Annual Report • Mar 30, 2021
Annual Report
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Message from CEO CHAPTER 1 MANAGEMENT BOARD REPORT General information about the Company and its Group Management Board Supervisory Board The Strategy of Profitable Growth in action Business model Selected financial data of the Echo Investment Group The main figures disclosed in the annual financial statements of Echo Investment S.A. and its Group Operating segments of Echo Investment Group Ownership structure of Echo Investment S.A. and description of shares Volume of the Company’s shares and bonds held by managing and supervising persons Major events in 2020 and material agreements for the operation of the Company and its Group Material post-balance sheet events Residential segment – market outlook and Echo Investment business activities Office segment – market outlook and Echo Investment business activities Retail segment – market outlook and Echo Investment business activities Our employees and diversity policy How we manage risk Portfolio of properties Main investments in 2020 – acquisition of plots Output markets and sources of supplies of materials, goods and services Composition of the Group Financial liabilities of the Company and its Group Off-balance sheet liabilities Information on dividend policy and dividend Assessment of financial resources management and investment plan feasibility Factors and one-off events influencing the financial result in 2020 and in Q4 2020 External and internal factors significant for the development of Echo Investment S.A. and its group Remuneration of the Management Board and Supervisory Board Seasonal or cyclical nature of operations Significant court, arbitration or public administration proceedings Information on borrowings granted in 2020, including to related entities Agreements concluded with an entity authorised to audit financial statements Other disclosures required by law The impact of the COVID-19 pandemic on the operations of Echo Investment Group CHAPTER 2 STATEMENT ON THE APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES The Articles of Association of the Company and the most important corporate governance documents Systems of internal control and risk management Rules for amending the Company’s articles of association The procedure of the general meeting, a description of shareholders’ rights and the manner of exercising them Composition and changes in the management board Description of principles regulating the appointment and dismissal of managerial staff and their rights Composition of the Supervisory Board and its changes Company’s supervisory board – rules of operation Composition of the Audit Committee and its changes The responsibilities of the Audit Committee Investment Committee Echo Investment S.A. shareholding structure and shareholders’ rights CHAPTER 3 STATEMENT OF THE MANAGEMENT BOARD Contact MANAGEMENT BOARD REPORT ON OPERATIONS OF ECHO INVESTMENT S.A. AND ITS GROUP 22 CONTENT Message from CEO 4 CHAPTER 1 7 MANAGEMENT BOARD REPORT 7 General information about theCompany and its Group 8 Management Board 9 Supervisory Board 10 The Strategy of Profitable Growth in action 11 Business model 13 Selected financial data of the Echo Investment Group 14 The main figures disclosed in the annual financial statements of Echo Investment S.A. and its Group 15 Operating segments of Echo Investment Group 20 Ownership structure of Echo Investment S.A. and description of shares 22 Volume of the Company’s shares and bonds held by managing and supervising persons 23 Major events in 2020 and material agreements for the operation of the Company and its Group 24 Material post-balance sheet events 29 Residential segment – market outlook and Echo Investment business activities 32 Oce segment – market outlook and Echo Investment business activities 37 Retail segment – market outlook and Echo Investment business activities 40 Our employees and diversity policy 43 How we manage risk 48 Portfolio of properties 55 Main investments in 2020 – acquisition of plots 64 Output markets and sources of supplies of materials, goods and services 65 Composition of the Group 67 Financial liabilities of the Company and its Group 72 O-balance sheet liabilities 76 Information on dividend policy and dividend 85 Assessment of financial resources management and investment plan feasibility 86 Factors and one-o events influencing the financial result in 2020 and in Q4 2020 91 External and internal factors significant for the development of Echo Investment S.A. and its group 93 Remuneration of the Management Board and Supervisory Board 94 Seasonal or cyclical nature of operations 96 Significant court, arbitration or public administration proceedings 96 Information on borrowings granted in 2020, including to related entities 97 Agreements concluded with an entity authorised to audit financial statements 98 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. Other disclosures required by law 99 The impact of the COVID-19 pandemic on the operations of Echo Investment Group 100 CHAPTER 2 105 STATEMENT ON THE APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES 105 The Articles of Association of the Company and the most important corporate governance documents 106 Systems of internal control and risk management 110 Rules for amending the Company’s articles of association 113 The procedure of the general meeting, a description of shareholders’ rights and the manner of exercising them 113 Composition and changes in the management board 114 Description of principles regulating the appointment and dismissal of managerial sta and their rights 117 Composition of the Supervisory Board and its changes 119 Company’s supervisory board – rules of operation 122 Composition of the Audit Committee and its changes 125 The responsibilities ofthe Audit Committee 126 Investment Committee 128 Echo Investment S.A. shareholding structure and shareholders’ rights 129 CHAPTER 3 130 STATEMENT OF THE MANAGEMENT BOARD 130 Contact 132 31. 32. 4 Message from CEO I am pleased to present to you the financial report of Echo Investment for 2020, the publication of which coincides with the 25th anniversary of our company’s presence on the Warsaw Stock Exchange. During this time we have managed to complete almost 200 projects in over 30 Polish cities, we have gained experience and gathered the best team necessary to create large, city-forming ‘destinations’ projects that meet the needs of cities and complement them. Last year we earned PLN 122 million of net profit, what was the result of hand over to clients 1,505 apartments, growth in value of our commercial projects under construction, as well as completed Resi4Rent projects e strategic directions Taking into account the new reality in which we operate, social trends, and changing client pref- erences, our company focuses on growing the residential sector. Apartments for sale and for rent account today for about a quarter of our assets. Due to the high prospects for this sector in Poland and the lower need for external financing of this business, it is our ambition to increase significantly proportion of residential assets in our balance sheet. A lower level of indebtedness of the entire Group will be the positive result of this strategy. It is worth emphasizing that we intend to keep our business diversified. We will maintain our strong position in the oce sector, as well as remain active in the retail sector focusing on destination pro- jects where food and beverage is a crucial element. We are ready to implement this strategy. In recent years, we have focused on the purchase of large plots of land, where complex and perfectly designed attractive parts of the city can be built. In February this year, we concluded a preliminary agreement for the purchase of a 66% stake in the Wrocław-based developer Archicom, as a result of which the Echo-Archicom group will become the biggest residential developer in Poland. Residential sector In 2020 we hit records both in sales and handovers of apartments. We managed to sign 1,570 sales contracts with clients, what outperformed last year’s results by 16%. At the same time, clients received their keys to 1,505 apartments, what meant a 19% increase compared to 2019. The sales only in Q4 2020 amounted to 464 units, while handovers – 792. In 2020, we completed the construction of eleven projects in Warsaw, Łódź, Poznań and Wrocław. We are constantly expanding our oer: last year, we have started the construction and sale of apart- ments in seven projects which added almost 1,300 apartments to the oer. After finalizing the purchase of the majority stake in Archicom, only in 2021 our group will start construction of 7,000 apartments. apartments for sale and rent. The acquisition is in line with our strategic goal of becoming a nationwide leader in the residential sector. DEAR SHAREHOLDERS, PARTNERS AND CLIENTS, 5 Resi4Rent We are consistently developing Resi4Rent - the largest private company with apartments for rent in Poland. Currently, Resi4Rent has nearly 1.8 thous. apartments in Wrocław, Łódź and Warsaw. Dur- ing 2021 we will complete another 460 apartments and start a construction of more than 3 thous. additional units. Ultimately, by 2025, it will oer 10 thousand. apartments in the six largest Polish cities - in Warsaw, Kraków, Łódź, Wrocław, Gdańsk and Poznań. Oces Last year, Echo Investment’s oce department focused on completing the construction of oce buildings as scheduled and on providing tenants for them. We have commissioned five buildings with a total area of over 125,000 sqm. At the end of the year, their average lease level exceeded 60%, but the current level of leasing and our advanced talks bring this ratio closer to approx. 85% now, that is making the buildings ready to be sold on the market. Already in the first quarter of 2021, we sold Villa Oces in Warsaw and we are conducting advanced talks about the sale of other buildings. Our oce projects continue to win the trust of financial insti- tutions due to their high quality and the central locations in the dierent cities. In 2020, we obtained financing for the construction of the MidPoint71 projects in Wrocław and Fuzja in Łódź in the total amount of over EUR 90 million. Our company focuses on growing the residential sector. Apartments for sale and for rent account today for about a quarter of our assets. Due to the high prospects for this sector in Poland and the lower need for external nancing of this business, it is our ambition to increase signicantly proportion of residential assets in our balance sheet. A lower level of indebtedness of the entire Group will be the positive result of this strategy. We are ready to implement this strategy. In recent years, we have focused on the purchase of large plots of land, where complex and perfectly designed attractive parts of the city can be built. In February this year, we concluded a preliminary agreement for the purchase of a 66% stake in the Wrocław-based developer Archicom, as a result of which the Echo-Archicom group will become the biggest residential developer in Poland. e retail sector The retail sector was hit the hardest during the pandemic, mainly due to three lock-downs and con- tinually protracted restrictions. It has been a focus for our leasing and management departments to reach an agreement with tenants on principles for returning shopping centers. Through marketing campaigns and consistent brand building, we hope to quickly rebuild the footfall and turnover of Libero and Galeria Młociny, in close cooperation with our tenants. The most important event for our retail projects in 2020 was the opening of the first Primark store in Poland in Galeria Młociny in Warsaw. It was one of the most anticipated debuts on the Polish market, which definitely strengthens the attractiveness of this project. Bringing the brand to Poland is one of the greatest successes of the leasing department of Echo Investment. In 2020, the leasing process of Warsaw Brewery retail space was also completed. Tenants are finishing their premises and – with our support – they are getting ready to open their business. Financial position The financial situation of Echo Investment is stable. In 2020, we generated over PLN 122 million of consolidated net profit, and at the end of the period, we had cumulated PLN 327 million of cash on our accounts. In 2020 we have acquired attractive land properties for 275,000 sqm of residential and service space. With such a strong financial situation and an impressive land bank, we are ready to implement our strategy. I encourage you to read our financial report for 2020 in detail. Yours sincerely Nicklas Lindberg CEO of Echo Investment CHAPTER 1 MANAGEMENT BOARD REPORT 8 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Echo Investment Group’s core activity consists in the construc- tion, lease and sale of oce and retail buildings, construction and sale of residential buildings as well as trade in real estate. The parent company Echo Investment S.A., with its oce in Kielce, al. Solidarności 36, was registered in Kielce on June 30, 1994. Echo is a Joint Stock Company entered in the National Court Register under no. 0000007025 by the District Court in Kielce, 10th Economic Division of the National Court Register. Since 5 March 1996, the Company’s shares are listed at the War- saw Stock Exchange on the regulated market, sector – WIG – Real Estate. The parent entity is Lisala Sp. z o.o., and the ulti- mate parent of the group is WING IHC Zrt. The Company was established for an indefinite period of time. General information about theCompany and its Group Kielce 1996 First listing of Echo Investment on the WSE. 9 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Management Board Professional CV’s of the Board Members are presented in the Corporate Governance section on page 114. Nicklas Lindberg President of the Board, CEO Maciej Drozd Vice-President of the Board, CFO Artur Langner Vice-President of the Board Marcin Materny Member of the Board Rafał Mazurczak Member of the Board Waldemar Olbryk Member of the Board Małgorzata Turek Member of the Board 10 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Margaret Dezse Independent Supervisory Board Member Chair of the Audit Committee Supervisory Board Noah M. Steinberg Chairman Tibor Veres Deputy Chairman Sławomir Jędrzejczyk Independent Supervisory Board Member Deputy Chairman of the Audit Committee Maciej Dyjas Supervisory Board Member Nebil Senman Supervisory Board Member Audit Committee Member Bence Sass Supervisory Board Member Péter Kocsis Supervisory Board Member Professional CV’s of the Board Members are presented in the Corporate Governance section on page 119. 11 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The Strategy of Profitable Growth in action In 2016, the Management Board of Echo Investment prepared and introduced the Strategy of Profitable Growth with the ap- proval of the Supervisory Board. The strategic directions con- firmed in 2020 place particular emphasis on the Group’s devel- opment in the residential sector and increasing the importance of multifunctional, large destination projects in the pipeline. EFFECTS OF THE STRATEGY OF PROFITABLE GROWTH IMPLEMENTATION LEADERSHIP Actions Echo Investment is the largest development company operating in Poland in terms of the number and area of projects implemented. We are active in three sectors of real estate: oce, retail and residential – including new sector of apartments for rent. The strategy of profitable growth assumes that Echo Investment will be one of the top developers in each of these sectors separately. Our large scale of operations will allow for the optimal use of resources. • Strengthening the position in the residential sector by taking bigger share in the market: from c.a. 600 apartments sold annually until 2015 to c.a. 1,570 units in 2020; • Purchase in 2021 of a majority stake in the residential developer Archicom, making the group one of the top three developers selling apartments and a leader in terms of the number of apartments under construction (including Resi4Rent); • Preparation of residential projects allowing for further advancement in the ranking; • Entering a new market niche of apartment for rent by developing a company Resi4Rent in cooperation with a reputable financial partner; • Maintaining the leading position in the oce market (in terms of space under construction and preparation, as well as rental); • Search for new business niches, including in short-term rental (through the development of CitySpace); • Maintaining the leading position in the retail sector (in terms of relations with tenants and innovative approach); • Strengthening our competitive advantage by preparation and construction of multifunctional projects that enable us to combine dierent competencies and implement projects faster. LARGE DESTINATION PROJECTS Actions Echo Investment’s many years of experience in three real estate sectors gives a competitive advantage consisting in the ability to implement large, multifunctional and city- -forming projects. Thanks to this, the Group can buy larger areas, with regard to which the unit price is lower and the competition among buyers is much smaller. Combining the functions provides for faster completion of the project and comprehensive design of the urban space. • The construction of projects combining oce, retail, enter- tainment and residential functions – Warsaw Brewery, Moje Miejsce (Beethovena), Reset in Warsaw and Fuzja in Lodz with very good social reception; • Preparation of other multifunctional projects at ul. Towaro- wa 22 in Warsaw, Wita Stwosza in Kraków, Opieńskiego in Poznań, KEN in Warsaw, Kapelanka in Kraków and Widze- wska in Łódź; • Signing preliminary agreement for a plot in Sluzewiec Przemysłowy, Warsaw (Empark); • Search for other large areas for multifunctional purposes. 12 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 EFFECTS OF THE STRATEGY OF PROFITABLE GROWTH IMPLEMENTATION DEVELOPMENT ACTIVITY Actions The adopted business model focuses on the development activity, which consists of operations such as the purchase of a plot (real estate), project preparation, construction, leasing, sale of apartments, active management to increase the market value and then sale of finished oce and retail projects in optimal time for the possible return ratio, capital management, market expectations and trends. Echo Investment does not want to be a long-term owner of completed projects and the income from oce or retail rent accounts for a minority portion of its total revenue. Commercial and residential properties under construction constitute majority of the group’s assets. • Separation of working oce and retail assets in 2016 to another company – EPP and sale of all of its shares in 2016-2018; • Sales of finished oce and retail project in optimal time for the possible return ratio, capital management, market expectations and trends – including sales of buildings still remaining under construction or soon after their comple- tion; • Conducting the sales process of residential projects in such a way that 80% of units are sold at the time of com- pletion; • Provision of development services to external companies for remuneration. FOCUS ON POLAND Actions It is the largest country and real estate market in Central and Eastern Europe. Echo Investment, as an entity which has operated here for over two decades, knows its potential, realities and principles of functioning very well. We focus on the execution of projects in seven most important cities of the country, which are the most attractive and liquid real estate markets: Warsaw, Tri-City, Wrocław, Poznań, Katowice, Kraków and Łódź. • Purchase of real estate for future projects only in the seven largest Polish cities; • Disposal of non-core projects abroad; • Disposal of non-core projects (including in Częstocho- wa, Kielce, Kraków, Lublin, Poznań, Koszlin, Słupsk and Warsaw). STRATEGIC COOPERATION WITH RELIABLE PARTNERS Actions Echo Investment values long-term business relations with reliable partners, that created synergies for both sides. Development activities of Echo Investment are complementary to these entities. Such cooperation facilitates expanding Echo’s scale of operation, accelerates speed of projects implementation and limits risks. Echo Investment assumes entering into joint-ventures for projects requiring significant capital expenditures, providing its partners with services such as development, planning, leasing, accounting etc. Partners may also be oered by Echo with priority to acquire ready projects on market conditions. Material agreements between Echo Investment and its partners need to be discussed and approved by the Supervisory Board. • Partnership with EPP on large and capital-intensive commercial as well as multi-functional projects (Galeria Młociny, Towarowa 22 in Warsaw), in which Echo has 30% stake and conducts the development and leasing process for remuneration; • Partnership with a global fund manager on the development of Resi4Rent, in which Echo Investment holds 30% stake and for which it provides development services for fee. 13 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CONSTRUCTION LAND ACQUISITION CASH DIVIDEND DESIGN & PERMITTING SALE MARKETING LEASING, ACTIVE PROPERTY MANAGEMENT Business model Echo Investment Group runs the entire investment process in-house, starting with acquisition of proper- ty, through obtaining administrative permits, financ- ing and oversight of construction, to leasing, com- pletion, active property management to increase its value, taking decision of sale and execution of this decision in optimal moment from return, cash management, expectation and market trends. These steps are taken in most cases through the special purpose vehicles (SPV). The core business of Echo Investment Group falls into the following categories: 1. construction, lease, active property management to increase its value and sale of oce buildings, 2. construction, lease, active property management to increase its value and sale of retail buildings, 3. construction and sale of residential apartments 4. provision of services (general contractor, manag- ing contractor, leasing, consulting etc.). 14 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Selected financial data of the Echo Investment Group CONSOLIDATED FINANCIAL DATA OF THE ECHO INVESTMENT GROUP [PLN ‘000] [EUR ‘000] as at 31.12.2020 as at 31.12.2019 as at 31.12.2020 as at 31.12.2019 Revenue 1 212 854 880 133 271 077 204 596 Operating profit 338 167 450 153 75 582 104 643 Gross profit 176 612 398 188 39 473 92 563 Profit attributable to shareholders of the parent company 122 093 299 532 27 288 69 629 Cash flows from operating activities (70 736) (82 396) (15 810) (19 154) Cash flows from investment activities (752 895) (132 358) (168 275) (30 768) Cash flows from financing activities 658 433 267 517 147 162 62 187 Net cash flow (165 198) 52 763 (36 922) 12 265 Total assets 5 630 796 4 810 429 1 220 160 1 129 606 Equity attributable to equity holders of the parent 1 684 685 1 562 365 365 061 366 882 Long-term liabilities 1 939 376 1 970 451 420 251 462 710 Short-term liabilities 2 006 861 1 277 735 434 875 300 043 Number of shares 412 690 582 412 690 582 412 690 582 412 690 582 Profit (loss) per one ordinary share 0,30 0,73 0,07 0,17 Book value per one share 4,08 3,62 0,88 0,85 15 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 2018 2 769 2 935 2019 The main figures disclosed in the annual financial statements of Echo Investment S.A. and its Group Echo Investment S.A. Echo Investment Group ASSETS AND LIABILITIES – Non-current assets – Current assets – Assets held for sale ASSETS’ STRUCTURE 23% 72% 28% PLN 3 281 thous. 49% 28% PLN 5 631 thous. ASSETS’ VALUE PLN MLN 5 631 2020 3 281 2020 2018 3 892 4 810 2019 Echo Investment S.A. Echo Investment Group 16 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 NONCURRENT ASSETS’ STRUCTURE CURRENT ASSETS’ STRUCTURE EQUITY AND LIABILITIES – Interests in subsidiaries, joint-ventures and associates – Interests in joint-ventures and associates – Long-term nancial assets – Investment properties – Investment properties under construction – Borrowings granted – Other – Inventory – Trade and other receivables – Borrowings granted – Short-term nancial assets – Receivables due to other taxes – Cash and other cash equivalents – Other – Equity – Long-term liabilities – Short-term liabilities – Liabilities related to assets held for sale 40% 1% 32% 28% 6% 12% 32% 7% 3% 35% 5% 4% 6% 46% 13% PLN 2 368 thous. 22% 20% 9% PLN 912 thous. 40% PLN 3 281 thous. 50% 28% 11% PLN 2 765 thous. 58% 29% 7% 35% 20% 1% PLN 1 596 thous. PLN 5 631 thous. Echo Investment S.A. Echo Investment S.A. Echo Investment S.A. Echo Investment Group Echo Investment Group Echo Investment Group 17 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 0,1 0,05 2018 2019 55 2018 83 2019 PROFIT AND LOSS ACCOUNT REVENUE PLN MN 1 213 2020 Echo Investment S.A. Echo Investment Group OPERATING PROFIT PLN MN 144 2020 Echo Investment S.A. Echo Investment Group GROSS PROFIT PLN MN 2020 78 Echo Investment S.A. Echo Investment Group NET PROFIT PLN MN Echo Investment S.A. Echo Investment Group NET PROFIT PER SHARE PLN 0,14 2020 Echo Investment S.A. Echo Investment Group 713 2018 880 2019 2018 2019 68 30 404 450 2018 2019 338 2020 42 21 2019 2017 78 2020 0,74 0,73 2018 2019 0,3 2020 122 2020 305 300 2018 2019 2020 177 2018 2019 424 398 2018 430 313 2019 330 2020 18 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CASH FLOW CASH FLOW MLN PLN OPERATING CASH FLOW MLN PLN CASH FLOW ON INVESTING ACTIVITY MLN PLN Echo Investment S.A. Echo Investment S.A. Echo Investment S.A. Echo Investment Group Echo Investment Group Echo Investment Group -286 203 -41 – Cash ow on investing activity – Cash ow on investing activity – Cash ow on nancing activity – 2018 – 2019 – 2020 – 2018 – 2019 – 2020 -753 -39 -132 -71 142 -82 -753 658 -71 -41 138 6 -286 282 -70 19 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 -340 268 -466 114 CASH FLOW ON FINANCING ACTIVITY MLN PLN CASH FLOW – 2018 – 2019 – 2020 203 658 Echo Investment S.A. Echo Investment Group 20 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 – Assets – Liabilities ASSIGNMENT OF ASSETS AND LIABILITIES TO SEGMENTS AS AT 31 DECEMBER 2020 PLN MLN Oce RetailResidential Non-allocatedResi4Rent 5 631 mlnpln Total value of assets as at 31.12.2020 3 946 mln pln Total value of liabilities as at 31.12.2020 ASSIGNMENT OF ASSETS TO SEGMENTS PLN ‘000 31.12.2020 31.12.2019 Residential 1 179 869 1065493 Oce 2 943 537 2027505 Retail 975 625 954277 Resi4Rent 202 765 326788 Non-allocated 329 000 436366 Total 5 630 796 4810429 ASSIGNMENT OF LIABILITIES TO SEGMENTS PLN ‘000 31.12.2020 31.12.2019 Residential 534 817 435065 Oce 1 195 128 724347 Retail 409 463 373026 Resi4Rent 8 674 210265 Non-allocated 1 798 155 1505484 Total 3 946 237 3248186 Operating segments of Echo Investment Group All items contain proportional data to the shares of the Echo Investment group in the projects. 2 944 1 195 976 409 1 180 435 329 1 798 203 8,7 500 1 000 1 500 2 000 2 500 3 000 21 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 ALLOCATION OF COST OF SALES TO SEGMENTS PLN ‘000 1.01.2020 – 31.12.2020 01.01.2019 - 31.12.2019 Residential (564 165) (401 728) Oce (82 565) (57459) Retail (21 923) (54245) Resi4Rent (273 049) (91 168) Non-allocated (27 321) (72 530) Total (969 023) (677130) GROSS SEGMENT CONTRIBUTION INCLUDING FX GAIN/LOSS As at 31.12.2020 Residential Oce Retail Resi4Rent Non- -allocated Gross profit (loss) on sales 243 831 164 531 34 007 33 730 13 949 (2 385) Profit (loss) on investment property 228 985 - 216 426 12 717 - (158) Share of profit (loss) of associates and joint ventures (9 567) - - (42 501) 32 934 - Profit (loss) on FX derivatives (21 176) - (19 321) (8) - (1 847) Foreign exchange gains/(losses) (83 904) (3 820) (45 685) (24 085) - (10 314) Total gross profit on segments 358 170 160 711 185 428 (20 147) 46 882 (14 704) Segments’ share in gross profit 100% 45% 52% -6% 13% -4% ALLOCATION OF REVENUE TO SEGMENTS PLN ‘000 01.01.2020 - 31.12.2020 01.01.2019 - 31.12.2019 Residential 728 694 555 521 Oce 116 573 76558 Retail 55 653 72511 Resi4Rent 286 998 97 894 Non-allocated 24 936 77 649 Total 1 212 854 880133 ASSIGNMENT OF REVENUE, COST OF SALES AND GROSS PROFIT TO SEGMENTS FOR 2020 PLN ‘000 ALLOCATION OF GROSS PROFIT LOSS TO SEGMENTS PLN ‘000 01.01.2020 - 31.12.2020 01.01.2019 - 31.12.2019 Residential 164 529 153 793 Oce 34 007 19099 Retail 33 730 18266 Resi4Rent 13 950 6 726 Non-allocated (2 385) 5 119 Total 243 831 203003 – Gross prot – Cost of sales – Total revenue Residential Oce Retail Resi4Rent Non-allocated Total revenue 164 529 564 165 728 694 82 565 21923 273 049 27321 34 007 33730 13 950 2 385 116 573 55 653 286 998 24 936 1 212 854 22 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Ownership structure of Echo Investment S.A. and description of shares . 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 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. . 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. SHAREHOLDERS OF ECHO INVESTMENT S.A. HOLDING MORE THAN 5% OF THE SHARE CAPITAL AS AT 31 DECEMBER 2020 – Lisala Sp. z o.o. (Wing IHC Zrt and Grin 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% 23 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Volume of the Company’s shares and bonds held by managing and supervising persons To the best of the Company’s knowledge, among the persons in charge of Echo Investment S.A. management or super- visory functions, the shareholders and bondholders of the Company are Nicklas Lindberg, President of the Management Board, Maciej Drozd Vice-president, CFO To the best of the Company’s knowledge, none of the other members of the Man- agement Board or the Supervisory Board is a shareholder or a bondholder of the Company directly or indirectly as at the VOLUME OF SHARES OF ECHO INVESTMENT S.A. HELD BY MEMBERS OF THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD AS AT 31 DECEMBER 2020 Surname / Position in the company Number of shares held Share in the capital and votes at GMS Nicklas Lindberg President of the Board, CEO 538 676 0,13% Maciej Drozd Vice-President of the Board, CFO 221 765 0,05% Péter Kocsis Supervisory Board Member 44 000 0,01% VOLUME OF BONDS OF ECHO INVESTMENT S.A. HELD BY MEMBERS OF THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD AS AT 31 DECEMBER 2020 Surname / Position in the company Number of bonds held Nicklas Lindberg President of the Board, CEO 219 (code ECH0721) 229 (code ECH1022) Maciej Drozd Vice-President of the Board, CFO 219 (code ECH0522) 369 (code ECH0721) 50 (code ECH0923) 316 (code ECH1022) and Péter Kocsis, member of the Super- visory Board. Péter Kocsis has informed the Company on the purchase od the Company’s shares on August 14, 2020. To the best of the Company’s knowledge, previously Péter Kocsis did not hold any shares or bonds of Echo Investment S.A. date of publication of the report, none of them was a shareholder or bondholder on December 31, 2020 and during 2020, and none of them concluded any transac- tions for shares or bonds in the Company. 24 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Major events in 2020 and material agreements for the operation of the Company and its Group . Changes to the Supervisory Board Following the sale of their 56% stake and thus the complete withdrawal from Echo Investment’s share structure of the Pimco and Oaktree Capital Management funds, the following persons resigned from the Supervisory Board, eective from December 13th, 2019: Karim Khairallah, the Chairman of the Supervisory Board; Laurent Luccioni, the Vice-Chairman; and Sebastian A. Zilles, a member of the Supervisory Board. As a result, at the Extraordinary General Meeting of Share- holders held on January 9th, 2020, Noah Steinberg was appointed to the Supervisory Board and assigned as its Chairman, while Tibor Veres became the Vice-Chairman of the Supervisory Board, and Péter Kocsis and Bence Sass became Supervisory Board members for the current term. The new Supervisory Board members have all been appointed from Hungarian company Wing, being the new majority shareholder of Echo Investment. Due to Mark Abramson resignation from his seat in the Supervisory Board and dismission of Ste- fan Kawalec, the Ordinary General Meeting of the Shareholders ap pointed Margaret Dezse and Sławomir Jędrzejczyk as independent members of the supervisory board on August 13th 2020. The new members of the Supervisory Board also became members of the Audit Committee: Mar garet Dezse as chair and Sławomir Jędrzejczyk as vice-chairman. What is more, the Supervisory Board appointed the Investment Committee that will be responsible for the ongoing evaluation of the activities in the field of purchasing and selling assets, financing plans, the asset sales strategy development and the implemen tation of investment plans based on the approved annual budget. The Investment Committee consist ed of Noah M. Steinberg, Maciej Dyjas, Péter Kocsis, Bence Sass and Nebil Senman. . Wing’s announcement of a tender for an additional 10.04% stake in Echo Investment Due to Wing indirectly exceeding the threshold of 33% of the shares of Echo Investment and of the votes at the General Meeting of Shareholders, on February 3rd, 2020 the Hungarian company announced a tender oer for an additional 41,444,928 of Echo Investment’s shares, entitling it to a further 10.04% of the total number of the votes at the General Meeting of Shareholders, at a price of PLN 4.65 per share. Subscriptions started on February 21st, 2020 and ended on March 18th, 2020. As a result of the tender, Wing increased its stake to 66% and of the votes at the General Meeting of Shareholders of Echo Investment. The tender oer was conducted through brokerage house Santander Biuro Maklerskie. . Purchase of three plots with first generation shopping centres in Kraków, Poznań and Łódź On December 1, 2020, Echo Investment signed final purchase agreement for plots situated on ul. Opieńskiego in Poznań, ul. Widzewska in Łódź and ul. Kapelanka in Kraków. These sites, which belonged to companies owned by Tesco Group, are in excellent locations and fit into Echo In- vestment’s consistent strategy of continuing to expand the residential part of its business. The company is planning to develop mixed use projects on all the plots, which will include 4,000 apartments, retail space and (in Kraków) a building with oce functions. The total area of the acquired plots amounts to 190,000 sqm. The net price amounted to EUR 41.6 million. 