Business activity statement of the Magellan Capital Group for the period from 1 January 2017 to 31 December 2017

Transcription

1 Business activity statement of the Magellan Capital Group for the period from 1 January 2017 to 31 December 2017

2 TABLE OF CONTENTS 1. Legal status and description of the Magellan Capital Group General information The composition of the Group and its capital and organizational connections as of the end of the reporting period Legal form of Group entities The Group management Structure of shareholders of the Company Financial position of the Group Sales and markets Proceeds and revenues Financial results Prospective development directions and perspectives Nature of external and internal factors that are important for the development of the Group External financing Bond issue scheme Bank credits and loans Loans received from the parent Banca Farmafactoring S.p.A Financial risk management Events with a significant impact on the operations and performance of the Group Additional information Number and face value of parent company shares held by members of managing and supervisory bodies Proceedings pending before courts, competent arbitration authorities or public authorities

3 1. Legal status and description of the Magellan Capital Group 1.1. General information The Magellan Capital Group (Group) is an international financial institution which specializes in offering financial products and services to entities operating in the medical market and in the local government entities market. The Group offers a wide array of services for current operation and investment financing. It delivers standard and tailored financial services which enable medical market and local government entities to manage their funds in an optimal and effective way. The Group holds a strong market position and has a high growth potential, which result from its several years of experience, ability to offer solutions tailored to current needs and accounting liquidity of its clients, high quality of management as well as the investors' trust which gives the Group high and stable level of external financing. Magellan S.A. and its subsidiaries have been part of the Italian banking group BFF Banking Group ( BFF ) since June Magellan Group and BFF together constitute one of the biggest and fastest growing institutions delivering financial solutions to the public and healthcare sectors in Europe The composition of the Group and its capital and organizational connections as of the end of the reporting period The composition of the Magellan Capital Group as of the end of the reporting period: Magellan S.A. the parent entity, with registered office in Łódź, operates in Poland MEDFinance S.A. subsidiary, with registered office in Łódź, operates in Poland, 100% of shares controlled by Magellan S.A. Magellan Česká republika s.r.o. subsidiary, with registered office in Prague, operates in Czech Republic, 100% of shares controlled by Magellan S.A. Magellan Central Europe s.r.o. subsidiary, with registered office in Bratislava, operates in Slovakia, 100% of shares controlled by Magellan S.A. DEBT-RNT sp. z o.o. subsidiary, with registered office in Łódź, operates in Poland, 100% of shares controlled by Magellan S.A. Komunalny Fundusz Inwestycyjny Zamknięty with registered office in Warsaw, operates in Poland, Magellan S.A. owns 100% of issued certificates MEDICO Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Zamknięty with registered office in Warsaw, operates in Poland, Magellan S.A. owns 100% of issued certificates Associated entities as of 31 December 2017 were: Kancelaria Prawnicza Karnowski i Wspólnik Spółka Komandytowa; Restrukturyzacyjna Kancelaria Prawnicza Karnowski i Wspólnik spółka komandytowa spółka komandytowa (it has been operating as an entity affiliated indirectly through DEBT-RNT Sp. z o.o. (the subsidiary of Magellan S.A.) since 8 April 2016). During the reporting period, Magellan S.A. was a major client of both law firms and had a material impact on the operational and financial policy of these entities. Magellan S.A., as a parent entity, performs full consolidation of financial statements of MEDFinance S.A., Magellan Česká republika s.r.o., Magellan Central Europe s.r.o., DEBT-RNT sp. z o.o., Komunalny Fundusz Inwestycyjny Zamknięty and MEDICO NS FIZ. 3

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5 Parent entity for Magellan S.A. In connection with the entrance of the strategic investor in 2016 and the changes made to the structure of share ownership, the parent company and the only owner of Magellan S.A. with 100% share ownership is Banca Farmafactoring S.p.A. A detailed description of the parent entity can be found in note 1.1 to the annual consolidated financial statement. Changes in the composition of the Magellan Capital Group Until the end of 2016 operations in Spain were managed by the Corporate Branch of Magellan S.A. in Spain with registered office in Barcelona. As in 2016 Magellan S.A. became part of the BFF Banking Group (BFF), which provides non-recourse factoring services to the public government and health services sector in Spain since 2011, Magellan S.A. and its parent entity decided to merge their operations on the Spanish market in order to achieve operational synergies. In 2016 Farmafactoring España S.A. took over the operations and the portfolio of assets of the Corporate Branch of Magellan S.A. in Spain. On 11 April 2017 the Management Board decided to close Corporate Branch of Magellan S.A. with registered office in Barcelona. Corporate Branch of Magellan S.A. in Spain was deregistered from the National Court Register by the decision of the District Court for Łódź- Śródmieście in Łódź, 20th Division of the National Court Register, issued on 31 May Corporate Branch of Magellan S.A. in Spain was also deregistered from the Spanish register on October 19th On 4 April 2017 MEDICO Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Zamknięty ( MEDICO NSFIZ ) was registered by the District Court in Warsaw, 7th Civil Register Division under the Rfi number Magellan S.A. owns 100% of investment certificates issued by the Fund. AgioFunds TFI S.A. with the registered office in Warsaw, Plac Dąbrowskiego 1, Warszawa, is the managing body of the Fund and represents it in front of third parties. MEDICO NSFIZ is considered as a subsidiary of Magellan S.A. On 10 May 2017 the Management Board of Magellan Central Europe, s.r.o. decided to close the company's division in the Czech Republic (Magellan Central Europe s.r.o. odštěpný závod CZ). Magellan Central Europe s.r.o. odštěpný závod CZ was deregistered from the Czech court register on October 9th Legal form of Group entities Parent company Magellan S.A., the parent company of the Magellan Capital Group, was established by a notarized deed in The company's registered office is located in Łódź at ul. Piłsudskiego 76. The company is entered in the register of entrepreneurs kept by the District Court, 20th Division of the National Court Register in Łódź, under KRS number Corporate bonds in the alternative trading system on Catalyst market In 2016 the Management Board of Magellan S.A. decided to introduce corporate bonds to the alternative trading system on the Catalyst market. The company's corporate bonds were introduced to the alternative trading system managed by BondSpot S.A. and to the alternative trading system managed by the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A.) on the Catalyst market. The first series of bonds was introduced to the alternative trading system on the Catalyst market in December 2016 and was listed since 28 December The next 16 series of bonds were issued in February 2017 and they were listed since 17 March The detailed information about the bonds traded on the Catalyst market can be found in note 30 to the consolidated financial statement for year

