Arundel : Annual Report to 31 Dec 2023

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ARUNDEL AG

ANNUAL REPORT AND ACCOUNTS

FOR THE YEAR ENDED

31 DECEMBER 2023

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Contents	Page
Chairman's Statement	2 -3
Management Statement on the Financial Results	4
Company Information	5
Directors' Report	6
Report of the Group Auditors of Arundel AG	7 - 10
Consolidated Income Statement	11
Consolidated Statement of Comprehensive Income	12
Consolidated Balance Sheet	13
Consolidated Statement of Changes in Shareholders' Equity	14
Consolidated Cash Flow Statement	15
Notes to the Consolidated Financial Statements	16 - 55
Report of the Statutory Auditors of Arundel AG	56-59
Arundel AG Company Financial Statements	60-72
Report of the Statutory Auditors on the Remuneration Report	73-74
Management Remuneration Report	75-78
Corporate Governance Report	79-96

1

ARUNDEL AG

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2023

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CHAIRMAN'S STATEMENT

The Company is reporting its results for the year ended 31 December 2023 ("Dec23").

During 2023, the activities of the Arundel Group (the "Group") comprised:

1. The maintenance (and partial disposal) of the Group's investment properties; and
2. the provision of unregulated advice to various groups to generate fees.

Global factors

During 2023, global inflationary pressures started to ease but this is yet to be reflected in government bond yields or bank interest rates. While the direction of travel is more encouraging than a year ago, the effect of higher global interest rates has had a significant impact on your Company's results.

Financial review

Overall, your Company is reporting a consolidated net loss of $16.5 million for Dec23 compared to a net loss of $3.3 million for the year ended 31 December 2022 ("Dec22"). The results for Dec23 include:

• A loss on the disposal of the London freehold property in October 2023 of $4.75 million. As previously announced, the value of central London offices has remained under pressure as a result of higher interest rates, the impact of BREXIT and post pandemic working practices. After a strategic review, it was considered more cost effective to sell the London property than to invest significant capital to provide for energy efficiency and other enhancements necessary for letting the property long-term to third parties. Net sale proceeds were used to repay $11.2 million of the Group's most expensive loans, which were due for repayment between March and June 2024. As a result of the sale, the Group will save approximately $1.5 million per annum in finance and administrative expenses.
• A non-cash provision of $12.8 million against the carrying value of the Group's investment in the Leipzig Properties as of 31 December 2023. Whilst the methodology applied by the Leipzig Properties' independent valuer was consistent with past practice and had resulted in a fair value loss on 31 December 2023, the directors decided to increase the fair value loss to give greater weight to volatility in the market and the lack of comparable transactional evidence. The directors expect this volatility will reduce in the months ahead as inflationary pressures continue to ease and interest rates begin to decline; however, there can be no guarantee when or if improvements will occur.
• A non-cash provision of $2.0 million against the carrying value of the Group's investment properties in India reflecting a further decrease in the value of the rupee and the amount of time a sale is requiring. As previously announced, sale proceeds will be used to repay debt and to provide additional working capital.

As a result of the foregoing, total equity decreased from $13.2 million on 31 December 2022 to a net deficit of $1.4 million on 31 December 2023. The non-cash impact of fair value adjustments, provisions for the sale of assets and net adverse movements relating to changes in foreign exchange rates accounted for $15.4 million of the reduction in net assets.

For many years the Group has held net assets in Euros, Sterling and Indian rupees and net liabilities in US dollars and Swiss Francs. Accordingly, the Group's results have been susceptible to changes in the foreign exchange markets and will remain so until its operations can become more streamlined.

As detailed below, management continues to reduce expenses, streamline operations, pursue strategies to repay the Group's most expensive debt and to focus on the enhancement of the Group's Leipzig Properties where values are greatest and most impactful.

Operational review

Key developments during 2023 and early 2024 included the following:

• In 2023, the Group appointed an agent to review optimisation of its freehold property in London. On 5 October 2023 the Group completed its sale for a gross selling price of $20.8 million (including VAT). Proceeds were used to repay debt and to provide working capital. As a result of the sale, the Group further reduced personnel numbers and, following the sale, moved into a small, serviced office in London.
• In April 2023, the directors decided to sell the Group's development land in India. Efforts have not yet proved fruitful but the sale process is expected to be completed before the end of 2024.

