Echo Investment S.A.

About the Company Information on the financial statement CONSOLIDATED FINANCIAL STATEMENT OF ECHO INVESTMENT GROUP FOR 2020 CHAPTER 1 Consolidated statement of financial position Consolidated profit and loss account Consolidated statement of comprehensive income Statement of changes in equity Consolidated cash flow statement CHAPTER 2 EXPLANATORY NOTES Explanatory notes to the consolidated financial statement CHAPTER 3 INFORMATION ON THE FINANCIAL STATEMENTS Echo Investment Group Application of new and amended standards and interpretations issued by the IFRS Interpretations Committee Published standards and interpretations which are not effective yet and have not been adopted by the Group Main accounting principles Methods of determining the financial result Error correction – changing the presenting principles – restatement of statements for previous period Material estimates and judgments of the Management Board of the Company Financial risk management Capital risk management Agreements concluded with related entities Material post-balance sheet events Remuneration of the Management Board and Supervisory Board Agreements concluded with an entity authorised to audit financial statements CHAPTER 4 STATEMENT OF THE MANAGEMENT BOARD CONTACT CONSOLIDATED ANNUAL REPORT OF ECHO INVESTMENT GROUP 22 CONTENT About the Company 4 Information on the ﬁnancial statement 5 CONSOLIDATED FINANCIAL STATEMENT OF ECHO INVESTMENT GROUP FOR 2020 6 CHAPTER 1 Consolidated statement of ﬁnancial position 8 Consolidated proﬁt and loss account 10 Consolidated statement of comprehensive income 11 Statement of changes in equity 12 Consolidated cash ﬂow statement 13 CHAPTER 2 EXPLANATORY NOTES 15 Explanatory notes to the consolidated ﬁnancial statement 16 CHAPTER 3 INFORMATION ON THE FINANCIAL STATEMENTS 62 Echo Investment Group 63 Application of new and amended standards and interpretations issued by the IFRS Interpretations Committee 68 Published standards and interpretations which are not eective yet and have not been adopted by the Group 69 Main accounting principles 70 Methods of determining the ﬁnancial result 79 Error correction – changing the presenting principles – restatement of statements for previous period 83 Material estimates and judgments of the Management Board of the Company 85 Financial risk management 91 Capital risk management 98 01. 02. 03. 04. 05. 06. 07. 08. 09. Agreements concluded with related entities 99 Material post-balance sheet events 100 Remuneration of the Management Board and Supervisory Board 102 Agreements concluded with an entity authorised to audit ﬁnancial statements 104 CHAPTER 4 STATEMENT OF THE MANAGEMENT BOARD 105 Contact 107 10. 11. 12. 13. | Financial statement 4 Consolidated nancial statements of Echo Investment Group for 2020 The Echo Investment Group’s core activity consists of the construction, lease and sale of oce and re- tail buildings, construction and sale of residential buildings as well as trade in real estate. The parent company – Echo Investment Spółka Akcyjna (later referred to as the Company) has a registered oce in Kielce, al. Solidarności 36, Poland. The Company was registered in Poland, Kielce at al. Solidarności 36 on 23 July 1992. Echo is a Joint Stock Company entered into the National Court Register under no. 0000007025 by the District Court in Kielce, 10th Economic Department of the National Court Reg- ister. Since 5 March 1996, the Company’s shares are quoted at the Warsaw Stock Exchange on the regu- About the Company 1996 First listing of Echo Investment on the WSE. Kielce lated market. They are included into Warsaw Stock Exchange Index WIG, mWIG40 subindex, WIG ESG social responsible companies index as well as sec- tor index WIG-Real Estate. The main place where the Company runs its business is Poland. The parent entity is Lisala Sp. z o.o., and the ultimate parent of the group is WING IHC Zrt. The Company was estab- lished for an indeﬁnite period of time. Information on the Management Board and Super- visory Board has been prepared in the Management Board report on operations of Echo Investment S.A. and its Group for 2020 in Part 1 Basic information about the Company and the Group. | Financial statement 5 Consolidated nancial statements of Echo Investment Group for 2020 The consolidated statements of the Echo Investment S.A. present ﬁnancial data for the 12-month period ending on 31 December 2020 and comparative data for the 12-month period ending on 31 December 2019. The Group’s ﬁnancial statement in this ﬁnancial statements is presented in thousands of Polish zloty (PLN), if not indicated dierently. DECLARATION OF CONFORMITY The statements have been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted by the European Commission. ASSUMPTION OF CONTINUITY IN OPERATIONS The statements have been drawn up according to the going concern principle as there are no circumstanc- es indicating a threat to continued activity. APPROVAL OF FINANCIAL STATEMENTS The Company drew up the Consolidated Financial Statement for the year ended 31 December 2020, which was approved for publication on 30 March 2021. As at 31 December 2020 the Capital Group consisted of 141 entities consolidated according to the full method, and 23 entities consolidated accord- ing to the equity method. As at 31 December 2019 it consisted of 144 subsidiaries, presented according to the full method, and 20 associates consolidated according to the equity method. The composition of the Capital Group as at 31 December 2020 is pre- sented in paragraph 3. Information on the ﬁnancial statement CONSOLIDATED FINANCIAL STATEMENT OF ECHO INVESTMENT GROUP FOR 2020 CHAPTER 1 | Financial statement 8 Consolidated nancial statements of Echo Investment Group for 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000 Note As at 31.12.2020 As at 31.12.2019 – restated As at 1.01.2019 – restated ASSETS Non-current assets Intangible assets 2 3 459 3 741 2 468 Property, plant and equipment 3 27 872 25 762 8 938 Investment property 4 1 388 972 941 983 988 903 Investment property under construction 5 780 621 1 517 866 872 509 Investment in associates and joint ventures 27 306 449 254 142 258 531 Long-term ﬁnancial assets 8 201 194 115 862 84 590 Deferred tax asset 29 56 476 53 903 52 493 2 765 043 2 913 259 2 268 432 Current assets Inventory 9 925 173 1 052 327 771 836 Current tax assets 5 708 1 484 3 381 Other taxes receivable 10 93 050 59 006 87 177 Trade and other receivables 10 112 111 144 844 211 142 Short-term ﬁnancial assets 8 50 761 64 465 42 190 Derivative ﬁnancial instruments 13 - 2 669 - Other ﬁnancial assets * 14 82 524 57 157 54 719 Cash and cash equivalents 14 327 097 492 295 439 532 1 596 424 1 874 247 1 609 977 Assets held for sale 6 1 269 329 22 923 13 500 Total assets 5 630 796 4 810 429 3 891 909 * Mainly cash on escrow accounts from residential clients Consolidated statement of ﬁnancial position | Financial statement 9 Consolidated nancial statements of Echo Investment Group for 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000 Note As at 31.12.2020 As at 31.12.2019 – restated As at 1.01.2019 – restated EQUITY AND LIABILITIES Equity Equity attributable to equity holders of the parent 1 684 685 1 562 365 1 495 573 Share capital 15 20 635 20 635 20 635 Supplementary capital 15 1 280 664 1 259 252 1 420 922 Revaluation capital - - - Retained earnings 382 420 281 739 45 543 Foreign currency translation reserve 966 739 8 473 Non-controlling interest (126) (122) (114) 1 684 559 1 562 243 1 495 459 Long-term liabilities Credits, loans, bonds 17 1 465 767 1 602 126 1 149 693 Derivative ﬁnancial instruments - - - Long-term provisions 16 50 029 35 931 58 973 Deferred tax liabilities 29 203 518 152 733 111 303 Leasing 28,18 88 132 117 889 - Other liabilities 18 117 722 16 018 28 089 Liabilities due to customers 19 14 208 45 754 57 851 1 939 376 1 970 451 1 405 909 Short-term liabilities Credits, loans, bonds 17 846 501 367 545 280 729 Credits, loans, bonds - non-current assets classiﬁed as held for sale 17 496 036 - - Derivative ﬁnancial instruments - - - Income tax payable 1 618 5 035 8 859 Other taxes liabilities 18 13 626 16 126 8 400 Trade payables 18 130 249 238 011 234 623 Dividend payable 18 - - - Leasing 28,18 46 752 67 076 - Short-term provisions 16 32 059 89 428 115 843 Other liabilities 18 178 726 87 362 78 590 Liabilities due to customers 19 217 405 407 152 263 497 1 962 972 1 277 735 990 541 Liabilities directly associated with non-current assets classiﬁed as held for sale 6 43 889 - - Total equity and liabilities 5 630 796 4 810 429 3 891 909 | Financial statement 10 Consolidated nancial statements of Echo Investment Group for 2020 CONSOLIDATED PROFIT AND LOSS ACCOUNT PLN ‘000 Note 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Revenues 19 1 212 854 880 133 Cost of sales 20 (969 023) (677 130) Gross proﬁt 243 831 203 003 Proﬁt on investment property 21 228 985 398 412 Administrative costs associated with project implementation (33 162) (27 511) Selling expenses (29 855) (28 883) General and administrative expenses (69 291) (97 357) Other operating income 22, 28 10 383 22 516 Other operating expenses 23 (12 724) (20 027) Operating proﬁt 338 167 450 153 Financial income 24 15 028 15 244 Financial cost 25 (61 936) (61 371) Proﬁt (loss) on FX derivatives 13 (21 176) 4 100 Foreign exchange gains (losses) 26 (83 904) 2 691 Share of proﬁt (loss) of associates and joint ventures 27 (9 567) (12 629) Proﬁt before tax 176 612 398 188 Income tax 30 (54 523) (98 664) current tax (5 749) (53 438) deferred tax 29 (48 774) (45 226) Net proﬁt (loss), including: 122 089 299 524 Equity holders of the parent 122 093 299 532 Non-controlling interest (4) (8) Equity holders of the parent 122 093 299 532 Weighted average number of ordinary shares (in ‘000) without shares held 412 691 412 691 Proﬁt (loss) per one ordinary share (in PLN) 0,30 0,73 Diluted proﬁt (loss) per one ordinary share (PLN) 0,30 0,73 Consolidated proﬁt and loss account | Financial statement 11 Consolidated nancial statements of Echo Investment Group for 2020 Consolidated statement of comprehensive income CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Proﬁt for the year 122 089 299 524 Components of other comprehensive income that may be reclassiﬁed to proﬁt or loss in later periods exchange dierences on translation of foreign operations 227 (7 734) revaluation gains - - Other comprehensive income for the year, net of tax 227 (7 734) Total comprehensive income for the year, including: 122 316 291 790 Comprehensive income attributable to shareholders of the parent company 122 320 291 798 Comprehensive income attributable to non-controlling interest (4) (8) | Financial statement 12 Consolidated nancial statements of Echo Investment Group for 2020 Statement of changes in equity STATEMENT OF CHANGES IN EQUITY PLN ‘000 Share capita Supplemen- tary capital Accumula- ted retained earnings Currency translation dierences Equity attributable to equity holders of the parent Capital of non-control- ling interests Total equity For the period 1.01.2020 - 31.12.2020 Opening balance 20 635 1 259 252 281 739 739 1 562 365 (122) 1 562 243 Distribution of previous years' proﬁt/ loss – 21 412 (21 412) – – – – Other comprehensive income – – – 227 227 – 227 Net proﬁt (loss) for the period - - 122 093 - 122 093 (4) 122 089 Closing balance 20 635 1 280 664 382 420 966 1 684 685 (126) 1 684 559 For the period 1.01.2019 - 31.12.2019 Opening balance 20 635 1 420 922 45 543 8 473 1 495 573 (114) 1 495 459 Impact of implementation MSSF 16 on 1st January 2019 - - (18 661) - (18 661) - (18 661) Opening balance, with restated ﬁgures 20 635 1 420 922 26 882 8 473 1 476 912 (114) 1 476 798 Distribution of previous years' proﬁt/ loss - 44 675 (44 675) – – - – Dividend paid - (206 345) - – (206 345) - (206 345) Other comprehensive income – – - (7 734) (7 734) – (7 734) Net proﬁt (loss) for the period – – 299 532 – 299 532 (8) 299 524 Closing balance 20 635 1 259 252 281 739 739 1 562 365 (122) 1 562 243 | Financial statement 13 Consolidated nancial statements of Echo Investment Group for 2020 Consolidated cash ﬂow statement CONSOLIDATED CASH FLOW STATEMENT PLN ‘000 Note 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Operating cash ﬂow – indirect method Proﬁt (loss) before tax 176 612 398 188 Total adjustments Share in net (proﬁt) loss of associates and joint ventures 9 567 12 629 Depreciation of PP&E 11 738 9 472 FX gains (losses) 99 798 (15 541) - result on liquidation of Echo Prime Assets BV - (7 210) Interest and proﬁt sharing (dividends) 64 503 41 041 (Proﬁt) loss on revaluation of investment properties (282 693) (456 806) (Proﬁt) loss on investment activity (6 916) (23 045) Change of provisions (43 271) 15 368 (Proﬁt) loss on revaluation of assets and liabil-ities 5 954 (1 430) (141 320) (418 312) Changes in working capital Change in inventories 69 967 (161 720) Change in receivables (8 981) 86 046 Change in short–term liabilities, except for loans and borrowings (128 256) 71 205 Change in restricted cash (25 367) (2 438) (92 637) (6 907) Net cash generated from operating activities (I+II+III) (57 345) (27 031) Income tax paid (13 391) (55 365) Net cash generated from operating activities (70 736) (82 396) Cash ﬂows from investing activities Inﬂows Disposal of intangible assets and tangible ﬁxed assets 23 891 Sale of investments in property 29 577 580 445 From borrowings 17 763 14 309 Sale of investments 15 631 - 62 994 595 645 Outﬂows Purchase of intangible assets and PP&E (9 695) (10 810) Investment in property (656 200) (656 236) For borrowings (77 331) (60 957) Investments purchase (72 663) - (815 889) (728 003) Net cash ﬂow from investing activities (I+II) (752 895) (132 358) | Financial statement 14 Consolidated nancial statements of Echo Investment Group for 2020 CONSOLIDATED CASH FLOW STATEMENT CONT. PLN ‘000 Note 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Cash ﬂow from ﬁnancing activities Inﬂows Loans and borrowings 663 302 672 145 Issue of debt securities 17 492 183 133 832 Other ﬁnancial inﬂows - 1 430 1 155 485 807 407 Outﬂows Dividends and other payments to equity holders - (206 345) Repayment of loans and borrowings (134 881) (85 993) Redemption of debt securities 17 (250 272) (170 500) Due to FX derivatives (5 954) - Payments of leasing liabilities (17 209) (23 236) Interest paid (88 736) (53 816) (497 052) (539 890) Net cash ﬂow from ﬁnancing activities (I+II) 658 433 267 517 Total net cash ﬂows (A.V+B.III+C.III) (165 198) 52 763 Change in the balance of cash in consoli-dated statement of ﬁnancial position, including (165 198) 52 763 Change of cash due to FX dierences - - Cash and cash equivalents at the begin-ning of the period 492 295 439 532 Cash and cash equivalents at the end of the period (F+D) 327 097 492 295 CHAPTER 2 EXPLANATORY NOTES | Financial statement 16 Consolidated nancial statements of Echo Investment Group for 2020 Explanatory notes to the consolidated ﬁnancial statement NOTE 1 Conditional liabilities are presented at nominal val- ue. In the Company’s opinion, the fair value of the sureties and guarantees is near zero because the probability that they will be used is low. A detailed description of o-balance sheet items is presented which is a further part of the note. Information on expected loan loss are presented in the section 8 – ﬁnancial risk management. OFFBALANCE SHEET ITEMS PLN ‘000 31.12.2020 31.12.2019 Contingent liabilities for other parties: due to guarantees and sureties granted 1 369 944 1 378 770 due to court proceedings 17 523 11 042 Total contingent liabilities 1 387 467 1 389 812 | Financial statement 17 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 1A FINANCIAL SURETY AGREEMENTS BY ECHO INVESTMENT GROUP AS AT 31.12.2020 PLN ‘000 Issuer Entity receiving surety Beneciary Value Validity Description Echo Investment S.A. Echo – Browary Warszawskie Sp. zo.o. Sp.K. and Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. HPO AEP Sp. zo.o. Sp.J. 11 537 Until the date of ob- taining the occupancy permit for the invest- ments in progress, however not later than 07.12.2031. Surety for liabilities of Echo – Browary Warszawskie Sp. z o.o. Sp.K. and Dellia Investments – Projekt Echo – 115 Sp. z o.o. Sp.K. as a collateral of liabilities resulting from the lease agreement of 7.12.2016. Mutual surety issued in EUR. Echo Investment S.A. Projekt Echo 130 Sp. zo.o. PKO BP S.A. 23 074 until 31.01.2024 Surety for the repayment of the loan in connection with the disbursement of the construction loan up to the limit of EUR 5 million without completion of transferring a part of the property to the Company. Total 34 611 NONFINANCIAL SURETY AGREEMENTS BY ECHO INVESTMENT GROUP AS AT 31.12.2020 PLN ‘000 Issuer Entity receiving surety Beneciary Value Validity Description Echo – SPV 7 Sp. zo.o. / Echo – Aurus Sp. zo.o. Sagittarius-Projek Echo – 113 Sp.zo.o. Sp.k. Warburg – HiH Invest Real Estate GmbH 32 539 until 21.01.2022 Surety for liabilities of Sagittarius - Pro- jekt Echo - 113 Sp. z o.o. Sp.K. resulting from sale agreement. Echo – SPV 7 Sp. zo.o. / Echo – Aurus Sp. zo.o. Sagittarius – Projek Echo – 113 Sp. zo.o. Sp.K. Warburg – HiH Invest Real Estate GmbH 152 000 until 31.10.2028 Surety for liabilities of Sagittarius - Pro- jekt Echo - 113 Sp. z o.o. Sp.K. resulting from quality guarantee agreement and agreement on ﬁt-out works. Total 184 539 Total surety 219 150 | Financial statement 18 Consolidated nancial statements of Echo Investment Group for 2020 FINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31.12.2020 Issuer Entity receiving the guarantee Beneciary Value Validity Description Echo Investment S.A. Grupa Echo Sp. zo.o. IB 14 FIZAN 82 495 until 24.05.2024 Security for the proper performance of the obligations arising from the contract for the sale of the West Link oce building in Wrocław. Issued in EUR. After 24.05.2021 the maximum amount of the liability will be reduced by 80 percent. Echo Investment S.A. Midpoint 71-Cornwall Investments Sp. z o.o. SKA (former: Projekt 22 – Grupa Echo Sp. zo.o. S.K.A.) A19 Sp. zo.o. 27 689 until 4.07.2038 Guarantee for the obligations of Mid- point 71-Cornwall Investments Sp. z o.o. SKA (Midpoint 71 project) arising from the good neighborly agreement con- cluded on 4.07.2018. Issued in EUR. Echo Investment S.A. Rosehill Investments Sp. zo.o. IB 6 FIZAN / GPF 3 FIZAN 105 783 until 31.03.2022 Security for the proper performance of the obligations of Rosehill Investments Sp. z o.o. resulting from the program contract concluded on 31.08.2017. Issued in EUR. Echo Investment S.A. Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. LUX Europa III S.a.r.l. 50 763 until 3.03.2026 Security for the proper performance of the liabilities of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the sale contract of the Gatehouse Oces building being part of the War- saw Brewery complex. Issued in EUR. Echo Investment S.A. Projekt 17 – Grupa Echo Sp. zo.o. SKA Bank Millennium S.A. 4 938 until the conversion of the construction loan into an investment loan Guarantee securing rent proceeds during the performance of the West 4 Business Hub oce project in Wrocław. Issued in EUR. Echo Investment S.A. Face2Face - Stran- raer Sp. z o.o. SKA (former: Projekt 20 - Grupa Echo Sp. o.o. SKA) Bank Pekao S.A. 70 000 until 29.12.2023 Guarantee securing cost overrun, cov- ering interests on minimal level and se- curing own contribution on Face2Face oce project in Katowice. Issued in PLN. PKO BP S.A. (on behalf of Echo Investment S.A.) Galeria Libero - Pro- jekt Echo - 120 Sp. z o.o. Sp.K. Director of the Tax Administration Chamber in Kielce 873 until 10.02.2021 Lottery guarantee for Galeria Libero - Projekt Echo - 120 Sp. z o.o. Sp.K. Echo Investment S.A Midpoint71 – Cornwall Investments Sp. zo.o. SKA PKO BP S.A. 20 051 until 31.12.2029 Guarantee securing debt service cover ratio and covering rent-free periods in lease agreements on Midpoint 71 oce project in Wroclaw. Issued in EUR. Towarzystwo Ubezpieczeń Euler Hermes S.A. (on behalf of Echo Investment S.A.) Gosford Investment Sp. zo.o. Womak Delta Sp. zo.o. 29 14.07.2021 Rent guarantee - apartment sales oce in Wrocław Total 362 621 | Financial statement 19 Consolidated nancial statements of Echo Investment Group for 2020 NONFINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31.12.2020 PLN '000 Issuer Entity receiving the guarantee Beneciary Value Validity Description Echo Investment S.A. Projekt 104 Sp. zo.o. Skua Sp. zo.o. 27 689 until 31.07.2022 Security of the proper performance of the ﬁnal sale contract and the master lease contract for the Aquarius Business House II oce building in Wrocław. Issued in EUR. Echo Investment S.A. Echo – Opolska Busi- ness Park Sp. zo.o. Sp.K. issued for Ventry Investments Sp. z o.o. Sp.K (currently an au- thorized entity of EPP Oce O3 Business Campus Sp.z o.o.) 42 108 until 21.12.2026 Construction guarantee related to the sale of the O3 Business Campus I oce building in Kraków. The construction guarantee is secured by a corporate guarantee issued by Echo Investment S.A. The guarantee issued in EUR. Echo Investment S.A. ZAM – Projekt Echo – 127 Sp. zo.o. Sp.K. issued for Emfold Investments Sp. z o.o. (currently an authorized entity of Tryton Business Park Sp.z o.o.) 43 925 until 21.12.2026 Construction guarantee related to the sale of the Tryton oce building in Gdańsk. The construction guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guaran- tee issued in EUR. Echo Investment S.A. Symetris – Projekt Echo – 131 Sp. zo.o. Sp.K. issued for Flaxton Investments Sp. z o.o. (currently an authorized entity of EPP Oce - Symetris Business Park Sp.z o.o.) 18 789 until 21.12.2026 Construction guarantee related to the sale of the Symetris I oce building in Łódź. The construction guarantee is se- cured by a corporate guarantee issued by Echo Investment S.A. Guarantee issued in EUR. Echo Investment S.A. Projekt Echo 135 Sp. zo.o. Sp.K. A4 Business Park Sp. zo.o. 25 382 until 26.04.2027 Construction guarantee related to the sale of the A4 Business Park III oce building in Katowice. The guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guaran- tee issued in EUR. Echo Investment S.A. Echo – Opolska Busi- ness Park Sp. zo.o. Sp.K. EPP Oce O3 Business Campus Sp. zo.o 40 148 until 21.12.2027 Construction guarantee related to the sale of the O3 Business Campus II oce building in Kraków. The guarantee is se- cured by a corporate guarantee issued by Echo Investment S.A. Guarantee issued in EUR. Echo Investment S.A. gwarancja bez- pośrednia Echo Investment S.A. Nobilis – Projekt Echo – 117 Sp. zo.o. Sp.K. 40 000 until 31.10.2026 Quality guarantee for construction work related to the Nobilis oce building in Wrocław. Echo Investment S.A. Symetris – Projekt Echo – 131 Sp. zo.o. Sp.K. issued for Flaxton Investments Sp. z o.o. (currently an authorized entity of EPP Oce - Symetris Business Park Sp.z o.o.) 17 618 until 31.08.2023 Construction guarantee related to the sale of the oce building Symetris II in Łódź. Issued in EUR. The maximum amount of the liability will be succes- sively reduced as the amount of the liability that is secured by the guarantee decreases. Echo Investment S.A. R4R Łódź Wodna Sp. zo.o. R4R Wrocław Kępa Sp. zo.o. R4R Wrocławskie Rychtal- ska Sp. zo.o. R4R Warszawa Browary Sp. zo.o. Bank Pekao S.A. 14 147 until 30.09.2021 Guarantee securing exceeding the costs of performing Resi4REnt projects: Łódź Wodna, Wrocław Rychtalska, Warsaw Brewery, Wrocław Kępa. Echo Investment S.A. Projekt Beethovena – Projekt Echo – 122 Sp. zo.o. SKA PKO BP S.A. 36 000 until 30.06.2023 Security for exceeding the costs of per- forming the Moje Miejsce oce project in Warsaw. PKO BP S.A. Echo Investment S.A. LUX Europa III S.a.r.l. 6 450 until 7.05.2021 Security for the liabilities of Dellia In- vestments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the contract of quality guarantee concluded on 27.03.2019. | Financial statement 20 Consolidated nancial statements of Echo Investment Group for 2020 NONFINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31.12.2020 PLN '000 Issuer Entity receiving the guarantee Beneciary Value Validity Description Echo Investment S.A. Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. LUX Europa III S.a.r.l. 101 249 until 31.12.2024 Security for the proper performance of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the sale contract of the Gatehouse Oces build- ing being part of the Warsaw Brewery complex. Issued in EUR. Echo Investment S.A. Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. LUX Europa III S.a.r.l. 163 550 until 30.06.2030 Security for the proper performance of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. liabilities, arising from the sale agreement of the Gatehouse Oce building in the Warsaw Brewery complex. Issued in PLN. Echo Investment S.A. Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. Bank Pekao S.A. 73 738 until the conversion of the construction loan into an investment loan Guarantee securing the costs exceed of the oce project in the Warsaw Brew- ery complex in Warsaw. Issued in EUR. Echo Investment S.A. Projekt 17 – Grupa Echo Sp. zo.o. SKA Bank Millennium S.A. 8 045 until the conversion of the construction loan into an investment loan Guarantee of exceeding the costs of performing the West 4 Business Hub oce project in Wrocław. Echo Investment S.A. Echo – Opolska Busi- ness Park Sp. zo.o. Sp.K. EPP Development 6 Sp. zo.o. 37 226 until 9.08.2028 Construction guarantee related to the sale of the O3 Business Campus III oce building in Kraków. The guarantee is se- cured by a corporate guarantee issued by Echo Investment S.A. Guarantee issued in EUR. Echo – SPV 7 Sp. zo.o. R4R Poznań Szcze- panowskiego Sp. zo.o. R4R Warszawa Taśmowa Sp. zo.o. R4R Warszawa Woronicza Sp. zo.o. R4R Gdańsk Koło- brzeska Sp. zo.o. Santander Bank Pols- ka S.A., 24 500 until the conversion of the construction loan into an investment loan Security of the borrowers liabilities arising from the cost overrun not in- cluded in the budget speciﬁed in credit agreement. Echo Investment S.A Midpoint71 – Cornwall Investments Sp. zo.o. SKA PKO BP S.A. 39 000 until 31.12.2026 Guarantee securing cost overrun and maintanance of unleased area on Midpoint 71 oce project in Wroclaw. Issued in PLN. Echo Investment S.A Projekt Echo – 130 sp. zo.o. Bank Pekao S.A. 28 609 until 31.04.2024 A guarantee securing the costs of the oce project being exceeded as part of the Fuzja CDJ complex. Issued in PLN. Total 788 173 Total guarantees 1 150 794 | Financial statement 21 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 2 CHANGES IN PP&E  BY TYPES PLN ‘000 For the period 1.01.2020 - 31.12.2020 Purchased permits, patents, licences and similar assets Other intangible assets Total intangible assets a) gross value of intangible assets at the beginning of the period 9 733 708 10 441 b) Changes, due to: - purchase 1 811 132 1 943 - sale - - - c) Gross value of intangible assets at the end of the period 11 544 840 12 384 d) Accumulated depreciation at the beginning of the period (6 669) (31) (6 700) e) Deprecation for the period: - depreciation (2 210) (15) (2 225) - correction due to sale - - - f) Accumulated depreciation at the end of the period (8 879) (46) (8 925) g) Net value of intangible assets at the end of the period 2 665 794 3 459 CHANGES IN PP&E  BY TYPES PLN ‘000 For the period 1.01.2019 – 31.12.2019 Purchased permits, patents, licences and similar assets Other intangible assets Total intangible assets a) gross value of intangible assets at the beginning of the period 7290 820 8110 b) Changes, due to: - purchase 2446 (112) 2334 - sale (3) - (3) c) Gross value of intangible assets at the end of the period 9733 708 10441 d) Accumulated depreciation at the beginning of the period (5617) (25) (5642) e) Deprecation for the period: - depreciation (1055) (6) (1061) - correction due to sale 3 - 3 f) Accumulated depreciation at the end of the period (6669) (31) (6700) g) Net value of intangible assets at the end of the period 3064 677 3741 | Financial statement 22 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 3 CHANGES IN PP&E  BY TYPES PLN ‘000 For the period 1.01.2020 - 31.12.2020 Own land Buildings and struc- tures Technical equipment and machi- nes Means of transport Other PP&E Total PP&E a) gross value of PP&E at the beginning of the period after corrections 293 21 278 5 575 9 767 8 387 45 300 b) increases, due to: – purchase - 97 134 - 1 986 2 217 – leasing MSSF 16 - 5 397 - 1 487 - 6 884 c) decreases due to: – sale - - (50) - (129) (179) – liquidation - - - - (64) (64) d) gross PP&E at the end of the period 293 26 772 5 659 11 254 10 180 54 158 e) accumulated depreciation at the beginning of the period (11) (4 616) (5 025) (4 717) (5 169) (19 538) f) deprecation for the period: – depreciation (3) (352) (168) (339) (623) (1 485) – liquidation - - - - 64 64 – leasing MSSF 16 - (4 040) - (1 311) (153) (5 504) – correction due to sale - - 50 - 127 177 g) accumulated depreciation at the end of the period (14) (9 008) (5 143) (6 367) (5 754) (26 286) h) net value of PP&E at the end of the period 279 17 764 516 4 887 4 426 27 872 CHANGES IN PP&E  BY TYPES PLN ‘000 For the period 1.01.2019 – 31.12.2019 Own land Buildings and struc- tures Technical equipment and machi- nes Means of transport Other PP&E Total PP&E a) gross value of PP&E at the beginning of the period 357 5159 6764 2696 7766 22742 – impact of implementation MSSF 16 as of 1st January 2019 - 8081 - 6571 - 14652 a) gross value of PP&E at the beginning of the period after correc- tions 357 13240 6764 9267 7766 37394 b) icreases, due to: – purchase - 1018 308 305 2468 4099 – leasing MSSF 16 - 8003 - 752 - 8755 c) decreases due to: – sale (64) (231) (715) (557) (1269) (2836) – liquidation - (752) (782) - (578) (2112) d) gross PP&E at the end of the period 293 21278 5575 9767 8387 45300 e) accumulated depreciation at the beginning of the period (8) (965) (5786) (2184) (4862) (13805) f) deprecation for the period: – depreciation (3) (343) (488) (416) (1170) (2420) – liquidation - 183 764 - 517 1464 – leasing MSSF 16 - (3504) - (2486) - (5990) – correction due to sale - 13 485 369 346 1213 g) accumulated depreciation at the end of the period (11) (4616) (5025) (4717) (5169) (19538) h) net value of PP&E at the end of the period 282 16662 550 5050 3218 25762 The balance at the end of the period includes land use rights (perpetual usufruct) in the amount of PLN 18,330 thousand PLN (in 2019 it amounted to PLN 17,422 thous.) De-tailed information on the impact of the adop-tion of IFRS 16 is presented in Note 28. | Financial statement 23 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 4 CHANGES IN INVESTMENT PROPERTY PLN ‘000 Oces Shopping centers Plots Land use right Total Value at 1.01.2019 395 285 587 501 6 117 - 988 903 impact of implementation MSSF 16 as of 1st January 2019 - - - 51 398 51 398 Value at 1.01.2019 after corrections 395 285 587 501 6 117 51 398 1 040 301 purchase - 117 494 - 9 528 127 022 investment properties under construction taking 173 657 - - - 173 657 expenditure on investments 60 103 33 075 - - 93 178 sale (303 637) - - (3 510) (307 147) revaluation of property 25 548 (29 212) - (3 824) (7 488) taking to assets held for sale (164 797) - (3 905) (8 838) (177 540) Value at 31.12.2019 186 159 708 858 2 212 44 754 941 983 purchase - - - 8 389 8 389 investment properties under construction taking 862 265 - - 11 702 873 967 expenditure on investments 55 881 3 111 - - 58 992 revaluation of property 19 940 34 157 - (5 592) 48 505 taking to assets held for sale (532 784) - - (10 080) (542 864) Value at 31.12.2020 591 461 746 126 2 212 49 173 1 388 972 The Group measures investment properties at fair value at the end of each reporting period. The valu- ation methodology is described in section 04 “Ba- sic accounting principles”. The appraisals of the in- vestment properties were performed by the Internal Analyzes Department. Due to the commissioning of the Face2Face Business Campus I and II in Katowice, Villa Oces in War- saw and the West 4 Business Hub oce building in Wrocław, the Group transferred the value of these properties in the amount of PLN 862,265 thous. (in- cluding the right to use the land (perpetual use) in the amount of PLN 11,702 thous.) from the item “in- vestment property under construction” to the item “investment property”. Due to the intention to sell within 12 months, the Group reduced the status of investment properties, transferring to the item “assets held for sale”, the Moje Miejsce oce building phase I in Warsaw, worth PLN 196,369 thous. and the Villa Oces in Warsaw, worth PLN 336,415 thous. (including the right to use land (perpetual usufruct) in the amount of PLN 10,080 thous.). As at December 31, 2020 he value of the proper- ty consists mainly of real estate: Libero shopping center, the Face2Face Business Campus oce pro- ject, phase I and II in Katowice and West 4 Busi- ness Hub in Wrocław. At the same time, the value of investment real estate includes the value of the right to use the land (perpetual usufruct), which as at December 31, 2020 is PLN 49,173 thous. The fair value