6 In the preceding years other Magellan S.A.'s securities were traded on Warsaw Stock Exchange the company's shares were listed on the main market of the Warsaw Stock Exchange in Subsidiaries MEDFinance S.A. with the registered office in Łódź was registered on 30 July 2010 by the District Court for Łódź-Śródmieście in Łódź, 20th Division of the National Court Register, under the KRS number As of the end of the reporting period the share capital of the company, which consists of 8,500,000 ordinary shares with the par value of 1 PLN each, was 8,500,000 PLN. Magellan S.A. owns 100% of MEDFinance S.A. shares. The core business of MEDFinance S.A. is end-to-end financing of investments carried out by entities operating in the medical market. Magellan Česká republika, s.r.o. (formerly: MedFinance Magellan s.r.o.) with the registered office in Prague, Czech Republic, was registered in the Commercial Register kept by the Municipal Court in Prague, Division C, Ref , on 25 April The company's share capital is 700,000 CZK. Magellan S.A. owns 100% of company's shares. The core business of Magellan Česká republika, s.r.o. is provision of financial services to entities in the Czech healthcare market. Magellan Central Europe s.r.o. (formerly: Magellan Slovakia s.r.o.) with the registered office in Bratislava, the Slovak Republic, was entered into the Commercial Registered kept by the District Court Bratislava 1 under the number 55250/B. The company's share capital is 6,500 EUR. Magellan S.A. owns 100% of company's shares. The name of the Magellan Slovakia s.r.o. subsidiary with the registered office in Bratislava was changed by the decision of the District Court Bratislava 1 of 17 December 2015 and the Slovakian company now operated under the name of: Magellan Central Europe s.r.o. The core business of Magellan Central Europe s.r.o. is the provision of financial services to entities in the Slovakian healthcare market. The foreign subsidiaries offer financial services to the entities in the healthcare sector of the Czech Republic and Slovakia within the framework of the same business solutions as the ones used in Poland. DEBT-RNT sp. z o.o. (originally: RNT sp. z o.o.) the Articles of Association of the company were signed on 23 March The company s share capital, which consists of 8,000 ordinary shares with the par value of 50 PLN each, amounts to 400,000 PLN and has been fully taken up by Magellan S.A. Pursuant to the decision of the District Court for Łódź-Śródmieście in Łódź, 20th Division of the National Court Register, issued on 31 March 2016, the company DEBT-RNT sp. z o.o. was registered in the National Court Register under the KRS number The business of DEBT- RNT sp. z o.o. consists of restructuring of difficult receivables. Komunalny Fundusz Inwestycyjny Zamknięty (formerly: Municypalny Fundusz Inwestycyjny Zamknięty) was registered in the District Court in Warsaw, 7th Civil Register Division under the Rfi number on 1 December The Fund has been incorporated for an unlimited period of time with the investment objective to increase the value of its assets as a result of increasing the value of deposits. The Fund shall work towards this objective, in particular through offering financial products and services to entities operating on the local government market. Magellan S.A. owns 100% of investment certificates issued by the Fund. Komunalny FIZ is a closed-end investment fund, whose operations are subject to the provisions of the Act on investment funds of 27 May 2007 (Journal of Laws of 2014, item 157 as amended) and supervised by the Polish Financial Supervision Authority. AgioFunds Towarzystwo Funduszy Inwestycyjnych S.A. with the registered office in Warsaw, Plac Dąbrowskiego 1, Warszawa, is the managing body of the Fund and represents it in front of third parties. The registered office and 6

