Nr.../... Annual Report - Financial Exercise Report Date

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1 IMPACT DEVELOPER & CONTRACTOR SA Voluntari, 4C Pipera-Tunari Road, Construdava Business Center, floors 6,7, Ilfov County Phone: /71/72, fax: /82/83, mobile: Registered with the Trade Registry Office within Bucharest Court under no. J 23/1927/2006, Sole Registration Code RO Personal Data Operator, registered with the Personal Data Processing Evidence Registry under no Annual Report - Financial Exercise Report Date Nr.../... Company denomination: IMPACT DEVELOPER & CONTRACTOR S.A. ( IMPACT or Company ) Registration with the Trade Registry Office: J23/1927/2006. TAV registration code: RO Registered office: 4C Pipera-Tunari Road, Construdava Business Center, floors 6 th, 7 th, Ilfov County Phone: 021/ /71/72, fax: 021/ /82/83 Subscribed and paid up share capital: RON The regulated market traded on: Bucharest Stock Exchange, Premium Category 1. Analysis on Company s activity IMPACT Developer & Contractor had developed in 2016, as main activity the Real Estate Development (promotion), pursuant to NACE code In 1995, the Company has introduced the concept of residential assembly on the Romanian market and therefore it gradually transformed into a pure real estate developer. Starting in 1996, the company is listed on the Bucharest Stock Exchange (BVB). In 2006, the company's shares were promoted to the first category of the Stock Exchange, becoming the first company in the real estate and construction sector which has done so. Since January 2015, the company is part of the Premium category, pursuant to the new segmentation of the Bucharest Stock Exchange. In the past 25 years IMPACT Developer & Contractor has completed 17 small and medium projects, which included over 3,000 dwellings and over 25,000 square meters of offices and business areas. On 31st of December 2015, the company was involved in residential developments located in four cities in the country, each project with different sizes and found in different stages of completion. IMPACT activity is dominated by a major project: GREENFIELD residential assembly in Bucharest represented the year of IMPACT re-launching in the residential development sector. Thus, in November 2014 the launch of the newest neighborhood in GREENFIELD, Salcamilor assembly took place. Today it consists of 35 buildings with GF + 5, 924 apartments respectively with 2, 3 or 4 bedrooms. Salcamilor assembly completes the GREENFIELD complex, joining the five existing districts - Blue, Rubin, Topaz, Onix and Quartz. 1

2 Nevertheless, documentation was prepared for the commencement of construction of another 39 blocks, which will represent Platanior Assembly, with a total of 944 apartments, out of which a number of 387 apartments were completed (81% in stages 5 and 6), the rest of the apartments following to be completed as of Another major goal of the company in 2016 is launching technical documentation for development of a new residential project in Bucharest in the Ghencea Extension - Bd. Timisoara, where the company owns a land area of approximately 26 ha. Nevertheless, in 2015 it began the analysis, preparation and realization of the project design documentation of Barbu Vacarescu Ave., a project that started in September 2014 with the acquisition of ownership over a land area having an area of 2.6 ha. Also, the company's activity is focused on preparing the necessary documentation for Greenfield Plaza urban center building, with a total area of 10,400 square meters, which will include a SPA center, business and services areas of approximately 8,000 sq.m. and an administrative headquarters of 2,400 sqm. The company intends accelerating the production cycles and product standardization, so IMPACT offer to adjust to market demand, these being the main concerns of the management in the current period, in order to achieve sales and profitability objectives. For the purpose of financing the residential developments, in addition to its own sources of funding - reinvested profit, it is aims to co-finance development costs through bank loans. During 2015, IMPACT had contracted credit facilities amounting to 78.6 millions RON from Banca Transilvania and Libra Bank, in order to complete the works in the Salcamilor Assembly stages 2, 3 and 4 and in Platanilor Assembly stages 5 and 6. One of the main priorities of the management team was a more efficient adaptation to new market conditions through measures on: (i) Improvement of the competitiveness of the company by developing apartments concepts tailored on residential market requirements at a very good price / performance ratio; (ii) the adjustment in portfolio existing housing prices, to respond as well as possible to market needs and ensure cash flows required by the Company; (iii) viability / allotments of land for further sale, identifying opportunities for portfolio land by attracting partnerships (iv) employment of loans, an optimum leverage ratios around the value of 20% 2. Elements of company general assessment as of 31 December 2015: The individual financial statements as presented as from 2012 pursuant to IFRS. The 2016 afferent individual financial statements have been prepared in accordance with the requirements of Order of the Minister of Public Finance no. 1286/2012 for the approval of accounting regulations conforming to International Financial Reporting Standards, applicable to companies whose securities are traded on a regulated market and related amendments. No. Indicator Value M.U. a. Gross loss 29,610,138 RON b. Turnover (Operational revenues) 152,181,219 RON c. Operational expenses (115,212,878) RON 2

3 d. Liquidity (cash at the end of the period) 17,432,180 RON IMPACT constantly lodges endeavor to prove its customer focus by aligning to its specific needs. Implicitly IMPACT proves a high level of adaptability to the specific conditions of the market, whilst managing existing realities and identifying resources for exploration of new business opportunities. To this end, the company's management continues to follow trends and market evolution and believes in innovation and reinventing work processes, for IMPACT Developer & Contractor to become leader of the real estate market, both locally and regionally. 3. Evolution of sales in 2016 Sale of dwellings completed in Bucharest, Ploiesti, Oradea and Constanta. A significant influence on the operational revenues had the revenues from the sale of the buildings in the Salcamilor Assembly, approximately RON 139,000,000. Sales of apartments and houses In 2016 the sales reached a number of 439 buildings (apartments and houses) and 530 parking places, totaling a total built area of 37,685 sqm, 19% more compared to the previous year. Evolution of sales by location is 416 apartments in the Salcamilor Assembly, 15 apartments in Greenfield I, 6 houses in Oradea, 1 house in Ploiesti and 1 house in Constanta. The new residential development started by IMPACT DEVELOPER & CONTRACTOR SA in the summer of Salcamilor Assembly in GREENFIELD, generated the largest contribution to the company's sales apartments, respectively 35,061 sqm DBA. Growth was both in terms of sold units, namely 22% and value by increase of the average transaction value by over 18%. Graphic 1 Sales in 2016 by location (units / sq.m. of DBA) Graphic 2 Sales evolution and structure by location (units / sq.m. of DBA) 2016 v

4 The increase in apartment sales in GREENFIELD was favored by the quality of the new residential product as well as by the unique advantages offered by the location and the neighborhood, which together created a competitive advantage for the buyer. Nevertheless, the increase from 1 st of January 2016 of the value of buildings benefiting from the reduced VAT rate to 5% has led to an upgrading of buyers' preferences, given that the 4-room apartments have become more attractive. Sales of 2-room apartments have increased far beyond expectations, as a result of the announcement of the cancellation / modification of the First House Loan Program and the Foreclosure Law. 4

5 Project Dwelling type Number of dwellings available for sale at the end of December 2016 Fully sold dwellings + installments in 2016 Leased dwellings in Q EUROPA Houses LOTUS Houses ROUA Houses BOREAL Houses GREENFIELD Apartments GREENFIELD 2 Apartments TOTAL Offering for sale of land plots for individuals and legal entities, for the development of houses or small commercial areas. In land plots were sold in Oradea with an area of 3,157 sqm, 3 land plots f in Constanta with an area of 1,111 sqm, one land plot in Ploiesti with an area of 432 sqm and one land plot in Voluntari in the surface of 17 square meters. Compared to the same period of the previous year, the area of the sold land plots is 8 times smaller. The decrease in the volume of land sales was accentuated by the low appetite of the buyers for this product, plus the lack of financing. Land plots sales evolution and structure \9sq.m.) Less lease agreements and sale of leased dwellings 5

6 The activity of renting of apartments is no longer a priority for the Company in recent years. Most dwellings which lease agreements ceased in 2015 have been sold, so the number of leased dwellings has fallen from 21 dwellings at the end of December 2014 to 8 dwellings at the end of December At 31 st of December 2016 there were only 6 leased dwellings to be sold when the rental contracts were terminated. 4. Other information on the company: Employees structure as of Structure of employees The company had at the end of 2016 a total number of 66 employees, the personnel structure being indicated in the attached chart. There is no union constituted in the Company. Relations between management and employees are governed by individual employment agreements and job descriptions. 5. Elements of risk management To prevent liquidity risk, the Company prepares cash flow reports for periods of 5 years, 1 year and on monthly bases; it examines projections done and compares them to the real situation in order to prevent situations where liquidity problems may occur. Market Risks: The global financial crisis combined with recession in Europe, exposed Romania to certain risks on the financial market. Company Internal Control is provided: Through Acquisitions Department: Contracts are signed by the Legal Department, Head of Procurement, CFO and General Director; Through the Sales Department: Contracts are reviewed by the Department of Prices and Analysis and signed by the General Director; Through preventive financial control by which contracts compliance is verified; By tracking payments checked by the Preventive Financial Control and approved by the Chief Financial Officer and / or General Director. By implementation of essential codes of conduct and business ethics specific procedures are implemented, applicable to all directors, officers, managers, people with a role in control or management, employees, auditors, business partners, collaborators. Thus, IMPACT applies Anticorruption Policy, Code of Conduct, Essential Ethical Values Policy, and Policy for Safety and Health at Work, Employment, Environment, and Reporting Policy. 6

7 6. Perspective Elements concerning the company s activity Regarding the GREENFIELD neighborhood, the management objective is that in 2017 construction works will be finalized at the new residential complex - Platanilor Assembly, which will comprise 39 blocks with 944 apartments, totaling over 100,000 sqm. Nevertheless, the company's activity is focused on preparing the documentation necessary for the construction of the GREENFIELD PLAZA urban center, with a total area of 10,400 sqm, which will include a SPA center, commercial and service spaces of approximately 8,000 sqm and an administrative headquarters with 2,400 sqm. The company plans to accelerate the production cycles and product standardization, so that IMPACT's offer meets the market demand, these being the main concerns of the management in the current period, in order to achieve sales targets and profitability. For the purpose of financing of residential developments, besides its own sources of financing - reinvested profit, it is intended to co-finance development expenditures by bank loans. In order to sustain the development activity and to finance the mentioned projects, the company has proposed to obtain financing from the capital market through the issuance of corporate bonds up to a maximum of 135 million RON with a maturity of 7 years. In this respect, the Extraordinary General Assembly approved the issuance of the bonds through the decision of EGAS no.1 / , and the management of the company started the formalities for selecting the consultants. In line with the strategic vision imposed by the new management team of IMPACT, the permanent adaptation to the real estate market and maintaining the company's efficiency, the company has set for this year, goals that effectively respond to the needs of market, clients, but also partners. Optimism over the market, but also in terms of the relationship that IMPACT has with its customers is based on both real estate and financial product diversification offered by the company, being able to respond to so difficult access to funding sources, and rising customer expectations on habitat quality. Specifically, the following sales for 2017 are expected: 1) 500 apartments, out of which: - 10 units from the property inventory built before units from new developments. The development plan for 2017 envisages completion of construction for another 21 blocks of apartments (Stages 5 and 6 of the Platanilor Assembly), the commencement of works in stage 7 respectively, 18 buildings mp will be delivered in March mp will be delivered in November mp - works will begin in March 2017 and they will be delivered during the 1 st quarter of ) sq.m. land plots in Constanta. 7

8 3) Preparing the authorization documentation related to the commencement of works for the first 8 buildings in Greenfield Timisoarres assembly in surface of 34,000 sq.m. Following the implementation of the strategy launched in 2014, the operational revenues in 2016 exceeded EUR 33.5 million and the net profit was in amount of EUR 6.58 million. In reference to the evolution of EBITDA, the Company's management expects an encouraging evolution that will allow the recovery of losses from previous financial years. Thus, the management estimates continuous and sustained growth on annual bases, in the financial year 2019, the Company being expected to earn an EBITDA of EUR 30 million. The Company's management believes that it will be able to overcome the losses of the previous financial years and create the premises necessary for granting appreciable dividends. 7. Tangible assets and inventories of the company at are shown in the following table: On 31 st of December and on 31 st of December 2015, Company s lands and buildings were revalued by Colliers Valuation and Advisory SRL, external, independent valuators, authorized by the Romanian National Union of Licensed Appraisers ( ANEVAR ), with recent experience in terms of location and category of assessed property. COST Land and buildings Machinery, equipment and vehicles Fixtures and fittings Assets under construction 1 January ,605,663 2,337, ,384-18,763,065 Additions 146, ,354 50, , ,777 Disposals (1,555,990) (19,680) - (178,698) (1,754,368) Revaluation differences (52,132) (52,132) Offset of accumulated depreciation at revaluation date 14,143,540 2,576, ,110-17,591, December 2015 DEPRECIATION 9,992,017 1,553, ,098-12,166,984 Balance at 1 January , , , ,865 Depreciation for the year (691,439) (691,439) Impairment losses (93,714) (19,680) - - (113,394) Accumulated depreciation of disposals (47,449) (47,449) Offset of accumulated depreciation at revaluation date 9,403,738 1,704, ,233-11,868, December 2015 CARRYING AMOUNTS 5,613, , ,286-6,596,081 1 January ,739, , ,877-5,722,775 Total 31 December ,605,663 2,337, ,384-18,763,065 8

9 Land and buildings Machinery, equipment and vehicles Fixtures and fittings Assets under construction Total COST 1 January ,143,540 2,576, ,110-17,591,343 Additions 92, , , ,282 Disposals (4,766) (4,766) Revaluation differences 31 December ,230,973 3,160,288 1,007,599-18,398,859 DEPRECIATION 1 January ,403,738 1,704, ,233-11,868,567 Depreciation for the year 238, ,889 53, ,772 Impairment losses (78,536) (78,536) Accumulated depreciation of disposals Offset of accumulated depreciation at revaluation date December ,563,630 1,977, ,689-12,354,804 CARRYING AMOUNTS 1 January ,739, , ,877-5,722, December ,667,343 1,182, ,909-6,044,055 Impairment losses During 2016, following the revaluation reports for land and buildings, no impairment loss was recorded that is recognized as an expense as a result of the current year. Part of the land classified as property, plant and equipment include land related to the residential property with installed utilities networks attached. Up to 2013, the Company obtained benefits from the use of these assets as mark-up applied to the utilities expenses of the occupants. In 2013, the Company decided to outsource or to discard this activity because of its low return, but also due to the fact that this activity is not one of the main activities of the Company. Thus, the management of the Company considers that these land and buildings will not be able to bring direct and measurable benefits, their value in use being reduced to their recoverable value. The Company recorded an impairment loss computed as the difference between the net book value and their value in use. 9

