Consolidated Statement of Cash Flows

The notes on pages 17 to 39 are an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

For the year ended 31 December 2021

1)    General information

Black Sea Property PLC (the "Company") was originally incorporated in Jersey and re-domiciled to the Isle

of Man with effect from 20 July 2016 and continues under the Isle of Man Companies Act 2006 with

registered number 013712V.

The Company seeks to generate capital gains through the development, financing and sale of property in Bulgaria, including the prime areas of Bulgaria's Black Sea coast, the ski resorts and the capital, Sofia. The Company has five wholly owned Jersey subsidiaries. In 2020 the parent-company purchased the ECDC group, including entities in Cayman Islands, Malta, Cyprus, Romania and Bulgaria. This ECDC group was subsequently sold in the current year. The financial statements represent the financial position and effects of the operations of the Company and its subsidiaries (collectively referred as the "Group").

2)    Summary of significant accounting policies

a)         Basis of preparation

The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied throughout the year, unless otherwise stated.

The financial statements have been prepared on a going concern basis under the historical-cost convention as modified by the revaluation of financial assets held at fair value through profit or loss and investment properties that have been measured at fair value.

Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations as applicable to an Isle of Man company under the Companies Act 2006.

Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors, which are believed to be reasonable under the circumstances, and are reviewed on an on-going basis. The Directors believe that the estimates utilised in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates. The most significant accounting estimate affecting the financial statements is the valuation of investment property (see note 3).

 b)        Standards and amendments which are first effective for the period beginning 1 January 2021

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

c)         New standards, amendments and interpretations issued but not yet effective and not early

adopted

A number of new standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.

·      Amendments to IAS 12 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction. Effective date for annual periods on or after 1 January 2023.

Effective date for annual periods on or after 1 January 2023.

d)         Basis of consolidation

The financial statements comprise the results of the Company and its subsidiaries as set out in note 15. Subsidiaries in which the Company has the ability to exercise control are fully consolidated. Control is defined as having exposure, or rights, to variable returns due to involvement in an investee and the ability to affect those returns.

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. The accounting policies of the subsidiaries are consistent with those of the Company.

e)         Going concern

The Group had €5,232,940 current assets at 31 December 2021, the majority of which are trade receivables, cash and cash equivalents and other receivables. As part of their going concern assessment, the Board of Directors have reviewed cash flow forecasts for the 12 months from the date these financial statements were signed and with support by the shareholders, they believe that the group is able to continue as a going concern at least for the next 12 months from date of signing. Further details are given in note 25.

Accordingly, the Directors have a reasonable expectation that the Company and the Group will continue in operational existence for the foreseeable future, and for a period of at least 12 months from the date of signing of these financial statements. Therefore, the financial statements have been prepared as a going concern.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

f)          Functional and presentation currency

(i)         Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The consolidated financial statements are presented in Euros, which is the Company's presentational currency. The functional currency of each entity within the Group is a key judgement of management and the Directors. This judgement prioritises primary factors, such as the source of competitive forces and the denomination of sales prices and input costs, over secondary considerations such as the source of financing, in accordance with IAS21. These considerations indicate that the functional currency of the Bulgarian entities is Bulgarian Lev and the functional currency of the holding companies is the Euro.

(ii)        Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary items carried at fair value, which are denominated in foreign currencies, are translated at the rates prevailing at the date when the fair value was determined, and the gain or loss is recognised in the profit or loss.

(iii)       Foreign operations

The results and financial position of all the foreign entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·       all resulting exchange differences are recognised as a separate component of Other Comprehensive Income.

When a foreign operation is sold, such exchange differences are recognised in the Consolidated Statement

of Comprehensive Income as part of the gain or loss on sale.

g)         Fair value measurement principles

The Group measures its investments in properties at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The fair value for financial instruments traded in active markets at the reporting date is based on their mid quoted price or binding dealer price quotations, without any deduction for transaction costs. Securities defined in these accounts as 'listed' are traded in an active market.

