Asseco Poland S.A. Annual Report

Transcription

1 Asseco Poland S.A. Annual Report Annual Report

2 1,313 mpln in sales revenues for mpln in net profit for mpln paid out in dividends for ,851 highly committed employees 47.8 mpln of income tax paid in Poland in th largest software vendor in Europe

3 President s Letter 3

4 PRESIDENT S LETTER Dear Shareholders, It is my pleasure to present to you the report on business operations of Asseco Poland for the year It was a challenging and important year during which we took a number of initiatives intended to simplify our organizational structure and create new value. In 2015, we continued to cooperate with all of our major customers. We completed the development of new products which are now ready not only to conquer the Polish market, but also to attract international clients. We have high hopes, among others, for our proprietary Asseco Customer Banking Platform (CBP). This innovative e-banking solution follows the latest trend of omnichannel banking. Asseco CBP has been already implemented for the first clients in Poland. We achieved a lot of success in the market of public institutions, despite that the last year was not an easy period for this sector. As a result of waiting for the parliamentary elections and the initiation of the EU s new financial perspective, many projects have been postponed. Thanks to successive orders and new contracts from ARiMR and KRUS, we expanded our presence in the market for IT systems for agriculture. We launched ZEFIR 2 which became one of the main information systems of the Customs Administration, as well as one of the largest accounting systems operated at the Ministry of Finance. We confirmed our position as an undisputed leader in the market of IT solutions for the healthcare sector. Numerous additional hospitals decided to use our flagship Asseco Medical Management Solutions and we also carried out e-health projects at many regional medical facilities. We see a high potential in the defense and security systems. Therefore, acting together with local partners, we established the National BMS Consortium in response to the process of modernization and computerization of the Polish army initiated by the Ministry of National Defense. Asseco s specialists successfully completed highly demanding and complex IT projects for major Polish enterprises, including the implementation of a billing system for Orange, centralization of billing systems at Enea, as well as migration of data into the central billing system at Tauron Group. We also proceeded with our international project for the construction of a billing system in Ethiopia. Last year we made intensive efforts to shape the organization of Asseco Poland in an optimum way. We decided to build our competence in commercial insurance leveraging on the experience of our subsidiary Sapiens International, which is the second largest global provider of IT systems for the insurance industry. We acquired a majority stake in Exictos, a Portuguese company specialized in the provision of banking solutions to African countries, such as Angola and Mozambique. This was our next step towards expansion into the emerging markets. We effectively took over Infovide Matrix, a Polish company listed on the WSE, which will supplement the offering of Asseco Poland with IT services in the sectors of energy, telecommunications and public administration. Being a leader on the Polish IT market, and having a strong fundamental position and favourable future outlook, we have been once again able to recommend the distribution of PLN 250 million in dividends to our shareholders. On behalf of myself and the whole management team, I would like to cordially thank all the people who contributed to the continued process of building of a powerful and modern IT company of Asseco Poland. With best regards, Adam Góral President Asseco Poland S.A. 4

5 Management Report on Operations of Asseco Poland S.A. 5

6 MANAGEMENT REPORT ON OPERATIONS OF ASSECO POLAND S.A. Report on Operations of Asseco Poland S.A. PRESIDENT S LETTER... 4 GENERAL INFORMATION ON ASSECO POLAND S.A Asseco Poland S.A Directions of development... 8 Company s authorities... 9 Management Board... 9 Supervisory Board Awards and accolades Information technology market and its future outlook Product portfolio and target markets Product portfolio competencies Product portfolio sectors Financial information Summary and analysis of the financial results of Asseco Poland S.A Structure of sales revenues of Asseco Poland S.A Non-recurring events with impact on our financial performance Opinion on feasibility of investment plans Asseco Poland S.A. in the capital market Shareholder structure Shares held by the management and supervisory personnel Remuneration policy report Discussion of significant risk factors and threats OTHER INFORMATION Explanation of differences between the financial results disclosed in the annual report and previous financial forecasts for the year Opinion on feasibility financial forecasts for Changes in the Company management policies Remuneration of the management and supervisory personnel Description of the Company s sponsoring and charity policy Agreements concluded by Asseco Poland S.A. with its management personnel providing for payment of compensations if such persons resign or are dismissed from their positions Information on the agreements known to the Issuer which may result in future changes of the equity interests held by the existing shareholders and bondholders Organizational and equity relationships Related party transactions Bank loans, borrowings, sureties and guarantees Loans granted during the financial year Off-balance-sheet items Utilization of proceeds from issuance of shares Monitoring of employee stock option plans Significant agreements concluded by the Company Information on judicial proceedings where the value in dispute exceeds 10% of the amount of equity Information on adhering to the corporate governance standards Agreement with the entity authorized to audit financial statements Remuneration of the entity authorized to audit financial statements Statements made by the Management Board of Asseco Poland S.A. to the Annual Report

7 MANAGEMENT REPORT ON OPERATIONS OF ASSECO POLAND S.A. Report on Operations of Asseco Poland S.A. This Management Report on Operations has been approved for publication by the Management Board of Asseco Poland S.A. on 16 March Management Board: Adam Góral President Przemysław Borzestowski Andrzej Dopierała Tadeusz Dyrga Rafał Kozłowski Marek Panek Paweł Piwowar Zbigniew Pomianek Włodzimierz Serwiński Przemysław Sęczkowski Robert Smułkowski 7

8 GENERAL INFORMATION ON ASSECO POLAND S.A. Asseco Poland S.A. Asseco Poland S.A. (the Company, Asseco ) is the largest Polish information technology company listed on the Warsaw Stock Exchange (WSE ticker: ACP). With a market capitalization exceeding PLN 4.7 billion (more than EUR 1.0 billion), the Company is included in the WIG20 index. It is also the largest company listed in the IT industry index WIG-Info. Asseco Poland is a unique combination of a software house and a service provider. The Company is a producer of state-of-the-art software that supports mission-critical business processes of enterprises in all key sectors of the Polish economy. Asseco s software applications are used by more than half of Polish banks, the largest insurance, energy and telecommunications companies, miscellaneous healthcare institutions, local and central public administration bodies, as well as by the uniformed services. Over the twenty years of persistent implementation of our development strategy, which focuses on gaining expertise and development of proprietary software, we have become a leader in the Polish information technology market and accumulated the necessary potential to build a global company. Directions of development Our mission is to build a reliable and profitable, global information technology company providing high quality software and services. The strategy of Asseco Poland is based on two pillars. The first is organic growth which is achieved through proprietary software and services, whereas the second one involves expansion through acquisitions. Organic growth Asseco strategy relies on sector-specific business expertise, which is supported by technological competence. The Company builds long-term trustbased relationships with customers, becoming their strategic business partner. Asseco leverages on the vast experience of its international affiliated companies to create a comprehensive portfolio of products satisfying the needs of thousands of its customers. The Company wants to be perceived as a one-stop shop and therefore, in addition to its own IT solutions and services, it also delivers infrastructure necessary for the proper operation of business applications as well as third-party software. Expansion through acquisitions Asseco is interested in taking over companies that will either enhance its competence in individual sectors or provide an opportunity to enter new geographical markets. Asseco Poland has successfully implemented its acquisitions policy for many years, and nowadays is one of the most experienced market consolidators in Poland. Asseco Poland values our source code The Company has come up with its own source code that lists the common values of Asseco. These values have been devised by all of our employees and are recorded in a formal document, which is effective across our organization. Commitment we are fully committed to each and every project and the success of our clients is our greatest satisfaction Respect we require trust, honesty and mutual respect both from ourselves and from others Quality we always maintain high quality standards in all of our activities Professionalism we continually upgrade our qualifications and are willing to share experience Effectiveness we are ambitious and consistent in striving to achieve our goals Responsibility we take full responsibility for our work and environment in which we operate 8

