INVL Baltic Real Estate, Consolidated Interim Report for 6 months of 2017

Transcription

1 The special closed-ended type real estate investment company INVL Baltic Real Estate, Consolidated Interim Report for 6 months of 2017 Prepared in accordance with The Rules for the Preparation and the Submission of the Periodic and Additional Information approved by the decision No of the Board of the Bank of Lithuania passed on 28 February 2013.

2 2017 INTERIM REPORT 2 Translation note: This version of the Consolidated Interim Report for the 6 months of 2017 is a translation from the original, which was prepared in Lithuanian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version takes precedence over this translation. CONTENTS: I. GENERAL INFORMATION Reporting period for which the report is prepared General information about the Issuer and other companies comprising the Issuer s group Information about the Issuer Information on company s goals and strategy Information about the Issuer s group of companies Real estate objects owned by group companies in Vilnius (Lithuania)... 6 Investments in real estate Real estate objects owned by group companies in Riga (Latvia) II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS Overview of the Issuer and its group activity Comment made by INVL Asset Management real estate fund manager Vytautas Bakšinskas Operational environment Key figures of INVL Baltic Real Estate Results of INVL Baltic Real Estate Significant Issuer s and its group events during the reporting period, effect on the financial statement Significant Issuer s events Sigificant group s events Significant events of the Issuer and its group since the end of the reporting period Estimation of Issuer s and Group s activity last year and activity plans and forecasts Evaluation of implementation of goals for Activity plans and forecasts III. INFORMATION ABOUT SECURITIES The order of amendment of Issuer s Articles of Association Structure of the authorized capital Share capital changes Information about the Issuer s treasury shares Trading in Issuer s securities as well as securities, which are deemed to be a significant financial investment to the Issuer on a regulated market Shareholders Information about company s shareholders Dividends IV. ISSUER S MANAGING BODIES Issuer s managing bodies Information about the Audit Committee of the company Information on the Issuer s payable management fee, the amounts calculated by the Issuer, other assets transferred and guarantees granted to the Managing bodies and company providing accounting services... 26

3 2017 INTERIM REPORT 3 V. OTHER INFORMATION Agreements with intermediaries on public trading in securities Information on Issuer s branches and representative offices A description of the principal risks and uncertainties Significant investments made during the reporting period Information about significant agreements to which the issuer is a party, which would come into force, be amended or cease to be valid if there was a change in issuer s controlling shareholder Information on the related parties transactions... 27

4 2017 INTERIM REPORT 4 1 Reporting period for which the report is prepared I. GENERAL INFORMATION The report covers the financial period of INVL Baltic Real Estate, starting from 1 January 2017 and ending on 30 June The report includes significant events that occurred since the end of the reporting period. 2 General information about the Issuer and other companies comprising the Issuer s group 2.1. INFORMATION ABOUT THE ISSUER Name Code Special closed-ended type real estate investment company INVL Baltic Real Estate Registration address Gynėjų str. 14, 01109, Vilnius, Lithuania Telephone Fax Website Legal form Company type Date and place of registration Date of the Supervisory authority approval of collective investment entity formation documents Register in which data about the Company are accumulated and stored Management company breinfo@invl.com joint-stock company special closed-ended type real estate investment company 28 January 1997; Register of Legal Entities 22 December 2016 Register of Legal Entities INVL Asset Management, UAB, code , licence No. VĮK-005 Depository SEB bankas, AB, code , bank licence No INFORMATION ON COMPANY S GOALS AND STRATEGY INVL Baltic Real Estate real estate investment company was founded on 28 January 1997, former name Invaldos Nekilnojamo Turto Fondas, AB. On 17 August 2015 the Company was merged with its parent company; therefore the Company took over all its rights and obligations. INVL Baltic Real Estate seeks to profit from investments in commercial real estate property, guaranteeing rental income growth. INVL Baltic Real Estate manages about 58 thousand square meters of real estate space in Vilnius and Riga: mainly business centers and other commercial buildings. The company's managed objects are characterized by high occupancy rates and generate stable financial flows. In addition, part of them has further development potential. INVL Baltic Real Estate shares have been listed on NASDAQ Vilnius Baltic Additional trading list since 4 June Since the start of trading until the end of the reporting period the share price of INVL Baltic Real Estate on the NASDAQ Vilnius exchange has risen 30.1%. The company has approved a dividend policy which stipulates the annual payment of dividend per share of no less than EUR On 22 December 2016 the bank of Lithuania for INVL Baltic Real Estate (legal entity code , with its registered address at Gyneju str. 14, Vilnius, Republic of Lithuania) issued the closed-ended type investment company operating license enabling to engage in the closed-ended type investment company's activities under the Law of the Republic of Lithuania Collective Investment Undertakings. The special closed-ended type real estate investment company will work 30 years from receiving the special closed-ended real estate investment company license, the term of company's activity may be further

5 2017 INTERIM REPORT 5 extended for a period of no longer than 20 years. Upon receipt of the license, the company's management was transferred to the management company INVL Asset Management (hereinafter Management company) INFORMATION ABOUT THE ISSUER S GROUP OF COMPANIES Companies of INVL Baltic Real Estate group owns 12 real estate properties in Vilnius and Riga. Fig Simplified group structure of INVL Baltic Real Estate as of 30 June 2017.

