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Directors’ Report on the Operations of Capital Park S.A. in the six months ended June 30th 2013

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DIRECTORS’ REPORT ON THE OPERATIONS

OF CAPITAL PARK S.A. IN 2014

Directors’ Report on the operations of Capital Park S.A. in the financial year from January 1st to December 31st 2014

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DIRECTORS’ REPORT ON THE OPERATIONS

OF CAPITAL PARK S.A. IN 2014

Warsaw, March 2015


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TABLE OF CONTENTS

LETTER FROM THE MANAGEMENT BOARD .................................................................................................................. 4

INTRODUCTION ........................................................................................................................................................... 5

1 THE COMPANY ................................................................................................................................................. 6

2 OPERATIONS OF CAPITAL PARK S.A. AND THE CAPITAL PARK GROUP IN 2014 ............................................... 12

3 FINANCIAL STANDING AND ASSETS OF CAPITAL PARK S.A. ............................................................................ 18

4 STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE STANDARDS ............................................... 22


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LETTER FROM THE MANAGEMENT BOARD

To our great satisfaction, 2014 saw the completion of another

stage of our growth strategy presented in the Company's

prospectus. The activities we are undertaking enhance the

Company's fundamental value, but in 2014 this was not yet

reflected in our stock price.

In implementing the strategy we adopted and presented before

the IPO, we took a number of measures which are described in

more detail in this Report.

However, we would like to begin by highlighting certain 2014

achievements of which we, as the Management Board, are most

proud:

As planned, we completed Phase 1 of the Eurocentrum Office

Complex project, an environmentally-friendly premium-class

office building offering low running costs. We are happy to

report that, as at the date of this Report, we have already

commercialised 70% of the 42,000 sqm of the building's gross

leasable area. In the autumn of 2014, we launched Phase 2 of

this project.

The Royal Wilanów project is progressing on schedule and within

budget. With six months still left to the opening, we have already

leased out 50% of the available space.

We have obtained a building permit for our flagship project:

revitalisation of the post-industrial area of the Former Norblin

Factory, which enjoys great popularity among prospective

tenants. Commercialisation of the retail area is currently under

way, in line with our unique Make Stories not Stores concept.

We have successfully closed another year at Real Estate Income

Assets FIZ AN, the investment fund under our management. In

2014, certificate holders received dividend at an annualised rate

of 7% of the capital invested. In 2015 we want to continue to

develop investment products based on retail and office projects

generating stable cash flows. To that end, the Group's strategy

envisages partially divesting assets and generating income from

active management of our property portfolio.

Unfortunately, vacancy rates on the Warsaw office property

market continued to rise throughout 2014, which translated into

lower average rents. Although the level of commercialisation of

our new projects is on the rise, the value of our properties is

determined based on average market figures; therefore, the

assumptions adopted by property appraisers drove down the

valuation of the Group's properties and we reported a net loss at

year end.

Our strategy remains focused on building the Company value

through consistent implementation of projects featured in our

current portfolio, as well as identification of new investment

opportunities. Our focus is on properties with a potential for

value growth based on their redevelopment and active

management.

We aim at closing 2015 with a property portfolio where 75% (in

terms of value) of the projects have been completed and largely

commercialised, which should drive up our rental income. The

consistent growth in the occupancy rates of our projects is an

effect of the premium quality of Capital Park's properties,

combined with our key competitive advantage - the Office Plus

concept, which reflects our experience in property management,

effective building technologies and ability to respond quickly to

the evolving needs of tenants. We expect that the Office Plus

concept will not only offer added value to our tenants, but also

facilitate further effective commercialisation of our properties,

despite an oversupply of new commercial projects and an

pressure on rents on the Warsaw office space market.

Bearing in mind that the sector in general is valued by the

market at a major discount to book value, and the Capital Park

Group is no exception, we hope that we, and our Investors, will

see the market price match the fair value of our Company as

soon as possible.

On behalf of the Management Board of the Capital Park Group

and all of our team, we are taking this opportunity to thank you

for your unwavering support and assistance in our endeavours to

achieve the Company's strategy.

Jan Motz

Jerzy Kowalski

Michał Koślacz

Marcin Juszczyk


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INTRODUCTION

The Capital Park Group is one of the leading and most dynamically developing investment firms on the Polish real property

market. For over ten years, the Group has been engaged in the execution and management of real property projects, specialising

in complex property development and revitalisation projects that generate above-average margins.

Since its inception, the Group has completed approximately 100 investment transactions and currently manages a property

portfolio of 75 projects throughout Poland, with a total area of around 249,000 sqm. The Group manages its own projects as well

as projects owned by financial institutions (investment fund management companies).

Capital Park S.A. (the “Company”) began its operations on November 12th 2010 as a holding company, consolidating the Capital

Park Group’s operations consisting in the execution of investment projects. Since July 28th 2011, the Company has been the parent

of the CAPITAL PARK Group (the “Group”) and has prepared consolidated financial statements.

On December 13th 2013, Capital Park S.A. was first listed on the Warsaw Stock Exchange, and has since attracted leading pension

funds and investment fund management companies as investors in its shares.


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1 THE COMPANY

GROUP STRUCTURE

As at December 31st 2014, the Capital Park Group comprised 45 entities, including Capital Park S.A. (the “Company”), the parent,

and 44 subsidiaries directly or indirectly controlled or jointly controlled by the Company, the Open Museum of the Former Norblin

Factory Foundation (Fundacja Otwartego Muzeum Dawnej Fabryki Norblina), as well as the investment fund Real Estate Income

Assets FIZ AN and its nine companies. The Group’s property and projects are managed by CP Management Sp. z o.o.

Below is presented the structure of the Group as at December 31st 2014.

Notes:

1 CP Retail B.V. holds 15% of investment certificates of Real Estate Income Assets FIZ AN (“REIA FIZAN”). As at this report publication date, the Group controls REIA FIZAN.

2 REIA FIZ AN's subsidiary. The Group holds a 15% equity interest in the company indirectly through FIZ AN investment certificates. As at the Prospectus Date, the Group controls FIZAN and its SPVs.

3 A subsidiary of CP Property SCSp. and CP Property Sp. z o.o. (REIA FIZ AN's subsidiaries). CP Property Sp. z o.o. is the general partner and CP Property SCSp. is the limited partner in the company. The Group is entitled to a 15% share of the company's profits or losses indirectly through REIA FIZ AN investment certificates. As at the Prospectus Date, the Group controls REIA FIZAN and its SPVs.

4 CP Management Sp. z o.o. holds 667 shares (25%) in DT-SPV 12 Sp. z o.o., and Vera Investments – Bis Sp. z o.o. holds 1,973 shares (75%).


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5 ArtN Sp. z o.o. is the founder of the Open Museum of the Former Norblin Factory Foundation. 6 The remaining 50% of the shares in Patron Wilanow S.à r.l., a joint venture SPV, are held by Real Management S.A. Patron Wilanow S.à r.l. holds 100% of the shares in Rezydencje Pałacowa Sp. z o.o. and RM1 Sp. z o.o. 7 A subsidiary of Patron Wilanow S. à r.l. The Group indirectly holds 50% of shares in the company's share capital and the right to a 64% share in its profits. 8 Sapia Investments Sp. z o.o. is the general partner of Sapia Investments Sp. z o.o. Sp. k., and Jacek Nikiel is its limited partner. 9 Vera Investments - Bis Sp. z o.o. was established by way of a merger of 14 Group companies. Capital Park S.A. holds 41,710 shares (73.81%) in Vera Investments - Bis Sp. z o.o., and CP Management Sp. z o.o. holds 14,800 shares (26.19%) in the company.

CHANGES IN THE GROUP STRUCTURE

Changes in the structure of Real Estate Income Assets FIZ AN (closed end private equity investment fund)

In May 2014, the special purpose vehicles of Real Estate Income Assets FIZ AN, i.e. CP Property Sp. z o.o. SPV 1 SKA, CP Property

Sp. z o.o. SPV 2 SKA, CP Property Sp. z o.o. SPV 3 SKA, CP Property Sp. z o.o. SPV 4 SKA, CP Property Sp. z o.o. SPV 5 SKA, and CP

Property Sp. z o.o. SPV 6 SKA (“SPVs”) changed their legal form from partnerships limited by shares (spółka komandytowo-

akcyjna) to limited partnerships (spółka komandytowa). On May 13th 2014, CP Property SCSp of Luxembourg was established, to

which FIZ AN contributed assets in the form of its SPVs.

Establishment of new SPVs

On April 9th 2014, CP Retail (SPV 1) Sp. z o.o. was established as a company wholly-owned by CP RETAIL B.V. of the Netherlands.

The special purpose vehicle was established by the Group to pursue new investment objectives.

On August 12th 2014, CP Retail (SPV 2) Sp. z o.o. was established as a company wholly-owned by Capital Park S.A. of Warsaw. The

special purpose vehicle was established by the Group to pursue new investment objectives.

On September 16th 2014, CP Invest S.A. was established as a company wholly-owned by Capital Park S.A. of Warsaw. The object

of the company is to carry out the activities of a financial holding company.

Liquidation of SPVs

On May 15th 2014, the Extraordinary General Meetings of the following SPVs: Felipe Investments Sp. z o.o., Calista Investments

Sp. z o.o., Capital Park Opole Sp. z o.o. Sp. kom., Delphine Investments Sp. z o.o., and Emily Investments Sp. z o.o. resolved to

dissolve the companies and close their liquidation. As at December 31st 2014, the operations of all these SPVs had been

discontinued and they had been deleted from the National Court Register.

Merger of subsidiaries

On January 28th 2014, a merger plan was executed to combine the following SPVs of the Group: Roan Investments Sp. z o.o.,

Pablo Investments Sp. z o.o., Octavio Investments Sp. z o.o., Camael Investments Sp. z o.o., Cressida Investments Sp. z o.o., Makai

Investments Sp. z o.o., Capital Park TMI Sp. z o.o., Tetrao Investments Sp. z o.o., Capone Investments Sp. z o.o., Marco

Investments Sp. z o.o., Doria Investments Sp. z o.o., Foxy Investments Sp. z o.o., Vika Investments Sp. z o.o., and Vera Investments

Sp. z o.o. The merger was effected through incorporation of a new company, Vera Investments – Bis Sp. z o.o., to which all assets

of the merging companies were transferred in exchange for shares in the new company (merger by formation of a new company -

Art. 492.1.2 of the Commercial Companies Code). The share exchange ratio was 1:1, that is one share in a merging company was

exchanged for one share in the new company. The share capital of the new company was PLN 28,255,000, representing the sum

of the equity of the merged companies, and was divided into 56,510 shares with a par value of PLN 500 per share. Shares in the

new company were subscribed for by the merging companies’ shareholders at the exchange ratio.


