MANAGEMENT'S BOARD REPORT ON THE OPERATIONS OF LC CORP S.A. IN 2015

Transcription

1 MANAGEMENT'S BOARD REPORT ON THE OPERATIONS OF LC CORP S.A. IN 2015 Wrocław, 7 March 2016

2 Rules for drawing up the annual financial statements of the LC Corp S.A. Pursuant to the provisions of the Accounting Act of 29 September 1994, the Management Board is obliged to ensure the preparation of the annual report on the Company s operations during the accounting period, including significant information on the economic and financial position, the evaluation of achieved results, the identification of risks, and the description of threats. This report on the operations of the LC Corp S.A. (hereinafter referred to as "LC Corp", the "Company" or the "Issuer") covers the period from 1 January to 31 December The LC Corp S.A. s annual report, drawn up for the period from 1 January 2015 to 31 December 2015, contains: The LC Corp S.A. s financial statements for the accounting period from 1 January 2015 to 31 December 2015 and as at 31 December 2015, drawn up in accordance with the International Financial Reporting Standards, including: statement of financial position, statement of comprehensive income, statement of cash flows, statement of changes in equity and notes to the financial statements. Financial data comparable to the consolidated financial statements as at 31 December 2014 and for the period of twelve months ended on 31 December 2014, Management Board s report on the LC Corp S.A. s operations for the period from 1 January 2015 to 31 December 2015, Management Board s declaration, pursuant to Art ) and 6) of the Regulation of the Minister of Finance dated 19 February 2009 on the current and periodic information published by the issuers of securities and the conditions for recognizing as equivalent the information required by the laws of a nonmember state. 1 BASIC INFORMATION ON THE COMPANY LC Corp S.A. (hereinafter also "LC Corp", the "Company" or the "Issuer") was established by the Notarial Deed dated 3 March 2006 and entered on 15 March 2006 into the National Court Register maintained by the District Court for Wrocław-Fabryczna in Wrocław, VI Commercial Division of the National Court Register, under KRS No The Parent Undertaking's registered office is situated in Wrocław, Poland, at ul. Powstańców Śląskich 2-4. The Company has been assigned statistical identification number REGON The Company has been established for an indefinite time. The Company's primary activity is the activity of financial holdings (PKD Z). LC Corp B.V., controlled by Mr Leszek Czarnecki, is the Parent Undertaking of LC Corp S.A. The Company is the parent undertaking of the entities comprising the LC Corp group (hereinafter also as the "Group"). As at 31 December 2015, the LC Corp Group comprised LC Corp S.A. and its following subsidiaries: 2

3 Company Share capital as at 31 Dec 2015 (PLN) Effective share of LC Corp S.A. 31/12/ /12/2014 Arkady Wrocławskie S.A. seated in Wrocław 113,700, % 100% Sky Tower S.A. seated in Wrocław 23,100, % 100% Warszawa Przyokopowa Sp. z o.o. seated in Wrocław 1 33,001, % 100% (indirectly and directly) Kraków Zielony Złocień Sp. z o.o. seated in Wrocław 2 13,350, % (indirectly and directly) 100% LC Corp Invest I Sp. z o.o. seated in Wrocław 5, % (indirectly and directly) 100% (indirectly and directly) LC Corp Invest II Sp. z o.o. seated in Wrocław 88,800, % 100% LC Corp Invest III Sp. z o.o. seated in Wrocław 6,700, % 100% LC Corp Invest VII Sp. z o.o. seated in Wrocław 4,000, % 100% LC Corp Invest VIII Sp. z o.o. seated in Wrocław 13,500, % 100% LC Corp Invest IX Sp. z o.o. seated in Wrocław 4,700, % 100% LC Corp Invest X Sp. z o.o. seated in Wrocław 10,300, % 100% LC Corp Invest XI Sp. z o.o. seated in Wrocław 3 41,000, % 100% LC Corp Invest XII Sp. z o.o. seated in Wrocław 24,800, % 100% LC Corp Invest XV Sp. z o.o. seated in Wrocław 4 305, % 100% LC Corp Invest XVI Sp. z o.o. seated in Wrocław 5, % 100% LC Corp Invest XVII Sp. z o.o. seated in Wrocław 5, % 100% LC Corp Invest XVIII Sp. z o.o. seated in Wrocław 5, % 100% LC Corp Invest XV Sp. z o.o. Projekt 1 Sp. k. seated in Wrocław 5-100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 2 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 3 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 4 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 5 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 6 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 7 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 8 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 9 Sp. k. seated in Wrocław 6-100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 10 Sp. k. seated in Wrocław 7-100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 11 Sp. k. seated in Wrocław - 100% (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Projekt 12 Sp. k. seated in Wrocław 8-100% (indirectly) - LC Corp Invest XV Sp. z o.o. Projekt 14 Sp. k. seated in Wrocław - 100% (indirectly and directly) 100% (indirectly and directly) LC Corp Invest XVII Sp. z o.o. Projekt 20 Sp. k. seated in Wrocław 9-100% (indirectly and directly) 100% (indirectly and directly) LC Corp Invest XVII Sp. z o.o. Projekt 21 Sp. k. seated in Wrocław % (indirectly) - LC Corp Invest XV Sp. z o.o. Finance S.K.A. 50, % (indirectly) 100% (indirectly) LC Corp Invest XV Sp. z o.o. Investmets S.K.A. 91,905, % (indirectly and directly) 100% (indirectly and directly)