6 2017 INTERIM REPORT REAL ESTATE OBJECTS OWNED BY GROUP COMPANIES IN VILNIUS (LITHUANIA) Fig Real estate objects owned by group companies of INVL Baltic Real Estate in Vilnius (Lithuania) INVESTMENTS IN REAL ESTATE Vilnius Gates is an excellent choice for those who value the chance to work in the very centre of the capital city, right beside Vilnius s main street Gedimino Avenue and one of the city s key transport arteries Geležinio Vilko Street. Renovated and reorganised, this business centre in an exclusive urban area is now even more luminous and convenient. Flexible planning of space and the option of a separate entrance just for your company ensure a sense of comfort and distinctiveness. INVL Baltic Real Estate owns two floors of premises in this complex they start from the playful inverted glass frustum edifice with a restaurant on the ground floor and continue along Gynėjų Street, also including 55 parking spaces in the underground car park. The company acquired these premises in late VILNIUS GATES BUSINESS CENTRE AREA 8,100 SQ.M. The full Vilnius Gates complex comprises more than 53,000 sq. m. of varied-use premises, making it a highly attractive location for restaurants and providers of healthcare, fitness and other services. It s an ideal setting for service centres, creative agencies, providers of financial and legal services, IT firms and startups. Currently, the building design is completed and the building conversion works are carried out.

7 2017 INTERIM REPORT 7 The main tenants located here: the offices of Invalda INVL, one of the leading asset management groups in the Baltics; Rise Vilnius, which is a purpose-built workspace for the FinTech community; restaurant Stebuklai; Go Vilnius; Swedbank and others. Find out more about the premises INVL Batlic Real Estate owns in the Vilnius Gates complex at Occupancy on 30 June of %. Address: Gyneju str. 14, Vilnius. Basic information Total area Leased area Land area Property market value, 30 June of ,100 sq. m 6,400 sq. m 0.26 ha EUR 12.1 million IBC class A and B business centres at Seimyniskiu str. 1a, Seimyniskiu str. 3, A.Juozapaviciaus str. 6 in Vilnius IBC Business Centre a versatile, functional business premises complex. IBC is located in a very convenient location on the right bank of the Neris River in the central part of Vilnius, situated near important public institutions and businesses, at the main business artery in the Constitution Avenue, therefore is easily and quickly accessible from any place in Vilnius. IBC Class A business centre consists of two buildings, in which about 7,100 sq. m. are being leased (the total area of buildings 11,400 sq. m). The centre owns 250 spots parking lot in the protected courtyard, also in the two-storey covered and underground garages. IBC Business Centre is being constantly developed, more and more services are offered each year. Main tenants: IBM Lietuva, UAB, Šiaulių bankas, AB, Amber Food, UAB, Drogas, UAB, Sportland, UAB. Occupancy on 30 June of %. Address: Seimyniskiu str. 1a, Seimyniskiu str. 3, Juozapaviciaus str. 6, Vilnius. IBC CLASS A BUSINESS CENTRE AREA 11,400 SQ.M. Block F basic information Total area Leased area Land area Property market value, 30 June of ,500 sq. m 3,800 sq. m 1.47 ha (total area of the IBC complex) EUR 5.9 million

8 2017 INTERIM REPORT 8 Block G basic information Total area Leased area Land area Property market value, 30 June of ,900 sq. m 3,300 sq. m 1,47 ha (total area of the IBC complex) EUR 6.0 million IBC CLASS B BUSINESS CENTRE AREA 11,300 SQ.M IBC Class B business centre consists of 4 buildings, in which about 10,600 sq. m of different purpose premises are being leased (the total area of buildings 11,300 sq. m). The centre owns 200 spots parking lot in the protected courtyard. The IBC business centre has a development opportunity, detailed plan of the area is prepared. Main tenants: Sanofi-aventis Lietuva, ACNielsen Baltics, BAIP, State data protection inspectorate, Sandoz Pharmaceuticals. Occupancy on 30 June of %. Address: Seimyniskiu str. 3, Seimyniskiu str. 3a, Juozapaviciaus str. 6, Vilnius. Block A basic information Total area Leased area Land area Property market value, 30 June of ,100 sq. m 1,900 sq. m 1.47 ha (total area of the IBC complex) EUR 2.1 million Block B basic information Total area Leased area Land area Property market value, 30 June of ,400 sq. m 7,200 sq. m 1.47 ha (total area of the IBC complex) EUR 6.7 million

9 2017 INTERIM REPORT 9 Block C basic information Total area Leased area Land area Property market value, 30 June of sq. m 200 sq. m 1.47 ha (total area of the IBC complex) EUR 0.2 million Block D basic information Total area Leased area Land area Property market value, 30 June of ,600 sq. m 1,300 sq. m 1.47 ha (total area of the IBC complex) EUR 1.4 million OFFICE BUILDING IN THE CENTRE OF VILNIUS AREA 9,800 SQ.M. Business centre is located in one of the busiest places in the Old Town of Vilnius, between Vilnius, Pamenkalnio, Islandijos and Palangos streets. Vilnius Old Town - one of the most important components of the city and its centre, the oldest part of the city of Vilnius, situated on the left bank of the Neris River. Old Town area - protected and managed in accordance with the special heritage protection well, small business and residential function are being supported. There is a closed, guarded parking and underground garage in the area, convenient public transport access. Radvilų Palace, Teacher's House, Lithuanian Technical Library, St. Catherine's Church and other cultural attractions, cafes, restaurants are located near the building. Occupancy on 30 June of %. Address: Palangos str. 4/ Vilniaus str. 33, Vilnius. Block A basic information Total area Leased area Land area Property market value, 30 June of ,100 sq. m 3,800 sq. m 0.49 ha (total area of the complex) EUR 4.3 million

