Arcona Property Fund N.V.

ARCONA PROPERTY FUND N.V.

ANNUAL REPORT 2022

EOS BUSINESS PARK IN ROMANIA

CONTENTS

ARCONA PROPERTY FUND N.V

. ....................................................................................

FOREWORD FROM THE MANAGING BOARD

.................................................................

ARCONA PROPERTY FUND IN BRIEF

...........................................................................

PRE-ADVICE OF THE SUPERVISORY BOARD

..............................................................

REPORT OF THE MANAGING BOARD

...........................................................................

5.1

SUMMARY OF THE YEAR

...................................................................................................

5.2

EVENTS AFTER BALANCE SHEET DATE

............................................................................

5.3

INCOME, COST AND RESULT

.............................................................................................

5.4

DEVELOPMENTS IN THE MARKET AND PORTFOLIO

..........................................................

5.5

FUND STRATEGY AND OBJECTIVE

....................................................................................

5.6

DIVIDEND AND SHARE BUYBACK

.......................................................................................

5.7

OUTLOOK

...........................................................................................................................

5.8

RISK MANAGEMENT

...........................................................................................................

5.9

REMUNERATION POLICY

...................................................................................................

5.10

CORPORATE GOVERNANCE

..............................................................................................

5.11

STATEMENT REGARDING ADMINISTRATIVE ORGANISATION AND INTERNAL CONTROL .. 38

THE REAL ESTATE PORTFOLIO

...................................................................................

6.1

THE REAL ESTATE PORTFOLIO IN POLAND

.......................................................................

6.2

THE REAL ESTATE PORTFOLIO IN THE CZECH REPUBLIC

................................................

6.3

THE REAL ESTATE PORTFOLIO IN SLOVAKIA

....................................................................

6.4

THE REAL ESTATE PORTFOLIO IN BULGARIA

...................................................................

6.5

THE REAL ESTATE PORTFOLIO IN ROMANIA

.....................................................................

6.6

THE REAL ESTATE PORTFOLIO IN UKRAINE

.....................................................................

7-20 CONSOLIDATED FINANCIAL STATEMENTS 2022

........................................................................

KEY

FIGURES

REVENUES AND EARNINGS

2022

2021

Change

Gross rental and service charge income (in EUR 1,000)

8,598

9,176

-/- 6%

Net rental income (in EUR 1,000)

4,191

4,010

Direct result before tax (in EUR 1,000)

705

1,076

-/- 35%

Indirect result before tax (in EUR 1,000)

-/- 4,645

1,949

n.m.

Total result before tax

(in EUR 1,000)

-/- 3,940

3,025

n.m.

Tax (in EUR 1,000)

410

-/-109

n.m.

Total result after tax

(in EUR 1,000)

-/- 4,350

3,134

n.m.

Earnings per share (in EUR)

-/- 1.07

0.83

n.m.

Customized earnings per share according to APM

(in EUR)

-/- 0.05

0.03

n.m.

Dividend per share (in EUR)

n.m.

OCF (without non-regular costs) (%)

7.61

9.31

-/- 18%

BALANCE SHEET

31-12 2022

31-12 2021

Change

Investment property and inventories (in EUR 1,000)

75,018

81,738

-/- 8%

Assets held for sale (in EUR 1,000)

6,777

4,550

49%

Equity

(in EUR 1,000)

46,515

46,403

Net asset value (

NAV

) per share (in EUR)

11.71

13.09

-/- 11%

NNNAV per share (in EUR)

11.81

12.76

-/- 7%

Net Loan-to-Value (

LTV

) (%)

43.6

42.2

Weighted avg. number of shares outstanding

4,077,735

3,758,683

8.5%

KEY PORTFOLIO METRICS

31-12-2022

31-12-2021

Change

Number of properties

-/- 5%

Valuation (in EUR million)

82.4

85.1

-/- 3%

Annual net rental income (in EUR million)

4,191

4,010

Lettable area (in sqm)

57,244

67,597

-/- 15%

Weighted average occupancy (in %)

88.6

90.3

-/- 2%

Weighted remaining maturity of loans/ borrowings (years)

3.21

3.38

-/- 5%

See 7.1.4. APM stands for Alternative Performance Measure

See 15.39.3

See 15.40.14

BALANCE SHEET STATEMENT

(in EUR 1,000)

2022

2021

2020

2019

2018

Investment properties

73,183

79,973

79,577

80,992

89,032

Other non-current assets

1,454

1,259

471

929

680

Current assets

15,582

9,334

14,374

25,577

2,945

Total assets

90,219

90,566

94,422

107,498

92,657

Shareholders' equity

46,515

46,403

42,954

48,000

40,911

Deferred tax liabilities

3,183

3,514

4,143

4,684

4,606

Other non-current liabilities

17,597

30,597

18,274

33,448

26,519

Current liabilities

22,924

10,052

29,051

21,366

20,621

Total equity and liabilities

90,219

90,566

94,422

107,498

92,657

PROFIT AND LOSS STATEMENT

(in EUR 1,000)

2022

2021

2020

2019

2018

Direct result before tax

637

1,076

-/- 277

1,422

1,482

Indirect result before tax

-/- 4,577

1,949

-/- 3,295

-/- 905

-/- 1,336

Total result before tax

-/- 3,940

3,025

-/- 3,572

517

146

Income tax expense

410

-/- 109

217

424

352

Total result after tax

-/- 4,350

3,134

-/- 3,789

-/- 197

Occupancy (in %)

88.6

90.3

83.6

84.3

86.9

Rentable area (in sqm)

57,244

67,597

92,174

111,906

103,849

ISSUED CAPITAL

2022

2021

2020

2019

2018

Ultimo outstanding shares

4,185,984

3,758,683

3,165,149

Basic earnings p.s. (in EUR)

-/- 1.07

0.83

-/- 1.01

0.03

-/- 0.06

Adj.earnings p.s. acc.APM (in EUR)

0.11

-/- 0.33

-/- 0.63

-/- 0.01

0.38

DATA PER SHARE

(in EUR)

2022

2021

2020

2019

2018

(Interim-) dividend

n.a.

0.10

0.35

NNNAV

11.81

12.76

11.84

13.14

13.65

Avg. monthly turnover

227,468

269,291

75,006

198,217

260,359

Highest share price

7.49

7.60

6.29

7.48

7.95

Lowest share price

4.61

3.40

3.70

5.91

6.79

Ultimo share price

5.90

7.50

3.93

6.00

7.10

As at 31-12-2022

a covenant of the €13 million

Hypo Noe loan was in breach. The formal procedure to obtain a

waiver had not yet been completed at that time, hence the Hypo Noe loan is classified as current.

As earnings is used to measure the operational performance, it is the income return generated by the investment,

rather than the change in value or capital return on investments (see chapter

7 “performance

indicators

”)

REAL ESTATE PORTFOLIO AT A GLANCE

Portfolio breakdown (year-end 2022)

# assets

Value (in EUR m)

Value (in %)

Offices

47.7

57.9

Retail centres

23.7

28.8

Land plots

1.0

1.2

Total investment properties

72.4

87.9

Held for sale

10.0

12.1

Total portfolio

82.4

100.0

Real estate portfolio

Fair value per country

Rentable area per country

Zahradnicka and Boyana Residences

including assets held for sale

ARCONA

PROPERTY

FUND

N.V.

Incorporation

Arcona Property Fund N.V. (the

Fund

) is an investment company with variable capital within the meaning

of article 76a of Book 2 of the Dutch Civil Code. The Fund was incorporated on 27 November 2002 by a

notarial deed executed before Prof. D.F.M.M. Zaman, civil-law notary in Rotterdam.

Registered Office and entry in Trade Register

The Fund is registered in Amsterdam and is entered in the Trade Register of the Chamber of Commerce

under number 08110094.

Office Address

De Entree 55

–

floor 11

NL 1101 BH AMSTERDAM

The Netherlands

Tel: +31(0)20 82 04 720

E-Mail: info@arconacapital.com

Website: www.arconapropertyfund.com

Supervisory Board

The Supervisory Board of the Fund comprises:

Mr. drs. N. Krol (chairperson)

M.P. Beys Esq

Dr. J.J. van Heijst

The members of the Supervisory Board have chosen domicile at the offices of the Fund.

Mrs. Krol, born in 1966 (Rotterdam), holds a degree in Business Economics and Dutch Law from Erasmus

University. She has an extensive background in corporate law, including corporate governance issues, as

well as capital market transactions, such as IPOs, and regulatory issues like market abuse. Mrs. Krol has

also provided financial reporting advice on the application of Dutch GAAP and EU IFRS, demonstrating her

expertise in the field. With years of experience in advising on complex legal and financial transactions, she

has held senior positions at Loyens & Loeff N.V. Mrs. Krol is a member of the Supervisory Board of the

Dutch Vodafone Holding companies since September 2019 and was appointed to the Supervisory Board

on June 22, 2022, where she will serve a term ending on June 21, 2026.

Michael P. Beys, Esq., was born in New York, New York, USA on October 25, 1971. Appointed to the board

in 2021, he is the founder and partner of a law firm in New York, the chairman of the Board of Directors of

shareholder Secure Property Development & Investment Plc (

SPDI

), and also the interim CEO and director

of FTE Networks, Inc., which owns and operates a real estate portfolio in the U.S. He does not hold any

shares in a private capacity.

Dr Jan Jaap van Heijst was born in Leiden, on October 9, 1968. He received his PhD from Groningen

University, having done his research partly at Boston University on a Fulbright grant. He started his

professional career as a derivatives trader for Optiver in Amsterdam. He spent 2 years working for the same

company in New York. In 2009 he left as a partner and started working for ValuePartners Family Office as

an asset manager. Mr van Heijst owns 12,855 shares in the Fund.

Managing Board

The Fund is managed by Arcona Capital Fund Management B.V. (

ACFM

or the

Managing Board

). ACFM

is based in Amsterdam and registered in the Trade Register of the Chamber of Commerce under number

08107686.

The Managing Board currently has the following directors:

G.St.J. Barker LLB

P.H.J. Mars M.Sc.

M. van der Laan B.Sc [in function per 6 October 2022]

M.T.H. Blokland BBA [in function per 6 October 2022]

H.H. Visscher [until 01.09.2022]

The Managing Board has chosen domicile at the offices of the Fund. More information can be found on

the website: www.arconapropertyfund.com

Stichting Prioriteit

Stichting Prioriteit (the

Foundation

) of the Fund is managed by a managing board consisting of two

members:

G.St.J. Barker LLB

P.H.J. Mars M.Sc [in function per 01.09.2022]

H.H. Visscher [until 01.09.2022]

Auditors

Deloitte Accountants B.V.

Gustav Mahlerlaan 2970

NL 1081 LA Amsterdam

The Netherlands

Legal Advisor

Loyens & Loeff N.V.

Blaak 31

NL 3011 GA Rotterdam

The Netherlands

Listing Agent

ABN AMRO Bank N.V

Gustav Mahlerlaan 10

NL 1082 PP Amsterdam

The Netherlands

Administrator

KroeseWevers Accountants B.V.

Colosseum 1

NL 7500 AC Enschede

The Netherlands

Depositary

CSC Depositary B.V.

Woudenbergseweg 11

NL 3953 ME Maarsbergen

The Netherlands

Financial Calendar 2023

Publication of trading update of 1

quarter 2023

18 May 2023

Publication of semi-annual report 2023

31 August 2023

Publication of trading update of 3

quarter 2023

9 November 2023

Identification codes

The ISIN code is NL0006311706

The REUTERS code is ARCPF

The BLOOMBERG code is ARCPF:NA

The Managing Board holds a license to manage Investment Institutions as defined by Section 2:65 Wft (Act

on the Supervision of Investment Institutions, Wet op het financieel toezicht).

FOREWORD

FROM

THE

MANAGING

BOARD

As anticipated twelve months ago, the effects of surging inflation across the core markets of the Fund and

the actions taken by central banks to combat this inflation have created certain challenges for all owners

and operators of real estate. Rises in rents driven by indexed lease contracts have not entirely compensated

for outward movements in yields caused by higher financing and operating costs, as shown by the 2.8%

downward valuation of the Fund´s non-Ukrainian property portfolio over the year. As existing loan

arrangements expire, property investors are anticipating tighter refinancing conditions to impact loan to

value ratio covenants and debt service coverage rate covenants, together with sharp increases in the costs

of compulsory hedging instruments. Portfolios with high debt to equity ratios and low free cash generation

now find refinancing of their existing debt structures to be very challenging. The same applies to portfolios

with bond financing structures in place. These concerns are affecting sentiment and driving down

transaction activity.

The Fund has consistently lowered its loan-to-value ratios in recent years, decreasing from 52.7% in 2017

to 43.6% in 2022. Fortunately, the current robust level of 43% is at the lower end of the target range.

Occupancy rates within the Fund have held up well over the past year and this, combined with continuing

reductions in operating costs, enabled the Fund to increase its net income in 2022 by 5%. These positive

factors should enable the Fund to maintain its current financing structures and continue to demonstrate the

operational resilience evidenced during the volatility of the Covid epidemic and the recent (and ongoing)

Russian invasion of Ukraine.

The Fund made further significant progress in 2022 with the disposal of non-core assets, selling two

unrefurbished office buildings in Kosice, Slovakia, in January and a 1960`s office property in Brno, Czech

Republic, in August. These sales achieved total gross prices of EUR 8.9 million against their combined

valuations of EUR 7.4 million, enabling timely repayment of senior and junior debt and providing funding

for the share buyback programme that was launched in September.

One year on, the war in Ukraine has not demonstrably affected local market sentiment in neighbouring

countries where the Fund is active, but has certainly been responsible for large parts of the surge in inflation

which, as noted above, is impacting on regional sentiment and trading activity. The Fund initially wrote

down the full values of the two sites held in Ukraine, but decided, with local market advice, to reinstate a

proportion of the value of the Odessa site in December. Further adjustments to the holding values of these

sites will follow as the situation within Ukraine develops. The overall effect of the war on the Fund in 2022

has been twofold: a EUR 2.0 million valuation writedown on the development sites held there and the

complications resulting from the bankruptcy of Sberbank CZ, the Russian-owned financier of the Fund`s

portfolio in Czech Republic. These include the failure of Sberbank to operate the interest rate hedge in

place on the Fund`s EUR 8.45 million mortgage loan on the Czech portfolio and the blocking of

ca. EUR 300,000 in the Fund´s accounts. A positive resolution to at least part of these issues is expected

this year.

Net property results for the year 2022 show a loss of EUR 4,577,000, primarily by value adjustments. Net

fair value movements on the 18 assets held through the year contributed a EUR 1.2 million loss (26%), the

writedowns in Ukraine contributed a EUR 2.0 million loss (43%) and the IFRS value adjustment of EUR 1.4

million on the Boyana apartments in Sofia accounted for 31%. This reduction is required by IFRS

bookkeeping guidelines. The apartments are classified as inventory and must be valued at the lower of cost

price or fair value. This is a temporary, non-cash accounting impact that does not reflect the actual value

of the assets.

Highlights in 2022

4 January

| Sale of Pražská 2 and Pražská 4

The Fund sold two office buildings in Košice, Slovakia, for EUR 4.55 million. This marked a continuation of

the Fund's disposal programme of non-core assets.

3 February

| Repayment of three short-term loans

The Fund completed repayment of three short-term loans at Fund level, totalling EUR 2.25 million.

24 February

| The start of the Russian invasion of Ukraine

The Fund shared an update on its holdings in Ukraine, with a combined book value of EUR 3.39 million. On

21 March,

the Fund updated its reported Net Asset Value to reflect the latest valuation figures and the

situation in Ukraine, writing down the value of two land plots in Ukraine to zero.

30 March

| Expansion of real estate portfolio into Romania - Delenco

On March 30, 2022, the Fund completed the acquisition of a 24.35% stake in the Delenco office building in

Bucharest, Romania.

17 June

| Expansion of real estate portfolio into Romania - EOS

On June 17, 2022, the Fund completed the acquisition of the EOS Business Park office building in

Bucharest, Romania.

22 June 2022

| Changes in the Supervisory Board

On June 23, 2022, the Fund announced Mrs. A.N. Krol has been appointed as a member of the Supervisory

Board for a period of four years. Mr. H.H. Kloos has decided not to stand for re-election as chairman of the

Supervisory Board. In accordance with the retirement schedule and the maximum appointment term of 12

years, Mr. B. Vos is stepping down.

18 August

| The Fund agrees a sale, 36% above valuation

The Fund signed an agreement for the sale of its

Šujanovo náměstí

3 building in Brno, Czech Republic, for

CZK 106.8 million (EUR 4.32 million), 36% above the appraised value at the end of 2021. The Managing

Board intends to use a portion of the net sales proceeds for the planned share repurchase programme. The

share repurchase programme, initiated on September 14, 2022, intends to return up to EUR 10 million to

shareholders from the sales of non-core real estate assets.

7 October

| Changes

in the Managing Board

Mark van der Laan and Marike Blokland

–

after having received AFM approval

–

joined the Managing Board

of Arcona Capital Fund Management B.V. on 6 October. Mark van der Laan will take up the role of Financial

Director, while Marike Blokland will be responsible for Compliance and Human Resources. The new

members bring specialized expertise to the Managing Board and have worked with the senior management

team of Arcona Capital for many years.

24 October

| Update on the engagement with the insolvent bank Sberbank CZ

The Fund provided an update on its mortgage loan and cash deposits with Sberbank CZ. Sberbank CZ

went bankrupt in August 2022, but the bankruptcy trustee has received an offer for its loan portfolio from

Česká Spořitelna. Arcona's Czech subsidiary has an outstanding loan of EUR 8.35 million and

approximately EUR 3

14,500 in blocked accounts with Sberbank CZ. If Česká Spořitelna successfully

purchases the loan portfolio, medium-sized creditors like Arcona's subsidiary are expected to receive 100%

of their receivables.

ARCONA

PROPERTY

FUND

BRIEF

General

The Fund is an investment company with variable capital incorporated under Dutch law and registered in

Amsterdam. The shares have been listed on Euronext Amsterdam since 2003. Since 31 October 2018 the

Fund is also listed on the Prague Stock Exchange (the

PSE

). At the moment it is not possible to trade in

the shares on the PSE. The Fund invests in commercial real estate in Central and Eastern Europe (the

CEE

The Fund offers several important features that distinguish it from other real estate funds:

•

The focus on Central and Eastern Europe;

•

Local representation of Arcona Capital with its own offices in Amsterdam (Netherlands), Munich

(Germany), Prague (Czech Republic), Sofia (Bulgaria) and Warsaw (Poland);

•

Access to regional property management knowledge and facilities;

•

Long-term management experience in Central Europe (since 1992).

Managing Board

Arcona Capital Fund Management B.V. is the managing board of the Fund. On 24 January 2006, it obtained

from the AFM a permit under the Wft.

Fund Structure and tradability

The Fund is a closed-end investment institution, and its shares are listed on Euronext Amsterdam and the

PSE.

Strategy

The Fund is one of a limited number of listed and regulated property vehicles active in the CEE region,

providing regional market exposure for both private and institutional investors. It aims to provide capital

preservation and a high dividend yield through a diversified and liquid vehicle managed by property

specialists with a fiduciary mind-set. This is a key differentiation from the other listed stocks in the region,

which are either very sector-specific or are primarily development-focused with a higher risk profile.

The costs of maintaining such a structure, offering daily trading in the shares, are high and impact

disproportionally on smaller funds. Accordingly, since 2012 the Fund has pursued a growth strategy to

achieve both critical mass and adequate investment diversification. Over the past 9 years, the Fund has

doubled in size, expanded into 4 new regional markets and into the convenience retail and residential

sectors. Further growth through acquisition is, however, currently limited by the prevailing share price

discount (50% as at end 2022) to NAV. In the medium term, this restricts the Fund to acquisitions funded

by share issuances at NAV (such as SPDI) or by further debt issuance.

Continued strong focus on operations

The Fund continues to reduce operational cost ratios (see table 8) and improve occupancy levels in the

existing portfolio. The Fund will continue to identify and realise opportunities to add value to the existing

portfolio by redevelopment and refurbishment.

Portfolio management through selective investments and disposals in core markets

Going forward, the Fund has a clear strategy for its core markets, focusing on regional sectors with above-

average growth potential and limited international competition. The Fund will continue to dispose of assets

that are not aligned with its strategic focus if favourable opportunities for completing such disposals arise.

Maintaining a prudent financial strategy

The Fund intends to maintain its prudent financial strategy of conservative leverage, targeting a LTV-ratio

in the range of 40% - 50% (as at 31 December 2022: 43.6%), although an LTV percentage of up to 60% is

possible.

The Managing Board has regard to the need for flexibility, in particular the ability to sell real estate from the

portfolio without incurring high debt finance breakage costs. The Fund prefers to use several different

financiers, so as not to be dependent on just one party.

Investor relations and information supply

The Fund strives to achieve open, timely and clear communication with private and institutional investors,

asset managers and other interested parties, and endeavours to configure its public and investor relations’

policy accordingly. Currently the Fund’s investors are largely privat

e investors and asset/wealth managers.

Corporate Governance

Clarity and transparency in supervision and accounting is considered by the Fund to be the cornerstone of

good management and entrepreneurship. The Fund aims for a sound system of corporate governance, with

its strategy and investment objectives clearly defined and its operations effectively monitored by the

Managing Board, Supervisory Board and independent external parties.

Diversity

The Dutch Corporate Governance Code mandates a diversity policy for the managing and supervisory

boards of large public and private companies. Since the fund is not classified as a large company, there is

no obligation to specify a diversity policy. Currently, the Managing Board comprises four members (three

males, one female), while the Supervisory Board consists of three members (two males, one female).

Shareholders appoint these members based on their experience, language skills, and qualifications. As the

boards expand in the future, opportunities may arise for increased diversity in aspects such as age, gender,

and geographical experience.

The Fund's Managing Board is operated by ACFM. However, ACFM is not obligated by the Non-Financial

Information Disclosure Decree and the Diversity Policy Disclosure Decree to provide information regarding

its diversity policy.

Sustainability

Sustainability is becoming an increasingly important aspect of Arcona Property Fund's long-term value

creation strategy. Our business model now emphasizes reducing energy consumption within our portfolio

and establishing adaptable, inspiring work environments that prioritize the health and well-being of our

occupants. Although Arcona Property Fund N.V. is considered a small entity, we recognize the constantly

evolving nature of ESG and the need for our organization to adapt accordingly.

To address this, we will concentrate on energy efficiency, future-proof buildings, and social engagement.

We are committed to improving the energy efficiency of our portfolio, thereby reducing operational costs

and energy waste, and creating value for both the fund and our tenants. We will integrate these objectives

into our strategy to ensure a sustainable future for our business and stakeholders.

Arcona Property Fund N.V. does not currently perceive significant risks concerning ESG, such as

refinancing of expiring loans in 2024 and beyond. However, this situation may change in the future if banks

implement more stringent ESG standards, which they are not currently doing.

Portfolio and historical returns

As at 31 December 2022

, the Fund’s real estate portfolio comprise

s 21 properties, located in one city in the

Czech Republic, two cities in Slovakia, ten cities in Poland, two cities in Ukraine, one city in Bulgaria and

one city in Romania. The majority of the rentable area is designated as modern suburban retail space or

flexible primary and secondary office space. The fair value of the 21 properties as at 31 December 2022

was EUR 81.80 million

Table 1

–

Development of the annual return on NAV per share

2022

2021

2020

2019

2018

Return

(in %)

-/- 7.4

7.8

-/- 9.9

-/- 2.6

-/- 1.1

Including assets held for sale, investment property under development and inventory apartments.

Including shareholder distributions.

PRE-ADVICE

THE

SUPERVISORY

BOARD

Recommendation to the General Meeting

This annual report of the Fund has been prepared by the Managing Board. This report contains the financial

statements for the period from 1 January to 31 December 2022. The financial statements are audited and

have been approved by Deloitte Accountants B.V. The auditor’s report is presented

on pages 187

–

195.

The Supervisory Board has received notice of this approval.

On March 28, 2023 the auditors of Deloitte presented their paper with audit findings and discussed the

status of the audits of components in the various jurisdictions, significant risks, overview of loans &

borrowings, internal control environment and a couple of other audit topics with the Managing Board and

Supervisory Board.

The Supervisory Board recommends the financial statements for the year 2022 to the General Meeting for

approval.

Meetings and activities of the Supervisory Board

In view of the market volatility resulting from the Ukraine crisis the Supervisory Board maintained a high

frequency of its meetings with the Managing Board. During 2022, the Supervisory Board had 7 joint

meetings (2021: 9). During these meetings, the Supervisory Board and Managing Board discussed the

(administrative) organization, the operational performance, the difficulties surrounding the repayment of the

Alpha Bank loan, the strategy and financial reporting of the Fund. In addition, the Supervisory Board held 3

conference calls in July, August and October. As of November, the Managing Board updated the

Supervisory Board on a monthly basis via Teams regarding the progress of the sales of non-core assets,

the results of the share buyback program and compliance with bank covenants.

In the annual General Meeting in June 2022, the chairman (Mr. Kloos) confirmed the commitment from the

Supervisory Board that consultations will take place between a group of shareholders and the Supervisory

Board, as requested in a letter to the Supervisory Board. This meeting took place on September 8, 2022

with a few representatives of this group. The shareholders present explained their concerns about the large

gap between the share price and NAV per share. They indicated that they support the sales of non-core

assets and buyback of shares aimed at returning up to EUR 10 million to shareholders. The Supervisory

Board assured that it will closely monitor the pace of the disposal of non-core assets and continue

discussions on the future of the Fund with the Managing Board upon completion of the buyback.

In its meeting on December 15, 2022, the Supervisory Board discussed their performance as Supervisory

Board in its new composition since the annual General Meeting held in June 2022. The (self)evaluation was

particularly focused on the composition of the Supervisory Board and the competences of its members after

two of the Supervisory Board members had stepped down in 2022. The Supervisory Board also discussed

the performance of the Managing Board (not being present). Particular attention was paid to the

performance in respect of the sale of non-core assets to unlock value for the shareholders. The Supervisory

Board acknowledges the difficult market circumstances which may delay the disposal of certain assets. The

Supervisory Board is content that the Managing Board is committed to this sales program.

It is current practice for the Managing Board to seek prior approval from the Supervisory Board in respect

of decisions affecting the NAV per share. For the sake of good governance, the Supervisory Board

formalized this practice and adopted a resolution pursuant to which the Managing Board is requested to

seek prior approval for the following decisions: (i) the issuance of shares and granting of rights to subscribe

for shares, (ii) the alienation of shares in its own capital, (iii) the acquisition of real estate, including the

acquisition of shares in real estate companies, and (iv) the repurchase of own shares. In performing its

duties, the Supervisory Board is guided by the interests of the Fund, taking into account the interests of all

stakeholders.

Composition of the Supervisory Board

According to the Supervisory Board Bylaws, the Supervisory Board members, with the exception of a

maximum of one person, must be independent. A supervisory director who is a managing director or a

supervisory director, or otherwise a representative, of a legal entity (not being a group company) that holds

at least 10% of the shares in the Company is non-independent.

The current composition of the Supervisory Board complies with this provision. Mr. Beys is also the

Chairman of the Board of Directors of SPDI owning 1,072,910 or 25.6% (December 31, 2021: 593,534)

ordinary shares and is therefore non-independent. Mr. Van Heijst is a representative of the Stichting Value

Partners Family Office who controls 397.694 or 9.5% (December 31, 2021: 545,597) ordinary shares and

is therefore independent.

The Supervisory Board and the Managing Board discussed the composition of the Supervisory Board and

agreed that the expertise of the Supervisory Board should be expanded. The Boards are seeking a

candidate with real estate knowledge/experience, preferably in Eastern Europe. In accordance with the

diversity policy, the Boards will aim to appoint a female supervisory director.

Relevant information of each of the supervisory board members can be found on page 6.

Finally

The Supervisory Board would like to express its appreciation for the efforts made during the financial year

by the Managing Board and staff.

Amsterdam, 28 April 2023

Supervisory Board

Mr. drs. A. Nelleke Krol (chairperson)

Michael P. Beys, Esq.

Dr. Jan-Jaap van Heijst (vice-chairperson)

REPORT

THE

MANAGING

BOARD

The Managing Board hereby presents the annual report of 2022 of the Fund. The reporting period is from

1 January 2022 to 31 December 2022.

5.1

SUMMARY OF THE YEAR

5.1.1

DEVELOPMENTS IN 2022

The following events took place during the reporting period:

4 January 2022

| Sale of Pražská 2 and Pražská 4

On January 4, 2022 the Fund announced it has sold the two office buildings Pražská 2 and Pražská 4 in

Košice, Slovakia. The total gross sale price was

EUR 4.55 million, 2% below the appraisal value of EUR

4.63 million at the end of 2021.

3 February 2022

| Completion repayment of short-term loans

On February 3, 2022 the Fund announced it has completed repayment of three short-term loans at Fund

level in a total amount of EUR 2.25 million.

As a continuation of the disposal programme of non-core assets, the Fund instructed Knight Frank to find a

purchaser for

its property in Šujanovo námĕsti 3, Brno. This 4,655 m

office building dates from the 1970’s

and is located in a mixed-use area close to Brno city centre. The property has clear potential for conversion

to residential use.

24 February 2022

| Update on assets in Ukraine

On February 24, 2022 the Fund announced an update on its holdings in Ukraine (two developments plots).

As at December 31, 2021 the sites had a combined book value of EUR 3.39 million, which amounts to 4.2%

of the value of the property portfolio.

Bela Logistic Park is located in the Odessa region and has a value of EUR 2.7 million or 3.3% of the value

of the real estate portfolio. The plot is approximately 22 hectares and suitable for the development of

logistics.

Balabynska Village is located in the city of Zaporizhzhia and has a value of EUR 690,000 or 0.9% of the

value of the real estate portfolio. The plot has an area of approximately 26 hectares and is zoned for

commercial use.

Projects to be taken over

For the second phase of the SPDI acquisition, the Fund entered into an obligation in June 2021 to acquire

two plots of land in and around Kiev. The first plot is Rozhny, which is 42 hectares in size and located

approximately 43 kilometres from the centre of Kiev. The plot has an appraised value per 31 December

2021 of EUR 895,000. The second plot is Kiyanovksi Lane, which is 0.5 hectares in size. The plot is located

in the centre of Kiev and has a value of EUR 1,074,000.

The transfer of these plots still needs to take place. SPDI has now fulfilled all pre-completion obligations

and according to the share purchase agreement the plots will be re-valued and acquired for current market

value.

14 March 2022

| Update on withdrawal of banking licence of Sberbank CZ

On March 14, 2022 the Fund announced an update on the withdrawal of the banking licence of Sberbank

CZ. Developments in Ukraine and Russia caused a bank run at Sberbank CZ. The Czech National Bank

(CNB) subsequently decided to start the process to revoke the banking licence of Sberbank CZ.

The Sberbank CZ loan to ACREB amounts to EUR 8.45 million as at December 31, 2021. The loan has a

term until March 31, 2024 and the loan-to-value ratio is approximately 44%. In addition, ACREB holds a

number of accounts at Sberbank CZ for daily payments.

The effect of the CNB´s actions has been the freezing of all cash deposits on ACREB's accounts with

Sberbank CZ. It is also no longer possible to transfer money in and out of accounts at Sberbank CZ. The

loan is not in default.

ACREB has opened an account with Raiffeisen Bank to manage day-to-day business. This will enable

payments to be made to suppliers and the subsidiary to continue its normal business operations. As a

precautionary measure, an application has also been made to the State Bank Guarantee fund for release

of EUR 100,000, being the maximum amount covered by the scheme for individual depositors.

21 March 2022

| Updates Net Asset Value

On March 21, 2022 the Fund announced it has updated its reported Net Asset Value (

NAV

) to reflect the

latest valuation figures and the situation in Ukraine.

The Managing Board resolved to write down the value of the two land plots held by the Fund in Ukraine (in

Odessa and Zaporizhzhia) to zero (previous assessed value EUR 3.39 million). The effect of these two

adjustments, one positive, one negative, is that the NAV of the Fund after deduction of outstanding

borrowings and liabilities is EUR 44.54 million, being EUR 11.83 per share.

Neither the current situation on the ground in Ukraine nor future developments in the conflict can be

accurately assessed at this time. It is however clear that there is no functioning market for real estate assets

within the country. The Managing Board has therefore decided to adopt a prudent position and to write

down the asset values of the Ukrainian holdings of the Fund to zero on a temporary basis. The situation will

be reviewed regularly in consultation with the Fund´s local advisors.

The Fund´s subsidiary in the Czech Republic, ACREB has now received a pay-out of EUR 100,000 from

the State Bank Guarantee Fund in respect of its engagement with Sberbank CZ.

30 March 2022

| Completion of acquisition of 24.35% interest in Delenco

On March 30, 2022 the Fund announced it has completed the acquisition of

21.18% in the Delenco office building, one of the two assets in Bucharest

the Fund acquires from SPDI. On June 17, 2022 the Fund completed the

acquisition of another 3.17% in the Delenco office building. The total stake

is 24.35%.

The Fund financed the acquisition of the 21.18% by issuing 315,668 shares

and 76,085 warrants. The shares are issued at the Net Asset Value of EUR

11.83 per share. The warrants can be converted into shares of the Fund if

the share price reaches a price level of EUR 7.20 before March 29, 2027.

The Fund financed the acquisition of the 3.17% by issuing 47,020 shares and 11,333 warrants. The shares

are issued at the Net Asset Value of EUR 11.88 per share. The warrants can be converted into shares of

the Fund if the share price reaches a price level of EUR 7.20 before June 15, 2027.

The Delenco building has an area of 10,375 m

, of which 9,664 m

is office space and 711 m

retail space.

In addition, the building has 68 parking spaces. The appraised value of the 24.35% stake is EUR 3,810,000.

ANCOM (Romanian telecom regulator) is the largest

of Delenco’s tenants

with 81% of the rental income.

The lease with ANCOM runs until June 30, 2026. The annual rent for the entire building is EUR 1,716,000.

The building is not financed with a bank loan.

Delenco office in Bucharest

4 April 2022

| Update on Sberbank CZ situation

On April 4, 2022 the Fund announced an update on the Sberbank CZ situation. It mentions that on March

31, 2022, the Fund´s wholly owned subsidiary ACREB transferred, in accordance with the loan agreement,

approximately EUR 200,000 in interest and principal repayments to Sberbank. The Managing Board and

the Supervisory Board decided to fulfil this obligation under the existing loan agreement in line with legal

advice to avoid a formal default.

According to Sberbank CZ, the blocked funds of approximately EUR 400,000 on ACREB accounts at

Sberbank CZ cannot be used to meet the regular instalment and interest payments. This restriction has

been applied by the CNB for all clients of Sberbank CZ. By transferring the funds under the current loan

agreement, ACREB takes a precautionary measure and strengthens its position towards Sberbank CZ.

17 June 2022

| Completes acquisition of EOS building in Bucharest

On June 17, 2022 the Fund completed the acquisition of the EOS office

building in Bucharest. The Fund financed the acquisition by issuing 116,688

shares and 28,125 warrants. The shares were issued at a Net Asset Value

of EUR 11.88 per share. The warrants can be converted into shares of the

Fund if the share price reaches a price level of EUR 7.20 before June 15,

2027.

The EOS building has an appraised value of EUR 5,346,000, a lettable area

of 3,386 m

and 90 parking spaces. The office building is fully let to Danone

Romania until May 31, 2026. Patria Bank has provided financing of

EUR 3.3 million for the property, which runs to December 31, 2031.

22 June 2022

| Trading update

On June 22, 2022 the Fund announced a trading update during the General Meeting of Shareholders.

Sales

The Fund has received several bids for the Šujanovo námĕsti 3

office building in Brno, Czech Republic.

Offers over CZK 100 million (approximately EUR 4.0 million) have been received, approximately 28% above

the appraisal value at the end of 2021 (CZK 78.3 million). The timing of the sale depends on current

developments at the financing bank Sberbank CZ.

For the Boyana Residence (Bulgaria) project, the Fund has agreed terms with local developers to sell them

various plots. The proceeds from this sale should be more than sufficient to fully repay the loan from Alpha

Bank of approximately EUR 2.6 million. The remaining part of the sales proceeds will be used to renovate

the existing apartments, after which they will be sold.

The Záhradnicka office building in Bratislava with an appraised value of approximately EUR 4.0 million has

been put up for sale.

The Fund will focus on completing these sales from the second half of 2022. The proceeds, after repayment

of the bank loans, will be used to start the share repurchase programme.

Financing Sberbank CZ

Sberbank CZ has provided financing of approximately CZK 210 million (approximately EUR 8.45 million) to

ACREB. On April 30, 2022, the CNB definitively withdrew the banking licence of Sberbank CZ and

appointed a trustee. Refinancing of this loan is only possible at a substantially higher interest rate, so it is

preferable to continue with the current bank loan.

Rental Poland

In Poland, the Fund has signed a new seven-year lease for 1,430 m

with Carrefour for the supermarket

Inowroclaw II. The store opened at the beginning of August 2022 and Carrefour replaced the current tenant

SPAR at better rental conditions.

EOS office in Bucharest

Purchase of real estate from SPDI

On June 15, 2022 the Fund completed the purchase of the two office buildings in Bucharest from SPDI.

The Fund still has an obligation towards SPDI to acquire two Ukrainian land plots with an appraised value

of EUR 1.83 million. Due to the conflict in Ukraine, this acquisition has not yet been completed. The

purchase agreement with SPDI has specific conditions that protect the position of the Fund.

22 June 2022

| Composition Supervisory Board

On June 23, 2022, the Fund announced Mrs. A.N. Krol has been appointed as a member of the Supervisory

Board for a period of four years. Mr. H.H. Kloos has decided not to stand for re-election as chairman of the

Supervisory Board. In accordance with the retirement schedule and the maximum appointment term of 12

years, Mr. B. Vos is stepping down.

3 August 2022

| Resignation of Mr H.H. Visscher

On August 3, 2022,

the Fund announced that Mr. H. H. Visscher has accepted a position elsewhere and

will resign as director of ACFM as from 1 September 2022.

18 August 2022

| Arcona Property Fund sells building Brno 36% above valuation

On August 18, 2022,

the Fund announced it has signed an agreement for the sale of its

ujanovo n

(VUP) building in Brno, Czech Republic. The sale price of CZK 106.8 million (EUR 4.32 million) is 36% above

the appraised value of CZK 78.3 million at the end of 2021. It is the management of Arcona Property Fund's

intention to use a portion of the net sales proceeds of ca. EUR 1.7 million for the planned share repurchase

programme.

31 August 2022

| Trading update semi-annual report

On August 31, 2022, Arcona Property Fund N.V. published its semi-annual trading update, demonstrating

resilience in the first half of 2022 with improved operating results. The comparable gross rental income

increased by 9.4% to EUR 4.07 million, and the net rental income increased by 12.3% to EUR 2.05 million,

partly due to improved occupancy rates.

The first-half result after tax was negatively impacted by the write-down of real estate in Ukraine. However,

adjusted for these write-downs, the result before tax amounted to EUR 925,000, which was EUR 670,000

higher than the same period last year. Operating costs decreased to EUR 962,000 in the first half, and

financial costs decreased by 22% to EUR 938,000. The loan-to-value ratio decreased to 41.8%, and the

average loan term increased to 3.54 years. As of June 30, 2022, the net asset value (NAV) based on

NNNAV was EUR 12.00 per share.

14 September 2022

| Arcona Property Fund N.V. starts share buyback programme

On September 14, 2022, Arcona Property Fund N.V. initiated its programme to buy back its own shares on

the stock market for up to EUR 1.5 million. Subject to approval of the shareholder meeting the shares are

planned to be cancelled after the purchase, and this is part of a larger plan to return up to EUR10 million to

shareholders from the sales of non-core real estate assets. The buyback programme was subsequently

concluded on March 15, 2023.

7 October 2022

| New board members Arcona Capital Fund Management B.V.

As of October 6, 2022, Mark van der Laan and Marike Blokland have joined the board of Arcona Capital

Fund Management B.V. Van der Laan will be the Financial Director, managing the financial aspects of the

company and its funds. Blokland will be in charge of Compliance and Human Resources. The new members

have worked alongside the senior management team of Arcona Capital for years and bring specialized

expertise to the board. The current board members are Guy St. J. Barker, Peter H. J. Mars, Mark van der

Laan, and Marike T. H. Blokland.

24 October 2022

| Arcona Property Fund update on engagement with Sberbank CZ

On October 24, 2022, Arcona Property Fund N.V., provided an update on the mortgage loan and cash

deposits with Sberbank CZ through its Czech subsidiary. Sberbank CZ went bankrupt in August 2022, but

the bankruptcy trustee has received an offer for Sberbank CZ's loan portfolio from

esk

Spo

itelna. Arcona's

subsidiary, ACREB, has an outstanding loan of EUR 8.35 million and approximately EUR 314,500 in blocked

accounts with Sberbank CZ. Medium-sized creditors, including ACREB, are expected to receive 100% of

their receivables when

esk

Spo

itelna successfully purchases the loan portfolio.

9 November 2022

| Trading update first nine months 2022

On November 9, 2022, Arcona Property Fund N.V. released its trading update for the first nine months of

2022. Gross rental income was EUR 6.30 million and net rental income was EUR 3.14 million. Net rental

income for Q3 increased by 4.6% to EUR 1,083,000 compared to the same period last year. The operating

result for the first nine months was positive, with EUR 174,000, compared to a negative result of EUR

310,000 in the same period last year.

As of September 30, 2022, the occupancy rate was 89.1%, a decrease from 92.0% as of June 30, 2022.

This was due to AT&T surrendering the lease of one floor in the Letná offi

ce building in Košice

against

compensation of EUR 400,000.

Unrealized value adjustments of the VUP Brno building and EOS Business Park offset the EUR 3.3 million

write-down on Ukrainian real estate in Q1 2022. The fund's result for the first nine months of 2022 recovered

to EUR -/- 882,000, compared to EUR -/- 2,843,000 for the first half of 2022.

Interest expenses decreased by 10.2% to EUR 1,506,000 in the first nine months of 2022, compared to the

same period last year, mainly due to the repayment of high-interest loans and regular repayments on bank

loans. However, a new loan of EUR 2.9 million from Patria Bank in Romania and an increase in 3-month

PRIBOR in the Czech Republic from 4.08% to 7.33% limited the decrease in interest expenses. The loan-

to-value ratio decreased to 40.5% as of September 30, 2022, from 41.8% as of June 30, 2022.

The fund completed the sale of the VUP office building in the Czech Republic at the end of the year and will

use the proceeds partly for the share repurchase programme announced on September 14, 2022.

31 December 2022

| Reports end of year portfolio valuations

On January 12, 2023, Arcona Property Fund N.V. has released its annual revaluation of its property

portfolio, with the total value coming in at EUR 82.4 million as of 31 December 2022, a 1.7% decrease

compared to the previous year. While Polish assets saw a 3.5% decrease, three Czech properties increased

in value by 1.8%. In contrast, values in Slovakia, Romania, and Bulgaria decreased by 3.3%, 3.1%, and

9.3%, respectively. Due to the conflict in Ukraine, the value of the development site in Odessa has been

adjusted to 33% of its original value. Meanwhile, the value of the site in Zaporizhzhia has remained at zero

since the writedown in March 2022.

5.2

EVENTS AFTER BALANCE SHEET DATE

10 January 2023

| The Fund refinances project Boyana

On January 10, 2023, Arcona Property Fund N.V. has successfully refinanced the Boyana Residence project

in Bulgaria with a new EUR 3.6 million loan from Dutch investors. This gives the Fund the opportunity to

renovate and sell the apartments and development land within 18 months. The real estate comprises an

apartment complex with 26 apartments and 15,105 m

of development land in Sofia, Bulgaria. The

refinancing enabled the repayment of Alpha Bank, payment of historical taxes and renovation of all

apartments. The new loan has a maturity date of 30 June 2024 and a coupon of 9.0%, compared to Alpha

Bank's 7.25%.

15 March 2023

| Conclusion of initial share repurchase programme.

On March 15, 2023, Arcona Property Fund N.V. has concluded its first share repurchase programme, having

bought back 60,976 common shares at an average price of EUR 6.43 per share. A proposal to cancel a

proportion of the repurchased shares will be submitted to a shareholders' meeting.

28 March 2023

| Notification that Hypo Noe approved waiver

On 28 March 2023, the Fund was notified that Hypo Noe had approved a waiver for ACREP and Project 5,

addressing the breach of the DSCR forecast covenant.

4 April 2023

| Announcement that Sberbank CZ has been sold to

Česká Spořitelna

On April 4, 2023, it was announced that Sberbank CZ (as an enterprise) had been sold to Česká Spořitelna

based on publicly available information. The Sberbank CZ loan book with a nominal value of CZK 47.1

billion was transferred. Česká Spořitelna purchased

it for CZK 41.053 billion. Throughout April 2023, the

technical transfer of data from Sberbank CZ to Česká Spořitelna will take place.

There were no further material events after balance sheet date.

5.2.1

NAV PER SHARE AND SHARE PRICE DEVELOPMENT

The following tables show the development of the Fund’s Triple

NAV and share price during the period 1

January 2022 to 31 December 2022.

