CD Projekt

CD PROJEKT Group - Selected financial data translated into EUR Table of contents Interim condensed consolidated income statement Interim condensed consolidated statement of comprehensive income Interim condensed consolidated statement of financial position Interim condensed statement of changes in consolidated equity Interim condensed consolidated statement of cash flows General Information Consolidation policies Consolidated companies – as at 30 June 2023 Subsidiaries Basis of preparation of the interim condensed consolidated financial statements Going concern assumption Compliance with the International Financial Reporting Standards Amendments to standards or interpretations effective from 1 January 2023 applicable and adopted by the Group Standards and interpretations adopted by the IASB but not yet endorsed by the EU  Amendments to IAS 12 The International Tax Reform - Pillar Two Model Rules - applicable to annual reporting periods beginning on or after 1 January 2023,  Amendment to IAS 1 Presentation of financial statements: Classification of liabilities as current or non-current and Non-current Liabilities with Covenants - applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures - Supplier Finance Arrangements - applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates - Lack of Exchangeability - applicable to reporting periods beginning on or after 1 January 2025. Functional currency and presentation currency Functional currency and presentation currency Transactions and balances Assumption of comparability of the financial statements and changes in accounting policies Presentation changes Seasonality or cyclicality of the Group’s operations Audit by the registered auditor Operating segments Presentation of the financial statements taking into account operating segments Description of differences in the basis for determination of segments and the profit or loss of a segment compared with the last annual consolidated financial statements Information on individual operating segments Consolidated income statement by segments for the period from 01.01.2023 to 30.06.2023 Consolidated income statement by segments for the period from 01.01.2022 to 30.06.2022 Consolidated statement of financial position by segments as at 30.06.2023 Consolidated statement of financial position by segments as at 31.12.2022 Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact Material events Note 2. Property, plant and equipment Changes in property, plant and equipment (by category) for the period 01.01.2023 – 30.06.2023 Amounts of contractual commitments to purchase property, plant and equipment in the future Right-of-use assets relating to property, plant and equipment Note 3. Intangible assets and expenditure on development projects Changes in intangible assets and expenditure on development projects for the period 01.01.2023 – 30.06.2023 Amounts of contractual commitments to purchase intangible assets in future Note 4. Goodwill Note 5. Investment properties Changes in investment properties for the period 01.01.2023 – 30.06.2023 Contractual liabilities on purchase of investment properties Note 6. Inventories Change in inventory write-downs Note 7. Trade and other receivables Change in write-downs of receivables Current and overdue trade receivables as at 30.06.2023 Other receivables Note 8. Other financial assets Note 9. Prepayments and deferred costs Note 10. Deferred income tax Deductible temporary differences underlying the deferred tax asset Taxable temporary differences underlying the deferred tax provision Net deferred tax asset/provision * restated data Income tax expense recognized in the income statement Note 11. Share capital Share capital – structure as at 30.06.2023 Changes in share capital Note 12. Provision for retirement and similar benefits Note 13. Other provisions Change in other provisions Note 14. Other liabilities Current and overdue trade receivables as at 30.06.2023 Note 15. Deferred income Note 16. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments Financial assets – classification and measurement Financial liabilities – classification and measurement Note 17. Sales revenue Sales revenue – geographical structure Sales revenue – by type of production Sales revenue – by distribution channel Note 18. Operating expenses Note 19. Other operating income and expenses Other operating income Other operating expenses Note 20. Finance income and costs Finance income Finance costs Note 21. Leases of low-value assets and short-term leases Note 22. Issuance, redemption and repayment of debt and equity securities Issuance of debt securities Issuance of equity securities Note 23. Dividend paid (or declared) and received Note 24. Transactions with related entities Terms and conditions of transactions with related entities Transactions with related entities after consolidation eliminations Note 25. Unpaid loans or defaults on loan agreements in the cases where no corrective measures were adopted by the balance sheet date Note 26. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year Contingent liabilities in respect of guarantees, sureties and collateral Note 27. Changes in the structure of the Group and Group companies during the reporting period Note 28. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders Assumptions adopted for the valuation of the Incentive Plan A for the years 2023–2027. Changes in entitlements granted under Incentive Plan A for the years 2023–2027 Assumptions adopted for the valuation of the Incentive Plan B for the years 2023–2027. Changes in entitlements granted under Incentive Plan B for the years 2023–2027 Note 29. Tax settlements Note 30. Explanations to the condensed consolidated statement of cash flows Note 31. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities Note 32. Post-balance sheet date events Events with no impact on the financial statements for the period from 1 January to 30 June 2023 Interim condensed separate income statement Interim condensed separate statement of comprehensive income Interim condensed separate statement of financial position Interim condensed separate statement of changes in equity Interim condensed separate statement of cash flows Explanations to the condensed separate statement of cash flows Assumption of comparability of the financial statements and changes in accounting policies Changes in accounting policies Presentation changes Notes to separate financial statements of CD PROJEKT S.A. A. Deferred tax Deductible temporary differences underlying the deferred tax asset * restated data Taxable temporary differences underlying the deferred tax provision * restated data Net deferred tax asset/provision * restated data Income tax expense recognized in the income statement B. Other provisions Change in other provisions C. Goodwill D. Business combinations E. Dividend paid (or declared) and received F. Trade and other receivables Change in write-downs of receivables Current and overdue trade receivables as at 30.06.2023 Other receivables G. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments Financial assets – classification and measurement Financial liabilities – classification and measurement H. Transactions with related entities Statement of the Management Board of the Parent Company On the fairness of preparation of the interim condensed consolidated financial statements On the entity authorized to review the fairness of preparation of interim condensed consolidated financial statements Approval of the financial statement 1 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 2 Disclaimer This English language translation has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain discrepancies, omissions or approximations may exist. In case of any differences between the Polish and the English versions, the Polish version shall prevail. CD PROJEKT, its representatives and employees decline all responsibility in this regard. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 3 CD PROJEKT Group - Selected financial data translated into EUR PLN EUR 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Net sales of products, services, goods for resale and materials 325 214 377 916 70 499 81 400 Cost of sales of products, services, goods for resale and materials 107 213 101 334 23 241 21 827 Operating profit/(loss) 99 087 137 484 21 480 29 613 Profit/(loss) before tax 120 727 153 616 26 171 33 088 Net profit/(loss) attributable to owners CD PROJEKT S.A. 91 271 113 746 19 786 24 500 Net cash from operating activities 121 599 142 656 26 360 30 727 Net cash from investing activities (148 373) 132 928 (32 164) 28 632 Net cash from financing activities (101 717) (2 141) (22 050) (461) Net increase/(decrease) in cash and cash equivalents (128 491) 273 443 (27 854) 58 897 Number of shares (in thousands) 100 627 100 739 100 627 100 739 Net earnings/(loss) per share (in PLN) 0.91 1,13 0,20 0.24 Diluted earnings/(loss) per share (in PLN/EUR) 0.91 1,13 0,20 0.24 Book value per share (in PLN/EUR) 20.21 18.89 4.54 4.04 Diluted book value per share (in PLN/EUR) 20.21 18.88 4.54 4.03 Dividend declared or paid per share (in PLN/EUR) 1.00 1.00 0.22 0.22 PLN EUR 30.06.2023 31.12.2022 30.06.2023 31.12.2022 Total assets 2 180 597 2 274 124 489 989 484 898 Liabilities and provisions for liabilities (excluding accruals) 118 436 214 626 26 613 45 763 Non-current liabilities 30 041 36 186 6 750 7 716 Current liabilities 116 759 204 534 26 236 43 612 Equity 2 033 797 2 033 404 457 002 433 571 Share capital 99 911 100 771 22 450 21 487 The financial data presented above was translated into EUR as follows:  Items of the consolidated income statement and the consolidated cash flow statement were translated at exchange rates calculated as an arithmetic mean of the exchange rates announced by the National Bank of Poland for the euro applicable as at the last day of each month in a given reporting period. These rates were, respectively, as follows: from 1 January to 30 June 2023: 4.6130 PLN/EUR and from 1 January to 30 June 2022: 4.6427 PLN/EUR.  Items of assets, liabilities and equity in the consolidated statement of financial position were translated at exchange rates announced by the National Bank of Poland for the euro applicable on the last day of the reporting period. These rates were, respectively, as follows: 4.4503 PLN/EUR as at 30 June 2023 and 4.6899 PLN/EUR as at 31 December 2022. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 4 Table of contents Key financial data of the .......................................................................................................................................................................................................... 6 CD PROJEKT Group ................................................................................................................................................................................................................. 6 Interim condensed consolidated income statement ................................................................................................................................................ 7 Interim condensed consolidated statement of comprehensive income ........................................................................................................... 7 Interim condensed consolidated statement of financial position ........................................................................................................................ 8 Interim condensed statement of changes in consolidated equity ..................................................................................................................... 10 Interim condensed consolidated statement of cash flows ................................................................................................................................... 12 Notes to the interim condensed consolidated financial statements ....................................................................................................................... 14 General Information ......................................................................................................................................................................................................... 15 Consolidation policies ..................................................................................................................................................................................................... 15 Consolidated companies – as at 30 June 2023 ............................................................................................................................................... 15 Subsidiaries .................................................................................................................................................................................................................. 16 Basis of preparation of the interim condensed consolidated financial statements ..................................................................................... 16 Going concern assumption .............................................................................................................................................................................................17 Compliance with the International Financial Reporting Standards.....................................................................................................................17 Amendments to standards or interpretations effective from 1 January 2023 applicable and adopted by the Group ................. 17 Functional currency and presentation currency ...................................................................................................................................................... 18 Functional currency and presentation currency ............................................................................................................................................... 18 Transactions and balances ...................................................................................................................................................................................... 18 Assumption of comparability of the financial statements and changes in accounting policies ............................................................... 18 Presentation changes ................................................................................................................................................................................................ 19 Seasonality or cyclicality of the Group’s operations ........................................................................................................................................ 19 Audit by the registered auditor ..................................................................................................................................................................................... 19 Notes – operating segments of the CD PROJEKT Group ......................................................................................................................................... 20 Operating segments ........................................................................................................................................................................................................ 21 Information on individual operating segments ................................................................................................................................................. 22 Consolidated income statement by segments for the period from 01.01.2023 to 30.06.2023 ........................................................ 23 Consolidated income statement by segments for the period from 01.01.2022 to 30.06.2022 ...................................................... 24 Consolidated statement of financial position by segments as at 30.06.2023 ....................................................................................... 25 Consolidated statement of financial position by segments as at 31.12.2022.......................................................................................... 27 Notes – other explanatory notes to the interim condensed consolidated financial statements ................................................................... 29 Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact .................................................................................................................................... 30 Note 2. Property, plant and equipment................................................................................................................................................................ 31 Note 3. Intangible assets and expenditure on development projects ...................................................................................................... 33 Note 4. Goodwill ......................................................................................................................................................................................................... 34 Note 5. Investment properties ............................................................................................................................................................................... 34 Note 6. Inventories .................................................................................................................................................................................................... 35 Note 7. Trade and other receivables ................................................................................................................................................................... 35 Note 8. Other financial assets ................................................................................................................................................................................. 37 Note 9. Prepayments and deferred costs .......................................................................................................................................................... 