GPW - Giełda Papierów Wartościowych w Warszawie S.A.

Annual / Quarterly Financial Statement • Feb 28, 2018

Consolidated Financial Statements of the Giełda Papierów Wartościowych w Warszawie S.A. Group

for the year ended 31 December 2017

February 2018

TABLE OF CONTENTS

		TABLE OF CONTENTS 1
I.		CONSOLIDATED STATEMENT OF FINANCIAL POSITION4
II.		CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 6
III.		CONSOLIDATED STATEMENT OF CASH FLOWS7
IV.		CONSOLIDATED STATEMENT OF CHANGES IN EQUITY9
		THE ATTACHED NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 9
V.		NOTES TO THE FINANCIAL STATEMENTS 10
		1. GENERAL 10
	1.1	Legal status and scope of operations of the Group 10
	1.2	Approval of the financial statements11
	1.3	Composition and activity of the Group 11
		2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 13
		2.1 Basis of preparation of the consolidated financial statements13
		2.1.1 Statement of compliance 13
		2.1.1.1. New accounting Standards and Interpretations of the IFRS
		Interpretations Committee (IFRIC) 13 A. Standards and Interpretations adopted by the European Union
		14
		B. Standards and interpretations awaiting adoption by the
		European Union 17
		2.1.2. Impact of IFRS 9, IFRS 15 and IFRS 16 on future financial statements 20
		2.1.3 Functional and presentation currency 23 2.1.4 Basis of valuation 23
		2.1.5 Critical judgments and estimates 23
		2.1.5.1. Cash and cash equivalents 23
		2.1.5.2. Presentation of commodity market transactions and cash in the
		clearing guarantee system 23
		2.1.5.3. Economic useful life for property, plant and equipment and intangible assets 24
		2.1.5.4. Goodwill and investment in associates impairment tests 24
		2.1.5.5. Provisions 24
	2.2	The scope and methods of consolidation 24
		2.2.1 Subsidiaries 24
		2.2.2 Associates 25
	2.3	Valuation of balances presented in foreign curriencies 25
	2.4	Segment reporting 26
	2.5	Property, plant and equipment 26
	2.6	Intangible assets 27
		2.6.1 Goodwill 27
		2.6.2 Other intangible assets 27
	2.7	Impairment of non-financial assets 27
	2.8	Financial assets 28
		2.8.1. Classification and valuation of financial assets 28
		2.8.1.1 Loans and receivables 28
		2.8.1.2 Available-for-sale financial assets 28
		2.8.2. Impairment of financial assets 29

2.9 Non-current prepayments 30
2.10 Other receivables30
2.11 Inventories 30
2.12 Assets held for sale 30
2.13 Cash and cash equivalents recognised in the statements of cash flows 31
2.14 Equity of the Group31
2.15 Financial liabilities31
2.16 Contingent liabilities32
2.17 Income tax 32
2.17.1 Tax Group 32
2.17.2 Current income tax 33
2.17.3 Deferred income tax 33
2.18 Employee benefits33
2.18.1 Current employee benefits 33
2.18.2 Defined contributions scheme 34
2.18.3 Other non-current employee benefits 34
2.18.4 Management remuneration system 34
2.19 Provisions for other liabilities and other charges 34
2.20 Deferred income 34
2.21 Revenue 35
2.21.1 Sales revenue 35
2.21.2 Other revenue 36
2.21.3 Financial income 36
2.22 Expenses 36
2.23 Bond issue expenses 37
2.24 Leases37
2.25 Statement of cash flows 37
3. FINANCIAL RISK MANAGEMENT37
3.1 Financial risk factors 37
3.2 Market risk37
3.2.1 . Cash flow and fair value interest risk 37
3.2.2. Foreign exchange risk 39
3.2.3.Price risk 40
3.3 Credit risk41
3.4 Liquidity risk 41
3.5 Capital management 42
4. PROPERTY, PLANT AND EQUIPMENT43
5. INTANGIBLE ASSETS44
6. INVESTMENT IN ASSOCIATES47
7. DEFERRED TAX51
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS 52
9. NON-CURRENT PREPAYMENTS53
10. TRADE AND OTHER RECEIVABLES 54
11. CASH AND CASH EQUIVALENTS56
12. EQUITY57
12.1 Share capital57
12.2 Other reserves 58
12.3 Retained earnings 58
12.4 Dividend 59
12.5 Earnings per share59
13. BOND ISSUE LIABILITIES 60
14. LIABILITIES UNDER LOANS 61

15. EMPLOYEE BENEFITS PAYABLE 61
15.1 Liabilities under retirement benefits 61
15.2 Liabilities under other employee benefits 63
16. TRADE PAYABLES 64
17. OTHER LIABILITIES 64
18. ACCRUALS AND DEFERRED INCOME65
19. SALES REVENUE66
20. OPERATING EXPENSES 66
20.1. Salaries and other employee costs 67
20.2. External service charges 68
20.3. Other operating expenses 68
21. OTHER INCOME AND EXPENSES 69
21.1. Other income69
21.2. Other expenses69
22. FINANCIAL INCOME AND EXPENSES70
22.1. Financial income 70
22.2. Financial expenses 70
23. INCOME TAX71
24. CONTRACTUAL COMMITMENTS AND GUARANTEES72
25. RELATED PARTY TRANSACTIONS 72
25.1. Information about transactions with companies which are related parties of
the State Treasury 72
25.2. Transactions with associates73
25.3. Other transactions73
26. INFORMATION ON REMUNERATION AND BENEFITS OF THE KEY MANAGEMENT PERSONNEL 74
27. FUTURE MINIMUM LEASE PAYMENTS 75
28. SEGMENT REPORTING 75
29. IRGIT CLEARING GUARANTEE SYSTEM79
30. EVENTS AFTER THE BALANCE SHEET DATE 79

I. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	As at 31 December
		2017	2016
Non-current assets		596,354	597,287
Property, plant and equipment	4	110,784	119,130
Intangible assets	5	267,991	273,815
Investment in associates	6	207,389	197,231
Deferred tax assets	7	3,803	1,809
Available-for-sale financial assets	8	271	288
Non-current prepayments	9	6,116	5,014
Current assets		550,699	560,561
Inventories		56	57
Corporate income tax receivable		71	428
Trade and other receivables	10	64,096	113,262
Cash and cash equivalents	11	486,476	446,814
TOTAL ASSETS		1,147,053	1,157,848

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

		As at 31 December
	Note	2017	2016
Equity		811,481	745,252
Equity of the shareholders of the parent entity		810,908	744,727
Share capital	12.1	63,865	63,865
Other reserves	12.2	1,347	1,184
Retained earnings	12.3	745,696	679,678
Non-controlling interests		573	525
Non-current liabilities		259,951	143,422
Liabilities on bonds issue	13	243,573	123,459
Employee benefits payable	15	1,454	1,832
Finance lease liabilities		-	32
Accruals and deferred income	18	5,592	6,200
Deferred tax liability	7	7,108	9,675
Other non-current liabilities	17	2,224	2,224
Current liabilities		75,621	269,174
Liabilities on bonds issue	13	1,938	122,882
Trade payables	16	21,303	6,387
Employee benefits payable	15	12,958	8,114
Finance lease liabilities		31	62
Corporate income tax payable		6,012	16,154
Accruals and deferred income	18	7,386	7,144
Provisions for other liabilities and charges		210	333
Other current liabilities	17	25,783	108,098
TOTAL EQUITY AND LIABILITIES		1,147,053	1,157,848

II. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	Year ended 31 December
		2017	2016
Revenue	19	351,956	310,862
Operating expenses	20	(165,763)	(150,155)
Other income Other expenses	21.1 21.2	3,859 (6,149)	1,736 (4,553)
Operating profit		183,903	157,890
Financial income	22.1	- 5,550	- 12,950
Financial expenses	22.2	(11,147)	(12,079)
Share of profit of associates	6	10,059	3,518
Profit before income tax		188,365	162,279
Income tax expense	23	- (32,274)	- (31,145)
Profit for the period		156,091	131,134
Net change of fair value of cas h flow hedges reclas s ified to profit or los s	12.2	-	163
Gains / (los s es ) on valuation of available-for-s ale financial as s ets of as s ociates	12.2	201	(514)
Items that may be reclassified to profit or loss	12.2	201	(351)
Actuarial gains / (los s es ) on provis ions for employee benefits after termination		(38)	79
Items that will not be reclassified to profit or loss		(38)	79
Other comprehensive income after tax		- 163	- (272)
Total comprehensive income		156,254	130,862
Profit for the period attributable to s hareholders of the parent entity		156,008	131,094
Profit for the period attributable to non-controlling interes ts		83	40
Total profit for the period		156,091	131,134
Comprehens ive income attributable to s hareholders of the parent entity		156,171	130,822
Comprehens ive income attributable to non-controlling interes ts		83	40
Total comprehensive income		156,254	130,862
Basic / Diluted earnings per share (PLN)		3.72	3.12

III. CONSOLIDATED STATEMENT OF CASH FLOWS

		Year ended 31 December
	Note	2017	2016
Cash flows from operating activities:		155,924	205,814
Cash generated from operation before tax Net profit of the period		213,083 156,091	226,899 131,134
Adjustments: Income tax Depreciation of property, plant and equipment Amortisation of intangible assets Foreign exchange (gains)/losses (Profit) / Loss on sale of property, plant and equipment and intangible assets Financial (income) / expense of available-for-sale financial assets Gain on dilution of shares of associate Income from interest on deposits Interest on issued bonds Cost of bank loan Share of (profit)/loss of associates	23 20 20 22.1 22.2 22.2 6	56,992 32,274 14,047 14,278 (241) (13) 17 - (5,331) 7,624 1,267 (10,059)	95,765 31,145 13,964 11,829 7 353 (6) (5,807) (6,405) 7,629 - (3,518)
Other Change in current assets and liabilities: Change of non-current prepayments	9	916 2,213 (1,102)	4,439 42,135 (178)
Change of other non-current liabilities		-	2,224
(Increase) / Decrease of inventories		1	76
(Increase) / Decrease of trade and other receivables	10	49,166	18,295
Increase / (Decrease) of trade payables	16	14,916	(2,210)
Increase / (Decrease) of employee benefits payable	15	4,466	(1,343)
Increase / (Decrease) of accruals and deferred income	18	(366)	(119)
Increase / (Decrease) of other liabilities (excluding investment liabilities and dividend payable)		(64,746)	25,678
Net change other provisions for other liabilities and other charges		(122)	(288)
Interest on tax liabilities (paid)/refunded		(10,651)	-
Income tax (paid)/refunded		(46,508)	(21,085)

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

	Note	Year ended 31 December
		2017	2016
Cash flows from investing activities:		(16,719)	(14,456)
Purchase of property, plant and equipment and advances for property, plant and equipment		(10,263)	(13,699)
Purchase of intangible assets and advances for intangible assets		(12,388)	(9,910)
Proceeds from sale of property, plant and equipment and intangible assets		499	2,598
Interest received	22.1	5,331	6,405
Dividends received	25.2	102	150
Cash flows from financing activities:		(99,784)	(104,930)
Paid dividend Paid interest Interest paid on loans Loans taken Loans repaid Proceeds from bond issue Buy-back of bonds issued Payment of finance lease liabilities		(90,257) (7,642) (1,267) 60,000 (60,000) 119,929 (120,484) (63)	(99,092) (5,779) - - - - - (60)
Net (decrease) / increase in cash and cash equivalents		39,421	86,428
Impact of fx rates on cash balance in currencies		241	(7)
Cash and cash equivalents - opening balance		446,814	360,393
Cash and cash equivalents - closing balance		486,476	446,814

IV. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
		Attributable to the shareholders of	the parent	ent ity	Non
	Share capital	Other reserves	Retained earnings	Total	controlling interests	Total equity
A s at 31 December 2016	63,865	1,184	679,678	744,727	525	745,252
Dividends	-	-	(90,239)	(90,239)	(35)	(90,274)
Transactions with owners recognised directly in equity	-	-	(90,239)	(90,239)	(35)	(90,274)
Pro fit for the year ended 31 Decem ber 2017	-	-	156,008	156,008	83	156,091
O ther com prehensive incom e	-	163	-	163	-	163
Total comprehensive income for the year ended 31 December 2017	-	163	156,008	156,171	83	156,254
Other changes in equity	-	-	249	249	-	249
A s at 31 December 2017	63,865	1,347	745,696	810,908	573	811,481

		Attributable to the shareholders of the parent ent ity Non
	Share capital	Other reserves	Retained earnings	Total	controlling interests	Total equity
A s at 31 December 2015	63,865	1,455	647,326	712,646	546	713,192
Dividends	-	-	(99,054)	(99,054)	(61)	(99,115)
Transactions with owners recognised directly in equity	-	-	(99,054)	(99,054)	(61)	(99,115)
Pro fit for the year ended 31 Decem ber 2016	- -	- -	- 131,094	- 131,094	- 40	- 131,134
O ther com prehensive incom e	-	(272)	-	(272)	-	(272)
Total comprehensive income for the year ended 31 December 2016	-	(272)	131,094	130,822	40	130,862
Other changes in equity	-	-	313	313	-	313
A s at 31 December 2016	63,865	1,184	679,678	744,727	525	745,252

V. NOTES TO THE FINANCIAL STATEMENTS

1. General

1.1 Legal status and scope of operations of the Group

The parent entity of the Giełda Papierów Wartościowych w Warszawie S.A. Group ("the Group") is Giełda Papierów Wartościowych w Warszawie Spółka Akcyjna ("Warsaw Stock Exchange", "the Exchange", "GPW", "the Company" or "parent entity") with its registered office in Warsaw, ul. Książęca 4. The Company was established by Notarial Deed on 12 April 1991 and registered in the Commercial Court in Warsaw on 25 April 1991, entry no. KRS 0000082312, Tax Identification Number 526-025-09-72, Regon 012021984. GPW has been listed on GPW's Main Market since 9 November 2010.

The core activities of the Group include organising exchange trading in financial instruments and activities related to such trading. At the same time, the Group pursues activities in education, promotion and information concerning the capital market and organises an alternative trading system. The Group is active on the following markets:

• GPW Main Market (trade in equities, other equity-related financial instruments and other cash markets instruments as well as derivatives);
• NewConnect (trade in equities and other equity-related financial instruments of small and mediumsized enterprises);
• Catalyst (trade in corporate, municipal, co-operative, Treasury and mortgage bonds operated by GPW and BondSpot);
• Treasury BondSpot Poland (wholesale trade in Treasury bonds operated by BondSpot).

The Group also organises and operates trade on the markets operated by Towarowa Giełda Energii S.A. ("TGE") and InfoEngine S.A.:

• Energy Market (trade in electricity on the Intra-Day Market, Day-Ahead Market, Commodity Forward Instruments Market, Electricity Auctions),
• Gas Market (trade in natural gas with physical delivery on the Intra-Day and Day-Ahead Market and the Commodity Forward Instruments Market),
• Property Rights Market (trade in property rights in certificates of origin of electricity),
• CO2 Emission Allowances Market (trade in CO² emission allowances),
• OTC (Over-the-Counter) commodity trade platform (complements the offer with OTC commodity trade in electricity, energy biomass and property rights in certificates of origin).

On 23 February 2015, TGE received a decision of the Minister of Finance authorising TGE to operate an exchange and start trade on the Financial Instruments Market. The TGE Financial Instruments Market opened on 4 November 2015.

The GPW Group also operates:

• Clearing House and Settlement System (performing the functions of an exchange settlement system for transactions in exchange-traded commodities),
• Trade Operator and Balancing Entity services both types of services are offered by InfoEngine S.A., balancing involves the submission of power sale contracts for execution and clearing of nonbalancing with the grid operator (differences between actual power production or consumption and power sale contracts accepted for execution).

GPW also has a consultant in London whose mission is to support acquisition on the London market, in particular the acquisition of new investors and Exchange Members.

1.2 Approval of the financial statements

The consolidated financial statements were authorised for issuance by the Management Board of the parent entity on 27 February 2018.

1.3 Composition and activity of the Group

The Warsaw Stock Exchange and its following subsidiaries:

• Towarowa Giełda Energii S.A. ("TGE") the parent entity of the Towarowa Giełda Energii S.A. Group ("TGE Group"),
• BondSpot S.A. ("BondSpot"),
• GPW Benchmark S.A. ("GPWB"), formerly GPW Centrum Usług S.A.,
• Instytut Analiz i Ratingu S.A. ("IAiR")

comprise the Warsaw Stock Exchange Group.

The following are the associates over which the Group exerts significant influence:

• Krajowy Depozyt Papierów Wartościowych S.A. ("KDPW"), the parent entity of the KDPW S.A. Group ("KDPW Group"),
• Centrum Giełdowe S.A. ("CG"),
• Aquis Exchange Limited ("Aquis").

Name of the entity	Registered office of the entity	Scope of operations	GPW's % share in the share capital
		Parent entity
Giełda Papierów Wartościowych w Warszawie S.A. ("Warsaw Stock Exchange", "GPW")	00-498 Warsaw ul. Książęca 4 Poland	 operating a financial instruments exchange through the organisation of public trading in securities  conducting educational, promotional and information activities regarding the functioning of the capital market  organising an alternative trading system	N/A
		Subsidiaries

Name of the entity	Registered office of the entity	Scope of operations	GPW's % share in the share capital
Towarowa Giełda Energii S.A. ("TGE") (parent entity of the Towarowa Giełda Energii S.A. Group)	00-498 Warsaw ul. Książęca 4 Poland	• operating a commodity exchange on which the following may be traded: electricity, liquid and gas fuels, production limits, pollution emission limits, property rights whose value depends directly or indirectly on the value of electricity, liquid or gas fuels, operation of a register of certificates of origin of energy from renewable energy sources and from cogeneration and agricultural biogas	100.00%
BondSpot S.A. (formerly MTS-CeTO S.A.)	00-498 Warsaw ul. Książęca 4 Poland	 operating an over-the-counter market and conducting other activities related to organising trading in securities and other financial instruments  organising an alternative trading system  organising and conducting all activities which supplement and support the functioning of the markets operated by BondSpot	96.98%
GPW Benchmark S.A. ("GPW B") (formerly GPW Centrum Usług S.A.)	00-498 Warsaw ul. Książęca 4 Poland	 planned scope of activity: organiser of WIBID and WIBOR reference rate fixings	100.00%
Instytut Analiz i Ratingu S.A. ("IAiR")	00-498 Warsaw ul. Książęca 4 Poland	• planned core business: non-Treasury debt rating services, in particular for small and medium-sized companies • IAiR did not launch operations up to and including 31 December 2017	100.00%
		Towarowa Giełda Energii S.A. subsidiaries
Izba Rozliczeniowa Giełd Towarowych S.A. ("IRGiT")	00-498 Warsaw ul. Książęca 4 Poland	 operating a clearing house and a settlement system for transactions made on the regulated market  clearing transactions made on TGE  other activities related to organising and conducting clearing or settlement of transactions	TGE stake: 100.00%
InfoEngine S.A. ("IE") (formerly WSEInfoEngine S.A)	00-498 Warszawa ul. Książęca 4 Polska	 Trade Operator services on the electricity market  trade balancing services on the electricity market	TGE stake: 100.00%
		Associates
Krajowy Depozyt Papierów	00-498 Warsaw ul. Książęca 4 Poland	 maintaining a depository for securities  clearing transactions made on financial instruments exchanges, commodity	33.33%

Name of the entity	Registered office of the entity	Scope of operations	GPW's % share in the share capital
Wartościowych S.A. ("KDPW") (parent entity of the Krajowy Depozyt Papierów Wartościowych S.A. Group)		exchanges including energy exchanges, among others via the subsidiary KDPW_CCP S.A.  conducting other activities related to trading in securities and other financial instruments, administering the Guarantee Fund   operating a trade repository and issuing LEI codes
Centrum Giełdowe S.A. ("CG")	00-498 Warsaw ul. Książęca 4 Poland	 leasing of real estate on own account  real estate management  activities in respect of building, urban and technological design  undertaking general building works related to constructing buildings	24.79%
Aquis Exchange Limited ("Aquis")	Becket House 36 Old Jewry EC2R 8DD, London United Kingdom	 trade in stocks of the biggest companies from 13 Western European financial markets on a multi-lateral trading platform	20.31%

2. Summary of significant accounting policies

2.1 Basis of preparation of the consolidated financial statements

2.1.1 Statement of compliance

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The following amendments of existing standards adopted by the European Union are effective for the financial statements of the Group for the financial year started on 1 January 2017:

• 1) Disclosure initiative Amendments to IAS 7 Statement of Cash Flows;
• 2) Amendments to IAS 12 Deferred Tax recognition of deferred tax assets for unrealised losses,
• 3) Amendments to IFRS 12 Disclosure of Interest in Other Entities clarification of the scope.

