Consolidated Report for 1H 2016

CYFROWY POLSAT S.A. CAPITAL GROUP Interim Consolidated Report for the six month period ended June 30, 2016 Place and date of publication: Warsaw, August 25, 2016 Place and date of preparation: Warsaw, August 24, 2016 Interim Consolidated Report of Cyfrowy Polsat S.A. Capital Group for the six month period ended June 30, 2016 TABLE OF CONTENTS REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITIES OF CYFROWY POLSAT S.A. CAPITAL GROUP FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 POLSAT GROUP AT A GLANCE ....................................................................................................................................................... 4 DISCLAIMERS ............................................................................................................................................................................... 5 FINANCIAL DATA OVERVIEW .......................................................................................................................................................... 7 1. ORGANIZATION OF CYFROWY POLSAT S.A. CAPITAL GROUP ............................................................................................... 10 1.1 Composition and structure of Polsat Group ............................................................................................................... 10 1.2 Shareholders holding material bundles of shares of Cyfrowy Polsat ......................................................................... 13 1.3 Shares of Cyfrowy Polsat owned by Management Board and Supervisory Board members .................................... 13 2. BUSINESS REVIEW OF POLSAT GROUP ................................................................................................................................ 14 2.1 Segment of services to individual and business customers ....................................................................................... 14 2.2 Broadcasting and television production segment ....................................................................................................... 17 3. SIGNIFICANT EVENTS ......................................................................................................................................................... 20 3.1 Corporate events ........................................................................................................................................................ 20 3.2 Business related events ............................................................................................................................................. 22 3.3 Events after the balance date .................................................................................................................................... 23 4. OPERATING AND FINANCIAL REVIEW OF POLSAT GROUP ...................................................................................................... 25 4.1 Operating review of the Group ................................................................................................................................... 25 4.2 Key positions in the consolidated income statement ................................................................................................. 30 4.3 Review of the Group’s financial situation ................................................................................................................... 33 5. OTHER INFORMATION IMPORTANT FOR THE ASSESSMENT OF THE COMPANY’S PERSONNEL, ECONOMIC AND FINANCIAL POSITION, AS WELL AS FINANCIAL RESULTS ........................................................................................................................................ 54 5.1 Transactions concluded with related parties on conditions differing from market conditions ..................................... 54 5.2 Discussion of the difference of the Company's results to published forecasts .......................................................... 54 5.3 Material proceedings at the court, arbitration body or public authorities .................................................................... 54 5.4 Factors that may impact our results in at least the following quarter ......................................................................... 55 6. RISK FACTORS ................................................................................................................................................................... 63 6.1 Risks related to our business and the sector in which we operate ............................................................................ 63 6.2 Risk factors associated with the Group’s financial profile .......................................................................................... 72 6.3 Risks related to market environment and economic situation .................................................................................... 73 6.4 Risk factors associated with the legal and regulatory environment ........................................................................... 76 6.5 Risk factors associated with the Series A Bonds ....................................................................................................... 81 GLOSSARY ................................................................................................................................................................................. 82 MANAGEMENT BOARD’S REPRESENTATIONS INDEPENDENT AUDITOR’S REVIEW REPORT ON THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 INDEPENDENT AUDITOR’S REVIEW REPORT ON THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 2 Report of the Management Board on the activities of Polsat Group for the 6-month period ended June 30, 2016 REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITIES OF CYFROWY POLSAT S.A. CAPITAL GROUP FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2016 3 Report of the Management Board on the activities of Polsat Group for the 6-month period ended June 30, 2016 POLSAT GROUP AT A GLANCE Polsat Group is Poland’s leading multimedia group. Within the scope of our activities we provide a comprehensive array of integrated media and telecommunication services within the following areas: • pay digital TV services offered by Cyfrowy Polsat – the largest pay TV provider in Poland and one of the leading satellite platforms in Europe. We offer our customers access to over 170 TV channels, including 70 channels in high definition standard, as well as additional modern OTT services (e.g. Cyfrowy Polsat GO, PPV, VOD Home Movie Rental, TV online, catch-up TV) and Multiroom. We also provide online video services through IPLA – the leader on Poland’s online video market; • mobile telecommunication services, including voice and data transmission services, which we provide mainly through our subsidiary Polkomtel – one of Poland’s leading telecommunications operators; • mobile broadband Internet, offered under two alternative brands: Cyfrowy Polsat and Plus. We provide these services in the state-of-the-art LTE technology. We offer the largest LTE coverage in Poland and our customers attain the highest data transmission speed among offers provided by national mobile network operators technologies; • broadcasting and television production through Telewizja Polsat, leading commercial TV broadcaster on the Polish market, offering 33 popular TV channels, including 13 in HD standard. • wholesale services to other operators, including i.a. network interconnection, transit of traffic and national and international roaming services. The Group operates in two business segments: the segment of services to individual and business customers which relates to the provision of services to the general public and the broadcasting and television production segment. Our mission and main strategic goals Our mission is to create and deliver the most attractive TV content, telecommunication products and other services for the home, as well as residential and business customers, using state-of-the-art technologies to provide top quality multi-play services that match the changing needs of the market, while maintaining the highest possible level of customer satisfaction. The main goal of our strategy is the permanent growth of the value of Cyfrowy Polsat for its shareholders. We intend to achieve this goal by implementing the major elements of our operational strategy which include: • growth of revenue from services provided to residential and business customers through consistent building of the value of our customer base by maximizing the number of users of our services as well as the number of services offered to each customer, while simultaneously increasing average revenue per user (ARPU) and maintaining high levels of customer satisfaction, • growth of revenue from produced and purchased content by expanding its distribution, maintaining the audience shares of our channels and improving our viewer profile, • effective management of the cost base of our integrated media and telecom group by exploiting its inherent synergies and economies of scale, and • effective management of the Group’s finances, including its capital resources. 4 Report of the Management Board on the activities of Polsat Group for the 6-month period ended June 30, 2016 DISCLAIMERS This constitutes the

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