LETTER FROM THE MANAGEMENT BOARD

Transcription

1 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF THE CAPITAL PARK GROUP FOR 2016

2 LETTER FROM THE MANAGEMENT BOARD On behalf of the Management Board of Capital Park SA, we have the pleasure to present to you the 2016 Annual Report for the Capital Park Group. The past year has been a period full of challenges, while at the same time abounding in events which have consolidated our market position. We have consistently implemented successive steps in our development strategy, which will be described to you in detail further in this Report. At this point, we would like to highlight the activities of which we as the Management Board of the Company are particularly proud. First of all, we completed the construction of three projects: the second phase of the Eurocentrum Office Complex the Delta Building in Warsaw, the Topos office project in Kraków, and the Galeria Zaspa shopping mall in Gdańsk. The Delta Building and Topos were delivered in the first quarter of In both cases, the construction was completed on schedule and within the planned budget. In the second quarter of 2016, we finalized the redevelopment of one of the oldest shopping facilities in the Tri-city, Galeria Zaspa, on which we had worked in a joint venture with the Akron Group. Despite record high supply of new office space on the Warsaw market we have achieved very good results in commercializing our projects. In 2016, we leased 16k m2 office space. Our largest projects have reached the level of 71% of leased space for Eurocentrum and 85% for Royal Wilanów. Over a year of operation, the Royal Wilanów project has melted into its local surroundings. Thanks to various types of events, sport and cultural, which we have organized, the project has become a central landmark of the district. Its entertainment areas are being used not only by our tenants but by the entire local community. In 2016, we started the construction of a new hotel project located in the center of the Gdańsk Old Town. The hotel will be operated under the Hampton by Hilton brand and construction is scheduled to be completed in the first quarter of In the second half of 2016, we also started modernization of the oldest shopping center in Wielkopolska, ETC Swarzędz. This project, like Galeria Zaspa, is realized in cooperation with the Akron Group. We plan to complete construction in the third quarter of Our flagship project in Warsaw, ArtN, is currently in the commercialization phase according to the concept Make stories not stores. The last phases of preparation for construction are almost completed. At the end of 2016, as much as 81% of our real property portfolio consisted of completed projects with a high commercialization rate and increasing rental revenues. This was clearly visible in our financial performance. Consolidated operating revenues of the Group at the end of 2016 amounted to PLN 108 million, which is nearly a 50% increase over the PLN 72 million result last year. The Group also achieved higher operating cash flows, in 2016 they grew by 143% in comparison with 2015 and amounted to PLN 76 million. This increase is, among others the result of dynamic commercialization of the Eurocentrum Office Complex (the Beta Gamma buildings and the Delta building delivered for use in Q1 2016), as well as the Royal Wilanów project. Another major success of 2016 was raising new financing for the Eurocentrum project. The new credit replaced the previous construction credit and, in addition, enabled us to considerably reduce financing costs and to release the accumulated surplus. Alongside our new partner the Bank of China, the transaction amount exceeded EUR 124 million making it the Bank s largest transaction in Europe. As a result of the Group s success in managing the Real Estate Income Assets FIZ AN fund, on which its participants gained 40% since the Fund s creation (24% in the form of income and 16% in the form of increased valuation of the investment certificate), we decided to create another fund of this type. At the end of the year, we refinanced a portfolio of eight completed office and commercial properties with a total area of around 16k m2, which were subsequently included in the newly created Real Estate Income Assets FIZ AN II fund. Positive investor reactions to our real estate funds supports our firm s conviction that Poland is now ready for REIT funds and companies, which over the years have become very popular throughout the world, to invest in real properties for lease. We believe that they provide an excellent alternative to bonds and bank deposits. Together with the Warsaw Stock Exchange, we are now engaged in consultations concerning legislation which will enable the introduction of REIT on the Polish market. On behalf of the Management Board of the Capital Park SA Group and our entire Team, we would like to thank you for the confidence you have put in us. Ahead lies another year of challenges, which we hope will bring further increase to our company value. Jan Motz Kinga Nowakowska Marcin Juszczyk FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

3 KEY CONSOLIDATED FINANCIAL RESULTS Dec Dec Dec PLN 000 EUR 000 PLN 000 EUR 000 PLN 000 EUR 000 Investment property Cash and cash equivalents 2,084, ,138 1,934, ,967 1,595, , ,550 35, ,607 26, ,586 39,787 Total assets 2,337, ,357 2,152, ,109 1,858, ,093 Interest-bearing liabilities 1,243, ,971 1,065, , , ,949 Total liabilities 1,276, ,537 1,120, , , ,219 Non-controlling interests 71,745 16,217 72,583 17,032 64,776 15,197 Net assets 989, , , Number of shares 106,201, ,348, ,744,107 Net assets per share Net debt to total assets Net debt to equity M M M 2014 PLN 000 EUR 000 PLN 000 EUR 000 PLN 000 EUR 000 Rental income 107,732 24,621 72,373 17,294 50,702 12,103 Net operating profit 81,411 18,605 55,637 13,295 41,521 9,911 Margin 76% 77% 82% Administrative expenses and cost of companies operations (16,155) (3,692) (14,499) (3,465) (12,383) (2,956) Operating profit adjusted for property revaluation 55,525 12,689 45,627 10,903 21,034 5,021 Gain/loss on property revaluation 68,889 15,744 58,754 14,040 (60,976) (14,593) Operating profit 124,414 28, ,381 24,943 (39,942) (9,534) Group s net profit/loss 29,939 6,842 43,952 10,503 (61,468) (14,673) EPS 0,28 0,07 0,42 0,10 (0,59) (0,14) Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities 75,880 17,341 31,268 7,472 22,632 5,402 (103,623) (23,682) (292,167) (69,817) (279,595) (66,740) 70,686 16, ,920 48, ,535 85,584 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

