CONSOLIDATED FINANCIAL STATEMENTS FOR 2016

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS FOR 2016 Gdynia, 11 April 2017

2 CONTENTS These consolidated financial statements contain: I. CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 4 II. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 5 III. CONSOLIDATED CASH FLOW STATEMENT... 6 IV. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 7 V. NOTES... 8 V.1. INFORMATION ON BEST S.A. CAPITAL GROUP AND CONSOLIDATED ENTITIES... 8 V.2. CORPORATE BODIES OF CONSOLIDATED ENTITIES OF BEST GROUP... 9 V.3. BASIS FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS V.4. MAJOR EVENTS AFFECTING THE GROUP IN V.5. ASSETS AND LIABILITIES BROKEN DOWN INTO SHORT-TERM AND LONG-TERM V.6. DIRECT AND INDIRECT INVESTMENTS IN CLAIMS V.6.1. Acquired claims V.6.2. Investments in jointly controlled entities V.6.3. Investments in associates V.7. OTHER RECEIVABLES V.8. LIABILITIES DUE TO LOANS, BORROWINGS, BONDS AND LEASES V.8.1. Reconciliation of debt V.8.2. Liabilities due to bonds issue V.8.3. Liabilities due to borrowings V.8.4. Bank loan liabilities V.9. TRADE AND OTHER LIABILITIES V.10. OPERATING LEASE AGREEMENTS V.11. EQUITY AND EQUITY MANAGEMENT V Share capital and share premium movements V Share capital structure and shareholding of BEST V Capital management and debt ratios V.12. INCENTIVE PROGRAMMES V.13. TAXATION V Deferred tax assets and provisions V Income tax V.14. PP&E AND INTANGIBLE ASSETS V Property, plant and equipment V Intangible assets V.15. NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME V Operating revenue V Operating expenses V Financial expenses V Earnings per share V.16. NOTES TO THE CASH FLOW STATEMENT V Measurement and settlement of financial assets V Impairment of financial assets V Movement in liabilities V Movement in investments in claims V Repayment of borrowings and bank loans V Commissions and interest paid on financial liabilities V.17. OPERATING SEGMENTS V.18. FINANCIAL INSTRUMENTS V Financial instruments by category (carrying values) V Revenues, expenses, profit and loss items recognised in the statement of comprehensive income, broken down into categories of financial instruments V Fair value of financial instruments V Sensitivity analysis of claims classified as Level V Comparison of the fair value and the carrying value of financial instruments not measured at fair value V.19. FINANCIAL RISK ANALYSIS V Market risk V Liquidity risk V Credit risk V.20. TRANSACTIONS BETWEEN RELATED PARTIES V Information on remunerations for the members of Management Boards and Supervisory Boards of Group companies V Information on the value of unpaid advances, loans, borrowings, guarantees, sureties granted to and agreements concluded with managers or supervisors V Information on transactions with other related parties V.21. REMUNERATION OF ENTITY AUTHORISED TO AUDIT FINANCIAL STATEMENTS V.22. INFORMATION ON PAID (OR DECLARED) DIVIDEND V.23. EVENTS AFTER THE BALANCE SHEET DATE... 54

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4 I. CONSOLIDATED STATEMENT OF FINANCIAL POSITION as of 31 December 2016 Assets Note Cash and cash equivalents 22,045 43,194 Trade receivables 893 1,432 Income tax receivables Other receivables 5.7 8,742 9,934 Acquired claims , ,102 Investments in jointly controlled entities ,951 97,127 Investment real property 7,634 8,220 Investments in associates , ,953 Property, plant and equipment ,831 8,736 Intangible assets ,015 11,948 Goodwill Deferred tax assets Other assets 1,828 1,256 Total assets 904, ,108 Equity and liabilities Note Liabilities: 548, ,147 Liabilities due to employee benefits 6,491 3,652 Income tax liabilities 0 52 Trade and other liabilities ,058 6,300 Liabilities due to loans, borrowings, bonds and leases , ,150 Provisions for employee benefits Deferred tax provision , Equity attributable to BEST s Shareholders: 356, ,929 Share capital ,328 20,966 Share premium 40,628 5,494 Other reserve capitals 2,275 1,281 Retained profits 290, ,188 Equity attributable to non-controlling interests Total equity , ,961 Total equity and liabilities 904, ,108 4

5 II. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the 12-month period ended 31 December 2016 (single-step) Note 01/01/ /01/2015 Operating revenues, including: , ,908 Profits on interests in jointly controlled entities and associates 42,263 29,451 Operating expenses: ,696 52,667 Payroll and employee benefits ,559 25,517 Depreciation/amortisation 4,106 3,120 Third party services 14,097 8,002 Taxes and fees 20,749 11,249 Other operating expenses 4,185 4,779 Operating profit 133,582 88,241 Financial revenue Financial expenses ,612 17,500 Profit before tax 39,768 71,320 Income tax (10,856) Net profit, of which attributable to: 38,771 82,176 BEST s shareholders 38,245 81,809 Non-controlling interests Other net comprehensive income: (45) (10) Interest in other comprehensive income of associates which can be transferred to profit/loss (18) (19) Other items of net comprehensive income which will not be transferred to profit/loss (27) 9 Net comprehensive income, of which attributable to: 38,726 82,166 BEST s shareholders 38,200 81,799 Non-controlling interests Earnings per share from continued operations: Ordinary Diluted

6 III. CONSOLIDATED CASH FLOW STATEMENT for the 12-month period ended 31 December 2016 Operating cash flows Note 01/01/ /01/2015 Profit before tax 39,768 71,320 Adjustments for: (157,479) (240,499) Measurement and settlement of financial assets (42,263) (29,451) Depreciation/amortisation 4,106 3,120 Impairment of financial assets ,253 0 Interest and profit sharing 25,171 17,457 Result on investing activities Movement in receivables 1,731 (6,574) Movement in liabilities ,137 2,613 Movement in provisions, inventory, and other assets, equity and liabilities (256) 55 Movement in investments in claims (250,422) (230,840) Other items, net 2,060 2,974 Net cash from operating activities before tax (117,711) (169,179) Income tax cash flows (52) (3) Net cash from operating activities after tax (117,763) (169,182) Cash flow from investing activities Acquisition of intangible assets, and property, plant and equipment (17,282) (8,552) Other items, net (13) (14) Net cash from investing activities (17,295) (8,566) Cash flow from financing activities Inflows from the issue of debt securities 174, ,558 Net inflows from issue of shares 36,496 0 Inflows from bank borrowings and loans raised 49, ,000 Redemption of debt securities (81,000) (24,187) Repayment of borrowings and bank loans (37,750) (72,000) Commissions and interest paid on financial liabilities (26,433) (18,172) Payments due to lease (443) (345) Payments from net profit to non-controlling interests (458) (367) Net cash from financing activities 113, ,487 Movement in net cash (21,149) 5,739 Cash at the beginning of the period 43,194 37,455 Cash at the end of the period 22,045 43,194 6

7 IV. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the 12-month period ended 31 December 2016 Share capital Share premium Other reserve capitals Retained profits Equity attributable to BEST s shareholders Noncontrolling interests Total equity Equity as of 01/01/ ,966 5,494 1, , , ,961 Total comprehensive income for the reporting period: - - (45) 38,245 38, ,726 Financial result for the current period ,245 38, ,771 Other net comprehensive income - - (45) - (45) - (45) Contributions from and payouts to equity holders: 1,362 35,134 1,332-37,828 (458) 37,370 Issue of ordinary shares 1,362 35, ,496-36,496 Measurement of the incentive programme - - 1,332-1,332-1,332 Dividends and profit shares paid to equity holders (458) (458) Shares in the movement of capital of an associate - - (293) (2,537) (2,830) - (2,830) Equity as of 22,328 40,628 2, , , ,227 Equity as of 01/01/ ,966 5,494 (36) 173, , ,835 Total comprehensive income for the reporting period: - - (10) 81,809 81, ,166 Financial result for the current period ,809 81, ,176 Other net comprehensive income - - (10) - (10) - (10) Contributions from and payouts to equity holders: - - 1,365-1,365 (367) 998 Measurement of the incentive programme - - 1,365-1,365-1,365 Dividends and profit shares paid to equity holders (367) (367) Shares in the movement of capital of an associate - - (38) - (38) - (38) Equity as of 20,966 5,494 1, , , ,961 7

8 V. NOTES to the consolidated financial statements for 2016 V.1. INFORMATION ON BEST S.A. CAPITAL GROUP AND CONSOLIDATED ENTITIES BEST S.A. Capital Group (Group) is composed of the parent company BEST S.A. (BEST, Issuer) and its subsidiaries. BEST is one of the largest companies in the debt collection industry in Poland. Our Group actively invests in securitised claims portfolios using an investment fund structure. Parent company s data: Name: BEST Spółka Akcyjna Registered office: ul. Łużycka 8A, Gdynia Tax ID (NIP): KRS No.: Core business: managing claims of investment funds, monitoring claims, investing in claims portfolios. In 2016, the following events affected the Group s structure: The Extraordinary General Meeting of BEST Capital adopted a resolution on dissolving the company and initiating its liquidation according to Cypriot law. BEST (acquiring company) merged with the subsidiaries Gamex, Gamex Inwestycje and Actinium Inwestycje (acquired companies). The merger was performed according to Article item 1 of the Commercial Companies Code, i.e. by transferring all assets of the acquired companies to BEST. BEST acquired additional investment certificates of BEST Capital FIZAN amounting to PLN 130 million. As a result, BEST s direct share in that fund increased from 99.53% to 99.63%. We hold the remaining voting rights in the fund indirectly, through BEST TFI. The Extraordinary General Meeting of Actinium adopted a resolution on dissolving the company and initiating its liquidation. As a result, as of 31 December 2016, BEST s capital participation in the subsidiaries consolidated with the full method and in the non-controlled entities consolidated with the equity method was as follows: Name Type of relationship Registered office Core business BEST TFI S.A. (Investment Fund Company) subsidiary Gdynia, Poland establishing and managing investment funds (the Investment Fund Company currently manages BEST I NSFIZ, BEST II NSFIZ, BEST III NSFIZ and FIZAN) BEST Capital FIZAN (FIZAN) subsidiary Gdynia, Poland investing cash in securities specified in the statute, money market instruments and other property rights BEST I NSFIZ subsidiary Gdynia, Poland investing cash in securitised claims portfolios BEST II NSFIZ subsidiary Gdynia, Poland investing cash in securitised claims portfolios Best Nieruchomości sp. z o.o. (BEST Nieruchomości) subsidiary Gdynia, Poland property management Best Capital (CY) Ltd. in liquidation (BEST Capital) subsidiary Limmasol, Cyprus no operations are carried out; the company is in liquidation Actinium sp. z o.o. in liquidation (Actinium) subsidiary Gdynia, Poland no operations are carried out; the company is in liquidation Kancelaria Radcy Prawnego Rybszleger Sp. k. (Law Firm) subsidiary Gdynia, Poland legal services BEST III NSFIZ jointly-controlled Gdynia, Poland investing cash in securitised claims portfolios Kredyt Inkaso S.A. (Kredyt Inkaso) associate Warsaw, Poland other financial services 8

9 Presented below is the Group s structure and our percentage share in the jointly controlled entity and the associates. *jointly controlled entity **associate Tekst Kancelaria Radcy Prawnego Rybszleger sp. k w likwidacji Tłumaczenie Kancelaria Radcy Prawnego Rybszleger sp. k in liquidation V.2. BEST S.A. CORPORATE BODIES OF CONSOLIDATED ENTITIES OF BEST GROUP In May 2016, the Supervisory Board of BEST appointed Jacek Zawadzki, who had previously held the function of IT Division Director, to hold the function of Member of the Management Board beginning 1 July Therefore, as of the date of these statements, the composition of BEST s Management Board is as follows: Krzysztof Borusowski Marek Kucner Barbara Rudziks Jacek Zawadzki President of the Management Board Vice-President of the Management Board Member of the Management Board Member of the Management Board In January 2016, Krzysztof Kaczmarczyk was appointed Member of the Supervisory Board. In May 2016, Katarzyna Borusowska and Patrycja Kucner resigned from the Supervisory Board. In the same month, BEST s Ordinary General Meeting appointed Andrzej Klesyk and Mirosław Gronicki as Members of the Supervisory Board. Therefore, as of the date of these statements, the composition of BEST s Supervisory Board is as follows: Sławomir Lachowski Prof. Leszek Pawłowicz Prof. Pasquale Policastro Prof. Dariusz Filar Krzysztof Kaczmarczyk Andrzej Klesyk Mirosław Gronicki Chairman of the Supervisory Board Vice-Chairman of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board 9

