FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF THE …inwestor.capitalpark.pl/wp-content/uploads/2017/12/... · FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR 2017 2 LETTER FROM

FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF

THE CAPITAL PARK GROUP FOR 2017

(PLN ‘000)

FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS FOR 2017 2

LETTER FROM THE MANAGEMENT BOARD

Ladies and Gentlemen,

We are honoured to present to you the 2017 Annual Re-

port of the Capital Park Group.

Last year, we looked back at our past accomplishments,

reviewed the strategy and set new targets for the coming

years. We take great pride in having successfully com-

pleted all projects planned in 2013 and presented during

our pre-IPO meetings with investors, namely the con-

struction and commercialisation of Eurocentrum Office

Complex and Royal Wilanów, creation and placement on

the market of REIA FIZ AN and REIA II FIZ AN distributing

funds, and comprehensive preparation for the ArtN pro-

ject to revitalise the old Norblin factory. We achieved all

our financial and business objectives for 2017. The finan-

cial results of the Capital Park Group are detailed further

on in these Financial Statements.

As at the date of these Financial Statements, 89% of the

leasable area of our projects was taken up , with the

weighted average lease term of almost five years. In

2017, we saw record-high results in commercialisation:

with 26,680 m2 of new office space leased out and lease

contracts with existing tenants of 7,747 m2 extended. Our

rental income grew as expected, our properties were re-

financed with investment loans, and our projects gener-

ated increasingly stronger operating cash flows.

We replaced our existing loans with investment loans,

paid off PLN 109m of liabilities under PLN-denominated

bonds and partly replaced them with bonds denominated

in EUR. This contributed to bringing down the weighted

average cost of debt to nearly 3%, which will generate to-

tal savings on the Group’s interest expense of almost

EUR 18.5m by the maturity dates of these debt instru-

ments.

In early 2017, we launched our second real estate fund

REIA II FIZAN, which we placed among private investors,

raising PLN 44m. The fund assets comprise eight leased

out office and retail properties, with a total area of 15,550

m2, in six cities across Poland.

After more than 14 months of redevelopment works on

ETC Swarzędz 20,104 m2, in the autumn of 2017 we de-

livered this one of the first shopping centre in the prov-

ince of Poznań for occupancy, within the budget and on

schedule. We took great care to ensure that the building

reflected the current commercial and architectural

trends and had a comprehensive offering for customers

who want to shop in a quiet, creating strong alternative

to shopping destinations in Poznań. We attracted brands

which had not yet been present in Swarzędz, or even in

Poland, for example Dealz, which opened its first Polish

store in the centre. We are happy to have not only re-

nowned chain brands but also local entrepreneurs among

our tenants.

In autumn 2017, we started ArtN, our flagship project to

revitalise the former Norblin factory. ArtN will be a

unique place, setting new trends in the real estate sector.

It will combine modern, prestigious Class A office space

with a post-industrial setting and commercial aisles,

which will house unique boutiques, unique entertain-

ment venues, numerous restaurants and cafes, as well as

the Open Museum of the Former Norblin Factory and Bi-

oBazar with organic food. ArtN will bring to life a vision of

an open space perfectly integrated with the city fabric.

Open 24 hours a day, seven days a week, it will be an

excellent example of a privately owned public space

(POPS). In the ArtN project, we are using even more so-

phisticated solutions, drawing on the experience we

gained as an active operator of the acclaimed and award-

winning Royal Wilanów building along with the surround-

ing urban space, and Eurocentrum Office Complex with

its unique retail space on the ground floor.

In September 2017, we unveiled to investors our strategic

objectives for the coming years. They include finding ten-

ants for the remaining space (11%) in our completed pro-

jects, as well as completion, commercialisation and stabi-

lisation of our development projects still in progress. We

do not intend to sell the Group’s key projects but rather

to adjust the portfolio structure and optimise its financing

so we can ultimately become a dividend paying company.

We also plan to actively seek new capital to expand the

scale of assets managed by the Group through further ac-

quisitions and building our investment property portfolio.

In 2018–2021, we expect to earn significant development

margins on our projects, see NOI double (compared with

2017), and increase FFO nearly fourfold, which should sig-

nificantly increase the Group’s dividend paying capacity.

Now is a special time for the Capital Park Group. With the

completed projects stabilised and generating ever

stronger cash flows, the investment risk is limited. Com-

mencement of the ArtN project, which already enjoys

great interest from tenants, and a number of other pro-

jects in the pipeline, make us perfectly placed for further

rapid growth. We are facing another year of opportuni-

ties, which we, as the Group’s Management Board and

(PLN ‘000)


the entire Capital Park team, are eager to take on to con-

tinue building value for investors.

On behalf of the Management Board and the team of the

Capital Park Group, I would like to thank all the investors,

banks, tenants, suppliers, trading partners and other per-

sons working with us for the cooperation and for their

confidence in what we do.

With kind regards,

Jan Motz - President of the Management Board, CEO

Marcin Juszczyk - Member of the Management Board,

CFO/CIO

Kinga Nowakowska - Member of the Management Board,

COO

(PLN ‘000)


KEY CONSOLIDATED FINANCIAL DATA

Dec 31 2017 Dec 31 2016 Dec 31 2015

PLN ‘000 EUR ‘000 PLN ‘000 EUR ‘000 PLN ‘000 EUR ‘000

Investment property

2,174,397 521,326 2,084,314 471,138 1,934,579 453,967

Cash and cash equivalents

193,326 46,351 156,550 35,386 113,607 26,659

Total assets 2,471,102 592,463 2,337,450 528,357 2,152,521 505,109

Interest-bearing liabilities

1,307,885 313,574 1,243,017 280,971 1,065,552 250,042

Total liabilities 1,371,750 328,886 1,276,487 288,537 1,120,317 262,893

Non-controlling interests 114,918 27,552 71,745 16,217 72,583 17,032

Net assets (excluding NCI) 984,434 236,024 989,217 223,602 959,621 225,184

Number of shares 106,483,550 105,348,131 106,201,813

Net assets per share 9.24 2.22 9.31 2.11 9.11 2.14

Net debt to total assets

0.45 0.46 0.44

Net debt to equity

1.01 1.02 0.92

Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015 PLN ‘000 EUR ‘000 PLN ‘000 EUR ‘000 PLN ‘000 EUR ‘000

Rental income 125,758 29,627 107,732

24,621 72,373

17,294

Net operating profit 93,069 21,926 81,411 18,605 55,637 13,295

Margin 74% 76% 77%

Administrative expenses and cost of companies’ operations

(17,666)

(4,162) (16,155)

(3,692) (14,499)

(3,465)

Operating profit adjusted for revaluation of investment property

79,750

18,788 55,525

12,689 45,627

10,903

Gain/(loss) on property revaluation

(84,723)

(19,960) 68,889

15,744 58,754

14,040

Operating profit (4,970) (1,171) 124,414 28,433 104,381 24,943

Group’s net profit/(loss) (1,938) (457) 29,939

6,842 43,952

10,503

FFO 38,220 8,975 17,624 4,039 7,509 1,795

EPS (0.02) (0.02) 0.28 0.07 0.42 0.10

Cash flows from operating activities

85,416

20,123 75,880

17,341 31,268

7,472

Cash flows from investing activities

(88,365)

(20,818) (103,623)

(23,682) (292,167)

(69,817)

Cash flows from financing activities

39,725

9,359 70,686

16,154 204,920

48,968

(PLN ‘000)


FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS OF THE CAPITAL PARK GROUP FOR 2017

(PLN ‘000)


CONTENTS

LETTER FROM THE MANAGEMENT BOARD ................................................................ 2 1. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................................ 7 2. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ......................... 8 3. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY................................................................................. 9 4. CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................................... 10 5. REPRESENTATIONS OF THE MANAGEMENT BOARD .................................................................................. 11 6. GENERAL INFORMATION ........................................................................................................................... 12 7. SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS................................ 19 Note 1. OPERATING SEGMENTS ............................................................................................................................. 38 Note 2. INVESTMENT PROPERTY ............................................................................................................................ 41 Note 3. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES .................................................................................... 43 Note 4. OTHER NON CURRENT FINANCIAL ASSETS ................................................................................................ 45 Note 5. OTHER NON-CURRENT ASSETS .................................................................................................................. 45 Note 6. OTHER RECEIVABLES AND OTHER CURRENT ASSETS ................................................................................. 46 Note 7. TRADE RECEIVABLES .................................................................................................................................. 46 Note 8. OTHER CURRENT FINANCIAL ASSETS ......................................................................................................... 47 Note 9. CASH AND CASH EQUIVALENTS ................................................................................................................. 47 Note 10. EQUITY ....................................................................................................................................................... 48 Note 11. BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES ......................................................................... 50 Note 12. LIABILITIES UNDER NOTES IN ISSUE ........................................................................................................... 54 Note 13. OTHER LIABILITIES AND PROVISIONS........................................................................................................... 3 Note 14. TRADE PAYABLES ......................................................................................................................................... 3 Note 15. RENTAL INCOME .......................................................................................................................................... 4 Note 16. OPERATING EXPENSES BY NATURE ............................................................................................................. 4 Note 17. GAINS AND LOSSES ON INVESTMENT PROPERTY REVALUATION ................................................................ 5 Note 18. FINANCE INCOME AND COSTS ..................................................................................................................... 5 Note 19. CURRENT AND DEFERRED INCOME TAX ...................................................................................................... 6 Note 20. NOTES TO THE STATEMENT OF CASH FLOWS .............................................................................................. 8 Note 21. SURETIES PROVIDED .................................................................................................................................... 9 Note 22. GROUP’S ASSETS PLEDGED AS SECURITY ..................................................................................................... 9 Note 23. OTHER CONTRACTUAL OBLIGATIONS AND COMMITMENTS ....................................................................... 9 Note 24. CAPITALISED BORROWING COSTS ............................................................................................................. 10 Note 25. EARNINGS PER SHARE ............................................................................................................................... 10 Note 26. FINANCIAL INSTRUMENTS ......................................................................................................................... 10 Note 27. FINANCIAL RISK MANAGEMENT ................................................................................................................ 12 Note 28. CAPITAL MANAGEMENT ............................................................................................................................ 15 Note 29. EMPLOYEES ............................................................................................................................................... 15 Note 30. REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY PERSONNEL ........... 15 Note 31. TRANSACTIONS WITH THE QUALIFIED AUDITOR ....................................................................................... 62 Note 32. RELATED-PARTY TRANSACTIONS ............................................................................................................... 75 Note 33. TAX SETTLEMENTS ..................................................................................................................................... 76 Note 34. EVENTS SUBSEQUENT TO THE REPORTING DATE ...................................................................................... 76

(PLN ‘000)


1. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS Note Dec 31 2017 Dec 31 2016 Dec 31 2015

Non-current assets

Investment property 2 2,174,397 2,084,314 1,934,579

Deferred tax assets 19 21,890 15,591 14,111

Investments in jointly controlled entities 3 42,675 44,697 30,709

Other financial assets 4 2,649 4,187 0

Other non-current assets 5 2,243 2,243 2,403

2,243,854 2,151,032 1,981,802

Current assets

Inventories 0 0 12,937

Other receivables and other current assets 6 14,561 13,240 17,529

Trade receivables 7 11,944 10,359 9,523

Other financial assets 8 7,417 6,269 17,123

Cash and cash equivalents 9 193,326 156,550 113,607

227,248 186,418 170,719

TOTAL ASSETS 2,471,102 2,337,450 2,152,521

EQUITY AND LIABILITIES Note Dec 31 2017 Dec 31 2016 Dec 31 2015

Equity

Share capital 10 106,484 106,202 105,348

Share premium 858,320 858,320 858,320

Other reserves 10 6,352 17,066 15,149

Reserve capital from non-registered share capital and statutory reserve funds

45 170 0

Exchange differences on translating foreign operations 2,294 (5,418) (2,134)

Retained earnings/(deficit) 12,877 (17,062) (61,014)

Net profit/(loss) for current period (1,938) 29,939 43,952

984,434 989,217 959,621

Non-controlling interests 10 114,918 71,745 72,583

1,099,352 1,060,962 1,032,204

Non-current liabilities

Bank borrowings and other financial liabilities 11 1,014,807 1,003,032 862,764

Liabilities under notes in issue 12 156,231 55,374 142,828

Other liabilities and provisions 13 11,357 47 7,384

Deferred tax liabilities 19 24,738 5,425 6,384

1,207,133 1,063,878 1,019,360

Current liabilities

Bank borrowings and other financial liabilities 11 83,244 71,572 50,674

Liabilities under notes in issue 12 53,603 113,039 9,286

Trade payables 14 16,647 11,445 14,033

Other liabilities and provisions 13 11,123 16,554 26,964

164,617 212,610 100,957

TOTAL EQUITY AND LIABILITIES 2,471,102 2,337,450 2,152,521

(PLN ‘000)


2. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Note Jan – Dec

2017

Jan – Dec 2016

Jan – Dec 2015

Rental income 15 125,758 107,732 72,373

Direct property operating expenses 16 (32,689) (26,321) (16,736)

Net operating profit 93,069 81,411 55,637

Income from property management 1,529 1,897 907

Gain/Loss on disposal of investment property 221 (2,949) (2,043)

Cost of SPV operations 16 (6,296) (5,561) (5,310)

Administrative expenses 16 (11,370) (10,594) (8,312)

Renovation and repair of property 16 (802) (467) (682)

Cost of incentive scheme measurement 16 (1,718) (3,022) (3,656)

Gain/(loss) on property revaluation 17 (84,723) 68,889 58,754

Other expenses (3,558) (3,881) 0

Share in net profit/(loss) of equity-accounted entities 8,678 (1,309) 9,086

Operating profit/(loss) (4,970) 124,414 104,381

Interest income 18 2,183 2,654 2,648

Interest expense 18 (40,093) (51,716) (38,263)

Loss on measurement of financial liabilities 18 46,727 (42,045) (12,560)

Profit/(loss) before tax 3,847 33,307 56,206

Corporate income tax 19 (13,562) 1,904 14

Net profit/(loss) (9,715) 35,211 56,220

Exchange differences on translating foreign operations 7,712 (3,284) (2,531)

Total comprehensive income (2,003) 31,927 53,689

Net profit/(loss) attributable to owners of the parent (1,938) 29,939 43,952

Net profit/(loss) attributable to non-controlling interests (7,777) 5,272 12,268

Net earnings/(loss) per share (PLN)

Basic 25 (0.02) 0.28 0.42

Diluted 25 (0.02) 0.28 0.41

The entire loss/profit was earned from continuing opera-tions.

(PLN ‘000)


3. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capital Share premium Capital reserve from

issue of shares pend-ing registration

Other compo-

nents of eq-uity

Exchange dif-ferences on

translating for-eign opera-

tions

Retained earn-ings/(deficit)

Net profit/(loss)

for current period

Non-controlling interests

Total equity

Equity as at Jan 1 2017 106,202 858,320 170 17,066 (5,418) (17,062) 29,939 71,745 1,060,962

Issue of shares 282 0 (125) 0 0 0 0 0 157

Share-based payments 0 0 0 765 0 0 0 0 765

Profit distribution 0 0 0 0 0 29,939 (29,939) 0 0

Dividend payment 0 0 0 0 0 0 0 (5,666) (5,666)

Changes in the Group’s structure 0 0 0 (11,479) 0 0 0 56,616 45,137

Total comprehensive income 0 0 0 0 7,712 0 (1,938) (7,777) (2,003)

Equity as at Dec 31 2017 106,484 858,320 45 6,352 2,294 12,877 (1,938) 114,918 1,099,352

Equity as at Jan 1 2016 105,348 858,320 0 15,149 (2,134) (61,014) 43,952 72,583 1,032,204

Issue of shares 854 0 170 0 0 0 0 0 1,024

Share-based payments 0 0 0 1,917 0 0 0 0 1,917

Profit distribution 0 0 0 0 0 43,952 (43,952) 0 0


Changes in the Group’s structure 0 0 0 0 0 0 0 (1,754) (1,754)

Total comprehensive income 0 0 0 0 (3,284) 0 29,939 5,272 31,927

Equity as at Dec 31 2016 106,202 858,320 170 17,066 (5,418) (17,062) 29,939 71,745 1,060,962

Equity as at Jan 1 2015 104,744 858,320 0 12,568 397 454 (61,468) 64,776 979,791

Issue of shares 604 0 0 0 0 0 0 0 604

Share-based payments 0 0 0 2,581 0 0 0 0 2,581

Profit distribution 0 0 0 0 0 (61,468) 61,468 0 0


Total comprehensive income 0 0 0 0 (2,531) 0 43,952 12,268 53,689

Equity as at Dec 31 2015 105,348 858,320 0 15,149 (2,134) (61,014) 43,952 72,583 1,032,204

(PLN ‘000)


4. CONSOLIDATED STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Profit/(loss) before tax 3,847 33,307 56,206

Foreign exchange gains/(losses) (50,412) 42,591 (1,696)

Interest and profit distributions (dividends) 38,017 48,584 35,951

Loss/(gain) from investing activities 85,359 (54,118) (71,773)

Change in trade receivables (15) (427) (5,484)

Change in liabilities, net of borrowings 3,888 (2,875) 19,163

Valuation of employee share plan 765 3,022 3,531

Change in other assets (4,263) 892 (3,175)

Change in provisions 5,687 1,208 (8,216)

Impairment losses 3,558 3,881 6,815

Amortisation and depreciation 404 380 345

Other adjustments (903) 0 (3)

Total adjustments 82,085 43,139 (24,541)

Cash from operating activities 85,932 76,446 31,665

Income tax refunded/(paid) (516) (566) ( (398)

A. Net cash from operating activities 85,416 75,880 31,268

INVESTING ACTIVITIES

Interest on deposits 683 913 921

Disposal of investment property and inventories 250 21,011 5,917

Other cash provided by investing activities 43,557 0 0

Investments in property (122,901) (111,292) (289,789)

Purchase of shares (9,341) (7,286) (2,431)

Loans advanced (598) (6,872) (5,424)

Purchase of intangible assets, and property, plant and equipment

(15)

(96)

(1,361)

B. Net cash from investing activities (88,365) (103,623) (292,167)

FINANCING ACTIVITIES

Proceeds from issue of shares 135 0 0

Proceeds from issue of notes 152,910 14,980 46,115

Proceeds from borrowings 325,272 701,954 283,381

Dividends and other distributions to owners (5,666) (4,356) (4,461)

Interest and other cash used in financing activities (55,462) (72,135) (40,980)

Redemption of notes (108,886) 0 (65,000)

Repayment of borrowings, lease payments (268,578) (569,758) (14,134)

C. Net cash from financing activities 39,725 70,686 204,920

D. Total net cash flows 36,776 42,943 (55,979)

E. Net (decrease)/increase in cash and cash equivalents: 36,776 42,943 (55,979)

F. Cash and cash equivalents at beginning of period 156,550 113,607 169,586

G. Cash and cash equivalents at end of period 193,326 156,550 113,607

(PLN ‘000)


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’ these Finan-

cial Statements on the Group’s operations

The Management Board of Capital Park S.A. represents

that, to the best of its knowledge, these full-year consol-

idated 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 posi-

tion and financial performance. These financial state-

ments show a true view of the Group’s development,

achievements and position; they also include a descrip-

tion 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 Manage-

ment Board was aware of no facts or circumstances that

would indicate a threat to the Group continuing as a go-

ing concern in the 12 months after the reporting date, as

a result of any planned or forced discontinuation or ma-

terial downsizing of its current business.

Warsaw, March 23rd 2018

SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz President of the Management Board

Marcin Juszczyk Kinga Nowakowska Member of the Management Board Member of the Management Board

(PLN ‘000)


Representation of the Capital Park S.A.’s Manage-

ment Board on the auditor of the full-year consoli-

dated financial statements of the Group

The Management Board represents that the auditing

firm which audited the full-year consolidated financial

statements was appointed in compliance with the appli-

cable laws, and that both the auditing firm and the audi-

tors who performed the audit met the conditions re-

quired to issue an impartial and independent opinion on

the audited full-year consolidated financial statements,

in accordance with the applicable laws and professional

standards.

In accordance with the corporate governance standards

adopted by the parent’s Management Board, the audit-

ing firm was appointed by the Supervisory Board of Cap-

ital Park S.A. by way of Resolution No. 3/06/2017 of June

20th 2017 on appointment of the auditor. The Supervi-

sory Board selected the auditor with due regard for the

objectivity and independence of the appointment itself,

as well as of the performance of tasks of the auditor act-

ing on behalf of the auditing firm.

Warsaw, March 23rd 2018

SIGNATURES OF MANAGEMENT BOARD MEMBERS:

Jan Motz

President of the Management Board

Marcin Juszczyk Kinga Nowakowska

Member of the Management Board Member of the Management Board

(PLN ‘000)


6. GENERAL INFORMATION

6.1. PARENT

Name: Capital Park S.A.

Legal form: Joint-stock company (spółka akcyjna)

Registered office: ul. Klimczaka 1, 02-797 Warsaw, Poland

Country of incorporation: Poland

Principal business activities:

• activities of holding companies

• real estate property developement

• 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 Department of the National Court Register

National Court Register (KRS) number: 373001

Industry Identification Number (REGON) 142742125

6.2. DURATION OF THE GROUP

The parent (Capital Park S.A.) and the other Group entities were incorporated for an indefinite period.

6.3. PRESENTED PERIODS

These full-year consolidated financial statements contain

data for the period January 1st–December 31st 2017,

and comprise:

• Consolidated statement of financial position as at

December 31st 2017, showing total assets and to-

tal equity and liabilities of PLN 2,471,102 thou-

sand,

• Consolidated statement of profit or loss and other

comprehensive income for the period January 1st–

December 31st 2017, showing a net loss of PLN

1,938 thousand,

• Consolidated statement of changes in equity for

the period January 1st–December 31st 2017,

showing an increase in equity of PLN 38,390 thou-

sand,

• Consolidated statement of cash flows for the pe-

riod January 1st–December 31st 2017, showing a

net increase in cash of PLN 36,776 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 2016 and January 1st–Decem-

ber 31st 2015,

• in the consolidated statement of financial position

– as at December 31st 2016 and December 31st

2015,

• in the consolidated statement of changes in equity

– for the periods January 1st–December 31st 2016

and January 1st−December 31st 2015,

and have been prepared in accordance with Interna-

tional Accounting Standards and International Financial

Reporting Standards (IFRS).

(PLN ‘000)


6.4. MEASUREMENT OF ITEMS DENOMINATED IN FOREIGN CURRENCIES

The following exchange rates are used in these financial statements:

EUR/PLN Jan 1–

Dec 31 2017 Jan 1–

Dec 31 2016 Jan 1–

Dec 31 2015

Exchange rate effective for the end of the re-

porting period 4.1709 4.4240 4.2615

Average exchange rate in the reporting period 4.2447 4.3757 4.1848

6.5. AUDITING FIRM

PKF Consult Spółka z ograniczoną odpowiedzialnością Sp.k.

ul. Orzycka 6 suite 1B, 02-695 Warsaw, Poland

entered in the list of auditing firms under entry number 477

6.6. LAWYERS

Ishikawa Brocławik Sajna Sp.p. Adwokaci i Radcowie Prawni

30-004 Kraków, Al. Słowackiego 66

6.7. BANKS AND FINANCIAL INSTITUTIONS

Bank Polska Kasa Opieki S.A., Alior Bank S.A., Bank BGŻ

BNP Paribas Polska S.A., ING Bank Śląski S.A., Getin Noble

Bank S.A., Raiffeisen Bank Polska S.A., BOŚ Bank S.A.;

Hypo Noe Gruppe Bank AG, Bank of China (Luxembourg)

S.A. Polish Branch; ABN AMRO Bank N.V., ING Bank Śląski

S.A., Erste Group AG, Powszechna Kasa Oszczędności BP

S.A.

6.8. PARENT’S SHAREHOLDING STRUCTURE

At the reporting date as at December 31st 2017, shareholders holding 5% or more of total voting rights at the General

Meeting of the parent were as follows:

Shareholder Number of shares % ownership in-

terest Number of voting

rights % of total voting

rights

CP Holdings S.à r.l. 76,924,836 72.24% 76,924,836 70.41%

Jan Motz 2,849,283 2.68% 5,614,523 5.14%

Metlife 11,876,688 11.15% 11,876,688 10.87%

Other 14,832,743 13.93% 14,832,743 13.58%

Total 106,483,550 100.00% 109,248,790 100.00%

At the date of publishing of these consolidated financial statements the following shareholders held shares in the

parent:

Shareholder Number of shares % ownership inter-

est Number of voting

rights % of total voting

rights

CP Holdings S.à r.l. 76,924,836 72.17% 76,924,836 70.33%

Jan Motz 2,894,372 2.72% 5,659,612 5.18%

Metlife 11,751,000 11.02% 11,751,000 10.75%

Other 15,024,701 14.09% 15,024,701 13.74%

Total 106,594,909 100.00% 109,360,149 100.00%

(PLN ‘000)


6.9. STRUCTURE OF THE GROUP

a) The table below presents the subsidiaries and jointly controlled entities accounted for for consolidation pur-

poses as at December 31st 2017.