Table 2

–

Total Return on share price and Triple NAV during 2022

Based on share price

Based on NNNAV

In EUR

In %

In EUR

In %

Start of period

7.5

12.76

End of period

5.9

11.81

Return

-/- 1.6

-/- 21.33

-/- 0.95

-/- 7.45

Distribution to shareholders

0.0

Total Return

-/- 1.6

-/- 21.33

-/- 0.95

-/- 7.45

The NNNAV decreased by EUR 0.95 per share (-/- 7.45%), largely due to the decreased fair value of the

real estate portfolio, IFRS adjustments related to the Boyana project in Bulgaria and provisions made for

the Ukraine asset values.

Figure 1

–Development of the Fund’s

share price per share during 2022

200

400

600

800

1000

1200

1400

1600

1/1/2022

1/29/2022

2/26/2022

3/26/2022

4/23/2022

5/21/2022

6/18/2022

7/16/2022

8/13/2022

9/10/2022

10/8/2022

11/5/2022

12/3/2022

12/31/2022

Daily Turnover (in x1000

EUR)

in EUR

Turnover (in EUR)

Stock price per share (in EUR)

Table 3

–

Development of the share price per quarter in 2022

Quarter

Opening price

Start of quarter

Closing price

End of quarter

Volume

in EUR

number of shares

Quarter 2022

7.43

6.49

33,060

Quarter 2022

6.02

6.25

32,371

Quarter 2022

6.06

6.55

304,472

Quarter 2022

6.60

5.90

53,268

Average per quarter

105,793

The above table shows an average trading volume of 1,677 (2021: 2,297) shares per trading day

during

2022. The average quarterly traded volume was 105,793 shares (2021: 143,556) and the average turnover

was EUR 0.68 million per quarter (2021: EUR 0.80 million per quarter). The share price traded at the end

of 2022 at EUR 5.90 which represents a 50% discount (2021: 41%) to the NAV of EUR 11.81

Table 4

–

Comparative statement of the NAV per share

31-12-2022

31-12-2021

Shareholders’ equity in

accordance with NAV (in EUR 1,000)

49,033

49,204

Include:

Fair value of financial instruments

479

293

Fair value of debt

Fair value of deferred tax

-/- 1,498

-/- 1,547

Fair value of inventories

1,421

Shareholder’s equity in accordance with NNNAV

(in EUR 1,000)

49,439

47,961

Number of profit-sharing shares

4,185,984

3,758,683

NNNAV per profit-sharing share (in EUR)

11.81

12.76

Annual return on NNNAV (in %)

-/- 7.4

7.8

See also chapter 7.1.10

The Shareholders´ equity in accordance with Net Asset Value (NNNAV) has increased from EUR

47,961,000 in 2021 to EUR 49,439,000 in 2022. The number of ordinary shares in issue increased from

3,758,683 in 2021 to 4,185,984 in 2022 due to payment in shares for the acquisition of assets from SPDI.

The NNNAV per profit-sharing share has decreased from EUR 12.76 in 2021 to EUR 11.81 in 2022.

considering 252 tradings days at Euronext Amsterdam

5.3

INCOME, COST AND RESULT

The following section provides an analysis of the company's financial performance for the year ending

December 31, 2022. It covers various aspects of the company's finances, including balance statements,

results, cash flow, and ongoing charges ratios. It shows that the company experienced a decrease in total

assets and earnings per share, primarily due to a decrease in investment property value strongly related to

the war in Ukraine and the effect on the financial and real estate markets. However, the company also saw

improvements in shareholders' equity, cash flow, and ongoing charges ratios. The following will provide an

overview of the key findings and trends in the company's financial performance during the period under

review.

5.3.1

BALANCE

Table 5

–

Balance statement

All in EUR 1,000

31-12-2022

31-12-2021

Change

Investment property

73,183

79,973

-/- 6,790

Non-current assets

1,454

1,259

195

Current assets

15,582

9,334

6,248

Total assets

90,219

90,566

-/- 347

Shareholders’ equity

46,515

46,403

112

Deferred tax liabilities

3,183

3,514

-/- 331

Long-term loans and borrowings

17,597

30,597

-/- 494

Total current liabilities

22,924

10,052

366

Total shareholders’ equity and liabilities

90,219

90,566

-/- 347

As of December 31, 2022, the company's total assets decreased by EUR 347,000, primarily due to a

decrease in investment property of EUR 6.79 million, partially offset by increases in non-current assets and

current liabilities. Non-current assets increased by EUR 195,000, largely due to higher deferred tax assets.

Current assets increased by EUR 6.25 million, mainly due to the sale of assets held for sale in Slovakia

(

Pražská 2 and Pražská 4

) and the Czech Republic (VUP Brno).

Shareholders' equity increased by EUR 112,000 to EUR 46.52 million, primarily due to retained earnings

influenced by the acquisitions from SPDI through share-based payments. Deferred tax liabilities decreased

by EUR 331,000 to EUR 3.18 million, while long-term loans and borrowings decreased by EUR 494,000 to

EUR 30.10 million, mainly due to the reclassification of bank loans from current liabilities. Total current

liabilities increased by EUR 366,000 to EUR 10.42 million.

5.3.2

RESULT

In the 2022 financial year, the company's earnings per share (EPS) decreased to -/- EUR 1.07, down from

EUR 0.83 in the previous year. This decline was primarily attributed to the direct and indirect impacts of the

war in Ukraine, which affected the European real estate and financial markets. These events led to a

provisional write-off on the company's two Ukrainian assets and resulted in cost inflation, rising interest

rates, and complications with the Sberbank CZ loan.

The estimated related negative effects amount to EUR 5.0 million, with the most significant being the net

negative result on properties, totalling EUR 4.577 million. Other factors contributing to the decline in EPS

include a one-off penalty interest charge related to the Alpha Bank financing in Bulgaria, IFRS adjustments

related to Boyana, higher financing costs due to increased interest rates, and increased tax pressure

associated with property sales.

Despite these challenges, the direct result before tax, the result adjusted for the effects related to the war

in Ukraine and valuations, stands at EUR 705,000. For more details please see chapter 9.

Table 6

–

Overview of result

All in EUR 1,000

2022

2021

Change

Gross rental income

6,165

7,097

-/- 932

Service charge income

2,433

2,079

354

Service charge expenses

-/- 2,471

-/- 2,786

315

Property operating expenses

-/- 1,936

-/- 2,380

444

Net rental and related income

4,191

4,010

181

Financial and other operating income

775

1,145

-/- 370

Total direct income

4,966

5,155

-/- 189

Administrative expenses

-/- 705

-/- 648

-/- 57

Other operating expenses

-/- 1,348

-/- 1,281

-/- 67

Financial expenses

-/- 2,208

-/- 2,150

-/- 58

Total direct costs

-/- 4,261

-/- 4,079

-/- 182

Direct result before tax

705

1,076

-/- 371

Indirect result before tax

-/- 4,645

1,949

-/- 6,594

Result before tax

-/- 3,940

3,025

-/- 6,965

Tax

410

-/- 109

519

Result after tax

-/- 4,350

3,134

-/- 7,484

The

Result after tax

for 2022 (see table 6 and chapter 9) amounted to EUR -/- 4.35 million (2021: EUR 3.10

million positive) and can be divided into direct result and indirect result. The total comprehensive income,

the result including

Reserve currency translation differences

, amounted to EUR -/- 4.54 million (2021: EUR

3.45 million) (see table 7 and chapter 10).

The

direct result before tax

is EUR 0.71 million. The

indirect result

before tax

of EUR -/- 4.65 million reflects

the revaluation of the real estate portfolio, the IFRS impact on the Boyana apartment inventory value, and

the writedown on the Ukraine asset values. For more information about the property valuations see 15.2

(“Investment property”)

Table 7

–

Statement of comprehensive income

All in EUR 1,000

2022

2021

Foreign currency translation differences on net investment in group companies

-/- 163

358

Income tax on foreign currency translation differences on net investments in

group companies

-/- 26

-/- 43

Total foreign exchange differences

-/- 189

315

Net gain/ (loss) recognised directly in equity

-/- 189

315

Profit for the period

-/- 4,350

3,134

Total recognised income and expense for the period

-/- 4,539

3,449

The

"Foreign currency translation differences on net investment in group companies,"

shows the gains or

losses resulting from translating the net investment in foreign subsidiaries to the reporting currency.

The

"Income tax on foreign currency translation differences on net investments in group companies."

is the

tax effect associated with the foreign currency translation differences.

See for applicable portfolio in 2022 and 2021 paragraph 15.5

The net results in properties and the valuation results of investments in associates (see chapter 9)

The

"Profit for the period"

represents the company's profit or loss from its operations.

Ongoing Charges Figure

The below table provides information on the Ongoing Charges Figure (OCF) of the fund for the years 2019,

2020, 2021, and 2022. Ongoing Charges Figure is a metric that represents the total cost of running a fund,

including all expenses such as management fees, administration costs, and other operational expenses.

The OCF is expressed as a percentage of the total assets under management of the fund. In 2022 the OCF

decreased as a result of a decrease of the total expenses (including other operating expenses) by

approximately 7%, in conjunction with the increase of the average Group equity by approximately 10%.

Table 8

–

Ongoing Charges Figure

All in %

2022

2021

2020

2019

Ongoing Charges Figure

8.02

9.50

9.95

11.13

OCF excluding one-off and refinancing costs

7.61

9.31

9.00

10.01

Fund expense ratio

3.71

4.07

4.89

4.24

The Ongoing Charges Figure for the fund has been decreasing over the past few years. In 2019, the OCF

was 11.13%, while in 2022, it was 8.02%. This indicates that the cost of running the fund has decreased,

which is due to several factors such as increased efficiency and better negotiation of expenses.

The OCF excluding one-off and refinancing costs gives a more accurate picture of the ongoing costs of

running the fund. This metric takes out any one-time expenses that may have occurred in a particular year,

such as costs related to refinancing or restructuring. The OCF excluding one-off and refinancing costs has

also been decreasing over the past few years, from 10.01% in 2019 to 7.61% in 2022.

Finally, the Fund expense ratio also decreased over the past few years, with a high of 4.89% in 2020 and

a low of 3.71% in 2022.

See section 15.37 “Ongoing Charges Figure” for more i

nformation.

Fund operating expenses

The total

Fund operating expenses

of EUR 2.05 million (2021: EUR 1.93 million) include EUR 207,000 of

incidental expenses for consultancy and legal work on the SPDI deal during 2022. See also 15.36.

Financial expenses

The

Financial expenses

are EUR 2.21 million (2021: EUR 2.15 million), which includes regular EUR 1.93

million interest expenses on loans and derivatives. The remainder comprises other (incidental) financial

expenses detailed under 15.36

“

Financial Expenses

”

5.3.3

CASH FLOW

The net cash flow of the Fund after operating, investment and financing activities was EUR 3,028,000

(2021: EUR 440,000). The table below provides a summary of the cash flow (see also chapter 12

“Consolidated statement of cash flow”

Table 9

–

Consolidated cash flow statement

All in EUR 1,000

2022

2021

Cash flow from operating activities

-/- 99

-/- 575

Cash flow from investing activities

7,721

8,342

Cash flow from financing activities

-/- 4,594

-/- 7,327

Net increase / decrease (-/-) in cash and cash equivalents

3,028

440

The

cash flow from operating activities

, the cash generated from the Fund´s core business operations, was

EUR -/- 99,000, which was an improvement from the EUR -/- 575,000 in 2021. In both years it was affected

by the change in derivative financial instruments and trade and other receivables.

The

cash flow from investing activities,

the cash used or generated from the company's investments, such

as purchasing or selling assets

was EUR 7,721,000 (2021: EUR 8,342,000). The cash flows related to the

company's investments, such as the Romanian acquisitions, the Slovak and Czech asset sales and capital

expenditure on the properties.

The

cash flow from financing activities,

the cash generated or used from financing activities, including

issuing or repurchasing stocks, proceeds from loans, repayments of loans, and payments of lease liabilities,

was EUR -/- 4,594,000 (2021 EUR -/- 7,327,000).

5.3.4

BANK LOANS

Table 10

–

Overview of interest-bearing loans and borrowings

All in EUR 1,000

31-12-2022

31-12-2021

Non-current part of loans and borrowings

Secured bank loans

13,804

26,902

Other loans and borrowings

2,418

2,151

Subtotal

16,222

29,053

Lease liabilities

991

1,134

Total non-current part of loans and borrowings

17,213

30,187

Current part of loans and borrowings

Secured bank loans

16,371

3,993

Other loans and borrowings

2,370

2,453

Subtotal

18,741

6,446

Lease liabilities

171

163

Total current part of loans and borrowings

18,912

6,609

Grand total loans and borrowings

36,125

36,796

Table 11

–

Overview of secured bank loans

All in EUR 1,000

31-12-2022

31-12-2021

Slovenská Sporiteľňa

(Slovakia)

5,329

5,791

Sberbank CZ (Czech Republic)

5,644

8,089

Hypo NOE (Poland)

13,022

Patria Bank (Romania)

2,831

Total long-term interest-bearing loans and borrowings

26,310

26,902

Slovenská Sporiteľňa

462

794

Sberbank CZ

267

363

Hypo NOE

13,022

515

Alpha Bank (Bulgaria)

2,320

Patria Bank

300

Total short-term secured bank loans

3,865

3,992

Total secured bank loans

30,175

30,894

The total LTV of the portfolio as at 31 December 2022 is 43.6% (see also 15.16.4). The Managing Board

intends to maintain the total LTV-ratio of the portfolio in the range 40%

–

50%. At the end of the reporting

period the

weighted remaining maturity of “Loans and borrowings”

(see 15.40.14) was 3.21 years (2021:

3.38) and the loans had a weighted average interest rate of 5.49% (2021:4.15%).

As at 31-12-

2022 a covenant of the €13 million Hypo Noe loan was in breach.

The formal procedure to obtain a

waiver had not yet been completed at that time, hence the Hypo Noe loan is classified as current.

See section 15.16.4

“

Securities, bank covenants and ratios secured bank loans

”

for more information on

the secured bank loans as at the statement of financial position

’s date

5.3.5

CURRENCY EXCHANGE RATE

Exchange rates used for the Consolidated Statement of Financial Position (see also 13.7.4)

31-12-2022

31-12-2021

Bulgarian Lev (EUR/BGN)

1.9558

% change year-on-year

0.00%

0.0%

Czech Koruna (EUR/CZK)

24.116

24.858

% change year-on-year

3.0%

5.3%

Polish Zloty (EUR/PLN)

4.6808

4.5969

% change year-on-year

-/- 1.8%

-/-0.8%

Romanian Leu (EUR/RON)

4.9495

4.949

% change year-on-year

0.0%

-/- 1.7%

Ukrainian Hryvnia (EUR/UAH)

38.951

30.9226

% change year-on-year

-/- 26.0%

11.0%

US Dollar (EUR/USD)

1.0666

1.1326

% change year-on-year

5.80%

7.7%

Source: European Central Bank (ECB) if available. Exchange rates Ukrainian Hryvnia are based on National Bank of Ukraine.

5.4

DEVELOPMENTS IN THE MARKET AND PORTFOLIO

The following provides an analysis of economic and property market developments during 2022 in the

regions in which the Fund operates and an outlook for future trends.

5.4.1

ECONOMIC BACKGROUND AND OUTLOOK

The year 2022 proved challenging for economies around the world. Slowing GDP growth, high inflation and

rising interest rates all impacted on business conditions, consumer activity, financial markets and societies

as a whole. It is more clear than a year ago that the present episode of global inflation is the most profound

seen since the 1970s and requires due attention. Ru

ssia’s invasion of Ukraine on 24 February 2022 not

only brought substantial additional inflationary consequences, principally through rising energy and food

prices but also in Europe and particularly CEE significant disruptive economic,

social and demographic

effects. The war is ongoing and is likely to continue, extending these effects.

The onset of war in Ukraine brought an initial three-pronged shock to CEE. First, the CEE currencies and

asset markets sold off, reflecting proximity risk. Business and investment activity reduced in the region.

Secondly, inflation rates spiked and triggered faster interest rate rises in the succeeding months than were

projected beforehand. Thirdly, the influx of Ukrainian refugees, mainly comprising women, children and the

elderly had to be absorbed quickly. Out of the 8.1mn estimated (Statista, February 2023) refugees outside

of Ukraine, 2.6mn reside in the CEE countries outside of the CIS, including 1.56mn in Poland and 0.49mn

in the Czech Republic. The latter data amount to between 4%-5% of the pre-war populations of those two

countries. While time has allowed some of the effects to settle, including currencies regaining their losses

and some refugees returning home or moving elsewhere, those repercussions on inflation and interest

rates, in particular, linger into 2023.

CONSUMER PRICE INFLATION AND CENTRAL BANK POLICY INTEREST RATES, SELECTED CEE

COUNTRIES AND GERMANY, FEBRUARY 2023 (%, YOY)

Source: investing.com, TradingEconomics

*February 2023 data published in March 2023

Inflation rates have reached levels unseen in CEE economies since the early transition years of the 1990s

and unseen since the very early 1980s in the US and Europe. This inflation pulse remains likely to extend

in time through 2023 and into 2024 but at a diminished rate. Some of the supply side constrictions affecting

price hikes are improving, with supply chains recovering after being stretched or disrupted as a result of

COVID. European energy prices are lower after an unexpectedly mild 2022-23 winter, meaning that gas

supplies are more plentiful. But on the demand side, wage growth in some CEE countries remains

stubbornly elevated. Higher interest rates in CEE are starting to act as a brake on economic activity but are

not very likely to climb further in 2023, outside of a crisis situation. Policy interest rates sit well below the

latest consumer price inflation readings across the CEE region (excepting Ukraine) and in Germany and

thus in 2023 substantial disinflation is required to bring future price hikes under control. Higher inflation eats

away at real incomes of consumers and expenditure budgets of corporates alike and must be tackled.

Inflation itself thus acts as a drag on economies as do higher interest rates, which slow down consumer

activity, company borrowing, bank lending and for the real estate sector will feed through to pressure on

funding costs and real estate valuations. At the time of publication, the key Eurozone policy interest rate

stands at 3.0%, having risen steeply from -0.4% in July 2022.

18.4%

16.7%

15.4%

15.5%

14.1%

24.9%

8.7%

6.75%

7.0%

3.0%

7.0%

2.2%

25%

3.0%

10%

15%

20%

25%

30%

Poland

Czech Republic

Slovakia

Romania

Bulgaria

Ukraine

Germany

Consumer price inflation, (latest*, % year-on-year)

Central Bank interest rate (latest, %)

The CEE economies are proving relatively resilient to this difficult inflation and interest rate picture.

All of

the core economies registered GDP growth rates at or above Germany’s 1.8% in 2022. Poland (4.9% ye

ar-

on-year growth) and Romania (4.8% expansion) were positive outliers, both benefitting from stronger

momentum in domestic consumption. Ukraine’s

-30% contraction is an estimate, as that economy of course

faces significant disruption and destruction effects from the war.

GDP GROWTH, SELECTED CEE COUNTRIES AND GERMANY, 2019-23E (%)

Source: countryeconomy.com (historical data), 2022A for Ukraine from the IMF. Arcona Capital external consultancy

(2023 estimates), based

on EIU, European Commission, Ukrainian Ministry of Finance estimates.

Looking ahead, 2023’s economic growth rates are generally expected to be lower than those seen in 2022,

as those effects of higher inflation and interest rates bite. Some of the CEE economies may enter a GDP

growth contraction for a couple of quarters. For now, unemployment rates remain very low and therefore

offer some support to consumption. Wage growth needs to be reduced, though, if further interest rate rises

into 2024 are to be avoided.

CEE’s high export ratios, ability to attract “near

shoring” ca

pital, strong corporate investment, growing IT

specialism and still-cheap workforces are longer term positives in this environment.

REAL ESTATE MARKETPLACE

The onset of the war in Ukraine curtailed the recovery from the COVID-19 period in CEE-6 investment

volumes in 2022. Last year’s EUR 11.1bn of deals transacted ended flat versus 2021 and for the third year

running was more than -

20% below 2019’s record level, according to Colliers data. Overall volumes in the

broader European universe retreated -18%, according to CBRE, last year: CEE markets were relatively

more resilient.

CEE-6 FLOWS BY COUNTRY (2022, EUR bn)

CEE-6 FLOWS BY SECTOR (2022, %)

Source: Colliers

Polish transactions again made up the majority (54%) of deals in 2022. Volumes fell -4% there and -9% in

the Czech Republic, while Hungarian purchases fell a more significant -17%. The countries with higher

yields actually saw an expansion of deal activity with volumes rising 40% in Romania, 23% in Bulgaria and

30% in Slovakia last year.

4.9

2.4

1.7

4.8

3.9

1.8

0.8

0.0

1.5

2.8

1.5

1.0

-0.1

-8

-4

Poland

Czech Republic

Slovakia

Romania

Bulgaria

Ukraine

Germany

2019

2020

2021

2022

2023E

-30.0

6.0

1.6

0.9

1.1

1.3

0.3

Poland

Czech Republic

Hungary

Slovakia

Romania

Bulgaria

38%

27%

26%

Office

Retail

Industrial

Residential

Other

Domestic and CEE regional investors, as is common in more fragile market conditions, purchased a larger

proportion of the assets across the region last year. Their 38% share of the pie compares to 32% in 2021,

according to Colliers. Buyers from Europe/EMEA remained active, though their share halved to 21% in

2022. US and South African investors stepped in, snapping up 21% and 9% of the volume respectively: this

activity illustrates the ability of more remote investors into CEE to look through the geopolitical risks. Asian

investors were largely absent, though.

The office sector regained its premier sector position spot, with 38% of transactions by value according to

Colliers. Investment into retail real estate recovered in 2022, rising to 27% of the total, compared to just

15% in 2021. It was the proportion of industrial & logistics transactions that fell last year, to 26% from 38%

the year before. These shifts reflected more the composition of the 10 largest deals, which between them

amounted to 31% of the CEE volume in 2022. Buyer interest in industrial & logistics and residential remained

high for most of last year but both sectors in CEE lack available product compared to office and retail.

REAL ESTATE OUTLOOK

As we indicated in

our outlook last year, the economic difficulties caused by Russia’s invasion of Ukraine

and, partly as a consequence, inflation rising even higher and staying entrenched for longer has had

implications for the cost of capital and the valuation of assets in the region. This situation looks set to

continue in 2023.

Growth of rents at levels closer to the rate of change of consumer price inflation (“CPI”) helps real estate

assets hold their value in inflationary environments. Some tenant contracts will have automatic rent uplifts,

often linked to Eurozone CPI. The latter rose 8.5% year-on-year at the last reading in February 2023,

averaging 8.8% year-on-year over the prior 12 months. Higher service charges were very common across

all sectors in CEE as utility costs jumped through the year. Whether such rent hikes are affordable in an

environment where tenants are facing higher costs across their businesses remains key to the shorter term

outlook. This process is happening at the same time as CEE’s largest sect

or, offices, is facing other

challenges: weaker GDP growth, consideration of the space needed in the post-COVID environment, as

companies and employees assess their work location patterns, plus ESG enhancements and compliance

initiatives. The effect of both the COVID period and this present phase is increasing obsolescence risk as

assets age and technology advances. Conversely, construction activity was noticeably lower in 2022 across

CEE and is likely to be even weaker in 2023-24. Inflation-proofing has proved easier in the retail sector,

through turnover rents but also the tenants themselves are in a better position to keep their margins by

hiking prices, especially in the convenience retail sector. The mix in these centres of essential items such

as food,

beverages, pharmacy and pet goods, or “consumer staples” is an advantage in a slow

-growth

environment. Tenants in Logistics assets are also able to pass on increased costs and combined with low

supply of new developments in CEE have seen strong rent growth. This situation looks set to continue.

Supply chain industrial assets, very common in CEE, face less input cost challenges than 12 months ago

but investors have to be wary of recession risk if GDP growth is slowing. Across all sectors, construction

costs are showing signs of peaking but whether this can be taken advantage of is a judgment on that same

economic slowdown risk. It is not just the office sector that may see lower supply of new assets in 2023-24.

Higher central bank policy interest rates are acting to constrict that construction activity and real estate

investment activity more generally. As interest rates rise, so banks tighten their lending standards, choosing

to lend to what they perceive as safer clients and are also turning increased attention to ESG. A lending

“flight to quality” in turn raises real estate corporate bond yields for other players. As already observed at

the time of writing, the inability of some banks to weather the rapid rise in policy interest rates in key

economies is reducing the number of financial intermediaries and likely to further constrict lending activity

and increase the level of transaction debt funding costs. Hedging in or out of local currencies, if needed by

real estate players, is as expensive as observed a year ago and this cost is not likely to fall in the near term.

Interest rates in the US, the UK and Europe are likely to rise further, increasing the pressure on their local

real estate markets. The direction of real estate yields in CEE is likely to be up, as some transactions in the

UK arena are now being reported at higher yields than the market levels for prime CEE assets. A period of

low transaction volumes looks likely, due to the mismatched expectations of buyers and sellers and the

uncertainty over funding costs. Rent market outlooks look like staying in favour of tenants in the office and

retail sector especially with the opposite being the case for industrial & logistics.

The Polish office market

The 19% growth in 2022’s volume of lease transactions nationally in Poland reflects the country’s strong

GDP growth performance and a continued recovery from the COVID-19 period. Lease transaction

momentum was strongest in the capital Warsaw, jumping 34% year-on-year, according to Colliers data,

with the regional cities overall seeing only a 5% increase in demand overall. The share of

renegotiations/lease extensions in these gross national figures encouragingly dropped by some 8

percentage points to 36%. Space expansions made up 7% of the demand, another sign of health in business

investment volumes. The implied 950,000 sqm of combined new demand last year exceeded the national

supply of new space, 642,000 sqm according to Colliers data, by some margin. As in 2021, this excess

demand has helped the market move towards overall balance, in relatively turbulent times. That supply

increase added 5.1% to the national total stock of just over 12.7mn sqm in the calendar year. Developer

activity continued to decrease in 2022, with 772,000 sqm under construction across the country at the end

of the year. This level implies a fall of -36% in developer commitments compared to the end of 2021,

according to Colliers and would represent only a 6% expansion to national stock in the next 12-24 months.

Warsaw’s stronger leasing demand helped vacancy rates fall from 12.7% to 11.6% there. This helped prime

rents to grow 12.2% in the capital city to a level of EUR 27.5/sqm/month at the end of Q4 2022. In contrast,

vacancy rates rose in most regional cities, meaning that rent levels were more static compared to 2021. As

elsewhere, tenants are also facing rising operating costs.

In Szczecin, where our asset is located, the market is much healthier than in other regions. The city

’s

vacancy rate, flat versus a year before at 5.8% in Q4 2022, remains according to both CBRE and Colliers

the lowest amongst the office markets of the nine major cities in Poland. Very low supply again, at just 1,500

sqm in 2022, is in stark contrast to annual gross take-up of 18,500 sqm, according to Colliers data. Colliers

counts just 2,400sqm as under construction at year end; CBRE see no projects. The city’s proximity to

Germany and consideration of the marketplace by business service sector providers are likely to keep

demand robust in the near run, resulting in probable further downward pressure on that 5.8% office vacancy

rate. As a result of the excess demand in 2022, prime rents rose to EUR 14.50/sqm/month at the year end

versus EUR 13.50/sqm/month a year before, according to CBRE. Average rents also ticked up 9% to EUR

13.90/sqm/month.

Further appreciation in rent levels in this city cannot be ruled out.

The Polish retail market

New challenges appeared in the Polish retail arena in 2022, with the war in neighbouring Ukraine disrupting

demand as well as affecting the pricing of both goods supplied and construction costs.

Overall retail sales

grew 15.5% in nominal terms last year, containing of course a large inflation component. Real retail sales

or the growth in volume terms was a creditable 5% year-on-

year, matching the country’s GDP growth

performance. The influx of refugees from Ukraine, totalling 4%-5% of the population aided demand. High

inflation of course remains a challenge in the coming quarters but Oxford Economics expect real retail sales

growth of 3.6% for Poland in the 2023E-26E period.

As with both 2020 and 2021, it is e-commerce and

retail parks/convenience stores that are driving the momentum in overall retail sales. E-commerce

maintained a steady market share which varied between 8.4% to 11.9% during 2022, according to Statistics

Poland. Online sales are projected to grow 13% in 2023, according to JLL, suggesting that this market share

may again expand slightly. But the more bullish forecasts, such as that of Euromonitor International

foreseeing a jump to 22% of total retail sales by 2025, look too optimistic. It appears that the “bricks &

mortar” space is weathering the challenge, certainly with the help of omnichannel initiative

s from the retail

brands.

Within the investment arena, the vast majority of the 43 deals recorded in 2022 were in the retail

park and convenience centre formats, according to JLL. Prime yields for the best retail parks stayed firmly

at 6.75% at the end of 2022.

NEW COMPLETIONS BY RETAIL FORMATS IN POLAND (SQM GLA), 2015-2022

Source: JLL, as of H1 2022. 2022p = prognosis for full year

Illustrating the confidence in this segment new convenience store space in Poland was, very similarly to

2021, due

to grow by another 85,500 sqm in 2022 according to JLL’s estimates. The convenience centre

asset class as a result continues to build its overall share in the Polish retail universe. Convenience centres

made up 9% of total stock by gross leasable area (“GLA”) in H1 2022, up a full percentage point on H1

2021 and on the paltry 1% level in the year 2000. This growth has important implications for the onward

valuation of the asset class for landlords and offers an increasing choice of location for tenants. Rising

general construction costs as well as increases in minimum wages and electricity costs have pushed many

developers to search for cheaper construction options: the smaller retail formats, such as retail parks and

convenience centres, are a fitting solution to this dilemma. The expansion of these formats is probably not

finished, as the density of retail park and convenience centre space in Poland amounts to just 84 sqm per

1,000 inhabitants.

Total convenience centre stock monitored by JLL amounted to around 902,000 sqm at

the end of H1 2022, up from 804,000 sqm a year before.

Poland’s large number of moderately

-sized urban

centres is making it easier for developers to launch projects in new locations. Despite this opportunity most

of these appear to be retail park formats, as new construction activity of convenience centres comprised 12

projects in H2 2022 and amounted to 14,500 sqm, or only 1.6% of stock, according to JLL data.

In this period of high inflation and economic uncertainty, the composition of convenience centres by type of

retailer positions these assets well.

“Value” retailers occupied 37% of the GLA in traditional retail parks and

convenience centres in mid

—

2022, up from 33% a year earlier according to JLL. These key tenants meet

the day-to-day needs of the customers living in the immediate vicinity of the development. They are home

to retailers with basic offerings, very often from the off-price segment. The German DM Drogerie pharmacy

chain opened its first stores in Poland in and after April 2022, while Castorama continued expanding its

smaller-format offering last year. Other food retailers such as discounters Netto and Dino are increasing

their presence, as is Zabka, via new formats. Top local market player Biedronka is also looking at new small

convenience formats, which may spread from Warsaw. Ukrainian brands, such as the Lviv Croissants

bakery chain, are also expanding to service the new émigré populations. Rents in this environment are

broadly stable at EUR 8-12/sqm/month for a typical 2,000 sqm unit in a retail park. JLL noted in August

2022 some pressure for incentives from new tenants, including fit-out contributions. Service charges at a

low EUR 1.5-2.0/sqm/month, though the recent energy and general inflation cost pressures are building up.

JLL believe that smaller convenience-based retail assets have solid prospects, as leases are signed for

long periods.

The Czech office market

The Czech office market continued to slowly stabilise after the COVID-19 shocks of 2020-21. The trajectory

of Prague vacancy rates illustrates this steadying well, rising to a peak of 8.3% at the end of Q1 2022 but

falling again in H2 to end the year at 293,600 sqm or 7.7%, just -10bps lower than 2021. On top of that,

sub-leasing is still present, at up to 2% of the market according to Colliers, or 71,900 sqm, a number that

has not really changed in the last 2 years. What is helping this turnaround is the supply-demand balance.

Net take-up, the most reliable yardstick of demand, jumped 41% year-on-year in 2022, to 294,100 sqm. A

strong Q4 2022 especially helped 2022 breach 2019’s 260,000 sqm level. New supply last year was much

smaller, at just 75,400 sqm in Prague, amounting to just 2% of total stock. A relative lack of supply should

continue into 2023-24, with 129,000 sqm according to Colliers completing this year followed by just 55,000

sqm in 2024. As such, the market is probably insulated from everything but a significant demand reduction

over the next 24 months.

In this environment and driven by inflation indexing, prime headline rents in Prague rose 12.5% to the level

of EUR 26.50-

27.0 sqm/month by 2022’s year end, according to Colliers. Inner city cl

ass B rent levels shifted

up moderately to between EUR 17.5-18.0/sqm/month. For holders of these properties, these rental

increases were needed as prime office rental yields have backed up a full 100bps to a level of 5.0% by the

end of 2022. Higher financing costs are feeding into the Prague investment arena.

A flat-lining of gross take-up, amounting to 65,900 sqm in 2022 according to the Czech Regional Research

Forum, pushed up vacancy rates in the Brno office market to 13.4% by the year end. This level was 200bps

higher than 2021. New supply last year totalled 33,000 sqm, or 5% of total stock, which added to the vacant

floorspace on a net basis when take-

up renegotiations are taken into account. Brno’s prime rents

nevertheless firmed moderately, being 3%-6% higher than 2021 at EUR 16.0-

16.5/sqm/month by 2022’s

year end. Traditionally, Brno is home to technology and software development companies: JLL believes

that incremental interest from both larger international IT players and smaller companies could eat up the

vacant stock in coming quarters.

The Slovak office market

Slovakia’s office market absorbed the region

-wide challenges in 2022. Office vacancy rates in the

benchmark Bratislava arena ticked down 50bps to 11.2% at the end of last year, according to the Bratislava

Research Forum. The improvement was mostly due to a virtual drying up of new supply, with just 2 buildings

totalling 25,160 sqm coming to market in 2022. The addition to stock was thus just 2%. Net take-up was

much higher, amounting over the course of last year to 118,900 sqm, according to Cushman & Wakefield.

This supply-demand balance likely shifts a little to the unfavourable side in 2023 with Cushman & Wakefield

expecting 113,300 sqm of A+ office space due to be completed this year. Down-sizing and low levels of

pre-leasing by tenants could increase the pressure. Much will depend on the near-term overall performance

of the very export-oriented Slovak economy generating natural expansion demand from corporates.

Prime Bratislava Central Business District (CBD) rents firmed in 2022, rising to EUR 17.0/sqm/month. Rents

in the city’s peripheral locations, an approximation for B class offices and other cities such as Kosice, also

firmed in the course of 2022, rising from EUR 11.50/sqm/month towards EUR 12.50/sqm/month according

to Cushman & Wakefield. As elsewhere, higher funding costs for transactions brought a tick-up in prime

office rental yields, to 5.5% by the 2022 year end.

The Romanian office market

The Bucharest office market, like its regional peers, faced the twin challenges of relatively sluggish demand

and high inflation from the economy and the trend of “hybrid

working” in 2022. Overall vacancy rates

reflected this situation and again climbed last year, reaching the level of 14.1% according to CBRE. The

picture appears better when looking at the 12.3% vacancy rate for class A offices, which fell last year. The

high for net take-up in the last cycle was 269,000 sqm in 2019: 2022 saw demand rise 9% but to a level of

178,000 sqm. Thus, fresh excess demand remains elusive so far in this cycle. Renewal/renegotiation deals,

at 117,000 sqm, did not grow in 2022. But new supply, in contrast to 2021, was much less of a burden to

the market balance, falling to just 124,400 sqm. This was the lowest level of completions since 2015 and

meant that overall stock rose only 3.8% to 3.32mn sqm, according to CBRE. Colliers and CBRE see 100,000

sqm/113,000 sqm only of supply coming to the market in 2023, with the pipeline drying further into 2024.

Inflation-linking pushed CBD rents up some 4% in Bucharest up to EUR 19.50/sqm/month in 2022 according

to CBRE. Discount incentives are still present but the falling supply, rising inflation and increased

operational costs of managing buildings may limit tenant bargaining in the coming quarters.

A moderate

GDP growth outcome for Romania in 2023 could see office demand rise by as much as 2022’s 9% rate.

The IT sector made up 37% of demand in Bucharest last year, according to Colliers and has the potential

to continue growing. Bucharest’s prime office yields edged up 25bps last year, to 7.0%.

The Bulgarian residential market

The war in Ukraine, rising inflation, the onset of interest rate hikes and slowing GDP growth all combined

to s

low activity in Sofia’s high

-end residential sector in 2022. Colliers observed flat prices in the sales

market, concentrated in the districts of the city at the foot of the Vitosha mountain, last year. Activity was

nonetheless healthy with this unchanged pricing implying that the increase in total stock, some 1,560 units,

or 12% growth to 14,320 units, was completely absorbed. Discounts to asking prices disappeared. The

attention of buyers focused on larger units according to Colliers, with 71% of sales being of 3-bedroom

apartments. This shift reflects a desire for a better standard of living, reflected in that 85% of 2022’s demand

was intended for owner-occupation: this is the highest proportion seen in recent years by some margin.

Higher Bulgarian interest rates have meant a shift in funding: only 14% of transactions in H2 2022 were

financed partially with a mortgage, compared to 62% in H2 2021.

Rents ticked up but lagged double-digit general inflation: The average rent for a two

–

bedroom apartment

rose 5%-8% to EUR 1,000

–

1,300/month, including VAT, according to Colliers data. The first build-to-rent

projects are already under construction in Sofia, suggesting that the rental market may have a wider base

in the medium term. The volatility of construction material prices started to decrease in general in H2 2022,

though the pre-sales market for developers remains weak. The number of residential units under

construction is almost 4,000, back to 2020’s levels and higher than 2021’s 3,200. The implied period f

construction is presently 2 years.

Significantly slowing GDP growth in 2023 likely means that sales prices will likely remain around current

levels. Colliers sees underlying demand being able to absorb the supply, as the reliance on mortgage

financing appears low overall for this in-demand residential segment.

The Ukrainian land market

The Ukrainian economy is operating on a war footing and the land market thus has very limited activity. The

entire country remains under martial law and fully engaged in repelling the Russian invasion that began on

24 February 2022.

Damage to infrastructure and the occupation of territory, refugee emigration, disruption

to exports and fixed asset investment saw the economy contract -30% in 2022, according to World Bank

stimates. The pressures of the war and global factors sent consumer price inflation up to October’s peak

of 27% year-on-year, with the year-on-year change in the latest February 2023 reading sitting at 25%. The

National Bank of Ukraine hiked interest rates from 10% to 25% in June 2022, a level held since then to

discourage capital flight and to combat that inflation. In normal circumstances, such interest rates would act

to slow the economy and real estate development activity down. Real estate activity is likely to be focused

on re-building if and when the present war conditions end, probably with significant support from

government and multinational agencies.

Land price inflation in Ukraine, as elsewhere, is seen as a hedge on accelerating general inflation. Notional

land prices have thus appreciated in 2022 in US dollar terms according to the SV Development land price

source. For the record, Odessa oblast’s la

nd prices saw a 4.1% increase in USD terms at the beginning of

2023 compared to 2022. This matched the average land price rise in Kyiv Oblast’. In Dnepropretrovsk

oblast’, adjacent to Zaporizhzhe Oblast’, the same source saw a 2.7% increase in calendar 202

5.4.2

REAL ESTATE PORTFOLIO DEVELOPMENT

Table 12

–

Comparative statement of the real estate portfolio

31-12-2022

31-12-2021

change

Valuation (in EUR 1,000)

81,795

85,093

-/- 3,298

-/- 3.9%

Number of properties

-/- 1

-/- 4.5%

Rentable area (in sqm)

57,684

67,597

-/- 9,913

-/- 14.7%

The fair value as at end 2022 is EUR 3.3 million lower than the previous year, which is primarily due to the

sale of properties in Slovakia (two) and the Czech Republic (one), the acquisition of assets in Romania

(two) and valuation movements.

Table 13

–

Statement of changes in investment properties (see also 15.2.4)

All in EUR 1,000

2022

2021

Balance as of 1 January

75,877

75,674

Acquisitions

4,642

Purchases and additions

365

314

Exchange rate differences

458

1,069

Disposals

-/- 9

Fair value adjustments

-/- 3,737

3,508

Balance as of 31 December (including assets held for sale)

77,605

80,597

Reclassification

-/- 10,261

-/- 4,720

Balance as of 31 December

67,344

75,877

The

"Purchases and additions"

of EUR 365,000 corresponds to improvements of the investment properties.

The

"Exchange rate differences"

show that due to fluctuations in the currency exchange rates, the value of

investment properties changed by EUR 458,000. The

"Disposals"

of investment properties during the year

2022 are included in the assets-held-for-sale and are included in the

“Reclassification”

, reclassifies assets

from investment properties. The

"Fair value adjustments"

shows that the fair value of investment properties

was adjusted downwards by EUR 3,737,000 during the year.

Table 14

–

Comparative statement

of real estate income 2022

–

2021

2022

2021

Change

in EUR 1,000

In %

Gross rental income

5,464

5,743

-/- 279

-/- 4.9%

Service cost income

2,422

2,064

358

17.3%

Total income

7,886

7,807

1.0%

Service costs

-/- 2,363

-/- 2,278

-/- 85

3.7%

Operational costs

-/- 1,706

-/- 1,849

143

-/- 7.7%

Net rental income

3,817

3,680

137

3.7%

Table 14 displays the real estate income for the part of the real estate portfolio that is comparable between

the two years. Additionally, please note that two assets in Ukraine (land properties) and one asset in

Bulgaria (residential project) are not income-generating properties and, therefore, do not contribute to the

operational income.

“Total income” represents the sum of the gross rental income and service cost income. “Gross rental

income” represents the total rental income received by the property owner before any deductions are made.

“Service cost income” is the income received from tenants for serv

ices provided by the property owner,

such as maintenance, repairs, and cleaning.

Including assets held for sale

Assuming 24.35% of the 10.800 m

rentable area for the Delenco office in Romania

Solely based on property assets in possession during 2021 and 2022

“Service costs” represents the expenses incurred by the property owner in providing services to tenants.

“Operational costs” represents the expenses incurred by the property o

wner in maintaining and operating

the property, such as property taxes, insurance, and utilities.

“Net rental income” represents the income earned by the property owner after deducting the service costs

and operational costs from the gross rental income and service cost income. In 2022, the comparable net

rental income was EUR 3.817 million, which is EUR 137.000 or 3.7% higher than the income in 2021.

5.4.3

FUND PORTFOLIO OPERATIONS

The table below shows how the key ratios of the Fund´s operations changed over 2022:

Table 15

–

Comparative statement of the real estate portfolio based on indicators

31-12-2022

31-12-2021

Change

Change (%)

Fair value per asset (in EUR 1,000)

3,912

3,922

-/- 10.0

-/- 0.3%

Number of properties (annual average)

20.9

23.8

-/- 2.9

-/- 12.1%

NOI per asset

(in EUR 1,000)

244.1

211.1

33.0

15.6%

Occupancy

(in %)

88.6

90.3

-/- 1.7

-/- 1.9%

Total loan-to-value (in %)

43.6

42.2

1.4

3.3%

Discount Share price to NNNAV (in %)

50.0

41.2

8.8

21.4%

Ongoing Charges Figure

(in %)

8.0

9.5

-/- 1.5

-/- 15.6%

Fund expense ratio (in %)

3.71

4.07

-/- 0.4

-/- 8.8%

Solvability

(in %)

106.4

105.1

1.3

1.3%

5.5

FUND STRATEGY AND OBJECTIVE

The Fund's primary investment focus is income-generating real estate in Central and Eastern Europe. The

Fund's investment strategy aims to achieve a balanced portfolio of modern high-yielding, multi-tenanted

properties across the region with a loan to value between 40% to 50% (including convertible bonds).

Table 16

–

Distribution over the countries

OUNTRY

2022

2021

Poland

40.0%

39.8%

Czech Republic

19.4%

22.6%

Slovakia

20.3%

25.5%

Ukraine

1.2%

4.0%

Bulgaria

7.6%

8.1%

Romania

11.5%

0.0%

The Fund continually seeks to optimize its portfolio by balancing the allocation of assets across different

countries and improving its loan to value ratio.

Net Operating Income per income producing asset

Weighted based on fair value, excluding non-income generating properties Aisi Bela and Boyana Residence

Excluding one-off cost elements

Defined as equity / liabilities x 100%

5.6

DIVIDEND AND SHARE BUYBACK

The Fund's dividend policy is to distribute approximately 35% of the operational result to shareholders based

on the annual results. The Fund aims to pay an interim dividend with the half-year results, followed by a

final dividend after year-end, in cash. However, dividend proposals will take into account various factors,

such as expected future capital requirements, growth opportunities, net cash generation, and regulatory

developments.

In September 2022, the Fund started the share buyback programme, which was approved by the

shareholders in October 2021. The programme utilizes the net proceeds from asset sales after short-term

debt repayment obligations have been met. The share buyback programme was concluded on March 15,

2023. After this first six-month buyback period, the market will continue to be informed about the timing,

process and volumes.

5.7

OUTLOOK

Fund performance in 2023 will be strongly influenced by interest rate trajectories for its Euro- and Czech

Crown-denominated financing arrangements. Whilst the Fund has been able to absorb recent increases in

interest rates due to low overall loan to value ratios and continuing strong cash generation, there is a

perception that 2023 will see the peak of the current rate cycle and an easing of loan conditions, which will

enhance net financial returns at Fund level and improve market sentiment generally.

Developments in the conflict in Ukraine will continue to impact the Fund, but as the value of the Fund´s

holdings in the country have already been substantially written down the risk is potentially on the upside.