10 BEST TFI S.A. and investment funds In May 2016, the 3-year term of office of the following Management Board of BEST TFI expired: Krzysztof Borusowski Marek Kucner Krzysztof Stupnicki President of the Management Board Member of the Management Board Member of the Management Board For the next term of office, the Supervisory Board appointed Krzysztof Stupnicki, an existing Member of the Management Board, to hold the function of President of the Management Board. At the same time, the Supervisory Board appointed two new Members of the Management Board: Jarosław Galiński and Jarosław Zachmielewski, who had been Directors in BEST TFI. In September 2016, Krzysztof Stupnicki, who was appointed Member of the Investment Fund Company s Supervisory Board, resigned from his function of President of the Management Board. In October 2016, Piotr Urbańczyk became President of the Management Board. As a result, as of the date of these statements, the composition of the Investment Fund Company s Management Board is as follows: Piotr Urbańczyk Jarosław Galiński Jarosław Zachmielewski President of the Management Board Member of the Management Board Member of the Management Board Other entities Members of the corporate bodies of other companies of the Group: BEST Nieruchomości Actinium Law Firm BEST Capital Jacek Straszkiewicz President of the Management Board Edward Jednoralski Liquidator Urszula Rybszleger, attorney General Partner Andreas Raftis Liquidator In June 2016, Andrzej Ladko resigned from the Investment Fund Company s Supervisory Board. In October 2016, Krzysztof Stupnicki, who had held the function of President of BEST TFI S.A. s Management Board, was appointed Member of the Investment Fund Company s Supervisory Board. As a result, as of the date of these statements, the composition of the Investment Fund Company s Supervisory Board is as follows: Prof. Witold Orłowski Mirosława Szakun Krzysztof Stupnicki Chairman of the Supervisory Board Vice-Chairman of the Supervisory Board Member of the Supervisory Board In 2016, the Investment Fund Company managed all investment funds of BEST Group (BEST I NSFIZ, BEST II NSFIZ and BEST Capital FIZAN) and the jointly controlled fund BEST III NSFIZ. V.3. BASIS FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS These consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union. The statements cover the 12-month period from 1 January 2016 to 31 December 2016 and data for the comparable reporting period, and were prepared as a result of the consolidation of the statements of: BEST, Investment Fund Company (TFI), BEST Capital (these entities prepare separate financial statements according to the IFRS), BEST Nieruchomości, Law Firm and Actinium (these entities prepare separate financial statements in accordance with the Accounting Act of 29 September 1994; for consolidation purposes, they are restated in accordance with the IFRS), BEST I NSFIZ, BEST II NSFIZ and BEST Capital FIZAN (these entities prepare financial statements in accordance with the Accounting Act of 29 September 1994 and the Ordinance of the Minister of Finance of 24 December 2007 concerning detailed accounting rules for investment funds; for consolidation purposes, they are restated in accordance with the IFRS). In these consolidated financial statements, we measured the jointly controlled entity BEST III NSFIZ and the associate Kredyt Inkaso with the equity method. The goodwill disclosed in these consolidated financial statements was determined as a surplus of the acquisition cost of subsidiaries over the fair value of their net assets as of the day when BEST asserted control over them. The goodwill is not amortised, but tested for impairment. In the current reporting period, according to the amendments to IAS 1 Presentation of Financial Statements, effective from 1 January 2016, we introduced changes in the presentation of data. In particular, the purpose of the amendments to IAS 1 was to improve the usefulness of financial statements by allowing the exclusion of immaterial data from disclosures, even if other IFRS require such disclosures, the aggregation or disaggregation of data as well as the optimisation of the presentation of notes and of the applied accounting policy. Therefore, we verified our disclosures and focused on the presentation of data which is material from the perspective of our business activi ty. Our accounting principles for recognising the respective items of the statements are presented in the detailed notes to those items rather than in a collective note. The investment property, which we did not describe in detail in a separate note due to its low value in the balance sheet total, is measured at fair value based on appraisal studies prepared by independent appraisers. The remaining amendments to the IFRS which are effective as of 1 January 2016 have not materially affected our accounting policy. 10

11 Furthermore, in the reporting period, we introduced accounting principles for new transactions involving incentive programmes settled in phantom shares, and we classified such transactions as share-based payments settled in cash. For more information on the measurement of phantom share-based incentive programmes, see note In these consolidated statements, we have not decided to adopt the amendments to the IFRS before their effective dates. In particular, we have analysed the effect of the following standards on our future statements: Standard Main amendments and effective date Expected effect on our financial statements IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases The standard introduces a single model with only two categories of financial assets: measured at fair value and measured at amortised cost. The classification is performed at initial recognition and depends on the adopted model for managing financial instruments and on the characteristics of contractual cash flows from these instruments. When performing a fair value measurement, profits and losses are recognised in the financial result or in other comprehensive income. IFRS 9 introduces a new model for write-downs: the expected credit losses model. Effective date: 1 January The fundamental principle of this standard is to recognise revenue upon the transfer of goods or services to a customer at the transaction price. All goods or services sold in packages which can be separated as part of a given package should be recognised separately. In addition, all discounts and rebates on the transaction price should be allocated to individual package elements. According to IFRS 15, costs incurred to obtain and secure a contract should be recognised and settled over time, during the period in which a customer consumes that contract s benefits. Effective date: 1 January The standard introduces the recognition of lease transactions as assets and liabilities due to payment obligations, thus cancelling the classification into operating and finance lease, and introduces a single model for the recognition of leases by the lessee in the accounting books. Effective date: 1 January Currently, based on the requirements of IAS 39 Financial Instruments: Recognition and Measurement, we classify the acquired claims portfolios as financial assets measured at the fair value through profit/loss (as determined upon the initial recognition in that category). The business model of realising the claims involves generating contractual cash flows from repayments. Beginning 1 January 2018, we plan to reclassify our claims to financial assets measured at the amortised cost. If the standard had been adopted as of the balance sheet date, the estimated effect of the measurement principles on the claims value would have been immaterial. No material influence on our financial statements. In our business activity, we lease premises under lease agreements, which, according to the applicable laws, are recognised as operating lease. According to IFRS 16, we will be obliged to recognise assets and liabilities on account of such agreements in the financial statements. The value of minimum future fees on account of operating lease is PLN 6,391 thousand, representing an estimate of how our liabilities and assets would have increased if the standard had been adopted as of the balance sheet date. Introducing that change will affect the financial liabilities and, consequently, the debt ratios. Currently, we estimate that the remaining published amendments and the new standards not included in the above table will not materially affect our statements. Preparing financial statements requires making certain estimates and assumptions which influence the values of the presented items. This means that real results may differ from the results estimated and presented in the statements. Material assumptions adopted for estimates and judgments are presented in the notes to the respective items for which material estimates and judgments have been made, as presented below: Item Acquired claims Investments in jointly controlled entities Investments in associates Incentive programmes 5.12 Deferred tax assets and provisions Property, plant and equipment Intangible assets Unless indicated otherwise, all amounts presented in the statements are rounded to PLN thousands. The parent company s functional currency and the Group s presentation currency is the Polish zloty (PLN). In the opinion of BEST s Management Board, there are no factors that could be a significant threat to our going concern status. Therefore, these consolidated financial statements have been prepared on an on-going concern basis. Note V.4. MAJOR EVENTS AFFECTING THE GROUP IN 2016 The most important events in 2016 were: investments in claims (we acquired new claims portfolios with a nominal value of PLN 2.3 billion for PLN 258 million), 11

12 redemptions and issues of bonds, and the repayment of a portion of a borrowing granted by the Members of BEST s Management Bonds (we issued bonds worth PLN 175 million, redeemed bonds worth PLN 81 million and repaid borrowings from the Members of BEST s Management Bonds of PLN 36.5 million), write-down on the investment in Kredyt Inkaso S.A. (in two stages, we recognised a write-down in the total amount of PLN 69 million), increase of the share capital of BEST (combined with the share premium, leading to an increase of our equity by PLN 36.5 million), tests of SIGMA, an integrated system for settlements and claims management (allowing us to finally adopt that proprietary system at the beginning of 2017; by the end of 2016, we incurred total development expenditures on the system of PLN 15.5 million). V.5. ASSETS AND LIABILITIES BROKEN DOWN INTO SHORT-TERM AND LONG-TERM 31 December 2016: Short-term Long-term Total ASSETS Cash and cash equivalents 22,045-22,045 Trade receivables Income tax receivables Other receivables 8, ,742 Acquired claims 113, , ,111 Investments in jointly controlled entities 34,268 77, ,951 Investment real property - 7,634 7,634 Investments in associates - 106, ,703 Property, plant and equipment - 11,831 11,831 Intangible assets - 22,015 22,015 Goodwill Deferred tax assets Other assets 1, ,828 Total assets 181, , ,865 LIABILITIES Liabilities due to employee benefits 5, ,491 Trade and other liabilities 36, ,058 Liabilities due to loans, borrowings, bonds and leases 78, , ,949 Provisions for employee benefits Deferred tax provision - 1,888 1,888 Total liabilities 120, , ,638 12

13 31 December 2015: Short-term Long-term Total ASSETS Cash and cash equivalents 43,194-43,194 Trade receivables 1,432-1,432 Income tax receivables Other receivables 9, ,934 Acquired claims 62, , ,102 Investments in jointly controlled entities 14,309 82,818 97,127 Investment real property - 8,220 8,220 Investments in associates - 174, ,953 Property, plant and equipment - 8,736 8,736 Intangible assets - 11,948 11,948 Goodwill Deferred tax assets Other assets 1, ,256 Total assets 132, , ,108 LIABILITIES Liabilities due to employee benefits 3,652-3,652 Income tax liabilities Trade and other liabilities 6, ,300 Liabilities due to loans, borrowings, bonds and leases 168, , ,150 Provisions for employee benefits Deferred tax provision Total liabilities 178, , ,147 V.6. DIRECT AND INDIRECT INVESTMENTS IN CLAIMS Our core business is investing in claims, both directly and indirectly (e.g. by acquiring other entities whose core business also consists in investing in claims). Therefore, we present all operations relating to transactions on claims as operating activity. Our present investments in claims include the following: investing directly in claims by acquiring claims portfolios, investing in the jointly controlled entity BEST III NSFIZ (by acquiring that fund s investment certificates), investing in the associate Kredyt Inkaso (by acquiring its shares). Direct and indirect investments in claims: 829, ,182 Acquired claims 611, ,102 Investments in the jointly controlled entity BEST III NSFIZ 111,951 97,127 Investments in the associate Kredyt Inkaso 106, ,953 Percentage share in the balance sheet total 92% 88% 13

14 V.6.1. Acquired claims ACCOUNTING POLICY We include the purchased claims portfolios in the category of financial instruments measured at fair value through profit or loss. The revenues from the repayment of the purchased claims and the revenues from movements in the fair value are recognised in the statement of comprehensive income under Operating revenue because investing in securitised claims is the Group s core business activity. The claims portfolios are measured by an independent entity at the end of the last working day of each month, and on every balance sheet date. The claims are managed based on the following principles: Using an investment strategy defined by investors Risk analysis, especially based on the fair value The assessment of an investment is reported to the key management of the Group and to the investors of the funds which directly hold such assets. MATERIAL ESTIMATES The fair value of claims is estimated by an entity independent from the Group, using commonly applied estimation methods. Those methods are based on measuring the present value of expected cash flows realisable over the projected period of debt service, taking into account the costs of debt recovery. Estimation includes also the interest rate used for discounting projected cash flows for a given claims portfolio, which consists of the risk-free rate and the expected margin (risk premium). To learn more about the assumptions of the measurement models for this group of assets, see note to these statements. 01/01/ /01/2015 Opening balance 337, ,013 Increases (decreases) due to: 274,009 86,089 (1) purchase of new claims portfolios 258,338 85,125 (2) claims revaluation, including on account of: 15, (a) flows generated on claims (33,351) (20,431) (b) change of estimation parameters, including on account of: 49,022 21,395 extended service periods of claims as a result of agreements signed 37,639 11,188 Closing balance, including present value of estimated net flows: 611, ,102 recoverable within 1 year 113,526 62,787 recoverable within 1 to 5 years 340, ,580 recoverable in more than 5 years 157,361 73,735 In 2016, we purchased a total of 18 claims portfolios for PLN million, including claims with a nominal value of PLN 2.3 billion. 31 December 2016, total nominal value of the Group s claims (BEST I NSFIZ and BEST II NSFIZ) amounted to PLN 9.4 billion. Compared to the end of the previous year, the fair value of claims in our books has increased by more than 80% and now accounts for more than 2/3 of the balance sheet total. Claims with a fair value of PLN 91.4 million secure the repayment of series C bonds with a nominal value of PLN 30 million at the end of 2016 (by the date of these statements, we repaid another PLN 10 million). Claims with a fair value of PLN 40.5 million secure the repayment of a loan granted by ING Bank Śląski S.A. with a nominal value of PLN 25 million. 14

