of this Report. The Board points out that it convened an extraordinary general meeting of the
shareholders to take place on 28 August 2014 to resolve, among other matters, on the amendment and approval
of the new authorized share capital of the Company and to set it to an amount of EUR 400,000,000 in addition to
the then existing issued share capital.
To the best of Company’s knowledge the shareholder’s structure of the Company is as follows:
Shareholder
Number of Shares
%
Lavagna, a.s.; (Mr. Vítek)
701,297,979
24.01%
Zacari, a.s.; (Mr. Vítek)
638,236,468
21.85%
Rivaroli, a.s.; (Mr. Vítek)
576.673.203
19,74%
Mondello, a.s.; (Mr. Vítek)
550.694.915
18,85%
Materali, a.s.; (Mr. Vítek)
279.309.661
9,56%
ORCO Property Group
81.644.192
2,80%
Nas Prvy Realitny
44.289.242
1,52%
Alchemy Special Opportunity Fund II L.P.
31.914.894
1,09%
Brilliant 1419 GmbH & Co. Verwaltungs KG
11.531.259
0,39%
750.000
0,03%
4.482.091
0,15%
2.920.823.904
100,00%
Société Generale Paris
Others
Total
The Company is a real estate company founded in 2004 with a portfolio located in Germany and mainly in Berlin.
Through the acquisition of the Berlin based Gewerbesiedlungs-Gesellschaft (GSG) in 2007, GSG Group has
become one of the largest owners of commercial real estate in Berlin. The Company and its subsidiaries invest
in, manage, develop and lease out commercial properties whereby they pursue a long term holding strategy of
their assets with a focus on improving rental income with a diversified base of tenants.
Before the contribution of CPI to the Company, the business of GSG Group basically comprised of two segments,
the property investments segment and the development segment. The property investments division is GSG
Group’s core segment dealing with all real estate assets operated (as hotels and logistic parks) and rented out
assets or that will be so without any major refurbishment. The development business line comprises all real estate
assets under construction or designated as a future development in order to be sold to a third parties or to be
transferred to the property investment business line once completed.
Following the contribution of CPI to the Company, the GSG Group’s portfolio further expanded to central and
Eastern Europe, mainly to the Czech Republic, Slovakia, Poland and Hungary.
The Board of Directors of the Company currently consists of seven members, Mr. Edward Hughes (Chairman of
the Board), Mr. Tomáš Salajka (Secretary of the Board of Directors), Mr. Vítek, Mr. Martin Němeček (Managing
Director), Mr. Oliver Schlink, Mr. Ian Cash and Mr. Philippe Magistretti.
The Company itself does not have employees. Subsidiaries of the Company in Berlin have 103 employees as of
30 July 2014. Subsidiaries of CPI throughout CEE have 613 employees.
VIII. Intentions of the Bidder and the further Controlling Parties
According to Section 7 the Offer Document, the intentions of the Bidder and Mr. Vítek with respect to the future
business activities of GSG Group are the following:
“A. Economic and strategic background of the Offer
The Bidder and the other Controlling Persons together currently hold 94.02% of the voting rights in GSG Group.
Through its participation in GSG Group, the combination with CPI and the Offer, the Bidder together with the other
Controlling Persons intend to participate in GSG Group’s business and to expand GSG Group’s investment
strategy. GSG Group with its large portfolio should become the prime investment vehicle for the Mr. Vítek and the
Bidder and create a sector champion in the European real estate market providing for a well-balanced and
diversified portfolio.
B. Intentions of the Bidder and the further Controlling Parties
a) Future business activity, assets and future obligations of GSG Group
Following the implementation of the Mandatory Offer, the Bidder has no intention to change the business activities
of GSG Group. The Bidder is dedicated to the development of GSG Group’s existing portfolio of real estate and
committed to support the implementation of the planned investment strategy of GSG Group, which focuses on
stable income-generating real estate assets or real estate assets acquired opportunistically at a distressed price,
geographic diversification from Germany to the CEE region and Western Europe and strategic diversification with
investment in all standard real estate groups.
