Oponeo.pl group's activity in 2016 - ir.oponeo.pl

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

Oponeo.pl group's activity in 2016 - ir.oponeo.pl
Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 1 TABLE OF CONTENT LETTER OF THE CHAIRMAN OF THE BOARD 3 ABOUT OPONEO.PL CAPITAL GROUP 4 SELECTED FINANCIAL DATA 6 1. MACROECONOMIC SITUATION AND E-COMMERCE SECTOR 9 1.1. PACE OF GROWTH . 9 1.2. FINANCIAL MARKET . 10 1.3. AUTOMOTIVE MARKET . 11 1.4. TYRE INDUSTRY . 11 1.5. E-COMMERCE MARKET . 12 1.6. LEGAL CHANGES . 13 2. COMMENTARY ON THE RESULTS OF OPONEO.PL GROUP AND OPONEO.PL LTD16 2.1. MAIN FACTORS AFFECTING FINANCIAL RESULTS . 16 2.1.1. OPONEO.PL GROUP 16 2.1.2. OPONEO.PL LTD 19 2.2. FINANCIAL SITUATION . 21 2.2.1.

OPONEO.PL GROUP 21 2.2.2. OPONEO.PL LTD 23 2.3. CASH FLOWS . 24 2.3.1. OPONEO.PL GROUP 24 2.3.2. OPONEO.PL LTD 25 2.4. CHANGES IN EQUITY . 26 2.4.1. OPONEO.PL GROUP 26 2.4.2. OPONEO.PL LTD 26 2.5. FINANCIAL INDICATORS . 26 2.5.1. OPONEO.PL GROUP 26 2.5.2. OPONEO.PL LTD 27 2.6. OTHER FINANCIAL INFORMATION . 28 2.6.1. CREDITS AND LOANS 28 2.6.2. RECEIVABLES AND OFF-BALANCE SHEET LIABILITIES 28 2.7. PERSPECTIVES FOR OPONEO.PL GROUP AND THE OPONEO.PL LTD . 29 2.7.1. EXTERNAL FACTORS AFFECTING RESULTS 29 2.7.2. PLANNED ACTIONS 30 3. OPONEO.PL GROUP’S ACTIVITY IN 2016 32 3.1. OPONEO.PL GROUP’S STRUCTURE .

32 3.2. OPONEO.PL GROUP’S SALES STRUCTURE . 33 3.3. BUSINESS ACTIVITIES OF OPONEO.PL GROUP’S APPURTENANT COMPANIES . 34 3.3.1. OPONEO.PL LTD 34 3.3.2 BUSINESS ACTIVITIES OF OTHER COMPANIES 36 3.4. BASIC TYPES OF BUSINESS RISK . 39 3.4.1. FINANCIAL RISK 39 3.4.3. RISK ASSOCIATED WITH THE STRATEGY 40 3.4.4. OPERATIONAL RISK 41 3.4.5. LEGAL RISK 41

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 2 3.5. CUSTOMER RELATIONSHIP AND COOPERATION WITH SUPPLIERS . 42 3.6. EMPLOYMENT . 43 3.7. SPONSORING . 43 3.8. OTHER INFORMATION . 43 3.8.1. MATTERS IN DISPUTE 43 3.8.2. RELATED-PARTY TRANSACTIONS 43 4. CORPORATE GOVERNANCE 46 4.1. THE RULES OF CORPORATE GOVERNANCE AND THE SCOPE OF USE . 46 4.1.1. A SET OF CORPORATE GOVERNANCE STANDARDS AND GUIDELINES 46 4.1.2. UNAPPLIED ASPECTS OF THE GOVERNANCE PRINCIPLES 46 4.2. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS FOR THE PROCESS OF FINANCIAL REPORTING . 52 4.3. SHARES AND SHAREHOLDERS .

53 4.3.1. SHAREHOLDER’S STRUCTURE 53 4.3.2. REPURCHASING OF OWN SHARES 54 4.3.3. INFORMATION ON ISSUER’S SHARES HELD BY FROM MANAGEMENT AND SUPERVISORY BODIES 55 4.3.4. SPECIAL CONTROLLING PRIVILLEGES, RESTRICTIONS ON THE TRANSFER OF SECURITIES AND VOTING RIGHTS* 55 4.3.5. SHARE QUOTATION 55 4.3.6. DIVIDEND 56 4.4. STATUTE AND STATUTORY AUTHORITIES . 56 4.4.1. A SET OF CORPORATE GOVERNANCE STANDARDS AND GUIDELINES 57 4.4.2. SUPERVISORY BOARD 59 4.4.3. MANAGEMENT BOARD 60 4.4.4. REMUNERATION AND THE STATUTORY AUTHORITIES 62 4.5. DIVERSITY POLICY . 62 4.6. ENTITY ENTITLED TO AUDIT FINANCIAL STATEMENTS .

62

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 3 LETTER OF THE CHAIRMAN OF THE BOARD Dear Sir or Madam, With full responsibility, I can confirm that it was a very good year for OPONEO.PL Group. In 2016, we sold 2,111,2 tyres, which is 35.6% more than in the previous year. This was mainly due to the results obtained in the domestic market. In Poland we sold over 1,645.9 tyres, which means an increase of 45% compared to 2015. In 2016, sales of tyres for passenger cars and light commercial vehicles increased by 13% in the whole country. The comparison of these dynamics, points to a clear strengthening of the position of OPONEO.PL in the tyre market.

The dynamic increase in sales also translated into a corresponding increase in revenue. Revenues from sales amounted to 545,8 million zlotys, i.e. 31.0% more than in 2015. In the context of growing competition in the market, we achieve higher sales profitability than in the previous year. In 2016, the gross margin on sales was 17.5% compared to 17.3% the previous year. We ended 2016 with a net profit of 15,9 million zlotys, which is 55.4% higher than in 2015. This result guaranteed a high rate of return on equity ratio - at 12.2%.

The high quality of our services resulted in record sales results.

We have a very wide range of tyre products. In 2016, we offered customers more than 6,000 products from nearly 200 manufacturers. Together with the on-line tyre purchases, we also offer customers the option to book a tyre replacement at a partner service network. In total, we have worked with more than 4,700 tyre assembly points. For years, we have been leading the way in customer feedback. In 2016, we won first place in the Automotive category in the prestigious Opineo.pl Online Store Ranking. The year 2016, was also the period of OPONEO.PL Group's expansion into new foreign markets and new spheres of activity.

After the preparation period, in March 2017 we launched an online sales service in Hungary. We have also become the 100% owner of the AutoCentrum.pl website, the leading automotive website on the Polish market. We also started preparations to expand our business by selling bicycles and bicycle accessories. We assume that the newly created Dadelo company, in which we have a 50% stake, will dynamically develop its operations in 2017.

Our expansion into the market, good financial results and profit sharing with shareholders have been appreciated by the capital market. In 2016, the price of shares of OPONEO.PL S.A. increased by over 70%. As a result of the revision of the indexes, from 19th of March 2016, OPONEO.PL LTD is a part of the medium-sized companies index - WIG 80. We predicted good prospects for e-commerce development, as well as our strengths in the form of qualified staff, developed logistics, modern and secure IT solutions and a stable financial position allow us to look into the future with optimism.

I would like to sincerely thank all the employees, customers and contractors who contributed to the development of the OPONEO.PL Group in 2016, and invite you to read the annual report for 2016.

Yours faithfully Dariusz Topolewski Chairman of the Board

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 4 ABOUT OPONEO.PL CAPITAL GROUP OPONEO.PL Group is a leader in the field of online tyre sales in Poland, and is already present in 14 European countries and USA (states of Nevada and California). In 2016, the OPONEO.PL Group earned 545,8 million zlotys in revenue, an increase of 31.0% compared to 2015. 27% Constituted the foreign sale 95% Constituted the sale of tyres 36% The increase in the sale of tyres, compared to 2015 35,8 bn. zl The value of the e-commerce market in Poland in 2016

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 5 OPONEO.PL is No.

1 in the ranking of quality e-shops in the Automotive category. The company debuted on the Warsaw Stock Exchange in 2007, now its capitalization is 655 million zlotys. The OPONEO.PL Group systematically improves its financial results, which translates into regular dividend payments to shareholders. Brief information on the financial results of OPONEO.PL Group, for the years 2007-2016 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Revenues in mln zl 545,8 416,5 322,7 259,1 207,1 171,0 144 ,1 85,7 94,3 64,8 Gross profit/loss on sales in mln zl 95,5 72,3 53,0 39,6 33,6 32,0 27,7 12,5 5,5 5,0 Operating profit in mln zl 23,7 11,2 4,4 4,2 -1,1 6,2 9,4 1,7 6,7 5,1 Gross profit in mln zl 26,7 10,9 4,7 3,7 2,0 10,0 9,5 2,5 7,5 5,2 Net profit in mln zl 15,0 10,3 4,2 3,4 1,4 7,5 7,4 1,9 6,0 4,1 Profit per share in zl 1,08 0,76 0,3 0,24 0,1 0,57 0,59 0,15 0,47 0,33 Declared or paid dividend per one share in zl 0,1 0,05 0,03 0,03 0,2 0 0,01 0 0,1 0 5,5 mln zl 70% The value of dividends paid in 2011-2015 The increase in the value of OPONEO.PL shares in 2016 100 000 200 000 300 000 400 000 500 000 10 20 30 40 50 60 2007-11-13 2008-11-20 2009-11-26 2010-12-01 2011-12-06 2012-12-11 2013-12-23 2015-01-08 2016-01-14 2017-01-18 OPONEO listing of the shares in the years 2007-2017 Turnover (thous.

pcs.) The zloty exchange rate (zł)

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 6 SELECTED FINANCIAL DATA Selected financial data of OPONEO.PL Group in thous. PLN In thous. EUR 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 Net revenue from the sale of products, goods and materials 545 809 416 501 125 114 99 549 Profit (loss) from sales 95 509 72 257 21 893 17 270 Profit (loss) from operating activities 23 685 11 154 5 429 2 666 Gross profit (loss) 26 711 10 905 6 123 2 606 Net profit (loss) 15 962 10 273 3 659 2 455 Net cash flows from operating activities 31 122 21 532 7 035 5 053 Net cash flows from investment activities -7 679 -5 035 -1 736 -1 182 Net cash flows from financial activities 31 412 -570 7 100 -134 Net cash flows in total 54 855 15 927 12 399 3 737 Assets in total 225 623 139 106 51 000 32 642 Liabilities and provisions for liabilities 94 385 58 513 21 335 13 731 Long-term liabilities 6 067 10 1 371 2 Short-term liabilities 88 318 58 503 19 963 13 728 Equity 131 238 80 593 29 665 18 912 Share capital 13 936 13 936 3 150 3 270 Number of shares (in pcs.) 13 936 000 13 936 000 13 936 000 13 936 000 Profit (loss) per ordinary share (in PLN / EUR) 1,15 0,74 0,26 0,18 Diluted profit (loss) per ordinary share (in PLN / EUR) 1,15 0,74 0,26 0,18 Book value per share (in PLN / EUR) 9,42 5,78 2,13 1,36 Diluted Book Value per Share (PLN / EUR) 9,42 5,78 2,13 1,36

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 7 Selected financial data of OPONEO.PL LTD in thous. PLN in thous. EUR 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 Net revenue from the sale of products, goods and materials 544 333 414 245 124 775 99 009 Profit (loss) from sales 94 430 70 541 21 646 16 860 Profit (loss) from operating activities 14 167 2 716 3 247 649 Gross profit (loss) 24 534 9 492 4 624 2 269 Net profit (loss) 15 889 9 801 3 642 2 343 Net cash flows from operating activities 28 661 18 145 6 479 4 337 Net cash flows from investment activities -4 030 1 521 -911 364 Net cash flows from financial activities 30 748 -679 6 950 -162 Net cash flows in total 55 379 18 987 12 518 4 538 Assets in total 254 403 165 264 57 505 38 781 Liabilities and provisions for liabilities 102 687 64 498 23 211 15 135 Long-term liabilities 11 491 5 435 2 597 1 275 Short-term liabilities 91 196 59 064 20 614 13 860 Equity 151 716 100 766 34 294 23 646 Share capital 13 936 13 936 3 150 3 270 Number of shares (in pcs.) 13 936 000 13 936 000 13 936 000 13 936 000 Profit (loss) per ordinary share (in PLN / EUR 1,14 0,70 0,26 0,17 Diluted profit (loss) per ordinary share (in PLN / EUR) 1,14 0,70 0,26 0,17 Book value per share (in PLN / EUR 10,89 7,23 2,47 1,70 Diluted Book Value per Share (PLN / EUR) 10,89 7,23 2,47 1,70 For the purpose of converting the presented data into EUR, the following euro exchange rates were used: For the items of statement of comprehensive income and the statement of cash flows: • 4,3625 - the exchange rate calculated as the average of NBP exchange rates for the last day of each month for the four quarters of 2016, • 4,1839 - the exchange rate calculated as the average of NBP exchange rates for the last day of each month for the four quarters of 2015.

For the items of statement of financial position: • 4,4240 –NBP Exchange rate from 31st of December 2016, • 4,2615 – NBP Exchange rate from 31st of December 2015,

Oponeo.pl group's activity in 2016 - ir.oponeo.pl

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 8 1.MACROECONOMIC SITUATION AND E-COMMERCE SECTOR

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 9 1. MACROECONOMIC SITUATION AND E-COMMERCE SECTOR 1.1. PACE OF GROWTH According to the European Commission, in 2016, the European Union countries grew at a rate of 1.9% compared to 2.2% in 2015.

The main engine of European growth was consumption. In 2016, the pace of economic growth in Poland also weakened, compared to previous years. According to data from GUS, the dynamics of Gross Domestic Product (GDP) amounted to 2.8% compared to 3.9% in the previous year.