According to the Group's assessment, the amendments to the standards have no material impact on the consolidated financial statements.

The key accounting policies applied in the preparation of these consolidated financial statements are described below. These policies were continuously followed in all presented periods, unless indicated otherwise.

2.1.1.1. New accounting Standards and Interpretations of the IFRS Interpretations Committee (IFRIC)

The Group did not use the option of early application of new Standards and Interpretations already published and adopted by the European Union or planned for adoption in the near future which will take effect after the balance sheet date.

A. Standards and Interpretations adopted by the European Union

Certain Standards, Interpretations and Amendments to published Standards are not yet mandatorily effective for the annual period ending on 31 December 2017 and have not been applied in preparing these financial statements. The Group plans to adopt these pronouncements when they become effective. The following table presents:

• Standards and Interpretations adopted by the EU that are not yet effective for the annual period ending on 31 December 2017;
• Type of the expected impact on accounting policies implemented by a new Standard/Interpretation;
• Impact of the changes described on the Group's financial statements;
• Effective date of the amendments.

Standard/ Interpretatio n adopted by EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
1 Amendments to IFRS 4 Insurance Contracts	The amendments provide two optional solutions, an overlay approach and a deferral approach, to reduce the impact of the differing effective dates of IFRS 9 Financial Instruments and the forthcoming insurance contract standard. These differing effective dates may result in temporary volatility of reported results and accounting mismatches. The amended Standard will:  give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts Standard is issued; and  give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9 until 2021. The entities that defer the application of IFRS 9 will continue to apply IAS 39 Financial Instruments.	The Group does not expect the Amendments to have material impact on the financial statements.	1 January 2018
2. IFRS 9 Financial Instruments (2014)	The new standard replaces the guidance included in IAS 39 Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets, including a model for calculating impairment. IFRS 9 eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables used to classify financial assets. Under the new standard, financial assets are to be classified on initial recognition into one of three categories:  financial assets measured at amortized cost;  financial assets measured at fair value through profit or loss; or financial assets measured at fair value through  other comprehensive income (OCI). A financial asset is classified as being subsequently measured at amortized cost if the following two conditions are met:  the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and  its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. Otherwise, e.g. in the case of equity instruments of other entities, a financial asset will be measured at fair value.	The impact is described in Note 2.1.2.	1 January 2018

Standard/ Interpretatio n adopted by EU

Nature of impending change in accounting policy

Possible impact on financial statements

Effective date for periods beginning as the date or after that date

Gains and losses on remeasurement of financial assets measured at fair value are recognised in profit or loss, other than assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets – such remeasurement gains and losses are recognized in OCI.

In addition, at initial recognition of an equity investment that is not held for trading, an entity may irrevocably elect to present all fair value changes from the investment in OCI. The election is available on an individual share-by-share basis. No amount recognised in OCI in relation to the above-described remeasurement is ever reclassified to profit or loss at a later date.

The new standard retains almost all of the existing requirements in IAS 39 on the classification and measurement of financial liabilities and on derecognition of financial assets and financial liabilities. However, IFRS 9 requires that the portion of the gain or loss on a financial liability designated at initial recognition as fair value through profit or loss that is attributable to changes in its credit risk be presented in OCI, with only the remaining amount of the total gain or loss included in profit or loss. However, if this requirement creates or enlarges an accounting mismatch in profit or loss, or if the financial liability is a loan commitment or a financial guarantee contract, the entire fair value change is presented in profit or loss.

In respect of the financial assets impairment requirements, IFRS 9 replaces the "incurred loss" impairment model in IAS 39 with an "expected credit loss" model. Under the new approach, which aims to address concerns about "too little, too late" provisioning for impairment losses, it will no longer be necessary for a loss event to occur before an impairment allowance is recognized.

In short, the expected credit loss model uses a dual measurement approach, under which the loss allowance is measured as either:

• 12-month expected credit losses, or
• lifetime expected credit losses.

The measurement basis generally depends on whether there has been a significant increase in credit risk since initial recognition. If the credit risk of a financial asset has not increased significantly since initial recognition, the financial asset will attract a loss allowance equal to 12-month expected credit loss. If, however, its credit risk has increased significantly, it will attract an allowance equal to lifetime expected credit losses, thereby increasing the amount of impairment recognized. The standard contains a rebuttable presumption that the condition for recognizing lifetime expected credit losses is met when payments are more than 30 days past due.

3. IFRS 15	The new Standard provides a framework that replaces The impact is described in Note 2.1.2.	1 January 2018
Revenue from	existing revenue recognition guidance in IFRS. In
Contracts with	particular, the new Standard replaces IAS 18 Revenue,
Customers	IAS 11 Construction Contracts and related
	interpretations.
	Entities will adopt a five-step model to determine when
	to recognise revenue, and at what amount. The new

Standard/ Interpretatio n adopted by EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
	model specifies that revenue should be recognised when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue is recognised:  over time, in a manner that depicts the entity's performance; or  at a point in time, when control of the goods or services is transferred to the customer. IFRS 15 also establishes the principles that an entity shall apply to provide qualitative and quantitative disclosures which provide useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.
4. Amendments to IFRS 15 Revenue from Contracts with Customers	The amendments to IFRS 15 clarify some of the Standard's requirements and provide additional transitional relief for companies that are implementing the new Standard. The amendments clarify how to:  identify a performance obligation - the promise to transfer a good or a service to a customer- in a contract;  determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and  determine whether the revenue from granting a license should be recognised at a point in time or over time. The amendments also provide entities with two additional practical expedients which facilitate initial application of the standard and reduce the related cost.	The Group does not expect the Amendments to have material impact on its financial position and business results.	1 January 2018
	5. IFRS 16 Leases IFRS 16 supersedes IAS 17 Leases and related interpretations. The Standard eliminates the current dual accounting model for lessees and instead requires companies to bring most leases on-balance sheet under a single model, eliminating the distinction between operating and finance leases. Bringing operating leases in balance sheet will result in recognizing a new asset – the right to use the underlying asset – and a new liability – the obligation to make lease payments. The right-of-use asset will be depreciated and the liability accrues interest. This will result in a front-loaded pattern of expense for most leases, even when they pay constant annual rentals. Lessor accounting, however, shall remain largely unchanged and the distinction between operating and finance leases will be retained.	The impact is described in Note 2.1.2.	1 January 2019
6. Improvements to IFRS (2014- 2016)	The Improvements to IFRSs (2014-2016) contain 3 amendments to standards. The main changes were to: delete short-term exemptions for first-time  adopters (IFRS 1 First-time Adoption of International Financial Reporting Standards) relating, inter alia, to transition provisions of IFRS 7 Financial Instruments - Disclosures regarding comparative disclosures and transfers of financial assets, and of IAS 19 Employee Benefits;  clarify that requirements of IFRS 12 Disclosure of Interest in Other Entities (with an exception of disclosure of summarized financial information in	The Group does not expect the Improvements to IFRS to have material impact on the financial statements.	1 January 2018 (save for the changes to IFRS 12 that shall be applied for annual periods beginning on or after 1 January 2017)

Standard/ Interpretatio n adopted by EU

Nature of impending change in accounting policy

Possible impact on financial statements

Effective date for periods beginning as the date or after that date

accordance with paragraphs B10-B16 of that standard) apply to entities that has an interest in subsidiaries, or joint arrangements, or associates, or unconsolidated structured entities, which are classified as held for sale or discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations; and

clarify that election of exemption from applying the equity method per IAS 28 Investments in Associates and Joint Ventures shall be made separately for each associate or joint venture, and to clarify date of such an election.

B. Standards and interpretations awaiting adoption by the European Union

The following table presents:

• Standards and Interpretations awaiting adoption by the EU that are not yet effective for the annual period ending on 31 December 2017;
• Type of the expected impact on accounting policies implemented by a new Standard/Interpretation;
• Impact of the changes described on the financial statements;
• Effective date of the amendments.

Standard/ Interpretation awaiting adoption by the EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
1. IFRS 14 Regulatory Deferral Accounts	The interim Standard:  permits first time adopters of IFRS to continue to use its previous GAAP to account for regulatory deferral account balances both on initial adoption of IFRS and in subsequent financial statements;  requires entities to present regulatory deferral account balances and movements therein as separate line items on the face of the financial statements; and  requires specific disclosures to identify clearly the nature of, and risks associated with, the rate regulation that has resulted in the recognition of regulatory deferral account balances in accordance with this interim Standard.	The Group does not expect the new Standard to have material impact on the consolidated financial statements as it only applies to first time adopters.	1 January 2016 (The European Commission decided not to endorse this interim standard and to wait for the final standard)
2. Sale or Contribution	The Amendments address the acknowledged	The Group does not expect the	1 January

of Assets between	Amendments to have material impact inconsistency between the requirements in IFRS	2016 (deferred
an Investor and its	on the consolidated financial 10 and IAS 28 in dealing with the loss of control of	adoption by the
Associate or Joint	statements. a subsidiary that is contributed to an associate or	European
Venture	a joint venture. While IAS 28 restricts gains and	Commission)
(Amendments to	losses arising from contributions of non-monetary
IFRS 10	assets to an associate or a joint venture to the
Consolidated Financial	extent of the interest attributable to the other
Statements and	equity holders in the associate or joint venture,
IAS 28 Investments	IFRS 10 requires full profit or loss recognition on
in Associates)	the loss of control of subsidiary.
	The Amendments require a full gain or loss to be
	recognised when the assets transferred meet the
	definition of a business under IFRS 3 Business

Standard/ Interpretation awaiting adoption by the EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
	Combinations (whether it is housed in a subsidiary or not). A partial gain or loss (only to the extent of unrelated investors' interests) shall be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.
3. Amendments to IFRS 2 (Share based Payment)	The amendments, clarifying how to account for certain types of share-based payment transactions, provide requirements on the accounting for:  the effects of vesting and non-vesting conditions on the measurement of cash settled share-based payments;  share-based payment transactions with a net settlement feature for withholding tax obligations; and  a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash settled to equity-settled.	The Group does not expect the Amendments to have material impact on the consolidated financial statements.	1 January 2018
4. IFRIC 22 Foreign Currency Transactions and Advance Consideration	IFRIC 22 provides requirements about which exchange rate to use in reporting foreign currency transactions (such as revenue transactions) when payment is made or received in advance and clarifies that the transaction date is the date on which the company initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.	The Group does not expect the new Standard to have material impact on the consolidated financial statements.	1 January 2018
5. Amendments to IAS 40 (Investment Property)	The Amendments provide clarification on transfers to, or from, investment properties:  a transfer into, or out of investment property should be made only when there has been a change in use of the property; and  such a change in use would involve an assessment of whether the property qualifies as an investment property.	The Group does not expect the Amendments to have material impact on the consolidated financial statements.	1 January 2018
6. IFRS 17 Insurance Contracts	IFRS 17 replaces IFRS 4 Insurance Contracts which was an interim standard. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. IFRS 4 has given companies dispensation to carry on accounting for insurance contracts using national accounting standards. IFRS 17 introduces a new comprehensive model (general model) which combines the currently applied treatment of technical insurance reserves in the statement of financial position with the recognition of profits in the period when insurance cover is provided and it has the following features: it is based on the concept of meeting liabilities  under the contract and uses current assumptions;  it provides for a single recognition of income to reflect provided services;  it may be modified for some contracts.	The Group does not expect the new Standard to have material impact on the consolidated financial statements.	1 January 2021

Standard/ Interpretation awaiting adoption by the EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
7. IFRIC 23 Uncertainty over Income Tax Treatments	IFRIC 23 clarifies the accounting for income tax treatments that have yet to be accepted by tax authorities, whilst also aiming to enhance transparency. Under IFRIC 23, the key test is whether it is probable that the tax authority will accept the entity's chosen tax treatment. If it is probable that the tax authorities will accept the uncertain tax treatment then the tax amounts recorded in the financial statements are consistent with the tax return with no uncertainty reflected in measuring current and deferred taxes. Otherwise, the taxable income (or tax loss), tax bases and unused tax losses shall be determined in a way that better predicts the resolution of the uncertainty, using either the single most likely amount or expected (sum of probability weighted amounts) value. An entity must assume the tax authority will examine the position and will have full knowledge of all the relevant information.	The Group does not expect IFRIC 23 to have material impact on the consolidated financial statements.	1 January 2019
8. Amendments to IFRS 9 Financial Instruments	The amendment enables entities to measure financial assets with a prepayment option, which under contractual terms are instruments with cash flows that are solely payments of the principal and interest on the principal amount outstanding, for negative compensation, at amortized cost or at fair value through other comprehensive income instead of fair value through profit or loss if such financial assets meet the other applicable requirements of IFRS 9.	The Group does not expect the Amendments to have material impact on the consolidated financial statements.	1 January 2019
9. Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures	The Amendments clarify that an entity applies IFRS 9 Financial Instruments to interests in an associate or joint venture to which the equity method is not applied.	The Group does not expect the Amendments to have material impact on the consolidated financial statements.	1 January 2019
10. Annual Improvements to IFRS 2015-2017 Cycle    	The Improvements to IFRSs (2015-2017) contains four amendments to standards. The main changes were to: clarify that the entity remeasures its previously held interest in a joint operation when it obtains control of the business in accordance with IFRS 3 Business Combinations; clarify that the entity does not remeasure its previously held interest in a joint operation when it obtains joint control of the joint operation in accordance with IFRS 11 Joint Arrangements; clarify that the entity should always accounts for income tax consequences of dividend payments in profit or loss, other comprehensive income or equity according to where the entity originally recognized past transactions or events that generated distributable profits; and clarify that the entity should exclude from the funds that the entity borrows generally borrowings made specifically for the purpose of obtaining a qualifying asset until substantially all the activities necessary to prepare that asset for its intended use or sale are complete as borrowings made specifically for the purpose of obtaining a qualifying asset should not apply to a	The Group does not expect the Improvements to have material impact on the consolidated financial statements.	1 January 2019

Standard/ Interpretation awaiting adoption by the EU	Nature of impending change in accounting policy	Possible impact on financial statements	Effective date for periods beginning as the date or after that date
	borrowing originally made specifically to obtain a qualifying asset if that asset is ready for its intended use or sale.

2.1.2. Impact of IFRS 9, IFRS 15 and IFRS 16 on future financial statements

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments is effective for annual periods beginning on or after 1 January 2018. The new Standard eliminates the existing categories of financial assets:

• held to maturity,
• available for sale, and
• loans and receivables

replacing them with a new classification:

• financial assets measured at amortized cost,
• financial assets measured at fair value through profit or loss, and
• financial assets measured at fair value through other comprehensive income.

Classification of financial assets depends on the business model of asset portfolio management and the contractual terms of the financial asset.

Financial assets held by the Group, i.e., minority interest in Sibex, Innex and Infostrefa (previously recognised as available-for-sale financial assets), will be presented as of 1 January 2018 as financial assets measured at fair value through other comprehensive income because they are neither held for trading nor a conditional payment recognised by the acquiring entity in a business combination.

IFRS 9 introduces a fundamental change to the measurement of impairment of financial assets. Under the new Standard, entities will recognise and measure impairment under the "expected credit loss" model replacing the "incurred loss" impairment model. The amendment mainly affects the estimation of write-offs of debt. As at the date of preparation of these financial statements, the Company performed an initial analysis of the impact of IFRS 9 on the valuation of write-offs of debt.

Starting on 1 January 2018, the Group will estimate write-offs of debt according to expected credit loss based on historical data of debt that could not be collected from the parent entity's counterparties between 2014 and the end of H1 2017.

For this purpose, the parent entity performed a statistical analysis of trade receivables by category of clients as follows:

• Exchange Members,
• issuers, and
• other clients.

The Group performed a portfolio analysis and calculated, for each category of clients, a write-off matrix by age bracket on the basis of expected credit loss in the lifetime of debt. The Group concluded that default ratios estimated on the basis of historical data represent the probability of default of trade receivables in the future and consequently the ratios were not adjusted.

The estimated ratios are as follows:

• Exchange Members from 0.02% for debt not yet due to 12.32% for debt overdue from 181 to 365 days,
• issuers from 2.19% for debt not yet due to 88.52% for debt overdue from 181 to 365 days,
• other clients from 1.28% for debt not yet due to 54.28% for debt overdue from 181 to 365 days.

The write-offs of debt not overdue for a category of clients in a default bracket is equal to:

• value of trade receivables at the balance sheet date, times
• client's probability of default.

As a result of the preliminary estimation, the change of the approach to the recognition and measurement of impairment resulted in an increase of impairment write-offs and a decrease of equity by PLN 260 thousand as at the date of initial adoption of IFRS 9 (1 January 2018).

The adoption of IFRS 9 is not expected to have an impact on the valuation and presentation of the Group's financial liabilities. The implementation of the new Standard will extend the scope of disclosures in the financial statements.

The Group decided to implement the Standard without a restatement of comparative data. Adjustments under IFRS 9 will be implemented as of 1 January 2018.

IFRS 15 Revenue from Contracts with Customers

The Standard provides a framework that replaces existing revenue recognition guidance in IFRS. In particular, the new Standard replaces IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations.

