RomReal Ltd.

Annual Report (ESEF) • Apr 20, 2023

549300DHIW4W3OJW6A932022-01-012022-12-31iso4217:EUR549300DHIW4W3OJW6A932021-01-012021-12-31iso4217:EURxbrli:shares549300DHIW4W3OJW6A932022-12-31549300DHIW4W3OJW6A932021-12-31549300DHIW4W3OJW6A932020-12-31ifrs-full:IssuedCapitalMember549300DHIW4W3OJW6A932020-12-31ifrs-full:SharePremiumMember549300DHIW4W3OJW6A932020-12-31ifrs-full:RetainedEarningsMember549300DHIW4W3OJW6A932020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300DHIW4W3OJW6A932020-12-31ifrs-full:MiscellaneousOtherReservesMember549300DHIW4W3OJW6A932020-12-31549300DHIW4W3OJW6A932021-01-012021-12-31ifrs-full:IssuedCapitalMember549300DHIW4W3OJW6A932021-01-012021-12-31ifrs-full:SharePremiumMember549300DHIW4W3OJW6A932021-01-012021-12-31ifrs-full:RetainedEarningsMember549300DHIW4W3OJW6A932021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300DHIW4W3OJW6A932021-01-012021-12-31ifrs-full:MiscellaneousOtherReservesMember549300DHIW4W3OJW6A932021-12-31ifrs-full:IssuedCapitalMember549300DHIW4W3OJW6A932021-12-31ifrs-full:SharePremiumMember549300DHIW4W3OJW6A932021-12-31ifrs-full:RetainedEarningsMember549300DHIW4W3OJW6A932021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300DHIW4W3OJW6A932021-12-31ifrs-full:MiscellaneousOtherReservesMember549300DHIW4W3OJW6A932022-01-012022-12-31ifrs-full:IssuedCapitalMember549300DHIW4W3OJW6A932022-01-012022-12-31ifrs-full:SharePremiumMember549300DHIW4W3OJW6A932022-01-012022-12-31ifrs-full:RetainedEarningsMember549300DHIW4W3OJW6A932022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300DHIW4W3OJW6A932022-01-012022-12-31ifrs-full:MiscellaneousOtherReservesMember549300DHIW4W3OJW6A932022-12-31ifrs-full:IssuedCapitalMember549300DHIW4W3OJW6A932022-12-31ifrs-full:SharePremiumMember549300DHIW4W3OJW6A932022-12-31ifrs-full:RetainedEarningsMember549300DHIW4W3OJW6A932022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300DHIW4W3OJW6A932022-12-31ifrs-full:MiscellaneousOtherReservesMember RomReal Limited Annual Report 2022 15 April 2023 RomReal is a Company focused on the Romanian real estate market. Established in 2005 and owns a premium portfolio of properties in the Black Sea – Constanta region Page 1 of 51 2022 Highlights Net Asset Value (NAV) Net Asset value was EUR 0.40 (NOK 4.15 before any tax) per share, that being 2.5% below the announced year-end 2021 level of EUR 0.41 per share. The year-end 2022 valuation was concluded by Colliers in January 2023 and the values of the Group’s investment property have been updated accordingly. Operational highlights During 2022, the Company sold a total of 21,117 sq. meters from the various projects totalling EUR 2.7 milion. Hitherto, in 2023, the Company has sold 289 sq. meters for a total EUR 0.06 million. By the end of 2022, a total of EUR 6.9 million (ex VAT) have been invested in infrastructure, primarily in Industrial Park and Lakeside. Financial Results Net Result for the year 2022 was EUR 0.63 million loss compared to a EUR 1.53 million profit in 2021. By year-end 2022, the Company had a cash position of EUR 4.1 million plus a total of EUR 5.1 million in unsettled receivables related to binding sales agreements, totalling EUR 9.2 million, or about EUR 0.22 per share (2021: EUR 0.19 per share). Macro and real estate market highlights Romania's GDP expanded in 2022 by 4.8%, compared to a growth of 5.6% in 2021, according to data from the Country's statistical board (INS). European Commission’s Romania 2023 GDP growth projection to 2.5%. During 2022 the average residential prices in Romania reached an average price of EUR 1,705/sqm, indicating an 5.6% increase compared with end of year prices 2021. Price growth turned negative from June 2022. In Constanta, average prices at the end of December 2022 reached at EUR 1,609/sqm (1434), showing an increase of 10.9% compared with the same period last year according to www.imobiliare.ro Page 2 of 51 Key Financials EUR '000 2022 2021 Operating Revenue 4,853 3,711 Operating Expenses (1,721) 1,073 Other operating income/ (expense), net (3,627) (2,682) Net financial income/(cost) 37 (509) Pre-tax result (457) 1,593 Result for the period (635) 1,532 Total assets 16,724 17,986 Total liabilities 494 1,160 Total equity 16,230 16,826 Equity % 97.0% 93.6% NAV per share (EUR) 0.39 0.41 Cash position 4,098 3,807 For a more detailed analysis of the key financials please review the Financial Statements section of this report. Page 3 of 51 Property Portfolio Total size of the Company’s Property Portfolio (“Land Bank”) totaled 219,727 sqm at the end of 2022. The Company owns prime location plots in the Black Sea region, County Constanta: Plot name Location Size (m2) 1 Ovidiu Lakeside Constanta North/Ovidiu 2,764 2 Ovidiu Residence Constanta North/Ovidiu 50,000 3 Ovidiu (Oasis) Constanta North/Ovidiu 23,103 4 Centrepoint Constanta North/Ovidiu 121,672 5 Ovidiu Residence 2 and 3 Constanta North/Ovidiu 15,000 6 Balada Market Central Constanta 7,188 Total 219,727 For further information on the Company’s property portfolio, please visit www.RomReal.com Romanian Macro development The National Bank has decided to keep the monetary “Policy rate” at 7% (9 February 2023). The annual inflation rate went down to 16.4 percent in December 2022 from 16.8 percent in November 2022, mainly as a result of lower fuel prices amid the decline in oil prices and the appreciation of the leu against the US dollar. This trend continued in January 2023 with an increase of 15.1 percent y-o-y. According to the updated forecast from the Federal Planning Bureau, the annual inflation rate is expected to fall significantly during 2023 to 4.5 percent. On a 2022 full year basis, the GDP grew by 4.8%, compared to a 5.8% expansion in 2021, INS said in a statement 14 February 2023. According to the latest forecast by the European Commission, Romania’s economy is expected to grow 2.5 percent in 2023, marginally lower than what is assumed in the Government 2023 budget (2.8%). According to INS, a modest rebound of 3 % in GDP is projected for 2024 on the back of receding inflationary pressure, lower interest rates and improved external outlook. Otherwise, the EUR/Ron average was rather flat versus 2021, with just a 0.2 percentage increase to 4.93. This RON strength is probably due to a hefty inflow of EU money. Page 4 of 51 RomReal Ethical Policy Introduction RomReal is only involved in minor construction or development projects, but aiming to maintain its principles with regards to Ethical Policy since its listing to the Oslo Stock Exchange. These can be found below: Energy From initial site surveys, through to the specification of fixtures and fittings, the Company aims to identify the most energy- efficient solutions. The Company is seeking more intelligent and sustainable approaches to design, construction and materials. Water All of the developments consider ways in which water usage can be reduced, both during construction and occupancy. Where possible, specifying ways of increasing the efficiency of water usage within the infrastructure of our developments, delivering responsibility and cost-efficiency. Materials The Company is aiming to select all construction materials carefully. The aim is to protect natural resources and reduce carbon emissions, thereby contributing to a healthy environment for the residents in all developments. Waste RomReal is aware of the need to reduce and manage waste across our operations and is aiming to fulfil all legal requirements. It also supports and encourages residents in their own recycling efforts. Community From introducing improvements to the local infrastructure to including spaces for socialising and local amenities, the aim is to contribute to sustainable communities for everyone. Healthy Living RomReal recognizes our responsibility to support healthy lifestyles and meet the needs and aspirations of residents. RomReal seeks to maximize the natural benefits of sunlight, daylight and open space within each development. Education RomReal seeks to deliver sustainable development through its ethical policy and working practices. The terms of reference include requirements for economic and social progress at a local level. The Company has supported educational initiatives, both those that spread best practice in sustainable development, and those that enhance the local educational infrastructure in general. Page 5 of 51 Shareholder Overview Please see below the list of the top 20 shareholders in RomReal as of 06 March 2023: Rank Name Holding Stake 1 SIX SIS AG 10,331,934 24.98% 2 GRØNSKAG, KJETIL 5,913,006 14.29% 3 THORKILDSEN, WENCHE 5,392,985 13.04% 4 SAGA EIENDOM AS 3,386,636 8.19% 5 AUSTBØ, EDVIN 2,108,500 5.10% 6 Danske Bank A/S 1,557,838 3.78% 7 ENERGI INVEST AS 1,253,611 3.03% 8 Orakel AS 1,101,000 2.66% 9 GRØNLAND, STEINAR 1,045,277 2.53% 10 BNP Paribas 991,717 2.40% 11 SPAR KAPITAL INVESTOR AS 940,236 2.27% 12 THORKILDSEN INVEST AS 829,478 2.01% 13 PERSSON, ARILD 718,000 1.74% 14 HOEN, ANDERS MYSSEN 689,557 1.67% 15 KVAAL INVEST AS 682,000 1.65% 16 AKSEL MAGDAHL 466,092 1.13% 17 Frenico AS 396,000 0.96% 18 NORDNET LIVSFORSIKRING AS 295,903 0.72% 19 CITIBANK 220,000 0.53% 20 Jo Egil Aalerud 166,864 0.40% TOP 20 38,486,634 93.08% Page 6 of 51 Board of Directors Kjetil Grønskag - Chairman of the Board and CEO Lacramioara Isarescu – Board Member Bendt Thorkildsen – Board Member Heidi Sørensen Austbø – Board Member Mr. Grønskag holds a master of General Business (siviløkonom) from Handelshøyskolen BI and is a Certified Financial Analyst (CFA) from Norwegian School of Economics and Business Administration. He has also studied Law at University of Oslo. Mr. Grønskag has a long experience within international banking and Real Estate. Mr Grønskag has significant Directorship experience from both listed and private companies. He is a Norwegian citizen and resides in London, UK. Ileana Lacramioara Isarescu is a corporate professional with over 15 years of international experience in business development in real estate, finance and IT. Having worked in Vienna and New York, Ileana is currently the Governmental Programs Executive for IBM South East Europe, and resides in Bucharest, Romania. Ileana holds a MBA degree from Harvard Business School and a MSc in International Economics from the Academy of Economic Studies Bucharest. Mr. Thorkildsen holds a Master of Science (MSc) in International Marketing and Strategy from the Norwegian School of Economics and Business Administration. Mr. Thorkildsen has more than 20 years with varied experience with particular focus on business development/sales (IT). During the last 10 years Mr. Thorkildsen also has held various Directorship including in the real-estate industry. He is a Norwegian citizen. Mrs Austbø is a State Authorised Public Accountant from Handelshøyskolen BI in Oslo. Mrs Austbø has 14 years’ experience from both audit and Management with Norwegian and global equities, working for KPMG and long equity funds at Terra Fondsforvaltning and Arctic Fund Management. Mrs Austbø also has Directorship and CEO experience from privately held companies. She is a Norwegian citizen and resides in Oslo. 7 Today, the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors Report and the RomReal Ltd consolidated and annual financial statements as of 31 December 2022. To the best of our knowledge, we confirm that RomReal Ltd and RomReal Group’s consolidated annual financial statements for 2022 have been prepared in accordance with IFRSs and IFRICs as adopted by the European Union (EU), IFRSs as issued by the International Accounting Standards Board (IASB). The information presented in the financial statements gives a true and fair view of the Company’s and the Group’s assets, liabilities, financial position and results for the period viewed in their entirety. DIRECTORS REPORT 2022 RomReal Directors The Board of Directors of RomReal is responsible for the supervision and administration of the Company’s affairs and for ensuring that the Company’s operations are organized in a satisfactory manner. The Directors are shown below together with their interest in the number of shares in the Company per 31 