TMM Real Estate Development : Annual consolidated financial statements as at 31 December 2021

TMM Real Estate Development plc

Consolidated Financial Statements

As at 31 December 2021 and for the year then ended

with Independent Auditors' Report

CONTENTS

	Pages
Board of Directors and professional advisors	a
Management Report	b‐e
Independent auditor's report	f‐j
Consolidated statement of profit or loss and other comprehensive income	1
Consolidated statement of financial position	2
Consolidated statement of changes in equity	3
Consolidated statement of cash flows	4
Notes to the consolidated financial statements	5‐39

TMM Real Estate Development plc

BOARD OF DIRECTORS AND PROFESSIONAL ADVISORS

BOARD OF DIRECTORS

Mykola Tolmachov

Larysa Chyvurina

SECRETARY

Inter Jura CY (Services) Limited

INDEPENDENT AUDITORS

SPL Audit (Cyprus) Limited

Certified Public Accountants and Registered Auditors

13 Kypranoros str, 2nd Floor, Office 201,

P.O.Box 28860, CY ‐ 2083,

1061 Nicosia , Cyprus

BANKERS

Bank of Cyprus Public Company Ltd

JSC "State savings bank of Ukraine"

PJSC "Bank Credit Agricole"

JSC "UKRSIBBANK"

JSC CB PRIVATBANK

JSC "The State Export‐Import Bank of Ukraine"

JSC "FUIB"

RAIFFEISEN BANK JSC

JSC ALFA‐BANK

REGISTERED ΟFFICE

1, Lampousas Str.,

1095, Nicosia,

Cyprus

a

TMM Real Estate Development plc

CONSOLIDATED MANAGEMENT REPORT

The Board of Directors of TMM Real Estate Development plc (the ''Company'') presents their report together with the audited consolidated financial statements of the Company and its subsidiaries (collectively referred to as "the Group") to the shareholders for the year ended 31 December2021.

PRINCIPAL ACTIVITIES

The principal activities of the Group are the construction and development of residential and business properties mainly in Kyiv and Kharkiv regions of Ukraine.

EXAMINATION OF THE FUTURE DEVELOPMENT,POSITION AND PERFORMANCE OF THE ACTIVITIES OF THE GROUP

The Group's revenue for the year ended 31 December 2021 amounted to USD 6 576 thousand (2020: USD 8684thousand).

As at 31 December 2021 the Group's current liabilities exceeded its current assets by USD 5156thousand (2020: USD 4387 thousand). In addition, during the year ended 31 December 2021, the Group generated a net income of USD 124 thousand (2020: net income of USD 326 thousand).

The decline in market liquidity and purchasing power affected the Group's ability to generate sufficient cash flows from operating activities to repay its debt when it fallsdue.

The Board of Directors has assessed the risks set out in this report and believe that the step that were present in a country specific environment. To mitigate risks that are appropriate and reduce their material adverse effect on the financial performance and financial position of the Group. Therefore:

1. the current financial position, as presented in the consolidated financial statements is considered acceptable under the present circumstances;
2. the Board of Directors does not expect major changes in the principal activities of the Group in the short term.

FINANCIAL RESULTS AND DIVIDENDS

The Group's results for the year ended are set out on page 1.

The Board of Directors does not recommend for the dividends to be paid. Net result for the year is transferred to reserves.

MAIN RISKS AND UNCERTAINTIES

Main risks and uncertainties faced by the Group are:

(i) those related to the political and economic unrest in Ukraine.

The Group's operations are primarily carried out in Ukraine. The political and economic situation in Ukraine has been subjected to significant turbulence in recent years due to the political unrest and military operations in the east. Therefore, operations in the country involve risks that do not typically exist in other markets.

Ukraine has continued to limit its economic ties with Russia, taking into account the annexation of Crimea, the autonomous republic of Ukraine, and armed conflict in certain parts of Luhansk and Donetsk regions. Amid these events, the Ukrainian economy has demonstrated further refocusing on the European Union ("EU") market, realizing the potential of established Deep and Comprehensive Free Trade Area ("DCFTA") with EU, thus effectively responding to mutual trade restrictions between Ukraine and Russia.

