SIF Muntenia : Report of the Shareholders Representatives Council regarding the activity of SIF Muntenia in 2023

The Council of Shareholders' Representatives of

Muntenia S.A. Financial Investment Company

Alternative Investment Fund for Retail Investors (F.I.A.I.R.)

Bucharest, district 2, 46-48 S.V. Rachmaninov street,

Registered with the Trade Registry under no. J40 / 27499/1992, Tax ID no. 3168735

Registered in the FSA with no. PJR09FIAIR / 400005 / 09.07.2021

Authorized by FSA Authorization no. 151 / 09.07.2021

Registered in the Register of personal data operators under no. 26531

REPORT

for the 2023 mandate

Members of the Council of Shareholders' Representatives (B.S.R) of the Muntenia S.A. Financial Investment Company (S.I.F. Muntenia), elected at the Ordinary General Assembly of Shareholders (A.G.A.S.) on June 22, 2022, adopted on March 22, 2024 this Report for the term of office exercised by B.S.R. in the year 2023.

1. Context

Throughout 2023, the global economy proved to be surprisingly resilient to the overlapping shocks of recent years, with steadily declining inflation and persistent economic growth. Large economies managed to cope with the fastest rise in interest rates in 40 years, allaying fears of a strong constraint on the economic activity and, thus, an excessive rise in unemployment rates. Global inflation has also been tamed without triggering a recession. In this context, the ECB (European Central Bank) believes that a 'soft landing' of inflation is becoming increasingly likely.

However, growth of the global economy in 2023 was modest, and international trade growth was exceptionally slow against the background of a weakened industrial manufacturing sector and weak demand. According to winter estimates from the International Monetary Fund (IMF), the world economy grew by 3.1% y/y in 2023, below the 3.4% y/y level of 2022. Growth was supported by

the performance well above expectation of the US during the second half of the year and the recovery of the Chinese economy, albeit at a slower pace than expected.

According to estimates, growth of trade in goods shrank in 2023, while global trade in services outpaced annual GDP growth, with a strong recovery for tourism and international travel, which reached 90% of pre-pandemic levels.

The European Union economy had a slower evolution than the previous estimates. The European economic context was still marked by Russia's military aggression against Ukraine, its effects becoming more and more visible. According to the latest available data , the Gross Domestic Product (GDP) grew by a mere 0.5% in 2023 compared to the previous year in both the European Union and the euro area, after a technical recession (two consecutive quarters of GDP contraction) was narrowly avoided in the second half of last year. European economic growth was slowed down primarily by the erosion of household purchasing power, a sharp monetary tightening and a drop in external demand. An important aspect to mention in the context of the decline in purchasing power is Russia's membership in OPEC (Organization of the Petroleum Exporting Countries) and its ability to influence prices in this position. Furthermore, the war in the Middle East and the recent involvement of the Houthi rebels have generated another upward pressure on prices, impacting the European economy.

Locally, according to data presented by the Ministry of Finance , the execution of the general consolidated budget in late 2023 recorded a deficit of RON 89.90 billion. Expressed as a percentage of the Gross Domestic Product, the budget deficit decreased by 0.08 percentage points, from 5.76% of GDP in 2022 to 5.68% of GDP in 2023. Revenues of the general consolidated budget increased by 13.3% compared to those recorded in 2022, while expenses increased in nominal terms by 13.0% compared to the previous year.

Gross capital formation recorded strong growth, boosted by EU-funded investment in public infrastructure, which offset the slowdown in private consumption and decline in inventories, while the negative contribution of net exports diminished. After a weak third quarter, data and analyses for the final months of 2023 suggest that the economy has regained some momentum on the back of retail sales, services to the population and the solid construction sector.

Annual inflation rate dropped to 6.61% in December of 2023, from 6.72% during the previous month, on account of the continued slowdown in the increase of processed food and energy prices, which managed to outweigh the negative impact of the significant re-increase in annual fuel price dynamics, driven by a base effect.

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Throughout 2023, the annual inflation rate decreased by 9.76 percentage points (from 16.38% in December of 2022), mainly as a result of declines in processed food and energy price dynamics. Moreover, a modest disinflationary action was also exerted by LFO and fuel segments, while opposite influences, but of small magnitude, came from the subcomponents of non-food goods and market services of the core inflation.

As for the number of start-ups, the data of the National Trade Register show that, in Romania, in 2023, there were 147,026 new registrations, down by 3.78% from 2022. On the other hand, the number of companies that suspended their activity in 2023 was 16,335, up by 4.04% from the previous year, and companies in insolvency were 6,650, a number similar to the previous year (2022: 6,649 companies).