No. Name Registered office Principal business

Ownership interest

and voting rights held

(%)

1 CP Retail BV The Netherlands Activities of holding companies 100%

2 Dakota Investments Sp. z o. o. 1 Warsaw Real estate property development

and management 100%

3 SO SPV 50 Sp. z o.o. 2 Warsaw Real estate property development

and management 60%

4 Oberhausen Sp. z o. o.1 Warsaw Real estate property development

and management 100%

5 Real Estate Income Assets Fundusz Inwesty-cyjny Zamknięty Aktywów Niepublicznych 3

Warsaw Closed end investment fund 16%

6 CP Property Sp. z o. o. 5 Warsaw Activities of holding companies 16%

7 SO SPV 106 Sp. z o.o. 5 Warsaw Activities of holding companies 16%

8 CP Property 2 Sp. z o.o. 5 Warsaw Activities of holding companies 16%






14 CP Property S.à r.l. 5 Luxembourg Activities of holding companies 16%

15 CP Property S.C SP 6 Luxembourg Activities of holding companies 16%

16 CP Property 2 S.C SP 6 Luxembourg Activities of holding companies 16%



19 CP Property “SPV1” Sp. z o.o. 7 Warsaw Retail property management 16%

20 CP Property Sp. z o. o. “SPV2” SK 7 Warsaw Retail property management 16%


22 CP Property “SPV4” Sp. z o.o. 7 Warsaw Retail property management 16%


24 CP Property SPV6 Sp. z o.o. 7 Warsaw Retail property management 16%

25 Real Estate Income Assets II Fundusz Inwesty-cyjny Zamknięty Aktywów Niepublicznych 4

Warsaw Closed-end investment fund 15%

26 Capital Park Racławicka Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

27 CP Retail (“SPV1”) Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

28 Marcel Investments Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

29 Nerida Investments Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

30 Orland Investments Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

31 Sagitta Investments Sp. z o. o. 8 Warsaw Real estate property development

and management 15%

(PLN ‘000)


32 Hazel Investments Sp. z o.o. Warsaw Real estate property development

and management 100%

33 Capital Park Gdańsk Sp. z o.o. Warsaw Real estate property development

and management 100%

34 Diamante Investments Sp. z o.o. Warsaw Real estate property development

and management 100%

35 Alferno Investments Sp. z o.o. Warsaw Development of real estate projects 100%

36 Aspire Investments Sp. z o.o. Warsaw Real estate property development

and management 100%

37 CP Development S.à r.l. Luxembourg Activities of holding companies 100%

38 ArtN Sp. z o. o. 9 Warsaw Development of real estate projects 100%

39 Sporty Department Store Sp. z o.o. Warsaw Retail sale 100%

40 Fundacja Otwartego Muzeum Dawnej Fabryki Norblina 10

Warsaw Foundation 100%

41 CP Management Sp. z o.o. Warsaw Real estate property development

and management of Group’s projects

100%

42 Capital Park Opole Sp. z o.o. 10 Warsaw Real estate property development

and management 100%

43 Elena Investments Sp. z o.o. 10 Warsaw Real estate property development

and management 100%

44 DT-SPV 12 Sp. z o.o. 10 Warsaw Real estate property development

and management 100%

45 Silverado Investments Sp. z o.o. 12 Warsaw Real estate property development

and management 100%

46 Vera Investments – Bis Sp. z o.o. 13 Warsaw Real estate property development

and management 100%

47 Capital Park Kraków Sp. z o.o. Warsaw Real estate property development

and management 100%

48 IPOPEMA 141 Fundusz Inwestycyjny Za-mknięty Aktywów Niepublicznych 14

Warsaw Closed-end investment fund 100%

49 Roryd Investments Sp. z o.o. 15 Warsaw Real estate property development

and management 100%

50 Marlene Investments Sp. z o.o. 16 Warsaw Real estate property development

and management 100%

51 Sander Investments Sp. z o.o. Warsaw Development of real estate projects 100%

52 Patron Wilanow S.à r.l. 17 Luxembourg Activities of holding companies 50%

53 Rezydencje Pałacowa Sp. z o.o. 18 Warsaw Development of real estate projects 50%

54 RM1 Sp. z o. o. 18 Warsaw Real estate property development

and management 50%

55 Emir 30 Sp. z o.o. Warsaw Real estate property development

and management 100%

56 CP Retail (SPV2) Sp. z o.o. Warsaw Real estate property development

and management 100%

57 CP Invest Spółka Akcyjna Warsaw Activities of holding companies 100%

Notes: 1 Subsidiaries of CP Retail B.V. 2 Jointly controlled throught CP Retail B.V. in the JV with Akron

Group. The Group holds 60% of shares in SO SPV 50 Sp. zo.o. 3 The Group holds 16% of the fund’s certificates; however,

pursuant to IFRS 10 and, in particular, due to the indirect control exercised by Capital Park SA, the Group cosolidates REIA FIZAN and its assets.

4 The Group holds 15% of the fund’s certificates; however, pursuant to IFRS 10 and, in particular, due to the indirect control exercised by Capital Park SA, the Group cosolidates REIA II FIZAN and its assets.

5 Subsidiaries of Real Estate Income Assets Fundusz In-westycyjny Zamknięty Aktywów Niepublicznych. The Group indirectly holds 16% of shares in the company’s share capi-tal.

6 Subsidiaries of SO SPV 106 sp. z o.o., CP Property 2 Sp. z o.o., CP Property 3 Sp. z o.o., CP Property 4 Sp. z o.o., CP Property 5 Sp. z o.o.

7 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 Company holds indirectly 16% of the share capital in these companies; how-ever, it has full power to control the entities under relevant management contracts.

8 Subsidiaries of Real Estate Income Assets II Fundusz In-westycyjny Zamknięty Aktywów Niepublicznych. The Group indirectly holds 15% of shares in the company’s share captal.

9 Subsidiary of CP Development S. à r. l. 10 Subsidiaries of CP Management Sp. z o.o.

(PLN ‘000)


11 Subsidiary of Vera Investments – Bis Sp. z o.o. and CP Man-agement Sp. z o.o.

12 Subsidiary of DT-SPV 12 Sp. z o. o. 13 Subsidiary of CP S.A. and CP Management Sp. z o.o. 14 Subsidiary of Capital Park Kraków Sp. z o. o. 15 Subsidiaries of IPOPEMA 141 Fundusz Inwestycyjny Za-

mknięty Aktywów Niepublicznych 16 Subsidiary of Roryd Investment Sp. z o.o.

17 The Company 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.

Subsidiaries of Patron Wilanow S. à r.l. The company directly

holds 50% of the share capital and a 64% share in profits of:

Rezydencje Pałacowa Sp. z o.o.

Basis of full consolidation of the assets, liabilities, profit or

loss of:

1. the REIA FIZAN portfolio, i.e. the subsidiaries of

CP Retail B.V.: CP Property Sp. z o.o. SO SPV 106

Sp. z o.o. CP Property “SPV 1” Sp. z o.o.; CP

Property Sp. Z o. o. “SPV 2” SK; CP Property Sp.

z o. o. “SPV 3” SK; CP Property “SPV 4” Sp. z

o.o.; CP Property Sp. z o. o. “SPV 5” SK; CP Pro-

perty “SPV 6” Sp. z o.o., 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.; CP Pro-

perty 2 Sp. z o.o., CP Property 3 Sp. z o.o., CP

Property 4 Sp. z o.o., CP Property 5 Sp. z o.o.,

CP Property 6 Sp. z o.o., CP Property 7 Sp. z o.o.

and Real Estate Income Assets Fundusz Inwe-

stycyjny Zamknięty Aktywów Niepublicznych

(“FIZAN I”).

2. the REIA II FIZAN portfolio, i.e. the subsidiaries

of CP Retail B.V.: Nerida Investments Sp. z o.o.,

Marcel Investments Sp. z o.o., Orland Invest-

ments Sp. z o.o., Sagitta Investments Sp. z o.o.,

CP Retail (“SPV1”) Sp. z o.o., and Capital Park

Racławicka Sp. z o.o and Real Estate Income As-

sets II Fundusz Inwestycyjny Zamknięty Akty-

wów Niepublicznych II (“FIZAN II”).

In 2016 and 2017, CP Management Sp. z o.o. (a subsidiary

of Capital Park S.A.) signed agreements with the special

purpose vehicles for the provision of property manage-

ment and support services, and for management of the

special purpose vehicles owned by REIA FIZAN and REIA

II FIZAN.

Under the property management contracts, CP Manage-

ment Sp. z o.o is indirectly obliged to ensure the contin-

ued operation of the special purpose vehicles in an or-

derly manner, as the scope of the support and

management services includes:

• Managing the companies’ business;

• Managing the companies’ liquidity and bank

accounts; cash flow planning/ maintaining div-

idend capacity;

• Managing the projects’ profitability;

• Developing business plans and budgets;

• Conducting negotiations with third parties, in-

cluding trading partners;

• Managing the work of real estate agents, advis-

ers, appraisers, architects, bank monitors, etc.;

• Managing debt instruments;

• Managing financing/refinancing of the pro-

jects, including negotiating with banks and co-

ordinating related processes.

In accordance with an agreement of November 7th 2016

on transfer of responsibilities for the management the

REIA FIZAN fund executed by and between Open Finance

TFI S.A. and Penton TFI S.A. (currently Mount To-

warzystwo Funduszy Inwestycyjnych S.A.) and pursuant

to the provisions of the articles of association of REIA II

FIZAN, the fund is managed by Penton TFI S.A. (currently

Mount Towarzystwo Funduszy Inwestycyjnych S.A.).

As CP Management Sp. z o.o is owned by Capital Park

S.A., the obligations and responsibilities described above

result in an increased exposure of the Capital Park Group

to the volatility of the funds’ financial results but at the

same time provide more incentive to hold sufficient

rights to exercise control over the special purpose vehi-

cles. Capital Park S.A. owns indirectly the certificates in

REIA I FIZAN I and REIA II FIZAN through its subsidiary CP

Retail B.V. In summary and in accordance with a consoli-

dation rules the equity risk is recognized and assigned to

Capital Park. S .A.

Since 2017, there have also existed personal links be-

tween Mount TFI and Capital Park S.A. providing further

rights for exercise of control over the funds.

In summary, the provisions of the agreements and other

legal instruments provide grounds to assume that the

management of the funds’ significant actions is not car-

ried out solely by the exercise of voting rights but also by

other contractual arrangements.

As a consequence, the parent consolidates the equity, as-

sets and liabilities of the above-mentioned entities with

the full method, and discloses non-controlling interests

corresponding to the part of the assets, liabilities, profit

or loss which is attributable to the fund certificates sold

to investors outside the Group.

Method of accounting for interests in jointly controlled

entities (equity method in accordance with IAS 28), i.e. Pa-

tron Wilanów S. à r. l. Rezydencje Pałacowa Sp. z o.o. RM

1 Sp. z o.o. and SO SPV 50 Sp. z o.o.

(PLN ‘000)


The Group’s receivables from, liabilities to, and transac-

tions with these entities are not eliminated and are dis-

closed in the consolidated statement of financial position

and consolidated statement of profit or loss.

Changes in the Group’s structure during the reporting period, i.e. January 1st−December 31st 2017:

Sale of REIA II FIZAN certificates

As a result of sale of investment certificates of Real Estate

Income Assets II FIZAN carried out by CP Retail B.V., a

subsidiary, in 2017, the Group sold 142,808 fund certifi-

cates, i.e. 85% of the total number of the certificates,

with total net proceeds of PLN 43.6m. As at December

31st 2017, the Group’s interest in the fund was 15%.

Purchase of shares in Oberhausen Sp. z o.o.

On April 27th 2017, CP Retail B.V. of the Netherlands, a

subsidiary of Capital Park S.A., acquired a 47% interest in

Oberhausen Sp. z o.o., the owner of the Zaspa shopping

centre in Gdańsk. Thus, as of the date of the agreement,

the Capital Park Group holds 100% of the share capital of

Oberhausen Sp. z o.o. and has full control over the com-

pany.

In accordance with IFRS 3, the Group measured the ac-

quiree’s net assets. The net assets of the acquired entity

identified as at the moment of obtaining control were

measured at PLN 9,264 thousand. The total purchase

price of shares in Oberhausen Sp. z o.o., which the Group

acquired in 2015 (53% of all shares) and in 2017 (the re-

maining 47%), was PLN 5,833 thousand. Total gain from

bargain purchase calculated for both parts of the acqui-

sition was PLN 4,507 thousand.

Change of holding in IPOPEMA 141 Fundusz Inwestycyjny

Zamknięty Aktywów Niepublicznych

On May 5th 2017, Capital Park S.A. passed a resolution to

increase the share capital of Capital Park Kraków Sp. z

o.o., a subsidiary. The capital was increased through con-

tribution of all shares held in Roryd Investments Sp. o.o.,

which indirectly owned a land property in the Harsz com-

mune in the Mazury lake district. On May 25th 2017, CP

Kraków Sp. z o.o. acquired 21,591 investment certificates

issued by Ipopema 141 FIZAN in exchange for a non-cash

contribution in the form of a 100% interest in Roryd In-

vestments with a value of PLN 21,700 thousand.

Changes in the structure of REIA FIZAN

As part of the continued efforts to change (simplify) the

fund’s structure by exiting investments in the SCSp com-

panies and investing unlocked cash in shares and debt in-

struments of companies under commercial law, formal

steps have been taken to achieve a one-level structure of

the fund’s holdings. In a subsequent stage of the process,

on June 7th 2017, Real Estate Income Assets FIZAN ac-

quired 100% interests in CP Property 2 (formerly: SO SPV

131) Sp. z o.o., CP Property 3 (formerly: SO SPV 132) Sp.

z o.o., CP Property 4 (formerly: SO SPV 133) Sp. z o.o., CP

Property 5 (formerly: SO SPV 134) Sp. z o.o., CP Property

6 (formerly: SO SPV 135) Sp. z o.o., CP Property 7 (for-

merly: SO SPV 136) Sp. z o.o., each with a share capital of

PLN 5 thousand. Then, on June 30th 2017, due to diver-

sification requirements, the shares of individual SCSp

companies were transferred to separate companies in-

corporated under commercial law.

The planned activities aim to simplify the corporate

structure, by exiting from investments in Luxembourgian

companies so that the Fund ultimately has a one-level

structure, is the direct owner of all shares in Polish lim-

ited liability companies owning real estate.

6.10. REPRESENTATIONS OF THE MANAGEMENT BOARD

In compliance with the requirements laid down in the

Regulation of the Minister of Finance on current and pe-

riodic reports to be published by issuers of securities and

conditions for recognition as equivalent of information

whose disclosure is required under the laws of a non-

member state, dated February 19th 2009 (Dz. U. of 2014,

item 133, as amended) (the “Regulation of the Minister

of Finance of February 19th 2009 on current and periodic

information”), the parent’s Management Board hereby

represents that, to the best of its knowledge, these full-

year consolidated financial statements and the compar-

ative 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, fi-

nancial condition and financial performance.

The parent’s Management Board also represents that

the Directors’ Report on the Group’s operations gives a

true view of the Group’s development, achievements

and position, including a description of key threats and

risks.

These full-year consolidated financial statements were

prepared using the accounting policies, in accordance

with the International Accounting Standards, Interna-

tional Financial Reporting Standards and related inter-

pretations issued in the form of the European Commis-

sion’s regulations, and their scope is compliant with the

requirements set forth in the Regulation of the Minister

of Finance of February 19th 2009 on current and periodic

reports to be published by issuers of securities. These fi-

nancial statements cover the period from January 1st to

(PLN ‘000)


December 31st 2017 and the comparative period from

January 1st to December 31st 2016 and 2015.

The Management Board represents that the auditing

firm which audited the full-year consolidated financial

statements was appointed in compliance with the appli-

cable laws, and that both the auditing firm and the audi-

tors who performed the audit met the conditions re-

quired to issue an impartial and independent opinion on

the audited full-year consolidated financial statements,

in accordance with the applicable laws and professional

standards.

In accordance with the corporate governance standards

adopted by the parent’s Management Board, the audit-

ing firm was appointed by the Supervisory Board of Cap-

ital Park S.A. by way of Resolution No. 3/06/2017 of June

20th 2017 on appointment of the auditor. The Supervi-

sory Board selected the auditor with due regard for the

objectivity and independence of the appointment itself,

as well as of the performance of tasks of the auditor act-

ing on behalf of the auditing firm.

6.11. APPROVAL OF FINANCIAL STATEMENTS

These consolidated financial statements were authorised for issue and signed by the Parent’s Management Board on

March 23rd 2018.

Warsaw, March 23rd 2018 Warsaw, March 19th 2014

SIGNATURE OF THE PERSON WHO PREPARED THE FINANCIAL STATEMENTS:

Małgorzata Koc Chief Accountant

SIGNATURES OF MANAGEMENT BOARD MEMBERS:

Jan Motz

Kinga Nowakowska

President of the Management Board Member of the Management Board

Marcin Juszczyk

Member of the Management Board

(PLN ‘000)


7. SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED FINANCIAL STATE-

MENTS

7.1. COMPLIANCE


prepared in accordance with the International Account-

ing Standards, International Financial Reporting Stand-

ards and related interpretations issued in the form of the

European Commission’s regulations (“EU IFRSs”).

EU IFRS covers the standards and interpretations ac-

cepted by the International Accounting Standards Board

(IASB) and the International Financial Reporting Interpre-

tations Committee (IFRIC), approved for use in the EU.

The accounting policies applied to prepare the 2017 full-

year consolidated financial statements are consistent

with the policies applied to draw up the 2016 full-year

consolidated financial statements, except for the follow-

ing new or amended standards and interpretations en-

dorsed by the European Union and effective for annual

periods beginning on or after January 1st 2017. In 2017,

the parent adopted all the new and approved standards

and interpretations issued by the International Account-

ing Standards Board and the Interpretations Committee

and endorsed by the EU, which apply to the parent’s

business and are effective for reporting periods begin-

ning on or after January 1st 2017.

7.2 PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The data contained in these full-year consolidated finan-

cial 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 have been pre-

pared applying the historical cost convention, except for

investment property and derivative financial instruments

measured at fair value through profit or loss, and liabili-

ties under notes in issue, bank borrowings and leases

measured at amortised cost.

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 con-

sideration 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 inves-

tee. 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 con-

trol is temporary. The Group applies the acquisition

method to account for business combinations. The con-

sideration transferred in a business combination is meas-

ured at fair value, calculated as the sum of the acquisi-

tion-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 ac-

quired 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.

The Group ceases to consolidate an entity from the mo-

ment it loses control of the entity. The parent’s control

over a subsidiary ceases when it loses the power to gov-

ern 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.

(PLN ‘000)


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 11.

The Group applies these policies in connection with the

changes in IFRS 10, effective for reporting periods begin-

ning on or after January 1st 2013. The change of presen-

tation applies to all reporting periods presented, starting

from the earliest one.

Shares and investment certificates held by non-control-

ling interests and transactions with non-controlling inter-

ests

Shares and investment certificates held by non-control-

ling interests include shares and investment certificates

in consolidated companies held by non-Group entities.

Non-controlling interests are measured at the acquisi-

tion-date net assets of the related entity attributable to

non-Group entities. Identified non-controlling holdings

of shares and investment certificates in net assets of con-

solidated subsidiaries are recognised in the Group’s

statement of financial position under equity separately

from the parent’s ownership interest in such net assets.

Non-controlling holdings of shares and investment certif-

icates in net assets of a consolidated entity are deter-

mined for each reporting date; these include:

• the value of shares and investment certificates held

by non-controlling interests at the original combina-

tion date, calculated in accordance with IFRS 3,

• changes in equity attributable to shares and invest-

ment certificates held by non-controlling interests

from the combination date to the reporting date.

Profit and loss and each component of other comprehen-

sive income are attributed to owners of the parent and

non-controlling interests. Total comprehensive income is

attributed to owners of the parent and non-controlling

interests, even if as a result the value of the non-control-

ling interests becomes negative.

Consolidated companies

These consolidated financial statements for 2017 cover

the entities listed in Section 6.9 of these consolidated fi-

nancial 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 FIZAN and REIA II FIZAN

(listed in Section 6.9 above), in which the Group holds

16% and 15% equity interests, respectively, equity hold-

ings of non-controlling interests were determined.

In the case of the Company’s jointly controlled entities,

i.e.: Patron Wilanów S. à r. l. Rezydencje Pałacowa Sp. z

o.o. RM 1 Sp. z o.o. and SO SPV 50 Sp. z o.o., the Group

accounts for the holdings with the equity method, which

means that it only recognizes profits/(losses) of those

companies (in proportion to the Group’s share in finan-

cial results of the companies).

The basis of consolidation of the subsidiaries’ financial

data is presented in detail in Section 6.9 of these consol-

idated financial statements.

7.4 SIGNIFICANT ACCOUNTING POLICIES

Investment property

Investment property includes land and buildings, or parts

thereof, owned, jointly owned, or held in perpetual usu-

fruct by a Group Company and used to generate eco-

nomic benefits from their fair value growth or rental in-

come (or both). Investment property measured at fair

value also includes investment property under construc-

tion, i.e. property held for rent and not yet placed in ser-

vice, as well as projects that the Company plans to imple-

ment in the coming years, as such projects may be sold

at any stage of project execution.

Properties which are held partially for capital apprecia-

tion or to earn rentals and partially used for the Com-

pany’s own needs as owner-occupied property are ac-

counted for in line with the policies applicable to the

prevailing portion (no less than 90% of the area) of the

property, in accordance with the materiality principle.

A property is classified as investment property upon ini-

tial recognition. An item may be reclassified from invest-

ment property to another asset category based on the

Management Board’s decision to change the intended

purpose or function of the asset. Investment property is

recognised as an asset if it is probable that future eco-

nomic 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, includ-

ing transaction costs, i.e. costs directly related to the pur-

chase transaction (legal fees, commission fees, taxes and

charges relating to the purchase of property).

(PLN ‘000)


The value of investment property which includes a self-

constructed building is established in accordance with

the Polish Accounting Act/IFRS 16 (property, plant and

equipment), including subsequent outlays.

As at the date of the administrative decision to grant an

occupancy permit, the cost of production is the sum of

the entire expenditure on project construction until that

time, and the amount is the property’s value for the pur-

pose of tax depreciation. In particular, the expenditure

includes:

• Direct construction costs, design 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,

• Finance costs of external financing, including in par-

ticular interest on credit facilities, loans, notes and

bonds, to the extent they finance expenditure on

construction of the property, realised foreign ex-

change differences on foreign-currency liabilities re-

lated to the financing of investment expenditure,

and fees related to the raising of financing for in-

vestment project.

Any subsequent expenditure that increases the value of

the entire building (e.g. installation of modern alarm sys-

tems) increases the gross value of such property and thus

increases the tax depreciation base.

As buildings are constructed on a build-to-suit basis, ob-

taining the occupancy permit does not automatically ren-

der a property fit for use. In line with the established

business practice, the fit-out to suit the needs of a given

tenant involves construction work on indoor systems,

wall and floor finishing, and arranging the common areas,

sanitary facilities and circulation routes.

As a result, costs of finishing a rental area for a particular

tenant or several tenants, as well as agent fees and con-

tributions paid for tenant acquisition, even if they are in-

curred after the date of issue of the permit, are recog-

nised as expenditure on the property. These costs are

recorded separately from the expenditure on the entire

property, as they are not included in the tax depreciation

base. They are charged to the property’s running costs in

proportion to the term of the relevant lease contracts

with the tenants.

A building is considered fully ready for use when its entire

space is fitted out to suit the needs of the tenants.

Finance costs, in particular interest on construction

loans, which relate only to the financing of the finishing

of rental space and tenant acquisition fees, increase the

value of the building until it is fully fit for use or until con-

version of the building loan into an investment facility,

whichever comes first.

Expenditure on the finishing of rental space (i.e. space

that was fitted out for the needs of the previous tenant)

as well as tenant acquisition fees incurred after the prop-

erty became fully fit for use increase the property value

provided they are incurred after the date of valuation by

an appraiser and before the date of the next valuation,

that is most often during the financial year. Total Capex

so determined cannot exceed the residual value of the

property determined by the appraiser.

Subsequent to initial recognition, at least for each report-

ing date, investment property is measured at fair value,

reflecting market conditions prevailing 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 trans-

action between market participants at the measurement

date. Fair value reflects, in particular, rental income from

existing lease contracts, reasonable and justified expec-

tations 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 rec-

ognised in profit or loss in the period in which they arise.

Properties for which sale agreements have been con-

cluded, or for which the purchase price has been con-

firmed 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 ap-

praisers for balance-sheet purposes,

• managerial valuations and in-house appraisals of

properties.