4 LC Corp Invest XVIII Sp. z o.o. Real Estate S.K.A. 50, % (indirectly and directly) 100% (indirectly and directly) (1) On 15 December 2015, Warszawa Przyokopowa Sp. z o.o. acquired from LC Corp Invest XVIII Sp. z o.o. and LC Corp Invest XVIII Sp. z o.o. Real Estate S.K.A. a total of 300,010 shares with the total nominal value of PLN 30,001, in the share capital of Warszawa Przyokopowa Sp. z o.o., as a result of which the aforementioned shares were redeemed on this date in accordance with the resolution of the Extraordinary General Meeting of this company of 15 December From this day, LC Corp S.A. is the sole shareholder of the company. On 21 December 2015, the Extraordinary General Meeting of Warszawa Przyokopowa adopted a resolution concerning an increase in the company's share capital of PLN 2,000 from the company's supplementary capital, and an increase of the nominal value of the shares up to the amount of PLN 1, Therefore, after registering the change by the National Court Register, the share capital of the company amounts to PLN 33,003, and LC Corp S.A. holds all shares in the company. (2) On 4 December 2015, the District Court for Wrocław-Fabryczna, VI Commercial Division of the National Court Register (KRS), registered a change in the amount of the share capital of Kraków Zielony Złocień Sp. z o.o. From that day, the Company's new share capital totals PLN 13,530, The change in the amount of the share capital was made by the creation of 23,000 new shares that were taken up by LC Corp Invest XI Sp. z o.o., which thus became the new partner of Kraków Zielony Złocień Sp. z o.o. On 12 November 2015 Kraków Zielony Złocień sp. z o.o. assumed the rights and obligations of the limited partner LC Corp Invest XI sp. z o.o. of the following companies: LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 1 sp. k., LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 9 sp. k., LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 10 sp. k. and LC Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 21 sp. k., thus obtaining, in place of LC Corp Invest XI sp. z o.o., the status of a limited partner of the above-mentioned companies. (3) On 10 November 2015 LC Corp Invest XI sp. z o.o. disposed of its rights and obligations as the limited partner of LC Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 20 sp. k. to the benefit of LC Corp S.A. Therefore, from 10 November 2015 the partners of the above-mentioned company are LC Corp Invest XVII sp. z o.o., as the general partner, and LC Corp S.A., as the limited partner. On 12 November 2015 LC Corp Invest XI sp. z o.o. disposed of the rights and obligations of the limited partner of Kraków Zielony Złocień sp. z o.o. in the following companies: LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 1 sp. k., LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 9 sp. k., LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 10 sp. k. and LC Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 21 sp. k., thus losing the status of a limited partner of the above-mentioned companies. (4) On 11 May 2015, the District Court for Wrocław-Fabryczna, VI Commercial Division of the National Court Register (KRS), registered a change in the amount of the share capital of LC Corp Invest XV Sp. z o.o. From that day, the Company's new share capital totals PLN 305, The change in the amount of the share capital was made by the creation of new shares that were taken up by the existing partner - LC Corp S.A. (300 shares). (5) On 12 November 2015 Kraków Zielony Złocień sp. z o.o. took over from LC Corp Invest XI sp. z o.o. all rights and obligations of the limited partner of LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 1 sp. k., thus becoming the company's limited partner. (6) On 12 November 2015 Kraków Zielony Złocień sp. z o.o. took over from LC Corp Invest XI sp. z o.o. all rights and obligations of the limited partner of LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 9 sp. k., thus becoming the company's limited partner. (7) On 12 November 2015 Kraków Zielony Złocień sp. z o.o. took over from LC Corp Invest XI sp. z o.o. all rights and obligations of the limited partner of LC Corp Invest XV spółka z ograniczoną odpowiedzialnością Projekt 10 sp. k., thus becoming the company's limited partner. 4

5 (8) On 23 June 2015 the new name of the company - LC Corp Invest XV Spółka z ograniczoną odpowiedzialnością Projekt 12 Spółka komandytowa - was registered. The limited partners of the Company are LC Corp Invest IX Sp. z o.o. and LC Corp Invest VIII Sp. z o.o., while the general partner representing and managing the company's affairs is LC Corp Invest XV Spółka z ograniczoną odpowiedzialnością. (9) On 12 May 2015 LC Corp S.A. increased the amount of its contribution in Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 20 sp. k. by PLN 700,000.00, i.e. to the amount of PLN 61,600, On 18 June 2015 LC Corp S.A. increased the amount of its contribution by PLN 1,500,000.00, i.e. to the amount of PLN 63,100, On 14 July 2015 LC Corp S.A. increased the amount of its contribution by PLN 1,500,000.00, i.e. to the amount of PLN 64,600,000,00. On 23 July 2015 LC Corp S.A. increased the amount of its contribution by PLN 3,000,000.00, i.e. to the amount of PLN 67,600, On 2 September 2015 LC Corp S.A. increased the amount of its contribution by PLN 7,000,000.00, i.e. to the amount of PLN 74,600, On 10 November 2015 LC Corp Invest XI sp. z o.o. disposed of its rights and obligations as the limited partner of LC Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 20 sp. k. to the benefit of LC Corp S.A., including a contribution of PLN 9, On 9 December 2015 LC Corp S.A. increased the amount of its contribution by PLN 6,000,000.00, i.e. to the amount of PLN 80,609, As at 31 December 2015 the current value of contribution of LC Corp S.A. amounted to PLN 80,609,900, of which PLN 3,000,000 has not been paid yet. (10) On 23 February 2015 the new name of the company - LC Corp Invest XVII Spółka z ograniczoną odpowiedzialnością Projekt 21 Spółka komandytowa - was registered. LC Corp Invest XI Sp. z o.o. became the limited partner of the Company, while the general partner representing and managing the company's affairs is LC Corp Invest XV Spółka z ograniczoną odpowiedzialnością; on 12 November 2015 Kraków Zielony Złocień sp. z o.o. took over from LC Corp Invest XI sp. z o.o. all rights and obligations of the limited partner of LC Corp Invest XVII spółka z ograniczoną odpowiedzialnością Projekt 21 sp. k., thus becoming the company's limited partner. 5