10 2017 INTERIM REPORT 10 Block B basic information Total area Leased area Land area Property market value, 30 June of ,700 sq. m 2,400 sq. m 0,49 ha (total area of the complex) EUR 3.4 million ŽYGIS BUSSINESS CENTRE AREA 3,200 SQ.M. Zygio business centre the yellow brick, authentic nineteenth century architecture, renovated office building, perfectly adapted to modern office activities. The building stands in the Northern Town in a strategically attractive, busy part of Vilnius, easily accessible by car and public transport. Other commercial and business centres, banks, the State Tax Inspectorate, Social Insurance, Employment Exchange, medical clinics and various business services companies, attracting large flows of people, are located nearby. Also, even four large shopping centres Domus Gallery, Parkas, Hyper Rimi, Banginis-Senukai, are located near the business centre. Distance to the centre of Vilnius is about 3.5 km. 70 spots covered parking lot is installed next to the building. Occupancy on 30 June of %. Address: Žygio str. 97, Vilnius. Basic information Total area Leased area Land area Property market value, 30 June of ,200 sq. m 2,600 sq. m 0.6 ha EUR 2.6 million

11 2017 INTERIM REPORT 11 Administrative buildings and warehouses are in a strategically convenient location, in respect to storage/manufacturing, in the industrial area, the southwestern part of Vilnius, Kirtimų Street. This complex is very suitable for logistics, as it is located near the Western city bypass, which is one of the most important traffic arteries of Vilnius city. Engineering infrastructure is well-developed in the area. Occupancy on 30 June of %. Address: Kirtimu str. 33, Vilnius. *Note: on 26 July 2017 the company has signed an agreement on the sale of this real estate object. OFFICE AND WAREHOUSE PREMISES IN KIRTIMAI* AREA 3,000 SQ.M. Basic information Total area Leased area Land area Property market value, 30 June of ,000 sq. m 2,500 sq. m 0.67 ha EUR 0.86 million Residential house at Kalvariju str. 11, Vilnius (Rovelija, UAB) The house borders with IBC complex area owned by INVL Baltic Real Estate. Rovelija, which is owned by INVL Baltic Real Estate, owns all apartments located in this building. Basic information Total area Property market value, 30 June of sq.m EUR 0.35 million

12 2017 INTERIM REPORT REAL ESTATE OBJECTS OWNED BY GROUP COMPANIES IN RIGA (LATVIA) Fig Real estate objects owned by group companies of INVL Baltic Real Estate, AB in Riga (Latvia) DOMMO BUSINESS PARK MANUFACTURING, WAREHOUSE AND OFFICE COMPLEX Dommo Business Park manufacturing/warehouse and office premises complex in Latvia. The area is strategically well-located, to the right of Jelgava road, in front of the intersection with Jurmala - Tallinn bypass. Distance to the centre of Riga and the airport is 13 km, the port - 16 km. The area is suitable for the development of logistics centres. Occupancy on 30 June of %. Address: Stūnyši, Olaines region. AREA 12,800 SQ.M. Basic information Total area Leased area Land area Property market value, 30 June of ,800 sq. m 12,800 sq. m ha EUR 8.1 million