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Contribution of shares in Dakota Investements Sp. z o.o. to CP Retail B.V.

On December 30th 2014, Capital Park S.A. sold its entire shareholding in its subsidiary Dakota Investments Sp. z o.o., owner of a

real property located in Warsaw, to its subsidiary CP Retail B.V. by way of a contribution of 103,246 shares with a total par value

of PLN 51,623,000 and a carrying amount of PLN 284,516,662 as at December 30th 2014, an equivalent of EUR 67,643,817, made

in exchange for 67,643,817 new shares in CP Retail B.V. with a par value of EUR 1 per share.

CORE BUSINESS OF THE COMPANY AND OF THE GROUP

The Company’s core business consists in the activities of a holding company. Since July 28th 2011, the Company has been the

parent of the Capital Park Group, whose business is closely connected with the commercial property market in Poland. The

Company is the Group's holding company, which means that its main business objective is to hold shares of other Group

companies. As a rule, the Company does not engage in managing the Group's properties. Property management services are

provided by CP Management Sp. z o.o. The companies making up the Group have been established or acquired for the purpose of

executing specific investment projects, and they do not pursue any business activities other than those related to the execution of

their assigned projects and the subsequent provision of lease services or sale of assets after the projects have been completed.

KEY PRODUCTS, THEIR VALUES AND VOLUMES, SHARE OF INDIVIDUAL PRODUCT GROUPS IN TOTAL SALES OF THE CAPITAL

PARK GROUP, AS WELL AS RELEVANT CHANGES DURING THE FINANCIAL YEAR

OPERATING SEGMENTS

The Group’s business falls into the following four reporting segments, which form strategic and organisationally separate business

divisions. The Group’s reporting segments conduct the following activities:

Office Segment – development or redevelopment, revitalisation and commercialisation, as well as management of office

projects.

Retail Segment – development or redevelopment, revitalisation and commercialisation, as well as management of retail

projects.

Mixed-Use Segment – development or redevelopment, revitalisation and commercialisation, as well as management of

mixed-use projects.

Value Added Segment – development and sale of residential projects and other projects not classified above.

In each of the segments, the Group purchases properties for development or redevelopment, prepares designs, manages

administrative work, arranges financing and performs construction work, while seeking potential tenants. On completion of the

construction work, the Group either administers or sells the existing building.

Below are presented the Capital Park Group’s investment properties and their allocation to the Group’s operating segments.


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Office Segment

Entity Project

Capital Park Racławicka Sp. z o.o. Warsaw, Racławicka Point

Dakota Investments Sp. z o.o. Warsaw, Eurocentrum – Alfa building

Dakota Investments Sp. z o.o. Warsaw, Eurocentrum – Beta and Gamma buildings (Phase 1)

Dakota Investments Sp. z o.o. Warsaw, Eurocentrum – Delta building (Phase 2)

Elena Investments Sp. z o.o. Gdańsk, Piano House

Sagitta Investments Sp. z o.o. Kraków, Topos

The Group’s property portfolio in the Office Segment comprises six projects. The largest one is the Eurocentrum Office Complex,

located in Warsaw, at Al. Jerozolimskie, comprising the existing Alfa, Beta and Gamma buildings and the Delta building currently

under construction.

Retail Segment

Entity Project

Aspire Investments Sp. z o.o.



Diamante Investments Sp. z o.o.

Olsztyn, Piłsudskiego

Warsaw, KEN

Street Mall Vis à Vis Toruń

Street Mall Vis à Vis Łódź

Marcel Investments Sp. z o.o. Street Mall Vis à Vis Radom

Nerida Investments Sp. z o.o. Lidzbark Warmiński, Capitol

Zoe Investments Sp. z o.o. Warsaw, Leszno,

Vera Investments Bis Sp. z o. o. Koszalin, Biskupa Domina

Real Estate Income Assets FIZAN

In the Retail Segment, the Group manages its retail assets, including high-street properties and local shopping malls under its own

Street Mall Vis à Vis brand.

Mixed-Use Segment

Entity Project

ArtN Sp. z o. o. Warsaw, Żelazna

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

Hazel Investments Sp. z o.o. Warsaw, Royal Wilanów

Orland Investments Sp. z o.o. Warsaw, Sobieskiego

The Group's portfolio includes four mixed-use projects, including three office and retail projects and one hotel project. As at

December 31st 2014, the Group's Royal Wilanów project was under construction, with two other investments, ArtN and Neptun

House, in the pipeline.


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Value Added Segment

Entity Project

Capital Park Kraków Sp. z o.o. Kraków, Apartamenty Stachowicza

CP Management Sp. z o.o. Gdańsk, Al. Słomińskiego

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

CP Management Sp. z o.o. Grudziadz, Kopernika

CP Management Sp. z o.o. Bydgoszcz, Pomorzanin

CP Management Sp. z o.o. Włocławek, Polonia

CP Management Sp. z o.o. Grudziądz, Tivoli

CP Management Sp. z o.o. Brodnica, kino Świt (movie theatre)

Dakota Investments Sp. z o.o. Warsaw, plot of land at Al. Jerozolimskie 136

Emir 30 Sp. z o.o. Unieście

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

RM1 Sp. z o.o. Warsaw, plot of land located in the vicinity of the Natoliński Park

Sander Investments Sp. z o.o. Rubinowy Dom

Sapia Investments Sp. z o.o. Sp. Kom. Warsaw, Śmiała

Vera Investments Bis Sp. z o. o. Grudziądz, Chełmińska

Vera Investments Bis Sp. z o. o. Gdynia, Marynarz

The Value Added Segment comprises residential projects, land and other non-core projects of the Group.

REVENUE STRUCTURE

Capital Park S.A. is a holding company and its primary source of income is interest on loans advanced to and dividends received

from other Group companies.


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THE GROUP’S PROPERTY PORTFOLIO

As at December 31st 2014, the Capital Park Group managed a portfolio

of 75 projects (including 3 projects managed through jointly-controlled

entities) in 37 cities across Poland, with a total area of 249,000 sqm

comprising office, retail, mixed-use, and other projects. As at December

31st 2014, the fair value of the portfolio was PLN 1.6 bn.

The Group's portfolio includes:

56 completed projects, generating rental income (including 39

properties of Real Estate Income Assets FIZ AN),

2 projects under construction,

17 projects in the pipeline, at various pre-construction stages.

The Group's three key projects account for 61% of the current value of its property portfolio:

Eurocentrum Office Complex – 70,000 sqm of office space located at Al. Jerozolimskie in Warsaw.

Royal Wilanów – 37,000 sqm of office and retail space located on the road to the Miasteczko Wilanów housing complex

in Warsaw,

ArtN – 64,000 sqm of a mixed-use office, service and retail space in a unique building on the corner of Żelazna and

Prosta streets.

Completion of those projects will be one of the key drivers of the Group's growth.

In June 2014, the Group completed Phase 1 of Eurocentrum Office Complex (Beta and Gamma buildings) – an office project

located in Warsaw, at Al. Jerozolimskie 124/136. The project owner is Dakota Investments Sp. z o.o., a subsidiary of the Company.

In December 2014, the Group completed Street Mall Vis à Vis Łódź, a retail and services complex located in Łódź at ul. Zgierska.

The investor is Diamante Investments Sp. z o.o., a subsidiary of the Company.

In 2014, two major projects with a total leasable space of approximately 49,000 sqm were completed. 2015 will see the

completion of five other projects with a total area of nearly 64,000 sqm. Land and other non-core projects account for only 7% of

the Group's total investments.

The share of completed projects increased from 31% at the end of 2013 to 54% at the close of 2014, from PLN 420m to PLN

898m. This means that the Group has consistently transformed its portfolio with a high initial share of land into a portfolio of

completed projects generating stable cash flows.

The Capital Park Group's portfolio includes four mixed-use projects at various stages of completion, with a total book value of PLN

537m as at the end of 2014 and a target value of PLN 1.5bn.

Mixed-use projects account for one-third of the Group's portfolio, and their value is expected to grow with the completion of two

projects, Royal Wilanów and ArtN. Combining office and retail functions is a major source of competitive advantage for the Group.

Retail space facilitates the commercialisation of a building on Warsaw's demanding office space market and offers attractive

options for the personnel and tenants.

Portfolio structure as at December 31st 2014, by value

Completed

54%

Under constructi

on 20%

In pipeline 26%

PLN 1.6bn


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SOURCES OF REVENUE AND RAW MATERIALS, INCLUDING INFORMATION ON DEPENDENCE ON ONE OR MORE SUPPLIERS OR

CUSTOMERS

SOURCES OF REVENUE

As at the end of the financial year 2014, the Group conducted its operations and generated revenue in the territory of Poland,

with a particular focus on the Warsaw market, where local investment projects accounted for 79% of the value of the Group’s

property portfolio, and 77% of the total leasable area. These projects included Eurocentrum Office Complex Phase 1 (Beta

Gamma building), completed in 2014; investments completed before 2014: Racławicka Point, Sobieskiego 104, the Alfa building;

projects under construction in 2014: Royal Wilanów, Eurocentrum Office Complex Phase 2 (Delta building); projects launched in

2014; and projects in the pre-construction phase in 2014: ArtN (a mixed-use project of industrial space revitalisation in the former

Norblin Factory).

2 OPERATIONS OF CAPITAL PARK S.A. AND THE CAPITAL PARK GROUP IN 2014

In 2014, companies of the Capital Park Group continued projects launched in previous years and carried out new investment

projects.

INVESTMENT PROJECTS COMPLETED IN 2014

In May 2014, the Group completed the first phase of the Eurocentrum Office Complex project (Beta and Gamma buildings) with

the area of approximately 43,000 sqm – an office project located in Warsaw, at Al. Jerozolimskie 124/136. The project owner is

Dakota Investments Sp. z o.o., a subsidiary of the Company. It will be a complex of three connected 15-storey class A buildings

(Beta, Gamma and Delta) with a total gross leasable area of ca. 70,000 sqm and a three-storey underground car park for ca. 600

vehicles. The complex was designed in accordance with sustainable development standards, as evidenced by the LEED Gold pre-

certification. The central location of the project, its top quality and environmentally-friendly solutions facilitating optimisation of

running costs have already won approval from international companies such as Unilever, Imtech Polska, Tebodin, Qumak, CEPD

Management (Pelion S.A.), Randstad Polska, Group One, Commarch, and Chiesi Poland.