To determine the fair value of the property, independent

appraisers apply valuation methods most appropriate for

the valuation of the property. These are:

1. Income approach, investment method, discounted

cash flow (DCF) model – applied to investment prop-

erty that generates variable rental income and con-

sists in aggregating discounted cash flows for an

adopted forecast period and residual value of the

property,

2. Income approach, investment method, direct capital-

isation model – it is applied to investment property

that generates fixed rental income; the value of in-

vestment property is calculated as the product of an-

nual income that can be generated by the property

and the capitalisation rate,

(PLN ‘000)


3. Comparison approach (pairwise comparison or aver-

age price adjustment) − used to value investment

property for which data on comparable sale transac-

tions on a given market is available, as well as land,

4. Mixed approach, residual method – this approach is

generally used to determine the value of investment

property under construction, which is calculated as

the property’s target value (estimated based on the

income approach or comparison approach) less any

future capital expenditure to be incurred as at the val-

uation date and estimated future profit.

Property valuations are updated at least once a year at

the end of every financial year. If at the end of an interim

reporting period the valuations referred to above are not

updated, the value of investment property measured

with the discounted cash flow method is increased to in-

clude the amount of investment expenditure made on

the property since its most recent valuation date, and in-

creased or decreased, as appropriate, depending on ex-

change rate movements of the euro, which is the meas-

urement currency for investment property.

The effects of fair value measurement of investment

property are taken to profit or loss for the year in which

the measurement was made and are presented by the

Group in the operating part of its statement of profit or

loss and other comprehensive income.

Investment property is derecognised upon its sale or

when it is permanently withdrawn from use, if no future

economic benefits are expected from its sale. All gains or

losses arising from sale or discontinuation of use of in-

vestment property, that is the difference between net

proceeds from sale and the carrying amount of the asset,

are recognised in profit or loss for the current period.

Shares in jointly controlled entities

Investments in jointly controlled entities are accounted

for using the equity method in accordance with IAS 28.

As at the date of acquisition, shares are measured at the

amount equivalent to the share in the equity of a jointly

controlled entity determined as at the date of acquisition

or registration of shares issued due to a share capital or

statutory reserve funds increase. The difference be-

tween the value of acquired shares so determined and

the payments made for acquired or subscribed for shares

is recognised as either goodwill (if the price paid is higher

than the value of acquired shares) or as a gain from bar-

gain purchase (if the price paid is lower than the value of

acquired shares) negative goodwill.

Gain from a bargain purchase is charged to profit or loss

on the purchase date. Goodwill is tested for impairment

at each reporting date.

The Company measures the investments at least at each

reporting date based on the net asset value of each

jointly controlled entity, taking into account the portion

of share capital or the rights to share in profits attributa-

ble to the Group.

The effect of revaluation of the investments, that is the

difference between the current net asset value in the

part attributable to the Group and the value as at the

previous reporting date, are recognised under the

Group’s profit or loss.

Intangible assets

Intangible assets include identifiable non-monetary as-

sets without physical substance, including in particular:

• economic copyrights, neighbouring rights,

• licences (including software licences),

• permits and licences,

• rights to inventions, patents, trademarks, utility mod-els and ornamental design,

• know-how,

• goodwill,

• prepayments for intangible assets.

An intangible asset may be purchased or self-created but

it is recognised if and only if:

1. it is probable that future economic benefits that are

attributable to the asset will flow to the Company; and

2. the cost of the asset can be measured reliably.

Initially, intangible assets are measured at cost. As at the

reporting date, intangible assets are measured at initial

value less amortisation and impairment losses, if any; the

initial value is:

• for goodwill – the initial value determined in accord-

ance with IFRS 3;

• for other intangible assets – their cost.

On recognition of an intangible asset, the Company as-

sesses whether its useful life is finite or indefinite and, if

finite, it determines the amortisation method and rate.

Scheduled amortisation charges for items of intangible

assets are recognised as amortisation expense in accord-

ance with to the following rules:

• amortisation charges are calculated monthly, on a

straight-line basis;

• amortisation charges are made starting from the

month following the month in which the asset is avail-

able for use, until the end of the month in which the

total amortisation charges are equal to the asset’s in-

itial value, or in which the intangible asset is no longer

used or is classified as held for sale in accordance with

IFRS 5;

• amortisation charges for intangible assets are deter-

mined based on expected useful lives of the assets,

(PLN ‘000)


• intangible assets with initial unit value of less than PLN

2 thousand may be amortised on a one-off basis at the

rate of 100% at the time they are placed in service.

The Company applies the following useful lives for intan-

gible assets:

• software licences – 2 years;

• other intangible assets – 5 years.

The amortisation period and the amortisation method

are reviewed at least as at each reporting date. Any

changes are recognised under intangible assets prospec-

tively, i.e. with effect from the first day of the next finan-

cial year.

At the end of each reporting period, the Company tests

intangible assets for impairment in accordance with IAS

36. If there is an indication of impairment, the Company

determines the amount of impairment loss on the asset.

Impairment losses are recognised immediately in the

statement of profit or loss under other expenses.

Goodwill and intangible assets with indefinite useful lives

are not amortised. They are tested for impairment at the

end of each financial year and each time when there is

an indication of impairment.

On disposal of an intangible asset, its initial value and ac-

cumulated amortisation are derecognised, and the

amount from disposal is recognised in the statement of

profit or loss under other income or other expenses. Gain

or loss on disposal of an intangible asset is presented as

net gain or loss.

Other financial assets (financial instruments other than

derivatives)

Loans, receivables and bank deposits are recognised at

the date of origination. All other financial assets (includ-

ing assets measured at fair value through profit or loss)

are recognised at the transaction date, on which the

Company becomes a party to a mutual liability pertaining

to a given financial instrument.

The Company derecognises a financial asset upon the ex-

piry of its contractual rights to cash flows from that asset

or upon transfer of those rights in a transaction transfer-

ring substantially all material risks and rewards of owner-

ship of the asset. Any interest in the transferred financial

asset which is created or remains to be owned by the

Company is disclosed as an asset or liability.

A financial asset and a financial liability are offset and the

net amount is presented in the statement of financial po-

sition when, and only when, the Company has a legally

enforceable right to set off the recognised amounts or

intends either to settle on a net basis, or to realise the

asset and settle the liability simultaneously.

The Company classifies financial instruments other than

financial derivatives under the following categories: fi-

nancial assets at fair value through profit or loss, financial

assets held to maturity, loans and receivables, and finan-

cial assets available for sale.

Financial assets at fair value through profit or loss

Financial assets are classified as an investment measured

at fair value through profit or loss if they are held for trad-

ing or were designated as measured at fair value through

profit or loss on initial recognition. Financial assets are

designated as assets at fair value through profit or loss if

the Company actively manages such investments and

makes decisions concerning their purchase or sale based

on their fair value. Transaction cost relating to an invest-

ment is recognised in profit or loss of the period at the

time it is incurred.

Financial assets at fair value through profit or loss are

measured at fair value, and changes in their fair value are

recognised in profit or loss of the period. All profits or

losses relating to such investments are recognised in

profit or loss of the period.

Financial assets at fair value through profit or loss include

equity securities that would otherwise be classified as

held for sale.

Financial assets held to maturity

If the Company intends and is able to hold debt securities

to maturity, such debt securities are classified as financial

assets held to maturity. Financial assets held to maturity

are initially recognised at fair value plus directly attribut-

able transaction cost.

Subsequently, financial assets held to maturity are meas-

ured at amortised cost with the use of the effective inter-

est rate method, less impairment losses, if any. If a larger-

than-insignificant amount of financial assets held to ma-

turity is disposed of or reclassified earlier than close to

their maturity, the Company reclassifies all investments

held to maturity to investments available for sale and un-

til the end of a given financial year and throughout the

next two financial years the Company does not recognise

purchased investments as financial assets held to ma-

turity.

Financial assets held to maturity include bonds and

notes.

Loans and receivables

Loans and receivables are financial assets with deter-

mined or determinable payments, which are not listed on

an active market. Such assets are initially recognized at

fair value plus an immediately attributable transaction

costs.

(PLN ‘000)


Subsequently, loans and receivables are measured at

amortised cost with the use of the effective interest rate

method, less impairment losses, if any.

Loans and receivables also include cash and cash equiva-

lents, and trade receivables.

At least at the end of every financial year all financial as-

sets, in particular loans, are reviewed in accordance with

the prudent valuation principle.

Loan impairment indicators include:

• Default on scheduled interest or loan repayments af-

ter lapse of the payment date,

• Concerns about the borrower’s financial standing

which may cause difficulties in repayment of the loan

and interest,

• Borrower’s negative net asset value,

• information on the borrower entering bankruptcy

proceedings.

If any of the above indicators are identified, the recover-

able amount of the receivables should be determined,

which in principle corresponds to their fair value. The dif-

ference between the carrying amount and newly deter-

mined fair value is the amount of the impairment loss.

Impairment losses are recognised under finance costs in

the statement of profit or loss and other comprehensive

income in the period in which the fair value of the receiv-

ables is determined.

If following a measurement of receivables in a subse-

quent reporting period it occurs that the impairment in-

dication no longer exists, the recognised impairment loss

is reversed. The resulting gains are recognised under

other finance income.

Financial assets available for sale

Financial assets available for sale are non-derivative fi-

nancial assets that are designated as available for sale or

are not classified in any of the categories of financial as-

sets specified above.

Subsequent to initial recognition, financial assets availa-

ble for sale are measured at fair value, and changes in the

fair value other than impairment losses and exchange dif-

ferences on available-for-sale debt instruments are rec-

ognised in other comprehensive income and presented

in equity as fair value reserve. When an investment is de-

recognised, the gain or loss accumulated in equity is re-

classified to profit or loss of the period.

Available-for-sale financial assets include equity and debt

securities.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, cash at

banks, cash in transit, as well as bank deposits, other se-

curities, and interest on financial assets, which are paya-

ble or due within three months from the date of their re-

ceipt, issue, purchase or placement.

Domestic assets are recognised at nominal value during

the financial year and as at the reporting date. The nom-

inal value includes interest accrued or deducted by the

bank, if any.

As at the reporting date, assets denominated in foreign

currencies are translated at the average rate quoted for

a given currency by the National Bank of Poland for that

date.

During the financial year, inflows to and outflows from

foreign-currency accounts are measured in accordance

with the following rules:

• Completed transactions involving sale or purchase of

a foreign currency are accounted for at the buy or sell

rate used in the transaction;

• if there is no purchase or sale of a foreign currency,

the inflows to and outflows from a foreign currency

account are measured using the average rate quoted

by the National Bank of Poland for the day preceding

the transaction date,

• a decrease in foreign-currency cash in foreign cur-

rency accounts and in hand is measured using the

FIFO method.

Trade receivables

In these financial statements, receivables are classified as

short-term and long-term. Receivables maturing in more

than 12 months after the reporting date are disclosed as

non-current receivables, and those maturing sooner or

held for trading are presented as current receivables.

At the acquisition date or the date when a receivable oth-

erwise arises, short-term receivables are recognised at

their nominal amounts, i.e. their amounts as determined

on the origination date. At the reporting date, receiva-

bles are measured at the amount of payment due, net of

impairment losses, if any.

Impairment allowances are estimated according to the

following rules:

• on receivables from debtors that have been placed in

liquidation or declared bankrupt – up to the receiva-

ble amount in respect of which no guarantee or other

security has been provided and which has been noti-

fied to a liquidator or judge commissioner in bank-

ruptcy proceedings;

• on receivables from debtors in the case of whom a

bankruptcy petition has been dismissed on the

grounds that the debtor’s assets are insufficient to

cover the costs of the bankruptcy proceedings − in the

full amount of the receivable;

(PLN ‘000)


• on receivables which are questioned by debtors and

which are past their due dates, where, based on an

assessment of the debtor’s assets and financial stand-

ing, the debtor is unlikely to pay the receivable in the

full contractual amount – up to the receivable amount

in respect of which no guarantee or other security has

been provided;

• on receivables which are equivalent to an increase in

receivables in respect of which impairment losses

have been recognised − up to such amounts, until re-

ceived or written off;

• on receivables which are past due and in the case of

which there is considerable risk that they will not be

collected, as determined by the Management Board

on a case-by-case basis – in a reliably estimated

amount;

• on receivables which are not past due but in the case

of which there is considerable risk that they will not

be collected, as determined by the Management

Board on a case-by-case basis – in a reliably estimated

amount;

• in line with the prudence principle, an impairment

loss equal to 100% of the value is recognised on any

interest accrued on past-due receivables from cus-

tomers; such impairment is recognised immediately

as interest accrues and is posted in the accounting

books (the impairment loss is charged to finance

costs).

Revaluation write-downs on receivables, depending on

the type of receivable, are classified as other expenses or

finance costs.

Write-offs of receivables that are past due, time barred

or uncollectible reduce the amount of impairment losses

previously recognised on such receivables. If no impair-

ment losses have been recognised on such receivables or

the impairment losses that have been recognised were

lower than the full amount of the receivables, the write-

offs of receivables are charged to other expenses or fi-

nance costs, as appropriate.

If the reason for a write-down of a receivable ceases to

exist, then the amount that was previously written off in-

creases the value of the receivable, as well as other in-

come or finance income.

Impairment losses are presented in other expenses or fi-

nance costs, depending on the type of receivable that

they refer to.

On initial recognition, foreign-currency receivables are

measured at the average rate quoted by the NBP for the

date preceding the receivable origination date (e.g. the

invoice date). As at the reporting date, foreign-currency

receivables are measured at the average rate quoted by

the NBP for the reporting date.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are identified and rec-

ognised on a net basis, and are measured at the end of

every quarter.

Deferred tax assets are recognised for all deductible tem-

porary differences and for tax losses carried forward and

unused tax credits, to the extent it is probable that taxa-

ble income will be available in the future against which

such deductible temporary differences, tax losses and tax

credits can be utilised;

• except to the extent that the deferred tax assets re-

lated to deductible temporary differences arise from

the initial recognition of an asset or liability in a trans-

action which is not a business combination, and, at

the time of the transaction, affects neither accounting

profit before tax nor taxable income (tax loss); and

• in the case of deductible temporary differences aris-

ing from investments in associates and interests in

joint ventures, the related deferred tax assets are rec-

ognised in the statement of financial position to the

extent it is probable that in the foreseeable future the

temporary differences will be reversed and taxable in-

come will be generated which will enable the deduct-

ible temporary differences to be offset,

• except to the extent that the deferred tax asset arises

from fair-value measurement of investment property

in companies covered by the Group’s restructuring

plan. Such plan assumes that when these assets are

realised, subject to certain conditions provided for in

applicable laws, the relevant transactions will not be

subject to taxation, and therefore the deferred tax as-

set will not be realised.

The deferred tax asset is reviewed at each reporting date

− it is examined whether it is probable that sufficient tax-

able income will be generated against which the deduct-

ible temporary differences, tax losses and tax credits can

be offset, i.e.:

– whether there exist sufficient taxable temporary dif-

ferences in respect of which deferred tax liability has

been recognised, or

– whether it is probable that sufficient income will be

generated to allow the deductible temporary differ-

ences, tax losses and tax credits to be offset (genera-

tion of sufficient income is deemed to be probable if

so provided in the budgets for the following years).

Deferred tax liability is recognised for taxable temporary

differences:

• except to the extent that the deferred tax liability

arises from the initial recognition of goodwill or the

(PLN ‘000)


initial recognition of an asset or liability in a transac-

tion which is not a business combination and, at the

time of the transaction, affects neither accounting

profit before tax nor taxable income (tax loss), and

• in the case of taxable temporary differences associ-

ated with investments in subsidiaries or associates

and interests in joint ventures, unless the investor is

able to control the timing of reversal of the temporary

differences and it is probable that the temporary dif-

ferences will not reverse in the foreseeable future,

• except to the extent that the deferred tax liability

arises from fair-value measurement of investment

property in companies covered by the Group’s re-

structuring plan. Such plan assumes that when these

assets are realised, subject to certain conditions pro-

vided for in applicable laws, the relevant transactions

will not be subject to taxation, and therefore the de-

ferred tax liability will not be settled.

The carrying amount of deferred tax liabilities is reviewed

at each reporting date and is subject to appropriate re-

duction to the extent that a tax liability is no longer likely

to arise.

Deferred tax assets and deferred tax liabilities are calcu-

lated using tax rates expected to be effective at the time

of realisation of particular asset or liability, based on tax

rates (and tax legislation) effective at the reporting date

or tax rates (and tax legislation) which at the reporting

date are certain to be effective in the future.

The Group offsets deferred tax assets against deferred

tax liabilities only if it holds an enforceable title to offset

current tax assets against current tax payables, and the

Group expects to realise the assets and settle the liabili-

ties related to the same item at the same time. The Com-

pany offsets deferred tax related to financial instruments

and other receivables and payables.

Deferred tax assets and liabilities are recognised in ac-

counting records by posting, at the end of the reporting

period, only the change in the balances of the deferred

tax assets and deferred tax liabilities as determined at

the end and beginning of the reporting period.

If recognised deferred tax assets or deferred tax liabilities

relate to business transactions whose outcome affects

net profit or loss, then such deferred tax assets or liabili-

ties are recognised in correspondence with profit or loss.

Deferred tax assets and deferred tax liabilities related to

transactions which are charged to equity are also taken

to equity rather than to profit or loss.

Where IAS 12 so requires, deferred tax is disclosed as an

adjustment to goodwill.

Accruals and deferrals

Prepayments include costs that can be attributed to

more than one reporting period. Prepaid expenses in-

clude:

- prepaid costs of goods and services to be received in

future periods, such as subscriptions, insurance premi-

ums, rents or leases – accounted for on a straight-line ba-

sis,

- prepaid costs of electricity, gas, transport or utility ser-

vices – accounted for on a straight-line basis,

- initial fees paid upon execution of lease contracts – ac-

counted for on a straight-line basis over the lease term,

- costs of major renovations and repairs – accounted for

on a straight-line basis over periods of one to three years,

depending on the Management Board’s decision;

- real property tax, annual charges for perpetual usufruct

of land – accounted for on a straight-line basis,

- transfer of the excess of the costs of construction ser-

vices in progress, as determined at the reporting date,

over the costs of such services that match revenue – ac-

counted for in accordance with the principles applicable

to accounting for construction services;

- share issue costs until the issue date – accounted for on

the issue date.

The straight-line method used to account for the costs

mentioned above consists in accounting for these items

over time.

At least at the end of every financial year, all items of pre-

payments and accrued income are reviewed to ensure

whether they are still justified. Any assets that cannot be

directly attributed to revenue of future reporting periods

should be charged to current profit or loss.

Accrued expenses include:

• costs of performance of construction contracts in pro-

gress, as referred to in IAS 11 Construction Contracts;

• liabilities under uninvoiced deliveries and services re-

ceived by the Company; however, in the financial

statements such items are recognised under trade

payables, also when the Company may be required to

use estimates to determine the exact quantity and/or

price of deliveries/services.

Deferred income includes:

• prepayments and advances received for work or ser-

vices to be performed in subsequent reporting peri-

ods;

• payments received or receivables invoiced in advance

for work or services to be performed in subsequent

reporting periods – including mainly prepaid rents or

lease payments received as well as other prepay-

ments received, accounted for in equal monthly in-

stalments over the term of the contract,

(PLN ‘000)


• contractual penalties not yet received and compensa-

tion sought in court proceedings – charged to other

income at the time the income is received.

Equity

Equity is measured at nominal amounts.

Share capital is disclosed in the amount specified in the

Articles of Association and resolutions on an increase /

cancellation of share capital, entered in a relevant court

register. Until a share capital increase is registered, the

amounts contributed by shareholders are recognised as

reserve capital from non-registered share capital.

Any difference between the fair value of consideration

received and the par value of shares is recognised in stat-

utory reserve funds under share premium account. Share

issue costs incurred upon establishment of a joint-stock

company or share capital increase reduce statutory re-

serve funds up to the amount of the excess of the issue

proceeds over the par value of shares.

Other components of equity mainly include capital from

the settlement of acquisition of Art Norblin shares and

capital from measurement of the incentive scheme

(compensation in the form of shares in the parent).

Share-based payments – Incentive Scheme

The fair value of an option to subscribe for Capital Park

S.A. shares is recognised under costs of salaries and

wages with a corresponding increase in equity. The fair

value is determined as at the date of share option grant

to eligible persons and recognised over the vesting pe-

riod.

The amount charged to costs is adjusted to reflect the

current number of options granted for which the condi-

tions of employment and non-market vesting conditions

are met. In the case of share-based payment conditions

other than vesting conditions, the fair value of awards

granted as share-based payments is measured in such a

way as to reflect such other conditions but is not remeas-

ured if there are differences between expected and ac-

tual results.

The amount of the liability is reviewed at the end of each

reporting period and at the date of settlement. Changes

in the fair value of the liability are recognised as person-

nel costs in profit or loss of the period.

In addition to prior years’ profits and losses, retained

earnings also include the effect of material prior year er-

rors. A material prior year error is an error as a result of

which any of the following conditions is met:

• profit before tax deviates by more than 10% and total

assets deviate by more than 1%,

• profit before tax deviates by more than 10% and net

revenue deviates by more than 1%.

The Company corrects material prior period errors and

restates relevant data retrospectively, where practicable.

Correction of a material prior year error is recognised on

a net basis, i.e. after accounting for the effect of the error

on tax liabilities (both current and deferred).

Prior year profits, including profits that were allocated to

statutory reserve funds and reserve capital, may be paid

out to shareholders as dividend only after any prior years’

losses are covered and provided that the minimum

amount of the statutory reserve fund is reached, i.e. one-

third of the share capital, as specified for joint stock com-

panies in the Commercial Companies Code.

Financial liabilities other than derivative instruments

The Group recognises subordinated liabilities and liabili-

ties under outstanding debt securities at the date on

which they arise. All other financial liabilities, including li-

abilities at fair value through profit or loss, are recognised

at the trade date, or the date on which the Group be-

comes party to an agreement under which it is obliged to

deliver the financial instrument.

Upon initial recognition, the Company measures financial

liabilities at fair value adjusted for transaction costs

which may be directly attributed to the acquisition or is-

sue of a given financial liability.

The Group derecognises a financial liability when it has

been repaid or cancelled or becomes time barred.

Derivative financial instruments

The Group uses derivative financial instruments to hedge

its currency and interest rate risk exposure. Embedded

derivatives are separated from the host contract and ac-

counted for separately if the economic characteristics

and risks of the host contract and the embedded deriva-

tive are not closely related, a separate instrument with

the same terms as the embedded derivative would meet

the definition of a derivative, and the hybrid (combined)

instrument is not measured at fair value through profit

or loss.

Derivative financial instruments are initially recognised at

fair value. Transaction costs are recognised in profit or

loss of the period at the time they are incurred. Subse-

quent to initial recognition, the Company measures de-

rivative financial instruments at fair value, with gains and

losses arising from changes in fair value recognised in fi-

nance income or costs, or as an increase in investment

property if the derivative is used to hedge cash flows re-

lating to self-constructed investment property.

Provisions

Provisions under IAS 37 are recognised when the Group

has a present obligation (legal or constructive) as a result

of a past event, it is probable that an outflow of resources

embodying economic benefits will be required to settle

(PLN ‘000)


the obligation, and the amount of the obligation can be

reliably estimated. If the Group anticipates that the costs

for which provisions have been recognised will be recov-

ered, e.g. under an insurance agreement, the recovery of

such costs is recognised as a separate asset, but only

when it is practically certain to occur.

Provisions are recognised based on reliable estimates

made by the Management Board of each Group Com-

pany. At each reporting date, the Company verifies the

validity and the amount of provisions.

Recognised or increased provisions are charged to costs

of core operations, finance costs or capital expenditure

on property or inventories, depending on what circum-

stances the future obligation relates to. Provisions are

used when the liability for which the provision has been

recognised arises; use of provisions is accounted for as a

decrease in the provision amount and an increase in the

liability amount. A provision can only be used in accord-

ance with the purpose for which it was originally recog-

nised. If the underlying risk has ceased to exist or has di-

minished, the unused portion of the provision reduces

operating expenses or increases operating or finance in-

come, depending on which type of cost the provision was

originally charged to.

Examples of provisions include provisions recognised for: 1. Restructuring and liquidation – the provision is based

on expenditure inextricably related to restructuring

but unrelated to the entity’s day-to-day activities; for

instance, the provision may include severance pay-

ments and compensation under labour law or costs

of liquidation of businesses covered by restructuring,

such as costs or losses under penalties or compensa-

tion for cancellation or non-performance of executed

contracts; a restructuring provision does not include

costs related to future operations, including costs of

marketing, retraining costs, costs of staff assignment,

deployment of new distribution systems and net-

works, etc. Restructuring provisions are charged to

other expenses;

2. Guarantees and sureties issued – the need to recog-

nise a provision is assessed based on the analysis of

whether the entity to which the guarantee or surety

has been granted is likely to continue to perform the

obligations secured by the guarantee or surety; if the

entity to which the guarantee or surety has been

granted is in poor condition, the provision amount

will depend on the entity’s expectations regarding

the likelihood of the liability being paid by the Com-

pany; the issue of a guarantee or surety is not a basis

for recognition of a provision, but it requires recogni-

tion of a contingent liability;

3. Outcome of pending court proceedings – the proba-

bility of a possible obligation to recognise a provision

may be assessed based the course of pending court

proceedings or the opinions of lawyers; the amount

of the provision should cover not only the amount of

the claim but also court and legal fees;

4. Expected losses on contracts.

Trade payables and other liabilities

In these financial statements, liabilities are classified into

current and non-current. Liabilities maturing in more

than 12 months after the reporting date are disclosed as

non-current, and those maturing sooner or held for trad-

ing are presented as current liabilities.