Two further small development site acquisitions from SPDI in the Kiev area, contracted in 2021, are now

expected to be completed by the Fund in 2023, at pricing levels which will fully reflect current local market

conditions.

The Fund will continue its disposal programme for non-core assets across the Central European region,

with the target to generate up to EUR 10 million in net proceeds from asset sales during 2023. Operational

performance, reflecting strong occupational levels and rising rents, is expected to remain robust over the

course of the year.

Sberbank CZ situation

The Fund's wholly-owned subsidiary in the Czech Republic, Arcona Capital RE Bohemia s.r.o. (ACREB),

has a loan with Sberbank CZ, a subsidiary of Sberbank Europa AG and Sberbank of Russia, both of which

are on international sanctions lists. However, as of yet, Sberbank CZ is not on a sanctions list, and ACREB

can continue to conduct business with them.

ACREB's bank accounts at Sberbank CZ have been blocked since February 28, 2022, with approximately

EUR 400,000 frozen. ACREB received compensation of EUR 100,000 in April 2022 from the Czech

Guarantee Fund. A sale of the Sberbank CZ loan portfolio to Ceska Sporitelna, a subsidiary of Erste Bank

of Austria, has been agreed and is expected to complete during 2023. The Management anticipates that

ACREB should receive back 100% of its outstanding deposit balance with Sberbank once this sale

completes. It is also anticipated that ACREB´s EUR 8.45 million mortgage loan from Sberbank will be

transferred to Ceska Sporitelna on completion of the sale on existing terms and conditions. However, it is

not at this stage clear whether the advantageous interest rate hedging arrangements on the mortgage loan

will also be transferred.

Boyana Residence E.O.O.D.

The Fund's Bulgarian subsidiary, Boyana Residence E.O.O.D., refinanced its matured loan from Alpha

Bank in January 2023 with a syndicated loan of EUR 3.6 million from private Dutch investors. At the end of

2022 the Boyana project was valued at EUR 6.25 million. The Management expects to repay EUR 2.4

million of the new syndicated loan from sales within the project by June 2023.

5.8

RISK MANAGEMENT

The management of risk is an essential responsibility of the Board. We can report that there have been no

significant changes to the risk management framework outlined in section 15.42 of this annual report.

Risk appetite and risk management

Our risk management policy is designed to identify, assess, and respond to the primary risks inherent in the

Fund's activities. We conduct an annual top-down review and risk inventory to manage our risk exposure

by taking mitigating measures while pursuing our business opportunities to achieve our strategic objectives.

We have identified the risks presented in section 15.40 "Risk management" as our primary risks. We have

not found any other risks that could materially impact our business, but we acknowledge that unidentified

or unforeseen risks could have such an impact.

We have established an Internal Control Framework to provide reasonable assurance that risks are

identified and mitigated to achieve our significant objectives. The framework comprises monthly KPI

reporting, a cloud-based work environment supported by a data recovery plan, and a planning and control

structure. We have also implemented administrative organization and internal controls based on a division

of functions. Both contracting and payments take place based on the "four-eyes" principle.

Internal control framework

Risk reports are a recurring topic at our supervisory and managing board meetings, and we continuously

monitor risks with mitigating measures in place. We stress test and discuss the results with both the

Managing and Supervisory Board to ensure effective risk management.

For further details on our main risks and uncertainties, please refer to section 15.40 "Risk management"

and the notes to the consolidated financial statements.

5.9

REMUNERATION POLICY

The Fund's Managing Board applies a remuneration policy that contributes to appropriate and effective risk

management while avoiding unnecessary risks within the framework of the Fund's prospectus and statutes.

This policy is in line with the Fund's strategy, the goals and values of the Managing Board, and the interests

of the Fund's investors. Additionally, the remuneration policy includes measures aimed at preventing

conflicts of interest.

The goal is to maintain a healthy balance between fixed and variable remuneration. Fixed remuneration is

sufficient for daily expenses and includes payments for education and pension contributions. Variable

remuneration should be viewed as an addition to the fixed remuneration and is based on evaluating

individual employees' achievements for the company as a whole.

The Managing Board does not provide a guaranteed variable bonus. Instead, any variable bonus is

determined based on measurable results or clear achievement goals. For further information, the full

remuneration policy of the Managing Board can be downloaded from http://www.arconacapital.com.

Remuneration for the Managing Board for the period 2022

–

2018

In 2022 the Fund paid a total fee of EUR 1,286,000 (2021: EUR 1,301,000) to the Managing Board, affiliated

companies and Secure Management. Of this total amount, the Managing Board received a fund

management fee of EUR 705,000 (2021: EUR 648,000) and affiliated companies received an asset

management fee of EUR 498,000 (2021: EUR 591,000).

Table 17

–

Comparative statement of total remuneration per year

All in EUR

2022

2021

2020

2019

2018

The Managing Board

705,000

648,000

665,000

680,000

684,000

Arcona Capital Czech Republic

295,000

406,000

473,000

474,000

466,000

Arcona Capital Poland

203,000

185,000

180,000

179,000

180,000

Secure Management

83,000

62,000

89,000

5,000

n.a

Total remuneration

1,286,000

1,301,000

1,407,000

1,338,000

1,330,000

The remuneration for the Managing Board is described in section 15.33.1

“

Specification of administrative

expenses

”.

The Managing Board employed on average 4 employees (2021: 3 employees). The managing

directors of the Managing Board are employed by Arcona Capital Nederland N.V. (3) and Arcona Capital

GmbH (1). The total number of employees involved in the activities of the Fund is 7 (2021: 7). The Managing

Board of the Fund receives a fixed management fee, described in the prospectus of the Fund. Part of the

fixed management fee is paid as asset management fee to Arcona Capital Czech Republic, since 2017 to

Arcona Capital Poland and since 2019, to Secure Management.

People in senior management functions with the Managing Board are seen as identified staff. Identified staff

are defined as follows:

•

Managing directors of the Managing Board; and

•

Employees fronting administration, portfolio management, marketing and human resources.

No employees received (according to article 1:120 Wft) a remuneration exceeding EUR 500,000. The

Managing Board comprises three men and one woman. During 2022 the Fund did not employ any staff

directly (2021: 0). As identified staff, a managing director of Arcona Capital Nederland N.V. and its mother

company Arcona Capital GmbH is shown. This director is not a policy maker of the Managing Board.

Remuneration for the Supervisory Board for the period 2022

–

2018

The Supervisory Board received a total remuneration of EUR 35,000 (2021: EUR 35,000) in 2022. The

remuneration for the Supervisory Board and the remuneration for the statutory directors are described in

section 15.34.3 Analysis of Supervisory Board fees and 15.34.4 Analysis of other operating expenses.

Table 18

–

Comparative statement of supervisory board remuneration per year

All in EUR

2022

2021

2020

2019

2018

Supervisory Board

35,000

28,000

The Managing Board´s management contract with the Fund is described in the prospectus of the Fund and

determines the annual level of management fee. The Supervisory Board is therefore not required to issue

a remuneration report under the remuneration policy. The Supervisory Board monitors that the fees paid

are in accordance with these contractual arrangements. An adjustment of the remuneration can only be

implemented if approved by the General Meeting of Shareholders.

5.10

CORPORATE GOVERNANCE

The Fund is a listed company, which as an investment institution is not required fully to apply the Corporate

Governance Code preserved in law. However, the Managing Board and Supervisory Board of the Fund

consider the principles of accountability and transparency, which underlie the Corporate Governance Code,

to be of direct relevance to the Fund. Accordingly, they will seek to apply the principles and best practice

provisions set out in the Corporate Governance Code as fully as possible to the operation of the Fund.

5.11

STATEMENT REGARDING ADMINISTRATIVE ORGANISATION AND INTERNAL CONTROL

The Managing Board has reviewed all elements of the administrative organization during the reporting

period. We consider that the administrative organization and internal control as prescribed by Article 121 of

the

Bgfo

(Besluit gedragstoezicht financiële ondernemingen), meet the requirements prescribed by the Wft

and related regulations. Pursuant to this, we declare as the Managing Board of the Fund that the Company

possesses a description as prescribed by Article 121 of the Bgfo, which meets the requirements as

prescribed by the Bgfo. In addition, the Managing Board declares with a reasonable degree of certainty that

the administrative organization and internal control function effectively and in accordance with this

description.

Amsterdam, 28 April 2023

The Managing Board, Arcona Capital Fund Management B.V.

G.St.J. Barker LLB, Managing director

P.H.J. Mars, M.Sc., Managing director

M. Blokland, Managing Director

M. van der Laan, Managing Director

THE

REAL

ESTATE

PORTFOLIO

As of 31 December 2022,

the Fund’s portfolio comprised

twenty-one properties. The following section gives

an overview of each property in the portfolio during 2022. The properties are located in five Central

European countries: three in the Czech Republic,two in Slovakia, two in Romania, eleven in Poland, one in

Bulgaria and two in Ukraine.

6.1

THE REAL ESTATE PORTFOLIO IN POLAND

The Fund portfolio as at 31 December 2022 comprises ten modern retail centres in regional cities across

Poland and one modern office building, in Szczecin. The properties are all multi tenanted. The main

characteristics of each property are briefly summarised below:

8 Laubitza, Inowroclaw

(Laubitza)

Type

Retail

Rentable Surface

(in sqm)

1,749

Occupation Rate

(in %)

67.3

Fair value

(in EUR)

1,670,000

The property is located in Inowroclaw, within Stare Miasto district, at 8 Laubitza Street, close to Dworcowa Street. The

area is mostly commercial in nature. The retail building, completed in 2001, comprises one floor above ground of

1,749 sqm of total lettable area and 41 parking spaces situated at the east, south and west sides of the property. In

June 2022, Carrefour signed a seven-year lease for 1,430 square meters, under enhanced rental terms. The new

supermarket opened its doors in early August 2022.

800-lecia Inowroclawia 27, Inowroclaw

(Lecia)

Type

Retail

Rentable Surface

(in sqm)

2,548

Occupation Rate

(in %)

96.9

Fair value

(in EUR)

2,670,000

Inowrocław Lecia is located in the central part of Poland near to Bydgoszcz and Toruń

. The city has approximately

75,000 inhabitants. The site is located on the south-eastern edge of the city, in a residential area comprising apartment

blocks and single-family houses. The immediate area is served by seven bus lines providing convenient access to the

property for customers using public transport. The centre provides 2,548 sqm lettable area and 100 parking places.

1 Krzemowa, Gdansk

(Krzemowa)

Type

Retail

Rentable Surface

(in sqm)

1,622

Occupation Rate

(in %)

98.6

Fair value

(in EUR)

3,180,000

The Gdańsk–

Sopot-Gdynia (750,000 inhabitants) conurbation (TriCity) is located in the northern part of Poland, on

the Baltic coast. The property is situated in the southern part of Gdańsk, within the city’s most densely populated

district, Chelm (50,000 inhabitants). To the north-east it borders the Srodmiescie district, home of the medieval old

town. Surrounded by multifamily residential buildings, the property benefits from high volumes of passing traffic, with

Gdansk’s city centre reachable by car within less than

10 minutes. The site has two entry points, provides 46 parking

spaces and extends to 5,122 sqm. The main tenant is Biedronka, on a lease expiring in 2027.

1 Plutona, Glogow

(Plutona)

Type

Retail

Rentable Surface

(in sqm)

1,669

Occupation Rate

(in %)

77.6

Fair value

(in EUR)

1,900,000

Glogow is a developing medium-sized town in the south-east part of Poland, with a current population of nearly 70,000.

The property is located in the city’s largest housing estate, Kopernik, with a population of 22,500. High

-rise residential

buildings dominate t

he property’s direct surroundings. The lettable area is 1,

669 sqm and there are 62 parking places.

82 Kalinkowa, Grudziadz (Kalinkowa)

Type

Retail

Rentable Surface

(in sqm)

2,556

Occupation Rate

(in %)

98.2

Fair value

(in EUR)

2,670,000

Grudziadz is a city with nearly 100,000 inhabitants, located in the north of Poland. The property is located in the south-

western part of Grudziadz in a densely populated residential area. It is bordered by the Strzemiecin housing estate

with its 12-storey blocks of flats to the north and the Kopernika housing estate with its medium-density dwellings to

the north-east. The site size is 8,932 sqm and is predominantly held freehold. The parking area overall has 126 parking

places.

137 Wojska Polskiego, Piotrkow Trybunalski

(Wajska)

Type

Retail

Rentable Surface

(in sqm)

2,603

Occupation Rate

(in %)

96.3

Fair value

(in EUR)

3,310,000

Piotrków

Trybunalski is located in the central part of Poland near to Łódź. The city has approximately 75,000

inhabitants. The city’s main competitive advantage is its location in central Poland on the main transport artery

providing fast connections to the countr

y’s major towns and cities. With recent improvements in the national road and

transport infrastructure the city has become one of the most important distribution locations in Poland. The property is

located on Wojska Polskiego Street, the main road connecting Piotrkow city centre with the north-western peripheries.

Its neighbourhood comprises residential areas to the north and business facilities to the south. Because of its

prominent location on the main road and its distinctive signage, the retail centre is highly visible. Extensive new

residential developments are under way adjoining the site to north-

west which will add to the centre’s catchment area.

The property has 95 parking places. The main tenant is Biedronka, expiring in 2028.

6 Wolnosci, Slupsk

(Wolnosci)

Type

Retail

Rentable Surface

(in sqm)

1,859

Occupation Rate

(in %)

100.0

Fair value

(in EUR)

1,640,000

Slupsk is an historic town in north-western Poland, located just 18 km away from Ustka, a popular seaside resort on

the Baltic coast. The current population is 95,000 inhabitants. The property is located in the northern part of the city

and its immediate surroundings comprise high density mid-rise residential developments. The Old Town is within 10-

minutes’ walk. Two bus stops are located directly in front of the property with several others within walking distance.

The property has 48 parking places.

216 Legionow St., Torun

(Torun)

Type

Retail

Rentable Surface

(in sqm)

2,229

Occupation Rate

(in %)

100.0

Fair value

(in EUR)

3,080,000

This single-storey retail building, completed in 2001, comprises 2,229 sqm of total lettable area and 64 parking

spaces. The property is located in Torun, Chelminskie Przedmiescie district, at 216 Legionow St., close to Wielki Row

St. The area is predominantly residential in nature. There is direct access to the building from Legionow and Kozacka

Sts. Car parking is located from the north (Wielki Row St.), west (Legionow St.) and south sides of the property and

consists of 64 over ground car spaces. Public transport is secured with 2 bus lines that have stops at Wielki Row St.

and 4 bus lines that have stops at Legionow St. The site of the property is held leasehold.

20 Grzymaly Siedleckiego St., Bydgoszcz

(Bydgoszcz)

Type

Retail

Rentable Surface

(in sqm)

1,793

Occupation Rate

(in %)

100.0

Fair value

(in EUR)

1,370,000

This single-storey retail building, completed in 2001, comprises 1,793 sqm of total lettable area and 64 parking

spaces. The subject property is located in the capital of kujawsko-pomorskie voivodeship and ca. 3 km away from the

Old Town, on the same side of the Brda River crossing Bydgoszcz. The surroundings of the property are dominated

by multifamily residential development and services. The nearest bus and tram stops are located at Wojska Polskiego

Street at a distance of approx. 300 m and are serviced by 4 bus lines (including a night one) and 3 tram lines. The

site of the property is held leasehold.

107 Kardynala Wyszynskiego St., Lodz

(Lodz)

Type

Retail

Rentable Surface

(in sqm)

1,609

Occupation Rate

(in %)

85.9

Fair value

(in EUR)

2,160,000

This single-storey retail building, completed in 2001, provides 1,609 sqm of total lettable area and 60 parking spaces

situated in the north and east sides of the property. The property is located in Lodz, Polesie District, at 107 Kardynala

Wyszynskiego St., close to Popieluszki St. The area is predominantly residential in nature. Public transport is secured

with 7 bus lines that have stops to the west of the property. The main tenant is Netto, on a lease expiring in 2033.

The site of the property is held leasehold.

9 Holdu Pruskiego Square, Szczecin

(Maris)

Type

Office

Rentable Surface

(in sqm)

5,945

Occupation Rate

(in %)

92.8

Fair value

(in EUR)

9,040,000

This office building, completed in 2005, comprises six floors above ground and three underground levels (with 119

parking spaces) and is located in the city centre opposite Szczecin´s iconic new concert hall. The total rentable area

is 5,945 sqm. The property is currently multi-leased, with 11 tenants. The main tenant is Intive.

6.2

THE REAL ESTATE PORTFOLIO IN THE CZECH REPUBLIC

The portfolio comprises three commercial properties located in Prague, the capital city.. The properties vary

in construction, specification and tenant mix however all are multi tenanted and are primarily used as office

accommodation with some providing ground floor retail units. The main characteristics of each property are

summarised below.

Na Zertvach 34, Prague 8

(Palmovka)

Type

Office

Rentable Surface

(in sqm)

2,263

Occupation Rate

(in %)

100

Fair value

(in EUR)

3,596,000

The modern office building is located in Prague near the Palmovka metro station in a fast-developing area on the

border of the Prague districts of Karlin, Libeň and Vysočany. The total rentable area is 2,

263 sqm. The accessibility

by road is good and by public transport excellent. The building dates from 1998-1999 and has 28 underground

parking spaces.

Prvniho pluku 621, Prague 8

(Karlin)

Type

Office

Rentable Surface

(in sqm)

4,245

Occupation Rate

(in %)

83.2

Fair value

(in EUR)

6,221,000

This office complex comprises two adjoining 4- storey buildings. It is located in Karlin, Prague 8, close to the city

centre. One of the buildings was recently refurbished to modern standards and the other building was constructed

in 2002. The total rentable space (predominantly office space) is 4,245 sqm. There is sufficient parking capacity,

with 35 parking spaces in the courtyard.

Politických

vězňů

10, Prague 1

Type

Office

Rentable Surface

(in sqm)

2,286

Occupation Rate

(in %)

78.9

Fair value

(in EUR)

6,651,000

This representative office building is located in Prague’s city centre, near Wenceslas Square. The main building has

eight floors and the total rentable space is 2,286 sqm. The whole complex has partly been reconstructed with

additional parking spaces. The property is close to the Wilsonova arterial road through Prague city centre and within

5 minutes’ walk of the central railway station.

6.3

THE REAL ESTATE PORTFOLIO IN SLOVAKIA

The Fund portfolio as at end 2022 has two commercial properties in Slovakia. These comprise multi storey

B-/C class office blocks of concrete frame structure and flat roof construction, situated in urban locations.

The properties are all multi tenanted and are primarily used as office accommodation. Some properties

provide retail or storage space. The main characteristics of each property are briefly summarised below:

Záhradnicka 46, Bratislava

(Záhradnicka)

Type

Office

Rentable Surface

(in sqm)

3,755

Occupation Rate

(in %)

59.6

Fair value

(in EUR)

3,786,000

The underground floors and first four upper storeys of this modernised property are used for office or retail purposes.

The building is located on a side road close to the business centre of Bratislava. It has six stories and two

underground floors in total, providing 3,755 sqm of rentable area. The building has 28 parking spaces.

Letná 45,

Kosiče

(Letná)

Type

Office

Rentable Surface (in sqm)

11,169

Occupation Rate

(in %)

76.0

Fair value

(in EUR)

12,810,000

This office building (the biggest in the portfolio) is prominently situated on Festival Square, approx. 1 km northwest

from the historical centre of Košice. There is an ongoing refurbishment programme to increase accessibility,

aesthetics and tenant facilities. The building is easily accessible by car or public transport as it is near the outer city

ring road. There are 70 parking places and 14 garages available. The main tenant is AT&T.

6.4

THE REAL ESTATE PORTFOLIO IN BULGARIA

The Fund´s portfolio includes a residential project located in Sofia, Bulgaria. The project comprises five

apartment blocks and adjoining development land. The main characteristics of the property are summarised

below:

Boyana Residences, Sofia (Boyana)

Type

Apartments and land plot

Surface area

(in sqm)

22,440

Occupation Rate

(in %)

n/a

Fair value

(in EUR)

6,247,000

The project is located in the low-density Boyana residential district 9 km south-west of Sofia city centre.

Phase I of the project has been completed and obtained an occupancy permit in 2016. This phase delivered 67

apartment units, during 2020 apartment block 2A with 28 apartments has been sold. Phases II and III are not yet

under construction. They will add another 18,790 sqm of residential space (174 apartment units and 211 parking

places). The development plans include a variety of units, ranging from 60 to 150 sqm, with the ground floor units

also offering gardens.

The Fund´s business plan for the project is to refurbish and sell the remaining completed apartments, to update and

re-permit the development segments and ultimately to sell these on to local developers.

6.5

THE REAL ESTATE PORTFOLIO IN ROMANIA

The Fund´s portfolio includes two office properties in Bucharest, Romania. The main characteristics of the

properties are summarised below:

EOS office, Bucharest

Type

Office

Rentable Surface (in sqm)

3,386

Occupation Rate

(in %)

100%

Fair value

(in EUR)

5,346,000

The office building completed in June 2008 has Total Gross Lettable Area of 3,386 sq m and 90 exterior parking

places. The Property is 100% let to DANONE. The world leading food company occupies the building since 2008.

EOS Office Building is located in the North-Eastern part of Bucharest at 900 meters North of Fundeni Rd a major

artery within that particular area of the city. The neighbouring area comprises a mix between light industrial (food

processing and logistics) and residential use.

Delenco office, Bucharest (Fund has 24.35% ownership)

Type

Office

Rentable Surface (in sqm)

10,384

Occupation Rate

(in %)

86%

Fair value

(in EUR)

a 24.35% stake is :

16,750,000

4,078,000

The property is a multi-storey office building in central Bucharest, completed in June 2008.The DELENCO Building

has a Gross Lettable Area (GLA) of 10,384 sq m with 2 UG levels, lobby and retail space on the ground floor and

offices on upper floors. The property has different height levels, from 7 upper floors in the north wing facing Calea

Calarasilor to 9 partial floors in the main wing, facing Delea Noua, and 10 floors in the wing facing Matei Basarab St.

The main tenant is ANCOM, the national telecom regulator.

6.6

THE REAL ESTATE PORTFOLIO IN UKRAINE

The Fund´s portfolio includes two land plots located in Ukraine, in the cities of Odessa and Zaporizhzhia.

The main characteristics of the properties are briefly summarised below:

Nerubaiske Village, Odessa

(Biliayivskyi District)

Type

Land plot

Surface area

(in sqm)

223,934

Occupation Rate

(in %)

n/a

Fair value

(in EUR)

956,000

The land plot fronts the Odessa-Kiev M-05 Highway, a six-lane strategic road with high levels of freight traffic

connecting Ukraine´s capital city with its largest seaport. The land plot is approximately 7.5 km from the Odessa

Ring Road and 1.8 km from the nearest motorway exit. The immediate neighbourhood is developing as a logistics

and industrial hub for Odessa, with two major schemes, the established temperature-controlled

complex ‘Inrise

Logistics Park’ and

the

newly built ‘Ode

sa Logistics Park’

already in operation. The plot has been prepared for

warehouse construction with extensive foundation works already completed. The Fund´s business plan for the

project is to update the development documentation and planning and then to sell to a local or international

warehouse developer.

Balabynska Village, Zaporizhzhia

(Zaporizkyi District)

Type

Land plot

Surface area

(in sqm)

263,834

Occupation Rate

(in %)

n/a

Fair value

(in EUR)

This very large land plot is located about 2 km to the south of the city of Zaporizhzhia and borders the M105 highway

from Kharkov to Mariupol. The site is zoned for commercial use and offers potential for retail park or shopping centre

development.

CONSOLIDATED FINANCIAL STATEMENTS 2022

CONTENTS

PERFORMANCE INDICATORS

..............................................................................................................................

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

.................................................................................

CONSOLIDATED INCOME STATEMENT

..............................................................................................................

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

........................................................................

CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY

....................................................................

CONSOLIDATED STATEMENT OF CASH FLOWS

...............................................................................................

ACCOUNTING PRINCIPLES CONSOLIDATED FINANCIAL STATEMENTS

.......................................................

13.1

REPORTING ENTITY

...................................................................................................................................

13.2

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

.........................................................................

13.3

STATEMENT OF COMPLIANCE AND FUTURE RELATED ASSUMPTIONS

.................................................

13.4

COMPARISON ACCOUNTING PRINCIPLES WITH PREVIOUS YEAR

.........................................................

13.5

BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

.......................................

13.6

BASIS OF CONSOLIDATION

.......................................................................................................................

13.7

BASIS OF PREPARATION OF CONSOLIDATED STATEMENT OF CASH FLOWS

.......................................

13.8

CURRENCY

.................................................................................................................................................

13.9

FINANCIAL INSTRUMENTS

.........................................................................................................................

13.10

INVESTMENT PROPERTY

..........................................................................................................................

13.11

INVESTMENT PROPERTY UNDER DEVELOPMENT

...................................................................................

13.12

INVESTMENTS IN ASSOCIATES

.................................................................................................................

13.13

INVENTORIES

.............................................................................................................................................

13.14

DERIVATIVE FINANCIAL INSTRUMENTS

...................................................................................................

13.15

DEFERRED TAX ASSETS

...........................................................................................................................

13.16

TAX ASSETS

...............................................................................................................................................

13.17

TRADE AND OTHER RECEIVABLES

...........................................................................................................

13.18

PREPAYMENTS AND DEFERRED EXPENSES

...........................................................................................

13.19

CASH AND CASH EQUIVALENTS

...............................................................................................................

13.20

ASSETS HELD FOR SALE

...........................................................................................................................

13.21

GROUP EQUITY

..........................................................................................................................................

13.22

TAX LIABILITIES

..........................................................................................................................................

13.23

LOANS AND BORROWINGS

.......................................................................................................................

13.24

TRADE AND OTHER PAYABLES

.................................................................................................................

13.25

DEFERRED INCOME AND TENANT DEPOSITS

..........................................................................................

13.26

DEFERRED TAX LIABILITIES

......................................................................................................................

13.27

GROSS RENTAL INCOME

...........................................................................................................................

13.28

SERVICE CHARGE INCOME AND SERVICE CHARGE EXPENSES

............................................................

13.29

PROPERTY OPERATING EXPENSES

.........................................................................................................

13.30

VALUATION RESULTS OF PROPERTIES

...................................................................................................

13.31

RESULTS ON DISPOSALS OF PROPERTIES

.............................................................................................

13.32

(REVERSAL OF) IMPAIRMENT ALLOWANCE OF INVENTORIES

...............................................................

13.33

RESULTS OF DISPOSALS OF INVENTORIES

.............................................................................................

13.34

VALUATION RESULTS OF INVESTMENTS IN ASSOCIATES

......................................................................

13.35

RESULTS OF DISPOSALS OF INVESTMENTS IN ASSOCIATES

................................................................

13.36

FINANCIAL INCOME

....................................................................................................................................

13.37

OTHER OPERATING INCOME

....................................................................................................................

13.38

LEASES

.......................................................................................................................................................

13.39

ADMINISTRATIVE EXPENSES AND OTHER OPERATING EXPENSES

.......................................................

13.40

FINANCIAL EXPENSES

...............................................................................................................................

13.41

INCOME TAX EXPENSE

..............................................................................................................................

SEGMENT INFORMATION

.....................................................................................................................................

14.1

GENERAL

....................................................................................................................................................

14.2

GEOGRAPHIC CATEGORIES

......................................................................................................................

14.3

BUSINESS CATEGORIES

...........................................................................................................................

14.4

SEGMENTATION CRITERIA

........................................................................................................................

14.5

SEGMENT RESULTS

..................................................................................................................................

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

.........................................................................

100

15.1

SUBSIDIARIES

..........................................................................................................................................

100

15.2

INVESTMENT PROPERTY

........................................................................................................................

102

15.3

INVESTMENT PROPERTY UNDER DEVELOPMENT

.................................................................................

106

15.4

INVESTMENTS IN ASSOCIATES

...............................................................................................................

107

15.5

DERIVATIVE FINANCIAL INSTRUMENTS

.................................................................................................

107

15.6

RECOGNISED DEFERRED TAXES

...........................................................................................................

109

15.7

UNRECOGNISED DEFERRED TAXES

......................................................................................................

111

15.8

TAX ASSETS

.............................................................................................................................................

112

15.9

TRADE AND OTHER RECEIVABLES

.........................................................................................................

113

15.10

PREPAYMENTS AND DEFERRED EXPENSES

.........................................................................................

115

15.11

CASH AND CASH EQUIVALENTS

.............................................................................................................

116

15.12

INVENTORIES

...........................................................................................................................................

116

15.13

ASSETS HELD FOR SALE

.........................................................................................................................

117

15.14

GROUP EQUITY

........................................................................................................................................

118

15.15

TAX LIABILITIES

........................................................................................................................................

119

15.16

LOANS AND BORROWINGS

.....................................................................................................................

119

15.17

TRADE AND OTHER PAYABLES

...............................................................................................................

125

15.18

DEFERRED INCOME AND TENANT DEPOSITS

........................................................................................

126

15.19

DEFERRED TAX LIABILITIES

....................................................................................................................

126

15.20

CONTINGENT ASSETS

.............................................................................................................................

126

15.21

NON-CONTINGENT ASSETS

....................................................................................................................

126

15.22

NON-CONTINGENT LIABILITIES

...............................................................................................................

127

15.23

CONTINGENT LIABILITIES

........................................................................................................................

127

15.24

GROSS RENTAL INCOME

.........................................................................................................................

129

15.25

REBILLED AND NON-REBILLED SERVICE CHARGES AND PROPERTY OPERATING EXPENSES

.........

130

15.26

VALUATION RESULTS OF PROPERTIES

.................................................................................................

132

15.27

RESULTS ON DISPOSALS OF PROPERTIES

...........................................................................................

132

15.28

RESULTS ON DISPOSALS OF INVENTORIES

..........................................................................................

133

15.29

NET RESULTS ON PROPERTIES

..............................................................................................................

133

15.30

VALUATION RESULTS OF INVESTMENTS IN ASSOCIATES

....................................................................

134

15.31

FINANCIAL INCOME

..................................................................................................................................

134

15.32

OTHER OPERATING INCOME

..................................................................................................................

134

15.33

ADMINISTRATIVE EXPENSES

..................................................................................................................

134

15.34

OTHER OPERATING EXPENSES

..............................................................................................................

136

15.35

PERSONNEL COSTS

................................................................................................................................

138

15.36

FINANCIAL EXPENSES

.............................................................................................................................

139

15.37

ONGOING CHARGES FIGURE

..................................................................................................................

139

15.38

INCOME TAX EXPENSE

............................................................................................................................

140

15.39

EARNINGS PER SHARE

............................................................................................................................

142

15.40

RISK MANAGEMENT

.................................................................................................................................

143

15.41

DISCLOSURES LEASES

...........................................................................................................................

156

15.42

DISCLOSURES CONSOLIDATED STATEMENT OF CASH FLOWS

...........................................................

157

15.43

RELATED PARTIES

...................................................................................................................................

159

15.44

EVENTS AFTER STATEMENT OF FINANCIAL POSITION’S DATE

............................................................

161

PARENT COMPANY BALANCE SHEET

..............................................................................................................

163

PARENT COMPANY PROFIT AND LOSS ACCOUNT

.........................................................................................

164

ACCOUNTING PRINCIPLES PARENT COMPANY FINANCIAL STATEMENTS

................................................

165

18.1

GENERAL

..................................................................................................................................................

165

18.2

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

.......................................................................

165

18.3

BASIS OF PREPARATION OF THE PARENT COMPANY FINANCIAL STATEMENTS

................................

165

18.4

SIZE AND COMPOSITION OF THE EQUITY AND RESULTS IN THE CONSOLIDATED AND PARENT

COMPANY FINANCIAL STATEMENTS

....................................................................................................................

167

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

....................................................................

168

19.1

INVESTMENTS IN GROUP COMPANIES

...................................................................................................

168

19.2

RECEIVABLES FROM GROUP COMPANIES

............................................................................................

169

19.3

OTHER RECEIVABLES

.............................................................................................................................

170

19.4

DEFERRED EXPENSES

............................................................................................................................

170

19.5

RECOGNISED DEFERRED TAXES

...........................................................................................................

171

19.6

UNRECOGNISED DEFERRED TAXES

......................................................................................................

172

19.7

CASH AT BANK

.........................................................................................................................................

172

19.8

SHAREHOLDERS’ EQUITY

.......................................................................................................................

173

19.9

ISSUED CAPITAL

......................................................................................................................................

173

19.10

SHARE PREMIUM

.....................................................................................................................................

175

19.11

PROVISIONS

.............................................................................................................................................

175

19.12

DEFERRED TAX LIABILITIES

....................................................................................................................

176

19.13

PRIVATE LOANS

.......................................................................................................................................

176

19.14

DEBTS TO GROUP COMPANIES

..............................................................................................................

177

19.15

TAX LIABILITIES

........................................................................................................................................

178

19.16

OTHER LIABILITIES

..................................................................................................................................

178

19.17

ACCRUALS

...............................................................................................................................................

178

19.18

NON-CONTINGENT LIABILITIES

...............................................................................................................

178

19.19

CONTINGENT LIABILITIES

........................................................................................................................

179

19.20

INCOME FROM INVESTMENTS

................................................................................................................

179

19.21

REALISED VALUATION RESULTS OF INVESTMENTS IN GROUP COMPANIES

......................................

180

19.22

REALISED VALUATION RESULTS OF RECEIVABLES FROM GROUP COMPANIES

................................

180

19.23

UNREALISED VALUATION RESULTS OF INVESTMENTS IN GROUP COMPANIES

.................................

180

19.24

UNREALISED VALUATION RESULTS OF RECEIVABLES FROM GROUP COMPANIES

...........................

180

19.25

ADMINISTRATIVE EXPENSES

..................................................................................................................

181

19.26

OTHER OPERATING EXPENSES

..............................................................................................................

181

19.27

PERSONNEL COSTS

................................................................................................................................

182

19.28

INTEREST EXPENSES

..............................................................................................................................

182

19.29

INCOME TAX EXPENSE

............................................................................................................................

182

19.30

RELATED PARTIES

...................................................................................................................................

183

19.31

PROPOSAL FOR THE PARENT COMPANY RESULT APPROPRIATION

...................................................

183

19.32

DETERMINING OF PARENT COMPANY RESULT FOR THE PREVIOUS FINANCIAL PERIOD

..................

183

19.33

EVENTS AFTER BALANCE SHEET DATE

.................................................................................................

183

OTHER INFORMATION

........................................................................................................................................

185

20.1

GENERAL PROVISIONS OF ARTICLES OF ASSOCIATION CONCERNING RESULT APPROPRIATION

... 185

20.2

DECREE ON THE DUTCH ACT ON FINANCIAL SUPERVISION

................................................................

185

20.3

PERSONAL INTERESTS

...........................................................................................................................

185

20.4

SPECIAL CONTROLLING RIGHTS

............................................................................................................

186

20.5

INDEPENDENT AUDITOR’S REPORT

.......................................................................................................

187

PERFORMANCE

INDICATORS

The following performance indicators have been prepared in accordance with specific standards.

7.1.1

Earnings

Earnings reported in the Consolidated Income Statement as required under IFRS do not provide shareholders

with the most relevant information on the operating performance of real estate investment funds.

Earnings measures

the Fund’s operational performance

and the extent to which its dividend payments to

shareholders are underpinned by earnings is the level of income arising from operational activities.

The Fund’s

operational performance represents the net income generated from the operational activities. Unrealised

changes in valuation of properties, gains or losses on disposals of properties and certain other items do not

necessarily provide an accur

ate picture of the Fund’s underlying operational performance.

As earnings is used to measure the operational performance, it excludes all components not relevant to the

underlying net income performance of the portfolio, such as valuation results of owned investment properties,

valuation results of investment property under development, results on disposals of owned investment

properties and results on disposals of investment property under development. In effect, what is left as

earnings is the income return generated by the investment, rather than the change in value or capital return

on investments.

Adjusted earnings per share according to APM

should be calculated on the basis of the basic number of

shares. The main reason for this is that earnings and the dividends to which they give rise accrue to current

shareholders and therefore it is more appropriate to use the basic number of shares.

The diluted customized earnings per share according to APM should be calculated on a diluted basis taking

into account the impact of any options, convertibles, etcetera that are dilutive. For the explanation of the effect

of exercise of options, convertibles, and other equity interests (fully diluted basis) reference is made to the

explanation in (3), mentioned in section 7.1.8

“Explanation of adjustments calculation of N

”.

The adjusted earnings per share according to APM includes all types of profit-sharing shares (e.g., ordinary and registered shares).

Therefore, treasury shares are excluded from the adjusted earnings per share according to APM. The term APM stands for Alternative

Performance Measure.

7.1.2

Calculation of adjusted (diluted) earnings according to APM

Notes

2022

2021

In € 1,000

Earnings per IFRS Consolidated Income Statement

-/- 4,350

3,134

Exclude:

Valuation results of:

a. owned investment property

15.26

3,669

-/- 3,647

b. investment property under development

15.26

1,341

c. equity investments

15.30

Results on disposals of:

a. owned investment properties

15.27.1

realised currency results on net investments in

group companies

15.31

-/- 27

-/- 530

Tax on results on disposals of properties and

equity investments

-/- 5

Changes in fair value of financial instruments of:

a. derivatives

15.31

-/- 182

-/- 508

b. convertible bonds

Acquisition costs on share deals

Taxes in respect of adjustments

-/- 70

266

Earnings

449

-/- 1,230

Weighted average number of profit-sharing shares

4,077,735

3,758,683

Adjusted earnings per share according to APM (in €)

0.11

-/- 0.33

Weighted average number of profit-sharing shares (fully diluted)

4,077,735

3,758,683

Diluted adjusted earnings per share according to APM (in €)

0.11

-/- 0.33

7.1.3

Explanation of adjustments calculation of adjusted (diluted) earnings according to APM

Valuation results of properties and equity investments

This adjustment includes the gain or loss in the Consolidated Income Statement arising in the period from the

revaluation of owned investment property, investment property under development and equity investments at

their fair value. Therefore the valuation results of properties held for sale and right-of-use assets are not

excluded from earnings.

Results on disposals of properties and equity investments

This adjustment includes the profit or loss on disposal of owned investment property, investment property

under development and equity investments. Therefore the results on disposals of owned investment property

held for sale, right-of-use assets, right-of-use assets held for sale and investment property under development

held for sale are not excluded from earnings.

This adjustment includes also the profit or loss on foreign currency translation differences in case of (partial)

reduction of net investment in foreign activities (release from reserve for currency translation differences).

Tax on results on disposals of properties and equity investments

This adjustment includes the tax charge or credit relating to profits or losses on owned investment property,

investment property under development and equity investments sold in the period, calculated consistently with

1 and 2 above.

Changes in fair value of financial instruments

This adjustment includes the surplus or deficit arising in the period from the net mark-to-market adjustment to

the value of financial instruments (market value less acquisition price paid or received) which are used for

hedging purposes and where the Fund has the intention of keeping the hedge position until the end of the

contractual duration. Whether the Fund has chosen to apply hedge accounting under IFRS is irrelevant.

Material profits / costs associated with the early close-out of financial instruments used for hedging and / or

debt instruments should also be excluded from earnings.

The only exception to this is the early close-out of financial instruments or debt with a maturity date ending

within the current reporting period. In such circumstances, the cost of early close-out should not be adjusted

as the fair value difference would have been recognised in the current year’s earnings through the interest line

and therefore including the cost of early close-out should not significantly change earnings for that year.

Acquisition costs on share deals

This adjustment includes the acquisition costs related to share deals (IFRS 3) and joint venture interests which

are, under IFRS, recognised in the Consolidated Income Statement when incurred. Property-related

acquisition costs are first capitalised and subsequently recognised in the Consolidated Income Statement as

a revaluation movement. To achieve consistency, acquisition costs related to share deals and joint venture

interests should be excluded to arrive at earnings.

Taxes in respect of adjustments

This adjustment includes the deferred taxes in the period which only relates to the above items and which

would not crystallise until or unless the property, investment or financial instrument is sold. This would typically

include deferred tax on revaluation surpluses on owned investment property and investment property under

development which could reverse on disposal of the asset. This adjustment also includes any current income

tax relating directly to the above adjustments to the extent that they are considered material.

7.1.4

Calculation of (diluted) customized earnings according to APM

Notes

2022

2021

In € 1,000

Earnings

7.1.2

449

-/- 1,230

Exclude:

Valuation results of owned investment properties held

for sale

15.26

-/- 1,135

707

Valuation results of right-of-use assets

15.26

103

Results on disposals owned investment properties held

for sale

15.27.1

640

809

Impairment allowance of inventories

-/- 70

Results on disposals of inventories

15.28

Penalties for early termination of rental contracts

15.32

-/- 487

-/- 5

Costs of funding and acquisition

15.34.5

207

Interest expense on lease liabilities

15.36

Fee for early repayment loans and borrowings

10.

Break fee derivative financial instruments

11.

Foreign exchange and currency results

15.31

-/- 8

-/- 25

Include:

12.

Operating leases

15.16.5

-/- 188

-/- 186

Subtotal adjustments (before taxes)

-/- 821

1,638

13.

Taxes in respect of above adjustments

183

-/- 321

Total adjustments

-/- 638

1,317

Customized earnings

-/- 189

Weighted average number of profit-sharing shares

15.39.3

4,077,735

3,758,683

Customized earnings per share according to APM (in €)

-/- 0.05

0.02

Weighted average number of profit-sharing shares (diluted)

15.39.6

4,077,735

3,758,683

Diluted customized earnings per share according to APM

(in €)

-/- 0.05

0.02

7.1.5

Explanation of adjustments calculation of (diluted) customized earnings according to APM

The earnings is a measure of the underlying operating performance of an investment property company. It

therefore does provide a measure of recurring income, but does not, for example, exclude

“

exceptional

”

items

that are part of IFRS earnings. For that reason, the Fund has introduced its own (diluted) customized earnings

according to APM

. In this calculation the Fund excludes “exceptional” and “one

off costs” and “one

-off

revenues”.

Moreover, in this calculation valuation results, as well as results on disposals of properties held for

sale and right-of-use assets are excluded, as well as accrued interest lease liabilities.

The operating leases are included in the calculation of the (diluted) customized earnings according to APM.

As a result of above-described adjustments the impact of applying IFRS 16 (e.g. fair value adjustments right-

of-use assets) are eliminated in the (diluted) customized earnings according to APM.

7.1.6

Net Asset Value

Net Asset Value (

NAV

) is a key performance measure used for real estate investment funds. However, NAV

reported in the Consolidated Financial Statements under IFRS does not provide shareholders with the most

relevant information on the fair value of the assets and liabilities within an ongoing real estate investment

company with a long-term investment strategy.

The NAV measures the fair value of net assets on an ongoing, long-term basis. Assets and liabilities that are

not expected to crystallise in normal circumstances such as the fair value of derivative financial instruments

and deferred taxes on investment property, investment property under development or other non-current

investments are therefore excluded.

NAV should be calculated on a diluted basis considering the impact of any options, convertibles, etcetera that

are dilutive.

7.1.7

Calculation of NAV

Notes

31-12-2022

31-12-2021

In € 1,000

Group equity in accordance with IFRS

46,515

46,403

Exclude:

Fair value of financial instruments

15.5

-/- 479

-/- 293

Deferred tax

15.6.1

2,997

3,094

Group equity in accordance with NAV

49,033

49,204

Total number of profit-sharing shares

19.9.1

4,185,984

3,758,683

Effect of exercise of options, convertibles and other equity

interests (diluted basis)

Total number of profit-sharing shares (diluted)

4,185,984

3,758,683

NAV per profit-sharing share (in €)

11.71

13.09

7.1.8

Explanation of adjustments calculation of NAV

Fair value of financial instruments

This adjustment includes the net mark-to-market adjustment to the value of financial instruments (market value

less acquisition price paid or received) which are used for hedging purposes and where the Fund has the

intention of keeping the hedge position until the end of the contractual duration. Whether the Fund has chosen

to apply hedge accounting under IFRS is irrelevant. The mark-to-market of any convertible debt is also

excluded from the net assets.

The logic for this adjustment is that, under normal circumstances, the derivative financial instruments which

property investment companies use to provide an economic hedge are held until maturity and so the theoretical

gain or loss at Statement of Financial Position

’s date will not crystallise.

The above adjustments do not include (possible) foreign currency hedging instruments (fair value hedges or

net investment hedges) where the hedged item market value changes are also reflected in the Consolidated

Statement of Financial Position. The fair value of such instruments should remain in NAV to offset the

movement in the underlying investment being hedged.

Deferred tax

This adjustment includes the recognised deferred taxes in the Consolidated Statement of Financial Position in

respect of the difference between the fair value and tax value of owned investment property, investment

property under development, or other non-current investments (including investments in group companies) as

these deferred taxes would only become payable if the assets are sold. Therefore, deferred taxes on properties

held for sale, right-of-use assets held for sale as well as on lease incentives are not excluded from NAV.

The deferred tax liability relating to the fair value of financial instruments, which would not crystallise until or

unless the financial instrument is sold, should also be added back.

Effect of exercise of options, convertibles and other equity interests (diluted basis)

A convertible bond is viewed as dilutive provided that the following criteria are satisfied:

the convertible bond is dilutive in accordance with IAS 33.50; and

the share price as at Statement of Financial Position

’s date exceeds the conversion price (“in the

money”).

7.1.9

Triple Net Asset Value

The Triple Net Asset Value (

NNNAV

) measures the Net Asset Value including fair value adjustments in respect

of all material Statement of Financial Position

’s items whic

h are not reported at their fair values as part of the

NAV.