In 2020 and 2021 the Ukrainian economy was influenced by certain negative trends, namely: a decline in industrial output, certain instability due to reforms and new legislative initiatives as a result of changes in political power in Ukraine. These factors affect business activity and create risks unusual for markets with a stable economic environment, cause an unfavourable investment climate and lead to an economic slowdown. The inflation rate in Ukraine in 2021 increased significantly up to 10.0% mainly driven by the increase of oil and other raw material prices on the world market (2020: 5.0%). On the other hand, the national currency has strengthened during 2021 (hryvnia exchange rate against US dollar as of 31 December 2020 - UAH/USD 28.2746; as of 31 December 2021 - UAH/USD 27.2782).

b

TMM Real Estate Development plc

CONSOLIDATED MANAGEMENT REPORT

At the end of 2019, news about the COVID‐19 coronavirus arrived from China for the first time. In early 2020, the coronavirus spread around the world and its negative impact gained momentum. The global spread of COVID‐19 has caused significant instability, uncertainty and economic downturn in Ukraine and the world throughout 2020 and 2021. The coronavirus has spread to more than 200 countries and continues to have a negative impact on the economic situation and the healthcare sector. There is considerable uncertainty about the extent to which COVID‐19 will continue to spread, as well as the extent and duration of governmental measures to slow the spread of the coronavirus, such as quarantine, remote work, suspension of business operations, and other restrictions. The Company has taken a number of precautions to minimize risks to its employees, business and working communities, including the organization of remote workplaces and the provision of means of individual protection to its employees. However, the Company's management cannot guarantee that these actions will be effective and sufficient to avoid problems in the Company's operations in the future.

On 24 February 2022, russian federation in cooperation and using the territory of Belarus began full‐scale military invasion into Ukraine which is the continuation of the russian‐Ukrainian war which was started by russia with annexation of Crimea at the beginning of 2014 and military operation in Luhansk and Donetsk regions since April 2014.

As a result of the full‐scale invasion, the military actions took place in the Northern, Eastern and Southern Ukraine. The airspace was closed for the civil aviation; military and civil infrastructure are regularly subject to missile and artillery strikes. Consequently, on 24 February 2022, in accordance with the Decree of the President of Ukraine №64/2022 "On Introduction of Martial Law in Ukraine", the martial law was introduced in Ukraine for 30 days. Afterwards, the martial law regime was extended to November 2022.

During late March and April 2022 Ukraine regained control over Kyiv, Zhytomyr, Chernihiv, Sumy and partially Kharkiv and Mykolayiv regions. In September 2022 Ukraine secured liberation of almost the entire Kharkiv region and portions of Donetsk region which was followed in November 2022 by liberation of western part of Kherson region including the city of Kherson, thus effectively limiting the area of russian military invasion to several regions in Southern and Eastern Ukraine.

Despite the martial law and ongoing hostilities in different regions of Ukraine the Group continues its activities in its main markets in Kyiv and Kharkiv regions which were liberated by the Ukranian Armed Forces as of the date of issuance of these consolidated financial statements. Mentioned regions were significantly affected by the russian invasion but the Group continued its business without suffering any major losses. The Group expects that the effect of the russian invasion on its business will be limited.

However, it should be noted that the continuing war and limitations imposed by the martial law still can adversely affect the Group's ability to continue its business activities. Further development of military, political and economic situation depend on the joint efforts of Ukraine and its partners and worldwide community overall but as of the day of issuance these consolidated financial statements it is very hard to predict how the war will end, its possible consequences and influence on Ukraine as a state as well as on companies and organizations and business community in Ukraine and Europe.

Management monitors developments in the current environment and takes, where necessary, all measures to minimise any negative outcomes to the best of its abilities. Subsequent unfavorable events in the battle field, as well as political, macroeconomic and / or international trade environment that can adversely affect the financial position and results of the Group are impossible to predict at the moment.

Management believes it is taking appropriate measures to support the sustainability of the Group's business. In the current circumstances, a continuation of the current unstable business environment could have a negative effect on the Group's results and its financial position in a manner not currently determinable. These consolidated financial statements reflect management's current assessment of the impact of the Ukrainian business environment on the operations and the financial position of the Group. However, future business environment may differ from management's assessment.

1. real estate market risk in Ukraine
   Starting from the last quarter of 2008, the Ukrainian residential and industrial property markets have suffered a significant fall in demand following the overall macroeconomic turmoil. This resulted in weak liquidity and poor conditions prevailing in the Ukrainian property market. The market prices stabilized in 2010‐2013 and increased throughout 2014 ‐ 2021 in UAH terms due to the depreciation of UAH against US Dollar, however, the russian military invasion adversely affected the overall real estate market, and despite certain

c