· Web viewconcerning the issue of Series A1 through A12 bonds convertible into Series H shares, issue Series H shares as a part of a conditional share capital increase; to waive

Directors' Report on the Operations of the PBG Group in 2013

DIRECTORS’ REPORT ON THE OPERATIONS OF THE PBG GROUP

for the period January 1st – December 31st 2013

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TABLE OF CONTENTS

SECTION I: CORPORATE GOVERNANCE REPORT............................4I. STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES.......................................................4II. AGREEMENTS BETWEEN THE COMPANY AND ITS MANAGEMENT PERSONNEL PROVIDING FOR COMPENSATION IN THE EVENT OF A GIVEN PERSON RESIGNING OR BEING REMOVED FROM OFFICE..................21III. AUDITOR OF THE FINANCIAL STATEMENTS.......................................................................................................22

SECTION II: REPORT ON RISKS AND RISK MANAGEMENT.............24I. RISKS AND THREATS...........................................................................................................................................24II. FINANCIAL RISK IDENTIFICATION AND MANAGEMENT........................................................................................30III. INTERNAL CONTROL SYSTEM............................................................................................................................36IV. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS USED IN THE PREPARATION OF SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS..............................................................................................................36

SECTION III: THE PBG GROUP....................................................38I. STRUCTURE OF THE PBG GROUP........................................................................................................................38II. STRATEGY..........................................................................................................................................................39III. BUSINESS PROFILE............................................................................................................................................41IV. CHANGES ON PBG’S MARKETS.........................................................................................................................43V. SEGMENT OPERATIONS.....................................................................................................................................44VI. MARKET OUTLOOK............................................................................................................................................53VII. COMPANIES OF THE PBG GROUP.....................................................................................................................71VIII. BRANCHES......................................................................................................................................................72

SECTION IV: REPORT ON THE PBG GROUP’S OPERATIONS IN 2013...............................................................................................73

I. SHARES HELD IN RELATED ENTITIES..................................................................................................................73II. AGREEMENTS SIGNIFICANT TO THE GROUP’S OPERATIONS..............................................................................77III. BUSINESS COMBINATIONS, INCORPORATION OF NEW SUBSIDIARIES...............................................................95IV. EVENTS OF DEFAULT ON CREDIT FACILITIES, GUARANTEES AND BONDS........................................................98V. RELATED-PARTY TRANSACTIONS.....................................................................................................................108VI. CONTRACTED BANK BORROWINGS, LOAN AGREEMENTS...............................................................................108VII. LOANS ADVANCED.........................................................................................................................................108VIII. NON-RECURRING FACTORS AND EVENTS.....................................................................................................108IX. MAJOR R&D ACHIEVEMENTS...........................................................................................................................109X. CONTROL SYSTEMS FOR EMPLOYEE PLANS.....................................................................................................109XI. LITIGATION, ARBITRATION OR ADMINISTRATIVE PROCEEDINGS.....................................................................109XI. CHANGES IN SIGNIFICANT MANAGEMENT POLICIES........................................................................................118

SECTION V: SHARES AND SHAREHOLDERS................................119I. SHARE CAPITAL STRUCTURE AND LARGE HOLDINGS OF SHARES.....................................................................119III. CHANGES IN THE COMPANY’S SHAREHOLDER STRUCTURE............................................................................121IV. KEY DATA ON PBG SHARES............................................................................................................................121IV. SHARE BUY-BACKS.........................................................................................................................................122V. HOLDERS OF SECURITIES CONFERRING SPECIAL CONTROL RIGHTS...............................................................122VI. RESTRICTIONS ON VOTING RIGHTS................................................................................................................123VII. RESTRICTIONS ON TRANSFER OF PBG SECURITIES AND LIMITATIONS ON THE VOTING RIGHTS....................123VII. AGREEMENTS WHICH MAY RESULT IN CHANGE IN SHAREHOLDINGS............................................................123IX. EVENTS WHICH MAY RESULT IN CHANGE IN SHAREHOLDINGS......................................................................123X. INVESTOR RELATIONS.....................................................................................................................................124

SECTION VI: FINANCIAL OVERVIEW..........................................125I. ANALYSIS OF THE GROUP'S FINANCIAL POSITION.............................................................................................125II. CHANGES IN THE INCOME STATEMENT AND COST ANALYSIS..........................................................................129III. ASSETS, FINANCIAL STANDING AND FUNDING OF THE ASSETS......................................................................130IV. STATEMENT OF CASH FLOWS.........................................................................................................................134V. NET DEBT........................................................................................................................................................135VII. INVESTMENTS................................................................................................................................................135IX. FINANCIAL OUTLOOK......................................................................................................................................136XII. ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT..............................................................................136XII. SURETIES AND GUARANTEES GRANTED AND RECEIVED...............................................................................136XIV. GOING CONCERN ASSUMPTION....................................................................................................................137CONTACT DETAILS...............................................................................................................................................140

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SECTION I: CORPORATE GOVERNANCE REPORT

PBG PUBLISHED THE CONSOLIDATED TEXT OF THE STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES ON ITS WEBSITE AT:http://www.pbg-sa.pl/relacje-inwestorskie/lad-korporacyjny/lad-korporacyjny-na-gpw.html

I. STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

1. Corporate governance principles adopted by PBG PBG adopted the corporate governance principles set forth in the Code of Best Practice for WSE Listed Companies published at http://www.corp-gov.gpw.pl, adopted by the WSE Supervisory Board on November 21st 2012, effective as of January 1st 2013.

2. Corporate governance principles which PBG did not comply with The PBG Management Board represents that in 2013 the Company complied with the recommendations set forth in Section I, and with the applicable corporate governance principles set forth in Sections II−IV of the Code of Best Practice for WSE Listed Companies, except for:

a) Recommendation I.5: In 2013, the Company did not implement the recommendation regarding establishing the principles of remuneration policy in relation to management and supervisory bodies. The rules of remuneration of the Supervisory Board were set out in a resolution of the Extraordinary General Meeting of PBG of December 10th 2005. The amount of remuneration depends on the responsibilities and tasks assigned to individual Supervisory Board members. The amount of remuneration paid to members of the Management Board is determined by the Supervisory Board by way of a resolution. The remuneration amount depends on the scope of duties and responsibilities assigned to the individual Management Board members;

b) Recommendation I.9: The Company appoints Supervisory and Management Board members on the basis of their respective qualifications: experience, professionalism and expertise. Decisions regarding the appointment of management and supervisory personnel are left for the discretion of the Company’s relevant bodies and are made solely on the basis of criteria stated above. Although the recommendation was not implemented, the share of women in the Company’s governing bodies is rising. In 2013, composition of the Supervisory Board was as follows:

in the period from January 1st to June 21st 2013 − one woman, four men, in the period from June 21st to December 31st 2013 − one woman, six men,

and the composition of the Company’s Management Board was as follows: in the period from January 1st to March 18th 2013 − one woman, three men, in the period from January 1st to December 31st 2013 − two woman, three men;

c) Recommendation I.12: In 2013, as in the previous years, the Company did not implement the recommendation regarding on-line broadcasting of General Meetings due to inadequate IT infrastructure. However, the Company publishes the recordings on its website. The Company may begin to webcast its General Meetings in the future.

d) Best practice IV.10: The Company did not comply with this principle due to significant risk related to the quality of its IT infrastructure (similarly to item 2.c) above).

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http://www.corp-gov.gpw.pl/


3. Key features of the company’s internal control and risk management systems used in the preparation of separate and consolidated financial statements See Section II, Report on Risk and Control, page 36.

4. Shareholders directly or indirectly holding significant blocks of shares, with information on the number of shares and percentages of the Company’s share capital held by such shareholders, and the numbers of votes and percentages of the total vote that such shares represent at the General MeetingSee Section V, Shares and Shareholders, page 116.

5. Holders of any securities conferring special control rights, and description of those rightsSee Section V, Shares and Shareholders, page 119.

6. Any restrictions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the Company’s cooperation, the financial rights attaching to securities are separated from the holding of securitiesSee Section V, Shares and Shareholders, page 120.

7. Rules governing the appointment and removal of the Company’s management personnel and such personnel’s powers, including in particular the power to make decisions to issue or buy back shares

PBG Management BoardThe Management Board acts pursuant to the Commercial Companies Code, the Company’s Articles of Association and the Rules of Procedure for the Management Board. The scope of powers of the Management Board includes any matters which are not reserved for other governing bodies of the Company under the provisions of the Commercial Companies Code or the Company’s Articles of Association.Pursuant to the provisions of the Articles of Association currently in effect (Par. 37), the PBG Management Board consists of the President, one to four Vice-Presidents and up to three Members, appointed and removed from office by the Supervisory Board. The Supervisory Board appoints the President of the Management Board, and subsequently at the President’s request, appoints Vice-Presidents and Members of the Management Board. Only natural persons who have full capacity to enter into legal transactions may become members of the Management Board.Two Vice-Presidents acting jointly, a Vice-President acting jointly with a Member of the Management Board, a Vice-President acting jointly with a Proxy or a Member of the Management Board acting jointly with a Proxy are authorised to represent the Company. The President of the Management Board acting individually is authorised to represent the Company. The Management Board may grant powers of attorney (general powers of attorney, powers of attorney to perform specific types of activities, and powers of attorney to perform a specific activity) to act on behalf of the Company. In accordance with the Articles of Association, the Management Board may grant powers of proxy upon consent of all Members of the Management Board. A power of proxy may be revoked by any

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Member of the Management Board acting individually. However, due to the fact that the Company filed the petition for insolvency with arrangement option, the previously granted proxies automatically expired, and since the judicature concerning granting powers of proxy by management boards of companies in insolvency with arrangement option is ambiguous, the procedure requires approval by a Court Appointed Receiver and Judge Commissioner. Acting in the best interest of the Company, the Management Board sets forth the strategy and the main objectives of the Company’s operations, and submits them to the Supervisory Board for approval. The Management Board is responsible for implementation and performance of the same. The Management Board is responsible for transparency and effectiveness of the Company's management system and the conduct of its business in accordance with legal regulations and best practice.Members of the Management Board are appointed, removed from office and suspended from duties by the Supervisory Board in accordance with the rules set forth in the Commercial Companies Code and the Company’s Articles of Association. Candidates are nominated by the President of the Management Board. The Supervisory Board enters into and terminates employment contracts with Members of the Management Board. The Chairperson or Deputy Chairperson of the Supervisory Board is authorised to execute such contracts on behalf of the Supervisory Board. Other actions concerning the employment relationship with Members of the Management Board are dealt with in the same manner.The Supervisory Board determines remuneration for Members of the Management Board, taking into account the remuneration’s incentivising function in ensuring effective management of the Company.

Mandate of a Management Board Member expires:1) upon removal of a given Member from the Management Board,2) on the date of the General Meeting approving the financial statements for the last full

financial year during the term of office,3) upon death,4) upon resignation.

Resignations by Members of the Management Board should be submitted to the Supervisory Board, with a copy for the Management Board.

Without the consent of the Supervisory Board, a Management Board Member may not:1) conduct any activity competitive to the Company’s business,2) be a partner in any partnership under civil law or another type of partnership, or a member

of a governing body of an incorporated company or a member of the governing body of any other competitive legal entity,

3) participate in a competitive company in which a given Member holds at least 10% of shares or rights entitling that Member to appoint at least one member of the management board.

A Management Board Member is obliged to immediately notify the Supervisory Board of the occurrence of the circumstances specified above. The Management Board Member should remain fully loyal to the Company and refrain from taking any actions which could lead to the gaining of personal profits only. If the Member of the Management Board receives information on the

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possibility of investment or any other profitable transaction concerning the Company’s business, such Member should promptly present the information to the Management Board so that it can be considered in terms of its possible use by the Company. The use of such information by a Member of the Management Board or its conveying to a third party may only take place with the Management Board’s consent and only if it does not infringe upon the Company’s interest. Members of the Management Board should notify the Supervisory Board of each actual or potential conflict of interests in relation to the position they hold. A Member of the Management Board should treat its shareholding in the Company as a long-term investment.

Any activities which are beyond the scope of ordinary management require adoption of a resolution by the Management Board. In particular, the following matters require a resolution to be adopted by the Management Board:

1) decisions regarding major investment projects and the manner of their financing,2) outlining the Company’s strategic development plans and setting the Company’s financial

targets,3) definition of the Company’s organisational structure,4) definition of the Company’s rules of procedure and other internal regulations,5) internal division of powers between individual Members of the Management Board,6) outlining personnel and payroll policies, including assumptions underlying incentive

schemes.

Until the closing of arrangement proceedings, resolutions of the Management Board on matters which go beyond the ordinary management activities, require approval of the Court Appointed Receiver. With respect to all matters not listed above, Members of the Management Board should be responsible for managing the Company’s affairs individually, as per the division of powers. Board are obliged to promptly notify the Supervisory Board of any hindrance in their performance of duties. The President of the Management Board will decide which other Management Board Member will perform the duties instead.

Supervisory BoardThe Supervisory Board acts pursuant to the Commercial Companies Code, the Company’s Articles of Association and the Rules of Procedure for the Supervisory BoardThe Supervisory Board is composed of no less than five Members appointed by the General Meeting by way of a secret ballot for a one-year term of office. The Supervisory Board Members’ mandates expire on the date of the General Meeting which approves the financial statements for the previous full financial year when the Members held the office. Members of the Supervisory Board may be re-elected. The Supervisory Board is comprised of independent members, the criteria of their independence are provided for in the relevant laws or regulations contained in documents on public companies that specify the rules of corporate governance.A member of the Supervisory Board is deemed to be independent if:

1) they are not employed by the Company or Related Entity; 2) they are not a member of the supervisory and management bodies of a Related Entity;

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3) they are not a shareholder holding at least 5% of votes at a General Meeting of the Company or Related Entity;

4) they are not a member of the supervisory and management bodies or employee of an entity holding at least 5% of votes at a General Meeting of the Company or Related Entity;

5) They are not a parent, child, spouse, sibling or parent of a spouse, and not adopted by, any of the persons referred to in above points.

The Supervisory Board exercises ongoing supervision over the Company’s business, across all areas of its operations. It submits annually a brief assessment of the Company’s standing, as established by the Supervisory Board, to the General Meeting.

The Supervisory Board’s approval is required in particular for the following:1) acquisition of a business or of an organised part thereof, 2) opening or closing Company branches in Poland and abroad,3) assumption of liability for third party obligations (sureties, guarantees and avals)

whose value exceeds the Company’s share capital; however, assumption of liability for obligations of the Group companies does not require such approval,

4) conduct by Members of the Management Board of activities competitive to the Company’s business and participation in competing companies as a general partner or member of the governing bodies,

5) acquisition, subscription for, disposal of and resignation from pre-emptive rights to, shares, except shares in public companies whose number does not exceed 1% of their total number,

6) payment of interim dividend, 7) provision by the Company of any benefits to Members of the Management Board, other

than benefits under the employment relationship,8) execution by the Company or its subsidiary of a significant agreement with a related

party (except agreements executed with the Group companies), as supervisory board member, a management board member or their related parties,

9) acquisition or disposal of real estate, perpetual usufruct, or of an interest in real estate.10) appointment of the auditor; 11) acting on behalf of the Company in agreements and disputes between the Company

and Management Board members, 12) approval of the Rules of Procedure for the Management Board, 13) appointment and removal from office of Management Board members,14) issuing opinions on matters submitted by the Management Board.

In order to discharge its duties, the Supervisory Board may review each area of the Company’s activities, request the Management Board and employees to provide reports and clarifications, review the Company’s assets, and inspect accounts and documents. Members of the Supervisory Board should receive regular and exhaustive reports on all matters of importance and risks connected with the Company’s operations, as well as manner of managing such risks. In case of issues which need immediate attention, the Management Board informs the Members of the Supervisory Board by circulation (in writing). In such situations, the President or two Vice-Presidents

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acting jointly, a Vice-President acting jointly with a Management Board Member, a Vice-President acting jointly with a Proxy, or a Management Board Member acting jointly with a Proxy submit information in writing to the Chairperson of the Supervisory Board.A Supervisory Board Member should immediately notify the Chairperson of any hindrance in his or her performance of duties, stating the reasons for such hindrance.A Supervisory Board Member should notify other Supervisory Board Members without undue delay of:

a) an actual conflict of interests with the Company. In such a case, the Supervisory Board Member should refrain from expressing opinions or voting on adoption of resolutions concerning the matter which has given rise to the conflict of interests. Information on the conflict of interests so reported should be recorded in the minutes of the Supervisory Board meeting,

b) personal and factual relationships or organisational links between a Supervisory Board Member and a particular shareholder, especially the majority shareholder, which may affect the Company’s affairs.

A personal relationship with a shareholder is understood as a relationship by marriage or blood of the first degree. A factual relationship is understood as maintaining regular economic relations. Organisational links with a shareholder are understood as links under employment or similar contracts. The Company may request a Supervisory Board Member to furnish a statement regarding such relationships and links.

8. Rules governing amendments to the Company’s Articles of AssociationAn amendment to the Company’s Articles of Association requires:

General Meeting’s resolution adopted by at least three-fourths (3/4) of the votes cast (Art. 415 of the Commercial Companies Code), in the form of a notarial deed (a material change in the Company’s business requires a resolution adopted by at least two-thirds (2/3) of the votes (Art. 416 of the Commercial Companies Code),

an entry in the National Court Register (Art. 430 of the Commercial Companies Code).

In 2012, the Company’s Articles of Association were amended under resolution No.6 par.11 and resolution No. 7 of the Annual General Meeting dated June 28th 2012. The amendments to the Company's Articles of Association were published in Current Reports No. 18/2012 and 22/2012 (the reports are available at http://www.pbg-sa.pl/relacje-inwestors kie/raporty-biezace.html#!/2012 ) and consisted in:

Adding Par. 9.3 in the Company's Articles of Association:

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Resolution No. 6of the Extraordinary General Meeting of

PBG S.A. of Wysogotowodated April 3rd 2012

concerning the issue of Series A1 through A12 bonds convertible into Series H shares, issue Series H shares as a part of a conditional share capital increase; to waive pre-

emptive rights of the existing shareholders with respect to Series A1 through A12 bonds convertible into Series H shares and Series H shares, and amend the Company's Articles

of Association.(…)

Par. 11.This General Meeting resolves to amend the Company's Articles of Association so that Par. 9.3 of the Company's Articles of Association shall be added, reading as follows:“The Company share capital has been conditionally increased by no more than PLN 14,295,000.00 (fourteen million two hundred ninety five thousand Polish złoty) through an issue of no more than 14,295,000 ordinary (fourteen million two hundred ninety five thousand) bearer Series H shares with a par value of PLN 1.00 per share. The conditional share capital increase has been effected to grant rights to acquire Series H shares to holders of convertible Series A1 through A12 bearer bonds, with the pre-emptive rights of the Company's existing shareholders waived.”

Par. 10.1 of the Company's Articles of AssociationResolution No. 7

of the Extraordinary General Meeting ofPBG S.A. of Wysogotowo

dated April 3rd 2012

concerning amendments to the Company’s Articles of Association

Par. 1.Pursuant to Art. 430.1 of the Commercial Companies Code, the Extraordinary General Meeting of PBG S.A. of Wysogotowo (the “Company”) amends the Company's Articles of Association so that Par. 10.1 of the Company's Articles of Association shall read as follows:3,740,000 of Series A shares are registered shares, and 1,960,000 of Series A shares are bearer shares.

9. Manner of operation of the General Meeting and its key powers; shareholders’ rights and the manner of exercising those rights, including in particular the principles stipulated in the rules of procedure of the General Meeting

9. 1 Manner of operation of the General Meeting The manner of operation of the General Meeting is governed by the Rules of Procedure of the Company’s General Meeting. A shareholder may participate in the General Meeting if he/she has

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submitted to the Company a registered share certificate issued by the entity operating the shareholder’s securities account not later than one week prior to the date of the General Meeting and such certificate is not collected by the shareholder prior to the conclusion of the General Meeting. The General Meeting is valid if shareholders present at the Meeting represent at least a half of the share capital. Members of the Supervisory Board should also be present. Absence of any member of those bodies must be explained at the General Meeting. The Company’s auditor should participate in the Annual General Meeting and in any Extraordinary General Meeting whose agenda includes discussion of the Company’s financial matters. Experts and invited guests may participate in relevant parts of the Meeting, especially if their participation is advisable, given the need to present to the General Meeting opinions on the matters discussed. The Company’s Articles of Association provide for convening general meetings at which shareholders may cast their votes using an electronic voting system. Decisions regarding the use of such systems and the use of electronic means of communication during the General Meeting shall each time be taken by the Management Board.The Chairperson of the General Meeting presides over proceedings of the Meeting, in line with the adopted agenda and in compliance with the applicable regulations, the Company’s Articles of Association and the Rules of Procedure of the General Meeting. The Chairperson may not at his/her sole discretion remove items from the published agenda of the Meeting, rearrange items in the agenda or include in the agenda important matters which were not in the agenda originally communicated to the Shareholders. Upon presentation of each item in the agenda, the Chairperson prepares a list of persons who have registered for discussion and – upon closing the list – opens the discussion, giving the floor in the order the speakers registered for the discussion. The Chairperson closes the discussion at his/her sole discretion. The Chairperson may give the floor to members of the Supervisory Board and Management Board and invited experts who may speak out of turn. Participants of the meeting may take the floor exclusively on the matters on the agenda which are currently under discussion. For the purposes of discussing any individual matter, the Chairperson may limit each participant’s speaking time, including the time for speech in reply. The above limitation may not be applied to a member of the Supervisory Board or Management Board and invited experts. The Chairperson decides whether to lengthen the speaking time or give the floor again to the given speaker.Each participant of the General Meeting has the right to put questions to the Management Board, Supervisory Board and the auditor on the matters in the agenda which are currently under discussion. Members of the Management Board, Supervisory Board and the Company’s auditor are obliged to answer the questions. While answering such questions, it should be noted that the Company is required to observe the disclosure requirements under the regulations governing the trade in financial instruments. Forthwith upon closing the discussion, the Chairperson puts a formal motion to vote. At a participant’s request, his/her written statement is included in the minutes of the meeting.The General Meeting’s resolutions are adopted by way of an absolute majority of votes cast, unless absolutely binding laws or the Company’s Articles of Association require that a given resolution be adopted by a qualified majority.

Shareholders may vote at the General Meeting by postal ballot, using a form published by the Management Board on the Company's website, pursuant to the relevant provisions of law. The

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postal vote shall be deemed valid if it is submitted to the Company not later than during voting at the General Meeting. Postal ballot requires the voter to provide signature compliant with the specimen signature submitted to the Company, confirmed by the notary public.

9.2 Key powers of the General Meeting According to Par. 28 of the Articles of Association of PBG, the matters requiring the General Meeting’s resolution include:

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1) review and approval of the annual financial statements of the Company and the Directors’ Report on the Company’s operations for the previous financial year,

2) approval of discharge of duties by members of the Supervisory Board and Management Board,

3) distribution of profit or determination of means for covering losses; 4) any decisions concerning claims for remedy of damage inflicted in the establishment of the

Company or in the exercise of supervision or management;5) sale or lease of the business or of an organised part thereof or making it available for use by

a third party;6) issue of bonds convertible into shares or bonds conferring pre-emptive rights,7) defining the rules and amounts of remuneration of the Supervisory Board Members,8) appointment and removal from office of Supervisory Board members,9) setting the dividend record date, 10) creation, each instance of application, and liquidation of capital reserves.

9.3 Shareholders’ rights and the manner of exercising those rightsAccording to the Rules of Procedure of the PBG General Meeting:

1. A shareholder may participate in the General Meeting and exercise his/her voting rights personally, through a proxy or another representative. Powers of proxy to act on behalf of a Shareholder should be granted in writing under the pain of nullity and attached to the minutes of the General Meeting. Other representatives should duly document their authority to act on behalf of Shareholders.

2. The General Meeting elects its Chairperson from among the participants.

3. The Management Board convenes annual or extraordinary General Meetings. If the Management Board fails to adopt a resolution to call the Annual General Meeting before the lapse of the fifth month as from the end of the last financial year or convenes the Annual Meeting for a date later than the deadline specified in item 2, then the right to convene the Annual General Meeting shall also extend to the Supervisory Board. Shareholders representing at least a half of the share capital or at least a half of the total vote in the Company also have the right to convene the General Meeting and to appoint the Meeting's Chairperson.A Shareholder or Shareholders representing at least one-twentieth of the share capital may request that the Extraordinary General Meeting be convened and certain items be included in the agenda of the Meeting. The request shall be submitted to the Management Board in a written or electronic form. If the Extraordinary General Meeting is not convened within two weeks after the submission of such request to the Management Board, the registry court may authorise the Shareholders submitting the request to convene the Extraordinary General Meeting.

4. Each participant of the General Meeting has the right to put questions to the Management Board, Supervisory Board and the auditor on the matters in the agenda which are currently under discussion.

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5. Each participant of the General Meeting may submit a motion concerning a procedural matter. The Chairperson may allow participants to speak out of turn on procedural matters. At a participant’s request, his/her written statement is included in the minutes of the meeting.

6. Shareholders may propose amendments to the agenda of the General Meeting, and draft resolutions, pursuant to the provisions of the Commercial Companies Code.

10. Composition and activities of the issuer’s management, supervisory and administrative bodies or of their committees; changes in their composition in the last financial year

10.1 Composition and activities of the Supervisory Board and its committeesComposition of the Supervisory Board of the sixth term (beginning of the term: June 28th 2011) in the period from January 1st to June 21st 2013:Jerzy Wiśniewski – Chairman of the Supervisory Board;Maciej Bednarkiewicz – Deputy Chairman of the Supervisory Board;Małgorzata Wiśniewska – Secretary of the Supervisory Board; Dariusz Sarnowski – Member of the Supervisory Board;Przemysław Szkudlarczyk – Member of the Supervisory Board;

On June 21st 2013, the Annual General Meeting of PBG appointed the following persons to the Supervisory Board of the seventh term: Jerzy Wiśniewski – Chairman of the Supervisory Board; Maciej Bednarkiewicz – Deputy Chairman of the Supervisory Board; Małgorzata Wiśniewska – Secretary of the Supervisory Board; Dariusz Sarnowski – Member of the Supervisory Board;Przemysław Szkudlarczyk – Member of the Supervisory Board; Stefan A. Gradowski – Member of the Supervisory Board; Norbert Słowik – Member of the Supervisory Board.

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By the date of audit of these financial statements, the composition of the Supervisory Board did not change.

Full name Jerzy Wiśniewski

Position

Chair of the Supervisory BoardNon-independent Member of the Board − founding shareholder; Mr Wiśniewski does not conduct any activity competitive to the business of PBG S.A.Member of the Remuneration Committee

Qualifications Poznań University of Technology – Faculty of Civil Engineering MBA – Rotterdam School of Management Canadian International Management Institute – management programme

Experience PGNiG S.A. – manager in charge of gas transmission system operation PBG S.A. – founder, main shareholder, President of the Management Board,

and Member of the Supervisory Board

Full name Małgorzata Wiśniewska

PositionSecretary of the Supervisory BoardNon-independent Member of the Board; Ms Wiśniewska does not conduct any activity competitive to the business of PBG S.A.

Qualifications

Poznań University of Technology – Faculty of Civil Engineering MBA – Rotterdam School of Management Canadian International Management Institute – management programme Postgraduate programme on Management and Public Relations at the

Faculty of Finance and Banking at the Poznań School of Banking.

Experience

Assistant Designer at Przedsiębiorstwo Uprzemysłowione Budownictwa Rolniczego of Poznań

At PBG: Quality System Director, Public Relations Director, Member of the Management Board and Vice-President of the Management Board.

President of the Management Board of Poznańskie Stowarzyszenie Oświatowe since 1997

President of the Management Board of INFRA S.A. Chair of the Supervisory Board of Hydrobudowa Polska S.A. Deputy Chair of the Supervisory Board of Hydrobudowa 9 S.A. Chair of the Supervisory Board of PBG Dom Sp. z o.o. Chair of the Supervisory Board of APRIVIA S.A. Member of the Supervisory Board of GasOil Engineering AS Member of the PBG Supervisory Board in the period November 21st 2006–

August 31st 2008 and since April 21st 2010 President of the PBG Foundation

Full name Dariusz Sarnowski

Position

Since June 29th 2012, Member of the Supervisory Board; before that Secretary of the Supervisory BoardIndependent Member of the Board; Mr Sarnowski does not conduct any activity competitive to the business of PBG S.A.Member of the Audit Committee

Qualifications Poznań University of Economics – Accounting

Experience

Certified Chartered Auditor Consulting Department Assistant, Audit Department Assistant at W.

Frąckowiak i Partnerzy Sp. z o.o. BZ WBK S.A. – inspector in the consultancy division of the Capital Markets

Department Manager at Trade Institute – Reemtsma Polska S.A. Audit Department Assistant at BDO Polska Sp. z o.o. Audit Department Assistant at HLB Frąckowiak i Wspólnicy Sp. z o.o. Shareholder; President of Sarnowski & Wiśniewski Spółka Audytorska Vice-President of the Management Board of Usługi Audytorskie DGA Sp. z

o.o. Member of the Supervisory Board of Mostostal Poznań S.A. Member of the Supervisory Board of Browary Polskie BROK-STRZELEC S.A. Member of the Supervisory Board of NZOZ Szpital w Puszczykowie Sp. z

o.o. Member of the Supervisory Board of Swarzędz S.A. Member of the PBG Supervisory Board since 2005.

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Full name Przemysław Szkudlarczyk

PositionMember of the Supervisory BoardNon-independent Member of the Board; Mr. Szkudlarczyk does not conduct any activity competitive to the business of PBGMember of the Audit Committee

Qualifications Poznań University of Technology – Faculty of Machines and Motor Vehicles Warsaw University of Technology – gas engineering MBA – Rotterdam School of Management Canadian International Management Institute – management programme

Experience

PGNiG S.A. – technical assistant (natural gas transmission) Technologie Gazowe Piecobiogaz – development manager, member of the

management board KRI S.A. – president of the management board Hydrobudowa Śląsk S.A. – Commercial Proxy PBG S.A. – Vice-President of the Management Board, Member of the

Supervisory Board

Full name Stefan A. Gradowski

PositionMember of the Supervisory BoardIndependent Member of the Board; Mr Gradowski does not conduct any activity competitive to the business of PBG

Qualifications Warsaw School of Economics Completed several postgraduate programmes in organisation,

management and finance at universities in Poland and abroad (e.g. University of Lyon, University of Dublin).

Experience BZ WBK S.A. – Adviser to the President of the Management Board G.C. Consulting Sp. z o.o − owner of a consultancy business; Member of the Supervisory Boards of MACOPHARMA Polska, LOOK

Investment, ALTRECo S.A., and TRION S.A.

Full name Norbert Słowik

PositionMember of the Supervisory BoardNon-independent Member of the Board; Mr Słowik does not conduct any activity competitive to the business of PBG

Qualifications

University of Łódź Completed a Postgraduate European Programme in macroeconomics,

microeconomics and EU law. A certified consultant at the Centre for European Studies at the University

of Łódź. Graduated from the International School for Consultants run by the

University of Łódź and the Lyon University in France.

Experience

Legal counsel at the Central Planning Office Manager and specialist at the PHARE – STRUDER programme management

team at the Regional Development Agency of Łódź (Łódzka Agencja Rozwoju Regionalnego S.A.)

– Minister's legal counsel at the Office of the Committee for European Integration

– Director of the Cohesion Initiatives Department at the National Fund for Environmental Protection and Water Management

– Director for Strategy and Development at INFRA Sp. z o.o. Co-owner and general partner at Norbert Słowik i Wspólnicy Spółka

komandytowa

Members of the Supervisory Board are elected for one-year terms, and their remuneration is determined by the General Meeting. The Supervisory Board is responsible for exercising on-going supervision over the Company’s activities in all aspects of its operations. Specific duties conferred on the Board include: assessment of the consistency of financial statements and Directors’ Reports with the accounting records and documents, as well as with facts; review of the Management Board’s proposals concerning profit distribution or coverage of loss; and presentation of written annual reports on findings of such reviews to the General Meeting.

16


The duties of and the rules for the Supervisory Board are contained in a formal document. The Board carries out its duties as a collective body, with some of its powers delegated to specific persons or committees, as described below.

The following committees operate within the PBG Supervisory Board:1. Audit Committee;2. Remuneration Committee. In 2013, the Audit Committee consisted of:

Dariusz Sarnowski; Małgorzata Wiśniewska, Przemysław Szkudlarczyk.

The Audit Committee convenes on an ad hoc basis, at least once per quarter. In particular, the Committee is responsible for:a) monitoring the financial reporting process;b) monitoring the internal control, internal audit and risk management systems for their effectiveness;c) monitoring the auditing procedures;d) monitoring the independence of auditors and of entities qualified to review financial statements;e) providing the Supervisory Board with a recommendation regarding an entity authorised to review financial statements and to perform auditing procedures.

In 2013, the Remuneration Committee consisted of: Maciej Bednarkiewicz;Jerzy Wiśniewski.

The Remuneration Committee convenes on an ad hoc basis, at least once per quarter. In particular, the Committee is responsible for:

overall monitoring of the applied remuneration policies, and the levels of remuneration at the Company;

defining terms and conditions of employment for members of the Company’s Management Board and management personnel;

developing a bonus scheme for a given financial year.

Remuneration of the Supervisory Board MembersThe amount of remuneration paid to members of the Supervisory Board is determined in the resolution of the Extraordinary General Meeting of PBG, dated December 10th 2005.The amount of remuneration depends on the scope of duties and responsibilities of the individual Supervisory Board members delegated to independently perform supervisory functions.

Table 1: Remuneration of Supervisory Board members for holding office at the Parent

Remuneration (PLN Jan 1–Dec 31 2013 Jan 1–Dec 31 2012

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’000) Baseremuneratio

n

Other benefits

Total Baseremuneratio

n

Other benefits

Total

Jerzy Wiśniewski 120 5 125 188 3 191

Maciej Bednarkiewicz 96 - 96 108 - 108

Dariusz Sarnowski 36 - 36 48 - 48

Adam Strzelecki - - - 9 - 9

Marcin Wierzbicki - - - 9 - 9

Małgorzata Wiśniewska 60 1 61 78 13 91

Przemysław Szkudlarczyk

36 - 36 18 - 18

Andreas Madej - - - 9 - 9

Piotr Bień - - - 9 - 9

Andrzej Gradowski 19 - 19 - - -

Norbert Słowik 19 - 19 - - -

TOTAL 386 6 392 476 16 492

Table 2: Remuneration of Supervisory Board members for holding office at subsidiaries, jointly-controlled entities or associates

Remuneration (PLN’000)

01.01 – 31.12.2013 01.01 - 31.12.2012

Baseremuneratio

n

Other benefits Total Base

remuneration

Other benefits Total

Jerzy Wiśniewski 1,428 476* 1,904 208 142* 350

Dariusz Sarnowski 54 - 54 - - -

Małgorzata Wiśniewska 588 - 588 201 - 201

Przemysław Szkudlarczyk 240 - 240 116 - 116

TOTAL 2,310 476 2,786 525 142 667

*for members delegated to independently perform supervisory functions

Table 3: Company shares or rights to the Company shares (options) held by PBG supervising personnel

Supervising personNumber of shares

As at Dec 31 2013 As at the filing date of this Report

Jerzy Wiśniewski 3,881,224 3,881,224

Małgorzata Wiśniewska 3,279 3,279

Przemysław Szkudlarczyk 2,390 2,390

10.2 Composition and manner of operation of the Management Board

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The composition of the Management Board in the period from January 1st to December 31st 2013 was as follows:

Paweł Mortas – President of the Management Board; Tomasz Tomczak – Vice-President; Mariusz Łożynski – Vice-President; Kinga Banaszak-Filipiak − Vice-President; Bożena Ciosk – Member of the Management Board as of March 18th 2013.