In December 2014, the Group completed the Street Mall Vis à Vis Łódź project, a small convenience shopping centre, housing a

supermarket and a dozen or so service and retail outlets within an area of approximately 5,600 m². The project is located in Łódź,

at ul. Zgierska. The investor is Diamante Investments Sp. z o.o., a subsidiary of the Company.

INVESTMENT PROJECTS UNDER CONSTRUCTION

As at December 31st 2014, the following projects were under construction:

Royal Wilanów – a mixed-use project located in the Wilanów district of Warsaw. It is a five-storey class A office and retail building

with a total leasable area of ca. 37,000 sqm, including 7,000 sqm of retail space and nearly 30,000 sqm of office space, and a

three-storey underground car park with more than 900 parking bays. The project is scheduled for completion in August 2015.

Eurocentrum Office Complex Phase 2 (Delta building) – an office project located in Warsaw at Al. Jerozolimskie 124/136. The

project owner is Dakota Investments Sp. z o.o., a subsidiary of the Company. The second phase of the development is a 15-storey

building with more than 27,000 sqm of leasable space. Construction commenced in September 2014, with Erbud as the general

contractor. The project is scheduled for completion in Q4 2015.

http://www.urbanity.pl/mazowieckie/warszawa/erbud,f3


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MATERIAL EVENTS WITH A BEARING ON THE COMPANY'S AND THE GROUP’S OPERATIONS IN 2014

Registration of share capital increase

On February 14th 2014, the District Court for the capital city of Warsaw in Warsaw, 13th Commercial Division of the National

Court Register, registered an increase in the Company’s share capital from PLN 74,558,541 to PLN 104,744,107 through the issue

of 20,955,314 Series C ordinary bearer shares offered in a public offering, and 9,230,252 Series E ordinary bearer shares offered in

a private placement.

Early redemption of Series A notes

On July 9th 2014, the Company carried out an early redemption of 350,000 Series A bearer notes with a nominal value of PLN 100

per note and a total value of PLN 35,000 thousand, issued as part of a public offering on July 9th 2012 in line with the terms and

conditions of the notes defined in the invitation to acquire notes of June 15th 2012. The Company raised cash for the early

redemption through the issue of Series B three-year unsecured bearer notes with a total nominal value of PLN 35,000 thousand,

carried out on June 13th 2014. The notes were redeemed for cancellation.

SIGNIFICANT AGREEMENTS EXECUTED BY THE COMPANY IN 2014

SHAREHOLDER AGREEMENTS

The Company is not aware of any agreements significant to the Company's operations executed between its shareholders in 2014.

JOINT VENTURE AGREEMENTS

In 2014, there were no significant joint venture agreements between Capital Park S.A. and other entities.

INSURANCE CONTRACTS

Coverage

Insurer

Sum insured [PLN ’000]

Against claims relating to the Company's prospectus of November 14th 2013

AIG Europe Limited Sp. z o.o. Polish Branch 50,000

Against third-party liability of Management Board members

AIG Europe Limited Sp. z o.o. Polish Branch

100,000

Total

150,000

THIRD-PARTY CREDIT FACILITY AND LOAN AGREEMENTS EXECUTED IN 2014

No new credit facility or loan agreements were executed by the Company in 2014.

USE OF ISSUE PROCEEDS UNTIL THE DATE OF THIS REPORT

On February 17th 2014, Capital Park S.A. received proceeds from the initial public offering of PLN 132,355 thousand (proceeds of

PLN 136,210 thousand after the offering brokers' fees).

At the date of these financial statements, these proceeds have not been used in full.


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DEBT SECURITIES ISSUED AND REPAID IN 2014

On June 13th 2014, Capital Park S.A. issued 350,000 Series B three-year unsecured bearer notes with a nominal value of PLN 100

each and a total value of PLN 35,000 thousand, maturing on June 12th 2017. The notes bear interest at 6M WIBOR plus a margin

of 5.5%, payable every six months. The purpose of the issue was to refinance part of Series A notes by way of early redemption.

Since August 4th 2014, the notes have been listed on the ASO Catalyst market.

On September 23rd 2014, the Company issued 200,000 Series C three-year unsecured bearer notes with a nominal value of PLN

100 each and a total value of PLN 20,000 thousand, maturing on September 23rd 2017. The notes bear interest at 6M WIBOR plus

a margin of 5.3%, payable every six months. Since December 2nd 2014, the notes have been listed on the ASO Catalyst market.

On December 23rd 2014, Capital Park S.A. issued 538,855 Series D notes with a total value of up to PLN 53,885.5 thousand,

maturing on December 23rd 2017. The nominal value of one note is PLN 100 and the notes bear interest at 3M WIBOR plus a

margin of 4.3%. The value of valid subscriptions was PLN 53,885.5 and the reduction rate was 0.00% Since February 19th 2015,

the notes have been listed on the ASO Catalyst market.

LOANS ADVANCED IN 2014

In 2014, the Company advanced loans only to other Group companies, to finance projects carried out by SPVs. They were long-

term loans bearing an annual interest rate of 8.00%, i.e. 6M WIBOR plus margin.

As at December 31st 2014, the Company’s receivables under loans advanced to subsidiaries totalled PLN 396,228 thousand

(including interest of PLN 41,917 thousand). As at December 31st 2014, the loans were neither past due nor impaired. Loans

advanced by the Company are not collateralised by the subsidiaries’ assets.

As at December 31st 2014, the Company had receivables under loans advanced to a jointly controlled entity Patron Wilanow S.à

r.l. with a total value of PLN 28,780 thousand (including interest of PLN 5,767 thousand). Given the business outlook and the

expected deterioration in Patron Wilanow's liquidity position, Capital Park S.A. recognised an impairment loss of PLN 4,000

thousand. As a result, the carrying amount of the loans as at December 31st 2014, equal to their fair value, was PLN 24,780

thousand.

For key information on the largest loans, see Note 2 to the annual separate financial statements of Capital Park S.A. for the period

January 1st−December 31st 2014.

SURETIES AND GUARANTEES ISSUED AND RECEIVED IN 2014

On May 7th 2014, Capital Park S.A. signed an annex to a surety agreement with Alior Bank S.A. providing for joint and several

liability for a facility granted by the Bank to Diamante Investments Sp. z o.o., a subsidiary of the Company (the “Borrower”) for a

total amount of PLN 32,366 thousand. Under the annex, the surety will remain valid until such time as the Borrower obtains a

valid occupancy permit, establishes a mortgage in favour of the Bank on land lot No. 50/5 (KW LD1M/00118328/9), and achieves

a debt-service coverage ratio of 1.2, in accordance with the terms of the facility agreement.

As at December 31st 2014, all conditions for the release of the surety were met. For procedural reasons, the annex will expire in

March 2015.

MATERIAL RELATED-PARTY TRANSACTIONS CONCLUDED IN 2014 ON NON-ARM’S LENGTH TERMS

In 2014, Capital Park S.A. did not conclude any transactions with any subsidiary, jointly-controlled or related entity on non-arm’s

length terms.


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LITIGATION

As at December 31st 2014, the Company was not engaged in any single, or two or more, proceedings pending before a court,

arbitration tribunal or administrative authority, concerning the Company's liabilities or claims the value of which (related to a

single case, or two or more cases jointly) would represent at least 10% of the Company’s equity.

MATERIAL EVENTS SUBSEQUENT TO DECEMBER 31ST 2014

Material events subsequent to December 31st 2014 are presented in the 2014 separate annual financial statements, in Note 32.

DEVELOPMENT DIRECTIONS AND PROSPECTS OF THE COMPANY’S AND THE GROUP’S BUSINESS

The Group’s objective is to maximise its shareholder value through organic growth, i.e. by effective implementation of its business

plans for the existing project portfolio (particularly in Warsaw) and by purchasing new projects, given the growing importance of

the Polish market globally and the investment opportunities it offers − also in segments where the Group has not been present.

As market conditions become favourable, the Group will also seek to sell those of its completed projects which generate stable

income but show limited development potential. Even so, the Group may retain some interests in such projects, as was the case

with Real Estate Income Assets FIZ AN, earning additional income from management services.

The Group’s business strategy incorporates the following objectives:

Successful completion of projects in progress

Active management of the portfolio of income-generating and capital-growth assets

Identification of new investment opportunities.

TARGET STRUCTURE OF THE CAPITAL PARK GROUP

The Group adapts its structure depending on its current investment plans, by establishing new companies, or transforming or

combining existing ones.

In the immediate future, the Group plans to transfer significant assets as a non-cash contribution to its subsidiary CP Retail BV of

the Netherlands, comprising shares in Hazel Investments Sp. z o.o. and ArtN Sp. z o.o., which own large investment properties

currently under construction (Royal Wilanów) or at the pre-construction stage (the mixed-use project on the premises of the

former Norblin Factory).

RISK FACTORS AND THREATS

The Company's and the Group’s approach to risk management reflects its business model and relies on the knowledge and

experience of a committed management team. All investment decisions and progress of work on projects are discussed during

regular meetings of the Management Board. The risk areas described below and their effective management are also subject to

ongoing review by the Internal Control Department and the Audit Committee. Investment decisions which may carry potentially

higher risks or which involve considerable resources are also subject to review by the Investment Committee.

Given that Capital Park S.A., being the parent of the Capital Park Group, runs its business mostly through subsidiaries, below are

presented key risk factors which the Management Board believes to have the strongest bearing on the Group’s operations. The

list of risks discussed below is neither complete nor exhaustive, and therefore they may not be treated as the only risks to which

the Group is exposed. An exhaustive list of the risk factors which the Group considers material is presented in the base prospectus

prepared in connection with the PLN 100m public note issue programme, which was approved by the Polish Financial Supervision

Authority on November 24th 2014 and published on the Company's website.


