Merlin Properties Socimi S.A.

959800L8KD863DP20X04-20220224-en MERLIN PROPERTIES, SOCIMI, S.A. Financial Statements for the year ended 31 December 2021 and Management Report Translation of a financial statements originally issued in Spanish and prepared in accordance with regulatory financial reporting framework applicable to the Company in Spain (see Notes 2 and 25). In the event of a discrepancy, the Spanish-language version prevails. MERLIN PROPERTIES SOCIMI, S.A. BALANCE SHEET AT 31 DECEMBER 2021 (Expressed in thousands of euros) Notes to the Notes to the ASSETS financial statements 31-12-2021 31-12-2020 EQUITY AND LIABILITIES financial statements 31-12-2021 31-12-2020 NON-CURRENT ASSETS 8,437,705 8,533,832 EQUITY Note 11 3,673,353 3,791,649 Intangible assets - 94,013 116,590 SHAREHOLDERS’ EQUITY- 3,673,353 3,797,262 Goodwill Note 5 92,641 115,801 Subscribed capital 469,771 469,771 Concessions Note 6 — — Share premium 3,647,876 3,813,409 Other intangible assets 1,372 789 Reserves (432,104) (406,842) Property, plant and equipment 2,250 2,292 Treasury shares (32,305) (54,149) Investment property - Note 7 4,454,947 4,474,152 Other equity holder contributions 540 540 Land 2,202,752 2,153,744 Profit/(Loss) for the period 89,608 (25,467) Buildings 2,179,566 2,170,355 (Interim dividend) Note 3 (70,033) — Property, plant and equipment under construction and advances 72,629 150,053 VALUATION ADJUSTMENTS- Note 11.4 — (5,613) Non-current investments in Group companies and associates - 3,671,311 3,626,576 Hedging transactions — (625) Equity instruments Note 10 3,164,795 3,155,797 Financial instruments with changes in equity — (4,988) Loans to companies Notes 8 and 17.2 506,516 470,779 Non-current financial investments - Note 8 139,187 236,106 NON-CURRENT LIABILITIES 5,368,939 5,425,780 Equity instruments 6,796 2,595 Non-current provisions - Note 13 10,184 17,527 Financial assets at fair value with changes in profit or loss — 103,775 Long-term employee benefit obligations 3,338 9,220 Loans to third parties 100,791 95,550 Other provisions 6,846 8,307 Other financial assets 31,600 34,186 Non-current payables - 4,954,831 4,998,465 Deferred tax assets Note 15.3 75,367 78,116 Debt instruments and other marketable securities Note 12 4,017,570 4,065,802 Bank borrowings Note 12 872,358 870,875 CURRENT ASSETS 1,406,601 929,335 Derivatives Note 12 6,169 15,971 Inventories - 476 43 Other financial liabilities Note 13 58,734 45,817 Advances to suppliers 476 43 Non-current payables to Group companies and associates Notes 8 and 17.2 12,821 14,621 Trade and other receivables - Note 8 13,011 10,755 Deferred tax liabilities Note 15.4 391,103 395,167 Trade receivables for sales and services 4,156 610 Trade receivables from Group companies and associates Notes 8 and 17.2 2,272 3,327 Sundry accounts receivable 587 435 CURRENT LIABILITIES 801,384 245,738 Employee receivables 184 184 Other accounts receivable from public authorities Note 15 5,812 6,199 Current payables - 592,923 40,614 Current investments in Group companies and associates - Note 8 817,306 718,561 Debt instruments and other marketable securities Note 12 588,155 36,291 Financial assets at fair value with changes in profit or loss 80,964 — Loans to companies Note 17.2 735,892 718,523 Bank borrowings Note 12 1,497 1,525 Other financial assets Note 17.2 450 38 Other financial liabilities Note 13 3,271 2,798 Current financial investments - Note 8 311 75,694 Current payables to Group companies and associates Notes 8 and 17.2 108,630 112,725 Equity instruments 18 18 Trade and other payables - Note 14 99,831 92,349 Loans to companies 236 71,767 Payables to suppliers 25,087 23,045 Debt securities 2 3,849 Payables to suppliers - Group companies and associates Notes 8 and 17.2 33,809 34,351 Other financial assets 55 60 Sundry accounts payable Note 14 1,199 10,065 Current prepayments and accrued income 4,772 12,564 Staff costs (remuneration payable) Note 14 20,767 16,875 Cash and cash equivalents - Note 9 570,725 111,718 Other accounts payable to public authorities Note 15 18,969 8,013 Cash 570,725 110,930 Cash equivalents — 788 Current accrued expenses and deferred income — 50 TOTAL ASSETS 9,843,676 9,463,167 TOTAL LIABILITIES AND EQUITY 9,843,676 9,463,167 The accompanying Notes 1 to 24 are an integral part of the balance sheet at 31 December 2021. 1 MERLIN PROPERTIES SOCIMI, S.A. INCOME STATEMENT FOR 2021 (Thousands of euros) Notes to the Year Year financial statements 2021 2020 CONTINUING OPERATIONS: Revenue Note 19.1 344,001 338,466 Other operating income 2,057 1,217 Staff costs - Note 19.2 (37,945) (38,435) Salaries, wages and similar expenses (35,115) (35,795) Employee benefit costs (2,830) (2,640) Other operating expenses Note 19.3 (41,724) (39,773) Depreciation and amortisation Notes 5, 6 and 7 (64,162) (64,005) Change in provisions 1,510 (704) Impairment and gains or losses on disposal of non-current assets - Notes 7 and 10 1,222 (27,524) Impairment and other losses 1,222 (27,524) PROFIT/(LOSS) FROM OPERATIONS 204,959 169,242 Finance income - Note 19.4 4,602 3,335 From investments in equity instruments 1,145 — From marketable securities and other financial instruments 3,094 3,165 - In Group companies and associates 3,094 3,165 Other finance income Note 9 363 170 Finance costs - Note 19.4 (112,424) (113,904) On debts to Group companies and associates (1,433) (1,086) On payables to third parties (110,153) (105,954) Other finance costs (838) (6,864) Changes in fair value of financial instruments 14,792 (9,508) Impairment and gains or losses on disposal of financial instruments - Notes 8.3 and 10 (21,511) (73,942) Impairment and other losses (16,323) (73,766) Gains or losses on disposals and other (5,188) (176) FINANCIAL PROFIT/(LOSS) (114,541) (194,019) PROFIT/(LOSS) BEFORE TAX 90,418 (24,777) Income tax Note 15.2 (810) (690) PROFIT/(LOSS) FOR THE YEAR 89,608 (25,467) The accompanying Notes 1 to 24 are an integral part of the income statement for 2021. 2 MERLIN PROPERTIES SOCIMI, S.A. STATEMENT OF CHANGES IN EQUITY FOR 2021 A) STATEMENTS OF RECOGNISED INCOME AND EXPENSES (Thousands of euros) Year Year 2021 2020 PROFIT/(LOSS) PER INCOME STATEMENT (I) 89,608 (25,467) Income and expense recognised directly in equity - Arising from revaluation of financial instruments Financial assets at fair value with changes in equity — (286) TOTAL INCOME AND EXPENSE RECOGNISED DIRECTLY IN EQUITY (II) — (286) Transfers to profit or loss -From Financial assets at fair value with changes in profit or loss 4,988 - From cash flow hedges 625 1,264 TOTAL TRANSFERS TO PROFIT OR LOSS (III) 5,613 1,264 TOTAL RECOGNISED INCOME AND EXPENSE (I+II+III) 95,221 (24,489) The accompanying Notes 1 to 24 are an integral part of the statement of changes in total equity for 2021 3 MERLIN PROPERTIES SOCIMI, S.A. STATEMENT OF CHANGES IN EQUITY FOR 2021 B) STATEMENT OF CHANGES IN TOTAL EQUITY (Thousands of euros) Valuation Other Share Merger Treasury adjustments contributions Profit/(Loss) Interim Share capital premium Reserves reserves shares - from shareholders for the year dividend TOTAL BALANCE AT END OF 2019 469,771 3,813,409 (128,234) (309,966) (56,860) (6,591) 540 179,397 (92,939) 3,868,527 Total recognised income and expense — — — — — 978 — (25,467) — (24,489) Transactions with shareholders: — — — — — — — — — — Distribution of 2019 profit — — 86,458 — — — — (179,397) 92,939 — Distribution of dividends — — (68,518) — — — — — — (68,518) Acquisition of treasury shares — — — — (279) — — — — (279) Recognition of share-based payments (Note 18) — — 16,258 — — — — — — 16,258 Delivery of 2017 stock plan shares and flexible remuneration — — (2,840) — 2,990 — — — — 150 BALANCE AT END OF 2020 469,771 3,813,409 (96,876) (309,966) (54,149) (5,613) 540 (25,467) — 3,791,649 Total recognised income and expense — — — — 5,613 — 89,608 — 95,221 Transactions with shareholders: — — — — — — — — — Distribution of 2020 profit — (25,467) — — — — — 25,467 (70,033) (70,033) Distribution of dividends — (140,066) — — — — — — — (140,066) Acquisition of treasury shares — — 8,758 — 857 — — — — 9,615 Recognition of share-based payments (Note 18) — — (33,835) — — — — — — (33,835) Delivery of 2017 stock plan shares and flexible remuneration — — (185) — 20,987 — — — — 20,802 BALANCE AT END OF 2021 469,771 3,647,876 (122,138) (309,966) (32,305) — 540 89,608 (70,033) 3,673,353 The accompanying Notes 1 to 24 are an integral part of the statement of changes in total equity for 2021. 4 MERLIN PROPERTIES SOCIMI, S.A. STATEMENT OF CASH FLOWS FOR 2021 (Thousands of euros) Notes to the Year Year financial statements 2021 2020 CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES (I) 121,787 104,899 Profit/(Loss) for the year before tax 90,418 (24,777) Adjustments for: 60,603 176,205 - Depreciation and amortisation charge Notes 5, 6 and 7 64,162 64,005 - Impairment losses Notes 7 and 10 25,388 97,280 - Changes in provisions 22,347 19,079 - Gains/Losses on derecognition and disposal of non-current assets Notes 7 and 10 (10,469) 4,010 - Gains/Losses on derecognition and disposal of financial instruments 5,023 (11) - Changes in fair value of financial instruments (14,792) 9,508 - Finance income (4,602) (335) - Finance costs Note 19.4 112,424 113,904 - Dividend income Note 19.1 (110,693) (103,308) - Other income and expenses (28,185) (24,927) Changes in working capital (39,497) (74,320) - Inventories (433) 25 - Trade and other accounts receivable (5,221) 4,913 - Other current assets 5 369 - Accounts payable (11,861) (70,823) - Other assets and liabilities (21,987) (8,804) Other cash flows from/(used in) operating activities 10,263 27,791 - Interest payments (102,659) (121,281) - Dividends received 111,838 68,370 - Interest received 3,373 995 - Collections /(payments) on debts to Group companies (542) 79,337 - Income tax recovered (paid) Note 15.1 (1,747) 370 CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES (II) 68,690 (107,174) Payments due to investments (82,596) (107,174) - Group companies and associates (1,642) (1,119) - Intangible assets (1,222) (468) - Property, plant and equipment (479) (3) - Investment property Note 7 (71,357) (104,086) - Financial investments (7,896) (1,498) Proceeds from disposals 151,286 — - Group companies and associates 96,160 — - Investment property 55,126 — CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES (III) 268,530 (11,853) Proceeds and payments relating to equity instruments- (210,104) (68,548) - Treasury share purchases Note 11.3 (5) (30) - Premium refunds (140,066) — - Dividends paid: (70,033) (68,518) Proceeds and payments relating to financial liabilities 478,634 56,695 - Bank borrowings (669) 28,249 - Issuance of debentures and bonds 494,230 595,691 - Repayment of borrowings from Group companies and associates (14,927) (308,331) - Repayment of other borrowings — (258,914) EFFECT OF FOREIGN EXCHANGE RATE CHANGES (IV) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III+IV) 459,007 (14,128) Cash and cash equivalents at beginning of year 111,718 125,846 Cash and cash equivalents at end of year 570,725 111,718 The accompanying Notes 1 to 24 are an integral part of the statement of cash flows for 2021. 5 Merlin Properties SOCIMI, S.A. Notes to the Financial Statements for the year ended 31 December 2021 1. Nature and activities of the Company Merlin Properties, SOCIMI, S.A. (“the Company”) was incorporated in Spain on 25 March 2014 under the name Merlin Properties, S.A. Sociedad Unipersonal, in accordance with the Spanish Corporate Enterprises Law (Ley de Sociedades de Capital). On 22 May 2014, the Company requested to be included in the tax regime for real estate investment trusts (REITs), effective from 1 January 2014. On 27 February 2017, the Company changed its registered office from Paseo de la Castellana 42 to Paseo de la Castellana 257, Madrid, Spain. The Company’s corporate purpose is: –The acquisition and development of urban real estate for subsequent leasing, including the refurbishment of buildings as per Spanish Law 37/1992, of 28 December, on Value Added Tax (Ley 37/1992, de 28 de diciembre, del Impuesto sobre el Valor Añadido); –The holding of equity interests in real estate investment trusts (REITs) or in other non-resident entities in Spain with the same corporate purpose and that operate under a similar regime as that established for REITs with regard to the mandatory profit distribution policy stipulated by law or by the Articles of Association; –The holding of equity interests in other resident or non-resident entities in Spain whose main corporate purpose is to acquire urban real estate for subsequent leasing, and that operate under the same regime as that established for REITs with regard to the mandatory profit distribution policy enforced by law or by the Articles of Association, and that fulfil the investment requirements stipulated for these companies; and –The holding of shares or equity interests in collective real estate investment undertakings regulated by Spanish Law 35/2003, of 4 November, on collective investment undertakings (Ley 35/2003, de 4 de noviembre, de Instituciones de Inversión Colectiva), or any law that may replace it in the future. In addition to the economic activity relating to the main corporate purpose, the Company may also carry on any other ancillary activities, i.e., those that generate income, which in total represents less than 20% of the Company’s income in each tax period, or those that may be considered ancillary activities under the legislation applicable at any time. The activities included in the Company’s corporate purpose may be indirectly carried on, either wholly or in part, through the ownership of shares or equity interests in companies with a similar or identical corporate purpose. The direct and, where applicable, indirect performance of any activities which are reserved under special legislation are excluded. If the law prescribes the need for a professional qualification, administrative authorisation, entry in a public register, or any other requirement for the purpose of exercising any of the activities within the corporate purpose, no such activity can be exercised until all the applicable professional or administrative requirements have been met. The merger by absorption of Testa Inmuebles en Renta SOCIMI, S.A. took place in 2016, along with the business combination carried out with the property business of Metrovacesa, S.A. The information required by article 6 107 of Spanish Law 43/1995, of 27 December, on Corporation Tax (Ley 43/1995 de 27 de diciembre del Impuesto sobre sociedades) relating to mergers is broken down in the 2016 financial statements. Merlin Properties SOCIMI, S.A. (“the Company”) engages mainly in the acquisition and management (through leasing to third parties) of offices, industrial buildings, logistic centres, local premises and shopping centers, and it may also invest to a lesser extent in other assets for lease. All the Company's shares can be publicly traded and are listed on the Madrid, Barcelona, Bilbao and Valencia stock exchanges. The market price of the Company’s shares at 31 December 2021 and the average market price for the fourth quarter amounted to EUR 9.57 and EUR 9.54 per share, respectively. Starting 15 January 2020, the Company's shares were listed on Euronext Lisbon under a dual listing. The Company is the head of a group of subsidiaries and is obliged under current legislation to prepare consolidated financial statements separately. These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRSs), in conformity with Regulation (EC) no. 1606/2002 of the European Parliament and of the Council, of 19 July 2002, and with all the related implementing provisions and interpretations. The separate and consolidated financial statements for 2020 were formally prepared by the directors at the Board meeting held on 23 February 2022. The consolidated financial statements for 2021 of the Merlin Group prepared in conformity with the IFRSs adopted by the European Union present total assets of EUR 14,273 thousand and equity attributable to the Parent’s shareholders of EUR 7,027 thousand. Consolidated sales and consolidated profit attributable to the Parent in 2020 amount to EUR 468,203 thousand and EUR 511,919 thousand, respectively (EUR 446,132 and 56,358 thousand in 2020). In view of the business activities currently carried out by the Company, it does not have any environmental liability, expenses, assets, provisions or contingencies that could be significant with regards to its equity, financial position and results. Therefore, no specific disclosures relating to environmental issues are included in these notes to the financial statements. 1.1 REIT Tax Regime Merlin Properties, SOCIMI, S.A., as the Parent of its Group, is governed by Spanish Law 11/2009, of 26 October, as amended by Spanish Law 16/2012, of 27 December, governing REITs (Ley 16/2012, de 27 de diciembre, por la que se regulan las Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario). Article 3 of that Law sets out the investment requirements for these types of companies, namely: 1.At least 80% of a REIT's assets must be invested in urban real estate for leasing purposes and/or in land to be developed for leasing purposes provided such development starts within three years of acquisition, along with investments in the capital or equity of other entities referred to in article 2(1) of the Law. The value of the assets will be determined according to the average of the separate balance sheets for each quarter of the year, whereby the Company may opt to calculate such value by taking into account the market value of the assets included in such balance sheets instead of their carrying amount, in which case that value would apply to all balance sheets for the year. For these purposes, the money and collection rights arising from the disposal of these properties or shareholdings, if applicable, during the same year or previous years will not be calculated, provided that, in this last case, the reinvestment period referred to in article 6 of this Law has not elapsed. 2.Furthermore, at least 80% of the income for the tax periods for each year, excluding income from the transfer of shares and property assets that are earmarked for pursuit of the principal corporate purpose, once the holding period referred to in the following paragraph has elapsed, must arise from lease of investment property and from dividends or shares in profit obtained from those shares. This percentage is calculated based on consolidated profit if the company is a Parent of a group, as defined in article 42 of the Spanish Commercial Code (Código de Comercio), irrespective of the place of residence and the obligation to prepare consolidated financial statements. That group will be exclusively composed of the REIT and all the other entities referred to in article 2(1) of the Law. 7 3.The REIT’s real estate assets must be leased for at least three years. The time that the properties have been offered for lease, up to a maximum of one year, will be included for the purposes of this calculation. This period will be calculated: a)In the case of properties that are included in the REIT’s assets before it avails itself of the regime, from the date of commencement of the first tax period in which the special tax regime set forth in this Law is applied, provided that the property is leased or offered for lease at that date. Otherwise, the following letter will apply. b)In the case of properties developed or acquired subsequently by company, from the date on which they were leased or offered for lease for the first time. c)Shares or equity investments in entities referred to in article 2(1) of the Law must be kept in the REIT's asset base at least during three years after their acquisition or, if applicable, from the beginning of the first tax period during which the special tax regime established in the Law applies. As established in the First Transitional Provision of Law 11/2009, of 26 December, amended by Law 16/2012, of 27 December, governing REITs, these companies may opt to apply the special tax regime pursuant to article 13 of this Law, even when the requirements stipulated therein are not fulfilled, under the condition that such requirements are met within two years of the date application of the REIT tax regime is sought. REITs are taxed at a rate of 0% for income tax. However, where dividends distributed to an equity holder owning at least 5% of the REIT’s share capital are exempt from taxation or taxed below 10%, that REIT will be subject to a special charge of 19% of the dividends distributed to the said equity holder, in respect of corporate income tax. If considered applicable, this special charge will be paid by the REIT within two months after the dividend distribution date. The transitional period in which the Company had to meet all requirements of this tax regime ended in 2017. The Company's Directors, supported by the opinion of their tax advisers, assessed its compliance with the Regime's requirements in 2021, and concluded that all requirements are met. Consequently, the Company's financial statements for 2021, prepared by its Directors, awaiting approval by the General Shareholders Meeting, have been prepared under the REIT Scheme. However, the Company’s directors consider that the aforementioned financial statements will be approved without any significant changes. With effect for the years beginning on or after 1 January 2021, the Spanish Law 11/2021, of 9 July, on measures to prevent and combat tax fraud (Ley de medidas de prevención y lucha contra el fraude fiscal) amended article 9(4) of Spanish Law 11/2009, of 26 October, governing REITs (Ley de las Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario]). Specifically, a special tax of 15% was introduced on the amount of profit obtained in the year that is not distributed, in the part that comes from: (a) income not taxed at the general tax rate of income tax and; (b) income not from the transfer of eligible assets, once the three-year maintenance period has elapsed, which has been included in the three-year reinvestment period stipulated in article 6(1)(b) of Law 16/2012, of 27 December. This special tax will be considered income tax and will accrue on the day of the resolution to apply profit for the year by the General Shareholders Meeting or equivalent body. The tax must be self-assessed and paid within two months of its accrual. 1.2 Corporate transactions 2021 On 27 January 2021, the Company acquired 100% of the shares of Edged Spain, S.L.U. and subsequently sold 50% to Edged Global Services Iberia, S.L.U. for EUR 3 thousand on 30 March 2021. The Company Edged Spain, S.L.U. is dedicated to the provision of data processing centre services. 2020 No corporate transactions were performed with Group companies in 2020. 8 2. Basis of presentation of the financial statements 2.1 Regulatory financial reporting framework applicable to the Company These financial statements were prepared by the directors in accordance with the regulatory financial reporting framework applicable to the Company, which consists of: –The Commercial Code and all other Spanish corporate law; –The Spanish General Accounting Plan (Plan General de Contabilidad) approved by Royal Decree 1514/2007, with the amendments introduced by Royal Decree 1159/2010, as well as Royal Decree 602/2016 and Royal Decree 1/2021 and their industry adaptations. –The mandatory rules approved by the Spanish Accounting and Audit Institute in order to implement the General Accounting Plan and its supplementary rules. –Law 11/2009, of 26 October, as amended by Law 16/2012, of 27 December, governing REITs. –All other applicable Spanish accounting legislation. The figures included in the financial statements are expressed in thousands of euros. 2.2 Fair presentation The accompanying financial statements for 2021, which were obtained from the Company’s accounting records, are presented in accordance with Royal Decree 1514/2007 approving the General Accounting Plan, as well as the amendments made to it by Royal Decrees 1159/2010, 602/2016 and 1/2021, and, accordingly, present fairly the Company’s equity, financial position, results of operations and cash flows for 2021. These financial statements, which were formally prepared by the Company’s Board of Directors, will be submitted for approval at the Annual General Shareholders Meeting, and it is considered that they will be approved without any changes. 2.3 Comparative information For comparison purposes the directors present, in addition to the figures for 2021 for each item in the balance sheet, income statement, statement of changes in equity, statement of cash flows and notes to the financial statements, the figures for 2020. 2.4 Accounting principles applied The directors formally prepared these financial statements taking into account all the obligatory accounting principles and standards with a significant effect on them. All obligatory accounting principles were applied. No non-obligatory accounting principles were applied. 2.5 Key issues in relation to the measurement and estimation of uncertainty In preparing the Company’s financial statements, the directors made estimates based on past experience and other factors that are considered to be reasonable in view of the current circumstances and that constitute the basis for establishing the carrying amount of the assets and liabilities whose value is not easily determinable through other sources. These estimates relate basically to the following: –The market value of the Company’s property assets (see Note 4.3). The Company obtained valuations from independent experts at 31 December 2021. –The assessment of possible impairment losses on certain assets (see Notes 4.1, 4.2, 4.3 and 4.5). –The fair value of certain financial instruments (see Note 4.5). –The assessment of provisions and contingencies (see Note 4.9). 9 –The recovery of deferred tax assets and the tax rate applicable to temporary differences (see Note 4.11). –Definition of the transactions carried out by the Company as a business combination in accordance with Recognition and Measurement Standard 19 or as an acquisition of assets. –Compliance with the requirements governing REITs (see Notes 1 and 16). –Management of financial risk and, in particular, of liquidity risk (see Note 22). Although these estimates were made based on the best information available at 2021 year-end, events that take place in the future might make it necessary to change these estimates (upwards or downwards) in coming years. 2.6 Grouping of items Certain items in the balance sheet, income statement, statement of changes in equity and statement of cash flows are grouped together to facilitate their understanding; however, whenever the amounts involved are material, the information is broken down in the related notes to the financial statements. 2.7 Correction of errors In preparing the accompanying financial statements, no significant errors were detected that would have given rise to restating the amounts included in the financial statements for 2020. 2.8 Changes in estimates and accounting policies Starting on 1 January 2021, the new criteria apply to the classification and measurement of financial instruments, as well as the recognition and measurement of revenue from sales and services provided for in Royal Decree 1/2021, which are included in Notes 4.7 and 4.12, respectively, and they represent a change with regard to those applied in previous years. In accordance with the rules contained in paragraph 6 of transitional provision two, the Company decided to apply the new criteria prospectively, considering, for the purpose of classifying financial assets, the events and circumstances that existed at 1 January 2021 (the date of initial application). The comparative information was not adapted to the new measurement criteria, however the values on the books were adjusted to the new presentation criteria. Based on the analysis carried out by the directors, in view of the types of financial instruments of the Company, at the end of 2021 and 2020, no differences were identified regarding the valuation in books in accordance with the previous regulations and the new measurement category with their impact on book value determined in accordance with the new criteria, which is why there is no reconciliation of both values. Also, with regard to the changes in the criteria for recording and valuing revenue from sales and services provided, no differences were identified with regard to the above criteria, based on the Company's activity. 2.9 Quantitative and qualitative information on the impacts of COVID-19 The appearance of COVID-19 in China in January 2020 and its global expansion resulted in the World Health Organisation classifying the viral outbreak as a pandemic on 11 March 2020. This situation affected global financial markets, since restrictions have been placed on transportation and business activities in many sectors. On 14 March 2020, the Spanish Government declared a “state of alarm” under Royal Decree 463/2020, which led to certain commercial and food and beverage activities being classified as essential and were thus allowed to open, while all others were classified as non-essential and therefore subject to forced administrative closure. Likewise in Portugal, an Estado da Emergência was declared by the President of the Republic in Decree no. 14- A/2020, of 18 March, which established restrictions on certain fundamental rights due to COVID-19, which included restrictions on the country's retail commerce. In addition, on 3 November 2020, a new state of alarm was declared in Spain, lasting until 9 May 2021, which involved certain restrictions at the regional level, although they were not as severe as those of the first state of alarm. 10 In December 2020, the European Union approved the marketing of the first vaccines to deal with the virus, and the vaccination process began. The pandemic affected certain operating activities of the Company in 2020 and, to a lesser extent, in 2021. The Company's directors continued to assess the effects that the health and economic crisis caused by the COVID-19 pandemic had and could continue to have on the Company, including the following aspects: –The Company's estimates and, the case being, the book value of the assets and liabilities on the balance sheet. –Financial risks: credit risk and liquidity risk These do not include all of the impacts, although the Directors and Management believe that the others not listed above will not have a significant effect on the Company's activity. Valuation of investment property and participation in Group companies and associates The Company regularly uses third parties from outside the Company as experts to determine the fair value of its real estate assets, whether directly managed and through the Group companies and associates in which it participates, on which the recoverable value of the assets is mainly recognised. The valuation methods from last year have not been modified, although they were influenced by, among other things, the following aspects derived from the effects of COVID-19: -Closure of activities in shopping centers. –Loss of customers and reductions in traffic. –The positive impact on logistics distributors. –The risk of losing major contracts. –Payments of rent for commercial spaces. Liquidity risk The Company’s Directors believe that the appearance of the health crisis and the impact on the economy caused by the need for mobility restrictions has caused a significant impact on the general financial position of companies, which can be divided into the specific liquidity risk of the companies or groups and the liquidity risk of customers (credit risk). In this context, at 31 December 2021, the Company had a treasury position of EUR 570.7 million at the end of the period and a liquidity position of EUR 1,515.2 million, including its cash position, EUR 831.2 million of the undrawn credit facility and EIB loans, EUR 32.3 million in treasury shares and EUR 81 million of receivables corresponding to the financial asset value (net of the option on 15.26% of the shares) of the shares in Silicius Real Estate SOCIMI S.A. (Note 8.2) for EUR 80,964 thousand in the first quarter of 2020. Furthermore, the rating agencies S&P and Moody's confirmed MERLIN's credit rating in 2021 following the COVID-19 pandemic considering the commercial policy it implemented, which will be explained below. S&P rated the Group BBB with a stable perspective, while Moody's rated it Baa2 with a negative outlook. On 4 June 2021, Standard & Poor's again ratified the rating of “BBB” with stable outlook and on 3 December 2021, Moody's updated the rating to “Baa2” with stable outlook. The Company's Directors and Management are constantly monitoring the evolution of the situation and the effects it may have on the credit market, and they believe that the Company's situation at 31 December 2021 and the measures mentioned above ensure that solvent to fulfil the current obligations on the balance sheet at 31 December 2021, and there is no material uncertainty about the continuity of the Company's operations. 