Next Re SIIQ S p A : Annual financial report 2023 (Courtesy translation)

Annual Financial

Report

The Annual financial report 2023 has been translated into the English language solely for the convenience of international readers. The version compliant with the provisions of the Commission Delegated Regulation (EU) 2019/815 is the document named "Relazione finanziaria annuale al 31.12.2023 (formato ESEF)" published on the company website www.nextresiiq.iton March 29, 2024

CONTENTS
1. COMPANY PROFILE	3
COMPANY INFORMATION AND STRUCTURE	3
GROUP STRUCTURE	3
COMPANY OFFICES/POSITIONS	4
SHAREHOLDING STRUCTURE AS AT 31 DECEMBER 2023	5
2. DIRECTORS' REPORT ON OPERATIONS	6
CONSOLIDATED FINANCIAL HIGHLIGHTS	6
RELEVANT EVENTS DURING THE YEAR	8
EVENTS FOLLOWING THE REPORTING PERIOD	13
STOCK PERFORMANCE	14
THE ECONOMIC CONTEXT AND THE REAL ESTATE MARKET	16
REAL ESTATE PORTFOLIO	18
ECONOMIC PERFORMANCE ANALYSIS	26
BALANCE SHEET ANALYSIS	28
TRANSACTIONS WITH RELATED PARTIES	29
LEGAL AND REGULATORY FRAMEWORK OF LISTED REAL ESTATE INVESTMENT COMPANIES (SIIQ)	32
RISK MANAGEMENT	35
CORPORATE GOVERNANCE	40
REMUNERATION REPORT	42
ORGANISATIONAL MODEL & CODE OF ETHICS	42
EQUITY INVESTMENTS HELD BY DIRECTORS AND MEMBERS OF THE BOARD OF STATUTORY AUDITORS	43
OTHER INFORMATION ON THE MANAGEMENT	43
UPDATE ON THE IMPACT OF COVID-19	45
FORESEEABLE PERFORMANCE TREND	45
NEXT RE SIIQ S.P.A. - SIGNIFICANT DATA	46
RECONCILIATION BETWEEN THE SHAREHOLDERS' EQUITY AND THE PARENT COMPANY'S NET PROFIT AND THE
SHAREHOLDERS' EQUITY AND THE CONSOLIDATED NET PROFIT	49
PROPOSED ALLOCATION OF OPERATING RESULTS FOR THE PERIOD	50
EPRA PERFORMANCE INDICATOR	51
3. CONSOLIDATED FINANCIAL STATEMENTS OF THE NEXT RE SIIQ S.P.A. GROUP	60
CONSOLIDATED FINANCIAL STATEMENTS	60
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	61
CONSOLIDATED STATEMENT OF PROFIT/(LOSS)	62
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME	63
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY	64
CONSOLIDATED CASH-FLOW STATEMENT	65
CONSOLIDATED PROFIT (LOSS) PER SHARE	66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	67
CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS	101
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ANNEXES	102
REPORT OF THE INDEPENDENT AUDITORS	104
4. FINANCIAL STATEMENTS OF NEXT RE SIIQ S.P.A	110
FINANCIAL STATEMENTS OF NEXT RE	110
STATEMENT OF FINANCIAL POSITION	111
STATEMENT OF PROFIT/(LOSS)	112
STATEMENT OF OTHER COMPREHENSIVE INCOME	113
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY	114
CASH FLOW STATEMENT	115
NOTES TO THE FINANCIAL STATEMENTS	116
MANAGEMENT AND COORDINATION ACTIVITIES	156
CERTIFICATION OF THE FINANCIAL STATEMENTS	157
ANNEXES	158
REPORT OF THE INDEPENDENT AUDITORS	160
REPORT OF THE BOARD OF STATUTORY AUDITORS	166
VALUATIONS OF INDEPENDENT EXPERTS	184

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Company profile

1. COMPANY PROFILE

Company information and structure

NEXT RE SIIQ S.p.A. (hereinafter also referred to as "NEXT RE" or the "Company" or the "Parent Company") with registered office in Rome, Via Zara 28, Tax Code and VAT no. 00388570426, REA number RM-1479336, is a real estate investment company with shares listed on the Euronext Milan market ("EXM") organised and managed by Borsa Italiana S.p.A.

The Company currently manages a portfolio consisting of office and commercial properties.

Group structure

The NEXT RE group (hereinafter also referred to as the "Group") includes, in addition to the Parent Company, the wholly-owned subsidiary Fidelio Engineering S.r.l. (hereinafter also "Fidelio" or the "Subsidiary").

The corporate purpose of the Subsidiary is to carry out activities in Italy and abroad aimed at redeveloping and enhancing the value of areas subject to real estate development or existing buildings subject to redevelopment.