GDP growth in Poland was driven primarily by consumption (growth of 3.6%), which was stimulated by rising employment and rising remuneration (while maintaining deflation). The contribution of gross fixed capital formation to GDP was negative. In 2016 these expenditures were 5.5% lower than in the previous year. The limitation of investment activity was mainly due to delays in the absorption of EU funds from the perspective of 2014-2020, as well as an increased uncertainty about the future global economic situation and the effects of economic policy in Poland. The dynamics of GDP growth in the other countries in which OPONEO.PL Group operated was at the following level: -3,00 -2,00 -1,00 0,00 1,00 2,00 3,00 4,00 5,00 6,00 I Q 2014 II Q 2014 III Q 2014 IV Q 2014 I Q 2015 II Q 2015 III Q 2015 IV Q 2015 I Q 2016 II Q 2016 III Q 2016 IV Q 2016 p.p.

Growth factors of GDP in Poland External balance Changes in inventories Gross fixed capital formation Public consumption Consumption in the household sector GDP

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 10 1.2. FINANCIAL MARKET The financial markets in 2016 were characterized by high uncertainty. This caused a vague outlook for the world economy, the result of the referendum on UK’s membership of the EU and the outcome of the US presidential election. These events were conducive to the appreciation of the dollar on world markets; The appreciation of the currency was also influenced by the Federal Reserve’s December interest rate hike.

Under these conditions, in 2016, the euro (EUR) lost 3.2% of it’s value against the dollar (USD), but increased 16.7% against the British pound (GBP).

The Polish financial market was also affected by the uncertainty of changes in the legal environment of financial institutions, the impact of election promises on state finances, the unexpected downgrade of Poland by S & P Global Ratings and risk of being downgraded by other credit rating agencies. As a result of these phenomena, on 31st of December 2016, the zloty was 3.8% weaker against the euro and 7.1% against the US dollar, than at the end of 2015. 1,5 1,2 2,4 1,2 3,2 2,2 4,3 1,9 3,3 2,2 1,8 0,9 0,0 1,0 2,0 3,0 4,0 5,0 Austria Belgium Czech Republic France Spain The Netherlands Ireland Germany Slovakia Turkey Great Britain Italy GDP growth in 2016 (in %) 0,7 0,8 0,9 1 1,1 1,2 1-4-16 2-23-16 4-13-16 6-2-16 7-22-16 9-10-16 10-30-16 12-19-16 USD and GBP quotations in relation to euro USD GBP

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 11 In 2016, deflation continued in Poland. At the end of the year, due to rising food and fuel prices, inflation returned to Poland. In December 2016, prices were 0.8% higher than a year earlier. In conditions of persistent deflation, the Monetary Policy Council kept interest rates unchanged. 1.3. AUTOMOTIVE MARKET According to the Central Register of Vehicles and Drivers, there were 1368,3 passenger cars and 148,4 thousand trucks registered in Poland in 2016. In 2016, more than a million used passenger cars and trucks were brought to Poland from abroad.

The average age of the imported cars was almost 12 years. The increase in demand for imported vehicles was due to falling unemployment, increasing wages and social benefits, and above all changes in the excise tax on imported cars. 1.4. TYRE INDUSTRY In 2016, 206.7 million passenger cars were sold in Europe, 2% more than in the previous year. 9.8 million truck tyres were sold (3% increase). The increase in the number of newly registered cars also had a big impact, - reaching nearly 7%.

Tyres imported from non-European countries have become increasingly popular in Europe. In 2016, 143.4 million passenger cars were imported to Europe (an increase of 14%), including tyres from China 65.5 million (an increase of 13%). Last year, the most popular imported tyres were the ones from the lower shelf. Of the countries in which the OPONEO.PL Group operates, an increase in sales of passenger car tyres has been reported in the United Kingdom, the Czech Republic and Poland. In Spain and Italy sales remained at the same level as in the previous year.

It is estimated that in 2016 in Poland, there were nearly 11 million sold tyres.

In the case of passenger car and light truck tyres, sales were 13% higher than in the previous year. Sales structure also changed. In 2016, sales of premium tyres, SUVs and 17 "+ tyres grew rapidly. The dynamic growth was also noted in the sales of motorbike and scooter tyres – an increase of 59%. This was a result of a significant increase in the number of registrations. On the other hand, truck tyre sales decreased by about 1%. 3,5 3,8 4,1 4,4 4,7 1-4-16 2-23-16 4-13-16 6-2-16 7-22-16 9-10-16 10-30-16 12-19-16 Zloty exchange rates against the major currencies EUR USD

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 12 According to tyre industry estimates, the share of Asian tyres in the Polish market has increased to around 20% in 2016. According to Eurostat data, the number of imported tyres from China to Poland increased by 32%. Their interest was not only due to their lower price but also to their constantly improving quality and endurance. Thanks to these advantages, they displace the used tyres imported to Poland from Germany. 1.5. E-COMMERCE MARKET The dynamics of market growth According to estimates, in 2016 the value of internet commerce in Poland amounted to about 35.8 billion PLN.

In recent years, its value has grown at a rate of several percent a year. The internet commerce market is highly competative. Because of low barriers to entry, the number of online shopping stores is growing rapidly. It is estimated that in 2016, there were around 24 thousand.1 .

In 2016 in the e-commerce market, the following trends were becoming increasingly apparent: • Increasing importance of cross-border trade. This was favoured by the legislation governing distance selling. One of the most important events for the e-commerce industry was the creation of the Polish language version of the German Amazon store. • Expanding the range of products through online stores - customers are more likely to use the stores with a wide range of products. • The development of m-commerce, i.e. an increasing number of purchases are made on tablets or smartphones. This phenomenon requires the adaptation of the Internet domain to customer behavior (responsiveness of pages, applications, etc.).

• Introducing online retail outlets as a response to the needs of customers who would like to become acquainted with the product before making the decision to purchase. 1 Source: Barometr e-commerce 2016, Sociomantic Labs 17,9 26,0 30,0 32,0 35,8 0,0 10,0 20,0 30,0 40,0 2012 2013 2014 2015 2016 The value of e-commerce market in Poland ( in bn. PLN)

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 13 Customers’ preferences According to a survey conducted by Gemius for e-commerce in Poland in 2016, 48% of Internet users have been shopping on the Internet. Primary reasons given by customers for shopping online included: • ability to buy at any time - 84% • no need to drive to the store - 79% • more attractive prices than traditional stores - 75% • ease of comparison - 68% • ease of finding rare specialty products - 67% • larger variety than in traditional stores - 66% As an incentive to use online shopping more frequently, most of the respondents pointed at the lowest cost of delivery (62%).

The choice of the online store by the customers is mainly determined by: • attractive product price - 50% • low shipping / delivery costs - 42% • previous positive experiences - 39% • short delivery time - 29% The majority of respondents purchased clothes and accessories (72% of respondents) via Internet. On the other hand, cars and car parts had been bought by 39% of respondents. 1.6. LEGAL CHANGES The impact on the value of e-commerce car parts in 2016, including tyres, was caused by the announced modifications in excise tax on cars imported from abroad. According to the proposed changes, the tax rate would depend on engine capacity and emission standards, taking into account the age of the car.

According to a draft submitted by the Ministry of Finance, a higher rate than the current rate of tax will apply to older cars.

Excise work has led to a significant increase in imports of used cars from abroad, especially in the last months of 2016.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 14 2.COMMENTARY ON THE RESULTS OF OPONEO.PL GROUP AND OPONEO.PL LTD IN 2016

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 15

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 16 2. COMMENTARY ON THE RESULTS OF OPONEO.PL GROUP AND OPONEO.PL LTD 2.1.

MAIN FACTORS AFFECTING FINANCIAL RESULTS 2.1.1. OPONEO.PL GROUP In 2016, the OPONEO.PL Capital Group generated a net profit of 15,962 PLN - 55.4% higher than in the previous year. In 2016, the main drivers of the financial performance of the OPONEO.PL Group were: Dynamic growth in sales revenue. In 2016, they amounted to 545,809 PLN. i.e., they increased by 31.0% from the previous year. At the same time, domestic sales revenue amounted to 396,501 PLN and increased by 43.1% in relation to 2015. Inflows from overseas sales amounted to 149,308 PLN (increase by 7.1%).

An increase in operating expenses of 34.6% (i.e. costs of sales and administrative expenses) to 80,739 PLN. The increase in the number of contracts executed had a significant impact on the costs of external services (including mainly transport, freight and storage services) and staff costs. There was also a significant increase in marketing expenses. • Sale of the organized part of the company under the name Elektroda.pl for the amount of 15,332 PLN (the result on this transaction obtained in 2016 – 12,494 PLN). • Sale of own shares - by selling own shares the Group generated a tax result in the amount of 24,286 thousand PLN, which caused an additional tax charge of 4,614 thousand PLN.

At the same time, the result from the sale of treasury shares (in accordance with IAS 32) was recognized directly in equity (rather than in profit or loss). • Sale of a stake in Rotopino.pl Joint-stock Company, resulting in a loss of 591 thousand PLN. Basic items of the consolidated statement of comprehensive income of the OPONEO.PL Group (in thous. PLN) 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 Change in thous. PLN in % Sales revenue 545 809 416 501 129 308 31,0 Personal sale expense -450 300 -344 244 -106 056 30,8 Operating expenses (general management and sales) -80 739 -59 991 -20 748 34,6 Result on other operating activities 8 915 -1 112 10 027 X Result on financial activities 3 617 -249 3 866 X Gross result 26 711 10 905 15 806 144,9 Income tax -10 749 -632 -10 117 1 600,8 Net result 15 962 10 273 5 689 55,4 * Including share in profits (losses) of entities accounted for using the equity method and result from the sale of shares of units.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 17 Sales revenue In 2016, sales of the Group amounted to 545,809 PLN. Domestic sales amounted to 396,501 PLN. In 2016, domestic sales increased by 43.1%, while foreign activity grew by 7.1%. As a result, the share of domestic revenues in total revenues of the OPONEO.PL Group from sales increased from 66.5% in 2015 to 72.6% in 2016. The main source of revenue was the sales of tyres. They amounted to 516,437 PLN and represented 94.6% of the total sales revenue of the Group. Throughout 2016, the OPONEO.PL Group sold 2112.2 tyres, i.e.

by 35.6% more than a year earlier. In Poland sales increased by 45.2%, while abroad they increased by 10.0% in relation to 2015.

In 2016, the Group earned 21,141 revenue from sales of rims, i.e. by 37.4% more than in the previous year. 10 273 129 308 -106 056 -20 748 10 027 3 866 -10 117 15 962 Net result 2015 Sales revenues Personal sale expense Operating expenses Result on other operating activities Result on financial activities Income tax Net result 2016 Sources of net result creation of OPONEO.PL Group in 2016 (in thous. PLN) 392 601 516 347 15 385 21 141 7 215 7 440 1 300 791 - 100 000 200 000 300 000 400 000 500 000 600 000 700 000 2015 2016 Sales revenues of OPONEO.PL Group (in thous.PLN) Other goods Other revenues (services) Rims Tyres

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 18 Result on other operating activities In 2016, the result on other operating activities amounted to 8,915 thousand PLN. As a result of the sale of the organized part of the company under the name of Elektroda.pl was included in the amount of 15 332 thousand PLN (the result on this transaction obtained in 2016 - 12 494 thousand PLN). Result on financial activities The significant increase in the result was due to the positive foreign exchange differences, as well as received bonuses, discounts and dividends.

It also includes the result on the sale of shares of Rotopino.pl Joint-stock Company below their fair value, resulting in a loss of 591,000 PLN.

At the same time, this operation positively influenced liquidity, releasing 2,500,000 PLN for financing the Group's activities. This result also includes the Group's negative result from its participation in the results of its associates Dadelo Limited Liability Company. Operational costs The cost of outsourced services is the main component of OPONEO.PL Group's operating expenses. In 2016, they amounted to 35,279 PLN and accounted for 43.7% of total operating expenses. They were 25.6% higher than last year. Their growth was due to the dynamic development of the Group's business. Employee costs (salaries and other employee benefits) also played a significant role.

In 2016, they closed with 14,693 PLN and represented 18.2% of the Group's operating expenses. Staff costs increased by 31.7% compared to the previous year.

In 2016, other operating expenses increased by 65.3% compared with 2015. It was due to the increase in the scale of marketing activities, mainly advertising (including TV advertising) and internet marketing expenditures. Income tax In Q3 2016, the Group received a profit of 24,286 PLN from the sale of its own shares. In accordance with IAS 32, it was directly attributable to equity (and not to the income statement). At the same time, this operation generated a tax result, which incurred an additional fiscal burden of 4,614 PLN. 27 578 36 070 23 017 35 322 10 876 12 968 4 148 4 046 1 026 1 425 134 185 - 10 000 20 000 30 000 40 000 50 000 2015 2016 Structure of category costs of the OPONEO.PL Group (in thous.

pcs) Taxes and fees Usage of materials and energy Depreciacion Personnel costs Other operational costs Foreign service

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 19 2.1.2. OPONEO.PL LTD In 2016, OPONEO.PL LTD earned a net profit of 15,889 PLN - 62.1% higher than in the previous year. The main factors shaping the Company's financial result in 2016 were: • Dynamic growth in sales revenue. In 2016, they amounted to 544,333 PLN, i.e. an increase of 31.4% from the previous year. At the same time domestic sales revenues amounted to 395,519 PLN and an increase of 42.9% from 2015. Inflows from overseas sales amounted to 148,814 PLN (8.3% increase).

• Increase in operating expenses (i.e.

selling and administrative expenses). They amounted to 90,016 PLN, i.e. an increase of 34.8%. The increase in the number of contracts executed had a significant impact on the costs of external services (including mainly transport, freight and storage services) and staff costs. There was also a significant increase in marketing expenses. • Sale of the organized part of the company under the name of Elektroda.pl for the amount of 15,332 PLN (the result on this transaction obtained in 2016 – 12,494 PLN) • Sale of own shares - by selling its own shares the Company generated 24,286 PLN, which caused an additional tax charge of 4,614 PLN.

At the same time, the result from the sale of treasury shares (in accordance with IAS 32) was recognized directly in equity (rather than in profit or loss).