15 V.6.2. Investments in jointly controlled entities ACCOUNTING POLICY A joint arrangement has the following characteristics: Parties are bound by an agreement. Based on the agreement, two or more parties exercise joint control over the joint arrangement. Our share in BEST III NSFIZ is classified as an investment in a jointly controlled entity that has the form of a joint venture. Considering that our core business consists in investing in claims, both direct and indirect, we recognise the effects of the measurement of our share in BEST III NSFIZ in the operating activity. A joint arrangement has the form of either a joint operation or joint venture. A partner in a joint venture accounts for its share in the joint venture as an investment and settles that investment using the equity method. MATERIAL ESTIMATES We measure our share in BEST III NSFIZ based on the Group s interest-carrying share in the fund s net asset value at the end of each reporting period. The NAV (net asset value) is largely based on the fair value of the claims representing that entity s main assets. Since there is no reliable market value realisable on an active market, the fair value of the claims is estimated by an independent entity using commonly accepted estimation methods. Those methods are based on measuring the present value of expected cash flows realisable over the projected period of debt service, taking into account the costs of debt recovery. Estimation includes also the interest rate used for discounting projected cash flows for a given claims portfolio, which consists of the risk-free rate and the expected margin (risk premium). Investment in the jointly controlled entity BEST III NSFIZ Number of certificates in thousands 17,999 22,140 Share in the total number of votes (in %) 50,00 50,00 Value at the acquisition price 17,999 22,140 Total change in the value of investment in jointly controlled entity 93,952 74,987 01/01/ /01/2015 Opening balance 97,127 98,143 Redemption of certificates (4,141) (6,772) Increase in the value of investment for the reporting period 18,965 5,756 Closing balance 111,951 97,127 15

16 Presented below are selected figures from the financial statements of BEST III NSFIZ as of 31 December 2016, restated according to IFRS. BEST III NSFIZ Current assets, including: 230, ,186 cash 7,491 8,659 claims 220, ,450 Total assets 230, ,186 Short-term liabilities, including: 6,894 28,933 financial liabilities 0 21,044 Net assets 223, ,253 BEST III NSFIZ 01/01/ /01/2015 Revenue, including: 105,994 76,797 revenue from the repayment of debt 96,479 91,106 revaluation of claims portfolios 7,721 (14,458) interest on bank deposits Costs, including: 29,172 25,329 interest costs 555 1,724 Net profit 76,822 51,468 16

17 V.6.3. Investments in associates ACCOUNTING POLICY Associates An associate is an entity on which an investor exerts material influence. Material influence means the power to participate in decisions on financial and operational policy of the entity in which an investment was made, but it does not consist in exercising control or joint control over the policy of that entity. Material influence If we hold, directly or indirectly (e.g. through subsidiaries), 20% or more of the voting rights in an entity, we assume that we exert material influence on that entity, unless it can be clearly demonstrated otherwise. On the other hand, if we hold, directly or indirectly, less than 20% of voting rights in an entity, we assume that we do not exert material influence on that entity, unless such influence can be clearly demonstrated. The fact that another investor holds a controlling stake or a significant portion of interests does not preclude the possibility that we may exert material influence on another entity. In the consolidated financial statements, we measure the share in associates using the equity method, accounting for any impairment losses. If associates invest in mass claims, we classify the purchase of shares in such entities as indirect investments in claims. Given that investing in claims is our core business, we present the measurement of such entities in the operating activity (with respect to recognising our percentage share in the current result of that entity). Any change of our percentage share in other comprehensive income or other capital of that entity is recognised in other revenue or in the corresponding item of capitals respectively. Impairment losses At the end of each reporting period, we verify whether there are objective indications of impairment of investments in associates. If such indications exist, we perform an impairment test and determine the recoverable value of our investment. If the carrying value of an investment in an associate is higher than the recoverable value, we recognise an impairment loss. We recognise impairment losses on financial assets (including shares in associates) in the financial expenses. On the other hand, if we recognised a write-down in previous periods and there are objective indications that the reasons for which the write-down was recognised have discontinued or if there are indications that the value of the write-down has decreased, we revaluate the recoverable value of an investment. If the new recoverable value is higher than the carrying value, we increase the carrying value of an asset to the amount of the recoverable value. The carrying value of an asset which was increased due to reversal of the impairment loss should not exceed the carrying value which would have been determined if the impairment loss on such an asset had not been recognised in previous periods. We recognise the amount of a reversed impairment loss in the financial result as financial revenue. MATERIAL ESTIMATES AND JUDGMENTS Kredyt Inkaso is our associate. Since the plans to take control of that entity have not been successfully implemented and the expected synergies have not been achieved, we identified indications for impairment of that investment. Therefore, we performed an impairment test and estimated the recoverable value of the shares of Kredyt Inkaso at PLN 25 per share based on the transaction price for which WPEF VI Holding V.B.V., in September 2016, purchased more than 60% of that entity s shares following a tender offer. Considering that the transaction was concluded near the balance sheet date and on an active market, we believe that it gives an accurate account of that investment s recoverable value as of the balance sheet date. 17

18 Last year, we made an indirect investment in claims by purchasing 32.99% of the shares in Kredyt Inkaso with a view to achieve synergies and create value for the shareholders. The total purchase cost amounted to PLN million, i.e. approx. PLN per share. Soon after the purchase of the shares, we initiated a process aimed at achieving a merger with BEST. Consequently, the balance sheet items of claims, other assets and liabilities of BEST would have been increased by the corresponding values recognised previously in Kredyt Inkaso s statements. However, the merger was not successful because in January 2016 Kredyt Inkaso terminated the partnership agreement, citing inability to agree on a share exchange rate. The termination of the agreement and further actions of Kredyt Inkaso revealed a conflict of interests among that company s shareholders. In August 2016, WPEF VI Holding V. B.V., a subsidiary of Waterland Private Equity Investments (Waterland), announced a tender offer for the shares of Kredyt Inkaso as a result of which it purchased 61.16% of that company s shares for up to PLN 25 per share. As a result, in August 2016, we perf ormed an impairment test and, based on internal analyses, the available market data and probable scenarios, we measured our investment at PLN million. Since that value was lower than the previously recognised carrying value, we recognised a write-down of PLN 27 million in financial expenses. Due to the fact that, by December 2016, we did not execute our plans to take control of Kredyt Inkaso, we assumed that a merger was no longer the most likely scenario. Therefore, we re-analysed the indications for impairment and revaluated the recoverable value of that investment at PLN 25 per share based on the transaction price for which Waterland purchased Kredyt Inkaso s shares on 6 September That value does not account for the effects of a potential merger. We recognised the difference between the previous carrying value and the estimated recoverable value in financial expenses. Total write-downs in 2016 for the investment in Kredyt Inkaso amounted to PLN 69 million. Investment in the associate Kredyt Inkaso, including: 106, ,953 purchase price value 171, ,293 increase in the share value, accumulated from the purchase date: 4,663 3,660 value increase in ,660 3,660 value increase in ,003 0 impairment losses charged to financial expenses (69,253) 0 Number of shares in thousands 4,268 4,268 Share in the total number of votes (in %) 32.99% 32.99% Presented below is the data of the Capital Group of Kredyt Inkaso S.A. based on: condensed consolidated financial statements for Q3 of FY 2016/2017, consolidated financial statements for FY 2015/2016, condensed consolidated financial statements for Q3 of FY 2015/2016. Kredyt Inkaso S.A. Group Non-current assets 120, ,917 Current assets, including: 606, ,521 cash 65,822 98,923 claims 508, ,087 Total assets 726, ,438 Long-term liabilities, including: 291, ,582 financial liabilities 287, ,636 Short-term liabilities, including: 159, ,826 financial liabilities 124, ,027 Net assets 275, ,030 Net assets attributable to the shareholders of the parent company 261, ,477 18

19 Kredyt Inkaso S.A. Group 01/01/ /10/2015 * Revenue, including: 93,009 27,419 revenue from claims portfolios 81,710 23,213 interest revenue 4, Costs, including: 74,733 15,791 amortisation/depreciation and accumulated amortisation/depreciation 3, interest costs 27,527 6,107 Income tax 4, Net profit, of which: 13,804 11,421 Net profit attributable to the shareholders of the parent company 11,676 11,266 Total comprehensive income 13,750 11,364 * for the period from the day when we acquired material influence on the associate Kredyt Inkaso s shares are listed at the Warsaw Stock Exchange (GPW). The share price as of 30 December 2016 was PLN per share. V.7. OTHER RECEIVABLES ACCOUNTING POLICY Receivables which do not qualify as trade and borrowing receivables are recognised in other receivables. These receivables are recognised in the amount receivable, less write-downs. In particular, these include receivables from court fees subject to a refund, pursuant to Article 79 and Article 80 of the Act of 28 July 2005 on court fees in civil cases (Journal of Laws of 2005, No. 167, item 1398). According to the above provisions, the court routinely reimburses to a party three quarters of the claim fee in a payment order procedure if the payment order becomes legally binding. Receivables from court fees incurred 5,770 5,827 Receivables from the redemption of the investment certificates of BEST III NSFIZ 2,500 2,750 Other 496 1, 411 Other gross receivables 8,766 9,988 Write-downs (24) (54) Total 8,742 9,934 19

20 V.8. LIABILITIES DUE TO LOANS, BORROWINGS, BONDS AND LEASES ACCOUNTING POLICY We classify liabilities incurred due to loans, borrowings, bonds and leases into the category of financial liabilities. Upon initial recognition, they are measured at the fair value, less transaction costs incurred by the purchase date (primarily commissions and interest paid in advance). In the subsequent periods, liabilities due to loans, borrowings, bonds and leases are measured at the amortised cost, using the effective interest rate method. Liabilities due to bond issues 418, ,192 Liabilities due to borrowings 36,503 73,002 Bank loan liabilities 47,978 0 Liabilities due to finance lease Total, including: 503, ,150 long-term (1 to 5 years) 425, ,940 short-term (up to 1 year) 78, ,210 V.8.1. Reconciliation of debt Bonds Bank loans Borrowings received Lease agreements Debt as of 01/01/ , , ,150 Movements on account of cash flows: 69,541 46,859 (38,050) (479) 77,871 financing received 174,497 49, ,497 repayment of principal amount (81,000) (1,250) (36,500) (443) (119,193) interest and commissions paid (23,956) (891) (1,550) (36) (26,433) Cashless movements: 22,830 1,119 1, ,928 lease agreements concluded interest accrued 22, , ,171 other changes Debt as of 418,563 47,978 36, ,949 Total 20

21 Bonds Bank loans Borrowings received Lease agreements Debt as of 01/01/ , ,299 Movements on account of cash flows: 112, ,161 (367) 183,854 financing received 153, , ,558 repayment of principal amount (24,187) 0 (72,000) (345) (96,532) interest and commissions paid (17,311) 0 (839) (22) (18,172) Cashless movements: 16, ,997 lease agreements concluded interest accrued 16, ,458 other changes (221) 0 0 (36) (257) Debt as of 326, , ,150 Total V.8.2. Liabilities due to bonds issue 01/01/ /01/2015 New issues (nominal value), including: 174,655 New issues (nominal value), including: 153,770 L2 series 40,000 K3 series 35,000 L3 series 50,000 K4 series 20,000 P series 4,655 L1 series 60,000 Q1 series 20,000 M series 15,000 Q2 series 10,000 N series 17,000 R1 series 50,000 O series 6,770 Redemptions (nominal value), including: (81,000) Redemptions (nominal value), including: (24,187) G series (39,000) H series (10,000) M series (15,000) I series (14,187) N series (17,000) Total 129,583 C* series (10,000) Total 93,655 * series issued by BEST II NSFIZ In 2016, based on the second prospectus as part of the public bonds issue programme of 2014, we issued two new series of bonds, L2 and L3, with a total nominal value of PLN 90 million, thus realising the full value of the issue under that programme of PLN 300 million. In October 2016, the Polish Financial Supervision Authority approved another public issue prospectus for BEST s bonds with a nominal value of up to PLN 200 million, and we allotted the first series of bonds under that prospectus, i.e. series R1 bonds with a nominal value of PLN 50 million. By the publication date of these statements, we had allotted another two series of bonds, R2 and R3, with a total nominal value of PLN 90 million. Under the programme, we can issue an ad ditional PLN 60 million worth of bonds. Furthermore, as part of private offerings, we issued series P, Q1 and Q2 bonds with a total nominal value of PLN 34.7 million in We use the funds raised from the issue and the growing inflows from the repayment of debts to further the development of the Group by actively investing in new claims portfolios. 21