of investment properties was classiﬁed as level 3 of the fair value hierarchy. Detailed infor- mation in part 7 - Signiﬁcant estimates and judg- ments of the Management Board of the Company. | Financial statement 24 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 5 CHANGES IN INVESTMENT PROPERTY UNDER CONSTRUCTION PLN ‘000 Oces Shopping centers Plots Land use right Total Value at 1.01.2019 806 079 - 66 430 - 872 509 impact of implementation MSSF 16 as of 1st January 2019 - - - 36 355 36 355 Value at 1.01.2019 after corrections 806 079 - 66 430 36 355 908 864 purchase 45 850 - - 4 156 50 006 expenditure on investments 388 672 10 703 340 - 399 715 revaluation of property 399 433 - 39 - 399 472 movement to investment properties (173 657) - - - (173 657) sale (2 829) - - - (2 829) movement to inventory (62 072) - - (1 633) (63 705) Value at 31.12.2019 1 401 476 10 703 66 809 38 878 1 517 866 expenditure on investments 544 510 12 736 213 - 557 459 revaluation of property 216 767 - - 1 157 217 924 transfer from inventory 31 791 - - - 31 791 movement to investment properties (862 265) - - (11 702) (873 967) taking to assets held for sale (658 437) - - (12 015) (670 452) Value at 31.12.2020 673 842 23 439 67 022 16 318 780 621 The Group measures investment properties under construction at fair value at the end of each report- ing period. The valuation methodology is described in section 04 Main Accounting Principles. The ap- praisals of the investment properties under con- struction were performed by the Internal Analysis Department and an external appraiser. The expenses incurred for the implementation of the investment concerned the implementation of invest- ments located in Kraków, Katowice, Łódź, Gdańsk, Wrocław and Warsaw. Due to the fulﬁlment of the conditions allowing for the valuation to fair value of the investment prop- erty under construction, the Group recognized the result of the ﬁrst revaluation of the Moje Miejsce II oce building in Warsaw (PLN 17,773 thous.) and Fuzja CD in Łódź (PLN 18,973 thous.). In addition, the Group updated the fair value of oce buildings, Face2Face Business Campus stages I and II in Katow- ice (PLN 57,738 thous.), West 4 Business Hub (PLN 20,064 thous.), Midpoint71 in Wrocław (PLN 40,976 thous.), React I in Łódź (PLN 5,136 thous.) and the Malthouse Oces in Warsaw (PLN 53,212 thous.). The total amount of revenue recognized from the valuation of investment properties under construc- tion was PLN 213,872 thous. net, i.e. after taking into account the provision for the obligation to secure revenues for the rent-free periods (master lease) and proﬁt sharing. In connection with the commissioning of the Face- 2Face I and II oce property in Katowice, Villa Of- ﬁces in Warsaw and the West 4 Business Hub oce building in Wrocław, the Group transferred the value of these properties in the amount of PLN 862,265 thous. (including the right to use the land (perpetual usufruct) in the amount of PLN 11,702 thous.) from the item “investment property under construction” to the item “investment property”. Due to the intention to sell within 12 months, the Group reduced the status of investment properties under construction, transferring to the item “assets held for sale” the Moje Miejsce II oce building in Warsaw worth PLN 121,383 thous. and the oce building at the Malthouse Oce in Warsaw (Warsaw Brewery GH) in the value of PLN 527,335 thous. and a property in Wrocław worth PLN 9 719 thous. (in- cluding the right to use the land (perpetual usufruct) in the amount of PLN 12,015 thous.). As at December 31, 2020, in the report the Group presented investment properties under construction with a total value of PLN 780,621 thous. The closing balance of the reporting period consists mainly of: the Midpoint 71 oce building in Wrocław, the React I oce building in Łódź, the oce building Brain Park in Krakow. The value of investment property includes the right to use land (perpetual usufruct) in the amount of PLN 16,318thous. The value of liabilities for the purchase of investment properties under construction as at 31 December 2020 was PLN 57,696 thous. (as at December 31, 2019 it was PLN 90,078 thous.). The Group assigned level 3 in the fair value hierarchy for investment properties under construction. Details are presented in part 7 - Signiﬁcant estimates and judgments of the Management Board of the Com- pany. | Financial statement 25 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 6 CHANGE IN ASSETS HELD FOR SALE PLN ‘000 Oces Shopping centers Plots Land use right Total Value at 1.01.2019 - - 13 500 - 13 500 impact of implementation MSSF 16 as of 1st January 2019 - - - 5 518 5 518 Value at 1.01.2019 after corrections - - 13 500 5 518 19 018 investment properties taking 164 797 - 3 905 8 838 177 540 sale (164 797) - - (8 838) (173 635) Value at 31.12.2019 - - 17 405 5 518 22 923 investment properties under construction taking 658 437 - - 12 015 670 452 investment properties taking 532 784 - - 10 080 542 864 revaluation of property 16 262 - - - 16 262 expenditure on investments 39 751 - - - 39 751 sale - - (17 405) (5 518) (22 923) Value at 31.12.2020 1 247 234 - - 22 095 1 269 329 The Group measures assets held for sale at fair val- ue at the end of each reporting period. The valua- tion methodology is described in section 04 Main Accounting Principles. The valuations of the assets held for sale were performed by the Internal Analysis Works. Due to the intention to sell it within 12 months, the Group increased its assets held for sale by transfer- ring the Moje Miejsce II oce building in Warsaw worth PLN 121 383 thous. from the item “investment property under construction” and Malthouse Oces in Warsaw (Warsaw Brewery GH stage) in the value of PLN 527 335 thous. (including the right to use the land (perpetual usufruct) in the amount of PLN 12,015 thous.) and transferring the Moje Miejsce I of- ﬁce building in Warsaw with a value of PLN 196,369 thous. from the item “investment real estate” and the Villa Oces in Warsaw, worth PLN 336,415 thous. (in- cluding the right to use the land (perpetual usufruct) in the amount of PLN 10,080 thous.). The decrease in assets held for sale is related to the sale of a land property in Pamiątkowo near Poznań, worth PLN 3,905 thous. and a plot of land in Koszalin with a value of PLN 13,500 thous. including the right to use the land (perpetual usufruct) in the amount of PLN 5,518 thous. Details on the sale of real estate in 2020 are described in Note 32. As at December 31, 2020, under “assets held for sale”, the Group recognized oce properties in War- saw (Moje Miejsce I and II, Malthouse Oces and Villa Oces in Warsaw) and a property in Wrocław with a total value PLN 1,269,329 thous. including the right to use land (perpetual usufruct) in the amount of PLN 22,095 thous. The Group assigned level 3 in the fair value hierar- chy for investment properties classiﬁed as held for sale. Details are presented in part 7 - Signiﬁcant es- timates and judgments of the Management Board of the Company. In the consolidated statement of ﬁnancial position, liabilities related to projects are presented under “li- abilities related to assets held for sale”: OBLIGATIONS REGARDING ASSETS HELD FOR SALE 31.12.2020 31.12.2019 Liabilities due to Leasing 23 467 - Deposits received 20 421 - Total 43 889 - − Mathouse Oces and Villa Oces in Warsaw (Warsaw Brewery, stage K and GH) − Moje Miejsce stage I and stage II in Warsaw. Assets and liabilities related to assets held for sale | Financial statement 26 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 7 NOTE 8 AMOUNTS REGARDING PROPERTIES INCLUDED IN PROFIT AND LOSS ACCOUNT PLN ‘000 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 Rental income from investment property 111 756 76 415 Direct operating costs (including repair and maintenance costs) related to investment property which generated rental income in a given period (51 525) (46 211) FINANCIAL ASSETS PLN ‘000 31.12.2020 31.12.2019 long-term loans granted (with interests) 198 901 112 508 short-term loans granted (with interests) 50 762 65 527 long-term sureties 2 292 2 292 Assets at the end of the period 251 955 180 327 long-term 201 194 115 862 short-term 50 761 64 465 Loans were granted to legal entities and natural persons in PLN, with the WIBOR interest rate + mar- gin, as well as in EUR – with a ﬁxed interest rate. As at the balance sheet date, loans with a total value of PLN 204,787 thous. (after conversion into PLN) were granted to entities accounted for using the equity method: Galeria Młociny, Towarowa 22 and Resi4Rent. The carrying amount of loans granted to other entities is PLN 44,876 thous. The maximum credit risk associated with loans equals their carrying amount. The Company’s Man- agement Board actively monitors debtors and as- sesses that their loan obligations are possible to Detailed information on amounts related to proper- ties included in the proﬁt and loss account can be found additionally in Note 21. meet. In particular, it is possible in the case of the loans granted to related entities, which enables the Group to assess and identify the loans for which the credit risk has increased signiﬁcantly. The Compa- ny’s Management Board did not state such loans. The Management Board also assessed the loans in terms of making a write-down for expected credit losses and assessed such write-down as immaterial. The estimated fair value of the loans granted is ap- proximately equal to their carrying amount. | Financial statement 27 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 9 The “ﬁnished products” item includes mainly residential and commercial premises sold under ﬁnal contracts. The “semi-ﬁnished products and work in progress” item includes mainly real estate owned by the Group and expenditure on housing projects in preparation and implementation (eg. design services, construc- tion works, etc. provided by external companies). Additionally, this item shows the right to use land (perpetual usufruct). The remaining value of the item relates to the expenditure incurred on the services of ﬁnishing the premises (ﬁt-out). Due to the speciﬁc nature of the business, the purchased land, prepared for development, is presented as work in progress, and the newly purchased land as land. The ‘goods’ item includes land earmarked for sale. Inventories are valued according to the cost of pro- duction or purchase, but not higher than the obtain- able net sales value. This value is obtained according to the current market prices obtained from the devel- opment market. The reversal of an inventory write- down occurs either in connection with the sale of an inventory or in connection with an increase in the net selling price. The amounts of write-os of the value of inventories recognized as an expense in the period and the amounts of the reversal of write-downs of values decreasing the value of inventories recognized as income in the period are presented in the proﬁt and loss account under “cost of sale”. INVENTORY PLN ‘000 31.12.2020 31.12.2019 Semi-ﬁnished products and work-in-progress 540 294 939 245 – asset on perpetual usufruct 26 979 42 164 Finished products 181 682 64 925 Goods 17 834 48 157 Land intended for investment 185 363 - Inventory in total 925 173 1 052 327 The signiﬁcant increase in inventories in 2019 is the result of, among others disclosure of lease assets (IFRS 16), transfers from investment property under construction, as well as expenditure incurred and property purchases. In accordance with IAS 23, the Group activates the portion of ﬁnancial costs directly related to the acqui - sition and production of assets presented as invento- ries. The activation concerns the amount of ﬁnancial expenses determined using the eective interest rate reduced by the income from the temporary placement of cash (i.e. the interest on bank deposits, except for deposits resulting from blockades of accounts or let- ters of credit) in the case of targeted ﬁnancing con- tracted for a given construction project. In the case of leasing, interest costs on the leasing obligation related to a speciﬁc project are capitalized in the project cost (targeted ﬁnancing). In the case of general ﬁnancing, the overall ﬁnancing costs subject to capitalization are determined by applying the capitalization rate to the expenditure incurred for a given asset. The activated amount of borrowing costs for inven- tories in 2020 amounted to PLN 7,267 thous. (capi- talization rate 1.04%) whereas in 2019 it amounted to PLN 7,630 thous. (capitalization rate 1,17%). The value of inventories as at December 31, 2020 is PLN 925,173 thous., including for sale within 12 months 502,065 thous. PLN. INVENTORIES  IMPACT ON PROFIT/LOSS PLN ‘000 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 Amount of inventories recognised as an expense in the period (952 114) (657 730) Impairment losses on inventories recognised in the period as cost 588 (7 142) Reversal of impairment losses which decreases the value of inventories recog- nised in the period as income 14 409 24 872 The change in inventory write-down until December 31, 2020 amounted to PLN 14,997 thous. As at De- cember 31, 2019, this value amouted to PLN 17,730 thous. The reversal of write-downs in 2019 concerned mainly residential projects located in Wrocław (Gro - ta-Roweckiego 111), Poznań (Naramowice, Sołacz), Łódź (Wodna) and Warsaw (Reset), in relation to sale transactions concluded. Inventory write-downs and reversals refer to resi- dential projects included in the ‘ﬁnished goods’ and ‘goods’ items presented in Note 10 and they are intended to write down the value to the level of a feasible price. The inventory value recognized as income / cost in a given period is included in the proﬁt and loss ac- count under “cost of sales”. | Financial statement 28 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 10 SHORTTERM RECEIVABLES PLN ‘000 31.12.2020 31.12.2019 Trade receivables – up to 12 months 46 840 57 453 Total trade receivables 46 840 57 453 Advances for the purchase of land 20 402 17 584 Asset on perpetual usufruct 3 704 14 535 Receivables from selling Browary J - 8 814 advances for invoiced deliveries 18 046 13 998 cost of transferred infrastructure 2 963 4 662 advances - other 5 419 6 094 Other receivables 14 737 21 704 Total non-ﬁnancial assets 65 271 87 391 Receivables due to VAT tax 80 978 56 562 Receivables due to other taxes 12 072 2 444 Total receivables due to taxes 93 050 59 006 Total net short-term receivables 205 161 203 850 – impairment losses on receivables - trade receivables 10 882 10 899 Total gross-short-term receivables 216 043 214 749 Receivables on account of deliveries and services re- sult from provided development services, ﬁt-out ser- vices, rental of commercial and residential space, and other. A detailed description of the services provided by the Group’s companies can be found in note 19. The company controls the condition and payment capacity of its counterparties on an ongoing basis. There is no signiﬁcant risk concentration in relation to any of the clients of the Echo Investment Group. As at 31 December 2020, the Group estimated the val- ue of impairment losses based on a provision matrix based on historical data regarding the repayment of receivables by counterparties. The maximum value of credit risk related to trade receivables does not signiﬁcantly dier from the car- rying amount. The estimated fair value of trade re- ceivables is the current value of future expected dis- counted cash ﬂows and does not deviate signiﬁcantly from the balance sheet value of these receivables. | Financial statement 29 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 11 CHANGE IN IMPAIRMENT LOSSES ON SHORTTERM RECEIVABLES PLN ‘000 31.12.2020 31.12.2019 Opening balance 10 899 4 141 Increase due to: – establishment of an impairment loss 5 030 7 551 5 030 7 551 Decrease due to: – reversal of a provision (5 047) (763) – discontinuance of enforcement proceedings - (30) – sale of entities (5 047) (793) Impairment losses on short-term receivables at the end of the period 10 882 10 899 The Group estimated the value of impairment for trade receivables based on a provision matrix based on historical data regarding the repayment of receiv- ables by counterparties. The matrix has been pre- sented in the chapter on ﬁnancial risk management in the part concerning credit risk. NOTE 12 OVERDUE GROSS TRADE RECEIVABLES, WITH REMAINING MATURITY FROM THE BALANCE SHEET DATE PLN ‘000 31.12.2020 31.12.2019 up to 1 month 9 279 3 035 between 1 month and 3 months 3 324 4 441 between 3 months and 6 months 613 2 910 between 6 months and 1 year 2 807 3 004 over 12 months 7 499 4 730 Total (gross) overdue trade receivables 23 522 18 120 write-downs on trade receivables (10 882) (10 899) Total (net) overdue trade receivables 12 640 7 221 | Financial statement 30 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 13 NOTE 14 FINANCIAL INSTRUMENTS  ASSETS PLN ‘000 31.12.2020 31.12.2019 - Interest Rate Swap - - - FX fowards - 2 669 Total ﬁnancial investments in derivatives - 2 669 With maturities: - up to 1 year - 2 669 - from 1 to 3 years - - FINANCIAL INSTRUMENTS  LIABILITIES PLN ‘000 31.12.2020 31.12.2019 - Forward 10 929 - Total ﬁnancial investments in derivatives - - With maturities: - up to 1 year 10 929 - PROFIT LOSS ON FX DERIVATIVES PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 - proﬁt/loss on settlement of forwards/IRS (5 954) 1 431 - income/costs due to revaluation of forwards/IRS (15 222) 2 669 Total proﬁt (loss) on FX derivatives (21 176) 4 100 CASH AND ITS EQUIVALENTS PLN ‘000 31.12.2020 31.12.2019 Cash in hand and at bank 327 097 492 295 Total cash 327 097 492 295 OTHER FINANCIAL ASSETS PLN ‘000 31.12.2020 31.12.2019 Restricted cash: – proceeds from residential customers on escrow accounts released by the bank in the course of the progress of investment 60 095 32 617 – securing the refund of security deposit 12 708 6 880 – securing the repayment of interest and principal instalments 9 721 12 114 – other - 5 546 Total other monetary assets 82 524 57 157 The Group invests surplus cash in the following banks: PKO BP S.A., PEKAO S.A., DNB Bank Polska S.A., Santander Bank Polska S.A., Alior Bank Polska, Bank Millenium S.A., mBank S.A. and BNP Paribas Bank Polska S.A. The maximum credit risk of cash is equal to its car- rying amount. Cash at bank earns interest at ﬂoating interest rates based on daily bank deposit rates. Short-term deposits are made for various periods, from one day to one month, depending on the Group’s current demand for cash. They are subject to determined interest rates. | Financial statement 31 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 15A Description of shares The share capital of Echo Investment S.A. is divided into 412,690,582 ordinary bear- er shares of A, B, C, D, E and F series. None of the shares has limited rights. The Company’s share capital, i.e. the nominal value of all the shares, amounts to PLN 20,635, and it was paid in cash. The nom- inal value of one share is PLN 0.05. The number of shares equals the number of Shareholding structure The major shareholder of Echo Invest- ment S.A. is Lisala Sp. z o.o., controlled by Hungarian Wing IHC Zrt. The share- holding structure information as it was on December 31, 2020 and as on the balance sheet day is based on notiﬁcations from shareholders and information on the OFE (Opened Pension Funds) portfolios com- position as at December 31, 2020. votes at the General Meeting of Share- holders. The securities issued by Echo Investment S.A. do not provide their own- ers with any special controlling powers. Echo Investment S.A. does not have any information on limitations in exercising the voting right or transferring ownership rights by owners of its securities. SHAREHOLDERS OF ECHO INVESTMENT S.A. HOLDING MORE THAN 5% OF THE SHARE CAPITAL AS AT 31 DECEMBER 2020 Shareholder No of shares and votes % of share capital % Votes on GMS Lisala Sp. z o.o. (Wing IHC Zrt and Grin Real Estate partners) 272 375 784 66,0 66,0 Nationale-Nederlanden OFE 55 833 698 13,53 13,53 Aviva Otwarty Fundusz Emerytalny Aviva Santander 27 350 695 6,63 6,63 Nicklas Lindberg 538 676 0,13 0,13 Maciej Drozd 221 765 0,05 0,05 Péter Kocsis 44 000 0,01 0,01 Others 56 325 964 13,65 13,65 Total 412 690 582 100,00% 100,00% – Lisala Sp. z o.o. (Wing IHC Zrt and Grin Real Estate partners) – Nationale-Nederlanden OFE – Aviva Otwarty Fundusz Emerytalny Aviva Santander – Nicklas Lindberg – CEO – Maciej Drozd – Vice-President, CFO – Péter Kocsis – Member of the Supervisory Board – Other Number of shares: 272 375 784 – 55 833 698 – 27 350 695 – 538 676 – 221 765 – 44 000 – 56 325 964 –  66% 6.63% 13.53% 13.53% 0.13% 0.05% 0.01% | Financial statement 32 Consolidated nancial statements of Echo Investment Group for 2020 SUPPLEMENTARY CAPITAL PLN ‘000 31.12.2020 31.12.2019 From share premium 100 748 100 748 Created out of proﬁts 993 865 993 865 Reserve fund for dividend 186 051 164 639 Total 1 280 664 1 259 252 The Ordinary General Meeting of Shareholders (OGMS) of Echo Investment S.A. took place on 13 August 2020 in Warsaw. The net proﬁt achieved in the completed ﬁnancial year 2019 in the amount of PLN 21 412 312.65 was allocated to distribute among all shareholders on the following principles: 1. The proﬁt allocated for distribution increased by PLN 184 932 978.35 from the Dividend Fund (PLN 206,345,291 in total) was allocated for distribu- tion among all shareholders of the Company as the dividend. 2. The amount of PLN 206,345,291 paid by the Com- pany on 21 October 2019 as an advance for div- idend for the ﬁnancial year was included on the dividend basis. As the dividend corresponded to the amount of the dividend advance payment, the shareholders decided that the Company would not pay any additional funds from the proﬁt for the ﬁnancial year 2019. In 2019, the Company paid an advance on dividends in the amount of PLN 206,345 thous. The value of the dividend per share was PLN 0.50. BOOK VALUE PER SHARE 31.12.2020 31.12.2019 Equity attributable to equity holders of the parent entity [PLN ‘000] 1 684 685 1 562 365 Number of shares (in thous. pieces) 412 691 412 691 Book value per share (in PLN) 4,08 3,79 Diluted number of shares 412 691 412 691 Diluted book value per share 4,08 3,79 EARNINGS PER SHARE 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 Proﬁt (loss) attributable to the parent entity's shareholders [PLN ‘000] 122 093 299 532 Weighted average number of ordinary shares (in thousands) 412 691 412 691 Basic proﬁt (loss) per ordinary share (in PLN) 0,30 0,73 Proﬁt (loss) attributable to the parent entity's shareholders [PLN ‘000] 122 093 299 532 Weighted average diluted number of ordinary shares (in thousands) 412 691 412 691 Diluted proﬁt (loss) per ordinary share (in PLN) 0,30 0,73 In 2020 and 2019 the Company did not use diluting instruments. NOTE 15B NOTE 15C | Financial statement 33 Consolidated nancial statements of Echo Investment Group for 2020 CHANGE IN PROVISIONS PLN ‘000 31.12.2020 31.12.2019 Opening balance Provisions on expected costs of general administrative (audit, bonuses, leave of absence, etc.) 531 4 441 Provision for estimated penalties and losses 12 631 15 967 Provision for court cases 5 773 6 126 Provision for liabilities related to investment projects 2 585 8 753 Provision for master lease obligations 19 679 33 182 Provision for proﬁt share obligations 78 306 97 443 Provision for ﬁt-out works 5 855 7 610 Provision for the ﬁnal settlement of the investment property sale price - 1 294 125 359 174 816 Increases due to: Provisions on estimated costs of general administrative (audit, bonuses, leave of absence, etc.) 605 631 Provision for estimated penalties and losses 1 243 5 247 Provision for estimated costs of warranty repairs, etc. 1 540 - Provision for court cases 1 342 369 Provision for liabilities related to investment projects 6 757 7 363 Provision for master lease obligations 4 728 17 888 Provision for proﬁt share obligations 12 006 29 489 Provision for ﬁt-out works 1 976 6 498 30 197 67 485 Utilization due to: Incurred costs of general administrative (435) (4 541) Incurred penalties and losses (860) (8 583) (266) - Provision for court cases (3 681) (722) Provision for liabilities related to investment projects (7 241) (13 531) Provision for master lease obligations (12 037) (31 391) Provision for proﬁt share obligations (44 029) (48 626) Provision for ﬁt-out works (4 919) (8 253) Provision for the ﬁnal settlement of the investment property sale price - (1 294) (73 468) (116 941) Closing balance Provisions on estimated costs of general administrative (audit, bonuses, leave of absence, etc.) 700 531 Provision for estimated penalties and losses 13 014 12 631 Provision for estimated costs of warranty repairs, etc. 1 274 - Provision for court cases 3 434 5 773 Provision for liabilities related to investment projects 2 101 2 585 Provision for master lease obligations 12 370 19 679 Provision for proﬁt share obligations 46 283 78 306 Provision for ﬁt-out works 2 912 5 855 Provision for the ﬁnal settlement of the investment property sale price - - 82 088 125 359 Including: Long-term provisions 50 029 35 931 Short-term provisions 32 059 89 428 NOTE 16 * Detailed information on provisions for lease guarantees are included in point 07 „Material estimates of the group’s management board” ** Detailed information on provisions for proﬁt shares obligations are included in point 07 „Material estimates of the group’s management board” | Financial statement 34 Consolidated nancial statements of Echo Investment Group for 2020 In the reporting period, the following provisions for investment liabilities were used: − related to the Symetris Business Park I oce build- ings in Łódź, O3 Business Campus I in Kraków, sold in 2016, in the amount of PLN 863 thous. − related to the O3 Business Campus II oce build- ings in Kraków and Nobilis Business House in Wrocław sold in 2017, in the amount of PLN 3,154 thous. − related to Sagittarius Business House in Wrocław sold in 2018 in the amount of PLN 1,019 thous. − related to the O3 Business Campus III in Kraków, Gatehouse Oces in Warsaw and Moje Miejsce I in Warsaw, in the amount of PLN 5,480 thous. Provisions for rental guarantees and the obligation to distribute the proﬁt were divided according to the maturity date from the balance sheet date. Pro- visions for rental guarantees have been divided into long-term guarantees in the amount of: PLN 2,997 thous. and short-term, in the amount of: PLN 9,373 thous. However, the liabilities to distribute the proﬁt to: long-term, in the amount of: PLN 46,083 thous. and short-term, in the amount of: PLN 200 thous. The dates of realization of provisions for penalties and losses, warranty costs and court cases are dif- ﬁcult to estimate, and there is a high probability of their realization within 12 months from the balance sheet date. Provision for penalties includes the value of penalties it can be encumbered by the Group for concluded agreements with the probability of being encum- bered by more than 50%. The provision for the expected costs of warranty re- pairs includes the value of repairs or compensation related to sold premises and projects, with the prob- ability of being charged more than 50%. The provision for project liabilities relates to the provision for brokerage and other project-related provisions. The amounts of provisions were estimated based on the Company’s best knowledge and its experience. NOTE 17 In the consolidated statement of ﬁnancial position, the item “Loans, borrowings and bonds ﬁnancing real estate held for sale” presents liabilities (bank loans, bonds, loans) relating to projects intended for sale and presented in the line “Assets held for sale”. As at the balance sheet date, this item includes lia- bilities ﬁnancing projects: − Oces at the Malthouse and Oces at the Villa in Warsaw (Warsaw Brewery K and GH) − Moje Miejsce I and II in Warsaw The „loans and borrowings” item presents special purpose loans and lines of credit in current accounts. The purpose credit agreements are secured by real estate mortgages, assignment of receivables re- sulting from lease agreements, construction agree- ments, policies and registered pledges on shares, accounts, belongings and rights of subsidiaries. In- terest rates on loans denominated in EUR are based on the EURIBOR plus a margin. Credit lines denominated in PLN are secured by blank promissory notes, declarations of submission to enforcement and powers of attorney to bank ac- counts. The loan interest rate is based on the WIBOR rate plus a bank’s margin. According to the best in- formation and data of the Management Boards of the Group’s companies, there were no breaches of the terms of loan agreements or the agreed levels of collateral during the ﬁnancial year and until the date of signing the ﬁnancial statements. In the ‘debt securities’ item the Group presents bonds issued. The interest on bonds is based on the CREDIT, LOANS AND BONDS PLN ‘000 31.12.2020 31.12.2019 Loans and borrowings 916 937 820 161 Credits, loans, - non-current assets classiﬁed as held for sale 467 055 - Debt securities 1 395 332 1 149 510 Debt securities - non-current assets classiﬁed as held for sale 28 980 - Total liabilities due to loans and borrowings 2 808 304 1 969 671 - of which long-term portion 1 465 767 1 602 126 - of which short-term portion 1 342 537 367 545 | Financial statement 35 Consolidated nancial statements of Echo Investment Group for 2020 WIBOR rate plus a margin. The fair value of loans and borrowings does not dier signiﬁcantly from their balance value. The fair value was determined by the income method based on the cash ﬂows dis- counted by the current market interest rate. The fair value measurement was classiﬁed as level 3 of the fair value hierarchy. Issuance of bonds denominated in EUR The Management Board of Echo Investment on Sep- tember 3, 2020 concluded an issue agreement with Bank Pekao S.A., establishing a program for the issu- ance of unsecured ordinary bearer bonds up to the total amount of the issued and outstanding bonds of EUR 100 million. Bonds issued pursuant to the Issu- ance Program will be oered for purchase without the need to draw up a prospectus or information memorandum. On the issuance date the Bonds will be registered in the depository maintained by Kra- jowy Depozyt Papierów Wartościowych S.A. and it Private bond issue On October 28, 2020, Echo Investment has also is- sued short-term bonds for a private investor in a will be introduced to trading in an alternative trading system operated by Warsaw Stock Exchange (Gieł- da Papierów Wartościowych w Warszawie S.A.). Bonds will be issued as unsecured ordinary bearer bonds denominated in EUR and bearing interest at a ﬁxed or variable interest rate, with a maturity not exceeding 5 years. The ﬁnal parameters of the bonds will be determined through talks with investors and will be subject to approval of the Company’s Man- agement Board. total value of EUR 12,8 million (the euro-bonds issu- ance program described above). BONDS ISSUED BY THE COMPANY IN 2020 IN PLN Series Date Nominal value [‘000 PLN] Bonds for institutional investors – series 1/2020 2.06.2020 150 000 Bonds for institutional investors – series 1P/2020 5.08.2020 100 000 Total 250 000 Even more detailed information on loans and bonds can be found in the Report of the Management Board on the activities of Echo Investment S.A. and its Capital Group for 2020 in part 20 “Financial lia- bilities of the Company and its Capital Group” Information on the bond issued in Q1 2021 you can ﬁnd in the item 11.3. BONDS ISSUED BY THE COMPANY IN 2020 IN EUR Series Date Nominal value [‘000 PLN] Bonds for institutional investors – series 1E/2020 23.10.2020 40 000 Bonds for institutional investors – series 2P/2020 * 28.10.2020 12 800 Total 52 800 Issue out of the issuance program with Bank Pekao S.A. | Financial statement 36 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 18 Fair value of trade and other liabilities does not dif- fer signiﬁcantly from the valuation at its carrying amount. TRADE AND OTHER LIABILITIES PLN ‘000 31.12.2020 31.12.2019 Trade payables maturing: Up to 12 months 130 249 238 011 130 249 238 011 Leasing liabilities 134 884 184 964 Liabilities due to purchases of land 125 234 - Security deposits from contractors and deposits received 55 493 57 266 Payments on escrow account from clients purchasing apartments 60 095 32 617 Financial instruments 10 929 - Accruals - future expenses to be incurred 22 553 - Accruals - bonuses for the Management Board and employees 6 893 5 940 Accruals - other 2 339 3 974 Other liabilities 12 912 3 584 431 332 288 345 Liabilities due to VAT 892 5 069 Liabilities due to other taxes 12 734 11 057 13 626 16 126 Total trade and others liabilities 575 207 542 482 NOTE 19 REVENUE FROM SALES PLN ‘000 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 Revenue from Contracts with Customers Sale and lease of residential space 728 560 554 169 Sale to the Resi4Rent 286 998 97 894 Services in oce space 54 103 46 514 Services in retail space 1 383 28 125 Other sale 24 519 76 670 Revenue from Contracts