13 2017 INTERIM REPORT 13 II. FINANCIAL INFORMATION AND SIGNIFICANT EVENTS 3 Overview of the Issuer and its group activity 3.1. COMMENT MADE BY INVL ASSET MANAGEMENT REAL ESTATE FUND MANAGER VYTAUTAS BAKŠINSKAS INVL Baltic Real Estate s consolidated net operating income from its property holdings in the first half of 2017 was EUR 1.2 million, or 2.7 per cent more than in the same period of 2016 when it was EUR 1.1 million. The company s consolidated revenue for the first half of 2017 was EUR 3.3 million, up 6.8 per cent from last year s first-half figure of EUR 3.1 million as consolidated leasing income from owned properties grew 6.8 per cent to EUR 1.9 million. INVL Baltic Real Estate s net profit for January-June increased more than 2.5 times on the year to EUR 1.5 million, largely due to a gain of nearly EUR 1 million from asset revaluation. We re pleased that the active work and investments reconstructing the Vilnius Gates business centre have brought the expected results, leading to an increase of about 1 million euros in this property s value. In the second half of the year, once the Vilnius Gates renewal is complete, we ll see the final results of the work done over the past year and a half. We don t intend to stop and will continue working actively to boost the value and leasing income of property holdings. Six-month leasing income for the largest property the company owns the 23,000 sq. m. IBC Business Centre on Šeimyniškių Street in the Lithuanian capital grew 1.3 per cent from the same period last year to EUR 940 thousand. The company s financial results show that active work with property holdings pays off and the chosen operating strategy is correct. Some of what was done in the first half of this year will be reflected in the results later, since most of the new leases and renewal agreements that were signed will take effect in the second half of the year. So the current half-year can be expected to be even more successful for INVL Baltic Real Estate OPERATIONAL ENVIRONMENT During the first half of 2017, the volume of construction works on the Lithuanian commercial real estate market was growing just as the number of transactions continued to increase. Developers were still focusing on developing office buildings in Vilnius and Kaunas. The first half of 2017 saw the completion of four construction projects of new office buildings: the reconstruction of the DNB Bank building on Basanavičiaus g., which now houses the business centre B NORDIC 26; the construction of Duetto, a brandnew office building near Vilnius western bypass (phase one); the completion of the construction of the Maxima LT office building on Naugarduko g.; and the completion of a small-scale office building on Verkių gatvė. These buildings offer 18,000 sq. m of useful office space. The gross area of modern office facilities in Vilnius went up to 645,400 sq. m at the end of the first half of the year. With the expansion of international and domestic companies keeping pace with the new supply, right now the office facility market in the capital city can be considered well-balanced. As companies are actively looking for new facilities in advance and tend to sign early lease contracts, new buildings are already full for the most part. The overall vacancies for office space in Vilnius business centres shrunk from 6.4% to 5.8% during the first half of this year. Vacant class A offices stood at 3.2%, class B 7.1% at the end of the reporting period. Regardless of the current level of tenant activity, new business centres are being launched and announcements of new building projects sometimes force developers to make compromises in terms of rent rates. As a result, they favour well-known and financially strong companies that build a solid neighbourhood and guarantee a stable rent flow. Another factor here is that international companies and strong domestic companies that are on a lookout for larger spaces in business centres are able to negotiate better prices of lease. Whereas smaller companies are in a considerably worse position to negotiate. Basically, the rent rates for premium (class A) office space have remained steady since 2015 and currently are within the range of EUR per sq. m. On the other hand, a downward trend has been observed in the class B office space segment: during the first quarter of the year, the floor of the per-square-meter rent of such facilities went down by around EUR 0.5 and currently is between EUR 8.0 and 13.0 per sq. m. The reason for this is the recent rapid expansion of this segment and the growing competition in this class of buildings. The supply structure is expected to shift significantly in the foreseeable future. In , a much larger amount of premium office space is likely to be launched on the capital city s market: right now, nearly 110,000 sq. m of class A and B offices are

14 2017 INTERIM REPORT 14 being built, of which volume over 70% will be premium office facilities. It is therefore likely that the overall (published and negotiated) rent rates will be adjusted downwards for this segment, too. However, the enduring considerable demand for modern offices is hardly a thing that would allow us to expect radical changes in the rates of class A offices any time soon: the extremely high and specific requirements (location, level of appointment of the building and premises, the layout of the premises, the floor plan, parking facilities, and possibilities for future expansion) posed by large companies leave but a few options to businesses, effectively curbing their negotiating powers. Whereas Kaunas is just preparing to introduce new office buildings to the market. The expected leap in the supply and the competition among the developers are keeping the office rent rates in Kaunas steady. At the end of the first quarter of this year, the rent rates of class A offices in the provisional capital city was EUR per sq. m, class B offices EUR per sq. m. Compared to the capital, Kaunas still offers attractive rates for modern offices, and further developments will depend on the actual demand. It is obvious, that Kaunas has laid a very real foundation for the supply to grow, and the market situation in the nearest future will be largely affected by the amount of willing tenants. Estimating specifically the potential of this city and the fulfilment of the developers expectations will be made possible in the second half of In the segment of lease of warehousing facilities, a slight downward trend in vacancies was observed in Vilnius and Kaunas in 2017, with space available for lease amounting to but a few per cent. Whereas due to facilities that have been vacated and new development projects, the vacancy rate in Klaipėda stood at around 13%. Rent rates in the major cities remain steady with no significant changes expected to happen in the second half of 2017 either. In 2017, developers expect to launch some 59,700 sq. m of new buildings to the Latvian warehousing and logistics market. Some projects are even being developed with no signed lease contracts in place. In 2017, the vacancy rate went up to 6%. The rent rates remained stable, ranging between EUR 3.5 and 4.5 per sq. m in class A facilities near Riga. Sources: KEY FIGURES OF INVL BALTIC REAL ESTATE EUR million Group Managed common area 51,676 sq. m 59,876 sq. m 59,876 sq. m Managed rental area 42,076 sq. m 48,476 sq. m 48,476 sq. m The real estate value Carrying amount of the loans granted for companies in Latvia Cash Other assets Assets Equity Borrowings from credit institutions Borrowings from Invalda INVL Other payables Total equity and liabilities Total equity for one share EUR 0.35 EUR 0.41 EUR 0.48

