Final Results

28 April 2016

Phoenix Spree Deutschland

(The "Company" or "PSD")

FINAL RESULTS FOR YEAR ENDED 31 DECEMBER, 2015

A LANDMARK YEAR

2015 was a landmark year for Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, which today announces its full year results for the year ended 31 December 2015.

The acquisition of Phoenix Spree Property Fund, a successful debt refinancing and the listing on the Main Market of the London Stock Exchange in June 2015 have provided the Company with a platform from which to take advantage of the structurally attractive German residential market.

Financial highlights

· Pre-exceptional Profit Before Tax up 132% to €19.7 million (31 December 2014: €8.5 million)1

· Portfolio value rose by 15.3% from €245.3m to €282.8m during the year, or 10.6% on a like-for-like basis2

· 2015 EPRA NAV per share grew by 10.7% to €2.28 (£1.67) (31 December 2014: €2.06 (£1.60))

· Strong letting performance Rent per square metre rose by 9.5% to €7.5 (4.8% on a like-for-like basis)2

· Average rent on new lettings for the overall portfolio was €8.9 per sqm, a 9.8% increase over 2014. In Berlin, new leases were signed at an average of €10.3 per sqm, a 10.6% increase over 2014

· Final Dividend of 2.9p, giving a total dividend of 4.2p for the financial year

Operational highlights

· Acquisition of Phoenix Spree Property Fund and debt refinancing completed

· Successful transition to the London Stock Exchange - share price increased by 18%3 since listing TO 31 March 2016

· Condominium sales strategy launched - 20 apartments notarised in H2 2015

· As at 31 December 2015, five Berlin residential properties notarised for acquisition with an aggregate consideration of €35.8m and expected to increase the Fund's rental income by c.5.4%

· Recent share placing raised £36.6 million after costs to fund attractive pipeline of acquisition opportunities

Outlook

· Outlook for the German residential market, in particular Berlin, remains positive

· Demand for property continues to grow due to population growth and ongoing process of urbanisation, driving an upward trend in rents and property prices

· Supply of rental housing is restricted to a limited number of high-value areas

· Further scope for market rental growth and yield compression

· Residential prices remain below the cost of construction

· Opportunity to improve rental incomes through active asset management

· Further condominium sales programmes are planned for the year ahead

Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:

"I am delighted to announce our first set of full year results since our introduction to the stock market. Since listing in June 2015 we have delivered against our strategic objectives of delivering value to shareholders by growing our German residential portfolio, particularly in Berlin where there is still a significant supply/demand imbalance. We have also grown rental incomes throughout the year due to the active asset management of the portfolio and unlocked further value by reselling apartment blocks as condominiums at a premium to rental property values.

"The outlook for the German residential market remains positive and there is significant opportunity for us to continue to grow the portfolio. The recent successful fundraising will allow us to continue to strengthen our Berlin presence and to take advantages of opportunities as they arise."

1 Excluding exceptional items relating to the acquisition of PSPF, stock market listing and impairment of goodwill.

2 Includes PSPF properties for 2014 and 2015. Like-for-like adjusts for acquisitions and disposals made during 2015.

3 Share price at June 2015 listing £1.50. Share price as at 31 March 2016 £1.77.

For further information please contact:

About Phoenix Spree Deutschland:

Phoenix Spree Deutschland Limited is a UK listed investment company offering shareholders exposure to the German real estate market, particularly residential property in Berlin and other secondary German cities. Since Phoenix Spree Deutschland was incorporated in Jersey in 2007, the Company has assembled an attractive portfolio of German real estate assets which as at 31 December 2015 consisted of 115 properties containing 2,175 rental units (plus parking and miscellaneous units) across Berlin and secondary cities in Germany, representing a lettable area of 172,895 square metres.

The primary assets are multi-apartment residential buildings mostly built pre-1914 or post-1990 and 83 per cent of the Portfolio by lettable area relates to residential property, with the balance being commercial property. Berlin is the Portfolio's largest geographical market representing 66 per cent of its current total value.

Phoenix Spree Deutschland has a growth strategy to manage and invest in the Portfolio in order to drive capital growth and increase shareholder value. The Property Advisor managing the Portfolio, PMM Partners, has significant experience in generating rental and capital growth through innovative asset management and value-added investment. Underpinning this strategy is the potential value uplift the Property Advisor believes can be achieved within the Portfolio through a natural reversion of current rents to higher market rents, combined with a number of strategies to maximise the rental income and value of properties, such as renovation of apartments and conversion of commercial space to residential.

CHAIRMAN'S STATEMENT

I am pleased to announce the Company's first annual results since its successful introduction to the London Stock Exchange on 15 June 2015.

It was a transformational year for the Company, marking a period which saw the completion of a major debt refinancing, the acquisition of the Company's sister fund Phoenix Spree Property Fund ('PSPF') and a transfer of the listing to the Main Market of the London Stock Exchange. These actions, combined with the recent successful capital raising, provide the financial platform for future growth and leave the Company well positioned to achieve its investment objectives in the years ahead.

Corporate Developments and Strategy

Phoenix Spree Deutschland was established in 2007 as a closed-ended investment fund listed on the Channel Islands Securities Exchange, with an initial lifespan of up to 10 years. A major strategic review was initiated at the beginning of 2014 and a variety of options to provide liquidity for shareholders were evaluated. The Board subsequently recommended that a transaction, which would see the Company acquire its sister fund, followed by a listing on the London Stock Exchange, was likely to deliver the best outcome for investors, whilst at the same time providing a platform to fund future growth. Following a major refinancing in the first quarter of 2015, which provided the Company with cash to finance further acquisitions, the listing commenced in June 2015.

