INVL Baltic Real Estate

Annual Report • Mar 18, 2020

Special Closed-End Type Real Estate Investment Company's "INVL Baltic Real Estate" Consolidated Annual Report, Consolidated and Company's Financial Statements for the year ended 31 December 2019

prepared in accordance with International Financial Reporting Standards as adopted by the European Union presented together with independent auditor's report

SUTNTIB "INVL Baltic Real Estate", kodas 152105644, Gynėjų g. 14, Vilnius

	CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS:
	DETAILS OF THE COMPANY 10
	CONSOLIDATED AND COMPANY'S STATEMENTS OF COMPREHENSIVE INCOME11
	CONSOLIDATED AND COMPANY'S STATEMENTS OF FINANCIAL POSITION11
	CONSOLIDATED AND COMPANY'S STATEMENTS OF CHANGES IN EQUITY 14
	CONSOLIDATED AND COMPANY'S STATEMENTS OF CASH FLOWS 16
	NOTES TO THE FINANCIAL STATEMENTS18
1	GENERAL INFORMATION 18
2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES20
3	FINANCIAL RISK MANAGEMENT 33
	3.1. Financial risk factors 33
	3.2. Capital management 36
4	FAIR VALUE ESTIMATION 36
5	INVESTMENTS INTO SUBSIDIARIES37
6	SEGMENT INFORMATION 40
7	REVENUE, LEASE EXPENSES, LEASE COMMITMENTS, PROVISIONS43
8	FINANCE COSTS49
9	INCOME TAX49
10	EARNINGS PER SHARE 52
11	INVESTMENT PROPERTIES53
12	FINANCIAL INSTRUMENTS BY CATEGORY60
13	TRADE AND OTHER RECEIVABLES 62
14	SHARE CAPITAL AND RESERVES 64
15	DIVIDENDS65
16	BORROWINGS65
17	OTHER CURRENT LIABILITIES 68
18	RELATED PARTY TRANSACTIONS68
19	EVENTS AFTER THE REPORTING PERIOD 72

Independent auditor's report

To the shareholders of INVL Baltic Real Estate Special Closed-End Type Real Estate Investment Company AB

Report on the audit of the separate and consolidated financial statements

Our opinion

In our opinion, the Company's separate and consolidated financial statements give a true and fair view of the Company's and consolidated financial position of INVL Baltic Real Estate Special Closed-End Type Real Estate Investment Company ("the Company") and its subsidiaries ("the Group") as at 31 December 2019, and of their Company's and consolidated financial performance and their Company's and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Our opinion is consistent with our additional report to the Audit Committee.

What we have audited

The Company's and the Group's financial statements comprise:

• the Company's and consolidated statement of financial position as at 31 December 2019;
• the Company's and consolidated statements of comprehensive income for the year then ended;
• the Company's and consolidated statement of changes in equity for the year then ended;
• the Company's and consolidated statement of cash flows for the year then ended; and
• the notes to the Company's and consolidated financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company and the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the Law of the Republic of Lithuania on the Audit of Financial Statements that are relevant to our audit of the Company's and consolidated financial statements in the Republic of Lithuania. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Law of the Republic of Lithuania on the Audit of Financial Statements.

To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Company and the Group are in accordance with the applicable law and regulations in the Republic of Lithuania and that we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014 considering the exemptions of Regulation (EU) No 537/2014 endorsed in the Law of the Republic of Lithuania on the Audit of Financial Statements.

PricewaterhouseCoopers UAB, J. Jasinskio g. 16B, 03163 Vilnius, Lithuania +370 (5) 239 2300, vilnius@lt.pwc.com, www.pwc.lt

No non-audit services were provided to the Company and the Group, in the period from 1 January 2019 to 31 December 2019.

Our audit approach

Overview

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Company's and consolidated financial statements (together "the financial statements"). In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Company and Group materiality for the Company's and consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the financial statements as a whole.

Overall Company and Group materiality	Overall materiality applied to the Company and the Group amounted to € 360 thousand and € 360 thousand (2018: € 350 thousand and € 353 thousand), respectively.
How we determined it	0,8% of total equity of the Company and the Group, respectively.
Rationale for the materiality benchmark applied	We chose the Company's and Group's equity as the benchmark because, in our view, it is an appropriate measure of underlying performance, and it is the benchmark

against which the performance of the Company, the Group and other companies in this industry is most commonly measured by users, and it is a generally accepted benchmark. The key driver of the business and determinant of the Company's and the Group's value is investments into various properties. For this reason, the key area of focus in the audit of the financial statements of the Company and the Group is the valuation of investment properties. Accordingly, an overall Company and Group materiality was based on total equity.

We chose 0,8%, which is within the range of acceptable quantitative materiality thresholds.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above € 36 thousand, the same for the Company and the Group, as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Valuation of investment properties

Refer to Notes 2.22 and 11 to the financial statements on pages 29 and 53, respectively.

The Group's/Company's investment properties represent the most significant category of the Group's/Company's assets. Investment properties are accounted at fair value. Management estimated the fair value of the Group's/Company's investment properties to be € 71,884 thousand and € 62,995 thousand at 31 December 2019, respectively, as compared to € 58,295 thousand and € 49,693 thousand at 31 December 2018, respectively.

Revaluation net gain of € 11,499 thousand and € 11,212 thousand (2018: € 1,473 thousand and € 1,379 thousand) was recorded as fair value net gains in the consolidated and Company's statements of comprehensive income, respectively.

The valuation of investment properties was based on the values determined by independent valuers or the values determined based on the preliminary sales agreement

Our procedures in relation to management's valuation of investment properties included as follows:

• evaluation of the independent external valuers' competence, capabilities and objectivity;

• assessment of the methodologies used and appropriateness of key assumptions based on our knowledge of real estate industry;

• testing, on a sample basis, whether specific information supplied to the valuers reflected the underlying property records held by the Group/Company;

• testing the data inputs underpinning the valuation for a sample of properties, including rental income, capital expenditure, by agreeing them back to the supporting documentation

• reviewing the preliminary and final sales agreements signed with an independent market participant and testing subsequent cash receipts.

Because of the subjectivity involved in determining the value of investment properties

signed with an independent market participant signed before 31 December 2019.

In determining the value of leased-out properties, the external valuers take into account property- specific current information such as current tenancy agreements and rental income earned by the asset. Subsequently, they apply assumptions in relation to capitalisation rates and current market rental prices and their growth, based on available market data and transactions, to arrive at a range of valuation outcomes, from which they derive a point estimate. Due to unique nature of each property, the assumptions applied take into consideration the individual property characteristics at a granular tenant-by-tenant level, as well as the qualities of the property as a whole.

The valuations of investment properties under development are also dependent upon the estimated costs to complete and expected profit margin of a developer.

The fair value of the investment properties which were under the sales process before the year end was determined with reference to the agreed sales price.

Given the materiality of investment properties, the revaluation to fair value had a significant impact on the financial statements. We also focused on this area as the conclusions are dependent upon significant estimates involved in performing the valuation, and they are most sensitive to the assumptions underlying those valuations. In particular, the most significant estimates relate to capitalisation, discount rates and fair market rental prices or sales prices of comparable assets, estimated costs to completion and risk premium assumptions.

For the above-mentioned reasons, due to existence of significant estimation uncertainty, we gave specific audit focus and attention to this area.

and existence of alternative assumptions and valuation methods, we have reviewed the sensitivity analysis of the fair value of investment properties to changes in key assumptions, which was prepared by the Group's management.

How we tailored our Group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The Group consists of 8 entities: the Company and its subsidiaries, three subsidiaries located in Lithuania and four subsidiaries located in Latvia. The Group engagement team conducted audit work covering all significant reporting entities in Lithuania as well as in Latvia. We performed audit work on

the selected balances and transactions of subsidiaries, which were assessed as material from the Group audit perspective. The Group's consolidation and the financial statements disclosures were audited by the group engagement team. Our work addressed all of the Group's revenues and 99% of the Group's total assets.

Reporting on other information including the consolidated annual report

Management is responsible for the other information. The other information comprises the consolidated annual report, including the corporate governance report (but does not include the financial statements and our auditor's report thereon), which we obtained prior to the date of this auditor's report.

Our opinion on the financial statements does not cover the other information, including the consolidated annual report.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

With respect to the consolidated annual report, we considered whether the consolidated annual report includes the disclosures required by the Law of the Republic of Lithuania on Consolidated Financial Reporting by Groups of Undertakings, the Law of the Republic of Lithuania on Financial Reporting by Undertakings implementing Article 19 of Directive 2013/34/EU.

Based on the work undertaken in the course of our audit, in our opinion:

the information given in the consolidated annual report for the financial year ended 31 December 2019, for which the financial statements are prepared, is consistent with the financial statements; and

the consolidated annual report has been prepared in accordance with the Law of the Republic of Lithuania on Consolidated Financial Reporting by Groups of Undertakings and the Law of the Republic of Lithuania on Financial Reporting by Undertakings.

In addition, in light of the knowledge and understanding of the Company and the Group and their environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the consolidated annual report which we obtained prior to the date of this auditor's report. We have nothing to report in this respect.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's and the Group's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and have communicated with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Appointment

We were first appointed as auditors of the Company and the Group as at 23 December 2014. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 6 years.

The key audit partner on the audit resulting in this independent auditor's report is Rimvydas Jogėla

On behalf of PricewaterhouseCoopers UAB

Rimvydas Jogėla Partner Auditor's Certificate No. 000457

Vilnius, Republic of Lithuania 18 March 2020

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (all amounts are in EUR thousand unless otherwise stated)

DETAILS OF THE COMPANY

Management

Management Company

UAB INVL Asset Management

Investment Committee

Mr. Vytautas Bakšinskas Mr. Andrius Daukšas

Principal place of business and company code

Gynėjų str. 14, Vilnius, Lithuania

Company code 152105644

Banks

AB Šiaulių Bankas AB SEB Bankas AS "SEB banka"

Auditor

UAB PricewaterhouseCoopers J. Jasinskio str. 16B, Vilnius, Lithuania

The financial statements were authorised for issue by the Management Company on 18 March 2020.

Mr. Vytautas Bakšinskas Vytenis Lazauskas Real estate fund manager at UAB INVL Asset Management

CFO at UAB INVL Asset Management

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of comprehensive income

		Group		Company
	Notes	2019	2018	2019	2018
Revenue	7	5,897	5,822	4,211	4,307
Interest income		23	-	23	-
Other income		9	4	9	4
Net changes in fair value of investments into subsidiaries designated at fair value through profit or loss	5			793	662
Net gains from fair value adjustments on investment property	11	11,499	1,473	11,212	1,379
Premises rent costs	6, 7	(101)	(309)	(103)	(309)
Utilities	6	(880)	(822)	(38)	(41)
Repair and maintenance of premises	6	(2,444)	(1,265)	(1,887)	(795)
Management and Performance Fee	7, 18	(2,244)	(391)	(2,244)	(391)
Property management and brokerage costs	6	(52)	(42)	(381)	(389)
Taxes on property	6	(321)	(322)	(303)	(303)
Employee benefits expenses		(142)	(93)	-	-
Provision for impairment of trade receivables	13	(20)	(38)	(15)	(23)
Depreciation and amortisation		(43)	(30)	(41)	(28)
Other expenses		(283)	(350)	(167)	(286)
Operating profit		10,898	3,637	11,069	3,787
Finance costs	8	(496)	(463)	(454)	(415)
Profit before income tax		10,402	3,174	10,615	3,372
Income tax credit (expense)	9	21	(5)	12	-
NET PROFIT FOR THE YEAR		10,423	3,169	10,627	3,372
Other comprehensive income for the year, net of tax		-	-	-	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		10,423	3,169	10,627	3,372
Attributable to:
Equity holders of the parent		10,423	3,169	10,627	3,372
Basic and diluted earnings per share (in EUR)	10	0.79	0.24

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of financial position

		Group		Company
	Notes	As at 31 December 2019	As at 31 December 2018	As at 31 December 2019	As at 31 December 2018
ASSETS
Non-current assets
Property, plant and equipment		464	160	183	156
Investment properties	11	71,884	58,295	62,995	49,693
Intangible assets		60	40	40	40
Investments into subsidiaries designated at fair value through profit or loss	5	-	-	7,894	6,553
Operating lease pre-payments	7	-	100	-	100
Finance lease receivables-long term	9	964	-	964	-
Other receivables, related to ABLV Bank, AS	16	-	150	-	-
Deferred tax asset		5	-	-	-
Total non-current assets		73,377	58,745	72,076	56,542
Current assets
Inventories, prepayments and deferred charges		185	63	165	55
Trade and other receivables	13	444	354	238	277
Finance lease receivables -short term		182	-	182	-
Other receivables, related to ABLV Bank, AS	3.1, 16	150	-	-	-
Cash and cash equivalents	3.1	1,039	734	459	454
Total current assets		2,000	1,151	1,044	786
TOTAL ASSETS		75,377	59,896	73,120	57,328

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of financial position (cont'd)

		Group		Company
	Notes	As at 31 December 2019	As at 31 December 2018	As at 31 December 2019	As at 31 December 2018
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent
Share capital	14	19,068	19,068	19,068	19,068
Share premium	14	2,478	2,478	2,478	2,478
Reserves	14	4,316	3,443	4,556	3,683
Retained earnings	14	18,162	10,331	17,822	9,787
Total equity		44,024	35,320	43,924	35,016
Liabilities
Non-current liabilities
Non-current borrowings	16	22,240	21,762	22,235	19,877
Non-current lease liabilities		953	-	953	-
Provisions	7	2,547	979	2,547	979
Deferred tax liability	9	-	4	-	-
Trade payables		7	-	-	-
Advances received		407	388	407	388
Total non-current liabilities		26,154	23,133	26,142	21,244
Current liabilities
Current portion of non-current borrowings	16	2,520	863	637	634
Current portion of lease liabilities		200	-	200	-
Current borrowings	16	1,506	-	1,506	-
Trade payables		376	206	154	95
Income tax payable		-	-	-	-
Provisions	7	1	14	1	14
Advances received		55	85	52	85
Other current liabilities	17	541	275	504	240
Total current liabilities		5,199	1,443	3,054	1,068
Total liabilities		31,353	24,576	29,196	22,312
TOTAL EQUITY AND LIABILITIES		75,377	59,896	73,120	57,328

(the end)

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of changes in equity

				Reserves
Group	Notes	Share capital	Share premium	Legal reserve	Reserve for purchase of own shares	Retained earnings	Total
Balance as at 31 December 2017		19,068	2,478	426	2,828	9,061	33,861
Net profit for the year		-	-	-	-	3,169	3,169
Total comprehensive income for the year		-	-	-	-	3,169	3,169
Dividends approved	15	-	-	-	-	(1,710)	(1,710)
Transfer to reserves	14	-	-	189	-	(189)	-
Total transactions with owners of the Company, recognised directly in equity		-	-	189	-	(1,899)	(1,710)
Balance as at 31 December 2018		19,068	2,478	615	2,828	10,331	35,320
Effect of IFRS 16 adoption (change in accounting policy)						(9)	(9)
Recalculated balance as at 31 December 2018		19,068	2,478	615	2,828	10,322	35,311
Net profit for the year						10,423	10,423
Total comprehensive income for the year		-	-	-	-	10,423	10,423
Dividends approved	15					(1,710)	(1,710)
Transfer to reserves	14			169	704	(873)	-
Total transactions with owners of the Company, recognised directly in equity		-	-	169	704	(2,583)	(1,710)
Balance as at 31 December 2019		19,068	2,478	784	3,532	18,162	44,024

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of changes in equity (cont'd)

				Reserves
Company	Notes	Share capital	Share premium	Legal reserve	Reserve for purchase of own shares	Retained earnings	Total
Balance as at 31 December 2017		19,068	2,478	666	2,828	8,314	33,354
Net profit for the year		-	-	-	-	3,372	3,372
Total comprehensive income for the year		-	-	-	-	3,372	3,372
Dividends approved	15	-	-	-	-	(1,710)	(1,710)
Transfer to reserves	14	-	-	189	-	(189)	-
Total transactions with owners of the Company, recognised directly in equity		-	-	189	-	(1,899)	(1,710)
Balance as at 31 December 2018		19,068	2,478	855	2,828	9,787	35,016
Effect of IFRS 16 adoption (change in accounting policy)						(9)	(9)
Recalculated balance as at 31 December 2018		19,068	2,478	855	2,828	9,778	35,007
Net profit for the year						10,627	10,627
Total comprehensive income for the year		-	-	-	-	10,627	10,627
Dividends approved	15					(1,710)	(1,710)
Transfer to reserves	14			169	704	(873)	-
Total transactions with owners of the Company, recognised directly in equity		-	-	169	704	(2,583)	(1,710)
Balance as at 31 December 2019		19,068	2,478	1,024	3,532	17,822	43,924

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of cash flows

	Group		Company
	Notes	2019	2018	2019	2018
Cash flows from (to) operating activities
Net profit for the year		10,423	3,169	10,627	3,372
Adjustments for non-cash items and non operating activities:
Net gains from fair value adjustments on investment property	11	(11,499)	(1,473)	(11,212)	(1,379)
Depreciation and amortization		43	30	41	28
Net loss from sale of non-current assets		-	-	-	-
Net changes in fair value of investments into subsidiaries designated at fair value through profit or loss	5	-	-	(793)	(662)
Interest income		(23)	-	(23)	-
Interest expenses	8	496	463	454	415
Deferred taxes	9	(9)	4	-	-
Current income tax expenses	9	(12)	1	(12)	-
Provisions	7	1,880	34	1,880	34
Loss from lease liabilities remeasurement due to indexation		25	-	25	-
Provision for impairment of trade receivables	13	20	38	15	23
Changes in working capital:
Decrease (increase) in inventories		-	-	-	-
Decrease (increase) in trade and other receivables		(101)	201	33	285
Decrease (increase) in other current assets		(122)	176	(110)	179
(Decrease) increase in trade payables		(218)	68	(279)	(42)
(Decrease) increase in other current liabilities		49	(286)	44	(308)
Cash flows from (to) operating activities		952	2,425	690	1,945
Income tax paid		-	(1)	-	-
Net cash flows from (to) operating activities		952	2,424	690	1,945

(cont'd on the next page)

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

Consolidated and Company's statements of cash flows (cont'd)

		Group		Company
	Notes	2019	2018	2019	2018
Cash flows from (to) investing activities
Acquisition of non-current assets (except investment properties)		(310)	(79)	(68)	(77)
Acquisition of (investment in existing) investment properties	11	(1,829)	(829)	(1,829)	(829)
Proceeds from sale of investment properties	11	-	-	-	-
Increase in share capital of subsidiaries				(238)	-
Loans granted		-	-	(310)	(10)
Repayment of loans granted		-	-	-	-
Interest received		23	-	23	-
Proceeds from settlement of finance lease receivables		179	-	179	-
Net cash flows from (to) investing activities		(1,937)	(908)	(2,243)	(916)
Cash flows from (to) financing activities
Cash flows related to Group owners
Dividends paid to equity holders of the parents		(1,662)	(1,675)	(1,662)	(1,675)
		(1,662)	(1,675)	(1,662)	(1,675)
Cash flows related to other sources of financing
Proceeds from loans	16	4,457	2,668	4,457	2,668
Repayment of loans	16	(826)	(1,722)	(600)	(1,375)
Lease payments		(194)	-	(194)	-
Interest paid	16	(485)	(464)	(443)	(416)
		2,952	482	3,220	877
Net cash flows from (to) financing activities		1,290	(1,193)	1,558	(798)
Net increase (decrease) in cash and cash		305	323	5	231
equivalents
Cash and cash equivalents at the beginning of the period		734	411	454	223
Cash and cash equivalents at the end of the period		1,039	734	459	454

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

Notes to the financial statements

1 General information

Special Closed-Ended Type Real Estate Investment Company INVL Baltic Real Estate (hereinafter 'the Company', previous name AB Invaldos Nekilnojamojo Turto Fondas, code 152105644) is a joint stock company registered in the Republic of Lithuania. It was established on 28 January 1997.

On 22 December 2016 the Company was issued a closed-end investment company (UTIB) licence by the Bank of Lithuania. Under the Company's Articles of Association, the Company will operate until 22 December 2046, with an extension possibility for additional term of twenty years.

As the Company obtained the status of a closed-ended investment company, its management was thereafter undertaken by UAB INVL Asset Management ('the Management Company'), which is entitled to the Management Fee (Note 2.12) and the Performance Fee (Note 2.12).

Based on the Articles of Association, for the sake of efficiency of the Company's activities and control over its investments, an Investment Committee was formed by a decision of the Board of the Management Company. The Investment Committee consists of 3 (three) members, to the positions of which the representatives of the Management Company (employees, members of management bodies of the Management Company, other persons appointed by a decision of the Board of the Management Company) were appointed. Members of the Investment Committee shall be appointed and removed from office by the Board of the Management Company. An approval of the Investment Committee must be obtained for all investments of the Company and for their sale.

The Company also signed an agreement on depository services with AB SEB Bankas, which acts as a depository of the Company's assets.

In 2019 and 2018 the group consisted of the Company and its directly and indirectly owned subsidiaries (hereinafter 'the Group', Note 5).

The address of the office is Gynėjų str. 14, Vilnius, Lithuania.

The Group was established on 29 April 2014 by spinning-off from AB Invalda INVL (code 121304349) the investments into entities, which business is investment into investment properties held for future development, into commercial real estate and renting thereof. On 17 August 2015 the parent entity AB INVL Baltic Real Estate (hereinafter 'the Former Parent Company', code 30329973) was merged to the Company, which continues its operations under the name INVL Baltic Real Estate and became the parent of the Group.

The Group has invested in commercial real estate: business centres and manufacturing and warehouse properties in Lithuania and Latvia. All the properties generate leasing income and most of them offer prospects for further development.

The Group seeks to earn profit from investments in commercial real estate by ensuring the growth of leasing income. When it makes business sense, the Company also considers investments in the reorganisation of its existing portfolio of properties, taking advantage of their good location.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

1 General information (cont'd)

The Management Company shall manage the Company's portfolio of investment instruments following the principles of diversification (the conformity of the Company's portfolio of investment instruments to the diversification principles shall be achieved within four years after the Bank of Lithuania has issued a permission to certify the Company's incorporation documents and to choose the Depository) as set forth in the Articles of Association. The Company cannot invest directly or indirectly more than 30% of its net asset value into a single real estate object. The total amount of investments into real estate objects under construction cannot exceed 20% of net asset value of the Company. The total amount of investments into a real estate object and movable property and/or equipment necessary for its use cannot exceed 40% of net asset value of the Company. The Company cannot invest more than 30% of its net asset value into any single issuer of the instruments. More detailed requirements are set out in the Articles of Association of the Company.

As at 31 December 2019 the Company's share capital is divided into 13,150,000 ordinary registered shares with the nominal value of EUR 1.45 each (as at 31 December 2018: 13,150,000 ordinary registered shares with the nominal value of EUR 1.45 each). All the shares of the Company were fully paid. Subsidiaries did not hold any shares of the Company. As at 31 December 2019 and 31 December 2018 the shareholders of the Company were:

	2019		2018
	Number of shares held Percentage		Number of shares held	Percentage
AB Invalda INVL	4,267,388	32.45	4,246,233	32.29
UAB LJB Investments (controlling shareholder Mr.
Alvydas Banys)	2,631,695	20.01	2,631,695	20.01
Mrs. Irena Ona Mišeikienė	2,498,596	19.00	2,498,596	19.00
Mr. Alvydas Banys	663,640	5.05	663,640	5.05
Other minor shareholders	3,088,681	23.49	3,109,836	23.65
Total	13,150,000	100.00	13,150,000	100.00

The Company's shares are traded on the Baltic Secondary List of NASDAQ Vilnius from 16 September 2015. Before the merger the shares of the Former Parent Company were traded on the Baltic Secondary List of NASDAQ Vilnius from 4 June 2014 until 17 August 2015.

As at 31 December 2019 the number of employees of the Group and the Company was 11 and nil, respectively. As at 31 December 2018 the number of employees of the Group and the Company was 8 and nil, respectively.

According to the Law on Companies of Republic of Lithuania, the annual financial statements prepared by the Management are authorised by the General Shareholders' meeting. The shareholders hold the power not to approve the annual financial statements and the right to request new financial statements to be prepared.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies

The principal accounting policies applied in preparing the Group's and the Company's financial statements for the year ended 31 December 2019 are as follows:

2.1. Basis of preparation

Statement of compliance

The financial statements of the Company and the consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (hereinafter the EU).

These financial statements have been prepared on a historical cost basis, except for investment properties and investments in subsidiaries that have been measured at fair value. The financial statements are presented in thousands of euro (EUR) and all values are rounded to the nearest thousand except when otherwise indicated. From 1 January 2015 the euro became local currency of the Republic of Lithuania.

Adoption of new and/or changed IFRSs and IFRIC interpretations

The Group/Company has adopted the new and amended IFRS and IFRIC interpretations as of 1 January 2019:

• IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019);
• IFRIC 23 Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019);
• Annual Improvements to IFRSs 2015-2017 cycle (effective for annual periods beginning on or after 1 January 2019);
• Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019);
• Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019);
• Amendments to IAS 19: Plan Amendment, Curtailment or Settlement (effective for annual periods beginning on or after 1 January 2019).

IFRS 16 Leases

The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, that are continued to be applied by the Group. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The Group and the Company has adopted IFRS 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The main impact for the Group's and the Company's financial statements had accounted of the lease agreement of 10 August 2007 (Note 7). The Group and the Company recognised lease liability of EUR 1,321 thousand and derecognised operating lease prepayment of EUR 100 thousand. Because all property leased by above mentioned lease agreement is subleased until the expire of the agreement and thus the Group and the Company transfer substantially all the risks and rewards from the right-of-use asset resulting from the head lease, the sublease is recognised as financial lease as of 1 January 2019 at an amount equal to the net investment in the sub-lease. The Group and the Company recognised finance lease receivable of EUR 1,325 thousand. The provision for onerous contract has decreased from EUR 182 thousand till EUR 95 thousand. The total negative impact on the Group's and the Company's equity as at 1 January 2019 is amounted to EUR 9 thousand. The weighted average of the lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial position at the date of initial application is 1.9 percent. From 1 January 2019 in the statement of comprehensive income is recognised interest expenses on lease liability and interest income from finance lease (previously was recognised lease expenses and sublease income).The Group and the Company has not capitalised leases of low value items as it is allowed by the standard.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

All other amendments adopted as of 1 January 2019 had no impact on the Group's and Company's financial statements for the year ended 31 December 2019.

Standards adopted by the EU but not yet effective and have not been early adopted

Other amendments to existing standards and new standards, which are adopted by the EU, but not yet effective, are not relevant to the Group and the Company.

Standards not yet adopted by the EU

Amendments to existing standards and new standards, which are not yet adopted by the EU, are not relevant to the Group and the Company.

2.2. Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

Subsidiaries are all entities (including structured entities) over which the group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group balances, transactions, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions that are recognised in assets, are eliminated in full.

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss or retained earnings, as appropriate.

2.3. Functional and presentation currency

From 1 January 2015 the euro became local currency of the Republic of Lithuania. The financial statements are prepared in euro (EUR), which is local currency of the Republic of Lithuania, and presented in EUR thousand. Euro is also the local currency of the Republic of Latvia. Euro is the Company's and the Group's functional and presentation currency. The exchange rates in relation to other currencies are set daily by the European Central Bank and the Bank of Lithuania.

As these financial statements are presented in EUR thousand, individual amounts were rounded. Due to the rounding, totals in the tables may not add up.

2.4. Business combinations and goodwill

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

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

The Group and the acquiree may have a preexisting relationship or other arrangement before negotiations for the business combination began, or they may enter into an arrangement during the negotiations that is separate from the business combination. In either situation, the Group identifies any amounts that are not part of what the Group and the acquiree (or its former owners) exchanged in the business combination. The Group recognises as part of applying the acquisition method only the consideration transferred for the acquiree and the assets acquired and liabilities assumed in the exchange for the acquiree.

The Group identifies any preexisting relationships to determine which ones have been effectively settled. Typically, a pre-existing relationship will be effectively settled, since such a relationship becomes an "intercompany" relationship upon the acquisition and is eliminated in the postcombination financial statements. If the preexisting relationship effectively settled is a debt financing issued by the acquiree to the Group, the Group effectively is settling a receivable. The Group recognises a gain or loss if there is an effective settlement of a preexisting relationship. When there is more than one contract or agreement between the parties with a preexisting relationship or more than one preexisting relationship, the settlement of each contract and each preexisting relationship is assessed separately. Settlement gains and losses from noncontractual relationships are measured at fair value on the acquisition date.

2.5. Property, plant and equipment

Property, plant and equipment is stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment losses. The carrying values of property, plant and equipment are reviewed for impairment when events or change in circumstances indicate that the carrying value may not be recoverable. Depreciation is calculated using the straight-line method over the estimated useful lives of 3 to 6 years.

The asset residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end to ensure that they are consistent with the expected pattern of economic benefits from items in property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income within "other income" in the year the asset is derecognised.

2.6. Investment properties

Properties that are held for long-term rental yields and for capital appreciation are classified as investment properties. Where the Group/Company owns the buildings, but not the land on which they are built, land is leased from the municipality under operating lease. Land held under operating leases is classified and accounted for by the Group/Company as investment property when the rest of the definition of investment property is met.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are carried at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise. The fair value of investment property is determined annually by qualified independent valuers (Note 11).

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group/Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of comprehensive income within "Net gains (losses) from fair value adjustments on investment property" in the year of retirement or disposal.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.7. Intangible assets other than goodwill

Intangible assets are measured initially at cost. Intangible assets are recognised if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets other than goodwill are assessed to be finite. Intangible assets are amortised using the straight-line method over their expected useful lives 3 years.

Intangible assets not yet available for use, such as technical development projects where the related property is not built, are tested annually for impairment and whenever there is an indication that the intangible asset may be impaired.

2.8. Investments into subsidiaries (the Company)

The business model of the Company is to manage investment into subsidiaries together with loans granted to subsidiaries as one portfolio and evaluate their performance on a combined fair value basis. On this basis information on portfolio is provided to the Management Company and the Investment Committee. Therefore, the portfolio is neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Consequently, such portfolio of financial assets are measured at fair value through profit or loss.

At initial recognition, the Group/the Company measures portfolio of investment into subsidiaries at its fair value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

If the fair value of the financial asset at initial recognition differs from the transaction price, it is recognised at fair value and '1 day gain' is recognised only if that fair value is evidenced by a quoted price in an active market for an identical asset or based on a valuation technique that uses only data from observable markets. In all other cases the difference between the fair value at initial recognition and the transaction price is deferred. For loans granted measured at fair value through profit or loss this difference is recognised using the straight-line method over the estimated maturity of financial asset.

2.9. Financial assets

Financial assets within the scope of IFRS 9 are classified as either financial assets at fair value through profit or loss (either through other comprehensive income or through profit or loss) or financial assets measured at amortised cost. The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.

As the business model for the Group's and the Company's other financial assets (except financial assets described in Note 2.8) is held to collect contractual cash flows and they are solely payments of principal and interest, other financial assets are measured at amortised cost. They comprised trade and other receivables, cash and cash equivalents. The Group and the Company reclassifies debt instruments when and only when its business model for managing those assets changes.

Financial assets are recognised when the Group/the Company becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group/the Company has transferred substantially all the risks and rewards of ownership.

At initial recognition, the Group/the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is calculated using the effective interest rate method and presented as "other income" in the statement of comprehensive income. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as separate line item in the statement of comprehensive income.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.10. Impairment of financial assets

From 1 January 2018, the Group/the Company assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Group/the Company follows a three-stage model for impairment for financial assets other than trade receivables:

• Stage 1 balances, for which the credit risk has not increased significantly since initial recognition, or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses ('ECL') are recognised and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 12-month ECL are the expected credit losses that result from default events that are possible within 12 months after the reporting date. It is not the expected cash shortfalls over the 12-month period but the entire credit loss on an asset weighted by the probability that the loss will occur in the next 12 months;
• Stage 2 comprises balances for which there have been a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognised, but interest revenue is still calculated on the gross carrying amount of the asset. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the financial instrument. Expected credit losses are the weighted average credit losses with the probability of default ('PD') as the weight;
• Stage 3 comprises balances with objective evidence of impairment at the reporting date. For these assets, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount (that is, net of credit allowance).

The financial assets is considered as credit-impaired, if objective evidence of impairment exist at the reporting date. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial reorganisation.

Financial assets are written off, in whole or in part, when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, among others, the probability of insolvency or significant financial difficulties of the debtor. Impaired debts are derecognised when they are assessed as uncollectible.

For trade and other receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Trade receivables are classified either to Stage 2 or Stage 3:

• Stage 2 comprises receivables for which there the simplified approach was applied to measure the expected lifetime credit losses, except for certain trade receivables classified in Stage 3;
• Stage 3 comprises trade receivables which are overdue more than 90 days (except is reasonable explanation for that) or individually identified as impaired.

The expected loss rates are based on the payment profiles of sales over a period of 36 months before the balance sheet date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the tenants to settle the receivable. Such forward-looking information would include:

• changes in economic, regulatory, technological and environmental factors, (such as industry outlook, GDP, employment and politics);
• external market indicators; and
• tenant base.

2.11. Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less. Deposits with original maturity of more than three months are classified as deposits on the statement of financial position.

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand and in current bank account as well as deposit in bank with an original maturity of three months or less.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.12. Performance Fee and Management Fee

The Management Fee is remuneration paid to the Management Company for management of the assets of the Company, which is payable for each quarter of a calendar year and is 0.375% of the quarterly weighted average capitalisation of the Company, calculated according to the Articles of Association. From 1 January 2018 the rate of the Management Fee was changed to 0.25% of the quarterly weighted average capitalisation of the Company.

The quarterly payable Management Fee is recorded as financial liability and is accounted for at amortised cost.

The Performance Fee depends on the return earned by the Company, which is calculated for the whole Company rather than for an individual shareholder, and is based on internal rate of return. The Performance Fee amounts to 20% of return in excess of the annual internal rate return of 8% (a high water-mark principle is applied). The Performance Fee is paid to the Management Company on a quarterly basis if both condition is met - the internal rate of return and the stock price growth (including dividends) exceed 8% annually.

The Performance Fee is accounted as a provision on a quarterly basis until the conditions, as described above, for the payment of the Performance Fee are satisfied, when payable part of the Performance Fee is recorded as financial liability and is further accounted for at amortised cost.

The first period for the calculation of the Performance Fee started from 30 November 2016 according to the Articles of Association of the Company, where initial amount for calculation of internal rate of return is net assets value of the Company as at 30 November 2016 (it is amounted to the equity of the Group as at 30 November 2016). If, after that date, the capitalisation of the Company (market value of the issued shares of the Company) is more than net assets value of the Company and internal rate of return calculated on the basis of net assets value is more than 8%, then payable Performance Fee is calculated based on net assets value of the Company. If the capitalisation of the Company is less than net assets value of the Company and internal rate of return calculated on the basis of capitalisation is more than 8%, then payable Performance Fee is calculated based on the capitalisation of the Company. After the Performance Fee becomes payable, the new period for calculating of the Performance Fee starts, where initial amount for calculation of internal rate of return is the capitalisation of the Company or net asset value of the Company as at the end of previous period depends on which based on these amounts payable part of the Performance Fee is calculated.

More detailed requirements are set out in the Articles of Association of the Company.

2.13. Financial liabilities

The Group/ Company recognises a financial liability when it first becomes a party to the contractual rights and obligations in the contract.

All financial liabilities are initially recognised at fair value, minus (in the case of a financial liability that is not at fair value through profit or loss) transaction costs that are directly attributable to issuing the financial liability. Financial liabilities are measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Financial liabilities included in trade payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

Borrowings

Borrowings are recognised initially at fair value less directly attributable transaction costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group/Company has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.14. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the profit or loss. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Provisions for onerous contracts

An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. A provision for onerous lease contracts is recognised when the expected benefits to be derived by the Group/Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

Provisions for the Performance Fee

The Company is obliged to pay the Performance Fee to the Management Company (Note 2.12). There is an obligation to pay the Performance Fee, which becomes payable only in the event of outperformance of the benchmark when both condition are met as described in Note 2.12 and the Company's Articles of Association.

As services are provided over time, the obligating past event arises and a provision for the Company's management services needs to be recognised. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

2.15. Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognised in equity as a deduction, net of tax, from the retained earnings. Where any group company purchases the company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company's equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company's equity holders.

2.16. Leases

Group and Company are the lessor in an operating lease

Leases in which a significant portion of the risks and rewards of ownership are retained by the Group and the Company as the lessor are classified as operating leases. Payments, including pre-payments, received under operating leases (net of any incentives granted to the lessee) are credited to the statement of comprehensive income on a straight-line basis over the period of the lease.

Property leased out under operating leases is included in investment property in the statement of financial position (Note 11). See Note 2.17 for the recognition of rental income.

Group and Company are the lessees

Accounting policy applied from 1 January 2019

From 1 January 2019, leases where the Group and/or the Company are lessees, are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company/the Group.

The right-of-use asset is measured at it's cost which includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date (less any lease incentives received), any initial direct costs incurred by the Group and/or the Company. The lease liabilities are measured at the net present value of the lease payments.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.16. Leases (cont'd)

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company/ the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The Company and the Group are exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Accounting policy applied until 31 December 2018

Leases where the lessor retains all the risk and benefits of ownership of the asset are classified as operating leases. Operating lease payments, including prepayments, (net of any incentives received from the lessor) are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Contingent rents are charged as expenses in the periods in which they are incurred.

Group and Company are the sub-lessors of assets leased

In case of leased property which is sub-leased by the Group/the Company, the classification of the lease is considered with reference to the right-of-use asset. If substantially all risks and rewards are transferred, the sub-lease is recognised as a finance lease. The intermediate lessor derecognises the right-of-use asset relating to the head lease and recognises the net investment in the sub-lease, which is equal to the present value of the lease payments for the underlying right-of-use asset during the lease term. The lessor recognises finance income over the lease term, based on a pattern reflecting a constant period rate of return on the lessor's net investment in the lease.

Recognition of land lease rights related to the investment property owned by the Group and the Company

The Group and the Company leases land under the buildings accounted as Investment properties. The lease payments are determined by municipalities as tariff which do not depend on an index or a rate related to fair value of the land. These variable lease payments that do not depend on an index or rate and can be adjusted at any time during the lease period are therefore accounted for as operating expenses when they are incurred and also presented as operating cash flows in the cash flow statement.

The Company and the Group measure the right-of-use asset at fair value, which is already recognised as part of the fair value of the Investment properties related to the land and a lease liability is recognised at nil.

2.17. Revenue recognition

Lease income

Operating lease income is recognised on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The Group and the Company elected to recognise lease income for variable payment that depends on an index or a rate in the periods in which changes of index or rate occur. Variable lease payments that do not depend on an index or a rate are recognised as lease income in the periods in which the event or condition that triggers those payments occurs. When the Group and the Company provides incentives to its tenants, the cost of the incentives is recognised over the lease term, on a straight-line basis, as a reduction of lease income.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.17 Revenue recognition(cont'd)

Utilities and other services income

Revenue from utilities and other services from is recognised in the accounting period in which control of the services are passed to the customer, which is when the service is rendered.