4 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF THE CAPITAL PARK GROUP FOR 2016 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

5 TABLE OF CONTENTS LETTER FROM THE MANAGEMENT BOARD... 2 KEY CONSOLIDATED FINANCIAL RESULTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS REPRESENTATIONS OF THE MANAGEMENT BOARD GENERAL INFORMATION SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. OPERATING SEGMENTS Note 2. INVESTMENT PROPERTY Note 3. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES Note 4. OTHER NON-CURRENT ASSETS Note 5. OTHER NON-CURRENT ASSETS Note 6. INVENTORIES Note 7. OTHER RECEIVABLES AND OTHER CURRENT ASSETS Note 8. TRADE RECEIVABLES Note 9. OTHER CURRENT FINANCIAL ASSETS Note 10. CASH AND CASH EQUIVALENTS Note 11. EQUITY Note 12. BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES Note 13. LIABILITIES UNDER NOTES IN ISSUE Note 14. OTHER LIABILITIES AND PROVISIONS Note 15. TRADE PAYABLES Note 16. RENTAL INCOME Note 17. OPERATING EXPENSES BY NATURE Note 18. GAIN AND LOSS ON INVESTMENT PROPERTY REVALUATION Note 19. FINANCE INCOME AND COSTS Note 20. CURRENT AND DEFERRED INCOME TAX Note 21. NOTES TO THE STATEMENT OF CASH FLOWS Note 22. SURETIES PROVIDED Note 23. SECURITY ESTABLISHED OVER THE GROUP S ASSETS Note 24. OTHER CONTRACTUAL OBLIGATIONS AND COMMITMENTS Note 25. CAPITALISED BORROWING COSTS Note 26. EARNINGS PER SHARE Note 27. FINANCIAL INSTRUMENTS Note 28. FINANCIAL RISK MANAGEMENT Note 29. CAPITAL MANAGEMENT Note 30. WORKFORCE Note 31. REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY PERSONNEL Note 32. TRANSACTIONS WITH THE QUALIFIED AUDITOR Note 33. RELATED-PARTY TRANSACTIONS Note 34. TAX SETTLEMENTS Note 35. EVENTS SUBSEQUENT TO THE REPORTING DATE FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

6 1. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS Note Dec Dec Dec Non-current assets Investment property 2 2,084,314 1,934,579 1,595,986 Deferred tax assets 20 15,591 14,111 20,265 Investments in jointly controlled entities 3 44,697 30,709 12,098 Other financial assets 4 4, ,824 Other non-current assets 5 2,243 2, ,151,032 1,981,802 1,636,829 Current assets Inventories ,937 24,452 Other receivables and other current assets 7 13,240 17,529 16,149 Trade receivables 8 10,359 9,523 5,933 Other financial assets 9 6,269 17,123 5,809 Cash and cash equivalents , , , , , ,929 TOTAL ASSETS 2,337,450 2,152,521 1,858,758 EQUITY AND LIABILITIES Note Dec Dec Equity Share capital , , ,744 Share premium 858, , ,320 Other capital reserves 11 17,066 15,149 12,568 Reserve capital under non-registered share capital and statutory reserve funds Exchange differences on translating foreign operations (5,418) (2,134) 397 Retained earnings/(deficit) (17,062) (61,014) 454 Net profit/(loss) for current period 29,939 43,952 (61,468) Non-controlling interests 11 71,745 72,583 64,776 Non-current liabilities 1,060,962 1,032, ,791 Bank borrowings and other financial liabilities 12 1,003, , ,878 Liabilities under notes in issue 13 55, , ,344 Other liabilities and provisions ,384 3,665 Deferred tax liabilities 20 5,425 6,384 13,309 Current liabilities 1,063,878 1,019, ,196 Bank borrowings and other financial liabilities 12 71,572 50,674 44,739 Liabilities under notes in issue ,039 9,286 67,398 Trade payables 15 11,445 14,033 14,569 Other liabilities and provisions 14 16,554 26,964 42, , , ,771 TOTAL EQUITY AND LIABILITIES 2,337,450 2,152,521 1,858,758 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

7 2. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Note 12M M M 2014 Rental income ,732 72,373 50,702 Direct property operating expenses 17 (26,321) (16,736) (9,181) Net operating profit 81,411 55,637 41,521 Income from property management 1, Loss on disposal of investment property (2,949) (2,043) (981) Cost of SPV operations 17 (5,561) (5,310) (4,254) Administrative expenses 17 (10,594) (8,312) (6,519) Renovation and repair of property 17 (467) (682) (976) Cost of share-option plan measurement 17 (3,022) (3,656) (3,906) Gain/loss on property revaluation 18 68,889 58,754 (60,976) Other expenses (3,881) 0 0 Share in net profit/loss of equity-accounted entities (1,309) 9,086 (4,782) Operating profit/loss 124, ,381 (39,942) Interest income 19 2,654 2,648 4,450 Interest expense 19 (51,716) (38,263) (19,698) Loss on measurement of financial liabilities 19 (42,045) (12,560) (13,963) Profit/(loss) before tax 33,307 56,206 (69,153) Income tax 20 1, ,538 Net profit/(loss) 35,211 56,220 (63,615) Exchange differences on translating foreign operations (3,284) (2,531) 2,337 Total comprehensive income 31,927 53,689 (61,278) Net profit/loss attributable to owners of the Parent 29,939 43,952 (61,468) Net profit/loss attributable to non-controlling interests 5,272 12,268 (2,147) Net earnings/loss per share (PLN) Basic (0.59) Diluted (0.59) The entire profit was generated from continuing operations FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