4,000 e number of apartments that could potentially be built on the plots in Łódź, Kraków and Poznań to be acquired from Tesco 25 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Warsaw Brewery complex in Warsaw This is the latest transaction concluded between Echo Investment and Tesco. At the end of last year, the developer bought the Tesco centre on al. Komisji Edukacji Narodowej in Warsaw’s Kabaty district from the retail chain. This property is located next to the Kabaty metro station. . Construction works completion in the Warsaw Brewery complex In 2020, Echo Investment completed nearly all construction work on the Warsaw Brewery com- plex. Remaining fit-out works in historic buildings, the last plantings and the arrangement of public spaces are to be completed in 2021. The Villa Oces building obtained an occupancy permit on April 15, 2020 and WeWork clients, as well as Accenture already work on its premises. The Malthouse Oces was provided with an occupancy permit on September 1, and its first tenants - law firm Allen & Overy and Grupa Żywiec – are currently working there. In July 2020, the occupancy permit was granted for the building Resi4Rent Warszawa Browary with 450 apartments for rent out of which c.a. 80% are already rented out. The occupancy permit for another building – the Malthouse Apartments (Warsaw Brewery E) was granted in October. The building has 81 high-standard apartments that are already being fitted-out by their owners. The Warsaw Brewery is the first city-forming, mixed-use ‘destination’ project of Echo Investment. The complex combine residential, oce, retail and entertainment functions and is situated on a plot of almost 4.5 ha between ul. Grzybowska, ul. Krochmalna, ul. Wronia and ul. Chłodna. 26 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . The issue of PLN 150 million of bonds and the purchase of bonds for redemption Under the company’s Bond Issue Programme, which could go up to a maximum value of PLN 1bil- lion, in cooperation with mBank S.A., on June 2, 2020 Echo Investment issued bonds worth a total of PLN 150 million to institutional investors. The nominal value and issue price of each bonds was PLN 10,000. They were issued for the period ending on May 31, 2024. The interest on the bonds was determined based on the variable WIBOR 6M rate supplemented by the investors’ margin. The interest will be paid in semi-annual periods. The bonds are to be redeemed on the redemption date at their par value. The bonds that were issued are not secured and are traded on the alternative trading system operated by the Warsaw Stock Exchange. At the same time, on June 1, 2020 the company purchased for redemption 1,005 own bonds bearing the ISIN code PLECHPS00258, 9,340 bonds with the code PLECHPS00282 and 349 bonds with the code PLECHPS00308. The unit par value of each bond was PLN 10,000. . Securing a construction loan for the MidPoint71 oce building On July 22, 2020 Echo Investment secured a loan for the construction of the MidPoint71 oce building, which is under development in Wrocław. PKO Bank Polski granted Echo Investment a EUR 54.4 million construction loan as well as a PLN 7 million VAT loan. Once the construction work is complete, the construction loan is to be converted into an investment loan. The loan is due to mature on June 30, 2026. MidPoint71, which is being constructed on ul. Powstańców Śląskich in the city, will have 37,000 sqm of oce space. Construction work started at the end of 2019, and the first tenants are due to move into the building in the fourth quarter of 2021. One of these will be Pyszne.pl, which will move its Wrocław headquarters to the building, where it will occupy 3,500 sqm. The ground floors of the oce building will include services, a restaurant and comfortable common areas. Medusa Group is responsible for the architectural design of the 14-storey building. Echo Investment has been investing in Wrocław for 15 years, with MidPoint71 being the compa- ny’s eighth oce project in the city, after Aquarius Business House, Nobilis, Sagittarius Business House, West Gate and West Link. In 2020 the first stage of the West 4 Business Hub oce com- plex on ul. Na Ostatnim Groszu was also completed . MidPoint71 in Wrocław 27 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Echo Investment issued four-year coupon bonds worth PLN 100 million covered by the PKO Para - solowy - FIO Investment Fund. The bearer bonds ma- ture on August 5, 2024. The interest rate is calculated based on the variable six-month WIBOR (Warsaw In- The Ordinary General Meeting of the Shareholders of Echo Investment was held on August 13, 2020. It was attended by shareholders entitled to over 86% of the votes. The shareholders unanimously approved the reports of the management board on the activities of Echo Investment S.A. and its Group for 2019, as well as separate and consolidated financial statements. The OGM also decided to allocate the profits for 2019 as follows: − the net profit generated by the company in the fi- nancial year 2019, amounting to PLN 21,412,312.65, was allocated for distribution among all share- holders; − the profit intended for distribution was increased by the sum of PLN 184,932,978.35 from the Div- idend Fund (PLN 206,345,291 in total) and was allocated for distribution among all shareholders; − the sum of PLN 206,345,291 was included in the dividend, paid on October 21, 2019 as a dividend advance; − the dividend corresponds to the amount of the dividend advance payment, therefore it was de- 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 Issuance Program will be oered 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 Krajowy Depozyt Papi- terbank Oered Rate) plus a margin and is to be paid in semi-annual periods. The bonds issued are not secured and are traded under the alternative trading system operated by the Warsaw Stock Exchange. cided that the company would not pay additional funds from the profit for the financial year 2019. In subsequent resolutions, the shareholders dis- charged all members of the management and super- visory boards from their duties, and made changes to the supervisory board, including those relevant to the resignation of Mark Abramson. The OGM recalled Stefan Kawalec from the supervisory board and ap- pointed Margaret Dezse and Sławomir Jędrzejczyk as independent members of the supervisory board. The OGM also introduced several changes to the company’s articles of association. These resulted from, among other reasons, new regulations or were of a reorganizational nature. The significant chang- es introduced include empowering the supervisory board to adopt annual budgets and business plans for the company and its subsidiaries. The sharehold- ers also adopted a remuneration policy for members of the management and supervisory boards. erów Wartościowych S.A. and it will be introduced to trading in an alternative trading system operated by Warsaw Stock Exchange (Giełda Papierów War- tościowych 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. . The issue of PLN 100 million of bonds for an institutional investor . The Ordinary General Meeting of Shareholders . Establishment of a bond issuance program for the issuance denominated in EUR and the first issuance 28 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Construction loan for oce buildings in Fuzja project in Łódź Echo Investment has gained a loan for the construc- tion of three oce buildings included in the multi- functional Fuzja project in Łódź. In accordance with the contract, Bank Pekao will grant Echo Investment nearly EUR 34 million in construction and investment loans, as well as PLN 10 million in VAT loan. The total funding period concludes on January 31, 2026. The loan agreement was signed on November 17th, 2020. The main tenant of the two oce buildings already in development is Fujitsu Poland Global Delivery Center – which is one of the world’s largest providers of infrastructure and IT support. The buildings will become a part of the entire urban space of Fuzja. A historical wall is designed to be a part of one of these buildings. The fragment was a part of the old build- ing of the bleach, mangle and dryer. The buildings have been designed in accordance with the BREEAM certification guidelines and will be constructed and used with respect for the environment, which will be reflected, inter alia, in low energy consumption, low atmospheric emissions, as well as the use of envi- ronmentally friendly building and finishing materials. Bank Pekao has been a partner of Echo Investment for many years. It financed the company’s developer projects, including the construction of the Villa Oc- es and the Malthouse Oces in the Warsaw Brewery complex. Construction works on Fuzja oce buildings in Łódź, where Fujitsu will locate its headquarter. 29 Management Board Report on operations of Echo Investment S.A. and its Group in 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 Oce of Compe- tition 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 re- main 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 Ar- chicom 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 Pol- ish nationwide leader in the residential sector. Archicom has been operating mainly on the Lower Silesian market and has been listed on the Stock Ex- change since 2016. The company has grown out of a family-owned architectual design oce and has 160 completed projects to its credit, including the revital- ized 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 residen- tial market. 30 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Sale of Villa Oces building Echo Investment Group has concluded final sale agreement of Villa Oces 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 con- cluded a building quality guarantee agreement and a rental guarantee agreement. The second one pro- vides 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 Oces 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 Oces 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. Villa Oces in the Warsaw Brewery Complex in Warsaw. 31 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . 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). 32 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Residential segment – market outlook and Echo Investment business activities . Residential market In Poland’s six largest metropolitan areas (Warsaw, Kraków, Wrocław, the Tri-City, Poznań and Łódź) sales of new apartments in 2020 exceeded 53,000. This represents a 19% drop compared to 2019, but JLL analysts stress that in the era of the pandemic, this is an exceptionally good result, especially con- sidering the second, much more dangerous wave of the pandemic and the recession in the economy. The new supply in 2020 was 4,400 less than the number of apartments sold. Developers marketed 24% fewer apartments throughout the year than in 2019. This left 48 thousand new apartments on of- fer in the primary market at the end of December Compared to other sectors of the economy, the residental segment is getting through the dicult situation perfectly. The good condition of the real es- tate development at the beginning of 2020 allowed development companies to make rational decisions and quickly adapt their operating mechanisms to the new conditions. last year. Compared to the end of 2019, none of the analysed markets recorded a decrease in prices of apartments remaining on oer. On an annual basis, prices increased the least in Poznań (3%) and the most in Kraków (12%). 2018 64,8 65,7 50,7 72,8 2017 67,5 48,3 2019 65,4 64 50,3 2020 53 48,5 48 – Apartments sold – Apartments launched for sale – Apartments on oer Source: JLL 10 15 20 5 25 30 35 40 45 55 65 50 60 70 75 APARTMENTS SOLD, LAUNCHED FOR SALE AND OFFER VOLUME THOUS. Perspectives of each market sectors in comming 12 months: – Very optimistic – Optimistic – Neutral – Pesimistic – Very pesimistic 33 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 – Warsaw – Wrocław – Poznań – Kraków – Try-City – Łódź Source: JLL AVERAGE PRICES OF APARTMENTS ON OFFER ON THE PRIMARY MARKET PLN/SQM, INCLUDING VAT, IN DEVELOPER’S STANDARD 4 000 5 000 6 000 7 000 8 000 9 000 10 000 11 000 Price [PLN] 2016 1Q 2Q 3Q 4Q 2017 1Q 2Q 3Q 4Q 2018 1Q 2Q 3Q 4Q 2019 1Q 2Q 3Q 4Q 2020 1Q 2Q 3Q 4Q At the end of 2020, the oer of developers in the analyzed cities was approximately equal to the an- nual sales. The exception was Warsaw, where due to a clear slowdown in new supply, the oer amounted to less than nine months’ sales. According to JLL experts, there are many indications that in 2021 demand will remain at a level similar to, or slightly higher than, last year. Importantly, this will not require price reductions, as demand continues to be strongly influenced by Poles’ desire to improve their housing conditions (especially in the context of fears of further lockdowns), near-zero interest rates and high inflation, that result in money from deposits in banks being transferred to the real estate market. The important sign of the good prospects for the residential market in Poland is the growing number of professional entities which intend to build port- folios of apartments for rent. Their interest confirms the opinion about the Polish residential market as a stable and safe place for investing capital. In Poland in 2020, we recorded transactions worth approxi- mately EUR 260 million, which were connected both in the segment of apartments for rent and student depots. JLL highlights that at the end of the year, transactions of significant value were in advanced negotiations and should be finalized in the first months of 2021. Its analysts estimated that at the end of last year the number of apartments in the institutional rental sector was around 4,500, with another 17,000 under construction or in preparation. 34 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 .. Echo Investment’s performance in the residential sector In 2020 Echo Investment hit records both in sales and handovers of apartments. It managed to sign 1,570 sales contracts with clients, what outperformed last year’s results by 16%. At the same time, clients received their keys to 1,505 apartments, what in turn means a 19% increase compared to 2019. The sales only in Q4 2020 amounted to 464 units, while hand- overs – 792. RESIDENTIAL PROJECTS OF ECHO INVESTMENT, CONSTRUCTION OF WHICH BEGAN IN 2020 Project and address Usable area Number of apartments Targeted completion Osiedle Krk I Kraków, ul. Zapolskiej 9 800 218 IV Q 2021 Osiedle Krk II Kraków, ul. Zapolskiej 9 800 218 II Q 2022 Bonarka Living I Kraków, ul. Puszkarska 8 000 143 IV Q 2021 Osiedle Jarzębinowe VIII Łódź, ul. Okopowa 6 100 101 IV Q 2021 Fuzja II Łódź, ul. Tymienieckiego 12 400 240 II Q 2022 Osiedle Enter Ia Poznań, ul. Naramowice 6 400 118 IV Q 2021 Stacja Wola II Warsaw, ul. Ordona 13 700 249 II Q 2022 Total 66 200 1 287 RESIDENTIAL PROJECTS OF ECHO INVESTMENT, WHICH CONSTRUCTION WAS COMPLETED IN 2020 Project and address Usable area Number of apartments Completion Fuzja I Łódź, ul. Tymienieckiego 14 300 282 IV Q 2020 Osiedle Jarzębinowe VI Łódź, ul. Okopowa 3 300 52 IQ 2020 Osiedle Jarzębinowe VII Łódź, ul. Okopowa 6 100 105 IV Q 2020 Malthouse Apartments (Warsaw Brewery E) ul. Grzybowska 5 700 81 IV Q 2020 Stacja 3.0 Wrocław, ul. Mińska 12 100 242 IV Q 2020 Osiedle Reset II Warsaw, ul. Taśmowa 12 200 255 III Q 2020 Apartamenty Esencja ul. Grabary 12 400 260 IV Q 2020 Widoki Mokotów Warsaw, ul. Puławska 4 800 79 II Q 2020 Moje Miejsce Warsaw, ul. Beethovena 13 300 251 II Q 2020 Osiedle Jaśminowe IV Poznań, ul. Sielawy 5 300 103 IQ 2020 Ogrody Graua Wrocław, ul. Gdańska 4 000 57 II Q 2020 Total 73 900 1 767 35 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The pandemic has had a transformative eect on social habits and the ways space is used, which in turn has influenced the design and construction of apartments. After several weeks of analysing the behaviour and needs of those living in cities, Echo Investment’s designers adapted its residential pro- jects under construction to these new conditions and to buyers’ changed expectations. These in - clude features to increase security levels, such as a resident identification system that automatically opens the door for them and summons an elevator to take them to their floor – without the need to touch buttons in the common areas. In the design and ar- rangement of the apartments, Echo Investment’s architects also provided greater options for easily adapting the space for home oce requirements. For the last 25 years Echo Investment has built 89 residential projects with almost 10 thousand units and in 2020, as one of the few development com- panies in Poland, it increased the number of apart- ments sold. Its first project was made in Kielce at Manifestu Lipcowego Street, and the most recog- nizable projects include Małe Naramowice Rynek in Poznań, Kościuszki Apartments in Cracow, Malthouse Apartments in the multifunctional Warsaw Brewery complex and Fuzja, that is part of the revitalized complex following former Scheibler’s plants in Łódź. On February 18, 2020 Echo Investment signed a preliminary purchase agreement of a 66% shares of the Wrocław-based Archicom company from its founders. Once the transaction is finalized, the Echo-Archicom group will be the largest residential developer in Poland – only in 2021 it will start the construction of 7,000 apartments for sale and rent. The acquisition is in line with Echo Investment’s stra- tegic goal of becoming a nationwide leader in the residential sector. At the end of 2020 in Wrocław and Kraków Archicom has c.a. 2,000 apartments under construction and 4,200 in preparation. The design oce which Ar- chicom originates from and the remaining assets in other cities are not the subject of the acquisition. Archicom has been operating mainly on the Lower Silesian market since 1986, and since 2016 it has been listed on the Warsaw Stock Exchange. It grew out of a family design oce with 160 completed invest- ments, including the revitalized Browary Wrocławsk- ie complex, the multi-award-winning Olimpia Port estate, as well as the first exclusive Platinum Lofts in Wrocław. Archicom is a strong, recognizable brand with almost a 15% share in the Wrocław residential market. Both companies will operate under a com- mon strategy and in one capital group. The combi- nation of the forces of both companies strengthens the group’s position of the strongest developer with the greatest potential in Wrocław. SALES AND HANDOVERS OF APARTMENTS IN ECHO INVESTMENT UNITS – Sales – Handovers 2018 986 935 2019 1 357 1 263 2020 1 570 1 505 36 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Resi4Rent Warszawa Browary – the rst Resi4Rent project opened in Warsaw . Echo Investment’s Group achievements on the market of apartments for rent and its outlook Resi4Rent’s 2020 oering has expanded by nearly a thousand apartments. The company took delivery of three newly built projects from Echo Investment - R4R Wrocław Kępa Mieszczańska, R4R Warszawa Browary and R4R Warszawa Woronicza. Paradoxi- cally, the pandemic situation has supported the rent- al rate of Resi4Rent apartments. Some people plan- ning to buy an apartment postponed transactions and - until their professional situation is stabilized - decided to rent an apartment from an institution. Resi4Rent is the biggest private company oering subscription-based apartments for rent, owned 30% by Echo Investment. The remaining 70% of its shares belong to a global fund. Echo Investment is also re- sponsible for the preparation and construction of Resi4Rent projects. Currently, Resi4Rent has over 1,800 apartments on oer in Wrocław, Łódź and Warsaw. In the first quar- ter of 2021, the platform expanded by another 372 apartments in the R4R Warszawa Taśmowa project, which just entered the lease oer. The company cur- rently has five projects under construction, in which about 1,200 units will be built. Ultimately, by 2025 it will oer 10,000 apartments in the six largest Polish cities - Warsaw, Kraków, Łódź, Wrocław, Gdańsk and Poznań. Each Resi4Rent apartment is finished, equipped with basic kitchen furniture, appliances, and additional furniture at request. In the rental price, tenants have can use a Wi-Fi network, a dedicated service desk and access to a panel that gathers all necessary in- formation on contract, operation of apartment and additional services for tenants. 37 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Oce segment – market outlook and Echo Investment business activities . Oce market in Poland Warsaw Due to the global pandemic, the year 2020 was char- acterized by unpredictability and challenges. Since March, employees of most companies have switched to remote working. In the following months, there was a noticeable trend of returning to oces - in var- ious models. In many cases, however, working from home has worked well, raising many questions about the future of work and the need for oce space. Last year, 314 thousand sqm of oce space in War- saw was provided within 16 projects. Their average leasing level at the moment of putting into operation was 86%. In quest of savings, a significant number of companies decided to sublease part of their oce space. However, a significant increase in the num- ber of such oers did not result in transactions - in the entire year only 15,4 thousand sqm of space was leased in this way, which is approximately 2.5% of the total demand. The vacancy rate in Warsaw increased by 2.2 pp to 9.9%. Although this puts pressure on rents, accord- Regional markets JLL’s analysts estimate that last year the demand for oce space in regional cities was only 16% lower compared to 2019. Nevertheless, the demand from the beginning of April to the end of December 2020 was as much as 35% lower compared to the same period in 2019. The vacancy rate increased by 3.2 pp through 2020. The total space of oce buildings un- der construction is now the lowest in about 5 years. A standout trend that has developed during the pandemic in Poland is a growing number of sub - lease oers. At the end of 2020, there was nearly 150 thousand sqm of such space outside of Warsaw, of which 30% was in Wrocław, 23% in Kraków and 20% in the Tri-City. Thanks to the variety of oers, ranging from less than 100 sqm to even 11 thousand sqm, both small companies and big corporations can take advantage of such oers. ing to CBRE, most landlords maintain transaction rents, but showing more flexibility and oering ad- ditional incentives. If developers keep up the pace of ongoing oce projects in Warsaw, the market will be expanded by nearly 8% in 2021. However, CBRE’s analysts expect a much smaller number and space of buildings to start construction this year, which will be a reasonable response to the increase in the vacancy rate, uncer- tainty connected with the pandemic and its impact on tenants’ decisions. On the other hand, it is noted that an increasing number of projects is temporar- ily taken out of use to be thoroughly modernized - mainly in Służewiec and the city center. A positive sign for the market is the gradual un- blocking of tenants’ decisions to extend their leases or relocate. Among such entities are international corporations, which consider moving their support functions here (nearsharing). The demand for oce space outside of Warsaw in 2020 reached 582.2 thousand sqm, of which 38% were renegotiations of contracts. As noted by JLL’s analysts, during the pandemic (Q2-Q4 2020), the share of contract renewals amounted to 49% - and these were renewals for shorter periods than in case of relocations. Interestingly, as much as 41% of the demand was generated by IT and technology sec- tors. Last year, 36 new buildings totalling 393.3 thousand sqm were delivered to the regional markets. The va- cancy rate in Poland’s eight largest cities is 12.7%, a 3.2 pp increase compared to the end of 2019. For this reason among others, JLL’s analysts note pressure on rents. Perspectives of each market sectors in comming 12 months: – Very optimistic – Optimistic – Neutral – Pesimistic – Very pesimistic 38 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 MAIN OFFICE MARKETS IN POLAND KEY INDICATORS IN 2020 City Existing space [sqm] New buildings [sqm] Vacancy [%] Gross demand [sqm] Monthly rental rates [EUR/sqm] Warsaw 5 912 500 314 000 9,9 602 000 18-24 EUR (CBD) Kraków 1 554 900 140 700 7,8 157 700 14-15,5 EUR Wrocław 1 226 300 58 500 15 128 400 13,5-15 EUR Katowice 589 700 61 300 9,2 65 000 13,6-14,5 EUR Łódź 578 500 50 800 16,4 62 400 12,5-14 EUR Source: JLL . Echo Investment’s performance in the oce sector Last year, Echo Investment’s oce department was focused on completing oce buildings under construction according to schedule and providing tenants for them. The company commissioned five buildings with a total area of over 125 thousand sqm. At the end of the year, their average occupancy lev- el exceeded 60%, and the current occupancy level and advanced negotiations bring this rate to approx. 85%. Last year the list of tenants in those buildings was extended by such reputable companies as Syn- ektik, SyzyGy Warsaw and Kan (Moje Miejsce, War- saw), Sii Polska (West 4 Business Hub, Wrocław) or ABB and Daikin (Face2Face, Katowice). Currently, all buildings are occupied by tenants such as Sii Polska or Pyszne.pl. In the first quarter of 2021, the company sold the building of Biura przy Willi, and is in advanced talks about selling other buildings. For more information on the sale of Villa Oces see 10.2 section on page 30. ECHO INVESTMENT OFFICE BUILDINGS STARTED TO BE CONSTRUCTED IN 2020 Project Usable area Planned completion Fuzja C iD Łódź, ul. Tymienieckiego 19 900 IQ 2022 ECHO INVESTMENT OFFICE BUILDINGS COMPLETED IN 2020 Project Usable area Completion Villa Oces (Brewery K) Warsaw, ul. Grzybowska 16 700 II Q 2020 Malthouse Oces (Brewery GH) Warsaw, ul. Grzybowska 29 000 III Q 2020 West 4 Business Hub I Wrocław, ul. Na Ostatnim Groszu 15 600 III Q 2020 Moje Miejsce II Warsaw, ul. Beethovena 17 200 IV Q 2020 Face2Face II Katowice, ul. Grundmanna 26 400 IV Q 2020 Total 125 400 39 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Haberbusch and Schiele street in the Warsaw Brewery. The pandemic caused Echo Investment to analyze the way of designing and used solutions which it provides to tenants as a standard. The result was to develop an equipment standard and the decision that oce buildings must have an extended package of solutions, adjusted to the new reality, which will guarantee users a higher level of safety - Echo Pure Oce. After a careful analysis of tenants’ needs, the developer focused on providing clean and healthy air. As part of the new Echo Pure Oce standard, ven- tilation ducts in oce spaces have been equipped with well-established RCI ActivePure technology, often used in hospitals. Echo Investment is the first developer in Poland and Europe to introduce this solution to oce projects on such a large scale. RCI ActivePure technology has already been installed in the West 4 Business Hub project in Wrocław, and it will next be installed in the React building in Łódź and the MidPoint71 building in Wrocław. By establishing cooperation with ActivTek, Echo In- vestment has invested in a system which allows to provide users the highest quality of indoor air both during and after the pandemic. It was focused on devices which are connected to ventilation systems in buildings, because it is through these channels that pathogenic microorganisms can be transmitted. Detail information on the loans made are described in 9.6 and 9.10 sections on pages 26 and 28. . Echo Investment’s performance in the flexible oces sector (CitySpace) CitySpace, a flexible oce space operator owned by Echo Investment, has had a good year. The company has continued its expansion and increased its man- aged space by 4.2 thousand sqm and 600 worksta- tions. This includes the expansion of the CitySpace Tryton oces in Gdańsk, CitySpace Beethovena in Warsaw, CitySpace Nobilis in Wrocław and CityS- pace O3 in Kraków. The pandemic has increased the attractiveness of flexible oces for tenants and potential tenants. The unpredictability about the situation makes compa- nies value greater flexibility and short-term lease commitments. As a result, in late 2020. CitySpace provided clients with an app to manage space and book space without a contract. 40 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Retail segment – market outlook and Echo Investment business activities . Retail real estate market in Poland The retail sector was hit the hardest during the pan- demic, mainly due to three lock-downs and contin- ually protracted restrictions. Despite this, in 2020, nearly 260,000 sqm of lease space in shopping centers was commissioned, which is a result similar to 2019. In 2021, the consulting company Colliers ex- pects another 200-250 thousand. sqm. In 2020, 21 new retail facilities were opened and the four existing ones were expanded. Thus, the total supply of space of shopping centers in Poland in- creased to 12.2 million sqm, most of which located in the Warsaw agglomeration (1.7 million sqm), Upper Silesia and Zagłębie area (1.2 million sqm). A slight increase in the vacancy rate in shopping centers was observed. According to Colliers, one of the most important trends in the urban development are multi-functional projects, such as Elektrownia Powiśle and Warsaw Brewery in Warsaw or Monopolis in Łódź. Other pro- jects of this type are under construction, including the Norblin Factory in Warsaw, Fuzja in Łódź or the Young City in Gdańsk. Last year was also marked by the dynamic devel- opment of e-commerce, which will also continue in 2021. Retail chains showed great flexibility, devel- oped new models of sales, multi-channel communi- cation. They also increased investments in new tech- nologies and the development of various forms of delivery. These activities resulted in the noticeable increase of online sales platforms - it is estimated that Poles’ spending on online purchases increased by 31.4% in 2020 and exceeded EUR 15.3 billion. Colliers experts believe that in the coming years, retail companies will more often decide to optimize the sales channels, focusing on warehouse space and developing e-commerce services. They indicate, however, that retail chains will continue to develop sales and omnichannel communication, with station- ary stores as an important channel. Despite the pandemic, about 15 retail chains decided to enter the Polish market last year, including Urban Outfitters, Ulla Popken or Primark. The brands de- buting last year in Warsaw also include those from the premium sector, ie. Patek Philipe, Giorgio Armani Beauty and Carl Hansen & Son (furniture industry). In 2020, new concepts were also introduced to the mar- ket by the chains that are already present in Poland, such as Falconeria (Calzedonia), Modivo (CCC) and Fitanu.com (Martes Sport). On the other hand, other chains such as Salamander, Promod, Camaieu and Sportisimo have announced their exit from Poland. Perspectives of each market sectors in comming 12 months: – Very optimistic – Optimistic – Neutral – Pesimistic – Very pesimistic 41 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Galeria Młociny, Warsaw . Echo Investment’s performance in the retail sector The most important event of 2020 for the entire re- tail market, as well as for Echo Investment, was the opening of the first Primark store in Poland in War- saw’s Galeria Młociny. This was one of the most ex- pected debuts on the Polish market, which has been attracting crowds of customers since mid-August. Bringing the brand to Poland is one of the greatest successes of Echo Investment’s leasing department. The Warsaw Primark store occupies nearly 3.7 thou- sand sqm of retail space on two floors of Galeria Mło- ciny, which is owned by Echo Investment in 30%. The remaining 70% is controlled by the EPP company. Shopping centers have been the most pandemic-hit real estate sector for the past year. The epidemio- logical restrictions limit operations of most tenants of shopping centers during the most critical periods. The most limiting restrictions, which caused 75-80% of tenants to close, were in eect from mid-March to early May, November 7 to 29, then December 28, 2020 to January 31, 2021. Due to growing number of infections, shopping centres are being closed down again in Poland. It has been a challenge for Echo Investment’s leasing and management departments to reach an agree- ment with tenants on principles for returning shop- ping centers to normal operation. Despite dicult negotiations and many controversies on the market, after the first lockdown Echo Investment focused on reaching an agreement with the tenants in Libero in Katowice and Galeria Młociny in Warsaw promptly and taking action as soon as possible to restore the operation of both projects to pre-pandemic levels. Importantly, in the first days of shopping centers’ operation, the recorded turnover was higher than expected based on the experience of other coun- tries. The conversion ratio, or the number of visitors to the number of transactions made, was also his- torically high. This demonstrated the responsibility of customers who come to stores to make specific purchases. Managers of both shopping centres and their tenants are aware of the unpredictability of the situation. 