7.1.10

Calculation of NNNAV

Notes

31-12-2022

31-12-2021

In € 1,000

Group equity in accordance with NAV

7.1.7

49,033

49,204

Include:

Fair value of financial instruments

15.5

479

293

Fair value of debt

Fair value of deferred tax

-/- 1,498

-/- 1,547

Fair value of inventories

1,421

Group equity in accordance with NNNAV

49,439

47,961

Total number of profit-sharing shares

19.9.1

4,185,984

3,758,683

Effect of exercise of options, convertibles and other equity

interests (diluted basis)

Total number of profit-sharing shares (diluted)

4,185,984

3,758,683

NNNAV per profit-sharing share (in €)

11.81

12.76

7.1.11

Explanation of adjustments calculation of NNNAV

Fair value of financial instruments

This reinstates, and is equal to, the adjustment 1, as mentioned in the calculation of NAV. The reason for

reinstating is that NNNAV approximates fair value NAV.

Since the fair value of inventories as at Statement of Financial Position’s date deviates materially from its

carrying amount, the difference

between these two values are included in the calculation in the NNNAV.

Fair value of debt

This adjustment includes the difference between loans and borrowings included in the Consolidated Statement

of Financial Position at amortised cost, and the fair value of loans and borrowings.

Fair value of deferred tax

This adjustment includes the fair value of the deferred taxes concerning owned investment property,

investment property under development or other non-current investments (including investments in group

companies; these three items hereinafter mentioned as

“

non-current investments

”

). The deferred taxes are

calculated with regard to all taxable temporary differences with regard to the non-current investments, whether

these deferred taxes are included in the Statement of Financial Position or not. For items not included in the

Statement of Financial Position is referred to section 13.41.3

“Deferred tax”

in the Accounting Principles

Consolidated Financial Statements.

The taxable temporary difference with regard to the non-current investments is calculated by the difference

between the fair value of the non-current investment less the tax value of the non-current investment. In case

the taxable temporary difference should result in a deferred tax asset, this deferred tax asset will only be

recognised as far as it is probable that future taxable profits will be available against which they can be used.

Deferred taxes are measured at the tax rates that are expected to be applied to taxable temporary differences

when they reverse, using tax rates enacted or substantively enacted at the Statement of Financial Position

’s

date. The deferred taxes are taken into account without applying any discount (nominal value), which is in

accordance with IFRS.

The Managing Board assessed the fair value for calculation-purposes of the deferred taxes applicable to non-

current investments by multiplying the deferred taxes (at nominal value, as mentioned above) by 50%. This

percentage is an estimation of the present value of the tax applicable in the (near) future.

Fair value of inventories

This adjustment includes the difference between inventories included in the Consolidated Statement of

Financial Position at the lower of cost and net realisable value, and the fair value of inventories.

Effect of exercise of options, convertibles, and other equity interests (diluted basis)

For the effect of exercise of options, convertibles, and other equity interests (fully diluted basis) reference is

made to the explanation in section 7.1.8 (3)

“Explanation of adjustments calculation

of NAV

”

above.

7.1.12

Calculation of NNNAV before distributions to shareholders

Notes

31-12-2022

31-12-2021

In € 1,000

Group equity in accordance with NNNAV

7.1.10

49,439

47,961

Exclude:

Cumulative distributions to shareholders

3,120

Group equity in accordance with NNNAV before distributions

to shareholders

52,559

51,081

Total number of profit-sharing shares

19.9.1

4,185,984

3,758,683

Effect of exercise of options, convertibles, and other equity

interests (diluted basis)

Total number of profit-sharing shares (diluted)

4,185,984

3,758,683

NNNAV per profit-sharing share before distributions to

shareholders (in €)

12.56

13.59

CONSOLIDATED

STATEMENT

FINANCIAL

POSITION

Notes

31-12-2022

31-12-2021

In € 1,000

Assets

Investment property

15.2

68,638

77,274

Investment property under development

15.3

958

2,699

Investments in associates

15.4

3,587

Derivative financial instruments

15.5

372

141

Deferred tax assets

15.6

432

605

Trade and other receivables

15.9

650

490

Prepayments and deferred expenses

15.10

Total non-current assets

74,637

81,232

Derivative financial instruments

15.5

107

152

Tax assets

15.8

563

Trade and other receivables

15.9

1,346

709

Prepayments and deferred expenses

15.10

214

327

Cash and cash equivalents

15.11

4,740

1,744

Inventories

15.12

1,835

1,765

Assets held for sale

15.13

6,777

4,550

Total current assets

15,582

9,334

Total assets

90,219

90,566

Group equity

(attributable to Parent Company shareholders)

15.14

46,515

46,403

Liabilities

Loans and borrowings

15.16

17,213

30,187

Deferred income and tenant deposits

15.18

384

410

Deferred tax liabilities

15.19

3,183

3,514

Total non-current liabilities

20,780

34,111

Tax liabilities

15.15

509

700

Loans and borrowings

15.16

18,912

6,609

Trade and other payables

15.17

3,344

2,590

Deferred income and tenant deposits

15.18

159

153

Total current liabilities

22,924

10,052

Total liabilities

43,704

44,163

Total Group equity and liabilities

90,219

90,566

CONSOLIDATED

INCOME

STATEMENT

Notes

2022

2021

In € 1,000

Gross rental income

15.24

6,165

7,097

Service charge income

15.25

2,433

2,079

Service charge expenses

15.25

-/- 2,471

-/- 2,786

Property operating expenses

15.25

-/- 1,936

-/- 2,380

Net rental and related income

4,191

4,010

Valuation results of properties

15.26

-/- 3,978

2,836

Results on disposals of properties

15.27

-/- 640

-/- 834

(Reversal of) impairment allowance of inventories

-/- 53

Results on disposals of inventories

15.28

-/- 29

Net results on properties

15.29

-/- 4,577

1,949

Share of results of investments in associates

15.30

-/- 68

Net results on equity investments

-/- 68

Financial income

15.31

262

1,121

Other operating income

15.32

513

Other income

775

1,145

Total income

321

7,104

Administrative expenses

15.33

705

648

Other operating expenses

15.34

1,348

1,281

Total operating expenses

2,053

1,929

Net operating result before financial expenses

-/- 1,732

5,175

Financial expenses

15.36

2,208

2,150

Profit before income tax

-/- 3,940

3,025

Income tax expense

15.38

410

-/- 109

Profit for the period

-/- 4,350

3,134

Attributable to:

Parent Company shareholders

-/- 4,350

3,134

Profit for the period

-/- 4,350

3,134

Basic earnings per share (€)

15.39.1

-/- 1.07

0.83

Diluted earnings per share (€)

15.39.4

-/- 1.07

0.83

CONSOLIDATED

STATEMENT

COMPREHENSIVE

INCOME

Notes

2022

2021

In € 1,000

Profit for the period

-/- 4,350

3,134

Items that are or may be reclassified subsequently to

profit or loss:

Foreign exchange and currency translation differences on net

investment in group companies

-/- 163

358

Income tax on foreign exchange and currency translation

differences on net investments in group companies

-/- 26

-/- 43

Total foreign exchange differences

-/- 189

315

Net gain / loss (-/-) recognised directly in Group equity

-/- 189

315

Total comprehensive income for the period

-/- 4,539

3,449

Attributable to:

Parent Company shareholders

-/- 4,539

3,449

Total comprehensive income for the period

-/- 4,539

3,449

CONSOLIDATED

STATEMENT

CHANGES

GROUP

EQUITY

Issued

capital

premium

Legal

revaluation

reserve

Reserve

currency

translation

difference

Equity

componen

convertibl

e bonds

Retained

earnings

Total

share-

holders’

equity

In € 1,000

Balance as at January 1, 2022

18,794

19,310

8,725

1,262

-/- 1,688

46,403

Profit or loss

-/- 4,350

Change in revaluation reserve

-/- 814

814

Other comprehensive income

-/- 189

Own shares issued

2,396

2,612

5,008

Share buy-back

-/- 357

Balance as at December 31, 2022

21,190

21,922

7,911

1,073

-/- 5,581

46,515

Balance as at January 1, 2021

18,794

19,310

6,691

947

144

-/- 2,932

42,954

Profit or loss

3,134

Change in revaluation reserve

2,034

-/- 2,034

Other comprehensive income

315

-/- 144

144

315

Balance as at December 31, 2021

18,794

19,310

8,725

1,262

-/- 1,688

46,403

CONSOLIDATED

STATEMENT

CASH

FLOWS

Notes

2022

2021

In € 1,000

Cash flows from operating activities

Profit for the period

-/- 4,350

3,134

Adjustments for:

Net results on properties

4,315

-/- 2,008

Net results on equity investments

15.30

Financial income

15.31

-/- 262

-/- 1,121

Financial expenses

15.36

2,208

2,150

Income tax expense

15.38

410

-/- 109

Changes in:

Derivative financial instruments

-/- 37

Tax assets

Trade and other receivables

182

-/- 129

Prepayments and deferred expenses

105

Tax liabilities

125

-/- 6

Trade and other payables

165

-/- 211

Deferred income and tenant deposits

-/- 14

Cash generated from operating activities

2,935

1,932

Interest received

Interest paid

-/- 1,627

-/- 1,671

Income tax paid / income tax received

-/- 1,446

-/- 894

Net cash from / used in (-/-) operating activities

-/- 99

-/- 575

Cash flows from investing activities

Acquisition of / additions to subsidiaries

Proceeds from the sale of assets held for sale

8,024

8,860

Acquisitions of / additions to owned investment properties

-/- 298

-/- 346

Acquisitions of / additions to assets held for sale

-/- 55

-/- 172

Net cash from / used in (-/-) investing activities

15.42.1

7,721

8,342

Cash flows from financing activities

Share buy-back (treasury shares)

-/- 346

Proceeds from (refinanced) secured bank loans

14,009

Proceeds from other long-term liabilities

3,100

2,340

Transaction costs related to loans and borrowings

-/- 331

Repayments of secured bank loans

-/- 4,260

-/- 16,810

Repayments of other long-term liabilities

-/- 2,900

-/- 6,349

Payments of lease liabilities

-/- 188

-/- 186

Net cash from / used in (-/-) financing activities

15.42.2

-/- 4,594

-/- 7,327

Net increase / decrease (-/-) in cash and cash equivalents

3,028

440

Cash and cash equivalents as at 1 January

15.11

1,744

1,272

Effect of exchange and currency translation result on cash held

-/- 32

Cash and cash equivalents as at 31 December

15.11

4,740

1,744

Transaction costs and change in lease incentives excluded.

ACCOUNTING

PRINCIPLES

CONSOLIDATED

FINANCIAL

STATEMENTS

13.1

REPORTING ENTITY

The company Arcona Property Fund N.V., hereinafter referred to as

“

the

Fund

”

, was incorporated on

November 27, 2002 in accordance with Dutch law and is established in Amsterdam (the Netherlands). The

Fund obtained a listing on the Euronext Fund Services (

EFS

) in Amsterdam on November 13, 2003 and a

listing on the Prague Stock Exchange (

PSE

) in Prague on October 30, 2018.

The Fund is registered in Amsterdam (the Netherlands), De Entree 55, 1101 BH and is entered in the Trade

The Fund is a closed-end investment company with variable capital within the meaning of Article 76a of Book

2 of the Dutch Civil Code. The Fund invests in commercial real estate in Central and Eastern Europe (

CEE

The Consolidated Financial Statements have been approved by the Supervisory Board.

The Consolidated Financial Statements of the Fund for the financial period comprise the Fund and its

subsidiaries.

13.2

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

The Consolidated Financial Statements have been prepared in accordance with the International Financial

Reporting Standards (

IFRS

) and the interpretations thereof adopted by the International Accounting Standards

Board (

IASB

) as adopted by the European Union (hereinafter referred to as

EU-IFRS

) and in accordance with

Part 9 of Book 2 of the Dutch Civil Code (Titel 9, Boek 2 van het Burgerlijk Wetboek) and the Dutch Act on

Financial Supervision (Wet op het financieel toezicht, the

Wft

13.3

STATEMENT OF COMPLIANCE AND FUTURE RELATED ASSUMPTIONS

The Fund has applied the significant accounting principles as set out in sections 13.2 to 13.41. The Managing

Board authorised the Consolidated Financial Statements for issue on April 28, 2023.

As at December 31, 2022, Group equity of the Fund is positive. As stated in the liquidity forecast up to end-

2024, the current cash position is sufficient to cover budgeted costs. This forecast takes into account debt

service requirements, the repayment and / or refinancing of loans and uncertainty regarding the impact of the

financial markets (reference is made to section 15.40

“Risk management” and

section 15.44

“Events after

Statement of Financial Position’s date”).

Invasion of Ukraine by Russia

Russian troops invaded Ukraine on February 24, 2022 and at March 31 2023 remained in occupation of about

17% of the country. The Fund currently owns two plots of land in Ukraine, one in Odessa and the other in

Zaporizhzhia. The Odessa plot, covering 223,934 sqm and situated north of the city along the Kyiv motorway,

is designated for logistics development and was valued at €2.7 million as of December 31, 2021. The

Zaporizhzhia plot, encompassing 263,834 sqm and located on the southern outskirts of the city, is intended

for retail development and was valued

at €689,000 as of the same date.

In the immediate aftermath of the invasion and reflecting the uncertainty of the situation on the ground,

Management decided to write down the value of both sites to zero. Unfortunately, some ten months later, the

Zaporizhzhia plot, although still under Ukrainian government control, is close to the current front lines in the

south-east of the country

and falls within the area formally “annexed” by Russian presidential decree in

September 2022. It is felt prudent to maintain the current valuation at zero. The security situation in Odessa

has improved significantly following the withdrawal of Russian troops to the east bank of the Dnieper river in

November 2022 although the city remains subject to sporadic missile attack. Management commissioned a

market report from a local expert in December 2022. This report confirmed that the current real estate market

conditions in the Odesa region were highly uncertain due to the war and market activity had been severely

impacted. Based on an internal review combined with the expert report, the Fund valued the Odessa property

at USD 1.02 million through an internal valuation, which is one-third of the external C&W property valuation at

the end of 2021.

The current political and market conditions create a higher degree of uncertainty regarding the reported value.

Firstly, there is a lack of quality data, as market activity has been severely impacted in many sectors due to

the war and there is therefore insufficient market evidence on which to base judgments. The land market in

the Odessa region currently lacks liquidity and only a few speculative buyers might be interested in purchasing

the subject site. Secondly, as future developments in the war are highly unpredictable, the current reported

value may change significantly within a short period of time. The advice is therefore reported on the basis of

"material valuation uncertainty," and less certainty should be attached to it than would normally be the case.

Given the above, the Managing Board will continue to closely monitor developments and adjust the valuations

of both land plots as necessary. It is important to note that adjusting the valuations will not impact the Fund's

continuity, as the two land plots are not leased to third parties and do not generate any income for the Fund.

The annual costs for maintaining these two plots amount to approximately €31,000.

CNB revokes bank licence of Sberbank CZ

On Monday, February 28, 2022, the Czech National Bank (

CNB

) announced its decision to initiate the process

of revoking Sberbank CZ's banking licence in response to a run on the bank that began the previous week

following the Russian invasion of Ukraine and the European Union's imposition of sanctions on Russian

companies. It should be noted that the Russian state holds a controlling stake of 50%+1 in the Russian parent

company of Sberbank CZ.

In 2019, the Fund received a loan from Sberbank CZ through its 100% subsidiary Arcona Capital RE Bohemia

s.r.o. (

ACREB

). As

of December 31, 2021, the outstanding loan amount was €

8.45 million with a term until

March 31, 2024, and a loan-to-value ratio of approximately 44%. ACREB also has an interest rate hedge (

IRS

)

with Sberbank CZ, which was valued at €

294,000 as of December 31, 2021. Additionally, ACREB holds

several deposit accounts with Sberbank CZ totalling

around €

400,000 for daily transactions. It has been

reported that the Sberbank CZ loan portfolio will be transferred to

Česka

Spořitelna

under the same conditions

as those applicable to Sberbank CZ.

Following the CNB's decision to revoke Sberbank CZ's banking licence, all funds in ACREB's accounts with

the bank were frozen, and it is no longer possible to transfer money to or from these accounts. However, the

frozen deposits are sufficient to cover ACREB's medium-term interest and principal repayment obligations for

the loan from Sberbank CZ, and there is currently no default on the loan.

ACREB has opened an account with Raiffeisen Bank for daily business transactions, allowing the company to

continue its operations such as receiving rent payments and paying suppliers. On March 17, 2022, ACREB

received €

100,000 on this account from the State Guarantee Fund.

The developments at Sberbank CZ have not yet had any significant negative impact on ACREB or the Fund.

Receivables have been submitted to the curator, and the Managing Board expects to receive 100% of the

deposit accounts. The status of the IRS is still uncertain, but the Managing Board is of the opinion that the

Fund has a right to the value of the IRS.

The Managing Board has conducted an analysis to determine if any of the involved parties are on sanction

lists. No transactions were identified with sanctioned parties.

Going concern

On December 31, 2022, two Polish subsidiaries of the Fund were in breach of the DSCR forecast covenant of

the Hypo Noe Bank loan. Pursuant to IFRS, as at the end of 2022 the Hypo Noe loan was classified as a short-

term liability due to this covenant breach. This causes short-term liabilities to temporarily exceed short-term

assets. In April 2023 Hypo Noe approved a waiver of this covenant breach, effective to December 31 2023.

Pursuant to IFRS, the Hypo Noe loan must be classified as a short-term liability at the end of 2022 due to the

covenant breach. This causes short-term liabilities to temporarily exceed short-term assets. However, the Fund

expects that due to the renewal of leases the loan will be reclassified to long term shortly.

Additionally, the Fund notes that the Sberbank CZ loan, under Sberbank CZ's loan agreements with ACREB,

will be transferred. The Fund e

xpects to extend the loan with Česka Spořitelna Bank after March 2024.

A large part of the 2022 result of EUR -/- 4.35 million is attributable to lower valuations of the real estate

portfolio, both directly and indirectly, mainly due to the war in Ukraine. This negative outcome arises from the

net negative valuation result on real estate, the downwards accounting IFRS adjustments related to Boyana

Residences apartments, increased financing costs from higher interest rates and a rise in tax pressure

associated with the sale of real estate.

Nonetheless, the Managing Board anticipates that the real estate portfolio, excluding these temporary and

indirect impacts, will continue to generate positive returns. Furthermore, the cash flow will remain positive,

driven by the expected sale of non-core real estate in the upcoming period.

Based on the assumptions outlined above, the Managing Board believes that the Fund can continue as a going

concern through 2023. Therefore, these Consolidated Financial Statements are prepared on the assumption

of going concern.

13.4

COMPARISON ACCOUNTING PRINCIPLES WITH PREVIOUS YEAR

Contrary to the processing in the Financial Statements 2021, the letting fees (payments to agents for services

in connection with negotiating lease contracts) have been classified as an addition to investment property with

effect from January 1, 2022. In previous year the letting fees were capitalised and amortised over the lease

term. Therefore as of January 1, 2022 the letting fees are set-off from investment property to avoid double

recognition. The comparative figures for 2021 have not been adjusted accordingly.

13.5

BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

13.5.1

General

The Consolidated Financial Statements have been prepared based on historical cost, except for:

•

investment property;

•

investment property under development;

•

assets held for sale;

•

financial assets at fair value through profit or loss; and

•

financial liabilities at fair value through profit or loss.

Investment property and investment property under development are

hereinafter referred to as ‘Investment

property’.

The accounting policies explained below have been consistently applied to the results, other gains and losses,

assets, liabilities, and cash flows of entities included in the Consolidated Financial Statements and are

consistent with those used in the prior period

, with the exception of the application of new and amended IFRS’s

as mentioned in section 13.5.4

“New and amended IFRS Standards and interpretations that are effective for

the current period”

13.5.1.1 Amortised cost

The amortised cost is the amount for which a financial asset or financial liability is recognised on the

Consolidated Financial Statements at initial recognition less repayments on the principal, increased or

decreased by the cumulative amortisation of the difference between that initial amount and the final maturity

amount - determined via the effective interest method - less any write-downs (directly or by forming a provision)

due to impairments or uncollectability.

13.5.1.2 Netting

An asset and an item in loan capital are reported net in the Consolidated Financial Statements exclusively if

and to the extent:

•

a proper legal instrument is available for simultaneous, net settlement of the assets and item of the

loan capital; and

•

there is a firm intention to settle the netted item as such or the two items simultaneously.

13.5.2

Judgements, assumptions, and estimation uncertainties

13.5.2.1 General

Preparation of the Consolidated Financial Statements in accordance with EU-IFRS requires the Managing

Board to make judgements, estimates and assumptions that affect the application of policies and the reported

value of assets and liabilities, income and expenses. The estimates and associated assumptions have been

based on historical experience and various other factors that are believed to be reasonable under the

circumstances. The results of these estimates and assumptions form the basis of the judgements made about

carrying amounts of assets and liabilities that are not readily apparent from other sources. The actual results

may differ from these estimates.

13.5.2.2 Judgements

Judgements made by the Managing Board in the application of the EU-IFRS that have significant effect on the

Consolidated Financial Statements with a significant risk of material adjustment in the next financial period

are:

•

equity-accounted investees: whether the Fund has significant influence over an investee;

•

consolidation: whether the Fund has de facto control over an investee; and

•

lease term: whether the Fund is reasonably certain to exercise extension options.

13.5.2.3

Assumptions and estimation uncertainties

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that period

or in the period of revision and future periods if the revision affects both current and future periods.

Assumptions and estimation uncertainties made by the Managing Board that have significant risk of resulting

in material adjustments to the carrying amounts of assets and liabilities in the next financial period are:

•

fair value measurements: in estimating the fair value of an asset or liability, the Fund uses observable

market data to the extent it is available. The Fund engages external, independent appraisers to perform

the valuation. The Managing Board works closely with the external, independent appraisers to establish

the appropriate valuation techniques and inputs to the model;

•

recognition of deferred tax assets: availability of future taxable profit against which deductible temporary

differences and tax losses carried forward can be utilised;

•

recognition and measurement of provisions and contingencies: key assumptions about the likelihood

and magnitude of an outflow of resources;

•

measurement of expected credit losses allowance for trade receivables: key assumptions in determining

the weighted-average loss rate;

•

acquisition of subsidiary: fair value of the consideration transferred (including contingent consideration)

and fair value of the assets acquired and liabilities assumed, measured on a provisional basis;

•

identifying related parties.

13.5.3

Measurement of fair values

Several of

the Fund’s accounting policies and disclosures require the measurement of fair values, for both

financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Fund uses observable market data as far as

possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in

the valuation techniques as follows.

•

level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices);

•

level 3: inputs for the asset or liability that are not based on observable market data (unobservable

inputs).

Further information about the assumptions made in measuring fair values is included in the following notes:

•

13.9

: “Financial instruments”;

•

13.10.2

: “

Investment property

”;

•

13.11

: “

Investment property under development

”;

•

13.20.2

: “Assets held for sale”.

13.5.4

New and amended IFRS Standards and interpretations that are effective for the current

period

A number of new standards and amendments to standards and interpretations are effective for annual periods

beginning after 1 January 2022. These standards and amendments did not have an impact on these

consolidated financial statements:

•

Annual Improvements to IFRS Standards 2018 - 2020:

IFRS 1“First time adopter of IFRS”;

IFRS 9 “Fees in the ‘10 per cent’ test for derecognition of financial’’;

IFRS 16 ’The amendment to Illustrative Example 13’’;

•

Amendments

to IFRS 3 ‘’Reference to the conceptual framework’’;

•

Amendments

to IAS 16, “Proceeds before intended use”;

•

Amendments

to IAS 37, “Cost of fulfilling a contract”.

The Fund expects these new standards, amendments and interpretations will not have a significant impact on

the Consolidated Financial Statements of the Fund.

13.5.5

New and revised IFRS Standards and interpretations not yet applied

New standards and interpretations not yet adopted:

A number of new standards, amendments to existing standards, and interpretations will become effective for

annual periods beginning after January 1, 2022, and have not been applied in preparing these consolidated

financial statements:

•

IFRS 17: Insurance Contracts

•

Classification of Liabilities as Current or Noncurrent: Amendments to IAS 1

•

Disclosure of Accounting Policies: Amendments to IAS 1 and IFRS Practice Statement 2

•

Definition of Accounting Estimate: Amendments to IAS 8

•

Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction: Amendments to IAS12

•

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture: Amendments to

IFRS 10 and IAS 28

These changes are not expected to have a material impact on the company in the current or future reporting

periods, or on foreseeable future transactions.

13.6

BASIS OF CONSOLIDATION

13.6.1

Subsidiaries

Subsidiaries are entities over which the Fund has direct or indirect predominant control. The Fund has

predominant control if:

•

it has power over the entity;

•

it is exposed to or entitled to variable returns because of its involvement in the entity; and

•

it has the possibility of using its predominant control over the entity to influence the size of these

returns.

Every one of these three criteria must be satisfied before the Fund is deemed to have predominant control

over the entity in which it has an interest.

Subsidiaries are fully consolidated with effect from the date on which predominant control commences until

the date that control ceases.

Consolidated Financial Statements are prepared using uniform accounting policies for similar transactions.

Accounting principles of subsidiaries are consistent with the policies adopted by the Fund.

13.6.2

Acquisitions of subsidiaries

The Fund recognises acquisitions if IFRS 3 (revised) “Business Combinations” or IAS 40 “Investment property”

applies. Acquisitions are considered a business combination if there is an acquisition of assets, rental activities

and such a management organisation, that the acquired entity can operate as an independent company, with

the aim of generating economic results. The Fund does not necessarily consider acquisitions of properties

within a legal company as a business combination, but evaluates these acquisitions individually for the above

operational characteristics.

The Fund applies the acquisition method to account for business combinations. The consideration transferred

for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former

owners of the acquired assets and the equity interests issued by the Fund. The consideration transferred

includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are

measured initially at their fair values at the acquisition date. The Fund recognises any non-controlling interest

in the acquired assets on an acquisition-by-acquisition basis, either at fair value or at the non-controlling

interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition

related costs are expensed as incurred. Goodwill is the amount by which the cost of an acquired entity at first

recognition exceeds the net fair value of the identifiable assets and liabilities and contingent liabilities assumed.

Changes in the purchase price after the acquisition date do not result in recalculation or adjustment of the

goodwill. After first recognition, the goodwill is valued at costs less any cumulative impairment losses. Goodwill

is attributed to cash-generating entities and is not amortised. Goodwill is assessed for impairment annually, or

earlier if circumstances give cause. Negative goodwill resulting from an acquisition is recognised directly into

Income Statement.

For acquisitions of subsidiaries not meeting the definition of a business, the Fund allocates the cost between

the individual identifiable assets and liabilities assumed in the Fund based on their relative fair values at the

date of acquisition. Acquisition-related costs are capitalised. Such transactions or events do not give rise to

goodwill and deferred taxes as at date of acquisition are not stated.

13.6.3

Elimination of transactions on consolidation

All intercompany receivables, payables, significant transactions and any unrealised profits and losses on

transactions within the Fund, or income or expenses from such transactions within the Fund have been

eliminated in the Consolidated Financial Statements to the extent that no impairment loss is applicable.

13.7

BASIS OF PREPARATION OF CONSOLIDATED STATEMENT OF CASH FLOWS

The Fund has used the indirect method for the Consolidated Statement of Cash Flows. Given the nature of

the Fund (investment company) financial income is not netted against financial expenses but presented

separately under the total income (reference is made to section 13.36

“Financial income”

), so financial income

is presented in the Consolidated Statement of Cash Flows under cash flows from operating activities.

Cash and cash equivalents as mentioned in the Consolidated Statement of Cash Flows include the Statement

of Financial Position

’s item

cash and cash equivalents and, if applicable bank overdrafts. Transactions without

settlement in cash are not recognised in the Consolidated Statement of Cash Flows.

13.8

CURRENCY

13.8.1

Functional and presentation currency

The functional currency of the Fund is the Euro (EUR

or €

reflecting the fact the majority of the Fund’s

transactions are settled in Euro. The Fund has adopted the Euro as its presentation currency since the shares

of the Fund are denominated in Euro.

All amounts have been rounded to the nearest thousand, unless otherwise indicated.

13.8.2

Foreign currency transactions

Foreign currency transactions are translated into Euros at the exchange rate applicable on the transaction

date. Assets and liabilities denominated in foreign currencies are translated into Euros at the exchange rate

applicable on the Statement of Financial Position

’s date

. Exchange rate differences arising from translation

are recognised in the Income Statement. Cash flows in foreign currencies are converted at the exchange rate

applicable on settlements date.

13.8.3

Financial Statements of foreign activities and net investment in foreign activities

The assets and liabilities of foreign operations and fair value adjustments arising on consolidation are

translated into Euros at the exchange rate applicable on the Statement of Financial Position

’s date.

The income and expenses of foreign operations are translated into Euros at the exchange rates at the dates

of the transactions. For practical reasons, the average monthly exchange rates for the financial period are

used to approximate the exchange rates at the dates of the transactions, however only if the exchange rates

do not fluctuate significantly.

Foreign currency translation differences arising on translation of the net investment in foreign activities, and

the associated hedging transactions, are taken through the comprehensive income and are recognised in the

reserve currency translation differences. In case of a (part) reduction of the net investments in foreign activities,

the deferred cumulative amount recognised in the comprehensive income relating to that particular foreign

operation will be recognised in the Income Statement.

13.8.4

Exchange rates used for the Consolidated Statement of Financial Position

31-12-2022

31-12-2021

Bulgarian Lev (EUR / BGN)

1.95580

% change

0.0%

Czech Koruna (EUR / CZK)

24.11600

24.85800

% change

3.0%

5.3%

Polish Zloty (EUR / PLN)

4.68080

4.59690

% change

-/- 1.8%

-/- 0.8%

Romanian Leu (EUR / RON)

4.94950

4.94900

% change

0.0%

-/- 1.7%

Ukrainian Hryvnia (EUR / UAH)

38.95100

30.92260

% change

-/- 26.0%

11.0%

US Dollar (EUR / USD)

1.06660

1.13260

% change

5.8%

7.7%

Source: European Central Bank (ECB) if available. Ukrainian Hryvnia: National Bank of Ukraine.

13.8.5

Average exchange rates used for the Consolidated Income Statement

2022

2021

Bulgarian Lev (EUR / BGN)

1.95580

Czech Koruna (EUR / CZK)

24.53775

25.64858

Polish Zloty (EUR / PLN)

4.86680

4.57202

Romanian Leu (EUR / RON)

4.92536

n.a.

Ukrainian Hryvnia (EUR / UAH)

34.43851

32.24849

13.9

FINANCIAL INSTRUMENTS

13.9.1

General

Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position

when the Fund becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly

attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets

and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are

recognised immediately in profit or loss.

13.9.2

Financial assets

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within

the time frame established by regulation or convention in the marketplace.

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair

value, depending on the classification of the financial assets.

13.9.2.1 Classification of financial assets

In accordance with IFRS 7 financial assets have been classified as follows:

Debt instruments that meet the following conditions are measured subsequently at amortised cost:

•

the financial asset is held within a business model whose objective is to hold financial

assets in order to collect contractual cash flows; and

•

the contractual terms of the financial asset give rise on specified dates to cash flows that

are solely payments of principal and interest on the principal amount outstanding.

II.

Debt instruments that meet the following conditions are measured subsequently at fair value through

other comprehensive income (

FVTOCI

•

the financial asset is held within a business model whose objective is achieved by both

collecting contractual cash flows and selling the financial assets; and

•

the contractual terms of the financial asset give rise on specified dates to cash flows that

are solely payments of principal and interest on the principal amount outstanding.

III.

By default, all other financial assets are measured subsequently at fair value through profit or loss

(

FVTPL

Despite the foregoing, the Fund may make the following irrevocable election / designation at initial recognition

of a financial asset:

•

the Fund may irrevocably elect to present subsequent changes in fair value of an equity investment

in other comprehensive income if certain criteria are met (see below); and

•

the Fund may irrevocably designate a debt investment that meets the amortised cost or FVTOCI

criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch

(see below).

Financial assets at amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of

allocating interest income over the relevant period.

For financial assets other than purchased or originated credit

‑

impaired financial assets (i.e. assets that are

credit

‑

impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated

future cash receipts (including all fees and points paid or received that form an integral part of the effective

interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through

the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount

of the debt instrument on initial recognition. For purchased or originated credit

‑

impaired financial assets, a

credit

‑

adjusted effective interest rate is calculated by discounting the estimated future cash flows, including

expected credit losses, to the amortised cost of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial

recognition minus the principal repayments, plus the cumulative amortisation using the effective interest

method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance.

The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for

any loss allowance.

Interest income is recognised using the effective interest method for debt instruments measured subsequently

at amortised cost and at FVTOCI. For financial assets other than purchased or originated credit

‑

impaired

financial assets, interest income is calculated by applying the effective interest rate to the gross carrying

amount of a financial asset, except for financial assets that have subsequently become credit

‑

impaired (see

below). For financial assets that have subsequently become credit

‑

impaired, interest income is recognised by

applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting

periods, the credit risk on the credit

‑

impaired financial instrument improves so that the financial asset is no

longer credit

‑

impaired, interest income is recognised by applying the effective interest rate to the gross carrying

amount of the financial asset.

For purchased or originated credit

‑

impaired financial assets, the Fund recognises interest income by applying

the credit

‑

adjusted effective interest rate to the amortised cost of the financial asset from initial recognition.

The calculation does not revert to the gross basis even if the credit risk of the financial asset subsequently

improves so that the financial asset is no longer credit

‑

impaired.

Interest income is recognised in profit or loss and is included in the financial income.

II.

Financial assets classified as at FVTOCI

There are no debt instruments or equity instruments designated as at FVTOCI as at Statement of Financial

osition’s date.

III.

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI (see I.) are

measured at FVTPL. Specifically:

•

investments in equity instruments are classified as at FVTPL, unless the Fund designates an equity

investment that is neither held for trading nor a contingent consideration arising from a business

combination as at FVTOCI on initial recognition;

•

debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria (see (I.) and (II.)

above) are classified as at FVTPL. In addition, debt instruments that meet either the amortised cost

criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such

designation eliminates or significantly reduces a measurement or recognition inconsistency (so

called

“

accounting mismatch

”

) that would arise from measuring assets or liabilities or recognising the

gains and losses on them on different bases. The Fund has not designated any debt instruments as

at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value

gains or losses recognised in profit or loss to the extent they are not part of a designated hedging relationship.

The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial asset

and is included in the financial income or financial expenses.

All the Fund’s financial assets

are classified as financial assets at amortised cost and effective interest method,

with the exception of:

•

investments in associates; and

•

derivative financial instruments.

Investments in associates and derivative financial instruments are classified as financial assets at FVTPL.

13.9.2.2 Impairment of financial assets

The Fund recognises a loss allowance for expected credit losses on investments in debt instruments that are

measured at amortised cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well

as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date

to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Fund always recognises lifetime ECL for trade receivables, contract assets and lease receivables. The

expected credit losses on these financial assets are estimated using a provision matrix based on the Fund’s

historical credit loss experience, adjusted for factors that are specific to the debtors, general economic

conditions, and an assessment of both the current as well as the forecast direction of conditions at the reporting

date, including time value of money where appropriate.

For all other financial instruments, the Fund recognises lifetime ECL when there has been a significant increase

in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased

significantly since initial recognition, the Fund measures the loss allowance for that financial instrument at an

amount equal to 12

‑

month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the

expected life of a financial instrument. In contrast, 12

‑

month ECL represents the portion of lifetime ECL that is

expected to result from default events on a financial instrument that are possible within 12 months after the

reporting date.

Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial

recognition, the Fund compares the risk of a default occurring on the financial instrument at the reporting date

with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this

assessment, the Fund considers both quantitative and qualitative information that is reasonable and

supportable, including historical experience and forward

‑

looking information that is available without undue

cost or effort. Forward

‑

looking information considered includes the future prospects of the industries in which

the Fund’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies,

relevant think

‑

tanks and other similar organisations, as well as consideration of various external sources of

actual and forecast economic information that relate to the Fund’s core operations.

In particular, the following information is taken into account when assessing whether credit risk has increased

significantly since initial recognition:

•

an actual or

expected significant deterioration in the financial instrument’s external (if available) or

internal credit rating;

•

significant deterioration in external market indicators of credit risk for a particular financial instrument,

e.g. a significant increase in the credit spread, the credit default swap prices for the debtor, or the

length of time or the extent to which the fair value of a financial asset has been less than its amortised

cost;

•

existing or forecast adverse changes in business, financial or economic conditions that are expected

to cause a significant decrease in the debtor’s ability to meet its debt obligations;

•

an actual or expected significant deterioration in the operating results of the debtor;

•

significant increases in credit risk on other financial instruments of the same debtor;

•

an actual or expected significant adverse change in the regulatory, economic, or technological

environment of the debtor that results in a significant decrease in the debtor’s ability to meet its debt

obligations.

Irrespective of the outcome of the above assessment, the Fund presumes that the credit risk on a financial

asset has increased significantly since initial recognition when contractual payments are more than 30 days

past due, unless the Fund has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Fund assumes that the credit risk on a financial instrument has not increased

significantly since initial recognition if the financial instrument is determined to have low credit risk at the

reporting date.

A financial instrument is determined to have low credit risk if:

the financial instrument has a low risk of default,

the debtor has a strong capacity to meet its contractual cash flow obligations in the near term, and

adverse changes in economic and business conditions in the longer term may, but will not

necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Fund considers a financial asset to have low credit risk when the asset has external credit rating of

‘investment grade’ in a

ccordance with the globally understood definition or if an external rating is not available,

the asset has an internal rating of

“

performing

”

. Performing means that the counterparty has a strong financial

position and there are no past due amounts.

For financial guarantee contracts, the date that the Fund becomes a party to the irrevocable commitment is

considered to be the date of initial recognition for the purposes of assessing the financial instrument for

impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition

of a financial guarantee contracts, the Fund considers the changes in the risk that the specified debtor will

default on the contract.

The Fund regularly monitors the effectiveness of the criteria used to identify whether there has been a

significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of

identifying significant increase in credit risk before the amount becomes past due.

Definition of default

The Fund considers the following as constituting an event of default for internal credit risk management

purposes as historical experience indicates that financial assets that meet either of the following criteria are

generally not recoverable:

•

when there is a breach of financial covenants by the debtor; or

•

information developed internally or obtained from external sources indicates that the debtor is

unlikely to pay its creditors, including the Fund, in full (without taking into account any collateral held

by the Fund).

Irrespective of the above analysis, the Fund considers that default has occurred when a financial asset is more

than 3 months past due unless the Fund has reasonable and supportable information to demonstrate that a

more lagging default criterion is more appropriate.

Credit

‑

impaired financial assets

A financial asset is credit

‑

impaired when one or more events that have a detrimental impact on the estimated

future cash flows of that financial asset have occurred. Evidence that a financial asset is credit

‑

impaired

includes observable data about the following events:

significant financial difficulty of the issuer or the borrower;

a breach of contract, such as a default or past due event (see above);

the lender(s) of the bo

rrower, for economic or contractual reasons relating to the borrower’s financial

difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise

consider;

it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

the disappearance of an active market for that financial asset because of financial difficulties.

Write-off policy

The Fund writes off a financial asset when there is information indicating that the debtor is in severe financial

difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation

or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over

one year past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement

activities under the Fund’s recovery procedures, taking into account legal advice where appropriate. Any

recoveries made are recognised in profit or loss.

Measurement and recognition of expected credit losses

The measurement of expected credit losses is a function of the probability of default, loss given default (i.e.

the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability

of default and loss given default is based on historical data adjusted by forward

‑

looking information as

described above.

As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount

the reporting date; for financial guarantee contracts, the exposure includes the amount drawn down as at the

reporting date, together with any additional amounts expected to be drawn down in the future by default date

determined based on historical tren

d, the Fund’s understanding of the specific future financing needs of the

debtors, and other relevant forward

‑

looking information.

For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows

that are due to the Fund in accordance with the contract and all the cash flows that the Fund expects to receive,

discounted at the original effective interest rate. For a lease receivable, the cash flows used for determining

the expected credit losses are consistent with the cash flows used in measuring the lease receivable in

accordance with IFRS 16.

For a financial guarantee contract, as the Fund is required to make payments only in the event of a default by

the debtor in accordance with the terms of the instrument that is guaranteed, the expected loss allowance is

the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Fund

expects to receive from the holder, the debtor or any other party.

If the Fund has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in

the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECL

are no longer met, the Fund measures the loss allowance at an amount equal to 12

‑

month ECL at the current

reporting date, except for assets for which a simplified approach was used.

The Fund recognises an impairment gain or loss in profit or loss for all financial instruments with a

corresponding adjustment to their carrying amount through a loss allowance account, except for investments

in debt instruments that are measured at FVTOCI, for which the loss allowance is recognised in other

comprehensive income and accumulated in the revaluation reserve, and does not reduce the carrying amount

of the financial asset in the Statement of Financial Position.

Derecognition of financial assets

The Fund derecognises a financial asset only when the contractual rights to the cash flows from the asset

expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the

asset to another entity. If the Fund neither transfers nor retains substantially all the risks and rewards of

ownership and continues to control the transferred asset, the Fund recognises its retained interest in the asset

and an associated liability for amounts it may have to pay. If the Fund retains substantially all the risks and

rewards of ownership of a transferred financial asset, the Fund continues to recognise the financial asset and

also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying

amount and the sum of the consideration received and receivable is recognised in profit or loss. In addition,

on derecognition of an investment in a debt instrument classified as at FVTOCI, the cumulative gain or loss

previously accumulated in the revaluation reserve is reclassified to profit or loss. In contrast, on derecognition

of an investment in equity instrument which the Fund has elected on initial recognition to measure at FVTOCI,

the cumulative gain or loss previously accumulated in the revaluation reserve is not reclassified to profit or

loss, but is transferred to retained earnings.

13.9.3

Financial liabilities and equity

13.9.3.1 Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the

substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting

all of its liabilities. Equity instruments issued by the Fund are recognised at the proceeds received, net of direct

issue costs.

Repurchase of the Fund’s own equity investments is recognized and deducted directly in equity. No gain or

loss is recognized in profit o

r loss on the purchase, sale, issue or cancellation of the Fund’s own equity

instruments.

Compound instruments

The component parts of convertible bonds issued by the Fund are classified separately as financial liabilities

and equity in accordance with the substance of the contractual arrangements and the definitions of a financial

liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of

cash or another financial asset for a fixed number of the Fund

’s

own equity instruments is an equity instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest

rate for a similar non

‑

convertible instrument. This amount is recorded as a liability on an amortised cost basis

using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.

The conversion option classified as equity is determined by deducting the amount of the liability component

from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of

income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity

will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity

will be transferred to retained earnings. Where the conversion option remains unexercised at the maturity date

of the convertible bond, the balance recognised in equity will be transferred to retained earnings. No gain or

loss is recognised in profit or loss upon conversion or expiration of the conversion option.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity

components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity

component are recognised directly in equity. Transaction costs relating to the liability component are included

in the carrying amount of the liability component and are amortised over the lives of the convertible bonds

using the effective interest method.

13.9.3.2 Financial liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest method or at

FVTPL.

However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or

when the continuing involvement approach applies, and financial guarantee contracts issued by the Fund, are

measured in accordance with the specific accounting policies set out below.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is:

contingent consideration of an acquirer in a business combination;

held for trading; or

it is designated as at FVTPL.

A financial liability is classified as held for trading if:

•

it has been acquired principally for the purpose of repurchasing it in the near term; or

•

on initial recognition it is part of a portfolio of identified financial instruments that the Fund manages

together and has a recent actual pattern of short

‑

term profit

‑

taking; or

•

it is a derivative financial instrument, except for a derivative financial instrument that is a financial

guarantee contract or a designated and effective hedging instrument.

A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a

business combination may be designated as at FVTPL upon initial recognition if:

•

such designation eliminates or significantly reduces a measurement or recognition inconsistency that

would otherwise arise; or

•

the financial liability forms part of a Fund of financial assets or financial liabilities or both, which is

managed and its performance is evaluated on a fair value basis,

in accordance with the Fund’s

documented risk management or investment strategy, and information about the Grouping is

provided internally on that basis; or

•

it forms part of a contract containing one or more embedded derivative financial instruments, and

IFRS 9 permits the entire combined contract to be designated as at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair

value recognised in profit or loss to the extent that they are not part of a designated hedging relationship. The

net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included

in financial income or financial expenses.

However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the

financial liability that is attributable to changes in the credit risk of that liability is recognised in other

comprehensive income, unless the recognition of the

effects of changes in the liability’s credit risk in other

comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining

amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable

to a financial liability’s credit risk that are recognised in other comprehensive income are not subsequently

reclassified to profit or loss; instead, they are transferred to retained earnings upon derecognition of the

financial liability.

Gains or losses on financial guarantee contracts issued by the Fund that are designated by the Fund as at

FVTPL are recognised in profit or loss.

Financial liabilities measured subsequently at amortised cost

Financial liabilities that are not:

contingent consideration of an acquirer in a business combination, or

held

‑

for

‑

trading, or

designated as at FVTPL

are measured subsequently at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of

allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts

estimated future cash payments (including all fees and points paid or received that form an integral part of the

effective interest rate, transaction costs and other premiums or discounts) through the expected life of the

financial liability, or (where appropriate) a shorter period, to the amortised cost of a financial liability.