Full name Paweł Mortas

Position President of the Management Board since October 28th 2012

Qualifications

Łódź University, Faculty of Economics, specialising in industrial economics Executive MBA programme of the Institute of Economics of the Polish

Academy of Sciences in Warsaw (Instytut Nauk Ekonomicznych Polskiej Akademii Nauk w Warszawie)

Executive DBA programme of the Institute of Economics of the Polish Academy of Sciences in Warsaw (Instytut Nauk Ekonomicznych Polskiej Akademii Nauk w Warszawie).

accounting course for candidate chief accountants, at the Foundation for Development of Accounting in Poland (Fundacja Rozwoju Rachunkowości w Polsce).

preparatory course for investment advisers, at the Post-Graduate School for Investment Advisers and Securities Analysts (Studium dla Doradców Inwestycyjnych i Analityków Papierów Wartościowych).

qualified to sit on supervisory boards of state-owned companies.

Experience

1997-1999 – Tongheung-ZTS Polska Sp. z o.o of Grójec, positions held: financial specialist, head of economics division,

2001 – Medim Sp. z o.o. of Warsaw, positions held: financial inspector, finance and organisation director,

2003-2005 – TBS - Bemowo Sp. z o.o. of Warsaw, vice-president of the management board (finance),

2003-2005 – TBS - Wola Sp. z o.o. of Warsaw, vice-president of the management board,

2005 - TBS – WOLA Sp. z o.o., liquidator, 2006 – TBS - Bemowo Sp. z o.o. of Warsaw, president of the management

board, 2007 – Kaskada Sp. z o.o. of Warsaw, president of the management board, 2007 – BDM Grupa Inwestycyjna S.A. of Warsaw, president of the

management board, 2007-2009 – ENEA S.A. of Poznań, positions held: acting president of the

management board, president of the management board, 2009-2010 – ALSTOM Sp. z o.o. of Warsaw, adviser PBG S.A. – Sales Organisation Director, President of the Management Board

Field of expertise Power constructionAreas of responsibility at the PBG Group Strategy and development

Full name Tomasz Tomczak

Position Vice-President of the Management Board

Qualifications

Poznań University of Technology – Faculty of Machines and Motor Vehicles University of Science and Technology in Kraków – Faculty of Oil and Gas

Drilling MBA – Business School of the Poznań University of Economics (MBA

programme run in cooperation with Nottingham Trent University) Canadian International Management Institute – management programme

Experience

VOLVO SERVICE – assistant service manager Piecobiogaz – technical assistant to the management board Technologie Gazowe Piecobiogaz – technical assistant to the management

board; site manager; project manager; technical manager PBG – technical manager; Member of the Management Board; Vice-

President of the Management BoardField of expertise Natural gas and crude oil

FuelsAreas of responsibility at the PBG Group Contract execution in the natural gas, crude oil and fuels sectors

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Full name Mariusz Łożyński

Position Vice-President of the Management Board

Qualifications Poznań University of Technology – Faculty of Civil Engineering

Experience

BORM Biuro Projektów – senior assistant GEOBUD Poznań – senior assistant designer Concret – Service Poznań – office manager Kulczyk TRADEX – project specialist PTC Poznań – specialist in charge of project planning/designing PBG S.A. – head of technical unit; head of contract execution support

department; manager in charge of contract preparation; commercial proxy; Member of the Management Board; Vice-President of the Management Board

Areas of responsibility at the PBG Group Bidding processes; securing contracts for the PBG Group

Full name Kinga Banaszak-Filipiak

Position Vice-President of the Management Board until October 28th 2012

Qualifications

Poznań School of Banking (Wyższa Szkoła Bankowa w Poznaniu), Finance and Banking, International Finance

Poznań University of Economics (Uniwersytet Ekonomiczny w Poznaniu), Faculty of Management, International Relations

Poznań School of Banking, Postgraduate studies in Controlling Executive MBA programme of the Poznan School of Banking and the

Helsinki School of Economics (currently Aalto University School of Economics).

Poznań School of Banking, Postgraduate studies in Equity Investments licensed insurance agent Certificate of LCCI (London Chamber of Commerce and Industry)

Experience

1999 – at PTE Norwich Union S.A. of Warsaw as sales representative 2000 – Office of the Committee for European Integration (UKIE), Warsaw,

internship at the Law Harmonisation Department 2004 – Group 4 Sp. z o.o. of Warsaw, Poznań Branch, assistant to the

Western Region Director 2004-2005 – Rybhand Trzcielińscy spółka jawna of Jarocin, assistant Since 2005 – PBG S.A. (in company voluntary arrangement) of Wysogotowo,

holding successively the following positions: analyst, Investor Relations Manager, Research Director, Capital Market Relations Director, Investor Relations Director - Press Officer.

Areas of responsibility at the PBG Group Economics and finance, investors relations, restructuring

Full name Bożena Ciosk

Position Member of the Management Board since March 18th 2013

Qualifications

Poznań Academy of Economics (now Poznań University of Economics), Faculty of Finance and Banking

Poznań School of Banking, Postgraduate studies in Controlling one-year course at the Advisory and Management Training Centre – Project

Management

Experience

2002-2003 Elektrim-Megadex S.A. of Warsaw, assistant to the Management Board;

2003 until present, PBG, holding successively the following positions: Economic Clerk, Deputy Financial Manager, Deputy Chief Financial Officer, Chief Financial Officer.

Areas of responsibility at the PBG Group Relations with financial institutions, debt restructuring

The current, fourth term of office of the Management Board commenced on June 29th 2012. Members of the Management Board are appointed by the Supervisory Board for a three-year term

20


of office. If appointed during a term of office, a member of the Management Board remains in office until the expiry of this term of office. The mandates of Management Board members shall expire on the date of the General Shareholders Meeting approving the financial statements for the last full financial year of the members' service.Until the date of issue of this report, the composition of the Management Board did not change.All matters not reserved for the General Meeting or the Supervisory Board fall within the scope of powers and responsibilities of the Management Board. Specific duties and rules of procedure are defined in a formal document, which sets out in detail the role of the Management Board as a corporate body. Members of the Management Board manage the respective areas of the Company’s business, and their work is coordinated by the President of the Management Board.

Remuneration of the Members of PBG Management BoardThe Management Board members are appointed by the Supervisory Board by way of a resolution. They are employed under employment or service contracts. The Supervisory Board’s resolution stipulates that members of the Management Board are entitled to base pay, bonuses and additional remuneration provided for in applicable rules and regulations concerning wages and salaries. The amount of remuneration depends on the respective scope of duties and responsibilities entrusted with an individual Management Board member.

Table 4: Remuneration of Management Board members for holding office at the Parent

Remunerationof Management Board members (PLN '000)

Jan 1–Dec 31 2013 Jan 1–Dec 31 2012Base

remuneration

Other benefits* Total

Baseremuneratio

nOther

benefits Total

Paweł Mortas 390 - 390 64 - 64Jerzy Wiśniewski - - - 727 1,000** 1,727Przemysław Szkudlarczyk - -

-199 2,500**

2,699

Tomasz Tomczak 455 - 455 378 - 378Mariusz Łożyński 387 - 387 324 - 324Kinga Banaszak - Filipiak 330 101* 431 42 - 42Bożena Ciosk 248 3 251 - - -

TOTAL 1,810 104 1,914 1,734 3,500 5,234

*maternity benefit**discretionary bonus

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Table 5: Remuneration of Management Board members for holding office at subsidiaries, jointly-controlled entities or associates

Remuneration of Management Board members (PLN '000)

Jan 1–Dec 31 2013 Jan 1–Dec 31 2012Base

remunerationOther

benefits Total Baseremuneration

Other benefits

Total

Paweł Mortas 600 177* 777 113 2 115Przemysław Szkudlarczyk - - - 103 - 103Wiesław Mariusz Różacki - - - 576 382 958Tomasz Tomczak 45 - 45 6 - 6Mariusz Łożyński 46 - 46 - - -

Total 691 177 868 798 384 1,182

*discretionary bonus

Table 6: Company shares or rights to Company shares (options) held by PBG managing personnel

Managing personNumber of shares

As at Dec 31 2013 As at the filing date of this Report

Tomasz TomczakMariusz ŁożyńskiBożena Ciosk

3,2503,553208

3,2503,553208

11. LITIGATION, ARBITRATION OR ADMINISTRATIVE PROCEEDINGSSee Section IV of the Directors’ Report on the Company’s operations in 2012, page 106.

12. Internal auditSee Section II, Report on Risk and Control, page 35.

II. AGREEMENTS BETWEEN THE COMPANY AND ITS MANAGEMENT PERSONNEL PROVIDING FOR COMPENSATION IN THE EVENT OF A GIVEN PERSON RESIGNING OR BEING REMOVED FROM OFFICE The Company has executed a contract with Paweł Mortas, President of the Management Board, which provides for a one-off severance pay equal to six months' remuneration, payable to the President in the event of his removal from office by the Supervisory Board or another body during the term of the contract. The President of the Management Board is entitled to receive the severance pay regardless of the reason of his removal unless it is due to his failure to properly discharge obligations under the contract or due to his wilful misconduct or negligence that has adversely affected the Company's interests. The President of the Management Board is also entitled to receive the severance pay upon termination or expiry of the contract. The contract includes a non-compete clause binding for a period of six months from the date of removal or the date of expiry or termination of the managerial contract. Under this provision, Paweł Mortas is entitled to a monthly compensation equal to 50% of his remuneration. The Company may unilaterally release Mr Mortas from the non-compete obligation.The Company has also executed non-compete agreements with the Vice-Presidents of the Management Board − Tomasz Tomczak, Mariusz Łożyński, and Kinga Banaszak-Filipiak, and with Bożena Ciosk, a Member of the Management Board. After termination of their employment at the

22


Company, members of the Management Board may not engage, personally or through third parties, in any activities competitive to the Company's business. The non-compete agreements remain in effect for a period of 12 months from the date of termination of the relevant employment contracts. Over said period, the Company is obliged to pay the Management Board members a monthly compensation equal to 100% of their remuneration from before the termination of employment.

III. AUDITOR OF THE FINANCIAL STATEMENTS On April 30th 2013, the Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) agreed with the Company's Supervisory Board and the current auditor Grant Thornton Frąckowiak Sp. z o.o. Sp.k. (“Grant Thornton”) to terminate the auditor's appointment to audit the Company's separate and consolidated financial statements for 2013 (see Current Report No. 13/2013 of April 30th 2013). The agreement was reached by unanimous decision of the parties to the contract of appointment. There were no differences in opinion between the parties as to the interpretation and application of laws and regulations or the Company's Articles of Association, and Grant Thornton expressed the opinion it did regarding PBG's annual separate financial statements and the PBG Group's consolidated financial statements for 2012 (available at http://www.pbg-sa.pl/relacje-inwestorskie/raporty-okresowe.html) partly because the arrangement process was still pending as at the date of the opinion.On April 30th 2013, the PBG Supervisory Board, on recommendation from its Audit Committee, passed a resolution to appoint Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Sp. k. (formerly Ernst&Young Audit Sp. z o.o., “E&Y”) as auditor to review the Company's and the Group's H1 2013 financial statements and to audit separate financial statement of PBG S.A. w upadłości układowej (in company voluntary arrangement) and the consolidated financial statements of the Company's Group for 2013.

Address details:Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k. (formerly Ernst & Young Audit sp. z o.o.), Rondo ONZ 1, 00-124 Warsaw, Poland

Practising licence:E&Y is entered in the list of qualified auditors of financial statements maintained by the National Council of Statutory Auditors under Reg. No. 130.Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Sp. k. (formerly Ernst & Young Audit Sp. z o.o.) is the auditor of financial statement of RAFAKO S.A., a PBG Group company.

1. Execution datePBG executed an agreement with Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Sp. k. (formerly Ernst & Young Audit Sp. z o.o.) on May 15th 2013.

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2. Total feesAs at December 31st 2013, total fees payable to Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Sp. k. (formerly Ernst & Young Audit Sp. z o.o.), for the audit of the interim financial statements of PBG and the PBG Group as at June 30th 2013 and the audit of the financial statements of the Company and the consolidated financial statements of the PBG Group were PLN 420,500 (VAT exclusive).

3. Other fees under the contractNot applicable

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SECTION II: REPORT ON RISKS AND RISK MANAGEMENT

I. RISKS AND THREATS

EXTERNAL RISKS AND THREATS

1. Economic environment in PolandThe implementation of the strategic goals of the Company and the PBG Group and the actual financial performance are affected by the macroeconomic factors discussed below, which include: GDP growth changes, structural investments, general situation of the Polish economy, and legislation changes. Favourable changes in the macroeconomic environment may result in higher revenues, while adverse macroeconomic developments may result in a failure to achieve forecast revenue and a deterioration of the Company's financial position. Even though 2013 was the second year of substantial economic slowdown in Poland and the eurozone, it also saw a clear but relatively slow improvement on the markets. Economic growth in Poland and the eurozone decelerated mostly on the back of flagging poor internal demand. The decline was caused by the necessary reduction of fiscal deficits, especially in countries which allowed their sovereign, household and corporate debt to expand excessively for a number of years, and now had to implement a tighter monetary policy.

Figure 1: General economic climate in the construction sector

Source: www.stat.gov.pl.poprawa improvementpogorszenie deteriorationsaldo balance

25

http://www.stat.gov.pl/


Figure 2: Annual and quarterly forecasts of IBnGR2013 2014

III IV I II III IV 2012 2013 2014

GDP % y/y 1.8 2.1 2.2 2.4 2.6 2.7 1.9 1.3 2.5GDP % 0.6 0.6 0.6 0.7 0.7 0.7 x X XAdded value

in industry % y/y 4.5 3.5 2.8 3.0 3.2 3.3 1.8 3.0 3.1in construction % y/y -7.6 -3.4 0.5 2.0 3.8 5.6 0.3 -9.9 5.0in market services % y/y 2.7 2.7 2.7 2.8 3.0 3.1 3.3 2.5 2.9

Domestic demand % y/y 1.4 1.5 1.6 1.9 2.2 2.6 -0.1 0.4 2.1Total consumption % y/y 1.4 1.6 1.8 1.9 2.1 2.2 1.0 1.1 2.0

incl. individual consumption % y/y 0.9 1.8 1.9 2.2 2.4 2.5 1.2 0.8 2.2Gross fixed capital formation % y/y -1.7 -0.5 0.5 1.8 3.0 3.8 -1.7 -1.6 2.6Sold production of

industry % y/y 4.9 3.4 2.7 3.9 4.9 5.2 0.9 1.9 4.2construction % y/y -7.3 -3.1 2.2 3.9 5.0 8.5 -1.8 -10.6 7.0

Inflation (CPI; average) % 1.1 1.5 1.6 2.0 2.1 2.1 3.7 1.1 1.9Inflation (CPI; end of period) % 1.0 1.6 1.7 2.2 2.1 2.3 2.4 1.6 2.3Money supply (3M, end of period) % 6.1 6.4 7.8 8.4 8.4 8.5 4.5 6.4 8.5Real gross remuneration % y/y 2.7 2.1 2.2 2.5 2.7 2.9 0.1 2.2 2.6Average employment (national economy)

% y/y -0.3 0.5 1.1 1.3 1.5 1.6 0.0 -0.4 1.4

Registered unemployment rate (end of period)

% 13.0 13.9 14.4 13.2 12.8 13.1 13.4 13.9 13.1

Exports (GUS/RN) % 1.8 3.4 3.1 4.5 4.9 4.5 3.9 2.4 4.3Imports (GUS/RN) % 0.9 1.0 1.9 3.4 4.1 4.3 -0.7 -0.4 3.4Current account balance (rolling) % of

GDP-1.6 -1.2 -1.7 -1.2 -1.5 -1.6 -3.7 -1.2 -1.6

Average exchange rate (NBP) PLN/USD

3.21 3.0 3.0 3.0 3.1 3.1 3.3 3.1 3.0

Average exchange rate (NBP) PLN/EUR

4.25 4.2 4.2 4.1 4.1 4.0 4.2 4.2 4.1

Source: Historical data – Central Statistics Office, National Bank of Poland.estimates and forecasts – IBnGR The Polish GDP growth rate is expected to reach 2.8% in 2014, which means that it will be higher than in 2013. According to the IBnGR, next quarters of 2014 will bring stronger economic growth, but the differences between individual periods will be slight, with GDP up 2.5% and 3.0% in Q1 and Q4 2014, respectively. Further improvement is expected in 2015, with estimated growth rate at 3.5%.According to the IBnGR forecast, GDP in Q2 and Q3 2014 will increase by 2.7% and 2.9%, respectively.Domestic demand will grow at a rate of 2.9% in 2014, reversing the downward trend seen in the last two years. According to the IBnGR’s forecast, private consumption will increase by 2.5% over the same period, and gross fixed capital formation will go up 4.7%. The increase in investments will be attributable chiefly to higher expenditure on replacement of non-current assets in the manufacturing sector, especially with numerous projects and investments long overdue. Investments will also be stimulated by an inflow of new European funds for infrastructural projects.In 2015, domestic demand will go up 3.3%, driven by both private consumption and higher capital expenditure (up by 3.3% and 5.5%, respectively). Domestic demand's share of GDP will be substantially higher in 2014-2015 than in 2013.

Source: www.pb.pl

2. Competition risk The PBG Group operates on the competitive market of specialist construction services in the gas and oil upstream and downstream sectors and power construction. In the past, the Group secured and performed infrastructural construction contracts (the water and road construction segment). Apart from pricing, there are also other important factors which determine the competitive advantage of a business, including: experience in execution of complex and specialist projects,

26


relevant credentials, high quality of offered services and efficient organisation enabling timely and efficient contract execution.

The PBG Group mitigates competition risk through: Ensuring high quality of the rendered services; Developing staff qualifications in new technologies by participation in largest contracts in

Poland; Entering into strategic alliances with reputable foreign companies operating on the Polish

and foreign markets.

The table below presents domestic and international competitors present on the PBG Group’s current markets:

Table 7: Domestic and international competitorsMARKE

T BUSINESS SEGMENT DOMESTIC COMPETITORS INTERNATIONAL COMPETITORS

NAT

URA

L G

AS A

ND

CRU

DE

OIL

UNDERGROUND GAS STORAGE FACILITIES - Polimex Mostostal- Investgas

- ABB- Sofregas

LNG PLANTS - Polimex Mostostal

- Tractebel- Linde- Costain- Air Products- DAEWOO Engeneering & Construction

TRANSMISSION

- Gazobudowa Poznań- POL-AQUA- ZRUG Poznań- PGNiG Technologie- Gazoprojekt- Nafta Gaz Serwis- Control Process

- FCC CONSTRUCCION

REFINERIES - Naftomontaż Krosno- Polimex Mostostal - ABB

DELIVERY OF SPECIALIST GAS EQUIPMENT AND AUXILIARY INFRASTRUCTURE

- Control Process- Bartimpex- Stalbud- Polimex Mostostal

- ABB- KAWASAKI

EXTRACTION FACILITIES - Naftomontaż Krosno- Tractebel- Linde- Costain- Air Products

FUEL

S

FUEL TERMINALS - POL-AQUA- Polimex Mostostal - Bilfinger Berger

CON

STRU

CTIO

N

INDUSTRIAL CONSTRUCTIONSPECIALIST CONSTRUCTION

RESIDENTIAL CONSTRUCTION

- WARBUD- POL-AQUA- Budimex- Dom Development- Hochtief Polska- Echo Investment- Instal Kraków

- SKANSKA- STRABAG

POW

ER

CON

STRU

CTI

ON

POWER GENERATING UNIT CONSTRUCTION - Polimex Mostostal- Mostostal Warszawa

- Alstom- Hitachi- Siemens- Samsung- Doosan Babcock

The Company’s position on the natural gas, crude oil and fuel market in Poland is strong thanks to the high quality of its services, experienced personnel and extensive credentials. The market is divided into two segments: the segment of specialist construction services which require

27


appropriate know-how and credentials, where PBG essentially faces only foreign competitors; and the segment of less complex construction projects, such as pipelines construction, where PBG competes primarily against Polish businesses. Historically, the contract win rate in the oil and gas segment was at the very high level of 34% (tender wins as a percentage of total tenders with the PBG Group as a bidder in 2008–2011). Because PBG is currently in company voluntary arrangement, winning new contracts is impossible until the arrangement with the Company’s Creditors is finalised. The power construction market is another key area of Group’s operations. Preparations for the market entry started in 2010 with the acquisition of a 25% equity interest in Energomontaż Południe S.A. (currently in liquidation bankruptcy; PBG lost control of the company). The same year saw the commencement of a process aimed at acquiring RAFAKO S.A. The process was closed at the beginning of 2012, with the Group having acquired, directly and indirectly, a 66% controlling interest in the company. At present, PBG’s interest is 61.01%. RAFAKO is the largest producer of boilers and environmental protection equipment for the power sector in Europe. It also offers a range of services for the power sector. The acquisition of RAFAKO enabled the PBG Group to secure a major position on the Polish power construction market.

3. Poland’s membership in the European UnionFollowing Poland’s accession to the European Union, international companies providing services similar to the Group’s services have become keener on entering the Polish market. This may result in fiercer competition and squeezed profit margins. However, international operators usually seek to acquire orders jointly with Polish companies to secure local execution capabilities.Moreover, RAFAKO, one of the subsidiaries, generates a significant portion of its revenue on foreign markets.To use the opportunities arising from Poland’s accession to the EU in a most efficient manner, the PBG Group companies:

Implement projects by forming strategic alliances with foreign companies operating in Poland,

Have implemented and work on improving an effective management culture, Offers the required quality of services, confirmed by implemented standards: PN-EN ISO

9001:2009, PN-EN ISO 14001:2005; PN-N-18001:2004, PN-EN ISO 3834-2:2007, and AQAP 2110:2003,

4. Seasonality riskThe PBG Group earns a majority of its revenue from the construction and assembly business, which, like the entire sector, experiences sales seasonality. Seasonality is mostly driven by the following factors which are beyond the companies' control:

Weather conditions in winter, significantly hindering construction works. The weather may be more severe than the average weather conditions and thus reduce the Group’s revenues;

Customers schedule most of their projects in such a way as to ensure they are completed in the final months of the year.

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5. Adverse changes in tax legislationIn Poland, the laws regarding taxation of business activity change frequently. In Poland, the laws regarding taxation of business activity change frequently. There is a risk that the tax legislation currently in effect may change and the new regulations may be less favourable to the Company or its customers, which may directly or indirectly affect the financial performance of the Company.PBG monitors developments in the tax legislation, and makes necessary modifications in its organisation to mitigate the risk.

6. Exchange rateThe following developments were driving the exchange rates of the Polish złoty:1. Interest rate cuts. There is little doubt that the two last interest rate cuts effected in 2013 will be followed by subsequent ones. This forecast is supported by falling inflation rates (down by 0.6% month on month to 2.8% in November, compared with the expected 3.0%), which enables monetary policy easing (as there is no threat of a sudden increase in inflation rates), as well as decelerating economic growth, which is to be stimulated with the cuts. Analysts' opinions on the scope of rate cuts differ, but a decrease of 0.25%, to 4%, is expected in January or February 2014, followed by further cuts of 0.25%-0.5% in May-June 2014. A reduction exceeding 0.25% is unlikely, as the Polish Monetary Policy Council seeks to rebuild markets' confidence by becoming a reliable partner. 2. Situation in southern Europe. Greece will most likely continue to request that the Euro Group provide it with financial aid, whereas Spain and Italy will make every effort to regain the trust of financial markets and lower yield on their treasury bonds, thus reducing the cost of debt service.

Figure 3: PLN/EUR exchange rate in the period January 21st 2013 – January 21st 2014 (mid-rates quoted by the National Bank of Poland)

Source: http://www.finanse.egospodarka.pl

Please note that any long-term forecasting of exchange rates is extremely difficult due to the strong market volatility seen in recent years. The risk of exchange rate volatility also affects Group companies, as a part of their revenue is export revenue denominated in foreign currencies. Moreover, a portion of costs related to the purchase of equipment necessary for the execution of

29


the contracts is incurred in foreign currencies. The PBG Group companies minimise the FX risk using appropriate financial instruments and passing some of the risk onto its subcontractors and suppliers. In the case of imports of high-value plant and equipment, the risk is also hedged with financial instruments available on the market.

7. Risk of failure to reach an agreement with creditors in the process of company voluntary arrangementCurrently, PBG is in the process of company voluntary arrangement. The process may be reached only if the arrangement is approved by at least 50% of creditors representing two thirds of the liabilities submitted for arrangement. There is a risk that the Company will not be able to reach agreement with all creditors and the statutory majorities will not be secured, leading to changing of the process of company voluntary arrangement into company liquidation. Liquidation proceedings would necessitate a change of the Company’s going concern assumption and thus affect the valuation of its assets and liabilities.

8. Risk of significant limitation in ability to win new contractsThe PBG Group companies win most of their contracts in public procurement procedures. The present legal status of the companies in the process of company voluntary arrangement or those filing for such protection prevents or limits their ability to win new contracts or participate in public tenders. Further, the ability to win new contracts is also limited by the fact that no guarantee limits are available to these companies. However, contracts may still be won outside of the public procurement market or through performance of subcontracts.

INTERNAL RISKS AND THREATS

1. Risk related to loss of key personnel PBG’s and other Group companies’ business operations are chiefly based on the knowledge and experience of highly qualified personnel, in particular the engineers. There is a potential risk that the employees of key importance for the Group’s development might leave, which could affect the quality of the services provided.The risk related to the loss of key personnel is limited by:

High internal organisational culture, which helps employees identify themselves with the Company and the PBG Group,

Opportunities for personal and career development. At present, the PBG Group companies, in particular the Parent, are facing the risk of loss of key personnel due to their poor financial condition and the current arrangement and liquidation proceedings. However, in recent months there were no significant changes in the Company's higher management staff.

2. Risk of default on contractsConstruction contracts include numerous clauses related to their proper and timely performance and proper removal of defects, which involves payment by PBG of performance bond or provision of security in the form of a bank guarantee or insurance policy.

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The security is generally provided on the contract execution date and settled after work under the contract is completed. The amount of the security depends on the type of contract. In most cases it is 10% of the contract value. If the Group companies fail to perform or improperly perform the concluded contracts, there exists a risk that a trading partner might claim payment of contractual penalties or terminate the contract.To mitigate such risk the PBG Group takes the following measures:

Insurance of contracts and subcontractors, Extensive use of IT tools in design and project management processes.

3. Risk of dependence on key customers At present, the main customers for services provided by PBG’s natural gas and crude oil and fuels segment are PGNiG and Polskie LNG (a wholly-owned subsidiary of Gaz-System). This is related to the execution of two contracts of substantial value for these customers, totalling nearly PLN 3.3bn (nearly PLN 1.1bn for PGNiG and over PLN 2.2bn for Polskie LNG). However, PBG’s and RAFAKO’s strategy provides for delivery of high-value contracts, which may increase the share of sales to a single customer in total revenues in the future, once PBG finalises the arrangement with its Creditors. In order to mitigate the risk of dependence on its key customers, the PBG Group gradually attracts new customers for its services, such as Polskie LNG, KGHM, DALKIA or PGE. The Group companies seek to mitigate the risk further by:

Winning new customers.

4. Operating riskThe Group’s operations, in particular on-site operations, involve certain risks of human and material loss.The Group mitigates these risks by:

Holding third-party insurance policies, Supplying the employees with state-of-the-art protective equipment on a regular basis, Organising trainings for employees and enhancing their qualifications, Constant supervision over the equipment used, Continuous occupational health and safety training and supervision.

II. FINANCIAL RISK IDENTIFICATION AND MANAGEMENT

The PBG Group is exposed to many risks related to financial instruments, including in particular: liquidity risk, market risk, comprising currency risk and interest rate risk, and credit risk.

Financial risk management at the Group is coordinated by the Parent, which closely cooperates in this respect with the Management Boards and chief financial officers of its subsidiaries. The following are the key objectives of the risk management process:

hedging short-term and medium-term cash flows and limiting cash flow volatility, preventing volatility of the Company’s financial result, implementing debt and asset restructuring measures by the Parent.

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The Company's Management Board believes that the proposed restructuring measures, i.e. filing the petition for insolvency with arrangement option, will best protect the interests of all stakeholders, i.e. creditors (including bondholders, lenders, contracting parties, consortium members, subcontractors and suppliers), employees and shareholders.

Given the Parent’s current situation, the PBG Management Board is taking steps to restructure the Company’s debt, operations and assets.

1.1. Liquidity risk

The PBG Group is exposed to liquidity risk, that is the loss of ability to timely meet financial liabilities. The PBG Group companies monitor the risk of losing operating cash flows by means of a periodic liquidity planning tool. The tool is used to control both the maturity dates of financial assets (mainly receivables) and the projected cash flows from operating and investing activities.As at December 31st 2013 and as at the date of approval of these financial statements, the PBG Group companies were focusing its efforts on maintaining financial liquidity that is necessary to carry out everyday tasks relating to contract execution.

Table 8: PBG Group’s financial liabilities under contractual undiscounted payments, by maturity as at the reporting date ('000 PLN)

ItemCurrent: Non-current: Total

undiscounted liabilities

Carrying amount of liabilities

up to 6 months

6 to 12 months

1 to 3 years

3 to 5 years

over 5 years

As at Dec 31 2013Total exposure to liquidity risk

2,060,905 10,653 76,268 13,767 32,462 2,194,055 2,234,648

As at Dec 31 2012Total exposure to liquidity risk

2,479,767 259,848 42,001 24,741 44,480 2,850,837 2,634,209

The Parent’s subsidiaries used external sources of financing, in the form of credit facilities. Credit limits available to the PBG Group as at December 31st 2013:

Table 9: Overdraft facility limits available to the PBG Group as at the reporting date

PLN ’000 Dec 31 2013 Dec 31 2012

Credit limits granted 354,258 303,000

Drawn balances 322,020 219,601

Available credit limits in current account 32,238 83,399

1.2 Market riskAll market risk management objectives should be considered as a whole, and their achievement is determined primarily by the Group’s internal situation and market conditions.

The financial risk management strategy adopted by the PBG Group companies provides for the use of natural hedging as well as hedging strategies based on derivative instruments. The following types of financial instruments may be used by the Group:

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forwards, - interest rate swaps (IRS) - swaps.

1.2.1. Currency riskThe PBG Group is exposed to currency risk in connection with its transactions. Currency risk arises when the Group companies execute sell or purchase transactions in currencies other than the valuation currency of the transactions.The PBG Group is exposed to risk related to fluctuations in exchange rates due to the fact that raw materials for high unit-value contracts are imported and some of the Group's revenue is denominated in foreign currencies. The currency risk is mainly related to fluctuations in the PLN/EUR, PLN/USD, PLN/UAH, PLN/HUF and PLN/RSD exchange rates.In the period under review, over 22% of the PBG Group's invoiced revenue and 14% of its cost of sales was expressed in foreign currencies.

Table 10: Company’s financial assets and liabilities in foreign currencies, translated into PLN at the closing rate as at the reporting date

Item Amount in foreign currency (‘000):Restated amount ('000)

Amount in PLN (‘000):

Carrying amount ('000)

EUR USD GBP CAD UAH CHF HUF RSD TRY BA

MMZN

BGN

SEK

OMR PLN PLN PLN

As at Dec 31 2013Financial assets (+) 18,280

2,130 24 - 172 173

31,074

23,648 100 10 274 35 3 - 86,296 764,501 850,797

Financial liabilities (-):

(14,528) - - -

(323,156) - - - - -

(126) - -

(147) (242,613) (1,996,214) (2,238,827)

Total exposure to currency risk 3,752

2,130 24 -

(322,984) 173

31,074

23,648 100 10 148 35 3

(147) (156,317)

(1,231,713)

(1,388,030)

As at Dec 31 2012Financial assets (+) 38,316

1,729 936 - 241,999 588

34,167

11,109

2,276 10

1,564 - - - 266,257 878,004 1,144,261

Financial liabilities (-):

(40,440)

(141)

(25)

(542)

(323,156)

(957) -

(8,264) (3) - - - - - (306,329) (2,339,579) (2,645,908)

Total exposure to currency risk

(2,124)

1,588

911

(542)

(81,157)

(369)

34,167 2,845

2,273 10

1,564 - - - (40,072)

(1,461,575)

(1,501,647)

In the period covered by these consolidated financial statements, PBG S.A. and its subsidiaries hedged their future currency exposures with standard forward contracts. The hedging transactions were concluded as part of the applied hedging policy, in order to hedge future cash flows on revenue (under the existing long-term contracts) and cost of sales. The transactions covered contracts with project owners and suppliers (mainly denominated in EUR and USD). In 2013, the Group reported a consolidated net gain on currency risk hedging derivatives of PLN 120 thousand, which was recognised in other income.

As at December 31st 2013, the notional amount of derivative instruments at the PBG Group was as follows:

Table 11: Notional value of derivative instruments as at December 31st 2013

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Notional value of derivative instruments ('000)Hedge for EUR sale transactions 5,000Hedge for EUR purchase transactions 12,705Hedge for USD purchase transactions 2,970

At December 31st 2013, the Group companies hedged 22% of EUR-denominated purchase transactions and 88% of USD-denominated purchase transactions, under which as at the reporting date there were probable future liabilities extending until 2015. At December 31st 2013, the Group companies also hedged 7% of EUR-denominated sale transactions, under which as at the reporting date there were probable future liabilities extending until 2014.

1.2.2. Interest rate riskManagement of interest rate risk focuses on minimising the impact of fluctuations in interest cash flows on financial assets and liabilities bearing variable rate interest. The exposure of the PBG Group companies to the interest rate risk arises primarily in connection with liabilities under contracted bank borrowings and advanced loans.A PBG Subsidiary in company voluntary arrangement uses interest rate swaps (IRS) to hedge against variable interest rate risk. Under a bank borrowing agreement the Subsidiary was required to reduce interest rate risk. In performance of the bank’s requirements, on November 24th 2011 the subsidiary entered into an IRS transaction for the principal amount of EUR 10,000 thousand, subject to amortisation, maturing on November 24th 2021. The Group uses hedge accounting for cash flows with respect to the derivative transaction referred to above and partially hedging against interest rate risk to which the cash flows are exposed.The Group companies which received the court's decision declaring them insolvent in voluntary arrangement stopped accruing interest on bank borrowings, bonds in issue and trade liabilities incurred prior to the court's decision. The amounts of liabilities incurred by the date of the decision and the accrued interest may change once the creditors approve the arrangement.

1.3. Credit riskCredit risk is understood as the inability of the PBG Group's debtors to meet their obligations towards the Group. The following are the key aspects of credit risk:

creditworthiness of customers with whom the Group companies enter into transactions for physical delivery of products;

creditworthiness of entities in which the Group companies invest. The following are the areas of credit risk exposures with different credit risk profiles:

cash and bank deposits, trade receivables, loans advanced,

PBG’s maximum exposure to the credit risk is measured through carrying amount of the financial assets presented in the table below:

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Table 12: Company’s maximum exposure to credit risk measured through carrying amount of the disclosed financial assetsPLN ’000 Dec 31 2013 Dec 31 2012

Borrowings 51,477 186,996Trade and other receivables 587,605 712,619Derivative financial instruments 15 53Debt instruments - 8,570Investment fund certificates - 14,477Other classes of other financial assets 1,806 0Cash and cash equivalents 173,894 173,536Total exposure to credit risk 814,797 1,096,251

The PBG Group companies monitor clients' and creditors' outstanding payments by analysing the credit risk individually, or for the individual asset classes according to credit risk (e.g. by industry, region or structure of customers).

With respect to such financial assets as cash and cash equivalents, the Group's exposure to credit risk arises from its counterparty's inability to make payments as they fall due. However, considering that in this case the Group's counterparties are banks registered in Poland, the related credit risk is immaterial. The maximum exposure to credit risk is equal to the carrying amount of these instruments, and as at December 31st 2013 amounted to PLN 173,894 thousand (December 31st 2012: PLN 173,536 thousand).

As at December 31st 2013, the outstanding balance of loans advanced by the PBG Group stood at PLN 51,477 thousand. To limit the risk related to loans advanced, the PBG Group companies monitor, on an ongoing basis, the assets and financial performance of borrowers. Credit risk related to loans advanced is material to the PBG Group.The PBG Group's credit risk exposure is closely related to the core business activities of the Group companies. The exposure results from concluded trade contracts and is related to the risk of occurrence of such credit events, as the contractor's insolvency, partial collection of receivables or material delays in repayment of receivables. Extending the so-called trade credit to trade partners is an essential part of conducting business. However, the Group companies undertake a number of measures to mitigate the risk of entering into trade relations with potentially unreliable customers. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures.