The valuations of investment properties are performed by an external accredited independent valuer with recognised and relevant professional qualifications and with recent experience in the location and category of

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

g)         Fair value measurement principles (continued)

the investment property being valued. The valuations are prepared in accordance with the RICS Valuation - Global Standards, which incorporate the International Valuation Standards ("IVS") and the RICS UK Valuation standards (the "RICS Red Book"), as set out by the International Valuation Standards Council ("IVSC"), taking into consideration the relevant IFRS 13 requirements. In arriving at their estimates of market values, the valuers have used their market knowledge and professional judgement and not only relied on historical transactional comparables. Properties are valued annually.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

·      Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

h)         Impairment of financial assets

The Group assesses at each reporting date whether a financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets' carrying amount and the present value of estimated future cash flows discounted using the asset's original effective interest rate.

i)          Interest income

Income on investments is recognised on an accrual basis.

j)          Revenue recognition

Revenue includes mainly fees from camping reservations. Such fees are recognised in income when received and in the period that the company reservation has occurred.

k)         Expenses

Expenses are accounted for on an accrual basis. The Group's property operating expenses, administration fees, finance costs and all other expenses are charged to the profit or loss. Transaction costs directly attributable to the purchase of investment property are included within the cost of the property.

l)          Loans payable at amortised cost

Loans payable are recognised on an amortised cost basis. Loans payable are recognised when cash is received from lenders and are derecognised when the cash, and related interest, has been repaid. Loans payable are initially recorded at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

m)        Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash held at the bank and demand deposits.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

n)         Trade and other receivables

Trade receivables are non-derivative financial assets with fixed or determinable payment terms that are not quoted in an active market. The carrying value of trade receivables approximates their fair values. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables.

o)         Investment properties

Property that is held for rental yields or for capital appreciation or both is classified as investment property. Investment property comprises freehold land, freehold buildings, and land held under long term operating leases. Investment property is measured initially at its cost, including related transaction costs and subsequently revalued annually to fair value.

Investment property that is being redeveloped for continuing use as investment property or for which the market has become less active continues to be measured at fair value.

Investment properties are accounted for on completion of contract when ownership is recorded in the trade registry.

p)         Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax is payable on taxable profits for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Current taxes include irrecoverable withholding tax on the interest receivable on loans from the Company

to its Bulgarian subsidiaries.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be sufficient profits from which the future reversal of the temporary differences can be deducted.

q)         Trade and other payables

Trade and other payables are recognised at amortised cost and relate to amounts accrued in the normal course of business which are payable within one year.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

r)          Share capital

Ordinary share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are deducted from the proceeds of issue and shown as a deduction to reserves.

Founder shares

Founder shares are classified as equity.

s)         Acquisition of businesses

The acquisition method of accounting is used to account for business combinations by the Group.

The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred.

t)          Disposal of businesses

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognized in profit or loss.

u)         Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another.

(i) Financial assets

Financial assets are classified at initial recognition. The classification of financial assets at initial recognition that are debt instruments depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income ("OCI"), it needs to give rise to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

Classification and measurement are based on both whether contractual cash flows are solely payments of principal and interest; and whether the debt instrument is held to collect those cash flows. In the case of the Company or Group, all financial assets meet this criteria and so are held at amortised cost.

Impairment of financial assets

IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses ("ECLs") - the ECL model. This replaces IAS 39's 'incurred loss model'.

ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate ("EIR").

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

Impairment of financial assets (continued)

The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a '12-month ECL'). For those credit exposures for which there has

been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a 'lifetime ECL').

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.

It is the Group's policy to measure ECLs on such instruments on a 12-month basis.

(ii) Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at amortised cost. The Group's financial liabilities include trade and other payables and loans.

Subsequent measurement

Loans and borrowings and trade and other payables

After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss and OCI when the liabilities are derecognised, as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income.

This category generally applies to trade and other payables.

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

v)         Intangible assets

Intangible assets include rights under a concession agreement. They are accounted for using the cost model. The cost comprises discounted cash flows of the future payment according to the concession agreement.