10 Investment properties Balance at 1 January Inputa Transfers from/to inventories, net ( ) ( ) Sales ( ) ( ) Changes in fair value Balance at 31 December Investment property comprises land and residential properties held with the purpose of capital appreciation. Also, the residential properties included in investment property comprise estates leased to third parties. All contracts related to the leased properties provide a starting period of 1 year, while the annual lease payments are not indexed to consumer prices. Subsequent extensions of the period are negotiated with the occupants, these being, on average, of 1 year. No contingent leased payments are charged. The land held for capital appreciation, amounting to lei at 31 st of December (2015: lei), has a total surface of sqm (2015: 686,530) and represents 98% of investment properties in balance (2015: 98%). This land is located in Bucharest ( sq.m.) and in other regions (Constanta, Oradea). Inventories 31 December December 2015 Land Impairment of land ( ) ( ) Other consumables Utilities networks and residential properties under development Impairment of utilities networks and residential properties under development ( ) ( ) Completed residential properties Impairment of completed residential properties ( ) ( ) Advance payments for acquisition of inventories Land with a carrying amount of Lei as at 31 st of December 2016 (2014: lei) consists of land held by the Company for development of new residential properties, especially in Bucharest, but also land which the Company intends to value through sale of enabled plots of land (Oradea, Constanta, Ploiesti). During the financial year ended 31 st of December 2014, the Company acquired a plot of land in Bucharest with the intention to build luxury residential projects. Utilities networks and residential properties under development with a carrying value of Lei as at 31 st of December 2016 (2015: ) relate to the equivalent of the capitalized works and services, rendered by the Company or to the Company by third parties, related to the connection of the properties to utilities, design and feasibility studies. Completed residential properties with a carrying value of Lei as at 31 st of December 2016 (2015: Lei) refer entirely to apartments held by the Company for further sale. 10

11 In 2016, inventories recognized in the cost of sales amounted to 92,022,102 lei (2015: 72,147,934 lei). In 2016, the losses from the decrease of the value of the inventories to the net realizable value amounted to 4,764,360 lei (2015: 1,430,704 lei). The reversals of losses from impairments amounted to 1,799,265 lei (2015: 3,381,855 lei). Impairment losses and reversals of impairment losses are presented on a straight-line basis and included in "Losses of assets" in the Individual Statement on Profit or Loss and other comprehensive income. The net achievable value of inventories is based on their market value at December 31 st, 2016 and December 31 st, 2015, as determined by valuation by Colliers Valuation and Advisory SRL, independent external valuators, authorized by ANEVAR, with recent experience in regard of the location and category of the property being valued. 8. Company issued securities market IMPACT Developer & Contractor SA has been listed at the Bucharest Stock Exchange since the year of 1996, and starting with the year 2006 its shares, counting are quoted in the first category of BVB. Since January 2015, IMPACT Developer & Contractor shares are traded on the Premium category, according to the new segmentation of Bucharest Stock Exchange. In April 2014, the General Assembly of Shareholders approved the increase of the Share Capital Social by the amount of RON 80,000,000 by issuance of new stocks, from RON 197,866,574 to RON 277,866,574. Subscription took place during the period , the 80,000,000 new stocks being integrally subscribed. All shares are ordinary and rank equally in the Company's residual assets. The nominal value of one share is 1 leu. Ordinary shares shareholders have the right to receive dividends as they are stated at certain times and the right to 1 vote for 10 shares at the Company's meetings. The market capitalization of the company at the end of 2016 was of 42.8 mill EUR. The company did not pay dividends in the past 3 years. Year Situation on dividends 2014 The company did not pay dividends 2015 The company did not pay dividends 2016 The company did not pay dividends 9. Company management Pursuant to the legislation in force and the company s Articles of Incorporation, the General Assembly of Shareholders is the managing and decisional body of the company, deciding upon its business. The company is lead by the Board of Administration, consisting of five administrators, individuals: Iuliana Mihaela Urda, Chairman of the Board of Administration; Gabriel Vasile, Administrator; Liviu Stan, Administrator; Konstantinos Tasoulas, Administrator; Victor Rachita, Administrator. 11

12 Mrs. Iuliana Mihaela Urda was elected as member of the Board of Administration in the General Ordinary Assembly in 26th of April 2013, by cumulative vote method, for a four years mandate, until April Mr. Gabriel Vasile was appointed as administrator, member of the Board of Administration, in the General Ordinary Assembly on 16th of September 2013, Mr. Liviu Stan was appointed as administrator, member of the Board of Administration, in the General Ordinary Assembly on 25th of April 2014, and Mr. Konstantinos Tasoulas was appointed as administrator, member of the Board of Administration, in the General Ordinary Assembly that took place on the date of and Mr. Victor Rachita was appointed as administrator, member of the Board of Administration, in the General Ordinary Assembly that took place on the date of 22 nd of April The Board of Administration is structured such as to allow diligently fulfillment of duties. The Board of Administration regularly meets to ensure fulfillment of its duties in an efficient manner. There is a clear distribution of responsibilities between the Board and the executive management. Surname and first name Date of birth Professional Qualification Professional Experience Iuliana Mihaela Urda 1968 Iuliana Mihaela Urda holds the position of Chief Executive Officer at Octagon Total Management since November 2011, having been promoted from the position of Director of Marketing, which she had held during June November During the period Iuliana Mihaela Urda held various positions in Altex Romania company, which recorded a turnover of about 300 mill. euro. Gabriel Vasile 1969 Gabriel Vasile graduated from the Academy of Economic Studies - Faculty of Economics in Gabriel Vasile has over 15 years of experience in leading teams in the administrative department, automotive, asset management, and financial reporting in the real estate industry, transport and telecommunications. Previously, he held positions as Director of Operations for TPG Quintet Asset Management and Advisory Practice in real estate and Head of Fleet & Reporting in Romtelecom SA. Between July 2012 and April 2013 he was a member of the Council of Shareholders Representatives of SIF Muntenia. Position and Seniority in position; Administrator and Chairman of the Board of Administration since Administrator since

13 Surname and first name Date of birth Professional Qualification Professional Experience Liviu Stan 1957 Liviu Stan graduated in Mechanical Engineering at the Polytechnic Institute of Bucharest. Liviu Stan has an experience of over 20 years in companies with construction materials and rich experience in entrepreneurship occupying the position of Managing Partner of the following companies: DufaTec SRL SC 2010, SC Shop24Automatic SRL in , SC Global real Invest SRL in , SC Dufa Romania SRL in , SC Ivex International SRL in Since 2007 he developed on his own North Residence real estate project valued at 4.5 million Euros and since 2012 is the business strategy consultant in the real estate project Pipera market. Konstantinos Tasoulas 1969 Constantinos Tassoulas worked in the Investment Banking division at Alpha Bank Greece, as Senior Project Manager in Real Estate Investment and Financial sector, geographically focusing on the Balkan region. With a solid experience of over 19 years in banking, he worked in major Greek and foreign banks. Mr. Tassoulas has expertise in Structured Finance and Real Estate Investments, Corporate Banking and also core competencies in areas such as Project Funding, Lending, Distressed Debt, Leasing, Forfeiting, Trade Finance, Corporate Finance, Structured Products and Capital Markets Real Estate Advisory. Mr. Tassoulas is a results oriented manager with a proven track record of success, a good knowledge of the real estate market in Greece and the Balkans and has good contacts with key local and international actors in the Corporate and Real Estate sector. Victor Rachita Minculescu 1974 Victor Rachita Minculescu graduated from the Academy of Economic Studies (A.Ş.) with specialization in Management and has accumulated over 14 years of experience in Real Estate, working since 2002 in several consulting companies in the field. Position and Seniority in position; Administrator since Temporary Administrator since Temporary Administrator since There is no agreement, understanding or family connection between the company s administrators and another person due to whom that person was appointed as administrator; Regarding the persons listed above, there is no litigation or administrative proceedings that were involved in, in the past 5 years, on their activity in the company, and nor in those concerning the ability of that persons to perform their duties within Impact. Executive Management of the Company Starting with September 1 st, 2016, the position of Chief Executive Officer of the Company is exercised by Mr. Bartosz Puzdrowski for a three-year term mandate. 13

14 The Board of Administration decided that Mr. Bartosz Puzdrowski, Chief Executive Officer and Mr. Gabriel Vasile, Administrator, are empowered to represent the company, in accordance with the provisions of art paragraph 5 of the Law no. 31/1990, regarding the commercial companies, starting with On the date of there was registered with the Trade Registry of the Ilfov Tribunal the termination by the parties agreement of the mandate contract of Mr. Stan Liviu from the position of Purchasing Manager of Impact Developer & Contractor SA. The Board of Administration revoked Mr. Bogdan Nicolae Geanta as the authorized person acting jointly with the Chief Executive Officer, starting with and appointed Mr. Gabriel Vasile, as the empowered person, according to art paragraph 5 of the Law no. 31/1990, regarding the commercial companies, and he shall further exercise his duties together with the Chief Executive Officer. Surname First name Position Citizenship Puzdrowski Bartosz Chief Executive Officer Romanian Geanta Bogdan Nicolae Financial Director Romanian Bartosz Puzdrowski - Chief Executive Officer since September 2016 Bartosz Puzdrowski is a successful real estate manager with over 20 years of experience in the field, occupying leading positions in leading residential, office and commercial residential real estate companies. Among other things, he was a board member of ICON Real Estate in Poland and Finland, responsible for residential and office development and renovation projects in Warsaw and Helsinki, general manager of the real estate development department at Marvipol Group and CEO of Polnord SA (top residential developers in Poland listed on the Warsaw Stock Exchange). He is a graduate of the Faculty of Philosophy and Sociology and he holds a Master in Business and Marketing at the University of Warsaw, as well as of the Executive MBA Program in Warsaw - Illinois, with specialization in business and commerce administration. Bogdan Nicolae Geanta - Financial Director since July 2013 Bogdan Geanta graduated from Faculty of Law and Accounting and has over 10 years experience in distribution, retail and real estate. He is responsible for Business financial planning, daily monitoring of financial operations and responsible for financial reporting and cost management. Company s Subsidiaries IMPACT Company holds investments in the following affiliated entities: Ownership title 31-Dec-16 Gross value Depreciation Book value Clearline Development and Management SRL % 22,400,000 (8,022,774) 14,377,226 Actual Invest House SRL 6.23% 109,950 (109,950) - 22,509,950 (8,132,724) 14,377,226 Company Clearline Development and Management SRL owns the remaining 93.77% of investments in Actual Invest House SRL 14

15 Clearline Development and Management SRL (formerly Lomb SA) is the project company through which IMPACT was to develop a residential project in Cluj-Napoca in partnership with the local authority. For investments made by Clearline Development & Management SRL in the realization of the Lomb project in Cluj, the project company has a litigation amounting to 17,053,000 lei, plus legal interest, a file that is currently being on trial with the Arges Tribunal and it is currently carrying out the expertise (Urban and Construction) as ordered in the case. Actual Invest House S.R.L, a company within the IMPACT Group, plays an important role in diversification of services related to the sale of homes. ACTUAL INVEST HOUSE collaborates with the leading financial institutions in Romania in order to find solutions for credit facilities in the shortest time possible for the customers that are to buy a home. It also provides management services to new residential development and services for furnishing and interior decoration by partnering with leading suppliers at competitive prices, using high quality materials. 10. The financial-accounting statement Presentation of the economical-financial statement for year 2016 compared to the previous years: Results indicators Indicators pursuant to IFRS (RON) Operational revenues, out of which: 32,599, ,157, ,181,219 Revenues from sale of residential properties inventory 21,171, ,484, ,550,045 Revenues from rentals and utilities re-invoiced to customers 4,377,164 4,123,351 4,184,235 Revenues from sale of Investment properties 6,088,013 4,295,138 2,189,510 Activity performed and capitalized by the entity Other operational revenues 962,525 2,253,996 1,257,429 Operational expenses, out of which: Carrying value of sold residential properties inventory (47,586,325) (107,768,69 5) (115,212,87 8) Operational costs afferent to rental and sold properties (22,687,973) (72,147,934) (92,022,102) Carrying value of Investment properties (2,778,621) (2,703,858) (2,878,913) Expenses concerning raw materials and materials (6,829,995) (4,238,327) (1,917,666) Services provided by third parties (3,465,610) (4,687,171) (2,528,353) Expenses with employee benefits (1,705,169) (9,843,405) (9,201,795) Other operational expenses (4,374,609) (8,162,218) (8,312,244) Provisions (5,744,348) (5,985,782) 1,648,195 Operational Result (EBITDA) (14,986,750) 9,388,460 36,968,341 Expenses with depreciation (522,975) (625,588) (664,545) Assets value loss, other than Investment properties 4,543,299 3,721,254 (5,643,512) Earnings / (losses) at fair value of Investment properties 16,967,592 1,745, ,053 Operational Result (EBIT) 6,001,166 14,229,254 31,152,337 Net financial cost (1,774,771) (1,488,663) (1,542,199) Gross Profit / Loss (EBT) 4,226,395 12,740,591 29,610,138 Income tax (135,252) 0 0 Net Profit/ (loss) of the period 4,091,143 12,740,591 29,610,138 15

16 Patrimony indicators Indicators pursuant to IFRS (RON) Tangible assets 6,596,081 5,722,775 6,044,055 Investment properties 230,979, ,898, ,736,403 Intangible assets 154, , ,663 Financial assets 14,377,276 14,377,226 14,377,226 Receivables 19,300,941 11,367,047 11,215,815 Total fixed assets 271,407, ,483, ,606,162 Inventories 158,125, ,887, ,813,138 Total current assets 170,749, ,491, ,029,353 Total assets 442,157, ,974, ,635,515 Share Capital 277,866, ,866, ,866,574 Equity 365,579, ,140, ,776,564 Total debt 76,577, ,834,063 93,858,951 Total liabilities 442,157, ,974, ,635,515 Indicators pursuant to IFRS (RON) Cash flows Cash and cash equivalents on 1 st of January Net cash from operational activities Net cash from investment activities Net cash from (used in) financing activities 4,543,781 3,464,726 17,080,822 (65,739,669) 7,883,080 (11,636,824) 7,174,009 2,080, ,578 57,743,170 3,652,470 11,445,577 Effect of currency exchange rate variation on cash (256,565) - - Cash and cash equivalents on 31 st of December 3,464,726 17,080,822 17,432,153 16