Customers who are deemed financially unreliable, based on the results of credit verification procedures performed by the Group companies, are required to provide appropriate financial security to limit the risk of insolvency of such customers to the PBG Group companies.

As at December 31st 2013, the total amount of the PBG Group's net trade receivables, excluding the fair value of accepted security, up to which the PBG Group may be exposed to credit risk, stood at PLN 587,605 thousand (December 31st 2012: PLN 712,619 thousand). With respect to trade receivables, the PBG Group companies are exposed to credit risk related to a single major partner or a group of similar partners.

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III. INTERNAL CONTROL SYSTEMThe Office of Internal Audit and Restructuring operates within the organisational support structure, and reports directly to the President of the Management Board. The Office is responsible for:

overseeing the operational implementation and delivery of the Restructuring Plan and reporting to the Management Board and Supervisory Board on the progress made;

providing information on the current status of the controlled business areas, identifying areas whose internal constitutive documents need to be revised, and providing examples of adequate and effective solutions;

checking accuracy and correctness of documents, and verifying authenticity, legal compliance, completeness and timely preparation of documentary evidence;

assessing the adequacy of business process organisation in achieving optimum results; assessing adequacy and effectiveness of the supervision and internal control system in

place at the organisation; monitoring compliance with the law and internal regulations, including the provisions

of the Integrated Management System; ensuring compliance with the provisions of the Integrated Management System; ensuring discharge of obligations imposed under the Polish Labour Code, work rules,

and the organisation’s internal regulations.

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IV. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS USED IN THE PREPARATION OF SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS

The PBG Management Board is responsible for the internal control system and for its effectiveness in the process of producing financial statements and periodic reports, prepared and published in accordance with the Minister of Finance’s Regulation on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated February 19th 2009 (Dz. U. of 2009 No. 33, item 259, as amended).

Financial statements are prepared by the Accounting Services Centre, and the process is directly supervised by the Financial Statements Consolidation Department in cooperation with other organisational units, which are responsible for providing accurate information on items not directly sourced from the Company’s accounting records, but disclosed in the financial statements. Due to the nature of the industry in which the Company operates, the Controlling Department plays an important role in the preparation of financial statements. The key measures used to reduce the risks include correct assessment and analysis of the construction contracts. As required by IAS 11, revenues and expenses associated with the contracts are estimated on the basis of budgets of individual contracts. These budgets are expertly drawn up by contract managers with relevant training. In the course of contract preparation and execution, the budgets are continuously reviewed and updated by the responsible personnel. Results of the reviews and any adjustments to the budgets are discussed at weekly meetings. The process is based on formal rules adopted by the Company and is subject to close supervision by the Management Board.

The Company’s financial information is presented using consistent accounting policies, which are in line with the valuation and presentation policies applied in all PBG Group companies. Since January 1st 2009, the Head Accountant has been responsible for drawing up and signing financial statements, and for drawing up and signing separate and consolidated financial statements – the Group Accounting Coordination Director, and as of July 1st 2010 - the Accounting Services Centre Director. The persons responsible for controlling and coordinating the process of preparing financial statements are professionals with relevant expertise in the field; all of them are bound by non-disclosure agreements.Members of the Management Board responsible for the preparation of financial statements are: Ms. Kinga Banaszak-Filipiak, Vice-President of the Management Board, and Ms. Eugenia Bachorz, Director of the Accounting Services Centre. In line with the internal procedures, in the course of preparation of the financial statements these members of the management team, acting on behalf of the entire Management Board, review the economic information and matters disclosed in the accounts and present their comments and remarks relevant for the preparation of the statements. Once the financial statements have been prepared, they are audited or reviewed, in accordance with applicable laws. All members of the Management Board are required to sign the financial statements before the auditor’s opinion is received.

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The financial statements are reviewed or audited by an entity qualified to audit financial statements, selected by the Company’s Supervisory Board from among renowned audit firms offering high-quality audit services and satisfying the criterion of independence.During the audit of financial statements and accounting records, the auditor holds meetings with key members of the Company’s staff, including members of the Management Board responsible for economic matters, to discuss individual aspects of the financial statements. The final version of the financial statements is then prepared, re-read and signed by the persons responsible for the preparation of the financial statements and the managing personnel, and contains any agreed-upon corrections or adjustments made by the qualified auditor, the responsible persons or the managing personnel. Every year, the Supervisory Board assesses consistency of the Company’s audited financial statements with the accounting records and documentation as well as with facts, and presents its findings to the shareholders in an annual report published by the Company.

Managing the risk related to the preparation of financial statements involves identifying and assessing risk areas and defining the relevant mitigating measures.

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SECTION III: THE PBG GROUP

I. STRUCTURE OF THE PBG GROUP

As at the date of filing this Report, the PBG Group was composed of 48 companies, including its Parent, PBG, 12 direct subsidiaries, and 34 indirect subsidiaries. The Group also includes one associate.

Figure 4: Structure of the PBG Group as at the date of filing this Report

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II. STRATEGY

1. Strategy

At the beginning of 2012, PBG decided to update the PBG Group's strategy and to focus its efforts on the strategic segments: power construction and gas, oil and fuels. A decision was also made to withdraw from the following areas of operations: roads, infrastructure and residential construction, as well as water and sewage. By focusing on its core business, the Company intends to engage in contracts producing satisfactory margins, with low or negative working capital requirements.

Since June 2012, the process of approval of PBG's voluntary arrangement with creditors has been on-going. At the current stage of the process, the key objective is to ensure that agreement is reached with the creditors and the arrangement is formally approved, on feasible terms and conditions. Once approved, the arrangement will allow the Company to continue business activities and rebuild its value in the future. The PBG restructuring process is complex. In parallel to the debt restructuring, the Company is also engaged in reorganisation of its operations and assets. All these efforts are being taken to prepare the organisation for effective performance of the arrangement and to enable the Group to operate as a regular business.

One of the factors contributing to the achievement of the PBG Group’s strategic objectives is the way in which the Group is organised in the individual areas of its operations. The PBG Management Board defines the development directions of a given company and determines its role in the Group. Each company is responsible for project execution in line with its business profile and resources.Figure 5: Organisational structure of the PBG Group as at December 31st 2013 (percentage of voting rights held by PBG)

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Figure 6: Current organisational structure of the PBG Group (percentage of voting rights held by PBG)

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GAZ ZIEMNY, ROPA NAFTOWA ORAZ USŁUGI GENERALNEGO WYKONAWSTWA

NATURAL GAS, CRUDE OIL, AND GENERAL CONTRACTOR SERVICES

BUDOWNICTWO ENERGETYCZNE POWER CONSTRUCTION

BUDOWNICTWO OGÓLNE, OCHRONA ŚRODOWISKA I HYDROINŻYNIERING

GENERAL CONSTRUCTION, ENVIRONMENTAL PROTECTION AND HYDRAULIC ENGINEERING

KOPALNIE KRUSZYW AGGREGATE QUARRIES

BUDOWNICTWO MIESZKANIOWE RESIDENTIAL CONSTRUCTION

DZIAŁALNOŚĆ ZAGRANICZNA FOREIGN OPERATIONS

GAZ ZIEMNY, ROPA NAFTOWA NATURAL GAS AND CRUDE OIL

w upadłości układowej In company voluntary arrangement

Within the Group, the natural gas, crude oil, and fuels markets are the responsibility of PBG, which has traded in these segments since its inception. PBG is the leader on these markets in Poland. It has gained its current position through strategic co-operation with international companies, which has enabled PBG to introduce technologically advanced solutions on the Polish market. PBG was able to use the resulting credentials and necessary experience to win contracts for execution of the largest projects on the Polish gas, oil, and fuels market. In the natural gas and crude oil segment, PBG oil and gas also plays a major role within the PBG Group; the company actively bids in public tenders.The natural gas and crude oil market is particularly important to the Group. This business line is expected to drive the Group's performance in the next several years.

The power construction business is the domain of RAFAKO. RAFAKO has been present in the power construction sector, where it has designed, manufactured and delivered boilers and environmental protection equipment, since 1949. RAFAKO is one of four European companies, next to ALSTOM, Hitachi Power Europe and Doosan Babcock, with access to comprehensive technology solutions for the construction of traditional power generating units and is one of the largest producers of boilers and environmental protection equipment for the power sector in Europe. RAFAKO is the unquestioned leader on the Polish power construction market. In accordance with the adopted strategy, the PBG Group’s operations in the energy segment will enable it to markedly increase its revenue streams. The PBG Group plans to significantly strengthen its position in the Polish power construction segment. In the current year and in the future, contracts worth between PLN 5bn and PLN 15bn are to be awarded. In the coming years, the estimated value of all projects in the sector may reach billions of złotys. The Group intends to be an active player in that sector.

The other areas of operations of the PBG Group are currently viewed as non-strategic and the Group plans to exit, discontinue or divest those operations (real property, PBG Dom's and PBG Erigo's projects).

III. BUSINESS PROFILE

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The business of PBG comprises general contractor services related to natural gas, crude oil, water and fuels facilities, provided on a “turn key” basis, as well as general contractor services for projects in the area of industrial construction, as well as residential, infrastructure and road construction. The Company’s operations mostly consist in executing projects in the gas, oil and fuels segments.

Currently, PBG divides its business into four major operating segments:1. gas, oil and fuels;2. water;3. industrial and residential construction;4. power construction.

Figure 7: Services by segments

Gaz ziemny, ropa naftowa i paliwa Natural gas, crude oil and fuels

Instalacje naziemne do wydobycia ropy naftowej i gazu ziemnego

Instalacje do skraplania gazu ziemnego, magazynowania i regazyfikacji LNG

Stacje separacji i magazynowania LPG, C5+ Instalacje odsiarczania Stalowe gazociągi do przesyłu gazu ziemnego

i ropy naftowej Zbiorniki paliwowe Instalacje techniczne i sanitarne

Surface installations for crude oil and natural gas production

Installations for liquefying natural gas and for LNG storage and regasification

LPG, C5+ separation and storage facilities Desulphurisation units Steel pipelines for oil and gas transmission Fuel tanks Technical and sanitary systems

Woda Water Systemy wodne i kanalizacyjne, w tym:

wodociągi, systemy ściekowe, oczyszczalnie ścieków, ujęcia wody, spalarnie śmieci

Obiekty hydroinżynieryjne, w tym: tamy, zbiorniki retencyjne, zapory wodne

Water supply and sewage systems, including: water pipelines, sewage systems, wastewater treatment plants, water intakes, waste incineration plants

Hydraulic engineering structures, including: dams, storage reservoirs

Bud. Przem. i Mieszk. Industrial and residential construction

Przemysł budowlany Budownictwo przemysłowe

W tym obiekty sportowe, stadiony, szpitale

Budownictwo mieszkaniowe

Construction industry Industrial construction

Including sports facilities, stadiums, hospitals

Residential construction

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Budownictwo komercyjne Commercial constructionBud. energetyczne Power construction

Montaż Modernizacje Naprawy urządzeń Naprawy instalacji do ochrony środowiska i

energetyki Produkcja kotłów Produkcja urządzeń ochrony środowiska

Assembly Upgrades Repairs Repairs of environmental protection and

power generation facilities Manufacture of boilers Manufacture of environmental protection

equipment

The scope of construction services provided as part of the above segments comprises comprehensive contracting services, engineering design work, upgrading, modernisation, repairs, and maintenance of facilities and systems.

Detailed financial data on the share of individual segments in revenue is presented in the section below devoted to changes on the Company’s markets.

IV. CHANGES ON PBG’S MARKETS

In 2013, revenue streams from the individual areas of operations of the PBG Group were generated mainly on the domestic market and were as follows:

Table 13: Industry segmentsRevenue 2013 Year 2012 Change (PLN

‘000)Change (%)

Gas, oil and fuels

(transmission, distribution, production)

328,206 198,011 +130,195 +66

Water

(hydraulic engineering and environmental protection,

pipeline rehabilitation)

14,428 30,308 -15,880 -52

Industrial and residential construction

(construction, infrastructure for industrial facilities)

66,882 17,637 +49,245 +279

Power construction

(power generating unit construction)

862,280 1,346,417 -484,137 -36

Road construction

(road construction)8,301 209,517 -201,216 -96

Other

(sale of merchandise, materials and products, other

services)

35,481 37,702 -2,221 -6

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Total revenue 1,315,579 1,839,592 -524,013 -28

Geographical presenceThe PBG Group's operations focus primarily on the domestic market, which the Group perceives as its key market because of the projects in the power construction sector, planned projects in the oil and gas sector, as well as hydro-engineering projects relating to flood protection systems. The Company, however, makes efforts to enter foreign markets, primarily in the gas and oil sector. Historically, PBG performed contracts for customers in Latvia, Pakistan and Norway.

V. SEGMENT OPERATIONS

1. Natural gas and crude oil segmentPBG has introduced to the Polish market a method of working on live gas pipelines in air-tight conditions, invented by T.D. Williamson. In 1999, PBG was the first company in Poland to design and perform, under a general contractor formula, an unmanned gas production facility. The Company was also the first in Poland to design and construct a liquefied natural gas (LNG) regasification unit. The unit is used in supplying gas and heat to towns and municipalities, as well as by industrial customers. PBG designs and builds co-generation systems, as well as CNG and LCNG units.The technologies it has developed and the experience acquired while developing the natural gas field are now being used in the development of an oil field. In 2003, PBG built its first unmanned crude oil production facilities. In 2005, in connection with more stringent requirements in the area of environmental protection, PBG was the first in Poland to construct a formation water purification system. A year later, the Company designed and implemented a system of underground crude oil heating to facilitate its extraction.

Moreover, the PBG Group provides general contracting services relating to projects involving construction of new facilities and modernisation of existing fuel terminals, together with auxiliary infrastructure. In the area of construction and repair of storage tanks, the Group also conducts work on active facilities. The Group is engaged in projects, commissioned by NATO, involving modernisation and extension of existing storage facilities for propellants and lubricants and delivery and execution of underground storage tanks for F-16 jet fighters at the military bases throughout Poland. The execution of military construction projects requires access to classified information marked as "CONFIDENTIAL". We are one of few contractors in Poland that meet the Investor’s requirements in that respect.

PBG GROUP COMPANIES OPERATING IN THE NATURAL GAS, CRUDE OIL AND FUELS SEGMENT PBG S.A. (in company voluntary arrangement)The Company provides comprehensive specialist contracting services for natural gas, crude oil, and fuel facilities. It acts as a general contractor or sub-contractor with respect to: engineering design work, construction, repairs, operation, and maintenance in the field of: production of natural gas and crude oil, transmission of natural gas and crude oil, storage of natural gas, fuels, LNG, LPG, C5+, and CNG. In the fuels segment, the PBG Group provides general contracting services relating

45


to projects involving construction of new facilities and modernisation of existing fuel terminals, together with auxiliary infrastructure.

PBG oil & gas Sp. z o. o.The Company provides comprehensive specialist contracting services for natural gas, crude oil, and fuels facilities.

Al Watanyiah Oil and Gas LLCThe Company provides comprehensive specialist contracting services for natural gas, crude oil, and fuels facilities. The company operates in Oman.

SALESThe Group renders its services in the natural gas and crude oil segment primarily in Poland. The largest customers in this segment are PGNiG and Gaz-System, as well as Polskie LNG, their subsidiary.

Table 14: Sales of services in the natural gas and crude oil segment

Revenue 2013 (PLN ‘000) 2012 (PLN ‘000) Change (PLN ‘000) Change (%)

Gas, oil and fuels

(transmission, distribution, production)

328,206 198,011 +130,195 +66

In 2013, the segment of natural gas, oil and fuels accounted for 25% of the Group's revenue. The segment's total revenue for the period under review was PLN 328m, up by PLN 130m on the corresponding period of the previous year. The natural gas and crude oil segment's considerable share in the Group's total revenue follows from the performance of the contract for the construction of the LNG terminal in Świnoujście for Polskie LNG and the completion of the contract for the construction of LMG oil production facility for PGNiG.

2. Power construction

RAFAKO S.A.The company offers general contractor services for the construction of fossil fuel-fired power generating units, specialising in boiler islands comprising a boiler, flue gas treatment plant, and waste incineration and biomass combustion plant. The company also offers design and construction of a wide array of boilers powered with lignite, hard coal, oil, gas, or a combination of these fuels, including conventional, supercritical parameters, fluidised bed, and stoker fired boilers. Additionally, the company has for a number of years manufactured boilers for thermal utilisation of waste and biomass combustion, as well as heat recovery boilers. A variety of maintenance services – from diagnostics to repairs, overhauls, supply of replacement parts, and comprehensive upgrades of boilers and accompanying equipment – complement the company's offering. The company designs, manufactures and assembles turnkey environmental protection solutions including flue gas desulphurisation, nitrogen oxide removal systems and fly-ash removal equipment.

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FPM S.A.The company's business profile includes primarily the production of plant and equipment for domestic and foreign power, CHP and heating plants, as well as industrial power plants supplying steelworks, mines, sugar factories, breweries, cement plants and chemical plants. FPM S.A. also manufactures machinery and mechanical equipment, as well as steel structures based on working documentation prepared in line with a customer's project method statement or based on working documentation provided by a customer.

RAFAKO ENGINEERING Sp. z o.o.Construction and process design, urban planning

RAFAKO ENGINEERING SOLUTION dooProcess design, construction, industry, and environmental protection consultancy and supervision.

RAFAKO Hungary Kft.Equipment assembly in the power and chemical industry.

ENERGOTECHNIKA ENGINEERING Sp. z o.o.

Engineering activities and related technical consultancy.

Palserwis Sp. z o.o.Manufacture, maintenance, and repairs.

SALESThe Group renders the services in the power construction segment primarily in Poland. However, the foreign order book has been growing, for both services and delivery of power installations and environmental protection equipment. RAFAKO is responsible for sales in foreign markets. The Group's main customers are private entities, as well as businesses co-owned by the State Treasury and responsible for the implementation of Poland's energy security strategy (KGHM, PGE, TAURON and Dalkia).

Table 15: Sales of services in the power construction segment


Power construction 862,280 1,346,417 -484,137 -36%

In 2013, the share of the power construction segment in the Group's revenue was 66%, down 7 pp year on year, and came at PLN 862 million, with the largest contribution from RAFAKO. The PBG Group has recognised revenue from the power construction segment since Q3 2011. Over the next several years, the power construction segment will be a strategic focus of the Group's operations. 3. Water segmentProjects executed by the PBG Group in the water segment are aimed to reduce the pollution of water, soil and air. Thus, the Group's activities in the area help significantly improve the condition

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of the natural environment. The PBG Group offers comprehensive execution capabilities for water engineering, environmental protection, and water and sewage projects.

PBG GROUP COMPANIES OPERATING IN THE WATER SEGMENT

KWG S.A. (in company voluntary arrangement) KWG S.A. specialises in the execution of infrastructure projects in the environmental protection sector, such as water supply and sewage systems, intermediate pumping stations and sewage treatment plants, as well as high-, medium- and low- pressure gas systems, pressure reduction and metering stations, and gas boiler houses.

SALESThe market for water segment services covers the territory of the entire country, which follows from the fact that the Group has signed contracts with different entities whereby it has been engaged to execute projects in specifically designated locations. The Group’s main customers include local government units and companies operating in the area of water and sewage management, including companies owned by local government units.

Table 16: Sales of services in the water segment


Water

(hydraulic engineering and environmental protection,

pipeline rehabilitation)

14,428 30,308 -15,880 -52%

The water segment is another area of the PBG Group's operations. In 2013, the share of the water segment in the Group's revenue was 1%, down 1 pp year on year. The PBG Group will gradually withdraw from this segment.

4. Industrial and residential construction segmentProjects executed by the PBG Group in this segment relate to the infrastructure for construction of residential buildings and industrial facilities, as well as provision of property development services in the commercial property sector.

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PBG GROUP COMPANIES OPERATING IN THE RESIDENTIAL CONSTRUCTION SEGMENT

PBG Dom Sp. z o.o.PBG Dom Sp. z o.o. operates in the property development sector. Currently, it is involved in the construction of a residential estate in Lusówko, near Poznań. The company's purpose is also to manage and optimise the property resources (buildings and land) owned by the Group companies; its responsibilities also include comprehensive execution of projects undertaken by special purpose vehicles and lease of office space.

PBG DOM INVEST III Sp. z o.o.The company operates in the construction and property development sectors.

PBG DOM INVEST II Sp. z o.o.The company operates in the construction and property development sectors.

Górecka Projekt Sp. z o.o. The company operates in the construction and property development sectors. The company owns the office building Skalar Office Center in Poznań.

Villa Poznań Sp. z o.o.The company’s purpose is to execute a property development project. The company owns a land lot in Poznań Radojewo.

Galeria Kujawska Sp. z o.o.The company owns real estate in Bydgoszcz, held for sale. The Galeria Kujawska shopping centre is to be built on the property.

Galeria Kujawska Nova Sp. z o.o.The company operates in the construction and property development sectors.

Galeria Kujawska Nova Sp. z o.o. Sp. k. The company operates in the construction and property development sectors.

PBG DOM Invest LimitedA transfer company established for tax optimisation purposes.

PBG DOM Capital LimitedThe company’s purpose is to execute a property development project.

ERIGO I Sp. z o.o.The company’s purpose is to execute a property development project.

ERIGO II Sp. z o.o.The company’s purpose is to execute a property development project.

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ERIGO III Sp. z o.o.The company’s purpose is to execute a property development project.

PBG ERIGO Sp. z o.o.The company’s purpose is to execute a property development project.

PGL-DOM Sp. z o.o.The company's business is the management of real estate.

PBG ERIGO FINANSE Sp. z o.oThe company’s business consists in buying and selling property.

PBG DOM INVEST X Sp. z o.o. Invest I S.K.A. The company’s business consists in buying and selling property, as well as long- and short-term rental of residential units. PBG ERIGO PROJEKT Sp. z o.o.The company’s business consists in buying and selling property.

CITY DEVELOPMENT Sp. z o.o.The company’s business consists in buying and selling property, and construction of residential buildings (property development). ECORIA Sp. z o.o.The company’s business consists in buying and selling property, and construction of residential buildings (property development).

PBG Erigo Projekt Sp. z o.o. Malta Hotel S.K.A.The company’s business consists in buying and selling property. PBG ERIGO PROJEKT Sp. z o.o. Strzeszyn S.K.A. The company’s business consists in buying and selling property, and construction of residential buildings (property development). PBG DOM INVEST X Sp. z o.o.The company’s business consists in buying and selling property.

PBG ERIGO Projekt Sp. z o.o. Platan Hotel S.K.A. The company’s business consists in hotel services.

PBG DOM INVEST X Sp. z o.o. Złotowska 51 S.K.A. The company’s business consists in buying and selling property, as well as long- and short-term rental of residential units.

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PBG ERIGO Projekt Sp. z o.o. ECORIA II S.K.A.The company’s business consists in buying and selling property, and construction of residential buildings (property development).

PBG ERIGO Projekt Sp. z o.o. QUADRO House S.K.A. The company’s business consists in buying and selling property, construction of residential buildings (property development), as well as long- and short-term rental of residential units.

SALESThe industrial and residential construction services are provided to customers throughout Poland.

Table 17: Sales of services in the industrial and residential construction segment


Industrial and residential construction

(construction, infrastructure for industrial facilities)

66,882 17,637 +49,245 +279%

In 2013, the share of the industrial and residential construction segment in the Group’s total revenue was 5%, up by 4 p.p. relative to 2012. The PBG Group will gradually withdraw from this segment.

5. Road construction segmentIn the road construction segment, the PBG Group carries out projects relating to road and bridge construction works. The Group operates a bitumen mastic production plant and research laboratories, which oversee the production operations. The PBG Group also produces mineral and bitumen mastics for use in construction of roads carrying heavy traffic volumes.

PBG GROUP COMPANIES OPERATING IN THE ROAD CONSTRUCTION SEGMENT

Brokam Sp. z o.o. BROKAM Sp. z o.o. owns the land and holds the licence enabling it to launch the production of aggregate. The incorporation of the company into the PBG Group created a materials base for the Group companies from the road construction segment.

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BATHINEX Sp. z o.o.The company owns land and licenses to launch aggregate production; the Brodziszów-Kłośnik Mine with reserves of granodiorite, an acidic fine-crystalline intrusive igneous rock. The incorporation of the company into the PBG Group created a materials base for the Group companies from the road construction segment.

SALESAt present, the road construction companies are bidding for and are executing contracts involving construction of local roads, expressways, and motorways.

Table 18: Sales of services in the road construction segment


Road construction

(road construction)8,301 209,517 -201,216 -96%

In 2013, the share of revenue from the road construction segment in the Group’s total sales was 1%, down by 10 p.p. year on year. Given the special nature of such contracts and their capital intensity, the PBG Group has resolved to withdraw from that segment.

6. Other operating areasIn addition to the companies mentioned above, there are also seven other companies in the PBG Group which operate in separate areas, omitted from the above description.

CONTRACTING SERVICES

PBG Operator Sp. z o.o.Special purpose vehicle

FOREIGN OPERATIONS

PBG UKRAINA Publiczna Spółka Akcyjna (the company is likely to discontinue operations)PBG Ukraina was set up with a view to conducting business activities primarily involving research of the Ukrainian market and establishing contacts with companies providing construction and associated services.

Wschodni Invest Sp. z o.o.Wschodni Invest Sp. z o.o. holds in its portfolio and manages the property development business of Energopol-Ukraina.

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Energopol-UkrainaThe company holds a legal title to a land property with an area of 63,000 m2 located in Kiev, which is planned to be developed and the development area is to be around 250,000 m2. The company provides a wide range of services in the investment process, including: general construction, production and design works. It is experienced in trading and works related to upgrading/modernising industrial facilities.On July 24th 2013, the Parent entered into a "Contract of Obligation to Sell" ("the Contract"), whose other parties were WSCHODNI INVEST Sp. z o.o. and a limited-liability company IMIDŻ FINANS GRUP of Kiev, incorporated under Ukrainian law ("the Buyer"). The Buyer committed to purchase the shares of Energopol Ukraina of Kiev from WSCHODNI INVEST Sp. z o.o. and to buy the claims on the loans advanced by WSCHODNI INVEST to Energopol Ukraina. The Buyer is ready to purchase from PBG 234,103 registered investment certificates in Dialog Plus – "Direct Investment Fund – High-Potential Property," a closed-end non-diversified venture-type investment fund set up under Ukrainian law, with a par value of UAH 1,000 per investment certificate, and to buy the claims on the loan advanced by Energopol Ukraina to PBG.The shares of Energopol Ukraina and the investment certificates will be transferred to the Buyer by December 31st 2015, after all the amounts due have been paid and separate disposal agreements have been executed. Pursuant to the provisions of the Contract, the certificates shall be purchased at a price above the book value recorded by the Company.

PBG Bułgaria Sp. z o.o. (the company is currently subject to the liquidation process)The company was formed to conduct research in the Bulgarian market and establish contacts with regional companies operating in the construction and related services sector. In view of the current situation of the Parent, activities of this type had to be discontinued.

SUPPORT FOR THE PBG GROUP COMPANIES

PBG AVATIA Sp. z o.o. (in company voluntary arrangement)The company provides IT services, including IT consultancy, implementation of IT systems, data processing and services relating to IT and computer-based technologies. As a company of the PBG Group, PBG Avatia provides IT support to all PGB Group companies.

Customers and suppliers with at least 10% share in the Group’s total revenueIn the period covered by this Report, customers and suppliers with at least 10% share in the Group's total revenue included: - customers: none- suppliers: none

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VI. MARKET OUTLOOK

General informationThe PBG Group's operations are concentrated in the specialist segment of the Polish construction and engineering sector. Specialist construction and engineering in the oil and gas sector infrastructure and power generation facilities construction are the core industry segments in which the Group operates. In addition to these industry segments, PBG has been also operating in water, industrial and residential construction, as well as road construction segments of the market. However, PBG Group will gradually withdraw from these market segments. The Group's operations are conducted primarily in Poland.

Polish construction industry According to the Central Statistics Office's data, in Q1 2013, the sales of construction and assembly services decreased by 15.1%, which was followed by a further decrease later during the year, to 23.1% year on year in April and 27.5% year on year in May 2013.Despite the decreases, experts hope for an improvement in the nearest future. In Q2 2013, the construction index grew by 45 points. The index increased by 0.2 points quarter on quarter. “While the quarter-on-quarter increase recorded in Q2 is attributable to the seasonal nature of the construction industry, it is currently exceptionally high. A similarly strong increase was seen in 2002 and 2003, when the construction industry was overcoming deep economic slumps. Such high index is reflected in the trend reversal. However, while the current results are undoubtedly satisfactory, the situation should be deemed a positive but not established yet,” reads a report prepared by the Economic Development Institute of the Warsaw School of Economics.

Figure 8: Business indicator

Source: Warsaw School of Economics.

Deceleration in the construction industry affects other economy sectors, including the steel industry. “The steel industry is connected with the construction industry and experiences deceleration as does the latter. Certain companies record revenue declines of as much as 30% year

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on year. As elsewhere in Europe, demand for steel structures in Poland is low,” said Marcin Siwa, Risk Assessment Director at Coface.“The Polish construction market was affected by the poor economic situation in Europe, EU financial problems and the economic slump experienced by the Spanish construction market,” said Robert Dziwiński, the Chief Building Inspection Officer, when interviewed by the Polish Press Agency PAP. “It has turned out that our construction companies are neither mentally nor legally prepared for entering into contracts for motorway construction,” said the Inspection Officer.In his opinion, the situation in residential development is similar. “Developers speak about a slump on the residential market, complaining that there is no demand for residential units. However, they have forgotten that they over-invested in 2009, when they were heavily buying land for residential development, which, experts believe, already then exceeded the demand potential of the market,” added Robert Dziwiński. Additional obstacles to the investment processes include protracting planning permit procedures and the excessive number of various approvals necessary for a construction design.The Chief Building Inspector Officer believes that 2014 will bring stability to the market, but “the rebound in the sector should occur in 2015, provided that there is no crisis on the global financial markets”. The EU funds for 2014−2020 will give a major impetus to the Polish construction industry.A rebound is expected to start on the construction market in 2014, when the implementation of projects under the EU new financial perspective will commence. The upside is that companies, learning from the experiences of 2012, have stopped reducing their margins excessively. As a result, construction companies now record higher profitability on contracts and are more financially liquid.

Figure 9: Sales of construction and assembly services (2006−2013)

Source: Central Statistics Office, Polish Press Agency PAP

Rok poprzedni = 100 Previous year = 100

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Experts from the Economic Development Institute of the Warsaw School of Economics expect the market situation to improve in the third quarter, especially in terms of the volume of construction services. However, there has been no significant improvement in terms of the volume of investments by construction companies.Source: www.inwestor.msp.gov.pl

Development of the construction market depends on overall economic performance and over the past five years has been broadly linked to GDP growth. The growth of the Polish construction industry has also been impacted by significant European Union funded and supported investment programs focusing on infrastructure and the environment, the national strategic need for oil and gas and power generation and transmission infrastructure development, water sector modernization, the National Road Construction Program and transportation and stadium infrastructure development related to preparations for the 2012 UEFA European Football Championship.The data below presents the growth of total construction output and of Poland's GDP vs. the EU data, 2009-2014. While the EU27 shows a decline in construction, Poland has shown continued growth in this sector in the last few years.Table 19: Annual GDP growth in 2009−2014Annual growth (%) 2009 2010 2011 2012 2013 2014

Construction(1)

EU 27 1.9 3.6 2.0 (3.8) (8.5) (4.1)

Poland 9.2 15.6 16.3 10.2 4.5 3.7

GDP(2)

EU 27 -4,3 2.1 1.5 -0,3 0.1 F 1.6 F

Poland 1.6 3.9 4.3 2.0 1.2 F 2.2 F

Source: Eurostat.(1) Total construction output(2) Market values.

Going forward it is expected that the structure of spending in the segment of the construction sector in which we operate will shift from the transport related to the non-transport related infrastructure segment, with special emphasis on the energy sub-segment.

CompetitionOur competitors in each of the segments in which we operate include both domestic and international construction companies. All of the segments, except for the road segment and simple infrastructure and water related works (from which the Group is withdrawing), require know-how, equipment and highly qualified employees with only a few construction companies being able to provide services at the level required.The attractiveness of the Polish construction market has been recognized by foreign construction companies for more than a decade and most of the European players have entered the market by either operating as independent companies or acquiring large Polish construction companies. Although a number of domestic companies have been acquired by foreign companies, numerous foreign companies still prefer to team up with a local partner while bidding for contracts. This is due

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http://www.inwestor.msp.gov.pl/


to the bidding entity having to possess local references and a local track record, only large scale projects being of interest to foreign competitors and international companies preferring to supply technology, know-how and equipment while outsourcing actual construction to a domestic entity. Further information regarding our competitors is set out below in the discussions of our segments.

NATURAL GAS, CRUDE OIL AND FUELS MARKET and SHALE GAS

NATURAL GAS

The Polish market for gas contracting services is viewed as very promising due to the expected multi-billion investments in the gas sector, following mainly from the implementation of Poland’s energy policy and the need to comply with the requirements of Poland’s membership in the European Union. The obligation to perform the tasks resulting from, among other things, Poland’s energy policy rests primarily with the PGNiG Group and OGP Gaz-System. Consequently, those companies are the leading investors in gas infrastructure projects and the projects led by them cover a wide range of investment tasks, from the construction of gas stations to the construction of gas production facilities or gas pipelines, which represent an attractive source of contracts for construction companies specialising in the provision of gas contracting services.

Energy Policy of Poland until 2030 of November 10th 2009 proposed by the Ministry of Economy outlines the main development directions for the Polish gas industry. In order to ensure Poland’s energy security and economic growth, the Ministry of Economy set out eight main task groups for the state-controlled companies:

discovery of new natural gas resources; increase of natural gas production capacity in Poland; acquisition of alternative sources of gas supply to Poland; extension of the natural gas transmission and distribution system; expansion of natural gas storage capacities; gaining access to natural gas fields outside Poland; gas production using coal gasification technology; commercial use of methane produced from surface wells.

Poland currently needs approximately 14.5 bn cubic metres of natural gas per year, approximately 30% of which is sourced from domestic production. The balance is imported mainly from Russia under the Yamal Contract.

In connection with the expected increase in natural gas demand in the coming years, as well as in the context of the 2009 gas crisis between Ukraine and Russia, and the construction of the Northern Pipeline, investments in the gas infrastructure aimed at improving Poland’s energy security have become the priority of the Polish government. Achieving the Polish government’s objective of enhancing Poland’s energy security will be possible only through the implementation of large-scale projects which require billions of PLN in capital expenditure. The development of the Polish gas infrastructure will be funded by the PGNIG Group and OGP Gaz-System as well as by the EU funds (under the Infrastructure and Environment Operational Programme). The PGNiG Group

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alone plans to spend PLN 25bn-32bn on the strategy-related projects by 2015. The EU funds will play a very important role in the financing of the projects. The European Commission earmarked EUR 28bn for the implementation of the Infrastructure and Environment Operational Programme in 2007–2013. Out of 15 priorities of the programme, two are related to the gas sector, namely:

Priority IX − environmentally friendly power infrastructure and energy efficiency – EUR 748m, and,

Priority X − energy security, including diversification of energy sources – EUR 974m.

Figure 10: Forecast demand and structure of supplies of natural gas to Poland until 2030

Source: Maciej Kaliski, Stanisław Nagy, Stanisław Rychlicki, Jakub Siemek, Adam Szurlej, “Gaz ziemny w Polsce – wydobycie, zużycie i import do 2013 roku” (Natural Gas in Poland − Production, Consumption and Imports until 2013), Górnictwo i geologia, Vol. 5.3, 2010.