• Sale of a stake in Rotopino.pl LTD, resulting in a loss of 591 thousand PLN. Basic items of the unconsolidated statement of comprehensive income of OPONEO.PL LTD (in thous. PLN) 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 Change In thous. PLN in % Sales revenue 544 333 414 245 130 088 31,4 Personal sale expense -449 903 -343 704 -106 199 30,9 Operating expenses (general management and sales) -90 016 -66 779 -23 237 34,8 Result on other operating activities 9 753 -1 046 10 799 X Result on financial activities 10 367 6 776 3 591 53,0 Gross result 24 534 9 492 15 042 158,5 Income tax 8 645 309 -8 954 X Net result 15 889 9 801 6 088 62,1

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 20 Sales revenue The main element of sales revenue was the sales of tyres, which amounted to 513,459 PLN and represented 94.3% of the total sales revenue of the Company. They were 32.2% higher than in the previous year. In 2016, the Company obtained 21,141 PLN in revenues from sales of rims, i.e. by 40.8% more than in the previous year. The result on other operating activities In 2016, the result on other operating activities amounted to 8,915 PLN. As a result of the sale of the organized part of the company under the name of Elektroda.pl was included in the amount of PLN 15,332 PLN (the result on this transaction obtained in 2016 – 12,494 PLN).

The result on financial activities In 2016, the result on financial activity amounted to 10,367 PLN (6,776 PLN in the previous year). It includes received dividends, bonuses and discounts.

9 801 130 088 -106 199 -23 237 10 799 3 591 - 8 954 15 889 Net result 2015 Sales revenues Personal sale expense Operating expenses Result on other operating activities Result on financial activities Income tax Net result 2016 Sources of net result creation of OPONEO.PL LTD (in thous. PLN) 388 329 513 459 15 019 21 141 9 597 8 943 1 300 790 - 100 000 200 000 300 000 400 000 500 000 600 000 700 000 2015 2016 Sales revenues of OPONEO.PL LTD (in thous. PLN) Other goods Other revenues (services) Rims Tyres

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 21 Operational costs The main component of operational costs OPONEO.PL LTD is the cost of outsourced services.

In 2016 they amounted to 36,070 PLN and accounted for 40.1% of total operating expenses. They were 30.8% higher than last year. Their growth was due to the dynamic development of the Company's business. Employee costs (salaries and other employee benefits) also played a significant role. In 2016, they closed with the amount of 12,968 PLN and represented 14.4% of the Company's operating expenses. Staff costs increased by 19.2% compared to the previous year.

In 2016, other operating expenses increased by 53.5% compared to 2015. It was related to the increase in the scale of marketing activities, mainly advertising (including TV advertising) and internet marketing expenditures. Income tax In the third quarter of 2016, the Company received a profit of 24,286 PLN from the sale of its own shares. In accordance with IAS 32, it was directly charged to equity (and not to the income statement). At the same time, this operation generated a tax result, which caused an additional fiscal burden of 4,614 PLN.

2.2. FINANCIAL SITUATION 2.2.1. OPONEO.PL Group On 31st of December 2016, the total assets of the Capital Group of OPONEO.PL amounted to 225,623 thousand PLN and were 62.2% higher than in the end of 2015.

Apart from organic growth, the increase in assets was a consequence of the acquisition of shares in Dadelo Limited Liability Company, as well as the repurchase of internet domains and shares. 27 578 36 070 23 017 35 322 10 876 12 968 4 148 4 046 1 026 1 425 134 185 - 10 000 20 000 30 000 40 000 50 000 2015 2016 Structure of category costs of the OPONEO.PL LTD (in thous. pcs) Taxes and fees Usage of materials and energy Depreciacion Personnel costs Other operational costs Foreign service

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 22 The main assets of the Group are: • Cash and cash equivalents - on 31st of December 2016 amounted to PLN 94,588 PLN (41.9% of assets). Their condition was 138.1% higher compared to the end of 2015. • Intangible assets - valued at 9,253 PLN (17.4% of assets). They were 21.7% higher compared to December 31st of 2015. This increase resulted, among others, from the purchase of Internet domains. • Inventories valued at 32,244 PLN (14.3% of assets) - during the year they increased by 18.1%. • Trade receivables and other receivables - they amounted to 28,860 PLN, or 12.8% of total assets.

Their value was 77.8% higher compared to the end of 2015.

On 31st of December 2016, OPONEO.PL Group in 58.2 percent financed its activities from its own resources. Equity was 131,238 PLN compared to 80,593 PLN at the end of 2015 (an increase of 62.8%). Next to the profit of 2016, this result of the equity was due to the income from the sale of treasury shares. A significant share in the Group’s total balance sheet also comes from short-term trade payables and other liabilities of 83,633 PLN (37.1% of liabilities). Their size increased by 45.3% compared to the end of 2015.

39,7 94,6 32,2 39,3 27,3 32,2 16,2 28,9 18,8 22,1 4,8 7,5 0,1 1,1 2015-12-31 2016-12-31 Structure of assets of OPONEO.PL Group (in mln PLN) Other current assets Other fixed assets Tangible fixed assets Trade receivables and other receivables Inventories Legal and non-material values Cash and cash equivalents 80,6 131,2 57,6 83,6 0,9 4,7 0,0 6,1 2015-12-31 2016-12-31 Structure of liabilities of the OPONEO.PL Group Long-term liabilities in total Other short-term liabilities in total Trade liabilities and other payables Equity capital in total

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 23 2.2.2. OPONEO.PL LTD On December 31st of 2016, total assets of OPONEO.PL LTD amounted to 254,403 PLN and were 53.9% higher than in the end of 2015. In addition to the dynamic organic growth of the Company, this was due to the sale of own shares. The main assets of the OPONEO.PL Group are: • Cash and cash equivalents - on 31st of December 2016 amounted to 85,121 PLN (33.5% of assets). Their figure was 186.3% higher compared to the end of 2015. • Long-term financial assets in the form of shares in subsidiaries and associates in the amounted to 63,830 PLN.

They accounted for 25.1% of assets. Their value increased by 25.5% year-on- year (since when?) as a result of purchase of shares in Dadelo Limited Liability Company, and AutoCentrum Limited Liability Company.

• Inventories valued at 32,193 PLN (12.7% of assets) - during the year they increased by 18.1%. • Trade receivables and other receivables - they amounted to 28,004 PLN, i.e. 11.0% of total assets. Their value was 37.6% higher compared to the end of 2015. • Tangible fixed assets with a value of 22,051 PLN (8.7% of assets) were 17.6% higher than at the end of 2015. • Intangible assets - valued at 20,345 PLN (8.0% of assets). They were 14.4% higher compared to 31st of December 2015. 29,7 85,1 50,9 63,8 27,3 32,2 17,8 20,3 20,4 28,0 18,8 22,1 0,4 1,7 0,1 1,1 2015-12-31 2016-12-31 Structure of assets of OPONEO.PL LTD (in mln.

PLN) Other current assets Other fixed assets Tangible fixed assets Trade receivables and other receivables Legal and non-material values Inventories Current financial assets Cash and cash equivalents

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 24 On 31st of December 2016, equity accounted for 59.6% of the Company's liabilities. They amounted to 151,716 PLN against 100,766 PLN at the end of 2015 (increase by 50.6%). In addition to the 2016 profit, this was the result of the equity result from the sale of treasury shares. A significant share in total assets of OPONEO.PL Joint-stock Company. They also had short-term payables for deliveries and services and other liabilities of 86,998 PLN (34.2% of liabilities). Their size increased by 48.7% relative to the end of 2015.

2.3. CASH FLOWS 2.3.1. OPONEO.PL Group In 2016, the OPONEO.PL Group recorded positive cash flows of PLN 54,855 PLN (15,927 PLN in the previous year). They consisted of: • Positive cash flows from operating activities of 31,122 PLN. Positive impact on cash flow had: generating profit (15,962 PLN), an increase in liabilities (by 25,129 PLN) and depreciation (4,052 PLN). On the other hand, the increase in receivables (by 11,422 PLN) and inventories (by 4,929 PLN) and the loss on investment activity (11,344 PLN) had a negative impact on cash flows from operating activities.

• Negative cash flows from investing activities amounting to 7,679 PLN.

This was primarily a result of: the purchase of a 50% stake in Dadelo Limited Liability Company, the acquisition of Internet domains and land for investment related to the expansion of the Company's registered office. • Positive cash flows from financing activities of 31,412 PLN, mainly due to the sale of treasury shares. 100,8 151,7 58,5 87,0 0,5 4,2 5,4 11,5 2015-12-31 2016-12-31 Structure of liabilities of OPONEO.PL LTD (in mln. PLN) Long-term liabilities in total Other short-term liabilities Trade liabilities and other payables Equity capital in total

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 25 2.3.2. OPONEO.PL LTD In 2016, OPONEO.PL Capital Group recorded positive cash flow of PLN 55,379 thousand PLN (18,987 PLN in the previous year). They consisted of : • Positive cash flows from operating activities of 28,661 PLN. Positive impact on cash flow : generating profit (15,889 PLN), an increase in liabilities (by 28,481 PLN) and depreciation (4,046 PLN). • The increase in receivables (by 7,646 PLN), inventories (by 4,935 PLN), dividends (8,106 PLN) and loss on investment activity (12,805 PLN) had a negative impact on cash flows from operational activities.

• Negative cash flow from investing activities – 4,030 PLN. This was primarily a result of: the purchase of a 50% stake in Dadelo Limited Liability Company, and land for the investment related to the expansion of the Company's registered office. • Positive cash flows from financing activities amounting to 30,748 PLN occurred primarily due to the sale of treasury shares. 39 733 31 122 -7 679 31 412 94 588 Cash flows - as at 31.12.2015 Cash flows form operational activities Cash flows from investment activities Cash flows from fianancial activities Cash flows - as at 31.12.2016 Cash flows of the OPONEO.PL Group in 2016 (in thous.

PLN) 29 733 28 661 - 4… 30 748 85 112 Cash flows - as at 31.12.2015 Cash flows form operational activities Cash flows from investment activities Cash flows from fianancial activities Cash flows - as at 31.12.2016 Cash flows of the OPONEO.PL LTD ( in thous. PLN)

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 26 2.4. CHANGES IN EQUITY 2.4.1. OPONEO.PL Group At the end of 2016, the Group's equity amounted to 131,238 PLN compared to 80,953 a year earlier. In addition to the profit of the current period, the effect on their size was: taking into account directly the equity from the sale of treasury shares, the increase of supplementary capital as a result of profit sharing for 2015. 2.4.2. OPONEO.PL LTD On 31st of December 2016, the Company's equity amounted to 151,716 PLN compared to 100,766 PLN- a year earlier.

2.5.

FINANCIAL INDICATORS 2.5.1. OPONEO.PL Group In 2016, the OPONEO.PL Group noted an improvement in all key indicators compared to the previous year. Significant improvement occurred especially in terms of operating margin (EBIT) and EBITDA margin. Profitability ratios % 2015 2016 EBIT Margin ( EBIT/ Sales revenues) x 100% 2,7% 4,3% EBITDA Margin ( EBITDA/ Sales revenues) x 100% 3,7% 5,1% Gross margin on sales (Gross profit from sales / Sales revenues) x 100% 17,3% 17,5% Net profit margin (loss) (Net profit / Sales revenues) x 100% 2,5% 2,9% Return on Assets - ROA (Net Profit / Assets) x 100% 7,4% 7,1% Return on Equity -.ROE (Net Profit / Equity) x 100% 12,8% 12,2% Liquidity ratios have also risen, which reached a satisfactory level in December 2016.

The overall debt ratio was lower than a year earlier.

Liquidity and debt ratios 2015 2016 Current liquidity ratio (Current assets / Short-term liabilities) 1,42 1,78 Accelerated liquidity ratio (Current assets - inventories - accrued expenses) / Short-term liabilities 0,96 1,41 Cash liquidity ratio (Cash and cash equivalents / Current assets) 0,48 0,60 Total debt ratio in % (Total liabilities / Total assets) x 100% 42,1% 41,8% Equity ratio of equity (Total liabilities / Equity) 0,73 0,72 In 2016, inventories were rotating faster than last year. Although the rotation of receivables and liabilities has increased, their level indicates that the Company manages the merchant loan well.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 27 Asset turnover ratios 2015 2016 Inventory cycle in days 28,56 25,78 Receivables cycle in days 14,03 19,04 Current liabilities cycle in days 50,57 58,25 Cash cycle -7,97 -13,44 2.5.2. OPONEO.PL LTD In 2016, the Company recorded an improvement in all core profitability ratios compared to the previous year. Significant improvement occurred especially in terms of operating margin (EBIT) and EBITDA margins. Profitability ratios % 2015 2016 EBIT Margin 0,7% 2,6% EBITDA Margin 1,7% 3,3% Gross margin on sales 17,0% 17,3% Net profit (loss) margin 2,4% 2,9% Return on Assets - ROA 5,9% 6,3% Return on Equity - ROE 9,7% 10,5% Liquidity ratios have also risen, which reached a satisfactory level in December 2016.

Liquidity and debt ratios 2015 2016 Current liquidity ratio (Current assets / Short-term liabilities) 1,31 1,61 Accelerated liquidity ratio ( Current assets – inventories-accured expenses)/Short-term liabilities 0,85 1,25 Cash liquidity ratio 0,38 0,58 Total debt ratio in % 39,0% 40,4% Equity ratio of equity 0,64 0,68 In 2016, inventories were rotating faster than last year. Although the rotation of receivables and liabilities has increased, their level indicates that the Group manages the merchant loan well. Asset turnover ratios 2015 2016 Inventory cycle in days 28,55 25,76 Receivables cycle in days 17,69 18,52 Current liabilities cycle in days 51,33 60,31 Cash cycle -5,09 -16,03

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 28 2.6. OTHER FINANCIAL INFORMATION 2.6.1. Credits and loans OPONEO.PL Capital Group has the possibility to use the multipurpose credit line taken from Bank BGŻ BNP Paribas Capital Group. The credit limit is 35,000 PLN. The Loan term determined by December 11, 2019. The interest rate on the loan is the WIBOR base rate for one-month deposits plus a margin of 1.1 p.p. The credit line is secured by the following: • blank promissory note, • capped mortgage up to 25,000 PLN, • assignment of insurance claims, • borrower's declaration of submission to execution in favor of the Bank, • registered pledge on stock, • Transfer of existing and future receivables from all commercial receivables of the Borrower from all its debtors, As at 31st of December 2016, the Group did not use the credit line.

