FON SE

ANNUAL REPORT

FOR THE PERIOD SINCE 01 JANUARY 2019 TILL 30 JUNE 2020 AND FOR THE YEAR ENDED ON 30 JUNE 2020

PREPARED IN COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS

Tallinn, 31/10/2020

FON SE GENERAL INFORMATION

Business name: FON SE Registry code: 14617916 Legal Entity Identifier code: 259400WB3K1M8CZO6N24 Address: Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145 Telephone: +48-796-118-929 E-Mail address: [email protected] Website: www.fon-sa.pl Reporting period: 01/01/2019 - 30/06/2020 Auditor: Number RT OÜ, Eve Leppik, license no: 230 Members ofthe Supervisory Board:

Wojciech Hetkowski
Jacek Koralewski
Małgorzata Patrowicz
Martyna Patrowicz

Member of the Management Board:

Damian Patrowicz

I.	GENERAL INFORMATION…………………………………4
II.	SELECTED FINANCIAL DATA ……….……………………………….…6
III.	LETTER OF MANAGEMENT BOARD ………….………….………….…7
IV.	REPORT OF THE MANAGEMENT BOARD ON THE COMPANY'S ACTIVITY7
V.	CORPORATE GOVERNANCE REPORT ………….………….………………26
VI.	FINANCIAL STATEMENTS …………………………… ……………41
1.	Statement of financial position………………………………….……41
2.	Profit and loss account… 43
3.	Statement of comprehensive income………………… ………44
4.	Statement of changes of equity………………………44
5.	Statement of cash flow………………………45
6.	Notes to the financial statement………………………46
VII.	STATEMENT OF COMPLIANCE………….…………………82

I. GENERAL INFORMATION

Name of the Company:FON SE

On 19/04/2018 there was registered merger of the Company, previously operating as a public limited company under Polish law under the name of FON Spółka Akcyjna with its registered office in Płock at Padlewskiego Street 18C, Poland, entered in the Register of Entrepreneurs of the National Court Register kept by the District Court for the Capital City of Warsaw in Warsaw, 14th Commercial Division, under the number 0000028913, NIP 5480075844,REGON 070009914 with FON1 Polska Akciová společnost headquartered in Ostrava, address: Poděbradova 2738/16, MoravskáOstrava, 702 00 Ostrava, the Czech Republic entered to the commercial register kept by the District Court in Ostrava, section B under the number 10981, identification number 06503390 (the Acquired Company).
As a result of registration of merger by the District Court for the Capital City of Warsaw in Warsaw, the Company has changed its legal form to the European Company and has already started operating as FON SE headquartered in Płock at Padlewskiego Street 18C, Poland, entered in the Register of Entrepreneurs of the National Court Register kept by the District Court for the Capital City of Warsaw in Warsaw, 14th Commercial Division, under the number 0000728655, REGON 070009914 and NIP 5480075844.
On 30/11/2018 the commercial register appropriate for the Estonian law (Ariregister) registered the transfer of the Company's registered office to Estonia. Registry code: 14617916.

Address:

since 01/12/2018 Narva mnt 5, 10117 Tallinn, Estonia
since 05/06/2019 Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145 Estonia

Business activity according to the business classification

Since 30/11/2018 activity with name "Activities of holding companies" under The Estonian Classification of Economic Activities (EMTAK) No 64201 was registered in Estonia.

Duration of the Company:

Duration of the Company is indefinite.

Share capital of the Company:

As at 30/06/2020 the share capital of the Company amounts to EUR 7 700 thous. and is divided into 52 500 000 shares without par value with a book value of 0,1467 EUR per share.
Since 15/07/2020 the share capital of the Company amounts to EUR 7 700 thous. and consists of 42 749 250 series A shares without par value with a book value of EUR 0,1467 entitling to 100% of dividend per share and 9 750 750 series B shares without nominal value with a book value of EUR 0,1467entitling to 50% of dividend per share.

Parent Company's Name:

Parent Company's name: PATRO INVEST OÜ headquartered in Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145, registry code: 14381342. Managemenet Board: Damian Patrowicz. Damian Patrowicz owns 100% shares of Patro Invest OÜ.

Financial year:

The financial year for the reporting period started on January 1, 2019 and ended on June 30, 2020. On May 6, 2019, the Commercial Companies Register (Ariregister), competent for Estonian law, registered the change in the financial year in accordance with Resolution No. 3 of the Extraordinary General Meeting of Shareholders of April 29, 2019. In connection with this, the Company's financial year begins on July 1 and ends on June 30.

Composition of the Management Board

In the reporting period, the composition of the Company's Management Board was as follows:

Damian Patrowicz – since 5/07/2018 appointed as a Member of the Management Board

Composition of the Supervisory Board

The composition of the Supervisory Board in the reporting period was as follows:

Wojciech Hetkowski Chairman of the Supervisory Board
Małgorzata Patrowicz Recorder of the Supervisory Board
Jacek Koralewski Member of the Supervisory Board
Martyna Patrowicz Member of the Supervisory Board

On January 11, 2019 Mr. Mariusz Patrowicz resigned from his membership in the Supervisory Board as ofJanuary 11, 2019.

II. SELECTED FINANCIAL DATA CONTAINING BASIC ITEM OF THE FINANCIAL STATEMENT (ALSO CONVERTED IN EURO)

	in thous. EUR
Selected financial data	Eighteen months ended 30/06/2020	Twelve months ended 31/12/2018
Revenue from interest, sales of land, products, goods and materials from continued operations	651	417
Revenuse from the sale of products, goods and materials from discontinued operations	82	35
Operating profit (loss) from continued operations	537	-561
Operating profit (loss) from discontinued operations	24	-16
Profit (loss) before taxation from continued operations	-3 165	-2 070
Profit (loss) before taxation from discontinued operations	24	-16
Net profit (loss)	-3 141	-2 086
Net cash flows from operating activities	-6 149	-25
Net cash flow from investing activities	531	70
Net cash flow from financing activities	5 579	0
Change in cash and cash equivalents	-39	-47
Total assets	11 462	9 338
Long-term liabilities	5 241	0
Short-term liabilities	255	14
Equity	5 966	9 324
Share capital	7 700	7 700
Weighted average number of sharesi (in pcs.)	36 183 729	70 000 000
Profit (loss) from continued operations per share (EUR)	-0,09	-0,03
Profit (loss) per share (EUR)	-0,09	-0,03
Book value per one share (EUR)	0,11	0,62

III. LETTER OF THE MANAGEMENT BOARD

Dear Sirs,

On behalf of the Management Board of FON SE, I am pleased to present to you the Annual Report for the financial year lasting from January 1, 2019 to June 30, 2020 containing a list of the most important information about the Company's operations and events that took place in the past financial year.

In the reporting period, the Company continued its activities in the field of financial service activities and at the same time ceased activities in the field ofgenerating energy from renewable energy sources.

The presented financial statement shows a loss on economic activity, however, in the opinion of the Management Board, the Company's situation is stable and there isno risk of losing liquidity and going concern. In the next financial year, the Company will pursue its activities in the field of financial service activities by granting non-consumer cash loans.

The Management Board of the Company also wishes to thank all Shareholders, Contractors and Co-operators, wishing them further, mutually fruitful cooperation.

Yours faithfully,

Damian Patrowicz Member of the Management Board

IV. REPORT OF THE MANAGEMENT BOARD ON THE COMPANY'S ACTIVITY

MAIN AREAS OF THE ACTIVITY, PRODUCTS AND SERVICES' GROUPS.

In the reporting period, the company's main business activity includes financial activity including loan service activities, production of Energy from renewable sources. In the reporting period, revenues connected with financial activity and sale of electricity and "green certificates" obtained from owned wind farms have decisive role in structure of Company's

revenues. Revaluation of the assets held i.e. stocks and shares of entities in the Company's portfolio also have significant influence on presented Company's results.