16

EXTERNAL RISK FACTORS

RISK FACTORS POTENTIAL IMPACT RISK MITIGATING MEASURES

RISK OF MACROECONOMIC VOLATILITY

Deterioration of overall economic conditions globally and in Poland

Deterioration of economic conditions in the real property market and property development sector

Cyclical nature of the real property market

Deterioration of conditions in the financial sector

Changes in the Polish financial system – ongoing deregulation of open-ended pension funds (OFE)

Depreciation of the market value of properties

Limited ability to sell properties leading to loss of liquidity

Tenants’ bankruptcies negatively affecting the liquidity position

Drop in rents which may be obtained from lease of properties

Lower availability of credit

Lower demand or no demand for new note issues

Higher cost of financing

Appropriate selection of portfolio properties. Careful analysis of the location and quality of properties

Appreciation of the value of properties through regular repairs and upgrades

Choosing strong-brand tenants of sound financial standing. Entering into agreements with chain tenants and reputable institutions

Using diversified sources of debt financing

Diversification of financing sources and fostering good relations with leading financial institutions

Adding dividends and property management fees to income sources

FOREIGN EXCHANGE RISK

Fluctuations in foreign exchange rates, in particular the EUR/PLN exchange rate

Lower proceeds from sale of properties as expressed in PLN

Lower rental income

A drop of the EUR/PLN exchange rate leads to a decrease in the carrying amounts of real properties

The use of natural hedging by matching the lease currency with the credit facility currency. However, given the fact that EUR is the base currency in which the properties are valued, and the balance-sheet hedging is not full, the Group has and will continue to have an exporter’s profile. It is not possible to fully eliminate the foreign exchange risk

Limited use of derivative instruments available on the market

INTEREST RATE RISK

Interest rates going up

Interest rates going down

Increase in debt service costs caused by an increase in interest rates

Higher yields (decrease in the value of properties owned by the Group). Yields are strongly correlated with the risk free rates and may grow along with an increase in interest rates

Opposite situation: a decline in yields as a result of a decrease in interest rates pushing up the prices of properties that the Group wants to purchase

Pursuing a long-term management strategy with respect to income-generating assets

Continuous monitoring of the real property market and economic situation, and fine-tuning the adopted strategy

Use of interest rate swaps. Such transactions, however, do not cover 100% of the exposure. The degree of exposure coverage is a compromise between lower risk and higher cost

COMPETITION RISK

Actions by competitive companies

Actions by local private investors

Drop in rents and selling prices of properties

More unoccupied space/units

Increase in prices and costs of purchase of properties

Investment process becoming longer and more difficult

Careful selection of properties and taking advantage of opportunities emerging with respect to distressed assets

Building on experience in project execution and knowledge of the market to implement unique projects

Leveraging the Group’s financial and organisational potential


17

RISK FACTORS RELATED TO THE PROPERTY PORTFOLIO

RISK FACTORS POTENTIAL IMPACT RISK MITIGATING MEASURES

RISK RELATED TO LOSS OF TENANTS

Loss of office or retail space tenants, or difficulties in finding such tenants

Failure to acquire tenants for office space in Warsaw in connection with large oversupply

Loss of anchor tenant

Loss of income and liquidity due to:

Lower rental income

Inability to sell properties

Inability to raise bank financing

Careful choice of tenants

Cooperation with reputable external firms specialising in real property agency services

Attractive offering for tenants

Regular monitoring of tenants’ satisfaction and taking remedial action

Using deposits and bank guarantees as security under lease agreements

RISK RELATED TO PROPERTY VALUATION

Decrease in the value of properties recognised as a loss on revaluation

Adoption of erroneous assumptions leading to misevaluation of properties and implementation of wrong strategies for a given project

Lower than expected income from rents and sale of properties

Carrying amount of properties that fails to reflect their fair value

Cooperation with independent property appraisers

Careful choice of valuation methods

Valuation approval procedure consisting of several stages

Regular reviews of properties and monitoring of key assumptions

RISK RELATED TO PROJECTS UNDER CONSTRUCTION

Exceeding the budget

Failure by general contractors to meet the agreed quality standards and deadlines

Failure to obtain occupancy permits

Development margin erosion

Project delays leading to reduced rental income

Breach of covenants under bank financing agreements

Emergence of claims

Negative impact on the Group’s image and ability to lease space

Cooperation with reputable contractors of sound financial standing

Security mechanisms included in general contractor agreements

Ongoing monitoring and supervision of construction work by building inspectors or specialised external firms

Recruiting experienced specialists

Experience in property development projects and ongoing monitoring of the progress of work

RISK RELATED TO ADMINISTRATIVE PROCEDURES

Sluggish activity of Polish government authorities and offices

Actions by non-governmental organisations or owners of neighbouring properties and local residents

Lack of local zoning plans

Failure to receive or delayed receipt of permits and decisions, leading to delays in or abandonment of investment projects

Prolonged process of obtaining permits reducing profitability of investment projects

Revocation of permits

Drawing on experience in going through administrative procedures

Recruiting specialists in numerous areas, including finance, law, construction and administrative procedures


18

3 FINANCIAL STANDING AND ASSETS OF CAPITAL PARK S.A.

SELECTED FINANCIAL DATA FROM THE STATEMENT OF FINANCIAL POSITION

The table below presents the statement of financial position of Capital Park S.A. for the period from January 1st 2014 to

December 31st 2014. Comparative data are presented as at December 31st 2013.

ASSETS Dec 31 2014

% of balance-sheet total

Dec 31 2013


Non-current assets

Investments in subsidiaries 701,188

55.2%

676,996

56.1%

Non-current loans advanced to subsidiaries 421,008

33.2%

348,808

28.9%

Deferred tax assets 20,773

1.6%

7,501

0.6%

1,142,969

90.0%

1,033,305

85.6%

Current assets

Current loans advanced to subsidiaries 0

0.0%

24,679

2.0% Trade and other receivables 3,694

0.3%

137,428

11.4%

Current prepayments and accrued income 107

0.0%

201

0.0% Cash and cash equivalents 123,191

9.7%

11,672

1.0%

126,992

10.0%

173,980

14.4%

TOTAL ASSETS 1,269,961

100.0%

1,207,285

100.0%

EQUITY AND LIABILITIES Dec 31 2014


Dec 31 2013


Equity

Share capital 104,744

8.2%

74,559

6.2%

Share premium 882,863

69.5%

669,809

55.5%

Capital reserve from issue of shares pending registration 0

0

217,185

18.0% Capital from measurement of share-option plan 4,776

0.4%

1,734

0.1%

Retained earnings/(deficit) 4,198

0.3%

4,196

0.3% Net profit/(loss) for the current period (25,015)

-2.0%

24,543

2.0%

971,566

76.5%

992,026

82.2%

Non-current liabilities

Non-current loans from related parties 57,825

4.6%

57,190

4.7%

Liabilities under notes in issue 106,344

8.4%

98,126

8.1% Liabilities under bank borrowings 42,536

3.3%

40,919

3.4%

Deferred tax liabilities 21,292

1.7%

8,730

0.7%

227,997

18.0%

204,965

17.0%

Current liabilities

Liabilities under notes in issue 67,398

5.3%

3,670

0.3%

Trade payables 173

0.0%

4,053

0.3% Other liabilities and provisions 2,827

0.2%

2,571

0.2%

70,398

5.5%

10,294

0.9%

TOTAL EQUITY AND LIABILITIES 1,269,961

100%

1,207,285

100.0%

Discussion of key items of the separate statement of financial position as at December 31st 2014

Investments in subsidiaries

Investments in subsidiaries comprise the value of all shares held by the Company in subsidiaries and jointly-controlled entities.


19

Deferred tax assets

Deferred tax assets are amounts recoverable in respect of deductible temporary differences between the carrying amounts and

tax bases of assets and liabilities, as well as the carryforward of unused tax losses.

Trade and other receivables

Trade receivables comprise amounts receivable for products and services delivered. Trade receivables are recognised and carried

at amounts initially invoiced, less any impairment losses on doubtful receivables.

Current prepayments and accrued income

Current prepayments and accrued income primarily comprise the Company’s insurance costs expensed over time.

Cash and cash equivalents

Cash and cash equivalents carried on the balance sheet comprise cash at banks and cash in hand, as well as short-time deposits

with original maturity of up to three months.

Liabilities under notes in issue

Under this item, the Company presents notes in issue at amortised cost. The notes are listed on the Catalyst market.

Deferred tax liabilities

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences

between the carrying amounts and the tax bases of assets and liabilities. These include mainly interest accrued on loans advanced

which was not received as at the reporting date.

Trade payables

Current trade payables are measured at amounts payable.

Twelve months ended December 31st 2014 vs. the year ended December 31st 2013

The Company’s assets rose by PLN 62,676 thousand, to PLN 1,269,961 thousand as at December 31st 2014, mainly driven by an

increase in receivables under loans granted to subsidiaries and jointly-controlled entities. As at December 31st 2014, the main

items of assets were shares in subsidiaries (55.2%) and loans advanced to subsidiaries (33.2%).

As at December 31st 2014, equity represented 76.5% of the Company's equity and liabilities. The PLN 20,460 thousand decline in

the equity amount was due to the loss incurred by the Company in 2014.

Financial debt rose by PLN 73,563 thousand, to PLN 216,278 thousand, following two issues of Series C and D notes with a total

value of PLN 74,000 thousand, of which PLN 54,000 thousand was applied by the Company to finance early redemption of Series

A notes in January 2015.


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SELECTED FINANCIAL DATA FROM THE STATEMENT OF PROFIT OR LOSS

The following table presents the financial highlights from the statement of profit or loss of Capital Park S.A. for the period January

1 st - December 31st 2014.

2014

2013

Change

Change (%)

Revenue 292

976

(684) (70.1%)

Dividend income 27,618

16,489

11,129 67.5%

Other income 78

2

76 3,800.0%

Personnel costs (563)

(143)

(420) (293.7%)

Other expenses (2,215)

(2,881)

666 23.1%

Cost of share-option plan measurement (3,906) 1,731 (5,637) (325.6%)

Impairment losses on shares in subsidiaries (62,859)

(4,728)

(58,131) (1,229.5%)

Share in loss of jointly-controlled entities (12,682)

0

(12,682) -

Operating profit (54,237)

11,446

(65,683) (573.9%)

Interest income 24,096

30,458

(6,362) (20.9%)

Other finance income 10,077

915

9,092 993.7%

Interest expense (14,510)

(14,990)

480 3.2%

Other finance costs (3,830)

(2,293)

(1,537) (67.0%)

Profit (loss) before tax (38,404)

25,536

(63,940) (250.4%)

Income tax 13,389

(993)

14,382 1,448.3%

Net profit (25,015)

24,543

(49,558) (201.9%)

Discussion of key items of the separate statement of profit or loss and other comprehensive income for the period January 1st - December 31st 2014

Revenue

Revenue includes income from re-invoicing of the costs of projects carried out by SPVs.

Dividend income

The item includes income on dividends from related entities.

Personnel costs

Costs of remuneration of members of the Management Board and Supervisory Board.

Interest income

Interest income comprises income on loans advanced to subsidiaries and income on bank deposits.


21

Interest expense

Interest expense comprises interest payable under bank borrowings, notes and loans from related entities.

