Fotex S E : Consolidated financial statements, 2021

Fotex Holding S.E.

28, avenue Pasteur

L-2310 Luxembourg

R.C.S. Luxembourg B 146.938

Consolidated financial statements as at 31 December 2022

Management report as at 31 December 2022

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	Table of contents
Management Report	3
Management Responsibility Statement	12
Report of the Réviseur D'Entreprises Agréé	13
Consolidated Statement of Financial Position	18
Consolidated Statement of Profit or Loss	19
Consolidated Statement of Comprehensive Income	20
Consolidated Statement of Changes in Equity	21
Consolidated Statement of Cash Flows	23
1.	General	25
2.	Significant Accounting Policies	26
3.	Significant Accounting Judgements, Estimates and Assumptions	39
3.	Significant Accounting Judgements, Estimates and Assumptions (continued)	40
4.	New and amended standards and interpretations	41
5.	Cash and Cash Equivalents	45
6.	Other Financial Assets	45
7.	Accounts Receivable and Prepayments	46
8.	Inventories	47
9.	Property, Plant and Equipment	48
10.	Investment Properties	50
11.	Intangible Assets	53
12.	Goodwill Arising on Acquisition	54
13.	Accounts Payable, Other Liabilities and Provision	55
14.	Share Capital and Reserves	56
15	Operating Expenses and Gain	57
16.	Interest-bearing Loans and Borrowings	58
17.	Income Tax	59
18.	Revenue	62
19.	Gain on Disposal of Investment Properties	63
20	Segment Information	64
21.	Financial Risks, Management Objectives and Policies	65
22.	Leases	68
23.	Earnings Per Share	68
24.	Related Party Transactions	69
25.	Subsequent Events after the End of the Reporting Period	70
26.	Headcount	70
27.	Audit fees	70
28.	Contingent liabilities	70

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Management Report

Review and development of the group's business and financial position

The net turnover for the year ended December 31, 2022, was EUR 33,366,480 compared with EUR 28,374,807 for the same period in 2021 representing an increase of EUR 4,991,673 (+17.59%). The net turnover is mainly composed of income from operating a real estate portfolio in Hungary and the Netherlands. The main reason of the increase is the positive impact on the Hungarian portfolio as it recovered from the negative impact of the COVID pandemic experienced in 2020 and 2021.

During 2021, the group incorporated a new subsidiary Arany Juhár Időstthon Kft. with the purpose of operating a retirement home on a property already owned by the group. This subsidiary has been included in the consolidated financial statements as of January 1st, 2022.

On December 29th, 2022, Fotex Netherlands and FN2, together via a partnership agreement, signed a purchase agreement with Páthé Theatres B.V. to acquire 100% ownership of the Páthé Arena, a cinema complex in Amsterdam at a total cost of Euro 31,942,775.

The overall income for the year amounts to EUR 33,366,711 which is impacted by the net sales and the financial revenue (31 December 2021: EUR 28,386,368).

The net result for the year is a profit of EUR 7,945,632.

No provision is recognised for covering future environment fines or expenditures in 2022.

Principle risks and uncertainties

The Group's business, financial condition or results can be affected by risks and uncertainties. Management has identified the following risks:

• Change in laws and regulations governing the operations of the Company and its subsidiaries which may affect their business, investments and results of operations
• Foreign currency risk
• Credit risk
• Interest rate risk
• Liquidity risk
• Country risk

The previously identified Economic risk arising from COVID-19 is no longer considered significant by management based on the relatively mild impact upon the group and that restrictions impacting business are no longer in place.

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Management monitors these risks and applies the following risk management procedures:

Foreign currency ("FX") risk

Financial instruments that potentially represent risk for the Group include deposits, debtors and credit balances denominated in foreign currency, creditors in foreign currency and deposits in foreign currency other than EUR. The Group's rental contracts are mostly stipulated in EUR or on EUR basis thus mitigating FX risk associated with non-EUR based revenues. As of 31 December 2022, the Group does not have any open forward transactions.