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. It is worth noting that some categories of tenants have grown stronger over the last year, including food chains and interior design stores In both projects marketing activities to strengthen brand awareness are implementing. Marketing ac- tivities in the first stage (until about the middle of 42 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Opening of the rst Primark store in Poland in Warsaw’s Galeria Młociny was one of the most important events for the retail market in 2020. the year) will focus only on increasing the turnover value, while only in the later stage they will focus on activities that support the footfall. The commercialization of Warsaw Brewery was also completed in 2020. Thanks to the agreements signed, the flagship Warsaw project of Echo Invest- ment will be joined by, among others, the operator of the food court in the historic cellars, restaurants, confectioneries, cafés, bakeries or unique service outlets. The retail and service part of Warsaw Brew- ery is fully leased. Tenants have been finishing their premises and, with the support of Echo Investment, preparing to open their businesses. 43 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Our employees and diversity policy . Our people The driving force of Echo Investment are its employ- ees, their diverse experience, competences, received education, work methods and individual approach- es to performed tasks. The stability of the team, systematic improvement of competences, current updates of market know-how and good employ- ment conditions limit the risks which the company is exposed to. The Management Board is aware of the importance of diversity in the selection of em- ployees, including those holding key management positions. In its personnel decisions the Management Board strives to take into account the elements of diversity including: professional experience, function competences, leadership competences, as well as dierence of opinion, background, gender, qualifi- cations or age. As at 31 December 2020 Echo Investment employed 455 people on regular employment contracts. Num- ber of our employees increased by 2% compared to 31 December 2019. The average seniority currently amounts to ca. 7 years. In 2020, we employed 49 people, and 36 people finished working in the Group. Since we have a lot of employees with diverse expe- rience and aspirations, we always start searching for people for new positions internally. Consequently as many as 36 of our employees were promoted and received greater responsibility in 2020. Echo Investment enjoys the long average seniority, a balance between the number of long-term, expe- rienced employees and the number of short-term employees, as well as the diversity of related qual- ifications, the gender balance and the top level of qualifications. The group employs eight people with disability certificates. As part of soft skills development, at the beginning of 2020 we continued a series of trainings on com- munication and cooperation within and between teams. They were based, among others, on the In- sights Discovery model, which indicates the individ- ual style of each employee. We also introduced a training program for the sales department with two development paths. One dedi- cated to Managers and the other to Sales Represent- atives. The program of interactive workshops was created on the basis of business needs and included practical exercises based on real situations and chal- lenges in working with the team and the client. In 2020 internal trainings online were also carried out. Our employees shared knowledge on such topics as changes in construction law, construction site safe- ty, and new systems and procedures. Additionally, we conducted a webinar and workshops on mental strength and resilience to equip managers with the tools to strengthen this resilience in their teams. As every year, we also participated in the Top Wom- an in Real Estate competition, thus promoting the achievements of women working for Echo Invest- ment on the real estate market. Echo’s HR strategy is flexible with business needs. We enabled employees across the organization to build career paths and develop competencies by promoting internal transfers and supporting relo - cation to new teams and projects in the residential segment, which is growing rapidly. In this way, we ensured the development of competencies that are needed in the organization: flexibility, openness to change, a broad business perspective, as well as broadening of experience and deepening of neces- sary specialist competencies. Since March 2020, we have been working hard to keep our employees safe and support them while ensuring maximum eciency and business conti- nuity. Throughout the pandemic, we have provided hygiene products at all our locations, adopted our work organization to the need of distance, and made changes to our oce space. We have continuously conducted the information and education campaign for employees, promoted safe behaviours, conduct- ed trainings for managers and provided extensive support in dealing with the infection, contacts with public institutions, introduced regulations and re- strictions, quarantine and isolation rules. As part of our support for employees and to ensure the highest safety standards, since the beginning of the pan- demic we have provided and organized testing for all employees who have had contact with people infected with SARS-COV-2 , regardless of their po- sition in the organization, and during the fall we also provided regular weekly screening tests for teams attending to external clients. 36 e number of employees promoted in 2020 49 e number of people newly employed in2020 EMPLOYEES OF ECHO INVESTMENT GROUP SPLIT BY GENDER 50% 50 % 44 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Diversity policy We operate on one of the most demanding job mar- kets in Poland, which is why we manage the organ- ization focusing on using diversity, openness and including our employees in building the value of the company. Our employees constantly share their skills and knowledge in order to achieve the best results, no matter what they do and where they do it. We build a culture of cooperation because it gives us strength and allows us to achieve success. We de- velop an open, inviting work culture, respecting the contribution of all employees. We believe that in our organization everyone shares their unique way of looking at the world, their talents and experience, their own approach and passion. Conducting complex projects throughout Poland requires a team with diverse experience, knowledge and skills. That is why we hire people from dierent backgrounds, regardless of their race, gender, age, social status, religion, sexual orientation, political views, disabilities or marital status. We care about increasing the participation of women in positions aecting the direction of our organization’s devel- opment. Our employees include people of several nationalities, also in senior positions. We strive for greater diversity and openness of the organization but we make the final decisions about employing a given person based on their skills because our priority is to hire and retain the best. The rules for appointing the Company’s governing bodies are reg- ulated by the Statute and the Code of Commercial Companies. At the very beginning of the pandemic, the crisis management team was set up with the participation of CEO and the security procedure was prepared. The key business divisions prepared the business continuity plan, where risks were minimized through the preparation of crisis communication, ensuring employee replacement and developing local pro- cedures of operation. 7 years e average seniority in the Echo Investment Group 455 e number of people employed by Echo Investment as at 31 December 2020 on regular employment contracts – years or younger – 30-50 years – 50 years or older EMPLOYEES OF ECHO INVESTMENT GROUP SPLIT BY AGE 69% 17% 14% 45 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Remuneration policy Echo Investment builds its remuneration pol - icy based on the principles of the Code of Conduct: − § 1.1 All companies from the Echo Invest- ment group are responsible for develop- ing and operating economically justified and socially responsible business. − § 2.2 Echo Investment makes every eort in order to ensure that the conditions of employment are fair and meet all the re- quirements of the national law and rele- vant conventions of the International La- bour Organisation. − § 2.6 We do not allow any cases of dis- crimination. We provide everyone with equal rights and opportunities regardless of race, colour, gender, nationality, reli- gion, ethnicity or other characteristics. . Report on remuneration policy SALARIES OF EMPLOYEES In view of the current global situation related to COVID-19 in 2020, the Company took a rational ap- proach to salary and benefits, taking care to ensure business continuity and to retain sta at a level that ensures eective operations in the market. The Com- pany did not benefit from anti-crisis shield solutions for working hours or remuneration and did not re- duce salaries of employees. The remuneration system of Echo Investment is based on transparent principles. The salary of each employee results from their role in the organiza- tion and assessment of their individual results. Each employee is informed about their assessment and comparing their remuneration to market standards (so-called compa ratio). This ensures transparency of the assessment criteria which are the basis for the remuneration system in a diversified organisation. 46 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 DETERMINING THE AMOUNT OF REMUNERATION Assumed role within the organization and its evalua- tion is the basis for fair remuneration in the company. Positions with greater responsibility are remunerat- ed better. Salaries are determined individually for each employee within fixed salary brackets. Salary brackets are specified in the remuneration scale (80- 120% of the median salary on the market). Salaries of employees vary depending on the responsibilities of the positions they hold, performance at work and competences used at work, but they do not depend on gender, age, nationality or seniority of a person employed. In addition to the remuneration policy, the ‘Remuneration Regulations of Echo Investment Employees’ of 16 January 2013, as amended, ‘Bo- nus Rules at the Echo Investment Capital Group for Employees of Support Departments’ of 26 May 2011 and ‘Bonus System of Development Departments in the Echo Investment Capital Group’ of 1 June 2017 are the main documents regulating the remuneration policy in Echo Investment. Remuneration in Echo Investment consists of a fixed part and a bonus. The purpose of the bonus part is to promote eciency of the company. Each employ- ee, including a support functions, has a chance to receive a bonus. In 2020, bonuses directly related to sales were paid unchanged, while other bonuses and awards were tied to the organization’s overall annual performance. In 2020, we operated according to previously devel- oped standards: we kept updated our professional position’s matrix and current valuation of new and changed positions, as well as its cohesion with mar- ket standards in real estate industry. We build em- ployee development paths in the context of current business needs, enabling employees to develop in new roles and increase responsibility through inno- vative actions in response to changing market condi- tions. Such a solution ensures high motivation, talent retention and long-term growth of the organization. Additionally, we focused on providing key benefits during the pandemic, i.e. extensive support within medical packages and the COVID-19 prevention. The actions taken in 2020 demonstrate the Man- agement Board’s high commitment to ensuring a cost-eective and motivating remuneration policy in the Company, which is particularly important during the current situation . In 2021, we intend to continue to work on supporting employee development and building an optimal work environment through fo- cusing on innovative use of acquired skills at work, a commitment to developing leadership skills of man- agers, and building modern and eective goal-set- ting and management tools through ongoing feed- back. Assumptions of Echo Investment’s remuneration policy: − striving to provide competitive i.e. similar rates of remuneration for employees of Echo Investment compared to oers in other companies, − striving to provide a competitive level of costs, − related to the remuneration budget at Echo In- vestment compared to other companies, − rewarding employees of Echo Investment in a way that takes into account the value of the position held (measured by the valuation result), its sig- nificance and impact, skills and competences of the employee, − work results. REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD Members of the Management Board re- ceive remuneration and bonuses in ac- cordance with the remuneration model described in the ‘Work Rules of the Man- agement Board’ adopted by the Super- visory Board in a resolution of 21 March 2013. The bonus system is based on an agreement in accordance with the MBO methodology (Management by Objec- tives) and it is related to the company’s results. Each Member of the Management Board may receive an annual bonus ex- pressed in a multiple of monthly basic salary, depending on the key business objectives which he/she has an influence on in the scope of their responsibility. At 47 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 the same time, all Members of the Man- agement Board have common goals, the execution of which below the expected level will result in a reduction of the bo- nus. The amount of remuneration and bo- nuses 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 spe- cific 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 opera - tions - in particular, to maintain uninter- rupted work on construction sites and in residential sales oces - 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 financial risks associated with the uncer- tain market situation, including decisions to partially defer the payment of bonuses for 2019 and to temporarily reduce the remuneration of executives. In 2020 and as at the date of publication of the report, there were no agreements concluded between the Company and executives, providing for compensation 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. 48 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 How we manage risk Significant risk factors and threats to the operations of Echo Investment S.A. and its Group Significant risk factors and threats to the operations of Echo In- vestment S.A. and its Group Risk management is an integral part of operating the Strategy of Profitable Growth and it ensures achievement of the assumed strategic goals of the Echo Invest - ment group. The risk management procedures applied include the identification of risks, their assessment, management and monitoring. The management of Echo Investment S.A, in coop- eration with the Supervisory Board and the Audit Committee, is responsible for the overall risk management. The Management Board, in cooperation with the Internal Audit Department, over- sees risk management by creating, implementing and analyzing control systems, employees responsible for internal audit as well as directors and managers of individual departments. STRATEGIC AND BUSINESS RISKS RISK Method of risk management and competitive advantages of Echo Investment Risks related to strategic goals and assump- tions • Risk of not achieving strategic goals; • Change of strategic assumptions and goals; • Non-uniform, unrealistic assumptions and strategic goals. • Experienced management focused on achieving goals. Incentive systems based on cascading of strategic goals to operational goals; • Periodical verification of key strategic goals for validity and their ongoing monitoring through developed procedures at project, portfolio and Group levels; • Monitoring of the markets in which the company operates based on industry reports and its own research and analysis, in particular covering the average level of apartment sales prices and rental rates and transaction prices on commercial markets. Risk related to land bank • Strong competition; • High price expectations; • Limited supply of well-prepared real estate. • Own land purchase department; • Close cooperation with renowned brokers and agents; • A significant financial potential enabling acquisition of large, multifunctional plots, which attract less competition; • Maintaining a land bank that ensures operations for app. 3-5 years. 49 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 STRATEGIC AND BUSINESS RISKS RISK Method of risk management and competitive advantages of Echo Investment Risk of not achieving assumed level of residen- tial sales • Strong competition on local markets; • The oer of apartments not matched to demand. • Constant, thorough analysis of local residential markets from the stage before the purchase of a given plot until the end of the sale process; • Constant analysis of the latest trends in the housing market based on industry reports and own analyses of customer preferences; • Ability to flexibly respond to changing customer preferences even during construction (own design department); • Conducting sales of apartments based on own sales teams; • Project implementation in stages; • Many years of experience from several local residential markets. Risk of not securing assumed level of oce and retail space lease • Strong competition on local retail markets; • Limited expansion of retailers; • Limited demand for oce space from potential tenants; • A poorly structured oce or retail oer; • Increasing tenant expectations in respect to fit-out standard and incentives. • Constant analysis of market trends and quick response to changes; • Constant cooperation and maintaining contacts with retail and oce tenants or potential tenants (including in particular retail chains or the BPO/SSC sector); • Many years of experience in the implementation and rental of commercial projects on several local markets in Poland; • Own large leasing teams; • Cooperation with all significant brokers and rental agents; • CitySpace company in the Group which provides serviced oces and is a tenant in some buildings completed by Echo Investment, and introduces smaller companies, start-ups or companies from the shared services sector that are just starting their operations in Poland to the buildings; • Furthermore, the serviced oces allow the Company to be more flexible when providing the tenant with the target oce space (the option of temporary placement of the tenant in CitySpace oces). Risks related to sales of oce and retail projects • Strong competition on the market of finished & operating commercial projects; • High requirements of potential investors regarding the product and the seller; • Limited demand for commercial properties. • Own sales team (consisting of industry, legal, tax and financial specialists); • Extensive market experience; • Extensive contacts on global real estate markets; • High quality projects that meet all the criteria required by international institutions investing in real estate assets; • Flexible and innovative approach to contracts with potential buyers; • Good reputation of the company, allowing for the early introduction of projects into the sales phase and securing sales through preliminary agreements, contracts for the right to submit the first oer (‘right of first oer’, ROFO), or provisions of cooperation agreements for joint venture projects; • Financial resources making it possible to maintain rented and revenue-generating assets on the balance sheet of the Echo Investment group in dicult market conditions. 50 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 STRATEGIC AND BUSINESS RISKS RISK Method of risk management and competitive advantages of Echo Investment Risks related to cooperation with contractors and subcontractors • Risk of the contractor’s bankruptcy; • Risk of delays in the work; • Risk of improper quality of the work provided; • Risk of increased prices of materials and workmanship; • Risk of claims and legal disputes with subcontractors. • Stable financial situation that makes Echo Investment an attractive and desirable client on the market; • Cooperation with a selected group of renowned contractors subcontractors and suppliers; • Examination of the financial condition and technical capabilities of the contractor or supplier before the final selection of the oer and signing of the contract; • Legal protection applied in concluded contracts for contractor services; • Permanent supervision over construction projects by project managers and directors of Echo Investment construction as well as inspectors or specialist external companies; • Echo Investment’s many years of experience and low employee turnover (average seniority of c.a. 7 years); • Own team responsible for cost estimates and constant monitoring of prices and supply of materials and services on the market; • Packaging of orders making it possible to reduce oer prices using the so-called eect of the scale. Risk of changes in estimates regarding devel- opment projects • The scale and long time horizon of develop- ment projects and the related volatility of material prices and workmanship; • The cyclical nature of the real estate market and macroeconomic conditions aecting both the revenue and cost side of budget assump- tions; • Limited project repeatability. • Internal teams of specialists for all key stages of the development process, enabling the achievement of an internal synergy eect; • Own department responsible for estimating development costs and monitoring the situation on the construction market on an ongoing basis; • Regular process of reviewing project budgets including risk analysis; • Designing based on functioning precise implementation standards for apartments and oces, allowing maximization of economies of scale and limiting the risks associated with low repeatability of implemented projects; • Mass orders, combined for several investments to ensure access to materials and equipment used massively on multiple investments; • Concluding flat-rate contracts with a fixed price guarantee. Risk of accidents at work and other hazards • Threats to the safety of Echo employees, sub- contractors’ employees and bystanders; • Insucient level of knowledge and compe- tence of subcontractors in the field of HSE. • Own team of specialists in the field of HSE, carrying out, among oth- ers periodic inspections, audits and trainings in the field of HSE; • Applying high HS standards in accordance with ISO 45001 (H&S) and ISO 14001 (environment) confirmed by periodic external audits; • Obligation of contractors to comply with the provisions and stand- ards of Echo in the field of HSE. 51 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 FINANCIAL RISKS RISK Method of risk management and competitive advantages of Echo Investment The risk of changes in interest rates • Use of hedging instruments (fixed rates, for some loans – IRS) for selected liabilities. Currency risk • Natural hedging – contracting loans to finance projects in EUR, which is also the main currency for rental and sale of retail real estate in Poland, financing of housing and construction activities in Polish zlotys, which are the main currency of concluded construction contracts and sale of apartments; • Establishing a EUR-denominated bond issue program in order to better adjust the currency structure of liabilities to the currency structure of assets and to carry out the first issues; • Selective use of derivatives (forward, currency options). The risk of loss of liquidity by the Company or its Group • Lack of access to external financing; • Disturbance of balance between receivables and liabilities. • Constant monitoring of forecast and actual short- and long-term cash flows; • Keeping cash in order to ensure proper liquidity management; • Keeping free credit limits on current accounts; • Fixed income from the sale of apartments; • Financing the implementation of projects with special-purpose credits; • Implementation of the most capital-intensive projects in partnership or cooperation with companies outside Echo Investment group; • Constant monitoring of receivables and liabilities; • Diversification of business into residential, oce and retail segments that might go through dierent phases of the business cycle at dierent times; • Conducting liquidity stress tests based on various market change scenarios. LEGAL AND REGULATORY RISKS RISK Method of risk management and competitive advantages of Echo Investment The risk related to administrative procedures • The risk of legal changes; • Risk related to interpretations of local and country-level regulations; • Risk of delays of authorities and prolonged administrative process; • Risk of delays in administrative processes due to poor project preparation; • Risk of delays in administrative processes due to the participation of third parties. • Constant monitoring of legal changes in planning and administrative procedures; • Experience in obtaining permits from major cities in Poland; • Hiring experienced specialists in the field of planning and administrative procedures; • Detailed legal and administrative analysis before purchasing the plot; • Precise project preparation in cooperation with experienced external architectural and urban planning studios; • Conducting informational and promotional activities regarding planned projects in order to obtain public acceptance; • Running many projects at the same time spreading the risk. 52 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 LEGAL AND REGULATORY RISKS The risk of introduction of new legal regulations or changes to current regulations • Risk of not complying with new regulations in a timely manner; • Change in interpretation of current regulations; • Public nature of the Company and the associated increased legal restrictions; • Increased expenditure related to legal compliance. • Constant monitoring of legislative work regarding the real estate: construction and related industries aecting the Group’s operations; • Continuous analysis of the potential impact of new solutions on the company’s operations at the level of the Management Board; • Participation in a social dialogue on ongoing legislative work through advisory, business and industry organizations; • Support of external law firms when specialized knowledge is needed; • Employment of capital markets specialist within the legal team; • Periodic legal compliance assessment audits; • Monitoring of legal solutions applied in developed countries (primarily the European Union and the USA). Complicated and variable tax system • Risk of not complying with new tax regulations & changes in tax regulations; • Not consistent interpretative practice of tax authorities and case-law; • Increased tax burden and cost of ensuring tax compliance. • Internal tax control – own tax team; • Constant monitoring of the tax conditions of the Capital Group’s operations; • Constant cooperation with renowned legal and tax advisors. MACROECONOMIC RISKS RISK Method of risk management and competitive advantages of Echo Investment The risk of adverse changes in the real estate market • Cyclical nature of the real estate market; • Risk of withholding external financing. • Early leasing of the commercial projects and its fast sale after com- pletion; • A financial potential that makes it possible to keep completed retail properties on your own balance sheet if they cannot be sold; • Sales of around 80% of flats in a given project at the construction stage, which provides information about the demand on the market early and allows us to respond appropriately to less advanced pro- jects (accelerate, delay, change the size and quality of apartments); • Constant maintenance of a high level of cash and available credit limits; • Implementation of residential projects from payments made by clients, without external financing; • Adjusting the pace and schedule of project implementation to mar- ket conditions; • Projects are carried out in stages. The risk of adverse changes in business climate indicators • Poorer economic growth; • Increase of unemployment; • Decrease of consumption; • Increase of inflation. • Designing projects tailored to financial capabilities and the demand on local markets; • Flexible response to changes in demand by e.g. changing the size or quality of apartments under construction, delay or slowdown of the construction pace; • Constant analysis of the behaviour and needs of consumers and clients. 