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Baltic Horizon Fund Consolidated Unaudited Interim Results for H1 2020

Management Board of Northern Horizon Capital AS (the Management Company) has approved the unaudited consolidated interim financial statements of Baltic Horizon Fund (the Fund) for the first six months of 2020.

Impact of COVID-19 pandemic
At the beginning of 2020, a new coronavirus (COVID-19) started spreading all over the world, which has had an impact on businesses and economies, including in the Baltics.
It is evident that the operating results of Q2 2020 and property valuations were affected by the COVID-19 effects on the tenants’ financial performance and relief measures taken to deal with the pandemic. However based on the currently available information, the Management Company believes that the COVID-19 pandemic should rather have a temporary effect on the Fund’s results and less than was previously expected. Broad portfolio diversification should allow the Fund to limit the COVID-19 impact on the whole portfolio and maintain healthy consolidated operational performance.

The Fund has opted to retain approx. EUR 2.7 million of distributable cash flow for H1 2020 results to strengthen the Fund’s financial position. Over the past two quarters, the Fund has increased its cash distribution reserve to EUR 3.5 million. The Management Company believes that it is in the best interest of the investors and the Fund to reduce its cash distribution at this time in order to protect and strengthen the Fund’s financial position. The management team will continue to actively monitor the economic impact of the pandemic and reassess future distribution levels depending on the upcoming operating results.

On 27 July 2020, S&P Global Ratings affirmed Baltic Horizon Fund “MM3” mid-market rating and removed the Fund from CreditWatch with negative implications, where the Fund was placed on 7 May 2020. The indicative corresponding rating for “MM3” on the global rating scale is “BB+/ BB”.

In summary, it may be concluded that the COVID virus induced lockdown in the Baltics has impacted mainly Baltic Horizon’s centrally located retail and entertainment centres, more specifically increasing their vacancies to approximately 15%. Retail assets located in the central business districts (Postimaja, Europa and Galerija Centrs) accounted for 31.5% of total portfolio NOI in H1 2020.  Overall, the portfolio has remained resilient to the crisis and the total negative effect on the portfolio NOI for the year of 2020 is not expected to exceed 10%.

Distributions to unitholders for Q1 2020 and Q2 2020 Fund results
On 24 April 2020, the Fund declared a cash distribution of EUR 1,701 thousand (EUR 0.015 per unit) to the Fund unitholders for Q1 2020 results. This represents a 1.12% return on the weighted average Q1 2020 net asset value to its unitholders.
On 24 July 2020, the Fund declared a cash distribution of EUR 1,701 thousand (EUR 0.015 per unit) to the Fund unitholders for Q2 2020 results. This represents a 1.14% return on the weighted average Q2 2020 net asset value to its unitholders.

Dividend capacity calculation
 The Fund reduced cash distribution for Q1-Q2 2020 due to COVID-19 outbreak. Generated net cash flow (GNCF) for Q1-Q2 2020 reached EUR 0.054 per unit. 

EUR ’000Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020
(+) Net rental income4,2565,4125,6355,7724,618
(-) Fund administrative expenses(817)(879)(846)(889)(634)
(-) External interest expenses(1,043)(1,295)(1,346)(1,331)(1,327)
(-) CAPEX expenditure1(180)(178)(225)(95)(97)
(+) Added back listing related expenses5160-3929
(+) Added back acquisition related expenses3916---
Generated net cash flow (GNCF)2,306 3,136 3,218 3,496 2,589
GNCF per weighted unit (EUR)0.024 0.031 0.029 0.031 0.023
12-months rolling GNCF yield2 (%)7.8% 8.4% 8.6% 11.5% 9.6%

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