Revenue is measured at the transaction price agreed under the contract. Amounts disclosed as revenue are net of variable consideration and payments to customers, which are not for distinct services, this consideration may include discounts, trade allowances, rebates.

A receivable is recognised when services are provided as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Interest income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

2.18. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Management Company and the Investment Committee that makes strategic decisions.

2.19. Borrowing costs

Borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.20. Current and deferred income tax

From 1 January 2018 all income of Collective Investment Undertakings are not subject to taxation.

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

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

The standard income tax rate in Lithuania was 15 % in 2018 and 2019. Starting from 2010, tax losses can be transferred within Lithuania at no consideration or in exchange for certain consideration between the group companies if certain conditions are met.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property will be recovered entirely through sale.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.20 Current and deferred income tax (cont'd)

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

In Lithuania tax losses can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or derivative financial instruments. In Lithuania such carrying forward is disrupted if entity changes its activities due to which these losses incurred except when entity does not continue its activities due to reasons which do not depend on entity itself. In Lithuania the losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years and only be used to reduce the taxable income earned from the transactions of the same nature. From 1 January 2014 current year taxable profit could be decreased by previous year tax losses only up to 70% in Lithuania.

From 1 January 2018 according to the new Corporate Income Tax Act of Latvia the annual profit is not taxed. Corporate income tax would be paid on distributed profit, including conditional distributed profit as for example: expenditure not related to economic activities, some loans granted to related parties, some provisions for doubtful debts. The tax rate on (net) distributed profit would be 20/80. From 1 January 2018 tax losses incurred before 31 December 2017 can be carried forward for 5 consecutive years to reduce up to 50% of tax base of distributed profit in Latvia. Until 31 December 2017 gains from the sale of shares are not taxed, and losses are not deductible in Latvia. From 1 January 2018 the tax base would be reduced by the gain on sale of shares, if the shares was held for an uninterrupted period of at least 36 months. The excess gain can be transferred and utilized in the future periods.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.21. Employee benefits

Social security contributions

The Company and the Group pay social security contributions to the state Social Security Fund (the Fund) on behalf of its employees based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under which the Group/Company pays fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period. Social security contributions are recognised as expenses on an accrual basis and included in payroll expenses.

Bonus plans

The Company and the Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

2.22. Significant accounting judgements and estimates

The preparation of financial statements requires management of the Group and the Company to make judgements and estimates that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities, at the end of reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.22.Significant accounting judgements and estimates (cont'd)

Judgements

In the process of applying the accounting policies, management has made the following judgements, which had the most significant effect on the amounts recognised in these financial statements:

The Group acts as principal in relation to utility and other services

The management has concluded that the Group acts as a principal in relation to utility and other services. Although the most of services rendered to the tenants is performed by other parties, the Group has a right to a service to be performed by the other party, which gives the Group the ability to direct that party to provide the service to the customer on the entity's behalf. From tenant perspective the Group combines the services provided by other parties in providing the specified service to the them. According to the management the Group is primarily responsible for fulfilling the promise to provide services and has discretion in establishing the price for the services.

Classification of investment property related to the business center IBC which was sold after the balance sheet date

In December 2019 the Group has entered in negotiations with a third party regarding potential sale of IBC business center. As at 31 December 2019, the Group had an unbinding agreement with the 3rd party regarding the potential transaction. As at 31 December 2019 the Group did not have a formally approved plan to dispose these assets, and as a result of the negotiations with the 3rd party, no binding agreement was reached by 31 December 2019. The Group considers that the conditions existent at the balance sheet date did not satisfy the criteria of the potential transaction to be highly probable and therefore assets related to IBC business center were not reclassified to the assets held for sale in the statement of financial position as at 31 December 2019. As disclosed in Note 19 the sales transaction was completed on 6 March 2020.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group/Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments however, may change due to market changes or circumstances arising beyond the control of the Group/Company. Such changes are reflected in the assumptions when they occur.

The significant areas of estimation used in the preparation of these financial statements are discussed below.

Fair value of investment properties

Fair value of investment properties was based either on the market approach by reference to sales in the market of comparable properties or the income approach by reference to rentals obtained from the subject property or similar properties. Market approach refers to the prices of the analogues transactions in the market. These values are adjusted for differences in key attributes such as property size, location. Discounted cash flow projections in the income approach are based on estimates of future cash flows, supported by the terms of any existing lease and other contracts and by external evidence such as current (at the date of the statement of financial position) market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. The future rental rates were estimated depending on the actual location, type and quality of the properties, and taking into account market data and projections at the valuation date.

The Company's investment properties located in Lithuania have to be valued twice a year by two qualified independent valuers in accordance with the Lithuanian Law on Collective Investment Undertakings. In the process of valuation the Management has discussions with the qualified independent valuers about significant unobservable inputs. If both valuers select the same approach and determine the same use of the property, but use slightly different unobservable inputs, the valuation creates a range of fair values on the basis of which the management estimate the most appropriate fair value. If the valuers determine different use of the property, the management selects to use the valuation of the valuer whose use of the property satisfies the highest and the best use principle.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.22. Significant accounting judgements and estimates (cont'd)

The fair value of the investment properties of the Group and the Company as at 31 December 2019 was EUR 71,884 thousand and EUR 62,995 thousand, respectively (as at 31 December 2018 – EUR 58,295 thousand and EUR 49,693 thousand, respectively) (described in more details in Note 11).

Fair value of investments into subsidiaries in stand-alone financial statements

The fair values of investments into subsidiaries together with loans granted to subsidiaries are determined by using valuation techniques, primarily discounted cash flows. The fair value of these investments was measured at the fair value of their net assets, including loans granted by the Company. The main assets of subsidiaries are investment properties, which are measured at fair value using the income approach. The main liabilities of subsidiaries are borrowings from external financial institutions, which are measured using an income approach, such as a present value technique. The models used to determine fair values are periodically reviewed and compared against historical results to ensure their reliability.

The fair value of the investments in subsidiaries as at 31 December 2019 was EUR 7,894 thousand (as at 31 December 2018 – EUR 6,553 thousand) (described in more details in Note 5).

The provision for onerous lease

Estimate until 31 December 2018

The amount of provision for onerous lease represents the present value of future cash flows related to the lease contract. Future cash flows projections are based on the estimates of future rent income from subleased premises, contractual lease payments and estimates of maintenance and management expenses of leased premises. The estimates are reviewed at the end of each reporting period.

Estimate from 1 January 2019

From 1 January 2019 upon application of IFRS 16, the operating lease contract, related to which provision for onerous lease was calculated, was recognised as a liability and right of use asset at the same amount, according to the contractual future lease payments discounted at the incremental borrowing rate of the Group. This asset is subleased to a third party, and a sublease contract was recognised as a finance lease, as substantive risks and rewards related to the right-of-use assets leased by the Group, were transferred under the sublease contract. As a result, right-of-use asset was derecognised, and finance lease receivable was recognised (see note 2.16 for accounting policy description). As the lease contract includes indexation clause based on consumer price index and the sublease contract does not include indexation, the provision for onerous contract since 1 January 2019 is recognised as a discounted difference between lease payments including the estimated indexation effect and lease payments used for measurement of lease liabilities.

The provision for onerous lease was EUR 62 thousand as at 31 December 2019 (as at 31 December 2018 – EUR 182 thousand, (described in more details in Note 7). If the inflation estimation would be change by 50 basis points the carrying amount of onerous contract provision would be an estimated EUR 15 thousand higher/lower as at 31 December 2019 (as at 31 December 2018 – EUR 20 thousand).

The provision for the Performance Fee

The amount of provision for the Performance Fee represents the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The provision is calculated on the basis of the net assets value of the Company, which equals to the equity of the Group. The Performance Fee would become payable only if the stock price growth (including dividends) exceeded 8% annually. As described in Note 2.12, the payable Performance Fee could be based on net assets value or on the capitalisation of the Company. The Company cannot control stock price of the Company shares, therefore the timing and the amount of the Performance Fee payable in future are uncertain.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

2 Summary of significant accounting policies (cont'd)

2.22. Significant accounting judgements and estimates (cont'd)

As at 31 December 2019, provision was calculated as an amount equal to 20% of return in excess of the annual internal rate of return of 8% for period from 30 September 2019 till 31 December 2019. For this period internal rate of return based on net assets value of the Company amounted to 270.89%. Initial amount for calculation of internal rate of return for this period was capitalisation of the Company as at 30 September 2019, as internal rate of return for period from 30 June 2019 till 30 September 2019 based on the capitalisation of the Company amounted to 11.01% and exceeded 8%, but the capitalisation was less than net assets value of the Company as at 30 September 2019.

As at 31 December 2018, provision was calculated as an amount equal to 20% of return in excess of the annual internal rate of return of 8% for period from 30 September 2018 till 31 December 2018. For this period internal rate of return based on net assets value of the Company amounted to 73.17%. Initial amount for calculation of internal rate of return for this period was capitalisation of the Company as at 30 September 2018, as internal rate of return for period from 31 December 2017 till 30 September 2018 based on the capitalisation of the Company amounted to 9.13% and exceeded 8%, but the capitalisation was less than net assets value of the Company as at 30 September 2018.

As at 31 December 2019 the Company recognised non-current provision for the Performance Fee of EUR 2,486 thousand (as at 31 December 2018 - EUR 811 thousand) after deducting the payable part of the Performance Fee of EUR 238 thousand recognised within other current liabilities) (Note 7).

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

3 Financial risk management

3.1. Financial risk factors

The risk management function within the Group is carried out in respect of financial risks, operational risks and legal risks. On an overall Group level strategical risk management was executed by the Management Company. Operational risk management is carried out at each entity level by directors. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.

The Group's and the Company's principal financial liabilities comprise borrowings, trade and other payables. The main purpose of the borrowings is to raise finance for the Group's and the Company's operations. The Group and the Company have various financial assets such as trade and other receivables, loans granted and cash which arise directly from its operations. The Company and the Group have not used any derivative instruments so far, as management considered that there is no necessity for them.

The main risks arising from the financial instruments are market risk (including currency risk, cash flow and fair value interest rate risk and price risk), liquidity risk and credit risk. The risks are identified and disclosed below.

Credit risk

Credit risk is the risk one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk arises from cash and cash equivalents, deposits, credit exposures to outstanding trade receivables and loans granted. The Group/Company seeks to ensure that rental contracts are entered into only with lessees with an appropriate credit history, from some of lessees advance lease payments are required.

The maximum exposure to credit risk and impairment of trade and other receivables is disclosed in Note 13. The maximum exposure to credit risk for loans granted to subsidiaries measured at fair value through profit or loss are their carrying amounts (Note 5). In Note 13 is also disclosed credit quality of trade receivable. There are no transactions of the Group or the Company that occur outside Lithuania and Latvia.

As at 31 December 2019 the Group and the Company had no significant concentrations of credit risk.

With respect to credit risk arising from cash and cash equivalents and deposits the Group's and the Company's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

According to the European deposit insurance scheme, cash, cash equivalents and deposits of up to EUR 100 thousand of every legal entity in each bank are covered with insurance. All the Group's balance of cash and cash equivalents are covered with the insurance, except for the Company's cash and cash equivalents, because the Company is a collective investment undertaking. The insured amounts of cash placed on AS "SEB banka" accounts were exceeded by EUR 157 thousand and insured amounts of cash placed on AB Šiaulių bankas accounts were exceeded by EUR 102 thousand as at 31 December 2019.

All cash balances have a low credit risk at the reporting date and the impairment loss determined on 12-month expected credit losses is resulted in an immaterial amount.

The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the banks:

	Group		Company
	2019	2018	2019	2018
Moody's short-term ratings
Prime-1	424	290	46	70
Prime-2	615	444	413	384
Not rated		-		-
	1,039	734	459	454

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

3 Financial risk management (cont'd)

3.1 Financial risk factors (cont'd)

Market risk

Cash flow and fair value interest rate risk

The Group's/Company's exposure to the risk of changes in market interest rates relates primarily to the debt obligations with floating interest rates. The borrowings from related party AB Invalda INVL were with fixed interest rates for one year.

The following table demonstrates the sensitivity to a reasonably possible change in floating interest rates (EURIBOR), with all other variables held constant, of the Group's and the Company's profit before tax (through the impact on floating rate borrowings). There is no impact on the Group's and the Company's equity other than current year profit impact.

	Increase in basis points	Group	Company
2019
EUR	+50 bps	(124)	(114)
2018
EUR	+50 bps	(113)	(102)

As at 31 December 2019 and 2018 EURIBOR were negative and according to borrowings agreements was equalled to zero.

Foreign exchange risk

The Group and the Company holds assets and liabilities denominated only in the Euro, which is functional and presentation currency of the Group. Therefore, the Group and the Company are not exposed to foreign exchange risk.

Liquidity risk

The Group's and the Company's policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities to meet their commitments at a given date in accordance with strategic plans. The liquidity risk of the Group's operation in Lithuania and the Company is controlled on an overall Group level. The liquidity risk of the Group's operation in Latvia is controlled on an entity level. The Group's and the Company's objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. The liquidity risk management is divided into long-term and shortterm risk management.

The aim of the short-term liquidity management is to meet daily needs for funds. Short-term liquidity for the Group and the Company is controlled through monthly monitoring of the liquidity status and needs of funds.

Long-term liquidity risk is managed by analysing the predicted future cash flows taking into account the possible financing sources. Before approving the new investment projects the Group and the Company evaluate the possibilities to attract needed funds.

The Group's liquidity ratio (total current assets / total current liabilities) as at 31 December 2019 and 2018 was approximately 0.4 and 0.8, respectively. The Company's liquidity ratio as at 31 December 2019 and 2018 was approximately 0.3 and 0.74.

As at 31 December 2019 the current assets were lower than current liabilities by EUR 3,199 thousand in the Group and EUR 2,010 thousand in the Company. Management of the Group and the Company forecasted the cash flows of the Group and the Company for 2020 and the forecast indicates that the Group and the Company will have sufficient funds to cover liabilities, which fall due in 2020. The Group has sold IBC business center on 6 March 2020 (see note 19) for EUR 33 million which fully covers short term liquidity needs.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

3 Financial risk management (cont'd)

3.1 Financial risk factors (cont'd)

Liquidity risk (cont'd)

The table below summarises the maturity profile of the Group's financial liabilities as at 31 December 2019 and 2018 based on contractual undiscounted payments.

	On demand	Less than 3 months	4 to 12 months	2 to 5 years	More than 5 years	Total
Interest bearing borrowings	-	1,839	2,612	23,115	-	27,566
Leasing liabilities	-	55	164	876	119	1,214
Trade and other payables	-	374	2	7	-	383
Provision for onerous contract	-	-	1	42	20	63
Other liabilities	114	305	1	-	-	420
Balance as at 31 December 2019	114	2,573	2,780	24,040	139	29,646
Interest bearing borrowings	-	317	948	22,924	-	24,189
Trade and other payables	-	206	-	-	-	206
Provision for onerous contract	-	3	11	99	71	184
Other liabilities	67	37	-	-	-	104
Balance as at 31 December 2018	67	563	959	23,023	71	24,683

The table below summarises the maturity profile of the Company's financial liabilities as at 31 December 2019 and 2018 based on contractual undiscounted payments.

	On demand	Less than 3	4 to 12	2 to 5	More than 5
		months	months	years	years	Total
Interest bearing borrowings	-	260	777	23,109	-	24,146
Leasing liabilities	-	55	164	876	119	1,214
Trade and other payables	-	154	-	-	-	154
Provision for onerous contract	-	-	1	42	20	63
Other liabilities	114	298	-	-	-	412
Balance as at 31 December 2019	114	767	942	24,027	139	25,989
Interest bearing borrowings	-	249	746	21,021	-	22,016
Trade and other payables	-	95	-	-	-	95
Provision for onerous contract	-	3	11	99	71	184
Other liabilities	67	27	-	-	-	94
Balance as at 31 December 2018	67	374	757	21,120	71	22,389

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

3 Financial risk management (cont'd)

Liquidity risk (cont'd)

Provision for onerous contract is disclosed in the tables above, because it is a financial liability arising from the unavoidable cost of meeting the obligation of contract. The amounts disclosed are undiscounted future loss amounts used to calculate provision.

3.2. Capital management

The primary objective of the capital management is to ensure that the Group and the Company maintain a strong credit health and healthy capital ratios in order to support their business and maximise shareholder value. The Company's management supervises the investments so that they are in compliance with requirements applied to the capital, specified in the appropriate legal acts, as well as provide the Group's management with necessary information.

The Group's and the Company's capital comprises share capital, share premium, reserves and retained earnings.

The Group and the Company manage their capital structure and make adjustments to it, in light of changes in economic conditions and specific risks of their activity. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Company is obliged to keep its equity ratio at not less than 50 % of its share capital, as imposed by the Law on Companies of Republic of Lithuania. The Company and the Group complied with this requirement as at 31 December 2019 and 2018, except for two subsidiaries in 2019 and in 2018. There are no plans yet to rectify the situation in Lithuania. Pursuant to the Latvian Commercial Law the authorised share capital of a private limited liability company must be not less than EUR 2,800. As of 31 December 2019 and 2018, all Latvian subsidiaries complied with this requirement.

Starting from 2016 the Company has the right to pay dividends without bank consent if the ratio of EBITDA (earnings before interest, tax, depreciation and amortization) divided by the sum of debt service costs (interest and principal repayments) and dividends would be higher than 1.1. In addition, on 29 December 2017 the Extraordinary General Shareholders Meeting of the Company changed dividend payment policy by increasing the minimum dividend from EUR 0.012 till EUR 0.026, if the legal and contractual requirements do not restrict the payment of dividends. After change of nominal value of shares the minimum dividend per share can not be less than EUR 0.13 (Note 14).

4 Fair value estimation

Assets carried at fair value

The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);

Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The following table provides the fair value measurement hierarchy of the Group's and the Company's assets measured at fair value in the statement of financial position as at 31 December 2019.

	Level 1	Level 2	Level 3	Total balance
Assets of the Group
Investment properties (Note 11)	32,904	4,894	34,086	71,884
Assets of the Company
Investment properties (Note 11)	32,498	1,293	29,204	62,995
Investment into subsidiaries (Note 5)	-	-	7,894	7,894

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

4 Fair value estimation (cont'd)

Assets carried at fair value (cont'd)

The following table provides the fair value measurement hierarchy of the Group's and the Company's assets measured at fair value in the statement of financial position as at 31 December 2018.

	Level 1	Level 2	Level 3	Total balance
Assets of the Group
Investment properties (Note 11)	-	4,490	53,805	58,295
Assets of the Company
Investment properties (Note 11)	-	1,040	48,653	49,693
Investment into subsidiaries (Note 5)	-	-	6,553	6,553

In 2019 the investment property related to business center IBC was reclassified from value measurement level 3 to level 1 because these assets were revalued based at the transaction price at which these assets were sold after the balance sheet date (see note 19). There were no transfers of assets between the Level 1 and Level 2 and between Level 2 and Level 3 of the fair value hierarchy during 2018 .

There were no liabilities measured at fair value in the Group's and the Company's statements of financial position.

Financial instruments that are not carried at fair value

The Group's and the Company's principal financial instruments that are not carried at fair value in the statement of financial position are cash and cash equivalents, deposits, trade and other receivables, trade and other payables, non-current and current borrowings, provision for onerous contract.

The carrying amount of the cash and cash equivalents, deposits, trade and other receivables, trade and other payables of the Group and the Company as at 31 December 2019 and 2018 approximated their fair value because they are short-term and the impact of discounting is immaterial.

The carrying amount of borrowings of the Group and the Company and provision for onerous contract as at 31 December 2019 and 2018 approximated their fair value. Bank borrowings have floating interest rate and were renegotiated recently, therefore their interest rate represents the current market rate. The interest rates of borrowings from related party are reviewed at the end of each financial year and adjusted in line with market rates changes, therefore it was concluded that their fair value approximates carrying amount. The fair values of non-current borrowings are based on discounted cash flows using a current interest rate. They are classified as level 3 fair values in the fair value hierarchy due to use of unobservable inputs, including own credit risk.

5 Investments into subsidiaries

The Group had the following subsidiaries directly or indirectly owned by the Company as at 31 December 2019 and 2018:

Name	Country of incorporation and place of business	Proportion of shares (voting rights) directly/indirectly held by the Company/Group (%)	Nature of business
UAB Rovelija*	Lithuania	100.00	Real estate owner and lessor
UAB Perspektyvi veikla	Lithuania	100.00	Dormant
UAB Proprietas*	Lithuania	100.00	Real estate owner and lessor
SIA Dommo Grupa*	Latvia	100.00	Real estate owner and lessor
SIA Dommo Biznesa Parks	Latvia	100.00	Real estate owner and lessor
SIA Dommo	Latvia	100.00	Real estate management
SIA DBP Invest	Latvia	100.00	Dormant

*These subsidiaries are directly owned by the Company.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

5 Investments into subsidiaries (cont'd)

All subsidiary undertakings listed in the tables above are included in the consolidation.

In 2019 and 2018 the Company has not invested into or sold any subsidiaries.

The subsidiary SIA Dommo Bizness Parks has no right to pay dividends without a bank's written consent according to the loan agreements. The bank shall give its consent to pay dividends if a subsidiary's ability to repay borrowings is not degraded subsequently, and the subsidiary performs its obligation under the loan agreement as at the moment of giving the aforementioned consent. The loans granted (including accumulated interest thereon) to SIA Dommo Grupa and SIA Dommo Bizness Parks are subordinate to the bank borrowings and can be repaid only upon maturity of the bank borrowings in 2020.

Fair value of investments into subsidiaries

Investments into subsidiaries together with loans granted to subsidiaries are measured at fair value through profit or loss in the Company's stand-alone financial statements in 2019 and 2018. It is Level 3 fair value measurement. The fair value of investments is measured at the fair value of their net assets including loans granted by the Company. The main assets of dormant entities are cash. The main assets of active subsidiaries are investment properties, which are measured at fair value using the income approach. The main liabilities of subsidiaries are borrowings from external financial institutions, which are measured using an income approach, such as a present value technique.

The split of carrying amounts of the investment into subsidiaries by legal components is as follows:

	2019	2018
Shares	303	99
Loans granted	7,591	6,454
	7,894	6,553

Key inputs to valuation on subsidiaries as at 31 December 2019 and 2018:

Significant unobservable inputs	Value of input or range, 2019	Value of input or range, 2018
Sales price EUR per sq. m. (with VAT)	N/A	2
Cost to completion EUR per sq. m (without VAT)	N/A	887
Profit on cost ratio of the entire project (%)	N/A	30
Discount rate (%)	11	11
Capitalisation rate for terminal value (%)	9	9
Vacancy rate (%)	3	3-15
Increase of rents per year (%)	N/A	1.5
Inflation (%)	2	1.4 – 1.6

The inputs related to valuation of assets of Rovelija UAB were not used in valuation of assets as of 31 December 2019 because these assets were valued at transaction price.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

5 Investments into subsidiaries (cont'd)

Fair value of investments into subsidiaries (cont'd)

The sensitivity analysis of fair value of subsidiaries as at 31 December 2019 is as follows:

Reasonable possible shift +/- (%)	Increase of estimates	Decrease of estimates
Change in expected vacancy rates by 20%	(33)	34
Change in discount and capitalization rate by 50 bps	(271)	304

The sensitivity analysis of fair value of subsidiaries as at 31 December 2018 is as follows:

Reasonable possible shift +/- (%)	Increase of estimates	Decrease of estimates
Change in future sale prices of developed properties by 10%	160	(170)
Change in construction costs by 10%	(130)	130
Change in profit on cost ratio of the entire project by 200 bps	(30)	20
Change in Increase of rents per year by 100 bps or change in future rental rates by 1%	168	(164)
Change in expected vacancy rates by 20%	(57)	56
Change in discount and capitalization rate by 50 bps	(270)	301

The following table presents the movement in Level 3 instruments for the year ended 31 December 2019 and 2018:

Fair value as at 31 December 2017	5,881
Gains and losses recognised in profit or loss (within 'Net changes in fair value of investment into subsidiaries designated at fair value through profit or loss')	662
Loan granted during a year (Note 18)	10
Fair value as at 31 December 2018	6,553
Gains and losses recognised in profit or loss (within 'Net changes in fair value of investment into subsidiaries designated at fair value through profit or loss ')	793
Investment into share capital	238
Loan granted during a year (Note 18)	310
Fair value as at 31 December 2019	7,894
Change in unrealised gains or losses for the period included in profit or loss for assets held at the end of 2019	793
Change in unrealised gains or losses for the period included in profit or loss for assets held at the end of 2018	662

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

5 Investments into subsidiaries (cont'd)

The main part of investments into subsidiaries together with loans granted are loans granted to Latvian entities. In 2015 50% of these loans were acquired by the Former Parent Company at a price below their estimated fair value, which was measured as 50% of fair value of net assets of subsidiaries, over which control was obtained by the Former Parent Company. On the acquisition day, the difference amounted to EUR 1,014 thousand. As the fair value was not determined based on observable inputs, this '1 day profit' was not recognised immediately but is deferred and is recognised during the estimated maturity of the loans. During 2019 and 2018 the Company has recognised EUR 203 thousand and EUR 203 thousand of this '1 day profit' within 'Net changes in fair value of investment into subsidiaries designated at fair value through profit or loss' in the statement of comprehensive income, respectively. As at 31 December 2019 and as at 31 December 2018 unrecognised part of '1 day profit' was EUR 101 thousand and EUR 304 thousand, respectively. Therefore, the total fair value of loans granted by the Company was EUR 7,692 thousand and EUR 6,758 thousand as at 31 December 2019 and 2018, respectively (their carrying amount – EUR 7,591 thousand and EUR 6,454 thousand, respectively). It is Level 3 measurement.

6 Segment information

Management of the Company has determined the operating segments based on the reports reviewed by the Investment Committee of the Management Company that are used to make strategic decisions. The Investment Committee analyses performance of the Group on property-by-property basis of owned premises, while leased premises are reported on a combined basis. Performance is evaluated based on net operating income. Net operating income is calculated by deducting from revenue premises rent costs (excluding provision for onerous contract), utilities expenses, repair and maintenance expenses, property management and brokerage costs, taxes on property and insurance costs. Segment assets and liabilities are not reported to the Investment Committee. Management of the Company has determined the following reportable segments:

• Owned property in Lithuania. The reportable segment comprises four (until September 2017 five) operating segments on a property-by-property basis, which are aggregated. The operating segments have similar economic characteristics, because all owned premises are located in Vilnius, Lithuania. These are office buildings with some warehouse premises. Most of them have further development opportunities. All properties are multi-tenant. Corporate tenants dominate, but some premises are also leased to governmental and retail tenants.
• Leasehold property. They are located in Vilnius and Kaunas, Lithuania. These are office buildings and warehouses. From 1 September 2017 the segment comprise of one investment property (office building) in Vilnius.
• Owned property in Latvia. Revenue is earned from warehouse located in Riga, Latvia.

The following table presents performance of reportable segments of the Group for the year ended 31 December 2019:

	Owned property in Lithuania	Owned property in Latvia	Total
Year ended 31 December 2019
Rent income	4,081	552	4,633
Other revenue (utilities and other service)	1,261	-	1,261
Revenue	5,342	552	5,894
Expenses
Premises rent costs	(104)	(4)	(108)
Utilities	(879)	(1)	(880)
Repair and maintenance of premises	(2,445)	(42)	(2,487)
Property management and brokerage costs	(28)	(24)	(52)
Taxes on property	(306)	(14)	(320)
Insurance costs	(11)	(3)	(14)
Net operating income for the period	1,569	464	2,033

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

6 Segment information (cont'd)

The following table presents performance of reportable segments of the Group for the year ended 31 December 2018:

	Owned property in Lithuania	Leasehold property	Owned property in Latvia	Total
Year ended 31 December 2018
Rent income	3,984	202	530	4,716
Other revenue (utilities and other service)	1,103	-	-	1,103
Revenue	5,087	202	530	5,819
Expenses
Premises rent costs	(94)	(211)	(4)	(309)
Utilities	(819)	-	(3)	(822)
Repair and maintenance of premises	(1,266)	-	(26)	(1,292)
Property management and brokerage costs	(16)	-	(26)	(42)
Taxes on property	(307)	-	(15)	(322)
Insurance costs	(11)	-	(3)	(14)
Net operating income for the year	2,574	(9)	453	3,018

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

6 Segment information (cont'd)

The following table presents reconciliation of the Group's operating profits to net operating income, rent costs and revenue.

	2019			2018
	Net operating income to operating profit	Premises rent costs	Repair and maintenance of premises	Revenue	Net operating income to operating profit	Premises rent costs	Repair and maintenance of premises	Revenue
From reportable	2,033	(108)	(2,487)	5,894	3,018	(309)	(1,292)	5,819
segment Provision for onerous contracts	7	7	-	-	-	-	-	-
Other revenue not included in reportable segments	3	-	-	3	3	-	-	3
Add back insurance and other costs (included within 'other expenses')	56	-	43	-	41	-	27	-
Brokerage cost on sale of investment property	-	-	-	-	-	-	-	-
Management and Performance Fee	(2,244)	-	-	-	(391)	-	-	-
Impairment of trade receivables	(20)	-	-	-	(38)	-	-	-
Employee benefits expenses	(142)	-	-	-	(93)	-	-	-
Depreciation and amortisation	(43)	-	-	-	(30)	-	-	-
Other expenses	(283)	-	-	-	(350)	-	-	-
Other income	32	-	-	-	4	-	-	-
Net gains from fair value adjustments on investment property	11,499	-	-	-	1,473	-	-	-
Total	10,898	(101)	(2,444)	5,897	3,637	(309)	(1,265)	5,822

The table below presents distribution of the Group non-current assets (other than financial instruments and deferred tax assets) by geographical area as at 31 December 2019 and 2018:

	Lithuania	Latvia	Total
As at 31 December 2019	64,006	8,402	72,408
As at 31 December 2018	50,412	8,183	58,595

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions

Revenue

The Group being the lessor has entered into commercial property leases of the Group's investment properties under operating lease agreements. The majority of the agreements have remaining terms of between 1 and 6 years.

Analysis of revenue by category:

	Group		Company
	2019	2 018	2 019	2 018
Rent income	4,633	4,716	4,074	4,183
Utilities revenue	857	812	17	20
Other services revenue	407	294	120	104
Total revenue	5,897	5,822	4,211	4,307

From 1 January 2018 subsidiary UAB Proprietas provide property management services for the Company and utilities and other services to the tenants of the Company. Therefore, from 1 January 2018 most of utilities and other services revenue is earned by the subsidiary, not by the Company.

The Group has earned rent income from both owned and subleased premises. Breakdown of revenue by ownership of premises is presented below:

		Group		Company
	2019	2 018	2 019	2 018
Rent income from owned premises	4,633	4,514	4,074	3,981
Other revenue from owned premises	1,264	1,106	137	124
Total revenue from owned premises	5,897	5,620	4,211	4,105
Rent income from subleased premises	-	202	-	202
Other revenue from subleased premises	-	-	-	-
Total revenue from subleased premises	-	202	-	202
Total revenue	5,897	5,822	4,211	4,307

Analysis of revenue of the Group by geographical areas:

	Group
	2019	2 018
Lithuania	5,342	5,289
Latvia	555	533
Total	5,897	5,822

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

Revenue (cont'd)

In 2019 and 2018 there is no single customer, from which the Group and the Company has received more than 10% of its revenue.

The Group's future rentals receivable under non-cancellable and cancellable operating leases as at 31 December 2019 and 2018 are as follows:

		2019	2018
Within one year
	- non-cancellable lease	1,460	2,002
	- non-cancellable amount of cancellable lease	1,376	1,246
	- minimum lease payments, total	2,836	3,248
	- cancellable amount of cancellable lease	239	507
		3,075	3,755
Within two years
	- non-cancellable lease	1,423	1,530
	- non-cancellable amount of cancellable lease	581	542
	- minimum lease payments, total	2,004	2,072
	- cancellable amount of cancellable lease	634	607
		2,638	2,679
Within three years
	- non-cancellable lease	1,136	1,198
	- non-cancellable amount of cancellable lease	264	225
	- minimum lease payments, total	1,400	1,423
	- cancellable amount of cancellable lease	888	676
		2,288	2,099
Within four years
	- non-cancellable lease	571	848
	- non-cancellable amount of cancellable lease	204	478
	- minimum lease payments, total	775	1,326
	- cancellable amount of cancellable lease	706	303
		1,481	1,629
Within five years
	- non-cancellable lease	362	251
	- non-cancellable amount of cancellable lease	65	116
	- minimum lease payments, total	427	367
	- cancellable amount of cancellable lease	619	355
		1,046	722

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

Revenue (cont'd)

After five years

	- non-cancellable lease	305	162
	- non-cancellable amount of cancellable lease	-	61
	- minimum lease payments, total	305	223
	- cancellable amount of cancellable lease	1,005	590
		1,310	813
Total		11,838	11,697
	- non-cancellable lease	5,257	5,991
	- non-cancellable of cancellable lease	2,490	2,668
	- minimum lease payments, total	7,747	8,659
	- cancellable amount of cancellable lease	4,091	3,038
		11,838	11,697

The Company's future rentals receivable under non-cancellable and cancellable operating leases as at 31 December 2019 and 2018 are as follows:

		2019	2018
Within one year
	- non-cancellable lease	1,460	1,995
	- non-cancellable amount of cancellable lease	885	1,120
	- minimum lease payments, total	2,345	3,115
	- cancellable amount of cancellable lease	143	477
		2,488	3,592
Within two years
	- non-cancellable lease	1,423	1,530
	- non-cancellable amount of cancellable lease	472	542
	- minimum lease payments, total	1,895	2,072
	- cancellable amount of cancellable lease	186	600
		2,081	2,672
Within three years
	- non-cancellable lease	1,136	1,198
	- non-cancellable amount of cancellable lease	264	225
	- minimum lease payments, total	1,400	1,423
	- cancellable amount of cancellable lease	331	669
		1,731	2,092

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

Revenue (cont'd)

Within four years - non-cancellable lease 571 848 - non-cancellable amount of cancellable lease 204 478 - minimum lease payments, total 775 1,326 - cancellable amount of cancellable lease 151 296 926 1,622 Within five years - non-cancellable lease 362 251 - non-cancellable amount of cancellable lease 65 116 - minimum lease payments, total 427 367 - cancellable amount of cancellable lease 145 350 572 717 After five years - non-cancellable lease 305 162 - non-cancellable amount of cancellable lease - 61 - minimum lease payments, total 305 223 - cancellable amount of cancellable lease 425 590 730 813 Total 8,528 11,508 - non-cancellable lease 5,257 5,984 - non-cancellable of cancellable lease 1,890 2,542 - minimum lease payments, total 7,147 8,526 - cancellable amount of cancellable lease 1,381 2,982 8,528 11,508

The Company's and the Group's future rentals receivable under non-cancellable and cancellable operating subleases as at 31 December 2018 are as follows:

		2018
Within one year
	- non-cancellable lease	202
	- non-cancellable amount of cancellable lease	-
	- minimum lease payments, total	202
	- cancellable amount of cancellable lease	-
		202
From one to five years
	- non-cancellable lease	809
	- minimum lease payments, total	809

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

Revenue (cont'd)
After five years
	- non-cancellable lease	404
	- minimum lease payments total	404
Total		1,415
	- non-cancellable lease	1,415
	- non-cancellable of cancellable lease	-
	- minimum lease payments, total	1,415
	- cancellable amount of cancellable lease	-

The Company's and the Group's future rentals receivable under finance lease as at 31 December 2019 are as follows:

	2019
Year 1	219
Year 2	219
Year 3	219
Year 4	219
Year 5	219
After 5 years	119
Total	1,214
Unearned interest	(61)
	1,153

For the cancellable lease and sublease agreements, tenants must notify the administrator 1–12 months in advance if they wish to cancel the rent agreement and have to pay for the cancellation 1–3 months' rent fee penalty or penalty based on initial repair cost incurred to prepare premises to rent proportionally to remaining term of rent. According to some agreements, the tenants has to right to cancel the rent agreement within 12–60 months of the start of lease term. According to non-cancellable lease and sublease agreements tenants must pay the penalty equal to rentals receivable during the whole remaining lease period.

Some of lease and sublease agreements have a clause enabling upward revision of the rental charges on an annual basis according to prevailing market conditions.

Expenses and provisions

The Company was leasing premises from an external party until August 2017 under the lease agreement of 10 August 2007, except for one property, which is leased until the expiry of the current sublease agreement (31 December 2025). The Company had paid a one off deposit in the amount of EUR 825 thousand corresponding to the 6 months rental fee amount, which will be set-off against the last part of lease payment at the termination of the lease. The rent payments are subject to an indexation at the end of August each year on the basis of harmonised consumer price index, if the latter is more than 1%, but there is a cap for annual indexation of 3.8%. In November of 2016 the amendment to the lease agreement was signed. According to the amendment, EUR 275 thousand of prepayments was set off against lease payables in 2016, EUR 450 thousand of prepayments was set off in 2017, and EUR 100 thousand of prepayments has to be set off in 2025.

During the year ended 31 December 2018 the Group and the Company has incurred EUR 211 thousand lease expenses under this agreement. Contingent rent constituted EUR 36 thousand within this amount during the year ended 31 December 2018 in the Group and in the Company.

The lease expenses of the Group from other agreements amounted to EUR 104 during the year ended 31 December 2018. The lease expenses of the Company from other agreements amounted to EUR 98 thousand during the year ended 31 December 2018 .

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

Expenses and provisions (cont'd)

Future minimum non-cancellable lease payments according to the signed operating lease contracts are as follows:

		Group 2018	Company 2018
Within one year
	- lease of premises from agreement of 10 August 2007	215	215
	- other lease	34	29
		249	244
From one to five years
	- lease of premises from agreement of 10 August 2007	859	859
	- other lease	13	13
		872	872
After five years
	- lease of premises from agreement of 10 August 2007*	330	330
	- other lease	-	-
		330	330
		1,451	1,446

* In 2018 the prepayment of EUR 100 thousand was deducted from the future lease payments in the caption 'after five years'.

The lease agreement of 10 August 2007 is an onerous contract, therefore there is a provision of EUR 62 thousand and EUR 182 thousand to cover the loss anticipated in connection with this contract recognised in the statement of financial position as at 31 December 2019 and 2018, respectively. This amount represents the present value of future cash flows related to the lease contract. Future cash flows projections are based on the estimates of future rent income from subleased premises, contractual lease payments and estimates of maintenance and management expenses of leased premises.

The changes in the provision for onerous contract is presented below:

	2019	2018
As at 1 January	182	181
IFRS 16 adoption impact	(88)	-
Re-estimation of provision at the end of the year	-	9
Amount used (recognised as a reduction of 'Premises rent costs')	(1)	(9)
Unwinding of the discount and changes in the discount rate	-	1
Change in cashflow	(31)	-
As at 31 December	62	182
Non-current	61	168
Current	1	14

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

7 Revenue, lease expenses, lease commitments, provisions (cont'd)

As at 31 December 2019 the Company recognised non-current provision for the Performance Fee of EUR 2,486 thousand (as at 31 December 2018: EUR 811 thousand) (Notes 2.12 and 2.22).