After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment losses. Impairment losses are recognized in the statement of profit or loss and other comprehensive income for the respective period.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

v)         Intangible assets (continued)

Subsequent expenditure on an intangible asset after its purchase or its completion is expensed as incurred unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured reliably and attributed to the asset. If these two conditions are met, the subsequent expenditure is added to the carrying amount of the intangible asset.

Residual values and useful lives are reviewed at each reporting date.

3)    Significant accounting judgements, estimates and assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The Group based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

A key judgement area for the Group is the valuation of investment properties. External independent valuers assessed the fair value of investment properties. The valuations are performed by a recognised valuer with a relevant professional qualification and recent experience in the location and category of the investment properties as described in note 2g. Details of investment properties held at fair value can be found in note 9.

The investment properties are valued annually. The Directors consider any relevant movements in property markets that may impact the carrying values of the property held between the date of the last valuation

and the date of financial statements.

4)    Net operating income

All income during the year is primarily due to camping reservations from CSB - see note 8.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

5)    Administration and other expenses

In 2021, key management personnel comprise the Board (2020: The Board). The Board's compensation

comprised Directors' fees only during the year, the amount of which is summarised within the Directors'

Report.

6)         Disposal of ECDC group

On 30 September 2021, the Company successfully completed the disposal of 100% of European Convergence Development (Cayman) Limited ("ECD Cayman") and ECD Management (Cayman) Limited ("ECD Management"). The consideration receivable for ECD Cayman and ECD Management in total is €4,500,000. Both companies were subsidiaries of Black Sea Property PLC.

The fair value of assets and liabilities disposed were as follows:

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

The profit on disposal of the ECD Cayman group is presented as follows:

7)    Finance income/(expense)

The following amounts have been included in the Consolidated Statement of Comprehensive Income line for the reporting periods presented:

*The interest on borrowings relates mainly to the secured debt funding on note 14).

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

8)    Taxation

Isle of Man

There is no taxation payable on the Company's or its Jersey subsidiaries' results as they are based in the Isle of Man and in Jersey respectively where the Corporate Income Tax rates for resident companies are 0% (2020: 0%). Additionally, neither the Isle of Man nor Jersey levies tax on capital gains.

Consequently, shareholder's resident outside of the Isle of Man and Jersey will not incur any withholding tax in those jurisdictions on any distributions made to them.

Bulgaria

Subsidiaries of the Company incorporated in Bulgaria are taxed in accordance with the applicable tax laws of Bulgaria. The Bulgarian corporate tax rate for the year was 10% (2020: 10%).

Cyprus

Subsidiaries of the Company incorporated in Cyprus are taxed in accordance with the applicable tax laws of Cyprus. The Cyprus corporate tax rate for the year was 12.5% (2020: 10%).

Malta

Subsidiaries of the Company incorporated in Malta are taxed in accordance with the applicable tax laws of Malta. The Malta corporate tax rate for the year was 35% (2020: 35%).

No deferred tax assets are recognised on trading losses in the subsidiary companies as there is significant uncertainty as to whether sufficient future profits will be available in order to utilise these losses.

A reconciliation of the tax charge for the year to the standard rate of corporation tax for the Isle of Man of 0% (2020: 0%) is shown below.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

9)    Investment properties

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

Upon the prior year purchase of ECD group, the group acquired three plots in Plovdiv with a fair value of €1,472,142 (through European Convergence Development (Malta) Limited) and two plots in Burgas with a fair value of €3,364,000 (through Targovski Park Kraimorie).

The fair value of the Tsaratsovo Plovdiv properties was measured at the most recent sale prices.

With the current year sale of the ECD group, the group disposed of the three plots in Plovdiv (through European Convergence Development (Malta) Limited) and the two plots in Burgas with a fair value of €4,836,142.

The valuations of the other Group properties at 31 December 2021 and 31 December 2020 were based on the most recent independent valuation received for each property. The valuations were performed by external accredited independent valuers with recognised professional qualifications and with recent experience in the location and category of the investment properties being valued.