9 Company s authorities Management Board During the period of 12 months ended 31 December 2015, the Company s Management Board was composed of the following persons: Management Board Period of service Adam Góral Przemysław Borzestowski Andrzej Dopierała Tadeusz Dyrga Rafał Kozłowski Marek Panek Paweł Piwowar Zbigniew Pomianek Włodzimierz Serwiński Przemysław Sęczkowski Robert Smułkowski Andrzej Dopierała responsible for Infrastructure Division, Data Processing Center, and ICT Department Tadeusz Dyrga responsible for Social Insurance Division, Healthcare Systems Division, and Systems Maintenance Division Adam Góral President of the Management Board responsible for the development vision and strategy of Asseco Group Rafał Kozłowski Chief Financial Officer responsible for Finance Division of Asseco Group, and Logistics Department Marek Panek Przemysław Borzestowski responsible for Development Division of Asseco Group, and EU Projects Office responsible for Public Administration Division, Capital Market Division, and Office for Protection of Non-Public Information 9

10 Paweł Piwowar responsible for Energy and Gas Industry Division, Telecommunications and Media Division, Agriculture Division, and Enterprises Division Robert Smułkowski responsible for PKO Bank Division Zbigniew Pomianek responsible for Commercial Banks Division, Cooperative Banks Division, Business Intelligence Division, Compliance Department, and Maintenance and Development of Back-Office Systems Department Włodzimierz Serwiński responsible for Commercial Insurance Division Przemysław Sęczkowski responsible for Public and Investor Relations Department, and Marketing Department 10

11 Supervisory Board During the period of 12 months ended 31 December 2015, the Company s Supervisory Board was composed of the following persons: Supervisory Board Period of service Jacek Duch Adam Noga Piotr Augustyniak Dariusz Brzeski Artur Kucharski Dariusz Stolarczyk Artur Kucharski Member of the Supervisory Board Dariusz Stolarczyk Member of the Supervisory Board Jacek Duch Chairman of the Supervisory Board Adam Noga Vice Chairman of the Supervisory Board Piotr Augustyniak Member of the Supervisory Board Dariusz Brzeski Member of the Supervisory Board 11

12 Awards and accolades 41 st place on Rzeczpospolita 500 List this prestigious ranking presents 500 Polish companies with largest sales revenues, operating in all sectors of the economy. Rzeczpospolita also prepared a comparison of the current 500 List with its counterpart of 2005, showing Asseco among the top 10 companies that recorded the highest growth in revenues over the past decade. Book of Lists No. 1 in the category of Software Producer our victory in the annual ranking of the Book of Lists compiled by Warsaw Business Journal. This report contains information on companies from various business sectors, including consulting, advertising, telecommunications, information technology, and real estate. AUMS for Energy Utilities in the Gartner s Magic Quadrant internationally recognized research and advisory firm Gartner has published a report on key vendors of IT solutions for the utilities sector, entitled Magic Quadrant for Utilities Customer Information Systems Asseco Utility Management Solutions were mentioned in the prestige group of products that meet the demanding functional criteria at a sufficiently large scale of business, and were the only Polish product included in the report. Asseco def3000/tr in the Gartner s Magic Quadrant for Trading Platforms Asseco Poland with its Asseco def3000/tr (Treasury) solution dedicated to banks was the only Polish company placed in this prestigious report in the category of Niche Players. Asseco proved to be the best in 6 categories of the Computerworld Top200 report. The latest edition of the report sums up the competitors results for Asseco has maintained its leading position in the ranking of IT companies with the highest net earnings as well as with the largest R&D expenditures. The company continues to be the largest provider of IT solutions and services for the Public Administration and Healthcare sectors. Furthermore, Asseco has been again listed as the number 1 among providers of IT maintenance services and suppliers of customer-tailored software. Bull and Bear award of Parkiet Stock Market and Investors Newspaper granted for recordbreaking results for 2014, for providing the highest annual return to shareholders among all of the WIG20 index participants (nearly 18%, including dividends), as well as for a significant improvement in its financial performance allowing for international expansion of the company. 7 th place in the Polish Ambassadors ranking of Wprost weekly which presents 200 of the largest Polish companies. Asseco ranked the highest among all local information technology companies. The report has shown that exports grew the most dynamically just in the IT sector, which was greatly contributed by Asseco s results. Asseco was awarded in the Polish Company International Champion competition organized by PwC consulting firm. The company has been awarded in the category of Investor Polish Private Companies. 12

13 Information technology market and its future outlook Development prospects of the global IT market According to Gartner s forecasts, in 2016 the global IT industry will grow by 0.6% to reach the total value of USD 3,536 billion. Concurrently, according to these same experts, in 2015 the market recorded the steepest decline in the history of their research, this is by 5.8%, which was caused primarily by the high exchange rate of the US dollar against other currencies. In this year, the most dynamic growth is anticipated in the enterprise software market, by 5.3% to the level of USD 326 billion. A high increase of 3.1% is also expected in the market for IT services. Here the demand will be driven, among others, by the growing popularity of cloud-based services. Both the abovementioned segments (IT services and software) constitute the core business of Asseco Poland and Asseco Group. Whereas, the highest deterioration by 1.9% is expected in the sales of IT hardware, mainly due to the weak economic situation in countries such as Russia, Japan and Brazil, as well as high demand for cheap phones in the developing countries. Telecommunication services, which are the largest of the analyzed markets, are supposed to decrease by 1.2% to the level of USD 1,454 billion. Forecast of global IT spending in 2016 (in billions of USD) Segment 2015 Change Computer hardware % Data Center systems % Software % IT services % Telecommunication 1, % services Total 3, % Source: Gartner, January 2016 IT Market in Poland As presented by Computerworld magazine in their latest TOP200 ranking, according to IDC estimates, in 2014 the Polish information technology market was worth PLN 57 billion, having expanded by 12.8%. This was almost three times more than the Polish GDP growth in this period. Concurrently, it was the third consecutive year of double-digit growth in the IT market, showing its high development potential for the future. The largest customers for IT services and products are still the institutions of public administration which spent approx. PLN 3.1 billion for that purpose in Sales to the commercial sector were not much lower and amounted to PLN 2.7 billion, increasing by 24.3%. The third largest client of IT companies was the telecommunications sector which purchased computer hardware, services and software for PLN 2.6 billion. However, the fastest growth in IT purchases was observed in the healthcare sector, which reached nearly PLN 0.6 billion, increasing by 31.8%, as compared with an 11.3% improvement achieved a year ago. Whereas, sales of IT companies to the utilities sector (excluding the energy industry) decreased by 11.1% in 2014 in comparison to Company s market position Asseco Poland tops the rankings of IT vendors that are prepared by both Polish and international research institutes. The following table presents the position of Asseco Poland in the Truffle ranking, which lists the largest European software vendors by the amount of sales of proprietary software and services generated in Name of company Coun try Sales of proprietary software (in millions of EUR) 1. SAP DE 17, Dassault Systems FR 2, Sage UK 1, Hexagon SE 1, Wincor Nixdorf DE 1, Asseco Poland PL 1, Software AG DE DATEV DE Wolters Kluwer NL Misys UK Source: Truffle 100 ranking, 2015 In 2014, the Company achieved the second largest growth of proprietary software revenues among the top 10 vendors leading the ranking. According to the latest available estimates of COMPUTERWORLD TOP200, Asseco Poland ranked 11 th in the category of the Largest IT companies operating in Poland. Concurrently, Asseco is the second largest IT group and the largest IT company in Poland in terms of net earnings, outperforming the runner-up in this ranking by 4.5 times. Asseco is also the biggest R&D spender in this market. 13