22 Liabilities due to bonds issue as of : Series code Nominal value of bonds Nominal interest rate Issue date Maturity Value based on measurement short-term long-term Total K1 45,000 WIBOR 3M % 30/04/ /04/2018 2,415 42,563 44,978 K2 50, % 30/10/ /10/2018 2,913 47,067 49,980 K3 35,000 WIBOR 3M % 10/03/ /03/2019 1,704 32,833 34,537 K4 20,000 WIBOR 3M % 10/03/ /03/2020 1,014 18,815 19,829 L1 60,000 WIBOR 3M % 28/08/ /08/2020 3,099 56,634 59,733 L2 40,000 WIBOR 3M % 04/03/ /03/2020 2,134 37,169 39,303 L3 50,000 WIBOR 3M % 10/05/ /05/2020 2,542 46,723 49,265 O 6,770 WIBOR 3M % 30/12/ /12/ ,388 6,705 P 4,655 WIBOR 3M % 27/01/ /07/ ,398 4,635 Q1 20,000 WIBOR 3M % 30/06/ /01/ ,812 19,811 Q2 10,000 WIBOR 3M % 29/07/ /03/ ,357 9,854 R1 50,000 WIBOR 3M % 10/11/ /04/2021 2,516 46,768 49,284 C* 30,000 WIBOR 6M % 17/01/ /01/ ,470 19,179 30,649 Total 421,425 31, , ,563 * series issued by BEST II NSFIZ The liabilities due to the issue of series C bonds are secured with claims with a fair value of PLN 91,376 thousand as of. Liabilities due to bonds issue as of : Series code Nominal value of bonds Nominal interest rate Issue date Maturity Value based on measurement short-term long-term Total G 39,000 WIBOR 3M % 28/11/ /05/ , ,953 K1 45,000 WIBOR 3M % 30/04/ /04/2018 2,493 42,166 44,659 K2 50, % 30/10/ /10/2018 3,010 46,703 49,713 K3 35,000 WIBOR 3M % 10/03/ /03/2019 1,764 32,527 34,291 K4 20,000 WIBOR 3M % 10/03/ /03/2020 1,048 18,710 19,758 L1 60,000 WIBOR 3M % 28/08/ /08/2020 3,198 56,386 59,584 M 15, % 07/09/ /03/ , ,163 N 17,000 WIBOR 3M % 09/09/ /09/ , ,751 O 6,770 WIBOR 3M % 30/12/ /12/ ,339 6,654 C* 40,000 WIBOR 6M % 17/01/ /01/ ,140 28,526 40,666 Total 327,770 94, , ,192 * series issued by BEST II NSFIZ 22

23 V.8.3. Liabilities due to borrowings Lenders Granted on Repayment date Interest rate Value as of Members of the Management Board of BEST S.A. September 2015 December % 36,503 In September 2015, BEST concluded borrowing agreements with two Management Board members in the total amount of PLN 73 million and an annual interest rate of 3.50%. In March 2016, BEST repaid PLN 36.5 million, which accounts for a half of the borrowings granted. the date of these statements, according to the addenda to the borrowing agreements signed with the Management Board Members in March 2017, the repayment deadline of the remaining portion of the borrowings was extended to 31 December V.8.4. Bank loan liabilities Liabilities due to loan raised with BZ WBK S.A. 22,753 Liabilities due to loan raised with ING Bank Śląski S.A. 25,225 Total, including: 47,978 long-term (1 to 5 years) 37,762 short-term (up to 1 year) 10,216 Agreements Purpose Max. nominal loan amount Revolving loan agreement concluded on 25/03/2016 between BEST, Best Capital, BEST I NSFIZ, BEST II NSFIZ, and BEST TFI, and Bank Zachodni WBK S.A. Each repayment of the loan or its portion decreases the balance of debt and allows the loan to be used again. The loan is to be repaid completely by 31/03/2018. Interest of WIBOR 3M plus the bank s margin will be charged on the used amount of the loan. Interest will be paid on a quarterly basis. Agreement concluded on 19/07/2016 between BEST II NSFIZ and ING Bank Śląski S.A. The maximum expiry date of the loan agreement (allowing for the possibility to extend it) is 31/07/2027. Interest in the amount of the base interest rate plus the bank s margin will be charged on the used amount of the loan. The interest period for each tranche is 3 months. * On 19/04/2017, that amount will be increased to PLN 50,000 thousand. Financing or refinancing the purchase of claims, directly or indirectly, by acquiring investment certificates or bonds. Financing the purchase price of claims, but not more than 65% of the price. Nominal amount used as of the balance sheet date Security 24,000 22,750 registered pledge on series E investment certificates of BEST Capital FIZAN with a fair value of PLN 40,901 thousand as of blank bill of exchange statements on submission to enforcement proceedings made by the entity from BEST Group using the loan 25,000* 25,000 registered pledge on claims with a fair value of PLN 40,496 thousand as of. 23

24 V.9. TRADE AND OTHER LIABILITIES ACCOUNTING POLICY Trade and other liabilities are measured at amortised cost using the effective interest rate method. We apply simplified methods of measuring liabilities if this does not cause a distortion of information included in the financial statements. In particular, short-term trade liabilities are measured upon initial recognition and in the subsequent period in the amount payable. Trade liabilities, including: 4,194 3,246 liabilities related to investments in PP&E and intangible assets Liabilities due to taxes and contributions to statutory employee insurance 1,687 1,357 Liabilities due to the purchase of claims portfolios 28,497 0 Liabilities due to surplus and unsettled repayment of claims 1,605 1,458 Other Total, including: 36,058 6,300 long-term (1 to 5 years) 1 1 short-term (up to 1 year) 36,057 6,299 V.10. OPERATING LEASE AGREEMENTS ACCOUNTING POLICY A lease under which a major portion of risks and benefits from the possession remains with the lessor is operating lease. In particular, we classify rent agreements for office and storage space, and for parking places as operating lease agreements. Using the straight line method, we recognise benefits from special promotional offers as a decrease of the costs of fees for using the object of lease. Value of minimum payments under irrevocable agreements: up to 1 year 1, to 5 years 4, Total 6,391 1,467 24

25 V.11. EQUITY AND EQUITY MANAGEMENT ACCOUNTING POLICY Equity is divided into equity attributable to BEST s Shareholders and to noncontrolling interests. Equity attributable to BEST s Shareholders includes the following: Share capital is disclosed in the nominal value, in an amount consistent with our statute and the entry into the National Court Register, following adjustments on account of hyperinflation. Called-up unpaid capital contributions are recognised as called-up capital. Share premium is a supplementary capital from the surplus on the issue of shares above their nominal value. Other reserve capitals are capitals on account of other items, including in particular: from the surplus of the measurement of financial assets available for sale, in connection with the measurement of incentive schemes based on equity instruments, from actuarial profit and loss in connection with provisions created for employee benefits on account of retirement and disability benefits. Retained profit/loss includes profits/losses from previous years which were allocated to supplementary capital or to cover profits from subsequent years, and the result of the current reporting period. Share capital 22,328 20,966 Share premium 40,628 5,494 Other reserve capitals 2,275 1,281 Retained profits 252, ,379 Net profit attributable to BEST s Shareholders 38,245 81,809 Equity attributable to BEST s Shareholders 356, ,929 Equity attributable to non-controlling interests V Share capital and share premium movements 01/01/2016 Opening balance: 26,460 Share capital 20,966 Share premium 5,494 Increase due to issue of series D shares 36,496 Share capital nominal value of shares issued 1,362 Share premium: 35,134 surplus of issue price over nominal price 35,138 costs of share capital increase (4) Closing balance, including: 62,956 Share capital 22,328 Share premium 40,628 In March 2016, BEST increased the share capital from PLN 20,853,220 to PLN 22,216,177 by issuing 1,362,957 series D ordinary bearer shares with an issue price of PLN per share. The shares were acquired for cash by the Members of BEST s Management Board. For details, see note

26 V Share capital structure and shareholding of BEST Authorised share capital 22,216 20,854 Hyperinflation adjustment Total share capital 22,328 20,966 BEST s shareholders as of 31 December 2016: Shareholders: BEST s management and supervisory personnel: Number of shares held Share of the shares held in the Issuer's share capital (%) Number of votes vested with shares held Share of votes held in the total number of votes at the Issuer s GSM (%) Krzysztof Borusowski* 18,429, ,149, Marek Kucner 3,213, ,213, Barbara Rudziks 53, , Other shareholders 519, , Total 22,216, ,936, * of which 1,680 are registered shares with a 5:1 voting preference BEST s shareholders as of 31 December 2015: Shareholders: BEST s management and supervisory personnel: Number of shares held Share of the shares held in the Issuer's share capital (%) Number of votes vested with shares held Share of votes held in the total number of votes at the Issuer s GSM (%) Krzysztof Borusowski* 17,160,236 82,29 23,880, Marek Kucner 3,120,000 14,96 3,120, Barbara Rudziks 53,216 0,26 53, Other shareholders 519,768 2,49 519, Total 20,853, ,573, * of which 1,680 are registered shares with a 5:1 voting preference 26

27 V Capital management and debt ratios We manage our capital in such a way so as to achieve our business goals and ensure a sustainable growth in our shares value. Our main goal in the years to come will be to ensure conducive conditions for business growth, which in particular depends on our ability to borrow funds for new investmen ts. Therefore, one very important element in capital management is managing our debt ratios. If the permitted level of those ratios is exceeded, BEST s bondholders may demand an ear ly redemption of the bonds issued by BEST, or our loan agreements may be violated. the balance sheet date, we were obliged to maintain the following ratios at specific levels: Ratio: Net financial debt/equity Item Financial debt 503,949 Cash and cash equivalents 22,045 Net financial debt 481,904 Equity 356,227 (Net financial debt/equity): permitted value 2.50 actual value 1.35 Ratio: (Full net financial debt less investment surplus) / Full cash EBITDA Item Full net financial debt 592,174 Investment surplus 143,236 Full cash EBITDA (12 months) 148,249 (Full net financial debt less investment surplus) / Full cash EBITDA: permitted value 400% actual value* 303% * The data of the jointly controlled entity and the associate from the statements as of has been accounted for according to the share held. Ratio: Net debt / Financial assets Item Net debt 481,904 Financial assets 861,445 Net debt / Financial assets: permitted value 75% actual value 56% 27

28 Full EBITDA is the Group s EBITDA less depreciation, amortisation and net financial expenses of non-controlled entities (calculated proportionately to the Group s share in those entities net assets). Full cash EBITDA is full EBITDA less revenues from the Group s claims and from the claims of non-controlled entities (calculated proportionately to the Group s share in those entities net assets), plus repayment of the Group s claims and of the claims of non-controlled entities (calculated proportionately to the Group s share in those entities net assets). Non-controlled entity is an entity in which the Group does not hold a controlling share. Investment surplus is the positive difference between the expenditures on the purchase of claims portfolios less inflows from the sale of claims portfolios during period T0, and the expenditures on the purchase of claims portfolios less inflows from the sale of claims portfolios during period T -1, whereby: T0 a 12-month period ending on the day as of which the ratio is audited T-1 a 12-month period preceding T0. Full net financial debt is the Group s new financial debt plus the net financial debt of non-controlled entities (calculated proportionately to the Group s share in those entities net assets). Financial debt means all liabilities or reimbursements of money on account of any of the following: (a) money borrowed (loans or borrowings), (b) amounts accumulated by discounting bills of exchange or by issuing bonds, bills of exchange or promissory notes, (c) transactions on derivatives, (d) lease liabilities, (e) redeemable shares, (f) sureties, guarantees or similar securities granted by the Issuer to third parties, or any other liabilities which require the payment of interest or remuneration for using the principal amount of a liability. Net financial debt means financial debt less: (a) cash and cash equivalents, (b) financial debt of a Group entity on account of which the Issuer has granted a surety, guarantee or a similar security, and (c) value of sureties, guarantees or similar securities granted by the Issuer to investment funds which are not members of the Group and which are managed by BEST Towarzystwo Funduszy Inwestycyjnych S.A. in connection with the acquisition by such entities of claims portfolios or rights to considerations under claims. V.12. INCENTIVE PROGRAMMES ACCOUNTING POLICY Currently, we run incentive programmes for the Members of BEST s Management Board which, according to IFRS 2 Share-based Payment, meet the definition of: share-based payments settled with equity instruments, or share-based payments settled with cash. Share-based payments settled with equity instruments Share-based payments settled with equity instruments include incentive programmes for the Members of the Management Board based on share options or subscription warrants which, upon the programme s realisation, entitle the holder to settle considerations and services with BEST s shares. The fair value of services provided by BEST s Management Board in exchange for the instruments is recognised as the cost of remuneration and reserve capital respectively. The amount of share-based payments is measured using the indirect method, i.e. by recognising the awarded equity instruments at fair value. Share-based payments settled with cash Share-based payments settled with cash include incentive programmes for the Members of the Management Board based on phantom shares which, upon the programme s realisation, entitle the holder to settle considerations and services in cash. The fair value of the liability due to granting phantom shares is recognised as the costs of remunerations and liabilities respectively. The amount of sharebased payments is measured using the indirect method, i.e. by recognising it in the fair value of the liability. MATERIAL ESTIMATES The fair value of the awarded equity instruments is estimated based on the Black- Scholes-Merton model. On each reporting date, we verify previous estimates regarding the measurement of incentive programmes. The influence of a possible change in previous estimates is recognised in the statement of comprehensive income as the costs of remunerations, corresponding to the reserve capital. The fair value of the liability due to the programme settled with phantom shares is estimated based on the programme's value and according to its terms. By the time the liability is settled, at the end of each reporting period and on the settlement date, we measure the liability at the fair value and recognise any differences in the costs of remunerations. Measurement of the incentive programme settled with subscription warrants, recognised in the reserve capitals: 2,697 1,365 charged to the costs of remunerations for the current period 1,332 1,365 charged to the costs of remunerations for previous periods 1,365 0 Measurement of the incentive programme settled with phantom shares, recognised in liabilities: 1,160 0 charged to the costs of remunerations for the current period 1,

