Appeninn Vagyonkezelo Nyilvánosan Muködo Reszvenytársaság : Fenttarthatósági jelentés 2023 Sustainability report 2023

1. Letter from the CEO

With its expertise, Appeninn Plc. serves diverse customer needs with the highest possible quality. As a listed company, it creates real value and predictable investment for shareholders with its steadily increasing ability to generate profit. We are particularly proud that despite the economic challenges of 2023, the Company and its consolidated and owned subsidiaries have already exceeded their financial goals by its business strategy in the first half of the year. Moreover, the group achieved considerable growth through significant acquisitions.

The successful operation of Appeninn Plc. cannot solely be based on business considerations. We believe that business success and sustainable operations are mutually reinforcing. We prepared and published the Company's first sustainability report in this spirit. Through this report, we would like to present our results along the environmental, social, and governance (ESG) pillars of sustainability and set our future goals.

Before compiling and publishing the ESG report, we reviewed our operations and the entire real estate portfolio. We realised that our activity is essential in making our environment more sustainable. As a result, we pay special attention to increasing the energy efficiency of buildings and practising responsible water management regarding the existing real estate portfolio and during future acquisitions.

In 2024, we plan to advance in the digitisation of our everyday processes, thus reducing the unnecessary use of paper, and our goal is to implement selective waste collection in the properties we own. In addition, we continue our corporate social responsibility programs and meet the expectations of our employees, maintaining a positive corporate culture.

We see our first ESG report as a milestone in the life of our Company; in addition to mandatory regulations, our goal is to create value and set an example within the industry.

Official name:

Appeninn Vagyonkezelő Holding Nyilvánosan Működő Részvénytársaság (In English: Appeninn Asset Management Holding Public Limited company, hereinafter referred to as "Company," "Appeninn", "the Holding", "Appeninn Plc.")

Nature and form of ownership:

Public limited company

Countries of operation:

Hungary, Poland

Entities covered by the ESG report: In Hungary:

• Appeninn E-Office Plc.
• • Alagút Investments Ltd.
• Appeninn Property Plc.
• • Felhévíz-AppenLtd.
  • Appen-RetailLtd.
• Appeninn- Bp 1047 Plc.

• CURLINGTON Ltd.

• Szent László Square Service HouseLtd
• BERTEX Plc.
• Appeninn Project-EGRV Ltd.
• Appeninn Project-MSKC Ltd.
• Appeninn BLT Ltd.
• SECTURA Property Management Ltd.
• Kantrum Property Ltd.
• Tidaholm Properties Ltd.

In Poland:

• Dounby Sp. Z.o.o.,
• Wisniowy Management Sp. Z.o.o.

Reporting period:

following the financial statement, the calendar year of 2023, from 1 January 2023 to 31 December 2023

Number of employees: 8

Appeninn is a dynamically growing real estate investment and asset management company focusing on the office and retail real estate market. Since its foundation in 2009, Appeninn has become a dominant player in the Hungarian real estate market. The Company's principal activities include real estate leasing and facility management.

The Company has been on the Budapest Stock Exchange (BSE) for over ten years and has been listed in the Premium category since 2011. The Company's primary goals are portfolio diversification, yield increase, and stable income generation while creating shareholder value.

From Appeninn's foundation until 2020, it primarily owned office buildings in Hungary's capital and bought logistics and commercial real estate nationwide. According to the Company's strategy approved in 2020, the acquisition and development of tourism projects came to the fore.

As part of this, in February 2020, it acquired a 76% stake in Solum-Invest Ltd., and in June 2020, a 75% stake in Dreamland Holding Plc.

In its amended business strategy published in February 2022, the Company set the sale of its tourism portfolio as a primary goal, as well as the acquisition of commercial real estate in the Southeast European and Central-Eastern European regions, within the framework of which its tourism development projects were sold during 2022-2023.

In 2023, the Appeninn group used the sale proceeds to acquire Hungarian and Polish subsidiaries (Dounby Sp. Z.o.o., Tidaholm Properties Ltd., Kantrum Property Ltd.). As a result of these acquisitions, the range and quality of its income- generating properties and the Company's income increased significantly.

The consistent implementation of the strategy formulated in 2022, including the sale of the tourism development portfolio and the office and commercial real estate purchase transactions implemented with a conservative financing structure, Scope Ratings positively evaluated the Company's risk profile on the 5th April 2023; Appeninn's issuer rating was raised to "B+ /stable" and its unsecured bond to "B+" level.

The purpose of future transactions is to diversify the portfolio while maintaining a stable income- generating capacity.