The Company realizing its business profile in the scope of granting loans, concluded contracts with Polish and Estonian entities. Due to the nature of the activity, there are no sources of supply for goods and materials.

GENERAL (MACROEKONOMIC) DEVELOPMENT OF THE ENVIROMENT IN WHICH THE ACCOUNTING ENTITY CONDUCTS ACTIVITY AND THE IMPACTOF THIS DEVELOPMENT ON ITS FINANCIAL EFFICIENCY.

The Company conducts financial activities in particular connected with granting cash loans to natural persons and economic entities, most often from the micro and small enterprises sector. In opinion of the company's Management Board, activity in this area is developing, especially on the Polish market. In Poland, among more than 2 million small and medium-sized enterprises, only 17% use loans and borrowings. It results from the restrictive policy of bank in the scope of high-risk assessment for granting loans for this type of entities. A small entrepreneur has to fulfil the bank's difficult requirements, primarily seldom achieved for young entities, credit worthiness. Majority of novice entrepreneurs also do not have any collateral and do not have a long bank history. Entrepreneurs, who do not receive financing from the bank, are looking for alternative forms offinancing. They reach out to the companies providing loan services. Companies in this sector, including FON SE, show great flexibility in the scope of service procedure adjusted to the needs ofindividual clients and their abilities in the scope of granted collateral. The Company sees the development potential in the scope of providing of the financial services for this type of entities and consistently intends to continue its business in this segment.

In the reporting period, the Company also achieved revenues from owned windfarms which were sold in August 2019. The decision to sell was made due to the instability of the energy in the scope of renewable Energy and the age of owned devices.

INFORMATION ON IF THE OPERATIONAL ACTIVITY OF ACCOUNTING ENTITY IS BASED ON THE SEASONALITY, OR IS THE ENTITY' ACTIVITY CYCLICAL.

In the reporting period, the main activity of the Company was financial service (loan) and therefore there is no seasonality or cyclicality. In the scope of renewable energy activities conducted in the reporting period, there is no cyclicality and it is difficult to define seasonality in terms of the main factor affecting energy production i.e. wind, due to climate changes.

FINANCIAL INSTRUMENTS, POLICY AND RISK MANAGEMENT AND RISKS CONNECTED WITH THE CURRENCY EXCHANGE, INTEREST RATE AND COURSES OF SHARES, WHICH APPEARED IN THE FINANCIAL YEAR OR DURING THE PREPARATION OF THE REPORT.

The main types of risk resulted from Company's financial instruments include: interest rate risk, liquidity risk, credit risk and risk related to the financial collateral. The Management Board is responsible for establishing risk management principles in the Company and for supervising its following. The Company's risk management rules aimed at identifying and analysing the risks to which the Company is exposed, determining appropriate limits and controls, and also monitoring risk and adjusting the level of limits matched to it. The main

risks to which the Company can be exposed are indicated in note 22 of the Annual Financial Statement for the financial year lasting since 01/01/2019 until 30/06/2020.

THE MOST IMPORTANT INVESTMENTS MADE DURING THE FINANCIAL YEAR AND PLANNED FOR THE NEAREST FUTURE.

Due to the Company's main activity in the field of financial services in the scope of granting cash loans to business entities, more important investments made by the Company during the reporting period, were related to loans granted, which were described in notes 3 and 6 of the Annual Financial Statement for the financial year lasting from 01/01/2019 until 30/06/2020. In the near future, the Company intends to continue its main loan activity, so the Management Board assesses that any future significant investments will also be implemented in this area.

SIGNIFICANT RESEARCH AND DEVELOPMENT PROJECTS AND RELATED TO THEM FINANCIAL EXPENDITURES IN THE FINANCIAL YEAR AND NEXT YEARS.

Due to the specifics of the Company's main activity i.e.financial services, the Company does not conduct research and development projects.

CAPITAL SHARE STRUCTURE INCLUDING THE SECURITIES THAT ARE NOT APPROVED TO TRADING ON THE REGULAR MARKET OF THE CONTRACTING COUNTRIES AND IF POSSIBLE, DATA OF VARIOUS CLASSES OF INSTRUMENTS, RIGHTS AND OBLIGATIONS CONNECTED WITH EVERY CLASS OF SECURITIES AND ITS PERCENTAGE SHARE IN SHARE CAPITAL OF THE COMPANY

Since 27/05/1999 FON SE shares have been listed on the Warsaw Stock Exchange. As at 31/12/2018 FON SE held 70 000 000 shares issued without nominal value with book value of 0,11 EUR per share. As at 31/12/2018 the price per share was PLN 0,02 (0,005 EUR) and there was 70 000 000 shares. Since 31/12/2018 until 5/05/2019 there was still 70 000 000 shares of FON SE. Since 6/05/2019 as a result of resplit (reverse split) operation the book value of one share was increased from 0,11 EUR into 0,88 EUR and the number of shares decreased from 70 000 000 into 8 750 000. Share capital was still the same. Until 14/01/2020 there was 8 750 000 shares. Since 15/01/2020 as a result of split operation the book value of one share decreased from 0,88 EUR into 0,1467 EUR and the number of shares increased from 8 750 000 into 52 500 000 shares - the share capital has not changed. There are currently 52 500 000 shares as at30/06/2020 and as at date of preparing the financial statements. Since 15/07/2020 the share capital of the Company amounts to EUR 7 700 thous. and consists of42 749 250 series A shares without par value with a book value of EUR 0,1467 entitling to 100% of dividend per share and 9 750 750 series B shares without nominal value with a book value of EUR 0,1467 entitling to 50% of dividend per share. The shares are freely transferable and have no statutory restrictions. The shares are freely transferable and have no statutory restrictions.

ANY RESTRICTIONS APPLIED BY THE COMPANY'S STATUE ON THE TRANSFERABILITY OF SECURITIES, ALSO INCLUDING LIMITATIONS ON THE OWNERSHIP OF SECURITIES OR THE NECESSITY OF OBTAINING THE COMPANY OR OTHER OWNERS OF THE SECURITIES CONSENT.

The Company's Articles of Association do not impose any restrictions on the transferability of securities limitation on the ownership of securities orthe necessity to obtain the consent of the Company or other owners ofsecurities.

SIGNIFICANT SHARE PACKAGES IN ACCORDANCE WITH THE PROVISIONS OF § 185 THE SECURITIES MARKET ACT

According to the best knowledge of the Management Board, as at 31/10/2020 the structure of direct and indirect shareholders holding at least 5% of the total number of votes at the General meeting was as follows:

No.	Direct shareholders	Number of shares	% of shares	Number of votes	% of votes
1.	Patro Invest OÜ	18 130 520	34,53	18 130 520	34,53
X	Total	52 500 000	100,00	52 500 000	100,00

Direct shareholding structure as at 31/10/2020:

Indirect shareholding structure as at31/10/2020

No.	Indirect shareholders	Number of shares	% of shares	Number of votes	% of votes
1.	Patro Invest OÜ	18 130 520	34,53	18 130 520	34,53
2.	Damian Patrowicz	18 130 520	34,53	18 130 520	34,53

* Damian Patrowicz owns 100% of Patro Invest OU

According to the best knowledge of the Management Board, as at the balance sheet date, i.e. 30/06/2020 the structure of direct and indirect shareholders holding at least 5% of the total number of votes at the General meeting was as follows:

Direct shareholding structure as at 30/06/2020

No.	Direct shareholders	Number of shares	% of shares	Number of votes	% of votes
1.	Patro Invest OÜ	18 130 520	34,53	18 130 520	34,53
X	Total	52 500 000	100,00	52 500 000	100,00

Indirect shareholding structure as at30/06/2020

No.	Indirect shareholders	Number of shares	% of shares	Number of votes	% of votes
1.	Patro Invest OÜ	18 130 520	34,53	18 130 520	34,53
2.	Damian Patrowicz	18 130 520	34,53	18 130 520	34,53