38 Note 10. Deferred income tax ................................................................................................................................................................................ 39 Note 11. Share capital ................................................................................................................................................................................................. 41 Note 12. Provision for retirement and similar benefits ..................................................................................................................................... 41 Note 13. Other provisions ........................................................................................................................................................................................ 42 Note 14. Other liabilities ........................................................................................................................................................................................... 42 Note 15. Deferred income ....................................................................................................................................................................................... 43 Note 16. Information on financial instruments ................................................................................................................................................... 43 Note 17. Sales revenue ............................................................................................................................................................................................. 45 Note 18. Operating expenses................................................................................................................................................................................. 46 Note 19. Other operating income and expenses .............................................................................................................................................. 47 Note 20. Finance income and costs .................................................................................................................................................................... 48 Note 21. Leases of low-value assets and short-term leases ......................................................................................................................... 48 Note 22. Issuance, redemption and repayment of debt and equity securities ...................................................................................... 49 Note 23. Dividend paid (or declared) and received ........................................................................................................................................ 49 Note 24. Transactions with related entities ....................................................................................................................................................... 49 Note 25. Unpaid loans or defaults on loan agreements in the cases where no corrective measures were adopted by the balance sheet date ....................................................................................................................................................................................... 51 Note 26. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year ........ 52 Note 27. Changes in the structure of the Group and Group companies during the reporting period ............................................ 54 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 5 Note 28. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders ........................................................................................................................................................................................................ 54 Note 29. Tax settlements ........................................................................................................................................................................................ 56 Note 30. Explanations to the condensed consolidated statement of cash flows .................................................................................. 57 Note 31. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities ............................... 59 Note 32. Post-balance sheet date events .......................................................................................................................................................... 60 Interim condensed separate financial statements of CD PROJEKT S.A. ............................................................................................................... 61 Interim condensed separate income statement ..................................................................................................................................................... 62 Interim condensed separate statement of comprehensive income ................................................................................................................ 62 Interim condensed separate statement of financial position ............................................................................................................................. 63 Interim condensed separate statement of changes in equity ............................................................................................................................ 65 Interim condensed separate statement of cash flows.......................................................................................................................................... 67 Assumption of comparability of the financial statements and changes in accounting policies .............................................................. 69 Changes in accounting policies ............................................................................................................................................................................ 69 Presentation changes ............................................................................................................................................................................................... 69 Notes to separate financial statements of CD PROJEKT S.A. ............................................................................................................................ 70 A. Deferred tax....................................................................................................................................................................................................... 70 B. Other provisions ................................................................................................................................................................................................. 71 C. Goodwill .............................................................................................................................................................................................................. 72 D. Business combinations .................................................................................................................................................................................. 72 E. Dividend paid (or declared) and received ................................................................................................................................................ 76 F. Trade and other receivables......................................................................................................................................................................... 76 G. Information on financial instruments ..........................................................................................................................................................78 H. Transactions with related entities................................................................................................................................................................ 81 Statement of the Management Board of the Parent Company ......................................................................................................................... 82 Approval of the financial statement ........................................................................................................................................................................... 83 Key financial data of the CD PROJEKT Group 1 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 7 Interim condensed consolidated income statement Note 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Sales revenue 325 214 377 916 Sales of products 17 238 084 285 868 Sales of services 17 799 1 235 Sales of goods for resale and materials 17 86 331 90 813 Cost of sales of products, services, goods for resale and materials 107 213 101 334 Costs of products and services sold 18 42 701 37 013 Cost of goods for resale and materials sold 18 64 512 64 321 Gross profit/(loss) on sales 218 001 276 582 Selling expenses 18 85 106 90 599 Administrative expenses 18 58 866 45 968 Other operating income 19 33 708 5 386 Other operating expenses 19 8 654 7 909 (Impairment)/reversal of impairment of financial instruments 4 (8) Operating profit/(loss) 99 087 137 484 Finance income 20 51 610 39 354 Finance costs 20 29 970 23 222 Profit/(loss) before tax 120 727 153 616 Income tax 10 29 456 39 870 Net profit/(loss) 91 271 113 746 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 91 271 113 746 Net earnings/(loss) per share (in PLN) - - Basic for the reporting period 0.91 1.13 Diluted for the reporting period 0.91 1.13 * restated data Interim condensed consolidated statement of comprehensive income 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Net profit/(loss) 91 271 113 746 Other comprehensive income subject to reclassification to gains or losses after specific conditions have been met: (1 359) (6 439) Exchange differences on measurement of foreign operations (1 696) 1 552 Measurement of derivative financial instruments – fair value through other comprehensive income, taking into account the tax effect 337 (7 991) Other comprehensive income not subject to reclassification to gains or losses - - Total comprehensive income 89 912 107 307 Total comprehensive income attributable to non-controlling interests - - Total comprehensive income attributable to owners of CD PROJEKT S.A. 89 912 107 307 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 8 Interim condensed consolidated statement of financial position Note 30.06.2023 31.12.2022 NON-CURRENT ASSETS 1 296 676 1 119 978 Property, plant and equipment 2 161 009 145 252 Intangible assets 3 69 785 69 157 Expenditure on development projects 3 596 575 473 202 Investment properties 5 37 429 42 560 Goodwill 3,4 56 438 56 438 Shares in non-consolidated subordinated entities 16 43 477 41 607 Prepayments and deferred costs 9 42 727 31 074 Other financial assets 8,16 242 203 207 437 Deferred tax assets 10 46 658 52 862 Other receivables 7,16 375 389 CURRENT ASSETS 883 921 1 154 146 Inventories 6 8 118 12 701 Trade receivables 7,16 83 557 165 290 Current income tax receivable 12 356 1 458 Other receivables 7 42 359 57 139 Prepayments and deferred costs 9 21 494 22 886 Other financial assets 8,16 249 576 279 515 Bank deposits over 3 months 16 317 125 337 330 Cash and cash equivalents 16 149 336 277 827 TOTAL ASSETS 2 180 597 2 274 124 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 9 Note 30.06.2023 31.12.2022 EQUITY 2 033 797 2 033 404 Equity of the shareholders of CD PROJEKT S.A. 2 033 797 2 033 404 Share capital 11, 22 99 911 100 771 Supplementary capital 1 714 604 1 567 325 Share premium 116 700 116 700 Treasury shares - (99 993) Other reserves 12 984 2 255 Foreign exchange differences on translation 208 1 904 Retained earnings (Accumulated losses) (1 881) (2 651) Net profit (loss) for the period 91 271 347 093 Non-controlling interests - - NON-CURRENT LIABILITIES 30 041 36 186 Other financial liabilities 16 18 206 18 883 Other liabilities 14 2 500 2 620 Deferred tax provision 10 46 50 Deferred income 15 2 753 3 669 Provision for retirement and similar benefits 12 366 366 Other provisions 13 6 170 10 598 CURRENT LIABILITIES 116 759 204 534 Other financial liabilities 16 8 478 9 578 Trade payables 16 49 870 72 119 Current income tax liabilities - 2 116 Other liabilities 14 10 760 10 244 Deferred income 15 25 611 22 425 Provision for retirement and similar benefits 12 10 10 Other provisions 13 22 030 88 042 TOTAL LIABILITIES AND EQUITY 2 180 597 2 274 124 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 10 Interim condensed statement of changes in consolidated equity Share capital Supplementary capital Share premium Treasury shares Other reserves Foreign exchange differences on translation Retained earnings (Accumulated losses) Net profit (loss) for the period Equity of the shareholders of CD PROJEKT S.A. Non-controlling interests Total equity 01.01.2023 – 30.06.2023 Equity as at 01.01.2023 100 771 1 567 325 116 700 (99 993) 2 255 1 904 344 442 - 2 033 404 - 2 033 404 Costs of the incentive plan - - - - 10 392 - - - 10 392 - 10 392 Appropriation of the net profit/offset of loss - 246 412 - - - - (246 412) - - - - Payment of dividend - - - - - - (99 911) - (99 911) - (99 911) Redemption of treasury shares (860) (99 133) - 99 993 - - - - - - - Total comprehensive income - - - - 337 (1 696) - 91 271 89 912 - 89 912 Equity as at 30.06.2023 99 911 1 714 604 116 700 - 12 984 208 (1 881) 91 271 2 033 797 - 2 033 797 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 11 Share capital Supplementary capital Share premium Treasury shares Other reserves Foreign exchange differences on translation Retained earnings (Accumulated losses) Net profit (loss) for the period Equity of the shareholders of CD PROJEKT S.A. Non-controlling interests Total equity 01.01.2022 – 30.06.2022 Equity as at 01.01.2022 100 739 1 425 647 115 909 - 47 994 1 591 202 476 - 1 894 356 - 1 894 356 Costs of the incentive plan - - - - 2 320 - - - 2 320 - 2 320 Appropriation of the net profit/offset of loss - 135 195 - - - - (135 195) - - - - Payment of dividend - - - - - - (100 739) - (100 739) - (100 739) Total comprehensive income - - - - (7 991) 1 552 - 113 746 107 307 - 107 307 Equity as at 30.06.2022 100 739 1 560 842 115 909 - 42 323 3 143 (33 458) 113 746 1 903 244 - 1 903 244 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 12 Interim condensed consolidated statement of cash flows Note 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 OPERATING ACTIVITIES Net profit/(loss) 91 271 113 746 Total adjustments: 30 21 148 23 992 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties 6 611 7 346 Amortization of development projects recognized as cost of goods sold 43 213 36 215 Foreign exchange (gains)/losses 18 842 (4 855) Interest and participation in profits (25 225) (17 553) (Gains)/losses on investing activities (43 042) 1 486 Increase/(Decrease) in provisions (49 904) (50 187) (Increase)/Decrease in inventories 4 583 750 (Increase)/Decrease in receivables 78 922 72 643 Increase/(Decrease) in liabilities, excluding loans and borrowings (15 429) 7 523 Change in other assets and liabilities (8 112) (34 673) Other adjustments 10 689 5 297 Cash from operating activities 112 419 137 738 Income tax expense 13 496 15 236 Withholding tax paid abroad 15 960 24 634 Income tax (paid)/refunded (20 276) (34 952) Net cash from operating activities 121 599 142 656 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 13 Note 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 INVESTING ACTIVITIES Inflows 420 885 461 761 Sale of intangible assets and property, plant and equipment 514 14 Repayment of loans granted - 11 910 Expiry of bank deposits over 3 months 329 970 265 000 Redemption of bonds 56 411 173 090 Interest on bonds 6 479 2 102 Interest received on deposits 17 195 9 018 Inflows from execution of forward contracts 10 273 - Other cash inflows from investing activities 43 627 Outflows 569 258 328 833 Acquisition of intangible assets and property, plant and equipment 29 696 25 621 Expenditure on development projects 162 616 89 710 Expenditure on intangible assets 380 - Acquisition of investment properties and capitalization of expenditure 98 145 Loans granted 4 215 3 400 Purchase of shares in a subsidiary 3 515 - Contribution to the capital of a subsidiary - 26 010 Purchase of bonds and cost of their purchase 58 973 168 120 Placement of bank deposits over 3 months 309 765 - Outflows from execution of forward contracts - 15 763 Other outflows on investing activities - 64 Net cash from investing activities (148 373) 132 928 FINANCING ACTIVITIES Inflows 29 20 Payment of finance lease liabilities 28 20 Interest paid 1 - Outflows 101 746 2 161 Dividends and other distributions to shareholders 99 911 - Payment of lease liabilities 1 441 1 894 Interest paid 394 267 Net cash used in financing activities 31 (101 717) (2 141) Net increase/(decrease) in cash and cash equivalents (128 491) 273 443 Change in cash and cash equivalents in the balance sheet (128 491) 273 443 Cash and cash equivalents as at the beginning of the period 277 827 411 586 Cash and cash equivalents as at the end of the period 149 336 685 029 Notes to the interim condensed consolidated financial statements 2 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 15 General Information Name of reporting entity: CD PROJEKT S.A. (there have been no changes in the name of the reporting entity since the end of the prior reporting period) Legal form: a joint stock company (spółka akcyjna) Registered office: ul. Jagiellońska 74, 03-301 Warsaw Country of registration: Poland Core activities: CD PROJEKT S.A. is the holding company of the CD PROJEKT Group which operates in the CD PROJEKT RED and GOG.COM segments. Principal place of business: Warsaw Registration body: District Court for the Capital City of Warsaw in Warsaw, 14th Business Department of the National Court Register Statistical number REGON: 492707333 Tax