On December 27, 2016, the Company's Supervisory Board approved the loan to a limited liability company named Dadelo in the amount of 5 million PLN, payable in three installments: • 1 million PLN by December 31, 2016, • 2.million PLN by January 10, 2017 • 2 million PLN by February 10, 2017 The loan is due to be repaid by 31st of July 2017. 2.6.2. Receivables and off-balance sheet liabilities In 2016, the parent company OPONEO.PL Capital Group nor any of its subsidiaries have granted loans, credit or loan sureties that would not be included in the balance sheet. Company OPONEO.PL Capital Group has entered into an agreement to lease storage space with limited liability company PDC Industrial Center 43.

In accordance with point 13 is obliged to present to the landlord within 21 days its unconditional, transferable and payable first bank guarantee expressed in EUR. The contractual guarantee is to be maintained for the entire rental period of the storage facilities.

First bank guarantee for limited liability company PDC Industrial Center 43 was issued by BGŻ BNP Paribas in the amount of 215,396,00 EUR on January 25, 2016 with expiry date until January 30, 2017. Due to the conclusion of another contract with limited liability company PDC Industrial Center 43 for the lease of additional storage space, on 28th of December 2016, the bank guarantee issued by BGŻ BNP Paribas was changed to 274,557,39. The guarantee is valid until January 30, 2018. In 2016, there were no significant off-balance sheet items in the OPONEO.PL Capital Group.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 29 2.7.

PERSPECTIVES FOR OPONEO.PL GROUP AND THE OPONEO.PL LTD 2.7.1. External factors affecting results GDP growth The European Commission predicts that in 2017 the Gross Domestic Product in the European Union will increase by 1.8% compared to the previous year. Private consumption will remain a major growth driver. It will be supported by significant improvements in the labour market and increase in nominal wages.2 . It is expected that in Poland, in 2017 (thanks to tendencies recorded in the second half of the year), GDP growth will return to the previous growth path. According to the European Commission, the economic growth rate is 3.2%.

Consumption remains the main driver of development. At the same time, the increased absorption of EU funds should lead to an increase in fixed asset growth. Investments will also encourage low interest rates and a high capacity utilization. OPONEO.PL Group's situation will depend also on the situation on the financial markets, in particular the zloty against the main currencies. The NBP predicts that in 2017 the Polish currency will strengthen against the euro.3 .

E-commerce development The potential of internet commerce is significant. At present, only 15% of Europeans are actively using online shopping, and only 8% of small and medium-sized businesses choose to expand their business with online sales, and provide sales channels to foreign customers. A survey conducted by the European Commission in 2016 shows that only 37% of websites and online shops allow customers from other EU Member States to complete transactions. The possibilities of e-commerce development in Poland are even greater than in Western European countries. In 2016, online sales in Poland accounted for 7.7% of the Polish trade, while in Germany and the UK, it was was 8.8% and 14.5% respectively.

It is estimated that in Poland by 2020 the value of online shopping will increase on average by 16% per year.4 .

2 Source: Winter 2017 Economic Forecast, Komisja Europejska 3 Source: Projekcja inflacji i wzrostu gospodarczego Narodowego Banku Polskiego, 13 marca 2017 roku 4 Source: raport McKinsey, "Cyfrowi Polacy” 1,6 1,4 1,5 1,4 2,3 2,0 1,5 1,6 3,2 2,7 2,8 1,5 3,5 0,9 0,0 1,0 2,0 3,0 4,0 GDP forecast for 2017 projected by the EC (in %)

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 30 Legal changes It is expected propsed changes to Sunday trading laws may have a negative impact on the online sales. Currently, Internet trading is mainly done during the week, and on weekends, consumers prefer to visit shopping malls (again this is American).

By closing the traditional stores on the last day of the week, the popularity of the network's offerings will increase significantly. If the prohibition of trade also includes online shops, the popularity of foreign online shops and the registration of Polish entrepreneurs abroad will increase.

After several years of preparation, the European Union has started the process of implementing unified regulation on distance sales. Standards are introduced in the area of online payments, for example through the PSD2 directive and in supply logistics, inter alia by setting fixed shipping costs and reasonable returns. In May 2016, the European Commission also submitted a draft regulation on geo-blocking. It prohibits merchants from blocking access to customer web interfaces due to their nationality, place of residence or business. It also assumes that the redirection to ‘national’ variants of the stores will be possible only with the explicit consent of the customer.

The obligation to replace summer tyres for winter ones, may be beneficial and boost the demand for tyres. In the following countries covered by the activities of OPONEO.PL Group there is still no obligation to have winter tyres: The Netherlands, Belgium United Kingdom, Ireland, Turkey, Hungary and France (except for the areas of the French Alps). In Germany there is a situational obligation to have winter tyres. On the other hand, the requirement for winter tyres is present in : Austria, the Czech Republic and Slovakia.

2.7.2. Planned actions OPONEO.PL Group intends to continue its projects in the immediate future, including: • Development of sales on the Polish market, inter alia on the basis of cooperation with car repairers; • Launch of sales in other foreign markets - in March 2017 a shop in Hungary started functioning; • Development of sales of automotive parts (using the potential of AutoCentrum.pl LTD); • Extension of the range of offered products - in the near future the OPONEO.PL Group will start selling bicycles and accessories in the new Dadelo business; • Refining logistical processes to improve the quality of services provided.

As part of these activities, in 2017 the Group will increase warehouse space by another 5,500 M², while in 2018 it plans to introduce automation of the process of issuing goods.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 31 3.OPONEO.PL GROUP’S ACTIVITY IN 2016

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 32 3. OPONEO.PL GROUP’S ACTIVITY IN 2016 3.1. OPONEO.PL GROUP’S STRUCTURE On 31st of December 2016, the composition of OPONEO.PL Capital Group was as follows: The OPONEO.PL Group consists of entities operating on the e-commerce market or in the sphere of its infrastructure. OPONEO.PL LTD As a parent company, by exercising control functions in company supervisory bodies, it makes key decisions on both the scope of activities and the finances of the entities forming the Group.

Capital relations of OPONEO.PL LTD with Companies strengthen trade ties. The Company's transactions with its subsidiaries are carried out on an arm's length basis. On 20th of April 2016, OPONEO.PL Capital Group acquired 1,010 shares with a nominal value of 500 PLN each, representing 50% of the share capital of the newly established Dadelo Capital Group, and pledged to make a cash contribution of 6,005 thousand zlotys. The Dadelo Capital Group’s core business is the retail sale of bicycles, bicycle accessories and other travel accessories. % of votes at WZ/ZW Subsidiaries 100% OPONY.PL Sp. z o.o.

100% 100% 100% 99% OPONEO BRANDHOUSE Sp. z o.o.

OPONEO BRANDHOUSE Sp. z o.o. Inwestycje S.K.A. OPONEO.CO.UK LTD Oponeo.de GmbH OPONEO Lastik Satış ve Pazarlama Dış Ticaret Limited Şirketi OPONEO.COM INC. Hurtopon.pl Sp. z o.o. Autocentrum.pl S.A. 100% 100% 100% 100% 1% EXIMO Project Sp. z o.o. Dadelo Sp. z o.o. 10% 50% OPONEO.PL S.A. Affiliates

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 33 On 1st of September 2016, OPONEO.PL LTD acquired from Temetis limited liability company 2,512,000 ordinary shares of AutoCentrum.pl LTD with a nominal value of PLN 0,10 each, representing a 50.26% share of the Company's share capital and the total number of votes at the General Assembly of AutoCentrum.pl LTD.

The total purchase price of AutoCentrum.pl LTD shares amounted to 6,534 thousand PLN and was additionally increased by an amount equal to half of the Company's dividend for the first 8 months of 2016 (see the current report No. 29/2016 dated September 1, 2016 ).

As a result of this investment agreement, OPONEO.PL LTD holds 5,000,000 shares, representing 100% of the share capital of AutoCentrum.pl LTD. The Company owns the independent AutoCentrum.pl portal, which has for years been one of the leading players among Polish automotive websites. 3.2. OPONEO.PL GROUP’S SALES STRUCTURE In 2016, the OPONEO.PL Group sold 2,111,2 tyres, which is 35,6% more than a year earlier. In relation to 2015, sales in Poland increased by 45.2% and by about 10.0% abroad. Number of tyres sold by the OPONEO.PL Group 2015 2016 Annual change in total Country Abroad In total Country Abroad In total Car tyres 1 122 375 373 088 1 495 463 1 632 799 410 777 2 043 576 36,7% Motorcycle tyres 9 875 49 761 59 636 11 886 54 543 66 429 11,4% Truck tyres 1 564 0 1 564 1 230 0 1 230 -21,4% 55 31 487 105 593 287 102 45 742 109 802 311 0 100 200 300 400 500 600 700 800 900 All season tyres - Poland All season tyres - Abroad Winter tyres - Poland Winter tyres - Abroad Summer tyres - Poland Summer tyres - Abroad Number of tyres sold by the OPONEO.PL Group (in thous.

pcs.) 2016 2015

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 34 In the structure of sales of tyres, the largest share belonged to summer tyres. In total, over 1113,3 thousand summer tyres and 850,7 winter tyres have been sold in the country and abroad. In 2016, the OPONEO.PL Group sold 89,008 rims (both aluminum and steel), i.e. 42.7% more than in the previous year. The number of wheels sold by the OPONEO.PL Group 2015 2016 Annual change in total Country Abroad In total Country Abroad In total Alloy wheels 21 627 3 035 24 662 31 285 3 702 34 987 41,9% Steel wheels 21 213 17 033 38 246 31 174 23 596 54 770 43,2% 3.3.

BUSINESS ACTIVITIES OF OPONEO.PL GROUP’S APPURTENANT COMPANIES 3.3.1. OPONEO.PL LTD Core business The core business of OPONEO.PL LTD is retailing tyres and rims through the Internet, using proprietary e-commerce and IT solutions. The company offers tyres for passenger cars, vans and SUVs (4x4), as well as steel and aluminum wheels, chains and other automotive goods. Apart from Poland, the Company sells tyres and rims online, in 10 different European countries. At the end of 2016, the following internet portals were directly owned by the Company: • Oponeo.pl – online shop for tyres and wheels in Poland • Opony.com – a domain that is used to sell tyres and steel rims in Poland • Opony.com.pl – the oldest Polish Tyre vortal , which is Europe's largest database of information on quality, condition, wholesalers and car tyre use.

The same domain is also used to sell tyres. • Motostrada.pl – online shop selling cheap tyres in Poland • Felgi.pl – e-shop specializing in the sale of aluminum wheels; The site also has a unique functionality - virtual wheel fitting; • Partadax.pl – a portal dealing with wholesale of original auto parts, it has a special zone for wholesalers • oponeo.cz – online tyre shop for customers from the Czech Republic • oponeo.sk – e-shop in Slovakia, selling tyres for cars and motorcycles as well as rims; • pneus-oponeo.be – a domain in French for the sale of tyres and rims in Belgium • banden-oponeo.be –a domain in Flemish, for the sale of tyres and rims in Belgium • oponeo.es – is a website that sells tyres, rims and chains on the Iberian Peninsula • oponeo.fr – e-shop for tyres, rims and chains, for French customers, the shop offers the possibility of tyre delivery to over 1,169 tyre replacement services • oponeo.it – an online store selling tyres, rims and chains for Italian customers, and offering a free of charge delivery, up to 1,400 tyre replacement services • oponeo.nl – a shop offering car tyres, steel rims and chains and the possibility of delivery to 332 tyre replacement stations in the Netherlands, free delivery; • oponeo.at – online sales of tyres, steel rims and chains in Austria; • oponeo.ie – online shop selling tyres and wheels for cars and motorbikes, free delivery of tyres within Ireland

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 35 In March 2017, OPONEO.PL LTD, launched another foreign online store that operates in Hungary under the name Oponeo.hu On 21st of March 2016, OPONEO.PL LTD sold an organized part of the company, operating under the name Elektroda.pl. The sold company consisted of an organized set of tangible and intangible components designed to run a web portal, which provides the information in the electronics and discussion forum. The company also offers free delivery of tyres to their replacement services. This service was available in 974 workshops.

The number of partner sites increased by 18.7% compared to the end of 2015. In the fourth quarter of 2016, 11.2% of OPONEO.PL customers benefited from the on-line shopping service, with the possibility of booking free tyre replacement in one of the affiliate services. Sales results In 2016, OPONEO.PL LTD sold 1919.6 tyres, i.e. by 40.5% more than a year earlier. Domestic sales were 1626,7 thousand tyres - 84.7% of the total number of tyres sold. It was 46.4% higher than in the previous year. Sales of tyres through foreign domains were 292,9 units and increased by 14.9% in relation to 2015.

The Company's sales were dominated by car tyres (97.6% of all tyres sold). Number of tyres sold by the OPONEO.PL LTD.

2015 2016 Annual change in total Country Abroad In total Country Abroad In total Car tyres 1 099 846 227 676 1 327 522 1 613 647 260 818 1 874 465 41,2% Motorcycle tyres 9 785 27 209 36 994 11 812 32 103 43 915 18,7% Truck tyres 1 564 0 1 564 1 230 0 1 230 -21,4% In the tyre sales structure, summer tyres had the highest share. They were sold in Poland and abroad in quantities of 990,5 thousand pcs, i.e. by 31.3% more than in the previous year. At the same time, a dynamic increase in the sales of all-season tyres (79.1%) and winter (48.3% increase) was recorded. In 2016, the Company sold 82,5 thousand rims (an increase of 47.9% compared to the previous year).