* Damian Patrowicz owns 100% of Patro Invest OU

According to the information presented in the annual report for 2018, indirect and direct shareholding structure holding at least 5% of total number of votes at the General meeting was as follows:

Direct shareholding structure as at 31/12/2018

No.	Direct sharehlders	Number of shares	% of shares	Number of votes	% of votes
1.	Patro Invest OÜ	23 123 763	33,03	23 123 763	33,03
X	Total	70 000 000	100	70 000 000	100

Indirect shareholding structure as at31/12/2018

No.	Indirect shareholders	Number of	% of shares	Number of votes	% of votes
		shares
1.	Patro Invest OU	23 123 763	33,03	23 123 763	33,03
2.	Damian Patrowicz	23 123 763	33,03	23 123 763	33,03

ALL LIMITATIONS AND AGREEMENTS RELATED TO THE RIGHT TO VOTE AND IF THE PREFERENCE SHARES GIVE THE RIGHT TO VOTE, INCLUDING RESTRICTIONS OF VOTING RIGHTS IN A CERTAIN SCOPE OF OWNERSHIP OR SPECIFIC NUMBER OF VOTES, CONDIDTIONS INDICATED TO EXERCISE OF VOTING RIGHTS OR A SYSTEM IN WHICH FINANCIAL RIGHTS CONNECTED WITH SECURITIES AND THEIR OWNERSHIP ARE SEPARAED WITH ANY AGREEMENT WITH THE COMPANY.

In accordance with the provisions of point 2.3 of the Company's Articles of Association the Company has two classes of shares:

A series - registered shares without a nominal value. Each A-share shall give 1 (one) vote at the general meeting. An A-share entitles the shareholder to receive 100% of the dividend per share paid in accordance with the resolution of the generalmeeting.
B series - registered shares without a nominal value (B-shares). Each B-share shall give 1 (one) vote at the general meeting. A B-share entitles the shareholder to receive 50% of the dividend per share paid in accordance with the resolution of the generalmeeting.

PROVISIONS AND RULES OF ELECTION, APPOINTMENT, RESIGNATION AND DISMISSAL OF THE COMPANY'S MANAGEMENT BOARD MEMBERS ESTABLISHED BY LAW.

In accordance with the provisions of point 5.3. The Company's Articles of Association, members of the Company's Management Board are appointed and dismissed by the Supervisory Board, which also decides on the remuneration of members of the Management Board.

RESOLUTIONS AND RULS OF MAKING AN ALTERNATION IN THE ARTICLE OF ASSOCIATION SETTLED BY LAW.

In accordance with point 4.9.1 of the Company's Articles of Association, amendment of the Company's Articles is included in the General Meeting of Shareholders' competencies.

In accordance with point 4.5 Of the Articles of Association, the General Meeting is able to adopt valid resolutions, if at the General Meeting there is more than half of all votes represented in company shares, if the applicable legal acts do not provide for a higher majority of votes.

If an enough number of shareholders does not participate in General Meeting, in order to ensure a majority of votes, in accordance with point 4.5, the Management Board of the Company within three weeks, but not earlier than after seven days, convenes a new general meeting with the same agenda. In this way, the General Meeting is competent to adopt resolutions regardless of the number of votes represented. Resolutions ofthe general meeting are adopted, when more than a half of all represented at the General Meeting votes are for the resolution, and if there is no other requirement arising from applicable legal acts.

AUTHORIZING MEMBERS OF THE MANAGEMENT BOARD OF THE COMPANY, INCLUDING AUTHORIZING TO ISSUING AND BUYING BACK SHARES.

During the reporting period the Management Board was not authorized to issue or repurchase shares.

DESCRIPTION OF THE BASIC ECONOMIC AND FINANCIAL DATA REVEALED IN THE ANNUAL FINANCIAL STATEMENT AND DESCRIPTION OF THE FACTORS AND THE MOST IMPORTANT UNTYPICAL EVENTS HAVING SIGNIFICANT INFLUENCE ON THE ACTIVITY OF THE COMPANY AND ACHIEVED PROFITS OR LOSSES IN THE FINANCIAL YEAR.

The Company in the reporting period recorded:

CONTINUED OPERATIONS:

• Revenues from interest, the sale oflands, product from continued operations in the amount of EUR 651 thous.

• Gross profit on sales from continued operations in the amount of EUR 548 thous.

• Profit from operating activities from continued operations in the amount of EUR 537 thous.

• Net loss from economic activity from continued operations in the amount of EUR 3 165 thous.

• Financial costs from continued operations in the amount of EUR 3 703 thous.

• General administrative costs in the reporting period from continued operations in the amount of EUR 65 thous.

DISCONTINUED OPERATIONS:

• Revenues from the sale of product from discontinued operations in the amount of EUR 82 thous.

• Gross profit on sales from discontinued operations in the amount of EUR 56 thous.

• Profit from operating activities from discontinued operations in the amount of EUR 24 thous.

• Net loss from economic activity from discontinued operations in the amount of EUR 24 thous.

• Financial costs from discontinued operations in the amount of EUR 0 thous

• General administrative costs in the reporting period from discontinued operations in the amount of EUR 12 thous.

In the reporting period, the Company has obtained revenues mainly from interest from lending activity and owned wind farm.

As at 31/12/2018 the Company held 12.899 shares in IFEA Spółka z ograniczoną odpowiedzialnością with balance value of PLN 15 277 thous. (= EUR 3 516 thous.). As a result of the transformation IFEA Spółka z ograniczoną odpowiedzialnością into Nowy Wiatr Spółka z ograniczoną odpowiedzialnością in liquidation limited partnership and subsequent liquidation of this company, the amount of PLN 15 277 thous.(= EUR 3 516 thous.)was written off in full as at June 30, 2020 and full amount PLN 15 277 thous. (= EUR 3 516 thous.) recorded as financial costs.

In the reporting period, the Company sold intangible assets trademark "Urlopy.pl" and Patro Invest OÜ redeemed 27 000 000 tokens based on blockchain Ethereum called PATRO-ICO1 held by the Company for PLN 2 thous. (= EUR 450).

On 19/02/2019 the shares of IFERIA in the amount of957 854 were sold for PLN 958 (0 thous. EUR). The value of 69 shares of Fon Zarządzanie Nieruchomościami Sp. z o.o. in the amount of PLN 7 thous. (EUR 2 thous.) was written down as at 30/06/2020 due to liquidation of the this company.

LIST OF THE MOST SIGNIFICANT EVENTS IN THE REPORTING PERIOD.

The most important and in the opinion of the Management Board significant events, which took place in the reporting period, were described in section List of the most important events in the reporting period of this Report of the Management Board on the Company's Activity being part of the Annual Financial Report of the Company for the financial year since 01/01/2019 until 30/06/2020.

SIGNIFICANT EVENTS, WHICH HAPPENED IN THE PERIOD OF PREPARING THE ANNUAL FINANCIAL STATEMENT AND WHICH ARE NOT INCLUDED IN IT, BUT HAVE OR MAY HAVE A SIGNIFICANT IMPACT ON FINANCIAL EFFICIENCY IN THE NEXT YEARS.

In the opinion of the Management Board significant events that happened after the balance sheet date and were not included in the financial statement have been indicated in note 20 of the Annual Financial Statement for the financial year lasting from 01/01/2019until 30/09/2020.

INDICATION OF PENDING PROCEEDINGS IN THE COURT, COMPETENT AUTHORITY FOR ARBITRATION PROCEEDINGS OR PUBLIC ADMINISTRATION AUTHORITY

In the reporting period, the Company has not initiated and has not become a party of any new, important judicial or administrative proceedings.