7 address of AgioFunds Towarzystwo Funduszy Inwestycyjnych S.A. is the registered office and address of the Fund. MEDICO Niestandaryzowany Sekurytyzacyjny Fundusz Inwestycyjny Zamknięty ( MEDICO NSFIZ ) was registered by the District Court in Warsaw, 7th Civil Register Division under the Rfi number on 4 April It is a closed-end securitization investment fund, whose operations are subject to the provisions of the Act on investment funds and the management of alternative investment funds of 27 May 2004 (Journal of Laws of 2004, number 146, item 1546 as amended) and supervised by the Polish Financial Supervision Authority. AgioFunds Towarzystwo Funduszy Inwestycyjnych S.A. with the registered office in Warsaw, Plac Dąbrowskiego 1, Warszawa, is the managing body of the Fund and represents it in front of third parties. The registered office and address of AgioFunds Towarzystwo Funduszy Inwestycyjnych S.A. is the registered office and address of the Fund. Magellan S.A. owns 100% of investment certificates issued by the Fund The Group management Parent company Composition of the Management Board of Magellan S.A. as of 31 December 2017: Krzysztof Kawalec President of the Management Board, Chief Executive Officer Rafał Karnowski Vice President of the Management Board, Chief Legal Officer Michele Antognoli Member of the Management Board, Integration Director in BFF Group. Urban Kielichowski Member of the Management Board, Chief Operations Officer Radosław Moks Member of the Management Board, Chief Sales Officer Wojciech Wolski Member of the Management Board, Chief Financial Officer In 2017, the composition of the Management Board of Magellan S.A. changed. Composition of the Management Board of Magellan S.A. prior to 11 July 2017: Krzysztof Kawalec President of the Management Board Grzegorz Grabowicz Vice-President of the Management Board Emanuele Bona Member of the Management Board Rafał Karnowski Member of the Management Board Urban Kielichowski Member of the Management Board On 11 July 2017 the Company received from Mr. Grzegorz Grabowicz his resignation from the office of the Vice-President and Member of the Management Board of Magellan S.A. effective from 11 July On the same day the Company's Supervisory Board appointed Mr. Radosław Moks as the Member of the Management Board of Magellan S.A. The composition of the Management Board of Magellan S.A. from 11 July 2017 to 2 October 2017: Krzysztof Kawalec President of the Management Board Emanuele Bona Member of the Management Board Rafał Karnowski Member of the Management Board Urban Kielichowski Member of the Management Board Radosław Moks Member of the Management Board On 2 October 2017 the Company received from Mr. Emanuele Bona his resignation from the office of the Member of the Management Board of Magellan S.A. effective from 2 October On 3 October 2017 the Company's Supervisory Board appointed Mr. Michele Antognoli as the Member of the Management Board of Magellan S.A. At the same time the Supervisory Board appointed Mr. Rafał Karnowski to be the Vice-President of the Management Board. The composition of the Management Board of Magellan S.A. from 3 October 2017 to 1 December 2017: Krzysztof Kawalec President of the Management Board Rafał Karnowski Vice President of the Management Board 7

8 Michele Antognoli Member of the Management Board Urban Kielichowski Member of the Management Board Radosław Moks Member of the Management Board On 1 December 2017 the Company's Supervisory Board appointed Mr. Wojciech Wolski as the Member of the Management Board of Magellan S.A., expanding the Management Board to consist of six people. Composition of the Management Board of Magellan S.A. since 1 December 2017: Krzysztof Kawalec President of the Management Board Rafał Karnowski Vice President of the Management Board Michele Antognoli Member of the Management Board Urban Kielichowski Member of the Management Board Radosław Moks Member of the Management Board Wojciech Wolski Member of the Management Board The Management Board of the company did not change after the end of the reporting period. Composition of the Supervisory Board of Magellan S.A. as of 31 December 2017: - Massimiliano Belingheri Chairman of the Supervisory Board - Carlo Zanni Vice-Chairman of the Supervisory Board - Piotr Stępniak Member of the Supervisory Board In 2017, the composition of the Supervisory Board of Magellan S.A. changed. Composition of the Supervisory Board of Magellan S.A. prior to 31 May 2017: - Massimiliano Belingheri Chairman of the Supervisory Board - Carlo Zanni Vice-Chairman of the Supervisory Board - Piergiorgio Bicci Member of the Supervisory Board - Jarosław Iwanicki Member of the Supervisory Board - Piotr Stępniak Member of the Supervisory Board On 31 May 2017 the Company received an information that Mr. Jarosław Iwanicki and Mr Piergiorgio Bicci resigned from the office of the Member of the Supervisory Board of Magellan S.A. effective from 31 May Composition of the Supervisory Board of Magellan S.A. since 31 May 2017: - Massimiliano Belingheri Chairman of the Supervisory Board - Carlo Zanni Vice-Chairman of the Supervisory Board - Piotr Stępniak Member of the Supervisory Board After the end of the reporting period the composition of the Supervisory Board did not change. Subsidiaries MEDFinance S.A. The composition of the Management Board of as of the end of the reporting period: Radosław Moks President of the Management Board The Management Board of the company did not change during the reporting period. However; the composition of the Management Board of MEDFinance S.A. changed after the end of the reporting period. On 26 January 2018 Mr. Mariusz Błoch was appointed to be a Member of the Management Board. 8