identification number NIP: 7342867148 Number in the BDO register (national waste management database): 000141053 Duration of the Group: unspecified Name of parent entity: CD PROJEKT S.A. Name of the top parent of the group: CD PROJEKT S.A. Consolidation policies Consolidated companies – as at 30 June 2023 % share in capital % share of voting rights consolidation method CD PROJEKT S.A. parent entity - - GOG sp. z o.o. 100% 100% acquisition accounting CD PROJEKT Inc. (currently: CD PROJEKT RED Inc.) 100% 100% acquisition accounting Spokko sp. z o.o. 100% 100% not consolidated CD PROJEKT RED Vancouver Studio Ltd. 100% 100% not consolidated The Molasses Flood LLC 71% 71% not consolidated CD PROJEKT SILVER Inc. 100% 100% not consolidated Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 16 In accordance with the accounting policy adopted by the Group, the parent entity does not have to consolidate a subsidiary using the acquisition accounting method, if:  the subsidiary’s share in the parent entity’s total assets does not exceed 2%,  the share in the parent entity’s revenue from sales and financial transactions does not exceed 1%, where those transactions between the subsidiary and its parent entity which would be eliminated during consolidation are not taken into account when determining whether the said thresholds have been exceeded. In total, the financial data of the subsidiaries excluded from consolidation cannot exceed:  5% of the share in the parent entity’s total assets,  2% of the share in the parent entity’s revenue from sales and financial transactions, where those transactions between the subsidiary and its parent entity which would be eliminated during consolidation are not taken into account when determining whether the said thresholds have been exceeded. Subsidiaries Subsidiaries are all and any entities over which the Group has control which manifests itself by, simultaneously:  having power, consisting of having substantive rights that give the Group the current ability to direct the relevant activities, i.e. those activities which significantly affect the entity’s financial results,  being exposed or having rights to variable returns, consisting of having the potential to change the financial results of the Group depending on the results of the subsidiary,  having the ability to use the power exercised to affect its returns from the subsidiary by using its power in order to affect the financial results attributable to the Group resulting from involvement in the subsidiary. Subsidiaries are fully consolidated from the date on which the Group assumed control over them. They cease to be consolidated from the date that control ceases. Revenue and costs, receivables and payables and unrealized gains on transactions between Group companies are eliminated for the purposes of the consolidated financial statements. Unrealized losses are also eliminated, unless the transaction is an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the accounting policies adopted by the Group. Basis of preparation of the interim condensed consolidated financial statements These interim condensed consolidated financial statements have been prepared in accordance with the International Accounting Standard No. 34 Interim Financial Reporting endorsed by the EU (“IAS 34”). The interim condensed consolidated financial statements do not comprise all the information and disclosures which are required in annual financial statements and should be read jointly with the consolidated financial statements of the Group for the year ended 31 December 2022 approved for publication on 30 March 2023. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 17 Going concern assumption These interim condensed consolidated financial statements have been prepared based on the assumption that the Group and the Parent Company will continue in operation as a going concern in the foreseeable future, i.e. for a period of at least 12 months after the balance sheet date. As at the date of signing these financial statements, the Management Board of the Parent Company has not identified any facts or circumstances which would indicate any threats to the Group continuing in operation as a going concern for a period of 12 months after the end of the reporting period as a result of intended or forced discontinuation or significantly curtailing its existing operations. By the date of preparing the consolidated financial statements for the period from 1 January to 30 June 2023, the Management Board of the Parent Company did not become aware of any events which should have been but were not recognized in the accounting records for the reporting period. At the same time, there were no significant prior year events undisclosed in these financial statements. Compliance with the International Financial Reporting Standards These interim condensed consolidated financial statements have been prepared in accordance with the International Accounting Standard No. 34 Interim Financial Reporting and in accordance with the relevant International Financial Reporting Standards (IFRS) applicable to interim financial reporting, approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) as applicable as at 30 June 2023. The Group intends to apply changes to IFRS published but not yet binding by the date of publication of these interim condensed consolidated financial statements in accordance with their effective dates. Information on standards and interpretations adopted for the first time, early adoption of the standards, standards effective on or after 1 January 2023 and the assessment of impact of IFRS changes on the future consolidated financial statements of the Group has been presented in the second part of the Consolidated Financial Statements for 2022. Amendments to standards or interpretations effective from 1 January 2023 applicable and adopted by the Group  IFRS 17 Insurance Contracts - endorsed on 19 November 2021, applicable to reporting periods beginning on or after 1 January 2023,  Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies (published on 12 February 2021) - endorsed on 2 March 2022 and applicable to annual periods beginning on or after 1 January 2023,  Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - endorsed on 2 March 2022 and applicable to periods beginning on or after 1 January 2023,  Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction - endorsed on 11 August 2022 and applicable to periods beginning on or after 1 January 2023,  Amendments to IFRS 17 Insurance Contracts concerning Initial Application of IFRS 17 and IFRS 9 - Comparative Information - endorsed on 8 September 2022 and applicable to periods beginning on or after 1 January 2023. These amendments have no material impact on the accounting Policies applied by the Group in respect of the Group’s operations or its financial results. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 18 Standards and interpretations adopted by the IASB but not yet endorsed by the EU When approving these financial statements, the Group did not apply the following standards, amendments and interpretations which have not yet been endorsed by the EU:  Amendments to IAS 12 The International Tax Reform - Pillar Two Model Rules - applicable to annual reporting periods beginning on or after 1 January 2023,  Amendment to IAS 1 Presentation of financial statements: Classification of liabilities as current or non-current and Non-current Liabilities with Covenants - applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback - applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures - Supplier Finance Arrangements - applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates - Lack of Exchangeability - applicable to reporting periods beginning on or after 1 January 2025. The Group is analysing the estimated impact of the standards and amendments listed above on the Group’s financial statements. Functional currency and presentation currency Functional currency and presentation currency The functional currency of the Group and the Parent Company and the reporting currency of these financial statements is the Polish zloty (PLN). Unless stated otherwise, all data is presented in thousands of Polish zlotys (PLN ‘000). Transactions and balances Transactions expressed in foreign currencies are translated into functional currency based on the exchange rate as at the date of transaction. Foreign exchange gains and losses on the settlement of these transactions and the translation of monetary assets and liabilities as at the balance sheet date are recognized in the income statement, unless they are deferred in equity, when they qualify for recognition as cash flow hedges and hedges of a net investment. Assumption of comparability of the financial statements and changes in accounting policies The accounting policies applied in these interim condensed consolidated financial statements, material judgments made by the Management Board with regard to the accounting policies applied by the Group and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the annual consolidated financial statements of the CD PROJEKT Group for 2022, with the exception of changes in accounting policies and presentation changes described below. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 December 2022. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 19 Presentation changes In these interim condensed consolidated financial statements for the period from 1 January to 30 June 2023 changes were introduced in the presentation of selected financial data. In order to ensure comparability of the financial data in the reporting period, presentation of the data for the period from 1 January to 30 June 2022 was changed. The data is presented after the following change:  In the income statement for the period from 1 January 2022 to 30 June 2022, presentation of the provisions for the variable component of the performance-related remuneration of the Management Board Members was changed. Consequently, the following items changed: - Selling expenses – a decrease of PLN 10,708 thousand - Administrative expenses – an increase of PLN 10,708 thousand Seasonality or cyclicality of the Group’s operations A detailed description of seasonality and cyclicality of the operations is presented in the Management Board Report on CD PROJEKT Group activities in the period between 1 January and 31 June 2023. Audit by the registered auditor The financial data presented in the statement of financial position as at 30 June 2023 and the financial data presented in the income statement, cash flow statement and the statement of changes in equity for the period from 1 January to 30 June 2023 and from 1 January to 30 June 2022 was not audited by the registered auditor. The data for the periods referred to above was reviewed by the registered auditor. The statement of financial position as at 31 December 2022 was audited by the registered auditor. Notes – operating segments of the CD PROJEKT Group 3 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 21 Operating segments Presentation of the financial statements taking into account operating segments The scope of the financial information provided on the Group’s operating segments is consistent with the requirements of IFRS 8. The segments’ results are determined based on their net profits. Description of differences in the basis for determination of segments and the profit or loss of a segment compared with the last annual consolidated financial statements The Group did not make any changes in the determination of segments or in the measurement of the profits or losses of the individual segments in relation to the financial statements for the year ended 31 December 2022. There are no differences between the measurement of the assets, liabilities, profits and losses of the Group’s reporting segments. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 22 Information on individual operating segments Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.01.2023 – 30.06.2023 Sales revenue 244 271 84 522 (3 579) 325 214 from external customers 240 760 84 454 - 325 214 between segments 3 511 68 (3 579) - Net profit/(loss) of the segment 91 420 (141) (8) 91 271 Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.01.2022 – 30.06.2022 Sales revenue 295 488 88 751 (6 323) 377 916 from external customers 289 301 88 615 - 377 916 between segments 6 187 136 (6 323) - Net profit/(loss) of the segment 113 475 353 (82) 113 746 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 23 Consolidated income statement by segments for the period from 01.01.2023 to 30.06.2023 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 244 271 84 522 (3 579) 325 214 Sales of products 236 595 - 1 489 238 084 Sales of services 506 439 (146) 799 Sales of goods for resale and materials 7 170 84 083 (4 922) 86 331 Cost of sales of products, services, goods for resale and materials 50 922 59 752 (3 461) 107 213 Costs of products and services sold 42 725 4 (28) 42 701 Cost of goods for resale and materials sold 8 197 59 748 (3 433) 64 512 Gross profit/(loss) on sales 193 349 24 770 (118) 218 001 Selling expenses 64 931 20 184 (9) 85 106 Administrative expenses 55 157 3 926 (217) 58 866 Other operating income 34 089 691 (1 072) 33 708 Other operating expenses 8 946 629 (921) 8 654 (Impairment)/reversal of impairment of financial instruments 4 - - 4 Operating profit/(loss) 98 408 722 (43) 99 087 Finance income 50 828 782 - 51 610 Finance costs 28 482 1 577 (89) 29 970 Profit/(loss) before tax 120 754 (73) 46 120 727 Income tax 29 334 68 54 29 456 Net profit/(loss) 91 420 (141) (8) 91 271 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 91 420 (141) (8) 91 271 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 24 Consolidated income statement by segments for the period from 01.01.2022 to 30.06.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 295 488 88 751 (6 323) 377 916 Sales of products 283 471 - 2 397 285 868 Sales of services 1 927 136 (828) 1 235 Sales of goods for resale and materials 10 090 88 615 (7 892) 90 813 Cost of sales of products, services, goods for resale and materials 43 791 63 208 (5 665) 101 334 Costs of products and services sold 37 141 42 (170) 37 013 Cost of goods for resale and materials sold 6 650 63 166 (5 495) 64 321 Gross profit/(loss) on sales 251 697 25 543 (658) 276 582 Selling expenses 69 844 20 874 (119) 90 599 Administrative expenses 43 031 3 164 (227) 45 968 Other operating income 5 362 2 183 (2 159) 5 386 Other operating expenses 8 379 1 872 (2 342) 7 909 (Impairment)/reversal of impairment of financial instruments (8) - - (8) Operating profit/(loss) 135 797 1 816 (129) 137 484 Finance income 34 910 4 444 - 39 354 Finance costs 17 578 5 694 (50) 23 222 Profit/(loss) before tax 153 129 566 (79) 153 616 Income tax 39 654 213 3 39 870 Net profit/(loss) 113 475 353 (82) 113 746 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 113 475 353 (82) 113 746 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 25 Consolidated statement of financial position by segments as at 30.06.2023 CD PROJEKT RED GOG.COM Consolidation eliminations Total NON-CURRENT ASSETS 1 269 324 44 633 (17 281) 1 296 676 Property, plant and equipment 159 837 2 778 (1 606) 161 009 Intangible assets 69 146 1 129 (490) 69 785 Expenditure on development projects 594 129 2 212 234 596 575 Investment properties 37 429 - - 37 429 Goodwill 56 438 - - 56 438 Investments in subordinated entities 15 405 - (15 405) - Shares in non-consolidated subordinated entities 43 477 - - 43 477 Prepayments and deferred costs 6 100 36 627 - 42 727 Other financial assets 242 203 - - 242 203 Deferred tax assets 44 785 1 887 (14) 46 658 Other receivables 375 - - 375 CURRENT ASSETS 840 247 51 078 (7 404) 883 921 Inventories 8 118 - - 8 118 Trade receivables 83 176 5 035 (4 654) 83 557 Current income tax receivable 10 784 1 572 - 12 356 Other receivables 40 432 1 927 - 42 359 Prepayments and deferred costs 9 484 14 760 (2 750) 21 494 Other financial assets 249 576 - - 249 576 Bank deposits over 3 months 317 125 - - 317 125 Cash and cash equivalents 121 552 27 784 - 149 336 TOTAL ASSETS 2 109 571 95 711 (24 685) 2 180 597 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 26 CD PROJEKT RED GOG.COM Consolidation eliminations Total EQUITY 2 010 528 38 887 (15 618) 2 033 797 Equity of the shareholders of CD PROJEKT S.A. 2 010 528 38 887 (15 618) 2 033 797 Share capital 99 911 136 (136) 99 911 Supplementary capital 1 681 868 38 251 (5 515) 1 714 604 Share premium 116 700 - - 116 700 Treasury shares - - - - Other reserves 13 997 704 (1 717) 12 984 Foreign exchange differences on translation (741) (65) 1 014 208 Retained earnings (Accumulated losses) 7 373 2 (9 256) (1 881) Net profit (loss) for the period 91 420 (141) (8) 91 271 Non-controlling interests - - - - NON-CURRENT LIABILITIES 30 014 1 174 (1 147) 30 041 Other financial liabilities 18 206 1 147 (1 147) 18 206 Other liabilities 2 500 - - 2 500 Deferred tax provision 46 - - 46 Deferred income 2 753 - - 2 753 Provision for retirement and similar benefits 339 27 - 366 Other provisions 6 170 - - 6 170 CURRENT LIABILITIES 69 029 55 650 (7 920) 116 759 Other financial liabilities 8 251 743 (516) 8 478 Trade payables 19 501 34 972 (4 603) 49 870 Other liabilities 5 415 5 345 - 10 760 Deferred income 18 479 9 882 (2 750) 25 611 Provision for retirement and similar benefits 9 1 - 10 Other provisions 17 374 4 707 (51) 22 030 TOTAL LIABILITIES AND EQUITY 2 109 571 95 711 (24 685) 2 180 597 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 27 Consolidated statement of financial position by segments as at 31.12.