In the second half of the year, our objective was to grow the Portfolio through selective property acquisitions. The criteria for new acquisitions are rigorous, with all proposals having to meet, or exceed, the Company's target of achieving an IRR of 8-10%. It is therefore pleasing to report that, by the year-end, five Berlin properties had been notarised with an aggregate purchase value of €35.8m. Combined with the successful disposal of three non-core properties, these actions have increased exposure to the Berlin market, leaving the Portfolio better positioned to deliver reliable income, as well as capital growth.

Placing of New Ordinary Shares

At the time of the introduction to the Main Market of the LSE, no new shares were issued. Following property acquisitions in the second half of 2015, the Company issued new equity in February 2016 by way of an Offer for Subscription and Placing, raising a total of £38m to facilitate further growth of the Portfolio, particularly in Berlin. The Company also gained shareholder approval for a Placing Programme to enable additional equity to be raised in an efficient manner in the event that further investment opportunities arise. Notwithstanding a difficult market backdrop, the capital raising attracted a high level of investor interest and allowed the Company to welcome a number of new institutional investors to the register.

Financial Results

The year to December 2015 demonstrated continuing operational strength. Growth in both rents and property values continued, enabling EPRA NAV to increase by 10.7% for the year to €2.28 (12.2% before exceptional items). The active asset management strategies that have been pursued during 2015 have allowed the Company to take advantage of both the strong reversionary rental potential that exists within the Portfolio, as well as the opportunity to unlock value by reselling apartment blocks as condominiums.

During the year, new leases were signed at an average 21.2% premium to in-place rents. Additionally, the value arbitrage between an apartment block and the value of the same property sold as single apartments remains significant and the results of the first-phase condominium sales programme have been very encouraging.

Share Price & Dividend

The Company listed with an initial share price of 150 pence per share. By 31 March 2016, the share price had risen to 177 pence per share, representing an increase during the period of 18%. This share price appreciation has taken place against an uncertain market backdrop and, for the greater part, declining global equity markets. Whilst no guarantees can be provided in relation to future share price performance, it is nonetheless pleasing to see shareholders rewarded for their continued support during a period of stock market uncertainty and transformational change for the Company.

Since the introduction to the Main Market, the Company has targeted a dividend equal to 2.5% of EPRA NAV per share and intends to pursue a progressive dividend policy. The Board is therefore pleased to declare a final dividend of 2.9 pence per share, taking the full year dividend to 4.2 pence per share. This is expected to be paid on or around 10 June 2016.

Asset Manager

The past year has been an extremely demanding period for PMM Partners (PMM), Property Advisor to the Company. They have been actively involved in the complex and time-consuming corporate transactions that have successfully positioned the Company for its next phase of growth, whilst at the same time remaining focused on the day-to-day management of the Portfolio. The recruitment of Jörg Schwagenscheidt to the position of Chief Executive of PMM Partners Germany GmbH, and a number of other senior Berlin-based hires, should ensure that our asset management platform is capable of delivering on our key operating metrics and growth ambitions. The Board would like to thank PMM Partners and its staff for their role in contributing to this year's progress.

Corporate Governance

The Directors recognise that high standards of corporate governance are vital if the Company is to deliver its strategy and safeguard the interests of our shareholders and other valued stakeholders and are committed to ensuring that the Company complies with best practice standards for the business it carries out. As the shares are listed on the premium segment of the Official List, Listing Rule 9.8.6(5)R requires the Company to apply the provisions of the Code to the extent relevant to it.

The Board has considered the principles and recommendations of the Code and is pleased to confirm that the Company complies with the provisions of the Code which are relevant to it as an investment company.

Outlook

The outlook for the German residential market remains positive, particularly in Berlin, where residential prices remain on average below the cost of construction and demand for property continues to grow, due to the ongoing process of urbanisation and population growth. The Directors believe there is scope for further market rental growth and yield compression through the Portfolio's exposure to a structurally attractive German real estate market as well as the opportunity to improve rental incomes through active asset management. Additionally, a number of new condominium sales programmes are either underway or planned for the year ahead.

The market listing and subsequent capital raising, combined with a strengthening in our Berlin presence, provide the Company with both the funding and platform to take advantage of the pipeline of potential investment opportunities that lie ahead.

Robert Hingley

OPERATIONAL REVIEW

2015 represented a landmark year for the Company. Rents and property values continued their upward trend, while the results of the condominium sales programme first phase were encouraging. The acquisition of PSPF, the market listing and the recent share placing provide the Company with a solid foundation for growth.

The operating metrics detailed in the subsequent paragraphs are calculated on a pro-forma basis (i.e. as if PSPF was fully owned for the entire period under review) unless otherwise stated. The Directors believe this gives a better assessment of the operational performance of the property portfolio.

FINANCIAL HIGHLIGHTS

Like-for-like Portfolio value increases by 10.6%

The Portfolio valuation rose by 15.3% from €245.3m to €282.8m. On a like-for-like basis (excluding properties acquired or disposed of during 2014 and 2015), property values rose by 10.6%. This represents a value per sqm of €1,635, and a gross fully occupied yield of 5.7%. Using EPRA methodology, the net yield as at December 2015 was 4.6% (December 2014: 4.8%). Growth was strongest in Berlin and Nuremberg & Furth, which saw like-for-like values increase by 12.2% and 14.7% respectively.

Rental Growth Demonstrates Reversionary Potential

Annualised rental income increased to €14.1m at December 2015, a like-for-like increase of 3.2% compared with December 2014. Average in-place rent per sqm stood at €7.5, a like-for-like increase of 4.8% compared with December 2014. Nuremberg & Fürth saw the strongest growth in rent per sqm, with an 8.9% increase, followed by Berlin with 6.5%.