The new Standard specifies that revenue should be recognised at transaction price when (or as) an entity transfers control of goods or services to a customer. All bundled goods or services that can be separated under the contract with the customer should be recognised separately. Any discounts and rebates of the transaction price should, as a rule, be allocated to individual components of bundled products or services. If revenue is variable, the variable amount is recognised as revenue if the recognised revenue is highly unlikely to be reversed as a result of revaluation. Depending on whether certain criteria are met, revenue is recognised:

• over time, in a manner that depicts the entity's performance; or
• at a point in time, when control of the goods or services is transferred to the customer.

Under IFRS 15, cost incurred to win and secure a contract with a customer should be recognised over time in the period when the benefits of the contract are available.

The Group performed a detailed analysis of the impact of IFRS 15 on the recognition of revenue from contracts of the Group, in particular contracts concerning complaints, licence fee holidays, services provided free of charge in the trial period, recognition of annual and quarterly fees, recognition of the cost of winning a contract, and recognition of revenue where the entity is likely to receive the fee.

In the opinion of the GPW Management Board, IFRS 15 implemented as of 1 January 2018 will not have a material impact on the recognition of contracts with customers. In particular, the analysis shows that retrospective application of the Standard would not have a material impact on the revenue reported in 2017.

The Group's analysis suggests that the implementation of the Standard only impacts the presentation of data concerning annual and quarterly fees charged from customers under contracts and regulations in interim consolidated financial statements. Such fees were previously presented as "Accruals and deferred income" but will be presented under the new Standard as "Service payables".

The Standard requires qualitative and quantitative disclosures which provide useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer.

According to IFRS 15 C3 (b), the GPW Management Board decided to implement the Standard retrospectively with the cumulative effect of initial application at initial application date, i.e., 1 January 2018, through equity according to C7-C8 of the Standard. The analysis did not identify any adjustment of equity on initial application.

The retrospective application with the cumulative effect of initial application at initial application date through equity (simplified approach) is based on the GPW Management Board's general assessment of marginal impact of IFRS 15 on the existing recognition of revenue from contracts with customers combined with the option of using simplifications available in this approach which limit the scope of analysis of historical data without prejudice to comparability of data presented in the Group's consolidated financial statements.

According to the simplification allowed by the Standard for retrospective application with the cumulative effect of initial application through equity, the Management Board of the parent entity decided to use the simplification under C7 A (b), i.e., not to apply retrospective restatement of contracts which changed before the date of initial application (1 January 2018).

According to the Management Board of the parent entity , the impact of the simplification is marginal.

IFRS 16 Leases

The fundamental amendment under the new Standard introduces a new definition of leases based on the concept of control of the asset and the resulting obligation of the lessee to recognise in the balance sheets assets and liabilities under all leases which meet the criteria of the Standard (with a limited number of derogations and simplifications). For leases previously classified as operating leases, under IFRS 16, as at the date of the contract, the lessee recognises in the balance sheet assets and liabilities arising from future cash flows under the contract. Leases of office space or other space for business purposes and leases of transport vehicles and other assets are presented in the lessee's assets and liabilities in the amount of discounted expected cash flows under the contract. This amendment may have a material impact on the Company's financial position including its debt ratios and the assessment of conditions of other contracts related to external financing. It may also impact EBIT.

The Group is performing a detailed analysis of the impact of IFRS 16 on the financial statements on the understanding that the implementation of IFRS 16 will have an impact on the financial statements of the Group. The analysis of the Group's contracts has identified the following contracts (groups of contracts) which could meet the criteria of leases or contain leases:

• Space lease contracts contracts concluded for an undetermined period. Considering that space is leased from an associate of the parent entity, the parent entity uses a period of useful life which is directly related to the remaining period of depreciation of the leased assets. At the same time, the parent entity is transferring assets to subsidiaries for use under separate lease agreements and thus becomes a lessor in relation to the subsidiaries;
• Perpetual usufruct of land a contract with a term of 99 years. The value of assets was estimated based on annual fees and the initial fee, which was previously treated as operating lease and presented in prepayments;
• Colocation contracts contracts concluded for an undetermined period. The Group uses a period of useful life which is directly related to the remaining period of depreciation of the infrastructure.

Considering that some of those contracts are concluded for an undetermined period, the valuation of assets and related liabilities required and will require the Group to use / update judgments concerning the useful life of assets used under such contracts. Judgments and assumptions will at each time be disclosed in the Group's financial statements along with a range of other disclosures required under IFRS 16.

The current preliminary approach is as follows:

• to apply IFRS 16 to annual reporting periods beginning on or after 1 January 2019;
• to apply IFRS 16 retrospectively to each previous reporting period and to restate comparative data;
• not to reclassify lease contracts effective as at the initial application date;
• to apply simplifications for short-term leases and low-value leases;
• to change the presentation approach by including all assets under IFRS 16 as right-to-use assets.

With the implementation of the Standard, the Group will disclose in the statement of financial position rightto-use assets and lease liabilities from perpetual use of land and contracts with incorporate leases, active as at the balance sheet date, including space leases, colocation contracts and car lease contracts.

Considering the expected material impact of the new Standard on assets shown in the Group's statement of financial position, the Management Board of the parent entity intends to use retrospective application for each previous reporting period, which requires the restatement of comparative data.

The Group is planning to use a simplification, i.e., not to calculate lease assets/liabilities for short-term leases and low-value leases (e.g., coffee machines, low-value electronic equipment).

2.1.3 Functional and presentation currency

These consolidated financial statements are presented in the Polish zloty (PLN), which is the functional currency of the parent entity, and all values are presented in thousands of Polish zlotys (PLN'000) unless stated otherwise.

2.1.4Basis of valuation

The financial statements have been prepared on the historical cost basis, except for hedge accounting of cash flows and available-for-sale financial assets which are measured at fair value.

2.1.5 Critical judgments and estimates

The preparation of financial statements in accordance with the IFRS requires making certain critical accounting estimates. It also requires the Management Board of the parent entity to exercise professional judgment in the process of applying the parent entity's accounting policies.

Estimates and accounting judgments are subject to on-going verification. Estimates and judgments adopted for the purpose of preparing the financial statements are based on historical experience, analyses and predictions of future events, which to the best knowledge of the Management Board of the parent entity are believed to be reasonable in the given situation.

Judgments

2.1.5.1. Cash and cash equivalents

The Group performs a judgment to check whether deposits with original maturities up to one year fulfilf the definition of cash and cash equivalents taking into account the liquidity of deposits, the market interest rates, the ease of conversion to a specific amount of cash, and exposure to material change of fair value.

2.1.5.2. Presentation of commodity market transactions and cash in the clearing guarantee system

The Group performs a judgment concerning IRGiT's role in the clearing of transactions on the commodity forward instruments market. IRGiT provides the service of clearing and settlement of exchange transactions.

IRGiT is a technical counterparty to transactions as it provides clearing and settlement of exchange transactions. Furthermore, since the exchange is a fully anonymous market, IRGiT is named for technical reasons in sale and purchase documents (invoices) of cleared exchange transactions although IRGiT is not

a buyer or seller in the strict sense as IRGiT only clears transactions. According to applicable regulations, IRGiT does not guarantee the clearing of transactions with its own resources.

As described in Note 29, to secure transactions on the forward market in electricity and gas, the Group has set up a clearing guarantee system. The Group is not exposed to material risk of loss of cash contributed to the clearing guarantee system. The Group is not the owner of such cash and neither does it realise any benefits from the holding of such cash. The group charges fees for management of the guarantee system resources.

According to the judgment of the Management Board of the parent entity, both the entire risk and all benefits related to the holding of cash contributed to the clearing guarantee system remain with the Clearing House Members. Hence, cash in the IRGiT clearing guarantee system is not shown under the assets of the Group.

Estimates

2.1.5.3. Economic useful life for property, plant and equipment and intangible assets

The Group determines the estimated economic useful life and depreciation and amortisation rates for property, plant and equipment and intangible assets. These estimates are based on the anticipated periods for using the individual groups of property, plant and equipment and intangible assets. The adopted economic useful life may undergo considerable changes as a result of new technological solutions appearing on the market, plans of the Management Board of the parent entity or intensive use.

2.1.5.4. Goodwill and investment in associates impairment tests

A cash flow generating unit, to which goodwill has been allocated, is subject to annual impairment tests. Impairment of investments in associates is tested on the occurrence of indications of potential impairment.

Goodwill impairment tests are conducted using the discounted cash flows method based on financial forecasts or estimated fair value less cost of sale. Forecasts of future financial results of cash flow generating units are based on a number of assumptions, of which some (among others those relating to observable market data such as macroeconomic conditions) are beyond control of the Group.

The assumptions of goodwill impairment tests are described in Note 5 and impairment tests of investments in associates in Note 6.

2.1.5.5. Provisions

The Group creates provisions when Group companies have a current legal or customarily expected obligation resulting from past events and it is likely that the performance of such obligation will require an outflow of resources containing economic benefits and the amount of such obligation can be reliably estimated. The Group creates provisions based on the best estimates of the Management Boards of Group companies in the amount of expenditures necessary to perform the current obligation as at the balance sheet date. If the effect of change of the value of money in time is significant, the amount of provisions corresponds to the present value of expenditures which are expected to be necessary to perform the obligation.

2.2 The scope and methods of consolidation

2.2.1Subsidiaries

Subsidiaries are entities controlled by the Company. The Company controls an entity if its investment in the entity gives it the right to participate in variable financial results and exert influence on the amount of such financial results through the power to govern the entity. In assessing whether the Group controls a given entity, the existence and effects of potential voting rights, which are exercisable or convertible at a given time, must be assessed. On the date the Group takes control over a company, the subsidiary begins to be fully consolidated. The consolidation ceases once the Group no longer controls the entity.

Acquisitions of subsidiaries by the Group are accounted for using the purchase method. The cost of the acquisition is measured as the fair value of the consideration transferred, the recognised value of noncontrolling interest in the acquiree plus the fair value of previously held equity interest in the acquiree less the net recognised value (fair value) of the identifiable assets acquired and assumed liabilities. Identifiable acquired assets, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date regardless of the extent of any minority interest. Excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income.

Intra-group transactions and settlements between Group companies, as well as unrealised gains on intragroup transactions, have been eliminated. Unrealised losses are also subject to elimination, unless the transaction provides evidence of an impairment loss of the asset transferred.

When necessary, accounting policies of subsidiaries have been changed to ensure consistency with the accounting policies adopted by the Group.

On loss of control, the Group no longer recognises the assets and liabilities of the subsidiary, non-controlling interests and other equity of the subsidiary. Any surplus or shortage on loss of control is recognised in the profit / loss of the period. If the Group retains any stake in a former subsidiary, it is shown at fair value as at the date of loss of control.

2.2.2 Associates

Associates are all entities over which the Group has significant influence but does not control. The Group possesses between 20 to 50 percent of the voting rights. Investments in associates are accounted for using the equity method and are initially recognised at cost.

The Group's share of profit of associates from the date of acquisition is recognised in the statement of comprehensive income, and its share of changes in other reserves from the date of purchase - in other reserves. The carrying amount of the investment is adjusted for the cumulative change from the date of acquisition. When the Group's share of losses of an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group ceases to recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's participation in those entities. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred.

In order to prepare the consolidated financial statements, accounting policies of associates have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

2.3 Valuation of balances presented in foreign curriencies

Transactions presented in foreign currencies are booked at the transaction date at the following foreign exchange rate:

• the rate actually applied at such date, depending on the nature of the transaction for sale or purchase of foreign currencies or payment of receivables or payables;
• the average rate published for the currency by the National Bank of Poland at the day preceding such date – for other operations.

As at the balance sheet date:

• monetary items presented in foreign currencies are converted with the closing foreign exchange (FX) rates;
• non-monetary items presented in foreign currencies valued at historical cost are converted at the FX rate prevailing at the transaction date;

non-monetary items presented in foreign currencies at fair value are converted at the FX rate prevailing at the day of determining the fair value.

Foreign exchange gains and losses resulting from settlements of transactions in foreign currencies and from the conversions of monetary assets and liabilities denominated in foreign currencies are disclosed as profit / loss of the current period.

2.4 Segment reporting

Segment information is disclosed based on the entity's components monitored by the top management (Management Board of the Exchange) to the extent of operating decision-making. An operating segment is a component of the entity:

• which may earn revenues and incur expenses;
• whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and
• for which discrete financial information is available.

The segments are identified based on specific service groups having homogenous characteristics. The presentation by operating segment follows the management approach at GPW Group level. The Group's chief operating decision maker is the Management Board of the parent entity.

2.5 Property, plant and equipment

Property, plant and equipment are disclosed at the cost of purchase or production, expansion or modernisation, net of accumulated depreciation and impairment losses (principle in Note 2.7).

Purchase cost includes the cost of purchase, expansion and/or modernisation as well as external financing costs.

Depreciation is calculated for property, plant and equipment items over their estimated useful life, taking into account their residual value and using the straight-line depreciation method.

Table 1 Estimated useful life periods of property, plant and equipment, by category

Property, plant and equipment category	Depreciation period
Buildings1	10-40 years
Leasehold improvements	10 years
Vehicles	5 years
Computer hardware	3-5 years
Other property, plant and equipment	5-10 years

Land is not subject to depreciation.

Individual components of property, plant and equipment with a different useful life are recognised separately and depreciated throughout the useful life taking into account their residual value.

The depreciation method, the depreciation rate and the residual value are subject to regular verification by the Group. Any changes resulting from the verification are recorded as a change in accounting estimates, prospectively.

¹ The Group also uses common areas of the "Centrum Giełdowe" building. Common areas (such as escalators, halls, corridors), owned in respective parts by the Exchange and other owners of the building, are managed by the "Książęca 4" Tenants Association appointed for this purpose. The common areas of the building in the part owned by the Group are recognised as assets in the consolidated financial statements. The maintenance costs incurred in respect of the use of those areas of the building (such as current maintenance, repairs and refurbishments of technical equipment and installations included in common areas, electricity, security, administrative services, etc.) are recognised in the statement of comprehensive income at the time when they incurred.

A component of property, plant and equipment is derecognised when sold or when economic benefits from its use or disposal are no longer expected. Gains and losses on disposal / liquidation of property, plant and equipment are determined as the difference between the proceeds (if any) and the net book value of property, plant and equipment and included in the profit or loss of the period as net other profit/loss.

Property, plant and equipment under construction or development is disclosed at the cost of purchase or production less of impartment losses, if any, and is not depreciated until complete.

2.6 Intangible assets

2.6.1 Goodwill

Goodwill from acquisition is the difference between the purchase price and the fair value of the acquired net assets, liabilities and identifiable contingent commitments. After initial recognition, goodwill is disclosed at cost of purchase net of accumulated impairment losses (principle in Note 2.7). Goodwill is tested against potential impairment annually or more frequently in case of events or changes indicating potential impairment.

For impairment testing purposes, goodwill is allocated to cash generating assets which are expected to benefit from the transaction responsible for the creation of goodwill.

2.6.2 Other intangible assets

Other intangible assets are disclosed at cost of purchase or production net of accumulated amortisation and impairment losses (principle in Note 2.7).

Amortisation is calculated with the straight-line method over the estimated useful life of other intangible assets. The estimated useful life of intangible assets varies from 1 to 5 years except for the intangible assets corresponding to trading systems which have an expected useful life of 6 to 12 years, respectively, and knowhow of the PCR project in the subsidiary TGE which has an expected useful life of 20 years.

Costs of intangible assets which do not improve or extend their useful life are recognised as cost when incurred. Otherwise, the costs are capitalised.

The amortisation method and the amortisation rate are subject to regular verification by the Group. Any changes resulting from the verification are recorded as a change in accounting estimates, prospectively.

A component of intangible assets is derecognised when sold or when economic benefits from its use or disposal are no longer expected. Gains and losses on disposal / liquidation of intangible assets are determined as the difference between the net proceeds (if any) and the book value of intangible assets and included in the profit or loss of the period.

2.7 Impairment of non-financial assets

At each balance sheet date, the Group reviews non-financial assets to determine whether there are indicators of impairment except for inventories (see Note 2.11) and deferred tax assets (see Note 2.17.3) to which other valuation procedures apply. If such indicators are identified, the recoverable amount of an asset is estimated (as the higher of: fair value less selling costs or value in use). Value in use corresponds to the discounted value of the estimated future economic benefits which would be generated by an asset. If an asset does not generate cash flows that are independent from the cash flows generated by other assets, the analysis is performed for the group of assets generating cash flows (a cash generating unit) to which the asset belongs.

If the carrying value of an asset (or a cash generating unit) is higher than its recoverable value, impairment is recognised and the asset value is written down to recoverable value. Impairment losses are charged to the profit or loss of the period.

At the end of every reporting period, the Group checks for conditions indicating that the impairment losses recognised in previous reporting periods may be redundant or excessive. In that case, impairment losses are reversed in whole or in part and the asset value is disclosed net of the impairment losses (but including

amortisation or depreciation). Impairment reversal is recognised as other income in the statement of comprehensive income.

Impairment of goodwill is not subject to reversal.

2.8 Financial assets

2.8.1. Classification and valuation of financial assets

The Group classifies its financial assets in the following categories: loans and receivables; available-for-sale financial assets. This classification is based on the reason for purchasing financial assets. The Management Boards of companies of the Group determine the classification of financial assets at their initial recognition. Financial assets are derecognised when the right to cash flows that they generate expires or is transferred if a Group company transfers substantially all the risks and benefits of ownership.

2.8.1.1 Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market, other than:

• financial assets that the entity intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity designates at fair value through profit or loss upon initial recognition;
• financial assets that the entity designates as available-for-sale upon initial recognition; or
• financial assets which are classified as available-for-sale, and for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

Loans and receivables are initially recognised at fair value plus directly attributable transaction costs. After initial recognition, loans and receivables are measured at amortised cost using the effective interest rate method less impairment losses, if any. The amortised cost method is discussed in Note 2.15.

Interest on financial assets classified as loans and receivables is measured using the effective interest rate method and recognised in the profit or loss of the period as part of financial income.

Loans and advances include cash and cash equivalents as well as trade and other receivables.

2.8.1.2 Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are classified as available for sale or are not classified in any of the other categories of financial assets. In particular, they comprise shares in entities over which a Group company does not exercise control or exert significant influence. They are disclosed as non-current assets unless the Group intends to sell them within 12 months after the balance sheet date.

Available-for-sale financial assets are initially recognised at fair value plus directly attributable transaction costs. After initial recognition, available-for-sale financial assets are measured at fair value and any effect of change in the fair value other than impairment losses (see Note 2.8.2) and FX differences for available-forsale debt instruments is recognised in other comprehensive income and presented in equity as fair value reserves. On derecognition, the cumulative profit or loss recognised in equity is taken to the profit or loss of the period.

Interest on available-for-sale financial assets calculated using the effective interest method is disclosed in the profit or loss of the period as part of financial income. Dividends from available-for-sale equity instruments are disclosed in the profit or loss of the period as part of financial income when a Group company acquires the rights to the respective payments.

The fair value of investments listed on an active market derives from the current price. Fair value is determined based on listed prices.

If the market for a financial asset is not active (also in respect of non-listed securities), the Group determines the fair value using valuation techniques. These include the use of recent arm's length transactions, reference to transactions in other virtually identical instruments, discounted cash flow analysis, using market information to the maximum extent and relying on information from the Group to the minimum extent.