29 Total 3,857 1,365 Programmes settled with subscription warrants Programme I Award date 16/12/2015 Entitled persons Modification of the programme in the reporting period and its effect on the programme s measurement Entitlement conditions Entitlement period Members of BEST s Management Board Krzysztof Borusowski Marek Kucner Barbara Rudziks Max. life for tranche A: until 31/12/2017 for tranche B: until 31/12/2020 Programme settlement method In particular, the modification involved the following: change of the number of warrants and grouping into tranches: A for 2015: up to 108 thousand B1 for 2016: up to 210 thousand (previously: 180 thousand) B2 for 2017: up to 210 thousand (previously: 180 thousand) B3 for 2018: up to 210 thousand (previously: 180 thousand) change of the exercise price for tranche B from PLN 1 to PLN per share. The modification did not result in a change of the estimate value of the programme. The programme s value could have changed only as a result of an increase of the programme s fair value after the modification. Given that the value of the modified programme is lower than the value of the original programme as of the modification date, that change is not accounted for according to IFRS 2. Fulfilment of the respective KPI percentage level specified separately for (the KPI for have not yet been specified), as confirmed by the Supervisory Board based on audited financial statements and other documents. The Supervisory Board may adjust the KPI for any extraordinary and one-time events. If the fulfilment of the KPI is below 85%, no warrants will be granted for a given period (the warrants are transferred to a reserve to be used in the next programme period). Continuity of employment From 16/12/2015 to: for tranche A: 12 months from the date when the KPI fulfilment for 2015 is confirmed (the KPI fulfilment was confirmed in March 2016) for tranche B: 12 months from the date when the KPI fulfilment for 2018 is confirmed or a resolution is adopted on not awarding the tranche B3 warrants (the KPI fulfilment will be confirmed in 2019, once the financial statements for 2018 have been audited by a statutory auditor) The programme will be settled by exercising a warrant at a price specified in the terms of the programme. 29

30 Programme II Award date 02/11/2016 Entitled persons Entitlement conditions Entitlement period Max. life until 31/12/2020 Programme settlement method Jacek Zawadzki Member of the Management Board Fulfilment of the respective KPI percentage level specified separately for (the KPI for have not yet been specified), as confirmed by the Supervisory Board based on audited financial statements and other documents. The Supervisory Board may adjust the KPI for any extraordinary and one-time events. If the fulfilment of the KPI is below 85%, no warrants will be granted for a given period (the warrants are transferred to a reserve to be used in the next programme period). Continuity of employment From 02/11/2016 to the expiry of a 12-month period from the date when the KPI fulfilment for 2018 is confirmed or a resolution is adopted on not awarding the tranche C3 warrants (the KPI fulfilment will be confirmed in 2019, once the financial statements for 2018 have been audited by a statutory auditor). The programme will be settled by exercising a warrant at a price specified in the terms of the programme. Number of warrants (in thousands) At the beginning of the period (01/01/2016) 648 Change during the period as a result of modification: (decrease) (540) increase 630 Change in the period new Programme II 30 Remaining at the end of the period () 768 Exercisable at the end of the period ()* 0 * At the end of the period, there are warrants awarded for the KPI fulfilment for 2015, but they cannot be exercised on that date due to the required holding period. No warrants expired or were exercised in the reporting period. In connection with the KPI fulfilment for 2015, in March 2016 we offered to the entitled persons the acquisition of a total of 108 thousand series A subscription warrants. All offers were accepted. Therefore, a total of 108 thousand series A subscription warrants we re issued and acquired, vested with the right to acquire 108 thousand series C shares with a nominal value of PLN 1 each. Every entitled manager acquired 36 thousand warrants. In the following years, the issue of a total of 630 thousand series B subscription warrants is planned as part of Programme I, vested with the right to acquire series E shares for an issue price of PLN per share, while Programme II provides for the issue of a total of 30 thousand series C subscription warrants, vested with the right to acquire series F shares for an issue price of PLN per share. Input data for the measurement model Programme I market value of shares PLN exercise price PLN 1 annual risk-free interest rate 2.19 % share price fluctuation 71.2 % duration of options in years 5.05 max. number of warrants as of the award date 648 thousand max. value per warrant as of the award date PLN Programme modification in 2016: max. number of warrants 738 thousand exercise price for tranche B PLN max. value per warrant after the modification* PLN weighted average exercise price per warrant after the modification PLN * Since the maximum value of a single warrant following the modification is lower than on the granting date, the modification does not change the value of the whole programme estimated based on the data as of the award date in

31 Input data for the measurement model Programme II market value of shares PLN exercise price PLN annual risk-free interest rate 2.50 % share price fluctuation 58.1 % duration of options in years 4.16 max. number of warrants as of the award date 30 thousand max. value per warrant as of the award date PLN weighted average exercise price per warrant PLN In the measurement models for Programmes I and II: The share price fluctuation has been calculated based on the prices of our shares from 22 May 2015 (i.e. the day when BEST joined the Liquidity Support Programme and switched from double fixing to continuous trading) to the day preceding the programme award date. The dividend is not accounted for because we are not planning to pay a dividend due to a liability resulting from the terms of issue of our bonds. Programme realised with phantom shares Award date 21/03/2016 Entitled persons Entitlement conditions Entitlement period Max. life Programme settlement method Members of BEST s Management Board Fulfilment of the KPI specified separately for (the KPI for have not yet been specified), as confirmed by the Supervisory Board based on audited financial statements. The Supervisory Board may adjust the KPI for any extraordinary or one-time events. Continuity of employment From 21 March 2016 to the end of the holding period, which is 6 months from the day when an offer to purchase the phantom shares was accepted. Offers to purchase phantom shares for each financial year of the programme will be made to the Management Board Members based on a resolution of the Supervisory Board on awarding phantom shares, once the KPI fulfilment for a given year has been verified based on data from audited financial statements. Any phantom shares under which an entitled person fails to exercise their right to receive a monetary consideration expire upon the Supervisory Board s resolution on awarding phantom shares for the next financial year. The phantom shares awarded for each financial year entitle the holder to receive a phantom consideration after the expiry of the holding period. The phantom consideration will be determined by multiplying the awarded phantom shares and the price of BEST s shares, representing the arithmetical average share price at the end of each trading day at GPW during the holding period. The programme s value in each financial year will be calculated with the following formula: WP = [1% x (consolidated net profit of BEST Group + Full Cash EBITDA)] x 50%. The total number of phantom shares awarded to all programme participants in a given financial year of the programme is calculated by dividing the programme s value by the price of BEST s shares, representing the arithmetical average share price at the end of each trading day at GPW in the last three full months from the day when the Supervisory Board adopts a resolution verifying whether the share award conditions have been fulfilled, rounded down to the nearest integer. 31

32 V.13. TAXATION V Deferred tax assets and provisions ACCOUNTING POLICY In connection with temporary differences between the value of assets, and the equity and liabilities disclosed in the accounting books and their tax value, and the tax loss deductible in the future, we create a provision and determine the amount of deferred income tax assets. Deferred income tax assets are determined in the amount of income tax recoverable in the future due to negative temporary differences, which in the future will result in reducing the income tax base and recoverable tax loss. Deferred income tax assets from negative temporary differences and unused tax losses are recognised only if it is possible that in the future there will be a taxation base sufficient enough to deduct such differences. A deferred income tax provision is created in the amount of income tax payable in the future due to positive temporary differences, i.e. differences that will result in an increase in the income tax base in the future. Deferred income tax assets and provisions are not discounted and are classified as long-term assets or long-term liabilities accordingly. The deferred income tax provision and assets are determined taking into account the income tax rate applicable in the year in which the tax obligation arises. When presenting the deferred income tax, we offset deferred income tax assets against deferred income tax provisions only if: we hold an enforceable legal title for the offsetting, the deferred tax assets and provisions pertain to income tax imposed by the same tax authority. MATERIAL JUDGMENTS We are not a tax group and recognise our assets on account of the tax losses of consolidated entities. 31 December 2016, we did not recognise a deferred tax asset on a portion of the tax loss for 2015 and on the full tax loss for 2016 of the parent company BEST because of the uncertainty of estimates concerning the amount of future taxable income that will allow us to realise negative temporary differences. The potential asset on that account amounts to PLN 28,954 thousand. In the foreseeable future, there is uncertainty concerning realisable income from the increase in the value of subsidiaries and jointly controlled entities in an amount that would obligate us to pay income tax in BEST. Deferred tax assets, including: 10,791 10,543 Deferred tax assets subject to offsetting 10,780 10,532 Deferred tax assets not subject to offsetting Deferred income tax provision, including: 12,668 11,346 Deferred tax provision subject to offsetting 10,940 10,652 Deferred tax provision not subject to offsetting 1, Deferred tax assets after offsetting Deferred tax provision after offsetting 1,

33 Deferred tax assets before offsetting: tax losses provisions liabilities due to employee benefits Temporary negative differences on account of: receivables other items Total 01/01/2016 9, ,543 Increases , ,085 Decreases , ,837 9, ,791 01/01/2015 5, ,523 Increases 4, , ,156 Decreases ,136 9, ,543 Tax loss asset: Year in which entities from the Group incurred a tax loss Value of the tax loss for which an asset has been recognised Value of the tax loss asset Tax loss expiry date , /12/ ,837 4,909 31/12/ /12/ ,468 4,648 31/12/ /12/2021 The possibility to settle non-capitalised tax losses for 2015 of PLN 77,663 thousand and for 2016 of PLN 74,725 thousand expires in 2020 and 2021 respectively. Deferred tax provision before offsetting: PP&E and intangible assets receivables Temporary positive difference on account of: investment real property investments in subsidiaries and jointly controlled entities financial liabilities and assets financed with them 01/01/2016 1, , ,346 Increases 2, ,263 3,558 Decreases ,046 1,038 2,236 4, , ,668 01/01/ , ,755 Increases 1, , ,451 Decreases , ,860 1, , ,346 Total 33

34 V Income tax ACCOUNTING POLICY Corporate income tax includes: current portion representing the actual obligation, measured at amounts expected to be paid to tax authorities using tax rates and tax law legally binding as of the balance sheet date, deferred portion representing the difference between a change in the balance of deferred income tax provisions and assets. The deferred portion of the income tax pertaining to operations settled through capital is recognised in other items of net comprehensive income. Income tax in the statement of comprehensive income: 01/01/ /01/2015 Current income tax, of which: (85) (427) for a given financial year tax of subsidiaries whose fiscal year is not a calendar year (85) 0 adjustment for (530) Deferred income tax 1,082 (10,429) Total 997 (10,856) Total deferred income tax: 01/01/ /01/2015 Tax on negative temporary differences: (244) (369) occurred in the period (2,029) (1,492) reversed in the period 1,785 1,123 Tax on positive temporary differences: 1,322 (5,409) occurred in the period 3,558 27,451 reversed in the period (2,236) (32,860) Total tax on temporary differences 1,078 (5,778) Tax on temporary differences from tax loss: (2) (4,651) settled in the period asset recognised (56) (4,664) Total deferred tax recognised in profit or loss 1,082 (10,429) Total deferred tax recognised in reserve capital (6) 0 34