Reported vacancy stood at 10.1% at the year end, compared with 10.3% as at June 2015 and 9.1% as at December 2014. On an EPRA basis, which adjusts for units under renovation and reserved for resale, vacancy stood at 3.9% compared to 5.6% in June 2015 and 4.1% in December 2014.

Strong Performance in New Lettings

The Company had a strong letting performance, both in terms of volume and the price achieved. Around 370 leases were signed, representing 16% of total units owned. The average rent achieved on new lettings for the overall portfolio was €8.9 per sqm, a 9.8% increase over 2014. In Berlin, new leases were signed at an average of €10.3 per sqm, a 10.6% increase over 2014.

By the final quarter of December 2015, the achieved price for new lettings stood at €8.9 per sqm, which represented a 24.7% premium to the average portfolio passing rent, and for Berlin this premium stood at 40%. This significant reversionary gap between new leases and passing rents is one of the strengths of the Company's portfolio, and should underpin rental income growth into the medium term.

Investment and maintenance

Pro-forma renovation spend for the 12 month period was in line with expectations at €4.9m. The majority of this spend related to the renovation of vacated apartments prior to re-letting at rents at a premium to those paid by outgoing tenants. Around 6% of units were renovated in 2015, and the average rental premium achieved on re-letting was 68%. The average spend per refurbishment was approximately €20,400 or €290 per sqm. Further investment spend was focussed on upgrades to communal parts such as facades and staircases as well as investment in more efficient heating systems. In addition to capital expenditure, approximately €1.0m was spent on repairs and maintenance during 2015.

Portfolio Regional Overview

Acquisitions and Disposals

The company acquired a 94.8% interest in Phoenix Spree Property Fund Gmbh & Co KG in March 2015 for a consideration of €41.5m funded by a cash payment of €2.4m and the issue of 19.2m new shares. The Company had previously agreed an economic merger with PSPF in 2009 and the two funds had been managed on a joint basis since this time. The consideration paid for the controlling interest was in line with the latest reported NAV and therefore value neutral for shareholders.

During 2015, the Company notarised the purchase of five properties with an aggregate value of €35.8m. The properties consist of 213 apartments, 14 commercial units and, a lettable area of 18,200 sqm. These buildings are located in Berlin and represent an average purchase price of around €1,960 per sqm. The majority of the acquisitions are located in Prenzlauer Berg and Friedrichshain, two popular East Berlin districts. As at December 2015 one transaction valued at €16m had completed, and the remaining transactions completed in the first half of 2016. In aggregate, the acquisitions represent an increase in net contracted rent of around 10.4%. They have been financed using a combination of existing cash resources and debt. Following the completion of the recent share placing, the Company has significant resources available to fund further acquisitions and it is anticipated that several property purchases will be notarised during 2016.

Three properties were notarised for sale during the period, representing an aggregate disposal value of €2.3m. The first property, a commercial building in Dinslaken, was sold for a consideration of €1.4m and the sale completed in the second half of 2015. Additionally, two properties located in Nuremberg were notarised for sale, representing proceeds of €0.9m and a premium to book value of around 60%. These disposals are due to complete in the first half of 2016.

During the second half of 2015, 20 individual units (condominiums) were notarised for sale for an aggregate consideration of €4.9m. As at December 2015, 16 sales had completed, representing proceeds of €4.1m. The average price achieved for apartments was €3,912 per square metre, a significant premium to the average value for the Company's Berlin rental properties of €1,863.

Financial Results

The financial results for the period include the consolidation of PSPF from the date of its acquisition. Reported revenue for the period was €12.1m (December 2014: €6.6m). On an IFRS basis, profit before taxation was €13.0m (December 2014: €8.5m). The results were positively affected by a revaluation gain of €18.1m (December 2014: €4.5m). Profit before taxation is calculated after charging exceptional items relating to the acquisition of PSPF and the subsequent stock market listing of €2.3m, and goodwill impairment of €4.5m. Excluding these items, PBT was €19.7m (December 2014 €8.5m). Further one-off costs of €1.0m, incurred in relation to the cancellation of loans as part of the Company's refinancing, were recorded as finance charges. Reported earnings per share for the period were €0.14c (December 2014: €0.16c).

The board has declared a final dividend of 2.9 pence per share (December 2014: zero pence), which is expected to be paid on or around 10 June 2016 to shareholders on the register at close of business on 20 May 2016, with an ex-dividend date of 19 May 2016. Taking into account the interim dividend paid in October 2015, the declared dividend for the financial year to December 2015 is 4.2p. This is consistent with the Company's current policy of paying a dividend which is equivalent to 2.5% of EPRA NAV.

Balance Sheet

As at December 2015, the Company had gross borrowings of €133.8m (December 2014 €53.5m) and cash balances of €12.8m (December 2014 €3.6m) equating to a net debt of €121.0m (December 2014: €49.9m) and a net loan to value on the portfolio of 42.8%. With the exception of loans amounting to €9.6m, all loans across the portfolio have fixed interest rates and the average remaining duration is 5.4 years.

In February 2015, the Company entered into a €68m seven-year loan facility. As at December 2015, €66m of this facility was drawn and swap agreements entered into which result in an effective interest rate of 1.8%. The majority of this facility was used to refinance existing facilities. On 17 August 2015, the company drew an additional €14.7m of debt against properties within its PSPF subsidiary. Interest rates were fixed at 1.92% for seven years using swap contracts.

Since the year end, further debt has been arranged to finance properties notarised for purchase during 2015.

In March 2016, the Company issued 22.6 million new ordinary shares by way of a Placing and Offer for Subscription, raising £36.6m net of fees. The proceeds will be used to finance further acquisitions and upgrade existing properties.