Other finance costs

The item comprises mainly the note issue costs expensed over time and costs of a mortgage provided by a subsidiary as security

for the notes in issue.

Financial results for the twelve months ended December 31st 2014 relative to the comparative period of 2013

Despite a PLN 11,129 thousand growth in its dividend income from subsidiaries, the Company posted a loss of PLN 25,015

thousand due to a considerable increase in impairment losses on shares in and loans to subsidiaries.

KEY ITEMS OF THE STATEMENT OF CASH FLOWS

The following table presents key items of the statement of cash flows of Capital Park S.A. for the period January 1st−December

31st 2014. Comparative data are presented for the period January 1st−December 31st 2013.

2014 2013 Change Change (%)

Cash at beginning of period 11,672

29,260

(17,588) (60.1%)

Cash flows from operating activities (2,460)

(1,849)

(611) (33.0%)

Net cash from investing activities (79,887)

(63,297)

(16,590) (26.2%)

Net cash from financing activities 193,866

47,558

146,308 307.6%

Cash at end of period 123,191

11,672

111,519 955.4%

The Company's investment cash outflows in 2014 were related primarily to loans provided to subsidiaries and jointly-controlled

entities, and acquisition of shares in subsidiaries.

PLN 193,866 thousand of net cash provided by financing activities comprised mostly proceeds from issues of shares and notes.

DISCUSSION OF DISCREPANCIES BETWEEN ACTUAL PERFORMANCE AND PUBLISHED FORECASTS

The Company did not publish any forecasts for 2014.

FINANCIAL RATIOS

Below are presented the Company’s selected financial ratios:

COMPANY’S LIQUIDITY RATIOS

Dec 31 2014 Dec 31 2013

Current ratio 1.8 16.9

Cash ratio 1.7 1.1

Current ratio (current assets/current liabilities) – year-on-year deterioration as a result of a rise in the Company’s current liabilities

following the issue of notes (maturing in July 2015).

Cash ratio (cash/current liabilities) – increase attributable to a considerable year-on-year growth of the Company’s cash at bank

following receipt of proceeds from the issues of shares and notes.


22

COMPANY’S DEBT RATIOS

Dec 31 2014 Dec 31 2013

Net debt ratio 13.4% 15.9%

Total debt ratio 23.5% 17.8%

Net debt ratio (net debt, i.e. interest-bearing notes, bank and non-bank borrowings less cash/equity + net debt) – year-on-year

drop as a result of an increase in cash (receipt of proceeds from the issue of shares and notes) and the loss incurred in 2014.

Debt ratio (total liabilities/total assets) – increase driven by an increase in liabilities, mostly following the issue of notes by the

Company.

ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT

In the Management Board’s opinion, the Company’s current and expected financial position is stable and there are no material

risks related to financial resources management, as evidenced by the Company’s safe liquidity and debt ratios. As at the date of

the financial statements, no events with a negative bearing on the Company’s future operations were reported.

FEASIBILITY OF INVESTMENT PLANS

At present, all operating activities of the Capital Park Group are carried out by the Company’s subsidiaries and jointly-controlled

entities. In line with the policy adopted by the Group to finance its operations, funds from banks are secured by individual SPVs,

responsible for separate investment projects. This strategy allows the Group to minimise the risk exposure of other projects and

mitigate the general business risk attributable to potential risks involved in individual projects.

The Group strives to have sufficient funds and available bank borrowings, and takes steps to secure financing on the best terms

achievable at a given time.

Since 2012, Capital Park S.A., as the Group’s parent, has also been financing development projects with proceeds from sale of

corporate notes. The Company issued notes with a total value of nearly PLN 175m, of which PLN 55m was repaid in January 2015.

They are partially secured three-year notes with a variable interest rate of 6M or 3M WIBOR plus margin. In 2013, the Company,

acting as a holding company, contracted a credit facility of EUR 10m to finance the business objects defined in its Articles of

Association.

Funds raised by the parent are transferred to its subsidiaries and jointly-controlled entities through long-term loans, acquisition of

notes or contribution of additional equity. All intra-Group transactions are executed on an arm’s length basis.

In the Management Board’s opinion, the Company is well-positioned to receive financing for its future investment projects.

Thanks to its reputation and a proven track-record, the Company has access to a number of financial institutions and diversified

sources of financing.

4 STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE STANDARDS

The set of corporate governance principles applicable to Capital Park S.A. is provided in the ’Code of Best Practice for WSE Listed

Companies’ attached as an appendix to WSE Supervisory Board Resolution No. 12/1170/2007 of July 4th 2007 concerning the

adoption of the ’Code of Best Practice for WSE Listed Companies’, as laid down by WSE Supervisory Board Resolution No.

17/1249/2010 of May 19th 2010, amended by WSE Supervisory Board Resolution No. 20/1287/2011 of November 19th 2011 and

WSE Supervisory Board Resolution No. 19/1307/2012 of November 21st 2012.


23

The consolidated text of the ’Code of Best Practice for WSE Listed Companies’ as applicable to the Company in 2014 is attached as

an appendix to WSE Supervisory Board Resolution No. 19/1307/2012 of November 21st 2012. The document is available on the

website of the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie S.A.) at http://www.corp-gov.gpw.pl.

Since the admission of Company shares to trading on the main market of the WSE, the Management Board has complied with all

corporate governance principles stipulated in the ’Code of Best Practice for WSE Listed Companies’, except the following:

i) Recommendation I.5 − where it refers to having in place a remuneration policy and rules of defining the policy.

The Company does not have in place a remuneration policy for the Supervisory Board and Management Board members or rules

of defining the policy. The Company is considering the possibility of establishing such policy and rules in the future.

ii) Recommendation I.9 – where it refers to ensuring a balanced proportion of women and men in management and

supervisory functions in companies.

As at the date of this statement of compliance, the Company does not ensure a balanced proportion of women and men on its

Management Board and Supervisory Board. There are no women among the four members of the Management Board. There are

two women among the six members of the Supervisory Board, however, the Company cannot give any assurance that this

proportion will be maintained in the future. Although the Company endorses the recommendation, it should be noted that the

Supervisory Board’s composition is determined by the shareholders at the General Meeting. The Company has a policy of

employing competent and creative individuals with appropriate professional experience and educational background.

iii) Recommendation I.12 – where it refers to enabling the shareholders to exercise their right to vote during a General

Meeting, either in person or through a proxy, from a location other than the venue of the General Meeting, using

electronic communication means.

Currently, the Company’s Articles of Association do not contain provisions that would enable the Company shareholders to

participate in a General Meeting using electronic communication means. Considering the provisions of Art. 4065 of the Polish

Commercial Companies Code, stating that companies may enable shareholders to participate in a General Meeting with the use

of electronic communication means only when their Articles of Association provide for such an option, the Company cannot

enable its shareholders to participate in a General Meeting using real-time electronic communication. Another reason why the

Company does not comply with the above recommendation is the excessively high cost of procurement of the appropriate

equipment and technical capabilities that would allow the Company to fulfil the tasks imposed by the recommendation, which is

incommensurate with the potential benefits to the shareholders.

iv) Recommendation IV.10 – where it refers to enabling shareholders to participate in a General Meeting using means

of electronic communication through:

1) real-time broadcast of General Meetings,

2) real-time two-way communication where shareholders may take the floor during a General Meeting from a location

other than the General Meeting.

The Company does not comply with the above recommendation because of the excessively high cost of procurement of the

appropriate equipment and technical capabilities that would allow the Company to fulfil the tasks imposed by the

recommendation, which is incommensurate with the potential benefits to the shareholders.

The Articles of Association provide that candidates to the Supervisory Board and members of the Supervisory Board are obliged to

submit, promptly after being appointed, a written statement to the Company to the effect that they meet the independence

criteria under Annex II to the Commission Recommendation of February 15th 2005 on the role of non-executive or supervisory


24

directors of listed companies and on the committees of the (supervisory) board, and advise the Company promptly if their status

changes during the Supervisory Board’s term of office.

In 2014, the Management Board decided to comply with the corporate governance recommendation provided for in Section

II.1.9a of the 'Code of Best Practice for WSE Listed Companies', which refers to recording the General Meeting in audio format and

making such recording available from the Company's website. The recommendation will be implemented as of the next General

Meeting.

Where the implementation of a corporate governance principle requires amendments to the Company’s corporate documents

(Articles of Association, Rules of Procedure for the Management Board, Rules of Procedure for the Supervisory Board, Rules of

Procedure for the General Meeting), the Management Board will take steps necessary to ensure that such amendments are

made. The Management Board also intends to recommend to the Supervisory Board and the General Meeting compliance with all

principles of the ’Code of Best Practice for WSE Listed Companies’, except as specified above.

Importantly, the decision whether or not to comply with certain principles stipulated in the ’Code of Best Practice for WSE Listed

Companies’ will be made by the Company shareholders and the Company’s Supervisory Board.

SHARE CAPITAL AND SHAREHOLDERS

SHAREHOLDERS

As at December 31st 2014, the Company’s share capital was PLN 104,744,107.00 and was divided into 104,744,107 shares with a

par value of PLN 1.00 per share, including:

1) 100,000 Series A ordinary registered shares,

2) 71,693,301 Series B ordinary registered shares,

3) 20,955,314 Series C registered shares,

4) 9,230,252 Series E registered shares,

5) 2,765,240 Series F registered preference shares, each carrying two votes at the Company’s General Meeting.

The table below presents shareholders with large holdings of Company shares as at December 31st 2014.

Shareholder

Number of shares

% ownership interest

Number of voting rights

% of total voting rights

CP Holdings S. à r. l. 77,759,836 74.23% 77,759,836 72.33%

Jan Motz 2,805,943 2.68% 5,571,183 5.18%

Other 24,178,328 23.08% 24,178,328 22.49%

Total 104,744,107 100.00% 107,509,347 100.00%

As at the date of this Report, the Company’s share capital was divided into 105,348,131 shares with a par value of PLN 1 per

share, including:

1) 100,000 Series A ordinary registered shares,

2) 71,693,301 Series B ordinary registered shares,

3) 20,955,314 Series C registered shares,

4) 604,024 Series D shares,


25

5) 9,230,252 Series E registered shares,

6) 2,765,240 Series F registered preference shares, each carrying two votes at the Company’s General Meeting.

The table below presents shareholders with large holdings of Company shares as at the date of this Report.