with Customers 1 095 563 803 372 Lease (MSSF16) 117 291 76 761 Revenue total 1 212 854 880 133 The following are disclosures regarding the main groups of in- come that will enable users of the ﬁnancial statements to be- come acquainted with the nature, amounts, acquisition dates and uncertainties related to income and cash ﬂows resulting from concluded agreements. | Financial statement 37 Consolidated nancial statements of Echo Investment Group for 2020 REVENUES PLN ‘000 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 Sale (A) 728 560 554 169 Lease (C) 134 1 352 Apartments 728 694 555 521 Lease (C) 62 470 30 044 Fit-out services (D) 54 103 46 514 Oce 116 573 76 558 Sale (A) 0 6 850 Lease (C) 54 270 44 386 Development services (E) 1 383 21 275 Retail 55 653 72 511 Sale (G) 286 998 97 894 Resi4Rent 286 998 97 894 Sale (F) 22 614 71 274 Lease (C) 417 979 Services (F) 1 905 5 396 Other 24 936 77 649 FUTURE MINIMUM CASH FLOWS RESULTING FROM LEASES IN WHICH THE GROUP IS THE LESSOR PLN ‘000 31.12.2020 31.12.2019 up to 1 year 100 357 39 498 over 1 to 2 years 130 120 75 925 over 2 to 3 years 140 805 89 636 from 3 to 4 years old 126 040 100 315 over 4 to 5 years 114 397 90 652 over 5 years 375 617 303 817 Total 987 335 699 843 The leased investment properties are also mostly objects of leasing, with the Echo Group being the lessee. Lease contracts signed by the Echo Group as a lessor assume monthly payments. The lease price depends only on the market price indexes. Where it is necessary to reduce credit risk, the Echo Group receives deposits or bank guarantees from tenants. The Echo Group is exposed to a decline in market lease rates, however, due to the fact that lease agree- ments are signed for periods of several years, the impact of such market changes is spread over time. | Financial statement 38 Consolidated nancial statements of Echo Investment Group for 2020 (A) Revenues related to property development – sale of residential and commercial space in residential projects The Group recognizes revenues when a obligation to perform a service is fulﬁlled. The obligation to perform the service is deemed fulﬁlled when the property is handed over to the buy- er, which is based on the acceptance protocol signed by the parties only after completion of the construction property and obtaining the occupancy permit, as well as provided by 100 % payments towards the purchase price of real estate made by the buyer. Agreements included within this income group do not include variable remuneration. Moreover, in the Group’s opinion, the concluded agreements do not contain a signiﬁcant element of ﬁnancing. Therefore, the Group, as a rule, does not show re- ceivables or other asset balances under contracts related to this group of revenues. Contractual obligations reﬂect the advance payments made by the customers. The table below presents changes in the balance of contractual liabilities in relation to this group of revenues. The total value of revenues to be recognized in the future, re- sulting from contracts for the sale of residential space, signed as at the balance sheet date 31 December 2020, amounts PLN 1,182,051 thous., of which the Group received advance payments in the amount of PLN 231,613 thous. until the balance sheet date. These revenues will be recognised when the property is delivered to the buyers, after completion of the construction and obtaining the necessary administrative decisions, which follows on average after a period of about 1 to 3 months after construc-tion is completed. DEFERRED INCOME ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Deferred income - opening balance 452 906 321 348 Increase - inﬂows 507 267 684 886 Presented as revenue in the period (728 560) (553 328) – including revenue presented in the period, considered in balance of received ad- vanced payments at the beginning of the period (420 394) (123 279) Deferred income - closing balance 231 613 452 906 | Financial statement 39 Consolidated nancial statements of Echo Investment Group for 2020 DEFERRED INCOME RESULTING FROM RESIDENTIAL SALES AGREEMENTS PLN ‘000 Project Targeted completion Targeted total value Total value of defer- red revenue related to concluded agreements Received advances / Liabilities under contracts with customers (long-term) * Received advance paymants / deferred income (long and short- term) * Deposit on apartments (long and short-term other liabilities (note 18) Osiedle Krk I, Kraków IV Q 2022 97 056 97 056 0 12 412 42 Osiedle Krk II, Kraków II Q 2023 97 070 97 070 6 498 0 353 Osiedle Bonarka Living I, Kraków IV Q 2022 68 400 68 400 0 6 363 0 Osiedle Jarzębinowe V, Łódź project completed 43 911 6 0 0 0 Osiedle Jarzębinowe VII, Łódź project completed 36 661 4 857 0 2 690 39 Osiedle Jarzębinowe VIII, Łódź IV Q 2021 39 302 39 302 0 12 111 893 Nowa Dzielnica, Łódź project completed 30 200 1 535 0 1 0 Fuzja I, Łódź project completed 105 589 50 083 0 8 109 424 Fuzja II, Łódź II Q 2022 92 307 92 307 1 152 0 277 Osiedle Jaśminowe IV, Poznań project completed 31 380 38 0 0 0 Osiedle Perspektywa I, Poznań project completed 43 683 230 0 182 0 Osiedle Perspektywa II, Poznań project completed 24 795 16 0 16 0 Osiedle Perspektywa III, Poznań project completed 30 836 62 0 0 35 Osiedle Enter IA, Poznań IV Q 2021 41 649 41 649 0 13 092 849 Osiedle Enter IB, Poznań IV Q 2021 37 838 37 838 0 1 376 275 Nasze Jeżyce I, Poznań II Q 2021 57 829 57 829 0 21 361 16 874 Nasze Jeżyce II, Poznań II Q 2021 64 200 64 200 0 18 059 11 403 Apartamenty Esencja, Poznań project completed 116 366 38 110 0 15 204 12 235 Widoki Mokotów, Warszawa project completed 69 273 7 491 0 25 17 Warsaw Brewery phase A, Warsaw project completed 55 343 160 0 53 0 Warsaw Brewery phase B, Warsaw project completed 125 289 188 0 0 49 Warsaw Brewery phase C, Warsaw project completed 91 536 1 118 0 375 0 Warsaw Brewery phase D, Warsaw project completed 113 411 43 396 0 704 2 058 Osiedle Reset I, Warszawa project completed 67 163 576 0 162 0 Osiedle Reset II, Warszawa project completed 119 369 6 683 0 3 056 40 Moje Miejsce, Warsaw project completed 132 313 6 129 0 744 259 Stacja Wola I, Warsaw III Q 2021 204 300 204 300 0 82 135 5 346 Stacja Wola II, Warsaw II Q 2022 138 430 138 430 6 558 0 4 226 Grota – Roweckiego 111 etap III project completed 16 232 60 0 0 41 Ogrody Graua, Wrocław project completed 47 209 19 094 0 1 333 3 Stacja 3.0, Wrocław project completed 89 306 50 707 0 6 826 3 508 Zebra, Wrocław project completed 75 795 1 514 0 99 150 Puszkarska R4R, Kraków IQ 2021 - sale of plot 5 969 5 969 0 5 969 0 Other 5 647 5 647 0 4 948 699 Total 2 415 657 1 182 051 14 208 217 405 60 095 * Advances exempt from duciary accounts ** Remaining advances (gross amount) to be released from escrow accounts In the item “Liabilities under contracts with customers”, the Group presents payments from customers for apartments in pending residential projects kept and released from escrow accounts. As at December 31, 2020, the amount of unblocked depos- its was PLN 231,613 thous., of which long-term amounted to PLN 14,208 thous. As at December 31, 2019, the amount of un- blocked deposits was PLN 452,906 thous., of which long-term: PLN 45,754 thous. | Financial statement 40 Consolidated nancial statements of Echo Investment Group for 2020 (B) Revenues related to property development – sale of commercial real estate – oce buildings and shipping centres The Group recognizes types and numbers of services to which it has committed for the beneﬁt of the buyer under the contract for the sale of real estate, including rent guarantees. As part of the sale of investment properties, the Group recogniz - es revenue when the obligation to perform the service is fulﬁlled, i.e. when the notarial deed is signed, which is the moment when the control over the property is transferred to the buyer. The Group recognises the amount of revenue in the amount of the price resulting from the transaction speciﬁed in the contract between the entity and the buyer. Its level is determined at the fair value, taking into account the amount of future liabilities resulting from the economic content of the concluded contract. The variable element occurring in this type of contracts (due to its dependence on future events) is the amount concerning rental guarantee. Despite the uncertainty, the Group is able to reliably estimate the cost that it will have to incur on account of the vacant space in the building in the period speciﬁed in the contract at the moment of conclusion of the contract. The Group creates provisions in this respect in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. This provision reduces the remuneration from the contract, and thus recognised revenues from its execution. The result on the sale of commercial real estate classiﬁed as investment property in accordance with IAS 40 “Investment Property” is presented in the statement of comprehensive income as Proﬁt (loss) on investment property. Details regarding provisions recognised by the Group as at 30 June 2020 are presented in note 16. The Group recognises additional costs of concluding a sales agreement as an element of the proﬁt and loss account, at the moment of recognising the revenue from the sale of an asset. Moreover, in the Group’s opinion, the concluded agreements do not contain a signiﬁcant element of ﬁnancing. The purchase price of the property obtained from the buyer is paid in full in such agreements at the time of the sale. Due to such character- istics of the contracts concluded, the Group, as a rule, does not show receivables or other balances of assets due to contracts related to this group of revenues. (C) Revenues related to lease Commercial buildings - shopping centres and oces, commis- sioned for use, and individual premises in residential projects for rent are a source of rental income for the Group. In accordance with IFRS 16 Leases, revenues from the lease of residential and commercial space are recognised on a straight-line basis over the term of the agreements concluded. | Financial statement 41 Consolidated nancial statements of Echo Investment Group for 2020 (D) Revenues related to ﬁt-out works  As part of services conedted with construction of oce pro- jects, the market standard is to perform ﬁt-out works of space before their occupancy by tenants. The Group provides ﬁt-out works, which includes preparation and agreement of the scope of works, organisation and carrying out tenders for construction works, as well as supervision and coordination of construction works. The Group recognises revenues when the obligation to perform the service is fulﬁlled, i.e. during the service provision period. The remuneration resulting from the concluded agree- ments is permanent and due to the Group after handing over the oce space to the tenant. The duration of contracts is rel- atively short and ranges from 1 to 2 months. Moreover, in the Group’s opinion, the concluded agreements do not contain any signiﬁcant element of ﬁnancing. Due to such characteristics of the contracts signed, there are no signiﬁcant balances of assets or liabilities under contracts, except for trade receivables (see note 10). The total value of revenues to be recognised in the future related to obligations to perform contracts for the implementation of ﬁt-out works signed as at the balance sheet date on 31 Decem- ber 2020 is PLN 972 thous. These revenues will be recognised at the time of completion of works, which depending on the oce building is expected in the following periods: DEFERRED INCOME RESULTING FROM FITOUT WORKS AGREEMENT PLN ‘000 Building Tenant Date of execu- tion Value Sagittarius Business House, Wrocław Oras Olesno sp. zo.o. 2021/07 972 Total 972 (E) Revenues related to project implementation services As part of the investment implementation services, the Group provides services for the preparation and organisation of the in- vestment process with respect to development projects owned by other entities, entities associated with the Echo Investment Group and unrelated entities. As part of its responsibilities, the Group undertakes the performance of advisory, management, legal and other activities necessary to manage the implemen- tation of the investment. This process includes the preparation of investments, organisation and carrying out tenders for con- struction works, supervision and coordination of construction works as well as customer service. The Group recognises reve- nues when the obligation to perform the service is fulﬁlled, i.e. during the service provision period. The remuneration resulting from the concluded contracts is permanent and due to the Com- pany monthly. Moreover, in the Group’s opinion, the concluded agreements do not contain a signiﬁcant element of ﬁnancing. Due to such characteristics of the contracts signed, there are no signiﬁcant balances of assets or liabilities under contracts, except for trade receivables (see note 10). | Financial statement 42 Consolidated nancial statements of Echo Investment Group for 2020 (F) Other revenues of the Group The Management Board analyzed the remaining contracts for the provision of real estate brokerage, accounting, legal, con- sulting, IT, ﬁnancial, marketing and other services. The Group recognises revenues when the obligation to perform the per- formance is fulﬁlled, i.e. for certain contracts - at the end of the given type of service (e.g. signing a real estate sale agreement as a result of the intermediation service in the sale of real estate) or during the period of providing a given type of services (e.g. in the period of provision of accounting, marketing, consulting, legal or real estate management services). In most cases, servic- es are provided on a monthly basis and are accounted for in the same period, and the remuneration for the Group becomes due. For some contracts (e.g. real estate intermediation), the remu- neration resulting from concluded contracts contains a variable element, however, the nature of these contracts shows that the Group is entitled to the remuneration only when the contractual obligation is fulﬁlled. This means that the variable remuneration is known at the moment of recognising the revenue, and its value is not changed later. Moreover, in the Group’s opinion, the concluded agreements do not contain a signiﬁcant element of ﬁnancing. Due to such characteristics of the contracts signed, there are no signiﬁcant balances of assets or liabilities under contracts, except for trade receivables (see note 10). (G) Income from the sale of rental apartments As part of the sale of real estate included in the Resi4Rent cate- gory, relating to the ﬂat platform for rent, the Group recognizes revenue upon fulﬁlment of the performance obligation, i.e. when control of the property is transferred to the buyer. The Group recognizes the amount of revenue in the amount of the price resulting from the transaction deﬁned in the sale and purchase agreement between the entity and the buyer. Its level is deter- mined according to the fair value of the payment, taking into account the amount of future liabilities resulting from the eco- nomic substance of the concluded contract. | Financial statement 43 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 20 NET OPERATING COSTS PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Sale and lease of residential space (564 165) (401 728) Construction and lease of oce space (82 565) (57 459) Lease of retail space (21 923) (54 245) Sale to the Resi4Rent (273 049) (91 168) Other (27 321) (72 530) Total net operating costs (969 023) (677 130) COSTS BY TYPE PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Amortisation (11 738) (9 472) Consumption of materials and power (105 985) (119 880) Outsourced services (701 686) (751 413) Taxes and charges (18 573) (13 027) Payroll (47 409) (65 802) Social security contributions and other beneﬁts (8 725) (10 441) Other costs by type (35 758) (61 858) Value of goods and materials sold - - Total costs by type (929 875) (1 031 892) Change in inventories, ﬁnished products and work in progress 171 456 (201 011) - - Administrative expenses related to execution of projects (33 163) (27 511) Selling and distribution expenses (29 855) (28 883) General and administrative expenses (69 291) (97 357) Cost of products sold (969 023) (677 130) | Financial statement 44 Consolidated nancial statements of Echo Investment Group for 2020 NET PROFIT ON INVESTMENT PROPERTY PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Proﬁt on investment property (11 977) 16 597 Revaluation of property, including: 251 008 376 674 - asset on leasing IFRS 16 2 695 (3 839) Costs of proﬁt share (10 045) 5 141 Net proﬁt (loss) on investment property 228 985 398 412 NOTE 21 In 2020, the Group sold a plot of land in Pamiątkowo near Poznań and a plot of land in Koszalin. The trans- actions are described in note 32. In the item “proﬁt (loss) on the sale of investment properties”, among others costs of securing rent- al revenues (master lease) are presented, which mainly relate to sold Sagittarius Business House in Wrocław and O3 Business Campus in Kraków. The item “revaluation of real estate” presents real estate appraisals, which mainly relate to oce projects: Face2Face Business Campus (I and II), Villa Oces and Malthouse Oces (Warsaw Brewery K and GH), Moje Miejsce ( I and II) in Warsaw, Midpoint71 and West 4 Business Hub in Wrocław and Fuzja CD in Łódź. On the other hand, the item “Proﬁt sharing costs” presents liabilities to proﬁt distribution, which mainly concern Moje Miejsce (I and II) in Warsaw and Libero Shopping Center in Katowice. NOTE 22 In 2020, the release of provisions mainly con-cerned court cases in the amount of PLN 3,400 thous. OTHER OPERATING INCOME PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Reversal of writte-os and reseves * 4 713 8 021 Termination of reserves and provisions 387 3 018 Revaluation of receivable 1 108 1 151 Contractual penalties 855 1 520 Compensations 520 5 675 Proﬁt from sale of non-ﬁnancial non-current assets 22 890 Other 2 778 2 241 Total other operating income 10 383 22 516 NOTE 23 OTHER OPERATING EXPENSES PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Established provisions (4 670) (5 318) Revaluation of receivable (2 111) (2 708) Contractual penalties (1 048) (3 847) Donations (555) (276) Cost of sale of non-ﬁnancial non-current assets (152) (971) Other (4 188) (6 907) Total other operating expenses (12 724) (20 027) * W pozycji „Utworzone rezerwy” prezentowane są głównie rezerwy na naprawy gwarancyjne, sprawy sądowe, pośrednictwo w najmie. | Financial statement 45 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 24 NOTE 25 FINANCIAL INCOME PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Proﬁt on disposal of investments 7 926 7 210 income from borrowings interest with amortized cost 6 817 7 265 Income from interest 285 761 Other ﬁnancial income - 8 Total ﬁnancial income 15 028 15 244 In the item “proﬁt on the sale of investments” in 2020, the Group showed the result on the sale of Projekt Pamiątkowo Sp. z o.o. , Projekt Echo 132 Sp. z o.o. in the amount of PLN 2,664 thous. and the company Projekt 18 - Grupa Echo Sp. z o.o. S.K.A in the amount of PLN 5,262 thous. Revenue from the sale of shares in Projekt 18 - Grupa Echo Sp. z o.o. S.K.A amounted to 3,192 thous., the value of assets sold amounted to PLN 27,675 thous, including inventories PLN 26,894 thous. and the value of liabilities sold amounted to PLN 28,298 thous., including loans of PLN 26,578 thous. Revenue from the sale of shares in Projekt Pa- miątkowo Sp. z o.o. and Projekt Echo 132 Sp. z o.o. amounted to PLN 3 541 thous. NOTE 25 FINANCIAL COSTS PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 interest expense from credit and bonds with amortized cost (53 768) (53 509) costs of expected credit loss (445) (650) Costs due to interest of leasing (3 354) (6 913) loss on disposal of investments (4 369) (300) Total (61 936) (61 371) In accordance with IAS 23, the Group activates the part of ﬁnancial costs that are directly related to the acquisition and production of assets. In the case of general ﬁnancing, the ﬁnancing costs subject to cap- italisation are determined using the weighted aver- age of all borrowing costs in relation to the incurred outlays for a given asset. The activated amount of borrowing costs in 2020 amounted to: PLN 8,599 thous. at a capitalization rate of 1.04% (of which: for inventories: PLN 7,267 thous., for investment properties under construction: PLN 1,332 thous.). In 2019, it was 10,785 thous. At a capitalization rate of 1.17%, (including: for inventories PLN 7,630 thous., for investment properties under construction: PLN 3 155 thous.). NOTE 26 GAIN LOSS DUE TO EXCHANGE RATE DIFFERENCES PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 - Realised exchange rate dierences’ losses over gains surplus 1 679 55 - Unrealised exchange rate dierences’ losses over gains surplus (85 583) 2 636 Total gain (loss) due to exchange rate dierences (83 904) 2 691 | Financial statement 46 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 27 Rosehill Investments Sp. zo.o., Berea Sp. zo.o. (Galeria Młociny) On 31 May 2017 the Echo Investment Group together with the EPP Group concluded a purchase agree- ment concerning a property located in Warsaw at ul. Zgrupowania AK „Kampinos”. Under the conclud- ed transaction the companies purchased shares in Rosehill Investments Sp. z o.o., which is the owner of Galeria Młociny project by way of holding 100% shares in Berea Sp. z o.o. The property value was established as EUR 104.5 mln. As at the day of the acquisition and the balance date i.e. on 31 December 2020 the Echo Investment Group held 30% shares in the project company being the owner of the prop- erty and the remaining 70% was held by the EPP Group. Echo Investment S.A. and EPP N.V. are only responsible for their respective parts of the purchase price. The share of the Group in Berea Sp. z o.o. pre- sented in the ﬁnancial report is estimated accord- ing to the equity method. Pursuant to the articles of association, all strategic ﬁnancial and operational decisions (including in particular: purchase of a sig- niﬁcant asset, conclusion of a lease agreement, etc.) require the unanimous consent of both shareholders. A summary of ﬁnancial information in the joint ven- ture is presented below. The carrying value of the investment as at 31 December 2020 amounted to PLN 104,919 thous. In 2019, the company analyzed the impairment of net investment value based on the equity method in a jointly controlled company Rosehill Investments Sp. z o.o (projekt Młociny). In the ﬁrst half of 2019, due to Galeria Młociny opening, the company updated the fair value of the project in the net assets of the jointly controlled entity. The company estimated that the recoverable amount of the net investment as at the balance sheet date is lower than the value of the shares in net assets as at that day. As a result, the company recognized an impairment loss of PLN 12,756 thous. The value of investments in associates and joint ventures accounted for using the equity method is presented in the table below: 31.12.2020 31.12.2019 Rosehill Investments Sp. zo.o., Berea Sp. zo.o. (Galeria Młociny) 104 919 88 178 Projekt Echo – 138 Sp. zo.o. Sp.K. (Towarowa 22) 147 741 147 986 R4R Poland Sp. zo.o. (Resi4Rent) 53 789 17 978 Total 306 449 254 142 Joint-ventures | Financial statement 47 Consolidated nancial statements of Echo Investment Group for 2020 SELECTED DATA FROM THE FINANCIAL SITUATION PLN ‘000 31.12.2020 Fixed assets – investment property 1 816 847 Current assets 14 916 Cash 46 477 Total assets 1 878 240 Long-term liabilities 1 321 682 Short-term liabilities 280 271 Total liabilities 1 601 953 Equity 276 287 % share of Echo Investment S.A. 30,00% Share of the Echo Investment Group in net assets * 82 886 Joint venture’s ﬁnancial data – Galeria Młociny SELECTED DATA FROM THE STATEMENT OF COMPREHENSIVE INCOME PLN ‘000 1.01.2020 – 31.12.2020 Operating income 66 929 Operating costs (30 109) Revenue/cost - revaluation of property * (121 073) General and administrative expenses (1 696) Costs of sales – Other income / operating costs (3 000) Financial income 717 Financial costs (52 793) Gross proﬁt (loss) (141 025) Income tax 1 559 Net proﬁt (loss) (139 465) Total comprehensive income (139 465) Share of the Echo Investment Group (%) 30,00% Share of the Group in comprehensive income resulting from joint-venture (41 840) * as a result of the new valuation made in 2020, a decrease in the value of the property was recognized (Galeria Młociny), taking into account the situation related to COVID 19. * The dierence between the net investment value (PLN 104,919 thous.) and the value of Echo Investment Group’s share in the net assets of Rosehill Investments Sp. z o.o. - the Młociny project (PLN 82,886 thous.) constitutes goodwill. | Financial statement 48 Consolidated nancial statements of Echo Investment Group for 2020 Projekt Echo – 138 Sp. zo.o. Sp.K. (Towarowa 22) On 15 September 2016 the Echo Investment Group and the EPP Group concluded a conditional pur- chase agreement under which they were planning to purchase a property located at ul. Towarowa 22 in Warsaw, where a joint investment enterprise is to be developed. The ﬁnal purchase agreement was con- cluded on 23 December 2016. The property sales price was EUR 77.4 mln, however, it will be increased to EUR 119.4 mln upon the fulﬁlment of conditions stipulated in the agreement. Echo Investment paid EUR 35.82 mln and EPP’s contribution amounted to EUR 41.58 mln. Thus, as at the balance date i.e. on 31 December 2020 the Echo Investment Group had 46.20% share in the project company being the owner of the property at ul. Towarowa 22. EPP held the remaining 53.80%. Upon the fulﬁlment of all conditions increasing the price, the share of Echo Investment in the transaction and the planned en- terprise will ultimately amount to 30% and 70% will be held by the EPP Group. Pursuant to the articles of association, all strategic ﬁnancial and operational decisions (including in particular: purchase of a sig- niﬁcant asset, conclusion of a lease agreement, etc.) require the unanimous consent of both shareholders. As at the balance sheet day, on 31 December 2020 those conditions were not yet fulﬁlled. Echo Invest- ment S.A. and EPP N.V. are only responsible for their proportional parts of the price. The share of the Echo Investment Group in the joint venture is shown in the consolidated ﬁnancial statement and it is estimated using the equity method. The carrying value of the investment as at 31 December 2020, amounted to PLN 147,741 thous. A summary of ﬁnancial informa- tion in the joint venture is presented below. SELECTED DATA FROM THE FINANCIAL SITUATION PLN ‘000 31.12.2020 Fixed assets – investment property 425 153 Other ﬁxed assets 476 Cash 4 744 Current assets 754 Total assets 431 127 Long-term liabilities 84 958 Short-term liabilities 21 122 Total liabilities 106 080 Equity 325 047 Share of Echo Investment S.A. 46,20% Elimination of mutual transactions between unit and the Group (2 412) Share of Echo Investment S.A. 147 741 Joint venture’s ﬁnancial data – Towarowa 22 | Financial statement 49 Consolidated nancial statements of Echo Investment Group for 2020 SELECTED DATA FROM THE STATEMENT OF COMPREHENSIVE INCOME PLN ‘000 1.01.2020 – 31.12.2020 Operating income 9 570 Operating costs. (10 111) Costs of projects’ sell – General and administrative expenses (248) Other income / operating costs 672 Financial income and costs (1 352) Gross proﬁt (loss) (1 469) Income tax 33 Net proﬁt (loss) (1 436) Total comprehensive income (1 436) Share of the Echo Investment Group (%) 46,20% Share of the Group in comprehensive income resulting from joint-venture (663) R4R Poland Sp. zo.o. (RESI4RENT) On 20 July 2018 Echo Investment S.A. acquired 30% of shares and votes in a joint investment venture. The remaining 70% of shares and votes was acquired by R4R S.a.r.l. Pursuant to the articles of association, all strategic ﬁnancial and operational decisions (in- cluding in particular: purchase of a signiﬁcant asset, conclusion of a lease agreement, etc.) require the unanimous consent of both share-holders. Pursuant to the agreement, the project will operate as a plat- form of apartments for rent in Poland. As part of the project, buildings with apartments for rent were built - primarily in four locations in Warsaw, Łódź and Wrocław. Under the agreement, Echo Invest- ment S.A. provides planning, design and investment implemen-tation services while R4R Poland Sp. z o.o. is responsible for the operational management of the platform. On 14 September 2018, subsidiar- ies of R4R Poland Sp. z o.o. concluded preliminary purchase agreements for four development pro- jects developed by subsidiaries of Echo Investment S.A. for a total price of PLN 338,670 thousand. The projects created approximately 1,200 apartments, which, according to the assumptions of the project, are dedicated to rent. The projects that are the subject of the agreements are: − Warsaw Brewery, developed on a property locat- ed in Warsaw at 58 Grzybowska street, − Rychtalska, carried out on a property located in Wrocław at Rychtalska street, − Kępa Mieszczańska, constructed on a prop- erty located in Wrocław on the island of Kępa Mieszczańska, − Wodna, developed on a property located in Łódź at 23 Wodna street. Pursuant to the provisions of the preliminary con- tract, an agreement for the ﬁnal sale of the real estate was signed for the above-described real es- tate. The R4R Rychtalska contract projects were sold to the R4R platform in 2019, while the R4R Kępa Mieszczańska, R4R Wodna and R4R Browary Warszawskie projects were sold in 2020. By fulﬁlling its commitment to co-ﬁnance the pro- ject, in 2018 Echo Investment S.A. provided capital to R4R Poland Sp. z o.o. acquiring new shares in the in- creased share capital with a value of PLN 41,354,269, in 2019 with a value of PLN 9,434,700, in 2020 with a value of PLN 3,474,000. At the same time, Echo Investment granted a loan to R4R Poland Sp. z o.o. in 2019 for the amount of PLN 77 250 728 and in 2020 for the amount of PLN 35 546 700. In 2019 and 2020, new subsidiaries of R4R Poland Sp. z o.o. were created in order to develop pro- jects located among others in Warsaw (Taśmowa, Woronicza, Wilanowska streets), Gdańsk (Kołobrzes- ka street), Kraków (3 Maja street, Jana Pawła II and Puszkarska street) and Poznań (Szczepanowskiego street). The share of the Echo Investment Group in the consolidated ﬁnancial statements is recognised by using the equity method. A summary of ﬁnancial information in the joint venture is provided below. The carrying value of the investment as at 31 Decem- ber 2020 amounted PLN 53 789 thous. | Financial statement 50 Consolidated nancial statements of Echo Investment Group for 2020 SELECTED DATA FROM THE FINANCIAL SITUATION PLN ‘000 31.12.2020 Fixed assets – investment property 553 625 Fixed assets – investment properties under construction 408 414 Other ﬁxed assets 2 301 Cash 24 692 Current assets 38 224 Total assets 1 027 256 Long-term liabilities 801 342 Short-term liabilities 43 612 Total liabilities 844 954 Equity 182 302 Share of the Echo Investment S.A. 30,00% Elimination of mutual transactions between unit and the Group (902) Share of the Echo Investment S.A. 53 789 Joint venture’s ﬁnancial data – Platforma R4R SELECTED DATA FROM THE STATEMENT OF COMPREHENSIVE INCOME PLN ‘000 1.01.2020 – 31.12.2020 Operating income 14 855 Administrative costs related to project (4 162) Revenue - revaluation of property 151 155 General and administrative expenses (13 206) Other income / operating costs (2 119) Financial costs (12 956) Gross proﬁt (loss) 133 567 Income tax (26 759) Net proﬁt (loss) 106 808 Total comprehensive income 106 808 Share of the Echo Investment Group (%) 30,00% Share of the Group in comprehensive income resulting from joint-venture 32 042 | Financial statement 51 Consolidated nancial statements of Echo Investment Group for 2020 Perpetual usufruct right Other agreements Fixed assets Inventory Investment properties Investment properties under con- struction Assets held for sale Fixed assets Inventory Investment properties Investment properties under con- struction Right-of-use asset As of 1.01.2020 - 42 164 2 945 38 879 5 517 17 422 - 41 809 - Depreciation - (2 328) - - - (5 504) - - - Fair value measurement - 188 198 - - (67) - (5 990) - Increases - 11 442 1 822 2 051 22 095 6 478 - 8 389 - Reductions - (24 488) - (24 611) (5 517) - - - - As of 31.12.2020 26 979 4 965 16 319 22 095 18 330 - 44 207 - Perpetual usufruct right Other agreements Fixed assets Inven- tory Invest- ment properties Investment properties under con- struction Assets held for sale Fixed assets Inventory Investment properties Investment properties under con- struction Lease liabilities As of 1.01.2020 - 53 547 2 945 38 825 5 514 18 357 - 65 777 - Interest expense - 2 414 198 (4 225) - (27) - 4 682 - Debt repayment - (6 593) - - - (485) - (10 130) - Increases - 20 821 1 624 1 466 22 465 4 099 - 7 700 - Reductions - (37 615) - (18 716) (5 514) (5 491) - (53) - Reclassiﬁcation - (1 694) (200) (1 340) - - - - - As of 31.12.2020 - 30 880 4 568 16 010 22 465 16 453 - 67 975 - Perpetual usufruct right Other agreements Fixed assets Inven- tory Investment properties Investment properties under con- struction Assets held for sale Fixed assets Inventory Investment properties Investment properties under con- struction Lease liabilities short-term - 30 880 4 5 088 22 465 399 - 11 383 - long-term - - 4 564 10 922 - 16 054 - 56 592 - NOTE 28 Leases | Financial statement 52 Consolidated nancial statements of Echo Investment Group for 2020 The total outﬂow of cash due to the repayment of lease liabilities in 2020 amounted to PLN 17,209 thous. 