The number of wheels sold by the OPONEO.PL LTD. 2015 2016 Annual change in total Country Abroad In total Country Abroad In total Alloy wheels 21 627 1 883 23 510 31 285 2 617 33 902 44,2% Steel wheels 21 213 11 079 32 292 31 174 17 473 48 647 50,6% Organisation and infrastructure The company has in Bydgoszcz a modern logistics center, occupying a total of 25 thousand m² of space. It is able to send more than 35,000 tyres a day to individual customers. Internet sales are realized by means of IT solutions, developed independently by the expanded IT Department, which is an integral part of the Company.

On 31st of December 2016, the company employed 222 people against 208 at the end of 2015. Awards and honourable mentions In 2016, OPONEO.PL LTD received the following awards and honourable mentions: • 1st place in the Automotive category in the OPINEO 2016 online store ranking,

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 36 • The title of the Export Eagle in the Kujawsko-Pomorskie Voivodship in the category of the Most Dynamic Exporter, in the ranking prepared by Rzeczpospolita, • An honourable mention in the 11th edition of the Business Cheetah Competition 2016, organized by the Institute of European Business, • An honourable mention in the 4th edition of the Global Company Competition 2016, on the basis of reliable financial data from the National Court Register and Customs Offices, • Global Leader of the Future, in the Global Leaders of the Future Competition, organized by think tank Poland, Go Global!

OPONEO.PL LTD Website is certified and approved by the Michelin and Continental ,guaranteeing high quality at every stage of tyre purchase. 3.3.2 Business activities of other companies Opony.pl Limited Liability Company The core business of Opony.pl Limited Liability Company, based in Bydgoszcz, is wholesale of parts and accessories for motor vehicles. The Company owns the Opony.pl online shop. On 31st of December 2016, the Company's share capital amounted to 1225 PLN and did not change during the last year.

In 2016, the Management Board of Opony.pl Limited Liability Company was a single person.

This function was performed by Arkadiusz Kocemba.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 37 On 31st of December 2016, the assets of Opony.pl LTD Amounted to 1,328 PLN against 1,108 PLN a year earlier. In 2016, the Company received 216 thousand PLN net profit in comparison with 3 thousands PLN in 2015. OPONEO BRANDHOUSE Limited Liability Company OPONEO BRANDHOUSE Limited Liability Company based in Bydgoszcz operates in the field of intellectual property rights management (including trademark rights) and marketing. On 31st of December 2016, the Company's share capital amounted to 28,921 PLN and did not change during the year.

In 2016, Filip Fischer was the President of the one-man Board of Directors. On 31st of December 2016, the Company's total assets amounted to 31,659 PLN compared to 30,360 PLN a year earlier. In 2016, the net profit of OPONEO BRANDHOUSE Limited Liability Company amounted to 8,412 PLN ( 7,250 PLN in 2015). Oponeo Brandhouse Limited Liability Company, has been awarded by the Institute of European Business in the eleventh edition of the Cheetahs of Business 2016, ninth edition of Effective Company in 2016, and the fourth edition of the Promotional Strong Trustworthy Company in 2016, on the basis of reliable financial data from the National Court Register.

OPONEO BRANDHOUSE Limited Liability Company Inwestycje Partnership Limited by Shares The subject of the activity of OPONEO BRANDHOUSE Limited Liability Company Investment Partnership Limited by Shares with a registered office in Bydgoszcz, was the management of shares in Rotopino.pl. On 31st of December 2016 the share capital of the Company amounted to 100.000 PLN. The general partner of the Company is OPONEO BRANDHOUSE Limited Liability Company. On 31st of December 2016, the Company's assets amounted to 5,046 PLN. In 2016, it generated a net loss of 1,211 PLN.

HURTOPON.PL Limited Liability Company HURTOPON.PL Limited Liability Company with its registered office in Bydgoszcz, was established in 2005.

The Company's main objective, is to provide companies in the tyre, automotive and transportation industries with an online trading platform. On this platform wholesalers can place offers for sale and purchase of tyres and wheels. HURTOPON.PL Limited Liability Company does not offer any products on its own and is not a contractual party between users and suppliers.

On 31st of December 2016, the Company's share capital amounted to 150,000 PLN and did not change during the year. In 2016, Krzysztof Huss was the President of the Management Board. The Management Board of the Company was a one-man Board. AutoCentrum.pl LTD AutoCentrum.pl LTD based in Kraków, is a company active in the field of new media. Its activity is focused on the internet market. On 31st of December 2016, the Company's share capital amounted to 500,000 PLN.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 38 In 2016, the Board of AutoCentrum.pl LTD,was a one-man Board.

Zachar Zawadzki was the President of the Management Board. The AutoCentrum.pl website, created by the Company, was created based on the idea of "users for users". Since its inception in 2000, it has been pursuing the strategy of a leading online automotive medium based on the development of its own services, acquiring content from users and creating new services based on the needs of its customers. It offers drivers tools such as: Cost Log and Virtual Breathalyzer. It has guides such as: LPG Calculator, Gasoline or diesel, Loan or Leasing. The website also provides links to auto parts stores.

On 31st of December 2016, the assets of AutoCentrum.pl LTD amounted to 1,435 thousand PLN. In 2016, the Company achieved a net profit of 335 thousand PLN. OPONEO.CO.UK LTD The core business of OPONEO.CO.UK LTD based in London is marketing, online sales, wholesale and retail of automotive products, tyres and car parts. The company operates in the UK via oponeo.co.uk platform. Delivery time of goods purchased in the UK is 2-5 working days. The company cooperates with 675 sites mounting tyres, and supplies them with tyres free of charge. In 2016, the Management Board of the Company consisted of: • Dariusz Topolewski – President of the Management Board • Ernest Pujszo – Member of the Management Board • Seweryn Rutkowski – Member of the Management Board On 31st of December 2016, the Company's share capital was 100 GBP.

At the end of 2016, the assets of OPONEO.CO.UK LTD amounted to 3,495 PLN ( 6,618 PLN at the end of 2015). The Company ended 2016 with a net profit of 410,000 PLN compared to 781,000 PLN of net profit in the previous year.

Oponeo.de. GmbH The company Oponeo.de. GmbH based in Berlin, deals with the sale of tyres and wheels, as well as spare parts and accessories for cars and motorcycles. In Germany, the Company operates through the oponeo.de platform. Goods are available to customers at the Company's expense within 2-4 days. On 31st of December 2016, the Company's share capital amounted to 25.000 euro. In 2016, Filip Fischer was the President of the one-man Board. On 31st of December 2016, the Company's assets amounted to 400,000 PLN against 572,000 PLN at the end of the previous year. In 2016, the Company ended with a net loss of 22,000 PLN (loss of 211,000 PLN in the previous year).

OPONEO.COM INC. The Company OPONEO.COM.INC. based in Wilmington, was founded in 2012. Its scope of activity is based on the online sales of tyres, through the oponeo.com website in states of Nevada and California (since may 2016). In 2016, the Management Board of the Company consisted of: • Dariusz Topolewski – President of the Management Board

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 39 • Ernest Pujszo – Vice President of the Board On 31st of December 2016, the Company's assets amounted to 250,000 PLN( 351,000 PLN a year earlier).

In 2016 ,the net result of the Company amounted to 98,000 PLN, against 181,000 PLN net loss in 2015. OPONEO Lastik Satış ve Pazarlama Dış Ticaret Limited Şirketi OPONEO Lastik Satış ve Pazarlama Dış Ticaret Limited Şirketi, based in Istanbul, sells a wide assortment of tyres for cars and motorcycles through the Oponeo.com.tr platform. On the Company's website you can also read popular articles and tips on automotive topics. On 6th of April 2016, the Company's share capital was raised from 410,000 Turkish lira up to 580,00 Turkish lira.

In 2016, the Management Board of the Company consisted of: • Ernest Pujszo – President of the Management Board • Seweryn Rutkowski – Member of the Management Board On 31st of December 2016, the assets of OPONEO Lastik Satış ve Pazarlama Dış Ticaret Limited Şirketi amounted to 502,000 PLN as compared to 541,000 PLN at the end of 2015. The net result of the Company amounted to 117,000 PLN( 111,000 PLN net loss in the previous year). Dadelo Limited Liability Company The core business of the Company is retail sales of bicycles and bicycle accessories via Internet. In addition, the product base will be expanded with other travel accessories used in sports, such as running, Nordic walking or swimming.

On 31st of December 2016, the Company's share capital amounted to 1,010 PLN. Company shareholders: 50% of the shares belong to OPONEO.PL Joint-stock Company, and CCR Sport Limited Liability Company. The composition of the Management Board as at 31st of December 2016: • Marcin Tomasz Sobczyński – Member of the Management Board • Ryszard Zawieruszyński - Member of the Management Board 3.4. BASIC TYPES OF BUSINESS RISK 3.4.1. Financial risk The activities of the OPONEO.PL Group are influenced by: • Foreign exchange risk - The Group conducts trade activities outside of Poland, mainly within the European Union, and therefore fluctuations in exchange rates affect its results.

The Group strives to balance revenues and expenses in a given currency and includes forward hedging transactions in respect of payments and receivables in foreign currency. Approximately one month before the start of the current sales season, OPONEO.PL Joint-stock Company estimates the amount of foreign exchange purchases. This is the moment, when national companies announce their price lists and the terms of purchase. These elements are the reference points for deciding on the volume of purchases in a foreign currency. In order to calculate the purchase price in PLN, the exchange rates applicable at the time of estimation of purchases

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 40 are taken into account. As regards handling and securing foreign exchange transactions, the Parent Entity cooperates with BGŻ BNP Paribas Joint-stock Company. • Interest rate risk - companies in the OPONEO.PL Group use variable rate credit lines; therefore, increases in official interest rates may pose a risk of increased financing costs for the Group. The Group does not use hedging instruments for the interest rate risk. • Credit risk - this may be due to the economic downturn, which will worsen the payment situation of counterparties.

However, such risk is negligible, as payments for goods are largely carried out by cash on delivery. Granting credit to a certain customer is evaluated on a case- by-case basis. In addition, trade receivables are insured at Euler Hermes company. • Liquidity risk - The OPONEO.PL Group constantly monitors the chargeability of receivables and liabilities. OPONEO.PL aims to maintain financial balance also through the use of various sources of financing (bank credit, merchant loans). A threat to the Group may be the tightening of lending policy or limiting of the possibility to obtain external financing.

3.4.2. Risk associated with the macroeconomic situation The financial situation of the OPONEO.PL Group depends on the economic situation of Poland and Europe, and in particular on: • The pace of economic growth and the share of consumption in creating GDP growth. The increase in the wealth level of society and the climate conducive to making purchasing decisions translate into an increase in demand for means of transport and their equipment. The recession can lead to: – The limitation of demand for tyres and other car accessories, as well as a decrease in their prices and dealer margins. At the same time, a low number of new registrations may have a positive impact on the mid-term tyre demand associated with replacing old tyres with new tyres.

– The reduction of individual modes of transport due to lack of funds for their maintenance; This will reduce tyre wear and thus reduce the need for replacement. • Monetary policy, including the level of interest rates, which together with the banks' lending policy determine the level of household purchases for credit. • The situation on the foreign exchange market and the zloty exchange rate. Significant depreciation of the zloty, influencing the rise in prices of imported goods, may translate into a drop in demand for imported cars and accessories.

• Higher prices of raw materials, especially crude oil and rubber, which will lead to higher tyre prices.

• Overproduction of tyres, which may result in a decrease in their prices. • Increasing competition in the market - low entry barriers for online shops, may cause an increase in competitive pressure and decrease margins. 3.4.3. Risk associated with the strategy Strategic risk is related to the potential for negative financial consequences of misleading decisions, made on the basis of an incorrect assessment of the organization's strategic direction, and in particular:

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 41 • Improper assessment of the pace of e-commerce development.Higher than the Group's long- term plans pace of market development, may result in unsuitable sales processes, and the Group may lose its leading position on the market. • The failure to include technological developments in the Group's long-term development plans, i.e. new tyre production technologies, the use of drones in delivery of consignments. • Inadequate assessment of future customer preferences, regarding the use of the latest technology (mobile sales, abandonment of private cars for public transport).

3.4.4. Operational risk While conducting business in the e-commerce area, the OPONEO.PL Group is exposed to the following risks: • IT risk, i.e. problems related to: – Ensuring the continuity of the application. Any problems with the correct functioning of IT systems could mean a reduction in sales volume or even prevent it from running.In order to prevent occurrence of such a situation, the Group uses high quality hardware with low failure rate and secures itself by a full multiplication of hardware and software. – Potential system intrusion. The connection to the Internet IT systems creates the potential for cyber-crimes, such as hacking and denial of service.

The Group does not underestimate this risk by maintaining a team of people responsible for the security of the portal and by applying appropriate security and safety procedures.

• The risk of problems related to Logistics. The company is guaranteeing the availability of goods in the warehouse, proper complementation and packing of goods,as well as cooperation with couriers. • Risks associated with an excessive stockpiling. The risk of improper assessment, such as weather - large tyre stocks generate additional costs and cause their aging. • The risk related to concentration of commodity in one place. The logistic center and basic warehouse facilities are located in the Bydgoszcz region. Any accidental events (fire, flood, etc.) would result in serious disruptions of supply continuity to the recipients.

In order to minimize the possible negative effects of this risk factor, a system was implemented to allow systematic backups of all information and possible immediate recovery of an IT network based on an emergency system. There are also insurance contracts that cover any possible losses. • The risk of outflow of skilled workers - lack of qualified personnel may lead to an increase in errors in order processing.

3.4.5. Legal risk The activities of the OPONEO.PL Group depend primarily on legal changes in the following areas: • the tax system - an increase in fiscal burdens can lead to a lower profitability of this activity; • rules of trade - the introduction of trade restrictions in online stores on Sunday, may adversely affect their turnover; • labour and social security laws that can translate into increased employment costs; • regulations concerning entities operating in the telecommunications market.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 42 There is also a risk of differences in interpretation of tax laws.