6 Share capital and shareholders of LC Corp S.A. as at 31 December 2015 As at 31 December 2015, the share capital of LC Corp S.A. amounted to PLN 447,558,311 and was divided into 447,558,311 ordinary bearer shares carrying one vote at the General Meeting, with a par value of PLN 1.00 each. Shareholders possessing, directly or indirectly through subsidiaries, at least 5% of the total vote at the Company's General Meeting SHAREHOLDERS POSSESSING, DIRECTLY OR INDIRECTLY, AT LEAST 5% OF THE TOTAL VOTE AT THE GENERAL MEETING AS AT 31 DECEMBER 2015 ACCORDING TO INFORMATION HELD BY THE ISSUER Shareholder Leszek Czarnecki directly and indirectly (1) including: LC Corp B.V. seated in Amsterdam Number of shares 229,359, ,701,110 Number of votes 229,359, ,701,110 Participation in share capital (%) 51.24% 47.97% Share in total vote at general meeting (%) 51.24% 47.97% AVIVA Otwarty Fundusz Emerytalny AVIVA BZ WBK (2) 30,200,000 30,200, % 6.75% Nationale Nederlanden Otwarty Fundusz Emerytalny 35,000,000 35,000, % 7.82 % OFE PZU "Złota Jesień" 44,669,000 44,669, % 9.98 % (1) Mr Leszek Czarnecki directly holds 14,657,685 shares representing 3.27% of the share capital and 3.27% of the total vote at the General Meeting, and indirectly through his subsidiary undertakings Mr Leszek Czarnecki holds 214,702,110 shares representing 47.97% of the share capital and 47.97% of the total vote at the General Meeting. Mr Leszek Czarnecki s subsidiary undertakings include LC Corp B.V., seated in Amsterdam and holding 214,701,110 shares representing 47.97% of the share capital and 47.97% of the total vote at the General Meeting, and RB Investcom Sp. z o.o., seated in Wrocław and holding 1,000 shares representing % of the share capital and % of the total vote at the General Meeting. 2 ACTIVITIES OF THE COMPANY IN 2015 In 2015, LC Corp S.A. focused its activities on administrating, managing and exercising owner s supervision over its subsidiary undertakings and acquiring funds for their investment activity. LC Corp S.A. was also involved in intense activities related to the acquisition of land for its new projects in Warsaw, Kraków, Gdańsk and Wrocław. LC Corp S.A. s subsidiary undertakings were active on the property development market, continuing their investment projects or preparing to start construction projects as well as managing the Arkady Wrocławskie and Sky Tower retail, service and office centres in Wrocław, the Wola Center office centre in Warsaw and Silesia Star office centre in Katowice. The description of the activities of the companies managed by LC Corp SA is presented in the Management Board's report on LC Corp Group's operations Basic products, goods and services The Company is solely involved in holding activity which consists in providing holding services (management, financial, administration) to subsidiary undertakings. The company's activity is limited to the territory of Poland. The following tables show the data on revenue and profits for the year ended 31 December 2015 and for the year ended 31 December 2015.

7 Holding activity Year ended 31 December 2015 Year ended 31 December 2014 Revenue Revenue from sales 25,236 7,684 Revenue from interest and discounts 18,443 21,105 Revenue from dividends 12,681 29,548 Other financial income 16,962 0 Other Total revenue 73,632 58,415 Expenses Operating expenses (42,415) (19,561) Costs of interest and discounts ( 16,724) ( 16,938) Other financial expenses ( 7,448) ( 14,941) Other ( 45) ( 255) Total expenses ( 66,632) ( 51,695) Pre-tax profit (loss) of the segment 7,000 6,720 Assets and liabilities Total assets 1,376,975 1,344,558 Total liabilities 514, , Market situation The Company conducts its activity for the benefit of its subsidiary undertakings. The company's activity is limited to the territory of Poland Company s dependence on suppliers and recipients Service recipients In 2015, neither the Company nor the Group's companies were dependent on any service recipient, as the Group s clients are mainly natural persons, belonging to a broadly understood consumer group. Service suppliers In 2015, neither the Company nor the Group's companies were dependent on specific suppliers building services are offered by numerous companies competing on the Polish mature construction market and the Group s companies use the services provided by various construction companies to eliminate the risk of being dependent on a single entity. The Group enters into contracts on construction works selecting contractors by way of tenders and choosing the most advantageous bid. The Group s projects are carried out in the general contracting system Significant agreements, insurance agreements In 2015, the Issuer did not conclude any significant agreements or insurance agreements. 3 EVENTS EXERTING A SIGNIFICANT IMPACT ON THE COMPANY'S ACTIVITY AND THE FINANCING OF THE COMPANY'S ACTIVITY IN THE ACCOUNTING YEAR 3.1. Information on the loans taken/repaid by the Issuer Annexes to the loan agreement concluded by LC Corp S.A. and Getin Noble Bank S.A. On 19 February 2015 the Issuer concluded with Getin Noble Bank S.A. an annexe to the bank loan agreement of 18 June 2014, extending the period of payment of the taken loan in the amount of PLN 40,000,000 by the end of June As at 30 June 2015 was not initiated. On 19 August 2015 the Issuer concluded with Getin Noble Bank S.A. an annexe to the bank loan agreement of 18 June 2014, extending the period of payment of the taken loan in the amount of PLN 40,000,000 by the end of As at 31 December 2015, the loan was initiated in the amount of PLN 38,000,000. 7