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Costs related to leasing low-value assets 281 878 Costs related to short-term leasing 18 616 16 610 Revenue from subleasing right-of-use assets 20 434 17 642 | Financial statement 53 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 29 CHANGE IN DEFERRED INCOME TAX ASSETS + AND DEFERRED TAX PROVISIONS  PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 1. Deferred tax at the beginning of the period measurement of ﬁnancial instruments (507) - valuation of investment property (153 629) (111 114) interests in subsidiaries, jointly controlled entities and associates * (11 565) (13 991) tax loss 27 847 14 428 liabilities due to loans and bonds (measurement, FX dierences, etc.) (1 691) (1 581) liabilities due to borrowings (measurement, FX dierences, etc.) (3 004) (4 103) loans receivable (interest, valuation, exchange rate dierences, etc.) (7 748) (3 843) liabilities related to investment projects (master lease) 29 663 21 680 activated costs on projects during construction 20 877 31 204 costs due to created reserves 2 918 2 113 other (6 294) 6 396 the impact of implementing IFRS 16 on January 1, 2019 4 304 (5 208) (98 829) (64 019) 2. Change in the period measurement of ﬁnancial instruments 786 (507) valuation of investment property (30 132) (42 516) interests in subsidiaries, jointly controlled entities and associates * 1 853 2 426 tax loss 11 909 13 419 liabilities due to loans and bonds (measurement, FX dierences, etc.) 10 653 (110) liabilities due to borrowings (measurement, FX dierences, etc.) 2 609 1 099 loans receivable (interest, valuation, exchange rate dierences, etc.) (6 323) (3 905) liabilities related to investment projects (master lease) (28 720) 7 984 activated costs on projects during construction (5 764) (10 327) costs due to created reserves 11 805 other (5 691) (12 690) IFRS 16 598 9 512 (48 211) (34 810) 3. Total deferred income tax at the end of the period measurement of ﬁnancial instruments 279 (507) valuation of investment property (183 762) (153 629) interests in subsidiaries, jointly controlled entities and associates * (9 712) (11 565) tax loss 39 756 27 847 liabilities due to loans and bonds (measurement, FX dierences, etc.) 8 964 (1 691) liabilities due to borrowings (measurement, FX dierences, etc.) (395) (3 004) loans receivable (interest, valuation, exchange rate dierences, etc.) (14 071) (7 748) liabilities related to investment projects (master lease) 944 29 663 activated costs on projects during construction 15 112 20 877 costs due to created reserves 2 929 2 918 other (11 986) (6 294) IFRS 16 4 903 4 304 (147 039) (98 829) including: Deferred tax assets 56 476 53 903 change during the year 2 573 1 410 Deferred tax provision 203 518 152 733 change during the year 50 785 41 430 * Estimated value of the tax burden related to the expected changes in the Group’s structure resulting from the dierence between the tax and balance sheet value of the subsidiaries’ shares. As of 31 December 2020, the Group did not recognise deferred income tax assets for the amount of PLN 24,195 thous. on account of tax losses. The expiry dates of the right to income tax reduction due to tax loss fall in the years: 2021 (PLN 1,463 thous.), 2022 (PLN 26,884 thous.), 2023 (PLN 21,464 thous.), 2024 (PLN 84,234 thous.), and 2025 (75,195 thous.). | Financial statement 54 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 30 INCOME TAX  EFFECTIVE TAX RATE ‘000 PLN 1.01.2020- 31.12.2020 1.01.2019- 31.12.2019 1. Proﬁt before tax (gross proﬁt) 176 612 398 188 2. Income tax calculated according to the parent company tax rate (19%) 33 556 75 655 3. Dierences: Tax eect of non-taxable income (20 946) (4 664) Tax eect of non-deductible costs 45 106 29 235 Utilization of previously unrecognized tax losses (2 073) (877) Tax losses for which deferred income tax has not been recognized 8 082 4 903 Income tax for the preceding years (3 791) - Tax losses from previous years for which deferred income tax was recognized (4 994) (5 588) Interim result of partnerships (191) - Eect of tax rate change (226) - Dierences total 20 967 23 009 Charge on the ﬁnancial result due to income tax, including 54 523 98 664 current tax (5 749) (53 438) deferred tax (48 774) (45 226) | Financial statement 55 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 31 NOTE 31A NOTE 31B NOTE 31C NOTE 31D ALLOCATION OF GAINS FROM SALE TO SEGMENTS PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Residential 728 694 555 521 Oces 116 573 76 558 Shopping centres 55 653 72 511 Resi4Rent 286 998 97 894 Unallocated assets 24 936 77 649 Total 1 212 854 880 133 SEGMENT REPORTING ALLOCATION OF COST OF SALE TO SEGMENTS PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Residential (564 165) (401 728) Oces (82 565) (57 459) Shopping centres (21 923) (54 245) Resi4Rent (273 049) (91 168) Unallocated assets (27 321) (72 530) Total (969 023) (677 130) ALLOCATION OF ASSETS TO SEGMENTS PLN ‘000 31.12.2020 31.12.2019 Residential 1 179 869 1 065 493 Oces 2 943 537 2 027 505 Shopping centres 975 625 954 277 Resi4Rent 202 765 326 788 Unallocated assets 329 000 436 366 Total 5 630 796 4 810 429 ALLOCATION OF LIABILITIES TO SEGMENTS PLN ‘000 31.12.2020 31.12.2019 Residential 534 817 435 064 Oces 1 195 128 724 347 Shopping centres 409 463 373 026 Resi4Rent 8 674 210 265 Unallocated assets 1 798 155 1 505 484 Total 3 946 237 3 248 186 | Financial statement 56 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 31E NOTE 31F ALLOCATION OF GROSS GAIN LOSS OF SALE TO SEGMENTS PLN ‘000 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Residential 164 529 153 793 Oces 34 007 19 099 Shopping centres 33 730 18 266 Resi4Rent 13 950 6 726 Unallocated assets (2 385) 5 119 Total (gross) 243 831 203 003 ALLOCATION OF VALUE OF INVESTMENTS IN ASSOCIATES AND JOINT VENTURES TO SEGMENTS PLN ‘000 31.12.2020 31.12.2019 Residential 25 435 25 477 Oces 94 615 94 772 Shopping centres 113 981 97 255 Resi4Rent 72 418 36 638 Total 306 449 254 142 In 2019 and 2020, the Group generated sales reve- nues only in Poland. NOTE 32 Sale of investment properties Property in Koszalin The subsidiary of Echo Investment S.A., i.e. Galeria Nowa - “Grupa Echo” Sp. z o.o. Sp.K. based in Kielce on January 30, 2020, acting as the seller, and the company Sent To Sp. z o.o. Sp. K. with its oce in Koszalin, as buyers, concluded a contract for the sale of property located in Koszalin at Krakusa and Wan- da street and Zwycięstwa street. The selling price of the property was PLN 13,500 thous. After consid- ering all costs related to the transaction, the Group recognized a loss on sale of the investment property in the amount of PLN 155 thous. | Financial statement 57 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 33 CHANGE OF LIABILITIES RESULTING FROM FINANCIAL ACTIVITY PLN ‘000 liabilities due to credits, loans and bonds dividend liabilities opening balance as at 1.01.2020 1 969 671 - Cash ﬂows - inﬂows 1 155 485 - - Outﬂows (473 889) - Non-cash changes 157 037 - - accrued interest 71 830 - - valuation of FX dierences 84 348 - - valuation by eective interest rate 859 - closing balance as at 31.12.2020 2 808 304 - CHANGE OF LIABILITIES RESULTING FROM FINANCIAL ACTIVITY PLN ‘000 liabilities due to credits, loans and bonds dividend liabilities opening balance as at 1.01.2019 1430422 - Cash ﬂows - inﬂows 805977 - - Outﬂows (310309) - Non-cash changes 43581 - - accrued interest 50176 - - valuation of FX dierences (5137) - - valuation by eective interest rate (1459) - closing balance as at 31.12.2019 1969671 - CHANGE OF SHORTTERM LIABILITIES, EXCLUDING BORROWINGS AND LOANS ‘000 PLN 1.01.2020 – 31.12.2020 1.01.2019 – 31.12.2019 Change of short-term liabilities, excluding borrowings and loans, including (128 256) 71 205 - due to deferred income (150 069) 131 558 - due to trade liabilities and others (43 685) (62 478) - due to other tax liabilities (2 501) 7 726 - due to liabilities on residential deposits on escrow accounts 21 871 (3 812) - due to liabilities on deposits received from sybcontractors and advance payment received 27 478 (17 921) - due to liabilities on deposits received from sybcontractors and advance payment received" 18 649 16 132 ADDITIONAL EXPLANATION TO CONSOLIDATED CASH-FLOW STATEMENT Lessee includes in the cash-ﬂow statement following items as part of ﬁnancial activity: − monetary payments of main instalments with in- terests, On the other hand, as part of operating activities, it classiﬁes:: − short-term lease instalments, − lease instalments covering low value assets and, − variable lease instalments not included in lease liabilities. | Financial statement 58 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 34 INFORMATION ON FINANCIAL INSTRUMENTS [PLN ‘000] The Group classiﬁes its ﬁnancial assets into the fol- lowing categories: − ﬁnancial assets measured at amortized cost, − ﬁnancial assets are measured at fair value through other comprehensive income, − ﬁnancial assets at fair value through proﬁt or loss. The classiﬁcation of ingredients is made at the time of initial recognition. It depends on the ﬁnancial in- struments management model adopted by the entity and the analysis of the contractual cash ﬂow charac- teristics of these instruments. The application of IFRS 9 did not signiﬁcantly change the classiﬁcation of the Group’s ﬁnan-cial assets. As a rule, IFRS 9 does not intro-duce signiﬁcant chang- es to the classiﬁcation and measurement of ﬁnancial liabilities, except for modiﬁcations that do not cur- rently result in derecognition of an existing ﬁnancial liability. As a result of the application of IFRS 9, the classiﬁcation of the Group’s ﬁnancial liabilities has not been changed. Type of instrument Note Classication according to IAS 39 Classication according to IFRS 9 Carrying value as at 31.12.2020 Carrying value as at 31.12.2019 FINANCIAL ASSETS Long-term loans granted 8 Loans and receivables Amortized cost 198 901 112 508 Short-term loans granted 8 Loans and receivables Amortized cost 50 762 65 527 Trade receivables 10 Loans and receivables Amortized cost 85 683 120 090 Cash and cash equivalents 14 Loans and receivables Amortized cost 409 621 549 452 FINANCIAL LIABILITIES Liabilities from the issue of debt securities 17 Amortized cost Amortized cost 1 395 332 1 149 510 Trade liabilities 18 Amortized cost Amortized cost 404 405 331 476 Credits and loans 17 Amortized cost Amortized cost 1 412 972 820 161 Loans granted, trade receivables and other receiva- bles are measured by the Group at amortized cost, as two conditions are met for them: 1. assets are kept as part of a business model which intention is to maintain assets in order to obtain ﬂows resulting from the contract; 2. contractual terms of these ﬁnancial assets give rise to speciﬁed cash ﬂows that are solely repay- ment of the principal and the interest on the un- paid part of the capital. In accordance with IFRS 9, as at each reporting date, the entity estimates the amount of the impair-ment loss in the amount equal to the expected credit loss- es: − in the next 12 months, if the credit risk associ- ated with a given instrument has not increased signiﬁcantly since the initial recognition of the instrument; or − until the end of the expected maturity (the so- called period of life) of a given ﬁnancial asset, if the credit risk associated with a given instrument has signiﬁcantly increased since the initial recog- nition of this instrument and if there has been a default event, which is identiﬁed after 90 days from the maturity date. While determining the future expected credit loss, the Group considers all reasonable and conﬁrmed information, including this that relates to the future. The Group will apply the permitted simpliﬁcation of measurement of impairment on the basis of ex- pected losses over the whole life for all receivables. In case of trade receivables, the Group applies the simpliﬁed approach and therefore does not monitor changes in credit risk over their life, and estimates the impairment loss in the amount equal to the ex- pected credit losses over the life of receivables. The Group uses the matrix of provisions, made on the basis of historical data concerning repayment of re- ceivables by contractors, to calculate the value of the impairment loss on trade receivables. Additionally, the Group analyzes trade receivables and other re- ceivables on an individual basis with a high degree of probability of irrecoverability, in cases justiﬁed by the type of business or the structure of recipients - and recognizes a write-o at a reliably estimated value. Classiﬁcation of an asset to this category is made on the basis of information about the current ﬁnancial situation of the counterparty and information about other events that may have a signiﬁcant impact on the recoverability of the asset. The impairment loss is updated on each reporting date. | Financial statement 59 Consolidated nancial statements of Echo Investment Group for 2020 NOTE 35 Activities of Echo Investment S.A. capital group since March 2020 has been exposed to a number of mac- roeconomic and environmental risks associated with the spread of SARS-CoV-2 coronavirus and COV- ID-19. The restrictions introduced by the government directly aected the course of business processes and the organization of the Group’s work. On March 17, 2020, Echo Investment S.A. published a current report on the potential impact of the pandemic on the Company’s operations, listing potential areas of impact and associated risks. The impact of a pan- demic is analyzed on an ongoing basis to adapt the strategy and method of operation to the changing restrictions. Securing the functioning of the company The introduction of restrictions on the functioning of the economy and society in mid-March 2020 result- ed in the vast majority of companies and organiza- tions — as far as possible — deciding to reduce their operations or switch to remote working (home of- ﬁce) procedures. In the case of Echo Investment, the situation was monitored on an ongoing basis by the management sta and a crisis management center appointed in accordance with internal procedures. The company focused on the following activities: 1. Securing the possibility for employees to work remotely. 2. Securing the continuity of the company’s basic functions. 3. Securing the oces and construction sites with additional personal protective equipment. 4. Elaboration and implementation of emergency procedures. 5. Permanent, daily management teleconferences for ongoing risk analysis and decisions. 6. Elaboration and implementation of precaution- ary procedures after the personnel returns to the oces. 7. Accelerating the plan of digitization of business processes — primarily accounting and contracts. 8. The group also conducted a number of analyz- es and studies to learn about the preferences of customers, colleagues, university students (future employees) regarding remote work and the im- pact of the pandemic on the change in consumer preferences and behavior, which allows for adjust- ing the oer and marketing activities. Continuity of work on construction sites The most important task for the Management Board was to ensure the continuity of work on all construc - tion sites. The company has introduced additional emergency procedures at the construction sites in the event of an illness, and has equipped all the sites with personal protective equipment, antibacterial gels, masks and information materials. The Manage- ment Board also conducted daily monitoring of the number of employees on individual construction sites, and in the event of a threat to continuity, it was prepared to introduce additional employees to the construction sites. The state of supplies of mate- rials and the associated risks were monitored, a plan was implemented to secure supplies by anticipatory deliveries directly to the construction site, especial- ly as regards equipment and materials from abroad whose transport to Poland could be threatened or delayed due to the virus. As a result, all the construc- tions have maintained undisturbed activity. The company has established a business continuity plan for all construction sites. Teams on construction sites have been split so that two groups work in the same location, and if one team becomes ill, construc- tion continuity can be provided by a second team. Emergency cover on smaller sites, where it is not possible to split the team, is provided by teams from other projects or, as a last resort, by hired external teams. A strict sanitation regime is maintained on construction sites - limiting meetings, brieﬁngs held outside, social distancing, temperature testing, lim- iting visits by outsiders (mail carriers, couriers) to a separate area in the construction oce, disinfection and using medical devices to ﬁlter the air in the most exposed areas (e.g. meeting rooms). The company has established a business continuity plan for all construction sites. Teams on construction sites have been split so that two groups work in the same location, and if one team becomes ill, construc- tion continuity can be provided by a second team. Emergency cover on smaller sites, where it is not possible to split the team, is provided by teams from other projects or, as a last resort, by hired external teams. A strict sanitation regime is maintained on construction sites - limiting meetings, brieﬁngs held outside, social distancing, temperature testing, lim- iting visits by outsiders (mail carriers, couriers) to a separate area in the construction oce, disinfection and using medical devices to ﬁlter the air in the most exposed areas (e.g. meeting rooms). Due to the expected reduction in demand for con- struction services in the future, the Management The impact of the COVID-19 pandemic on the operations of Echo Investment Group | Financial statement 60 Consolidated nancial statements of Echo Investment Group for 2020 Board has taken steps to reduce the costs of con- struction services and materials. Negotiations and a number of savings initiatives have been undertaken, as a result of which costs on individual projects are reduced by 5-10% compared to the initial budgets. The eects of these procedures are already visible when contracting subsequent construction works. There is a noticeable increase in the number of con- struction companies submitting tenders, which gives the contracting authorities a better negotiating po- sition. Group’s ﬁnancial liquidity security The priority for securing the Group at the time of the lockdown and in the face of a potential economic slowdown was to secure ﬁnancial liquidity. The Man- agement Board has undertaken a number of activi- ties to this end, such as, among others: − involvement of operating teams in planning the cash ﬂow on a larger scale than before; − reviewing the budgets of all departments and re- ducing costs; − reducing new hires; − limiting employee beneﬁts; − minimizing the number of days of outstanding leave to employees; − withholding of bonuses for employees in 2020; − exemption and deferment of payment of social insurance (ZUS) contributions; − deferral of payment of fees for perpetual usufruct of land, based on the so-called anti-crisis shields; − ongoing and constant analysis of proceeds from the sale of apartments; − ongoing and constant analysis of the balance of rent receivables in ﬁnished oce buildings and other receivables; − analyzing the land bank and commencing the pro- cess of selling real estate outside the main area of the company’s strategy; − halting or slowing down the construction of pro- jects at an early stage of construction that do not have secured tenants; − introducing the requirement of pre-selling apart- ments before the construction of a housing pro- ject begins; − reducing external costs, in particular for consul- tancy and marketing services; − discussions with banks to suspend or reduce pro- ject debt handling. Retail sector The most dicult time for the retail sector was the periods of the so-called “hard lockdown” - (March- April 2020, November 2020, January 2021, March 2021) when the operations of stores and restaurants in shopping centers was limited (except for grocery stores, drugstores, pharmacies, pet food stores and services). In case of the Echo Investment Group, this concerned the Libero shopping center in Katowice and Galeria Młociny in Warsaw (in which the Group holds a 30% stake). During the lockdown periods, the operations of most tenants in both facilities were very limited (only several percent of tenants were operating in Libero). Maintaining the activities of the remaining tenants required taking extra precautions, providing security materials, and maintaining the fa- cility’s service (security, cleaning, day-to-day opera- tions). “Defrosting” the tenants’ operations from the beginning of May involved the need to renegotiate leases and reach an agreement with the tenants on incurring losses incurred during the closing. Following the spring lockdown, shopping center owners, tenants and banks agreed on a compromise that would optimally distribute costs between ten- ants and lessors, with the long-term goal of restoring shopping center turnover and footfall to pre-pan- demic levels. Echo Investment immediately started to implement this agreement and signed appropriate annexes with tenants. Rapid actions brought very good results, fast growth in turnover and gradual return of customers. In line with its strategy, Echo Investment aims to reach an agreement with the tenants as soon as possible after each lockdown and to return Libero and Galeria Młociny to normal operations as soon as possible. Despite dicult negotiating conditions, both facilities were among the ﬁrst to be fully oper- ational on the market after the spring lockdown. As a result of the pandemic, the list of tenants changed slightly by single service outlets, whose owners de- clared bankruptcy. Despite a number of restrictions and safety measures, the pace of customer return to both projects and turnover growth from June to Oc- tober were faster than expected. The historically high conversion rate (the ratio of visitors to transactions) demonstrated the responsibility of customers who come to the shopping centres for speciﬁc purchases. With the second and third waves of the pandemic, the government reimposed signiﬁcant restrictions on tenants of shopping centres. About 25% of all tenants were operating in Libero. Echo Investment is in constant contact with all tenants. Agreements with tenants worked out after the ﬁrst shopping centres’s closing assumed the possibility of further closings, but they only applied to 2020. Currently, Echo Investment is focusing on signing short-term 1-2 month agreements, based on the current situa- tion of tenants and their individual standings. Both managers of both shopping centres and their ten- ants are aware of the unpredictability of the situation in the long term. Both parties assume to return to negotiating long-term annexes in the middle of the year, when the situation regarding the end of the epidemic should be more predictable. Then it will be easier to assess the situation of individual tenants, their restructuring and development plans. | Financial statement 61 Consolidated nancial statements of Echo Investment Group for 2020 Both facilities are focused on marketing activities to strengthen brand awareness. Marketing actions in the ﬁrst stage (until about the middle of the year) will focus only on increasing the turnover value, while only in the later stage they will be focused on activ- ities to support footfall. It is important that the vast majority of tenants focus on maintaining existing stores and innovative sales approaches. In order to minimize operating costs of shopping centres, steps have been taken to defer or cancel some payments (e.g. perpetual usufruct or real es- tate tax, principal and interest instalments on loans) and to optimize operating costs. Residential for sale and apartments for rent sectors Although regulations related to the pandemic did not limit the operation of sales oces, notaries and authorities, in practice, the sale of apartments was almost completely stopped during the second half of March. Clients returned to the analysis of the housing market and submitting their inquiries in the second week of April. Due to the already advanced work related to the digitalization of sales processes, Echo Investment’s salesmen were prepared for remote customer service: they could present their oers at online meetings and with the help of virtual reality tools, negotiate contract provisions in the CRM sys- tem or present the progress of construction work through cameras. The introduction of the pandemic state accelerated the implementation of further ele- ments of on-line service: a system for signing binding booking agreements or initial customer service using artiﬁcial intelligence. Taking into account new trends and customers’ needs, Echo Investment’s designers and vendors have introduced new solutions and facilities to their projects, which support sales. Depending on the project, these include applications allowing for con- tact-free entry into apartments (from the housing estate gate, in front of the main door and the ele- vator), the services of architects (who help arrange an apartment in such a way that oce space can be made easily accessible), special marking and training materials, washbasins or disinfectants in common areas (e.g. at playgrounds). Balconies, terraces, log- gias and gardens have also become more important for customers. Since June, the number of inquiries and meetings with potential customers has remained at a level similar to before the pandemic. However, custom- ers are still more cautious when making purchasing decisions. There is a noticeable increase in the num- ber of transactions for investment purposes, with no or little credit, which involves the desire to protect the capital after a series of interest rate cuts. Ready apartments and apartments with near commission- ing dates are bought more willingly. Clients pay more attention to security of transactions, which works in favour of large and capital-stable entities such as Echo Investment. The most sensitive group are cli- ents buying their ﬁrst apartment, who depend on obtaining a credit, with relatively low income and low own contribution. Because of the uncertainty about macroeconomic developments and, therefore, about their personal ﬁnancial situation, these clients prefer suspending transactions. The housing sector is also strongly aected by the tightening of banks’ lending policies. The initially tightened credit policy of banks was also of great importance for the housing sector, but this turned out to be temporary. Despite the in- troduction of restrictions in the economy, the sale of apartments in Echo Investment and the number of inquiries since summer 2020 has remained at a satisfactory level. Despite the increase in the num- ber of cases and the introduction of restrictions, the activity of customers is constant. As a consequence of the economic downturn, great- er caution and Echo Investment’s conservative poli- cy, new projects were being started on the condition of achieving certain level of pre-sale. On spring 2020 the company reduced its annual sales target to 1,400 apartments. Finally the company has sold (by pre- liminary agreement) 1,570 apartments and handed over to clients 1,505 units. Restrictions related to the pandemic did not have a signiﬁcant impact on the operation of the Resi- 4Rent residential platform, in which Echo Investment has a 30% stake. Although in the ﬁrst weeks of the restrictions introduced, the process of renting pro- jects was almost completely stopped, very quickly the interest of potential clients returned to normal. In line with the Management Board expectation, Re- si4Rent beneﬁts from the pandemic situation, with slight decrease of rent rates expectations. Due to the increased uncertainty in the economy and higher requirements for taking out mortgage loans, a large number of potential apartment buyers postpone the purchase decision and take advantage of institution- al apartment rental. Oce sector The most important task in the oce sector was maintaining negotiations on leasing space in pro- jects built by the company and continuing the sales processes of the ﬁnished buildings. The rental de- partment is observing an elongation of decisions on the part of tenants, which is connected to the uncertainty about the future work system and the impact of remote working on companies. However, the potential tenants do not withdraw from negoti- ations. In the sales processes, the Group lowered its expectations concerning yields on future sales trans- actions and suspended the sale of some buildings. In Q1 2021 the Group has sold Villa Oces building in the Warsaw Brewery complex, what stabilised the long-term cash-ﬂow. Promising sale negotiations are | Financial statement 62 Consolidated nancial statements of Echo Investment Group for 2020 also underway regarding the Malthouse Oces and Moje Miejsce oce buildings in Warsaw (signed let- ters of intent). The group also returned to sale pro- cess of the Face2Face oce buildings in Katowice (signed letters of intent). In order to meet the expectations of customers, new standards have been introduced to prevent the spread of the virus in oce buildings. From the be- ginning of the epidemiological threat, the team of Echo Investment experts has set the task of better securing employees of organizations that have locat- ed their oces in the buildings of Echo Investment. A number of solutions responding to post-covid needs have been compiled into the “healthy oce” program. Special air puriﬁcation systems, dedicated application, tilt windows, the use of easy-to-clean ﬁnishing materials are just some of the points of the program. In addition to the solutions introduced at the stage of implementation and planning of the in- vestment, Echo Investment focused on securing the already operating oce buildings. The “ﬁve for safe- ty” program is a guarantee that these oce buildings are ready to receive employees returning to the of- ﬁces. Echo Investment focused on key installations of building security: ventilation and air conditioning. Clean and healthy air for the new oce buildings of Echo Investment will be provided to tenants using the RCI ActivePure technology. The impact of the coronavirus pandemic on the operations and results of the Echo Investment Group in the future The occurrence of the third wave of the COVID-19 pandemic after the balance sheet date and possible escalation of its course in the future may result in the need to revise certain assumptions adopted in the preparation of the ﬁnancial statements, which may lead to changes in accounting estimates in sub- sequent reporting periods. The Management Board of the Company and the Group analyzed the areas related to the estimated values and areas in the ﬁ- nancial statements that are aected by the situation. The results of this analysis indicate the following po- tential impact areas. It is possible that the continuation of the pandem- ic will limit the expansion of companies in Poland, which will result in a decrease in demand for oce space. This may result in a lower pace of new build- ings leasing and a decline in rental rates. This situ- ation may lead to a slowdown of the construction of buildings at an early stage of construction and a fair value decrease of completed buildings. In the case of buildings that are ready, due to their fair val- ue decrease, in an extreme situation, the covenants provided for in loan agreements may be broken and the need to repay part of the loan faster. When it comes to completed buildings, the pandemic may also lead to lower investors’ interest in purchasing such buildings and, as a consequence, to postponed sale of them. The Management Board of Echo Investment also indicates that in the case of shopping centers: Libe- ro in Katowice and Galeria Młociny in Warsaw (in which the Group holds a 30% stake), the develop- ment of the pandemic and subsequent lockdowns may result in bankruptcy of some tenants, which in practice may mean termination of some lease agree- ments . The consequence could be a reduction in the rental ratios, future revenues and the fair value of both projects. The consequence of such a situation may be the breach of covenants provided for in the loan agreements and the need to repay part of the loan faster. Moreover, if further restrictions on the activities of