15 2017 INTERIM REPORT RESULTS OF INVL BALTIC REAL ESTATE EUR million Group Revenue rental income from owned premises rental income from subleased premises other revenue Investment property revaluation Net operating income from owned properties Profit before tax Net profit Earnings per share EUR 0.01 EUR 0.01 EUR SIGNIFICANT ISSUER S AND ITS GROUP EVENTS DURING THE REPORTING PERIOD, EFFECT ON THE FINANCIAL STATEMENT SIGNIFICANT ISSUER S EVENTS On 10 February 2017 it was announced that Egidijus Damulis will leave the investment committee for the real estate investment company INVL Baltic Real Estate, which is managed by INVL Asset Management, as of 13 February this year. Vytautas Bakšinskas and Andrius Daukšas will continue on the committee. On 20 March 2017 INVL Baltic Real Estate announced the consolidated audited results of INVL Baltic Real Estate group of The audited consolidated net profit of INVL Baltic Real Estate group amounted to EUR 4,507 thousand, the revenue was EUR 6,290 thousand for the period of The audited net profit of INVL Baltic Real Estate itself amounted to EUR 4,710 thousand. On 20 March 2017 INVL Baltic Real Estate announced the Initial net asset value, which was EUR 27,633,382 or EUR per share on 30 November The net asset value of the Company was EUR 31,072,202 or EUR per share on 31 December On 11 April 2017 INVL Baltic Real Estate announced decisions of the General Shareholders Meeting. During the meeting the Shareholders were presented with the consolidated annual report of the Company and independent auditor's report on the financial statements, approved the consolidated and companies financial statements for 2016, approved the distribution of the profit of the Company. The shareholders also approved the regulations of the Audit Committee, elected new members of Audit Committee of INVL Baltic Real Estate and approved the remuneration for them. The Amendment of the Services Agreement of special closed-ended type real estate investment company INVL Baltic Real Estate with AB SEB bankas was also approved during the Meeting. Information about convened General Shareholders Meeting was published on 20 March 2017 and supplemented on 24 March On 11 April 2017 INVL Baltic Real Estate announced the annual information (consolidated and Company s financial statements, consolidated annual report) and the confirmation of responsible persons of INVL Baltic Real Estate for the year On 28 April 2017 INVL Baltic Real Estate announced that for 3 months of 2017, the unaudited consolidated net profit of the INVL Baltic Real Estate group was EUR 360 thousand, revenue was EUR 1,669 thousand. On 28 April 2017 INVL Baltic Real Estate announced that the net asset value of the company was EUR 31,431,866 or EUR per share on 31 March On 3 May 2017 INVL Baltic Real Estate announced that has signed the Amendment of the Services Agreement with AB SEB bank according to the decision made on the General Shareholders meeting dated 11 April On 11 May 2017 INVL Baltic Real Estate announced information about the procedure for the payout of dividends for the year 2016.

16 2017 INTERIM REPORT SIGIFICANT GROUP S EVENTS There were no important events in the activities of the real estate companies in The companies performed usual activity during the reporting period. 4 Significant events of the Issuer and its group since the end of the reporting period On 27 July 2017 INVL Baltic Real Estate announced that has signed an agreement on the sale of 3,000 square metres of office and warehouse premises on Kirtimų Street in Vilnius. The value of the transaction is EUR 1 million. The transaction should be completed by the end of September Estimation of Issuer s and Group s activity last year and activity plans and forecasts 5.1. EVALUATION OF IMPLEMENTATION OF GOALS FOR 2016 During the first half of 2017, INVL Baltic Real Estate succeeded to implement the essential goals to improve company s operating results, as well as to launch and carry out the planned restructuring works of Vilnius Gates complex. These should be completed in the third quarter of the year ACTIVITY PLANS AND FORECASTS INVL Baltic Real Estate will continue seeking to earn from investments in commercial real estate, ensuring the growth of rental income and cost optimisation.. Features of the managed assets of INVL Baltic Real Estate make it reasonable to expect continuous growth in the value of assets.

17 2017 INTERIM REPORT 17 III. INFORMATION ABOUT SECURITIES 6 The order of amendment of Issuer s Articles of Association The Articles of Association of INVL Baltic Real Estate may be amended by resolution of the General Shareholders Meeting, passed by more than 2/3 of votes (except in cases provided for by the Law on Companies of the Republic of Lithuania). Actual wording of the Articles of Association is dated as of 10 November 2016, which entered into force after the new share issue placement. The Articles of Association are available on the company s website. 7 Structure of the authorized capital 7.1. SHARE CAPITAL CHANGES Table 7.1. Structure of INVL Baltic Real Estate authorised capital as of 30 June Type of shares Ordinary registered shares Number of shares, units Total voting rights granted by the issued shares, units Nominal value, EUR Total nominal value, EUR Portion of the authorised capital, % 65,750,000 65,750, ,067, All shares are fully paid-up and no restrictions apply on their transfer INFORMATION ABOUT THE ISSUER S TREASURY SHARES INVL Baltic Real Estate or its portfolio companies have not implemented acquisition of shares in INVL Baltic Real Estate directly or indirectly under the order of subsidiary by persons acting by their name. 8 Trading in Issuer s securities as well as securities, which are deemed to be a significant financial investment to the Issuer on a regulated market 8.1. table. Main characteristics of INVL Baltic Real Estate shares admitted to trading Shares issued, units 65,750,000 Shares with voting rights, units 65,750,000 Nominal value, EUR 0.29 Total nominal value, EUR 19,067,500 ISIN code Name Exchange List LT INR1L NASDAQ Vilnius Baltic Secondary list Listing date Included into indexes B8000GI, OMX BALTIC FINANCIALS GI, (SE ) B8000PI, OMX BALTIC FINANCIALS PI, (SE ) B8600GI, OMX BALTIC REAL ESTATE GI, (SE ) B8600PI, OMX BALTIC REAL ESTATE PI, (SE ) OMXBGI, OMX_BALTIC_GI, (SE ) OMXBPI, OMX_BALTIC_PI, (SE ) OMXVGI, OMX VILNIUS_GI, (LT ) Company has signed a market-making agreement with Šiaulių bankas, AB on 1 March Table 8.2. Trading in INVL Baltic Real Estate shares