53 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 RISKS ASSOCIATED WITH THE DEVELOPMENT OF THE SARSCOV2 CORONAVIRUS EPIDEMIC RISK Method of risk management and competitive advantages of Echo Investment Risk of limitations of conducting business activities of the Group due to taking extra precautions • Establishing the emergency management team, in line with the previously implemented crisis management procedure; • Strengthening IT systems and constant analysis on systems eectiveness allowing for re-mote business operation; • Speeding up planned processes of changing traditional documentation workflow to electronic workflow; • Implementation of a system of remote meetings with clients and contractors, as well as internal meetings; • Daily monitoring of the progress of work at construction sites, analyzing risks and ways to prevent or reduce them; • Constant analysis of the probable development of the situation and possibilities of securing against expected risks; • Extraordinary precautions taken to support the safety of employees and subcontractors’ employees. Risk of economic downturn due to the epidemic • Risk of delays at construction sites due to limitations in the operations of construction companies or problems with the supply of materials; • Risk of deterioration of financing conditions of project or significant reduction of financing possibilities; • Risk of decrease in demand for apartments, among others, due to limitations in granting mortgage loans; • Risk of delays in investment decisions by funds buying finished oce buildings and shopping centres as well as decreases in achievable transaction prices; • Risk of reducing the profitability of projects. • Strengthened monitoring of the progress at all construction sites, increased scope of risk analysis and possibilities of preventing or reducing risks; • Diversification of supplies: ongoing cooperation with around 350 subcontractors and suppliers; • Constant maintaining high liquidity, e.g. due to high level of cash and current credit lines; • Possibility to respond flexibly to market conditions in terms of launching new projects or changing functions of buildings that may be developed on purchased plots of land; • Preparation to take advantage of the possible weaker economic conditions to seek opportunities in the land market or take over smaller companies; • Holding a significant land bank to maintain high development activity over the next 3-5 years; • Renegotiation of supply and construction costs as a consequence of a drop in procurement on the market; • Possibility of keeping finished oce buildings and shopping centres and possibility of profit from current rental income. IT RISKS RISK Method of risk management and competitive advantages of Echo Investment Cybersecurity • Risk related to unauthorized access to data from inside and outside the organization that may result in leakage of confidential data. • Functioning internal IT security standards; • Requirement of IT solution providers to meet ECHO security stand- ards; • A functioning security system that includes continuous monitoring and detection of threats to IT systems and infrastructure; • Conducting periodic internal information campaigns in the field of cybersecurity and cyclical testing in the field of IT infrastructure and application security. Systems stability • Risk for maintaining the stability of company networks and systems in the condition of the need for massive remote work. • Using reputable suppliers and contractors of software in the field of modern technologies; • Conducting regular network and system endurance tests, which was positively verified in 2020 during remote work of a large part of the team. 54 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 RISK RELATED TO M&A TRANSACTION RISK Method of risk management and competitive advantages of Echo Investment Risks related to the transaction • Legal; • Economic; • Pricing risk; • Tax; • Regulatory. • Conducting a detailed legal, financial, commercial, tax and technical due diligence process with the support of internal and external reputable field specialists; • Acquisition in line with a long-term strategic development plan; • Cooperation with reputable advisors and law firms; • Experience of the management sta in mergers and acquisitions; • The acquired entity operates in the industry from the core business of Echo Investment; • The acquired entity is listed on the Warsaw Stock Exchange, which improves its transparency and helps to determine the appropriate valuation. Risk related to business combination (long- term) • The risk of failure to achieve the appropriate eectiveness of the merger; • The risk of not achieving added value; • Risk of consolidation and financial reporting. • Appropriate strategy for selecting an acquisition target; • Experience of the management sta in mergers and acquisitions; • Correct integration is an element of the bonus system for key board members and senior management; • Development of plans to connect the businesses and mutual synergy of both organizations; • Cooperation with reputable consultants in the field of management and optimization. 55 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Portfolio of properties . Residential RESIDENTIAL PROJECTS UNDER CONSTRUCTION Project / address Sales area [sqm] Number of units Sales level [% of units] Targeted revenues [PLN mln] Targeted budget [PLN mln] Expenditure incurred [%] Start Targeted completion KRAKÓW Osiedle Krk I ul. Zapolskiej 9 800 218 70% 97,1 66,4 58% IQ 2020 IV Q 2021 Osiedle Krk II ul. Zapolskiej 9 800 218 52% 97,1 66,6 40% III Q 2020 II Q 2022 Bonarka Living I ul. Puszkarska 8 000 143 47% 68,4 48,3 38% III Q 2020 IV Q 2021 ŁÓDŹ Fuzja I ul. Tymienieckiego 14 300 282 73% 105,6 80,9 91% II Q 2019 IV Q 2020 Fuzja II ul. Tymienieckiego 12 400 240 11% 92,3 69,4 16% IV Q 2020 II Q 2022 Osiedle Jarzębinowe VII ul. Okopowa 6 100 105 98% 36,7 28,4 96% II Q 2019 IV Q 2020 Osiedle Jarzębinowe VIII ul. Okopowa 6 100 101 67% 39,3 29,0 40% II Q 2020 IV Q 2021 POZNAŃ Apartamenty Esencja ul. Grabary 12 400 260 91% 116,4 87,3 94% IQ 2019 IV Q 2020 Nasze Jeżyce I ul. Szczepanowskiego 7 500 142 91% 57,8 44,7 75% III Q 2019 II Q 2021 Nasze Jeżyce II ul. Szczepanowskiego 8 200 162 78% 64,2 48,9 54% III Q 2019 II Q 2021 Osiedle Enter Ia ul. Naramowice 6 400 118 77% 41,6 30,6 70% IQ 2020 IV Q 2021 WARSAW Malthouse Apartments (Warsaw Brewery E) ul. Grzybowska 5 700 81 80% 113,4 72,2 97% IV Q 2018 IV Q 2020 Stacja Wola I ul. Ordona 20 000 387 88% 204,3 141,6 61% IV Q 2019 III Q 2021 Denitions: Sales level – the item exclusively concerns pre- liminary contracts An estimated budget includes the value of land, cost of design, construction and external supervi- sion. It does not include the cost of supply main- tenance, interest costs or activated nancial costs, marketing and total personnel costs related to the project. e Company estimates additional costs to equal on average 6% of the targeted budget. 56 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 RESIDENTIAL PROJECTS UNDER PREPARATION Project / address Sales area [sqm] Number of units Targeted revenues [PLN mln] Targeted budget [PLN mln] Expenditure incurred [%] Targeted start Targeted completion KRAKÓW ZAM I ul. Rydlówka 6 300 115 62,0 44,5 30% IQ 2021 II Q 2022 Bonarka Living II c ul. Puszkarska 9 700 179 84,2 58,9 19% III Q 2021 IV Q 2022 Bonarka Living II d ul. Puszkarska 8 200 151 71,4 50,1 18% IV Q 2021 IQ 2023 ZAM II ul. Rydlówka 5 400 98 59,4 42,7 23% IQ 2022 II Q 2023 Kapelanka I ul. Kapelanka 14 600 262 146,7 108,0 22% III Q 2024 II Q 2026 Kapelanka II ul. Kapelanka 10 300 178 108,4 79,8 21% III Q 2025 IQ 2027 Kapelanka III ul. Kapelanka 7 900 146 84,0 63,5 20% II Q 2026 IV Q 2027 Kapelanka IV ul. Kapelanka 16 000 296 175,3 120,0 22% IV Q 2026 II Q 2028 Kapelanka V ul. Kapelanka 8 600 128 96,6 66,8 21% III Q 2027 Ikw 2029 ŁÓDŹ Wodna 17 ul. Wodna 12 700 234 84,3 62,6 12% II Q 2021 IQ 2023 Widzewska I ul. Widzewska 9 000 170 53,2 41,2 6% III Q 2021 IQ 2023 Fuzja III ul. Tymienieckiego 9 100 152 67,8 50,1 11% IQ 2022 IV Q 2023 Widzewska II ul. Widzewska 8 800 166 53,2 41,0 6% II Q 2022 IV Q 2023 Widzewska III ul. Widzewska 8 500 156 52,3 38,9 6% II Q 2023 III Q 2024 Widzewska IV ul. Widzewska 9 000 168 56,2 41,4 6% IV Q 2023 II Q 2025 Widzewska V ul. Widzewska 9 000 168 57,4 41,0 6% III Q 2024 IQ 2026 Widzewska VI ul. Widzewska 8 800 166 57,7 39,9 6% IQ 2025 IV Q 2026 RESIDENTIAL PROJECTS UNDER CONSTRUCTION Project / address Sales area [sqm] Number of units Sales level [% of units] Targeted revenues [PLN mln] Targeted budget [PLN mln] Expenditure incurred [%] Start Targeted completion Stacja Wola II ul. Ordona 13 700 249 44% 138,4 95,3 38% III Q 2020 II Q 2022 WROCŁAW Stacja 3.0 Wrocław, ul. Mińska 12 100 242 75% 89,3 68,9 93% III Q 2019 IV Q 2020 Total 152 500 2 948 1 361,9 978,5 57 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 RESIDENTIAL PROJECTS UNDER PREPARATION Project / address Sales area [sqm] Number of units Targeted revenues [PLN mln] Targeted budget [PLN mln] Expenditure incurred [%] Targeted start Targeted completion Widzewska VII ul. Widzewska 5 900 111 39,5 29,8 6% II Q 2022 IV Q 2023 Widzewska VIII ul. Widzewska 7 200 135 49,5 35,7 6% IQ 2023 III Q 2024 Widzewska IX ul. Widzewska 10 400 190 73,4 52,4 6% III Q 2023 II Q 2025 Widzewska X ul. Widzewska 10 400 190 75,3 52,4 6% III Q 2024 IQ 2026 Widzewska XI ul. Widzewska 7 200 135 53,3 35,4 6% II Q 2025 IQ 2027 Widzewska XII ul. Widzewska 8 600 162 65,4 42,4 6% IQ 2026 III Q 2027 Widzewska XIII ul. Widzewska 3 900 58 30,6 21,4 5% IV Q 2026 II Q 2028 POZNAŃ Osiedle Enter Ib ul. Naramowice 6 000 104 37,8 28,3 24% IQ 2021 IV Q 2021 Osiedle Enter II ul. Sielawy 9 400 153 60,6 43,2 15% IQ 2021 IV Q 2022 Osiedle Enter III ul. Sielawy 9 600 159 62,2 45,1 14% IQ 2021 IV Q 2022 Apartamenty Esencja II ul. Grabary 6 500 130 63,3 48,9 18% III Q 2021 III Q 2023 Opieńskiego I ul. Opieńskiego 12 600 205 90,0 70,3 9% III Q 2022 II Q 2024 Opieńskiego II ul. Opieńskiego 8 900 183 63,8 49,5 9% II Q 2023 IQ 2025 Opieńskiego III ul. Opieńskiego 8 100 167 58,4 44,9 9% IQ 2024 IV Q 2025 Opieńskiego IV ul. Opieńskiego 7 800 149 58,4 43,5 9% IQ 2025 III Q 2026 Opieńskiego V ul. Opieńskiego 5 700 106 43,5 31,7 9% IV Q 2025 III Q 2027 Opieńskiego VI ul. Opieńskiego 11 100 215 87,3 62,1 9% III Q 2026 II Q 2028 WARSAW Stacja Wola III ul. Ordona 14 900 270 147,8 102,9 27% III Q 2021 II Q 2023 Kabaty al. KEN 17 300 299 213,7 154,3 27% IV Q 2021 III Q 2023 Total 333 400 6 054 2 743,7 1 984,5 58 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Residential projects for rental platform Resi4Rent RESIDENTIAL PROJECTS OF RENTAL PLATFORM RESI4RENT IN OPERATION Project / address Residential area [sqm] Number of units Targeted annual rental revenues [PLN mln] Targeted budget [PLN mln] Completion R4R Wrocław Rychtalska Wrocław, ul. Zakładowa 11 400 302 8,4 76,8 III Q 2019 R4R Łódź Wodna Łódź, ul. Wodna 7 800 219 4,9 52,4 IV Q 2019 R4R Wrocław Kępa Mieszczańska Wrocław, ul. Dmowskiego 9 300 269 6,8 76,3 II Q 2020 R4R Warszawa Browary Warsaw, ul. Grzybowska 19 000 450 16,6 187,6 III Q 2020 R4R Warszawa Woronicza Warsaw, ul. Suwak 7 900 229 6,2 60,7 IV Q 2020 Total 55 400 1 469 42,9 453,8 RESIDENTIAL PROJECTS OF RENTAL PLATFORM RESI4RENT UNDER CONSTRUCTION Project / address Residential area [sqm] Number of units Targeted annual rental revenues [PLN mln] Targeted budget [PLN mln] Start Targeted completion R4R Warszawa Taśmowa Warsaw, ul. Taśmowa 13 000 372 11,1 112,1 IQ 2019 IQ 2021 R4R Poznań Szczepanowskiego Poznań, ul. Szczepanowskiego 5 000 160 3,8 42,2 III Q 2019 III Q 2021 R4R Gdańsk Kołobrzeska Gdańsk, ul. Kołobrzeska 10 200 301 8,8 88,7 III Q 2019 II Q 2021 R4R Warszawa Żwirki Warsaw, ul. Żwirki iWigury 5 200 161 5,0 52,3 III Q 2020 III Q 2022 R4R Kraków Puszkarska Kraków, ul. Puszkarska 5 000 149 3,5 36,4 III Q 2020 II Q 2022 Total 38 400 1 143 32,2 331,7 Denitions: An estimated budget of Resi4Rent projects includes the value of land, cost of design, construction and external supervision, devel- opment services and nancial costs. It does not include the cost of the platform operation, such as marketing. 59 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 RESIDENTIAL PROJECTS OF RENTAL PLATFORM RESI4RENT IN PREPARATION Project / address Residential area [sqm] Number of units Targeted annual rental revenues [PLN mln] Targeted budget [PLN mln] Targeted start Targeted completion R4R Warszawa Wilanowska Warsaw, al. Wilanowska 12 400 407 11,8 128,5 IQ 2021 IQ 2023 R4R Kraków 3-Maja Kraków, ul. 3- Maja 12 100 387 9,8 105,4 II Q 2021 III Q 2022 R4R Kraków Jana Pawła Kraków, al. Jana Pawła II 9 400 296 7,2 75,8 II Q 2021 IQ 2023 R4R Wrocław Jaworska Wrocław, ul. Jaworska 13 700 391 11,0 111,8 III Q 2021 III Q 2023 R4R Pohoskiego Warszawa Warsaw, ul. Pohoskiego 8 600 304 8,3 89,6 IV Q 2021 III Q 2023 R4R Nowomiejska, Gdańsk Gdańsk, ul. Nowomiejska 10 300 295 8,7 98,9 I Q 2022 I Q 2024 R4R Kilińskiego, Łódź Łódź, ul. Kilińskiego 10 000 291 7,2 77,8 I Q 2022 I Q 2024 R4R Na Ostatnim Groszu, Wrocław Wrocław, ul. Na Ostatnim Groszu 10 000 296 7,3 78,2 IV Q 2021 III Q 2023 Total 86 500 2 667 59,5 766,0 * Sale of land plots from Echo Investment to Resi4Rent is pending. 60 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Oce OFFICE BUILDING IN OPERATION Project / address GLA [sqm] Leasing [%] NOI [EUR mln] Targeted budget [PLN mln] Expend- iture incurred [%] Recognized fair value gain [PLN mln] Completion Comments Moje Miejsce I Warsaw, ul. Beethovena 19 000 91% 3,4 159,2 99% 35,0 II Q 2019 ROFO agreement with Globalworth Poland Moje Miejsce II Warsaw, ul. Beethovena 17 200 16% 3,1 145,7 78% 17,8 IV Q 2020 ROFO agreement with Globalworth Poland Face2Face I Katowice, ul. Grundmanna 20 500 91% 3,7 153,2 96% 56,1 IQ 2020 Face2Face II Katowice, ul. Grundmanna 26 400 92% 4,7 204,9 93% 61,1 IV Q 2020 West 4 Business Hub I Wrocław, ul. Na Ostatnim Groszu 15 600 45% 2,7 115,3 82% 29,7 III Q 2020 Malthouse Oces (Warsaw Brewery GH) Warsaw, ul. Grzybowska 29 000 63% 7,2 332,1 85% 278,6 III Q 2020 Villa Oces (Warsaw Brewery K) Warsaw, ul. Grzybowska 16 700 66% 4,1 177,8 88% 175,9 II Q 2020 Building sold in Q1 2021 Total 144 400 28,9 1 288,2 654,2 OFFICE BUILDINGS UNDER CONSTRUCTION Project / address GLA [sqm] Leasing [%] NOI [EUR mln] Targeted budget [PLN mln] Expenditure incurred [%] Recognized fair value gain [PLN mln] Start Targeted completion React I Łódź, ul. Piłsudskiego 15 100 23% 2,6 109,1 52% 18,8 II Q 2019 I Q 2022 Fuzja C iD Łódź, ul. Tymienieckiego 19 900 82% 3,5 148,9 18% 19,0 III Q 2020 IQ 2022 Midpoint71 Wrocław, ul. Powstańców Śląskich 36 200 23% 6,6 292,8 35% 82,3 IV Q 2019 IV Q 2021 Total 71 200 12,7 550,8 120,1 Denitions: GLA – gross leasable area NOI – net operating income with the assump- tion of full rental and the average market rent rates ROFO – (right of rst oer) Due to 25% of capital participation in the pro- ject, ROFO partner is entitled to 25% of prot after sale of project. Completion – date of commissioning permit. Signicant part of t-out works to be done after this date. An estimated budget includes the value of land, cost of design, construction and external supervision. It does not include the personnel costs related to the project, cost of marketing, leasing and nancing, which are estimated by the Company to equal on average 7% the targeted budget. In addition, it does not include costs reducing sales revenue (price), such as master lease, prot share and costs of projects sale. Fair value includes currency dierences on investment loans e recognised fair value gain is reduced by the prot share obligation and the provision to secure rent-free periods (master lease). 61 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 OFFICE BUILDINGS IN PREPARATION Project / address GLA [sqm] NOI [EUR mln] Targeted budget [PLN mln] Expenditure incurred [%] Targeted start Targeted completion Piotra Skargi Katowice, ul. P. Skargi / Sokolska 26 600 4,6 186,4 7% III Q 2022 II Q 2024 Brain Park I Kraków, ul. Fabryczna / Al. Pokoju 29 400 5,4 261,0 22% IQ 2021 III Q 2022 Brain Park II Kraków, ul. Fabryczna / Al. Pokoju 12 800 2,4 118,5 21% IV Q 2021 II Q 2023 Wita Stwosza I Kraków, ul. Wita Stwosza 23 900 4,2 210,6 18% IV Q 2021 III Q 2023 Wita Stwosza II Kraków, ul. Wita Stwosza 31 000 5,5 274,2 18% III Q 2022 IV Q 2024 React II Łódź, ul. Kilińskiego / al. Piłsudskiego 25 900 4,4 186,0 8% III Q 2022 IQ 2024 Fuzja I, J Łódź, ul. Tymienieckiego 10 200 1,7 81,2 8% IQ 2022 IV Q 2024 Swobodna Wrocław, ul. Swobodna 46 100 8,5 374,0 12% II Q 2022 III Q 2024 West 4 Business Hub II Wrocław, ul. Na Ostatnim Groszu 23 300 4,0 174,4 13% II Q 2021 IQ 2023 West 4 Business Hub III Wrocław, ul. Na Ostatnim Groszu 33 100 5,7 237,4 12% II Q 2022 II Q 2024 Kapelanka Kraków, ul. Kapelanka 21 300 3,6 167,8 17% III Q 2022 II Q 2024 Total 283 600 50,0 2 271,5 62 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Retail RETAIL PROJECTS IN OPERATION Project / address GLA [sqm] Leasing [%] NOI [EUR mln] Targeted budget [PLN mln] Expend- iture incurred [%] Recognized fair value gain [PLN mln] Completion Comments Libero Katowice, ul. Kościuszki 44 900 100% 9,3 390,4 100% 188,3 IV Q 2018 ROFO agreement with EPP Galeria Młociny Warsaw, ul. Zgrupowania AK „Kampinos” 84 300 97% 21,1 1 286,7 97% 16,2 II Q 2019 30% JV with EPP holding 70% Total 129 200 30,4 1 677,1 204,5 Denitions: GLA – gross leaseable area NOI – net operating income with the assump- tion of full rental and the average market rent rates ROFO – right of rst oer Due to 25% of capital participation in the pro- ject, ROFO partner is entitled to 25% of prot after sale of project. Completion – date of commissioning permit. Signicant part of t-out works to be done after this date. An estimated budget includes the value of land, cost of design, construction and external supervision. It does not include the personnel costs related to the project, cost of marketing, leasing and nancing, which are estimated by the Company to equal on average 7% the targeted budget. In addition, it does not include costs reducing sales revenue (price), such as master lease, prot share and costs of projects sale. Fair value includes currency dierences on investment loans e recognised fair value gain is reduced by the prot share obligation and the provision to secure rent-free periods (master lease). 63 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Land bank EARLY STAGE PROJECTS Project / address Plot area [sqm] Potential of leasing/ sales area [sqm] Comments Warsaw, ul. Towarowa 64 900 230 000 Plot for residential, service and oce functions. Project owned by Echo In- vesment in 30% and by EPP in 70%. Poznań, ul. Janickiego 32 900 78 500 Plot for residential function, acquired in Q1 2021 Warsaw, al. KEN 29 700 32 000 Plot for retail, services and entertainment functions Łódź, ul. Tymienieckiego 19 200 21 600 Plot for oce and services Poznań, ul. Hetmańska 65 300 80 000 Plot for residential and oce functions Total 212 000 442 100 INVESTMENT PROPERTIES Project / address Plot area [sqm] Comments Poznań, Naramowice 77 500 67,600 sqm sold in Q1 2021 Warsaw, ul. Antoniewska 14 100 Preliminary sale agreement Zabrze, Miarki 8 100 Warsaw, ul. Konstruktorska 7 200 Plot for educational function Radom, Beliny 6 300 Preliminary sale agreement Total 106 900 64 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Main investments in 2020 – acquisition of plots In 2020 Echo Investment group has acquired land properties for 275,000 sqm of residential and service space. The total value of this transactions amounted to PLN 217 million. In addition, plots for 100,000 sqm of residential space has been secured by preliminary agreements. In Q1 2021 the Group acquired invest- ment plot in Poznań on ul. Janickiego, where 78,500 sqm. of residential space can be built. 792 pln Average land price in 1 sqm of leasable or sellable space possible to build on plots acquired in2020. PROPERTIES ACQUIRED BY ECHO INVESTMENT GROUP IN 2020 Date of transaction Address Legal form Area Capacity 1 Q 2020 Kraków, ul. Puszkarska ownership 25,800 sqm. 29,900 sqm. of residential and service space 2 Q 2020 Warsaw, ul. Żwirki iWigury perpetual usufruct 6,000 sqm. 5,100 sqm. of residential space, property sold to Resi4Rent 4 Q 2020 Kraków, ul. Kapelanka ownership 56,000 sqm. 78,600 sqm. of residential, oce and service space 4 Q 2020 Poznań, ul. Opieńskiego ownership and perpetual usufruct 44,200 sqm. 54,100 sqm. of residential and service space 4 Q 2020 Łódź, ul. Widzewska ownership 88,000 sqm. 106,700 sqm. of residential and service space The potential of purchased real properties is esti- mated based on planning documents and guidelines valid at the date of purchase. Ultimately, the use of each property is determined at a later stage of pro- ject preparation, taking into account current plan- ning documents, arrangements, market potential and finally accepted project concept. Details of preliminary purchase agreements signed with Tesco Gro- up are presented in item 6.3 on page 24. PROPERTIES ACQUIRED BY RESI4RENT IN 2020 Date of transaction Address Legal form Area Capacity 2 Q 2020 Warsaw, ul. Żwirki iWigury perpetual usufruct 6,000 sqm. 5,100 sqm. 2 Q 2020 Warsaw, ul. Pohoskiego ownership 2,100 sqm. 13,700 sqm. 3 Q 2020 Kraków, al. Jana Pawła II ownership 3,400 sqm. 9,400 sqm. 4 Q 2020 Wrocław, ul. Jaworska ownership 4,300 sqm. 12,900 sqm. 65 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Output markets and sources of supplies of materials, goods and services Output markets All projects implemented in 2020 by Echo Investment and companies from the Group were located in Poland. In accord- ance with its strategy, Echo Investment is withdrawing from projects outside the country. Contracting parties The main contracting parties of Echo Investment S.A. and companies from its Capital Group are the entities which the Company and the Group cooperate with on the implementation of development projects (contractors and suppliers). The share of contracting parties is measured by the value of transactions (purchases or orders) to the revenue of the Group. MAJOR CONTRACTORS OF ECHO INVESTMENT GROUP IN 2020 Business partner Turnover [PLN ‘000] Topaz Jewel Sp. zo.o. 159,1 Pearl Jewel Sp. zo.o. 70,2 M&J Bud Invest Sp. zo.o.. pl sp. K. 62,0 Porr S.A. 53,2 Przedsiębiorstwo Instalacyjne Unimax Sp. zo.o. 45,3 Eiage Polska Serwis Sp. zo.o. 44,8 Krakbau S.A. 41,0 Polimex Infrastruktura Sp. zo.o. 41,0 Wework Poland Sp. zo.o. 34,2 M&J Bud Sp. zo.o. Invest EU Sp.K. 31,7 GPRE Management Sp. zo.o. 30,1 RE-Bau Sp. zo.o. 28,4 Mota-Engil Central Europe S.A. 25,8 ZBB Firma Budowlana Sp. zo.o. Sp.K. 22,7 GEO-Kat Sp. zo.o. 22,3 Tetris Poland Sp. zo.o. 22,3 Alsal Sp. zo.o. Sp.K. 19,2 Modzelewski & Rodek Sp. zo.o. 18,8 Prof Fair Jarosław Poraj 18,7 Keller Polska Sp. zo.o. 18,7 MG Building Sp. zo.o. Sp.K. 18,7 Fabet-Konstrukcje Sp. zo.o. 18,4 66 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 MAJOR CUSTOMERS OF ECHO INVESTMENT GROUP, INCLUDING SERVICE RECIPIENTS IN 2020 Client Turnover [PLN ‘000] R4R Warszawa Browary Sp. zo.o. 74,4 Honeywell Services Poland Sp. zo.o. 25,2 R4R Wrocław Kępa Sp. zo.o. 17,5 EPP Development 6 Sp. zo.o. 17,2 Sent To Sp. zo.o. Sp.K. 17,0 Okam 2024 Sp. zo.o. 15,7 R4R Poland Sp. zo.o. 14,2 Allen & Overy A.Pędzich Sp.K. 9,4 R4R RE Sp. zo.o. 9,0 Lux Europa III SARL 8,2 Swanage Sp. zo.o. 7,9 R4R RE Wave 3 Sp. zo.o. 7,5 Common Investment S.A. 6,2 Topaz Jewel Sp. zo.o. 5,8 R4R Łódź Wodna Sp. zo.o. 5,4 Accenture Services Sp. zo.o. 5,4 EPP Oce-03 Business Campus Sp. zo.o. 5,2 Zielona Skarpa Sp. zo.o. 5,0 Clients The clients of Echo Investment or the Group companies are the entities which the project management services are provided for and the entities which the Company or Group companies sell real estate to (usually completed oce or re- tail projects). Clients (usually individual) who buy apartments are a separate group of contracting parties. 67 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Composition of the Group Echo Investment S.A. plays the most important role in the structure of the Group, which it su - pervises, co-executes and provides financial re- sources 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 resulting from the construc - tion process of a specific development 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 oce % of capital held Parent entity 1 53 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 2 Avatar - Projekt Echo - 119 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 3 Babka Tower - Projekt Echo - 93 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 4 Bełchatów - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 5 City Space - GP Sp. zo.o. Warsaw 100% Echo Investment S.A. 6 Supersam City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 7 Rondo 1 City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 8 Plac Unii City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 9 City Space Management Sp. zo.o. Warsaw 100% Echo Investment S.A. 10 Cornwall Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 11 React - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 12 Dagnall Sp. zo.o. Warsaw 100% Echo Investment S.A. 13 Dellia Investments - Projekt Echo - 115 sp. zo.o. Sp.K. Kielce 100% Pudsey Sp zo.o. 14 Doxent Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 15 Duże Naramowice - Projekt Echo - 111 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 16 Echo - Advisory Services Sp. zo.o. Kielce 100% Echo Investment S.A. 17 Echo - Arena Sp. zo.o. Kielce 100% Echo Investment S.A. 18 Echo - Aurus Sp. zo.o. Kielce 100% Echo Investment S.A. 19 Echo - Babka Tower Sp. zo.o. Kielce 100% Echo Investment S.A. 20 Echo - Babka Tower Sp. zo.o. Sp.K. Kielce 100% Gleann Sp. zo.o. 21 Echo - Browary Warszawskie Sp. zo.o. Kielce 100% Echo Investment S.A. 22 Echo - Browary Warszawskie Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 23 Echo - Galaxy Sp. zo.o. Kielce 100% Echo Investment S.A. 24 Echo - Galaxy Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 25 Echo - Nowy Mokotów Sp. zo.o. Kielce 100% Echo Investment S.A. 26 Echo - Nowy Mokotów Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 68 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 27 Echo - Opolska Business Park Sp. zo.o. Kielce 100% Echo Investment S.A. 28 Echo - Opolska Business Park Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 29 Echo - Property Poznań 1 Sp. zo.o. Kielce 100% Echo Investment S.A. 30 Echo - SPV 7 Sp. zo.o. Kielce 100% Echo Investment S.A. 31 Tryton - City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 32 Echo Investment ACC - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 33 Echo Investment Project 1 S.R.L. Brasov 100% Echo - Aurus Sp. zo.o. 34 Echo Investment Project Management S.R.L. Brasov 100% Echo Investment S.A. 35 Elektrownia RE Sp. zo.o. Kielce 100% Echo Investment S.A. 36 Fianar Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 37 Galeria Libero - Projekt Echo 120 Sp. zo.o. Sp.K. Kielce 100% Fianar Investments Sp. zo.o. 38 Galeria Nova - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 39 Galeria Tarnów - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 40 Gleann Sp. zo.o. Warsaw 100% Echo Investment S.A. 41 Gosford Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 42 GRO Nieruchomości Sp. zo.o. Kraków 100% Echo Investment S.A. 43 Grupa Echo Sp. zo.o. Kielce 100% Echo Investment S.A. 44 Kasztanowa Aleja - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 45 Kielce - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 46 Klimt House - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 47 Malta Oce Park - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 48 Metropolis - Projekt Echo 121 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 49 Oxygen - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 50 Park Postępu - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 51 Park Rozwoju III - Projekt Echo - 112 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 52 Perth Sp. zo.o. Warsaw 100% Echo Investment S.A. 53 PHS - Projekt CS Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 54 Pod Klonami - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 55 Potton Sp. zo.o. Warsaw 100% Echo Investment S.A. 56 PPR - Grupa EchoSp. zo.o. SKA Kielce 100% Echo Investment S.A. 57 Princess Investment Sp. zo.o. Kielce 100% Echo Investment S.A. 58 Projekt 1 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 59 Projekt 12 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 60 Projekt 13 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 61 Projekt 132 - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 62 Projekt 133 - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 63 Nobilis - City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 64 Projekt 14 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 65 React - Dagnall Sp. zo.o. SKA Kielce 100% Potton Sp zo.o. 66 Projekt 16 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 67 Projekt 17 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 68 Cinema Asset Manager - Grupa Echo sp. zo.o. SKA Kielce 100% Echo Investment S.A. 69 Face2Face - Stranraer Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 70 Projekt 21 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 71 Midpoint71 - Cornwall Investments Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 72 Projekt 5 - Grupa Echo Sp. zo.o. SKA Szczecin 100% Echo Investment S.A. 73 Projekt Beethovena - Projekt Echo - 122 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 74 Projekt CS Sp. zo.o. Kielce 100% Echo Investment S.A. 75 Projekt Echo - 104 Sp. zo.o. Kielce 100% Echo Investment S.A. 76 Projekt Echo - 108 Sp. zo.o. Kielce 100% Echo Investment S.A. 77 Projekt Echo - 111 Sp. zo.o. Kielce 100% Echo Investment S.A. 78 Projekt Echo - 112 Sp. zo.o. Kielce 100% Echo Investment S.A. 79 Projekt Echo - 113 Sp. zo.o. Kielce 100% Echo Investment S.A. 80 Projekt Echo - 115 Sp. zo.o. Kielce 100% Echo Investment S.A. 69 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 81 Projekt Echo - 116 Sp. zo.o. Kielce 100% Echo Investment S.A. 82 Projekt Echo - 119 Sp. zo.o. Kielce 100% Echo Investment S.A. 83 Projekt Echo - 120 Sp. zo.o. Kielce 100% Echo Investment S.A. 84 Projekt Echo - 121 Sp. zo.o. Kielce 100% Echo Investment S.A. 85 Projekt Echo - 122 Sp. zo.o. Kielce 100% Echo Investment S.A. 86 Projekt Echo - 123 Sp. zo.o. Kielce 100% Galeria Nova - Grupa Echo Sp. zo.o. SKA 87 Projekt Echo - 127 Sp. zo.o. Kielce 100% Echo Investment S.A. 88 Projekt Echo - 128 Sp. zo.o. Kielce 100% Echo Investment S.A. 89 Projekt Echo - 129 Sp. zo.o. Kielce 100% Selmer Investments Sp. zo.o. Sp.K. 90 Projekt Echo - 130 Sp. zo.o. Kielce 100% Echo Investment S.A. 91 Projekt Echo - 131 Sp. zo.o. Kielce 100% Echo Investment S.A. 92 Projekt Echo - 135 Sp. zo.o. Kielce 100% Echo Investment S.A. 93 Projekt Echo - 135 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 94 Projekt Echo - 136 Sp. zo.o. Kielce 100% Echo Investment S.A. 95 Projekt Echo - 136 Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 96 Projekt Echo - 137 Sp. zo.o. Kielce 100% Echo Investment S.A. 97 Projekt 139 - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o. 98 Projekt 140 - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 99 Aquarius - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 100 142 - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 101 Beethovena - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 102 Projekt 144 - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo - Arena Sp. zo.o. 103 Projekt 145 - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 104 Projekt 146 - City Space - GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o. 105 Projekt 147 - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 106 Projekt 148 - Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 107 Projekt Echo - 93 Sp. zo.o. Kielce 100% Echo Investment S.A. 108 Projekt Echo - 99 Sp. zo.o. Kielce 100% Echo Investment S.A. 109 Projekt K-6 - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 110 Projekt Naramowice - Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 111 Projekt Saska Sp. zo.o. Kielce 95% Echo Investment S.A. 112 Pudsey Sp. zo.o. Warsaw 100% Echo Investment S.A. 113 Pure Systems Sp. zo.o. Kraków 100% Echo Investment S.A. 114 Q22 - Projekt Echo - 128 Sp. zo.o. Sp.K. Kielce 100% Potton Sp zo.o. 115 Sagittarius - Projekt Echo - 113 Sp. zo.o. Sp.K. Kielce 100% Doxent Investments Sp. zo.o. 116 Seaford Sp. zo.o. Warsaw 100% Echo Investment S.A. 117 Selmer Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 118 Selmer Investments Sp. zo.o. Sp.K. Warsaw 100% Echo Investment S.A. 119 Senja 2 Sp. zo.o. Warsaw 100% Echo - Browary Warszawskie Sp. zo.o. Sp.K. 120 Shanklin Sp. zo.o. Warsaw 100% Echo Investment S.A. 121 Stranraer Sp. zo.o. Warsaw 100% Echo Investment S.A. 122 Strood Sp. zo.o. Warsaw 100% Echo Investment S.A. 123 Swanage Sp. zo.o. Warsaw 100% Echo Investment S.A. 124 Symetris - Projekt Echo - 131 Sp. zo.o. Sp.K. Warsaw 100% Gosford Investments Sp. zo.o. 125 Taśmowa - Projekt Echo - 116 Sp. zo.o. SKA Kielce 100% Echo Investment S.A. 126 ZAM - Projekt Echo - 127 Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o. 127 Villea Investments Sp. zo.o. Warsaw 100% Echo Investment S.A. 128 Bowen Sp. zo.o. Warsaw 100% Echo - Browary Warszawskie Sp. zo.o. Sp.K. 129 RPGZ IX Sp. zo.o. Kraków 100% Echo Investment S.A. 130 Projekt 150 – Shanklin Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A. 131 Projekt 151 - Projekt 13 - Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 132 Projekt 152 - Projekt 14 - Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 133 Projekt 153 - Projekt 21 - Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 134 Projekt 154 - Projekt K-6 - Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A. 70 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 SUBSIDIARIES No Subsidiary Registered oce % of capital held Parent entity 135 Projekt Echo - 139 Sp. zo.o. Kielce 100% Echo Investment S.A. 136 Projekt Echo - 140 Sp. zo.o. Kielce 100% Echo Investment S.A. 137 Projekt Echo - 141 Sp. zo.o. Kielce 100% Echo Investment S.A. 138 Projekt Echo - 142 Sp. zo.o. Kielce 100% Echo Investment S.A. 139 Projekt Echo - 143 Sp. zo.o. Kielce 100% Echo Investment S.A. 140 Projekt Echo - 144 Sp. zo.o. Kielce 100% Echo Investment S.A. 141 Projekt Echo - 145 Sp. zo.o. Kielce 100% Echo Investment S.A. JOINT VENTURES No Subsidiary Registered oce % of capital held Parent entity GALERIA MŁOCINY 1 Rosehill Investments Sp. zo.o. Warsaw 30% Echo Investment S.A. 2 Berea Sp. zo.o. Warsaw 30% Rosehill Investments Sp. zo.o. TOWAROWA 22 3 Projekt Echo - 138 Sp. zo.o. Sp.K. Warsaw 45,26% Strood Sp. zo.o. 4 Projekt Echo - 138 Sp. zo.o. Warsaw 30% Echo Investment S.A. RESI4RENT 5 R4R Poland Sp. zo.o. Warsaw 30% Echo Investment S.A. 6 R4R Łódź Wodna Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 7 R4R Wrocław Kępa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 8 R4R Wrocław Rychtalska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 9 R4R Warszawa Browary Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 10 R4R Leasing Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 11 R4R Poznań Szczepanowskiego Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 12 R4R Warszawa Taśmowa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 13 R4R Warszawa Woronicza Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 14 R4R Gdańsk Kołobrzeska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 15 R4R RE Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 16 R4R Kraków 3 Maja Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 17 R4R Warszawa Wilanowska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 18 R4R RE Wave 3 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 19 R4R Kraków Puszkarska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 20 Pimech Invest Sp.zo.o. Warsaw 30% R4R Poland Sp. zo.o. 21 M2 Hotel Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 22 R4R RE Wave 4 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 23 R4R Kraków JPII Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o. 71 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Changes in the structure of the group in 2020 INCREASE OF THE GROUP PLN Entity Action Date Share capital Projekt Echo – 141 Sp. zo.o. Registration by the District Court in Kielce 27.01.2020 5 000 Projekt Echo – 142 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 Projekt Echo – 143 Sp. zo.o. Registration by the District Court in Kielce 24.01.2020 5 000 Projekt Echo – 144 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 Projekt Echo – 145 Sp. zo.o. Registration by the District Court in Kielce 23.01.2020 5 000 DECREASE OF THE GROUP PLN Entity Action Date Share capital Projekt - Pamiątkowo Sp. zo.o. Sale of shares by Echo – SPV 7 Sp. z o.o. to Common Investment S.A 5.05.2020 50 000 Projekt Echo 132 Sp. zo.o. Sale of shares by Echo Investment S.A. to Common Invest- ment S.A. 5.05.2020 3 910 000 Forum 60 Fundusz Inwestycyjny Zamknięty Liquidation 1.06.2020 20 000 Projekt 18 – Grupa Echo Sp. zo.o. S.K.A. Sale of shares by Echo Investment S.A. and Grupa Echo Sp. z o.o. to Palena Sp. z o.o. and Student Depot Group B.V. 3.11.2020 50 000 OTHER CHANGES Entity Action Date Projekt Echo – 120 Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 28.01.2020 Projekt Echo – 115 Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 28.01.2020 Projekt Echo – 113 Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 25.02.2020 Projekt Echo – 131 Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 28.02.2020 Echo – Opolska Business Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 9.03.2020 Projekt Echo – 122 Sp. zo.o. Registration of the capital increase by Echo Investment S.A. 13.03.2020 Echo - Browary Warszawskie Sp. zo.o. Sp.K. Registration of the contribution reduction made by the limited partner of Echo Investment S.A. 20.11.2020 72 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Financial liabilities of the Company and its Group . Bonds COMPANY’S LIABILITIES DUE TO BONDS ISSUED AS AT 31 DECEMBER 2020 Bonds for institutional investors [‘000 PLN] Series ISIN code Bank / brokerage house Nominal value Maturity Interest rate 1/2017 PLECHPS00225 mBank S.A. 155000 31.03.2021 WIBOR 6M + margin 2,9% 2/2017 PLECHPS00258 mBank S.A. 139950 30.11.2021 WIBOR 6M + margin 2,9% 1/2018 PLECHPS00282 mBank S.A. 46600 25.04.2022 WIBOR 6M + margin 2,9% 1/2019 PLECHPS00308 mBank S.A. 96510 11.04.2023 WIBOR 6M + margin 4,25% 1/2020 PLO017000012 mBank S.A. 150000 31.05.2024 WIBOR 6M + margin 4,50% 1P/2020 PLO017000020 PKO TFI Parasolowy and Michael / Ström Dom Maklerski S.A. as an agent 100000 5.08.2024 WIBOR 6M + margin 4,50% Total 688060 Bonds for individual investors [‘000 PLN] E-series PLECHPS00217 DM PKO BP S.A. 100000 6.07.2021 WIBOR 6M + margin 2,9% F-series PLECHPS00233 DM PKO BP S.A. 125000 11.10.2022 WIBOR 6M + margin 2,9% G-series PLECHPS00241 DM PKO BP S.A. 75000 27.10.2022 WIBOR 6M + margin 2,9% H-series PLECHPS00266 DM PKO BP S.A. 50000 22.05.2022 WIBOR 6M + margin 2,8% I-series PLECHPS00274 Consortium: DM PKO Banku Polskiego S.A., Noble Securities S.A. and Centralny Dom Maklerski Pekao S.A 50000 8.11.2023 WIBOR 6M + margin 3,4% J and J2-series PLECHPS00290 J-series: consortium Noble Securities S.A., Michael / Ström Dom Maklerski S.A., Dom Maklerski Banku Ochrony Środowiska S.A 33832 21.09.2023 WIBOR 6M + margin 3,4% J2-series: DM PKO Banku Polskiego S.A. Total 433832 Total PLN-denominated bonds 1 121 892 Bonds for institutional investors EUR-denominated [‘000 EUR] 1E/2020 PLECHPS00316 Bank Pekao S.A. 40 000 23.10.2024 fixed interest rate 4,5% 2P/2020 PLO017000038 Michael/Ström DM 12 800 31.10.2021 fixed interest rate 6% Total EUR-denominated bonds 52 800 * Issue beyond the bond issue program in EUR of September 3, 2020. 