The activities of the OPONEO.PL Group and its tax treatment in declarations and tax returns may be considered by the tax authorities to be incompatible. If the tax authorities interpret tax regulations differently than those used to calculate the tax liability made by the Group, such a situation could have a material impact on its business. 3.5. CUSTOMER RELATIONSHIP AND COOPERATION WITH SUPPLIERS The customers of the OPONEO.PL Group are mainly individual clients. In its activities the Group takes into account their diverse needs and preferences: • The Group's offer - it covers about 6,000 products from over 180 manufacturers.

These are tyres not older than 18 months from the date of their manufacture, i.e. this period is half shorter than that intended for sale by the Polish PN-C94300-7 standard. • Shipping costs - the survey shows that they are one of the key factors that motivate individual customers to shop online. Most of the stores belonging to the OPONEO.PL Group provide customers with free of charge delivery.

• Time of delivery - In Poland, purchased goods are predominantly delivered within 24 working hours. • Forms of payment - Customers can use various forms of payment, and some stores provide them with an opportunity to make purchases in installments. • The information - the portals of the Group provide customers with the largest database of information and opinions on automotive issues in Poland. You can also use a variety of guides on tyre selection and use . There is also a variety of guides on tyre selection and use, avaliable to all of the customers. The information also includes tests of newly launched products, being carried out by specialists from the OPONEO.PL Group.

• The Assembly - In many countries, the OPONEO.PL Group offers customers the possibility to deliver tyres to the replacement service. At the end of 2016, this network consisted of some 4,700 assembly points. The clients highly appreciate the quality of the Group's services, as evidenced by the average customer ratings for the OPONEO.PL Group companies participating in the Opineo Program - ‘I listen to my clients.’ Company Opineo rating Delivery costs Time of delivery Purchases in installments Oponeo.pl 9,1 Free of charge 24 h Yes Opony.com 9 Free of charge 24h -working hours No Opony.pl 8,9 Free of charge Yes Motostrada.pl 9 20 zl for 1-4 tyres Yes Felgi.pl 9 Free of charge 24 h -working hours Yes, over 300 zl Partadax.pl Does not participate Free of charge 48 h No Owing to the business profile of the OPONEO.PL Group, the main suppliers are tyre manufacturers and wholesalers.

Two tyre suppliers had more than 10% share of the Group's revenues in 2016.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 43 3.6. EMPLOYMENT On December 31, 2016, the OPONEO.PL Group employed a total of 278 employees. During the year, employment increased by 64 employees. The increase in employment resulted from a significant increase in the scale of the Group's operations. Employment in the OPONEO.PL Group 31st of December 2015 31st of December 2016 Sales department 117 146 IT 34 39 Warehouse 21 57 Other departments (administration) 42 36 Total 214 278 3.7. SPONSORING The OPONEO.PL Group is involved in the development of motorsport.

In particular, it supports the efforts to rebuild the rallycross in Poland conducted within the framework of OPONEO Motorsport. Its main purpose is to organize competitions, train future players and referees. In 2016, the Main Automotive Sports Commission awarded OPONEO Rallycross the rank of Polish Cup. Apart from OPONEO Motorsport, the organizers of the event were: Automobilklub, Rzemieślnik, Automobilklub Kujawsko-Pomorski and LKT Wyczół Gościeradz.

On the other hand, the OPONEO Motorsport team consisting of Marcin Gagacki and Marcin Bilski, competing for the first time in the Fabia R5 Skate at the Barburka 2016, took 12th place in the Karowa criterion. OPONEO.PL also supports the OPONEO cycling group. The group competed among others in the: Vistula Wrestling Race in Kutno, Polish Championships Par Masters , Nowy Targ Road Race, Parzęczew Cycling Race and Polish Individual Championship - winning the Polish Champion title. The cost of the above activities in 2016, amounted to 57,000 PLN.

3.8. OTHER INFORMATION 3.8.1. Matters in dispute In the period covered by this report, the OPONEO.PL Group did not make any significant settlements in court proceedings.

During 2016, as well as until the date of submission of this periodic report, there had been no pending proceedings or pending before a court or an arbitration or public administration body, any proceedings relating to liabilities or receivables of the Company, the value of which individually or collectively represents at least 10% of the capital of OPONEO.PL.

3.8.2. Related-party transactions During the period covered by this report, there was not even one significant transaction, between the OPONEO.PL Group and related parties, that was signed on terms other than market conditions.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 44 In the report of the OPONEO.PL Group for the period from 1st of January to 31st of December 2016, the related party transactions covered by full consolidation were eliminated. The consolidated financial statements included the net values of the transactions that took place in 2016.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 45 4.CORPORATE GOVERNANCE

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 46 4. CORPORATE GOVERNANCE 4.1. THE RULES OF CORPORATE GOVERNANCE AND THE SCOPE OF USE 4.1.1. A set of corporate governance standards and guidelines This corporate governance statement at OPONEO.PL Joint-stock Company, is being forwarded in accordance with §91 of the Regulation of the Minister of Finance of 19th of February 2009, on current and periodic information provided by issuers.

OPONEO.PL Joint-Stock Company applies corporate governance principles included in the Good Practices of WSE Listed Companies of 2016, which were adopted by the Resolution of the Supervisory Board of the Warsaw Stock Exchange Joint-Stock Company on October 13, 2015. The text of the current set of rules, is publicly available on the official website of the Warsaw Stock Exchange Joint-Stock Company dedicated to issues of corporate governance of companies listed on the WSE Main List: http://corp-gov.gpw.pl/.

The Board of Directors of OPONEO.PL Joint-Stock Company announces, that it has made every effort to ensure that its information policy is transparent and effective, and to the fullest extent afforded appropriate communication with investors and analysts. As a part of the information policy implemented, the Board of Directors of OPONEO.PL Joint-Stock Company uses traditional communication methods, ie direct meetings of the Management Board with investors, teleconferencing and activities conducted by the Investor Relations Department, which provides information on individual inquiries of investors and responds to inquiries sent by e-mails to ir@oponeo.pl.

In 2016, the Company continued to run a dedicated website, which provided all the information necessary for a proper assessment of the Company's situation and prospects, including financial performance, actions taken by the Management Board and other material events resulting from the Company's ongoing operations. The information posted on the investor relations website: http://www.ir.oponeo.pl/ owned by OPONEO.PL Joint-Stock Company, is updated on a regular basis. 4.1.2. Unapplied aspects of the governance principles In 2016, the Company did not apply the following principles set out in the Good Practices of WSE Listed Companies of 2016: Principle The comment of OPONEO.PL LTD.

I. Information policy and communication with investors I.Z.1. The Company operates a corporate website and publishes on it, in a readable form and a separate place, in addition to the information required by law: I.Z.1.7. The company's information materials on the company's strategy and financial results The principle is not applied in the part concerning information on the strategy. The Company does not publish separate materials and documents on the strategy.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 47 I.Z.1.10. The financial projections - when the company decided to publish them –published during at least the last five years, together with information on the degree of their implementation, The rule does not apply because the Company does not publish financial projections. I.Z.1.16. The information on the planned transmission of the general meeting - no later than 7 days before the date of the general meeting, The Company does not provide direct transmission of the General Meeting of Shareholders, resulting from Rule IV.Z.2.

The transmission costs of the General Meeting are too high and disproportionate to the potential benefits to the shareholders.

I.Z.1.20. The record of proceedings of the general assembly, in the form of audio or video, The rule does not apply. The Company does not provide any direct transmission of the General Meeting's proceedings, and does not post on its website any record of the proceedings of the General Meeting in the form of audio or video. With a view to possible legal problems associated with the log of the General Assembly and the costs of such record, the Company does not intend to apply this rule. I.Z.2.. The company, whose shares are classified in the WIG 20 or mWIG40 stock exchange indices, ensures the availability of its website in English, at least to the extent specified in principle I.Z.1.

This policy should also apply to companies outside the above indices if the structure of their shareholders, or the nature and scope of their business, is in favor of this.

The rule does not apply. Company Shares are not classified in WIG20 or mWIG40. The website - www.ir.oponeo.pl is available for investors in English, in selected key areas. At the explicit request of investors, the company is able to prepare selected information in English. II. Management Board and Supervisory Board II. Z.1. The internal division of responsibility for individual areas of the company's activities between board members, should be formulated in an unequivocal and transparent manner and a division plan available on the company's website. The rule does not apply. The Company has developed a division of responsibility for individual areas of the company's operations among board members, but does not include this information on its website.

II.Z.3. At least two members of the supervisory board should meet the criteria of being independent, referred to in principle II.Z.4 The rule does not apply. Due to the structure and size of the company, as well as the lack of significant dispersion of shares,the introduction of the aforementioned rule, regarding the requirement to appoint at least two independent members of the Supervisory Board, is not necessary in the opinion of the Company. In the Supervisory Board of OPONEO.PL Joint-Stock Company, there is one independent member.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 48 II.Z.7. The provisions of Annex I to the European Commission Recommendation referred to in Rule II.Z.4, apply to the tasks and functioning of committees operating within the Supervisory Board. In case the audit committee functions as a supervisory board, the above rules shall apply accordingly. The rule is not applicable. In the Supervisory Board of OPONEO.PL Joint-Stock Company, there is only an audit committee composed of one independent member of the Supervisory Board. Apart from the aforementioned, there are no other committees within the Supervisory Board.

II.Z.10. In addition to regulatory actions, once a year, the Supervisory Board prepares and presents to the General Meeting: II.Z.10.1. The assessment of the company's situation, including assessment of internal control systems, risk management, compliance and internal audit functions; This evaluation includes all relevant control mechanisms, including in particular financial reporting and operational activities; The rule does not apply. The assessment of the OPONEO.PL Joint-Stock Company's situation, prepared by the Supervisory Board does not include an assessment of the compliance system and internal audit function, due to the lack of separation of Compliance and Internal Audit functions within the Company.

III. Systems and internal functions III.R.1. The Company distinguishes within its structure the entities, responsible for the performance of tasks, in particular systems or functions, unless the separation of organizational units is not justified by the size or nature of the activities carried out by the company The rule does not apply. The Company does not have in its structure separate entities responsible for performing the tasks of internal control systems, risk management, compliance and internal audit.

III.Z.1. The management board of the company is responsible for the implementation and maintenance of effective internal control, risk management, compliance and internal audit functions. The rule does not apply. The Management Board is responsible for controlling the Company's operating activities, including its internal business processes and risk management processes. Because of the size of the company, the functions included in this principle are carried out on a regular basis in each area of activity by individual organizational units of the Company or by external entities (without a dedicated special cell).

III.Z.2. Subject to rule III.Z.3, the persons responsible for risk management, internal audit and compliance shall be directly liable to the chairman or other members of the management board, and shall be provided the opportunity to report directly to the supervisory board or audit committee.

The rule does not apply. The rule is not applicable because, as indicated in the justification for non-application of rule no. III.Z.1, cells in risk management, internal audit and compliance, were not identified in the Company. In the opinion of the Company, the current organizational structure, where the directors of particular divisions are subject to the Company's Management Board, ensures in a sufficient manner the proper flow of information and supervision over the activities of particular areas. There are no procedures in

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 49 the Company, prohibiting direct reporting to the Supervisory Board.

III.Z.3. With respect to the person in charge of the internal audit function, as well as other persons responsible for the performance of its tasks, the principles of independence apply as defined in generally and internationally accepted standards of professional practice of internal audit. The rule does not apply. The rule is not applicable because there is no separate internal audit unit in the Company, and there is no separate position of the person managing the entity.

III.Z.4. At least once a year, the person responsible for internal audit(In the case of the separation of functions in the company) and the management board shall present to the supervisory board its own assessment of the effectiveness of the systems and functions, referred to in Rule III.Z.1, together with the relevant report. The rule does not apply. There is no separate internal audit unit in the Company, there is no separate position of the person managing the entity, and the audit committee acts within the Supervisory Board.

III.Z.5. The Supervisory Board monitors the effectiveness of the systems and functions referred to in Rule III.Z.1, partly on the basis of reports that are drawn up periodically and communicated directly to those responsible for those functions and to the Board of Directors, which annually evaluates the effectiveness of these systems and functions in accordance with principle II.Z.10.1.

The rule does not apply because the Company does not have specialized units in the management of internal control processes, risk management, compliance (rule number III.Z.W). IV. General assembly and relations with shareholders IV.R.2. If it is justified by the shareholder structure or the company's expectations to the shareholders, if the company is able to provide the technical infrastructure necessary for the smooth conduct of the general meeting using electronic means of communication, it should enable shareholders to participate in the general meeting using such means, as : 1) Real-time transmission of the general meeting 2) Bilateral real-time communications whereby shareholders may express themselves during a general meeting, while being in the place other than the venue of a general meeting.

3) The Shareholder may participate in the General Meeting and exercise his/her voting rights in person or through proxies. The rule does not apply. In the Company's opinion, the present shareholding structure does not justify the application of the rules; The rules of participation in the general meeting enable the exercise of the rights resulting from the shares and safeguard the interests of all shareholders.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 50 IV.R.3. The Company strives to ensure that, when securities issued by a company are traded in different countries (or markets) and under different jurisdictions, corporate events related to the acquisition of shareholder rights occur at the same dates in all countries,in which they are listed.

The rule does not apply. Securities issued by the Company are traded on the Polish market. IV.Z.2. . If justified by the company's shareholding structure, the company provides publicly avaliable transmission of the general meeting, in a real-time.

The rule is not applicable. In the Company's opinion, the shareholder structure and the lack of shareholder expectations, are justified by the fact that there is no need to broadcast the General Meeting in a real time. In addition, the applicable rules of participation in the general meeting enable the exercise of rights arising from the shares and safeguard the interests of all shareholders. The Company provides shareholders with the opportunity to participate in the General Meeting in person or through a proxy. The Company fulfills its information obligations imposed by law. Not later than within 24 hours from the end of the general meeting, it transmits in the form of current reports, the information on the content of the adopted resolutions, the results of voting and simultaneously publishes this information on the corporate website.

In addition, upon completion of the Meeting, the Company places a video of the General Meeting on its website. The Company does not exclude the possibility of applying the aforementioned principle in the future.