There is no intention on the Bidder’s side to modify the use of the assets or to establish any future liabilities of the
GSG Group outside the ordinary course of business. The Bidder also does not intend to divest any business
divisions or to implement any structural changes (to the extent not set forth otherwise in [(e) below]) in relation to
the GSG Group or its subsidiaries. For the avoidance of doubt, the Bidder expects that GSG Group will continue
to acquire and divest real estate assets in the ordinary course of business.
b) Registered seat of GSG Group, location of significant parts of the business
There are no intentions with respect to relocating the business seat or relocating or closing sites of significant
parts of the business.
c) Employees, employee representation and employment conditions
GSG Group has no employees. All employees are employed by GSG Group’s subsidiaries. On the basis of the
planning and intentions of the Bidder, the employment relationships and employment conditions of these
employees as well as the operational structure will remain unaffected by the completion of the Offer. The Bidder
does not intend any changes regarding the employment relation-ships, the employment conditions or the
representations of these employees.
d) Members of the Board of Directors and the Management of GSG Group
The Board of Directors was changed in March and May 2014, by the removal of Mr. Brad Taylor and Mr. Aleš
Vobruba, the resignation of Mr. Jean-Francois Ott and Mr. Nicolas Tommasini and the appointment of Mr. Vítek,
Mr. Edward Hughes, Mr. Martin Němeček, Mr. Tomáš Salajka, Mr. Oliver Schlink, Mr. Philippe Magistretti and Mr.
Ian Cash as new members of the Board of Directors. Mr. Edward Hughes was appointed Chairman of the Board
of Directors.
Subsequently, the new Board of Directors resolved to change the Management by terminating the executive
management positions of Mr. Jean-Francois Ott, Mr. Nicolas Tommasini and Mr. Brad Taylor and appointing Mr.
Martin Němeček as the new CEO and Mr. Zdeněk Havelka as the new Deputy CEO of GSG Group.
The Bidder agrees with this management restructuring and has no intention to implement any further changes
regarding the Board of Directors or the Management in connection with this Offer.
e) Intended structural measures
The Bidder and the other Controlling Persons intend to limit their participation in GSG Group to less than 95% of
GSG Group’s share capital. In the event that this threshold will be reached in connection with this Offer, the Bidder
and the other Controlling Persons intend to sell GSG-Shares in order to stay below this thresh-old. If Shareholders
that have not accepted the Mandatory Offer exercise their Right to Tender (please see Section 13(d) [of the Offer
Document]) after the end of the Acceptance Period, the Bidder and the other Controlling Persons may also sell
GSG-Shares in order to stay below this threshold.
Subsequent to the implementation of the Offer, the Bidder and the other Controlling Persons may consider to
increase the free float of the GSG-Shares again through a public offering of GSG-Shares (which might be
implemented in connection with a further capital increase of GSG Group or through the sale of GSG-Shares held
by the Bidder and/or the other Controlling Persons).
f) Intentions with respect to the business activities of the Bidder and Mr. Vítek (as further controlling
party)
Upon completion of the Mandatory Offer, the Bidder will remain a holding company. There are no changes
intended with respect to the business activities of the Bidder or Mr. Vítek (in particular regarding the registered
seat and the location of significant parts of the business, the use of the assets, the creation of future liabilities,
the employees and their representations, the members of the management or significant changes to the
employment conditions).”
IX.
Position of the Board vis-à-vis the Offer
A. General
The Board of Directors, after carefully reviewing the Offer and the Offer Document, in particular the sections
concerning the implementation of the bid on all the Company’s interest and specifically employment, and on the
Bidder’s strategic plans for the Company and their likely repercussions on employment and location of the
Company’s places of business presents its positions as follows. It shall be pointed out that Mr. Vítek abstained
on the deliberation and voting concerning this Report due to conflicts of interests.