shopping centers are introduced, rental income may be lost, which may also lead to a reduc- tion in value and violation of covenants. At this stage, the Company is not able to reliably estimate the impact of the above events on the value of investment properties, as the situation is changing day by day. In the Management Board opinion, in the moderate scale of the pandemic, the LTV covenants, which are the ratio of bank ﬁnancing to the market value of real estate, are not endangered. Neverthe- less, the Management Board would like to point out that the pace of renting oces recorded before the epidemic was faster. The prolonged pandemic and possible new restric- tions may slow down the sale of apartments or discourage some potential clients from concluding transactions. It could lead to a lower than planned sale of apartments, which will translate into lower revenues and shifting the realization of revenues and proﬁts from the sale of apartments to the following years. Due to the short observation horizon, the Manage- ment Board is not able to accurately estimate the impact of the COVID epidemic on the operations of the Company and the Group in subsequent peri- ods. Currently, the oce buildings built by the Group are provided with ﬁnancing. Residential projects are mainly ﬁnanced by prepayments from clients. At the end of 2020, the Group had over PLN 320 million in cash in its accounts. In Q1 2021, the Group sold the Villa Oces building in Warsaw, the sales process- es of further assets held for sale within the next 12 months from the balance sheet date are processing as planned. In Q1 2021, the Company also placed bonds with a total value of PLN 195 million. Taking all above into consideration, the Management Board does not currently identify a signiﬁcant threat relat- ed to the impact of the development of the coro- navirus epidemic on the Company’s liquidity or its ability to continue operation, despite the expected need to pay for a controlling stake in Archicom in the coming weeks. The Management Board monitors the potential impact on an ongoing basis and takes all possible steps to mitigate any negative eects for the Group. INFORMATION ON THE FINANCIAL STATEMENTS CHAPTER 3 | Financial statement 64 Consolidated nancial statements of Echo Investment Group for 2020  Echo Investment Group Echo Investment S.A. plays the most important role in the structure of the Group, which it supervises, co-executes and provides ﬁnancial resources for the implementation of development projects. The vast majority of companies being part of the Group were established or purchased in order to execute speciﬁc investment tasks, including those rsulting from the construction process of a speciﬁc devel- opment project. .. Composition of the Group As at 31 December 2020 the Capital Group included 141 subsidiaries consolidated according to the full method and 23 jointly controlled companies con- solidated according to the equity method. SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 1 53 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 2 Avatar – Projekt Echo – 119 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 3 Babka Tower – Projekt Echo – 93 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 4 Bełchatów – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 5 City Space – GP Sp. zo.o. Warsaw 100% Echo Investment S.A. 6 Supersam City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 7 Rondo 1 City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 8 Plac Unii City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 9 City Space Management Sp. zo.o. Warsaw 100% Echo Investment S.A. 10 Cornwall Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 11 React – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 12 Dagnall Sp. zo.o. Warsaw 100% Echo Investment S.A. 13 Dellia Investments – Projekt Echo – 115 sp. zo.o. Sp.K. Kielce 100% Pudsey Sp zo.o. 14 Doxent Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 15 Duże Naramowice – Projekt Echo – 111 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 16 Echo – Advisory Services Sp. zo.o. Kielce 100% Echo Investment S.A. 17 Echo – Arena Sp. zo.o. Kielce 100% Echo Investment S.A. 18 Echo – Aurus Sp. zo.o. Kielce 100% Echo Investment S.A. 19 Echo – Babka Tower Sp. zo.o. Kielce 100% Echo Investment S.A. 20 Echo – Babka Tower Sp. zo.o. Sp.K. Kielce 100% Gleann Sp. zo.o. 21 Echo – Browary Warszawskie Sp. zo.o. Kielce 100% Echo Investment S.A. 22 Echo – Browary Warszawskie Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 23 Echo – Galaxy Sp. zo.o. Kielce 100% Echo Investment S.A. 24 Echo – Galaxy Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 25 Echo – Nowy Mokotów Sp. zo.o. Kielce 100% Echo Investment S.A. 26 Echo – Nowy Mokotów Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. | Financial statement 65 Consolidated nancial statements of Echo Investment Group for 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 27 Echo – Opolska Business Park Sp. zo.o. Kielce 100% Echo Investment S.A. 28 Echo – Opolska Business Park Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 29 Echo – Property Poznań 1 Sp. zo.o. Kielce 100% Echo Investment S.A. 30 Echo – SPV 7 Sp. zo.o. Kielce 100% Echo Investment S.A. 31 Tryton – City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 32 Echo Investment ACC – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 33 Echo Investment Project 1 S.R.L. Brasov 100% Echo – Aurus Sp. zo.o. 34 Echo Investment Project Management S.R.L. Brasov 100% Echo Investment S.A. 35 Elektrownia RE Sp. zo.o. Kielce 100% Echo Investment S.A. 36 Fianar Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 37 Galeria Libero – Projekt Echo 120 Sp. zo.o. Sp.K. Kielce 100% Fianar Investments Sp. zo.o. 38 Galeria Nova – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 39 Galeria Tarnów – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 40 Gleann Sp. zo.o. Warsaw 100% Echo Investment S.A. 41 Gosford Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 42 GRO Nieruchomości Sp. zo.o. Kraków 100% Echo Investment S.A. 43 Grupa Echo Sp. zo.o. Kielce 100% Echo Investment S.A. 44 Kasztanowa Aleja – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 45 Kielce – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 46 Klimt House – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 47 Malta Oce Park – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 48 Metropolis – Projekt Echo 121 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 49 Oxygen – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 50 Park Postępu – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 51 Park Rozwoju III – Projekt Echo – 112 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 52 Perth Sp. zo.o. Warsaw 100% Echo Investment S.A. 53 PHS – Projekt CS Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 54 Pod Klonami – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 55 Potton Sp. zo.o. Warsaw 100% Echo Investment S.A. 56 PPR – Grupa EchoSp. zo.o. SKA Kielce 100% Echo Investment S.A. 57 Princess Investment Sp. zo.o. Kielce 100% Echo Investment S.A. 58 Projekt 1 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 59 Projekt 12 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 60 Projekt 13 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 61 Projekt 132 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 62 Projekt 133 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 63 Nobilis – City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 64 Projekt 14 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 65 React – Dagnall Sp. zo.o. SKA Kielce 100% Potton Sp zo.o. 66 Projekt 16 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 67 Projekt 17 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 68 Cinema Asset Manager – Grupa Echo sp. zo.o. SKA Kielce 100% Echo Investment S.A. 69 Face2Face – Stranraer Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 70 Projekt 21 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 71 Midpoint71 – Cornwall Investments Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 72 Projekt 5 – Grupa Echo Sp. zo.o. SKA Szczecin 100% Echo Investment S.A. 73 Projekt Beethovena – Projekt Echo – 122 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 74 Projekt CS Sp. zo.o. Kielce 100% Echo Investment S.A. 75 Projekt Echo – 104 Sp. zo.o. Kielce 100% Echo Investment S.A. 76 Projekt Echo – 108 Sp. zo.o. Kielce 100% Echo Investment S.A. 77 Projekt Echo – 111 Sp. zo.o. Kielce 100% Echo Investment S.A. 78 Projekt Echo – 112 Sp. zo.o. Kielce 100% Echo Investment S.A. 79 Projekt Echo – 113 Sp. zo.o. Kielce 100% Echo Investment S.A. 80 Projekt Echo – 115 Sp. zo.o. Kielce 100% Echo Investment S.A. 81 Projekt Echo – 116 Sp. zo.o. Kielce 100% Echo Investment S.A. | Financial statement 66 Consolidated nancial statements of Echo Investment Group for 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 82 Projekt Echo – 119 Sp. zo.o. Kielce 100% Echo Investment S.A. 83 Projekt Echo – 120 Sp. zo.o. Kielce 100% Echo Investment S.A. 84 Projekt Echo – 121 Sp. zo.o. Kielce 100% Echo Investment S.A. 85 Projekt Echo – 122 Sp. zo.o. Kielce 100% Echo Investment S.A. 86 Projekt Echo – 123 Sp. zo.o. Kielce 100% Galeria Nova – Grupa Echo Sp. zo.o. SKA 87 Projekt Echo – 127 Sp. zo.o. Kielce 100% Echo Investment S.A. 88 Projekt Echo – 128 Sp. zo.o. Kielce 100% Echo Investment S.A. 89 Projekt Echo – 129 Sp. zo.o. Kielce 100% Selmer Investments Sp. zo.o. Sp.K. 90 Projekt Echo – 130 Sp. zo.o. Kielce 100% Echo Investment S.A. 91 Projekt Echo – 131 Sp. zo.o. Kielce 100% Echo Investment S.A. 92 Projekt Echo – 135 Sp. zo.o. Kielce 100% Echo Investment S.A. 93 Projekt Echo – 135 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 94 Projekt Echo – 136 Sp. zo.o. Kielce 100% Echo Investment S.A. 95 Projekt Echo – 136 Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 96 Projekt Echo – 137 Sp. zo.o. Kielce 100% Echo Investment S.A. 97 Projekt 139 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 98 Projekt 140 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 99 Aquarius – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 100 142 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 101 Beethovena – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 102 Projekt 144 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo – Arena Sp. zo.o. 103 Projekt 145 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 104 Projekt 146 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 105 Projekt 147 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 106 Projekt 148 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 107 Projekt Echo – 93 Sp. zo.o. Kielce 100% Echo Investment S.A. 108 Projekt Echo – 99 Sp. zo.o. Kielce 100% Echo Investment S.A. 109 Projekt K-6 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 110 Projekt Naramowice – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 111 Projekt Saska Sp. zo.o. Kielce 95% Echo Investment S.A. 112 Pudsey Sp. zo.o. Warsaw 100% Echo Investment S.A. 113 Pure Systems Sp. zo.o. Kraków 100% Echo Investment S.A. 114 Q22 – Projekt Echo – 128 Sp. zo.o. Sp.K. Kielce 100% Potton Sp zo.o. 115 Sagittarius – Projekt Echo – 113 Sp. zo.o. Sp.K. Kielce 100% Doxent Investments Sp. zo.o. 116 Seaford Sp. zo.o. Warsaw 100% Echo Investment S.A. 117 Selmer Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 118 Selmer Investments Sp. zo.o. Sp.K. Warsaw 100% Echo Investment S.A. 119 Senja 2 Sp. zo.o. Warsaw 100% Echo – Browary Warszawskie Sp. zo.o. Sp.K. 120 Shanklin Sp. zo.o. Warsaw 100% Echo Investment S.A. 121 Stranraer Sp. zo.o. Warsaw 100% Echo Investment S.A. 122 Strood Sp. zo.o. Warsaw 100% Echo Investment S.A. 123 Swanage Sp. zo.o. Warsaw 100% Echo Investment S.A. 124 Symetris – Projekt Echo – 131 Sp. zo.o. Sp.K. Warsaw 100% Gosford Investments Sp. zo.o. 125 Taśmowa – Projekt Echo – 116 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 126 ZAM – Projekt Echo – 127 Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 127 Villea Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 128 Bowen Sp. zo.o. Warsaw 100% Echo – Browary Warszawskie Sp. zo.o. Sp.K. 129 RPGZ IX Sp. zo.o. Kraków 100% Echo Investment S.A. 130 Projekt 150 – Shanklin Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 131 Projekt 151 – Projekt 13 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 132 Projekt 152 – Projekt 14 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 133 Projekt 153 – Projekt 21 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 134 Projekt 154 – Projekt K-6 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 135 Projekt Echo – 139 Sp. zo.o. Kielce 100% Echo Investment S.A. 136 Projekt Echo – 140 Sp. zo.o. Kielce 100% Echo Investment S.A. | Financial statement 67 Consolidated nancial statements of Echo Investment Group for 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 137 Projekt Echo – 141 Sp. zo.o. Kielce 100% Echo Investment S.A. 138 Projekt Echo – 142 Sp. zo.o. Kielce 100% Echo Investment S.A. 139 Projekt Echo – 143 Sp. zo.o. Kielce 100% Echo Investment S.A. 140 Projekt Echo – 144 Sp. zo.o. Kielce 100% Echo Investment S.A. 141 Projekt Echo – 145 Sp. zo.o. Kielce 100% Echo Investment S.A. JOINT VENTURES No Subsidiary Registered oce % of capital held Parent entity GALERIA MŁOCINY 1 Rosehill Investments Sp. zo.o. Warsaw 30% Echo Investment S.A. 2 Berea Sp. zo.o. Warsaw 30% Rosehill Investments Sp. zo.o. TOWAROWA 22 3 Projekt Echo – 138 Sp. zo.o. Sp.K. Warsaw 46,20% Strood Sp. zo.o. 4 Projekt Echo – 138 Sp. zo.o. Warsaw 30% Echo Investment S.A. RESI4RENT 5 R4R Poland Sp. zo.o. Warsaw 30% Echo Investment S.A. 6 R4R Łódź Wodna Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 7 R4R Wrocław Kępa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 8 R4R Wrocław Rychtalska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 9 R4R Warszawa Browary Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 10 R4R Leasing Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 11 R4R Poznań Szczepanowskiego Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 12 R4R Warszawa Taśmowa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 13 R4R Warszawa Woronicza Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 14 R4R Gdańsk Kołobrzeska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 15 R4R RE Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 16 R4R Kraków 3 Maja Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 17 R4R Warszawa Wilanowska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 18 R4R RE Wave 3 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 19 R4R Kraków Puszkarska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 20 Pimech Invest Sp.zo.o. Warsaw 30% R4R Poland Sp. zo.o. 21 M2 Hotel Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 22 R4R RE Wave 4 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 23 R4R Kraków JPII Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. | Financial statement 68 Consolidated nancial statements of Echo Investment Group for 2020 . Changes in the structure of the group in 2020. INCREASE OF THE CAPITAL GROUP Entity Action Date Share capital Projekt Echo – 141 Sp. zo.o. Registration by the District Court in Kielce 27.01.2020 5 000 PLN Projekt Echo – 142 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 PLN Projekt Echo – 143 Sp. zo.o. Registration by the District Court in Kielce 24.01.2020 5 000 PLN Projekt Echo – 144 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 PLN Projekt Echo – 145 Sp. zo.o. Registration by the District Court in Kielce 23.01.2020 5 000 PLN DECREASE OF THE CAPITAL GROUP Entity Action Date Share capital Projekt – Pamiątkowo Sp. zo.o. Agreement for the sale of shares by Echo - SPV 7 Sp. z o.o. for Common Investment S.A. 05.05.2020 50 000 PLN Projekt Echo 132 Sp. zo.o. Agreement for the sale of shares by Echo Investment S.A. for Common Investment S.A. 05.05.2020 3 910 000 PLN Forum 60 Fundusz Inwestycyjny Zamknięty Liquidation 01.06.2020 20 000 PLN Projekt 18 – Grupa Echo Sp. zo.o. S.K.A. Agreement for the sale of shares by Echo Investment S.A. and Grupa Echo Sp. z o.o. for Palena Sp. z o.o. and Student Depot Group B.V. 03.11.2020 50 000 PLN OTHER CHANGES Entity Action Date Projekt Echo – 120 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.01.2020 Projekt Echo – 115 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.01.2020 Projekt Echo – 113 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 25.02.2020 Projekt Echo – 131 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.02.2020 Echo – Opolska Business Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 09.03.2020 Projekt Echo – 122 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 13.03.2020 Echo – Browary Warszawskie Sp. zo.o. Sp.K. Reduction in the contribution made by the limited partner of Echo Invest- ment S.A. was registered. 20.11.2020 | Financial statement 69 Consolidated nancial statements of Echo Investment Group for 2020 The following amendments to existing standards issued by the International Accounting Standards Board (IASB) and endorsed for use in the EU enter into force for the ﬁrst time in the Group’s 2020 ﬁ- nancial statements: Amendments to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – Denition of Materiality (approved in the EU on November 29, 2019) The standard is eective for annual periods begin- ning on or after January 1, 2020. Amendments to IFRS 3 “Business Combinations” – Denition of a Business (approved in the EU on April 21, 2020) The standard is eective for business combinations where the acquisition date is on or after the begin- ning of the ﬁrst annual period beginning on or after January 1, 2020, and for asset acquisitions that oc- curred on or after the beginning of the aforemen- tioned annual period. Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures” – Reform of the Reference Interest Rate (approved in the EU on January 15, 2020) The standard is eective for annual periods begin- ning on or after January 1, 2020. Amendments to IFRS 16 “Leasing” - Rent Reliefs in Connection with Covid-19 (approved in the EU on October 9, 2020) The standard is eective from 1 June 2020 at the latest for the ﬁnancial year beginning on 1 January 2020 or later. Changes to references to the conceptual framework in IFRS (approved in the EU on November 29, 2019) The standard is eective for annual periods begin- ning on or after January 1, 2020. The above-mentioned changes to the existing stand- ards did not have a signiﬁcant impact on the Group’s ﬁnancial statements for 2020.  Application of new and amended standards and interpretations issued by the IFRS Interpretations Committee | Financial statement 70 Consolidated nancial statements of Echo Investment Group for 2020  Published standards and interpretations which are not eective yet and have not been adopted by the Group New standards and amendments to existing standards that have already been issued by the IASB and endorsed by the EU, but not yet eective In approving these ﬁnancial statements, the follow- ing amendments to existing standards have been issued by the IASB and endorsed for use in the EU, which are eective at a later date: Amendments to IFRS 4 “Insurance Contracts” entitled “Extension of the temporary exemption from the application of IFRS 9” (approved in the EU on December 16, 2020) The expiry date of the temporary exemption from IFRS 9 has been extended from January 1, 2021 to annual periods beginning on or after January 1, 2023. Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and Measurement”, IFRS 7 “Financial Instruments: Disclosures”, IFRS 4 “Insurance Contracts” and IFRS 16 “Leasing” - Reform of the Reference Interest Rate - Stage 2 (approved in the EU on January 13, 2021) The standard is eective for annual periods begin- ning on or after 1 January 2021. New standards and amendments to existing standards issued by the IASB but not yet endorsed for use in the EU The IFRS as endorsed by the EU do not currently dier signiﬁcantly from the regulations issued by the International Accounting Standards Board (IASB), except for the following new standards and amend- ments to standards, which as at March 30, 2021 have not yet been approved for use in the EU (the fol- lowing eective dates refer to the full version of the standards): IFRS 14 “Deferred balances from regulated activities” The standard is eective for annual periods begin- ning on or after 1 January 2016. The European Com- mission has decided not to initiate the approval pro- cess of this interim standard for use in the EU until the ﬁnal version of IFRS 14 is issued. IFRS 17 “Insurance Contracts” as amended to IFRS 17 The standard is eective for annual periods begin- ning on or after January 1, 2023. Amendments to IAS 1 “Presentation of ﬁnancial statements” – Classiﬁcation of liabilities as short- term or long-term The standard is eective for annual periods begin- ning on or after January 1, 2023. Amendments to IAS 1 “Presentation of Financial Statements” - Disclosures on the accounting policy applied The standard is eective for annual periods begin- ning on or after January 1, 2023. Amendments to IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” - Disclosures on the Accounting Policy Applied The standard is eective for annual periods begin- ning on or after January 1, 2023. Amendments to IAS 16 “Property, Plant and Equipment” – Revenue Earned Before Accepting the Fixed Assets Component for Use The standard is eective for annual periods begin- ning on or after 1 January 2022. Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” - Onerous Contracts – Cost of Fullling the Contract The standard is eective for annual periods begin- ning on or after 1 January 2022. Amendments to IFRS 3 “Business Combinations” – Amendments to references to conceptual assumptions including amendments to IFRS 3 The standard is eective for annual periods begin- ning on or after 1 January 2022. | Financial statement 71 Consolidated nancial statements of Echo Investment Group for 2020 Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” – Sale or contribution of assets between an investor and its associate or joint venture and subsequent amendments The eective date of the amendments has been postponed until the completion of research work on the equity method. Amendments to various standards “Improvements to IFRS (2018-2020 cycle)” – changes made as part of the procedure of introducing annual improvements to IFRS (IFRS 1, IFRS 9, IFRS 16 and IAS 41) aimed mainly at resolving inconsistencies and clarifying the vocabulary (changes to IFRS 1, IFRS 9 and IAS 41 The standards are eective for annual periods be- ginning on or after January 1, 2022. Amendments to IFRS 16 concern only the illustrative example, and therefore the eective date is not provided. According to the Group’s estimates, the above-men- tioned new standards and changes to the existing standards would not have a signiﬁcant impact on the ﬁnancial statements, if they had been applied by the Group as at the balance sheet date. Hedge accounting of the portfolio of ﬁnancial assets and ﬁnancial liabilities, the principles of which have not been approved for use in the EU, still remain outside the regulations approved by the EU. According to the Group’s estimates, the application of hedge accounting for the portfolio of ﬁnancial assets or liabilities in accordance with IAS 39 “Fi- nancial Instruments: Recognition and Measurement” would not have a signiﬁcant impact on the ﬁnancial statements, if applied as at the balance sheet date. | Financial statement 72 Consolidated nancial statements of Echo Investment Group for 2020  Main accounting principles The most important accounting principles applied in the preparation of these ﬁnancial statements are presented below. These rules were applied in all pre- sented periods in a continuous manner unless stated otherwise. FUNCTIONAL CURRENCY AND CURRENCY OF PRESENTATION Items in the ﬁnancial statements of each Group’s entities are presented in the main currency of the economic environment in which given subsidiary op- erates (functional currency). The Group’s ﬁnancial statement is presented in the Polish zloty (PLN) – the presentation currency and the functional currency of the parent company. Transactions denominated in foreign currencies are translated into the functional currency at the ex- change rate eective on the transaction or measure- ment day when items are revalued. Gains and losses arising from the settlement of such transactions and measurement of assets and liabilities denominated in foreign currencies are recognised in proﬁt or loss. The Group comprises entities with a functional cur- rency other than PLN. The reporting data of those companies included in these statements have been converted to PLN in accordance with IAS 21, ex- cluding capital items, that should be recalculated according to historical currency exchange. Balance sheet items are translated at the exchange rate on the balance sheet, the proﬁt and loss account items are translated at the average exchange rate for the period (unless this average is not a reasonable ap- proximation of cumulative eect of the rates eec- tive on the transaction days – in which case income and expenses are translated at the dates of the trans- action days). The resulting exchange dierences are recognised in other comprehensive income and the cumulative amounts are recognised in a separate component of equity. In the moment of the foreign entity disposal, its accumulated currency dierences recognised in equity are recognised in proﬁt and loss account as proﬁt on disposal. LEASING e Group as a lessee In order for a contract to be classiﬁed as a leasing agreement, the following conditions must be met: − the contract must relate to an identiﬁed asset for which the supplier does not have a signiﬁcant converting right − the contract should give the beneﬁciary the right to control the use of the identiﬁed asset for a speciﬁed period of time. This means that the user has the right to take advantage of the economic beneﬁts of using a given component and the right to decide on its use − the contract must be payable. The Group applies the following simpliﬁcations, based on not including the lease liability: − short-term lease - a short-term lease agreement is a contract with no option to purchase an asset, concluded for a period shorter than 12 months from the beginning of the contract − low-value lease - the basis for the assessment of the „low” value should be the value of the new asset. The Management Board of the Group has decided that this applies to lease agreements re- garding assets whose value did not exceed PLN 15,000 (when new), which can be treated as the upper limit of recognition as a low value item. The Group recognizes the right of perpetual usu- fruct of land granted by administrative decisions as a leasing contract. This applies to all land, including those related to development projects presented as inventory. If lease and non-lease components are identiﬁed in a contract, the Group chooses a practical solution according to which it recognises each lease compo- nent and any accompanying non-lease components as a single lease component. In addition, in the case of a portfolio of leases with similar characteristics, the Group applies the standard to the entire portfolio when it reasonably expects that the impact that the application of this standard to the portfolio will have on the ﬁnancial statements will not be signiﬁcantly dierent from the impact of applying it to individual leases under this portfolio. | Financial statement 73 Consolidated nancial statements of Echo Investment Group for 2020 The duration of the lease contract is deﬁned as the irrevocable duration of the lease contract including also possible periods of renewal of the lease contract if the lessee is reasonably certain that the lessee will use this option and possible periods of notice for the lease contract if the lessee is reasonably sure that this option will not be used. At the time of the ﬁrst recognition, the Group recog- nises the lease liability measured at the current value of lease payments due to the lessor over the lease period dis-counted at the lease rate, and if it is not available, at the marginal lending rate typical for a given asset. Lease payments include: − ﬁxed payments less any incentives due; − variable lease payments, that depend on the in- dex or the rate, initially priced using the index or the rate eective as at the starting date of the contract; − amounts whose payment by the lessee is expect- ed within the guaranteed residual value; − the exercise price of the purchase option, if it can be assumed with sucient certainty that the les- see will use this option; − penalty payments for termination of the lease, if the lease terms reﬂect the exercise by the lessee of the option to terminate the lease. At the same time, the Group recognises an asset for the right to use in the same amount as a liability, adjusted for all lease payments paid on or before the start date, less any lease incentives received and increased by any initial direct costs incurred by the lessee. After the initial recognition, the Group recognizes a lease liability by: − increasing the carrying amount to reﬂect interest on a lease liability, − reducing the carrying amount to reﬂect lease pay - ments paid, and − updating the carrying amount valuation to take account of any reassessment or change in the lease, listed below (changes in the lease contract), or to account for substantially constant − lease payments. Changes to the lease agreement that make it nec- essary to update the value of the liability include: − a change in the leasing period, − a change in the assessment of the call option of the underlying asset. For the above changes, the Group uses an updated discount rate: − a change in the amount expected to be paid under the guaranteed ﬁnal value, − a change in future lease payments resulting from a change in the index or rate used to set those payments, including, for example, a change to take into account changes in rental rates in the free market following a review of those rentals. The Group applies an unchanged discount rate, unless the change in lease payments results from changes in variable interest rates. In that case, the Group shall use a revised discount rate that reﬂects changes in the interest rate. The Group shall recognise the amount of the remeas- urement of the lease liability as an adjustment to the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Group recognizes the remaining amount of the revaluation in the result. After the date of commencement of the lease, the asset under the right of use is measured at cost less total depreciation and amortization (impairment) and total impairment loss and the revised lease li- ability adjusted for any revaluation. Depreciation is calculated using the straight-line method over the estimated useful life. If the lease agreement transfers to the Group the title of the asset before the end of the lease period or when the cost of the asset due to the right of use reﬂects the fact that the Group will exercise the option to buy the residual value of the leased asset, the Group depreciates the asset from the right of use from the moment of commencement of the leasing contract until the end of the estimat- ed economic useful life of the asset. In other cases, the Group depreciates assets due to the right of use from the date of commencement of the contract to the earlier of two dates: the date of the end of the economic life of the asset or the end date of the lease. For lease contracts, the subject of which is an asset which, in accordance with the Group’s account- ing policies, is measured at fair value, the Group does not depreciate such assets due to the right of use but measures them at fair value. The Group has decided to include assets due to the right of use in the same line of the statement of ﬁ- nancial position, in which the corresponding leased assets are presented when they are the property of the Group. Liabilities are presented appropriately in long-term - when the asset due to the right of use is classiﬁed as a ﬁxed asset, investment property or in- vestment property under construction, or short-term - when perpetual usufruct concerns assets classi- ﬁed as inventory. The Group classiﬁes assets due to the right of use resulting from contracts / decisions issued to the following balance sheet items and ap- plies the appropriate accounting policy for certain items: | Financial statement 74 Consolidated nancial statements of Echo Investment Group for 2020 Contract type and presentation in the balance sheet Valuation method as at the balance sheet date Impact on the income statement Oce space lease agreements: – investment property, or Valuation at fair value Ye s – ﬁxed assets Depreciation Yes Rental agreement on means of transport: - ﬁxed assets Depreciation Yes Perpetual usufruct of land: – investment property, or Valuation at fair value Ye s – investment property under construction, not valued at fair value, or Depreciation with simultaneous capitalization of depreciation costs in the value of investment property