Current liabilities, including short-term trade payables, li-

abilities under salaries and wages and public charges are

measured at amounts payable at the reporting date. In-

terest may be charged on any amount payable (e.g. for

late payment) as at the reporting date.

At the date when a liability arises, current liabilities are

recognised at their nominal amount, i.e. their amount as

determined as at the origination date.

On initial recognition, foreign-currency liabilities are

measured at the mid rate quoted by the NBP for the date

preceding the date when the liability arose (e.g. the in-

voice date). As at the reporting date, foreign-currency li-

abilities are measured at the mid rate quoted by the NBP

for the reporting date.

Other liabilities include chiefly rental deposits (security

for rental contracts), retained amounts from general

contractors (performance bonds and security deposits

where no performance bond is provided), taxes payable,

as well as liabilities under received prepayments, which

are to be settled by delivery of merchandise or items of

property, plant and equipment, or performance of ser-

vices.

Operating income

Revenue represents the inflow of economic benefits dur-

ing a given period, arising in the ordinary course of the

Group’s business and resulting in an increase in equity

other than through contributions by the shareholders.

The Group classifies the following items as operating in-

come:

• income from the lease of office and retail space, in-

cluding compensations received from tenants on

early terminations of the lease contracts, as well as

charges payable by tenants to cover the cost of us-

ing the properties and the cost of services provided

by Group companies under the lease contracts,

• gains on disposal of investment property, apart-

ments and houses,

(PLN ‘000)


• income from the management of property and invest-

ment portfolio.

The Group presents its rental income based on the aver-

age rent for the rental agreement term, which means

that any changes in the rent rate during the rental term

(rent free periods) are recognised

Revenue is measured at fair value of the consideration

received or receivable, net of VAT and discounts, if any.

Revenue is recognised in accounting records at the time

it is due and payable under the terms of the relevant

lease contracts. In the case of sale of apartments or

houses, revenue is deemed earned when:

• the full price has been paid, or

• all the risks and rewards incidental to the possession

of the asset being sold have been transferred to the

buyer, which usually takes place upon execution of a

notarial deed or a hand-over report.

Operating expenses

The Group classifies the following items as operating ex-

penses:

• costs of operating the office and retail properties and

direct property operating expenses, which include

primarily the following items: cost of utility services

and other materials; cleaning and security services;

costs of property management and technical sup-

port services; charges payable to housing coopera-

tives or commonhold associations; real estate taxes

and perpetual usufruct charges; insurances; as well

as remuneration of staff employed directly on the

properties, excluding costs recharged to tenants;

• costs of operating the special purpose vehicles,

which include costs of salaries and administrative

expenses associated with the SPVs’ existence as

business entities, as well as other operating ex-

penses unrelated to the properties as such;

• administrative expenses, which include costs of sal-

aries and administrative expenses − such as consul-

tancy costs, office expenses, legal costs, commis-

sions, depreciation of property, plant and

equipment − of the parent Capital Park S.A. and of

CP Management Sp. z o.o. as the entity providing

support services to other Group companies, as well

as expenses incurred by other Group companies not

holding any properties;

• costs of renovation and repair of property;

• distribution costs;

• cost of measurement of the share-option plan for

eligible persons;

Other statement of profit or loss items presented under

operating activity:

• Gains/losses on investment property revaluation and

write-downs on inventories, comprising primarily

gains and losses on remeasurement of fair value of

investment properties, which reflect changes in

their fair value in a given period;

• Share in net profit/loss of equity-accounted entities

represents a portion of the profit or loss generated

in a given financial year by the equity-accounted en-

tities listed in Section 6.9 of these consolidated fi-

nancial statements.

Determination of net operating profit from core opera-

tions

Net operating profit is calculated as rental income from

completed properties less direct property operating ex-

penses.

Operating profit is calculated as net operating profit plus

items of other income and less items of other expenses.

The Group’s profit or loss is closely linked to price move-

ments in property markets, which are driven by rent lev-

els, occupancy rates, changes in yields, changes in inter-

est rates, construction costs, availability of bank

financing, EUR/PLN exchange rates, and overall credit

market conditions.

Finance income and costs

Interest income and expense are recognised on an ac-

crual basis.

Other finance income and costs consist mainly of realised

and unrealised foreign exchange differences arising in

connection with repayment and measurement of finan-

cial liabilities.

Borrowing costs are recognised as an expense when in-

curred, except for costs associated with the construction

or acquisition of an asset. Such borrowing costs are cap-

italised, provided that it is probable that they will gener-

ate economic benefits in the future. Borrowing costs are

capitalised under investment property or inventories, de-

pending on the type of property.

Current income tax

Current tax payable and current tax assets for the current

period and for previous periods are measured at the

amounts expected to be paid to (or recovered from) tax

authorities.

Dividend payment

Dividends are recognised when the shareholder’s right to

receive payment is established.

Format of the statement of cash flows

(PLN ‘000)


The statement of cash flows is prepared using the indi-

rect method. The indirect method consists in adjusting

profit or loss for:

• Results of non-monetary transactions such as

changes in the balance of receivables and liabilities,

accruals and deferrals, amortisation and deprecia-

tion, and foreign-exchange gains and losses;

• Cash inflows and outflows from investing and fi-

nancing activities.

The Group shows its cash flows broken into:

• operating activities – presenting cash inflows from

and outflows on the Group’s core operations, as

well as any other cash flows which are not classified

in any of the activities listed below,

• investing activities – presenting cash inflows from

and outflows on acquisition and sale of long-term

and short-term investments other than cash, as well

as all inflows and outflows related to operations in

the residential business segment,

• financing activities – presenting changes in the

amount and structure of the Group’s equity and

debt.

Operating cash flows

Cash flows from operating activities originate chiefly in

the Group’s core revenue-generating operations. The

cash flows are derived from transactions and other

events which are taken into account when calculating the

Group’s profit or loss, such as:

• Cash from sale of services and re-invoicing of costs to

tenants,

• Cash paid for supplies of goods and services,

• Taxes received and paid, including income tax,

• Employee benefits paid,

• other inflows and outflows related to the Group’s

core operations.

Investing cash flows

Cash from (or used in) investing activities represents ex-

penditure which will generate revenue and cash in the

future, as well as cash from disposal of assets whose use-

ful lives were longer than the standard lifecycle of the

services rendered by the Group companies. These are in

particular cash effects of such transactions as:

• Inflows and outflows relating to acquisition or dis-

posal of subsidiaries or their business units,

• Cash and cash equivalents of subsidiaries acquired

or disposed of,

• inflows and outflows relating to acquisition and dis-

posal of property, plant and equipment and intangi-

ble assets, including prepayments,

• Inflows and outflows relating to acquisition and dis-

posal of investments in property, including prepay-

ments,

• Inflows and outflows relating to acquisition and dis-

posal of investments in residential property, includ-

ing prepayments,

• cash received and paid in connection with imple-

mentation of financial instruments, except where

implementation of a financial instrument is closely

related to operating or financial activities,

• proceeds from cash deposited in bank accounts,

• proceeds from interest on loans advanced.

Financing cash flows

Cash flows from financing activities represent inflows

and outflows relating to the financing of the Group’s op-

erations, which serve to estimate future cash flows of en-

tities supplying the Group with capital. These are in par-

ticular cash effects of such transactions as:

• proceeds from issues of shares or other financial in-

struments,

• cash paid to shareholders as share in profit and eq-

uity,

• proceeds from and repayment of bank and non-

bank borrowings, issued notes and bonds, and other

securities,

• lease payments made.

(PLN ‘000)


7.5 CHANGES OF ACCOUNTING POLICIES


prepared in accordance with the International Account-

ing Standards, International Financial Reporting Stand-

ards and related interpretations issued in the form of the

European Commission’s regulations (“EU IFRSs”).

EU IFRSs include the standards and interpretations ac-

cepted by the International Accounting Standards Board

(IASB) and the International Financial Reporting Interpre-

tations Committee (IFRIC), approved for use in the EU.

The accounting policies applied to prepare the 2017 full-

year consolidated financial statements are consistent

with the policies applied to draw up the 2016 full-year

consolidated financial statements, except for the follow-

ing new or amended standards and interpretations en-

dorsed by the European Union and effective for annual

periods beginning on or after January 1st 2017. In 2017,

the parent adopted all the new and approved standards

and interpretations issued by the International Account-

ing Standards Board and the Interpretations Committee

and endorsed by the EU, which apply to the parent’s

business and are effective for reporting periods begin-

ning on or after January 1st 2017. The following are the

standards and amendments to standards approved for

use in the EU and applicable to reporting periods begin-

ning on or after January 1st 2017.

The following are the standards and amendments to

standards approved for use in the EU and applicable to re-

porting periods beginning on or after January 1st 2017.

Amendments to IAS 12 Income Taxes: recognition of de-

ferred tax assets for unrealised losses − effective for re-

porting periods beginning on or after January 1st 2017

The aim of the proposed amendments is to clarify that

unrealised losses on debt instruments measured at fair

value and measured at cost for tax purposes may give

rise to a deductible temporary difference.

The proposed amendments also state that the carrying

amount of an asset does not limit the estimation of prob-

able future taxable profits. Furthermore, when compar-

ing deductible temporary differences with future taxable

profits, future taxable profits exclude tax deductions re-

sulting from the reversal of those deductible temporary

differences.

Amendment to IAS 7 Statement of Cash Flows: disclosure

initiative − effective for reporting periods beginning on or

after January 1st 2017

The amendments are intended to improve information

provided to users of financial statements about an en-

tity’s financing activities and liquidity. The amendments

impose the requirement to:

• provide a reconciliation between the opening and

closing balances in the statement of financial posi-

tion of all items for which cash flows are classified

as financing activities, except for equity items;

• extend the disclosures about the entity’s liquidity,

for instance by adding disclosures about restrictions

that affect its decisions to use cash and cash equiv-

alent balances.

The application of the amendments to standards has not

caused any changes in the accounting policies of the

Group or in the presentation of data in its consolidated

financial statements.

The parent did not elect to apply early any standards or amendments to standards endorsed by the European Un-ion which are effective for reporting periods beginning on or after January 1st 2018:

IFRS 9 Financial Instruments (issued on November 12th 2009, with subsequent Amendments to IFRS 9 and IFRS 7 od December 16th 2011) – effective for reporting periods beginning on or after January 1st 2018

The new standard replaces the guidance contained in IAS

39 Financial Instruments: recognition and measurement,

regarding classification and measurement of financial as-

sets. The standard eliminates the existing IAS 39 catego-

ries of held to maturity, available for sale, and loans and

receivables.

The new IFRS 9 sets out a completely new classification

of financial instruments, based on an assessment of the

business model for managing the instrument and of the

instrument’s contractual terms:

• whether the instrument gives rise to cash flows that

are solely payments of principal and interest, which

reflects the credit risk and other risks, a profit mar-

gin and changes in the time value of money. This

category of instruments may be measured at amor-

tised cost,

• if the instrument also has other components, it

should be measured at fair value.

IFRS 9 introduces the concept of estimating expected

losses from impairment of financial assets, in contrast to

the current “incurred loss” model under IAS 39. The new

approach means that impairment losses on an instru-

ment are recognised sooner. The expected losses should

be estimated using a three-stage credit risk model when

the instrument is recognised for the first time. This im-

plies that it is increasingly important to estimate the ex-

pected impairment of financial assets (e.g. by identifying

a deterioration in financial standing, estimating potential

losses over the life of the financial instrument).

(PLN ‘000)


In conclusion, impairment of financial assets should be

estimated as follows:

• If an entity determines that the credit risk is low or

that the asset’s credit quality has not deteriorated,

it may calculate interest due on a gross basis (with-

out deducting estimated losses) and estimate the

losses over the next 12 months from the reporting

date,

• If an entity determines that the credit risk has in-

creased but still no evidence of impairment has

been identified, it may continue to calculate interest

due on a gross basis (without deducting estimated

losses), but at the same time it is required to esti-

mate the impairment of the asset over its entire life,

• If an entity identifies objective evidence that an in-

strument is impaired, it can calculate interest only

on a net basis (less estimated losses) and, at the

same time, it is required to estimate impairment

over the entire life of the instrument.

The standard permits a simplified approach to estimating

future losses on short-term trade receivables that do not

have a financial component (receivables from sales or

leases). In such cases, the credit risk analysis may be re-

placed by estimation of impairment losses over the en-

tire life of the instrument.

The Management Board has performed a detailed analy-

sis of the guidance of the new IFRS 9 in conjunction with

IFRS 15, IAS 27 and IAS 28, as well as all items of financial

instruments under assets and liabilities in the consoli-

dated financial statements. The following tables summa-

rise this analysis:

Financial liabilities

Current measurement method

IFRS 9 Comments

Bank borrowings

Amortised cost

Amortised cost In accordance with IFRS 9, amortised cost is the default method of measuring financial liabilities, except in circumstances described in paragraphs 4.2.1(a)–4.2.1(e). Bank borrowings do not fall into any of the above categories, nor have they been designated as at fair value.

Loans received

Amortised cost

Amortised cost In accordance with IFRS 9, amortised cost is the default method of measuring financial liabilities, except in circumstances described in paragraphs 4.2.1(a)–4.2.1(e). Loans received do not fall into any of the above categories, nor have they been designated as at fair value.

Bonds and notes

Amortised cost

Amortised cost In accordance with IFRS 9, amortised cost is the default method of measuring financial liabilities, except in circumstances described in paragraphs 4.2.1(a)–4.2.1(e). Bonds and notes issued by Capi-tal Park do not fall into any of the above catego-ries, nor have they been designated as at fair value.

Derivative instruments

Fair value Fair value IFRS 9 requires that derivative instruments be measured at fair value through profit or loss. The current measurement model is consistent with IFRS 9 and no changes are required.

Financial assets

Current measurement method

IFRS 9 Comments

Trade receivables

initial measurement at transaction price (if there is no significant financial component)

initial measurement at transac-tion price (if there is no signifi-cant financial component)

In accordance with paragraph 5.1.3 of IFRS 15, trade receivables should be initially measured at their transaction price if they do not contain a sig-nificant financial component. Next, their potential impairment should be assessed using a simplified expected credit loss (ECL) model. The estimation of impairment using the ECL model is a change from the current requirements.

Interests in jointly controlled entities

equity method in ac-cordance with IAS 28

equity method in accordance with IAS 28

In accordance with paragraph 5.2(a) of IFRS 9, in-terests in joint ventures are measured in line with IAS 28 (as required by paragraph 24 of IFRS 11).

Bank deposits

amortised cost amortised cost (conditions for loans advanced are met)

Given that the Group holds cash (including bank deposits) only in reputable financial institutions, the relevant credit risk seems immaterial.

(PLN ‘000)


This analysis has led to the conclusion that, compared

with the currently applied accounting policies, the new

IFRS 9 will have an impact on the Group’s consolidated

financial statements with respect to the value of trade

receivables.

The Management Board has estimated the expected

credit risk in relation to the aforementioned assets based

on historical financial data and expected future cash

flows. The calculation has demonstrated that such im-

pact would be immaterial, amounting to approximately

PLN 200 thousand.

IFRS 15 Revenue from Contracts with Customers – effec-

tive for reporting periods beginning on or after January

1st 2018

This standard is effective for reporting periods beginning

on January 1st 2018. The standard should be applied to

all contracts which are in effect on January 1st 2018.

Those contracts with customers whose impact was rec-

ognised in previous reporting periods should be analysed

retrospectively.

In accordance with paragraph 5a of IFRS 15, the standard

should be applied to all contracts with customers, except

for lease contracts within the scope of IAS 17 Leases (to

be replaced by IFRS 16 in the future).

To determine the impact of the new standard on the Cap-

ital Park Group’s consolidated financial statements, the

Management Board analysed the provisions of IFRS 15,

and particularly of paragraph 9, which identifies con-

tracts to which the standard applies, in conjunction with

IFRS 16 on lease contracts.

The aforementioned analysis was performed as follows:

The Management Board selected several lease contracts

considered significant and representative for the Capital

Park Group’s business. Six such contracts were analysed.

The primary subject of all these contracts is the lease of

office or retail space. The following categories of income

earned by the Group companies were defined: (i) lease

rent (including turnover rent, if any) and (ii) service

charges.

Moreover, these contracts may contain the following el-

ements relevant for the analysis:

• rent-free periods or step up rents;

• cash contribution to tenants;

• the lessor’s commitment to incur investment ex-

penditures required to enable the tenant to use the

property.

In connection with the wording of paragraph 9 of IFRS 15

and IFRS 16 Leases (currently: IAS 17), it was concluded

that IFRS 15 does not apply to the aforementioned lease

contracts, except for income from service charges, unless

these service charges are costs paid by the lessor and re-

invoiced in full to the tenant.

For service charges which are not re-invoiced in full to

the tenant, i.e. which constitute income recognised in ac-

cordance with IFRS 15, the Management Board does not

find it necessary to revise the current accounting policy,

as it ensures proper allocation of income (and costs) to

particular periods. In principle, both costs and income re-

lating to service charges are recognised on a straight-line

basis and the accounting period is a short, monthly pe-

riod. This means that no significant deviations are ob-

served during the reporting period.

Where income from service charges relates to costs in-

curred by the lessor that are re-invoiced in full, the Man-

agement Board also does not find it necessary to revise

the current accounting policy, according to which income

and costs on this account are offset and ultimately do not

affect the statement of profit or loss and other compre-

hensive income.

An analysis of the remaining elements of lease contracts

listed in Section 3 above, i.e. (i) rent-free periods or step

up rents, (ii) cash contribution to tenants and (iii) the les-

sor’s commitment to incur investment expenditures re-

quired to enable the tenant to use the property, leads to

the conclusion that they should be considered in the light

of IFRS 16 and therefore remain outside the scope of IFRS

15.

In view of the above, the Management Board of CP S.A.

concludes that IFRS 15 has no impact on the consolidated

financial statements of the Capital Park Group, because

the currently applied accounting policies are consistent

with the IFRS 15 guidance insofar as they relate to in-

come identified as falling within the scope of IFRS 15.

IFRS 16 Leases – effective for reporting periods beginning

on or after January 1st 2019

This standard is effective for reporting periods beginning

on January 1st 2019. The new standard eliminates the

concept of operating leases, which implies that all right-

of-use assets and corresponding lease liabilities will have

to be recognised in the statement of financial position.

Therefore, the new standard will generally not affect the

lessor’s financial statements.

For all lease contracts signed by the Group, the relevant

Group company acts as the lessor. The Group expects

that tenants/lessees may be willing to renegotiate such

contracts due to the introduction of the new IFRS 16.

In view of the above, the Management Board of CP S.A.

concludes that IFRS 16 will not affect the Capital Park

Group’s consolidated financial statements.

Clarifications to IFRS 15 Revenue from Contracts with

Customers – effective for reporting periods beginning on

or after January 1st 2018

(PLN ‘000)


The amendments clarify how to:

• identify performance obligations,

• determine whether an entity is the principal or the

agent,

• determine the manner of recognising revenue from

licences granted (at a point in time or over time).

The amendments include two additional relief provisions

to reduce the cost and complexity in first adopting the

standard.

The Management Board of CP S.A. concludes that IFRS 15

will not affect the Capital Park Group’s consolidated fi-

nancial statements.

Amendments to IFRS 4 Application of IFRS 9 Financial In-

struments and IFRS 4 Insurance Contracts – effective for

reporting periods beginning on or after 1 January 2018

The amendments aim to eliminate accounting mismatch

from the profit and loss accounts of entities issuing insur-

ance contracts. According to these amendments the fol-

lowing solutions are acceptable:

application of IFRS 9 Financial Instruments, including

recognition in the statement of comprehensive income

rather than through profit or loss of changes resulting

from the application of IFRS 9 Financial Instruments in-

stead of IAS 39 Financial instruments for all entities issu-

ing insurance contracts (i.e. the overlay approach)

temporary (until 2021) exemption from the application

of IFRS 9 Financial Instruments for entities whose activi-

ties are mainly related to insurance activities and appli-

cation in this period of IAS 39 Financial instruments (i.e.

the deferral approach).

The Management Board of CP S.A. concludes that IFRS 4

will not affect the Capital Park Group’s consolidated fi-

nancial statements.

Standards and interpretations adopted by the IASB, but

not yet endorsed by the EU:

IFRS 14 Regulatory Deferral Accounts – effective for re-


The standard was issued as part of a larger pro-

ject entitled Rate-Regulated Activities, which focuses on

the comparability of financial statements of entities op-

erating in areas subject to rate regulation by specific reg-

ulatory or supervisory bodies (depending on the jurisdic-

tion, such areas often include electricity and heat

distribution, electricity and gas sales, telecom services

etc.).

Rather than addressing a wide range of issues related to

accounting policies applicable to rate-regulated activi-

ties, IFRS 14 defines only the rules governing disclosure

of balances of income or expense accounts that would

not be recognised as an asset or liability in accordance

with other IFRSs but that qualify for deferral in line with

regulations on rate control.

IFRS 14 may be applied if an entity conducts rate-regu-

lated activities and has recognised amounts that meet

the definition of ‘regulatory deferral account balances’ in

its financial statements prepared in accordance with pre-

vious accounting policies.

Under IFRS 14, such items should be disclosed in a sepa-

rate item of assets or liabilities in the statement of finan-

cial position. These items are not classified as current or

non-current and are not referred to as assets or liabili-

ties. Consequently, deferral accounts presented under

assets should be disclosed as ‘deferral account debit bal-

ances’, whereas accounts under liabilities − as ‘deferral

account credit balances’.

The entities should disclose net movements in those bal-

ances in profit or loss or other comprehensive income,

separately in other comprehensive income and in profit

or loss (or in the separate statement of profit or loss).

Pursuant to the European Commission’s decision, this in-

terim standard will not be subject to the adoption pro-

cess.

IFRS 17 Insurance Contracts – effective for reporting peri-

ods beginning on or after January 1st 2021

IFRS 17 supersedes IFRS 4 Insurance Contracts. IFRS 17

introduces uniform principles of recognition and meas-

urement of insurance and reinsurance contracts based

on their present value. IFRS 17 requires that insurance

contracts be recognised based on current estimates and

assumptions that reflect the estimated future cash flows

and uncertainties relating to the such contracts. Income

from insurance contracts (contractual service margin)

are recognised alongside the provision of service under

the insurance contract throughout the insurance period.

Changes in estimated future cash flows between relevant

reporting dates are recognised in profit or loss, or as an

adjustment of the expected contractual service margin,

depending on the nature and reason for the change. An

entity may choose how to recognise certain changes in

the discount rate: either in the statement of profit or loss

or in the statement of comprehensive income for the pe-

riod.

Early application of IFRS 17 is possible if IFRS 9 and IFRS

15 have been implemented.

Amendments to IFRS 10 Consolidated Financial State-

ments and IAS 28 Investments in Associates and Joint

Ventures: sale or contribution of assets between an inves-

tor and its associate or joint venture − effective date de-

ferred indefinitely

The amendments concern sale or contribution of assets

between an investor and its associate or joint venture

and clarify that the recognition of any gain or loss arising

(PLN ‘000)


from a transaction between an investor and its associate

or joint venture depends on whether the assets sold or

contributed constitute a business.

Amendments to IFRS 2 Share-based Payment − effective

for reporting periods beginning on or after January 1st

2018

The amendments clarify how to account for certain

share-based payment transactions. They impose require-

ments for recognition of:

• cash-settled share-based payment transactions that

include a performance condition,

• share-based payment transactions settled net of tax

withholdings,

• modifications of share-based payment transactions

from cash-settled to equity-settled.

IFRIC 22 Foreign Currency Transactions – effective for re-


The interpretation clarifies the accounting treatment of

transactions which take into account the receipt or pay-

ment of advance payments in foreign currency. The in-

terpretation applies to transactions in foreign currency,

when the entity recognizes a non-cash asset or liability

arising from the receipt or payment of an advance in for-

eign currency before the entity recognizes the related as-

set, expense or income.

Amendments to IFRS 40 Investment Property − effective

for reporting periods beginning on or after January 1st

2018

The amendments are intended to clarify the principles of

transferring of assets to and from investment property.

The amendment applies to paragraph 57, which states

that an entity shall transfer a property to, or from, invest-

ment property when, and only when, there is evidence

of a change in use. The list of examples of evidence in

paragraph 57(a) – (d) is presented as a non-exhaustive

list instead of an exhaustive list.

The Management Board of CP S.A. has concluded that

IFRS 40 will not affect the Capital Park Group’s consoli-

dated financial statements.