17 PROFITABILITY SOLVENCY AND LIQUIDITY 31-Dec Dec-16 Returns on employed capital Profit before interests and tax (A) -2,970,746 31,152,337 Employed Capital (B) 390,201, ,159,913 A/B -0.8% 7.2% Returns on Assets Net Profit (A) -4,459,409 29,610,138 Total assets ( B ) 467,974, ,635,515 A/B -1.0% 6.1% Return on Equities Net Profit (A) -4,459,409 29,610,138 Equity ( B) 361,140, ,776,564 A/B -1.2% 7.6% Debt ratio Total Debt ( A ) 106,834,063 93,858,951 Total Assets ( B ) 467,974, ,635,515 A/B 22.8% 19.4% Debt ratio (loans) Total loans ( A ) 45,789,003 57,234,580 Total assets ( B ) 467,974, ,635,515 A/B 9.8% 11.8% Indebtedness ration (Loans vs. Equities) Total loans ( A ) 45,789,003 57,234,580 Equities ( B) 361,140, ,776,564 A/B 12.68% 14.65% Indebtedness ration (Loans vs. Permanent Capital) Total loans ( A ) 45,789,003 57,234,580 Equities ( B) 361,140, ,776,564 A/(A+B) 11.25% 12.78% Current ration Indicator Current Assets ( A ) 221,491, ,029,353 Current Debts ( B ) 77,772,701 49,475,602 A/B 285% 639% Quick Ratio Indicator Current Assets ( A ) 221,491, ,029,353 Inventories ( B ) 177,887, ,813,138 Current Debts ( C ) 77,772,701 49,475,602 ( A - B )/ C 56% 67% 11. Corporate Governance Corporate governance complies with the Romanian legislation in force, aiming to ensure both accuracy and transparency in terms of company s outcomes, and equal access of all shareholders to relevant information on the company. IMPACT Developer & Contractor SA is managed under unitary system, its management being provided by the General Director, under surveillance of the Board of Administration. Corporate governance elements are implemented within the company, pursuant to the code of Corporate Governance adopted by the Board of the Stock Exchange in December 2007, with implementation term as from the annual report of

18 IMPACT Developer & Contractor SA submitted and shall further submit all professional, legal and administrative efforts, necessary to ensure alignment with the provisions of the Code and transparent presentation of such outcomes. IMPACT Developer & Contractor SA publishes in a dedicated section of its own website details on GAS development, namely convocation notices, materials/documents afferent to agenda, special power fo attorney forms, correspondence voting forms, decision drafts. Nevertheless, the company ensures information of all shareholders immediately after GAS taking place, through its own website dedicated section, on decisions adopted in General Assemblies of Shareholders and the voting detailed result. The Company also makes available for the shareholders / investors current reports, notices, the financial schedule, annual, half-year, quarterly reports. Direct relation with the investors is provided by an appointed person, dedicated to informing the shareholders depending on their questions addressed in writing or by phone. Information on corporate governance are periodically reported through corporative governance statement in the annual report and permanently updated through current reports and internet page. Since 2014 Impact adopted the following documents grounding corporate governance: - Code on anticorruption - Code of conduct - Ethical values of the Company - Policy on security and health at the place of work, labor, environment law - Reporting Policy In September 2015, BVB issued a new Code of Corporate Governance. The provisions of the Code are carefully examined by the Company, and the status of compliance with its provisions is properly assessed by the Company. Along the years, the company complied with the provisions of CCG and at the moment it carries out arrangements to comply with the provisions of the New Code as well. Chairman of BoA Chief Executive Officer Financial Director Iuliana Mihaela Urda Bartosz Puzdrowski Bogdan Geanta 18

19 REPORT OF THE Board of Administration For year 2016 IMPACT DEVELOPER & CONTRACTOR SA

20 Table of content: 1. COMPANY PRESENTATION About IMPACT Board of Administration Executive Management of the Company IMPACT Auditor IMPACT on the Capital Market CORPORATIVE GOVERNANCE IMPACT ACTIVITY DURING YEAR Real estate market and Romanian economy in Overview Directii strategice si linii de activitate ale IMPACT in IMPACT Strategic trends and lines of activity in Strategic lines for the sale of the portfolio projects in Strategic lines for the sale of land lots in the portfolio budgeted versus achieved comparison OTHER INFORMATION ON THE COMPANY Employees structure Risk management elements ACTION PLAN FOR Greenfield Residence Stage II Land plots for houses Development of new residential projects in new locations in Bucharest SOURCES OF FINANCING THE ACTIVITY IN YEAR ECONOMICAL-FINANCIAL INDICATORS PERFORMANCE INDICATORS Report of the Board of Administration for year 2016 Page 2

21 1. COMPANY PRESENTATION 1.1. About IMPACT The company is one of the first companies active in real estate development in Romania, being founded in 1991 by public subscription. In 1995, the Company has introduced the concept of residential assembly on the Romanian market and therefore it gradually transformed into a pure real estate developer. Starting in 1996, the company is listed on the Bucharest Stock Exchange (BVB). In 2006, the company's shares were promoted to the first category of the Stock Exchange, becoming the first company in the real estate and construction sector which has done so. Since January 2015, the company is part of the Premium categry, pursuant to the new segmentation of local capital market. In the past 25 years IMPACT Developer & Contractor has completed 17 small and medium projects, which included over 3,000 homes and over 25,000 square meters of offices and business areas. On 31 st of December 2016, the company was involved in residential developments located in four cities in the country, each project with different sizes and found in different stages of completion. IMPACT activity is dominated by a major project: GREENFIELD residential assembly in Bucharest. After entry of the new management, since April 2013, IMPACT initiated a new policy of stabilization, recovery and relaunching, such as in year 2014 it resumed the residential developments. Thus, in November 2014 the launch of the newest neighborhood in GREENFIELD, Salcamilor assembly took place. Today it consists of 35 buildings with GF + 5, 924 apartments respectively with 2, 3 or 4 bedrooms. Nevertheless, documentation was prepared for and commencement of construction of another 39 blocks took place, representing the Platanilor Assembly, consisting of 944 apartments, which will be further completed by stages, as from the first semester of year The company's management follows the market trends and appropriately responds to any changes in demand and very quickly adapts to market changes. IMPACT constantly endeavors all efforts to prove its customer focus by aligning to the specific needs thereof. By default, IMPACT proves a high level of adaptability to market conditions; it manages the existing realities and identifies resources for exploration of new business opportunities. To this end, the company's management continually seeks trends and market developments, so that the urban concepts of innovation products it offers, to ensure recognition of IMPACT Developer & Contractor as leader of the real estate market on local level, with focus on Romania's capital, Bucharest. Report of the Board of Administration for year 2016 Page 3

22 1.2. Board of Administration Pursuant to the legislation in force and the company s Articles of Incorporation, the General Assembly of Shareholders is the managing and decisional body of the company, deciding upon its business. The company is lead by the Board of Administration, consisting of five administrators, individuals: Iuliana Mihaela Urda, Chairman of the Board of Administration; Liviu Stan, Administrator; Gabriel Vasile, Administrator; Constantinos Tassoulas, Administrator; Victor Rachita, Administrator. Mrs. Iuliana Mihaela Urda was elected in the Board of Administration in the General Ordinary Assembly in 26th of April 2013, by cumulative vote method, for a four years mandate, until April Mr. Gabriel Vasile was appionted as administrator in the General Ordinary Assembly on 16 th of September 2013, Mr. Liviu Stan was appionted as in the General Ordinary Assembly on 25 th of April 2014, and Mr. Konstantinos Tasoulas was appionted as administrator in the General Ordinary Assembly held on the date of 25 th of April 2015, and Mr. Victor Rachita was appionted as administrator in the General Ordinary Assembly held on the date of 22 nd of April The Board of Administration is structured such as to allow dilligently fulfillment of duties. The Board regularly meets to ensure fulfillment of its duties in an efficient manner. There is a clear distribution of responsibilities between the Board and the executive management Executive Management of the Company As from the date of 01 st of September 2016, the position of Chief Executive Officer of the company is exercised by Mr. Bartosz Puzdrowski, for a 3 years mandate. On the date of 09 th of January 2017 there was registered with the Trade Registry Office within Ilfov Court the termination of the mandate agreement by parties approval for Mr. Stan Liviu from the position of Acquisitions Manager of Company Impact Developer & Contractor SA. By decision of the Board of Administration, the individuals empowered to represent the company were the Chief Executive Officer, along with Mr. Bogdan Nicolae Geanta until the date of 09 th of January 2017, and after such date, the Chief Executive Officer shall act along with Mr. Gabriel Vasile, according to art par. 5 in Law 31/1990, on trading companies IMPACT Auditor DELOITTE AUDIT SRL had been appointed, by decision of GAS dated 22 nd of April 2016, for the purpose of auditing the financial statements for year 2016, drafted under the responsibility of the management of the company in compliance with the cu international standards IFRS (including the consolidated financial statements). Auditor s liability to the company and GAS is set fort and limited pursuant to the law. Report of the Board of Administration for year 2016 Page 4

23 1.5. IMPACT on the Capital Market IMPACT DEVELOPER & CONTRACTOR SA has been listed at the Bucharest Stock Exchange since the year Starting with the year 2006 its shares are quoted in the first category of BVB, and since 2015, IMPACT shares, in a number of 277,866,574, are traded on the Premium category according to the new segmentation of Bucharest Stoc Exchange. IMPACT stock price evolution (Jan.2016 Jan. 2017) The market capitalization of the company at the end of December 2016 was of 43 mill. EUR. There are no restrictions for the security transfer, there are no restrictions for the voting rights, and there are no holders of securities with special control rights. BET Index Evolution (Jan.2016 Jan. 2017) According to the situation reported by the Central Depositary and reports to the Bucharest Stock Exchange, among the shareholders that held over 10% of the company shares on the date of are: Gheorghe Iaciu - 49,48%, Andrici Adrian - 15,24%, SWISS CAPITAL together with a group of Report of the Board of Administration for year 2016 Page 5

24 shareholders affiliated to SWISS CAPITAL - 10,96%, and 24,32% of the shares are held by other shareholders. On the date of , 77.77% of the shares were held by individuals and 22.23% of the shares were held by legal entities The BET index recorded on 31 st of December 2016 an increase of 1% compared to the begining of the year, and the IMP shares have recorded a decrease of 26% (0,700 RON/share on compared to 0,940 RON/share on ). 2. CORPORATE GOVERNANCE Corporate governance complies with the Romanian legislation in force, aiming to ensure both accuracy and transparency in terms of company s outcomes, and equal access of all shareholders to relevant information on the company. IMPACT Developer & Contractor SA is managed under unitary system, its management being provided by the General Director, under surveillance of the Board of Administration. Corporate governance elements are implemented within the company, pursuant to the code of Corporate Governance adopted by the Board of the Stock Exchange in December 2007, with implementation term as from the annual report of IMPACT Developer & Contractor SA submitted and shall further submit all professional, legal and administrative efforts, necessary to ensure alignment with the provisions of the Code and transparent presentation of such outcomes. IMPACT Developer & Contractor SA publishes in a dedicated section of its own website details on GAS development, namely convocation notices, materials/documents afferent to agenda, special power fo attorney forms, correspondence voting forms, decision drafts. Nevertheless, the company ensures information of all shareholders immediately after HAS taking place, through its own website dedicated section, on decisions adopted in General Assemblies of Shareholders and the voting detailed result. The Company also makes available for the shareholders / investors current reports, notices, the financial schedule, annual, quarterly, trimestrial reports. Direct relation with the investors is provided by an appointed person, dedicated to informing the shareholders depending on their questions addressed in writing or by phone. Information on corporate governance are periodically reported through corporative governance statement in the annual report and permanently updated through current reports and internet page. Since 2014 Impact adopted the following documents fundamenting corporate governance: - Code on anticorruption - Code of conduct - Ethical values of the Company - Policy on security and health at the place of work, labor, environment law - Reporting Policy Report of the Board of Administration for year 2016 Page 6

25 In September 2015, BVB issued a new Code of Corporate Governance. The provisions of the Code are carefully examined by the Company, and the status of compliance with its provisions is properly assessed by the Company. Along the years, the company complied with the provisions of CCG and at the moment it carries out arrangements to comply with the provisions of the New Code as well. The Board of Directors met 50 times during Status of compliance with the provision of the new BSE Corporate Governance Code as of 31 December 2016 Section A-Responsabilities A.1. All companies should have internal regulation of the Board which includes terms of reference/ responsibilities for Board and key management functions of the company, applying, among others, the General Principles of this Section. A.2. Provisions for the management of conflict of interest should be included in Board regulation. A.3. The Supervisory Board should have at least five members. Compliance Yes/No/par tially complies YES YES YES The reason of nonconformity and identify measures for compliance A.4. The majority of the members of the Board should be non-executive. Not less than two non-executive members of the YES Board of Directors or Supervisory Board should be independent, in the case of Premium Tier Companies. Each member of the Supervisory Board should submit a declaration that he/she is independent at the moment of his/her nomination for election or re-election as well as when any change in his/her status arises, by demonstrating the ground on which he/she is considered independent in character and judgment. A.5. A Board member s other relatively permanent professional commitments and engagements, including executive and YES nonexecutive Board positions in companies and not-for-profit institutions, should be disclosed to shareholders and to potential investors before appointment and during his/her mandate. A.6. Any member of the Board should submit to the Board, information on any relationship with a shareholder who holds YES Report of the Board of Administration for year 2016 Page 7

26 directly or indirectly, shares representing more than 5% of all voting rights. A.7. The company should appoint a Board secretary responsible for supporting the work of the Board. A.8. The corporate governance statement should inform on whether an evaluation of the Board has taken place under the leadership of the chairman or the nomination committee and, if it has, summarize key action points and changes resulting from it. The company should have a policy/guidance regarding the evaluation of the Board containing the purpose, criteria and frequency of the evaluation process. NO Partially complies The Board of Administrators manages documents with support from the secretary department and legal department, which provides logistic support to organized the Board meetings. Board members are evaluated annually in accordance with the indicators of performance of internal policies and contracts of their mandate. The board will re-examine the A8 demands in 2016, in terms of Board s evaluation policy. A.9. The corporate governance statement should contain information on the number of meetings of the Board and the committees during the past year, attendance by directors (in person and in absentia) and a report of the Board and committees on their activities. A.10 The corporate governance statement should contain information on the precise number of the independent members of the Board of Directors or of the Supervisory Board. A.11. The Board of Premium Tier companies should set up a nomination committee formed of non-executives, which will lead the process for Board appointments and make recommendations to the Board. The majority of the members of the nomination committee should be independent. YES YES YES Section B - Risk management and internal control system B.1 The Board should set up an audit YES committee, and at least one member should be an independent non-executive. In the case of Premium Tier companies, the audit committee should be composed of at least three members and the majority of the audit committee should be independent. Report of the Board of Administration for year 2016 Page 8