35 Reconciliation between the effective rate and the statutory tax rate applicable in Poland: 01/01/ /01/2015 Gross profit before tax: 39,768 71,320 Tax on gross profit at the tax rate applicable in Poland (19%) 7,556 13,552 Tax effect of permanent differences, including on account of: (6,559) (24,408) change in the measurement of jointly controlled entities, associates and the assets of subsidiaries not accounted for in deferred tax (15,745) (24,079) tax revenue not recognised in the result 9, tax costs not recognised in the result (14,756) (14,756) non-capitalised tax losses 14,198 14,756 other differences 221 (776) Income tax recognised in profit or loss 997 (10,856) Effective tax rate 3% (15%) Our profits are generated mainly by investment funds, which are exempted from the corporate income tax. The income tax is charged upon the realisation of profits on investment certificates. V.14. PP&E AND INTANGIBLE ASSETS Property, plant and equipment Expenditures on SIGMA Other intangible assets 01/01/2016 8,736 6,774 5,174 20,684 Purchases 5, ,659 8,550 Capitalised costs of software developed with own work 0 8,770 (43) 8,727 Liquidations (7) 0 0 (7) Accumulated depreciation/amortisation (2,789) 0 (1,319) (4,108) 11,831 15,544 6,471 33,846 In 2014, the Management Board of BEST decided to start the development of SIGMA, a proprietary, integrated management and debt servicing system. In December 2016, the system was successfully tested, and in early January 2017 it was finally commissioned for use for 10 years. Total 35

36 V Property, plant and equipment ACCOUNTING POLICY In property, plant and equipment, we classify tangible assets which fulfil the following criteria: They are held to be used for administrative purposes, in the process of providing services, to be released to other entities on the basis of a lease agreement. They will be used for a period longer than one year. Property, plant and equipment include: real property i.e. own land, buildings, premises representing a separate property (other than those kept for investment purposes), plant and machinery, vehicles and other movable tangible assets, improvements in third party tangible assets, tangible assets under construction and not commissioned for use. In property, plant and equipment, we also classify system software which allows equipment to operate and the value of a unique utility supporting the management of the operation of equipment, purchased together with such equipment, if the licence terms for that software prevent it from being used with other equipment. The initial value of property, plant and equipment is its purchase price or manufacturing costs increased by costs related to their adaptation for use incurred by the date of commissioning for use. Borrowing costs related directly to the purchase or manufacturing of the adapted asset constitute an element of the purchase price or manufacturing cost of a tangible asset. The initial value of property, plant and equipment is increased by the costs of replacement of their main components and the improvement resulting in increasing their value in use. The costs of renovation, service and maintenance are recognised as costs of the period in the statement of comprehensive income. Property, plant and equipment is measured in accordance with the historical cost principle. The carrying value of property, plant and equipment is its purchase price or manufacturing costs, less depreciation and the total sum of impairment losses. PP&E (except for land, which is not depreciated) are depreciated in accordance with the determined plan, by applying the straight-line method throughout the useful economic life, taking into consideration the residual value. Depreciation/amortisation begins in the month in which an asset is commissioned for use and ends not later than when the value of depreciation and write-offs equals its initial value, it is designated for liquidation, sale or when a shortage is identified. Low-value PP&E items with an initial value not exceeding PLN 500 are charged to the costs of activities on a one time basis, in the month of their commissioning for use, and are not included in the records of property, plant and equipment. Property, plant and equipment under construction or not commissioned for use are disclosed at the purchase price or the manufacturing cost, and are not depreciated until the completion of construction and the commissioning for use. An item of PP&E can be derecognised from the statement of financial position once it is sold or when no economic benefits are expected from further use of such an asset. All profits or losses resulting from the derecognition of a tangible asset from the balance sheet are recognised in the statement of comprehensive income in the period in which the derecognition took place. PP&E used under finance lease agreements The principles of amortising/depreciating assets subject to finance lease and the principles of recognising impairment losses on assets under finance lease are consistent with the principles applied to assets owned by BEST. These assets are amortised/depreciated throughout the estimated period of use, taking into consideration their residual value. MATERIAL ESTIMATES The estimated useful economic lives of property, plant and equipment are between 2 and 15 years, including in particular: investments in third party tangible assets 5-15 years, plant and machinery 3-10 years, other tangible assets, including: 2-15 years, furniture: 15 years, company cars: 5 years. The periods of use of property, plant and equipment are verified on an annual basis and are subject to change if the currently estimated periods of use are other than projected. Each year, we verify the adopted residual values of property, plant and equipment. The abovementioned changes in estimates are recognised prospectively. 36

37 Buildings and structures 1,745 1,089 Technical equipment and machines 6,632 4,757 Means of transport, including: 2,398 2,152 cars under finance lease secured with blank bills of exchange 1,132 1,418 Other PP&E PP&E under construction and not commissioned for use Total 11,831 8,736 Property, plant and equipment movements in the period: INITIAL VALUE Buildings and structures Technical equipment Means of transport Other PP&E PP&E under construction 01/01/2016 6,776 10,523 2,721 1, ,815 Increases 1,112 3, ,406 9,666 Decreases 2, ,775 6,866 5,844 13,552 3,128 1, ,615 01/01/2015 6,755 10,324 1,924 1, ,322 Increases , ,393 3,539 Decreases ,046 6,776 10,523 2,721 1, ,815 Total ACCUMULATED DEPRECIATION / AMORTISATION 01/01/2016 5,687 5, , ,079 Increases 456 1, ,789 Decreases 2, ,084 4,099 6, , ,784 01/01/2015 5,129 5, , ,683 Increases 558 1, ,274 Decreases ,687 5, , ,079 NET VALUE 1,745 6,632 2, ,831 1,089 4,757 2, ,736 37

38 V Intangible assets ACCOUNTING POLICY In intangible assets, we classify assets which do not have a physical form and fulfil the following criteria: They can be separated from the entity and sold, transferred, licensed or provided for paid use to other entities. They result from contracts or other legal titles. Intangible assets include primarily: licences for computer software, costs of development works, intangible assets not commissioned for use, other intangible assets. We do not include in intangible assets system software which allows equipment to operate and the value of a unique utility supporting the management of the operation of equipment, purchased together with such equipment, if the licence terms for that software prevent it from being used with other equipment. Such software is classified as PP&E. The initial value of the purchased intangible assets is their purchase price plus costs related to preparing them for use (implementation costs) and borrowing costs directly related with the acquisition of intangible assets, incurred by the date of commissioning for use. The purchase price of intangible assets is increased in particular by the value of non-deductible VAT included in the price of the purchased intangible assets or in the price of services related to the purchase. Except for costs of development works which fulfil the criteria of capitalisation, other intangible assets developed in-house are not capitalised but are recognised in the financial result in the period in which these costs were borne. An intangible asset arising from development works is recognised only if the entity can demonstrate: that it is technically capable of completing the intangible asset so that it can be sold or used, that it intends to complete the intangible asset as well as to use it or sell it, that it is able to use or sell the intangible asset, the manner in which the intangible asset will generate probable future economic benefits, the availability of adequate technical, financial and other resources which serve to complete the development works and to use or sell the intangible asset, the ability to reliably measure expenditures incurred during the development works that can be attributed to that intangible asset. The costs of development works of a given intangible asset are the sum of expenditures incurred after the date when that intangible asset representing development works for the first time met the criteria for recognition. These costs are primarily social security contributions of employees involved in the implemented project and the costs of external services related to the development of the intangible asset. By the end of the development works and the decision regarding the commissioning for use, capitalised costs of development works are recognised as intangible assets under development and are not amortised. They are annually subject to obligatory impairment tests. Expenditures on research are recognised as a cost when incurred. All expenditures we have incurred to maintain and service computer software are recognised in the statement of comprehensive income when incurred. Intangible assets are measured in accordance with the historical cost principle. The carrying value of intangible assets is their purchase price or manufacturing cost, less amortisation and the total sum of impairment losses. Intangible assets with a definite useful life are amortised in accordance with the determined plan, using the straight-line method throughout their useful economic life. The basis for the calculation of amortisation is the initial value less residual value. It is assumed that the residual value of intangible assets equals zero, with possible exceptions for specific cases. Low-value intangible assets with an initial value not exceeding PLN 500 are charged to the costs of activities on a one-time basis, in the month of their commissioning for use. MATERIAL ESTIMATES The estimated useful economic lives of intangible assets range from 3 to 10 years, in particular: licences for standard computer software: 5 years, integrated SIGMA system: 10 years. Periods of use of intangible assets are verified on an annual basis and are subject to change if the currently estimated periods of use are other than previously projected. The abovementioned changes in estimates are recognised prospectively. 38

39 Intangible assets commissioned for use 4,782 4,093 Capitalised costs of development works SIGMA 15,544 6,774 Intangible assets not commissioned for use 1,689 1,081 Total 22,015 11,948 Capitalised costs of development works include the expenditures on SIGMA, a new operating system to support the claims management process. The system was commissioned for use in January 2017 and is expected to be used for 10 years. Intangible assets movements in the period: INITIAL VALUE Intangible assets commissioned for use Capitalised costs of development works SIGMA Intangible assets not commissioned for use 01/01/2016 7,155 6,774 1,081 15,010 Increases 2,051 8,770 1,574 12,395 Decreases ,206 15,544 1,689 26,439 01/01/2015 4,494 2, ,954 Increases 2,661 3,939 1,843 8,443 Decreases 0 0 1,387 1,387 7,155 6,774 1,081 15,010 Total ACCUMULATED DEPRECIATION / AMORTISATION 01/01/2016 3, ,062 Increases 1, ,362 Decreases , ,424 01/01/2015 2, ,181 Increases Decreases , ,062 NET VALUE 4,782 15,544 1,689 22,015 4,093 6,774 1,081 11,948 39

40 V.15. NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME ACCOUNTING POLICY Measurement of financial result and presentation of the statement of comprehensive income We use the comparative method to measure the financial result and present our statement of comprehensive income with the result for the current period and other comprehensive income. V Operating revenue ACCOUNTING POLICY Operating revenue includes revenue from core operations and other operating activities. Revenue from core operations includes in particular: revenue from the sale of services, revenue from securitised claims, increase in the value of interests in jointly controlled entities and associates which purchase claims measured with the equity method (this item also includes profit on the repurchase or sale of investment certificates). Revenue from the sale of services includes mainly amounts due from clients from the sale of services, less the applicable VAT. Revenue from securitised claims is revenue resulting from the repayment and revaluation of claims purchased by the Group. Increase in the value of interests in jointly controlled entities and associates measured under the equity method Our core business consists in investing in claims directly and indirectly. Due to the fact that cash investments in entities whose business involves investing in claims are our indirect investments, we represent any increase in the value of our share in such entities as operating revenue. Other operating revenue Other operating revenue are mainly amounts due from services provided outside of our core operations, in particular: the value of reversed write-downs on receivables, profit from the sale of non-current assets, penalty payments received, subsidies, revenue from the balance sheet measurement and sale of investment property. 01/01/ /01/2015 Operating revenue from core business 209, ,460 Other operating revenue 1, Total 210, ,908 40

41 Operating revenue from core business: 01/01/ /01/2015 Revenue from investment in claims 189, ,513 Management of claims of securitisation funds 15,351 12,832 Commissioned collection (monitoring of claims) 1,871 1,995 Management of investment funds 1,184 1,185 Legal services Other Total 209, ,460 Currently, we operate only in the territory of Poland and do not generate any revenue abroad. Revenue from investments in claims: 01/01/ /01/2015 Revenue from the repayment and measurement of claims (BEST I NSFIZ and BEST II NSFIZ), including: 147,416 94,060 revenue from the repayment of debt 131,745 93,096 revaluation 15, Profit on share in the jointly controlled entity BEST III NSFIZ, including: 38,411 25,734 result on the repurchase of investment certificates 19,446 19,978 increase in the value of share in the reporting period 18,965 5,756 Increase in the value of interest in associate 3,852 3,717 Other revenue 0 2 Total 189, ,513 V Operating expenses ACCOUNTING POLICY Operating expenses include costs by type related to the provided services, all costs of and losses on investments in claims as well as other operating expenses. Operating expenses are presented as follows: payroll and employee benefits, depreciation/amortisation, third-party services, taxes and charges, other operating expenses. Other operating expenses mainly include costs incurred due to: consumption of materials and energy, business trips, representation, advertising, insurance, court proceedings, court fees other than related to the current service of claims, losses on the sale and liquidation of non-current assets, shortages in non-current assets, donations, the value of write-downs on receivables, liquidated damages, fines, compensations, the effects of the balance sheet measurement of investment property, loss on the sale of investment property as well as loss on the sale of interests in jointly controlled entities and associates. Taxes and charges mainly include the costs of court and enforcement fees related to the legal enforcement of claims purchased and the costs of non-deductible VAT. The largest item of operating expenses are payroll and employee benefits (44% of operating expenses). For a detailed analysis of operating expenses, see note to the Management Report of the Capital Group and of BEST in