With regards to the capital market, in the US, the S&P 500 grew by 24.23%, while in the UK, the FTSE 100 appreciated by 3.78%. Across the euro area, the German DAX index saw a positive performance of 20.31%, while the MSCI Emerging Markets index experienced an appreciation of 7.04%.

The reference index of the domestic capital market - BET - increased by 31.79% as at 31 December 2023 compared to the end of 2022, and the BET-TR index (including both the evolution of the prices of the most traded companies on the BVB regulated market and the dividends offered by them) increased by 39.93%. The BET-TR index ranked first in the region in terms of performance.

In 2023, the largest initial public offering (IPO) in Europe was carried out on the Bucharest Stock Exchange, amounting to RON 9.28 billion (EUR 1.87 billion) with the listing of 20% of Hidroelectrica.

The number of investors reached 178,545 by the end of December , up by 34.27% compared to December of 2022 (2022: 132,972 investors), with most new investors attracted in Q2 (+18,000 investors), during the Hidroelectrica IPO discount period. They made 1.98 million transactions across all markets in 2023, including 1.46 million transactions in shares on the Main Market.

The total amount of the transactions on both BVB markets and for all types of financial instruments carried out in 2023 exceeded RON 38 billion (2022: approximately RON 24 billion), of which RON 37.45 billion were transactions on the main market (2022: RON 23.17 billion).

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2. The BSR of SIF Muntenia S.A.: Organization and roles

S.I.F. Muntenia S.A. is a Romanian legal entity, incorporated as a joint stock company with fully private capital. The operation of the company is regulated by the current legal provisions applicable to financial investment companies, as well as by the provisions of its articles of incorporation.

S.I.F. Muntenia S.A. was established as a joint stock company in November 1996, through the reorganization and transformation of the Private Property Fund IV Muntenia, pursuant to Law 133/1996 for the transformation of Private Property Funds into financial investment companies.

S.I.F. Muntenia S.A. is a collective investment undertaking operating in Romania in accordance with the provisions of the Companies Law 31/1990, Law 74/2015 on the administrators of alternative investment funds and Law 243/2017on the regulation of alternative investment funds and amending and supplementing certain regulatory acts and Law No 24/2017 on issuers of financial instruments and market operations.

According to the provisions of SIF Muntenia SA's Articles of Association, the Shareholders' Representative Council (B.S.R.) is a body that represents the interests of SIF Muntenia SA's shareholders in relation to its administrator, SAI Muntenia Invest SA, with the purpose of supervising the management activity carried out by the administrator. The General Meeting of Shareholders S.I.F. Muntenia SA chooses the C.R.A. composed of three members, for a term of four years, with the possibility of being re-elected.

The B.S.R structure in 2023, according to the A.G.O.A. resolution of 22 June 2022 for a period of 4 (four) years is the following:

• Stefan Dragoș Gioga - President
• George Alin Ștefan -Member
• Robert-CosminPană -Member

During 2023, B.S.R. manifested its attributions of representing the interests of the shareholders and of supervising the activity and the commitments of the administrator, within the limits imposed by the provisions of the articles of incorporation of S.I.F. Muntenia S.A., the management contract and the decisions of the General Assemblies of S.I.F. Muntenia S.A. (G.A.S.).

B.S.R. meetings were established according to the financial communication schedule of the S.I.F. Muntenia SA, which meets at least on the occasion of the quarterly, half-yearly and annual financial reports and in close correlation with the specific attributions of the B.S.R. according to the articles of association of the S.I.F. Muntenia SA. Representatives of the management company SAI Muntenia

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Invest S.A. were invited to attend B.S.R. for detailing specific items on the agenda of the B.S.R. meetings. All B.S.R. decisions were voted on unanimously in terms of quorum and decision-making transparency.

We emphasize that the B.S.R. does not have among its administrative attributions of SIF Muntenia SA, and SAI Muntenia Invest S.A. as a director, is responsible for the management activity, for the adoption and implementation of the investment policies as well as for the elaboration and presentation of the information and materials made available to the B.S.R. and G.A.S. The surveillance and verification activity of the B.S.R. does not remove the liability of SAI Muntenia Invest S.A. for the obligations incumbent on him through the management contract and the legal framework related to the development of his activity.

3. Analysis of notices and reports submitted by SAI Muntenia Invest S.A.

In the proper exercise of its powers, B.S.R. sought to ensure that the interests of the shareholders of SIF Muntenia SA are respected in accordance with the management program approved by the shareholders in the O.G.A.S. dated April 27, 2023. In this regard, the B.S.R. took note of the quarterly reports prepared by SAI Muntenia Invest SA in accordance to the applicable legal regulations regarding the managing activity of SIF Muntenia SA, analysed and debated the monthly information of the director of SAI Muntenia Invest S.A. regarding the implementation of the management program approved by the G.A.S., the calculation of the monthly net assets, the calculation of the management fee and the preparation of the quarterly / half-yearly / annual financial statements.