The Board points out that the following principles shall be respected and complied with in case of a mandatory
offer:
a) all holders of the securities of the Company of the same class must be afforded equivalent treatment;
moreover, if a person acquires control of a company, the other holders of securities must be protected;
b) the holders of the securities of the Company must have sufficient time and information to enable them to reach
a properly informed decision on the bid; where it advises the holders of securities, the Board of the Company
must give its views on the effects of implementation of the bid on employment, conditions of employment and
the locations of the company’s places of business;
c) the Board of the Company must act in the interests of the Company as a whole and must not deny the holders
of securities the opportunity to decide on the merits of the bid;
d) false markets must not be created in the securities of the Company, of the Bidder or of any other company
concerned by the bid in such a way that the rise or fall of the prices of the securities becomes artificial and the
normal functioning of the markets is distorted;
e) the Bidder must announce a bid only after ensuring that he/she can fulfil in full any cash consideration, if such
is offered, and after taking all reasonable measures to secure the implementation of any other type of
consideration; and
f) the Company must not be hindered in the conduct of its affairs for longer than is reasonable by a bid for its
securities. In any event this period shall not exceed 6 months from the date when the decision to make a
takeover bid was made public by the Bidder.
B. Acquisition of further GSG-Shares by the Bidder, Mr. Vítek and the Controlling Persons.
The Board of Directors specifically points out that Mr. Vítek and his affiliates (including the Bidder) hold in
aggregate 2,746,212,226 GSG-Shares representing 94.02% of the shares and voting rights in the Company.
Given that 2,746,212,226 GSG-Shares are already held by the Controlling Persons and the 137,464,693 GSGShares are held by the Major Shareholders which are subject to Non-Tender Agreements, only 37,146,985 GSGShares representing approximately 1.27% of the shares and voting rights in the Company can be potentially
tendered by the GSG-Shareholders into the Mandatory Offer.
C. Board position regarding the kind and amount of offer consideration
The offer price is EUR 0.53 per GSG-Share in cash.
According to Sec. 31 (3) WpÜG, the Bidder must offer a cash consideration to the shareholders of the target
company if he or persons acting in concert with him or their subsidiaries have acquired at least 5% of the shares
in the target company for cash in the last six months prior to the publication of acquisition of control. According to
the Offer Document, on 11 March 2014, Gamala Limited, an entity closely associated with Mr.Vítek acquired
114,600,000 GSG-Shares for a cash consideration of EUR 0.47 per share and on 12 June 2014 the Bidder
entered into various share purchase agreements, acquiring an aggregate number of 323,598,903 GSG-Shares
representing 71.29% of the then issued GSG-Shares. Therefore, the Bidder must offer a cash consideration.
According to Sec. 31 (1) and (7) WpÜG in conjunction with Secs. 4 and 5 WpÜG Offer Regulation, the
consideration offered to the GSG-Shareholders for their GSG-Shares as part of a mandatory public takeover offer
within the meaning of Sec. 35 (2) WpÜG must be fair. The minimum value to be offered to the GSG-Shareholders
per GSG-Share must in each case be equal to at least the greater of the two following amounts:
a)
According to Sec. 5 WpÜG Offer Regulation, the consideration for the GSG-Shares must be equivalent
to at least the weighted average domestic stock exchange price of the GSG-Shares during the last three
months before publication of the acquisition of control by the Bidder pursuant to Sec. 35 (1) sentence 1
in conjunction with Sec. 10 (3) WpÜG on 13 June 2014 ("Weighted Average Price"). According to the
Offer Document, the Weighted Average Price communicated by BaFin to the Bidder as of the relevant
date of 12 June 2014 is EUR 0.53 per GSG-Share. The Offer Price in the amount of EUR 0.53 per GSGShare is equal to the Weighted Average Price.
b) According to Sec. 4 WpÜG Offer Regulation, the consideration must be equivalent to at least the value
of the highest consideration agreed upon or granted by the Bidder, a person acting in concert with it
within the meaning of Sec. 2 (5) WpÜG, or their subsidiaries for the acquisition of GSG-Shares within
the last six months before the publication of this Offer Document pursuant to Sec. 35 (2), 14 (2) sentence
1 WpÜG on 24 July 2014. During the period of six months before 24 July 2014 (the date of publication
of the Offer Document), neither the Bidder nor persons acting in concert with it or their subsidiaries have
acquired GSG-Shares at a price exceeding EUR 0.53. The highest price paid per GSG-Share was in fact
EUR 0.52 in connection with the Pre-Acquisitions (please see Sec. 5.4 of the Offer Document). The Offer
Price in the amount of EUR 0.53 per GSG-Share therefore exceeds this amount by EUR 0.01, i.e., by
approx. 1.9 %.