The Company's most important results in 2023:

• Sale of tourism development project companies
• Acquisition of new commercial real estate (Tidaholm Properties Ltd., Kantrum Property Ltd.) and Polish office real estate (Dounby Sp. Z.o.o.) and integration of the newly acquired subsidiaries
• Stabilization of the favourable financing structure by achieving the recommended investment category for the Company and its bond
• Standard increase of rental and operational activities
• Transformation of the Holding structure, achieving greater transparency
• Preparation for the registration as a Regulated Real Estate Investment Pre- incorporation entity as of 1 January 2024
• Outstanding improvement in the group's financial results

2.1 Organizational Structure

The executive body of the Company - instead of a board of directors and a supervisory board - is the Board of Directors, which implements a unified management system. The Board consists of at least five and at most nine persons. The majority of the Board of Directors members must be independent persons as defined in the Civil Code.

Member of the Board of Directors in 2023:

• Zsolt László Kertai
• Györgyi Magdolna Szathmáriné Szűcs
• Dr. Tibor Endre Illés
• Csaba Törő
• Zoltán Jombik

Members of the Board of Directors since the 30th of January, 2024 and at the time of publication of the sustainability report:

• Györgyi Magdolna Szathmáriné Szűcs
• Dr. Tibor Endre Illés
• Zoltán Jombik
• Dr. Dezső János Jákó
• Dr. István Hüse

The Company's day-to-day work is managed and controlled by the Chief Executive Officer within the legislation and the Articles of Association framework, following the decisions of the General Assembly and the Board of Directors.

Chief Executive Officer:

• Györgyi Magdolna Szathmáriné Szűcs

The Audit Committee operates alongside the Board of Directors. It carries out its activities based on the laws in force at all times, the Company's Articles of Association and the rules of procedure in force.

Members of the Audit Committee in 2023:

• Zoltán Jombik (president)
• Zsolt László Kertai
• Csaba Törő

Members of the Audit Committee since the 30th of January, 2024 and at the time of publication of the sustainability report:

• Zoltán Jombik (president)
• Dr. Dezső János Jákó
• Dr. István Hüse

2.2 Ownership Structure

As of December 31, 2023, three shareholders in the Company exceed a 5% stake: Avellino Holding Plc., Sequor Holding Plc. and OTP Real Estate Investment Fund, while the free float share was 47.07%, of which 0.0039% are Appeninn's shares.

2.3 The Company's short-term sustainability strategy

To increase the Company's financial result, creating an energy-efficient,low-carbon operation in the core business is essential, which generates a significant positive impact for shareholders, business partners and the environment.

Concerning its existing properties and during future acquisitions, the Company intends to prioritise the increase of energy efficiency and responsible water management in its corporate sustainability activities.

2.4 Appeninn's sustainability vision for the next 10-15 years

The Board of Directors of Appeninn is aware that the importance of corporate responsibility, transparency and energy efficiency will increase worldwide. Incorporating ESG aspects into business activities positively impacts the profitability of the Appeninn group and its immediate and broader environment. Therefore, the Company plans to integrate as many sustainability considerations into its daily operations as possible in the next 10-15 years.

OTP Real Estate Investment Fund

5.1%

Sequor Holding Plc.

23.8%

The Company's business goals include active portfolio management, ensuring professional asset management and operational services, increased enforcement of ESG aspects, optimising the financing structure, improving and stabilising its income-generating ability at a high level, and geographical diversification.

Regarding sustainability reporting, the Company plans to expand its current practice by incorporating further ESG goals and objectives.

3.1.1 Stakeholders

The Company's stakeholders were identified in a benchmark analysis and subsequently discussed during an internal workshop with the leadership, where the list of stakeholders was finalised. During the analysis, the following stakeholders were identified:

• Shareholders
• National Bank of Hungary (NBH)
• Budapest Stock Exchange (BSE)
• National Tax and Customs Administration (NTCA)
• Financiers
• Clients (renters)
• Employees
• Suppliers

In the future, the Company plans to consult with the identified stakeholders for a more thorough understanding of the ESG-related effects and its impact on ESG-related matters.

3.1.2 Materiality Assessment

In 2023, Appeninn conducted a materiality analysis for the first time, and the results were used to determine the material topics for the Company's first ESG report. The exact steps of the materiality assessment were as follows:

Context definition: An internal workshop was conducted to understand Appeninn's approach to sustainability, an industry benchmark analysis was carried out to assess the ESG performance and objectives of key competitors, and finally, industry-specific material topics outlined by the Sustainability Accounting Standards Board (SASB) and MSCI for real estate and real estate services industries, respectively, were considered.

Identification of material topics: Based on the aggregated data and information, the topics of interest to Appeninn were identified and validated with the Company's management.

The research concluded the following list of material topics:

Environmental topics:

energy management; reduction of CO2 emissions; waste management; renewable energy

Social topics:

diversity, equality and inclusion; social responsibility; corporate culture

Governance topics:

transparency; ethical business conduct; compliance