14 IT companies with the highest Net profit net earnings in 2014 (in millions of PLN) Asseco Poland Action 69.5 Capgemini Poland 52.4 AB 47.8 Ericpol 43.5 Comarch 41.0 Source: Computerworld; figures in millions of PLN Again, according to COMPUTERWORLD TOP200 rankings, Asseco Poland held leading positions in terms of sales to individual sectors of the Polish economy. Ranking of providers of software and services to the sector of Ranking position Public administration 1 Healthcare 1 Large companies and corporations 2 Banking 2 Energy industry 2 Financial institutions 3 Telecommunications 7 COMPUTERWORLD TOP , Ranking of IT and telecom companies by sales revenues generated in 2014 The next table presents the positions taken by Asseco Poland in the COMPUTERWORLD TOP200 rankings that compare leading companies operating in the Polish market by type of business. Ranking Ranking position Producers of customer-tailored software 1 Providers of IT maintenance services 1 Providers of IT services 2 Providers of system integration services 6 COMPUTERWORLD TOP , Ranking of IT and telecom companies by sales revenues generated in

15 Product portfolio and target markets Product portfolio competencies Asseco Poland is a provider of software solutions tailored to the specific needs of customers. We have strong expertise in the following four main areas: Dedicated solutions Asseco Poland is the most experienced Polish IT company when it comes to the execution of largescale and complex IT projects, implemented to individual customer needs. A good example of Asseco s competence in this area is the IT project implemented for the Social Insurance Institution (ZUS), the largest in the history of our country. The Comprehensive Information System handles more than 24 million unique accounts and is used by over 30 thousand users on a daily basis. The Comprehensive Information System of ZUS won the main prize in the eeurope Awards for egovernment 2005 competition, which was organized by the European Institute of Public Administration (EIPA), working under the auspices of the European Commission. The ZUS s CIS was awarded for the creation of optimum environment for successful implementation of a public administration project. Comprehensive solutions for business sectors We offer comprehensive IT packages that are customized to individual needs of large and medium-sized companies virtually from every sector of the economy. In this category, our product portfolio includes comprehensive systems dedicated to the banking sector (Asseco def3000), power industry (AUMS), healthcare (AMMS), as well as for brokerage houses (Promak). Standard software packages We also provide standard software packages for thousands of small and medium-sized companies. With no need for customer-tailored products and at an affordable cost, firms can use Asseco s outof-the-box software to support their routine enterprise management functions. A good example of a standard software package is mmedica software dedicated to outpatient clinics and small hospitals. Cloud computing solutions Small and medium-sized enterprises can use our IT solutions available over the Internet. With a minimum of effort and cost and maximum benefits, our customers may take advantage of our knowledge and experience without investing large sums of money in IT infrastructure or a team of IT experts. Major clients for cloud-based e- banking systems delivered by Asseco Poland are cooperative banks operating in Poland. Product portfolio sectors Asseco Poland is specialized in the development of proprietary IT solutions for all sectors of the economy. Asseco s product portfolio can be divided into three main sectors: banking and finance, public administration, and general business. Each of these sectors comprises a wide range of institutions that use proprietary IT systems, infrastructure as well as thirdparty software delivered by Asseco Poland. Presented below is a selection of our IT solutions dedicated to individual sectors. Banking and Finance Banks production of banking software is one of the key businesses of Asseco Poland. The Company continues to improve and further develop its IT solutions tailored to meet the banking sector s growing expectations from information technology. Asseco s flagship product for the banking sector is the comprehensive IT suite called def3000 which is used by over a dozen financial institutions in Poland. In addition, we offer dozens of specialized ready-toimplement solutions, requiring only some adaptation to specific operations of a particular institution. In order to meet the market expectations, Asseco Poland has also developed modern e-banking and omnichannel solutions. Insurance Asseco Poland has, for many years, cooperated with major international insurance companies. Among them are life and property insurance companies, insurance brokers, as well as insurance market regulators. Advanced solutions provided by Asseco are always adjusted to conform to applicable insurance regulations and ensure the highest levels of security. The Company s portfolio features core insurance systems and a variety of specialized solutions, including billing and collection systems, applications supporting claim settlement processes, reinsurance, co-operation with agents, and detection of insurance frauds. To complement the above described banking and insurance industry competencies, Asseco is a provider of all-in-one IT solutions for brokerage houses, as well as for leasing and factoring companies. 15

16 Public Institutions Central level Asseco Poland develops and implements software solutions for public administration in the areas that, due to their nature, cannot be supported by ready-made tools. These are mostly complex systems with powerful functionality suitable for processing of large data volumes. The Company has got vast experience in the execution of complex IT projects for the public administration. The largest information technology project in Poland the Comprehensive Information System of the Social Insurance Institution has been implemented by Asseco. Furthermore, Asseco developed the Central Register of Vehicles and Drivers for the Ministry of the Interior and Administration, Information System for the National Border Guard, as well as IT solutions for the Agency for Restructuring and Modernisation of Agriculture. As the only IT company of Central and Eastern Europe, we executed over 50 prestigious projects for the EU and NATO agencies, including the EU border protection system for the Frontex agency. Healthcare Asseco is an undisputed leader in the market of IT solutions for all types of medical facilities. Our solutions are used by hundreds of major hospitals and clinics across Poland. Asseco s services include professional consulting on the design, implementation and maintenance of information systems for health insurance companies, and the provision of comprehensive solutions for hospitals and clinics. Asseco delivers patient service solutions, contract settlement systems as well as facility management solutions. In this sector, Asseco s flagship product is AMMS (Asseco Medical Management Solution), a comprehensive package of information systems designed to help manage large and medium-sized hospitals, polyclinics, medical centers, outpatient clinics and emergency departments. Local Governments Asseco provides proprietary IT solutions for all levels of local administration bodies. A significant advantage of our software is that it can be easily integrated with specialized tools such as digital maps or metropolitan networks. General Business Asseco Poland offers comprehensive proprietary solutions that are capable of handling multi-million customer databases and are customized for the specific needs of telecommunication, media, energy, gas and utility enterprises. Over a 20-year long presence of our solutions in this sector resulted in strategic partnerships with many major enterprises which appreciate the in-depth professional knowledge and experience of our specialists and the flexibility of our solutions. Our product portfolio dedicated to the Telco & Utilities sector includes billing systems, fraud detection systems, sales and CRM applications, portal applications, data warehouses, BI tools, and many more. The product portfolio is supplemented with technical infrastructure and asset management systems, and GIS/NIS solutions. Asseco Poland has, for many years, been one of the key providers of billing systems to Orange Poland. Our software solutions are also used by other mobile and fixed-line telephony operators, as well as by media companies such as ITI Group. Moreover, our systems are utilized by major energy holdings operating in Poland, such as Tauron, PGNiG, Enea, and PGE. 16