December 2022 and per 31 December 2021: 31 December 2022 31 December 2021 Kjetil Grønskag Appointed Nov 2006 5,913,006 5,752,914 Heidi Sørensen Austbø Appointed April 2017 Nil Nil Bendt Thorkildsen Appointed April 2016 6,222,463 6,222,463 Lacramioara Isarescu Appointed April 2014 Nil Nil TOTAL 12,135,469 11,975,377 8 Operations Update Lake Side (No.1 on the table) – The Company has sold 7 plots during 2022. Street and utilities have been delivered to the City Hall for public use according to agreement. The City Hall has delivered the utilities to the water company during February 2023. RomReal is marketing the remaining 4 small plots for sale. Oasis (No. 3 on the table) – The Company has commenced the process to re-authorise the regular utilities like gas, electricity and roads on the plot. Both block structures have already been re-authorised by Ovidiu City Hall. This in order to add value to the plot and commence the works for constructing the utilities. The Company has commenced the works for water and sewage on the plot as well. Industrial Park (No. 4 on the table) – The project is partly or fully still for sale. Some investments is required on the plot to maintain its existing PUZ and building Authorisation before October 2023. Balada Market (No. 6 on the table) – The project is for sale. A regulation process to utilise a larger part of the plot for parking has been obtained and installation is expected be completed during April this year. Ovidiu Residence (former Badulescu plot, No. 2 on the table) – Based on the Lakeside plot experience, the Company has commenced a process to regulate this plot located nearby Lakeside for residential and commercial use. The regulation process is moving more or less as planned, but a urbanistic regulation/PUZ is not obtained yet. The Company has signed a precontract for sale of a part of the plot with a local investor. Ovidiu Residence 2 (former Gynaydin 7,900 sqm No. 5 on the table) - The Company has commenced a process to regulate the plot located nearby Lakeside for residential use. This will include infrastructure investments. It is expected the urbanistic regulation/PUZ of the plot to be approved by local authorities hopefully within end 2023. The Company has signed a precontract for sale of the plot with a local investor. Ovidiu Residence 3 (former Gunaydin 7,100 sqm, No. 5 on the table) – The Company has commenced a process to regulate the plot located nearby the road between Ovidiu and Constanta for residential use. It is expected to include infrastructure investments. It is expected the urbanistic regulation/PUZ of the plot to be approved by local authorities hopefully within end 2023. Key features of the real estate market Romanian Investment Market: According to Colliers, 2022 was a strong year for investment deals in Romania totalling EUR 1.25 billion versus EUR 890 million in 2021. The largest transaction was the sale of CA Immo’s office portfolio in Romania of EUR 377 million. Another characteristic of 2022 is the increased strong demand stemming from local investors with an estimated 50 percent of the volume. Offices: In the main market Bucharest, about 125,000 m2 of new modern offices has been delivered this year. Taking the overall stock to about 3.3m m2 according to Colliers. The estimated vacancy ended at about 15 percent versus around 16.5 percent by the end of 2021. The two main unknowns for 2023 is the overall macro development and a how the hybrid work (home vs office work) pans out. The new office pipeline for 2023 is about 100,000 9 m2. All in all, the Romanian office market is still undersupplied on a per capita basis relative to Western European capitals, and the Romanian regional market is even more so. Retail: According to Colliers, about 77,000 m2 was delivered in total in Romania in 2022 versus about 102,000 m2 in 2021. This is the second lowest year figure in almost two decades. The largest delivery in Bucharest in 2022 was the extension of the Colosseum Mall (16,500 m2) and the Scallier’s Funshop Retail Park in Timisoare (10,800 m2). The bulk of the deliveries came via retail parks. The estimated total retail space in Romania is about 4.1m m2 by the end of 2022. The estimated 2023 deliveries of about 260,000 m2, may turn out to be among the most significant supply additions since 2011. This could lead to some delays and some projects pushed into 2024. Again, retail parks are set to be the main contributor. Industrial/logistics: The industrial and logistic sector reached 6.2m m2 of modern stock during 2022 following completion of several larger projects, About 50% of the new stock came in Bucharest. During last year about 800,000 m2 was agreed in new rental contracts. The RomReal Limited Fourth quarter 2022 Page 6 of 15 biggest transaction in 2022 was H & M’s new distribution center in Ploiesti, totalling circa 88,000 m2. Colliers is optimistic with regards to the long-term prospects of the I&L market, with an estimate of about 10m m2 by the end of the decade. Residential: Asking prices for apartments and houses in Romania decreased by 1.35% in the fourth quarter of 2022 compared the third quarter of 2022 (EUR 1,705/m2 to EUR 1,682/m2 at the end of 4Q 2022). In Constanta, average prices increased by 0.21% during the fourth quarter of 2022 (EUR 1,431/m2 at the end of December 2022, compared to EUR 1,428/m2 at the end of September 2022), according to www.imobiliare.ro index. The Romanian housing market has been increasing since 2015 with a nationwide price average of about 84%. This trend turned negative from June 2022. The Governmental project Noua Casa (New Home), which gives favourable, state-guaranteed loans to those who intends to buy their first home, has seen less demand last year. Only about 75% of the available funds in the programme has been used this year vs 100% take-up after two months in 2021. The main reasons are increased interest rates and building costs and reduced consumer confidence. The following graphs indicate the apartment prices trend in Romania and Constanta by year- end 2022: During 2022, the average residential prices in Romania reached an average price of EUR 1,682/sqm, indicating an 5.6% increase compared with end of year prices 2021 (EUR 1,593/sqm). Romania 10 Price growth turned negative from June 2022. In Constanta, average prices at the end of December 2022 reached at EUR 1,431/sqm. (2021: 1,408) showing an increase of 1.63% compared with the same period last year according to www.imobiliare.ro Accounts and financial position RomReal has prepared the financial statements as of 31 December 2022, on the basis of going concern. While the industry has faced significant challenges in Romania, RomReal actively seeks to improve liquidity, capitalize on its strong assets base, and take advantage of the future developments of the country’s economy. Operating revenues RomReal had consolidated operating revenues of EUR 4.85 million in 2022 compared to EUR 3.71 million in 2021. The main revenue streams were rental income from the Balada Market and sales of plots. Operating expenses Total consolidated operating expenses were EUR 1.72 million in 2022 (mainly due to the unrealised losses related to the inventories portfolio) compared to a positive EUR 1.07 million in 2021. RomReal (parent Company) operating loss were EUR 1.15 million in 2022 compared to EUR 2.32 million gains in 2021. Profit/Loss Consolidated profit/loss after tax in 2022 was a los of EUR 0.635 million compared to a profit after tax of EUR 1.532 million in 2021. RomReal (parent Company) loss after tax was EUR 0.60 million in 2022 compared to EUR 1.79 million gain in 2021. Constanta 11 The end of year 2022 independent land bank portfolio valuation has shown a net increase on a like for like basis compared to the end of year 2021 valuation, mainly reflecting the works to increase the value of plots under Lakeside and Oasis Residence. Dividends The Directors are not proposing any dividends for the period. Balance sheet RomReal had on a consolidated basis a total balance sheet of EUR 16.72 million at 31 December 2022 (2021: EUR 17.99 milion). RomReal (parent Company) had a total balance sheet of EUR 16.29 million (2021: EUR 16.88 million). Total consolidated equity at 31 December 2022 amounted to EUR 16.23 million (parent Company EUR 16.23 million) compared with EUR 16.83 million in 2021 (parent Company EUR 16.82 million). The Company has total current and non current liabilities of EUR 0.49 million at 31 December 2022 (parent Company EUR 0.06 million). Net cash flow from consolidated operations was positive EUR 0.29 million at December 31 2022 compared to positive EUR 2.60 million in 2021 (parent Company positive EUR 0.25 million compared to negative EUR 0.16 million in 2021). Consolidated current assets were EUR 12.22 million at 31 December 2022 compared to EUR 13.37 million at 31 December 2021 (parent Company EUR 0.29 million in 2022 compared to EUR 0.04 million in 2021). Financial risk The Company does not have any current nor potential litigation, previous tax dispute was fully settled in November 2020. Organization RomReal Ltd operates in Romania through its fully owned subsidiary S.C. Westhouse Group SRL (WHG). WHG holds an office in Constanta, Romania, and a small team of five employees, legal operations of the subsidiary companies being supervised by Cristea & Partners Law office headed by Mr. Adrian Cristea. The employees mainly deal with managing the assets, accounting compliance and reporting as well as sales/ marketing. Working Conditions, Equal Opportunities, Health and Environmental issues RomReal works continuously on facilitating employee development, good health, enthusiasm and commitment among its employees. The Company also encourages employees to use public transport on travelling to reduce pollution. Women and men in comparable jobs receiving the same pay. Climate risks and risk management RomReal has a clear ambition to exit the Romanian real estate market by selling its projects (primarily land) in due course, and the remaining assets is rather limited in value and size. Consequently, the view of the Board of the Directors is it will not materially be affected from external climate risk or any known EU and/or Romanian regulations. Even though, the Romanian affiliated companies of the Group have on a best effort basis satisfied all known climate risk/environmental procedures assessment for all the remaining properties, and the required approvals has been issued in time by the Environment authorities for each project. 12 Corporate Governance RomReal Ltd (RomReal) is trying to focus on practicing good corporate governance, which will strengthen confidence in the Group and thereby contribute to the best possible long-term value creation to the benefit of the shareholders, the employees and other stakeholders. The purpose of its principles for corporate governance is to regulate the division of roles between shareholders, the Board and the Executive Management more comprehensively than is required by legislation. The Norwegian code of practice for corporate governance (the code) has been issued by the Norwegian Corporate Governance Board (NCGB). It builds on the principle of “comply or explain”, whereby companies must either comply with the code or explain why they may have chosen an alternative approach. It also requires the Company’s report on its corporate governance to address all 15 sections of the code. The Oslo Stock Exchange stipulates that listed companies must provide an overall presentation of their corporate governance principles in accordance with the applicable code, and that this must be included in their annual report. RomReal’s principles for corporate governance are based on the recommendation of 14 October 2021, which can be found at www.nues.no. 1. Implementation and reporting on corporate governance Confidence in its Management and business are crucial for RomReal’s present and future competitiveness. The Group practices open Management, and thereby builds trust both in-house and externally. The Board of RomReal is responsible for implementing sound corporate governance principles in the Group according to Bermuda Corporate Governance standards. RomReal’s corporate governance does not deviate from the requirements of the code in a significant way which requires more detailed explanation. Relations between owners and the Group will be characterized by respect for the owners, good and timely information, and equal treatment of shareholders. 