If available-for-sale financial assets are not quoted, they do not have a fixed maturity (equity instruments) and their fair value cannot be reliably determined, they are valued at cost net of impairment losses.

Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are disclosed as other comprehensive income.

Fair value hierarchy

The Group classifies the valuation of fair value on the basis of a fair value hierarchy which reflects the significance of valuation input data. The fair value hierarchy includes the following levels:

• (unadjusted) trading prices on active markets for identical assets or liabilities (level 1);
• input data other than trading prices at level 1, which can be identified or observed for an asset or liability, directly (as prices) or indirectly (calculations based on prices) (level 2); and
• input data for an asset or liability not based on observable market data (non-observable data) (level 3).

2.8.2.Impairment of financial assets

At each balance sheet date, the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of financial assets classified as available-for-sale, when determining impairment of securities, a significant or prolonged decline of a given security's fair value below cost, the financial standing and possibilities of further development of an issuer as well as the influence of the political and economic situation in the issuer's home country are taken into account. If such evidence exists in respect of available-for-sale financial assets, total cumulative losses in other comprehensive income are excluded from equity and disclosed in the statement of comprehensive income. Cumulative losses taken from equity to profit are determined as the difference between the purchase price (less all principal payments and amortisation) and present fair value less possible losses resulting from impairment recognised earlier in the profit. Losses from the impairment of equity instruments recognised earlier in profit are not reversed through the financial result.

If the indications of impairment cease to exist, impairment losses are reversed:

• through the profit or loss of the current period in the case of available-for-sale financial assets which are debt securities;
• through other comprehensive income in the case of available-for-sale financial assets which are equity instruments.

Impairment losses on trade receivables are created when there is objective evidence that the Group will not be able to collect all of the amounts that were due to the original terms of the receivables. The debtor's significant financial difficulties, probability of bankruptcy or creditor arrangement, delay in payments are all considered indicators that the trade receivables are impaired. The amount of the provision is the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted using the effective interest rate method.

Bad debts and allowances for doubtful receivables are written off through the profit or loss of the current period.

Receivables are written off the statement of comprehensive income when their uncollectability has been documented:

uncollectible decision recognised by the creditor as corresponding with the facts, issued by the appropriate authority of enforcement; or

• court decision rejecting an application for bankruptcy involving the liquidation of assets where the assets of the insolvent debtor are insufficient to cover the costs of the proceedings, or discontinuing the bankruptcy proceedings involving the liquidation of assets where the debtor's assets are insufficient to satisfy the claims of creditors, or closing bankruptcy proceedings involving the liquidation of assets; or
• report stating that the anticipated costs associated with the proceedings and enforcement of debt would be equal to or greater than the amount stated.

2.9 Non-current prepayments

Non-current prepayments include the right to perpetual usufruct of land with expected economic useful life longer than one year, which is equivalent to operating lease. Perpetual usufruct is initially recognised at cost and subsequently at the end of the reporting period at net carrying value, i.e., cost less incremental depreciation charges and impairment losses.

The rights to perpetual usufruct of land are equivalent to operating lease.

2.10 Other receivables

Other receivables mainly comprise prepayments and non-current payments for the rights to perpetual usufruct of land, which is equivalent to operating lease.

Prepayments are recorded when expenditures incurred relate to future reporting periods. Prepayments comprise:

• long-term balances relating to future reporting periods, more than 12 months from the balance sheet date; and
• short-term balances relating to future reporting periods, up to 12 months from the balance sheet date.

Prepayments are recognised in the statement of comprehensive income over the lifetime of the relevant contract.

2.11 Inventories

Inventories are disclosed at the cost of purchase or acquisition, not higher than their net realisable value.

As at the balance sheet date, materials are stated at the lower of purchase price and net realisable value, less impairment losses. Impairment losses are charged to other operating expenses.

2.12 Assets held for sale

Non-current assets (or groups for sale) are classified as held for sale if their carrying value will be recovered through sale rather than continued use. The condition is met only if the sale is very probable and the asset (or group for sale) is available for sale immediately in its current condition. Classification of an asset as held for sale implies that the management of the entity intends to make the sale within one year after reclassification.

If the sale involves loss of control over a subsidiary, all assets and liabilities of the subsidiary are classified as held for sale.

Non-current assets (or groups for sale) classified as held for sale are recognised at the lower of carrying amount or fair value less the cost of sale.

2.13 Cash and cash equivalents recognised in the statements of cash flows

Cash and cash equivalents include cash in hand, on-demand deposits with banks and other short-term investments with original maturities of twelve months or less from placement which are highly liquid or easily convertible to a specific amount of cash and not exposed to significant change of fair value.

2.14 Equity of the Group

The Group's equity comprises:

• share capital of the parent entity disclosed at par, adjusted for hyperinflation;
• other reserves, including the revaluation reserve;
• retained earnings, comprised of:
• retained earnings from prior years (comprised of supplementary capital and other reserves formed from prior year profits); and
• profit of the current period.

Equity items (except for retained earnings and any surpluses on revaluation of assets) have been restated using the general price index beginning from the date on which a given equity item was contributed or otherwise formed, for the period in which the economy in which the Group carries out its operations was a hyperinflationary economy, i.e., until 31 December 1996. The effect of recalculating the appropriate equity items using the inflation ratios was reflected in retained earnings and is presented in Note 12.

The Group presents non-controlling interests pro rata to the share in the net assets of a subsidiary. Changes to a stake in a subsidiary which do not result in loss of control are shown as transactions with the owners of the subsidiary directly under equity. Any changes to non-controlling interests are recognised pro rata to the share in the net assets of the subsidiary. In that case, goodwill is not adjusted and no gains or losses are recognised.

2.15 Financial liabilities

Financial liabilities include trade payables, liabilities under bond issues, finance leases and other liabilities.

Financial liabilities at the balance sheet date are valued at amortised cost. The valuation is based on cost at which the liability was initially recognised less the repayment of the nominal value, adjusted for the cumulative amount of the discounted difference between the initial value and the maturity value. For instruments at floating interest rates, in relation to the next agreed re-pricing (on which the interest rate is determined), it is calculated using the effective interest rate method. The effective interest rate is the internal rate of return (IRR) of the liability, which is used for discounting future cash flows of the financial instrument to present value.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.

2.16 Contingent liabilities

A contingent liability is:

• a possible obligation resulting from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully under the entity's control; or
• a present obligation resulting from past events, which however is not recorded in the financial statements because:
• it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
• the amount of the obligation (liability) cannot be reliably determined.

2.17 Income tax

2.17.1 Tax Group

On 3 October 2013, the Head of the First Mazovian Tax Office in Warsaw issued a decision registering the Tax Group for a period of three tax years from 1 December 2013 to 31 December 2016. The Tax Group was comprised of Giełda Papierów Wartościowych w Warszawie S.A. and GPW Centrum Usług S.A. (now GPW Benchmark S.A.) until 31 December 2016.

On 28 September 2016, the following companies:

• Giełda Papierów Wartościowych w Warszawie S.A.,
• Towarowa Giełda Energii S.A.,
• BondSpot S.A. and
• GPW Centrum Usług S.A. (now GPW Benchmark S.A.)

entered into a notarised agreement creating the GPW Tax Group ("GPW TG" or "TG") for a period of three years from 1 January 2017 to 31 December 2019.

The companies participating in TG are not treated individually but collectively as one corporate income taxpayer under the Corporate Income Tax Act. Such taxpayer's income is determined as the surplus of incomes of the companies participating in TG over the sum of their losses.

As the Parent Company Representing the Tax Group, Giełda Papierów Wartościowych w Warszawie S.A. is responsible for the calculation and payment of quarterly corporate income tax advances of the Tax Group pursuant to the Corporate Income Tax Act.

In separate financial statements, the members of the Tax Group present income tax as if they were a separate taxpayer and present income tax payments to GPW within the Tax Group. GPW presents income tax payments from the subsidiaries within the Tax Group accordingly.

In the separate statement of cash flows, any change of such payments is presented in cash flows from operating activities as an (increase)/decrease of other receivables/payables and the corporate income tax paid by GPW in the amount determined for the Tax Group is presented in GPW's separate statement of cash flows under income tax (paid)/refunded. The subsidiaries do not present such payments under income tax (paid)/refunded in their separate statements of cash flows.

The deferred tax assets and liabilities in the separate financial statements of the companies participating in the Tax Group are recognised as if they were a separate taxpayer.

While income taxes of the companies participating in TG are no longer paid individually, the companies are still required to individually pay other taxes including VAT and local taxes.

2.17.2 Current income tax

Current income tax is calculated on the basis of net taxable income for a given financial year determined in accordance with the binding tax regulations and using the tax rates provided in those regulations. Net taxable income (loss) differs from accounting profit (loss) for the year due to excluding taxable income and deductible costs relating to future periods as well as cost and income items that would never be deductible or taxable.

2.17.3 Deferred income tax

Deferred tax is calculated using the liability method as tax payable or reimbursable in the future in respect of differences between carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax amounts used for the calculation of the tax base.

The deferred tax provisions are recorded in the full amount and are not subject to discounting.

Deferred tax assets are recognised to the extent that it is probable that future taxable income will be available against which the temporary differences could be utilised.

The amount of the deferred tax asset is analysed at each balance sheet date, and it is written down if the expected future taxable income or taxable temporary differences are not sufficient to utilise the asset in full or in part.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. The deferred tax is recognised in the statement of comprehensive income for the given period unless the deferred tax relates to transactions or events recognised in other comprehensive income or directly in equity, when it is also recognised as other comprehensive income or directly in equity.

The parent entity uses no deferred tax assets or liabilities for the differences between the taxable and accounting investment in subsidiaries and associates when the Group cannot control the date of reversal of termprary differences (for deferred tax liabilities) and such differences are unlikely to reverse in the foreseeable future.

Deferred tax assets and liabilities can be offset when the Group has an enforceable right to offset current income tax receivables and liabilities and when the deferred tax assets and liabilities relate to income tax imposed on the same taxpayer by the same tax authorities.

2.18 Employee benefits

2.18.1 Current employee benefits

Liabilities in respect of current employee benefits are charged to costs in the period when benefits are paid. Liabilities are charged to costs in the amount of expected payments to employees in respect of short-term cash bonuses or profit sharing plans when the Group has a legal or constructive obligation to make such payments as compensation for services provided by employees in the past and the amount of the obligation can be reliably estimated.

Furthermore, the Group has an incentive scheme, according to which employees have the right to an annual bonus (dependent on the sales profit and the implementation of bonus targets and a discretionary element linked to the employee's individual appraisal) and a discretionary bonus. The Group sets up provisions for bonuses in order to assign costs to the periods to which they relate. Provisions are estimated according to the best knowledge of the Management Boards of Group companies concerning probable bonuses to be paid based on the framework of the incentive scheme.

2.18.2 Defined contributions scheme

The parent entity pays contributions to the Employee Pension Scheme, which employees join voluntarily based on an agreement. After payment of the contributions, GPW has no further obligations to make payments to the Employee Pension Scheme. These contributions are charged to costs of employee benefits as they are incurred. Paid pension benefits are recognised as a cost of the period they relate to.

Under the applicable legislation, the Group is required to charge and pay contributions to employees' pension benefits. Such benefits are a state scheme which is a defined contributions scheme. Consequently, the Group's obligation to pay contributions to the pension scheme for each period is recognised in the amount of contributions to be paid in the year.

2.18.3 Other non-current employee benefits

The present value of liabilities in respect of employee benefits is measured by an independent actuary at each balance sheet date. Liabilities equal discounted future payments, taking into account employee rotation, for the period up to the balance sheet date. Demographic and employee rotation statistics are historical data.

Actuarial gains and losses on employee benefits after the term of service are recognised in other comprehensive income.

2.18.4 Management remuneration system

As of April 2017, the remuneration of the Management Board is subject to the limitations and requirements of the Act of 9 June 2016 on the terms of determining remuneration of managers of certain companies ("New Remuneration Cap Act"). According to the New Remuneration Cap Act, the remuneration of the Company's management includes:

• a fixed monthly base salary determined depending on the scale of the Company's business, and
• a variable part ("bonus") which is supplementary remuneration for the financial year depending on the performance of management targets.

Depending on its appraisal of the performance of individual targets and the results of the Company, the Exchange Supervisory Board may award a bonus to Management Board members in the amount not greater than 100% of the base salary of the Management Board member in the previous financial year.

2.19 Provisions for other liabilities and other charges

Provisions are recorded when Group companies have a current (legal or constructive) obligation resulting from past events and it is probable that settling the obligation will result in an outflow of resources embodying economic benefits and the amount of the liability can be reliably estimated.

Provisions are recorded in particular against the following (if the above-mentioned conditions for recording a provision have been met):

• results of pending litigation and disputes;
• restructuring costs.

Provisions are recorded based on the best estimates of the Management Boards of Group companies of the expenditure necessary to settle the current obligation at the balance sheet date. If the effect of changes in the time value of money is material, the provision corresponds to the present value of the expenditure which as expected would be necessary to settle the obligation.

2.20 Deferred income

Deferred income from sales

Deferred income includes accrued income for services to be provided in future reporting periods (e.g., membership fees and fees for market participation paid by clients for the next financial year).

Deferred income from government subsidies

The Group's deferred income includes received subsidies for assets. Government subsidies are recognised if it is sufficiently certain that the Group will meet the related conditions and the subsidies will be received.

Subsidies for assets are presented in the statement of financial position as deferred income and shown in profit (other income) regularly over the useful life of the assets concerned.

Subsidies for assets are shown in profit (other income) regularly in the periods when the Group recognises the costs to be covered by the subsidies.

2.21 Revenue

2.21.1 Sales revenue

Sales revenue is recognised when it is likely that economic benefits will flow to the Group from transactions and the amount of revenue can be reliably measured. Sales revenue is recognised at the fair value of the consideration received or due, representing receivables for services provided in the course of ordinary business activities. Sales revenue is recognised at the time the services representing the Group's core activities are provided.

Sales revenue consists of three main business segments (lines):

• Financial market,
• Commodity market,
• Other (sales) revenue.

Sales revenue from the financial market consists of:

Revenue from trading

Trading revenue consists of the fees collected from Exchange Members on the basis of the Exchange Rules and the Alternative Trading System Rules. Trading fees are the main revenue item in this category. Trading fees depend on the value of transactions, the number of executed orders and the volume of trade and type of traded instruments. In addition to trading fees, flat-rate fees are charged for access to and use of the IT systems of the Exchange. Trading revenue on the financial market also includes the revenue of BondSpot from trading on the debt instrument markets operated by BondSpot.

Revenue from listing

Listing comprises the revenue collected from issuers on the basis of the Exchange Rules and the Alternative Trading System Rules. Annual fees for the listing of securities are the main revenue item in this category. In addition, fees for admission to trading as well as other fees are collected from issuers. The Group's listing revenue also includes the revenue of BondSpot from issuers of instruments listed on the debt instrument markets operated by BondSpot.

Revenue from information services

Revenue from information services of the parent entity consist of revenue earned on the sale of stock exchange information: real-time stock exchange data and statistical and historical data in the form of a statistical e-mail daily bulletin, electronic publications, calculation of indices, index licenses and other calculations. The sale of stock exchange information is based on separate agreements signed with exchange data vendors, exchange members and other organizations, mainly financial institutions. The Group's revenue from information services also includes the revenue from BondSpot information services.

Revenue from the commodity market includes mainly fees charged by TGE under the Towarowa Giełda Energii S.A. Market Rules, by IRGiT under the Exchange Clearing House Rules (mainly for clearing of transactions made on TGE), and by InfoEngine from its activity as trade operator and as technical trade operator.

Revenue from the commodity market includes:

Revenue from trading

Trading revenue consists of fixed fees collected from TGE members for participation in markets and transaction fees on the markets operated by TGE including the Day-Ahead and Intra-Day Market, the Gas Market, the Property Rights Market, the Commodity Forward Instruments Market, the Emission Allowances Market.

Revenue from operation of the Register of Certificates of Origin and the Register of Guarantees of Origin

In its operation of the Registers, the Group charges fees for services provided to Register members including entry of certificates, issuance of rights, increase or reduction of the balances of rights, cancellation of certificates, entry of guarantees, notification of transfer of guarantees to the end consumer, acceptance of a sale offer, review of an application.

Revenue from clearing

Clearing revenue is the revenue of IRGiT including:

• revenue from fixed fees collected from IRGiT members;
• revenue from clearing and settlement of exchange transactions on the markets operated by TGE.

Revenue from information services

Revenue from information services on the commodity market is earned by the parent entity based on separate agreements signed with exchange data vendors, exchange members and other organisations, mainly financial institutions.

Other (sales) revenue is earned on other services provided by the Group including lease of office space and services for the Polish Financial Supervision Authority including provision of an IT application supporting the use of data as well as technical and substantive support.

2.21.2 Other revenue

Other revenue includes received damages and donations, gains on the sale of property, plant and equipment, reversed impairment of receivables and investments, annual correction of the input VAT, services reinvoiced for employees, revenue from the operator of the Polish power transmission system as payment for international projects (see Note 2.20).

2.21.3 Financial income

Financial income is comprised of gains on sale of financial assets, revenue from interest on available-for-sale and held-to-maturity financial instruments, as well as dividend income.

Interest income is recognised on a time-proportionate basis using the effective interest rate method. Dividend income is recognised at the moment of establishing the shareholders' right to receive the payment.

2.22 Expenses

Expenses (of the core operating activities) include expenses of the core business of Group companies, i.e., the activity for which the companies were established, which are recurring and not incidental. These include without limitation salaries and the cost of maintenance of the IT infrastructure of the trading systems which supports trade in financial instruments and related activities on the financial market and trade in electricity,

gas and property rights on the commodity market, as well as the cost of capital market education, promotion and information.

Expenses are a probable decrease of economic benefits in the reporting period, whose amount is reliably determined, that reduces the value of assets or increases liabilities and provisions, which will reduce equity or increase negative equity, other than due to withdrawal of funds by shareholders or owners.

The Group records expenses by type.

2.23 Bond issue expenses

As an issuer of bonds, GPW pays debt service costs. Interest on bonds is calculated using the effective interest rate method. At each time there are changes in the interest rate, the Company determines a new effective interest rate that will be in effect immediately.

2.24 Leases

A lease agreement is classified as a finance lease when the terms of the agreement transfer substantially all risks and rewards of ownership to the lessee. All remaining leases are treated as operating leases.

Leases in which a significant portion of the risks and rewards of ownership is retained by the lessor are classified as operating leases. If it is not expected that the legal title will be transferred to the lessee before the end of the lease term, it is classified as an operating lease. In particular, operating lease agreements comprise rights to perpetual usufruct of land owned by the State Treasury.

Payments made under operating leases (net of any incentives received from the lessor) are charged to costs on a straight-line basis over the period of the leases.

2.25 Statement of cash flows

The statement of cash flows is prepared using the indirect method.