17 Product portfolio sectors Banking and Finance Banks Insurance Brokerage houses Investment funds Pension funds Leasing companies Factoring companies Public Institutions Healthcare International organizations Social insurance Uniformed services Education General Business Telecommunications Energy industry Municipal utilities Gas industry Manufacturing, trade and services FMCG Multimedia 17

18 Financial information Summary and analysis of the financial results of Asseco Poland S.A. Presented below are the operating results for the year ended 31 December 2015 as well as for the comparable period of the previous year: mpln 12 months ended 31 Dec months ended 31 Dec (restated) Change Revenues 1, ,321.3 (0.6%) Proprietary software and services ,049.8 (7.2%) Gross profit/(loss) on sales (17.8%) Selling costs (54.7) (53.4) 2.4% General and administrative expenses (77.6) (78.5) (1.1%) Other operating activities % Cash flows The following table presents major lines of the separate statement of cash flows for the years 2015 and Dec Dec (restated) CFO CFI (39.2) 50.7 CAPEX (40.1) (25.1) M&A expenditures (143.3) (7.0) Free cash flow Dividend income Operating profit (24.8%) CFF (280.9) (279.6) EBITDA (21.9%) Net profit (11.40%) EBITDA = EBIT + depreciation and amortization In 2015, the Company generated slightly lower sales than in A bigger decline was observed in revenues from proprietary software and services, primarily due to the sale of our commercial insurance venture to Insseco, and subsequent disposal of that company. Whereas, the Company s net profit and operating profit decreased, among others, as a result of onetime events, such as the termination of a contract with one of our public administration clients in the fourth quarter of Profitability 31 Dec Dec (restated) Change Gross profit margin 23.3% 28.2% (17.4%) Operating profit margin 13.8% 18.2% (24.2%) EBITDA margin 17.9% 22.8% (21.5%) Net profit margin 19.6% 22.0% (10.9%) In 2015, all of our key profitability ratios deteriorated in comparison with The decrease in the net profit margin was attributable, among others, to the renegotiation of contracts with our existing customers. Dividend payment (240.7) (215.8) Net change in cash and cash equivalents Cash conversion rate (FCF/EBIT Non-IFRS) (43.4) (21.1) % 72.62% CFO = net cash provided by (used in) operating activities CFI = net cash provided by (used in) investing activities CAPEX = expenditures for purchases of property, plant and equipment and intangible assets + expenditures for R&D projects M&A expenditures = expenditures for company acquisitions CFF = net cash provided by (used in) financing activities In 2015, the Company s cash flows were influenced primarily by merger and acquisition transactions. In September 2015, Asseco Poland purchased 61.4% of shares in Exictos, a Portuguese IT company, for EUR million (as announced in the current report no. 17/2015). At the end of last year, as a result of a tender offer, we effectively purchased Infovide Matrix, a Polish IT company listed on the Warsaw Stock Exchange (current report no. 26/2015). Furthermore, in 2015 Asseco Poland paid a dividend for the year 2014 in the total amount of PLN million. Thanks to the optimum management of the Company s cash liquidity, at the end of 2015 the cash conversion rate clearly exceeded 100%, reaching almost 120%. Liquidity Working capital, defined as the difference between current assets and current liabilities, represents the amount of capital which is used to finance current assets. 18

19 The table below presents the closing balances of working capital as at 31 December 2015 and at the end of the comparable period. 31 Dec Dec (restated) Working capital (in millions of PLN) Current liquidity ratio Quick liquidity ratio Absolute liquidity ratio Working capital = current assets - current liabilities Current liquidity ratio = current assets / current liabilities Quick liquidity ratio = (current assets - inventories prepayments) / current liabilities Absolute liquidity ratio = (cash + short-term bank deposits) / current liabilities The Company s working capital declined primarily as a result of an increase in current liabilities from the level of PLN million as at 31 December 2014 to PLN million reported as at the end of last year, which was driven mainly by trade payables. Due to the similar level of current assets and the decline in working capital, all of our liquidity ratios (current, quick, and absolute) decreased. Debt The total debt ratio increased, among others, due to higher short-term trade payables. However, the amount of total debt decreased year on year, primarily as a result of lower long-term bank loans as well as long-term finance lease liabilities, which translated into a decrease in the debt/equity ratio. 31 Dec Dec (restated) Total debt ratio 11.3% 9.9% Debt/equity ratio 3.9% 4.5% Short-term debt ratio 6.5% 4.7% Quarterly financial results The tables below present our financial results for the individual quarters of 2015 as well as for the comparable periods of 2014: mpln Q1'15 Q2'15 Q3'15 Q4'15 Revenues of which proprietary software and services Margin IV EBIT Net profit Depreciation and amortization (13.4) (13.6) (13.5) (13.7) CFO CAPEX (incl. R&D) (9.1) (11.3) (13.1) (6.6) Margin IV = net profit on sales CFO = net cash provided by (used in) operating activities CAPEX = expenditures for purchases of property, plant and equipment and intangible assets + expenditures for R&D projects mpln Q Q Q Q Revenues of which proprietary software and services Margin IV EBIT Net profit Depreciation and amortization (15.4) (15.1) (15.0) (14.8) CFO (2.4) CAPEX (incl. R&D) (3.9) (7.5) (5.9) (7.8) Margin IV = net profit on sales CFO = net cash provided by (used in) operating activities CAPEX = expenditures for purchases of property, plant and equipment and intangible assets + expenditures for R&D projects Long-term debt ratio 4.8% 5.3% Total debt ratio = (non-current liabilities + current liabilities) / assets Debt/equity ratio = (interest-bearing bank loans + debt securities + finance lease liabilities) / equity Short-term debt ratio = (current liabilities / assets) Long-term debt ratio = (non-current liabilities / assets) 19

20 Structure of sales revenues of Asseco Poland S.A. Breakdown of sales revenues by products and sectors in 2015 and in the comparable period General Business mpln 22% Other 10.2 mpln 1% Banking and Finance mpln 27% General Business mpln 23% Other 42.3 mpln 3% Banking and Finance mpln 28% Public Administration mpln 50% Public Administration mpln Banking and Finance Asseco Poland is the national leader in the development of software for financial institutions. More than half of Polish banks use IT solutions produced by Asseco. The Company is furthermore a leading provider of IT systems for the capital market and insurance industry. The following table presents the financial results generated by our Banking and Finance segment for the years 2015 and mpln 12 months ended 31 Dec months ended 31 Dec (restated) Change Sales 1) (5.3%) EBITDA 2) (27.3%) EBITDA margin 27.1% 35.3% (8.2) pp Depreciation and amortization (14.8) (16.4) (9.8%) Margin IV (29.8%) Margin IV (%) 22.9% 30.8% (7.9) pp Margin IV adjusted (28.2%) Margin IV adjusted (%) 24.7% 32.6% (7.9) pp Employment [persons] 866 1,013 (14.5%) Allocated goodwill (2.0%) 1) Sales to external customers 2) EBITDA = Margin IV + depreciation and amortization 3) Margin IV = net profit on sales generated by operating segment 4) Margin IV adjusted = Margin IV + PPA, where PPA means amortization charges on intangible assets recognized in purchase price allocation In 2015, Asseco Poland managed to strengthen its leading position as a provider of top quality IT solutions and services for the sector of banking and finance. We continued our long-lasting cooperation with PKO BP, which is the largest bank in the region. Apart from working on the bank s core system, Asseco specialists carried out a successful integration of IT systems used by PKO BP and Nordea Bank. Asseco also reinforced its position as a leading provider of software for cooperative banks. The def3000 core banking systems have been implemented for successive cooperative banks, including in Pabianice, Aleksandrów Kujawski, Pisz, Lipno, Płońsk, and others. In 2015, our Banks Division completed the development of a brand new product called Asseco Customer Banking Platform (Asseco CBP). This innovative solution follows the latest trend of omnichannel banking, allowing customers to use banking services via mini-applications which are available both on desktop computers and mobile devices. Our new solution has been already purchased and successfully implemented at Bank Ochrony Środowiska and Deutsche Bank Poland. In the first half of 2015, we launched a brand new software system for brokerage houses called PROMAK Foreign Markets, which enables brokerage customers to execute trades in foreign stock exchanges. The new solution of Asseco Poland has been already chosen by PKO BP Brokerage House. Asseco Poland also prepared another new product for financial institutions, which is designed to support all asset management processes, including those related to the network of bank agents. In the first quarter last year, we signed an agreement with Bank Gospodarstwa Krajowego (BGK) under which Asseco is going to implement an IT system for the management of human resources. The Bank will use the solution in the Software as a Service (SaaS) model. Such an extensive and technologically advanced HR and payroll application will be 20