2. Business RomReal owns a portfolio of prime location plots in the Black Sea region, more specifically Constanta and Ovidiu. The plots are well suited for residential and commercial developments. RomReal is involved in several construction or development projects for the time being. The ethical guidelines observed by RomReal reflect its values base; please see separate Ethical Policy Section. The objective of the Company for 2023 is to: • Focus on land value enhancing activities in order to improve the shareholder value. • Key action points are increased & more professional sales & marketing efforts • Some infra-structure investments and, if necessary, engage more resources into regulation processes like what is planned on Oasis. • Maintain a cost efficient, and healthy organisation • Conservative cash management and secure collection of vendor financing 3. Equity and dividends RomReal aims to maintain a solid equity and good liquidity appropriate to its objectives, strategy, and risk profile 13 Dividend The Company is fully financed without any external debt, and when/if certain additional disposals are realized, tax cases concluded a potential re-distribution of cash to the shareholders will reappear on the Board of Directors agenda. Under Bermuda law, a Company’s Board of Directors may declare and pay dividends from time to time unless there are reasonable grounds for believing that the Company is, or would after the payment be, unable to pay its liabilities as they become due or that the realizable value of its assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. Under the Company’s Bye-Laws, each share is entitled to dividends if, as and when dividends are declared by the Board, subjects to any preferred divided right of the holders of any preference shares. There are no restrictions on the Company’s ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to Norwegian residents who are holders of the Company’s Shares. 4. Equal treatment of shareholders and transactions with close associates Share Issues Only the General Meeting considers Board mandates to increase the share capital for each purpose after assessing the requirements set by the Board. Different Classes of Shares RomReal has a single share class, and each share carries one vote. Shareholders will be treated equally unless qualified grounds exist for an alternative approach. Efforts will be made to conduct possible transactions by the Company in its own shares through the stock exchange or in others ways at prevailing stock exchange prices. Transactions with close associates RomReal’s routines specify that, in general, no transactions should be conducted between the Group and its shareholders, Directors, senior executives or their close associates. Should any of these have an interest in a transaction involving the Group, the Board must be informed and take up the matter for consideration if necessary. Unless the transaction is insignificant, the Board will secure third-party assessments of the transaction and otherwise assure itself that no form of unfair treatment of shareholders, elected officers, employees or others is involved. The related parties, including shareholders and close associates, are reported to the stock exchange via www.newspoint.no. During 2022, there was nine insider transaction by Chairman Kjetil Gronskag. 14 5. Shares and negotiability RomReal’s articles of association place no restrictions on transferability, and its shares are freely negotiable. RomReal received a listing on the Oslo Stock Exchange’s Oslo Axess list on 11 June 2007. 6. General Meetings RomReal facilitates the participation of as many shareholders as possible at the General Meeting and ensures that it functions as much as possible as an effective meeting place for the shareholders and the Board so that the owners can exercise their rights. Notice of the Meeting and supporting documents are prepared no later than 21 days before the Meeting is to take place and posted on the Company’s website. The documents are sent to all shareholders with a known address in the Norwegian Central Securities Depository (VPS) in good time before the General Meeting takes place. This is facilitated by RomReal’s register keeper DNB, which ensures that documents, including proxies and notifications, are carried by email and/or regular post to all shareholders. The notifications and proxies clearly specify the deadline for returning the proxies which provide the shareholders between 2 to 3 weeks to return their vote depending on their accessibility more i.e., email or post. The Meeting takes place on 27 April 2023, at our registered office in Bermuda and it is accessible to all Board members and shareholders. Shareholders unable to attend in person will be given an opportunity to vote by proxy. The Company provides information on the procedure for: (a) Appointing a proxy (b) appoint a person who can act as proxy for the shareholder (c) allowing separate voting instructions for each matter but not for each one of the candidates nominated. The Board will propose to vote for each individual Board Member as of Ordinary General Meeting scheduled for 27 April 2023. Representatives of the Board always attend the Annual General Meeting, together with representatives of the Executive Management, and normally a representative from EY auditors either in person or via conference calling. The Board determines the agenda for the General Meeting. The main items on the agenda comply with the requirements of the Public Limited Companies Act as well as the parent Company’s articles of association. As recommended by the code, each General Meeting appoints a person to act as its independent Chair. Minutes of general meetings are published on www.RomReal.com and on the Oslo Stock Exchange website at www.newsweb.no. For 2022, the Annual General Meeting of the Company will take place on the 27 April 2023, at the Company’s registered office in Bermuda. 7. Nomination Committee RomReal has chosen not to comply with the directive 7 for appointing a Nomination Committee. This is due to the current size, resources and activity of the Company, the Company considers that the cost of running a separate nomination committee should be avoided. 15 8. Board of Directors: composition and independence RomReal’s Board of Directors consisted at 31 December 2022 of four Directors: Kjetil Grønskag Bendt Thorkildsen Lacramioara Isarescu Heidi Sørensen Austbø The Directors have long and varied experience in real estate, banking and finance which ensures that the Board can function effectively as a collegiate body. An overview of the Directors expertise, role and attendance can be found on the Company’s website, www.RomReal.com. The composition of the Board ensures that it serves the common interest and that it can operate as independently as possible of special interests. Chairman Kjetil Gronskag holds an executive position as Chief Executive of RomReal following Board approval on the 26 May 2016. The Chairman of the Board, as well as the Vice Chairman, Secretary, and assistant Secretary are elected by the Board of Directors during the first meeting of the newly elected Board. The term office for members of the Board is one year. To be proposed as of Ordinary General Meeting on 27 April 2023, the General Meeting should elect the Chairman of the Board as the Company’s highest governing body. 9. The work of the Board of Directors The Board of Directors is the Company’s highest body, and answerable only to the General Meeting. It has overall responsibility for planning and execution of the Group’s strategy and activities, including its organization, remuneration policy and risk Management. The Board also has overall responsibility for control and supervision. It produces an annual plan for its work with objectives, strategy and implementation. This is supported by a 2 year forecast plan or budget, which is updated on a quarterly basis during Board meetings. During Board meetings decisions are taken and tasks are delegated to the Executive Management. The Board discusses all matters relating to the Group’s activities which are of significant importance or of a special character. The duties and responsibilities of the Board are dictated by applicable legislation, the parent Company’s articles of association, and mandates and instructions adopted by the general meeting. The Board will exercise supervision to ensure that the Group meets its business goals and manages risk in a wise and satisfactory manner. The Board is responsible for appointing the chief executive. The Chairman is responsible for ensuring that the work of the Board is conducted in an efficient and proper manner and in compliance with applicable legislation. During 2022 6 (six) Board meetings were conducted. In addition to the Chairman, the Board has two independent chairs to lead the discussion on issues where the chair has a conflict of interest or is unable to attend. The Board carries out an annual assessment of its work 16 The Board of Directors ensures that members of the board of Directors and executive personnel make the Company aware of any material interests that they may have in items to be considered by the board of Directors, prior to each Annual General Meeting. The Board does not hold any Independent Committees due to the small size and limited activity of the Company. Four out of five Board members are independent therefore their direct judgement and decision-making during Board meetings, ensures that the Board is aligned to shareholders’ value in decisions related to audit and remuneration of the executive personnel. 10. Risk Management and internal control The Board and Executive Management of RomReal place great emphasis on establishing and maintaining routines for risk Management and internal control. An annual review of the most important risks affecting the business is conducted by the Board. Economic conditions and Emerging markets risk The financial market climate and especially the price of property/plots and general rental levels in Romania represents risk, as it will affect the Group’s limited rental income. There is risk associated with the general development of lease levels of commercial property for various segments and the locations where the Group owns properties. This especially applies to the market conditions at the expiration of lease contracts on the Group’s properties. The Company aims to reduce this type of fluctuations, by holding tenants’ deposits and/or bank guarantees. If fluctuations occur, it will have a negative impact on the Group’s earnings and financial position. The risk of market slowdown due to Covid-19 and the political risk in the region is evaluated and monitored by the Management on a regular basis. Financial reporting Quarterly operational and accounting reports are prepared for Board approval using International Financial Reporting Standards. Counterparty risk RomReal conducts an annual review of both clients and suppliers to identify counterparty risk. New clients are also subject to a thorough assessment to identify any risk they may present. Financial risk The Company will continue to pursue all available legal means for challenging the effects of such reassessment, in order to cancel the additional tax liabilities. Foreign Exchange risk The Company’s main reporting currency is the EUR, which is used to facilitate loans to its subsidiaries. At the subsidiary level in Romania, the operational currency is RON. Due to its 17 operational exposure in Romania, the financial reporting currency used to value the Company’s assets is the RON. Due to the difference between reporting and operational currency the Company is exposed to foreign exchange risk. To manage this, the Company holds its deposits in a mix of RON and EUR. The average exchange rate during 2022 was 1.00 EUR to 4.93 RON (4.92). Tax risk Changes in laws and rules regarding tax and duties may involve new and changed parameters for investors and the Company. This may involve a reduction in the profitability of investing in property and the profit after tax for the Company. Tax implications of transactions and dispositions conducted by the Company are to a certain extent based on judgment of applicable tax laws and regulations. Even if the Company is of the opinion that it has assessed tax law in good faith, it could not be ruled out that the authorities are of a different opinion. A change in regulation status in parts or all of the Land Bank may also normally change the applicable tax. The Company is required to calculate its current income tax at a flat rate of 16%. Starting 2013, the companies in the Group with turnover below a EUR 65,000 threshold are subject to a 1% tax calculated on total revenue. This is the case for 4 of the Group companies (2 pay 1% tax and 2 of them 3% tax) while one compay subject to 16% on taxable profits. In order to simplify and optimize the Romanian sub-holding structure, a number of merger processes of the Romanian subsidiaries is under way. The new fiscal code implemented 01 Jan 2016 has applied a land tax increase of 500% on idle plots that lack cleaning. The Board has allocated a budget for the Management to maintain all of the Company’s idle plots in a clean condition. Director’s Liability risk The Company holds a Directors and Officers liability insurance policy with the reputable insurance Company, Chartis. 