3. Financial risk management

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks. The Group is exposed to the following financial risks: market risk (including cash flow and fair value interest rate risk, currency risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise any potential adverse effects on the Group's financial performance. The GPW Management Board is responsible for risk management. The Group has dedicated departments, responsible for ensuring its liquidity, including foreign currency liquidity, debt collection and timely payment of liabilities, particularly tax liabilities.

3.2 Market risk

3.2.1 . Cash flow and fair value interest risk

The Group is moderately exposed to interest rate risk.

The Group holds short-term deposits where the interest rate is fixed, negotiated and determined when contracted at levels close to market rates at contracting. If market rates rise, the Group will earn higher interest income; if market rates fall, the Group will earn lower interest income.

Based on a sensitivity analysis of market interest rates in the results of the parent entity, an increase/(decrease) in the market interest rate by 0.50 percentage point (assuming no other changes) would result in a change in the parent entity's financial income causing:

• in 2017, a decrease/(increase) in the profit before tax and cash flows by PLN 1,123 thousand.
• in 2016, a decrease/(increase) in the profit before tax and cash flows by PLN 1,039 thousand,

The parent entity is also an issuer of bonds at floating interest rates based on WIBOR 6M. In the case of an increase in interest rates, the parent entity will be obligated to pay out interest coupons with a higher value; in the case of a decrease in interest rates, the value of those coupons will be lower. The Company calculates sensitivity to the market interest rate WIBOR 6M using as input data the level of debt and interest rates in the current reporting period.

Based on a sensitivity analysis, an increase/(decrease) in the market interest rate by 0.50 percentage point (assuming no other changes) would result in a change in the Parent's entity financial costs causing:

• in 2017, a decrease/(increase) in the profit before tax and cash flows by PLN 576 thousand;
• in 2016, a decrease/(increase) in the profit before tax and cash flows by PLN 1,225 thousand.

The other financial assets, not represented in the table below, as well as financial liabilities (other than bond issue liabilities) bear no interest.

Table 2 Analysis of financial assets and liabilities based on interest rate reset dates and maturity of the assets and liabilities, whichever is the earlier

	As at 31 December 2017 Maturity / Interest reset date
		up to 1 year
	< 1 M	1-3 M	> 3 M	Total	1-5 Y	> 5 Y	Total
Bank deposits and current accounts	3 1 1 ,2 3 1	1 6 9 ,7 2 8	5,516	486,475	-	-	486,475
Total financial assets	311,231	169,728	5,516	486,475	-	-	486,475
Liabilities on bonds issue - non-current	-	-	-	-	2 4 3 ,5 7 3	-	243,573
Liabilities on bonds issue - current	-	-	1,938	1,938	-	-	1,938
Total financial liabilities	-	-	1,938	1,938	243,573	-	245,511

Table 3 Analysis of financial assets and liabilities based on interest rate reset dates and maturity of the assets and liabilities, whichever is the earlier

	As at 31 December 2016 Maturity / Interest reset date
		up to 1 year
	< 1 M	1-3 M	> 3 M	Total	1-5 Y	> 5 Y	Total
Bank deposits and current accounts	3 5 6 ,7 4 2	25,539	64,517	446,798	-	-	446,798
Total financial assets	356,742	25,539	64,517	446,798	-	-	446,798
Liabilities on bonds issue - non-current	-	-	-	-	-	1 2 3 ,4 5 9	123,459
Liabilities on bonds issue - current	1 2 2 ,2 7 9	-	603	122,882	-	-	122,882
Total financial liabilities	122,279	-	603	122,882	-	123,459	246,341

3.2.2. Foreign exchange risk

The Group is exposed to moderate foreign exchange risk. To minimise FX risk, the Group covers the current cost denominated in EUR with cash deposited in a currency account, raised from clients who pay their debt in EUR.

Based on the results of an analysis of sensitivity as at 31 December 2017, a 10% change in the average exchange rate of PLN assuming no other changes would result in the following change in the profit before tax for 2017:

• EUR (decrease/increase of the exchange rate by PLN 0.4171) decrease/increase in the net profit by PLN 1,371 thousand;
• GBP (increase/decrease of the exchange rate by PLN 0.4700) decrease/increase in the net profit by PLN 18 thousand.

Based on the results of an analysis of sensitivity as at 31 December 2016, a 10% change in the average exchange rate of PLN assuming no other changes would result in the following change in the profit before tax for 2016:

• EUR (decrease/increase of the exchange rate by PLN 0.4424) decrease/increase in the net profit by PLN 1,930 thousand;
• GBP (increase/decrease of the exchange rate by PLN 0.5145) decrease/increase in the net profit by PLN 41 thousand;
• USD (increase/decrease of the exchange rate by PLN 0.4179) decrease/increase in the net profit by PLN 3 thousand.

Table 4 The Group's FX exposure

		As at 31 December 2017
	PLN	EUR*	USD*	GBP*	Total carrying amount in PLN
Cash and cash equivalents	474,706	11,768	-	2	486,476
Trade receivables (net)	39,881	6,751	-	-	46,632
Other receivables	389	-	-	-	389
Total financial assets	514,976	18,519	-	2	533,497
Trade payables	18,538	2,582	-	183	21,303
Liabilities on bonds issue	245,511	-	-	-	245,511
Finance lease liabilities	31	-	-	-	31
Dividends payable and other liabilities	5,029	2,224	-	-	7,254
Total financial liabilities	269,109	4,806	-	183	274,098
Net balance (assets-liabilities)	245,867	13,713	-	(181)	259,399
* Amounts converted to PLN at the rate as at the balance-s heet date.

Table 5 The Group's FX exposure

		As at 31 December 2016
	PLN	EUR*	USD*	GBP*	Total carrying amount in PLN
Other receivables	9,094	-	-	-	9,094
Cash and cash equivalents	430,466	16,346	-	2	446,814
Trade receivables (net)	93,279	7,001	-	-	100,280
Total financial assets	532,839	23,347	-	2	556,188
Trade payables Liabilities on bonds issue	4,127 246,341	1,822 -	25 -	413 -	6,387 246,341
Finance lease liabilities	94	-	-	-	94
Dividends payable and other liabilities	11,519	2,224	-	-	13,743
Total financial liabilities	262,081	4,046	25	413	266,565
Net balance (assets-liabilities)	270,758	19,301	(25)	(411)	289,623
* Amounts converted to PLN at the rate as	at the balance-s	heet date.

3.2.3. Price risk

The Group is exposed to debt and equity securities price risk because of investments held by the Group and classified as available-for-sale in the statements of financial position. The Group is not exposed to any mass commodity price risk.

Debt securities purchased by the Group have a fixed redemption price and are characterised by low risk. Potential changes to their market prices depend on changes in interest rates, the impact of which is presented in Note 3.2.1 above.

3.3 Credit risk

Credit risk is defined as a risk of occurrence of losses due to a counterparty's default of payments of liabilities to the Group or as a risk of decrease in economic value of amounts due as a result of deterioration of a counterparty's ability to pay due amounts.

Credit risk connected with trade receivables is mitigated by the Management Board of the parent entity by performing on-going assessment of counterparties' credibility. In the opinion of the Management Board of the parent entity, there is no material concentration of credit risk of trade receivables within the Group. Resolutions of the Management Board of the parent entity, which are binding in the Group, set payment dates that differ depending on groups of counterparties. These payment dates amount to 21 days for most counterparties, however, for data vendors, they are most often 45 days.

The credibility of counterparties is verified in accordance with internal regulations of GPW and general laws concerning the capital market as applicable to issuers of securities and Exchange Members. In the verification, GPW reviews in detail the application documents including financial statements, copies of entries in the National Court Register, and notifications of the Polish Financial Supervision Authority.

By decision of the Management Board of the parent entity, the portfolio of debt securities comprises only securities issued or guaranteed by the State Treasury (rating A2 according to Moody's). In this way, exposure to the risk of lost benefits or loss is mitigated.

In the case of banks and financial institutions (especially term deposits and bank accounts), only entities with a high rating and stable market position are acceptable (i.e., Moody's rating higher than Baa2). Credit risk of cash is managed by the Group by diversifying banks in which free cash is deposited.

The maximum exposure of the Group to credit risk is reflected in the carrying value of trade receivables, bank deposits held and the value of the portfolio of purchased debt securities.

	As at 31 December
	2017	2016
Trade receivables (net)	46,632	100,280
Other receivables	389	9,094
Bank deposits and current accounts (included in cash and cash equivalents)	486,475	446,798
Total	533,496	556,172

Table 6 The Group's exposure to credit risk

3.4 Liquidity risk

Analysis of the Group's financial position and assets shows that the Group is not materially exposed to liquidity risk.

An analysis of the structure of the Group's assets shows a considerable share of liquid assets and, thus, a very good position of the Group in terms of liquidity. Cash and cash equivalents of the Group amounted to PLN 486,476 thousand as at 31 December 2017 (PLN 446,814 thousand as at 31 December 2016), representing 42.41% of the total assets as at 31 December 2017 (38.59% as at 31 December 2016). An analysis of the structure of liabilities shows the following share of equity in the financing of the operations of the Group: equity accounted for 70.74% of total liabilities and equity as at 31 December 2017 (64.37% as at 31 December 2016).

The Management Board of the parent entity monitors, on an on-going basis, forecasts of the Group's liquidity on the basis of contractual cash flows, based on the current interest rates.

Table 7 Liquidity analysis

		As at 31 December 2017
	Up to 1 M	1-3 M	3-6 M	6-12 M	1-5 Y	> 5 Y	Total
Bank deposits and current accounts and cash in hand	311,232	169,728	5,516	-	-	-	486,476
Trade receivables (ne t)	44,340	2,292	-	-	-	-	46,632
O ther receivables	389	-	-	-	-	-	389
Total assets	355,961	172,020	5,516	-	-	-	533,497
Trade payables	20,507	796	-	-	-	-	21,303
Liabilities on bonds issue	-	-	682	1,256	243,573	-	245,511
Finance lease liabilities	5	10	16	-	-	-	31
Dividends payable and other liabilities	3,746	1,283	-	-	2,224	-	7,254
Total liabilities	24,258	2,089	698	1,256	245,797	-	274,098
Liquidity surplus/gap	331,703	169,931	4,818		(1,256) (245,797)	-	259,399

Table 8 Liquidity analysis

		As at 31 December 2016
	Up to 1 M	1-3 M	3-6 M	6-12 M	1-5 Y	> 5 Y	Total
Bank deposits and current accounts and cash in hand	356,758	25,539	64,517	-	-	-	446,814
Trade receivables (ne t)	30,698	3,336	-	66,246	-	-	100,280
O ther receivables	9,094	-	-	-	-	-	9,094
Total assets	396,550	28,875	64,517	66,246	-	-	556,188
Trade payables	6,317	70	-	-	-	-	6,387
Liabilities on bonds issue	122,279	-	603	-	-	123,459	246,341
Finance lease liabilities	5	10	16	32	31	-	94
Dividends payable and other liabilities	11,519	-	-	-	2,224	-	13,743
Total liabilities	140,120	80	619	32	2,255	123,459	266,565
Liquidity surplus/gap	256,430	28,795	63,898	66,214	(2,255)	(123,459)	289,623

3.5 Capital management

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern in order to provide optimum returns to the shareholders and benefits to other stakeholders.

The Group defines capital as the carrying value of equity including non-controlling interests. The Group also uses external capital (interest-bearing liabilities) in order to optimise the structure and cost of capital.

The equity of the Group was PLN 811,481 thousand representing 70.74% of the total equity and liabilities of the Group as at 31 December 2017 and PLN 745,252 thousand representing 64.37% of the total equity and liabilities of the Group as at 31 December 2016. The parent entity of the Group paid a dividend of PLN 90,239 thousand in 2017 and PLN 99,054 thousand in 2016 (see the statement of changes in equity).

The external capital of the Group includes mainly liabilities in respect of the issuance of GPW S.A. series C, D and E corporate bonds (see Note 13).

The indicators used by the Company in capital management include: net debt / EBITDA, debt to equity, current liquidity, bond interest coverage ratio.

Table 9 Group's capital management indicators

	As at/Year ended	31 December	Optimum
	2017	2016
Debt and financing ratios:
Net debt / EBITDA*	(1.1)	(1.1)	less than 3
Debt to equity**	30.3%	33.1%	50-100%
Liquidity ratios:
Current liquidity***	7.3	2.1	more than 1.5
Coverage of interest on bonds****	29.3	24.3	more than 1.5
* Net debt = interes t-bearing liabilities - liquid as EBI TDA = operating profit + depreciation and amortis	s ets (as at balance-s ation (for a period of	heet date) 12 months )

** Debt to equity = interes t-bearing liabilities / equity (as at balance-s heet date)

**** Coverage of interes t on bonds = EBI TDA / interes t on bonds *** Current liquidity = current as s ets / current liabilities (as at balance-s heet date)

4. Property, plant and equipment

Table 10 Change of the net carrying value of property, plant and equipment by category

		Year ended 31 December 2017
	Land and buildings	Vehicles and machinery	Furniture, fittings and equipment	Property, plant and equipment under construction	Total
Net carrying value - opening balance	78,475	29,003	1,103	10,549	119,130
Additions	279	609	49	6,198	7,135
Reclassification and other adjustments	1,162	12,838	350	(14,350)	-
Disposals	-	(21)	(5)	(14)	(40)
Depreciation charge	(3,030)	(11,893)	(518)	-	(15,441)
Net carrying value - closing balance	76,886	30,536	979	2,383	110,784
As at 31 December 2017:
Gross carrying value	122,443	111,996	6,038	2,383	242,860
Depreciation	(45,557)	(81,460)	(5,059)	-	(132,076)
Net carrying value	76,886	30,536	979	2,383	110,784

Table 11 Change of the net carrying value of property, plant and equipment by category

		Year ended 31 December 2016
	Land and buildings	Vehicles and machinery	Furniture, fittings and equipment	Property, plant and equipment under construction	Total
Net carrying value - opening balance	81,459	12,818	10,783	20,170	125,229
Additions	-	-	65	17,165	17,230
Reclassification and other adjustments	142	27,006	(9,185)	(26,748)	(8,785)
Disposals	(7)	(508)	(28)	(38)	(581)
Depreciation charge	(3,119)	(10,313)	(532)	-	(13,964)
Net carrying value - closing balance	78,475	29,003	1,103	10,549	119,130
As at 31 December 2016:
Gross carrying value	121,001	99,134	6,761	10,549	237,445
Depreciation	(42,526)	(70,131)	(5,658)	-	(118,315)
Net carrying value	78,475	29,003	1,103	10,549	119,130

5. Intangible assets

Table 12 Change of the net carrying value of intangible assets by category

		Year ended 31 December 2017
	Licences	Copyrights	Know how	Goodwill	Total
Net carrying value - opening balance	95,433	452	6,960	170,970	273,815
Additions	7,156	2,035	-	-	9,191
Disposals	(737)	-	-	-	(737)
Amortisation charge	(13,630)	(299)	(349)	-	(14,278)
Net carrying value - closing balance	88,222	2,188	6,611	170,970	267,991
As at 31 December 2017:
Gross carrying value	226,402	6,500	6,989	172,374	412,265
Impairment	-	-	-	(1,404)	(1,404)
Amortisation	(138,180)	(4,312)	(378)	-	(142,870)
Net carrying value	88,222	2,188	6,611	170,970	267,991

Table 13 Change of the net carrying value of intangible assets by category

		Year ended 31 December 2016
	Licences	Copyrights	Know how	Goodwill	Total
Net carrying value - opening balance	90,529	229	-	170,970	261,728
Additions	15,889	198	1,436	-	17,523
Reclassification and other adjustments	3,269	153	5,553	-	8,975
Disposals	(2,370)	-	-	-	(2,370)
Amortisation charge	(11,884)	(128)	(29)	-	(12,041)
Net carrying value - closing balance	95,433	452	6,960	170,970	273,815
As at 31 December 2016:
Gross carrying value	220,569	4,465	6,989	172,374	404,397
Impairment	-	-	-	(1,404)	(1,404)
Amortisation	(125,136)	(4,013)	(29)	-	(129,178)
Net carrying value	95,433	452	6,960	170,970	273,815

UTP

The UTP trading system licence presented under licences was commissioned on 15 April 2013. The useful life of the UTP trading system was determined at 12 years (until 31 March 2025). The net value of the UTP trading system as at 31 December 2017 was PLN 56,253 thousand (as at 31 December 2016: PLN 64,012 thousand).

PCR Project

The Group holds intangible assets (know-how) in a net amount of PLN 6,611 thousand as at 31 December 2017 (PLN 6,960 thousand as at 31 December 2016) relating to the PCR (Price Coupling of Regions) project. PCR ensures co-ownership of system software of the day-ahead market by seven European energy exchanges. The project is aimed at harmonisation of the European market using a shared calculation algorithm. The Group's participation (via TGE) in the project relates mainly to the required implementation of European regulations and the special role of the energy exchange supporting the development of the energy market. The project will provide financial benefits to TGE market participants by maximising the benefits of crossborder trade in electricity.

In 2016, TGE received a refund of part of the PCR cost from the Polish power transmission system operator Polskie Sieci Energetyczne S.A. in the implementation of international projects aiming among others to implement European regulations applicable to cross-border energy exchange (see Note 18). The refund took place under agreements signed with the operator and letters of guarantee issued by the Polish energy regulator as a partial refund of capital expenditure and operating expenses paid by the Group in the project.

Goodwill

Goodwill was PLN 170,970 thousand as at 31 December 2017 including:

• goodwill on GPW's taking control of Towarowa Giełda Energii S.A. at PLN 147,792 thousand,
• goodwill on GPW's taking control of BondSpot S.A. at PLN 22,986 thousand,
• goodwill on InfoEngine taking control of the Electricity Trading Platform (poee) at PLN 1,589 thousand less impairment of PLN 1,404 thousand,
• goodwill on GPW's taking control of GPW Benchmark at PLN 8 thousand.

The goodwill from taking control of the TGE Group was tested for impairment as at 31 December 2017 by estimating the value in use under the discounted cash flows (DCF) method according to the financial assumptions for 2018-2022 including the expected trade in electricity, gas and property rights, taking into account expected market changes in those areas, changes to the price list, operating expenses and capital expenditure. The main assumptions of the impairment test are presented in the table below. The Management Board identified no key assumptions whose change in a reasonably expected degree would cause impairment.

Following the analysis, the GPW Management Board identified no circumstances indicating impairment of the goodwill of the TGE Group as at 31 December 2017.

The goodwill from taking control of BondSpot S.A. was tested for impairment as at 31 December 2017 by estimating the value in use under the discounted cash flows (DCF) method according to the financial assumptions for 2018-2022 including the expected growth of the Treasury debt market and the company's market share, as well as operating expenses and capital expenditure. The main assumptions of the impairment test are presented in the table below. The Management Board identified no key assumptions whose change in a reasonably expected degree would cause impairment.

Following the analysis, the GPW Management Board identified no circumstances indicating impairment of the goodwill of BondSpot S.A. as at 31 December 2017.