73 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Value of the bonds corresponds to undiscounted cash flows without interests. Change of business and economic conditions had no significant eect on the financial obligations’ fair value. 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 oered 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 Bonds issued by Echo Investment S.A. are not se- cured. With an exception of 2P/2020-series, they are all quoted in Alternative Exchange System (ASO) Catalyst: bonds for individual investors on GPW ASO Catalyst platform and for institutional investors – on BondSpot ASO Catalyst. 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 REDEEMED BY THE COMPANY IN 2020 Series Date Nominal value [‘000 PLN] Bonds for institutional investors – series 1/2016 18.11.2020 100 000 Bonds for institutional investors – series 2/2017 1.06.2020 10 050 Bonds for institutional investors – series 1/2018 1.06.2020 93 400 Bonds for institutional investors – series 1/2019 1.06.2020 3 490 Total 206 940 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 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 Information on the bond issued in Q1 2021 you can nd in the item 10.3 on page 31. Issue out of the issuance program with Bank Pekao S.A. 74 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Credit facilities Investment loans are secured by standard securities such as mortgages, registered and financial pledge agreements, powers of powers of attorney to bank ac- counts, subordination agreements, statements on sub- mission to enforcement proceedings, agreements to secure the transfer of claims and rights and claims of a borrower under selected agreements, guarantees on overrun of cost / own contribution, interest coverage. INVESTMENT LOANS OF ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 ‘000 Investment project Borrower Bank Contractual amount of loan Outstanding loan amount Interest rate Repayment deadline Libero, Katowice Galeria Libero - Projekt Echo 120 Sp. z. o.o. Sp.K. Santander Bank Polska S.A. / BNP Paribas Bank Polska S.A. 67 566 EUR 66 553 EUR Margin + EURIBOR 3M 22.11.2024 Galeria Młociny, Warsaw Berea Sp. zo.o. Santander Bank Polska S.A. / PKO BP S.A. / Bank Gospodarstwa Krajowego 56 100 EUR 55 594 EUR Margin + EURIBOR 3M 30.04.2025 Moje Miejsce IiII, Warsaw Projekt Beethovena - Projekt Echo - 122 Sp. zo.o. SKA PKO BP S.A. 50 280 EUR 41 763 EUR Margin + EURIBOR 3M 30.09.2023 16 000 PLN 1 171 PLN Margin + WIBOR 1M 31.03.2021 Villa Oces and Malthouse Oces (Warsaw Brewery K, GH), Warsaw Dellia Investments - Pro- jekt Echo - 115 Sp. zo.o. Sp.K. Bank Pekao S.A. 87 386 EUR 60 477 EUR Margin + EURIBOR 3M 31.12.2027 17 000 PLN 0 PLN Margin + WIBOR 1M 31.12.2022 West 4 Business Hub I, Wrocław Projekt 17 - Grupa Echo Sp. zo.o. SKA Bank Millennium S.A. 20 630 EUR 13 283 EUR Margin + EURIBOR 3M 30.06.2023 4 000 PLN 0 PLN Margin + WIBOR 1M 30.06.2021 Face2Face IiII, Katowice Face2Face - Stranraer Sp. zo.o. SKA Bank Pekao S.A. 64 997 EUR 50 576 EUR Margin + EURIBOR 3M 31.12.2023 18 000 PLN 0 PLN Margin + WIBOR 1M 31.12.2021 React I, Łódź React - Dagnall Sp. zo.o. SKA BNP Paribas Bank Polska S.A. 19 200 EUR 0 EUR Margin + EURIBOR 3M 01.12.2022 4 000 PLN 0 PLN Margin + WIBOR 1M 01.12.2022 Midpoint71, Wrocław Midpoint71 - Cornwall Investments Sp. zo.o. SKA PKO BP S.A. 54 400 EUR 0 EUR Margin + EURIBOR 3M 30.06.2026 7 000 PLN 0 PLN Margin + WIBOR 1M 30.06.2023 Fuzja CD iJ, Łódź Projekt Echo 130 Sp. zo.o. Bank Pekao S.A. 33 600 EUR 0 EUR Margin + EURIBOR 3M 30.01.2026 10 000 PLN 0 PLN Margin + WIBOR 1M 31.01.2024 Projekt Echo 129 Projekt Echo 129 Sp. zo.o. Bank Pekao S.A. 50 000 EUR 44 800 EUR Margin + EURIBOR 3M 30.09.2021 Resi4Rent - 1st tranche R4R Łódź Wodna Sp. zo.o./ R4R Wrocław Rychtalska Sp. zo.o./ R4R Warszawa Browary Sp. zo.o./ R4R Wrocław Kępa Sp. zo.o. consortium with Bank Pekao S.A. as a leading agent 77 600 PLN 77 816 EUR Margin + WIBOR 1M oraz 3M 30.06.2026 Resi4Rent - 2nd tranche R4R Poznań Szcze- panowskiego Sp. zo.o./ R4R Warszawa Taśmowa Sp. zo.o./ R4R Warsza- wa Woronicza Sp. zo.o./ R4R Gdańsk Kołobrzes- ka Sp. zo.o. Santander S.A. / Helaba AG ** 59 490 PLN 32 945 PLN Margin + WIBOR 1M 27.06.2027 Total 504 159 EUR 410 862 EUR 213 090 PLN 34 116 PLN * Echo Investment owns 30% of shares in SPV - borrowers. and presents 30% of credit value. ** After fulfilment of certain conditions the construction loan will be converted into investment loan with its amount of EUR 69 million. 75 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . Credit facilities CREDIT FACILITIES OF ECHO INVESTMENT S.A. AS AT 31 DECEMBER 2020 ‘000 PLN Bank Contractual amount of loan Outstanding loan amount Interest rate Repayment deadline PKO BP S.A. 75 000 63 458 WIBOR 1M + margin 31.10.2022 Alior Bank S.A. 35 000 35 000 WIBOR 3M + margin 14.04.2021 Santander Bank Polska S.A. 100 000 39 523 WIBOR 1M + margin 30.11.2022 Total 210 000 137 981 * The available loan amount as on 31 December 2020 is decreased by the guarantees issued and amounts to PLN 1,9 million PLN. ** Under the credit limit of PLN 100 million, the Company has been granted a sublimit for current loan up to PLN 75 million and a sublimit up to PLN 25 million for guarantees. As at 31 December 2020, the whole guarantee limit is available. Credit facilities are secured with standard instruments such as authorisation to the bank account or statement on submission to enforcement proceedings. The loan value corresponds to undiscounted cash flows. 76 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 O-balance sheet liabilities . Surety agreements FINANCIAL SURETY AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 PLN ‘000 Issuer Entity receiving surety Beneciary Value Validity Description Echo Investment S.A. Echo – Browary Warszawskie Sp. zo.o. Sp.K. oraz Dellia Investments – Projekt Echo – 115 Sp. zo.o. Sp.K. HPO AEP Sp. zo.o. Sp.J. 11 537 Until the date of issuance of the occu- pancy permit for the projects but no later than 7.12.2031. 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 agree-ment of 7.12.2016. Mutual surety issued in EUR. Echo Investment S.A. Projekt Echo 130 Sp. zo.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 construc-tion loan up to the limit of EUR 5 million without completion of transferring a part of the property to the Company. Total 34 611 NONFINANCIAL SURETY AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 PLN ‘000 Issuer Entity receiving surety Beneciary Value Validity Description Echo – SPV 7 Sp. zo.o. / Echo – Aurus Sp. zo.o. Sagittarius-Projek Echo – 113 Sp.zo.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. zo.o. / Echo – Aurus Sp. zo.o. Sagittarius – Projek Echo – 113 Sp. zo.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 77 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CHANGES IN SURETY AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP IN 2020 PLN ‘000 Change Issuer Beneciary Date of change Value Due Expiry Echo-Aurus Sp. zo.o. PKO Leasing S.A. 6.12.2020 312 Surety for liabilities of Supersam - City Space - GP Sp. z o.o resulting from leasing agreement of 6.12.2017. Issue Projekt Echo 130 Sp. zo.o. PKO BP S.A. 17.11.2020 23 074 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 comple- tion of transferring a part of the prop- erty to the Company. 78 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 PLN ‘000 Guarantor Issuer Beneciary Value [PLN ‘000] Validity Description Echo Investment S.A. Projekt 104 Sp. zo.o. Skua Sp. zo.o. 27 689 until 31.07.2021 Security of the proper performance of the final sale contract and the mas- ter lease contract for the Aquarius Business House II oce building in Wrocław. Issued in EUR. Echo Investment S.A. Echo - Opolska Business Park Sp. zo.o. Sp.K. issued for Ventry Invest- ments Sp. z o.o. Sp. k. (currently entitled EPP Oce O3 Business Cam- pus Sp. z o.o.) 42 108 until 21.12.2026 Construction guarantee related to the sale of the O3 Business Cam- pus I oce 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. zo.o. Sp.K. issued for Emfold Investments Sp. z o.o. (currently entitled Tryton Business Park Sp. z o.o.) 43 925 until 21.12.2026 Construction guarantee related to the sale of the Tryton oce building in Gdańsk. The construction guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guar- antee issued in EUR. Echo Investment S.A. Symetris - Projekt Echo - 131 Sp. zo.o. Sp.K. issued for Flaxton Investments Sp. z o.o. (currently entitled EPP Oce – Symetris Busi- ness Park Sp. z o.o.) 18 789 until 21.12.2026 Construction guarantee related to the sale of the Symetris I oce building in Łódź. The construction guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guar- antee issued in EUR. Echo Investment S.A. Projekt Echo 135 Sp. zo.o. Sp.K. A4 Business Park Sp. zo.o. 25 382 until 26.04.2027 Construction guarantee related to the sale of the A4 Business Park III oce building in Katowice. The guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guar- antee issued in EUR. Echo Investment S.A. Echo - Opolska Business Park Sp. zo.o. Sp.K. EPP Oce O3 Business Campus Sp. zo.o 40 148 until 21.12.2027 Construction guarantee related to the sale of the O3 Business Cam- pus II oce building in Kraków. The guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guarantee issued in EUR. Echo Investment S.A. direct guarantee of Echo Investment S.A. Nobilis - Projekt Echo - 117 Sp. zo.o. Sp.K. 40 000 until 31.10.2026 Quality guarantee for construction work related to the Nobilis oce building in Wrocław. Echo Investment S.A. Grupa Echo Sp. zo.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 oce 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. Midpoint71-Cornwall In- vestments Sp. zo.o. SKA (previously: Projekt 22 – Grupa Echo Sp. zo.o. S.K.A.) A19 Sp. zo.o. 27 689 until 4.07.2038 Guarantee for the obligations of Mid- point71-Cornwall Investments Sp. z o.o. SKA (Midpoint71 project) arising from the good neighborly agreement concluded on 4.07.2018. Issued in EUR. Echo Investment S.A. Symetris - Projekt Echo - 131 Sp. zo.o. Sp.K. issued for Flaxton Investments Sp. z o.o. (currently entitled EPP Oce – Symetris Busi- ness Park Sp. z o.o.) 17 618 until 31.08.2023 Construction guarantee related to the sale of the oce building Symetris II in Łódź. Issued in EUR. The maxi- mum amount of the liability will be successively reduced as the amount of the liability that is secured by the guarantee decreases. . Guarantee agreements 79 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 PLN ‘000 Guarantor Issuer Beneciary Value [PLN ‘000] Validity Description Echo Investment S.A. R4R Łódź Wodna Sp. zo.o. R4R Wrocław Kępa Sp. zo.o. R4R Wrocławskie Rychtalska Sp. zo.o. R4R Warszawa Browary Sp. zo.o. Bank Pekao S.A. 14 147 until 30.09.2021 Guarantee securing exceeding the costs of performing Resi4REnt pro- jects: Łódź Wodna, Wrocław Rychtal- ska, Warsaw Brewery, Wrocław Kępa. Echo Investment S.A. Rosehill Investments Sp. zo.o. IB 6 FIZAN / GPF 3 FIZAN 105 783 until 31.03.2023 Security for the proper perfor- mance 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. Projekt Beethovena – Projekt Echo – 122 Sp. zo.o. SKA PKO BP S.A. 36 000 until 30.06.2023 Security for exceeding the costs of performing the Moje Miejsce oce 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 Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the contract of quality guarantee concluded on 27.03.2019. Echo Investment S.A. Dellia Investments - Pro- jekt Echo - 115 Sp. zo.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 Oc- es building being part of the Warsaw Brewery complex. Issued in EUR. Echo Investment S.A. Dellia Investments - Pro- jekt Echo - 115 Sp. zo.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 Gate- house Oce building in the Warsaw Brewery complex. Issued in PLN. Echo Investment S.A. Dellia Investments - Pro- jekt Echo - 115 Sp. zo.o. Sp.K. LUX Europa III S.a.r.l. 50 763 until 3.03.2027 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 Oces building being part of the Warsaw Brewery complex. Issued in EUR. Echo Investment S.A. Dellia Investments - Pro- jekt Echo - 115 Sp. zo.o. Sp.K. Bank Pekao S.A. 73 738 until the date of conversion of the construction loan into an invest- ment loan Guarantee securing the costs exceed of the oce project in the Warsaw Brewery complex in Warsaw. Issued in EUR. Echo Investment S.A. Projekt 17 - Grupa Echo Sp. zo.o. SKA Bank Millennium S.A. 8 045 until the date of conversion of the construction loan into an invest- ment loan Guarantee of exceeding the costs of performing the West 4 Business Hub oce project in Wrocław. Echo Investment S.A. Projekt 17 - Grupa Echo Sp. zo.o. SKA Bank Millennium S.A. 4 938 until the date of conversion of the construction loan into an invest- ment loan Guarantee securing rent proceeds during the performance of the West 4 Business Hub oce project in Wrocław. Issued in EUR. Echo Investment S.A. Projekt 20 - Grupa Echo Sp. zo.o. SKA Bank Pekao S.A. 70 000 until 29.12.2023 Guarantee securing cost overrun, covering interests on minimal level and securing own contribution on Face2Face oce project in Katowice. Issued in PLN. 80 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31 DECEMBER 2020 PLN ‘000 Guarantor Issuer Beneciary Value [PLN ‘000] Validity Description Echo Investment S.A. Echo - Opolska Business Park Sp. zo.o. Sp.K. EPP Development 6 Sp. zo.o. 37 226 until 9.08.2028 Construction guarantee related to the sale of the O3 Business Cam- pus III oce building in Kraków. The guarantee is secured by a corporate guarantee issued by Echo Investment S.A. Guarantee issued in EUR. PKO BP S.A. (commis- sioned by Echo Invest- ment S.A.) Galeria Libero - Projekt Echo - 120 Sp. zo.o. Sp.K. Tax Administration Oce Directorin Kielce 873 until 10.02.2021 Lottery guarantee for Galeria Libero - Projekt Echo - 120 Sp. z o.o. Sp.K. Echo Investment S.A. Projekt 12 - Grupa Echo Sp. zo.o. SKA Tesco (Polska) Sp. zo.o. na. until 30.06.2025 Echo Investment S.A. corporate guar- antee securing performance of obli- gations of Project 12 - Grupa Echo Sp. z o.o. SKA regarding priority to lease space in the new shopping center, resulting from the preliminary sales contract of real estate concluded on 30.07.2019. Due to business and legal arrangements the warranty has no upper limit potential liability. Echo - SPV 7 Sp. zo.o. R4R Poznań Szcze- panowskiego Sp. zo.o. R4R Warszawa Taśmowa Sp. zo.o. R4R Warszawa Woronicza Sp. zo.o. R4R Gdańsk Kołobrzeska Sp. zo.o. Santander Bank Polska S.A., 24 500 until the date of conversion of the construction loan into an invest- ment loan Security of the borrowers liabilities arising from the cost overrun not included in the budget specified in credit agreement. Echo Investment S.A Midpoint71 – Cornwall Investments Sp. zo.o. SKA PKO BP S.A. 39 000 until 31.12.2026 Guarantee securing cost overrun and maintanance of unleased area on Midpoint71 oce project in Wroclaw. Issued in PLN. Echo Investment S.A Midpoint71 – Cornwall Investments Sp. zo.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 Midpoint71 oce project in Wroclaw. Issued in EUR. Towarzystwo Ubezpiec- zeń Euler Hermes S.A. (commissioned by Echo Investment S.A.) Gosford Investment Sp. zo.o. Womak Delta Sp. zo.o. 29 14.07.2021 Rent guarantee - apartment sales oce in Wrocław Echo Investment S.A Projekt Echo - 130 Sp. zo.o. Bank Pekao S.A. 28 609 until 31.01.2024 Guarantee securing cost overrun of the construction of Fuzja CDJ com- plex oce project. Issued in PLN. Echo Investment S.A Cinema Asset Manager – Grupa Echo Sp. zo.o. SKA Pearl Jewel sp. zo.o. na. earlier of the dates: handover of the space in accordance with the future lease agreement or 8 years from the date of the futures lease agreement con- clusion Corporate guarantee of Echo Invest- ment S.A. securing performance of obligations of Cinema Asset Manager - Grupa Echo Sp. z o.o. SKA concern- ing provision of substitute premises and premises under the future lease agreement in a new oce building, resulting from the property sales agreement signed on 1.12.2020. Due to business and legal arrangements, the guarantee has no upper limit of potential liability. Total 1 150 794 81 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 82 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CHANGES IN GUARANTEE AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP IN 2020 PLN ‘000 Change Guarantor Beneciary Date of change Value Due Expiry Santander Bank Pol- ska S.A. City of Katowice 16.01.2020 758 Warranty and quality guarantee for the liabil- ities of Galeria Libero - Projekt Echo 120 Sp. z o.o. Sp.K. resulting from the contract concluded on 16.06.2016 regarding the road agreement. Expiry PKO BP SA LUX Europa III S.a.r.l. 25.03.2020 6 450 Security for the liabilities of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the contract of quality guarantee concluded on 27.03.2019. Expiry Echo Investment S.A. issued for Ventry Investments Sp. z o.o. Sp. k. (cur- rently entitled EPP Oce O3 Busi- ness Campus Sp. z o.o.) 21.05.2020 912 Rental guarantee related to the sale of the O3 Business Campus I oce building in Kraków. The construction guarantee is secured by a corporate guarantee issued by Echo Invest- ment S.A. The guarantee 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. Expiry Echo Investment S.A. issued for Flaxton Investments Sp. z o.o. (currently entitled EPP Oce – Symetris Business Park Sp. z o.o.) 21.05.2020 157 Rental guarantee related to the sale of the Symetris I oce building in Łódź. The guar- antee is secured by a corporate guarantee issued by Echo Investment S.A. Partially issued in EUR. The maximum amount of the liability will be successively reduced as the amount of the liability that is secured by the guarantee decreases. Expiry Echo Investment S.A. Horta Sp. zo.o. 2.07.2020 22634 Security of the proper performance of the final sale contract of the Aquarius Business House I oce building in Wrocław. Issued in EUR. Expiry Towarzystwo Ubez- pieczeń Euler Hermes S.A. (commissioned by Echo Investment S.A.) PDG MA-SKI Auto Parksystemy Sp. zo.o. 4.08.2020 1386 Security of the payment for producing and delivery of parklift installation in Reset II project in Warsaw. Expiry Echo Investment S.A. Santander Bank Pols- ka S.A., PKO BP S.A., Bank Gospodarst- wa Krajowego and mBank S.A. 30.10.2020 42 918 Security for exceeding the costs of the Galeria Młociny project in Warsaw and the obligations of Berea Sp. z o.o. arising from the loan agree- ment concluded on 17.10.2017. Issued in EUR. Expiry Towarzystwo Ubez- pieczeń Euler Hermes S.A. (commissioned by Echo Investment S.A.) PDG MA-SKI Auto Parksystemy Sp. zo.o. 19.11.2020 375 Security of the payment for producing and de- livery of parklift installation in Fuzja B project in Łódź. Expiry Echo Investment S.A. R4R Warszawa Bro- wary Sp. zo.o. 16.12.2020 39 224 Guarantee for advance payments paid by R4R companies in accordance with the preliminary contracts for the sale of real estate Warsaw Brewery E in Warsaw. Expiry Santander Bank Pol- ska S.A. PDG MA-SKI Auto Parksystemy Sp. zo.o. 20.12.2020 470 Security of the payment for producing and delivery of parklift installation in Apartamenty Esencja project in Poznań. Expiry Echo Investment S.A. BNP Paribas Bank Polska S.A. 31.12.2020 10 499 Security for exceeding the costs of performing the React oce project in Łódź. Issue Echo Investment S.A. Topaz Jewel Sp. z o.o. 28.02.2020 6 828 Echo Investment S.A. corporate guarantee securing performance of obligations of Cinema Asset Manager – Grupa Echo Sp. z o.o. SKA of deposit payment for Topaz Jewel Sp. z o.o. in relation to purchase agreement of Tesco prop- erty in Kraków (Kapelanka str.). 83 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CHANGES IN GUARANTEE AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP IN 2020 PLN ‘000 Change Guarantor Beneciary Date of change Value Due Issue PKO BP S.A.(com- missioned by Echo Investment S.A.) Warburg-HiH Invest Real Estate GmbH 20.05.2020 1 047 Security of the liabilities of Sagittarius-Projek Echo - 113 Sp.z o.o. Sp.k. arising from the rental guarantee contract. The maximum amount of the liability will be successively reduced as the amount of the liability that is secured by the guarantee decreases. Issue PKO BP S.A.(com- missioned by Echo Investment S.A.) LUX Europa III S.a.r.l. 20.05.2020 6 450 Security for the liabilities of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the contract of quality guarantee concluded on 27.03.2019. Issue Towarzystwo Ubez- pieczeń Euler Hermes S.A. (commissioned by Echo Investment S.A.and from its limit) PDG MA-SKI Auto Parksystemy Sp. zo.o. 08.06.2020 363 Security of payment due to parklifts produc- tion and delivery to Fuzja B project in Łódź. Issue Echo – Aurus Sp. zo.o. Nobilis – Projekt Echo 117 Sp. zo.o. Sp.K. 14.07.2020 818 Guarantee securing the liabilities of Nobilis - City Space GP Sp. z o.o. Sp.K. arising from the lease agreement concluded on 28.02.2017. Issued in EUR. Issue Echo Investment S.A Nobilis - Business House sp. zo.o. 14.07.2020 590 The guarantee securing the liabilities of Nobilis - City Space GP Sp. z o.o. Sp.K. resulting from the amendment to the lease agreement. Issued in EUR. Issue Echo Investment S.A PKO BP S.A. 22.07.2020 39 000 Guarantee securing cost overrun and main- tanance of unleased area on Midpoint71 oce project in Wroclaw. Issued in PLN. Issue Echo Investment S.A PKO BP S.A. 22.07.2020 19 669 Guarantee securing debt service cover ratio and covering rent-free periods in lease agree- ments on Midpoint71 oce project in Wroclaw. Issued in EUR. Issue Santander Bank Pol- ska S.A. PDG MA-SKI Auto Parksystemy Sp. zo.o. 17.09.2020 461 Security of the payment for producing and delivery of parklift installation in Apartamenty Esencja project in Poznań. Issue Towarzystwo Ubez- pieczeń Euler Hermes S.A.(commissioned by Echo Investment S.A.) WOMAK DELTA sp. zo.o. 14.07.2020 29 Rent guarantee - apartment sales oce in Wrocław Issue Echo Investment S.A. Pekao S.A. 17.11.2020 28 609 Guarantee securing cost overrun of the con- struction of Fuzja CDJ complex oce project. Issued in PLN. Issue Echo Investment S.A. Pearl Jewel sp. zo.o. 1.12.2020 na. Corporate guarantee of Echo Investment S.A. securing performance of obligations of Cinema Asset Manager - Grupa Echo Sp. z o.o. SKA concerning provision of substitute premises and premises under the future lease agreement in a new oce building, resulting from the property sales agreement signed on 1.12.2020. Due to business and legal arrangements, the guarantee has no upper limit of potential liability. Extension PKO BP S.A. LUX Europa III S.a.r.l. 30.06.2020 24 Security of the liabilities of Dellia Investments - Projekt Echo - 115 Sp. z o.o. Sp.K. arising from the rental guarantee contract. The maximum amount of the liability will be successively reduced as the amount of the liability that is secured by the guarantee decreases. Extension Echo Investment S.A. issued for Echo Opol- ska Business Park Sp. z o.o. Sp. k. (currently entitled EPP Develop- ment 6 Sp. z o.o.) 30.06.2020 1 099 Security for the liabilities of Projekt 132 - City Space - GP Sp.z o.o. Sp.K. arising from the lease agreement concluded on 4.06.2019. Issued in EUR. 84 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CHANGES IN GUARANTEE AGREEMENTS ISSUED BY ECHO INVESTMENT GROUP IN 2020 PLN ‘000 Change Guarantor Beneciary Date of change Value Due Extension PKO BP S.A IREEF – Stryków Propco Sp. zo.o. 31.07.2020 542 Guarantee for the obligations of Echo Invest- ment S.A. resulting from the lease contract concluded on 24.10.2016. Issued in EUR. Extension and value reducing Rosehill Investments Sp. zo.o. IB 6 FIZAN / GPF 3 FIZAN 20.10.2020 103 766 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. 85 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Information on dividend policy and dividend . The dividend policy . Advanced dividend from the 2019 profit On 26 April, 2017 the Management Board of Echo Investment adopted a resolution on the Company’s dividend policy. The adopted dividend policy states that from the profit in 2018 and subsequent years the Management Board will be recommend- ing the payment of the dividend up to amount of 70% of the consolidated net profit of the Capital Group attributable to shareholders of the parent company. When recommending the dividend payment the Management Board will take into con- sideration the current and expected condition of the Company and the Capital Group as well as their development strategy, in particular: − safe and the most eective management of debt and liquid- ity in the Group; − investment plans resulting from the development strategy, purchase of land in particular. Assumptions of the dividend policy were based on predictions concerning future profits from the Group’s property develop- ment operations. The Management Board of Echo Investment adopted on 11 Sep- tember 2019 a resolution on conditional payment of the ad- vance payment for the dividend for the accounting year 2019 to its shareholders. The total amount of the advance dividend amounts to PLN 206.3 million, i.e. PLN 0.5 per share. It did not exceed half of the Company’s profit generated after the end of the previous financial year, as published in the financial report dated 30 June 2019, increased by a reserve capital created in order to pay dividend or an advance payment towards the divi- dend and reduced by uncovered losses and value of own shares. The advance dividend was paid on 21 October 2019 to those shareholders who held shares on 14 October 2019, i.e. 7 days before the payment date. e dividend policy states that the Management Board recommends the payment of the dividend up to amount of 70% of the consolidated net prot annually. 0,50 pln Amount of advanced dividend paid from 2019 prot. The OGM also decided to allocate the profits for 2019 as follows: − the net profit generated by the company in the financial year 2019, amounting to PLN 21,412,312.65, was allocated for dis- tribution among all shareholders; − the profit intended for distribution was increased by the sum of PLN 184,932,978.35 from the Dividend Fund (PLN 206,345,291 in total) and was allocated for distribution among all shareholders; − the sum of PLN 206,345,291 was included in the dividend, paid on October 21st 2019, as a dividend advance; − the dividend corresponds to the amount of the dividend ad- vance payment, therefore it was decided that the company would not pay additional funds from the profit for the finan- cial year 2019. 