18 INTERIM REPORT Share price, EUR: open high low medium last Turnover, units 64, , ,035 Turnover, EUR 19, , , Traded volume, units OMXBBGI Change (%) OMXV Change (%) B8600GI Change (%) INR1L Change (%) Fig INVL Baltic Real Estate change of share price and indexes 1 1 OMX index is an all-share index which includes all the shares listed on the Main and Secondary lists on the NASDAQ Vilnius with exception of the shares of the companies where a single shareholder controls at least 90% of the outstanding shares. The OMX Baltic Real Estate GI index is based on the Industry Classification Benchmark (ICB) developed by FTSE Group (FTSE).

19 INTERIM REPORT 19 0,5 0,45 0,4 0,35 0,3 0,25 0,2 0,15 0,1 0, Turnover Share price Fig Change of share price of INVL Baltic Real Estate and turnover 9 Shareholders 9.1. INFORMATION ABOUT COMPANY S SHAREHOLDERS The total number of shareholders in INVL Baltic Real Estate was 3,635 on 30 June There are no shareholders entitled to special rights of control table. Shareholders who held title to more than 5% of INVL Baltic Real Estate authorised capital and/or votes as of 30 June Name of the shareholder or company LJB Investments, UAB code , Juozapavičiaus str. 9A, Vilnius Number of shares held by the right of ownership, units Share of the authorised capital held, % Share of votes given by the shares held by the right of ownership, % Share of the votes, % Indirectly held votes, % Total, % 13,158, Irena Ona Mišeikienė 12,492, Invalda INVL, AB code , Gynėjų str. 14, Vilnius 21,127, Alvydas Banys 3,318, According to section 1 item 6 of article 24 of the Law on Securities of the Republic of Lithuania, Alvydas Banys is considered to hold the voting rights of the controlled company UAB LJB Investments.

20 2017 INTERIM REPORT 20 Alvydas Banys 5.05% Other shareholders 23.81% "Invalda INVL", AB 32.13% "LJB investments", UAB 20.01% Irena Ona Mišeikienė 19.00% Fig. Votes as of 30 June Dividends The General Shareholders Meeting decides upon dividend payment and sets the amount of dividends. The company pays out the dividends within 1 month after the day of adoption of the resolution on profit distribution. Persons have the right to receive dividends if they were shareholders of the company at the end of the tenth working day after the day of the General Shareholders Meeting which issued the resolution to pay dividends. According to the Lithuanian Law on Personal Income Tax and the Lithuanian Law on Corporate Income Tax, 15 % tax is applied to the dividends since The company is responsible for calculation, withdrawn and transfer (to the benefit of the State) of applicable taxes 3. INVL Baltic Real Estate on 15 January 2016 approved a dividend policy which stipulates the yearly payment of dividends per share of no less than EUR 0.012, which is equal to 3% of the offering price. On 11 April 2017, the General Shareholders Meeting of INVL Baltic Real Estate decided to allocate EUR dividend per share. Dividends were allocated to the shareholders, who at the end of the tenth business day following the day of the General Shareholders Meeting that adopted a decision on dividend payment, i.e. on 26 April 2017 were shareholders of INVL Baltic Real Estate. On 11 May 2017 INVL Baltic Real Estate announced that the company started to allocate dividends. Dividends were allocated to those shareholders of the company, who has provided existing bank accounts Table. Indexes related with shares Company s 31 December December June 2017 Net Asset Value per share, EUR Price to book value (P/Bv) Dividend yield * 3 This information should not be treated as tax consultation.

21 2017 INTERIM REPORT 21 IV. ISSUER S MANAGING BODIES 11 Issuer s managing bodies The management of INVL Baltic Real Estate was transferred to the management company INVL Asset Management on 22 December 2016 as soon as Bank of Lithuania granted special closed-ended type real estate investment company INVL Baltic Real Estate the license of closed-ended type investment company. The rights and duties of the Board and the head of the Company were also transferred to the Management Company. The manager of the management company Darius Šulnis,CEO at INVL Asset Management. Darius Šulnis (the chairman), Nerijus Drobavičius and Vytautas Plunksnis are members of the Board of the Management Company since 19 January On 6 May 2016 Egidijus Damulis and Andrius Daukšas were appointed as the Members of the Investment Committee by a decision of the Board of the Management Company. Vytautas Bakšinskas joined the Investment Committee on 2 January He was appointed by the decision of the Board of the Management Company dated 22 December There are 2 members in the Investment committee at the moment: Vytautas Bakšinskas, Andrius Daukšas. Egidijus Damulis was removed from the members of the Investment Committee from 13 February 2017 by the decision of the Board of the Management Company. The Advisory Committee is not formed. Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Participation in other companies Darius Šulnis CEO and the Chairman of the Board of the Management Company INVL Asset Management Duke University (USA). Business Administration. Global Executive MBA. Vilnius University. Faculty of Economics. Master in Accounting and Audit. Financial broker s license (General) No. A109. Since the beginning of the 2015 general director of INVL Asset Management, UAB Invalda, AB President Invalda, AB Advisor. Since May 2013 Invalda INVL, AB President Invalda Real Estate, UAB (current name Inreal Valdymas) Director FBC Finasta, AB Director Personally: 0 units of shares. Together with controlled company Lucrum Investicija: 1,224,371 units of shares, 1.86 % of authorised capital, 3.17 % of votes (including votes granted by the shares transferred by the repurchase agreement). Invalda INVL, AB Member of the Board, the president Litagra, UAB Member of the Board LP grupė, UAB Member of the Board IPAS INVL Asset Management (Latvia) Member of the Supervisory Board AS INVL atklātajs pensiju fonds (Latvia) Member of the Supervisory Board Šiaulių bankas, AB Member of the Supervisory Board