under construction No – ﬁxed assets Depreciation Yes inventory Depreciation with simultaneous capitalization of depreciation costs in inventory Yes Lease liabilities are covered by IFRS 9 with respect to determining when these liabilities meet the cri- teria for removing them from the balance sheet. A liability in accordance with IFRS 9 par. B.3.31-B.3.34 is removed from the balance sheet once it has been settled, expired or the debtor has been legally re- leased from debt, e.g. by transferring the debt to an - other party. The right of perpetual usufruct of land, in relation to which the Group is legally released from the debt arising from the obligation to pay fees for perpetual usufruct or transformation fees only at the time of legal (notarial) transfer of a share in the land belonging to the premises sold to the buyer, is a spe- cial case. Therefore, until the transfer of the above ownership, the liabilities of the lease of land, as well as the corresponding assets due to the right to use the land in perpetual usufruct, remain on the balance sheet, although in accordance with the policies de- scribed in section 20. Methods for determining the ﬁnancial result, revenues from the sale of residential and service premises are recognized when the prop- erty is delivered to the buyer. For this reason, when the premises are transferred to the buyer (which is also the moment when the proceeds from the sale of the premises are recognized), a portion of the related leasing asset is transferred from inventory to receivables from the buyer, in the amount corre- sponding to the recognized liability for the leasing of the given land. Until the (notarial) transfer of the property to the purchaser, both the receivable and the liability are disclosed as short-term, because they will be settled by transfer to the buyer dur - ing the “operating cycle”. On the date of transfer of ownership to the buyer, the liability for land lease and receivables from the purchaser of premises are de-recognised through the cost of sales. e Group as a lessor In the case of contracts where the Group acts as a lessor, each lease contract is classiﬁed as operat- ing or ﬁnance lease. Lease agreements under which the lessor retains a signiﬁcant portion of the risks and rewards of ownership of the leased asset are classiﬁed as operating leases. A leasing contract is classiﬁed as a ﬁnancial leasing if, as a result of this contract, substantially all of the risk and rewards of ownership of the leased asset are transferred to the lessee. In the case of operating lease agreements, the Group recognizes lease revenues on an on-going basis in the statement of comprehensive income. In the case of ﬁnance leases, the Group de-recognises the asset that is the subject of the agreement while recognizing the lease receivable. Sub-leasing - a transaction for which an underlying asset is re-leased by a lessee (‘intermediate lessor’) to a third party, and the lease (‘head lease’) between the head lessor and lessee remains in eect. The Group classiﬁes sub-leasing as follows: − if it was decided to choose a short-term lease ex- emption for main lease, subleasing is classiﬁed as operating lease − otherwise, sub-leasing is classiﬁed in relation to the asset due to the right to use the principal lease and not the underlying asset. − If the sub-lease agreement is classiﬁed as operat- ing lease, the indirect lessor (the Group) continues to recognize the lease liability and asset due to the right to use of the main lease. At the same time, it recognizes sublease leasing revenues on an ongoing basis. − If the sub-lease agreement is classiﬁed as ﬁnancial lease, the indirect lessor (the Group): − ceases to recognize the asset due to the right to use the main lease as at the date of the initial sub-lease agreement; − recognizes the net investment from sub-leasing instead and assesses it for impairment (lease re- ceivable); − continues to recognize the original lease liability. | Financial statement 75 Consolidated nancial statements of Echo Investment Group for 2020 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment include ﬁxed assets owned by the Group. The composition of the Group’s ﬁxed assets include: − real estate (not leased and not intended for trade) used by the Group; − plant and machinery; − vehicles; − other complete and serviceable items with an ex- pected service life of more than one year. Fixed assets are valued and presented in the state- ment according to purchase prices or production costs, less depreciation and impairment write-os. Fixed assets are posted on collective accounts ac- cording to the groups of the Classiﬁcation of Fixed Assets and a detailed register of ﬁxed assets is kept. Fixed assets are depreciated using the straight-line method of tax rates. Subsequent expenditure is in- cluded in the asset’s carrying amount or recognized as a separate asset (where appropriate) only when it is probable that economic beneﬁts will ﬂow to the Company from the item and the cost of the item can be reliably measured . All other repair and mainte- nance expenses are charged to the proﬁt and loss account in the ﬁnancial period in which they were incurred. Property, plant and equipment are veriﬁed for im- pairment if events or changes in circumstances indi- cate that the carrying amount may not be realizable. An impairment loss is recognized for the amount by which the carrying amount of an asset or cash-gen- erating unit exceeds the recoverable amount and is recognized in the proﬁt and loss account. The re- coverable amount is the higher of the fair value less costs to sell or value in use. Gains and losses on disposal of ﬁxed assets, repre- senting the dierence between the sales proceeds and the carrying amount of the ﬁxed asset sold are recognised in the proﬁt and loss account under other operating income / expenses. INVESTMENT PROPERTIES, INVESTMENT PROPERTIES UNDER CONSTRACTION Investment properties include properties owned by the Group which are leased out together with land directly related to these properties, as well as land purchased and maintained in order to increase their value. Investment properties under construction are investments carried out by the Group intended for lease and under construction. The Group classiﬁes investment properties under construction as invest- ment proper-ties when they are available for use. Investment properties are initially recognized at purchase price / manufacturing cost. Subsequent expenditure is included in the carrying amount of the investment property or recognized as a sepa- rate investment property (where applicable) only when it is probable that an economic beneﬁt will ﬂow to the Group from the item and the cost of the item can be reliably measured. . All other repair and maintenance expenses are charged to the statement of comprehensive income in the ﬁnancial period in which they are incurred. The value of investment properties under construction includes costs directly related to the project not yet completed. They con- sist of expenses incurred for the purchase of land real estate, outlays for the design and implementa- tion of buildings (mainly external services), activated ﬁnancial costs and other costs incurred during the implementation directly related to the investment. After the initial recognition, as at each balance sheet date, investment property under construction that meets the premises for their valuation, and invest- ment property are disclosed at fair value. The fair value measurement is updated at least quarterly. Proﬁts or losses resulting from changes in the fair value of investment properties are recognized in the proﬁt and loss account in the period in which they arise. The result on the valuation of investment prop - erties is presented in the proﬁt / loss on investment property item. The result on the valuation of investment proper- ties is presented in the proﬁt / loss on investment property item. For real estate under construction, the premises for valuation are deemed to be met in the case of pro- jects where a signiﬁcant part of the risks related to the construction process has been eliminated and it is possible to measure reliably at fair value. In other cases, when it is not possible to reliably determine the fair value, the value of real estate under con- struction is valued according to the purchase price or production cost less impairment losses. The Group has speciﬁed the conditions under which it begins the process of analyzing whether signiﬁcant risks relating to investment properties under construction have been eliminated. These conditions include: − obtaining a building permit, − contracting construction works with a value of at least 30% of the investment budget, − renting at least 20% of the area in the project un- der implementation. The presented conditions constitute the boundary criteria of the analysis. Each in-vestment property under construction is analyzed individually in terms of the possibility of obtaining a reliable valuation to fair value, taking into account, in addition to the conditions described above, also the general eco - nomic and market situation, the availability of data for similar properties and expectations regarding the volatility of factors underlying the valuation and the method of ﬁnancing. investment project. The fair values of land and buildings measured at fair value are updated in such a way as to reﬂect the market conditions prevailing at the end of the re- porting period. The fair value is the price that would have been received for the sale of an asset or paid | Financial statement 76 Consolidated nancial statements of Echo Investment Group for 2020 for the transfer of a liability in a transaction between market participants carried out on normal conditions at the valuation date. Property fair values are sub- ject to veriﬁcation by internal Analyse Department in cooperation with the Management Board, based on transaction concluded on active market, oers, preliminary agreements, knowledge and experience, or based on external valuations prepared by experts. As a rule, valuations of oce real estate, for which the Group carries out an active sales preparation process, are prepared internally, based on available market data, in particular a level of discount rate (yield) discussed with po-tential buyers, and based on levels of rent and other rental conditions. The discounted net cash ﬂow (DCF) method is used to determine the fair value. In the case of in-vestment property under construction, the valuation is re- duced by the discounted expenditure necessary to complete the investment, taking into account the development margin. At the time the property is measured at fair value, the Group recognizes at the same time the provisions related to real estate for securing rent-free periods, which granted and/or due to proﬁt share in the event of contractual arrange- ments providing for the proﬁt share of the sale of the property of other parties. Provisions for securing rent-free periods include all expected future pay- ments related to acquiring tenants that the Group expects to pay economically, i.e. primarily costs of rent-free periods (periods with reduced rents), costs of ﬁt-out work to be carried out, costs other leasing incentives for tenants and costs of agents. Recog- nized provisions for projects sold adjust the result recognized on the valuation of investment property presented under “revaluation of immovable proper- ty “, and for projects sold - under “proﬁt / loss on the sale of the property”. The values expressed in EUR and USD are converted every quarter accord- ing to the current exchange rates published by the National Bank of Poland. In the event of a change in the use of the property, it shall be appropriately reclassiﬁed in the ﬁnancial statements. The property is transferred and recognized in the item of property, plant and equipment or inventory at the previously disclosed carrying amount. The result on the sale of investment property is recognized under ‘proﬁt / loss on investment property’. The Group transfers investment properties to a category of assets held for sale only when the property is sold outside the ordinary operating cycle. This is due to the adopt- ed strategy of the Echo Investment Group, accord- ing to which real estate is maintained by the Group and sold at the best moment - in the opinion of the Management Board - that takes into account expec- tations regarding return on invested capital, avail- ability of capital for other investments, as well as basing the decision on the market situation and ex- pectations for its further development. The Group’s goal is to build properties and increase their value through active management of investment projects. Therefore, the Group classiﬁes investment projects as investment properties (or investment properties under construction) and reclassiﬁes them to assets held for sale only in rare situations. ASSETS HELD FOR SALE Assets (or a disposal group) are classiﬁed as held for sale if their carrying amount is recovered principally through a sale transaction and not through its fur- ther use. This condition is considered to be fulﬁlled only when the occurrence of the sale transaction is very likely and the asset (or the disposal group) is available for immediate disposal in its current state (in accordance with generally accepted commercial terms). Classi-ﬁcation of an asset as held for sale as- sumes the intention of the company’s manage-ment to make a sale transaction within one year from the change of classiﬁcation. They are valued at the lower of the following two amounts: their carrying amount and fair value minus costs of disposal. INVENTORY The item of inventories comprises: semi-ﬁnished products and work in process, ﬁnished products, and goods. Due to the speciﬁc nature of the activity, pur- chased land prepared for development is presented as work in progress, and land freshly purchased as land. The work in progress includes also the expens- es incurred over the process of construction of facil- ities and sites for sale (design services, construction works, etc. provided by external contractors). Fin- ished products mainly include residential and busi- ness premises completed and sold under ﬁnal sale contracts. The goods include land intended for sales. The inventories of tangible items of current assets are measured at the value corresponding to the purchase price of land and the cost of production of developers’ business products increased by ac- tivated ﬁnancial costs, being not higher than the net realizable value. This value is collected based on market transaction prices in the residential real estate market. Reversal of impairment loss of inven- tories appears either on the sale of inventories exor due to increased net sales price. Both the amount of write-downs of inventories recognised as an expense in the period and the amount of any reversal of any write-downs decreasing the value of inventories rec- ognised in the period as reduction in cost are stated in the proﬁt and loss accounts under sales cost. FINANCIAL ASSETS In accordance with IFRS 9, the Group classiﬁes its ﬁnancial assets into the following categories: − ﬁnancial assets measured at amortised cost, − ﬁnancial assets measured at fair value through other comprehensive income, − ﬁnancial assets at fair value through proﬁt or loss. The classiﬁcation of assets takes place at the mo- ment of initial recognition. It depends on the ﬁnan- cial instruments management model adopted by the entity and analysis of the characteristics of contrac- tual cash ﬂows from these instruments. | Financial statement 77 Consolidated nancial statements of Echo Investment Group for 2020 Loans granted and restricted cash that are not in line with a deﬁnition of cash equiva-lents in accordance with IAS 7 “Cash ﬂow” (i.e. collateral for bank guar- antees and funds accumulated on open residential ﬁduciary accounts) and trade receivables and other receivables are measured by the Group at amortized cost, as two conditions are met for them: assets are held under a business model whose intention is to hold assets in order to obtain contractual ﬂows and the contractual terms of these ﬁnancial assets create cash ﬂows at repetitive times that are only repay- ment of principal and interest on outstanding capital. Assets are recognised on the transaction date, and derecognised upon the expiry of the contractual rights to cash ﬂows from the ﬁnancial asset or where a ﬁnancial asset is transferred along with all risks and beneﬁts of ownership thereof or when the asset is signiﬁcantly modiﬁed. The Group applies the weight- ed average purchase price as the valid method of expenditure in the area of ﬁnancial instruments. If the renegotiation or other type of modiﬁcation of the contractual cash ﬂows generat-ed by the ﬁnan- cial asset results in its derecognition in accordance with IFRS 9, the modiﬁed instrument is treated as new. In the event of a renegotiation or other mod- iﬁ-cation of the contractual cash ﬂows generated by a given asset that does not result in derecogni- tion, the Group revalues the gross carrying amount of that ﬁnancial asset (i.e. the amount of its amor- tized cost before allowance for credit losses). The revalua-tion is the discounting of the new expected contractual cash ﬂows (after modiﬁcation) using the original eective interest rate. The resulting dier- ence is recognized as proﬁt / loss in proﬁt or loss. From that moment on, the Group assesses whether the credit risk of a given ﬁnancial instrument has increased signiﬁcantly after its initial recognition, by comparing the credit risk as at the date of the ﬁnan- cial statements (under the modiﬁed terms) with the risk at initial recognition (under the terms before the modiﬁcation). RECEIVABLES Trade and other receivables are recognized in the balance sheet at transaction price and then at amor- tized cost using the eective interest method, reduc- ing them by im-pairment losses. When the dierence between the value at amortized cost and the value of the amount of the payment required does not have a signiﬁcant eect on the Company’s ﬁnancial results, such receivables are recognized in the balance sheet as the amount of the payment required. The value of receivables is updated taking into ac- count the degree of probability of their payment by making a write-down. The rules for creating revalu- ation write-os are described below in the section Impairment of ﬁnancial assets. Advances for deliveries are valued according to cash disbursed and in accordance with received VAT in- voices documenting the granting of advance pay- ments. LOANS GRANTED Loans granted are Debt Instruments held for the pur- pose of obtaining contractual cash ﬂows that consist solely of principal and interest repayments (“SPPI”). These assets are booked under at the date of the transaction, and derecognized when the contractual rights to cash ﬂows from a ﬁnancial asset expire or when the ﬁnancial asset is transferred along with all the risks and beneﬁts of ownership of the asset. Loans granted are recognized as at the date of en- tering the books at fair value plus transaction costs, then as at the balance sheet date at amortized cost determined using the eective interest method. The rules for recognition of impairment write-downs are described below in the sec-tion Impairment of ﬁnancial assets. LOSS OF VALUE OF FINANCIAL ASSETS (‘ECL’) Pursuant to IFRS 9, as at each reporting day, the Group estimates the amount of the impairment loss equal to the expected credit loss (‘ECL’). The Group calculates the write-o as follows for individual asset categories: Trade receivables The Group uses a simpliﬁed approach and therefore does not monitor changes in credit risk during its lifetime and measures the impairment loss in the amount equal to the expected credit losses (‘ECL’) over the life of the debt. To calculate the value of the impairment loss for trade receivables, the Com- pany uses a provision matrix made once a year as at December 31 based on historical data regarding the payment of receivables by contractors. Impairment losses are updated as at each reporting day. The provision matrix is based on the analysis of the pay- ment of receivables in indi-vidual past due groups and determining the probability of non-payment of receivables from a given age range based on his- torical data. For the purposes of the analysis, trade receivables are divided into two groups: receivables from the sale of apartments, the lease and other re- ceivables. The calculated probability of non-payment of receivables in each of the past due groups for speciﬁc categories of receivables is applied to the current balance of receivables in each of the past due groups and the write-o for the expected credit losses of receivables is calculated. | Financial statement 78 Consolidated nancial statements of Echo Investment Group for 2020 Additionally, the Group analyzes trade receivables and other receivables on an individual basis with a high degree of probability of irrecoverability, in cases justiﬁed by the type of business or the structure of recipients - and recognizes a write-o at a reliably estimated value. Classiﬁcation of an asset to this category is made on the basis of information about the current ﬁnancial situation of the counterparty and information about other events that may have a signiﬁcant impact on the recoverability of the as- set. Such receivables are excluded from the matrix analysis, and a possible write-o is recognized on the basis of an individual analysis. Loans granted and covered bonds The Group calculates the expected credit losses (‘ECL’) for loans and bonds as the dierence be - tween the cash ﬂows arising from the contracts signed and the cash ﬂows that the entity expects to receive. The Group calculates the cash ﬂows that it expects to obtain based on the default ratio determined on the basis of the margin on the bonds issued by the Group and adjusted by the recovery ratio as a relia- ble estimate of the level of credit risk. In addition, the Group provides the individual analy- sis of loans granted and bonds covered with a signif- icant level of probability of default, in cases justiﬁed by the type of business or the client structure - and recognizes the write-o in a reliably estimated value. Such loans and bonds are excluded from the cal- culation of the write-o for expected credit losses. DERIVATIVES Derivatives are recognised in the books at the time where the Companies becomes a party to a binding agreement. The Group takes recourse to derivative instruments to mitigate the risks associated with changes in ex-change rates or interest rates. The Group does not apply hedge accounting. At the balance sheet date, derivatives are measured at fair value. Whereas derivatives with fair value greater than zero are ﬁnancial assets, those with negative fair value are ﬁnancial liabilities. Proﬁt or loss on derivative instruments is recognized in ﬁnancial income or expenses respectively, and in the consolidated cash ﬂow statement as cash ﬂows from investing activities if the acquisition results in the recognition of an asset in the consolidated state- ment of ﬁnancial position. FINANCIAL ASSETS HELD FOR SALE On the day of recognition, these assets are measured at fair value increased by transaction costs, while at the balance sheet date they are measured at fair value. Gains or losses arising from changes in the fair value of an asset is recognised directly in other comprehensive income. In the event of impairment, (in case of material or long-term drop of fair value of given bond under its cost) the amounts previ- ously recognised in other comprehensive income is reclassiﬁed to proﬁt or loss. Assets available for sale include stocks and shares in companies other than subsidiaries and associates which are not quoted in an active market, which are current or non-current assets. In cases where no fair value can be deter- mined, their valuations are carried at cost less ac - cumulated impairment losses, whereas valuation eects are recognised in proﬁt or loss. CASH Cash at bank and in hand, as well as short-term investments, as well as other ﬁnancial assets that meet the deﬁnition of cash equivalents are meas- ured at nominal value. As at the balance sheet date, the Group assesses premises for impairment of cash value, including the need to create a provision for expected credit losses. Cash in foreign currencies is valued at the report- ing date. The same deﬁnition of cash shall apply to cashﬂow report. FINANCIAL LIABILITIES Financial liabilities include loans, borrowings, debt securities, not payable interest on bank loans ac- counted for according to the accrual principle as well as the discount of debt securities to be settled in subsequent accounting periods. Foreign currency loans are measured at the average exchange rate of the National Bank of Poland. Financial liabilities are initially recognized at fair val- ue less transaction costs, and then measured using the “amortized cost” method. The valuation of liabil- ities includes all costs of obtaining ﬁnancing, includ- ing directly related to ﬁnancing costs of bank fees, costs of brokers and agents, legal costs, experts, a bank monitor, and costs related to marketing at ob- taining the capital, occurring in the issue of bonds. Trade liabilities are initially measured at fair value, and subsequently, long-term liabilities are measured at amortized cost using the eective interest meth- od. In cases where the dierence between the value at amortized cost and the value in the amount of the payment required does not have a signiﬁcant eect | Financial statement 79 Consolidated nancial statements of Echo Investment Group for 2020 on the ﬁnancial results of the Group, such liabilities are recognized in the balance sheet in the amount of the payment required. CONTRACTS OF ISSUED FINANCIAL GUARANTEES Financial guarantee contracts are recognized in o-balance sheet liabilities and receivables. At each balance sheet date, the Group assesses whether there is a likelihood of a need to make a withdrawal and create a provision. The amount of the pro-vision is determined based on estimates of the amount of probable expenditure necessary to settle the liabili- ty arising from the guarantee contract. At the same time, in accordance with the requirements of IFRS 9, the Group creates the provision for expected credit losses (‘ECL’) due to ﬁnancial guarantees granted. The Group calculates the expected credit loss (‘ECL’) regarding the guarantees given as expected pay- ments to compensate the guarantee holder for the incurred credit loss. The Group ﬁrst determines the value of the Group’s exposure due to guarantees granted (the actual total value of the contingent li- ability as at the balance sheet date). The net expo- sure resulting from the guarantee thus determined is multiplied by the default ratio (determined on the basis of the margin on bonds issued by the Group and adjusted for the recovery ratio). INCOME TAX Income tax on the proﬁt or loss for the year includes the tax currently payable and deferred tax. Income tax is recognised in the proﬁt and loss account, ex- cept for amounts related to items recognised in oth- er comprehensive income, in which case the income tax is accordingly recognised in other comprehen- sive income. The current portion of the income tax is the expect- ed tax on the taxable income for the year, calculat- ed by using tax rates enacted at the balance sheet date, together with any tax adjustments for previous years. Deferred tax is calculated with the balance sheet method as tax to be paid or reimbursed in the future on the dierences between the carrying values of assets and liabilities and the correspond- ing tax values used to calculate the tax base, except for temporary dierences which arise at the time of initial recognition of an asset or liability, and do not aect the accounting or tax result. At the com- mencement of the lease, the right-of-use asset and the lease liability are equal, so there is no temporary dierence and no deferred tax is created. During the lease term, a dierence arises between the value of the asset and the lease liability. The Group calculates deferred income tax on the dierence between these values. This approach aims to reﬂect the relationship between the right-of-use asset and the lease liability, and account for deferred tax based on cumulative temporary dierences. This method provides an ef- fective tax rate that better reﬂects the economics of the entire lease transaction. For the calculation of deferred income tax, a tax rate is used which will apply in the reporting periods in which assets will be settled or liabilities will be released. Deferred tax is not created for temporary dierences on investments in subsidiaries, jointly controlled enti- ties and associates, if the Group controls the reversal of these dierences and they will not be reversed in foreseeable future. Deferred income tax assets due to tax loss are cre- ated, if the settlement of the loss in the following years is probable. Deferred income tax assets are created in the amount to be deducted from income tax in the future due to negative temporary dierences, which will reduce the tax base and deductible tax loss in the future. EQUITY CAPITAL The share capital is measured at nominal value shown at the National Court Register. The dierenc- es between the fair value of the payment received and the nominal value of shares are recognised in the reserve fund as capital from sales of shares above their nominal value. The share issue costs reduce the Group’s supple- mentary capital. PROVISIONS The provisions are recognised when the Group is un- der a present obligation resulting from past events, it is probable that fulﬁlment of this obligation will cause an outﬂow of resources representing econom- ic costs and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the costs estimated in accord- ance with the best knowledge of the management of the Group, the incursion of which is required to settle the present liability at the balance sheet date. In accordance with the adopted principle, no provi- sions are made for retirement beneﬁts. Due to the age of employees and their rotation, potential re- serves would not have a signiﬁcant impact on the presented ﬁnancial statements. Upon their occur- rence, the payment of retirement severance pays will be booked on a cash basis. | Financial statement 80 Consolidated nancial statements of Echo Investment Group for 2020  Methods of determining the ﬁnancial result REVENUE The amount of revenue is equal to the remunera- tion determined in agreements with clients exclud- ing amounts receiving on behalf of the third party. In accordance with IFRS 15, the Group recognises revenues when the obligation is fulﬁlled (or in the course of fulﬁlling) by transferring a promised goods or services (i.e. an asset) to a customer. The asset is transferred when the customer obtains control of that asset. After fulﬁlling (or in the course of fulﬁll- ing) obligations, the entity recognises an amount equal to a transaction price as income, which has been assigned to that performance obligation. To determine the transaction price, the entity shall con- sider the terms of the contract and its usual commer- cial practices. The transaction price is the amount of remuneration that the entity expects to be entitled to in exchange for the transfer of promised goods or services to the customer, excluding amounts col- lected on behalf of third parties (for example, cer- tain sales taxes). The remuneration speciﬁed in the contract with the client may include ﬁxed amounts, variable amounts or both. Revenue from the sale of residential and service premises are recognised on the date of handover of real estate to the buyer. This occurs on the basis of the acceptance protocol signed by the parties pro- viding only after completion of the construction of real estate and receiving the occupancy permit on condition that the buy-er will pay 100% towards the purchase price of real estate. Paid apartments are also considered to be cases of minor underpayments (up to PLN 500), larger underpayments, which the Group decides not to collect from customers, or in the event of receivables from tenant changes, which, according to arrangements, are payable later than the moment of handover of the premises. Revenues from the rental of residential and com- mercial space are recognised on a straight-line basis over the term of the contracts concluded. Revenue from other con-tracts for the provision of services (legal, consulting, IT, ﬁnancial, marketing, security and other services) is recognised by the Group when the performance obligation is met. COST OF SALES Costs of goods, products and services sold consist of costs incurred in respect of revenues of a given ﬁnancial year and overheads not yet incurred. The cost of goods and products sold is measured at the production cost, using the method of detailed identiﬁcation of the actual cost of assets sold or the percentage share e.g. of the land or shares sold, etc. In particular, the cost of sales of premises and land