IV.Z.3. Representatives of the media are allowed to attend the general meetings. The rule does not apply. The Company's General Meetings are attended by persons authorized and serving the General Meeting. According to the Company, the applicable laws adequately govern the performance of disclosure obligations imposed on public companies in the field of publicity and transparency of matters being the subject of the General Meeting. In case of questions addressed to the Company by the media representatives, within the limits permitted by applicable law, the Company shall promptly provide appropriate responses.

VI. Remuneration VI.R.1 The remuneration of members of the company's governing bodies and key managers, should be derived from the remuneration policy. The rule does not apply. Due to the size of the Company, the organizational structure and scope of its activities, the Company has not

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 51 prepared a separate document constituting the remuneration policy referred to in Rule VI.R.1. The remuneration for particular members of the Company's authorities, including the tasks assigned to them and the assessment of their implementation, is prepared and handed over to the Management Board by the members of Supervisory Board, but the assesment for the members of the supervisory board is prepared by the General Meeting of Shareholders. VI.R.2. The remuneration policy should be closely linked to the company's strategy, its short- and long-term objectives, long-term interests and results, and should include solutions to avoid discrimination for any cause.

The rule does not apply. The Company has not developed a special "Remuneration Policy" document. VI.R.3. If there is a Remuneration Committee on the Supervisory Board, its scope of work should be in accordance with Rule II.Z.7. The rule is not applicable. There is no remuneration committee in the Supervisory Board of OPONEO.PL Joint-Stock Company. VI.Z.1. Motivation programs should be designed to, among other things, make the level of remuneration of board members and their key managers dependent on the company's long- term financial standing, long-term shareholder value and business stability.

The detailed rule does not apply. The Company has not adopted any incentive programs addressed at board members and key managers yet. VI.Z.2. To associate the remuneration of board members and key managers with the long-term business and financial goals of the company, the period between the incentive option or other equity-linked options, is limited to a minimum of 2 years. The detailed rule does not apply. The incentive programs for the board and key managers have not been enacted in the Company. VI.Z.4. The Company presents a report on the remuneration policy in its activity report, comprising at least: 1.

General information about the company's remuneration system, 2. Information on the terms and amounts of remuneration for each member of the Management Board, broken down by fixed and variable remuneration components, with key parameters for determination of variable remuneration components and rules for payment of severances and other payments for termination of employment, contract or other similar legal relationship - separately for the company and each unit of the capital group, The rule does not apply. The Company publishes information on the remuneration of its Members, in accordance with the applicable International Accounting Standards.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 52 3. Information on non-financial remuneration components for individual board members and key managers, 4. Indication of significant changes that occurred during the last financial year in the remuneration policy, or information about their absence, 5. Evaluating the functioning of the remuneration policy from the point of view of achieving its objectives,in particular, long- term value growth for shareholders and stability of the company.

4.2. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS FOR THE PROCESS OF FINANCIAL REPORTING Adoption of the Accounting Policy for OPONEO.PL LTD and its subsidiaries, in accordance with the International Financial Reporting Standards, provides for the correctness and reliability of accounting records for these entities.

In accordance with the Accounting Act from 29th of September 1994, under which the Company's Management Board approved the documentation describing the accounting policies, implemented by the Company. The separate financial statements of OPONEO.PL LTD, are prepared in accordance with the Polish accounting rules. With the formation of the Joint Stock Company in 2010, the consolidated financial statements are prepared in accordance with the International Financial Reporting Standards. The process of preparing financial statements is carried out in a strict and absolute application of the above principles.

The preparation of the source data, is a subject to formal, operational and acceptance procedures, that determine the extent of the competence of the individual. The data entered in the Ledger is based on records in the Documents and Source Books. By applying internal control systems in the field of accounting and financial reporting, the Company ensures a fair and transparent presentation of its financial and material standing. The responsibility for the internal control system, risk management and its effectiveness with regard to the process of drawing up financial statements is borne by the Management Board.

The Company has a documentation, describing adopted accounting policies, determining methods of valuation of assets and liabilities, and determining the financial result, as well as the manner of keeping books of accounts, data protection systems and their collections. The prepared financial statements are formally approved by the Chief Accountant and subsequently by the Company's Management Board.

In the process of preparing the statements, the control element is the verification of the financial statements of the Company and the financial statements of the Capital Group companies by an independent auditor. The auditor's tasks include in particular: the review of semi-annual financial statements and examination of annual reports. The financial data underlying the financial statements and periodic reports are derived from the Company's monthly financial and operating reporting, conducted through the financial and accounting system. Preparation of financial statements and periodic reports begins after acceptance of the results of the period.

During the year, the Management Board and the Supervisory Board analyze, evaluate and supervise the financial results obtained in relation to the adopted assumptions of the budget plan prepared in accordance with the adopted

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 53 accounting policy of the Company. On the effectiveness of applied control and risk management procedures in the process of preparing financial statements of OPONEO.PL Joint-Stock Company may testify - the high quality of the reports. The quality of the reports is very good, as confirmed by the auditors' opinions on the audit of financial statements. OPONEO.PL Joint-Stock Company monitors significant legal, tax, economic and operational risks that affect the Company's business. In addition, for all known risks, the Company is prepared in accordance with the adopted accounting policy.

4.3. SHARES AND SHAREHOLDERS 4.3.1. Shareholder’s structure On 31st of December 2016, the share capital of OPONEO.PL Joint-Stock Company amounted to 13,936 PLN and was divided into 8,676,000 ordinary bearer shares with a nominal value of 1,00 PLN each, 4,000,000 ordinary bearer shares of series B with a par value of 1,00 PLN each and 1,260,000 ordinary bearer shares C with a nominal value of 1,00 each.

In 2016, the value of the Company's share capital did not change. OPONEO.PL LTD's shares are ordinary bearer shares. There are no special control rights attached to the Company's shares. The Company's Articles of Association do not impose any restrictions on the transfer of ownership of shares issued by the Company, the exercise of voting rights nor the provisions under which the equity rights attached to securities are separated from the possession of securities. The list of shareholders holding, directly or indirectly through subsidiaries, at least 5% of the total number of votes at the General Meeting of OPONEO.PL LTD was as follows: Shareholder 25.04.2017 31.12.2016 31.12.2015 Number of shares Share in the share capital and in the number of votes at the general meeting in% Number of shares Share in the share capital and in the number of votes at the general meeting in% Number of shares Share in the share capital and in the number of votes at the general meeting in% Ryszard Zawieruszyński 3 283 097 23,56 3 283 097 23,56 3 194 669 22,92 Dariusz Topolewski 3 011 592 21,61 3 011 592 21,61 3 029 261 21,74 ALTUS TFI S.A.

2 882 596 20,68 2 915 596* 20,92 OPONEO.PL S.A - 1 173 026 8,42 AEGON OFE 1 155 000 8,29 1 155 000 8,29 807 010 5,79 Pozostali 3 603 715 25,86 3 570 715 25,62 5 732 034 41,13 In total 13 936 000 100,00 13 936 000 100,00 13 936 000 100,00 * The shareholding includes the transaction, concluded on 30th of December 2016, referred to in the current report no. 1/2017.

As at the date of publication of the report, the Company did not have information on contracts, which could result in future changes in the proportions of shares held by the existing shareholders.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 54 *The date of publication of this report 4.3.2. Repurchasing of own shares On 7th of September 2016, the Company sold to ALTUS TFI LTD through the WSE, 1,033,000 of own shares, purchased under the Program of repurchase of own shares, implemented pursuant to the resolution No. 30 of the Ordinary General Meeting of Shareholders of OPONEO.PL LTD of 26th of June 2012, No.

22 of the Ordinary General Meeting of OPONEO.PL LTD of 27th of June 2013, and No. 5 of the Extraordinary General Meeting of OPONEO.PL LTD, dated March 31, 2014. The total face value of the shares sold, was 1,033,000,00 PLN. It constituted 7.41% of the share capital of OPONEO.PL LTD and the total number of votes at the General Meeting of the Company. The Company's own shares were sold in accordance with the share buyback Program, ie. Acquisition of shares of OPONEO.PL LTD, especially with the intention for further resale.Taking into account the needs of the business, the Board of OPONEO.PL LTD decided to sell its own shares, in order to obtain the necessary funds for financing an increased trading volume and investment, related to the development of the OPONEO.PL Group (including modern technologies from the internet industry).

23,56% 21,61% 20,68% 8,29% 25,86% The Shareholder structure of OPONEO.PL LTD, as at 25.04.2017* Others AEGON OFE ALTUS TFI S.A Ryszard Zawieruszyński Dariusz Topolewski

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 55 4.3.3. Information on Issuer’s shares held by from Management and Supervisory bodies The possesion of shares of OPONEO.PL LTD by members of the Supervisory Board and members of the Management Board (as at the date of publication of the annual report): Shareholder 25.04.2017 31.12.2016 31.12.2015 Number of shares Share in the share capital and in the number of votes at the general meeting in% Number of shares Share in the share capital and in the number of votes at the general meeting in% Number of shares Share in the share capital and in the number of votes at the general meeting in% Ryszard Zawieruszyński 3 283 097 23,56 3 283 097 23,56 3 194 669 23,11 Dariusz Topolewski 3 011 592 21,61 3 011 592 21,61 3 029 261 21,61 Andrzej Reysowski - 260 280 1,87 272 702 1,87 Wojciech Topolewski 69 780 0,50 69 780 0,50 79 000 0,57 Michał Butkiewicz 17 093 0,12 17 093 0,12 17 093 0,12 * On March 10, 2017, the Company received a notice from Mr.

Andrzej Reysowski on resignation from the position of a Member of the Management Board of OPONEO.PL LTD, which entered into force on March 10, 2017, as reported in the current report No. 6/2017 The OPONEO.PL Group does not operate any employee share programs. 4.3.4. Special controlling privilleges, restrictions on the transfer of securities and voting rights* In the OPONEO.PL Capital Group,there are no special control rights and restrictions on voting rights nor the transfer of ownership of securities.

4.3.5. Share quotation In the course of 2016, the share price of the OPONEO.PL LTD at the close of trading on the WSE ranged from 22,23 PLN (recorded on 11th of January) to 47,90 PLN (session on 23rd of November). On the last trading day of 2016, that is December 30, the price of OPONEO.PL LTD’s share was 47,00 PLN, which is 72.1% higher than on the last trading day in 2015. For comparison, the WIG index rose by 11.4% in 2016. In 2016, the average trading volume of shares of OPONEO.PL LTD on the WSE was 19,330 shares. From the session of 19th of March 2016, the shares of OPONEO.PL Joint-Stock Company are included in the sWIG 80 Index, and from 16th of December 2016 ,in WIGdiv.

On 31st of December 2016, the market value of OPONEO.PL Joint-Stock Company was at the level of 655m PLN, while the book value was 130,3m. PLN. The C / WK ratio (price / book value) for the Company was 5.0 and the C / Z (price / profit) was 43.6.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 56 4.3.6. Dividend The size of the dividend for the shareholders of OPONEO.PL Joint-Stock Company, depends on the current market situation, development of the Company's operations and maintenance of adequate financial liquidity of the Company and the Capital Group OPONEO.PL.

According to the resolution No. 9 on distribution of profit for the financial year from 1st of January 2015 to 31st of December 2015, the Ordinary General Meeting of Shareholders decided to allocate 1,276,297,40 PLN (i.e. PLN 0,10 per share ) to pay dividends.

The dividend day was set at 11th of July 2016, and the dividend payout was scheduled for 25th of July 2016. Dividend payment was made on time. Dividend 2011 2012 2013 2014 2015 2016 Net profit of OPONEO.PL LTD (in thous. PLN) 28 647,7 1 308,7 2 735,5 3 605,3 9 801,0 15 889** Dividend from the profit of the given year (in thous. PLN) 2 7872 418,1 383,9 638,1 1 276,3 - Dividend per share (in PLN) 0,2 0 0,03* 0,05* 0,10* - Date of setting the right to the dividend 31.08.2012 15.07.2013 03.07.2014 03.07.2015 11.07.2016 - * From the total number of shares, the own shares were deducted, and their purchase until the dividend date was not fulfilled.

** At the date of publication of this annual report, the Ordinary General Meeting of OPONEO.PL Joint-Stock Companym, has not decided on the dividend payment from the profit for 2016.

4.4. STATUTE AND STATUTORY AUTHORITIES The amendment to the Company’s Statute, requires the resolution of the General Meeting and the entry into the register of entrepreneurs of the National Court Register. On 20th of June 2016, the Ordinary General Meeting of Shareholders adopted Resolution No. 20 on amending the Company's Articles of Association. Changes related to §5 of the Company's Statute, i.e. the extension of the activity of OPONEO.PL Joint-Stock Company. This change was entered into the National Court Register on 18th of August 2016.

50 100 150 200 250 300 350 400 75 90 105 120 135 150 165 180 2015-12-30 2016-02-29 2016-04-30 2016-06-30 2016-08-31 2016-10-31 2016-12-31 Share quotations of OPONEO.PL LTD (WIG) Trading volume OPONEO.PL LTD WIG

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 57 4.4.1. A set of corporate governance standards and guidelines The General Meetings are held at the registered office of the Company in Bydgoszcz. The General Meeting of OPONEO.PL Joint-Stock Company deliberates as ordinary or extraordinary. It is convened by the Management Board on its own initiative or at the request of a Shareholder or Shareholders representing at least one twentieth of the share capital,(the Supervisory Board in the cases specified in §18 point 7 T of the Company’s Statute). An Extraordinary General Meeting may also convene Shareholders representing at least half of the share capital or at least half of the total number of votes in the Company, appointing the president of this assembly.