27 B.2 The audit committee should be chaired by an independent non-executive member. B.3. Among its responsibilities, the audit committee should undertake an annual assessment of the system of internal control B.4. The assessment should consider the effectiveness and scope of the internal audit function, the adequacy of risk management and internal control reports to the audit committee of the Board, management s responsiveness and effectiveness in dealing with identified internal control failings or weaknesses and their submission of relevant reports to the Board. B.5. The audit committee should review conflicts of interests in transactions of the company and its subsidiaries with related parties. B.6. The audit committee should evaluate the efficiency of the internal control system and risk management system. B.7. The audit committee should monitor the application of statutory and generally accepted standards of internal auditing. The audit committee should receive and evaluate the reports of the internal audit team. B.8. Whenever the Code mentions reviews or analysis to be exercised by the Audit Committee, these should be followed by cyclical (at least annual), or ad-hoc reports to be submitted to the Board afterwards. YES YES YES YES YES YES YES B.9. No shareholder may be given undue preference over other shareholders with regard to transactions and agreements made by the company with shareholders and their related parties B.10The Board should adopt a policy ensuring that any transaction of the company with any of the companies with which it has close relations, that is equal to or more than 5% of the net assets of the company (as stated in the latest financial report), should be approved by the Board following an obligatory opinion of the audit committee. B.11. The internal audits should be carried out by a separate structural division (internal audit department) within the company or by retaining an independent third-party entity. YES YES YES Report of the Board of Administration for year 2016 Page 9

28 B.12. To ensure the fulfillment of the core functions of the internal audit department, it should report functionally to the Board via the audit committee. For administrative purposes and in the scope related to the obligations of the management to monitor and mitigate risks, it should report directly to the chief executive officer. YES Section C- Fair rewards and motivation C.1. The company should publish a remuneration policy on its website and include in its annual report a remuneration statement on the implementation of this policy during the annual period under review. Any essential change of the remuneration policy should be published on the corporate website in a timely fashion. YES Section D- Building value through investors relations YES D.1. The company should have an Investor Relations function - indicated, by person (s) responsible or an organizational unit, to the general public. In addition to information required by legal provisions, the company should include on its corporate website a dedicated Investor Relations section, both in Romanian and English, with all relevant information of interest for investors, including: D.1.1. Principal corporate regulations: the articles of association, general shareholders meeting procedures. D.1.2. Professional CVs of the members of its governing bodies, a Board member s other professional commitments, including executive and non-executive Board positions in companies and not-for-profit institutions; YES YES YES D.1.3. Current reports and periodic reports (quarterly, semi-annual and annual reports); D.1.4. Information related to general meetings of shareholders; YES Report of the Board of Administration for year 2016 Page 10

29 D.1.5. Information on corporate events; YES D.1.6. The name and contact data of a person who should be able to provide knowledgeable information on request; YES D.1.7. Corporate presentations (e.g. IR presentations, quarterly results presentations, etc.), financial statements (quarterly, semiannual, annual), auditor reports and annual reports. D.2. A company should have an annual cash distribution or dividend policy. The annual cash distribution or dividend policy principles should be published on the corporate website. D.3. A company should have adopted a policy with respect to forecasts, whether they are distributed or not. The forecast policy should be published on the corporate website. D.4. The rules of general meetings of shareholders should not restrict the participation of shareholders in general meetings and the exercising of their rights. Amendments of the rules should take effect, at the earliest, as of the next general meeting of shareholders. D.8. The quarterly and semi-annual financial reports should include information in both Romanian and English regarding the key drivers influencing the change in sales, operating profit, net profit and other relevant financial indicators, both on quarteronquarter and year-on-year terms. YES YES YES YES YES Report of the Board of Administration for year 2016 Page 11

30 3. IMPACT ACTIVITY IN YEAR Romanian real estate market and economy in Overview. GDP In 2016 Romania recorded an economic growth in real terms by 4,8% compared to year 2015, maintaining one of the highest increases in Europe in 2016 as well. The GDP estimated for year 2016 was of ,6 millions RON in current prices. According to the National Statistics Institute (INS), in the GDP growth in 2016 compared to 2015 contributed all sectors of the economy, except agriculture, forestry and fisheries, major positive contributions having the following branches: Wholesale and retail trade; repair of motor vehicles and motorcycles; transportation and storage; hotels and restaurants (+ 1.8%), with a share of 18,1% to the GDP and of which workload was increased by 10,9%; Information and communications (+0,7%), with a lower share in GDP (5,6%), but which have recorded a significant increase in business volume (14,2%); professional, scientific and technical activities; activities of administrative services and activities of support services (+0,6%), with a share of 7,4% to GDP and of which workload was increased by 8,0%; industry (+0,4%), with a share of 23,1% to the GDP and of which workload was increased by 1,7%; Net taxes on products (+0,5%), with a share of 10,5% o GDP, and of which workload was increased by 4,3%. Construction (+0,1%), with a share of 6,0% to GDP and of which workload was increased by 1,8% and of which price index increased by 9% compared to year Source: INS Report of the Board of Administration for year 2016 Page 12

31 From the viewpoint of using GDP the growth was due mainly to final consumption expenditure of households, of which volume was increased by 7,40%, contributing by 4,50% to GDP growth. Also, gross fixed capital formation registered an increase in volume by 2,60% but it had not positively contributed to GDP increase. A significant negative contribution to GDP growth had the net export (-0,80%), consequence of the increase by 7,60% of exports of goods and services correlated with a greater increase in imports of goods and services, by 9,30% compared to year Unemployment rate At the end of December 2016, the nationally registered unemployment rate was 5,50%, by 0,2 less than the one in November 2016 and by 1,2 pp less compared to the one in December In terms of the total number of unemployed registered by the territorial agencies for employment at the end of December 2016, it decreased by 14 thousands of individuals compared to the previous month, reaching 507 thousands of individuals. Inflation rate Consumption prices in December 2016 compared to December 2015, were lower by 0,50%, as measured by the CPI (Consumption prices index) and the annual consumption prices rate was -0,10%, determined based on consumption prices depreciated index (IAPC) it is shown in a release of the National Institute of Statistics. Overall, the average consumption prices rate in the past 12 months (January December 2016), compared to the previous 12 months (January December 2015), calculated based on IPC, is -1,50%. Determined based on IAPC, the average rate is -1,10%. Evolution of the consumption prices index (IPC) by categories, in the past 12 months: food products had increased in theweighted total by 0,60%, non-food products had decreased by 0,87%, and services had decreased in total by 1,83%. Real estate market In year 2016, the volume of construction works decreased compared to year 2015, as gross series by 4,80%. On structure elements there were decreases in overhauling works by 23,50% and in new construction works by 2,70%. Current maintenance and repair works had increased by 1,50%. By construction objects, the volume of construction works decreased in engineering works by 11,20%. Increases were registered in residential buildings, by 12,10% and in non-residential buildings by 1,10% In year 2016 there were completed dwellings, increased by dwellings compared to year Completed housing situation by region and main sources of funding in year 2016, is as follows: Report of the Board of Administration for year 2016 Page 13

32 Completed dwellings units TOTAL North East South East South Muntenia South West Oltenia West North West Center Bucharest Ilfov Source: INS By residential areas, the analysis on new dwellings construction, in year 2016 compared to year 2015, underlines the increase of the share in the urban area (53,4%) and decrease in the rural area (46,6%). Distribution by financing funds for completed dwellings shows that, compared to year 2015, in year 2016, the number of dwellings made from private funds had increased by dwellings, and the number of dwellings made from public funds had decreased by 60 dwellings. Completed dwellings - units Year 2016 Structure % TOTAL ,00 Urban Area ,40 Rural Area ,60 Out of total: ,00 Private funds Public funds ,40 Source: INS After seven years of declining, the real estate market began to slightly rebound in 2015, 2016 being the year in which the price of apartments continued to grow. End of this year shows that the market trend is growing, given that the number of acquisitions of housing is higher than the previous year. Analysts say that these are the first signs of a possible recovery of the real estate market. End of year results clearly show that in 2016 the volume of transactions nationwide was better than last year. Market data show that some of the most spectacular real estate developments are still found in Bucharest. Report of the Board of Administration for year 2016 Page 14

33 By analyzing the official data of the National Statistics Institute (INS), we find that housing delivery in 2016 are superior to those of the boom in 2008, when units were completed. Analysts said the large number of homes delivered shows that the market is thawing and during the crisis developers continued to work Strategic Directions and Activities Guidelines of IMPACT in 2016 Year 2016 was marked during the first semester, by the completion of stages 3 and 4, consisting of 17 buildings summing 420 apartments within the new residential development in Salcamilor Assembly, located in GREENFIELD neighborhood, and during the decond semester by the commencement of two new production cycles afferent to the new Platanilor Assembly - stages 5 and 6 in Greenfield, consisting of 21 buildings summing 476 apartments. Since spring of year 2016 there was initiated the signing of sale-purchase agreements and dwelling delivery in stages 3 and 4 in Salcamilor Assembly in Greenfield to the new owners. Sales have continued at a rapid pace until the end of year 2016 reaching an annual record of 416 units plus 36 reservations and promises. The 4 stages of Salcamilor Assembly had thus reached a contracting rate of over 86% of gthe total of 924 completed apartments. Since August 2016 there was initiated the offering and signing of reservations and pre-agreements for the new stages 5 and 6 in Platanilor Assembly, under construction, with completion term during the first half of On 31 st of December 2016 there were already 89 promises and reservations signed, the contracting rate being of over 19%. The development plan for 2016 was accelerated to prevent the existing demand in the market. Another major goal of the company in year 2016, was drafting of the technical documentation for development of the new residential project in Bucharest, in the area Ghencea Extension - Timisoara Ave., where the company owns a land with an area of approximately 26 ha. Nevertheless, in year 2016 there was continued the analysis, preparation and execution of the design documentation afferent to the project in Barbu Vacarescu Ave., project that was commenced in September 2014 by purchase of the ownership title pver a land with an area of 2,6 ha. Company is fulfilling all legal formalities for further exiting division. Also, the company's activity is focused on preparing the necessary documentation necessary for the approval fo the new PUZ and construction of Greenfield Plaza urban center, with a total area of 10,400 square meters, which will include a spa, business and services areas of approximately 8,000 sqm and an administrative headquarters of 2,400 sqm. The company intends accelerating the production cycles and product standardization, such as IMPACT offer to adjust to the market demand, these being the main concerns of the management in the current period, in order to achieve sales and profitability objectives. To finance residential developments, in addition to its own sources of funding - reinvested profit, it is aims to co-finance development costs through bank loans. Also for assisting the development and financing activities of the mentioned projects, the company has proposed obtaining financing on the capital market up to RON 135 million by issuing corporate bonds. Report of the Board of Administration for year 2016 Page 15

34 3.3. Main objectives of IMPACT in 2016: Sale of dwellings completed in Bucharest, Ploiesti, Oradea and Constanta; In year 2016 there were 439 houses and apartments ans 530 parking lots sold, with a built developed area of sq.m., increased by 19% compared to the previous year. Housing sales were achieved in: Bucharest - GREENFIELD 2 - Salcamilor Assembly: 416 apartments Bucharest - GREENFIELD 1: 15 apartments other neighborhoods in the country: 8 houses. Compared to year 2015, in year 2016 a significant increase was recorded in the sales of apartments in GREENFIELD, as result of completion of residential developments started by Impact in the summer of SALCAMILOR Assembly stages 3 and 4 (17 buildings summing 420 apartments). GREENFIELD sales growth was favored by the residential new product s quality as well as by the benefits offered by the residential assembly, which together have created a competitive advantage for the buyer. Also, buyers increased appetite associated with increased interest shown by the banks on granted financing favored sales increasing. Report of the Board of Administration for year 2016 Page 16

35 Given that the number of units sold in 2016 compared to 2015 considerably increased, the built sold area also proportionately increased by approximately sq.m. (+19%). Providing the sale of plots of land to individuals and legal entities for the development of homes or small commercial areas. In year 2016 there were sold land plots in area of sq.m. in Ploiesti, Voluntari, Constanta and Oradea. Report of the Board of Administration for year 2016 Page 17

36 Compared to year 2015, sales of plots of land have decreased, mainly on account of the attempt to liquidize the lands portfolio in the Oradea and Constanta projects (an area of more than sq.m.). Decrease in the sales of land plots was accentuated by the low appetite of the buyers for this products, to which lack of financing was added. Less lease contracts and sale of leased housings Leasing activity of the apartments is no longer a priority for the company in recent years. Dwellings of which leases have ended in 2016, were sold so that the number of rented homes fell from 8 homes at th end of December 2015, to 6 homes at th end of December Continuation of the residential development in GREENFIELD neighborhood, by commencement of construction works in new stages During the first semester of year 2016 there were completed stages 3 and 4, consisting of 17 buildings summing 420 apartments within the new residential development in Salcamilor Assembly, located Report of the Board of Administration for year 2016 Page 18

37 in GREENFIELD neighborhood, and during the second semester there were two new production cycles initiated in Platanilor Assembly stages 5 and 6, consisting of 21 buildings summing 476 apartments. GREENFIELD district's development strategy is the following: A new concept for ground floor apartments - they benefit from a tennis court beside the apartments that will be purchased with the apartment; To each new residential development a dedicated parking area for visitors is assigned, so that each apartment is assigned an undivided share of visitor car parks; Indoor traffic roads of the assembly are allocated in undivided share to each apartment and are transferred to future owners Strategic directions for the sale of portfolio projects in 2016 As a result of the changes that were recorded in the real estate market in the past years, in 2016, IMPACT has continued to make changes in its operational activities, aiming at the best possible adaptation to current market conditions. In the past four years, the main priorities of the company were company stabilization, the most efficient capitalization of assets in the portfolio and elaboration of the necessary documentations and preparation of the new developments. The economic situation in recent years has influenced the level of consumer confidence, along with increased expectations in terms of quality of the living environment. The considerable increase in sales in GREENFIELD (from 66 in 2014 to 374 units in 2015 and to 416 apartments in year 2016), was favored by increased appetite of the buyers in the new post crisis economic climate, by the price adjustment to the new features of the market, but also by the greater promotion of products and interest on customers granted financing manifested by banks Strategic directions for the sale of land plots in the portfolio In year 2016, the company has searched for solutions to boost sales of plots of land for building houses. In this respect, thete were put on sale viable / ongoing viability plots for construction of houses in Bucharest, Voluntari, Ploiesti, Constanta and Oradea. A plot of land of about 2 hectares owned by the company in Constanta was dismantled in 48 lots for homes, which are already on sale. These plots are near the Boreal villas assembly developed by IMPACT. Report of the Board of Administration for year 2016 Page 19