42 Payroll and employee benefits: 01/01/ /01/2015 Payroll, including: 28,295 21,411 current remuneration for the members of the Management Boards and the Supervisory Boards 3,658 2,881 cost of incentive programmes for the Members of BEST s Management Board 2,492 1,365 Social security contributions 4,209 3,177 Employee benefits 1, Total 33,559 25,517 The increase in the costs of employment is a result of higher costs of labour, but also a higher number of employees. Number of employees: White-collar workers Blue-collar workers 8 7 Total V Financial expenses ACCOUNTING POLICY Financial costs are mainly the costs of borrowing: interest, commissions and discounts due to financial liabilities (in particular, due to the issue of bonds). Our financial expenses also include: loss on the sale of interests, shares and securities, the costs of the impairment of financial assets, the costs related to the acquisition of subsidiaries and the surplus of FX losses over FX gains. 01/01/ /01/2015 Measurement of financial liabilities at amortised cost 25,171 17,458 Impairment loss on investment in Kredyt Inkaso 69,253 0 Other Total 94,612 17,500 In the current reporting period, financial expenses were charged with an impairment loss on our investment in Kredyt Inkaso. For a detailed description of the impairment loss, see note

43 V Earnings per share ACCOUNTING POLICY Earnings per share amount to the net profit attributable to BEST s Shareholders divided by the weighted average number of shares. Diluted earnings per share for each period are calculated by dividing the net profit for a given period by the projected weighted average number of shares. The weighted average number of diluting shares takes into account the diluting effect related to incentive programmes settled with equity instruments which are convertible into BEST s shares. 01/01/ /01/2015 Net profit attributable to BEST s Shareholders (in PLN 000) 38,245 81,809 Weighted average number of ordinary shares (in thousands) 21,915 20,853 Weighted average number of diluting shares (in thousands) 89 0 Basic earnings per share (in PLN/share) Diluted earnings per share (in PLN/share) V.16. NOTES TO THE CASH FLOW STATEMENT ACCOUNTING POLICY We present our cash flow statement using the indirect method. Considering that our core business involves investing in claims (directly or indirectly, through acquisitions), the inflows and expenditures related to such investments and their implementation are disclosed in the operating cash flows. V Measurement and settlement of financial assets 01/01/ /01/2015 Profit from share in jointly controlled entities (BEST III NSFIZ) (38,411) (25,734) Profit from share in associates (3,852) (3,717) Total (42,263) (29,451) V Impairment of financial assets 01/01/ /01/2015 Impairment loss on Kredyt Inkaso charged to financial expenses 69,

44 V Movement in liabilities 01/01/ /01/2015 Movement in liabilities due to the purchase of claims portfolios 28,497 (116) Movement in other liabilities 4,109 3,176 Movement in investment liabilities 398 (327) Other movements 133 (120) Total 33,137 2,613 V Movement in investments in claims 01/01/ /01/2015 Movement in direct investments in claims: (274,009) (86,089) purchases of claims (258,338) (85,125) revaluation of claims (15,671) (964) Movement in indirect investments in claims: 23,587 (144,751) movement in investment in the jointly controlled entity BEST III NSFIZ 23,586 26,750 acquisition of subsidiaries 0 (208) acquisition of associates 0 (171,293) other 1 0 Total (250,422) (230,840) V Repayment of borrowings and bank loans 01/01/ /01/2015 Repayments of borrowings (36,500) (72,000) Repayments of bank loans (1,250) 0 Total (37,750) (72,000) V Commissions and interest paid on financial liabilities 01/01/ /01/2015 Interest and commissions on bonds (23,956) (17,311) Interest and commissions on loans (891) 0 Interest on borrowings (1,550) (839) Interest on leases Total (36) (26,433) (22) (18,172) 44

45 V.17. OPERATING SEGMENTS The purpose of IFRS 8 Operating Segments is to present segment information based on a reporting structured used for internal purposes. Considering that BEST s Management Board regularly analyses the consolidated results and, based on them, makes business decisions, we do not separate operating or reporting segments. V.18. FINANCIAL INSTRUMENTS ACCOUNTING POLICY Financial instruments are grouped into the following categories: financial assets available for sale, financial assets or liabilities measured at fair value through profit/loss, investments held to maturity, borrowings and receivables, financial liabilities measured at amortised cost. Currently, we hold financial instruments classified as: assets measured at the fair value through profit/loss, borrowings, financial receivables and financial liabilities measured at the amortised cost. Financial assets measured at fair value through profit/loss Financial assets are classified as measured at fair value through profit or loss if they are held for trading or if they were determined as measured at fair value through profit or loss at initial measurement. In particular, this category includes the portfolios of securitised claims recognised in the consolidated financial statements at the purchase price on the conclusion date of the agreement. Subsequently, the claims are measured at a reliably estimated fair value through profit or loss. Borrowings and receivables In this category, we include: borrowings granted, trade receivables, other receivables, cash and cash equivalents. Borrowings granted Borrowings granted are recognised in the statement of financial position upon the payout of the funds to the borrower. Upon initial recognition in the accounting books, they are measured at fair value increased by transaction costs that may be directly attributed to a given financial asset. In subsequent periods, receivables from borrowings are measured at the amortised cost with the use of the effective interest rate. Trade and other receivables Trade and other receivables are initially recognised at the fair value. After initial recognition, these receivables are measured at the amortised cost, using the effective interest rate, taking into account impairment losses. Trade receivables maturing in less than 12 months from the date when the receivable arises are not discounted. Cash and cash equivalents Cash disclosed in the statement of financial position includes cash in bank and cash in hand, short-term deposits with an original maturity of up to 3 months, and cash equivalents held as of the balance sheet date. Financial liabilities measured at amortised cost Financial liabilities are recognised on the date when a transaction is concluded. In this category, we include: Financial liabilities due to interest These are liabilities due to loans, borrowings, bonds and leases. Upon initial recognition, they are measured at the fair value, less transaction costs incurred upon the purchase (primarily commissions and interest paid in advance). In subsequent periods, the measurement is performed at the amortised cost. Trade liabilities These are trade liabilities and other financial liabilities, in particular due to the purchase of claims portfolios. Upon initial recognition, they are measured at the fair value. In subsequent periods, the measurement is performed at the amortised cost. We apply simplified methods of measuring liabilities if this does not cause a distortion of the information included in the financial statements. In particular, short-term liabilities are measured upon initial recognition and in the subsequent periods in the amount payable. 45

46 V Financial instruments by category (carrying values) Financial assets 642, ,640 Assets measured at the fair value through profit/loss claims purchased 611, ,102 Financial assets held for sale 0 1 Borrowings and receivables, including: receivables 9,635 11,343 cash and cash equivalents 22,045 43,194 Financial liabilities measured at amortised cost: 538, ,090 Financial trade liabilities 34,370 4,940 Financial liabilities due to interest 503, ,150 V Revenues, expenses, profit and loss items recognised in the statement of comprehensive income, broken down into categories of financial instruments For the year ended 31 December 2016: measured at fair value through profit or loss measured at amortised cost Financial assets/liabilities borrowings and receivables Interest revenues/(expenses) - (25,171) (24,376) Foreign exchange gains/(losses) - (13) - - (13) (Creation)/reversal of write-downs - - (21) - (21) Profit/(loss) on fair value measurement 15, ,671 Profit/(loss) on settlement (including repayment of claims) 131, ,745 Total 147,416 (25,184) ,006 cash Total 46

47 For the year ended 31 December 2015: measured at fair value through profit or loss measured at amortised cost Financial assets/liabilities borrowings and receivables Interest revenues/(expenses) - (17,458) (16,880) Foreign exchange gains/(losses) - (3) - - (3) (Creation)/reversal of write-downs Profit/(loss) on fair value measurement Profit/(loss) on settlement (including repayment of claims) cash Total 93, ,098 Total 94,060 (17,461) ,187 V Fair value of financial instruments Presented below is the data pertaining to the fair value measurement of financial instruments. This note does not include any information on the measurement of BEST III NSFIZ s investment certificates or Kredyt Inkaso s shares. Investments in those entities are not classified as financial instruments under IAS 39 and they are measured with the equity method. We classify financial instruments in accordance with the principles of fair value measurement, using the following hierarchy which reflects the use of various input data for the measurement: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities, Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices), Level 3: inputs for the asset or liability which are not based on observable market data (unobservable inputs). 31 December 2016, we held only financial instruments measured at fair value classified as Level 3. Level 3 In this level, we classify claims acquired that are measured at fair value through the financial result. Level 3 Acquired claims 611, ,102 47

48 Claims acquired include claims whose nominal value differs significantly from the price paid. Claims acquired are grouped into portfolios. The fair value of claims portfolios is estimated based on recognised estimation methods. The basic parameters (input data) used for the measurement of claims are: portfolio service period, estimated inflows and expenditures related to the service of claims during a portfolio s service period, and discount rate. Any changes of the above parameters cause an increase or a decrease in the fair value. Portfolio service period The originally planned portfolio service period can be extended as a result of the conclusion of agreements on debt repayment. Estimated inflows and expenditures related to the service of claims during a portfolio s service period The originally planned amount of inflows and expenditures can be modified. Where over the past 6 full months preceding the measurement the difference between the actual and planned amount of inflows exceeds 10% of the amount of inflows planned in that period, the reasons for the differences are analysed, in particular: external reasons: changing economic conditions, change in settlement repayment rate, changes in legislation, etc., internal reasons: phase of portfolio management, debt collection activities, availability of debtors, changes in the characteristics and size of the settlement portfolio, etc. Where over the past 6 full months preceding the measurement the difference between the actual and planned amount of outflows exceeds 10% of the amount of outflows planned in that period, the reasons for the differences are analysed, in particular: reasons for a change in claims-related outflows estimated in the future, resulting from a change in the strategy of referring claims to court and enforcement proceedings, an adjustment of the remuneration of the entity managing claims so that it reflects market conditions, the amount of court fees and advances on court enforcement proceedings. After verifying and adjusting initial parameters, the materiality of their impact on the amount of flows anticipated in the future is estimated, and recently estimated values are adjusted. The verification of the parameters of inflows and expenses for claims portfolios with a low fair value can be examined jointly. Discount rate The discount rate is the sum of the risk-free rate and the risk premium. A change in the risk-free rate by at least 0.5 pp causes a respective change in the discount rate used in the model. We have adopted the following assumptions for the measurement of claims portfolios at the end of the reporting periods: Portfolio service period January November 2032 January October 2028 Nominal value of estimated remaining collections (ERC), including: 1,192, ,211 up to 1 year 166, ,182 1 to 5 years 603, ,890 5 to 10 years 391, ,321 over 10 years 31, Discount rate, including: 7%-45% 7%-45% risk-free rate 1.6%-3.2% 1.6%-3.1% risk premium 4.2%-42.2% 4.2%-42.2% Due to the adopted measurement method, there is a risk that the fair value of claims purchased by us may differ from the values which would have been determined if there had been an active market. 48

49 V Sensitivity analysis of claims classified as Level 3 In the reporting period, we analysed the sensitivity of the acquired claims to a change in base interest rates and planned collections. Analysis of sensitivity to changes in interest rates Effect on fair value, PLN 000 Carrying value Increase in interest rates by 1 pp Decrease in interest rates by 1 pp Acquired claims 611,111 (18,808) 19,931 Effect on fair value, PLN 000 Carrying value Increase in interest rates by 1 pp Decrease in interest rates by 1 pp Acquired claims 337,102 (9,967) 9, December 2016, the fair value of the purchased claims would have been lower by PLN 18,808 thousand or higher by PLN 19,931 thousand if the interest rates used to measure this value had been higher or lower by 1 pp respectively. Analysis of sensitivity to changes in planned flows Effect on fair value, PLN 000 Carrying value Increase in net flows by 10% Decrease in net flows by 10% Acquired claims 611,111 61,111 (61,111) Effect on fair value, PLN 000 Carrying value Increase in net flows by 10% Decrease in net flows by 10% Acquired claims 337,102 33,710 (33,710) 31 December 2016, the fair value of purchased debts would have been respectively higher or lower by PLN 61,111 thousand if the anticipated realisable net cash flows had increased or decreased by 10%. V Comparison of the fair value and the carrying value of financial instruments not measured at fair value Fair value Carrying value Fair value Carrying value Financial liabilities due to bonds issue 422, , , ,192 Financial liabilities due to bonds issue, for balance sheet purposes, were measured at amortised cost, taking into account the incurred expenses directly related to the issue and the effective interest rate. The fair value of bonds quoted in an active market and comparable value was estimated on the basis of the transaction price as of the balance sheet date, increased by interest accrued. The fair value of other (i.e. unquoted) bonds was estimated by discounting future cash flows with an interest rate taking account of the margin and WIBOR on the balance sheet date. The carrying amounts of other financial instruments approximate their fair values. 49