Ukraina UkraineCzechy Czech RepublicJamał Yamal ContractInne OtherNiemcy GermanyWydobycie własne Domestic productionKraje Azji Środkowej Central Asia countriesPopyt – prognoza PEP2030 Demand – Forecast, Poland’s Energy Policy until

2030

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The flagship project aimed at enhancing Poland’s energy security is the construction of the LNG terminal in Świnoujście. The project, which is currently valued at approximately PLN 2.4bn (VAT exclusive), is to be carried out by Polskie LNG Sp. z o.o., a special purpose company fully owned by OGP Gaz-System. The agreement with the contractor was signed on July 15th 2010. The contractor is a consortium of the following companies: PBG, Saipem (as the consortium leader), Techint Compagnia Tecnica Internazionale, Snamprogetti Canada, and PBG Export. The annex of September 10th 2013 provides for the terminal being commissioned by December 30th 2014. Initially, the Świnoujście terminal will be able to receive 5bn cubic metres of gas per year. In the next stage, depending on the demand, it will be possible to increase the regasification capacity up to 7.5 bn cubic metres, which represents ca. 50% of the current annual demand for natural gas in Poland. Also, an international research was carried out in late 2012/early 2013 focusing on the market potential and demand for services of the LNG terminal which is being built in Świnoujście. The results indicate a significant demand for increased regasification capacity, as well as for other services which could be provided by the terminal, while the market potential justifies the extension of the terminal with a third tank. A decision regarding such extension is expected to be made in 2014. According to Polskie LNG, the demand from Polish entities may exceed the terminal's capacity as soon as in 2015. In 2020, the demand for services, combined with the already reserved regasification capacity, will reach a level close to the extended terminal's maximum capacity.

The Baltic Pipe is another project which should also contribute to the diversification of Polish gas supplies. The project provides for the construction of a pipeline connecting Polish Niechorze with the Danish transmission system, facilitating gas imports from the Norwegian sources. The Norwegian gas was originally to be delivered to Denmark through the Skanled pipeline. However, the consortium (with PGNiG as one of its members) decided to suspend the project due to adverse economic conditions. Despite the suspension of the Skanled project, OGP Gaz-System decided to continue the work and to prepare the relevant technical design and perform a survey of the Baltic seabed. The capacity of the 240 km long Baltic Pipe is to be 3 bn cubic metres of gas per year.

Figure 11: Natural gas supply to Poland by source

10.4%

61.2%

28.4%

Current Imports from countries west of Poland

Imports from countries east of Poland

Domestic produc-tion

30%

40%

30%

Desired

Source: 2012 National Report of the President of the Energy Regulatory Office.

Pursuant to the 2012 Annual Report of the President of the Energy Regulatory Office (URE), the technical condition of the transmission infrastructure plays the key role in ensuring security of gas

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fuel supplies. Although in 2008 the transmission system’s operation was failure-free, its age and heavy depreciation may pose a threat to the continuity of gas supplies in the future.Figure 12: Aging of gas transmission pipelines in Poland

60%

8%

15%

11%4% 2%

over 25 years21−25 years16−20 years11−15 years6−10 yearsup to 5 years

Source: 2011 National Report of the President of the Energy Regulatory Office.

Figure 13: Existing coverage and projected expansion of natural gas transmission network in Poland

Source: http://www.rynek-gazu.cire.pl

NORWEGIA NORWAYLITWA LITHUANIANIEMCY GERMANYBIAŁORUŚ BELARUSUKRAINA UKRAINECZECHY CZECH REPUBLICSŁOWACJA SLOVAKIAJamał Yamal ContractPMG Underground Gas Storage Facility

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Furthermore, the President of URE highlights the underdevelopment of the gas transmission network, lack of capacity reserves and insufficient integration of the Polish gas system with systems of the neighbouring countries, in particular those of the EU Member States. The President of URE primarily points to the need of eliminating bottlenecks, i.e. points with reduced capacity. The greatest difficulties in transmitting high-methane gas and increasing the flow capacity to customers at exit points from the transmission system are seen in North-Western Poland where the largest amount of capital expenditure is required in the immediate future; the required spending also involves the construction of the LNG terminal in Świnoujście.

The investment tasks related to the development of the transmission network will be implemented by OGP Gaz-System, which in 2009–2014 intends to invest ca. PLN 8bn and construct over 1,000 km of new gas pipelines. The planned projects include:

Figure 14: Transmission gas network – GAZ SYSTEM S.A.’s projects until 2014

Source: Gaz-System S.A.

Faza koncepcyjna Concept stageFaza planowana Planned stageInwestycje realizowane Projects under wayGazociąg Europol Gaz S.A. Europol Gaz S.A. gas pipelineE gazociągi gazu wysokometanowego E high-methane gas pipelinesLw gazociągi gazu zaazotowanego Lw nitrogen-rich gas pipelines

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Tłocznie gazu Gas compressor stationsAnalizowany gazociąg Baltic Pipe Baltic Pipe gas pipeline under analysisTerminal LNG w Świnoujściu LNG terminal in ŚwinoujścieAnalizowana Rozbudowa Połączenia Polska-Czechy

Extension of the Poland-Czech Republic gas pipeline under analysis

Analizowany gazociąg Polska-Słowacja Poland-Slovakia gas pipeline under analysisAnalizowany Gazociąg Polska-Litwa Poland-Lithuania gas pipeline under analysisStan na lipiec 2012 r. Źródło: archiwum GAZ-SYSTEM S.A. Gazociągi przedstawione na mapie mają charakter schematyczny. Dokładna mapa systemu przesyłowego dostępna jest na www.gaz-system.pl

As at July 2012. Source: GAZ-SYSTEM S.A. archive. Map for reference only. For a detailed map of the gas transmission network go to www.gaz-system.pl

The development of the transmission network is expected to entail extension of the gas distribution network operated by the PGNiG Group.

Increasing gas production by domestic producers is another area requiring capital expenditure to ensure Poland’s energy security. Projects in this area will be implemented by the PGNiG Group and will involve increasing gas production from Polish fields and providing access to the gas produced from fields located abroad, e.g. in Norway. In 2013, the PGNiG Group produced 4.6bn cubic metres of gas from Polish fields. According to the PGNiG Group’s strategy adopted in 2008, in the coming years the PGNiG Group intends to increase natural gas production to approximately 6.2 bn cubic metres per year by increasing production from the Polish fields to approximately 4.5 bn cubic metres and by launching production from foreign fields. After 2015, at least 1.5 bn cubic metres of the annual production of natural gas is to come from the equity gas reserves on the Norwegian Continental Shelf (i.e. gas produced by a consortium; PGNiG holds an interest in equity gas pro rata to its share in the consortium). The most important project related to increasing domestic gas production and doubling crude production is the development of Lubiatów-Międzychód-Grotów oil and gas fields. In 2008, the PGNiG Group and the PBG Group as the contractor executed a PLN 1.7bn contract (VAT inclusive) for the development of an oil and gas field; the field was commissioned in March 2013.Another vital aspect of Poland’s energy security is the implementation of projects designed to expand gas storage capacity. Gas storage facilities help maintain a required amount of reserves in case of short-term interruptions in gas supplies resulting from system failures or reduced supplies. In addition, the storage facilities guarantee a stable level of production throughout the year. In periods of lower demand, gas is injected into a storage facility, and at times of peak demand – the gas is drawn from the facilities. PGNiG operates seven storage facilities with an aggregate active storage capacity of 1.82 bn cubic metres, which represents 11.5% of the annual demand in Poland. The storage facilities are located in various types of geological structures and have different gas compression and output capacities.

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Figure 15: Location and storage capacity of underground gas storage facilities in Poland

Source: GAZ-SYSTEM S.A.

PMG Underground Gas Storage FacilityKPMG Underground Gas Storage Cavern Facilitymln millionIstniejące PMG Existing Underground Gas Storage FacilitiesInwestycje w perspektywie 2015 r. Investment projects planned until 2015Inwestycje w perspektywie 2020 r. Investment projects planned until 2020

Figure 16: Filling levels of the gas storage facilities as at February 5th 2014.

Source: http://osm.pgnig.pl/osm/uslugi/stan_napel

Stan napełnienia instalacji magazynowych na początek doby gazowej

Amount of gas stored as at the beginning of the gas day

Ilość gazu zatłoczonego Amount of gas injectedIlość gazu odebranego Amount of gas drawnStan napełnienia instalacji magazynowaych na koniec doby gazowej

Amount of gas stored as at the end of the gas day

Mln m3 MCM

PGNiG’s strategy provides for the expansion of storage capacity by approximately 2bn cubic metres, to a target capacity of 3.8bn cubic metres in 2015. The most extensive project is the

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expansion of the Wierzchowice Gas Storage Facility from 0.5bn cubic metres to a target capacity of 3.5bn cubic metres in 2015. The first stage of this project is currently under way and is scheduled to be completed in 2014, with the expansion of the gas storage capacity to 1.2bn cubic metres. This contract, worth PLN 1.3bn (VAT inclusive), is performed by a PBG-led consortium. In addition to the construction of the new capacity at Wierzchowice, PGNiG is currently implementing the following capacity expansion projects:

expansion of the Mogilno Storage Facility; construction of the Kosakowo Storage Facility;

New entrants on the Polish market include private distributors of natural gas (e.g. Grupa DUON S.A.) and gas exploration companies, such as FX Energy or Aurelian Gas&Oil. Those companies also have investment plans designed to develop the existing transmission and distribution networks, as well as gas production facilities.

SHALE GAS

In the context of recent reports on the growth prospects for the Polish natural gas sector, shale gas should be mentioned as a resource which may in the near future dramatically change Poland’s position on the global market of production of and trade in natural gas. Poland appears to have an exceptionally large potential in this field. According to the U.S. Energy Information Administration, Poland may have the largest resources of shale gas in Europe. Potentially, Poland may have recoverable shale gas reserves of 5.3 trillion cubic metres, which is the largest amount of all European countries where the relevant studies have been carried out. Given the current consumption levels, these reserves are equivalent to 300 years of domestic consumption. According to the Polish Ministry of the Environment, prospective producers of shale gas have already been attracted, and as of February 1st 2014, 93 licences for unconventional gas deposit exploration have been issued in Poland to both international (e.g. Chevron Corporation, ExxonMobil Corporation, ConocoPhillips, Eni) and domestic (e.g. PGNiG S.A., PKN Orlen, Lotos, Petrolinvest S.A.) entities. Depending on the source, capital expenditure on exploring for shale gas in Poland over the next two years is estimated at around USD 1bn. The largest players on the market have already announced drilling new boreholes. Each of the companies which obtained licences for shale gas exploration in Poland must expend around USD 15m on one complete borehole. This level of expenditure has been confirmed by the operators which have already been conducting drilling work in Poland.Particularly important for shale gas appraisal are the obligations under the licences granted for gas exploration and fulfilment of the criteria stipulated therein. Each investor is obliged to drill at least two boreholes, usually within three years. It is not enough to perform vertical drilling; while exploring for shale gas, it is also necessary to perform fracturing and horizontal drillings. All these operations are designed to arrive at a more accurate determination of reserves of a given deposit. However, the first boreholes currently drilled in Poland mark only a starting point for a more accurate determination of shale gas reserves in Poland and, in a longer time horizon, gas production. The holders of exploration licences will have to apply for production permits if they find the production economically viable. Experts estimate that the process will take at least a year and a

64


half. Therefore, the most reasonable appear to be the forecasts which project that the commercial production of shale gas in Poland will be possible in seven to ten years at the earliest. In its most recent projections, the International Energy Agency (“IEA”) expects that the significance of shale gas as a source of energy in the global economy will grow. Its consumption is forecast to grow by 50% by 2035.Production of just 15 bn cubic metres of unconventional gas annually will satisfy 100% of the domestic demand and will free Poland from having to buy gas from external suppliers.

Large gas reserves in Poland will be sufficient to yield up to 100 bn cubic metres of unconventional gas annually in 10 to 15 years time, though a more likely estimate is somewhere between 20 and 30 bn cubic metres annually. If this scenario proves true, the Polish power sector may potentially become the largest buyer of unconventional gas. According to PMR Publications, the proportion of installed generation capacity of power and CHP plants using gas fuel in the total generation capacity mix in Poland is merely 3.7%, while the average for the European Union as a whole is 26.6%. As it can be expected, the new gas-fired power units will be a driving force behind investment projects in the power sector in the coming years, of which we will also try to benefit from given our leading position within the Polish power specialist construction and engineering sector.It is with a growing frequency that the problem has been emerging of transporting newly discovered and producible gas from deposits to networks. It will be necessary to build gas pipelines and other gas facilities. This is good news for the PBG Group and its parent, PBG – a leader in gas facilities construction in Poland – as well as for its subsidiary PBG Oil & Gas, as the potential construction market in the natural gas sector may grow significantly.

CRUDE OIL AND FUELS

The PGB Group’s position in the oil industry is related to investment plans of PKN ORLEN S.A., LOTOS S.A., NATO, OLPP, PERN Przyjaźń S.A. as well as other organisations in the fuel sector. Factors with a material bearing on the oil and fuel market include:

Investment plans of PKN Orlen S.A. for 2011–2013 amounting to PLN 22.5bn; Investment plans of Lotos S.A. for 2011–2015 amounting to approximately PLN 5.7bn,

including the final implementation of the 10+ Programme (objectives of the Programme include increasing crude processing capacity from 6m to 10.5m tonnes; improving the oil conversion ratio; mild hydrocracking unit (MHC); diesel oil hydrodesulphurisation unit (HDS); and residuum oil supercritical extraction (ROSE)). The other investment plans mainly relate to the production of crude oil on the Baltic Shelf (the planned budget exceeds PLN 3bn), as well as in the Norwegian Sea and the North Sea. Production is assumed to increase to 20% of the processed volume, that is to 1.2m tonnes per annum in 2015, and is expected to further grow thereafter.

Also Polskie Górnictwo Naftowe i Gazownictwo plans to increase crude oil production.

The planned budgets for natural gas and crude oil exploration are as follows: PGNiG:

until 2015, around PLN 600–650m annually in Poland; until 2015, around PLN 300–500m annually abroad.

65


Orlen: about PLN 420m in Poland and abroad.

Moreover, NATO’s investments in Poland in 2011–2014, are to reach EUR 1bn, including fuel storage depots (PLN 0.7bn).

Plans for construction of crude oil pipelines: Adamowo – Płock – Gdańsk; Adamowo – Płock – Heinersdorf (Germany); Gdańsk – Płock; Gdańsk – Płock – Heinersdorf (Germany):

PERN Przyjaźń S.A.’s crude oil transport infrastructure is a pipeline network divided into three major sections.The Eastern Section of the Friendship pipeline connects a tank farm in Adamowo, located on the Belarusian border with a depot in Płock. This section reaches the capacity of 50m tonnes of crude oil per year.The Western Section of the Friendship pipeline connects the depot in Płock with a crude oil tank farm situated in Schwedt. This section of the network supplies crude oil for two German refineries: PCK Raffinerie GmbH Schwedt and TOTAL Raffinerie Mitteldeutschland GmbH in Spergau. The Western Section of the Friendship pipeline reaches the capacity of 27m tonnes of crude oil per year.The Pomeranian pipeline connects the depot in Płock with the handling depot in Gdańsk. This is where Russian crude oil goes through, destined for the Gdańsk refinery, owned by the LOTOS Group S.A., or for export via Naftoport.Crude oil may be transported in two directions via the Pomeranian pipeline. On the Gdańsk-Płock route its capacity is about 30m tonnes of crude oil per year and in the reverse mode its capacity reaches about 27m tonnes per year.

Figure 17: PERN pipeline

Source: www.pern.com.pl Podstawowe dostawy rurociągiem “Przyjaźń” Key supplies via the Druzhba pipeline

66

http://www.pern.com.pl/


Dostawy uzupełniające “z morza” Supplementary shipments by seaNaftoport NaftoportRafinerie Refineries

Figure 18: Pipelines in Europe

Source: www.pern.com.plLegenda LegendRurociąg Odessa-Brody Odessa-Brody pipelineRurociąg Przyjaźń Druzhba pipelineIII nitka w budowie 3rd line under constructionPlanowany rurociąg Planned pipelinerafineria Refineryport Seaport

POWER CONSTRUCTION MARKET

Investment in new and upgraded power generation facilities in Poland is driven by growing domestic demand and the need to update the ageing infrastructure. According to evaluations by the Polish Ministry of Economy, the Polish power and heat producers are required to replace or modernize their mainly coal fired power generation infrastructure due to its age or lack of compliance with European Union environmental regulations. This replacement process is expected to be phased in within the next 10 years in Poland. At the same time demand for electricity is expected to increase by 12% between 2009 and 2015, which in the absence of significant

67

http://www.pern.com.pl/


modernization and new generation capacity projects, poses a real risk of electricity shortages which, according to government estimates, may appear as early as 2016. As a consequence, essential investments in the power segment will be required through to 2020. According to URE publications, the required investments are estimated at between PLN 150bn and PLN 200bn, including in certain areas in which the PBG Group companies hold competences. The investments are expected to be carried out mainly by the major Polish vertically integrated electricity utilities, namely PGE, Energa, ENEA and Tauron. Moreover, it is expected that additional new generation capacity and modernization projects will be pursued by other players in the Polish power sector such as EDF, Kulczyk and industrial players such as PKN Orlen, PGNiG S.A., ZA Puławy and KGHM. The four major Polish electricity utilities have outlined significant capex spend in the coming years. According to initial plans announced by these operators, PGE plans to invest PLN 80bn through 2020 including commencement of construction of the first nuclear power plant in Poland, Tauron is targeting capex spend of PLN 48.8bn for 2010 to 2020, ENEA S.A. plans to invest PLN 22bn in 2010-2020, and Energa plans to invest PLN 20bn in 2010-2020.We expect that the PBG Group will benefit from these investment and modernization programs. In addition, European Union and domestic policy and government funding geared towards cleaner technology is promoting investment in the industry. According to the EPP, one of the main objectives of the energy policy is to ensure ongoing demand for energy can be met, including by building new generation capacity to balance domestic demand for electricity.

Power production, demand and consumption The Polish electricity and heat generation sector is one of the largest in Europe and the largest in Central Europe according to Eurostat, with gross domestic electricity consumption of 158 TWh in 2013. Poland is the sixth largest power consumer in Europe (after France, Germany, Great Britain, Italy and Spain). Furthermore, according to the Polish Ministry of Economy, demand for gross electricity in Poland is forecast to grow by up to 42% between 2015 and 2030. At the same time average consumption levels are lower in Poland than in more developed European Union member states, which provides significant growth potential.Table 20: Power demand in selected European countries

(kWh/capita) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Poland 3,662 3,733 3,724 3,792 3,872 3,945 3,958 3,976 4,008 4,068France 7,770 7,918 7,720 7,882 7,902 7,852 7,821 7,802 7,794 7,826Germany 7,189 7,159 6,787 7,001 7,166 7,166 7,194 7,231 7,273 7,331Italy 5,701 5,655 5,265 5,298 5,320 5,315 5,337 5,382 5,432 5,488Spain 6,290 6,319 6,069 6,095 6,217 6,302 6,412 6,531 6,658 6,815UK 6,152 6,055 5,693 5,706 5,707 5,712 5,740 5,752 5,785 5,817

Source: EIU

According to PSE's estimates, in 2013, gross generation of electricity in Poland was 162.5 TWh, up 2% on 2012. Domestic consumption of electricity in 2013 amounted to 158 TWh and was 1% higher than consumption in 2012. The majority of heat and electricity is produced at coal- and lignite-fired thermal power plants, which use technology that has become one of the PBG Group's main areas of expertise following the acquisition of interest in RAFAKO by PBG. The EPP provides the framework

68


for a change of the electricity and heat generation mix to increase the share of gas, renewable and potentially nuclear power production sources in electricity generation in Poland. These areas also fall within our industrial construction expertise where we may act as a leader or subcontractor.

Table 21: Projected changes in maximum output capacity and structure of commercial power and combined heat and power plants, according to PSE S.A.

Source: www.ure.gov.pl

Wariant Optiondolny Lowergórny UpperMoc osiągalna brutto, w tym: Gross maximum capacity, includingEl. na węgiel brunatny Lignite-fired – electricityEl. na węgiel kamienny Hard coal-fired – electricityEC na węgiel kamienny Hard coal-fired – electricity and heatEl. na gaz ziemny Natural gas – electricityEC na gaz ziemny Natural gas – electricity and heatElektrownie wodne Hydroelectric power plantsInne źródła odnawialne Other RES

Poland is served by a district heating system that is concentrated in large coal or gas fired combined heat and power units located in major Polish cities and operated by major Polish vertically integrated utilities and a selected number of foreign utilities such as EDF, CEZ, and EON. Similar to the large power generation units, these facilities are expected to be replaced, upgraded and modernized during the next 10 years and these capex programs are within our core areas of expertise.

69

http://www.ure.gov.pl/


Without substantial expansion and upgrade, the existing power infrastructure in Poland may struggle to cope with expected increase in demand; according to the URE, the average age of power units owned by Polish energy producers is between 30 and 40 years, with approximately one quarter of all units in Poland older than 40 years. According to the Ministry of Economy, over 47% of boilers in Poland are over 30 years old. Such old facilities emit large amounts of carbon dioxide, which, in line with the EU 2020 Climate and Energy Package, each member state of the European Union must reduce by 20% from 1990 levels by 2020. According to estimates by the Polish Energy Agency, 15,000 MW of current generation capacities would have to be decommissioned by 2030 due to old age or environmental considerations in order for this target to be met in Poland. Decommissioned generation plants will have to be replaced by new capacities to enable Poland to meet expected growth of electricity demand.The following figure shows the age structure of power units in Poland as of December 31, 2011.

Figure 19: Age of power units in Poland

< 5 years 5-10 years 10-20 years 20-30 years > 30 years0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

5%8%

11%

32%

44%

5%7%

10%

31%

47%

Turbine generator sets Boilers

Source: URE.

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Figure 20: Generation capacities to be placed in service and retired in 2011-2025

Source: 2012 Report of the President of URE.

Moc zainstalowana (MW) Installed capacity (MW)Okres prognozy (w latach) Forecast period (years)Nowe inwestycje New projectsWycofanie z eksploatacji Decommissioned

CompetitionThis segment is characterized by high barriers to entry and limited number of market participants. We estimate that approximately 80% of boilers operated by Polish utilities have been delivered by RAFAKO, providing us with a significant competitive advantage while bidding for the role of general contractor or subcontractor for new capacity generation and modernization projects, with only turbines outsourced. Following the acquisition of RAFAKO, our only domestic competitors for turn-key projects in the power generation sector include Polimex-Mostostal and Mostostal Warszawa, while the only other companies which produce and assemble boilers and related infrastructure at power generation plants are Sefako and Energoinstal Katowice. Our international competitors that have been active in the Polish market include Foster Wheeler, Doosan Babcock, Hitachi, Fisia Babcock and Alstom Power. The complexity of the power plant construction process and resulting limited number of companies with the required industrial expertise and infrastructure make us uniquely positioned to participate as subcontractor in projects secured by our competitors.

VII. COMPANIES OF THE PBG GROUP

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As at the date of filing this Report, the PBG Group consisted of the companies listed below.

Table 22: Parent

Company Address Tel./Fax WWW E-mail

PBG S.A. (in company voluntary arrangement)

ul. Skórzewska 35, 62-081 Wysogotowo , Poland

(+48 61) 665 17 00 (+48 61) 665 17 01

www.pbg-sa.pl [email protected]

Table 23: Direct subsidiaries


KWG S.A. (in company voluntary arrangement)

ul. Pomorska 35, 70-812 Szczecin

(091) 432 11 30 (091) 469 24 24 www.kwg.com.pl [email protected]

PBG Operator Sp. z o.o.


(+48 61) 665 17 00 (+48 61) 665 17 01

www.grupapbg.pl none

Bathinex Sp. z o.o.

ul. Skórzewska 35, 62-081 Wysogotowo near Poznań, Poland

(0) 663 750 374 www.aprivia-sa.pl none

Brokam Sp. z o.o.


(+48) 691 470 133 (+48 61) 66 41 981


PBG oil & gas Sp. z o.o.


(061) 664 19 50 (061) 664 19 51 www.grupapbg.pl none

PBG Dom Sp. z o.o.


(061) 66 41 986 (061) 661 41 960

www.pbgdom.pl [email protected]

RAFAKO S.A. ul. Łąkowa 33, 47-400 Racibórz, Poland

(+48 32) 410 10 00 (+48 32) 415 34 27

www.rafako.com.pl [email protected] Ukraina PSA

Kondratiuka 1, 04-201 Kiev, Ukraine

(+48 61) 665 17 00 (+48 61) 665 17 01


Wschodni Invest Sp. z o.o.


(+48 61) 665 17 00 (+48 61) 665 17 01


PBG Bułgaria Sp. z o.o. (in liquidation)


(+48 61) 665 17 00 (+48 61) 665 17 01


PBG Avatia Sp. z o.o. (in company voluntary arrangement)

ul. Skórzewska 35, 62-081 Wysogotowo near Poznań

(+48 61) 66 46 440 (+48 61) 66 46 441

www.avatia.pl [email protected]

Multaros Trading Company Limited of


(+48 61) 665 17 00 (+48 61) 665 17 01

www.pbg-sa.pl none

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http://www.pbg-sa.pl/

mailto:[email protected]

http://www.avatia.pl/

http://www.grupapbg.pl/




http://www.rafako.com.pl/


http://www.pbgdom.pl/



http://www.aprivia-sa.pl/



http://www.kwg.com.pl/


http://www.pbg-sa.pl/


Table 24: Indirect subsidiaries


PBG Dom Invest III Sp. z o.o.


(061) 66 41 986 (061) 661 41 960

www.grupapbg.pl [email protected]

PBG ERIGO Sp. z o.o.


(061) 66 41 986 (061) 661 41 960

www.pbg-erigo.pl [email protected]

Górecka Projekt Sp. z o.o.


(061) 66 41 986 (061) 661 41 960


Villa Poznań Sp. z o.o.


(061) 66 41 986 (061) 661 41 960


PBG DOM INVEST LIMITED

Afentrikas 4, Larnaka 6018, Cyprus

(061) 66 41 986 (061) 661 41 960


PBG DOM CAPITAL LIMITED

Afentrikas 4, Larnaka 6018, Cyprus

(061) 66 41 986 (061) 661 41 960


ERIGO I Sp. z o.o.


(061) 66 41 986 (061) 661 41 960


ERIGO II Sp. z o.o.


(061) 66 41 986 (061) 661 41 960


ERIGO III Sp. z o.o.


(061) 66 41 986 (061) 661 41 960

www. grupapbg .pl [email protected]

ENERGOPOL UKRAINA

Kondratiuka 1, 04-201 Kiev, Ukraine

+380 (44)4304720 +380

21509.ua.all.biz none

FPM S.A. Ul. Towarowa 11, 43-190 Mikołów, Poland

(+48 32) 73 79 000 (+48

www.fpmsa.com [email protected]

PGL-DOM Sp. z o.o.

ul. Bukowa 1, 47-400 Racibórz, Poland

032/415-55-29, 032/415-55-02

none [email protected]

RAFAKO ENGINEERING Sp. z o.o.

ul. Łąkowa 33, 47-400 Racibórz, Poland

(+48 32) 410-11-07 (+48 32) 415-34-27 www.rafako.com.pl [email protected]

RAFAKO ENGINEERING SOLUTION doo


(+48 32) 410-11-07 (+48 32) 415-34-27 www.rafako.com.pl [email protected]

RAFAKO Hungary Kft.


(+48 32) 410-11-07 (+48 32) 415-34-27

www.rafako.com.pl [email protected]

VIII. BRANCHES

PBG’s (the Parent’s) branches:none

RAFAKO S.A.:Branch in TurkeySECTION IV: REPORT ON THE PBG GROUP’S OPERATIONS IN 2013

73









http://www.fpmsa.com/

http://21509.ua.all.biz/
















http://www.pbg-erigo.pl/




I. SHARES HELD IN RELATED ENTITIES

Table 25: Shares held in related entities

Related entity

Relation As at Dec 31 2013 As at the date of representation

Parent Type of relation

Number of shares

Par value of shares

Number of shares Par value of shares

KWG S.A. w upadłości układowej (in company voluntary arrangement)

PBG S.A. subsidiary 28,700 PLN 2,870,000.00 28,700 PLN 2,870,000.00

PBG Dom Sp. z o.o. PBG S.A. subsidiary 550,000 PLN 55,000,000.00 550,000 PLN 55,000,000.00

Brokam Sp. z o.o. PBG S.A. subsidiary 12,000 PLN 12,000,000.00 12,000 PLN 12,000,000.00

PBG AVATIA Sp. z o.o. (in company voluntary arrangement)

PBG S.A. subsidiary 999 PLN 49,950.00 999 PLN 49,950.00

Wschodni Invest Sp. z o.o. PBG S.A. subsidiary 37,740 PLN

3,774,000.00 37,740 PLN 3,774,000.00

PBG Ukraina Publiczna Spółka Akcyjna PBG S.A. subsidiary 222,227 UAH 888,908,00 222,227 UAH 888,908.00

BATHINEX Sp. z o.o. PBG S.A. subsidiary 50 PLN 50,000.00 50 PLN 50,000.00

PBG Operator Sp. z o.o. PBG S.A. subsidiary 50 PLN 5,000.00 50 PLN 5,000.00

PBG oil & gas PBG S.A. subsidiary 50 PLN 5,000.00 50 PLN 5,000.00

PBG Bułgaria Sp. z o.o. PBG S.A. subsidiary - BGN 35,000.00 - BGN 35,000.00

RAFAKO S.A.

PBG S.A.

Multaros Trading

Company Limited of

Nicosia

subsidiary

indirect subsidiary

7,665,995

34,800,001

PLN 15,331,998.00

PLN 69,600,002.00

7,665,995

34,800,001

PLN 15,331,998.00

PLN 69,600,002.00

Multaros Trading Company Limited of Nicosia

PBG S.A. subsidiary 526,000 EUR 526,000.00 526,000 EUR 526,000.00

FPM S.A. RAFAKO S.A.

indirect subsidiary 1,376,508 PLN

4,363,530.36 1,376,508 PLN 4,363,530.36

PGL-DOM Sp. z o.o. RAFAKO S.A.

indirect subsidiary 607 PLN

6,070,000.00 607 PLN 6,070,000.00

RAFAKO ENGINEERING Sp. z o.o.

RAFAKO S.A.

indirect subsidiary 1,000 PLN 500,000.00 1,000 PLN 500,000.00

RAFAKO ENGINEERING RAFAKO indirect 1 EUR 38,500.00 1 EUR 38,500.00

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Related entity



Number of shares

Par value of shares


SOLUTION doo S.A. subsidiary

RAFAKO Hungary Kft. RAFAKO S.A.

indirect subsidiary 1 HUF 40,000.00 1 HUF 40,000.00

Górecka Projekt Sp. z o.o.

PBG Dom Sp. z o.o.

indirect subsidiary 1,000 PLN 50,000.00 100 PLN 50,000.00

Villa Poznań Sp. z o.o. PBG Dom Sp. z o.o.

indirect subsidiary 21,100 PLN

2,110,000.00 21.10 PLN 2,110,000.00

PBG Dom Invest III Sp. z o.o.

PBG Dom Sp. z o.o.

indirect subsidiary 100 PLN 5,000.00 100 PLN 5,000.00


PBG S.A. subsidiary 100,000 PLN 5,000,000.00 100,000 PLN 5,000,000.00

PBG Dom Invest

Limitedindirect subsidiary 120,000 PLN

6,000,000.00 120,000 PLN 6,000,000.00

PBG DOM Invest Limited

PBG Dom Sp. z o.o.

indirect subsidiary 4,000 EUR 4,000.00 4,000 EUR 4,000.00

PBGDOM Capital Limited


indirect subsidiary 11,000 EUR 11,000.00 11,000 EUR 11,000.00

ERIGO I Sp. z o.o. PBG ERIGO Sp. z o.o.


ERIGO II Sp. z o.o. PBG ERIGO Sp. z o.o.


ERIGO III Sp. z o.o. PBG ERIGO Sp. z o.o.


Energopol-UkrainaWschodni Invest Sp.

z o.o.indirect

subsidiary 51 UAH 123,981.00 51 UAH 123,981.00

PBG Dom Invest II Sp. z o.o.

PBG Dom Sp. z o.o.


Galeria Kujawska Nova Sp. z o.o.

PBG Dom Sp. z o.o. indirect

subsidiary

100 PLN 5,000.00 100 PLN 5,000.00

Villa Poznań - PLN 00.00 - PLN 00.00

Galeria Kujawska Sp. z o.o.

PBG Dom Sp. z o.o.

indirect subsidiary

9,126 PLN 4,563,000.00 9,126 PLN 4,563,000.00

Galeria Kujawska Nova Sp. z

o.o.92 PLN 46,000.00 92 PLN 46,000.00

75


Related entity



Number of shares

Par value of shares


ENERGOTECHNIKA ENGINEERING Sp. z o.o.

RAFAKO ENGINEERING Sp. z

o.o.


Galeria Kujawska Nova Sp. z o.o. Sp. k.

PBG DOM

subsidiary

9,217 PLN 107,469.23 9,217 107.469,23

Galeria Kujawska Nova Sp. z

o.o.1 PLN 1,085.54 1 1.085,54

PBG ERIGO FINANSE Sp. z o.o.

PBG Erigo Sp. z o.o. subsidiary 100 PLN 5,000.00 100 PLN 5,000.00

PBG Dom Invest X Sp. z o.o. Invest I S.K.A.

PBG Erigo Sp. z o.o. subsidiary 500,000 PLN 50,000.00 500,000 PLN 50,000.00

PBG ERIGO PROJEKT Sp. z o.o.


City Development Sp. z o.o.

PBG Erigo Sp. z o.o. subsidiary 71,000 PLN

3,550,000.00 71,000 PLN 3,550,000.00

ECORIA Sp. z o.o. PBG Erigo Sp. z o.o. subsidiary 1,000 PLN 50,000.00 1,000 PLN 50,000.00

PBG ERIGO PROJEKT Sp. z o.o. Malta Hotel S.K.A.


PBG ERIGO PROJEKT Sp. z o.o. Strzeszyn S.K.A.


PBG Dom Invest X Sp. z o.o.


PBG ERIGO PROJEKT Sp. z o.o. PLATAN HOTEL S.K.A.

PBG Erigo Sp. z o.o. subsidiary 8,900,000 PLN 890,000.00 8.900.000 PLN 890,000.00

PBG Dom Invest X Sp. z o.o. Złotowska 51 S.K.A.

PBG Erigo Sp. z o.o. subsidiary 1,250,000 PLN 125,000.00 1,250,000 PLN 125,000.00

PBG ERIGO PROJEKT Sp. z o.o. ECORIA II S.K.A.


PBG ERIGO PROJEKT Sp. z o.o. QUADRO House S.K.A.


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In addition to the companies listed above, PBG holds interests in the following entities:

Table 26: Shares held in other entities

No.

CompanyNumber of shares

held by PBGPar value of shares (PLN)

% of shares and votes held

1. Poner Sp. z o.o. 399 399,000.00 19.00

2. Energia Wiatrowa PL Sp. z o.o. 230 11,500.00 18.70

3. Lubickie Wodociągi Sp. z o.o. 60 30,000.00 15.00

4. Towarzystwo Ubezpieczeń Wzajemnych TUZ 60 600.00 0.01

5.Strateg Capital Sp. z o.o. (in company voluntary arrangement) 250 250.000.00 100.00

6. Hydrobudowa Polska S.A. (in liquidation) 82,302,263 82,302,263.00 39.09

7. PBG Technologia Sp. z o.o. (in liquidation) 46,100 23,050,000.00 100.00

8. Aprivia SA (in liquidation) 14,775,999 14,775,999.00 20.52

9. Energomontaż Południe SA (in liquidation) 46,333,520 46,333,520.00 65.28

After the reporting date PBG did not acquire any shares in other entities.

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II. AGREEMENTS SIGNIFICANT TO THE GROUP’S OPERATIONS

Table 27: Agreements material to the PBG Group’s operations and concluded within the period covered by this Report and subsequent to the reporting date

Execution date

Parties Subject matter Key terms

Mar 28 2013

Annex to a significant conditional agreement

Principal:

Mostostal Warszawa S.A.