Credit risk

The Group aims to mitigate lending risk by its careful and continuous debtor portfolio monitoring process and by requiring bank guarantees and collateral. In addition, the Group regularly follows up information about the main debtors in the market.

Concentrations of credit risk, with respect to trade accounts receivable, are limited due to the large number of customers and due to the dispersion across geographical areas.

Receivable balances are monitored on an ongoing basis.

Investments of surplus funds are made only with reliable counterparties and are allocated between more banks and financial institutions in order to mitigate financial loss through potential counterparty failure.

Interest rate risk

In order to mitigate the interest rate risk, the Group uses mainly fixed rate loans.

As of the year end the group has one fixed interest loan at an interest rate of 1.79% p.a.

Liquidity risk

Liquidity risk is monitored as follows:

• Monitoring daily available deposited and free cash by entity.
• Monitoring weekly cash flows by entity.
• As part of the management information system, the Group monitors the operations of each entity on a monthly basis.
• The Group monitors its long-term cash flows in order to match the maturity patterns of its assets and liabilities.

Country risk

The Group has operations in Luxembourg, in the Netherlands and in Hungary. By the geographical diversification of the operations, the Group mitigates the effects of country risk. The Group has not identified any significant risks that may affect the financial performance of Group members associated with the countries in which the Group operates. Further as members of the European Union and the legal structure associated with it, management believes that country risk is not a matter of significant concern.

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Internal control and risk management systems in relation to the financial reporting process

The Board of Directors has overall responsibility for ensuring that the Group maintains a sound system of internal controls, including financial, operational and compliance controls. Such a system forms an integral part of the corporate governance strategy of the Company. Internal control procedures help to ensure the proper management of risks and provide reasonable assurance that the business objectives of the Company can be achieved. The internal control procedures are defined and implemented by the Company to ensure:

• the compliance of actions and decisions with applicable laws, regulations, standards, internal rules and contracts;
• the efficiency and effectiveness of operations and the optimal use of the Company's resources;
• the correct implementation of the Company's internal processes, notably those to ensure the safeguarding of assets;
• the integrity and reliability of financial and operational information, both for internal and external use;
• that management's instructions and directions are properly applied; and
• that material risks are properly identified, assessed, mitigated and reported.

Like all control systems, internal controls cannot provide an absolute guarantee that risks of misstatement, losses or human error are fully mitigated or eliminated. The control environment is an essential element of the Company's internal control framework, as it sets the tone for the organization. This is the foundation of the other components of internal control, providing discipline and structure.

Regarding the internal controls in the area of accounting and financial reporting, the following should be noted:

• In the context of the ongoing organizational realignment implemented since the Group moved its headquarters to Luxembourg, a greater integration of the financial operations of the parent company and affiliates under a single management structure was established.
• Controls have been established in the processing of accounting transactions to ensure appropriate authorizations for transactions, effective segregation of duties, and the complete and accurate recording of financial information.
• The Company relies on a comprehensive system of financial reporting. Strategic plans, business plans, budgets and the interim and full-year consolidated accounts of the Group are drawn up and brought to the Board for approval. The Board also approves all significant investments. The
  Board receives monthly financial reports setting out the Company's financial performance in comparison to the approved budget and prior year figures.
• A clear segregation of duties and assignment of bank mandates between members of management, and the accounting departments is implemented.

Research and development

The Company itself has no research and development activity and the research and development activity carried out through its subsidiaries is not significant.

Share capital

The Company's approved and issued share capital totals EUR 30,543,933 consisting of shares with a face value of EUR 0.42 each. At 31 December 2022, the Company's issued share capital included 70,723,650 ordinary shares and 2,000,000 dividend preferred shares (31 December 2021: 70,723,650 ordinary shares and 2,000,000 dividend preferred shares).

The "dividend preferred shares" carry the same rights as ordinary shares in the event of liquidation or dissolution. They entitle the holder to an annual dividend determined by the General Meeting, but do not carry voting rights.

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