11. Remuneration of the Board of Directors The General Meeting determines Directors’ fees. The remuneration is not linked to the Company’s performance in any way. During 2022, the Directors received the following remuneration: Lacramioara Isarescu EUR 6,000 Heidi Sørensen Austbø EUR 6,000 Bendt Thorkildsen EUR 6,000 During 2022, Chairman Kjetil Grønskag abstained from receiving any remuneration as a Board Member during the year. There are no outstanding share options. The Company does not grant share options to board members. 18 12. Remuneration of the Executive Management The Board determines the Chief Executive’s terms of employment. The main principle applied by RomReal for determining the pay of the Chief executive and other senior executives is that these persons will be offered competitive terms. In addition, RomReal will offer terms which encourage value creation for the Group and its shareholders, and which strengthen the loyalty of senior employees to the business. The Executive Management of RomReal comprises three executives with good knowledge within their job functions and with senior Management experience from across the industry. The Executive Management of RomReal currently includes the following persons with the yearly outlined remuneration: Name Position Yearly fees Benefits/Bonuses Kjetil Gronskag CEO RomReal €97,200 0.7% on asset sales Adrian Cristea Board member of Rom subsidiaries and legal advisor €54,000 2% on asset sales * Claudia Oprisan Chief Accountant €23,000 N/A * The incentive lawyer fee is applied on the net proceeds received by RomReal or any of its subsidiary net of any transactions fees and vat to be added (net proceeds in Euro). These net proceeds have to be approved by the CEO of RomReal’s subsidiaries Board of Directors and paid by RomReal’s subsidiaries. 13. Information and communication RomReal takes the view that objective, detailed and frequent information to the market is essential for a correct valuation of its share, and accordingly pursues a continuous dialogue with analysts and investors. Information about important events in RomReal as well as its periodic reporting of results is published in accordance with the guidelines to which the Group became subject through its listing on Oslo Axess. RomReal seeks continuously to publish all relevant information to the market in a timely, efficient and non-discriminatory manner. The Company constantly improves its Investor Relation material by upgrading its reporting format, content, and website. All stock exchange announcements are made available on www.RomReal.com and the Oslo Stock Exchange website www.newsweb.no. The Group will provide the same information to all shareholders at the same time. To the extent that analysts or shareholders ask for further details, RomReal and the Board will ensure that only information which has already been made public is provided. The Group holds quarterly and interim presentations. These provide an overview of operational and financial developments in the previous quarter as well as an overview of market prospects and the outlook for the business. Interim reports, and presentation materials are made available on the Group’s website for a period of at least 5 years. 19 The Board determines the Group’s financial calendar, which specifies the dates for publication of interim reports, the annual general meeting and the payment of dividends. This calendar is published by the end of December via the Oslo Stock Exchange’s information system and on the RomReal website. 2023 Financial Calendar includes the following dates: Q4 2022 Report 23/02/2023 AGM 2022 27/04/2023 Q1 2023 Report 25/05/2023 Q2 2023 Report 31/08/2023 Q3 2023 Report 24/11/2023 14. Takeovers In the event of a bid for the parent Company’s shares, the Board and the Executive Management will try to ensure that everyone gets access to sufficient information to be able to reach a decision on the offer. Unless otherwise instructed by the general meeting, the Board will not try to deploy defensive mechanisms to prevent the implementation of the bid. The Board will provide shareholders with its view of the offer and, providing they have reached a decision on this, Directors are duty-bound to inform shareholders whether they personally intend to accept the bid. Should the Board find that it is unable to recommend whether the shareholders should accept the bid, it will explain the reasons why such a recommendation cannot be given. An explanation must be provided if the Board’s decision is not unanimous. The Board will consider whether an assessment should be obtained from an independent expert. 15. Auditors and advisors RomReal is audited by Ernst & Young AS. Ernst & Young AS, registration number 976 389 387, has been the Company’s auditor since its incorporation in 2005. The registered business address of Ernst & Young AS is Thormøhlens gate 53 D, NO-5008 Bergen, Norway, and Ernst & Young AS is a member of the Norwegian Institute of Public Accountants (Nw. “Den Norske Revisorforeningen”). The Group will not use the auditor as a consultant unless this has been approved in advance by the Board or its Chair. A plan for their work is submitted annually by the external auditor to the Board, and this plan will specify planned services other than auditing. The auditor attends Board meetings which deal with the annual accounts and is also present during the AGM. During these meetings, the auditor will review possible changes to the Company’s auditing principles, assessments of significant accounting estimates and all cases where disagreement has arisen between the auditor and the Executive Management. At least once a year, the auditor will conduct a review of the Company’s internal control system and possible weaknesses. The auditor will also propose improvements. In addition, the Board and the auditor will hold at least one meeting a year without the chief executive or other executive personnel being present. A briefing on the audit work and an assessment of the Group’s internal control will be provided by the auditor to the general meeting. The Board of Director’s Reports the auditor remuneration to the general meeting, including details of the fee paid for audit work and any fees paid for other specific assignments. 20 Prospects Both the CPI and GDP growth in Romania is expected fall during 2023 with a modest improvement in 2024. RomReal is in a relatively strong financial position with zero external debt. The weakening macro fundamentals have already resulted in a slower sales progress of the remaining projects, and no additional new sales have materialised during 1.quarter 2023. Hitherto, all the vendor financing schemes have been 100% honoured. In addition, the infrastructure investments are reviewed on an on-going basis to ensure the cash position is satisfactory. Bermuda, 15.04.2023 The Board of Directors of RomReal .......................................... .......................................... Kjetil Grønskag (Chairman & CEO) Bendt Thorkildsen (Director) ........................................... ........................................... Heidi Sørensen Austbø (Director) Lacramioara Isarescu (Director) 21 FINANCIAL STATEMENTS 2022 22 Income Statement Figures in EUR Consolidated Parent company Notes 2022 2021 2022 2021 Rental income 12 188,148 172,108 - - Sales of inventories 12 4,665,261 3,539,372 Cost of sales- inventories 12 (3,480,332) (2,875,897) - - Profit / (loss) on sales of investment property 1,184,929 663,475 - - Total income 1,373,077 835,583 - - Payroll and related expenses 13 (260,660) (242,987) (18,000) (18,000) Depreciation expense 3 (19,939) (41,854) - - Other operating expenses 15 3,662 (92,124) (191,115) 2,668,806 Inventory (write off )/ reversal 5 (741,756) 2,180,481 General and administrative expenses 14 (698,997) (822,593) (257,256) (331,646) Operating expenses (1,717,690) 980,923 (466,371) 2,319,160 Net gain/(loss) from revaluation of investment properties (149,876) 285,583 - - Profit/(loss) from operations (494,48 9) 2,102,089 (466,371) 2,319,160 Interest income 16 61,426 7,152 680 - Interest expense 16 - - - - Foreign exchange, net 16 (24,429) (516,055) (10,756) (512,017) Profit/(loss) before taxes (457,492) 1,593,186 (476,447) 1,807,143 Tax expense 17 (177,719) (61,175) (119,859) (16,000) Result of the period (635,21 1) 1,532,011 (596,305) 1,791,143 Attributable to: -Equity holders of the parent (635,21 1) 1,532,011 (596,305) 1,791,143 Basic earnings/(losses) per share from continuing operations 22 (0.02) 0.04 (0.01) 0.04 Basic earnings/(losses) per share from continuing - diluted 22 (0.02) 0.04 (0.01) 0.04 23 Statement Of Comprehensive Income Figures in EUR Consolidated Parent company 2022 2021 2022 2021 Profit / (loss) for the year (635,21 1) 1,532,011 (596,305) 1,791,143 Other comprehensive income to be reclassified to profit or loss in subsequent periods Exchange differences on translation of foreign operations 38,907 259,145 - - Other comprehensive income for the year, net of tax 38,907 259,145 - - Total comprehensive income for the year, net of tax (596,304) 1,791,156 (596,305) 1,791,143 Attributable to equity holders of the parent: (596,304) 1,791,156 (596,305) 1,791,143 24 Statement of Financial Position Figures in EUR Consolidated Parent company ASSETS Notes December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Noncurrent assets Property, plant & equipment 3 54,983 51,620 - - Investment properties 4 4,398,324 2,032,724 - - Deferred tax asset 17 55,178 55,170 - - Investments in subsidiaries 1 - - 15,995,495 16,844,808 Total non current assets 4,508,485 2,139,514 15,995,495 16,844,808 Current assets Inventories 5 5,719,233 8,679,507 - - Trade receivables and other assets 6 2,397,725 880,021 16,059 15,726 Cash and cash equivalents 9 4,098,477 3,807,182 274,479 19,492 Total current assets 12,215, 435 13,366,710 290,538 35,217 Assets held for sale 11 - 2,480,010 - - Total assets 16,723, 920 17,986,234 16,286,032 16,880,025 Figures in EUR LIABILITIES AND EQUITY Notes December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Equity Issued share capital 7 103,419 103,419 103,419 103,419 Contributed surplus 7 87,117,249 87,117,249 87,117,249 87,117,249 Retained earnings 8 (74,761 ,935) (74,126,7 24) (70,993,046) (70,396,741) Other Reserves 160,221 160,221 - - Translation reserve 3,611,071 3,572,164 - - Total equity 16,230,025 16,826,329 16,227,622 16,823,927 Non current liabilities