Contractor:

RAFAKO S.A.

Annex 3 to a conditional agreement of December 18th 2012 providing for engineering, procurement and construction of the process part of two lines for the Waste Thermal Treatment Plant for the Szczecin Metropolitan Area, comprising a grate, boiler and flue gas treatment unit.

The Agreement was executed subject to a condition subsequent that it shall be terminated if the ultimate client i.e. the Waste Thermal Treatment Plant for the Szczecin Metropolitan Area does not unconditionally approve the Contractor or terms of the Agreement.

Under Annex 3, the parties extended the occurrence date for the condition subsequent from March 29th 2013 to May 1st 2013.

For more information see RAFAKO's Current Report No. 15/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_15_2013_Mostostal_Aneks%203.pdf

Apr 29 2013


Principal:


Contractor:

RAFAKO S.A.


The agreement was executed subject to a condition subsequent that it shall be terminated if the ultimate client i.e. the Waste Thermal Treatment Plant for the Szczecin Metropolitan Area does not unconditionally approve the Contractor or terms of the Agreement.

Under Annex 4, the parties extended the occurrence date for the condition subsequent from May 1st 2013 to May 31st 2013. The parties further agreed to amend the conditional agreement of December 18th 2012 by extending the completion date by the number of days elapsed between April 15th 2013 and the date when the client (Waste Thermal Treatment Plant for the Szczecin Metropolitan Area) unconditionally accepts the terms of the agreement.

For more information see RAFAKO's Current Report No. 16/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_16_2013_Mostostal_Aneks%204.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_15_2013_Mostostal_Aneks%203.pdf


May 16 2013

Annex to a significant contract (the Opole project)

Principal:

PGE Górnictwo i Energetyka Konwencjonalna SA

Contractor:

Consortium: RAFAKO SA, Polimex-Mostostal SA and Mostostal Warszawa SA

Annex to the contract for construction of power generating units No. 5 and 6 in at Elektrownia Opole, dated February 15th 2012

Under the Annex:

i. In the context of the decision made by the Principal to close the Opole II Project, the Parties agreed on the terms of settlement and reimbursement of the costs incurred by the General Contractor in connection with preparatory work related to the performance of the contract,

ii. The Parties agreed on the way to proceed if the General Contractor fails to return the advance payment received from the Principal in the event that the whole or any part of the advance payment remains to be returned by the General Contractor after the settlement of the costs referred to in item 1 above,

iii. The Parties extended the deadline by which the Principal will be able to give notice of its intention to order commencement of work on the project to three months from the Annex date.

For more information, see RAFAKO's Current Report No. 17/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2017_%20aneks%20opole(1).pdf

May 22 2013

Principal:


Contractor:

RAFAKO S.A.

The contract for modernisation of the FGD installation at Units No. 5 and 6 at PGE GiEK S.A., Elektrownia Bełchatów Branch

Contract price: PLN 116,000,000 VAT-exclusive (PLN 142,680,000 VAT-inclusive).

Contract completion date: September 30th 2014.

Contractual penalties have been capped at 20% of the contract price exclusive of VAT, with a proviso that payment of contractual penalties in the maximum amount does not prejudice the Principal's right to seek damages in excess of the contractual penalties, but further with a proviso that the Contractor's total liability towards the Principal on all heads of damage may not exceed 100% of the contract price exclusive of VAT.

The other terms of the contract do not differ from standard terms applied in agreements of such type.The contract was classified as significant as its value exceeds 10% of the RAFAKO Group's revenue for the past four financial quarters.

For more information, see RAFAKO's Current Report No. 18/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2018_PGEx(1).pdf

May 27 2013

Consortium agreement

RAFAKO S.A.

- North China Power Engineering Co., Ltd. of China Power Engineering Consulting Group of Beijing

Consortium agreement concerning the scope of work to be performed by RAFAKO SA under the contract for “Development of new coal-fired generation capacities at TAURON Wytwarzanie S.A. - Construction of supercritical 910 MW generation unit at the Jaworzno III Power Plant - II Power Plant: steam boiler, turbine generator set, main building, electrical and I&C systems.”

In order to protect its legitimate interests, the Company withheld from publication the commercial terms of the agreement as confidential pursuant to Art. 57 of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, and filed a notification to that effect with the Polish Financial Supervision Authority (KNF).

The Company will publish the terms of the agreement by July 31st 2013, which is its scheduled execution date.

For more information see RAFAKO's Current Report No. 20/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2020_Chiny.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2018_PGEx(1).pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2017_%20aneks%20opole(1).pdf


May 29 2013


Principal:


Contractor:

RAFAKO S.A.


Under Annex 5, the parties extended the occurrence date for the condition subsequent from May 31st 2013 to June 7th 2013.

The parties further agreed to amend the Agreement by extending the completion date by the number of days elapsed between April 15th 2013 and the date when the client (Waste Thermal Treatment Plant for the Szczecin Metropolitan Area) unconditionally accepts the terms of the agreement.

For more information see RAFAKO's Current Report No. 21/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2020_Chiny.pdf

Jun 07 2013


Principal:


Contractor:

RAFAKO S.A.


As announced in Current Report No. 7/2013, the Agreement was executed subject to a condition subsequent that it would be terminated if the ultimate client, the Waste Thermal Treatment Plant for the Szczecin Metropolitan Area, refused to unconditionally approve the Contractor or the terms of the Agreement.

With the client's approval of the conceptual design and process design for the project issued on June 5th 2013, the Contractor received the required unconditional acceptance, and, as the condition subsequent had not materialised, the Agreement came into effect as of February 28th 2013.

Furthermore, the parties to the Agreement amended the relevant Subcontractor Agreement by changing the Completion Date for the Works (understood as the date of issue of Handover Certificate for the Works) to July 4th 2015 and by changing the commissioning and testing end date (understood as the date of issue of Completion Certificate) to December 4th 2015. The parties also agreed that if Mostostal Warszawa S.A. were to hand over the construction site for the works performed by RAFAKO S.A. after March 15th 2014, the final completion date would be automatically extended by the number of days elapsed between March 15th 2014 and the date when the construction site for the works performed by RAFAKO S.A. was handed over by Mostostal Warszawa S.A.

For more information see RAFAKO's Current Report No. 23/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_23_2013_Mostostal_Aneks%206_v%205.pdf

Jun 12 2013

Principal:

PGNIG SA of Warsaw, the Sanok Branch

Contractor:

Consortium: PBG oil and gas Sp. z o.o. (consortium leader) and ControlTec Sp. z o.o. of Wrocław (consortium partner)

The contract provides for proper and comprehensive execution, by July 11th 2014, of construction and assembly work on the Investment Project "Installation of an additional compressor at the Husów Underground Gas Storage Facility as part of the Husów Underground Gas Storage Facility Expansion Project" ("the Investment Project").

The agreed lump sum payable to the Consortium for the performance of the contract is PLN 16,384,717.29 plus VAT at applicable rate.The agreed sum payable to POG for the performance of their part of the contract is estimated at approximately PLN 13.3m.The period for notification of defects by PGNiG is 36 months, commencing from the date of signing of an unqualified Acceptance Report.The maximum value of contractual penalties is 100% of the contract’s VAT-exclusive price.

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2020_Chiny.pdf


For more information, see PBG Current Report No. 17/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/17-2013-zawarcie-istotnej-umowy-przez-spolke-zalezna.html

Jul 25 2013

Cooperation agreement

RAFAKO S.A.

China Power Engineering Consulting Group Corporation (CPECC) of Beijing and NCPE

Cooperation agreement for joint execution of a contract to be signed between the Company and Mostostal Warszawa SA (forming a consortium) on one side and Tauron Wytwarzanie SA on the other side

In order to protect its legitimate interests, the Company postponed disclosure of the commercial terms of the Agreement pursuant to Art. 57 of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, and filed a notification to that effect with the Polish Financial Supervision Authority.

For more information, see RAFAKO's Current Report No. 29/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2029_Chiny_4.pdf

Aug 4 2013

Consortium agreement


RAFAKO S.A.

Amended and restated consortium agreement for the Jaworzno Project, originally executed on October 17th 2012

The main changes relative to the original consortium agreement, introduced by the Amended Consortium Agreement, provide for:a) performance by RAFAKO and Mostostal Warszawa of 99.99% and 0.01%, respectively, of the works on the Jaworzno project;b) division of the remuneration due to each of the consortium partners working on the Jaworzno project in a manner corresponding to the partners’ new scopes of work;c) RAFAKO, as the consortium leader, will be authorised to make independent decisions and represent the consortium before the employer in connection with the Jaworzno project, save for a closed list of issues reserved under the Amended Consortium Agreement for joint decision by the consortium partners.

For more information, see RAFAKO's Current Report No. 31/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_31_Umowa%20z%20Mostostal_Jaworzno.pdf

Aug 4 2013

Additional Agreement


RAFAKO S.A.

The Additional Agreement defines the commercial terms for the new framework of cooperation between the Parties on the Jaworzno Project, including the compensation due to Mostostal Warszawa in view of the reduction of its share in the remuneration and scope of work under the Jaworzno Project.

The Company postponed disclosure of the commercial terms of the Additional Agreement, having notified the Polish Financial Supervision Authority accordingly, as RAFAKO's legitimate interests could be adversely affected if such disclosure was made at the current stage of the transaction process. The commercial terms of the Additional Agreement will be disclosed in a separate current report when the disclosure no longer threatens RAFAKO's legitimate interests, but not later than on October 1st 2013, which is the day immediately following expiry of the validity period of the bid for the Jaworzno Project (see Current Report No. 30/2013 of July 30th 2013).

For more information, see RAFAKO's Current Report No. 31/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_31_Umowa%20z%20Mostostal_Jaworzno.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_31_Umowa%20z%20Mostostal_Jaworzno.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2029_Chiny_4.pdf

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/17-2013-zawarcie-istotnej-umowy-przez-spolke-zalezna.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/17-2013-zawarcie-istotnej-umowy-przez-spolke-zalezna.html


Aug 13 2013

Annex to a significant contract (the Opole project).

Principal:


Contractor:


Annex to the contract for construction of power generating units No. 5 and 6 in at Elektrownia Opole, dated February 15th 2012

Under the annex, the parties agreed that, as an additional condition for the Notice to Proceed, the terms governing relations between the Employer, the General Contractor and/or Subcontractor and PKO Bank Polski S.A. must be agreed and implemented, including financial terms, payment conditions, payment security and performance bonds.

The parties further agreed that the Employer was entitled to issue the Notice to Proceed not later than 24 months after the date of the contract (i.e. not later than February 15th 2014), with the proviso that the NTP may not be issued earlier than 120 days after the date on which the Employer notifies of its intention to issue the NTP.

Today, the General Contractor has been notified of the Employer’s intention to issue the NTP. In the notice, the Employer indicates that it intends to issue the NTP on December 15th 2013, provided that all preconditions for the NTP stipulated in the contract have been met.

For more information, see RAFAKO's Current Report No. 32/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/32_Raport%20biezacy%20aneks%20opole

%2014_08_2013_35168242_1%20_2_.pdf

Aug 13 2013

Letter of Intent (Opole Project)



PKO BP S.A.

Alstom Power Sp. z o.o.

The Letter of Intent is for the purposes of a project to build generating units No. 5 and No. 6 at Elektrownia Opole, executed by the Consortium under a contract of February 15th 2012.

The purpose of the Letter of Intent is to agree the terms of Alstom's joining the Project and to determine the scope of related changes to the Project's documentation.

The signatories declared their intention to agree the terms of Alstom's joining the Project and to sign any required changes to the Project's documentation by September 30th 2013.

For more information, see RAFAKO's Current Report No. 33/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/33_Raport%20biezacy%20list%20intencyjny

%2013_08_2013_35168254_1.pdf

Aug 08 2013

Energomontaż-Południe S.A. w upadłości układowej (in company voluntary arrangement)

PBG S.A. w upadłości układowej (in company voluntary

An annex of August 7th 2013 to an agreement of April 17th 2012 for the delivery of fuel tanks as part of the project involving upgrading and extension of the existing storage facilities for propellants and lubricants in Poland (Annex).

Under the Annex, part of the works covered by the agreement were excluded from the Company's scope of work and the amount of contractual remuneration was reduced to PLN 26.5m. The value of the agreement as at the publication date of Current Report No. 18/2012 was estimated at PLN 32.8m. Following said amendments, the schedule of works and expenditures was modified, while the completion date (June 30th 2014) and the other terms of the agreement remained unchanged.

For more details, see EPD's Current Report No. 33/2013: http://www.inwestor.energomontaz.pl/artykuly/2629,955/d,raporty_bezace_podstrona,aktualizacja-informacji-nt-

umowy-podwykonawczej-na-wykonanie-zbiornikow-paliwowych.htm

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http://www.inwestor.energomontaz.pl/artykuly/2629,955/d,raporty_bezace_podstrona,aktualizacja-informacji-nt-umowy-podwykonawczej-na-wykonanie-zbiornikow-paliwowych.htm

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/33_Raport%20biezacy%20list%20intencyjny%2013_08_2013_35168254_1.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/33_Raport%20biezacy%20list%20intencyjny%2013_08_2013_35168254_1.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/32_Raport%20biezacy%20aneks%20opole%2014_08_2013_35168242_1%20_2_.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/32_Raport%20biezacy%20aneks%20opole%2014_08_2013_35168242_1%20_2_.pdf


Sep 10 2013

Annex to a significant contract for the construction of LNG Terminal in Świnoujście

Principal:

Polskie LNG SA

Contractor:

Saipem S.A. as consortium leader, and Saipem S.A., SAIPEM Canada Inc., Techint Compagnia Tecnica Internazionale S.p.A., PBG S.A. (in company voluntary arrangement) and PBG Energia Sp. z o.o. (formerly: PBG Export Sp. z o.o.) as

Delivery of the working design, construction and commissioning of the Liquefied Natural Gas Regasification Terminal in Świnoujście.

Presented below are material amendments made to the contract:

- at the consortium's initiative, the parties agreed to change the cooling technology;

- a change of technology led to an increase in remuneration payable to the Consortium for the Contract delivery by PLN 278,775,000, - the change of technology led to an increase in remuneration payable to the consortium from PLN 2,088,976,000 VAT-exclusive (changes to the remuneration were reported in Current Report No. 12/2011 of February 10th 2011 and Current Report No. 80/2011 of December 23rd 2011) to PLN 2,367,751,000 VAT-exclusive;

- following the change of technology, the date for signing the project handover certificate was postponed from June 30th 2014 to December 30th 2014.

Furthermore, at the employer's request, the consortium has extended the warranty against defects period and the technical assistance period by six months.

For more information see PBG's Current Report No. 27/2013 http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/27-2013-zawarcie-aneksu-do-umowy-znaczacej-na-budowe-terminalu-lng-w-swinoujsciu.html

Oct 9 2013


RAFAKO SA

CPECC Jaworzno Project

Under an agreement with RAFAKO, CPECC confirmed its readiness to carry out all the obligations under the cooperation agreement by itself. The agreement followed from the fact that RAFAKO and CPECC are considering to perform the contract without NCPE.

For more information see RAFAKO's Current Report No. 38/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_38_umowa%20z%20CPECC_09_09_2013.pdf

Oct 11 2013

Annex to a significant contract (the Opole project)

Principal:


Contractor:


Annex to the contract for construction of power generating units No. 5 and 6 at Elektrownia Opole, dated February 15th 2012

Under the annex, Alstom Power Sp. z o.o. was added to the list of subcontractors preferred by the General Contractor.

The Parties also agreed on terms of the Employer’s payment to the General Contractor of the second instalment of the advance. The General Contractor agreed to deposit the funds received in the first instalment in the custodial escrow accounts of individual consortium members, with a proviso that the first instalment was to be paid by the Employer to the General Contractor after the Employer received an advance payment bond for an amount corresponding to the sum of the first and second instalment.

For more information see RAFAKO's Current Report No. 39/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2039_Aneks_projekt%20Opole.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_38_umowa%20z%20CPECC_09_09_2013.pdf

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/27-2013-zawarcie-aneksu-do-umowy-znaczacej-na-budowe-terminalu-lng-w-swinoujsciu.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/27-2013-zawarcie-aneksu-do-umowy-znaczacej-na-budowe-terminalu-lng-w-swinoujsciu.html


Oct 11 2013



PKO BP S.A.

Alstom Power Sp. z o.o

Agreement setting out the terms and conditions on which the Bank is to provide support for the Project, including in the form of guarantees required under a contract for the construction of generating units No. 5 and No. 6 at Elektrownia Opole, dated February 15th 2012.

The purpose of the agreement is to identify all documents, acts in law and practical steps in relations between the Employer, General Contractor, Alstom, and the Bank, including financial terms, settlement terms and security for payments, whose execution or performance is a necessary, but not sufficient, condition of the Bank’s support for the Project (“Bank Terms and Conditions”).

The Bank Terms and Conditions will come into effect provided that: (i) relevant lending decisions are approved by the Bank, and (ii) representations are made by the consortium members to the effect that they have obtained relevant approvals to fulfil the Bank Terms and Conditions, including to enter into agreements, amend existing agreements, and create security interests required by the Bank.

The agreement stipulating the Bank Terms and Conditions is considered significant as it pertains to a contract generating revenue which exceeds 10% of the RAFAKO Group's total revenue generated over the four most recent financial quarters.

For more information see RAFAKO's Current Report No. 40/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2040_Umowa_projekt%20Opole_katalog

%20dokumentow.pdf

Oct 18 2013

Principal:

Synthos Dwory 7 spółka z ograniczoną odpowiedzialnością SKA

Contractor:

RAFAKO S.A.

Construction of a fluidized boiler at the Employer’s plant.

The contract value is PLN 151,650,000.00 VAT-exclusive (PLN 186,529,500.00 VAT-inclusive).

The scheduled completion date is January 2016.

Contractual penalties have been capped at 35% of the contract price exclusive of VAT, with a proviso that payment of contractual penalties in the maximum amount does not prejudice the Employer's right to seek damages in excess of the contractual penalties, but further with a proviso that the Contractor's total liability towards the Employer on all heads of damage may not exceed 130% of the contract price exclusive of VAT.

The other terms of the contract do not differ from standard terms applied in agreements of such type.

For more information, see RAFAKO's Current Report No. 42/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_42_kontrakt_Syntos.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB%2040_Umowa_projekt%20Opole_katalog%20dokumentow.pdf


Oct 18 2013

ENERGOMONTAŻ-POŁUDNIE SA w upadłości likwidacyjnej (in bankruptcy by liquidation)

PBG SA w upadłości układowej (in company voluntary arrangement) (PBG)

Agreement on termination of a subcontractor agreement for the delivery of fuel tanks

The bankruptcy administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (the “Company”) reported that on October 18th 2013 PBG S.A. w upadłości układowej (PBG) and the Company executed an agreement to terminate a subcontractor agreement for the delivery of fuel tanks. The termination agreement was signed as PBG did not agree to transfer the rights and obligations under the subcontractor agreement to third parties participating in the tender for sale of an organised part of business. Another reason for the termination was that the bankruptcy administrator, having no intention of engaging in business involving construction work and being unable to assign the subcontractor agreement to the extent it pertains to construction work, aimed to terminate the agreement in a way that would produce an optimum result for creditors and the bankrupt estate.

According to a works progress report, the value of works outstanding under the terminated agreement is significant, at approximately PLN 18m, VAT-exclusive, and meets the Company's criteria of a significant agreement.

The Company has liability under a guarantee and statutory warranty for the works performed by the date of the termination agreement, and is under the obligation to deliver the quality documentation relating to the works performed within seven days of the date of the termination agreement. Furthermore, PBG will pay the outstanding remuneration for the works performed, of approximately PLN 2.1m, in monthly instalments, by December 31st 201. PBG waived its right to seek contractual penalties related to the termination.

Following the termination of the subcontractor agreement, the Company's revenue and order book value decreased. In accordance with preliminary arrangements made between the parties, performance under the subcontractor agreement will, to some extent, be taken over by the Company's subsidiary, Energomontaż-Południe Katowice sp. z o.o., which will partly offset the effects of the termination.

For more information see EPD's Current Report No. 38/2013: http://www.inwestor.energomontaz.pl/artykuly/2643,955/d,raporty_bezace_podstrona,porozumienie-w-sprawie-

rozwiazania-umowy-podwykonawczej-na-wykonanie-zbiornikow-paliwowych.htm

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http://www.inwestor.energomontaz.pl/artykuly/2643,955/d,raporty_bezace_podstrona,porozumienie-w-sprawie-rozwiazania-umowy-podwykonawczej-na-wykonanie-zbiornikow-paliwowych.htm


Oct 12 2013

Principal:

RAFAKO S.A.

Contractor:

E001RK sp. z o.o.

A subcontractor agreement, part of the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole, dated February 15th 2012

• The company, as the contractor, ordered SPV-RAFAKO, the subcontractor, to execute the full scope of works and services for which the company is responsible under the Opole Project, including to coordinate the performance of the Subcontractor Agreement by SPV-RAFAKO, as the subcontractor, and by sub-subcontractors, and to supervise the performance of the Subcontractor Agreement by sub-subcontractors,

• As the subcontractor, SPV-RAFAKO will be responsible for executing agreements with sub-subcontractors; if SPV-RAFAKO is in breach of the Contractor Agreement in respect of its execution of sub-subcontractor agreements, the company may request that SPV-RAFAKO pay a contractual penalty of PLN 1,000,000.00 (one million złoty, 00/100) for each breach resulting in a contractual penalty being imposed on the company by the Principal pursuant to the Main Contract,

• The company agreed that SPV-RAFAKO may subcontract execution of the Subcontractor Agreement in full to Alstom Power Sp. z o.o. (“Alstom”) as the sub-subcontractor – on the terms set out in an agreement between SPV-RAFAKO and Alstom,

• SPV-RAFAKO’s remuneration for the performance of the works and services for which the company is responsible under the Opole Project is PLN 3,965,520,000.00 (three billion, nine hundred and sixty-five million, five hundred and twenty thousand, 00/100),

Throughout the term of the Main Contract, SPV-RAFAKO intends not to undertake any activities other than the activities relating to the performance of the Main Contract. The execution by each Consortium member of subcontractor agreements with their respective subsidiaries designated to execute the Opole Project constituted one of the conditions precedent for obtaining the support of Powszechna Kasa Oszczędności Bank Polski S.A. for the Opole Project, as announced by RAFAKO in Current Report No. 40/2013. The Consortium members designate their subsidiaries to perform the work under the Opole Project within the scope specified in their respective subcontractor agreements, which secures stable cash flows in the Opole Project and mitigates the risk of any of the Consortium members failing to perform or improperly performing their obligations under the Main Contract.

For more information, see RAFAKO's Current Report No. 46/2014: http://www.rafako.com.pl/pub/File/rapo rty_biezace/2013/RB_46_Raport%20biezacy%20umow a%20podwykonawcza%20RFK-SPV%20RFK_35175109_2.pdf

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Oct 26 2013

Principal:

SPV-RAFAKO

Contractor:


A subcontractor agreement, part of the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole, dated February 15th 2012

• SPV-RAFAKO engaged Alstom, as the subcontractor, to perform the full scope of works and services for which the company is responsible under the Opole Project, excluding the work already performed by the company (“Scope of Alstom’s Subcontractor Work”), and Alstom accepted the engagement,

• Alstom undertook towards SPV-RAFAKO to perform the Scope of Alstom’s Subcontractor Work (i) on the terms specified for the company’s obligations set forth in the consortium agreement and the Main Contract, and (ii) on the same terms – to be liable towards SPV-RAFAKO for the non-performance or improper performance of the Scope of Alstom’s Subcontractor Work, and to bear any reasonable costs incurred by SPV-RAFAKO as a result of the non-performance or improper performance of the Scope of Alstom’s Subcontractor Work,

• In connection with the Scope of Alstom’s Subcontractor Work, Alstom agreed to provide the Principal, as the beneficiary, with a Performance Bond amounting to 8% of the consideration for the Scope of Alstom’s Subcontractor Work, and with an Advance Payment Bond for an amount equal to the advance payment received by Alstom for the Scope of Alstom’s Subcontractor Work; the two guarantees to be supplied by Alstom will be consistent with the Performance Bond and the Advance Payment Bond required under the Main Contract,

• In exchange for the performance of the Scope of Alstom’s Subcontractor Work, SPV-RAFAKO agreed to pay to Alstom PLN 3,965,520,000.00 (VAT-inclusive) (three billion, nine hundred and sixty-five million, five hundred and twenty thousand złoty, 00/100) as remuneration,

• Alstom agreed to pay the company PLN 67,650,000.00 (sixty-seven million, six hundred and fifty thousand złoty, 00/100) as remuneration for the work executed to date by the company as part of the Opole Project.

The Subcontractor Agreement was executed on the condition that the Principal agrees to its execution in a multilateral agreement between Alstom, the company, PGE and other members of the Consortium responsible for the Main Contract and on the condition that Alstom and the Consortium sign a relevant agreement.

The execution of the Subcontractor Agreement was one of the conditions precedent to signing an agreement between the company and the Alstom Group, as announced by RAFAKO on October 16th 2013 in Current Report No. 41/13.

For more information see RAFAKO's Current Report No. 47/2013: http://www.rafako.com.pl/pub/File/rapo rty_biezace/2013/RB_47_Raport%20biezacy%20umow a%20podwykonawcza%20SPV%20RFK-Alstom_35175116_3.pdf

Oct 26 2013


Principal

RAFAKO S.A.

Contractor:


An additional agreement, part of the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole, dated February 15th 2012

Alstom:

• In connection with the Opole Project, declared its readiness to engage companies of the RAFAKO Group to perform specific deliveries and works, with the expected total value of PLN 650,000,000.00 (six hundred and fifty million złoty, 00/100).

• Agreed to indemnify the company for any claims under the consortium agreement which may be brought against the company by Polimex or Mostostal in connection with the Opole Project, provided that Alstom will have recourse rights against Polimex and Mostostal under the consortium agreement.

For more information see RAFAKO's Current Report No. 47/2013: http://www.rafako.com.pl/pub/File/rapo rty_biezace/2013/RB_47_Raport%20biezacy%20umow a%20podwykonawcza%20SPV%20RFK-Alstom_35175116_3.pdf

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Oct 25 2013

Agreement concerning the Opole Project

PGE Górnictwo i Energetyka Konwencjonalna S.A.

Consortium: RAFAKO S.A., Polimex-Mostostal S.A. and Mostostal Warszawa S.A.

E001RK Sp. z o.o.

Polimex-Cekop Development sp. z o.o. w likwidacji (in liquidation; pending change of name to Polimex Projekt Opole sp. z o.o.)

Mostostal Power Development Sp. z o.o.


The agreement specifies the terms and conditions of the parties’ joint execution of the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole of February 15th 2012.

Under the Agreement, the Principal accepted the draft subcontract agreements between RAFAKO and SPV-RAFAKO, Polimex and SPV-Polimex, and Mostostal and SPV-Mostostal (jointly – “Subcontract Agreements with SPVs”) and approved their execution, and the parties to the Agreement undertook to perform their respective obligations towards the Principal under their individual subcontract agreements. Furthermore, pursuant to the Agreement, the Principal accepted the draft subcontract agreements between SPV-RAFAKO and Alstom, SPV-Polimex and Alstom, and SPV-Mostostal and Alstom (jointly – “Subcontract Agreements with Alstom”) and approved their execution, and the parties agreed that Alstom would perform its obligations towards the Principal under the above-mentioned Subcontract Agreements.

Under the Agreement:

• The parties agreed that in exchange for the work performed by Alstom under Subcontract Agreements with Alstom the Principal will transfer the remuneration under the Main Contract directly to Alstom, within the meaning of transfers set out in Art. 9211 of the Civil Code, in order to fulfil the Principal's obligation to pay the Consortium's remuneration under the Main Contract, each Consortium member's obligation to pay the relevant SPV's remuneration under the Subcontract Agreement with that SPV, and relevant SPVs obligation to pay Alstom's remuneration under the relevant Subcontract Agreement with Alstom;

• The parties agreed on the manner in which the Consortium will provide the Advance Payment Bond, and on the manner of payment of the advance's second instalment by the Principal;

•In view of the fact that Alstom will perform its obligations under Subcontractor Agreements with Alstom for the Principal, the parties agreed that Alstom will provide the Principal with the bank and insurance guarantees which, pursuant to the Subcontractor Agreements with Alstom, Alstom is required to provide for the benefit of SPV-RAFAKO, SPV-Polimex and SPV-Mostostal to secure Alstom's performance of its obligations under these Subcontractor Agreements with Alstom, and Alstom will designate the Principal as the beneficiary of these guarantees;

• The parties determined the terms on which the Principal will return the amount of PLN 277,399,440.00, paid by the Consortium in cash to serve as the Performance Bond within the meaning of the Main Contract;

•The Consortium members and Alstom defined what would constitute an event of default by the Consortium members in connection with the Opole Project; if a Consortium member defaults on the execution of the Project, the other members have the right to take over the defaulting party's entire scope of work;

The execution of an agreement between the Principal, the Consortium, SPV-RAFAKO, SPV-Polimex, SPV-Mostostal and Alstom was one of the conditions precedent to signing an agreement between RAFAKO and the Alstom Group, as announced by RAFAKO on October 16th 2013 in Current Report No. 41/13.

For more information, see RAFAKO's Current Report No. 48/2014: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_48_Raport%20biezacy%20duze

%20porozumienie_35175290_4.pdf

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_48_Raport%20biezacy%20duze%20porozumienie_35175290_4.pdf


Oct 25 2013

Agreement concerning the Opole Project

Consortium: RAFAKO S.A., Polimex-Mostostal S.A. and Mostostal Warszawa S.A.


The agreement specifies the terms and conditions of the joint execution by Alstom and the Consortium of the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole of February 15th 2012.

Under the agreement, the parties appointed Alstom as the general designer and leader of the design works under the Opole Project, with the proviso that Alstom, acting in the capacity of the general designer, would implement no changes resulting in changes to the environmental approval for and the deadlines of the Opole Project, as specified in the Main Contract.

Alstom undertook towards Polimex and Mostostal to settle Polimex's and Mostostal's claims against the Company under the consortium agreement, arising as a result of (i) non-performance or improper performance of the Company's obligations as the Consortium leader under the consortium agreement, and (ii) non-performance or improper performance of the scope of the works which the company undertook to perform as part of the Opole Project.

The execution of an agreement between Alstom and the Consortium was one of the conditions precedent to signing an agreement between RAFAKO and the Alstom Group, as announced by RAFAKO on October 16th 2013 in Current Report No. 41/13.

For more information, see RAFAKO's Current Report No. 49/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_49_Raport%20biezacy%20male

%20porozumienie_35175287_1.pdf

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Oct 29 2013

Withdrawal from collaboration with NCPE and CPECC on the Jaworzno Project

RAFAKO S.A.

NCPE

CPECC

RAFAKO’s decision to withdraw from collaboration with NCPE and CPECC on the Jaworzno project was caused by the parties’ divergent views on the contract execution, as well as by the inability to reach an understanding as to the contents of the subcontracting agreement between RAFAKO and CPECC.

Therefore, RAFAKO hereby presents the commercial terms of the Consortium Agreement and the Cooperation Agreement, whose publication was withheld by RAFAKO to protect its legitimate business interests.1. Consortium AgreementPursuant to the Consortium Agreement, RAFAKO and NCPE agreed to:a) Jointly perform RAFAKO's scope of works under the Contract (as at the Contract execution date, RAFAKO was to perform 58.96% of the Contract's entire scope of works); RAFAKO and NCPE were to share equally in the income and expenses of RAFAKO's scope of works under the Contract;b) NCPE and RAFAKO will bear joint and several liability towards the Principal for the Contract's performance;c) NCPE undertook to obtain, from a Chinese bank, bank guarantees equal in amount to the guarantees required under the Contract for the RAFAKO's scope of works (i.e. advance payment bond, performance bond and warranty), with a bank specified by RAFAKO S.A. as the beneficiary. In addition, RAFAKO undertook to obtain the guarantees required under the Contract from the bank which was to be the beneficiary of the NCPE's guarantees, and appoint the Principal as the beneficiary of the guarantees;d) The Contract's performance was to be managed by a steering committee composed of two representatives appointed by RAFAKO and two appointed by NCPE. The committee's decisions would require a majority vote;e) The cooperation agreement between RAFAKO and NCPE signed on May 27th 2013 (“Cooperation Agreement with NCPE”) was an integral part of the Consortium Agreement. In the Cooperation Agreement, the parties detailed the terms of their cooperation and mutual settlements in connection with their joint performance of the Contract under the Consortium Agreement.The Consortium Agreement would automatically terminate if the Contract was not executed by December 31st 2013.On October 28th 2013, NCPE and RAFAKO terminated the Consortium Agreement and the Cooperation Agreement with NCPE.2. Cooperation agreementPursuant to the Cooperation Agreement:a) NCPE and CPEEC will perform 50% of RAFAKO's scope of works under the Contract for 50% of the remuneration under the Contract. For the purposes of the Cooperation Agreement, RAFAKO increased its total scope of works under the Contract to 99.99%.b) NCPE and CPEEC undertook to obtain guarantees in favour of the Principal (i.e. an advance payment bond, performance bond and warranty) for 99.99% of the amounts of the guarantees required under the Contract;c) RAFAKO undertook to obtain guarantees in favour of the Principal (i.e. an advance payment bond, performance bond and warranty) for 0.01% of the amounts of the guarantees required under the Contract;d) The Contract's performance was to be managed by a steering committee composed of two representatives appointed by RAFAKO, one by NCPE and one by CPEEC. The committee's decisions would require a majority vote;e) The parties agreed that the detailed terms of their cooperation and mutual settlements would be set out in a subcontractor agreement to be negotiated and executed at a later time, and that NCPE, CPEEC and RAFAKO would bear joint and several liability towards the Principal for their share of the Contract's works;f) Pursuant to the Cooperation Agreement, RAFAKO would be required to employ NCPE and CPEEC in an advisory capacity in exchange for a remuneration agreed on by the parties in a subcontractor agreement in the event that, following the Contract's execution: (i) the Principal did not permit RAFAKO to subcontract NCPE and CPEEC to perform the work, or (ii) the Principal permitted RAFAKO to subcontract NCPE and CPEEC to perform the work, but the scope of the work to be performed amounted to less than 50% of RAFAKO's work under the Contract. If RAFAKO failed to fulfil these obligations, RAFAKO would be liable to pay a contractual penalty to NCPE and CPEEC in an amount equal to the remuneration due to NCPE and CPEEC for their advisory services;g) The parties agreed that the Cooperation Agreement would prevail over the Consortium Agreement.

The Cooperation Agreement would automatically terminate if the Contract was not executed by December 31st 2013.

No subcontractor agreement had been executed by the parties to the date of this report. Today, RAFAKO served NCPE and CPEEC with a notice of termination of the Cooperation Agreement.

For more information, see RAFAKO's Current Report No. 50/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_50_publikacja%20warunkow%20handlowych

%20Jaworzno_35175740_2.pdf

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Oct 30 2013

RAFAKO S.A. (Principal)

ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation)

Termination of two contracts with RAFAKO S.A.

Further to Current Report No. 24/2012 of May 23rd 2012 on the execution of a contract for the delivery and assembly of steel structures for SCR reactors to be used in a catalytic flue gas denitration system for PO-650 boilers Nos. 4, 5, 6, 7 and 8 at Elektrownia Kozienice S.A., the Bankruptcy Administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Issuer”, the “Company”) reports that on October 30th 2013 the Company received a notice from RAFAKO S.A. (the “Principal”) on the termination of the above-mentioned contract, with effect as of the notice delivery date. On the same day, the Company received a notice from RAFAKO S.A. on the termination of another contract with the Company, concerning the prefabrication and delivery of steel structures to be used in the upgrade and overhaul of the rotary air pre-heaters in generating units Nos. 7–12 at Elektrownia Bełchatów S.A., with effect as of the 14th day of the notice delivery date. The Company did not disclose the contract in a current report, as it did not meet the Company's criteria of a significant agreement. As at their termination, the aggregate value of the above-mentioned contracts was significant at approximately PLN 14.7m. Following the termination of the contracts, the Company's revenue and order book value decreased.