Table 14 Main assumptions of the valuation of the recoverable amount

Main assumptions of the valuation of the recoverable amount
		Goodwill				Main assumptions of the impairment test
	Initial recognition	Impair- ment	Goodwill net of impairment	Projection years	WACC	Annual average change of	Annual average change of revenue expenses	Growth rate at the end of f orecast horizon
Goodwill from:
GPW taking control of TGE	147,792		147,792	5	9%	$-3%$	2%	2%
GPW taking control of BondSpot InfoEngine acquisition of	22,986		22,986	5	9%	6%	2%	2%
Electricity Trading Platform (poee)	1,589	(1, 404)	184
GPW taking control of GPWCU	8		8
Total goodwill at 31 December 2017:	172,375	(1, 404)	170,970
Goodwill from:
GPW taking control of TGE	147,792		147,792	5	9%	$-5%$	$-1%$	2%
GPW taking control of BondSpot InfoEngine acquisition of	22,986		22,986	5	9%	3%	2%	2%
Electricity Trading Platform (poee)*	1,589	(1, 404)	184
GPW taking control of GPWCU	8		8
Total goodwill at 31 December 2016:	172,375	(1, 404)	170,970
* Tested for impairment by comparing the carrying value of the cash-generating unit to which goodwill is allocated and fair	$111$ $2211$

value (price of I nfoEngine s hares s old by GPW to TGE)

6. Investment in associates

As at 31 December 2017 and as at 31 December 2016, the parent entity held interest in the following associates:

• Krajowy Depozyt Papierów Wartościowych S.A. (parent entity of the KDPW Group),
• Centrum Giełdowe S.A.,
• Aquis Exchange Limited.

The registered offices of KDPW S.A. and Centrum Giełdowe S.A. are located in Poland, the registered office of Aquis Exchange Limited is located in the United Kingdom.

Investment in Aquis Exchange Limited

On 19 August 2013, the GPW Management Board and Aquis Exchange Limited signed an agreement to take up new issue shares of Aquis Exchange Limited. Aquis Exchange was established in the UK in 2012 and offers a pan-European market in shares on a multilateral trading platform. Its shares were taken up by GPW in two steps, closed on 18 February 2014. The total price was PLN 25,307 thousand (GBP 5 million).

Following the acquisition of the second tranche of shares of Aquis Exchange Limited, GPW held 384,025 ordinary shares representing 36.23% of the total number of shares and giving 30.00% of economic and voting rights in Aquis Exchange Limited as an associate of the GPW Group as at 31 December 2014.

Following an issue of a new tranche of shares in Q3 2015, in which GPW did not participate, GPW's stake in the total number of shares of Aquis decreased from 36.23% as at 31 December 2014 to 31.01% as at 31 December 2015, and GPW's share in economic and voting rights decreased from 30.00% to 26.33%.

Following an issue of a new tranche of shares in 2016, in which GPW did not participate, GPW's stake in the total number of shares of Aquis decreased from 31.01% as at 31 December 2015 to 22.99% as at 31 December 2016, and GPW's share in economic and voting rights decreased from 26.33% to 20.31%.

GPW's share in economic and voting rights remained unchanged at 20.31% as at 31 December 2017.

		As at/Year ended 31 December
	2017	2016
Opening balance	197,231	188,570
Gain on dilution of shares of Aquis Exchange Limited		- 5,807
Dividends	(102)	(150)
Share of profit (after tax)	10,059	3,518
Share of net profit	10,414	3,763
Other increase / (decrease) of profit	(355)	(245)
Share in other comprehensive income	201	(514)
Closing balance	207,389	197,231

Table 15 Change of investment in associates

Table 16 Investment in associates

	As at 31 December
	2017	2016
KDPW S.A. Group	177,315	164,549
Centrum Giełdowe S.A.	16,999	16,383
Aquis Exchange Limited	13,075	16,299
Total	207,389	197,231

Table 17 Data of associates in 2017

		As at/Year ended 31 December 2017
	KDPW Group*	Centrum Giełdowe S.A.	Aquis Exchange Limited	Total
Current assets:	2,219,249	3,890	21,428	n/d
including cash and cash equivalents	70,313	2,925	18,735	n/d
Non-current assets	198,220	67,027	2,632	n/d
Current liabilities	1,861,642	1,824	1,297	n/d
Non-current liabilities	22,384	521	-	n/d
Sales revenue	132,284	15,581	9,791	n/d
Depreciation and amortisation	14,968	2,944	408	n/d
Income tax	9,183	684	-	n/d
Dividend due to GPW S.A. in the 12-month period ended 31 December 2017	-	102	-	n/d
Net profit / (loss) for the year ended 31 December 2017	38,759	2,896	(15,874)	n/d
Group's share in profit / (loss)**	33.33%	24.79%	20.31%	n/d
Group's share in the profit / (loss) for the year ended 31 December 2017	12,565	718	(3,224)	10,059
* The KDPW Group prepares financial s tatements	under the Accountancy Act. The KDPW Group's		net profit pres	ented in

the table was adjus ted to the accounting policies followed by the GPW Group.

Table 18 Data of associates in 2016

		As at/Year ended 31 December 2016
	KDPW Group*	Centrum Giełdowe S.A.	Aquis Exchange Limited**	Total
Current assets:	1,922,516	3,459	42,329	n/d
including cash and cash equivalents	94,093	2,499	39,716	n/d
Non-current assets	219,958	68,994	334	n/d
Current liabilities	1,633,825	6,222	550	n/d
Non-current liabilities	15,860	143	-	n/d
Sales revenue	117,544	14,598	6,521	n/d
Depreciation and amortisation	15,428	2,906	1,009	n/d
Income tax	5,854	267	(1,415)	n/d
Dividend due to GPW S.A. in the 12-month period ended 31 December 2016	-	150	-	n/d
Net profit / (loss) for the year ended 31 December 2016	23,829	1,100	(18,996)	n/d
Group's share in profit / (loss)**	33.33%	24.79%	20.31%	n/d
Group's share in the profit / (loss) for the year ended 31 December 2016	7,698	273	(4,453)	3,518
* The KDPW Group prepares financial s tatements	under the Accountancy Act. The KDPW Group's		net profit pres	ented in

the table was adjus ted to the accounting policies followed by the GPW Group.

** The equity of Aquis was increas ed s everal times in 2016 without the participation of GPW. Cons equently, GPW's s hare in Aquis changed in 2016. GPW's s hare of property and voting rights was 20.31% as at 31 December 2016.

Dilution of investment in Aquis

In 2015 and 2016, Aquis Exchange Limited issued shares without the participation of GPW. The price of the new issue shares was GPW 16.93 per share in 2015 and GBP 18.50 per share in 2016, which was more than the price paid by GPW for Aquis shares (GBP 13.02 per share). As the price of the new issue shares was significantly higher than the price paid for the shares by GPW, the value of GPW's investment in Aquis increased and the company realised gains on dilution at PLN 5,807 thousand in 2016 and PLN 2,754 thousand in 2015. The increase took place even though GPW's stake in the company decreased. Following the share issues without the participation of GPW, GPW's share in Aquis measured by the number of shares decreased from 31.01% as at 31 December 2015 to 22.99% as at 31 December 2016 and GPW's share in economic and voting rights decreased from 26.33% to 20.31%.

Evaluation of impairment indicators of Aquis Exchange Limited

Aquis launched its operation on 26 November 2013. It is now posting losses. The business model of Aquis is based on subscription fees charged for generated traffic rather than on the value of trade as do other trading platforms.

Despite the improved position and financial results of Aquis after 2016, the operation of Aquis and the success of its business model still depend mainly on attracting a sufficient number of members and subscription fees

and sale of trading platform software enabling the company to break even in the future, which is not expected until 2019.

Due to incurred losses, delayed implementation of the strategy, in particular the pace of acquisition of new members and the growth of revenue of Aquis, the GPW Management Board decided to test potential impairment of the investment in Aquis.

The impairment test of the investment in Aquis was performed as at 31 December 2017 by estimating the realisable amount based on the fair value of the investment less the selling cost. The fair value was determined using a comparative method based on the average P/S of exchanges whose expected revenue CAGR 2017- 2019 is 44-99% (average 68%). The minimum growth rate of revenue of Aquis in that period if 86%. In the opinion of the GPW Management Board, the population of operators of exchanges with a high CAGR of revenue seems comparable to Aquis in terms of activities, business models and growth rates. In the opinion of the GPW Management Board, P/S seems to be the most useful ratio to determine the value of the investment in Aquis considering its growth stage, current financial results and growth potential.

The calculations were based on the following key assumptions:

• P/S expected in 2018: 13.2;
• expected growth of Aquis revenue YoY in 2018: 52%.

The realisable amount is PLN 19,666 thousand higher than the net book value of the investment in Aquis.

The values of the key assumptions required for the realisable amount to be equal to the net book value of the investment in Aquis are as follows:

• P/S: down by 60.1%, i.e., P/S of 5.3;
• expected decrease of Aquis revenue YoY in 2018: 60.1%, i.e., ca. 39.3% lower than the actual revenue earned by Aquis in 2017.

GPW also obtained an independent valuation of Aquis commissioned by the Management of Aquis in December 2017 in connection with a potential IPO under consideration. The valuation was provided by an authorised independent advisor (NOMAD) on London's AIM and it showed a fair value of Aquis greater than the net book value of the investment in Aquis presented in the consolidated financial statements of the GPW Group. The fair value was determined by the independent advisor using a P/S which was comparable to that used by the GPW Management Board in the Aquis impairment test.

Based on the analysis, the GPW Management Board identified no impairment of the investment in Aquis as at 31 December 2017

7. Deferred tax

Table 19 Deferred tax assets and liabilities

		Deferred tax (asset) / liability
			(Credited)/	A	s at 31 December 2017
	A s at 1 January 2017	(Credited)/ Debited in prof it	Debited in other comprehensive income	(Asset)/ Liability	Def erred tax asset	Def erred tax liability
Difference between accounting and tax value of property, plant and equipment and intangible assets	12,706	(371)	-	12,335	-	12,335
Difference between accounting and tax value of investment in associates	-	(2,324)	-	(2,324)	(2,324)	-
Impairment allowance for receivables	(1,288)	(3)	-	(1,291)	(1,291)	-
Annual and discretionary awards	(1,315)	(751)	-	(2,066)	(2,066)	-
Retirement benefits	10	(144)	(10)	(144)	(144)	-
Unused holiday	(433)	(42)	-	(475)	(475)	-
Other	(1,814)	(916)	-	(2,730)	(3,806)	1,076
Deferred tax (asset)/liability before netting	7,866	(4,551)	(10)	3,305	(10,106)	13,411
Netting					6,303	(6,303)
Deferred tax (asset)/liability (net)					(3,803)	7,108

Table 20 Deferred tax assets and liabilities

		Deferred tax (asset) / liability
			(Credited)/	A	s at 31 December 2016
	A s at 1 January 2016	(Credited)/ Debited in prof it	Debited in other comprehensive income	(Asset)/ Liability	Deferred tax asset	Deferred tax liability
Difference between accounting and tax value of property, plant and equipment and intangible assets	14,558	(1,852)	-	12,706	-	12,706
Impairment allowance for receivables	(1,289)	1	-	(1,288)	(1,288)	-
Annual and discretionary awards	(1,921)	606	-	(1,315)	(1,315)	-
Retirement benefits	(7)	17	-	10	10	-
Unused holiday	(479)	46	-	(433)	(433)	-
Other	139	(1,993)	40	(1,814)	(2,791)	977
Deferred tax (asset)/liability before netting	11,000	(3,175)	40	7,866	(5,817)	13,683
Netting					4,008	(4,008)
Deferred tax (asset)/liability (net)					(1,809)	9,675

8. Available-for-sale financial assets

Table 21 Non-current available-for-sale financial assets

		As at 31 December 2017
	InfoStrefa	Innex	Sibex	Total
Value at cost	487	3,820	1,343	5,650
Revaluation	-	-	(137)	(137)
Impairment	(411)	(3,820)	(1,011)	(5,242)
Carrying value	76	-	195	271

Table 22 Non-current available-for-sale financial assets

	As at 31 December 2016
	InfoStrefa	Innex	Sibex	Total
Value at cost	487	3,820	1,343	5,650
Revaluation	-	-	(120)	(120)
Impairment	(411)	(3,820)	(1,011)	(5,242)
Carrying value	76	-	212	288

Innex

GPW acquired a stake in the Ukrainian Stock Exchange Innex in July 2008. The intention of GPW was to transform Innex into a state-of-the-art platform of trading in Ukrainian securities and subsequently also derivatives. Impairment of the shares of Innex at PLN 3,820 thousand (equal to the total value of the investment) was written off based on the following:

• deep economic crisis in Ukraine, which significantly affected the market outlook and prevented GPW from pursuing an active policy on the Ukrainian capital market; and
• significant decrease in the number of privatisations, which are currently Innex's main stream of revenue, which caused Innex's loss for 2008.

As the shares of Innex have no active market and it is not possible to reliably determine their fair value, they are recognised at cost less impairment losses.

The financial results of Innex for the previous periods do not meet the conditions of reversal of the impairment loss for the shares of Innex as at 31 December 2017.

Sibex

S.C. SIBEX – Sibiu Stock Exchange S.A. (SIBEX) with its registered office in Romania has been listed on S.C. SIBEX – Sibiu Stock Exchange S.A. (SIBEX) since 2010. The purchase price of SIBEX shares was PLN 1,343 thousand and the fair value based on the share price was PLN 195 thousand as at 31 December 2017 (PLN 212 thousand as at 31 December 2016).

InfoStrefa (formerly "IRK")

On 8 July 2015, GPW executed a conditional agreement to sell 80.02% of shares of InfoStrefa to Polska Agencja Prasowa S.A. The final selling price was PLN 382 thousand.

GPW held 19.98% of shares of InfoStrefa as at 31 December 2017 and as at 31 December 2016. The carrying value of the investment was PLN 76 thousand.

Fair value hierarchy

The fair value of Sibex as at 31 December 2017 and as at 31 December 2016 was recognised at the share price (level 1 of the fair value hierarchy). The value of InfoStrefa was recognised at the selling price of InfoStrefa shares to PAP less a discount for loss of control (level 3 of the fair value hierarchy).

9. Non-current prepayments

As at 31 December 2017, non-current prepayments amounted to PLN 6,116 thousand (as at 31 December 2016: PLN 5,014 thousand).

Non-current prepayments related mainly to the right to perpetual usufruct of land (PLN 2,437 thousand as at 31 December 2017, PLN 2,543 thousand as at 31 December 2016) and to the IT infrastructure support services (PLN 2,766 thousand as at 31 December 2017, PLN 857 thousand as at 31 December 2016).

The current portion of prepayments in respect of the right to perpetual usufruct of land in the amount of PLN 106 thousand as at 31 December 2017 (PLN 106 thousand as at 31 December 2016) is included in prepayments in Note 10.

Perpetual usufruct of land is deferred and amortised over 40 years.

10. Trade and other receivables

Table 23 Trade and other receivables

	As at 31 December
	2017	2016
Gross trade receivables*	49,161	102,221
Impairment allowances for receivables	(2,529)	(1,941)
Total trade receivables	46,632	100,280
Current prepayments	4,141	3,837
Other receivables and advance payments	389	9,094
incl.: receivables from PSE S.A. - refund of PCR Project cos ts (s ee Note 5 and Note 18)	-	8,608
Receivables in respect of tax settlements	12,934	51
incl: VAT	12,899	23
Total other receivables	17,464	12,982
Total trade and other receivables	64,096	113,262
* Gros s trade receivables include receivables in res pect of adjus ted payments	from counterparties	(Note 32) at PLN

1,215 thous and as at 31 December 2017 and PLN 66,246 thous and as at 31 December 2016.

Table 24 Trade receivables by credit quality

	31 December	As at
	2017	2016
Receivables which are neither overdue nor impaired	41,635	92,654
1 to 30 days overdue	1,690	6,451
31 to 61 days overdue	1,136	298
61 to 90 days overdue	84	362
90 to 180 days overdue	695	239
More than 180 days overdue	1,392	276
Total overdue receivables (no impairment)	4,997	7,626
Impaired and overdue receivables	2,529	1,941
Total gross trade receivables	49,161	102,221

Trade receivables which are neither overdue nor impaired include mainly trade receivables from other debtors in respect of adjustments of VAT payments (Note 32) and receivables from Exchange Members (banks and brokerage houses), receivables from issuers of securities as well as receivables for other services.

Table 25 Trade receivables which are neither overdue nor impaired by type of debtor

	As at 31 December
	2017	2016
Exchange Members / Members of markets operated by the GPW Group	19,585	17,856
Issuers*	3,232	260
Other*	18,818	74,538
Total gross trade receivables not overdue	41,635	92,654
* Receivables from debtors who are at the s ame time Exchange Members and I s s uers	or Exchange Members	and Data

Vendors are pres ented under receivables from Exchange Members . Trade receivables in res pect of adjus ted VAT payments are pres ented as receivables from other debtors .

Receivables from Exchange Members include receivables from Polish and foreign banks and brokerage houses, whose risk ratings are presented in the table below. Due to the fact that the Group does not have its own credit rating system, external credit ratings were used. If a single debtor had no credit rating, the rating of the parent company of the debtor was used.

Table 26 Receivables from Exchange Members by Moody's ratings

	As at 31 December
	2017	2016
A a	630	-
A	8,096	5,818
Baa	2,360	405
B a	-	1,641
B oraz BB	3,140	4,553
No rating	5,359	5,439
Total trade receivables from Exchange Members / Members of markets operated by the GPW Group	19,585	17,856

Receivables from issuers include fees due from companies listed on GPW.

As at 31 December 2017, the GPW Group's trade receivables of PLN 7,526 thousand (31 December 2016 – PLN 9,567 thousand) were overdue, including PLN 5,286 thousand in the parent entity. Of the total amount, overdue receivables of the parent entity from debtors in bankruptcy or under creditor arrangements were PLN 1,322 thousand as at 31 December 2017 (31 December 2016 – PLN 1,328 thousand) and other past due receivables were PLN 3,964 thousand (31 December 2016 – PLN 3,050 thousand).

As at 31 December 2017, trade receivables which were overdue and impaired amounted to PLN 2,529 thousand (PLN 1,941 thousand as at 31 December 2016).

Table 27 Change of impairment loss on receivables

	As at 31 December
	2017	2016
Opening balance	1,941	1,716
Initial impairment allowances	1,125	552
Receivables written off during the period as uncollectible	(272)	(217)
Reversal of impairment allowances	(265)	(110)
Closing balance	2,529	1,941

The Group has no collateral on receivables. None of the trade receivables were renegotiated.

Table 28 Gross trade receivables by geographical concentration

	As at 31 December
	2017	2016
Domestic receivables	37,659	91,253
Foreign receivables	11,502	10,968
Total	49,161	102,221

In view of the short due date of trade receivables, the carrying value of those receivables is similar to their fair value.