EPRA NAV increases by 10.7%

EPRA NAV per share rose by 10.7% to €2.28 (£1.67) compared to €2.06 (£1.60) as at December 2014. Taking into account the interim dividend of 1.3p, the EPRA Total Return for the year was 11.5% in local currency. This compares to the Company's target of 8-10% per annum. EPRA NAV was affeted by a number of exceptional items relating to the acquisition of PSPF and the stock market listing in June. In total these exceptional items reduce EPRA NAV by around 1.5%.

Market Outlook

The outlook for the German residential market, and in particular Berlin, remains positive going into 2016. Population growth in the major urban areas, combined with limited supply, has driven an upward trend in rents and property prices, which is expected to continue into the medium term. With property values still below the replacement cost, new supply of rental housing is restricted to a limited number of high-value areas. PMM believes that prices would need to rise further before the supply and demand imbalance is addressed and, therefore, there is still significant upside potential within the Company's portfolio.

Property Advisor Adds Resource

Since the stock market listing, PMM has made significant investments into its asset management platform. Jörg Schwagenscheidt, former COO/Joint CEO of GSW, Berlin's largest residential property company, was recruited to the role of CEO of PMM Partners Germany. A number of additional senior hires have been made over the last three months, including heads of acquisitions and technical services. PMM believes this investment ensures that it has sufficient resource to manage further growth in the portfolio.

Background on PMM Partners

PMM Partners has acted as property advisor to the Company since inception. PMM has 13 members of members of staff, across offices in London and Berlin, focussing wholly or primarily on the Portfolio. PMM is responsible for the management activities of the real estate assets in the Portfolio which include:

PMM's principals have a background in property and finance and each have more than a decade of experience operating in the German residential market. The PMM team was recently enhanced by the recruitment of Jörg Schwagenscheidt who was previously chief operating office and board member of GSW Immobilien, Berlin's largest residential property company. PMM, its staff, and family members had an aggregate shareholding of 14.9% in the Company as at 31 March 2016.

REGIONAL REVIEW

Berlin Region (66% by value)

The Berlin portfolio had an excellent year, with rents and property values continuing the upward momentum observed since 2011.

During 2015, the portfolio value grew by 12.2% on a like-for-like basis, reflecting a combination of rental growth and yield compression. Like-for-like average rent per let sqm grew by 6.5% in the period. The increase was primarily driven by new lettings. 17.4% of the portfolio was re-let during 2015 at an average rent per sqm of €10.3. This represents a premium of 28.8% to passing rents. This premium has increased from 11% in 2011 to 40% by the fourth quarter of 2015. In addition, the Company's new letting prices have consistently outperformed the market (as represented by Jones Lang Lasalle (JLL)), reflecting both the quality of the properties and their premium locations within the most popular districts in Berlin.

Demand for housing in Berlin continues to outstrip supply. JLL estimates that there was demand for 24,000 new homes in 2015 versus supply of just 7,300. This supply gap has led to a decline in vacancy rates and caused average market asking rents to increase from €6.5 per sqm in 2010 to €9.1 in 2015. While it is unlikely that this speed of increase will be sustained, market commentators still expect rents to rise, given the population and economic outlook for the city, and the fact that rents remain relatively affordable compared to local income levels and rents in other capital cities. One of the key parts of the Company's strategy in Berlin for 2016 will be to integrate new acquisitions into the portfolio and carry out any value-added investment required in order to grow rents and capital values.

Central and North Germany (20% by value)

The Northern Germany portfolio includes the cities of Bremen, Hanover, Kiel and their surrounding areas.

The Portfolio is a mixture of "alt-bau", post war and recent build, consisting of 42 properties, representing 852 units. During 2015, the region saw limited growth, with capital values and average rents increasing by 3.2% and 2.4% respectively. The focus for the region in 2016 is to optimise rental performance while considering portfolio management strategies in relation to potential acquisitions and disposals.

Nuremberg & Furth (10% by value)

The region enjoyed a strong 2015, with rents and property values seeing significant growth.

Rent per let sqm saw an increase of 8.9%, driven by significant premiums achieved on new residential leases, while the value of the portfolio increased by 14.7%. Over the last three years, the Company has made significant renovation investment in the region and it is pleasing to see this being represented in the performance of the portfolio. In 2016, the priority is to drive further performance of the rental portfolio and to examine development opportunities that exist within a number of properties.

Condominiums

The Company launched its first condominium sales projects in the middle of 2015, with the intention of augmenting returns from its core rental business.

The strategy is designed to take advantage of the significant arbitrage that exists in the market between the average value of a Berlin apartment block, of around €1,900 per sqm, and the resale value of an individual apartment of between €2,500 and €5,000.

Two former multi-family rental properties, consisting of 47 units,. were prepared for sale during 2014 and 2015 and the first units were offered to the market in June 2015. By the end of 2015, 20 units had been notarised for sale with an aggregate sales value of €4.9 million, representing a €0.8 million premium over book value. For residential units, this represents an average value per sqm unit of €3,912 (or €3,642 including commercial units). Since the year end, prices for the remaining units have been increased to take into account market movements and further units have been notarised. It is expected that all units within these properties will be sold by mid-2017.

Two further condominium sales projects are planned for 2016. The first project is located in Berlin, Moabit and consists of 38 units, of which 32 are vacant following the comprehensive modernisation of the property during 2014 and 2015. It is expected that the property will generate sales proceeds of around €9 million and the first reservations are expected within the first half of 2016. The second project is expected to launch by the year-end and consists of 67 units in Berlin Friedrichshain.

 BUSINESS MODEL AND STRATEGY

The Company's strategy is to manage and invest in the portfolio in order to drive capital growth and increase shareholder value. PMM has significant experience in generating rental and capital growth through innovative asset management and value-added investment.