38 3.6 Budgeted versus achieved comparison 2016 Sales budget for year 2016 has a value deviation of 43% and quantity deviation of 50%. The approved Sales plan was the following: 33 units in the inventory of buildings built before 2013(in Greenfield and within the country) 750 units in new developments in Greenfield sq.m. of land plots in the plots in Constanta and Oradea. Sales budget of the inventory of buildings built before had a deviation of approximately 30% due to provincial decreased appetite for houses, and buyers preferences in Greenfield for new apartments. In terms of the new development, there were delays registered in several segments, respectively the authorization terms, completion of certain construction works, registration of documents with the Land Book, which led to delays in transaction of properties compared to the initial budgeted rhythm. We mention that at the end of year 2016 the company recorded a total number of 36 buildings reserved in Salcamilor assembly - stages 2, 3 and 4 si and a number of 89 buildings in Platanilor Assembly - stages 5 and 6. In year 2016 there were sold plots of land in area of sq.m. in Ploiesti, Voluntari, Oradea and Bucuresti, more than half of the sold plots of land were in Oradea, deviation registered to the budget is 61%, being generated from non-performance of sales in Constanta. The appetite for land acquisition is further reduced, the company makes an effort to make them viable and to accelerate their sales process. Significant variations to the budget were registered in: - cresterea cu 7% increase in expenditure on administration of projects based on works carried out in Greenfield District, old but also as a result of increase of the property inventory Report of the Board of Administration for year 2016 Page 20

39 - high variation in Provisions and other unpredicted expenses by resuming to income of the provision for ANAF litigation, but also by registration of an additional provision of RON increase in interests costs due to contracting of three new loans for further support of the production activity. Budget proposed for year 2016 (RON) Budgeted Achieved Variation % Total Incomes, out of which 275,699, ,964, % Income from existing inventory dwellings sales 8,305,891 6,708, % Income from land sales 3,740, , % Income from new development dwellings sales 263,653, ,361, % Total Operational Expenditure, out of which -209,852, ,423, % Sold goods cost existing inventory dwellings -8,099,199-6,563, % Sold goods cost lands -3,537, , % Sold goods cost new development dwellings -183,412,698-97,776, % Project portfolio administration expenditure -3,372,429-3,640, % Administrative expenditure -11,430,952-9,680, % Operational Result (EBITDA) 65,846,288 28,541, % Depreciation and amortization expenditure -630, , % Provisions and other unexpected expenditure -3,542,137 3,228, % Operational Result (EBIT) 61,674,151 31,105, % Net interests -512,499-1,578, % Exchange rate differences 0 83,321 Gross Result (EBT) 61,161,652 29,610, % Profit tax 0 0 0% Net Result 61,161,652 29,610, % Note: The figures in this section are compliant with the internal reporting standard. 4. OTHER INFORMATION ON THE COMPANY: 4.1. Structure of employees The company had at the end of year 2016 a number of 66 employees, the personel structure being wshown in the chart below. There is no union set up within the Company. Relations between management and employees are governed by individual employment agreements and job descriptions. Report of the Board of Administration for year 2016 Page 21

40 Employees structure on Development Dep., 12 CEO, 1 Lega; Dep., 2 Financial-Accounting Dep. 11 Quality Management and Administrative Dep., 7 IT Dep., 2 Non-executive Administrators, 5 Human Rwsources Dep., 2 Sales& Marketing Dep., Elements of risk management To prevent liquidity risk, the Company prepares cash flow reports for periods of 5 years, 1 year and on monthly bases; it examines projections done and compares them to the real situation in order to prevent situations where liquidity problems may occur. Market Risks: The global financial crisis combined with recession in Europe, exposed Romania to certain risks on the financial market. Company Internal Control is provided: Through Acquisitions Department: Contracts are signed by the Legal Department, Head of Procurement, CFO and CEO; Through the Sales Department: Contracts are reviewed by the Department of Prices and Analysis and signed by the General Director; Through preventive financial control by which contracts compliance is verified; By tracking payments checked by the Preventive Financial Control and approved by the Chief Financial Officer and / or General Director. By implementation of essential codes of conduct and business ethics specific procedures are implemented, applicable to all directors, officers, managers, people with a role in control or management, employees, auditors, business partners, collaborators. Thus, IMPACT applies Anticorruption Policy, Code of Conduct, Essential Ethical Values Policy, and Policy for Safety and Health at Work, Employment, Environment, and Reporting Policy. Report of the Board of Administration for year 2016 Page 22

41 5. ACTION PLAN FOR 2017 General principles underlying the budget set up for 2017, as well as for the subsequent year, and for the action plan for the current year are the following: increase in turnover and income from the sale of new homes focusing on completion of the next stages of construction in GREENFIELD, Platanilor Assembly respectively (stages 5, 6 and 7 being integrant part of STAGE II of development) preparation of authorization documentation and for commencement of execution works for the first 8 buildings in GREENFIELD neighborhood Drumul Taberei, in area of sq.m. elaboration of documentations necessary for development of the future stages in GREENFIELD Baneasa neighborhood identification of land plots in Bucharest and cities with populations exceeding inhabitants for development of projects sizing apartments destocking land in other localities viability / allotment of lands for further sale identificarea unor oportunitati de colaborare/dezvoltare/vanzare pentru terenurile din portofoliu rigorous planning of new projects minimizing the production and sale respectively cycles for built properties careful management and liquidization of non-core assets (assets that are not required in the main activity of the company Establishment of a business plan with long-term vision allowing an optimal financial structure hiring new loans, in depending on the needs, employing a company leverage ratios of maximum 35% preparation of prospect and identification of investmenbts for bonds issuance transfer of infrastructure / networks available from completed projects Financial management focused on controlling costs and maximizing revenue optimizing operating and administration costs, overheads control Implementation of an appropriate and effective entrepreneurial and project management policy maximizing the profitability of invested capital, minimizing terms of return on investment the principle of budget system superposition, on the system of authority within the company Implementation of an efficient communication standard in order to promote transparency in the investors and analysts community interdepartmental solidarity and correspondence principle with the general policy of the company reporting principle by each department. For each project, the works will be executed only on the basis of a well documented and beforehand established budget. Each contract must be within the set budget Implementation of a cost control system in real time the principle of consistency with human resources policy to determine motivation and adherence to strategic objectives by implementing a attractive motivation plan based on periodic evaluation of employee performance and results clear establishment of the structure and teams responsible for development of each project, procedures and work flows increase of labor productivity. In preparation of the current incomes and expenses budget for year 2017 there were not estimated the influences which trere are no certain anticipation information for. In line with the strategic vision imposed by the new management team of IMPACT, of permanent adaptation to the real estate market and maintaining the company's efficiency, the company has set for this year, goals that effectively respond to the needs of market, clients, but also partners. Report of the Board of Administration for year 2016 Page 23

42 Optimism over the market, but also in terms of the relationship that IMPACT has with its customers is based on both real estate and financial product diversification offered by the company, being able to respond both to the difficult access to funding sources, and to rising customer expectations in terms of habitat quality. 5.1.Greenfield Residence Stage II In the spring of year 2017 IMPACT launches the construction of a new neighborhood in Greenfield II, Platanilor assembly. The first production cycle consists of 21 blocks, respectively 476 apartments (48,000 sqm BDA), and in the second half of 2016 it will begin work on another 18 blocks, respectively 412 apartments (42,000 sqm BDA) sq.m. will be delivered during March sq.m. will be delivered during November sq.m. works will commence in March 2017 and they will be delivered during the first semester of 2018 New residential developments will benefit from all the advantages of location disclosed under the Greenfield brand (900 ha of forest in the vicinity of Baneasa Forest, 5 minutes from the commercial area Baneasa - Metro Cash & Carry, Selgross, IKEA, Mobexpert, Carrefour Feeria, Bricostore, immediate access to DN1 Bucharest - Ploiesti, 10 minutes from two airports: Baneasa and Henri Coanda). The second development phase of the Greenfield neighborhood aimed at extending the living area in an improved concept, adapted to current market conditions and attracting investors / operators for improvement of facilities / services serving the residential area. In the fall of year 2018 it will begin authorization of a complex dedicated to the community in Greenfield neighborhood that will include a spa, football, tennis fields and swimming pools, school and kindergarten, supermarket, restaurant, space for events, and the new administrative headquarters of IMPACT that will have 1,200 square meters and will be an A class building at the current technological level Land plots for houses Given the increasing number of private individuals interested in smaller individual plots for building houses, especially in residential areas outskirts of large cities, IMPACT will continue offering the sale of parcels of land for construction of houses in Voluntari, Constanta and Oradea, with areas ranging from 200 to 1,000 sqm. For even greater flexibility to the needs of its clients, IMPACT offers them the opportunity to acquire plots of land in the company's portfolio to develop their own dream house. Meanwhile, the company provides consulting regime services, customers being able to turn anytime to the team of specialists recommend by the company, from architects, engineers, up to project managers. Customers appreciate the freedom and flexibility to build the desired house in the chosen location and IMPACT provides them, in this respect, over 20 years experience in real estate Development of new residential projects in new locations in Bucharest Development of a new project in Bucharest, located in Timisoara Ave. - Ghencea Extension Report of the Board of Administration for year 2016 Page 24

43 In the course of 2016, IMPACT has started developing the technical documentation for a new residential project in Bucharest in the Ghencea Extension - Timisoara Ave., where the company owns a land area of approximately 26 ha. The size of Impact s new project in Ghencea Extension - Timisoara Ave. is about 2,350 apartments, 65 blocks, representing over 220,000 sqm, SPA, trade area, school and kindergarten. The project will be built in six production cycles, during a period of 4-5 years. In 2017 the authorization documentation upon commencement of execution works for the first 8 buildings in Greenfield Drumul Taberei project with an area of sq.m. will be prepared Development of a new project in Bucharest, located on Barbu Vacarescu Ave. In September 2014, IMPACT purchased a land located in Bucharest, in a semi-central area, on Barbu Vacarescu Ave., intended for a new real estate development. It has acquired a share of 1/3 (representing 2.7 ha) of ownership of the property consisting of 5 lands, with a total area of sq. m. Upon purchase of the land, the development degree of infrastructure in the area, proximity to public means of transportation, shops, business buildings, schools, kindergartens and green spaces was taken into account. Report of the Board of Administration for year 2016 Page 25

44 The characteristics of Barbu Vacarescu area: Excellent Location, close to the business centres of Romania: The largest concentration of office buildings in Bucharest 290,000 square meters and 23 office buildings with an occupancy rate of 83% 2 projects with over 80,000 square meters, undergoing various stages of construction, to be delivered during A very good transportation network Between two subway stations; Easy access to downtown and to the International Airport; A few steps from the business centres; In the proximity of Verdi and Floreasca parks Excellent proximity to commercial area Promenada Business Centre. Main characteristics of Barbu Vacarescu p;roject: Total land area: Biuilt area on ground: sq.m sq.m. Number of dwellings: 588 apartments (with 2, 3 and 4 rooms) in 6 buildings with GF + 11 height regime Underground parking spaces: 750 parking spaces Works schedule (includes development and sale, as from 2017): 30 luni in 2 cicluri de productie Construction cost (excluding VAT): EUR for eachproduction cycle 34,5 mill EUR, out of which EUR 7,5 mill for parking spaces, 13,5 mill EBITDA MARGIN: 40% Report of the Board of Administration for year 2016 Page 26

45 6. SOURCES OF ACTIVITY FINANCING IN YEAR 2017 In order to continue the projects development activity of the Company, IMPACT will use mixed sources of funding: o o o o o amounts from selling homes and land plots existing in the portfolio, according to the sales plan for year 2017 self-financing by contracting homes in stages 3, 4, 5 and 6 of development of the Greenfield II neighborhood attracting funding from the capital market by issuing bonds attracting bank loans for development of phases conducted this year in Greenfield and for residential projects development in other areas of Bucharest partnerships with financiers to be drawn into the facility to be developed in the Greenfield project area in Bucharest. 7. ECONOMICAL-FINANCIAL INDICATORS Results indicators ony indica Indicators pursuant to IFRS (RON) Operational revenues, out of which: 117,157, ,181,219 Revenues from sale of residential properties inventory 106,484, ,550,045 Revenues from rentals and utilities re-invoiced to customers 4,123,351 4,184,235 Revenues from sale of Investment properties 4,295,138 2,189,510 Other operational revenues 2,253,996 1,257,429 Operational expenses, out of which: (124,968,695) (115,212,878) Carrying value of sold residential properties inventory (72,147,934) (92,022,102) Operational costs afferent to rental and sold properties (2,703,858) (2,878,913) Carrying value of Investment properties (4,238,327) (1,917,666) Expenses concerning raw materials and materials (4,687,171) (2,528,353) Services provided by third parties (9,843,405) (9,201,795) Expenses with employee benefits (8,162,218) (8,312,244) Other operational expenses (5,985,782) (3,951,952) Provisions (17,200,000) 5,600,147 Operational Result (EBITDA) (7,811,540) 36,968,341 Expenses with depreciation (625,588) (664,545) Assets value loss, other than Investment properties 3,721,254 (5,643,512) Earnings / (losses) at fair value of Investment properties 1,745, ,053 Operational Result (EBIT) (2,970,746) 31,152,337 Net financial cost (1,488,663) (1,542,199) Gross Profit / Loss (EBIT) (4,459,409) 29,610,138 Income tax 0 0 Net Profit/ (loss) of the period (4,459,409) 29,610,138 Tangible assets 5,722,775 6,044,055 Investment properties 214,898, ,736,403 Report of the Board of Administration for year 2016 Page 27