11. Cash and cash equivalents

Table 29 Cash and cash equivalents

	31 December	As at
	2017	2016
Cash	1	16
Current accounts	40,361	265,502
Bank deposits	446,114	181,296
Total cash and cash equivalents	486,476	446,814

Cash and cash equivalents include bank deposits up to twelve months, current accounts and cash in hand. For short-term bank deposits and current accounts, given their short realisation period, the carrying value is similar to the fair value. The average maturity of the parent entity's deposits was 7 days in 2017 and in 2016.

12. Equity

Table 30 Equity of the shareholders of the parent entity

	As at 31 December
	2017	2016
Share capital	63,865	63,865
Other reserves	1,347	1,184
Retained earnings	745,696	679,678
Total equity	810,908	744,727

12.1 Share capital

The share capital from before the year 1996 with a nominal value of PLN 6,000 thousand was restated by applying the general price index (compound inflation for the period from April 1991 to December 1996 at 464.9%). As at 31 December 2017, the share capital stood at PLN 41,972 thousand and the restatement of the share capital for inflation was PLN 21,893 thousand.

As at 31 December 2017, the share capital of GPW stood at PLN 41,972 thousand and was divided into 41,972,000 shares with a nominal value of PLN 1 per share including:

• 14,779,470 series A shares (35.21% of all shares);
• 27,192,530 series B shares (64.79% of all shares).

The Company's shares were fully paid up.

Series A shares are preferred registered shares which may be exchanged into bearer shares and become series B ordinary shares on exchange. Each series A share gives 2 votes.

Series B shares are bearer shares. Each series B share gives 1 vote.

Table 31 Shareholders in the parent entity as at 31 December 2017 and as at 31 December 2016

	As at 31 December 2017				As at 31 December 2016
		% share			% share
	Value at par	share capital	total vote	Value at par	share capital	total vote
Registered shares:	14,779	35.21%	52.08%	14,779	35.21%	52.08%
State Treasury	14,688	35.00%	51.76%	14,688	35.00%	51.76%
Banks	56	0.13%	0.20%	56	0.13%	0.20%
Brokers	35	0.08%	0.12%	35	0.08%	0.12%
Other	-	0.00%	0.00%	-	0.00%	0.00%
Bearer shares	27,193	64.79%	47.92%	27,193	64.79%	47.92%
Total	41,972	100.00%	100.00%	41,972	100.00%	100.00%

12.2 Other reserves

Table 32 Other reserves

	As at 31 December 2016	Revaluation and disposal	As at 31 December 2017
Capital arising from available-for-sale financial assets and other assets:	1,296	201	1,497
Parent entity	6	-	6
- revaluation	6	-	6
Associate	1,290	201	1,491
Capital arising from actuarial gains/losses:	(112)	(38)	(150)
- revaluation	(141)	(48)	(189)
- deferred tax	29	10	39
Total other reserves: from revaluation	1,184	163	1,347

12.3 Retained earnings

Table 33 Retained earnings in 2017

	Reserve capital	Other reserves	Retained earnings	Prof it for the period	Total
As at 31 December 2016	99,736	279,539	169,309	131,094	679,678
Distribution of the profit for the year ended 31 December 2016	6,618	78,499	45,977	(131,094)	-
Dividend	-	-	(90,239)	-	(90,239)
Other changes in equity	(5)	-	254	-	249
Profit for the year ended 31 December 2017	-	-	-	156,008	156,008
As at 31 December 2017	106,349	358,038	125,301	156,008	745,696

Table 34 Retained earnings in 2016

	Reserve capital	Other reserves	Retained earnings	Prof it for the period	Total
As at 31 December 2015	84,759	281,688	159,403	121,475	647,326
Distribution of the profit for the year ended 31 December 2015	14,493	369	106,613	(121,475)	-
Dividend	-	(2,518)	(96,536)	-	(99,054)
Acquisition of non-controlling interests	484	-	(171)	-	313
Profit for the year ended 31 December 2016 (restated)	-	-	-	131,094	131,094
As at 31 December 2016	99,736	279,539	169,309	131,094	679,678

As required by the Commercial Companies Code, which is binding upon Group companies, the amounts to be divided between the shareholders may not exceed the net profit reported for the last financial year plus retained earnings, less accumulated losses and amounts transferred to reserves that are established in accordance with the law or the Articles of Association that may not be earmarked for the payment of dividend.

As required by the Articles of Association of the parent entity, reserve capital is earmarked for covering losses that may arise in the operations of the parent entity and for supplementing the share capital or for payment of dividends. Reserve capital should not be lower than one-third of the share capital. Transfers from distributed profit to reserve capital may not be lower than 10% of the profit. Transfers may be discontinued when reserve capital equals one-third of the share capital. One-third of reserve capital may only be used to cover losses reported in financial statements.

Reserves are maintained in the parent entity to ensure the ability of financing investments and other expenses connected with the operations of the parent entity. Reserves can be used towards share capital or payment of dividends.

12.4 Dividend

On 19 June 2017, the Ordinary General Meeting of GPW passed a resolution concerning the distribution of the Company's profit earned in 2016, including the allocation of PLN 90,239 thousand to the payment of dividend (PLN 99,054 thousand of the profit earned in 2016). The dividend was PLN 2.15 per share. The dividend record date was set at 19 July 2017. The dividend was paid out on 2 August 2017. The dividend paid to the State Treasury was PLN 31,580 thousand.

12.5 Earnings per share

Table 35 Earnings per share

	Year ended 31 December
	2017	2016
Net profit for the period attributable to the shareholders of the parent entity	156,008	131,094
Weighted average number of ordinary shares (in thousands)	41,972	41,972
Basic and diluted earnings per share (in PLN)	3.72	3.12

13. Bond issue liabilities

Table 36 Bond issue liabilities

	As at 31 December
	2017	2016
Liabilities under bond issue - non-current:	243,573	123,459
Series C bonds	124,050	123,459
Series D and E bonds	119,523	-
Liabilities under bond issue - current:	1,938	122,882
Series A and B bonds	-	122,279
Series C bonds	682	603
Series D and E bonds	1,256	-
Total liabilities under bond issue	245,511	246,341

Series A and B bonds

Series A and B bonds in a total nominal amount of PLN 245,484 thousand were redeemed on 6-12 October 2016 and 2 January 2017.

Series C bonds

On 29 September 2015, the GPW Management Board passed a resolution on the issue of series C unsecured bearer bonds. The bonds were issued on 6 October 2015.

On 6 October 2015, GPW issued 1,250,000 series C bearer bonds in a total nominal amount of PLN 125,000 thousand. The nominal amount and the issue price was PLN 100 per bond. The series C bonds bear interest at a fixed rate of 3.19 percent per annum. Interest on the bonds is paid semi-annually. The bonds are due for redemption on 6 October 2022 against the payment of the nominal value to the bond holders.

The series C bonds were introduced to the alternative trading system on Catalyst.

Series D and E bonds

On 13 October 2016, the GPW Management Board passed a resolution to issue 1,200,000 unsecured bearer bonds with a nominal value of PLN 100 per bond and a total nominal value of PLN 120,000 thousand. The bonds were issued in January 2017 in two series: series D bonds with a total nominal value of PLN 60,000 thousand and series E bonds with a total nominal value of PLN 60,000 thousand. The issue price of series D bonds addressed to institutional investors was PLN 100 per bond. The issue price of series E bonds addressed to individual investors was from PLN 99.88 to PLN 99.96 (depending on the date of subscription).

The bonds bear interest at a floating rate equal to WIBOR 6M plus a margin of 95 basis points. The interest on the bonds is paid semi-annually. The bonds are due for redemption on 31 January 2022.

The series D and E bonds were introduced to trading on the regulated market Catalyst operated by GPW and in the alternative trading system Catalyst operated by BondSpot.

14. Liabilities under loans

On 15 March 2017, the subsidiary TGE took a short-term loan of PLN 60 million from DNB Polska to pay outstanding VAT liabilities following a change of the VAT policy. The interest rate of the loan was based on WIBOR 1M and interest was paid monthly. The maturity of the loan was 30 March 2018. The loan was repaid in full on 2 November 2017 together with interest of PLN 1,267 thousand.

15. Employee benefits payable

Table 37 Employee benefits payable by short-term and long-term liabilities

	As at 31 December
	2017	2016
Retirement benefits	631	620
Other	823	1,212
Non-current	1,454	1,832
Retirement benefits	123	114
Other	12,835	8,000
Current	12,958	8,114
Total benefits in statement of financial position	14,412	9,946

15.1 Liabilities under retirement benefits

The Group records provisions for retirement and pension benefits and jubilee bonuses (employee benefits) based on the actuarial valuation prepared as at the balance sheet date by an independent actuarial advisor.

Table 38 Employee benefits recognised in the statement of comprehensive income according to actuarial valuation

	As at 31 December
	2017	2016
Total benefits in operating expenses	27	150
Total benefits in other comprehensive income	48	(95)
Total benefits in statement of comprehensive income	75	55

Table 39 Change of liabilities under retirement benefits

	Year ended 31 December
	2017	2016
Opening balance	734	833
Current cost of employment Interest cost Cost of past employment and reduction of the benefit plan	82 24 -	76 26 48
Gains and losses on the benefit plan	(79)	-
Actuarial gains/(losses) recognised in other comprehensive income due to change of: - financial assumptions	48 33	(95) 10
- demographic assumptions - other assumptions	2 13	(5) (100)
Total recognised in comprehensive income	75	55
Benefits paid	(55)	(153)
Closing balance	754	734

Table 40 Main actuarial assumptions at dates ending the reporting periods

	2017	2016
Discount rate	3.2%	3.5%
Expected average annual increase of the base of retirement benefits and jubilee awards	3.5%	2,3% - 3,5%
Inflation p.a.	2.5%	2.5%
Weighted average employee mobility	5,1% - 8%	4,5% - 9,9%

15.2 Liabilities under other employee benefits

Table 41 Changes to short-term and long-term other employee benefits

	Year ended 31 December 2017
	Opening balance	Set up	Used	Reclass ified	Released	Closing balance
Annual and discretionary bonuses	5,661	11,368	(6,158)	173	(947)	10,097
Unused holiday leave	2,336	747	(351)	-	(310)	2,422
Overtime	-	291	-	-	-	291
Car allowance	3	-	(1)	-	(2)	-
Benefits not paid	-	25	-	-	-	25
Total current other employee benefits payable	8,000	12,431	(6,510)	173	(1,259)	12,835
Annual and discretionary bonuses	1,212	531	(42)	(173)	(705)	823
Total non-current other employee benefits payable	1,212	531	(42)	(173)	(705)	823
Total other employee benefits payable	9,212	12,962	(6,552)	-	(1,964)	13,658

Table 42 Changes to short-term and long-term other employee benefits

	Year ended 31 December 2016
	Opening balance	Set up	Used	Reclass ified	Released	Closing balance
Annual and discretionary bonuses	6,657	7,925	(7,671)	279	(1,529)	5,661
Unused holiday leave	2,605	59	(87)	-	(241)	2,336
Overtime Car allowance	4 5	- 18	(4) (20)	- -	- -	- 3
Reorganisation severance pay	-	1,498	(1,498)	-	-	-
Total current other employee benefits payable	9,271	9,500	(9,280)	279	(1,770)	8,000
Annual and discretionary bonuses	3,400	1,608	-	(279)	(3,517)	1,212
Total non-current other employee benefits payable	3,400	1,608	-	(279)	(3,517)	1,212
Total other employee benefits payable	12,671	11,108	(9,280)	-	(5,287)	9,212

16. Trade payables

Table 43 Trade payables

	As at 31 December
	2017 2016
Trade payables to associates	197	102
Trade payables to other parties*	21,106	6,285
Total trade payables	21,303	6,387
* As of 2017, trade payables include accruals (univoiced liabilities ).

In the opinion of the Management Board of the parent entity, due to the short due dates of trade payables, the carrying value of trade payables is similar to the fair value.

17. Other liabilities

Table 44 Other liabilities by short-term and long-term liabilities

	As at 31 December
	2017	2016
Other liabilities	2,224	2,224
Total non-current liabilities	2,224	2,224
Dividend payable	232	214
Liabilities in respect of tax settlements (including VAT)	20,753	96,923
incl.: VAT	19,588	94,281
Other liabilities (including mainly investment commitments)	4,798	10,961
Total current liabilities	25,783	108,098
Total other liabilities	28,007	110,322

As at 31 December 2016 the VAT liabilities derived from a change of TGE's tax policy. As at 31 December 2017 the amounts present current VAT liabilities.

18. Accruals and deferred income

Table 45 Accruals and deferred income

	As at 31 December
	2017	2016
Deferred income	5,592	6,200
Non-current accruals and deferred income	5,592	6,200
Financial market	2,200	-
Commodity market*	4,606	4,300
Other income	580	571
Deferred income	7,386	4,871
Accruals**	-	2,273
Current accruals and deferred income	7,386	7,144
Total accruals and deferred income	12,978	13,344
* Members hip fees on markets operated by the TGE Group are paid for the next financial year. ** As of 2017, accruals are pres ented in trade payable (uninvoiced liabilities ).

As at 31 December 2017, the Group presented deferred income of PLN 12,978 thousand including non-current items of PLN 5,592 thousand and current items of PLN 7,386 thousand. As at 31 December 2016, the Group presented deferred income of PLN 11,071 thousand including non-current items of PLN 6,200 thousand and current items of PLN 4,871 thousand.

The main item of deferred income is a subsidy for assets, i.e., the refund of some costs of the PCR project described in Note 5 received from Polskie Sieci Energetyczne S.A. in a carrying value of PLN 6,151 thousand as at 31 December 2017 (PLN 6,471 thousand as at 31 December 2016).

The refund was granted in 2016 upon TGE's fulfilment of conditions set in the agreement but the cash was received in January 2017. The total amount of the refund was PLN 6,998 thousand including:

• subsidy for assets property, plant and equipment at PLN 538 thousand and intangible assets at PLN 5,955 thousand (including know-how described in Note 5); this part of the subsidy was presented in deferred income in the initial amount of PLN 6,493 thousand, including PLN 319 thousand in the profit of 2017 and PLN 22 thousand in 2016;
• subsidy for income at PLN 505 thousand, which covered the cost of salaries of employees participating in the PCR project; this part of the subsidy was presented in other income in 2016.

19. Sales revenue

Table 46 Sales revenue by business segment

	Year ended 31 December
	2017	2016
Financial market	208,849	184,025
Trading	141,336	119,079
Listing	24,968	23,930
Information services and calculation of reference rates	42,545	41,016
Commodity market	142,088	124,927
Trading	70,092	60,857
Register of certificates of origin	30,628	24,907
Clearing	41,019	39,163
Information services	349	-
Other revenue	1,019	1,910
Total sales revenue	351,956	310,862

Table 47 Revenue by geographic distribution

	Year ended 31 December
	2017	Share (%)	2016	Share (%)
Revenue from foreign customers	83,535	23.7%	71,917	23.1%
Revenue from local customers	268,421	76.3%	238,945	76.9%
Total	351,956	100.0%	310,862	100.0%

20. Operating expenses

Table 48 Operating expenses by category

	Year ended 31 December
	2017	2016
Depreciation and amortisation*	28,325	25,793
Salaries	50,764	49,860
Other employee costs	12,081	11,300
Rent and other maintenance fees	9,505	9,444
Fees and charges	6,553	10,009
including fees paid to PFSA	5,579	9,121
External service charges	53,194	38,587
Other operating expenses	5,341	5,162
Total operating expenses	165,763	150,155
* Amortis ation of PLN 1,394 thous and in res pect of intangible as s ets - licences (TGE's new trading s ys tem X-Stream

and Sapri s ys tem). Total depreciation and amortis ation charges in 2017 s tood at PLN 29,719 thous and.

20.1. Salaries and other employee costs

Table 49 Salaries by category

	Year ended 31 December
	2017	2016
Salaries:	49,385	48,398
Gross remuneration	38,856	42,115
Annual and discretionary bonuses	9,098	4,211
Retirement benefits	26	165
Reorganisation severance pay	192	1,602
Non-competition	-	322
Other (including: unused holiday leave, overtime)	1,213	(17)
Supplementary payroll	1,379	1,462
Total employee costs	50,764	49,860

Table 50 Other employee costs by category

	Year ended 31 December
	2017	2016
Social security costs	7,870	7,502
Employee Pension Plan	487	361
Other benefits (including medical services, lunch subsidies, sports, insurance, etc.)	3,724	3,437
Total other employee costs	12,081	11,300

The Group offers its employees who retire a benefit equal to one month's salary (Note 15).

The parent entity also offers its employees defined contribution plans (Employee Pension Scheme). A defined contribution plan is financed with contributions paid by GPW and by an employee to a pension fund operating independently of the financial structure of GPW.

The remuneration system for the members of the Management Boards of Group companies is defined on the basis of the Remuneration Cap Act (the details are described in Note 2.18.4).

The Group offers the employees an incentive program consisting of a fixed part (base salary) and a variable component (annual bonus as well as an additional bonus). The variable component of the incentive system – the annual bonus – is based on the employee's individual appraisal and tied to the results on sales. The additional bonus is awarded under the remuneration rules by the Management Board on request of a superior in an amount not higher than the maximum set additional bonus (fixed as a percentage of the amount of remuneration paid).

20.2. External service charges

Table 51 External service charges by category

	Year ended 31 December
	2017	2016
IT cost:	32,467	22,161
IT infrastructure maintenance	15,752	12,395
TBSP maintenance services	1,091	1,453
Data transmission lines	5,242	5,924
Software modification	10,382	2,389
Office and office equipment maintenance:	3,325	2,860
Repair and maintenance of installations	1,012	1,038
Security	1,396	904
Cleaning	528	495
Phone and mobile phone services	389	423
International (energy) market services	2,003	399
Leasing, rental and maintenance of vehicles	659	527
Transportation services	139	125
Promotion, education, market development	4,618	5,392
Market liquidity support	522	583
Advisory (including: audit, legal services, business consulting)	6,213	3,716
Information services	956	892
Training	813	700
Mail fees	95	78
Bank fees	123	135
Translation	364	224
Other	897	795
Total external service charges	53,194	38,587

20.3. Other operating expenses

Table 52 Other operating expenses by category

	Year ended 31 December
	2017	2016
Consumption of materials and energy	3,239	3,131
Membership fees	627	585
Property insurance	288	290
Impairment of perpetual usufruct	106	106
Business trips	825	831
Conferences	231	80
Other	25	139
Total other operating expenses	5,341	5,162

21. Other income and expenses

21.1. Other income

Table 53 Other income by category

	Year ended 31 December
	2017	2016
Damages received	21	5
Gains on sale of property, plant and equipment	31	9
Reversal of impairment allowance for receivables	2,921	-
Medical services reinvoiced for employees	317	338
Annual correction of input VAT	245	67
Other	324	1,317
Total other income	3,859	1,736

Other income in 2017 and 2016 included an annual correction of VAT, medical services reinvoiced for employees, the refund of overpaid tax at source, final clearing of costs of the Książęca 4 Tenants Association, revenue from the distribution of assets of companies in bankruptcy (trade receivables of the Group) and revenue from the operator of the Polish power transmission system as payment for international projects (see Note 18).