PMM has identified a number of strategies to maximise the rental income and value of properties:

Over the last five years, the value of the combined portfolio of PSD and PSPF has grown by 51.9% to €283m. Berlin now represents more than two thirds of the portfolio value and this focus is expected to increase during 2016.

The Company's investment strategy is to acquire and manage residential property in Berlin and other selected German secondary cities. The aggregate value of the Portfolio (including the assets of PSPF) has risen from €167.8m in 2008 to €282.8m in 2015, with each year seeing an increase. This equates to an average value per sqm of €1,635, ranging from €1,140 in Central and Northern Germany to €1,979 in Berlin (€1,863 excluding condominium projects).

The portfolio mainly consists of classic "alt-bau" properties which were built before 1914. Typically, these five storey buildings contain between 20 and 40 units, consisting of 1 to 3 bedroom apartments, often with shops on the ground floor. The vast majority of the Portfolio was acquired by the Company or PSPF during the period 2006 to 2008 and, as a result, the Properties have benefited from significant investment and active asset management by PMM.

The Company's business model is to acquire, renovate, optimise and monetise properties within Berlin and selected secondary cities.

Acquire

The Company focuses on apartment buildings which offer the potential for medium-term value creation. For example, properties may be rented at rates well below current market levels, have development capacity, or have the potential to be profitably resold as condominiums. Single properties, packages and portfolios are considered.

Renovate

A business plan is formulated for each property which analyses medium term investment requirements and the potential return on investment. A single apartment costs between €20,000 and €30,000 to renovate, while an entire building renovation might cost up to €2m. The Company targets a capital return on investment in excess of 100% on any value added investment.

Optimise

For properties considered to be core rental buildings, vacant units are re-let after refurbishment at the prevailing market rent. In the case of Berlin, this can be 50-100% above the level paid by previous tenants. Where appropriate, rent increases are applied for tenants paying less than the statutory rent level (Mietspiegel), where modernisation has been undertaken (and these costs are allowed to be recouped), or where the lease contains provisions for indexation. For properties which are designated as condominiums, units may be left vacant so they can achieve higher sale prices when sold in the near future.

Monetise

A percentage of properties are revalued each year. The increased rental income following renovation and optimisation is reflected in an uplift in property values which, in turn, generates further NAV growth. This enables the renovation investment to be recouped through additional bank lending if required. Condominium properties are sold on a unit-by-unit basis at a premium to rental property values. The cash flow from refinancing and condominium sales is used to facilitate further acquisitions and to pay dividends.

INVESTMENT PROPOSITION

Providing investors with exposure to a diversified portfolio of German residential real estate assets that offer potential for reliable income and capital growth.

The Directors are targeting a total annual return equivalent to 8-10% of EPRA NAV, of which 2.5% is expected to be in the form of dividends. The Company generates its investment returns through a number of streams.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2015

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015

1. Basis of preparation

The group consists of a parent company Phoenix Spree Deutschland Limited ('the Company'), incorporated in Jersey, Channel Islands and all its subsidiaries ('the Group') which are incorporated and domiciled in and operate out of Jersey and Germany. Phoenix Spree Deutschland Limited is listed on the premium segment of the main market of the London Stock Exchange.

The Group invests in residential and commercial property in Germany and during the year acquired Phoenix Spree Property Fund GmbH & Co. KG, a company with the same activities.

The registered office is at 13-14 Esplanade, St Helier, Jersey, JE1 1EE, Channel Islands.

In accordance with Section 105 of The Companies (Jersey) Law 1991, the Group confirms that the financial information for the year ended 31 December 2015 are derived from the Group's audited financial statements and that these are not statutory accounts and, as such, do not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRS").

The statutory accounts for the year ended 31 December 2015 have been audited and approved, but have not yet been filed.

The Group's audited financial statements for the period ended 31 December 2015 received an unqualified audit opinion and the auditor's report contained no statement under section 113B (3) and (6) of The Companies (Jersey) Law 1991.

The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 28 April 2016.

2. Summary of significant accounting policies

The principal accounting policies adopted are set out below.

2.1 Going concern

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future, based on the facilities secured through refinancing the borrowings of the Group, as set out more fully in note 26. The Directors have prepared projections for the period to 31 December 2018. These projections have been prepared using assumptions which the Directors consider to be appropriate to the current financial position of the Group as regards to current expected revenues and its cost base and the Group's investments, borrowing and debt repayment plans and show that the Group should be able to operate within the level of its current facilities. After making enquiries the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

2.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). The Company controls an entity when the Group is exposed to, or has rights to, variable returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Profit or loss and each component of other comprehensive income are attributable to the owners of the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributable to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Accounting policies of subsidiaries which differ from Group accounting policies are adjusted on consolidation. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. Those interests of non-controlling shareholders that present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. The non-controlling interest is computed on an EPRA basis.

Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

2.3 Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred to the Group, the liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non-controlling interest in the acquiree on an acquisition by acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Acquisition-related costs are expensed in profit or loss as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Goodwill is measured as the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase gain.

2.4 Revenue recognition

Revenue includes rental income and excludes service charges and other amounts directly recoverable from tenants. Rental income from operating leases is recognised in income on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives are recognised over the lease term, on a straight-line basis, as a reduction of rental income.

2.5 Foreign currencies

(a) Functional and presentation currency

The currency of the primary economic environment in which the Company operates ('the functional currency') is the Euro (€).The presentational currency of the financial statements is also the Euro.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Foreign exchange gains and losses resulting from such transactions are recognised in the consolidated statement of comprehensive income.

Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

2.6 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

2.7 Operating profit

Operating profit is stated before the Group's gain on its financial asset and after the revaluation gains for the year in respect of investment properties and after gains or losses on the disposal of investment properties.

