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EfTEN Real Estate Fund III AS financial results, second quarter and 1st half-year 2018 (unaudited)

Teade

Comment of the Chairman of the Board

The  main events of the first half of 2018 in EfTEN Real Estate Fund III AS were
the  acquisition of the Evolution office  building in Vilnius, the completion of
the  DSV Riga  Logistics Center  and the  acquisition of  a property at Tähesaju
Business  campus in  Tallinn for  the construction  of a  new garden  center for
Hortes.  At the time of the publication of the interim report, a building permit
has  been  issued  to  the  Fund  for  the construction of the garden center and
negotiations  are under negotiation for signing of a construction contract and a
lease  contract. The Fund plans to start construction in August 2018. The Selver
development  project in  Laagri is  also completed  after the  completion of the
asphalting works in May this year.

In  addition, in the  1st quarter of 2018 the  temporary vacancies filled in the
Ulonu  office building  in Vilnius.  Regarding to  usual economic  activity, the
second  quarter  and  the  first  half-year  of  2018 met  the  expectations  of
management.

During  the first half  of the year  2018, EfTEN Real Estate  Fund III AS earned
free  cash-flow for the potential dividend payout of 1,200 thousand euros, which
is 37 euros per share. The Fund's dividend policy foresees a dividend payment of
80% from  the Fund's annual cash flow. If necessary, it will be coordinated with
the creditors of the Fund. The distribution of the Fund's profit will be decided
by  the general meeting of the Fund and  the dividend payment from the profit of
2018 will be made after the general shareholders' meeting on spring 2019.

Financial overview

The  consolidated sales revenue of  EfTEN Real Estate Fund  III AS for the first
half  of 2018 was EUR 4.105million (the  first half of 2017: EUR 3.537 million),
which  increased by 16% in a year. In the first half of 2018, the Group's profit
before  revaluation of investment properties, depreciation and financial income/
-costs  and income  tax expense  (EBITDA) totalled  EUR 2.719 million (the first
half  of 2017: EUR  2.517 million). The  Group's net  profit for the same period
amounted  to EUR 3.149 million  (the first half  of 2017:EUR 4.030 million). The
smaller net profit is due to lower investment property revaluation profit, which
in the first half of this year was EUR 962 thousand, but EUR 2.316 thousand last
year.

The  consolidated gross  profit margin  in the  first half  of 2018 was 98% (the
first   half  of  2017: the  same).  Therefore,  expenses  directly  related  to
management of properties (incl. land tax, insurance, maintenance and improvement
costs)  accounted for only 2% (the first half of 2017: the same) of the revenue.
The  Group's expenses related to  properties, marketing costs, general expenses,
other  income and expenses accounted for 21.2% of  the revenue in the first half
of 2018. The respective indicator was 21.5% in the first half of 2017.

As   at   30.06.2018, the   Group's   total   assets   were  in  the  amount  of
EUR 106.048million   (31.12.2017:   97.291 million),  including  fair  value  of
investment  property,  which  accounted  for  95% (31.12.2017: 91%) of the total
assets.

In  the first half of the  year, the net asset value  of the share of EfTEN Real
Estate  Fund III AS increased by  2.08%, attributable to the growth in operating
profit,  low interest rates and effective cost management. From the 2017 profit,
EUR  2,191 thousand  (in  spring  2017: EUR  1,503 thousand)  was  paid  out  in
dividends in April 2018. Without the dividend payment, the Fund's NAV would have
increased  by 6.8% in the first half  of 2018. Return on invested capital (ROIC)
was  16.6% in the first half of  2018 (the first half of 2017: 27.6%). Access to
flexible financing conditions will help to increase the Group's competitiveness.
In  the first  hald of  2018, the Group  entered into  new loan contracts in the
total  amount  of  EUR  9.2 million  in  connection  with the acquisition of new
investment  properties. As  at the  end of  the first  half of 2018, the average
interest rate on Group's loan agreements (including interest swap contracts) was
1.86% (31.12.2017: 1.73%) and the LTV (loan to value) ratio was 53% (31.12.2017:
52%).

The  dividend policy of  EfTEN Real Estate  Fund III AS  provides that the Group
will  pay out 80% of the free cash  flow to shareholders as (gross) dividends in
each  accounting year.  In April  2018, EfTEN Real  Estate Fund  III AS paid the
shareholders  (net) dividends in  the amount of  EUR 2.2 million (2017: EUR 1.5
million), which represents 6.1% (2017: 6.0%) of the share capital paid in.

During  the first half of 2018, the Group earned  a free cash flow of EUR 1.703
million  (the first half of 2017: EUR 1.399 million). Following the deduction of
Lithuanian  income tax  expense and  the calculation  of the dividend income tax
expense  in Estonian and Latvian companies, EfTEN  Real Estate Fund III would be
able  to pay net dividends to the shareholders in the total amount of EUR 1.200
million  (37 cents per  share) from the  profit earned in  the first half of the
year.  For  the  entire  previous  year,  the  fund  paid the shareholders a net
dividend of 68 cents per share.


Marilin Hein
CFO
Phone 655 9515
E-mail: [email protected] (mailto:[email protected])



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