We specify that the mentioned elements reflect the operations that the administrator carried out without the prior consultation of the B.S.R., which did not examine, did not recommend and did not participate in their substantiation or implementation. Subsequent receipt of such information shall not constitute an approval or ratification of such operations by the B.S.R. In addition, during the course of 2023, B.S.R received and analysed:

• The individual financial statements as at 31.12.2022 prepared according to Regulation 39/2015 for the approval of the Accounting Regulations compliant with the International Financial Reporting Standards, applicable to entities authorized, regulated and supervised by the Financial Supervisory Authority in the Financial Instruments and Investments Sector, as well as the Investor Compensation Fund (FSA regulation 39/2015) ;
• Report of the director of SAI Muntenia Invest SA for the financial year 2022;

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• Periodic notices on the management of SIF Muntenia SA and the monthly execution of the revenue and expenditure budget of SIF Muntenia SA;
• The director report of SAI Muntenia Invest SA and the Interim Financial Statements prepared according to FSA regulation 39/2015 for the first and third quarters of 2023;
• The director report of SAI Muntenia Invest SA and the Interim Financial Statements prepared according to FSA regulation 39/2015 for the first semester of 2023;
• Notices on market operations according to art. 17 let. (g) of the Management Agreement;
• Notices on significant changes in the structure of the Council of Directors and the executive management of SAI Muntenia Invest S.A .;
• The internal audit reports prepared by ANB Consulting SRL (Ascentor), the internal auditor of SIF Muntenia S.A. regarding the review and modification of certain internal procedures aimed at improving the activity of some departments within SAI Muntenia Invest SA, as well as other aspects aimed at determining the adequacy of the procedures drawn up by the administrator and verifying their implementation in the flow of activity, in accordance with the legislation in force and with the applicable domestic regulatory framework;
• The status of lawsuits pending at various stages in which the S.I.F. Muntenia S.A. this part;
• Other information / reports requested by the B.S.R.

We mention that SAI Muntenia Invest promptly responded to all requests made by B.S.R. so that at the date of this Report we can conclude that all requests or recommendations of the B.S.R. made in 2023 were carried out by the manager, and that no situations have been identified that would require additional requests or interventions from the B.S.R.

4. Corporate Events

• The Ordinary General Assembly of Shareholders dated 27.04.2023 approved the annual financial statements of SIF Muntenia S.A. for the financial year 2022 based on the discussions and reports presented by the director of SAI Muntenia Invest S.A., the financial auditor Deloitte Audit SRL and the Council of Shareholders' Representatives (B.S.R.). The Management Program of SIF Muntenia S.A. was also approved and the Budget of revenues and expenditures for the financial year 2023 according to the proposals of the director of SIF Muntenia S.A.

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• The Extraordinary General Meeting of Shareholders held on 21.06.2023 (at the first convocation) approved the of the decrease in the subscribed share capital of SIF Muntenia SA from RON 78,464,520.10 to RON 76,110,584.5, by cancelling 23,539,356 own shares acquired by the Company following the public offering for the purchase of own shares between 14.07.2022 and 27.07.2022 in application of the buy-back programme approved by the Shareholders' General Meeting. After the share capital decrease, the subscribed and paid- up share capital of SIF Muntenia SA will be in the amount of RON 76,110,584.5, divided into 761,105,845 registered shares with a value of RON 0.1 each;
• The same Extraordinary General Meeting of Shareholders held on 21.06.2023 approved the change of Company name from Societatea de Investiții Financiare Muntenia SA to Bedrock Investment Group SA as well as the amendment of the Company Articles of Incorporation accordingly.
• The Ordinary General Meeting of Shareholders held on October 25, 2023 (at the first convocation) elected the appointment of the financial auditor KPMG Audit SRL, according to the recommendation of the Audit Committee, approved by the Board of Directors of the Administrator, SAI Muntenia Invest SA, for a period for 2 years, starting from 01.05.2024, for the financial years 2024 - 2025.

5. SIF Muntenia financial results for 2023

The company records, on 31.12.2023, a net profit of 212.80 million lei.

The value of total assets on December 31, 2023 increased by 390.09 million lei, respectively by 20.11%, compared to the value on December 31, 2022.