8 3.1. Issue and buyback of securities 1) On 20 March 2015, LC Corp S.A. issued 65,000 five-year unsecured coupon bonds, having a par value of PLN 1,000 and the total nominal value of PLN 65,000,000 under a Bond Issue Agreement with the buyback date set at 20 March 2020 concluded with the banks Pekao S.A. having its registered office in Warsaw and BRE Bank S.A. having its registered office in Warsaw. The funds obtained from the above issue were intended in their entirety for the redemption of securities issued on 1 June 2012 under the above-mentioned Bond Issue Agreement, whose buyback date fell on 25 May ) On 25 May 2015, the Issuer made a buyback on the buyback date of 650 unsecured dematerialised coupon bonds series LCC , code ISIN PLLCCRP00041, having a par value of PLN 100, each and a total nominal value of PLN 65,000,000, issued on 1 June ) On 29 June 2015, LC Corp S.A. concluded with Arkady Wrocławskie S.A. an annexe to the Agreement on the issue, acquisition and buyback of securities in the form of bills of exchange of 20 January The annexe postponed the buyback date of 10 bills of exchange issued by LC Corp S.A., acquired by Arkady Wrocławskie S.A., from 30 June 2015 to 29 June Payment of dividend to the Issuer by subsidiaries Payment of dividend by Arkady Wrocławskie S.A. On 23 July 2015, pursuant to the resolution of the Ordinary General Meeting of Arkady Wrocławskie S.A. of 21 July 2015, dividend was paid of the total amount of PLN 4,548,000 to the sole shareholder - LC Corp S.A Payment of dividend by Sky Tower S.A. On 30 June 2015, the Ordinary General Meeting of Sky Tower S.A. adopted a resolution on the payment of dividend for 2014 of the total of PLN 8.000,000 to the sole shareholder - LC Corp S.A. The payment of dividend was made on 24 August Payment of dividend by LC Corp Invest I Sp. z o.o. On 17 June 2014, the Ordinary General Meeting of LC Corp Invest I Sp. z o.o. adopted a resolution on the payment of dividend for 2014 of the total of PLN 125,000 (including PLN 25,000 to LC Corp S.A.). The payment was made on 15 July Payment of dividend by LC Corp Invest XVI Sp. z o.o. On 29 June 2015, the Ordinary General Meeting of LC Corp Invest XVI Sp. z o.o. adopted a resolution on the payment of dividend for 2014 of the total of PLN 108,000 to the sole shareholder - LC Corp S.A. The payment was made on 15/07/ Information on material transactions concluded by the Issuer or its subsidiary with related entities on the terms other than at arm s length The Company did not enter into any transactions other than those concluded at arm s length Loan agreements concluded by the Company with the Group's companies in 2015 In 2015, the Company did not conclude any new loan agreements with the Group's companies Information on sureties and guarantees granted and received in the accounting period 1. In connection with the loan agreement of 18 June 2014, concluded between the Issuer and Getin Noble Bank S.A., LC Corp Invest XV Sp. z o.o. Projekt 2 Sp. k. secured the repayment of the loan by creating a joint mortgage for up to PLN 60,000, on the property owned by this company and submitted a declaration on surety for the loan with the liability limited exclusively to the mortgaged property. 2. On 8 December 2015, LC Corp S.A. submitted a declaration of granting a surety for LC Corp Invest XV Sp. z o.o. Projekt 7 Sp. k. with regard to the payment by this company of PLN 3,948, for the President of the City of Kraków should the conditions set out in the agreement on the change of the agreement on the right of perpetual usufruct of the property in Kraków be fulfilled. With regard to the payment of the above fee for the change of the agreement on the right of perpetual usufruct, LC Corp Invest XV Sp. z o.o. Projekt 7 Sp. k. 8