11 Credit risk In 2020, in response to the COVID-19 pandemic, the Company launched two commercial policies, the Commercial Policy associated with 100% rent relief for tenants whose activity was closed down as a result of the state of alarm and who were up to date on their contractual obligations, and the Complementary commercial measures, which initially covered a period from June to 31 December 2020, and consisted of partial rent relief, decreasing from 60% in June to 10% in December 2020. In the first half of 2021, the Company continued with the additional commercial policies established in 2020 in response to the COVID-19 pandemic. These supplementary measures range from 1 January to 30 June 2021 and are aimed at the majority of the tenants with commercial activity in the Company's asset portfolio, to support them in their reopening and recovery in the first half of 2021. The measures consisted of providing 25% partial discounts on the guaranteed minimum rent (30% for entertainment and catering). In the case of forced closure, a 100% discount was applied during the period in which the tenants were not legally authorised to open. This rent relief led to a EUR 10,183 thousand reduction in net rental income at the end of 2021 for these actions (EUR 19,406 thousand in 2020). The Company recorded this rent relief as lower “Revenue” on the accompanying income statement according to its interpretation of accounting regulations and the consideration that there are have been no significant changes to the leases. In the second half of 2021, the Company and the Group led by it ended their supplemental commercial policies by limiting the commercial measures to certain tenants, whose activity was particularly affected by the effects of the pandemic. In 2021, the directors continued to assess the credit risk of the tenants as a result of the COVID-19 crisis. While the Company has continued to support its tenants with the rent relief indicated above, based on these facts and on the application of the simplified approach of impairment and credit risk, and also taking into consideration other differential factors of the Company's portfolio of tenants and the characteristics of their leases, and the amounts collected thus far, the Company has concluded that the increased credit risk of its customers has not been significantly affected, as its risk of delinquency is below 1% of its turnover. In relation to its other financial assets exposed to credit risk, which mainly correspond to loans to associates and third parties, the Directors of the Company have determined that there has not been a significant increase in the risk, considering the measures agreed in some cases with tenants and the long-term expectations based on the historical experience with those entities, which make it possible to estimate that the credit risk will remain stable. Nevertheless, the Company's Directors are monitoring the evolution of the situation constantly with the goal of mitigating the possible financial and non-financial impacts that may arise. 12 3. Distribution of profit The distribution of profit for the year proposed by the Company’s directors for approval at the Annual General Shareholders Meeting is as follows: Thousand of euros Profit for the period Distribution: 89,608 Legal reserve 8,961 Interim dividend 70,033 Dividends for distribution 10,614 Other dividends distributed On 27 April 2021, the General Shareholders Meeting approved the distribution of a dividend of EUR 140,066 thousand charged to the “share premium” reserve. On 11 November 2021, the Company's Board approved the distribution of a dividend of EUR 70,033 thousand charged to the profit for 2021. In the last five years, the Company distributed the following dividends and Share Premium refunds: 2021 2020 2019 2018 2017 Shareholder remuneration 210,099 68,518 232,347 215,364 187,411 3.1 Restrictions relating to the distribution of dividends The Company is subject to the special regime for REITs. As established in article 6 of Law 11/2009, of 26 October, amended by Law 16/2012, of 27 December, REITs opting to pay tax under the special tax regime are required to distribute the profit generated during the year to unitholders as dividends. Once the corresponding commercial obligations have been fulfilled, said distribution must be agreed within six months from year end, and the dividends paid within one month from the date on which the pay-out is agreed. Moreover, as specified in Law 11/2009, of 26 October, amended by Law 16/2012, of 27 December, the Parent must distribute the following as dividends: –100% of the profit from dividends or shares in profits distributed by the entities referred to in article 2(1) of Law 11/2009. –At least 50% of the profits arising from the transfer of the properties, shares or ownership interests referred to in article 2(1) of Law 11/2009, subsequent to expiry of the time limits referred to in article 3(2) of Law 11/2009, which are used for pursuit of the entities' principal corporate purpose. The remainder of these profits must be reinvested in other property or investments used for the pursuit of said activity within three years after the transfer date. Otherwise these profits should be distributed in full together with any profit arising in the year in which the reinvestment period expires. If the items to be reinvested are transferred prior to the end of the holding period, that profit must be distributed in full together with, if applicable, the profit generated during the year in which the items were transferred. The obligation to distribute profit does not apply to the portion of the profit attributable to prior years in which the Company was not included under the special tax regime established in this Law. –At least 80% of the remaining profits obtained. When dividend distributions are charged to reserves generated from profits in a year in which the special tax regime applied, the distribution must necessarily be approved as set out above. 13 4. Accounting policies and measurement bases The principal accounting policies and measurement bases applied by the Company in preparing its financial statements for 2021 were as follows: 4.1 Intangible assets As a general rule, intangible assets are recognised initially at acquisition or production cost. They are subsequently measured at cost less any accumulated amortisation and any accumulated impairment losses. These assets are amortised over their useful life. When the useful life of these assets cannot be estimated reliably, they will be amortised over a period of ten years. The gains or losses arising from the derecognition of an intangible asset are calculated as the difference between the net profit obtained on the sale and the carrying amount of the asset, and are recognised in the consolidated income statement when the asset is derecognised. Goodwill Goodwill is recognised as an asset when it arises in an acquisition for valuable consideration in the context of a business combination. Goodwill is allocated to the cash-generating units to which the economic benefits of the business combination are expected to flow. After initial recognition, goodwill is measured at acquisition cost less any accumulated depreciation and any recognised accumulated impairment losses. In accordance with applicable legislation, the useful life of the goodwill is 10 years and it is amortised on a straight-line basis. These cash-generating units are analysed at least once a year for indications of impairment and, if those indications exist, they are tested for impairment in accordance with the methodology indicated below and the corresponding impairment loss is recognised. Impairment losses recognised for goodwill must not be reversed in a subsequent period. Specifically, the Company recognises under “Goodwill” the goodwill that arose on the merger by absorption in 2016 of Testa Inmuebles en Renta SOCIMI, S.A. Computer software The computer software acquired or developed by the Company is recognised at acquisition or production cost and, where applicable, amortised on a straight-line basis over four years. Computer software maintenance costs are recognised with a charge to the income statement for the year in which they are incurred. Concession projects This heading includes administrative concessions which are recognised at acquisition or production cost less any accumulated amortisation and any accumulated impairment losses. Administrative concessions are recognised at the amount paid by the Company in operating fees and are amortised on a straight-line basis over the years of the concession. The gains or losses arising from the derecognition of a concession project are calculated as the difference between the net profit obtained on the sale and the carrying amount of the asset, and are recognised in the income statement when the asset is derecognised. Impairment of intangible assets, property, plant and equipment and investment property: Whenever there are indications of impairment of assets with a finite useful life (i.e. all the Company’s intangible assets, property, plant and equipment, and investment property), the Company tests the tangible and intangible assets for impairment to determine whether the recoverable amount of the assets has been reduced to below their carrying amount. The recoverable amount is the higher of fair value less costs to sell and value in use. In particular, the recoverable amount for virtually all assets and investment property is determined based on the evaluation of an independent expert (see Notes 6 and 7). 14 Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. This impairment loss reversal is recognised as income, except in the case of goodwill, as mentioned in this Note. 4.2 Property, plant and equipment Property, plant and equipment are initially recognised at acquisition or production cost, at which the amount of the additional or supplementary investments made are included, and are subsequently reduced by the related accumulated depreciation and by any impairment losses recognised, as indicated in Note 4.1 above. The revaluation surpluses or net increases in value resulting from revaluations and the assignments of gains as a result of business combinations are depreciated over the tax periods in the remaining useful lives of the revalued assets. Property, plant and equipment upkeep and maintenance expenses are recognised in the income statement for the year in which they are incurred. However, the costs of improvements leading to increased capacity or efficiency or to a lengthening of the useful lives of the assets are capitalised. For non-current assets that necessarily take a period of more than twelve months to get ready for their intended use, the capitalised costs include those borrowing costs as might have been incurred before the assets are ready for their intended use and that have been charged by the supplier or relate to loans or other specific-purpose or general-purpose borrowings directly attributable to the acquisition or production of the assets. Work carried out by the Company on its own property, plant and equipment is recorded at accumulated cost, resulting from external costs plus in-house costs (determined based on in-house materials consumption) and manufacturing costs applying the same criteria as those used for inventory valuation. Depreciation of property, plant and equipment is calculated on a straight-line basis, based on the years of estimated useful life of the assets. The annual depreciation rates are applied to the respective values at the revalued cost, where applicable, and the years of estimated useful life are as follows: Years of useful life estimated Buildings for lease 50 – 75 Other fixtures 10-18 Furniture 10 Computer hardware 4 Other items of property, plant and equipment 4-5 Property, plant and equipment under construction is not depreciated until it enters into operation, at which time it is transferred to the corresponding property, plant and equipment account in view of its nature. 4.3 Investment property “Investment Property” in the balance sheet reflects the values of the land, buildings and other structures held either to operate them as rentals or for capital appreciation from the capital gains subsequently arising in the future in their respective market prices. Depreciation of these items is carried out systematically and rationally based on the useful life of the assets and their residual value, based on the normal decline in value caused by their use and by wear and tear, without prejudice to the technological or commercial obsolescence that may also affect the assets. The straight-line method is used to calculate the depreciation of investment property based on its estimated useful life (see Note 4.2). Investment property is measured as described in Note 4.2 on property, plant and equipment. 15 The Company estimates the impairment losses on its investment property based on the fair value obtained in the appraisal performed by the independent expert. The method used to determine the fair value of the assets is detailed in Note 7. 4.4 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the tenant. All other leases are classified as operating leases. Finance leases: In finance leases in which the Company acts as the tenant, the cost of the leased assets is presented in the balance sheet, based on the nature of the leased asset, and, simultaneously, a liability is recognised for the same amount. This amount will be the lower of the fair value of the leased asset and the present value, at the inception of the lease, of the agreed minimum lease payments, including the price of the purchase option when it is reasonably certain that it will be exercised. The minimum lease payments do not include contingent rent, costs for services and taxes to be paid by and reimbursed to the landlord. The total finance charges arising under the lease are allocated to the income statement for the year in which they are incurred using the effective interest method. Contingent rent is recognised as an expense for the period in which it is incurred. There are no finance leases in which the Company acts as landlord. Operating leases: In operating leases, the ownership of the leased asset and substantially all the risks and rewards relating to the leased assets remain with the landlord. If the Company acts as the lessor, income and costs arising under operating leases are allocated to the income statement for the year in which they are incurred. Also, the acquisition cost of the leased asset is presented in the balance sheet in accordance with the nature of the asset, increased by the costs directly attributable to the lease, which are recognised as an expense over the lease term, applying the same method as that used to recognise lease income. If the Company acts as the tenant, costs arising under operating leases are allocated to the income statement for the year in which they are incurred. Any collection or payment that might be made when arranging an operating lease will be treated as a prepaid lease collection or payment that will be allocated to profit or loss over the lease term in accordance with the time pattern in which the benefits of the leased asset are provided or received. Any collection or payment that might be made when arranging an operating lease will be treated as a prepaid lease collection or payment that will be allocated to profit or loss over the lease term in accordance with the time pattern in which the benefits of the leased asset are provided or received. 4.5 Financial assets Classification The financial assets held by the Company are classified in the following categories: a) Financial assets at amortised cost: includes financial assets, including those admitted to trading on an organised market, which the Company holds for investment to receive the cash flows arising from performance of the contract, and where the contractual terms of the asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the amount of the principal outstanding. In general, this category includes: 16 i.Trade receivables: arising from the sale of goods or the provision of services for commercial transactions with deferred collection, and ii.Non-trade receivables: these come from loans or credits granted by the Company, the payments on which are determined or determinable. b) Financial assets at fair value through changes in equity: financial assets whose contractual terms give rise, on specified dates, to cash flows that are only principal and interest payments on the amount of the principal outstanding are included in this category, and are not held for trading and are not classified in the preceding category. Investments in equity instruments irrevocably designated by the Company at the time of their initial recognition will also be included in this category, provided that they are not held for trading and should not be measured at cost. c) Financial assets at cost: the following investments are included in this category: a.equity instruments in Group companies, jointly controlled entities and associates b.equity instruments whose fair value cannot be reliably determined, and the derivatives where these investments are the underlying asset; c.contributions made in participating account contracts and similar agreements; d.contingent participating loans with interest; e.financial assets that should be classified in the following category, but their fair value cannot be estimated reliably. Group companies are considered to be those related to the Company as a result of a relationship of control and associates are companies over which the Company exercises significant influence. Jointly controlled entities include companies over which, by virtue of an agreement, the Company exercises joint control with one or more other investors. d) Financial assets at fair value through profit or loss: includes financial assets held for trading and financial assets that have not been classified in any of the above categories. This category also includes financial assets that the Company optionally designates as such at the time of their initial recognition and that would otherwise have been included in another category, since this designation eliminates or significantly reduces an inconsistency in measurement or an accounting misrepresentation that would arise otherwise. Initial recognition Financial assets are initially recognised, in general, at the fair value of the consideration given, plus any directly attributable transaction costs. However, transaction costs directly attributable to assets recognised at fair value through changes in the income statement will be recognised in the income statement for the year. In the case of equity investments in Group companies affording control over the subsidiary, since 1 January 2010 the fees paid to legal advisors and other professionals relating to the acquisition of the investment have been recognised directly in profit or loss. Subsequent measurement Financial assets at amortised cost will be recognised using this measurement approach, where the interest accrued using the effective interest method is recognised in the income statement. Financial assets included in the fair value category with changes in equity will be recognised at fair value, without deducting any transaction costs incurred in their disposal. Any changes that arise in fair value are recognised directly in equity until the financial asset is derecognised from the balance sheet or impaired, at which time the amount recognised in equity is taken to profit or loss. Financial assets at fair value with profit or loss are measured at their fair value and the result of changes in fair value is recognised in the income statement. 17 Investments in Group companies and associates and interests in jointly controlled entities are measured at cost net, where appropriate, of any accumulated impairment losses. These losses are calculated as the difference between the carrying amount of the investments and their recoverable amount. Recoverable amount is the higher of fair value less costs to sell and the present value of the future cash flows from the investment. Unless there is better evidence of the recoverable amount, it is based on the value of the equity of the investee, adjusted by the amount of the unrealised gains existing at the date of measurement (including any goodwill). The valuation was carried out in accordance with the Appraisal and Valuation Standards issued by the Royal Institute of Chartered Surveyors (RICS) of the United Kingdom and the International Valuation Standards (IVS) issued by the International Valuation Standards Committee (IVSC). In the case of Company companies with an equity deficit, the Company follows the policy of recognising provisions for this equity deficit. Impairment At least at each reporting date the Company tests financial assets not measured at fair value through profit or loss for impairment. Objective evidence of impairment is considered to exist when the recoverable amount of the financial asset is lower than its carrying amount. When this occurs, the impairment loss is recognised in the income statement. Objective evidence of impairment is considered to exist when the recoverable amount of the financial asset is lower than its carrying amount. In any case, equity instruments at fair value with changes in equity will be presumed to have been impaired after a fall of one and a half years or 40% in their market price, without the value having recovered. The depreciation charge is recognised in the income statement. The Company derecognises a financial asset when it expires or when the rights to the cash flows from the financial asset have been transferred and substantially all the risks and rewards of ownership of the financial asset have been transferred. However, the Company does not derecognise financial assets, and recognises a financial liability for an amount equal to the consideration received, in transfers of financial assets in which substantially all the risks and rewards of ownership are retained. 4.6 Financial liabilities The Company classifies its financial liabilities into the following valuation categories: a) Financial liabilities at amortised cost: this include accounts payable by the Company that have arisen from the purchase of goods or services in the normal course of the Company’s business or those that, do not have a commercial origin and are not derivative instruments, but arose from loans or credits received by the Company. These liabilities are initially recognised at the fair value of the consideration received, adjusted by the directly attributable transaction costs. These liabilities are subsequently measured at amortised cost. b) Other liabilities at fair value through profit or loss. Liability derivative financial instruments are measured at fair value using the same methods as those described in the preceding section for held-for-trading financial assets at their fair value with changes in profit and losses. Assets and liabilities are presented separately in the balance sheet and are presented at their net amount only when the Company has the right to offset the amounts recognised and, in addition, when it intends to settle the amounts for their net value or to realise the asset and settle the liability simultaneously. The Company derecognises financial liabilities when the obligations giving rise to them cease to exist. 4.7 Equity instruments An equity instrument is a contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Capital instruments issued by the Company are recognised in equity at the proceeds received, net of issue costs. The equity instruments acquired by the Company are recognised separately at acquisition cost and deducted from equity in the balance sheet, regardless of why they were acquired. No gains or losses from transactions involving own equity instruments are recognised in the consolidated income statement. 18 If the Parent’s own equity instruments are subsequently retired, capital is reduced by the nominal amount of these treasury shares and the positive or negative difference between the acquisition price and nominal amount of the shares is debited from or credited to reserves. The transaction costs related to own equity instruments are recognised as a decrease in equity, net of any related tax effect. 4.8 Severance Under current legislation, the Company is required to pay severance to employees terminated under certain conditions. Therefore, severance that can be reasonably quantified are recognised as an expense in the year in which the decision to terminate the employment relationship is taken. In this sense, at 31 December 2021, the Company does not have commitments for this item, and there is no Downsizing Plan in force. 4.9 Provisions and contingencies When preparing the financial statements, the Company’s Directors draw a distinction between: a.Provisions: credit balances covering present obligations arising from past events, the settlement of which is likely to give rise to an outflow of resources, but that are uncertain as to their amount and/or timing. b.Contingent liabilities: possible obligations arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not within the Company’s control. The financial statements include all the provisions with regard to which it is considered that it is more likely than not that the obligation will have to be settled. Unless they are considered unlikely, contingent liabilities are not recognised in the financial statements, but rather are disclosed. Provisions are measured at the present value of the best possible estimate of the amount required to settle or transfer the obligation, taking into account the information available on the event and its consequences. Where discounting is used, adjustments made to provisions are recognised as interest cost on an accrual basis. The compensation receivable from a third party on settlement of the obligation is recognised as an asset, provided there is no doubt that the reimbursement will take place, unless there is a legal relationship whereby a portion of the risk has been externalised, as a result of which the Company is not liable, in which case, the compensation will be taken into account when estimating, if appropriate, the amount of the related provision. 4.10 Share-based payments On the one hand, the Company recognises the goods and services received as an asset, if qualifying, or an expense, when obtained, with an increase to equity, if the transaction is settled in equity instruments, or with the corresponding liability, if it is settled with an amount that is referenced to the value of equity instruments. In the case of equity-settled transactions, both the services rendered and the increase in equity are measured at the fair value of the equity instruments granted, by reference to the grant date. In the case of cash-settled share-based payments, the goods and services received and the related liability are recognised at the fair value of the latter, by reference to the date on which the requirements for recognition are met. Additionally, the General Shareholders Meeting held on 26 April 2017 approved a remuneration plan for the management team and other important members of the Company’s workforce (which includes, inter alia, the Executive Directors and Senior Management), the measurement period of which is from 1 January 2017 to 31 December 2019 (the “2017-19 Incentive Plan”). In accordance with that plan, the beneficiaries may be entitled to receive (i) a certain monetary amount based on the increase in the share price; and (ii) shares in the Company, provided that certain objectives are met. Vesting of the incentive will independently be conditional upon the total rate of return obtained by the shareholder during the three-year period due to: –an increase in the Company’s share price plus the dividends distributed by the Company to shareholders during the measurement period; and 19 –an increase in the Company’s share price plus the dividends distributed by the Company to shareholders during the measurement period; For the right to the share-based incentive and to the EPRA NAV-based incentive to be vested, the total shareholder rate of return (TSR) must be at least 24%, as detailed below: TSR NAV / TSR share price Percentage assigned to beneficiaries (“PR”) Percentage assigned to shareholders < 24% 0% 100% ≥ 24% and < 36% 6% 94% ≥ 36% 9% 91% To calculate the TSR, (i) the percentage assigned to the Beneficiaries in accordance with the above table will be applied to the result of multiplying the Share Price TSR multiplied by the number of Shares of the Company as of 31 December 2019; (ii) the result of that transaction will be balanced through an adjustment mechanism in favour of the Beneficiaries, as, once a minimum return is reached, the Beneficiaries will be entitled to the assigned percentage of the total return generated from the start. The date for calculating the amount of the incentive tied to the EPRA NAV per share and the amount of the incentive tied to the quoted price of the shares was 31 December 2019. The maximum amount to be received for the incentive tied to the share price from 2017 to 2019 amounted to EUR 37.5 million, which was paid out in 2020. Also, the maximum amount of the incentive tied to EPRA NAV per share will be EUR 75 million and a maximum of 6,000,000 shares have been allocated for its payment. At 31 December 2019, there were 5,874,111 shares that were ultimately allocated to the incentive benchmarked to the EPRA NAV. 50% of the allocated shares will be paid out on the second settlement date, i.e., on the second business day after the formulation of the 2020 annual financial statements. The remaining 50% of the allocated shares will be paid out on the third settlement date, i.e., on the second business day after the formulation of the 2021 annual financial statements. 4.11 Income tax 4.11.1 General regime Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense (deferred tax income). Current tax expense is the tax payable by the Company on its taxable income for a given year. Tax credits and other tax benefits, excluding tax withholdings and pre-payments, and tax loss carryforwards from prior years effectively offset in the current year reduce the current income tax expense. The deferred tax expense or income relates to the recognition and derecognition of deferred tax assets and liabilities. These include temporary differences measured at the amount expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled. Deferred tax liabilities are recognised for all taxable temporary differences, unless the temporary difference arises from the initial recognition of goodwill, goodwill for which amortisation is not deductible for tax purposes or the initial recognition of other assets and liabilities in a transaction that affects neither accounting profit (loss) nor taxable profit (tax loss). Deferred tax assets are recognised for temporary differences to the extent that it is considered probable that the Company will have sufficient taxable profits in the future against which the deferred tax asset can be utilised, and the deferred tax assets do not arise from the initial recognition of other assets and liabilities in a transaction that affects neither accounting profit (loss) nor taxable profit (tax loss). The other deferred tax assets (tax loss, temporary differences and tax credit carryforwards) are only recognised if it is considered probable that the Company will have sufficient future taxable profits against which they can be utilised. The deferred tax assets recognised are reassessed at the end of each reporting period and the appropriate adjustments are made to the extent that there are doubts as to their future recoverability. Also, unrecognised 20 deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that they will be recovered through future taxable profits. 4.11.2 REIT regime The REIT special tax regime, as amended by Law 16/2012 of 27 December, is based on a 0% corporate income tax rate, provided certain requirements are met. Particularly noteworthy amongst those conditions is that at least 80% of income must come from urban real estate used for leasing purposes and acquired in full ownership or through holdings in Spanish or foreign companies, regardless of whether or not they are listed on organised markets, that meet the same investment and profit distribution requirements. Likewise, the main sources of income for these entities must come from the real estate market, either through leasing the properties, their subsequent sale after a minimum lease period, or the income generated from holdings in entities with similar characteristics. Nevertheless, tax is accrued in proportion to dividend distributions. Dividends received by the shareholders are exempt, unless the recipient is a legal person subject to corporate income tax or a permanent establishment of a foreign entity, in which case a deduction in the tax liability is established, so that these earnings are taxed at the shareholder’s rate. However, the remaining earnings will not be taxed so long as they are not distributed to shareholders. As established in the Ninth Transitional Provision of Law 11/2009, of 26 October, amended by Law 16/2012, of 27 December, governing REITs, the entity will be subject to a special tax rate of 19% on the total dividends or shares in profit distributed to shareholders with a shareholding in the entity of 5% or more, when these dividends are exempt or taxed at a rate below 10% in the shareholders. The Group has therefore established the procedure guaranteeing confirmation by shareholders of their tax rate, proceeding where applicable, to withhold 19% of the dividend distributed to shareholders that do not meet the aforementioned tax requirements. With effect for the years beginning on or after 1 January 2021, the Spanish Law 11/2021, of 9 July, on measures to prevent and combat tax fraud amended article 9(4) of Law 11/2009, of 26 October, governing REITs. Specifically, a special tax of 15% was introduced on the amount of profit obtained in the year that is not distributed, in the part that comes from: (a) income not taxed at the general tax rate of income tax and; (b) income not from the transfer of eligible assets, once the three-year maintenance period has elapsed, which has been included in the three-year reinvestment period stipulated in article 6(1)(b) of Law 16/2012, of 27 December. This special tax will be considered income tax and will accrue on the day of the resolution to apply profit for the year by the general shareholders meeting or equivalent body. The tax must be self-assessed and paid within two months of its accrual. 