9 Composition of the Management Board of MEDFinance S.A. since 26 January 2018: Radosław Moks President of the Management Board Mariusz Błoch Member of the Management Board Composition of the Supervisory Board as of the end of the reporting period: Krzysztof Kawalec Chairman of the Supervisory Board Tomasz Mrowczyk Member of the Supervisory Board Piergiorgio Bicci Member of the Supervisory Board Composition of the Supervisory Board changed during the reporting period. Composition of the Supervisory Board of MEDFinance S.A. prior to 11 July 2017: Grzegorz Grabowicz Chairman of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Tomasz Mrowczyk Member of the Supervisory Board Piergiorgio Bicci Member of the Supervisory Board On 11 July 2017 the Company received from Mr. Grzegorz Grabowicz his resignation from the office of the Member of the Supervisory Board of MEDFinance S.A. The composition of the Supervisory Board of MEDFinance S.A since 11 July 2017: Krzysztof Kawalec Member of the Supervisory Board Tomasz Mrowczyk Member of the Supervisory Board Piergiorgio Bicci Member of the Supervisory Board On 3 November 2017 the Supervisory Board appointed Mr. Krzysztof Kawalec as the Chairman of the Supervisory Board. After the end of the reporting period there were no changes to the composition of the Supervisory Board of MEDFinance S.A. Magellan Česká republika, s.r.o. The composition of the Management Board as of the end of the reporting period: Rafał Skiba Member of the Management Board Ladislav Valabek Member of the Management Board The Management Board of the company did not change during the reporting period. Composition of the Supervisory Board as of the end of the reporting period: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Rafał Karnowski Member of the Supervisory Board During the reporting period there were changes to the Supervisory Board of Magellan Česká republika, s.r.o. Composition of the Supervisory Board prior to 11 July 2017: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Grzegorz Grabowicz Member of the Supervisory Board In connection with Mr. Grzegorz Grabowicz resignation from the office of the Member of the Supervisory Board effective from 11 July 2017 between 11 and 20 July 2017 the Supervisory Board consisted of Krzysztof Kawalec and Emanuele Bona. On 20 July 2017 by the decision of the Sole Shareholder the composition of the Supervisory Board was extended to three people and Mr Rafał Karnowski was appointed to be the Member of the Supervisory Board. 9

10 Composition of the Supervisory Board of Magellan Česká republika, s.r.o. since 20 July 2017: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Rafał Karnowski Member of the Supervisory Board. Magellan Central Europe s.r.o. Composition of the Management Board as of the end of the reporting period: Rafał Skiba Member of the Management Board Ladislav Valabek Member of the Management Board. The Management Board of the company did not change during the reporting period. Composition of the Supervisory Board as of the end of the reporting period: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Rafał Karnowski Member of the Supervisory Board During the reporting period there were changes to the Supervisory Board of Magellan Central Europe s.r.o. Composition of the Supervisory Board prior to 11 July 2017: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Grzegorz Grabowicz Member of the Supervisory Board In connection with Mr. Grzegorz Grabowicz resignation from the office of the Member of the Supervisory Board effective from 11 July 2017 between 11 and 20 July 2017 the Supervisory Board consisted of Krzysztof Kawalec and Emanuele Bona. On 20 July 2017 by the decision of the Sole Shareholder the composition of the Supervisory Board was extended to three people and Mr Rafał Karnowski was appointed to be the Member of the Supervisory Board. Composition of the Supervisory Board of Magellan Central Europe s.r.o. since 20 July 2017: Emanuele Bona Member of the Supervisory Board Krzysztof Kawalec Member of the Supervisory Board Rafał Karnowski Member of the Supervisory Board. DEBT-RNT Sp. z o.o. The composition of the Management Board as of the end of the reporting period: Janusz Burkot - President of the Management Board The Management Board of the company changed during the reporting period. To the date of the 28th of March 2017, the President of the Management Board was Paweł Szefler who was dismissed due to the Stakeholder s resolution on the 28th of March As of the same date, Janusz Burkot has been appointed as the President of the Company Structure of shareholders of the Company Within the accounting period the Shareholders structure of the Parent of Magellan Capital Group - the Company Magellan S.A did not change. 10

11 The structure of shareholders of the Parent as at the end year 2017 and the comparable period of 2016: Shareholders on / Number of shares Value of shares (PLN) Share % Votes during Meeting of Shareholders of the Company Banca Farmafactoring S.p.A. 128,291,677 38,487, % 128,291,677 Total 128,291,677 38,487, % 128,291, Financial position of the Group 2.1. Sales and markets In 2017, Magellan Capital Group continued the activity in the area of financial services, financial intermediation and investment financing for entities operating on the health care market and on the market of local government units. In 2017, Magellan Capital Group conducted business activity on the Polish (Magellan S.A, MEDFinance S.A, Komunalny FIZ, DEBT-RNT Sp. z o.o., MEDICO NSFIZ), Czech (Magellan Česká republika s.r.o.), and Slovak market (Magellan Central Europe s.r.o.). The Group's presence on foreign markets gives it a competitive advantage by introducing territorial diversification, both in the area of sales generated and diversification of the portfolio of financial assets. The total value of the Group's contracts in 2017 reached PLN 2,894,363 thousand and was by PLN 499,090 thousand, i.e. 21% higher than in the comparable period. As part of on-balance sheet contracts, in 2017 the Group concluded agreements with the total value of PLN 2,325,802 thousand in relation to the value of PLN 1,824,837 thousand of agreements concluded in 2016, which means an increase by PLN 500,965 thousand, i.e. by 27%. In 2017, the Group's off-balance-sheet contract value amounted to PLN 568,561 thousand and was at a comparable level as compared to 2016 (PLN 570,436 thousand). The table below presents the Group's contracts executed in 2017 and data in PLN thousand: Product type Execution Execution Change Change % On-balance sheet contracts 2,325,802 1,824, ,965 27% Off-balance-sheet contracts 568, ,436-1, % Contracting altogether 2,894,363 2,395, ,090 21% Data for the comparable period presented in the table include changes and annexes to concluded contracts signed until Realized on-balance sheet contracts correspond to financial assets which, as a result of signed contracts, were included in the Group's assets during particular periods. On the other hand, offbalance-sheet contracts are framework and conditional agreements concluded with respect to products offered by the Group, which do not increase the value of the Group's assets at the time of signing. The contracting is presented at par value under the concluded contracts. 11

