ENR Russia Invest : Interim Report 2023

Semi-Annual Report 2023

Contents

Letter to Shareholders	4
Economic Review	5
Portfolio Investments	6 - 7
Net Asset Value	8 -  9
Financial Statements	10 - 31
Investment Guidelines	32 - 33
Shareholder Information and Corporate Details	34

4

Letter to Shareholders

Dear shareholders,

For the six months ended 30 June 2023, ENR Russia Invest SA and its subsidiaries produced a consolidated net loss of CHF 6.09 million (con- solidated net profit of CHF 13.37 million for similar period in 2022). The net loss resulted from ruble depreciation of almost 20% against the Swiss Franc in the reporting period. Shareholders equity, at 30 June 2023, was CHF 32.33 million (year-end 2022: CHF 41.68 million).

Greenhouses are at full capacity utilisation at our flower producer with 25.1 hectares in productive use. 15 hectares are planted with more than 40 rose varieties; 2 hectares are planted with more than 20 germini and gerbera variet- ies; 5 hectares are used for an annual tulip program (12.5 million tulips in 2023) and other seasonal flower programs; 3 hectares are used for chrysanthemums, with 0.1 hectare for flower plant propagation. Flower growing, cutting and sales remain solid. At the Petrovsky Fort business centre, the 1'000 square meter area under refurbishment to create a new value added coworking rentable space is progressing well. Regular ongoing improvements and capex programs continue. At the Turgenevskaya parking garage in Moscow, parking income is stable.

Due to sanctions the Russian operating environment is impacted by import and export restric- tions, import substitution, new regional and international sourcing and distribution routes, and capital controls. No material remedial action is presently required to sustain our operational businesses in Russia. There are challenges. Our listed equities and bonds are blocked and we are restricted from trading or repatriating

sales proceeds abroad. Central Bank of Russia ("CBR") exchange control rules and international intermediary banks compliance policies, at times, complicate cash distributions from our operational businesses. Inflation is rising with an increase in domestic demand which also surpasses the pace of the expansion of domestic output capacity (i.e. leads to higher imports) and this weakens the ruble. The CBR increased its 2023 inflation forecast from 5% to 6.5% and raised the key rate in July 2023 from 7.5% to 8.5%.

As the ruble continued to weakened, the CBR again increased the key rate to 12.00% during August 2023 to tighten monetary policy and slow down inflationary trends. With higher defence spending and sanctions squeezing Rus- sian energy revenues, the targeted 2% budget deficit is also under pressure. Measures to manage the gap may slow economic growth and could also have a negative impact on the value of the ruble.

ENR continues to monitor geopolitical developments and the economic environment to assess what actions to take.

Geneva, 23 August 2023

Gustav Stenbolt	Ben de Bruyn
Chairman	Chief Executive Officer

5

Economic Review

The inflationary pressures increased due to higher domestic demand surpassing the capacity to expand output as well as from the weaker ruble. Demand from the government sector remains high. Consumer demand was subdued until end 2022 but started to expand in early 2023 with rising wages and higher consumer confi- dence. In the second quarter of 2023, this accelerated due to increased bank lending. High demand exceeded the ramp-up of domestic supply, and pushed up prices (an example: domestic tourism demand expanded dramatically and the Russian hospitality industry needs a certain period to adjust to this rapid growth). Companies are also passing on higher costs to the consumer, whilst demand expansion contributed to a recovery of imports.

Growth has gained momentum as companies use resources, workforce and manufacturing capacities that were idle during the downturn in 2022. Unemployment dropped to a record low, while utilisation rates of manufacturing capacities are reaching peak levels. The economy has returned to its pre-crisis level, except for the oil and gas sector that is subject to tight external sanctions. On this front Russia-China ties continue to deepen with China now being the largest buyer of Russian oil during the first half of 2023.

Trends vary in different industries and regions. Most of those that are primarily focused on domestic demand have returned to the pre-crisis level. Industries focusing on exports still has limited opportunities to restore output. The acceleration in growth highlights a structural

weakness in the economy where a factor impeding the faster increase in output affecting all industries is staff shortages (the CBR estimates that three-fourths of machine building companies are facing staff shortages). The headcount deficit is most acute in regions with high economic growth rates and this challenge is exacerbated because of workers' low interregional and intersectoral mobility.

Currently, the main growth sectors are the manufacturing and construction industries as well as the retail sector. The defence sector is boosting production of finished metal products, op- tics, radar and electronic equipment. Construction is driven by higher bank lending and discounted or subsidised mortgages. For retail, it is driven by higher salaries and social grants.

The CBR recently stated that the main factor for the ruble depreciation is due to shrinking exports over several months combined with increased imports. Normally, an exchange rate weakening causes a contraction in demand for imports, but this did not happen due to an increase in domestic demand for imports. Another reason for ruble weakness could be linked to government policies to manage a growing budget deficit (i.e hard currency tax revenues from the energy sector translates into more ruble income).