The Offer Document states that the Bidder considered the historical stock exchange prices of the Listed GSGShares in addition to the minimum pricing rules. The Bidder states in the Offer Document that it believes that the
stock exchange prices of the Listed GSG-Shares constitute a suitable basis for assessing the reasonableness of
the Offer Price, because the Listed GSG-Shares demonstrate a functioning stock exchange trading with adequate
free-float and adequate trading volume.

On 11 June 2014, the last stock exchange trading day prior to publication of voting rights notifications of
Bidder pursuant to Art. 8 and 9 of the Luxembourg Transparency Law, the closing price of the Listed GSGShares in the XETRA electronic trading system amounted to EUR 0.51. The Offer Price thus includes a
premium of EUR 0.02, or approx. 3.8 %, on the closing price of 11 June 2014.

The volume-weighted one-month average price of the Listed GSG-Shares from 11 May 2014 through 11
June 2014 amounted to EUR 0.52. The Offer Price thus includes a premium of EUR 0.01 per GSG-Share,
or approx. 1.9 %, on that average price.

The volume-weighted six-month average price of the Listed GSG-Shares Shares from 11 December 2013
through 11 June 2014 amounted to EUR 0.52. The Offer Price thus includes a premium of EUR 0.01 per
GSG-Share, or approx. 1.9 %, on that average price.
It should be noted that the historical stock exchange prices and average prices set out above have likely been
affected by the press release made by GSG Group on 2 June 2014 announcing the contribution of CPI to the
Company and the resulting obligation for Mr Vítek to make a mandatory offer to the shareholders of GSG-Group
and that due to the capital increases of 16/17 June 2014 in the meantime a dilution of the participation of Listed
GSG-Shares in the capital of GSG Group has occurred.
Ultimately, the Offer Price is equal to the Weighted Average Price and exceeds the highest price paid per GSGShare in connection with the Pre-Acquisitions (see above).
Based on such considerations, the Board of Directors has concluded that the offer consideration offered by the
Bidder is fair, but does not offer any attractive premium over the Company's historic stock prices.
D. Board position regarding the expected consequences of a successful offer for the Company, the
employees, the conditions of employment and the locations of the Company and the goals pursued
by the Bidder
The Board reviewed the intentions of the Bidder and the further Controlling Persons concerning the future of the
Company as declared in Section 7 of the Offer Document. The Board has no capacity to examine or verify the
intentions declare by the Bidder and the further Controlling Persons and the only source of such intentions is the
Offer Document.
a) Future business activity, assets and future obligations of GSG Group
The Bidder declares that it “… has no intention to change the business activities of GSG Group … [and that he]
… is dedicated to the development of GSG Group’s existing portfolio of real estate and committed to support the
implementation of the planned investment strategy of GSG Group, which focuses on stable income-generating
real estate assets or real estate assets acquired opportunistically at a distressed price, geographic diversification
from Germany to the CEE region and Western Europe and strategic diversification with investment in all standard
real estate groups.”
The Board of Directors welcomes the position of the Bidder with respect to business activities and strategy of the
Company. The Board decided to expand the Company’s strategy following the general meeting held on 13 May
2014, and to adapt the new investment principles that will diversify the Company’s investment focus on more
regions and will include growing CEE markets and high-yielding assets1.
The Board is satisfied with the Bidder’s position that the Company … “with its large portfolio should become the
prime investment vehicle for Mr. Vítek and the Bidder and create a sector champion in the European real estate
market providing for a well-balanced and diversified portfolio”. The growth of the Company and its success is in
1
Please refer to Company press release “Extraordinary General Meeting of Shareholders held on 13 May 2014. Expansion of Strategy” published
of 14 May 2014
the interest of all shareholders and other stakeholders of the Company, including the employees of the Company’s
group.