2.8 Administrative and property expenses

All expenses are accounted for on an accruals basis and are charged to the consolidated statement of comprehensive income in the period in which they are incurred. Service charge costs, to the extent that they are not recoverable from tenants, are accounted for on an accruals basis and included in property expenses.

2.9 Exceptional items

Exceptional items are disclosed separately in the financial statements where this provides further understanding of the financial performance of the group, due to their significance in terms of nature or amount.

2.10 Property advisor fees

The element of property advisor fees for management services provided are accounted for on an accruals basis and are charged to the consolidated statement of comprehensive income as property expenses in the period in which they are incurred. Property advisor performance fees which are settled in shares are accounted for in accordance with the requirements of IFRS 2 Share Based Payments. Property advisor fees comprising synthetic equity participation fees are accounted for in accordance with the requirements of IFRS 2 Share Based Payments.

2.11 Investment property

Property that is held for long term rental yields or for capital appreciation or both, and that is not occupied by the Group is classified as investment property.

Investment property is measured initially at cost, including related transaction costs. After initial recognition, investment property is carried at fair value, based on market value.

The change in fair values is recognised in profit or loss for the year.

A valuation exercise is undertaken by the Group's independent valuer, Jones Lang LaSalle GmbH ("JLL"), at each reporting date in accordance with the methodology described in note 21 on a building-by-building basis. Such estimates are inherently subjective and actual values can only be determined in a sales transaction. The valuations have been prepared by JLL on a consistent basis at each reporting date.

Subsequent expenditure is added to the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are charged to the consolidated statement of comprehensive income during the financial period in which they are incurred. Changes in fair values are recorded in profit or loss for the year.

Purchases and sales of investment properties are recognised on legal completion.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

2.12 Goodwill

Goodwill is the difference between the amount paid on the acquisition of the subsidiary undertakings and the aggregate fair value of their separable identifiable assets acquired and liabilities assumed. Goodwill is capitalised as an intangible asset and in accordance with IAS 36 'Impairments of Assets' is not amortised but tested for impairment annually and when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. For impairment testing purposes goodwill is allocated to cash-generating units (CGUs). If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit or loss on sale.

2.13 Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation.

Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is charged so as to write off the costs of assets to their residual values over their estimated useful lives, on the following basis:

Equipment, fixtures and vehicles - 14.50% - 25% per annum, straight line

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

2.14 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.15 Tenant deposits

Tenant deposits are held off balance sheet in a separate bank account in accordance with German legal requirements, and the funds are not accessible to the Group. Accordingly neither an asset nor a liability is recognised.

2.16 Financial Instruments

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial liabilities are de-recognised when the obligation specified in the contract is discharged, cancelled or expired.

The Group classifies its financial assets as held at fair value through profit or loss, or loans and receivables. The classification depends on the purpose for which the financial assets were acquired, and is determined at initial recognition.

(a) Financial assets at fair value through profit or loss ('FVTPL')

Financial assets are classified as FVTPL when the financial asset is designated as FVTPL. A financial asset may be designated as FVTPL upon initial recognition if:

· such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

· the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management strategy, and information about the grouping is provided internally on that basis;

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. Fair value is determined in the manner described in note 32.

(b) Loans and receivables

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents. Loans and receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

i. Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the consolidated statement of comprehensive income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short term trade and other receivables when the recognition of interest would be immaterial.

Service charges receivable from tenants are presented net of amounts paid on account by tenants.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due. For trade and other receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within property expenses in the consolidated statement of comprehensive income. On confirmation that the trade and other receivables will not be collectable, the gross carrying value of the asset is written off against the associated provision.

ii. Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, cash at agents, demand deposits, and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

(c) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

(d) Trade and other payables

Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest method; this method allocates interest expense over the relevant period by applying the 'effective interest rate' to the carrying amount of the liability.

(e) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.

(f) Leases 

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

2.17 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the accounting date.

(b) Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is charged or credited in the consolidated statement of comprehensive income except when it relates to items credited or charged directly in equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is calculated at the tax rates and laws that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the accounting date.

The carrying amount of deferred tax assets is reviewed at each accounting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

2.18 New standards and interpretations

The following relevant new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning on 1 January 2015, as adopted by the European Union, and have not been early adopted:

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Company when the relevant standards and interpretations come into effect. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The following standards have been issued by the IASB but have not yet been adopted by the EU:

While the above standards have not yet been adopted by the EU the company is currently assessing their impact.

3. Financial Risk Management

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the Audit and Risk Committee under policies approved by the Board of Directors. The Board provides principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk and investment of excess liquidity.

3.2 Market risk

Market risk is the risk of loss that may arise from changes in market factors such as foreign exchange rates, interest rates and general property market risk.

(a) Foreign exchange risk

The Group operates in Germany and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to Sterling against the Euro arising from the costs which are incurred in Sterling. Foreign exchange risk arises from future commercial transactions, and recognised monetary assets and liabilities denominated in currencies other than the Euro.

The Group's policy is not to enter into any currency hedging transactions.

(b) Interest rate risk

The Group has exposure to interest rate risk. It has external borrowings at a number of different variable interest rates. The Group is also exposed to interest rate risk on some of its financial assets being its cash at bank balances. Details of actual interest rates paid or accrued during each period can be found in note 26 to the financial statements.

The Group's policy is to manage its interest rate risk by entering into interest rate swaps in order to limit exposure to borrowings at variable rates.

(c) General property market risk

Through its investment in property, the Group is subject to other risks, which can affect the value of property. The Group seeks to minimise the impact of these risks by review of economic trends and property markets in order to anticipate major changes affecting property values.

3.3 Credit risk

The risk of financial loss due to counterparty's failure to honour their obligations arises principally in connection with property leases and the investment of surplus cash.