2

• In November 2023, the Company announced that it would consult with its largest shareholders and holders of the Group's Swiss Franc convertible bonds (the "Notes") about the prospect of de-listing the Company's registered shares from the SIX Swiss Exchange as part of the strategy to further reduce operational expenses. Following a positive response from the largest shareholders, the directors will propose resolutions to de-list the Company's shares at the Annual General Meeting which is scheduled to be held in late May.
• In December 2023, the Company announced that it had reached agreement with a significant creditor and shareholder of the Company, to convert a portion of the Group's debt into 3 million shares of the Company at a price of CHF 1 per share, by way of a share capital increase against a set-off of approximately $3.4 million of debt.
• In February 2024, the Company announced that it had procured the consent of the required majority of third-party noteholders to amend the terms and conditions of the Notes with effect from 1 March 2024, to eliminate the convertibility of the Notes into shares of the Company. All other principal terms and conditions of the Notes remain the same.
• Early this year, the directors decided to liquidate the Group's US regulated subsidiary which will further reduce costs and de-risk the Group's activities. The liquidation is expected to be completed during the course of 2024.
• The directors are presently reviewing options to improve the environmental impact of the Leipzig Properties by working with the tenant to improve the Properties in exchange for revised lease terms for the benefit of both parties.
• The Group has commenced discussions with the lender currently secured by the Leipzig Properties in respect of refinancing the current five-year facility which matures on 30 September 2024. The Group will have repaid approximately 10.4% of the original borrowing (€65 million) by 30 September 2024 and the directors are confident that a refinancing will be completed prior to this date. It should be noted that rising global interest rates will mean that the prospective interest rate is likely to be significantly higher than the interest rate on the current facility.

Management matters

On 31 December 2023 management owned 2,180,166 of the Company's issued share capital representing 12.0% of the total number of shares in issue. These holdings remain unchanged from shares held on 31 December 2022.

We look forward to reporting on future developments in the months ahead.

Arundel AG

David P. Quint (Chairman)

Approved by the board: 29 April 2024

3

ARUNDEL AG

MANAGEMENT REPORT ON THE FINANCIAL RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2023

Financial results

During the year ended 31 December 2023 ("Dec23"), 81.4% of the Company's revenues were derived from rental income and 18.6% from advisory fees compared to 76.6% and 23.4% for Dec22, respectively. Rental income from the Leipzig Properties for Dec23 was $6.8 million (Dec22 - $6.6 million). Advisory income for Dec23 was $1.5 million (Dec22 - $2.0 million) with the reduction primarily caused by the relinquishment of the UK subsidiary's regulatory licence in 2022.

The Leipzig Properties were reduced by fair value losses of $12.8 million on 31 December 2023 reflecting the increased risk premium in determining the discount and residual value rates to be added to the yields on the 10-year and 25-year German government bonds as of that date and the directors' assessment of volatility in the market. The directors also made an impairment provision of $2.0 million against the independent valuation of the development land in India in anticipation of a sale later this year and the time required to sell.

Administrative and marketing expenses for Dec23 were $4.8 million (Dec22 - $5.6 million) with the decrease primarily attributable to a 25% reduction in professional fees paid during Dec23 compared to the prior year. Personnel costs were $0.6 million lower in Dec23, excluding a $0.5 million reversal of personnel cost accruals in Dec22.

Finance costs for Dec23 are stated at $5.3 million (Dec22 - $7.3 million). The total for Dec22 included a foreign exchange rate charge of $1.7 million. Excluding non-cash related items such as the impact of movements in foreign exchange rates and amortisation of debt issue expenses, net finance costs for Dec23 were $5.0 million (Dec22 - $5.2 million). Although the Group repaid $11.2 million of its most expensive debt in October 2023, future savings in finance costs will be offset by a significantly higher interest rate on the new facility expected to be secured on the Leipzig Properties from 1 October 2024.

Balance sheet

Total assets on 31 December 2023 were $169.1 million compared to $195.4 million on 31 December 2022, reflecting the sale of the London freehold property in October 2023 and the fair value adjustments and additional impairments provided against the Leipzig Properties and development land in India mentioned above.

The Leipzig Properties are reflected $145.9 million (€132.0 million) on 31 December 2023 compared to $154.3 million (€143.9 million) on 31 December 2022. The current weighted average unexpired lease term for the Leipzig properties is 7.2 years.

Development land in India on 31 December 2023 is stated at $7.0 million (31 December 2022 - $9.5 million). This carrying value reflects the independent valuation performed on 31 December 2023 less a 20% provision to reflect a potential sale of the assets, including selling costs.