Annual Improvements (2012−2014 cycle) – amendments

to IFRSs introduced as part of an annual improvements

cycle – effective for reporting periods beginning on or af-

ter January 1st 2017/after January 1st 2018

Amendments to IAS 1 First-time Adoption of International

Financial Reporting Standards

The improvement deleted the short-term exemptions in

paragraphs E3–E7 of IFRS 1, because they referred to

prior reporting periods and have now served their in-

tended purpose. These exemptions allowed the first-

time adopters of IFRS to use the same disclosures, which

were available to entities that apply IFRS them for a long

time with regard to:

• disclosures of certain comparative information on

financial instruments, required as a result of amend-

ments to IFRS 7

• presentation of comparative information for the

disclosures required by IAS 19 on the sensitivity of

defined benefit obligations to actuarial assumptions

• retrospective application of the requirements for in-

vestment entities included in IFRS 10, IFRS 12 and

IAS 27.

Amendment to IFRS 12 Disclosure of Interests in Other En-

tities

The improvement clarifies the scope of the standard by

specifying that the disclosure requirements in the stand-

ard, except for those in paragraphs B10–B16, apply to an

entity’s interests classified as held for sale, as held for dis-

tribution or as discontinued operations in accordance

with IFRS 5 Non-current Assets Held for Sale and Discon-

tinued Operations. The improvement was introduced be-

cause of confusion on the interaction of the disclosure

requirements between IFRS 5 and IFRS 12.

Amendments in IAS 28 Investments in Associates and

Joint Ventures

The improvement clarified that the election to measure

at fair value through profit or loss (rather than with the

equity method) an investment in an associate or a joint

venture that is held by an entity that is a venture capital

organisation, or other qualifying entity (e.g. mutual

funds, trust funds), is available for each investment in an

associate or joint venture on an investment-by-invest-

ment basis, upon initial recognition. Under the improve-

ment, entities that are not investment entities are also

permitted to retain the fair value measurement applied

by their associates and joint ventures (that are invest-

ment entities) when applying the equity method.

IFRIC 23 Uncertainty over Income Tax Treatments – effec-

tive for reporting periods beginning on or after January

1st 2019

The interpretation clarifies how to reflect uncertainty in

accounting for income taxes in the financial statements.

It refers to situations when it is unclear how tax law ap-

plies to a particular transaction or circumstance, or when

the entity is not sure whether the tax authorities will ac-

cept the entity’s approach or interpretation of tax law.

Amendments to IFRS 9 Financial Instruments – Prepay-

ment Features with Negative Compensation (issued on

October 12th 2017, effective for reporting periods begin-

ning on or after January 1st 2019)

(PLN ‘000)


The amendment clarifies that financial instruments con-

taining prepayment features with negative compensa-

tion could be eligible for measurement at amortised cost

or at fair value through other comprehensive income, de-

pending on the entity’s business model for managing fi-

nancial assets.

Amendments to IAS 28 Investments in Associates and

Joint Ventures – Long-term Interests in Associates and

Joint Ventures (issued on October 12th 2017, effective for

reporting periods beginning on or after January 1st 2019)

The purpose of the amendments is to specify how long-

term interests in associates or joint ventures should be

measured. Paragraph 14A has been added to clarify that

an entity applies IFRS 9, including its impairment require-

ments, to long-term interests in an associate or joint ven-

ture that form part of the net investment in the associate

or joint venture but to which the equity method is not

applied. Paragraph 41 has been deleted because the

Board felt that it merely reiterated the requirements of

IFRS 9 and had created confusion about the accounting

for long-term interests.

Annual Improvements (2015−2017 cycle) – amendments

to IFRSs introduced as part of an annual improvements

cycle – effective for reporting periods beginning on or af-

ter January 1st 2019

The amendments to IFRS 3 Business Combinations and

IFRS 11 Joint Arrangements clarify as follows:

• when an entity obtains control of a joint operation

that meets the definition of a business, it remeas-

ures previously held interests in that operation.

• when an entity obtains joint control of a joint oper-

ation that meets the definition of a business, the en-

tity does not remeasure previously held interests in

that operation if the change in the interests held re-

sults in the creation or maintenance of joint control.

Amendment to IAS 12 Income Taxes clarifies that income

tax consequences of dividends should be recognised in

the same manner as consequences of other transactions.

Amendment to IAS 23 Borrowing Costs clarifies that any

specific borrowing related to the generation of an asset

must be treated by an entity as part of the funds that the

entity borrows generally, when the asset is ready for its

intended use or sale.

The parent estimates that the above standards, interpre-

tations and amendments to standards, except for those

described above, will not have a material impact on the

Group’s consolidated financial statements.

7.6 FUNCTIONAL CURRENCY AND PRESENTATION CURRENCY

Items of the consolidated financial statements are meas-

ured in the currency of the primary economic environ-

ment in which the Group operates (“functional cur-

rency”). The consolidated financial statements are

presented in thousands of Polish złotys (PLN), which is

the functional currency and presentation currency of the

Group.

Foreign currency transactions are translated into the

functional currency using the exchange rates prevailing

at the transaction dates. Any currency exchange gains or

losses arising on settlement of such transactions or on

measurement of the carrying amounts of monetary as-

sets and liabilities denominated in foreign currencies are

recognised in the statement of profit or loss and other

comprehensive income.

7.7 MATERIAL ESTIMATES AND JUDGEMENTS

While preparing consolidated financial statements, the

parent’s Management Board has to make certain esti-

mates and judgements, which affect the values and man-

ner of presentation of items disclosed in the financial

statements. The majority of estimates are based on anal-

yses of the market conditions, as well as the laws and tax

regulations effective in a given financial period. While the

adopted assumptions, estimates and judgements are

based on the Management Board’s best knowledge, ac-

tual figures may differ from forecasts, particularly in the

event of any changes in the market, legal or tax environ-

ment. The estimates and related assumptions are re-

viewed and any resulting changes are disclosed in the pe-

riod in which they are made, or in the current and future

periods if a change in estimate affects both current and

future periods.

7.8 MANAGEMENT BOARD’S MATERIAL ESTIMATES AND ASSUMPTIONS

Assumption of having control of REIA FIZAN and REIA II

FIZAN despite holding minority interests, i.e. 16% and

15%, respectively, of the funds’ certificates.

For assumptions made in determining whether the entity

controls REIA FIZAN and REIA II FIZAN, see Note 6.9.

(PLN ‘000)


Fair value disclosure of investment property

A property is classified as investment property upon ini-

tial recognition, based on a decision made by the Group’s

Management Board reflecting the assumptions as to the

manner in which a given property will be used. Invest-

ment property is recognised as an asset if it is probable

that the future economic benefits associated with the in-

vestment property will flow to the Group and the cost of

the investment property can be measured reliably.

Investment property is measured at fair value, reflecting

market conditions prevailing 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 be-

tween 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.



the valuation of the property. For the method of deter-

mining the fair value of investment property, see Note 2.

Notwithstanding the professional nature of investment

property valuation methodologies, any adopted assump-

tions are largely subjective as they refer to future (and

therefore uncertain) events. The Group’s Management

Board seeks to determine the value of a property on a

prudent basis, which means that both most conservative

and most imprudent scenarios are eliminated from

among the data accepted for valuation.

The Management Board closely monitors the economic

situation in Poland and abroad. Changes in the market

environment strongly affect the value of the Group’s

properties. Investment property is sensitive to many fac-

tors, including in particular changes in yields and the

EUR/PLN exchange rate, because in large part invest-

ment property valuations are based on EUR-denomi-

nated rents. An increase/decrease in the EUR/PLN ex-

change rate is reflected directly in higher/lower value of

a property expressed in PLN, resulting in a gain/(loss) on

investment property revaluation. For information on the

effect of foreign exchange movements on property valu-

ations, see Note 17.

Deferred tax on investment property revaluation

The Group does not recognise deferred tax assets and li-

abilities in respect of differences between the carrying

amounts and tax bases of those properties which the

Group does not plan to exit or where any potencial trans-

action would be conducted throught the sale of shares.

Should the Group decide to sell properties (throught as-

set sale or sale of the organized enterprise) the Group

would be required to recognise a deferred tax liability of

up to PLN 104,953 thousand, which would reduce its net

assets as at December 31st 2017 by the same amount

(2016: PLN 90,635 thousand). The Group monitors the

estimates of future tax results of its subsidiaries on an

ongoing basis, recognizing such amounts of deferred tax

assets as will be be used in the future. As a result, in the

cases indicated above the Group does not see a need to

recognise deferred tax liabilities for the difference be-

tween the tax value and fair value of these properties.

(PLN ‘000)


NOTES TO THE FULL-YEAR CONSOLIDATED FINANCIAL STATEMENTS

Note 1. OPERATING SEGMENTS

The Group’s business falls into the following three re-

porting segments. The Management Board decided to

change its segment reporting starting from the presenta-

tion of data for 2017. In the Management Board’s opin-

ion, the new presentation of segments better reflects the

division of the Group’s portfolio.

Currently, the Group’s operations are divided into: (i) the

Investments Assets, which comprises projects that are al-

ready operated as properties yielding steady income, (ii)

Development Assets, comprising projects that are at the

stage of construction or are being prepared for construc-

tion; and (iii) the Other Assets, which includes properties

that do not represent the Group’s core business. In the

Investments Assets, the Group presents financial high-

lights concerning projects over which the Group has con-

trol even though it holds non-controlling stake of invest-

ment certificates (closed-end investment funds).

Comparative figures have been restated to match the

newly defined segments.

Investments Assets Segment

Entity Project

Dakota Investments Sp. z o.o. Eurocentrum – Alfa, Beta, Gamma and Delta buildings

Hazel Investments Sp. z o.o. Royal Wilanów

Diamante Investments Sp. z o.o. Street Mall Vis à Vis, Łódź

Oberhausen Sp. z o.o. Galeria Zaspa, Gdańsk

Aspire Investments Sp. z o.o. KEN, Warsaw

Sander Investments Sp. z o.o. Rubinowy Dom, Bydgoszcz

Real Estate Income Assets FIZ AN 39 properties

Real Estate Income Assets FIZ AN II 8 properties

Investments Assets Segment financial highlights

FINANCIAL HIGHLIGHTS 2017 2016

(PLN ‘000) (PLN ‘000)

Value of property 1,727,904 1,681,659

Including in closed-end investment funds 317,939 337,142

Interest-bearing liabilities 1,029,675 964,415


Rental income 124,829 106,573


Property expenses (30,596) (24,564)

Including in closed-end investment funds (5,063) (5,684)

Net operating income 94,233 82,009

Other revenue 0 0

Other expenses (13,366) (8,341)

Net operating result 80,867 73,668

Finance income/costs 27,595 (79,112)

Operating profit/(loss) 108,462 (5,444)

Revaluation of properties (82,983) 71,286

Including in closed-end investment funds (20,157) 3,049

Profit/(loss) before tax 25,479 65,842

(PLN ‘000)


Development Assets Segment

Entity Project

ArtN Sp. z o.o. Warszawa Żelazna

Capital Park Gdańsk Sp. z o.o. Neptun House

CP Retail SPV 2 Sp. z o.o. Eurocentrum – Crown, Warsaw

Development Assets Segment financial highlights

DANE FINANSOWE 2017 2016

(PLN ‘000) (PLN ‘000)

Value of property 415,470 370,609

Interest-bearing liabilities 39,627 17,770

Rental income 929 126

Property expenses (1,410) (927)

Net operating income (481) (801)

Other revenue 0 0

Other expenses (553) (1,030)

Net operating result (1,034 ) (1,831)

Finance income/costs 4,151 (1,401)

Operating profit/(loss) 3,117 (3,232)

Revaluation of properties (1,250) 660

Profit/(loss) before tax 1,867 (2,572)

Other Assets Segment

Entity Project

CP Management Sp. z o.o. Tuchola, Kościuszki

CP Management Sp. z o.o. Gdańsk, Słonimskiego

Emir 30 Sp. z o.o. Unieście

Marlene Investments Sp. z o.o. Święcajty, Mazury

Vera-Bis Sp. z o.o. Łódź, Kościuszki

Other Assets Segment financial highlights

DANE FINANSOWE 2017 2016

(PLN ‘000) (PLN ‘000)

Value of property 31,023 32,046

Interest-bearing liabilities 0 0

Rental income 0 1,033

Property expenses (683) (830)

Net operating income (683) 203

Other revenue 221 0

Other expenses (387) (334)

Net operating result (849) (131)

Finance income/costs (7) 22

Operating profit/(loss) (856) (109)

Revaluation of properties (490) (3,057)

Profit/(loss) before tax (1,346) (3,166)

(PLN ‘000)


2017 financial highlights by segment and the Group’s total

FINANCIAL HIGHLIGHTS

Investments

Assets

Development

Assets

Other

Assets Other TOTAL

Value of property 1,727,904 415,470 31,023 0 2,174,397

Interest-bearing liabilities 1,029,675 39,627 0 238,583 1,307,885

Rental income 124,829 929 0 0 125,758

Property expenses (30,596) (1,410) (683) 0 (32,689)

Net operating income 94,233 (481) (683) 0 93,069

Other revenue 0 0 221 10,204 10,425

Other expenses (13,366) (553) (387) (9,438) (23,744)

Net operating result 80,867 (1,034) (849) 766 79,750

Finance income/costs 27,595 4,151 (7) (22,919) 8,820

Operating profit/(loss) 108,462 3,117 (856) (22,153) 88,570

Revaluation of properties (82,983) (1,250) (490) 0 (84,723)

Profit/(loss) before tax 25,479 1,867 (1,346) (22,153) 3,847

2016 financial highlights by segment and the Group’s total

FINANCIAL HIGHLIGHTS Investments

Assets

Development

Assets

Other

Assets Other TOTAL

Value of property 1,681,659 370,609 32,046 0 2,084,314

Interest-bearing liabilities 964,415 17,770 0 260,832 1,243,017

Rental income 106,573 126 1,033 0 107,732

Property expenses (24,564) (927) (830) 0 (26,321)

Net operating income 82,009 (801) 203 0 81,411

Other revenue 0 0 0 1,897 1,897

Other expenses (8,341) (1,030) (334) (18,078) (27,783)

Net operating result 73,668 (1,831) (131) (16,181) 55,525

Finance income/costs (79,112) (1,401) 22 (10,616) (91,107)

Operating profit/(loss) (5,444) (3,232) (109) (26,797) (35,582)

Revaluation of properties 71,286 660 (3,057) 0 68,889

Profit/(loss) before tax 65,842 (2,572) (3,166) (26,797) 33,307

(PLN ‘000)


Note 2. INVESTMENT PROPERTY

Investment property is the property owned, jointly

owned or held in usufruct by the Group, or property

leased/used by the Group under finance lease agree-

ments. In accordance with IAS 40, all properties are

measured at fair value.

The Management Board closely monitors the economic

situation in Poland and abroad. Changes in the market

environment strongly affect the value of the Group’s

properties. Investment property is sensitive to many fac-

tors, including in particular changes in yields and the

EUR/PLN exchange rate, because in large part invest-

ment property valuations are based on EUR-denomi-

nated rents. An increase/decrease in the EUR/PLN ex-

change rate is reflected directly in higher/lower value of

a given property expressed in PLN, resulting in a

gain/(loss) on investment property revaluation.

For details of the impact of changes in the EUR/PLN ex-

change rates on the value of investment properties, and

thus on the Group's financial result and equity, see Note

27 further in these financial statements.

Type of project Number

of projects

Share as at Dec 31 2017

Dec 31 2017 Dec 31 2016 Dec 31 2015

Investments Assets 54 80% 1,727,904 1,681,659 1,307,081

Including in closed-end investment funds

47 15% 317,939 337,142 186,803

Development Assets 3 19% 415,470 370,609 510,655

Other Assets 5 1% 31,023 32,046 116,843

Total 62 100% 2,174,397 2,084,314 1,934,579

CHANGE IN INVESTMENT PROPERTY VALUATION Dec 31 2017 Dec 31 2016 Dec 31 2015

Gross carrying amount at beginning of period 2,084,314 1,934,579 1,595,986

Increase, including: 174,305 164,393 340,710

purchase of investment property 25,560 0 8,090

acquisition of control of Oberhausen Sp. z o.o. 62,003 0 0

capitalisation of subsequent expenditure1 86,742 89,541 257,661

net gain from property revaluation at fair value 0 74,852 74,959

Decrease, including: (84,222) (14,658) (2,117)

sale of investment property (1,000) (14,658) (2,117)

net loss from property revaluation at fair value (83,222) 0 0

Gross carrying amount at end of period [PLN ‘000] 2,174,397 2,084,314 1,934,579

Gross carrying amount at end of period [EUR ‘000] 521,326 471,138 453,967

1Capitalised expenditure primarily includes: construction costs, costs of architectural design, costs of advisory services, finance costs (interest on borrowings and notes, fees and commissions, foreign exchange differences on interest), legal costs, costs incurred in con-nection with any present or future income planned to be generated by the companies (costs of tenant acquisition and costs of adapting the rented space to tenants’ requirements, which can be attributed to specific rental contracts executed for definite), and costs of capitalised services charged from the SPVs by CP Management Sp. z o.o., a Group company, for managing property development projects.

The net loss from investment property revaluation com-

prises:

• loss resulting from a decrease in the EUR/PLN ex-

change rate,

• gain resulting from the following factors:

- development expenditure on property (fit-out work on

Royal Wilanów and the Eurocentrum Beta, Gamma and

Delta buildings, commencement of construction work on

the ArtN project),

- slight compression of property yields,

- growing occupancy rates in major projects (Eurocen-

trum and Royal Wilanów),

- expiry of rent free periods under leases signed in previ-

ous years, translating into improved cash flow.

(PLN ‘000)


The table below presents capitalised expenditure incurred on the Group’s key property projects:

CAPITALISED EXPENDITURE ON PROPERTY PROJECTS Dec 31 2017 Dec 31 2016 Dec 31 2015

Dakota Investments – Eurocentrum 22,322 50,488 110,933

Hazel Investments − Royal Wilanów 6,974 19,740 127,474

Capital Park Gdańsk – Neptun House 34,507 10,872 1,695

ArtN – Former Norblin Factory 21,486 4,879 8,991

Other projects 1,453 3,562 8,568

Total 86,742 89,541 257,661

Disclosures in accordance with IFRS 13 (based on signifi-cant unobservable inputs, Level 3)

Acting in accordance with the guidelines set forth in IFRS

13, the parent’s Management Board performed an anal-

ysis of the methodology applied to determine the fair

value of investment properties as at December 31st 2017

and December 31st 2016, and concluded that the meth-

odology was based on level 3 of the fair value measure-

ment hierarchy. There were no current transactions with

similar terms and the valuation of investment property

was made in reliance on a number of assumptions which

had a material impact on the final determination of the

fair value.



the valuation of the property at the given stage of devel-

opment. These are:

Income approach, investment method

Two techniques are used in this method: cash flow dis-

counting and direct capitalisation. This approach is used

mainly for valuation of completed commercial property

projects. Cash flow discounting involves discounting of a

series of cash flows the real property is expected to gen-

erate in an assumed forecast period, which is ten years

for the purpose of this analysis. Discounted residual value

of the real property is added to the discounted cash

flows. In direct capitalisation, the value of investment

property is calculated as the product of annual income

that can be generated by the property and the capitalisa-

tion rate (yield).

Properties valued with the use of the method described

above jointly account for 80% of the Group’s investment

property portfolio.

Below are presented key assumptions used in the calculation of the fair value of selected properties in this category:

Project Location Status

Total area

(‘000 square

metres)

Accu- pancy

Target NOI

(PLN ‘000)

Yield

Carrying amount

(PLN ‘000)

Target Value

(PLN ‘000)

Eurocentrum - Beta, Gamma

Warsaw com-pleted

44 89% 30,192 6.30% 464,221 479,236

Eurocentrum - Delta Warsaw com-pleted

27 83% 19,471 6.30% 290,712 309,064

Eurocentrum Alfa Warsaw com-pleted

14 74% 8,889 7.75% 108,860 114,699

Royal Wilanów Warsaw com-pleted

37 94% 27,707 6.50% 415,839 426,266

Galeria Zaspa Warsaw com-pleted

9 93% 4,724 7.50% 62,146 62,981

Vis à Vis Łódź Gdańsk com-pleted

6 99% 2,864 8.00% 35,795 35,795

Warszawa, Belgradzka Warsaw com-pleted

3 79% 1,924 7.25% 26,539 26,539

Warszawa, KEN Radom com-pleted

0 100% 357 7.25% 4,922 4,922

REIA FIZAN (39 proper-ties)

Łódź com-pleted

15 93% 13,011 7.49% 173,605 173,605

REIA II FIZAN (8 proper-ties)

Toruń com-pleted

16 95% 10,629 7.36% 144,334 144,334

* NOI – target average annual net operating income.

(PLN ‘000)


Mixed approach, residual method

This approach is generally used to determine the value of

investment property under construction, which is calcu-

lated as the property’s target value (estimated based on

the income approach or comparison approach) less any

future capital expenditure to be incurred as at the valua-

tion date and future development profit. It is used for val-

uation of properties where the project development pro-

cess has not been completed, including retail, office and

mixed-use properties. The target value, i.e. after comple-

tion of the project, was determined based on the income

approach, using the investment method (direct capitali-

sation model).



property portfolio.

Below are presented key assumptions used in the calculation of the fair value of this category of properties:

Project Location Status Total area

(‘000 square metres)

NOI (PLN ‘000)

Yield Expenditure to be spent after

Dec 31 2017

Carrying amount

(PLN ‘000)

ArtN Warsaw under construction 67 60,667 5.38% 748,113 320,367

Neptun House Gdańsk under construction 7 5,227 8.50%* 11,676 47,803

*In view of the likelihood of execising the rights under th CP Gdansk SP. z o.o. share purchase agreement, the value of assets being the object of the potential transaction has been revised in accordance with the agreement, based on an analysis of the agreement terms and the company’s current financial data. As a result, a capitalisation rate of 8,5% - consistent with the provisions of the agreement – has been applied.

Comparison approach (pairwise comparison or average price adjustment)

This approach is used to value investment property for

which data on comparable property sale transactions on

a given market is available as well as land and residential

property. Valuation of these types of property involves

an analysis of similar properties which are being sold on

the market and for which the characteristics that deter-

mine the purchase price and the terms of the transac-

tions are known. Since very few comparable transactions

are executed on the market and the prices of such trans-

actions differ widely, the valuation was performed using

the pairwise comparison method. The Group uses this

approach mainly to value undeveloped properties or de-

veloped properties with unspecified use or zoning on

which no capital expenditure has been made, and to

value apartments for resale.



property portfolio.

Note 3. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

LONG-TERM INVESTMENTS PROJECT Dec 31 2017 Dec 31 2016 Dec 31 2015

Interest in the Patron Wilanów joint venture Rezydencje Pałacowa II; Vis-à-vis Przyczółkowa

26,923 26,324 20,469

Interest in the Oberhausen joint venture* Galeria Zaspa 0 8,624 10,240

Interest in the SO SPV 50 joint venture** ETC Swarzędz 15,752 9,749 0

Total 42,675 44,697 30,709

* On April 26th 2017, the Group acquired 47% of shares in Oberhausen Sp. z o.o. thus gaining full control over the entity due to the holding of 100% of its share capital.

** No comparative data as at December 31st 2015 available. The Group acquired an interest in the entity on July 7th 2016.

The Group presents interests in joint ventures that are

accounted for using the equity method. The carrying

amount of joint ventures comprises the value of interests

in such joint ventures and loans advanced to such joint

ventures, plus accrued interest, less impairment write-

downs.

The Group presents interests in joint ventures on a net

basis, i.e. plus/less receivables/liabilities related to par-

(PLN ‘000)


ticipation in joint ventures, which equal the estimated fu-

ture cash flows related to coverage of losses or right to

the profit on joint ventures.

On April 27th 2017, CP Retail B.V. of the Netherlands, a

subsidiary of Capital Park S.A., acquired a 47% interest in

Oberhausen Sp. z o.o., the owner of the Galeria Zaspa

shopping centre in Gdańsk. Thus, as of the date of the

agreement, the Capital Park Group holds 100% of the

share capital of Oberhausen Sp. z o.o. and has full control

over the company.

In accordance with IFRS 3, the Group measured the ac-

quiree’s net assets. The net assets of the acquired entity

identified as at the moment of obtaining control were

measured at PLN 9,264 thousand. The total purchase

price of shares in Oberhausen Sp. z o.o., which the Group

acquired in 2015 (53% of all shares) and in 2017 (the re-

maining 47%), was PLN 5,833 thousand. Total gain from

bargain purchase calculated for both parts of the acqui-

sition was PLN 4,507 thousand.

INTEREST IN JOINT VENTURE PATRON WILANÓW Dec 31 2017 Dec 31 2016 Dec 31 2015

Interest value 6,637 6,637 6,637

Long-term loans advanced 33,790 32,375 30,189

Share in loss (13,504) (12,688) (16,359)

Total 26,923 26,324 20,469

INTEREST IN JOINT VENTURE OBERHAUSEN *

Dec 31 2017 Dec 31 2016 Dec 31 2015

Interest value 0 2,426 2,426

Long-term loans advanced 0 6,210 5,682

Share in profit/(loss) 0 (12) 2,132

Total 0 8,624 10,240

* On April 26th 2017, the Group acquired 47% of shares in Oberhausen Sp. z o.o. thus gaining full control over the entity due to the holding of 100% of its share capital.