Deferred tax liability 17 101,092 157,763 - - Total non current liabilities 101,092 157,763 - - Current liabilities Trade and other payables 10 365,747 963,335 58,410 56,098 Income tax payable 17 1,932 13,686 - - Contract liabilities 25,124 25,121 - - Total current liabilities 392,803 1,002,142 58,410 56,099 Total liabilities and equity 16,723, 920 17,986,234 16,286,032 16,880,025 25 Signed on behalf of the Board of Directors .......................................... .......................................... Kjetil Grønskag (Chairman & CEO) Bendt Thorkildsen (Director) ........................................... ........................................... Heidi Sørensen Austbø (Director) Lacramioara Isarescu (Director) 26 Consolidated Statement Of Changes in Equity Figures in EUR Attributable to equity holders of the parent Share Capital (Note 7) Contributed Surplus (Note 7) Retained Earnings (Note 8) Translation Reserve Other Reserves Total Balance as of 31 December 2020 103,419 87,117,249 (75,658,735) 3,313,019 160,221 15,035,173 Profit / (loss) for the period - - 1,532,011 - - 1,532,011 Other comprehensive income - - - 259,145 - 259,145 Total comprehensive income for the year - - 1,532,011 259,145 - 1,791,156 Balance as of 31 December 2021 103,419 87,117,249 (74,126,724) 3,572,164 160,221 16,826,329 Profit / (loss) for the period - - (635,211) - - (635,211) Other comprehensive income - - - 38,907 - 38,907 Total comprehensive income for the year - - (635,211) 38,907 - (596,304) Balance as of 31 December 2022 103,419 87,117,249 (74,761,935) 3,611,071 160,221 16,230,025 27 Parent Company’s Statement Of Changes in Equity Figures in EUR Share Capital (Note 7) Contributed Surplus (Note 7) Retained Earnings (Note 8) Total Balance as of 01 January 2021 103,419 87,117,249 (72,187,884) 15,032,783 Profit for the period - - 1,791,143 1,791,143 Other comprehensive income - - - - Total comprehensive income and expense for the year - - 1,791,143 1,791,143 Balance as of 31 December 2021 103,419 87,117,249 (70,396,741) 16,823,927 Profit for the period - - (596,305) (596,305) Other comprehensive income - - - - Total comprehensive income and expense for the year - - (596,305) (596,305) Balance as of 31 December 2022 103,419 87,117,249 (70,993,046) 16,227,622 28 Statement Of Cash Flows Figures in EUR Consolidated Parent company Notes 2022 2021 2022 2021 CASH FLOW FROM OPERATING ACTIVITIES: Net profit/(loss) (635,21 1) 1,532,011 (596,305) 1,791,143 Adjustments for: - Income tax expense/(profit) 17 177,719 61,175 119,859 - -Net (gain)/loss from revaluation of investment properties 4,11 891,632 (2,466,064) - - -Expenses/(gain) on disposal of investment property 4,11 (1,184,929) (663,475) - - - Depreciation and amortization 3 19,939 41,854 - - - Interest Income 16 (61,426) (7,152) (680) - - Interest expense 16 - - - - -Unrealised foreign exchange (gain) / loss 16 24,429 516,055 10,755 512,017 -Other operating expenses 15 - - 191,115 (2,668,807) Decrease/(increase) in trade and other receivables (1,517,708) (356,580) (333) 7,333 (Decrease)/increase in current payables (597,585) 870,592 2,312 896 Decrease/(increase) in inventories 2,508,331 114 - - Cash generated from operations (374,809) (471,470) (273,277) (357,418) Income tax paid (292,960) (17,935) (119,859) 16,000 Net cash flow from operating activities (667,769) (489,405) (393,136) (341,418) CASH FLOWS FROM INVESTING ACTIVITIES: Sales of investment property 2,698,465 3,857,295 - - Capital expenditure on investment property (1,796,603) (811,676) - - Net cash flow used in investing activities 901,862 3,045,619 - - CASH FLOWS FROM FINANCING ACTIVITIES: Payment of issue costs - - 647,424 181,976 Repayment of borrowings - - - - Interest paid 16 - - - - Interest received 57,120 7,152 680 - Net cash from financing activities 57,120 7,152 648,104 181,976 Other non-cash expenses/(revenues) 82 36,834 19 - Net change in cash and cash equivalents 291,295 2,600,200 254,987 (159,442) Cash and cash equivalents, beginning of period 3,807,182 1,206,982 19,492 178,934 Cash and cash equivalents, end of period 4,098,477 3,807,182 274,479 19,492 29 Notes To The Financial Statements Note 1 ORGANIZATION AND OPERATIONS The consolidated financial statements of RomReal Limited and its subsidiaries (collectively the “Group” or the “Company”) for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the directors on the 15 April 2023. These financial statements cover RomReal Ltd. and its subsidiaries. RomReal Ltd. is incorporated in Bermuda whereas the subsidiaries Westhouse Group SRL, Concorde Group SRL, Investate SRL, Westhouse Oasis Residences SRL (former Rofrench Connection SRL) , Westhouse Lakeside SRL ( former Terra del Sol SRL) are incorporated in Romania. RomReal Ltd and its subsidiaries (the Group) are principally engaged in property investments and development in Romania. Also, for reference, single financial statements of the parent company, Romreal Ltd. have been prepared. As a general rule, all comments refer to the consolidated financial statements of the Group, unless specifically mentioned otherwise. Both consolidated financial statements and those of the parent have been prepared on a going concern basis. The registered office address of RomReal Ltd is located at Burnaby Building, 16 Burnaby street, Hamilton HM11, Bermuda. The investment in subsidiaries at the Parent Company have been impaired, mainly as a result of the decrease in land bank valuations after the 2008 crisis as well as due to the ongoing operational expenditure. The vast majority of the impairment is concentrated in Westhouse Group SRL where most of the assets are located. During 2022 2 (two) shares in Westhouse Lakeside (former Terra del Sol) are transferred from RomReal to Westhouse Group, in exchange for 1 (one) share increase in number of shares of Westhouse Group. During the period, there were no additions or disposal. The movement in investment in subsidiaries for the parent company during the period is due to the change in value between the periods and increase in share capital of Westhouse Oasis Residences by EUR 2m, equivalent of 197,706 shares (2021: 152,430 shares). Entity Country of business Owner’s share Number of shares Westhouse Group SRL Romania 100% 19,612,516 Concorde Group SRL Romania 100% 375,442 Westhouse Oasis Residences SRL (former Rofrench Connection SRL) Romania 100% 350,136 Investate SRL Romania 100% 351,320 Westhouse Lakeside SRL (former Terra del Sol SRL) Romania 100% 22 30 Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis for preparation The consolidated financial statements of the RomReal Group and those of the parent company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), adopted by the EU. All IFRS standards adopted have effective date 1 January 2022 or earlier. The consolidated financial statements and those of the parent company are presented in euros. The financial statements have been prepared on the basis of historical cost except for Investment Properties which is presented at fair value and Assets Held for sale which are measured at the lower of carrying amount before the reclassification and the fair value less cost to sell. 2.2 Consolidation The consolidated financial statements comprise the financial statements of RomReal Ltd. and its subsidiaries as of 31 December 2022 and 31 December 2021; the Group was established in the autumn 2005. 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. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full. A subsidiary is a company which the Company controls. The control is typically evidenced if an only if the Company has: • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) • Exposure, or rights, to variable returns from its involvement with the investee, and • The ability to use its power over the investee to affect its returns 2.3 Significant accounting judgements, estimates and assumptions The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgements In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements. Classification of property The Group determines whether a property is classified as investment property, assets held for sale or inventory: -Investment property comprises land and buildings which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. -Assets held for sale comprises property which is available for immediate sale and for which the sale is highly probable and expected to be substantially completed within a year from the date of classification. -Inventory comprises property that is held for sale in the ordinary course of business. Principally, this is residential property that the Group develops and intends to sell before or on completion of construction. 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 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 that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. 31 Estimate of fair value of investment properties Fair values are determined based on an annual evaluation performed by an accredited external, independent valuer that is certified by the Romanian Institute of Valuers. Valuation has been made such, in accordance with the International Valuation Standards, to reflect market value of the properties, namely “The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties, in an arm’s length transaction”. No account has been taken of any additional prospective purchaser with a special interest. No allowance has been made with regard to any expenses of realization, or for any taxation arising in case of disposal. The determined fair value of the investment properties is most sensitive to the degree to which comparable transactions are available, including the degree of judgement and adjustments necessary to make such market transactions comparable to the investment property being valued. The determination of the fair value of investment property may also require the use of estimates such as future cash flows from assets and discount rates applicable to those assets. In addition, development risks (such as construction and letting risks) are also taken into consideration when determining the fair value of investment properties under construction. These estimates are based on local market conditions existing at reporting date. Taking into account the characteristics of the Group’s properties, as well as the features of the local market, the market comparison approach was considered in these circumstances as the most suitable in estimating the market value of the properties. The management believes that the valuation assumptions used reflect the best estimate of the investment properties’ fair value at the date of the balance sheet. The key assumptions used to determine the fair value of the investment properties are further explained in Note 4. Estimation of net realisable value for inventory Inventory is stated at the lower of cost and net realisable value (NRV). NRV for completed inventory property is assessed with reference to market conditions and prices existing at the reporting date. NRV in respect of inventory property under construction is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less the estimated costs to make the sale. NRV is determined by the Group based on an annual evaluation performed by an accredited external, independent valuer. However, given the limited liquidity of the market, there is a significant degree of uncertainty in estimating the NRV. Recognition of the deferred tax asset When determining the deferred tax liabilities and deferred tax assets, the Group considers, at the balance sheet date, the manner in which it expects to recover or settle the carrying amount of its assets and liabilities. A deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. Where the group considered that it is not probable enough future taxable profits will be available within the legal time framework of seven years to utilise the tax losses against, the group has not recognised such deferred tax assets. Capitalised costs Costs are capitalised when future cash generation is expected. Such costs include the construction costs of the inventories. See note 2.8. 