12 The Group's high level of activity contributed to very good sales results: the Polish market - in 2017, the Komunalny FIZ fund operating on the market of local governments executed on-balance sheet contracts almost six times higher than in the previous year, and MEDFinance S.A., a company providing services in the field of comprehensive financing of investment processes, achieved in 2017 a 32% increase in sales in comparison to 2016; foreign markets - in 2017, the Slovakian company achieved a 58% increase in on-balance sheet contracts in relation to the comparable period. The charts below show the Group's on-balance sheet and off-balance-sheet contracts in PLN thousand executed in subsequent quarters of 2017 and The Polish market is the most important for the Group and has the largest share in the value of sales and sales revenues, but the Group also achieves very good sales results on the Slovakian market. The table below presents the share of foreign markets in the Group's key results for 2017 and as at the 31st of December Data in thousands of PLN Magellan Capital Group The Polish market Foreign markets altogether Transactions between business segments (consolidation eliminations) Foreign markets as a % of the Group's total value On-balance sheet contracts 2,325,802 2,027, ,870-13% Sales revenue 179, ,224 40,333 (3,985) 22% Financial assets portfolio 2,656,817 2,213, ,304 (112,215) 21% The Group strives to cooperate and maintain business relations with the largest possible number of counterparties and was not dependent on a single trading partner during the reporting period. In order to ensure the security of its assets, the Group applies the principle of diversification of the financial assets portfolio and maintains the exposure ratio of an individual customer at a safe level in relation to the value of the financial assets portfolio. 12

13 The Group believes that the market in which it operates has growth potential. The mismatch of financial flows in the health care system generates a constant demand for services provided by the Group. In the Group's opinion, the investment needs of health care services, both in terms of financing new facilities and adapting them to the European Union standards, create a great potential for its further development by offering investment process financing services in the medical market. Additionally, the Group actively operates on the financial services market addressed to local government units. In the Group's opinion, this market is also characterised by a growing demand for financing of current operations and investment activities, which translates directly into a growing interest in the products offered. The Group companies operate on the Polish, Czech and Slovakian markets. The presence on foreign markets allows the Group to use the experience gained on the Polish market and significantly increases its development potential. It also gives the Group a competitive advantage by introducing territorial diversification both in the demand for offered services and generated sales and diversification of the portfolio of financial assets held Proceeds and revenues Given the specificity of the Group's business, the figures presented below characterise the scale of operations by listing the following items: proceeds, commissions and equivalent revenue, including the value of proceeds and earned capital repayments for loans granted and financial leasing agreements. The value of proceeds, commission and equivalent revenue comprise: proceeds, offsets and deductions due to the realization of the portfolio of financial assets held - repayment of the capital part of receivables (excluding proceeds from loans and financial leasing), commission income and the discount for individual products, interest income on individual products classified as core business. From 01/01/2017 to 31/12/2017 From 01/01/2016 to 31/12/2016 (in PLN thousand) (in PLN thousand) Proceeds, commissions and equivalent revenue 870,150 1,054,935 Cost corresponding to proceeds (694,739) (901,450) Revenue from sales of services 175, ,485 Revenue from sales of goods 4,161 8,587 Total sales revenue 179, ,072 Proceeds from repayment of loans and finance lease agreements 1,145, ,922 Total revenue 2,019,744 1,761,444 In 2017, the Group's turnover, interpreted as the total amount of proceeds from the portfolio of financial assets held, were PLN 875,850 (in thousand) and were lower by PLN 184,785 (in thousand), i.e. 18% lower than the turnover in Cost corresponding to the proceeds is the value of realized financial assets, at the purchase price. In 2017, proceeds (including compensations, deductions and accrual income) increased by revenues from sales of goods, repayment of loans granted by the Group and proceeds from financial leasing contracts amounted to PLN 2,019,744 (in thousand) and were by PLN 258,300 (in thousand), i.e. 15% higher than the proceeds of the comparable period. In 2017, the Group's revenues were PLN 179,572 (in thousand) and were higher by PLN 17,500 (in thousand), i.e. 11% higher compared to the revenues in