To avoid additional costs in the form of contractual penalties, the Company took steps to ensure that the contracts are terminated by mutual agreement.

According to the bankruptcy administrator, both cases of termination are ineffective as they are not grounded in fact or in law.

For more details, see EPD Current Report No. 41/2013: http://www.inwestor.energomontaz.pl/ar tykuly/2647,955/d,raporty_bezace_podstrona,wyp owiedzenia-dwoch-kontraktow-realizowanych-dla-rafako-s-a.htm

Nov 21 2013

Principal: RAFAKO S.A.

Contractor: Consortium comprising ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) and ENERGOMONTAŻ-POŁUDNIE Katowice Sp. z o.o.

An agreement on the termination of the contract for the modernisation of the high-pressure vessel in boilers B1–B7 at the Połaniec power plant owned by GDF SUEZ

On November 21st 2013, a trilateral agreement was signed by the Consortium comprising the ENERGOMONTAŻ-POŁUDNIE S.A. upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Company”) and its subsidiary – ENERGOMONTAŻ-POŁUDNIE Katowice sp. z o.o. (Contractor), and RAFAKO S.A. (Principal).

Pursuant to the agreement, the parties unilaterally agreed that the Contract would be terminated on November 30th 2013.

The parties would not be entitled to seek payment of any contractual penalties following the Contract's termination or seek remedy for damages on general terms. In addition, the Principal would not be entitled to complete the Contract's performance at the Contractor's cost and risk. Furthermore, the Principal would pay the Contractor its due remuneration for the work performed before November 30th 2013, within seven days of receiving a correct VAT invoice for the work, without any set-off against the Contractor's receivables under the Contract.

Pursuant to the agreement, the Contractor undertook towards the Principal to fulfil all guarantee and warranty obligations under the Contract and generally applicable laws. The exclusion of liability does not apply to these claims. The Company estimates that the net value of the work remaining to be performed under the terminated Contract is significant, at approximately PLN 26.1m.

For more information, see EPD Current Report No. 45/2012 http://www.inwestor.energomontaz.pl/ar tykuly/2653,955/d,raporty_bezace_podstrona,por ozumienie-w-sprawie-rozwiazania-umowy -na-wykonanie-

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Nov 25 2013

ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation)

RAFAKO S.A.

ENERGOMONTAŻ-POŁUDNIE Katowice Sp. z o.o.

Sale of organised parts of business

The Bankruptcy Administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Company”) reported that on November 25th 2013 it sold, in separate transactions, organised parts of the Company's business, including:

- a total of 200 of the Company's employees,

- the Company's own property, plant and equipment necessary to operate the organised parts of its business,

- intangible assets related to the organised parts of business.

The organised parts of business were purchased by two companies: RAFAKO S.A. and ENERGOMONTAŻ-POŁUDNIE Katowice sp. z o.o., the latter no longer a member of the Company's Group.

Following the sale of the organised parts of business, a part of the Company's enterprise is transferred to the purchasing companies pursuant to Art. 231 of the Polish Labour Code. The organised parts of business will be transferred to the purchasing companies on November 29th 2013.

The total net selling price of the above-mentioned organised parts of the Company's business was PLN 1,522.7 thousand. The selling price was not lower than the original estimates.

The sale of the organised parts of business significantly reduced the Company's financial liabilities by materially lowering its employment costs.

The Company further reports that on November 25th 2013 it executed an agreement with ENERGOMONTAŻ-POŁUDNIE Katowice sp. z o.o. (Lessee) for the lease of:

a) a developed real property with a Laboratory and Research Centre, Training Centre and utility building entered into the Land and Mortgage Register under No. KA1K/00011081/3, and land properties entered into the Land and Mortgage Register under Nos. KA1K/00061873/7 and KA1K/00008989/4,

b) movables.

The term of the lease agreement is two years, with the monthly lease payments set at a net total of PLN 28 thousand.

The Company and RAFAKO S.A. are companies of the PBG Group related through the person of Mr Paweł Mortas, who is Chairman of the Company's Supervisory Board and President of the RAFAKO Management Board. The Company and RAFAKO S.A. are also related as trade partners. The Company is not related to ENERGOMONTAŻ-POŁUDNIE Katowice Sp. z o.o.

For more information, see EPD Current Report No. 48/2012: http://www.inwestor.energomontaz.pl/ar tykuly/2657,955/d,raporty_bezace_podstrona,zby cie-zorganizowanych-czesci-przedsiebiorstwa-emitenta.htm

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http://www.inwestor.energomontaz.pl/artykuly/2657,955/d,raporty_bezace_podstrona,zbycie-zorganizowanych-czesci-przedsiebiorstwa-emitenta.htm


Nov 28 2013

Consortium: ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation), ENERGOMONTAŻ-POŁUDNIE Katowice sp. z o.o and SICILSALDO s.p.a.

Consortium: Saipem, Techint, PBG

Termination of the contract for the performance of mechanical work on the LNG terminal in Świnoujście,

Further to Current Report No. 13/2012 of April 10th 2012 and Current Report No. 28/2013 of August 1st 2013 on the contract for the performance of mechanical work on the LNG terminal in Świnoujście, the Bankruptcy Administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Issuer”, the “Company”) reports than on November 28th 2013 the above-mentioned contract was terminated pursuant to Art. 98.1 of the Bankruptcy and Recovery Law.

Considering that the fundamental purpose of bankruptcy proceedings is to ensure prompt and efficient liquidation of the bankrupt company's assets so as to optimally satisfy its creditors, the Bankruptcy Administrator believes that further performance of the contract would adversely affect the bankruptcy estate by exposing it to additional costs.

Prior to the termination, the contract was performed by the Consortium comprising the Company, ENERGOMONTAŻ-POŁUDNIE Katowice sp. z o.o. and SICILSALDO s.p.a. for the Consortium of Saipem, Techint and PBG. As at November 28th 2013, the net value of the work remaining to be performed under the contract was estimated at approximately PLN 5.7m Following the termination of the contract, the Company's revenue and order book value decreased.

For more information, see EPD Current Report No. 50/2013: http://www.inwestor.energomontaz.pl/ar tykuly/2659,955/d,raporty_bezace_podstrona,ods tapienie-od-umowy-na-wykonanie-prac-mechaniczn ych-na-

terminalu-lng-w-swinoujsciu.htm

Dec 6 2013

An agreement concerning the Opole Project


RAFAKO S.A., Polimex-Mostostal S.A. and Mostostal Warszawa S.A.

with Alstom Power Sp. z o.o.

Agreement setting the new date on which the Principal is to issue the Notice to Proceed for the work to be performed under the Contract of February 15th 2012 for the construction of generating units Nos. 5 and 6 at Elektrownia Opole

Pursuant to the Agreement executed at the Principal's request, the Notice to Proceed will be issued to the General Contractor on January 31st 2014. In accordance with the Main Contract, the General Contractor has been ready to commence work on the project since December 15th 2013.

For more information, see RAFAKO's Current Report No. 57/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_57_%20NTP%20na%20Opole_31-01-2014.pdf

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Dec 16 2013


Contractor: ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation)

Termination of two trading agreements

Further to Current Report No. 11/2012 of March 29th 2012, the Bankruptcy Administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Issuer”, the “Company”, the “Contractor”) reports that on December 16th 2013, acting pursuant to Art. 98.1 of the Bankruptcy and Recovery Law, the Administrator informed RAFAKO S.A. (the “Principal”), f the Company terminated two trading agreements with the Principal.

One of the agreements was a contract of December 1st 2011 for the fabrication and delivery of steel structures for the purposes of RAFAKO's project to upgrade and overhaul the rotary air pre-heaters at PGE Elektrownia Bełchatów S.A.'s power generating units Nos. 7–12. The agreement of April 19th 2012 was a contract for the erection of flue gas heating pipelines for the Principal. Given its value, the agreement was not disclosed in a separate current report.

Considering that the fundamental purpose of bankruptcy proceedings is to ensure prompt and efficient liquidation of the bankrupt company's assets so as to optimally satisfy its creditors, the Bankruptcy Administrator believes that further performance of the contracts would adversely affect the bankruptcy estate by exposing it to additional costs.

The net value of the work remaining to be performed under the contracts as at the publication date of the report was estimated at approximately PLN 6.6m.

Following the termination of the contracts, the Company's revenue and order book value decreased.

For more details, see EPD Current Report No. 52/2013: http://www.inwestor.energomontaz.pl/ar tykuly/2661,955/d,raporty_bezace_podstrona,ods tapienie-od-dwoch-umow-handlowych-zawartych-z-rafako-s-a.htm

Jan 14 2014


Contractor: ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation)

Termination of the contract for delivery and assembly of steel structures for SCR reactors at Elektrownia Kozienice S.A.

Further to Current Report No. 24/2012 of May 23rd 2012, the Bankruptcy Administrator of ENERGOMONTAŻ-POŁUDNIE S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) (the “Issuer”, the “Company”, the “Contractor”) reports that on January 14th 2014, acting pursuant to Art. 98.1 of the Bankruptcy and Recovery Law, the Administrator informed RAFAKO S.A. (the “Principal”) that the Company terminated the contract with the Principal.

The above-mentioned contract provided for the delivery and assembly of steel structures for SCR reactors to be used in a catalytic flue gas denitration system for PO-650 boilers Nos. 4, 5, 6, 7 and 8 at Elektrownia Kozienice S.A.

Considering that the fundamental purpose of bankruptcy proceedings is to ensure prompt and efficient liquidation of the bankrupt company's assets so as to optimally satisfy its creditors, the Bankruptcy Administrator believes that further performance of the contract would adversely affect the bankruptcy estate by exposing it to additional costs.

The net value of the work remaining to be performed under the contract as at the publication date of the report was estimated at approximately PLN 9.5m.

Following the termination of the contract, the Company's revenue decreased.

For more information, see EPD Current Report No. 2/2014: http://www.inwestor.energomontaz.pl/ar tykuly/2676,955/d,raporty_bezace_podstrona,ods tapienie-od-kontraktu-na-dostawe-i-montaz -konstrukcji-

stalowych-reaktorow-scr-realizowa nego-w-elektrowni-kozienice-s-a.htm

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http://www.inwestor.energomontaz.pl/artykuly/2676,955/d,raporty_bezace_podstrona,odstapienie-od-kontraktu-na-dostawe-i-montaz-konstrukcji-stalowych-reaktorow-scr-realizowanego-w-elektrowni-kozienice-s-a.htm



http://www.inwestor.energomontaz.pl/artykuly/2661,955/d,raporty_bezace_podstrona,odstapienie-od-dwoch-umow-handlowych-zawartych-z-rafako-s-a.htm

http://www.inwestor.energomontaz.pl/artykuly/2661,955/d,raporty_bezace_podstrona,odstapienie-od-dwoch-umow-handlowych-zawartych-z-rafako-s-a.htm


Jan 17 2014

Termination of significant agreement by RAFAKO Disclosure of the business terms of a significant contract previously classified as confidential by RAFAKO.

RAFAKO S.A.

MOSTOSTAL WARSZAWA S.A.

RAFAKO terminated the Additional Agreement, which resulted in the expiry of the Additional Agreement. The Additional Agreement was terminated by RAFAKO after RAFAKO and TAURON Wytwarzanie S.A. (the “Principal”) had failed to sign a contract for the execution of the Jaworzno Project by the date of this report.

Pursuant to the Additional Agreement:

a) RAFAKO agreed to pay Mostostal Warszawa PLN 130m (plus VAT) for reducing Mostostal Warszawa's share in the Jaworzno Project to 0.01%. The amount was to be paid in three instalments depending on the execution date of the Project Jaworzno contract and as advance payments made by the Principal towards the contract performance.

b) RAFAKO agreed to bear sole liability towards the Principal for performing the Jaworzno Project contract and to indemnify Mostostal Warszawa against any liability towards the Principal for performing the Jaworzno Project contract;

c) RAFAKO agreed to act in good faith to offer and negotiate subcontractor agreements for the Jaworzno Project with Mostostal Warszawa and its chosen companies, for a total amount of PLN 360m; and

d) RAFAKO gave companies designated by Mostostal Warszawa the right of last offer (each company designated by Mostostal Warszawa could either match the offer for subcontractor work chosen by RAFAKO in a tender procedure or offer a lower price) with respect to a list of works under the Jaworzno Project, for a total amount of PLN 140m.

For more information see: RAFAKO's Current Report No. 4/2014: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_4_warunki%20umowy%20dodatkowej%20z

%20MWA_odtajnienie(1).pdf

The materiality criteria are set forth in the following regulations:Legal basis:Par. 5.1.3 of the Minister of Finance’s Regulation on current and periodic information to be published by issuers of securities, dated October 19th 2005.Art. 56.5 of the Public Offering Act – information updateLegal basis:The Minister of Finance’s Regulation on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated February 19th 2009.

III. BUSINESS COMBINATIONS, INCORPORATION OF NEW SUBSIDIARIES

95

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http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_4_warunki%20umowy%20dodatkowej%20z%20MWA_odtajnienie(1).pdf


Table 28: Changes in organisational links in the reporting period and subsequent to the reporting date

Date Parties Transaction type Description

Jan 8 2013

RAFAKO S.A.


MULTAROS Trading Company Limited

ADAPTORINVEST Ltd.

Clearance for deletion of pledge over shares

PBG received a notification of January 7th 2013 from Multaros Trading Company Limited ("Multaros"), in which Multaros notified the Company that it received from Adaptorinvest Limited the original copy of consent to delete the pledge over RAFAKO S.A. shares (the "Pledge") and that Adapotorinvest Limited will not enforce the Pledge as long as Multaros holds the original copy of the document.

For more information, see PBG Current Report No. 1/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/1-2013-informacja-dotyczaca-zastawu-na-

akcjach-rafako.html

09.01.2013

Pledge over RAFAKO shares

Multaros Trading Company Limited

RAFAKO S.A.

Deletion of pledge over RAFAKO shares

Further to Current Report No. 101/2012 of October 5th 2012, corrected by Current Report No. 112/2012 of November 16th 2012, the Management Board of PBG S.A. (in company voluntary arrangement) reports that on January 8th 2013 the Company received a notification of January 7th 2013 from Multaros Trading Company Limited ("Multaros"), in which Multaros notified the Company that it received from Adaptorinvest Limited the original copy of consent to delete the pledge over RAFAKO shares (the "Pledge") and that Adapotorinvest Limited will not enforce the Pledge as long as Multaros holds the original copy of the document.

For more information, see PBG Current Report No. 03/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/3-2013-przejecie-pelnej-kontroli-nad-spolka-

strateg-capital-sp-o-o.html

Feb 7 2013


STRATEG CAPITAL Sp. z o.o.

Acquisition of shares

PBG and Mr Mirosław Borowicz executed an agreement on purchase of 50 shares in STRATEG CAPITAL Sp. z o.o. (in company voluntary arrangement) for a total price of PLN 50,000.

Before the transaction, PBG held 200 shares in Strateg Capital, representing 80% of its share capital. Upon payment for the remaining 50 shares, PBG will hold 250 shares in STRATEG CAPITAL, i.e. the entire share capital of the company.

For more information, see PBG Current Report No. 3/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/3-2013-przejecie-pelnej-kontroli-nad-spolka-

strateg-capital-sp-o-o.html

Feb 8 2013

RAFAKO S.A.

PBG S.A. (in company

Deletion of pledge over shares

The PBG Management Board was notified by the Administrator of subsidiary MULTAROS TRADING COMPANY Limited that the pledge over RAFAKO shares held by MULTAROS, which had existed for the benefit of Adaptorinvest Ltd., was deleted.

96

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http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/1-2013-informacja-dotyczaca-zastawu-na-akcjach-rafako.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/1-2013-informacja-dotyczaca-zastawu-na-akcjach-rafako.html


voluntary arrangement)

MULTAROS Trading Company Limited

ADAPTORINVEST Ltd.

The relevant entry was made in the Pledge Register on February 7th 2013 on the basis of a request for deletion of the pledge, submitted on December 31st 2012, with effect from December 21st 2012, i.e. the day on which Adaptorinvest Ltd. made a statement confirming its consent to the cancellation of the pledge.

For more information, see PBG Current Report No. 3/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/4-2013-wykreslenie-zastawu-na-akcjach-

rafako-s-a-nalezacych-do-spolki-zaleznej.html

Apr 22 2013

PBG S.A. w upadłości

układowej (in company voluntary

arrangement)

Disposal of shares in

Grupa DUON S.A.

The Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) ("PBG") reports that a transaction involving the sale of shares in Grupa DUON S.A. ("DUON") was settled on April 22nd 2013. In block transactions executed on the trading day of April 17th 2013, PBG sold its entire holding of 15,718,841 shares in DUON, representing 15.34% of votes and shares in that company.

For more information, see PBG Current Report No. 12/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/12-2013-zawarcie-istotnego-porozumienia-przez-pbg-z-wierzycielem-banco-espirito-santo-de-investimento-s-a-oddzial-w-polsce-oraz-sprzedaz-

akcji-w-spolce-grupa-duon-s-a.html

Sep 6 2013

PBG S.A. w upadłości układowej (in company voluntary arrangement)

INFRA S.A.

Natural person

Annex to the agreement on sale of 4,997,500 shares in INFRA S.A.

The Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) reports that on September 6th 2013 it signed an annex to the agreement with a natural person on sale of 4,997,500 shares in INFRA S.A., dated May 31st 2010.

The Annex changes the terms of the sale with respect to the price as a consequence of the fact that it is impossible to lift the surety provided by INFRA with respect to PBG debt.

After an analysis of the possible options of closing the transaction, including a buy-back of INFRA shares by PBG, and taking into consideration the current financial condition of INFRA, the PBG Management Board negotiated the sale price of all 4,997,500 shares at PLN 1.00. Concurrently, the PBG Management Board reports that the transaction will have no effect on the financial performance of PBG. The impairment loss on receivables under the sale of INFRA shares was recognised and disclosed in the financial statements for 2012.

Furthermore, the annex provides for the possibility of reverse transfer of ownership of the INFRA shares to PBG if INFRA fails to pay the contractual penalty of PLN 8,450,000, which will be imposed on it if INFRA liabilities towards PBG are not paid when due and INFRA shareholders make a decision to pay dividend.

For more information, see PBG Current Report No. 26/2013 http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/26-2013-zawarcie-aneksu-do-umowy-

sprzedazy-akcji-infra-sa.html

Nov 30 2013

Jan Rędziniak, conducting business activity under the name

Filing a petition for the Company's bankruptcy

Mr Jan Rędziniak, a subcontractor conducting business activity under the name JANAR Jan Rędziniak ("Janar” or "the Creditor”), filed a Bankruptcy Petition with the District Court of Gliwice, 12th Commercial Insolvency and Arrangement Division, wherein Mr Rędziniak petitioned for the Company's bankruptcy by liquidation.

97

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http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/26-2013-zawarcie-aneksu-do-umowy-sprzedazy-akcji-infra-sa.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/12-2013-zawarcie-istotnego-porozumienia-przez-pbg-z-wierzycielem-banco-espirito-santo-de-investimento-s-a-oddzial-w-polsce-oraz-sprzedaz-akcji-w-spolce-grupa-duon-s-a.html



http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/4-2013-wykreslenie-zastawu-na-akcjach-rafako-s-a-nalezacych-do-spolki-zaleznej.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/4-2013-wykreslenie-zastawu-na-akcjach-rafako-s-a-nalezacych-do-spolki-zaleznej.html


JANAR Jan Rędziniak

by a subcontractor

According to the information obtained by the Company from the District Court of Gliwice, no further action was taken in respect of the petition filed by Janar due to the fact that the court requested the Creditor to make a prepayment on the costs of court proceedings. As at the date of publication of this Report, the Creditor has not made any such prepayment.

Janar was the Company’s subcontractor on the project involving the replacement of an electrostatic precipitator at the TE Tuzla power plant. In the Company's view, at the time the petition was filed by Janar, the Janar's claim against the Company under the subcontractor agreement related to that project was fully satisfied. Furthermore, the amounts specified by Janar in the petition are incorrect and the Janar's claim is unjustified. The claim was satisfied through an offset against the penalty imposed on the subcontractor for delayed performance of the agreement.

The Company reports that no court proceedings have been or are pending with respect to the claim.

In view of the foregoing, the Company reports that in its opinion the filing of the petition by the Creditor with the insolvency court in Gliwice is unjustified and is only part of the efforts undertaken by Janar in connection with the divergence of positions regarding the existence of the claim.

For more information, see RAFAKO Current Report No. 55/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_55_%20wniosek%20Janar%20o

%20ogloszenie%20upadlosci.pdf

Dec 12 2013

PBG S.A. w upadłości układowej (in company voluntary arrangement)

Strateg Capital Sp. z o.o.

District Court's letter notifying the status of the insolvency proceedings with respect to STRATEG CAPITAL Sp. z o.o.

Further to Current Report No. 21/2013 of July 10th 2013, on December 11th 2013, the Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) received a notification from the Company's subsidiary confirming the status of the insolvency proceedings pending with respect to that subsidiary. In an official letter, the District Court in Wałbrzych confirmed that Strateg Capital Sp. z o.o. was in insolvency proceedings with the option to enter into an arrangement, and that the former bankruptcy administrator was now acting as executive trustee.

For more information, see PBG Current Report No. 35/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/35-2013-informacja-z-sadu-rejonowego-o-

sposobie-prowadzenia-postepowania-upadlosciowego-spolki-strateg-capital-sp-z-o-o.html

Jan 9 2014

RAFAKO S.A.

Jan Rędziniak, conducting business activity under the name JANAR Jan Rędziniak

Execution of agreement with subcontractor concerning mutual claims and withdrawal of RAFAKO’s bankruptcy petition

The Management Board of RAFAKO S.A. of Racibórz reports that on January 9th 2014, RAFAKO S.A. and Mr Jan Rędziniak, conducting business activity under the name JANAR Jan Rędziniak, executed an agreement setting the amounts of mutual claims and the terms of further cooperation with respect to projects where Janar acts as the Company’s subcontractor.

Today, Janar filed with the District Court of Gliwice, 12th Commercial Insolvency and Arrangement Division, a letter in which it withdrew its petitioned for RAFAKO's bankruptcy, as reported by RAFAKO in Current Report No. 55/2013, and requested to discontinue RAFAKO’s bankruptcy proceedings.

For more information see: RAFAKO Current Report No. 1/2014: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_1_porozumienie%20z%20Janar.pdf

98

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http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/35-2013-informacja-z-sadu-rejonowego-o-sposobie-prowadzenia-postepowania-upadlosciowego-spolki-strateg-capital-sp-z-o-o.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/35-2013-informacja-z-sadu-rejonowego-o-sposobie-prowadzenia-postepowania-upadlosciowego-spolki-strateg-capital-sp-z-o-o.html

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_55_%20wniosek%20Janar%20o%20ogloszenie%20upadlosci.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_55_%20wniosek%20Janar%20o%20ogloszenie%20upadlosci.pdf


Jan 15 2013

District Court of Gliwice, 12th Commercial Insolvency and Arrangement Division

Discontinuation of RAFAKO’s bankruptcy proceedings

On January 15th 2014, the District Court of Gliwice, 12th Commercial Insolvency and Arrangement Division, issued a decision to discontinue RAFAKO’s bankruptcy proceedings following withdrawal of the bankruptcy petition filed by Mr Jan Rędziniak, the subcontractor conducting business activity under the name JANAR Jan Rędziniak. The subcontractor waived his right to appeal against the Court’s decision. The Court's decision will become final upon the lapse of seven days from the date of its delivery to the parties to the proceedings.

For more information, see RAFAKO Current Report No. 2/2014: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2_umorzenie%20postepowania%20ws

%20upadlosci.pdf

IV. EVENTS OF DEFAULT ON CREDIT FACILITIES, GUARANTEES AND BONDS

Table 29: Events of default

Agreement/call/

termination/declaration date

Parties Agreement/call/termination/declaration subject matter Key terms

Feb 8 2013

Annex to credit facility agreement

RAFAKO

PKO BP S.A.

Annex to the credit facility agreement under which the Bank had granted to RAFAKO a PLN 300,000,000 overdraft facility for the financing of the company’s day-to-day operations.

The annex extends the term of the agreement until March 7th 2013.

The facility bears interest at 1M WIBOR + bank margin. The annex also provides for the customary bank fees and commissions. Interest is payable on a monthly basis. Repayment of the facility is secured by:a) blank promissory note with promissory note declarationb) assignment of claims under the RAFAKO's trading agreementsc) set-off clause whereby the Bank's claims may be deducted from RAFAKO's accounts held with the bankd) RAFAKO's representation on submission to enforcement

The annex does not essentially alter the remaining terms and conditions set out in the credit facility agreement.

For more information, see RAFAKO Current Report No. 3/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2013_3.pdf

Feb 13 2013

Extension of bank guarantee

RAFAKO

PKO BP S.A.

On February 13th 2013, an annex was signed to a bank guarantee agreement between RAFAKO and PKO BP, as reported in detail in Current Report No. RB nr 21/201. Also on February 13th 2013, RAFAKO received from PKO BP an annex to the advance payment guarantee, for PLN 79,310 thousand, issued for the benefit of PGE Górnictwo i Energetyka Konwencjonalna S.A. (a legal successor of the guarantee's original beneficiary, i.e. PGE Elektrownia Opole S.A.).

The annex extended the term of the guarantee until May 15th 2013. The Annex did not essentially alter any other terms of conditions of the bank guarantee agreement.

The guarantee was issued, as requested by the Issuer, in relation to an EPC contract for construction of Units No. 5 and 6 at PGE, executed between PGE and the Consortium consisting of: RAFAKO S.A. (Consortium Leader), Polimex-Mostostal S.A. and Mostostal Warszawa S.A.

For more information, see RAFAKO Current Report No. 5/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2013_5.pdf

99

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2013_5.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2013_3.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2_umorzenie%20postepowania%20ws%20upadlosci.pdf

http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_2_umorzenie%20postepowania%20ws%20upadlosci.pdf


Mar 7 2013

Notice of initiation of enforcement proceedings

Creditor:

Banco Espirito Santo de Investimento S.A. Spółka Akcyjna Poland Branch

Bartosz Guzik, Court Enforcement Officer at the District Court for Poznań-Grunwald and Jeżyce in Poznań, acting at the request of the Company's creditor, Banco Espirito Santo de Investimento S.A. Spółka Akcyjna Branch in Poland (the “Creditor”), gave the following notices:

1. Notice of enforcement proceedings for payment of a principal amount of PLN 2,443,650.31 against real estate entered in the Land and Mortgage Register under No. KW PO1P/00136241/7 (joint enforcement proceedings instigated at the request of Polski Bank Przedsiębiorczości S.A.), PO1P/00275496/5, PO1P/00091909/0, and PO1P/00218712/9;




5. Notice of enforcement proceedings for payment of a principal amount of PLN 1,636,599.68 against real estate entered in the Land and Mortgage Register under No. KW PO1P/00136241/7 (joint enforcement proceedings instigated at the request of Polski Bank Przedsiębiorczości S.A.), PO1P/00275496/5, PO1P/00091909/0, and PO1P/00218712/9.

The total carrying amount of the real estate subject to the enforcement proceedings is PLN 77,766,621.98. The claimed principal amounts being enforced by the court enforcement officer total PLN 13,366,117.97.

For more information, see PBG Current Report No. 6/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/6-2013-zawiadomienie-o-wszczeciu-postepowan-egzekucyjnych.html

100

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/6-2013-zawiadomienie-o-wszczeciu-postepowan-egzekucyjnych.html

http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/6-2013-zawiadomienie-o-wszczeciu-postepowan-egzekucyjnych.html


Mar 7 2013


RAFAKO

PKO BP S.A.


The annex extends the term of the agreement until June 30th 2013.

The facility bears interest at 1M WIBOR + bank margin. The annex also provides for the customary bank fees and commissions. Interest is payable on a monthly basis. Repayment of the facility is secured by:a) blank promissory note with promissory note declarationb) assignment of claims under the Issuer's trading agreementsc) set-off clause whereby the Bank's claims may be deducted from the Issuer's accounts held with the bankd) Issuer's representation on submission to enforcement


For more information, see RAFAKO Current Report No. 9/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_9_aneks%203%20do%20umowy%20z%20PKO.pdf

Apr 3 2013

Execution of a material agreement concerning voluntary repayment of due and payable debt outside arrangement, secured with tacit mortgages, and suspension of proceedings by the Bank

Creditor:

Bank DnB NORD Polska S.A. of Warsaw

The Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) (“PBG”) reports that on April 2nd 2013 it was notified of the execution on March 27th 2013 of an Agreement with DnB NORD Polska Spółka Akcyjna of Warsaw on voluntary repayment of due and payable debt, outside the arrangement, secured with five tacit mortgages. The mortgages were established over the Company’s real estate, including PBG’s head office. The Agreement concerns PBG’s debt (both own debt and joint and several liabilities) under Global Limit Agreement No. 07/2005 of March 8th 2005, as amended. Execution of the agreement was reported by the Company in Current Report No. 19/2005 of March 18th 2005.

The Agreement became effective as of the date of its approval by the court supervisor, that is March 29th 2013. The Company did not report on the enforcement proceedings as the mortgaged real estate did not represent significant assets.

Key provisions of the Agreement:

a. During the term of the Agreement, the Bank will not conduct enforcement proceedings against the Company’s assets (they will be either suspended or discontinued, at Bank's discretion), will not file a motion for changing the insolvency procedure and will accede to PBG’s debt restructuring agreement provided that such agreement is concluded by at least 50% of the banks being the Company’s creditors and that the Bank’s credit committee approves such accession to the agreement by the Bank;

b. The secured debt will be repaid in instalments, in accordance with a schedule agreed upon by the parties, by December 31st 2014;

c. At the Company’s request, the Bank will release security by reducing the amounts of mortgages entered in relevant registers, on a quarterly basis;

d. If the mortgaged properties are sold, the proceeds will be applied towards repayment of PBG’s debt to the Bank, up to the value of a given mortgage.

For more information, see PBG Current Report No. 11/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/11-2013-zawarcie-istotnego-porozumienia-w-sprawie-dobrowolnej-splaty-wymagalnego-zadluzenia-pozaukladowego-zabezpieczonego-hipotekami-przymusowymi-oraz-dotyczacego-wstrzymania-przez-bank-

postepowania.html

101

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Apr 22 2013

Material agreement concluded by PBG with creditor, Banco Espirito Santo de Investimento SA Oddział w Polsce (Polish Branch)

Creditor:

Banco Espirito Santo de Investimento SA Poland Branch (Polish Branch) of Warsaw

TRIGON Dom Maklerski S.A. of Kraków

On March 27th 2013, an agreement on release from seizure in enforcement proceedings was executed by PBG with Banco Espirito Santo de Investimento SA Poland Branch of Warsaw ("the Bank"), and TRIGON Dom Maklerski S.A. of Kraków ("TRIGON"). In the agreement the parties confirmed that PBG had liabilities towards the Bank under guarantees executed to secure the Bank's claims against PBG's subsidiaries and liabilities under agreements to issue bank guarantees ("the Liabilities"), of which PLN 14,345,901.96 represents outstanding liabilities ("the Outstanding Liabilities"). PBG had failed to pay the Outstanding Liabilities, as a result of which the Bank initiated enforcement proceedings ("the Enforcement Proceedings") against PBG's assets.

Under the Agreement, the Parties agreed that:

1) PBG would transfer to the Bank – pursuant to Art. 4.4 of the Agreement and Art. 102 of the Banking Law of August 29th 1997 – the ownership of the Deposit as security for repayment of the Outstanding Liabilities.

2) Until:

a. the date when the decision to approve the Arrangement becomes final; or

b. the date when the decision to discontinue the Insolvency Proceedings becomes final; or

c. the date when the decision to change the status of the Insolvency Proceedings to liquidation of the Debtor's assets becomes final

The Bank is not entitled to apply the Deposit towards repayment of the Outstanding Liabilities, subject to mandatory rules of law and subject to rulings and agreements binding on the Bank.

The Agreement, signed as part of the Divestment Programme pursued by the Company, enabled the sale of DUON shares owned by PBG, based on the Bank’s consent and after an application to discontinue the Enforcement Proceedings to the extent pertaining to the seizure of the Shares was filed by the Bank. Furthermore, the Bank agreed that during the effective term of the Agreement it will take any steps necessary to ensure that relevant applications to discontinue Enforcement Proceedings are granted, that it will not withdraw said applications, and that it will not file an application to change the status of the Enforcement Proceeding to liquidation of the Debtor's assets or an application to revoke the Debtor's self-administration.

For more information, see PBG Current Report No. 12/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/12-2013-zawarcie-istotnego-porozumienia-przez-pbg-z-wierzycielem-banco-espirito-santo-de-investimento-

s-a-oddzial-w-polsce-oraz-sprzedaz-akcji-w-spolce-grupa-duon-s-a.html

102





Jun 28 2013


RAFAKO

PKO BP S.A.


The annex extends the term of the credit facility agreement until September 30th 2013.

The facility bears interest at 1M WIBOR + bank margin. The annex also provides for the customary bank fees and commissions. Interest is payable on a monthly basis.

The Company agreed to establish in favour of the Bank a registered pledge over a set of movables or rights constituting the entire economic entity of the Company's enterprise, and to create a joint mortgage for an amount of up to PLN 300,000,000 over real property owned or held in perpetual usufruct by the Company, excluding the Company's residential property. The Bank is not a related party of the Company.

The Company will provide information on the carrying amounts of the encumbered assets in reports concerning the establishment of the relevant security interests.

Moreover, the additional collateral provided to secure the repayment of the facility includes:

a) blank promissory note with promissory note declarationb) assignment of claims under the Issuer's trading agreementsc) set-off clause whereby the Bank's claims may be deducted from the Issuer's accounts held with the bankd) RAFAKO's representation on submission to enforcement


For more information, see RAFAKO Current Report No. 28/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_28_aneks%204%20do%20umowy%20z%20PKO.pdf

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Jul 27 2013

Execution of a material agreement on voluntary repayment of debt secured by a contractual mortgage and remaining outside the arrangement scheme

Creditor:

FM Bank PBP S.A.

The Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) ("PBG", "the Company" or "the Debtor") reports that on July 26th 2013 an agreement ("the Agreement") was signed with FM Bank PBP S.A. ("the Bank"), providing for repayment by the Company of the portion of debt arising under Credit Agreement KT 5/2011 of June 29th 2011 ("the Credit Agreement") which is equal to the value of the Company's freehold property ("the Property") on which a contractual mortgage has been established to secure the Bank's claims under the Credit Agreement, that is the portion of the Bank's claims under the Credit Agreement amounting to PLN 6,005,400.

The debt will be repaid in accordance with the repayment schedule provided for in the Agreement, which sets December 31st 2014 as the final repayment date of the debt, amounting to PLN 6,005,400 in aggregate. The parties agreed that the execution of the Agreement does not defer the repayment of the portion of debt covered by the Agreement or the remaining debt under the Credit Agreement, both of which remain due and payable in full amounts throughout the effective term of the Agreement. The Bank also agreed to refrain, throughout the duration of the Agreement and on the terms specified therein, from seeking the repayment of any portion (instalment) of the debt covered by the Agreement or any interest that may accrue thereon, on any terms other than those specified in the repayment schedule.

The Agreement stipulates that in the event of disposal of the Property the Debtor will agree to apply all proceeds from the disposal towards repayment of the outstanding debt covered by the Agreement.

Furthermore, the Bank agreed:

1) not to proceed against the Debtor to enforce its security under the mortgage created on the Property,

2) not to file an application to change the status of the ongoing Insolvency Proceedings to bankruptcy by liquidation of the Debtor's assets or an application to revoke the Debtor's self-administration,

3) to consider in good faith becoming party to the Debtor's debt restructuring agreement, to be concluded with the Debtor's other creditors if at least 50% of the creditor banks agree to become parties to the agreement and the Bank's governing bodies approve such a decision.

For more information, see PBG Current Report No. 23/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/23-2013-zawarcie-istotnego-porozumienia-w-sprawie-dobrowolnej-splaty-wymagalnego-zadluzenia-

pozaukladowego-zabezpieczonego-hipoteka-umowna.html

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Sep 4 2013

Establishment of joint mortgage

RAFAKO S.A.