50 V.19. FINANCIAL RISK ANALYSIS We are exposed to financial risks, including primarily: market risk, liquidity risk, credit risk. The following disclosures pertain in particular to financial instruments classified into the respective categories according to IAS 39 Financial Instruments. The risk analysis accounts for our investments in the jointly controlled entity BEST III NSFIZ and in the associate because those items make up nearly ¼ of our balance sheet total and are also exposed to financial risks. V Market risk FX risk Due to the fact that we hold only short-term foreign exchange liabilities and repay them regularly, the foreign exchange risk is not material. Interest rate risk We consider the interest rate risk from the perspective of its impact on cash flows and fair value. Our main exposures to the interest rate risk from the point of view of the impact on cash flows are: cash (bank deposits) and financial liabilities due to interest. The main item exposed to the interest rate risk from the point of view of the impact on the fair value are claims purchased. In the case of cash, we do not specifically hedge against the interest rate risk because we use mainly short-term deposits maturing in less than 3 months. We do not deposit cash for investment purposes, but only in order to improve the efficiency of liquidity management, and therefore a change of base interest rates does not have a significant influence on our financial results. We do not specifically hedge against the risk of an increase in financial liabilities due to an increase in borrowing costs, but we constantly monitor any changes in interest rates in order to take appropriate actions if there are any indications of an increase in borrowing costs. We also issue bonds with a fixed interest rate, which are not exposed to the interest rate risk. At the end of 2016, we analysed the sensitivity of the above financial instruments to interest rate fluctuations. The sensitivity analysis of claims is presented in note , and presented below is the sensitivity analysis of cash and financial liabilities due to interest. The carrying value of individual items was assumed as the value at risk. The analysis excludes financial liabilities due to interest with a fixed interest rate which are not sensitive to changes of interest rates. Sensitivity analysis from the perspective of the effect on cash flows Carrying value as of Increase in interest rates by 1 pp Decrease in interest rates by 1 pp Cash and cash equivalents: 22, (220) of which taken into account for taxation 11, (112) Financial liabilities due to interest (variable WIBOR) 417,466 (4,175) 4,175 of which taken into account for taxation 338,839 (3,388) 3,388 Effect before tax (3,955) 3,955 Tax (19%) 622 (622) Effect after tax (3,333) 3,333 Sensitivity analysis from the perspective of the effect on cash flows Carrying value as of Increase in interest rates by 1 pp Decrease in interest rates by 1 pp Cash and cash equivalents: 43, (432) of which taken into account for taxation 22, (220) Financial liabilities due to interest (variable WIBOR) 335,274 (3,353) 3,353 of which taken into account for taxation 294,608 (2,946) 2,946 Effect before tax (2,921) 2,921 Tax (19%) 518 (518) Effect after tax (2,403) 2,403 In 2016, our net profit and equity would have changed by PLN 3,333 thousand if the interest rates used for measuring bank deposits and financial liabilities had been higher/lower by 1 pp. Other price risk 50

51 Another market risk exposure is an investment in the associate Kredyt Inkaso. In 2015, we purchased 32.99% of its shares, with the prospect of acquiring control of and merging with that company. We did not achieve that goal, leading to the investment s value being adjusted to PLN 106,703 thousand at the end of It is a long-term investment. In the case of a demand for cash and if the decision concerning this investment is changed, it may be difficult to quickly sell those assets. V Liquidity risk The main liquidity risk exposures are our financial liabilities in the form of bonds issued which are used to finance the purchase of claims portfolios. Thus far, investments in claims have guaranteed a stable increase in value and, at the same time, they allowed a periodic realisation of a portion of the cash used to repay liabilities incurred, and to support reinvestments, operating expenditures or infrastructural investments. We make rational investment decisions, allowing punctual service of financial liabilities incurred to finance investments. Before making an investment, we estimate in detail the expected inflows from and expenditures on an investment, and adjust repayment dates and amounts accordingly. BEST regularly manages claims which are the subject of deposits of investment funds, significantly facilitating the process of planning and controlling cash flows. Presented below is the maturity structure of financial liabilities: Financial trade liabilities 34,370 4,940 Financial liabilities due to interest 503, ,150 Total, including: 538, ,090 long-term (1 to 5 years) 425, ,940 short-term (up to 1 year) 113, ,150 Since we repay our liabilities on time, we do not expect any problems in that regard. In the event of a violation of the terms of the incurred liabilities due to interest (in particular, if the permitted debt ratios discussed in note are exceeded), demands may be made for an early repayment o f liabilities, which could adversely affect our liquidity. To mitigate that risk, we regularly analyse our debt ratios and have implemented an investment strategy to maintain them at safe levels. For more information about our liquidity (in particular, for a liquidity gap analysis), see note to the Management Report of the Capital Group and of BEST in V Credit risk Our main credit risk exposures are investment certificates, claims purchased and an investment in an associate. In spite of the significant value of cash, we assume that it is not significantly exposed to the credit risk. This is due to the fact that we hold and invest our cash mainly in accounts and deposits in Poland. The main risk factors for the buyer of claims portfolios and (indirectly) for the buyer of investment certificates are: incorrect measurement of claims portfolios, in spite of best efforts, deterioration of the economic situation and the insolvency of debtors, uncertainty as to the future value of claims, low liquidity of investment certificates and the fund s deposits, risks related to the fund s environment (legal, economic, etc). We can assess the value of claims portfolios purchased by the funds prior to the purchase, thus reducing the risk of investing in such assets. We also monitor the effectiveness of the whole portfolio service process. A securitisation fund does not guarantee the performance of the assumed investment objec tive and its participants must take into account the possibility of losing at least some of the deposited funds. Given that we invest in investment certificates and claims which are not admitted to trading on a regulated market, it may be the case that, if cash is required, it may be difficult to sell such assets. In addition, due to the uniformity of investments, risk concentration is possible. Due to the dispersion of claims representing investments, the risk concentration is significantly reduced. Financial assets exposed to risk concentration: Share in jointly controlled entities BEST III NSFIZ s investment certificates 111,951 97,127 Acquired claims 611, ,102 Total 723, ,229 balance sheet total 904, ,108 % of assets in the balance sheet total 80% 63% 51

52 A deterioration in the economic situation leads to a deterioration in the debtors financial situation. Such circumstances have an adverse impact on the ability to repay financial liabilities by natural persons and enterprises. This causes a decrease in inflows from claims purchased, which are the fund s investments, leading to a decrease in the value of the purchased investment certificates. The credit risk is also indirectly associated with the investment in Kredyt Inkaso due to the nature of that company s business (investing in claims portfolios). V.20. TRANSACTIONS BETWEEN RELATED PARTIES V Information on remunerations for the members of Management Boards and Supervisory Boards of Group companies The remuneration for the members of Management Boards of BEST and the Investment Fund Company is determined by Supervisory Board s Remuneration Committee, depending on responsibilities and market trends. In 2016 and 2015, total remuneration for the members of Management Boards and Supervisory Boards was as follows: 01/01/ /01/2015 Current remuneration 3,658 2,881 Measurement of incentive programmes for the Issuer s Management Board members 2,492 1,365 Total 6,150 4,246 Current remunerations of persons comprising the Management Boards and Supervisory Boards of BEST Group companies: Management Board: Remunerations for 2016 Remunerations for 2015 BEST 2,499 1,588 Investment Fund Company 819 1,048 BEST Nieruchomości Actinium Inwestycje 2 6 Actinium 6 16 Gamex 8 8 Supervisory Board: BEST Investment Fund Company In addition to their remuneration, the Management Board Members of BEST participate in the incentive programmes realised in subscription warrants and phantom shares, whose costs in the current period amount to PLN 1.3 million and PLN 1.2 million respectively. In 2016, in connection with the KPI fulfilment for 2015, as part of the incentive programme, BEST s Management Board Members Krzysztof Borusowski, Marek Kucner and Barbara Rudziks each acquired 36 thousand series A subscription warrants, each vested with the right to acquire one series C share of BEST for an issue price corresponding to the nominal value. The warran ts for the subsequent years will be vested with the right to acquire series E and F shares of BEST for an issue price of PLN per share. For details on the incentive programmes, see note V Information on the value of unpaid advances, loans, borrowings, guarantees, sureties granted to and agreements concluded with managers or supervisors In September 2015, BEST concluded borrowing agreements with two Management Board members in the total amount of PLN 73 million and an annual interest rate of 3.50%. In February 2016, BEST concluded addenda to the borrowing agreements, allowing a part of the principal amount to be repaid earlier. In March 2016, BEST repaid PLN 36.5 million, which accounts for a half of the borrowings granted. In September 2016 and March 2017 (after the balance sheet date), we concluded further addenda to the borrowing agreements to extend the repayment deadline to the end of The interest due and paid on those borrowings in 2016 amounted to PLN 1.6 million. 31 December 2016, outstanding borrowings amounted to PLN 36.5 million. In March 2016, BEST, the President of the Management Board and the Vice-President of the Management Board of BEST concluded agreements for the acquisition of series D shares. Presented below are the details of the shares acquisition by BEST s managers. Number of shares acquired Share issue price (PLN/share) Total value of shares Krzysztof Borusowski 1,269, ,000 Marek Kucner 93, ,500 52

53 In the reporting period, the Members of the Issuer s Management Board to whom the 2015 incentive programme was offered accepted the offers to acquire a total of 108 thousand series A subscription warrants as part of the incentive programme for that year. V Information on transactions with other related parties Transactions between BEST and its subsidiaries were eliminated during consolidation and have not been recognised in this note. Our transactions with other related parties include only transactions with the jointly controlled entity BEST III NSFIZ and with the associate Kredyt Inkaso, and are presented below: Transactions with BEST III NSFIZ: Revenue from the sale of services: Transaction value in the period 01/01/ /01/2015 BEST (parent company) 15,351 12,832 other Group entities 1,626 1,624 Revenue from the redemption of investment certificates: other Group entities 23,586 26,750 Liabilities: Unsettled balances as of Unsettled balances as of BEST (parent company) 0 1 Receivables: other Group entities 2,999 3,888 53

54 Transactions with Kredyt Inkaso: Receivables: BEST (parent company): from the joint payment of the liability of Kredyt Inkaso (in connection with the 2015 merger plan) Unsettled balances as of Unsettled balances as of V.21. REMUNERATION OF ENTITY AUTHORISED TO AUDIT FINANCIAL STATEMENTS Remuneration for: Due or paid for 2016 Due or paid for 2015 audit of annual financial statements other certification services, including review of financial statements V.22. INFORMATION ON PAID (OR DECLARED) DIVIDEND In the period from 1 January to 31 December 2016, BEST did not pay or declare the payment of a dividend. In addition, in the terms of issue, we undertook that we would not pay any dividend by 10 March 2020 and by 1 March 2021 in excess of 50% of the Group s consolidated net profit generated from 1 January 2018 to date. V.23. EVENTS AFTER THE BALANCE SHEET DATE At the beginning of 2017, as part of our second public bonds issue programme, we allotted series R2 and R3 bonds with a total nominal value of PLN 90 million to investors. Both series are 4.5-year bonds with a variable interest rate equal to WIBOR 3M, plus a 3.3% margin. Together with the issue in October 2016 as part of our second programme, we have already placed bonds worth PLN 140 million. Under the programme, we can issue an additional PLN 60 million worth of bonds. The events referred to above are associated with a long-term financial plan of the Group to acquire new claims portfolios. In January 2017, we partially redeemed series C bonds issued by BEST II NSFIZ. The nominal value of the redeemed bonds was PLN 10 million. 54

55 These statements were prepared and approved for publishing on 11 April Krzysztof Borusowski President of the Management Board of BEST S.A. Marek Kucner Vice-President of the Management Board of BEST S.A. Barbara Rudziks Member of the Management Board of BEST S.A. Jacek Zawadzki Member of the Management Board of BEST S.A. Signature of the person entrusted with bookkeeping: Anna Rokita Chief Accountant of BEST S.A. 55

56 UL. ŁUŻYCKA 8A, GDYNIA Phone