2.4 Property, plant and equipment Plant and equipment is stated at cost net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of such plant and equipment when that cost is incurred if the recognition criteria are met. Depreciation is calculated on a straight-line basis over the useful life of the assets. The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may be impaired. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows: IT equipment Motor vehicles Other fixtures and fittings 2-4 years 4 years 3-9 years 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 income statement in the year the asset is derecognised. 32 The asset's residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end. 2.5 Investment properties Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. Investment property comprises freehold land and freehold buildings. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values are included in the income statement in the year in which they arise. Please see 2.3 above for details about fair values estimations. Investment properties are derecognised when they have been disposed of or permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition. Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefit associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use. Property being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and net realisable value (NRV). If an item of property, plant and equipment becomes an investment property because its use has changed, any differences resulting between the carrying value and the fair value of this item at the date of transfer is recognised in equity as a revaluation of property, plant and equipment under IAS 16. However, if it is a fair value gain, such is recognised in the income statement. 2.6 Cash and cash equivalents Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be converted into cash within three months and to a known amount, and which contain insignificant risk elements. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 2.7 Financial assets Financial assets are classified at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially 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. As the Group’s rent and other trade receivables do not contain a significant financing component or for which the Group has applied the practical expedient, they are measured at the transaction price determined under IFRS 15. Refer to the accounting policies on revenues from contracts with customers. In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income (OCI), it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows. 33 2.8 Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory and is measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less cost to complete development and selling expenses. The cost of inventory recognised in profit or loss on disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold. 2.9 Trade and other receivables Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group recognises an allowance for expected credit losses (ECLs) for all debt instrument except those held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms 2.10 Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for sale in its immediate condition. The sale should be expected within one year from the date of classification as held for sale. Immediately before classification as held for sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter, the assets are recognised at the lower of their carrying amount and fair value less cost to sell. Assets classified as held for sale are not depreciated. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are included in the income statement. Gains are not recognised in excess of any cumulative impairment loss. In case conditions for classification of non-current assets are no longer met, classification as held for sale ceases. Non-current assets that ceases to be classified as held for sale are remeasured at the lower of their carrying amount before classification as held for sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset or disposal group not been classified as held for sale, and its recoverable amount at the date of the subsequent decision to sell. 2.11 Provisions Provisions are recognised when, and only when, the company has a valid liability (legal or constructive) as a result of past events and it can be proven probable (more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and that the size of the amount can be measured reliably. Provisions are reviewed on each balance sheet date and their level reflects the best estimate of the liability. 2.12 Equity Transaction costs relating to equity transactions are recognised directly in equity. Share Issues Only the General Meeting considers Board mandates to increase the share capital for each purpose after assessing the requirements set by the Board. Different Classes of Shares RomReal has a single share class, and each share carries one vote. Shareholders will be treated equally unless qualified grounds exist for an alternative approach. Efforts will be made to conduct possible transactions by the Company in its own shares through the stock exchange or in others ways at prevailing stock exchange prices. 34 2.13 Operating lease contracts – the Group as a lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements (such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property), that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. 2.14 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and sales taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. Revenue includes rental income, service charges and management charges from properties, and income from property trading. Rental income: Rental income is recognised over the life of the rental period. Rental income related to rent yielding assets of the Group in respect of properties let to third parties. Other income: Other income is recognised as it is earned. Income from sales of investment property plots: Deposits cashed by the Group for the sale of plots are not recognised as revenue until the Group has transferred to the buyer the significant risks and rewards of ownership of the plots. 2.15 Foreign currency translation The consolidated financial statements are presented in euros, which is the parent company's functional and presentation currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement. The functional currency of the Romanian operations is the Romanian New Leu. As at the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of RomReal Ltd. Group (the euro) at the rate of exchange ruling at the balance sheet date and, their income statements are translated at the average exchange rates for each month unless there have been significant fluctuations in the exchange rate over the applicable period, in which case the exchange rate at each transaction date is applied. The exchange differences arising on the translation are recognised in other comprehensive income. December 31, 2022 December 31, 2021 Closing 4.9474 4.9481 2.16 Taxes RomReal Ltd. is incorporated in the Islands of Bermuda so is not subject to any income, withholding or capital gains taxes under current Bermuda law. The subsidiaries are registered in Romania and are subject to Romanian taxation rules. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the 35 reporting date. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses. Deferred income tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry- forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. 2.17 Loans and Borrowings Borrowing costs generally are expensed as incurred. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the assets are substantially ready for their intended use. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Loan is accounted for at fair value, at the time of disbursement, reduced for any transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance cost in the income statement. 2.18 Operating segments For management purposes, the group is organised into a single business unit and consequently has only one operating segment which the management monitors in terms of performance assessment. 2.19 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year. No new standards have been applied in 2022. 36 Note 3 PROPERTY, PLANT AND EQUIPMENT Figures in EUR - Consolidated IT equipment Other fixtures and fittings Motor vehicles Total Gross book value as at December 31, 2021 49,680 293,280 53,994 396,954 Additions in period 3,442 16,553 - 19,995 Disposals in period - (21,724) - (21,724) Translation difference (2) 42 187 227 Gross book value as at December 31, 2022 53,120 288,151 54,181 395,452 Accumulated Depreciation as at December 31, 2021 (49,421) (254,335) (41,576) (345,333) Charge for the period (1,762) (18,177) - (19,939) Disposals in the period - 21,724 - 21,724 Translation difference (3) 3,091 (9) 3,079 Accumulated Depreciation as at December 31, 2022 (51,186) (247,697) (41,585) (340,469) Net book Value as at December 31, 2021 259 38,945 12,418 51,621 Net book Value as at December 31, 2022 1,934 40,454 12,596 54,983 Depreciation method Linear Linear Linear Depreciation period (Years) 2-4 3-9 4 There were no impairment charges in 2022 and 2021. Note 4 INVESTMENTS PROPERTIES Figures in EUR - Consolidated 2022 2021 Opening balance as at January 1 2,032,724 3,329,477 Additions in period 32,370 - Sales - - Transfers from Assets Held for Sale (note 11) 2,128,000 - Transfers to Inventories - (1,239,000) Fair value adjustment during the period 205,603 15,329 Translation differences (373) (73,082) Carrying amount as at December 31 4,398,324 2,032,724 Investment properties consist of land and buildings at various locations in Romania. The fair value of investment property as at 31 December 2022 is based on a valuation by an independent valuer who holds a recognised and 37 relevant professional qualification in Romania and who has recent experience in the location and categories of the investment property being valued. Additionally, for those properties where pre-sale agreements were in place, the sale value included in the respective sale agreements has been used for the purposes of the valuation. Valuation has been made such, in accordance with the International Valuation Standards, to reflect market value of the properties, namely “The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties, in an arm’s length transaction”. No account has been taken of any additional prospective purchaser with a special interest. No allowance has been made with regard to any expenses of realization, or for any taxation arising in case of disposal. With regard to the valuation methodology, two approaches were used: (i) the direct market comparison approach and (ii) the residual approach. Both approaches were utilised, and the degree to which either, or both, are relevant depended upon the nature of the specific land plot and the availability of information. When data is available, the market comparison approach is the most direct and systematic approach as it recognizes that property prices are determined by the market. Valuation by comparison is essentially objective since it is based on an analysis of the price achieved or offered for sites with broadly similar development characteristics with the land being valued. The residual approach estimates the land value considering the value of the proposed project upon completion and the deduction of the development costs, including the developer’s profit. This method requires the input of a large amount of data and involves a large number of assumptions. Even small changes in any of the inputs can cumulatively lead to a large change in the land value. Thus, the application of this method requires a high level of expertise, being mainly used as an alternative approach when there are no or limited comparables to apply the direct market comparison approach. In line with the market practice, the valuation of assets is determined and quoted in EUR. While the basis for preparation of accounting records is RON the EUR/RON exchange rate movements