The Ordinary General Meeting is convened annually by the Management Board of the Company, by 30th of June of the following financial year, at the latest. The subject of the Ordinary General Meeting should be: • Consideration and approval of the Management Board’s report on the Company's activities, and approval of the financial statements for the previous financial year; • Adopting a resolution on profit distribution or loss coverage; • Granting members of the Company, in respect of the performance of their duties. The following matters require a resolution of the General Meeting: • adoption of the balance sheet, profit and loss account, and cash flow statement for the previous year, • granting discharge to members of the Company's Management Board and Supervisory Board, for the performance of their duties, • any provisions relating to the claims of the Shareholders, to compensate for any damage caused to the Company or its management or supervision, • leasing the business and establishing the right to use it, • disposal of an enterprise, • profit allocation and determination of loss coverage, • determination of the remuneration of the Supervisory Board Members, • approval of annual and multi-annual plans of the Company's activities, • dissolution, liquidation and transformation of the Company, • increase and decrease of the Company's share capital and the redemption of shares by the Company, • amendments to the Statute • exercising control over the activities of the Supervisory Board, • approval of the Rules of Procedure of the Supervisory Board, • appointment and dismissal of members of the Supervisory Board.

The subject matter of the General Meeting, may be any matter addressed by the Management Board, Supervisory Board of the Company, or at the request of Shareholders representing at least 10% of the share capital. Requesting to convene a General Meeting and place specific issues in its agenda submitted by authorized entities should be justified.

Draft resolutions proposed for adoption by the General Meeting of Shareholders, and other relevant materials, should be submitted to the Shareholders together with the justification and the opinion of the Supervisory Board before the General Meeting in time, to familiarize them with and evaluate them.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 58 The General Meeting convened at the request of the Shareholders, should be held within the time indicated in the request, and if meeting that deadline encounters significant obstacles - at the earliest possible date, enabling the General Meeting to settle the issues brought to its attention.

The Appeal of the General Meeting, whose agenda includes specific matters at the request of authorized entities or which is convened on such request, is only possible with the consent of the applicants. In other cases, the General Meeting may be canceled, if its holding encounters extraordinary obstacles (ie. Force majeure) or is obviously groundless. The appeal takes place in such a way as it was convened, ensuring the least negative impact for the Company and the Shareholders, not later than three weeks before the originally planned date.

The change of the date of the General Meeting takes place in the same manner as its cancellation, even if the proposed agenda has not changed. The participation of the shareholder's representative at the General Meeting, requires the right to act on his behalf properly. There is a presumption that a written document confirming the right to represent the Shareholder at the General Meeting is lawful and does not require additional confirmations. Each share equals 1 vote at the General Meeting. Resolutions are adopted by a majority of 51% of all voting rights held by the Shareholders. The voting is open unless the provisions of the Commercial Companies Code require a secret ballot.

In addition, at the request of at least one of the current Shareholders, as well as in the election and motion to remove the members of the Company's authorities or its liquidators, and to pull them into account, as well as for discharge, a secret ballot shall be held. The election of the Supervisory Board, including the voting in separate groups, takes place in accordance with the provisions of the Commercial Companies Code. Any Shareholder, as well as advisors, specialists, or other persons invited by the Management Board or Supervisory Board of the Company, may participate in the General Meeting.

Members of the Supervisory Board and the Management Board should be present at the General Meeting. The Management Board will invite the Company's auditor to participate in the Ordinary General Meeting and to participate in the Extraordinary General Meeting, if the Company's financial matters are to be discussed. The Absence of a member of the Management Board or a member of the Supervisory Board at the General Meeting requires clarification. Members of the Supervisory Board and the Management Board and the statutory auditor should, within the limits of their competence and to the extent necessary to settle matters discussed by the Assembly, provide the participants with explanations and information concerning the Company.

When answering questions from the General Assembly, the Board should be taking into account, that information obligations of a public company are exercised in a manner resulting from the law governing the public trading of securities and that certain information may not be exercised in any way, other than arising from this law. Applicants who object to the resolution, shall be provided with the opportunity to briefly state their objection. In this way, the Management Board or the Chairman of the General Meeting should formulate resolutions, so that any eligible person who does not agree with the merits of the resolution constituting the object of the resolution has the opportunity to challenge it.

At the request of a participant of the General Meeting, a written statement is accepted in the minutes. The statement of the participant of the General Meeting should concern only matters of importance and considered by the General Meeting.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 59 4.4.2. Supervisory board The composition of the board The Supervisory Board consists of five members, appointed and dismissed by a resolution of the General Meeting for a joint term of 5 years. The members of the Supervisory Board shall elect a Chairman from among themselves. Since the introduction of the Company's shares to trading on a regulated market, at least one member of the Supervisory Board is an Independent Member. An Independent Member should meet the conditions set out in § 19 section 3 of the Company’s Statute.

On 1st of January 2016, the composition of the Supervisory Board of OPONEO.PL LTD, was as follows: • Ryszard Zawieruszyński Chairman of the supervisory board • Lucjan Ciaciuch Member of the Supervisory Board • Wojciech Małachowski Member of the Supervisory Board • Wojciech Topolewski Member of the Supervisory Board On 20th of June 2016, the Ordinary General Meeting appointed Mr. Tomasz Gaszynski to the Supervisory Board.

On 31st of December 2016, the Supervisory Board of the Company consisted of: • Ryszard Zawieruszyński Chairman of the supervisory board • Lucjan Ciaciuch Member of the Supervisory Board • Tomasz Gaszyński Member of the Supervisory Board • Wojciech Małachowski Member of the Supervisory Board • Wojciech Topolewski Member of the Supervisory Board Competence The competence of the Supervisory Board is set out in the Company's Articles of Association. The Supervisory Board exercises permanent supervision over the Company and all its branches. Special duties of the Supervisory Board include: • Exercising permanent supervision over the activities of the Management Board and submitting annual reports on activities of the Supervisory Board to the General Meeting, • Examination and evaluation of the reports referred to in art.

395 § 2 (1) of the Commercial Companies Code, in terms of their compliance with books and documents as well as with the actual state, • Giving opinions on annual and periodic reports of the Management Board and the Management Board's proposals on distribution of profits and their use, • Representing the Company in disputes and concluding agreements between the Management Board or a Member of the Management Board and the Company, suspending in the actions for important reasons individual members of the Management Board, • Issuing opinions on motions of the Management Board concerning establishment of new companies, joining existing companies and economic organizations, acquisition and sale of shares and stocks in other companies, • Issuing opinions on periodical economic plans of the Company, • Granting consent to start new companies, joining existing companies and business organizations, acquire and sell shares in other companies, create and close branches, businesses or subsidiaries, • Approving the Company's business plans and periodic development plans • Considering and settling the motions of the Management Board,

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 60 • Consent to the acquisition, sale and encumbrance of property or participation in real property, • Determining the remuneration of members of the Management Board, • Approving the Company's budget, • Appointing and dismissing the statutory auditors for the annual audit of the Company's financial statements, and approval of a material change in accounting practices, unless such change results from the applicable law • Giving consent to start a business, in new business sectors, unless it is a result of an approved annual plan of the Company, • Approving contracts with related entities, marriage or kinship with any of the members of the Board, • Approving the work regulations of the Management Board, • Delegating a member or members of the Supervisory Board to temporary execution of the Management Board's activities in the event of the suspension of members of the Management Board or the entire Management Board, • Granting the consent of appointing the Proxies to the Management Board, • Giving a consent to sell and/or lease, pledging or encumbering Company assets of more than 10% of the Company's share capital, provided that they are not attributable to the Company's approved annual plan or business plan covering part or all of the Company's activities, • Convening an Ordinary General Meeting if the Management Board fails to convene it within the time specified in the Articles of Association; • Convening the Extraordinary General Meeting whenever the Board deems it appropriate and the Management Board fails to convene the General Meeting within two weeks of the request being made by the Board, • Performing the tasks of an audit committee in accordance with applicable laws.

4.4.3. Management board The composition of the board: According to the Statute, the Board is single or multiplayer. Members of the Management Board are appointed and dismissed by a resolution of the Supervisory Board, which by one vote, entrusts the function of the President of the Management Board. The term of office of the Management Board is common and lasts 5 years.

In 2016, the Board of Directors of OPONEO.PL LTD, worked in the following composition: • Dariusz Topolewski – Chairman of the Board • Michał Butkiewicz – Member of the Board • Maciej Karpusiewicz – Member of the Board • Andrzej Reysowski – Member of the Board On 10th of March 2017, the Company received a notice from Mr. Andrzej Reysowski,to resign from the position of a Member of the Management Board of OPONEO.PL Joint-Stock Company, with the effect from 10th of March 2017. The resignation does not contain information about its causes. On 27th of March 2017, the Supervisory Board of the Company adopted a resolution, appointing a member of the Management Board of OPONEO.PL Joint-Stock Company, Mr.

Ernest Pujszo, and entrusted him with the function of a Member of the Board.

As of the date of publication of the report, the Management Board of OPONEO.PL LTD consisted of: • Dariusz Topolewski – Chairman of the Board • Michał Butkiewicz – Member of the Board • Maciej Karpusiewicz – Member of the Board • Ernest Pujszo – Member of the Board

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 61 Kompetencje The Management Board of the Company, is entitled and obliged to make any decisions relating to the operative management of the affairs of OPONEO.PL Joint-Stock Company. In particular, the scope of activities of the Management Board includes: • Running the Company's business • Preparing the Management Board's reports on the Company's activities, balance sheet, as well as profit and loss account, in the manner and within the deadlines set by the applicable laws, • Keeping the minutes of the General Meeting, as well as the books of adopted resolutions, • Executing resolutions of the General Meeting and adhering to the recommendations and resolutions of the Supervisory Board, • Keeping all matters not reserved for the other Company's governing bodies.

The Management Board is obliged to fulfill all obligations incumbent upon it by virtue of the binding provisions of law, as well as binding resolutions and entitled under separate regulations of external control and management bodies of the Company's organs.

Adopting a resolution of the Management Board requires matters in excess of the ordinary Management Board, and in particular: • Approving an execution of orders :  atypical for the Company's business,  based on individual (detailed) calculations;  realized on the basis of a general contract, except for general contracts with a fixed price list or specified price-setting parameters if their value exceeds 10% of the Company's share capital; • Granting and borrowing, guarantees and sureties; • Awarding a grant, donation or other gratuitous benefit to a third party; • Entering into a contract with a value exceeding 10% of the share capital, and conclusion of all general contracts; • Entering into a sponsorship or advertising agreement with a value exceeding 0,2% of the Company's share capital; • Concluding an agency brokering or other similar contract, if they may result in future commission or other form of remuneration exceeding 0,5% of the Company's share capital; • Signing a co-operation agreement, joining a social or economic organization, where this entails the possibility of generating financial benefits on the Company's side; • Relinquishing the Company's agreements and withdrawing from the organizations to which the Company belongs; • Acquisition, modernization, extension, etc.

of fixed assets that are not included in the investment plan submitted for approval by the Supervisory Board; • Acquisition or disposal of securities; • Concluding a transfer of the assets of the Company; • Establishing a mortgage on the property owned by the Company; • Refusal to recognize claims worth more than 0,5% of the Company's share capital; • Permission to write off the debt before the limitation period expires, if their value exceeds the equivalent of 0,2% of the Company's share capital; • Sale of receivables; • Referring the case to court, administrative or arbitration court if the value of the dispute exceeds 1,0% of the Company's share capital.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 62 4.4.4. Remuneration and the statutory authorities Information on paid or payable remunerations of managers and supervisors of OPONEO.PL Joint- Stock Company, has been disclosed in the Group's consolidated financial statements for 2016, in item 5.8 . On 4th of April 2011, OPONEO.PL Joint-Stock Company and all Members of the Management Board signed an agreement to act as a Member of the Management Board, which stipulates that in case of dismissal of the members of the Management Board, for reasons other than a gross violation of duties, there will be paid the amount of three monthly salaries received in the Company from all titles.

The remuneration is calculated on the basis of the average remuneration from all of the titles received within 12 months, before the termination of his / her function in the Company's Management Board.

4.5. DIVERSITY POLICY OPONEO.PL Joint-Stock Company strives to ensure diversity in terms of sex, education, age and professional experience of all its employees, with particular focus on the Company's management and its key managers. The Company applies rules that promote the prevention of discrimination in employment, particularly on grounds of gender, age, disability, race, religion, nationality, political beliefs, trade union membership, ethnicity, religion, sexual orientation. For this purpose, the internal regulations have been developed to increase diversity and to ensure equal opportunities for employment among the employed.

OPONEO Joint-Stock Company, as a company with international reach, employs people of different nationalities.

4.6. ENTITY ENTITLED TO AUDIT FINANCIAL STATEMENTS On 27th of June 2016, the Supervisory Board of OPONEO.PL Joint-Stock Company chose Morison Finansista Audit Limited Liability Company to carry out: • a review of the interim separate and consolidated financial statements of OPONEO.PL Joint- Stock Company, prepared on 30th of June 2016, • an audit of the separate and consolidated financial statements of OPONEO.PL Joint-Stock Company, prepared on 31st of December 2016. Morison Finansista Audit Limited Liability Company with its registered office in Poznań at Główna 6 street, is entered in the list of entities authorized to audit financial statements under 255 registration number.

OPONEO.PL Joint-Stock Company has previously used the services provided by Morison Finansista Audit Limited Liability Company for the review, and audit of financial statements for the years 2009- 2015.

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 63 Remuneration of the entity authorized to audit financial statements 01.01.2016- 31.12.2016 01.01.2015- 31.12.2015 Audit of annual financial statements and consolidated financial statements 50 55 Other certifying services, including a review of the financial statements / consolidated financial statements 0 0 Tax advisory services 0 0 Other services (annual audit of subsidiaries' financial statements) 0 0 In total 50 55

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 64 APPROVAL FOR PUBLICATION The Management Board's Report on Operations, was approved for publication by the Board of Directors of OPONEO.PL Joint-Stock Company on 25th of April 2017. Signatures of persons representing the Company: Dariusz Topolewski Chairman of the Board Michał Butkiewicz Member of the Board Maciej Karpusiewicz Member of the Board Ernest Pujszo Member of the Board Bydgoszcz, 25th of April, 2017

OPONEO.PL CAPITAL GROUP Report of the Management Board on Operations in 2016 65

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