9 filed a declaration on submission to enforcement in the notarial deed pursuant to Art (5) of the Code of Civil Procedure against the President of the City of Kraków Overview of strategic options Taking account of the Issuer's further development, including obtaining by the Issuer facilitated access to more attractive financing, the Issuer decided to commence the overview of strategic options in all areas of the its business activity, as well as an analysis of the development potential of the real estate market in Poland (about which the Issuer informed in current report No. 82/2015 of 9 October 2015). To date, the above-mentioned process has not been completed and all options will be considered, including maintaining the ownership structure, as well as looking for a strategic investor for the Issuer, both a professional and financial one. No decisions related to the selection of a specific option by the Management Board have been made to date and there is uncertainty whether such a decision will be made in the future. 4. ASSET, FINANCIAL, AND REVENUE SITUATION OF THE COMPANY Basic economic and financial figures Situation as at 31 December 2015 PLN 000 Situation as at 31 December 2014 PLN 000 Non-current assets 1,229,213 1,148,764 Current assets 147, ,794 Equity 862, ,119 Liabilities and provisions for liabilities 514, ,439 Balance sheet total 1,376,975 1,344,558 Revenue from sale of services, products and goods 25,236 7,684 Revenue from interest and discounts 18,443 21,105 Revenue from dividends 12,681 29,548 Other financial income 16,962 0 Total operating expenses ( 66,632) ( 51,695) Net profit/(loss) 17,079 7,208 In 2015, LC Corp S.A. achieved revenues from the sale of goods and services totalling PLN 25,236,000 from the interest and discounts in the amount of PLN 18,443,000, and revenue from dividend totalling PLN 12,681,000. The Company reported a net profit of PLN 17,079,000. Apart from standard revenue and expenses, the factors and events which significantly affected LC Corp S.A.'s financial results in 2015 comprises the verification of valuation allowances for shares in subsidiaries. Revenue from this verification totalled PLN 16,962,000. Also, the Company created a deferred tax asset in the amount of PLN 8,958,000 concerning the valuation allowance for investments in shares Clarification of the discrepancies between the financial results disclosed in the annual report and the financial forecasts for the year published at an earlier date The LC Corp did not publish any financial forecasts in Significant off-balance sheet items entities concerned, titles, and values The detailed information about off-balance sheet items is presented in Notes 29.2 and 29.4 of the Accounting principles (policy) and Notes to the financial statements of LC Corp S.A. for the year Structure of assets and liabilities of the separate balance sheet Assets 31 December December 2014 A. Non-current assets 1,229,213 89% 1,148,764 85% 1. Intangible assets 254 0% 272 0% 2. Property, plant and equipment 906 0% % 2.1. Tangible assets 903 0% % 9

10 2.2. Tangible assets under construction 3 0% 6 0% 3. Non-current loans and receivables 386,683 28% 353,122 26% 4. Non-current investments 830,193 60% 793,216 59% 5. Non-current prepayments and accrued income 0 0% 0 0% 6. Deferred tax assets % % B. Current assets 147,762 11% 195,794 15% 1. Inventories 102,011 8% 116,150 9% 2. Trade and other receivables 6,180 0% 4,749 0% 3. Income tax receivable 0 0% 0 0% 4. Current financial assets 10,238 1% 68,924 5% 5. Cash and cash equivalents 29,017 2% 5,797 1% 6. Current prepayments and accrued income 316 0% 174 0% C. Non-current assets classified as held for sale 0 0% 0 0% Total assets 1,376, % 1,344, % Equity and liabilities A. Equity 862,198 63% 845,119 63% 1. Share capital 447,558 33% 447,558 33% 2. Balance of called-up share capital not paid 0 0% 0 0% 3. Reserve funds 294,493 22% 357,285 27% 4. Other reserve funds 100,000 7% 30,000 2% 5. Other capital 3,068 0% 3,068 0% 6. Retained profit/(loss carried forward) 17,079 1% 7,208 1% B. Non-current liabilities 390,427 28% 374,585 28% 1. Non-current financial liabilities 281,363 20% 231,669 17% 2. Non-current liabilities on account of the acquisition of a subsidiary 109,045 8% 142,897 11% 3. Provisions 19 0% 19 0% 4. Deferred tax liability 0 0% 0 0% C. Current liabilities 124,350 9% 124,854 9% 1. Current financial liabilities 73,734 5% 81,702 6% 2. Current liabilities on account of the acquisition of a subsidiary 38,996 3% 38,996 3% 3. Trade and other payables 4,532 0% 1,043 0% 4. Income tax payable 47 0% 0 0% 5. Provisions 11 0% 11 0% 6. Accrued expenses and revenue 7,030 1% 3,102 0% Total equity and liabilities 1,376, % 1,344, % The most important factors affecting the value of the balance-sheet items in the year ended 31 December 2015: the increase in non-current investments is related to payments for capitals in subsidiary undertakings and the decrease of the valuation allowance for shares. the decrease in current financial assets is caused by the received payment for a part of the receivables on account of loans granted, the increase in non-current financial liabilities is related to the new non-current bank loan taken in the accounting year, the decrease in the liabilities on account of the acquisition of a subsidiary undertaking is related to the payment of the next instalments during the year 4.4 Assessment of financial management Selected financial ratios: 10