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Company profile

Company offices/positions

Board of Directors

The composition of the Board of Directors- appointed by the Shareholders' Meeting on April 26, 2021and supplemented by the Shareholders' Meeting on November 10, 2021- was as follows until May 16, 2023:

Giancarlo Cremonesi	Chairman
Stefano Cervone	Managing Director
Luca Nicodemi	Independent Director
Giuseppe Colombo	Director
Daniela Becchini	Independent Director
Camilla Giugni	Independent Director
Giovanni Naccarato	Vice-Chairman and Director
Eleonora Linda Lecchi	Independent Director
Maria Spilabotte	Independent Director

Following the May 16, 2023 Shareholders' Meeting, the composition of the Board of Directors was redetermined as follows:

Mirko Bertaccini	Chairman
Giovanni Naccarato	Managing Director
Giuseppe Colombo	Vice-Chairman
Luca Matrigiani	Independent Director
Eleonora Linda Lecchi	Independent Director
Maria Spilabotte	Independent Director

Board of Statutory Auditors

At the date of approval of this Report, and until the date of the General Meeting of Shareholders convened to approve the financial statements for the year ending December 31, 2023, the composition of the Board of Statutory Auditors was as follows:

Luigi Mandolesi	Chairman
Sara Mattiussi	Statutory Auditor
Domenico Livio Trombone	Statutory Auditor
Sergio Mariotti	Alternate Auditor
Barbara Premoli	Alternate Auditor

The manager in charge pursuant to Article 154-bis paragraph 2 TUF (Consolidated Finance Act)

Francesca Rossi

Independent Auditors

EY S.p.A. is appointed as statutory auditor for the period 2021-2029.

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Company profile

Shareholding structure as at 31 December 2023

Shareholder	Percentage % on capital

CPI Property Group S.A.

Dea Capital Partecipazioni S.p.A.

National Association of Pensions and Assistance for Accountants and Commercial Experts

Other shareholders

Treasury shares

5

79.79%

4.99%

2.76%

12.29%

0.17%

TOT. 100.00%

Directors' Report on operations

2. DIRECTORS' REPORT ON OPERATIONS

Consolidated financial highlights

The following are the key indicators of the NEXT RE Group as at 31 December 2023 compared to 31 December 2022.

PERFORMANCE		31/12/2023	31/12/2022
Rental income	Euro/million	6.4	5.8
Net operating income (NOI)	Euro/million	5.1	4.3
Fund from operation (FFO)	Euro/million	-2.1	-2.7
EBITDA	Euro/million	0.64	0.03
EBIT (Operating income)	Euro/million	-7.7	2.7
Consolidated profit/(loss) for the year	Euro/million	-9.44	0.35
ASSETS		31/12/2023	31/12/2022
Total assets	Euro/million	140.9	157.2
Investment property	Euro/million	130.1	135.9
Commercial surface	m²	43,879	43,879
Occupancy	%	100%	98%
WALT	Years	4	3.8
Portfolio assets	No.	6	6
INDEBTEDNESS		31/12/2023	31/12/2022
Consolidated shareholders' equity	Euro/million	76.5	85.9
EPRA NRV	Euro/million	76.5	85.9
Total financial indebtedness	Euro/million	57.08	53.17
Net loan to value (NET LTV)	%	44%	39%
EPRA LTV	%	44%	40%
Portfolio Loan to value (LTV)	%	42%	44%

The main results of the 2023 financial year are shown below:

• the Consolidated net result for the year 2023 was equal to a loss of € -9.44 million, compared to a profit of € 0.35 million as at 31 December 2022;
• EBITDA for the year 2023 is negative and amounted to € -0.64 million compared to € 0.03 million in December 2022;
• Shareholders' equity was € 76.5 million as at 31 December 2023 compared to € 85.9 million as at 31 December 2022;
• Total financial debt was € 57.08 million as at 31 December 2023 compared to € 53.17 million as at 31 December 2022;
• the Net Loan to Value was 44% as at 31 December 2023 compared to 39% as at 31 December 2022.

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Directors' Report on operations

Consolidated profit/(loss) for the year is about € -9.44 million and reflects the negative adjustment to fair value of Investment Properties of about € 7 million resulting from the adjustment of asset values as estimated by the independent expert. The loss for the year also reflects the impact of the write-down of deferred tax assets in the amount of € 0.2 million.

Consolidated EBITDA which represents the margin before the result of financial management, asset adjustments, and taxes, is € -0.64 million and incorporates, in addition to the margin of Net Rental Revenues of € 5.1 million (€ 4.3 million as of December 31, 2022), Personnel Costs of € 2.7 million and General Costs of

• 2.9 million. Personnel Costs and General Costs incorporate the economic effects, amounting to approximately € 2.2 million, of the settlement agreements with the previous top management resolved by the Board of Directors on March 21, 2023 concerning the terms and conditions of the consensual early termination of the executive employment relationships of the General Manager and the Chief Investment Officer as well as the early termination of the offices of the Chairman and the Chief Executive Officer.