The changes in the provision for the Performance Fee is presented below:

	2019	2018
As at 1 January	811	777
Re-estimation of provision at the end of the year	1,913	84
Reclassification of payable part to 'other current liabilities'	(238)	(50)
As at 31 December	2,486	811

8 Finance costs

	Group		Company
	2019	2 018	2019	2018
Interest expenses of bank borrowings	(465)	(454)	(423)	(406)
Interest expenses of borrowings from related parties	(6)	(7)	(6)	(7)
Unwinding of the discount of provision for onerous contract	-	(1)	-	(1)
Lease interest	(23)	-	(23)	-
Other financial expenses	(2)	(1)	(2)	(1)
	(496)	(463)	(454)	(415)

9 Income tax

	Group		Company
	2019	2 018	2019	2 018
Components of the income tax (expenses)/credit
Current income tax (expense)/credit	-	-	-	-
Prior year current income tax correction	12	(1)	12	-
Deferred income tax (expense)/credit	9	(4)	-	-
Income tax (expense)/credit charged to profit or loss – total	21	(5)	12	-

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

9 Income tax (cont'd)

There is no income tax expense (credit) recognised in other comprehensive income. Deferred income tax asset and liability were estimated at 15% rates as at 31 December 2019 and 2018. The movement in deferred income tax assets and liabilities of the Group during 2019 is as follows:

	Balance as at 31 December 2018	Recognised in profit or loss during the year	Balance as at 31 December 2019
Deferred tax asset
Tax loss carry forward	1,091	12	1,103
Investment properties	18		18
Deferred tax asset available for recognition	1,109	12	1,121 -
Less: unrecognised deferred tax asset from tax losses carried forward	(1,090)		(1,090)
Less: unrecognised deferred tax asset due to future uncertainties	(18)		(18)
Recognised deferred income tax asset	1	12	13 -
Asset netted with liability of the same legal entities	(1)	(3)	(4)
Deferred income tax asset, net 1	-	9	9 -
Deferred tax liability			- -
Investment properties	(5)	(3)	(8)
Deferred income tax liability	(5)	(3)	(8) -
Liability netted with asset of the same legal entities	1	3	4
Deferred income tax liability, net	(4)	-	(4) -
Deferred income tax, net	(4)	9	5

After changes in Latvian Income Tax Law the tax losses from Latvian entities could be carried forward not for indefinite period of time, but for 5 consecutive years. Deferred tax asset arising from the tax losses from Latvian entities amounted to EUR 1,054 thousand (all amount is unrecognised) as at 31 December 2019.

The Group's deferred tax assets will be recovered within than 12 months as of 31 December 2019.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

9 Income tax (cont'd)

The movement in deferred income tax assets and liabilities of the Group during 2018 is as follows:

	Balance as at 31 December 2017	Recognised in profit or loss during the year	Balance as at 31 December 2018
Deferred tax asset
Tax loss carry forward	1,087	4	1,091
Investment properties	18	-	18
Receivables	-	-	-
Deferred tax asset available for recognition	1,105	4	1,109 0
Less: unrecognised deferred tax asset from tax losses carried forward	(1,085)	(5)	(1,090)
Less: unrecognised deferred tax asset due to future uncertainties	(18)	-	(18)
Recognised deferred income tax asset	2	(1)	1 0
Asset netted with liability of the same legal entities	(2)	1	(1)
Deferred income tax asset, net 1	-	-	-
Deferred tax liability
Investment properties	(2)	(3)	(5)
Deferred income tax liability	(2)	(3)	(5) 0
Liability netted with asset of the same legal entities	2	(1)	1
Deferred income tax liability, net	-	(4)	(4)
Deferred income tax, net	-	(4)	(4)

Following the provisions of the Lithuanian Law on Corporate Income Tax, all income (in 2017 - investment income) of closed-end investment companies operating in accordance with the Lithuanian Law on Collective Investment Undertakings are not subject to taxation. Therefore, the Company has not any taxable temporary differences in 2019 and 2018 and has not recognised any deferred tax assets or liabilities.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

9 Income tax (cont'd)

The reconciliation of the total income tax to the theoretical amount that would arise using the tax rate of the Group and the Company is as follows:

	Group		Company
	2019	2018	2019	2018
Profit before income tax	10,402	3,174	10,615	3,372
Tax calculated at the tax rate of 0 %	-	-	-	-
Tax effect of non-deductible expenses and non-taxable income	6	(2)		-
Deferred tax expenses arising from write-down, or reversal of a previous write-down, of deferred tax asset due to changes in probability to utilise it	(5)	(3)		-
Prior year current income tax correction	12	(1)	12
Differences in tax rates in subsidiaries (15% instead of 0%)	8	1	-	-
Income tax (expense)/credit recorded in the statement of comprehensive income	21	(5)	12	-

Following the provisions of the Lithuanian Law on Corporate Income Tax, all income (in 2017 - investment income) of closed-end investment companies operating in accordance with the Lithuanian Law on Collective Investment Undertakings are not subject to taxation.

10 Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The weighted average number of shares for the year ended 31 December 2019 was 13,150 thousand.

On 15 January 2018 the change of the nominal value of shares from EUR 0.29 to EUR 1.45 was considered as reverse share split. Therefore, the basic and diluted earnings per share was recalculated by using number of shares if the reverse share split would have occurred before the start of the comparative period of financial statements.

		Group
	2019	2 018
Net profit (loss), attributable to the equity holders of the parent	10,423	3,169
Weighted average number of ordinary shares (thousand)	13,150	13,150
Basic earnings (deficit) per share (EUR)	0.79	0.24

For 2019 and 2018 diluted earnings per share of the Group are the same as basic earnings per share.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties

The movements of investment properties of the Group were:

	Other investment properties valued using sales comparison method	Other investment properties valued using sales comparison method	Properties leased out by the entity	Investment properties held for future redevelopment	Total
Fair value hierarchy	Level 1	Level 2	Level 3	Level 3
Balance as at 31 December 2017	-	4 073	51 918	350	56 341
Subsequent expenditure	-	-	481	-	481
Gain from fair value adjustment	-	417	1 127	-	1 544
Loss from fair value adjustment	-	-	(71)	-	(71)
Balance as at 31 December 2018	-	4 490	53 455	350	58 295
Subsequent expenditure	-	-	2 180	-	2 180
Transfer to other valuation level	23 350	-	(23 000)	(350)	-
Disposal	-	-	(90)	-	(90)
Gain from fair value adjustment	9 554	404	1 541	-	11 499
Loss from fair value adjustment	-	-	-	-	-
Balance as at 31 December 2019	32 904	4 894	34 086	-	71 884
Unrealized gains or losses for the period, included within 'Net gain (losses) on fair value adjustments of investment property' in profit or loss	9 554	404	1 541	-	11 499

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

The movements of investment properties of the Company were:

	Other investment properties valued using sales comparison method	Other investment properties valued using sales comparison method	Properties leased out by the entity	Investment properties held for future redevelopment	Total
Fair value hierarchy	Level 1	Level 2	Level 3	Level 3
Balance as at 31 December 2017	-	788	47,045	-	47,833
Subsequent expenditure	-	-	481	-	481
Gain from fair value adjustment	-	252	1,127	-	1,379
Loss from fair value adjustment	-	-	-	-	-
Balance as at 31 December 2018	-	1,040	48,653	-	49,693
Subsequent expenditure	-	-	2,180	-	2,180
Transfer to other valuation level	23,000	-	(23,000)	-	-
Disposal	-	-	(90)	-	(90)
Gain from fair value adjustment	9,498	253	1,461	-	11,212
Loss from fair value adjustment	-	-	-	-	-
Balance as at 31 December 2019	32,498	1,293	29,204	-	62,995
Unrealized gains or losses for the period, included within 'Net gain (losses) on fair value adjustments of investment property' in profit or loss	9,498	253	1,461	-	11,212

Investment properties of the Group are office buildings, warehouses and the entire building of old apartments. The majority of buildings and warehouses are leased out under the operating lease agreements and generate rental income.

The direct operating expenses arising from investment properties can be allocated as follows:

	Group		Company
	2019 2018		2019 2018
To properties that generated rental income	2,819	1,723	2,659	1,585
To properties that did not generate rental income	85	48	78	42
	2,904	1,771	2,737	1,627

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

During 2019 and 2018 the reconstruction expenses of EUR 166 thousand and EUR 59 thousand have incurred, respectively, and were capitalised and added to the acquisition cost of investment property, located at Gynėjų 14, Vilnius. During 2019 and 2018 the reconstruction expenses of EUR 2,014 thousand and EUR 272 thousand have been incurred additionally for the investment properties, located at Palangos 4, Vilnius. In 2018 the reconstruction expenses of EUR 150 thousand have incurred additionally for the investment properties, located at Žygio g. 97, Vilnius.

During 2019 the Group/the Company has paid outstanding payables from 2017 for subsequent expenditure for investment properties of EUR 4 thousand and has paid EUR 1,825 thousand for subsequent expenditures during 2019. During 2018 the Group/the Company has paid outstanding payables from 2017 for subsequent expenditure for investment properties of EUR 348 thousand and has paid EUR 481 thousand for subsequent expenditures during 2018. As at 31 December 2019 outstanding payables for subsequent expenditure from 2019 for investment properties amounted to EUR 355 thousand. As at 31 December 2018 outstanding payables for subsequent expenditure from 2017 for investment properties amounted to EUR 4 thousand. During 2019 the Group/the Company incurred higher expenses for the renovation of premises than in 2018 recognised in the statement of comprehensive income for the preparation of premises for the new long term leases (in 2019 were incurred repair expenses of EUR 1,832 thousand, of which attributable to IBC Business Center EUR 1,177 thousand, and in 2018 were incurred repair expenses of EUR 766 thousand in all real estate objects).

Investment properties are measured at fair value. During 2019, properties leased out by the entity and investment properties held for future redevelopment in Lithuania were valued as at 31 October 2019 and 30 April 2019, respectively, by an accredited valuer UAB OBER-HAUS Nekilnojamasis Turtas (hereinafter together with SIA OBER-HAUS Vertešanas Serviss referred to as 'Oberhaus') using the income approach, in 2018 investment properties also were valuated by an accredited valuer UAB Newsec Valuations (hereinafter 'Newsec') using the income approach and market approach. During 2019 investment properties located in Latvia were valued as at 31 October 2019 and 30 April 2019, respectively, by an accredited valuer SIA OBER-HAUS Vertešanas Serviss using a market approach for land and using an income approach for warehouse. There were no significant changes in the market during period from valuation date till end of reporting period that could have an effect on the value of investment properties, therefore the updated valuation was not performed as at 31 December 2019.

The Group's policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.

The fair value represents the price that would be received selling an asset in an orderly transaction between market participants at the measurement date, in compliance with the International Valuation Standards set out by the International Valuation Standards Committee. An investment property's fair value was based either on the market approach by reference to sales in the market of comparable properties or the income approach by reference to rentals obtained from the subject property or similar properties. Market approach refers to the prices of the analogues transactions in the market. These values are adjusted for differences in key attributes such as property size, location and quality of interior fittings. The most significant input into this valuation approach is price per square metre.

The investment property of business center IBC which was sold after the balance sheet date, has been valued at its sales price in these financial statements, as the sales price provided the best estimate of the fair value of the property at the balance sheet date.

Income approach is based on the assumption that defined correlation between net activity future income and fair value of the objects exists. For properties leased out by the entity main inputs include:

• Future rental cash inflows based on the actual location, type and quality of the properties and supported by the terms of any - existing lease, other contracts or external evidence such as current market rents for similar properties;

• Discount rates reflecting current market assessments of the uncertainty in the amount and timing of cash flows;

• Estimated vacancy rates based on current and expected future market conditions after expiry of any current lease;

• Maintenance costs including necessary investments to maintain functionality of the property for its expected useful life;

• Capitalisation rates based on actual location, size and quality of the properties and taking into account market data at the valuation date;

• Terminal value taking into account assumptions regarding maintenance costs, vacancy rates and market rents.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

Investment properties held for future redevelopment were estimated taking into account the following estimates (in addition to the inputs noted above):

• Sales prices based on the valuers' experience and knowledge of market conditions of residential and commercial properties;

• Costs to complete that are based on the valuers' experience and knowledge of market conditions and term sheets outlined in approved detailed plans. Costs to complete also include a reasonable profit margin;

• Completion dates, as properties under construction require approval or permits from oversight bodies at various points in the development process, including approval or permits in respect of initial design, zoning, commissioning, and compliance with environmental regulations. Based on management's experience with similar developments, all relevant permits and approvals are expected to be obtained. However, the completion date of the development may vary depending on, among other factors, the were no changes to the valuation techniques during the period;

• Profit on cost ratio reflecting current market assessment of profitability margin of developments projects. It is based on the internal rate of returns for similar projects.

The split of carrying amounts of the properties leased out by the entity by type:

	Group		Company
	2019	2018	2019	2018
Offices premises in city centre – Lithuania	29,204	25,653	29,204	25,653
IBC related investment property	32,498	23,000	32,498	23,000
Warehouse – Latvia	4,882	4,802	-	-
	66,584	53,455	61,702	48,653

Description of valuation techniques used and key inputs to valuation on investment properties located in Lithuania as at 31 December 2019:

	Valuation technique	Significant unobservable inputs	Range (weighted average) Oberhaus
Properties leased out by the entity	Discounted cash flows	Discount rate (%)	8,0 – 9,0 (8,51)
		Capitalisation rate for terminal value (%)	7,5 – 8,0 (7,74)
		Vacancy rate (%)	0-25
		Office premises in city centre - Rent price EUR per sq. m. (without VAT)
		Warehouse premises - Rent price EUR per sq. m. (without VAT)	7,41 – 20,3 (12,48)

All inputs in the Company are the same as in the Group. Fair value of investment property related to IBC business center was determined based on the price of transaction executed after the balance sheet date (see note 19).

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

Description of valuation techniques used and key inputs to valuation on investment properties located in Lithuania as at 31 December 2018:

	Valuation	Significant unobservable inputs	Range (weighted average)
	technique		Oberhaus	Newsec
Properties leased out by the entity	Discounted cash flows	Discount rate (%)	8.5 – 9 (8.85)	9.00 – 9.8 (9.20)
		Capitalisation rate for terminal value (%)	7.0 – 8.0 (7.41)	7.5 – 8.5 (7.65)
		Vacancy rate (%)	3-25	5-10, in first year 5-50
		Office premises in city centre -
		Rent price EUR per sq. m. (without VAT)	7.2 – 20 (10.70)	5.79 – 19.70 (11.0)
		Warehouse and office premises in industrial area - Rent price EUR per sq. m. (without VAT)	4.5-6.5 (4.68)	3.77-6.12 (5.01)
Investment properties held for future redevelopment	Discounted cash flows with	Profit on cost ratio of the entire project (%)	30	-
	estimated costs to complete	Cost to completion EUR per sq. m (without VAT)	887	-
		Sales price EUR per sq. m. (with VAT)*	1,810	-
		Completion date, years	2	-

Inputs for investment properties held for future developments are not relevant to the Company. All other inputs in the Company are the same as in the Group.

Description of valuation techniques used and key inputs to valuation on investment properties located in Latvia as at 31 December 2019:

	Valuation technique	Significant unobservable inputs	Value of input or range Oberhaus
Properties leased out by the entity	Net operating income capitalisation method	Yield (%)	9
		Vacancy rate (%)	3

Description of valuation techniques used and key inputs to valuation on investment properties located in Latvia as at 31 December 2018:

	Valuation technique	Significant unobservable inputs	Value of input or range Oberhaus
Properties leased	Discounted	Discount rate (%)	11
out by the entity	cash flows (five	Capitalisation rate for terminal value (%)	9
	year estimated)	Vacancy rate (%)	3 - 15
		Increase of rents per year (%)	1.5
		Inflation (%)	1.4-1.6

Oberhaus is used for valuation of current contractual rent prices and has indexed these prices by input of increase of rents per year.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

The sensitivity analysis of investment properties located in Lithuania valued using income approach as at 31 December 2019 is as follows:

Group	Increase of estimates	Decrease of estimates
Reasonable possible shift +/- (%)	Properties leased out by the entity	Properties leased out by the entity
Change in future rental rates by 10 %	1,984	(1,888)
Change in construction costs by 10%	-	-
Change in expected vacancy rates by 20%	(240)	337
Change in discount and capitalization rate by 50 bps	(1,744)	2,053

Company	Increase of estimates	Decrease of estimates
Reasonable possible shift +/- (%)	Properties leased out by the entity	Properties leased out by the entity
Change in future rental rates by 10 %	1,984	(1,888)
Change in expected vacancy rates by 20%	(240)	337
Change in discount and capitalization rate by 50 bps	(1,744)	2,053

The sensitivity analysis of investment properties located in Latvia valued using income approach as at 31 December 2019 is as follows:

Reasonable possible shift +/- (%)	Increase of Decrease of estimates estimates
Change in Increase of rents per year by 100 bps or change in future rental rates by 1%	54	(53)
Change in expected vacancy rates by 20%	(33)	34
Change in discount and capitalization rate by 50 bps	(271)	304

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

The sensitivity analysis of investment properties located in Lithuania valued using income approach as at 31 December 2018 is as follows:

Group Reasonable possible shift +/- (%)	Increase of estimates Properties leased out by the entity	Investment properties held for future redevelopment	Decrease of estimates Properties leased out by the entity	Investment properties held for future redevelopment
Change in future rental rates by 10 %	4,939	-	(4,940)	-
Change in future sale prices of developed properties by 10%	-	160	-	(170)
Change in construction costs by 10%	-	(130)	-	130
Change in expected vacancy rates by 20%	(810)	-	805	-
Change in discount and capitalization rate by 50 bps	(3,538)	-	3,135	-
Change in profit on cost ratio of the entire project by 200 bps	-	(30)	-	20

Company	Increase of estimates	Decrease of estimates
Reasonable possible shift +/- (%)	Properties leased out by the entity	Properties leased out by the entity
Change in future rental rates by 10 %	4,939	(4,940)
Change in expected vacancy rates by 20%	(810)	805
Change in discount and capitalization rate by 50 bps	(3,538)	3,135

The sensitivity analysis of investment properties located in Latvia valued using income approach as at 31 December 2018 is as follows:

Reasonable possible shift +/- (%)	Increase of estimates	Decrease of estimates
Change in Increase of rents per year by 100 bps or change in future rental rates by 1%	168	(164)
Change in expected vacancy rates by 20%	(57)	56
Change in discount and capitalization rate by 50 bps	(270)	301

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

11 Investment properties (cont'd)

As at 31 December 2019 the Group's investment properties with carrying amount of EUR 71,298 thousand (EUR 57,784 thousand as at 31 December 2018) were pledged to the banks as collateral for the loans (Note 16).

As at 31 December 2019 the Company's investment properties with carrying amount of EUR 62,897thousand (EUR 49,602 thousand as at 31 December 2018) were pledged to the banks as collateral for the loans (Note 16).

As of 31 December 2016 a written consent was required for sale of investment property from AB SEB bankas as a depository service provider. According to the Lithuanian Law on Collective Investment Undertakings, the sale price of investment properties may not be lower by more than 15% of the value determined by the independent qualified valuer. Having concluded a contract on sale of investment properties, when the above-described condition is not satisfied, the Management Company must, in exceptional cases and provided that interests of participants of the Company are not harmed, notify the supervisory authority thereof immediately.

On 28 September 2018 the Group signed a preliminary agreement regarding the sale of 20.6 hectares of land plots in Latvia. In order for the transaction to be completed, the buyer of the land plots must by the end of April 2019 sign a lease agreement for the properties planned to be built on the land plots, and also make an advance payment and perform other actions envisaged in the agreement. If the parties fulfil all the stipulated conditions, the transaction could be completed by 1 July 2019. The conditions were not fulfilled, and the agreement was terminated on 30 April 2019.

There were no other restrictions on the realisation of investment properties or the remittance of income and proceeds of disposals in 2019 and 2018.

No contractual obligations to purchase, construct, repair or enhance investment properties existed at the end of the period.

12 Financial instruments by category

Group	Financial assets at amortised cost
	2019	2 018
Assets as per statement of financial position
Financial lease receivables	1,146	-
Other receivables	150	150
Trade and other receivables excluding tax prepayments	388	351
Deposits	-	-
Cash and cash equivalents	1,039	734
Total	2,723	1,235
Company	Financial assets at amortised cost	Assets at fair value through the profit and loss	Total
31 December 2019
Assets as per statement of financial position
Financial lease receivables	1,146	-	1,146
Investments into subsidiaries designated at fair value through profit or loss	-	7,894	7,894
Trade and other receivables excluding tax prepayments	238	-	238
Cash and cash equivalents	459	-	459
Total	1,843	7,894	9,737

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

12 Financial instruments by category (cont'd)

Company	Loans and receivables	Assets at fair value through the profit and loss	Total
31 December 2018
Assets as per statement of financial position
Investments into subsidiaries designated at fair value through profit or loss	-	6,553	6,553
Trade and other receivables excluding tax prepayments	277	-	277
Cash and cash equivalents	454	-	454
Total	731	6,553	7,284

Group	Financial liabilities at amortised cost
	2019	2 018
Liabilities as per statement of financial position
Borrowings	26,266	22,625
Lease liabilities	1,153	-
Provision for onerous lease contract	62	182
Trade payables	383	206
Other current liabilities excluding taxes and employee benefits	420	104
Total	28,284	23,117

Company		Financial liabilities at amortised cost
	2019	2 018
Liabilities as per statement of financial position
Borrowings	24,378	20,511
Lease liabilities	1,153	-
Provision for onerous lease contract	62	182
Trade payables	154	95
Other current liabilities excluding taxes and employee benefits	412	94
Total	26,159	20,882

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

13 Trade and other receivables

	Group			Company
	2019	2 018	2 019	2 018
Trade receivables, gross	358	342	188	253
Accrued lease income, gross	100	64	100	64
Taxes receivable, gross	56	3	-	-
Total trade and other receivable, gross	514	409	288	317
Less: provision for impairment of trade and other receivables	(37)	(16)	(32)	(16)
Less: Write off still subject to enforcement activity	(33)	(39)	(18)	(24)
Trade and other receivable net of expected credit losses	444	354	238	277

Changes in provision for impairment of trade and other receivables for the year 2019 and 2018 have been included within 'Provision for impairment of trade receivables' in the statement of comprehensive income.

Trade and other receivables are non-interest bearing and are generally with a credit term of 30 days.

Movements in the accumulated impairment losses on credit impaired accounts receivable of the Group and in the write-off were as follows:

	Group
	Impairment losses	Write off still subject to enforcement activity	Total
Balance as at 31 December 2017	35	-	35
Restatement according to application of IFRS 9	(28)	28	-
Charge for the year	42	-	42
Write-offs charged against the provision	(33)	33	-
Enforcement activity ended	-	(18)	(18)
Recoveries of amounts previously impaired or written off	-	(4)	(4)
Balance as at 31 December 2018	16	39	55
Charge for the year	24	-	24
Write-offs charged against the provision	-	(5)	(5)
Enforcement activity ended			-
Recoveries of amounts previously impaired or written off	(3)	(1)	(4)
Balance as at 31 December 2019	37	33	70

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

13 Trade and other receivables (cont'd)

Movements in the accumulated impairment losses on credit impaired accounts receivable of the Company and in the write-off were as follows:

	Company
	Impairment losses	Write off still subject to enforcement activity	Total
Balance as at 31 December 2017	35		35
Restatement according to application of IFRS 9	(28)	28	-
Charge for the year	27	-	27
Write-offs charged against the provision	(18)	18	-
Enforcement activity ended	-	(18)	(18)
Recoveries of amounts previously impaired or written off	-	(4)	(4)
Balance as at 31 December 2018	16	24	40
Charge for the year	19	-	19
Write-offs charged against the provision	-	(5)	(5)
Enforcement activity ended			-
Recoveries of amounts previously impaired or written off	(3)	(1)	(4)
Balance as at 31 December 2019	32	18	50

The credit quality of trade receivables of the Group can be assessed on the ageing analysis disclosed below:

	Group
	Current	Less than 30 days	30–90 days	90–180 days	More than 180 days	Credit impaired	Total
As at 31 December 2019
Trade receivables net of write off	225	41	15	3	-	41	325
Accrued lease income	100	-	-	-	-	-	100
Expected credit losses	-	-	-	-	-	- 37	(37)
Trade and other receivable net of expected credit losses	325	41	15	3	-	4	388
As at 31 December 2018
Trade receivables, gross	204	60	13	3	-	23	303
Accrued lease income	64	-	-	-	-	-	64
Expected credit losses	-	-	-	-	-	(16)	(16)
Trade and other receivable net of expected credit losses	268	60	13	3	-	7	351

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

13 Trade and other receivables (cont'd)

The credit quality of trade receivables of the Company can be assessed on the ageing analysis disclosed below:

	Company
	Current	Less than 30 days	30–90 days	90–180 days	More than 180 days	Credit impaired	Total
As at 31 December 2019
Trade receivables net of write off	93	30	10	1	-	36	170
Accrued lease income	100	-	-	-	-	-	100
Expected credit losses	-	-	-	-	-	- 32	- 32
Trade and other receivable net of expected credit losses	193	30	10	1	-	4	238
As at 31 December 2018
Trade receivables, gross	78	52	74	2	-	23	229
Accrued lease income	64	-	-	-	-	-	64
Expected credit losses	-	-	-	-	-	(16)	(16)
Trade and other receivable net of expected credit losses	142	52	74	2	-	7	277

The impairment losses for not credit impaired trade receivables is not recognised, because it is immaterial. As at 31 December 2019 and 2018 most of trade receivables were secured by advances received from tenants.

The ageing analysis of the credit impaired trade receivables of Group and the Company disclosed below:

	Current	Less than 30 days	30–90 days	90–180 days	More than 180 days	Total
Trade receivables net of write off as at 31 December 2019	-	-	5	1	17	23
Trade receivables net of write off as at 1 January 2019	-	-	5	1	17	23

14 Share capital and reserves

As at 31 December 2019 and 31 December 2018 the Company's and the Group's share capital was divided into 13,150,000 ordinary registered shares with the nominal value of EUR 1.45 each. All the shares of the Company were fully paid.

Changes during 2019

On 26 April 2019 EUR the annual general meeting has decided to transfer from retained earnings EUR 169 thousand to the legal reserve and EUR 704 thousand the reserves for own shares acquisition.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

14 Share capital and reserves (cont'd)

Changes during 2018

On 26 March 2018 EUR the annual general meeting has decided to transfer from retained earnings EUR 189 thousand to the legal reserve.

Legal reserve

Legal reserve is a compulsory reserve under Lithuanian legislation. Annual transfers of not less than 5 % of net profit, calculated in accordance with the statutory financial statements, are compulsory until the reserve reaches 10 % of the share capital. The reserve can be used only to cover the accumulated losses.

Reserve for the acquisition of own shares

Reserve for the acquisition of own shares is formed for the purpose of buying own shares in order to keep their liquidity and manage price fluctuations. It can be formed by shareholders' decision at the Annual Shareholders Meeting from the profit available for distribution. The reserve cannot be used to increase the share capital. The reserve does not change when Company acquires own shares, but is utilised when own shares are cancelled. The shareholders can decide to transfer unused amounts of the reserve back to retained earnings at the Annual Shareholders Meeting.

15 Dividends

Payment of dividends of EUR 0.13 per share and total dividends of EUR 1,710 thousand in respect of the year ended 31 December 2017 was approved at the Annual General Meeting of Shareholders on 26 March 2018.

Payment of dividends of EUR 0.13 per share and total dividends of EUR 1,710 thousand in respect of the year ended 31 December 2018 was approved at the Annual General Meeting of Shareholders on 26 April 2019.

16 Borrowings

	Group		Company
	2019	2 018	2 019	2 018
Non-current:
Non-current bank borrowings	22,235	21,757	22,235	19,877
Non-current other borrowings	5	5	-	-
	22,240	21,762	22,235	19,877
Current:
Current portion of non-current borrowings	2,520	863	637	634
Borrowings from related parties	1,506	-	1,506	-
	4,026	863	2,143	634
Total borrowings	26,266	22,625	24,378	20,511

All borrowings are expressed in EUR.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

16 Borrowings (Cont'd)

Borrowings with fixed or floating interest rate (with changes in 3 and 6 months period) were as follows: Interest rate type: Group Company

	2019	2 018	2 019	2 018
Fixed	1,511	5	1,506	-
Floating	24,755	22,620	22,872	20,511
	26,266	22,625	24,378	20,511

The carrying amounts of assets pledged to the banks to secure the repayment of borrowings are as follows:

	Group		Company
	2019	2 018	2 019	2 018
Investment properties (Note 11)	71,298	57,784	62,897	49,602
Property, plant and equipment	1	2	-	-
Trade receivables	1	-	-	-
Prepayments	2	2	-	-
Deposits/other receivables	150	150	-	-
Cash	770	539	413	384

The shares of SIA Dommo Grupa and SIA Dommo Bizness parks are pledged to the bank in Latvia.

Weighted average effective interest rates of borrowings for the period:

			Company
2019	2 018	2 019	2 018
1.98%	2.05%		2.05%
		Group

As at 31 December 2019 and 2018 all Group entities have complied with bank loan covenants.

On 10 April 2018 the Group/the Company has signed additional amendment to the borrowing agreement with AB Šiaulių bankas. According to the amendment the new credit limit of EUR 23,926 thousand was set. It consists of two parts. The first part amounts to EUR 22,926 thousand and could be disbursed until 31 May 2019. The second part is a credit line of EUR 1,000 thousand, which could be disbursed until 22 December 2022. Furthermore, the settlement schedule and interest rate were changed. In 2018 the Group/the Company had to repay the amount of EUR 575 thousand instead of EUR 447 thousand. In 2018 the Group/the Company has disbursed EUR 2,668 thousand of borrowing to settle liabilities. In May 2019 the Group/Company used remaining part of the first loan (EUR 2,023 thousand). As at 31 December 2019 the Group/Company has used EUR 935 thousand of credit line. During 2018 the Group/Company has repaid EUR 800 thousand to a subsidiary of AB Invalda INVL. In November 2019 AB Invalda INVL has granted loan of EUR 1,500 thousand to the Company. The initially maturity of borrowings was 31 January 2020, which was extended until 31 March 2020. The borrowing was repaid on 9 March 2020.

After acquisition of Latvian entities on 15 July 2015 the Group has signed borrowings agreement with ABLV Bank, AS for financing Latvian entities in amount of EUR 3,000 thousand. The term of the agreement is 5 years According to the agreement amount of EUR 150 thousand was deposited to secure borrowing.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

16 Borrowings (cont'd)

On 23 February 2018 the Board of the Financial and Capital Market Commission in Latvia adopted a decision on the unavailability of deposits at ABLV Bank, AS. On 12 September 2018 it was announced that the Financial and Capital Market Commission has approved ABLV Bank, AS voluntary liquidation. The cash on the current account on ABLV Bank, AS was used for repayment of borrowing from ABLV Bank, AS. In 2018 EUR 45 thousand of deposit placed on the ABLV Bank, AS was used for repayment of the borrowing. According to borrowing agreement in April 2018 the deposit was restored to EUR 150 thousand by transfer cash from other bank. Because ABLV Bank, AS ceased to be bank after voluntary liquidation process was approved, the previous deposit became as other receivables from ABLV Bank, AS. They comprise legally from three part:

• the Group claim of EUR 5 thousand from ABLV Bank, AS in liquidation process;
• blocked guaranteed compensation of EUR 100 thousand according to Latvian deposit insurance systems;
• the Group owned funds of EUR 45 thousand in possession of the ABLV Bank, AS (restored amount of deposits).
• The other receivables could be paid to the Group only after borrowing to ABLV Bank, AS would be settled in full.

Changes in liabilities arising from financing activities are presented in the table below:

		Group	Company
	Borrowings and lease liabilities	Dividends payable (Note 15, 17)	Borrowings and lease liabilities	Dividends payable (Note 15, 17)
As at 31 December 2017	21,681	32	19,220	32
Cash flows from (to) financing activities	482	(1,675)	877	(1,675)
Interest expenses (Note 8)	462	-	414	-
Approved dividends	-	1,710	-	1,710
As at 31 December 2018	22,625	67	20,511	67
Cash flows from (to) financing activities	2,952	(1,662)	3,220	(1,662)
Impact of IFRS 16 (recognition of lease liabilities)	1,321		1,321
Interest expenses (Note 8)	496		454
Increase of lease liabilities recalculation due to indexation	25		25
Approved dividends	-	1,710	,	1,710
As at 31 December 2019	27,419	115	25,531	115

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

17 Other current liabilities

Other current liabilities are presented in the table below:

	Group		Company
	2019	2018	2019	2018
Financial liabilities
Dividends payable	115	67	115	67
Performance Fee (Note 7, 2.22)	-	-	-	-
Other amounts payable	305	37	297	27
	420	104	412	94
Non – financial liabilities
Salaries and social security contributions payable	19	10	0	-
Tax payable	102	161	92	146
	121	171	92	146
Total other current liabilities	541	275	504	240

18 Related party transactions

The related parties of the Group were the shareholders of the Company, who have significance influence (note 1), key management personnel, including companies under control or joint control of key management and shareholders having significant influence. AB Invalda INVL and the entities controlled by AB Invalda INVL (hereinafter the Other related parties) are also considered to be related parties, because the shareholders of the Company, having significance influence, also have a joint control over AB Invalda INVL group through shareholders' agreement.

The Group's transactions with related parties during 2019 and related balances as at 31 December 2019 were as follows:

Group	2019	Revenue and other income from related parties	Purchases (including provision) and interest from related parties	Receivables from related parties	Payables to related parties (excluding provision)
AB Invalda INVL (accounting services)		-	15	-	-
Other related parties (borrowings)		-	6	-	1,506
Other related parties (maintenance and repair services)		-	407	-	40
Other related parties (rent, utilities and other)		340	6	6	-
Other related parties (management services provided by the Management Company)		-	2,245	-	27
		340	2,679	6	1,573

In November 2019 AB Invalda INVL has granted loan of EUR 1,500 thousand to the Company. The initially maturity of borrowings was 31 January 2020, which was extended until 31 March 2020. The borrowing was repaid on 9 March 2020. Effective interest rate – 4.5%.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

18 Related party transactions (cont'd)

The Group's transactions with related parties during 2018 and related balances as at 31 December 2018 were as follows:

	2018	Revenue and other income from related parties	Purchases (including provision) and interest from related parties	Receivables from related parties	Payables to related parties (excluding provision)
Group
AB Invalda INVL (accounting services)		-	15	-	7
Other related parties (borrowings)		-	7	-	-
Other related parties (maintenance and repair services)		-	460	-	23
Other related parties (rent, utilities and other)		313	7	6	-
Other related parties (management services provided by the Management Company)		-	391	-	23
		313	880	6	53

The Company's related parties are the subsidiaries, shareholders (Note 1), which have significance influence, key management personnel and companies under control or joint control of key management and shareholders with significant influence. AB Invalda INVL and the entities controlled by AB Invalda INVL (hereinafter the Other related parties) are also considered to be related parties, because the shareholders of the Company, having significance influence, also have a joint control over AB Invalda INVL group through shareholders' agreement.

Transactions of the Company with subsidiaries in 2019 and balances as at 31 December 2019 were as follows:

	2019	Revenue and other income from related parties	Purchases and interest from related parties	Receivables from related parties	Payables to related parties
Company
Loans to subsidiaries Other		- -	- 378	7,591 -	- 15
		-	378	7,591	15

Loans granted to Latvian entities are subordinate to the bank borrowings and can be repaid only upon maturity of the bank borrowings in 2020. The repayment date of the loans granted to subsidiaries in Lithuania is 31 December 2020. As described in Note 2.8, the Company measured the loans granted to subsidiaries at fair value and did not recognise interest income separately.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

18 Related party transactions (cont'd)

Transactions of the Company with subsidiaries in 2018 and balances as at 31 December 2018 were as follows:

	2018	Revenue and other income from related parties	Purchases and interest from related parties	Receivables from related parties	Payables to related parties
Company
Loans to subsidiaries		-	-	6,454	-
Other		-	395	61	42
		-	395	6,515	42

Loans granted to Latvian entities are subordinate to the bank borrowings and can be repaid only upon maturity of the bank borrowings in 2020. The repayment date of the loans granted to subsidiaries in Lithuania is 31 December 2019. As described in Note 2.8, the Company measured the loans granted to subsidiaries at fair value and did not recognise interest income separately.

The Company's transactions with other related parties during 2019 and related balances as at 31 December 2019 were as follows:

2019	Revenue and other income from related parties	Purchases (including provision) and interest from related parties	Receivables from related parties	Payables to related parties (excluding provision)
Company
AB Invalda INVL (accounting services)	-	7	-	-
Other related parties (borrowings)	-	6	-	1,506
Other related parties (maintenance and repair services)	-	122	-	27
Other related parties (rent, utilities and other)	279	-	-	-
Other related parties (management services provided by the Management Company )	-	2,244	-	-
	279	2,379	-	1,533

In November 2019 AB Invalda INVL has granted loan of EUR 1,500 thousand to the Company. The initially maturity of borrowings was 31 January 2020, which was extended until 31 March 2020. The borrowing was repaid on 9 March 2020. Effective interest rate – 4.5%.

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

18 Related party transactions (cont'd)

The Company's transactions with other related parties during 2018 and related balances as at 31 December 2018 were as follows:

	2018	Revenue and other income from related parties	Purchases (including provision) and interest from related parties	Receivables from related parties	Payables to related parties (excluding provision)
Company
AB Invalda INVL (accounting services)		-	8	-	-
Other related parties (borrowings)		-	7	-	-
Other related parties (maintenance and repair services)		-	225	-	4
Other related parties (rent, utilities and other)		262	-	-	-
Other related parties (management services provided by the Management Company)		-	391	-	23
		262	631	-	27

The movements of borrowings from AB Invalda INVL and its subsidiaries were:

	Group		Company
	2019	2 018	2 019	2 018
At 1 January	-	801	-	801
Borrowings received during the year	1,500	-	1,500	-
Borrowings repaid during the year	-	(800)	-	(800)
Interest charged	6	7	6	7
Interest paid	-	(8)	-	(8)
At 31 December	1,506	-	1,506	-

The movements of loans granted to subsidiaries of the Group were:

		Company
	2019	2 018
At 1 January	6,454	5,769
Loans granted during year	310	10
Loans repayment received	-	-
Changes in fair value of loans granted	827	675
Interest received	-	-
At 31 December	7,591	6,454

CONSOLIDATED AND COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

(all amounts are in EUR thousand unless otherwise stated)

18 Related party transactions (cont'd)

The management remuneration contains short-term employee benefits. Key management of the Company and the Group includes the Management Company and member of Investment Committee.

	Group		Company
	2019	2 018	2 019	2 018
Wages, salaries and bonuses	1	1	-	-
Social security contributions	-	-	-	-
Management Fee (Note 2.12)	331	307	331	307
Performance Fee (Note 2.12) (change in provision)	1,913	84	1,913	84
Total key management compensation	2,245	392	2,244	391

There were no loans granted to key management during the reporting period or outstanding at the end of the reporting period.