8 3. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital Share premium Capital reserves from issue of shares pending registration Other capital reserves Exchange differences on translating foreign operations Retained earnings/(deficit) Net profit/(loss) for current period Non-controlling interests Total equity Equity as at Jan , , ,149 (2,134) (61,014) 43,952 72,583 1,032,204 Issue of shares ,024 Share-based payments , ,917 Profit distribution ,952 (43,952) 0 0 Dividend payment (4,356) (4,356) Changes in the Group s structure (1,754) (1,754) Total comprehensive income (3,284) 0 29,939 5,272 31,927 Equity as at Dec , , ,066 (5,418) (17,062) 29,939 71,745 1,060,962 Equity as at Jan , , , (61,468) 64, ,791 Issue of shares Share-based payments , ,581 Profit distribution (61,468) 61, Dividend payment (4,461) (4,461) Total comprehensive income (2,531) 0 43,952 12,268 53,689 Equity as at Dec , , ,149 (2,134) (61,014) 43,952 72,583 1,032,204 Equity as at Jan , , ,185 9,526 (1,940) (25,097) 25,551 68,807 1,038,400 Issue of shares 30, ,511 (217,185) ,511 Share-based payments , ,042 Profit distribution ,551 (25,551) 0 0 Dividend payment (4,113) (4,113) Total comprehensive income ,337 0 (61,468) 82 (59,049) Equity as at Dec , , , (61,468) 64, ,791 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

9 4. CONSOLIDATED STATEMENT OF CASH FLOWS OPERATING ACTIVITIES 12M M M 2014 Profit/(loss) before tax 33,307 56,206 (64,371) Foreign exchange gains/(losses) 42,591 (1,696) 11,655 Interest and profit distributions (dividends) 48,584 35,951 (14,759) Loss (gain) from investing activities (54,118) (71,773) 62,266 Change in trade receivables (427) (5,484) (4,022) Change in liabilities, net of borrowings (2,875) 19,163 7,989 Valuation of employee share plan 3,022 3,531 3,906 Change in other assets 892 (3,175) 7,140 Change in provisions 1,208 (8,216) 1,181 Impairment losses 3,881 6,815 11,522 Amortisation and depreciation Other adjustments 0 (3) (10) Total adjustments 43,139 (24,541) 87,272 Cash from operating activities 76,446 31,665 22,901 Income tax refunded/(paid) (566) (398) (269) A. Net cash from operating activities 75,880 31,268 22,632 INVESTING ACTIVITIES Interest on deposits ,932 Disposal of investment property and inventories 21,011 5,917 3,404 Other cash provided by investing activities Investments in property (111,292) (289,789) (282,849) Purchase of shares (7,286) (2,431) (65) Loans advanced (6,872) (5,424) (2,758) Purchase of intangible assets and property, plant and equipment (96) (1,361) (432) B. Net cash from investing activities (103,623) (292,167) (279,595) FINANCING ACTIVITIES Proceeds from issue of shares ,795 Proceeds from issue of notes 14,980 46, ,886 Proceeds from borrowings 701, , ,236 Dividends and other distributions to owners (4,356) (4,461) (4,113) Interest and other cash used in financing activities (72,135) (40,980) (20,955) Redemption of notes 0 (65,000) (35,000) Repayment of borrowings, lease payments (569,758) (14,134) (20,314) C. Net cash from financing activities 70, , ,535 D. Total net cash flows 42,943 (55,979) 101,572 E. Net (decrease)/increase in cash and cash equivalents: 42,943 (55,979) 101,572 F. Cash and cash equivalents at beginning of period 113, ,586 68,014 G. Cash and cash equivalents at end of period 156, , ,586 FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

10 5. REPRESENTATIONS OF THE MANAGEMENT BOARD Representation of Capital Park S.A. s Management Board on the reliability of the full-year consolidated financial statements and the Directors Report on the Group s operations The Management Board of Capital Park S.A. represents that, to the best of its knowledge, these full-year consolidated financial statements of the Capital Park Group and the comparative data have been prepared in compliance with the applicable accounting standards and give a true, fair and clear view of the Group s assets, financial position and financial performance. These financial statements show a true view of the Group s development, achievements and position; they also include a description of key risks and threats. These financial statements have been prepared on the assumption that the Capital Park Group will continue as a going concern in the foreseeable future. At the date of signing these financial statements, the Parent s Management Board was aware of no facts or circumstances that would indicate a threat to the Group s continuing as a going concern in the 12 months after the reporting date, as a result of any planned or forced discontinuation or material downsizing of its existing operations. Warsaw, March 17th 2017 SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz President of the Management Board Marcin Juszczyk Member of the Management Board Kinga Nowakowska Member of the Management Board FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

11 Representation of the Capital Park S.A. s Management Board on the auditor of the full-year consolidated financial statements of the Group The Management Board of Capital Park S.A. represents that the auditing firm and the auditor who audited the full-year consolidated financial statements of the Capital Park Group met the conditions required to issue an impartial and independent auditor s opinion and report, in accordance with the applicable laws and professional standards. Warsaw, March 17th 2017 SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz President of the Management Board Marcin Juszczyk Member of the Management Board Kinga Nowakowska Member of the Management Board FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