The fair value of completed investment property has been determined on a market value basis in accordance with the RICS "Red Book". In arriving at their estimates of market values, the valuers have used their market knowledge and professional judgement, historical transactional comparables and discounted cash flow forecasts. The highest and best use of the investment properties is not considered to be different from its current use.

The cost of the investment properties comprises their purchase price and directly attributable expenditure. Directly attributable expenditure includes professional fees for legal services and stamp duty land tax.

10)   Intangible assets

At the end of 2020, after participating in an open concession award procedure, the Group through Camping South Beach received the concession rights over the sea beach "Camping Gradina". During the active summer season of 2021 the beach is managed by CSB under the terms of a lease agreement. The concession agreement entered into force on 17.10.2020, and at the beginning of 2021 the handover of the sea beach by the grantor Ministry of Tourism to the concessionaire was carried out. The term of the contract is 20 years. The concession contract of CSB grants the right to operate the sea beach, performing alone or through subcontractors providing visitors to the sea beach of the following services: beach services, including the provision of umbrellas and sunbeds, services in fast food restaurants, sports and entertainment services, water attraction services, health and rehabilitation services and other events, after prior agreement with the grantor. A condition for operation of the concession site is the implementation of mandatory activities, which include provision of water rescue activities, security of the adjacent water area, health and medical services for beach users, sanitary and hygienic maintenance of the beach, maintenance for use of the elements of the technical infrastructure, the temporary connections, the movable objects, the facilities and their safe functioning.

In 2020 the Group paid the first due concession fee, which provides the period from the date of entry into force of the concession agreement until the end of the same calendar year and the period from January 1 of the last calendar year in which the concession agreement is valid until the date upon expiration of the contract.

According to the financial model presented by the Company, which is accepted by the grantor and is an integral part of the concession agreement, for the concession period the Group will make additional investments related to the implementation of mandatory activities and investments to improve access to the beach. After the expiration of the concession contract, all constructed sites remain the property of the grantor. The activities related to the operation of the concession site are performed by the concessionaire at his risk and at his expense. The cost of the acquired intangible assets was €655,876 and no amortization expenses were recognized in 2020. During the year, the acquired intangible asset was amortized by €142,499.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

11)   Trade and other receivables

*All amounts are due within one year. The expected credit losses (ECL) for this amount is nil.

12)   Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash held at the bank and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. € 83,726 cash are restricted according to the bank loan agreement with Unicredit.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

13)   Trade and other payables

Non-current trade and other payables can be presented as follows:

The current trade and other payables can be presented as follows:

14)   Bank loans

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

(a)        In October 2017, the Company entered into a secured debt funding of €7 million from UniCredit Bulbank AD ("UniCredit"), a leading Bulgarian commercial bank which was used to complete the acquisition of the Ivan Vazov 1 Building. The debt funding from UniCredit is secured by a commercial mortgage on the property valued at €11,150,000 (see note 9). The term of the debt funding is thirty-six months from date of execution of the loan documentation. The repayment shall be made as a one-off payment on the repayment deadline. The company renegotiated the terms of the loan, extending the repayment period until 30 November 2033 and changed the margin to the interest rate to 2%.

The interest on the loan is now the internal interest percentage by the bank plus 2.00% (2020: 3%).

(b)        Central Cooperative bank loan and overdraft

(i)         This is an overdraft with Central Cooperative Bank. The interest on the account is 4% and was repayable on 24 June 2020 however the terms of the contract were extended to 24 June 2021. At the date these financial statements were signed the Company made an extension of the credit repayment period by 12 months.

(ii)         The interest rate on the overdraft and the investment loan is 3.6%. The maturity date for both the overdraft and the investment loan is 21 January 2028.

In March 2020, the Group successfully negotiated reduction of the interest rates on the loans due to Central Cooperative Bank to 2.8%. The loan is secured by the commercial property of South Beach (Gradina) Camp which includes all the tangible fixed assets of the property along with the mortgage on the land.