The main changes to the asset elements compared to 2022 are as follows:

• Cash and cash equivalents and deposits placed with banks increased, compared to 31.12.2022, by 70.35 million lei, a fact due to the Administrator's decision, with the mention that the strategy regarding the liquidity of the Company's portfolio was respected (% of total assets on 31.12. 2023 -

8.88%);

• Financial assets at fair value through profit or loss appreciated by 146.15 million lei, respectively 16.03%, compared to the value recorded on December 31, 2022, as a result of the increase in the value of assets that are part of this class. At the end of 2023, Biofarm SA represents 17.65% of the total assets of the Company (31.12.2022: 16.17%);

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• Financial assets at fair value through other elements of the global result increased by 199.88 million lei, respectively 22.51%, as a result of recording favorable differences in fair value, in particular, for issuers traded on the regulated market or SMT. On 31.12.2023, the package held at Banca Transilvania SA represented 21.62% of the total assets of the Company (31.12.2022: 19.28%).

Equity holds the major share in the liability structure. They increased by 20.21% compared to the end of the previous year, representing a variation of 375.57 million lei, mainly due to positive differences in the fair value of financial assets recorded in the category Financial assets at fair value through other elements of the result global as of December 31, 2023 and of the retained earnings.

The total revenues of the Company recorded in 2023 exceeded the budgeted value approved by the shareholders by 36.88%.

The total expenses reached a level of 158.75% of the budgeted value for the year 2023 and are mainly made up of the following subcategories:

• administration expenses represent the commission collected by SAI Muntenia Invest SA, calculated according to the administration contract in force, concluded between the Company and the Administrator, respectively:

• The management fee calculated and paid monthly is equal to 0.125% of the total asset value, as certified by the Company Depository for the last working day of the month. In 2023, the value of this commission was 31.52 million lei.
• The performance fee calculated at the end of the year, which is paid after the approval by the Company's AGM of the financial statements, is equal to 10% of the amount by which the gross profit achieved exceeds the gross profit provided for in the Revenue and Expenditure Budget approved by the AGM, for the year for which the profit was recorded. In 2023, the value of this commission was 18.71 million lei. The performance fee has not been budgeted.

In 2023, the Company collected dividends from its subsidiaries in the amount of 35.80 million lei, which represents 46.48% of the total dividends collected during the year.

On 31.12.2023 the net asset value of these subsidiaries, certified by the Depository, was 747.74 million lei (31.12.2022: 614.56 million lei), and the percentage of the total assets of the Company was 31.51 % (31.12.2021: 31.77%).

During the analyzed period, the coupons of the bond issues issued by Opus - Chartered Issuances SA were collected in a total amount of 1.63 million lei (328,200 EUR).

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As of December 31, 2023, the Company has in its portfolio fund units in 12 investment funds (5 open investment funds and 7 closed investment funds).

The total value of fund units in the net asset on 31.12.2023 is 250,664,091 lei. Comparing with the balance on 31.12.2022 (respectively 210,984,517 lei), in 2023 a net gain was recorded in the amount of 39,679,573.85 lei, which comes from the increase in value of these fund units, classified in the category of financial assets measured at fair value through profit or loss.

During the year 2023, SIF Muntenia SA subscribed to the newly established company ICPE Electric Motors SRL, by acquiring a number of 10,000 shares, the total value of the transaction being 1,000,000 lei.

On 31.12.2023, the shares owned by SIF Muntenia SA totaled 1,374,427 lei.

At the end of 2023, we find that SAI Muntenia Invest managed SIF Muntenia in accordance with the established strategic objectives.

6. Conclusions and recommendations of the B.S.R. addressed to the administrator of SAI Muntenia Invest S.A.

In relation to the activities and discussions between the members of the B.S.R. and the representatives of the administrator of SAI Muntenia Invest SA, in 2023 emphasis was placed on the observance of the prudential norms provided in the applicable legislation in force, in accordance with the objectives assumed by the administrator through the administration and risk management of the assets of SIF Muntenia SA with the recommendation of increased attention to the macroeconomic risk factors present in 2023, respectively former inflation and geopolitical uncertainty, factors with important economic, financial and social implications. The still high price levels, especially of food products and those on the energy market, fuelled the inflationary phenomenon, and the evolution of the war between Russia and Ukraine together with the war between the Hamas group and Israel are among the additional risks of a geopolitical nature.

B.S.R. maintains the request addressed to the administrator regarding the obligation to permanently adopt an adequate vigilance in the management of the financial assets of SIF Muntenia in order to preserve the integrity of the assets of SIF Muntenia by:

• making financial investments in order to maximize the value of one's own shares, in accordance with the regulations in force;
• managing the investment portfolio and exercising all the rights associated with the instruments in which it invests;

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• proper monitoring and management of risks.

This report of the Council of Shareholders' Representatives of Muntenia S.A. Financial Investment Company is addressed exclusively to the shareholders of SIF Muntenia S.A. and to be presented at the Ordinary General Assembly of Shareholders of SIF Muntenia S.A. convened for April 29/30 2024.

Chairman of the Council of Shareholders' Representatives,

Stefan Dragos GIOGA

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