22 2017 INTERIM REPORT 22 Nerijus Drobavičius Member of the Board of Management Company Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Participation in other companies In 1998 graduated Vytautas Magnus University and gained his Bachelor s degree in Business management. Graduated Vytautas Magnus University in 2000 and gained his Master's degree in banking and finance. Since 2015 INVL Asset Management, UAB, Head of Finance and IT department Since 2014 works at Invalda INVL, AB group Independent financial expert CFO in Sanitas Group Sampo Bank. Head of Accounting and Reporting department, later CFO of the bank - IPAS INVL Asset Management (Latvia) Member of the Supervisory Board AS INVL atklātais pensiju fonds (Latvija) Member of the Supervisory Board Andmevara AS - The Chairman of the Supervisory Board Inservis, UAB The Chairman of the Board Imoniu grupe Inservis, UAB The Chairman of the Board Jurita, UAB - The Chairman of the Board Etronika, UAB - Member of the Board INVL Technology, CEF Member of the Investment Committee Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Vytautas Plunksnis Member of the Board of Management Company Graduated the studies in economics at Kaunas University of Technology in 2001, gained Bachelor s degree in Management. Financial broker s licence (General) No. G091. Since INVL Asset Management, UAB, Head of Private Equity Funds Since 2015 Inventio, UAB, Director Since 2014 Consult Invalda, UAB, Director Fund Manager at Invalda INVL, AB Finasta Asset Management, UAB analyst, fund manager, strategic analyst 2004 ELTA redactor (business news) Baltic News Service business journalist Personally: 5,000 units of shares; 0.01% of authorised capital and votes.

23 2017 INTERIM REPORT 23 Participation in other companies IPAS INVL Asset Management (Latvia) Deputy Chairman of the Supervisory Board AS INVL atklātais pensiju fonds (Latvia) Deputy Chairman of the Supervisory Board AS Norway Registers Development Member of the Board NRD, UAB Member of the Board NRD CS, UAB - Member of the Board Algoritmu sistemos, UAB - Chairman of the Board Vernitas, AB Member of the Supervisory Board Investuotoju Asociacija Chairman of the Board INVL Farmland Management, UAB Chairman of the Board INVL Finasta, UAB FMI - Member of the Board Inventio, UAB - director INVL Technology, CEF Member of the Investment Committee Work experience Owned amount of shares in INVL Baltic Real Estate Participation in other companies Vytautas Bakšinskas Member of the Investment Committee Since 2 January 2017 Real Estate Fund Manager at INVL Asset Management director at Dizaino institutas, UAB director at Variagis, UAB director at Riešės investicija, UAB director at Tripolio valda, UAB director at Paralelių valda, UAB director at Dipolio valda, UAB director at Etanija, UAB director at Justiniškių valda, UAB head of Lease department at Inreal valdymas, UAB director at Elniakampio namai, UAB director at Akvilas, UAB director at Aikstentis, UAB director at Trakų kelias, UAB project manager at Naujoji švara, UAB project manager at Sago, UAB project manager at Inreal valdymas, UAB assistant of project manager at Inreal valdymas, UAB - -

24 2017 INTERIM REPORT 24 Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Participation in other companies Andrius Daukšas Member of the Investment Committee Master's degree in banking at the Faculty of Economics of Vilnius University. Financial broker's license (general) No. G311. Since 22 December 2016 Investment Manager at INVL Asset Management 3 January December 2016 deputy director at INVL Baltic Real Estate December January 2016 director at INVL Baltic Real Estate March December 2016 investment manager at Invalda INVL director of the Treasury Department of the bank Finasta an accountant, later - the department manager of securities accounting at FBC Finasta Personally: 25,000 units of shares, 0.04% of authorised capital and votes. Inservis, UAB Member of the Board Imoniu Grupe Inservis, UAB Member of the Board, director Jurita, UAB Member of the Board Kelio Zenklai, UAB Chairman of the Board Informacinio verslo paslaugų įmonė, AB Member of the Board Proprietas, UAB director 12 Information about the Audit Committee of the company. The Audit Committee consists of 2 members. The majority of members shall be independent. The members of the Audit Committee are elected by the General Shareholders Meeting at the proposal of the Company s shareholders or the Management company. The main functions of the Committee are the following: provide recommendations to the Management company with selection, appointment, reappointment and removal of an external audit company of the Company as well as the terms and conditions of engagement with the audit company; monitor the process of external audit of the Company; monitor how the external auditor and audit company follow the principles of independence and objectivity; observe the process of preparation of financial reports of the Company; monitor the efficiency of the internal control and risk management systems of the Management company directly related to the management of the Company. Once a year review the need of the dedicated internal audit function for the Company within the Management company; monitor if the Management company gives due consideration to the recommendations or comments provided by the audit company regarding management of the Company. The General Shareholders Meeting which took place on 11 April 2017 decided to elect Danguolė Pranckėnienė, the partner at Moore Stephens Vilnius, UAB, and Tomas Bubinas, CFO at Biotechpharma UAB to the Audit Committee of INVL Baltic Real Estate for the 4 (four) years term of office. Both members are independent.