In 2020, in connection with the Covid-19 pandemic and the effects on the business environment in Bulgaria, the Governing Council of the Bulgarian National Bank (BNB) approved the implementation of a debt moratorium with a limited duration, allowing for changes in the principal repayment schedule and / or interest on bank loan liabilities, without changing key parameters of the loan agreement. The Group took advantage of this opportunity for debt substitution agreements for the investment loan one of the overdrafts. With annexes from 12.06.2020 and 31.12.2020 a grace period was determined for the due interest from May 2020 to January 2021. The term of repayment of the loans remains unchanged.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

15)   Details of Group undertakings

The Group holds 20% or more of the nominal value of any class of share capital in the following investments:

BSPF (Property 3) Limited and BSPF (Property 6) Limited are dormant companies.

16)   Issued share capital

The Founders shares do not carry any rights to dividends or profits and on liquidation they will rank behind Shares for the return of the amount paid up on each of them. The shares carry the right to receive notice of and attend general meetings, but carry no right to vote thereat unless there are no Participating Shares in issue.

During the prior year, the Company successfully completed a share raise of 416,880,162 new ordinary shares of nil par value (at a price of €0.011 per ordinary share).

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

Capital management

The Directors consider capital to be the net assets of the Group. The capital of the Company will be managed in accordance with the Investment Strategy documented on the Company's website.

17)   Reserves

The following describes the nature and purpose of each reserve within equity:

Retained earnings - The retained earnings represent cumulative net profits and losses recognised in the Group's statement of comprehensive income.

Foreign currency translation reserve - Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. Currency Units). The Bulgarian subsidiaries' functional currency is the Bulgarian Lev which is pegged to the Euro at 1 EUR = 1.95583 BGN, hence there is no movement of foreign currency translation reserve during the year.

18)   Profit and Net Asset Value per share

Profit per share

The basic profit per ordinary share is calculated by dividing the net profit attributable to the ordinary

shareholders of the Company by the weighted average number of ordinary shares in issue during the year.

The Company has no dilutive potential ordinary shares; the diluted earnings per share is the same as the

basic earnings per share.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

19)   Segmental analysis

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

Other than the previous investments in money market funds in the UK, the Group is organised into one main operating and reporting segment focusing on investment in the Bulgarian property market.

No additional disclosure is included in relation to segmental reporting as the Group's activities are limited to one operating and reporting segment.

20)   Contingencies and commitments

There are no contingencies or commitments outstanding at 31 December 2021 (2020: nil).

21)   Directors' interests

Total compensation paid to the Directors during the period was €62,101 (2020: €78,934). Outstanding

Directors' fee was € 6,522 (2020: €9,484).

22)   Ultimate controlling party

The Directors consider that there is no controlling or ultimate controlling party of the Group.

23)   Financial risk management objectives and policies

The Group's financial instruments comprise cash and cash equivalents, receivables and payables that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and receivables for accrued income. All of the Group's financial instruments are loans and receivables. The main risks the Group faces from its financial instruments are (i) market price risk (comprising currency risk, interest rate risk and other price risk), (ii) liquidity risk and (iii) credit risk.

The Board regularly considers risks applicable to the portfolio.

As a result of the short term nature of the Group's financial instruments, the carrying values approximate to fair value.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

i.          Currency risk

The functional and presentational currency of the Group is Euros. The Group does not hedge this risk.

An analysis of the Group's currency exposure is detailed below:

Foreign currency sensitivity

The Bulgarian lev has been pegged to the Euro since its launch in 1999 at the rate of 1.95583 leva = 1 euro, hence effectively there is no foreign currency risk as long as the peg is in place. If the EUR/GBP exchange rate as at 31 December 2021 was to strengthen or weaken by +/-10% it would result in a decrease or increase respectively in the net liabilities of €10 (2020: a decrease or increase in net liabilities of €12,540).

ii.         Credit risk

Credit risk arises on investments, cash balances and debtor balances. The amount of credit risk is equal to the amounts stated in the statement of financial position for each of these assets. Cash balances are limited to high-credit-quality financial institutions. The Group has recognized and impairment of € nil for the loan granted to Phoenix Capital Holding as at 31 December 2021 (2020: €3,950).

The allowance for expected credit losses (ECLs) are nil.