INTEREST IN JOINT VENTURE SO SPV 50

Dec 31 2017 Dec 31 2016 Dec 31 2015*

Interest value 6,105 6,105 0

Long-term loans advanced 6,830 6,457 0

Share in profit/(loss) 2,817 (2,813) 0

Total 15,752 9,749 0

*No comparative data available. The Group acquired the interest on July 7th 2016.

The table below presents key information on the agreements classified as joint ventures.

Patron Wilanów Group SO SPV 50

Jointly controlled entities

Patron Wilanów S.à r.l. of Luxembourg and its subsi-diaries: Rezydencje Pałacowa Sp. z o.o. and RM 1 Sp. z o.o.

SO SPV 50 Sp. z o.o.

% interest in share capital and profit/(loss)

50% interests in the share capital of Patron Wilanów S.à r.l. (held directly), Rezydencje Pałacowa Sp. z o.o. and RM 1 Sp. z o.o. (held indirectly); 64% share of profit/(loss)

60% interest in the share capital of SO SPV 50 SP. z

o.o.; 60% share of profit/(loss)

General infor-mation about the agreement

Agreement executed on August 13th 2008 with Real Management Sp. z o.o., providing for the construc-tion, sale and management of residential and com-mercial properties located in the Wilanów area.

Agreement executed on February 3rd 2016 with Gal-

axy Sp. z o.o., providing for the remodelling, recom-mercialisation, repositioning, and management of a shopping centre in Swarzędz.

(PLN ‘000)


The table below presents the key financial data of jointly controlled entities − classified as joint ventures.

Patron Wilanów Group

Key financial data Dec 31 2017 Dec 31 2016 Dec 31 2015

Assets of entity/entities 96,462 82,312 81,738

Liabilities of entity/entities 117,933 102,137 98,832

Equity of entity/entities (21,471) (19,825) (9,787)

Net profit/loss of entity/entities for the reporting period (1,276) (935) 10,879

Loans advanced (net) 33,790 32,375 30,189

Oberhausen

Key financial data Dec 31 2017* Dec 31 2016 Dec 31 2015

Assets of entity/entities 0 69,159 63,379

Liabilities of entity/entities 0 59,126 49,242

Equity of entity/entities 0 10,034 14,137

Net profit/loss of entity/entities for the reporting period 0 (4,085) 4,007

Loans advanced (net) 0 6,210 5,682

The Group acquired an interest in the entity on April 27th 2017 and therefore has full control over the entity and consolidates its financial figures using the full method.

SO SPV 50

Key financial data Dec 31 2017 Dec 31 2016 Dec 31 2015*

Assets of entity/entities 155,837 106,483 0

Liabilities of entity/entities 140,880 100,996 0

Equity of entity/entities 14,956 5,487 0

Net profit/loss of entity/entities for the reporting period 9,383 (8,329) 0

Loans advanced (net) 6,830 6,457 0

No comparative data available. The Group acquired an interest in the entity on February 3rd 2016.

Note 4. OTHER NON CURRENT FINANCIAL ASSETS

LONG-TERM INVESTMENTS Dec 31 2017 Dec 31 2016 Dec 31 2015

Valuation of derivative financial instruments 2,649 4,187 0

Total 2,649 4,187 0

Under other N/C financial assets, the Group presents the

non-current portion of the financial instrument (CAP) re-

lated to the credit facility agreement concluded with the

Bank of China in 2016. It hedges the maximum interest

rate at the level of 0.35% for 70% of the facility amount .

Note 5. OTHER NON-CURRENT ASSETS

OTHER NON-CURRENT ASSETS Dec 31 2017 Dec 31 2016 Dec 31 2015

Property, plant and equipment 682 802 954

Long-term prepayments and accrued income 492 249 742

Intangible assets 543 666 707

Long-term receivables 526 526 0

Total 2,243 2,243 2,403

The Group’s property, plant and equipment mainly com-

prise leasehold improvements at the Group’s headquar-

ters. In the reporting period, the Group held property,

plant and equipment classified as buildings and struc-

tures, plant and equipment, and other property, plant

and equipment.

(PLN ‘000)


The Group did not recognise any impairment loss on

property, plant and equipment. All property, plant and

equipment are owned by the Group and there are no re-

strictions on their use.

In the period covered by these consolidated financial

statements, the Group held intangible assets classified as

software and other items. The Group did not recognise

any impairment loss on intangible assets.

Note 6. OTHER RECEIVABLES AND OTHER CURRENT ASSETS

OTHER RECEIVABLES AND OTHER CURRENT ASSETS Dec 31 2017 Dec 31 2016 Dec 31 2015

Receivables from the government 8,244 5,788 8,902

Short-term prepayments and accrued income 6,214 1,715 1,254

Other receivables 103 137 672

Prepayments for property 0 5,600 6,701

Total 14,561 13,240 17,529

Under receivables from the government the Group

mainly discloses VAT receivables related to mainly

costruction process.

Other prepayments and accrued income comprise

mainly costs of ongoing processes.

Prepayments for property presented as at December

2016 related to the planned acquisition of a property on

ul. Belgradzka in Warsaw, the transaction was concluded

in September 2017.

SHORT-TERM PREPAYMENTS AND ACCRUED INCOME Dec 31 2017 Dec 31 2016 Dec 31 2015

Prepaid auxiliary services 0 0 534

Costs of ongoing projects 219 1,430 0

Accrued income 0 0 327

Fees paid of non-disbursed loans 5,933 0 0

Other prepayments and accrued income, including taxes 62 285 393

Total 6,214 1,715 1,254

Costs of ongoing projects presented as at December

2016 related to the planned acquisition of a property on

Belgradzka street in Warsaw, the transaction was con-

cluded in September 2017.

The agreement of bank loans PEKAO S.A. (finanse Art.N)

was concluded on November 14th 2017. As at the report-

ing date, the facility has not been disbursed. The amount

relates to costs of bank financing.

Note 7. TRADE RECEIVABLES

TRADE RECEIVABLES Dec 31 2017 Dec 31 2016 Dec 31 2015

Trade receivables (gross) 23,333 14,630 9,957

Impairment losses (11,389) (4,271) (434)

Net trade receivables 11,944 10,359 9,523

The increase of impairment losses which took place in 2017 is mainly due to lease agreement with RW Polska Sp. z o.o. These receivables are secured on mortgage.

The Group is in the process of execution of the secure-ment.

(PLN ‘000)


Ageing of trade receivables as at December 31st 2017, December 31st 2016 and December 31st 2015:

Total Not past due Past due

<90 days 91–180 days

181 – 360 days

>360 days

As at Dec 31 2017

Trade receivables (gross) 23,333 12,124 4,145 2,237 2,563 2,264

Impairment losses (11,389) (5,484) 0 (1,963) (2,163) (1,779)

Net trade receivables 11,944 6,640 4,145 274 400 485

As at Dec 31 2016


Impairment losses (4,271) 0 (2,290) (17) (1,005) (959)

Net trade receivables 10,359 6,215 1,863 1,695 0 586

As at Dec 31 2015

Trade receivables (gross) 9,957 1,714 5,496 1,622 755 370

Impairment losses (434) 0 0 0 (76) (358)

Net trade receivables 9,523 1,714 5,496 1,622 679 12

Note 8. OTHER CURRENT FINANCIAL ASSETS

OTHER CURRENT FINANCIAL ASSETS Dec 31 2017 Dec 31 2016 Dec 31 2015

Short-term loans advanced 6,499 6,269 6,039

Valuation of derivative financial instruments 918 0 11,084

Total 7,417 6,269 17,123

Non recured loan granted for the purchase of a property

in Krynica. The loan bore interest at a rate of 6% pa.

Under other current assets, the Group presents the cur-

rent portion of the financial instrument FWD related to

the credit facility agreement concluded with the BOŚ

Bank. The Group entered in to a forward contract to

hedge the conversion amount relating to conversion of

the construction facility into investment facility, covering

100% of the facility amount.

Note 9. CASH AND CASH EQUIVALENTS

CASH IN HAND AND AT BANKS: Dec 31 2017 Dec 31 2016 Dec 31 2015 Bank Pekao S.A. 82,836 92,663 14,968 Bank of China 10,030 9,459 0

Raiffeisen Bank 6,028 6,574 4,127 PKO BP S.A. 199 23,900 59,887 BOŚ Bank 4,455 5,551 0

mBank S.A. 0 131 3,738 Getin Bank 12,379 1,897 1,608 BNP Paribas Bank 18,849 30 2,232 Alior Bank 6,776 713 0

Cash from foreign operations and cash in hand 14,763 4,155 2,338 Cash in hand and at banks: 156,315 145,073 88,898 Short-term deposits with maturities of up to three months 37,011 11,477 24,709 Other cash: 37,011 11,477 24,709 Total 193,326 156,550 113,607

(PLN ‘000)


Cash and cash equivalents presented above include re-

stricted cash. As at December 31st 2017, restricted cash

amounted to PLN 61,501 thousand (December 31st

2016: PLN 37,310 thousand). It comprises cash held in

banks’ technical accounts as funds made available but

not yet drawn under credit facilities and cash held

(blocked) in bank accounts as security for repayment of

borrowings incurred by Group companies.

AVAILABLE UNDRAWN CREDIT FACILITIES

Credit facility agreement with Bank Pekao S.A.

On November 14th 2017, ArtN Sp. z o.o., a subsidiary of

Capital Park S.A., executed a credit facility agreement

with Bank Pekao S.A. whereby it obtained a construction

facility of EUR 159,300 thousand and a VAT financing fa-

cility of PLN 35,000 thousand to execute the ArtN project

located in Warsaw, Żelazna Street. As at the reporting

date, the facility has not been disbursed.

Note 10. EQUITY

The structure of the parent’s share capital as at December 31st 2017 is presented below:

Series/issue and type of shares Number of

shares

Par value (PLN)

Par value of se-

ries/issue

Form of pay-ment

Registration

date

Series A, ordinary bearer non-pre-ferred shares

100,000 1.0 100,000 cash contribu-

tion 2010-12-17

Series B, ordinary bearer non-pre-ferred shares

71,693,301 1.0 71,693,301

cash contribu-tion and non-

cash contribu-tion

2011-10-13

Series C, ordinary bearer non-pre-ferred shares

20,955,314 1.0 20,955,314 cash contribu-

tion 2014-02-14

Series D, ordinary bearer non-pre-ferred shares

1,739,443 1.0 1,739,443 cash contribu-

tion 2017-07-19

Series E, ordinary bearer non-pre-ferred shares

9,230,252 1.0 9,230,252 non-cash 2014-02-14

Series F, ordinary registered pre-ferred shares (voting preference)

2,765,240 1.0 2,765,240 cash contribu-

tion 2013-12-05

Total 106,483,550 106,483,550

The par value of all outstanding shares is PLN 1 (one złoty) per share. The shares are fully paid, and the rights conferred

by the shares are not restricted in any way.

The Company’s shareholding structure, including shares held by members of the Management Board, as at Decem-

ber 31st 2017:

Shareholder Number of shares

% ownership interest Number of vot-ing rights

% of total voting rights

CP Holdings S.à r.l. 76,924,836 72.24% 76,924,836 70.41%

Jan Motz 2,849,283 2.68% 5,614,523 5.14%

Marcin Juszczyk 860,882 0.81% 860,882 0.79%

Others 25,848,549 24.27% 25,848,549 23.66%

Total 106,483,550 100.00% 109,248,790 100.00%

On May 17th 2017, Marcin Juszczyk, Jan Motz and other

eligible persons exercised their rights under subscription

warrants by acquiring 46,840 and 8,840 Series D shares,

respectively, at par, i.e. at PLN 1 per share.

On July 19th 2017, Series D shares were registered with

the National Court Registry. As a result, the Company’s

share capital was increased from PLN 106,372,191 to PLN

106,483,550, by way of issue of 111,359 Series D ordi-

nary bearer shares, as part of a conditional share capital

increase through the exercise of rights attached to

111,359 subscription warrants.

(PLN ‘000)


The structure of the parent’s share capital as at the date of these consolidated financial statements was as follows:

Series/issue and type of shares Number of

shares

Par value (PLN)

Par value of series/issue

Form of payment Registration

date

Series A, ordinary bearer non-preferred shares

100,000 1.0 100,000 cash contribution 2010-12-17

Series B, ordinary bearer non-preferred shares

71,693,301 1.0 71,693,301 cash contribution

and non-cash con-tribution

2011-10-13

Series C, ordinary bearer non-preferred shares

20,955,314 1.0 20,955,314 cash contribution 2014-02-14

Series D, ordinary bearer non-preferred shares


Series E, ordinary bearer non-preferred shares

9,230,252 1.0 9,230,252 non-cash 2014-02-14

Series F, ordinary registered preferred shares (voting prefer-ence)


Total 106,594,909 106,594,909

Capital increase from PLN 106,483,550 to

PLN 106,594,909, effected as a result of delivery of

111,359 Series D bearer shares, issued as part of a condi-

tional share capital increase through the exercise of

rights attached to 111,359 Series D subscription war-

rants, was registered with the National Court Registry on

February 28th 2018.

The Company’s shareholding structure, including shares held by Members of the Management Board, as at the date of

these consolidated financial statements:

Shareholder Number of shares

% ownership interest Number of vot-ing rights

% of total voting rights

CP Holdings S.à r.l. 76,924,836 72.17% 76,924,836 70.33%

Jan Motz 2,894,372 2.72% 5,659,612 5.18%

Marcin Juszczyk 871,472 0.82% 871,472 0.80%

Others 25,904,229 24.29% 25,904,229 23.69%

Total 106,594,909 100.00% 109,360,149 100.00%

OTHER CAPITAL RESERVES Dec 31 2017 Dec 31 2016 Dec 31 2015 Capital from changes in the structure of the Group (3,687) 7,792 7,792

Capital from measurement of share-option plan 10,039 9,274 7,357

Total 6,352 17,066 15,149

As a result of offerings of investment certificates of Real

Estate Income Assets FIZAN II carried out by CP Retail

B.V., a subsidiary, in 2017, the Group sold 142,808 invest-

ment certificates, i.e. 85% of the total number of the cer-

tificates, with total net proceeds of PLN 43.6m. As at De-

cember 31st 2017, the Group’s interest in the fund was

15%.

The decrease in equity related to changes in the Group’s

structure results from recognition of expenses related to

the sale of 85% of FIZ AN II certificates (PLN 7,792 thou-

sand). In accordance with paragraph 23 of IAS 10, any ef-

fects of changes in the Group’s structure that do not re-

sult in the loss of control should be reflected in the

Group’s equity.

The increase in equity from measurement of the share-

option plan (incentive scheme) compared with the end

of 2016 results from remeasurement of the plan as at De-

cember 31st 2017. For a detailed description of the

share-option plan and its measurement, see Note 30 to

these financial statements.

(PLN ‘000)


Equity attributable to non-controlling interests

CHANGES IN EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS Dec 31 2017 Dec 31 2016 Dec 31 2015 At beginning of period 71,745 72,583 64,776

Sale of certificates/shares 56,616 (1,754) 0

Dividend paid to investors (5,666) (4,356) (4,461)

Share in profit/(loss) of subsidiaries (7,777) 5,272 12,268

At end of period 114,918 71,745 72,583

The increase in equity attributable to non-controlling interests results from recognition of the net asset value related

to the sale of 85% of REIA II FIZ AN certificates.

Note 11. BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES

The Group measures bank borrowings and other finan-

cial liabilities at amortised cost (in accordance with IAS

39), which means that the amount of the liability follows

from the related cash flows using the effective interest

rate method .

BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES Dec 31 2017 Dec 31 2016 Dec 31 2015 Credit facilities 1,093,568 1,063,652 862,959

Lease liabilities 0 0 41,198

Derivative financial instruments (IRS)* 4,483 10,952 9,281

Total 1,098,051 1,074,604 913,438

Non-current bank borrowings and other financial liabilities 1,014,807 1,003,032 862,764

Current bank borrowings and other financial liabilities 83,244 71,572 50,674

*Derivatives are used by the Group to hedge against the interest rate movements and EUR/PLN exchange rate risks related to liabil-ities incurred, and are not traded.

LIABILITIES BY MATURITY: Dec 31 2017 Dec 31 2016 Dec 31 2015 Up to one year 83,244 71,572 50,674

1 year to 3 years 203,613 131,317 109,013

3 years to 5 years 772,725 269,023 156,184

More than 5 years 38,469 602,692 597,567

Total 1,098,051 1,074,604 913,438

As at December 31st 2017, liabilities maturing in up to

one year included:

• current portion of long-term borrowings of

PLN 82,992 thousand,

• current portion of the measurement of finan-

cial instruments at the end of the reporting pe-

riod, of PLN 252 thousand.

SIGNIFICANT CREDIT FACILITIES

The Group has relations with most of banks operating in

Poland. Most of the credit facilities contracted by Group

companies are investment or construction loans. In their

credit facility agreements, Group companies undertook

to maintain specific levels of selected financial ratios. The

key covenants relate to the Loan to Value and Debt Ser-

vice Coverage ratios. Most of the facilities are denomi-

nated in EUR and measured at each reporting date.

Therefore, any movements in the EUR/PLN exchange

rate have a material bearing on the PLN-denominated

structure of the Group’s statement of financial position.

(PLN ‘000)


Credit facility agreement with Getin Noble Bank

On July 22nd 2013, Capital Park S.A. executed a credit fa-

cility agreement with Getin Noble Bank, under which the

Company obtained a credit facility of up to EUR 10m to

finance its day-to-day operations. The facility bears inter-

est at a variable rate of 3M EURIBOR plus margin. The re-

payment date of the facility’s last tranche is December

20th 2018. As at December 31st 2017, debt outstanding

under the facility was EUR 7,500 thousand. In January

2018 the Company repaid the amount of EUR 2,500 thou-

sand. As a date of the report’s publication the debt oudstand-

ing under the facility was EUR 5,000 thousand.

Credit facility agreement with Bank of China

On September 22nd 2016, Dakota Investments Sp. z o.o.

signed a EUR 124,430 thousand credit facility agreement

with Bank of China (Luxembourg) S.A. Oddział w Polsce

to refinance the credit facility originally contracted from

Bank Polska Kasa Opieki S.A. for the refinancing of the

purchase price of a property (the Alfa project) and financ-

ing of the construction of Eurocentrum Phase 1 and 2

(Beta, Gamma and Delta projects). The facility advanced

by the Bank of China bears interest at a variable rate

equal to 3M EURIBOR plus the bank’s margin, and the fi-

nal repayment date is September 22nd 2022. As at De-

cember 31st 2017, debt outstanding under the facility

was EUR 121,319 thousand.

The Company entered into a hedging contract (CAP),

which hedges the interest rate up to 0.35%. Pursuant to

the facility agreement, the interest rate may not be lower

than 0.0%.

Syndicated credit facility agreement with BGŻ BNP Paribas S.A. and ING Bank Śląski S.A.

On June 30th 2017, Hazel Investments Sp. z o.o, a subsid-

iary of Capital Park S.A., signed an investment facility

agreement of EUR 62,500 thousand with a bank syndi-

cate comprising BGŻ BNP Paribas S.A. and ING Bank Śląski

S.A. (each bank provides 50% of the facility amount). The

facility was contracted to refinance the PKO BP invest-

ment loan, and bears interest at a variable rate of 3M EU-

RIBOR plus margin. The final repayment date is June 30th

2022. The facility was disbursed on July 13th 2017.

As at December 31st 2017, debt outstanding under the

facility was EUR 61,484 thousand.

The Company also entered into a hedging contract (IRS),

which hedges 70% of the facility amount at 0.48%

Credit facility agreement with Hypo Noe Gruppe Bank AG

On April 30th 2015, the the entities owned by REIA

FIZAN:, i.e. CP Property (“SPV1”) sp. z o.o., CP Property

sp. z o.o. (“SPV2”) sp.k., CP Property (“SPV3”) sp. z o.o.,

CP Property (“SPV4”) sp. z o.o., CP Property sp. z o.o.

(“SPV5”) sp.k., and CP Property (“SPV6”) sp. z o.o., exe-

cuted a credit facility agreement with HYPO NOE Gruppe

Bank AG of Austria under which the bank granted an in-

vestment credit facility of up to EUR 26,150 thousand to

refinance the existing finance lease liabilities payable by

the subsidiaries to Raiffeisen-Leasing Polska S.A. The fa-

cility bears interest at 3M EURIBOR plus the bank’s mar-

gin, and the term of the agreement is five years. The par-

ties also executed an interest rate risk hedge agreement

for a period of five years. As at December 31st 2017, the

debt outstanding under the loan was EUR 24,255 thou-

sand.

The entities entered into a hedging contract (IRS), which

hedges 100% of the facility amount at 0.59%.

According to IFRS 10 and control recognition the amount

of the loan is disclosed in a full amount although the

Group owns only 16% of investment certificates in REIA I

FIZAN and there is no recourse toward the Group.

Credit facility agreement with Hypo Noe Gruppe Bank AG

On December 19th 2016, the entities owned by REIA II

FIZAN: Capital Park Racławicka Sp. z o.o., CP Retail SPV1

Sp. z o.o., Marcel Investments Sp. z o.o., Nerida Invest-

ments Sp. z o.o., Orland Investments Sp. z o.o. and Sagitta

Investments Sp. z o.o. entered into a credit facility agree-

ment with HYPO NOE Gruppe Bank AG of Austria, pursu-

ant to which the Bank advanced an investment credit fa-

cility of up to EUR 20,838 thousand to refinance their

existing liabilities under lease and credit facility agree-

ments (Capital Park Racławicka Sp. z o.o., Marcel Invest-

ments Sp. z o.o., Orland Investments Sp. z o.o., and Ne-

rida Investments Sp. z o.o.) and to refinance property

purchases (CP Retail SPV1 Sp. z o.o. and Sagitta Invest-

ments Sp. z o.o.). The facility advanced by HYPO NOE

Gruppe Bank AG bears interest based on 6M EURIBOR

plus the Bank’s margin, and the term of the agreement is

five years. The parties also executed an interest rate risk

hedge agreement for a period of five years. The entities

entered into a hedging contract (IRS), which hedges

100% of the facility amount at 0.5%

(PLN ‘000)


As at December 31st 2017, the debt outstanding under

the loan was EUR 20,270 thousand.

According to IFRS 10 and control recognition the amount

of the loan is disclosed in a full amount although the

Group owns only 15% of investment certificates in REIA

II FIZAN and there is no recourse toward the Group.

Credit facility agreement with Bank Ochrony Środowiska

On March 16th 2015, Capital Park Gdańsk Sp. z o.o. and

Bank Ochrony Środowiska S.A. executed agreements for

a PLN 49,650 thousand non-revolving credit facility (con-

struction loan) and a PLN 1,430 thousand revolving credit

facility (VAT financing) to complete the Neptun House

project in Gdańsk.

On September 5th 2016, Annex 1 to the non-revolving

credit facility was signed, pursuant to which the period of

availability of the credit facility was extended until March

31st 2018, and its final repayment date was postponed

until March 31st 2033.

On September 5th 2016, Annex 1 to the revolving credit

facility was also signed, pursuant to which the facility

amount was increased to PLN 3,000 thousand, the period

of availability of the credit facility was extended until

March 31st 2018, and the final repayment date was post-

poned until June 30th 2018.

On September 30th 2016, the first tranche of the revolv-

ing credit facility and the first tranche of the non-revolv-

ing credit facility were made available.

The Company entered into a forward contract to hedge

the conversion amount relating to conversion of the con-

struction facility into an investment facility, covering

100% of the facility amount.

As at December 31st 2017, debt outstanding under the

construction loan was PLN 37,389 thousand, while debt

outstanding under the VAT financing facility amounted to

PLN 2,332 thousand.

Credit facility agreement with Alior Bank S.A.

On October 24th 2012, Diamante Investment Sp. z o.o.,

a subsidiary of Capital Park S.A., executed a credit facility

agreement with Alior Bank S.A. whereby it obtained a

credit facility of PLN 32,366 thousand to finance the con-

struction of a shopping centre in Łódź and refinance a

previous credit facility.

On March 31st 2015, the credit facility was converted

into an investment loan of EUR 6,961 thousand. The fa-

cility bears interest at M EURIBOR plus margin.

As at December 31st 2017, the debt outstanding under

the loan was EUR 6,294 thousand.


On April 1st 2015, Oberhausen Sp. z o.o., a subsidiary of

Capital Park S.A., signed a credit facility agreement with

Alior Bank S.A. The project was completed in the second

quarter of 2016. The construction loan facility was con-

verted into an investment facility and the repayment of

principal and interest instalments commenced on Sep-

tember 30th 2016. As at December 31st 2017, the com-

pany had only the investment facility, with an outstand-

ing amount of EUR 9,270 thousand. The facility bears in-

terest at 3M EURIBOR plus margin. The company also

entered into a hedging contract (IRS), which hedges 75%

of the facility amount at 0.03%. The facility is to be repaid

by July 7th 2021.


