POLIMEX-MOSTOSTAL CAPITAL GROUP CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 WITH AUDITOR’S OPINION Warsaw, 24 March 2017 Polimex-Mostostal Capital Group Consolidated Financial Statements for the year ended 31 December 2016 (in PLN '000) TABLE OF CONTENTS Consolidated Income Statement ................................................................................................... 5 Consolidated Statement of Comprehensive Income ..................................................................... 6 Consolidated Balance Sheet ......................................................................................................... 7 Consolidated Balance Sheet ......................................................................................................... 8 Consolidated Cash Flow Statement .............................................................................................. 9 Consolidated Statement of Changes in Equity ............................................................................ 10 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED AS AT 31 DECEMBER 2016 ........ 12 1. General information ............................................................................................................... 12 1.1. Composition of the Group and its changes ................................................................. 12 1.2. Functional and reporting currency .............................................................................. 15 2. Approval of the financial statements ..................................................................................... 15 3. Application of International Financial Reporting Standards .................................................. 16 3.1. Statement of compliance............................................................................................. 16 3.2. Effects of new and amended standards and interpretations....................................... 16 4. Summary of significant accounting policies .......................................................................... 18 4.1. Going concern ............................................................................................................. 18 4.2. Basis for preparation of the consolidated financial statements .................................. 18 4.3. Consolidation principles .............................................................................................. 19 4.4. Investments in associates ........................................................................................... 19 4.5. Interests in joint ventures ............................................................................................ 20 4.6. Translation of foreign currency items .......................................................................... 20 4.7. Property, plant and equipment .................................................................................... 20 4.8. Investment property .................................................................................................... 21 4.9. Intangible assets ......................................................................................................... 21 4.10. Leases ......................................................................................................................... 22 4.11. Impairment of non-financial non-current assets .......................................................... 22 4.12. Borrowing costs ........................................................................................................... 23 4.13. Financial assets .......................................................................................................... 23 4.14. Impairment of financial assets .................................................................................... 24 4.15. Derivative financial instruments and hedges .............................................................. 25 4.16. Inventory ..................................................................................................................... 25 4.17. Trade and other receivables ....................................................................................... 25 4.18. Performance bonds transferred in relation to construction contracts ......................... 25 4.19. Cash and cash equivalents ......................................................................................... 26 4.20. Credit facilities, loans and debt securities (bonds) ..................................................... 26 4.21. Assets (disposal groups) held for sale ........................................................................ 26 4.22. Other assets ................................................................................................................ 26 4.23. Deferred income .......................................................................................................... 26 4.24. Trade and other liabilities ............................................................................................ 26 4.25. Performance bonds received in relation to construction contracts ............................. 27 4.26. Liabilities due to employee benefits ............................................................................ 27 4.27. Provisions .................................................................................................................... 28 4.28. Share-based payments ............................................................................................... 28 4.29. Allocation of profit to employee benefits and special funds ........................................ 28 The accounting principles (policies) and Notes 1-39 to the financial statements form their integral part 2 Polimex-Mostostal Capital Group Consolidated Financial Statements for the year ended 31 December 2016 (in PLN '000) 4.30. Revenue ...................................................................................................................... 29 4.31. Taxes........................................................................................................................... 29 5. Material values based on professional judgment and estimates .......................................... 30 5.1. Material estimates ....................................................................................................... 30 6. Reporting segments .............................................................................................................. 32 6.1. Key clients and suppliers of the Group ....................................................................... 37 6.2. Geographic information ............................................................................................... 37 7. Revenue and expenses ......................................................................................................... 37 7.1. Sales revenue ............................................................................................................. 37 7.2. Other operating revenue ............................................................................................. 38 7.3. Other operating expenses ........................................................................................... 38 7.4. Financial revenue ........................................................................................................ 38 7.5. Financial expenses ..................................................................................................... 39 7.6. Expenses by type ........................................................................................................ 39 7.7. Amortization/depreciation expense charged to profit or loss ...................................... 39 7.8. Costs of employee benefits ......................................................................................... 40 8. Income tax ............................................................................................................................. 40 8.1. Income tax ................................................................................................................... 40 8.2. Deferred income tax .................................................................................................... 42 9. Earnings per share ................................................................................................................ 43 10. Dividends paid and proposed ................................................................................................ 44 11. Property, plant and equipment .............................................................................................. 45 12. Goodwill from consolidation .................................................................................................. 50 13. Intangible assets ................................................................................................................... 51 14. Investments in associates measured using the equity method ............................................. 51 15. Financial assets ..................................................................................................................... 52 15.1. Change in the balance of long-term financial assets - shares .................................... 52 16. Inventory ................................................................................................................................ 52 17. Trade and other receivables.................................................................................................