12 6. GENERAL INFORMATION 6.1. PARENT Name: Legal form: Registered office: Country of incorporation: Principal business activities: Capital Park S.A. Joint-stock company (spółka akcyjna) ul. Klimczaka 1, Warsaw, Poland Poland holding management activities development of building projects buying and selling of own real estate renting and operating of own real estate Registry court: District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register National Court Register (KRS) number: Industry Identification Number (REGON) DURATION OF THE GROUP The Parent (Capital Park S.A.) and the other Group entities were incorporated for an indefinite period PRESENTED PERIODS These full-year consolidated financial statements contain data for the period January 1st December 31st 2016, and comprise: Consolidated statement of financial position as at December 31st 2016, showing total assets and total equity and liabilities of PLN 2,337,450 thousand, Consolidated statement of profit or loss and other comprehensive income for the period January 1st December 31st 2016, showing a net profit of PLN 35,211 thousand, Consolidated statement of changes in equity for the period January 1st December 31st 2016, showing an increase in equity of PLN 28,758 thousand, Consolidated statement of cash flows for the period January 1st December 31st 2016, showing a net increase in cash of PLN 42,943 thousand, Notes to the financial statements; The comparative data in these consolidated financial statements is presented: in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of cash flows for the periods January 1st December 31st 2015 and January 1st December 31st 2014, in the consolidated statement of financial position as at December 31st 2015 and December 31st 2014, in the consolidated statement of changes in equity for the periods January 1st December 31st 2015 and January 1st December 31st 2014, and have been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (IFRS). FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

13 6.4. MEASUREMENT OF ITEMS DENOMINATED IN FOREIGN CURRENCIES The following exchange rates are used in these financial statements: EUR/PLN Exchange rate effective for the end of the reporting period Jan 1 Dec Jan 1 Dec Jan 1 Dec Average exchange rate in the reporting period AUDITORS PKF Consult Sp. z ograniczoną odpowiedzialnością Sp. k; ul. Orzycka 6, suite 1B, Warsaw, Poland 6.6. LAWYERS Ishikawa Brocławik Sajna Sp.p. Adwokaci i Radcowie Prawni Al. Słowackiego 66, Kraków, Poland 6.7. BANKS AND FINANCIAL INSTITUTIONS Bank Polska Kasa Opieki S.A., Powszechna Kasa Oszczędności Bank Polski S.A., Alior Bank S.A., Bank BGŻ BNP Paribas Polska S.A., Getin Noble Bank S.A., mbank S.A., Raiffeisen Bank Polska S.A., BOŚ Bank S.A., ING Bank Śląski S.A.; Hypo Noe Gruppe Bank AG, Bank of China (Luxembourg) S.A. Polish Branch; ABN AMRO Bank N.V PARENT S SHAREHOLDING STRUCTURE At the reporting date, shareholders holding 5% or more of total voting rights at the General Meeting of the Parent were as follows: Shareholder Number of shares % ownership interest Number of voting rights % of total voting rights CP Holdings S.à r.l. 76,869, % 76,869, % Jan Motz 2,805, % 5,571, % Metlife 10,829, % 10,829, % Other 15,696, % 15,696, % Total 106,201, % 108,967, % At the date of these consolidated financial statements the following shareholders held shares in the Parent: Shareholder Number of shares % ownership interest Number of voting rights % of total voting rights CP Holdings S.à r.l. 76,869, % 76,869, % Jan Motz 2,805, % 5,571, % Metlife 11,876, % 11,876, % Other 14,819, % 14,819, % Total 106,372, % 109,137, % FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

14 6.9. STRUCTURE OF THE GROUP a) The table below presents the subsidiaries and jointly controlled entities accounted for for consolidation purposes as at December 31st No. Name Registered office 1 Alferno Investments Sp. z o.o. Warsaw 2 ArtN Sp. z o.o. 1 Warsaw 3 Aspire Investments Sp. z o.o. Warsaw 4 Capital Park Gdańsk Sp. z o.o. Warsaw 5 Capital Park Kraków Sp. z o.o. Warsaw 6 Capital Park Racławicka Sp. z o. o. 13 Warsaw 7 Capital Park Opole Sp. z o.o. 2 Warsaw Description of business Development of building projects Development of building projects Construction of buildings and property management Construction of buildings and property management Development of building projects and property management Construction of buildings and property management Construction of buildings and property management Ownership interest and voting rights held (%) 8 CP Development S.à r.l. Luxembourg Activities of holding companies 100% 9 Real Assets Towarzystwo Funduszy Inwestycyjnych Spółka Akcyjna 10 CP Management Sp. z o.o. Warsaw 100% 100% 100% 100% 100% 100% 100% Warsaw Activities of holding companies 100% Construction of buildings and property management; management of Group s projects 11 CP Property Sp. z o.o. 10 Warsaw Activities of holding companies 16% 12 CP Property Sp. z o.o. SPV1 SK 3 Warsaw Retail property management 16% 13 CP Property Sp. z o.o. SPV2 SK 3 Warsaw Retail property management 16% 14 CP Property Sp. z o.o. SPV3 SK 3 Warsaw Retail property management 16% 15 CP Property Sp. z o.o. SPV4 SK 3 Warsaw Retail property management 16% 16 CP Property Sp. z o.o. SPV5 SK 3 Warsaw Retail property management 16% 17 CP Property Sp. z o.o. SPV6 SK 3 Warsaw Retail property management 16% 18 CP Property S.à r.l. Luxembourg Activities of holding companies 16% 19 CP Property S.C SP 8 Luxembourg Activities of holding companies 16% 20 CP Property S.C SP 2 8 Luxembourg Activities of holding companies 16% 21 CP Property S.C SP 3 8 Luxembourg Activities of holding companies 16% 22 CP Property S.C SP 4 8 Luxembourg Activities of holding companies 16% 100% 23 CP Retail BV The Netherlands 24 CP Retail ( SPV1 ) Sp. z o. o. 13 Warsaw 25 CP Retail (SPV2) Sp. z o.o. Warsaw 26 Dakota Investments Sp. z o.o. 12 Warsaw Activities of holding companies 100% Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management 100% 100% 100% 27 Diamante Investments Sp. z o.o. Warsaw Construction of buildings and property management 100% FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