Total financial debt improved by approximately € 3.9 million compared to 31 December 2022. The change is mainly attributable to: i) the reduction in financial payables as a result of early repayments of bank loans and real estate leases totalling € 6.3 million, which led to a corresponding decrease in liquidity, ii) the increase, due to the recognition of interest accrued during the year of € 1.3 million, in financial payables related to credit facility agreements disbursed by CPI Property Group S.A. for which the Company has the option to repay at maturity in 2026, and iii) financial outlays related to the above-mentioned settlement agreements.

The Net Loan to Value is 44% and increased against the above-mentioned effects in relation to Total Financial Debt. The value of Investment property decreased by approximately 4% compared to 31 December 2022 following the recognition of negative fair value adjustments as estimated by the independent expert.

Please refer to the sections on The Real Estate Portfolio, Analysis of Operating Performance and Analysis of Financial Performance in this Report for further details.

Alternative performance measures

The content of the "alternative performance measures" not established by the international accounting standards adopted by the European Union (IFRS-EU), used in this Report in order to allow for a better assessment of the Company's profit and loss and financial position in accordance with the recommendations of the Guidelines published in October 2015 by ESMA, is provided below. The meaning, content and basis for the calculation of these indicators are outlined below:

Net operating income (NOI): indicates the profitability of the real estate portfolio and corresponds to the item Net rental income in the Financial Statements.

EBITDA: Earnings before value adjustments such as depreciation and amortisation of fixed assets, fair value adjustments of Investment property and Financial assets at fair value, results of financial management and taxes. EBITDA measures the Company's operating performance.

Total financial debt: calculated in accordance with the ESMA Guidelines on financial debt, published on 4 March 2021, which the supervisory authority Consob has asked to be adopted as of 5 May 2021.

Net Loan to Value (Net LTV): Ratio between Payables to banks and other lenders, net of Cash and cash equivalents, and the value of Investment Property. This measures the sustainability of the Company's financial structure.

EPRA LTV: The indicator is calculated in accordance with EPRA guidelines and is the ratio of the Group's net debt to the market value of the assets held. The indicator expresses the leverage of the company from the shareholders' perspective.

Portfolio Loan to value (LTV): Ratio between the nominal value of residual debt relating to the loans taken out

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Directors' Report on operations

for the assets in the portfolio and the market value of all the assets in the portfolio (Investment property, measured at fair value, and the market value of the portion of the asset in Rome, Via Zara recorded under Other tangible assets). This indicator measures the sustainability of financial debt related to real estate assets.

Fund from operation (FFO): is calculated as net income/(loss) for the period adjusted for non-cash cost and revenue components and non-recurring income components.

EPRA NRV (NET REINSTATEMENT VALUE): this measure aims to represent the value of net assets over the long term. It represents the repurchase value of the company, assuming the company does not sell real estate. It is calculated starting from the relevant shareholders' equity (as reported in the financial statements according to IFRS principles) excluding certain assets and liabilities that are not expected to arise under normal business conditions, such as the fair value of hedging derivatives; deferred taxes on market valuations of real estate and hedging derivatives.

WALT: index relating to the overall weighted average lease term on the outstanding annual leases of NEXT RE's real estate portfolio as at 31 December 2022. The above index was calculated on the first contractual expiry date of the individual lease contracts in place, not taking into account any early termination options.

Occupancy: ratio between leasable area and leased area of assets in the portfolio.

Relevant events during the year

The main relevant events of the 2023 financial year are shown below.

On 1 January 2023, the company announced that the deadline for the fulfilment of the conditions precedent set out in the framework agreement (the "Framework Agreement") signed on 5 August 2021 with the controlling shareholder CPI PG, DeA Capital S.p.A., De Agostini S.p.A. and DeA Capital Real Estate SGR S.p.A., amended on 5 July 2022 by the "Deed of Reinstatement and Amendment to the Framework Agreement" (the "Deed of Reinstatement"), which lost effectiveness on 31 December 2022, expired.

Therefore, the Company announced that: (i) the prerequisites for the partial execution, up to an amount of Euro 1 billion, of the capital increase based on the proxy conferred on 26 April 2021 by the Extraordinary Shareholders' Meeting of NEXT RE to the Company's Board of Directors, pursuant to Article 2443 of the Italian Civil Code, have not been realised within the desired timeframe; (ii) the shareholders' agreements contained in the Framework Agreement, as amended by the Deed of Reinstatement, have lost their effectiveness on 31 December 2022 due to the natural expiry of the term.