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total NON-CURRENT ASSETS 1 104 545 32 593 (17 160) 1 119 978 Property, plant and equipment 143 837 3 269 (1 854) 145 252 Intangible assets 69 476 171 (490) 69 157 Expenditure on development projects 471 528 1 439 235 473 202 Investment properties 42 560 - - 42 560 Goodwill 56 438 - - 56 438 Investments in subordinated entities 15 092 - (15 092) - Shares in non-consolidated subordinated entities 41 607 - - 41 607 Prepayments and deferred costs 5 314 25 760 - 31 074 Other financial assets 207 437 - - 207 437 Deferred tax assets 50 867 1 954 41 52 862 Other receivables 389 - - 389 CURRENT ASSETS 1 095 224 64 332 (5 410) 1 154 146 Inventories 12 701 - - 12 701 Trade receivables 164 079 6 621 (5 410) 165 290 Current income tax receivable 38 1 420 - 1 458 Other receivables 55 340 1 799 - 57 139 Prepayments and deferred costs 6 508 16 378 - 22 886 Other financial assets 279 515 - - 279 515 Bank deposits over 3 months 337 330 - - 337 330 Cash and cash equivalents 239 713 38 114 - 277 827 TOTAL ASSETS 2 199 769 96 925 (22 570) 2 274 124 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 28 CD PROJEKT RED GOG.COM Consolidation eliminations Total EQUITY 2 009 986 38 715 (15 297) 2 033 404 Equity of the shareholders of CD PROJEKT S.A. 2 009 986 38 715 (15 297) 2 033 404 Share capital 100 771 136 (136) 100 771 Supplementary capital 1 539 839 33 001 (5 515) 1 567 325 Share premium 116 700 - - 116 700 Treasury shares (99 993) - - (99 993) Other reserves 3 268 391 (1 404) 2 255 Foreign exchange differences on translation 955 (65) 1 014 1 904 Retained earnings (Accumulated losses) 6 351 4 (9 006) (2 651) Net profit (loss) for the period 342 095 5 248 (250) 347 093 Non-controlling interests - - - - NON-CURRENT LIABILITIES 36 156 1 367 (1 337) 36 186 Other financial liabilities 18 883 1 337 (1 337) 18 883 Other liabilities 2 620 - - 2 620 Deferred tax provision 50 - - 50 Deferred income 3 666 3 - 3 669 Provision for retirement and similar benefits 339 27 - 366 Other provisions 10 598 - - 10 598 CURRENT LIABILITIES 153 627 56 843 (5 936) 204 534 Other financial liabilities 8 687 1 417 (526) 9 578 Trade payables 38 787 38 236 (4 904) 72 119 Current income tax liabilities 2 116 - - 2 116 Other liabilities 4 382 5 862 - 10 244 Deferred income 16 379 6 046 - 22 425 Provision for retirement and similar benefits 9 1 - 10 Other provisions 83 267 5 281 (506) 88 042 TOTAL LIABILITIES AND EQUITY 2 199 769 96 925 (22 570) 2 274 124 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements Notes – other explanatory notes to the interim condensed consolidated financial statements 4 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 30 Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact Material events The following unusual events had a material impact on the results, assets, equity & liabilities and cash flows of the CD PROJEKT Group in the reporting period (which was not observed in the comparative period):  In the CD PROJEKT RED segment, in connection with the determination of the new framework for the Sirius project developed by The Molasses Flood studio, a write-down of expenditure incurred on development work until the end of 2022 was partially reversed (an increase in the balance of Other operating income of PLN 21 531 thousand) and part of the expenditure incurred on the project in the first quarter of 2023 was written off (an increase in the balance of Other operating expenses of PLN 2 745 thousand). This materially affected the Group’s net profit or loss and the relevant items of the Statement of financial position and the Statement of cash flows presented in this Report,  In connection with the fact that CD PROJEKT S.A. is taking advantage of tax relief for an innovative employee, the CD PROJEKT RED segment reduced current personal income tax liabilities under PIT4 and PIT8A and recognized income in this respect (an increase in the balance of Other operating income of PLN 7 718 thousand); at the same time, the deferred tax asset relating to the R&D relief available in subsequent periods was reduced accordingly, resulting in an increase in the balance of Income tax in the Income statement,  In the second quarter of the current year, Incentive Plan A and Incentive Plan B were introduced in the CD PROJEKT Group, replacing the existing inventive program operated since 2020. The cost of rights awarded as part of the said incentive plans determined by an actuarial valuation were accounted for partly as modifications. The settlement of costs of this modification, taking into account earlier periods of the former incentive plan, resulted in a one-off increase in the cost associated with the functioning of the incentive plans in the reporting period. The total amount of the Group’s costs relating to the functioning of the incentive plans in the first half of 2023 was PLN 10 392 thousand. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 31 Note 2. Property, plant and equipment Changes in property, plant and equipment (by category) for the period 01.01.2023 – 30.06.2023 Land Buildings and structures Civil and hydraulic engineering facilities Plant and machinery Vehicles Other fixed assets Assets under construction Total Gross carrying amount as at 01.01.2023 40 435 82 297 1 925 58 856 3 251 5 776 28 089 220 629 Increase due to: - 24 811 2 867 22 636 674 1 665 5 627 58 280 purchase - 141 2 15 804 31 306 5 627 21 911 lease contracts concluded - 283 - - 642 - - 925 transfer from investment properties - 3 854 - 316 - - - 4 170 transfer from assets under construction - 20 148 2 865 6 512 - 1 359 - 30 884 reclassification - 50 - - - - - 50 other - 335 - 4 1 - - 340 Decrease due to: - 4 535 99 451 10 35 30 939 36 069 sale - - - 201 5 - - 206 scrapping - 1 044 99 190 5 35 1 1 374 transfer from assets under construction - - - - - - 30 884 30 884 reclassification - - - 50 - - 54 104 lease contracts terminated - 3 491 - - - - - 3 491 other - - - 10 - - - 10 Gross carrying amount as at 30.06.2023 40 435 102 573 4 693 81 041 3 915 7 406 2 777 242 840 Accumulated depreciation as at 01.01.2023 1 817 25 351 717 42 482 1 537 3 473 - 75 377 Increase due to: 283 4 293 95 5 985 321 494 - 11 471 depreciation charge 283 3 310 95 5 920 318 494 - 10 420 transfer from investment properties - 570 - 48 - - - 618 reclassification - 81 - - - - - 81 other - 332 - 17 3 - - 352 Decrease due to: - 4 415 99 458 10 35 - 5 017 sale - - - 200 5 - - 205 scrapping - 924 99 177 5 35 - 1 240 reclassification - - - 81 - - - 81 lease contracts terminated - 3 491 - - - - - 3 491 Accumulated depreciation as at 30.06.2023 2 100 25 229 713 48 009 1 848 3 932 - 81 831 Impairment write-downs as at 01.01.2023 - - - - - - - - Impairment write-downs as at 30.06.2023 - - - - - - - - Net carrying amount as at 01.01.2023 38 618 56 946 1 208 16 374 1 714 2 303 28 089 145 252 Net carrying amount as at 30.06.2023 38 335 77 344 3 980 33 032 2 067 3 474 2 777 161 009 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 32 Amounts of contractual commitments to purchase property, plant and equipment in the future 30.06.2023 31.12.2022 Construction of an office building on the CD PROJEKT campus 97 072 - Leasing of passenger cars 554 599 Total 97 626 599 Right-of-use assets relating to property, plant and equipment 30.06.2023 Gross amount Accumulated depreciation Net amount Land 14 540 771 13 769 Real properties 9 385 4 606 4 779 Vehicles 2 464 674 1 790 Total 26 389 6 051 20 338 31.12.2022 Gross amount Accumulated depreciation Net amount Land 14 540 669 13 871 Real properties 14 332 8 735 5 597 Civil and hydraulic engineering facilities 99 99 - Vehicles 2 264 625 1 639 Total 31 235 10 128 21 107 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 33 Note 3. Intangible assets and expenditure on development projects Changes in intangible assets and expenditure on development projects for the period 01.01.2023 – 30.06.2023 Expenditure on development projects in progress Expenditure on completed development p rojects Trademarks Patents and licenses Copyright Computer software Goodwill Intangible assets under construction Total Gross carrying amount as at 01.01.2023 247 277 930 087 33 199 4 160 18 469 50 078 56 438 172 1 339 880 Increase due to: 148 058 - - 1 255 5 907 - 1 716 151 941 purchase - - - 1 255 5 523 - 1 320 3 103 assets internally generated 148 058 - - - - - - 396 148 454 transfer from intangible assets under construction - - - - - 343 - - 343 reclassification - - - - - 41 - - 41 Decrease due to: 14 589 - - 41 - 4 552 - 359 19 541 scrapping 2 745 - - - - 4 552 - - 7 297 utilization of impairment write- downs 11 844 - - - - - - - 11 844 transfer from intangible assets under construction - - - - - - - 343 343 reclassification - - - 41 - - - 16 57 Gross carrying amount as at 30.06.2023 380 746 930 087 33 199 5 374 18 474 46 433 56 438 1 529 1 472 280 Accumulated amortization as at 01.01.2023 - 657 011 - 2 767 301 33 853 - - 693 932 Increase due to: - 43 471 - 450 150 2 254 - - 46 325 amortization charge - 43 471 - 450 150 2 254 - - 46 325 Decrease due to: - - - - - 4 551 - - 4 551 scrapping - - - - - 4 551 - - 4 551 Accumulated amortization as at 30.06.2023 - 700 482 - 3 217 451 31 556 - - 735 706 Impairment write-downs as at 01.01.2023 33 375 13 776 - - - - - - 47 151 Increase - - - - - - - - - Decrease due to: 33 375 - - - - - - - 33 375 reversal of write- downs 21 531 - - - - - - - 21 531 release of write- downs (write-off) 11 844 - - - - - - - 11 844 Impairment write-downs as at 30.06.2023 - 13 776 - - - - - - 13 776 Net carrying amount as at 01.01.2023 213 902 259 300 33 199 1 393 18 168 16 225 56 438 172 598 797 Net carrying amount as at 30.06.2023 380 746 215 829 33 199 2 157 18 023 14 877 56 438 1 529 722 798 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 34 Amounts of contractual commitments to purchase intangible assets in future Not applicable. Note 4. Goodwill During the period from 1 January to 30 June 2023 there were no changes in goodwill. Note 5. Investment properties The Parent Company owns a real estate complex located at ul. Jagiellońska 76 in Warsaw. Given that a part of the properties purchased is leased out to third parties, including CD PROJEKT Group companies, the Group decided to partly classify these properties as investment properties. The remaining part of the property is used for own needs of the activities conducted. The Group measures the properties purchased at cost less accumulated depreciation. The last appraisal report by the expert surveyor, for the buildings recognized as investment properties, was prepared on the basis of unit prices for the construction of buildings with the most similar parameters included in the Bistyp Catalogue of Unit Prices for Works and Investment Facilities 2021. The valuation of the individual assets amounted to PLN 60 692 thousand for the buildings at ul. Jagiellońska 74, and PLN 13 212 thousand for the buildings at ul. Jagiellońska 76. Changes in investment properties for the period 01.01.2023 – 30.06.2023 Gross carrying amount as at 01.01.2023 47 946 Increase due to: 98 capitalized expenditure 98 Decrease due to: 5 033 scrapping 864 reclassification to other asset categories 4 169 Gross carrying amount as at 30.06.2023 43 011 Accumulated amortization as at 01.01.2023 5 386 Increase due to: 941 amortization charge 941 Decrease due to: 745 scrapping 127 reclassification to other asset categories 618 Accumulated amortization as at 30.06.2023 5 582 Impairment write-downs as at 01.01.2023 - Increase - Decrease - Impairment write-downs as at 30.06.2023 - Net carrying amount as at 30.06.2023 37 429 Contractual liabilities on purchase of investment properties Not applicable. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 35 Note 6. Inventories 30.06.2023 31.12.2022 Goods for resale 8 115 12 697 Other materials 3 4 Gross inventories 8 118 12 701 Inventory write-downs - - Net inventories 8 118 12 701 Change in inventory write-downs Not applicable. Note 7. Trade and other receivables 30.06.2023 31.12.2022 Trade and other receivables, gross 127 105 223 636 Write-downs 814 818 Trade and other receivables 126 291 222 818 from related entities 423 1 855 from other entities 125 868 220 963 Change in write-downs of receivables Trade receivables Other receivables Total OTHER ENTITIES Write-downs as at 01.01.2023 86 732 818 Increases, including: 2 - 2 write-downs recognized for past-due and disputed receivables 2 - 2 Decreases, including: 6 - 6 release of write-downs 6 - 6 Write-downs as at 30.06.2023 82 732 814 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 36 Current and overdue trade receivables as at 30.06.2023 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 573 312 247 14 - - - default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 573 312 247 14 - - - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 83 066 81 571 1 383 12 18 2 80 default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 82 - - - - 2 80 total expected credit losses 82 - - - - 2 80 Net receivables 82 984 81 571 1 383 12 18 - - Total gross receivables 83 639 81 883 1 630 26 18 2 80 impairment write- downs 82 - - - - 2 80 Net receivables 83 557 81 883 1 630 26 18 - - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 37 Other receivables 30.06.2023 31.12.2022 Other gross receivables, including: 43 466 58 260 tax receivables, other than corporate income tax 26 074 43 414 prepayments for inventories 14 142 6 940 prepayments for development projects 1 718 1 433 security deposits 475 1 071 settlements with employees 59 - provisions for sales revenue – prepayments 53 137 prepayments for property, plant and equipment and intangible assets 30 135 settlements with suppliers of property, plant and equipment items - 4 160 settlements with payment operators - 7 settlements with members of the Management Boards of the Group companies - 2 other 915 961 Write-downs 732 732 Other receivables, including: 42 734 57 528 current 42 359 57 139 non-current 375 389 Note 8. Other financial assets 30.06.2023 31.12.2022 Loans granted 4 789 739 Bonds 464 196 475 848 Derivative financial instruments 20 534 7 809 Private equity interests in the gaming sector 2 260 2 556 Other financial assets, including: 491 779 486 952 current 249 576 279 515 non-current 242 203 207 437 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 38 Note 9. Prepayments and deferred costs 30.06.2023 31.12.2022 Minimum guarantees, advance payments and prepayments GOG.COM 47 706 41 457 Software, licences 10 042 6 186 Costs of future marketing services 1 522 1 597 Fees for pre-emptive rights 1 218 1 271 Costs of repairs and maintenance 974 1 142 Costs of IT security resources 451 380 Staff relocation costs 365 39 Property and personal insurance 263 785 Costs in connection with redevelopment of the car park 260 260 Business travel (tickets, hotels, insurance) 235 85 Transaction costs 143 - Perpetual usufruct 141 - Domains, servers 125 235 Other prepayments and deferred costs 776 523 Prepayments and deferred costs, including: 64 221 53 960 current 21 494 22 886 non-current 42 727 31 074 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 39 Note 10. Deferred income tax Deductible temporary differences underlying the deferred tax asset 31.12.2022 Differences affecting the deferred tax recognized in the profit or loss 30.06.2023 Provision for other employee benefits 376 - 376 Provision for costs of performance-related and other remuneration 49 565 (40 310) 9 255 Tax loss 5 467 1 306 6 773 Foreign exchange losses 7 573 17 507 25 080 Difference between the carrying and tax amount of expenditure on development projects 34 836 (16 762) 18 074 Salaries and wages and social security payable in future periods 47 25 72 Deferred income in respect of virtual wallet top-ups and fringe benefit scheme 3 955 216 4 171 Other provisions 34 167 (4 590) 29 577 Tax value of leased non-current assets 20 697 (265) 20 432 Research and development relief 318 126 (40 623) 277 503 Prepayments recognized as revenue for tax purposes 7 523 (4 552) 2 971 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 12 (12) - Measurement of forward contracts 892 (665) 227 Other - 20 20 Total deductible differences, including: 483 236 (88 705) 394 531 taxed at 5% 71 657 (399) 71 258 taxed at 19% 410 344 (88 222) 322 122 deferred tax charged abroad 1 235 (84) 1 151 Deferred income tax asset 81 900 (16 803) 65 097 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 40 Taxable temporary differences underlying the deferred tax provision 31.12.2022 Differences affecting the deferred tax recognized in the profit or loss 30.06.2023 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 17 780 1 939 19 719 Current period revenue invoiced in the subsequent period/accrued income 132 427 (68 541) 63 886 Foreign exchange gains 8 722 (8 131) 591 Difference between the carrying and tax amount of expenditure on development projects 254 638 (42 463) 212 175 Book value of leased non-current assets 20 844 (414) 20 430 Other 151 60 211 Total taxable differences, including: 434 562 (117 550) 317 012 taxed at 5% 382 911 (83 862) 299 049 taxed at 19% 50 214 (33 592) 16 622 deferred tax charged abroad 1 437 (96) 1 341 Deferred tax provision 29 088 (10 603) 18 485 * restated data The deferred part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, or at the rate of 5% for the tax base corresponding to income from qualifying intellectual property (the so-called IP BOX). When determining the appropriate tax rate for temporary differences, the Group relied on forecasts of which tax base will give rise to the realization of the temporary differences recognized. Net deferred tax asset/provision 30.06.2023 31.12.2022 Deferred tax asset 65 097 81 900 Deferred tax provision 18 485 29 088 * restated data Income tax expense recognized in the income statement 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Current income tax, including: 23 256 32 862 withholding tax paid abroad 15 961 24 634 Change in deferred tax 6 200 7 008 Income tax expense recognized in the income statement 29 456 39 870 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 41 Note 11. Share capital Share capital – structure as at 30.06.2023 Series Number of shares Value of the series/issue at par Manner of covering share capital A - M 99 910 510 99 910 510 Fully paid up Total 99 910 510 99 910 510 - On 18 April 2023, an Extraordinary General Meeting of the Parent Company took place at which the shareholders approved, among others, resolutions concerning a decrease of the share capital and redemption of 860 290 own shares acquired by the Parent Company between 5 and 24 October 2022. The contents of the resolutions passed by the Extraordinary General Meeting is available on the Parent Company’s website . On 26 June 2023, in connection with the adopted resolutions, the District Court for the City of Warsaw in Warsaw entered in the Register of Businesses changes consisting in, among other things, decreasing the Parent Company’s share capital by PLN 860 290 and thereby, redemption of 860 290 of the Parent Company’s own shares (i.e. own shares acquired earlier with a view to their redemption as part of the buyback executed between 5 and 24 October 2022). As a result, as at the date of publication of this report, the Parent Company’s share capital amounts to PLN 99 910 510 and consists of 99 910 510 ordinary bearer shares with a par value of PLN 1 each, designated as series A – M shares. The total number of votes resulting from all shares of the Parent Company is 99 910 510. There were no changes in the amount of the Parent Company’s share capital after the balance sheet date. Changes in share capital 01.01.2023 – 31.06.2023 01.01.2022 – 31.12.2022 Share capital as at the beginning of the period 100 771 100 739 Increase due to: - 32 issuance of shares paid up in cash – incentive plan - 32 Decrease due to: 860 - redemption of own shares 860 - As at the end of the period 99 911 100 771 Note 12. Provision for retirement and similar benefits 30.06.2023 31.12.2022 Provision for retirement and disability bonuses 376 376 Total, including: 376 376 current 10 10 non-current 366 366 During the period from 1 January to 30 June 2023 there were no changes in provisions for retirement and similar benefits. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 42 Note 13. Other provisions 30.06.2023 31.12.2022 Provision for liabilities, including: 28 200 98 640 provision for costs of the audit and review of the financial statements 73 167 provision for costs of external services 910 850 provision for costs of performance-related and other remuneration 9 254 67 966 provision for other costs 17 963 29 657 Total, including: 28 200 98 640 current 22 030 88 042 non-current 6 170 10 598 Change in other provisions Provision for costs of performance-related and other remuneration Other provisions Total As at 01.01.2023 67 966 30 674 98 640 Provisions recorded during the year 9 254 36 927 46 181 Provisions utilized/released 67 966 48 655 116 621 As at 30.06.2023, including: 9 254 18 946 28 200 current 9 254 12 776 22 030 non-current - 6 170 6 170 Note 14. Other liabilities 30.06.2023 31.12.2022 Liabilities in respect of taxes, customs duties, social security and other, with the exception of corporate income tax 9 775 9 547 VAT 4 309 5 302 Withholding tax 504 32 Personal income tax 1 071 1 944 Social security contributions 3 764 2 043 PFRON (State Disabled Persons Fund) 91 75 PIT-8AR (personal income tax) settlements 36 134 Other - 17 Other liabilities 3 485 3 317 Liabilities in respect of pre-emptive rights and costs of future marketing services 2 500 2 620 Other settlements with employees 148 241 Other settlements with members of the Management Boards 1 32 Prepayments received from foreign customers - 8 Other liabilities 836 416 Total other liabilities 13 260 12 864 current 10 760 10 244 non-current 2 500 2 620 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 43 Current and overdue trade receivables as at 30.06.2023 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 To related entities 2 1 1 - - - - To other entities 13 258 12 905 123 5 - 22 203 Total 13 260 12 906 124 5 - 22 203 Note 15. Deferred income 30.06.2023 31.12.2022 Subsidies 4 586 5 511 Sales relating to future periods 18 991 16 088 GOG wallet 4 746 4 460 Rental of company phones 41 35 Deferred income, including: 28 364 26 094 current 25 611 22 425 non-current 2 753 3 669 Note 16. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments The Management Boards of Group companies analysed specific classes of financial instruments. Based on the analysis, it was concluded that the carrying amounts of the instruments does not materially differ from their fair values, as at both 30 June 2023 and 31 December 2022. 30.06.2023 31.12.2022 LEVEL 1 Assets measured at fair value Assets measured at fair value through other comprehensive income 220 483 243 091 bonds issued by foreign governments – EUR 15 609 25 111 bonds issued by foreign governments – USD 204 874 217 980 LEVEL 2 Assets measured at fair value through profit or loss Derivatives 20 534 7 809 currency forwards – EUR 973 1 249 currency forwards – USD 19 561 6 560 Private equity interests in the gaming sector 2 260 2 556 private equity interests in the gaming sector – SEK 919 1 085 Private equity interests in the gaming sector – USD 1 341 1 471 Liabilities measured at fair value through profit or loss Derivatives 227 891 currency forwards – EUR 56 72 currency forwards – USD 171 819 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 44 Financial Instruments measured at fair value are classified to 3-stage fair value hierarchy: Level 1 - quoted prices in active markets for identical assets or liabilities. Level 2 - fair value based in observable market data. Level 3 - fair value based on market data that is not observable in the market. Financial assets – classification and measurement 30.06.2023 31.12.2022 Financial assets measured at amortized cost 798 895 1 014 332 Other non-current receivables 375 389 Trade receivables 83 557 165 290 Cash and cash equivalents 149 336 277 827 Bank deposits over 3 months 317 125 337 330 Treasury bonds and bonds guaranteed by the State Treasury 243 713 232 757 Loans granted 4 789 739 Financial assets measured at cost 43 477 41 607 Shares in non-consolidated subordinated entities 43 477 41 607 Assets measured at fair value through other comprehensive income 220 483 243 091 Bonds issued by foreign governments 220 483 243 091 Financial assets measured at fair value through profit or loss: 22 794 10 365 Derivative financial instruments 20 534 7 809 Private equity interests in the gaming sector 2 260 2 556 Total financial assets 1 085 649 1 309 395 Financial liabilities – classification and measurement 30.06.2023 31.12.2022 Financial liabilities measured at amortized cost 76 327 99 689 Trade payables 49 870 72 119 Other financial liabilities 26 457 27 570 Financial liabilities measured at fair value through profit or loss 227 891 Derivative financial instruments 227 891 Total financial liabilities 76 554 100 580 In accordance with the requirements of IFRS 9 Financial Instruments, the Parent Company analysed the business model for managing financial assets and examined the characteristics of contractual cash flows for each component of the bond portfolio, and concluded that:  the purpose of investments in domestic and foreign Treasury bonds and domestic bonds guaranteed by the Polish State Treasury is to hold them to maturity and to collect contractual cash flows;  investment mandates for managing the foreign bonds portfolio allow selling bonds before maturity as part of the adopted strategy;  all bonds purchased meet the SPPI test. As a result of the analysis conducted, purchased bonds were classified into two financial asset management models which differ in terms of the entity managing the bond portfolio. Polish Treasury bonds and bonds guaranteed by the Polish State Treasury are measured at amortized cost, because they are held to collect contractual cash flows. Foreign Treasury bonds are measured at fair value through other comprehensive income, because of the investment mandate which allows the possibility of the portfolio being managed by an Asset Manager. In accordance with the requirements of IFRS 13 Fair Value Measurement, the Group analysed the valuation of the financial instruments measured at amortized cost in the consolidated statement of financial position in order to determine their fair values and their classification on the fair value hierarchy. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 45 Listed debt securities were classified to Level 1. They include State Treasury bonds and bonds guaranteed by the State Treasury whose fair value was determined on the basis of a market valuation provided by the brokerage office as part of the applicable agreement for the provision of brokerage services. 30.06.2023 31.12.2022 LEVEL 1 Fair value of assets measured at amortized cost 236 096 219 713 Treasury bonds and bonds guaranteed by the State Treasury 236 096 219 713 Other items of financial assets and financial liabilities measured at amortized cost were classified to Level 3. With regard to equity interests in other entities, the Group estimates the fair values of the shares held using the method which consists in forecasting future cash flows generated by a relevant cash generating unit and requires determining a discount rate to be used to calculate the present value of these cash flows. In justified cases, the Group assumes historical cost as an acceptable approximation of the fair value. The Group did not determine the fair values of receivables, trade payables, cash and cash equivalents, bank deposits over 3 months and loans granted with variable interest, because their carrying amounts are considered by the Group to be a reasonable approximation of their fair values. There were no movements between levels in the fair value hierarchy in the reporting period and in the comparative period. Note 17. Sales revenue Sales revenue – geographical structure 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 in PLN in % in PLN in % Domestic sales 14 079 4.33% 14 785 3.91% Export sales, including: 311 135 95.67% 363 131 96.09% Europe 70 964 21.82% 76 438 20.23% North America 210 622 64.77% 248 040 65.64% South America 1 746 0.54% 1 530 0.40% Asia 24 164 7.43% 32 975 8.73% Australia 3 407 1.04% 3 947 1.04% Africa 232 0.07% 201 0.05% Total 325 214 100% 377 916 100% * The data presented relates to the place of residence of the customers of the Group companies: for CD PROJEKT S.A. – distributors, and for retail sales conducted by GOG sp. z o.o., CD PROJEKT RED STORE sp. z o.o., CD PROJEKT Inc. – end customers. Sales revenue – by type of production 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Own production 238 084 285 868 Third party production 86 331 90 813 Other revenue 799 1 235 Total 325 214 377 916 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 46 Sales revenue – by distribution channel 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Games – box issues 21 942 17 436 Games – digital issues 288 172 346 839 Other revenue 15 100 13 641 Total 325 214 377 916 Note 18. Operating expenses 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties, including: 6 611 7 346 depreciation on leased buildings 560 834 depreciation of leased vehicles 237 174 Materials and energy used 1 783 1 218 External services, including: 52 310 55 697 costs of short-term leases and low value leases 246 343 Taxes and fees 937 552 Salaries and wages, social insurance and other benefits 79 728 69 590 Business travel 1 812 563 Cost of using company cars 118 117 Cost of goods for resale and materials sold 64 512 64 321 Costs of products and services sold 42 701 37 013 Other costs 673 1 484 Total 251 185 237 901 Selling expenses 85 106 90 599 Total administrative expenses, including: 58 866 45 968 cost of research work 3 273 3 904 Costs of sales 107 213 101 334 Total 251 185 237 901 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 47 Note 19. Other operating income and expenses Other operating income 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Reversal of a write-down of expenditure on development projects in progress 21 531 - Tax relief for innovative employees 7 718 - Rental income 2 187 3 351 Subsidies 924 931 Income from re-invoicing 429 398 Other sales 346 41 Fixed assets and goods for resale received free of charge 168 - Release of unused provisions for costs 141 232 Refund of overpaid tax on civil law transactions 94 - Payments from enforcement officers 27 - Gains on disposal of non-current assets 24 9 Damages received - 1 Other 119 423 Total other operating income 33 708 5 386 Other operating expenses 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Scrapping of fixed assets and intangible assets 2 879 482 Cost of rental 1 713 1 831 Depreciation of investment properties 928 929 Disposal of investment properties 737 - Cost of sales of other sales 495 32 Costs relating to re-invoicing 429 398 Donations and charity 404 1 223 Provision for the uninsured portion of the US court settlement cost 335 - VAT written off 255 - Cost of destruction of materials and goods for resale 171 2 758 Irrecoverable receivables 54 - Other 254 256 Total other operating expenses 8 654 7 909 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 48 Note 20. Finance income and costs Finance income 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Interest income 25 636 18 021 on current bank deposits 17 195 9 018 on bonds 8 339 8 788 on loans 102 215 Other finance income 25 974 21 333 settlement and measurement of derivative financial instruments 23 634 3 824 gain on redemption of bonds 2 294 17 507 forward contracts – Management Board - 2 other finance income 46 - Total finance income 51 610 39 354 Finance costs 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Interest expense 646 717 on bonds 18 201 on lease contracts 393 267 on liabilities to the State Treasury 232 248 on trade payables 3 1 Other finance costs 29 324 22 505 net foreign exchange losses 29 130 3 985 settlement and measurement of derivative financial instruments - 18 353 commission and fees on purchase of bonds 143 167 measurement of private equity interests in the gaming sector 51 - Total finance costs 29 970 23 222 Net finance income/expense 21 640 16 132 Note 21. Leases of low-value assets and short-term leases The Group concluded lease contracts for office equipment (multifunctional photocopiers, kitchen appliances) and residential premises which potentially meet recognition criteria for leases under the new IFRS 16. However, the Group considered these contracts to be short-term leases and leases of low-value assets and decided not to apply the new requirements for leases to these assets, as permitted by paragraph 5 of the standards. In such cases, lease payments are charged to costs of the period to which they relate, either on a straight-line basis or in some other systematic way that reflects the distribution of costs over the life of the contract (information on the cost of these leases incurred in the period from 1 January to 30 June 2023 is included in Note 18). As at 30 June 2023 and 31 December 2022, future payments in respect of irrevocable short-term leases and leases of low-value assets were as follows: 30.06.2023 31.12.2022 Up to 1 year 319 467 From 1 to 5 years 199 334 Total 518 801 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 49 Note 22. Issuance, redemption and repayment of debt and equity securities Issuance of debt securities Not applicable. Issuance of equity securities Specification 30.06.2023 31.12.2022 Number of shares in thousands 99 911 100 771 Par value of shares in PLN 1 1 Share capital 99 911 100 771 Note 23. Dividend paid (or declared) and received On 6 June 2023, the Ordinary Shareholders Meeting of the Parent Company decided to set aside a part of the Parent Company’s net profit for 2022 for distribution to shareholders as dividend. In accordance with the Resolution adopted, on 20 June 2023, the Parent Company paid out PLN 99 910 510 thousand, i.e. 1 PLN per each share participating in the dividend. The number of the Parent Company’s shares giving right to the dividend was 99 910 510, which represented the total number of the Parent Company’s shares as at the payment date less the Parent Company’s own shares (860 290 shares). Note 24. Transactions with related entities Terms and conditions of transactions with related entities The terms and conditions of intra-group transactions were determined on an arm’s length basis. The essence of this principle is based on the premise that the terms and conditions agreed in transactions between related parties should not differ from those that would be agreed between independent parties in a comparable situation. In the process of determining prices in controlled transactions related entities belonging to the CD PROJEKT Group refer to methods provided for in OECD Guidelines and in the national legislation, including the safe harbour legislation. The selection of an appropriate method of verifying transfer prices is preceded by a detailed analysis of each transaction which involves, among other things, the distribution of functions between parties to the transaction, assets engaged by the parties and the distribution of risks. Prices are determined using the most appropriate method for a given type of transaction in such a way that the terms of transactions between the CD PROJEKT Group companies correspond to the terms which independent entities would agree to adopt in comparable circumstances. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 50 Transactions with related entities after consolidation eliminations Sales to related entities Purchases from related entities Receivables from related entities Liabilities to related entities 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 30.06.2023 31.12.2022 30.06.2023 31.12.2022 SUBSIDIARIES Spokko sp. z o.o. 226 737 1 140 - 2 156 246 - CD PROJEKT RED Vancouver Studio Ltd. 23 29 10 104 7 781 563 1 694 1 730 2 746 The Molasses Flood LLC 1 - 25 690 10 311 4 789 742 2 855 2 579 MEMBERS OF THE MANAGEMENT BOARDS OF GROUP COMPANIES AND SUPERVISORY BOARD MEMBERS Marcin Iwiński - 1 - - - - - 7 Adam Kiciński - - - - - - - 13 Piotr Nielubowicz - 1 - - - 2 - 13 Michał Nowakowski - 3 - - - - - 4 Adam Badowski 1 6 - - - - 1 6 Piotr Karwowski 3 2 - - - - - 2 Urszula Jach - Jaki 1 1 - - - - - - Maciej Gołębiewski - 2 - - - - - - Paweł Zawodny 6 7 - - - - - - Jeremiah Cohn - 1 - - - - - - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 51 Note 25. Unpaid loans or defaults on loan agreements in the cases where no corrective measures were adopted by the balance sheet date Not applicable. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 52 Note 26. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year Contingent liabilities in respect of guarantees, sureties and collateral Specification Currency 30.06.2023 31.12.2022 mBank S.A. Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 50 000 Bill of exchange agreement Bank guarantee securing a rental contract PLN 427 427 Mazowiecka Jednostka Wdrażania Programów Unijnych Contractual commitment Commitment to incur operating and renovation expenditures on leased space PLN - 20 Narodowe Centrum Badań i Rozwoju Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0105/16 PLN 7 711 7 711 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0110/16 PLN 3 846 3 846 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0112/16 PLN 3 692 3 692 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0118/16 PLN 1 358 1 358 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0120/16 PLN 1 204 1 204 Pekao Leasing Sp. z o.o. Bill of exchange agreement Lease contract 37/1991/21 PLN 240 314 Santander Bank Polska S.A. (previously: BZ WBK S.A.) Bill of exchange agreement Framework agreement on financial market transactions PLN 23 500 23 500 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 53 Bank Polska Kasa Opieki Spółka Akcyjna Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 50 000 BNP Paribas Bank Polska S.A. Bill of exchange agreement Framework agreement on financial market transactions PLN 26 600 26 600 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 54 Note 27. Changes in the structure of the Group and Group companies during the reporting period Parent Company  Acquisition of the remaining shares in the subsidiary Spokko sp. z o.o. On 31 January 2023, as a result of the Parent Company concluding agreements for the sale of shares with the other shareholders of the subsidiary Spokko sp. z o.o., the Parent Company acquired from those shareholders a total of 135 shares in Spokko sp. z o.o. with a nominal value of PLN 50 each, as a result of which the Parent Company became the owner of 100% (i.e. 1089) of shares in that subsidiary.  Registration of the merger between the Parent Company and its subsidiary - CD PROJEKT RED STORE sp. z o.o. On 28 February 2023, the District Court for the Capital City of Warsaw in Warsaw entered in the Register of Businesses the merger through acquisition by the Parent Company, as the surviving company, with its subsidiary CD PROJEKT RED STORE sp. z o.o. with its registered office in Warsaw, as the target company. The merger was carried out in accordance with the merger plan announced on 17 November 2022, i.e. by transferring all the assets of CD PROJEKT RED STORE sp. z o.o. to the Parent Company, without increasing the share capital of the Parent Company and without exchanging shares of the target company for shares of the Parent Company due to the fact that the Parent Company holds 100% of the shares in the target company.  Signing of the plan of a merger between the Parent Company and its subsidiary – SPOKKO sp. z o.o. On 20 April 2023, the Management Board of the Parent Company informed that a merger plan between the Company, as the surviving company, and its single-shareholder subsidiary SPOKKO sp. z o.o. was agreed upon and signed. The Merger Plan (including attachments thereto) has been made available, among other things, as an attachment to current report no. 14/2023 . Resolutions on the merger between the Parent Company and its subsidiary SPOKKO sp. z o.o. were passed by the General Meeting of the Parent Company and the General Meeting of SPOKKO sp. z o.o. on 6 June 2023. The merger will become effective on the date of its entry in the register. CD PROJEKT Inc. (currently: CD PROJEKT RED Inc.) On 31 May 2023, as a result of decisions taken by the Board of Directors of CD PROJEKT Inc. (currently: CD PROJEKT RED Inc.) and CD PROJEKT S.A. (its sole shareholder), the share capital of CD PROJEKT Inc. was increased by USD 720 thousand i.e. to USD 6 020 thousand. On the same date, CD PROJEKT RED Inc. concluded an agreement with The Molasses Flood LLC and one of its shareholders at that time whereby CD PROJEKT Inc. acquired 60 000 additional shares in The Molasses Flood LLC as a result of which it became the owner of 70.91% (i.e. 390 000) of its shares. Note 28. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders Incentive Plan for the years 2020-2025 Based on the resolutions of the Parent Company’s General Meeting of 28 July 2020 and 22 September 2020, the incentive plan for 2020-2025 was revised. In accordance with the adopted assumptions, a maximum of 4 000 000 entitlements, understood as a conditional right to take up subscription warrants, entitling to take up shares in the Parent Company issued separately as part of a conditional share capital increase, or alternatively to purchase, on preferential terms, the Parent Company’s treasury shares were to be granted as part of the implementation of the plan. Taking up and exercising of rights from the subscription warrants or, as the case may be, purchasing the Parent Company’s shares by the eligible persons was to be conditional upon the Parent Company’s determination that the objectives and criteria of the plan have been met. The plan included performance-related objectives (80% of entitlements), market related objectives (20% of entitlements), individual objectives in selected cases and, in each case, the loyalty criterion which applies until the date of determining that the plan objectives and criteria have been met. For more information on the principles of the incentive plan for the years 2020-2025, see e.g. Management Board Report on CD PROJEKT Group activities in 2021. Based on the results achieved during the period of the functioning of the plan and the assumptions for the subsequent years of the plan, the Management Board assessed the possibility of achieving the performance targets set in the plan over the entire period of the plan duration and revised the estimates, considering it most likely that the performance targets would not be achieved over that period. On 20 December 2022, the General Meeting of the Parent Company passed Resolution no. 5 concerning discontinuation of the incentive plan for the financial years 2020-2025. However, due to the fact that entry into force of that resolution was conditional upon the General Meeting’s adopting specific resolutions on the introduction of a new incentive plan, the resolution concerning discontinuation of the Plan for 2020-2025 became effective on 18 April 2023 and resulted in expiry of the Plan in its entirety. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 55 During the reporting period, no new entitlements were granted as part of the Incentive Plan for the years 2020-20250. As at 18 April 2023, 2 113 000 entitlements granted remained in the Incentive Plan for the years 2020-2025. In accordance with the Regulations of the Incentive Plan for the years 2020-2025, in the case of expiry of the incentive plan, entitlements awarded as part of that plan also expire. Incentive Plans for the years 2023-2027 Based on the resolutions of the General Meeting of the Parent Company of 18 April 2023, two new incentive plans for the financial years 2023-2027 were introduced on that date by resolutions of the Parent Company’s General Meeting of 18 April 2023: the Incentive Plan A and Incentive Plan B, which replaced the Incentive Plan for the years 2020-2025. Incentive Plan A Incentive Plan A is addressed to persons who are not members of the Management Board of the Parent Company. The assumptions are that the entitlements in this plan will be granted in each of the financial years 2023–2027 (i.e. in five phases). A maximum of 1 500 000 entitlements may be granted under the entirety of the Incentive plan A. The entitlements shall be realized alternatively through: (i) offering participants to subscribe for warrants entitling them to subscribe for an identical number of shares in the Parent Company issued as part of the conditional share capital increase, or (ii) offering participants to purchase from the Parent Company treasury shares acquired by the Parent Company as part of a buy-back carried out for this purpose. Taking up and exercising of rights from the subscription warrants or, as the case may be, purchasing the Parent Company’s shares by the participant under Incentive Plan A shall be conditional upon meeting the loyalty criterion (understood as participants of Incentive Plan A remaining in a legal relationship with the Parent Company or its related entity during the vesting period). The price of taking up or acquiring the Company’s shares as part of executing entitlements under Plan A shall correspond to the nominal value of the Parent Company’s shares. The vesting period shall be 3 years. By the date of publication of this report, 100 444 entitlements were awarded under Incentive Plan A, of which 97 261 remain active. Assumptions adopted for the valuation of the Incentive Plan A for the years 2023–2027. Date of vesting CDR volatility ratio Risk-free interest rate Entitlements granted on 26.05.2023 44% 6.2% Entitlements granted on 27.05.2023 44% 6.2% Entitlements granted on 29.05.2023 44% 5.9% Entitlements granted on 07.06.2023 44% 5.8% Changes in entitlements granted under Incentive Plan A for the years 2023–2027 Specification 01.01.2023 – 30.06.2023 Number of shares Granted during the period 100 444 Forfeited during the period 3 183 Unrealized as at the end of the period 1 500 000 Granted unrealized as at the end of the period 97 261 Incentive Plan B Incentive Plan B is addressed to both persons who are members of the Parent Company’s Management Board and persons who are not members of the Management Board. The assumptions are that the entitlements in this plan will be granted in each of the financial years 2023-2027 (i.e. in five phases). A maximum of 3 500 000 entitlements may be granted under the entirety of the Incentive Plan B. The entitlements shall be realized alternatively through: (i) offering participants to subscribe for warrants entitling them to subscribe for an identical number of shares in the Parent Company issued as part of the conditional share capital increase, or (ii) offering participants to purchase from the Parent Company treasury shares acquired by the Parent Company as part of a buy- back carried out for this purpose. Taking up and exercising the rights from the subscription warrants or, as the case may be, purchasing the Parent Company’s shares by the eligible persons under Incentive Plan B will be conditional upon the Parent Company determining that the performance condition (for 70% of the entitlements), the market condition (for 30% of the entitlements), and in selected cases the individual conditions and, in each case, the loyalty condition (understood as participants of Incentive Plan A remaining in a legal relationship with the Parent Company or its related entity during the vesting period) have been met. The base price of subscription for or purchase of the Company’s shares as part of exercising the entitlements under Plan B will correspond to the price of the Company’s shares at the close of the last trading session preceding the date of the relevant resolution on the participant’s inclusion in the plan. The plan provides for the possibility to reduce the price of subscription for or purchase of the shares with a simultaneous proportional reduction in the number of rights to be exercised by the participant. The base vesting period corresponds to four consecutive financial years starting from the year in which the relevant phase commenced (with the possibility of shortening to three financial years for performance-related entitlements in the event of a possible faster achievement of the four-year performance target over a three-year period). Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 56 By the date of publication of this report, 662 000 entitlements were awarded under Incentive Plan B, of which 662 000 remain active. Assumptions adopted for the valuation of the Incentive Plan B for the years 2023–2027. Date of vesting CDR volatility ratio WIG volatility ratio WIG correlation ratio Risk-free interest rate Entitlements granted on 26.05.2023 44% 21% 43% 6.1% Changes in entitlements granted under Incentive Plan B for the years 2023–2027 Specification 01.01.2023 – 30.06.2023 Number of shares Granted during the period 662 000 Unrealized as at the end of the period 3 500 000 Granted unrealized as at the end of the period 662 000 Note 29. Tax settlements Tax settlements and other areas of activities regulated by the tax law may be subject to inspections by administrative bodies which are entitled to impose high penalties or sanctions. The lack of reference to established legal regulations in Poland results in ambiguities and inconsistencies in the binding regulations. Frequent differences of opinion as to the legal interpretation of tax regulations, both internally within the state bodies and between the state bodies and enterprises, result in areas of uncertainty and conflict arising. Due to these factors, the tax risk in Poland is considerably higher than that usually existing in countries with better developed tax systems. In accordance with a general rule, tax settlements may be subject to inspections within 5 years from the end of the year in which tax was paid. Following the fulfilment of the criteria set out in Article 19 of the Act of 30 May 2008 on certain forms of innovation support (consolidated text, Journal of Laws of 2022, item 2474), the Minister of Development and Technology, by decision No. DNP- V.4241.27.2023.2 of 23 August 2023, maintained the status of a research and development centre granted to the Parent Company by decision 4/CBR/18 of 19 June 2018. The status allows the Parent Company to use the research and development relief provided for in the Act of 15 February 1992 on corporate income tax (consolidated text, Journal of Laws of 2022, item 2587, as amended, hereinafter the “CIT Act”). Starting from the month following the submission of the CIT-8 tax return, the Parent Company is taking advantage of a relief in respect of an innovative employee. As part of the relief, it is possible to deduct the research and development relief which the Parent Company did not deduct from the tax base in the tax return for the previous tax year. As a result of using tax relief in respect of an innovative employee, the Parent Company is reducing tax advances remitted to the tax office in respect of personal income tax and flat-rate personal income tax for employees performing research and development work for the Parent Company. At the same time, the amount of the research and development relief reported and not deducted is being reduced (the reduction is the product of the personal income tax liability due and the personal income tax rate). With effect from 1 January 2019, provisions were introduced into the Act on corporate income tax granting preferential taxation at the 5% tax rate for qualified income earned by a taxpayer from qualified intellectual property rights. Having met the prerequisites and formal conditions contained in the said legislation, the Parent Company accounts for income (in respect of selected sources of income) taking this tax relief into account. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 57 Note 30. Explanations to the condensed consolidated statement of cash flows 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Cash and cash equivalents reported in the statement of cash flows 149 336 685 029 Cash and cash equivalents in the balance sheet 149 336 685 029 Depreciation and amortization 6 611 7 346 Amortization of intangible assets 1 144 1 080 Amortization of expenditure on development projects 258 622 Depreciation of property, plant and equipment 5 196 5 625 Depreciation of investment properties 13 19 Foreign exchange gains/(losses) arise on the following items: 18 842 (4 855) Foreign exchange gains and losses on measurement of private equity interests in the gaming sector 246 - Foreign exchange gains/(losses) on measurement of loans granted as at the balance sheet date 224 26 Foreign exchange gains/(losses) on measurement of leases (172) - Foreign exchange gains/(losses) on measurement of bonds 18 544 (4 881) Interest and shares in profits comprise: (25 225) (17 553) Interest on bank deposits (17 195) (9 018) Interest on bonds (8 321) (8 587) Interest accrued on loans granted (102) (215) Interest on lease contracts 393 267 (Gains)/losses on investing activities arise on the following items: (43 042) 1 486 Proceeds from sale of property, plant and equipment (25) (14) Net carrying amount of property, plant and equipment 1 5 Net carrying amount of non-current assets scrapped 133 199 Net carrying amount of scrapped intangible assets and expenditure on research and development work 2 746 283 Net carrying amount of investment properties scrapped 737 - Reversal of impairment write-downs of property, plant and equipment, intangible assets and expenditure on development work (21 531) - Settlement and measurement of derivative financial instruments (22 998) 18 353 Measurement of private equity interests in the gaming sector 51 - Disclosure of property, plant and equipment and intangible assets (5) - Commission and fees on purchase of bonds 143 167 Proceeds from redemption of bonds (36 711) (157 700) Value of bonds purchased 34 417 140 193 Change in provisions results from the following items: (49 904) (50 187) Increase/(Decrease) in provisions for liabilities (70 440) (49 003) Increase/(Decrease) in provision for costs of performance-related and other remuneration recognized under expenditure on development projects 20 536 (1 184) Change in inventories results from the following items: 4 583 750 (Increase)/Decrease in inventories 4 583 750 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 58 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Change in receivables results from the following items: 78 922 72 643 (Increase)/Decrease in current receivables in the balance sheet 85 615 121 804 (Increase)/Decrease in non-current receivables in the balance sheet 14 (48) (Increase)/Decrease in prepayments for investment properties - (79) Income tax settled against withholding tax 14 909 29 548 Withholding tax paid abroad (15 960) (24 632) Adjusted for current income tax (4 041) (27 205) (Increase)/Decrease in prepayments for development projects 285 (26 786) (Increase)/Decrease in prepayments for property, plant and equipment and intangible assets (105) 41 (Increase)/Decrease in receivables in respect of the sale of property, plant and equipment and intangible assets (1 795) - Change in current liabilities, excluding loans and borrowings, results from the following items: (15 429) 7 523 Increase/(Decrease) in current liabilities in the balance sheet (24 949) 90 418 Adjusted for current income tax 2 116 24 446 Increase/(Decrease) in other current financial liabilities 1 100 (3 922) Increase/(Decrease) in liabilities resulting from purchase of property, plant and equipment 5 763 (2 722) Increase/(Decrease) in liabilities resulting from purchase of intangible assets 541 32 Increase/(Decrease) in liabilities resulting from dividend from retained earnings - (100 739) Increase/(Decrease) in liabilities resulting from purchase of investment properties - 10 Change in other assets and liabilities results from the following items: (8 112) (34 673) (Increase)/Decrease in prepayments and accruals in the balance sheet (10 261) (19 767) Increase/(Decrease) in deferred income in the balance sheet 2 270 (14 786) Adjusted for prepayments and deferred costs with the double entry in liabilities (121) (120) “Other adjustment” comprise: 10 689 5 297 Costs of the incentive plan 10 141 2 318 Measurement of derivative financial instruments (665) 63 Amortization and depreciation written off, reported under cost of sales, consortium settlements and other operating expenses - 1 046 Amortization and depreciation reported under cost of sales and other operating expenses 1 544 1 664 Foreign exchange differences on translation (231) 271 Other adjustments (100) (65) Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 59 Note 31. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities 01.01.2023 Cash flows Non-monetary changes 30.06.2023 Takeover of leased fixed assets Foreign exchange differences Interest accrued Adoption of resolution on the payment of dividend Lease liabilities 20 967 (1 806) 925 (172) 393 - 20 307 Liabilities to shareholders in respect of payment of dividend - (99 911) - - - 99 911 - Total 20 967 (101 717) 925 (172) 393 99 911 20 307 01.01.2022 Cash flows Non-monetary changes 30.06.2022 Takeover of leased fixed assets Foreign exchange differences Interest accrued Adoption of resolution on the payment of dividend Lease liabilities 16 655 (2 141) 4 581 1 267 - 19 363 Liabilities to shareholders in respect of payment of dividend - - - - - 100 739 100 739 Total 16 655 (2 141) 4 581 1 267 100 739 120 102 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 60 Note 32. Post-balance sheet date events Events with no impact on the financial statements for the period from 1 January to 30 June 2023 On 10 July 2023, as a result of decisions taken by the Board of Directors of CD PROJEKT Inc. (currently: CD PROJEKT RED Inc.) and the Parent Company (as its sole shareholder), the company’s name was changed from “CD PROJEKT Inc.” to “CD PROJEKT RED Inc.” and its principal place of business was moved to Boston (Waltham), Massachusetts. On 26 July 2023, the Management Board of the Parent Company announced a decision to adjust the scale and structure of the Parent Company’s team to its operating needs and project publishing plans executed under the strategy of the CD PROJEKT Group. As a result, workforce reduction will be carried out covering 9% of the personnel in the CD PROJEKT RED studio, including, among others production and publishing teams as well as back-office. The process is planned to end in the first quarter of 2024. The decision adopted is related to the ongoing transformation which involved, among other things, the CD PROJEKT RED studio implementing the Agile methodology, making production methods more efficient and optimizing work organization. The change in approach and an attempt to build more effective project teams is a continuation of the ongoing transformation processes which the Parent Company believes are of key importance to creating high quality games, published on time and developed without burdensome and excessive overtime work. The Parent Company informed that the estimated provisions for costs relating to termination of employment contracts (including costs of severance pay) amounted to approximately PLN 4.5 million. The amount will be charged to the net profit or loss of the CD PROJEKT Group in the third quarter of 2023. Interim condensed separate financial statements of CD PROJEKT S.A. 5 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 62 Interim condensed separate income statement Note 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Sales revenue 243 490 290 969 Sales of products 236 593 283 752 Sales of services 470 1 137 Sales of goods for resale and materials 6 427 6 080 Cost of sales of products, services, goods for resale and materials 49 130 41 007 Costs of products and services sold 42 405 36 780 Cost of goods for resale and materials sold 6 725 4 227 Gross profit/(loss) on sales 194 360 249 962 Selling expenses 67 065 70 635 Administrative expenses 52 891 40 026 Other operating income 34 102 5 618 Other operating expenses 8 844 8 592 (Impairment)/reversal of impairment of financial instruments 4 (8) Operating profit/(loss) 99 666 136 319 Finance income 53 726 36 350 Finance costs 28 482 21 374 Profit/(loss) before tax 124 910 151 295 Income tax A 29 382 39 435 Net profit/(loss) 95 528 111 860 Net earnings/(loss) per share (in PLN) - - Basic for the reporting period 0.95 1.11 Diluted for the reporting period 0.95 1.11 * restated data Interim condensed separate statement of comprehensive income 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Net profit/(loss) 95 528 111 860 Other comprehensive income subject to reclassification to gains or losses after specific conditions have been met 337 (7 991) Measurement of derivative financial instruments – fair value through other comprehensive income, taking into account the tax effect 337 (7 991) Other comprehensive income not subject to reclassification to gains or losses - - Total comprehensive income 95 865 103 869 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 63 Interim condensed separate statement of financial position Note 30.06.2023 31.12.2022 NON-CURRENT ASSETS 1 261 942 1 094 596 Property, plant and equipment 159 479 143 439 Intangible assets 70 414 70 324 Expenditure on development projects 594 134 471 537 Investment properties 37 429 42 560 Goodwill C 49 168 49 168 Investments in subordinated entities 57 910 53 566 Prepayments and deferred costs 6 100 5 314 Other financial assets G 242 203 207 437 Deferred tax assets A 44 737 50 868 Other receivables F,G 368 383 CURRENT ASSETS 838 024 1 089 378 Inventories 8 118 9 886 Trade receivables F,G 83 188 164 708 Current income tax receivable 10 716 - Other receivables F 40 376 54 677 Prepayments and deferred costs 9 362 6 189 Other financial assets G 249 576 279 515 Bank deposits over 3 months G 317 125 337 330 Cash and cash equivalents G 119 563 237 073 TOTAL ASSETS 2 099 966 2 183 974 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 64 Note 30.06.2023 31.12.2022 EQUITY 2 006 408 2 001 765 Share capital 11,22 99 911 100 771 Supplementary capital 1 681 466 1 539 437 Share premium 116 700 116 700 Treasury shares - (99 993) Other reserves 14 504 3 777 Retained earnings (Accumulated losses) (1 701) - Net profit (loss) for the period 95 528 341 073 NON-CURRENT LIABILITIES 29 968 36 106 Other financial liabilities G 18 206 18 883 Other liabilities 2 500 2 620 Deferred income 2 753 3 666 Provision for retirement and similar benefits 339 339 Other provisions B 6 170 10 598 CURRENT LIABILITIES 63 590 146 103 Other financial liabilities G 2 085 1 788 Trade payables G 18 945 39 587 Current income tax liabilities - 2 116 Other liabilities 5 452 4 350 Deferred income 18 479 15 032 Provision for retirement and similar benefits 9 9 Other provisions B 18 620 83 221 TOTAL LIABILITIES AND EQUITY 2 099 966 2 183 974 * Detailed information on changes in items are presented in relevant notes to interim condensed consolidated financial statements. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 65 Interim condensed separate statement of changes in equity Share capital Supplementary capital Share premium Treasury shares Other reserves Retained earnings (Accumulated losses) Net profit (loss) for the period Total equity 01.01.2023 – 30.06.2023 Equity as at 01.01.2023 100 771 1 539 437 116 700 (99 993) 3 777 341 073 - 2 001 765 Costs of the incentive plan - - - - 10 390 - - 10 390 Retained earnings / (Accumulated losses) of the acquired entity - - - - - (1 701) - (1 701) Appropriation of the net profit/offset of loss - 241 162 - - - (241 162) - - Payment of dividend - - - - - (99 911) - (99 911) Redemption of Treasury shares (860) (99 133) - 99 993 - - - - Total comprehensive income - - - - 337 - 95 528 95 865 Equity as at 30.06.2023 99 911 1 681 466 116 700 - 14 504 (1 701) 95 528 2 006 408 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 66 Share capital Supplementary capital Share premium Treasury shares Other reserves Retained earnings (Accumulated losses) Net profit (loss) for the period Total equity 01.01.2022 – 30.06.2022 Equity as at 01.01.2022 100 739 1 366 952 115 909 - 49 515 235 934 - 1 869 049 Costs of the incentive plan - - - - 2 318 - - 2 318 Appropriation of the net profit/offset of loss - 135 195 - - - (135 195) - - Payment of dividend - - - - - (100 739) - (100 739) Total comprehensive income - - - - (7 991) - 111 860 103 869 Equity as at 30.06.2022 100 739 1 502 147 115 909 - 43 842 - 111 860 1 874 497 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 67 Interim condensed separate statement of cash flows 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 OPERATING ACTIVITIES Net profit/(loss) 95 528 111 860 Total adjustments: 25 688 36 941 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties 5 774 5 501 Amortization of development projects recognized as cost of goods sold 43 217 36 138 Foreign exchange (gains)/losses 18 842 (4 859) Interest and participation in profits (25 077) (16 966) (Gains)/losses on investing activities (45 962) 3 883 Increase/(Decrease) in provisions (48 493) (49 728) (Increase)/Decrease in inventories 1 768 2 792 (Increase)/Decrease in receivables 80 058 73 045 Increase/(Decrease) in liabilities, excluding loans and borrowings (14 588) (1 323) Change in other assets and liabilities (1 545) (16 581) Other adjustments 11 694 5 039 Cash from operating activities 121 216 148 801 Income tax expense 13 422 14 803 Withholding tax paid abroad 15 960 24 632 Income tax (paid)/refunded (20 123) (34 188) Net cash from operating activities 130 475 154 048 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 68 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 INVESTING ACTIVITIES Inflows 420 246 462 168 Sale of intangible assets and property, plant and equipment 22 6 Repayment of loans granted - 12 934 Expiry of bank deposits over 3 months 329 970 265 000 Redemption of bonds 56 411 173 090 Interest on bonds 6 479 2 102 Interest received on deposits 17 048 8 397 Inflows from execution of forward contracts 10 273 - Other inflows from investing activities 43 639 Outflows 566 793 332 815 Acquisition of intangible assets and property, plant and equipment 28 284 25 165 Expenditure on development projects 161 585 89 710 Expenditure on intangible assets 380 - Acquisition of investment properties and capitalization of expenditure 98 145 Loans granted 4 215 4 000 Purchase of shares in a subsidiary 440 - Contribution to the capital of a subsidiary 3 053 29 912 Purchase of bonds and cost of their purchase 58 973 168 120 Placement of bank deposits over 3 months 309 765 - Outflows from execution of forward contracts - 15 763 Net cash from investing activities (146 547) 129 353 FINANCING ACTIVITIES Inflows 29 20 Payment of finance lease liabilities 28 20 Interest paid 1 - Outflows 101 467 1 646 Dividends and other distributions to shareholders 99 911 - Payment of lease liabilities 1 162 1 402 Interest paid 394 244 Net cash from financing activities (101 438) (1 626) Net increase/(decrease) in cash and cash equivalents (117 510) 281 775 Change in cash and cash equivalents in the balance sheet (117 510) 281 775 Cash and cash equivalents as at the beginning of the period 237 073 345 795 Cash and cash equivalents as at the end of the period 119 563 627 570 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 69 Explanations to the condensed separate statement of cash flows 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 “Other adjustment” comprise: 11 694 5 039 Costs of the incentive plan 9 539 2 149 Amortization and depreciation written off, reported under cost of sales, consortium settlements and other operating expenses - 1 046 Amortization and depreciation reported under cost of sales and other operating expenses 1 501 1 844 Accounting for shares in the acquired entity 2 900 - Retained earnings/(Accumulated losses) of the acquired entity (1 701) - Net amount of property, plant and equipment and intangible assets of the acquired entity (545) - Assumption of comparability of the financial statements and changes in accounting policies The accounting policies applied in these interim condensed separate financial statements, material judgments made by the Management Board with regard to the accounting policies applied by the Company and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the annual financial statements of CD PROJEKT S.A. for 2022, with the exception of changes in accounting policies and presentation changes described below. These interim condensed financial statements should be read in conjunction with the financial statements for the year ended 31 December 2022. Changes in accounting policies Changes in accounting policies relating to the Company are the same as those described in the section Comparability of the financial statements and consistency of accounting policies of the consolidated financial statements for the period from 1 January to 30 June 2023. Presentation changes In these interim condensed separate financial statements for the period from 1 January to 30 June 2023 changes were introduced in the presentation of selected financial data. In order to ensure comparability of the financial data in the reporting period, presentation of the data for the period from 1 January to 30 June 2022 was changed. The data is presented after the following change:  In the income statement for the period from 1 January 2022 to 30 June 2022, presentation of the provisions for the variable component of the performance-related remuneration of the Management Board Members was changed. Consequently, the following items changed: - Selling expenses – a decrease of PLN 10,708 thousand - Administrative expenses – an increase of PLN 10,708 thousand Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 70 Notes to separate financial statements of CD PROJEKT S.A. A. Deferred tax Deductible temporary differences underlying the deferred tax asset 31.12.2022 Differences affecting the deferred tax recognized in the profit or loss 30.06.2023 Provision for other employee benefits 348 - 348 Provision for costs of performance-related and other remuneration 48 719 (39 466) 9 253 Foreign exchange losses 7 118 17 492 24 610 Difference between the carrying and tax amount of expenditure on development projects 34 848 (16 762) 18 086 Salaries and wages and social security payable in future periods 47 25 72 Other provisions 33 282 (4 864) 28 418 Tax value of leased non-current assets 20 671 (265) 20 406 Research and development relief 317 927 (40 623) 277 304 Prepayments recognized as revenue for tax purposes 7 523 (4 552) 2 971 Total deductible differences, including: 470 483 (89 015) 381 468 taxed at 5% 71 651 (399) 71 252 taxed at 19% 398 832 (88 616) 310 216 Deferred income tax asset 79 361 (16 857) 62 504 * restated data Taxable temporary differences underlying the deferred tax provision 31.12.2022 Differences affecting the deferred tax recognized in the profit or loss 30.06.2023 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 16 358 2 019 18 377 Current period revenue invoiced in the subsequent period/accrued income 132 887 (69 392) 63 495 Foreign exchange gains 8 417 (8 305) 112 Difference between the carrying and tax amount of expenditure on development projects 253 594 (42 205) 211 389 Book value of leased non-current assets 20 849 (426) 20 423 Other 7 60 67 Total taxable differences, including: 432 112 (118 249) 313 863 taxed at 5% 382 910 (83 862) 299 048 taxed at 19% 49 202 (34 387) 14 815 Deferred tax provision 28 493 (10 726) 17 767 * restated data Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 71 The deferred part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, or at the rate of 5% for the tax base corresponding to income from qualifying intellectual property (the so-called IP BOX). When determining the appropriate tax rate for temporary differences, the Company relied on forecasts of which tax base will give rise to the realization of the temporary differences recognized. Net deferred tax asset/provision 30.06.2023 31.12.2022 Deferred tax asset 62 504 79 361 Deferred tax provision 17 767 28 493 * restated data Income tax expense recognized in the income statement 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 Current income tax, including: 23 251 32 788 withholding tax paid abroad 15 960 24 632 Change in deferred tax 6 131 6 647 Income tax expense recognized in the income statement 29 382 39 435 B. Other provisions 30.06.2023 31.12.2022 Provision for liabilities, including: 24 790 93 819 provision for costs of the audit and