result into currency differences which are reflected as an adjustment to the carrying value of the investment property. Taking into account the characteristics of the Group’s properties, as well as the features of the local market, the market comparison approach was considered in these circumstances as the most suitable in estimating the market value of the properties. For each property, several comparables were selected and the following elements of comparison were considered: price, real property rights transferred, financing terms, conditions of sale, expenditures made immediately after the purchase, location, area, visibility and frontage, utilities, access, public transportation, existing buildings, existing potential building permitting and best use. Land price varies depending on the size of the plot. In case of development sites, the larger the plot, the lower the price per square meter. In terms of size, based on market evidence, land plots were grouped in several intervals, as follows: smaller than 1,000 sq m, between 1,000 and 5,000 sq m, between 5,000 and 10,000 sq m, between 10,000 and 50,000 sq m and larger than 50,000 sq m. If comparison was made with sites that are in different size intervals, a 5% adjustment was applied. The properties have been inspected along with the surrounding neighbourhood and location from which comparable data was drawn where possible. The limited liquidity of the market has resulted in comparables being mainly based on the most recent asking prices. In such cases, several adjustments ranging on average between 10-30% were applied to the asking prices to adjust for reduced liquidity, difference in size, accessibility, permitting, etc. Within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement the above-described valuation of investment properties is categorised as Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. In arriving at their estimates of market values the valuators used their market knowledge and professional judgement and did not rely solely on historical transactional comparables. In these circumstances, there was a greater degree of uncertainty than which exists in a more active market in estimating the market values of investment property. Furthermore, given the rapid change on the market, significant alterations of value can be encountered within short periods of time. Unforeseen macroeconomic or political crises can have a sudden and dramatic effect on markets. This could manifest itself by either panic buying or selling, or simply disinclination to trade until it is clear how prices in the market will be 38 affected in the longer term. There have been no transfers between Levels in the hierarchy as compared to the previous reporting period. There were no disposals to investment properties during 2022. Note 5 INVENTORIES Figures in EUR - Consolidated 2022 2021 Opening balance 8,679,507 7,850,162 Additions 1,237,743 418,883 Disposals (3,480,332) (2,875,897) Transfers from Investment Properties - 1,239,000 Change in provisions (741,756) 2,180,481) F/X reserve 24,071 (133,122) Balance as at December 31 5,719,233 8,679,507 Inventories consist of the development projects of the Group. These are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs to make the sale. At year-end 2022, inventories relate to the Oasis project (EUR 3.8 million) and Lakeside (EUR 0.7 million). The cost for the Oasis project is EUR 5.5 million. The net realisable value test in 2022 resulted in a reversal of provision. Within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement the above-described estimate of net realisable value is categorised as Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. In arriving at their estimates of market values the valuators used their market knowledge and professional judgement. The net realisable value was assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less the estimated costs to make the sale. There have been no transfers between Levels in the hierarchy as compared to the previous reporting period. Note 6 TRADE RECEIVABLES AND OTHER CURRENT ASSETS Figures in EUR Consolidated 2022 2021 Trade receivables 2,272,048 776,644 VAT receivable 102,809 86,356 Other prepayments 1,935 1,013 Other short-term receivables 20,933 16,008 Total 2,397,725 880,021 Trade receivables include mainly receivables related to the sales of plots for which an instalments payment schedule has been agreed by the Group and other receivables resulting in the ordinary course of business in respect of the lease agreements for some of the rent yielding investment properties and the rest in sundry debtors. 39 Parent company trade receivables refer to other short-term receivables. As of 31 December, the analysis of receivables that are past due is set out below: Total Neither past due nor impaired Past due but not impaired <30 days 30-60 days 60-90 days 90-120 days >120 days 2022 2,397,725 2,335,226 - - - - 62,499 2021 880,021 829,375 11,535 39,111 - - - Note 7 SHARE CAPITAL AND PAID-IN CAPITAL Figures in EUR Number of shares Share capital Contributed Surplus Paid in share capital Total share capital January 1, 2021 41,367,783 103,419 87,117,249 87,220,668 New issues in the period - - - - Reduction in par value of shares - - - - Total share capital December 31, 2021 41,367,783 103,419 87,117,249 87,220,668 New issues in the period - - - - Reduction in par value of shares - - - - Total share capital December 31, 2022 41,367,783 103,419 87,117,249 87,220,668 There were no changes to the share capital or the number of shares during 2022 and 2021. 40 Shareholders rights There are no restrictions on voting rights or the transferability of shares in RomReal Ltd. The below summarised is the 20 largest shareholders as of 06 March 2023. Rank Name Holding Stake 1 SIX SIS AG 10,331,934 24.98% 2 GRØNSKAG, KJETIL 5,913,006 14.29% 3 THORKILDSEN, WENCHE 5,392,985 13.04% 4 SAGA EIENDOM AS 3,386,636 8.19% 5 AUSTBØ, EDVIN 2,108,500 5.10% 6 Danske Bank A/S 1,557,838 3.78% 7 ENERGI INVEST AS 1,253,611 3.03% 8 Orakel AS 1,101,000 2.66% 9 GRØNLAND, STEINAR 1,045,277 2.53% 10 BNP Paribas 991,717 2.40% 11 SPAR KAPITAL INVESTOR AS 940,236 2.27% 12 THORKILDSEN INVEST AS 829,478 2.01% 13 PERSSON, ARILD 718,000 1.74% 14 HOEN, ANDERS MYSSEN 689,557 1.67% 15 KVAAL INVEST AS 682,000 1.65% 16 AKSEL MAGDAHL 466,092 1.13% 17 Frenico AS 396,000 0.96% 18 NORDNET LIVSFORSIKRING AS 295,903 0.72% 19 CITIBANK 220,000 0.53% 20 Jo Egil Aalerud 166,864 0.40% TOP 20 38,486,634 93.08% (1) This is the Top 20 Shareholder list as per 06 March 2023 (2) The total issued number of shares issued at 06 March 2023 was 41,367,783. (3) Thorkildsen Invest AS is a Company controlled by RomReal Kay Thorkildsen family. (4) Chairman Kjetil Grønskag owns directly and indirectly 5,913,006 shares corresponding to 14.92%. (5) The above list is the 20 largest shareholders according to the VPS print out; please note that shareholders might use different accounts and account names, adding to their total holding. Note 8 RETAINED EARNINGS Movements in retained earnings for the Group can be analysed as follows: Figures in EUR Consolidated Retained earnings as of December 31, 2021 (74,126,724) Net profit in the period (635,211) Retained earnings as of December 31, 2022 (74,761,935) No dividends will be distributed by the Group in respect of 2022. Note 9 CASH AND CASH EQUIVALENTS 41 Cash and cash equivalents amount to EUR 4,098,477 at 31 December 2022 (EUR 3,807,182 at 31 December 2021). At parent company level, cash and cash equivalents amount to EUR 274,479 at 31 December 2022 (EUR 19,492 at 31 December 2021). There are no restrictions on the cash balances. Note 10 TRADE AND OTHER PAYABLES Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Figures in EUR Consolidated 2022 2021 Trade payables 51,601 39,332 Contract liabilities 243,903 858,287 Employee taxes 6,469 4,282 Other payables 63,774 61,434 Trade and other payables 365,747 963,335 At 31 December 2022, the balance of EUR 365,747 Other payables for the group as well as the balance of Other payables of EUR 58,410 for the parent company, include EUR 59,708 accrued expenses related to the 2022 audit fees. Contract liabilities in amount of EUR 243,903 at 31 December 2022 (EUR 858,287 at 31 December 2021) mainly include the payments received in respect of pre-sales of plots. Figures in EUR Parent company 2022 2021 Trade payables - - Employee taxes - - Other payables 58,410 56,098 Trade payables 58,410 56,098 Note 11 ASSETS HELD FOR SALE Figures in EUR - Consolidated 2022 2021 Opening balance as at January 1 2,480,010 2,240,016 Sales - - Transfers to investment Properties (note 4) (2,128,000) - Fair value adjustment during the period (353,503) 277,119 Translation differences 1,493 (37,125) Carrying amount as at December 31 - 2,480,010 The Group does not consider the completion of the transactions highly probable; the assets are not available for immediate sale in their present condition. Hence Piata Balada plot has been reclassified as investment property. 42 Note 12 RENTAL INCOME AND REVENUE FROM CONTRACTS WITH CUSTOMERS Figures in EUR - Consolidated 2022 2021 Rental income 6,18 188,148 172,108 Sales of inventories 5 4,665,261 3,539,372 Cost of sales- inventories 5 (3,480,332) (2,875,897) Total operating income 1,373,077 835,583 All rental revenue is generated from Balada market for both years. Future minimum rentals receivable under non- cancellable operating leases as at 31 December are, as follows: Figures in EUR - Consolidated 2022 2021 Within 1 year 188,148 172,108 After 1 year - - Total operating income 188,148 172,108 The Sales of inventories during 2022 relate to the sale of several small plots of land the Group owned in the town of Ovidiu. Note 13 PAYROLL EXPENSES AND NUMBER OF EMPLOYEES The key management (which includes the executive officer of the Group and its directors) received remuneration in amount of EUR 120,771 (2021: EUR 94,800). Mr Kjetil Grønskag’s remuneration as CEO of the Group has been assimilated to the Management Support Agreement (see note 18). The Directors are shown below together with their interest in the shares of the Company per 31 December 2022 and per 31 December 2021: 31 December 2022 31 December 2021 Kjetil Grønskag Appointed November 2006 5,913,006 5,752,914 Heidi Sørensen Austbø Appointed April 2017 Nil Nil Bendt Thorkildsen Appointed April 2016 6,222,463 6,222,463 Lacramioara Isarescu Appointed April 2014 Nil Nil TOTAL 12,135,469 11,975,377 The average number of employees in Westhouse Group during 2022 was 12. Payroll expenses related to these employees amounted to EUR 260,660 during 2022 (2021: 242,987). All compensations offered by the Group are short term benefits. The Group does not offer a pension plan or other long term employee benefits to its employees as of December 31, 2022 nor are there any post-employment benefits. 