21 implemented as a service for the first time in Poland. Public Administration Asseco Poland is the most experienced Polish provider of IT solutions and services for the central administration. In 2015, we continued to work for the Social Insurance Institution (ZUS) in the scope of maintenance and upgrading of their Comprehensive Information System (CIS). The Company expanded its presence in the market for IT systems dedicated to agriculture. Last year, we signed a contract with the Agency for Restructuring and Modernization of Agriculture (ARiMR) to complete their Campaign 2015 project, which is meant to ensure the proper payment of financial subsidies for agricultural producers. Asseco also signed a framework agreement with ARiMR to develop and modify their IT systems that are utilized to serve 1.5 million agricultural producers. We also completed the implementation of e-application which is a comprehensive online service for handling of area payment applications submitted by farmers. The following table presents the financial results generated by our Public Administration segment in the years 2015 and mpln 12 months ended 31 Dec months ended 31 Dec (restated) Change Sales 1) % EBITDA 2) (9.4%) EBITDA margin 13.7% 16.5% (2.8) pp Depreciation and amortization (21.5) (22.0) (2.3%) Margin IV (11.5%) Margin IV (%) 10.4% 12.9% (2.5) pp Margin IV adjusted (10.9%) Margin IV adjusted (%) 11.1% 13.6% (2.5) pp Employment [persons] 1,112 1,156 (3.8%) Allocated goodwill ) Sales to external customers 2) EBITDA = Margin IV + depreciation and amortization 3) Margin IV = net profit on sales generated by operating segment 4) Margin IV adjusted = Margin IV + PPA, where PPA means amortization charges on intangible assets recognized in purchase price allocation system that helps manage retirement and pension benefits provided to 1.3 million farmers. We also signed an agreement with the Ministry of Labour and Social Policy to develop and provide comprehensive support for the Big Family Card Information System. This programme is dedicated to 3.4 million multi-child family members. At the end of 2015, we launched ZEFIR 2 Integrated Tariff Collection and EU/Budget Settlements System, which constitutes an important component of the Customs Administration Information System. ZEFIR 2 is one of the largest accounting systems operated at the Polish Ministry of Finance. Asseco strengthened its leading position in software solutions for the healthcare sector. Here, our key revenue driver is the segment of hospitals and clinics, where Asseco Poland covers more than a half of the market. Our flagship product called Asseco Medical Management Solutions (AMMS) has been chosen by a number of further hospitals as a result of which, at the end of 2015, the system has been installed and running at more than 200 medical centers across the country. Asseco successfully continued the e-health project which is aimed at informatization of the Polish healthcare sector. During the past year, we completed the construction of an ICT network as part of the e- Health for Mazovia project, and completed the implementation of Hospital Information Systems (HIS) based on our proprietary AMMS, at nine hospitals in the Kuyavian-Pomeranian region. Last year, we also signed e-health agreements with nine hospitals located in the Lower Silesia. The Company intends to continue this process in other regions of Poland. In order to face the new national defense challenges, Asseco Poland together with Teldat, Siltec, Enigma, CMGI and the Military University of Technology have formed a consortium that will offer a high-tech Battlefield Management System (BMS). The national BMS Consortium has been established in response to the process of modernization and computerization of the Polish army initiated by the Ministry of National Defense. In the third quarter of 2015, Asseco Poland in a consortium with Asseco Group subsidiaries, namely ZETO Bydgoszcz and Unizeto Technologies, signed an agreement with the Agricultural Social Insurance Fund to ensure comprehensive support for their IT 21

22 General Business During 2015, Asseco Poland executed a number of projects for energy, telecommunications and other companies. As part of this cooperation we not only provided our proprietary software and high quality services but also following the one-stop-shop principle delivered third-party software and the required IT infrastructure. Asseco s IT specialists have confirmed their professional skills by successfully completing large projects that involved the centralization of billing systems for the energy industry clients. In the third quarter, we completed the project of data migration into the central billing system AUMS EDO (Asseco Utility Management Systems) at Tauron Group. The system s functionality covers all the customer service processes, including contracting, accounting, settlements, debt collection, reporting and interoperation with the e-customer Service Office. The project was conducted from August 2012 till May The implementation process involved migrating the data of 4.4 million customers along with their 3-year-long account history from Tauron s 12 distributed source systems. As a result, we created one of the largest billing systems operated in Europe. In the fourth quarter of last year, we also finished the process of centralization of billing systems at Enea Group. Asseco continued to work for Orange Poland throughout the whole year, where we formally completed the implementation of AUMS billing system. In addition, we started the execution of the Serat Decommissioning program, which is one of the several strategic projects aiming to provide a modern environment for the operator s customer services. The project will involve the migration of data of business customers served by Orange. Furthermore, Asseco continued to cooperate with Polkomtel, another major telecom operator. We deployed a new online store and carried on implementing a billing system for this client. We also performed further work in favour of INSA (Information Network Security Agency) in Ethiopia, under a framework agreement for the delivery and implementation of AUMS. The high quality and innovation of Asseco s proprietary solution has once again won recognition from the renowned research firm Gartner who placed AUMS in their Magic Quadrant for Utilities Customer Information Systems report for In 2015, Asseco also managed to carry out a portion of the Internet for Mazovia project. This task has been executed by the Polish-Korean consortium, with the participation of Asseco. We were responsible for the supply and installation of active networking equipment as well as for the implementation of software to support such devices. The company will also provide maintenance services for the supplied infrastructure over a period of five years. Moreover, Asseco delivered, installed and configured the Network Passporting System. The following table presents the financial results generated by our General Business segment in the years 2015 and mpln 12 months ended 31 Dec months ended 31 Dec (restated) Change Sales 1) (4.7%) EBITDA 2) (31.5%) EBITDA margin 15.4% 21.4% (6.0) pp Depreciation and amortization (11.9) (16.1) (26.1%) Margin IV (33.2%) Margin IV (%) 11.3% 16.1% (4.8) pp Margin IV adjusted (33.2%) Margin IV adjusted (%) 11.3% 16.1% (4.8) pp Employment [persons] (5.8%) Allocated goodwill ) Sales to external customers 2) EBITDA = Margin IV + depreciation and amortization 3) Margin IV = net profit on sales generated by operating segment 4) Margin IV adjusted = Margin IV + PPA, where PPA means amortization charges on intangible assets recognized in purchase price allocation 22