Shareholder

Number of shares

% ownership interest

Number of voting rights

% of total voting rights

CP Holdings S. à r. l. 77,759,836 73.81% 77,759,836 71.92%

Jan Motz 2,805,943 2.66% 5,571,183 5.15%

Other 24,782,352 23.52% 24,782,352 22.92%

Total 105,348,131 100.00% 108,113,371 100.00%

On March 3rd 2015, Series D shares were registered with the National Court Register. As a result, the Company's share capital

was increased from PLN 104,774,107 to PLN 105,348,131, by way of an issue of 604,024 Series D ordinary bearer shares, as part

of a conditional share capital increase through the exercise of rights attached to 604,024 subscription warrants.

CONTROL POWERS

Pursuant to Art. 13.1 and 2 of the Company’s Articles of Association, Jan Motz and Jerzy Kowalski, acting jointly as ‘the first

entitled group’, and CP Holdings s.à r.l. acting as ‘the second entitled group’, are vested with the special right to request that the

Management Board convene an Extraordinary General Meeting not later than within five weeks following such request, and to

request that certain items be placed on the agenda of such General Meeting. If an Extraordinary General Meeting is not convened

within two weeks from the request submission or if the requested items are not placed on the agenda of such General Meeting,

each entitled group is vested with the special right to convene an Extraordinary General Meeting and set its agenda.

Pursuant to Art. 19.3 of the Company’s Articles of Association, as long as the shareholders included in the first entitled group

jointly hold at least 5% of the total vote at the Company’s General Meeting, they are vested with the special right to appoint and

remove one member of the Supervisory Board.

Pursuant to Art. 19.4 of the Company’s Articles of Association, as long as the shareholders included in the first entitled group

jointly hold at least 2.1%, but less than 5%, of the total vote at the Company’s General Meeting, they are vested with the right to:

Nominate at least two candidates to the Supervisory Board, from among whom the General Meeting appoints one

member of the Supervisory Board. In such a case, if the General Meeting fails to appoint a member of the Supervisory

Board from among the candidates nominated by the first entitled group, the group will have the special right to appoint

one member of the Supervisory Board from among the candidates it nominated earlier. If the General Meeting appoints

to the Supervisory Board exclusively candidates which have not been nominated by the first entitled group, the group

will have the special right to remove one of the members appointed by the General Meeting and appoint a member of

the Supervisory Board from among the candidates it nominated earlier.

Demand that the General Meeting remove a member of the Supervisory Board appointed under the procedure referred

to above, provided that the group simultaneously nominates new candidates. If the General Meeting fails to remove

such member of the Supervisory Board, the first entitled group will be vested with the special right to remove such

member and appoint a member of the Supervisory Board from among the candidates it nominated earlier.

Pursuant to Art. 19.5 of the Company’s Articles of Association, as long as the shareholders included in the second entitled group

hold at least 5%, but less than 10%, of the total vote at the Company’s General Meeting, the group is vested with the special right

to appoint and remove one member of the Supervisory Board serving as the Chairperson of the Board.


26

Further, pursuant to Art. 19.6 of the Company’s Articles of Association, as long as the shareholders included in the second entitled

group hold at least 10%, but less than 25% (twenty-five percent), of the total vote at the Company’s General Meeting, the group is

vested with the special right to appoint and remove two members of the Supervisory Board, including the Chairperson of the

Board.

Additionally, pursuant to Art. 19.7 of the Company’s Articles of Association, as long as the shareholders included in the second

entitled group hold at least 25% of the total vote at the Company’s General Meeting, the group is vested with the special right to

appoint and remove three members of the Supervisory Board, including the Chairperson of the Board.

These rights can be exercised by delivering to the Company a written statement on the appointment or removal of (a) member(s)

of the Supervisory Board, signed by all members of a given entitled group in accordance with the rules of representation.

As at the date of this Report, Jan Motz and Jerzy Kowalski, comprising the first entitled group, jointly held 7.74% of the total vote

at the Company’s General Meeting, while CP Holdings S.à r.l., forming the second entitled group, held 71.92% of the total vote at

the Company’s General Meeting.

SHARES HELD BY MEMBERS OF THE MANAGEMENT AND SUPERVISORY BOARDS

As at December 31st 2014, the numbers and total par value of shares held by members of the Management Board were as

follows:

Number of shares

Par value [PLN ’000]

Jan Motz

2,805,943

2,806

Jerzy Kowalski

2,792,707

2,793

Michał Koślacz

18,245

18

Marcin Juszczyk 0 0

As at the date of this Report, the number and total par value of shares held by members of the Management Board were as

follows:

Number of shares

Par value [PLN ’000]

Jan Motz

2,805,943

2,806

Jerzy Kowalski

2,792,707

2,793

Michał Koślacz

320,257

320

Marcin Juszczyk 302,012 302

On January 14th 2015, Marcin Juszczyk and Michał Koślacz exercised their rights under subscription warrants by acquiring

302,012 Series D shares each, at the nominal price of PLN 1 per share. On March 3rd 2015, Series D shares were registered with

the National Court Register. As a result, the Company's share capital was increased from PLN 104,774,107 to PLN 105,348,131, by

way of an issue of 604,024 Series D ordinary bearer shares, as part of a conditional share capital increase through the exercise of

rights attached to 604,024 subscription warrants.

Members of the Management Board did not hold directly any shares in any of the SPVs of the Capital Park Group.

Members of the Supervisory Board did not hold shares in Capital Park S.A. or in other Group entities.


27

LIMITATIONS ON RIGHTS FROM SHARES

Limitations on exercise of voting rights

The Company’s Articles of Association stipulate no limitations on the exercise of voting rights.

Limitations on transfer of ownership rights to the Company’s securities

The 1,813,123 shares held by Jan Motz and 1,813,123 shares held by Jerzy Kowalski are subject to lock-up in the following way:

906,562 shares held by Jan Motz and 906,562 shares held by Jerzy Kowalski are locked up until the earlier of:

i) the lapse of three years after acquiring these shares by Jan Motz and Jerzy Kowalski, that is December 5th 2016,

and

ii) CP Holdings’ reaching a pre-defined minimum threshold of return on investment in the Company.

906,561 shares held by Jan Motz and 906,561 shares held by Jerzy Kowalski are locked up until Patron Wilanów S.à r.l

achieves a minimum return determined in accordance with the Investment Agreement.

AGREEMENTS KNOWN TO THE COMPANY WHICH MIGHT IN THE FUTURE CAUSE CHANGES IN THE SHAREHOLDINGS OF EXISTING

SHAREHOLDERS AND BONDHOLDERS

On December 3rd 2013, shareholders CP Holdings S.à r.l. and Jan Motz signed an agreement under which Jan Motz is

conditionally obliged to re-transfer to CP Holdings S.à r.l. 906,562 shares in Capital Park S.A. with voting preference, if CP Holdings

S.à r.l. does not achieve the rate of return provided for in the agreement. Conversely, if CP Holdings S.à r.l. achieves the rates of

return defined in the agreement, Jan Motz will have the right to receive up to 3,142,323 ordinary shares in Capital Park S.A.

On December 3rd 2013, shareholders CP Holdings S.à r.l. and Jerzy Kowalski signed an agreement under which Jerzy Kowalski is

conditionally obliged to re-transfer to CP Holdings S.à r.l. 906,562 ordinary shares in Capital Park S.A. if CP Holdings does not

achieve the rate of return provided for in the agreement. Conversely, if CP Holdings S.à r.l. achieves the rates of return defined in

the agreement, Jerzy Kowalski will have the right to receive up to 3,142,323 ordinary shares in Capital Park S.A.

RULES OF AMENDING THE ARTICLES OF ASSOCIATION

For an amendment to the Company’s Articles of Association to take effect, a relevant resolution must be adopted by the General

Meeting of Capital Park S.A. and a relevant entry must be made in the Register of Entrepreneurs of the National Court Register.

GENERAL MEETING

The General Meeting may be held as an annual or extraordinary meeting, and − as a corporate body − acts pursuant to the

provisions of the Commercial Companies Code and the Company’s Articles of Association.

Only those persons who are the Company’s shareholders at the record date, that is 16 days before the date of a General Meeting,

are entitled to attend the Meeting.

A General Meeting is validly held regardless of the number of shares represented.

Resolutions of the General Meeting are adopted by an absolute majority of votes, unless provisions of the Commercial Companies

Code or the Company’s Articles of Association provide otherwise. Resolutions of the General Meeting concerning removal of any

Management Board member are adopted by two-thirds majority of votes.

Voting at the General Meeting by postal ballot is not permitted. Also, it is not possible to hold a General Meeting with the use of

electronic means of communication.


28

A General Meeting is convened by the Management Board. The Supervisory Board may convene a General Meeting if the

Management Board fails to do so in due time, or an Extraordinary General Meeting if the Supervisory Board deems it advisable.

A General Meeting may be convened by the Company’s shareholders under their special rights referred to in Section 4.1.2 of this

Report.

A General Meeting is convened by way of a notice on the Company’s website and in the manner required for publication of

current reports pursuant to the Act on Public Offering. Such notice should be published at least 26 days before the date of the

General Meeting.

The powers and responsibilities of the General Meeting include:

review and approval of the Directors’ Report on the Company’s operations and the financial statements for the previous

financial year,

distribution of profit or coverage of loss,

approval of performance of duties by members of the Management Board and the Supervisory Board,

amendments to the Articles of Association,

increase or reduction of the share capital,

merger, demerger or transformation of the Company,

dissolution of the Company and its liquidation,

adoption of Rules of Procedure for the General Meeting and Rules of Procedure for the Supervisory Board,

review and resolution of proposals put forward by the Supervisory Board,

other matters reserved for the General Meeting under the provisions of the Articles of Association or the applicable

laws.

Approval of the General Meeting is not required for acquisition or disposal of real property, perpetual usufruct right, or interest in

real property or perpetual usufruct right.

MANAGEMENT BOARD

RULES OF APPOINTING AND REMOVING MANAGEMENT BOARD MEMBERS

In accordance with the Company’s Articles of Association, the Management Board may consist of one to four members. Members

of the Management Board are appointed for a joint five-year term of office. The number of members of the Management Board is

determined by the Supervisory Board. The Supervisory Board has the power to suspend from duties any or all members of the

Management Board, for a good reason, and to delegate members of the Supervisory Board to temporarily perform the duties of

members of the Management Board for up to three months. A member of the Management Board may also be removed from

office or suspended from duties by way of a resolution of the General Meeting.

