BUSINESS FOR THE YEAR 2Business overview 2.1 Business overview 2.1.1 Economic environment The Eurozone economy has improved since the beginning of 2017, Overall, economic improvements are expected to be sustained with Gross Domestic Product (GDP) growth expected to reach into 2018, backed by the European Central Bank’s accommodative 2.4% for the entire year, compared to 1.8% in 2016(1). Solid economic monetary policy, a highly positive consumer sentiment, and an improvement from the Eurozone’s larger economies contributed improving labor market. GDP is projected to grow by 2.2%, and inflation to this growth, with economic confidence rising to its highest level is forecasted to remain at 1.5%. in 17 years(2) . Labor market conditions continued to improve, with unemployment declining in virtually all countries (9.1% in 2017, vs. 10.0% in 2016). Private consumption remained resilient (+1.8% in 2017, vs. +1.9% in 2016), while inflation accelerated to 1.5%, from 0.2% in 2016. 3 2017 AND 2018 MACROECONOMIC FORECASTS BY COUNTRY Real GDP growth rate Unemployment rate Inflation rate Country 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E EUROZONE 1.8% 2.4% 2.2% 10.0% 9.1% 8.5% 0.2% 1.5% 1.5% France 1.1% 1.8% 1.8% 10.1% 9.4% 9.2% 0.3% 1.1% 1.1% Belgium 1.5% 1.7% 1.7% 7.9% 7.2% 6.7% 1.8% 2.2% 1.6% Italy 1.1% 1.6% 1.5% 11.7% 11.2% 10.5% -0.1% 1.4% 1.2% Scandinavia Norway 1.1% 2.1% 1.8% 4.7% 4.3% 4.0% 3.5% 1.9% 1.6% Sweden 3.1% 3.1% 2.8% 6.9% 6.6% 6.0% 1.0% 1.9% 2.1% Denmark 2.0% 2.2% 2.0% 6.2% 5.8% 5.7% 0.2% 1.2% 1.6% Iberia Spain 3.3% 3.1% 2.3% 19.6% 17.2% 15.4% -0.3% 2.0% 1.3% Portugal 1.5% 2.6% 2.3% 11.0% 9.1% 8.2% 0.6% 1.5% 1.1% CEE & Turkey Poland 2.9% 4.3% 3.5% 6.2% 4.8% 4.3% -0.7% 1.9% 2.0% Czech Republic 2.5% 4.3% 3.5% 3.9% 3.0% 2.8% 0.7% 2.3% 2.2% Hungary 2.2% 3.9% 3.6% 5.1% 4.2% 4.0% 0.4% 2.3% 2.7% Turkey 3.3% 6.1% 4.9% 10.9% 11.1% 11.0% 7.8% 10.7% 9.9% The Netherlands 2.1% 3.3% 3.1% 6.0% 4.9% 4.5% 0.1% 1.3% 1.7% Germany 1.9% 2.5% 2.3% 4.2% 3.7% 3.5% 0.4% 1.7% 1.8% Source: OECD Economic Outlook, December 2017. Yearly data is change in % over previous year. 2.1.2 Retailer sales (3) On a geographic basis, retailer sales rose by 2.4% in France, with On a like-for-like basis , total retailer sales at Klépierre’s malls rose by 2.1% for the last 12 months (1.3% excluding extensions). Over the first particularly solid results in leading shopping centers such as Val 11 months of the year, they outperformed aggregated national retailer d’Europe (Paris), Créteil Soleil (Paris), and Écully Grand Ouest (Lyon). sales indices by 120 basis points(4). In addition to a better economic In Italy, retailer sales were flat for the year as a whole, but improved in climate and improved consumer confidence, releasing transactions the second half (+0.8%) with the dissipation of an adverse competitive and marketing initiatives, such as the Black Friday campaign rolled out impact in the northern part of the country. Spain and Portugal at 113 malls in 12 countries, contributed to this performance. continued to post impressive results, with retailer sales growing by 4.5% and 4.7%, respectively, reflecting Klépierre’s strong positioning in these countries. In Central Europe & Turkey (+7.2%), Hungary was the best performer (+10.9%), followed by Turkey (+9.8%), the Czech Republic (+5.2%), and Poland (+4.3%). Lastly, retailer sales in Germany grew at a steady pace (+1.9%), benefiting from recent leasing initiatives in Forum Duisburg (near Düsseldorf) and Centrum Galerie (Dresden). (1) Except indicated otherwise, all macroeconomic data in chapters 5 and 6 of this document are extracted from the OECD Economic Outlook, December 2017. (2) As measured by the economic sentiment indicator (ESI) of the European Commission as of December 2017. (3) Like-for-like change is on a same-center basis and excludes the impact of asset sales and acquisitions. (4) Compound index based on the following national retailer indices weighted by the share of each country in Klépierre’s total NRI. France: CNCC, Italy: ISTAT, Spain: INE, Portugal: INE, Norway: Kvarud, Sweden: HUI, Denmark: Danmarks statistik, Poland: PRCH, Hungary: KSH, Czech Republic: CZSO, the Netherlands: CBS; Turkey: AYD. 42 KLÉPIERRE 2017 REGISTRATION DOCUMENT