The Company indicates below the most important pending court and administrative proceedings:

Administrative procedure conducted by Polish Financial Supervision Authority against FON SE regarding imposition the financial fine on FON SE based on article 97(1) point 2 of July 29, 2005 on Public Offering and terms of launching to organized trading venue and on public companies, towards breaching article no. 69 (1) point 1 with relation to the article no. 87 (5) point. 1 of an act of Offer in relation to purchase on January 1, 2012 shares of public Company Zakłady Mięsne Herman S.A. (current Investment Friends Capital SE with registered office in Płock). After getting above- mentioned decision on 14/06/2017, the Company applied for reconsideration and repealing the decision in its entirety. As at 29/05/2018 Polish Financial Supervision Authority decided of repealing in its entirety and again imposed a lower fine in the amount of PLN 90 thousand (=EUR 20 thous.) . Due to the re-imposition of the penalty, the Company on 03/07/2018 filed the complaint for the Polish Financial Supervision Authority's decision to the Provincial Administrative Court. On 08/01/2019 Provincial Administrative Court passed a judgement, which dismiss the Company's complaint and as a result on 29/03/2019 the Company appealed against sentence to Supreme Administrative Court. The case is proceeding.

A case from the Company's application for confirmation of the acquisition of an inheritance from the Company's debtor. On 8/11/2018 the Company applied to the District Court in Bydgoszcz for a declaration of inheritance for PLN 918 thous (= EUR 206 thous.). The court is setting the dates of hearings in order to hear the participants in the proceedings. The case remains pending court proceedings.

INFORMATION ON TRANSACTIONS CONCLUDED BY THE COMPANY OR A SUBSIDIARY OF THE COMPANY WITH RELATED ENTITIES OTHER THAN MARKET CONDITIONS, WITH THEIR AMOUNTS AND INFORMATION DEFINING THE NATURE OF THESE TRANSACTIONS.

In the period covered by this report, the Company did not conclude significant transactions with related entities on terms other than market terms.

Transactions significant in the opinion of the Management Board, including with related entities, have been indicated in note 17 a of the Company's Annual Financial Statements for the financial year lasting from 01/01/2019 until 30/06/2020.

INFORMATION ABOUT LOANS GRANTED IN A GIVEN FINANCIAL YEAR, WITH SPECIAL CONSIDERATIONS OF LOANS GRANTED TO THE COMPANY'S AFFILIATED ENTITIES, WITH THEIR AMOUNT, TYPE AND AMOUNT OF THE INTEREST RATE, CURRENCY AND DUE DATE.

Loans granted by the Company were specified in notes 3 and 6 of the Company's Annual Financial Statements for financial year lasting from 01/01/2019 until 30/06/2020. The Company has a liability under a loan received from Atlantis SE withits registered office in Tallinn on 30/12/2019. As at the balance sheet date, the amount of the liability with interest is PLN 24 444 thous. (EUR 5 486 thous.).

ASSESSMENT AND ITS JUSTIFICATION, REGARDING MANAGEMENT OF FUNDS, SPECIFYING ABILITY TO DISCHARGE FROM TAKEN OBLIGATIONS, AND INDICATION OF POSSIBLE THREATS AND ACTIONS WHICH THE COMPANY UNDERTOOK OR INTENDS TO UNDERTAKE IN ORDER TO PREVENT THOSE THREATS.

In the reporting period, apart from indicated in section List of the most important events in the reporting period of this Report of the Management Board on the Company's Activity being part of the Annual Financial Report of the Company for the financial year since 01/01/2019 until 30/06/2020, there have not happened any important, in the opinion of the Management Board, events which could significantly influence the assessment and change the property and financial statement of the Company and ability to fulfill the Company's obligations.

The Company maintains realization of the business concept based on optimizing costs, including minimizing of the HR resources by outsourcing most of the services needed for the Company.

The significant influence on the Company's results have redemption of owned tokens, write off of financial instruments being in the Company's portfolio as well as loans granted.

Because the main business activity of the Company is financial activity, including loan services, the significant influence on the Company's liquidity has also the proper and term fulfilling of obligations of the Borrowers toward the Company, resulting from concluded loan agreements. The Company also obtained revenues from renewable energy sources.

The Company's activity since 30/11/2018 after transfer of headquarter to Tallinn in Estonia is continued and still the leading activity of the Company is financial activity, i.e. financial service activity. In the reporting period the Company finished its activity related to production of electricity in the renewable source of energy as well as sold owned turbines and the infrastructure connected to them.

ASSESSMENT OF POSSIBILITY OF REALIZATION OF INVESTMENT INTENTIONS, INCLUDING CAPITAL INVESTMENTS, IN COMPARISON WITH OWNED INSTRUMENTS TAKING INTO ACCOUNT POSSIBLE CHANGES IN THE STRUCTURE OF FINANCING OF THIS ACTIVITY.

The Company conducts mostly financial service activity,granting non-consumer cash loans for business entities. The current lending operating is financed from own funds of the Company. Further activities in the field of granting loans and possible investments, the

Company intends to realize mainly from own funds. In case of necessity to get additional financing, the Company does not exclude a possibility of issuance of shares and debt instruments.

ASSESSMENT OF FACTORS AND ATYPICAL EVENTS HAVING INFLUENCE ON RESULT FROM OPERATING FOR THE FINANCIAL YEAR, SPECIFYING LEVEL OF INFLUENCE OF THESE FACTORS OR ATYPICAL EVENTS ON OBTAINED RESULT.

According to the assessment and the best knowledge of the Management Board, apart from events described in section List of the most important events in the reporting period of this Report of the Management Board on the Company's Activity being part of the Annual Financial Report of the Company for the financial year since 01/01/2019 until 30/06/2020 there have not occurred any other, especially atypical, factors and events which could have a significant influence on assessment and financial situation of the Company and on ability to fulfill its obligations. The significant influence on the Company's results have the the write off of held 12.899 shares in IFEA Spółka z ograniczoną odpowiedzialnością with value of PLN 15 277 thous. (= EUR 3 516 thous.). As a result of write off in as at June 30, 2020 full amount of PLN 15 277 thous. (= EUR 3 516 thous.) was put to financial costs.

CHARACTERISTIC OF EXTERNAL AND INTERNAL FACTORS SIGNIFICANT FOR DEVELOPMENT OF THE ENTERPRISE OF THE COMPANY AND DESCRIPTION OF PERSPECTIVES FOR DEVELOPMENT OF THE COMPANY'S ACTIVITY, AT LEAST TO THE END OF THE FINANCIAL YEAR FOLLOWING THE YEAR COVERED BY THE FINANCIAL STATEMENTS INCLUDED IN THE ANNUAL REPORT, SPECIFYING ELEMENTS OF MARKET STRATEGY WORKED OUT BY THE COMPANY.

Taking into account the Company's leading activity, including financial service activities in the field of granting non-consumer cash loans in the Company's opinion, significant influence on development and results, currently have and will have the following internal and external factors:

general market prosperity on lending market and level of interest rates,
proper realization by the Borrowers of their obligations resulting from concluded loan agreements, as wellas course of execution process and vindication of loans terminated, if such agreements occurs,
efficiency of procedures and administrative and legal proceedings in which a possible participant or a part can be the Company,
opportunity to gain possible borrowers,
market prosperity on capital markets,
economic situation and investing circumstances in Poland, Estonia and the region,
access to external financing sources,
cooperation with other financial entities,

In the next financial year, the Management Board intends to continue and develop the Company activity in the field of financial service activity, focusing mainly on granting cash loans for the business entities.

ANY AGREEMENTS BETWEEN THE COMPANY AND ITS MANAGEMENT BOARD WHICH PROVIDE COMPENSATIONS IN THE CASE OF RESIGNATION OR THEIR EXPELLING FROM HELD FUNCTION WITHOUT AN IMPORTANT REASON OR IF THEIR DISMISSAL OR EXPELLING HAPPEN DUE TO MERGER OF TAKOVER OF THE COMPANY.