COMPOSITION OF THE MANAGEMENT BOARD

As at December 31st 2014 and the date of this Report, the Management Board consisted of:

Jan Motz – President of the Management Board

Group’s co-founder and President of the Management Board of Capital Park S.A. since its inception. In 1986-2001, he was the

owner of Progressive Development Inc., a property development company running a number of building projects on the US

market; in 1988-1997, he was a co-owner of Real Management Inc. At the time of highest demand, Jan Motz’s construction


29

companies employed 1,500 staff, working on a number of construction projects executed simultaneously. In 1997–2007 he was a

co-founder and shareholder of Communication One Inc., a group that includes Call Center Poland S.A. – the leader of the Polish

call center service market. In the 1990s, Jan Motz was a shareholder in the group of Polish companies owned by Euro RSCG, one

of the leading European marketing companies. He studied at the Faculty of Veterinary Medicine of the SGGW Warsaw University

of Life Sciences.

Jerzy Kowalski – Member of the Management Board

Group’s co-founder and Member of the Management Board of Capital Park S.A. since its inception. In 1996-2006 he was a

member of the Management Board and shareholder of Kinoplex sp. z o.o. (Kinoplex S.A. from 2002), manager of the Multiplex

cinema chain in Poland. Since 2007, Jerzy Kowalski has served on the Management Boards of a number of subsidiaries. Since

2008, he has been a member of the Polish Business Roundtable (Polska Rada Biznesu), an organisation bringing together the CEOs

and owners of the largest Polish companies and international corporations operating in Poland. He studied at the Institute of

Applied Social Sciences of the University of Warsaw.

Marcin Juszczyk – Member of the Management Board, Investment Director

He has been with the Capital Park Group for over eleven years; Member of the Management Board of Capital Park S.A. since its

inception. In 1995-1997, he worked as a consultant at the business consulting agency Agencja Doradztwa Gospodarczego AM

Jesiołowscy, where he was responsible for enterprise valuations. In 1997-2001, he was a project leader at Normax Sp. z o.o.

(member of Hogart, an international business consulting group). In 2001-2006, he was Financial Director of Call Center Poland S.A.

In 2004-2005, he was Financial Director of the Capital Park Group, and has been the Group’s Investment Director since 2005. He

studied IT and Econometrics at the Kraków University of Economics. He qualified as a member of the Association of Chartered

Certified Accountants, and has held the FCCA title since 2010.

Michał Koślacz – Member of the Management Board, Financial Director

He has been with the Capital Park Group for ten years; Member of the Management Board of Capital Park S.A. since its inception.

Since 2005, he has been Financial Director of the Group. In 2001-2005 he was an auditor at a consultancy Salustro Reydel Polska,

where he specialised in audits of construction and property development companies. He also advised on prospectus drafting

projects. In 2003, he worked in France at RSM Salustro Reydel as an enterprise valuation specialist and an M&A advisor. He began

his professional career in 2000-2001 at ZCH S.A. as a financial analyst. He studied at the Silesian University of Technology in

Gliwice and the Silesian International Business School in Katowice, a business college established by universities from Poland, the

United Kingdom and France.

Changes in the composition of the Management Board

In the period January 1st–December 31st 2014 and as at the date of this Report, there were no changes in the composition of the

Management Board.

OPERATION OF THE MANAGEMENT BOARD

The Management Board manages the Company’s operations and assets, and represents the Company before courts, government

authorities and third parties. The Management Board makes decisions on all matters which are not in the exclusive competence

of the Supervisory Board or the General Meeting under the Articles of Association or the applicable laws.

The Management Board operates in accordance with the Commercial Companies Code, the Company’s Articles of Association and

its Rules of Procedure adopted by the Supervisory Board on November 18th 2013.


30

Management Board resolutions are adopted by an absolute majority of votes. In the event of a voting tie, the President of the

Management Board has the casting vote. The President of the Management Board is in charge of the Management Board’s work,

divides responsibilities between its individual members, convenes and chairs Management Board meetings and issues the

Company’s internal regulations. The President of the Management Board may authorise other persons to convene and chair

Management Board meetings and issue the Company’s internal regulations.

Under the Company’s Articles of Association, Management Board meetings may be held and Management Board resolutions may

be adopted using direct means of remote communication, including in particular video and conference calls.

Each Management Board member acting individually is authorised to represent the Company.

Under the Company’s Articles of Association, the Management Board is obliged to submit to the Supervisory Board a report on all

material events relevant to the Company’s business at least on a quarterly basis. The report should include data on the Company’s

revenue, costs and financial performance, in particular the quarterly, semi-annual and annual separate and consolidated financial

statements of the Company and the Group.

SUPERVISORY BOARD

RULES OF APPOINTING AND REMOVING SUPERVISORY BOARD MEMBERS

Pursuant to the Company’s Articles of Association, the Supervisory Board is composed of six members appointed for a joint five-

year term of office. Two Supervisory Board members are appointed and removed by the General Meeting, with the remaining

four members being appointed and removed by the Company’s shareholders under their special rights referred to in Section 4.1.2

of this Report.

COMPOSITION OF THE SUPERVISORY BOARD

As at December 31st 2014 and the date of this Report, the Supervisory Board consisted of:

Keith Breslauer – Chairman of the Supervisory Board

Founder of the Patron Capital Partners Group (1999), managing director at Patron Capital Advisers LLP and investment adviser for

Patron Group funds, in charge of all projects of investment funds of the Patron Capital Partners Group. Keith Breslauer began his

professional career in 1987 at Lehman Brothers. In 1993, he transferred to London, where he launched and managed the Principal

Finance Group, established to invest Lehman Brothers capital in financial institutions, as well as real property companies and

assets located throughout Europe. He also managed or supported investments in assets with a total value exceeding USD 16bn,

including a number of investments in property, mortgages and operating businesses (hotels, service companies and mortgage

lenders). Mr Breslauer also has extensive experience in corporate transactions, from mergers and acquisitions to raising capital

and debt, to providing structured finance. He holds an MBA from the University of Chicago and a Bachelor of Science degree from

the New York University School of Business.

Jacek Kseń – Independent Member of the Supervisory Board

Jacek Kseń has been involved with the financial markets for several decades. He has spent many years serving on the Supervisory

Boards of such companies as Wydawnictwa Szkolne i Pedagogiczne S.A., Polimex-Mostostal S.A., and AmRest Holdings S.E., and is

currently a Supervisory Board member of Sygnity S.A, NWAI Dom Maklerski S.A., ORBIS S.A. and Caspar Asset Management S.A.

He is also the Polish operations adviser to a top private equity fund, Advent International. In 2001-2007, he served as President of

the Management Board of Bank Zachodni WBK S.A. He graduated from the Poznań University of Economics, Foreign Trade

Department, and holds a Ph.D. in international financial markets from the Higher School of Planning and Statistics in Warsaw (now

the Warsaw School of Economics).


31

Shane Law – Member of the Supervisory Board

Shane Law is Chief Operating Officer at Patron Capital Advisers LPP (part of the Patron Capital Partners Group of Funds), which he

joined in 2003. Apart from serving as the COO, Mr Law focuses on the Patron Group’s corporate and related investments. Before

joining Patron Capital, he worked for six years in investment banking, focusing on European mergers, acquisitions and public

offerings, and before that he spent 3 years at Ernst & Young. Mr Law holds a Bachelor of Science degree from the University of

Durham, and is a qualified Chartered Accountant.

Matthew Edward Utting – Member of the Supervisory Board

Since 2000, Matthew Edward Utting has been Investment Director at Patron Capital Advisers LLP. Before that, he was an analyst

for Bank of Nova Scotia, Citibank and Bank of Montreal. He graduated from the University of Waterloo with a Master of Arts in

economics and a Bachelor of Arts in applied economics.

Anna Frankowska – Independent Member of the Supervisory Board

Ms Frankowska is an American attorney and partner at Weil, Gotshal & Manges – Paweł Rymarz Sp. k. She graduated from St.

Louis University with a degree of Master of Arts, and earned a title of Juris Doctor at the University of Illinois, Champaign-Urbana,

in 1990. In July 1990, Anna Frankowska passed the bar examination and was admitted to the Illinois State Bar Association. After

graduation, she worked in the banking and finance department at Sidley & Austin, one of the leading US law firms. In July 1991,

she started working for a Chicago-based law firm, Altheimer & Gray, in the international transactions and companies department.

Since 1996, she has been with the law firm Weil, Gotshal & Manges, specialising in capital market transactions.

Katarzyna Ishikawa – Member of the Supervisory Board

Ms Ishikawa is an attorney and a graduate of the Faculty of Law and Administration of the Jagiellonian University in Kraków. She

completed legal training in court and as an attorney. She has been working in the legal profession since 2001. In 2009, she

became a partner at the Ishikawa, Brocławik, Sajna Adwokaci i Radcowie Prawni sp. p. law firm. In 2002-2007, she sat on the

Supervisory Board of Call Center Poland S.A. In 2004-2007, she was an arbitrator at the Exchange Court of the Warsaw Stock

Exchange. Ms Ishikawa has extensive legal expertise related to trade in real property, construction projects and commercialisation

of space.

Changes in the composition of the Group’s Supervisory Board

In 2014 and as at the date of this Report, there were no changes in the composition of the Group's Supervisory Board.

OPERATION OF THE SUPERVISORY BOARD

The Supervisory Board operates on the basis of the Articles of Association and Rules of Procedure adopted by virtue of the

Supervisory Board’s resolution No. 3/11/2013 of November 18th 2013. The Supervisory Board’s role is to exercise ongoing

supervision over all areas of the Company’s operations.

In accordance with the provisions of the Articles of Association, resolutions of the Supervisory Board are valid only if all

Supervisory Board members have been invited to the meeting and at least four of them are present.

Supervisory Board resolutions are adopted by an absolute majority of votes. In the case of a voting tie, the Chairman of the

Supervisory Board has the casting vote. Resolutions of the Supervisory Board to suspend or remove Management Board members

are adopted by a majority of at least four out of six votes.

The Supervisory Board may adopt resolutions by written ballot or using means of remote communication.


32

In addition to matters reserved for the Supervisory Board under the Commercial Companies Code, the powers of the Supervisory

Board include:

approval of annual budgets,

approval of all transactions which have not been provided for, or are implemented on conditions different from those

envisaged in, the Group’s annual business plan, where their value exceeds a specified limit (subject to Art. 23.4 of the

Articles of Association),

selection of an entity qualified to audit financial statements and to perform financial auditing procedures at the

Company,

exercise of voting rights by the Management Board, acting on behalf of the Company as a shareholder of its subsidiaries

at the general meetings of such subsidiaries, concerning specific matters.