11 1 2 Profitability ratios Return on assets (ROA) (net profit/total assets) 1.2% 0.5% Return on equity (ROE) (net profit/equity) 2.0% 0.9% Liquidity ratios Current ratio current assets/(current liabilities, without provisions) Quick ratio (current assets inventories)/(current liabilities, without provisions) Debt ratios Debt to equity (total liabilities/equity) Debt to equity net (total net liabilities/equity) Total debt (total liabilities/total assets) % 58.7% 53.6% 49.3% 36.9% 36.9% The presented financial ratios for 2015 illustrate the Company's very good financial position. The increase in the profitability ratios confirms the effectiveness of the implemented strategy. The liquidity ratio and the debt ratio illustrate the Company s good liquidity position. Financial risk management is described in the separate financial statements, in Notes 33, 34 and INFORMATION ABOUT PROCEEDINGS BEFORE COURTS, RELEVANT ARBITRATION AUTHORITY OR PUBLIC ADMINISTRATION AUTHORITY As at 31 December 2015, no individual proceedings were initiated with regard to liabilities or receivables of the Issuer or its subsidiaries, whose value would represent at least 10% of the Issuer s equity. Also, as at 31 December 2015 no proceedings were initiated with regard to liabilities and receivables of the Issuer and its subsidiaries, whose aggregate value would represent at least 10% of the Issuer s equity. 6. OTHER EVENTS SIGNIFICANTLY AFFECTING THE ENTITY'S OPERATION, WHICH OCCURRED 1. LC AFTER Corp S.A. THE ACCOUNTING PERIOD, BY THE DATE OF APPROVING THE LC CORP S.A.'S FINANCIAL STATEMENTS 6.1. Change in the amount of capital of Warszawa Przyokopowa Sp. z o.o. in the Group's companies On 21 January 2016, the District Court for Wrocław-Fabryczna in Wrocław, VI Commercial Division of the National Court Register (KRS), registered a change in the amount of the share capital of Warszawa Przyokopowa Sp. z o.o. The new share capital of the company totals PLN 33,003, All shares in the company are owned by the sole shareholder - LC Corp S.A. (30,000 shares having a total nominal value of PLN 33,003,000.00) Registration of a new company, LC Corp Invest XVII Sp. z o.o. Projekt 22 Sp. k. On 5 January 2016, the new name of the company - LC Corp Invest XVII Spółka z ograniczoną odpowiedzialnością Projekt 22 Spółka komandytowa - was registered. LC Corp S.A. is the limited partner of the Company, while LC Corp Invest XVII Spółka z ograniczoną odpowiedzialnością is the general partner representing the company and managing its affairs Increase of the contribution of LC Corp S.A. in LC Corp Invest XVII Sp. z o.o. Projekt 20 Sp. k. 11

12 On 7 January 2016, LC Corp S.A. made a payment of PLN 3,000, on account of the increase of contribution of 9 December On 15 February 2016, LC Corp S.A. increased the amount of its contribution by PLN 3,000,000.00, i.e. to the amount of PLN 83,609, Annexe to the loan agreement concluded by LC Corp S.A. and Getin Noble Bank S.A. On 29 January 2016, an Annexe to the loan agreement concluded on 19 December 2011 with Getin Noble Bank S.A. was signed, extending the repayment term of the bank loan to 31 March Loan agreement concluded by LC Corp Invest XVII Sp. z o.o. Projekt 20 Sp. k. On 26 February 2016, the Issuer's subsidiary undertaking, LC Corp Invest XVII Spółka z ograniczoną odpowiedzialnością Projekt 20 Sp. k., as borrower, concluded with PKO BP S.A. a loan agreement for the amount equivalent in EUR to PLN 63,500,000 intended for partial financing of stage 2 of the construction of an office complex with retail and service facilities and car parks under the name Silesia Star in Katowice at ul. Uniwersytecka 20. The loan will be secured by: a mortgage of up to 170% of the amount of loan granted on the land property owned by the borrower, established due to the increase of the security established in relation to stage 1, a support agreement concluded by the borrower, the bank and the Issuer, pursuant to which the Issuer, acting as the guarantor, will be obliged, among others, to provide financial support to the borrower under the circumstances specified in the agreement, along with submission by the Issuer to enforcement pursuant to Art. 777 of the Code of Civil Procedure, a promissory note with a promissory note agreement, a pledge by registration and the financial pledge on bank accounts of the borrower, pledge on the receivables, assignment of the rights under subordination loan agreements, subordination agreement whereas neither security has been established as at the date of these financial statements Appointment of new members of the Supervisory Board by the Extraordinary General Meeting On 20 January 2016, the Extraordinary General Meeting of the Issuer appointed new members to the composition of the Supervisory Board: Ms Joanna Gransort and Mr Grzegorz Korczyński Acquisition of real property by the Issuer On 1 March 2016, the Issuer acquired from an unrelated entity the perpetual usufruct right to the property located in Warsaw at ul. Skierniewicka/Siedmiogrodzka, with the total area of ha, for the purpose of a commercial project. Apart from the above-mentioned acquisitions, no other events occurred after 31 December 2015 that could significantly change the financial results of the LC Corp Group. 7. FACTORS SIGNIFICANT FOR THE COMPANY'S DEVELOPMENT AND PROSPECTS FOR ITS GROWTH 7.1. Risk factors Some of the risk factors of the property development conducted by the Group may transfer to the operation of the Company the main factors are described below. Risk related to the situation on the financial and real estate markets The factors that could exert a negative impact on the Group s activity include the policy implemented by the banking sector with regard to property development companies, as the scale of giving loans to property development companies will have a significant influence on the scale of commencing new projects. The policy of the banking sector with regard to mortgage loans affects natural persons and also represents a substantial risk factor. More restrictive criteria adopted by banks to assess their clients' creditworthiness caused numerous new potential residential buyers to face the creditworthiness barrier. The lack of new credit solutions and the limited credit availability may be a factor reducing the demand for new flats and houses. Another risk seems to be also the announced termination of the Mieszkanie dla Młodych (Flat for the Young) government programme. Foreign exchange risk 12