The Board also notes the information that the Bidder … “also does not intend to divest any business divisions or
to implement any structural changes in relation to the GSG Group or its subsidiaries.”
b) Registered seat of GSG Group, location of significant parts of the business
The Board acknowledges and welcomes that the Bidder has no intention to relocate the business seat of the
Company or relocate or close sites of significant parts of the business. The registered (business) seat of the
Company is located in Luxembourg and, as it appears from the Offer Document, there is no intent by the Bidder
to change it. While the Board expects increasing of the business presence in CEE, in particular after the
acquisition of CPI, there shall be no repercussions on the registered seat of the GSG Group. The increased
presence and business of the group throughout the CEE relates to the expansion of strategy of the Company,
which was approved before the Offer. The increased presence in the CEE region also comes with the acquisition
of CPI business. This is viewed by the Board in a positive manner, given that all these changes are related to
the growth of the whole group.
c) Employees, employee representation and employment conditions
While GSG Group itself has no employees, the various subsidiaries of the Company employ a total of 716
employees throughout CEE, mainly in the Czech Republic, Germany and Hungary.
The Board believes that protecting the employees’ positions is an important element of corporate responsibility
and overall steering of the Company. In particular, following the restructuring and cost cutting procedures that
occurred during the crisis period, the announcement by the Bidder that it does not plan any changes regarding
the employment relationships, the employment conditions or the representations of these employees, is perceived
positive by the Board of Directors. Given that there are no repercussions to the employment announced by the
Bidder, the Board is of the opinion that position and livelihood of the employees will be protected.
The Board distributed the Offer Document to the employees of the Company’s subsidiaries on 25 July 2014. As
of the date hereof, no feedback was provided and therefore the Board is no able to annex a separate employees’
opinion to this Board Report.
d) Members of the Board of Directors and the Management of GSG Group
The Board points out significant changes in the structure of the Board and the management that occurred in 2014.
The Board of Directors was changed in March and May 2014. The former Board members Mr. Brad Taylor and
Mr. Aleš Vobruba were removed and Mr. Jean-Francois Ott and Mr. Nicolas Tommasini resigned from their Board
functions. As of the date of this Report, the Board is composed of the following members: Mr. Vítek, Mr. Edward
Hughes, Mr. Martin Němeček, Mr. Tomáš Salajka, Mr. Oliver Schlink, Mr. Philippe Magistretti and Mr. Ian Cash.
In March 2014 the Board of Directors resolved to change the management by terminating the executive
management positions of Mr. Jean-Francois Ott, Mr. Nicolas Tommasini and Mr. Brad Taylor and appointing Mr.
Martin Němeček as the new CEO and Mr. Tomas Salajka as the new Deputy CEO of GSG Group.
The Bidder informed that he agrees with this management restructuring and has no intention to implement any
further changes regarding the Board of Directors or the Management in connection with the Offer.
It is further noted that following the completion of capital increases of 16 and 17 June 2014 resulting in the
acquisition by GSG Group of 100% shares and voting rights in CPI, the Board of Directors of GSG Group decided
to proceed with the implementation of changes in the management structure of GSG Group as of 1 August 2014,
notably including top managers of CPI and of ORCO PROPERTY GROUP into GSG Group.
Mr. Martin Nemecek remains in the position of CEO of GSG Group. Mr. Nemecek also serves as the Managing
Director of the Board of Directors of GSG Group. Mr. Zdenek Havelka has been appointed Deputy CEO of GSG
Group. Mr. Tomas Salajka, previously Deputy CEO became Director of Asset Management and Sales of GSG
Group. Mr. Salajka also serves as the Secretary of the Board of Directors of GSG Group.