Current assets on 31 December 2023 were $12.2 million compared to $5.4 million on 31 December 2022. Current liabilities on 31 December 2023 were $78.1 million compared to $10.9 million on 31 December 2022, including $65.7 million in respect of senior debt secured on the Leipzig Properties which is due for repayment on 30 September 2024. Long term borrowings on 31 December 2023 were $89.6 million compared to $163.3 million on 31 December 2022 with the decrease primarily attributable to the debt secured against the Leipzig Properties being transferred to current liabilities and the repayment of $11.9 million of debt during the year. Deferred tax of $2.3 million has been provided on 31 December 2023 ($8.3 million - 31 December 2022) with the reduction reflecting assets sales and lower asset valuations on 31 December 2023.

On 31 December 2023, the Group's weighted average loan maturity was 2.8 years and the current weighted average interest rate payable on borrowings was 2.71% per annum with 100% of the Group's debt on fixed interest rates.

Cash flow

During Dec23 the group used $2.8 million in operating activities compared to $0.9 million during Dec22. Net cash generated by investing activities less financing activities in Dec23 totalled $8.8 million compared to $2.2 million used in Dec22.

Overall, the Group increased its net cash and cash equivalents in Dec23 by $5.9 million compared to a net decrease of $3.1 million in Dec22.

Approved by the board - 29 April 2024

4

ARUNDEL AG

COMPANY INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2023

DIRECTORS	AUDITORS
Mr. David Quint (Chairman)	PricewaterhouseCoopers AG
Mr. Markus Müller	Birchstrasse 160
CH-8050 Zurich
Mr. Ralph Beney
Switzerland
COMPANY SECRETARY
Mr. Markus Müller
EXECUTIVE MANAGEMENT	LEGAL ADVISORS
(as to Swiss Law)
Mr David Quint (Executive Chairman)	Advestra AG
Mr. Ralph Beney (Deputy Chairman and Chief
Uraniastrasse 9
Financial Officer)	CH-8001 Zurich
	Switzerland
REGISTERED OFFICE	REGISTRAR
Gotthardstrasse 21	SAG SIS Aktienregister AG
Baslerstrasse 100
CH-8002 Zurich	Postfach
Switzerland	CH-4601 Olten
INDEPENDENT PROXY	Switzerland
Dr. Roger Groner	REGISTERED NUMBER
Tödistrasse 52,
CH-8002 Zürich	CH-020.3.922.903-6
Switzerland

5

ARUNDEL AG

DIRECTORS' REPORT

FOR THE YEAR ENDED 31 DECEMBER 2023

The Directors present their report and the audited consolidated financial statements to the shareholders for the year ended 31 December 2023.

PRINCIPAL ACTIVITY

Arundel AG (the "Company") is domiciled in Switzerland with its registered office at Gotthardstrasse 21, CH-8002, Zürich and is the ultimate parent company of the Arundel Group (the "Group"). The Company is an investment holding company. The Group is focused on investment and financing activities in Europe, the USA and India.

The Company is listed on the SIX Swiss Exchange.

DIRECTORS

The Directors of the Company at 31 December 2023, all of whom have been directors for the whole of the year then ended unless otherwise indicated, are set out below. In accordance with Swiss law, the term of each director is limited to one year.

	Nationality	Function	Member since
Executive members
Mr. David Quint	USA/GB	Chairman	2005
Mr. Ralph Beney	British	Deputy Chairman	2020
Non-executive members
Mr. Markus Müller	Swiss	Member	2016

SECRETARY

The secretary of the Company at 31 December 2023 was Mr. Markus Müller.

AUDITORS

The auditors are PricewaterhouseCoopers AG, Zurich, Switzerland.

DIRECTORS' INTERESTS

The Directors' interests in the shares of the Company were as stated below:

	31 December	31 December
	2023	2022
Mr. David Quint	1,638,075	1,638,075
Mr. Markus Müller	Nil	Nil
Mr. Ralph Beney	542,091	542,091

By order of the Board

Mr David Quint

Chairman - Date: 29 April 2024

6

Report of the statutory auditor

to the General Meeting of Arundel AG Zurich

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of Arundel AG and its subsidiaries (the Group), which comprise the consolidated income statement, the consolidated statement of comprehensive income for the year ending 31 De- cember 2023, the consolidated balance sheet as at 31 December 2023, the consolidated statement of changes in share- holders' equity, the consolidated cash flow statement for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the consolidated financial statements (pages 11 to 55) give a true and fair view of the consolidated financial position of the Group as at 31 December 2023 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards and comply with Swiss law.