On September 13th 2017, Alferno Investments Sp. z o.o.,

a subsidiary of Capital Park S.A., signed credit facility

agreements with Alior Bank S.A. whereby the company

received an investment facility and VAT financing facility

to be used to finance the purchase of the property lo-

cated on Belgradzka Street in Warsaw. The investment

facility was advanced in the amount of EUR 4,800 thou-

sand to finance the VAT-exclusive price of the property,

cost of fitting out the space for tenants and servicing in-

terest payments on both facilities during the grace period

(until September 29th 2018). The VAT financing facility

amounting to PLN 5,520 thousand was advanced to

cover the amount of VAT payable on the purchase price

of the property and to refinance the VAT on the advance

payment towards the purchase price. The investment fa-

cility bears interest at 1M EURIBOR plus margin, and the

VAT financing facility bears interest at 1M WIBOR plus

margin.

As at December 31st 2017, the amount outstanding un-

der the investment facility was EUR 4,129 thousand. EUR

671 thousand remains available until September 28th

2018. As at December 31st 2017, the amount outstand-

ing under the VAT financing facility was PLN 5,518 thou-

sand. The maturity dates of the investment facility and

the VAT financing facility are August 31st 2022 and No-

vember 30th 2018, respectively.

(PLN ‘000)


Credit facility agreement with Powszechna Kasa Oszczędności Bank Polski S.A.

On November 14th 2017, ArtN Sp. z o.o., a subsidiary of

Capital Park S.A., executed a loan facility agreement with

Bank Pekao S.A. whereby it obtained a construction facil-

ity of EUR 159,300 thousand and a VAT financing facility

of PLN 35,000 thousand to execute the ArtN project lo-

cated in Warsaw, Żelazna Street. As at the reporting date,

the facility has not been disbursed.

Bank Dec 31 2017 Dec 31 2016 Dec 31 2015

Facility amount as per agree-

ment*

Cur-rency

Interest rate Maturity date

Bank of China 500,096 542,444 0 124,430 EUR 3M EUR by 2022

BGŻ BNP Paribas S.A.

251,597 0 0 62,500 EUR 3M EURIBOR +

margin by 2022

Hypo Noe Gruppe Bank AG (REIA FIZ AN)

100,669 110,006 108,600 26,150 EUR 3M EURIBOR +

margin by 2020

Hypo Noe Gruppe Bank AG (REIA II FIZ AN)

83,840 91,305 0 20,838 EUR 6M EURIBOR +

margin by 2021

BOŚ Bank 39,627 8,612 0 49,650 PLN 3M WIBOR +

margin by 2033

Alior Bank S.A. 38,421 0 0 9,656 EUR 3M EURIBOR +

margin by 2021

Getin Noble Bank S.A.

31,188 32,259 42,101 10,000 EUR 3M EURIBOR +

margin by 2018

Alior Bank S.A. 26,261 28,909 28,824 6,961 PLN 3M EURIBOR +

margin by 2022

Alior Bank S.A. 21,869 0 0 4,800 EUR 1M EURIBOR +

margin by 2022

PKO BP S.A. 0 250,117 245,293 57,131 EUR 1M EURIBOR +

margin repaid

Pekao S.A. 0 0 101,133 31,146 EUR 3M EURIBOR +

margin repaid

Pekao S.A. 0 0 307,761 445,992 PLN 3M WIBOR +

margin repaid

PKO BP S.A. 0 0 6,241 20,000 PLN 1M WIBOR+

margin repaid

Bank BGŻ BNP Pari-bas S.A.

0 0 21,466 6,000 EUR 1M EURIBOR +

margin repaid

Pekao Bank Hipo-teczny S.A.

0 0 1,540 2,120 PLN 3M WIBOR +

margin repaid

Total 1,093,568 1,063,652 862,959

*Amounts in the currency of the agreement.

(PLN ‘000)


Note 12. LIABILITIES UNDER NOTES IN ISSUE

The Company measures notes at amortised cost (in ac-

cordance with IAS 39), which means that the amount of

the liability follows from the related cash flows using the

effective interest rate method. No series of the notes is

secured.

Series E notes listed on the Catalyst market

On March 18th 2015, Capital Park S.A. issued 111,145 Se-

ries E three-year unsecured bearer notes with a nominal

value of PLN 100 per note, and a total value of PLN

11,115 thousand, maturing on March 18th 2018. The

notes bear interest at 3M WIBOR plus a margin of 4.3%,

payable every three months. The notes were issued to

finance the Company’s investing activities.

At the date of maturity the Group redeemed notes serie

E in amount PLN 11,115 thousand.

Series F notes listed on the Catalyst market

On June 3rd 2015, Capital Park S.A. issued 331,163 Series

F three-year unsecured bearer notes with a nominal

value of PLN 100 per note, and a total value of PLN

33,116 thousand, maturing on June 3rd 2018. The notes

bear interest at 3M WIBOR plus a margin of 4.3%, paya-

ble every three months. The notes were issued to finance

the Company’s investing activities.

Series G notes listed on the Catalyst market

On August 14th 2015, Capital Park S.A. issued 18,840 Se-

ries G three-year unsecured bearer notes with a nominal

value of PLN 100 per note and a total value of PLN 1,884

thousand, maturing on August 14th 2018. The notes bear

interest at 3M WIBOR plus a margin of 4.3%, payable

every three months. The notes were issued to finance

the Company’s investing activities.

Series H and I notes listed on the Catalyst market

On April 22nd 2016, Capital Park S.A. issued 92,000 Series

H three-year unsecured bearer notes with a nominal

value of PLN 100 per note and a total value of PLN 9,200

thousand, maturing on April 15th 2019. The notes bear

interest at 3M WIBOR plus a margin of 4.8%, payable on

a quarterly basis. The objective of the issue was to secure

financing for the Neptun House project in Gdańsk and

the ETC shopping centre in Swarzędz.

On June 3rd 2016, Capital Park S.A. issued 58,000 Series I

three-year unsecured bearer notes with a nominal value

of PLN 100 per note and a total value of PLN 5,800 thou-

sand, maturing on April 15th 2019. The notes bear inter-

est at 3M WIBOR plus a margin of 4.8%, payable on a

quarterly basis. The purpose of the issue was to secure

financing for the Group’s investing activities.

On August 17th 2016, the Management Board of the Cen-

tral Securities Depository of Poland assimilated 92,000

Series H bearer notes with 5,800 Series I bearer notes.

Series J notes

On March 3rd 2017, Capital Park S.A. issued 20,000 Se-

ries J three-year unsecured bearer notes with a nominal

value of EUR 100 per note, and a total value of EUR 2,000

thousand, maturing on March 17th 2020.

The notes bear interest at 3.75%, payable on a quarterly

basis. The purpose of the issue was to change the cur-

rency profile of the Company’s debt by refinancing the

notes maturing in 2017, and to finance the Group’s in-

vestment needs.

Series K and L notes listed on the Catalyst market

On April 27th 2017, Capital Park S.A. issued 156,700 Se-

ries K three-year unsecured bearer notes with a nominal

value of EUR 100 per note, and a total value of EUR

15,670 thousand, maturing on April 27th 2020. The notes

bear interest at 4.1%, payable on a semi-annual basis. The

purpose of the issue was to change the currency profile

of the Company’s debt by refinancing the notes maturing

in 2017, and to finance the Group’s investment needs.

On July 3rd 2017, Capital Park S.A. issued 57,050 Series L

three-year unsecured bearer notes with a nominal value

(PLN ‘000)


of EUR 100 per note, and a total value of EUR 5,705 thou-

sand, maturing on April 27th 2020. The notes bear inter-

est at 4.1%, payable on a semi-annual basis. The purpose

of the issue was to change the currency profile of the

Company’s debt by refinancing the notes maturing in

2017, and to finance the Group’s investment needs.

On November 3rd 2017, the Management Board of the

Central Securities Depository of Poland assimilated

156,700 Series K bearer notes with 57,050 Series L bearer

notes.

Series M notes listed on the Catalyst market

On December 21st 2017, Capital Park S.A. issued 151,250

Series M three-year unsecured bearer notes with a nom-

inal value of EUR 100 per note, and a total value of EUR

15,125 thousand, maturing on December 21st 2020. The

notes bear interest at 4.1%, payable on a semi-annual ba-

sis. The purpose of the issue was to change the currency

profile of the Company’s debt by refinancing the notes

maturing in 2018–2019, and to finance the Group’s in-

vestment needs.

Notes listed on the Catalyst market

Dec 31 2017 Dec 31 2016 Dec 31

2015 Nominal

amount Cur-

rency Interest rate Maturity date

Series B notes 0 34,875 34,490 35,000 PLN 6M WIBOR + 5.5% repaid

Series C notes 0 20,171 19,523 20,000 PLN 6M WIBOR + 5.3% repaid

Series D notes 0 52,138 52,816 53,886 PLN 3M WIBOR + 4.3% repaid

Series E notes 11,095 11,013 10,894 11,115 PLN 3M WIBOR + 4.3% March 2018

Series F notes 32,872 32,454 31,793 33,116 PLN 3M WIBOR + 4.3% June 2018

Series G notes

1,868 1,861 1,827 1,884 PLN 3M WIBOR + 4.3% August 2018

Series H and I notes

14,934 14,924 0 15,000 PLN 3M WIBOR + 4.8% April 2019

Series J notes

8,152 0 0 2,000 EUR Fixed 3.75% March 2020

Series K and L notes

87,534 0 0 21,375 EUR Fixed 4.1% April 2020

Series M notes

52,370 0 0 15,125 EUR Fixed 4.1% April 2020

Interest accrued 1,009 977 771 0 --- 2018

Total 209,834

168,413 152,114

Long-term notes 156,231 55,374 142,828

Short-term notes 53,603 113,039 9,286

Note 13. OTHER LIABILITIES AND PROVISIONS

OTHER LIABILITIES AND PROVISIONS Dec 31 2017 Dec 31 2016 Dec 31 2015

Provisions 3,349 1,546 23,326

Deposits from tenants 11,283 9,161 6,635

Taxes, customs duties, social security payable 2,956 2,780 2,081

Current tax liability 0 80 114

Deposits from general contractors 3,933 2,460 1,267

Deferred income – Harsz plot 300 0 218

Other liabilities and provisions 659 574 707

Total 22,480 16,601 34,348

Other liabilities and provisions – non-current 11,357 47 7,384

Other liabilities and provisions – current 11,123 16,554 26,964

(PLN ‘000)


OTHER PROVISIONS Dec 31 2017 Dec 31 2016 Dec 31 2015 Audit provision 213 180 207

Provisions for uninvoiced expenditure on property 0 0 19,490

Provisions for property operating costs 1,805 976 2,676

Provisions for bonuses (MIS) 1,331 390 953

Total 3,349 1,546 23,326

CHANGE IN PROVISIONS Dec 31 2017 recognised reversed used Dec 31 2016

Audit provision 213 213 0 (180) 180

Provisions for uninvoiced expenditure on property

0 0 0 0 0

Provisions for property operating costs 1,805 1,805 0 (976) 0 976

Provisions for bonuses (MIS) 1,331 1,247 0 (306) 390

Total 3,349 3,265 0 (1,462) 1,546

CHANGE IN PROVISIONS Dec 31 2016 recognised reversed used Dec 31 2015

Audit provision 180 180 0 (207) 207

Provisions for uninvoiced expenditure on property

0 0 (1,744) (17,746) 19,490

Provisions for property operating costs 976 976 0 (2,676) 0 2,676

Provisions for bonuses (MIS) 390 390 0 (953) 953

Total 1,546 1,546 (1,744) (21,852) 23,326

Note 14. TRADE PAYABLES

TRADE PAYABLES Dec 31 2017 Dec 31 2016 Dec 31 2015

To other parties 16,647 11,445 14,033

To related parties 0 0 0

Total 16,647 11,445 14,033

Ageing of trade payables:

As at Dec 31 2017 Total Not past due

Past due

<90 days 91–180 days 181 – 360 days

>360 days

To related parties 0 0 0 0 0 0

To other parties 16,647 16,647 0 0 0 0

Trade payables 16,647 16,647 0 0 0 0


Past due

<90 days 91–180 days 181 – 360 days

>360 days


To other parties 11,445 11,445 0 0 0 0

Trade payables 11,445 11,445 0 0 0 0

(PLN ‘000)



Past due but collectible

<90 days 91–180 days 181 – 360 days

>360 days


To other parties 14,033 12,617 1,416 0 0 0

Trade payables 14,033 12,617 1,416 0 0 0

Note 15. RENTAL INCOME

Rental income includes rents, service and maintenance

charges and direct recharge invoices for service costs.

The tenant base is highly diversified, with individual ten-

ants’ shares in total rental income remaining low, under

10%.

RENTAL INCOME 2017 share Jan–Dec

2017 Jan–Dec

2016 Jan–Dec

2015

Investments Assets 99% 124,829 106,573 71,550

Including in closed-end investment funds 23% 29,411 29,692 18,657

Development Assets 1% 929 126 197

Other Assets 0% 0 1,033 626

Total 100% 125,758 107,732 72,373

The higher rental income resulted primarily from an in-

crease in office space occupancy in new projects com-

pleted in 2016 and 2015:

· the Royal Wilanów mixed-use building in Warsaw,

· the Beta-Gamma and Delta office buildings in the Euro-

centrum complex;

and from the recognition of income from a retail project

of Oberhausen Sp. z o.o., whose income and expenses for

the period May–December 2017 have been fully consol-

idated.

The Group presents its rental income based on the aver-

age rent for the lease agreement term, which means that

any changes in the rent rate during the rental term (rent

free periods) are recognised over the term of the lease

agreement.

Note 16. OPERATING EXPENSES BY NATURE

OPERATING EXPENSES Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Amortisation and depreciation 404 380 345

Raw materials and consumables used 22,398 22,101 20,137

Services 15,110 10,305 6,551

Taxes and charges 8,077 6,191 1,229

Salaries and wages 3,442 2,812 1,885

Cost of share-option plan 1,718 3,022 3,656

Other expenses 1,726 1,154 1,770

Total 52,875 45,965 35,573

(PLN ‘000)


Note 17. GAINS AND LOSSES ON INVESTMENT PROPERTY REVALUATION

The Group measures its properties at fair value at least

at each reporting date. Revaluation gains or losses are

recognised in profit or loss of the current period. The

Group’s profit or loss is closely linked to price movements

in property markets, which are driven by rent levels, oc-

cupancy rates, changes in yields, changes in interest

rates, construction costs, availability of bank financing,

EUR/PLN exchange rates, and overall credit market con-

ditions.

INVESTMENT PROPERTY REVALUATION 2017 share Jan – Dec

2017 Jan – Dec

2016 Jan – Dec

2015

Investments Assets 98% (81,482) 77,248 75,451

Including in closed-end investment funds 24% (20,157) 3,049 9,939

Development Assets 1% (1,250) 660 4,713

Other Assets 1% (490) (3,057) (5,205)

100% (83,222) 74,852 74,959

Investment property revaluation adjustment due to accrual basis presentation of rental in-come

(1,501) (5,962) (8,435)

Revaluation of residential properties 0 0 (7,770)

Total (84,723) 68,889 58,754

The loss from property revaluation which amounts PLN

83,222 thousands, composes of gain on property value

increase of PLN 32,419 thousand and loss on foreign ex-

change of PLN 115,641 thousand.

The property revaluation adjustment due to accrual basis

presentation of rental income results from the presenta-

tion of such income based on the average effective rent

for the rental agreement term.

Note 18. FINANCE INCOME AND COSTS

INTEREST INCOME Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Interest on deposits 720 913 851

Interest on loans advanced 1,463 1,741 1,797

Total 2,183 2,654 2,648

INTEREST EXPENSE Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Interest on borrowings and finance leases (28,301) (40,663) (31,222)

Interest on notes (11,724) (10,805) (6,785)

Other interest (68) (248) (256)

Total (40,093) (51,716) (38,263)

OTHER FINANCE INCOME AND COSTS Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Net foreign exchange losses 50,282 (31,226) (4,639)

Issue costs (1,755) (1,385) (1,880)

Valuation of derivative instruments 1,465 (1,750) (3,512)

Other (3,265) (7,684) (2,529)

Total 46,727 (42,045) (12,560)

The decrease in interest expense on both bank borrow-

ings and notes results from debt rollover. The new fi-

nancing terms are much more favourable for the Group

than in previous financial years.

The Group measures financial liabilities at amortised

cost, in accordance with IAS 39. Any gains or losses aris-

ing from the measurement are recognised in profit or

loss as an adjustment to interest expense on bank bor-

rowings and finance leases. In 2017, the adjustment

(PLN ‘000)


dereased interest expense by PLN 3,635 thousand (for 12

months 2016: increase PLN 1,986 thousand).

Net foreign exchange gains result from unrealised for-

eign exchange differences on financial liabilities denomi-

nated in EUR, contracted at an exchange rate signifi-

cantly higher than the rate applicable at the end of 2017

reporting date.

Valuation of derivatives includes valuations of forward

contracts, IRS and CAP hedging instruments, which

hedge future cash flows related to the planned repay-

ment and redenomination of bank borrowings.

Note 19. CURRENT AND DEFERRED INCOME TAX

INCOME TAX EXPENSE Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Current income tax (548) (535) (757)

Deferred income tax (13,014) 2,439 771

Tax expense recognised in the consolidated statement of profit or loss and other comprehensive income

(13,562) 1,904 14

CURRENT INCOME TAX Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Profit before tax 3,847

33,307 56,206

Corporate income tax (13,562) 1,904 14

Effective income tax rate (share of income tax in profit be-fore tax)

352.55% (5.72%) (0.02%)

RECONCILIATION OF EFFECTIVE TAX RATE Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Profit before tax 3,847 33,307 56,206

Reconciling items between the Group’s accounting profit and taxable profit

Income of non-taxable entities (23,175) 23,691 (25,192)

Gains on investment property revaluation 84,723 (68,889) (11,342)

Tax depreciation of property (45,088) (41,538) (23,744)

Interest on liabilities not paid (6,381) 7,938 16,726

Interest on loans advanced not received (1,463) (12,489) 49,500

Non-taxable income (465) (7,007) 0

Impairment losses on assets 3,558 3,881 0

Provision for costs 3,265 2,818 2,677

Unused provisions for expenses 0 0 (1,938)

Non-tax-deductible expenses 2,867 3,385 0

Deduction of tax losses brought forward 10,553 (9,826) (28,984)

Change in unused tax losses 63,249 (5,901) 0

Unrealised foreign exchange differences (60,796) 29,983 816

Other 36,685 30,624 (34,799)

Taxable profit 71,379 (10,023) (74)

Tax expense (13,562) 1,904 14

(PLN ‘000)


Tax losses which could be used in the future by Group’s entities, according to the estimation future tax profit:

Tax losses carried: Amount To use in the period:

Loss carried in 2013 - 2017 13,343 2018

Loss carried in 2014 - 2017 25,180 2019

Loss carried in 2015 - 2017 47,917 2020

Loss carried in 2016 - 2017 9,564 2021

Loss carried in 2017 6,917 2022

Total 102,921 -

DEFERRED TAX ASSETS

Dec 31 2017 recognised reversed used Dec 31 2016

Losses deductible from future taxable in-come

19,555 16,027 0 (2,005) 5,533

Unpaid interest on financial liabilities 917 917 0 0 (2,129) 2,129

Foreign exchange losses 844 844 0 (7,338) 0 7,338

Other 574 574 0 (591) 591

Total 21,890 18,362 0 (12,063) 15,591

DEFERRED TAX LIABILITIES


Unpaid interest on loans advanced 17,509 14,785 0 0 2,724

Revaluation of investment property 1,391 19 0 0 1,372

Foreign exchange losses 5,838 5,838 0 (781) 781

Other 0 0 (548) 0 548

Total 24,738 20,641 (548) (781) 5,425

DEFERRED TAX ASSETS


Losses deductible from future taxable in-come

5,533 13,365 (14,399) (1,954) 8,521

Unpaid interest on financial liabilities 2,129 2,129 0 0 (621) 621

Foreign exchange losses 7,338 7,338 0 (2,893) 0 2,893

Other 591 591 (2,076) 0 2,076

Total 15,591 23,423 (16,475) (5,468) 14,111

DEFERRED TAX LIABILITIES


Unpaid interest on loans advanced 2,724 2,373 0 0 351

Revaluation of investment property 1,372 (3,176) 0 0 4,548

Foreign exchange losses 781 781 0 (1,050) 1,050

Other 548 548 (435) 0 435

Total 5,425 526 (435) (1,050) 6,384

Deferred tax on investment property revaluation












(PLN ‘000)








Note 20. NOTES TO THE STATEMENT OF CASH FLOWS

ITEM Dec 31 2017 Dec 31 2016

Cash in the statement of financial position 193,326 156,550

Exchange differences on measurement of cash 0 0

Total cash and cash equivalents disclosed in the statement of cash flows 193,326 156,550

ITEM Dec 31 2017 Dec 31 2016

Foreign exchange gains/losses: (50,412) 42,591

Exchange differences on measurement of financial liabilities (58,124) 45,875

Exchange differences on translating foreign operations 7,712 (3,284)

Interest and profit distributions 38,017 48,584

Interest accrued on loans advanced (1,356) (1,741)

Interest accrued on bank borrowings 28,301 40,663

Interest accrued on notes 11,724 10,805

Interest accrued on bank deposits (720) (913)

Other interest 68 (231)

Gain/(loss) from investing activities 85,359 (54,118)

Property revaluation 84,723 (68,598)

Profit attributable to non-controlling interests 7,777 (5,272)

Loss on sale of inventories, net of write-downs from previous years 0 8,668

Share in net profit/(loss) of equity-accounted entities (8,678) 0

Derecognition of financial instrument 1,537 11,084

Change in liabilities, net of borrowings 3,888 (2,875)

Change in liabilities in the statement of financial position 5,202 (2,588)

Other items (1,314) (287)

Change in receivables (15) (427)

Change in receivables in the statement of financial position (2,906) 3,454

Adjustment for impairment losses on receivables (3,558) (3,881)

Other items 6,449 0

Change in provisions 5,687 1,208

Change in provisions in the statement of financial position 5,879 (17,748)

Use of provisions for purchase of investment property 0 19,490

Other items (192) (534)

(PLN ‘000)


Note 21. SURETIES PROVIDED

Surety pro-vider

Beneficiary Type of security Expiry

Capital Park S.A.

Alferno In-vestments Sp. z o.o.

Surety securing the re-payment of investment and VAT financing facil-ities for up to 200% of the facilities amount.

The surety is valid until the company has transferred through accounts held with the bank rent from tenants in an amount of no less than PLN 190 thousand per month for six consecutive months. The first month for the fulfilment of the condition is September 2018.

Capital Park S.A. also assumed an obligation towards

Bank Ochrony Środowiska, which provides financing for

the Neptun House project in Gdańsk, to support the pro-

ject SPV (Capital Park Gdańsk Sp. z o.o.) if it is unable to

service the facility (both principal and interest) when

due. The support agreement remains effective until ap-

proved financial statements for 2019 are submitted and

all of the following conditions are met:

• all the covenants (net debt/EBITDA and current ratio) are complied with;

• in accordance with the provisions of the invest-ment facility agreement, the SPV’s DSCR is above 1.1;

• a debt servicing deposit in an amount equal to three monthly credit instalments (principal and interest) is provided for the Bank’s benefit.

CP Retail BV, a subsidiary of Capital Park S.A., assumed an

obligation towards Erste Group Bank AG, i.e. the bank fi-

nancing the redevelopment of ETC Swarzędz (SO SPV50

Sp. z o.o.), to provide financial support should the the

project monitorr determine cost overruns, up to 10% of

the project budget. The agreement is effective until the

date on which the bank-appointed project monitor sub-

mits a report on completion of the construction, includ-

ing confirmation that the project budget has not been ex-

ceeded.

Note 22. GROUP’S ASSETS PLEDGED AS SECURITY

To secure the repayment of the Group companies’ bor-

rowings, including interest, a number of security instru-

ments were provided to the financing banks,

including in particular:

• promissory notes,

• declarations of submission to enforcement,

• powers of attorney over bank accounts,

• assignment of claims under existing and future

rental contracts, insurance policies, construc-

tion contracts and performance bonds,

• registered pledges over existing and future

shares in subsidiaries,

• deposits,

• subordination agreements granting priority for

satisfaction of claims under borrowings before

any other claims.

In addition, a number of mortgages were estab-

lished on properties owned by the Group compa-

nies, The total value of which as at December 31st

2017 was PLN 233,293 thousand and EUR 597,011

thousand.

Note 23. OTHER CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As at December 31st 2017, the Group had the following

investment commitments:

• of PLN 3,316 thousand concerning completion of a

construction process already in progress, under an

agreement with the general contractor and other

contractors for the Hampton by Hilton project in

Gdańsk,

• of PLN 26,632 thousand concerning completion of

stage one of the Art. N project (former Norblin fac-

tory), under an agreement with a contractor of the

foundation works.

These commitments will be financed with cash held by

the Group and with proceeds from existing credit facili-

ties.

(PLN ‘000)


Note 24. CAPITALISED BORROWING COSTS

In accordance with IAS 23, the Group recognises borrow-

ing costs incurred as part of a construction process as an

increase in the value of the investment property and re-

lated inventories. These are mainly cost of credit facilities

and notes which were used to finance the project (inter-

est expense, fees and exchange rate differences).