During 2019 the Company paid to AB Invalda INVL EUR 551 thousand of dividends, net of tax, and paid to other shareholders, who have significance influence, EUR 692 thousand of dividends, net of tax.

During 2018 the Company paid to AB Invalda INVL EUR 551 thousand of dividends, net of tax, and paid to other shareholders, who have significance influence, EUR 692 thousand of dividends, net of tax.

19 Events after the reporting period

Sale of IBC business center and repayment of borrowings

On 6 March 2020 the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius was sold to the closed-end investment fund for informed investors Lords LB Baltic Green Fund (V), which is managed by Lords LB Asset Management UAB. The real estate at the address Kalvarijų Street 11a belonging to the INVL Baltic Real Estate company Rovelija was also sold. The value of the transaction was EUR 33 million. The assets related to the sale transaction has been valued based on the sales price in these financial statements (see note 11). EUR 5.7 million of the transaction amount will be directed to the repayment of Group borrowings.

Dividends

A dividend in respect of the year ended 31 December 2019 of EUR 1.55 per share, amounting to a total dividend of EUR 20,382.5 thousand, is to be proposed at the annual general meeting for the year of 2019. These financial statements do not reflect this dividend payable.

The potential impact of COVID-19 virus on the Group and the Company

The spread of COVID-19 and resulting slow down of economy may reduce the rental income but the management considers that effect would not be material. Currently it is difficult to quantify a potential effect. The Group and the Company will have sufficient resources to fulfil its obligations. The management function of the Company and the Group performed by INVL Asset Management UAB should not be negatively effected by these events.

The special closed-ended type real estate investment company INVL Baltic Real Estate, Consolidated Annual Report for the year of 2019

Translation note:

This version of the Consolidated Annual Report for the year of 2019 is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version takes precedence over this translation.

CONTENTS:

	3
I.	GENERAL INFORMATION 77
1	Legal basis for preparation of the Annual Consolidated Report and content of information 77
2	Reporting period for which the report is prepared 77
3	General information about the Issuer and other companies comprising the Issuer's group 77
	3.1. Information about the Issuer 77
	3.2. Information on company's goals and strategy78
	3.3. Information about the Issuer's group of companies78
	3.3.1. Real estate objects owned by group companies in Vilnius (Lithuania)79
	Investments in real estate 79
	3.3.2. Real estate objects owned by group companies in Riga (Latvia) 86
	II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS 88
4	Overview of the Issuer and its group activity 88
	4.1. Comment made by INVL Asset Management real estate fund manager Vytautas Bakšinskas 88
	4.2. Operational environment 88
	4.3. Results of INVL Baltic Real Estate 89
	4.4. Financial ratios* 90
	4.5. Key figures of INVL Baltic Real Estate 91
	4.6. Net Asset value of INVL Baltic Real Estate 91
	4.7. Significant Issuer's and its group events during the reporting period, effect on the financial statement92
	4.7.1. Significant Issuer's events92
	MANAGEMENT OF THE COMPANY 92
	GENERAL SHAREHOLDERS MEETINGS 92
	INFORMATION RELATED TO THE ALLOCATION OF DIVIDENDS93
	FINANCIAL INFORMATION 93
	Investments 94
	4.7.2. Sigificant group's events 94
	5 Significant events of the Issuer and its group since the end of the financial year95
6	Estimation of Issuer's and Group's activity last year and activity plans and forecasts95
	6.1. Evaluation of implementation of goals for 2019 95
	6.2. Activity plans and forecasts95
	III. INFORMATION ABOUT SECURITIES 96
7	The order of amendment of Issuer's Articles of Association 96
8	Structure of the authorized capital 96
	8.1. Share capital changes 96

		8.2. Information about the Issuer's treasury shares 96
9		Trading in Issuer's securities as well as securities, which are deemed to be a significant financial investment to the Issuer on a regulated market 96
	10	Shareholders100
		10.1. Information about company's shareholders100
		10.2. Rights and obligations carried by the shares 101
		10.2.1. Rights of the shareholders101
		10.2.2. Obligations of the shareholders 102
	11	Dividends 102
		IV. ISSUER'S MANAGING BODIES104
	12	Structure, authorities, the procedure for appointment and replacement 104
		12.1. General Shareholders' Meeting104
		12.1.1. Powers of the General Shareholders' Meeting 104
		12.1.2. Convocation of the General Shareholders' Meeting of INVL Baltic Real Estate 105
		12.2. Management company and the Investment Committee 107
	13	Information about members of the Board of the Management Company, general manager and members of the Investment Committee109
		13.1. The issuer's management bodies 109
	14	Information about the Audit Committee of the company113
		14.1. Procedure of work of the audit committee113
		14.2. Members of the Audit Committee114
	15	Information on the Issuer's payable management fee, the amounts calculated by the Issuer, other assets transferred and guarantees granted to the Managing bodies and company providing accounting services115
		V. OTHER INFORMATION 116
	16	Agreements with intermediaries on public trading in securities 116
	17	Information on Issuer's branches and representative offices116
	18	A description of the principal risks and uncertainties 116
		18.1. General Risk Factors in the Business Field Where the Group Operates116
		18.2. Risk Factors Characteristic of the Group 117
		18.3. Risk Factors Related to the Company's Shares (investments thereto)119
		18.4. Information about the extent of risk and its management in the Company 120
		18.5. The most Important risk factors during the reporting period 120
		18.6. The main indications about internal control and risk management systems related to the preparation of consolidated financial statements 120
	19	Issuer's and its group companies' non – financial results. Information related to social responsibility. environment
		and employees121
		19.1. Responsible business actions in the company 121
		19.2. Employees121
		19.3. Environmental Protection 121
	20	Information about agreements of the Company and its managing bodies, members of the formed committees, or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated in view of the change of the control of the Company121
	21	Significant investments made during the reporting period 121

22	Information about significant agreements to which the issuer is a party, which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder122
23	Information on the related parties' transactions 122
24	Information on harmful transactions in which the issuer is a party123
25	References to and additional explanations of the data presented in the annual financial statements and consolidated financial statements123
26	Information on Audit Company123
27	Data on the publicly disclosed information 124
	APPENDIX 1. INFORMATION ABOUT GROUP COMPANIES, THEIR CONTACT DETAILS 129
	APPENDIX 2. CORPORATE GOVERNANCE CODE 130
	APPENDIX 3. COMPANY'S MANAGEMENT REPORT 145
	APPENDIX 4. COMPANY'S OPERATING AND FINANCIAL INDICATOR FORMULAS AND DEFINITIONS151

I. GENERAL INFORMATION

1 Legal basis for preparation of the Annual Consolidated Report and content of information

The Annual Consolidated Report of the public joint-stock company Special closed-ended type real estate investment company "INVL Baltic Real Estate" (hereinafter may be reffered as the Company or INVL Baltic Real Estate) has been prepared by the Company in accordance with the Lithuanian Law on Securities of the Republic of Lithuania, the Law on Companies of the Republic of Lithuania, the Rules on the Disclosure of Information and the Guidelines on the Disclosure of Information approved by the Board of the Bank of Lithuania. The content of the consolidated annual report is disclosed according to Law on Consolidated Financial Statements of Enterprises of the Republic of Lithuania and Law on Corporate Financial Reporting of the Republic of Lithuania.

The Company informs that after evaluating the Information Disclosure Rules approved by the Bank of Lithuania and Guidelines for Non-Financial Reporting (Methodology for Providing Non-Financial Information), the information disclosing information about the Company presented in this Annual Report is divided into five (V) sections. These sections discloses information on Company's securities, the Management of the Company, the Company's and the Group's activities and other information, that Company's Management values as important to disclose. The Company notes that the information presented in the Annual Report is relevant for understanding the Company's performance, condition and impact of operations.

2 Reporting period for which the report is prepared

The report covers the financial period of INVL Baltic Real Estate, starting from 1 January 2019 and ending on 31 December 2019. The report also discloses information from the end of the reporting period to the release of the report. The report was audited.

3 General information about the Issuer and other companies comprising the Issuer's group

3.1. INFORMATION ABOUT THE ISSUER

Name	Special closed-ended type real estate investment company "INVL Baltic Real Estate"
Code	152105644
Registration address	Gynėjų str. 14, 01109, Vilnius, Lithuania
Telephone	+370 5 279 0601
Fax	+370 5 279 0530
E-mail	breinfo@invl.com
Website	www.invlbalticrealestate.lt
LEI code	529900GSTEOHKA0R1M59
Legal form	joint-stock company
Company type	special closed-ended type real estate investment company
Date and place of registration	28 January 1997; Register of Legal Entities
Date of the Supervisory authority approval of collective investment entity formation documents	22 December 2016
Register in which data about the Company are accumulated and stored	Register of Legal Entities
Management company	INVL Asset Management, UAB, code 126263073, licence No. VĮK-005
Depository	SEB bankas, AB, code 112021238, bank licence No. 2

3.2. INFORMATION ON COMPANY'S GOALS AND STRATEGY

INVL Baltic Real Estate – real estate investment company that was founded on 28 January 1997, former name – Invaldos Nekilnojamo Turto Fondas, AB. On 17 August 2015 the Company was merged with its parent company; therefore the Company took over all its rights and obligations.

On 22 December 2016 the Bank of Lithuania issued the closed-ended type investment company operating license enabling INVL Baltic Real Estate to engage in the closed-ended type investment company's activities under the Law of the Republic of Lithuania Collective Investment Undertakings. The special closed-ended type real estate investment company will operate 30 years from receiving the special closed-ended real estate investment company license, the term of company's activity may be further extended for a period of no longer than 20 years. Upon receipt of the license, the company's management was transferred to the Management company INVL Asset Management (hereinafter – the Management company). The rights and duties of the Board and the head of the Company were also transferred to the Management company.

According to the Articles of Association of the Company, the Management company formed an Investment Committee, which based on powers vested by the Management company, also participates in the management of the Company.

INVL Baltic Real Estate seeks to ensure the growth of rental income and earn from investments in commercial real estate. The companies owned by INVL Baltic Real Estate have invested in commercial real estate: business centers, manufacturing and warehouse properties at strategically attractive locations in Lithuania and Latvia. All the properties are characterized by high occupancy rates and generate stable financial flows. In addition, most of them has further development potential.

INVL Baltic Real Estate shares have been listed on Nasdaq Vilnius Baltic Secondary trading list since 4 June 2014. Since the start of trading until the end of the reporting period the share price of INVL Baltic Real Estate on the Nasdaq Vilnius exchange has risen 84%. The company has approved a Dividend Payment policy which stipulates the annual payment of dividend per share of no less than EUR 0.13.

3.3. INFORMATION ABOUT THE ISSUER'S GROUP OF COMPANIES

Companies of INVL Baltic Real Estate - the structure of the group companies is disclosed below – at the end of the reporting period the group owned 7 real estate properties in Vilnius and Riga. At the moment of the release of the report the Company owns 4 real estate properties in Vilnius and Riga. The amount of owned real estate properties reduced due to the sale of IBC business centre located at A Juozapaviciaus str. and Seimyniskiu str. in Vilnius.

Fig. 3.3.1. Simplified group structure of INVL Baltic Real Estate as of 31 December 2019.

3.3.1. REAL ESTATE OBJECTS OWNED BY GROUP COMPANIES IN VILNIUS (LITHUANIA)

Fig. 3.3.2. Real estate objects owned by group companies of INVL Baltic Real Estate in Vilnius (Lithuania)

INVESTMENTS IN REAL ESTATE

Vilnius Gates is an excellent choice for those who value the chance to work in the very centre of the capital city, right beside Vilnius's main street – Gedimino Avenue – and one of the city's key transport arteries – Geležinio Vilko Street.

Renovated and reorganised, this business centre in an exclusive urban area is now even more luminous and convenient. Flexible planning of space and the option of a separate entrance just for your company ensure a sense of comfort and distinctiveness.

INVL Baltic Real Estate owns two floors of premises in this complex – they start from the playful inverted glass frustum edifice with a restaurant on the ground floor and continue along Gynėjų Street, also 56 parking spaces in the underground area. The Company acquired the premises at the end of 2015.

VILNIUS GATES BUSINESS CENTRE

AREA 8,100 SQ.M.

The full Vilnius Gates complex comprises more than 53 thousand sq. m. of varied-use premises, making it a highly attractive location for restaurants and providers of healthcare, fitness and other services. It's an ideal setting for service centres, creative agencies, providers of financial and legal services, IT firms and startups.

For more information please visit www.vvartai.lt.

Basic information
Total area	8,100 sq. m
Leased area	7,100 sq. m
Land area	0.26 ha
Property market value at the end of 2019	EUR 15.3 million
Occupancy at the end of 2019	98 percent

Main tenants: INVL Asset Management, BAIP, Etronika, Rockit, restaurant Stebuklai, Go Vilnius.

Address Gyneju str. 14, Vilnius

2019 ANNUAL REPORT | 80

IBC class A and B business centres at Seimyniskiu str. 1a, Seimyniskiu str. 3, A.Juozapaviciaus str. 6, Slucko str. 2 in Vilnius*

* After the reporting period INVL Baltic Real Estate announced that on 6 March 2020 a real estate sale transaction was completed with the subsidiary companies Juozapavičiaus 6 UAB and Ateira UAB of the closed-end investment fund for informed investors Lords LB Baltic Green Fund (V), which is managed by Lords LB Asset Management UAB, regarding the sale of the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius which the Company owns. Also sold was real estate at the address Kalvarijų Street 11a belonging to the INVL Baltic Real Estate company Rovelija. Transaction value – EUR 33 million. For further information please visit Company's web site (Section For investors News). Link: https://bre.invl.com/lit/en/naujienu-centras).

At the end of the reporting period IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius was a part of Company's real estate portfolio. In the table below the Company provides information as of 31th December 2019.

IBC Business Centre – a versatile, functional business premises complex. IBC is located in a very convenient location – on the right bank of the Neris River in the central part of Vilnius, situated near important public institutions and businesses, at the main business artery in the Constitution Avenue, therefore is easily and quickly accessible from any place in Vilnius.

IBC CLASS A BUSINESS CENTRE*

AREA 11,300 SQ.M.

IBC Class A business centre consists of two buildings, in which about 7,100 sq. m. are being leased (the total area of buildings – 11,400 sq. m).

The centre owns 250 spots parking lot in the protected courtyard, also in the two-storey covered and underground garages.

IBC Business Centre is being constantly developed, more and more services are offered each year.

Block F basic information
Total area	4,500 sq. m
Leased area	3,800 sq. m
Land area	1.47 ha (total area of the IBC complex)
Occupancy at the end of 2019	100 percent

Block G basic information
Total area	6,900 sq. m
Leased area	3,400 sq. m
Land area	1,47 ha (total area of the IBC complex)
Occupancy at the end of 2019	100 percent

Main tenants: IBM Lietuva, Šiaulių bankas, Amber Food, Drogas, Sportland.

Address: Seimyniskiu str. 1a, Seimyniskiu str. 3, Juozapaviciaus str. 6, Vilnius.

IBC CLASS B BUSINESS CENTRE*

AREA 11,300 SQ.M

IBC Class B business centre consists of 4 buildings, in which about 10,300 sq. m of different purpose premises are being leased (the total area of buildings – 11,300 sq. m).

The centre owns 200 spots parking lot in the protected courtyard.

The IBC business centre has a development opportunity, detailed plan of the area is prepared.

Block A basic information
Total area	2,100 sq. m
Leased area	1,900 sq. m
Land area	1.47 ha (total area of the IBC complex)
Occupancy at the end of 2019	100 percent
Block B basic information
Total area	7,400 sq. m
Leased area	6,900 sq. m
Land area	1.47 ha (total area of the IBC complex)
Occupancy at the end of 2019	92 percent
Block C basic information
Total area	200 sq. m
Leased area	200 sq. m
Land area	1.47 ha (total area of the IBC complex)
Occupancy at the end of 2019	100 percent

2019 ANNUAL REPORT | 83

Block D basic information
Total area	1,600 sq. m
Leased area	1,400 sq. m
Land area	1.47 ha (total area of the IBC complex)
Occupancy at the end of 2019	95 percent

Main tenants: Sanofi-aventis Lietuva, ACNielsen Baltics, Sandoz Pharmaceuticals. Address: Seimyniskiu str. 3, Seimyniskiu str. 3a, Juozapaviciaus str. 6, Slucko str. 2, Vilnius.

* After the reporting period INVL Baltic Real Estate announced that on 6 March 2020 a real estate sale transaction was completed with the subsidiary companies Juozapavičiaus 6 UAB and Ateira UAB of the closed-end investment fund for informed investors Lords LB Baltic Green Fund (V), which is managed by Lords LB Asset Management UAB, regarding the sale of the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius which the Company owns. Also sold was real estate at the address Kalvarijų Street 11a belonging to the INVL Baltic Real Estate company Rovelija. Transaction value – EUR 33 million. For further information please visit Company's web site (Section For investors News). Link: https://bre.invl.com/lit/en/naujienu-centras).

At the end of the reporting period IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius was a part of Company's real estate portfolio. In the table below the Company provides information as of 31th December 2019.

OFFICE BUILDING IN THE CENTRE OF VILNIUS

AREA 9,800 SQ.M.

Business centre is located in one of the busiest places in the Old Town of Vilnius, between Vilnius, Pamenkalnio, Islandijos and Palangos streets.

Vilnius Old Town - one of the most important components of the city and its centre, the oldest part of the city of Vilnius, situated on the left bank of the Neris River. Old Town area - protected and managed in accordance with the special heritage protection well, small business and residential function are being supported. There is a closed, guarded parking and underground garage in the area, convenient public transport access.

Radvilų Palace, Teacher's House, Lithuanian Technical Library, St. Catherine's Church and other cultural attractions, cafes, restaurants are located near the building.

Block A basic information
Total area	5,100 sq. m
Leased area	3,900 sq. m
Land area	0.49 ha (total area of the complex)
Property market value at the end of 2019	EUR 6.0 million
Occupancy at the end of 2019	99 percent (total complex occupancy)

Block B basic information
Total area	4,700 sq. m
Leased area	2,600 sq. m
Land area	0,49 ha (total area of the complex)
Property market value at the end of 2019	EUR 6.2 million
Occupancy at the end of 2019	99 percent (total complex occupancy)

Main tenants: TransferGo, Telia LT, restaurant Grill London, Uncle Sam's.

Address: Palangos str. 4/ Vilniaus str. 33, Vilnius.

Talent Garden Vilnius' opened on 12th December 2019 and was established on a campus of more than 2,000 sq. m. on Vilniaus Street (Vilniaus g. 33). The space is also host to the first Startup Museum in the country, a creation of Vilnius's tourism and development agency Go Vilnius. The campus features a total of over 230 workplaces, more than half of which are in private offices, as well as a 150-seat modern conference hall.

More about the project:https://talentgarden.org/

ŽYGIS BUSSINESS CENTRE

2019 ANNUAL REPORT | 85

AREA 3,200 SQ.M.

Zygio business centre – the yellow brick, authentic nineteenth century architecture, renovated office building, perfectly adapted to modern office activities.

The building stands in the Northern Town – in a strategically attractive, busy part of Vilnius, easily accessible by car and public transport.

Other commercial and business centres, banks, the State Tax Inspectorate, Social Insurance, Employment Exchange, medical clinics and various business services companies, attracting large flows of people, are located nearby.

Also, even four large shopping centres – Domus Gallery, Ogmios miestas, Hyper Rimi, Banginis-Senukai, are located near the business centre. Distance to the centre of Vilnius is about 3.5 km. 70 spots covered parking lot is installed next to the building.

Basic information

Total area	3,200 sq. m
Leased area	2,900 sq. m
Land area	0.4 ha
Property market value at the end of 2019	EUR 3.0 million
Occupancy at the end of 2019	67 percent

Main tenants: school "Žiniukas", Innoforce, Stuburo studija.

Address: J. Galvydzio str. 7 / Zygio str. 97, Vilnius.

Residential house at Kalvariju str. 11, Vilnius (Rovelija, UAB) *

The residential house is near the IBC complex area owned by INVL Baltic Real Estate. Rovelija, which is owned by INVL Baltic Real Estate, manages all apartments located in this building.

* After the reporting period INVL Baltic Real Estate announced that on 6 March 2020 a real estate sale transaction was completed with the subsidiary companies Juozapavičiaus 6 UAB and Ateira UAB of the closed-end investment fund for informed investors Lords LB Baltic Green Fund (V), which is managed by Lords LB Asset Management UAB, regarding the sale of the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius which the Company owns. Also sold was real estate at the address Kalvarijų Street 11a belonging to the INVL Baltic Real Estate company Rovelija. Transaction value – EUR 33 million. For further information please visit Company's web site (Section For investors News). Link: https://bre.invl.com/lit/en/naujienu-centras).

At the end of the reporting period IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius was a part of Company's real estate portfolio. In the table below the Company provides information as of 31th December 2019.

3.3.2. REAL ESTATE OBJECTS OWNED BY GROUP COMPANIES IN RIGA (LATVIA)

Fig. 3.3.3. Real estate objects owned by group companies of INVL Baltic Real Estate in Riga (Latvia)

DOMMO BUSINESS PARK MANUFACTURING, WAREHOUSE AND OFFICE COMPLEX

AREA 12,800 SQ.M.

2019 ANNUAL REPORT | 87

Dommo Business Park manufacturing/warehouse and office premises complex in Latvia.

The area is strategically well-located, to the right of Jelgava road, in front of the intersection with Jurmala - Tallinn bypass. Distance to the centre of Riga and the airport is 13 km, the port - 16 km.

The area is suitable for the development of logistics centres.

Basic information

Total area	12,800 sq. m
Leased area	12,800 sq. m
Land area	58.21 ha
Property market value at the end of 2019	EUR 8.4 million
Occupancy at the end of 2019	100 percent

Main tenant: Bohnenkamp, Tente, Rewico Baltikum, Flakt. Address: Stūnyši, Olaines region.

II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS

4 Overview of the Issuer and its group activity

4.1. COMMENT MADE BY INVL ASSET MANAGEMENT REAL ESTATE FUND MANAGER VYTAUTAS BAKŠINSKAS

The past year was a time of particularly successful growth for the company in pursuit of our goal of earning a return for investors regardless of the size of the assets held.

Thus it is highly gratifying that last year we not only ensured stable growth in leasing income and in the value of property holdings, but also, after announcing in December that negotiations were underway, in March of this year we completed a transaction for the sale of the IBC Business Centre. The properties sold in the transaction were valued on INVL Baltic Real Estate's balance sheet for the end of 2019 at the transaction price, as required by accounting standards. The impact of the transaction on INVL Baltic Real Estate's 2019 profit was EUR 7.6 million and its impact on the company's net asset value (NAV) per share was EUR 0.58.

INVL Baltic Real Estate's consolidated net operating income from its properties in 2019 was EUR 2.0 million, or 33% less than in 2018 (when it was EUR 3.0 million). That result was

significantly influenced by renovated premises, also at the IBC Business Centre, since those ongoing maintenance expenses were assessed as costs. INVL Baltic Real Estate's consolidated revenue for 2019 was EUR 5.90 million, or 1.3% more than in 2018 (EUR 5.82 million). Of that, consolidated leasing income from owned properties increased 2.6% to EUR 4.6 million.Last year also stood out for another new project – the opening of the Talent Garden Vilnius coworking space in the building at Vilnius Street 33, which completed the reconstruction works on the building at Palanga Street 4 / Vilnius Street 33.

In addition, the Vilnius Gates Business Centre continues to improve its results – its leasing income for the year rose to EUR 1.1 million, or 4.1% more than in 2018. The group's net profit for 2019 was EUR 10.4 million. The value of its property holdings increased by EUR 13.6 million (including a EUR 11.5 million revaluation) and at year-end was EUR 71.9 million, while its equity was EUR 44 million at the end of the year. Equity per share was EUR 3.35 and during the year increased 29% (also taking into account dividends that were paid during 2019).

Last year the IBC Business Centre, which is the largest of INVL Baltic Real Estate's properties, further maintained a high level of occupancy and increased its leasing income, which grew 4.7% from 2018 to EUR 2 million. Not only did we manage to successfully renew all planned lease agreements last year, but we also gave a lot of attention to the renewal of leased premises (enhancement, renewal and repair work was carried out on existing premises). In December 2019 we gave notification that negotiations were underway regarding the sale of this property – the transaction was completed in March and had a value of EUR 33 million.

Other properties owned by INVL Baltic Real Estate also showed high occupancy and improving performance indicators. We are pleased that our clients continue to remain loyal and trust INVL Baltic Real Estate as a reliable and long-term partner. In the coming year we will strive to further meet our clients' expectations and increase value for investors.

4.2. OPERATIONAL ENVIRONMENT

The year 2019 was particularly favourable for the Real Estate (hereinafter referred to as the RE) market. The low profitability of alternative traditional investment instruments had a significant impact on the RE attractiveness not only in the housing sector but also in the commercial property sector. Irrespective of the economic circumstances favourable to the RE market, each sector faces its own challenges. If property buyers are satisfied with a better financial return on the property, property developers borrow at an increasingly higher cost, which has a significant impact on the revision of initial development plans. The economic environment that is still favourable, the growing income of companies in the services sector and active development of international and local companies cause the office segment to remain highly dynamic and liquid.

In 2019, the construction of four business centres was completed in the capital city. They added 50,000 sq.m. of floor space available for lease to the market, i.e. half of the planned floor area. The development of some projects was delayed and, therefore, they will open their doors to the public only in 2020. In total, in 2020, the market should expand by approx. 150,000 sq.m. of leasable space, including the slightly delayed projects. At the end of the year, the vacancy of Class A business centres further decreased and makes up 2 %, which gives more confidence to the developers who are willing to offer more interesting projects to the market. The non-leased floor area of B1 business centres has, in principle, remained the same and since the last year it has slightly decreased, a little less than by 1 %, and it currently makes up 4 %. The occupancy rate of Class B2 business centres has remained the same and decreased only by 1 % over the last year. Although it is likely that the attractiveness of Class B2 business centres will decrease in the future but it would be too early to state that this process has already started. Traditionally, the strengths of Class B2 include not only a lower lease price but also the possibility of leasing premises with a smaller floor space. Over the last year, the number of co-working spaces offered for lease in the capital city has been increasing. Although they are significantly more expensive than Class A offices but the flexibility offered by coworking spaces in terms of floor space is acceptable to lessees, and this will make the situation of the lower class business centres in the competitive fight even harder. The lease prices in Vilnius have remained stable, the change is recorded in the Class B1 segment only, after the lower threshold price has increased. The price range of Class A business centres still stands at EUR 14–17/sq.m., B1 Class – EUR 11–14/sq.m., and Class B2 remained the same and amounts to EUR 7–10/sq.m.

In 2019, six business centres were opened in Kaunas and offered around 40,000 sq.m. of leasable space to the market. The opening of two projects was transferred into the year 2020. Currently, it is planned that another six business centres will be opened in 2020 and they will also offer to the market over 40,000 sq.m. Currently, the vacancy of Class A business centres accounts for 9 %, i.e. 1 % more than during the same period last year and 5 % more than in the middle of the year. Over the past 12 months, the vacancy of Class B1 premises grew from 9 % to 14 %, and the vacancy of Class B2 premises increased from 11 % to 14 %. Slightly more vacant premises did not have any major impact on the lease prices, and they remain unchanged. The price range of newly concluded contracts is EUR 12-14/sq.m. in Class A business centres, EUR 9–12/sq.m. in Class B1 business centres and EUR 6–9/sq.m. in Class B2 business centres.

The Klaipėda office market is still lagging behind, compared to the cities of Kaunas and Vilnius; however, the development plans are implemented without any delays there. As anticipated, one business centre, which offered the premises with a total area of 6,000 sq.m. for lease, was opened in 2019. The plans for the year 2020 remain the same – four business centres, 2 Class A and 2 Class B, with a total area of 10,000 sq.m. available for lease. However, the Klaipėda city stands out in terms of the most unused market potential of business centres; thus, the pace of development should be more rapid in the longer perspective. The moderate development of business centres had no significant impact on the occupancy rate of business centres. The occupancy rate of Class A business centres decreased and vacant premises account for 22 %, but the supply of premises of this class is not high and a few transactions can significantly change the situation. The vacancy of Class B1 premises has been constantly decreasing since the end of 2018. Currently, it makes up only 4 % and is around 1 % lower than in 2018. No significant changes have been recorded in the Class B2 segment, vacant spaces account approx. for 5 %, and since the last year they have decreased by 1 % as well. Over the year, the average lease prices in the Klaipėda-based Class A business centres fell by 10 %. Currently, such premises can be leased at the price of EUR 9–12/sq.m. It can be stated that the Class A business centres in the port city have started to directly compete with Class B1, where the lease price of premises makes up EUR 7–11/sq.m. More intense competition between the higher-class offices reduced the prices in the B2 segment in which the premises can be rented at the rate of EUR 5–7/sq.m.

In 2019, the Riga warehousing and logistics market was supplemented by the new warehousing spaces of approx. 70,000 sq.m. The plans for this year include the development of new spaces with a total area of 210,000 sq.m. The vacancy rate in Riga stood at 1.7 %, and the lease prices fluctuated within the range of EUR 3.5-4.7/sq.m. Sources:

https://www2.colliers.com/en-LV/Research/2019-Q4-Baltic-States-Real-Estate-Market-Review https://www.inreal.lt/file/1/6/7/9/Ekonomikosir-NT-rinkos-apzvalga-2019-2020%2CINREAL-Siauliu-bankas-COBALT\_2020-01-30\_compressed.pdf

	Group			Company
EUR million	01.01.2017 – 31.12.2017	01.01.2018 – 31.12.2018	01.01.2019 – 31.12.2019	01.01.2017 – 31.12.2017	01.01.2018 – 31.12.2018	01.01.2019 – 31.12.2019
Income (revenue)	6.20	5.82	5.90	5.72	4.31	4.21
rental income from owned premises	3.98	4.51	4.6	3.50	3.98	4.1
rental income from subleased premises	1.17	0.20	-	1.17	0.20	-
other revenue	1.05	1.11	1.3	1.05	0.13	0.1
Investment property revaluation***	2.33	1.47	11.50	2.27	1.38	11.21
Net operating income from owned properties*	2.68	3.03	2.03	-	-	-
Profit before tax***	3.58	3.17	10.40	3.78	3.37	10.62
Net profit***	3.58	3.17	10.42	3.78	3.37	10.63
Earnings per share**	EUR 0.27	EUR 0.24	EUR 0.79	EUR 0.29	EUR 0.26	EUR 0.81

4.3. RESULTS OF INVL BALTIC REAL ESTATE

*The Company publishes Alternative performance measures (AVR), that are in use of the Company, provides indicators definitions and calculation formulas. All the information is disclosed in the Company's web site section "For Investors" → "Financial information and reports" → "Formulas of performance indicators". The link is provided https://bre.invl.com/lit/en/for-investors/reports/formulas-of-performanceindicators. Also, for the convenience of investors, the Company provides AVR in Annex 4 to the Annual Report.

**Nominal value per share – EUR 1.45

*** The increase of the results was mainly influenced by the revaluation of the assets of IBC Business Center at its actual sale price dated 06-03-2020.

The consolidated income (revenue) of INVL Baltic Real Estate in 2019 amounted to EUR 5.9 million or 1.3 percent more than in 2018 (EUR 5.82 million), while consolidated operating income from own objects grew by 2.6 percent to EUR 4.6 million.

4.4. FINANCIAL RATIOS*

EUR million		Group		Company
	2017	2018	2019	2017	2018	2019
Return on Equity (ROE)**, %	11.02	9.16	26.27	11.86	9.86	26.92
Return on Assets (ROA)**, %	6.32	5.38	15.41	7.08	6.00	16.29
Debt ratio	0.42	0.41	0.42	0.39	0.39	0.40
Debt – Equity ratio	0.71	0.70	0.71	0.65	0.64	0.66
Gearing ratio	0.39	0.38	0.36	0.36	0.36	0.35
Liquidity ratio	0.51	0.80	0.38	0.42	0.74	0.34
Pre-tax profit margin**, %	57.67	54.52	176.39	66.07	78.29	252.08
Normalized operating profit, thousand EUR	2,048	2,194	1,280	1,663	1,776	945
Normalized operating profit margin, %	33.02	37.68	21.71	29.07	41.24	22.44
Borrowings to value of investment properties, %	38.5	38.8	36.5	-	-	-
Interest coverage ratio	4.34	4.75	2.72	-	-	-
Bank's debt service coverage ratio	1.71	1.59	0.99	-	-	-
Net profit margin**, %	57.67	54.43	176.75	66.08	78.29	252.36
Earnings per share (EPS)***, EUR	0.27	0.24	0.79	0.29	0.26	0.81
Price to earnings ratio (P/E)***	8.80	10.08	3.80	8.19	9.31	3.70

*The Company publishes Alternative performance measures (AVR), that are in use of the Company, provides indicators definitions and calculation formulas. All the information is disclosed in the Company's web site section "For Investors" → "Financial information and reports" → "Formulas of performance indicators". The link is provided https://bre.invl.com/lit/en/for-investors/reports/formulas-of-performance-

indicators. Also, for the convenience of investors, the Company provides AVR in Annex 4 to the Consolidated Annual Report.

** The increase of the results was mainly influenced by the revaluation of the assets of IBC Business Center at its actual sale price dated 06-03-2020.

***Nominal value per share – EUR 1.45.

4.5. KEY FIGURES OF INVL BALTIC REAL ESTATE

EUR million	Group			Company
	31.12.2017	31.12.2018	31.12.2019	31.12.2017	31.12.2018	31.12.2019
Managed common area	56,876 sq. m	56,876 sq. m	56,876 sq. m	43,800 sq. m	43,800 sq. m	43,800 sq. m
Managed rental area	46,276 sq. m	46,876 sq. m	47,176 sq. m	33,200 sq. m. 33,800 sq. m.		34,100 sq. m
The real estate value	56.34	58.30	71.88	47.83	49.70	63.0
Investments into subsidiaries (including loans granted to subsidiaries)	-	-	-	5.88	6.55	7.89
Long-term prepayment under the sublease agreement	0.10	0.10	-	0.10	0.10	-
Cash	0.41	0.73	1.04	0.22	0.45	0.46
Other assets	1.14	0.77	2.46	0.97	0.53	1.77
Assets	57.99	59.90	75.38	55.00	57.33	73.12
Equity	33.86	35.32	44.02	33.35	35.02	43.92
Borrowings from credit institutions	20.88	22.63	24.76	18.42	20.51	22.87
Borrowings from Invalda INVL group	0.80	-	1.51	0.80	-	1.51
Other payables	2.45	1.95	5.09	2.43	1.80	4.82
Total equity and liabilities	57.99	59.90	75.38	55.00	57.33	73.12
Total equity for one share*	EUR 2.57	EUR 2.69	EUR 3.35	-	-	-

*Nominal value per share – EUR 1.45.

4.6. NET ASSET VALUE OF INVL BALTIC REAL ESTATE

Date	Net asset value per share, EUR	Net asset value, EUR	Recalculated net asset value per share, EUR*	Allocated dividends per share, EUR*
30 11 2016**	0.4203	27,633,382	2.1014
31 12 2016	0.4726	31,072,202	2.3629
31 03 2017	0.4781	31,431,866	2.3903
30 06 2017	0.4838	31,811,344	2.4191	0.06
30 09 2017	0.4924	32,374,388	2.4619
31 12 2017	0.5150	33,860,074	2.5749
31 03 2018	2.4984	32,853,366	2.4984	0.13
30 06 2018	2.5900	34,058,027	2.5900
30 09 2018	2.6147	34,382,903	2.6147
31 12 2018	2.6859	35,319,397	2.6859
31 03 2019	2.7033	35,548,100	2.7033
30 06 2019	2.6850	35,307,971	2.6850	0.13
30 09 2019	2.7185	35,748,715	2.7185
31 12 2019	3,3479	44,024,833	3,3479

* Net asset value per share and allocated dividends are recalculated taking into account the changed nominal value per share (EUR 1.45). ** Initial net asset value per share: EUR 2.1014, reevaluated by the nominal value per share beeing EUR 1.45.

4.7. SIGNIFICANT ISSUER'S AND ITS GROUP EVENTS DURING THE REPORTING PERIOD, EFFECT ON THE FINANCIAL STATEMENT

4.7.1. SIGNIFICANT ISSUER'S EVENTS

MANAGEMENT OF THE COMPANY

• On 21th March 2019 the Company informs that the decision from the Director of the Supervision Service of the Bank of Lithuania on the amendment of the Company's regulatory activity form was received. The Company now is considered not to be operating on the basis of a license, but operating under the permission issued by the Bank of Lithuania. This decision of the Bank of Lithuania was adopted seeking to implement the new wording of the Collective Investment Undertakings Law that came into force on 1st February 2019.
• On 26th April 2019 the Company informs that on 26th April 2019 based on the resolutions of the Ordinary General Shareholders meeting the amendment of the Depository Services Agreement with AB SEB bankas was signed. The amendment was implemented to introduce to clearer separation of functions related to money laundering and terrorist financing prevention between the depositary service provider and the management company.
• On 21th May 2019 INVL Asset Management UAB, the Management Company of INVL Baltic Real Estate, has received the information from the Bank of Lithuania that it is being given a warning regarding process deficiencies in the provision of investment and investment fund management services and a fine of EUR 140 thousand for infringements relating to the distribution of mutual funds. It should be noted that this decision is not related to the areas of pension funds, alternative investments or the operations of INVL Baltic Real Estate
• On 6th June 2019 the Company informed that on 5th June 2019 a new wording of the Articles of Association of the special closed-ended type real estate investment company INVL Baltic Real Estate were registered in the Register of Legal Entities. Shareholders of the Company approved the draft Articles of Association on 26th April 2019, during the Ordinary General Shareholders meeting. The Articles of Association of the Company have been amended in order to comply with the relevant provisions of the legal acts regulating the activities of the Company - the Law on Companies of the Republic of Lithuania and the Law of the Republic of Lithuania on Collective Investment Undertakings.
• On 23th August 2019 the Company informed that the new version of the Law on Collective Investment Undertakings of the Republic of Lithuania (hereinafter - CIU) came into force. The Company operating under the CIU is under an obligation to have a valid prospectus (hereinafter - the Prospectus) prepared in accordance with the requirements of the CIU or of the Law on Securities of the Republic of Lithuania (hereinafter - LS). Taking into account that at the time of publication of the information there are no grounds that the Company should prepare and own a prospectus complying with the requirements of the LS, the Company in order to meet the said requirement, prepared a Prospectus in compliance with CIU. The Prospectus complies with the format and content requirements according to CIU. It is noted that INVL Asset Management UAB, the Management Company of INVL Baltic Real Estate approved the Prospectus and approved its publication.