46 Indicators pursuant to IFRS (RON) Intangible assets 117, ,663 Financial assets 14,377,226 14,377,226 Receivables 11,367,047 11,215,815 Total fixed assets 246,483, ,606,162 Inventories 177,887, ,813,138 Total current assets 221,491, ,029,353 Total assets 467,974, ,635,515 Share Capital 277,866, ,866,574 Equity 361,140, ,776,564 Total debt 106,834,063 93,858,951 Total liabilities 467,974, ,635,515 Operational Activity Operational revenues (mill RON) Operational expenditures (mill RON) (110.00) (115.00) (115.21) (120.00) (125.00) (130.00) (124.97) Revenue from the sale of real estate has the main share in operating income of IMPACT. In 2016 total operating revenues increased by 30%, due to commencement of sales in the third stage and fourth stage of Salcamilor Assembly in Greenfield. The sale of Housing had a distinctive structure in 2015, due to increases in sales in Greenfield neighborhood and declining in sales within the country - Oradea, Ploiesti and Constanta, on account of diminishing of the housing inventory. Thus, in 2016 the sales of residential property inventory increased by 36%, and the sales of real estate investments decreased by 49% compared to the previous year. The activity of renting buildings also experienced a decrease of 12% in revenues in 2016 compared to 2015, even if it is no longer consistent with the company's strategy of focusing on sales activity including of leased buildings. 31-Dec Dec-16 Variatie (%) Revenues from sales of rezidential properties inventory 106,484, ,550,045 36% Carrying value of sold rezidential properties inventory (72,147,934) (92,022,102) 28% Profit/loss from residential properties sales 34,336,736 52,527,943 53% Report of the Board of Administration for year 2016 Page 28

47 Rentals revenue 1,307,380 1,468,822 12% Operating costs re-invoiced to tenants 2,815,971 2,715,413-4% Operating costs related to leased properties (2,703,858) (2,878,913) 6% Net revenue from re-invoicing 1,419,493 1,305,322-8% Revenues from investments properties 4,295,138 2,189,510-49% Carrying value of investments properties (4,238,327) (1,917,666) -55% Profit/loss from Investment properties sales 56, , % (10.00) (20.00) Operational result (mill RON) (7.81) Total operational expenses have increased by 30% compared to the previous year as influentced by the sales increase in Salcamilor (there were 51 more new units sold than the previous year) and they led to the increase in operational profit by 573%, from the loss of 7,81 mill. RON in 2015 at a profit of 36,97 mill RON at the end of year The result of the previous year was yet influenced by registration of the ANAF litigation afferent provisions amounting to 17,2 mill ron Increases in expenses were recorded in 2016 in Operational costs afferent to rentals and sold properties, these ones increasing by 6% and in Employees benefits expenses they increased by 2%. Also, significant decreases in spendings registered in 2016 were also in Expenditure on raw materials and equipment, which decreased by 46% (10.00) Operational result (mill RON) (2.97) In terms of operational result before interest and tax, IMPACT recorded a profit amounting to 31,15 mill. RON compared to -2,97 mill. RON profit in This result is determined by losses in the fair value of investment properties, which are 252% lower compared to year 2015, according to IAS 40. Investment properties include land and residential properties owned for the purpose of increasing the capital value. Also, residential properties included in investment properties also include properties leased to third parties. Report of the Board of Administration for year 2016 Page 29

48 Gross profit / loss (mill RON) Gross profit registered in year 2016 is of 29,61 mill. RON, compared to the loss of 4,46 mill. RON in (10.00) (4.46) Financial result The net financial result increased by 3% in 2016 compared to 2015, on account of the increase in interests expenditures due to contracting of three new loans for further financing of Stages 5 and 6 in Platanilor Assembly - Greenfield. Financial result 31-Dec Dec-16 Variation (%) Financing costs (1,343,417) (1,451,973) 8% Financial incomes 18,841 31,337 66% Currency exchange rate differences (77,321) 63, % Other financial elements, net (86,766) (185,135) 113% Financial result (1,488,663) (1,542,199) 3% Net Result In year 2016 the company recorded a profit, according to IFRS, of 29,61 mill RON. Profit tax is calculated based on tax provisions related to deferred income tax. On 31 st of December 2016, the Company's land and buildings were revalued by independent valuer Colliers International. Tangible Assets According to IFRS, tangible assets increased by 6% in year 2016 compared to year 2015, from 5,72 mill RON to 6,04 mill RON, as result of purchase of tangible assess for further performance of operational activity. Real Estate Investments In 2016 the Investment properties decreased by 36% in year 2016 compared to year 2015, from 214, Tangible assets (mill RON) Report of the Board of Administration for year 2016 Page 30

49 mill. RON to 136,74 mill. RON. During year 2016, a land area of sq.m. in Greenfield registered in investment properties was transferred into the inventories account in raw materials for further development. Also, considering the company s strategy to develop the first stage of Greenfield Drumul Taberei Assembly, also during year 2016, a land area of sq.m. in Ghencea Timisoarei registered in investment properties was transferred to the account of inventories in raw materials for further development. Investment properties include land and residential properties owned in order to increase value. Lands held for assessing the value, amounting to RON on 31 st of December 2016 ( from the balance of RON on 31 st of December 2015), have a total area of sq.m. and represent 98% of Investment properties in the balance. These lands are located in Bucharest ( sq.m.) and in the country (Constanta, Oradea) Investment properties (mill RON) Inventories According to IFRS, inventories registered an increase of 59%, from 177,89 mill. RON in 2015 to 282,81 mill. RON in The increase is due to completion of works in stages 3 and 4 in Salcamilorsi Assembly, to capitalization of works in stages 5 and 6 afferent to Greenfield Bucharest - 1 st District project Inventories (mill RON) Receivables Category of receivables assets includes receivables with a maturity longer than one year afferent to receivables arising from installments sales portfolio. The level of receivables decreased by 1,3% in 2016: from 11,37 mill. RON as of December 31 st 2015 to 11,22 mill. RON at the end of 2016, on account of receipts from customers pursuant to payment schedules, and to the reduction in the number of installments payment contracts signed in the past 3 years. Report of the Board of Administration for year 2016 Page 31

50 Receivables (mill RON) Cash and cash equivalents at the end of year 2016 recorded an increase by 2%, from 17,08 mill. RON in 2015 to 17,43 mill. RON on December 31 st During year 2016, the company's activity had an intense cash flow. On one side were recorded significant inflows from the sale of real estate in Greenfield, contracting loans to finance construction stages, but also outputs for project financing and repayment of loans Cash and cash equivalents (mill RON) Indicators pursuant to IFRS (RON) Cash Flows Cash and cash equivalents on January 1 st 2016 Net cash from operating activities Net cash used in investments activities Net cash from (used in) financing activities Effect of variation in the exchange rate on cash Cash and cash equivalents on 31 st of December ,464,726 17,080,848 7,883,106 (11,636,823) 2,080, ,578 3,652,470 11,445, ,080,848 17,432,180 Financial assets (mill RON) Financial assets The financial assets recorded the same amount as in 2015 and they represent the value of equity in group companies Report of the Board of Administration for year 2016 Page

51 Total Debts According to IFRS, total debts decreased by 12%, from 106,86 mill. RON in 2015 to 93,86 mill. RON in 2016, on the date of reporting the amounts granted by credit institutions with a share of 61% (57,36 mill. RON) in total debts. Thus, the debt ratio has slightly decreased from 22,8% in 2015 to 19,4% in year Debt Rate (total debts/ total assets) % % Total active (mil RON) Total datorii (mil RON) Rata Datoriei (%) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% The company's total assets increased by 4%, from 467,97 mill. RON in 2015 to mill. RON in 2016, mainly due to capitalization of production in the two stages 3 and 4 in Salcamilor Assembly completed in GREENFIELD neighborhood development. Share Capital Subscribed and paid up share capital of the Company on December 31 st 2016 is RON The nominal value of a share is RON 1. Note : The figures presented are in accordance with the audited financial statements for year PERFORMANCE INDICATORS Stock exchange indicators - evolution: Indicatori Dec-13 Dec-14 Dec-15 Dec-16 Report of the Board of Administration for year 2016 Page 33

52 Price per share No. of shares Market capitalization ( RON ) Exchange rate Market capitalization ( EUR ) Net Asset Value ( RON ) Net Asset Value ( EUR ) ,866, ,866, ,866, ,866, ,639, ,631, ,194, ,506, ,001,475 92,062,172 57,728,938 42,832, ,430, ,579, ,140, ,776,564 62,753,475 81,564,387 79,818,879 86,053,283 Annual Profit (RON) (42,457,620) 4,091,143 (4,459,409) 29,610,138 Gain per share ( RON ) (0.215) (0.016) Net Asset Value (RON)/share) Premium/discount compared to the net asset value -62% 13% -28% -50% During year 2016 the company's shares have registered a price decrease down to 26% (0,700 RON/share on compared to 0,940 RON/share on ), fluctuations influenced by both the local market evolution, and the external ones. The stock exchanges were strongly affected by the European economy slowing, BREXIT, by issues concerning the reference interests, exchange rates, deflation and the collapse of oil price. The BET index apreciated by 1% in 2016, after during the period it increased in average by 11% per year. Economic and financial indicators evolution Return Indicators Dec-14 Dec-15 Dec-16 Return on Assets (ROA) Net Profit (A) [RON] 4,091,143 (4,459,409) 29,610,138 Total Asset (B) [RON] 442,157, ,974, ,635,515 A/B 0.93% -0.95% 6.11% Return on Equities (ROE) Dec-14 Dec-15 Dec-16 Net Profit (A) [RON] 4,091,143 (4,459,409) 29,610,138 Equity (B) [RON] 365,579, ,140, ,776,564 A/B 1.12% -1.23% 7.58% Report of the Board of Administration for year 2016 Page 34

53 Solvency Indicators Dec-14 Dec-15 Dec-16 Debt ratio (Debt vs. Asset) Total Debt (A) [RON] 76,577, ,834,063 93,858,951 Total Asset (B) [RON] 442,157, ,974, ,635,515 A/B 17.32% 22.83% 19.37% Leverage (Equity vs. Asset) Equity (A) [RON] 365,579, ,140, ,776,564 Total Assets (B) [RON] 442,157, ,974, ,635,515 A/B 82.68% 77.17% 80.63% Gearing ratio (Loans vs. Equity) Total Laons (A) [RON] 36,749,542 45,789,003 49,272,582 Equity (B) [RON] 365,579, ,140, ,776,564 A/B 10.05% 12.68% 12.61% Ration Indicators Dec-14 Dec-15 Dec-16 Current Ration Current Assets (A) [RON] 170,749, ,491, ,029,353 Current Debts (B) [RON] 37,640,818 77,772,701 49,475,602 A/B Quick Ration Dec-14 Dec-15 Dec-16 Current Assets (A) [RON] 170,749, ,491, ,029,353 Inventories (B) [RON] 158,125, ,887, ,813,138 Current Debts (C) [RON] 37,640,818 77,772,701 49,475,602 (A-B)/C It shows a stabilization of the economic and financial indicators, on the one hand by operating profits generated by the Company, but also by improving the capital attracted during year Description Dec-15 Dec-16 IFRS Net Asset Value 361,140, ,776,564 Report of the Board of Administration for year 2016 Page 35

54 Number of shares 277,866, ,866,574 IFRS Net Asset Value /Share Revaluation of inventories / available land for sale 65,476,258 68,955,678 Excludes: Deffered tax 13,000,347 13,000,347 EPRA Net Asset Value 439,617, ,732,589 EPRA Net Asset Value/Share The objective of the EPRA Accounting Net Asset indicator is to highlight the fair value of net assets on an ongoing analysis on long term. value. Adjustments are considering the revaluation of assets and land available for sale to net achievable 1"EPRA" European Public Real Estate is an association representing public real estate companies listed in Europe. Report of the Board of Administration for year 2016 Page 36

55 CONSOLIDATED REPORT OF THE Board of Administration For year 2016 IMPACT DEVELOPER & CONTRACTOR SA

56 Table of content: 1. COMPANY PRESENTATION About IMPACT Board of Administration Executive Management of the Company Entities within the Group IMPACT Auditor IMPACT on the Capital Market CORPORATIVE GOVERNANCE IMPACT ACTIVITY DURING YEAR Real estate market and Romanian economy in Overview Directii strategice si linii de activitate ale IMPACT in IMPACT Strategic trends and lines of activity in Strategic lines for the sale of the portfolio projects in Strategic lines for the sale of land lots in the portfolio budgeted versus achieved comparison OTHER INFORMATION ON THE COMPANY Employees structure Risk management elements ACTION PLAN FOR Greenfield Residence Stage II Land plots for houses Development of new residential projects in new locations in Bucharest SOURCES OF FINANCING THE ACTIVITY IN YEAR ECONOMICAL-FINANCIAL INDICATORS PERFORMANCE INDICATORS Consolidated report of the Board of Administration for year 2016 Page 2

57 1. COMPANY PRESENTATION 1.1. About IMPACT The company is one of the first companies active in real estate development in Romania, being founded in 1991 by public subscription. In 1995, the Company has introduced the concept of residential assembly on the Romanian market and therefore it gradually transformed into a pure real estate developer. Starting in 1996, the company is listed on the Bucharest Stock Exchange (BVB). In 2006, the company's shares were promoted to the first category of the Stock Exchange, becoming the first company in the real estate and construction sector which has done so. Since January 2015, the company is part of the Premium categry, pursuant to the new segmentation of local capital market. In the past 25 years IMPACT Developer & Contractor has completed 17 small and medium projects, which included over 3,000 homes and over 25,000 square meters of offices and business areas. On 31 st of December 2016, the company was involved in residential developments located in four cities in the country, each project with different sizes and found in different stages of completion. IMPACT activity is dominated by a major project: GREENFIELD residential assembly in Bucharest. After entry of the new management, since April 2013, IMPACT initiated a new policy of stabilization, recovery and relaunching, such as in year 2014 it resumed the residential developments. Thus, in November 2014 the launch of the newest neighborhood in GREENFIELD, Salcamilor assembly took place. Today it consists of 35 buildings with GF + 5, 924 apartments respectively with 2, 3 or 4 bedrooms. Nevertheless, documentation was prepared for and commencement of construction of another 39 blocks took place, representing the Platanilor Assembly, consisting of 944 apartments, which will be further completed by stages, as from the first semester of year The company's management follows the market trends and appropriately responds to any changes in demand and very quickly adapts to market changes. IMPACT constantly endeavors all efforts to prove its customer focus by aligning to the specific needs thereof. By default, IMPACT proves a high level of adaptability to market conditions; it manages the existing realities and identifies resources for exploration of new business opportunities. To this end, the company's management continually seeks trends and market developments, so that the urban concepts of innovation products it offers, to ensure recognition of IMPACT Developer & Contractor as leader of the real estate market on local level, with focus on Romania's capital, Bucharest. Consolidated report of the Board of Administration for year 2016 Page 3