13 In the companies that manage commercial property, the revenue and liabilities connected with the financing agreement are denominated in EUR. In consequence, the Group is exposed to foreign exchange risk related to the fluctuations in the PLN/EUR exchange rate. The currency risk arising from the servicing of a foreign currency loan is minimized by collecting rents indexed against the currency of the loan financing the investment. The risk posed by time differences between invoicing and the repayment of the loan is minimized, depending on the market situation, by the purchase of a proper amount of currency at the dates of invoicing rents. The currency risk also includes the balance sheet valuation of commercial property and the valuation of loans (financing the projects), which as at the balance sheet date are converted from EUR to PLN according to the average exchange rate of the National Bank of Poland effective on that date. Interest rate risk The interest rate risk relates mainly to non-current financial liabilities, based on a floating interest rate. This risk is partly compensated by the indexation of revenue from lease. In some companies, financed by non-current investment loans, transactions are and will be entered into, in accordance with the provisions of those loan agreements, to hedge against the interest rate risks (for which the hedge accounting will be used). Credit risk The Group concludes transactions with renowned companies of good credit capacity. Moreover, owing to the current monitoring of receivables, the Group's exposure to the risk of uncollectible receivables is negligible. With regard to the Group's financial assets such as cash and cash equivalents, the Group's credit risk is minimal, because the Group deposits its funds in banks of good and stable financial standing. There is no significant concentration of credit risk in the Group. Liquidity risk The Group aims to maintain a balance between the continuity and flexibility of financing, by means of using different sources of financing such as bank loans and bonds. The Group has its own funds to secure the current activity and ongoing projects, however in order to expand its business the Group needs to obtain additional financing by entering into bank loan agreements or issuing bonds. Maturity dates of successive repayments are adjusted to projected proceeds from the sale of respective projects. Risk related to the implementation of property development projects The completion of property development projects, due to their complex legal and technical nature, is accompanied by numerous substantial risks. These risks include, in particular, failure to obtain permits necessary to make use of real property as planned by the Group, delays in completion of projects, costs exceeding the costs assumed in the budget due to unfavourable weather conditions, insolvency of contractors or subcontractors, labour disputes concerning contractors or subcontractors, shortage of construction materials or equipment, accidents or unforeseeable technical difficulties, impossibility of obtaining occupancy permits or other required permits regarding a building or buildings, or changes in the regulations concerning the use of land. If any of the above-mentioned risks takes place, there may occur delays in the completion of property development projects, an increase in costs or loss of revenue, freezing of funds invested to purchase the real property for development, and in some cases the inability to finalise projects, which may have a considerable adverse impact on the Group s operations, financial position or results. Administrative and construction related risk Imperfections in the provisions of the Polish legislation lead to situations where the construction administration authorities may issue administrative decisions (e.g. building permit) which infringe the provisions of law, which in turn may result in such decisions being appealed against by third parties acting out of their self-interest. Appeals against such decisions (whether justified or not) may result in an interruption of the construction process, which translates directly into the deterioration in the project profitability, and thus in the investor's financial results. Another significant risk relates to the ever more frequent demands from the municipal authorities that make the issuance of building permits conditional on additional factors, not following from the law. Risk related to liability for flats and houses after their sale The Group's activity will include in particular the sale of flats and houses. Therefore, the Group may be exposed to disputes and court proceedings related to completed projects, as a result of which the Group's undertakings may be obliged to fulfil specific obligations (e.g. resulting from the performance of bonds for construction works granted to clients). It may have a significant negative influence on the Group's activity, financial conditions or results. 13

14 Risk management in LC Corp S.A. is effected by a formalised process of regular identification, analysis and assessment of risk factors. The process of risk identification includes establishing relevant procedures and processes, whose introduction is aimed at eliminating or reducing the risk for the Company and for the Group Strategy The Company develops and subsequently, through the appropriate management of projects, implements an optimum strategy of using the current resources of the Group, as well as extending its activities, adjusted to the market situation. Its main elements are described below: Product and geographical diversification One of the key elements of the Group's strategy is to carry out property development projects in big Polish cities and in their vicinity. The key cities, from the Group's perspective, include: Warsaw, Wrocław, Kraków and Gdańsk. In each of these cities it is planned to carry out several projects, in many locations and to varying standards, in order to offer products addressed to different target groups. Extending the product and service range The Group intends to expand its property development activity, in the scope of building and managing modern commercial space, office space in particular, thus ensuring the diversification of revenue sources. Maintaining the required level of project profitability The company monitors the situation on a regular basis and accordingly starts the property development projects from its portfolio as well as monitors the property development market searching for projects which can ensure the required profitability in a given location and given market circumstances. Building the bank of land By monitoring the land property market, particularly in big agglomerations, the Group consistently increases its bank of land. For the purpose of creating the bank of land, the Group acquires and intends to acquire plots in attractive locations, enabling it to carry out property development projects for at least the following five years of the Group s activity. At present, the Group holds plots in Warsaw, Wrocław and its neighbourhood, Kraków, Gdańsk, Łódź and Katowice. Maintaining the appropriate financing structure The Group cooperates with renowned financial institutions. Founding on the quality of its possessed assets and experience of obtaining funds, the Group is able to finance up to 70% of its investments using bank loans or other external capital financing. Therefore, the Group can commit its own capital to numerous property development projects (as well as to the creation of the bank of land) and thus it is able to diversify the investment risk. The strategy for 2016 and subsequent years provides for an increase in the Group s share in the Warsaw market. 8. EMPLOYMENT STRUCTURE IN LC CORP 8.1. Employment structure in LC Corp S.A. The average employment in the Company in the year ended 31 December 2015 was as follows: Year ended 31 December 2015 Year ended 31 December 2014 The Management Board 5 5 White collar workers / administrative staff Blue collar workers 0 0 Total