GENERAL SHAREHOLDERS MEETINGS

• On 5th April 2019 the Company decided to propose to allocate a dividend of EUR 0.13 per share for the year 2018, during the General Shareholders meeting of the Company held on 26th April 2019 (the total amount of dividends allocation amount EUR 1.71 million). Also, the Company proposed to the shareholders to approve the amendments of the Articles of Association of the Company and the project of the new version of the Articles of Association during the General Shareholders meeting.
• On 5th April 2019 the Company announced about convocation of the General Shareholders Meeting on 26th April 2019. The Meeting was held at the premises of the Company, located at Gyneju str. 14, Vilnius. The draft agenda of the General Shareholders Meeting of INVL Baltic Real Estate was announced - including questions regarding presentation of the consolidated annual report for 2018 and independent auditor's report on the financial statements and consolidated annual report of the Company. Also, approval of the consolidated and stand-alone financial statements for 2018 and profit distribution of INVL Baltic Real Estate. The questions regarding approval of the Amendment of the Depository Services Agreement with AB SEB bankas and regarding the change of the Articles of Association and approval of the new wording of the Articles of Association and purchase of own shares.
• On 26th April 2019 it was announced about resolutions of the General Shareholders Meeting of INVL Baltic Real Estate. The shareholders of the Company was introduced with the consolidated annual report for 2018 and independent auditor's report on the financial statements and consolidated annual report of the Company. The

consolidated and stand-alone financial statements for 2018 and profit distribution (allocating EUR 0.13 dividend per share) of INVL Baltic Real Estate was approved as well. The shareholders also approved the Amendment of the Depository Services Agreement with AB SEB bank and the change of the Articles of Association and approved the new wording of the Articles of Association, also approved purchase of own shares.

• On 26th September 2019 the Company announced about convocation of the General Shareholders Meeting on 18th October 2019. The Meeting was held at the premises of the Company, located at Gyneju str. 14, Vilnius. The draft agenda of the General Shareholders Meeting of INVL Baltic Real Estate was announced - including questions regarding carrying out of the audit of the annual financial statements for 2019 financial and opinion on the annual report.
• On 18th October 2019 the Company announced about resolutions of the General Shareholders Meeting of INVL Baltic Real Estate about carrying out of the audit of the annual financial statements for 2019 financial and opinion on the annual report. UAB PricewaterhouseCoopers was elected as the auditor for the year 2019.

INFORMATION RELATED TO THE ALLOCATION OF DIVIDENDS

• On 23th May 2019 the Company in order to implement resolutions of the General Shareholders Meeting regarding allocation of Company's profit, announced the procedure for the payout of dividends for 2018. The General Shareholders Meeting of INVL Baltic Real Estate decided to allocate EUR 0.13 dividend per share. Dividends were paid to the shareholders who on 13th May 2019 were shareholders of the Company. The Company informed that the dividends will be allocated from 24th May 2019.

FINANCIAL INFORMATION

• On 28th February 2019 the Company announced unaudited results of INVL Baltic Real Estate group of 2018.
• On 18th March 2019 the Company announced the audited annual information for 2018 together with the Confirmation of the Responsible persons and factsheet. The unaudited consolidated net profit of INVL Baltic Real Estate group amounted to EUR 3.17 million, the revenue was EUR 5.82 million for the period of 2018 (for 12 months of 2017 consolidated net profit was EUR 3.58 million, revenue was EUR 6.20 million). The unaudited net profit of INVL Baltic Real Estate itself amounted to EUR 3,372 thousand for 12 months of 2018 and EUR 3,779 thousand for 12 months of 2017.
• On 18th March 2019 the Company announced that the net asset value of the Company amounted to EUR 35,319,397 or EUR 2.6859 per share on 31th December 2018.
• On 26th April 2019 the Company announced the audited annual information and the confirmation of responsible persons together with Audit Committee report of INVL Baltic Real Estate for the year 2018.
• On 30th April 2019 the Company announced the results for 3 months of 2019. Unaudited consolidated net profit of the INVL Baltic Real Estate group was EUR 0.24 milions, revenue was EUR 1.54 milions for 3 months of 2019 (for 3 months of 2018 consolidated net profit was EUR 0.70 milions, revenue was EUR 1.49 milions). The unaudited net profit of INVL Baltic Real Estate itself amounted to EUR 0.29 milions for 3 months of 2019 and EUR 0.75 milions for 3 months of 2018.
• On 30th April 2019 the Company announced that the net asset value of the Company amounted to EUR 35,548,100 or EUR 2.7033 per share on 31 March 2019.
• On 19th August 2019 the Company announced the results for 6 months of 2019. Unaudited consolidated net profit of the INVL Baltic Real Estate group was EUR 1.71 milions, revenue was EUR 2.98 milions for 6 months of 2019 (for 6 months of 2018 consolidated net profit was EUR 1.91 milions, revenue was EUR 2.92 milions). The unaudited net profit of INVL Baltic Real Estate itself amounted to EUR 1.81 milions for 6 months of 2019 and EUR 2.01 milions for 6 months of 2018.
• On 19h August 2019 the Company announced that the net asset value of the Company amounted to EUR 35,307,971 or EUR 2.6850 per share on 31 June 2019.
• On 31th October 2019 the Company announced the results for 9 months of 2019 Unaudited consolidated net profit of the INVL Baltic Real Estate group was EUR 2.1 milions, revenue was EUR 4.4 milions for 9 months of 2019 (for 9 months of 2018 consolidated net profit was EUR 2.2 milions, revenue was EUR 4.3 milions The unaudited net profit of INVL Baltic Real Estate itself amounted to EUR 2.3 milions for 9 months of 2019 and EUR 2.4 milions for 9 months of 2018.

• On 31th October 2019 the Company announced that the net asset value of the Company amounted to EUR 35,748, 715 or EUR 2.7185 per share on 30 September 2019.

2019 ANNUAL REPORT | 94

• On 16th December 2019 the Company announced investor's calendar for 2020. The Company plans to publish information to investors in 2020 in accordance with the following calendar: 18 March 20120 – interim information for 12 months of 2019; 30 April 2020 – Net Asset Value and factsheet for 3 months of 2020; 19 August 2020 – Net Asset Value and semi–annual report of 2020; 30 October 2020 – Net Asset Value and factsheet for 9 months of 2020.

INVESTMENTS

• On 30th April 2019 the Company announced that the preliminary agreement signed by Dommo Grupa, the company managed by the real estate investment company INVL Baltic Real Estate, regarding the sale of 20.6 hectares of land plots in Latvia was terminated on 30th April 2019.The preliminary agreement signed at the end of September 2018 was terminated due to the fact that the conditions stated in the agreement was not implemented. The terminated transaction will not affect indicators of INVL Baltic Real Estate's, the Company will continue to make the best use of assets managed in Latvia.
• On 28th June 2019 the Company announced that on 27th June 2019, the Investment Committee of the special closed-ended type real estate investment company INVL Baltic Real Estate made a decision on the signing of a franchise agreement between the Company's property administrator Proprietas UAB and Talent Garden. The Company notes that the signing of the agreement marks the start of a new operating segment for the Company – the creation and development of coworking space, for that space choosing a building on Vilniaus Street (at the address Vilniaus St. 33) which is part of INVL Baltic Real Estate's portfolio.
• On 12th December 2019 the Company announced that opend coworking network Talent Garden Vilnius operates on a campus of more than 2,000 sq. m. on Vilnaus Street (Vilniaus g. 33) The space was created by the real estate investment company INVL Baltic Real Estate, which owns the building. In June 2019 the company signed a franchise agreement on representing the network.
• On 19th December 2019 the Company announced that negotiations are underway regarding the sale of the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius which is owned by the closed-end investment company INVL Baltic Real Estate.

The Company publishes all publicly available information on the Nasdaq Vilnius website (link), on the Central Regulatory Information Base (link), as well as on the Company's website (For investors → News). Link: https://bre.invl.com/lit/en/naujienucentras).

4.7.2. SIGIFICANT GROUP'S EVENTS

The Companys subsidiary Proprietas, UAB has stood up relating to the signing of a franchise agreement with Talent Garden, one of Europe's largest coworking platforms. Talent Garden Vilnius' opened on 12th December 2019 and was established on a campus of more than 2,000 sq. m. on Vilniaus Street (Vilniaus g. 33). The space is also host to the first Startup Museum in the country, a creation of Vilnius's tourism and development agency Go Vilnius. The campus features a total of over 230 workplaces, more than half of which are in private offices, as well as a 150-seat modern conference hall.

More about the project:https://talentgarden.org/

5 Significant events of the Issuer and its group since the end of the financial year

• On 28th February 2020 the Company gave notification that, as of the expiration on 28 February 2020 of the Letter of Intent signed between INVL Baltic Real Estate and the fund managed by Lords LB Asset Management, a transaction on the possible sale of Assets, regarding possible sale transaction of Companys real estate about which was announced on 19th December 2019, had not been made.
• On 5th March 2020 INVL Baltic Real Estate announced that taking into account the upcoming inside information disclosure and seeking to ensure protection of the shareholder's interest of the Company, the Company submitted a request to Nasdaq Vilnius to suspend trading in INVL Baltic Real Estate shares (ISIN LT0000127151) from 5th March 2020 (inclusive) until the announcement of the inside information disclosure. Company's shares are listed in Baltic Secondary List of the Nasdaq Vilnius Stock Exchange.
• The Company gave notification that, after negotiations were renewed, on 6th March 2020 a real estate sale transaction was completed with the subsidiary companies Juozapavičiaus 6 UAB and Ateira UAB of the closed-end investment fund for informed investors Lords LB Baltic Green Fund (V), which is managed by Lords LB Asset Management UAB, regarding the sale of the IBC Business Centre on A. Juozapavičiaus and Šeimyniškių streets in Vilnius which the Company owns. Also sold was real estate at the address Kalvarijų Street 11a belonging to the INVL Baltic Real Estate company Rovelija. The value of the transaction is EUR 33 million. It is assessed that its impact on INVL Baltic Real Estate's 2019 profit will be EUR 7.6 million and its impact on the company's net asset value (NAV) per share will be EUR 0.58. At the end of September 2019, INVL Baltic Real Estate's NAV per share was EUR 2.72. The proceeds of the transaction will be used for pay-outs to shareholders and to reduce outstanding loans of the Company.
• On 10th March 2020 the Company gives notification that, after relinquishing ownership of the IBC Business Centre in Vilnius on 6 March 2020, the Company temporarily is not in conformity with the largest allowed level of debt specified in INVL Baltic Real Estate's Articles of Association. The Articles of Association envisage that up to 50 percent of the value of the real estate belonging to the Company may be borrowed on its behalf. The Law on Collective Investment Undertakings currently in effect allows a real estate fund's ratio of loans to real estate value to be up to 80 percent. Taking preliminary data for 31 December 2019, at the time of this announcement INVL Baltic Real Estate's ratio of loans to equity was approximately 56 percent. The Company's management company, INVL Asset Management UAB, is taking measures and preparing an action plan upon whose implementation would eliminate the discrepancy in the Company's loan to equity ratio.

The Company publishes all publicly available information on the Nasdaq Vilnius website (link), on the Central Regulatory Information Base (link), as well as on the Company's website (For investors → News). Link: https://bre.invl.com/lit/en/naujienucentras).

6 Estimation of Issuer's and Group's activity last year and activity plans and forecasts

6.1. EVALUATION OF IMPLEMENTATION OF GOALS FOR 2019

INVL Baltic Real Estate managed to implement its main goals during 2019 - successful management of assets under reconstruction and successful negotiations with the new and existing tenants enabled to improve the company's performance and increase the value of its assets.

6.2. ACTIVITY PLANS AND FORECASTS

INVL Baltic Real Estate will continue to earn from investments in commercial real estate, ensuring the growth of rental income and cost optimisation. Features of the managed assets of INVL Baltic Real Estate make it reasonable to expect continuous growth in the value of assets.

III. INFORMATION ABOUT SECURITIES

7 The order of amendment of Issuer's Articles of Association

According to the Articles of Association of the Company, the Articles of Association of INVL Baltic Real Estate may be amended by the desicion of the General Shareholders' Meeting, passed by more than 3/4 of votes (except in cases stated in the Law on Companies of the Republic of Lithuania and in cases stated in Company's Articles of Association). During the reporting period, Company's Articles of Association was amended once:

• On 5 June 2019 wording of Articles of Association of the Company has been registered with the Register of Legal Entities, which entered into force after an approval to change the Company's Article of Association was given by the Bank of Lithuania. The wording of this Articles of Association was approved by the General Shareholders Meeting held on 26 April 2019. The Articles of Association of the Company have been amended in order to comply with the relevant provisions of the legal acts regulating the activities of the Company - the Law on Companies of the Republic of Lithuania and the Law of the Republic of Lithuania on Collective Investment Undertakings.

Currently actual wording of the Articles of Association of INVL Baltic Real Estate is dated as of 5 June 2019. The Articles of Association is available on the Company's website (Section in the website For investors → Legal documents → Articles of Association. Link:https://bre.invl.com/lit/en/for-investors/articles-of-association)

8 Structure of the authorized capital

8.1. SHARE CAPITAL CHANGES

Table 8.1. Structure of INVL Baltic Real Estate authorized capital as of 31 December 2019.

Type of shares	Number of	Total voting rights granted	Nominal value,	Total nominal	Portion of the authorised
	shares, units	by the issued shares, units	EUR	value, EUR	capital, %
Ordinary registered shares	13,150,000	13,150,000	1.45	19,067,500	100

All shares are fully paid-up and no restrictions apply on their transfer.

8.2. INFORMATION ABOUT THE ISSUER'S TREASURY SHARES

INVL Baltic Real Estate or its portfolio companies have not implemented acquisition or transferred of shares in INVL Baltic Real Estate directly or indirectly under the order of subsidiary by persons acting by their name.

9 Trading in Issuer's securities as well as securities, which are deemed to be a significant financial investment to the Issuer on a regulated market

Table 9.1. Main characteristics of INVL Baltic Real Estate shares admitted to trading as of 31 December 2019

Shares issued, units	13,150,000
Shares with voting rights, units	13,150,000
Nominal value, EUR	1.45
Total nominal value, EUR	19,067,500
ISIN code	LT0000127151
LEI code	529900GSTEOHKA0R1M59
Ticker	INR1L
Exchange	Nasdaq Vilnius
List	Baltic Secondary list
Listing date	04.06.2014

Included into indexes	B8000GI, OMX BALTIC FINANCIALS GI, (SE0004384154) B8000PI, OMX BALTIC FINANCIALS PI, (SE0004384444) B8600GI, OMX BALTIC REAL ESTATE GI, (SE0004384188) B8600PI, OMX BALTIC REAL ESTATE PI, (SE0004384477) OMXBGI, OMX BALTIC ALL SHARE GROSS INDEX, (SE0001849977) OMXBPI, OMX BALTIC ALL SHARE PRICE INDEX, (SE0001849985)
	VILSE, OMX VILNIUS INDEX, (LT0000999963)

Company has signed a market-making agreement with Šiaulių bankas, AB on 1 March 2016.

Reporting	Price, EUR		Turnover, EUR			Last trading	Total turnover
period	high	low	last	high	low	last	date	units	EUR
2015 1st Q	1.900	1.840	1.860	1,890.56	3.7	0	31.03.2015	4,552	8,398.7
2015 2nd Q	1.910	1.600	1.890	1,017.5	5.67	32.13	30.06.2015	5,894	10,965.52
2015 3rd Q	1.900	0.200	0.200	1,211.49	3.78	0	30.09.2015	3,127	4,863.44
2015 4th Q	0.390	0.315	0.360	2,526.51	25.16	511.92	30.12.2015	41,254	14,135.72
2016 1st Q	0.447	0.390	0.405	6,062.45	71.38	799.49	31.03.2016	143,323	58,066.95
2016 2nd Q	0.417	0.380	0.390	5,534.83	4.03	1,167.14	30.06.2016	89,786	35,761.02
2016 3rd Q	0.413	0.381	0.402	5,959.64	6.11	0	30.09.2016	158,675	64,033.03
2016 4th Q	0.400	0.388	0.388	6,786.26	35.97	1,159.57	30.12.2016	99,641	39,314.25
2017 1st Q	0.399	0.375	0.397	9,985.26	2.35	0	31.03.2017	175,498	67,609,54
2017 2nd Q	0.449	0.386	0.424	16,547.66	7.02	338.95	30.06.2017	366,537	151,781.03
2017 3rd Q	0.480	0.415	0.471	63,552.70	27.53	0	29.09.2017	457,150	196,305.46
2017 4th Q	0.485	0.465	0.475	10,304.66	11.75	687.80	29.12.2017	201,801	95,575.01
2018 1st Q	2.42	0.476	2.26	41,834.75	2.36	41,834.75	03.29.2018	108,793	228,569.82
2018 2nd Q	2.36	2.12	2.30	49,996.02	61.02	2,001.14	06.29.2018	94,034	213,477.10
2018 3rd Q	2.56	2.28	2.48	31,417.80	111.56	999.44	28.09.2018	60,284	144,223.46
2018 4th Q	2.52	2.32	2.42	12,226.06	59.52	433.18	28.12.2018	32,269	77,646.76
2019 1st Q	2.54	2.10	2.50	26,646.30	2.52	1,604.00	2019.03.29	58,518	143,881.60
2019 2nd Q	2.54	2.40	2.44	12,057.50	15	1,185.84	2019.06.28	38,723	95,869.40
2019 3rd Q	2.58	2.42	2.58	84,949.22	9.84	278.64	2019.09.30	50,954	129,517.18
2019 4th Q	3.20	2.46	3.00	39,175.68	33.28	3,536.76	2019.12.30	45,810	118,648.98

Table 9.2. Trading in the company's shares on Nasdaq Vilnius*

*The amount of shares and share price changed on 17 August 2015, when the Company was merged with it's parent company (hereinafter referred to as the Reorganization Day), the stock statistics submitted prior to the Reorganization Day have not been recalculated and are not comparable with the data of the subsequent period; also taking in account the change in the nominal value per share to EUR 1.45, after the Articles of the Association was registered on 15th January 2018.

Table 9.3. Trading in INVL Baltic Real Estate shares 2015 – 2019

	2015*	2016	2017	2018	2019**
Share price, EUR:
open	0.300	0.399	0.388	0.475	2.42
high	0.380	0.447	0.485	2.56	3.20
low	0.200	0.380	0.375	0.476	2.10
medium	0.333	0.401	0.293	1.668	2.51
last	0.360	0.388	0.475	2.42	3,00
Turnover, units	54,827	491,425	1,200,986	295,380	194,005
Turnover, EUR	38,363.38	197,175.25	511,271.04	663,917.14	487,917.16
Traded volume, units	170	382	565	612	396

*In 2015 the share price was restated due to the influence of the Reorganization

** Taking in account the change in the nominal value per share to EUR 1.45, after the Articles of the Association was registered on 15th January 2018

Table 9.4. Capitalisation 2015 - 2019

Last trading date	Number of shares having voting rights, units	Last price, EUR	Capitalisation, EUR
31.03.2015	7,044,365	1.860	13,102,519
30.06.2015	7,044,365	1.890	13,313,850
30.09.2015*	43,226,252	0.200	8,645,250
30.12.2015	43,226,252	0.360	15,561,451
31.03.2016**	65,750,000	0.405	26,628,750
30.06.2016	65,750,000	0.390	25,642,500
30.09.2016	65,750,000	0.402	26,431,500
30.12.2016	65,750,000	0.388	25,511,000
31.03.2017	65,750,000	0.397	26,102,750
30.06.2017	65,750,000	0.424	27,878,000
29.09.2017	65,750,000	0.471	30,968,250
29.12.2017	65,750,000	0.475	31,231,250
31.03.2018***	13,150,000	2.26	29,719,000
30.06.2018	13,150,000	2.30	30,245,000
29.09.2018	13,150,000	2.48	32,612,000
29.12.2018	13,150,000	2.42	31,823,000
29.03.2019	13,150,000	2.50	32,875,000
28.06.2019	13,150,000	2.44	32,086,000
30.09.2019	13,150,000	2.58	33,927,000
30.12.2019	13,150,000	3.00	39,450,000

* The capital share significantly changed due to the Reorganization Day impact

** Share capital increased after the new share issue placement on 8 March 2016

*** The Articles of the Association was registered on 15th January 2018, after the nominal value per share was changed to EUR 1.45

Fig. 9.1. INVL Baltic Real Estate change of share price and indexes¹

Fig. 9.2. Change of share price of INVL Baltic Real Estate and turnover

¹ OMX index is an all-share index which includes all the shares listed on the Main and Secondary lists on the NASDAQ Vilnius with exception of the shares of the companies where a single shareholder controls at least 90% of the outstanding shares. The OMX Baltic Real Estate GI index is based on the Industry Classification Benchmark (ICB) developed by FTSE Group (FTSE).

10 Shareholders

10.1. INFORMATION ABOUT COMPANY'S SHAREHOLDERS

The total number of shareholders in INVL Baltic Real Estate was 3,522 on 31 December 2019. There are no shareholders entitled to special rights of control.

Table 10.1.1. Shareholders who held title to more than 5% of INVL Baltic Real Estate authorised capital and/or votes as of 31 December 2019.

Shareholder name and surname or company name and legal entity code	Number of shares owned	Portion of share capital, %	Voting rights granted by owned shares, %	Indirectly held votes, %	Total, %
LJB Investments, UAB code 300822575, Juozapavičiaus str. 9A, Vilnius	2,631,695	20.01	20.01	0	20.01
Irena Ona Mišeikienė	2,498,596	19.00	19.00	0	19.00
Invalda INVL, AB code 121304349, Gynėjų str. 14, Vilnius	4,267,388	32.45	32.45	0	32.45
Alvydas Banys	663,640	5.05	5.05	20.012	25.06

10.1.1. Fig. Votes as of 31 December 2019.

² According to the article 16 (item 1) of the Law on Securities of the Republic of Lithuania, Alvydas Banys is considered to hold the voting rights of the controlled company UAB LJB Investments.

Table 10.1.2. Distribution of securities by investors' groups as of 31 December 2019

		Shareholders	Share of votes given by the owned shares
Investors	Amount	Part, %	Amount	Part, %
Private persons	3,507	99.57	5,427,435	41.27
Legal persons (private corporations, Financial institutions and insurance corporations and their clients)	15	0.43	7,722,565	58.73
Total	3,522		13,150,000

Fig. 10.1.2. Distribution of securities by investors' groups as of 31 December 2019

Table 10.1.4. Distribution of securities by countries as of 31 December 2019

	Shareholders		Share of votes given by the owned shares
Regions	Amount	Part, %	Amount	Part, %
Lithuania	3,463	98.33	12,922,699	98.27
Other EU members	41	1.16	222,227	1.69
Non- EU countries	18	0.51	5,074	0.04
Total	3,522		13,150,000

10.2. RIGHTS AND OBLIGATIONS CARRIED BY THE SHARES

10.2.1. RIGHTS OF THE SHAREHOLDERS

The Company's shareholders have the following property and non-property rights:

• 1) to receive a part of the Company's profit (dividend);
• 2) to receive the company's funds when the authorised capital of the company is reduced with a view to paying out the company's funds to the shareholders;
• 3) to receive a part of assets of the company in liquidation;
• 4) to receive shares without payment if the authorised capital is increased out of the Company funds, except in cases provided by the laws of the Republic of Lithuania;
• 6) to lend to the company in the manner prescribed by law; however, when borrowing from its shareholders, the company may not pledge its assets to the shareholders. When the company borrows from a shareholder, the interest may not be higher than the average interest rate offered by commercial banks of the locality where the lender has his place of residence or business, which was in effect on the day of conclusion of the loan agreement. In such a case the company and shareholders shall be prohibited from negotiating a higher interest rate;
• 7) other property rights provided by laws;
• 8) to attend the General Shareholders' Meetings;
• 9) to submit to the Company in advance the questions connected with the issues on the agenda of the General Meeting of Shareholders;
• 10) to vote at the General Shareholders' Meetings according to voting rights carried by their shares;
• 11) to receive information on the Company specified in the Law on Companies of the Republic of Lithuania;
• 12) to appeal to the court for reparation of damage resulting from nonfeasance or malfeasance by the Company's manager and the Board members of their obligations prescribed by the Law on Companies of Republic of Lithuania and other laws of the Republic of Lithuania and the Company's Articles of Association as well as in other cases laid down by laws;
• 13) to receive information on a public company whose shares are admitted to trading on a regulated market as specified in the Law on Companies of Financial Instruments Markets in the Republic of Lithuania;
• 14) other non-property rights established by laws and the Company's Articles of Association.

10.2.2. OBLIGATIONS OF THE SHAREHOLDERS

The shareholders have no property obligations to the Company, except for the obligation to pay up, in the established manner, all the shares subscribed for at their issue price.

If the General Shareholders' Meeting takes a decision to cover the losses of the Company from additional contributions made by the shareholders, the shareholders who voted "for" shall be obligated to pay the contributions. The shareholders who did not attend the General Shareholders' Meeting or voted against such a resolution shall have the right to refrain from paying additional contributions.

The person who acquired all shares or part of shares in the company from the Company's sole shareholder must notify the company of the acquisition or transfer of shares within 5 days from the conclusion of the transaction. The notice shall indicate the number of acquired or transferred shares, including share number per class, when the different share class is acquired, the nominal share price and the particulars of the person who acquired or transferred the shares (the natural person's full name, personal number, personal code and address; the name, legal form it has taken, registration number, address of the registered office of the legal person.). A document confirming the acquisition of the shares or an acquisition extract must be added to the notice. If an acquisition extract is provided, it must include the parties to the transaction, the subject of the transaction and the date of acquisition of the shares.

Contracts between the company and holder of all its share shall be executed in a simple written form, unless the Civil Code prescribes the mandatory notarised form.

A shareholder shall repay the Company any dividend paid out in violation of the mandatory norms of the Law on Companies, if the Company proves that the shareholder knew or should have known thereof.

Each shareholder shall be entitled to authorise a natural or legal person to represent him when maintaining contacts with the Company and other persons.

11 Dividends

The General Shareholders' Meeting decides upon dividend payment and sets the amount of dividends. The company pays out the dividends within 1 month after the day of adoption of the resolution on profit distribution.

Persons have the right to receive dividends if they were shareholders of the company at the end of the tenth working day after the day of the General Shareholders' Meeting which issued the resolution to pay dividends.

According to the Lithuanian Law on Personal Income Tax and the Lithuanian Law on Corporate Income Tax, 15 % tax is applied to the dividends since 2014. The company is responsible for calculation, withdrawn and transfer (to the benefit of the State) of applicable taxes³ .

³ This information should not be treated as a tax consultation.

The General Shareholders Meeting of the Company held on 29 December 2017 approved the new wording of the Dividend payment policy which stipulates the yearly payment of dividends per share of no less than EUR 0.13 (when the nominal value per share is EUR 1.45).

On 26 April 2019, the General Shareholders Meeting of INVL Baltic Real Estate decided to allocate EUR 0.13 dividend per share.

Dividends were allocated to the shareholders, who at the end of the tenth business day following the day of the General Shareholders Meeting that adopted a decision on dividend payment, i.e. on 13 May 2019 were shareholders of the Company.

The Company started to allocate dividends for the year 2018 from 24 May 2019. Dividends were allocated to those shareholders of the company, who have provided existing bank accounts.

Information relevant to the dividends paid by the Company, as well as matter of dividend payments and valid Dividend payment policy is published on Company's web page.

11.1. Table. Indexes related with shares*

Company's	2015	2016	2017	2018	2019
Net Asset Value per share**, EUR	2.15	2.36	2.57	2.69	3.35
Price to book value (P/Bv)	0.84	0.82	0.92	0.90	0.90
Dividend yield	-	3.1	2.5	5.4	4.3
Dividends/ Net profit	-	0.18	0.22	0.54	0.16

*The Company publishes Alternative performance measures (AVR), that are in use of the Company, provides indicators definitions and calculation formulas. All the information is disclosed in the Company's web site section "For Investors" → "Financial information and reports" → "Formulas of performance indicators". The link is provided https://bre.invl.com/lit/en/for-investors/reports/formulas-of-performanceindicators. Also, for the convenience of investors, the Company provides AVR in Annex 4 to the Consolidated Annual Report. **Nominal value per share – EUR 1.45

IV. ISSUER'S MANAGING BODIES

12 Structure, authorities, the procedure for appointment and replacement

The management of INVL Baltic Real Estate was transferred to the Management company INVL Asset Management on 22 December 2016 as the Bank of the Republic of Lithuania granted INVL Baltic Real Estate with the license of the closed-ended type investment company. The rights and duties of the Board and the Manager of the Company were also transferred to the Management Company. Managing bodies of the Company is not formed.

In order to ensure management efficiency and control of investments, the Management company formed an Investment Committee of INVL Baltic Real Estate.

The Management company is responsible for convening and organizing the highest management body of the Company - the General Shareholders Meeting.

12.1 fig. Structure of the Management of the Company

Detailed information on the structure of the management of the Company before the CEF license was granted is published in the consolidated annual report for the year 2016 of INVL Baltic Real Estate. The report is published on the Company's website section For Investors.

12.1. GENERAL SHAREHOLDERS' MEETING

12.1.1. POWERS OF THE GENERAL SHAREHOLDERS' MEETING

Persons who were shareholders of the Company at the close of the accounting day of the General Shareholders Meeting or at a repeat General Shareholders Meeting (the 5th working day before the General Shareholders' Meeting) shall have the right to attend and vote at the General Shareholders' Meeting in person, unless otherwise provided for by laws, or may authorise other persons to vote for them as proxies or may conclude an agreement on the disposal of the voting right with third parties. The shareholder's right to attend the General Shareholders' Meeting shall also cover the right to speak and enquire.

The General Shareholders' Meeting may take decisions and shall be held valid if attended by the shareholders who hold the shares carrying not less than ½ of all votes. After the presence of a quorum has been established, the quorum shall be deemed to be present throughout the General Shareholders' Meeting. If a quorum is not present, the General Shareholders' Meeting shall be considered invalid and a repeat General Shareholders' Meeting must be convened, which shall be authorised to take decisions only on the issues on the agenda of the General Shareholders' Meeting that has not been held and to which the quorum requirement shall not apply.

An Annual General Shareholders' Meeting must be held every year at least within 4 months from the close of the financial year.

All decisions of the general meeting of Shareholders of the Company shall be taken by a 3/4 majority of votes carried by Shares of the Shareholders present in the meeting, except for the decisions indicated below, which shall be taken by a 2/3 majority of votes carried by Shares of the Shareholders present in the meeting, i.e. decisions:

• to elect and remove a certified auditor or audit firm and establish terms of payment for audit services;
• to approve sets of annual and interim financial statements;
• on extension of the Term of Activities of the Company and making related amendments to the Articles of Association.

The below-indicated decisions of the general meeting of Shareholders of the Company can be taken only after taking into account the recommendations given by the Management Company and with regard to consequences of a relevant decision indicated by the Management Company, i.e. decisions regarding:

• amending the Articles of Association of the Company;
• redemption of Shares;
• distribution of the profit (loss) of the Company;
• formation, use, reduction and cancellation of reserves;
• increase or reduction of the authorised capital;
• reorganisation, spin-off or transformation of the Company;
• merger of the Company with other collective investment undertakings;
• approval of the agreement with the Depository, appointment of the person authorised to sign the approved agreement with the Depository on behalf of the Company, change of the Depository;
• liquidation of the Company or extension of the Term of Activities of the Company;
• restructuring of the Company.

The Management Company must present its recommendations on draft decisions on issues indicated in Articles of Association hereof together with the announced draft decisions proposed by the Management Company. In case draft decisions are proposed not by the Management Company but by Shareholders, the Management Company must, no later than within 5 (five) Business Days after presentation of such a draft decision to the Company, prepare a relevant recommendation and announce it in the manner in which draft decisions are announced. In any case recommendations of the Management Company regarding all draft decisions on relevant issues of the agenda must be announced no later than 3 (three) Business Days until the date of the general meeting of Shareholders.

In case the general meeting of Shareholders takes a decision not following the recommendations given by the Management Company, the Management Company shall not be responsible if such decisions violate requirements for management of the Company or there are other negative consequences.

12.1.2. CONVOCATION OF THE GENERAL SHAREHOLDERS' MEETING OF INVL BALTIC REAL ESTATE

The right to initiate convocation of the meeting is vested in the Management Company and Shareholders, owning at least 1/10 of all the votes in the General Shareholder Meeting.

The convocation of a General Shareholders's Meeting is organised by the Management Company.

The shareholders are entitled: (i) to propose to supplement the agenda of the General Shareholders Meeting submitting draft resolution on every additional item of agenda or, than there is no need to make a decision - explanation of the shareholder (this right is granted to shareholders who hold shares carrying at least 1/20 of all the votes). Proposal to supplement the agenda is submitted in writing sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company on business hours or by sending proposal to the Company by email breinfo@invl.com. The agenda is supplemented if the proposal is received no later than 14 days before the General Shareholders Meeting. In case the agenda of the Meeting is supplemented, the Company will report on it no later than 10 days before the Meeting in the same way as on convening of the Meeting and (ii) to propose draft resolutions on the issues already included or to be included in the agenda of the General Shareholders Meeting at any time prior to the date of the General Shareholders meeting (in writing, sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company on business hours or by sending proposal to the Company by email breinfo@invl.com) or in writing during the General Shareholders Meeting (this right is granted to shareholders who hold shares carrying at least 1/20 of all the votes); (iii) to submit questions to the Company related to the issues of agenda of the General Shareholders Meeting in advance but no later than 3 business days prior to the General Shareholders Meeting in writing sending the proposal by registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company on business hours or by sending proposal to the Company by email breinfo@invl.com. All answers related to the agenda of the General Shareholders Meeting to questions submitted to the Company by the shareholders in advance, are submitted in the General Shareholders Meeting or simultaneously to all

shareholders of the Company prior to the General Shareholders Meeting. The company reserves the right to answer to those shareholders of the Company who can be identified and whose questions are not related to the company's confidential information or commercial secrets.

Shareholder participating at the General Shareholders Meeting and having the right to vote, must submit documents confirming personal identity. Each shareholder may authorize either a natural or a legal person to participate and to vote on the shareholder's behalf at the General Shareholders Meeting. A power of attorney issued by a natural person must be certified by a notary. The representative has the same rights as his represented shareholder at the General Shareholders Meeting. The authorized persons must have documents confirming their personal identity and power of attorney approved in the manner specified by law which must be submitted to the Company no later than before the commencement of registration for the General Shareholders Meeting. A power of attorney issued in a foreign state must be translated into Lithuanian and legalised in the manner established by law. The Company does not establish special form of power of attorney. The persons with whom shareholders concluded the agreements on the disposal of voting right, shall have the right to attend and vote at the General Shareholders Meeting.

Shareholder is entitled to issue power of attorney by means of electronic communications for legal or natural persons to participate and to vote on its behalf at the General Shareholders Meeting. No notarisation of such authorization is required. The power of attorney issued through electronic communication means must be confirmed by the shareholder with a safe electronic signature developed by safe signature equipment and approved by a qualified certificate effective in the Republic of Lithuania. The shareholder shall inform the Company on the power of attorney issued through the means of electronic communication by e-mail breinfo@invl.com not later than on the last business day before the General Shareholders Meeting. The power of attorney and notification must be issued in writing and could be sent to the Company by electronic communication means, if the transmitted information is secured and the shareholder's identity can be identified. By submitting the notification to the Company the shareholder shall include the Internet address from which it would be possible to download software to verify an Electronic Signature of the shareholder free of charge.

The Company is not providing the possibility to attend and vote at the General Shareholders Meeting through electronic means of communication.

Shareholder or its representative may vote in writing by filling general voting bulletin. The form of general voting bulletin is presented at the Company's webpage www.invlbalticrealestate.com section For Investors. If shareholder requests, the Company shall send the general voting bulletin to the requesting shareholder by registered mail or shall deliver it in person against signature no later than 10 days prior to the General Shareholders Meeting free of charge. The filled general voting bulletin must be signed by the shareholder or its authorized representative. Document confirming the right to vote must be added to the general voting bulletin if an authorized person is voting. The filled general voting bulletin must be sent by the registered mail to the Company at Gyneju str. 14, Vilnius, Lithuania, or delivered in person to the representative of the Company no later than the day before of the General Shareholders Meeting. Ballots will be considered as valid if they are properly filled-in and received by the Company prior the Meeting.

For the convenience of the shareholders of INVL Baltic Real Estate the company provides notifications about convocation of General Shareholders Meeting, draft resolutions as well as general voting bulletins and resolutions adopted in the Meetings on the company's website section For Investors (Shareholders' Meetings).

There were 2 (two) General Shareholders Meetings of INVL Baltic Real Estate during the 2019.

On 26th April 2019, during the General Shareholders Meeting of INVL Baltic Real Estate, the shareholders of the Company was introduced with the consolidated annual report for 2018 and independent auditor's report on the financial statements and consolidated annual report of the Company. The consolidated and stand-alone financial statements for 2018 and profit distribution (allocating EUR 0.13 dividend per share), approval of the amendment of the institutions and the new wording of the Articles of Association, purchase of own shares and of INVL Baltic Real Estate was approved as well. The shareholders also approved the Amendment of the Depository Services Agreement with AB SEB bankas

On 18th October 2019 the Companys Extraordinary Shareholders Meeting decided to conclude an agreement with UAB PricewaterhouseCoopers to carry out of the audit of the annual financial statements of the SUTNTIB INVL Baltic Real Estate for 2019 financial year and establish the payment in amount of EUR 16,900 for audit of annual financial statements set and opinion on the annual report (VAT will be calculated and payed additionally in accordance with order established in legal acts. To authorise the management company of INVL Baltic Real Estate to negotiate other terms and conditions of the audit services contract (including remuneration for additional services).

12.2. MANAGEMENT COMPANY AND THE INVESTMENT COMMITTEE

Since the Central Bank of the Republic of Lithuania granted the license of closed-ended type investment company to INVL Real Estate, the management of the Company has been transferred to the Management Company, therefore, following the Law of the Republic of Lithuania on Collective Investment Undertakings, and the rights and duties of the Board and the head of the Company, as set in the Law of the Republic of Lithuania on Companies, have been transferred to the Management Company.

The Management Company is responsible for convocation and organisation of the General Shareholders Meeting of the Company, giving notices about publically not disclosed information under the procedure set by legal acts, organisation of activities of the Company, proper management of information about activities of the Company and performance of other functions assigned to the Management Company.

The Management Company has the right:

• to perform all actions of management bodies of the Company and other actions assigned to the competence of the Management Company according to effective legal acts and/or defined in the Articles of Association;
• to get the Management Fee and the Performance Fee, as they are defined in the Articles of Association;
• to conduct and perform transactions in connection with management of the assets of the Company at the expense and in the interests of the Company;
• to make deductions from assets of the Company provided for in the Articles of Association;
• subject to approval of the general meeting of Shareholders, to instruct a company, having the right to provide relevant services, to perform some of its management functions;
• other rights established in the Articles of Association and legal acts of the Republic of Lithuania.