58 1.2. Board of Administration Pursuant to the legislation in force and the company s Articles of Incorporation, the General Assembly of Shareholders is the managing and decisional body of the company, deciding upon its business. The company is lead by the Board of Administration, consisting of five administrators, individuals: Iuliana Mihaela Urda, Chairman of the Board of Administration; Liviu Stan, Administrator; Gabriel Vasile, Administrator; Constantinos Tassoulas, Administrator; Victor Rachita, Administrator. Mrs. Iuliana Mihaela Urda was elected in the Board of Administration in the General Ordinary Assembly in 26th of April 2013, by cumulative vote method, for a four years mandate, until April Mr. Gabriel Vasile was appionted as administrator in the General Ordinary Assembly on 16 th of September 2013, Mr. Liviu Stan was appionted as in the General Ordinary Assembly on 25 th of April 2014, and Mr. Konstantinos Tasoulas was appionted as administrator in the General Ordinary Assembly held on the date of 25 th of April 2015, and Mr. Victor Rachita was appionted as administrator in the General Ordinary Assembly held on the date of 22 nd of April The Board of Administration is structured such as to allow dilligently fulfillment of duties. The Board regularly meets to ensure fulfillment of its duties in an efficient manner. There is a clear distribution of responsibilities between the Board and the executive management Executive Management of the Company As from the date of 01 st of September 2016, the position of Chief Executive Officer of the company is exercised by Mr. Bartosz Puzdrowski, for a 3 years mandate. On the date of 09 th of January 2017 there was registered with the Trade Registry Office within Ilfov Court the termination of the mandate agreement by parties approval for Mr. Stan Liviu from the position of Acquisitions Manager of Company Impact Developer & Contractor SA. By decision of the Board of Administration, the individuals empowered to represent the company were the Chief Executive Officer, along with Mr. Bogdan Nicolae Geanta until the date of 09 th of January 2017, and after such date, the Chief Executive Officer shall act along with Mr. Gabriel Vasile, according to art par. 5 in Law 31/1990, on trading companies Entities within the Group IMPACT held at the end of year 2016 equity in the following companies: Ownership title 31 December Note 31 December Clearline Development and 100,00% 100,00% Consolidated report of the Board of Administration for year 2016 Page 4

59 Management SRL Actual Invest House 100,00% 100,00% Clearline Development and Management SRL (formerly Lomb SA) is the project company through which IMPACT was to develop a residential project in Cluj-Napoca in partnership with the local authority, and there is a dispute for this project presented in the current reports. Actual Invest House S.R.L, a company within the IMPACT Group, plays an important role in diversification of services related to the sale of homes. ACTUAL INVEST HOUSE collaborates with the leading financial institutions in Romania in order to find solutions for credit facilities in the shortest time possible for the customers that are to buy a home. It also provides management services to new residential development and services for furnishing and interior decoration by partnering with leading suppliers at competitive prices, using high quality materials IMPACT Auditor DELOITTE AUDIT SRL had been appointed, by decision of GAS dated 22 nd of April 2016, for the purpose of auditing the financial statements for year 2016, drafted under the responsibility of the management of the company in compliance with the cu international standards IFRS (including the consolidated financial statements). Auditor s liability to the company and GAS is set fort and limited pursuant to the law IMPACT on the Capital Market IMPACT DEVELOPER & CONTRACTOR SA has been listed at the Bucharest Stock Exchange since the year Starting with the year 2006 its shares are quoted in the first category of BVB, and since 2015, IMPACT shares, in a number of 277,866,574, are traded on the Premium category according to the new segmentation of Bucharest Stoc Exchange. IMPACT stock price evolution (Jan.2016 Jan. 2017) The market capitalization of the company at the end of December 2016 was of 43 mill. EUR. There are no restrictions for the security transfer, there are no restrictions for the voting rights, and there are no holders of securities with special control rights. Consolidated report of the Board of Administration for year 2016 Page 5

60 BET Index Evolution (Jan.2016 Jan. 2017) According to the situation reported by the Central Depositary and reports to the Bucharest Stock Exchange, among the shareholders that held over 10% of the company shares on the date of are: Gheorghe Iaciu - 49,48%, Andrici Adrian - 15,24%, SWISS CAPITAL together with a group of shareholders affiliated to SWISS CAPITAL - 10,96%, and 24,32% of the shares are held by other shareholders. On the date of , 77.77% of the shares were held by individuals and 22.23% of the shares were held by legal entities The BET index recorded on 31 st of December 2016 an increase of 1% compared to the begining of the year, and the IMP shares have recorded a decrease of 26% (0,700 RON/share on compared to 0,940 RON/share on ). 2. CORPORATE GOVERNANCE Corporate governance complies with the Romanian legislation in force, aiming to ensure both accuracy and transparency in terms of company s outcomes, and equal access of all shareholders to relevant information on the company. IMPACT Developer & Contractor SA is managed under unitary system, its management being provided by the General Director, under surveillance of the Board of Administration. Corporate governance elements are implemented within the company, pursuant to the code of Corporate Governance adopted by the Board of the Stock Exchange in December 2007, with implementation term as from the annual report of IMPACT Developer & Contractor SA submitted and shall further submit all professional, legal and administrative efforts, necessary to ensure alignment with the provisions of the Code and transparent presentation of such outcomes. IMPACT Developer & Contractor SA publishes in a dedicated section of its own website details on GAS development, namely convocation notices, materials/documents afferent to agenda, special power fo attorney forms, correspondence voting forms, decision drafts. Consolidated report of the Board of Administration for year 2016 Page 6

61 Nevertheless, the company ensures information of all shareholders immediately after HAS taking place, through its own website dedicated section, on decisions adopted in General Assemblies of Shareholders and the voting detailed result. The Company also makes available for the shareholders / investors current reports, notices, the financial schedule, annual, quarterly, trimestrial reports. Direct relation with the investors is provided by an appointed person, dedicated to informing the shareholders depending on their questions addressed in writing or by phone. Information on corporate governance are periodically reported through corporative governance statement in the annual report and permanently updated through current reports and internet page. Since 2014 Impact adopted the following documents fundamenting corporate governance: - Code on anticorruption - Code of conduct - Ethical values of the Company - Policy on security and health at the place of work, labor, environment law - Reporting Policy In September 2015, BVB issued a new Code of Corporate Governance. The provisions of the Code are carefully examined by the Company, and the status of compliance with its provisions is properly assessed by the Company. Along the years, the company complied with the provisions of CCG and at the moment it carries out arrangements to comply with the provisions of the New Code as well. 3. IMPACT ACTIVITY IN YEAR Romanian real estate market and economy in Overview. GDP In 2016 Romania recorded an economic growth in real terms by 4,8% compared to year 2015, maintaining one of the highest increases in Europe in 2016 as well. The GDP estimated for year 2016 was of ,6 millions RON in current prices. According to the National Statistics Institute (INS), in the GDP growth in 2016 compared to 2015 contributed all sectors of the economy, except agriculture, forestry and fisheries, major positive contributions having the following branches: Wholesale and retail trade; repair of motor vehicles and motorcycles; transportation and storage; hotels and restaurants (+ 1.8%), with a share of 18,1% to the GDP and of which workload was increased by 10,9%; Information and communications (+0,7%), with a lower share in GDP (5,6%), but which have recorded a significant increase in business volume (14,2%); Consolidated report of the Board of Administration for year 2016 Page 7

62 professional, scientific and technical activities; activities of administrative services and activities of support services (+0,6%), with a share of 7,4% to GDP and of which workload was increased by 8,0%; industry (+0,4%), with a share of 23,1% to the GDP and of which workload was increased by 1,7%; Net taxes on products (+0,5%), with a share of 10,5% o GDP, and of which workload was increased by 4,3%. Construction (+0,1%), with a share of 6,0% to GDP and of which workload was increased by 1,8% and of which price index increased by 9% compared to year Source: INS From the viewpoint of using GDP the growth was due mainly to final consumption expenditure of households, of which volume was increased by 7,40%, contributing by 4,50% to GDP growth. Also, gross fixed capital formation registered an increase in volume by 2,60% but it had not positively contributed to GDP increase. A significant negative contribution to GDP growth had the net export (-0,80%), consequence of the increase by 7,60% of exports of goods and services correlated with a greater increase in imports of goods and services, by 9,30% compared to year Unemployment rate At the end of December 2016, the nationally registered unemployment rate was 5,50%, by 0,2 less than the one in November 2016 and by 1,2 pp less compared to the one in December In terms of the total number of unemployed registered by the territorial agencies for employment at the end of December 2016, it decreased by 14 thousands of individuals compared to the previous month, reaching 507 thousands of individuals. Consolidated report of the Board of Administration for year 2016 Page 8

63 Inflation rate Consumption prices in December 2016 compared to December 2015, were lower by 0,50%, as measured by the CPI (Consumption prices index) and the annual consumption prices rate was -0,10%, determined based on consumption prices depreciated index (IAPC) it is shown in a release of the National Institute of Statistics. Overall, the average consumption prices rate in the past 12 months (January December 2016), compared to the previous 12 months (January December 2015), calculated based on IPC, is -1,50%. Determined based on IAPC, the average rate is -1,10%. Evolution of the consumption prices index (IPC) by categories, in the past 12 months: food products had increased in theweighted total by 0,60%, non-food products had decreased by 0,87%, and services had decreased in total by 1,83%. Real estate market In year 2016, the volume of construction works decreased compared to year 2015, as gross series by 4,80%. On structure elements there were decreases in overhauling works by 23,50% and in new construction works by 2,70%. Current maintenance and repair works had increased by 1,50%. By construction objects, the volume of construction works decreased in engineering works by 11,20%. Increases were registered in residential buildings, by 12,10% and in non-residential buildings by 1,10% In year 2016 there were completed dwellings, increased by dwellings compared to year Completed housing situation by region and main sources of funding in year 2016, is as follows: Completed dwellings units TOTAL North East South East South Muntenia South West Oltenia West North West Center Bucharest Ilfov Source: INS By residential areas, the analysis on new dwellings construction, in year 2016 compared to year 2015, underlines the increase of the share in the urban area (53,4%) and decrease in the rural area (46,6%). Consolidated report of the Board of Administration for year 2016 Page 9

64 Distribution by financing funds for completed dwellings shows that, compared to year 2015, in year 2016, the number of dwellings made from private funds had increased by dwellings, and the number of dwellings made from public funds had decreased by 60 dwellings. Completed dwellings - units Year 2016 Structure % TOTAL ,0 Urban Area ,4 Rural Area ,6 Out of total: ,0 Private funds Public funds ,4 Source: INS After seven years of declining, the real estate market began to slightly rebound in 2015, 2016 being the year in which the price of apartments continued to grow. End of this year shows that the market trend is growing, given that the number of acquisitions of housing is higher than the previous year. Analysts say that these are the first signs of a possible recovery of the real estate market. End of year results clearly show that in 2016 the volume of transactions nationwide was better than last year. Market data show that some of the most spectacular real estate developments are still found in Bucharest. By analyzing the official data of the National Statistics Institute (INS), we find that housing delivery in 2016 are superior to those of the boom in 2008, when units were completed. Analysts said the large number of homes delivered shows that the market is thawing and during the crisis developers continued to work Strategic Directions and Activities Guidelines of IMPACT in 2016 Year 2016 was marked during the first semester, by the completion of stages 3 and 4, consisting of 17 buildings summing 420 apartments within the new residential development in Salcamilor Assembly, located in GREENFIELD neighborhood, and during the decond semester by the commencement of two new production cycles afferent to the new Platanilor Assembly - stages 5 and 6 in Greenfield, consisting of 21 buildings summing 476 apartments. Since spring of year 2016 there was initiated the signing of sale-purchase agreements and dwelling delivery in stages 3 and 4 in Salcamilor Assembly in Greenfield to the new owners. Sales have continued at a rapid pace until the end of year 2016 reaching an annual record of 416 units plus 36 reservations and promises. The 4 stages of Salcamilor Assembly had thus reached a contracting rate of over 86% of gthe total of 924 completed apartments. Since August 2016 there was initiated the offering and signing of reservations and pre-agreements for the new stages 5 and 6 in Platanilor Assembly, under construction, with completion term during the first Consolidated report of the Board of Administration for year 2016 Page 10

65 half of On 31 st of December 2016 there were already 89 promises and reservations signed, the contracting rate being of over 19%. The development plan for 2016 was accelerated to prevent the existing demand in the market. Another major goal of the company in year 2016, was drafting of the technical documentation for development of the new residential project in Bucharest, in the area Ghencea Extension - Timisoara Ave., where the company owns a land with an area of approximately 26 ha. Nevertheless, in year 2016 there was continued the analysis, preparation and execution of the design documentation afferent to the project in Barbu Vacarescu Ave., project that was commenced in September 2014 by purchase of the ownership title pver a land with an area of 2,6 ha. Company is fulfilling all legal formalities for further exiting division. Also, the company's activity is focused on preparing the necessary documentation necessary for the approval fo the new PUZ and construction of Greenfield Plaza urban center, with a total area of 10,400 square meters, which will include a spa, business and services areas of approximately 8,000 sqm and an administrative headquarters of 2,400 sqm. The company intends accelerating the production cycles and product standardization, such as IMPACT offer to adjust to the market demand, these being the main concerns of the management in the current period, in order to achieve sales and profitability objectives. To finance residential developments, in addition to its own sources of funding - reinvested profit, it is aims to co-finance development costs through bank loans. Also for assisting the development and financing activities of the mentioned projects, the company has proposed obtaining financing on the capital market up to RON 135 million by issuing corporate bonds Main objectives of IMPACT in 2016: Sale of dwellings completed in Bucharest, Ploiesti, Oradea and Constanta; In year 2016 there were 439 houses and apartments ans 530 parking lots sold, with a built developed area of sq.m., increased by 19% compared to the previous year. Housing sales were achieved in: Bucharest - GREENFIELD 2 - Salcamilor Assembly: 416 apartments Bucharest - GREENFIELD 1: 15 apartments other neighborhoods in the country: 8 houses. Compared to year 2015, in year 2016 a significant increase was recorded in the sales of apartments in GREENFIELD, as result of completion of residential developments started by Impact in the summer of SALCAMILOR Assembly stages 3 and 4 (17 buildings summing 420 apartments). Consolidated report of the Board of Administration for year 2016 Page 11