25 2017 INTERIM REPORT 25 The term of office Since 2017 until 2021 Danguolė Pranckėnienė Independent Member of the Audit Committee Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Vilnius Gediminas Technical University, Master of Business Administration Vilnius University, Master of Economics. The International Coach Union (ICU), professional coucher name, license No. E-51. Lithuanian Ministry of Finance, the auditor's name, license No since 1997 the Partner at Moore Stephens Vilnius, UAB Audit Manager, Deloitte & Touche Lecturer, Vilnius Gediminas Technical University Lecturer, Vilnius University - The term of office Since 2017 till 2021 Tomas Bubinas Independent Member of the Audit Committee Educational background and qualifications Work experience Owned amount of shares in INVL Baltic Real Estate Baltic Management Institute (BMI), Executive MBA Association of Chartered Certified Accountants. ACCA. Fellow Member 1997 Lithuanian Sworn Registered Auditor Vilnius University, Msc. in Economics Since 2013 Chief Operating Officer at Biotechpharma, UAB Senior Director, Operations. TEVA Biopharmaceuticals (USA) CFO for Baltic countries, Teva Pharmaceuticals m. CFO, Sicor Biotech Senior Manager, PricewaterhouseCoopers Senior Auditor, Manager, Coopers & Lybrand. -

26 2017 INTERIM REPORT Information on the Issuer s payable management fee, the amounts calculated by the Issuer, other assets transferred and guarantees granted to the Managing bodies and company providing accounting services After the Bank of Lithuania issued the closed-ended type investment company operating license for INVL Baltic Real Estate on 22 December 2016, the rights and duties of the Board and the head of the Company are implemented by the asset management company INVL Asset Management, which took over the management of INVL Baltic Real Estate. The management fee payable to the Management Company (hereinafter Management Fee) is the remuneration for management of the assets of the Company, which shall be payable for each quarter of a calendar year. The Management Fee for a full quarter of a calendar year shall be 0.375% of the weighted average capitalisation of the Company. The Performance Fee shall be additionally paid to the Management Company under the procedure set in the Articles of Association. During the reporting period the Management fee payable to the Management Company was EUR 127 thousand. The members of the Board and the members of the investment committee of the Management Company do not receive remuneration for these duties. They are paid the salary according to the employment contract with the Management Company. During the reporting period company s managing bodies, which are mentioned in the section 11 of the report, were paid EUR 306 of dividends, net of tax. Information on the paid dividends to the related parties of the managing bodies is disclosed in consolidated interim condensed financial statements for the six months of There were no assets transferred, no guarantees granted, no bonuses paid and no special payouts made by the company to its managing bodies. The managing bodies were not granted with bonuses by other companies of INVL Baltic Real Estate group. During the reporting period INVL Baltic Real Estate Group and the Company for the company providing accounting services respectively paid EUR 5 thousand and EUR 4 thousand during the reporting period (in 2016 respectively paid EUR 12 thousand and EUR 10 thousand, in 2015 respectively paid EUR 13 thousand and EUR 9 thousand; in 2014 respectively paid EUR 9 thousand and EUR 7 thousand).

27 N BALTIC REAL ESTATE * fld 'dg 2017 TNTERTM REPORT I V. OTHER INFORTMATION 14 Agreements with intermediaries on publictrading in securities INVL Baltic Real Estate has signed these agreements with this intermediary:. Siauliu bankas (Seimyniskiu str. 1A, Vilnius, Lithuania. tel ) - the agreement on management of securities accounting, the market maker services agreement and service agreement on the payment of dividends. o AB SEB bankas (Gedimino pr. 12, Vilnius, Lithuania tel ) - agreement on depository services. 15 lnformation on lssuer's branches and representative offices INVL Baltic Real Estate has no branches or representative offices. 16 A description of the principal risks and uncertainties During the six months of 2017 of this year there were no material changes from the information about the principal rinks and uncertainties disclosed in the latest annual report. 17 Significant investments made during the reporting period During the first half of 2017 the main INVL Baltic Real Estate investments were made to reconstruct and reorganize the Vilnius Gates complex. The investments amounted to EUR 0.7 million. Completion of this phase of reconstruction is planned in the 3rd quater ol After the completion, the complex occupancy will exceed 90%. 18 lnformation about significant agreements to which the issuer is a party, which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder There are no significant agreements of the company which would come into force, be amended or cease to be valid if there was a change in issuer's controlling shareholder. 19 lnformation on the related parties'transactions lnformation on the related parties' transactions is disclosed in 't 6 point of explanatory notes of consolidated interim condensed financial statements for the six months ended 30 June Real estate fund manager of the Management Company INVL Asset Management Vytautas BakSinskas INVL Baltic Real Estate code , Gyndjq sk. 14. Vilnius INRlL Nasdaq Bllti.:1!rl