The Management Company must:

• act in a fair, correct and professional manner on the terms best for the Company and its Shareholders and in their interests and ensure integrity of the market;
• act carefully, professionally and prudently;
• have and use means and procedures necessary for its activities;
• have reliable administration and accounting procedures, electronic data processing control and security measures and a proper mechanism of internal control, including the rules on personal transactions in financial instruments conducted by employees of the Management Company and transactions in financial instruments conducted at the expense of the Management Company;
• ensure that documents of and information about taken investment decisions, conducted transactions would be kept for at least 10 years after the date of taking an investment decision, conduction of a transaction or performance of an operation, unless legal acts set a longer term of keeping documents;
• have such an organisational structure that would help to avoid conflicts of interest. When it is impossible to avoid conflicts of interest, the Management Company must ensure that Shareholders are treated fairly;
• ensure that persons taking decisions on management of the Company would have qualification and experience established by the Supervisory Authority, be of sufficiently good repute;
• ensure that assets of the Company would be invested according to the investment strategy set in the Articles of Association and requirements set in legal acts of the Republic of Lithuania;
• prepare the Prospectus, the key investor information document, annual and semi-annual reports under the procedure set by legal acts;
• perform other duties set in the Articles of Association and legal acts of the Republic of Lithuania.

The Company's management agreement with the Management Company must be approved by the General Shareholders Meeting. The currently valid Management agreement between the Managament company and INVL Baltic Real Estate was signed on 5 January 2018, the wording of the Management agreement was approved during the General Shareholders Meeting held on 29 December 2017.

The Management Company can be replaced by a decision of the General Shareholders Meeting of the Company. The Management Company can be replaced by a decision of the General Shareholders Meeting in cases mentioned below:

• the Management Company is liquidated;
• the Management Company undergoes restructuring;
• bankruptcy proceedings are initiated against the Management Company;
• the Supervisory Authority takes a decision to restrict or cancel the rights provided for in the license of the Management Company related to management of investment companies;
• the Management Company commits a material breach of the agreement, Articles of Association or legal acts;

• in other circumstances in compliance with applicable legislation.

The Management Company could be replaced after receipt of a prior permission of the Bank of Lithuania.

The Management company ensuring the management of INVL Baltic Real Estate has the General manager, the Board of the Company and the Investment Committee, formed by the decision of the Board.

The General Manager of the Management company is Laura Križinauskienė (from 2nd October 2017).

The Board of the Management Company operates following the Civil Code of the Republic of Lithuania, the Law of the Republic of Lithuania on Companies, other legal acts, Articles of Association of the Company, the resolutions of the General Shareholders Meetings, decisions of the Board and Regulations of the Board.

The Board acts in furtherance of the declared strategic objectives in view of the need to optimize shareholder value and to ensure that the rights and interests of persons other than the company's shareholders (e.g. employees, creditors, suppliers, clients, local community), participating in or connected with the company's operation, are duly respected.

The procedure of work, rights and responsibilities of the members of the Board of the Management Company are set in the Regulations of the Board.

Darius Šulnis (the Chairman), Nerijus Drobavičius and Vytautas Plunksnis are the members of the Board of the Management Company since 19 January 2015. After the reporting period (on 14th January 2019) the Board of Management Company was re-elected for the new 4 years of office, after the Bank of Lithuania granted their permission. The composition of the Board remained unchanged: Darius Šulnis (the Chairman), Nerijus Drobavičius and Vytautas Plunksnis

For the sake of efficiency of the Company's activities and control over its investments, an Investment Committee is being formed by a decision of the Board of the Management company. At the end of the reporting period there were 2 (two) members of the Investment Committee: Vytautas Bakšinskas and Andrius Daukšas.

The Investment Committee of the Management company is the collegial investment and management decision-making body responsible for adopting decisions regarding the management of the Managed company's assets and representing and protecting the Managed Company's interests. According to Company's Articles of Association Investment Committee shall consist of 3 (three) members, representatives of the Management Company (employees, members of management bodies of the Management Company, other persons appointed by a decision of the Board of the Management Company) shall be appointed to their positions. Members of the Investment Committee shall be appointed by a decision of the Management Company. Members of the Investment Committee shall be appointed and removed from office by the Board of the Management Company. An approval of the Investment Committee must be obtained for all investments of the Company and for their sale.

The procedure of formation, responsibilities, functions of the Investment Committee, decision-making procedure and other procedures of the Investment Committee is set in the Regulations of the Investment Committee of INVL Baltic Real Estate, which is published in the Company's website section For Investors.

Currently there are 2 (two) members in the Investment Committee, appointed from the representatives of the Management Company: Vytautas Bakšinskas and Andrius Daukšas. Egidijus Damulis was withdrawn from the position of the member of the Investment Committee from 13 February 2017, by the decision of the Board of the Management company.

During the reporting period 33 Investment Committee meetings were held. Vytautas Bakšinskas attended 32 meetings personally and 1- remotely, Andrius Daukšas attended 32 meetings personally and 1 - remotely.

For the sake of efficiency of activities of the Company, an Advisory Committee may be formed by a decision of the Board of the Management company. It is a collegial advisory body composed of representatives of the shareholders of the Management company which is intended to advise the Investment Committee for the Company regarding the adoption of investment decisions.

The purpose of the Advisory Committee is to ensure having knowledge about investments objects, into which the Company's assets may be invested, and knowing their specifics. The Advisory Committee shall present its opinion and conclusions to the Investment Committee regarding investments of the Company.

The procedure of formation, responsibilities, functions of the Advisory Committee, decision-making procedure and other procedures of the Advisory Committee is set in the Regulations of the Advisory Committee, of INVL Baltic Real Estate, which is published in the Company's website section For Investors.

The Advisory Committee is not formed at the moment.

13 Information about members of the Board of the Management Company, general manager and members of the Investment Committee

13.1. THE ISSUER'S MANAGEMENT BODIES

The management of INVL Baltic Real Estate was transferred to the management company INVL Asset Management on 22 December 2016 as soon as the Central Bank of the Republic of Lithuania INVL Baltic Real Estate the license of closed-ended type investment company. The rights and duties of the Board and the head of the Company were also transferred to the Management Company.

The General Manager of the Management company is Laura Križinauskienė (from 2nd October 2017).

Darius Šulnis (the chairman), Nerijus Drobavičius and Vytautas Plunksnis are members of the Board of the Management company since 19 January 2015. After the reporting period (on 14th January 2019) the Board of Management Company was re-elected for the new 4 years of office, after the Bank of Lithuania granted their permission. The composition of the Board remained unchanged: Darius Šulnis (the Chairman), Nerijus Drobavičius and Vytautas Plunksnis. During the reporting period the Board of the Management company remained unchanged.

On 6 May 2016 Egidijus Damulis and Andrius Daukšas were appointed as the Members of the Investment Committee of the Company by a decision of the Board of the Management Company. Vytautas Bakšinskas joined the Investment Committee on 2 January 2017. He was appointed by the decision of the Board of the Management company on 22 December 2016.

Currently there are 2 (two) members in the Investment Committee: Vytautas Bakšinskas and Andrius Daukšas.

The Advisory Committee is not formed.

Darius Šulnis – Chairman of the Board of the Management company.

Main workplace – Invalda INVL, AB (code 121304349, Gynėjų str. 14, Vilnius) - president

	Duke University (USA). Business Administration. Global Executive MBA.
Educational background	Vilnius University. Faculty of Economics. Master in Accounting and Audit.
and qualifications	Financial broker's license (General) No. A109.
	2015 – October 2017 General manager of INVL Asset Management, UAB
	2006 – 2011 Invalda, AB – President. 2011 – 2013 Invalda, AB – Advisor. Since May 2013
Work experience	Invalda INVL, AB – President
	2002 – 2006 Invalda Real Estate, UAB (current name Inreal Valdymas) – Director
	1994 – 2002 FBC Finasta, AB – Director
Owned amount of shares	Personally: 0 units of shares. Together with controlled company Lucrum Investicija: 244,875
in INVL Baltic Real	units of shares and votes - 1.86 % of authorised capital.
Estate
	Invalda INVL, AB (code 121304349, Gynėjų str. 14, Vilnius) – Member of the Board, the
	President
	Šiaulių bankas, AB (code 112025254, Tilžės str. 149, Šiauliai) – Member of the Supervisory
	Board
Participation in other	INVL Baltic Farmland, AB (code 303299781, Gynėjų str. 14, Vilnius ) – Member of the Board
companies	Litagra, UAB (code 304564478, Savanorių ave. 173, Vilnius) – Member of the Board
	INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) – Chairman of the
	Board
	INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) managed fund
	INVL Baltic Sea Growth Fund – Investment Committee Member

	Main workplace – INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) Private Equity Partner
Educational background and qualifications	In 1998 graduated Vytautas Magnus University and gained his Bachelor's degree in Business management. Graduated Vytautas Magnus University in 2000 and gained his Master's degree in banking and finance.
Work experience	Since 2014 works at Invalda INVL, AB group Since 2015 till August 2018 Head of Finance unit of INVL Asset Management, UAB. From August 2018 – Private Equity Partner of INVL Asset Management, UAB 2012 – 2014 Independent financial expert 2007 – 2011 CFO in Sanitas Group 2001 – 2007 Sampo Bank. Head of Accounting and Reporting unit, later – CFO of the bank
Owned amount of shares in INVL Baltic Real Estate	-
Participation in other companies	INVL Technology, CEF (code 300893533, Gynėjų str. 14, Vilnius) – Member of the Investment Committee Andmevara AS (code 10264823, Parnu mnt. 158, 11317, Tallinn, Estonia) – The Chairman of the Supervisory Board Inservis, UAB (code 126180446 , A.Juozapavičiaus str. 6, Vilnius) – The Chairman of the Board Imoniu grupe Inservis, UAB (code 301673796, Gynėjų str. 14, Vilnius) – The Chairman of the Board Jurita, UAB (code 220152850, Justiniškių str. 64, Vilnius) – The Chairman of the Board Etronika, UAB (code 125224135, Gynėjų str. 14, Vilnius) – Member of the Board (till July 2019) BSGF Sanus, UAB (code 304924481, Gynėjų str. 14, Vilnius) – Director Montuotojas, UAB (code 121520069, Granito g. 3-10, Vilnius) - Member of the Supervisory Board (from July 2019) UAB "InMedica" (codas 300011170, L. Asanavičiūtės str. 20-201, Vilnius) – The Chairman of the Board INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) managed fund INVL Baltic Sea Growth Fund – Investment Committee Member

Nerijus Drobavičius – Member of the Board,

Vytautas Plunksnis – Member of the Board

Main workplace – INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) Head of Private Equity

Educational background and qualifications	Graduated the studies in economics at Kaunas University of Technology in 2001, gained
	Bachelor's degree in Management.
	Financial broker's licence (General) No. G091.
	Since 2016 - INVL Asset Management, UAB, Head of Private Equity Funds
	2009 – 2015 Fund Manager at Invalda INVL, AB
Work experience	2006 – 2009 Finasta Asset Management, UAB – analyst, fund manager, strategic analyst
	2004 ELTA redactor (business news)
	2002 – 2004 Baltic News Service business journalist
Owned amount of shares in	Personally: 1,000 units of shares; 0.01% of authorised capital and votes.
INVL Baltic Real Estate
	INVL Technology, CEF (code 300893533, Gynėjų str. 14, Vilnius) – Member of the
	Investment Committee
	Norway Registers Development AS (code NO 985 221 405, Lokketangen 20 B, 1337
	Sandvika, Norway) – Member of the Board
	NRD Systems, UAB (code 111647812, Gynėjų str. 14, Vilnius) – Member of the Board
	NRD CS, UAB (code 303115085, Gynėjų str. 14, Vilnius) – Member of the Board
	Algoritmu sistemos, UAB (code 125774645, Gynėjų str. 14, Vilnius) – Chairman of the Board
Participation in other	Investuotoju Asociacija (code 302351517, Konstitucijos pr. 23, Vilnius) – Chairman of the
companies	Board
	NRD Companies AS (code NO 921 985 290, Lokketangen 20 B, 1337 Sandvika,
	Norway) – Member of the Board (from January 2019)
	BC Moldova-Agroindbank SA (MAIB) (code 1002600003778, 9 Cosmonautilor stree,t
	Chisinau, Moldova) – Member of the Supervisory Board
	Montuotojas, UAB (code 121520069, Granito g. 3-10, Vilnius) - Chairman of the
	Supervisory Board (from July 2019)
	INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) managed fund
	INVL Baltic Sea Growth Fund – Investment Committee Member

Laura Križinauskienė – General Manager of the Management company

Main workplace – INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) General manager

Educational background and	Vilnius Gediminas Technical University, Master's degree in Management and Business
qualifications	Administration
Work experience	2016-2017 Danske Bank A/S Lithuanian branch – Operational manager, Head of Global Function 2012-2016 Baltpool UAB – general manager, member of the Board 2010-2012 Finasta bank AB – Director of the Capital market department 2005-2012 held various positions in Finasta FMĮ AB, Finasta bank AB, Finasta investiciju valdymas (currently INVL Asset Management)
Owned amount of shares in INVL Baltic Real Estate	-
Participation in other companies	FMI Finasta, UAB (code 304049332, Gynėjų str. 14, Vilnius) – Member of the Board IPAS INVL Asset Management (code 40003605043, Smilšu iela 7-1, Riga, Latvia) – Member of the Supervisory Board AS INVL atklātajs pensiju fonds (code 40003377918, Smilšu iela 7-1, Riga, Latvia) – Member of the Supervisory Board

	Vytautas Bakšinskas – Member of the Investment Committee, Main workplace – INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) Real estate fund manager
Work experience	Since 2 January 2017 – Real Estate Fund Manager at INVL Asset Management 2016 – 31.12.2016 – director at Dizaino institutas, UAB 2016 – 31.12.2016 – director at Variagis, UAB 2014 – 31.12.2016 – director at Riešės investicija, UAB 2013 – 31.12.2016 – director at Tripolio valda, UAB 2013 – 31.12.2016 – director at Paralelių valda, UAB 2013 – 31.12.2016 – director at Dipolio valda, UAB 2013 – 31.12.2016 – director at Etanija, UAB 2012 – 31.12.2016 – director at Justiniškių valda, UAB 2011 – 31.12.2016- – head of Lease department at Inreal valdymas, UAB 2015-06 – 2016-01 – director at Elniakampio namai, UAB 2014-03 – 2016-06 – director at Akvilas, UAB 2014-03 – 2015-07 – director at Aikstentis, UAB 2014-03 – 2015-07 – director at Trakų kelias, UAB 2013-01 – 2013-02 – project manager at Naujoji švara, UAB 2010-04 – 2013-02 – project manager at Sago, UAB 2008-11 – 2011-08 – project manager at Inreal valdymas, UAB
Owned amount of shares in INVL Baltic Real Estate	-
Participation in other companies	Proprietas, UAB (code 303252098, Gynėjų str. 14, Vilnius) - Director
	Andrius Daukšas – Member of the Investment Committee, Main workplace – INVL Asset Management, UAB (code 126263073, Gynėjų str. 14, Vilnius) Investment manager
Educational background and qualifications	Master's degree in banking at the Faculty of Economics of Vilnius University. Financial broker's license (general) No. G311.
Work experience	Since 22 December 2016 – Investment Manager at INVL Asset Management 3 January 2016 – 21 December 2016 – deputy director at INVL Baltic Real Estate December 2014 - January 2016 – director at INVL Baltic Real Estate March 2010 – 21 December 2016 - investment manager at Invalda INVL 2008-2010 - director of the Treasury Department of the bank Finasta 2004-2008 - an accountant, later - the department manager of securities accounting at FBC Finasta
Owned amount of shares in INVL Baltic Real Estate	Personally: 5,000 units of shares, 0.04% of authorised capital and votes.

Continued of the next page

The beginning of the information is on the previous page

	Imoniu Grupe Inservis, UAB (code 301673796, Gynėjų str. 14, Vilnius) - Member of the
	Board, director
	Inservis, UAB (code 301673796, Gynėjų str. 14, Vilnius) - Member of the Board
	Jurita, UAB (code 220152850, Justiniškių str. 64, Vilnius) - Member of the Board
Participation in other	Kelio Zenklai, UAB (code 185274242, Vilkaviškio dist., Pilviškių village Geležinkelio str. 28) -
companies	Member of the Board
	Informacinio verslo paslaugu imone, AB (code 123043773, Eigulių str. 21, Vilnius) -
	Chairman of the Board
	Vernitas, AB (code 193052526, Stoties str. 16, Marijampolė) - Member of the Supervisory
	Board

14 Information about the Audit Committee of the company

The Audit Committee consists of 2 (two) independent members. The members of the Audit Committee are elected by the decision of the General Shareholders' Meeting. The members of the Audit Committee are proposed by the Management company and the shareholders of the company. The Audit Committee is elected for a four-year term of office.

The main functions of the Adit Committee are the following:

• provide recommendations to the Management company with selection, appointment, reappointment and removal of an external audit company of the Company as well as the terms and conditions of engagement with the audit company;
• monitor the process of external audit of the Company;
• monitor how the external auditor and audit company follow the principles of independence and objectivity;
• observe the process of preparation of financial reports of the Company;
• monitor the efficiency of the internal control and risk management systems of the Management company directly related to the management of the Company. Once a year review the need of the dedicated internal audit function for the Company within the Management company;
• monitor if the Management company gives due consideration to the recommendations or comments provided by the audit company regarding management of the Company;
• The Audit Committee reports its activities to the Company's ordinary General Shareholders Meeting by submitting a written report on Audit Committee activities during the last financial year.

Any member of the Audit Committee should have the right to resign upon submitting a 14 (fourteen) days written notice to the Management company. When the Management company receives the notice of resignation of a member of the Audit Committee and considers all circumstances related to the resignation, it may decide - either to convene an Extraordinary General Shareholders Meeting to elect new member of the Audit Committee, or to postpone the question on the election of the new member of the Audit Committee till the next General Shareholders Meeting of the Company. The new member is elected till the end of term of office of the operating Audit Committee.

14.1. PROCEDURE OF WORK OF THE AUDIT COMMITTEEVIN

The Audit Committee informs about its activities to the Company's ordinary General Shareholders Meeting by submitting a written report.

The Audit Committee is a collegial body, taking decisions during meetings. The Audit Committee may take decisions and its meeting should be considered valid, when both members of the Committee participate in it. The decision should be passed when both members of the Audit Committee vote for it. The member of the Audit Committee may express his will – for or against the decision in question, with the draft of which he is familiar with – by voting in advance in writing. Voting in writing should be considered equal to voting by telecommunication end devices, provided text protection is ensured and it is possible to identify the signature.

The right of initiative of convoking the meetings of the Audit Committee is held by both members of the Audit Committee. The other member of the Audit Committee should be informed about the convoked meeting, questions that will be discussed there and the suggested drafts of decisions not later than 3 (three) business days in advance in writing (by e-mail or fax). The meetings of the Audit Committee should not be formed as a written protocol, if the taken decisions are signed by both members of the Committee. When both Audit Committee members vote in writing, the decision should be written down and signed by

the secretary of the Audit Committee who should be appointed by the Management company. The decision should be written down and signed within 7 (seven) days from the day of the meeting of the Audit Committee.

The Audit Committee should have the right to invite the head of the Management company, member(s) of the Board, the chief financier, employees responsible for finance, accounting and treasury issues of the managed Company as well as external auditors of the Company to its meetings. Members of the Audit Committee may receive remuneration for their work in the committee. The remuneration for the Audit Committee members is approved by the General Shareholders Meeting fixing the maximum hourly rate.

The Company's Audit Committee is guided by the Regulations of the Audit Committee (hereinafter referred to as the Regulations) approved by the General Shareholders Meeting of the Company held on 11 April 2017. The Regulations are published on the Company's website in the section For investors.

14.2. MEMBERS OF THE AUDIT COMMITTEE

During the General Shareholders Meeting held on 11 April 2017 Dangutė Pranckėnienė, partner and auditor of Moore Stephens Vilnius, UAB and Tomas Bubinas, director of Biotechpharma, UAB were elected for the Audit Committee of the Company for the 4 (four) years of office term. Both members of the Audit Committee are independent, having submitted an notice certifying their independence.

Tomas Bubinas – Independent Member of the Audit Committee
The term of office	Since 2017 till 2021
Educational background and qualifications	2004 - 2005 Baltic Management Institute (BMI), Executive MBA 1997 - 2000 Association of Chartered Certified Accountants. ACCA. Fellow Member 1997 Lithuanian Sworn Registered Auditor 1988 - 1993 Vilnius University, Msc. in Economics
Work experience	Since 2013 Chief Operating Officer at Biotechpharma, UAB 2010 - 2012 Senior Director, Operations. TEVA Biopharmaceuticals (USA) 2004 - 2010 CFO for Baltic countries, Teva Pharmaceuticals 2001 - 2004 m. CFO, Sicor Biotech 1999 - 2001 Senior Manager, PricewaterhouseCoopers 1994 - 1999 Senior Auditor, Manager, Coopers & Lybrand.
Owned amount of shares in	-
INVL Baltic Real Estate

	Dangutė Pranckėnienė – Independent Member of the Audit Committee
The term of office	Since 2017 till 2021

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2019 ANNUAL REPORT | 115

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Educational background and qualifications	1995 - 1996 Vilnius Gediminas Technical University, Master of Business Administration. 1976 - 1981 Vilnius University, Master of Economics. The International Coach Union (ICU), professional coucher name, license No. E-51. Lithuanian Ministry of Finance, the auditor's name, license No. 000345.
Work experience	since 1997 the Partner at Moore Stephens Vilnius, UAB 1996 - 1997 Audit Manager, Deloitte & Touche 1995 - 1996 Lecturer, Vilnius Gediminas Technical University 1982 - 1983 Lecturer, Vilnius University
Owned amount of shares in	-
INVL Baltic Real Estate

15 Information on the Issuer's payable management fee, the amounts calculated by the Issuer, other assets transferred and guarantees granted to the Managing bodies and company providing accounting services

After the Bank of Lithuania issued the closed-ended type investment company operating license for INVL Baltic Real Estate on 22 December 2016, the rights and duties of the Board and the head of the Company are implemented by the Management company INVL Asset Management.

The management fee payable to the Management Company (hereinafter – Management Fee) is the remuneration for management of the assets of the Company, which shall be payable for each quarter of a calendar year. By the decision of the Gereral Shareholders' Meeting of the Company held on 29th December 2017, the Management Fee was reduced from 1.5% to 1.0%, the Management Fee for a calendar year shall be 0.25% for the quarter of the year of the weighted average capitalisation of the Company. The Performance Fee shall be additionally paid to the Management Company under the procedure set in the Articles of Association. During the reporting period the Management fee payable to the Management Company was EUR 331 thousand and EUR 238 thousand success fee payable (in 2018 the Management fee to the Management Company amounted to EUR 307 thousand and EUR 50 thousand success fee payable, whereas in 2017 - the Management fee payable to the Management Company amounted to EUR 296 thousand and EUR 386 thousand success fee payable).

The members of the Board and the members of the Investment Committee of the Management Company do not receive remuneration for these duties. They are paid the salary according to the employment contract with the Management Company.

During the reporting period company's managing bodies, which are mentioned in the section 13 of the report, were paid EUR 663 of dividends, net of tax. There were no assets transferred, no guarantees granted, no bonuses paid and no special payouts made by the company to its managing bodies. The managing bodies were not granted with bonuses by other companies of INVL Baltic Real Estate group.

During the reporting period INVL Baltic Real Estate Group and the Company for Invalda INVL, AB - the company providing accounting services - respectively paid EUR 15 thousand and EUR 7 thousand during the reporting period (in 2018 – respectively paid EUR 15 thousand and EUR 8 thousand, in 2017 – respectively paid EUR 12 thousand and EUR 10 thousand, in 2016 – respectively paid EUR 12 thousand and EUR 10 thousand, in 2015 – respectively paid EUR 13 thousand and EUR 9 thousand).

Invalda INVL, AB and INVL Asset Management, UAB provide accounting services and preparation of the documents related with bookkeeping for INVL Baltic Real Estate according to an Accounting services agreement.

V. OTHER INFORMATION

16 Agreements with intermediaries on public trading in securities

INVL Baltic Real Estate has signed these agreements with the following intermediaries:

• AB Siauliu bankas (Seimyniskiu str. 1A, Vilnius, Lithuania. tel. +370 5 203 2233) the agreement on management of securities accounting, the market maker services agreement and service agreement on the payment of dividends.
• AB SEB bankas (Gedimino pr. 12, Vilnius, Lithuania tel. +370 5 268 2800) agreement on depository services.

17 Information on Issuer's branches and representative offices

INVL Baltic Real Estate has no branches or representative offices.

18 A description of the principal risks and uncertainties

Information, provided in this document, should not be considered complete and covering all aspects of the risk factors associated with public company's INVL Baltic Real Estate activity and securities. There are only basic risks and their descriptions provided in this report. Detailed descriptions of the risks are published on the Company's website.

18.1. GENERAL RISK FACTORS IN THE BUSINESS FIELD WHERE THE GROUP OPERATES

Risk factor, related to the change of the legal status of the Company

After the issuance of the Licence by the LB on 22 December 2016, the Company started to operate not only according to the Law on Companies and Law on Securities and other related legal acts, as it was until obtaining a Licence, but also under the Law on Collective Investment Undertakings and other related legal acts, which establish certain specific obligations in respect of the protection of Company's shareholders and certain operating restrictions, e.g. the Company is entitled to invest the managed funds following the requirements of the investment strategy of the Company, certain limitations of the applicable laws are applied to the Company with regards its investments, their diversification, management thereof, etc. Furthermore, the Company's operating expenses might be increased because of the requirements to conduct periodic property's assessment, protect the Company's property in the Depository and other.

It should also be noted that investments into Shares of the Company (holding a Licence) are related to higher than average, long-term risk. The Company cannot guarantee that the shareholders will get invested funds back. Therefore, Shares of the Company are suitable only for investors, who seek higher long term returns but could afford to take higher than average risk, including loss of principal.

General risk

The value of an investment into real estate can fluctuate in the short term depending on the general economic situation, real estate lease and sale prices, demand and supply fluctuations. Investments into real estate should be made for a medium or long period in order that the investor could avoid the risk of short-term price fluctuations. Investments into real estate are related to higher than average risk. If investments are not profitable or in case of other unfavourable circumstances (inability to pay creditors in time), bankruptcy proceedings can be instituted against the Company. Redemption of the Shares is limited, i.e. a shareholder cannot demand that the Company or the Management Company, which took over its management, would redeem the Shares. But a shareholder will have a possibility to sell Shares in the secondary market.

Real estate development risk

Real estate projects developed by the Company can take longer than planned or cost more than planned and return on investments of the Company may decrease for this reason. Managing this risk, the Company will assign sufficient resources for control over the budgets and performance terms of real estate development projects.

Risk of inflation and deflation

There is a risk that in case of inflation the value of a Share will grow slower than the inflation, which would result in the return lower than inflation. In such a case, the real return earned by persons who sold the Shares of the Company in the market from increase in the value of the Shares can be smaller than expected. In case of deflation, there would be a risk that the value of the Company's investments will decrease by reason of the drop of the general price level.

Macroeconomic environment

Real estate development tends to follow the general developments in the macroeconomic environment. Interest rates, unemployment, inflation, private consumption, capital expenditure and other macroeconomic indicators have significant influence on real estate developments and hence the operations and the potential profitability of the Group.

Favourable developments in the macroeconomic environment increase demand for real properties, allow the real estate companies to increase rent rates of properties and other prices related to activities of the Group. Adverse developments increase pressure on real estate prices, rent rates and yields. Hence the Group's results are dependent on general macroeconomic environment and adverse developments in the environment might lead to reconsideration of some of the Group's development plans, negative pressure on prices and rents of the Group's properties or other changes in relation to the Group's properties that might have a material adverse effect on the Group's business, results of operations, financial condition and profitability.

Cyclicality of the real estate sector

Real estate development is a cyclical sector. The number of real estate related transactions fluctuates significantly depending on the stage of the real estate cycle. In the Baltic countries has been relatively high lately as a fast growth in prices fuelled by availability of cheap financing was followed by a steep decline as a result of financial crisis. In the future the Baltic real estate market might regain the lost momentum, again inflating the price levels, which might be followed by overheating of the market and downward pressure on the prices, thus, starting the next real estate cycle.

18.2. RISK FACTORS CHARACTERISTIC OF THE GROUP

Risk of the management and human resources

The success of the Company's investments will largely depend on decisions taken by persons in the Management Company who are responsible for management of the Company and on experience and capabilities of the said persons. There is no guarantee that the same persons will always remain responsible for management of the Company, however efforts will be used that activities of the Company would always be taken care of by properly qualified persons.

Dependence on external financing

The Group's cash inflows currently are sufficient to finance operating cash outflows and to pay monthly instalments of repayments and interests payments of bank borrowings. However, further development of the Group's activities will require substantial amounts of capital to fund capital expenditures. For this reason, failure to secure adequate levels of external financing might limit the Group's growth plans and place it at competitive disadvantage as compared to well-capitalized peers. Failure to obtain external financing may lead to forced sale of assets at unfavourable prices or even cause insolvency which may have a material adverse effect on the Group's business, results of operation or financial condition and may destroy the shareholders' value.

Risk related to lease agreements

The Group's lease agreements may be divided into two categories: non-cancellable fixed-term lease agreements and cancellable lease agreements entered into for an unspecified term. For the cancellable lease and sublease agreements, tenants must notify the administrator 1-12 months in advance, if they wish to cancel the rent agreement and have to pay 1-6 months' rent fee penalty for the cancellation. According to non-cancellable lease and sublease agreements tenants must pay the penalty equal to rentals receivable during the whole remaining lease period.

The Group seeks to use both types of agreements, depending on the market situation and the properties in question. Lease agreements entered into for an unspecified term involve nevertheless a risk that a large number of such agreements may be terminated within a short period of time. The Group aims at renewing the fixed term lease agreements flexibly in cooperation with its tenants. There are, however, no guarantees that the Group will be successful in this. In order to prevent tenants from terminating the lease agreements, the Group may also be forced to agree on the reduction of rent fees. The reduction of rent fees payable to the Group under a large number of lease agreements and/or concurrent termination of a large number of lease agreements could have a material adverse effect on the Group's business, results of operations and financial condition.

Reliance on the administrator of the Company's property

On 2 January 2013 the Company has entered into an agreement with a third party for property management and administration services on part of Company's asset portfolio. An agreement was terminated on 1 January 2018, after the Company's subsidiary Proprietas, UAB and the Company signed a property management and administration agreement. The detailed list of buildings, administered, based on this agreement is provided in Section 2.3. of the Company's consolidated annual report "Information about the Issuer's group of companies". Under this agreement the third party, as an administrator of the property, is committed to increase Company's value and maintain high quality of service for buildings' tenants and employees. In case of change in administrative prices in the market, new contracts under less favourable conditions can be entered into with administrator, which may directly influence the increase in Company's costs.

Interest rate risk

There is a risk that in case of fast recovery of the global economy or increase in inflation, central banks will increase interest rates and it will be more expensive to service loans in connection with the Company's investments, therefore, the value of the Company's investments can decrease. In order to avoid this risk, the Management Company shall seek that the Company would get most of its loans at fixed interest rates. If it seems necessary, the Company shall hedge against interest rate risk when entering into relevant transactions.

Furthermore, interest rate risk mainly includes loans with a variable interest rate. On 26 August 2014 the Company and Šiaulių Bankas AB entered into a credit agreement for EUR 15.35 million credit (on 10 April 2018 a credit limit was increased till EUR 23,925,500) with variable interest rate – 6 month EURIBOR and fixed margin. In addition to that, on 15 July 2015 the Subsidiary Dommo Biznesa Parks SIA and ABLV Bank AS entered into a credit agreement in an amount of 3 million with variable interest rate – 3 month EURIBOR and fixed margin. Rising interest rates will increase the Group's debt service costs, which will reduce the return on investment. If considered necessary, the Group will manage interest rate risk by entering into financial derivatives' contracts.

Leverage risk

Leverage risk is related to possible depreciation of real estate objects acquired with borrowed money. The bigger the leverage, the higher probability of this risk is. The level of borrowings of the Group was 36.5% of its investment property market value as of 31 December 2019 (38.8% as of 31 December 2018, 38.5% as of 31 December 2017, 41% as of 31 December 2016).

Credit risk

The Company has given and may have given loans to other companies, therefore, in case of deterioration of the financial condition of those companies, there is a risk that the Company will not get back all the loans granted by it.

Liquidity risk

This is a risk to incur losses due to low liquidity of the market, when it becomes difficult to sell assets at the desired time at the desired price. In management of this risk, the Company will regularly monitor the real estate market, will get ready for the property sale process in advance, in this way reducing the liquidity risk. Acquiring Shares, the shareholders also assume the risk of securities liquidity – in case of a drop in demand for Shares or delisting them from the stock exchange, investors would find it difficult to sell them. In case of deterioration of the Company's financial situation, the demand for Shares, as well as their price may decrease. Liquidity risk also covers the cash flow disruption risk incurred by the Company due to late payments and/or full default on monetary obligations by insolvent tenants.

Total investment risk

The value of the investment in real estate can vary in the short term, depending on the general economic conditions, rent and purchase prices of real estate, demand and supply fluctuations, etc. Investment in real estate should be carried out in the medium and long term, so that the investor could avoid short-term price fluctuations. Investing in real estate is related to higher than medium risks. Failure of investments of the Group or under other ill-affected circumstances (having been unable to pay for the creditors) can have a significant adverse effect on the Group's performance and financial situation or in the worst case scenario bankruptcy proceedings may be initiated.

Investment diversification risk

This is a risk that one bad investment can have a significant effect on the results of the Company. In order to reduce this risk, the Company will have a sufficient number of different real estate objects in its portfolio, in this way maintaining the proper diversification level.

Tenants' risk

The Company will seek to let real estate objects at as high prices as possible. Though currently the rent is paid in time (overdue obligations of tenants are very small and are not significant for activities of the Company), there is a risk that upon change (deterioration) of the economic situation the tenants will default on their obligations – this would have a negative impact on the profit and cash flows of the Company. In case of late performance of a large part of obligations, the ordinary business of the Company may be disrupted, it may be necessary to search for additional sources of financing, which may be not always available. The Company, in case of failure to earn planned income from lease or to maintain a high percentage of occupation of the buildings, can face the problem of costs that are not compensated by permanent tenants. This risk may manifest itself in case of big increase in the supply of rented premises and reduction in demand, drop in rental fees. In case of a failure to let the premises at planned prices or in planned scopes, also in case current tenants terminate their lease agreements, the income of the Company could decrease, whereas fixed costs would remain the same. Accordingly, the profit of the Company would decrease.

Risk of valuation of the Company's assets

The assets of the Company will be evaluated according to the main rules set in the Articles of Association and the Accounting Policy of the Management Company. Valuation of individual assets held by the Company shall be performed by the independant appraiser, however such valuation of assets shall be only determining the value of the assets, which does not automatically mean the exact sale price of an investment held by the Company, which depends on many circumstances, for example, economic and other conditions, which cannot be controlled. Thus, the sale price of investments held by the Company can be higher or lower than the value of assets determined by a property appraiser.

Competition risk

The Company, investing into investment objects, will compete with other investors, including, without limitation, with other investment companies or real estate investment funds. Thus, there is a risk that competition with other investors will demand that the Company would conduct transactions at less favourable conditions than it would be possible in other cases.

18.3. RISK FACTORS RELATED TO THE COMPANY'S SHARES (INVESTMENTS THERETO)

Market risk

Acquisition of Shares entails the risk to incur losses due to unfavourable changes in the Share price in the market. A drop in the price of the Shares can be caused by negative changes in the value of assets and profitability of the Company, general share market trends in the region and in the world. Trade in Shares can depend on comments of financial brokers and analysts and announced independent analyses about the Company and its activities. If the analysts give an adverse opinion about prospects of the Shares, this can also have a negative effect on the price of Shares in the market. In assessing Shares, nonprofessional investors are advised to address intermediaries of public trading or other specialists in this field for help.

Dividend payment risk

Though the Company has approved its dividend payment policy, payment of dividend to Shareholders is not guaranteed and will depend on profitability of activities, investments plans and the general financial situation.

Liquidity of the Issuer's Shares is not guaranteed

It may be possible that in case an investor wants to urgently sell the Issuer's securities (especially a large number of them), demand for them on the exchange will not be sufficient. Therefore, sale of shares can take some more time or the investor may be forced to sell shares at a lower price. Analogous consequences could appear after the exclusion of the Company's Shares from the Secondary List of Nasdaq. Besides, in case of deterioration of the Company's financial situation, demand for the Shares of the Company and, at the same time, their price may decrease.

18.4. INFORMATION ABOUT THE EXTENT OF RISK AND ITS MANAGEMENT IN THE COMPANY

Information on the extent of risks and management of them is disclosed in the section 3 of explanatory notes of consolidated and company's financial statements in 2019.

18.5. THE MOST IMPORTANT RISK FACTORS DURING THE REPORTING PERIOD

In 2018 and during the reporting period the most important risk factor was Reliance on the administrator of the Company's property. A description of the risk factor and a brief commentary:

The Company transferred its asset management to its subsidiary UAB Proprietas on 1 January 2018. The transfer of property administration was smooth, the real estate managers team of Proprietas was finalized in 2018. Whereas in 2019 the real estate managers team was strengthened.

Reliance on the administrator of the Company's property

On 2 January 2013 the Company has entered into an agreement with a third party for property management and administration services on part of Company's asset portfolio. An agreement was terminated on 1 January 2018, after the Company's subsidiary Proprietas, UAB and the Company signed a property management and administration agreement. The detailed list of buildings, administered, based on this agreement is provided in Section 2.3. of the Company's consolidated annual report "Information about the Issuer's group of companies". Under this agreement the third party, as an administrator of the property, is committed to increase Company's value and maintain high quality of service for buildings' tenants and employees. In case of change in administrative prices in the market, new contracts under less favourable conditions can be entered into with administrator, which may directly influence the increase in Company's costs.

18.6. THE MAIN INDICATIONS ABOUT INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS RELATED TO THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The Audit Committee supervises preparation of the consolidated financial statements. systems of internal control and financial risk management and how the company follows legal acts that regulate preparation of consolidated financial statements.

The Management company of INVL Baltic Real Estate is responsible for the supervision and final review of the consolidated financial statements. To order to manage these functions properly, the Management company is using an external provider of relevant services. Management company, together with the accounting service provider constantly reviews International Financial Reporting Standards (IFRS) in order to implement in time IFRS changes, analyses company's and group's significant deals, ensures collecting information from the group's companies and timely and fair preparation of this information for the financial statements, periodically informs the Board of the Management company about the preparation process of financial statements.

Accounting of all the Company Group's entities is provided by the same external accounting service provider (Invalda INVL AB) by using the unified accounting system, the standard chart of accounts and by applying unified accounting principles. Standardized data collection files prepared by Excel program are used for preparation of consolidated numbers. It also facilitates the automatic reconciliation and elimination of balances and transactions between subsidiaries in the preparation of consolidated accounts. Internal control of the financial numbers of the Group's entities and of the Group financial statements durint the reporting period was provided by CFO of external accounting service provider and chief financier of the Management Company.

19 Issuer's and its group companies' non – financial results. Information related to social responsibility. environment and employees

19.1. RESPONSIBLE BUSINESS ACTIONS IN THE COMPANY

The management of the Company is transferred to the asset management company INVL Asset Management, which applies the Policy of Equal Opportunities in its activities. The Policy specifies that the Company organizes its activities in a way that employees, despite of their duties and the need to upgrade their qualifications, are secure about equal working conditions, opportunities to develop competence, etc. Equally, the same benefits are granted regardless of the gender, race, nationality, language, origin, social status, believes or convictions, age, sexual orientation, disability, ethnicity, religion, marital status, intention of having children's or membership of the political party or association.