14 2.3. Financial results During 01/01/ /12/2017, Magellan Capital Group generated a net profit of PLN 33,861 (in thousand). The 2017 net result was higher by PLN 4,025 (in thousand), i.e. 13% higher than the result achieved in In 2017, the Group recorded a positive dynamics of the financial result, which was associated with excellent sales results. The high level of diversification in the markets where the Group operates, plus a diversified product offer, allowed the Group to achieve a competitive advantage resulting from its presence on various markets, including foreign, and the on-balance sheet contracts by the Group in 2017 increased by 27% compared to Good sales results of 2017 were reflected in the growing value of the portfolio, which at the end of 2017 reached the value of PLN 2,656,817 (in thousand) - namely PLN 684,014 (in thousand) i.e. 35% higher than the value of the portfolio at the end of the comparable period. Within the Group, significant growth values of the portfolio at the end of 2017 were recorded by the Slovak company Magellan Central Europe s.r.o. (growth by PLN 177,713 (in thousand), i.e. by 48% compared to 2016) and Komunalny FIZ (almost 4.5-fold growth). Such a high increase in the assets portfolio contributed to the increase in revenues of both entities and the generation of good financial results. Selected basic financial categories can be found in the table below. Category 01/01/ /12/2017 (in PLN thousand) 01/01/ /12/2016 (in PLN thousand) Change ( ) Change as % of the 2016 performance Proceeds, commissions and equivalent revenue including the repayment of loans and leasing 2,019,744 1,761, ,300 15% granted Total revenue from sales 179, ,072 17,500 11% Portfolio financing costs 68,712 70,048-1,336-2% Cost margin (sales revenue minus the value of goods sold and the cost of financing) 106,913 83,642 23,271 28% Costs by nature of expense ,142 13,429 27% Net profit 33,861 29,836 4,025 13% Earnings per share in PLN % On-balance sheet contracting of financial assets 2,325,802 1,824, ,965 27% Value of the financial assets portfolio 2,656,817 1,972, ,014 35% Operating margin (EBIT/sales revenues) 25% 22% 3 pp. 14% Net profit margin (net profit/total sales revenues) 19% 18% 1 pp. 6% Costs by nature of expense/sales revenue 35% 30% 5 pp. 17% Operational leverage - Costs by nature of expense (adjusted for write-downs and provisions)/sales revenues (adjusted for writeoffs 24% 25% -1 pp. -4% recognized in this item) Cash flow ratio (current assets/short-term liabilities) % Debt ratio (liabilities/total assets) 84% 81% 3 pp. 4% Financial leverage (interest liabilities/equity) % 14

15 In 2017, the Group's net profitability calculated as the ratio of realized net profit to sales revenues was 19% and was higher by 1 pp., i.e. by 6% compared to The operating margin also increased as the ratio of EBIT to sales revenues, which was 25% in 2017, compared to 22% in 2016 (increase by 3 pp., i.e. by 14%). Operating expenses related to the core operations in 2017 were PLN 65,571 (in thousand) and were higher than the costs of the comparable period by PLN 13,429 (in thousand), i.e. by 27%. The main factor causing an increase in operating costs was the value of impairment losses recognized in 2017 and included in the costs by nature of expense - PLN 18,838 (in thousand) compared to PLN 7,867 (in thousand) in the comparable period. Due to higher operating costs in 2017, the Group achieved operating leverage, calculated as the ratio of costs by nature of expense reduced by the costs of created provisions and write-offs to sales revenues corrected by write-offs included in this item, at 24%, against 25% in the comparable period in As a result, an 11% increase in sales revenues and a 27% increase in the costs of core operations, translated into a 29% increase in operating profit and a 13% increase in net profit. Entry in 2016 into an international banking group strengthened the liquidity position of the Group and ensured its access to stable financing in the form of loans granted by the parent company. Financing received from the BFF in 2017 carries a maturity of less than 1 year, which can be extended for subsequent periods in line with the Group's needs. It has contributed to the increase in the value of short-term liabilities. The change in the structure of financing and the increase in short-term liabilities affected the change in the cash flow ratio calculated as the ratio of current assets to the value of short-term liabilities, which was 0.64 as of 31 December 2017 vs 0.84 as of 31 December Current assets as of 31/12/2017 were valued at PLN 1,301,639 (in thousand) and increased by PLN 246,532 (in thousand), i.e. by 23% compared to PLN 1,055,107 (in thousand) as of 31/12/2016. On the other hand, short-term liabilities at the end of 2016 were PLN 2,040,190 (in thousand) and increased by PLN 778,471 (in thousand), i.e. by 62% compared to PLN 1,261,719 (in thousand) at the end of Simultaneously, there was an increase in the value of non-current assets by PLN 431,385 (in thousand), i.e. by 44%, from PLN 986,195,000 (in thousand) as of 31/12/2016 to the level of PLN 1,417,580 (in thousand) as of 31/12/2017, mainly due to the increase in the Group's long-term portfolio of financial assets. The share of equity in the financing of the Group's assets was 16% at the end of The remaining part in the structure of liabilities consisted of liabilities and provisions for liabilities of 84% (including third party loans of 41%, bank loans and credit facilities of 46%, medium-term debt securities of 7%, other financial liabilities of 5%, others of 1%) Prospective development directions and perspectives Development directions and perspectives of the parent company in the Group - Magellan S.A. Business conditions - the capability to generate sales According to the Company, the entities acting in the public sector, including public hospitals, face a considerable quality change in 2018, both in relation to how services are contracted and financed. This will be the first full year in which hospital networks are operating and the amended Act on Health Care Financing from Public Funds (Ustawa o finansowaniu zdrowia z funduszy publicznych) is in force. As a result, the increase of funds in the health care system should bring about a rise in the hospitals' revenues. The Company's view is that hospitals and their suppliers will still be in need of working 15