COMMITTEES OF THE SUPERVISORY BOARD

The following committees have been established within the Supervisory Board: Investment Committee, Audit Committee and

Remuneration Committee. In 2014, the composition of the committees was as follows:

Investment Committee

Audit Committee Remuneration Committee

Keith Breslauer V

V

Jacek Kseń

V V

Shane Law V V Matt Utting V V Anna Frankowska

V

Katarzyna Ishikawa

Audit Committee

The Supervisory Board appoints an Audit Committee, which should include at least three members of the Supervisory Board, of

whom at least one member should meet the independence criteria and should be qualified in accounting or financial auditing,

and at least one member should be appointed by the second entitled group.

The Audit Committee’s tasks include in particular:

supervision of the organisational unit responsible for internal audit;

monitoring of financial reporting processes;

monitoring of the effectiveness of the internal control, internal audit and risk management systems;

monitoring of the financial audit function;

making recommendations to the Supervisory Board as to the selection of an entity qualified to audit financial

statements,

monitoring the independence of the statutory auditor and the entity qualified to audit financial statements,

reviewing the Company’s financial statements and presenting opinion on these statements to the Supervisory Board;

reviewing transactions with related parties.


33

Investment Committee

The Investment Committee’s primary role is to consult and review:

proposed investments and purchase of assets by the Group,

all financial and legal documents related to the Group’s investment projects,

selection of persons to fill top executive positions,

supervision of the Group’s capital expenditure.

The Investment Committee meets with the Management Board members at least once a month and has the right to request a

meeting with the Management Board members at its own discretion. The Investment Committee receives monthly management

reports and draft reports on important developments in the Company’s activities. The Investment Committee also receives drafts

of the business plans.

Remuneration Committee

The tasks and rules of operation of the Remuneration Committee and the Nomination Committee are defined by Annex I to the

Commission Recommendation of February 15th 2005 on the role of non-executive directors (2005/162/EC).

The Company also has in place an Internal Audit unit, which monitors compliance with the standards of corporate governance on

an ongoing basis.

REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD

AMOUNTS AND RULES OF REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD

The table below presents the amounts of remuneration received by individual Management Board members from the Company

and its subsidiaries in 2014.

Remuneration received at the Company(PLN ’000)

Remuneration received at other Group entities

(PLN ’000)

Jan Motz 46

1,686

Jerzy Kowalski 46

1,674

Marcin Juszczyk 478

516

Michał Koślacz 478

510

Incentive Scheme for members of the Management Board

The objective of the Incentive Scheme is to provide incentives that will encourage, retain and motivate the Eligible Persons (at the

scheme inception date − members of the Company's Management Board) to work towards the Company's shareholder value

growth. These incentives consist in enabling the Eligible Persons to acquire Company Shares.

The key assumptions of the Incentive Scheme are set out in a resolution of the Extraordinary General Meeting of Capital Park S.A.

of September 30th 2013 and the Rules of the Incentive Scheme (attached to the resolution).

Key terms of the Incentive Scheme

The Incentive Scheme is addressed to Jan Motz, Jerzy Kowalski, Michał Koślacz and Marcin Juszczyk, as long as they

remain members of the Company's Management Board.


34

As part of the Incentive Scheme, the Company is authorised to issue up to 7,218,738 registered subscription warrants

carrying rights to acquire a total of 7,218,738 Series D ordinary bearer shares in the Company. The subscription

warrants will be issued in series from A to G, and granted free of charge. The subscription warrants may be inherited,

but may not be encumbered and are not transferable.

The date of allotment of Series A warrants may fall no later than one month after the allotment of shares in the public

offering. The allotment date for Series B to Series G warrants falls no later than two months after the publication of the

full-year or half-year financial statements, audited or reviewed by a qualified auditor.

On the date of allotment of Series A warrants a total of 604,024 Series A warrants were granted to Marcin Juszczyk and

Michał Koślacz. The number of Series B to Series G warrants allotable on future allotment dates will depend on the

following economic criteria: increase in net asset value at the allotment date and increase in the market price of

Company shares on the allotment date.

Each warrant will confer the right to acquire one Series D share, at an issue price of PLN 1 per share.

All rights to acquire Series D shares under the warrants will expire on December 31st 2019.

As at the date of this Report, 1,628 thousand subscription warrants were issued under the Incentive Scheme.

The Black-Scholes model was applied for valuation of the subscription warrants.

As part of remeasurement of the Incentive Scheme as at December 31st 2014, it was assumed that a total of 3,558,035 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 10,958 thousand, PLN 8,929 thousand less than as at the end of the previous

year. The total cost of the Incentive Scheme is expensed over time in proportion to its duration. Capital reserve from

measurement of the Incentive Scheme as at December 31st 2014 was PLN 4,776 thousand. The difference between the value of

capital reserve from measurement of the Incentive Scheme as at December 31st 2014 and as at December 31st 2013 was charged

to costs, which is presented in the table below:

Cost of share-option plan measurement

Dec 31 2014 Dec 31 2013

Cost of share-option plan measurement/adjustment to cost of share-option plan measurement

3,042 (1,731)

Provision for the cost of bonuses related to warrants 864 0

3,906 (1,731)

Pursuant to Resolution No. 1/12/2013 of the Supervisory Board of December 19th 2013, on January 3rd 2014, Marcin Juszczyk

and Michał Koślacz were each allotted as part of the Incentive Scheme 302,012 Series A subscription warrants carrying rights to

acquire the same number of Series D shares in the Company, at a price of PLN 1 per share. The allotted subscription warrants

could be converted into Company shares not earlier than one year after the date of allotment, that is January 3rd 2015.

On January 14th 2015, Marcin Juszczyk and Michał Koślacz exercised their rights under allotted subscription warrants by acquiring

302,012 Series D shares each, at the nominal price of PLN 1 per share. For more information on the Company shares held by

Management Board Members, see “Shares held by members of the Management and Supervisory Boards” in this Report.


35

AMOUNTS AND RULES OF REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD

Remuneration received at the

Company(PLN ’000)

Remuneration received at other Group

entities(PLN ’000)

Katarzyna Ishikawa 130

-

Anna Frankowska 130

-

Jacek Kseń 130

-

390 -

As at the date of this Report, there were no agreements between the Company or its subsidiaries and the Supervisory Board

members which would provide for any benefits payable upon termination of their employment contracts.

INFORMATION ON THE SYSTEM OF CONTROL OF EMPLOYEE STOCK OPTION SCHEMES

No employee stock option schemes are operated by the Company other than the plan described in the section devoted to

remuneration of the Management Board members.

CHANGES IN KEY RULES OF MANAGING THE COMPANY’S BUSINESS AND ITS GROUP

In 2014, there were no material changes in the key rules of managing the Company’s business and its Group.

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS

The Capital Park Group has in place internal control and risk management systems, which are managed by a dedicated

organisational unit, and whose components in the process of preparation of financial statements and consolidated financial

statements include:

Internal procedures and risk management

The Group has in place internal procedures concerning financial information and circulation of documents, the purpose of which

is to identify and eliminate risk areas and irregularities in all aspects of the Group companies’ activity. The control procedures are

regularly reviewed and updated.

Regular assessment of internal control procedures

The internal control procedures are supervised by the Financial Controller to ensure their security and effectiveness, as well as

their consistency with applicable regulations. Control reports are submitted to the Company’s Management Board at least once a

month.

Regular assessment of the companies’ activities based on periodic financial reports

At the end of each year, the Group prepares a detailed operating and financial budget for the next year, in a process which

involves all members of the Group’s management. An annual budget is subject to approval by the Management Board, while its

performance is monitored on a quarterly basis.

In the course of a year, companies of the Capital Park Group prepare detailed financial reports which enable the Management

Boards of the companies to review and evaluate their performance. Financial reports are prepared at least once a quarter by the

financial department.


36

Formalised system for preparing budgets and financial plans and continuous monitoring of their performance

Evaluation and control, in particular of ongoing and planned investment projects, is performed on the basis of financial models

prepared by the Group for individual investment projects. Detailed investment budgets are prepared in reliance on the long-

standing experience and in-depth understanding of the property market by the Capital Park Group consultants. The financial plans

prepared by the Group enable it to supervise and assess the entire property development process as it unfolds, to control costs

and budget performance, and to monitor timetables. The budgets of projects in progress are updated as needed, while the

budgets of other projects are updated at least once every three months.

Clearly defined scope of duties and powers in the process of preparation and authorisation of financial statements

Financial statements of the Capital Park Group companies are prepared by accountants and reviewed by the Group’s Financial

Controller (who is responsible for internal control procedures of the Group). Preparation of financial statements of the Company

and consolidated financial statements of the Capital Park Group is the responsibility of the Company’s Management Board, which

approves the financial statements, and submits them to the Company’s Supervisory Board for assessment before they are

published.

Review of the financial statements by an independent auditor

Annual financial statements of Capital Park S.A. and consolidated financial statements of the Capital Park Group are audited by an

independent auditor, as are annual financial statements of the Company’s selected subsidiaries. For the purpose of preparation of

consolidated financial statements of the Capital Park Group, financial statements of the other Group companies are subject to

review.

AUDITOR

Pursuant to a resolution of the Extraordinary General Meeting of August 21st 2014, PKF Consult Sp. z o.o. of Warsaw, ul. Orzycka

6/1B, entered in the list of qualified auditors of financial statements maintained by the National Chamber of Statutory Auditors

under Reg. No. 477, was appointed as a qualified auditor to audit the financial statements of Capital Park S.A. for the financial

year ended December 31st 2014.

PKF Consult Sp. z o.o. is also the auditor of the Capital Park consolidated financial statements of the Capital Park Group, and of

separate financial statements of Capital Park Group’s selected subsidiaries.

Consideration paid or due for the financial year

2014

2013

Audit of the full-year separate and consolidated financial statements 0

20

Audit of the full-year consolidated financial statements of the Capital Park Group 104 90

Review of the half-year separate and consolidated financial statements of the Capital Park Group

143

178

Tax advisory services 0

0

Other services 0

0

247 288


37

SIGNATURES OF MEMBERS OF THE MANAGEMENT BOARD OF CAPITAL PARK S.A.

Jan Motz Jerzy Kowalski President of the Management Board

Vice-President of the Management Board

Marcin Juszczyk Michał Koślacz Member of the Management Board

Member of the Management Board

Warsaw, March 19th 2015


38

Documents

DIRECTORS’ REPORT ON THE OPERATIONS OF CAPITAL PARK …inwestor.capitalpark.pl/wp-content/uploads/2016/12/... · The Group indirectly holds 50% of shares in the company's share