INVL Asset Management has joined the UN-supported Principles for Responsible Investment (PRI) in the middle of 2017.

The PRI, founded in 2006, is a global network of over 1700 investors, aims to assess the investment implications of environmental, social and governance (ESG) factors. An economically efficient, sustainable global financial system is considered a necessity for long-term value creation. Investors who support the PRI voluntarily work to apply the principles in their investment activities.

Six specific responsible investment Principles are outlined by the PRI. They provide a menu of possible actions for incorporating ESG issues into investment practice – from investment analysis and decision-making to their incorporation into ownership policies and practices. Additionally, signatories to the Principles are encouraged to promote the Principles' acceptance in the investment industry and to work together for their effective implementation.

19.2. EMPLOYEES

At the end of 2019, as well as in 2018, 2017 and in 2016 INVL Baltic Real Estate did not have any employees. Two (2) employees had been working at INVL Baltic Real Estate at the end of 2015. The number of employees has changed because of the changes of the legal status of the Company. The management and all the functions earlier performed by the Company's employees were transferred to the Management Company.

There were 11 employees working at INVL Baltic Real Estate portfolio companies on 31 December 2019, 8 - employees – in 2018, 6 employees – in 2017, 4 employees – in 2016 and 2015. Number of employees in the portfolio Companies has changed in 2018 due to the concluded administrative agreement between the Company's portfolio company UAB Proprietas and the Company itself, also because of the need to perform administrative services.

19.3. ENVIRONMENTAL PROTECTION

Talent Garden Vilnius among Company's real estate portfolio pays special attention to environmental protection. Talent Garden Vilnius is a coworking space located at Vilniaus str 33 and managed by the Company. Opened in 2019, the coworking space incorporates the latest in ventilation, air conditioning, heating and indoor lighting technologies to save energy. The facility actively collects waste, uses smart water and electrical appliances that conserve natural resources.

20 Information about agreements of the Company and its managing bodies, members of the formed committees, or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated in view of the change of the control of the Company.

There are no agreements of the company and the Members of the Board, Members of the Investment Committee or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated in view of the change of the control of the company.

21 Significant investments made during the reporting period

The main investment in 2019 was the establishment of the coworking space Talent Garden Vilnius located at Vilniaus str 33 and the refurbishment of Palanga str 4 real estate object. The investment amounted to about EUR 2 million.

22 Information about significant agreements to which the issuer is a party, which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder

There are no significant agreements of the company which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder.

23 Information on the related parties' transactions

Information on the related parties' transactions is disclosed in consolidated annual financial statements' 18 note of explanatory notes for the year of 2019.

In addition, information regarding Transactions with Related Parties, according to the Law on Companies article 37 (2) , is published on the Company's web site – "For Investors" → "Legal documents". The link to the Company's web site: https://bre.invl.com/lit/en/for-investors/documentslegal-documents

At the time the report was published, the Company provides information about Company's Transactions with Related Parties in the Annex 3 part 5 of the consolidated annual report.

Pursuant to paragraph 10 of Article 37 (2) of the Law on Companies of the Republic of Lithuania, the Company report the amounts of the Company's transactions with related parties, which were implemented in the ordinary course of business and with the same related party in the financial year.

	Transaction value, Eur
Related party*	Sale income from related party	Purchase costs from related party
AB Invalda INVL Code 121304349 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	24,304	6,951
UAB Inservis Code 126180446 Juozapaviciaus str. 6, Vilnius, Lithuania Register of Legal Entities	38,692	121,925
UAB INVL Asset Management Code 126263073 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	194,195	568,995
UAB FMĮ INVL Finasta Code 304049332 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	21,390
UAB Proprietas Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities		378,347

Related party*	Balance of loans granted 01-01- 2019, Eur	Loans granted during 2019, Eur	Interest calculated during 2019, Eur	Balance of loans granted 31-12-2019, Eur
SIA DBP Invest (Įmonės kodas 40103463830 Lapegles", Stuniši, Olaines raj., Latvija Latvijos Respublikos įmonių registras)	4,793		160	4,953
UAB Rovelija Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	286,237		12,881	299,118
UAB Proprietas Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	54,665	310,000	6,218	370,883

Related party *	Balance of loans received 01-01-2019, Eur	Loans received during 2019, Eur	Interest calculated during 2019, Eur	Balance of loans granted 31-12-2019, Eur
AB Invalda INVL Code 121304349 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	0	1,500,000	6,473	1,506,473

2019 ANNUAL REPORT | 123

Related party *	Increase of the Authorised capital, Eur
UAB Proprietas Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	232,000
UAB Rovelija Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	5,800

* The relation between the Company and the Related party is described in Part 5 of Annex 3 of the Consolidated Annual Report. Except FMI INVL Finasta, UAB, which is 100 percent managed by Invalda INVL, AB. Invalda INVL, AB owns 30 percent of shares in UTIB INVL Baltic Real Estate

24 Information on harmful transactions in which the issuer is a party

There were no harmful transactions (those that are not in line with issuer's goals, not under usual market terms, harmful to the shareholders' or stakeholders' interests, etc.) made in the name of the issuer that had or potentially could have negative effects in the future on the issuer's activities or business results. There were also no transactions where a conflict of interest was present between the managing bodies of the Management company, members of the Investment Committee, controlling shareholders' or other related parties' obligations to the issuer and their private interests.

25 References to and additional explanations of the data presented in the annual financial statements and consolidated financial statements

All data is presented in consolidated and company's financial statements' of explanatory notes for the year of 2019.

26 Information on Audit Company

The company have not approved criteria for selection of the audit company. The audit of the annual financial statements of the company for the financial year of 2019 was provided by the audit company PricewaterhouseCoopers. During the General Shareholders' Meeting of the company, held on 18 October 2019, the audit company PricewaterhouseCoopers, UAB was elected to provide audit services on annual financial statements of the company for the financial year of 2019. It was decided to set the payment of EUR 16,900 for audit of annual financial statements set and opinion on the annual report (VAT will be calculated and payed additionally in accordance with order established in legal acts). To authorise the management company of INVL Baltic Real Estate to negotiate other terms and conditions of the audit services contract.

Audit Company	PricewaterhouseCoopers, UAB
Address of the registered office	J. Jasinskio str. 16B, LT-03163, Vilnius
Code	111473315
Telephone	(+370 5) 239 2300
E-mail	vilnius@lt.pwc.com
Website	www.pwc.com/lt

No internal audit is performed in the company.

27 Data on the publicly disclosed information

The information publicly disclosed by INVL Baltic Real Estate during 2019 is presented on the company's website Company's website (For investors → News). Link: https://bre.invl.com/lit/en/naujienu-centras).

Table 27.1. Summary of publicly disclosed information

Date of disclosure	Brief description of disclosed information
03.01.2019	Notification on transactions on the issuer's securities
09.01.2019	Notification on transactions on the issuer's securities
14.01.2019	Notification on transactions on the issuer's securities
17.01.2019	Notification on transactions on the issuer's securities
23.01.2019	Notification on transactions on the issuer's securities
23.01.2019	Notification on transactions on the issuer's securities
28.01.2019	Notification on transactions on the issuer's securities
28.02.2019	INVL Baltic Real Estate Interim information for 12 months of 2018
18.03.2019	Audited results of INVL Baltic Real Estate group of 2018
18.03.2019	Announcement of net asset value of INVL Baltic Real Estate as of 31 December 2018
18.03.2019	The proposal to allocate dividends to the shareholders of INVL Baltic Real Estate for the year 2018
21.03.2019	Regarding the change of regulatory activity form
22.03.2019	Notification on transactions on the issuer's securities
29.03.2019	Notification on transactions on the issuer's securities
05.04.2019	Convocation of the Ordinary General Shareholders Meeting of INVL Baltic Real Estate and draft resolutions
05.04.2019	The proposal to allocate dividends to the shareholders of INVL Baltic Real Estate for the year 2018 and approval of the new wording of the Articles of Association
26.04.2019	INVL Baltic Real Estate signed the amendment of the Depository Services Agreement
26.04.2019	Shareholders of INVL Baltic Real Estate approved dividends allocation for the year 2018 and of the new wording of the Articles of Association
26.04.2019	Audited annual information of INVL Baltic Real Estate for 2018
26.04.2019	Resolutions of the General Ordinary Shareholders meeting of INVL Baltic Real Estate
30.04.2019	INVL Baltic Real Estate Interim information for 3 months of 2019
30.04.2019	The agreement for the sale of plots in Latvia, by the company managed by INVL Baltic Real Estate, was terminated
30.04.2019	Announcement of net asset value of INVL Baltic Real Estate as of 31 March 2019
08.05.2019	Notification on transactions on the Issuer's securities
15.05.2019	Notification on transactions on the Issuer's securities
21.05.2019	Notification on transactions on the Issuer's securities
21.05.2019	Regarding information received by INVL Asset Management, the Management Company of INVL Baltic Real Estate
23.05.2019	Procedure for the payout of dividends for the year 2018
28.05.2019	Notification on transactions on the issuer's securities
05.06.2019	Notification on transactions on the issuer's securities

Date of disclosure	Brief description of disclosed information
06.06.2019	The new wording of the Articles of Association of INVL Baltic Real Estate were registered
11.06.2019	Notification on transactions on the issuer's securities
17.06.2019	Notification on transactions on the issuer's securities
28.06.2019	INVL Baltic Real Estate is bringing international coworking network Talent Garden to Vilnius
03.07.2019	Notification on transactions on the issuer's securities
05.07.2019	Notification on transactions on the issuer's securities
19.08.2019	INVL Baltic Real Estate Interim information for 6 months of 2019
19.08.2019	Announcement of net asset value of INVL Baltic Real Estate on 30 June 2019
23.08.2019	Notification on transactions on the issuer's securities
23.08.2019	Regarding the approval of INVL Baltic Real Estate document
27.08.2019	Notification on transactions on the issuer's securities
30.08.2019	Notification on transactions on the issuer's securities
05.09.2019	Notification on transactions on the issuer's securities
11.09.2019	Notification on transactions on the issuer's securities
26.09.2019	Convocation of the General Extraordinary Shareholders Meeting of INVL Baltic Real Estate and draft resolutions on agenda issue
18.10.2019	Resolutions of the General Extraordinary Shareholders meeting of INVL Baltic Real Estate
31.10.2019	Announcement of net asset value of INVL Baltic Real Estate on 30 September 2019
31.10.2019	INVL Baltic Real Estate Interim information for 9 months of 2019
12.12.2019	INVL Baltic Real Estate opened coworking network Talent Garden Vilnius
16.12.2019	INVL Baltic Real Estate investor's calendar for 2020
19.12.2019	Regarding possible sale of part of INVL Baltic Real Estate's

Table 27.2. Summary of the notifications on transactions in INVL Baltic Real Estate shares concluded by managers of the Company during 2019.

Date	Person	Number of securities	Security price (EUR)	Total Value of transaction (EUR)	Form of transaction	Type of transaction	Place of transaction	Form of settlement
02.01.2019	Invalda INVL, AB	413	2.42	999.46	acquisition	share sale purchase	AUTO	money
03.01.2019	Invalda INVL, AB	38	2.42	91.96	acquisition	share sale purchase	AUTO	money
03.01.2019	Invalda INVL, AB	375	2.42	907.50	acquisition	share sale purchase	AUTO	money
07.01.2019	Invalda INVL, AB	407	2.46	1,001.22	acquisition	share sale purchase	AUTO	money
08.01.2019	Invalda INVL, AB	407	2.460	1,001.22	acquisition	share sale purchase	AUTO	money
10.01.2019	Invalda INVL, AB	403	2.48	999.44	acquisition	share sale purchase	AUTO	money
11.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money

Date	Person	Number of securities	Security price (EUR)	Total Value of transaction (EUR)	Form of transaction	Type of transaction	Place of transaction	Form of settlement
14.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
15.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
16.01.2019	Invalda INVL, AB	125	2.44	305	acquisition	share sale purchase	AUTO	money
16.01.2019	Invalda INVL, AB	285	2.44	695.40	acquisition	share sale purchase	AUTO	money
18.01.2019	Invalda INVL, AB	407	2.46	1,001.22	acquisition	share sale purchase	AUTO	money
21.01.2019	Invalda INVL, AB	407	2.46	1,001.22	acquisition	share sale purchase	AUTO	money
22.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
23.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
25.01.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
19.30.2019	Invalda INVL, AB	394	2.54	1,000.76	acquisition	share sale purchase	AUTO	money
20.03.2019	Invalda INVL, AB	1	2.54	2.54	acquisition	share sale purchase	AUTO	money
20.03.2019	Invalda INVL, AB	393	2.54	998.22	acquisition	share sale purchase	AUTO	money
21.03.2019	Invalda INVL, AB	403	2.48	999.44	acquisition	share sale purchase	AUTO	money
26.03.2019	Invalda INVL, AB	854	2.50	2,135.00	acquisition	share sale purchase	AUTO	money
27.03.2019	Invalda INVL, AB	346	2.50	865	acquisition	share sale purchase	AUTO	money
27.03.2019	Invalda INVL, AB	508	2.50	1,270.00	acquisition	share sale purchase	AUTO	money
28.03.2019	Invalda INVL, AB	400	2.50	1,000.00	acquisition	share sale purchase	AUTO	money
28.03.2019	Invalda INVL, AB	100	2.50	250	acquisition	share sale purchase	AUTO	money
28.03.2019	Invalda INVL, AB	354	2.50	885	acquisition	share sale purchase	AUTO	money
29.03.2019	Invalda INVL, AB	400	2.50	1,000.00	acquisition	share sale purchase	AUTO	money
29.03.2019	Invalda INVL, AB	40	2.50	100	acquisition	share sale purchase	AUTO	money
03.05.2019	Invalda INVL, AB	400	2.50	1,000.00	acquisition	share sale purchase	AUTO	money
06.05.2019	Invalda INVL, AB	400	2.50	1,000.00	acquisition	share sale purchase	AUTO	money
07.05.2019	Invalda INVL, AB	607	2.50	1,517.50	acquisition	share sale purchase	AUTO	money
10.05.2019	Invalda INVL, AB	1	2.52	2.52	acquisition	share sale purchase	AUTO	money

Date	Person	Number of securities	Security price (EUR)	Total Value of transaction (EUR)	Form of transaction	Type of transaction	Place of transaction	Form of settlement
10.05.2019	Invalda INVL, AB	601	2.52	1,514.52	acquisition	share sale purchase	AUTO	money
13.05.2019	Invalda INVL, AB	187	2.44	456.28	acquisition	share sale purchase	AUTO	money
13.05.2019	Invalda INVL, AB	200	2.44	488	acquisition	share sale purchase	AUTO	money
13.05.2019	Invalda INVL, AB	23	2.44	56.12	acquisition	share sale purchase	AUTO	money
14.05.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
16.05.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
17.05.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
24.05.2019	Invalda INVL, AB	122	2.44	297.68	acquisition	share sale purchase	AUTO	money
27.05.2019	Invalda INVL, AB	75	2.44	183	acquisition	share sale purchase	AUTO	money
27.05.2019	Invalda INVL, AB	441	2.44	1,076.04	acquisition	share sale purchase	AUTO	money
31.05.2019	Invalda INVL, AB	516	2.44	1,259.04	acquisition	share sale purchase	AUTO	money
03.06.2019	Invalda INVL, AB	347	2.44	846.68	acquisition	share sale purchase	AUTO	money
03.06.2019	Invalda INVL, AB	63	2.44	153.72	acquisition	share sale purchase	AUTO	money
04.06.2019	Invalda INVL, AB	8	2.42	19.36	acquisition	share sale purchase	AUTO	money
04.06.2019	Invalda INVL, AB	277	2.42	670.34	acquisition	share sale purchase	AUTO	money
06.06.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
10.06.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
12.06.2019	Invalda INVL, AB	40	2.44	97,60	acquisition	share sale purchase	AUTO	money
13.06.2019	Invalda INVL, AB	63	2.44	153.72	acquisition	share sale purchase	AUTO	money
14.06.2019	Invalda INVL, AB	154	2.44	375.76	acquisition	share sale purchase	AUTO	money
28.06.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
01.07.2019	Invalda INVL, AB	124	2.44	302.56	acquisition	share sale purchase	AUTO	money
04.07.2019	Invalda INVL, AB	410	2.44	1,000.40	acquisition	share sale purchase	AUTO	money
20.08.2019	Invalda INVL, AB	6	2.50	15	acquisition	share sale purchase	AUTO	money

2019 ANNUAL REPORT	128

Date	Person	Number of securities	Security price (EUR)	Total Value of transaction (EUR)	Form of transaction	Type of transaction	Place of transaction	Form of settlement
20.08.2019	Invalda INVL, AB	133	2.50	332.50	acquisition	share sale purchase	AUTO	money
20.08.2019	Invalda INVL, AB	261	2.50	652.50	acquisition	share sale purchase	AUTO	money
22.08.2019	Invalda INVL, AB	395	2.52	995.40	acquisition	share sale purchase	AUTO	money
23.08.2019	Invalda INVL, AB	217	2.52	546.84	acquisition	share sale purchase	AUTO	money
23.08.2019	Invalda INVL, AB	180	2.52	453.60	acquisition	share sale purchase	AUTO	money
26.08.2019	Invalda INVL, AB	350	2.52	882	acquisition	share sale purchase	AUTO	money
27.08.2019	Invalda INVL, AB	24	2.52	60.48	acquisition	share sale purchase	AUTO	money
27.08.2019	Invalda INVL, AB	325	2.52	819	acquisition	share sale purchase	AUTO	money
28.08.2019	Invalda INVL, AB	9	2.52	22.68	acquisition	share sale purchase	AUTO	money
29.08.2019	Invalda INVL, AB	160	2.52	403.20	acquisition	share sale purchase	AUTO	money
02.09.2019	Invalda INVL, AB	394	2.54	1,000.76	acquisition	share sale purchase	AUTO	money
09.09.2019	Invalda INVL, AB	388	2.54	985.52	acquisition	share sale purchase	AUTO	money
03.09.2019	Invalda INVL, AB	6	2.54	15.24	acquisition	share sale purchase	AUTO	money
04.09.2019	Invalda INVL, AB	12	2.45	30.48	acquisition	share sale purchase	AUTO	money
04.09.2019	Invalda INVL, AB	103	2.54	261.62	acquisition	share sale purchase	AUTO	money
06.09.2019	Invalda INVL, AB	392	2.54	995.68	acquisition	share sale purchase	AUTO	money
09.09.2019	Invalda INVL, AB	24	2.54	60.96	acquisition	share sale purchase	AUTO	money
09.09.2019	Invalda INVL, AB	158	2.54	401.32	acquisition	share sale purchase	AUTO	money

Explanations:

AUTO – automated trade concluded on a regulated market.

Real estate fund manager of the Management Company

INVL Asset Management Vytautas Bakšinskas

APPENDIX 1. INFORMATION ABOUT GROUP COMPANIES, THEIR CONTACT DETAILS

Company	Registration information	Type of activity	Contact details
Rovelija, UAB	Code 302575846 Address – Gynėjų str. 14, Vilnius Legal form – private limited liability company Registration date 20.12.2010	investments into commercial rental real estate	Tel. +370 5 2790601 breinfo@invl.com
Perspektyvi Veikla, UAB	Code 302607087 Address – Gynėjų str. 14, Vilnius Legal form – private limited liability company Registration date 25.03.2011	carries no activity	Tel. +370 5 2790601 breinfo@invl.com
Proprietas, UAB	Code 303252098 Address – Gynėjų str. 14, Vilnius Legal form – private limited liability company Registration date 27.02.2014	investments into commercial rental real estate	Tel. +370 5 2790601 proprietas@invl.com
DOMMO grupa SIA	Code 40003733866 Address – Lapegles, Stūnīši, Olaines pag., Olaines nov., LV 2127 Latvia Legal form – private limited liability company Registration date 17.03.2005	investments into commercial rental real estate	Tel. +370 5 2790601 breinfo@invl.com
DOMMO biznesa parks SIA	Code 40003865398 Address – Lapegles, Stūnīši, Olaines pag., Olaines nov., LV 2127 Latvia Legal form – private limited liability company Registration date 13.10.2006	investments into commercial rental real estate	Tel. +370 5 2790601 breinfo@invl.com
DOMMO SIA	Code 40003787271 Address – Lapegles, Stūnīši, Olaines pag., Olaines nov., LV 2127 Latvia Legal form – private limited liability company Registration date 05.12.2005	Real estate	Tel. +370 5 2790601 breinfo@invl.com
DBP Invest SIA	Code 40103463830 Address – Brīvības iela 74-3, Rīga, LV-1011 Latvia Legal form – private limited liability company Registration date 28.09.2011	carries no activity

APPENDIX 2. CORPORATE GOVERNANCE CODE

UTIB INVL Baltic Real Estate (hereinafter referred to as the "Company"), acting in compliance with Article 22 (3) of the Law of the Republic of Lithuania on Securities and paragraph 24.5 of the Listing Rules of AB Nasdaq Vilnius, hereby discloses how it complies with the Corporate Governance Code for the Companies listed on Nasdaq Vilnius as well as its specific provisions or recommendations. In case of non-compliance with this Code or some of its provisions or recommendations, the specific provisions or recommendations that are not complied with must be indicated and the reasons for such non-compliance must be specified. In addition, other explanatory information indicated in this form is provided.

1. Summary of the Corporate Governance Report:

The management of INVL Baltic Real Estate was transferred to the management company INVL Asset Management on 22 December 2016 as soon as the Central Bank of the Republic of Lithuania granted special closed-ended type real estate investment company INVL Baltic Real Estate the license of closed-ended type investment company. The rights and duties of the Board and the head of the Company were also transferred to the Management company.

The Management Company is responsible for convocation and organisation of the general meeting of Shareholders of the Company, giving notices about publically not disclosed information under the procedure set by legal acts, organisation of activities of the Company, proper management of information about activities of the Company and performance of other functions assigned to the Management company.

The CEO, the Board and the Investment committee formed by a decision of the Board are acting to ensure the management of INVL Baltic Real Estate in the Management company (more about the competencies of the management bodies, formation and procedure of work is set in the IV section "Issuer's Managing Bodies" of the report).

The information concerning the compliance with the Governance code after INVL Baltic Real Estate received the license of closed-ended type investment company is provided below.

The information concerning the compliance with the Governance code before the issue of the license of closed-ended type investment company corresponds the information submitted in the Appendix 2 of the annual report for the year 2015 and is available on Company's website.

PRINCIPLES/ RECOMMENDATIONS	YES/NO/ NOT APPLICABLE	COMMENTARY
Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders' rights
The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate governance framework should protect the rights of shareholders.
1.1. All shareholders should be provided with access to the information and/or documents established in the legal acts on equal terms. All shareholders should be furnished with equal opportunity to participate in the decision-making process where significant corporate matters are discussed.	YES
1.2. It is recommended that the company's capital should consist only of the shares that grant the same rights to voting, ownership, dividend and other rights to all of their holders.	YES
1.3. It is recommended that investors should have access to the information concerning the rights attached to the shares of the new issue or those issued earlier in advance, i.e. before they purchase shares.	YES

2. Structured table for disclosure:

13	1

1.4. Exclusive transactions that are particularly important to the company, such as transfer of all or almost all assets of the company which in principle would mean the transfer of the company, should be subject to approval of the general meeting of shareholders.	YES
1.5. Procedures for convening and conducting a general meeting of shareholders should provide shareholders with equal opportunities to participate in the general meeting of shareholders and should not prejudice the rights and interests of shareholders. The chosen venue, date and time of the general meeting of shareholders should not prevent active participation of shareholders at the general meeting. In the notice of the general meeting of shareholders being convened, the company should specify the last day on which the proposed draft decisions should be submitted at the latest.	YES
1.6. With a view to ensure the right of shareholders living abroad to access the information, it is recommended, where possible, that documents prepared for the general meeting of shareholders in advance should be announced publicly not only in Lithuanian language but also in English and/or other foreign languages in advance. It is recommended that the minutes of the general meeting of shareholders after the signing thereof and/or adopted decisions should be made available publicly not only in Lithuanian language but also in English and/or other foreign languages. It is recommended that this information should be placed on the website of the company. Such documents may be published to the extent that their public disclosure is not detrimental to the company or the company's commercial secrets are not revealed.	YES
1.7. Shareholders who are entitled to vote should be furnished with the opportunity to vote at the general meeting of shareholders both in person and in absentia. Shareholders should not be prevented from voting in writing in advance by completing the general voting ballot.	YES
1.8. With a view to increasing the shareholders' opportunities to participate effectively at general meetings of shareholders, it is recommended that companies should apply modern technologies on a wider scale and thus provide shareholders with the conditions to participate and vote in general meetings of shareholders via electronic means of communication. In such cases the security of transmitted information must be ensured and it must be possible to identify the participating and voting person.	NO	Shareholders can vote via an attorney or by completing the general voting bulletin, as for now shareholders cannot participate and vote in General Shareholders' Meetings via electronic means of communication.
1.9. It is recommended that the notice on the draft decisions of the general meeting of shareholders being convened should specify new candidatures of members of the collegial body, their proposed remuneration and the proposed audit company if these issues are included into the agenda of the general meeting of shareholders. Where it is proposed to elect a new member of the collegial body, it is recommended that the information about his/her	YES

educational background, work experience and other managerial positions held (or proposed) should be provided.
1.10. Members of the company's collegial management body, heads of the administration4 or other competent persons related to the company who can provide information related to the agenda of the general meeting of shareholders should take part in the general meeting of shareholders. Proposed candidates to member of the collegial body should also participate in the general meeting of shareholders in case the election of new members is included into the agenda of the general meeting of shareholders.	YES

Principle 2: Supervisory board

2.1. Functions and liability of the supervisory board

The supervisory board of the company should ensure representation of the interests of the company and its shareholders, accountability of this body to the shareholders and objective monitoring of the company's operations and its management bodies as well as constantly provide recommendations to the management bodies of the company.

The supervisory board should ensure the integrity and transparency of the company's financial accounting and control system.

2.1.1. Members of the supervisory board should act in good faith, with care and responsibility for the benefit and in the interests of the company and its shareholders and represent their interests, having regard to the interests of employees and public welfare. 2.1.2. Where decisions of the supervisory board may have a	the Company, NOT Company and following the APPLICABLE formed. for adopting	The management of the Company is transferred to Management which carries the functions of the Board and the Manager of the Company. The Supervisory
different effect on the interests of the company's shareholders, the supervisory board should treat all shareholders impartially and fairly. It should ensure that shareholders are properly informed about the company's strategy, risk management and control, and resolution of conflicts of interest.		Board is not formed the the Management Company. By the decision of the Board of the Management
2.1.3. The supervisory board should be impartial in passing decisions that are significant for the company's operations and strategy. Members of the supervisory board should act and pass decisions without an external influence from the persons who elected them.		Articles of Association of the INVL Baltic Real Estate Investment Committee is
2.1.4. Members of the supervisory board should clearly voice their objections in case they believe that a decision of the supervisory board is against the interests of the company. Independent5 members of the supervisory board should: a) maintain independence of their analysis and decision-making; b) not seek or accept any unjustified privileges that might compromise their independence.		The Investment Committee is the collegial investment and management decision making body responsible decisions regarding the management of the Managed company's

⁴ For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions.

⁵ For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the criteria of unrelated parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania.

	2.1.5. The supervisory board should oversee that the company's tax planning strategies are designed and implemented in accordance with the legal acts in order to avoid faulty practice that is not related to the long-term interests of the company and its shareholders, which may give rise to reputational, legal or other risks.		assets and representing and protecting the Managed Company's interests.
	2.1.6. The company should ensure that the supervisory board is provided with sufficient resources (including financial ones) to discharge their duties, including the right to obtain all the necessary information or to seek independent professional advice from external legal, accounting or other experts on matters pertaining to the competence of the supervisory board and its committees.
	2.2. Formation of the supervisory board
	The procedure of the formation of the supervisory board should ensure proper resolution of conflicts of interest and effective and fair corporate governance.
2.2.1.	The members of the supervisory board elected by the general meeting of shareholders should collectively ensure the diversity of qualifications, professional experience and competences and seek for gender equality. With a view to maintain a proper balance between the qualifications of the members of the supervisory board, it should be ensured that members of the supervisory board, as a whole, should have diverse knowledge, opinions and experience to duly perform their tasks.		The management of the Company is transferred to the Management Company, which carries the functions of the Board and the Manager of the Company. The Supervisory Board is not formed the the Management Company
2.2.2.	Members of the supervisory board should be appointed for a specific term, subject to individual re-election for a new term in office in order to ensure necessary development of professional experience.
2.2.3. the	Chair of the supervisory board should be a person whose current or past positions constituted no obstacle to carry out impartial activities. A former manager or management board member of the company should not be immediately appointed as chair of the supervisory board either. Where company decides to depart from these recommendations, it should provide information on the measures taken to ensure impartiality of the supervision.	NOT APPLICABLE
2.2.4.	Each member should devote sufficient time and attention to perform his duties as a member of the supervisory board. Each member of the supervisory board should undertake to limit his other professional obligations (particularly the managing positions in other companies) so that they would not interfere with the proper performance of the duties of a member of the supervisory board. Should a member of the supervisory board attend less than a half of the meetings of the supervisory board throughout the financial year of the company, the shareholders of the company should be notified thereof.

2.2.5. When it is proposed to appoint a member of the supervisory board, it should be announced which members of the supervisory board are deemed to be independent. The supervisory board may decide that, despite the fact that a particular member meets all the criteria of independence, he/she cannot be considered independent due to special personal or company-related circumstances. 2.2.6. The amount of remuneration to members of the supervisory board for their activity and participation in meetings of the supervisory board should be approved by the general meeting of shareholders.
2.2.7. Every year the supervisory board should carry out an assessment of its activities. It should include evaluation of the structure of the supervisory board, its work organization and ability to act as a group, evaluation of the competence and work efficiency of each member of the supervisory board, and evaluation whether the supervisory board has achieved its objectives. The supervisory board should, at least once a year, make public respective information about its internal structure and working procedures.
Principle 3: Management Board
3.1. Functions and liability of the management board
The management board should ensure the implementation of the company's strategy and good corporate governance with due regard to the interests of its shareholders, employees and other interest groups.
3.1.1. The management board should ensure the implementation of the company's strategy approved by the supervisory board if the latter has been formed at the company. In such cases where the supervisory board is not formed, the management board is also responsible for the approval of the company's strategy.	YES
3.1.2. As a collegial management body of the company, the management board performs the functions assigned to it by the Law and in the articles of association of the company, and in such cases where the supervisory board is not formed in the company, it performs inter alia the supervisory functions established in the Law. By performing the functions assigned to it, the management board should take into account the needs of the company's shareholders, employees and other interest groups by respectively striving to achieve sustainable business development.	YES
3.1.3. The management board should ensure compliance with the laws and the internal policy of the company applicable to the company or a group of companies to which this company belongs. It should also establish the respective risk management and control measures aimed at ensuring regular and direct liability of managers.	YES

3.1.4. Moreover, the management board should ensure that the measures included into the OECD Good Practice Guidance6 on Internal Controls, Ethics and Compliance are applied at the company in order to ensure adherence to the applicable laws, rules and standards.	YES
3.1.5. When appointing the manager of the company, the management board should take into account the appropriate balance between the candidate's qualifications, experience and competence.	YES
3.2. Formation of the management board
3.2.1.The members of the management board elected by the supervisory board or, if the supervisory board is not formed, by the general meeting of shareholders should collectively ensure the required diversity of qualifications, professional experience and competences and seek for gender equality. With a view to maintain a proper balance in terms of the current qualifications possessed by the members of the management board, it should be ensured that the members of the management board would have, as a whole, diverse knowledge, opinions and experience to duly perform their tasks.	NOT APPLICABLE	Due to the specifics of the Company's activities, the General Shareholders Meeting of the Company does not elect the members of the Board of the Management Company.
3.2.2.Names and surnames of the candidates to become members of the management board, information on their educational background, qualifications, professional experience, current positions, other important professional obligations and potential conflicts of interest should be disclosed without violating the requirements of the legal acts regulating the handling of personal		Due to the specifics of the Company's activities, the General Shareholders Meeting of the Company does not elect the members of the Board of

requirements of the legal acts regulating the handling of personal data at the meeting of the supervisory board in which the management board or individual members of the management board are elected. In the event that the supervisory board is not formed, the information specified in this paragraph should be submitted to the general meeting of shareholders. The management board should, on yearly basis, collect data provided in this paragraph on its members and disclose it in the company's annual report.	NOT APPLICABLE	members of the Board of the Management Company. Information about the education, qualification, professional experience and participation in the management of other companies of the managers of the Management Company and members of the Investment Committee of the Company is presented in the annual report of the
3.2.3.All new members of the management board should be		Company.
familiarized with their duties and the structure and operations of the company.	YES

⁶ Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/antibribery/44884389.pdf

136

3.2.4.Members of the management board should be appointed for a specific term, subject to individual re-election for a new term in office in order to ensure necessary development of professional experience and sufficiently frequent reconfirmation of their status.	YES
3.2.5.Chair of the management board should be a person whose current or past positions constitute no obstacle to carry out impartial activity. Where the supervisory board is not formed, the former manager of the company should not be immediately appointed as chair of the management board. When a company decides to depart from these recommendations, it should furnish information on the measures it has taken to ensure the impartiality of supervision.	NOT APPLICABLE	Due to the specifics of the Company's activities, the General Shareholders Meeting of the Company does not elect the members of the Board of the Management Company, whose elect the Chairman of the Board of the Management Company.
3.2.6. Each member the management board should give sufficient time and attention to perform the duties of a member of the Board. If a member of the management Board participated in less than half of the board meetings during the financial year of the Company, the Company's Supervisory Board should be informed if the Supervisory Board is not formed in the Company - the General Shareholder Meeting.	NOT APPLICABLE	Due to the specifics of the Company's activities, attendance of the Management Company's Board meetings is not recorded in the Annual report of the Company. The Company discloses information on the number of the Company's Investment Committee meetings and attendance of the meetings of the appointed Committee members.
3.2.7. In the event that the management board is elected in the cases established by the Law where the supervisory board is not formed at the company, and some of its members will be independent7 , it should be announced which members of the management board are deemed as independent. The management board may decide that, despite the fact that a particular member meets all the criteria of independence established by the Law, he/she cannot be considered independent due to special personal or company-related circumstances.	NO	Due to Company's management specifics, independency criteria is not applicable to the managers of the Management Company.
3.2.8. The general meeting of shareholders of the company should approve the amount of remuneration to the members of the management board for their activity and participation in the meetings of the management board.	NO	The management fee, payable to the Management Company is disclosed in the Annual Report of the Company, according to the valid management agreement between the Company and

⁷ For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of unrelated persons defined in Article 33(7) of the Law on Companies of the Republic of Lithuania.

		the Management Company. The managers of the Management Company and appointed members of the Investment Committee receive renumeration according to the employment contract signed between them and the Management Company.
3.2.9.The members of the management board should act in good faith, with care and responsibility for the benefit and the interests of the company and its shareholders with due regard to other stakeholders. When adopting decisions, they should not act in their personal interest; they should be subject to no-compete agreements and they should not use the business information or opportunities related to the company's operations in violation of the company's interests.	YES
3.2.10. Every year the management board should carry out an assessment of its activities. It should include evaluation of the structure of the management board, its work organization and ability to act as a group, evaluation of the competence and work efficiency of each member of the management board, and evaluation whether the management board has achieved its objectives. The management board should, at least once a year, make public respective information about its internal structure and working procedures in observance of the legal acts regulating the processing of personal data.	NOT APPLICABLE	Due to Company's management specifics, the managers of the Management Company do not carry out assessment of its activities.
Principle 4: Rules of procedure of the supervisory board and the management board of the company The rules of procedure of the supervisory board, if it is formed at the company, and of the management board should ensure efficient operation and decision-making of these bodies and promote active cooperation between the company's management bodies.
4.1. The management board and the supervisory board, if the latter is formed at the company, should act in close cooperation in order to attain benefit for the company and its shareholders. Good corporate governance requires an open discussion between the management board and the supervisory board. The management board should regularly and, where necessary, immediately inform the supervisory board about any matters significant for the company that are related to planning, business development, risk management and control, and compliance with the obligations at the company. The management board should inform he supervisory board about any derogations in its business development from the previously formulated plans and objectives by specifying the reasons for this. 4.2. It is recommended that meetings of the company's collegial	NOT APPLICABLE	The management of the Company is transferred to the Management Company, which carries the functions of the Board and the Manager of the Company. The Supervisory Board is not formed the the Management Company.
bodies should be held at the respective intervals, according to the pre-approved schedule. Each company is free to decide how often	YES

meetings of the collegial bodies should be convened but it is recommended that these meetings should be convened at such intervals that uninterruptable resolution of essential corporate governance issues would be ensured. Meetings of the company's collegial bodies should be convened at least once per quarter.
4.3. Members of a collegial body should be notified of the meeting being convened in advance so that they would have sufficient time for proper preparation for the issues to be considered at the meeting and a fruitful discussion could be held and appropriate decisions could be adopted. Along with the notice of the meeting being convened all materials relevant to the issues on the agenda of the meeting should be submitted to the members of the collegial body. The agenda of the meeting should not be changed or supplemented during the meeting, unless all members of the collegial body present at the meeting agree with such change or supplement to the agenda, or certain issues that are important to the company require immediate resolution.	YES
4.4. In order to coordinate the activities of the company's collegial bodies and ensure effective decision-making process, the chairs of the company's collegial supervision and management bodies should mutually agree on the dates and agendas of the meetings and close cooperate in resolving other matters related to corporate governance. Meetings of the company's supervisory board should be open to members of the management board, particularly in such cases where issues concerning the removal of the management board members, their responsibility or remuneration are discussed.	YES

Principle 5: Nomination, remuneration and audit committees

5.1. Purpose and formation of committees

The committees formed at the company should increase the work efficiency of the supervisory board or, where the supervisory board is not formed, of the management board which performs the supervisory functions by ensuring that decisions are based on due consideration and help organise its work in such a way that the decisions it takes would be free of material conflicts of interest.

Committees should exercise independent judgment and integrity when performing their functions and provide the collegial body with recommendations concerning the decisions of the collegial body. However, the final decision should be adopted by the collegial body.

5.1.1. Taking due account of the company-related circumstances		Due to the Company's
and the chosen corporate governance structure, the supervisory		management type and an
board of the company or, in cases where the supervisory board is		absence of employees, the
not formed, the management board which performs the supervisory		Nomination and
functions, establishes committees. It is recommended that the		Remuneration Committees
collegial body should form the nomination, remuneration and audit	NOT	are not formed. Audit
committees8	APPLICABLE	Committee members are
5.1.2. Companies may decide to set up less than three committees. In such case companies should explain in detail why they have chosen the alternative approach, and how the chosen approach corresponds with the objectives set for the three different committees.		elected by the General Shareholders Meeting.