The Group has policies in place to ensure that rental contracts are made with customers with an appropriate credit history. Tenant rent payments are monitored regularly and appropriate action taken to recover monies owed or if necessary to terminate the lease.

Cash transactions are limited to financial institutions with a high credit rating.

3.4 Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans secured on the Group's properties. The terms of the borrowings entitles the lender to require early repayment should the Group be in default with significant payments for more than one month.

3.5 Capital management

The prime objective of the Group's capital management is to ensure that it maintains the financial flexibility needed to allow for value-creating investments as well as healthy balance sheet ratios.

The capital structure of the Group consists of net debt (borrowings disclosed in note 26 after deducting cash and cash equivalents) and equity of the Group (comprising stated capital, reserves and retained earnings).

When reviewing the capital structure the Group considers the cost of capital and the risks associated with each class of capital. The Group reviews the gearing ratio which is determined as the proportion of net debt to equity. In comparison with comparable companies operating within the property sector the Board considers the gearing ratios to be reasonable.

The gearing ratios for the reporting periods are as follows:

4. Critical accounting estimates and judgements

The preparation of consolidated financial statements in conformity with IFRS requires the Group to make certain critical accounting estimates and judgements. In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the consolidated financial statements.

i) Estimate of fair value of investment properties

The best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence of such information, the Group determines the amount within a range of reasonable fair value estimates. In making its judgement, the Group considers information from a variety of sources including:

a) Current prices in an active market, and its third party independent experts, for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences.

b) Recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices.

c) Discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

ii) Principal assumptions for management's estimation of fair value of investment property

If information on current or recent prices or assumptions underlying the discounted cash flow approach is not available, the fair values of investment properties are determined using discounted cash flow techniques. The Group uses its third party independent experts and assumptions that are mainly based on market conditions existing at each reporting date. The principal assumptions underlying management's estimation of fair value are those related to: the receipt of contractual rentals; expected future market rentals; void periods; maintenance requirements; and appropriate discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market. The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

iii) Estimated impairment of goodwill

The acquisition of Phoenix Spree Property Fund GmbH &Co.KG in the year gave rise to goodwill of €4,493,000. The Directors have carried out an impairment review in respect of the goodwill and made full provision as in their opinion there would be no enduring asset capable of generating identifiable cash flows in the future.

iv) Accounting for acquisitions

The estimates and judgements inherent in accounting for acquisitions are set out in the accounting policy for Business combinations.

5. Segmental Information

Information reported to the Board of Directors, which is the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance is focussed on the different revenue streams that exist within the Group. The Group's principal reportable segments under IFRS 8 are therefore as follows:

· Residential

· Commercial

All revenues are earned in Germany with property and administrative expenses incurred in Jersey and Germany.

The measure of segment result is considered to be operating profit. Assets and liabilities which have not been allocated to segments are principally the financial assets at fair value and borrowings which are centrally managed.

There are no inter-segmental revenues.

31 December 2015

31 December 2014

6. Revenue

The total future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

Revenues comprise rental income earned from residential and commercial property in Germany. There are no individual tenants that account for greater than 10% of revenue during any of the reporting periods.

7. Other operating income

8. Administrative expenses

The Group did not have any employees during any of the reporting periods and the Directors do not receive any other emoluments.

Key management compensation - the functions of management are undertaken by external providers of professional services, as set out in note 34.

9. Exceptional items - transaction costs

Exceptional costs incurred this year comprise those costs directly attributable to the listing on the London Stock Exchange and any costs directly associated with the acquisition of subsidiaries. Certain costs were also incurred in 2014 and were disclosed in the accounts for the year ended 31 December 2014 as part of Administrative expenses and amounted to €390,000.

10. Auditor's remuneration

An analysis of the fees charged by the auditor and its associates is as follows:

11. Property expenses

Included in property expenses is a provision for doubtful debts relating to possible non-recoverability of rent receivable (see note 24).

12. Gain on disposal of investment property

13. Investment property fair value gain

Further information on investment properties is shown in note 21.

14. Financial asset at fair value through profit or loss

Phoenix Spree Property Fund GmbH and Co.KG ("PSPF") is a partnership established in the form of a limited partnership which is subject to the German Commercial Code and its principal activity is the holding of German investment properties until PSPF was acquired on 9 March 2015. The company's interest in PSPF comprises two elements, i) an equity interest, and ii) a Variable Rate Loan ("VRL") capital sum.

The equity interest arose in 2013 when the Company obtained an equity interest in PSPF by becoming a limited partner for an initial contribution of €100 and a capital contribution of €9,900. The initial contribution represented 0.03% of voting rights in PSPF. Up until 9 March 2015, PSPF was subject to independent management and effective control and is therefore not consolidated as part of the Group for the full year.

The purpose of putting in place the VRL was to implement the first step of equalising the two fund NAVs as a precursor to amalgamation of the entities, which has now been completed by virtue of the acquisition.

The VRL capital loan amounting to €0.3m (2014:€5.3m) between the Company and PSPF was initially advanced in June 2009 as unsecured and non interest bearing. In accordance with the terms of the VRL, the Company revalued the loan each reporting period such that the ratio of the NAV's of the two entities (the Company and PSPF) was equal to their share of the combined NAV at the reporting date. The movement required on the VRL in order to maintain this ratio is defined as the gain on the financial asset in the consolidated statement of comprehensive income.

On acquisition of PSPF on 9 March 2015 the value of the VRL was determined to be €38,254,000 resulting in a fair value gain of €1,395,000 in respect of the period 1 January 2015 to 9 March 2015, which has been recognised in the Consolidated Statement of Comprehensive Income. The respective asset and liability recognised by the Company and by PSPF is eliminated on consolidation as at 31 December 2015.