16 capital. Despite the fact that the health care financing rate and methods have been changed, the hospitals will still search for external funding sources as means of improving their unfavourable cashflow situation. It will not be possible to balance the hospitals' payment needs with regard to their suppliers, as well as the increasing medical and non-medical staff salaries with their scale of revenues. The suppliers, on the other hand, faced with restrictions regarding the statutory ban on assigning the receivables on third parties, will look for alternative solutions. The Company's view is that local government units will take increased interest in product solutions allowing for a higher EU-funds absorption within the new financial perspective The demand for factoring services on the part of local government suppliers will also increase, as a consequence of the growing liquidity needs of the SME sector. Legal and political conditions In 2017, the government adopted two important acts regarding the design of the hospital market and the service contracting method (the so-called Act on Hospital Network, ustawa o sieci szpitali), and the health care financing rate from public funds (amendment of the Act on Health Care Financing from Public Funds). In spring 2017, the Sejm passed an act of law establishing the System of Basic Hospital Provision of Medical Benefits, commonly called the hospital network. The system is expected to secure access to benefits such as hospital treatment, highly specialist services, or outpatient specialist care. Hospitals qualifying to the network have a guarantee of a 4-year contract with the National Health Fund (NFZ) and are financed on a lump-sum basis, with the amount depending on the scope of services provided and reported in the preceding reporting period. The network comprises of 594 hospitals. The amendment of the Act on Health Care Financing from Public Funds provides for steadily growing expenditures for health care. The target level (6% GDP) is to be reached in In 2018, at least 4.67% of GDP will be allocated to health care, and 4.86% in 2019, respectively. The additional funds are to be used, in the first place, to finance health care services (in the form od subsidy for the NFZ). The list of services will be defined by the Minister for Health on an annual basis. These will include i.a. services with longest queues. The key factors in the local government market in 2018 are the new EU perspective and the need to cover the so-called non-eligible costs in the projects managed by local governments. As a consequence, the Company envisions a further growing demand for offered products by both local governments and their suppliers. The economic upturn is expected to continue, resulting in higher demand for working capital financing of small and medium enterprises. Planned development directions in 2018 The Company will continue its policy of approximating the product offer to the changing market conditions. New products, non-standard solutions tailored to the requirements of the customers, flexibility with regard to capital acquisition are meant to guarantee the leading position in the market of financing public entities and their suppliers. The Company's primary markets will still be public hospitals and their suppliers in the Polish, Slovakian and Czech medical markets. At the same time, the Company will continue its operations in the local government market, where its main focus are solutions taking into account the needs of local governments and their suppliers, as well as in the factoring services market. In 2016, the Company has acquired a strategic investor - an Italian entity Banca Farmafactoring S.p.A., with its registered address in Milan, which has become the Company's sole shareholder. The synergies gained thanks to the collaboration with the new business partner have substantially influenced the Company's future standing, and the projected development directions. The Company's presence in the BFF Banking Group has not only made it possible to decrease its financing costs, use the financial leverage effect, and achieve operational benefits, but also strengthened the Company's position as a business partner on the European level in the eyes of multinational companies. The policy of searching for and using the synergy potential of collaboration with BFF will be continued, which is expected to further enhance the Company's business scale. 16

17 Development directions and perspective of the subsidiaries Magellan Central Europe s.r.o. and Magellan Česká republika, s.r.o. In 2018, foreign companies will continue their operations based on their developed business models, by simultaneously expanding their acquisition activities in new areas, that is the local government market (start-up in the Czech market and continuation in the Slovakian market). Czech market The local government market will be the main growth generator. The company Magellan Česká republika, s.r.o. completed their first transaction there in January The attractiveness of that market can be mainly attributed to indebtedness limits for local governments, forcing around 8% of them to substantial debt rate reductions. The Company has prepared a solution aiming at supporting investment activities by local governments without having the qualified debt for local governments increased. In the medical sector, the Company is awaiting a slightly higher demand for overdue receivables financing services, compared with 2017, which will result from increased deficit in hospital in the second half of The increase will be triggered by the obligatory 10% pay rises for all public-sector employees (the pay rise was adopted by the government). The Slovakian market The terms for adjusting debts of Slovakian hospitals set in the government program are a considerable departure from what would be expected in the market, which enhances the attractiveness of the Magellan Central Europe s.r.o's offer. At the same time, the Company monitors the activities of the hospitals' suppliers to improve the debt adjustment program's terms, which translates into a temporary incapability to use the market to its full potential. In 2018, the Company intends to launch a new receivables service for non-transferable receivables, which will make it possible to provide services for this part of the sector, which is currently out of scope of the Company's interest due to legal barriers. On account of the planned expansion of the BFF Banking Group to the Croatian market, Magellan Central Europe s.r.o, as the company liable for sale in the region, will improve its attractiveness for international customers dealing directly in the Slovakian and Croatian markets. MEDFinance S.A. The Company's assessment is that the investment and investment financing markets are bound for a dynamic growth. The medical investment market in the next quarters will be largely determined by the long-term EU grants. Apart from products dedicated to investment financing, the Company also offers financial products dedicated to hospitals engaging in investments co-financed from EU grants. Investments in public health care are still financed primarily with funds originating from grants and financial means acquired from entities established based on the Act on medical activity (ustawa o działalności leczniczej). The Company assesses that the long-term investment needs of the medical sector in Poland are high, the estimate data of the Ministry and the Association of Polish Counties (Związek Powiatów Polskich) suggest that the investment needs of the sector amount to as much as a dozen billion of Polish zloty. The main investment-need driving factors are: increasing requirements and standards required by NFZ; hospitals in need of systematic investments into their medical equipment base; limited access to grants from local governments and EU; sanitary and fire protection regulations. In 2017, the government adopted two important acts regarding the design of the hospital market and the service contracting method (the so-called Act on Hospital Networks, ustawa o sieci szpitali), and the health care financing rate from public funds (amendment of the Act on Health Care Financing from Public Funds). In spring 2017, the Sejm passed an act of law establishing the System of Basic Hospital Provision of Medical Benefits, commonly called the hospital network. The system is expected to secure access to benefits such as hospital treatment, highly specialist services, or outpatient specialist care. Network- 17