PKO BP S.A.

Establishment of a joint mortgage of up to PLN 300,000,000.00 to secure repayment of amounts due to PKO BP S.A. under a credit facility agreement

The mortgage was established over real property owned or held in perpetual usufruct by RAFAKO, excluding residential property. It was established over the Company’s ownership or perpetual usufruct rights to real property entered in the Land and Mortgage Register (KW) under the following numbers: Kw Nr GL1R/00011491/5, GL1R/00011639/5, GL1R/00022092/8, GL1R/00025241/9, GL1R/00028691/9, GL1R/00035563/5, GL1R/00043505/0, GL1R/00053896/0, GL1R/00054907/8 i KA1M/00048865/3.

The mortgage will be created upon its entry into the Land and Mortgage Register maintained for the real property listed above. The relevant requests were filed on September 4th 2013.

Based on RAFAKO’s accounting records, the total carrying amount of the mortgaged assets is PLN 92,943,565, with the carrying amount of the property and perpetual usufruct rights at PLN 9,268,092, the carrying amount of buildings at PLN 71,238,421, and the carrying amount of structures at PLN 12,437,052.

No links exist between RAFAKO or members of its management and the Bank or members of its management.

For more information, see RAFAKO Current Report No. 34/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_34_Hipoteka_4_9_2013%20-%20wer_2.pdf

Sep 30 2013


RAFAKO S.A.

PKO BP S.A.

Establishment of a joint mortgage of up to PLN 300,000,000.00 to secure repayment of amounts due to PKO BP S.A. under a credit facility agreement

The annex extends the term of the credit facility agreement until December 20th 2013.


The company agreed to deliver to the Bank its applications for a pledge to be registered over the company’s business by November 15th 2013. Pursuant to the credit facility agreement, if the company fails to perform this obligation, the Bank may terminate the facility or request that additional security be established.


For more information, see RAFAKO Current Report No. 37/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_37_%20aneks%205%20do%20umowy%20z%20PKO.pdf

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Oct 25 2013

Execution of a trilateral Agreement between PBG, ING and PGNiG.

Creditor:

ING Bank Slaski S.A.

Further to Current Report No. 65/2009 of August 21st 2009, the Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) ("PBG", "the Company" or "the Party") reports that on October 25th 2013 the Company entered into a trilateral agreement with PBG, ING Bank Śląski S.A. ("the Bank", "ING" or "the Party") and Polskie Górnictwo Naftowe i Gazownictwo S.A. ("PGNiG", "the Employer" or "the Party") ("the Agreement"), which amends the terms of security of the Bank's claims under the framework agreement of September 6th 2007, as amended, in the form of a conditional assignment of receivables ("Assignment of Receivables") under the EPC contract for the investment project "Construction of Surface Infrastructure for the Wierzchowice Underground Gas Storage Facility, phase: 3.5bn Nm3, sub-phase: 1.2bn Nm3" of November 19th 2008" ("the Contract").

The Agreement stipulates that the Bank will be entitled to receive from the Employer, on behalf of PBG, or directly from PBG the following amounts due to the Bank under the Assignment of Receivables:

- PLN 8,322,947 (following Technical Acceptance in accordance with the Contract); and

- PLN 6,697,101 (following Final Acceptance in accordance with the Contract)

i.e. a total of PLN 15,020,048 ("Guaranteed Assignment Amount"), instead of PBG's all receivables under the Contract, as was the case previously.

If the Employer fails to pay the entire Guaranteed Assignment Amount by February 28th 2014, the Company will be obliged to pay the remaining part of the Guaranteed Assignment Amount by March 31st 2014. Following the receipt of the Guaranteed Assignment Amount, the Bank will return the remaining receivables under the Contract to PBG.

This satisfaction of the Bank's claims against PBG is performed outside of the arrangement.

In the executed Agreement, PBG and ING confirmed the total amount of the Bank's claim against the Company, which stood at PLN 181,477,407.91 as at the Agreement date.

The performance of the Agreement will enable the Company to receive the part of remuneration due to it under the Contract.

For more information, see PBG Current Report No. 32/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/32-2013-zawarcie-trojstronnego-porozumienia-pomiedzy-pbg-ing-oraz-pgnig.html

Nov 7 2013

Conclusion of arbitration and court disputes

RAFAKO S.A.

ALSTOM Power Systems GmbH, ALSTOM Boiler Deutschland GmbH and ALSTOM Power Sp. z o.o.

Settlement of disputes over the Karlsruhe, Westfalen and Bełchatów projects jointly executed by RAFAKO and the Alstom Group.

The Management Board of RAFAKO S.A. reports that once the settlement became effective, on November 7th 2013 the proceedings before the state court in Stuttgart, Federal Republic of Germany, concerning the Westfalen project were discontinued as Alstom had withdrawn its claim.

The Management Board of RAFAKO S.A. also reports that on November 6th and 7th 2013, RAFAKO and Alstom withdrew their respective claims and counter-claims filed in the arbitration proceedings concerning the Karlsruhe project and the Bełchatów project. RAFAKO is currently awaiting formal confirmation of the discontinuation of the arbitration proceedings from the respective arbitration courts.

For more information, see RAFAKO Current Report No. 52/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_52_%20zakonczenie%20sporow%20z%20Alstom.pdf

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Nov 21 2013

Execution of material agreement for release of seizures in enforcement proceedings

Creditor:

Banco Espirito Santo de Investimento SA Poland Branch

Further to Current Report No. 109/2012 of November 8th 2012, Current Report No. 6/2013 of March 7th 2012, and Current Report No. 12/2013 of April 22nd 2013, the Management Board of PBG S.A. w upadłości układowej (in company voluntary arrangement) (“PBG” or “the Company”) reports that on November 20th 2013 an agreement was executed with Banco Espirito Santo de Investimento SA Oddział w Polsce (Polish Branch) (“the Bank”), (“the Agreement”) on the release of seizures in enforcement proceedings.

The Agreement between the Bank and the Company (jointly “the Parties”) was executed in connection with the enforcement proceedings instituted at the request of the Bank against the assets of PBG (jointly “the Assets”) (“the Enforcement Proceedings”). In the Agreement, the Parties confirmed the amount of PBG’s liabilities towards the Bank, with PLN 25,632,531.47 representing the principal amount (“Due and Payable Amounts”).

Under the Agreement, the Parties agreed that:

1) Within seven days from the execution of the Agreement, the Bank will file applications for suspension of the Enforcement Proceedings;

2) PBG and the Bank will cooperate to dispose of the Assets in such a way that PBG will be able to sell the Assets subject to the Bank’s approval; On the day of the Bank’s approval for the sale of an Asset specified by the Company, the Bank will file applications for discontinuation of the Enforcement Proceedings towards that Asset;

3) PBG will place a deposit for the benefit of the Bank (“the Security Deposit”) in the amount of 35% of the proceeds from each disposal of an Asset as agreed upon with the Bank, until the total amount of the Security Deposit reaches the amount specified in the Agreement (“the Maximum Security Deposit Amount”); In accordance with the Agreement, the Maximum Security Deposit Amount will be equal to (i) 65% of the Due and Payable Amounts, or (ii) 15% of the Due and Payable Amounts, or (iii) another amount resulting from the Company’s debt restructuring agreement as may be executed between the Company and its Creditors; As at the date of the Agreement, the Maximum Security Deposit Amount is calculated at 65% of the Due and Payable Amounts;

4) Once PBG has provided a Security Deposit equal to the Maximum Security Deposit Amount, the Bank will file applications for discontinuation of the Enforcement Proceedings as a whole;

5) The Bank will be entitled to satisfy its claims from the Security Deposit provided by the Company only if (i) a decision on the Arrangement between the Company and its creditors becomes final, or (ii) a decision on discontinuation of the insolvency proceedings against the Company (the “Insolvency Proceedings”), becomes final, or (iii) a decision to convert the Insolvency Proceedings from voluntary arrangement to proceedings involving liquidation of the Company's assets becomes final;

6) The Bank will be entitled to recommence the Enforcement Proceedings if the Company fails to provide the Security Deposit in the Maximum Security Deposit Amount by the 30th day before the lapse of 12 months after suspension of the last Enforcement Proceedings;

7) The amount of PLN 5,069,504.04, provided as a security deposit for the benefit of the Bank under the Agreement on Release of Duon Shares from Seizure, on which PBG reported in Current Report No. 12/2013 of April 22nd 2013 and which expired upon the execution of the Agreement, will be applied towards the Security Deposit;

8) If the obligations imposed on the Company under the Agreement are fulfilled, the Bank will not file the application for conversion of the Insolvency Proceedings into proceedings for liquidation of PBG assets or revocation of PBG's self-administration.

For more information, see PBG Current Report No. 34/2013: http://www.pbg-sa.pl/relacje-inwestorskie/raporty-biezace/34-2013-zawarcie-istotnego-porozumienia-przez-pbg-z-wierzycielem-banco-espirito-santo-de-investimento-

s-a-oddzial-w-polsce.html

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Dec 20 2013


RAFAKO S.A.

PKO BP S.A.


The annex extends the term of the credit facility agreement until March 31st 2014.


RAFAKO agreed to deliver to the Bank its applications for a pledge to be registered over the company’s business by February 28th 2014. Pursuant to the credit facility agreement, if the company fails to perform this obligation, the Bank may terminate the facility or request that additional security be established.

The Annex does not essentially alter the remaining terms and conditions set out in the credit facility agreement.

For more information, see RAFAKO Current Report No. 60/2013: http://www.rafako.com.pl/pub/File/raporty_biezace/2013/RB_60_%20aneks%207%20do%20umowy%20z%20PKO.pdf

V. RELATED-PARTY TRANSACTIONS

In 2013, the Parent and its subsidiaries executed transactions with related parties on an arm’s-length basis, and the nature and terms of those transactions were determined by day-to-day operations. Transactions between the Parent and its subsidiaries are disclosed in Note. 5.29 to the 2013 separate financial statements of PBG S.A. w upadłości układowej (in company voluntary arrangement), while transactions between the PBG Group companies and other related parties are presented in Note 35 to the 2013 consolidated financial statements of the PBG Group.

VI. CONTRACTED BANK BORROWINGS, LOAN AGREEMENTS

For information on contracted bank borrowings and loans, see the consolidated financial statements of the PBG Group.

VII. LOANS ADVANCED

For information on advanced loans, see the consolidated financial statements of the PBG Group.

VIII. NON-RECURRING FACTORS AND EVENTS

In June 2012, three PBG Group companies, including PBG S.A., HYDROBUDOWA POLSKA S.A. and Aprivia S.A., filed petitions for bankruptcy with arrangement option. The decision to file the petitions was prompted by difficult liquidity positions of the companies resulting from the execution of capital-intensive road construction projects, only partial settlement of the contract for the

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construction of the National Stadium in Warsaw, and the protracting negotiations with the financing banks. Two weeks later, on August 10th 2012, other eight subsidiaries (PBG Avatia Sp. z o.o., Dromost Sp. z o.o., Przedsiębiorstwo Robót Inżynieryjno-Drogowych S.A., Metorex Sp. z o.o., KWG Sp. z o.o., PBG Technologia Sp. z o.o., PBG Energia Sp. z o.o., Strateg Capital Sp. z o.o. and Energomontaż Południe S.A.) filed similar petitions to protect their interests, as well as the interests of their creditors and employees. The decision by 12 companies of the PBG Group to make their filings almost simultaneously was prompted by the fact that the companies had provided cross guarantees to secure the repayment of bank loans and trade creditors, and (in some cases) assumed joint and several liability under consortium-delivered contracts. Currently, arrangement proceedings involving PBG, KWG, PBG AVATIA, DROMOST, PRID and Strateg Capital, and liquidation proceedings involving HYDROBUDOWA POLSKA, APRIVIA, PBG TECHNOLOGIA and Energomontaż Południe are under way. The petition filed by PBG Energia has been rejected for procedural reasons. Its ongoing arrangement procedure affects PBG’s operations and, consequently, the Company’s performance. The economic position and the ongoing arrangement proceedings at the PBG Group companies mentioned above may have a negative effect on the financial condition of PBG.

IX. MAJOR R&D ACHIEVEMENTS

In the period covered by this Report, the PBG Group did not have any major R&D achievements which would have a significant effect on the Group’s performance.

X. CONTROL SYSTEMS FOR EMPLOYEE PLANS

The PBG Group does not operate any employee plans.

XI. LITIGATION, ARBITRATION OR ADMINISTRATIVE PROCEEDINGS

1. LITIGATIONS AND DISPUTES

As at the date of these annual financial statements, the Group was involved in litigations in which it acted as the defendant or the plaintiff.

Key litigation and other disputes instigated by the Group

1. PBG S.A. w upadłości układowej (in company voluntary arrangement) against the State Treasury – General Director for National Roads and Motorways (GDDKiA), court docket No. IC 1022/12

The case concerns a Court amendment to Contract No. 2811/30/2010 (construction of the A4 motorway). The party requested a PLN 270,100 thousand rise in the VAT-exclusive remuneration payable to the Consortium due to a sharp increase in the prices of construction materials and services (the prices of steel, aggregate, concrete, bitumen, and fuels, including transport costs). The key and most significant element of evidentiary hearing will be the opinion of experts in the economics of road building. The court will consider evidence motions, including the key motion to admit the expert witness evidence based on which it will be possible to determine whether the loss

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incurred by the Consortium was substantial and whether the Consortium is entitled to claim the increased remuneration. Because not all witnesses appeared at the four hearings which have already been held, the Court has not yet made a decision concerning other evidence motions, including motions to admit as evidence expert witness opinions which are of key importance for resolving the case as to its merits.

2. PBG S.A. w upadłości układowej (in company voluntary arrangement) against Przedsiębiorstwo Usługowo - Produkcyjne POM Sp. z o.o., court docket No. IX Gc 815/13

On June 19th 2013, the Regional Court in Poznań, 9th Commercial Division, in writ-of-payment proceedings, issued a decision ordering POM Przedsiębiorstwo Usługowo-Produkcyjne to pay the amount claimed by the plaintiff and to cover the costs of litigation. POM filed a valid complaint against the decision. On November 7th 2013, after the dispute had been referred to mediation, the parties held negotiations before a mediator and reached a settlement under which PBG was to receive PLN 160 thousand, POM was to withdraw its claims for a total amount of approximately PLN 400 thousand, and the parties were to formally terminate their binding agreements. The Regional Court approved the settlement and decided to discontinue the proceedings.

3. PBG S.A. w upadłości układowej (in company voluntary arrangement) against Control Process S.A. – a case for payment including petition for exemption from court fees and a petition for a temporary injunction order

The Company has been pursuing claims against Control Process S.A. in connection with performance of the LMG Project – Central Facility, Well Areas, Pipelines and Other Infrastructure, including claims under Defendant's default to pay VAT invoices under an agreement for lease of containers with auxiliary facilities, an agreement for the provision of IT network access service, an agreement for lease of space at the construction site facilities, as well as recharged environmental analyses, recharged testing of guaranteed parameters, recharged factory testing, recharged emergency medical assistance, and recharged geodesic services. In the statement of claim, the Plaintiff also petitioned to be released from court costs in full and for the court to issue a temporary injunction. By virtue of its decision of September 16th 2013, the Regional Court dismissed the petition for release from costs. On September 26th 2013, the Plaintiff's attorney lodged a complaint against the dismissal of petition for release from court costs to the Court of Appeals. By a decision of October 30th 2013, the Court of Appeals dismissed the complaint. In a payment order issued on January 10th 2014, the Regional Court of Poznań ordered the Defendant to pay the Plaintiff an amount of PLN 996 thousand along with interest and cost of proceedings within 14 days, or to lodge an objection. At the request by the attorney for the Plaintiff, by virtue of decision of January 28th 2014, the Regional Court corrected an obvious spelling error concerning the deadline for payment of interest on one of the claimed amounts.Until March 13th 2014, the law office in charge of the case had not received the objection against the payment order (such objection was received by the Court on February 18th 2014), as the Court has not yet issued a relevant order. Until the objection is physically received by the law office, the status presented herein remains unchanged.

4. PBG SA w upadłości układowej (in company voluntary arrangement) against Marian Siska for payment

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Action for payment of PLN 1,200 thousand in connection with sale of shares in GasOil Engineering As. The case has been conducted in accordance with the Slovakian law by barrister Piotr Giebel. By virtue of a payment order, the Regional Court of Poprad ordered the defendant to make the payment as demanded in the statement of claim. In pleadings of February 18th 2014, Marian Siska appealed against the payment order. The Company's attorney has been preparing a response to the appeal.

5. PBG S.A. w upadłości układowej (in company voluntary arrangement) against Miejskie Wodociągi i Kanalizacja w Bydgoszczy Sp. z o.o. (“MWiK”), court docket No. VIII KC 282/12/K

Proceedings brought before the Regional Court in Bydgoszcz by the Company against Miejskie Wodociągi i Kanalizacja w Bydgoszczy Sp. z o.o. (“MWiK”) for determining that:

a) the termination notice served by MWiK on June 5th 2012, dissolving contract No. 2004PL16CPE003-12/3 “Rainwater discharge from the water intake protection zone areas of Las Gdański and Czyżkówko and extension of the rainwater system in Bydgoszcz. Part 3”, concluded on April 3rd 2008 (“the Contract”) with PBG and Hydrobudowa Polska SA (currently in bankruptcy by liquidation) as a Consortium member, is ineffective;

b) MWiK is not entitled to claim payment for non-performance or improper performance of the Contract by the Company and Hydrobudowa Polska;

c) MWiK is not entitled to claim any contractual penalty for dissolution of the Contract for reasons attributable to the Company and Hydrobudowa Polska

together with a request to secure the said claims by imposing an injunction on MWiK prohibiting the use of advance payment guarantee No. GZo/329/08-081 granted on May 27th 2008 by Powszechny Zakład Ubezpieczeń S.A. of Warsaw (“PZU”), in particular by demanding any payments under the advance payment guarantee, until the final conclusion of the proceedings; and if any amounts have already been paid by PZU to MWiK under the said guarantee, also by ordering that MWiK returns to the Guarantor any such amounts without delay. The first hearing is scheduled for October 8th 2013.Value of the claim: PLN 30,849 thousand.Otherwise, the Court dismissed the petition to provide temporary injunctive relief. A complaint against the decision was lodged by MWiK, but on March 26th 2013 the Court dismissed MWiK's complaint against the Court's decision granting temporary injunctive relief, and the decision became final. Notwithstanding the foregoing, on April 26th 2013 the Company filed a petition requesting a change (an extension) of the injunctive relief to include seizure of claimed amounts in MWiK's bank accounts up to the equivalent of EUR 3,758 thousand. In its decision of June 27th 2013, the Regional Court of Bydgoszcz dismissed the Plaintiff's petition to change the manner of providing injunctive relief; the Company appealed against that decision on July 17th 2013. By a decision of October 25th 2013, the Court of Appeals dismissed the Plaintiff's complaint. At the same time, as the case files were transferred to the court of appeals, the hearing set for October 2nd 2013 was cancelled. A new date of hearing has not yet been fixed, because the files have not yet been returned to the Regional Court in Bydgoszcz.

6. PBG SA w upadłości układowej (in company voluntary arrangement) against the Bankruptcy Administrator of Maxer SA w upadłości (in bankruptcy) – court docket No. IX GNc 1254/13/7

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On September 2nd 2013, PBG SA w upadłości układowej (in company voluntary arrangement) filed a claim with the Regional Court of Poznań, 9th Commercial Division, against the Bankruptcy Administrator of Maxer SA (in bankruptcy) for payment, along with a petition for full release from court costs. Value of the claim: PLN 820 thousand.By virtue of its decision of September 25th 2013, the Court dismissed the petition for release from costs. A complaint against that decision was filed on October 7th 2013. The Poznań Court of Appeals dismissed the appeal, and the Company paid the required court fee. Currently, we are awaiting the court to examine the case and issue a payment order or fix a date and time of a hearing.

7. PBG SA w upadłości układowej (in company voluntary arrangement) against Krolpol Sp. z o.o.

The case concerns return of an advance payment in connection with Krolpol Sp. z o.o.'s failure to carry out the agreed work and a refund of temporarily incurred costs of purchase of materials and prefabrication services used or performed in accordance with the instructions given by Krolpol Sp. z o.o. to provide for performance of work for which Krolpol Sp. z o.o. has already been paid, which were supposed to be subsequently recharged to Krolpol Sp. z o.o. Value of the claim: PLN 100 thousand and interest until the date of payment. The statement of claim is being prepared.

8. PBG SA w upadłości układowej (in company voluntary arrangement) against Gazomontaż SA

The case concerns a claim for reimbursement of an amount paid by the Company to Gazomontaż S.A. for the performance of certain works, in respect of which Gazomontaż S.A. failed to make appropriate settlements with its subcontractor KWG and which the project owner, PGNiG, paid to KWG in accordance with Clause 14.18−21 of the EPC Contract for the LMG Project from remuneration due to PBG. The Court issued a payment order. Gazomontaż S.A. filed an objection. Another hearing was scheduled for February 25th 2014. On March 11th 2014 the Court ruled that the amount claimed by the Company must be paid by Gazomontaż (along with litigation costs plus interest). Value of the claim: PLN 851 thousand plus statutory interest until the date of payment.

Disputes pending against the Company:

1. Litigation concerning the construction of the National Stadium in Warsaw The Company was a member of the consortium (“the Consortium”) selected in a tender as the general contractor for the National Stadium project in Warsaw. The contract between the Consortium and Narodowe Centrum Sportu Sp. z o.o. ("NCS") was executed on May 4th 2009 (the "Contract"). The Consortium provided NCS with an insurance guarantee for the amount of PLN 152,479 thousand, securing the claims of NCS (as the employer) relating to the non-performance or improper performance of the Contract, which was issued by Zurich Insurance plc. Niederlassung für Deutschland (“Guarantor” or “Zurich”). On June 1st 2012, NCS called on the Consortium to pay the penalty of PLN 308,832 thousand for a delay in the completion of the National Stadium project. On July 5th 2012, NCS demanded payment of PLN 152,479 thousand from the Guarantor under the insurance guarantee. According to the Consortium (including the Company), the claim for payment of the penalty for a delay in the

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completion of the construction project was ungrounded, because the delay occurred due to reasons for which the Consortium could not be held liable. As a result, on March 1st 2013 the Consortium (including the Company) brought an action before the Regional Court in Warsaw against NCS and the State Treasury – the Minister of Sport and Tourism (i) for determining that the defendants are not entitled to claim payment of penalty for a delay in the completion of the National Stadium construction project, and (ii) for ordering the defendants to cease the unlawful use of the guarantee issued by Zurich. In addition, the Consortium filed a request for an injunctive relief with respect to the above claims by prohibiting the defendants from accepting any payments under the guarantee provided by NCS until the final conclusion of the proceedings. By decision of March 22nd 2013, the Regional Court in Warsaw dismissed the request for security. On April 9th 2013, the Consortium filed a complaint against the decision to the Court of Appeals in Warsaw. On April 22nd 2013, Zurich received NCS' demand for payment from the performance bond. Next, the Court of Appeals dismissed the appeal. By its decision of September 25th 2013 the District Court of Warsaw suspended the proceedings ex-officio following declaration of bankruptcy of two other plaintiffs, i.e. Alpine Bau Deutschland AG and Alpine Bau GmbH. Pursuant to a representation of December 4th 2013, the administrator of Alpine Bau Deutschland AG and the administrator of Alpine Bau GmbH acceded to the proceedings and moved for resumption of the proceedings. By this date, the District Court has not yet issued a decision to resume the proceedings.Notwithstanding the foregoing, it needs to be emphasised that during performance of the Contract, the Consortium completed many auxiliary works ordered by NCS, for which it has never received any payment. Currently, the Consortium (including PBG) is demanding payment for the auxiliary works it has performed. Moreover, the Consortium also suffered financial losses in connection with the non-performance or improper performance of the Contract by NCS. Therefore, the Consortium is planning to bring one of several actions, depending on the needs, in the near future in connection with these claims it has against the NCS and the State Treasury. The detailed value of the litigation has not yet been determined. The Consortium is planning to bring the action early in 2014.In the meantime, on June 18th 2013, PBG and Hydrobudowa Polska SA w upadłości likwidacyjnej (in bankruptcy by liquidation) (another Consortium member) filed a call for a conciliation hearing at the District Court of Warsaw against the State Treasury – the Minister of Sport and Tourism, concerning an amount of PLN 162,984 thousand in payment for the auxiliary work enumerated above and damages. The conciliation hearing was held on October 10th 2013, but the parties failed to reach an agreement (court docket No. VIII GCo 552/13).On April 22nd 2013, NCS lodged a claim demanding payment by Zurich of a relevant amount under the insurance policy provided as a performance bond (court docket No. XX GC 211/13). On December 16th 2013, the Company filed a defendant-side intervention. On December 18th 2013, a defendant-side intervention was also filed by the bankruptcy administrator of Hydrobudowa. The date of hearing in this case has not yet been fixed. Value of the claim: PLN 152,479 thousand.

On September 20th 2013, Imtech Polska sp. z o.o. (one of the main subcontractors working for the Warsaw National Stadium Construction Consortium) filed a claim for payment of PLN 115,037 thousand against PBG SA, Alpine Construction Polska sp. z o.o., NCS and the State Treasury – the Minister of Sport and Tourism. Imtech demands payment for the work done during the construction of the National Stadium in Warsaw and payment to cover the damage it sustained in connection

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with the fact that the work could not be performed at the originally scheduled time. Imtech's claim was formally lodged on December 12th 2013. PBG SA has three months to respond to the claim. The proceedings are pending.

2. SAN-BUD Sp. z o.o. against PBG SA w upadłości układowej (in company voluntary arrangement), court docket No. IX GC 206/13/

Action for payment of PLN 1,572 thousand before the Regional Court of Wrocław, X Commercial Division; date of filing the statement of claim: March 28th 2013. The response to the statement of claim was prepared on June 27th 2013. A hearing was held on September 6th 2013. The date of another hearing will be set by the Court ex officio. The proceedings are pending.

3. Dimark Sp. z o.o. against PBG SA w upadłości układowej (in company voluntary arrangement), court docket No. IX GC 533/13/4

Action for payment of PLN 100 thousand before the Regional Court of Poznań – date of filing the statement of claim: June 13th 2013On October 30th 2013, the Regional Court issued a decision dismissing the action brought by Dimark Sp. z o.o. in whole and awarding a refund of the costs of proceedings to the Company. Dimark appealed against that decision. The Company filed a response to the appeal within the statutory time limit, i.e. by March 7th 2014. In this case, the plaintiff is pursuing a claim against the defendant on the basis of the defendant's unjust enrichment. The plaintiff, acting as a member of the general contractor consortium, entered into an assignment agreement with a third party, under which the plaintiff and the other consortium members assigned their amounts receivable as payment of their remuneration by the project sponsor to a bank, to create security in respect of a credit facility agreement to which the defendant, among other entities, is a party. When receiving an amount due in respect of the assigned debt claim, the Bank accounted for that receivable recognising it towards coverage of the defendant's liabilities. In the plaintiff's opinion, the defendant's liabilities under the credit facility agreement were paid at the plaintiff's cost and without the necessary legal basis, giving rise - in the plaintiff's opinion - to an unjust enrichment of the defendant.

4. Gmina Zabrze, ZPWiK against PBG SA w upadłości układowej (in company voluntary arrangement), Hydrobudowa Polska SA w upadłości likwidacyjnej (in bankruptcy by liquidation), court docket No. X GCo 543/13/7

On October 21st 2013, the petitioner submitted with the District Court for Poznań- Stare Miasto, 10th Commercial Division, a call for a conciliation hearing against PBG S.A. w upadłości układowej (in company voluntary arrangement) and Hydrobudowa Polska S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) as part of its pursuit of a claim of EUR 810 thousand in contractual penalties under the contract “Improving water and wastewater management in the Zabrze Municipality – districts of Grzybowice and Rokitnica. Project No. 1”. Due to the fact that the petitioner failed to present any conciliation proposal, the hearing held on February 25th 2014 did not end in any settlement.

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5. Towarzystwo Ubezpieczeń Euler Hermes SA of Warsaw against PBG SA w upadłości układowej (in company voluntary arrangement), court docket No. XVI GNc 1157/13

On October 9th 2013, Towarzystwo Ubezpieczeń Euler Hermes brought a claim against PBG SA with reference to a PLN 5,075 thousand payment order on the basis of a promissory note.Towarzystwo Ubezpieczeń Euler Hermes provided to Hydrobudowa Polska SA general insurance in connection with various construction contracts. By way of providing security in respect of potential recourse claims against TU Euler Hermes, Hydrobudowa issued a blank promissory note, for which PBG provided its surety. In connection with the bankruptcy of Hydrobudowa Polska, the bankruptcy administrator withdrew Hydrobudowa Polska SA from a contract performed for the Municipality of Poznań as the project sponsor. The Municipality of Poznań demanded satisfaction of its claims from TU Euler Hermes (as the insurer). TU Euler Hermes satisfied the Municipality of Poznań's claim, and then filled in the promissory note and brought an action for payment against the Company (as the entity that provided a surety with respect to the promissory note). On November 15th 2013, the District Court of Warsaw issued a payment order of PLN 5,075 thousand (including interest) against the Company. Next, on December 12th 2013, the Company lodged an objection against the payment order because it took the stance that the promissory note was invalid and was incorrectly (defectively) issued, due to the fact that as a result of Hydrobudowa Polska SA's withdrawal from the contract, it ceased to be party to the contract. The Company's objection has not yet been examined by the Court.

ADMINISTRATIVE PROCEEDINGSAdministrative proceedings instigated ex officio by the Polish Financial Supervision Authority are currently pending against the Company. The proceedings seek the imposition of an administrative sanction on the Company under Art. 96.1c of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, of July 29th 2005. The Polish Financial Supervision Authority extended the proceedings until March 31st 2014.

Key litigation and other disputes instigated by the RAFAKO Group

1. RAFAKO SA against ING Bank Śląski SA On November 3rd 2009, RAFAKO S.A. brought an action for payment to the Regional Court of Warsaw, XX Commercial Division, against ING Bank Śląski S.A. In the action, RAFAKO S.A. demands a refund of PLN 9m which was unlawfully enforced from its accounts by ING Bank Śląski S.A. On November 29th 2010, the court of first instance issued a ruling in which it awarded an amount of PLN 8,997 thousand, plus statutory interest and costs of proceedings, to be paid by ING Bank Śląski S.A. to RAFAKO S.A. The attorney of ING Bank Śląski S.A. filed an appeal against the ruling of the court of first instance. On October 12th 2011, the Court of Appeals in Warsaw, following a hearing, did not find the claims raised in the appeal by ING Bank Śląski S.A. justified, but resolved ex officio that the court of first instance failed to consider the substance of the dispute, reversed the ruling and remanded the case for re-examination by the court of first instance. The case is presently pending before the Regional Court of Warsaw, XX Commercial Division. The date of the next hearing was set for April 1st 2014.

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2. RAFAKO SA against the Rybnik Branch of the Social Insurance Institution (ZUS) Following an inspection carried out by the Rybnik Branch of the Social Insurance Institution, on November 17th 2011 RAFAKO S.A. was served a decision concerning social security contributions, contributions to the Labour Fund and contributions to the Guaranteed Employee Benefits Fund. The Social Insurance Institution challenged the allocation by RAFAKO S.A. of funds from the Company Social Benefits Fund towards special gift cards. The decision assesses the company’s liability towards the Social Insurance Institution at PLN 2,370 thousand (net of interest). Disagreeing with the decision, RAFAKO S.A. decided to appeal against it to the Regional Court of Gliwice, IX Labour and Social Security Division. The Court recognised RAFAKO’s arguments as valid and issued rulings favourable to RAFAKO, which were appealed against by the Social Insurance Institution. As at the date of these financial statements, the date of the appeals hearing has not yet been fixed. RAFAKO SA is convinced that the court of second instance will uphold the ruling favourable to RAFAKO. Following the favourable court ruling, in 2012 RAFAKO S.A. released the PLN 2,370 thousand provision that had been recognised in connection with the dispute, and the PLN 952 thousand provision for related interest.

3. RAFAKO SA against Donetskoblenergo of Ukraine In another material court proceedings involving RAFAKO S.A., the company is seeking compensation from Donetskoblenergo of Ukraine in the amount of USD 11,500 thousand (PLN 38,151 thousand). RAFAKO demands the compensation following the customer’s final decision to abandon a boiler construction project. In 2009, courts of the first and second instance ruled in favour of RAFAKO. However, the High Commercial Court, having examined a cassation appeal, reversed the rulings and remanded the case for re-examination. On August 6th 2010, RAFAKO received a decision issued by the Judicial Chamber for business cases of the Supreme Court of Ukraine granting a cassation appeal lodged by the company on March 2nd 2010 and upholding the ruling of the Donetsk Commercial Court of Appeals of December 23rd 2008, whereby RAFAKO was awarded UAH 56.7m (approximately USD 11,500 thousand as at the date of filing the claim) in compensation, default interest, court expenses and legal representation costs. As the enforceability of the decision remains uncertain, RAFAKO did not recognise the awarded amount in revenue. RAFAKO’s attorney reported that in July 2012 the Commercial Court of the Donetsk region resumed the examination of the case in connection with Donetskoblenergo’s claim to declare the agreement of May 16th 1994 invalid. According to the attorney, there is no new evidence to admit the claim. The next hearing is scheduled for April 10th 2014.

Disputes pending against the RAFAKO Group:

1. ING Bank Śląski SA against RAFAKO SA and RAFAKO Engineering SA In July 2010, ING Bank Śląski S.A. brought to the Regional Court of Warsaw, XX Commercial Division, an action for payment in the writ-of-payment proceedings against RAFAKO S.A. and RAFAKO Engineering Sp. z o.o., requesting a refund of the amount paid on February 1st 2010 to the beneficiary of the guarantee purportedly issued by ING Bank Śląski S.A. to the order of Fabryka Elektrofiltrów ELWO S.A. w upadłości (in bankruptcy). ING Bank Śląski S.A. alleges that the claim against RAFAKO S.A. is purportedly based on the provisions of the Credit Agreement of June 25th 2008. On June 9th 2011, the Regional Court of Warsaw, XX Commercial Division, issued a default

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judgement at a hearing, awarding PLN 1,462 thousand, plus statutory interest from February 1st 2010 and PLN 80 thousand as reimbursement of the costs of the proceedings, to be paid to ING Bank Śląski S.A. by RAFAKO S.A. On June 17th 2011, despite the fact that the attorney of RAFAKO S.A. and RAFAKO Engineering Sp. z o.o. notified the attorney of ING Bank Śląski S.A. of the filing of an objection, the Court Enforcement Officer seized RAFAKO S.A.’s bank accounts at the request of ING Bank Śląski S.A. By virtue of a decision of June 22nd 2011, the Regional Court of Warsaw, XX Commercial Division, at the request of the attorney of the Defendants, suspended the order of immediate enforceability of the default judgement, claiming that there were serious doubts as to the justifiability of the default judgement. As a result of the actions taken by the Defendants’ attorney, from the amounts enforced by the Court Enforcement Officer from RAFAKO S.A., the amount of PLN 128 thousand was transferred to ING Bank Śląski S.A., and PLN 1,688 thousand was transferred to the court deposit. On March 21st 2012, a ruling was issued in the case. In its ruling, the court reversed the default judgement in its entirety, awarded PLN 1,334 thousand plus statutory interest and statutory interest on PLN 128 thousand to be paid jointly and severally by RAFAKO S.A. and RAFAKO Engineering Sp. z o.o. to ING Bank Śląski S.A., dismissing the other points of the action. RAFAKO SA’s attorney lodged an appeal, which was dismissed in its entirety at a hearing held on February 21st 2013. The Court awarded reimbursement of the legal representation costs jointly and severally from the Defendants. The ruling was implemented.