15 8.2. System of control over share-based staff incentive schemes In 2015, the Company did not have any share-based staff incentive schemes. INCENTIVE 9. INFORMATION OR BONUS ON THE SCHEMES MEMBERS BASED OF THE ON ISSUER S MANAGEMENT AND SUPERVISORY BOARD 9.1. Value of remuneration, bonuses and benefits, including those obtained through incentive or bonus schemes based on shares, paid or due to members of the Management and Supervisory Board and the information about the value of remuneration for members of LC Corp S.A.'s Management and Supervisory Board for functions performed in the authorities of subsidiary undertakings. Payments made to members of the Management Board of LC Corp SA in the period from 1 January 2015 to 31 December 2015: Dariusz Niedośpiał remuneration, including bonuses, totalled PLN 2,177,000; no share-based payments Joanna Jaskólska remuneration, including bonuses, totalled PLN 1,145,000; no share-based payments Mirosław Kujawski remuneration, including bonuses, totalled PLN 1,247,000; no share-based payments Tomasz Wróbel remuneration, including bonuses, totalled PLN 568,000; no share-based payments Payments made to members of the Supervisory Board of LC Corp SA in the period from 1 January 2015 to 31 December 2015: Leszek Czarnecki remuneration totalled PLN 0; no share-based payments Andrzej Błażejewski remuneration totalled PLN 24,000; no share-based payments Remigiusz Baliński remuneration totalled PLN 24,000; no share-based payments Zbigniew Dorenda remuneration totalled PLN 24,000; no share-based payments Jakub Malski remuneration totalled PLN 24,000; no share-based payments 9.2. Holding of the Issuer s shares or rights to such shares by its management and supervisory staff as at the reporting date Supervisory staff holding the Issuer s shares Full name Leszek Czarnecki Andrzej Błażejewski Remigiusz Baliński Zbigniew Dorenda Jakub Malski Joanna Gransort Grzegorz Korczyński Function in the body Chairman of the Supervisory Board Vice-Chairman of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Share ownership 14,657, ,142 32,722-9, Management staff holding the Issuer s shares 15

16 Full name Function in the body Share ownership Dariusz Niedośpiał Joanna Jaskólska Tomasz Wróbel Mirosław Kujawski Małgorzata Danek President of the Management Board Vice-President of the Management Board Member of the Management Board Member of the Management Board Member of the Management Board 158,791 6, , Agreements between the Issuer and management staff which anticipate compensation in case they resign or are dismissed from their position without a material reason, or in case their dismissal results from a merger of the Issuer by way of a takeover Managerial contracts concluded by the Issuer and Members of the Management Board anticipate payments of six months remuneration in the case the Company terminates any such contract, and in the case of removal of a member of the management board or failure to appoint him for the new term after a change of the majority shareholder, the contracts anticipate the obligation to pay compensation equivalent to eighteen months' remuneration. 10. ADDITIONAL INFORMATION Major achievements in research and development The Company has no major research and development achievements Information on the acquisition of own shares As at the date of drawing up this report, the Company did not acquire own shares Branches of the Company The Company does not have any branches. 16

17 11. SUMMARY In the year 2015 the activity was focused on carrying out investment projects and searching for real estate for new investment projects for the Group s companies and managing commercial buildings by the Group s companies. While maintaining its financial security, the Group continued its investment projects and significantly expanded its offer through appropriate acquisitions. The Group s strategy assumes maintaining the scale of activity in the following years at a level achieved in 2015 (both in terms of sales volume and margins), as well as the strengthening of the other sector of its business, i.e. activity in the area of commercial property (mainly office space). Taking into account the further development of the Group in Q4 2015, a decision was made to commence the review of strategic options in all areas of the Group's business activity, as well as an analysis of the development potential of the real estate market in Poland (about which the Issuer informed in current report No. 82/2015 of 9 October 2015). As at the date of preparing these financial statements, the above-mentioned process was not completed. In the Management Board s opinion, the operating results and margins achieved in 2015 were satisfactory. 12. INFORMATION ABOUT THE AGREEMENT WITH AN ENTITY QUALIFIED FOR AUDITING FINANCIAL STATEMENTS 2015 On 12 October 2015, an agreement was concluded with Ernst & Young Audyt Polska Sp. z o.o. Sp. k., seated in Warsaw, on the audit of the financial statements and consolidated financial statements of LC Corp S.A. for the year The remuneration under the above agreement totals PLN 120,000 net. An agreement on the review of the financial statements and consolidated financial statements of LC Corp S.A. for the first half of 2015 was concluded on 24 July The remuneration under this agreement totals PLN 55,000 net On 28 October 2014, an agreement was concluded with Ernst & Young Audyt Polska Sp. z o.o. Sp. k., seated in Warsaw, on the audit of the financial statements and consolidated financial statements of LC Corp S.A. for the year The remuneration under the above agreement totals PLN 95,000 net. An agreement on the review of the financial statements and consolidated financial statements of LC Corp S.A. for the first half of 2014 was concluded on 24 July The remuneration under this agreement totals PLN 55,000 net. Furthermore, in 2014, the Company purchased training services for the amount of PLN 1, DECLARATION OF COMPLIANCE WITH CORPORATE GOVERNANCE RULES The declaration on the application of the Corporate Governance rules is attached to this report. I. II. 14. DECLARATION OF THE MANAGEMENT BOARD The Management Board of LC Corp Spółka Akcyjna hereby declares that the Company s continued activity is not at risk. Drawn up in: Wrocław, on 7 March 2016 Dariusz Niedośpiał - President of the Management Board Joanna Jaskólska Vice-President of the 17

18 Management Board Mirosław Kujawski Member of the Management Board Tomasz Wróbel Member of the Management Board Małgorzata Danek Member of the Management Board 18