23 Non-recurring events with impact on our financial performance Non-recurring events with impact on the financial performance of Asseco Poland in the year 2015 and in the comparable period were as follows: Sale of a business venture of Asseco Poland S.A. to its subsidiary Insseco Sp. z o.o., which has been described in explanatory note V.9 under the supplementary information to the financial statements of Asseco Poland for the year This transaction concerned certain assets, including copyrights as well as the rights and obligations arising from contracts that have so far been executed by the Company for some clients in the commercial insurance industry. Acquisition of a 61.38% stake in Portugalbased Exictos SGPS for EUR million. This transaction has been described in detail in explanatory note V.9 under the supplementary information to the consolidated financial statements of Asseco Group for the period of 12 months ended 31 December Decision to create an allowance for our trade receivables from Mostostal Warszawa, in the amount of PLN 7.7 million. Acquisition of 100% of shares in Infovide- Matrix S.A., a Polish IT company listed on the Warsaw Stock Exchange. This transaction has been described in our current report no. 28/2015 as well as in explanatory note V.9 under the supplementary information to the consolidated financial statements of Asseco Group for the period of 12 months ended 31 December Opinion on feasibility of investment plans Asseco Poland S.A. pays its trade payables, settles the state obligatory charges, and fulfils its investment obligations on a timely basis. We maintain loan facilities at various banks in order to diversify our sources of financing. The Company pays its liabilities from current operating revenues which may be supplemented with third-party financing, in the form of short-term bank overdraft facilities, bank term loans, borrowings, or capital contributions. 23

24 Price of Asseco Poland shares (PLN) Report on Operations of Asseco Poland S.A. Asseco Poland S.A. in the capital market Asseco Poland WIG Δ 12M Asseco Poland S.A. (PLN) % WIG20 (points) 2, , , , , % WIG (points) 51, , , , , % WIG-Info (points) 1, , , , , % In 2015, the price of Asseco Poland shares performed much better than the index of blue chips WIG20 and the broad market measured by WIG index. Over this period, Asseco shares appreciated by 12.6%, while both the WIG20 and WIG indices declined by 19.5% and 9.6%, respectively. The IT industry benchmark WIG-Info, in which Asseco Poland has a considerable share, recorded an increase by 16.4%. Last year the Polish capital market remained under the influence of political factors, both local and international. In Poland, the most noteworthy events included the parliamentary elections and the changes introduced by the new ruling party. On the global scale, investors focused on the falling prices of oil, weaker economic growth in China, the military conflict in Syria, as well as on the future of the European Union. The commencement of the new financial perspective of the European Union for the years was also a significant factor, especially for the stock prices of IT companies in Poland. The market valuation of Asseco Poland might have been also affected by the acquisition of new companies as well as by the distribution of a dividend amounting to PLN 2.90 per share. Company s stock information Total number of shares 83,000,303 ISIN WSE Reuters Bloomberg PLSOFTB00016 ACP ACPP.WA ACP PW 24

25 Shareholder structure Major Shareholders as at 31 December 2015 Aviva Pension Fund holds 9,384,498 shares representing 11.31% of voting rights Adam Góral holds 8,083,000 shares representing 9.74% of voting rights Other shareholders hold 57,080,644 shares representing 68.77% of voting rights PZU Pension Fund holds 4,281,040 shares representing 5.16% of voting rights Nationale-Nederlanden Pension Fund holds 4,171,121 shares representing 5.02% of voting rights As at the date of publication of this report, i.e. on 16 March 2016, the Shareholders who, either directly or through their subsidiaries, hold at least 5.0% of total voting rights are as follows: Shareholders as at 16 March 2016 Number of shares held Percentage of total voting rights Aviva Open Pension Fund 2) 9,384, % Adam Góral, President 3) 8,083, % PZU Open Pension Fund 1) 4,281, % NN Open Pension Fund 4) 4,171, % Other shareholders 57,080, % 83,000, % 1) In accordance with the current report no. 38/2010 of 2 June ) In accordance with the current report no. 02/2012 of 5 January ) In accordance with the current report no. 51/2012 of 15 December ) In accordance with the current report no. 21/2015 of 19 October 2015 As at 31 December 2015, the Shareholders who, either directly or through their subsidiaries, held at least 5.0% of total voting rights were as follows: Shareholders as at 16 March 2016 Number of shares held Percentage of total voting rights Aviva Open Pension Fund 2) 9,384, % Adam Góral, President 3) 8,083, % PZU Open Pension Fund 1) 4,281, % NN Open Pension Fund 4) 4,171, % Other shareholders 57,080, % 83,000, % 1) In accordance with the current report no. 38/2010 of 2 June ) In accordance with the current report no. 02/2012 of 5 January ) In accordance with the current report no. 51/2012 of 15 December ) In accordance with the current report no. 21/2015 of 19 October 2015 As at the publication date of the prior report, i.e. on 13 November 2015, the Shareholders who, either directly or through their subsidiaries, held at least 5.0% of total voting rights were as follows: Shareholders as at 16 March 2016 Number of shares held Percentage of total voting rights Aviva Open Pension Fund 2) 9,384, % Adam Góral, President 3) 8,083, % PZU Open Pension Fund 1) 4,281, % Other shareholders 61,251, % 83,000, % 1) In accordance with the current report no. 38/2010 of 2 June ) In accordance with the current report no. 02/2012 of 5 January ) In accordance with the current report no. 51/2012 of 15 December 2012 Shares held by the management and supervisory personnel The numbers of Asseco Poland shares held by its management and supervisory staff are presented in the table below: Jacek Duch Chairman of the Supervisory Board Adam Góral President of the Management Board Tadeusz Dyrga Vice President of the Management Board Robert Smułkowski of the Management Board 16 March Dec November ,458 31,458 31,458 8,083,000 8,083,000 8,083,000 3,710 3,710 3,710 2,212 2,212 2,212 The remaining members of the Supervisory Board and Management Board did not hold any shares in Asseco Poland S.A. in any of the above-mentioned periods. 25

26 Remuneration policy report The objective of the Company s remuneration policy is to support the strategy of achieving the target business results, while meeting the needs of employees within the Company s financial capabilities. The human resources policy is implemented in accordance with the provisions of law as well as internal procedures and standards adopted by the Company. The policy guidelines take into account the processes of recruitment, retaining and development of employees. The rules included in this policy are applied to all of the Company s employees. General rules for remuneration practices: the remuneration system should be adjusted to match the Company s business strategy, objectives and long-term interests; an incentive system should be used in order to ensure adequate human resources; the amount of remuneration should depend on the type of work performed and qualifications required for the job, taking into account the quality of work performed; the remuneration system is based on the Company s competence scheme which organizes the tasks and roles of employees, and also promotes the development of organizational culture oriented towards customers, quality, achievement of results, collaboration, and professional development; the remuneration system should be designed, implemented and supervised in compliance with the principles of effective finance and risk management of the Company. The policy of remuneration payable to the members of the Company s management body is based on the below listed principles; however, the amount of variable remuneration shall be subject to an upper limit: each Members is be paid a fixed remuneration in the gross amount of PLN 30,000 per month; variable remuneration of a Member of the Management Board depends on: the amount of margin IV achieved by the business units supervised directly by a particular Member of the Management Board; the amount of net profit earned by the Company s capital group. The table below presents the gross amounts of variable remuneration payable to the Members of the Management Board for performing their managerial duties at Asseco Poland S.A. during the year 2015: Gross amount of variable remuneration for the period (in millions of PLN) 12 months ended 31 Dec Adam Góral 1.2 Przemysław Borzestowski 0.7 Andrzej Dopierała 0.6 Tadeusz Dyrga 0.9 Rafał Kozłowski 0.4 Marek Panek 0.6 Paweł Piwowar 1.1 Zbigniew Pomianek 1.4 Włodzimierz Serwiński 0.3 Przemysław Sęczkowski 0.7 Robert Smułkowski 1.1 Total 9.44 The total amount of remuneration payable to the Management Board Members is largely dependent on the Company s financial performance. The remuneration model adopted by the Company is aimed to award the Management Board Members and other managerial staff depending on the actually achieved financial results, as well as to constantly motivate them to accomplish the business targets set for a given period. As regards the package of additional employee benefits, Members and key managers, just like other employees, are subject to the labour law regulations. Moreover, the Company provides specialized medical care and subsidies to the employees participation in sports activities. The Company believes that the applied remuneration policy supports the implementation of the Company s objectives and development strategy, particularly in terms of long-term shareholder value growth and the stability of its operations. Over the last year, the Company did not introduce any significant changes to its remuneration policy. 26