66 GREENFIELD sales growth was favored by the residential new product s quality as well as by the benefits offered by the residential assembly, which together have created a competitive advantage for the buyer. Also, buyers increased appetite associated with increased interest shown by the banks on granted financing favored sales increasing. Given that the number of units sold in 2016 compared to 2015 considerably increased, the built sold area also proportionately increased by approximately sq.m. (+19%). Consolidated report of the Board of Administration for year 2016 Page 12

67 Providing the sale of plots of land to individuals and legal entities for the development of homes or small commercial areas. In year 2016 there were sold land plots in area of sq.m. in Ploiesti, Voluntari, Constanta and Oradea. Compared to year 2015, sales of plots of land have decreased, mainly on account of the attempt to liquidize the lands portfolio in the Oradea and Constanta projects (an area of more than sq.m.). Decrease in the sales of land plots was accentuated by the low appetite of the buyers for this products, to which lack of financing was added. Consolidated report of the Board of Administration for year 2016 Page 13

68 Less lease contracts and sale of leased housings Leasing activity of the apartments is no longer a priority for the company in recent years. Most dwellings of which leases have ended in 2016, were sold so that the number of rented homes fell from 8 homes at th end of December 2015, to 6 homes at th end of December Continuation of the residential development in GREENFIELD neighborhood, by commencement of construction works in new stages During the first semester of year 2016 there were completed stages 3 and 4, consisting of 17 buildings summing 420 apartments within the new residential development in Salcamilor Assembly, located in GREENFIELD neighborhood, and during the second semester there were two new production cycles initiated in Platanilor Assembly stages 5 and 6, consisting of 21 buildings summing 476 apartments. GREENFIELD district's development strategy is the following: A new concept for ground floor apartments - they benefit from a tennis court beside the apartments that will be purchased with the apartment; To each new residential development a dedicated parking area for visitors is assigned, so that each apartment is assigned an undivided share of visitor car parks; Indoor traffic roads of the assembly are allocated in undivided share to each apartment and are transferred to future owners Strategic directions for the sale of portfolio projects in 2016 As a result of the changes that were recorded in the real estate market in the past years, in 2016, IMPACT has continued to make changes in its operational activities, aiming at the best possible adaptation to current market conditions. In the past four years, the main priorities of the company were company stabilization, the most efficient capitalization of assets in the portfolio and elaboration of the necessary documentations and preparation of the new developments. The economic situation in recent years has influenced the level of consumer confidence, along with increased expectations in terms of quality of the living environment. Consolidated report of the Board of Administration for year 2016 Page 14

69 The considerable increase in sales in GREENFIELD (from 66 in 2014 to 374 units in 2015 and to 416 apartments in year 2016), was favored by increased appetite of the buyers in the new post crisis economic climate, by the price adjustment to the new features of the market, but also by the greater promotion of products and interest on customers granted financing manifested by banks Strategic directions for the sale of land plots in the portfolio In year 2016, the company has searched for solutions to boost sales of plots of land for building houses. In this respect, thete were put on sale viable / ongoing viability plots for construction of houses in Bucharest, Voluntari, Ploiesti, Constanta and Oradea. A plot of land of about 2 hectares owned by the company in Constanta was dismantled in 48 lots for homes, which are already on sale. These plots are near the Boreal villas assembly developed by IMPACT. 3.6 Budgeted versus achieved comparison 2016 Sales budget for year 2016 has a value deviation of 43% and quantity deviation of 50%. The approved Sales plan was the following: Consolidated report of the Board of Administration for year 2016 Page 15

70 33 units in the inventory of buildings built before 2013(in Greenfield and within the country) 750 units in new developments in Greenfield sq.m. of land plots in the plots in Constanta and Oradea. Sales budget of the inventory of buildings built before had a deviation of approximately 30% due to provincial decreased appetite for houses, and buyers preferences in Greenfield for new apartments. In terms of the new development, there were delays registered in several segments, respectively the authorization terms, completion of certain construction works, registration of documents with the Land Book, which led to delays in transaction of properties compared to the initial budgeted rhythm. We mention that at the end of year 2016 the company recorded a total number of 36 buildings reserved in Salcamilor assembly - stages 2, 3 and 4 si and a number of 89 buildings in Platanilor Assembly - stages 5 and 6. In year 2016 there were sold plots of land in area of sq.m. in Ploiesti, Voluntari, Oradea and Bucuresti, more than half of the sold plots of land were in Oradea, deviation registered to the budget is 61%, being generated from non-performance of sales in Constanta. The appetite for land acquisition is further reduced, the company makes an effort to make them viable and to accelerate their sales process. Significant variations to the budget were registered in: - cresterea cu 7% increase in expenditure on administration of projects based on works carried out in Greenfield District, old but also as a result of increase of the property inventory - high variation in Provisions and other unpredicted expenses by resuming to income of the provision for ANAF litigation, but also by registration of an additional provision of RON increase in interests costs due to contracting of three new loans for further support of the production activity. Budget proposed for year 2016 (RON) Budgeted Achieved Variation % Total Incomes, out of which 275,699, ,964, % Income from existing inventory dwellings sales 8,305,891 6,708, % Income from land sales 3,740, , % Income from new development dwellings sales 263,653, ,361, % Total Operational Expenditure, out of which -209,852, ,423, % Sold goods cost existing inventory dwellings -8,099,199-6,563, % Sold goods cost lands -3,537, , % Sold goods cost new development dwellings -183,412,698-97,776, % Project portfolio administration expenditure -3,372,429-3,640, % Administrative expenditure -11,430,952-9,680, % Operational Result (EBITDA) 65,846,288 28,541, % Depreciation and amortization expenditure -630, , % Provisions and other unexpected expenditure -3,542,137 3,228, % Operational Result (EBIT) 61,674,151 31,105, % Consolidated report of the Board of Administration for year 2016 Page 16

71 Net interests -512,499-1,578, % Exchange rate differences 0 83,321 Gross Result (EBT) 61,161,652 29,610, % Profit tax 0 0 0% Net Result 61,161,652 29,610, % Note: The figures in this section are compliant with the internal reporting standard. 4. OTHER INFORMATION ON THE COMPANY: 4.1. Structure of employees The company had at the end of year 2016 a number of 66 employees, the personel structure being wshown in the chart below. There is no union set up within the Company. Relations between management and employees are governed by individual employment agreements and job descriptions. Employees structure on CEO, 1 Lega; Dep., 2 Dvelopment Dep., 12 Financial-Accounting Dep. 11 Quality Management and Administrative Dep., 7 IT Dep., 2 Non-executive Administrators, 5 Human Rwsources Dep., 2 Sales& Marketing Dep., Elements of risk management To prevent liquidity risk, the Company prepares cash flow reports for periods of 5 years, 1 year and on monthly bases; it examines projections done and compares them to the real situation in order to prevent situations where liquidity problems may occur. Market Risks: The global financial crisis combined with recession in Europe, exposed Romania to certain risks on the financial market. Consolidated report of the Board of Administration for year 2016 Page 17

72 Company Internal Control is provided: Through Acquisitions Department: Contracts are signed by the Legal Department, Head of Procurement, CFO and CEO; Through the Sales Department: Contracts are reviewed by the Department of Prices and Analysis and signed by the General Director; Through preventive financial control by which contracts compliance is verified; By tracking payments checked by the Preventive Financial Control and approved by the Chief Financial Officer and / or General Director. By implementation of essential codes of conduct and business ethics specific procedures are implemented, applicable to all directors, officers, managers, people with a role in control or management, employees, auditors, business partners, collaborators. Thus, IMPACT applies Anticorruption Policy, Code of Conduct, Essential Ethical Values Policy, and Policy for Safety and Health at Work, Employment, Environment, and Reporting Policy. 5. ACTION PLAN FOR 2017 General principles underlying the budget set up for 2017, as well as for the subsequent year, and for the action plan for the current year are the following: increase in turnover and income from the sale of new homes focusing on completion of the next stages of construction in GREENFIELD, Platanilor Assembly respectively (stages 5, 6 and 7 being integrant part of STAGE II of development) preparation of authorization documentation and for commencement of execution works for the first 8 buildings in GREENFIELD neighborhood Drumul Taberei, in area of sq.m. elaboration of documentations necessary for development of the future stages in GREENFIELD Baneasa neighborhood identification of land plots in Bucharest and cities with populations exceeding inhabitants for development of projects sizing apartments destocking land in other localities viability / allotment of lands for further sale identificarea unor oportunitati de colaborare/dezvoltare/vanzare pentru terenurile din portofoliu rigorous planning of new projects minimizing the production and sale respectively cycles for built properties careful management and liquidization of non-core assets (assets that are not required in the main activity of the company Establishment of a business plan with long-term vision allowing an optimal financial structure hiring new loans, in depending on the needs, employing a company leverage ratios of maximum 35% preparation of prospect and identification of investmenbts for bonds issuance transfer of infrastructure / networks available from completed projects Financial management focused on controlling costs and maximizing revenue optimizing operating and administration costs, overheads control Implementation of an appropriate and effective entrepreneurial and project management policy maximizing the profitability of invested capital, minimizing terms of return on investment Consolidated report of the Board of Administration for year 2016 Page 18

73 the principle of budget system superposition, on the system of authority within the company Implementation of an efficient communication standard in order to promote transparency in the investors and analysts community interdepartmental solidarity and correspondence principle with the general policy of the company reporting principle by each department. For each project, the works will be executed only on the basis of a well documented and beforehand established budget. Each contract must be within the set budget Implementation of a cost control system in real time the principle of consistency with human resources policy to determine motivation and adherence to strategic objectives by implementing a attractive motivation plan based on periodic evaluation of employee performance and results clear establishment of the structure and teams responsible for development of each project, procedures and work flows increase of labor productivity. In preparation of the current incomes and expenses budget for year 2017 there were not estimated the influences which trere are no certain anticipation information for. In line with the strategic vision imposed by the new management team of IMPACT, of permanent adaptation to the real estate market and maintaining the company's efficiency, the company has set for this year, goals that effectively respond to the needs of market, clients, but also partners. Optimism over the market, but also in terms of the relationship that IMPACT has with its customers is based on both real estate and financial product diversification offered by the company, being able to respond both to the difficult access to funding sources, and to rising customer expectations in terms of habitat quality Greenfield Residence Stage II In the spring of year 2017 IMPACT launches the construction of a new neighborhood in Greenfield II, Platanilor assembly. The first production cycle consists of 21 blocks, respectively 476 apartments (48,000 sqm BDA), and in the second half of 2016 it will begin work on another 18 blocks, respectively 412 apartments (42,000 sqm BDA) sq.m. will be delivered during March sq.m. will be delivered during November mp works will commence in the second semester of 2017 and they will be delivered during the second semester of 2018 New residential developments will benefit from all the advantages of location disclosed under the Greenfield brand (900 ha of forest in the vicinity of Baneasa Forest, 5 minutes from the commercial area Baneasa - Metro Cash & Carry, Selgross, IKEA, Mobexpert, Carrefour Feeria, Bricostore, immediate access to DN1 Bucharest - Ploiesti, 10 minutes from two airports: Baneasa and Henri Coanda). The second development phase of the Greenfield neighborhood aimed at extending the living area in an improved concept, adapted to current market conditions and attracting investors / operators for improvement of facilities / services serving the residential area. Consolidated report of the Board of Administration for year 2016 Page 19

74 In the fall of year 2018 it will begin authorization of a complex dedicated to the community in Greenfield neighborhood that will include a spa, football, tennis fields and swimming pools, school and kindergarten, supermarket, restaurant, space for events, and the new administrative headquarters of IMPACT that will have 1,200 square meters and will be an A class building at the current technological level Land plots for houses Given the increasing number of private individuals interested in smaller individual plots for building houses, especially in residential areas outskirts of large cities, IMPACT will continue offering the sale of parcels of land for construction of houses in Voluntari, Constanta and Oradea, with areas ranging from 200 to 1,000 sqm. For even greater flexibility to the needs of its clients, IMPACT offers them the opportunity to acquire plots of land in the company's portfolio to develop their own dream house. Meanwhile, the company provides consulting regime services, customers being able to turn anytime to the team of specialists recommend by the company, from architects, engineers, up to project managers. Customers appreciate the freedom and flexibility to build the desired house in the chosen location and IMPACT provides them, in this respect, over 20 years experience in real estate Development of new residential projects in new locations in Bucharest Development of a new project in Bucharest, located in Timisoara Ave. - Ghencea Extension In the course of 2016, IMPACT has started developing the technical documentation for a new residential project in Bucharest in the Ghencea Extension - Timisoara Ave., where the company owns a land area of approximately 26 ha. The size of Impact s new project in Ghencea Extension - Timisoara Ave. is about 2,350 apartments, 65 blocks, representing over 220,000 sqm, SPA, trade area, school and kindergarten. The project will be built in six production cycles, during a period of 4-5 years. Consolidated report of the Board of Administration for year 2016 Page 20

75 In 2017 the authorization documentation upon commencement of execution works for the first 8 buildings in Greenfield Drumul Taberei project with an area of sq.m. will be prepared Development of a new project in Bucharest, located on Barbu Vacarescu Ave. In September 2014, IMPACT purchased a land located in Bucharest, in a semi-central area, on Barbu Vacarescu Ave., intended for a new real estate development. It has acquired a share of 1/3 (representing 2.7 ha) of ownership of the property consisting of 5 lands, with a total area of sq. m. Upon purchase of the land, the development degree of infrastructure in the area, proximity to public means of transportation, shops, business buildings, schools, kindergartens and green spaces was taken into account. The characteristics of Barbu Vacarescu area:: Excellent Location, close to the business centres of Romania: The largest concentration of office buildings in Bucharest 290,000 square meters and 23 office buildings with an occupancy rate of 83% 2 projects with over 80,000 square meters, undergoing various stages of construction, to be delivered during A very good transportation network Between two subway stations; Easy access to downtown and to the International Airport; A few steps from the business centres; In the proximity of Verdi and Floreasca parks Excellent proximity to commercial area Promenada Business Centre. Main characteristics of Barbu Vacarescu p;roject: Total land area: Biuilt area on ground: sq.m sq.m. Number of dwellings: 588 apartments (with 2, 3 and 4 rooms) in 6 buildings with GF + 11 height regime Consolidated report of the Board of Administration for year 2016 Page 21