The Company has not concluded any agreements with the managing staff.

INFORMATION ON AN AVERAGE EMPLOYMENT.

In the reporting period the Company didn't employe people in comparison to period since 01/01/2018 to 30/12/2018 there was 1,8 people under the employment contract.

INDICATION OF TOTAL NUMBER AND NOMINAL VALUE OF ALL SHARES (STOCKS) OF THE COMPANY AND SHARES IN RELATED ENTITIES OF THE COMPANY OWNED BY THE MANAGING AND SUPERVISING PERSONS OF THE COMPANY.

Members of the Management Board

As at the balance date 30/06/2020 and as at the date of publication of this periodical report, the Member of the Management Board Mr. Damian Patrowicz owns indirectly the Company's shares. According to the best knowledge of the Management Board, Mr. Damian Patrowicz owns indirectly, via his subsidiary Patro Invest OÜ 18 130 520 shares of FON SE, constituting 34,53% of the share capital of the Company and entitling to 18 130 520 votes what constitute 34,53% of the votes at the General Meeting of the Company. The Member of the Management Board of FON SE Mr. Damian Patrowicz owned indirectly 98,96% shares of IFEA Spółka z o.o. as at 30/06/2020.

Members of the Supervisory Board

According to the knowledge of the Management Board of FON SE, Membersof the Supervisory Board as at the balance date and as at the date of publication of the periodical report do not own directly and indirectly shares ofthe Company.

INFORMATION ON FINANCIAL INSTRUMENTS IN TERMS OF:

1) risks: prices' change, credit, significant interruptions of cash flows and loosing of financial liquidity, to which the entity is exposed

2) applied by the entity goals and methods of financial risk management, along with securing methods of significant kinds of planned transactions for which hedging accountancy is applied.

The Company has no formalized system of financial risk managements. Decisions on application of securing instruments for planned transactions are made on the basis of current analyse of the Company's situation and its environment.

INFORMATION REGARDING AN AGREEMENT AND AN ENTITY AUTHORIZED TO AUDIT FINANCIAL STATEMENTS OF THE COMPANY.

The governing body entitled to choose a certified auditor, according to the Company's Article of Association is the General Meeting of Shareholders. General Meeting of Shareholders of FON SE decided to select the company Number RT OÜ based in Tallinn, Kristiine linnaosa, Linnu tee 21a, 11317, company registration number 10213553, as the auditing company that will audit and assess the Company's financial statements for the financial year lasting from 01/01/2019 until 30/06/2020 and from 1/07/2020 until 30/06/2021. The remuneration for the auditor will be payable in accordance with the contract concluded between FON SE and Number RT OÜ on market terms.

OTHER INFORMATION WHICH IN THE VIEW OF THE COMPANY ARE SIGNIFICANT FOR ASSESSMENT OF THE FINANCIAL, PERSONNEL, MATERIAL SITUATION, FINANCIAL RESULT AND CHANGES OF THEM AND INFORMATION WHICH ARE IMPORTANT FOR ASSESSING THE POSSIBILITY TO REALIZATION THE LIABILITIES BY THE COMPANY.

In the reporting period, except those indicated in the report, there have not occurred any other events, which could significantly influence on an assessment and change of the material and financial situation of the Company and its possibility to fulfil its liabilities to the best knowledge of the Management Board.

The Company maintain business concept involving cost optimization, including minimization of personnel sourced through outsourcing majority of the Company's areas.

Loans granted have a significant impact on the Company's results.

As the subject of the company's activity is financial activity, including lending activity, the correct and timely fulfilment of the Borrowers' obligations towards the Company, resulting from the concluded loan agreements, also has a significant impact on the Company's liquidity.

The activity of the Company after the transfer of the registered office on 30/11/2018 is continued and the main activity of the Company is still financial activity, i.e. loan services. Currently, the Management Board, to the best of its knowledge, does not plan to change the profile of the Company's operations.

INDICATION OF FACTORS WHICH ON THE VIEW OF THE COMPANY WILL HAVE INFLUENCE ON ACHIEVED RESULTS IN THE PERSPECTIVE OF AT LEAST THE NEXT QUARTER.

To the knowledge of the Management Board, significant external and internal factors, which have indirect or direct influence on the development of FON SE are as follows:

a) situation on the financial market, on loan market and interest rates, which will have influence on realization the basic business profile of the Company – granting loans.

b) Proper fulfilling the conditions of the agreements within due time of liabilities repayment to the Company, and possible foreclosures and debt collection of (if any) undischarged loans

c) Business cycle on capital markets having influence on financial instruments owned by the Company, its valuation and liquidity of owned securities

List of the most important events in the reporting period.

Information regarding the selection of the Home State.

FON SE informed on January 24, 2019, being obliged pursuant to (i) Art. 2 of Directive 2004/109 / EC of the European Parliament and of the Council of 15 December 2004 (in line with the amendments to Directive 2013/50 / EU of the European Parliament and of the Council of 22 October 2013) and (ii) § 1844 par. 1 of the Estonian Securities Markets Act, that it has selected a Contracting State as the Home State of the Republic of Estonia. Accordingly, the Republic of Poland is a host Contracting State.

Obtaining a license to trade in cryptocurrencies

The Management Board of FON SE based in Tallinn, registration number: 14617916, announced that on March 18,2019, the Company obtained a license to conduct financial activities, including the provision of cryptocurrency trading services in relation to currencies recognized as legal tender. The licenses were issued by the Estonian Financial Intelligence Unit and are registered under the numbers: FRK000677 and FVR000776. No such activity took place during the reporting year.

Settlement of the Surety Agreement

The Management Board of FON SE, based in Tallinn,announced that on 04/01/2019 the Company paid the amount of PLN 590 thous. (= EUR 136 thous.) to Investment Friends SE for the fulfillment of obligations under the Surety Agreement of April 18, 2018 the conclusion of which the Company informed in the currentreport No. 11/2018 of April 18, 2018. The Management Board of FON SE announced that after the payment of the above amount, all claims ofInvestment Friends SE against the Company under the Surety Agreement concluded were satisfied.

Conclusion of an agreement on the purchase of Tokens

The Management Board of FON SE with its seat in Tallinn announced that on April 12, 2019 the Company concluded an agreement with the company PATRO INVEST OÜ based in

Tallinn regarding the purchase of 27 000 000 (twenty seven million) Tokens based on the Ethereum blockchain called PATRO-ICO1 (https://www.ethereum.org) owned by the Company. On the basis of the concluded agreement,the parties agreed that on April 12, 2019, PATRO INVEST OÜ, based in Tallinn, redemption of 27 000 000 Tokens based on the Ethereum blockchain for a totalprice of PLN 2 468 thous (EUR 568 thous.) with the payment date until December 31,2019. The Company informed that the total value of the acquisition of the Tokens in question was PLN 11 300 thous. (EUR 2 601 thous.)and FON SE informed about the conclusion of the Token subscription agreement in the currentreport No. 63/2017 of 04/12/2017. As a result of redemption the Company had prfit in the amount PLN 218 thous. (EUR 50 thous.) Because the value in balance as at 12/04/2019 amounted to PLN 2 250 thous. (EUR 518 thous.).

Change in the ownership of the Company's shares.

The Management Board of FON SE basedin Tallinn informed that the Company received notifications of 02/05/2019 from Patro Invest OÜ regarding the direct change in the ownership of the Company's shares and Mr. Damian Patrowicz regarding the indirect change in the ownership of FON SE shares. Mr. Damian Patrowicz via Patro Invest OÜ bought 116 737 shares of FON SE on 2/05/2020.

Registration of the change in the Company's financial year. Registration of amendments to the Articles of Association.