27 The table below presents the gross amounts of remuneration payable for performing supervisory duties on the Supervisory Boards of Asseco Group companies: mpln ABS S.A. ADS S.A. Formula Systems (1985) Ltd. ACE Group Otago Sp. z o.o. ZUI Novum Sp. z o.o. Adam Góral Przemysław Borzestowski Andrzej Dopierała Rafał Kozłowski Marek Panek Zbigniew Pomianek Przemysław Sęczkowski Total: These remunerations were paid generally on a monthly basis, whereas in the case of Formula Systems Ltd. on a quarterly basis. The table below presents the gross amounts of fixed and variable remuneration payable for performing managerial duties at the Group s subsidiary companies: mpln Asseco Data Systems S.A. Asseco Western Europe S.A. Andrzej Dopierała fixed variable fixed variable Rafał Kozłowski Przemysław Sęczkowski Total: The policy of remuneration payable to the members of management bodies at the Group s subsidiary companies is similar that applicable in the Parent Company: fixed remunerations are paid on a monthly basis; variable remunerations depend on: the amount of margin IV achieved by the business units of Asseco Data Systems Group; the amount of net profit earned by Asseco Western Europe Group. The Management Board Members are not entitled to any other packages of additional benefits, also in terms of severance payments upon their dismissal. Information on the full amount or remunerations paid to the Members and Supervisory Board of Asseco Poland S.A. is provided in explanatory note 35 to the financial statements of Asseco Group. Discussion of significant risk factors and threats Risk related to intensified competition Business operations of Asseco Poland are under the pressure of intense competition both from local players and international IT corporations. Competitors with global reach are getting continually stronger as they have got faster access to innovative technological solutions, but also to cheaper sources of funds which makes it possible to finance large contracts more efficiently. It is not certain whether the increasing competition will have no significant adverse impact on the Company s operations, financial position, financial results and future development outlook. Risk related to technological changes in the industry and development of new products The IT sector is characterized by rapid development of new solutions and technologies, which shorten the lifecycle of products. Therefore, the future success of Asseco Poland will largely depend upon our capability to incorporate the latest technological solutions into our products and services. In order to maintain the competitive advantage in this market, it is necessary to conduct research work and to invest in new products. Asseco keeps on monitoring the present information technology trends and develops and upgrades its business offer accordingly. However, there is still a risk that the market will receive new products, which will cause our products and services to become less attractive, and eventually not as profitable as expected. Additionally, it cannot be taken for granted that the new solutions which are, or will be, created or developed by Asseco will satisfy the technological requirements, and whether they will be accepted positively by their potential users. Such circumstances might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. Risk related to market saturation Technological saturation that begins to emerge in the Polish banks and private enterprises may prompt them to focus their strategies on smaller or mid-size IT projects that would address their current needs only. Such circumstances might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. 27

28 Risk related to consolidation of the banking sector The banking and finance sector is the place of ongoing consolidation processes. There is a risk that consolidators of this sector will force the acquired financial institutions to use their global IT solutions, which may slow down the process of gaining new contracts or even result in termination of already concluded contracts. Such circumstances might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. Risk related to carrying out of public tenders Delays in finalization of the tendering procedures for delivery of IT infrastructure for the public administration may result in unstable revenues from this sector. If combined with unsatisfactory utilization of the EU funds granted for improving innovation at public offices, this might substantially reduce the local demand for IT services and thereby exert a negative impact on the operations, financial position, financial results and prospective development of Asseco. Risk involved in gaining new contracts It is characteristic of the IT business that most of contracts of Asseco Poland are awarded under tendering procedures. Therefore, it is not certain that the Company will be able to gain such new contracts that would ensure sufficiently high and satisfactory revenues in the future. These factors might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. Risk related to the macroeconomic situation of Poland Development of the IT services sector is closely correlated to the overall economic prosperity. The main factors affecting the financial results of Asseco Poland include the pace of GDP growth, value of public orders for IT solutions, level of capital expenditures made by enterprises, inflation rate, and foreign currency exchange rates versus the Polish zloty. Risk of becoming dependent on the key customers The implementation of contracts with key clients will heavily impact the level of sales revenues generated by Asseco Poland in the coming years. It cannot be precluded that a potential loss of any major client, deterioration in the financial terms for provision of services, or potential compensatory claims would have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. Risk of increasing cost of work Salaries account for over 70% of the project implementation costs. Taking into account such high human resource requirements, an increase in salaries would squeeze the margins achieved on projects, and consequently have an unfavourable impact on the financial results of Asseco Poland S.A. In order to manage the risk of higher cost of work, the Company takes a number of measures which can help reduce potential negative effects of rising salaries. Among other things, Asseco (i) employs people in many geographical regions aiming to diversify that risk, (ii) continually monitors the level of salaries in the market not to be taken by surprise, and (iii) tries to maintain an appropriate structure of employment within particular levels of competence. Risk of changes in regulations and their interpretation Frequent amendments, lack of cohesion and uniform interpretations of the provisions of law, concerning in particular the tax regulations, banking law, insurance law (inclusive of social insurance), public procurement law, personal data protection law, regulations pertaining to trading in securities and public offering, and commercial companies law, give rise to the regulatory risk occurring in the environment in which Asseco Poland operates. The tax regulations and their interpretations are more than others prone to numerous changes. Practices of the internal revenue administration and the court judicature are not uniform in this domain. In the event the taxation authorities take a position that is different from our interpretation of tax regulations, the operations, financial position and financial results of Asseco may be exposed to negative consequences thereof. Such risk may be materializing especially due to potential doubts expressed by the taxation authorities over the transactions the Company conducts with its related parties. This might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. Risk of losing the clients trust Operations of Asseco Poland S.A. are to a large extent based on the customers trust. Implementation of an IT system, which has critical importance for the customer s business, usually results in signing a long-term agreement with the system user. The quality of solutions and services provided to such clients determines their confidence in the Asseco brand. In the event the quality of delivered products and services was poor, our customers might lose their trust in Asseco, which might hurt our reputation in 28