15 No. Name Registered office 28 DT-SPV 12 Sp. z o.o. 4 Warsaw 29 Elena Investments Sp. z o. o. 2 Warsaw 30 Emir 30 Sp. z o.o. Warsaw 31 Description of business Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management Ownership interest and voting rights held (%) 100% 100% 100% Fundacja Otwartego Muzeum Dawnej Fabryki Norblina 5 Warsaw Foundation 100% 32 Hazel Investments Sp. z o.o. Warsaw 33 Marcel Investments Sp. z o. o. 13 Warsaw 34 Marlene Investments Sp. z o. o. 14 Warsaw 35 Nerida Investments Sp. z o. o. 13 Warsaw 36 Oberhausen Sp. z o.o. 16 Warsaw 37 Orland Investments Sp. z o. o. 13 Warsaw Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management 38 Patron Wilanow S.à r.l. 6 Luxembourg Activities of holding companies 50% % 100% 100% 100% 53% 100% Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych Warsaw Private equity investment fund 16% 7 40 Sagitta Investments Sp. z o. o. 13 Warsaw 41 Sander Investments Sp. z o.o. Warsaw 42 Silverado Investments Sp. z o.o. 11 Warsaw Construction of buildings and property management Development of building projects Construction of buildings and property management 43 Sporty Department Store Sp. z o.o. 5 Warsaw Retail sale 100% 44 Rezydencje Pałacowa Sp. z o.o. 9 Warsaw 45 RM1 Sp. z o.o. 9 Warsaw 46 Vera Investments Bis Sp. z o. o. 15 Warsaw 47 Roan Investments Sp. z o.o. Warsaw Development of building projects Construction of buildings and property management Construction of buildings and property management Construction of buildings and property management 48 SO SPV 106 Sp. z o.o. 10 Warsaw Activities of holding companies 16% 49 SO SPV 50 Sp. z o.o. 16 Warsaw 50 Construction of buildings and property management 100% 100% 100% 50% 50% 100% 100% Real Estate Income Assets II Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych Warsaw Private equity investment fund 100% 12 II Notes: 1 Subsidiary of CP Development S. à r. l. 2 Subsidiaries of CP Management Sp. Ltd. 3 Subsidiaries of CP Property SCSp, CP Property SCSp 2, CP Property SCSp 3, CP Property SCSp 4 and CP Property Sp. z o. o. (general partner, holds 1% of shares in each company and a 1% share in the companies profits). The Group holds indirectly 16% of the share capital in these companies; however, it has full power to control the entities under relevant management contracts. 4 Subsidiary of Vera Investments Bis Sp. z o.o. and CP Management Sp. z o.o. 5 Subsidiary of ArtN Sp. z o.o. 6 The Group holds 50% of the share capital and voting rights in Patron Wilanow S. à r.l., and the right to a 64% share in its profits. 7 Subsidiary of CP Retail B. V. The Group holds 16% of its certificates; however, it has full power to control the entity under relevant management contracts. 8 Subsidiaries of SO SPV 106 sp. z o.o. 60% FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