The Management Board of FON SE with its registered office in Tallinn announced that on May 6, 2019 the Commercial Companies Register (Ariregister), competent for Estonia's law, registered the change in the financial year pursuant to Resolution No. 3 of the Extraordinary General Meeting of Shareholders of April 29, 2019. In connection with this, the Company's financial year begins on July 1 and endson June 30.

Information for Shareholders.

The Management Board of FON SE with its seat in Tallinn, announced that today the company received Resolution No. 387/2019 of the Management Board of the Warsaw Stock Exchange S.A. of May 7, 2019 on the indefinite suspension of trading in the shares of FON SE on the WSE Main Market. The reason for the suspension of trading was the assessment of the Management Board of the Warsaw Stock Exchange as to the unlawfulness of the change of the financial year by the Company. The decision of the WSE contradicted the position of the Ministry of Finance of Estonia Ariregister - the Registry Department of Tartu County Court which registered the above changes, as wellas the content of the independent legal opinion of the International Law Firm at the request of the WSE.

Registration of amendments to the Articles ofAssociation

The Management Board of FON SE with its registered office in Tallinn announced that today, it learned that on 23/05/2019 the Commercial Companies Register applicable for Estonian's law (Ariregister) registered amendments to the Company's Articles of Association in accordance with Resolution No. 1 of the Extraordinary General Meeting of Shareholders of 29/04/2019. In relations to this, the current text of § 2.4 of Articles of Association is as follows:"the minimum number of shares in the company without a nominal value is 8.750.000 (eight million seven hundred and fifty thousand) shares, and the maximum number of shares in the company without a nominal value is 35.000.000 (thirty five million) shares. As a result of resplit there was decreased number of shares from 70 000 000 into 8 750 000 and the book value of one share increased from 0,11 EUR into 0,88 EUR without change of share capital.

KDPW (The National Depository for Securities) announcement regarding the consolidation of the Company's shares.

The Management Board of FON SE with registered office in Tallinn in reference to the current report no. 24/2019 of 27/05/2019 informed that in relations with the initiated procedure of consolidation of the Company's shares, the Company on 29/05/2019 learned about the issuance by the National Depository for Securities S.A. in Warsaw the announcement ONPZ/2019/036 regarding the timetable and information related to the implementation of the stock consolidation operation.

Announcement of the WSE Management Board regarding the consolidation of the company's shares and the cessation of qualifying the Company's shares to the Alert List.

The Management Board with its registered office in Tallinn announced that today the Company received an announcement from the Management Board of the Warsaw Stock Exchange S.A. of 30/05/2019 regarding the operation of consolidation of the Company's shares and the cessation of qualification of the Company's shares to the Alert List, starting of 31/05/2019.

Information on the change of the Company's registered office

The Management Board of FON SE with registered office in Tallinn, announced that on 05/06/2019 the Commercial Companies Register applicable for Estonian law (Ariregister) registered the change of the Company's address. In view of the above, the Company informed that the new address ofthe Company's registered office is: Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145.

Receipt of the notification of the conclusion of the debt takeover agreement to the Company.

The Management Board of FON SE with registered office in Tallinn, announced that on 27/06/2019 the Company received a notification from Elkop SE withits registered office in Płock informing that on 27/06/2019 Elkop SE concluded an agreement with FON Zarządzanie Nieruchomościami Sp. z o.o. with registered office in Płock, an agreement of taking over the debt of FON Zarządzanie nieruchomościami Sp. z o.o. towards FON SE with registered office in Tallinn, Estonia resulting from a cash loan granted on 24/04/2018 in the amount of PLN 19 042 thous. (EUR 4 273 thous.) as at 27/06/2019 the debt of which was PLN 19 994 thous.(EUR 4 487 thous.).

Information on a significant receivable towards Nowy Wiatr Sp. z o.o. in the context of the situation of Newind S.A.

The Management Board of FON SE decided to write off FON SE's receivables towards Nowy Wiatr Sp. z o.o. in the amount of PLN 4 379 thous (EUR 983 thous.). The reason for this write-off was the fact that the only asset of Nowy Wiatr Sp. z o.o. are receivables from Newind S.A. and shares in that company. The reason of the difficult economic situation of Newind S.A. is the loss by Newind S.A. significant assets and financial liquidity

Information on the conclusion of a trust deed.

The Management Board of FON SE in Tallinn announced that on 18/11/2019 the Company concluded with the Company Nowy Wiatr Sp. z o.o. with registered office in Płock at Al. Marszałka Józefa Piłsudskiego 35 Street (KRS 0000636582), trust deed, the subject of which is the Company entrusting the trustee with the ownership of 12.899 (twelve thousand eight hundred and ninety-nine) shares ofIFEA Sp. z o.o. with registered office in Płock (09-402) at Padlewskiego 18C Street (KRS 0000512607). The purpose of the trust deed is to search for a buyer by the trustee and to conduct the sale of shares of IFEA Sp. z o.o. for a price not lower than PLN 1.000 (one thousand zlotys) per each share i.e. for a total price not lower than PLN 12.899 thous. (twelve million eight hundred and ninety-nine thousand zlotys). The Trustee is obliged to sell the shares being the subjectof the Agreement until 31/12/2020 a and in the case of the lack of sale of the shares to be transferred back to the Company. The Company received the consent of Supervisory Board to conclude this agreement.

Granting consent to debt takeover.

FON SE withits registered office in Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145, Estonia, entered into the Estonian Commercial Register with number 14617916 consented on June 27, 2019 to take over the Company's debton June 27, 2019, FON Zarządzanie Nieruchomościami Sp. z o.o. towards FON SE due tocash loan granted on April 24, 2018 in the total amount of PLN 19 042 thous (EUR 4 273 thous.) balance of the debt of the described loan as at June 27, 2019 of the statement amounted to total PLN 19 994 thous. (EUR 4 487 thous.) by the Company ELKOP Spółka Europejska (KRS no. 0000782225).

Statement of the Polish National Depository for Securities S.A. on the conditional registration of shares.

The Management Board of FON SE with its registered office in Płock informed that on 13/12/2019 was informed about the issuance of the Statement by the National Depository for Securities S.A. no. 1133/2019 of 13/12/2019 on the conditional registration of up to 1.187.375 ordinary registered shares of the Company FON SE under the code ISIN EE3100145939.

Conclusion of a loan agreement with ELKOP SE

The Management Board of FON SE with registered office in Tallinn announced that on 30/12/2019. The Company, as the Lender, concluded a cash loan agreement with ELKOP SE with registered office in Płock (KRS: 0000782225) as a Borrower. By means of agreement of 30/12/2019 the Company granted to the Borrower a cash loan in the amount of PLN 27 200 thous. (twenty-seven million two hundred thousand zlotys 00/100) (EUR 6 104 thous.) for the period until 31/12/2024.

Registration of amendments to the Articles ofAssociation.

The Management Board of FON SE withregistered office in Tallinn announced that today it learned that on 15/01/2020 the Commercial Companies Register applicable for Estonian law (Ariregister) registered amendments to the Company's Articles of Association in accordance with Resolution no. 2 of the Extraordinary General Meeting of Shareholders of 6/01/2020. In connection with this, the current text of § 2.4 of the Articles of Association is as follows: "The minimum number of shares in the company without a nominal value is52.500.000 (fifty-two million five hundred thousand) shares, and the maximum number of sharesin the Company without a nominal value is210.000.000 (two hundred and ten million) shares.As a result of split operation the number of shares increased from 8 750 000 into 52 500 000 and the book value of one share decreased from 0,88 EUR into 0,1467 EUR without change of share capital.

Submission of an application for the suspension of the Company's quotation in connection with the procedure of splitting the Company's shares

The Management Board of FON SE announced that the Company submitted to the Warsaw Stock Exchange S.A. request for suspension for the period from January 16, 2020 to January 20,2020 (inclusive) of the quotation of all the Company's shares in connection with the started procedure of splitting of Company's shares in the ratio of 1:6 (one existing share with the ISIN code: EE3100145939 will be exchanged for six new shares with the new ISIN code: EE3100005166) to settle the balance of the accounts. Therefore, after the exchange of shares under the ISIN code: EE3100005166, 52.500.000 shares will be registered

Establishing a registered pledge on the Company's shares.