43 Note 14 GENERAL AND ADMINISTRATIVE EXPENSES Figures in EUR Consolidated 2022 2021 Management fee (97,200) (94,800) Legal expenses (128,382) (134,531) Rent expenses (6,137) (6,140) Travel expenses (1,709) (581) Professional services (63,708) (136,900) Land and other taxes (67,895) (63,943) Other expenses (333,966) (385,698) Total (698,997) (822,593) Legal expenses include one off fees related to the legal services in connection with the sales of plots entered into during 2022. For the parent company, Professional Services include EUR 59,708 accrued expenses related to the 2022 audit fees. Figures in EUR Parent company 2022 2021 Management fee (97,200) (94,800) Legal expenses - - Rent expenses - - Travel expenses (1,709) (593) Professional services (63,708) (183,123) Land and other taxes - - Other expenses (94,639) (53,130) Total (257,256) (331,646) Note 15 OTHER OPERATING (LOSS) / GAINS For RomReal (the parent company) “Other operating (loss)/gains” of EUR 191,115 loss in 2022 (2021: EUR 2,668,806 gain) relates mainly to change in the fair value of the investment in subsidiaries). Note 16 FINANCIAL INCOME AND EXPENSE Figures in EUR Consolidated 2022 2021 Interest income from subsidiaries - - Interest income from banks 61,426 7,152 Total financial income 61,426 7,152 44 Interest expense and other bank fees - - Foreign exchange gain - 19,601 Foreign exchange loss (24,429) (535,656) Total Financial expense (36,997) (516,055) Figures in EUR Parent company 2022 2021 Interest income from subsidiaries - - Interest income from banks 680 - Total financial income - - Interest expense and other bank fees - - Foreign exchange gain - - Foreign exchange loss (10,756) (512,057) Total Financial expense (10,076) (512,057) During 2022 the RON has fluctuated against the EUR and at year end was 0.014% stronger against the EUR. Note 17 TAXATION RomReal Ltd. is registered in Bermuda and is consequently not subject to taxation. The subsidiaries are subject to taxation in Romania. The applicable tax rate in Romania is 16%. The applicable tax rate is the same whether any profits are paid out as dividends or retained in the company. There have not been any changes to the applicable tax rates in 2022. Current income tax expense for 2022 was EUR 177,719 (2021: 61,175). The major components of the income tax expense for the periods ended December 31, 2022 and December 31, 2021 are: The table below shows the composition of the deferred tax assets and deferred tax liability in the balance sheet: Figures in EUR - Consolidated 2022 2021 Losses carried forward resulting in deferred tax asset 55,178 55,170 Fair value adjustments of Investment property resulting in deferred tax liability 101,092 157,763 The following table shows the composition of the deferred tax asset per each company: Figures in EUR - Consolidated 2022 2021 Current income tax charge 234,596 17,935 Deferred income tax movement in the period (56,877) 43,240 Income tax expense/(income) in the consolidated income statement 177,719 61,175 45 2022 2021 Westhouse SRL 55,178 55,170 TOTAL 55,178 55,170 The deferred tax asset relates to the following: 2022 2021 Carried forward fiscal losses 55,178 55,170 TOTAL 55,178 55,170 The following table shows the composition of the deferred tax liability per each company: 2022 2021 Concorde SRL 91,701 148,373 Investate SRL 9,391 9,390 TOTAL 101,092 157,763 The deferred tax liability relates to the following: 2022 2021 Revaluation of investment properties to fair value 101,092 157,763 TOTAL 101,092 157,763 The Group measures the deferred tax liabilities and deferred tax assets in order to reflect the tax consequences that would follow from the manner in which the entity expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities. Consequently, where the group had transactions which are not expected to carry a deferred tax liability or the deferred tax asset, the group has not recognised such deferred tax. The Group used its judgement to determine whether there will be enough taxable income in the foreseeable future to offset the deferred tax asset against. Where there was not enough conclusive evidence to support that, such deferred tax asset was not recognised/written off. The following shows a numerical reconciliation between the tax expense and the accounting profit. 2022 2021 Accounting taxable profits/(loss) (457,492) 1,593,187) Tax at applicable rate of 16% 73,199 (254,910) Tax effect of (expenses)/income that are not (deductible)/taxable in determining taxable profit (250,918) 193,735 Tax (expense)/income (177,719) (61,175) The Company has not recognised a deferred tax assets in respect of the carried forward tax losses for which there was not enough evidence to support future taxable income to offset them against. The Group can carry forward the tax losses for a period of 7 years on a rolling basis. 46 Note 18 TRANSACTIONS WITH RELATED PARTIES Transactions with subsidiary As at 31 December 2022, RomReal Ltd. does not have any loan to its Romanian subsidiaries. Previous loans granted to Westhouse Group were converted into equity in 2020. In dec 2021 agreement was signed for loan interest forgiveness between RomReal Ltd. and Westhouse Group. Transactions with other related parties During 2022 the Company paid a direct remuneration of EUR 120,771 per year to Chairman and CEO Kjetil Grønskag. The Chairman and CEO agreement has a yearly remuneration of EUR 97,200 and a variable element of 0.7% of all realized sales. The Group’s Chairman Kjetil Gronskag, holds an executive position as Chief Executive of RomReal following Board approval on the 26 May 2016. All transactions with related parties have been conducted following the principle of arm’s length. Note 19 FINANCIAL RISK, FAIR VALUES AND CAPITAL MANAGEMENT The Group’s principal financial liabilities comprise trade and other payables. Its financial assets comprise cash and cash equivalents as well as trade receivables. Fair value The fair value of the financial assets and liabilities are the amounts at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Cash and short-term deposits, trade receivables, trade payables, and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of borrowings is estimated by discounting future cash flows using rates currently available for debt or similar terms and remaining maturities. The fair value approximates their carrying values gross of unamortised transaction costs. The fair value of the Group’s financial assets and liabilities is equal to the carrying amount. Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities, from its financial investments and from its deposits with banks. The carrying amounts of the Group’s cash and cash equivalents, other current assets and receivables represented the maximum exposure to credit risk in relation to financial assets. Cash is placed with reputable banks. As of 31 December 2022, no trade and other receivables were impaired (see note 6). Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At 31 December 2022, the Group’s had no exposure bearing the risk of changes in market interest rates 47 Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans. The objective of the Group is to ensure that sufficient cash is maintained to cover the operating costs until the market recovers. Equally, the Group is actively looking to divest some of smaller plots in order to strengthen its cash position. The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments. Year ended 31 December 2022 On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total Other payables - 365,747 - - - 365,747 Deferred income - - 25,124 - - 25,124 Tax payable - 1,932 - - - 1,932 Total - 367,679 25,124 - - 392,803 Year ended 31 December 2021 On demand Less than 3 months 3 to 12 months 1 to 5 years > 5 years Total Other payables - 963,335 - - - 963,335 Deferred income - - 25,121 - - 25,121 Tax payable - 13,686 - - - 13,686 Total - 977,021 25,121 - - 1,002,142 Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is subject to foreign exchange risk as the Romanian subsidiaries have business activities denominated in RON, which is different from the currency of the parent company, EUR. All investment properties are owned by the Romanian subsidiaries and thus denominated in RON. However, it is the market practice that investment properties are valued with reference to EUR denominated values, thus minimising the foreign exchange risk of the Group. From an operational point of view, the Group’s policy is to mitigate these effects by retaining as much cash in EUR as possible and also by denominating receivables in EUR. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities of the subsidiaries before they get translated into the functional currency of the Group. The impact on the Group’s equity is due to the translation reserves. Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. The Group monitors capital primarily using a loan to value ratio, which is calculated as the amount of outstanding debt divided by the valuation of the investment property portfolio. The Group’s policy is to keep a low average loan to value ratio of the Group and in any event not higher than 70%. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group complies with its target loan to value ratio and no changes were made in the objectives, policies or processes during the years ended 31 December 2022 and 31 December 2021 and had no financial debt. Note 20 GUARANTEE OBLIGATIONS The Group has not issued any guarantees on behalf of external parties. The directors of the Parent Company have issued a support letter to its operating subsidiaries stating its intentions to continue to support the subsidiaries if issues regarding their viability subsequently arose. 48 Note 21 EARNINGS PER SHARE Basis for calculation of earnings per share Consolidated 2022 2021 The year’s earnings from continuing operations (635,211) 1,532,011 No. of shares at the balance sheet date 41,367,782 41,367,782 Average of no. of shares 41,367,782 41,367,782 Earnings per share (0.02) 0.04 Diluted Earnings per share (0.02) 0.04 Note 22 SUBSEQUENT EVENTS No subsequent events. Basis for calculation of earnings per share Parent Company 2022 2021 The year’s earnings from continuing operations (596,305) 1,791,143 No. of shares at the balance sheet date 41,367,782 41,367,782 Average of no. of shares 41,367,782 41,367,782 Earnings per share (0.01) 0.04 Diluted Earnings per share (0.01) 0.04 49 Statement pursuant to Section 5-5 of the Securities Trading Act We hereby confirm that the annual accounts for the Group and the Company for 2022 to the best of our knowledge have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit t or loss of the Group and the Company taken as a whole. The Directors’ report gives a true and fair view of the development and performance of the business and the position of the Group and the Company, as well as a description of the principal risks and uncertainties facing the Group. Bermuda, 15.04.2023 The Board of Directors of RomReal Ltd .......................................... .......................................... Kjetil Grønskag (Chairman) Bendt Thorkildsen ........................................... ........................................... Heidi Sorensen (Director) Lacramioara Isarescu (Director) 50 Company Addresses Westhouse Group srl Westhouse Group SRL, 54 Cuza-Voda Street, ap. 3, ground floor, Constanta, Romania, 900682 RomReal Ltd Burnaby Building, 16 Burnaby Street, Hamilton, HM11, Bermuda Auditors Ernst & Young SRL, Premium Plaza Building, 3 rd Floor, 63-69 Dr. Iacob Felix Street, Sector 1, 011033, Bucharest, Romania Auditors Ernst & Young AS, Thormøhlens gate 53 D, PO Box 6163, Postterminalen, Bergen, N5892, Norway Legal Advisors Wakefield Quin Limited, Victoria Place, 31 Victoria Street, Hamilton, HM10, Bermuda Bank in Norway Nordea Bank Norge ASA, Olav Munkegaten 21gt. 39/4, 7005 Trondheim, Norway Bank in Romania Alpha Bank Constanta, 175 Mamaia Boulevard, 900540, Constanta, Romania IR investors@RomReal.com For further information on RomReal, including presentation material relating to this interim report and financial information, please visit www.RomReal.com DISCLAIMER The information included in this Report contains certain forward-looking statements that address activities, events or developments that RomReal Limited (“the Company”) expects, projects, believes or anticipates will or may occur in the future. These statements are based on various assumptions made by the Company, which are beyond its control and are subject to certain additional risks and uncertainties. The Company is subject to a large number of risk factors including but not limited to economic and market conditions in the geographic areas and markets in which RomReal is or will be operating, counterparty risk, interest rates, access to financing, fluctuations in currency exchange rates, and changes in governmental regulations. As a result of these and other risk factors, actual events and our actual results may differ materially from those indicated in or implied by such forward-looking statements. The reservation is also made that inaccuracies or mistakes may occur in the information given above about current status of the Company or its business. Any reliance on the information above is at the risk of the reader, and RomReal disclaims any and all liability in this respect.