16 Subsidiaries of Patron Wilanow S. à r. l. The Group indirectly holds 50% of the share capital and voting rights in Rezydencje Pałacowa Sp. z o.o. and RM1 Sp. z o.o., as well as the right to a 64% share in their profits. Subsidiaries of Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych. The Group indirectly holds 15% of shares in the company s share capital. Subsidiary of DT-SVPV 12 Sp. z o. o. Subsidiaries of CP Retail B.V. Subsidiaries of Real Estate Income Assets II Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych II. The Group indirectly holds 100% of shares in the company s share capital. Subsidiary of Roryd Investment Sp. z o.o. Subsidiary of CP S.A. and CP Management Sp. z o.o. Jointly controlled entities of CP Retail B.V. Basis of full consolidation of the assets, liabilities, profit or loss of the REIA FIZ AN portfolio, i.e. subsidiaries of CP Retail B.V., that is: CP Property Sp. z o.o.; SO SPV 106 Sp. z o.o., CP Property Sp. z o.o. SPV 1 SK, CP Property Sp. z o.o. SPV 2 SK, CP Property Sp. z o.o. SPV 3 SK, CP Property Sp. z o.o. SPV 4 SK, CP Property Sp. z o.o. SPV 5 SK, CP Property Sp. z o.o. SPV 6 SK, CP Property S. C. SP, CP Property 2 S. C. SP, CP Property 3 S. C. SP, CP Property 4 S. C. SP CP Property S.à r.l. and Real Estate Income Assets Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych ( FIZ AN ; closed end private equity investment fund). On May 13th 2013, Capital Park S.A. and Open Finance Towarzystwo Funduszy inwestycyjnych S.A. ( TFI ) executed an agreement to establish an investment fund whose principal business activity would be property management to pay dividends to investors in REIA FIZAN investment certificates. Under the agreement and pursuant to Art of the Act on Investment Funds, the management of REIA FIZAN investment portfolio was transferred to CP Management Sp. z o.o., a subsidiary of CP S.A. with qualified assetmanagement resources. On May 16th 2013, CP Management, a subsidiary of Capital Park S.A., executed an agreement with TFI for the management of REIA FIZAN. Under the agreement CP Management Sp. z o.o. has full discretion to make decisions regarding REIA FIZAN s investment policy; in particular, it may make investment decisions concerning REIA FIZAN assets, place bids and negotiate terms of transactions to buy or sell assets. Also, pursuant to the above agreement, CP Management Sp. z o.o. s fees depends on the net asset value of the portfolio of assets under its management. The agreement expired in January rental contracts with tenants, searching for additional sources of revenue, preparing investment budgets, settlements of service costs with tenants, and maintaining relations with external institutions. The terms of the agreements described above expose CP Management Sp. z o.o. to risks and benefits related to changes in REIA FIZAN s net asset value, and to SPVs results on property rentals. In accordance with IFRS 27, effective for annual periods beginning on or after January 1st 2013, and with IFRS 10, applicable to the Group as of January 1st 2014, an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Given the provisions of the management agreements and the IFRS provisions regarding control, Capital Park S.A. assumes that it controls operations of these entities and is exposed to their profit or loss. The aforementioned agreements were concluded for three years and were renewed in 2017 for another three-year period. Thereafter, the agreements will be automatically extended for another two years. The Parent intends to continue its involvement in the REIA FIZ AN project in the coming years. Consequently, the Parent consolidates the equity, assets and liabilities of the above-mentioned entities with the full method, and discloses non-controlling interests corresponding to this part of the assets, liabilities, profit or loss which is attributable to the investment certificates sold to investors outside the Group. CP Management Sp. z o.o. also renders property management services to the Special Purpose Vehicles in which REIA FIZAN invests, i.e.: CP Property Sp. z o.o. SPV 1 SK, CP Property Sp. z o.o. SPV 2 SK, CP Property Sp. z o.o. SPV 3 SK, CP Property Sp. z o.o. SPV 4 SK, CP Property Sp. z o.o. SPV 5 SK, CP Property Sp. z o.o. SPV 6 SK. In particular, CP Management Sp. z o.o. s services consist in property administration, negotiating terms of FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

17 Method (equity method in accordance with IAS 28) used to account for interests in jointly controlled entities, i.e. Patron Wilanów S. à r. l., Rezydencje Pałacowa Sp. z o.o., RM 1 Sp. z o.o., Oberhausen Sp. z o.o. and SO SPV 50 Sp. z o.o. The Group s receivables from, liabilities to, and transactions with the above-mentioned entities are not eliminated; they are presented in the consolidated statement of financial position and consolidated statement of profit or loss. b) Changes in the Group s structure during the reporting period, i.e. January 1st December 31st 2016: Change of the REIA FIZ AN structure investment diversification In order to diversify FIZ AN s investment portfolio, in March 2016 three partnerships were established (Société en Commandite Spécial, abbreviated to SCSp) of Luxembourg, which became limited partners of the Special Purpose Vehicles. CP Property S.a r.l. continues to be FIZ AN s limited partner. After the change, the structure of FIZ AN is as follows: CP Property Société en Commandite Spéciale, as a limited partner, holds 99.99% of shares in CP Property Sp. z o.o. SPV 1 sk and 69.99% of shares in CP Property Sp. z o.o. SPV 5 sk, CP Property 2 Société en Commandite Spéciale, as a limited partner, holds 99.99% of shares in CP Property Sp. z o.o. SPV 2 sk and 30.00% of shares in CP Property Sp. z o.o. SPV 5 sk CP Property 3 Société en Commandite Spéciale, as a limited partner, holds 99.99% of shares in CP Property Sp. z o.o. SPV 3 sk and 99.99% of shares in CP Property Sp. z o.o. SPV 4 sk, CP Property 4 Société en Commandite Spéciale, as a limited partner, holds 99.99% of shares in CP Property Sp. z o.o. SPV 6 sk. On December 27th 2016, REIA FIZ AN acquired 100% of shares in SO SPV 106 Sp. z o.o. with the share capital of PLN 5,000 and then sold to this company 100% of shares in the following Luxembourg-based companies: CP Property SCSP, CP Property 2 SCSP, CP Property 3 SCSP, and CP Property 4 SCSP. Sale of shares in Sapia Investments Sp. z o.o. On April 25th 2016, Capital Park S.A. sold its entire shareholding in Sapia Investments Sp. z o.o. The company was a limited partner in Sapia Investments Sp. z o.o. sp. komandytowa, which owned a residential property on Śmiała street in Warsaw. Acquisition of a new company On April 22nd 2016, Capital Park S.A. acquired 100% of the shares in Roryd Investments Sp. z o.o. and is the company s sole shareholder. The company s business consists in construction of buildings and property management. On April 27th 2016, the Extraordinary General Meeting of Roryd Investments Sp. z o.o. passed a resolution to increase the company s share capital from PLN 5,000 to PLN 25,734,350. The share capital increase was covered by a contribution of shares in Malene Investments Sp. z o.o. Sale of shares in Zoe Investments Sp. z o.o. On August 1st 2016, Capital Park S.A. sold its entire shareholding in Zoe Investments Sp. z o.o., which was the owner of a property located on Leszno street in Warsaw, Poland. Acquisition of interest in SO SPV 50 Sp. z o.o. On February 3rd 2016, Capital Park S.A. s subsidiary, CP Retail B.V. of the Netherlands, signed a joint-venture agreement with Galaxy Real Estate Sp. z o.o., a company of the Akron Group. The agreement provided for purchase of an interest in SO SPV 50 Sp. z o.o., the owner of the property in Swarzędz on which the ETC Swarzędz shopping centre is located. The parties to the agreement decided to cooperate on redevelopment and recommercialisation of the centre, and subsequently to jointly manage it. On July 7th 2016, under a JV agreement signed earlier with Akron, CP Retail BV, a subsidiary of Capital Park S.A., acquired an equity interest in SO SPV 50 Sp. z o.o. in the form of new shares. As at the reporting date, CP Retail BV held 60% of the shares in SO SPV 50 Sp. z o.o. Incorporation of REIA II FIZ AN By way of a resolution of November 30th 2016, Capital Park S.A. increased the share capital of its Dutch subsidiary CP Retail B.V. by PLN 41,617,000. The new shares were paid for with a contribution of shares in the following companies: Nerida Investments Sp. z o.o., Marcel Investments Sp. z o.o., Orland Investments Sp. z o.o., Sagitta Investments Sp. z o.o., and Capital Park Racławicka Sp. z o.o. Next, on December 14th 2016, CP Retail B.V. acquired all the certificates of the new REIA II FIZ AN fund in exchange for a contribution of shares in the following companies: Nerida Investments Sp. z o.o., Marcel Investments Sp. z o.o., Orland Investments Sp. z o.o., Sagitta Investments FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