Basis for opinion

We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor's responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw your attention to note 2.1 to these consolidated financial statements, which states that the Group has certain borrowings that mature until 30 September 2024. If the Group is unable to refinance the borrowings or to extend their repayment date, this would significantly affect the Group's liquidity. In response to this uncertainty, the Group has taken the measures disclosed in note 2.1 to the consolidated financial statements. As the outcome of these measures is uncer- tain, this indicates the existence of a material uncertainty which may cast significant doubt about the ability of the Group to continue as a going concern. Our opinion is not qualified in respect of this matter.

Our audit approach

Overview	Overall Group materiality: USD 800'000
	We concluded full scope audit work at three reporting units in three countries.
	Our audit scope addressed over 91% of the Group's assets. In addition, audit
	of specific accounts were performed on a further two reporting units in two
	countries representing a further 7% of the Group's assets.
	We tailored the scope of our audit in order to perform sufficient work to enable
	us to provide an opinion on the consolidated financial statements as a whole,
	taking into account the structure of the Group, the accounting processes and
	controls, and the industry in which the Group operates

PricewaterhouseCoopers AG, Birchstrasse 160, Postfach, 8050 Zürich, Switzerland

Telefon: [phone], www.pwc.ch

PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.

As key audit matter the following area of focus has been identified:

Valuation of investment property and development land

Materiality

The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole.

Overall Group materiality	USD 800'000
Benchmark applied	Total assets
Rationale for the materiality bench-	We chose total assets as a relevant benchmark for a Group that mainly holds
mark applied	capital investments. This is a generally accepted benchmark.

Audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and con- trols, and the industry in which the Group operates.

The Group consists of 15 companies, of which four operate from the British Virgin Islands, three in the United States, two each in Germany and Singapore, one each in the United Kingdom, India and Mauritius, and the holding company in Switzerland. We have identified two companies that, in our view, required a full scope audit due to their size and charac- teristics. Specified procedures were also carried out at a further three companies to give appropriate coverage of material balances. All work was performed by the Group audit team.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the 'Material uncertainty related to going concern' section, we have determined the matter described below to be the key audit matter to be communicated in our report.

8 Arundel AG | Report of the statutory auditor to the General Meeting

Valuation of investment property and development land

Key audit matter

Refer to page 35 (Note 12: Investment Property and Development Land) of the consolidated financial statements.

The Group owns investment property in Leipzig, Germany and development land in Chennai, India. The property in Leipzig is held at fair value. The development land in Chen- nai is held at fair value less costs to sell.

The valuation of investment property and development land is considered a key audit matter due to the significance of these assets on the consolidated balance sheet (USD

145.9 million) as well as Management's considerable

judgement in determining the fair value of investment prop- erty and development land.

The valuation of investment property is performed by a third-party appraiser using a discounted cash flow model to calculate the market value assuming a 10-year calculation period and a long-term growth rate (terminal value). In determining the fair value, management decided to give greater weight to the volatility in the market at the end of the year leading to a fair value loss of USD 12.8 million. The valuation of development land is performed by a third- party appraiser using a comparison method under a market approach. Management deducted from the fair value the estimated costs to sell leading to a fair value loss of USD 2.5 million.

The most significant judgements affecting the investment property valuation are the assumptions surrounding the rents relating to the period after the current lease expires, void periods as well as the discount rates and capitalization rate for terminal values. The most significant judgements affecting the development land valuation are the discounts and premiums applied to the subject property relative to comparable land properties.

How our audit addressed the key audit matter

To evaluate the appropriateness of Management's valuation we performed the following audit procedures:

•We tested the valuation of the investment property and development land by involving PwC valuation specialists in Germany and India. This included an assessment of the competency, capability and objectivity of Management's independent property appraisers and the appropriateness of the valuation methodologies applied to appraise the prop- erty.

•We assessed Management's assumptions and valuation models as described in Note 12 of the consolidated financial statements. This included assessing the overall valuation of the property based on Management's valuation of the property and market developments in Germany. For development land, we evaluated adjustments applied to comparable properties under the market approach, such as adjustments to reflect the size, the infra-structure and ac- cess, the location within the neighborhood and the shape and topography of the property. Furthermore, we considered the estimated costs to sell based on similar transac- tions.

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Based on the work performed we consider Management's approach to value the investment property and development land as reasonable.

Other information

The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the remuneration report and our auditor's reports thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

9 Arundel AG | Report of the statutory auditor to the General Meeting