4.12 Revenue and expenses Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related goods and services occurs, regardless of when the resulting monetary or financial flow arises. Revenue is measured at the fair value of the consideration received, net of discounts and taxes. Interest and dividends received from financial assets The Company’s income that relates to dividends received from investees, in accordance with Ruling no. 2 of the Official ICAC Gazette no. 79/2009, on the classification for accounting purposes in separate financial statements of income and expenses of holding companies, is recognised as revenue, as the Company’s ordinary business activities include the management and administration of investments in other investees. Interest and dividends from financial assets accrued after the date of acquisition are recognised as income in the income statement. Interest is recognised using the effective interest method and dividends are recognised when the right to receive them is declared. For these purposes, unmatured accrued explicit interest as well as the dividends agreed upon by the competent body at the time of acquisition are independently recognised, by maturity, when the financial assets are initially recognised. Explicit interest is that obtained on applying the contractual interest rate of the financial instrument. If the dividends distributed clearly originate from profit generated prior to the date of acquisition, as a result of the amounts distributed being greater than the profit generated by the investee since then, they are not recognised as income and the carrying amount of the investment is reduced. 21 Revenue from sales and services Revenue from sales is recognised when the significant risks and rewards of ownership of the goods sold have been transferred to the buyer, and the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Rental income is recognised on an accrual basis and incentives and the initial costs of the lease agreements are allocated to income on a straight-line basis. Revenue arising from variable rental income, which is calculated based on the sales of the tenants at the leased premises, is accrued on a regular basis by virtue of the most recent known sales data, given that the income can be reliably measured at this time, and is invoiced once the final sales data for the year is available. Interest income from financial assets is recognised using the effective interest method and dividend income is recognised when the shareholder’s right to receive payment has been established. In any case, interest and dividends from financial assets accrued after the date of acquisition are recognised as income in the income statement. 4.13 Classification of assets and liabilities as current and non-current Assets and liabilities are classified in the balance sheet as current and non-current. For this purpose, assets and liabilities are classified as current when they are associated with the Company’s normal operating cycle and when they will foreseeably be sold, used, realised or settled within a maximum of one year; non-current assets and liabilities are different from the foregoing and will foreseeably mature, be sold or realised within a period of more than one year. 4.14 Related party transactions The Company carries out all its transactions with related parties at market values and in accordance with the agreements. The Company’s directors consider that there are no material risks in this connection that might give rise to significant liabilities in the future. 4.15 Environmental assets and liabilities Environmental assets are considered to be assets used on a lasting basis in the Company’s operations whose main purpose is to minimise environmental impact and protect and improve the environment, including the reduction or elimination of future pollution. Because of their nature, the Company’s business activities do not have a significant environmental impact. 4.16 Business combinations Business combinations are accounted for using the acquisition method, to which end the acquisition date and cost of the business combination are determined, whereby the identifiable assets acquired and liabilities assumed are measured at their acquisition-date fair value. Goodwill or the loss on the combination is the difference between the fair values of the assets acquired and liabilities assumed recognised and the cost of the business combination all at the aforementioned acquisition date. The cost of the business combination is the sum of: –The acquisition-date fair values of the assets transferred, liabilities incurred or assumed and equity instruments issued. –The fair value of any contingent consideration that depends on future events or on the fulfilment of certain pre-defined conditions. The cost of the business combination does not include expenses relating to the issuance of equity instruments offered or financial liabilities delivered in exchange for the items acquired. 22 Also, the cost of a business combination does not include the fees paid to legal advisers and other professionals involved in the combination, or any costs incurred internally in this connection. Those amounts are taken directly to profit or loss. In the exceptional case in which a loss arises on the combination, it is recognised as income in the income statement. If at the end of the year in which a combination occurs it has not been possible to complete the valuation work needed to apply the acquisition method outlined above, the combination is accounted for provisionally. These provisional amounts can be adjusted during the period necessary to obtain the required information, which in no case may exceed one year. The effects of any adjustments made during this period are accounted for retroactively, and the comparative information is modified if necessary. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss, unless the consideration was classified as equity, in which case subsequent changes in its fair value are not recognised. 4.17 Foreign currency transactions The Company's functional currency is the euro. Therefore, transactions in currencies other than the euro are considered to be “foreign currency transactions” and are recognised by applying the exchange rates prevailing at the date of the transaction. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to euros at the rates then prevailing. Any resulting gains or losses are recognised directly in the income statement in the period in which they arise. 4.18 Statement of cash flows The following terms are used in the statement of cash flows, which was prepared using the indirect method, with the meanings specified: –Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value. –Operating activities: the principal revenue-producing activities of the Company and other activities that are not investing or financing activities. –Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents. –Financing activities: activities that result in changes in the size and composition of the equity and liabilities that are not operating activities. 5. Goodwill The goodwill recognised at 31 December for 2021 arose from the merger by absorption with Testa Inmuebles en Renta, SOCIMI, S.A. in 2016. The changes in this heading in 2021 and 2020 were as follows (in thousands of euros): 2021 Thousands of euros Balance at 31-12-2020 Additions Amortisation Balance at 31/12/2021 Cost 115,801 — (23,160) 92,641 115,801 — (23,160) 92,641 2020 23 Thousands of euros Balance at 31/12/2019 Additions Amortisation Balance at 31/12/2020 Cost 138,962 — (23,161) 115,801 138,962 — (23,161) 115,801 The Company amortises goodwill over a period of 10 years and, therefore, recognised the related amortisation for the year under “Amortisation of property” in the accompanying income statement for 2021 for EUR 23,160 thousand (EUR 23,161 thousand at 31 December 2020). The Company's Directors, in accordance with their expectations of the evolution of the real estate market, as well as the market values of the acquired assets, have not identified any signs of impairment in their recoverable value. In this regard, at 31 December 2021 the existing gains in the property assets from Testa Inmuebles en Renta SOCIMI, S.A. amounted to EUR 925,374 thousand (EUR 889,637 thousand in 2020), as detailed as follows: Thousands of euros 2021 2020 Carrying amount of the investment property from Testa Inmuebles en Renta SOCIMI, S.A. 2,325,487 2,330,127 Fair value of the investment property from Testa Inmuebles en Renta SOCIMI, S.A. 3,250,861 3,219,764 Unrealised gains 925,374 889,637 The fair value indicated above was obtained from the valuations performed by independent experts, applying the methodology described in Note 7 below. 6. Concessions The changes in concession projects at year-end 2021 are as follows: Thousand of euros Balance at 31 December 2019 82,903 Additions 7 Depreciation and amortisation charge (285) Disposals (82,625) Balances at 31 December 2020 — Additions — Depreciation and amortisation charge — Disposals — Balance at 31 December 2021 — In 2016, after the integration of the commercial assets of Metrovacesa, S.A., the Company added the La Fiura shopping center located in Reus (Tarragona), which entered into service in November 2015. This shopping center is operated under an administrative concession granted by the Reus Municipal Council for a maximum term of 50 years, maturing in 2065. On 27 February 2020, the Company proceeded with a capital increase of Silicius Real Estate, S.L., contributing certain secondary commercial assets. That contribution included the La Fira Shopping Center and, therefore, the Company derecognised the related administrative concession (see Note 10). 24 7. Investment property The breakdown of and changes in this heading in 2021 and 2020 are as follows: 2021 Thousands of euros Initial balance 31.12.2020 Entries, Additions and Contributions Removals, Disposals, and Reversals Transfers Closing balance at 31.12.2021 Cost: Land 2,328,947 3,896 (14,030) 66,983 2,385,796 Buildings 2,352,538 57,368 (30,619) 13,834 2,393,121 Property, plant and equipment under construction and advances 150,189 10,093 — (87,315) 72,967 4,831,674 71,357 (44,649) (6,498) 4,851,884 Accumulated depreciation: Buildings (171,993) (39,837) 3,170 6,498 (202,162) (171,993) (39,837) 3,170 6,498 (202,162) Impairment: Land (175,203) (8,931) 1,090 — (183,044) Buildings (10,190) (1,862) 659 — (11,393) Property, plant and equipment under construction and advances (136) (202) — — (338) (185,529) (10,995) 1,749 — (194,775) Investment property 4,474,152 20,525 (39,730) — 4,454,947 25 2020 Thousands of euros Initial balance 31.12.2019 Entries, Additions and Contributio ns Removals, Disposals, and Reversals Transfers Closing balance at 31.12.2020 Cost: Land 2,330,799 11,559 (13,411) — 2,328,947 Buildings 2,368,578 54,390 (70,430) — 2,352,538 Property, plant and equipment under construction and advances 112,052 38,137 — — 150,189 4,811,429 104,086 (83,841) — 4,831,674 Accumulated depreciation: Buildings (136,162) (39,517) 3,686 — (171,993) (136,162) (39,517) 3,686 — (171,993) Impairment: Land (158,233) (16,973) 3 — (175,203) Buildings (3,782) (6,410) 2 — (10,190) Property, plant and equipment under construction and advances — (136) — — (136) (162,015) (23,519) 5 — (185,529) Investment property 4,513,252 41,050 (80,150) — 4,474,152 “Land and buildings” includes real estate assets in operation. In addition, undeveloped land amounting to EUR 89,948 thousand (EUR 97,151 thousand in 2020) is also included. “Property, plant and equipment under construction and advances” corresponds to assets under development and assets that are being completely refurbished. Buildings for lease 2021 Additions The main acquisition of assets carried out in 2021 relates to the purchase of vertical building rights on a plot zoned for offices in Madrid, known as Ática XIX D, for EUR 1,903 thousand. Improvements to buildings in use and under construction The main additions to “Land and buildings” correspond to the improvement and adaptation works that have been carried out on certain properties owned by the Company, notably including the Saler Shopping Center in Valencia and the Porto Pi Shopping Center in Palma de Mallorca, as well as the Castellana 85, Torre Gloriés and Plaza Ruiz Picasso buildings in the office segment. Disposals The disposals in 2021 relate to the sales of the Ulises 16-18, the San Francisco de Sales commercial premises, and the logistics warehouses of Guadalajara-Azuqeca, having obtained a profit of EUR 10,469 thousand, recognised under “Impairment and gains or losses on disposal of non-current assets” in the accompanying income statement. 26 Transfers The main changes of note are the transfer to operation of the office building at Castellana, 85, as well as the completion of the works carried out at the shopping centers of Porto Pi and Saler and in the office building at Arturo Soria, 343. Also, in 2021 the net cost associated with the overhaul of the Plaza Ruiz Picasso and Ática 1 offices was transferred to “buildings under construction”. 2020 Additions The main acquisition of assets made in 2020 corresponds to the purchase of the office building called Plaza Cataluña in Barcelona amounting to approximately EUR 15,410 thousand. Improvements to buildings in use and under construction The main additions to “Land and buildings” correspond to the improvement and adaptation works that have been carried out on certain properties owned by the Company, notably including the Saler Shopping Center in Valencia and the Porto Pi Shopping Center in Palma de Mallorca, as well as the development of Castellana 85, Torre Gloriés and Plaza Ruiz Picasso in the office segment. Disposals The disposals in 2020 correspond to the contribution of two shopping centers to the investee, Silicus Socimi (see Note 10), in the capital increase process it carried out. The Company takes out the insurance policies it considers necessary to cover the risks that might affect its investment property. At 31 December 2021, the Company’s directors considered that the property, plant and equipment were fully insured against these risks. At 31 December 2021, the Company had no firm purchase commitments for investment property, without considering the investments committed for constructions and improvements. In 2021 no significant finance costs were capitalised in the construction costs or as a result or improvements to or refurbishments of the properties. At 31 December 2021, the Company did not have any investment property that was fully depreciated. At 31 December 2021, the Company does not hold any real estate assets as collateral for loans and derivative financial instruments. The Company holds no rights of use, seizure or similar situations with regard to its investment property. At 31 December 2021 and 2020, the gross surface areas and occupancy rates of the assets by line of business were as follows: 2021 GLA Occupanc y rate (%) Offices 849,689 91% Shopping centers 168,901 93% Logistics 166,710 99% Others 58,941 97% Total surface area 1,244,241 92% * Not including projects under construction or land. 27 2020 GLA Occupanc y rate (%) Offices 867,783 93% Shopping centers 169,262 90% Logistics 194,705 98% Others 59,111 97% Total surface area 1,291,861 93% * Not including projects under construction or land. All of the Company’s investment property is used for its own business activities and is located in Spain. Impairment losses The fair value of the property assets was determined by independent experts in accordance with the Appraisal and Valuation Standards issued by the Royal Institution of Chartered Surveyors (RICS) of the United Kingdom and the International Valuation Standards (IVS) issued by the International Valuation Standards Committee (IVSC). The method used to calculate the market value of the real estate assets involves drawing up ten-year projections of income and expenses for each asset, adjusted at the reporting date using a market discount rate. The residual amount at the end of year 10 is calculated by applying an exit yield or cap rate to the net income projections for year 11. The market values obtained are analysed by calculating and assessing the capitalisation of the returns implicit in these values. The projections are designed to reflect the best estimate of future income and expenses from the investment properties. Both the exit yield and discount rate are determined taking into account the national market and institutional market conditions. The recoverable amount of the Company’s investment property at 31 December 2021, calculated based on the appraisals carried out by Jones Lang LaSalle, S.A., Savills Consultores Inmobiliarios, S.A. and CB Richard Ellis, which are not related to the Company, amount to EUR 6,140,769 thousand at 31 December 2021 (EUR 6,117,575 thousand at 31 December 2020). Based on this appraisal, the Company’s Directors have identified several individual assets whose recoverable amount is less than their carrying amount and, therefore, an impairment loss of EUR 10,995 thousand (EUR 23,519 thousand at 31 December 2020) was recognised under “Impairment and gains or losses on disposal of non-current assets” in the income statement for 2021. At 31 December 2021, the valuations performed by CBRE Valuation Adviser, S.A., Jones Lang LaSalle, S.A. and Savills Consultores Inmobiliarios, S.A. did not indicate any type of uncertainty regarding the market value of the Company's investment property. Income and expenses The main expense relating to operating leases corresponds to the lease agreement that the Company entered into to rent out its offices. On 27 February 2017, the Company changed its registered office from Paseo de la Castellana 42 to Paseo de la Castellana 257, Madrid. This lease was novated in 2021 and its maturity was extended until January 2024. The total lease expense accrued in 2021 amounted to EUR 757 thousand (EUR 760 thousand in 2020). The income for subleases in 2021 and 2020 from Magic Real Estate, S.L.U. and Testa Home, S.L. increased in both years to EUR 18 thousand, and is recognised under “Other operating income” in the accompanying income statement for 2021. a.Operating leases as tenant At the end of 2021 and 2020 the Company had contracted with lessors for the following minimum lease payments, based on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment revisions: 28 Thousands of euros Nominal value 2021 2020 Operating leases Minimum lease payments Within one year 832 801 Between one and five years 901 55 1,733 856 b.Operating leases as landlord At the end of 2021 the Company had contracted with tenants for the following minimum lease payments, based on the leases currently in force, without taking into account the charging of common expenses, future increases in the CPI or future contractual lease payment revisions (in thousands of euros): Thousands of euros 2021 2020 Minimum lease payments: Within one year 208,265 203,443 Between one and five years 421,664 362,380 After five years 73,567 51,419 703,496 617,242 The detail of the operating lease and sublease payments recognised as an expense and as income, respectively, in 2021 is as follows: Thousands of euros 2021 2020 Minimum lease payments 219,987 208,251 Transfer of common expenses 43,553 48,658 263,530 256,909 The expenses passed on to the tenants recognised in the income statement for 2021 decreased the balance of “Other operating expenses” (Note 19.3). 8. Financial assets The detail of “Current and non-current financial investments” at 31 December 2021 and 2020 is as follows: 29 Thousands of euros 31-12-2021 31-12-2020 Non-current financial investments: Equity instruments 6,796 2,595 Financial assets at fair value with changes in profit or loss — 103,775 Guarantees given and prepayments 31,600 34,186 Loans to Group companies 506,516 470,779 Loans to third parties 100,791 95,550 645,703 706,885 Current financial investments: Equity instruments 18 18 Financial assets at fair value with changes in profit or loss 80,964 — Loans to Group companies 736,342 718,561 Loans to third parties 236 71,767 Trade and other receivables 13,011 10,755 Debt securities and other financial assets 57 3,909 830,628 805,010 1,476,331 1,511,895 8.1 Guarantees given and prepayments “Guarantees given and prepayments” includes mainly the guarantees arranged for lease agreements as collateral that the Company has deposited in the Housing Institute of each region, the balance of which at 31 December 2021 amounted to EUR 31,003 thousand (EUR 32,317 thousand at 31 December 2020), as well as the deposits amounting to EUR 307 thousand at that date (EUR 1,707 thousand at 31 December 2020). 8.2 Financial assets at fair value through profit or loss At 31 December 2020, a holding in Aedas Homes, S.A. was included in the amount of EUR 17,254 thousand, equivalent to 1.7% of its share capital. The negative variation in the fair value of this holding in 2020 in the amount of EUR 286 thousand was recognised under “Valuation adjustments” in the accompanying balance sheet for 2020. That valuation was obtained from the share price of Aedas Homes, S.A. at 31 December 2020 (EUR 21.10 per share). On 30 July 2021, the Company sold its ownership interest in Aedas Homes, S.A. equal to 1.70% of its share capital (817,727 shares), obtaining a negative result of EUR 5,041 thousand recognised under “Impairment and gains or losses on disposal of financial instruments” in the income statement. In addition, at 31 December 2020 this heading included a 15.29% (after dilution of capital gains, see Note 10) stake in Silicius Real Estate, SOCIMI, S.A., amounting to EUR 86,521 thousand acquired by the Company through an asset injection in 2020, on which the Company has an option to sell to Silicius itself for the initial cost. At 31 December 2021, the Company's exercise of the put option is highly probable at the acquisition price, without the Company's Management’s analysis identifying any signs of impairment on the recoverable value of that financial asset. In 2021, the Company reclassified EUR 86.5 million to “Financial assets at fair value with changes in profit or loss” corresponding to the value of the shares associated with that liquidity mechanism maturing in 2022. In 2021, this balance was reduced by EUR 5,418 thousand, after the sale of 353,966 shares in the first half of 2021 for a loss of EUR 139 thousand. 8.3 Balances with Group companies (current and non-current) The Company has the following long-term and short-term balances with its subsidiaries at 31 December 2021 and 2020 30 31/12/2021 Thousands of euros Long- term loans Short- term loans Current accounts - receivable s Trade receivabl es Non- current payables Current payables Current accounts - payables Payables to suppliers Group companies: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. — — — — — (31,142) — — Merlin Retail, S.L.U. — 148,614 — 142 — — — — Merlin Oficinas, S.L.U. — 12,510 — 186 — — (2) — Merlin Logística, S.L.U. — 178,579 — 202 — — — — Sevisur Logistica, S.A. — 21,273 — 40 — — — — Parc Logistic de la Zona Franca, S.A. — — — 66 (8,771) (18,578) — — Innovación Colaborativa, S.L.U. — 2,588 — 430 — — — (2) Exhibitions Company, S.A.U. — — — — — (3,346) — — Gescentesta, S.L.U. — 37 — — — (1) — — Metroparque, S.A.U. — — — 54 — (28,629) — — La Vital Centro Comercial y de Ocio, S.L.U. — — — 21 — (4,495) — — Desarrollo Urbano de Patraix, S.A.U. — 6,937 — — — — — (32,007) Sadorma 2003, S.L.U. — 51 — — — (19,932) — — Global Murex Iberia, S.L.U. 2,555 — — — — (2,483) — — Varitelia Distribuciones, S.L.U — 195,156 — 60 — — — — Global Carihuela Patrimonio Comercial, S.L.U — 50,968 — 20 — — — — MPCVI - Compra e Venda Imobiliária, S.A. 15,099 — — 8 — — — — MPEP - Properties Escritórios Portugal, S.A. 21,889 — — 14 — — — — MP Monumental, S.A. 79,292 — — 83 — — (22) — MP Torre A, S.A. 38,251 — — 14 — — — — VFX Logística, S.A. 27,381 — — 30 — — — — Promosete, Invest Inmobiliaria 22,064 — — 34 — — — — Praça do Marqués - Serviços Auxiliares, S.A. — — — 19 — — — — Torre Dos Oceanus Investimentos Inmobiliarios,S.A. 20,504 — — 23 — — — — Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 276,708 103,178 — 133 — — — — Forum Almada II, S.A. — — — 86 — — — — Torre Arts - Investimentos Imobiliarios, S.A. — — — 48 — — — — Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A. — — — 34 — — — — Milos Asset Development, S.A. — 14,883 — — — — — — Associates: Provitae Centros Asistenciales, S.L. — 1,106 — — — — — — 31 Pazo de Congresos de Vigo, S.A. — — — 340 — — — — Paseo Comercial Carlos III, S.A. 2,561 — — — — — — — PK Hoteles 22, S.L. — — — 2 — — — — G36, Development, S.A. 212 12 — — — — — — Edged Spain, S.L. — — 100 49 — — — — Silicius Real Estate, S.L. — — — 54 (4,050) — — (1,800) Other ownership interests: Renazca, S.A. — — 350 80 — — — — 506,516 735,892 450 2,271 (12,821) (108,606) (24) (33,809) 31/12/2020 32 Thousands of euros Long- term loans Short- term loans Current accounts - receivabl es Trade receivabl es Non- current payables Current payables Current accounts - payables Payables to suppliers Group companies: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. — — — — — (33,057) — — Merlin Retail, S.L.U. — 161,749 — 148 — — — — Merlin Oficinas, S.L.U. — — — 386 — (7,772) 2 — Merlin Logística, S.L.U. — 15,988 — 188 — — — — Sevisur Logística, S.A. — 19,795 — 40 — — (143) — Parc Logistic de la Zona Franca, S.A. — — — 62 (8,771) (16,142) (37) — Innovación Colaborativa, S.L.U. — 5,475 — 7 — — — — Exhibitions Company, S.A.U. — — — — — (4,333) — — Gescentesta, S.L.U. — — — — — (123) — — Metroparque, S.A.U. — — — 120 — (26,013) — — La Vital Centro Comercial y de Ocio, — — — 21 — (2,542) — — Desarrollo Urbano de Patraix, S.A.U. — 6,938 — — — — — (32,007) Sadorma 2003, S.L.U. — 52 — — — (19,936) — — Global Murex Iberia, S.L.U. 2,534 — — — — (2,483) — — Varitelia Distribuciones, S.L.U. — 201,321 — 124 — — — — Global Carihuela Patrimonio Comercial, S.L.U. — 49,035 — 19 — — — — MPCVI - Compra e Venda 14,383 — — 8 — — — — MPEP - Properties Escritórios 17,363 — — 9 — — — — MP Monumental, S.A. 58,212 — — 19 — — (146) — MP Torre A, S.A. 36,472 — — 14 — — — — VFX Logística, S.A. 23,543 — — 20 — — — — Promosete, Invest Inmobiliaria 21,300 353 — 15 — — — — Praça do Marqués – Serviços Auxiliares, S.A. — — — 20 — — — — Torre Dos Oceanus Investimentos Inmobiliarios, S.A. 19,639 — — 12 — — — Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 276,708 94,435 — 964 — — — — Formum Almada II, S.A. — — — 691 — — — — Torre Arts – Investimentos — — — 24 — — — — Torre Fernao Magalhanes – Imobiliarios, S.A. — — — 13 — — — — Milos Asset Development, S.A. — 17,396 — — — — — — Renazca, S.A. — — 36 49 — — — — Associates: Provitae Centros Asistenciales, S.L. — 1,081 1 — — — — — Pazo de Congresos de Vigo, S.A. — — — 340 — — — — Paseo Comercial Carlos III, S.A. — 1,005 — 10 — — — — Centro Intermodal de Logística, S.A. — — — 4 — — — — G36 Development, S.A. 625 8 — — — — — — Silicius Real Estate, S.L. — — — — (5,850) — — (2,344) 470,779 718,523 37 3,327 (14,621) (112,401 (324) (34,351) Long-term loans to Group and associated companies 33 The main long-term loans granted by the Company to Group companies and associates recognised under “Loans to Group companies” were as follows: –In 2018, as a result of the of the purchase of Forum Almada-Gestao de Centro Comercial, Sociedade Uniperssoal, Lda, the Company subrogated to three primary loans that the subsidiary had with the previous shareholder for a total amount of EUR 276,708 thousand with maturity set for 31 January 2022. Those loans accrue interest at a mean annual rate of 2.71%. At 31 December 2021, the accrued and unpaid interest amounted to EUR 36,930 thousand (EUR 29,388 thousand in 2020) and is recognised under “Short-term loans” in the accompanying balance sheet. These loans were extended, with a new maturity set on 21 January 2023. –In 2019, as a result of the purchase of the asset owned by MPEP- Properties Escritórios Porugal, S.A., the Company granted a loan amounting to EUR 13,330 thousand, accruing a fixed interest rate of 5% and maturing on 2 September 2029. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 16,430 thousand. – In 2016, as a result of the purchase of the company MPCVI-Compra e venda Imobiliária, S.A., the Company was subrogated into the primary loan that the subsidiary had taken out from the previous owner for an amount of EUR 11,800 thousand with maturity set for 1 June 2025. That loan accrues interest at a fixed annual rate of 5.98%. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 15,099 thousand. –Also, in 2018 as a result of the of the purchase of Torre Dos Oceanus Investimentos Imobiliários, S.A., the Company subrogated to the primary loan that the subsidiary had with the previous owner for an amount of EUR 17,294 thousand with maturity set for 17 April 2022. That loan accrues interest at a fixed annual rate of 5%. The outstanding balance at the end of 2021 of principal plus accrued and unpaid interest amounted to EUR 20,504 thousand (EUR 19,639 thousand at 31 December 2020). This loan was extended, with its new maturity set for 17 April 2023. –Meanwhile in 2017, as a result of the of the purchase of Promosete Investimentos Inmobiliarios, S.A., the Company subrogated to two primary loans that the subsidiary had with the previous owner for an amount of EUR 17,833 thousand with maturity set for 31 January 2022. That loan accrues interest at a fixed annual rate of 5%. The outstanding balance of principal at year-end 2021 and 2020 amounted to EUR 21,300 thousand plus EUR 764 thousand in accrued and unpaid interest at 31 December 2021 (EUR 353 thousand in 2020). This loan was extended with a maturity set for 31 December 2029. –Similarly, in 2016, as a result of the of the purchase of MP Monumental, S.A., the Company subrogated to two primary loans that the subsidiary had with the previous shareholder for an amount of EUR 38,040 thousand. Those loans accrue interest at a mean annual rate of 3% and mature on 21 January 2023. The outstanding balance of principal amounts to EUR 38,000 thousand plus accrued and unpaid interest at the 2021 year-end of EUR 10,144 thousand. –Also in 2016, as a result of the of the purchase of MP Torre, S.A., the Company subrogated to a primary loan that the subsidiary had with the previous shareholder for an amount of EUR 31,122 thousand. That loan accrues interest at a mean annual rate of 3% and matures on 21 January 2023. The outstanding balance of principal amounts to EUR 31,122 thousand plus accrued and unpaid interest at the 2021 year-end of EUR 7,129 thousand. –The Company holds a participatory loan with Global Murex Iberia, S.L.U. amounting to EUR 18,000 thousand. This loan matured in 2019, at which time an addendum was signed extending the maturity of the agreement until 1 September 2024. At 31 December 2021, the outstanding balance of the loan is impaired in an amount of EUR 15,445 thousand (EUR 15,466 thousand in 2020). –Lastly, in 2020, the Company signed a credit facility for CAPEX with VFX Logistics, S.A., MP Monumental, S.A. and MPEP Properties Escritórios Portugal for maximum amounts of EUR 26,360, 30,250 and 7,000 thousand respectively. The maturity of these agreements is 31 December 2025, with an interest rate of 3%. The outstanding balance at 31 December 2021, including principal and interest, is EUR 27,381, EUR 31,108 and EUR 7,043 thousand respectively. –In 2018, the Company acquired from its investee Merlin Parques Logísitivos, S.A.U. (merged with Parc Logístic de la Zona Franca, S.A.U.) the stake it held in VFX Logística. S.A., agreeing to a loan for the deferred amount (8,771 thousand euros) maturing on 28 December 2023. 34 Short-term loans and debts to Group companies and associates –As a result of the of the purchase of Forum Almada-Gestao de Centro Comercial, Sociedade Uniperssoal, Lda, the Company subrogated to a primary loan that the subsidiary had with the previous shareholder for a total current amount of EUR 98,410 thousand. That loan does not accrue interest. The main outstanding balance at the end of 2021 amounted to EUR 66,249 thousand. –Loan agreement between Group companies with Merlin Logistics, S.L.U. lasting one year until 31 December 2022, with subsequent renewals allowed for similar periods, at an interest rate of 1.15% per year. The outstanding balance of principal at the 2021 year-end amounts to EUR 178,579 thousand. –Loan with Global Carihuela Patrimonio Comercial, S.L.U., whose balance comes from the financing from the business combination with Metrovacesa executed in 2016 through current accounts with Group companies. That agreement has a term of one year until 31 December 2022 and subsequent renewals for equal periods may be agreed, accruing an annual interest rate of 1.15%. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 50,968 thousand. –Inter-Group loan agreement with Varitelia Distribuciones, S.L.U. for a period of one year until 31 December 2022, allowing subsequent renewals for similar periods, at an interest rate of 1.15% per year. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 195,156 thousand. –Inter-Group loan agreement with Sevisur Logistics, S.A. for a period of one year, 31 December 2022, with subsequent renewals permitted for similar periods, at an interest rate of 1.15% per year. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 21,273 thousand. –Loan agreement with Metroparque, S.A. whose balance comes from the financing from the business combination with Metrovacesa executed in 2016 through current accounts with Group companies. That agreement has a term of one year until 31 December 2022 and subsequent renewals for equal periods may be agreed, accruing an annual interest rate of 1.15%. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 28,629 thousand. –Loan agreement with Sadorma, S.A. whose balance comes from the financing from the business combination with Metrovacesa executed in 2016 through current accounts with Group companies. That agreement has a term of one year until 31 December 2022 and subsequent renewals for equal periods may be agreed, accruing an annual interest rate of 1.15%. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 19,932 thousand. –Loan agreement with Tree Investments Inmobiliarias SOCIMI, S.A., the duration of which is one year until 31 December 2022, with subsequent renewals allowed for similar periods, yielding an interest rate of 1.15% annually. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 31,142 thousand. –Loan agreement with Parc Logisctic, Zona Franca, S.A. This agreement has a duration of one year until 31 December 2022, with subsequent renewals allowed for similar periods, at an interest rate of 1.15% per year. The outstanding balance of principal plus accrued and unpaid interest at the 2021 year-end amounts to EUR 18,578 thousand. –In 2020 the Company recognised impairment of short-term loans to Innovación Collaborativa, S.L.U., for EUR 4,522 thousand. On 1 June 2021, the Company capitalised the loan by partially converting it in the amount of EUR 12,000 thousand (see Note 10). –In 2020 the Company recognised an impairment of the current loan with Milos Asset Development, S.L.U. for EUR 90 thousand, which was reversed in 2021. At 31 December 2021, the Company had no recorded impairment losses on the loans granted to Group companies and associates except its loan to its investee Global Murex Iberia, S.L.U. 35 8.4 Loans to third parties (current and non-current) The loan granted to Desarrollos Urbanísticos Udra, S.A.U. amounting to EUR 86,397 thousand, which accrues interest at market rates, is recognised in non-current asset under “Loans to third parties”. In 2020 the first capitalisation of interest took place, amounting to EUR 1,423 thousand. In 2021, a new capitalisation took place for an amount of EUR 1,442 thousand, with the resulting principal balance of the loan at 31 December amounting to EUR 89,262 thousand (EUR 87,820 thousand at the end of 2020). The outstanding interest amount amounted to EUR 307 and EUR 302 thousand at 31 December 2021 and 2020, respectively. In relation to that loan, the Company has guarantees from the creditor associated with 10% of the shares the creditor holds in Distrito Castellana Norte, S.A. In addition, this heading includes rental income straight lining and tenant installation costs amounting to EUR 11,164 thousand. At the close of 2020, “Loans to third parties” included the loan granted to Juno Holdings 1, S.a.r.l. for EUR 70,000 thousand, which has a bullet repayment on maturity in November 2021. That loan accrues interest at an annual rate of 2% due at maturity. On 15 December 2021, the Group received EUR 73,010 thousand, with EUR 70,000 thousand in principal and the rest being interest. 8.5 Trade and other receivables At 31 December 2021, “Trade and other receivables” includes the following items: Thousands of euros 31-12-2021 31-12-2020 Current assets: Trade and notes receivable 4,156 610 Group companies and associates 2,272 3,327 Sundry accounts receivable 587 435 Staff 184 184 Other receivables from public authorities (Note 15) 5,812 6,199 13,011 10,755 “Trade and notes receivable” in the balance sheet at 31 December 2021 mainly included the balances receivable from leasing investment property. In general these receivables are interest free and the terms of collection range from immediate payment on billing to payment at 30 days, while the average collection period is approximately 5 days (5 days in 2020). The Company periodically analyses the risk of insolvency of its accounts receivable by updating the related provision for impairment losses. The Company’s directors consider that the amount of trade and other receivables approximates their fair value. The changes in the provision for impairment and bad debt in 2021 were as follows: Thousands of euros 2021 2020 Beginning balance (7,854) (7,423) Charges for the year (818) (661) Reversals/amounts used 652 230 Other 24 — Ending balance (7,996) (7,854) 36 In 2021, the losses from bad debts amounted to EUR 273 thousand (EUR 175 thousand in 2020). The majority of impaired receivables are overdue by more than six months. 9. Cash and cash equivalents “Cash and cash equivalents” includes the Company’s cash and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. The balance of this heading of the accompanying balance sheet comprises mainly the current accounts in euros held by the Company at various financial institutions, which accrue interest at market rates, amounting to EUR 570,725 thousand (EUR 110,930 thousand in 2020). At 31 December 2020, the balances included under “Cash and cash equivalents” amounting to EUR 788 thousand were not available as they were pledged to secure the various obligations existing at that date. At 31 December 2021, there were no balances pledged. The interest earned in this regard in 2021 amounted to EUR 363 thousand and is recognised under “Finance Income” in the accompanying income statement (EUR 170 thousand in 2020). 10. Non-current investments in Group companies and associates The breakdown of and changes in the balance of “Equity instruments” at 2021 and 2020 year-end is as follows: 2021 37 In thousands of euros Balance at 31/12/20 Additions Disposals Impairment Other Balance at 31/12/21 Group companies: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. 657,984 — — — — 657,984 Merlin Retail, S.L.U. 251,408 — — — — 251,408 Merlin Oficinas, S.L.U. 771,345 — — — — 771,345 Merlin Logística, S.L.U. 292,304 — — — — 292,304 Sevisur Logistica, S.A. 37,629 — — — — 37,629 Parc Logistic de la Zona Franca, S.A. 118,310 — — — — 118,310 Innovación Colaborativa, S.L.U. — 12,000 — (4,534) (5,446) 2,020 Exhibitions Company, S.A.U. 4,287 — — (633) — 3,654 Gescentesta, S.L.U. 3 — — — — 3 Metroparque, S.A.U. 231,557 — — — — 231,557 La Vital Centro Comercial y de Ocio, S.L.U. 56,788 — — — — 56,788 Desarrollo Urbano de Patraix, S.A.U. 25,090 — — (30) — 25,060 Sadorma 2003, S.L.U. 18,603 — — 254 — 18,857 Varitelia Distribuciones, S.L.U 21,552 — — 333 — 21,885 Global Carihuela Patrimonio Comercial, S.L.U 13,125 — — (5,464) — 7,661 MPCVI - Compra e Venda Imobiliária, S.A. 6,418 — — — — 6,418 MPEP - Properties Escritórios Portugal, S.A. 85 — — — — 85 MP Monumental, S.A. 20,348 1,200 — — — 21,548 MP Torre A, S.A. 10,186 — — — — 10,186 VFX Logística, S.A. 18,363 440 — (6,493) — 12,310 Promosete, Invest Inmobiliaria 10,386 — — — — 10,386 Praça do Marqués - Serviços Auxiliares, S.A. 56,359 — — — — 56,359 Torre Dos Oceanus Investimentos Inmobiliarios,S.A. 15,912 — — — — 15,912 Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 33,774 — — — (1,200) 32,574 Torre Arts - Investimentos Imobiliarios, S.A. 85,781 — — — — 85,781 Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A. 27,555 — — — — 27,555 Milos Asset Development, S.A. — — — 2 — 2 Associates: Provitae Centros Asistenciales, S.L. 3,509 — — 5 — 3,514 Paseo Comercial Carlos III, S.A. 25,668 — — — — 25,668 Centro Intermodal de Logística, S.A. 95,688 — — — — 95,688 Parking del Palau, S.A.II., S.L.U. 1,357 — — (140) — 1,217 PK Hoteles 22, S.L. 2,467 — — (283) — 2,184 Distrito Castellana Norte, S.A. 169,386 2,922 — (410) — 171,898 G36, Development, S.A. 2,027 — — — — 2,027 Edged Spain, S.L. — 2 — (2) — — Silicius Real Estate, S.L. 70,543 — (4,003) 1,828 18,650 87,018 Total net value of the investment 3,155,797 16,564 (4,003) (15,567) 12,004 3,164,795 38 2020 In thousands of euros Balance at 31/12/19 Additions Disposals Impairment Balance at 31/12/20 Group companies: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. 657,984 — — — 657,984 Merlin Retail, S.L.U. 251,408 — — — 251,408 Merlin Oficinas, S.L.U. 771,345 — — — 771,345 Merlin Logística, S.L.U. 292,304 — — — 292,304 Sevisur Logística, S.A. 37,629 — — — 37,629 Parc Logistic de la Zona Franca, S.A. 118,310 — — — 118,310 Innovación Colaborativa, S.L.U. — — — — — Exhibitions Company, S.A.U. 4,287 — — — 4,287 Gescentesta, S.L.U. 3 — — — 3 Metroparque, S.A.U. 231,557 — — — 231,557 La Vital Centro Comercial y de Ocio, S.L.U. 56,788 — — — 56,788 Desarrollo Urbano de Patraix, S.A.U. 25,090 — — — 25,090 Sadorma 2003, S.L.U. 18,404 — — 199 18,603 Global Murex Iberia, S.L.U. — — — — — Varitelia Distribuciones, S.L.U. 48,478 — — (26,926) 21,552 Global Carihuela Patrimonio Comercial, S.L.U. 33,231 — — (20,106) 13,125 MPCVI - Compra e Venda Imobiliária, S.A. 6,418 — — — 6,418 MPEP - Properties Escritórios Portugal, S.A. 85 — — — 85 MP Monumental, S.A. 20,348 — — — 20,348 MP Torre A, S.A. 10,186 — — — 10,186 VFX Logística, S.A. 17,495 — — 868 18,363 Promosete, Invest Inmobiliaria, S.A. 11,246 — (860) — 10,386 Praça Do Marques Servicios Auxiliares S.A. 56,359 — — — 56,359 Torre Dos Oceanus Investimentos Inmobiliarios, S.A. 15,912 — — — 15,912 Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 31,533 2,241 — — 33,774 Torre Arts - Investimentos Imobiliarios, S.A. 85,781 — — — 85,781 Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A. 27,555 — — — 27,555 Milos Asset Development, S.A. 1 — — (1) — Associates: Provitae Centros Asistenciales, S.L. 4,574 — — (1,065) 3,509 Pazo de Congresos de Vigo, S.A. — — — — — Paseo Comercial Carlos III, S.A. 25,668 — — — 25,668 Centro Intermodal de Logística, S.A. 95,688 — — — 95,688 Parking del Palau, S.A.II., S.L.U. 2,136 — — (779) 1,357 PK Hoteles 22, S.L. 2,467 — — — 2,467 Distrito Castellana Norte, S.A. 168,893 1,119 — (626) 169,386 Silicius Real Estate, S.L. — 91,021 — (20,478) 70,543 G36 Development, S.L. 2,027 — — — 2,027 Total net value of the investment 3,131,190 94,381 (860) (68,914) 3,155,797 39 In compliance with article 155 of the Corporate Enterprises Law, the Company reported the holdings that exceed 10% of share capital in the companies described in the table above. The most significant transactions executed in 2021 are as follows: – Capital increase of Innovación Colaborativa, S.L.U. for EUR 12,000 thousand, by partially offsetting the loan. –On 27 January 2021, the Company acquired 100% of the shares of Edged Spain, S.L.U. and subsequently sold 50% to Edged Global Services Iberia, S.L.U. on 30 March 2021. The Company Edged Spain, S.L.U. is dedicated to the provision of data processing centre services. At 31 December 2021, this stake was fully provisioned. –In 2021, the Company increased its ownership interest in the Portuguese subsidiary MP Monumental, S.A. by capitalising the loan granted to it, amounting to EUR 1.2 million, as supplementary contributions. –In 2021, the Company increased its ownership interest in the Portuguese subsidiary VFX Logística S.A. by capitalising the loan granted to it, amounting to EUR 440 thousand, as supplementary contributions. –Changes in share put price of the Portuguese company Forum Almada Gestão Centro Comercial Sociedade Unipessoal, Lda., due to tax contingencies included in the purchase agreement, which resulted in a negative adjustment to the price of EUR 1,200 thousand. –In relation to stakes in associates, the main change relates to the sale of 353,966 shares of Silicius Real Estate SOCIMI, S.A. for EUR 5,418 thousand, with the proceeds recorded in the income statement. In addition, amounts were received as premium repayment amounting to EUR 4,003 thousand. In relation to that ownership interest, the Company has liabilities associated with ensuring the return on the assets contributed to cover the capital increase with non-monetary contributions amounting to EUR 5,850 thousand, recognised under “Other financial liabilities”. –In 2021, the Company took part in a capital increase of Castellana Norte, S.A. District, increasing the its share by EUR 2,922 thousand. The most significant transactions executed in 2020 are as follows: –Silicius Real Estate SOCIMI, S.A. On 27 February 2020, the Company resorted to a capital increase of Silicius Real Estate, S.A. for a sum of EUR 173 million. The capital increase was performed by contributing certain secondary commercial assets owned by the Group, namely those entitled Thader, La Fira and Nassica. The capital increase saw the Group acquire 34.37% of the shares in the company, which is a multi-product company managed externally. The asset contribution also entailed the assumption of certain obligations associated with the contributed assets for a total of EUR 9,000 thousand, at a sum of EUR 1,800 thousand a year, of which EUR 5,800 thousand is maintained as outstanding obligations at 31 December 2021, recorded as “other financial liabilities”, current and non-current respectively (which at 31 December 2020 amounted to EUR 8,100 thousand). The terms and conditions agreed with Silicius Real Estate SOCIMI, S.A. included certain conditions in relation to the shares received by the Group: •Class-A liquid shares: For 50% of the shares received, the Group has a put option to sell the shares to Silicius Real Estate SOCIMI, S.A., at the same contribution price and with a maturity of 24 months from the date of the transaction (February 2022). The Company recorded this 50% of the investment as a "financial asset" in accordance with IFRS 9 in the amount of EUR 86.5 million, as it considers it highly probable that the put option will be exercised at the issue price and, consequently, understands that there is no exposure to the future risks and rewards arising from the performance of the investee's business. 40 •Class-B liquid shares: For the remaining amount of the shareholding, which initially represented 17.19% of the share capital, it was recorded as an "long-term investment in group companies and associates" as it exercised significant influence on the Board of Directors of Silicius Real Estate SOCIMI, S.A. and because it was considered that for this part of the shareholding there was exposure to the future risks and rewards of the investee. For this 50% (class-B liquid shares), on the fifth anniversary of the contribution of assets: •Silicius Real Estate SOCIMI, S.A. has the option to proceed with the purchase of the shares at a price per share equivalent to the net asset value (NAV) per share available at the above date increased by 30%. •If Silicius Real Estate SOCIMI, S.A. does not exercise the call option, Merlin will be entitled to request the redemption of the holding by way of return in kind of certain pre-selected assets. •If the Board of Silicius Real Estate SOCIMI, S.A. is not satisfied with the selection of assets made by Merlin, it will be obliged to purchase or redeem the class-b liquid shares in cash from Merlin at the issue price (including their par value and share premium) at which they were admitted. In relation to Class-A liquid shares, the Company recognised 50% of the initial value of the contribution as a financial asset with a change in value as a result, since it was considered highly probable that the option will be exercised and, therefore, their value is not associated with the Company's future performance (see Note 8). This transaction caused the Company a capital loss of EUR 3,891 thousand, after considering the expenses associated with it, as well as the obligations assumed, as indicated above. The Directors annually assess the existence of signs of impairment on the holdings above and concluded that there are no further impairments at 31 December 2021. To determine whether or not the shares in Group companies and associates have become impaired, the proportional part of equity of the investees, adjusted by any unrealised gains and goodwill at the valuation date, was considered to be the best evidence of the recoverable amount, which were mainly identified based on third-party valuations of those assets. In 2021, indications of impairment were identified, for a total of EUR 16,141 thousand, mainly related to the shares held in Innovación Colaborativa, S.L.U., Global Carihuela Patrimonio Comercial, S.L.U. and VFX Logística, S.A. The most significant information in relation to investments in Group companies and associates at 2021 and 2020 year-end is detailed in Appendix I. 11. Equity and shareholders’ equity 11.1 Share capital and share premium The detail of “Equity” and of the changes therein is presented in the statement of changes in equity. Share capital At 31 December 2021, the share capital of Merlin Properties SOCIMI, S.A., amounted to EUR 469,771 thousand, represented by 469,770,750 fully subscribed and paid shares of EUR 1 par value each, all of which are of the same class and confer the holders thereof the same rights. All the Company's shares can be publicly traded and are listed on the Madrid, Barcelona, Bilbao and Valencia and Lisbon Stock Exchanges. The market price of the Parent’s shares at 31 December 2021 and the average market price for the fourth quarter amounted to EUR 9.57 and EUR 9.54 per share, respectively. At 31 December 2021, according to information extracted from the CNMV, in relation to the provisions of Royal Decree 1362/2007, of 19 October and Circular 2/2007, of 19 December, the shareholders with significant holdings in the share capital of Merlin Properties SOCIMI, S.A., both direct and indirect, in excess of 3% of the share capital, are the following according to public information: 41 Shares % of share capital Direct Indirect Total Banco Santander, S.A. 87,940,821 26,072,122 114,012,943 24,270% Nortia Capital Investment Holding, S.L. 38,371,083 — 38,371,083 8.168% BlackRock, INC — 18,773,897 18,773,897 3.996% The information from Banco Santander and Manual Lao Hernández (Nortia Capital Investment Holding, S.L.), has been obtained from the company´s Share Register Book, as of 31st December 2021. Share premium The Consolidated Text of the Corporate Enterprises Law expressly permits the use of the share premium to increase capital and establishes no specific restrictions as to its use. This reserve is unrestricted so long as its allocation does not lower the Company’s equity to below the amount of its share capital. On 27 April 2021, the General Shareholders Meeting approved the distribution of a dividend of EUR 140,066 thousand charged to the share premium reserve, as well as the allocation of EUR 25,467 thousand against prior years' losses also charged to it. 11.2 Reserves Legal reserve The legal reserve will be established in accordance with article 274 of the Consolidated Text of the Corporate Enterprises Law, which stipulates, in all cases, that 10% of net profit for each year must be transferred to the legal reserve until the balance of this reserve reaches at least 20% of the share capital. This reserve cannot be distributed, and if it is used to offset losses, in the event no other reserves are available for this purpose, it must be restored with future profits. At 31 December 2021, the Company had not yet reached the legally required minimum established in the revised text of the Corporate Enterprises Law. The legal reserve of companies which have chosen to avail themselves of the special tax regime established in Law 11/2009, of 26 October, governing REITs, must not exceed 20% of share capital. The Articles of Association of these companies may not establish any other type of restricted reserves. Merger reserves The mergers carried out in 2017 generated positive merger reserves of EUR 1,629 thousand. As a result of the merger by absorption of Testa Inmuebles en Renta SOCIMI, S.A. with the Company in 2016, this transaction generated negative merger reserves in the amount of EUR 308,131 thousand. 11.3 Treasury shares in 2021 At 31 December 2021, the Parent held treasury shares amounting to EUR 32,305 thousand. The changes in 2021 were as follows: 42 Number of Shares Thousands of euros Balance at 01 January 2020 5,077,369 5,686 Additions 26,177 279 Disposals (267,043) (299) Balance at 31 December 2020 4,836,503 54,149 Additions 374 3 Disposals (1,951,386) (21,847) Balance at 31 December 2021 2,885,491 32,305 The General Shareholders Meeting held on 10 April 2019 revoked the authorisation granted by the General Meeting of April 2018 with regard to the part not used, and then authorised the acquisition of treasury shares by the Parent itself or by Group companies pursuant to article 146 and related provisions of the Corporate Enterprises Law, in accordance with the requirements and restrictions established in current legislation during the five-year period. The withdrawals of treasury shares amounting to EUR 21,847 thousand (average cost of EUR 11.20 per share) mainly correspond to the first delivery of shares under the “17-19 Incentive Plan” (see Note 18) for EUR 20,986 thousand, and to payments to employees under the flexible remuneration plan for EUR 853 thousand. The Group has a liquidity agreement for the securities listed on the Lisbon Stock Exchange, with net sales of 364 shares in 2021. At 31 December 2021, the Parent held treasury shares representing 0.614% of its share capital. 11.4 Valuation adjustments This heading of the statement of financial position includes changes in the value of financial derivatives designated as cash flow hedges, as well as that corresponding to financial assets with changes in profit or loss. Movement in this heading in 2021 was as follows: Thousands of euros Balance at 31 December 2019 (6,591) Changes in the fair value of hedges in 2020 1,264 Changes in the fair value of “Financial assets with changes in equity" (286) Balance at 31 December 2020 (5,613) Changes in the fair value of hedges in 2021 625 Changes in the fair value of “Financial assets with changes in profit or loss” 4,988 Balance at 31 December 2021 — The change in the fair value of the hedging instruments corresponds to the value recognised when there is a loss of efficiency, which will be deferred over the life of the derivative and has been recognised as an increase in finance costs in the accompanying income statement. 12. Current and non-current financial liabilities The detail of current and non-current liabilities at 31 December 2021 and 2020 is as follows (in thousands of euros): 43 Thousand of euros 2021 2020 Non-current: Measured at amortised cost Syndicated loan 850,000 850,000 Syndicated loan arrangement expenses (3,545) (5,052) Total syndicated loan 846,455 844,948 Revolving credit facility — — Unsecured loan 29,000 29,000 Loan arrangement expenses of the revolving credit facility and unsecured loan (3,097) (3,073) Total other loans 25,903 25,927 Debentures and bonds 4,042,786 4,091,086 Debenture issue expenses (25,216) (25,284) Total debentures and bonds 4,017,570 4,065,802 Total amortised cost 4,889,928 4,936,678 Measured at fair value Interest rate derivative financial instruments 6,169 15,971 Total at fair value 6,169 15,971 Total non-current 4,896,097 4,952,649 Current: Measured at amortised cost Syndicated loan 644 644 Debentures and bonds 588,622 36,291 Unsecured loan 123 125 Revolving credit facility 410 404 Loan arrangement expenses (467) — Total amortised cost 589,332 37,464 Measured at fair value Interest rate derivative financial instruments 320 352 Total at fair value 320 352 Total current 589,652 37,816 There is no material difference between the carrying amount and the fair value of financial liabilities at amortised cost. On 20 April 2016, the Company was given a credit rating of “BBB” with stable outlook by Standard & Poor’s Rating Credit Market Services Europe Limited. On 24 May 2018, Standard & Poor's updated this rating to “BBB” with a positive outlook, changing it to stable outlook due to the COVID-19 pandemic on 27 March 2020. On 4 June 2021, Standard & Poor's again ratified the rating of “BBB” with stable outlook. Additionally, on 17 October 2016, the Company was given a “Baa2” investment grade credit rating by Moody’s. On 27 May 2020, Moody's updated this rating to “Baa2” with a negative outlook due to the Covid-19 pandemic. On 3 December 2021, Moody's updated the rating to “Baa2” with stable outlook. 12.1 Loans The detail of loans at 31 December 2021 and 2020 is as follows (in thousands of euros): 44 31/12/2021 Initial loan / Limit Debt arrangement expenses Long term Short term Short-term interest Syndicated loan 850,000 (3,545) 850,000 — 644 Revolving credit facilities 700,000 (3,055) — — 410 Unsecured loan 160,200 (42) 29,000 — 123 Total 1,710,200 (6,642) 879,000 — 1,177 31/12/2020 Initial loan / Limit Debt arrangement expenses Long term Short term Short-term interest Syndicated loan 850,000 (5,052) 850,000 — 644 Revolving credit facilities 700,000 (3,026) — — 404 Unsecured loan 115,000 (47) 29,000 — 125 Total 1,665,000 (8,125) 879,000 — 1,173 Syndicated loans and revolving credit facilities On 25 April 2019, the Company arranged a senior syndicated loan amounting to EUR 1,550 million, including two tranches, a corporate loan of EUR 850 million and a corporate credit facility of EUR 700 million due in 2024. The initial maturity date for this revolving credit facility was 2024, with the possibility of two optional one-year extensions. The second one-year extension was approved on 30 June 2021, and the new maturity date is 9 May 2026. The corporate loan accrues an interest rate of the one-month EURIBOR + 120 basis points, while the revolving credit facility yields an interest rate of the one-month EURIBOR + 90 basis points, and it incorporates a cost adjustment mechanism based on four sustainability criteria. On 20 March 2020, the Company drew down EUR 700 million from its corporate credit facility to optimise and strengthen its financial position in view of the uncertainty generated by COVID-19. On 17 July 2020 the Company repaid the full amount drawn down from its credit facility. This facility maintains the commitments to maintain certain hedge ratios existing in the previous facility, in the Company's bonds and in the loan from the European Investment Bank. These ratios are defined as the ratio between the value of the assets versus outstanding debt (‘Loan to Value’), the ratio between the income of the Merlin Group, of which it is the Parent, and its debt coverage (‘ICR’) and the ratio between its assets and its secured and unsecured debt (‘Unencumbered Ratio’). The Company’s directors have confirmed that these ratios were met at 31 December 2021 and do not expect that they will not be fulfilled in the coming years. Unsecured loans On 20 December 2018, the Company took out an unsecured loan from the European Investment Bank in an amount of EUR 51,000 thousand and with a 10-year maturity. On 4 November 2019, the Company formalised the second tranche of the unsecured loan from the European Investment Bank amounting to EUR 64,000 thousand, with the two tranches totalling EUR 115,000 thousand. This loan has a maturity of 10 years. This credit facility must be allocated to the development of logistics in the Castilla–La Mancha region. On 10 March 2020 and 26 October 2020, the Group drew down EUR 23,400 thousand and EUR 5,600 thousand corresponding to the first tranche of the facility. This loan accrues a fixed interest rate of 60 basis points. 45 On 16 December 2021, the Parent took out an unsecured loan from the European Investment Bank in an amount of EUR 45,200 thousand and with a 10-year maturity. This financing will be used to make investments in energy efficiency. At year-end, this loan was not drawn down. This facility maintains the commitments to maintain certain hedge ratios existing in the previous facility, in the Company's bonds and in the syndicated loans. These ratios are defined as the ratio between the value of the assets versus outstanding debt (‘Loan to Value’), the ratio between the income of the Merlin Group, of which it is the Parent, and its debt coverage (‘ICR’) and the ratio between its assets and its secured and unsecured debt (‘Unencumbered Ratio’). The Company’s directors have confirmed that these ratios were met at 31 December 2021 and do not expect that they will not be fulfilled in the coming years. Maturity of debt The maturity detail of the amounts provided in these loans is as follows (in thousands of euros): Syndicate d loan Revolving credit facility Total 2022 — — — 2023 — — — 2024 850,000 — 850,000 Over 3 years 29,000 — 29,000 879,000 — 879,000 None of the Company’s debt was denominated in non-euro currencies at 31 December 2021. The Company had undrawn loans at 31 December 2021 with a number of financial institutions totalling EUR 831 million (EUR 786 million at 31 December 2020). There are no significant differences between the fair values and carrying amounts of the Company’s financial liabilities. The finance cost for interest on the loans and the revolving lines of credit totalled EUR 12,677 thousand in 2021 (EUR 14,765 thousand in 2020) and is recognised in the accompanying income statement for 2021. At 31 December 2021, the loan arrangement costs were recognised as a reduction in “Bank borrowings”. In 2021, the Company recognised EUR 2,151 thousand (EUR 2,211 thousand in 2020) associated with the debt under “Finance costs” in the accompanying income statement for 2021, having capitalised EUR 669 thousand in 2021. 12.2 Debenture issues On 12 May 2017, the Company subscribed a Euro Medium Term Notes (EMTN) issue programme of up to EUR 4,000 million, which will replace the original bond issue programme and its supplement subscribed on 25 April 2016 and 14 October 2016, respectively, for an overall maximum amount of EUR 2,700 million. On 18 May 2018, the Company extended that bond-issue scheme (Euro Medium Term Notes - EMTN) up to an amount of EUR 5,000 million. On 17 June 2020, the General Shareholders Meeting approved the extension of this bond issuance programme up to an amount of EUR 6 billion, and it was extended on 21 March 2021. On 7 February 2020, the Company issued a bond of EUR 100 million at 15 years at 102% of the nominal value and with a coupon of 1.875%, in addition to EUR 500 million of the same bond issued in the fourth quarter of 2019. On 13 July 2020, the Company issued a bond of EUR 500 million at 7 years with a coupon of 2.375%. Part of the proceeds were used to repurchase EUR 151.7 million of the bonds expiring in 2022 and EUR 107.2 million of the 46 bonds expiring in 2023. The remainder (EUR 241.1 million) was used to early settle secured loans of Group companies maturing in 2025. On 30 June 2021, the Company issued a 9-year bond for EUR 500 million at 99.196% of the par value and a coupon of 1.375%. These funds were used for early redemption, on 23 February 2022, of the bond maturing in May 2022. This facility maintains the commitments to maintain certain hedge ratios existing in the previous facility, in the Company's mortgage loan and in the loan from the European Investment Bank. These ratios are defined as the ratio between the value of the assets versus outstanding debt (‘Loan to Value’), the ratio between the income of the Merlin Group, of which it is the Parent, and its debt coverage (‘ICR’) and the ratio between its assets and its secured and unsecured debt (‘Unencumbered Ratio’). The Company’s directors have confirmed that these ratios were met at 31 December 2021 and do not expect that they will not be fulfilled in the coming years. The detail at 31 December 2021 of the bonds issued by Company is as follows: Maturity Nominal amount (Millions of Euros) Coupon Listed price Yield Market May 2022 548 2.375% MS + 53 bp (0.01%) Ireland (a) April 2023 743 2.225% MS + 65 bp 0.169% Luxembourg May 2025 600 1.750% MS + 55 bp 0.405% Luxembourg November 2026 800 1.875% MS + 73 bp 0.708% Luxembourg July 2027 500 2.375% MS + 87 bp 0.897% Luxembourg September 2029 300 2.375% MS + 117 bp 1.319% Luxembourg June 2030 500 1.375% MS + 139 bp 1.603% Luxembourg December 2034 600 1.875% MS + 165 bp 2.058% Luxembourg 4,591 2.008% 2020 Maturity Nominal amount (millions of EUR) Coupon Listed price Yield Market May 2022 548 2.375% MS + 36 bp (0.16%) Ireland (a) April 2023 743 2.225% MS + 56 bp 0.04% Luxembourg May 2025 600 1.750% MS + 98 bp 0.51% Luxembourg November 2026 800 1.875% MS + 118 bp 0.75% Luxembourg July 2027 300 2.375% MS + 146 bp 1.1% Luxembourg September 2029 600 2.375% MS + 164 bp 1.32% Luxembourg December 2034 500 1.875% MS + 185 bp 1.74% Luxembourg 4,091 2.085% (a) Due to the business combination with Metrovacesa carried out in 2016, the Group recognised a bond issue launched by Metrovacesa for EUR 700 million. The terms and conditions of the bonds abide by UK laws and are traded on the Irish Stock Exchange. This issue also includes a series of compliance obligations and guarantees, which is common in these types of transactions. At the end of 2021, the Group complied with the covenants established in this agreement. It redeemed them on 23 February 2022 (see Note 24). The finance cost for interest corresponding to bond issues amounted to EUR 89,330 thousand (EUR 82,109 thousand in 2020, which includes EUR 6,026 thousand corresponding to the premium associated with early bond redemptions) and is included in the accompanying income statement for 2021. The accrued interest payable at 31 December 2021 amounted to EUR 40,322 thousand (EUR 36,291 thousand in 2020). Debt arrangement expenses taken to the income statement in 2021 amounted to EUR 5,370 thousand (EUR 5,610 thousand in 2020). 