As of the date of this Report the management team of GSG Group is comprised of the following members as of
1 August 2014: Mr. Martin Nemecek, CEO; Mr. Zdenek Havelka, Deputy CEO; Mr. Tomas Salajka, Director of
Asset Management and Sales; Mr. Pavel Semrad, Deputy Director of Asset Management and Sales; Mr. Yves
Desiront, CFO; Mr. Pavel Mechura, Deputy CFO; Mr. Pavel Mensik, Director of Investments; Mr. Igor Klajmon,
Director of Development; Mr. Martin Stibor, Head of Property Management; Mr. Stepan Razga, Chief Operations
Officer; and Mr. Martin Matula, General Counsel.
e) Intended structural measures
The acknowledges that “The Bidder and the other Controlling Persons intend to limit their participation in GSG
Group to less than 95% of GSG Group’s share capital.” Given that Mr. Vitek, the Bidder and the other Controlling
Persons already hold 94.02% of the shares and voting rights in the Company, the outcome of the Offer will not
have any significant impact on the overall shareholding of the Company.
f) Intentions with respect to the business activities of the Bidder and Mr. Vítek (as further controlling
party)
The Board of Directors acknowledges the Bidder’s statement that “upon the completion of the Mandatory Offer,
the Bidder will remain a holding company. There are no changes intended with respect to the business activities
of the Bidder or Mr. Vítek (in particular regarding the registered seat and the location of significant parts of the
business, the use of the assets, the creation of future liabilities, the employees and their representations, the
members of the management or significant changes to the employment conditions).”
E. Board statement regarding the intent of any of its members to accept the Offer
Mr. Vítek, as a shareholder of the Company, informed the Board that neither he nor any of his Controlling Persons
intend to accept the Offer by the Bidder, since they all act in concert with the Bidder and intend to maintain their
shareholding structure.
F. Conclusion
In conclusion the Board is of the opinion that the Mandatory Offer will not have a significant impact on the
Company’s future business activity, registered seat, location of significant parts of business, employees and
employment conditions, management and structural changes, shareholders and other stakeholders, given that
Mr. Vítek, the Bidder and the other Controlling Persons already hold 94.02% of the shares and voting rights in
the Company.
Taking into account intentions of the Bidder described in the Offer, in particular with respect to changes of the
Company’s business, registered seat and employment that are not planned by the Bidder, the Board of Directors
believes that the completion of the Offer as such, will not have a negative influence on the Company’s situation.
The Board does not intend to make any steps aimed at potential frustration of the Offer.
Moreover, if Mr. Vitek intends to use GSG Group as his prime investment vehicle in the European real estate
market, the Company’s growth will be beneficial to all the Company’s stakeholders.
The Board does not express any recommendation to the Shareholders whether or not to accept the Offer.
Shareholders should carefully consider the consequences of accepting or not accepting the Offer.
Before taking the final decision to accept the Offer GSG-Shareholders should consult with professional tax
advisers any tax consequences of accepting the Offer.
Shareholders who accept the Offer:
a)
will no longer participate in the potential positive development of the Company's business and cannot
claim any future dividends;
b)
will not have an opportunity to participate in any compensation offers resulting from a squeeze-out or
sellout right as more fully described in Section 13 of the Offer Document;
c)
have a right of withdrawal as more fully described in Section 14 of the Offer Document.
Shareholders who do not accept the Offer will continue to participate in the chances and risks of investment in
the GSG-Shares but need to be aware of the possible consequences described more fully in Section 13 of the
Offer Document including, but not limited to
a)
b)
c)
movements of the stock price of the GSG-Shares;
reduced free float affecting the liquidity of the markets on which GSG-Shares are traded;
the risk that the GSG-Shares could be delisted (even if the Bidder has not stated any intent to cause a
d)
delisting);
the right to tender the GSG-Shares to the Bidder pursuant to Art. 16 (2) Luxembourg Takeover Act and
Art. 15 (3) to (5) Luxembourg Takeover Act;
e)
f)
the Squeeze-out right of the Bidder;
the ability of the Bidder and the Controlling Persons to pass important decisions in general meetings of
the Company, including, but not limited to the election and dismissal of members of the Board of
Directors, changes to the articles of association, capital increases (with or without exclusion of
subscription rights), the conversion of ordinary shares, issuing convertible/warrant-linked bonds or
participation rights, creation of authorized capital, transformation, merger, de-merger as well as
liquidation.
The Board of Directors of the Company.
Luxembourg, 7 August 2014

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