18 qualified hospitals have a 4-year contract with the NHF and are financed as a lump sum whose amount will depend on the scope of services performed and reported in the previous reporting period. The network comprises of 594 hospitals. The amendment of the Act on Health Care Financing from Public Funds provides for steadily growing expenditures for health care. The target level of 6% of the GDP is to be reached in In 2018, at least 4.67% of the GDP will be allocated for health care with 4.86% in 2019, respectively. Additional funds are to be primarily allocated for financing (in the form of NHF subsidies) of healthcare services. The list of healthcare services will be defined by the Minister for Health on an annual basis. They are supposed to be services with the longest waiting periods. In 2016, the company started its operations by granting loans to medical professionals and individuals running businesses. In 2018, it plans to further develop in this market segment Nature of external and internal factors that are important for the development of the Group External factors shaping the environment and conditions of the Group's operations and primarily affecting its development potential include: Current political situation and declarations regarding plans to introduce changes in the health care system; Changing macroeconomic values and the general situation on financial markets; The overall economic situation in the country, especially changes in the cash flow situation of units in the medical sector and the local government units sector; Changes in the strategies of operation of competing companies and banks; The development of baseline interest rates and the cost of external financing used by the Group; Legal environment, especially the conditions shaping court rulings regarding the product offer of the Group. Some internal factors conditioning the maintenance of the Group's development pace include: Continuation of the current business line and development strategy of the Group; Intensive development of operations on foreign markets and further development of a business line dedicated to financing investment processes in the health care sector; Development of a business line dedicated to financing self-government units; Maintenance and further development of cooperation with the largest customers; Entry of Magellan S.A. and its subsidiaries as part of the international banking group of the BFF Banking Group and the resulting opportunities: (i) Changes in the structure and availability of financing through the use of financing provided by the parent company; (ii) Possible increase in the scale of the Company s operations in Poland as a result of the use of financial leverage; (iii) Benefits of scale enjoyed by the newly established corporate group, based on relationships with suppliers of health care entities; (iv) Benefits of risk diversification and optimized taking advantage of resources as a result of integration of BFF and the Company. 3. External financing In 2017, the Group increased the level of external financing - from PLN 1,529,997 (in thousand) as of 31 December 2016 to PLN 2,139,036 (in thousand) as of 31 December This translates as an increase in external financing by PLN 609,039 (in thousand), i.e. by 40%. The increase in the level of external financing resulted mainly from the increase in financing in the form of bank loans. The average level of external financing in 2017 was PLN 1,725,096 (in thousand) and was higher than the average level of financing in 2016 by PLN 341,068 (in thousand) (25%). 18

19 3.1. Bond issue scheme In the reporting period, the bond issue scheme was held by Magellan S.A., the Group parent company. As of 1 December 2017, the company had one active bond issue scheme valued at PLN 750 million in mbank S.A., allowing the issue of coupon bonds with a maturity of 360 days to 5 years. The value and structure of issued bonds depends on the current and anticipated demand for cash and on the maturity of issue-financed assets. The bonds issued under the agreement with Alior Bank S.A. and the bonds issued under the scheme agreement with Raiffeisen Bank S.A. were repaid early in September Both schemes expired in As of 31/12/2017 the nominal value of issued bonds was PLN 150,041 (in thousand) compared to PLN 420,849 (in thousand) as of 31/12/2016. This translates as a drop in financing with own bonds by PLN 270,808 (in thousand), i.e. by 64%. The average level of corporate bonds financing in 2017 was PLN 292,248 (in thousand) and was lower than the average level of financing in 2016 by PLN 259,622 (in thousand) (-47%). The use of the limits held (nominal values) as of 31 December 2017: Under mbank S.A. scheme: PLN 750,000 (in thousand) - limit granted; PLN 150,041 (in thousand) - issued bonds; PLN 599,959 (in thousand) - limit to be used; As of 31/12/2017, the carrying amount of issued bonds was PLN 151,690 (in thousand) compared to PLN 423,157 (in thousand) as of 31/12/2016, which translates into a decrease in the level of financing with own bonds by PLN 271,467 (in thousand), i.e. by 64%. Specific information on bonds was presented in Note 30 of the annual consolidated financial statements Bank credits and loans As of 31/12/2017, the Magellan Capital Group made use of bank credits and loans received from entities other than affiliates with a total carrying amount of PLN 1,055,031 (in thousand), compared to PLN 388,505 (in thousand) as of 31/12/2016, representing an increase by PLN 666,526 (in thousand), i.e. by 172%. The loans and credit limits used as of 31 December 2017 consist of: overdraft facility for the total amount of PLN 139,089 (in thousand), working capital loans and loans for the total amount of PLN 915,942 (in thousand). The average level of financing with bank loans and loans from non-related entities in 2017 was PLN 602,495 (in thousand) and was higher by PLN 42,159 (in thousand) (i.e. by 8%) than the average level of financing in the comparable period valued at PLN 560,336 (in thousand). As of 31/12/2017, the nominal value of bank credits and loans used was PLN 1,056,029 (in thousand) compared to PLN 389,688 (in thousand) as of 31/12/2016. Specific information on bank credits and loans was presented in Note 29 of the annual consolidated financial statements. In 2017, none of the Group's loan agreements was terminated by the bank. 19