47 12.3 Interest rate derivatives At the end of 2021, the financial instruments for interest rate hedging came from the Company's syndicated corporate loan. On the occasion of the refinancing of the syndicated loan, a new interest rate swap (IRS) was signed to hedge the extension of the maturity of the financing from 2021 to 2024. The notional contract amounts to EUR 850,000 thousand at a cost of 0.0154%. The detail of the financial instruments as of 31 December 2021 is as follows (in thousands of euros): Thousand of euros Non-current Interest rate derivatives 6,169 Total non-current 6,169 Current Interest rate derivatives 320 Total current 320 At 31 December 2021, the effect of the Company's interest rate derivatives, in view of changes of 50 basis points in the credit risk rate, was not significant. 48 13. Other current and non-current liabilities The detail of non-current and current liabilities at 31 December 2021 and 2020 is as follows: Thousands of euros 31-12-2021 31-12-2020 Non-current: Provisions 10,184 17,527 Other non-current liabilities 11,972 3,000 Guarantees and deposits received 46,762 42,817 68,918 63,344 Current: Other payables 132 — Other current liabilities 3,139 2,798 3,271 2,798 72,189 66,142 The headline "Provisions" includes the provisions for the measurement of risk associated with a number of lawsuits and claims filed by third parties arising from the Company’s activity, which were recognised in accordance with the best existing estimates, as well as the provision corresponding to the variable retribution that will be disbursed in the long term for a total amount of EUR 3,338 thousand (EUR 9,220 thousand in 2020). “Guarantees and deposits received” primarily comprise the amounts deposited by lessees to secure leases, which will be reimbursed at the end of the lease term. The amount included under “Other liabilities” relates to the estimated value of the resulting put option on the holding in Silicius (see Note 10). 14. Trade and other accounts payable The detail of trade and other payables is as follows: Thousands of euros 31/12/202 1 31/12/202 0 Trade and other payables: Payables to suppliers 25,087 23,045 Payables to suppliers - Group companies and associates 33,809 34,351 Sundry accounts payable 1,199 10,065 Staff costs (remuneration payable) 20,767 16,875 Other accounts payable to public authorities (Note 15) 18,969 8,013 99,831 92,349 The increase in “Remuneration payable” relates to the reclassification of the variable remuneration indicated in Note 13 as non-current. The directors consider that the carrying amount of trade payables approximates their fair value. Information on the average period of payment to suppliers. Final provision two of Law 31/2014, of 3 December 49 Below are the disclosures required by additional provision three of Spanish Law 15/2010, of 5 July (amended by final provision two of Spanish Law 31/2014, of 3 December), prepared in accordance with the Spanish Accounting and Audit Institute (ICAC) Resolution of 29 January 2016 on the disclosures to be included in the notes to financial statements in relation to the average period of payment to suppliers in commercial transactions. Days 2021 2020 Average period of payment to suppliers 34 32 Ratio of transactions settled 33.9 31.9 Ratio of transactions not yet settled 37.7 35.6 Thousands of euros 2021 2020 Total payments made 109,838 175,867 Total payments outstanding 2,216 6,994 In accordance with the ICAC Resolution, the average period of payment to suppliers was calculated by taking into account the commercial transactions corresponding to the delivery of goods or provision of services that took place from the date of entry into force of Law 31/2014, of 3 December. For the exclusive purpose of providing the information envisaged in this Resolution, payable to suppliers are considered trade payables for debts with suppliers of goods and services, included under “Trade and other payables” under current liabilities in the balance sheet. “Average period of payment to suppliers” is understood as the time elapsed between the date the supplier delivers the goods or provides the services and the date of actual payment. The maximum payment period applicable to the Company in 2014 and 2015 under Law 3/2004, of 29 December, establishing measures to combat late payment in commercial transactions (Ley 3/2004, de 29 de diciembre, por la que se establecen medidas de lucha contra la morosidad en las operaciones comerciales), and pursuant to the transitional provisions contained in Law 15/2010, of 5 July, was 60 days until the publication of Law 11/2013, of 26 July, and 30 days since publication of the aforementioned Law (unless the conditions mentioned in it are met, in which case the maximum payment period may be increased to 60 days). 15. Tax situation The breakdown of the tax receivables and payables at 31 December 2021 and 2020 is as follows: 50 Thousands of euros 31-12-2021 31-12-2020 Tax receivables: Non-current- Deferred tax assets 75,367 78,116 Current- VAT refundable 1,345 2,613 Deferred input VAT 3,379 2,229 Other tax receivables 1,088 1,357 81,179 84,315 Tax payables: Non-current- Deferred tax liabilities 391,103 395,167 Current- VAT payable 473 3,883 Personal income tax withholdings payable 13,873 1,695 Payable to the Social Security 240 206 Deferred output VAT 126 2,229 410,072 403,180 15.1 Reconciliation of accounting profit, taxable profit and tax expense At 31 December 2021, the taxable profit was calculated as the accounting profit for the year. The reconciliation of the accounting profit, the taxable profit from corporation tax, the corporation tax payable or refundable, and the corporation tax expenses at 31 December 2021 and 2020 is as follows: 51 Thousands of euros 2021 2020 Accounting profit before tax 90,418 (24,777) Temporary differences 23,326 24,455 Permanent differences 19,666 146,876 Taxable profit prior to offsetting tax losses 133,410 146,554 Tax loss carryforwards (4,126) — Taxable profit 129284 146,554 Taxable profit under the REIT regime 116,905 146,554 Taxable profit at the standard tax rate 12,379 — Tax charge under the REIT regime (0%) — — Tax charge under the REIT regime (25%) 3,095 — Adjustments to the tax charge — — Tax credit for reinvestment (774) — Tax credit for temporary measures (157) — Prepayments (3,252) (1,357) Corporation tax payable / (receivable) (1,088) (1,357) Taxable profit under the REIT regime 116,905 146,554 Taxable profit at the standard tax rate 12,379 — Tax charge under the REIT regime (0%) — — Tax charge under the REIT regime (25%) 3,095 — Activated deductions (931) — Special encumbrance — Total current income tax expense 2,164 — Tax bases 1,032 — Deductions offset 1,717 786 Offset of corporation tax e.g. previous — — Other corporate income tax adjustments (39) — Deferred tax asset adjustments — — Deferred tax liability adjustments (4,064) (96) Total deferred tax expense (1,354) 690 Total corporate income tax expense 810 690 The current tax expense recognised in 2021 relates to the tax impact due to the sales of investment property, the portion of which was taxed under the general regime. The permanent differences in 2021 mainly relate to amortisation of goodwill arising from the merger by absorption of Testa Inmobilia en Renta, SOCIMI, S.A., as well as various non-deductible expenses and provisions in 2021 are included as a permanent difference. The detail of the corporation tax (expense)/income at year-end 2021 and 2020 is as follows: Thousand of euros 2021 2020 Current tax: Continuing operations 2,164 — Deferred tax: Continuing operations (1,354) 690 Total tax (income)/expense 810 690 15.2 Deferred tax assets recognised The changes in 2021 and 2020 in the deferred tax assets recognised are as follows: 52 Thousands of euros Total deferred tax assets at 31 December 2020 78,116 Tax loss carryforwards (1,032) Set-off of deductions (1,717) Tax adjustment for prior years — Total deferred tax assets at 31 December 2021 75,367 Thousands of euros Total deferred tax assets at 31 December 2019 78,902 Tax loss carryforwards — Set-off of deductions (786) Tax adjustment for prior years — Total deferred tax assets at 31 December 2020 78,116 The detail of the tax loss carryforwards at 31 December 2021 is as follows: Thousand of euros Recognised Tax Tax base credit Tax loss carryforwards: 2009 139,838 3,496 2010 1,650 413 2011 82,275 20,569 2019 1,201 — 2020 8,307 — Total tax loss carryforwards 233,272 55,941 Other deferred taxes recognised 77,703 19,426 Total capitalised deferred tax assets 310,974 75,367 “Other deferred taxes recognised” includes mainly the temporary differences arising from the limit on the depreciation of the assets generated by the acquisition of the Testa subgroup and Metrovacesa and unused tax credits mainly due to reinvestment. The deferred tax assets indicated above were recognised in the accompanying balance sheet because the Company’s directors considered that, based on their best estimate of the Company’s future earnings, including certain tax planning measures, it is probable that these assets will be recovered. As a result of the merger of Testa Inmuebles en Renta SOCIMI, S.A. and the property business of Metrovacesa, S.A., tax gains were generated arising from the difference between the values at which the assets were included in the financial statements and their tax bases. In accordance with the REIT regime, the Company will pay tax on these gains when the property asset is sold. The directors estimate that the deferred tax assets detailed in the table above will be recovered when the property assets are sold, thus offsetting the aforementioned gains. The Company had unused tax deductions and credits at 31 December 2021 amounting to EUR 17,004 thousand (EUR 17,777 thousand in 2020), mainly due to the tax credits for reinvestment. At the 2021 year-end, the Company does not have unrecognised tax loss carryforwards. 53 15.3 Deferred tax liabilities The deferred tax liabilities mainly arose from the merger and the business combination executed in 2016 with Testa Inmuebles en Renta, SOCIMI, S.A. and the property business of Metrovacesa, S.A. and were caused by the differences existing between the book values and the tax values of the assets received in those transactions. The changes in “Deferred tax liabilities” at 31 December 2021 and 2020 were as follows: Thousands of euros Total deferred tax liabilities at 31 December 2020 395,167 Sales of real estate assets (4,064) Total deferred tax liabilities at 31 December 2021 391,103 Thousands of euros Total deferred tax liabilities at 31 December 2019 395,264 Sales of real estate assets (97) Total deferred tax liabilities at 31 December 2020 395,167 As a result of the merger of Testa Inmuebles en Renta SOCIMI, S.A. and the property business of Metrovacesa, S.A., tax gains were generated arising from the difference between the values at which the assets were included in the financial statements and their tax bases. In accordance with the REIT regime, the Company will pay tax on these gains when the property asset is sold. 15.4 Years open to tax audits and inspections Under current legislation, taxes cannot be deemed to have been definitively settled until the tax returns filed have been reviewed by the tax authorities or until the four-year statute of limitations has expired. At 2021 year-end, the Company had all years since their incorporation open for review for all the taxes applicable to them. The Company’s managing body considers that the tax returns for the aforementioned taxes have been filed correctly and, therefore, even in the event of discrepancies in the interpretation of current tax legislation in relation to the tax treatment afforded to certain transactions, the possible liabilities as might arise would not have a material effect on the accompanying financial statements. Also, Law 34/2015, of 21 September, partially amending Spanish Law 58/2003, of 17 December, on General Taxation (Ley 58/2003, de 17 de diciembre, General Tributaria), establishes the right of the tax authorities to initiate a review and investigation procedure of the tax losses offset or carried forward or tax credits taken or carried forward, which will become statute barred after ten years from the last day of the regulatory period established for filing the tax return or self-assessment relating to the year or the tax period in which the right to offset the tax loss or to apply the tax credits arose. On 10 February 2022, the Tax Agency informed the Company of the initiation of audit and investigation actions relating to its income tax in 2016 to 2019 and its value added tax and withholdings in 2018 to 2019. On the date these Financial Statements were approved, the Parent was in the process of collecting the information required by the tax authorities. 16. Disclosure requirements arising from REIT status, Law 11/2009, amended by Law 16/2012 a.Reserves arising from the years prior to applying the tax regime established in Law 11/2009, amended by Law 16/2012, of 27 December and by Law 11/2021. 54 There are no reserves from years prior to the Company’s adherence to the REIT regime, taking into consideration the Company was incorporated in 2014, the year in which it requested to apply the aforementioned tax regime. b.Reserves arising from the years in which the tax regime established in this Law was applied, distinguishing between the portion that comes from income subject to a 0%, 15% or a 19% tax rate and that which is taxed at the standard tax rate, where applicable. The following changes in reserves occurred in 2021, 2020, 2019, 2018, 2017, 2016, 2015 and 2014: Thousands of euros Subject to a 0% tax rate Subject to a 19% tax rate Subject to a 15% tax rate Subject to the general tax rate Not Subject 2021 (25,467) — — — — 2020 17,940 — — — — 2019 20,857 — — — — 2018 11,453 — — — (38) 2017 11,897 — — — 1,628 2016 2,986 — — — (532,767) 2015 (54,543) — — — — 2014 (30,475) — — — — c.Dividends distributed charged to profit for each year in which the tax regime established in this Law was applied, distinguishing between the portion that comes from income subject to a 0%, 15% or a 19% tax rate and that which is taxed at the standard tax rate, where applicable. Thousands of euros Subject to a 0% tax rate Subject to a 15% tax rate Subject to a 19% tax rate Subject to the general tax rate 2021 70,033 — — — 2020 68,519 — — — 2019 185,857 — — 1,275 2018 16,235 — — 86,911 2017 102,687 — — 38,081 2016 3,789 — — 57,808 2015 25,035 — — — 2014 — — — — d.In the case of dividends distributed charged to reserves, indicate the year relating to the reserves applied and whether they were taxed at a rate of 0%, 15%, 19% or at the standard tax rate. No dividends were distributed charged to reserves in 2021, 2020, 2019, 2018, 2017, 2016, 2015 and 2014. e.Date of the resolution to distribute dividends referred to in letters c) and d) above. On 11 November 2021, the Company's Board approved the distribution of a dividend of EUR 70,033 thousand charged to the profit for 2021. 55 On 17 June 2020, the Company’s General Shareholders Meeting approved the distribution of an interim dividend charged to profit for 2019 in the amount of EUR 68,518 thousand. That dividend was paid on 8 July 2020. On 10 October 2019, the Company’s Board of Directors resolved to distribute of an interim dividend charged to profit for 2019 in the amount of EUR 92,939 thousand. This interim dividend was paid to shareholders on 28 October 2019. On 10 April 2019, the Company’s General Shareholders Meeting approved the distribution of an interim dividend charged to profit for 2018 in the amount of EUR 94,193 thousand. That dividend was paid on 7 May 2019. On 9 October 2018, the Company’s Board of Directors resolved to distribute of an interim dividend charged to profit for 2018 in the amount of EUR 93,522 thousand. This interim dividend was paid to shareholders on 25 October 2018. On 7 May 2018, the Company’s General Shareholders Meeting approved the distribution of an interim dividend charged to profit for 2017 in the amount of EUR 9,624 thousand. That dividend was paid on 25 May 2018. On 9 October 2017, the Company’s Board of Directors resolved to distribute a dividend in the amount of EUR 93,457 thousand as an interim dividend charged to profit for 2017. This interim dividend was paid to shareholders on 25 October 2017. The General Shareholders Meeting held on 26 April 2017 approved the distribution of a dividend out of 2016 profit of EUR 47,311 thousand, which was paid to shareholders on 18 May 2017. On 19 October 2016, the Company’s Board of Directors resolved to distribute EUR 59,759 thousand as an interim dividend with a charge to profit for 2016. This interim dividend was paid to shareholders on 25 October 2016. The General Shareholders Meeting held on 6 April 2016 approved the distribution of a dividend out of 2015 profit of EUR 1,838 thousand, which was paid to shareholders on 27 April 2016. On 14 October 2015, the Company’s Board of Directors resolved to distribute EUR 25,035 thousand as an interim dividend with a charge to profit for 2015. This interim dividend was paid to shareholders on 28 October 2015. f.Acquisition date of the properties intended for lease and the interest in the share capital of companies referred to in article 2(1) of this Law. Detail in Appendix II g.Identify the assets included in the calculation of the 80% referred to in article 3(1) of this Law. 100% of the Company’s investment property is made up of urban properties intended for lease, as well as land intended for property development and subsequent lease. Accordingly, the majority of the shares in companies complies with the requirements of article 2(1) of Law 11/2009. These assets are identified in Appendix II, which is an integral part of these financial statements. The Company’s consolidated balance sheet of the Merlin Group for REIT purposes complies with the minimum investment requirement of 80%. h.Reserves arising from the years in which the special tax regime established in this Law was applied, that were drawn down in the tax period, that were not used for distribution or to offset losses, identifying the year relating to these reserves. No reserves were provisioned in 2021, 2020, 2019, 2018, 2017, 2016, 2015 and 2014. 56 17. Balances and transactions with related parties 17.1 Transactions with Group companies and associates The detail of the transactions with Group companies and associates in 2021 and 2020 is as follows: Thousands of euros 2021 2020 Services rendered: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. 1,577 1,587 Merlin Retail, S.L.U. 592 689 Merlin Oficinas, S.L.U. 694 688 Merlin Logística, S.L.U. 795 678 Sevisur Logística, S.L.U. 155 142 Parc Logistic de la Zona Franca, S.A. 248 231 Metroparque, S.A.U. 215 236 La Vital Centro Comercial y de Ocio, S.L.U. 85 84 Varitelia Distribuciones, S.L.U. 218 451 Global Carihuela Patrimonio Comercial, S.L.U. 78 67 MPCVI - Compra e Venda Imobiliária, S.A. 31 32 MPEP - Properties Escritórios Portugal, S.A. 28 27 MP Monumental, S.A. 78 1 MP Torre A, S.A. 56 56 VFX Logística, S.A. 20 1 Promosete, Invest Inmobiliaria 66 61 Praça do Marqués - Serviços Auxiliares, S.A. 78 78 Torre Dos Oceanus Investimentos Inmobiliarios, S.A. 47 47 Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 504 457 Forum Almada II, S.A. 346 346 Torre Arts - Investimentos Imobiliarios, S.A. 95 96 Torre Fernao Magalhaes - Investimentos 64 49 PK Hoteles 22, S.L. 26 — Renazca, S.A. 66 — Edged Spain, S.L. 50 — Paseo Comercial Carlos III, S.A. 42 54 6,252 6,158 Dividends: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. 51,559 42,237 Merlin Retail, S.L.U. 2,667 11,779 Merlin Oficinas, S.L.U 15,155 9,442 Merlin Logística, S.L.U. 15,905 11,187 Sevisur Logística, S.A. 3,174 2,406 Metroparque, S.A.U. 6,354 7,612 La Vital Centro Comercial y de Ocio, S.L.U. 1,397 2,421 Varitelia Distribuciones, S.L.U. — 5,959 Parc Logistic de la Zona Franca, S.A. 4,939 6,108 Torre Arts - Investimentos Imobiliarios, S.A. 2,030 1,952 Torre Fernao Magalhaes - Investimentos 557 526 57 MPCVI - Compra e Venda Imobiliária, S.A. 261 136 Centro Intermodal de Logística, S.A. 1,788 1,274 Silicius Real Estate, S.L. — 267 MPEP - Properties Escritórios Portugal, S.A. 69 — Promosete, Invest Inmobiliaria 444 — Praça do Marqués - Serviços Auxiliares, S.A. 2,094 — Torre Dos Oceanus Investimentos Inmobiliarios,S.A. 521 — PK Hoteles 22, S.L. 1,780 — 110,694 103,308 Loan income: Merlin Retail, S.L.U. 1,711 645 Merlin Oficinas, S.L.U. 22 — Merlin Logística, S.L.U. 1,890 1,550 Sevisur Logística, S.A. 226 158 Innovación Colaborativa, S.L.U. 71 — Desarrollo Urbano de Patraix, S.A.U. 79 97 Varitelia Distribuciones, S.L.U. 2,253 — Global Carihuela Patrimonio Comercial, S.L.U. 575 79 MPCVI - Compra e Venda Imobiliária, S.A. 715 2,038 MPEP - Properties Escritórios Portugal, S.A. 826 486 MP Monumental, S.A. 2,930 717 MP Torre A, S.A. 1,780 709 VFX Logística, S.A. 778 2,320 Promosete, Invest Inmobiliaria, S.A. 411 1,785 Torre Dos Oceanus Investimentos Inmobiliarios, S.A. 865 243 Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. 7,542 493 Milos Asset Development, S.A. 234 867 Provitae Centros Asistenciales, S.L. — 7,563 G36 Development, S.A. 4 87 Paseo Comercial Carlos III, S.A. 16 265 22,929 19,851 Revenue from rental activity: Innovación Colaborativa, S.L.U. 2,308 2,458 Parking del Palau, S.A.II., S.L.U 17 18 2,324 2,476 Revenue from rebilling of expenses: Innovación Colaborativa, S.L.U. 691 619 691 619 Other operating income: Merlin Retail, S.L.U. 4 — Centro Intermodal de Logística, S.A. 5 8 Innovación Colaborativa, S.L.U. 2 — Renazca, S.A. 2 — Silicius Real Estate, S.L. 8 — 21 8 Other operating expenses: Merlin Oficinas, S.L.U. — (45) 58 Varitelia Distribuciones, S.L.U. (80) (88) Innovación Colaborativa, S.L.U. (18) (8) Parking del Palau, S.A.II., S.L.U (12) (13) (110) (154) Finance costs: Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. (419) (100) Merlin Retail, S.L.U. — (116) Merlin Oficinas, S.L.U. (106) (42) Parc Logistic de la Zona Franca, S.A. (223) (165) Exhibitions Company, S.A.U. (46) (49) Gescentesta, S.L.U. (1) (3) Metroparque, S.A.U. (333) (332) La Vital Centro Comercial y de Ocio, S.L.U. (49) (20) Sadorma 2003, S.L.U. (227) (232) Global Murex Iberia, S.L.U. (28) (27) (1,433) (1,086) At 31 December 2021 and 2020, the Company had entered into services agreements with some companies of its Group, by virtue of which it earned income for the provision of services amounting to EUR 6,252 thousand and EUR 6,158 thousand, respectively. These services were recognised under “Revenue” in the accompanying income statement. 17.2 Balances with Group companies and associates The amount of the balances in the balance sheet at 31 December 2021 detailed in Note 8 is as follows: Thousands of euros 31-12-202 1 31-12-202 0 Non-current loans to Group companies and associates 506,516 470,779 Current loans to Group companies and associates 735,892 718,523 Other current financial assets 450 38 Non-current payables to Group companies and associates (12,821) (14,621) Current payables to Group companies and associates (108,630) (112,725) Receivables from Group companies and associates 2,272 3,327 Payables to suppliers - Group companies and associates (33,809) (34,351) 17.3 Balances and transactions with related parties The detail of the balances and transactions with related parties is as follows: 59 Thousand of euros 2021 2020 Assets Liabilities Assets Liabilities Balances: Banco Santander, S.A (a) 288,710 65,806 18,410 65,806 Banco Santander, S.A (a) — 65,806 () — 223,806 () Banco Santander, S.A (a) — 127 — 95 Pº Comer. Carlos III 2,561 — 1,005 — Provitae Centros Asistenciales, S.L. 1,106 — 1,081 — Silicius Real Estate SOCIMI, S.A. 80,964 5,850 86,521 4,050 G36 Developments S.L. 224 — 633 — Total 373,565 137,589 107,650 293,757 (*) This amount does not represent the recognition of a liability 2021 2020 Income Expenses Income Expenses Transactions: Banco Santander, S.A 552 1,366 830 1,817 Pº Comer. Carlos III 16 — 5 — Provitae Centros Asistenciales, S.L. — — 2 — G36 Developments S.L. 4 — 6 — Total 572 1,366 843 1,817 During 2021, only the shareholder Banco Santander, S.A. held the status of significant shareholder pursuant to the regulations in force. (a) Balances with Banco Santander, S.A. At 31 December 2021, the Company had bank balances deposited at Banco Santander, S.A. in the amount of EUR 288,710 thousand. The Company has financing loans contracted with its significant shareholder, Banco Santander, S.A for a sum of EUR 65,806 thousand, and it has a hedging derivative for its financing positions whose contracted notional value at the 2021 year-end amounted to EUR 65,806 thousand. These positions correspond to Banco de Santander, S.A.’s stake in the loans included among the Company's financing operations, the detail of which can be found in Note 12. The deposits received due to agreements for lease of properties to Banco Santander, S.A. amounted to EUR 127 thousand. The Company also has guarantee lines granted by the shareholder Banco Santander, S.A. in the amount of EUR 5,446 thousand. (b) Transactions with Banco Santander, S.A. In 2021, the Company had 4 leases with Banco Santander, S.A. in different buildings. The duration of the leases covers a period of up to 5 years, and in 2021 they generated of EUR 552 thousand, including income from leasing, as well as parking spaces and transfers of ATM space in shopping centers. The security deposits paid by the tenants amount to EUR 127 thousand. In 2021, the financial cost associated with financing operations with Banco Santander, S.A. was EUR 1,268 thousand, including EUR 31 thousand for security commission and EUR 17 thousand for current account management. In addition, the Company has contracted General Shareholders Meeting and shareholder registration organisational services amounting to EUR 60 thousand, in addition to listing agent services on the Euronext Lisbon stock exchange for EUR 32 thousand. 60 (c) Paseo Comercial Carlos III S.A. At 31 December 2021, the Company, together with the other shareholder of the associate and as a condition of bank financing, has a loan for EUR 2,539 thousand in force, plus EUR 22 thousand in accrued interest (EUR 16 thousand in 2021), which was granted on 27 July 2020 to the associate Paseo Comercial Carlos III, S.A., which manages a shopping center in Madrid. (d) Provitae Centros Asistenciales, S.L. At 31 December 2021, the Company had a loan in force for EUR 962 thousand, plus EUR 144 thousand of interest accrued, which was granted on 10 January 2002 to the associated company Provitae Centro Asistenciales, S.L., which holds a property in Villajoyosa, Alicante. (e) Silicius Real Estate SOCIMI, S.A. At 31 December 2021, the Company has a “financial asset with changes in profit or loss” amounting to EUR 80,964 thousand corresponding to the value of the shares associated with the liquidity mechanism maturing in February 2022, agreed in the non-monetary contribution that the Company made on 27 February 2020. In the first half of 2021, the Company sold 353,966 shares for EUR 5,418 thousand. The Company also has outstanding obligations to pay EUR 5,850 thousand, recognised under “Other current and non-current financial liabilities”. (f) G36 Developments S.L. At 31 December 2021, the Company has a loan in force for EUR 212 thousand, plus EUR 12 thousand of interest accrued (EUR 4 thousand in 2021), which was granted on 1 October 2018, to the associated company G36 Developments, S.L., the holder of an asset that will be dedicated to the management of coworking spaces. Dividends and other profits distributed to related parties (thousands of euros) 2021 2020 Significant shareholders 51,209 16,999 Banco Santander, S.A. 51,209 16,999 Directors and Officers 1,780 695 Directors 1,551 439 Executives 229 256 Total 52,989 17,694 18. Information relating to the Company’s Board of Directors and Senior Management The Company's directors and the parties related thereto did not have any conflicts of interest that had to be reported in accordance with section 229 of the revised text of the Spanish Corporate Enterprises Law. Directors' compensation and other benefits At 31 December 2021 and 2020, salaries, attendance fees and any other type of compensation paid to members of the Parent’s managing bodies totalled EUR 6,523 thousand and EUR 3,149 thousand, as detailed below: 61 Thousands of euros 2021 2020 Fixed and variable remuneration 6,259 2,909(1) (1) Statutory compensation — — Severance — — Attendance fees 250 228 Life and health insurance 14 12 6,523 3,149 (1) In 2020 the Executive Directors waived their variable remuneration In addition to the above amounts and in relation to the variable remuneration for Executive Directors corresponding to the prior years' bonuses, an amount of EUR 3,027 thousand was paid related to the deferred amounts of the variable objectives for 2015 and 2018 in accordance with the terms set out in those plans. In this regard, there are accrued amounts pending payment associated with variable remuneration targets for 2016 to 2019 in the amount of EUR 3,250 thousand and the amount of remuneration corresponding to 2021 in the amount of EUR 2,700 thousand, of which, EUR 1,350 thousand are recorded under “non-current provisions” and EUR 1,350 thousand in the heading "trade and other payables" on the accompanying balance sheet, to be paid in the short term. Also, as indicated below in this Note, as members of the management team, the Executive Directors are entitled to payment of a remuneration plan granted to the management team in 2017 for the 2017-19 period, which will be described below. Under that plan, the Executive Directors have been paid 979 thousand shares derived from 50% of the benchmarked amount, based on compliance with the incentive linked to increasing the EPRA NAV in that period. In accordance with the extraordinary incentive, described below, the Executive Directors accrued EUR 750 thousand as an extraordinary incentive. The Ordinary General Shareholders Meeting of 17 June 2020 approved the appointment of Maria Ana Forner Beltran and Ignacio Gil Casares Satrustegui as proprietary directors. The Board of Directors thus consisted of 14 members on 31 December 2020. On 20 January 2021, Director John Gómez Hall resigned. The breakdown, by board member, of the amounts disclosed above is as follows: 62 Thousands of euros 2021 2020 Director: Remuneration of board members Javier García-Carranza Benjumea Chair - Proprietary director — — Ismael Clemente Orrego CEO 2,800 1,000 (1) (1) Miguel Ollero Barrera Executive director 1,900 1,000 (1) María Luisa Jordá Castro Independent director 172 144 Ana García Fau Independent director 172 134 George Donald Johnston Independent director 134 116 John Gómez Hall Independent director 6 97 Fernando Ortiz Vaamonde Independent director 136 111 Juan María Aguirre Gonzalo Independent director 176 146 Pilar Cavero Mestre Independent director 159 124 Francisca Ortega Hernández Agero Proprietary director 129 — Emilio Novela Berlín Independent director 168 127 María Ana Forner Beltrán Proprietary director 161 73 Ignacio Gil Casares Satrústegui Proprietary director 146 65 6,259 3,137 (1) In 2020 the Executive Directors waived their variable remuneration The Company has granted no advances, loans or guarantees to any of its board members. The Company's directors are covered by the “Corporate Third-Party Liability Insurance Policies for Directors and Officers” taken out by the Company to cover possible damages that may be claimed, and that are evidenced as a result of a management error committed by its directors or executives, as well as those of its subsidiaries, in discharging their duties. The premium amounted to an annual total of EUR 493 thousand (EUR 221 thousand in 2020). Remuneration and other benefits of Senior Management The remuneration of the Company's Senior Management, including the Head of Internal Audit, excluding those who are simultaneously members of the Board of Directors (whose remuneration is disclosed above) in 2021 and 2020, is summarised as follows: 2021 Thousands of euros Number of employees Fixed and variable remuneration Other remuneration Total 8 5,525 36 5,561 2020 63 Thousands of euros Number of employees Fixed and variable remuneration Other remuneration Total 5 1,865 (1) 26 1,891 (1) In 2020 the members of Management waived their variable remuneration. In addition to the above amounts and in relation to the variable remuneration for Senior Management corresponding to the prior years' bonuses, an amount of EUR 4,105 thousand was paid related to the deferred amounts of the variable objectives for 2015 and 2018 in accordance with the terms set out in those plans. In this regard, there are accrued amounts pending payment associated with variable remuneration targets for 2016 to 2019 in the amount of EUR 4,372 thousand and the amount of remuneration corresponding to 2021 in the amount of EUR 4,085 thousand, which are recorded under “Trade and other payables” on the accompanying balance sheet. Under the 2017-19 incentives plan described below, Senior Management have been paid 806 thousand gross shares derived from 50% of the amount accrued for meeting the incentive linked to increasing the EPRA NAV in that period. In 2021, two members of Senior Management left the company. In 2021 they received fixed and variable remuneration of EUR 242 thousand, as well as other remuneration amounting to EUR 3 thousand. They were also paid EUR 3,870 thousand corresponding to the deferred amounts of the variable targets for 2015, 2016, 2018 and 2019. There are no unpaid accrued amounts. In addition, in relation to the remuneration plan associated with the 2017-19 period, they received 1,076 thousand gross shares arising from the entire amount accrued for meeting the incentive linked to increasing the EPRA NAV over the period. In accordance with the extraordinary incentive described below, Senior Management accrued EUR 540 thousand as an extraordinary incentive. In regards to the “golden parachute” clauses for the Company’s Executive Directors and other Senior Management in the event of dismissal or takeover, these clauses provide for compensation that represented a total commitment of EUR 9,400 thousand as of 31 December 2021. 