21.2. Other expenses

Table 54 Other expenses by category

	Year ended 31 December
	2017	2016
Donations	3,581	3,116
Loss on sale of property, plant and equipment	18	362
Impairment allowance for receivables	607	395
Damages, penalties, fines	15	-
Other	1,928	680
Total other expenses	6,149	4,553

In 2017, donations were made by the Group to:

• Polish National Foundation PLN 3,000 thousand;
• GPW Foundation PLN 414 thousand;
• Archdiocese of Warsaw PLN 140 thousand;
• Wolność i Demokracja Foundation PLN 25 thousand,
• Dziecięca Fantazja Foundation PLN 2 thousand.

In 2016, donations were made by the Group to:

• Polish National Foundation PLN 3,000 thousand;
• Lesław A. Paga Foundation PLN 34 thousand;
• Polish-Chinese Cooperation Forum Association PLN 28 thousand;
• GPW Foundation PLN 28 thousand (in kind);
• Youth Entrepreneurship Foundation PLN 10 thousand;
• Caritas Diecezji Łowickiej PLN 10 thousand.

22. Financial income and expenses

22.1. Financial income

Table 55 Financial income by category

	Year ended 31 December
	2017	2016
Interest on bank deposits and current accounts	5,331	6,405
Gains on dilution of investment in an associate	-	5,807
Other	219	738
Total financial income	5,550 12,950

22.2. Financial expenses

Table 56 Financial expenses by category

	Year ended 31 December
	2017 2016
Interest on bonds, including:	7,624	8,046
Accrued	2,712	3,211
Paid	4,912	4,835
Interest on loans	1,267	-
Other (including interest on tax liabilities)	2,256 4,033
Total financial expenses	11,147	12,079

23. Income tax

Table 57 Income tax by current and deferred tax

	Year ended 31 December
	2017	2016
Current income tax	36,825	34,320
Deferred tax	(4,551)	(3,175)
Total income tax	32,274	31,145

As required by the Polish tax regulations, the tax rate applicable in 2017 and 2016 is 19%.

Table 58 Reconciliation of the theoretical amount of tax arising from profit before tax and the statutory tax rate with the income tax expense presented in the statement of comprehensive income

	Year ended 31 December
	2017	2016
Profit before income tax	188,365	162,279
Income tax rate	19%	19%
Income tax at the statutory tax rate	35,789	30,833
Tax effect:	(3,515)	313
Non-tax-deductible expenses	1,350	1,384
Additional taxable income	-	6
Gains on dilution of investment in Aquis	-	(1,103)
Non-taxable dividend income	(2,324)	-
Tax losses of subsidiaries not recognised in deferred tax	49	307
Non-taxable share of profit of associates	(1,911)	(668)
Other adjustments	(679)	387
Total income tax	32,274	31,145

24. Contractual commitments and guarantees

Contracted investments in plant, property and equipment were PLN 1,226 thousand as at 31 December 2017 including purchase of CISCO switches at TGE (PLN 811 thousand as at 31 December 2016 including reconstruction of office space in the GPW premises).

Contracted investments in intangible assets were PLN 1,979 thousand as at 31 December 2017 including mainly the trade surveillance system and the purchase of Microsoft licences for the GPW Group. Contracted investments were PLN 527 thousand as at 31 December 2016 including mainly the financial and accounting system and the flow of documents in GPW.

As at 31 December 2017, the subsidiary TGE held a bank guarantee of EUR 7.8 million issued by a bank to NordPool in respect of payments between TGE S.A. and Nord Pool in Market Coupling valid until 30 June 2018.

25. Related party transactions

Related parties of the Group include:

• the associates,
• the State Treasury as the parent entity (holding 35.00% of the share capital and 51.76% of the total number of voting rights as at 31 December 2017),
• entities controlled and jointly controlled by the State Treasury and entities over which the State Treasury has significant influence,
• members of the key management personnel of the Company: the Exchange Management Board and the Exchange Supervisory Board.

25.1. Information about transactions with companies which are related parties of the State Treasury

Companies with a stake held by the State Treasury

The Group keeps no records which would clearly identify and aggregate transactions with all entities which are related parties of the State Treasury.

Companies with a stake held by the State Treasury, with which the parent entity enters into transactions, include issuers (from which GPW charges introduction and listing fees) and Exchange Members (from which GPW charges fees for access to trade on the exchange market, fees for access to the GPW IT systems, and fees for trade in financial instruments).

Entities with a stake held by the State Treasury, with which TGE and IRGiT enter into transactions, include members of the markets operated by TGE and members of the Clearing House. Fees are charged from such entities for participation and for trade on the markets operated by TGE, for issuance and cancellation of property rights in certificates of origin, and for clearing.

All trade transactions with entities with a stake held by the State Treasury are concluded in the normal course of business and are carried out on an arm's length basis.

Polish Financial Supervision Authority

The Act of 12 June 2015 amending the Capital Market Supervision Act and certain other Acts has largely extended the list of entities required to finance supervision (to include among others banks, insurers, investment fund companies, public companies, brokers and foreign investment firms) and changed the amount of contributions of entities.

The Regulation of the Minister of Finance which determines among others the calculation method as well as the terms and conditions of the payment of fees by relevant entities took effect as of 1 January 2016. According to the Regulation, the Chairperson of the Polish Financial Supervision Authority publishes the rates and the indicators necessary to calculate the fees in a public communique promulgated in the Official Journal

of the Polish Financial Supervision Authority by 31 August of each calendar year. On that basis, the entities obliged to pay the fee will calculate the final amount of the annual fee due for the year and pay the fee by 30 September of the calendar year.

Fees paid to PFSA stood at PLN 5,579 thousand in 2017 and PLN 9,121 thousand in 2016.

Tax Office

The Company is subject to taxation under Polish law. Consequently, the Company pays taxes to the State Treasury, which is a related party. The rules and regulations applicable to the Company are the same as those applicable to other entities which are not related parties.

25.2. Transactions with associates

Table 59 Group's transactions with associates

	As at		Year ended
	31 December 2017		31 December 2017
		Receivables Liabilit ies* Sales revenue		Operat ing
				expenses
KDPW S.A. Group	-	-	20	100
C entrum Giełdowe S.A.	-	247	-	2,017
Aquis Exchange Limited	9	20	14	20
Total	9	267	34	2,137

Table 60 Group's transactions with associates

	As at		Year ended
	31 December 2016		31 December 2016
	Receivables	Liabilit ies	Sales revenue	Operat ing
				expenses
KDPW S.A. Group	-	-	-	61
Centrum Giełdowe S.A.	-	102	46	729
Aquis Exchange Limited	-	-	21	-
Total	-	102	67	790

On 18 May 2017, the Ordinary General Meeting of Centrum Giełdowe decided to allocate PLN 413 thousand of the company's profit earned in 2016 to dividend. The dividend amount due to the parent entity was PLN 102 thousand. The dividend was paid on 31 May 2017. In 2016, Centrum Giełdowe paid a dividend for 2015 in a total amount of PLN 606 thousand, of which the dividend amount due to the parent entity was PLN 150 thousand.

Receivables from associates were not written off as uncollectible from associates or provided for in the year ended on 31 December 2017 and 31 December 2016, also the allowances for doubtful receivables from associates were not created.

As owner and lessee of office space in the Centrum Giełdowe building, GPW pays rent and service charges for office space, including joint property, to the building manager, Centrum Giełdowe S.A.

25.3. Other transactions

Książęca 4 Tenants Association

In 2017, GPW also concluded transactions with the Książęca 4 Street Tenants Association of which it is a member. The expenses amounted to PLN 4,023 thousand in 2017 and PLN 3,452 thousand in 2016. Moreover, when the Tenants Association generates a surplus during a year, it is credited to current operating expenses, and where there is a shortage, the Company is obliged to contribute an additional payment. The refund amounted to PLN 75 thousand in 2017 and the additional payment was PLN 153 thousand in 2016.

26. Information on remuneration and benefits of the key management personnel

The management personnel of the Group includes the Exchange Management Board and the Exchange Supervisory Board. The data presented in the table below are for all (current and former) members of the Exchange Management Board and the Exchange Supervisory Board who were in office in 2016 and 2017, respectively.

The table does not present social security contributions paid by the employer.

Table 61 Cost of remuneration and benefits of the Group's key management personnel (paid and due for 2015, 2016 and 2017)

	Year ended 31 December
	2017	2016
Base salary	1,879	2,999
Holiday leave equivalent	177	80
Bonus - bonus bank*	(245)	(362)
Bonus - one-off payment*	784	(354)
Bonus - phantom shares*	(184)	(153)
Other benefits	38	100
Benefits after termination	-	217
Total remuneration of the Exchange Management Board	2,449	2,527
Remuneration of the Exchange Supervisory Board 524		527
Total remuneration of the key management personnel 2,973		3,054
* Negative bonus amounts in 2017 repres ent releas e of provis ions for bonus es of	the Exchange Management Board for

2016 at PLN 947 thous and (including one-of f payment of PLN 284 thous and, bonus bank of PLN 379 thous and, phantom s hares of PLN 284 thous and). I n 2016, the corres ponding provis ions releas ed amounted to PLN 2.4 million (including one-of f payment of PLN 0.7

million, bonus bank of PLN 1.0 million, phantom s hares of PLN 0.7 million).

As at 31 December 2017, due (not paid) remuneration and benefits of the key management personnel stood at PLN 1,617 thousand including bonuses for 2014, 2016 and 2017. The cost of bonuses due for 2014,2016 and 2017 was shown in the statement of comprehensive income for 2014, 2016 and 2017, respectively.

As at 31 December 2016, due (not paid) remuneration and benefits of the key management personnel stood at PLN 1,452 thousand including bonuses for 2014 and 2016 (no bonus was due for 2015). The cost of bonuses due for 2014 and 2016 was shown in the statement of comprehensive income for 2014 and 2016, respectively.

27. Future minimum lease payments

Lease fees paid under operating lease are charged to expenses over the lease period using the straight-line method.

GPW is a party to office space and server room rental agreements for a determined period (until 2018 and 2019) and for an undetermined period (with a termination notice of a three months and twelve months).

Table 62 Total future minimum lease payments under non-cancellable operating leases

	Future minimum lease payments under non cancellable operating lease
	< 1 Y	1-5 Y	> 5 Y	Total
As at 31 December 2017	5,398	3,015	8,347	16,760
As at 31 December 2016	4,759	6,422	8,466	19,647

The amounts above include VAT. All lease payments are denominated in PLN. GPW's annual fees for perpetual usufruct of land are PLN 118 thousand.

28. Segment reporting

These consolidated financial statements disclose information on segments based on components of the entity which are monitored by the managers to make operating decisions. Operating segments are components of the entity for which discrete financial information is available and whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess the Group's performance.

For management purposes, the Group is divided into segments based on the type of services provided. The three main reporting segments are as follows:

1) Financial Market segment, which covers the activity of the Group including organising trade in financial instruments on the exchange as well as related activities. The Group also engages in capital market education, promotion and information activities and organises an alternative trading system.

The Financial Market includes three subsegments:

• Trading (mainly revenue from trading fees which depends on turnover on the exchange, fees for access to and use of exchange systems);
• Listing (revenue from annual securities listing fees and one-off fees, e.g., for introduction of securities to trading on the exchange);
• Information services (mainly revenue from information services for data vendors, historical data, calculation and distribution of WIBOR and WIBID reference rates).

The Financial Market segment includes the companies GPW and BondSpot.

2) Commodity Market segment, which covers the activity of the Group including organising trade in commodities as well as related activities. The Group provides clearing and settlement on the commodity market through the company Warsaw Commodity Clearing House ("IRGiT") and offers exchange trade in commodities (electricity, gas) and operates the Register of Certificates of Origin of electricity through the company TGE. The GPW Group also earns revenues from the activity of a trade operator and the entity responsible for trade balancing on the electricity market.

The Commodity Market includes the following sub-segments:

• Trading (mainly revenue on the Energy Market from spot and forward transactions in electricity, revenue from spot and forward transactions in natural gas, revenue on the Property Rights Market from trade in certificates of origin of electricity);
• Operation of the Register of Certificates of Origin of electricity (mainly revenue from issuance and cancellation of property rights in certificates of origin of electricity);
• CO² Allowances Market (trade in certificates of origin of electricity);
• Clearing (revenue from other fees paid by market participants (members));
• Information services.

The Commodity Market segment includes the TGE Group.

3) The segment Other includes mainly activities of IAiR.

The accounting policies for the operating segments are the same as the accounting policies of the GPW Group.

The Management Board monitors separately the operating results of the segments to make decisions about resources to be allocated and assess the results of their allocation and performance. Each segment is assessed up to the level of net profit or loss.

Transaction prices of transactions between the operating segments are set at arm's length, as for transactions with non-related parties.

The Group's business segments focus their activities on the territory of Poland.

The tables below present a reconciliation of the data analysed by the Management Board of the parent entity with the data shown in these consolidated financial statements.

Table 63 Business segments: Statement of comprehensive income

		Year ended 31 December 2017
	Financial Market	Commodity Market	Other	Total segments	Exclusions and adjustments	Total segments and exclusions
Sales revenue:	209,994	142,321	8,428	360,743	(8,787)	351,956
To third parties	208,849	142,088	1,019	351,956	-	351,956
Sales between segments and intragroup transactions	1,145	233	7,409	8,787	(8,787)	-
Operating expenses:	(120,654) (53,250)			(207) (174,111)	8,348	(165,763)
including depreciation and amortisation	(20,298)	(8,027)	-	(28,325)	-	(28,325)
Profit / (Loss) on sales	89,340	89,071	8,221	186,632	(438)	186,194
Profit / (Loss) on other operations	(3,850)	2,272	-	(1,578)	(712)	(2,290)
Operating profit (loss)	85,490	91,343	8,221	185,054	(1,150)	183,903
Profit / (Loss) on financial operations:	(3,567)	19,211	26	15,670	(21,266)	(5,597)
interest income	4,003	1,492	26	5,521	(190)	5,331
dividend received	1,266	20,000	-	21,266	(21,266)	-
interest cost	(7,628)	(2,945)	-	(10,573)	190	(10,383)
Share of profit of associates	-	-	-	-	10,059	10,059
Profit before income tax	81,923	110,554	8,247	200,724	(12,357)	188,365
Income tax		(17,440) (17,158)	-	(34,598)	2,324	(32,274)
Net profit	64,483	93,396	8,247	166,126	(10,033)	156,091

Table 64 Business segments: Statement of financial position

		Year ended 31 December 2017
	Financial Market	Commodity Market	Other	Total segments	Exclusions and adjustments	Total segments and exclusions
Total assets	762,651	345,524	2,229	1,110,404	36,649	1,147,053
Total liabilities	291,501	47,531	31	339,063	(3,491)	335,572
Net assets (assets - liabilities)	471,150	297,993	2,198	771,341	40,140	811,481
* Exclus ions and adjus tments	include mainly an adjus	tment of inves tments	in as s ociates	s hown at cos	t in the Financial Market

s egment adjus ted to equity valuation (PLN 170 million) les s cons olidation adjus tments (PLN 130 million).

Table 65 Business segments: Statement of comprehensive income

	Year ended 31 December 2016
	Financial Market	Commodity market	Other	Total segments	Exclusions and adjustments	Total segments and exclusions
Sales revenue:	184,406	124,927	4,364	313,697	(2,835)	310,862
To third parties	184,025	124,927	1,910	310,862	-	310,862
Sales between segments and intragroup transactions	381	-	2,454	2,835	(2,835)	-
Operating expenses:	(109,754) (42,556)			(678) (152,988)	2,833	(150,155)
including depreciation and amortisation	(20,203)	(5,495)	(97)	(25,795)	-	(25,795)
Profit /(Loss) on sales	74,652	82,371	3,686	160,709	(2)	160,707
Profit /(Loss) on other operations	(3,615)	797	39	(2,779)	(38)	(2,817)
Operating profit (loss)	71,037	83,168	3,725	157,930	(40)	157,890
Profit /(Loss) on financial operations:	58,580	9,538	36	68,154	(67,283)	871
interest income	4,345	2,024	36	6,405	-	6,405
dividend received	61,590	11,500	-	73,090	(73,090)	-
gains/(losses) on dilution of investment in a subsidiary	-	-	-	-	5,807	5,807
interest cost	(8,059)	(1)	-	(8,060)	-	(8,060)
Share of profit of associates	-	-	-	-	3,518	3,518
Profit before income tax	129,617	92,706	3,761	226,084	(63,805)	162,279
Income tax		(14,255) (16,890)	-	(31,145)	-	(31,145)
Net profit	115,362	75,816	3,761	194,939	(63,805)	131,134

Table 66 Business segments: Statement of financial position

	Year ended 31 December 2016
	Financial Market	Commodity market	Other	Total segments	Exclusions and adjustments	Total segments and exclusions
Total assets	783,586	343,360	3,763	1,130,709	27,139	1,157,848
Total liabilities	294,079	119,644	15	413,738	(1,142)	412,596
Net assets (assets - liabilities)	489,507	223,716	3,748	716,971	28,281	745,252
* Exclus ions and adjus tments include mainly an adjus tment of inves tments in as s ociates s hown at cos t in the Financial Market

s egment adjus ted to equity valuation (PLN 160 million) les s cons olidation adjus tments (PLN 132 million).

29. IRGiT Clearing Guarantee System

The clearing guarantee system operated by IRGiT includes:

• Transaction deposits which cover cash settlement,
• Margins which cover positions in forward instruments,
• Guarantee funds which guarantee the clearing of transactions concluded on forward markets in the event of a shortage of transaction deposits and margins posted by a member,
• Margin monitoring system which compares the amount of liabilities of an IRGiT clearing member under exchange transactions and margins with the amount of posted transaction deposits and margins.

Table 67 Cash deposited with the IRGiT clearing guarantee system

	As at 31 December 2017		As at 31 December 2016
	In IRGiT bank accounts	In client bank accounts	In IRGiT bank accounts	In client bank accounts
Transaction deposits	564,594	315,229	474,858	321,745
Margins	583,359	135,955	333,094	59,381
Guarantee funds	172,864	32,617	102,742	19,842
Total	1,320,817	483,801	910,694	400,968

Non-cash collateral credited to margins stood at PLN 460,630 thousand as at 31 December 2017 and PLN 123,979 thousand as at 31 December 2016.

Cash resources of the IRGiT clearing guarantee system are not assets of the Group and are not presented in the cash assets of the Group.

30. Events after the balance sheet date

There were no significant events after the balance sheet date, i.e., 31 December 2017, that could impact the consolidated financial statements of the GPW Group for the twelve-month period ended 31 December 2017.

The consolidated financial statements are presented by the Management Board of the Warsaw Stock Exchange:

Marek Dietl – President of the Management Board ……………………………………… Jacek Fotek – Vice-President of the Management Board ……………………………………… Michał Cieciórski – Vice-President of the Management Board ………………………………………

Dariusz Kułakowski – Member of the Management Board ………………………………………

Signature of the person responsible for keeping books of account:

Sylwia Sawicka – Chief Accountant ………………………………………

Warsaw, 27 February 2018