All the

Fund’s liabilities are classified as financial liabilities measured subsequently at amortised cost, with the

exception of derivative financial instruments. Derivative financial instruments are classified as Financial

liabilities at FVTPL.

Derecognition of financial liabilities

The Fund derecognises financial liabilities when, and only when, the Fund’s obligations are discharged,

cancelled, or have expired. The difference between the carrying amount of the financial liability derecognised

and the consideration paid and payable is recognised in profit or loss.

When the Fund exchanges with the existing lender one debt instrument into another one with substantially

different terms, such exchange is accounted for as an extinguishment of the original financial liability and the

recognition of a new financial liability. Similarly, the Fund accounts for substantial modification of terms of an

existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new

liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows

under the new terms, including any fees paid net of any fees received and discounted using the original

effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of

the original financial liability.

If the modification is not substantial, the difference between:

the carrying amount of the liability before the modification; and

the present value of the cash flows after modification should be recognised in profit or loss as the

modification gain or loss within other gains and losses.

13.9.3.3 Derivative financial instruments

The Fund enters into a variety of derivative financial instruments to manage its exposure to interest rate and

foreign exchange rate risks, including foreign exchange forward contracts, options and interest rate swaps.

Derivative financial instruments are recognised initially at fair value at the date a derivative contract is entered

into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is

recognised in profit or loss immediately unless the derivative is designated and effective as a hedging

instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge

relationship.

A derivative financial instrument with a positive fair value is recognised as a financial asset whereas a

derivative financial instrument with a negative fair value is recognised as a financial liability. Derivative financial

instruments are not offset in the Consolidated Financial Statements unless the Fund has both the legal right

and the intention to offset. A derivative financial instrument is presented as a non

‑

current asset or a non

‑

current

liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised

or settled within 12 months.

Other derivative financial instruments are presented as current assets or current liabilities.

13.10

INVESTMENT PROPERTY

13.10.1 General

Investment property comprises owned investment property, as well as right-of-use assets.

Investment property is property that is held to realise rental income or an increase in value, or both. The initial

recognition of investment properties is at cost including related transaction costs. Additions to investment

property also includes letting fees. After initial recognition, investment properties are carried at fair value, with

an adjustment for the carrying amount of lease incentives.

Right-of-

use assets are assets that represent a lessee’s right to use an underlying asset for the lease term.

For the accounting principles of right-of-use assets reference is made to section 13.35

“Leases”.

Lease incentives are initially and subsequently measured at historical cost. Lease incentives are allocated

proportionally to subsequent periods.

The time of accounting an investment property sale is based on an assessment of the time when control is

transferred. The Fund believes that control is transferred when the investment property is transferred to the

buyer and this party can therefore actually dispose of the investment property.

13.10.2

Measurement of fair value

Fair value is the price that would be received for an asset in an orderly transaction between market participants

at the measurement date and adjusted, if necessary, for differences in the nature, location, or condition of the

specific asset. If this information is not available, the Fund uses alternative valuation methods, such as recent

prices on less active markets or discounted cash flow or capitalisation projections. Valuations are performed

as at Statement of Financial Position

’s date

. External valuations are performed by an independent appraiser

with relevant recognised qualifications and recent experience with the location and the type of property. The

valuations have been made in accordance with the appropriate sections of the current RICS Valuation

Standards. The fair values are based on market values, being the estimated amount for which a property could

be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction

after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Considering the type of investment property Level 3 fair value hierarchy is applied for all real estate assets in

the portfolio.

The valuations are made on the basis of the total of the net annual rents generated by the properties and,

where relevant, the associated costs. The major sources of uncertainty in estimates are as follows:

development of rents;

capitalisation factor for transactions;

fair rents per type of property;

property prices;

vacancy;

remaining period of non-cancellable rental contracts.

Three standard methods of valuation computation are considered, namely:

term and reversion method;

II.

hard core and top-slice method;

III.

initial yield method.

Term and reversion method

The term and reversion method involves the following: net income up to the end of the contract term and the

market-based net income over the following at least ten years are discounted back to the valuation date

(“term”). For the time after this period, the st

abilised net rental income is capitalised at the market interest rate

and also discounted back to the valuation date to determine the perpetual yield (“reversion”). Depending on

the estimates of risk

–

which are based on the type of property, location and region as well as current market

circumstances

–

different discount rates are applied to the current rental income and the capitalisation of the

perpetual yield. The assumptions underlying the valuation, e.g. for risk, void periods, vacancies or

maintenance costs and capex are based on estimates by relevant market players, on derived data or the

appraisers’ experience. Capital expense (

CAPEX

) is expenditure in the foreseeable future which falls outside

the scope of the normal annual maintenance programme.

II.

Hard core and top-slice method

The hard core and top-slice method is similar to the logic behind the term and reversion model. Net income

generated by the property

–

up to the market rent (hard core component)

–

is capitalised at a normal market

interest rate as a perpetual yield over the entire term (term of the rental contract plus subsequent rental). The

top-slice component (the net income for this same term that exceeds the market rent) is then discounted at a

risk-adjusted market interest rate. The amount of the risk premium is dependent on the probability of vacancy.

III.

Initial yield method

The initial yield method applies a single all risks yield at the date of valuation, i.e. net income / gross purchase

price.

For all investment properties that are measured at fair value, the current use of the properties is their highest

and best use. In these Financial Statements all properties were externally valued using the

“h

ard core and top-

slice method

”

. In order to arrive at the valuation of the property, the annual net rents are capitalized using a

yield factor that reflects the specific risks inherent to the net cash flows.

13.10.3

Analysis of assumptions and input parameters used in the valuations per property category

The fair value is the outcome of the (theoretical) rent divided by the net initial yield (expressed as a percentage)

of the investment property. The yields applied are specific to the type of property, location, maintenance

condition and letting potential of each asset. The yields are determined based on comparable transactions, as

well as on market and asset-specific knowledge.

The most important assumptions and input parameters used in the valuations are mentioned in below tables.

2022

2021

No.

Property category

Yield factor

in %

Office

-class

6.11

–

9.00

6.00

–

9.00

Office

–

-class

7.50

–

9.75

7.50

–

9.00

Office / business

B / C-class

n/a

7.00

–

14.25

Retail B-class

7.50

–

9.25

7.00

–

7.75

2022

2021

No.

Property category

Market rent

per sqm

Market rent

per sqm

in € 1

In € 1

Office

-class

108

–

159

108

–

152

Office

–

-class

122

–

132

117

–

132

Office / business

B / C-class

n.a.

–

Retail B-class

–

157

–

153

2022

2021

No.

Property category

Vacancy

in %

Office

-class

0.0

–

24.0

4.8

–

16.1

Office

–

-class

13.2

–

40.4

6.5

–

38.3

Office / business

B / C-class

n/a

10.4

–

36.9

Retail B-class

0.0

–

32.7

0.0

–

22.0

Where necessary the following aspects are reflected in the valuation:

•

the type of tenant that uses the property or that is responsible for fulfilling the rental obligations, or

the type of tenant that is likely to use the property after vacancy, and the general expectation with

regard to their creditworthiness;

•

void periods, vacancies, and maintenance costs, which are based on estimates by relevant market

players, on derived data or the appraisers’ experience;

•

the residual economic life of the property. Standard and infinite economic life is assumed;

•

whereby it is assumed that in the case of rent adjustment or extension of the lease, in the case of

which a rent increase is expected, all notifications, and where necessary notices to the contrary,

meet all legal requirements and have been sent in good time.

Profits or losses arising from changes in the fair value are recognised in the Income Statement. In determining

the property fair value capitalized lease incentives are reflected in the valuation results, to avoid double

counting

At the valuation date, an unprecedented set of circumstances arose due to the war in Ukraine, and a lack of

relevant or sufficient market evidence on which valuators could base their judgments. Consequently, the

property valuations are reported as subject to material valuation uncertainty as per VPS 3 and VPGA 10 of the

RICS Valuation

–

Global Standards.

As of April 28, 2023, the Managing Board anticipates no adverse impact from developments in Ukraine on the

Fund

’

s remaining real estate portfolio in Central Europe. The Fund operates in countries that are members of

NATO, making it unlikely for Russia to attack any of these countries as it would trigger a counter-reaction from

other NATO members.

The yield factors 2021 and 2022 corresponds with the equivalent yield specifications of the external independent appraiser.

Higher yields are related to the leasehold retail assets.

13.11

INVESTMENT PROPERTY UNDER DEVELOPMENT

Property that is currently being constructed or developed for future use as investment property is classified as

investment property under development. Investment property under development is measured at fair value if

the fair value is considered to be reliably determinable. Investment property under development for which the

fair value cannot be determined reliably, but for which the Fund expects that the fair value of the property will

be reliably determinable when construction is completed, is measured at cost less impairment until the fair

value becomes reliably determinable or construction is completed

–

whichever is earlier.

It may sometimes be difficult to reliably determine the fair value of the investment property under development.

In order to evaluate this, the Managing Board considers the following factors, among others:

•

the provisions of the construction contract;

•

the stage of completion;

•

whether the project / property is standard (typical for the market) or non-standard;

•

the level of reliability of expected cash inflows after completion;

•

the development risk specific to the property;

•

past experience with similar constructions;

•

status of construction permits.

Costs include the material and labour for the construction, costs of staff directly related to technical supervision,

project management on the basis of time spent and finance costs. The finance cost is capitalised interest that

is charged until the date of delivery and is based on the interest to be allocated to development or on the basis

of the average effective rate of the Fund, where no specific project financing is present. Interest charges

include interest and all costs associated with the Fund.

Capitalised interest will cease when substantially all the activities necessary to prepare the investment property

under development for its intended use or sale are complete.

The fair value of investment property under development is determined on an identical basis to investment

property, with the understanding that the capitalisation factor is adjusted to reflect development risks.

Fair value changes and impairment losses are recognised in the Income Statement as valuation result.

Investment property under development will be transferred to investment property on the date of delivery.

13.12

INVESTMENTS IN ASSOCIATES

An associate is an entity over which the Fund has significant influence.

Significant influence is the power to participate in the financial and operating policy decisions of the investee

but is not control or joint control of those policies. If the Fund holds, directly or indirectly (e.g. through

subsidiaries), 20 percent or more of the voting power of the investee, it is presumed that the Fund has

significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the Fund

holds, directly or indirectly (e.g. through subsidiaries), less than 20 percent of the voting power of the investee,

it is presumed that the Fund does not have significant influence, unless such influence can be clearly

demonstrated. A substantial or majority ownership by another investor does not necessarily preclude the Fund

from having significant influence.

The existence of significant influence by the Fund is usually evidenced in one or more of the following ways:

representation on the board of directors or equivalent governing body of the investee;

participation in policy-making processes, including participation in decisions about dividends or other

distributions;

material transactions between the Fund and its investee;

interchange of managerial personnel; or

provision of essential technical information.

The Fund may own share warrants, share call options, debt or equity instruments that are convertible into

ordinary shares, or other similar instruments that have the potential, if exercised or converted, to give the Fund

additional voting power or to reduce another party’s voting power over the financial and operating policies of

another entity (i.e. potential voting rights). The existence and effect of potential voting rights that are currently

exercisable or convertible, including potential voting rights held by other entities, are considered when

assessing whether the Fund has significant influence. Potential voting rights are not currently exercisable or

convertible when, for example, they cannot be exercised or converted until a future date or until the occurrence

of a future event.

In assessing whether potential voting rights contribute to significant influence, the Fund examines all facts and

circumstances (including the terms of exercise of the potential voting rights and any other contractual

arrangements whether considered individually or in combination) that affect potential rights, except the

intentions of Managing Board and the financial ability to exercise or convert those potential rights.

The Fund loses significant influence over an investee when it loses the power to participate in the financial

and operating policy decisions of that investee. The loss of significant influence can occur with or without a

change in absolute or relative ownership levels. It could occur, for example, when an associate becomes

subject to the control of a government, court, administrator, or regulator. It could also occur as a result of a

contractual arrangement.

Usually investments in associates are valued using the equity method. Since the investments in associates is

held by, or is held indirectly through a “mutual fund” the Fund elect

to measure the investments in associates

at fair value through profit or loss in accordance with IFRS 9 (IAS 28:18). Therefore investments in associates

are initially and subsequently recognised at fair value, with transaction costs recognised in the Income

Statement.

13.13

INVENTORIES

Inventories are assets:

held for sale in the ordinary course of business;

in the process of production of such sale; or

in the form of materials or supplies to be consumed in the production process or in the rendering of

services.

Inventories encompass goods purchased and held for resale including, for example merchandise purchased

by a retailer and held for resale, or land and other property held for resale. Inventories also encompass finished

goods produced, or work in progress being produced, by the Fund and include materials and supplies awaiting

use in the production process.

Inventories are recognised initially at cost, including transaction costs, which represents their fair value at the

time of acquisition and are subsequently measured at the lower of cost and net realisable value.

Costs include the material and labour for the construction, costs of staff directly attributable to technical

supervision, project management on the basis of time spent and finance costs. The finance cost is capitalised

interest that is charged until the date of delivery and is based on the interest to be allocated to inventories or

on the basis of the average effective rate of the Fund, where no specific project financing is present. Interest

charges include interest and all costs associated with the Fund.

Capitalised interest will cease when substantially all the activities necessary to prepare the inventories for their

intended use or sale are complete.

Net realisable value represents the estimated selling price in the ordinary course of business less all estimated

costs of completion and costs to be incurred in marketing, selling and distribution.

13.14

DERIVATIVE FINANCIAL INSTRUMENTS

For the accounting principles with regard to derivative financial instruments (assets and liabilities) reference is

made to section 13.9

“Financial instruments”.

13.15

DEFERRED TAX ASSETS

For the accounting principles with regard to deferred tax assets reference is made to section 13.41

“Income

tax expense”.

13.16

TAX ASSETS

Tax assets comprise the expected tax receivable on the taxable amounts and any adjustments to the tax

receivable in respect of previous years. The amount of the tax receivable is the best estimate of the tax amount

expected to be received, reflecting uncertainty related to taxes.

13.17

TRADE AND OTHER RECEIVABLES

Trade and other receivables (without a significant financing component) are initially measured at the

transaction price and subsequently measured at amortised cost using the effective interest method, less

provision for impairment.

13.18

PREPAYMENTS AND DEFERRED EXPENSES

Prepayments and deferred expenses are initially and subsequently measured at historical cost. Prepayments

and deferred expenses are allocated proportionally to subsequent periods.

13.19

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and cash held in bank accounts. Time deposits are only included

in cash and cash equivalents if the expectation is that they will be used to fund working capital within a period

of three months or less from the date of acquisition. Cash and cash equivalents meet the definition given by

IFRS 9, i.e., short-term, highly-liquid investments that are readily convertible to known amounts of cash and

subject to an insignificant risk of changes in value.

Cash and cash equivalents are recognised and measured at fair value through profit or loss in accordance

with IFRS 9, as described in section

13.9 “Financial instruments”.

Cash In the Consolidated Statement of Cash Flows bank overdrafts at call, which constitute an integral part of

the Fund’s

asset management, form part of cash and cash equivalents.

13.20

ASSETS HELD FOR SALE

13.20.1 General

Non-current assets or disposal groups comprising assets and liabilities are classified as held for sale if it is

highly probable that they will be recovered primarily through sale rather than through continuing use. This only

applies if the asset or disposal group is available for immediate sale in its present condition. Furthermore, the

sale must be highly probable, the Managing Board must be committed to a plan to sell the asset or disposal

group and an active programme to locate a buyer must have been initiated. It is expected the sale will

principally be completed within one year from the date of classification.

13.20.2

Measurement of fair value

Assets or disposal groups held for sale are generally measured at the lower of their carrying amount and fair

value less cost of disposal, except for investment property. Investment property held for sale and right-of-use

assets held for sale are measured in accordance with section 13.10

“

Investment property

”. Any impairment

loss on a disposal group is allocated to the remaining assets and liabilities on a pro rata basis, except that no

loss is allocated to financial assets, deferred tax assets or investment property, which continue to be measured

in accordance with the

Fund’s

regular accounting policies. Impairment losses on initial classification as held

for sale or held for distribution and subsequent gains and losses on re-measurement are recognised in the

Income Statement.

Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised

or depreciated, and any equity-accounted investee is no longer equity accounted.

13.21

GROUP EQUITY

For the accounting principles of the several

shareholders’

equity components reference is made to sections

18.3.3

“

Issued capital

”

to 18.3.7

“

Reserve investments in group companies

”

13.22

TAX LIABILITIES

Tax liabilities comprise the expected tax payable on the taxable amounts and any adjustments to the tax

payable in respect of previous years. The amount of the tax payable is the best estimate of the tax amount

expected to be paid, reflecting uncertainty related to taxes.

13.23

LOANS AND BORROWINGS

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred and subsequently

measured at amortised cost, with any difference between cost and the redemption amount being stated in the

Income Statement over the term of the loans using the effective interest method.

13.24

TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost

using the effective interest method.

13.25

DEFERRED INCOME AND TENANT DEPOSITS

Deferred income and tenant deposits are initially and subsequently measured at historical cost. Deferred

income is allocated proportionally to subsequent periods. Tenant deposits are recognised at their received

amounts.

13.26

DEFERRED TAX LIABILITIES

For the accounting principles with regard to the deferred tax liabilities reference is made to section 13.41

“Income tax expense”.

13.27

GROSS RENTAL INCOME

Gross rental income from investment properties is stated in the Income Statement excluding Value Added Tax

(VAT), on the basis of the period of the lease. If the investment property has been acquired during the financial

period, the rental income is accounted as of the date of acquisition by the Fund. If office or other equipment is

leased together with the premises, this is included in the rental income.

Rent adjustments due to indexation are recognised as they arise.

Rent-free periods and investments made, or allowances granted to tenants by the Fund (lease incentives) are

allocated on a linear basis over the lease term. The lease term consists of the period until the first break option

for the tenants, which period can be extended by the Managing Board with the expected prolongation of the

leases.

Revenue received from tenants for early termination of leases is directly recognised in the Income Statement

as it arises.

13.28

SERVICE CHARGE INCOME AND SERVICE CHARGE EXPENSES

The Fund is acting as principal for service charge income. Service charge income corresponds to service

charges invoiced to tenants and is presented separately in the Income Statement. Service charge income is

recorded as income in the period in which it is earned.

Service charge expenses cover the costs of services such as general maintenance and repairs, security,

heating, cooling, lighting and cleaning of common areas. Service charge expenses are recognised in the

Income Statement of the period to which they relate.

13.29

PROPERTY OPERATING EXPENSES

Property operating expenses consist mainly of maintenance costs, property taxes, insurance premiums and

management and collection costs. Service charges are stated separately in the Income Statement. If the

investment property has been acquired during the financial period, the direct operating expenses are

accounted for from the date of acquisition by the Fund.

13.30

VALUATION RESULTS OF PROPERTIES

The valuation results of properties (inventories excluded) are unrealised changes in the fair value of properties

compared to the fair value as at 31 December of the preceding financial period. In case (part of) a property is

sold the valuation result of properties also includes the reversal of the unrealised changes in the fair value

from prior years (reference is made to section 13.31

“Results on disposals of properties”)

13.31

RESULTS ON DISPOSALS OF PROPERTIES

The results on disposals of properties comprise realised results on disposals of properties (inventories

excluded). This result is calculated by the difference between the selling price less the original purchase price.

Therefore, the results on disposals of properties comprise the valuation result of properties in the current year

as well as the unrealised valuation results of properties booked in prior years.

13.32

(REVERSAL OF) IMPAIRMENT ALLOWANCE OF INVENTORIES

The (reversal of) impairment allowance of inventories relate to (reversal of) impairment changes of the

inventories in relation to the valuation as at 31 December of the preceding financial period.

13.33

RESULTS OF DISPOSALS OF INVENTORIES

The results on disposals of inventories relate to realised results on disposals of inventories. This result is

calculated by the difference between the selling price less valuation as at 31 December of the preceding

financial period.

13.34

SHARE OF RESULTS OF INVESTMENTS IN ASSOCIATES

The share of results of investments in associates are unrealised changes in the fair value of investments in

associates compared to the fair value as at 31 December of the preceding financial period. In case (part of)

an investment in associate is sold the valuation result of investment in associates also includes the reversal of

the unrealised changes in the fair value from prior years (reference is made to

section 13.35 “Results on

disposals of investments in associates”).

13.35

RESULTS OF DISPOSALS OF INVESTMENTS IN ASSOCIATES

The results on disposals of investments in associates relate to realised results on disposals of investments in

associates. This result is calculated by the difference between the selling price less the original purchase price.

Therefore the results on disposals of investments in associates comprise the valuation result of investments

in associates in the current year as well as the unrealised valuation results of investments in associates booked

in prior years.

13.36

FINANCIAL INCOME

Interest income on funds invested is recognised in the Income Statement as it accrues.

Given the nature of the Fund (investment company) financial income is not netted against finance charges,

but presented separately under the total income, except:

•

foreign exchange and currency results;

•

change in fair value of derivative financial instruments;

•

interest income / interest expense on derivative financial instruments; and

•

interest income / interest expense of Tax Authorities.

Financial income arises principally from the investments held in order to be used for investment in property.

Financial income also includes the exchange and currency translation profits that arise principally from the

settlement of monetary items or from the translation of monetary items in foreign currency.

Financial income also includes the positive changes in fair value of derivative financial instruments.

13.37

OTHER OPERATING INCOME

Other operating income is recognised in the Income Statement when it is probable that the economic benefits

will flow into the Fund and the (net) revenues can be measured reliably.

Other operating income also includes penalties for early termination of rental contracts. Tenants who terminate

leases prior to the contractual expiration date are liable to pay early termination penalties, which are credited

to income for the period in which they are recognised.

13.38

LEASES

At inception of a contract, the Fund assesses whether a contract is, or contains, a lease. A contract is, or

contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time

in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified

asset, the Fund uses the definition of a lease in IFRS 16.

13.38.1

The Fund as a lessee

At commencement or on modification of a contract that contains a lease component, the Fund allocates the

consideration in the contract to each lease component on the basis of its relative stand-alone prices. However,

for the leases of property the Fund has elected not to separate non-lease components and account for the

lease and non-lease components as a single lease component.

The Fund recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-

use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any

lease payments made at or before the commencement date, plus any initial direct costs incurred and an

estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site

on which it is located, less any lease incentives received.

The right-of-use asset is subsequently measured at cost (subject to certain exceptions), less accumulated

depreciation and impairment losses or, if it relates to investment property the right-of-use will be valued at fair

value in line with IAS 40. The right-of-use will additionally be adjusted for any remeasurement of the lease

liability, when applicable.

The lease liability is initially measured at the present value of the lease payments that are not paid at the

commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily

determined, the Fund

’s incremental borrowing rate. Generally,

the Fund uses its incremental borrowing rate

as the discount rate.

The Fund determines its incremental borrowing rate by obtaining interest rates from various external financing

sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

•

fixed payments, including in-substance fixed payments;

•

variable lease payments that depend on an index or a rate, initially measured using the index or rate

as at the commencement date;

•

amounts expected to be payable under a residual value guarantee; and

•

the exercise price under a purchase option that the Fund is reasonably certain to exercise, lease

payments in an optional renewal period if the Fund is reasonably certain to exercise an extension

option, and penalties for early termination of a lease unless the Fund is reasonably certain not to

terminate early.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease

payment made. It is remeasured when there is a change in future lease payments arising from a change in an

index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee,

or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain

to be exercised or a termination option is reasonably certain not to be exercised.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount

of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been

reduced to zero.

13.38.2

Short-term leases and low value assets

The Fund has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets

(USD 5,000 or less) and short-term leases. The Fund recognises the lease payments associated with these

leases as an expense on a straight-line basis over the lease term.

13.38.3

The Fund as a lessor

At inception or on modification of a contract that contains a lease component, the Fund allocates the

consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When the Fund acts as a lessor, it determines at lease inception whether each lease is a finance lease or an

operating lease.

To classify each lease, the Fund makes an overall assessment of whether the lease transfers substantially all

of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a

finance lease; if not, then it is an operating lease. As part of this assessment, the Fund considers certain

indicators such as whether the lease is for a major part of the economic life of the asset.

When the Fund is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease

separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising

from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which

the Fund applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Fund applies IFRS 15 to allocate the

consideration in the contract.

The Fund applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease.

The Fund further regularly reviews estimated unguaranteed residual values used in calculating the gross

investment in the lease.

The Fund recognises lease payments received under operating leases as income on a straight-line basis over

the lease term as part of other operating income.

Generally, the accounting policies applicable to the Fund as a lessor in the comparative period did not differ

from IFRS 16.

13.39

ADMINISTRATIVE EXPENSES AND OTHER OPERATING EXPENSES

Administrative expenses and other operating expenses are recognised in the Income Statement. Expenses

may only be deferred if they meet the definition of an asset.

13.40

FINANCIAL EXPENSES

Financial expenses comprise the interest expense on funds taken up, calculated using the effective interest

method, exchange, and currency translation losses, which arise principally from the settlement of monetary

items, or in the translation of monetary items in foreign currency.

Financial expenses also include the negative changes in fair value of derivative financial instruments.

Interest expense is recognised in the Income Statement as it accrues, by means of the effective interest rate

method.

13.41

INCOME TAX EXPENSE

13.41.1

Income tax expense

The income tax expense for the financial period comprises current and deferred tax. It is recognised in Income

Statement except to the extent that it relates to a business combination, or items recognised in equity or

comprehensive income.

13.41.2 Current tax

The current tax comprises the expected tax payable or receivable on the taxable statement of income for the

financial period and any adjustments to the tax payable or receivable in respect of previous years. The amount

of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that

reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively

enacted as at Statement of Financial Position

’s date

. Current tax also includes any tax arising from dividends.

Tax assets and liabilities are offset only if certain criteria are met.

13.41.3 Deferred tax

Deferred tax is recognised in respect of taxable and / or deductible temporary differences between the carrying

amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes.

Deferred tax is not recognised for:

•

taxable and / or deductible temporary differences on the initial recognition of assets or liabilities in a

transaction that is not a business combination and that affects neither accounting nor taxable profit

or loss (“Initial Recognition Exception”);

•

taxable and / or deductible temporary differences related to investments in subsidiaries, associates

and joint arrangements to the extent that the Fund is able to control the timing of the reversal of the

taxable temporary differences and it is probable that they will not reverse in the foreseeable future;

•

taxable and / or deductible temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary

differences to the extent that it is probable that future taxable profits will be available against which they can

be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences.

If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then

future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the

business plans for individual subsidiaries in the Fund. Deferred tax assets are reviewed at each Statement of

Financial Position

’s date

and are reduced to the extent that it is no longer probable that the related tax benefit

will be realised; such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each Statement of Financial Position

’s date

and

recognised to the extent that it has become probable that future taxable profits will be available against which

they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to taxable temporary differences

when they reverse, using tax rates enacted or substantively enacted at the Statement of Financial Position

’s

date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which

the Fund expects, at Statement of Financial Position

’s date, to recover or settle the carrying amount of its

assets and liabilities. For this purpose, the carrying amount of properties measured at fair value is presumed

to be recovered through sale, and the Fund has not rebutted this presumption.

Deferred tax assets and deferred tax liabilities are not discounted.

Deferred tax assets and liabilities are offset in case the Fund or its subsidiaries has a legally enforceable right

to set-off tax assets against tax liabilities and the deferred tax assets and the deferred tax liabilities relate to

income taxes levied by the same Tax Authority.

SEGMENT

INFORMATION

14.1

GENERAL

Segment information is given for each operating segment. An operating segment is a component of the Fund:

•

that engages in business activities from which it may earn revenues and incur expenses (including

revenues and expenses related to transactions with other components of the Fund);

•

whose operating results are used by the fund manager to make decisions about resources to be

allocated to the segment and to regularly review and assess its performance; and for which discrete

financial information is available.

Given the Fund’s management decision

-making structure and internal reporting structure each property is

indicated as an operating segment. The properties held during the financial period (current period and / or

previous period), as mentioned in section 14.5.1

“

Overview of segment result (Overview A)

”,

are taken into

account in the segment reporting overviews.

The following segment reporting overviews are given for each property:

overview of segment result (net operating income),

apportioned to the Fund’s geographic categories;

overview

carrying amount of type of property, apportioned to the Fund’s

business categories;

verview of assets apportioned to the Fund’s geographic categories

Since each separate property is indicated as an operating segment, most of the Fund’s assets cannot be

allocated to the operating segments. Therefore only the carrying amount of each property is reported as a

segment asset. For an overview of the carrying amount of each type of property reference is made to section

14.5.3

“

Overview carrying amount of type of property per business category (overview B)

”.

14.2

GEOGRAPHIC CATEGORIES

The Fund distinguishes the following geographic categories:

Czech Republic;

Slovakia;

Poland;

Ukraine;

Bulgaria;

Romania;

The Netherlands;

Other countries.

14.3

BUSINESS CATEGORIES

The Fund distinguishes the following business categories:

Office;

Retail;

Residential;

Land.

14.4

SEGMENTATION CRITERIA

The Fund uses the following segmentation criteria of its assets:

•

if the assets in an individual foreign country represent more than 1% of the total assets as at

Statement of Financial Position

’

s date, these assets shall be disclosed separately. If those assets

represent less than 1% of the total assets as at Statement of Financial Position

’s date,

these items

will be allocated as other countries

. The assets located in the Fund’s country o

f domicile are

disclosed separately, also in case these assets are less than 1% of the total assets;

•

the allocation of the property is based on the geographic location of the premises;

•

the allocation of deferred tax assets is based on the geographic location of the company which

generated the deferred tax assets;

•

the allocation of investments in associates and other equity investments is based on the business

location of the company the Fund invests in;

•

the allocation of other assets (tax assets, trade and other receivables, prepayments and deferred

expenses and cash and cash equivalents) is based on the geographic location of the debtor and / or

contracting party.

The allocation of segment results to the several geographic categories is based on the geographic location of

the premises.

14.5

SEGMENT RESULTS

14.5.1

Overview of segment result (overview A)

Segment

Gross

rental income

Service

charge income

Service

charge expenses

Property

operating

expenses

Subtotal net

rental &

related income

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

in € 1,000

Czech Republic:

Palmovka

313

268

128

105

-/- 97

-/- 75

-/- 77

-/- 92

267

206

Karlin

475

472

199

175

-/- 175

-/- 136

-/- 123

-/- 132

376

379

VUP

217

218

208

181

-/- 202

-/- 161

-/- 81

-/- 74

142

164

PV 10

310

312

144

140

-/- 131

-/- 103

-/- 90

-/- 95

233

254

Total Czech Republic

1,315

1,270

679

601

-/- 605

-/- 475

-/- 371

-/- 393

1,018

1,003

Slovakia:

Záhradn

cka

317

325

-/- 89

-/- 81

-/- 131

-/- 128

108

124

Pražská 2

422

-/- 10

-/- 177

-/- 15

-/- 157

Pražská 4

364

-/- 9

-/- 111

-/- 13

-/- 123

-/- 4

132

Letná

1,200

1,227

-/- 213

-/- 167

-/- 348

-/- 321

660

753

Vural

n.a.

409

n.a.

-/- 207

n.a.

-/- 170

n.a.

Kosmalt

n.a.

243

n.a.

-/- 139

n.a.

-/- 123

n.a.

-/- 14

Total Slovakia

1,562

2,990

-/- 321

-/- 882

-/- 507

-/- 1,022

766

1,176

Poland:

Laubitza 8

137

148

-/- 70

-/- 64

-/- 62

-/- 76

800-lecia Inowroclawia

165

162

137

156

-/- 140

-/- 135

-/- 92

Krzemowa

261

253

182

156

-/- 134

-/- 114

-/- 85

-/- 77

224

218

Plutona

150

117

-/- 76

-/- 65

-/- 34

-/- 56

Kalinkowa

259

233

176

151

-/- 165

-/- 155

-/- 81

-/- 110

189

119

Wojska Polskiego

274

258

203

173

-/- 162

-/- 146

-/- 89

226

196

Wolnosci

166

161

-/- 100

-/- 88

-/- 62

-/- 57

Grzymaly Siedleckiego

238

234

109

-/- 104

-/- 95

-/- 29

-/- 28

214

204

Kardyn. Wyszynskiego

171

195

123

100

-/- 108

-/- 102

-/- 61

-/- 45

125

148

Legionow

353

319

202

138

-/- 170

-/- 166

-/- 61

-/- 75

324

216

Maris

775

757

408

269

-/- 316

-/- 297

-/- 150

-/- 160

717

569

Total Poland

2,949

2,837

1,722

1,388

-/- 1,545

-/- 1,427

-/- 806

-/- 865

2,320

1,933

Ukraine:

Aisi Bela

-/- 2

-/- 31

-/- 30

-/- 31

-/- 32

Bulgaria:

Boyana

-/- 71

-/- 51

-/- 71

-/- 51

Inventories

-/- 79

-/- 19

-/- 79

-/- 19

Total Bulgaria

-/- 150

-/- 70

-/- 150

-/- 70

Romania:

EOS Business Park

339

n.a.

-/- 45

n.a.

294

n.a.

Delenco

n.a.

-/- 26

n.a.

-/- 26

n.a.

Total Romania

339

n.a.

-/- 71

n.a.

268

n.a.

Grand total

6,165

7,097

2,433

2,079

-/- 2,471

-/- 2,786

-/- 1,936

-/- 2,380

4,191

4,010

Segment

Subtotal net

rental &

related income

Net results on

properties and

equity

investments

Other operating

income

Financial

expenses

Total segment

result

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

in € 1,000

Czech Republic:

Palmovka

267

206

-/- 20

269

247

475

Karlin

376

379

-/- 227

-/- 65

220

315

VUP

142

164

947

480

1,089

644

PV 10

233

254

-/- 35

433

198

687

Total Czech Republic

1,018

1,003

665

1,117

1,754

2,121

Slovakia:

Záhradn

cka

108

124

-/- 295

-/- 259

-/- 184

-/- 133

Pražská 2

-/- 92

-/- 449

-/- 90

-/- 361

Pražská 4

-/- 4

132

-/- 66

-/- 271

-/- 70

-/- 139

Letná

660

753

-/- 261

413

812

829

Vural

n.a.

-/- 765

n.a.

-/- 672

Kosmalt

n.a.

-/- 14

n.a.

-/- 31

n.a.

-/- 45

Total Slovakia

766

1,176

-/- 714

-/- 1,699

416

468

-/- 521

Poland:

Laubitza 8

-/- 66

-/- 227

-/- 7

-/- 166

800-lecia Inowroclawia

-/- 96

425

-/- 26

516

Krzemowa

224

218

-/- 48

208

176

426

Plutona

-/- 80

273

306

Kalinkowa

189

119

229

266

348

Wojska Polskiego

226

196

-/- 54

-/- 3

172

193

Wolnosci

-/- 70

362

440

Grzymaly Siedleckiego

214

204

-/- 403

-/- 197

202

Kardyn. Wyszynskiego

125

148

-/- 252

517

-/- 147

644

Legionow

324

216

-/- 157

486

119

652

Maris

717

569

-/- 342

401

375

970

Total Poland

2,320

1,933

-/- 1,491

2,705

753

4,531

Ukraine:

Aisi Bela

-/- 31

-/- 32

-/- 1,959

-/- 75

-/- 1,990

-/- 107

Bulgaria:

Boyana

-/- 71

-/- 51

-/- 1,829

-/- 21

-/- 1,900

-/- 72

Inventories

-/- 79

-/- 19

-/- 53

-/- 38

-/- 72

Total Bulgaria

-/- 150

-/- 70

-/- 1,788

-/- 74

-/- 1,938

-/- 144

Romania:

EOS Business Park

294

n.a.

710

n.a.

1,004

n.a.

Delenco

-/- 26

n.a.

-/- 68

n.a.

-/- 94

n.a.

Total Romania

268

n.a.

642

n.a.

910

n.a.

Grand total

4,191

4,010

-/- 4,645

1,949

487

-/- 43

5,880

Other operating income relates solely to penalties for early termination of rental contracts.

Financial expenses relate solely to interest expense on lease liabilities.

14.5.2

Reconciliation segment result with profit for the period

The reconciliation between the total segment results as calculated in section 14.5.1

“Overview of segment

result (overview A)”

with the profit for the period, as stated in the Consolidated Income Statement, is made

below.

2022

2021

in € 1,000

Total segment result (overview A)

-/- 43

5,880

Unallocated income:

Financial income

262

1,121

Other operating income

513

Less: early termination of rental contracts (allocated)

-/- 487

-/- 5

Subtotal unallocated income

288

1,140

Unallocated expenses:

Administrative expenses

705

648

Other operating expenses

1,348

1,281

Financial expenses

2,208

2,150

Less: interest expense on lease liabilities (allocated)

-/- 76

-/- 84

Subtotal unallocated expenses

4,185

3,995

Profit before income tax

-/- 3,940

3,025

Income tax expense

410

-/- 109

Profit for the period

-/- 4,350

3,134

14.5.3

Overview carrying amount of type of property

per business category

(overview B)

31-12-2022

31-12-2021

Segment

Carrying

amount

Carrying

amount

In € 1,000

Office:

Palmovka

3,597

3,458

Karlin

6,220

6,231

VUP

Sold

3,150

PV 10

6,651

6,476

Záhradnícka

3,786

4,054

Pražská 2

Sold

2,316

Pražská 4

Sold

2,234

Letná

12,810

13,100

Maris

9,040

9,220

EOS Business Park

5,346

Total office

47,450

50,239

Retail:

Laubitza 8

1,670

1,730

800-lecia Inowroclawia

2,670

2,750

Krzemowa

3,180

3,230

Plutona

1,900

1,970

Kalinkowa

2,700

2,610

Wojska Polskiego

3,310

3,370

Wolnosci

1,640

1,710

Grzymaly Siedleckiego

1,370

1,720

Kardyn. Wyszynskiego

2,160

2,370

Legionow

3,080

3,220

Total retail

23,680

24,680

Residential:

Inventories Boyana

1,835

1,765

Land:

Aisi Bela

958

3,387

Boyana

2,991

4,820

Total land

3,949

8,207

Grand total

76,914

84,891

14.5.4

Major tenants

The Fund reports one tenant (2021: one) with a gross rental income more than 10%

(i.e. € 8

05,000) of the

Fund’s total gross rental income.

This tenant, AT&T Global Network Services Slovakia s.r.o., is a tenant in the

Letná building, located in

Košice

, Slovakia.

Right-of-use assets excluded.

Based on main purpose of the property.

14.5.5

Overview of geographic assets (overview C)

Czech Republic

Slovakia

Poland

Ukraine

Bulgaria

31-12-2022

31-12-2021

31-12-2022

31-12-2021

31-12-2022

31-12-2021

31-12-2022

31-12-2021

31-12-2022

31-12-2021

in € 1,000

Investment property

16,468

19,315

12,810

17,154

34,014

35,297

688

4,820

Investment property under development

958

2,699

Investments in associates

n.a.

Derivative financial instruments

293

Deferred tax assets

432

427

119

Inventories

1,835

1,765

Tax assets

509

Trade and other receivables

1,006

237

454

201

263

Prepayments and deferred expenses

102

122

163

Cash and cash equivalents

1,374

318

249

273

1,196

931

Assets held for sale

3,786

4,550

2,991

18,887

20,064

17,633

22,533

36,014

37,168

977

3,511

4,831

6,658

Romania

The Netherlands

Other countries

Total

31-12-2022

31-12-2021

31-12-2022

31-12-2021

31-12-2022

31-12-2021

31-12-2022

31-12-2021

in € 1,000

Investment property

5,346

4,820

68,638

77,274

Investment property under development

958

2,699

Investments in associates

3,587

n.a.

3,587

n.a.

Derivative financial instruments

479

293

Deferred tax assets

432

605

Inventories

1,765

1,835

1,765

Tax assets

563

Trade and other receivables

144

408

422

1,996

1,199

Prepayments and deferred expenses

214

350

Cash and cash equivalents

1,833

207

4,740

1,744

Assets held for sale

6,777

4,550

9,154

6,658

1,836

210

887

422

90,219

90,566

100

NOTES

THE

CONSOLIDATED

FINANCIAL

STATEMENTS

15.1

SUBSIDIARIES

15.1.1

Consolidated subsidiaries

All subsidiaries of the Fund have been included in the consolidation. These are as follows:

31-12-2022

Name of subsidiary

Registered

office

Country of

incorporation

Proportion

of shares

held by the

Parent

Proportion

of shares

held by the

Group

In %

Arcona Capital RE Bohemia s.r.o.

Prague

Czech Republic

100.0

n.a.

Arcona Capital RE Slovakia s.r.o.

Bratislava

Slovakia

100.0

n.a.

Arcona Capital Real Estate Poland Sp. z o.o.

Warsaw

Poland

100.0

n.a.

Arcona Capital Real Estate Trio Sp. z o.o.

Warsaw

Poland

100.0

n.a.

Arcona Real Estate B.V.

Amsterdam

The Netherlands

100.0

n.a.

Arcona Poland B.V.

Amsterdam

The Netherlands

n.a.

100.0

Arcona Poland B.V. Project 5 Sp.k.

Warsaw

Poland

n.a.

100.0

Aisi Bela LLC

Kiev

Ukraine

100.0

n.a.

Boyana Residence E.O.O.D.

Sofia

Bulgaria

100.0

n.a.

Arcona Capital Real Estate Bulgaria Ltd.

Sofia

Bulgaria

100.0

n.a.

Arcona Black Sea Real Estate B.V.

Amsterdam

The Netherlands

100.0

n.a.

N-E Real Estate Park First Phase S.r.l.

Bucharest

Romania

n.a.

100.0

31-12-2021

Name of subsidiary

Registered

office

Country of

incorporation

Proportion

of shares

held by the

Parent

Proportion

of shares

held by the

Group

In %

Arcona Capital RE Bohemia s.r.o.

Prague

Czech Republic

100.0

n.a.

Arcona Capital RE Slovakia s.r.o.

Bratislava

Slovakia

100.0

n.a.

Arcona Capital Real Estate Poland Sp. z o.o.

Warsaw

Poland

100.0

n.a.

Arcona Capital Real Estate Trio Sp. z o.o.

Warsaw

Poland

100.0

n.a.

Arcona Real Estate B.V.

Amsterdam

The Netherlands

100.0

n.a.

Arcona Poland B.V.

Amsterdam

The Netherlands

n.a.

100.0

Arcona Poland B.V. Project 5 Sp.k.

Warsaw

Poland

n.a.

100.0

Aisi Bela LLC

Kiev

Ukraine

100.0

n.a.

Boyana Residence E.O.O.D.

Sofia

Bulgaria

100.0

n.a.

Arcona Capital Real Estate Bulgaria Ltd.

Sofia

Bulgaria

n.a.

Arcona Black Sea Real Estate B.V.

Amsterdam

The Netherlands

100.0

n.a.

N-E Real Estate Park First Phase S.r.l.

Bucharest

Romania

n.a.

15.1.2

Subsidiaries incorporated during the financial period

During the financial period the Fund incorporated no subsidiaries.

101

15.1.3

Subsidiaries acquired during the financial period

During the financial period the Fund acquired the following subsidiaries:

Subsidiary

Interest

Date of acquisition

In %

N-E Real Estate Park First Phase s.r.l.

100.0

June 21, 2022

The acquisitions during the financial period are not determined as a business combination (IFRS 3), but as an

asset acquisition. Therefore the result on acquisition of the identifiable assets acquired and liabilities assumed

are attributed to the acquired properties.

15.1.3.1

Acquisition of N-E Real Estate Park First Phase S.r.l.

The following table summarises the recognised amounts at fair value of assets acquired and liabilities assumed

at the date of acquisition, as well as the result on acquisition. The result on acquisition relates to the amount

by which the balance of the identifiable net assets acquired exceeds the consideration paid, including

acquisition-related costs. This surplus is attributed to the acquired properties.

21-06-2022

Identifiable assets acquired

and liabilities assumed

Recognised fair

values on

acquisition

Fair value

adjustments

Acquisition

carrying

amount

In € 1,000

Investment property

5,346

-/- 704

4,642

Tax assets

Trade and other receivables

Prepayments and deferred expenses

Cash and cash equivalents

Loans and borrowings

-/- 3,276

Tax liabilities

-/- 17

Deferred tax liabilities

-/- 704

704

Trade and other payables

-/- 29

Net identifiable assets acquired, and liabilities assumed

1,473

Result on acquisition

21-06-2022

In € 1,000

Balance of identifiable net assets and liabilities acquired

1,473

Consideration paid (by issuance of shares of the Parent Company)

-/- 1,473

Acquisition-related costs

Result on acquisition

15.1.4

Subsidiaries sold during the period

During the financial period the Fund sold no subsidiaries.

102

15.2

INVESTMENT PROPERTY

15.2.1

Analysis of investment property

31-12-2022

31-12-2021

In €

1,000

In € 1,000

Owned investment property (lease incentives excluded)

67,204

75,668

Lease incentives

140

209

Owned investment property

67,344

75,877

Right-of-use assets

1,294

1,397

68,638

77,274

15.2.2

Analysis of owned investment property

31-12-2022

31-12-2021

In € 1,000

Buildings (including underground)

67,344

70,369

Land plots

5,508

67,344

75,877

103

15.2.3

Specification of owned investment property

Name of property

Address

31-12-2022

31-12-2021

In €

1,000

In € 1,000

In ownership of Arcona Capital RE Bohemia s.r.o. (Czech Republic)

Palmovka

Na Žertvách 34, Prague

3,597

3,458

Karlin

Prvního Pluku 621/8a, Prague

6,220

6,231

VUP

Šujanovo námĕsti 3, Brno

Sold

3,150

PV 10

Politických Vězň

u 10, Prague

6,651

6,476

Subtotal

16,468

19,315

In ownership of Arcona Capital RE Slovakia s.r.o. (Slovakia)

Záhradnícka

Záhradnícka 46, Bratislava

n.a.