2021 extraordinary incentive The General Shareholder Meeting held on 27 April 2021 approved an extraordinary incentive for 2021 linked to the fulfilment of a series of strategic objectives and with a maximum amount of one time the fixed remuneration of the beneficiaries. The degree of compliance with this extraordinary incentive was 37.5% and its overall amount totalled EUR 2,737 thousand, the accrual of which was recognised under “Staff costs” in the accompanying consolidated income statement. This incentive will be paid in cash in April 2022. 2017-19 incentives plan Also, at the General Shareholders Meeting held on 26 April 2017, the shareholders approved a new remuneration plan for the management team and other important members of the Group’s workforce, the measurement period of which is from 1 January 2017 to 31 December 2019 (the “2017-19 Incentive Plan”). According to the plan, the members of the management team may be entitled to receive: (i) a certain monetary amount in accordance with the increase of the share price and (ii) Parent Company shares, if certain objectives are fulfilled. Vesting of the incentive will independently be conditional upon the total rate of return obtained by the shareholder during the three-year period due to: –the increase in the quoted price of the Company's share plus the dividends distributed to shareholders during the measurement period; and 64 –the increase in the EPRA NAV per share of the Company plus the dividends distributed to shareholders during the measurement period; For the right to the share-based incentive and to the EPRA NAV-based incentive to be vested, the total shareholder rate of return (TSR) must be at least 24%. TSR NAV / TSR share price Percentage assigned to beneficiaries (“PR”) Percentage assigned to shareholders < 24% 0% 100% ≥ 24% and < 36% 6% 94% ≥ 36% 9% 91% To calculate the TSR, (i) the percentage assigned to the Beneficiaries in accordance with the above table will be applied to the result of multiplying the Share Price TSR multiplied by the number of Shares of the Company as of 31 December 2019; (ii) the result of that transaction will be balanced through an adjustment mechanism in favour of the Beneficiaries, as, once a minimum return is reached, the Beneficiaries will be entitled to the assigned percentage of the total return generated from the start. The date for calculating the amount of the incentive tied to the EPRA NAV per share and the amount of the incentive tied to the quoted price of the shares was 31 December 2019. The maximum amount to be received for the incentive tied to the share price from 2017 to 2019 amounted to EUR 37.5 million, which was paid out in March 2020. Also, the maximum amount of the incentive tied to EPRA NAV per share will be EUR 75 million and a maximum of 6,000,000 shares have been allocated for its payment. At 31 December 2019, there were 5,874,111 shares that were ultimately allocated to the incentive benchmarked to the EPRA NAV. 50% of the allocated shares will be paid out on the second settlement date, i.e., on the second business day after the formulation of the 2020 annual financial statements. The remaining 50% of the allocated shares will be paid out on the third settlement date, i.e., on the second business day after the formulation of the 2021 annual financial statements. In this regard, as of 31 December 2021, the Company recognised the expense in the amount of EUR 8,758 thousand, corresponding to the vested portion of the 2017-19 Incentive Plan, with a balancing entry in reserves. In 2021, a total of 2,805,035 gross shares corresponding to the first payment of the incentive referenced to the EPRA NAV were paid, as well as 537,971 shares corresponding to the second payment of such incentive for beneficiaries' exit from the Company in 2021. Transactions outside the normal course of business or not on an arm’s length basis performed by the managing body Apart from the transactions with connected parties described in Note 17, the Company’s managing body did not carry out any transactions with the Company or Group companies outside the normal course of business or that were not on an arm’s length basis in 2020. Stakes held by directors and their affiliates in other companies The Company's directors and the parties connected to them did not have any conflicts of interest that had to be reported in accordance with section 229 of the revised text of the Corporate Enterprises Law. 19. Revenue and expenses 19.1 Ordinary revenue The distribution of revenue is as follows: 65 Thousands of euros 2021 2020 Lease income 203,334 208,248 Revenue from services rendered 7,045 7,059 Dividend income 110,693 103,308 Interest income 22,929 19,851 Total revenue 344,001 338,466 The breakdown, by type of activity and geographical market, of rental income for 2021 is as follows: Thousands of euros 2021 % Segment: Offices 156,052 77% Shopping centers 33,584 17% Logistics 7,435 4% Other 6,263 3% 203,334 100% Thousands of euros 2021 % Autonomous Communities: Madrid 141,615 70% Catalonia 32,899 16% Andalusia 9,779 5% Valencia 7,350 4% Castilla-La Mancha 4,453 2% Rest of Spain 7,238 4% 203,334 100% 19.2 Staff costs The detail of the remuneration expenses for employees at 31 December 2021 and 2020 is as follows: Thousands of euros 2021 2020 Salaries, wages and similar expenses 23,561 16,396 Termination benefits 152 1,167 Other employee benefit costs and taxes 2,831 2,640 Long-term and Extraordinary Incentives Plan 11,401 18,232 37,945 38,435 66 19.3 Other operating expenses The detail of this heading of the 2021 and 2020 income statements is as follows: Thousands of euros 2021 2020 Non-recoverable expenses of leased properties 26,732 25,366 Outside services Professional services 9,691 6,975 Insurance 613 377 Costs associated with asset acquisitions and sales, financial investments and financing 1,430 3,106 Utilities and other outside services 2,623 3,296 Taxes other than income tax 47 47 Losses, deterioration and variation of provisions for commercial operations 587 606 Total other operating expenses 41,722 39,773 19.4 Finance income and finance costs The detail of the balances of these headings in the income statement is as follows: Thousands of euros 2021 2020 Interest on deposits and current accounts 3,457 3,335 From investments in equity instruments of Group companies and associates 1,145 — Finance income 4,602 3,335 Interest on loans and other credits (112,424) (113,904) Finance expenses (112,424) (113,904) Changes in fair value of financial instruments 14,792 (9,508) Impairment and other losses (16,323) (73,766) Gains or losses on disposals and other (5,188) (176) Impairment and gains or losses on disposal of financial instruments (21,511) (73,942) Net financial profit/loss (114,541) (191,832) “Interest on loans and other credits” includes the repayment of the debt arrangement expenses in the amount of EUR 7,521 thousand for 2021 (EUR 7,821 thousand for 2020), applying the effective interest method to the financial debt. 20. Information on employees The average number of employees in the Company, by professional category, in 2021 and 2020 was as follows: 67 Number of employees 2021 2020 Professional category: Executive directors 2 2 Senior Management 8 6 Management Team - 5 Middle management 56 45 Other staff 102 110 168 168 The distribution, by gender, of the Company’s workforce at the end of 2021 and 2020 was as follows: 2021 2020 Women Men Women Men Executive directors 2 - 2 Senior Management 1 7 - 5 Management Team - - 1 4 Middle management 10 48 6 37 Other staff 56 50 56 57 67 107 63 105 The average number of employees at the Company in 2021 and 2020 with a disability equal to or greater than 33%, by category, was as follows: Number of employees 2021 2020 Professional category: Executive directors - - Senior Management - - Management Team - - Middle management - - Other staff 5 5 5 5 21. Auditor’s fees In 2021 the fees for financial audit and other services provided by the auditor of the Company’s financial statements, Deloitte, S.L., or by companies related to these auditors as a result of control, common ownership or common management, were as follows: 68 Thousands of euros 2021 2020 Audit services 269 270 Other audit-related services: 328 132 Services required under applicable law - - Other attest services 126 132 Tax advisory services - - Other services 202 - 597 402 “Other audit-related services” includes the verification services performed by the auditor in the bond issue process, as well as certain agreed procedures related to the performance of covenants. “Other services” includes technical and urban planning advisory services, as well as other advisory services. The audit services, in turn, include, in addition to the statutory annual audit, review services for interim periods. 22. Information on financial risk management Financial risk factors The Company’s activities are exposed to various financial risks: market risk, credit risk, liquidity risk and cash flow interest rate risk. The Company's global risk management programme focuses on the uncertainty of the financial markets and aims to minimise the potential adverse effects on the Company's financial returns. Risk management is undertaken by the Company's Senior Management in accordance with the policies approved by the Board of Directors. Senior Management identifies, assesses and hedges financial risks in close cooperation with the Company’s operating units. The Board of Directors issues the written global risk management policies and the policies for specific areas, including those for covering market risk, interest rate risk and liquidity risk and investing cash surpluses. Market risk Given the current situation of the property sector and in order to mitigate its effects, the Company has specific measures in place to minimise that impact on its financial position. These measures are applied pursuant to the results of sensitivity analyses carried out by the Company on a regular basis. These analyses involve: –The economic environment in which the Group operates: Designing different economic scenarios and modifying the key variables potentially affecting the Group (interest rates, share price, investment property occupancy rates, etc.). Identifying interdependent variables and the extent of their relationship. –The time scale in which the assessment is being carried out: The time frame of the analysis and its possible deviations will be taken into account. MERLIN Properties is exposed to market risk from possible vacancies or renegotiations of leases when the leases expire. This risk could have a direct negative impact on the valuation of the Company's assets. However, market risk is mitigated by the customer acquisition and selection policies and the mandatory lease terms negotiated with customers. Therefore, at 31 December 2021, the average occupancy rate of the asset portfolio was 92.3%, with a weighted average unexpired lease term of 3.1 years (weighted by GRI). 69 Credit risk Credit risk is defined as the risk of financial loss to which the Company is exposed if a customer or counterparty does not comply with its contractual obligations. In general, the Company holds its cash and cash equivalents at banks with high credit ratings. The Company has policies in place to limit the volume of risks posed by customers. Exposure to the risk of being unable to recover receivables is mitigated in the normal course of business through funds or guarantees deposited as collateral. The Company has formal procedures to identify any impairment of trade receivables. Delays in payment are detected through these procedures and individual analysis by business area and methods are established to estimate impairment loss. Cash and cash equivalents The Company has cash and cash equivalents of EUR 570,725 thousand, which represents its maximum exposure to the risk posed by these assets. Cash and cash equivalents are deposited with banks and financial institutions. Liquidity risk Liquidity risk is defined as the risk of the Company encountering difficulties meeting its obligations regarding financial liabilities settled in cash or with other financial assets. At 31 December 2021, the Company’s working capital amounted to EUR 605,217 thousand. The Company conducts prudent management of liquidity risk by maintaining sufficient cash to meet its payment obligations when they fall due, both in normal and stressed conditions, without incurring unacceptable losses or risking the Company’s reputation. In addition, liquidity risk has the following mitigating factors, which should be highlighted: (i) the generation of recurrent cash from the businesses in which the Company conducts its activity; and (ii) the capacity to renegotiate and obtain new financing facilities based on the Company's long-term business plans and the quality of its assets. At the date of preparation of the financial statements, taking into account the foregoing, the Company had covered all its funding requirements to fully meet its commitments to suppliers, employees and the authorities based on the cash flow forecast for 2022. Likewise, the type of sector in which the Company operates, the investments it makes, the financing it obtains to make such investments, the EBITDA they generate and the occupancy rates of the properties, enables the liquidity risk to be mitigated and excess cash to be produced. Any cash surpluses are used to make short-term investments in highly liquid deposits with no risk. The acquisition of share options or futures, or any other high-risk deposits as a method of investing cash surpluses, is not among the possibilities considered by MERLIN Properties for investing cash surpluses. Interest rate risk in cash flows The Company manages its interest rate risk by borrowing at fixed and floating rates of interest. The Company’s policy is to ensure non-current net financing from third parties is at a fixed rate. Exchange rate risk The Company’s policy is to ensure non-current net financing from third parties is at a fixed rate. Consequently, currently there is no foreign currency risk. The Company is not exposed to exchange rate fluctuations as all its operations are in its functional currency. 70 Tax risk As mentioned in Note 1, the Parent and part of its subsidiaries are subject to the special tax regime for Real Estate Investment Trusts (REITs). The transitional period of the Parent ended in 2017 and, therefore, compliance with all requirements established by the regime (see Notes 1 and 4.11) became mandatory. Some of the more formal obligations that the Parent must meet involve the inclusion of the term REIT in its company name, the inclusion of certain information in the notes to its separate financial statements, the share price on the stock market, etc., and other obligations that require estimates to be made and judgements to be applied by management that may become fairly complex, especially considering that the REIT regime is relatively recent and was developed by the Directorate-General of Taxes mainly in response to the queries posed by various companies. The Group’s Management, based on the opinion of its tax advisors, assessed compliance with the requirements of the regime, concluding that all those requirements were met at 31 December 2021. Accordingly, and also for the purpose of taking into consideration the financial effect of the regime, it should be noted that, as established in article 6 of Law 11/2009, of 26 October, amended by Law 16/2012 of 27 December, governing REITs, and in the percentages established in this Law, companies that have opted for the special tax regime are required to distribute the profit generated during the year to their shareholders in the form of dividends, once the related corporate obligations have been met. This distribution must be approved within six months from each year-end, and the dividends paid in the month following the date on which the pay-out is agreed (see Note 4.11). If the Parent does not comply with the requirements established in the regime or if the shareholders at the General Meetings of these companies do not approve the dividend distribution proposed by the Board of Directors, calculated in accordance with the requirements of this Law, it would not be complying therewith and, accordingly, tax would have to be paid under the general regime, not the regime applicable to REITs. Climate change management risk Within the framework of the European Green Pact and the United Nations Sustainable Development Goals, the Group is carrying out various initiatives in the field of sustainability. Firstly, the Group's Parent Company, in 2021 has created a Sustainability, Ethics and Innovation Committee reporting to the Board of Directors whose main competencies are to advise the Board of Directors, among others, on environmental and sustainability matters; to advise the Board of Directors in the formulation of the Group's sustainability strategy in its relations with stakeholders and in its publication and public communication; and to supervise the communication and information to the market of any information in which reference is made to sustainability issues and non-financial information and to keep the ESG (Environmental Social and Governance) Risk map up to date. In this sense, the Group has incorporated in its investment and financing policies decision factors related to non-financial KPIs. Along these lines, the investment studies for real estate acquisitions and investments in repositioning the Group's assets consider, among other factors, elements such as obtaining energy efficiency certificates with the highest rating (see Note 7), air conditioning, lighting, solar energy, irrigation of green areas, accessibility, etc. When certifying assets, the Group selects the most appropriate framework and method depending on the stage of the assets, as well as the characteristics of the building, its degree of occupancy at the time of certification or the tenants occupying it. In this regard, the process of certifying the portfolio under the standards of the leaders in this market, BREEAM and LEED, continues, with the objective of reaching 99% of the portfolio. During the 2021 fiscal year, the Group has achieved certification or its renewal in 27 assets. Additionally, the Group has obtained a rating of 81% in the 2021 GRESB edition, a platform that allows harmonizing and comparing information related to sustainability criteria (environmental, social and corporate governance - ESG) in real estate investments. Thus, the Group has an Environmental Management System (EMS) certified according to ISO 14001, which constitutes the umbrella under which it manages its portfolios and which incorporates new properties into its perimeter on an annual basis. In 2015, the Group initiated a plan for ISO 14001 (environmental management) and ISO 50001 (energy management) certifications, to maintain and expand the number of real estate assets that have at least ISO 71 14001, and subsequently ISO 50001 (understanding it as a natural step to achieve the ISO 14001 standard prior to aspiring to ISO 50001). This plan covers office buildings as well as shopping centers and logistics warehouses. Regarding ISO 14001, 84 certified buildings were achieved in 2021, with a surface area of 1,141,317 m2. The Group has also continued the process of implementing an Energy Management System under the ISO 50001 standard initiated in 2017, with 81 buildings currently certified, which have a surface area of 1,072,765m2, 17 more than in 2020. Additionally, during the 2021 financial year, the Group has carried out an analysis of the entire portfolio to determine the carbon footprint of each of its assets, as well as the necessary measures to reduce the referred carbon footprint to its minimum expression. In the assets included in the Energy Management System under the ISO 50001 standard, there is a target of reducing total energy consumption by 5% with respect to 2019, based on the implementation of ESMs (energy saving measures). Likewise, the Group's financing policies are sensitive to the savings premiums currently offered by the capital market linked to the performance of certain sustainability indicators. Currently 15% of the Group's debt with credit institutions and bondholders is linked to compliance with ESG indicators (see Note 14). These financings include a cost adjustment mechanism based on management indicators calculated based on four sustainability criteria, measurable on an annual basis. At the end of 2021 the Group complies with the indicators established in these contracts and the Directors estimate that they will also be complied with in 2022. The indicators for the 2021 fiscal year were: 1. Investment of at least €2.2 million in energy efficiency improvements across the portfolio. 2. Achievement of at least 5 LEED and BREEAM external energy certifications with a minimum rating of Silver LEED and Good BREEAM, respectively 3. Obtaining at least 9 AIS/DIGA certifications for handicapped access for all tenants and consumers. 4. Electricity consumption of at least 40 GW from renewable energy sources. Additionally, the Group in its commitment to climate responsibility, has incorporated qualitative factors related to the Group's sustainability strategy into the short-term variable compensation measurement targets for its staff and management team (see Note 20). In addition, during 2021, the Group has applied to adhere to 11 objectives of the United Nations Sustainable Development Goals. Finally, the Group has also made progress in reworking its sustainability policy, which will be articulated around 3 main pillars: (i) fight against climate change, (ii) well-being of tenants and users of the spaces and (iii) impact on the cities and society in which the Group operates. All of the above will form part of the Group's path to net zero or commitment to the fight against climate change. 23. Guarantee commitments to third parties and other contingent liabilities At 31 December 2021 and 2020, the Company had granted bank guarantees amounting to EUR 24,724 thousand and EUR 47,833 thousand, respectively. 24. Events after the reporting period On 23 February, the Company prepaid EUR 548.3 million corresponding to the bond maturing on 23 May 2022. This transaction was paid out from available cash, obtained mainly by issuing EUR 500 million in bonds in June 72 APPENDIX I - Group companies and associates 2021 Thousands of euros Company Line of business / Location Ownership interest Share Profit/(loss) Remaining shareholders’ equity Total Dividends received Carrying amount Consolidation method Auditor Operations Net Equity Cost Impairment Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 9,323 66,293 53,908 91,189 87,001 51,559 657,984 — Integración Global Deloitte Merlin Retail, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 17,963 44,643 42,923 236,491 297,378 2,667 251,408 — Integración Global Deloitte Merlin Oficinas, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 29,674 16,334 16,130 718,601 764,405 15,155 771,345 — Integración Global Deloitte Merlin Logística, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 28,166 32,863 31,544 274,082 333,792 15,905 292,304 — Integración Global Deloitte Sevisur Logística Urban development, construction and operation of buildings for logistics activities and common services. Ctra. de la Esclusa, 15. 41011, Seville. 100% 17,220 3,834 3,839 9,526 30,584 3,174 37,629 — Integración Global Deloitte Parques Logísticos de la Zona Franca, S.A. Acquisition and development of property assets for lease, Avda. 3 del Parc Logístic, nº 26, Barcelona 100% 15,701 4,957 5,230 107,017 127,948 4,939 118,310 — Integración Global Deloitte Exhibitions Company, S.A.U. Provision of all manner of services, technical, commercial and economic services/Paseo de la Castellana 257, Madrid 100% 180 (787) (741) 4,215 3,654 — 4,287 (633) Integración Global N/A Gescentesta, S.L.U. Provision of services / Paseo de la Castellana 257, Madrid 100% 3 197 151 782 936 — 3 — Integración Global N/A Metroparque, S.A. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 56,194 7,881 8,186 33,086 97,465 6,354 231,557 — Integración Global Deloitte La Vital Centro Comercial y de Ocio, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 14,846 2,446 2,495 18,731 36,071 1,397 56,788 — Integración Global Deloitte Desarrollo Urbano de Patraix, S.A. Land management / Avda. Barón de Carcer, 50, Valencia 100% 2,790 (2) (81) 22,351 25,060 — 25,090 (30) Integración Global N/A Sadorma 2003, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 73 (3) 254 18,531 18,857 — 25,485 (6,628) Integración Global N/A 73 Global Murex Iberia, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 14 (1) 21 (15,480) (15,445) — — — Integración Global N/A Varitelia Distribuciones, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 15,443 2,586 333 6,110 21,886 — 172,979 (151,094) Integración Global Deloitte Global Carihuela, Patrimonio Comercial S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 3,303 (4,214) (4,757) 9,115 7,661 — 34,102 (26,441) Integración Global Deloitte MPCVI – Compra e Venda Imobiliária, S.A. Acquisition and development of properties for lease / Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 1,050 1,092 292 5,955 7,296 261 6,418 — Integración Global Deloitte Portugal MPEP – Properties Escritórios Portugal, S.A. Acquisition and development of properties for lease / Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 50 700 (123) 26 (47) 69 85 — Integración Global Deloitte Portugal MP Monumental, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 1,525 (1,630) 7,162 5,582 — 21,548 — Integración Global Deloitte Portugal MP Torre A, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 1,534 (367) (60) (377) — 10,186 — Integración Global Deloitte Portugal VFX Logística, S.A. Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 5,050 (5,997) (6,500) 13,760 12,310 — 21,353 (9,043) Integración Global Deloitte Portugal Promosete, Invest. Inmobil. SA. Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 200 2,173 1,323 7,372 8,895 444 10,386 — Integración Global Deloitte Portugal Praça Do Marquês serviços Auxiliares, SA Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 15,893 2,846 2,128 61,049 79,070 2,094 56,359 — Integración Global Deloitte Portugal Torre Dos Oceanus Investimentos Inmobiliarios,S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 1,643 593 3,319 3,962 521 15,912 — Integración Global Deloitte Portugal Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 5 (1,284) (7,137) 15,053 7,921 — 32,574 — Integración Global Deloitte Portugal Forum Almada II, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 10,000 12,852 8,977 57,136 76,113 — 307,512 — Integración Global Deloitte Portugal Torre Arts - Investimentos Imobiliarios, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 100 2,861 2,177 83,653 85,930 2,030 85,781 — Integración Global Deloitte Portugal Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 100 1,302 995 26,870 27,965 557 27,555 — Integración Global Deloitte Portugal 74 Innovación Colaborativa, S.L. Selection, contracting, conditioning, organisation and management of coworking spaces/Paseo de la Castellana 257, Madrid 100% 15 (4,462) (4,534) 6,539 2,020 — 15,868 (13,848) Integración Global N/A Milos Asset Development, Acquisition, holding, management, disposal and development of land located within the “Distrito Castellana Norte” project / Paseo de la Castellana 257, Madrid 100% 3 (3) 374 (124) 253 — 2 — Integración Global N/A Paseo Comercial Carlos III, S.A. Acquisition and development of property assets for lease / Avda. San Martín Valdeiglesias, 20 - 28922 Madrid 50% 8,698 1,160 116 21,800 30,614 — 25,668 — Método de participación Deloitte Provitae Centros Asistenciales, S.L. Acquisition and development of property assets for lease / C. Fuencarral, 123. Madrid 50% 6,314 (42) (42) (1,160) 5,112 — 5,061 (1,547) Método de participación N/A G36 Development, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 93, Madrid 50% 4,053 (21) (21) — 4,032 — 2,027 — Método de participación N/A Centro Intermodal de Logística S.A. (CILSA) Development, management and performance of logistics activities in a port system / Avenida Ports d’Europa 100, Barcelona 49% 18,920 15,744 10,401 118,936 148,257 1,788 95,688 — Método de participación EY Pazo de Congresos de Vigo, S.A. Project for the execution, construction and operation of the Vigo Convention Centre / Avda. García Barbón, I, Vigo 44% n.d n.d n.d. n.d. n.d — 3,600 (3,600) Método de participación n.d PK. Hoteles 22, S.L. Acquisition and development of property assets for lease / C. Príncipe de Vergara, 15. Madrid 33 % 5,801 8,387 6,215 (5,298) 6,718 1,780 2,467 (283) Método de participación CROWE, S.L.P. Parking del Palau, S.A. Acquisition and development of property assets for lease / Paseo de la Alameda, s/n. Valencia 33 % 1,698 (10) (12) 458 2,144 — 2,137 (920) Método de participación BDO Araba Logística, S.A. Acquisition and development of property assets for lease/Avda. Álava s/n Rivabellosa (Álava) 25 % 1,750 911 391 2,925 5,066 — 2,257 (2,257) Método de participación Mazars Distrito Castellana Norte, S.A. Performance of all manner of real estate activity/Paseo de la Castellana 216, Madrid 14 % 196,060 (6,274) (2,833) (27,350) 165,877 — 172,934 (1,036) Método de participación KPMG Silicius Real Estate, S.L. Performance of all manner of real estate activity/Calle de Velázquez, 123, Madrid 15 % 36,112 58,541 52,369 306,816 395,297 — 87,018 — Método de participación PWC Edged Spain, S.L.U Data processing centre services/Paseo de la Castellana 257, Madrid 50 % 3 (191) (191) (1) (189) — 2 (2) Método de participación N/A 75 APPENDIX I - Group companies and associates 2020 Thousands of euros Company Line of business / Location Ownership interest Share Profit/(loss) Remaining shareholders’ equity Total Dividends received Carrying amount Consolidation method Auditor Operations Net Equity Cost Impairment Tree Inversiones Inmobiliarias, SOCIMI, S.A.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 9,323 77,951 51,559 91,189 53,159 42,237 657,984 — Full consolidation Deloitte Merlin Retail, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 17,963 8,362 2,438 236,491 256,892 11,780 251,408 — Full consolidation Deloitte Merlin Oficinas, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 29,674 15,787 15,517 718,239 763,430 9,442 771,345 — Full consolidation Deloitte Merlin Logística, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 28,166 20,775 16,776 273,211 318,153 11,187 292,304 — Full consolidation Deloitte Sevisur Logística Urban development, construction and operation of buildings for logistics activities and common services. Ctra. de la Esclusa, 15. 41011, Seville. 100% 17,220 3,706 3,553 9,173 29,946 2,406 37,629 — Full consolidation Deloitte Parques Logísticos de la Zona Franca, S.A. Acquisition and development of property assets for lease, Avda. 3 del Parc Logístic, nº 26, Barcelona 100% 15,701 4,624 4,939 107,017 127,657 6,108 118,310 — Full consolidation Deloitte Exhibitions Company, S.A.U. Provision of all manner of services, technical, commercial and economic services/Paseo de la Castellana 257, Madrid 100% 180 (36) 10 4,205 4,395 — 4,287 — Full consolidation N/A Gescentesta, S.L.U. Provision of services / Paseo de la Castellana 257, Madrid 100% 3 192 147 635 785 — 3 — Full consolidation N/A Metroparque, S.A. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 56,194 6,030 6,354 33,086 95,633 7,612 231,557 — Full consolidation Deloitte La Vital Centro Comercial y de Ocio, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 14,846 1,537 1,552 18,576 34,973 2,421 56,788 — Full consolidation Deloitte Desarrollo Urbano de Patraix, S.A. Land management / Avda. Barón de Carcer, 50, Valencia 100% 2,790 (22) (102) 22,453 25,141 — 25,090 — Full consolidation N/A Sadorma 2003, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 73 (2) 199 18,332 18,603 — 24,605 (6,002) Full consolidation N/A 76 Global Murex Iberia, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 14 — 21 (15,501) (15,466) — — (15,466) Full consolidation N/A Varitelia Distribuciones, S.L.U. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 15,443 (18,531) (20,560) 26,670 21,553 5,959 172,979 (151,427) Full consolidation Deloitte Global Carihuela, Patrimonio Comercial S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 257, Madrid 100% 3,303 (13,937) (14,420) 24,242 13,125 — 34,102 (20,977) Full consolidation N/A MPCVI – Compra e Venda Imobiliária, S.A. Acquisition and development of properties for lease / Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 1,050 1,071 274 5,941 7,265 136 6,418 — Full consolidation Deloitte Portugal MPEP – Properties Escritórios Portugal, S.A. Acquisition and development of properties for lease / Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 50 798 78 22 150 — 85 — Full consolidation Deloitte Portugal MP Monumental, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 (680) (2,674) 8,636 6,012 — 20,348 — Full consolidation Deloitte Portugal MP Torre A, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 1,515 (269) 325 106 — 10,186 — Full consolidation Deloitte Portugal VFX Logística, S.A. Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 5,050 1,118 875 12,445 18,370 — 20,913 (2,550) Full consolidation Deloitte Portugal Promosete, Invest. Inmobil. SA. Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 200 1,607 863 6,924 7,987 — 10,384 — Full consolidation Deloitte Portugal Praça Do Marquês serviços Auxiliares, SA Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon 100% 15,893 2,809 2,758 60,595 79,246 — 56,361 — Full consolidation Deloitte Portugal Torre Dos Oceanus Investimentos Inmobiliarios,S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 50 1,535 521 3,319 3,890 — 15,912 — Full consolidation Deloitte Portugal Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 5 (5,252) (7,221) 12,905 5,689 — 33,774 — Full consolidation Deloitte Portugal Forum Almada II, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 10,000 13,255 9,369 47,767 67,136 — 298,143 — Full consolidation Deloitte Portugal Torre Arts - Investimentos Imobiliarios, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 100 2,666 2,030 83,653 85,783 1,952 85,781 — Full consolidation Deloitte Portugal Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A. Acquisition and development of property assets for lease / Avda. Fontes Pereira de Melo, 51, Lisbon 100% 100 719 557 26,870 27,526 526 27,555 — Full consolidation Deloitte Portugal 77 Innovación Colaborativa, S.L. Selection, contracting, conditioning, organisation and management of coworking spaces/Paseo de la Castellana 257, Madrid 100% 4 (4,601) (4,699) (751) (5,446) — 3,868 (9,314) Full consolidation N/A Milos Asset Development, Acquisition, holding, management, disposal and development of land located within the “Distrito Castellana Norte” project / Paseo de la Castellana 257, Madrid 100% 3 (36) (123) (1) (121) — 3 (124) Full consolidation N/A Paseo Comercial Carlos III, S.A. Acquisition and development of property assets for lease / Avda. San Martín Valdeiglesias, 20 - 28922 Madrid 50% 8,698 (1,672) (3,472) 25,409 30,635 — 25,668 — Equity method Deloitte Provitae Centros Asistenciales, S.L. Acquisition and development of property assets for lease / C. Fuencarral, 123. Madrid 50% 6,314 (42) (47) (1,112) 5,155 — 5,061 (1,553) Equity method N/A G36 Development, S.L. Acquisition and development of property assets for lease / Paseo de la Castellana 93, Madrid 50% 4,053 (21) (21) — 4,032 — 2,027 — Equity method N/A Centro Intermodal de Logística S.A. (CILSA) Development, management and performance of logistics activities in a port system / Avenida Ports d’Europa 100, Barcelona 49% 18,920 12,299 9,063 113,906 141,889 1,274 95,688 — Equity method EY Pazo de Congresos de Vigo, S.A. Project for the execution, construction and operation of the Vigo Convention Centre / Avda. García Barbón, I, Vigo 44% N/A N/A N/A N/A N/A — 3,600 (3,600) Equity method N/A PK. Hoteles 22, S.L. Acquisition and development of property assets for lease / C. Príncipe de Vergara, 15. Madrid 33% 5,801 625 369 (220) 5,920 — 2,467 — Equity method CROWE, S.L.P. Parking del Palau, S.A. Acquisition and development of property assets for lease / Paseo de la Alameda, s/n. Valencia 33% 1,698 (76) (78) 527 2,147 — 2,137 (779) Equity method BDO Araba Logística, S.A. Acquisition and development of property assets for lease/Avda. Álava s/n Rivabellosa (Álava) 25% 1,750 1,726 1,053 1,873 4,676 — 2,257 (2,257) Equity method Deloitte Distrito Castellana Norte, S.A. Performance of all manner of real estate activity/Paseo de la Castellana 216, Madrid 14% 175,853 (5,807) (4,327) (23,018) 148,508 — 170,012 (626) Equity method KPMG Silicius Real Estate, S.L. Performance of all manner of real estate activity/Calle de Velázquez, 123, Madrid 15% 361,122 (13,259) (11,957) 6,986 356,141 267 91,021 (20,478) Equity method PWC 78 APPENDIX II - List of the properties intended for lease and the holding in the share capital of companies referred to in article 2(1) of Law 11/2009, amended by Law 16/2012 ACQ. DATE REIT date ASSET NAME ADDRESS TOWN ASSET TYPE USE 1 01 Jan. 15 01 Jan. 15 Av. de Bruselas, 24 AV Bruselas 24 Alcobendas Investment Property Offices 2 01 Jan. 15 01 Jan. 15 Av. de Bruselas, 26 AV Bruselas 26 Alcobendas Investment Property Offices 3 01 Jan. 15 01 Jan. 15 Av. de Bruselas, 33 AV Bruselas 33 Alcobendas Investment Property Offices 4 14 Sep. 16 14 Sep. 16 Encinar CL Manuel Pombo Angulo 20 Alcobendas Investment Property Offices 5 14 Sep. 16 14 Sep. 16 Av. Av. Europa, 1 - Edificio A-B AV Europa 1 Alcobendas Investment Property Offices 6 14 Sep. 16 14 Sep. 16 Vegacinco I-II CL Francisca Delgado 9 Alcobendas Investment Property Offices 7 14 Sep. 16 14 Sep. 16 Factory Bonaire CA A3 Km 345 Aldaya Investment Property Shopping Center 8 01 Jan. 15 01 Jan. 15 Alovera Warehouses I-II-III CL Rio Henares 1 Alovera Investment Property Logistics 9 01 Jan. 15 01 Jan. 15 Azuqueca Warehouses II and III CL Milan 8 y 12 Azuqueca de Henares Investment Property Logistics 10 01 Jan. 15 01 Jan. 15 Vilanova, 12-14 AV Vilanova 12 Barcelona Investment Property Offices 11 14 Sep. 16 14 Sep. 16 Diagonal 199 AV Diagonal 199 Barcelona Investment Property Offices/Hotel 12 14 Sep. 16 14 Sep. 16 Diagonal 458 AV Diagonal 458 Barcelona Investment Property Offices 13 01 Jan. 15 01 Jan. 15 Diagonal, 514 AV Diagonal 514 Barcelona Investment Property Offices 14 01 Jan. 15 01 Jan. 15 Diagonal, 605 AV Diagonal 605 Barcelona Investment Property Offices 15 14 Sep. 16 14 Sep. 16 Balmes CL Balmes 236-238 Barcelona Investment Property Offices 16 14 Sep. 16 14 Sep. 16 P.E. Poble Nou 22@ Ed. A-C-D CL Bac de roda 52 Barcelona Investment Property Offices 17 14 Sep. 16 14 Sep. 16 P.E. Poble Nou 22@ Ed. B CL Fluviá 65 Barcelona Investment Property Offices 18 14 Sep. 16 14 Sep. 16 Bizcargi 1 1D CL Bizcargi 1 1D Bilbao Investment Property Other 19 01 Jan. 15 01 Jan. 15 Naves Cabanillas I CL Castilla la Mancha P. I. Cabanillas Cabanillas del Campo Investment Property Logistics 20 01 Jan. 15 01 Jan. 15 Naves Coslada I AV de la Cañada 64 Coslada Investment Property Logistics 21 01 Jan. 15 01 Jan. 15 Naves Coslada III CL Torres Quevedo 1 Coslada Investment Property Logistics 22 14 Sep. 16 14 Sep. 16 N-IV Km.12,7 Getafe CA Polig. Industrial Los Ángles P-33 Getafe Investment Property Other 23 01 Jan. 15 01 Jan. 15 Escudo del Carmen CL Escudo del Carmen 31 Granada Investment Property Offices 24 14 Sep. 16 14 Sep. 16 P.E. Alvia Ed. 1-2-3 CL Jose Echegaray 8 Las Rozas Investment Property Offices 25 14 Sep. 16 14 Sep. 16 P.I. Európolis CL Londres S/N Las Rozas Investment Property Other 26 01 Jan. 15 01 Jan. 15 Mangraners CL Els Mangraners N-240 Km.88 Lerida Investment Property Offices 27 14 Sep. 16 14 Sep. 16 Torre De Madrid PL De España 18 Madrid Investment Property High Street retail 28 14 Sep. 16 14 Sep. 16 Torre de Madrid (Housing) PL de España 18 Madrid Investment Property Other 29 01 Jan. 15 01 Jan. 15 Plaza de los Cubos CL Princesa 3 Madrid Investment Property High Street retail 30 01 Jan. 15 01 Jan. 15 Princesa, 3 CL Princesa 3 Madrid Investment Property Offices 31 01 Jan. 15 01 Jan. 15 Princesa, 5 CL Princesa 5 Madrid Investment Property Offices 79 32 01 Jan. 15 01 Jan. 15 Princesa parking garage CL Princesa 5 Madrid Investment Property Car parks 33 01 Jan. 15 01 Jan. 15 Ventura Rodríguez, 7 CL Ventura Rodriguez 7 Madrid Investment Property Offices 34 14 Sep. 16 14 Sep. 16 Callao PL Callao 5 Madrid Investment Property High Street retail 35 01 Jan. 15 01 Jan. 15 Partenón, 12-14 AV Partenon 12 Madrid Investment Property Offices 36 01 Jan. 15 01 Jan. 15 Partenón, 16-18 AV Partenon 16 Madrid Investment Property Offices 37 01 Jan. 15 01 Jan. 15 Eucalipto, 25 CL Eucalipto 25 Madrid Investment Property Offices 38 01 Jan. 15 01 Jan. 15 Eucalipto, 33 CL Eucalipto 33 Madrid Investment Property Offices 39 01 Jan. 15 01 Jan. 15 Josefa Valcárcel, 48 CL Josefa Valcarcel 48 Madrid Investment Property Offices 40 01 Jan. 15 01 Jan. 15 Pedro de Valdivia, 10 CL Pedro de Valdivia 10 Madrid Investment Property Offices 41 01 Jan. 15 01 Jan. 15 Juan Esplandiú, 11-13 CL Juan Esplandiu 11-13 Madrid Investment Property Offices 42 01 Jan. 15 01 Jan. 15 Príncipe de Vergara, 187 CL Principe de Vergara 187 Madrid Investment Property Offices 43 01 Jan. 15 01 Jan. 15 Ribera del Loira, 60 CL Ribera del Loira 60 Madrid Investment Property Offices 44 14 Sep. 16 14 Sep. 16 P.E. Puerta de las Naciones Ed. 1 a 4 CL Ribera del Loira 38-50 Madrid Investment Property Offices 45 01 Jan. 15 01 Jan. 15 Castellana, 83-85 PS de la Castellana 83 Madrid Investment Property Offices 46 14 Sep. 16 14 Sep. 16 Cadagua PS de la Castellana 93 Madrid Investment Property Offices 47 01 Jan. 15 01 Jan. 15 Local Castellana 191 PS de la Castellana 191 Madrid Investment Property Other 48 14 Sep. 16 14 Sep. 16 Castellana, 278 PS de la Castellana 278 Madrid Investment Property Offices 49 01 Jan. 15 01 Jan. 15 Torre Castellana 259 PS de la Castellana 259 Madrid Investment Property Offices/Hotel 50 14 Sep. 16 14 Sep. 16 Sollube PL Carlos Trías Bertrán 7 Madrid Investment Property Offices 51 14 Sep. 16 14 Sep. 16 Santiago de Compostela, 94 CL Santiago de Compostela 94 Madrid Investment Property Offices 52 14 Sep. 16 14 Sep. 16 Jose María Churruca Ed. I-II CL Almansa 101-105 Madrid Investment Property Offices 53 14 Sep. 16 14 Sep. 16 Jose María Churruca Ed. III-IV CL Beatriz de Bobadilla 14-18 Madrid Investment Property Offices 54 14 Sep. 16 14 Sep. 16 Fuente De La Mora CM Fuente de la Mora 9 Madrid Investment Property Offices 55 14 Sep. 16 14 Sep. 16 P.E. Vía Norte Ed. 1 - 6 CL Quintanavides 11 a 21 Madrid Investment Property Offices 56 14 Sep. 16 14 Sep. 16 P.E. Alvento A-B-C-D VI de los Poblados 1 Madrid Investment Property Offices 57 14 Sep. 16 14 Sep. 16 Cristalia VI de los Poblados 3 Madrid Investment Property Offices 58 14 Sep. 16 14 Sep. 16 Trianon I-II-III-IV VI de los Poblados 9 Madrid Investment Property Offices 59 14 Sep. 16 14 Sep. 16 P.E. Sanchinarro Ed. I-II CL María de Portugal 9-11 Madrid Investment Property Offices 60 14 Sep. 16 14 Sep. 16 P.E. Las Tablas Ed. 1-2-3 CL Federico Mompou 5 Madrid Investment Property Offices 61 14 Sep. 16 14 Sep. 16 Elipse AV Manoteras 18 Madrid Investment Property Offices 62 14 Sep. 16 14 Sep. 16 Arturo Soria, 343 CL Arturo soria 343 Madrid Investment Property Offices 63 14 Sep. 16 14 Sep. 16 G. Ampudia 12 CL General Ampudia 12 Madrid Investment Property Other 64 01 Jan. 15 01 Jan. 15 Centro Oeste CL El Carralero. Las Moreras Majadahonda Investment Property Shopping Center 65 01 Jan. 15 01 Jan. 15 C.C. Larios AV de la Aurora 21 Málaga Investment Property Shopping Center 80 66 01 Jan. 15 01 Jan. 15 C.C. Porto Pi AV de Gabriel Roca 54 Palma de Mallorca Investment Property Shopping Center 67 01 Jan. 15 01 Jan. 15 Nave Pedrola CL General Motors 1. P.I. El Pradillo Pedrola Investment Property Logistics 68 01 Jan. 15 01 Jan. 15 Ática II, A-B-C AV de Europa 19 Pozuelo de Alarcón Investment Property Offices 69 01 Jan. 15 01 Jan. 15 Ática 1 AV de Europa 26 Pozuelo de Alarcón Investment Property Offices 70 01 Jan. 15 01 Jan. 15 Ática 2 CL Inglaterra 2 Pozuelo de Alarcón Investment Property Offices 71 01 Jan. 15 01 Jan. 15 Ática 3 y 4 VI Dos Castillas 33 Edf. 3 y 4 Pozuelo de Alarcón Investment Property Offices 72 14 Sep. 16 14 Sep. 16 Ática Ed. 6 VI Dos Castillas 33 Edf.6 Pozuelo de Alarcón Investment Property Offices 73 14 Sep. 16 14 Sep. 16 Cerro Gamos I-II-III-V-VI CL Cerro de los Gamos 1 Pozuelo de Alarcón Investment Property Offices 74 01 Jan. 15 01 Jan. 15 Sant Cugat I CL Alcalde Barnils 64 San Cugat del Valles Investment Property Offices 75 01 Jan. 15 01 Jan. 15 Sant Cugat II AV Via Augusta 71 San Cugat del Valles Investment Property Offices 76 14 Sep. 16 14 Sep. 16 Jovellanos 91 CL Jovellanos 91 Sant Adriá del Besos Investment Property Other 77 01 Jan. 15 01 Jan. 15 Borbolla AV Borbolla 5 Seville Investment Property Offices 78 14 Sep. 16 14 Sep. 16 C.C. El Saler CA Autovía De El Saler 16 Valencia Investment Property Shopping Center 79 01 Jan. 15 01 Jan. 15 Palau parking garage PS de la Alameda 34 Valencia Investment Property Other 80 14 Sep. 16 14 Sep. 16 C.C. Vilamarina AV Segle XXI 6 Viladecans Investment Property Shopping Center 81 14 Sep. 16 14 Sep. 16 Rambla Salvador Sama CL Rambla Salvador Samà 45/49 Vilanova I La Geltrù Investment Property Other 82 01 Jan. 15 01 Jan. 15 Aznar Molina CL Aznar Molina 2 Zaragoza Investment Property Offices 83 12 Jan. 17 12 Jan. 17 Torre Glories Av. Diagonal, 211 Barcelona Investment Property Offices 84 21 Jan. 20 21 Jan. 20 Plaza Cataluña, 9 Plaza Cataluña, 9 Barcelona Investment Property Offices 85 30 Dec. 21 30 Dec. 21 PE Atica XIX D Pozuelo De Alarcón, 19 Pozuelo de Alarcon Investment Property Offices 86 03 Jul 14 03 Jul 14 Tree Inversiones Inmobiliarias SOCIMI, S.A PS Castellana 257 Madrid Ownership interest 87 30 Jul 14 01 Jan. 14 Merlin Retail S.L. PS Castellana 257 Madrid Ownership interest 88 04-Aug-14 01 Jan. 14 Merlin Oficinas, S.L. PS Castellana 257 Madrid Ownership interest 89 30 Jul 14 01 Jan. 14 Merlin Logística, S.L. PS Castellana 257 Madrid Ownership interest 90 14 Sep. 16 01 Jan. 17 La Vital Centro Comercial y de Ocio, S.L. PS Castellana 257 Madrid Ownership interest 91 14 Sep. 16 01 Jan. 17 Varitelia Distribuciones, S.L. PS Castellana 257 Madrid Ownership interest 92 14 Sep. 16 01 Jan. 17 Metroparque, S.A. PS Castellana 257 Madrid Ownership interest 93 14 Sep. 16 01 Jan. 18 Global Carihuela Patrimonio Comercial, S.L. PS Castellana 257 Madrid Ownership interest 94 28 Jul 17 01 Jan. 17 Sevisur, S.A. PS Castellana 257 Madrid Ownership interest 95 17 Oct. 16 01 Jan. 19 PLZF Avda. 3 del Parc Logístic, nº 26 Madrid Ownership interest 96 17 Oct. 16 27 Dec. 19 VFX Logística, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 97 18 Mar. 15 05 Oct. 18 MPEP - Properties Escritórios Portugal, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 98 18 Mar. 15 05 Oct. 18 MP Compra e Venda Inmobiliária, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 99 31 Mar. 16 05 Oct. 18 MP Monumental, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 81 100 31 Mar. 16 05 Oct. 18 MP Torre A S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 101 07 Apr. 17 07 Apr. 17 Promosete Investimentos Inmobiliarios, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 102 28 Sep. 17 05 Oct. 18 Praça do Marques - serviços auxiliares, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 103 30 Apr. 18 05 Oct. 18 Torre Dos Oceanus Investimentos Inmobiliarios, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 104 17 Jan. 19 13 Mar. 19 Torre Arts, Investimentos inmobiliàrios, S.A. Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 105 17 Jan. 19 13 Mar. 19 Torre Fernão Magalhães Investimentos inmobiliàrios, S.A Rua Braamcamp nº2, piso 2 Lisbon (Portugal) Ownership interest 106 43888 01 Jan. 19 Silicius Real Estate SOCIMI, S.A. Velázquez, 123 Madrid Ownership interest 82 MERLIN PROPERTIES, SOCIMI, S.A. Individual Management Report for the year ended 31 December 2021 1 1. Situation of the Company Economic Situation The markets in which Merlin Properties Socimi (“MERLIN” or “MERLIN Properties” or the “Group’) operates are benefiting from the gradual economic recovery after the overwhelming effect of the pandemic in 2020. It should be noted that the first half of the year, both in Spain and Portugal, was marked by restrictions, which mainly affected physical consumption. The turning point came in the second half of the year, since virtually all the restrictions were lifted and optimal vaccination levels were reached, with 80% of the population getting fully vaccinated. This economic situation has led to a slight increase in take up volumes, which has translated into an increase in occupancy in the three categories of assets in which we operate. Various analyst firms expect the Iberian Peninsula's economy to continue to expand in the coming years, which should have a positive impact on business performance. The investment volume for all asset types in Spain increased exponentially, hitting EUR 12,750 million in 2021 compared to EUR 9,477 million in direct investment in Spain in 2020. Given the Eurozone's expansive monetary policy and the global context of low interest rates, and rising inflation, demand for income- generating assets is expected to remain high. 1.1. Rental market situation by geographical area Madrid Madrid is both the largest metropolitan area and the main real estate market on the Iberian Peninsula. In general, the rental market benefited from the recovery of the economy especially in the second half of the year. Therefore, surface area take up in offices was around 414,000 sqm, +22% higher than in 2020. The COVID-19 crisis has caused a slight adjustment in prime rents (ca. 2%) and an increase in availability to 12%. With regard to the logistics market, it was a record year in terms of surface area take up, with more than one million square meters leased, 12% more than in the previous year. Lastly, shopping centers are gradually recovering and the latest waves seem to have a lower impact on footfall and sales. Barcelona Barcelona was one of the cities that recovered most strongly in 2021. As for the office market, prime rents decreased slightly to EUR 27.50/sqm/month, while average rents increased by 12.8% compared to 2020. The logistics market, on the other hand, is suffering from a lack of both available land and quality product for e- commerce operators. As far as shopping centers are concerned, they have been affected both by opening restrictions and by the fall in tourism, which has particularly affected the urban assets. Lisbon The evolution of the rental office market was positive, with 162,000 sqm leased and an unemployment rate that rose slightly to 9%. The prime rents remained stable during the year, reaching EUR 25/sqm/month. In relation to logistics, rents remain stable at EUR 4/sqm/month, on the of Alverca/Azambuja axis. In addition, it was a record year in terms of take up, with 264,000 sqm leased, comfortably beating the previous record (171,000 sqm in 2017). Lastly, shopping centers were affected by the severe restrictions on movement and on opening of premises, especially at the beginning of the year, which led to a slower recovery in their activity. 1.2. Rental market situation by business segment Offices According to JLL, in 2021 the Spanish office market recorded an increase in activity compared to 2020, with take up increasing by 20%. Unemployment went up in both markets, hitting 12.4% in Madrid and 10.5% in Barcelona, although unemployment in the most central sub-markets continues to be low. Premium rents have 2 stood their ground despite the situation, although in more peripheral locations there have been slight declines. This performance was similar in Portugal. Shopping centers 2021 began with very low levels of sales and footfall as a result of the third wave of the virus and storm Filomena, but the gradual decline in uncertainty about the health and economic situation allowed the activity of shopping centers to bounce back gradually. Nevertheless, the reduction in tourist flows continues to impact the sector. Logistics The upward trend in the logistics sector has been favoured by COVID-19, which has fuelled the development of e-commerce in the face of the constraints imposed on occupancy limits and physical opening. It was a record year for logistics take up in all submarkets, especially in Madrid, Barcelona and Valencia. The volume reached by turnkey projects and pre-lets is of particular note given the lack of available logistics platforms that meet current demand requirements. This shortage of quality products has influenced rents of logistics. 1.3. Organisational and operational structure As a Group, MERLIN’s main objective is to generate sustainable returns for shareholders through the acquisition, focused management and selective rotation of real estate assets in the moderate risk profile segments ("Core" and "Core Plus"). Its strategy and operations are characterised by: 1. Focusing on Core and Core Plus assets in Spain and Portugal 2.An investment grade capital structure 3.Distribution of 80% of AFFO (see Note 7.1. of the Management Report) in the form of dividends 4.Being one of the most efficient REITs in Europe 5.Implementing the best practices of Corporate Governance The description of the internal organisational structure can be summarised as follows: –A Board of Directors made up of 13 directors that receives advice from the Audit and Control Committee (CAC), the Appointments Committee (CN), the Remuneration Committee (CR) and the Sustainability Committee (CS). MERLIN’s Board, comprised a majority of independent directors, focuses its activity on defining, supervising and monitoring the policies, strategies and general guidelines to be followed by the Group. The Board is responsible for the long-term strategy and for monitoring its implementation. –A Chief Executive Officer reports directly to the Board and sits on it. –An Investments Committee reports to the CEO and is formed by the management team. 2. Business performance and results 2.1. Business results in 2021 The Company’s business performed excellently during the year, with growth in like-for-like rents and release spread in all asset categories. 3 Merlin Properties closed the year with lease income of EUR 203.3 million, 2.3% less than in 2020 and an operating profit of EUR 204 million. In 2021 the Company continued its plan for improvements to Landmark offices, with the remodelling of Castellana 85, Torre Gloriés, Diagonal 605, Arturo Soria 343 and Plaza Ruiz Picasso being of special note, as well as the plan for improvements to flagship shopping centers, specifically Saler in Valencia and Porto Pi in Palma de Mallorca. 2.1. Outlook for the Company in 2022 The evolution expected in 2022 will depend significantly on how the pandemic plays out. In 2021 the Company expects its occupancy rates to remain high and its cash flow to remain strong given the long lease term remaining (3.1 years from 31 December 2021, weighted by GRI). The Company also expects to continue to acquire and rotate assets that fit its investment philosophy. To that end, it has a cash position and debt securities of EUR 570.7 million at the end of 2021 and a liquidity position of EUR 1,514.7 million, including undrawn credit facilities, EUR 32 million in treasury shares and EUR 81 million of receivables from Silicius Real Estate SOCIMI, S.A. 3. Capital and Liquidity Resources 3.1. Debt At the end of 2021, the Company's financial debt amounted to approximately EUR 5,478 million, made up of corporate financing without mortgage collateral (syndicated loans and bonds). The Company's strategy is to actively manage both the Group's assets and the liabilities. With regard to liabilities, the goal is to extend the average maturity of the debt and to take advantage of current market conditions to reduce or maintain borrowing cost and eliminate the interest rate risk. Currently, 100% of the Group’s debt accrues interest at a fixed rate or is subject to interest rate hedges. In 2021, the Company carried out various actions on its financial liabilities with the aim of extending the average maturity of the debt and maintaining or reducing its average cost. The transactions carried out were: –Issue of a 9-year bond for EUR 500 million at 99.2% of the par value and a coupon of 1.375%. This bond will be used to pay off the bond maturing in 2022 with a coupon of 2.375%. –Unsecured loan from the European Investment Bank to carry out energy efficiency projects amounting to EUR 45.2 million, maturing in 10 years. This transaction represents the first green loan in line with the new European framework. 3.2. Liquidity available The Company's liquidity position at 31 December 2021 amounted to EUR 683.7 million, including EUR 32 million in treasury shares and EUR 81 million corresponding to the collection rights for financial assets maturing in the short term. This transaction was carried out in the first quarter of 2020. This liquidity is increased by EUR 831 million by the revolving credit facility, which was not drawn down in 2021, and the undrawn financing from the European Investment Bank. Additionally, the Company has the ability to access the capital markets through the euro medium-term note (EMTN) programme, which has a limit of EUR 6,000 million. At 2021 year end, EUR 1,957 million was available through the aforementioned programme. 4 4. Environmental matters Since the assets were acquired, the Company has incorporated sustainability into its decision-making process, aware of its impact on improving the performance of assets and the well-being of tenants. The Company and its Group seek to differentiate their properties along these lines and, to that end, in 2021 they have continued with their three key repositioning plans: Landmark I, Flagship and Best II and III, the time horizon for which is 2019-23. These plans are focused on creating value by repositioning selected properties, incorporating sustainability into the process, as well as in obtaining better financing terms linked to meeting sustainability targets. 4.1. Sustainability certification In 2021 the Company continued to make progress on making its asset portfolio sustainable by investing in improving the environmental performance of its properties. When certifying assets, the Company selects the most appropriate framework and modality based on the asset’s phase, as well as the characteristics of the building, its occupancy rate at the time of certification or the tenants who occupy it. We are continuing the process of certifying our portfolio under the standards of the leaders in this market, BREEAM and LEED, with the aim of certifying 99% of our portfolio. In 2021 the Company achieved certification or renewal in 12 assets. Assets Category # Assets Certification Rating Date Avenida de Bruselas 33 Offices 1 LEED GOLD Jan-21 Vilamarina Shopping Centers 1 BREEAM VERY GOOD Mar-21 Torre Glories Offices 1 BREEAM EXCELLENT May-21 Castellana 85 Offices 1 LEED PLATINUM Aug-21 A2-Coslada Complex Logistics 4 BREEAM GOOD Aug-21 Diagonal 458 Offices 1 BREEAM GOOD Aug-21 Zaragoza-Pedrola Logistics 1 BREEAM GOOD Aug-21 Eucalipto 25 Offices 1 LEED GOLD Oct-21 Partenon 16-18 Offices 1 LEED GOLD Dec -21 Total 12 The Company also obtained an excellent rating (81%) in the 2021 edition of GRESB, a platform that makes it possible to harmonise and compare information related to sustainability criteria (environmental, social and corporate governance - ESG) in real estate investments. This rating is above the global average and that of our counterparts and reinforces the Company's commitment to investing in sustainability. 4.2. ISO sustainability certifications As the manager of its portfolios, the Company has an Environmental Management System (EMS) certified according to ISO 14001, which is the umbrella under which it manages its portfolios and that incorporates new properties into its scope every year. Thus, in 2015 the Company began an ambitious plan for ISO 14001 (environmental management) and ISO 50001 (energy management) certifications to maintain and expand the number of real estate assets that have at least ISO 14001 certification, and subsequently ISO 50001 certification (based on the understanding that it is a natural step to obtain ISO 14001 certification before aspiring to ISO 50001). In keeping with the optimisation of the environmental performance of its assets, in 2021, given their significant role in the Company’s environmental performance, the Company continued with an environmental training program for shopping center operators in an effort to promote greater awareness and, thus, achieve better asset performance. 5 4.3. ESG indicators Syndicated Loan In 2019 the Company completed the process begun in 2018 of refinancing its debt by a corporate syndicated loan (EUR 1,550 million) and a secured loan increased in 2021 (EUR 70 million) under the sustainable loan format (ESG). The corporate loan marked an important milestone, as it was the largest financing of this type granted to a real estate company in Europe and the second largest obtained in Spain. This financing includes a cost adjustment mechanism based on management indicators calculated on the basis of four sustainability criterion, which are measured annually and audited by the Company's auditor. The indicators for 2021 were: –Investment of at least EUR 2.2 million in energy efficiency improvements across the portfolio –Obtaining at least 5 LEED and BREEAM external energy certifications with a minimum rating of LEED Silver and BREEAM Good. –Obtaining at least 9 AIS/DIGA certifications for disability access for all tenants and consumers –Electricity consumption of at least 40 GW from renewable energy sources At the end of 2021, 4 of the 4 goals were met, with the consequent adjustment to borrowing costs for both loans for 2022. In line with these loans under the principles of Corporate Social Responsibility, the Company took out a loan for EUR 115 million from the European Investment Bank in two tranches (2018 and 2019) for the financing of 5 logistics warehouses in Castilla-La Mancha, on the basis of eligibility for development of convergence zones. In December 2021, the Company also took out a EUR 45 million loan from the European Investment Bank to finance investments in energy efficiency actions, photovoltaic facilities and electric vehicle chargers. This is the first green loan granted by the EIB under the new European framework. These transactions highlight the Company's ongoing effort to integrate Corporate Social Responsibility principles by incorporating sustainability criteria in the investments of its asset portfolio, as well as in the management of the liabilities on its balance sheet. 5. Staff management a.Staff breakdown Merlin Properties SOCIMI, S.A.’s staff are its main asset. At 2021 year end, the Company's team was comprised a total of 168 employees, divided into 5 categories in keeping with MERLIN’s strategy of maintaining a horizontal structure. Total number of employees at 2021 year end. Country, Sex, Professional Category and Age Professional category Women Men Overall total Executive Directors - 2 2 Senior Management 1 7 8 Middle Management 11 48 59 Other Staff 55 50 105 Total Employees 67 107 174 6 Country Professional category Age Range Women Men Overall total SPAIN Executive Directors >50 years old - 2 2 30-50 years old - - - Total Executive Directors - 2 2 Senior Management >50 years old - 3 3 30-50 years old 1 4 5 Total Senior Management 1 7 8 Middle management >50 years old 3 21 24 30-50 years old 7 25 32 <30 1 2 3 Total Middle Management 11 48 59 Other Staff >50 years old 17 16 33 30-50 years old 31 30 61 <30 7 4 11 Total Other Staff 55 50 105 Total SPAIN 67 107 174 Overall total 67 107 174 Total number of employees at 2021 year end by type of employment contract The Company has a team of professionals with indefinite-term contracts and an average age of 44. Throughout 2021, to promote the employability of young people, the Company implemented a first job plan for people who, having just finished their compulsory education, want to continue training and combine their studies with employment on some weekends. From the moment they join the Company, it offers its employees stable contracts to ensure their loyalty and improve its ability to attract talent to the organisation. At the end of 2021, 98.81% of the Company's employees had an indefinite contract. Contract Type Time Total Indefinite-term Full-time 163 Part-time 8 Total Indefinite-term 171 Temporary Full-time 3 Total Temporary 3 Overall total 174 6. Dividend policy 6.1. Dividend policy The Company’s dividend policy takes into account sustainable levels of distribution and reflects the Company's expectation of obtaining recurring profits. The Company does not intend to create reserves that cannot be distributed to Shareholders, except as required by law. Under the REIT regime, after fulfilling any relevant requirement of the Corporate Enterprises Law, the Company is required to pass resolutions to distribute the profit obtained in the year to shareholders in the form of dividends and this distribution must be approved within six months of the close of each year, as follows: (i) at least 50% of the profit from the transfer of real estate and shares of qualified subsidiaries, provided that the remaining profit is reinvested in other real estate assets within no more than three years of the date of the transfer or, otherwise, 100% of the profit must be distributed as dividends after such period has elapsed; (ii) 100% of the profit obtained from receiving the dividends paid by qualified subsidiaries; (iii) at least 80% of the remaining profit obtained. 7 If the dividend distribution resolution is not adopted within the legally established period, the Company will lose its REIT status for the financial year to which the dividends refer. As established in the Company's IPO Prospectus, Merlin Properties SOCIMI, S.A., has set itself the goal of distributing an annual dividend of between 4% and 6% of the IPO value. The Company's dividend policy establishes a minimum distribution of 80% of the AFFO ("Adjusted FFO"), understood as the cash flow from operations less interest paid and less ordinary maintenance expenses for the assets. The distributions made to MERLIN shareholders in 2021 are shown in the accompanying table. On 19 May 2021, the final dividend for 2020 was paid out, amounting to EUR 140,055 thousand. Furthermore, on 3 December 2021, the Company’s Board of Directors resolved to distribute EUR 70,033 thousand as an interim dividend charged to profit for 2021. 