sold is determined proportionally to their share in the total cost of construction of the facility and the entire land constituting a given project. ADMINISTRATIVE COSTS RELATED TO PROJECTS Administrative costs related to projects include ad- ministrative costs indirectly related to the implemen- tation of development projects which include: real estate tax, maintenance fees, property protection, administrative sta remuneration costs and mainte- nance costs of employees responsible for construc- tion of projects in the part where cannot be assigned to a speciﬁc project or they relate to projects com- pleted and other costs related to the maintenance of development projects. Costs of employees respon- sible for construction of projects in the part where cannot be assigned to a speciﬁc project, during the construction period are capitalised in the value of project. Costs are allocated on the basis of working hours reported by employees. These costs, despite an indirect connection with the construction 07 Methods of determining the ﬁnancial result 85 Con- solidated ﬁnancial statements of Echo Investment Group for 2019 Information on the ﬁnancial state- ment of development projects, are not capitalised in the value of inventories/investment properties, because: − in light of IAS 2, these costs are excluded from the purchase price or the cost of inventories due to the fact that they are not incurred in order to bring inventories to their current status and place; − IAS 40, which refers in this respect to the provi- sions of IAS 16, does not permit capitalisation of administrative and general management costs in the value of investment property. | Financial statement 81 Consolidated nancial statements of Echo Investment Group for 2020 FINANCING COSTS Financial costs related to the current period are rec- ognized in the proﬁt and loss account according to the amortized cost method described in the Liabil- ities section, except for costs subject to activation in accordance with the solution included in IAS 23. The Group activates the part of ﬁnancial expens- es which is directly related to the acquisition and production of ﬁnancial assets recognized as stock and projects commenced. In the case of targeted ﬁnancing for a given construction project, activation covers the amount of ﬁnancial costs minus income received from temporary depositing of cash (i.e. in- terest on bank deposits with the exception of depos- its resulting from the blocking of accounts, accredi- tation agreements). In the case of general ﬁnancing, the general ﬁnancing costs subject to capitalization are determined using the capitalization rate in rela- tion to the expenditures incurred for a given asset component. In the case of leasing, interest costs on the leasing obligation related to a speciﬁc project are capitalized in the project cost (targeted ﬁnancing). In accordance with the requirements of IAS 23, the Group begins to activate ﬁnancial costs when the Group undertakes actions necessary to prepare an asset for its in-tended use or sale. These activities involve more than just activities related to its phys- ical construction. They also include technical and administrative work prior to commencing physical construction, such as activities related to obtaining necessary permits, design and preparatory works. However, such activities do not include the holding of an asset when no production or development that changes the asset’s condition is taking place. CONSOLIDATION OF SUBSIDIARIES Subsidiaries are all entities over which the Group exercises control, which occurs when the Company: − exercises authority over the entity, − is exposed to changing ﬁnancial results or holds rights to variable ﬁnancial results, − is capable of using the authority exercised over the entity in which the investment was made to inﬂuence the amount of their ﬁnancial results. Subsidiaries are consolidated in the full method from the date of extending authority over them to the time of losing it. Financial statements of subsidiar- ies present data for the same accounting period as the parent company, using consistent accountancy methods. The process of consolidation eliminates all intra-group transactions and accounting balances. Elimination also extends to the value of shares held by the Company and other consolidated entities in subsidiaries which represents the share of the Com- pany and other Group entities subject to consolida- tion in the equity of subsidiaries. The most important role in the structure of the Group is played by Echo Investment S.A., which is the owner of units of the Group, supervises, co-participates and provides funds for the implementation of ongoing developer’s projects. The companies included in its composition have been established or acquired in or- der to carry out speciﬁc investment tasks and mostly do not engage in business operations other than that which would result from the process of execution of speciﬁc project, and next from the provision of services of lease assets already completed or other services. COMBINATIONS OF ECONOMIC ENTITIES The Group has subsidiaries which hold real estate. At the time of the acquisition, the Group considers whether the acquisition is the acquisition of an enter- prise or the acquisition of an asset. The Group ana- lyzes whether the acquisition meets the deﬁnition of a venture in accordance with IFRS 3. In particular, the Group performs a concentration test that ena- bles a simpliﬁed assessment of whether the acquired set of activities and assets constitutes a venture. A positive concentration test result means that the acquisition does not constitute a business and no additional assessment is required. The concentration test is positive when substantially all of the fair value of the acquired gross assets is concentrated in a sin- gle identiﬁable asset or group of similar identiﬁable assets. A negative result requires a detailed analysis of whether the acquisition meets the deﬁnition of a project. The acquisition of subsidiaries by the Group, except for the acquisition of entities under common con- trol, is accounted for according to the acquisition method. The payment transferred in the business combination transaction is measured at fair value, calculated as the collective fair value of the Group’s assets transferred, liabilities contracted to the previ- ous owners of the acquired entity and capital instru- ments issued by the Group in exchange for acquisi- tion of control over the acquired entity. The costs related to the acquisition are recognized in the result at the time they are incurred. Goodwill is valued as the excess of the amount of payment transferred, the amount of non-controlling interest in the acquired entity and the fair value of shares in the acquiree previously held the acquirer over the fair value of identiﬁable net assets acquired and liabilities measured at the acquisition date. If, af- ter re-veriﬁcation, the net value of identiﬁable assets and liabilities valued at the date of acquisition, ex- ceeds the sum of the payment transferred, the value of non-controlling interests in the acquiree and the fair value of shares in that entity previously held by the acquirer, this surplus is recognized directly in the result as a gain on bargain purchase. | Financial statement 82 Consolidated nancial statements of Echo Investment Group for 2020 Non-controlling shares that form part of owner- ship interests and entitle owners to a proportionate share in the net assets of the entity in the event of its liquidation can be initially measured at fair value or proportionally to non-controlling interests in the recognized value of identiﬁable net assets of the acquiree. The selection of the valuation method is made individually for each takeover transaction. In the event that the acquisition of subsidiaries does not constitute a takeover of the business, it is rec- ognized as the acquisition of a group of assets and liabilities. The acquisition cost is allocated to assets and liabilities acquired based on their relative fair values and no goodwill or deferred income tax is recognized. INVESTMENTS IN ASSOCIATED COMPANIES AND JOINT VENTURES Associates are the companies which the parent com- pany has a direct or indirect (through subsidiaries) inﬂuence on yet are not its subsidiaries or joint ven- tures. Joint ventures are contractual arrangements whereby two or more parties undertake a business which is subject to co-control. Joint ventures are joint contractual agreement ac- cording to which co-controlling parts have rights to net assets resulting from the contractual agreement. The ﬁnancial year of associates, joint ventures and the parent company is the same. The Group’s investments in associates and joint ventures are accounted for in the consolidated ﬁ- nancial statements using the equity method. Under the equity method, the investment in an associate or joint venture is initially recognized at cost and sub- sequently adjusted to take account of the Group’s interest in the ﬁnancial result and other comprehen- sive income of the associate or joint venture. If the Group’s share of losses in an associate or joint ven- ture exceeds its share in the entity, the Group ceases to recognize its share of further losses. Additional losses are recognized only to the extent consistent with legal or customary liabilities assumed by the Group or to payments made on behalf of an associ- ate or joint venture. An investment in an associate or joint venture is ac- counted for using the equity method from the date on which the entity acquired the status of a joint venture or associ-ate. On the date of investing in an associate or joint venture, the amount by which the investment costs exceed the Group’s share of the net fair value of the identiﬁable assets and liabilities of that entity is recognized as goodwill and included in the bal-ance value of the investment. The amount by which the Group’s share of net fair value in identiﬁ- able assets and liabilities exceeds investment costs is recognized directly in proﬁt or loss in the period in which the investment was made. When assessing the need to recognize the impair- ment of an investment of the Group in an associate or joint venture, the requirements of IAS 28 apply. If necessary, the entire carrying amount of the invest- ment is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount. with the carrying amount. The recognized impairment is part of the carrying amount of the investment. The reversal of this impairment is recognized in accordance with IAS 36 to the extent corresponding to the subsequent in- crease in the recoverable amount of the investment. The Group ceases to apply the equity method on the date a given investment ceases to be its associate or joint venture and when it is classiﬁed as earmarked for sale. The dierence between the balance value of an associate or joint venture at the date of discon- tinuance of the equity method and the fair value of retained interests and proceeds from the disposal of a portion of the interest in that entity is taken into ac- count when calculating the gain or loss on disposal of an associate or joint venture. If the Group reduces its share in an associate or in a joint venture but it continues to settle it using the equity method, it transfers to the ﬁnancial result any portion of proﬁt or loss previously recognized in other total income, corresponding to the share reduction, provided that the proﬁt or loss is subject to reclassiﬁcation to the ﬁnancial result at the time of the disposal of related assets or liabilities. Unrealized proﬁts and losses resulting from transac- tions between the Group and the entity recognized under the equity method are subject to consolida- tion eliminations in accordance with the Group’s share in the equity of the entity recognized using the equity method. VALUATION TO FAIR VALUE The Group measures ﬁnancial instruments such as in- struments measured at fair value available for sale as well as derivative instruments and non-ﬁnancial as- sets such as investment properties at fair value as at each balance sheet date. Fair value is deﬁned as the price that would have been received from the sale of an asset or paid to transfer a liability in a trans- action carried out on the usual terms of asset dis- posal between market participants on the valuation date under current market conditions. The fair value measurement is based on the assumption that the sale transaction of an asset or liability transfer takes place on the market available for the main market for a given asset or liability, available to the Group, or in the absence of the main market, on the most advantageous market for a given asset or liability. The fair value of an asset or liability is measured as- suming that when determining the price of an asset | Financial statement 83 Consolidated nancial statements of Echo Investment Group for 2020 or liability, market participants act in their best eco- nomic interest. The fair value measurement of a non-ﬁnancial asset takes into account the market participant’s ability to generate economic beneﬁts through the largest possible and best use of the asset or its disposal to another market participant that would ensure the greatest possible and best use of the asset. The Group applies valuation techniques that are ap- propriate to the circumstances and for which su- cient data is available to measure fair value, with the maximum use of appropriate observable input data and the minimum use of unobservable input data. All assets and liabilities that are measured at fair value or their fair value is disclosed in the ﬁnancial statements are classiﬁed in the fair value hierarchy as described below based on the lowest input data level that is signiﬁcant for the fair value measure- ment taken as a whole: − Level 1 – Quoted (unadjusted) market prices in an active market for identical as-sets or liabilities, − Level 2 – Valuation techniques for which the low- est level of input data, which is signiﬁcant for the fair value measurement as a whole, is directly or indirectly observable, − Level 3 – Valuation techniques for which the low- est level of input data, which is signiﬁcant for the fair value measurement as a whole, is unobserv- able. At each balance sheet date, in the case of assets and liabilities occurring at particular balance sheet dates, the Group assesses in the ﬁnancial statements whether transfers took place between levels of the hierarchy by reassessing the classiﬁcation to indi- vidual levels, guided by the relevance of the input data from the lowest level that is signiﬁcant for the valuation to fair value treated as a whole. REPORTING BY SEGMENTS The Group’s business segments are presented in ac- cordance with data from internal management re- porting and analyzed by the key operational decision maker. The key operating decision maker, which is responsible for the allocation of resources and the assessment of operating segments’ results, is the Management Board of Echo Investment S.A. In the Group, the following reporting segments were identiﬁed, which are identical to operating segments deﬁned on the basis of the type of projects imple- mented: − residential areas (rental and sale of residential and service areas), − shopping centres (rental), − oce buildings (rental), − others (services for external clients − accountancy, leasing, development). Principles for determining revenues, costs, segment’s result measurement, asset valuation and segment’s liabilities are the accounting policies adopted for the preparation and presentation of the Group’s consol- idated ﬁnancial statements, as well as accounting policies that speciﬁcally relate to segment reporting. The operating segment proﬁt margin is measured as ‘gross proﬁt / loss on sales’. Segment ﬁnancial data are included in note 31 to the ﬁnancial statements. NET PROFIT PER SHARE The net proﬁt per share for each period is calculated by dividing the net proﬁt for a given period attrib- utable to ordinary shareholders of the parent entity by the weighted average number of shares issued during the period. CASH FLOW The cash ﬂow statement is prepared using the in- direct method. Liabilities on account of overdraft facilities are denominated as loan debt rather than cash equivalent. | Financial statement 84 Consolidated nancial statements of Echo Investment Group for 2020  Error correction – changing the presenting principles – restatement of statements for previous period The Management Board of the Group voluntarily de- cided to change the incorrect presentation of ﬁnan- cial costs and ﬁnancial revenues related to amortised costs of interests on granted borrowing, received loans and issued bonds. After the analysis, the Man- agement Board concluded that the ﬁnancial revenue related to the adjusted purchase price on the con- tracted loans and issued bonds in the amount of PLN 6,605 thous. should be presented as ﬁnancial costs, The Group’s Management Board decided to change the incorrect presentation of provisions in the con- solidated statement of ﬁnancial position. After the analysis, the Management Board concluded that long-term provisions will be presented under long- term liabilities, while short-term provisions will be while ﬁnancial costs related to the adjusted purchase price on loans granted in the amount of PLN 1,959 thous. should be presented as ﬁnancial revenue. As a result, the Group made an appropriate presentation change in the consolidated proﬁt and loss account in the comparative period, i.e. from January 1, 2019 to December 31, 2019. The changes are presented below: presented under short-term liabilities. As a result, the Group made an appropriate presentation change in the consolidated statement of ﬁnancial position as at December 31, 2019 and January 1, 2019. The changes are presented in the table below. CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000 PLN 31.12.2019 published data 31.12.2019 transformed data Change Provisions Long-term provisions 35 931 - (35 931) Short-term provisions 89 428 - (89 428) Deferred tax liabilities 152 733 - (152 733) Long-term liabilities Long-term provisions - 35 931 35 931 Deferred tax liabilities - 152 733 152 733 Short-term liabilities Short-term provisions - 89 428 89 428 CONSOLIDATED PROFIT AND LOSS ACCOUNT PLN ‘000 PLN 1.01.2019 – 31.12.2019 published data 1.01.2019 – 31.12.2019 transformed data Change Financial income 23 808 15 244 (8 564) Financial cost (69 935) (61 371) 8 564 | Financial statement 85 Consolidated nancial statements of Echo Investment Group for 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000 PLN 31.12.2019 published data 31.12.2019 transformed data Change Provisions Long-term provisions 58 973 - (58 973) Short-term provisions 115 843 - (115 843) Deferred tax liabilities 111 303 - (111 303) Long-term liabilities Long-term provisions - 58 973 58 973 Deferred tax liabilities - 111 303 111 303 Short-term liabilities Short-term provisions - 115 843 115 843 | Financial statement 86 Consolidated nancial statements of Echo Investment Group for 2020  Material estimates and judgments of the Management Board of the Company The preparation of the ﬁnancial statements requires the Management Board of the Company to adopt certain assumptions and make estimates and judg- ments that aect the ﬁgures disclosed in the ﬁnancial statements. Assumptions and estimates are based on the best knowledge of current and future events and activities, however, actual results may dier from those anticipated. Estimates and related assump- tions are subject to ongoing veriﬁcation. Change in accounting estimates is recognized in the period in which they were changed – if it concerns only this period, or in the current and future period – if the changes concern both the current and future period. The main ﬁelds in which the Management Board’s estimates have a material impact on the ﬁnancial statements and key sources of uncertainty as at the balance sheet date are: INVESTMENT PROPERTIES / INVESTMENT PROPERTIES UNDER CONSTRUCTION / ASSETS HELD FOR SALE Investment real estate includes facilities leased to cli- ents by companies which are part of the Group. The fair value of investment real estate is classiﬁed at level 3 in the fair value hierarchy. There were no transfers between the levels. After a change in the strategy of the Echo Investment Group, the Group most often measures properties at fair value during construction and / or commerciali- sation. The property valuation is based on the income method using the discounted cash ﬂow technique, which takes into account future proceeds from rent (including rent guarantees), the sale of real estate and other expenditure to be incurred. The yield used to determine residual values recognized in cash ﬂows result from the Management Board’s estimates based on preliminary agreements for the sale of real estate, letters of intent, external valuations of appraisers or their familiarity with the market. The rates used also take into account the risk, and the level of risk is as- sessed individually for each property subject to its status. The fair value of real estate properties which are almost 100% commercialised and generate a ﬁxed income is determined by the unit according to the income method, using simple capitalization technique as the quotient of the project’s net operating income (NOI) and the yield, or using the value resulting from external valuation, a preliminary contract for the sale of real estate, a letter of intent or a purchase oer, provided they exist. According to the valuations prepared by the Group, the value of investment properties as at 31 December 2020 amounted to PLN 1,388,972 thous. It consisted of real estate measured at fair value (PLN 1,266,595 thou- sand) and other properties (PLN 122,377 thousand) The table below presents an analysis of investment properties carried at fair value in the consolidated statement of ﬁnancial position according to the levels of the fair value hierarchy: | Financial statement 87 Consolidated nancial statements of Echo Investment Group for 2020 INVESTMENT PROPERTY  FAIR VALUE HIERARCHY LEVELS Level 1 Level 2 Level 3 Fair value - total 2020 Shopping Centers - - 629 304 629 304 Oces - - 593 084 593 084 Oces - CitySpace - - 44 207 44 207 Total - - 1 266 595 * Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities ** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly observable *** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable As at December 31, 2019, the value of investment properties was PLN 941,983 thous. It consisted of real estate measured at fair value (PLN 820,154 thous.) and other properties (PLN 121,829 thous.). The key input data and assumptions adopted for investment properties measured using the income method are as follows: INVESTMENT PROPERTY  VALUATION TECHNIQUES Valuation Valuation technique Discount rate % Capitalization % 2020 Shopping Centers 629 304 Income method 7,00% 6,50% Oces 593 084 Income method 7,62%-7,85% 7,12%-7,35% Oces - CitySpace 44 207 Income method 5,05% - Total 1 266 595 The table below presents an analysis of investment properties carried at fair value in the consolidated statement of ﬁnancial position according to the levels of the fair value hierarchy: INVESTMENT PROPERTY  FAIR VALUE HIERARCHY LEVELS Level 1 Level 2 Level 3 Fair value - total 2019 Shopping Centers - - 592 185 592 185 Oces - - 186 159 186 159 Oces - CitySpace - - 41 809 41 810 Total - - 820 154 * Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities ** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly observable *** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable The key input data and assumptions adopted for investment properties measured using the income method are as follows: | Financial statement 88 Consolidated nancial statements of Echo Investment Group for 2020 The value of investment properties under construc- tion as at December 31, 2020 amounted to PLN 780,621 thous. It consisted of real estate valued at fair value (PLN 384,008 thousand) and real estate valued at the value of expenditure (PLN 396,613 thousand). The table below presents an analysis of investment properties carried at fair value in the consolidated statement of ﬁnancial position according to the lev- els of the fair value hierarchy: INVESTMENT PROPERTY UNDER CONSTRUCTION  VALUATION TECHNIQUES Valuation Valuation technique Discount rate % Capitalization % 2020 Shopping Centers 67 022 Other method Oces 316 986 Income method 7,00% – 8,00% 6,50% – 7,50% Total 384 008 - INVESTMENT PROPERTY UNDER CONSTRUCTION  FAIR VALUE HIERARCHY LEVELS Level 1 Level 2 Level 3 Fair value - total 2020 Shopping Centers - - 67 022 67 022 Oces - - 316 986 316 986 Total - - 384 008 * Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities ** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly observable *** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable The key input data and assumptions adopted for investment properties measured using the income method are as follows: When calculating the valuation of the fair value of investment properties under construction, the Group companies take into account the valuation of the debt related to the debt incurred for the purpose of the implementation of a speciﬁc invest- ment project. As at December 31, 2019, the value of investment properties under construction amounted to PLN 1,517,866 thousand. It consisted of real estate valued at fair value (PLN 1,113,543 thousand) and real es- tate valued at the value of expenditure (PLN 404,323 thousand). INVESTMENT PROPERTY  VALUATION TECHNIQUES Valuation Valuation technique Discount rate % Capitalization % 2019 Shopping Centers 592 185 Income method 7,00% 6,50% Oces 186 159 Income method 7,25% 6,75% Oces - CitySpace 41 810 Income method 11,27% - Total 820 154 | Financial statement 89 Consolidated nancial statements of Echo Investment Group for 2020 INVESTMENT PROPERTY UNDER CONSTRUCTION  VALUATION TECHNIQUES Valuation Valuation technique Discount rate % Capitalization % 2019 Shopping Centers 66 809 Other method Oces 1 046 734 Income method 5,10%-8,00% 4,60% – 7,50% Total 1 113 543 INVESTMENT PROPERTY UNDER CONSTRUCTION  FAIR VALUE HIERARCHY LEVELS Level 1 Level 2 Level 3 Fair value - total 2019 Shopping Centers - - 66 809 66 809 Oces - - 1 046 734 1 046 734 Total - - 1 113 543 * Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities ** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly observable *** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable ASSETS HELD FOR SALE  FAIR VALUE HIERARCHY LEVELS Level 1 Level 2 Level 3* Fair value - total 2020 Oces - - 1 259 610 1 259 610 Total - - 1 259 610 * Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities ** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly observable *** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable The key input data and assumptions adopted for investment properties measured using the income method are as follows: Under the ‘assets held for sale’ item the Group pre- sents the properties with reference to which a de- cision was made to sell them within 12 months. This item includes completed projects as well as ongoing projects and investment plots. As at 31 December 2020, the value of assets held for sale amounted to PLN 1,269,329 and consisted of oce buildings measured at fair value (PLN 1,259,610 thous.) and real estate valued at the value of expenditure (PLN 9,719 thous.). The table below presents an analysis of assets held for sale carried at fair value in the consolidated state- ment of ﬁnancial position according to the levels of the fair value hierarchy: The table below presents an analysis of investment properties carried at fair value in the consolidated statement of ﬁnancial position according to the lev- els of the fair value hierarchy: | Financial statement 90 Consolidated nancial statements of Echo Investment Group for 2020 As at 31 December 2019, the value of assets held for sale was PLN 22,923 thous. and consisted of invest- ment land. SECURING REVENUE FOR RENT-FREE PERIODS (MASTER LEASE) ) When an investment property is selling, it occurs that buildings are not fully commercialized at the time of sale. The price is calculated based on the project’s projected revenue (NOI) while the Group signs a contract securing the rent-free periods (mas- ter lease). Securing rental proceeds (master lease) is estimated on the basis of information obtained from the oce project leasing team, accepted by the Member of the Management Board responsible for this segment of activity, concerning: − terms of signed lease agreements, − assumptions for vacant areas, such as expected transfer dates The following is calculated on this basis: − for vacancies: the rent that would be paid by the potential future tenant, − for signed contracts: rental holidays (if any). The estimate is made from the balance sheet date for the period of securing rental proceeds. In each calculated month: − if a vacancy is expected on an area in a given month, the cost of securing rental revenue is a full rent which is provided for on this area; − if it is expected that a given area will be trans- ferred and the tenant has a rental holiday, the cost of securing the rental proceeds related to this area in a given month is equal to the value of rental holidays; − if it is expected that the tenants’ rental holidays are over in a given month, the cost of securing the rental proceeds is equal to zero. The basic rent and the maintenance fees are calcu- lated in this way, the exception being that there are no rental holidays on maintenance fees. The total of these values discounted as at the balance sheet date is the value of the reserve for securing rent-free peri- ods (master lease). The reserve for securing rent-free periods (master lease) is calculated for projects sold. The key input data and assumptions adopted for as - sets held for sale measured using the income meth- od are as follows: ASSETS HELD FOR SALE  VALUATION TECHNIQUES Valuation Valuation technique Discount rate % Capitalization % 2020 Oces 1 259 610 Income method 5,20% – 7,65% 4,70% – 7,15% Total 1 259 610 As at 31 December 2020, the value of reserves established to secure rent free periods amounted to PLN 12,370 thousand. As at 31 December 2019, the value of reserves es- tablished to secure rent free periods amounted to PLN 19,679 thousand. PROFIT SHARE FROM SALE OF REAL ESTATE A proﬁt share is a share in the minority investor’s proﬁt. It results from concluded agreements ac- cording to which the investor is obliged to pay the capital constituting a share in the investment. The capital is contributed to the entities which perform the project in the form of a loan or an is- sue participating bonds. At the time of the sale of the project, the capital is returned to the investor along with due proﬁt share (calculated as the sale price - costs). The provision for the proﬁt share is estimated for projects valued using the income method in proportion to the released proﬁt on real estate. Therefore, the ﬁrst provision for the proﬁt share is created along with the ﬁrst valuation of the project at fair value. As at 31 December 2020, the value of provision for costs on account of the proﬁt share from the sale of real estate amounted to PLN 46,283 thous. As at 31 December 2019, the value of provision for costs on account of the proﬁt share from the sale of real estate amounted to PLN 78,306 thousand. INVENTORY When estimating the amount of the write-down on inventories held by the Group as at the balance sheet date, information is analyzed according to the current market prices obtained from the de- velopment market, regarding the expected sale | Financial statement 91 Consolidated nancial statements of Echo Investment Group for 2020 prices and current market trends, as well as informa- tion resulting from the preliminary sales agreements concluded by the Group. Assumptions used in the calculation of the write- down are mainly based on valid market prices of real estate in a given market segment. In the case of land included in the item of inventories, the value of write-downs results from the suitability of the given land for the needs of the current and future oper- ations of the Group estimated by the Management. Data regarding write-downs updating the value of inventories to the net value possible to obtain and reversing write-downs on this account are presented in note 9. FINANCIAL INSTRUMENTS VALUED ACCORDING TO FAIR VALUE The Group uses its judgment when selecting valua- tion methods and makes assumptions based on mar- ket conditions existing at each balance sheet date. In particular, concluded forward contracts and con- cluded option agreements are valued on the basis of valuations provided by banks, which use such data as current exchange rates, their historical volatility and interest rates on deposits (WIBOR, EURIBOR) when calculating them. As at 31 December 2020, the Group did not change the valuation principles for ﬁnancial instruments, there were no changes in the classiﬁcation or movements between levels of the fair value hierarchy. There is no dierence between the carrying value