86 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Assessment of financial resources management and investment plan feasibility . For Echo Investment S.A. Financial resources management of the parent entity and the Group in 2020 was mainly focused on securing financial liquidity under uncertainty caused by the pandemic, as well as securing financing for ongoing projects, on maintaining safe liquidity ratios and planned financing structure. Ac- cording to the Management Board, financial situation of the parent entity and the Group at the end of 2020 reflects their stable financial condition, which is confirmed by the ratios presented below. PROFITABILITY RATIO The increase of the operating profit margin and the net profit margin is caused mainly by lower general and administrative expenses and an increase of other operating income. The ROA and ROE rates increased due to faster growth of net profit compared to assets and equity value. Operating profit margin (operating profit/revenue) Net balance sheet profit margin (net profit/revenue) Return on assets ROA (net profit/total assets) Return on equity ROE (net profit/equity) PROFITABILITY RATIOS 31.12.2020 31.12.2019 Operating profit margin ratio 44% 26% Net balance profit margin ratio 18% 7% Return on assets (ROA) 2% 1% Return on equity (ROE) 4% 2% 87 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 TURNOVER Turnover depends on the specifics of the business. Due to the fact that inventory includes acquired ownership rights, construction expenditures and costs relating to development projects for sale, this cycle will always be long compared to other indus- tries, such as production of fast moving consumer goods. The ratios will be aected by lower revenues from sales (lower revenues from project execution services from related entities). In addition, the receiv- ables turnover ratio will be aected by an increase in loans granted to related companies. Trade receiv- ables have not changed significantly. Growth of trade liabilities, apart from decrease of revenues influenced the liabilities turnover ratio. LIQUIDITY RATIO Liquidity ratios remain at similar levels to the previ- ous year. The indicators are at safe levels. The slight decrease in ratios was caused by the increase in short-term liabilities, which was almost completely oset by the simultaneous increase in the value of cash. Inventory turnover in days ( inventory 360/revenues) Current receivables turnover in days (short-term receivables 360/revenues) Current liabilities cycle in days (current trade liabilities360/revenues) TURNOVER RATIO 31.12.2020 31.12.2019 Inventory turnover in days 217 244 Current receivables turnover in days 415 754 Current trade liabilities turnover in days 29 61 Current ratio (current assets / current liabilities) Quick ratio (current assets - inventories / current liabilities) Cash ratio (cash / short-term liabilities) LIQUIDITY RATIO 31.12.2020 31.12.2019 Current ratio 0,87 1,94 Quick ratio 0,68 1,57 Cash ratio 0,14 0,43 88 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 DEBT RATIOS Debt ratios remain safe, which proves the Company’s good standing. Equity to assets ratio (equity / total assets) The decrease of this ratio results from a slower in- crease of equity value (generated profit) in relation to the increase of assets value (loans granted to subsidiaries). Equity to fixed assets ratio (equity / fixed assets including assets held for sale) The slight increase of the ratio results from the par- allel increase in the value of fixed assets and equity. General debt ratio (total liabilities / total assets) The increase of the ratio results from a faster increase of liabilities value (increased value of loans and re- ceived advances for apartments) than the increase in total assets value (loans granted to subsidiaries). Equity debt ratio (total liabilities / equity) The increase of the ratio results from a faster increase of total liabilities value than the increase of equity. DEBT RATIOS 31.12.2020 31.12.2019 Equity coverage ratio 40% 43% Fixed asset coverage ratio 56% 69% Total debt ratio 60% 57% Debt to equity ratio 149% 132% 89 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 . For Echo Investment Group PROFITABILITY RATIOS The decrease of the operating and balance sheet profit margin results from a faster increase of reve- nues (more apartments delivered) than the increase in operating profit (lower value of the fair value gains) and net profit (profit / loss from joint-ven- tures). The decline of the ROA rate results from a large increase of the assets value (investment prop- erties under construction and inventories - new pur- chases, investment expenditure on projects). TURNOVER RATIO Turnover depends on the specifics of the business. Due to the fact that inventory includes acquired ownership rights, construction expenditures and costs relating to development projects for sale, this cycle will always be long compared to other indus- tries, such as production of fast moving consumer goods. The ratios will be aected by lower revenues from sales (lower revenues from project execution services from related entities). In addition, the receiv- ables turnover ratio will be aected by an increase in loans granted to related companies. Trade receiv- ables have not changed significantly. Operating profit margin (operating profit/revenue) Net balance sheet profit margin (net profit/revenue) Return on assets ROA (net profit/total assets) Return on equity ROE (net profit/equity) Inventory turnover in days (inventory 360/revenues) The increase of the ratio results from the greater dynamics of the inventories growth in relation to revenues. Current receivables turnover in days (short-term receivables 360/revenues) The decrease of this ratio results from a decrease of receivables with an increase in revenues. This is caused by i.e. large number of flats handed over. Current liabilities cycle in days (current trade liabilities360/revenues) The decrease of the ratio results from higher dynam- ics of revenues than liabilities. PROFITABILITY RATIOS 31.12.2020 31.12.2019 Operating profit margin ratio 28% 51% Net balance profit margin ratio 10% 34% Return on assets (ROA) 2% 6% Return on equity (ROE) 7% 19% TURNOVER RATIOS 31.12.2020 31.12.2019 Inventory turnover in days 275 430 Current receivables turnover in days 63 84 Current trade liabilities turnover in days 92 133 90 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 LIQUIDITY RATIO 31.12.2020 31.12.2019 Current ratio 0,81 1,58 Quick ratio 0,34 0,69 Cash ratio 0,21 0,46 LIQUIDITY RATIO The liquidity ratios, despite a slight decrease, re- mains at the exemplary levels, which proves the sta- ble situation of the Group. The decrease of ratios results from faster growth of liabilities. This is caused by three factors: a new approach to leasing and its valuation in accordance with standards, increased advance payments for apartments and an increase of financial liabilities. DEBT RATIOS Equity to assets ratio (equity / total assets) The ratio remains at a safe level, and its slight de- crease is caused by faster growth rate of assets in relation to equity. Equity to fixed assets ratio (equity / fixed assets) The decrease of this ratio results from higher dy- namics of the increase in the value of fixed assets (new purchases, real estate appraisals, investment expenditures) in relation to the dynamics of the in- crease of equity (dividend payment). Current ratio (current assets / current liabilities) Quick ratio (current assets - inventories / current liabilities) Cash ratio (cash / short-term liabilities) Debt ratio (total liabilities / total assets) The increase of this ratio results from a faster in- crease in liabilities, which was influenced by the val- uation of lease liabilities and an increase of financial debt. Equity debt ratio (total liabilities / equity) The increase of this ratio results from the increase in debt with a lower increase in equity (caused, among others, by the payment of dividends). DEBT RATIOS 31.12.2020 31.12.2019 Equity coverage ratio 30% 32% Fixed asset coverage ratio 42% 53% Total debt ratio 69% 62% Debt to equity ratio 232% 190% 91 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Revenue resulting from hand overs of 1,505 housing units. Sale of R4R Łódź Wodna, R4R Wrocław Kępa Mieszczańska and R4R Warszawa Browary Warszawskie projects to Resi4Rent. Valuation of joint-venture projects: Galeria Młociny in Warsaw, Towarowa 22 in Warsaw and Resi4Rent. Costs of sales and overheads. Valuation of liabilities related to of bonds and loans in accord- ance with amortised cost principle. Profit on investment property amounting to PLN 241 million. Factors and one-o events influencing the financial result in 2020 and in Q4 2020 RESIDENTIAL PROJECTS SHARES IN THE TOTAL NUMBER OF FINAL CONTRACTS UNITS PROFIT ON INVESTMENT PROPERTY BY ASSETS MLN PLN – Warsaw, Moje Miejsce – Warsaw, Reset II – Poznań, Apartamenty Esencja – Łódź, Fuzja I – Wrocław, Stacja 3.0 – Poznań, Osiedle Jaśminowe IV – Łódź, Osiedle Jarzębinowe VII – Warsaw, Widoki Mokotów – Other 16% 16% 5% 7% 8% 10% 13% 19% 6% Cash and loans valuation on resulting from of currency exchange fluctuations. Measurement and settlement of FX hedging instruments. Interest on deposits and borrowings granted. Factors which influenced the Group’s financial results in 2020: 1,505 UNITS – Malthouse Oces (Warsaw Brewery GH), Warsaw – Face2Face II, Katowice – MidPoint71, Wrocław – Villa Oces (Warsaw Brewery K), Warszawa – Libero, Katowice – West4 Business Hub I, Wrocław – Fuzja CD, Łódź – Other 43 53,2 31,8 41 29,4 20 19 6 PLN 241 MN 92 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Revenue resulting from hand overs of 792 housing units. Valuation of joint-venture projects: Galeria Młociny in Warsaw, Towarowa 22 in Warsaw and Resi4Rent. Costs of sales and overheads. Valuation of liabilities related to of bonds and loans in accord- ance with amortised cost principle. Profit on investment property amounting to PLN 22 million. − Face2Face II, Katowice – PLN 10.5 million; − Malthouse Oces (Warsaw Brewery GH), Warsaw – PLN 10.2 million; − Libero, Katowice – PLN 10 million; − MidPoint71, Wrocław – PLN 8.5 million; − West4 Business Hub I, Wrocław – PLN 6.1 million; − Fuzja CD, Łódź – PLN 5 million; − Moje Miejsce I, Warsaw – PLN 4,3 million and; − Others PLN 4.5 million. In Q4 2020 the value of profit on investment property was de- creased due to the need of accounting settlement of rent re- ductions in the Libero shopping center and completed oce buildings by c.a. PLN 31.7 million. RESIDENTIAL PROJECTS SHARES IN THE TOTAL NUMBER OF FINAL CONTRACTS UNITS – Poznań, Apartamenty Esencja – Łódź, Fuzja I – Wrocław, Stacja 3.0 – Łódź, Osiedle Jarzębinowe VII – Warsaw, Reset II – Warsaw, Malthouse Apartments (Warsaw Brewery E) – Warsaw, Moje Miejsce – Other 20% 14% 24% 7% 12% 12% 8% 3% Cash and loans valuation on resulting from of currency exchange fluctuations. Measurement and settlement of FX hedging instruments. Interest on deposits and borrowings granted. Factors which influenced the Group’s financial results in Q4 2020 792 UNITS 93 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 EXTERNAL FACTORS: Positive: − continued interests of entities purchasing com- mercial real estate, − good pace of development and expansion plans of Polish and foreign companies (with particular emphasis on the shared services sector) and the resulting demand for oce space, including flex- space, − the ratio of oce space per 1,000 inhabitants is lower compared to Western Europe, − fast pace of recovering from losses in the retail sector, including shopping centers, after tempo- rary limitations of operations due to the pandemic, − structural housing deficit and stabile apartments value, − stabile economic situation of Poland, compared to other countries, − good condition of the Polish financial sector. Negative: − unclear zoning status of many properties resulting from e.g. the lack of precise zoning plans in many cities and administrative districts, long-lasting court and administrative procedures, − volatility of foreign exchange rates (EUR), − uncertainty about the level of interest rates, − uncertainty about the key assumptions of the fiscal policy (amendments to tax laws) and the monetary policy in Poland, − uncertainty about the development of epidemic in Poland and worldwide as well as its further in- fluence on global economy. INTERNAL FACTORS: Positive: − a clearly defined development strategy, − the Group’s established position on the develop- ment market and its high credibility confirmed by its presence on Warsaw Stock Exchange, the Developer’s Certificate, the membership in sector and business organisations, − purchase of controlling stake of residential devel- oper Archicom, − cooperation with banks with stable financial standing in the area of lending, placement of sur- pluses and cooperation on the derivative transac- tions market, foreign exchange transactions and interest rates, − good cooperation with stable and reputable part- ners, tenants, contractors, suppliers and real es- tate buyers, − organizational structure, with separate depart- ments corresponding to operating segments that are responsible for generating profits from the op- erations of their segment and conduct projects as a whole i.e. from purchasing a plot to rental or sale, − regulated legal sphere (no material court proceed- ings), − experienced sta, − a large land bank for investment project devel- opment, − adaptation of the constructed projects to the new pandemic conditions. Negative: − the specificity of the business activity expressed in significant dependence on complicated and lengthy administrative procedures (including ob- taining building or occupancy permits, waiting for amendments to local zoning plans, etc.), − strong demand for working capital, particularly related to the large number of projects imple- mented. External and internal factors significant for the development of Echo Investment S.A. and its group 94 Management Board Report on operations of Echo Investment S.A. and its Group in 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 benets Total From Echo Investment S.A. Basic remuneration From subsidiaries, joint-ventures and associates Other benets 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 oces - 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. 95 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD PLN 2020 2019 From Echo Investment S.A. From subsidiaries, joint-ventures and associates Other benets 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. 96 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The Group’s activity covers several segments of the real estate market. Accounting revenues from sale of housing developments depends on the commissioned residential buildings and revenue on these operations is gen- erated in every quarter but it varies in terms of stability. Historically majority of apartments was handed over by the Group in the second half of the year, in particular in the fourth quarter. Revenue and results from general investment contractor services, sales of commercial investments and trade in property may be irregular. The Management Board cannot exclude other one-o events which may influence results generated in a given period. Seasonal or cyclical nature of operations Significant court, arbitration or public administration proceedings From 1 January to 31 December 2020, there were no proceedings pending before court, a competent arbitration authority or a public administration authority concerning liabilities or claims of Echo Investment S.A. or its subsid- iary, the value of which constitutes at least 10% of the equity of the Company. 97 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 BASIC DATA ON MAJOR BORROWINGS WITHOUT INTERESTS AND REVALUATION WRITE OFFS AS AT 31 DECEMBER 2020 PLN ‘000 Lender Borrower Amount [mln PLN] Interest Maturity Projekt Echo - 129 Sp. zo.o. Echo Investment S.A. 192,8 EURIBOR 3M + margin 30.09.2021 Echo Investment S.A. Projekt 12 - Grupa Echo Sp. zo.o. SKA 122,7 WIBOR 3M + margin 30.09.2021 Echo Investment S.A. Echo - SPV 7 Sp. zo.o. 109,0 WIBOR 3M + margin 31.12.2021 Swanage Sp. zo.o. Dellia Investments - Projekt Echo - 115 Sp. zo.o. Sp.K. 101,9 WIBOR 3M + margin 28.12.2021 Echo - SPV 7 Sp. zo.o. Cinema Asset Manager - Grupa Echo Sp. zo.o. SKA 76,9 WIBOR 3M + margin 30.06.2021 Echo Investment S.A. Fianar Investments Sp. zo.o. 71,4 WIBOR 3M + margin 31.12.2021 Echo Investment S.A. Villea Investments Sp. zo.o. 68,4 WIBOR 3M + margin 31.03.2021 Echo Investment S.A. R4R Poland Sp. zo.o. 61,5 margin 31.03.2029 Projekt Naramowice – Grupa Echo Sp. zo.o. SKA React - Dagnall Sp. zo.o. SKA 59,6 WIBOR 3M + margin 30.09.2021 Echo - Aurus Sp. zo.o. Face2Face - Stranraer Sp. zo.o.SKA 51,1 WIBOR 3M + margin 30.06.2021 Echo - SPV 7 Sp. zo.o. Face2Face - Stranraer Sp. zo.o.SKA 50,8 WIBOR 3M + margin 30.06.2021 Echo Investment S.A. Pudsey Sp. zo.o. 49,4 EURIBOR 3M + margin 31.03.2021 Echo Investment S.A. Galeria Libero - Projekt Echo - 120 Sp. zo.o. Sp.K 49,0 WIBOR 3M + margin 10.10.2026 Echo Investment S.A. Galeria Libero - Projekt Echo - 120 Sp. zo.o. Sp.K. 48,5 WIBOR 3M + margin 10.10.2026 Echo - SPV 7 Sp. zo.o. Projekt 139 - Grupa Echo Sp. zo.o. Sp.K. 47,7 WIBOR 3M + margin 31.03.2021 Echo Investment S.A. RPGZ IX Sp. zo.o. 47,5 WIBOR 3M + margin 31.12.2021 Echo Investment S.A. Gosford Investments Sp. zo.o. 46,4 WIBOR 3M + margin 30.09.2021 Echo Investment S.A. Projekt 144 - Grupa Echo Sp. zo.o. Sp.K. 43,8 WIBOR 3M + margin 31.03.2021 Echo Investment S.A. Senja 2 Sp. zo.o. 43,1 WIBOR 3M + margin 31.03.2021 Echo Investment S.A. Echo - Aurus Sp. zo.o. 42,0 WIBOR 3M + margin 31.12.2021 Information on borrowings granted in 2020, including to related entities 98 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 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 expert auditors to audit separate financial reports of Echo Investment and consolidated financial reports of the Echo Investment Capi - tal Group for the years 2020-2021. The agreement was concluded by the Man- agement Board, based on the Supervi- sory 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 99 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 .. Agreements between shareholders The company does not have any information on contracts concluded in 2020 between shareholders, that might be significant for its operations. . Significant transactions concluded by the Company or its subsidiaries with entities aliated on conditions other than market ones In 2020, no material transactions were concluded between Echo Investment S.A and its subsidiaries, and related parties on terms other than market terms. .. Influence of 2020 result achieved on the published financial forecasts Echo Investment S.A. did not publish any forecasts of financial results for 2020. . Changes in the basic principles of management In 2020, there were no material changes in the basic management principles of the Company and the Group. . Contracts which may result in changes in the ownership structure of shares The Company is not aware of any agreements potentially resulting in changes in the proportion of shares held by existing shareholders. Other disclosures required by law 100 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 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 aected 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 oces 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 oces. 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 The impact of the COVID-19 pandemic on the operations of Echo Investment Group preferences and behavior, which allows for adjust- ing the oer 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, especially 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 oce, 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 101 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 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 oce, 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 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 eects 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 eco- nomic slowdown was to secure financial liquidity. The Management Board has undertaken a number of activities 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 oce buildings and other receivables; − analyzing the land bank and commencing the process 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 dicult 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 dicult 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 102 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 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. Both facilities are focused on marketing activities to strengthen their 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 oces, 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 oers 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 eleva- tor), the services of architects (who help arrange an apartment in such a way that oce 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 clients 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 aected by the tightening of banks’ lending policies. The initially tightened credit pol- icy of banks was also of great importance for the housing sector, but this turned out to be tempo- rary. Despite the introduction 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 number of cases and the introduction of re- strictions, 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 high- er requirements for taking out mortgage loans, a signicant number of potential apartment buyers postpone the purchase decision and take advantage of institutional apartment rental. 103 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Oce sector The most important task in the oce 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 adjusted its expectations concerning yields on future sales trans- actions and suspended the sale of some buildings. In Q1 2021 the Group has sold Villa Oces building in the Warsaw Brewery complex, what stabilised the long-term cash-flow. Promising sale negotiations are also underway regarding the Malthouse Oces and Moje Miejsce oce buildings in Warsaw (signed let- ters of intent). The group also returned to sale pro- cess of the Face2Face oce 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 oce 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 oces in the buildings of Echo Investment. A number of solutions responding to post-covid needs have been compiled into the “healthy oce” 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 oce buildings. The “five for safe- ty” program is a guarantee that these oce 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 oce 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 aected 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 oce space. This may result in a lower pace of new build- ings leasing and a decline in rental rates. This situa- tion 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 value decrease, in an extreme situation, the covenants pro- vided for in loan agreements may be broken cutting 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 in- dicates that in the case of shopping centers: Libero in Katowice and Galeria Młociny in Warsaw (in which the Group holds a 30% stake), the development of the pandemic and subsequent lockdowns may result in bankruptcy of some tenants, which in practice may mean termination of some lease agreements . The consequence could be a reduction in the rent- al 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 activ- ities of shopping centers are introduced, rental in- come 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. 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 oces 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 periods. Currently, the oce buildings built by the Group are provided with financing. Residential projects are 104 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 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 Kielce, March 30, 2021 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 Oces 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 related to the impact of the development of the coronavirus 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 poten- tial impact on an ongoing basis and takes all possible steps to mitigate any negative eects for the Group. | Corporate governance 105 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 CHAPTER 2 STATEMENT ON THE APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES | Corporate governance 106 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The main document governing the issues of cor- porate governance is the Articles of Association of Echo Investment S.A. The binding Articles of Asso- ciation of the Company is available on the website en.echo.com.pl in the tab “Strategy and corporate governance”. Other issues of corporate governance are regulated in the following documents: − By-laws of the General Meeting of the Shareholders, − By-laws of the Supervisory Board, − By-laws of the Management Board, − By-laws of the Audit Committee, − Code of Conduct. All the above documents are available on the website en.echo.com.pl in the tab “Investor relations – Strat- egy and corporate governance”. Changes in the Company’s Articles of Association during 2020. In 2020, amendments were made to the Articles of Association of Echo Investment S.A., based on the resolutions of the Ordinary General Meeting of Share- holders of August 13, 2020. The amendments mainly concerned rights and obligations of the Supervi- sory Board. Compared to the previous regulations, the Supervisory Board received new competencies, some of which result from legal requirements and others from changes in the way the Company and the Group are managed. Pursuant to the amendments introduced in 2020, the Supervisory Board is authorized or obliged to: − establish the Supervisory Board bylaws and ap- prove the Management Board bylaws; − prepare reports on the remuneration of the Man- agement Board members and of the Supervisory Board members during the financial year, in line with the remuneration policy adopted by the Gen- eral Meeting. As amended in 2020, the prior approval of the Su- pervisory Board is required for: − concluding an agreement with a sub-issuer re- ferred to in Article 433 para 3 of the Code of Commercial Companies and Partnerships; − incurring liabilities and disposing of rights as re- gards issues included in the Company’s current operations – if their value exceeds 20% of the Company’s equity. In case of doubt as to wheth- er a given matter is incorporated in the range of current operations, the Supervisory Board shall be entitled, at the request of the Management Board, to make a relevant interpretation in this respect. Such interpretation shall be binding for the Man- agement Board, − the adoption of the annual budget and business plan for the Company and its subsidiaries pre- pared by the Management Board; − the signing, a substantial change (in particular the change on financial conditions or termination con- ditions) or the termination of any agreement be- tween the Company or its subsidiary, on the one hand, and members of the Management Board, the Supervisory Board or their related parties (within the meaning of International Accounting Standard 24 “Related Party Disclosures”), on the other hand; − making changes in the accounting policy that have a significant eect on the standalone or consolidated financial statements of the Compa- ny, except for changes required by the auditor of the Company or its subsidiary or resulting from changes in the law (Polish accounting principles or International Financial Reporting Standards); − exercising by the Company or a subsidiary, as a shareholder or a partner of its subsidiary, of voting rights at the general meeting or partners’ meet- ing of the subsidiary with respect to the matters referred to in § 16 para 2 items (a)-(c), (f) and (g) of the Company’s Articles of Association; for the purposes of this section, for the purposes of this section, references to the Company and the mem- bers of the Management Board referred to in the sections above shall be interpreted as references to the subsidiary and the members of the Man- agement Board of the Subsidiary, respectively; − payment of an advance dividend to shareholders proposed in the Management Board resolution. The Articles of Association of the Company and the most important corporate governance documents | Corporate governance 107 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Best Practices of WSE Listed Companies In 2020 Echo Investment S.A. was subject to the cor- porate governance principles contained in the docu- ment ‘Best Practices of WSE Listed Companies 2016’ adopted by the resolution of the Council of WSE on October 13, 2015. The principles came into force on January 1, 2016 and they are still in eect. The text of the set of the above principles is available on the website of the Warsaw Stock Exchange at gpw. pl/best-practice. Currently the Company applies all recommended best practice principles except for listed above. ‘IV.Z.2. If it is justied due to the shareholding structure of the company, a company provides a universally available broadcast of the general meeting in real time.’ The company does not provide a universally available broadcast of the general meeting in real time, but fol- lowing completion of the general meeting, the com- pany makes an audio-visual recording of the general meeting available on its website. ‘V.Z.6 e company denes in its internal regu- lations the criteria and circumstances in which a conict of interest may arise in the company as well as the rules of conduct in the event of a con- ict of interest or the possibility of its occurrence. e company’s internal regulations include ways of preventing, identifying and resolving conicts of interest as well as the rules of excluding a member of the management board or supervisory board from participation in considering a matter covered or threatened by a conict of interest.’ In its Code of Conduct the Company has defined the criteria and circumstances in which a conflict of interest or possibility of its occurrence may arise. In the event of a conflict of interest or the possibility of its occurrence, the Management Board and the Supervisory Board have determined the practice of excluding a person whose conflict of interest may be involved in decision making. The Company un- dertakes to specify detailed methods of preventing, identifying and resolving a conflict of interest as well as the principle of excluding a member of the management board or supervisory board from par- ticipation in the consideration of a matter covered or threatened by a conflict of interest in appropriate procedures. ‘IV.Z.11. e members of the management board and the supervisory board participate in the general meeting in a composition providing for substantive answers to questions asked during the general meeting.’ Representatives of the Board are present at the Gen- eral Meeting or are available to participants of the General Meeting to answer questions. Although the Management Board also invites members of the Su- pervisory Board to be present at or available to the Shareholders so that the Supervisory Board mem- bers are present and may answer the Share-holders’ questions, no assurance may be given that the Super- visory Board representatives will be present during the general meeting. Notwithstanding the above, the Company is of the opinion that the Company’s Man- agement Board is the only corporate body author- ised to respond to questions pursuant to Article 428 of the Commercial Companies Code, while members of the Supervisory Board have no such power. If the representatives of the Management Board are not able to answer the Shareholder’s questions during the General Meeting, the Company undertakes to re- spond to the Shareholder’s questions in the shortest possible time, subject to the restrictions set forth in applicable binding laws. Standards recommended by the WSE for the compliance management system on counteracting corruption and the whistle-blower protection system On October 8, 2018 the Warsaw Stock Exchange published “Standards recommended for the com- pliance management system on counteracting cor- ruption and the whistle-blower protection system in companies listed on markets organized by the Warsaw Stock Exchange S.A.”