15. Net finance charge

16. Taxation

The tax charge for the year can be reconciled to the theoretical tax charge on the profit in the income statement as follows:

Reconciliation of current tax liabilities

Reconciliation of deferred tax

Jersey Income Tax

The Group is liable to Jersey income tax at 0%.

German Tax

As a result of the Group's operations in Germany, the Group is subject to German Corporate Income Tax (CIT) - the effective rate for Phoenix Spree Deutschland Limited for 2015 was 15.8% (2014: 15.8%).

Factors affecting future tax charges

The Group has accumulated tax losses of approximately €22.9 million (2014: €17.8 million) in Germany, which will be available to set against suitable future profits should they arise, subject to the criteria for relief. No deferred tax asset is recognised in respect of these losses as there is insufficient certainty the losses can be utilised.

17. Dividends

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders on the Register of Members on 20 May 2016. The total estimated dividend to be paid is 4.2p per share. The payment of this dividend will not have any tax consequences for the Group.

18. Goodwill

Since the Company transitioned its listing to the Main Market of the London Stock Exchange, the Directors have now had an opportunity to complete the initial accounting in respect of the acquisition of Phoenix Spree Property Fund Limited & Co. KG and the Goodwill resulting from this transaction. As a result of this review, the Directors have been unable to attach additional value to the Goodwill over and above the value of the investment property which is reflected in the financial statements at market value and have therefore fully impaired it.

19. Business combination

On 9 March 2015 the Group acquired 94.8% of Phoenix Spree Property Fund Limited and Co.KG ('PSPF'), a partnership incorporated in Germany, for a fair value consideration of €41.5 million. This consideration was made up of €2.4 million paid in cash and 19,237,484 shares of the Company valued on the day of the acquisition at the published share price, a total of €39.1 million.

In 2009, the Company entered into an economic merger with PSPF by way of variable rate loan ("VRL"). The aim of the agreement was to allow investors in the Company and PSPF to share in the economic performance of each other's property portfolios as if they had completed a legal merger on a NAV equivalent basis as at 31 December 2008. The acquisition of PSPF was made in order to formalise the economic merger, and align the risks and benefits of partners in PSPF with those of the shareholders of the Company.

Prior to the acquisition the Group held a nominal equity interest of €100 only being 0.03% of the voting rights of PSPF. No fair value gain is recognised on re-measurement.

In addition to the 94.8% acquired, the group also entered into an option agreement to acquire the remaining 5.2% interest in PSPF from the remaining partners. The options are to be exercised on the fifth anniversary of the majority interest acquisition for a period of three months thereafter.

The consideration for the option is equal to the remaining partners proportion of the EPRA NAV of PSPF based on the most recent interim or full year accounts plus any tax liabilities incurred in connection with the disposal.

20. Subsidiaries

The Group consists of a parent company Phoenix Spree Deutschland Limited, incorporated in Jersey, Channel Islands and a number of subsidiaries held directly by Phoenix Spree Deutschland Limited, which are incorporated in and operate out of Jersey and Germany. Further details are given below:

The investments in PSPF General Manager GmbH, PSPF Acquisition Vehicle GmbH and PSPF Property GmbH & Co.KG are all held via the investment in PSPF Holding GmbH, which was acquired on 7 September 2007. The other subsidiaries are held directly.

21. Investment properties

Included in the portfolio are properties which are subject to security in respect of the Group's bank loans payable (note 26).

A valuation exercise is undertaken by the Group's independent valuers, Jones Lang LaSalle GmbH ("JLL"), at each reporting date in accordance with the methodology described below.

The valuation is performed on a building-by-building basis and the source information on the properties including current rent levels, void rates and non recoverable costs was provided to JLL by the Property Advisors PMM Partners (UK) Limited. Assumptions with respect to rental growth, adjustments to non recoverable costs and the future valuation of these are those of JLL. Such estimates are inherently subjective and actual values can only be determined in a sales transaction (note 4).

Having reviewed the JLL report, the Directors are of the opinion that this represents a fair and reasonable valuation of the properties and have consequently adopted this valuation in the preparation of this financial information.

The valuations have been prepared by JLL on a consistent basis at each reporting date and the methodology is consistent and in accordance with IFRS.

All properties are valued as Level 2 measurements under the fair value hierarchy (see note 32) as the inputs which have a significant effect on the recorded fair value are observable. Valuations are undertaken using the discounted cash flow valuation technique with the following inputs:

The information below includes descriptions and definitions relating to valuation techniques, observable inputs and other assumptions made in determining the fair values:

Discounted cash flow method (DCF)

Under the DCF method, a property's fair value is estimated using explicit assumptions regarding the benefits and liabilities of ownership over the asset's life including an exit or terminal value. As an accepted method within the income approach to valuation the DCF method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, an appropriate, market-derived discount rate is applied to establish the present value of the income stream associated with the real property.

The duration of the cash flow and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related lease up periods, re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating incomes, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted.

The frequency of inflows and outflows (monthly, quarterly, annually) are contract and market-derived.

An appropriate discount rate is then applied to the cash flow. If the frequency of the time points selected for the cash flow is, for example, quarterly, the discount rate must be the effective quarterly rate and not a nominal rate. The DCF method assumes that cash outflows occur in the same period that expenses are recorded. The exit yield is normally separately determined and differs from the discount rate.

Definitions

Estimated rental value (ERV) - the estimated rental value at which space could be let in the market conditions prevailing at the date of valuation.

Indexation - the estimated average increase based on both market estimations and contractual indexations.

Vacancy rate - percentage of estimated vacant space divided by the total lettable area.

Discount rate - rate used to discount the net cash flows generated from rental activities during the period of analysis.

Capitalisation rate - ratio between the net operating income produced by a property and its current market value.

22. Property, plant and equipment

23. Loans and receivables