and the fair value of ﬁnancial in- struments. ASSET FROM DEFERRED INCOME TAX The Group recognizes deferred tax asset based on the assumption that tax proﬁt will be achieved in the future and it will be possible to use it. This assump- tion would be unjustiﬁed if the tax results deterio- rated in the future. The Management Board veriﬁes the adopted esti- mates regarding the probability of recovering de- ferred tax assets based on changes in factors taken into account when making them, new information and past experience. LEASING The adaption and application of IFRS 16 required the Company to make various estimates and to engage in professional judgment. The main area in which it happened concerning the assessment of lease pe- riods, in agreements for an indeﬁnite period and in agreements for which the Company was entitled to extend the agreement. When determining a lease period, the Company had to consider all facts and circumstances, including the existence of economic incentives to use or not to extend the agreement and any termination option. The Company also es- timated the discount rate used in the calculation of the lease liability - as a risk-free rate increased by the characteristic margin for the given asset to which the lease relates. As at 1 January 2019, the average weighted IBR rate used to discount of liability valuation amounted to 5.73%. | Financial statement 92 Consolidated nancial statements of Echo Investment Group for 2020  Financial risk management THE RISK OF CHANGES IN CASH FLOWS AND FAIR VALUE RELATED TO INTEREST RATE The Group’s exposure to interest rate risk stems from ﬁnancial assets and liabilities, in particular with loans granted, bank deposits, bank loans received and bonds issued. Borrowings, loans, and bonds bear interest at variable rates and make the Group vul- nerable to interest rate risk, while loans bear inter- est at ﬁxed interest rates and expose the Group to ﬂuctuations in fair value of ﬁnancial instruments. In addition, the Group is exposed to the risk of interest rate ﬂuctuations in the case of borrowing a new loan or reﬁnancing existing debt into long-term ﬁnancing. As at 31 December 2020 and 31 December 2019, 100% of liabilities on loans and debt securities yield- ed variable-rate interest. As at 31 December 2020, 66.93% of loans granted yielded ﬁxed-rate interest, the remaining part - var- iable-rate interest. As at 31 December 2019, 55.81% of loans granted were yielding ﬁxed-rate interest, the remaining part - variable-rate interest. As at December 31, 2020, the Group used interest rate hedging for issued bonds and contracted loans in the form of IRS instruments. INTEREST RATES’ RISK  LIABILITIES DUE TO DEBT SECURITIES ISSUE PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of liabilities due to the debt securities issue 1 395 332 1 149 510 Financial costs of debt securities issue’s interests 75 371 53 085 Estimated change in interest rates +/- 1 p.p. +/- 1 p.p. Financial costs of debt securities issue’s interests rates, taking into account increase / (decrease) of interests rates 13 953 11 495 Total impact on the gross results for the period 13 953 11 495 Income tax 2 651 2 184 Total impact on the net result for the period 11 302 9 311 | Financial statement 93 Consolidated nancial statements of Echo Investment Group for 2020 INTEREST RATES’ RISK  LIABILITIES DUE TO LOANS AND BORROWINGS PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of liabilities due to loans and borrowings 1 412 318 819 241 Financial costs of interests 26 673 8 009 Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p. Change of interest as a result of interest rate’s change (on a yearly basis) 14 123 8 192 Total impact on the gross results for the period 14 123 8 192 Income tax 2 683 1 557 Total impact on the net result for the period 11 440 6 635 INTEREST RATES’ RISK  CASH, CASH EQUIVALENTS AND OTHER FINANCIAL ASSETS PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of cash, cash equivalents and other ﬁnancial assets 327 097 549 451 Financial income from granted loans’ interests 387 3 018 Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p. Financial income from granted loans’ interests, taking into account interests rates’ changes 3 271 5 495 Total impact on the gross results for the period 3 271 5 495 Income tax 621 1 044 Total impact on the net result for the period 2 649 4 451 INTEREST RATES’ RISK  LOANS GRANTED PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of granted loans 76 421 71 706 Financial income from granted loans’ interests 2 089 1 815 Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p. Financial income from granted loans’ interests, taking into account interests rates’ changes 764 717 Total impact on the gross results for the period 764 717 Income tax 145 136 Total impact on the net result for the period 619 581 | Financial statement 94 Consolidated nancial statements of Echo Investment Group for 2020 hedging the ex-change rate of EUR to PLN. As a re- sult of opened position, as of 31 December 2020 the Group remained hedged for cash ﬂows of EUR 51.4 million. Transactions were con-ducted on the basis of bank agreements, not speculatively and were a part of hedging policy (but not treated by the Group as hedge accounting as deﬁned by IAS39) with the intention of securing future cash ﬂows from conver- sion of loan tranches granted in EUR and funds from the sale of commercial projects. The Group pursues a uniform risk management pol- icy of exchange rate changes and constantly mon- itors risk areas, while using available strategies and mechanisms to minimise the negative eects of market volatility and cash ﬂow hedges. The Group maintains ﬁnancial surpluses mostly in the PLN. The amounts held in bank accounts in other currencies are mainly to current transactions. As at 31 Decem- ber 2020, 92.7% of cash held by the Group were denominated in PLN, 7.3% – denominated in EUR. As at 31 December 2019, 64.5% of cash held by the Group were denominated in PLN, 35.5% – denomi- nated in EUR. Based on the simulations, it was found that the im- pact of changes in EUR/PLN interest rates by 10% net proﬁt would be a maximum increase or decrease, within individual categories of receivables and lia- bilities: CURRENCY RISK The risk of foreign exchange rate ﬂuctuations is relat- ed to the investment loans and borrowings denomi- nated in foreign currencies within the Group (as at 31 December 2020 they amounted EUR 276,029 thous, however as at 31 December 2019 – EUR 144,485 thous.) the lease agreements, where rents are de- pendent on the PLN/EUR exchange rate and other receivables ex-pressed in foreign currencies. This risk arises on the opportunity of the following types of ﬁnancial events: − currency translation of received loans (tranches of loans) and funds from the sale of commercial projects from EUR to PLN; − repayment of loan instalments; − obtaining receivables in respect of property lease; − currency translation of other receivables in for- eign currency. The Group uses natural hedging: contracts with ten- ants are expressed in the currency of the loan that was taken out to ﬁnance the investment. Payments received from the tenants obtained in this way are intended for repayment of the aforementioned loans. Such linking of funding with sources of in-come re- duces the foreign exchange risk to a minimum or eliminates it completely. In 2020 in order to safeguard from exchange rate risk the Group opened positions on the forward currency market by acquiring derivative ﬁnancial instruments CURRENCY RISK  RECEIVABLES DUE TO SALE OF PROJECTS AND OTHER PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of receivables from sale of projects and other (in EUR) 2 235 7 423 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 224 742 Estimated (deferred) income tax 42 141 Impact on the net result 182 601 | Financial statement 95 Consolidated nancial statements of Echo Investment Group for 2020 CURRENCY RISK  BORROWINGS LIABILITIES PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of liabilities due to borrowings (in EUR) 11 185 13 485 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 1 118 1 349 Estimated (deferred) income tax 213 256 Impact on the net result 905 1 093 CURRENCY RISK  LOANS LIABILITIES PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of liabilities due to loans (in EUR) 1 262 635 601 806 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 126 264 60 181 Estimated (deferred) income tax 23 990 11 434 Impact on the net result 102 274 48 747 CURRENCY RISK  BONDS LIABILITIES PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of liabilities due to bonds issued (in EUR) 273 329 79 700 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 27 333 7 970 Estimated (deferred) income tax 5 193 1 514 Impact on the net result 22 140 6 456 CURRENCY RISK  BORROWINGS RECEIVABLES PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of receivables due to borrowings (in EUR) 34 555 28 130 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 3 456 2 813 Estimated (deferred) income tax 657 534 Impact on the net result 2 799 2 279 | Financial statement 96 Consolidated nancial statements of Echo Investment Group for 2020 CURRENCY RISK  CASH, CASH EQUIVALENTS AND OTHER FINANCIAL RESTRICTED ASSETS PLN ‘000 as at 31.12.2020 Value calculated for the analysis as at 31.12.2019 Balance of cash, cash equivalents and other ﬁnancial restricted assets (in EUR) 29 740 195 065 Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p. FX dierence due to exchange rate’s change 2 974 19 506 Estimated (deferred) income tax 565 3 706 Impact on the net result 2 409 15 800 CREDIT RISK Credit risk arises in the case of cash, granted borrowings, derivative ﬁnancial instruments and deposits in banks and ﬁnancial institutions, as well as in rela - tion to clients and tenants of the Group in the form of outstanding receivables. The speciﬁcs of the Group’s operations in the ﬁeld of sales of residential space, lease and provision of services mean that the Group is not exposed to signiﬁcant credit risk. As at 31 December 2020, the Group estimated the value of impairment losses on trade receivables based on the provision matrix based on historical data regarding repayment of receivables by contractors in the division of types of sales revenues. Credit loss ratios were calculated on the basis of a model based on historical repayment of receivables in individual overdue groups. The table be- low presents data on exposures and the value of impairment losses on expected credit losses. In addition, the Group has implemented procedures to assess the creditworthi- ness of customers and tenants, where- as for the latter hedging in the form of 31 December 2020 Default rate weighted average Gross value of trade receivables [PLN ‘000] Provision for expected credit losses [PLN ‘000] current 0,09% 34 200 32 1-30 days 1,34% 9 279 124 31-90 days 51,95% 3 324 1 727 91-360 days 61,99% 3 420 2 120 over 361 days 91,73% 7 499 6 879 Total 57 722 10 882 deposits and guarantees are applied as collateral. No signiﬁcant concentration of risk occurs in relation to any of the cus- tomers of the Group. In the case of cash and deposits in banks, the Group uses the services of reputable entities. With regard to all classes of ﬁnancial assets, the Group considers that the credit risk associated with ﬁnancial instruments is too low. In the Management Board’s opinion, in view of the presented business characteristics, the risk of non-performance of contractu- al obligations is low, the Group’s debtors have a high short-term ability to fulﬁl their obligations within the scope of contracts concluded with the Group, and possible adverse changes in economic and busi- ness conditions in the long term may - but not necessarily and, in the opinion of the Management Board, they should not - limit their ability to fulﬁl their obligations within the scope resulting from conclud- ed agreements. | Financial statement 97 Consolidated nancial statements of Echo Investment Group for 2020 LOSS OF LIQUIDITY The risk of losing liquidity is the risk that the Group will not be able to settle its ﬁnancial liabilities on their due dates. The Group manages the liquidity risk by main- taining the appropriate amount of the available cash reserve, using the oer of banking services and reserve credit lines and by monitoring the forecast and ac- tual cash ﬂows. As at 31 December 2020 out of PLN 210 million available under current and working capital loans, the Group had PLN 37.4 million of free lim- it and PLN 327 million of non-restricted cash. As at 31 December 2019 out of PLN 225 million available under current and working capital loans, the Group had PLN 1.6 million of free limit and PLN 492 mil- lion of non-restricted cash. Due to the dy- namic nature of its operations, the Group retains the ﬂexibility of ﬁnancing through the availability of cash and the diversity of sources of ﬁnancing. The Group has sucient funds to pay all liabilities in due time. Liquidity risk is minimised in the longer term through the availability of bank credit facilities. At any time, the Group may use sucient funds from the loan facilities granted by banks. The analysis of the Group’s undiscounted ﬁnancial liabilities that will be settled in appropriate aging periods based on the time remaining to contractual maturity date as at the balance day 31 December 2020: ANALYSIS OF UNDISCOUNTED FINANCIAL LIABILITIES AS AT 31.12.2020 PLN ‘000 Period Loans Borrowings Bonds Leasing Guarantees and sureties Derivates Trade and other liabilities Up to 1 year 817 033 3 114 522 390 70 219 49 188 10 026 158 444 1 – 3 years 289 278 - 459 501 40 461 373 161 - 89 183 3 – 5 years 295 476 - 413 441 28 709 235 428 903 7 556 5 – 10 years - 8 071 - 12 001 672 942 - - Over 10 years - - - 6 961 39 226 - 300 Total 1 401 787 11 185 1 395 332 158 351 1 369 945 10 929 255 484 ANALYSIS OF UNDISCOUNTED FINANCIAL LIABILITIES AS AT 31.12.2019 PLN ‘000 Period Loans Borrowings Bonds Leasing Guarantees and sureties Derivates Trade and other liabilities Up to 1 year 219629 6367 141549 69563 48593 2669 240195 1 – 3 years 136178 - 762995 42805 416167 - - 3 – 5 years 316978 - 173864 28013 276244 - - 5 – 10 years - 7312 - 30673 448665 - - Over 10 years 133697 - 71102 13910 189101 - - Total 806482 13679 1149510 184964 1378770 2669 240195 The analysis includes estimated future interest payments. | Financial statement 98 Consolidated nancial statements of Echo Investment Group for 2020 LIQUIDITY RATIOS Current ratio (current assets / short-term liabilities) Quick ratio indicator (current assets - inventories / short-term liabilities) Instant cash ratio (cash / short-term liabilities) VALUES OF LIQUIDITY RATIO 31.12.2020 31.12.2019 Current ratio 0,81 1,47 Quick ratio indicator 0,34 0,64 Instant cash ratio 0,21 0,43 | Financial statement 99 Consolidated nancial statements of Echo Investment Group for 2020  Capital risk management The Group’s objective in managing capital is to pro- tect the Group’s ability to continue its operations, so that it can generate return for shareholders and to maintain an optimal capital structure to reduce its cost. While managing the capital, the Group makes deci- sions regarding the level of ﬁnancial leverage, divi- dend policy, issuance of new shares or purchasing and subsequent redemption or resale of previously issued shares and the possible sale of assets to re- duce debt. The Group monitors its capital by such methods as debt ratios. This ratio is calculated as the ratio of net debt to total capital. Net debt is calculated as the sum of loans and borrowings (including current and long-term loans reported in the balance sheet) increased by unpaid dividends and reduced by cash, cash equivalents and other restricted ﬁnancial assets. The total capital is calculated as equity shown in the balance sheet inclusive of net debt. DEBT RATIO PLN ‘000 Note 31.12.2020 31.12.2019 Total loans, borrowings and bonds 17 2 808 304 1 969 671 Liability for dividend - - Cash and equivalents 14 (327 097) (492 295) Other restricted ﬁnancial assets 14 (82 524) (57 157) Net debt 2 398 683 1 420 219 Total equity 1 684 685 1 562 365 Total capital 4 083 368 2 982 584 Debt ratio 58,74% 47,62% Value of presented ratios are within the ﬁnancial assumptions of the Group. | Financial statement 100 Consolidated nancial statements of Echo Investment Group for 2020  Agreements concluded with related entities TRANSACTIONS WITH RELATED ENTITIES PLN ‘000 31.12.2020 31.12.2019 Results of transactions with owners Receivables from loans granted 37 446 - Trade receivables - - Trade liabilities 1 517 3 033 Incurred costs 14 800 14 792 Recognized revenue - - Results of transactions with related entities Receivables from loans granted - - Trade liabilities 1 091 - Trade liabilities 4 - Incurred costs 4 37 499 Recognized revenue 5 030 49 522 Results of transactions with members of the Management Board Recognized revenue 2 857 1 504 Advances received 766 1 005 Results of transactions with jointly controlled entities Receivables from loans granted 205 160 169 092 Trade receivables 8 054 21 652 Liabilities - 10 646 Incurred costs 15 - Recognized revenue 298 564 107 274 Advances received 5 969 113 005 CHANGE IN ALLOWANCES FOR EXPECTED CREDIT LOSSES  RECEIVABLES PLN ‘000 31.12.2020 31.12.2019 As at the beginning of the period 217 - Increases due to: – creation of a write-o 174 217 Balance of write-os at the end of the period Stan odpisów na koniec okresu 391 217 | Financial statement 101 Consolidated nancial statements of Echo Investment Group for 2020  Material post-balance sheet events . Conclusion of a preliminary agreement on the acquisition of a majority stake of shares in Archicom S.A. On February 17, 2021 the Management Board of Echo Investment entered into a preliminary agreement with Dorota Jarodzka-Śródka, Kazimierz Śródka and Rafał Jarodzki on the acquisition of a stake of Archicom S.A. shares representing in total approxi- mately 66.01% of the share capital and entitling to a total of approximately 65.99% of votes. The price for the shares will be PLN 425 million. Echo Investment will pay PLN 237 million on the transaction day and the remaining PLN 188 million in bonds issued with a maturity date of 3.5 years, bearing interest at an annual rate of 5%. The signing of the ﬁnal agreement and the closing of the transaction shall be subject to the consent of the President of the Oce of Com- petition and Consumer Protection. The transaction will exclude the development busi- ness carried out outside the Wrocław agglomeration and two development projects in Kraków, as well as the architectural design studio - these assets will remain in the hands of the sellers. The development projects will be sold to Dorota Jarodzka-Śródka and Rafał Jarodzki for PLN 131 m million (paid in two instalments), and the design studio will be sold to Dorota Jarodzka-Śródka and Kazimierz Śródka for PLN 2.4 million. In addition, on the closing date of the transaction an option agreement shall be executed under which Echo Investment S.A. or an entity designated by the company shall be entitled to purchase the Archicom S.A. shares remaining in the hands of the sellers, representing 8.31% of the share capital and carrying 13.32% of total votes at the general meeting. The option will be exercisable until March 15, 2023. At the end of 2020 in Wrocław and Kraków Archicom has c.a. 2,000 apartments under construction and 4,200 in preparation. After completion of the trans- action, the Echo-Archicom Group will be the largest residential developer in Poland, having started the construction of a total of 7 thousand apartments for sale and rent in 2021. The acquisition is in line with Echo Investment’s strategic goals of becoming a Polish nationwide leader in the residential sector. Archicom has been operating mainly on the Lower Silesian market and has been listed on the Stock Exchange since 2016. The company has grown out of a family-owned architectual design oce and has 160 completed projects to its credit, includ - ing the revitalized Wrocław Brewery complex, the award-winning Olimpia Port estate and the ﬁrst exclusive Platinum Lofts in Wrocław. Archicom is a strong, recognizable brand with nearly 15% share in the Wrocław residential market. . Sale of Villa Oces building Echo Investment Group has concluded ﬁnal sale agreement of Villa Oces building being part of the Warsaw Brewery complex. It was acquired by KGAL Group, a leading independent investment and asset manager. The building was sold for approximately EUR 86.7 million. The transaction value was reduced, inter alia, by the value of the rent-free periods, the partial value of capitalized rents on premises not handed over to tenants, the value of arrangement works, and other costs. As a result, the price payable at closing was EUR 69.3 million plus VAT. After the space is hand- ed over to all tenants, the price will be increased to EUR 76.6 million plus VAT. In addition the seller received a separate fee related to the completion of arrangement works on the tenants’ premises and the repair of defects in the total amount of EUR 4.6 million plus VAT. As part of the transaction, the parties have also concluded a building quality guarantee agreement | Financial statement 102 Consolidated nancial statements of Echo Investment Group for 2020 and a rental guarantee agreement. The second one provides a guarantee to the buyer that the seller will cover rent payments and service charges for parts of the building that have not been yet rented and those that have been rented, but for which rent reductions or rent-free periods have been applied. The Villa Oces building received an occupancy permit in April 2020 and is already fully leased with such companies as WeWork, Accenture and Etno Café that occupies its ground ﬂoor. Soon a reputable ﬁnancial institution and Echo Investment, as well as well-known Mediterranean restaurant will also move into the building. The 13-ﬂoor building of Villa Oces is located in the immediate vicinity of the restored Schiele Villa, a historical house of the former owner of the famous brewery, near the entrance to the heart of Warsaw Brewery. The structure is 55-meter high and its total rental area amounts to 16,600 sqm. . Bond issue of a total value of PLN 195 million On March 17, 2021 institutional investors have ac- quired Echo Investment’s bonds with a total value of PLN 195 million. The obtained funds will be allocated to the company’s development, particularly in the promising residential sector. The bonds have a 4-year maturity. Their interest rate is based on the WIBOR 6M variable rate plus a margin for investors. The agent of this new issue is mBank S.A. Echo Investment plans to allocate the money obtained from the bond issue to ﬁnance the development of its business and to repay the bonds maturing at the end of Q1 of this year. The issued bonds are not secured and will be entered into the market in the alternative trading system of the Warsaw Stock Exchange. Due to issue of bonds, the Company redeemed 1,475 own bonds with a nominal value of PLN 10,000 each (ISIN code PLECHPS00225). | Financial statement 103 Consolidated nancial statements of Echo Investment Group for 2020 REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD PLN 2020 2019 From Echo Investment S.A. Basic remuneration From subsidiaries, joint-ventures and associates Other benets Total From Echo Investment S.A. Basic remuneration From subsidiaries, joint-ventures and associates Other benets Total Bonus Bonus Nicklas Lindberg 1 003 933 2 145 339 596 006 3 745 278 1 076 227 20 861 365 2 192 026 843 250 24 972 867 Maciej Drozd 421 672 336 000 1 224 713 35 218 2 017 603 753 413 359 100 721 999 1 080 1 835 592 Artur Langner 204 000 228 000 972 000 4 504 1 408 504 233 973 167 400 850 800 4 002 1 256 175 Marcin Materny 207 000 180 000 814 032 9 552 1 210 584 240 000 125 280 702 842 8 676 1 076 798 Rafał Mazurczak 207 000 177 120 808 992 10 052 1 203 164 200 000 180 000 814 032 8 676 1 202 708 Waldemar Olbryk 627 000 537 350 - 66 466 1 230 816 702 000 386 100 - 6 704 1 094 804 Małgorzata Turek (appointed on 7.03.2019) 204 000 114 538 739 076 4 404 1 062 018 217 857 - 467 500 3 702 689 059 Total 2 874 605 1 573 008 6 704 152 726 202 3 423 469 22 079 245 5 749 199 876 090 Total for the year 11 877 967 32 128 003  Remuneration of the Management Board and Supervisory Board Remuneration of members of the Management Board Members of the Management Board receive remu- neration and bonuses in accordance with the remu- neration model described in the ‘Work Rules of the Management Board’ adopted by the Supervisory Board in a resolution of 21 March 2013. The bonus system is based on an agreement in accordance with the MBO methodology (Management by Ob- jectives) and it is related to the company’s results. Each Member of the Management Board may receive an annual bonus expressed in a multiple of monthly basic salary, depending on the key business objec- tives which he/she has an inﬂuence on in the scope of their responsibility. At the same time, all Members of the Management Board have common goals, the execution of which below the expected level will result in a reduction of the bonus. The amount of remuneration and bonuses of Management Board Members is conﬁrmed by a resolution of the Super- visory Board every time. In connection with the outbreak of the pandemic, in 2020, in addition to the speciﬁc objectives set individually for each Member of the Management Board, the common objectives of the Management Board were to maintain the continuity and stability of the company’s operations - in particular, to main- tain uninterrupted work on construction sites and in residential sales oces - and to ensure the safety of employees and associates. At the same time, when the pandemic broke out, the Management Board took measures to respond to the business and ﬁ- nancial risks associated with the uncertain market situation, including decisions to partially defer the payment of bonuses for 2019 and to temporarily re- duce the remuneration of executives. In 2020 and as at the date of publication of the re- port, there were no agreements concluded between the Company and executives, providing for compen- sation in case of their resignation or dismissal from their position without an important reason, or if their dismissal occurs due to a merger of Echo Investment S.A. or due to an acquisition. | Financial statement 104 Consolidated nancial statements of Echo Investment Group for 2020 REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD PLN 2020 2019 From Echo Investment S.A. From subsidiaries, joint-ventures and associates Other benets From Echo Investment S.A. From subsidiaries, joint-ventures and associates Noah M. Steinberg (appointed on 9.01.2020) 137 086 - - - - Karim Khairallah (resigned on 13.12.2019) - - - - - Tibor Veres (appointed on 9.01.2020) 75 194 - - - - Laurent Luccioni (resigned on 13.12.2019) - - - - - Mark E. Abramson (resigned on 13.08.2020) 126 290 - - 180 000 - Margaret Dezse (appointed on 13.08.2020) 54 194 - - - - Maciej Dyjas 60 000 - - 60 000 - Sławomir Jędrzejczyk (appointed on 13.08.2020) 54 194 - - - - Stefan Kawalec (dismissed on 13.08.2020) 126 290 - 1 800 180 000 - Péter Kocsis (appointed on 9.01.2020) 53 710 - - - - Bence Sass (appointed on 9.01.2020) 53 710 - - - - Nebil Senman 60 000 - 825 60 000 - Sebastian Zilles (resigned on 13.12.2019) - - - - - Total 800 668 2 625 480 000 Total for the year 803 293 480 000 Remuneration of the Supervisory Board The remuneration of the Supervisory Board is de- termined in the form of resolutions of the General Meeting of the Company’s Shareholders. The reso- lution which is currently in force is resolution no. 23 of the General Meeting of Shareholders of 25 April 2018, which determines the amount of remuneration for Supervisory Board members as follows: − monthly remuneration of the Chairman of the Su- pervisory Board – PLN 10,000 gross, − monthly remuneration of the Deputy Chairman of − the Supervisory Board – PLN 7,000 gross, − monthly remuneration of a Member of the Super- visory Board – PLN 5,000 gross, − additional monthly remuneration for the chair- men of the Supervisory Board committees – PLN 10,000 gross. Members of the Supervisory Board shall also be entitled to reimbursement of costs incurred in con- nection with the exercise of the function, in particu- lar – travel costs to the place of Supervisory Board meetings and back, costs of individual supervision as well as costs of accommodation and meals. | Financial statement 105 Consolidated nancial statements of Echo Investment Group for 2020 Anna Gabryszewska-Wybraniec Chief Accountant Agreements concluded with an entity authorised to audit ﬁnancial statements  The Supervisory Board of Echo Invest- ment S.A., upon the recommendation of the Audit Committee, has selected Deloitte Audyt Sp. z o.o. Sp.K. based in Warsaw, al. Jana Pawła II, registered as number 73 in the list of auditor compa- nies to audit separate ﬁnancial reports of Echo Investment and consolidated ﬁ- nancial reports of the Echo Investment Capital Group for the years 2020-2021. The agreement was concluded by the Management Board, based on the Super- visory Board’s authorisation. The Management Board of Echo Invest- ment S.A. informs that the selection of the auditing company conducting the audit of the annual ﬁnancial statements was made in accordance with the regu- lations, including the selection and pro- cedure for the selection of the auditing company, based on the resolution of the Supervisory Board of 14 November 2019. The auditing company and the members of the team conducting the audit met the conditions for preparing an unbiased and independent report on the audit of the annual ﬁnancial statements in accord- ance with the applicable regulations, professional standards and professional ethics. Echo Investment S.A. complies with the existing regulations related to rotation of the auditing company and the key stat- utory auditor, as well as prevailing man- date periods. Echo Investment S.A. has a policy with respect to the selection of the auditing company and a policy with respect to providing services to the issuer by the auditing company, any entity relat- ed to the auditing company or a member of its network of additional non-auditing services, including services which are conditionally excluded from the ban on such services by the auditing company. The auditing company selection policy and the non-auditing services purchase policy were approved by resolutions of the Audit Committee dated March 23, 2018 and are available on the Company’s website under Investor relations / Strat- egy and corporate governance. THE NET REMUNERATION DUE TO THE AUDITOR ENTITLED TO AUDIT FINANCIAL REPORTS OF THE COMPANY AND THE GROUP PLN Due Contractual amount [PLN] Review of the standalone and consolidated ﬁnancial statements for H1 2020 135 000 Audit of the standalone ﬁnancial statement for Q3 2020 98 000 Audit of the standalone and consolidated ﬁnancial statements for 2020 278 000 Annual audit of subsidiaries 74 250 Total 585 250 Kielce, March 30, 2021 Nicklas Lindberg President of the Board, CEO Maciej Drozd Vice-President of the Board, CFO Artur Langner Vice-President of the Board Rafał Mazurczak Member of the Board Marcin Materny Member of the Board Waldemar Olbryk Member of the Board Małgorzata Turek Member of the Board The document is signed with qualiﬁed electronic signature STATEMENT OF THE MANAGEMENT BOARD CHAPTER 4 | Statement 107 Consolidated nancial statements of Echo Investment Group for 2020 The Management Board of Echo Investment S.A. declares that, to the best of its knowl- edge, the annual separate ﬁnancial statements for 2020 and comparative data have been presented in compliance with the applicable accounting principles, and that they reﬂect in a true, reliable and transparent manner the economic and ﬁnancial situation of Echo Investment S.A. and its ﬁnancial result. The management report of Echo In- vestment S.A. presents a true view of development, accomplishments and situation of Echo Investment S.A., including a description of fundamental risks and threats. The Management Board of Echo Investment S.A. declares that the entity authorised to audit ﬁnancial statements, auditing the annual ﬁnancial statements for 2020, was selected in accordance with the laws. This entity and the statutory auditors conducting the audit fulﬁlled the conditions required to express an unbiased and independent opinion on the audited annual ﬁnancial statements, pursuant to the applicable laws and professional standards. Kielce, 30 March, 2021 Nicklas Lindberg President of the Board, CEO Maciej Drozd Vice-President of the Board, CFO Artur Langner Vice-President of the Board Rafał Mazurczak Member of the Board Marcin Materny Member of the Board Waldemar Olbryk Member of the Board Małgorzata Turek Member of the Board The document is signed with qualiﬁed electronic signature CONTACT Echo Investment S.A. Warsaw oce Q22 building al. Jana Pawła II 22 00-133 Warsaw Design and execution: Damian Chomątowski | be.net/chomatowski

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