4,054

Letná

Letná 45, Ko

ice

12,810

13,100

Subtotal

12,810

17,154

In ownership of Arcona Capital Real Estate Poland Sp. z o.o. (Poland)

Laubitza

Laubitza 8, Inowroclaw

1,670

1,730

Lecia Inowroclawia

800-lecia Inowroclawia 27, Inowroclaw

2,670

2,750

Krzemowa

Krzemowa 1, Gdansk

3,180

3,230

Plutona

Plutona 1, Glogow

1,900

1,970

Kalinkowa

Kalinkowa 82, Grudziadz

2,700

2,610

Wojska Polsiekgo

Wojska Polskiego 137, Piotrkow Trybunalski

3,310

3,370

Wolnosci

Wolnosci 6, Slupsk

1,640

1,710

Subtotal

17,070

17,370

In ownership of Arcona Capital Real Estate Trio Sp. z o.o. (Poland)

Grzymaly Siedleckiego

Grzymaly Siedleckiego 20, Bydgoszcz

1,370

1,720

Kardynala Wyszynskiego

Kardynala Wyszynskiego 107, Lodz

2,160

2,370

Legionow

Legionow 216, Torun

3,080

3,220

Subtotal

6,610

7,310

In ownership of Arcona Capital Poland B.V. Project 5 Sp.k. (Poland)

Maris

Holdu Pruskiego 9 & 12 Malopolska 12,

Szczecin

9,040

9,220

In ownership of Aisi Bela LLC (Ukraine)

Balabino Project

Territory of Balabynska Village Council,

Zaporizkyi District, Zaporizhzhia Region

688

In ownership of Boyana Residence E.O.O.D. (Bulgaria)

Boyana

Gardova Glava, Boyana

n.a.

4,820

In ownership of N-E Real Estate Park First Phase S.r.l. (Romania)

EOS Business Park

Strada Nicolae Cânea 140-160, Bucharest

5,346

67,344

75,877

104

15.2.4

Statement of changes in owned investment property

2022

2021

In € 1,000

Balance as at 1 January

75,877

75,674

Acquisitions

4,642

Additions

365

314

Fair value adjustments

-/- 3,737

3,508

Exchange rate differences

458

1,069

Disposals

-/- 9

Reclassification (to assets held for sale)

-/- 10,261

-/- 4,720

Balance as at 31 December

67,344

75,877

The

“

Acquisitions

”

amounting to €

4,642,000 pertains to the acquisition of EOS Business Park (Romania),

completed as of June 21, 2022.

On the other hand, the

“

Reclassification (to assets held for sale)

”

amounting to a negative €

10,261,000, is

attributed to the properties VUP (Czech Republic), Záhradnicka (Slovakia), and Boyana (Bulgaria) which have

been reclassified as assets held for sale. For further reference, please see section 15.13.4

“

Statement of

changes in owned investment property held for sale

”

15.2.5

Valuation of owned investment property

The owned investment property, stated under section 15.2.3

“

Specification of owned investment property

”,

was valued by an external, independent appraiser as at Statement of Financial Position

’s date

, with the

exception of the Zaporizhzhia plot and the Odessa plot, both in Ukraine. For the Odessa plot an internal

valuation was undertaken with reference to an external expert report. For further reference, please see

paragraph Invasion of Ukraine by Russia in section 13.3.

For the Zaporizhzhia plot the Managing Board resolved, considering the current situation in Ukraine and the

proximity of the site to the current front lines, to write down the value of the land plot prudently to zero. The

situation will be reviewed regularly

in consultation with the Fund’s local advisors.

The valuations are prepared for accounting purposes and are in accordance with relevant IFRS regulations.

15.2.6

Specification of right-of-use assets

Nature of right-of-use asset

Related to owned investment property

31-12-2022

31-12-2021

In € 1,000

Right-of-use held by Arcona Capital Real Estate Trio Sp. z o.o. (Poland)

Land lease

Grzymaly Siedleckiego

114

164

Land lease

Kardynala Wyszynskiego

342

381

Land lease

Legionow

838

852

1,294

1,397

15.2.7

Statement of changes in right-of-use assets

2022

2021

In € 1,000

Balance as at 1 January

1,397

1,494

Fair value adjustments

-/- 103

-/- 97

Balance as at 31 December

1,294

1,397

105

15.2.8

Valuation of right-of-use assets

The right-of-use assets, stated under section 15.2.6

“Specification of right

-of-

use assets”, were not valued by

an external, independent appraiser as at Statement of Financial Position’s date.

Right-of-use assets are initially

measured at cost, which compromises the initial amount of the lease liability adjusted by the amount of any

prepaid or accrued lease payment, less any lease incentives received. The right-of-use asset is subsequently

measured at fair value (subject to certain exceptions), less accumulated depreciation and impairment losses.

The right-of-use asset will additionally be adjusted for any remeasurement of the lease liability, when

applicable.

The Managing Board is of the opinion the above method is the most appropriate approach to the valuation of

right-of-use assets as required by IFRS 16.

15.2.9

Transactions with related parties

The property sale and purchase transactions executed during the financial period were not executed with

parties affiliated with the Managing Board or the Fund.

15.2.10 Sensitivity analysis

The appraisal of the buildings including underground, hereinafter referred to as the Portfolio implies an average

weighted

“

Reversion Yield

”

of 8.1% (December 31, 2021: 8.5%).

In case the yields used for the appraisals of the Portfolio as at Statement of Financial Position

’s date

had been

50 basis points higher, the value of the Portfolio would have decreased by 6.5% (December 31, 2021: 6.5%).

In this situation, the Group

equity would have been €

3,843,000 lower (December 31, 2021

: €

4,030,000 lower).

In case the yields used for the appraisals of the Portfolio as at Statement of Financial Position

’s date

had been

50 basis points lower, the value of the Portfolio would have increased by 7.5% (December 31, 2021: 7.4%). In

this situation, the Group

equity would have been €

4,415,000 higher (December 31, 2021

: €

4,602,000 higher).

A sensitivity analysis with possible changes in Yield and Estimated Rental Value (

ERV

) results in the following

changes in portfolio value:

31-12-2022

Change in

Change in yield

ERV

-/- 0.50%

-/- 0.25%

0.00%

0.25%

0.50%

-/- 5.0%

2.8%

-/- 0.9%

-/- 4.3%

-/- 7.5%

-/- 10.5%

-/- 2.5%

5.1%

1.4%

-/- 2.1%

-/- 5.5%

-/- 8.5%

0.0%

7.5%

3.6%

0.0%

-/- 3.4%

-/- 6.5%

2.5%

9.8%

5.9%

2.1%

-/- 1.3%

-/- 4.5%

5.0%

12.1%

8.1%

4.3%

0.8%

-/- 2.5%

31-12-2021

Change in

Change in yield

ERV

-/- 0.50%

-/- 0.25%

0.00%

0.25%

0.50%

-/- 5.0%

2.7%

-/- 0.9%

-/- 4.3%

-/- 7.5%

-/- 10.5%

-/- 2.5%

5.1%

1.4%

-/- 2.1%

-/- 5.4%

-/- 8.5%

0.0%

7.4%

3.6%

0.0%

-/- 3.3%

-/- 6.5%

2.5%

9.7%

5.8%

2.1%

-/- 1.3%

-/- 4.5%

5.0%

12.1%

8.1%

4.3%

0.8%

-/- 2.5%

The ERV

is the external appraisers’ opinion as to the open market rent which, on the date of valuation, could

reasonably be expected to be obtained on a new letting or rent review of an investment property.

106

15.3

INVESTMENT PROPERTY UNDER DEVELOPMENT

15.3.1

Specification of investment property under development

Name of property

Address

31-12-2022

31-12-2021

In € 1,000

In ownership of Aisi Bela LLC (Ukraine)

Bela Logistic Park

Territory of Nerubaiske Village Council,

Biliayivskyi District, Odesa Region

958

2,699

15.3.2

Statement of changes in investment property under development

2022

2021

In € 1,000

Balance as at 1 January

2,699

2,409

Fair value adjustments

-/- 1,341

-/- 7

Exchange rate differences

-/- 400

297

Balance as at 31 December

958

2,699

15.3.3

Valuation of investment property under development

The investment property under development, stated under section 15.3.1 “Specification of investment property

under

development”, w

as based on the internal valuation as at the

Statement of Financial Position’s date. The

fair values of investment property under development are primarily derived using the “

Market approach

”

based

on comparable properties in the market.

An external, independent expert stated that there is a much greater than usual degree of uncertainty in respect

of the reported value. There are two major external risks:

The lack of quality data due to severe market disruptions in several sectors. As of the valuation date,

the appraiser is faced with an unprecedented set of circumstances caused by war and a lack of

relevant and sufficient market evidence to base their judgments on.

The value is likely to be volatile over time. Given the unknown future impact of the war on the real

estate market, the expert recommends that the Managing Board frequently review the valuation of

the land plot.

Based on above the Managing Board decided to value the land plot at one-third (in original currency) of the

valuation (which was valued by an external, independent appraiser) as at December 31, 2021. This amount

corresponds approximately to the analysis according to the expert report as at Statement of Financial

Positio

n’s date.

107

15.4

INVESTMENTS IN ASSOCIATES

15.4.1

Specification of investments in associates

Name of project

Name of associate

Country

Asset type

31-12-2022

31-12-2021

In € 1,000

Delea Nuova Project

Lelar Holdings Limited and

S.C. Delenco Construct S.r.l.

Romania

Office

building

3,587

n.a.

31-12-2022

29-03-2022 to 31-12-2022

Name of project

Proportion

of shares

held by the

Group

Total

assets

Total

liabilities

Net rental

and related

income

Valuation

result of

properties

Profit for

the period

In %

In € 1,000

Delea Nuova

Project

24.35

17,281

2,555

1,056

-/- 1,240

-/- 391

As of March 29, 2022, the Fund had acquired a 21.18% share in Lelar Holdings Limited, through its subsidiary

Arcona Black Sea Real Estate B.V. Subsequently, on June 15, 2022, the Fund acquired an additional 3.17%

share in Lelar Holdings Limited, also through its subsidiary. As a result, the total interest in Lelar Holdings

Limited as of the Statement of Financial Position date amounted to 24.35%.

The fair value of the Fund’s share in Lelar Holdings Limited at acquisition’s date amounted to € 3,655,000. The

acquisition of Lelar Holdings Limited was paid through share-based payments. The agreed value of the share-

based payments amounted to € 4,293,00

0 (362,688 registered shares against a weighted average price of

€ 11.84). Besides there is a still payable amount of € 73,000 (see also section 19.9.7 “Acquisitions through

share-

based payments”). T

here was a IFRS 2.10 negative booking effect of

€ 711,00

0 (see also section 19.1.2

“Statement of changes in investments in group companies”).

15.4.2

Statement of changes in investments in associates

2022

2021

In € 1,000

Balance as at 1 January

Acquisitions

3,655

Share of results of investments in associates

-/- 68

Balance as at 31 December

3,587

15.5

DERIVATIVE FINANCIAL INSTRUMENTS

15.5.1

Specification of derivative financial instruments

31-12-2022

31-12-2021

In € 1,000

Non-current part of derivative financial instruments

372

141

Current part of derivative financial instruments

107

152

479

293

108

15.5.2

Specification of derivative financial instruments

31-12-2022

31-12-2021

In € 1,000

Interest rate swaps used for hedging

479

293

109

15.6

RECOGNISED DEFERRED TAXES

15.6.1

Specification of recognised deferred taxes

31-12-2022

Recognised

deferred tax

assets

Recognised

deferred tax

liabilities

Total

In € 1,000

Owned investment property

467

3,367

-/- 2,900

Receivables from shareholders and other group companies

-/- 97

Subtotal non-current investments

467

3,464

-/- 2,997

Tax losses (carried forward)

209

Trade and other receivables

Prepayments and deferred expenses

(Interest) receivables from shareholders and group companies

-/- 34

Assets held for sale

176

-/- 176

Loans and borrowings

Loans due to shareholders and other group companies

118

Interest due to shareholders and other group companies

Derivative financial instruments

-/- 71

Trade and other payables

Deferred taxes before set-off

1,009

3,760

-/- 2,751

Set-off deferred taxes

-/- 577

432

3,183

-/- 2,751

31-12-2021

Recognised

deferred tax

assets

Recognised

deferred tax

liabilities

Total

In € 1,000

Owned investment property

498

3,521

-/- 3,023

Receivables from shareholders and other group companies

-/- 71

Subtotal non-current investments

498

3,592

-/- 3,094

Tax losses (carried forward)

446

Trade and other receivables

Prepayments and deferred expenses

-/- 1

(Interest) receivables from shareholders and group companies

-/- 13

Assets held for sale

339

-/- 339

Loans and borrowings

-/- 9

Loans due to shareholders and other group companies

Interest due to shareholders and other group companies

Derivative financial instruments

-/- 65

Trade and other payables

Deferred income and tenant deposits

-/- 2

Deferred taxes before set-off

1,126

4,035

-/- 2,909

Set-off deferred taxes

-/- 521

605

3,514

-/- 2,909

110

15.6.2

Analysis of recognised deferred taxes

31-12-2022

31-12-2021

In € 1,000

In €

1,000

Will expire

112

256

Will never expire

-/- 2,863

-/- 3,165

-/- 2,751

-/- 2,909

An allocation of the recognised deferred tax assets to the various geographic segments is presented in section

14.5.5

“

Overview of geographic assets (overview C

)”.

15.6.3

Analysis of recognised deferred tax assets concerning tax losses (carried forward)

31-12-2022

31-12-2021

In € 1,000

Expires in 2025

112

187

Expires in 2026

Subtotal will expire

112

256

Will never expire

190

209

446

Based on the tax forecast the Managing Board expects (taking into account local tax law and regulations) that

in the future there will be sufficient taxable profit to set-off these recognised tax losses.

15.6.4

Statement of changes in recognised deferred taxes

2022

2021

In € 1,000

Balance as at 1 January

-/- 2,909

-/- 3,966

Adjustments related to prior years

-/- 42

Additions as a result of acquisitions

-/- 704

Additions / withdrawals

945

1,078

Change in tax rate

-/- 1

Exchange rate differences

-/- 41

-/- 24

Balance as at 31 December

-/- 2,751

-/- 2,909

111

15.7

UNRECOGNISED DEFERRED TAXES

15.7.1

Specification of unrecognised deferred taxes

31-12-2022

Unrecognised

deferred tax

assets

Unrecognised

deferred tax

liabilities

Total

In €

1,000

In € 1,000

Owned investment property

591

-/- 588

Investment property under development

351

Receivables from shareholders and group companies

489

Tax losses (carried forward)

2,491

Inventories

Trade and other receivables

(Interest) receivables from shareholders and other

group companies

Assets held for sale

124

Loans due to shareholders and other group companies

Trade and other payables

Interest due to shareholders and other

group companies

3,619

591

3,028

31-12-2021

Unrecognised

deferred tax

assets

Unrecognised

deferred tax

liabilities

Total

In € 1,000

Owned investment property

179

-/- 179

Investment property under development

174

Tax losses (carried forward)

2,294

Inventories

Trade and other receivables

Loans due to shareholders and other group companies

Trade and other payables

Interest due to shareholders and other

group companies

2,689

179

2,510

112

15.7.2

Analysis of unrecognised deferred taxes

31-12-2022

31-12-2021

In € 1,000

Will expire

258

228

Will never expire

2,770

2,282

3,028

2,510

15.7.3

Analysis of unrecognised deferred tax assets concerning tax losses (carried forward)

31-12-2022

31-12-2021

In € 1,000

Expires in 2022

Expires in 2023

Expires in 2024

Expires in 2025

Expires in 2026

116

Expires in 2027

Subtotal will expire

258

228

Will never expire

2,233

2,066

2,491

2,294

The Managing Board expects (taking into account local tax law and regulations) that in the future there will be

insufficient taxable profit to set-off these unrecognised tax losses. The unrecognised deferred tax assets

concerning tax losses (carried forward) which will never expire relates mainly to tax losses of the Parent

Company. Mainly as a result of applying the participation exemption in the Netherlands it is expected the

Parent Company will not generate taxable profits in the (near) future. Therefore the Managing Board is of the

opinion no deferred tax assets can be recognised for these tax losses (carried forward).

15.7.4

Statement of changes in unrecognised deferred taxes

2022

2021

In € 1,000

Balance as at 1 January

2,510

2,597

Adjustments related to prior years

-/- 20

Additions as a result of acquisitions

-/- 591

Additions / withdrawals

1,209

-/- 600

Change in tax rate

484

Exchange rate differences

-/- 112

Balance as at 31 December

3,028

2,510

15.8

TAX ASSETS

15.8.1

Specification of tax assets

31-12-2022

31-12-2021

In € 1,000

Non-current part of tax assets

Current part of tax assets

563

113

15.8.2

Specification of tax assets

31-12-2022

31-12-2021

In € 1,000

In €

1,000

Corporate income tax (

CIT

)

558

Value added tax (

VAT

)

Property tax

563

15.9

TRADE AND OTHER RECEIVABLES

15.9.1

Analysis of trade and other receivables

31-12-2022

31-12-2021

In € 1,000

Non-current part of trade and other receivables

650

490

Current part of trade and other receivables

1,346

709

1,996

1,199

15.9.2

Specification of trade and other receivables

31-12-2022

31-12-2021

In € 1,000

Trade receivables

353

516

Debt Service Reserve Account (

DSRA

)

650

490

Sold properties

877

Receivables Secure Management S.r.l.

114

Termination derivative financial instruments (interest rate swaps)

Receivables SPDI

Interest income

Invoiceable amounts

Other trade and other receivables

1,996

1,199

The “Sold properties” for the amount of € 877,000 relates to the

remaining part of the sold property VUP (Czech

Republic). This amount was received during the first quarter 2023.

The “Receivables SPDI”

for the amount of

€ 8,000 relates to an overpayment as a result of withholding tax.

15.9.3

Analysis of trade receivables

31-12-2022

31-12-2021

In € 1,000

Trade receivables (gross)

800

957

Total expected credit losses for trade receivables

-/- 447

-/- 441

353

516

114

15.9.4

Provision for doubtful trade receivables

The Fund always measures the loss allowance for trade receivables at an amount equal to lifetime expected

credit losses. The Fund has chosen to apply the “simplified model” for the calculation of the loss allowance for

trade receivables. The expected credit loss-rate is based on historical information (chosen is a 5-year history),

whereby the historical default loss percentage is adjusted for forecast information. The Fund presumed that

all trade receivables are homogenous. Usually, the Fund has recognised a loss allowance of 100% for

collective assessed expected credit losses with regard to trade receivables over one year past due (after

reduction of recoverable value added tax), because historical experience has indicated that these trade

receivables are generally not recoverable.

There has been no change in the estimation techniques or significant assumptions made during the current

reporting period.

The Fund writes-off on a trade receivable when there is information indicating the debtor is in severe financial

difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed into liquidation

or has entered into bankruptcy proceedings.

15.9.5

Risk profile of trade receivables

The following table details the risk

profile of trade receivables based on the Fund’s provision matrix.

31-12-2022

Not

past

due

Up to

1 month

past due

1 to

3 months

past due

3 months

to 1 year

past due

than 1

year

past due

Total

Expected credit loss rate

2.7%

3.6%

9.1%

29.0%

99.3%

Trade receivables (gross)

(in € 1,000)

185

112

428

800

Collective assessed expected credit

losses (in € 1,000)

-/- 5

-/- 4

-/- 9

-/- 425

-/- 447

Individually assessed expected

credit losses (in € 1,000)

Trade receivables (net) (in € 1,000)

353

31-12-2021

Not

past

due

Up to

1 month

past due

1 to

3 months

past due

3 months

to 1 year

past due

than 1

year

past due

Total

Expected credit loss rate

4.5%

3.3%

7.3%

18.8%

100.0%

Trade receivables (gross)

(in € 1,000)

178

120

150

112

397

957

Collective assessed expected credit

losses (in € 1,000)

-/- 8

-/- 4

-/- 11

-/- 21

-/- 397

-/- 441

Individually assessed expected

credit losses (in € 1,000)

Trade

receivables (net) (in € 1,000)

516

115

15.9.6

Movement in lifetime expected credit losses for trade receivables

The following table shows the movement in lifetime expected credit losses that has been recognised for trade

and other receivables in accordance with the

“

simplified approach

”

as set out in IFRS 9.

2022

Collective

assessed

expected credit

losses

Individually

assessed

expected credit

losses

Total expected

credit losses

In € 1,000

Balance as at 1 January

441

Additions as a result of acquisitions

Amounts written-off

-/- 63

Amounts recovered

-/- 92

Change in loss allowance due to new trade and

other receivables originated net of those

derecognised due to settlement

155

Exchange rate differences

-/- 1

Balance as at 31 December

447

2021

Collective

assessed

expected credit

losses

Individually

assessed

expected credit

losses

Total expected

credit losses

In € 1,000

Balance as at 1 January

821

-/- 96

725

Amounts written-off

-/- 470

-/- 395

Amounts recovered

-/- 56

Change in loss allowance due to new trade and

other receivables originated net of those

derecognised due to settlement

141

162

Exchange rate differences

Balance as at 31 December

441

15.10

PREPAYMENTS AND DEFERRED EXPENSES

15.10.1

Analysis of prepayments and deferred expenses

31-12-2022

31-12-2021

In € 1,000

Non-current part of prepayments and deferred expenses

Current part of prepayments and deferred expenses

214

327

214

350

116

15.10.2

Specification of prepayments and deferred expenses

31-12-2022

31-12-2021

In € 1,000

Deferred expenses

177

Prepayments

117

173

214

350

15.11

CASH AND CASH EQUIVALENTS

The cash and cash equivalents are at the free disposal of the Fund, with the exception of

€

481,000

(December 31, 2021

: €

183,000), which amount is retained on

reserve accounts (e.g. “Security Deposit

Account”, “Repair Reserve Account” and “CAPEX Account”)

15.11.1

Specification of cash and cash equivalents

31-12-2022

31-12-2021

In € 1,000

Bank balances

4,579

1,561

Deposits

161

183

4,740

1,744

15.12

INVENTORIES

15.12.1

Analysis of inventories

31-12-2022

31-12-2021

Name of inventory

Address

Quantity

Carrying

amount

Quantity

Carrying

amount

In € 1,000

In ownership of Boyana Residence E.O.O.D.

(Bulgaria)

Apartment 1-D

Residential Complex

Gardova Glava, Boyana

367

Apartment 3-C

Residential Complex

Gardova Glava, Boyana

426

Apartment 7-D

Residential Complex

Gardova Glava, Boyana

305

Apartment 8-E

Residential Complex

Gardova Glava, Boyana

482

Parking places

Residential Complex

Gardova Glava, Boyana

255

185

1,835

1,765

117

15.12.2

Statement of changes in inventories

2022

2021

In € 1,000

Balance as at 1 January

1,765

1,818

(Reversal of) impairments

-/- 53

Balance as at 31 December

1,835

1,765

The fair value of the inventories as at Statement of Financial P

osition’s date

€

3,256,000

(December 31, 2021

: €

2,070,000).

15.13

ASSETS HELD FOR SALE

15.13.1

Analysis of assets held for sale

31-12-2022

31-12-2021

In € 1,000

Owned investment property held for sale

6,777

4,550

15.13.2

Analysis of owned investment property held for sale

31-12-2022

31-12-2021

In € 1,000

Buildings (including underground)

3,786

4,550

Land plots

2,991

6,777

4,550

15.13.3

Specification of owned investment property held for sale

Name of property

Address

31-12-2022

31-12-2021

In € 1,000

In ownership of Arcona Capital RE Bohemia s.r.o. (Czech Republic)

VUP

Šujanovo námĕsti 3, Brno

Sold

n.a.

In ownership of Arcona Capital RE Slovakia s.r.o. (Slovakia)

Záhradnícka

Záhradnícka 46, Bratislava

3,786

n.a.

Pražská

Pražská 2

, Ko

ice

Sold

2,316

Pražská

4, Ko

ice

Sold

2,234

Subtotal

3,786

4,550

In ownership of Boyana Residence E.O.O.D. (Bulgaria)

Boyana

Gardova Glava, Boyana

2,991

n.a.

6,777

4,550

The Fund has identified the properties listed above as owned investment property held for sale. Within the

financial period, three of these properties (VUP,

Pražská 2, and Pražská 4) were successfully sold.

On August 18, 2022, VUP was sold for €

4,350,000 (CZK 106,744,000). Additionally, Pražská 2 and Pražská

4 were sold for a combined total of €

4,550,000 on January 19, 2022.

118

15.13.4

Statement of changes in owned investment property held for sale

2022

2021

In € 1,000

Balance as at 1 January

4,550

9,861

Reclassification (from owned investment property)

10,261

4,720

Additions

172

Fair value adjustments

795

-/- 1,343

Disposals

-/- 8,900

-/- 8,860

Balance as at 31 December

6,777

4,550

The amount of €10,261,000 was reclassified from owned investment

property and pertains to the following

properties: VUP in Czech Republic, Záhradnicka in Slovakia, and Boyana in Bulgaria. This reclassification is

described in section 15.2.4 of the

“

Statement of Changes in Owned Investment Property

”

15.13.5

Valuation of owned investment property held for sale

The owned investment property held for sale, as listed in section 15.13.3

“

Specification of Owned Investment

Property Held for Sale

”

, has been valued by an external, independent appraiser as of the Statement of

Financial Position

’

s date. These valuations have been prepared in compliance with the applicable IFRS

regulations, and are intended for accounting purposes.

15.14

GROUP EQUITY

15.14.1

“Closed

end” structure

The Fund operates as a closed-end investment company. Ordinary shares can be traded continuously through

Euronext Fund Services (

EFS

) in Amsterdam (The Netherlands).

The registered shares are currently restricted from trading on EFS and / or PSE.

On September 14, 2022, the Fund declared a buyback programme for its ordinary shares, with a maximum

limit of €

1.5 million. The execution of this buyback programme took place between September 15, 2022, and

March 15, 2023, or until the purchase of €

1.5 million worth of ordinary shares was completed, whichever came

first.

Ultimately, a partial cancellation of the ordinary shares by the shareholders

’

meeting will be proposed .

15.14.2 Capital management

All issued ordinary, treasury and registered shares are part of the

Fund’s capital management

responsibilities.

The

Fund’s objectives when managing capital are to safeguard the Fund’s ability to continue as a going

concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an

optimal capital structure to reduce the cost of capital. The Fund reserves the right to declare dividends and /

or distributions if the Managing Board so decides.

15.14.3

Equity components

For further analysis and statements of changes in the various equity components reference is made to section

19.

8.1 “Statement of changes in shareholders’ equity”

119

15.15

TAX LIABILITIES

15.15.1

Specification of tax liabilities

31-12-2022

31-12-2021

In € 1,000

Non-current part of tax liabilities

Current part of tax liabilities

509

700

509

700

15.15.2

Analysis of tax liabilities

31-12-2022

31-12-2021

In € 1,000

Corporate income tax (

CIT

)

150

475

Property tax

233

114

Value added tax (

VAT

)

Withholding tax (

WHT

)

509

700

15.16

LOANS AND BORROWINGS

15.16.1

Analysis of loans and borrowings

31-12-2022

Kind of loans and borrowings

Non-current

liabilities

Current

liabilities

Total

In € 1,000

Secured bank loans

13,804

16,371

30,175

Lease liabilities

991

171

1,162

Other loans and borrowings

2,418

2,370

4,788

17,213

18,912

36,125

31-12-2021

Kind of loans and borrowings

Non-current

liabilities

Current

liabilities

Total

In € 1,000

Secured bank loans

26,902

3,993

30,895

Lease liabilities

1,134

163

1,297

Other loans and borrowings

2,151

2,453

4,604

30,187

6,609

36,796

120

15.16.2

Statement of changes in secured bank loans

2022

2021

In € 1,000

Balance as at 1 January

30,895

33,378

Additions as a result of acquisitions

3,276

Loans advanced

14,009

Redemptions

-/- 4,260

-/- 16,810

(Amortisation) flat fee and transaction costs

-/- 136

Exchange rate differences

212

454

Balance as at 31 December

30,175

30,895

15.16.3

Analysis of secured bank loans

31-12-2022

Name of company

Name of

credit

institution

Date of

maturity

Weighted

average

interest

rate

Face value

Carrying

amount

In %

In € 1,000

Arcona Capital RE Bohemia s.r.o.

Sberbank CZ

31-03-2024

9.05

5,914

5,911

Arcona Capital RE Slovakia s.r.o.

Slovenská

Sporiteľňa

30-09-2024

3.64

5,792

5,791

Arcona Capital Real Estate Poland

Sp. z o.o.

Hypo Noe

31-03-2026

4.81

7,661

7,576

Arcona Poland B.V. Project 5 Sp.k.

Hypo Noe

31-03-2026

4.81

5,499

5,446

Boyana Residence E.O.O.D.

Alpha Bank

30-06-2021

5.92

1,789

Arcona Capital Real Estate

Bulgaria Ltd.

Alpha Bank

30-06-2021

5.92

531

N-E Real Estate Park First Phase

S.r.l.

Patria Bank

10-12-2031

4.72

3,201

3,131

30,387

30,175

31-12-2021

Name of company

Name of

credit

institution

Date of

maturity

Weighted

average

interest

rate

Face value

Carrying

amount

In %

In €

1,000

In € 1,000

Arcona Capital RE Bohemia s.r.o.

Sberbank CZ

31-03-2024

3.62

8,459

8,452

Arcona Capital RE Slovakia s.r.o.

Slovenská

Sporiteľňa

30-09-2024

2.45

6,588

6,585

Arcona Capital Real Estate Poland

Sp. z o.o.

Hypo Noe

31-03-2026

2.95

8,060

7,948

Arcona Poland B.V. Project 5 Sp.k.

Hypo Noe

31-03-2026

2.95

5,660

5,590

Boyana Residence E.O.O.D.

Alpha Bank

30-06-2021

4.75

1,789

Arcona Capital Real Estate

Bulgaria Ltd.

Alpha Bank

30-06-2021

4.75

531

31,087

30,895

Exclusive variable remunerations.

121

Boyana Residence E.O.O.D. and Arcona Capital Real Estate Bulgaria Ltd.

The Fund

’

s 100% subsidiary companies in Bulgaria, Boyana Residence E.O.O.D. and Arcona Capital Real

Estate Bulgaria Ltd., had a loan from Alpha Bank with a total outstanding amount of a

pproximately €

2.32

million, which was due on June 30, 2021. As of the Statement of Financial Position

’

s date, the subsidiaries

had not yet refinanced the loan or agreed on an extension of its term with Alpha Bank. At the end of 2022, the

Boyana project was valued at €

6.25 million, and Alpha Bank charged a penalty interest of 2%, resulting in a

weighted average interest rate of 7.92%.

As of January 9, 2023, the loan(s) from Alpha Bank, including accrued (penalty) interest and costs, had been

fully repaid as a result of successful refinancing. The Fund acquired loan(s) from Dutch investors for

approximately

€

3.6 million, with a maturity date of June 30, 2024, and an interest rate of 9.0%. Additionally, a

variable remuneration based on the gross sellable area of eight pre-selected apartment rights is payable, with

a maximum variable remuneration of 4% of the original loan amount.

The refinancing allows for the full repayment of Alpha Bank, payment of historical accrued taxes, and the

renovation of all apartments within the next 18 months in accordance with the original business plan. Alpha

Bank had previously limited the realization of potential additional value from the project by not allowing for the

separate sale of the development land or individual apartments.

122

15.16.4

Securities provided, bank covenants and ratios secured bank loans

As at Statement of Financial Position

’s date

the following securities were provided and bank covenants agreed

with regard to the secured bank loans. The ratios, as well as the withdrawable facilities as at Statement of

Financial Position’s date are also mentioned.

Sberbank

Slovenská

Sporiteľňa

Hypo

Noe

Alpha

Bank

Patria

Bank

Carrying amounts securities provided:

•

Owned investment property

(in € 1,000)

16,468

12,810

26,110

5,346

•

Inventories (in € 1,000)

1,835

•

Assets held for

sale (in € 1,000)

3,786

2,991

•

Trade and other receivables

(in € 1,000)

224

521

137

•

Cash and cash equivalents

(in € 1,000)

1,374

249

968

Bank covenants:

•

Debt Service Coverage Ratio

(

DSCR

) (minimum)

1.15

1.25

1.20

n.a.

1.30

•

Debt Service Reserve Account

(

DSRA

) (in € 1,000)

n.a.

190

400

n.a.

•

Capital expenditure (

CAPEX

)

(in € 1,000)

n.a.

•

Minimum total annual collection in

the bank account

(in € 1,000)

n.a.

606

•

Equity / liabilities (minimum)

n.a.

10.00%

n.a.

•

Loan to value (maximum)

70.00%

45.00%

65.00%

n.a.

•

Negative equity borrower

n.a.

•

Issued shares borrower pledged

Yes

Ratios:

Debt Service Coverage Ratio (

DSCR

)

1.18

1.27

1.87

n.a.

1.50

Loan to value (

LTV

)

35.91%

34.90%

50.40%

37.14%

59.87%

Withdrawable credit facilities:

Maximum credit facilities

5,914

5,792

13,160

2,320

3,201

Outstanding amount

5,914

5,792

13,160

2,320

3,201

Withdrawable credit facilities

For further information on pledged issued shares of the borrower reference is made to section 19.1.3

“Securit

ies provided

”

In accordance with the bank covenant the Debt Service Reserve account (DSRA) has to be built up monthly with an amount of

€

5,000

until an amount of € 265,000 is reached.

In accordance with the bank covenant RON 3,000,000.

Each borrower (Arcona Capital Real Estate Poland Sp. z o.o. and Arcona Poland B.V. Project 5 Sp.k.) has to ensure that, at all times,

its total assets increased by the aggregate of the subordinated liabilities then outstanding are greater than its total liabilities. For the

purpose of this calculation contingent and prospective liabilities will not be taken into account and liabilities under subordinated

shareholders loan will be treated as equity and not as liabilities.

Only the shares in Arcona Capital Real Estate Poland Sp. z o.o. are pledged. The shares in Arcona Poland B.V. Project 5 Sp.k. are not

pledged.

123

15.16.5

Statement of changes in lease liabilities

2022

2021

In € 1,000

Balance as at 1 January

1,297

1,410

Redemptions

-/- 188

-/- 186

Accrued interest

Exchange rate differences

-/- 23

-/- 11

Balance as at 31 December

1,162

1,297

15.16.6

Analysis of lease liabilities

Nature of lease liability

Related to property

31-12-2022

31-12-2021

In € 1,000

Lease liability by Arcona Capital Real Estate Trio Sp. z o.o. (Poland)

Land lease

Grzymaly Siedleckiego

101

152

Land lease

Kardynala Wyszynskiego

307

354

Land lease

Legionow

754

791

1,162

1,297

15.16.7

Maturity analysis contractual undiscounted cash flows of lease liabilities

31-12-2022

31-12-2021

In € 1,000

Less than 1 year

171

174

1 year to 5 years

522

592

More than 5 years

1,330

1,473

2,023

2,239

15.16.8

Statement of changes in other loans and borrowings

2022

2021

In € 1,000

Balance as at 1 January

4,604

5,071

Loans advanced

3,100

5,840

Redemptions

-/- 2,900

-/- 6,349

(Amortisation) flat fee and transaction costs

-/- 39

Accrued interest

Exchange rate differences

-/- 14

Balance as at 31 December

4,788

4,604

124

15.16.9

Analysis of other loans and borrowings

31-12-2022

Name of company

Name of

counterparty

Secured /

unsecured

Date of

maturity

Weighted

average

interest rate

Face value

Carrying

amount

In %

In € 1,000

Aisi Bela LLC

Almaz-Press-

Ukraine LLC

Unsecured

0.00

Arcona Capital Real

Estate Trio Sp. z o.o.

Bond holder

Secured

29-03-2024

9.67

2,000

1,937

Arcona Property Fund

N.V.

Other third

party (I)

Unsecured

15-01-2024

9.50

250

Arcona Property Fund

N.V.

Other third

party (II)

Unsecured

30-06-2024

9.00

1,000

980

Arcona Property Fund

N.V.

Other third

party (III)

Unsecured

30-06-2024

9.00

600

588

Arcona Property Fund

N.V.

Other third

party (IV)

Unsecured

30-06-2024

9.00

1,000

980

4,903

4,788

31-12-2021

Name of company

Name of

counterparty

Secured /

unsecured

Date of

maturity

Weighted

average

interest rate

Face value

Carrying

amount

In %

In € 1,000

Aisi Bela LLC

Almaz-Press-

Ukraine LLC

Unsecured

0.00

Arcona Capital Real

Estate Trio Sp. z o.o.

Bond holder

Secured

29-03-2024

8.50

2,150

2,037

Arcona Property Fund

N.V.

Other third

party (I)

Unsecured

15-01-2024

9.50

250

Arcona Property Fund

N.V.

Other third

party (V)

Secured

31-01-2022

10.00

1,000

Arcona Property Fund

N.V.

Other third

party (VI)

Unsecured

31-01-2022

11.00

250

Arcona Property Fund

N.V.

Other third

party (VII)

Unsecured

31-03-2022

10.00

1,000

4,717

4,604

The weighted average interest rate used amounts 11.78%.

The weighted average interest rate used amounts 10.61%.

125

15.16.10 Securities provided of other loans and borrowings

As at Statement of Financial Position’s date the following securities were

provided with regard to the other

loans and borrowings:

bond

holders

Other third

parties

Financial covenants:

•

Debt Service Coverage Ratio (

DSCR

) (minimum)

1.10

n.a.

•

Loan to value (

LTV

) (maximum)

40.00%

n.a.

•

Issued shares borrower pledged

Yes

n.a.

As at Statement of Financial Position’s date, the Fund’s financing covenants remain in line with the

commitments in its facility agreements.

15.17

TRADE AND OTHER PAYABLES

15.17.1

Analysis of trade and other payables

31-12-2022

31-12-2021

In € 1,000

Non-current part of trade and other payables

Current part of trade and other payables

3,344

2,590

3,344

2,590

15.17.2

Specification of trade and other payables

31-12-2022

31-12-2021

In €

1,000

In € 1,000

Trade payables

346

410

Administrative expenses

1,120

1,099

Accruals

847

643

(Penalty) interest payables and costs Alpha Bank

660

251

Interest payables

228

182

Payable settlement acquisitions

120

Other trade and other payables

3,344

2,590

15.17.3

Specification of administrative expenses

31-12-2022

31-12-2021

In € 1,000

Fund management fee

1,120

1,099

Performance-related remuneration

1,120

1,099

126

15.18

DEFERRED INCOME AND TENANT DEPOSITS

15.18.1

Analysis of deferred income and tenant deposits

31-12-2022

31-12-2021

In € 1,000

Non-current part of deferred income and tenant deposits

384

410

Current part of deferred income and tenant deposits

159

153

543

563

15.18.2

Specification of deferred income and tenant deposits

31-12-2022

31-12-2021

In € 1,000

Deposits received from tenants

523

551

Advance payments received from tenants

543

563

15.19

DEFERRED TAX LIABILITIES

For the specification and analysis of the (un)recognised deferred tax liabilities reference is made to sections:

•

15.6

.1 “Specification of recognised deferred taxes”;

•

15.6

.4 “Statement of changes in recognised deferred taxes”;

•

15.7.1

“Specification of unrecognised deferred tax

”

; and

•

15.7.4

“

Statement of changes in

unrecognised deferred taxes”

15.20

CONTINGENT ASSETS

As of the Statement of Financial Position

’

s date, the Fund did not hold any contingent assets that are not

included in the Statement of Financial Position, except for unrecognised deferred tax assets, as mentioned in

section 15.7

“

Unrecognised Deferred Taxes

”

15.21

NON-CONTINGENT ASSETS

As of the Statement of Financial Position

’

s date, the Fund did not hold any non-contingent assets other than

those already recognised in the Statement of Financial Position.

127

15.22

NON-CONTINGENT LIABILITIES

As of the Statement of Financial Position

’

s date, the Fund had the following non-contingent liabilities, which

are not included in the Statement of Financial Position:

Arcona Capital RE Slovakia s.r.o. has a non-

contingent liability of € 78,000 for repair and

maintenance;

Boyana Residence E.O.O.D. has a non-

contingent liability of € 150,000 to carry out necessary

maintenance and improvement works on the real estate mortgaged in favour of Alpha Bank to

enhance sales. However, as a result of the refinancing as of January 9, 2023, this non-contingent

liability is no longer applicable.

As of the Statement of Financial Position

’

s date, the Fund was not subject to any other contractual obligations,

such as investments, repairs, maintenance, or other non-contingent liabilities, that require settlement in a future

financial period.

15.23

CONTINGENT LIABILITIES

As at Statement of Financial Position

’s date the Fund has the following contingent liabilities

which are not

included in the Statement of Financial Position:

Arcona Capital RE Bohemia s.r.o. has a contingent liability for the amount of CZK 4,973,000

(€ 2

,000) towards the buyer of the investment property Štefánikova with regard to rent received in

advance by Arcona Capital RE Bohemia s.r.o. for usage of the parking places (free of payment) by

the lessee of Štefánikova. Based on the agreement (2012) the buyer of Štefánikova will pay the taxes

with regard to this rent;

The Fund has a contingent liability towards Secure Property Development & Investments Ltd (

SPDI

)

for the acquisition of:

•

Two development sites in the Kiev region of Ukraine, with a total value of approximately

€ 1.8 million

Due to the conflict situation in Ukraine, it is not currently possible to complete the purchase of the

two remaining properties (development plots) in and around Kiev, which was agreed in June 2021

€

1,970,000. This is because the purchase contract contains specific pre-completion conditions,

the fulfilment of which require decisions and actions to be taken by Kiev City Council and other

Ukrainian public authorities. The Sellers were unable to fulfil these conditions prior to the Russian

invasion.

At the start of 2023, all the necessary conditions had been met, and the parties had come to a verbal

agreement that a new valuation was required. The acquisition price will be determined based on this

valuation, and delivery is expected in the second half of the same year.

The Fund has a contingent liability towards 4 Dutch investors who provided loans during December

2022 and January 2023 for an original

amount of €

3.6 million. Based on the loan agreements a

variable remuneration is payable based on the gross sellable area of 8 pre-selected apartment rights

held by Boyana Residence E.O.O.D. The maximum variable remuneration amounts to 4% of the loan

originally provided. The fair value of this liability is negligible.

128

The Fund has a contingent liability to issue ordinary shares against an exercise price as mentioned

below as a result of the outstanding warrants. The conditions are as follows:

Holder

Number of

warrants

Date of

issue

Expiration

date

Required

share price

Exercise

price

SPDI

67,063

01-11-2019

01-11-2024

€

8.10

€

0.00

SPDI

77,201

05-12-2019

01-11-2024

€

8.10

€

0.00

SPDI

76,085

29-03-2022

29-03-2027

€

7.20

€

0.00

SPDI

39,458

15-06-2022

15-06-2027

€

7.20

€

0.00

The exercise date of the outstanding warrants is the trading day immediately following the 10

trading day on which the shares have traded on a regulated market (or system comparable to a

regulated market) and for which the volume-weighted average price of a share was

€ 7.20, € 8

.10

or higher

(the “required share price”)

, provided that this warrant may not be exercised within a 12

months period following the issue date, unless a prospectus approved by the Dutch Authority for the

Financial Markets (Autoriteit Financiële Markten, the

AFM

) with respect to the warrants and / or the

warrant shares is published by the Fund.

In case the conditi

ons are met the warrant shares will be issued against an exercise price of € 0.00.

The fair value of the warrants is nil. In case the conditions are met the warrant shares will be charged

from the share premium or other freely distributable reserve to the issued capital.

The statement of changes in warrants is as follows:

2022

2021

In pieces

Balance as at 1 January

144,264

Granted during the financial period

115,543

Forfeited during the financial period

Expired during the financial period

Balance as at 31 December

259,807

144,264

Exercisable as at 31 December

On 28 March 2023, the Fund was notified that Hypo Noe had approved a waiver for ACREP and

Project 5, addressing the breach of the DSCR forecast covenant. The Fund is responsible for a

contingent liability, providing financial resources to ACREP and Project 5 up to a cumulative amount

of € 400,000 (€ 250,000 for Project 5 and € 150,000 for ACREP). This funding is intended to address

potential gaps in Project 5 for financing the planned fit-out costs at the Maris property and in ACREP

for financing the planned fit-out costs of the

Słupsk

property.

As at State

ment of Financial Position’s date the Fund was not subject to any further contingent liabilities,

including any obligations that result from security transactions related to (exchange) rate risk in connection

with investments.

129

15.24

GROSS RENTAL INCOME

15.24.1 General

The Fund leases out its investment property. The Fund has classified these leases as operating leases

because the Fund does not transfer substantially all of the risks and rewards incidental to the ownership of the

assets. All gross rental income can be classified as operating lease income, with the exception of amortisation

of lease incentives.