6.2. Table of dividends paid by year Type Payment date Item EUR per share 2015 interim dividend 28 Oct. 15 Dividend 0.0775 2015 final dividend 27 Apr. 16 Dividend 0.0055692 2015 final dividend 27 Apr. 16 Distribution of share premium 0.102608 2015 total dividend 0.19 2016 interim dividend 25 Oct. 16 Dividend 0.185 Extraordinary distribution 25 Oct. 16 Distribution of share premium 0.02 2016 final dividend 18 May. 17 Dividend 0.10071014 2016 final dividend 18 May. 17 Distribution of share premium 0.09928767 2016 total dividend 0.40 2017 interim dividend 25 Oct. 17 Dividend 0.2 2017 final dividend 25 May. 18 Dividend 0.02053654 2017 final dividend 25 May. 18 Distribution of share premium 0.24 2017 total dividend 0.46 2018 interim dividend 25 Oct. 18 Dividend 0.2 2018 final dividend 07 May. 19 Dividend 0.20270039 2018 final dividend 07 May. 19 Distribution of share premium 0.09729961 2018 total dividend 0.50 2019 interim dividend 28 Oct. 19 Dividend 0.2 2019 final dividend 8 Jul. 20 Dividend 0.14741659 2019 total dividend 0.34741659 2020 final dividend 19 May. 21 Distribution of share premium 0.3 2020 total dividend 0.3 2021 interim dividend 03 Dec. 21 Dividend 0.15 2021 total dividend 0.15 7. Main risks and uncertainties The Company’s Risk Management System is based on the principles, key elements and methodology established in the COSO Framework ("Committee of Sponsoring Organizations of the Treadway Commission"), which aims to minimise the volatility of results (profitability) and, therefore, maximise the Group’s economic value, incorporating risk and uncertainty into the decision-making process to provide reasonable assurance of achieving the strategic objectives established, providing shareholders, other stakeholders and the market in general with an adequate level of guarantees to ensure that the value generated is protected. Based on a comprehensive view of risk management, the Company has adopted a methodological approach based on the Enterprise Risk Management Framework - Integrating with Strategy and Performance (COSO ERM 2017), which emphasises the importance of enterprise risk management in strategic planning and incorporates it throughout the organisation, since risk influences strategy and performance in all areas, departments and functions. 8 The Risk Management and Control Policy (https://www.merlinproperties.com/en/corporate-governance/ corporate-governance-normative/) was initially approved by the Board of Directors in February 2016, then in its second version in March 2018 and finally, in its current wording, in April 2021. This policy establishes the general guiding principles, rooted in the perception that risk management is an ongoing process based on the identification and assessment of the Company’s potential risks according to its strategic and business objectives, the determination of action plans and controls for critical risks, the supervision of the effectiveness of the controls designed and the evolution of residual risk to be reported to the Company’s governing bodies. The Company’s risk management is a process driven by the Board of Directors and Senior Management, and each and every member of the organisation is responsible for it within their own purview. Risk management, supervised by the Audit and Control Committee, allows Management to effectively manage uncertainty and its associated risks, thereby improving the ability to generate value. A central element of the Risk Management System is the Risk Map — drawn up for the first time in 2015, updated every six months by the Audit and Control Committee and approved by the Board of Directors — which reflects and assesses the risks that could potentially impact the Company’s ability to meet its strategic objectives. 7.1. Description of the Company’s risks The Company is exposed to a variety of risks inherent to the various segments of the real estate business in which it operates and in the leasing and/or development activities it carries on in each of these segments, as well as in the geographical areas in which it is established and in the evolution of external factors, both political and economic. To implement risk management and control, the Board of Directors is assisted by the Audit and Control Committee, which supervises and reports on the adequacy and effectiveness of the risk management and control system. The Audit and Control Committee is responsible for supervising the Company's risk management and control system (including internal controls) and verifying its suitability and integrity. The Audit and Control Committee carries out this supervisory function through the Internal Audit Department, which verifies the suitability and integrity of the Risk Management System implemented by the Group's management on an annual basis. Based on the analysis of the Company's strategic vision, values and strategy, the various components are periodically analysed according to the grouping of the different strategic objectives included in these elements (being the benchmark REIT, creation of long-term value, generation of sustainable and growing dividends, values of transparency, ethics and responsibility). In 2021, the Company’s Risk Map was regularly updated to reflect every six months the perception of the Company's main executives and governing bodies as regards the risks faced by the Company. In this regard, the Company’s Risk Map has a total of 29 key risks, as shown below: Business Risks: which affect the strategic objectives of long-term value creation and the generation of sustainable and growing dividends, achievement of which depends mainly on the Group's various assets, grouped together in the different business segments (offices, net leases, shopping centers, logistics and others): occupancy rate of the assets, fluctuation in rent levels, rent concentration, loss of property value, inefficiency in investments, political risk, etc. Resource Risks: which affect the strategic objectives of generating sustainable and growing dividends and the values of transparency, ethics and responsibility, achievement of which depends mainly on the various internal and external resources available to the Group (human, technological and financial): staff dependence and their remuneration, occupational risk prevention, business continuity plan, cybersecurity breaches, technological innovation, the Company's credit rating, volume of short-term debt, compliance with covenants, etc. 9 ESG Risks: which affect the strategic objectives of leadership and reference (being the benchmark REIT) and the values of transparency, ethics and responsibility; achievement of which depends mainly on the various actions taken and policies implemented by the Group to guarantee the sustainability of its assets (physical impact, transition costs, compliance with sustainability standards) for its various stakeholders (customers, suppliers, society; investors and shareholders; and regulatory bodies): customer and supplier credit risk, the Group's reputation, macroeconomic conditions in the country, shareholder remuneration (dividends), compliance with the REIT regime, etc. Section E of the Annual Corporate Governance Report, which is included in this Management Report, details the main risks, the action plans established and, where applicable, those that have carried out during the year and the circumstances that have led to them. 7.2. Financial and tax risks Financial risk management policies within the rental property sector are determined mainly by analysing the investment projects, management of the occupancy of the properties and the situation of the financial markets: Market risk: Merlin Properties SOCIMI, S.A. is exposed to market risk from possible vacancies or renegotiations of leases when the leases expire. This risk could have a direct negative impact on the valuation of the Company's assets. However, market risk is mitigated by the customer acquisition and selection policies and the mandatory lease terms negotiated with customers. Therefore, at 31 December 2021, the average occupancy rate of the asset portfolio was 92%, with a weighted average unexpired lease term of 3.1 years (weighted by GRI). Credit risk: Credit risk is defined as the risk of financial loss to which the Company is exposed if a customer or counterparty does not comply with its contractual obligations. In general, the Company holds its cash and cash equivalents at banks with high credit ratings. The Company does not have any material credit risk concentration. The Parent's directors do not consider that there is any material credit risk regarding receivables due from this lessee. With respect to other customers, the Company has policies in place to limit the volume of risks posed by customers. Exposure to the risk of being unable to recover receivables is mitigated in the normal course of business through funds or guarantees deposited as collateral. The Company has formal procedures to identify any impairment of trade receivables. Delays in payment are detected through these procedures and individual analysis by business area and methods are established to estimate impairment loss. Liquidity risk: To manage liquidity risk and meet its various funding requirements, the Company uses an annual cash budget and a monthly cash projection, the latter being detailed and updated daily. The factor causing the liquidity risk is the working capital deficiency, which mainly includes short-term debt. In addition, liquidity risk has the following mitigating factors, which should be highlighted: (i) the generation of recurrent cash from the businesses on which the Group bases its activity; and (ii) the capacity to renegotiate and obtain new financing facilities based on the Group's long-term business plans and the quality of its assets. At the date of preparation of the consolidated financial statements, taking into account the foregoing, the Company had covered all its funding requirements to fully meet its commitments to suppliers, employees and the authorities based on the cash flow forecast for 2021. Likewise, the type of sector in which the Company operates, the investments it makes, the financing it obtains to make such investments, the EBITDA they generate and the occupancy rates of the properties, enables the liquidity risk to be mitigated and excess cash to be produced. Any cash surpluses are used to make short-term investments in highly liquid deposits with no risk. The acquisition of share options or futures, or any other high-risk deposits as a method of investing cash surpluses, is not among the possibilities considered by the Company. 10 Interest rate risk: To minimise the Company's exposure to this risk, financial instruments have been arranged to hedge cash flows, such as interest rate swaps. At 31 December 2021, the percentage of debt the interest rate of which is covered by the aforementioned financial instruments was 99.9%. Foreign currency risk: the Company's policy is to borrow in the same currency as that of the cash flows of each business. Consequently, currently there is no foreign currency risk. However, noteworthy in this connection are the exchange rate fluctuations arising in translating the financial statements of foreign companies whose functional currency is not the euro. At 31 December 2021, the Company had the euro as its functional currency. Tax risk: The Parent and a portion of its subsidiaries qualified for the special tax regime for real estate investment trusts (REITs). The transitional period of the Parent ended in 2017 and, therefore, compliance with all requirements established by the regime became mandatory. Some of the more formal obligations that the Parent must meet involve the inclusion of the term REIT in its company name, the inclusion of certain information in the notes to its separate financial statements, the share price on the stock market, etc., and other obligations that require estimates to be made and judgements to be applied by management that may become fairly complex, especially considering that the REIT regime is relatively recent and was developed by the Directorate-General of Taxes mainly in response to the queries posed by various companies. In this regard, the Company’s management, based on the opinion of its tax advisors, assessed compliance with the requirements of the regime, concluding that such requirements were met at 31 December 2021. Accordingly, and also for the purpose of taking into consideration the financial effect of the regime, it should be noted that, as established in article 6 of Law 11/2009, of 26 October, amended by the Law 16/2012 of 27 December, governing REITs, and in the percentages established in this Law, companies that have opted for the special tax regime are required to distribute the profit generated during the year to their shareholders in the form of dividends, once the related corporate obligations have been met. This distribution must be approved within six months from each year-end, and the dividends paid in the month following the date on which the pay-out is agreed. If the Company does not comply with the requirements established in the regime or if the shareholders at the General Meetings of these companies do not approve the dividend distribution proposed by the Board of Directors, calculated in accordance with the requirements of this Law, it would not be complying therewith and, accordingly, tax would have to be paid under the general regime, not the regime applicable to REITs. •Climate change management Within the framework of the European Green Pact and the United Nations Sustainable Development Goals, the Group is carrying out various initiatives in the field of sustainability. Firstly, the Group's Parent Company, in 2021 has created a Sustainability, Ethics and Innovation Committee reporting to the Board of Directors whose main competencies are to advise the Board of Directors, among others, on environmental and sustainability matters; to advise the Board of Directors in the formulation of the Group's sustainability strategy in its relations with stakeholders and in its publication and public communication; and to supervise the communication and information to the market of any information in which reference is made to sustainability issues and non-financial information and to keep the ESG (Environmental Social and Governance) Risk map up to date. In this sense, the Group has incorporated in its investment and financing policies decision factors related to non-financial KPIs. Along these lines, the investment studies for real estate acquisitions and investments in repositioning the Group's assets consider, among other factors, elements such as obtaining energy efficiency certificates with the highest rating (see Note 7), air conditioning, lighting, solar energy, irrigation of green areas, accessibility, etc. When certifying assets, the Group selects the most appropriate framework and method depending on the stage of the assets, as well as the characteristics of the building, its degree of occupancy at the time of certification or the tenants occupying it. 11 In this regard, the process of certifying the portfolio under the standards of the leaders in this market, BREEAM and LEED, continues, with the objective of reaching 99% of the portfolio. During the 2021 fiscal year, the Group has achieved certification or its renewal in 27 assets. Additionally, the Group has obtained a rating of 81% in the 2021 GRESB edition, a platform that allows harmonizing and comparing information related to sustainability criteria (environmental, social and corporate governance - ESG) in real estate investments. Thus, the Group has an Environmental Management System (EMS) certified according to ISO 14001, which constitutes the umbrella under which it manages its portfolios and which incorporates new properties into its perimeter on an annual basis. In 2015, the Group initiated a plan for ISO 14001 (environmental management) and ISO 50001 (energy management) certifications, to maintain and expand the number of real estate assets that have at least ISO 14001, and subsequently ISO 50001 (understanding it as a natural step to achieve the ISO 14001 standard prior to aspiring to ISO 50001). This plan covers office buildings as well as shopping centers and logistics warehouses. Regarding ISO 14001, 84 certified buildings were achieved in 2021, with a surface area of 1,141,317 m2. The Group has also continued the process of implementing an Energy Management System under the ISO 50001 standard initiated in 2017, with 81 buildings currently certified, which have a surface area of 1,072,765m2, 17 more than in 2020. Additionally, during the 2021 financial year, the Group has carried out an analysis of the entire portfolio to determine the carbon footprint of each of its assets, as well as the necessary measures to reduce the referred carbon footprint to its minimum expression. In the assets included in the Energy Management System under the ISO 50001 standard, there is a target of reducing total energy consumption by 5% with respect to 2019, based on the implementation of ESMs (energy saving measures). Likewise, the Group's financing policies are sensitive to the savings premiums currently offered by the capital market linked to the performance of certain sustainability indicators. Currently 15% of the Group's debt with credit institutions and bondholders is linked to compliance with ESG indicators (see Note 14). These financings include a cost adjustment mechanism based on management indicators calculated based on four sustainability criteria, measurable on an annual basis. At the end of 2021 the Group complies with the indicators established in these contracts and the Directors estimate that they will also be complied with in 2022. The indicators for the 2021 fiscal year were: 1. Investment of at least €2.2 million in energy efficiency improvements across the portfolio. 2. Achievement of at least 5 LEED and BREEAM external energy certifications with a minimum rating of Silver LEED and Good BREEAM, respectively 3. Obtaining at least 9 AIS/DIGA certifications for handicapped access for all tenants and consumers. 4. Electricity consumption of at least 40 GW from renewable energy sources. Additionally, the Group in its commitment to climate responsibility, has incorporated qualitative factors related to the Group's sustainability strategy into the short-term variable compensation measurement targets for its staff and management team (see Note 20). In addition, during 2021, the Group has applied to adhere to 11 objectives of the United Nations Sustainable Development Goals. Finally, the Group has also made progress in reworking its sustainability policy, which will be articulated around 3 main pillars: (i) fight against climate change, (ii) well-being of tenants and users of the spaces and (iii) impact on the cities and society in which the Group operates. All of the above will form part of the Group's path to net zero or commitment to the fight against climate change. 12 8. Fraud and corruption prevention measures In accordance with its Articles of Association, MERLIN aspires to ensure that its conduct and that of the people related to it comply and are compliance with the current law, its system of corporate governance and also with generally accepted principles of ethical and social responsibility. In this regard, MERLIN has a Criminal Compliance Management System that is based on Merlin's firm commitment to the values and principles framed within the rejection of and zero tolerance for any unlawful act. These principles are set out in the Code of Conduct (https://www.merlinproperties.com/gobierno- corporativo/normativa-de-gobierno-corporativo/) approved by the Board of Directors in 2015 and updated in 2021, and are projected onto the organisation's employees, managers and governing bodies, with a strong message of rejection of and zero tolerance for any unlawful behaviour or behaviour that violates the Group's policies, values and principles. The Criminal Compliance Policy (https://www.merlinproperties.com/gobierno-corporativo/normativa-de- gobierno-corporativo/) helps to reinforce the Company’s commitment to good corporate governance in accordance with its values and principles, and on the other hand, to diligently exercise in the organisation the necessary due control over the Group’s governing bodies, executives and employees to minimise as much as possible the potential risk of bad practices or non-compliance with regulations in the performance of its activity. In addition, MERLIN has a series of policies that express the Group's intention to strictly comply with the highest standards of ethical and legal behaviour. In this regard, in 2018 the Board of Directors approved the Tax Strategy, Tax Policy, and Tax Function Regulations, which establish a series of guiding principles, including strict compliance with tax obligations and payment of taxes that are legally enforceable, not to use artificial structures or structures that make no economic or business sense in order to reduce the tax burden of the Company or its shareholders, and the commitment not to operate in territories classified as tax havens for the main purpose of reducing the tax burden of the Company or its shareholders. These policies especially include the Policy on Corruption and Fraud (updated in 2021), which is based on the principle of zero tolerance for unlawful or criminal acts and, therefore, does not allow any of its employees, regardless of their hierarchical or functional level, to become involved or participate in any transaction or business within its business activity that involves a criminal or fraudulent act or goes against the principles set out in its Code of Ethics; and the Public Authority Relations Policy, which aims to establish the basic principles governing the Group, and the rules of conduct for MERLIN Group employees in their interactions with public authorities to impose preventive and proactive action in the fight against corruption and bribery in all areas of its business activity. 8.1. Policies approved in 2021 As explained above, in October 2021 the Board of Directors approved an update to the Code of Conduct (dating from 2015) and the Whistleblower Reporting Procedure. The improvements/updates to the Code of Conduct consisted of technical improvements to the document, drafting improvements (simplification and improved adaptation to MERLIN), reinforcement of the gifts and presents policy, strengthening of the message of the obligation to understand and report, as well as improvement of the whistleblower reporting procedure. The updates to both documents, as the backbone of MERLIN's Compliance System, were the subject of specific communication and training for all MERLIN Group staff, as well as their publication on the corporate website. On the other hand, the corruption and bribery prevention policy has been updated for its technical improvement and greater alignment with ISO 37,001, especially with the following changes: technical improvement according to Ibex-35 best practices, reinforcement of the message of zero tolerance of corruption and bribery, clearly specifying the types of actions that are prohibited, detailing the management model and the compliance structure, as well as explaining the consequences of violations. 13 In addition to the policies already mentioned in the report, the updates and improvements made this year included the following: –Risk Control and Management Policy –Financial and non-financial reporting policy –Internal securities market conduct regulations –Financing and financial risks policy –Investment policy –Treasury share transactions policy –Anti-money laundering and countering the financing of terrorism manual. These policies, and a summary of all the policies that make up the MERLIN Corporate Governance System, are accessible on the corporate website. (https://www.merlinproperties.com/gobierno-corporativo/normativa-de-gobierno-corporativo/). 8.2. Crime Prevention Model MERLIN has a Crime Prevention and Detection Model that was designed as a specific and effective programme to reduce the risk of crimes or other unlawful acts being committed within the Company and implemented as a set of general and specific measures aimed at preventing, detecting and reacting to possible crimes. In turn, this will allow the Group, where applicable, to be able to guarantee third parties and judicial and administrative bodies that it has exercised the proper prevention control legally required of all businesses in relation to their employees, managers and governing bodies. In turn, this will allow the Group, where applicable, to be able to guarantee third parties and judicial and administrative bodies that it has exercised the proper prevention control legally required of all businesses in relation to their employees, managers and governing bodies. To that end, Merlin has a Criminal Compliance Body (CCB) that is as a collective body that reports to the Parent's Board of Directors. The CCB has autonomous powers to take initiative and exercise control to ensure compliance with Merlin's Crime Prevention and Detection Model. The manner in which this body functions is defined in its Operating Procedures and, additionally, Merlin has a manual that defines the different responsibilities within the organisation in relation to crime prevention and detection. In 2021, MERLIN’s Crime Prevention and Detection Model was updated and adapted to the new risks identified as a result of the COVID-19 pandemic, in particular with regard to the prevention of occupational risks and the protection of personal data, as well as updating the risks and controls related to Market Abuse. In addition, MERLIN has a Whistle-blowing Channel ([email protected]) that provides a confidential channel through which to communicate any event that violates the laws in force and the Code of Conduct, as well as potentially material irregularities of a financial or accounting nature or of any other nature. This Channel is accessible to all MERLIN companies and is equally public and accessible to any interested third party, for which purpose there is a specific email address, which is detailed in the Code of Conduct and it is published on the Group's corporate web page. In 2021, four reports were received through the Group’s Whistleblowing Channel that were processed in accordance with the Whistleblower Channel Procedure updated in 2021, although, following their analysis, it was concluded that they have no impact on the effectiveness of the Internal Financial Reporting Control System, and they did not result in penalties or sanctions for any employees. 14 8.3. External Compliance System Certification With regard to risks relating to corruption and fraud and MERLIN’s Criminal Compliance Management System, it is worth noting that it obtained quality certification in 2019, which was subsequently renewed in 2021, in accordance with the UNE 19601 standard, the Spanish national standard for best practices in management systems to prevent crime, reduce risk and promote an ethical business culture that complies with the law, thus contributing to generating confidence. Likewise, in 2021 the MERLIN Anti-Corruption and Bribery System was accredited under ISO 37,001, the international standard in best practices against corruption and bribery. Both certifications accredit that MERLIN’s Crime Prevention and Detection Model meets the standard requirements and is also effective in its commitment to ongoing improvement to incorporate the highest standards of compliance. The certification accredits that MERLIN’s Crime Prevention and Detection Model meets all the standard's requirements and is also effective in its commitment to ongoing improvement to incorporate the highest standards of compliance. Among other aspects, MERLIN’s Crime Prevention and Detection Model includes a Map of Risks or Criminal Offences to which the Group is exposed due to its activity and identifies, documents and executes more than 90 controls linked to such offences, demonstrating that the organisation has put in place the mechanisms and controls within its reach in the area of Criminal Compliance. Thus, MERLIN has become one of the first real estate companies among the Ibex 35 to obtain both quality certificates, which helps to generate confidence among its stakeholders as they recognise MERLIN's effort to prioritise and adopt the best national and international practices in compliance, corporate governance, social responsibility and business ethics. 15 9. Acquisition and disposal of treasury shares At 31 December 2021, the Parent held treasury shares amounting to EUR 32,305 thousand. The changes in 2021 were as follows: Number of Shares Thousands of euros Balance at 01 January 2020 5,077,369 56,860 Additions 26,177 279 Disposals (267,043) (2,990) Balance at 31 December 2020 4,836,503 54,149 Additions 374 3 Disposals (1,951,386) (21,847) Balance at 31 December 2021 2,885,491 32,305 On 27 April 2017, the shareholders authorised the Board of Directors to acquire shares of the Company. The General Shareholders Meeting held on 10 April 2019 revoked the authorisation granted by the General Meeting of April 2017 in the part not used and then authorised the acquisition of shares by the Company itself, pursuant to article 146 and related provisions of the Corporate Enterprises Law, in accordance with the requirements and restrictions established in current legislation during the five-year period. The withdrawals of treasury shares amounting to EUR 21,847 thousand (average cost of EUR 11.20 per share) mainly correspond to the first delivery of shares under the “17-19 Incentive Plan” (see Note 15) for EUR 20,986 thousand, and to payments to employees under the flexible remuneration plan for EUR 853 thousand. The Company has a liquidity agreement for the securities listed on the Lisbon Stock Exchange, with net sales of 364 shares in 2021. At 31 December 2021, the Company held treasury shares representing 0.614% of its share capital. 10. Other relevant information 10.1. Stock market information On 31 December 2021, MERLIN shares closed at a price of EUR 9.57, representing a 23% increase in their price compared to the closing price on 31 December 2020 (EUR 7.78). 10.2. Average period of payment to suppliers Below are the disclosures required by additional provision three of Spanish Law 15/2010, of 5 July (amended by final provision two of Spanish Law 31/2014, of 3 December), prepared in accordance with the Spanish Accounting and Audit Institute (ICAC) Resolution of 29 January 2016 on the disclosures to be included in the notes to financial statements in relation to the average period of payment to suppliers in commercial transactions. Days 2021 2020 Average period of payment to suppliers 34 32 Ratio of transactions settled 33.9 31.9 Ratio of transactions not yet settled 37.7 35.6 16 Thousands of euros 2021 2020 Total payments made 109,838 175,867 Total payments outstanding 2,216 6,994 In accordance with the ICAC Resolution, the average period of payment to suppliers was calculated by taking into account the commercial transactions corresponding to the delivery of goods or provision of services that took place from the date of entry into force of Law 31/2014, of 3 December. For the exclusive purpose of providing the information envisaged in this Resolution, payable to suppliers are considered trade payables for debts with suppliers of goods and services, included under “Trade and other payables” under current liabilities in the balance sheet. “Average period of payment to suppliers” is understood as the time elapsed between the date the supplier delivers the goods or provides the services and the date of actual payment. The maximum legal period applicable to the Company in accordance with Law 11/2013, of 26 July, was 30 days following the publication of the aforementioned Law to date (unless the terms established therein are met that would enable the aforementioned maximum period to be extended up to 60 days). 10.3. R&D activities In relation to R&D activities and other innovative initiatives, MERLIN continued promoting numerous projects of a technological nature to position MERLIN at the forefront in terms of solutions for its clients and internal management. Of those projects the following are of note: –Special projects: ◦Sensorisation programme for offices (in collaboration with Signify) and shopping centers (in collaboration with Vodafone) ◦Last mile in logistics ◦Photovoltaic self-consumption project ◦Introduction of third-party technologies (e.g. KeepEyeOnBall, Mayordomo and Fillit) ◦User experience app –Sponsorship: Agreement with Fifth Wall, a venture capital firm focused on the real estate industry 11. Annual Corporate Governance Report and Annual Remunerations Report For the purposes of section 538 Corporate Enterprises Act, it is stated that the Annual Corporate Governance Report and the Annual Remuneration Report for 2021 form part of this Management Report. (See Appendix I and II). 12. Events after the reporting period On 23 February, the Group prepaid EUR 548.3 million corresponding to the bond maturing on 23 May 2022. This transaction was paid out from available cash, obtained mainly by issuing EUR 500 million in bonds in June 2021. 17 13. Alternative Performance Measures See the definitions of the APMs, as well as their reconciliation with MERLIN’s financial statements, in the Consolidated Management Report accompanying the 2021 Consolidated Financial Statements. 18

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