On 6 February 2023, the Company announced that it had approved the preliminary results for the year ended

31 December 2022, reporting the following as the main preliminary results for 2022:

• the preliminary Net Profit for the year 2022 showed a profit of EUR 0.3 million compared to the profit of EUR 0.4 million as of 31 December 2021;
• the preliminary EBITDA for the year 2022 was positive and estimated at EUR 1 thousand compared to EUR -1.7 million for the year 2021;
• preliminary shareholders' equity was estimated at EUR 85.9 million as of 31 December 2022 compared to EUR 85.5 million as of 31 December 2021;
• preliminary Total Financial Debt was estimated at EUR 53.22 million as of 31 December 2022 compared to EUR 61.04 million as of 31 December 2021;
• preliminary Net Loan to Value was estimated at 39% as of 31 December 2022 compared to 44% as of 31 December 2021.

On the same date, the Board of Directors also approved the 2023-2026 Business Plan, providing for the following three strategic objectives (the 'Business Plan') :

• stabilisation of the Company's operating cash flows and economic results;
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Directors' Report on operations

• increasing the profitability of the real estate portfolio, also through the implementation of the process of its valorisation and rotation;
• rationalisation and streamlining of the Company's economic and financial structure in order to facilitate, and better convey, the capital increase project, according to a timeframe consistent with that of the proxy granted to the Board of Directors by the Shareholders' Meeting of 26 April 2021, to be exercised by the date of the Shareholders' approval of the financial statements as of 31 December 2023, pursuant to Article 2443 of the Italian Civil Code, also excluding option rights pursuant to Article 2441, paragraphs 4 and 5, of the Italian Civil Code.

On 21 March 2023, the Company announced that it had approved the Annual Financial Report for the year ended 31 December 2022, prepared in accordance with international accounting standards (IAS/IFRS), reporting the following as the main results for the year 2022, which did not differ significantly from the preliminary figures already disclosed to the market on 6 February 2023:

• the Consolidated Profit/(Loss) for the year showed a profit of EUR 0.35 million compared to the profit of EUR 0.43 million as of 31 December 2021;
• Consolidated EBITDA was positive at EUR 30,000 compared to EUR -1.7 million in 2021;
• Consolidated shareholders' equity was EUR 85.9 million as of 31 December 2022 compared to EUR 85.5 million as of 31 December 2021;
• Total consolidated financial debt was EUR 53.17 million as of 31 December 2022 compared to EUR 61.03 million as of 31 December 2021;
• Profit/(Loss) for the year was EUR 0.35 million compared to profit of EUR 0.43 million as at 31 December 2021;
• Shareholders' Equity was EUR 85.9 million as of 31 December 2022 compared to EUR 85.5 million as of 31 December 2021;
• Net Loan to Value was 39% as of 31 December 2022 compared to 44% as of 31 December 2021.

On the same date, the Board of Directors took note of the evaluations expressed by the controlling shareholder CPI PG, which, in the context of the economic-financial rebalancing envisaged by the Industrial Plan, which aims at maintaining a management balance, assuming only a moderate - and possible - growth of the portfolio, proposed a different cost balance of the current governance and managerial structure aimed, inter alia, at further and significant rationalisation of costs. In this context, in view of the willingness expressed by the Chairman of the Board of Directors, Giancarlo Cremonesi, by the Chief Executive Officer (as well as General Manager) Stefano Cervone and by the Chief Investment Officer Claudio Carserà - all of whom are related parties of the Company pursuant to Article 2.1, letter (a) of the "Procedure on Transactions with Related Parties of NEXT RE SIIQ S.P. A" - in order to facilitate the aforementioned path, the Board of Directors approved the settlement agreements concerning the terms and conditions: (i) of the consensual early termination of the executive employment relationships of the General Manager and the Chief Investment Officer effective as of 30 April 2023 as well as, (ii) of the termination of the offices of the Chairman and the Chief Executive Officer effective as of the conclusion of the Shareholders' Meeting called to approve the 2022 financial statements (the "Settlement Agreements").

On the same date, the Board of Directors also acknowledged the concurrent resignations of Directors Giuseppe Colombo, Luca Nicodemi (Independent Director and Chairman of the Appointments and Remuneration Risk Control Committee), Giovanni Naccarato (Executive Director and CFO of the Company) and Camilla Giugni (Independent Director and member of the Appointments and Remuneration Risk Control Committee) from their respective offices (resignations effective as of the conclusion of the Shareholders' Meeting convened to approve the 2022 financial statements), deemed appropriate, also taking into account the Company's cost rationalisation plan currently being implemented, in order to refer all decisions on the new composition of the Board of Directors to the Shareholders' Meeting.

Therefore, following the resignation of the majority of the directors in office, pursuant to Article 16 of the Bylaws, the Board of Directors appointed by the Shareholders' Meeting of 26 April 2021 and supplemented by the Shareholders' Meeting of 10 November 2021, took note of its own forfeiture, remaining in office until the

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