During the financial period, as well as during the previous financial period no contingent rental income was

accounted for as income in the Income Statement. Leases for a determined time are normally indexed yearly

with annual inflation stated by the relevant national Central Banks. New leases for a determined time are

normally signed for a term of five years. All these lease contracts usually include at least a three-month deposit.

15.24.2

Analysis of gross rental income

2022

2021

In € 1,000

In €

1,000

Gross rental income collected / accrued

6,389

7,349

Amortisation of lease incentives

-/- 224

-/- 252

6,165

7,097

15.24.3

Analysis of gross rental income collected / accrued

2022

2021

In € 1,000

Fixed lease payments received

6,165

7,097

Variable lease payments received

6,165

7,097

15.24.4

Weighted average percentage of the vacant space

Weighted to the fair value, the weighted average percentage of the vacant space as at Statement of Financial

Position’s date

is as follows:

31-12-2022

31-12-2021

In %

Buildings (including underground)

8.5

8.6

Land plots

n.a.

Investment property under development

100.0

Inventories

100.0

Buildings (including underground) held for sale

41.0

23.4

Land plots held for sale

n.a.

130

Weighted to the fair value, the weighted average percentage of the vacant space during the financial period is

as follows:

2022

2021

In %

Buildings (including underground)

10.6

9.4

Land plots

n.a.

Investment property under development

100.0

Inventories

100.0

Buildings (including underground) held for sale

40.0

33.6

Land plots held for sale

n.a.

15.24.5 Non-cancellable leases

The gross rental income receivable on account of non-cancellable leases related to owned investment

property, investment property under development and inventories as at

Statement of Financial Position’s date

is as follows (the future minimum gross rental income receivable in foreign currency has been translated at the

average exchange rate used for the Consolidated Income Statement for the financial period):

31-12-2022

31-12-2021

In € 1,000

In €

1,000

Less than 1 year

5,414

5,896

1 year to 2 years

3,713

4,461

2 years to 3 years

1,981

3,127

3 years to 4 years

1,161

1,489

4 years to 5 years

863

558

More than 5 years

1,041

1,256

14,173

16,787

15.25

REBILLED AND NON-REBILLED SERVICE CHARGES AND PROPERTY OPERATING

EXPENSES

15.25.1 General

As the Fund invoices service charges independently (or as principal) to the lessees on the basis of the leases

entered into, such reimbursed service charges are shown separately in the Income Statement. The work

associated with the service charges is carried out either by the Fund, or by third parties on a contract basis.

Contracts for the performance of service work are normally entered into for a maximum period of six months.

In addition, service charge expenses also include charges related to vacant units and / or other irrecoverable

service charges due to contractual limits or insolvent tenants.

131

15.25.2

Analysis of property operating expenses

2022

2021

In € 1,000

Property management

452

531

Asset management

581

653

Maintenance expenses in respect of properties

471

708

Property taxes and fees

352

357

Letting fees

Insurance premiums

Other property operating expenses

Subtotal

1,900

2,380

Adjustment property taxes and fees previous year(s)

Reimbursement from tenants

-/- 22

1,936

2,380

15.25.3

Allocation of service charges and property operating expenses

The determination of costs from non-rented properties is based on properties that had an average vacancy of

more than 10% during the financial period. The allocation of service charges and direct operating expenses to

the properties, whether or not rent generating, is as follows:

2022

2021

In € 1,000

For properties let

3,952

4,696

For properties not let

455

470

4,407

5,166

15.25.4

Non-cancellable operating leases (not in scope of IFRS 16)

Non-cancellable operating leases of investment properties and inventories as at 31 December of the relevant

financial period, which are not in scope of IFRS 16 are shown as follows (the future non-cancellable operating

leases in foreign currency have been translated at the average exchange rate used for the Consolidated

Income Statement for the financial period):

31-12-2022

31-12-2021

In € 1,000

Less than 1 year

1 to 5 years

More than 5 years

As of January 1, 2022 the letting fees have been classified as an addition to investment property, instead of amortization over the term

the lease (for more information is referred to section 13.4 “Comparison accounting principles with previous year”).

132

15.26

VALUATION RESULTS OF PROPERTIES

2022

2021

In € 1,000

Owned investment property

-/- 3,669

3,647

Right-of-use assets

-/- 103

-/- 97

Investment property under development

-/- 1,341

-/- 7

Owned investment property held for sale

1,135

-/- 707

-/- 3,978

2,836

15.27

RESULTS ON DISPOSALS OF PROPERTIES

15.27.1

Analysis of results on disposals of properties

2022

2021

In € 1,000

Owned investment property

-/- 25

Owned investment property held for sale

-/- 640

-/- 809

-/- 640

-/- 834

15.27.2

Specification of results on disposals of properties - per building

2022

2021

In € 1,000

Pražská

2, Ko

ice (Slovakia)

-/- 427

Pražská

4, Ko

ice (Slovakia)

-/- 422

VUP, Brno (Czech Republic)

209

Land plot Kalinkowa, Grudziadz (Poland)

-/- 25

Vural, Ko

ice (Slovakia)

-/- 914

Kosmalt, Ko

ice (Slovakia)

105

-/- 640

-/- 834

15.27.3

Specification of results on disposals of properties

2022

2021

In € 1,000

Realised value adjustments

-/- 341

-/- 661

Transaction costs on sale of properties

290

162

Consultancy fees and legal fees

Subtotal

299

173

Total

-/- 640

-/- 834

133

15.28

RESULTS ON DISPOSALS OF INVENTORIES

15.28.1

Analysis of results on disposals of inventories

2022

2021

In €

1,000

In € 1,000

Apartment Block 2-A, Gardova Glava, Boyana (Bulgaria)

-/- 29

15.28.2

Analysis of results on disposals of inventories

2022

2021

In € 1,000

Settlement charged costs of adjustment refund of Value Added Tax

-/- 29

The “Settlement charged costs of adjustment refund of Value Added Tax” for the amount of € 29,000 negative

represents the settlement of the receivable towards SEC South East Continent Unique Real Estate

Management Limited (Secure Management). The original amount of the adjustment refund of Value Added

Tax amounts € 114,000 negative and represents the expense for Bulgarian Value Added Tax as a result of

the repayment of a tax credit incurred by the sale of apartment Block 2-A, at Boyana, Bulgaria. In the past this

amount was supposed to be fully recovered from the Asset Manager (Secure Management). During June 2022

it was agreed these costs are recovered from Secure Management for an amount of € 85,000.

15.29

NET RESULTS ON PROPERTIES

2022

2021

In €

1,000

In € 1,000

Valuation gains

1,941

4,361

Valuation losses

-/- 6,190

-/- 2,239

-/- 4,249

2,122

Costs on sale of properties

-/- 328

-/- 173

-/- 4,577

1,949

134

15.30

VALUATION RESULTS OF INVESTMENTS IN ASSOCIATES

2022

2021

In €

1,000

In € 1,000

Lelar Holdings Limited

-/- 68

15.31

FINANCIAL INCOME

2022

2021

In € 1,000

Realised currency results on net investments in group companies

530

Change in fair value of derivative financial instruments

182

508

Interest income on derivative financial instruments

Interest on trade receivables

Foreign exchange and currency gains

Penalty interest and fees

Other financial income

262

1,121

15.32

OTHER OPERATING INCOME

2022

2021

In € 1,000

Penalties for early termination of rental contracts

487

Other operating income

513

15.33

ADMINISTRATIVE EXPENSES

15.33.1

Specification administrative expenses

2022

2021

In € 1,000

In €

1,000

Fund management fee

705

648

Performance-related remuneration

705

648

15.33.2 Management fee

This is the total fee received by the Managing Board (Arcona Capital Fund Management B.V.) for the

management it performs. The total management fee consists of the Fund management fee as well as the

Asset management fee. The management fee is calculated by percentages on the value of the

Fund’s total

assets at month-end.

In accordance with the Fund’s prospectus, the Registrati

on Document dated October 19,

2016 and the Security Note dated October 28, 2016 these percentages are:

•

or assets below € 75 million: 1.50% per annum (0.125% per month);

•

for assets as of

€ 75 million and above: 1.00% per annum (0.083% per month).

135

15.33.3

Specification fund management fee

2022

2021

In € 1,000

Management fee

1,286

1,301

Less: Asset management fee:

Arcona Capital Czech Republic s.r.o.

295

406

Arcona Capital Poland Sp. z o.o.

203

185

CEG South East Continent Unique Real Estate Management Limited

581

653

Fund management fee (Arcona Capital Fund Management B.V.)

705

648

15.33.4 Performance-related remuneration

The Managing Board is entitled to performance-

related remuneration dependent on the Fund’s total annual

return. The total return is defined as the increase in Net Asset Value per profit-sharing share over the relevant

financial period increased by dividends distributed during that financial period. The sum of these components

is expressed as a percentage of the Net Asset Value per profit-sharing share at the start of the financial period.

The total performance-related remuneration is calculated on the total average number of outstanding profit-

sharing shares in the relevant financial period multiplied by the Net Asset Value per profit-sharing share at the

start of the relevant financial period.

The performance-related remuneration consists of three tiers:

in the case of a total return of up to 12% the performance-related remuneration is 0%;

in the case of a total return of 12% to 15% the performance-related remuneration is 20% of the total

return less 12%;

in the case of a total return of more than 15% the performance-related remuneration is 30% of the

total return less 15%. In addition, the remuneration indicated under 2 will be awarded.

The performance-related remuneration will be charged annually in arrears and is budgeted and put aside on

a three-monthly basis. This performance-related remuneration will not be due if the stock exchange price of

the share plus the dividends distributed in the relevant financial period is lower than that of any preceding

period for which the performance-related remuneration was deducted.

50% of the performance-related remuneration is payable in shares of the Fund, such shares to be issued at

Net Asset Value as at year-end rather than the prevailing stock exchange price (unless the stock market price

is above the Net Asset Value per share). The share component of the performance-related remuneration due

for a financial period is payable after publication of the Annual Report after the end of the relevant financial

period, the cash components are payable in three equal amounts on 30

April, 31

July and 31

October following

the end of the relevant financial period.

For the financial period, the Managing Board is not entitled to performance-related remuneration.

Reference is made to section 15.25

.2 “Analysis of property operating expenses”.

136

15.34

OTHER OPERATING EXPENSES

15.34.1

Specification of other operating expenses

2022

2021

In € 1,000

Costs of service providers

1,006

967

Other operating expenses

135

228

1,141

1,195

Costs of funding and acquisitions

207

1,348

1,281

15.34.2

Analysis of costs of service providers

2022

2021

In € 1,000

Accounting expenses

257

262

Audit fees

255

236

Consultancy fees

151

207

Court fees

Custody fees

Appraisal expenses

Supervisory Board fees

Supervisors’ expenses

Insurance AIFMD

Bank costs

Marketing expenses

Listing, Paying and Fund Agent fees

Other costs of service providers

1,006

967

For the items listed above the following explanation can be given:

•

he “Accounting expenses” include the expenses

in respect of bookkeeping, consolidation activities

on a quarterly basis for results announcements and the determination of corresponding Net Asset

Value (

NAV

), preparation of (Semi)-Annual Report and other activities to fulfil administrative

requirements for the Fund and its subsidiaries;

•

he “Audit fees”

include the fees for the audit of the Consolidated Financial Statements and Parent

Company Financial Statements, as well as audits of accounts of subsidiaries. The fees for the audit

of the Consolidated Financial Statements, Parent Company Financial Statements and European

Single Electronic Format (

ESEF

) reporting 2022 (Deloitte Netherlands)

are estimated at €

88,000

(2021

: €

68,000). During the financial period audit fees related to prior years have been booked in

an amount of €

17,000 (2021

: €

12,000). The audit fees of accounts of subsidiaries (Deloitte other

countries) amount to

€

150,000 (2021

: €

156,000).

Except for:

audit of the Consolidated Financial Statements and Parent Company Financial Statements,

audits of accounts of subsidiaries, and

audit of ESEF reporting and requirements

no services of Deloitte have been used.

•

he “Consultancy fees”, including legal fees, relate mainly to consultancy fees for tax structuring;

•

the “Court fees” relates to a court case towards Alpha Bank, with regard to

several (enforcement)

costs invoiced by Alpha Bank, since the term of the secured bank loan(s) are already expired;

•

he “Custody fees”

include the fees for operational activities by the AIFMD Depositary;

137

•

he “Supervisors’ expenses” include

expenses for supervision by the Dutch Authority for the Financial

Markets (Autoriteit Financiële Markten, the

AFM

)

and “De Nederlandsche Bank” (

DNB

);

•

he “Other

costs of service providers

” include, among others, costs of press releases

, required

software ESEF, Euronext Fund Services (

EFS

) and Prague Stock Exchange (

PSE

15.34.3

Analysis of Supervisory Board fees

2022

2021

In € 1,000

Mr. H.H. Kloos RBA (until June 30, 2022)

Mr. B. Vos M.Sc. (until June 22, 2022)

Mr. M.P. Beys

Mrs. A.N. Krol (as of June 22, 2022)

Mr. J.J. van Heijst MSc.

The Fund has provided no loans, advances, or guarantees for the members of the Supervisory Board. The

members of the Supervisory Board receive no options or remuneration in the form of the Fund’s shares.

15.34.4

Analysis of other operating expenses

2022

2021

In € 1,000

Irrecoverable trade receivables

395

Change in provision for doubtful trade receivables

-/- 288

Non-refundable value added tax (

VAT

)

109

Wages and salaries statutory directors

135

228

15.34.5

Analysis of costs of funding and acquisitions

2022

2021

In € 1,000

Consultancy fees / legal fees

207

Due diligence

207

The costs of funding and acquisitions include costs of technical, legal and tax due diligence for potential

acquisitions.

Mr. J.J. van Heijst M.Sc. has waived his Supervisory Board fee.

138

15.34.6 Transaction costs

In accordance with the EU-IFRS accounting principles the Fund includes the transaction costs incurred on

purchase of properties, inventories and other equity investments in the purchase price of investments and

recognises the transaction costs incurred on sale of properties, inventories and other equity investments under

results on disposals of investments.

Based on article 123:1.c of the Decree on Conduct of Business Supervision of Financial Undertakings under

the Act of Financial Supervision (in Dutch: Besluit Gedragstoezicht Financiële ondernemingen Wft) the

analysis of identifiable and quantifiable transaction costs on purchase and sale of investments during the

financial period is disclosed.

The analysis is as follows:

2022

2021

In € 1,000

Transaction costs on purchase of investments

Transaction costs on sale of investments

328

173

328

173

15.34.7

Costs of lending financial instruments

During the financial period no financial instruments were borrowed or lent by either the Fund or her associated

parties (so-called securities lending). No expenses were therefore incurred, or fees requested.

15.34.8

Remuneration for orders on behalf of the Fund

Neither the Managing Board, the directors of the Managing Board, the Fund, the Depositary of the Fund, nor

parties affiliated with these parties, received any remuneration for performing assignments for the Fund, other

than as described in section 15.33

“Administrative expenses” and 15.

“

ther operating expenses”.

15.34.9 Outsourcing expenses

The Managing Board of the Fund has in the ordinary course of business outsourced the accounting activities

of the Fund to KroeseWevers Accountants B.V.

The related expenses are included in the section accounting expenses, as indicated in section 15.34.2

“

Analysis of costs of service providers

”.

15.34.10 Comparison of actual costs with prospectus

2022

2021

Actual

Prospectus

Actual

Prospectus

In € 1,000

Costs of service providers

1,006

900

967

900

For comparison of actual costs of service providers with budgeted costs of service providers

as per the Fund’s

prospectus, the Registration Document dated October 19, 2016 in conjunction with the Security Note dated

October 28, 2016 has been used.

For the analysis of costs of service providers is referred to section 15.34

.2 “Analysis of

costs of service

providers”.

15.35

PERSONNEL COSTS

The Fund does not employ any personnel, with the exception of statutory directors of the

Fund’s subsidiaries

The statutory directors receive a wage, which is specified in other operating expenses (reference is made to

section 15.34.4

“Analysis of other operating expenses”

139

15.36

FINANCIAL EXPENSES

2022

2021

In € 1,000

Interest expense on secured bank loans

1,549

1,091

Interest expense on other loans and borrowings

302

563

Interest expense on convertible bonds

217

Interest expense on derivative financial instruments

Interest expense on lease liabilities

Penalty interest and costs on secured bank loans

196

Interest expense and costs of Tax Authorities

Withholding tax on loans due to shareholders and other group companies

Other financial expenses

2,208

2,150

15.37

ONGOING CHARGES FIGURE

Based on article 123:1.l of the Decree on Conduct of Business Supervision of Financial Undertakings under

the Act of Financial Supervision (in Dutch: “Besluit Gedragstoezicht Financiële ondernemingen Wft”) the

Ongoing Charges Figure (

OCF

) is disclosed. The OCF is calculated by dividing the total expenses (including

operating expenses) during the financial year by the average Group equity of the Fund during the financial

year. The total expenses include the expenses charged to the profit for the period as well as to Group equity.

They also include the operating expenses of the properties. No net service charges are included in the total

expenses, since these are entirely covered by the service income from service fees and the fees part of the

gross rental income.

The expenses which are related to the issuance and the redemption of own ordinary

shares, as far as these are covered by surcharges and reductions received, are not taken into consideration.

Regular interest charges for loans contracted, as well as costs of investment transactions, are also not included

in the calculation of the OCF.

The average Group equity is determined by the average of all calculated and published Net Asset Values

(

NAV

’s).

2022

2021

2020

2019

2018

In %

OCF

8.02

9.50

9.96

11.13

10.85

In 2022 the OCF decreased as a result of a decrease of the total expenses (including other operating

expenses) by approximately 7%, in conjunction with the increase of the average Group equity by approximately

10%.

The total expenses also include non-regular costs, such as costs of funding and acquisition (reference is made

to section 15.33.5

“Analysis of costs of funding and acquisitions”

). Without these non-regular costs, the OCF

would be as follows:

2022

2021

2020

2019

2018

In %

OCF (without non-regular costs)

7.61

9.31

9.00

10.01

10.72

140

15.38

INCOME TAX EXPENSE

15.38.1 Tax position

The taxable profits of the Fund are subject to corporate income tax (

CIT

15.38.2

Income tax expense recognised in the Consolidated Income Statement

2022

2021

In € 1,000

Current income tax expense

Current year

649

996

Adjustments related to prior years

-/- 17

Subtotal current income tax expense

632

1,015

Deferred income tax expense

Origination and reversal of taxable temporary differences

-/- 878

150

Recognition of previously unrecognised (derecognition of previously

recognised) tax losses

140

-/- 110

Recognition of previously unrecognised (derecognition of previously

recognised) other taxable temporary differences

474

-/- 1,159

Change in tax rate

-/- 1

Adjustments related to prior years

-/- 4

Subtotal deferred income tax expense

-/- 222

-/- 1,124

Total income tax expense

410

-/- 109

15.38.3

Reconciliation of effective tax rate

2022

2021

In %

In € 1,000

In %

In € 1,000

Profit before income tax

-/- 3,940

3,025

Tax using the Parent Company’s domestic tax rate

25.8

-/- 1,017

25.0

757

Effect of tax rates in foreign jurisdictions

-/- 12.1

475

-/- 12.6

-/- 381

Change in tax rate

0.0

-/- 1

Tax effect of:

Non-deductible expenses

-/- 4.4

173

9.2

278

Tax exempt revenues

2.5

-/- 99

-/- 6.5

-/- 196

Tax on phantom results

-/- 0.2

10.7

324

Current year losses for which no deferred tax asset

is recognised

-/- 5.8

229

12.0

364

Recognition of previously unrecognised

(derecognition of previously recognised) tax losses

-/- 3.5

140

-/- 3.6

-/- 110

Recognition of previously unrecognised

(derecognition of previously recognised) other

taxable temporary differences

-/- 12.1

475

-/- 38.3

-/- 1,159

Adjustments related to prior years

-/- 0.6

0.5

-/- 10.4

410

-/- 3.6

-/- 109

141

15.38.4

Deferred income tax recognised directly in Group equity

2022

2021

In € 1,000

Related to receivables from shareholders and other group companies

15.38.5

Applicable local corporate income tax rates

2024

2023

2022

2021

2020

In %

The Netherlands

- first bracket

19.00

15.00

16.50

- Second

bracket as of € 200,000

25.8

25.80

n.a.

25.00

Second bracket as of € 245,000

n.a.

25.00

n.a.

Second bracket as of € 395,000

n.a.

25.80

n.a.

Czech Republic

19.00

Poland

- Regular

19.00

- Small taxpayers

9.00

Romania

- Regular

16.00

- Micro-companies

with at least 1 employee

1.00

- Micro-companies with no employees

n.a.

3.00

Slovakia

- Regular

21.00

- Micro-taxpayers

15.00

n.a.

Ukraine

18.00

Bulgaria

10.00

As of January 1, 2019 a reduced corporate income tax rate was introduced in Poland for so-

called “small taxpayers”. Small taxpayers

are, for example, entities whose revenues, including value added tax (

VAT

), in a given tax year did not exceed in the preceding tax year

the

PLN equivalent of € 1

.2 million (as of January 1, 2020

: €

2 million). The reduced corporate income tax rate will not be available for

entities created or involved in certain restructuring activities.

Micro-companies in Romania are corporate taxpayers and entrepreneurs and self-employed individuals that achieve turnover up to

€ 1 million for the relevant tax period

(as of January 1, 2023: up to € 0

.5 million). The reduced tax rate of 1.00% is solely appliable if the

company has at least one employee with full-time employment contract for an indefinite period.

As of January 1, 2021 a reduced corporate income tax rate was introduced in Slovakia for so-

called “

micro-

taxpayers”.

Micro-taxpayers

are corporate taxpayers and entrepreneurs and self-

employed individuals that achieve taxable income (revenues) up to € 49,790 for the

relevant tax period.

142

15.39

EARNINGS PER SHARE

15.39.1

Calculation of basic earnings per share

The basic earnings per share are calculated by dividing the profit for the period attributable to holders of shares

by the weighted average number of shares outstanding during the financial period.

The weighted average number of shares is adjusted for events, other than the conversion of potential ordinary

shares, that have changed the number of ordinary shares outstanding without a corresponding change in

resources.

If the number of shares outstanding increases as a result of a capitalisation, bonus issue or share split, or

decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share and of

the comparative figures is adjusted retrospectively.

15.39.2

Profit for the period attributable to shareholders (basic)

2022

2021

In € 1,000

Profit for the financial period

-/- 4,350

3,134

15.39.3

Weighted average number of outstanding shares (basic)

2022

2021

In pieces

Issued shares as at 1 January

3,758,683

Effect of issued shares during the financial period

326,898

Effect of treasury shares held during the financial period

-/- 7,846

4,077,735

3,758,683

15.39.4

Calculation of diluted earnings per share

The diluted earnings per share are calculated by dividing the profit for the period attributable to holders of

shares, adjusted for costs relating to the convertible securities included in the profit for the period, by the

weighted average number of shares during the financial period, adjusted for the maximum number of shares

that could be converted during the financial period.

The adjustments as described are only made in case conversion will cause dilution of earnings. In case

conversion will have a positive effect on the earnings per share, these adjustments are not made.

15.39.5

Profit for the period attributable to shareholders (diluted)

2022

2021

In € 1,000

Profit for the period

-/- 4,350

3,134

Interest expense on convertible bonds (net of tax)

-/- 4,350

3,134

The calculation of the earnings per share includes all types of profit-sharing shares (e.g. ordinary and registered shares). Therefore,

treasury shares are excluded from the earnings per share.

143

15.39.6

Weighted average number of outstanding shares (diluted)

2022

2021

In pieces

Weighted average number of outstanding shares outstanding during

the financial period (basic)

4,077,735

3,758,683

Effect of conversion of warrants

Effect of conversion of convertible bonds

4,077,735

3,758,683

15.40

RISK MANAGEMENT

15.40.1 General

According to its investment policy set out in the prospectus, the Registration Document dated

October 19, 2016 in conjunction with the Security Note dated October 28, 2016, the Fund may hold investments

in direct property in Central Europe. The

Fund’s investment portfolio currently consists of pro

perty in the Czech

Republic, Slovakia, Poland, Ukraine, Bulgaria and Romania. These properties in principle are held for an

indefinite period. The aim is however to sell the assets in Ukraine and Bulgaria in the next three years. The

Fund’s investment acti

vities result in exposure to various risks, as also defined in the prospectus.

The Managing Board of the Fund determines the tactical investment mix. The Managing Board regularly

monitors the deviation between the previously determined tactical investment mix and the actual investment

mix. The risks are summarised in the table below:

Risk

category

Risk

Policy

Notes

Risk

appetite

Impact

Likelihood

Strategy

Market

Mitigation

15.40.2

High

Medium

High

Concentration

Avoidance/control

15.40.6

Low

Medium

Economic

Acceptance

15.40.8

High

Operational

Fraud

Avoidance

15.40.15

Low

Medium

Low

Internal control

Mitigation

15.40.15

Low

Medium

Low

Counterparty

Mitigation

15.40.9

Low

Medium

Low

Integrity

Avoidance

15.40.19

Low

Medium

Low

Financial

position

Currency

Mitigation/Avoidance

15.40.3

Medium

High

Interest rate

Mitigation

15.40.4

Low

High

Price

Acceptance

15.40.5

High

Borrowed money

Avoidance

15.40.7

Low

High

Medium

Credit

Mitigation

15.40.9

Low

Medium

Low

Rent

Mitigation

15.40.10

Medium

High

Debtor

Mitigation

15.40.11

Medium

Low

High

Vacancy

Mitigation

15.40.12

Medium

High

Liquidity

Avoidance

15.40.14

Low

High

Medium

Financial

reporting

Outsourcing

Avoidance

15.40.17

Low

Legal and

compliance

risk

Regulations

Mitigation

15.40.13

Low

Medium

Tax

Mitigation/Acceptance

15.40.16

Low

Medium

High

Legal

Mitigation

15.40.18

Low

High

ESG

Mitigation/Avoidance

15.40.20

Low

Medium

The nature and scope of properties as at Statement of Financial Position

’s date and the risk policy with regard

to the above-mentioned risks and other risks are discussed below.

144

15.40.2 Market risk

Market risk is the risk of losses in positions arising from movements in market prices. Property values are

affected by many factors, including the outlook for economic growth, inflation rate, and developments on the

capital markets and the rental income at the time of sale of the property.

The greater the fluctuation in the development of these factors, the greater the risk. The Fund cannot influence

macro-economic factors that determine property value. However, through good investment property

management the Fund will try to mitigate the risk and will seek to maximise the attraction of the properties in

its portfolio to prospective tenants and purchasers. The Fund invests in countries which have different legal

systems to Western Europe. In some areas there is much less public information available than would be the

case in Western Europe.

Control of the market risk is determined largely by the

Managing Board’s

investment policy, which is aimed at

achieving investment results by purchasing investments that are assumed to have been undervalued and are

expected to benefit from the further development of the Czech, Slovak, Polish, Ukrainian, Bulgarian, and

Romanian economy. The market risk is managed on a day-to-day basis.

The Fund’s policy is

mitigation

. The risk appetite is high. The impact is considered medium, the likelihood is

high (reference is made to section 15.2.10

“Sensitivity analysis” of the

buildings (including underground)).

15.40.3 Currency risk

The currency risk can be defined as the risk that the fair value of investments and the fair value or future cash

flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Fund may invest in properties in countries where the Euro has not (yet) been implemented. There is a

currency risk that the exchange rate fluctuates. The Fund has the option to mitigate the risk by using financial

instruments to hedge the currency risk. The Fund also seeks to mitigate/avoid the risk by concluding rental

contracts in Euro.

The Fund invests in property in currencies other than the functional currency (the Euro) used in these

Consolidated Financial Statements. At present, the currencies involved are:

•

Czech Koruna (CZK);

•

Polish Zloty (PLN);

•

US Dollar (USD);

•

Ukrainian Hryvnia (UAH);

•

Bulgarian Lev (BGN); and

•

Romanian Leu (RON).

Consequently, the Fund is exposed to the risk that the exchange rate of the functional currency in relation to

the foreign currency may develop in such a way that this has a negative impact on the value of the investment

portfolio in foreign currency.

Taking into account the high costs involved and Managing Board

’s

expectation that the EUR / CZK exchange

rate, EUR / PLN exchange rate, EUR / USD exchange rate, EUR / UAH exchange rate and EUR / RON

exchange rate will continue to show relative stability over the long term, the Managing Board has opted not to

hedge the currency risk by means of financial derivative financial instruments, such as forward contracts.

The EUR / BGN exchange rate has been pegged for many years. The Managing Board does not expect that

this will change the following years.

The EUR / UAH exchange rate is more vulnerable to fluctuations, as the UAH is, compared to the other

currencies, less liquid.

145

As at Statement of Financial Position

’s date

the Fund had the following exposure with regard to financial

assets. The percentages are based on the carrying amount of financial assets.

31-12-2022

31-12-2021

In %

Euro (EUR)

67.3

47.3

Polish Zloty (PLN)

10.3

32.2

Czech Koruna (CZK)

20.9

20.4

Romanian Leu (RON)

1.4

0.0

US Dollar (USD)

0.0

Ukrainian Hryvnia (UAH)

0.0

0.1

Bulgarian Lev (BGN)

0.1

0.0

100.0

The following table sets out the Fund’s total exposure to currency risk and the net

exposure to currencies of

the monetary assets and liabilities. The amounts are based on the carrying amount of monetary assets and

liabilities.

In € 1,000

31-12-2022

Monetary assets

Monetary liabilities

Net exposure

Euro (EUR)

3,656

31,690

-/- 28,034

Czech Koruna (CZK)

2,380

6,306

-/- 3,926

Polish Zloty (PLN)

1,023

1,552

-/- 529

Bulgarian Lev (BGN)

416

-/- 410

Romanian Leu (RON)

155

Ukrainian Hryvnia (UAH)

-/- 66

US Dollar (USD)

-/- 5

7,220

40,109

-/- 32,889

31-12-2021

Monetary assets

Monetary liabilities

Net exposure

Euro (EUR)

1,633

29,322

-/- 27,689

Czech Koruna (CZK)

670

8,581

-/- 7,911

Polish Zloty (PLN)

947

1,661

-/- 714

Bulgarian Lev (BGN)

193

-/- 193

Ukrainian Hryvnia (UAH)

-/- 74

US Dollar (USD)

3,251

39,832

-/- 36,581

146

If the Euro had weakened by 5.0% in relation to one of the other

currencies, with all variables held constant,

net assets attributable to shareholders per the Consolidated Income Statement and equity would have

decreased by the amounts shown below:

31-12-2022

31-12-2021

In € 1,000

Czech Koruna (CZK)

196

396

Polish Zloty (PLN)

Bulgarian Lev (BGN)

Romanian Leu (RON)

-/- 4

Ukrainian Hryvnia (UAH)

US Dollar (USD)

A 5% strengthening of the Euro against the above currencies would have resulted in an equal but opposite

effect on the above Financial Statement amounts, on the basis that all other variables remain constant.

The Fund’s policy is mitigation / avoidance. T

he risk appetite is medium, the impact is medium and the

likelihood high.

15.40.4 Interest rate risk

General

The interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because

of changes in market interest rates.

The F

und’s investment policy allows loans to be taken up. For reasons of control

of liquidity, the Fund holds

limited cash and cash equivalents. The Fund has the possibility of investing these funds in short-term deposits.

The Fund manages its interest rate risk with the objective of reducing the cash flow interest rate risk by the

use of derivative financial instruments. As at Statement of Financial Position

’s date the Fund

has contracted

into the following derivative financial instruments for the loans contracted in the Czech Republic (Interest rate

swap I) and Poland (Interest rate swap II).

In the Czech Republic,

Sberbank CZ asserts that on September

27, 2022, they terminated the swap as part of the insolvency process, thus reducing its value to zero. On

February 9, 2023, Sberbank CZ rejected the objections of ACREB regarding the zero value of the interest rate

swap. The Fund is currently consulting with external legal counsel to determine the viability of defending the

position of the Fund.

31-12-2022

Nominal

amount

Average

fixed

interest rate

Termination

date

Assets

Liabilities

Line item in the SFP where

the hedging instrument is

included

In € 1,000

In %

In € 1,000

Interest rate swap I

n.a.

1.995

25-10-2022

Trade and other receivables

Interest rate swap II

9,212

1.480

31-03-2026

479

Derivative financial

instruments

31-12-2021

Nominal

amount

Average

fixed

interest rate

Termination

date

Assets

Liabilities

Line item in the SFP where

the hedging instrument is

included

In € 1,000

In %

In € 1,000

Interest rate swap I

5,990

1.995

29-03-2024

293

Derivative financial

instruments

147

Exposure to interest rate risk

The following table details the Fund’s exposure to interest rate risks. It includes the Fund’s

financial assets

and financial liabilities, categorised by the earlier of contractual re-pricing or maturity date measured by the

carrying amount of the financial assets and financial liabilities.

In € 1,000

31-12-2022

Less

than

1 month

3 months

1 year

5 years

than

5 years

Non-

interest

bearing

Total

Investments in associates

3,587

Derivative financial instruments

479

Tax assets

563

Trade and other receivables

650

1,346

1,996

Prepayments and deferred

expenses

214

Cash and cash equivalents

4,739

4,740

Financial assets

5,389

479

5,711

11,579

Loans and borrowings

2,353

17,133

15,191

881

795

36,406

Effect of interest rate swaps

-/- 9,212

Tax liabilities

226

283

509

Trade and other payables

3,344

Deferred income and tenant

deposits

543

Financial liabilities

2,579

17,133

5,979

881

795

4,224

31,590

Total interest sensitivity gap

2,810

-/- 17,133

-/- 5,500

-/- 881

-/- 795

1,487

-/- 21,499

In € 1,000

31-12-2021

Less

than

1 month

3 months

1 year

5 years

than

5 years

Non-

interest

bearing

Total

Derivative financial instruments

293

Tax assets

Trade and other receivables

490

709

1,199

Prepayments and deferred

expenses

350

Cash and cash equivalents

1,741

1,744

Financial assets

2,231

293

1,149

3,673

Loans and borrowings

4,577

22,955

8,035

507

876

37,017

Effect of interest rate swaps

-/- 5,990

Tax liabilities

700

Trade and other payables

2,590

Deferred income and tenant

deposits

563

Financial liabilities

4,577

16,965

8,035

507

876

3,920

34,880

Total interest sensitivity gap

-/- 2,346

-/- 16,672

-/- 8,035

-/- 507

-/- 876

-/- 2,771

-/- 28,436

148

Fair value sensitivity analysis for fixed-rate instruments

An increase of 100 basis points in interest rates as at Statement of Financial Position

’s date

would have

decreased Group

equity and profit for the period by €

215,000 (2021

: €

284,000).

A decrease of 100 basis points in interest rates as at Statement of Financial Position

’s date

would have

increased Group

equity and profit for the period by €

215,000 (2021

: €

284,000).

This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

Cash flow value sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points (

) in interest rates as at Statement of Financial Position

’s

date would have increased and / or decreased profit for the period by the amounts shown below.

This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

In € 1,000

31-12-2022

31-12-2021

100 bp

increase

100 bp

decrease

100 bp

increase

100 bp

decrease

Variable rate instruments

-/- 235

272

-/- 144

Interest rate swaps

-/- 78

-/- 49

Cash flow sensitivity (net)

-/- 157

194

-/- 95

Weighted average interest rate of loans and borrowings

The main part of the financial liabilities represents loans and borrowings. As at Statement of Financial

Position

’s date

the weighted average interest rate of loans and borrowings is as follows:

31-12-2022

31-12-2021

In %

Weighted average interest rate of loans and borrowings

6.13

4.15

The Fund’s policy is

mitigation.

The risk appetite is low. The impact of interest rate risk is high, the likelihood

of the risk is high.

15.40.5 Price risk

The price risk can be defined as the risk that the value of the investments will fluctuate as a result of changes

in market prices (other than those arising from currency risk or interest rate risk), caused by factors specific to

the individual investment or the issuing institution or factors applicable to the market as a whole.

Rental risk includes the risk of loss of rental income due to vacancies, the lettability of space and movements

in market rents.

Property value risk includes the risk of loss of property value due to changing economic circumstances,

economic decline and / or oversupply of comparable real estate.

Since the Fund’s properties are stated at fair value, with both

realised and unrealised value adjustments being

recognised directly in the Income Statement

, a change in market conditions impacts directly on the Fund’s

investment result. The price risk is managed by the Fund by constructing a portfolio such that optimum

diversification across sectors and markets is achieved.

The Fund’s risk policy towards price risk is

Acceptance.

The risk appetite is high. The impact of this risk is

high, the likelihood is also high.

For the sensitivity analysis of the buildings (including underground) is referred to section 15.2.10

“Sensitivity

analysis”.

149

15.40.6 Concentration risk

The concentration risk is the risk that can occur if the Fund has a large concentration of investments in certain

regions or types of properties or if the Fund depends on a limited number of large tenants. To reduce this risk,

investments of the Fund are spread across different types of properties in several regions in Central Europe

and the portfolio has many small and medium-sized tenants. The Fund has decreased its concentration in

Košice

, Slovakia by selling during 2022 a further two of the eight properties it originally owned in the city,

reducing the holding to a single property (Letna).

The Fund’s policy towards this risk is

Avoidance / control.

The risk appetite is low. The impact of this risk is

medium, the likelihood is medium.

15.40.7

Risk associated with investing with borrowed money

The risk associated with investing with borrowed money lies in the fact that shareholders might lose their

investment because the lender has a priority call on the proceeds of realisation. The investments are indeed

used as a security for the (bank) loans. However, this risk is limited to the equity within the borrower subsidiary

as there is no cross collateralisation and no parent entity guarantee. If the “Loan

-to-

Value” (

LTV

) ratio is too

high according to the bank covenants it is possible that the Fund needs to sell property to improve LTV. The

Fund manages this risk by keeping the LTV below 60% and preferably around 50%. For the LTV reference is

made to section 15.15.4

“Securities provided, bank covenants and ratios secured bank loans”.

The Fund’s policy towards this risk is

Avoidance.

The risk appetite is low. The impact of this risk is high, the

likelihood is medium.

15.40.8 Economic risk

Economic risk is derived from direct financial factors (developments in interest rates and inflation) and market

developments (changes in for example GDP growth and employment). The former tends to affect capital

values, the latter occupancy rates and rental levels. Economic risk is managed by the Fund through focussing

the

Fund’s investments on flexible assets in economically stable regional centres, and managing these assets

through local professional teams closely attuned to developments in local market conditions.

The Fund’s policy towards this risk is

Acceptance.

The risk appetite is high. The impact of economic risk is

high, the likelihood is also high.

15.40.9

Counterpart risk (credit risk)

The credit risk can be defined as the risk of a counterparty being unable to fulfil its obligation to the Fund

associated with monetary assets. The Fund has a credit policy, and the counterpart risk is monitored and

controlled on a continuous basis. The risk is presumed to be low, given the short settlement period of most of

such monetary assets. The Fund does business with various parties; the most important are banks, tenants

and the local administrators of the properties. The Fund will mitigate this risk by regular contact with these

counterparties. If credits rise above certain risk limits, measures will be taken to reduce the risk for the Fund.

150

The carrying amount of monetary assets best represents the maximum credit risk exposure as at Statement

of Financial Position

’s date.

As this date

, the Fund’s monetary assets exposed to credit risk amounted to the

following, related to the F

und’s net assets attributable to the holders of redeemable ordinary

registered and

treasury shares:

31-12-2022

31-12-2021

In €

1,000

In %

In € 1,000

In %

Derivative financial instruments

479

1.0

293

0.6

Tax assets

0.0

Trade and other receivables

1,996

4.3

1,199

2.6

Cash and cash equivalents

4,740

10.2

1,744

3.8

7,220

15.5

3,251

7.0

Other than the above-mentioned items, there were no significant concentrations of credit risk to counterparties

as at Statement of Financial Position

’s date

. No individual financial investment exceeded 10% of the net assets

attributable to the holders of redeemable ordinary and registered shares either as at Statement of Financial

Position

’s date

he following table sets out the ageing analysis of the Fund’

s monetary assets. The amounts are based on

the carrying amount of monetary assets.

In € 1,000

31-12-2022

Current

(not past

due)

Up to

1 month

past due

1 to

3 months

past due

3 months

to 1 year

past due

More than

1 year

past due

Total

Gross monetary assets

Derivative financial instruments

479

Tax assets

Trade and other receivables

1,741

112

122

436

2,442

Cash and cash equivalents

4,740

6,965

112

122

436

7,666

Impairment of monetary assets

Derivative financial instruments

Tax assets

Trade and other receivables

424

446

Cash and cash equivalents

424

446

Net monetary assets

Derivative financial instruments

479

Tax assets

Trade and other receivables

1,736

108

118

1,996

Cash and cash equivalents

4,740

6,960

108

118

7,220

Exclusive of corporate income tax (

CIT

151

In €

1,000

31-12-2021

Current

(not past

due)

Up to

1 month

past due

1 to

3 months

past due

3 months

to 1 year

past due

More than

1 year

past due

Total

Gross monetary assets

Derivative financial instruments

293

Tax assets

Trade and other receivables

851

121

151

120

397

1,640

Cash and cash equivalents

1,744

2,903

121

151

120

397

3,692

Impairment of monetary assets

Derivative financial instruments

Tax assets

Trade and other receivables

397

441

Cash and cash equivalents

397

441

Net monetary assets

Derivative financial instruments

293

Tax assets

Trade and other receivables

843

117

140

1,199

Cash and cash equivalents

1,744

2,895

117

140

3,251

The impairment with regard to trade and other receivables relates entirely to trade receivables. For further

details with regard to this amount is referred to section 15.8

“Trade and other receivables” in the “Notes to the

Consolidated Financial S

tatements”. The following table sets out the pledges of the Fund’s financial assets.

In € 1,000

31-12-2022

Guarantee deposits

from tenants

Other pledge

Total

Trade and other receivables

225

Prepayments and deferred expenses

265

In € 1,000

31-12-2021

Guarantee deposits

from tenants

Other pledge

Total

Trade and other receivables

175

Prepayments and deferred expenses

232

The Fund’s policy towards this risk is

Mitigation.

The risk appetite is low. The impact is medium, the likelihood

is low.

15.40.10 Rent risk

Rent levels may be subject to downward pressure in periods of economic weakness. In the market, vacancy

rates can increase and rents will drop. This can also occur at other points of the economic cycle when new

development creates supply that temporarily exceeds demand. Rental risk can be best mitigated by

professional, active local asset management with the ability to deploy cash resources to modernise assets and

Exclusive of corporate income tax (

CIT

152

fund tenant incentives. It is also mitigated by ensuring diversification in lease contract expiry dates, to avoid a

number of contracts expiring contemporaneously into a weak market.

The Fund’s policy towards the risk is

Mitigation.

The risk appetite is medium. The impact of the rent risk is

medium, the likelihood is high.

15.40.11 Debtor risk

Debtor risk is the risk that arises from the possibility that a specific counterparty is unable to meet its obligations

to the Fund. The policy of the Fund is to reduce the default risk by applying a capital adequacy ratio to

(potential) tenants and by ensuring a diverse tenant base across industries (e.g. Food Retail, Financial

Services, Communications, Healthcare, Technology, Government, Transportation & Logistics) so that an

exposure to certain sectors is limited.

The Fund’s policy towards this risk is

Mitigation

. The risk appetite is medium. The impact of this risk is, due to

tenant base low, the likelihood is high.

15.40.12 Vacancy risk

The occupancy of properties may decrease by lease termination or bankruptcy of tenants. This risk is mitigated

and most effectively managed by the Fund by active local asset management and by a regular programme of

capital investment at asset level. For information about non-cancellable leases reference is made to section

15.24.5

“

non-cancellable

leases”

The Fund’s policy towards this risk is

Mitigation.

The risk appetite is medium. The impact of this risk is medium,

the likelihood is high.

15.40.13 Risks with regard to regulations

Political decisions to change the law on, for example, soil pollution, zoning, rent control and taxation can affect

the yield of the Fund. This risk is mitigated by the undertaking of detailed analysis of potentially relevant risks

(due diligence) before an acquisition. The Fund also follows new developments and adjusts its policy if

necessary, based on changes in laws and regulations.

The Fund’s policy is

Mitigation

. The risk appetite is low. The impact of this risk is medium, the likelihood also

is medium.

153

15.40.14 Liquidity risk

The liquidity risk can be defined as the risk of the Fund being unable to fulfil its obligation to counterparties

associated with monetary liabilities.

The Fund invests in real estate, a characteristic of which is its relative illiquidity; typically, the sale of real estate

takes time and this could potentially affect the liquidity position of the Fund. The Fund will continuously monitor

and manage liquidity to meet its obligations.

The following table shows the contractual, undiscounted cash flows of the Fund’s monetary liabil

ities. The

loans and borrowings include the payable interest. The payable interest is calculated by using the weighted

average interest rate of loans and borrowings as at Statement of Financial Position

’s date.