29 the market and make it impossible to continue successful business operations. Risk of underestimation of the project cost Most of Asseco s profits are derived from the execution of complex information technology projects carried out under long-term agreements with a predefined remuneration. Implementation of such projects requires very good planning both in terms of the schedule of work and the resources needed to provide the promised scope of the contract. Here the Company follows complex procedures, which on one hand facilitate the process of preparation of reliable plans and on the other hand prevent the incurrence of unexpected costs. In order to manage the risk of the project cost underestimation, Asseco Poland applies the methods (either based on the world recognized standards or proved by own experience) for estimation of the project costs, preparation of work schedules, and identification of risks that may hinder timely, professional or financial performance under a contract. Risk of concluding a contract with a dishonest customer Asseco is exposed to the risk of defaulting contractors. This risk is connected firstly with the financial credibility and good will of customers to whom the Company provides IT solutions, and secondly with the financial credibility of contractors with whom supply transactions are concluded. Hence, the risk control measures usually consist in monitoring the timely execution of bank transfers and, if needed, sending a reminder of outstanding payment. In the case of smaller clients, it is quite helpful to monitor their industry press as well as to analyze previous experience gathered by ourselves and by our competitors, etc. Risk of inability to effectively integrate the takenover companies or to achieve the intended rates of return on acquisitions or investments Asseco Poland implements the strategy of development, among others, through acquisitions of or capital investments in IT companies. Valuation of the future acquisitions or investments will depend on the market conditions as well as on other factors beyond the Asseco s control. It cannot be entirely precluded that the investor company may be unable to accurately estimate the values of undertaken acquisitions or investments. There is also a risk that earnings generated by the acquired or investee companies fall short of the initial estimates which might prevent us from achieving the rates of return that were originally expected from such transactions. Risk related to losing the key personnel The Company s operations and development outlook depend to a large extent on the knowledge, experience and professional qualifications of its employees, who implement the IT projects. A substantial demand for IT specialists and the competitors activities may induce the key personnel to leave our organization, and also make it quite difficult to recruit new employees with suitable knowledge, experience and professional qualifications. Still there is a risk that resignation by the key personnel would have a negative impact on the execution of IT contracts conducted by the Company, as well as on ensuring the required quality and range of services provided. This in turn might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco Poland S.A. Risk of data leakage As a result of deliberate actions of third parties or dishonest employees, as well as mistakes or carelessness of our employees or contractors, confidential data of the Company or of our clients may be disclosed to unauthorized persons. Such circumstances might have an adverse impact on the perception of Asseco by our clients, and consequently on the Group s operations, financial position, financial results and prospective development. Risk of property damage As a result of abuse or errors committed by employees of Asseco, the Company may suffer damage to its property. Such circumstances might have an adverse impact on the Group s financial condition and business continuity, and consequently on the Company s operations, financial position, financial results and prospective development. Personnel policy risk Asseco Poland may incur costs in connection with legitimate or illegitimate claims filed by its employees on the grounds of discrimination, working conditions, etc. Such circumstances might have a significant adverse impact on the operations, financial position, financial results and prospective development of Asseco. 29

30 OTHER INFORMATION Explanation of differences between the financial results disclosed in the annual report and previous financial forecasts for the year Asseco Poland S.A. did not publish any financial forecasts for the year Opinion on feasibility of the Management Board financial forecasts for 2016 The Management Board of Asseco Poland S.A. did not publish any financial forecasts for the year 2016 or for subsequent financial periods. Changes in the Company management policies During the year 2015, the Company s management practices remained unchanged. Remuneration of the management and supervisory personnel The amounts of remuneration due to our management and supervisory staff have been disclosed in explanatory note 32 to the separate financial statements of Asseco Poland S.A. for the year ended 31 December Description of the Company s sponsoring and charity policy Since 2006, Asseco Poland has been a major sponsor of the volleyball team Asseco Resovia Rzeszów, the current champions of Poland. The Company also supports one of the best teams in the Polish basketball league, namely Asseco Gdynia. The Management of Asseco Poland is an active supporter, not only in financial terms, but also by devoting their time and expertise to assist the players and help the teams in building their strategies for development. For the last two years, on the occasion of Christmas, Asseco Poland has provided one-time financial donations to institutions and foundations that had been selected by the company s employees. These organizations operate in the regions where the divisions of Asseco Poland are based. The charity campaign We Help has been created on the initiative of Asseco Poland that decided to resign from buying any Christmas presents for the company s clients. This way the company saved PLN 200,000 and allocated this money to a campaign, where our employees take part in an internal competition to come up with the best project of aid for various social institutions. The company co-finances the organization of the Olympiad in Informatics as well as the international contest called Asseco Programming Marathon24. In addition, Asseco Poland s specialists give lectures in graduate and postgraduate programs at the Warsaw University of Life Sciences as well as at the University of Information Technology and Management in Rzeszów. Moreover, Asseco Poland has for years provided regular financial and material support to the following foundations: Cooperative Banking Development Foundation, Foundation A kogo? (Who cares?), Foundation Mimo wszystko (Despite everything), and TVN s Foundation Nie jesteś sam (You are not alone). Agreements concluded by Asseco Poland S.A. with its management personnel providing for payment of compensations if such persons resign or are dismissed from their positions Asseco Poland S.A. did not conclude any agreements with their management officers that would provide for payment of compensations in the event such persons resign or are dismissed from their positions without substantial reason, or when they are dismissed as a result of a company merger by acquisition. Information on the agreements known to the Issuer which may result in future changes of the equity interests held by the existing shareholders and bondholders There are no agreements which may result in future changes of the equity interests held by the existing shareholders and bondholders. Organizational and equity relationships Asseco Poland S.A. is the parent company of Asseco Poland Group, and its equity relationships have been presented in explanatory note 9 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December Related party transactions Related party transactions have been presented in explanatory note 25 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December These transactions were carried out on an arm s length basis. Bank loans, borrowings, sureties and guarantees Bank loans drawn, loans granted, as well as sureties and guarantees granted have been described in explanatory notes 20 and 28 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December

31 Loans granted during the financial year Information on loans granted by Asseco Poland S.A. has been presented in explanatory note 11 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December Off-balance-sheet items The nature, purpose and value of significant offbalance-sheet items have been presented in explanatory notes 27 and 28 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December Utilization of proceeds from issuance of shares In the period of 12 months ended 31 December 2015, Asseco Poland S.A. did not issue any new shares. Monitoring of employee stock option plans As at the date of preparation of this report, the Company did not run any share-based employee incentive scheme. Significant agreements concluded by the Company During the year ended 31 December 2015, the Company did not sign any significant agreements. Information on judicial proceedings where the value in dispute exceeds 10% of the amount of equity At the publication date of this report, the Company was not a party to any proceedings pending before any court, arbitration authority or public administration authority, under which the value in dispute would exceed 10% of the Company s equity. Information on adhering to the corporate governance standards Information on adhering to the corporate governance standards has been contained in the separate Report on compliance of Asseco Poland S.A. with the corporate governance standards in the year Agreement with the entity authorized to audit financial statements The agreement with the entity authorized to audit financial statements, namely Ernst & Young Audyt Polska Sp. z o.o. sp. k., to carry out audits of the separate and consolidated financial statements of Asseco Poland S.A. drawn up for the year ended 31 December 2015 was signed on 27 June Remuneration of the entity authorized to audit financial statements Information on remuneration due to the entity authorized to audit financial statements has been provided in explanatory note 31 to the annual financial statements of Asseco Poland S.A. for the year ended 31 December This Management Report on Operations has been approved for publication by the Management Board of Asseco Poland S.A. on 16 March

32 Statements by the Management of Asseco Poland S.A. to the Annual Report Statements made by the Management Board of Asseco Poland S.A. to the Annual Report for the year ended 31 December 2015