CAPITALISED BORROWING COSTS Dec 31 2017 Dec 31 2016 Dec 31 2015

Investment property 924 1,914 5,027

Total 924 1,914 5,027

Note 25. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the

net profit for a given period attributable to holders of or-

dinary shares by the weighted average number of out-

standing ordinary shares in that period.

Diluted earnings per share are calculated by dividing the

net profit for a given period attributable to holders of or-

dinary shares by the weighted average number of out-

standing ordinary shares in that period adjusted for the

effect of dilutive options and dilutive redeemable prefer-

ence shares convertible into ordinary shares.

CALCULATION OF LOSS (EARNINGS) PER SHARE – ASSUMPTIONS Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Net profit/(loss) from continuing operations (1,938) 29,939 43,952

Profit/(loss) from discontinued operations 0 0 0

Loss/(profit) reported for the purpose of calculating basic earnings per share

(1,938) 29,939 43,952

Dilutive effect 0 0 0

Loss/(profit) reported for the purpose of calculating diluted earn-ings per share

(1,938) 29,939 43,952

NUMBER OF SHARES OUTSTANDING Dec 31 2017 Dec 31 2016 Dec 31 2015

Weighted average number of shares reported for the purpose of calculating basic earnings per share

106,411 105,629 105,246

Effect of dilutive ordinary shares 950 745 1,440

Unexercised warrants 1,135 886 1,740

Weighted average number of ordinary shares reported for the pur-pose of calculating diluted earnings per share

107,361 106,374 106,685

Net loss/(earnings) per share (PLN)

Basic (0.02) 0.28 0.42

Diluted (0.02) 0.28 0.41

The entire loss/profit was generated from continuing operations. Note 26. FINANCIAL INSTRUMENTS

The primary financial instruments used by the Group’s

companies include credit facilities, loans, notes/bonds,

derivatives, and trade payables. The Group uses credit fa-

cilities, loans to finance its day-to-day operations. The

Group companies hold financial assets, such as trade re-

ceivables, loans advanced, derivatives, cash, and short-

term deposits.

According to its policy, the Group does not trade in finan-

cial instruments.

The table below presents a comparison of all the carrying

amounts and fair values of the Group’s financial instru-

ments, broken down into individual classes and catego-

ries of assets and liabilities.

(PLN ‘000)


Values of individual categories of financial instruments:

FINANCIAL ASSETS Carrying amount

Class of financial instruments Dec 31 2017 Dec 31 2016 Dec 31 2015

Receivables and loans 73,624 74,909 64,963 Receivables and loans

Trade receivables 11,944 10,359 9,523

Other receivables 14,561 13,239 17,529

Loans advanced 47,119 51,311 37,910

Financial assets at fair value through profit or loss, including:

3,566 4,187 11,085 Financial assets at fair value through profit or loss

Derivative financial instruments 3,566 4,187 11,085

Cash and cash equivalents 193,326 156,550 113,607 Receivables and loans

FINANCIAL LIABILITIES Carrying amount

Class of financial instruments Dec 31 2017 Dec 31 2016 Dec 31 2015

Other financial liabilities 1,303,402 1,232,064 1,015,073

Financial liabilities bearing interest at variable rates 1,155,346 1,232,064 1,015,073

bearing interest at fixed rates 148,056 0 0

Other financial liabilities 4,483 10,953 50,479

Financial liabilities Finance lease liabilities 0 0 41,198

Derivative financial instruments (IRS) 4,483 10,953 9,281

Trade payables 39,127 28,045 48,381 Financial liabilities

Trade payables 16,647 11,445 14,033

Other liabilities 22,480 16,600 34,348

Hierarchy of assets and liabilities measured at fair value

The Group carries the following assets measured at fair

value:

- investment property (Level 3 in the hierarchy, Note 2)

- derivatives instruments (hierarchy level 2) - recognised

in the consolidated financial statements based on valua-

tions obtained from banks with which relevant agree-

ments have been signed. The measured transactions are

unregulated OTC instruments. The data provided in the

bank's valuation refer to the stated exercise date of the

derivative. The figures are presented in the table above.

Credit risk exposure is capped at fair value. The carrying

amounts of both financial assets and financial liabilities

are equal to their fair values, which follows from the fact

that the Group measures derivative financial instruments

at fair value, while other items are measured at values at

which individual assets or liabilities could be sold or pur-

chased.

The table below presents the Group’s income and other gains and costs and other losses on financial instruments,

broken down into individual classes and categories of assets and liabilities.

FINANCIAL ASSETS

Interest/Foreign exchange differences/Measurement at amor-tised cost

Dec 31 2017 Dec 31 2016 Dec 31 2015

Receivables and loans (1,996) (8,125) 5,910

- trade receivables (3,558) (3,881) 0

- other receivables 720 913 851

- loans advanced 1,463 1,741 1,797

- derivatives (621) (6,898) 3,262

(PLN ‘000)


FINANCIAL LIABILITIES

Interest/Foreign exchange differences/Measurement at amortised cost

Dec 31 2017 Dec 31 2016 Dec 31 2015

Other financial liabilities 66,755 (47,162) (28,756)

- bearing interest at variable rates 64,984 (47,162) (28,756)

- bearing interest at fixed rates 1,771 0 0

Trade payables (41) (256) 140)

- trade payables (32) (179) (98)

- other liabilities (9) (77) (42)

Note 27. FINANCIAL RISK MANAGEMENT

The Group’s business activities expose it to a number of

various financial risks, in particular interest rate risk, cur-

rency risk, credit risk, and liquidity risk. The parent’s Man-

agement Board reviews and establishes rules for manag-

ing each of these types of risk; the rules are briefly dis-

cussed below. The Group also monitors the risk of market

prices with respect to the financial instruments it holds.

FINANCIAL RISK FACTORS Financial assets and liabilities as at December 31st 2017, December 31st 2016 and December 31st 2015

Types of assets, liabilities and receivables exposed to market risk

Dec 31 2017

Total including exposed to currency risk

including exposed to interest rate risk

Investment property 2,174,397 2,095,143 0

Financial liabilities 1,307,885 1,207,488 1,158,821

Cash and receivables 267,868 119,731 6,895

Dec 31 2016

Types of assets, liabilities Total including exposed to

currency risk including exposed to interest

rate risk


Financial liabilities 1,243,017 141,844 1,232,064


Dec 31 2015

Types of assets, liabilities Total including exposed to

currency risk including exposed to interest

rate risk


Financial liabilities 1,065,552 595,103 1,056,272


INTEREST RATE RISK

The Group is exposed to interest rate risk inherent in the

nature of its business and the type of financing sources

used (interest and principal payments). Variable-rate

borrowings and debt instruments make the Group’s cash

flows sensitive to interest rate fluctuations. The Group

monitors its interest rate risk exposure on an on-going

basis and assesses its potential impact on the Group’s

profit or loss. To minimise the exposure, the Group en-

ters into derivative transactions, including interest rate

swaps and CAP options.

The table below presents sensitivity of the profit or loss

before tax for the 12 months of 2017, 12 months of 2016

and 12 months of 2015 to reasonably probable fluctua-

tions in interest rates on a ceteris paribus assumption

(related to interest-bearing assets and liabilities):

Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

(PLN ‘000)


Effect on profit or loss before tax and on eq-uity

1pp increase in interest rates

1pp decrease in

interest rates


1pp decrease in interest rates


1pp decrease in interest rates

Financial liabilities (4,951) 2,621 (3,027) 1,272 (4,040) 3,701

Loans and receivables 69 (69) 513 (513) 379 (379)

Total (4,882) 2,552 (2,514) 759 (3,661) 3,322

If as at December 31st 2017 annual interest rates on bank

borrowings and debt securities denominated in PLN had

been 1 pp higher than the current level, ceteris paribus,

the Group's profit or loss for the period and its equity for

the twelve months of 2017 would have been PLN 4,882

thousand lower than the current level. If the respective

interest rate had been pp lower than the current level,

then the financial result for the financial year and the

Group's equity for the twelve months of 2017 would

have been PLN 2,552 thousand higher than the current

level (for the twelve months of 2016: PLN 2,514 thousand

lower than the current level and PLN 759 thousand

higher than the current level, respectively), chiefly as a

result of higher/lower interest expense on floating rate

loans, borrowings and bonds.

The above calculations take account of the hedging ef-

fect of the contracts for financial instruments presented

in Note 11.

CURRENCY RISK

The key sources of currency risk for the Group include :

the nature of its business (with revenue denominated in

EUR), as well as buy and sell transactions and financing

cash flows related to repayment of borrowings denomi-

nated in currencies other than its functional currency.

The Group mitigates the risk by using natural hedges,

matching revenues and expenses for the same currency,

or by using derivative instruments to hedge its foreign-

currency transactions.

The table below presents sensitivity of the Group’s pre-

tax profit or loss (arising from changes in the fair value of

assets, including in particular investment property and li-

abilities) and equity to possible fluctuations in EUR/PLN

exchange rate, on a ceteris paribus assumption:

Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2015

Effect on profit or loss before tax and on eq-uity

1 pp depreciation

of PLN against EUR*

1 pp apprecia-

tion of PLN against EUR*

1 pp depreciation

of PLN against EUR*

1 pp apprecia-

tion of PLN against EUR*

1 pp depreciation

of PLN against EUR

1 pp apprecia-

tion of PLN against EUR

Investment property and financial liabilities

10,074 (10,074) 23,654 (23,654) 19,347 (19,347)

* Exchange rates used: reporting date rate (December 31st 2017) of EUR 1= PLN 4.1709, and the same rate plus 1 pp, i.e. EUR 1 = PLN 4.2126.

If the złoty had depreciated/appreciated by 1 percentage

point against the euro, ceteris paribus, the Group’s profit

or loss for the 12 months of 2017 would have been PLN

10,074 thousand higher/lower (12 months of 2016: PLN

23,654 thousand), mainly due foreign exchange

losses/gains on translation of investment properties and

financial liabilities denominated in the euro.

The above calculations do not take account of the hedg-

ing effect of the contracts for financial instruments pre-

sented in Note 11.

CREDIT RISK

Credit risk is related primarily to cash and cash equiva-

lents, deposits with banks, loans advanced as well as

credit exposure to tenants, which involves mainly unre-

alised receivables. The Group mitigates the risk by enter-

ing into transactions with reputable firms with sound

credit standing, by demanding that rental contracts be

secured with rental deposits or bank guarantees, usually

in the amount of triple monthly rentals, and by diversify-

ing cash deposits (the Group has relationships with a rel-

atively large number of banks). For more details, see

Note 9.

As regards the Group’s financial assets such as cash and

cash equivalents, financial assets available for sale and

some derivatives, the credit risk exposure is capped at

fair value of the instrument.

As at December 31st 2017, December 31st 2016 and De-

cember 31st 2015, past due receivables were as follows:

(PLN ‘000)


Past due

Dec 31 2017 Total Not past due < 90 91 -180 181 – 360 >360


Other receivables 14,561 14,561 0 0 0 0

Loans advanced 47,119 47,119 0 0 0 0

Total 85,013 73,804 4,145 2,237 2,563 2,264

Past due




Loans advanced 55,311 55,311 0 0 0 0

Total 83,179 74,764 4,153 1,712 1,005 1,545

Past due


Trade receivables (gross) 9,956 1,713 5,496 1,622 755 370


Loans advanced 37,910 37,910 0 0 0 0

Total 65,395 57,152 5,496 1,622 755 370

LIQUIDITY RISK

The Group seeks to maintain balance between the conti-

nuity of financing of its investment activities and timely

repayment of debt by securing financing from various

sources, including bank and non-bank borrowings,

notes/bonds or finance leases.

The Management Board manages liquidity risk by moni-

toring budgets of the Group’s investment projects and

maturities of its financial liabilities, and by forecasting op-

erating cash flows.

The Management Board monitors performance of all

credit facility and lease agreements on an on-going basis.

The table below presents the Group’s financial liabilities

by maturity as at December 31st 2017, December 31st

2016 and December 31st 2015, based on contractual un-

discounted payments.

Dec 31 2017 Total > 3 months 3–12 months

1−3 years 3–5 years > 5 years

Interest-bearing borrowings and lease liabilities

1,093,568 20,761 62,231 202,694 769,574 38,308

Notes in issue 209,834 12,104 41,499 156,231 0 0

Trade and other payables 39,127 16,647 11,123 2,111 9,246 0

Derivatives 4,483 50 202 919 3,151 161

Total 1,347,012 49,562 115,055 361,955 781,971 38,469

(PLN ‘000)



1−3 years 3–5 years > 5 years


919,491 17,725 53,176 129,970 266,263 452,357

Notes in issue 170,101 977 112,062 57,062 0 0

Trade and other payables 11,445 11,445 0 0 0 0

Derivatives 10,281 168 503 1,347 2,759 5,504

Total 1,111,318 30,315 165,741 188,379 269,022 457,861


1− 3 years 3–5 years > 5 years


913,438 11,747 35,242 109,013 156,184 601,253

Notes in issue 152,114 771 0 151,343 0 0

Trade and other payables 48,381 48,381 0 0 0 0

Derivatives 9,281 1,259 3,778 943 943 2,357

Total 1,123,214 62,158 39,020 261,299 157,127 603,610

Note 28. CAPITAL MANAGEMENT

The main objective of capital management is to maintain

a safe capital structure.

NET DEBT RATIO Dec 31 2017 Dec 31 2016 Dec 31 2015

Interest-bearing borrowings, lease liabilities and notes 1,303,402 1,243,017 1,065,552

Cash and cash equivalents (193,326) (156,550) (113,607)

Net debt 1,110,076 1,086,467 951,945

Total assets 2,471,102 2,337,450 2,152,521

Net debt to total assets 45% 46% 44%

Note 29. EMPLOYEES

AVERAGE NUMBER OF STAFF UNDER EMPLOYMENT CONTRACTS Dec 31 2017 Dec 31 2016 Dec 31 2015

Management Board 4 3 4

Administration 4 2 3

Other 6 3 4

Total 14 8 11

Note 30. REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY PERSONNEL

GROSS REMUNERATION Dec 31 2017 Dec 31 2016 Dec 31 2015

Management Board 3,755 6,761 4,247

Supervisory Board 360 417 416

Total 4,115 7,178 4,663

(PLN ‘000)


The Board Members who received remuneration in 2017:

• Jan Motz − PLN 1,985 thousand

• Marcin Juszczyk − PLN 1,210 thousand

• Kinga Nowakowska − PLN 559 thousand.

The Supervisory Board Members who received remuneration for serving on the Board in 2017:

• Anna Frankowska − PLN 120 thousand

• Katarzyna Ishikawa − PLN 120 thousand

• Jacek Kseń − PLN 120 thousand.

No loans were advanced by Capital Park S.A. to Members of the Management Board or the Supervisory Board in 2017.

INCENTIVE SCHEME

The purpose of the Incentive Scheme is to create incen-

tives that encourage, retain and motivate the Eligible Per-

sons – members of the Company’s Management Board

(“Primary Eligible Persons”) and other employees of the

Company who are not members of the Management

Board, named at the discretion of the Management

Board („Secondary Eligible Persons”) – to work towards

increasing shareholder value by enabling them to acquire

Company shares.

The detailed terms and assumptions of the Incentive

Scheme are set out in a resolution of the Extraordinary

General Meeting of Capital Park S.A. dated July 28th

2011, later amended on September 30th 2013 and March

21st 2017, and the Rules of the Incentive Scheme (at-

tached to the resolution).

Key terms and assumptions of the Incentive Scheme:

• As part of the Incentive Scheme, the Company is au-

thorised to issue up to 7,218,738 registered subscrip-

tion warrants carrying rights to acquire a total of

7,218,738 Series D ordinary bearer shares in the

Company, at the issue price of PLN 1 per share.

• The subscription warrants may be inherited, but may

not be encumbered and are not transferable.

• The number of warrants to be acquired on each suc-

cessive allocation date depends on the following eco-

nomic criteria: increase in net asset value and stock

price growth, to ensure alignment between the inter-

ests of the management staff and the shareholders of

Capital Park S.A.

• Until the date of preparation of these financial state-

ments, Eligible Persons were allocated Series A–I war-

rants.

• A–G Series subscription warrants have been acquired

by Primary Eligible Persons only, H and I Series war-

rants have been acquired by Primary and Secondary

Eligible Persons, and subscription warrants of subse-

quent Series J–M may be acquired by both Primary

and Secondary Eligible Persons.

• The allocation dates for Series A–I warrants are pre-

sented in the table below; the allocation dates for Se-

ries J–M may fall no later than two months after the

issue of full-year or half-year financial statements, au-

dited or reviewed by a qualified auditor.

• Dates for the exercise of rights from the Series A–E

warrants are presented in the table below. All rights

to acquire shares carried by Series F–G warrants will

expire on December 31st 2019, while the rights car-

ried by Series H–M warrants – on June 30th 2021.

• Mr Michał Koślacz, former member of the Manage-

ment Board, maintaind the right to take up Series D

shares in exercising the rights carried by Series E–G

warrants.

Mr Jerzy Kowalski, despite not being a member of the

Management Board, has the right to take up Series D

shares in exercising the rights carried by Series E war-

rants and he did exercise this right on December 28th

2017.

• Pursuant to a resolution of the Extraordinary General

Meeting of March 21st 2017, Series F warrants and

Series G warrants were issued on May 17th 2017 and

May 15th 2017 to Ms Kinga Nowakowska. The alloca-

tion date of Series F warrants was May 31st 2016, and

of Series G warrants – September 29th 2016.

(PLN ‘000)


WARRANTS ALLOCATED AND EXERCISED

Se-ries

Allocation date

Exercise date Jan

Motz Jerzy

Kowalski Marcin

Juszczyk Michał Koślacz

Kinga Nowakow-

ska

Secondary Eligible

Persons

A Jan 3 2014 Jan 14 2015 - - 302,012 302,012 - -

B May 31 2014 Jun 1 2016 - - 426,841 426,841 - -

C Sep 29 2014 Sep 30 2016 - - 85,189 85,189 - -

D Apr 24 2015 Apr 24 2017 8,840 8,839 46,840 46,840 - -

E Dec 25 2015 Dec 28 2017 45,089 45,090 10,590 10,590 - -

F May 31 2016 - 45,089 - 10,590 10,590, 45,089 -

G Sep 29 2016 - 127,874 - 30,034 30,034 127,874 -

H May 17th

2017 - 141,918 - 94,612 - 94,612 141,918

I Nov 21 2017 - 37,056 - 24,704 - 24,704 37,055

*Additionally: Jan Motz on January 12th 2018, and Marcin Juszczyk on January 4th 2018 and on February 5th 2018 Michał Koślacz.

For more information on Company shares held by

Management Board members, see Note 10 to these

financial statements.

The Black-Scholes model was applied to estimate the

value of the subscription warrants.

As part of remeasurement of the Incentive Scheme as

at December 31st 2017, it was assumed that a total of

3,053,751 warrants would be exchanged for shares.

Based on the assumed number of warrants and the

current price of Company shares, the total value of the

Incentive Scheme was estimated at PLN 14,091 thou-

sand. The total cost of the Incentive Scheme is ex-

pensed over time throughout the term of the Scheme.

Capital reserve from the Incentive Scheme as at De-

cember 31st 2017 was PLN 10,040 thousand. The dif-

ference between capital reserves from measurement

of the Incentive Scheme as at December 31st 2017 and

as at December 31st 2016 was charged to costs, which

is presented in the table below:

COST OF INCENTIVE SCHEME MEASUREMENT Dec 31 2017 Dec 31 2016 Dec 31 2015

Cost of incentive scheme measurement/adjustment to cost of incentive scheme measurement

805 1,917 2,581

Provision for cost of bonuses related to warrants 913 1,105 1,075

Total 1,718 3,022 3,656

Note 31. TRANSACTIONS WITH THE QUALIFIED AUDITOR

On June 20th 2017, the Supervisory Board of Capital

Park S.A. passed a resolution to appoint PKF Consult Sp.

z o.o. Sp.k as the auditor of the financial statements of

Capital Park S.A. for the year ended December 31st 2017

and of the consolidated financial statements of the Cap-

ital Park Group for the year ended December 31st 2017.

FEES PAID OR DUE FOR THE FINANCIAL YEAR Dec 31 2017 Dec 31 2016 Dec 31 2015

For audit of the full-year and review of interim separate and consoli-dated financial statements

403 417 311

For other assurance services 0 0 68

Total 403 417 379

(PLN ‘000)


Note 32. RELATED-PARTY TRANSACTIONS

Receivables from related parties un-

der loans Liabilities to related parties under

loans

Dec 31 2017 Dec 31 2016 Dec 31 2017 Dec 31 2016

Patron Wilanów S.à r.l 33,790 32,375 0 0

Oberhausen Sp. z o.o.* 0 6,210 0 0

SO SPV 50 Sp. z o.o. 6,830 6,457 0 0

Jan Motz 6,499 6,269 0 0

Total 47,119 55,311 0 0

Other receivables from

related parties Other liabilities to

related parties

Dec 31 2017 Dec 31 2016 Dec 31 2017 Dec 31 2016

Rezydencje Pałacowa Sp. z o.o. 186 186 0 0

Oberhausen Sp. z o.o.* 0 359 0 0

Jan Motz 0 0 148 0

Marcin Juszczyk 0 0 74 53

Myecolife Sp. z o.o. 5 0 1 54

Varsovia Food Company Sp. z o.o. 92 191 0 0

Invipay S.A. 54 0 0 0

Masketan Nicholas Motz 0 0 0 0

Total 337 736 223 107

Interest income on

loans advanced Interest expense on

borrowings

Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2017 Jan–Dec 2016

Patron Wilanów S.à r.l 756 1,403 0 0


SO SPV 50 Sp. z o.o. 370 9 0 0

Jan Motz 230 231 0 0

Total 1,463 2,356 0 0

Revenue from sale of services Cost of purchased services

Jan–Dec 2017 Jan–Dec 2016 Jan–Dec 2017 Jan–Dec 2016

SO SPV 50 Sp. z o.o. 869 717 0 0


Jan Motz 0 0 1,884 2,147

Marcin Juszczyk 0 0 1,154 636

Kinga Nowakowska 0 0 528 613

Myecolife Sp. z o.o. 125 52 103 93

Varsovia Food Company Sp. z o.o. 649 667 94 901

Invipay S.A. 462 0 15 0

Masketan Nicholas Motz 3 9 151 236

Total 2,215 2,007 3,929 4,626

* On April 26th 2017, the Group acquired 47% of shares in Oberhausen Sp. z o.o. thus gaining full control over the entity due to the

holding of 100% of its share capital

(PLN ‘000)


Note 33. TAX SETTLEMENTS

Tax settlements and other regulated areas of activity are

subject to inspection by administrative authorities, which

are authorised to impose significant fines and other sanc-

tions. The lack of reference to established legal regula-

tions in Poland gives rise to ambiguity and inconsistency

of applicable regulations. Differences in the interpreta-

tion of tax legislation are frequent, both between govern-

mental authorities and between those authorities and

businesses, leading to uncertainty and conflicts.

Tax settlements may be subject to tax inspection for a

period of five years from the end of the calendar year in

which the tax payment was made. Such inspections may

result in additional tax liabilities being imposed on the

Group companies.


















For more information, see Section 7.8 of these financial

statements and the Directors’ Report on the operations

of the Capital Park Group in the period ended December

31st 2017 (Risk factors and threats: risks associated with

real estate valuation and presentation of deferred tax).

Note 34. EVENTS SUBSEQUENT TO THE REPORTING DATE

Increase in the Company’s share capital

Capital increase from PLN 106,483,550 to

PLN 106,594,909, effected as a result of delivery of

111,359 Series D bearer shares, issued as part of a con-

ditional share capital increase through the exercise of

rights attached to 111,359 Series D subscription war-

rants, was registered with the National Court Registry on

February 28th 2018.

Merger of subsidiaries

On January 31st 2018, pursuant to a resolution of the

Extraordinary General Meeting of CP Management Sp. z

o.o. dated December 22nd 2017, the following subsidi-

aries: DT-SPV 12 Sp. z o.o., Capital Park Opole Sp. z o.o.,

Silverado Investments Sp. z o.o., Vera Investments - Bis

Sp. z o.o., Elena Investments Sp. z o.o., Cp Invest S.A.

were merged with CP Management Sp. z o.o.

Redemption Notes serie E

On March 19th 2018 the Group redeemed notes serie E in amount PLN 11,115 thousand.

(PLN ‘000)


Warsaw, March 17th 2017 Warsaw, March 19th 2014

SIGNATURE OF THE PERSON WHO PREPARED THE FI-NANCIAL STATEMENTS:

Małgorzata Koc Chief Accountant SIGNATURES OF MANAGEMENT BOARD MEMBERS: Jan Motz

Kinga Nowakowska

President of the Management Board Member of the Management Board Marcin Juszczyk Member of the Management Board

CAPITAL PARK S.A. ul. Klimczaka 1

02-797 Warsaw, Poland

Phone: +48 22 318 88 88 Fax: +48 22 318 88 89 [email protected]

www.capitalpark.pl

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