EPH European Property : Semi-Annual Report 2022

SEMI-ANNUAL REPORT 2022

MANAGEMENT REPORT

1. STATEMENT OF THE BOARD OF DIRECTORS

1. KEY PERFORMANCE INDICATORS

1. PROPERTY REVIEW

1. CORPORATE GOVERNANCE

EXTERNAL REPORTS

1. INDEPENDENT AUDITOR'S REPORT

1. REPORTS EXTERNAL VALUERS

FINANCIAL REPORT

1. INTERIM CONDENSED CONSOLIDATED ACCOUNTS (UNAUDITED)

1. NOTES TO THE INTERIM CONDENSED CONSOLIDATED ACCOUNTS

GENERAL INFORMATION

80 CORPORATE DETAILS

STATEMENT OF THE BOARD OF DIRECTORS	01
MANAGEMENT REPORT

DEAR

SHAREHOLDERS

The current market environment poses great challenges for the entire real estate industry. We are confronted with various trouble spots around the world - the coronavirus pandemic, the conflict in the Ukraine, combined with surging inflation and the resulting interest rate increases.

Especially the sanctions against Russia, which have changed the operating environment in Russia and the relationships between Russia and Europe, do affect EPH and its business as a part of our real estate portfolio is in Moscow. However, due to our strong portfolio in Western Europe and the fact that all our properties are operating independently from each other, our business is until now only affected to a limited extent.

Due to the quality of our assets and our professional asset management, in the first half of 2022 we demonstrated once again the sustainability of our portfolio - the asset value of the Western European portfolio has increased by a solid 4% since year end 2021 as well as the net rental income of EPH Group in Western Europe has increased from EUR 8.5 million to EUR 11.5 million for the first six months of 2022 compared to the same period in 2021 - mostly because the properties QBC 1, 2 and 7 started to generate full income after the expiration of rent-free periods.

Despite the ongoing conflict in the Ukraine, also our real estate portfolio in Russia still shows a stable rental income. Nevertheless, our properties Berlin House and Geneva House are rented mostly to international tenants whose operational business in Russia remains restricted and we expect at least a shift in the tenant portfolio over the coming years. Furthermore, and as expected, the unstable political and economic situation in Russia has affected the independent valuations of our Russian portfolio. The values of the Russian properties decreased substantially by approx. 30% in functional currency (RUB) - mainly due to the RUB strengthening against US$ - for Berlin House and Geneva House which are valued in US$, but also due to the use of more conservative valuation assumptions to reflect the changes and uncertainties of the market. This factor was the reason for the loss of EUR

37.1 million reported by EPH for HY 2022. However, since the rouble has strengthened considerably the Russian properties show in the Company's consolidated financial statements an increase in asset value in EUR by 21%.

EPH continues to monitor geopolitical developments and the economic environment to evaluate how the situation is evolving, and to assess what actions to take. Among other things which need to be closely monitored, current prohibitions make transferring funds between EPH Russian entities and the EPH holding company in Cyprus difficult. As a measure to improve liquidity, in HY 2022, a total of EUR 103 million was raised from two EPH shareholders and the interest rates on the issued bonds were reduced.

The decision to not only invest in Russia but to geographically diversify the real estate portfolio to balance the uncertainties in Russia with investments in strong and stable economies has paid off. These investments in high-quality properties in prime locations in Europe form a stable basis for sustainable values, long-term capital preservation and stable risk-adjusted revenues.

Over the last few months, we have taken great strikes forward with the refurbishment of LASS 1 office building in Vienna. Despite the difficult market environment, reconstruction measures have only been slightly delayed, and we are close to completing the refurbishment. The building offers its tenants modern workspaces on nine floors with a total area of almost 45,000 square metres. In July 2022, the first tenant, Wiener Gesundheitsverbund ("Vienna Healthcare Group"), has moved into the building and will be followed by Wiener ArbeitnehmerInnen Förderungsfonds ("Vienna Employment Promotion Fund") in October 2022 as well as ISS Austria in December 2022. ISS Austria will not only be a tenant but will also provide the facility management for the property which as such is expected to have a positive effect on the quality of the building, the entire process flow and on communication with tenants.

Following the fact that most of our assets are in Western Europe and to underline EPH's strategic focus, the Company was re-domiciled to Cyprus, a member of the European Union and Euro zone as well as changed its functional currency and presentation currency of EPH Group's financial statements from US$ to EUR effective as of 1 January 2022. The change increases transparency and allows EPH to better reflect the performance of the asset portfolio as 60% of the portfolio is in Germany and Austria. Fur- thermore, as per the approval of the Company's shareholders, the currency of EPH's share capital has been changed and the Company's shares listed on the SIX Swiss Exchange are traded in euros since 10 June 2022. In addi- tion, the currency of the Company's bonds issued on the stock exchange has been changed to euros after approval from all bondholders. Together with the mentioned factors the conversion from US$ to euro reduces the currency fluctuations in the Group's financial result.

Despite the challenging market situation, we are optimistic about the future development of EPH. The performance of our European portfolio gives us good grounds to be confident. Our core strategic focus will remain the office asset class in the main cities of Europe while at the same time we believe that hotels in excellent locations and operated by large hotel chains also offer great potential. All in all, there are still very good opportunities in our target markets, particularly in Germany and Austria, where demand for modern spaces in very good locations remains high. We will carefully examine market opportunities in order to continue to position the real estate portfolio for long- term stability in income and value growth.

We would like to thank our shareholders for the trust they continue to place in our Company, and our business partners for their exceptional collaboration.

For the Semi Annual Report, we have opted to only focus on what has changed during the period under review. If you are looking at EPH European Property Holdings the first time, please be sure to also have the 2021 Annual Report on hand.

Sincerely,

The Board of Directors

September 2022

MANAGEMENT

REPORT