review of the financial statements 73 137 provision for costs of performance-related and other remuneration 9 254 67 121 provision for other costs 15 463 26 561 Total, including: 24 790 93 819 current 18 620 83 221 non-current 6 170 10 598 Change in other provisions Provision for costs of performance-related and other remuneration Other provisions Total As at 01.01.2023 67 121 26 698 93 819 Provisions recorded during the year 9 254 36 178 45 432 Provisions utilized/released 67 121 47 340 114 461 As at 30.06.2023, including: 9 254 15 536 24 790 current 9 254 9 366 18 620 non-current - 6 170 6 170 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 72 C. Goodwill During the period from 1 January to 30 June 2023 there were no changes in goodwill. D. Business combinations Business combinations of jointly controlled entities are not covered directly in the International Financial Reporting Standards, therefore when accounting for such transactions, the Company uses a method consistent with the pooling of interests method, which assumes that:  assets and liabilities of combining entities are measured at carrying amounts derived from the Company’s consolidated financial statements. This means that goodwill previously recognized in the consolidated financial statements and all other intangible assets recognized as part of accounting for the combination are moved to separate financial statements;  transaction costs relating to the business combination are recognized in the income statement (finance costs);  mutual balances of receivables/payables are eliminated;  any difference between the amount paid or transferred and net assets acquired (at amounts derived from consolidated financial statements) is reflected in the equity of the acquiring company (the amount embedded in equity is not a component of supplementary capital, and therefore is not subject to distribution);  the income statement presents the results of the combined entities from the moment when the combination occurred, while the data for prior periods of the year in which the combination took place are recognized in equity as retained earnings, and the data for the year preceding the business combination are not restated. On 28 February 2023, the District Court for the Capital City of Warsaw in Warsaw entered in the Register of Businesses the merger through acquisition by the Parent Company, as the surviving company, with its subsidiary CD PROJEKT RED STORE sp. z o.o. with its registered office in Warsaw, as the target company. The merger was carried out in accordance with the merger plan announced on 17 November 2022, i.e. by transferring all the assets of CD PROJEKT RED STORE sp. z o.o. to the Parent Company, without increasing the share capital of the Parent Company and without exchanging shares of the target company for shares of the Parent Company due to the fact that the Parent Company holds 100% of the shares in the target company. The merger was aimed at simplifying the Group’s structure in connection with plans to continue the existing operations of the acquired company in cooperation with a specialized third party. The Parent Company informed of the registration of the merger in its current report no. 7/2023. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 73 Income statement for the period from 01.01.2023 to 28.02.2023 CD PROJEKT S.A. CD PROJEKT RED STORE sp. z o.o. Business combination adjustment CD PROJEKT S.A. after combination Sales revenue 55 765 1 458 (11) 57 212 Sales of products 52 454 - - 52 454 Sales of services - 108 (11) 97 Sales of goods for resale and materials 3 311 1 350 - 4 661 Cost of sales of products, services, goods for resale and materials 17 516 1 006 - 18 522 Costs of products and services sold 14 658 93 - 14 751 Cost of goods for resale and materials sold 2 858 913 - 3 771 Gross profit/(loss) on sales 38 249 452 (11) 38 690 Selling expenses 19 914 127 (3) 20 038 Administrative expenses 10 854 208 (26) 11 036 Other operating income 8 446 98 (40) 8 504 Other operating expenses 8 621 508 (21) 9 108 Operating profit/(loss) 7 306 (293) (1) 7 012 Finance income 13 688 5 - 13 693 Finance costs 8 176 3 (1) 8 178 Profit/(loss) before tax 12 818 (291) - 12 527 Income tax (1 446) - - (1 446) Net profit/(loss) 14 264 (291) - 13 973 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 74 Statement of financial position as at 28 February 2023 CD PROJEKT S.A. CD PROJEKT RED STORE sp. z o.o. Business combination adjustment CD PROJEKT S.A. after combination NON-CURRENT ASSETS 1 145 098 545 (3 040) 1 142 603 Property, plant and equipment 153 785 149 (140) 153 794 Intangible assets 70 580 396 - 70 976 Expenditure on development projects 505 453 - - 505 453 Investment properties 42 345 - - 42 345 Goodwill 49 167 - - 49 167 Investments in subsidiaries 51 152 - (2 900) 48 252 Prepayments and deferred costs 2 620 - - 2 620 Other financial assets 211 045 - - 211 045 Deferred tax assets 58 580 - - 58 580 Other receivables 371 - - 371 CURRENT ASSETS 1 303 979 814 (25) 1 304 768 Inventories 10 242 259 - 10 501 Trade receivables 49 436 306 (25) 49 717 Current income tax receivable 3 071 - - 3 071 Other receivables 66 812 225 - 67 037 Prepayments and deferred costs 11 655 19 - 11 674 Other financial assets 534 491 - - 534 491 Bank deposits over 3 months 442 023 - - 442 023 Cash and cash equivalents 186 249 5 - 186 254 TOTAL ASSETS 2 449 077 1 359 (3 065) 2 447 371 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 75 CD PROJEKT S.A. CD PROJEKT RED STORE sp. z o.o. Business combination adjustment CD PROJEKT S.A. after combination EQUITY 2 014 138 908 (2 896) 2 012 150 Equity of the shareholders of CD PROJEKT S.A. 2 014 138 908 (2 896) 2 012 150 Share capital 100 771 29 (29) 100 771 Supplementary capital 1 639 437 2 764 (2 764) 1 639 437 Share premium 116 700 - - 116 700 Treasury shares (99 993) - - (99 993) Other reserves 3 587 - - 3 587 Retained earnings (Accumulated losses) 239 372 (1 594) (103) 237 675 Net profit (loss) for the period 14 264 (291) - 13 973 Non-controlling interests - - - - NON-CURRENT LIABILITIES 26 385 59 (59) 26 385 Other financial liabilities 19 221 59 (59) 19 221 Other liabilities 5 498 - - 5 498 Deferred income 1 327 - - 1 327 Provision for retirement and similar benefits 339 - - 339 CURRENT LIABILITIES 408 554 392 (110) 408 836 Other financial liabilities 263 506 85 (85) 263 506 Trade payables 31 961 178 (25) 32 114 Other liabilities 2 620 - - 2 620 Deferred income 16 121 1 - 16 122 Provision for retirement and similar benefits 9 - - 9 Other provisions 94 337 128 - 94 465 TOTAL LIABILITIES AND EQUITY 2 449 077 1 359 (3 065) 2 447 371 No other business combinations of the Group entities took place in the reporting period. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 76 E. Dividend paid (or declared) and received On 6 June 2023, the Ordinary General Meeting of the Company decided to set aside a part of the Company’s net profit for 2022 for distribution to shareholders as dividend. In accordance with the adopted resolution, on 20 June 2023, the Company paid out the total amount of PLN 99 910 510, i.e. 1 PLN per share participating in the dividend. The number of shares of the Company giving the right to dividend was PLN 99 910 510, i.e. the total number of the Company’s shares less the Company’s own shares held then (i.e. 860 290 shares). F. Trade and other receivables 30.06.2023 31.12.2022 Trade and other receivables, gross 124 746 220 586 Write-downs 814 818 Trade and other receivables 123 932 219 768 from related entities 4 978 5 535 from other entities 118 954 214 233 Change in write-downs of receivables Trade receivables Other receivables Total OTHER ENTITIES Write-downs as at 01.01.2023 86 732 818 Increases, including: 2 - 2 write-downs recognized for past-due and disputed receivables 2 - 2 Decreases, including: 6 - 6 release of write-downs 6 - 6 Write-downs as at 30.06.2023 82 732 814 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 77 Current and overdue trade receivables as at 30.06.2023 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 4 978 4 978 - - - - - default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 4 978 4 978 - - - - - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 78 292 76 830 1 374 3 3 2 80 default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 82 - - - - 2 80 total expected credit losses 82 - - - - 2 80 Net receivables 78 210 76 830 1 374 3 3 - - Total gross receivables 83 270 81 808 1 374 3 3 2 80 impairment write- downs 82 - - - - 2 80 Net receivables 83 188 81 808 1 374 3 3 - - Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 78 Other receivables 30.06.2023 31.12.2022 Other gross receivables, including: 41 476 55 792 tax receivables, other than corporate income tax 24 451 41 766 prepayments for inventories 14 041 6 826 prepayments for development projects 1 718 1 433 security deposits 432 687 settlements with employees 40 - prepayments for property, plant and equipment and intangible assets 30 135 settlements with suppliers of property, plant and equipment items - 4 160 settlements with payment operators - 7 settlements with members of the Management Boards - 2 other 764 776 Write-downs 732 732 Other receivables, including: 40 744 55 060 current 40 376 54 677 non-current 368 383 G. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments The Management Boards of the Company analysed specific classes of financial instruments. Based on the analysis, it was concluded that the carrying amounts of the instruments does not materially differ from their fair values, as at both 30 June 2023 and 31 December 2022. 30.06.2023 31.12.2022 LEVEL 1 Assets measured at fair value Assets measured at fair value through other comprehensive income 220 483 243 091 bonds issued by foreign governments - EUR 15 609 25 111 bonds issued by foreign governments - USD 204 874 217 980 LEVEL 2 Liabilities measured at fair value through profit or loss Derivatives 20 534 7 809 currency forwards - EUR 973 1 249 currency forwards - USD 19 561 6 560 Private equity interests in the gaming sector 2 260 2 556 private equity interests in the gaming sector - SEK 919 1 085 Private equity interests in the gaming sector - USD 1 341 1 471 Financial Instruments measured at fair value are classified to 3-stage fair value hierarchy: Level 1 - quoted prices in active markets for identical assets or liabilities. Level 2 - fair value based in observable market data. Level 3 - fair value based on market data that is not observable in the market. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 79 Financial assets – classification and measurement 30.06.2023 31.12.2022 Financial assets measured at amortized cost 768 746 972 990 Other non-current receivables 368 383 Trade receivables 83 188 164 708 Cash and cash equivalents 119 563 237 073 Bank deposits over 3 months 317 125 337 330 Treasury bonds and bonds guaranteed by the State Treasury 243 713 232 757 Loans granted 4 789 739 Financial assets measured at cost 57 910 53 566 Investments in subordinated entities 57 910 53 566 Assets measured at fair value through other comprehensive income 220 483 243 091 Bonds issued by foreign governments 220 483 243 091 Financial assets measured at fair value through profit or loss: 22 794 10 365 Derivative financial instruments 20 534 7 809 Private equity interests in the gaming sector 2 260 2 556 Total financial assets 1 069 933 1 280 012 Financial liabilities – classification and measurement 30.06.2023 31.12.2022 Financial liabilities measured at amortized cost 39 236 60 258 Trade payables 18 945 39 587 Other financial liabilities 20 291 20 671 Total financial liabilities 39 236 60 258 In accordance with the requirements of IFRS 9 Financial Instruments, the Company analysed the business model for managing financial assets and examined the characteristics of contractual cash flows for each component of the bond portfolio, and concluded that:  the purpose of investments in domestic and foreign Treasury bonds and domestic bonds guaranteed by the Polish State Treasury is to hold them to maturity and to collect contractual cash flows;  investment mandates for managing the foreign bonds portfolio allow selling bonds before maturity as part of the adopted strategy;  all bonds purchased meet the SPPI test. As a result of the analysis conducted, purchased bonds were classified into two financial asset management models which differ in terms of the entity managing the bond portfolio. Polish Treasury bonds and bonds guaranteed by the Polish State Treasury are measured at amortized cost, because they are held to collect contractual cash flows. Foreign Treasury bonds are measured at fair value through other comprehensive income, because of the investment mandate which allows the possibility of the portfolio being managed by an Asset Manager. In accordance with the requirements of IFRS 13 Fair Value Measurement, the Company analysed the valuation of the financial instruments measured at amortized cost in the separate statement of financial position in order to determine their fair values and their classification on the fair value hierarchy. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 80 Listed debt securities were classified to Level 1. They include State Treasury bonds and bonds guaranteed by the State Treasury whose fair value was determined on the basis of a market valuation provided by the brokerage office as part of the applicable agreement for the provision of brokerage services. 30.06.2023 31.12.2022 LEVEL 1 Fair value of assets measured at amortized cost 236 096 219 713 Treasury bonds and bonds guaranteed by the State Treasury 236 096 219 713 Other items of financial assets and financial liabilities measured at amortized cost were classified to Level 3. With regard to equity interests in other entities, the Company estimates the fair values of the shares held using the method which consists in forecasting future cash flows generated by a relevant cash generating unit and requires determining a discount rate to be used to calculate the present value of these cash flows. In justified cases, the Company assumes historical cost as an acceptable approximation of the fair value. The Company did not determine the fair values of receivables, trade payables, cash and cash equivalents, bank deposits over 3 months and loans granted with variable interest, because their carrying amounts are considered by the Company to be a reasonable approximation of their fair values. There were no movements between levels in the fair value hierarchy in the reporting period and in the comparative period. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 81 H. Transactions with related entities Sales to related entities Purchases from related entities Receivables from related entities Liabilities to related entities 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 01.01.2023 – 30.06.2023 01.01.2022 – 30.06.2022 30.06.2023 31.12.2022 30.06.2023 31.12.2022 SUBSIDIARIES GOG sp. z o.o. 4 017 6 455 379 1 502 4 394 2 798 4 2 610 CD PROJEKT Inc. 187 170 7 890 8 224 2 909 43 1 249 1 185 Spokko sp. z o.o. 226 737 1 140 - 2 156 246 - CD PROJEKT RED STORE sp. z o.o. - 735 - 69 - 839 - 19 CD PROJEKT RED Vancouver Studio Ltd. 23 29 10 104 7 781 563 1 694 1 730 2 746 The Molasses Flood LLC 1 - 25 690 10 311 4 789 742 2 855 2 579 THE PARENT COMPANY’S MANAGEMENT BOARD AND MEMBERS OF THE SUPERVISORY BOARD Marcin Iwiński - 1 - - - - - 7 Adam Kiciński - - - - - - - 13 Piotr Nielubowicz - - - - - 2 - 13 Michał Nowakowski - 1 - - - - - 4 Adam Badowski 1 6 - - - - 1 6 Piotr Karwowski - - - - - - - 2 Paweł Zawodny 6 7 - - - - - - Jeremiah Cohn - 1 - - - - - - Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 82 Statement of the Management Board of the Parent Company On the fairness of preparation of the interim condensed consolidated financial statements In accordance with the requirements of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State, the Management Board of the Parent Company declares that, to the best of its knowledge, these interim condensed consolidated financial statements and comparative data have been prepared in accordance with the accounting policies applicable in the CD PROJEKT Group and that they reflect in a true, fair and clear manner the Group’s financial position and its results of operations. These interim condensed consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) endorsed by the European Union published and effective as at 1 January 2023, and to the extent not governed by the said standards, in accordance with the Accounting Act of 29 September 1994 and the implementing legislation issued on the basis thereof and to the extent required by Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State. On the entity authorized to review the fairness of preparation of interim condensed consolidated financial statements On 9 March 2022, the Supervisory Board of the Parent Company selected Grant Thornton Polska Prosta spółka akcyjna with its registered office in Poznań, as recommended by the Audit Committee, as auditor to carry out the review of semi-annual and the audit of the annual financial statements of the Company and its Group for 2022 and 2023. Grant Thornton Polska Prosta spółka akcyjna has been entered on the list of entities authorized to audit financial statements by the National Chamber of Statutory Auditors with the number 4055. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 January to 30 June 2023 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 83 Approval of the financial statement This semi-annual report has been signed and approved for publication by the Management Board of CD PROJEKT S.A. on 30 August 2023. Warsaw, 30 August 2023 Adam Kiciński Piotr Nielubowicz Adam Badowski President of the Management Board Vice-President of the Management Board Member of the Management Board Michał Nowakowski Piotr Karwowski Paweł Zawodny Member of the Management Board Member of the Management Board Member of the Management Board Jeremiah Cohn Krystyna Cybulska Member of the Management Board Chief Accountant 84

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