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

iii. Interest rate risk

Interest rate movements may affect: (i) the fair value of the investments in fixed interest rate securities and (ii) the level of income receivable on cash deposits. There are no fixed interest rate securities as at 31 December 2021 or 31 December 2020. The interest rate profile of the Group's financial instruments excluding other receivables was as follows:

Interest rate sensitivity

An increase of 100 basis points in interest rates during the year would have decreased the net assets attributable to shareholders and changes in net assets attributable to shareholders by €161,229 (2020: increase €161,480). A decrease of 100 basis points would not be possible because an interest rate floor has been set with loan providers which is currently in operation.

iv. Liquidity risk

'Liquidity risk' is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Group's policy and the Boards approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions. The Group's financial assets include investment properties, which are generally illiquid. As a result, the Group may not be able to liquidate some of its investments in due time to meet its liquidity requirements. The Group's liquidity is managed on a daily basis by the administrators of the Company and its subsidiaries in accordance with policies and procedures in place. The Group's overall liquidity risk is managed on a monthly basis by the Board of Directors.

The following table sets out the carrying amount, by maturity, of the Group's financial instruments that are

exposed to liquidity risk:

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

24)   Related party transactions

In the prior year, the Group provided a loan of € 196,000 to Phoenix Capital Holdings at a fixed interest rate of 4.50% and due up to June 2021. At the end of the year the debtor made a repayment of the loan amounting to €149,309 (2020: €47,429). The outstanding balance as at 31.12.2021 is € nil (2020: € 149 309). The Group has recognized expected credit losses of € nil (2020: € 3,950).

In July 2017, the Company appointed Phoenix Capital Management JSC as its investment adviser with responsibility for advising on the investment of the Company's property portfolio. Phoenix Capital Holding JSC owns 79.99% of the Phoenix Capital Management JSC shares. Phoenix Capital Holding JSC, through its wholly owned subsidiary Mamferay, holds 24.81% (2020: 24.81%) of the issued share capital of the Company. Phoenix Capital Management JSC received fees of €214,272 (2020: €214,272). The amount outstanding as at year-end is €53,568 (2020: €160,704).

Yordan Naydenov is a Director of the Company and a partner with Boyanov & Co, a legal adviser to the Company. During the year, Boyanov & Co received fees of €26,391 (2020: €87,347).

Upon the prior year business combination the Group recognized €3,982,084 as payables to Sienit Holdings AD owner of 30% of Targovski Park Kraimorie. The liabilities represented loans granted by the shareholder. The Group recognized interest expenses for €nil (2020: €166,080). The outstanding liabilities as 31.12.2021 are €nil (2020: €4,148,164).

Upon the prior year business combination the Group acquired a receivable from Sienit Holding. The nominal value was €1,325,000, but at acquisition date it had been fully impaired. As at prior year end, the board made a valuation of the recoverability and 50% of nominal value (€662,500) had been recognized. The Group has successfully arranged a new repayment schedule with Sienit.

25)   Subsequent events

Revised Lending agreed on Ivan Vazov Building refurbishment

The company entered into an agreement with Unicredit Bulbank AD ("Uni|Credit"), a leading Bulgarian commercial bank, which involved revised and extended lending terms for the construction of the Ivan Vazov 1 Building.

The bank has agreed to lend the Company up to BGN 4,498,409 (approximately £2.0 million) in agreed allocated tranches for the reconstruction, which need to be utilised within agreed timescales. The Funding

Notes to the Consolidated Financial Statements (continued)

For the year ended 31 December 2021

will be secured by a commercial mortgage on the property and the Company has agreed to provide additional security to the bank in accordance with normal commercial practice.

Lending agreed from Neo London Capital AD

The company agreed and entered into lending terms with its major shareholder Neo London Capital AD for deposits that may be required in relation to the exploration of future property development opportunities.

Neo London Capital AD has agreed to lend the Company up to EUR2,500,000 in agreed allocated tranches for the exploration, which need to be utilised within agreed timescales. The Funding is un-secured and is for a term of 3 months from the date the funding is provided.