The Management Board of FON SE with registered office in Tallinn announced that on January 27, 2020, learned about the establishment of a registered pledge by Nasdaq CSD on January 27, 2020 between the Company Patro Invest OÜ with registered office in Tallinn, and Damar Patro UÜ with registered office in Tallinn. Patro Invest OÜ, as a pledger, established a registered pledge for Damar Patro UÜ on 9.750.750 (nine million seven hundred and fifty thousand seven hundred and fifty) dematerialized ordinary registered shares lettered stocks on the Warsaw Stock Exchange S.A coded EE3100005166 without the nominal value owned by Patro Invest OÜ in the amount of 9 750 750.

Withdrawal of the cryptocurrency trading license.

The Management Board of FON SE withits registered office in Tallinn, registration number: 14617916, announced that on 25/03/2020 the Company obtained information about the withdrawal of the license (FRK000677 and FVR000776) for the provision of cryptocurrency trading services in relation to currencies recognized as legal means of payment, due to the lack of the undertaking activities in this direction. Thereby, the Company did not undertake any activity in the above-mentioned area. Thus,the Company did not undertake any activities specified in the license.

Premature repayment of the part of the cash loan by the Borrower.

The Management Board of FON SE withits registered office in Tallinn at Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145, Estonia, entered into the Estonian Commercial Register under number 14617916 with reference to the current report No. 15/2018 of April 24, 2018 and current report no. 30/2019 of April 27, 2019 informed that today the Borrower Elkop SE withregistered office in Płock (KRS nr 0000782225) made a premature repayment of the loan taken over on June 27, 2019 acquire by FON Zarządzanie Nieruchomościami Sp. z o.o. towards FON SE. The amount repaid on 16/06/2020 was PLN 9 170 thous. The debt balance of the described loan as at the date of loan acquisition by Elkop SE i.e. as at June 27, 2019 it was PLN 19 994 thous.(EUR 4 487 thous.). The Loan Agreement of April 24, 2018 was concluded for the period until April 24, 2021.

Conclusion of a cash loan agreement

The Management Board of FON SE with its registered office in Tallinn announced that on 9/06/2020 and 16/06/2020 it granted a total of loans to Damar Patro UU with registered office in Harju maakond, Tallinn, Kesklinna linnaosa, Tornimäe tn 5, 10145, (register number 14494537) in the amount of EUR 2 200 thous. According to the concluded agreements, the payment of the loan was made in Polish zlotys, and the conversion rate was 4,40 PLN for EUR. The loan agreement was concluded until 30/06/2023.

Revaluation of the Company's assets

The Management Board of FON SE with its registered office in Tallinn informed that in relations with the works carried out by the Management Board on the annual report for the financial year 2019/2020, The Management Board of the Company on 09/07/2020 decided to make for the balance sheet date 30/06/2020revaluation of the Company's financial assets. As at the balance sheet date 30/06/2020 the Company held 12 899 shares of IFEA Sp. z o.o., which constituted 44,58% of the share capital and entitled to cast 12 899 votes constituting 44,58% of the total number of votes IFEA Sp. z o.o. The Company on 9/07/2020 decided to update the value of the Company's financial assets in the VI quarter of the 2019/2020 financial year, due to the decrease in the value of IFEA Sp. z o.o. shares by PLN 15 277 thous. (=EUR 3 516 thous). The value of 12 899 shares of IFEA Sp. z o.o. in the annual financial statements of the Company as at 31/12/2018 amounted to PLN 15 277 thous (=EUR 3 516 thous.). The Company's Management Board decided to made a write off of the above asset in connection with the liquidation of the IFEA Sp. z o.o.

List of the significant events after the balance sheet date 30/06/2020

Registration of amendment to the Articles of Association.

The Management Board of FON SE with its registered office in Tallinn informed that on 15/07/2020 The Commercial Companies Register applicable for Estonian's law (Ariregister) registered amendments to the Company's Articles of Association pursuant to Resolution no. 1 of Extraordinary General Meeting of Shareholders of 23/06/2020. Accordingly, the current text of § 2.3 of the Articles of Association is as follows: "2.3. The Company has two series of shares: 2.3.1 Registered shares without nominal value (series A shares). Each series A share gives 1 (one) vote at the general meeting. Each series A share entitles the shareholder to receive 100% of the paid dividend per share in accordance with the resolution of the general meeting. 2.3.2 Registered shares without the nominal value (series B shares). Each B series share gives 1 (one) vote at the generalmeeting. Each series B share entitles the shareholder to receive 50% of the paid dividend per share in accordance with the resolution of the general meeting. 2.3.3 Both the shareholders of series A shares and series B shares have the right to participate in the general meeting of the Company's shareholders and vote on all cases. Both the shareholders ofseries A shares and series B shares also participate on an equal basis in the distribution of assets remaining after the dissolution of the Company and have equal rights resulting from the law and theCompany's Articles of Association.

SARS-CoV-2 coronavirus epidemic in the area of the Company's operation

The management board assesses the situation with SARS-CoV-2 coronavirus epidemic as a special event after the balance sheet date. The Company is moderately exposed to the negative consequences of the SARS-CoV-2 coronavirus epidemic causing the COVID19 disease. The Management Board of the Company is not able to predict the full consequences and scale of

the decrease in revenues from core activities, however, the Company expects that the current situation may have a negative impact on the Company's results.

V. CORPORATE GOVERNANCE REPORT

DECLARATION OF THE MANAGEMENT BOARD ON APPLICATION OF CORPORATE GOVERNANCE RULES, DRAWN UP UNDER § 24 ² OF THE ESTONIAN ACCOUNTING ACT (RT I 2002, 102, 600).

Indication of the set of corporate governance rules to which Investment Friends Capital SE is subject and places where the text of the set of rules is publicly available.

The Company's statement regarding the compliance with the Best Practice for WSE Listed Companies 2016 and Corporate Governance Principles is available on the Company's website www.fon-sa.pl, in the "Regulations" section, the "Good practices" tab on corporate governance.

At the same time, the Company explains that in the reporting period it did not apply any good corporate governance practices other than those listed below, including those thatgo beyond the legal requirements.

Indication of the extent to which the Company departed from the Corporate Governance Principles along with an indication of these principles and the reasons for the withdrawal.

Information on the state of compliance with the recommendations by the company and principles contained in the Code of BestPractice for WSE Listed Companies 2016.

During the reporting period, in the scope of Good Practices, the Company did not apply 3 recommendations: III.R.1., IV.R.2., VI.R.1.

In the reporting period regarding Good Practices, the Company did not apply 20 specific principles:

I.Z.1.6., I.Z.1.7., I.Z.1.8., I.Z.1.9. , I.Z.1.15., I.Z.1.16., I.Z.1.17., I.Z.1.18., I.Z.1.20., I.Z.1.21., II.Z.3., II.Z.4., II.Z.8., II.Z.10.3., II.Z.10.4., III.Z.3., III.Z.4., IV.Z.2., IV.Z.3., VI.Z.4.

I. Information policy and communication with investors

A listed company ensures proper communication with investors and analysts, conducting a transparent and effective information policy. For this purpose, it provides easy and non-discriminatory access to the information disclosed using a variety of communication tools.

Recommendations

I.R.1 In a situation where the company becomes aware of the dissemination of false information in the media,which is affect its assessment, and immediately after becoming aware of it, it publishes a message on its website containing a position on this information - unless, in the company's opinion, the nature of the information and its circumstances publications give grounds to consider adopting another solution as more appropriate.

The rule was applied.

Company's comment : In the reporting period, the Company did notconduct any activities in this area.