18 Sp. z o.o., CP Retail ( SPV1 ) Sp. z o.o., and Capital Park Racławicka Sp. z o.o REPRESENTATIONS OF THE MANAGEMENT BOARD The Parent s Management Board hereby represents that, to the best of its knowledge, these consolidated financial statements and the comparative data have been prepared in compliance with the applicable accounting policies applied by the Group, and give a true, fair and clear view of the Group s assets, financial standing and financial performance. These financial statements have been prepared on the assumption that the Capital Park Group will continue as a going concern in the foreseeable future. At the date of signing these financial statements, the Parent s Management Board was aware of no facts or circumstances that would indicate a threat to the Group s continuing as a going concern in the 12 months after the reporting date, as a result of any planned or forced discontinuation or material downsizing of its existing operations. The Parent s Management Board represents that the auditor of these consolidated financial statements was appointed in compliance with the applicable laws, and that both the auditing firm and the auditors who performed the audit met the conditions required to issue an impartial and independent auditor s opinion and report, in accordance with the applicable provisions of Polish law. The auditor was appointed by the Supervisory Board of Capital Park S.A. by way of its resolution of June 28th 2016 on appointment of the auditor. The Supervisory Board selected the auditor with due regard for the objectivity and independence of the appointment itself, as well as of the performance of the auditor s tasks APPROVAL OF FINANCIAL STATEMENTS These consolidated financial statements were approved for issue and signed by the Parent s Management Board on March 17th Warsaw, March 17th 2017 SIGNATURE OF THE PERSON WHO PREPARED THE FINANCIAL STATEMENTS: Małgorzata Koc Chief Accountant SIGNATURES OF MANAGEMENT BOARD MEM- BERS: Jan Motz President of the Management Board Kinga Nowakowska Member of the Management Board Marcin Juszczyk Member of the Management Board FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

19 7. SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL STATE- MENTS 7.1. STATEMENT OF COMPLIANCEWITH IFRS These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) applicable to financial statements for periods starting after January 1st In accordance with IAS 1 Presentation of Financial Statements, the IFRS comprise the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). 7.2 PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS The data contained in these consolidated financial statements is presented in thousands of the Polish złoty (the Group s functional currency and presentation currency), rounded to the nearest thousand. These consolidated financial statements of the Group should be read in conjunction with the separate financial statements of Capital Park S.A. approved for issue by the Management Board of the Parent and issued on the date as these consolidated financial statements, in order to obtain complete information on the Group s assets and financial position as at December 31st 2016 and its financial performance in the period from January 1st to December 31st 2016, in accordance with the International Financial Reporting Standards endorsed by the European Union. These consolidated financial statements have been audited by an independent auditor. The auditor s opinion and report are attached to these consolidated financial statements. 7.3 BASIS OF CONSOLIDATION Subsidiaries Subsidiaries are all entities over which the Group has control and power to govern their financial and operating policies. Such power is usually derived from the holding of the majority of voting rights in the entity s governing bodies. While assessing whether the Group controls a given entity in accordance with IFRS 10, it takes into consideration the existence and effect of potential voting rights which may be exercised or converted at a given time as well as whether it is exposed to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In order to determine the status of each entity whose financial data may be subject to consolidation, the Group analyses whether it has retained control over the entity in line with the criteria described above as at the end of each reporting period, i.e. as at the end of each calendar quarter. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, unless the control is temporary. The Group applies the acquisition method to account for business combinations. The consideration transferred in a business combination is measured at fair value, calculated as the sum of the acquisition-date net fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer, in accordance with IFRS 3. Any excess of the acquisition cost over the fair value of the Group s interest in the identifiable net assets acquired is recognised as goodwill. If the acquisition cost is lower than the fair value of the net assets of the acquiree, the difference is recognised directly in profit or loss. FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