. At present the doc- ument is a non-binding recommendation for listed companies. The recommendations include: − development and application of the Anti-Corrup- tion Code; − sta training in the field of counteracting corrup- tion; − introduction of anti-corruption clauses in con- tracts; − development and application of the policy for granting and accepting gifts; − development and application the policy for spon- soring and donations; − implementation of the procedure to facilitate re- porting about irregularities by whistle-blowers; − establishment of the compliance management function. Echo Investment completed all of the above rec- ommendations, except for the last one regarding the establishment of the compliance management function. In Echo Investment, compliance manage- ment falls within duties of several employees of the legal department, and among others, the Ethics Committee. The Ethics Committee is a advisory body of the Management Board with responsibility for super- vising the proper implementation of procedures and the application of adopted codes, regulations and other internal regulations, in particular the An- | Corporate governance 108 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 ti-Corruption Code and procedures for concluding and performing donation, sponsorship and similar agreements. The Committee includes: − a Management Board Member appointed by res- olution of the Management Board or by decision of the Management Board President; − a Director or some other member (legal counsel or advocate) of Echo’s legal department, appoint- ed by the department’s director; − an employee of the Marketing Department ap- pointed by resolution of the Management Board or by decision of the Management Board Presi- dent. The current members of the Committee: − Maciej Drozd, Vice-President for finance, − Rafał Zboch, the Director of the legal department, − Emil Górecki, communication manager. Anti-Corruption Code In 2018, the Management Board of Echo Investment introduced the Anti-Corruption Code which states who is considered a public person or his/her closest person, on what basis Echo Investment’s employees can contact public persons, and what precautions are required when undertaking such issues with pub- lic persons as donations and sponsorship, invitations, covering accommodation costs, catering, informal and private meetings, presents and occasional gifts, agency agreements in contact with public adminis- tration ocials or other contracts with public per- sons. Engagement of public persons The Anti-Corruption Code also states the principles of the engagement of public persons or their closest persons. According to the Code, the engagement is always carried out in the standard mode, in accord- ance with recruitment procedures and on conditions adopted in the company, but in addition, the risk as- sessment of the engagement of a person performing - now or in the past - a public function is a part of any recruitment process . If the HR department recognis- es a potential risk, HR employees inform the Ethics Committee about this fact. The Ethics Committee, after examining the case, makes recommendations on continuing the recruitment process. Employees of Echo Investment are also obliged to inform the Committee if their closest person becomes a public person. Cooperation with intermediaries in contact with administration ocials As to contact with public administration ocials, Echo Investment often engages intermediaries e.g. architects. In order to cooperate with a new enti- ty - an intermediary whose task will be to obtain decisions, approvals and other ocial orders, Echo Investment employees are obligated to apply the following procedure: 1. The analysis of opinions on a given partner who would be engaged in contact with administration ocials; 2. The question whether a potential intermediary is connected with public persons or their closest persons; 3. The collection from an intermediary a statement of getting acquainted with the Code of Conduct and the Anti-Corruption Code of Echo Investment; 4. The collection from an intermediary a statement that that no part of the remuneration paid by Echo will be used to pay the cost of any economic or personal benefits for any public ocials. A consent of the Ethics Committee is required to conclude an agreement with a new entity that will act as intermediary in contact with public adminis- tration ocials he administration and oces. In case of suspected irregularities in cooperation with an in- termediary, the Committee may also undertake ex- planatory actions. Also, any circumstances suggest- ing an unethical or non-compliant with standards behaviour of business partners should be reported to the Ethics Committee. Dealing with business partners Employees of Echo Investment involved in transac- tions with third parties must loyally represent the Company’s interests, while business partners are guaranteed fair treatment on terms that are based exclusively on transparent considerations of a busi- ness nature. All conflicts of interests on the part of any Employees must be reported according to the Code of Conduct. In addition, the Committee must be notified of any attempt to obtain business for or from Echo Group companies in any unethical manner. Echo Employees shall pay attention to and inform the Committee on any circumstances suggesting an unethical or non-compliant with Echo’s standards behaviour of an intermediary. The Committee shall then immediately undertake actions aimed at veri- fying the reported circumstances and deciding on further cooperation with a given business partner. Echo expects that rules arising from generally ap- plicable anti-corruption laws will be complied with also by all of Echo’s business partners. To this end, the Legal Department makes sure that any Echo contracts which it drafts or opines for Echo Group companies contain anti-corruption clauses which are appropriate for the nature of the particular contrac- tual obligations, including at the minimum the fol- lowing provisions, adjusted as needed to the object of a given agreement. Auditing Compliance with the provisions of this Code, as well as the performance of duties presented therein by Echo employees and the Ethics Committee is subject to periodic examination by the internal audit depart- | Corporate governance 109 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 ment. The full content of the Anti-Corruption Code is available on the website en.echo.com.pl in the tab “Strategy and corporate governance”. The procedure of concluding and performing donation, sponsorship and similar agreements Echo Investment implemented the procedure of concluding and performing donation, sponsoring and similar agreements in order in order to ensure that Echo’s funds in the area of social responsibility in business are spent transparently and eectively, and in compliance with applicable laws as well as Echo’s internal policies and standards of ethics. This Policy is binding upon all Echo group companies and applies to all donation, sponsorship and similar agreements, whereby these companies undertake to provide resources, financial or in-kind, to any third party in order to support charitable, social, cultural, sport or business ventures, projects or events. The procedure is under the strict supervision of the Eth- ics Committee. It implemented a detailed path of proceedings with applications and matters related to charity, sponsorship, etc., in which a potential donor is Echo Investment or a company from the group. It includes a request for support, screening of a poten- tial beneficiary, proceedings in case when a public person is connected with an applicant, and later per- formance monitoring of the granted support. Code of Conduct As part of risk management and in order to strength- en its corporate culture, Echo Investment introduced the Code of Conduct – a document which defines the company’s values and ethical norms required in its relations with employees, shareholders, local ad- ministration and communities. The Code of Conducts organizes issues such as relations among employees and superiors or relations with business parties and other interested parties. It also defines the code of conduct in dicult situations such as a conflict of interest, a suspicion of irregularities, a corruption proposal or working with co-operators of bad repu- tation. As every year, in 2020, Echo Investment con- ducted a mandatory training for each employee in ethics, mainly based on the Code of Conduct. The training ended with an obligatory exam. Whistleblowing policy The company has implemented procedures of ir- regularity reporting and their examination, which promote ethics in everyday work and provides the reporting persons with a sense of security. They make it possible for employees to report unethical or illegal activities observed, which infringe the law, internal regulations or principles of social co-exist- ence. The system operates with the support of an external company Linia Etyki. Other procedures and policies Echo Investment has also introduced other proce- dures and specific policies concerning, inter alia, auditor selection policy, policy non-audit services, environmental policy or security policy. They stream- lines and automates the management process for specific areas of Echo Investment’s operations and facilitates performance monitoring. The content of these procedures and policies is available on the website en.echo.com.pl in the tab “Strategy and corporate governance”. | Corporate governance 110 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Systems of internal control and risk management The Company’s Management Board is responsible for the internal control system and its eectiveness in the process of preparing financial statements and periodic reports published according to the Regula- tion of the Minister of Finance of February 19, 2009 on current and periodic information to be submitted by issuers of securities and conditions for consider- ing as equivalent information required under the law of a non-member state (J.L. No. 33, item 259). The eectiveness and correct operation of the internal control system and of the risk management system is ensured by: − defined and transparent organisational structure, − skills, know-how and experience of people in- volved in the internal control process, − supervision by the management over the system and regular evaluation of the Company’s business, − verification of financial statements by an inde- pendent statutory auditor. Mutual connections and interdependence of internal control elements in several areas, such as: − operating activity, − financial activity, − reporting process (including the preparation of financial statements), − analysis of costs and expenditures related to pro- jects, costs and general administrative expenses and sale, and costs and expenditures related to the use of leasable area, − risk management, ensuring an eective internal control system and supporting the management of the whole Group. To make this process optimal and eective, the Com- pany has introduced the automation in the internal control process: − decision limits (approval of costs, expenditures, payments, selection of counterparties), − supervision over employee quotas by independ- ent of people assigning quotas, − configuration of accounts (enabling manual post- ings on automatic accounts, transparent and easy process of transferring information for reporting), − automation of payments (generating a payment from the accounting system for electronic bank- ing systems), − − integrated systems moneyFlow, contractFlow, projectFlow, budgetFlow and businessPartner360 facilitating the circulation of invoices, approval of expenditures and costs, posting, verification of the legitimacy and analysis of financial flows in the Group. Main characteristics of the internal control and of the risk management system in relation to the process of financial statements Main characteristics of the internal control and of the risk management system in relation to the process of preparing separate and consolidated financial statements: − transparent organisational structure, − qualified sta, − direct supervision by the management, − internal audit department, − auditor verification of statements. The people responsible for preparing financial statements, as part of the Company’s financial and management reporting, are a highly qualified team of specialists of the Finance Department, which is managed directly by the Finance Director and, in-di- rectly, by the Company’s Management Board. In the Finance Department, this process involves mainly sta from the Accounting Division, assisted by em- ployees from the Budgeting and Analysis Division and Financing Division, and the whole process is supervised by mid-level management sta of the Finance Department. Economic events in the course of the year are re- corded by the Records Team of the Accounting Di- vision. As part of internal control, the correctness of economic records is monitored by the Reporting Team from the Accounting Division, who have certif- icates of the Minister of Finance to provide ser-vic- es involving the keeping of accounting books (so called independent accountants). After completing all pre-defined processes of closing the books, the Team prepares financial statements. The process of monitoring the correctness of posting costs also in- volves employees from the Department of Budget- ing and Analysis. | Corporate governance 111 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Valuations recognised in the statements are pre- pared and submitted to the Reporting Division by the employees of the Department of Budgeting and Analysis. This Department has knowledge in the area of financial accounting (some of the sta are inde- pendent accountants), management accounting and financial analyses (some of the sta are adequately trained in audit and internal control). They also mon- itor the correct posting of these measurements. The whole process of preparing statements is supervised by managers from the Accounting Division and the Department of Budgeting and Analysis. The recon- ciliation of settlements with banks is the responsi- bility of the Payments and Insurance Team. Thanks to a broad internal control system, which involves sta from individual teams, and supervision by man- agers from the Finance Department, any errors are adjust-ed on an ongoing basis in the Company’s ac- counting books according to the adopted account- ing policy. Verification of financial data correctness is automated. Before presented to an independent au- ditor, the pre-pared financial statements are checked by the Company’s Finance Director. According to the applicable laws, the Company reviews or audits its financial statements using a renowned and highly qualified independent statutory auditor. Other use of internal control system and of risk management system in the company, taking account of significance of the financial and accounting system The controlling process in the Company, whose basic and key element is the internal control, is based on a system of budgets. On an annual basis, the Company updates short-term, mid-term and long-term plans, and prepares very detailed budgets for the following year with regard to: − construction projects, − expenditures, − general administrative and sales expenses. Based on the budgets, cash flow forecasts, which are necessary in the risk management process, are up- dated. The budgeting process is based on the Com- pany’s existing formalised rules and is closely super- vised by the Finance Director. The process involves the Company’s mid-level and senior management sta responsible for specific budget areas. Respon- sibility for the preparation and presentation rests with the Finance Branch, which is also responsible for monitoring the incurred expenditures and report- ing on the performance of budgets. The budget of construction projects is the responsibility of Project Managers, who are assisted by the Business Con- trolling Department sta. The budget of costs and general administrative and sale expenses is the re- sponsibility of the Budgeting and Analysis Division. This division is also responsible for preparing finan- cial and cash flow forecasts and for verifying them. The budget prepared for the following year on an annual basis is approved by the Company’s Manage- ment Board and Supervisory Board. The Company’s financial and accounting system is the source of data for the whole reporting system of the Company, i.e.: − for the process of preparing financial statements, − periodic reports, − management reporting system. The whole reporting system uses the Company’s financial and management accounting based on the accounting policy adopted in the Company (In- ter-national Financial Reporting Standards). Thanks to this, management reporting is not detached from the prepared financial statements and takes account of the format and the level of detail of data present- ed in these statements. The process of preparing financial statements is described in the section before. The periodic and management reporting process is a continuation of the budgeting process described before. Once the accounting books have been closed, reports are prepared on the actual performance compared to budgets and forecasts. In relation to closed reporting periods, the Group’s financial results are analysed in detail and compared to the budget assumptions and forecasts made in the month preceding the analysed reporting period. The key element in this process is the monitoring of the deviation of actual perfor- mance from the plan, and explaining the reasons for such a deviation. Monitoring deviations and learning their reasons helps optimise the Group’s operations and minimise potential risks. Risk management Eective internal control (along with the existing re-porting system) is the basic step in identifying risks and managing changes. In addition to the reporting system, eective risk management also involves a risk analysis. Therefore, the Company’s key measure aimed at reducing its risk exposure is the correct assessment of prospective investments (Budgeting and Analysis Division) and the monitor- ing of current investments (project managers). To this end, investment models and decision-making procedures are employed, whose observance is closely monitored by the Company’s Management Board. In addition, all requests and potential changes in the budgets of investment projects are entered by the Budgeting and Analysis Division into result forecast models and a cash flow forecast so that an issue can be examined globally, and to eliminate risks related to projects, liquidity, foreign exchange rates, etc. Global management and risk monitoring as well as internal control in all areas that are important for the organisation largely limits most risks to which the Company is exposed. | Corporate governance 112 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Risk Management Policy As part of improving corporate governance stand- ards, the Echo Investment Group implemented a Risk Management Policy. The policy describes the objectives of risk management, its place within the management system, and the responsibility and the rights of people involved in the process. The Man- agement Board of Echo Investment S.A. is responsi- ble for the overall risk management, in cooperation with the Supervisory Board and the Audit Commit- tee. The main goal of the Risk Management Policy is to provide sustainable and stable economic growth of the Group and to promote a proactive approach to reporting, estimating and managing risks related to the Group’s operations. The Risk Management Pol- icy formalises and presents in a structured manner the approach to risk management in the Echo Invest- ment Group expected by the Management Board. Internal Audit The Internal Audit Department that performs inde- pendent assessment of risk management and inter- nal control systems, has been functioning in Echo Investment. Audit tasks engagements are carried out based on annual audit plans, approved and adopted by the Audit Committee. Ad-hoc audits recommend- ed requested by the Audit Committee or the Man- agement Board of the Company are also conducted. The results of the internal audit work are reported directly to the Audit Committee and the Company’s Management Board. The internal audit department has free and unrestricted access to the Management Board and Audit Committee of the Supervisory Board. The Internal Audit Director reports function- ally to the Audit Committee and administratively to vice-president, CFO who performs oversight role over internal audit function in the Company. Audit Department meets the criteria and principles of in- dependence set out in the widely used international standards for the professional practice of internal auditing. | Corporate governance 113 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The rules for amending the Company’s Statute or Articles of Association are governed by the Commercial Companies Code. Amendments to the Statute require a resolution of the General Shareholders’ Meeting of Echo Investment S.A. and an entry into the National Court Register (KRS). The Management Board reports the amendment to the Statute to the respective register court within three months of the date of the resolution of the General Meeting. Together with the entry of an amendment to the Statute, the amendment to the Com- pany’s corporate data reported to the register court is entered into the National Court Register. The General Shareholders’ Meeting can authorise the Supervisory Board of Echo Investment S.A. to specify a complete text of the amended Statute or to introduce other editorial amendments, as specified by the resolution of the Meeting. The procedure of the General Meeting of the Company, its powers and the rights of share-holders as well as the manner of exercising them are governed by the Company’s Statute and the Code of Commercial Companies. The Company’s Statute is available in the Investor relations / Strategy and corporate governance tab on the Company’s website en.echo.com.pl. The schedule of work related to the organization of the gen- eral meetings of the Company, including the preparation of materials presented at the general meeting, is planned so as to duly fulfil the obligations towards shareholders and enable them to exercise their rights. Rules for amending the Company’s articles of association The procedure of the general meeting, a description of shareholders’ rights and the manner of exercising them | Corporate governance 114 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Composition and changes in the management board In 2020 and as for the day of this report the com- pany’s Management Board acted in the same com- position: Nicklas Lindberg – President of the Board, Maciej Drozd – Vice-President of the Board, CFO, Artur Langner – Vice-President of the Board, Marcin Materny – Member of the Board, Rafał Mazurczak – Member of the Board, Waldemar Olbryk – Member of the Board, Małgorzata Turek – Member of the Board. Due to the conditional appointment of Waldemar Olbryk for the CEO of Archicom S.A., on March 15, 2021 Waldemar Olbryk, resigned from his seat in the Management Board of Echo Investment. The resig- nation will be eective under the condition of final- izing the purchase of Archicom shares by the Echo Investment Group. Nicklas was appointed CEO of Echo Investment in 2016 and he is responsible for the strat- egy and development of the company. From 2016 Echo Investment has significantly grown its scale of operation and pipe- line. The launched Strategy of Profitable Growth trans - formed Echo Investment into pure developer operating in seven major Polish cities, Nicklas Lindberg President of the Board, CEO market leader in residential, oce and retail real estate sectors. The Group started to design and build urban ‘desti- nation’ projects, that combine all functions and are well-de- signed parts of the cities, where people can live, work and entertain. It has also intro- duced operation in flex oce space (CitySpace) and rental apartments (Resi4Rent) seg- ments. Until 2015 Nicklas Lindberg was employed by Skanska Group, where he held several top positions, such as presi- dent of Skanska Commercial Development Europe (CDE), head of Skanska Property Po- land, CFO and CEO of Skan- ska Russia and a manager of residential development units in the Nordics. He graduated from the University of Lund in 2001. | Corporate governance 115 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Responsible for the construc- tion department of the Group. He is a graduate of the facul- ty of civil engineering at the Kielce University of Technol - ogy. After finishing his stud- ies he started working in the construction sector, where Artur Langner Vice-President of the Board he gained experience in par- ticipating in every stage of project construction. Artur started working for Echo In - vestment in 1998 as a project manager. In June 2000 he was appointed director of project preparation and later director of the technical division. In June 2005 he became a man- agement board member and was made a vice-president of the management board on June 27th 2008. Marcin Materny Management Board Member Responsible for the develop- ment of the company’s shop- ping and entertainment cen- tres. He has been employed by Echo Investment since 1997 and has since climbed all the career ladders in the company. He started as a leasing specialist and was lat- er in charge of a leasing team responsible for ten shopping centres completed in 1998– 2000. Following this, as the leasing director, he coordinat- ed (among others) the leasing and marketing of Pasaż Grun- waldzki in Wrocław. In 2007– 2010, Marcin was employed by Capital Park, where he co- ordinated the develop-ment of retail and oce projects. In 2014 he became the di - rector of Echo Investment’s shopping centre department, where he contributed to the company’s strategy in this field and was responsible for its comprehensive develop- ment. He was appointed to the management board on September 15th 2016. Rafał Mazurczak Management Board Member Responsible for Echo Invest- ment’s office department. He started his career at Echo In-vestment in 2000 as an of- fice leasing manager. In 2007– 2013 he was the leasing direc- tor of Echo Investment’s oce department. Since 2013 he has been the director of the oce department. He co-devised the development strategy of this part of Echo Investment’s business and was responsi- ble for its implementation. He was also responsible for the construction, leasing and marketing of one of the com- pany’s flagship projects, the Q22 sky-scraper in Warsaw, along with Park Rozwoju and O3 Business Park in Kraków, A4 Business Park in Katowice, the Tryton oce building in Gdańsk as well as West Gate and Nobilis in Wrocław. Rafał was appointed to the man- agement board on September 15th 2016. Appointed as a vice-president of Echo Investment’s board in 2015. Responsible for finance and back oce operations. He restructured the Echo In- vestment group while intro- ducing the Profitable Growth Strategy. His task was, among others a change in the mod- el of operation and financing of the Group, which was the long-term owner of a portfo- lio of commercial real estate Maciej Drozd Vice-President of the Board, CFO generating fixed income from rent, and has become a clas- sic developer focused on fast capital turnover and generat- ing high returns. As a result, Echo Investment has been paying dividends on a regular basis since 2016. The compa- ny is also one of the largest bond issuers in the real estate sector. In 1995 he joined Eastbridge Group, initially as the financial director of the group’s oper- ational companies. Between July 2009 and June 2015 he was also the CFO and man- aging partner of Eastbridge Group. He studied philoso - phy, mathematics and man- agement at the University of Warsaw and holds a master’s degree in philosophy and a master’s degree in manage - ment. Maciej also holds an MBA degree from the Univer- sity of Illinois. | Corporate governance 116 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Małgorzata Turek Management Board Member A specialist in the field of as- set management as well as real estate purchase and sale transactions. She has over twenty years of experience in the real estate sector, working for both investment and de- velopment companies as well as international law firms. In 2017, she became president of the then newly formed Globalworth Poland Real Es- tate, where she was respon- sible for the organisation and development of a sustainable, revenue-generating property portfolio, as well as the estab- lishment of all key functions of the company. She also gained valuable experience at Skans- ka Property Poland, where in 2012–2017, as a board member (and chief operating ocer), she was responsible for the company’s transactions and operations. Previously, she was employed by leading law firm Linklaters, where she spe- cialised in transactions on the commercial real estate mar- ket. Małgorzata is a graduate of the faculty of law and ad- ministration of the Jagiellon- ian University in Kraków and a member of the Polish Bar Association. Waldemar Olbryk Management Board Member Responsible for the devel- opment of the company’s operations in the residential sector. He joined Echo Invest- ment in August 2017. Prior to this he was employed by the Skanska group, in such posi- tions as the director of busi- ness development and team manager responsible for new business, including public pri- vate partnerships and shared services. Prior to 2008 he was employed by Philips Po- land, Apsys Poland and BP. Waldemar graduated in inter- national economic relations at the University of Łódź and also completed MBA studies at the University of Łódź and the University of Maryland. He was appointed to the board of Echo Investment on October 10th 2017. | Corporate governance 117 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Description of principles regulating the appointment and dismissal of managerial sta and their rights The Management Board of Echo Investment S.A. op- erates based on the Commercial Companies Code Act (J.L. of 2017, item 1577), the Company’s Stat- ute, the Rules and Regulations of the Management Board of Echo Investment S.A., and according to the adopted “Code of Best Practice for WSE Listed Companies”. The Management Board or its Mem- bers are appointed, dismissed and suspended by the Supervisory Board, which also appoints the Presi- dent and the Vice-Presidents of the Management Board. The term of oce of the Management Board is three years, and Management Board members are appointed for a joint term of oce, which does not preclude the right to dismiss a member of the Management Board earlier. Mandates of Members of the Management Board expire on the day of the GSM’s approval of the financial statements for the last year of the Management Board’s term of oce. The Management Board or its individual Members may be dismissed by the Supervisory Board before the expiry of their term of oce, especially follow- ing a justified written motion of shareholders who represent at least 1/3 of the share capital, or if the Management Board’s fulfilment of duties for the last closed financial year is not acknowledged by the Or- dinary General Shareholders’ Meeting. The Manage- ment Board may consist of one or more persons. The Management Board represents the Company before ocials, institutions, third parties, courts as well as public authorities. An appointed Proxy may act on behalf of the Company to the same eect. Declarations of intention, commitments and sign- ing contracts and other documents on behalf of the Company must be made jointly by: the President and the Vice-President of the Management Board; or two Vice-Presidents of the Management Board; or the President or the Vice-President together with Member of the Management Board; or the President or the Vice-President of the Management Board to- gether with the Proxy. Management Board Members may only fulfil their duties in person. The Manage- ment Board runs all current aairs of the Company, subject to restrictions specified by the Commercial Companies Code and the Article of Association. The purchase and sale of real property, perpetual usu- fruct title or a share in real property or a share in perpetual usufruct title by the Company lies within the responsibilities of the Management Board, sub- ject to § 16, section 2, letters b) of the Statute. When exercising the rights of the General Meeting in subsidiaries, the Company’s Management Board is obliged to obtain a prior consent from the Compa- ny’s Supervisory Board, even if the incurred liability or the exercise of a right by a subsidiary exceeds the limits specified in § 16, section 2, letters b) and c) of the Statute. According to this, a consent from the Su- pervisory Board is required for the Company to incur liabilities exceeding 10% of its equity, and in case of obligations within the scope of matters covered by the Company’s day-to-day operations, the consent of the Supervisory Board is required if the value of the activity exceeds 20% of the Company’s equity. When deciding on the Company’s issues, the Man- agement Board is particularly obliged to act within the limits of reasonable economic risks, following an in-depth analysis and consideration of all available information, studies and opinions which, in the opin- ion of the Management Board, should be taken into consideration in the Company’s interest. In addition, the Management Board submits motions regarding issues to be discussed by the General Meeting to the Company’s Supervisory Board for approval. Information on the produced opinions is announced to the public by the Company immediately after such information is received from the Company’s Supervi- sory Board. When contacting the media, members of the Management Board may only provide generally available information about the Company. All state- ments for the media regarding financial forecasts and the strategy of the Company or of the Manage- ment Board may only be made by the President or the Vice-President of the Management Board. With regard to other issues, all members of the Manage- ment Board or other authorised persons are allowed to contact the media. The Management Board meets at least once a month, the meetings are presided over by the President of the Management Board and, in his/her absence, by the Vice-President of the Management Board and, in the absence of the President and the Vice-President of the Management Board, the meetings are presid- ed over by the longest-serving Management Board member of Echo Investment S.A. The meetings of the Management Board are held at the Company’s oce, unless all members of the Management Board agree to hold a meeting in a dierent location. A meeting of the Management Board may be held, if all members of the Management Board have been | Corporate governance 118 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 informed about the meeting, and at least two mem- bers of the Management Board are present. The meetings of the Management Board are convened by the President of the Management Board or by any other member of