I.R.2. If a company carries out sponsorship, charity or other similar activities, it publishes information on its policy in this annual activity report.

The rule does not apply to the Company.

Company's comment : In the reporting period, the Company did notconduct any activities in this area.

I.R.3. The Company should enable investors and analysts to ask questions and obtain taking into account the prohibitions arising from applicable law - explanations on topics of interest to these people. This recommendation may be implemented in the form of open meetings with investors and analysts or in another form provided by the Company.

The principle was applied

Company's comment : The company provides explanations within the limits permitted by law for all queries of shareholders and investors.The company conducts electronic communication with investors. Open meetings with investors and analysts are not organized because there is no interest in this form of obtaining information about the company by investors.

I.R.4. The company should endeavour, including taking all necessary steps in advance to prepare a periodic report, to enable investors to become familiar with its financial results as soon as possible after the end of the reporting period.

The principle was applied

Company's comment : The Company makes its best ef ort in order to publicize periodical reports in possibly shortest time after the end of a reporting period.

Detailed rules

I.Z.1. The company operates a corporate website and publishes on it,in a legible form and in a separate place, in addition toinformation required by law:

I.Z.1.1. Basic corporate documents, in particular the company's articles ofassociation,

I.Z.1.2. The composition of the management board and supervisory board of the company and the professional CVs ofthe members ofthese bodies

I.Z.I.3. Division of tasks and responsibilities among Members ofthe Management Board, prepared in accordance with principle II.Z.1,

I.Z.I.4. The current shareholding structure, indicating shareholders holding at least 5% of the total number of votes in the company - based on information provided to the company by shareholders in accordance with applicable regulations,

I.Z.I.5. Current and periodic reports as well as issue prospectuses and information memoranda with annexes, published by the company within at least the last 5 years,

Above principles were applied

Company's comment : The Company's Management Board is one-man and in accordance with the Articles of Association is responsible for all areas of the Company's operations.

I.Z.1.6. calendar of corporate events resulting in the acquisition or restriction of rights on the part of a shareholder, calendar of publication of financial reports and other events significant from the investors' point of view - within atime limit enabling investors to make investment decisions,

The principle was not applied

Company's comment : The Company makes public in the form of current reports, which are also available on the Company's website, information on all corporate events in good time. In the Company's opinion, information in the form ofa calendar is unnecessary.

I.Z.1.7. information materials published by the company on the company's strategy and its financial results,

The principle was not applied

Company's comment : The company has not yet prepared and published information materials on the company's strategy and its financial results. The financial results of the company and plans for operations in the next reporting period are published by the Company in periodic reports, which it publishes with relevant reports and on the company's websites.

I.Z.1.8. statements of selected financial data of the company for the last 5 years of activity, in a formatenabling processing of these data by their recipients,

The principle was applied

Company's comment : The company discloses in the form of periodic reports information on the company's financial results and selected financial data. This information is also available on the Company's website.

I.Z.1.9. information on the planned dividend and dividend paid by the company in the last 5 financial years, including data on the dividend day, payment dates and the amount of dividends - in total and per share,

The principle was not applied

Company's comment : The company makes public in the form of current reports information on resolutions adopted by the General Meeting. These reports are also available on the Company's website. The decision regarding dividend payment belongs to the General Meeting.

I.Z.1.10. financial forecasts - if the company has decided to publish them - published over a period of at least the last 5 years, together with information on the degree of their implementation,

The rule does not apply to the company.

Company's comment : The company has not yet prepared financial forecasts and is not planning to prepare these forecasts in the near future.

I.Z.1.11. information about the content of the company's rule regarding changing the entity authorized toaudit financial statements, or about the lack of such a rule,

The principle was applied

Company's comment : The company complied with the rules of changing the entity authorized to audit financial statements resulting from generally applicable regulations.

I.Z.1.12 the company's statement on the application of corporate governance included in the last published annual report,

The principle was applied

I.Z.1.13. information on the state of adopting of the recommendations and principles contained in this document by the company, consistent with the information which the company should provide in this respect on the basis ofrelevant provisions,

The principle was applied

Company's comment : The Company publishes on an ongoing basis information on the adopting of the principles and recommendations contained in the Good Practices of Stock Exchange Listed Companies through the EBI system.

I.Z.1.14 Materials provided to the general meeting, including assessments, reports and positions indicated in principle II.Z.10, submitted to the general meeting by the supervisory board

The principle was applied

I.Z.1.15. information containing a description of the company's diversity policy in relation to the company's authorities and its key managers; the description should take into account elements of diversity policy such as gender, education, age, professional experience, as wellas indicate the objectives of the diversity policy applied and the manner of its implementation in a given reporting period; if the company has not developed and does not implement a diversity policy, it shall publish on its website an explanation of such a decision,

The principle was not applied

Company's comment : Key personnel decisions with respect to the Company's authorities and its key managers are made by the General Meeting and the Supervisory Board. As a criterion for the selection of members of individual bodies, the company is guided by the qualifications of the candidate to perform specific functions. Information on the data of persons sitting on the Company's governing bodies is published in the relevant current reports informing about the selection of bodies and on the Company's website.

I.Z.1.16. information on the planned broadcast of the general meeting - no later than 7 days before the date of the General Meeting,

The principle was not applied

Company's comment : The Company recognizes that the costs of broadcasting the General Meeting are too high. At the same time, the Management Board indicates that the Company's shareholder structure causes a lack of interest in the General Meeting. At the same time, the Company's Articles of Association do not provide for transmission of the meeting.

I.Z.1.17. justifications for draft resolutions of the general meeting regarding matters and decisions that are significant or that may raise doubts for shareholders - within a time limit enabling the participants of the general meeting to become acquainted with them and toadopt a resolution with due consideration,

The principle was not applied

Company's comment : The company publishes draft resolutions of General Meetings in accordance with applicable law. In cases where justification of the content of a draft or resolution is required, it is forwarded together with draft resolutions presented to the General Meeting.

I.Z.1.18. information on the reasons for cancelling the general meeting, changing the date or agenda, as wellas information about a break in the generalmeeting and the reasons for ordering a break,

The principle was not applied

Company's comment : The decision regarding the cancellation of General Meetings is, in principle, taken by the shareholders or the Management Board, in such a situation the Company publishes the relevant current report.

I.Z.1.20. recording the general meeting in audio or video form,

The principle was not applied

Company's comment : In the Company's opinion, the costs of such a solution are too high. The Company does not have the necessary technical infrastructure and there is no interest in recording the course of General Meetings due to the shareholding structure of the Company. At the same time, the Company's Articles of Association do not provide for broadcasting of the General Meeting.

I.Z.1.21. contact details for persons responsible in the company for communication with investors, indicating the name and surname, e-mail address or telephone number.

The principle was not applied

Company's comment : The company provides on its website contact details that can be used by all interested parties. In the Company's opinion, it is not justified to extract contact details for the purpose of communication with investors.

I.Z.2. A company whose shares are included in the WIG20 or mWIG40 stock indexes ensures that its website is also available in English, at least to the extent specified in principle I.Z.1. Companies outside the above-mentioned indices should also apply this rule, if it is justified by their shareholding structure or the nature and scope of their operations.

The principle was not applied

Company's comment : The company does not participate in the WIG20 mWIG40 stock indices,

II. Management Board and Supervisory Board

A listed company is managed by the Management Board, its Members act in the interest of the company and are responsible for its activities. The Management Board includes, in particular, leadership in the company, commitment to setting its strategic goals and their implementation, as well as ensuring the company efficiency and security. The company is supervised by an effective and competent Supervisory Board. Members of the Supervisory Board act in the interest of the Company and are guided by the independence of their own opinions and judgements. The Supervisory Board in particular issues opinions on the Company's strategy and verifies the work of the management board in achieving strategic goals and monitors the results achieved by the Company.