In € 1,000

31-12-2022

Less

than

1 month

3 months

1 year

5 years

than

5 years

No stated

maturity

Total

Non-derivative liabilities

Tax liabilities

359

Loans & borrowings

2,584

973

4,910

29,223

2,831

40,521

Trade and other payables

3,191

153

3,344

6,134

1,126

4,910

29,223

2,831

44,224

Derivative liabilities

Interest rate swaps

Monetary liabilities

6,134

1,126

4,910

29,223

2,831

44,224

In € 1,000

31-12-2021

Less

than

1 month

3 months

1 year

5 years

than

5 years

No stated

maturity

Total

Non-derivative liabilities

Tax liabilities

225

Loans & borrowings

4,113

1,761

1,988

31,337

1,258

40,457

Trade and other payables

2,471

119

2,590

6,809

1,880

1,988

31,337

1,258

43,272

Derivative liabilities

Interest rate swaps

Monetary liabilities

6,809

1,880

1,988

31,337

1,258

43,272

Weighted remaining maturity of loans and borrowings

The main part of the financial liabilities represents loans and borrowings. As at Statement of Financial

Position

’s date

the weighted remaining maturity of loans and borrowings is as follows:

31-12-2022

31-12-2021

In years

Weighted remaining maturity of loans and borrowings

3.21

3.38

Exclusive of Corporate Income Tax (

CIT

154

Withdrawable credit facilities

As at Statement of Financial Position

’s date

the withdrawable credit facilities of the Fund are as follows:

31-12-2022

31-12-2021

In € 1,000

In €

1,000

Withdrawable credit facilities

250

The Fund’s polic

y towards this risk is

Avoidance.

The risk appetite is low. The Fund works with budgets where

the debt service obligation towards banks is carefully monitored. The impact of this risk can be high, the

likelihood medium.

15.40.15 Operational risk

Operational risk is the risk of losses coming from failed internal processes, people or systems or from external

operational events. Examples of operational risk incidents are fraud, claims, losses, errors, violation of laws

and system failure. During the financial period no material operational risks materialised.

The risk appetite is low.

The Fund’s policy towards operational risks is

Avoidance

Mitigation.

The Fund for

example does not tolerate fraud, executes an extensive supplier due diligence / know your customer analysis

for service contracts and for transactions and asks for Supervisory Board approval for the purchase or sale of

real estate. The impact of these risks is medium, the likelihood is low.

15.40.16 Tax risk

Tax risk is the risk associated with possible changes in tax laws or changing interpretations and effects of

government policy and regulation.

he Fund’s policy towards this risk is

Mitigation / Acceptance.

The Fund tries to mitigate this risk by using local

specialists on regulation and taxation. The risk appetite is low. The impact of this risk is medium, the likelihood

is high.

15.40.17 Outsourcing risk

Risk of outsourcing activities brings with it the risk that the counterparty does not fulfil its contractual obligations

or makes mistakes. The Fund periodically assesses the compliance of the agreements and takes action as it

deems necessary, e.g. when mistakes occur.

The Fund’s policy towards this risk is

Avoidance

. The risk appetite, impact and likelihood are low.

15.40.18 Legal risk

Legal risk is the risk associated with possible changes in legislation or changing interpretations. In normal

times legislative changes are proposed by governments and made subject to comment by interested parties

before finally being passed into law. This enables drafting errors and unintended consequences to be identified

and removed and market participants to prepare themselves carefully for the impact of such changes. The

COVID-19 pandemic has led to a wave of emergency legislation from governments across the region in which

the Fund invests. This legislation has not been subject to the usual consultation and review processes. As a

result, there is a significantly increased risk that such legislation will impact negatively on the interests of the

Fund and its subsidiaries. In particular, there is a risk that cancellation or deferment of lease obligations,

ostensibly to help retail tenants affected by the pandemic, will lead to a long-term diminution of value in some

of the Fund´s properties. The Managing Board will carefully assess all such legislation and seek to mitigate its

negative effects to the fullest extent possible by active asset management and by specific legal action.

The Fund’s policy is therefore

Mitigation

. The risk appetite is low. The impact can be high, the likelihood is

high.

155

15.40.19 Integrity risk

Within organizations there is a risk that people harm organizations by committing fraud or theft.

The Managing Board therefore evaluates the reliability and integrity of its staff. All staff in key positions

employed the Managing Board

will be screened by “Pre

-E

mployment Screening of Dutch Securities Institute”

(

DSI

The Fund’s policy towards the integrity risk is

Avoidance

. The risk appetite is low. The impact of the risk is

medium, the likelihood low.

15.40.20 ESG risk

ESG risk refers to the risk of non-compliance with ESG standards for properties, which can have adverse

effects. To mitigate this risk, the Fund actively strives to meet ESG standards by investing in energy-saving

measures, enhancing real estate, and fostering a positive social environment for tenants. As of now, the Fund

does not perceive significant ESG risks, such as refinancing of expiring loans in 2024 and beyond. However,

this may change in the future if banks establish higher ESG standards, which they presently do not.

The Fund's policy for managing this risk is

Mitigation/avoidance

, with a low risk appetite. The impact of this

risk is considered medium, while the likelihood is medium.

15.40.21 Offsetting financial assets and financial liabilities

As at Statement of Financial

Position’s date t

he Fund has set-off the following financial assets and / or financial

liabilities:

In € 1,000

31-12-2022

Gross amounts before

set-off

Gross amounts

set-off

Net amounts

presented in SFP

Trade and other receivables

2,079

-/- 83

1,996

Trade and other payables

3,427

-/- 83

3,344

In € 1,000

31-12-2021

Gross amounts before

set-off

Gross amounts

set-off

Net amounts

presented in SFP

Trade and other receivables

792

-/- 83

709

Trade and other payables

2,673

-/- 83

2,590

The above set-

off relates to a receivable towards SDPI for the amount of € 83,000, with regard to penalty

interest of Alpha Bank. The receivable for

€ 83,000 has been set

-off against the liability towards Alpha Bank

with regard to accrued penalty interest. In case Alpha Bank will charge the penalty interest SPDI will bear the

burden

for an amount of € 83,000.

The Fund does not intend to set-off other financial assets and / or financial liabilities and / or does not have

the legally enforceable right to do so in the business as usual.

156

15.41

DISCLOSURES LEASES

15.41.1

Impact as at Statement of Financial Position’s date

The following table present the impact of

the application of IFRS 16 as at Statement of Financial Position’s

date:

31-12-2022

31-12-2021

In € 1,000

Right-of-use assets

1,294

1,397

Total assets

1,294

1,397

Non-current lease liabilities

991

1,134

Current lease liabilities

171

163

Total liabilities

1,162

1,297

For the specification and statement of changes in right-of-use assets is referred to sections:

•

15.2.

6 “Specification of right

-of-

use assets”; and

•

15.2.7 “Statement of changes in

right-of-

use assets”

For the statement of changes, analysis, and maturity analysis of undiscounted cash flows of lease liabilities is

referred to sections:

•

15.16.5

“Statement of changes in lease liabilities”

;

•

15.16.6

“

Analysis of lease liabilities; and

•

15.16.7

“Maturity analysis contractual undiscounted cash flows of lease liabilities”

15.41.2

Amounts recognised in Consolidated Income Statement

The following table present the impacts of the application of IFRS 16 in the Consolidated Income Statement:

31-12-2022

31-12-2021

In € 1,000

Valuation losses of right-of-use assets

103

Interest expense on lease liabilities

Foreign exchange and currency results of lease liabilities

-/- 23

Expenses relating to short-term leases

Expenses relating to leases of low-value assets, excluding short-term

leases of low-value assets

156

192

15.41.3

Amounts recognised in Consolidated Statement of Cashflows

The following table present the impacts of the application of IFRS 16 in the Consolidated Statement of

Cashflows:

31-12-2022

31-12-2021

In € 1,000

Payment of lease liabilities

188

186

15.41.4

Analysis of lease payments

31-12-2022

31-12-2021

In € 1,000

Fixed lease payments

188

186

Variable lease payments

188

186

157

15.42

DISCLOSURES CONSOLIDATED STATEMENT OF CASH FLOWS

15.42.1

Changes in cash flows arising from investing activities

The following table shows the changes in cash flows arising from investing activities, including:

•

changes arising from cash flows; and

•

non-cash changes.

In € 1,000

2022

Investing activities

Cash

changes

Non-cash

changes

Total

Acquisition of subsidiaries, net of cash acquired

Acquisitions of / additions to owned investment property

-/- 298

-/- 4,709

-/- 5,007

Acquisitions of investments in associates

-/- 3,655

Acquisitions of / additions to assets held for sale

-/- 55

-/- 16

-/- 71

Proceeds from the sale of assets held for sale

8,024

876

8,900

Fair value adjustments of owned investment property

3,737

Fair value adjustments right-of-use assets

103

Fair value adjustments of investment property under development

1,341

Fair value adjustments investments in associates

Fair value adjustments of assets held for sale

-/- 795

(Reversal) of impairment of inventories

-/- 70

Effect of changes in exchange rate of owned investment property

-/- 458

Effect of changes in exchange rate of property under development

400

Reclassification (to assets held for sale)

10,261

Reclassification (from owned investment property)

-/- 10,261

7,721

-/- 3,178

4,543

In € 1,000

2021

Investing activities

Cash

changes

Non-cash

changes

Total

Acquisitions of / additions to owned investment property

-/- 346

-/- 9

-/- 355

Acquisitions of / additions to assets held for sale

-/- 172

Proceeds from the sale of owned investment property

Proceeds from the sale of assets held for sale

8,860

Fair value adjustments of owned investment property

-/- 3,508

Fair value adjustments right-of-use assets

Fair value adjustments of investment property under development

Fair value adjustments of assets held for sale

1,343

(Reversal) of impairment of inventories

Effect of changes in exchange rate of owned investment property

-/- 1,069

Effect of changes in exchange rate of property under development

-/- 297

Reclassification (to assets held for sale)

4,720

Reclassification (from owned investment property)

-/- 4,720

8,342

-/- 3,374

4,968

158

15.42.2

Changes in cash flows arising from financing activities

The following table shows the changes in cash flows arising from financing activities, including:

•

changes arising from cash flows; and

•

non-cash changes.

In € 1,000

2022

Financing activities

Cash

changes

Non-cash

changes

Total

Share buy-back (treasury shares)

-/- 346

-/- 11

-/- 357

Proceeds from / acquisitions of secured bank loans

3,276

Proceeds from other loans and borrowings

3,100

Repayments of secured bank loans

-/- 4,260

Repayments of other loans and borrowings

-/- 2,900

Payments of lease liabilities

-/- 188

(Amortisation) flat fee and transaction costs secured bank loans

(Amortisation) flat fee and transaction costs other loans and

borrowings

-/- 39

Accreted interest of lease liabilities

Accreted interest of other loans and borrowings

Effect of changes in exchange rate of secured

bank loans

212

Effect of changes in exchange rate of lease liabilities

-/- 23

Effect of changes in exchange rate of other loans and borrowings

-/- 14

-/- 4,594

3,566

-/- 1,028

In € 1,000

2021

Financing activities

Cash

changes

Non-cash

changes

Total

Proceeds from secured bank loans

14,009

Proceeds from other loans and borrowings

2,340

3,500

5,840

Repayments of secured bank loans

-/- 16,810

Repayments of convertible bonds

-/- 3,500

Repayments of other loans and borrowings

-/- 6,349

Payments of lease liabilities

-/- 186

(Amortisation) flat fee and transaction costs secured bank loans

-/- 241

105

-/- 136

(Amortisation) flat fee and transaction costs other loans and

borrowings

-/- 90

Accreted interest of convertible bonds

Accreted interest of lease liabilities

Accreted interest of other loans and borrowings

Effect of changes in exchange rate of secured

bank loans

454

Effect of changes in exchange rate of lease liabilities

-/- 11

Effect of changes in exchange rate of other loans and borrowings

-/- 7,327

792

-/- 6,535

159

15.43

RELATED PARTIES

15.43.1

Identity of related parties

For the Fund the following categories of related parties were identified during the financial period:

Managers in key positions, meaning the Managing Board and the Supervisory Board;

II.

Major investors (more than 20% voting rights);

III.

All organisational entities within the Group designated as Arcona Capital;

IV.

Investment trusts, investment funds and other investment companies which are managed by an

entity belonging to Arcona Capital;

Investments undertaken by Arcona Capital, in which Arcona Capital has significant influence (more

than 20% of voting rights).

Related parties include both natural and legal persons. Close members of the family of natural persons, being

related parties, are also classified as related parties.

15.43.2

Transactions with and / or interests of managers in key positions (I)

During the financial period the Fund entered into the following transactions with the managers in key positions:

the Managing Board received a remuneration (management fee) for an amount of € 1,286,000 (2021:

€ 1,301,000);

the Managing Board reduced its own management fee by an amount equivalent to the asset

management fees paid by the Fund (and / or its subsidiaries) to Arcona Capital Czech Republic s.r.o.

for the amount of €

295,000 (2021

: € 4

06,000);

the Managing Board reduced its own management fee by an amount equivalent to the asset

management fees paid by the Fund (and / or its subsidiaries) to Arcona Capital Poland Sp.

z o.o.

for the amount of €

203,000 (2021

: € 1

85,000);

the Managing Board reduced its own management fee by an amount equivalent to the asset

management fees paid by the Fund (and / or its subsidiaries) to CEG South East Continent Unique

Real Estate Management Limited for the amount of € 83,000 (2021: € 62,000);

the Supervisory Board received a remuneration for an

amount of € 35,000 (2021: € 35,000)

During the financial period no other transactions occurred with members of the Managing Board and / or

members of the Supervisory Board.

For the personal interests of members of the Managing and Supervisory Board reference is made to section

20.3

“Personal interests”.

For the remuneration of the Managing Board reference is made to section 15.33

“Administrative expenses”.

For the remuneration of the Supervisory Board and the remuneration of the statutory directors reference is

made to section 15.34

.3 “Analysis of Supervisory Board fees” and

section 5.34

.4 “Analysis of other operating

expenses”.

15.43.3

Specification major investors

As at Statement of Financial Position’s date the Fund identified the following major investors:

Name

Type of share

Direct real

voting rights

Indirect real

voting rights

Direct potential

voting rights

Total

In %

Stichting Prioriteit APF

Priority shares

100.00

n.a.

100.00

Secure Property Development &

Investment Plc (SPDI)

Registered

25.32

n.a.

6.13

31.45

The voting rights are based on information in the Register of substantial holdings and gross short positions of

the AFM, as at Statement of Financial Position

’s date.

160

15.43.4

Transactions with and / or interests of major investors (II)

During the financial period the Fund entered into or maintained the following transactions with major investors:

2022

31-12-2022

Name

Kind of transaction

Amount of transaction

Carrying amount

In € 1,000

SPDI

Acquisition 21.18%-share in Lelar Holding Ltd.

3,173

SPDI

Acquisition 3.17%-share in Lelar Holding Ltd.

482

SPDI

Acquisition 100%-share in N-E Real Estate

Park First Phase S.r.l.

1,473

SPDI

Receivable / current account

2021

31-12-2021

Name

Kind of transaction

Amount of transaction

Carrying amount

In € 1,000

In €

1,000

H.M. van Heijst

Conversion convertible bonds into loan

provided

2,000

1,000

H.M. van Heijst

Payable interest loan provided

H.M. van Heijst

Payable interest convertible bonds

108

15.43.5

Transactions with other related parties (III-IV-V)

During the financial period the Fund entered into or maintained the following transactions with other related

parties:

2022

31-12-2022

Name

Kind of transaction

Other

information

Amount of

transaction

Carrying

amount

In € 1,000

In €

1,000

Arcona Capital Czech Republic s.r.o.

Asset management fee

295

Arcona Capital Poland Sp. z o.o.

Asset management fee

203

498

Arcona Capital Czech Republic s.r.o.

Advisory services

Several

Rental income

268 m

Statutory directors

Wages and salaries

2021

31-12-2021

Name of other related party

Kind of transaction

Other

information

Amount of

transaction

Carrying

amount

In € 1,000

Arcona Capital Czech Republic s.r.o.

Asset management fee

406

Arcona Capital Poland Sp. z o.o.

Asset management fee

185

591

Arcona Capital Czech Republic s.r.o.

Advisory services

Several

Rental income

268 m

Statutory directors

Wages and salaries

15.43.6

Investments in other related parties (III-IV-V)

Investment trusts, investment funds and other investment companies, which are managed by an entity

belonging to Arcona Capital, do hold investments in companies in which the Fund also holds investments.

As at

Statement of Financial Position’s date the Fund held no investments in other related parties.

161

15.43.7

Agreements with related parties

During the financial period the Fund entered into or maintained the following transactions with related parties

affiliated with the Managing Board of the Fund:

2022

31-12-2022

Name

Kind of transaction

Amount of transaction

Carrying amount

In €

1,000

In € 1,000

R.J. Barker

Providing unsecured loan

250

R.J. Barker

Payable interest unsecured loan provided

2021

31-12-2021

Name

Kind of transaction

Amount of transaction

Carrying amount

In € 1,000

R.J. Barker

Providing unsecured loan

250

R.J. Barker

Payable interest unsecured loan provided

The Fund has not entered into any other agreements with parties affiliated with the Managing Board of

the Fund.

15.43.8

Loans from third parties

During the financial period the Fund has entered into loan agreements with third parties. Those third parties

are not related parties to the Fund or the Managing Board but are investors in other funds managed by the

Managing Board.

15.44

EVENTS AFTER STATEMENT

OF FINANCIAL POSITION’S DATE

The following material events after Statement of Financial Position’s date have occurred:

On January 10, 2023 the Fund announced it has successfully refinanced the Boyana Residence

project in Bulgaria with a new loans

for an amount of € 3.6 million.

The new loans from Dutch

investors replaces two expired loans from Alpha Bank. This refinancing makes it possible to fully

repay Alpha Bank, pay historical taxes and renovate apartments in accordance with the original

business plan. Alpha Bank had not permitted the separate sale of the development land or the sale

of individual apartments, thus limiting the realization of potential additional value from the project;

In the period from January 1, 2023 to March 15, 2023 the Parent Company has repurchased 60,976

ordinary shares of the Parent Company at an average price of € 6.43 per share. The total acquired

amount in cash terms is € 392,050. These shares have been acquired as part

of the share buy-back

programme announced on September 14, 2022, for an amount up to € 1.5 million.

The ordinary

shares are proposed for partial cancellation

in due course upon a resolution of the Shareholders’

Meeting to reduce the Parent Company’s capital;

On 28 March 2023, the Fund was notified that Hypo Noe had approved a waiver for ACREP and

Project 5, addressing the breach of the DSCR forecast covenant.

On April 4, 2023, it was announced that Sberbank CZ (as an enterprise) had been sold to Česká

Spořitelna based on publicly available information. The Sberbank CZ loan book with a nominal value

of CZK 47.1 billion was transferred. Česká Spořitelna purchas

ed it for CZK 41.053 billion. Throughout

April 2023, the technical transfer of data from Sberbank CZ to Česká Spořitelna will take place.

For more information is referred to section 13.3

“Statement of compliance and future related assumptions”

further material events have occurred after Statement of Financial Position’s date.

162

PARENT COMPANY FINANCIAL STATEMENTS 2022

163

PARENT

COMPANY

BALANCE

SHEET

After proposal result appropriation

Notes

31-12-2022

31-12-2021

In € 1,000

Investments

Investments in group companies

19.1

31,981

35,146

Receivables from group companies

19.2

22,549

17,327

54,530

52,473

Receivables

Other receivables

19.3

1,149

1,131

Deferred expenses

19.4

1,152

1,134

Other assets

Cash at bank

19.7

1,814

205

Total assets

57,496

53,812

Shareholders’ equity

19.8

Issued capital

19.9

21,190

18,794

Share premium

19.10

21,922

19,310

Revaluation reserve

19.8.1

7,911

8,725

Reserve currency translation differences

19.8.1

1,073

1,262

Reserve investments in group companies

19.8.1

9,157

7,989

Retained earnings

19.8.1

-/- 14,738

-/- 9,677

46,515

46,403

Provisions

Investments in group companies

19.11

Long-term liabilities

Private loans

19.13

668

250

Debts to group companies

19.14

6,717

2,153

7,385

2,403

Current liabilities

Private loans

19.13

2,130

2,250

Debts to group companies

19.14

1,384

Tax liabilities

19.15

Other liabilities

19.16

Accruals

19.17

1,353

1,298

Total current liabilities

3,558

4,994

Total shareholders’ equity and liabilities

57,496

53,812

164

PARENT

COMPANY

PROFIT

AND

LOSS

ACCOUNT

Notes

2022

2021

In € 1,000

Income from investments

Interest

19.20

1,165

761

Realised valuation results of investments

Investments in group companies

19.21

527

Receivables from group companies

19.22

530

Unrealised valuation results of investments

Investments in group companies

19.23

-/-

1,910

3,726

Receivables from group companies

19.24

-/- 1,923

-/- 3,833

3,726

Total income

-/- 2,641

5,017

Administrative expenses

19.25

705

648

Other operating expenses

19.26

633

524

Interest expenses

19.28

397

754

Total expenses

1,735

1,926

Result before income tax

-/-

4,376

3,091

Income tax expense

19.29

-/- 26

-/- 43

Result after income tax

-/- 4,350

3,134

165

ACCOUNTING

PRINCIPLES

PARENT

COMPANY

FINANCIAL

STATEMENTS

18.1

GENERAL

The Parent Company Financial Statements for the financial period are part of the Consolidated Financial

Statements for the financial period.

18.2

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

The Parent Company Financial Statements have been prepared in accordance with the provisions of Part 9 of

Book 2 of the Dutch Civil Code (Titel 9, Boek 2 van het Burgerlijk Wetboek). For the purpose of determining

the principles of valuation of assets and liabilities and the determination of results for its Parent Company

Financial Statements, the Parent Company makes use of the option offered in Book 2, article 2:362 (8) of the

Dutch Civil Code. This means that the principles of valuation of assets and liabilities and determination of

results (hereinafter referred to as the “principles of valuation”)

of the Fund’s

Parent Company Financial

Statements are identical to those that have been applied for the Consolidated Financial Statements. In this

context investment in group companies, on which significant influence is exercised, are valued at Net Asset

Value. The Consolidated Financial Statements have been prepared in accordance with the standards adopted

by the International Accounting Standards Board (“

IASB

”) and accepted by the Eur

opean Union (hereinafter

referred to as “EU

IFRS”). Reference is made to sections 1

3.5

“Basis of preparation of the consolidated

financial statements”

to 13.41

“Income tax expense”

, inclusive for a description of those principles.

18.3

BASIS OF PREPARATION OF THE PARENT COMPANY FINANCIAL STATEMENTS

18.3.1

Investments in group companies

Investments in group companies in which the Parent Company either exercises voting control or effective

management responsibility are valued at Net Asset Value. The initial recognition in the accounts and valuations

at balance sheet dates is made at Net Asset Value. The value is adjusted with the share of the Parent Company

in the results of the group company, based on the principles for determining results as applied in the

Consolidated Financial Statements and with the share in the other movements in equity of the group company

with effect from the date on which control commences.

In case the value of the group company is reduced to zero, additional losses are provided for, and a liability is

recognised, only to the extent that the Parent Company has incurred legal or constructive obligations or made

payments on behalf of the group company. If the group company subsequently reports profits, the Parent

Company resumes recognising its share of those profits only after its share of the profits equals the share of

losses not recognised.

The Net Asset Value of the foreign group companies is translated into Euros at the exchange rate as at the

balance sheet date. The results of foreign group companies are translated into Euros at the exchange rates at

the dates of the transactions. For practical reasons, the average monthly exchange rates for the financial

period are used to approximate the exchange rates at the dates of the transactions, as long as the exchange

rates have not fluctuated significantly.

18.3.2

Receivables from group companies

Receivables from group companies are initially measured at fair value and subsequently measured at

amortised cost. As at balance sheet date the receivables from group companies are translated into Euros at

the exchange rate as at the balance sheet date. The recognition and determination of impairments takes place

in a forward-looking manner based on the expected credit loss model (

ECL

). The ECL model applies to the

receivables from group companies. Due to the fact that investments in group companies are considered as a

166

combination of assets and liabilities, this means in general that expected credit losses on receivables from

group companies are eliminated. The elimination is recognised in the carrying amount of the receivables from

group companies.

18.3.3

Acquisitions by share-based payments

In case the Fund acquires investments in group companies, receivables from group companies, investments

in associates or other assets by share-based payments (IFRS 2), the difference between the fair value of those

assets and the purchase price agreed is recognised directly into the share premium.

18.3.4

Issued capital

Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from

equity.

When equity shares are repurchased, the consideration paid, which includes directly attributable costs, is

recognized as a deduction from equity. The Parent Company classifies the repurchased shares as treasury

shares at the payment date to its liquidity provider and charges them to the retained earnings, including directly

attributable costs. If the treasury shares are sold or reissued later, the amount received is recognized as an

increase in equity, and any surplus or deficit resulting from the transaction is presented within share premium.

There is no impact on the profit and loss account when the company buys back, sells, issues, or cancels its

own shares.

18.3.5

Share premium

The share premium comprises the amount paid in by the shareholders on ordinary and registered shares of

the Parent Company over and above the nominal value. The uplift received on issuance of own ordinary and

registered shares or the reduction applied on redemption of own ordinary and registered shares is recognised

directly into the share premium.

18.3.6

Revaluation reserve

The legal revaluation reserve comprises the cumulative unrealised positive net changes in the fair value of the

properties held by the investments in group companies (owned investment property, investment property under

development as well as properties classified as assets held for sale), less the related deferred tax liabilities.

The deferred tax liabilities are deducted in accordance with the principles of valuation for deferred taxes.

In case of sale of property the cumulative unrealised positive net change in the fair value of the property sold,

as well as the related deferred tax liabilities, are no longer stated in the revaluation reserve but recognised

under retained earnings.

18.3.7

Reserve currency translation differences

Results arising from translation of net investments in group companies outside the Euro-zone into the Parent

Company

’s

functional currency (Euro)

are recognised directly in the shareholders’ equity in

reserve currency

translation differences. In the event of reduction or sale of the net investment in group companies the

cumulative exchange differences related to that group company are (proportionally) transferred to the retained

earnings.

18.3.8

Reserve investments in group companies

The Parent Company maintains a legal reserve

(“Reserve investments in group companies”)

for the amount

of its share in the positive result in its group companies and of its share in direct increases in equity since the

initial recognition of the group company was made. Negative cumulative results in a group company since its

first valuation are not taken into account.

The reserve investments in group companies will be reduced by:

•

distributions to which the Parent Company, until the moment of adoption of its own Financial

Statement, has acquired an entitlement;

•

direct decreases in equity of the group company;

•

distributions which the Parent Company may affect without restrictions.

167

The distributions as mentioned in this section do not include distributions made in the form of shares.

18.3.9

Result from investments in group companies

The share of the results from investments in group companies comprises the Parent Company

’s share in the

results of the group companies, including the revaluation results of the assets held by the group companies.

The result from investments in group companies has been determined on the basis of the principles of valuation

adopted by the Parent Company. Results from transactions between the Parent Company and the group

companies, as well as between the group companies themselves, are recognised insofar as they are realised.

If the group companies have been acquired in the course of the financial period, the Parent Company accounts

for the results from investments in group companies with effect from the date on which control commenced.

18.4

SIZE AND COMPOSITION OF THE EQUITY AND RESULTS IN THE CONSOLIDATED AND

PARENT COMPANY FINANCIAL STATEMENTS

As the Parent Company makes use of the option provided in Book 2, article 2:362 (8) of the Dutch Civil Code,

the size of the G

roup equity (in the Consolidated Statement of Financial Position) and the shareholders‘ equity

(in the Parent Company Balance Sheet) is identical.

The

composition of the equity (in the Consolidated Statement of Financial Position) and the shareholders‘

equity (in the Parent Company Balance Sheet) is not identical.

Since the Parent Company makes use of the option provided in Book 2, article 2:362 (8) of the Dutch Civil

Code, the profit for the period in the Consolidated Income Statement and profit for the period in the Parent

Company Profit and Loss Account is identical.

168

NOTES

THE

PARENT

COMPANY

FINANCIAL

STATEMENTS

19.1

INVESTMENTS IN GROUP COMPANIES

19.1.1

Analysis of investments in group companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital RE Bohemia s.r.o.

7,788

7,208

Arcona Capital RE Slovakia s.r.o.

13,422

13,612

Arcona Capital Real Estate Poland Sp. z o.o.

2,818

2,786

Arcona Capital Real Estate Trio Sp. z o.o.

6,309

6,565

Arcona Real Estate B.V.

894

885

Aisi Bela LLC

750

3,332

Boyana Residence E.O.O.D.

758

Arcona Capital Real Estate Bulgaria Ltd.

Arcona Black Sea Real Estate B.V.

31,981

35,146

The companies indicated above are included in the Consolidated Financial Statements. For further analysis of

the investments in group companies reference is made to section 15.1.1

“Consolidated subsidiaries”.

19.1.2

Statement of changes in investments in group companies

2022

2021

In € 1,000

Balance as at 1 January

35,146

35,434

Share in result of group companies

-/- 1,910

3,726

Distributions

-/- 372

-/- 4,744

Exchange rate differences

-/-

234

719

Other movements directly in shareholders’ equity

-/- 675

Reclassifications (to provision investments in group companies)

Balance as at 31 December

31,981

35,146

The negative amount of €

372,000 in "Distributions" represents dividend distributions from Arcona Capital RE

Slovakia s.r.o.

The

negative amount of €

675,000 in

“

Other movements directly in shareholders

’

equity

”

includes the following

items:

•

A result on acquisition of €

40,000 related to the acquisition of 100% shares in N-E Real Estate Park

First Phase S.r.l. by Arcona Black Sea Real Estate B.V.

•

A IFRS 2.10 negative booking effect of

€

711,000 related to the acquisition of a 24.35% share in

Lelar Holding Ltd. by Arcona Black Sea Real Estate B.V. (for further information is referred to section

15.4.1 “Specification of investments in associates”).

•

Exchange rate differences of €

4,000 related to net investments in group companies held by Arcona

Black Sea Real Estate B.V.

169

19.1.3

Securities provided

As at balance sheet date the following securities were provided:

•

The issued shares of Arcona Capital RE Bohemia s.r.o. are pledged to Sberbank CZ;

•

the issued shares of Arcona Capital Real Estate Poland Sp. z o.o. are pledged to Hypo Noe;

•

the issued shares of Arcona Capital Real Estate Trio Sp. z o.o. are pledged to the holders of secured

series A bearer bonds;

•

the issued shares of Boyana Residence E.O.O.D. are pledged to Alpha Bank.

For further information on the pledges to credit institutions and bank covenants reference is made to section

15.16.

4 “Securities provided, bank covenants and ratios secured bank loans”.

19.2

RECEIVABLES FROM GROUP COMPANIES

19.2.1

Analysis of receivables from group companies

31-12-2022

31-12-2021

In € 1,000

Loans to group companies

22,542

17,327

19.2.2

Analysis of loans to companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital Real Estate Poland Sp. z o.o.

7,950

7,500

Arcona Capital Black Sea Real Estate B.V.

5,670

Arcona Capital RE Bohemia s.r.o.

3,325

3,093

Arcona Real Estate B.V.

3,305

3,104

Boyana Residence E.O.O.D.

2,143

3,583

Aisi Bela LLC

149

22,542

17,327

As at balance sheet date the weighted average interest rate on all receivables from group companies is 5.46%

per annum (December 31, 2021: 4.57% per annum).

19.2.3

Statement of changes in loans to group companies

2022

2021

In € 1,000

Balance as at 1 January

17,327

16,334

Loans advanced

7,036

1,300

Redemption on loans advanced

-/- 476

Exchange rate differences

102

169

Provision

-/- 1,923

Balance as at 31 December

22,542

17,327

170

19.3

OTHER RECEIVABLES

This covers other receivables with a payment term within one year.

19.3.1

Analysis of other receivables

31-12-2022

31-12-2021

In € 1,000

Interest on loans to group companies

281

135

Dividend from investments in group companies

785

799

Receivables SPDI

Receivables Secure Management S.r.l.

114

1,149

1,131

For further information with regard to

“Receivables

SPDI

” for the amount of € 83,000

reference is made to

section 15.40.

20 “

Offsetting financial assets and financial liabilities

”.

19.3.2

Specification of interest on loans to group companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital RE Bohemia s.r.o.

281

132

Aisi Bela LLC

281

135

19.3.3

Specification of dividend from investments in group companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital Real Estate Trio Sp. z o.o.

785

799

19.4

DEFERRED EXPENSES

This covers deferred expenses with a maturity within one year.

19.4.1

Analysis of deferred expenses

31-12-2022

31-12-2021

In € 1,000

Prepayments

171

19.5

RECOGNISED DEFERRED TAXES

19.5.1

Specification of recognised deferred taxes

31-12-2022

Recognised

deferred tax

assets

Recognised

deferred tax

liabilities

Total

deferred

taxes

In € 1,000

Receivables from group companies

-/- 97

Tax losses (carried forward)

Deferred taxes before set-off

Set-off deferred taxes

-/- 97

31-12-2021

Recognised

deferred tax

assets

Recognised

deferred tax

liabilities

Total

deferred

taxes

In € 1,000

Receivables from group companies

-/- 71

Tax losses (carried forward)

Deferred taxes before set-off

Set-off deferred taxes

-/- 71

19.5.2

Analysis of recognised deferred taxes

31-12-2022

31-12-2021

In € 1,000

Will expire

Will never expire

19.5.3

Analysis of recognised deferred tax assets concerning tax losses (carried forward)

31-12-2022

31-12-2021

In € 1,000

Will expire

Will never expire

Based on the tax forecast the Managing Board expects (taking into account local tax law and regulations) that

in the future there will be sufficient taxable profit to set-off these recognised tax losses.

172

19.6

UNRECOGNISED DEFERRED TAXES

19.6.1

Specification of unrecognised deferred taxes

31-12-2022

Unrecognised

deferred tax

assets

Unrecognised

deferred tax

liabilities

Total

In € 1,000

Tax losses (carried forward)

1,766

Receivables from group companies

512

2,278

31-12-2021

Unrecognised

deferred tax

assets

Unrecognised

deferred tax

liabilities

Total

In € 1,000

Tax losses (carried forward)

1,634

Receivables from group companies

1,635

19.6.2

Analysis of unrecognised deferred taxes

31-12-2022

31-12-2021

In € 1,000

Will expire

Will never expire

1,766

1,635

1,766

1,635

The Managing Board expects (taking into account local tax law and regulations) that in the future there will be

insufficient taxable profit to set-off these unrecognised tax losses.

19.6.3

Statement of changes in unrecognised deferred taxes

2022

2021

In € 1,000

Balance as at 1 January

1,635

1,360

Adjustments related to prior years

Additions / withdrawals

630

211

Change in tax rate

Balance as at 31 December

2,278

1,635

19.7

CASH AT BANK

Cash at bank is entirely at the free disposal of the Parent Company.

173

19.8

SHAREHOLDERS’ EQUITY

19.8.1

Statement of changes in

shareholders’ equity

Issued

capital

premium

Revaluation

reserve

Reserve

currency

translation

differences

Reserve

investments

in group

companies

Equity

component

convertible

bonds

Retained

earnings

Share-

holders’

equity

In €

1,000

In € 1,000

Balance as at January 1, 2022

18,794

19,310

8,725

1,262

7,989

-/- 9,677

46,403

Result after income tax

-/- 4,350

Change in revaluation reserve

-/- 814

814

Change in reserve currency

translation differences

-/- 189

Change in reserve investments

in group companies

1,168

-/- 1,168

Own shares issued

2,396

2,612

5,008

Treasury shares repurchased

-/- 357

Balance as at December 31,

2022

21,190

21,922

7,911

1,073

9,157

-/- 14,738

46,515

Balance as at January 1, 2021

18,794

19,310

6,691

947

7,137

144

-/- 10,069

42,954

Result after income tax

3,134

Change in revaluation reserve

2,034

-/- 2,034

Change in reserve currency

translation differences

315

Change in reserve investments

in group companies

852

-/- 852

Change in equity component

convertible bonds

-/- 144

144

Balance as at December 31,

2021

18,794

19,310

8,725

1,262

7,989

-/- 9,677

46,403

19.9

ISSUED CAPITAL

19.9.1

Analysis of issued capital

31-12-2022

31-12-2021

In pieces

In €

1,000

In pieces

In € 1,000

Ordinary shares (at € 5.00 each)

3,113,074

15,565

3,165,149

15,826

Registered shares (at € 5.00 each)

1,072,910

5,364

593,534

2,968

Subtotal profit-

sharing shares (at € 5.00 each)

4,185,984

20,929

3,758,683

18,794

Treasury shares (at € 5.00 each)

52,075

261

Priority shares (at € 5.00 each)

4,238,060

21,190

3,758,684

18,794

174

19.9.2

Ordinary shares

The holders of ordinary shares are entitled to dividends, the distribution of which has been resolved by the

General Meeting of Shareholders. The holders of ordinary shares are entitled to exercise one vote per ordinary

share at the General Meeting of Shareholders.

2022

2021

In pieces

In € 1,000

In pieces

In € 1,000

Balance in issue as at 1 January

3,165,149

15,826

3,138,158

15,691

Conversion registered shares

26,991

135

Share buy-back

-/- 52,075

-/- 261

Balance in issue as at 31 December fully paid

3,113,074

15,565

3,165,149

15,826

19.9.3

Registered shares

The registered shares are currently restricted from trading on Euronext Fund Services (EFS) in Amsterdam

and the Prague Stock Exchange (PSE).

2022

2021

In pieces

In € 1,000

In pieces

In € 1,000

Balance in issue as at 1 January

593,534

2,968

620,525

3,103

Issued during the financial period

479,376

2,396

Conversion into ordinary shares

-/- 26,991

-/- 135

Balance in issue as at 31 December fully paid

1,072,910

5,364

593,534

2,968

19.9.4

Treasury shares

The treasury shares are held by the Parent Company.

2022

2021

In pieces

In € 1,000

In pieces

In € 1,000

Balance in issue as at 1 January

Share buy-back

52,075

261

Balance in issue as at 31 December fully paid

52,075

261

As at September 14, 2022 the Parent Company announced it would repurchase ordinary shares for a

maximum of € 1

.5 million. The buy-back programme will be executed in the period between September 15,

2022 up to and including March 15, 2023

, or until €

1.5 million in ordinary shares has been purchased. The

ordinary shares acquired will be cancelled subsequently following a resolution of the shareholders meeting.

19.9.5

Priority shares

From the profit earned in a financial period, primarily and as far as possible a dividend is distributed on the

priority shares amounting to seven per cent (7%) on an annual basis, calculated over the nominal value of the

priority shares. No further distributions are made on the priority shares.

2022

2021

In pieces

In € 1,000

In pieces

In € 1,000

Balance in issue as at 1 January

Issued during the financial period

Redeemed during the financial period

Balance in issue as at 31 December fully paid

175

19.9.6

Analysis of authorised share capital

31-12-2022

31-12-2021

In pieces

In € 1,000

In pieces

In € 1,000

Ordinary shares (at € 5.00 each)

4,999,999

25,000

4,999,999

25,000

Priority shares (at € 5.00 each)

5,000,000

25,000

5,000,000

25,000

19.9.7

Acquisitions through share-based payments

During the financial period the Fund acquired the following subsidiaries (investments in group companies),

through share-based payments:

•

N-E Real Estate Park First Phase S.r.l. (through Arcona Black Sea Real Estate B.V.): issuance of 10

registered shares for a total amount of €

1,000.

During the financial period the Fund acquired the following associates (investments in associates), through

share-based payments:

•

24,35%-share in Lelar Holdings Limited (through Arcona Black Sea Real Estate B.V.): issuance of

362,688 registered shares for a total amount of € 3,

582,000.

Besides the Fund has a payable with regard to the final settlement of the acquisition for an amount

of € 73,000.

The Fund intends to settle this payable in the near future by the issuance of additional

registered shares of the Parent Company.

During the financial period the Fund acquired the following loans to subsidiaries (receivables from group

companies), through share-based payments:

•

Loan to N-E Real Estate Park First Phase S.r.l. (through Arcona Black Sea Real Estate B.V.):

issuance of 116,678 registered

shares for a total amount of €

1,425,000.

Besides the Fund has a payable with regard to the final settlement of the acquisition for an amount

of € 47,000.

The Fund intends to settle this payable in the near future by the issuance of additional

registered shares of the Parent Company.

For a specification of the subsidiaries´ assets acquired and liabilities assumed reference is made to section

15.1.3

“Subsidiaries acquired during the financial period”.

19.10

SHARE PREMIUM

For the statement of changes in share premium reference is made to section

19.8.1 “Statement of changes in

shareholders’ equity”

The paid-up share premium for tax purposes as at December 31, 2022

was €

25,525,000 (December 31, 2021:

€

22,430,000).

19.11

PROVISIONS

19.11.1

Analysis of provisions

31-12-2022

31-12-2021

In € 1,000

Investments in group companies

176

19.11.2

Specification of provisions investments in group companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital Real Estate Bulgaria Ltd.

Arcona Black Sea Real Estate B.V.

19.11.3

Statement of changes in provisions investments in group companies

2022

2021

In € 1,000

Balance as at 1 January

Additions

Balance as at 31 December

19.12

DEFERRED TAX LIABILITIES

For the specification and analysis of the (un)recognised deferred tax liabilities reference is made to section

19.5 “Recognised deferred taxes and

section 19

.6 “Unrecognised deferred taxes”.

19.13

PRIVATE LOANS

19.13.1

Analysis of private loans

31-12-2022

31-12-2021

In € 1,000

(Un)secured loans third parties

2,798

2,500

19.13.2

Statement of changes in private loans

2022

2021

In € 1,000

Balance as at 1 January

2,500

4,373

Loans advanced

3,100

3,750

Redemptions

-/- 2,750

-/- 5,660

(Amortisation) flat fee and transaction costs

-/- 52

Balance as at 31 December

2,798

2,500

For the conditions and securities provided of the private loans reference is made to section 15.16.9

“

Analysis

of other loans and borrowings”

and section 15.16.10

“Securities provided of other loans and borrowings”.

19.13.3

Maturity analysis of private loans

31-12-2022

31-12-2021

In € 1,000

Less than 1 year

2,130

2,250

1 to 5 years

668

250

More than 5 years

2,798

2,500

177

19.14

DEBTS TO GROUP COMPANIES

19.14.1

Analysis of debts to group companies

31-12-2022

31-12-2021

In € 1,000

Loans due to group companies

6,237

3,359

Interest on loans due to group companies

480

178

6,717

3,537

19.14.2

Maturity analysis of debts due to group companies

31-12-2022

Loans due to

group companies

Interest on loans due to

group companies

Total

In € 1,000

In €

1,000

Less than 1 year

1 to 5 years

6,237

480

6,717

More than 5 years

6,267

480

6,717

31-12-2021

Loans due to

group companies

Interest on loans due to

group companies

Total

In € 1,000

Less than 1 year

1,346

1,384

1 to 5 years

2,013

140

2,153

More than 5 years

3,359

178

3,537

19.14.3

Specification of loans due to group companies

31-12-2022

31-12-2021

In € 1,000

Arcona Capital Real Estate Trio Sp. z o.o.

2,013

Arcona Capital RE Slovakia s.r.o.

3,623

745

Arcona Capital Real Estate Bulgaria Ltd.

601

6,237

3,359

As at balance sheet date the weighted average interest rate on all loans due to group companies is 4.98% per

annum (December 31, 2021: 7.10%).

19.14.4

Statement of changes in loans due to group companies

2022

2021

In € 1,000

In €

1,000

Balance as at 1 January

3,359

601

Loans advanced

3,450

2,758

Redemptions

-/- 572

Balance as at 31 December

6,237

3,359

178

19.14.5

Specification of interest on loans due to group companies

31-12-2022

31-12-2021

In €

1,000

In € 1,000

Arcona Capital RE Slovakia s.r.o.

Arcona Capital Real Estate Trio Sp. z o.o.

337

140

Arcona Capital Real Estate Bulgaria Ltd.

480

178

19.15

TAX LIABILITIES

31-12-2022

31-12-2021

In € 1,000

€ 1,000

Value Added Tax (

VAT

)

19.16

OTHER LIABILITIES

This covers other liabilities with a payment term within one year.

19.16.1

Analysis of other liabilities

31-12-2022

31-12-2021

In € 1,000

Trade payables

19.17

ACCRUALS

This covers accruals with a payment term within one year.

19.17.1

Analysis of accruals

31-12-2022

31-12-2021

In € 1,000

Administrative expenses

1,120

1,099

Other operating expenses

227

145

Interest payables

1,422

1,298

19.18

NON-CONTINGENT LIABILITIES

As at balance sheet date the Parent Company was not subject to any contractual obligation concerning for

example investments or other non-contingent liabilities that require settlement in a future financial period.

179

19.19

CONTINGENT LIABILITIES

As at balance sheet date the Parent Company has the following contingent liabilities:

As of January 1, 2022 the Parent Company is at the head of the fiscal unity for corporate income tax

(

CIT

) purposes with Arcona Black Sea Real Estate B.V. On this basis, the Parent Company is jointly

and severally liable for the corporate income tax liability of the fiscal unity as a whole.

The Parent Company has a contingent liability to issue ordinary shares arising from the outstanding

warrants. For further information reference is made to section 15.24

“Contingent liabilities”

The Parent Company has a contingent liability towards Secure Property Development & Investments

Ltd (

SPDI

) for the acquisition of:

•

Two development sites in the Kiev region of Ukraine, with a total value of approximately

€ 1.8 million.

Due to the conflict situation in Ukraine, it is not currently possible to complete the purchase of the

two remaining properties (development plots) in and around Kiev, which was agreed in June 2021

€ 1,970,000. This is because the purchase contract contains specific pre

-completion conditions,