the Management Board who sees fit to do so. Every member of the Management Board must be informed about the date and agenda of the meeting at least 2 days prior to the planned meeting. The notification may be delivered by phone, through the Oce of the Company’s Management Board, by e-mail, by fax or in writing. The meetings of the Management Board may be held even when they have not been formally convened, if all members of the Management Board are present and no present member objects to the meeting being held or to spe- cific items on the agenda. The Management Board may pass its resolutions in writing or using means of telecommunication, subject that, in such a case, the Management Board is presided over by the member requesting the adoption of a given resolution. This procedure is not allowed when at least one member of the Company’s Management Board objects. The Management Board makes decisions by way of resolutions. Resolutions of the Management Board are adopted by an absolute majority of votes. In the event of a tied vote when adopting resolutions by the Management Board, the President of the Man- agement Board shall have the casting vote and, in the absence of the President of the Management Board, the Vice-President of the Management Board shall have the casting vote. In the absence of the President and the Vice-President of the Management Board, the longest-serving member of the Compa- ny’s Management Board shall have the casting vote. When required, minutes are taken from the meetings of the Management Board. Resolutions of the Man- agement Board are recorded in the minutes in such a way so that they form attachments to the minutes, or are included in the text of the minutes. In addi- tion, the minutes must include the date and place of the meeting of the Management Board, names of the present Management Board members and the number of votes cast on individual resolutions. The minutes must be signed by all Management Board members attending the meeting. Any dissenting opinions of the attendees must be enclosed to the minutes. The minutes are kept at the Oce of the Company’s Management Board. The Management Board, when defining strategic objectives and current tasks, considers the best in- terest of the Company, its shareholders, partners, customers, employees and creditors, and observed the law. To ensure transparency and eectiveness of the management system, the Management Board followed the rule of professional conduct within the limits of reasonable economic risk, taking account of the wide range of the available information, analyses and opinions. The remunerations of the Management Board Mem- bers were defined by the Supervisory Board, based on the responsibilities and skills of individual Man- agement Board Members, and taking account into the Company’s financial results, and a reasonable relation was maintained to remunerations of Man- agement Boards in similar companies on Polish real property market. On August 13, 2020, the General Meeting of Share- holders adopted the Remuneration Policy for mem- bers of the Management Board and Supervisory Board, which organizes the issue of remuneration of persons sitting on the company’s governing bodies. The principles of remuneration in 2020 are in line with the policy. | Corporate governance 119 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Composition of the Supervisory Board and its changes SUPERVISORY BOARD AS AT JANUARY 1st 2020 Mark E. Abramson – Independent Member of the Board, Maciej Dyjas – Member of the Board, Stefan Kawalec – Independent Member of the Board, Nebil Senman – Member of the Board. SUPERVISORY BOARD AS AT DECEMBER 31, 2020 Noah M. Steinberg – Chairman of the Board, Tibor Veres – Vice- Chairman of the Board, Margaret Dezse – Independent Member of the Board, Maciej Dyjas – Member of the Board, Sławomir Jędrzejczyk – Independent Member of the Board, Peter Kocsis – Member of the Board, Bence Sass – Member of the Board, Nebil Senman – Member of the Board. On December 13, 2019 Karim Khairallah, Laurent Luc- cioni and Sebastian A. Zilles submitted resignations from membership in the Company’s Supervisory Board conditional upon the acquisition by WING IHC Zrt of all the shares in the share capital of Lisala sp. z o.o.. Condition included in the resignation letters was fulfilled as of December 13, 2019 and the resignations have been eective. On January 9, 2020, the Extraordinary General Meet- ing of Shareholders of Echo Investment S.A. resolved to appoint: Noah Steinberg, Tibor Veres, Peter Koc- sis and Bence Sass as a member of the Company’s Supervisory Board during the term of oce. The Extraordinary General Meeting of Shareholders of Echo Investment S.A. decided to entrust the function of the Chairman of the Supervisory Board to Noah Steinberg and the function of Vice Chairman of the Supervisory Board to Tibor Veres. Due to Mark Abramson resignation from his seat in the Supervisory Board and dismission of Ste - fan Kawalec, the Ordinary General Meeting of the Shareholders appointed Margaret Dezse and Sła- womir Jędrzejczyk as independent members of the supervisory board on August 13th 2020. The new members of the Supervisory Board also became members of the Audit Committee: Margaret Dezse as chair and Sławomir Jędrzejczyk as vice-chairman. Noah Steinberg is WING Group’s Chairman & Chief Ex- ecutive Ocer, and also one of its owners. An American citizen, he has worked in Hun- gary since 1990. In his current position since 1999, he was responsible for establishing WING and oversees the com- Noah M. Steinberg Chairman of the Supervisory Board pany’s investment and devel- opment businesses covering all market segments - oce, industrial and logistics, retail, hotel and residential - and its real estate services portfolio. He is also the chairman of Royal Institution of Chartered Surveyors (RICS) in Hungary. Graduated from Princeton University (Woodrow Wilson School of Public and Inter- national Affairs, Princeton University – BA) and the Dip- lomatic Academy of Vienna – MA). Speaks English, Hun - garian, French, German and Spanish. | Corporate governance 120 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 He founded together with his father, György Veres the legal predecessor of today’s Wal- lis Group. At present, he is the main owner of the Wallis Group, as well as the Chairman of its Board of Directors, while he is also a member of the Board of Directors at Grabo- plast and the Wing Group. Wing Group is the most sig- nificant enterprise connected to the Wallis Group, both in terms of asset value, as well as Tibor Veres Vice-Chairman of the Super- visory Board the level of business complex- ity. In 2016, he acquired the Praktiker home improvement chain, which had possessed a considerable real estate portfolio, so the Wallis Group broadened its spectrum with a new significant element. Three of the companies es - tablished by Mr. Tibor Veres are present at the Hungarian stock exchange as issuers of bonds and shares. In addition to the WING Group, Alteo En- ergy Services Plc. is involved in renewable energy produc- tion, and AutoWallis Plc. in- corporates the automotive members of the Wallis Group, a corporation which has been justly famous for decades. Tibor Veres earned his eco- nomics MA at the Moscow State Institute of International Relations in 1986. Margaret Dezse Independent Member of the Supervisory Board Maciej Dyjas Member of the Supervisory Board Margaret is a former partner of Ernst & Young (EY) and PwC and has spent a total of 35 years employed by the Big 4 accounting firms. In that pe- riod, for 20 years she was a partner in the fields of trans- actions advisory and corpo- rate finance, initially with PwC and for the final ten years with EY. As a chartered accountant, Margaret started out as an au- ditor, in her home country of Maciej is a shareholder of Grin Real Estate – a leading company on the commercial property market in Central and Eastern Europe. He is also a Managing Partner at the Cornerstone Partners private equity fund which invests in healthcare and pharmaceuti- cals, retail, industry, manufac- turing, and infrastructure sec- Canada. After moving to Hun- gary in 1989, her career quick- ly evolved from audit into the fields of privatisation and corporate finance. In the last 30 years, she has advised on hundreds of transactions and assisted clients from a variety of industries on strategic and investment decision making. In addition to leading the cor- porate finance and transac- tions advisory teams in Hun- gary, she has held dierent tors. He gained management experience in the Wandel & Goltermann Hewlett Packard Systems consulting company and he continued as a Man- aging Partner and Chairman at Eastbridge Group and key companies controlled by the fund, including NFI Em- pik Media & Fashion. In 2014 Eastbridge Group held as- regional leadership roles in the CEE region, including es- tablishing a corporate finance department in Ukraine. She is presently serving as a member of the board of directors and chairman of the audit commit- tee of Masterplast Nyrt and is an executive committee mem- ber of Kometa Zrt. She is also a supervisory board member of United Way Hungary and of the supervisory board of so- cial impact oriented venture capital fund Impact Ventures. sets worth more than USD 3 bln in the retail, consumer goods and real estate sec - tors. He studied business, management, IT, psychology of management and commu- nication at universities in War- saw, Stuttgart, Frankfurt and Southampton in Great Britain. | Corporate governance 121 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Sławomir has over 20 years of experience working for Warsaw Stock Exchange list- ed companies. In 2008–2017, he was vice-chairman of the management board and CFO of PKN Orlen S.A., as well as vice-chairman of the supervi- sory board of Unipetrol a.s., a member of the management board of Orlen Lietuva, and a member of the board of direc- tors of Orlen Upstream Can- ada. His main responsibilities Managing Partner at Grin Real Estate. For nine years Ne - bil Senman held leading po- sitions as a Senior Vice-Presi- dent and a Supervisory Board Member of Oaktree’s German and Polish real estate funds and he was responsible for operations worth several bil- He is WING’s Deputy Chief Ex- ecutive Ocer responsible for strategy, risk and controlling and has been with Wing since 2006. In his current position since 2009, he is responsible for risk analysis and tradition- al controlling of a portfolio of some 35 property SPVs with assets worth €800 million and with annual rental income of €50 million. Board member at He is a senior real estate pro- fessional with 18 years of ex- perience in real estate invest- ment. He holds a bachelor degree (BA) from the Buda- pest Business School and a master’s degree (MBA) from the Budapest University of Sławomir Jędrzejczyk Independent Member of the Supervisory Board Nebil Senman Supervisory Board Member Audit Committee Member Péter Kocsis Member of the Supervisory Board Bence Sass Member of the Supervisory Board have included implementing strategy geared towards in - creasing value, building cap- ital market relations, provid- ing financing, and increasing cash flows through operating excellence, divestments and projects aimed at improving working capital levels. He has also been responsible for planning and reporting, busi- ness controlling, accounting, supply chain manage ment, investor relations, M&A and IT. lion euro. Before joining Oak- tree he spent eight years deal- ing with the real estate and corporate consulting at Ernst & Young Real Estate (former Arthur Andersen), where he held dierent managerial po- sitions. He is a graduate of universities in Berlin (TU Ber- and also responsible for con- trolling of three real estate service provider subsidiaries with total annual turnover of €70 million. Generates strat- egy and business plan for the development portfolio worth €500 million. Chief Risk Of- ficer at two real estate fund management companies of Wing. Technology and Economics. In his current role, he is heading the international expansion activities at WING Group. He is also responsible for busi- ness development and trans- actions within the company. Before his current workplace, Sławomir has previously held the position of CEO of Emitel. He has also been employed by Telekomunikacja Polska, ORFE, Impexmetal and Price Waterhouse. He graduated from the London Business School (senior executive pro- gramme) and the Łódź Uni- versity of Technology’s facul- ty of electronics, and is also a member of the Association of Chartered Certified Account- ants (ACCA). lin, EBS), Paris (ESCP Europe) and London (LSE) and holds an MBA and a degree in civil engineering. He also holds a post-graduate diploma in real estate management (EBS). Nebil is a member of the Roy- al Institution of Chartered Sur- veyors (MRICS). Alumnus of Corvinus Uni- versity Budapest with MA and subsequently earned post-graduate degrees from the University of Birmingham (MIS) and from Georgetown University (MSFS). Speaks Hungarian, English and Ger - man. he was part of the leading real estate financing team of UniCredit Bank. He is a mem- ber of the Royal Institution of Chartered Surveyors (RICS). He speaks Hungarian, English and German. | Corporate governance 122 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Company’s supervisory board – rules of operation The Supervisory Board of Echo Investment S.A. op- erates based on the Commercial Companies Code Act (J.L. of 2017, item 1577), the Company’s Stat- ute, the Rules and Regulations of the Supervisory Board of Echo Investment S.A. and according to the adopted “Code of Best Practice for WSE Listed Com- panies”. The Supervisory Board is composed of at least 5 members who are appointed (and dismissed) by the General Meeting for a period of three years; members of the Supervisory Board are appointed for a joint term of oce, which does not preclude an earlier dismissal of every member of the Superviso- ry Board. At least two Members of the Supervisory Board should fulfil criteria of independency of the Company and entities materially related to the Com- pany. The independent Member of the Supervisory Board makes a written statement to the Company and to the Chairman of the Supervisory Board or the Deputy-Chairman of the Supervisory Board on fulfilment of the independency criteria. Supervisory Board Members may be re-appointed. A resolution of the General Meeting each time specifies the num- ber and the members of the Supervisory Board. If the General Meeting does not specify the function of a given member of the Supervisory Board when appoint such a member, the Supervisory Board ap- points the Chairman of the Supervisory Board from among its members and the Vice-Chairman in a se- cret ballot. Members of the Supervisory Board fulfil their duties only in person. Members of the Supervisory Board delegated to constant and individual supervision may not, without the Company’s consent, be in - volved in competitive business or participate in a competitive company as a partner in a civil law part- ner-ship, a partnership or as a member in a body of a capital company, or participate in another com- petitive legal person as a member of its bodies. This prohibition also includes participation in a compet- itive capital company in which a Supervisory Board member holds at least 10% of interests or shares, or has the right to appoint at least one management board member. Members of the Supervisory Board may be dismissed at any time by the General Share- holders’ Meeting. A Supervisory Board member may resign his/her post before the expiry of the term of oce for which he/she was appointed by submit- ting a statement to the Chairman of the Supervisory Board. If the Chairman of the Supervisory Board re- signs his/ her post, the statement is submitted to the Vice-Chairman. A Member of the Supervisory Board should not resign during the term of oce, if such a resignation could prevent the Supervisory Board from operating, and especially if it could pre vent the adoption of an important resolution. The mandate of a Supervisory Board member expires, at the latest, on the day of the General Meeting which approves the Company’s financial statements for the last full fi- nancial year in which the Supervisory Board member held his/her post (final year of the member’s term of oce). The mandate also expires up-on death or dis - missal of a Supervisory Board member. If, as a result of expiry of mandates of Supervisory Board mem- bers, the Supervisory Board is composed of fewer than 5 members, the Supervisory Board is unable to pass legally binding resolutions, and the Chair- man of the Supervisory Board, or, in the absence of the Chairman, the Vice-Chairman, requests the Company’s Management Board to promptly convene an Extraordinary General Meeting and to include the appointment of Supervisory Board members in the agenda of the General Meeting. A member of the Supervisory Board should be primarily concerned about the Company’s interest. When contacting the media, members of the Super- visory Board may only provide generally available information about the Company. Any statements for the media regarding the Company or the Superviso- ry Board may only be made by the Chairman of the Supervisory Board or a person appointed by him/ her. The responsibilities of the Supervisory Board include supervision over the Company’s business and other actions, as stipulated by the Commercial Compa- nies Code and other acts. The Supervisory Board adopts resolutions or gives opinions on issues within its scope of responsibilities, according to the Com- pany’s Statute and under the procedure stipulated by the provisions of the Statute or other laws. In particular, the Supervisory Board is authorised to: − examine the Company’s financial statements for the last financial year, − examine the Company’s Management Re-port and suggestions of the Management Board regarding the distribution of profit and the coverage of loss, − submit a written report on the above actions to the General Meeting, | Corporate governance 123 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 − express opinions on motions submitted by the Management Board directed to the General Meet- ing, and − express opinion and pass resolutions on other is- sues submitted by the Company’s Management Board, − appoint, dismiss and suspend the Company’s Management Board or its individual members, − appoint or change of an auditor Company to audit the Company’s financial statement with whom the Management Board concludes an agreement, − approve the Management Board’s conclusion of the agreement with a sub-issuer referred to in Ar- ticle 433 § 3 of the Commercial Companies Code, − approve the contracting of liabilities and dispos- ing of the rights to the extent within the current business of the Company – if their value exceeds 20 % of the Company’s equity, − approve the contracting of liabilities and dispos- ing of the rights that go beyond the current busi- ness of the Company – if their value exceeds 10% of the Company’s equity, − assessment of the criteria of independency of each Supervisory Board Member. If it is uncertain whether a given issue has been included in the current business of the Company, the Supervisory Board is entitled to make a rele - vant interpretation in this respect, at the request of the Management Board. The interpretation shall be binding for the Management Board. Issues related to trade in real estate are within the scope of the Company’s current business. The meetings of the Supervisory Board are held as necessary but at least three times per financial year. The meetings of the Supervisory Board are convened by the Chairman or the Vice-Chairman and are held in the Company’s oce or in a location indicated by the Chair-man or the Vice-Chairman. The meetings of the Supervi- sory Board are convened upon the initiative of the Chairman of the Board or at a written request of the Management Board or a member of the Supervisory Board. The meetings of the Supervisory Board con- vened at the request of the Management Board or a member of the Supervisory Board must be held within two weeks from the date of submitting the request, but no earlier than on the third day after receiving such request by the Chairman of the Su- pervisory Board. The meetings are presided over by the Chairman and, in his/her absence, by the Vice-Chairman of the Supervisory Board. If neither the Chairman nor the Vice-Chairman of the Super- visory Board is present at the meeting, the meeting is presided over by the Board member appointed by the present attendees. The Supervisory Board may hold a meeting without being formally convened, if all of its members are present, and no member objects to the meeting being held and to including specific items in the agenda. The meetings of the Su- pervisory Board may be attended by other persons invited by the Chairman of the Supervisory Board, including Members of the Management Board with the right to advise. The members of the Supervisory Board make deci- sions related to the exercise of supervisory and con- trol rights by way of resolutions. All Members of the Supervisory Board must be invited to the meeting and at least 50% of the Members must be present at the meeting or otherwise the resolutions of the Supervisory Board are null and void. The Supervisory Board may pass resolutions in writing. The Super- visory Board resolutions may be passed in writing under the condition of signing the resolution by each Supervisory Board Member under the same copy of the resolution draft or on separate copies, and informing all Supervisory Board Members about the con-tent of the draft resolution by sending it via post, including post courier, fax or e-mail on the address indicated by the Supervisory Board Member. Such a way may not involve the appointment of the Chairman and the Vice-Chairman of the Supervisory Board, the appointment of a Member of the Manage- ment Board as well as the dismissal and suspension of these individuals. In such a case, for the resolu- tions to be valid, the Supervisory Board members must be notified in advance about the draft reso- lutions. Resolutions of the Supervisory Board are adopted by an absolute majority of votes. In case of a tied vote when adopting resolutions by the Super- visory Board, the Chairman of the Supervisory Board shall have the casting vote. The meetings of the Supervisory Board are minuted. Resolutions of the Supervisory Board are recorded in the minutes in such a way so that they form attach- ments to the minutes, or are included in the text of the minutes. In addition, the minutes must include the date and place of the meeting of the Superviso- ry Board, names of the present Supervisory Board members and the number of votes cast on individ- ual resolutions. The minutes must be signed by all Supervisory Board members attending the meeting. Any dissenting opinions of the attendees must been closed to the minutes. To fulfil their duties, the Supervisory Board has the right to control the full scale of the Company’s op- erations, in particular: − request the Management Board to provide doc- uments and other materials on the Company’s operations, − verify the Company’s files and documentation, − demand explanations and reports from the Man- agement Board and from the employees, − revise the status of the company’s assets. The Supervisory Board has the right to submit mo- tions to the General Meeting regarding all issues within its scope of tasks and responsibilities. The | Corporate governance 124 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Supervisory Board fulfils its duties by acting joint- ly; it may, however, delegate individual members to independent and specific supervisory functions by way of a resolution. The Supervisory Board may appoint committees for specific matters, including Audit Committee, adopting its rules and appointing the Chairman of the Audit Commit-tee. The secre- tarial services to the Supervisory Board are provided by the oce of Company’s the Management Board. The secretarial services include: preparing invitations to the meetings of the Supervisory Board and send- ing them to the members of the Supervisory Board according to these rules and regulations, organising the premises where the meeting of the Superviso- ry Board is to be held, preparing minutes from the meeting, providing services during the meeting and archiving the Supervisory Board’s documentation. | Corporate governance 125 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Composition of the Audit Committee and its changes AUDIT COMMITTEE AS AT JANUARY 1, 2020.: Stefan Kawalec – Chairman, Mark E. Abramson – Vice-Chariman, Nebil Senman – Member of the Audit Committee. AUDIT COMMITTEE AS AT DECEMBER 31, 2020.: Margaret Dezse – Chair, Sławomir Jędrzejczyk – Vice-Chariman, Nebil Senman – Member of the Audit Committee. Throughout 2020 and as at the date of publication of the report, independent members of the Super- visory Board constitute the majority of the Audit Committee. | Corporate governance 126 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 The responsibilities ofthe Audit Committee The responsibilities of the Audit Committee include in particular: 1. monitoring: a. the financial reporting process; b. the eciency of the internal control systems and risk management systems as well as internal au- dits, including with respect to financial reporting; c. the execution of financial review proceedings, in- cluding specifically the audits performed by the auditing firm; 2. inspecting and monitoring the independence of the certified auditor and the auditing firm, spe- cifically in the event that the audit firm renders any non-audit services to the Company, including with regard to any change of the certified audi- tor or the auditing firm and the level of received remuneration; 3. informing the Supervisory Board about the results of the audit and providing explanations as to how the audit contributed to the accuracy of financing reporting in the Company, and what was the role of the Audit Committee in the audit procedure; 4. assessment of the independence of the certified auditor and consenting to that auditor conducting any non-audit permitted services in favour of the Company; 5. development of the policy of the selection of an auditing firm for the conduct of an audit 6. development of the policy applicable with respect to any non-audit permitted services rendered by the auditing firm which conducts the audit and by any entities related to that auditing firm and by any member of the auditing firm’s group; 7. determining the procedure for the selection of an auditing firm by the Company; 8. providing the Supervisory Board with recommen- dations concerning the appointment of certified auditors or auditing firms in accordance with the policies referred to in sections 3.5 and 3.6 of By- laws of the Audit Committee; 9. presentation of recommendations with the ob- jective of ensuring the accuracy of the financial reporting process in the Company; 10. assessment of the work of the certified auditor and the auditing firm; 11. supervising the manner in which the Company’s Management Board performs duties related to preparation of tax documentation of transactions with related entities; 12. preparation of the opinions within the scope of the Audit Committee’s competence, on the in- itiative of the Supervisory Board or on its own initiative; 13. informing the Supervisory Board in due time about the Audit Committee’s method of utilising its entitlements and about significant events re- garding its operations, in particular providing any and all information about the results of the Audit Committee’s work; 14. participation in Supervisory Board meetings, Man- agement Board meetings and General Meetings of the Company in order to provide a detailed account of the Audit Committee’s operations. The Audit Committee may demand that the key certified auditor discuss with an audit committee, management board or any other managing body, supervisory board or other supervisory or controlling body in a public interest entity or a key certified au- ditor may demand discussing with the Audit Com- mittee, management board or any other managing body, supervisory board or other supervisory or controlling body in a public interest entity of any issues discovered in the course of the audit which were mentioned in the additional report referred to in Article 11 of the Regulation No. 537/2014. The Audit Committee, without the intermediation of the Supervisory Board, is entitled to: 1. demand the Company to provide specific infor- mation, explanations and documents necessary for the performance of the duties referred to in sections 3.1 – 3.15 of By-laws of the Audit Com- mittee, including with regard to bookkeeping, finance, internal and external audit, in particular members of the Audit Committee are entitled to examine any and all books and documents and to obtain information and clarifications from mem- bers of the Management Board, directors and employees of the Company in the scope that is necessary for the appropriate performance of du- ties by the Audit Committee; 2. demand from the Company to submit the work schedules of internal auditors and certified audi- tors or auditing firms, 3. examining annual and semi-annual reports of the Company in due time; 4. putting forward recommendations and assess- ments to the Supervisory Board within the scope of the Audit Committee’s responsibilities, the President of the Management Board shall be in- | Corporate governance 127 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 formed about the recommendations and assess- ments put forward to the Supervisory Board While fulfilling its responsibilities the Audit Commit- tee can acquire help or information from an expert or experts chosen by the Audit Committee for a fee agreed by both the expert and the Audit Commit- tee, which needs to be approved by the President of the Supervisory Board. On obtaining the aforemen- tioned approval of the President of the Supervisory Board, the Audit Committee Chairman shall inform the Management Board about the agreed fee and other actions required in order to employ the ex- pert or experts. The Audit Committee will select the expert in consideration of the financial position of the Company. In terms of meeting the conditions of independence of members of the Audit Committee, the provisions referred to in Article 129 par. 3 of the Act of May 11, 2017 on statutory auditors, audit firms and public supervision, as well as independence criteria of su- pervisory board members in line with Best Practices of GPW Listed Companies 2016 (principle II.Z.4. sec- tion II: Management Board and Supervisory Board) are applied accordingly. | Corporate governance 128 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Investment Committee On September 2, 2020 the Supervisory Board ap- pointed the Investment Committee that will be re- sponsible for the ongoing evaluation of the activities in the field of purchasing and selling assets, financ- ing plans, the asset sales strategy development and the implementation of investment plans based on the approved annual budget. In 2020 there was no changes in the composition of the Investment Com- mittee. INVESTMENT COMMITTEE AS AT DECEMBER 31, 2020.: Noah M. Steinberg – Chairman, Maciej Dyjas, Péter Kocsis, Bence Sass, Nebil Senman. | Corporate governance 129 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Echo Investment S.A. shareholding structure and shareholders’ rights The share capital of Echo Investment S.A. is divided into 412,690,582 ordinary bearer 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 nominal value of one share is PLN 0.05. The number of shares equals the number of votes at the General Meeting of Shareholders. The securities issued by Echo Investment S.A. do not provide their owners 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. The shareholding 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 composition as at December 31, 2020. SHAREHOLDERS OF ECHO INVESTMENT S.A. HOLDING MORE THAN 5% OF THE SHARE CAPITAL AS AT 31 DECEMBER 2020 – Lisala Sp. z o.o. (Wing IHC Zrt and Grin 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% STATEMENT OF THE MANAGEMENT BOARD CHAPTER 3 | Statement 131 Management Board Report on operations of Echo Investment S.A. and its Group in 2020 Kielce, 30 March, 2021 The Management Board of Echo Investment S.A. declares that, to the best of its knowledge, the Management Board Report on operations of Echo Investment S.A. and its Group 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 Investment 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. 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 oce Q22 building al. Jana Pawła II 22 00-133 Warsaw Design and execution: Damian Chomątowski | be.net/chomatowski
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