DISPUTES INVOLVING THE RAFAKO GROUP

1. Dispute between the Alstom Group and RAFAKO SA In reference to the disputes with Alstom Group companies, described in previous financial reports, RAFAKO SA reports that on October 15th 2013 a settlement was executed which regulates in a comprehensive manner the terms of financial settlements and provides for a mutual waiver of claims by RAFAKO SA and the Alstom Group, and defines the scope of collaboration between RAFAKO SA and the Alstom Group on the parent’s projects.The key provisions of the final Settlement are as follows:

(i) The Alstom Group companies will pay to RAFAKO S.A. an amount of EUR 23m within 10 days of the Settlement effective date;

(ii) The Alstom Group companies will pay to RAFAKO S.A. an amount of EUR 20.5m within 30 days as of the later of: (i) the Settlement effective date and (ii) the date on which PGE Górnictwo i Energetyka Konwencjonalna S.A. (“PGE”) issues the Notice to Proceed under the contract for the construction of power generating units No. 5 and 6 at Elektrownia Opole of February 15th 2012 (the “Opole Contract”);

(iii) Both payments due to RAFAKO S.A. will be secured with a corporate guarantee provided by the parent of the Alstom Group. The guarantee should be granted within 30 days of the Settlement effective date;

(iv) RAFAKO S.A. and the Alstom Group will waive their existing mutual claims relating to the Karlsruhe, Westfalen and Bełchatów projects and will withdraw the actions and calls for arbitration submitted in connection with those disputes; and

(v) the parent has undertaken to cooperate with the Alstom Group on the Opole Contract, including to subcontract to the Alstom Group a part of RAFAKO’s scope of work on the Opole Contract. The detailed rules of cooperation and the scope of work subcontracted to the

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Alstom Group will be defined under a multilateral agreement to be executed by the Alstom Group, RAFAKO, PGE and the other members of the consortium to which the Opole Contract was awarded (the “Multilateral Agreement”), as well as under an agreement to be signed by the Alstom Group and the Opole Contract consortium (the “Agreement”).

As at the date hereof, all conditions precedent for the Settlement had been fulfilled and both payments due to RAFAKO, of EUR 43.5m in total, had been made. On November 6th and 7th 2013, the parties withdrew their respective claims and counterclaims relating to: dispute before the Court of Arbitration of the International Chamber of Commerce in Paris concerning the contract at PGE Elektrownia Bełchatów S.A.; dispute before the Court of Arbitration of the International Chamber of Commerce in Zurich concerning the Karlsruhe contract; and dispute before the Commercial Chamber of the Court of Stuttgart concerning the Hamm/Westfalia contract, as a result of which all court proceedings were terminated. The withdrawal of all claims, execution of the settlement, and the transfer of payments agreed upon in the settlement marked an end to all outstanding settlements, disputes, and issues related to penalties and claims between RAFAKO S.A. and the Alstom Group companies in connection with the Hamm/Westfalia, Karlsruhe and Elektrownia Bełchatów projects.

XI. CHANGES IN SIGNIFICANT MANAGEMENT POLICIES

In the period covered by this Report, the PBG Group companies did not make any major changes in its significant management policies.

SECTION V: SHARES AND SHAREHOLDERS

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I. SHARE CAPITAL STRUCTURE AND LARGE HOLDINGS OF SHARES

Currently, the Company’s share capital amounts to PLN 14,295 thousand and is divided into 3,740,000 registered shares with voting preference and 10,555,000 ordinary bearer shares. The par value of the preferred and ordinary shares is PLN 1 per share. Each preferred share confers the right to two votes at the General Meeting. Nearly 99.9% of the preferred shares are held by Mr Jerzy Wiśniewski, the founder and main shareholder of PBG, who also serves as Chairman of the PBG Supervisory Board.

Table 30: Share capital of PBG

PBG shares

Number of shares Type of shares Number of

sharesNumber of

votesNumber of outstanding shares

series A 5,700,000conferring voting preference 3,740,000 7,480,000 0

ordinary 1,960,000 1,960,000 1,960,000

Series B 1,500,000 ordinary 1,500,000 1,500,000 1,500,000

Series C 3,000,000 ordinary 3,000,000 3,000,000 3,000,000

Series D 330,000 ordinary 330,000 330,000 330,000

Series E 1,500,000 ordinary 1,500,000 1,500,000 1,500,000

Series F 1,400,000 ordinary 1,400,000 1,400,000 1,400,000

Series G 865,000 ordinary 865,000 865,000 865,000

Total 14,295,000 18,035,000 10,555,000

On April 19th 2012, the District Court of Poznań registered a conditional share capital increase at PBG by up to PLN 14,295,000.00, through the issue of no more than 14,295,000 Series H ordinary bearer shares with a par value of PLN 1.00 per share. The capital increase was registered based on the resolution adopted by the Extraordinary General Meeting held on April 3rd 2012 and concerning the issue of Series A1 through A12 bonds convertible into Series H shares, issue of Series H shares as a part of a conditional share capital increase, and waiver of pre-emptive rights of the existing shareholders with respect to Series A1 through A12 bonds convertible into Series H shares and Series H shares. The resolution enables PBG to issue bonds convertible into shares. The bonds may be issued in tranches (no more than twelve) and be subscribed for by trade or financial investors. The par value of the bonds is PLN 100,000.00 per bond, with the total par value of bonds to be issued of PLN 1,200,000,000.00. The Terms of the Bonds issued in the respective Series may provide for different rights and obligations of the issuer and bondholders, in particular with respect

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to the issue price, redemption dates, conversion price, premium or interest rate. All bondholders shall be entitled to acquire Series H ordinary bearer shares.

Table 31: Shareholders holding over 5% of shares

As at Dec 31 2013

Shareholder Number of sharesTotal par value

(PLN)Ownership

interest (%)% of total vote

Jerzy Wiśniewski3,881,224 shares,

including:3,735,054 registered preferred shares and

146,170 ordinary shares

3,881,224 27.15% 42.23%

As at the filing date of this Report

Shareholder Number of sharesTotal par value

(PLN)Ownership

interest (%)% of total vote

Jerzy Wiśniewski3,881,224 shares,

including:3,735,054 registered preferred shares and

146,170 ordinary shares

3,881,224 27.15% 42.23%

Figure 21: PBG shareholders holding over 5% of shares

42.23%

57.77%

Jerzy Wiśniewski Other shareholders

The Company is not aware of any other shareholders holding 5% or more of the total vote at the General Meeting. By the date of the Report, the Company has not been notified of any such shareholders.

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III. CHANGES IN THE COMPANY’S SHAREHOLDER STRUCTURE

In the period covered by this Report and subsequent to the reporting date, the following material changes occurred in PBG’s shareholding structure:

Table 32: Changes in PBG’s shareholding structure in 2013 and after the reporting date

Notification date Threshold Number of shares % of total vote

at GM (%) Date of change

ING Powszechne Towarzystwo Emerytalne S.A

July 16th 2013 <10% 121,804 0.68% July 11th 2013

IV. KEY DATA ON PBG SHARES

1. Share price

Figure 22: PBG stock price from January 1st 2013 to December 31st 2013 against the WIG and WIG-BUD indices

2013-01-02 2013-02-19 2013-04-10 2013-06-03 2013-07-19 2013-09-06Oct 24 20132013-12-130

1

2

3

4

5

6

7

8

9

PBG WIG WIG-BUD

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Figure 23: PBG stock price from the Company's IPO to February 2014 against the WIG and WIG-BUD indices

2004-08-03 2005-11-29 2007-03-28 2008-08-01 2009-12-01 2011-03-30 2012-08-01 2013-12-050

50

100

150

200

250

300

350

400

450PBG WIG WIG-BUD

2. 2. Key data on PBG shares

Table 33: Per-share data

Key per-share data 2013 2012 y-o-y change

52-week high PLN 7.61 83.90 -91

52-week low PLN 1.63 3.36 -51

Share price at year end PLN 2.21 5.28 -58

Number of shares at end of period number of

14,295,000 14,295,000 -

Number of outstanding shares number of

10,555,000 10,555,000 -

Capitalisation at year end PLN ‘000

31,591 75,477 58

Average daily trading value PLN ‘000

970 5.118 -81

Average daily trading volume number of

246,289 341,047 -28

IV. SHARE BUY-BACKS

In the period covered by this Report, the Company did not buy back any of its shares.

V. HOLDERS OF SECURITIES CONFERRING SPECIAL CONTROL RIGHTS

There are no securities conferring special control rights with respect to the Company. There are no restrictions with respect to the transfer of the Company shares or limitations on the voting rights attached to them.

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VI. RESTRICTIONS ON VOTING RIGHTS

PBG’s Articles of Association do not provide for any limitations on the voting rights of holders of a given percentage or number of votes.

VII. RESTRICTIONS ON TRANSFER OF PBG SECURITIES AND LIMITATIONS ON THE VOTING RIGHTS

In accordance with Par. 11.1 of the Company’s Articles of Association, the disposal of Series A registered shares requires the Management Board’s approval.

VII. AGREEMENTS WHICH MAY RESULT IN CHANGE IN SHAREHOLDINGS

As at the date of filing this Report, the Management Board is not aware of any agreements which may result in changes in the shareholdings.

IX. EVENTS WHICH MAY RESULT IN CHANGE IN SHAREHOLDINGS

On April 3rd 2012, the Extraordinary General Meeting was held. The main item on the agenda was voting on a resolution concerning issue of Series A1 through A12 bonds convertible into Series H shares, issue of Series H shares as a part of a conditional share capital increase and waiver of pre-emptive rights of the existing shareholders with respect to Series A1 through A12 bonds convertible into Series H shares and Series H shares. The resolution was adopted by the 96% majority. Under the resolution PBG may issue bonds convertible into shares. The bonds may be issued in tranches (no more than twelve) and be subscribed for by trade or financial investors. The par value of the bonds is PLN 100,000.00 per bond, with the total par value of bonds to be issued of PLN 1,200,000,000.00. The Terms of the Bonds issued in the respective Series may provide for different rights and obligations of the issuer and bondholders, in particular with respect to the issue price, redemption dates, conversion price, premium or interest rate. All bondholders shall be entitled to acquire Series H ordinary bearer shares on the following terms.In order to confer upon the bondholders the right to convert Series A1 through A12 Bonds into Series H shares, on April 19th 2012, the District Court of Poznań registered a conditional share capital increase at the PBG by up to PLN 14,295,000.00, through the issue of no more than 14,295,000 Series H ordinary bearer shares with a par value of PLN 1.00 per share.Series H shares shall confer the right to dividend as of January 1st 2012, i.e. for the financial year 2012, with the proviso that Series H shares confer the right to dividend payable for a given financial year if credited to the securities account of the former bondholder holding the shares not later than on the dividend record date defined by the General Meeting in a resolution concerning the distribution of profit and setting the dividend record date.

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X. INVESTOR RELATIONS

Investor relations have always played an important role in PBG’s activities. Our investor relations efforts have always been highly appreciated by capital market participants. However, PBG had been able to apply the best market practices in investor relations only until the Company filed a petition for insolvency with arrangement option. At the moment, prospective investors' interest in investing in the PBG stock has been significantly reduced, and brokerage houses (in line with their relevant policies) have discontinued research coverage of the PBG stock. The Company is not included in any of the indices of the Warsaw Stock Exchange (which is also due to its formal and legal status), which further affects investors' interest in our shares. In such circumstances, investor relations are focused on maintaining relationships with the existing shareholders for whom the IR Department personnel are always available.

The IR Department reports to the Vice-President of the Management Board, Finance and Economics Director. The main goal of the investor relations function is to establish an open platform of communication with investors and PBG’s shareholders in order to guarantee the most convenient access to information. The Company communicates with the market guided by the principle of transparency.

The investor relations website is an important communication hub and provides all interested parties with ample information on the Company. It features annual, interim and current reports, recordings of video- and audio conferences, the Company's financial calendar, information on General Meetings, and brokers' recommendations, all available for download.

1. Brokers' recommendations When PBG was declared insolvent in voluntary arrangement in early June 2012, the brokerage houses covering PBG shares suspended their coverage in line with the internal procedures they are expected to follow when a company they cover declares insolvency.

2. The Company and its shares

Table 34: IR contact data

IR Department Michał MaćkowiakTel. No. +48 (0) 61 66 46 431Email [email protected] www.pbgsa.plWSE PBGReuters PBGG.WA

SECTION VI: FINANCIAL OVERVIEW

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http://www.pbgsa.pl/



I. ANALYSIS OF THE GROUP'S FINANCIAL POSITION

All financial data and indicators are sourced from the IFRS-compliant financial statements.

1. RevenueAt the end of 2013, the PBG Group reported a 28% revenue decline year on year. The Group's revenue fell from PLN 1,836,893 thousand in 2012 to PLN 1,315,579 thousand in 2013. Cost of sales decreased by 52%, to PLN 1,327,748 thousand as at the end of 2013.

Figure 24: Historical development of revenue (past five years)

2009 2010 2011 2012 20130

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2,572,509 2,739,166

3,670,739

1,836,893

1,315,579

SALES (PLN ‘000)

Historically, sales of the PBG Group's services remained in an upward trend. However, the trend reversed in 2012 due to the difficult situation of the individual PBG Group companies, with a downward trend continuing in 2013. Lower revenue reported in the period under review was also due to a smaller number of companies comprising the PBG Group compared with the corresponding period of the previous year.

2. Order bookAs at January 1st 2014, the value of the PBG Group's order book was about PLN 5.5bn, of which around PLN 1.4bn represented orders to be executed in 2014, and the balance of approximately PLN 4.1bn scheduled for execution in subsequent years. Power construction projects (the segment where the Group classifies the contract for construction of power generating units in the Opole Power Plant) account for the largest proportion of the backlog's value - 92%. The oil, gas and fuels segment accounts for the second largest share of the order book (nearly 8%). The Group's largest contract for the construction of the LNG terminal in Świnoujście is reported under this segment. The water segment has a marginal share in the Company's order book.

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Figure 25: Historical development of the Group's order book (PLNm, past five years)

Jan 2010 Jan 2011 Jan 2012 01.2013 01.20140

1000

2000

3000

4000

5000

6000

7000

4,400

5,200

5,900 5,9005,500

Table 35: Order book structure as at January 1st 2014

ORDER BOOK AT JANUARY 1ST 2014 (% and PLNm)

Gas, oil and fuels 8 420Power construction 92 5,050*TOTAL 100.0% 5,470

*RAFAKO's entire share of deliveries (valued at PLN 3.2bn) under the project involving the construction of power generation units in the Opole power plant was subcontracted to an entity outside the PBG Group.

3. EBITDAIn 2013, the PBG Group’s EBITDA (operating profit plus depreciation/amortisation) increased by PLN 3,774m relative to 2012. EBITDA increased from PLN -3,401,772 thousand to PLN 372,582 thousand. In 2012, the PBG Group's EBITDA was heavily impacted by a number of non-recurring events which followed from the significant deterioration of the financial condition of PBG and PBG Group companies. In 2013, the economic and operational position of the Group, and PBG in particular, somewhat stabilised. However, the Group's performance continued to be impacted by non-recurring events.

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Figure 26: Historical development of EBITDA (past five years)

2009 2010 2011 2012 2013

-4,000,000

-3,500,000

-3,000,000

-2,500,000

-2,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

331,572 332,093 329,266

-3,401,772

372,582

EBITDA (PLN '000)

4. EBITOperating profit of the PBG Group in 2013 was PLN 337,067 thousand in contrast to operating loss of PLN -3,543,989 thousand posted in the same period of the previous year. Such a strong operating profit was driven by the effects of non-recurring events, which included: reversal of a provision for PBG's potential liabilities under sureties and guarantees issued or under joint and several liability to subcontractors related to projects performed under consortium agreements, and a reported gain on investments in related entities (the effect of exclusion from consolidation of Energomontaż Południe S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) and Strateg Capital Sp. z o.o. w upadłości układowej (in company voluntary arrangement)).

Figure 28: Historical development of EBIT (past five years)

2009 2010 2011 2012 2013

-4,000,000

-3,500,000

-3,000,000

-2,500,000

-2,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

284,316 285,380 269,312

-3,543,989

337,067

OPERATING PROFIT – EBIT (PLN '000)

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5. Earnings per share (EPS)In 2013, earnings per share stood at PLN 21.34, against a loss per share of PLN -200.72 posted in 2012.

Figure 29: Historical development of EPS (past five years)

2009 2010 2011 2012 2013

-250.00

-200.00

-150.00

-100.00

-50.00

0.00

50.0015.00 13.02 11.25

-200.72

21.34

EPS (PLN)

6. Liquidity ratios

Table 36: Liquidity ratios

RATIO FORMULA 2013 2012

Current ratio (current assets/current liabilities)*100 0.63 0.59

Quick ratio (current assets – inventories/current liabilities)*100 0.43 0.46

Cash solvency ratio (cash balance at end of period/current liabilities)*100 0.07 0.05

As at the end of 2013, the current ratio improved compared with the corresponding period of the previous year: it stood at 0.63, compared with 0.59 as at the end of 2012. This means that in 2013 the PBG Group would not be able to repay its current liabilities if they became immediately due and payable.While the quick ratio deteriorated in 2013, falling from 0.46 at the end of 2012 to 0.43 at the end of 2013. In the periods under review, the ratios were at levels considered unsafe, pointing to the Group's inability to meet liabilities promptly as they come due. The cash ratio increased from 0.05 at the end of 2012 to 0.07 at the end of 2013. The ratio suggests that the PBG Group is able to cover 7% of its current liabilities with the most liquid assets.

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7. Debt

Table 37: Debt ratios


Structure of equity and liabilities Equity attributable to owners of the parent / debt capital -0.26 -0.27

Structure of assets Non-current assets / current assets 0.61 0.73

Interest coverage ratio Gross profit + interest / interest 0.80 -32.84

In the period under review, the structure of equity and liabilities remained largely unchanged. In both 2012 and 2013, the equity was negative. The assets structure ratio decreased by 12pp year on year. In 2012, non-current assets represented 73% of current assets, while in 2013 non-current assets accounted for 61% of current assets, which indicates higher flexibility of assets and shortening of the period when funds remain tied-up.

II. CHANGES IN THE INCOME STATEMENT AND COST ANALYSIS

1. Income statement

Table 38: Changes in the income statement

PBG Group's income statement (PLN ‘000) 2013 2012 2013/2012

Net revenue from sales of products, merchandise and materials 1,315,579

1,836,893 73%

Cost of sales 1,327,748 2,743,690 48%Gross profit (loss) -12,170 -906,797 -Distribution costs 60,910 59,693 102%Administrative expenses 89,667 277,716 32%Profit on sales -162,747 -1,244,206 11%Other income 715,858 505,364 145%Other expenses 216,021 2,773,124 8%Operating profit (loss) 337,067 -3,543,989 -

Finance costs 136,772 158,536 86%Share of profit (loss) of equity-accounted entities - -5,790 -Profit (loss) before tax 212,218 -3,708,315 -Income tax expense 4,706 8,243 57%Net profit (loss) 207,512 -3,716,558 -- owners of the Parent 257,552 -2,869,225 -- non-controlling interests -50,039 -847,333 6%

As at the end of 2013, the Group's net profit attributable to owners of the Parent was PLN 257.5m. The positive value of operating profit and net profit was driven by the effects of the non-recurring events discussed further in this section of the Director's Report. With revenue of PLN 1,316m, the Group's cost of sales was PLN 1,328m. The Group's gross loss amounted to PLN 12.2m in 2013,

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compared with a loss of nearly PLN 907m reported in 2012. The 2013 results show a clear improvement at all levels of the income statement. Administrative expenses were nearly PLN 90m, down by 68% compared with the corresponding period of the previous year. Other income, totalling nearly PLN 716m, comprised mainly released provisions for PBG's potential liabilities under sureties and guarantees issued or under joint and several liability to subcontractors related to projects performed under consortium agreements totalling PLN 336m, and a reported gain on investments in related entities of PLN 251.5m arising from exclusion from consolidation of Energomontaż Południe S.A. w upadłości likwidacyjnej (in bankruptcy by liquidation) and Strateg Capital Sp. z o.o. w upadłości układowej (in company voluntary arrangement). Another key item in the Group's other income is reversal of impairment losses on receivables of PLN 43.6m. Other expenses of the PBG Group totalled PLN 216m. The most significant item of other expenses was impairment losses on receivables of PLN 59.6m and on loans advanced of PLN 28.5m. Fair value measurement of investment property stood out as another major item. The amount arising from measurement of investment property, recognised in other expenses, was PLN 19.2m. The cost of recognised provisions for liabilities amounted to PLN 17m, while the cost of surety and guarantee services was PLN 11.1m. Finance costs totalled nearly PLN 136.8m. The largest item in finance costs was impairment losses on held-to-maturity investments of PLN 76m, which comprised bonds issued in 2010 by Strateg Capital and acquired by PBG, and interest expenses related to financial instruments not at fair value through profit or loss of PLN 36.4m.

III. ASSETS, FINANCIAL STANDING AND FUNDING OF THE ASSETS

1. AssetsThe asset structure changed significantly during the period under review. As at the end of 2013, non-current assets represented 38% of total assets, which represented a decrease of 4% year on year. On the other hand, in H1 2013 the share of current assets in total assets increased to 26% year on year. The largest item of non-current assets, accounting for 38% of total non-current assets, was goodwill. The second largest item of non-current assets was property, plant and equipment, which accounted for 29% of total non-current assets. During the period under review, the structure of current assets also changed. In 2013, the largest item of current assets was trade and other receivables, representing 42% of total current assets. Inventory, which accounted for 31% of the current assets value, was the second largest item. The third largest item of current assets was amounts due from customers for construction contract work, accounting for 11% of total current assets.

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Figure 30: Assets (PLN ’000)

AKTYWA TRWAŁE NON-CURRENT ASSETSAKTYWA OBROTOWE CURRENT ASSETS

Figure 31: Largest items of assets (PLN' 000)

2013 20120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

385,518 385,531

292,314666,033

218,081

158,073

514,404442,433

183,371 256,352

692,268 811,855

173,894 173,536

Cash and cash equiva-lents

Trade and other re-ceivables

Amounts due from cus-tomers for construction contract work

Inventories

Investment property

Property, plant and equipment

Goodwill

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3,319,825


Table 39: Asset ratios (%)


Basic asset structure ratio (non-current assets / current assets )*100 60.9% 72.7%

Non-current assets to total assets (non-current assets/ total assets)*100 37.8% 42.1%

Current assets to total assets (current assets/ total assets)*100 62.2% 57.9%

Inventories to current assets (inventories / current assets)*100 30.9% 23.0%

Current receivables to current assets

(Current receivables / current assets)*100 52.6% 55.6%

The basic asset structure ratio is discussed in detail in Section 1.6, Section VI. There were significant changes in the value of particular items of assets and in the structure of total assets. In 2013, non-current assets fell 27% year on year. A decline was seen in current assets, which shrank by 13pp. As at the end of 2013, the share of non-current assets in total assets was 4% down on 2012. At the same time, current assets' share in PBG's total assets increased to 62%.

2. Equity and liabilitiesIn the period under review, the structure of asset financing at the Group did not change significantly. In 2013, like in 2012, the value of equity was negative. The share of non-current liabilities in the balance-sheet total fell to PLN 615m, or by 33%, compared with the same period of the previous year. The share of current liabilities in the balance-sheet total also declined. At the end of 2013, current liabilities stood at PLN 2,647m, down by 18% compared with 3,248m as at the end of 2012. The most significant item of non-current liabilities was other provisions totalling PLN 457m, including a provision for liabilities under sureties and guarantees of PLN 445m. The largest item of current liabilities was borrowings and other debt instruments, which comprised PLN 450m bonds issued by PBG in 2010, as well as PLN 375m bonds issued in 2009.

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Figure 32: Equity and liabilities (PLN ‘000)

Kapitał własny Equity

Zobowiązania długoterminowe Non-current liabilities

Zobowiązania krótkoterminowe Current liabilities

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Figure 33: Largest items of equity and liabilities (PLN' 000)

2013 2012

-858,283 -1,118,982

733,348 733,348

644,764 888,648

-2,245,136 -2,748,403

275,437 275,491

Other non-current pro-visions

Trade payables and other liabilities

Borrowings, other debt instruments

Non-controlling interests

Retained earnings

Other components of equity

Share premium

Equity attributable to owners of the Parent

IV. STATEMENT OF CASH FLOWS

Table 40: Cash flows (PLN ‘000)

2013 2012

Net cash from operating activities -21,284 -596,051

Net cash from investing activities +31,702 -175,599

Net cash from financing activities -11,735 388,741

Net cash at the end of the period 173,894 173,536

In 2013, like in 2012, the PBG Group generated negative net cash from operating activities, of PLN -21.3m. However, this result represented a significant improvement on PLN -596m reported in 2012. During the period under review, net cash from investing activities was positive at PLN +31.7m. Net cash from financing activities in 2013 was negative at PLN -11.7m.

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In the period under review, the Group incurred bank borrowings for a total amount of PLN 51.2m, and repaid bank borrowings of PLN 94.9m. In the same period, interest paid on bank borrowings totalled PLN 20.7m.

Table 41: Cash flow profile

2013 2012

Net cash from operating activities - -

Net cash from investing activities + -

Cash flow from financing activities - +

Net cash at the end of the period + +

V. NET DEBT

Table 42: Data used by the PBG Group to compute net debt (PLN ‘000)

2013 2012 y-o-y change

Non-current borrowings 49,600 39,557 +25Current borrowings 728,506 1,052,333 -31Finance lease liabilities 16,564 17,889 -7Bonds 838,772 838,772 -Net cash 173,894 173,536 -Net debt 1,459,546 1,775,015 -18

As at December 31st 2013, net debt was PLN 1,460m, down 18% on the end of 2012. This amount comprises interest-bearing debt, including PLN 50m in non-current borrowings, PLN 728m in current borrowings, PLN 16.6m in current and non-current finance lease liabilities, and PLN 838.8m in bonds, including 13.8m of interest (issued by PBG in two tranches: PLN 375m in 2009 and PLN 450m in 2010). Net cash of PLN 174m as at the end of 2013 was deducted from these amounts.

VII. INVESTMENTS

1. Equity investmentsIn 2013, the PBG Group made equity investments worth PLN 766 thousand.

2. Expenditure on property, plant and equipmentIn 2013, the Group invested mainly in the enhancement of its plant, workshops and warehouses. A part of the funds was invested in the modernisation and extension of the existing office buildings. The investments totalled approximately PLN 13.1m.

3. Feasibility of the Group's investment plans

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Given the current difficult financial position of the PBG Group and its parent, no major equity investments or expenditure on property, plant and equipment are planned. It may, however, prove necessary to incur expenditure on property, plant and equipment required for the execution of contracts. With a view to raising additional funds, the Parent intends to sell non-core assets.

IX. FINANCIAL OUTLOOK

Currently, a number of the PBG Group companies are in the process of company voluntary arrangement. Their expected financial condition to a large extent depends on the outcome of negotiations with financial institutions and other creditors. Notwithstanding the arrangement procedures, the Group has also been taking steps designed to stabilise the PBG Group companies' operations.

XII. ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT

The main objective of capital management at the Group companies is to maintain good credit ratings and safe equity ratios that can support the operations of the Group companies and increase their value for shareholders. To maintain or adjust their capital structure, the Group companies may usually contract bank borrowings, issue bonds, decide to pay dividend to shareholders, return capital to shareholders, or issue shares or bonds. Due to the Parent's ongoing insolvency in voluntary arrangement proceedings, at the date of approval of this Report capital management cannot be performed unless Parent enters into an arrangement with the creditors. Currently, the key objective is to enter into and successfully execute an arrangement with the creditors, which would enable the Parent to continue its operations and rebuild its shareholder value in the future.

XII. SURETIES AND GUARANTEES GRANTED AND RECEIVED

In the consolidated financial statements as at December 31st 2013, the PBG Group disclosed contingent liabilities recognised as off-balance-sheet items, including guarantees and sureties issued to other entities, of PLN 1,547,828 thousand.

The contingent liabilities pertain to liabilities under sureties issued for credit facilities, liabilities under sureties issued for trade payables, liabilities under sureties issued to third parties by PBG Group companies, as well as liabilities under guarantees issued at the request of PBG Group companies to third parties.

In compliance with IAS 37, as at December 31st 2012 the Parent estimated and recognised a provision for potential liabilities which may result in a future outflow of cash. The provision related to the Parent’s liabilities under joint and several liability for third parties, and liability arising in connection with sureties and guarantees issued by the Parent for other parties. The value of the provision was estimated based on the amount of contingent liabilities recorded by the Parent prior to the court's decision declaring the Company insolvent with arrangement option, i.e. as at June 13th 2012. As at December 31st 2012, the provision, established in accordance with the relevant assumptions, amounted to PLN 780,000 thousand.

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In the twelve months ended December 31st 2013, the Parent became aware that a part of the Group's off-balance-sheet liabilities had expired upon expiry of given financial products.

Following the Parent's submission of revised arrangement proposals to the Court on September 30th 2013 and the Parent becoming aware that a part of its off-balance-sheet liabilities had extinguished due to the expiry of corresponding financial products, as at December 31st 2013 the Parent, acting in accordance with IAS 8, revised the underlying estimates and released the provision in the portion above the amount of PLN 444,555 thousand. Prior to the reduction, the value of contingent liabilities recorded by the PBG Group as at December 31st 2013 was PLN 1,992,383 thousand.The final review of liabilities, including contingent liabilities, will be carried out by the Court during the final assessment of claims submitted by trading partners.

XIV. GOING CONCERN ASSUMPTION

PBG’s current financial condition puts in question its ability to continue as a going concern. However, the financial statements have been prepared on the assumption that PBG would continue as a going concern in the foreseeable future, i.e. for at least 12 consecutive months from the end date of the reporting period. This assumption is related to the proceedings regarding the Company's insolvency with arrangement option, as well as the Management Board's efforts to arrange with the creditors and ensure that the Company may continue its operations.

The Management Board wishes to indicate that, should the going concern assumption prove incorrect, the financial statements would have to reflect certain adjustments to the carrying amounts and classification of the Company's assets and liabilities which could be required if the Company were unable to continue its operations in the foreseeable future.

Below, the Company's Management Board presents the circumstances indicating that there is a threat to the Company's and its Group's continuing as going concerns, as well as steps taken in order to mitigate the risk.

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On June 4th 2012, the Company's Management Board made a decision to file for insolvency with an arrangement option (grounds for the decision were presented in the Company’s financial statements for 2012). On June 13th 2012, the District Court for Poznań–Stare Miasto in Poznań, 11th Commercial Insolvency and Arrangement Division, declared the Company insolvent, in voluntary arrangement. The Court’s decision became final on June 22nd 2012. Overall, twelve companies of the PBG Group filed petitions for insolvency with an arrangement option in 2012. The decision to make their filings almost simultaneously was prompted by the fact that the companies had provided cross guarantees to secure the repayment of bank loans and trade creditors, and (in some cases) assumed joint and several liability under consortium-delivered contracts. The formal and legal circumstances and the financial condition of the companies undergoing insolvency proceedings are very difficult, which affects both their business activities (for instance, their ability to secure new contracts) and the highly complex restructuring processes.

The voluntary arrangement procedure ensures proper satisfaction of the Creditors’ claims following approval and implementation of the arrangement. Since 2012, the Company’s Management Board has been actively involved in negotiations with the Creditors. The negotiations concern terms of debt repayment, including repayment periods, amounts and forms. During this time, the Creditors involved in financing the Company’s or other Group companies’ operations and representing the largest group of Creditors have been provided with a plan of the operational restructuring of the Company, prepared by the Company and its financial adviser PwC Polska Sp. z o.o. On September 3rd 2013, the Management Board and its legal adviser Weil, Gotshal & Manges, Paweł Rymarz Sp.k. completed work on preparation of the restructuring documents, including a draft of the Restructuring Agreement and Arrangement Proposals, which, upon receipt of corporate approvals, were presented to the Creditors, as announced by the Company in Current Report No. 24/2013. Pursuant to the currently tabled Arrangement Proposals, the Company’s Creditors will be satisfied in seven groups, depending on the category of interest they represent and the type and size of their claims. The Creditors will be divided into categories of interest in accordance with the Bankruptcy and Recovery Law. The full text of the draft restructuring documents is available on the Company’s website at www.pbg-sa.pl in the ‘Restructuring’ section.

In parallel to the debt restructuring, operational and asset restructuring efforts have also been undertaken.

The Management Board believes that the arrangement would enable the Company to continue its day-to-day operations, which in turn would protect interests of the Creditors (in particular those with smaller claims), and would also help protect important social interests: jobs, interests of subcontractors, interests of project sponsors (awaiting performance of strategic contracts), and interests of local communities.

In the opinion of the Company's Management Board, proper performance of the arrangement agreement is guaranteed by:

restructuring of Company’s non-operating non-current assets, the sale of which constitutes one of the sources of payments made as part of the arrangement;

divestment of the PBG Group’s property development and other investment projects;

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gaining potential access to profitable contracts in the power construction sector through the cooperation with RAFAKO S.A., PBG's subsidiary;

winning new contracts in the oil and gas sector, which is the strategic area of operations for PBG.

Considering the difficult situation of the Company and the loss disclosed in its 2012 financial statements, which exceeded the sum of the Company’s statutory reserve funds, capital reserves and one-third of its share capital, the Management Board, acting under Art. 397 of the Commercial Companies Code, decided to include in the agenda for the PBG General Meeting convened for June 21st 2013 voting on a resolution on whether the Company should continue in existence. The resolution was passed by the Company’s Shareholders.

Further stages of the voluntary arrangement proceedings held before the Bankruptcy Court have recently been completed. On June 12th 2013, the Company was notified that a list of claims had been delivered by the Court supervisor to the judge commissioner. The total amount of the acknowledged claims placed in the list of claims by the court supervisor was PLN 2,776,254 thousand, which is in accordance with the Management Board’s estimates. On July 4th 2013, the judge announced that the preparation of the list of claims had been completed. Currently, in accordance with the Bankruptcy and Restructuring Law, the process of examining objections raised against the list of claims and complaints against the decisions of Judge-Commissioner concerning the examination of objections, and revision of the claims is under way. On September 30th 2013, the Company filed with the Court a revised draft of the arrangement proposals, first filed along with the petition for PBG S.A.’s insolvency with an arrangement option on June 4th 2012. The proposals are consistent with the proposals provided to the Creditors on September 3rd 2013, as reported by the Company in Current Report No. 29/2013. The Company will supplement the revised proposals in the course of the insolvency proceedings, depending on the results of its negotiations with the Creditors on the conclusion of the restructuring agreement and determination of the detailed terms and conditions of the restructuring, once the list of claims is finally approved. It should also be noted that on December 24th 2013, the Judge announced preparation by the Court Supervisor of the first supplementary list of claims as at November 29th 2013. The total amount of the acknowledged claims placed in the first supplementary list of claims by the court supervisor was PLN 191.25m, which was in accordance with the Management Board’s estimates. Currently, in accordance with the Bankruptcy and Restructuring Law, as in the case of the list of claims announced by the Judge on July 4th 2013, the process of examining the objections raised against the first supplementary list of claims and complaints against dismissed objections is under way. The next step of the procedure defined by the Bankruptcy and Restructuring Law will be the approval of the lists of claims by Judge Commissioner, which will allow for the meeting of the Company’s creditors to be called with a view to entering into an arrangement.

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CONTACT DETAILS

REGISTERED OFFICE OF PBG:ul. Skórzewska 35 Wysogotowo, near Poznań, Poland62-081 Przeźmierowo Tel. No.: +48 61 66 51 700Fax No.: +48 61 66 51 701www.pbg-sa.pl email: [email protected]

INVESTOR RELATIONS:Michał MaćkowiakTel. No.: +48 61 66 46 431email: [email protected]

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SIGNATURES OF ALL MANAGEMENT BOARD MEMBERS, March 21st 2014

President of the Management Board Paweł Mortas

Vice-President of the Management Board Kinga Banaszak-Filipiak

Vice-President of the Management Board Tomasz Tomczak

Vice-President of the Management Board Mariusz Łożyński

Member of the Management Board Bożena Ciosk

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Documents

· Web viewconcerning the issue of Series A1 through A12 bonds convertible into Series H shares, issue Series H shares as a part of a conditional share capital increase; to waive