⁸ The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of Financial Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public limited liability companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any other Member State) are under the obligation to set up an audit committee (the legal acts provide for the exemptions where the functions of the audit committee may be carried out by the collegial body performing the supervisory functions).

5.1.3. In the cases established by the legal acts the functions assigned to the committees formed at companies may be performed by the collegial body itself. In such case the provisions of this Code pertaining to the committees (particularly those related to their role, operation and transparency) should apply, where relevant, to the collegial body as a whole.
5.1.4. Committees established by the collegial body should normally be composed of at least three members. Subject to the requirements of the legal acts, committees could be comprised only of two members as well. Members of each committee should be selected on the basis of their competences by giving priority to independent members of the collegial body. The chair of the management board should not serve as the chair of committees.
5.1.5. The authority of each committee formed should be determined by the collegial body itself. Committees should perform their duties according to the authority delegated to them and regularly inform the collegial body about their activities and performance on a regular basis. The authority of each committee defining its role and specifying its rights and duties should be made public at least once a year (as part of the information disclosed by the company on its governance structure and practice on an annual basis). In compliance with the legal acts regulating the processing of personal data, companies should also include in their annual reports the statements of the existing committees on their composition, the number of meetings and attendance over the year as well as the main directions of their activities and performance.
5.1.6. With a view to ensure the independence and impartiality of the committees, the members of the collegial body who are not members of the committees should normally have a right to participate in the meetings of the committee only if invited by the committee. A committee may invite or request that certain employees of the company or experts would participate in the meeting. Chair of each committee should have the possibility to maintain direct communication with the shareholders. Cases where such practice is to be applied should be specified in the rules regulating the activities of the committee.
5.2. Nomination committee
5.2.1. The key functions of the nomination committee should be the following:
1) to select candidates to fill vacancies in the membership of supervisory and management bodies and the administration and recommend the collegial body to approve them. The nomination committee should evaluate the balance of skills, knowledge and experience in the management body, prepare a description of the functions and capabilities required to assume a particular position and assess the time commitment expected;	NOT APPLICABLE	Due to the Company's management type and an absence of employees, the Nomination Committee is
2) assess, on a regular basis, the structure, size and composition of the supervisory and management bodies as well as the skills, knowledge and activity of its members, and provide the collegial body with recommendations on how the required changes should be sought;		not formed.
3) devote the attention necessary to ensure succession planning.

5.2.2. When dealing with issues related to members of the collegial body who have employment relationships with the company and the heads of the administration, the manager of the company should be consulted by granting him/her the right to submit proposals to the Nomination Committee.
5.3. Remuneration committee
The main functions of the remuneration committee should be as follows:
1) submit to the collegial body proposals on the remuneration policy applied to members of the supervisory and management bodies and the heads of the administration for approval. Such policy should include all forms of remuneration, including the fixed-rate remuneration, performance-based remuneration, financial incentive schemes, pension arrangements and termination payments as well as conditions which would allow the company to recover the amounts or suspend the payments by specifying the circumstances under which it would be expedient to do so; 2) submit to the collegial body proposals regarding individual remuneration for members of the collegial bodies and the heads of the administration in order to ensure that they would be consistent with the company's remuneration policy and the evaluation of the performance of the persons concerned; 3) review, on a regular basis, the remuneration policy and its implementation.	NOT APPLICABLE	Due to the Company's management type, the Renumeration Committee is not formed.
5.4.Audit committee
5.4.1.The key functions of the audit committee are defined in the legal acts regulating the activities of the audit committee9	YES
5.4.2.All members of the committee should be provided with detailed information on specific issues of the company's accounting system, finances and operations. The heads of the company's administration should inform the audit committee about the methods of accounting for significant and unusual transactions where the accounting may be subject to different approaches.	YES
5.4.3.The audit committee should decide whether the participation of the chair of the management board, the manager of the company, the chief finance officer (or senior employees responsible for finance and accounting), the internal and external auditors in its meetings is required (and, if required, when). The committee should be entitled, when needed, to meet the relevant persons without members of the management bodies present.	YES

⁹ Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament and the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on the Audit of Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees approved by the Bank of Lithuania.

5.4.4.The audit committee should be informed about the internal auditor's work program and should be furnished with internal audit reports or periodic summaries. The audit committee should also be informed about the work program of external auditors and should receive from the audit firm a report describing all relationships between the independent audit firm and the company and its group.	NOT APPLICABLE	Due to the Company's management type, there is no internal auditors function in the Company
5.4.5.The audit committee should examine whether the company complies with the applicable provisions regulating the possibility of lodging a complaint or reporting anonymously his/her suspicions of potential violations committed at the company and should also ensure that there is a procedure in place for proportionate and independent investigation of such issues and appropriate follow-up actions.	NO	The Audit Commiittee of the Company does not examine if the Company complies the functions stated in 5.4.5.
5.4.6.The audit committee should submit to the supervisory board or, where the supervisory board is not formed, to the management board its activity report at least once in every six months, at the time that annual and half-yearly reports are approved.	YES/NO	In accordance with the provisions of the Audit Committee, the Audit Committee submits its activity reports to the Annual General Meeting of Shareholders.
Principle 6: Prevention and disclosure of conflicts of interest
The corporate governance framework should encourage members of the company's supervisory and management bodies to avoid conflicts of interest and ensure a transparent and effective mechanism of disclosure of conflicts of interest related to members of the supervisory and management bodies.
Any member of the company's supervisory and management body should avoid a situation where his/her personal interests are or may be in conflict with the company's interests. In case such a situation did occur, a member of the company's supervisory or management body should, within a reasonable period of time, notify other members of the same body or the body of the company which elected him/her or the company's shareholders of such situation of a conflict of interest, indicate the nature of interests and, where possible, their value.	YES
Principle 7: Remuneration policy of the company
The remuneration policy and the procedure for review and disclosure of such policy established at the company should prevent potential conflicts of interest and abuse in determining remuneration of members of the collegial bodies and heads of the administration, in addition it should ensure the publicity and transparency of the company's remuneration policy and its long-term strategy.
7.1. The company should approve and post the remuneration policy on the website of the company; such policy should be reviewed on		The Renumeration policy

strategy.		approval ar the General Shareholders Meeting
7.2. The remuneration policy should include all forms of remuneration, including the fixed-rate remuneration, performance based remuneration, financial incentive schemes, pension arrangements and termination payments as well as the conditions specifying the cases where the company can recover the disbursed amounts or suspend the payments.	NOT APPLICABLE	together with the approval of the audited results of 2019.
		Information about the benefits and loans for the Management Company is provided in the periodical

will be submitted for the

7.3. With a view to avoid potential conflicts of interest, the remuneration policy should provide that members of the collegial bodies which perform the supervisory functions should not receive remuneration based on the company's performance. 7.4. The remuneration policy should provide sufficient information	reports, financial statements. Also in the Management agreement between the Management company and INVL Blatic Real Estate approved by the General Shareholder
on the policy regarding termination payments. Termination payments should not exceed a fixed amount or a fixed number of annual wages and in general should not be higher than the non variable component of remuneration for two years or the equivalent thereof. Termination payments should not be paid if the contract is terminated due to inadequate performance.	Meeting.
7.5. In the event that the financial incentive scheme is applied at the company, the remuneration policy should contain sufficient information about the retention of shares after the award thereof. Where remuneration is based on the award of shares, shares should not be vested at least for three years after the award thereof. After vesting, members of the collegial bodies and heads of the administration should retain a certain number of shares until the end of their term in office, subject to the need to compensate for any costs related to the acquisition of shares.
7.6. The company should publish information about the implementation of the remuneration policy on its website, with a key focus on the remuneration policy in respect of the collegial bodies and managers in the next and, where relevant, subsequent financial years. It should also contain a review of how the remuneration policy was implemented during the previous financial year. The information of such nature should not include any details having a commercial value. Particular attention should be paid on the major changes in the company's remuneration policy, compared to the previous financial year.
7.7. It is recommended that the remuneration policy or any major change of the policy should be included on the agenda of the general meeting of shareholders. The schemes under which members and employees of a collegial body receive remuneration in shares or share options should be approved by the general meeting of shareholders.
Principle 8: Role of stakeholders in corporate governance

The corporate governance framework should recognize the rights of stakeholders entrenched in the laws or mutual agreements and encourage active cooperation between companies and stakeholders in creating the company value, jobs and financial sustainability. In the context of this principle the concept "stakeholders" includes investors, employees, creditors, suppliers, clients, local community and other persons having certain interests in the company concerned.

8.1. The corporate governance framework should ensure that the rights and lawful interests of stakeholders are protected.	YES
8.2. The corporate governance framework should create conditions for stakeholders to participate in corporate governance in the manner prescribed by law. Examples of participation by stakeholders in corporate governance include the participation of employees or their representatives in the adoption of decisions that	YES

are important for the company, consultations with employees or their representatives on corporate governance and other important matters, participation of employees in the company's authorized capital, involvement of creditors in corporate governance in the cases of the company's insolvency, etc. 8.3. Where stakeholders participate in the corporate governance process, they should have access to relevant information.	YES
8.4. Stakeholders should be provided with the possibility of reporting confidentially any illegal or unethical practices to the collegial body performing the supervisory function.	NO	The Company does not provide possibility of reporting confidentially any illegal or unethical practices
Principle 9: Disclosure of information The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues, including the financial situation, operations and governance of the company.
9.1. In accordance with the company's procedure on confidential information and commercial secrets and the legal acts regulating the processing of personal data, the information publicly disclosed by the company should include but not be limited to the following:	YES
9.1.1. operating and financial results of the company;	YES
9.1.2. objectives and non-financial information of the company;	YES
9.1.3. persons holding a stake in the company or controlling it directly and/or indirectly and/or together with related persons as well as the structure of the group of companies and their relationships by specifying the final beneficiary;	YES
9.1.4. members of the company's supervisory and management bodies who are deemed independent, the manager of the company, the shares or votes held by them at the company, participation in corporate governance of other companies, their competence and remuneration;	YES

9.1.5. reports of the existing committees on their composition, number of meetings and attendance of members during the last year as well as the main directions and results of their activities; YES 9.1.6. potential key risk factors, the company's risk management and supervision policy; YES

9.1.7. the company's transactions with related parties;	YES
9.1.8. main issues related to employees and other stakeholders (for instance, human resource policy, participation of employees in corporate governance, award of the company's shares or share options as incentives, relationships with creditors, suppliers, local community, etc.);	NO	Due to the Company's management type - transfer of the Company's management to the Management Company – the Company itself does not have any employees.
9.1.9. structure and strategy of corporate governance;	YES

9.1.10. initiatives and measures of social responsibility policy and anti-corruption fight, significant current or planned investment projects. This list is deemed minimum and companies are encouraged not to restrict themselves to the disclosure of information included into this list. This principle of the Code does not exempt companies from their obligation to disclose information as provided for in the applicable legal acts.	YES
9.2. When disclosing the information specified in paragraph 9.1.1 of recommendation 9.1, it is recommended that the company which is a parent company in respect of other companies should disclose information about the consolidated results of the whole group of companies.	YES
9.3. When disclosing the information specified in paragraph 9.1.4 of recommendation 9.1, it is recommended that the information on the professional experience and qualifications of members of the company's supervisory and management bodies and the manager of the company as well as potential conflicts of interest which could affect their decisions should be provided. It is further recommended that the remuneration or other income of members of the company's supervisory and management bodies and the manager of the company should be disclosed, as provided for in greater detail in Principle 7.	NO	Information about the education, qualification, professional experience and participation in the management of other companies of the managers of the Management Company and members of the Investment Committee of the Company is presented in the annual report of the Company. The management fee, payable to the Management Company is disclosed in the Annual Report of the Company, according to the valid management agreement between the Company and the Management Company. The managers of the Management Company and appointed members of the Investment Committee receive renumeration according to the employment contract signed between them and the Management Company.
9.4. Information should be disclosed in such manner that no shareholders or investors are discriminated in terms of the method of receipt and scope of information. Information should be disclosed to all parties concerned at the same time.	YES
Principle 10: Selection of the company's audit firm

The company's audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm.
10.1. With a view to obtain an objective opinion on the company's financial condition and financial results, the company's annual financial statements and the financial information provided in its annual report should be audited by an independent audit firm.	YES
10.2. It is recommended that the audit firm would be proposed to the general meeting of shareholders by the supervisory board or, if the supervisory board is not formed at the company, by the management board of the company.	YES
10.3. In the event that the audit firm has received remuneration from the company for the non-audit services provided, the company should disclose this publicly. This information should also be available to the supervisory board or, if the supervisory board is not formed at the company, by the management board of the company when considering which audit firm should be proposed to the general meeting of shareholders.	YES

APPENDIX 3. COMPANY'S MANAGEMENT REPORT

(Prepared in accordance with the Law of the Republic of Lithuania on Financial Reporting by Undertakings (IX-575) in force from 6 July 2019

1. REFERENCE TO THE APPLICABLE CORPORATE GOVERNANCE CODE AND THE PLACE OF ITS PUBLICATION, AND (OR) REFERENCE TO THE ALL NECESSARY PUBLISHED INFORMATION REGARDING MANAGEMENT PRACTICES OF THE ENTITY

The Company discloses the information regarding the compliance with the applicable Corporate Governance Code in Appendix 2 of the consolidated report of 2019. The Company publishes its annual reports in the website of the Company (Company's web site section "Investor Relations" → "Financial information and reports" . The link https://bre.invl.com/lit/en/forinvestors/reportsfinancial-information-and-reportsfinancial-information-and-reports).

2. IN CASE OF DEROGATION FROM THE PROVISIONS OF THE APPLICABLE CORPORATE GOVERNANCE CODE AND (OR) WHEN THE PROVISIONS ARE NOT COMPLIED WITH, SUCH PROVISIONS AND THE REASONS THEREOF SHALL BE INDICATED

The Company discloses such information in sections "Yes/No/Irrelevant" and "Commentary" of Appendix 2 of the consolidated report of 2019 "Corporate Governance Code". The Company will provide an explanation in the "Commentary" section if it does not (of partially) follow the recommendations.

3. INFORMATION REGARDING THE LEVEL OF RISK AND RISK MANAGEMENT – MANAGEMENT OF RISKS RELATED TO THE FINANCIAL REPORTING, RISK MITIGATION MEASURES, AND INTERNAL CONTROL SYSTEMS IMPLEMENTED AT THE ENTITY SHALL BE DESCRIBED

The Company provides information regarding the level of risk, risk management, and implemented internal control systems, as well as the measures, in Clause 18.6 of the consolidated report of 2019.

4. INFORMATION REGARDING SIGNIFICANT DIRECTLY OR INDIRECTLY MANAGED HOLDINGS

The Company provides information regarding the significant directly or indirectly managed holdings in Clause 9 of the financial statement of 2019.

5. INFORMATION REGARDING TRANSACTIONS WITH RELATED PARTIES, ACCORDING TO THE LAW ON COMPANIES ARTICLE 37² (by specifying the counterparty (legal form, name, code, register of the legal entity in which the person is stored, premises (address); name, surname, address of the natural person and the value of the transaction);

2019 ANNUAL REPORT | 146

Information regarding Transactions with Related Parties, according to the Law on Companies article 37² , is published on the Company's web site – "For Investors" → "Related parties transactions". The link to the Company's website: https://bre.invl.com/lit/en/for-investors/documentslegal-documents/related-parties-transactions

Related party transaction policy of UTIB Baltic Real Estate was approved during the General Shareholders Meeting held on 26th March 2018.The policy is published on the Companys website: https://bre.invl.com/lit/en/for-investors/documentslegaldocuments

At the time the report was published, the Company provides information about Company's Transactions with Related Parties published on the Company's web site:

Related party	Company's relationship with the other counterparty	Date and value of the transaction	Other information
Rovelija, UAB Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A loan agreement with Rovelija, UAB was signed on 25th October 2018 No. BRE/181025/01 for the amount of EUR 10 thousand
Rovelija, UAB Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A loan agreement with Rovelija, UAB was signed on 28th December 2018 No. BRE/181228/01 for the amount of EUR 286,237.
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A loan agreement with Proprietas, UAB was signed on 28th December 2018 No. BRE/181228/02 for the amount of EUR 54,665.67
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A settlement with Proprietas UAB on the determination of the remuneration and its payment procedure was signed on 28-12- 2017, the settlement was an annex to a 28/12/2017 Property Simple Administration Agreement No. 28/12/2017 signed on 28th December 2017. Remuneration is determined on the basis of the documentation of Transaction Services of Proprietas, UAB, applying 5 percent performance overcharge
Inservis, UAB Code 126180446 Juozapavičiaus str. 6, Vilnius, Lithuania Register of Legal Entities	100 percent managed by Invalda INVL, AB. Invalda INVL, AB owns 30 percent of shares in UTIB INVL Baltic Real Estate	Proprietas, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed an annex No. 30 to Service Purchase - Sales Agreement (dated 2nd May 2011 No. 2011/05/01-03) on 9th October 2018 regarding the maintenance of engineering systems in the facility Juozapavičiaus 6, Vilnius. Transaction value EUR 145,20 with VAT per month.
Inservis, UAB Code 126180446 Juozapavičiaus str. 6, Vilnius, Lithuania Register of Legal Entities	100 percent managed by Invalda INVL, AB. Invalda INVL, AB owns 30 percent of shares in UTIB INVL Baltic Real Estate	Proprietas, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed an annex No. 29 to Service Purchase - Sales Agreement (dated 2nd May 2011 No. 2011/05/01-03) on 9th October 2018 regarding the maintenance of engineering systems in the facility Palangos 4, Vilnius. Transaction value EUR 60,50 with VAT per month.

Related party	Company's relationship with the other counterparty	Date and value of the transaction	Other information
Inservis, UAB Code 126180446	100 percent managed by Invalda INVL, AB.	Proprietas, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed an
Juozapavičiaus str. 6, Vilnius,	Invalda INVL, AB owns 30	annex No. 30 to Service Purchase - Sales
Lithuania	percent of shares in UTIB INVL	Agreement (dated 2nd May 2011 No.
Register of Legal Entities	Baltic Real Estate	2011/05/01-03) on 9th October 2018 regarding the on new hourly rates for
		technical facilities services in the facilities
		served.
Inservis, UAB Code 126180446	100 percent managed by Invalda INVL, AB.	Rovelija, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed a settlement
Juozapavičiaus str. 6, Vilnius,	Invalda INVL, AB owns 30	on 2nd January 2019 regarding
Lithuania	percent of shares in UTIB INVL	supplementing and amending the lease
Register of Legal Entities	Baltic Real Estate	agreement for non-residential premises dated on 1st February 2010. Transaction
		value EUR 592,03 with VAT per month.
Inservis, UAB	100 percent managed by Invalda	Rovelija, UAB, 100 percent owned by UTIB
Code 126180446 Juozapavičiaus str. 6, Vilnius,	INVL, AB. Invalda INVL, AB owns 30	INVL Baltic Real Estate signed an agreement on 2nd January 2019 regarding
Lithuania	percent of shares in UTIB INVL	the maintenance and provision of services
Register of Legal Entities	Baltic Real Estate	for the facility's general use facilities for
		facility and facility maintenance services. Transaction value EUR 16,69 with VAT per
		month.
Invalda INVL, AB	Shareholder of UTIB INVL Baltic	Proprietas, UAB, 100 percent owned by
Code 121304349 Gynėjų str. 14, Vilnius,	Real Estate, owning 30 percent of shares in the Company	UTIB INVL Baltic Real Estate on 21th December 2018 signed a settlement to
Lithuania		accounting service provision contract No.
Register of Legal Entities		20140531/02. Amount of salary changed to EUR 605 with VAT per month.
INVL Asset Management, UAB	100 percent managed by Invalda	The Company signed a settlement to a Non
Code 126263073	INVL, AB.	residential Lease Agreement (dated 30th
Gynėjų str. 14, Vilnius, Lithuania	Invalda INVL, AB owns 30 percent of shares in UTIB INVL	October 2015 No. 2015-10-30/1) with INVL Asset Management, UAB on 28th
Register of Legal Entities	Baltic Real Estate	September 2018. On the basis of the
		settlement additional premises was rented.
		Transaction value EUR 3,149.45 with VAT per month.
Inservis, SIA	100 percent managed by the	Dommo Grupa, SIA, UAB, 100 percent
Code 40203041770	subsidiary of Invalda INVL, AB.	owned by UTIB INVL Baltic Real Estate
"Lapegles", Stuniši, Olaines dist., Latvia	Invalda INVL, AB owns 30 percent of shares in UTIB INVL	signed a Services Agreement No. PL 2018/01/11 on 1st November 2018. Hourly
The Register of Enterprises of	Baltic Real Estate	service charges is provided in the contract.
the Republic of Latvia
Inservis, SIA Code 40203041770	100 percent managed by the subsidiary of Invalda INVL, AB.	Dommo Bizness parks, SIA, UAB, indirectly managed by UTIB INVL Baltic Real Estate
"Lapegles", Stuniši, Olaines	Invalda INVL, AB owns 30	signed a Premises Lease Agreement No.
dist., Latvia	percent of shares in UTIB INVL	27122018/1 on 27th December 2018.
The Register of Enterprises of the Republic of Latvia	Baltic Real Estate	Transaction value EUR 309,60 with VAT per month.
Inservis, SIA	100 percent managed by the	Dommo Bizness parks, SIA, UAB, indirectly
Code 40203041770 "Lapegles", Stuniši, Olaines	subsidiary of Invalda INVL, AB. Invalda INVL, AB owns 30	managed by UTIB INVL Baltic Real Estate signed a Services Agreement No.
dist., Latvia	percent of shares in UTIB INVL	01/01/2019-DBP on 1st February 2018,
The Register of Enterprises of	Baltic Real Estate	regarding repairment work in the premises.
the Republic of Latvia		Transaction value EUR 14,001.80 with VAT.

Related party	Company's relationship with the other counterparty	Date and value of the transaction	Other information
Inservis, SIA Code 40203041770 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	100 percent managed by the subsidiary of Invalda INVL, AB. Invalda INVL, AB owns 30 percent of shares in UTIB INVL Baltic Real Estate	Dommo Bizness parks, SIA, UAB, indirectly managed by UTIB INVL Baltic Real Estate signed a Services Agreement No. 01/02/2019-DBP on 1st February 2018, regarding repairment work in the premises. Transaction value EUR 10,357.47 with VAT.
Inservis, SIA Code 40203041770 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	100 percent managed by the subsidiary of Invalda INVL, AB. Invalda INVL, AB owns 30 percent of shares in UTIB INVL Baltic Real Estate	Dommo Bizness parks, SIA, Code 40003865398, indirectly managed by UTIB INVL Baltic Real Estate signed a Services Agreement No. 01/02/2020 on 26th February 2020, regarding repairment work in the premises. Transaction value EUR 27,956.95 with VAT.
DBP Invest, SIA Code 40103463830 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	Indirectly managed by UTIB INVL Baltic Real Estate	Dommo Grupa, SIA, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed a Loan Agreement No. 26062018/1 on 26th June 2018. Loan amount – EUR 200.
DBP Invest, SIA Code 40103463830 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	Indirectly managed by UTIB INVL Baltic Real Estate	Dommo Grupa, SIA, UAB, 100 percent owned by UTIB INVL Baltic Real Estate signed a Loan Agreement No. 16012019/1 on 16th January 2019. Loan amount – EUR 500.
DBP Invest, SIA Code 40103463830 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	Indirectly managed by UTIB INVL Baltic Real Estate	Dommo Grupa, SIA, 100 percent owned by UTIB INVL Baltic Real Estate signed a Loan Agreement No. 08012020/1 on 8th January 2020. Loan amount – EUR 350.
Dommo SIA Code 40003787271 "Lapegles", Stuniši, Olaines dist., Latvia The Register of Enterprises of the Republic of Latvia	Indirectly managed by UTIB INVL Baltic Real Estate	IPAS INVL Asset Management, Code 40003605043, 100 percent owned by Invalda INVL, AB signed a Premises Lease subagreement No. 19/12/2019 on 19th December 2019. Transaction value EUR 140 without VAT per month and utility costs.
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A loan agreement with Proprietas, UAB was signed on 19th September 2019. No BRE/190919/01 for the amount of EUR 250,000.
Invalda INVL, AB Code 121304349 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	Shareholder of UTIB INVL Baltic Real Estate, owning 30 percent of shares in the Company	A loan agreement with Invalda INVL, AB was signed on 26th November 2019. No P/191126/01 for the amount of EUR 1,500,000. The Company is the Borrower. The Company returned a loan on 9th March 2020 No. P/191126/01 for the amount of EUR 1,500,000 EUR according to the loan agreement

Related party	Company's relationship with the other counterparty	Date and value of the transaction	Other information
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	A loan agreement with Proprietas, UAB was signed on 8th October 2019. No BRE/191008/01 for the amount of EUR 60,000.
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	The Company has signed a Share Purchase agreement on 12-12-2019, according to which increases Authorised capital of Proprietas UAB by additional cash contribution which amounts to EUR 232,000 (increasing the Authorised capital from EUR 20,300 to EUR 252,000, issueing 800,000 units of ordinary registered shares with the nominal value of EUR 0.29). Increased authorised capital of Proprietas UAB registered in the Register of Legal Entities on 19-12-2019.
Rovelija, UAB Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	The Company has signed a Share Purchase agreement on 12-12-2019, according to which increases Authorised capital of Proprietas UAB by additional cash contribution which amounts to EUR 5,800 (increasing the Authorised capital from EUR 348,000 to EUR 353,800, issueing 20,000 units of ordinary registered shares with the nominal value of EUR 0.29). Increased authorised capital of Rovelija UAB registered in the Register of Legal Entities on 18-12-2019.
Proprietas, UAB Code 303252098 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	The Company entered into an agreement on 09-01-2020 regarding partial amendment of the Loan Agreement No. BRE/181228/02 as of 28-12-2018 signed with Proprietas UAB. Extension of loan repayment term has been made.
Rovelija, UAB Code 302575846 Gynėjų str. 14, Vilnius, Lithuania Register of Legal Entities	100 percent managed by UTIB INVL Baltic Real Estate	The Company entered into an agreement on 09-01-2020 regarding partial amendment of the Loan Agreement No. BRE/181228/01 as of 28-12-2018 signed with Rovelija UAB. Extension of loan repayment term has been made.

6. INFORMATION REGARDING THE SHAREHOLDERS WHO HAVE SPECIAL RIGHTS OF CONTROL AND THE DESCRIPTION OF SUCH RIGHTS

There are no shareholders having special rights of control in the Company.

7. INFORMATION REGARDING ALL CURRENT RESTRICTIONS ON VOTING RIGHTS (such as the restrictions on voting rights of persons having a certain percentage or number of the votes, the deadlines by which voting rights may be exercised or systems, according to which the property rights granted by the securities are to be separated from the holder of those securities)

No restrictions on voting rights are applied in the Company.

The management of the Company is transferred to the Management company UAB INVL Asset Management which exercises the functions of the Head and the board of the Company. The Rules of Procedure of the Board are applicable to the board members of the Management company. The provisions governing the appointment and dismissal of board members are not provided for by the aforementioned Rules, except for the possible resignation and procedures related thereof. A person who seeks to become the Board member of the Management company shall obtain a prior permit from the Supervision Service of the Bank of Lithuania (hereinafter – the Bank of Lithuania) to occupy a corresponding post. Moreover, such person shall fill in the Form of the Questionnaire of the Manager approved by the Bank of Lithuania and comply with the indicated requirements.

According to the Articles of Association of the Company, the Articles of Association of INVL Baltic Real Estate may be amended by the desicion of the General Shareholders' Meeting, passed by more than 3/4 of votes (except in cases stated in the Law on Companies of the Republic of Lithuania and in cases stated in Company's Articles of Association).

9. INFORMATION REGARDING THE POWERS OF THE BOARD MEMBERS

The management of the Company is transferred to the Management company UAB INVL Asset Management which exercises the functions of the Head and the board of the Company. The Board members of the Management company act in accordance with the Law on Companies of the Republic of Lithuania, Articles of Association of the Management company, Rules of Procedure of the Board, as well as other applicable legislation, and have no special powers. The Board members of the Management company always act for the benefit of the Company and its shareholders.

10. INFORMATION REGARDING THE COMPETENCE OF THE GENERAL MEETING OF SHAREHOLDERS, THE RIGHTS OF SHAREHOLDERS AND IMPLEMENTATION THEREOF, IF SUCH INFORMATION IS NOT ESTABLISHED IN THE APPLICABLE LEGISLATION

The company provides information regarding the competence of the general meeting of shareholders, the rights of shareholders, and implementation thereof, as well as the procedure for convening the meetings of shareholders, in Clause 12.1 of the consolidated annual report of 2019.

11. INFORMATION REGARDING THE COMPOSITION OF THE MANAGEMENT, SUPERVISORY BODIES, AND THE COMMITTEES THEREOF, AS WELL AS THE FIELDS OF ACTIVITY OF THE AFORESAID BODIES AND THE MANAGER OF THE COMPANY

The management of the Company is transferred to the Management company UAB INVL Asset Management which exercises the functions of the Head and the Board of the company. The Company provides information regarding the board members of the Management company, General Manager of the Management company, and the members of the Investment Committee of the Company in Clause 13 of the consolidated annual report of 2019.

The board members of the management company, General Manager of the management company, and the members of the Investment Committee of the company act in accordance with the Rules of Procedure of the Board, Provisions of the General Manager, and Provisions of the Investment Committee. In addition to this, the board members of the Management company, General Manager of the Management company, and the members of the Investment Committee always act for the benefit of the Company and its shareholders.

12. DESCRIPTION OF DIVERSITY POLICY APPLICABLE IN APPOINTING THE MANAGER OF THE COMPANY, MANAGEMENT, AND SUPERVISORY BODIES, RELATED TO THE ASPECTS SUCH AS AGE, GENDER, EDUCATION, PROFESSIONAL EXPERIENCE; OBJECTIVES OF SUCH POLICY, METHODS OF IMPLEMENTATION THEREOF, AND RESULTS OF THE REFERENCE PERIOD. IF THE DIVERSITY POLICY IS NOT APPLIED, THE REASONS THEREOF SHALL BE INDICATED

The management of the Company is transferred to the asset management company INVL Asset Management, which applies the Policy of Equal Opportunities in its activities. The Policy specifies that the Company organizes its activities in a way that employees, despite of their duties and the need to upgrade their qualifications, are secure about equal working conditions, opportunities to develop competence, etc. Equally, the same benefits are granted regardless of the gender, race, nationality, language, origin, social status, believes or convictions, age, sexual orientation, disability, ethnicity, religion, marital status, intention of having children's or membership of the political party or association.

INVL Asset Management has joined the UN-supported Principles for Responsible Investment (PRI) in the middle of 2017.

The PRI, founded in 2006, is a global network of over 1700 investors, aims to assess the investment implications of environmental, social and governance (ESG) factors. An economically efficient, sustainable global financial system is considered a necessity for long-term value creation. Investors who support the PRI voluntarily work to apply the principles in their investment activities.

Six specific responsible investment Principles are outlined by the PRI. They provide a menu of possible actions for incorporating ESG issues into investment practice – from investment analysis and decision-making to their incorporation into ownership policies and practices. Additionally, signatories to the Principles are encouraged to promote the Principles' acceptance in the investment industry and to work together for their effective implementation.

13. SHAREHOLDERS (THEIR TERMS AND CONDITIONS)

The Company's shareholders do not have mutual agreements.

APPENDIX 4. COMPANY'S OPERATING AND FINANCIAL INDICATOR FORMULAS AND DEFINITIONS

In according with the guidelines on Alternative Performance Indicators which were published by the European Securities and Markets Authority in 2015 and came into force on 3 July 2016, the Company provide definitions and formulas (below) of the company's operating and financial indicators.

The Company's performance and financial indicators are used to evaluate the Company's financial position or status. For these indicators, the Company's investor can obtain additional information to help understand the Company's financial position and strategy.

All the information stated in Appendix 4 is provided on the website of the Company (Company's web site section "For Investors" → "Financial information and reports" → "Formulas of performance indicators". The link: https://bre.invl.com/lit/en/forinvestors/reports/formulas-of-performance-indicators)

• Dividend yield – dividends attributable to shareholder paid per share for the last financial year divided by the price per share at the end of a financial period.

The set value of dividends paid per share for the last financial year

Dividend yield = ——————————————————————————————

The price per share at the end of a financial period

Dividend yiel ratio is a particularly an important valuation measure for investors seeking regular income. The higher the yield, the higher the payout for the shareholder compared to the price of the share.

• Book value per share – Group's equity divided by the number of shares, excluding Company's own shares, at the end of a financial period.

The Group's equity

Book value per share = —————————————————————————————————————————

The number of shares, excluding the Company's own shares, at the end of a financial period

The book value per common share indicates the remaining value for shareholder after all assets are liquidated and all liabilities are covered.

• Price to Book ratio – ratio between the share price at the end of a financial period and book value per share.

The share price at the end of a financial period

Price to Book ratio = ———————————————————————————

The book value per share

Price-to-book ratio compares a companies market value to book value by dividing price per share by book value per share. This shows how the valuation of the company is covered by equity.

• Dividends/Net profit – ratio between the dividends allocated at the ongoing year for the year before and ongoing year net profit of the Company.

The dividends allocated at the ongoing year for the year before

Dividends/Net profit = ——————————————————————————————

Ongoing year net profit of the Company

The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company. It is the percentage of earnings paid to shareholders in dividends.

• Return on Equity (ROE) – ratio between net income and average equity of a financial period, measured in percentage terms.

Net income

Return on Equity (ROE) (measured in percentage terms) = ——————————————————

Average equity for a financial period

Return on equity excludes debt in the denominator and compares net profit for the period with total average shareholders' equity. It measures the rate of return on shareholders' investment.

• Average equity is an arithmetical average of the beginning equity and ending equity of a financial period.

Average equity = (The beginning equity for the financial period + The ending equity for the financial period) / 2

• Return on Assets (ROA) – ratio between net income and average total assets of a financial period, measured in percentage terms.

Net income

Return on Assets (ROA) (measured in percentage terms) = ————————————————————

Average total assets for a financial period

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA indicates how efficient a company is using its assets to generate earnings.

• Average total equity is an arithmetical average of the beginning total assets and ending total assets of a financial period.

Average total equity = (The beginning total assets of a financial period + The ending total assets of a financial period) / 2

• Debt ratio – ratio between total liabilities and total assets.

Total liabilities

Debt ratio = ——————————

Total assets

The debt ratio is a financial ratio that measures the extent of a company's leverage. It can be interpreted as the proportion of a company's assets that are financed by debt.

• Debt to Equity ratio – ratio between total liabilities and Shareholders' equity.

Total liabilities

Debt to Equity ratio = ——————————

Shareholders' equity

The debt to Equity ratio is calculated by dividing a company's total liabilities by its shareholder equity. The ratio is used to evaluate a company's financial leverage.

• Gearing ratio – ratio between net debt and sum of net debt and equity. Net debt is the difference between borrowings and cash and cash equivalents.

Net debt

Gearing ratio = ——————————

Net debt + equity

Gearing ratio is analysis ratio of a level of net debt compared to equity capital. Lower gearing ratio means greater financial stability. However, borrowings are a way for companies

to leverage their value to increase profits for shareholders.

• Liquidity ratio – ratio between current assets, including assets classified as held for sale, and current liabilities.

Current assets (including assets classified as held for sale)

Liquidity ratio = ——————————————————————————————

Current liabilities

Liquidity ratio is a financial metric used to determine a debtor's ability to pay off current debt obligations without raising external capital.

• Quick ratio – ratio between current assets (excluding inventories, prepayments and deferred charges and current loans granted) and current liabilities.

Current assets (excluding inventories, prepayments and deferred charges and current loans granted)

Quick ratio = ————————————————————————————————————————————————

Current liabilities

The quick ratio is an indicator of a company's short-term liquidity position and measures a company's ability to meet its shortterm obligations with its most liquid assets.

• Normalized operating profit - operating profit excluding interest income, net gains (losses) from fair value adjustments on investment property and other income adding the re-estimation of provision for the Performance Fee.

Normalized operating profit = Operating profit – Interest income – Net gains (losses) from fair value adjustments on investment property – Other income + The re-estimation of provision for the Performance Fee.

Normalized operating profit is measurement of the companies operating profit and allows viewing operating trends and identifying strategies to improve operating performance and assists in comparing performance across reporting periods on a consistent basis by excluding item that are not indicative of the companies core operating performance.

• Normalized operating profit margin – ratio between normalized operating profit and sales, measured in percentage terms.

Normalized operating profit Normalized operating profit margin (measured in percentage terms) = —————————————

Sales

Normalized operating profit margin is a operating profit margin excluding item that are not indicative of the companies core operating performance.

• Pre-tax profit margin – ratio between pre-tax profit and sales, measured in percentage terms.

Pre-tax profit

Pre-tax profit margin (measured in percentage terms) = ————————

Sales

The pretax profit margin is the ratio of a company's pre-tax earnings to its total sales. The higher the pretax profit margin, the more profitable the company.

• Price earnings ratio (P/E) – share price at the end of a financial period divided by earnings per share (EPS).

The share price at the end of a financial period

Price earnings ratio (P/E) = ———————————————————————

Earnings per share (EPS)

To determine the P/E value, one simply must divide the current stock price by the earnings per share (EPS). It is used to compare a company against its own historical record or to compare aggregate markets against one another or over time.

• Borrowings to value of investment properties – ratio between borrowings and investment properties.

Borrowings

Borrowings to value of investment properties = ———————————

Investment properties

This indicator shows the proportion of the investment assets financed by borrowed funds.

• Interest coverage ratio – ratio calculated as normalized operating profit divided by borrowings' interest expenses. The latter amounted to interest expenses of bank borrowings plus interest expenses of borrowings from related parties.

Normalized operating profit

Interest coverage ratio = ————————————————

Borrowings' interest expenses*

*Borrowings' interest expenses = Interest expenses of bank borrowings + Interest expenses of borrowings from related parties

The purpose of this ratio is to give an indication of the companies general ability to service theinterests of it's debts.

• Bank's Debt Service Coverage Ratio – ratio between normalized operating profit and bank's debt service costs. Bank's debt service costs is during reporting period paid interest, commitment fees according to borrowings' agreements and principal repayments.

Normalized operating profit

Bank's Debt Service Coverage Ratio = ——————————————

Bank's debt service cost*

2019 ANNUAL REPORT | 155

*Bank's debt service cost = Interest paid during reporting period, commitment fees according to borrowings' agreements and principal repayments.

The purpose of this ratio is to give an indication of the companies general ability to service its debt.

• Net operating income is calculated by deducting from revenue premises rent costs (excluding provision for onerous contract), utilities expenses, repair and maintenance expenses, property management and brokerage costs, taxes on property and insurance costs.

Net operating income = Revenue premises rent costs (excluding provision for onerous contract) – Utilities expenses – Repair and maintenance expenses – Property management and brokerage costs – Taxes on property and insurance costs.

Net operating income is a calculation used to analyze the profitability of real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses.

• Net profit margin – net profit divided by sales, expressed in percentage terms.

Net profit

Net profit margin (measured in percentage terms) = ——————————

Sales

The net profitability is equal to how much net income or profit is generated as a percentage of revenue. It illustrates how much of each euro in revenue collected by a company translates into profit.