20 The Group ceases to consolidate an entity from the moment it loses control of the entity. The Parent s control over a subsidiary ceases when it loses the power to govern the financial and operating policies of the subsidiary. Control may be lost with or without a concurrent change in the absolute or relative interest in the entity. Jointly controlled entities Jointly controlled entities, i.e. entities with respect to which the Group does not have the full power to control their financial and operating policies despite having a majority share in their profit or loss, are accounted for in these consolidated financial statements using the equity method, in accordance with IAS 28. Shares and investment certificates held by noncontrolling interests and transactions with noncontrolling interests Shares and investment certificates held by noncontrolling interests include shares and investment certificates in consolidated companies held by non- Group entities. Non-controlling interests are measured at the acquisition-date net assets of the related entity attributable to non-group entities. Identified holdings of shares and investment certificates in net assets of consolidated subsidiaries are recognised in the Group s statement of financial position under equity separately from the Parent s ownership interest in such net assets. Holdings of shares and investment certificates in net assets of a consolidated entity are determined for each reporting date; these include: Profit and loss and each component of other comprehensive income are attributed to owners of the Parent and non-controlling interests. Total comprehensive income is attributed to owners of the Parent and noncontrolling interests, even if as a result the value of the non-controlling interests becomes negative. Consolidated companies These consolidated financial statements for the period ended December 31st 2016 cover the entities listed in Section 6.9 of these statements. Methods of accounting Subsidiaries with respect to which the Group has the full power to control their financial and operating policies are consolidated with the full method. In the case of subsidiaries of REIA FIZ AN (listed in Section 6.9 above), in which the Group holds a 15% equity interest, equity holdings of non-controlling interests were determined. Patron Wilanów S.à r.l., Rezydencje Pałacowa Sp. z o.o., RM 1 Sp. z o.o., Oberhausen Sp. z o.o. and SO SPV 50 Sp. z o.o. (entities jointly controlled by the Company). These entities are accounted for using the equity method, which means that the consolidated statement of financial position shows the Group s share in net assets of those entities in proportion to its share in the share capital or net profit/(loss) of those companies. The basis of consolidation of the financial data of subsidiaries is presented in detail in Section 6.9 of these financial statements. the value of shares and investment certificates held by non-controlling interests at the original combination date, calculated in accordance with IFRS 3, changes in equity attributable to shares and investment certificates held by non-controlling interests from the combination date to the reporting date. FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR

21 7.4 SIGNIFICANT ACCOUNTING POLICIES Investment property Investment property includes land and buildings, or parts of land or buildings, owned, jointly owned, held in perpetual usufruct or leased by a Group company, which are used to generate economic benefits from their fair value growth or rental income (or both). Investment property measured at fair value also includes investment property under construction, i.e. before it is placed into service, as well as projects that the Group is planning to implement in the coming years, as the Management Board does not rule out the possibility of selling a property at any stage of project execution. Properties which are held partially for capital appreciation or to earn rentals and partially used the Group s own needs as owner-occupied property are accounted for in line with the policies applicable to the prevailing portion (no less than 90% of the area) of the property, with due regard for the materiality principle. A property is classified as investment property upon initial recognition. An item may be reclassified from investment property into another asset category based on the Management Board s decision to change the intended purpose or function of a given asset. Investment property is recognised as an asset if it is probable that the future economic benefits associated with the investment property will flow to the entity and the cost of the investment property can be measured reliably. Investment property is initially measured at cost, including transaction costs, i.e. costs directly related to the purchase transaction (legal fees, commission of purchase of property, taxes and charges relating to the purchase of property). The initial cost of an interest in property held under a lease is determined as prescribed for a finance lease by IAS 17, i.e. at the lower of the fair value and the present value of minimum lease payments. The value of investment properties which are selfconstructed buildings is established in accordance with IAS 16. The cost of investment property constructed by the Company is the cost determined as at the date on which construction works are completed and the property is made ready for use. The cost of investment property comprises costs incurred until the day a given property is placed in service or after that day if the costs are incurred on building finishing or adaptation of space to tenant needs: direct construction costs, designing costs, and all other costs incurred in order to carry out the construction process as intended by the entity s Management Board, indirect costs of advisory services strictly related to supporting and managing the construction process, and costs of intermediation in transactions made as part of project implementation, taxes and other public charges (including primarily perpetual usufruct charges and real property taxes paid throughout the construction process), finance costs incurred in relation to external financing (in accordance with IAS 16), including in particular interest on credit facilities, loans, notes and bonds, to the extent they finance expenditure on the construction of investment property, realised foreign exchange differences on foreign-currency denominated liabilities related to financing of investment expenditure, and fees related to raising financing for the investment project, any costs incurred in connection with any present or future revenue that the entity expects to generate (costs of finding tenants, costs of adapting premises to the tenants requirements that can be allocated to specific lease agreements entered into for a definite term). After its initial recognition, at least once a year at the end of every financial year, investment property is measured at fair value which reflects market conditions at the reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value reflects, in particular, rental income from existing lease contracts, reasonable and justified expectations of rental income from future contracts as viewed by the market, as well as reliably estimated cash outflows on the investment property. Gains or losses arising from changes in the fair value of investment property are recognised in profit or loss in the period in which they arise. Properties for which sale agreements have been concluded, or for which the purchase price has been confirmed with the buyer otherwise, are measured at the selling price specified in such agreements. In the other cases, the Parent s Management Board is supported by experts in fair value measurement, using: estimate surveys prepared by independent expert appraisers for balance-sheet purposes, managerial valuations and in-house appraisals of properties. The fair value of properties is determined by independent property appraisers using valuation methods that are most appropriate to a given property. These are: FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR