Report of the Management Board on the Activity of ELEKTROBUDOWA SA and the ELEKTROBUDOWA GROUP in 2018

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Table of contents

1 Market environment ...... 1 1.1 Overview of the macro-economic situation ...... 1 1.2 Outlook for market development ...... 1 1.3 The strategy adopted by the issuer and its corporate group ...... 2 2 Basic information about ELEKTROBUDOWA SA and ELEKTROBUDOWA Group ...... 3 2.1 Business profile ...... 3 2.2 Divisions and branches ...... 3 2.3 Structure of ELEKTROBUDOWA Group ...... 3 2.4 Organisational and equity ties ...... 4 2.5 Changes in the structure of the Group ...... 4 2.6 Changes to the rules of managing the Company and the Group ...... 4 3 Business activity of ELEKTROBUDOWA Group and ELEKTROBUDOWA SA ...... 4 3.1 External and internal factors important for development of ELEKTROBUDOWA Group ...... 4 3.2 Essential risk and threat factors ...... 5 3.3 Atypical factors and events which had a significant impact on performance in the financial year ...... 6 3.3.1 Contract with PKN Orlen S.A. for building of Metathesis unit ...... 6 3.4 Structure of sales revenue ...... 7 3.4.1 Structure of sales revenue generated by ELEKTROBUDOWA Group ...... 7 3.4.2 The structure of sales revenue of ELEKTROBUDOWA SA ...... 12 3.5 Prospects for business development in the nearest year ...... 14 3.6 Sources of supply ...... 14 3.7 Contingent receivables and liabilities ...... 14 3.8 The use of proceeds from the issue of securities ...... 14 4 Analysis of the position of ELEKTROBUDOWA SA in respect of its assets and finance ...... 14 4.1 Major economic and financial figures concerning ELEKTROBUDOWA SA ...... 14 4.2 Basic financial and non-financial indicators for ELEKTROBUDOWA SA ...... 18 4.3 Managing the financial resources in ELEKTROBUDOWA SA ...... 18 5 Analysis of the financial situation and assets of ELEKTROBUDOWA Group ...... 20 5.1 Basic economic and financial figures referring to ELEKTROBUDOWA Group ...... 20 5.2 Basic financial and non-financial indicators of ELEKTROBUDOWA Group ...... 23 5.3 Managing the financial resources in ELEKTROBUDOWA Group ...... 23 6 Clarification of differences between the financial results recognised in the annual report and the forecasts of the results for the year which were announced earlier...... 25 7 Major events which significantly affected the activity and performance of the Group during the year 2018, and also later until the date of preparation of the financial statements ...... 26 8 Significant contracts ...... 28 8.1 Insurance contracts concluded for the ELEKTROBUDOWA Group Companies ...... 28 8.2 Related party transactions ...... 29 8.3 Loans and borrowings ...... 30 8.4 Main capital investments and equity investments in 2018 ...... 31 8.5 Information about loans granted in the financial year ...... 31 9 Other information ...... 31 9.1 The contracts which may involve a change in the shareholding structure ...... 31 9.2 Shares held by the managing or supervising persons ...... 31 9.3 Purchase of treasury shares ...... 31 9.4 Employee share ownership programme ...... 31 9.5 Assessment of the feasibility of implementing the investment plans ...... 31 9.6 Auditor ...... 32 9.7 Litigations ...... 32 9.8 Employment ...... 32 9.9 Major R&D accomplishments ...... 32 9.10 Sponsorship...... 33 1

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

10 The remuneration policy in ELEKTROBUDOWA SA ...... 33 10.1 The remuneration system and its amendments in the past year...... 33 10.2 Terms and amounts of remuneration of the Management Board Members ...... 33 10.3 Non-monetary components of the remuneration of the Management Board Members and key managers ...... 34 10.4 Agreements concluded with the managing persons providing for compensation in the case of resignation or dismissal ...... 34 10.5 Terms and amounts of remuneration of the Members of the Supervisory Board ...... 34 10.6 Evaluation of the remuneration policy...... 35 10.7 Commitments due to pension and similar benefits for former managing and supervising personnel ...... 35 11 Statement of compliance with the corporate governance rules by the parent company ...... 35 11.1 The set of corporate governance rules applied by the Company ...... 35 11.2 The scope of non-compliance with the corporate governance rules ...... 35 11.3 Internal control and risk management system ...... 35 11.4 Shareholders with substantial shareholdings ...... 37 11.5 Holders of securities with special control rights ...... 38 11.6 Restrictions on voting rights ...... 38 11.7 Restrictions on the transfer of securities ...... 38 11.8 Rules of appointment and removal of the managing persons, and their rights ...... 38 11.9 Rules for amending the Articles of Association ...... 41 11.10 General Meeting...... 41 11.10.1. Operation and powers ...... 41 11.10.2. Shareholders’ rights and their exercise ...... 42 11.10.3. General Meetings in 2018 ...... 43 11.11 Composition and its changes during the past financial year, operation of the Company’s managing and supervising bodies and their committees ...... 43 11.11.1. The Management Board of ELEKTROBUDOWA SA ...... 43 11.11.2. The Supervisory Board of ELEKTROBUDOWA SA ...... 44 11.11.3. Audit Committee and Nominations and Remuneration Committee ...... 45 11.12 Diversity policy ...... 50 12 The 2018 non-financial information statement of Elektrobudowa SA and ELEKTROBUDOWA Group ...... 51 12.1 Stakeholders of the Group and non-financial issues ...... 51 12.2 Key non-financial issues ...... 52 12.3 Governance ...... 53 12.3.2 Corporate Governance ...... 56 12.3.3 Risk Management ...... 58 12.3.4 Ethics management ...... 59 12.4 Environmental issues ...... 61 12.4.1 Materials and raw materials ...... 62 12.4.2 Energy and fuels ...... 63 12.4.3 Biodiversity...... 65 12.4.4 Emissions...... 65 12.4.5 Waste ...... 67 12.5 Employee issues ...... 68 12.5.1 Employment, remuneration and social security ...... 69 12.5.2 Diversity and equal opportunity ...... 81 12.5.3 Employee development ...... 81 12.5.4 Employee relations and freedom of association ...... 83 12.5.5 Occupational health and safety ...... 84 12.6 Respect for human rights ...... 87 12.7 Social issues...... 88 12.7.1 Social commitment and impact on local communities ...... 88 12.7.2 Product safety, including appropriate product labelling ...... 90 12.7.3 Customer relations ...... 92 12.7.4 Marketing communications ...... 92

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

12.7.5 Privacy protection ...... 92 12.8 Anti-corruption and anti-bribery ...... 93 12.9 Specification of SIN indicators ...... 94

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

1 Market environment

1.1 Overview of the macro-economic situation

The major part of the revenue of ELEKTROBUDOWA Group (”Group”, ”Elektrobudowa Group”) is generated in the area of investments in the electrical power industry in the sectors of power generation , transmission and distribution, and in the area of industrial investments. The investing level in each of the segments is directly related to the level of the GDP growth.

In 2018 Poland’s maintained its good economic growth rate reached in 2017. According to preliminary estimates by the Central Statistical Office of Poland (GUS) the growth of gross domestic product in 2018 in constant prices of the previous year reached 5.1 per cent year on year, while in 2017 it had the level of 4.8 per cent. As in 2017, one of the main causes of high GDP growth was the growth of investments. Gross expenditure on fixed assets rose 7.3 per cent compared to 3.9 per cent in 2017, while the inflation rate in 2018, understood as the relation of gross expenditure to gross domestic product in current prices, remained on the similar level as in the year 2017 and was 18.1 per cent in 2018, against 17.7 per cent in 2017. The gross value added in the building sector in 2018 rose 17.0 per cent on 2017, against 6.5 per cent growth in 2017. The annual average consumer price growth index in 2018 reached the value of 1.6 per cent compared to 2.0 per cent in 2017. The decline in y/y inflation was the result of lower growth in prices in the last months of 2018. In December 2018 the consumer inflation rate was equal to 1.1 per cent and was one percentage point lower than in December of the previous year. The unemployment rate in Poland in 2018 recorded a drop by 0.8 percentage point, from the level of 6.6 per cent in December 2017 to 5.8 per cent in December 2018.

In the opinion of the Management Board of the parent company („Company”, „Elektrobudowa SA”) the following market trends and factors significantly influence the performance of the Group in the reporting period or are expected to have significant influence of its future: • macroeconomic situation of Poland’s economy; • the level of investment expenditure in the Polish market and other European Union countries; • regulatory environment; • fluctuations of exchange rates; • seasonality; • participation in execution of large investment projects in the Polish power sector; • value of the order backlog; • restructuring of the operating activity; • desinvestment activity; • production activity.

1.2 Outlook for market development

According to the state budget assumptions for 2019, the real GDP growth in 2019 will reach 3.8 per cent compared to 5.1 per cent in 2018. As announced by the Minister of Finance, Poland is going to face economic slowdown, which is consistent with global business cycle. Foreign institutions stipulate that more pessimistic scenario may become a reality. According to forecasts published in the middle of February 2019, the GDP growth in 2019 will reach 3.6 per cent (the forecast by the International Monetary Fund) or even 3.5 per cent (forecast by the European Commission). According to the estimates, the reasons for the slowdown will include: slowing down foreign demand, moderate private investments and limited potential of further growth of private consumer expenditure, which may be under the pressure of the growing inflation. The Budget Act approved by the Sejm in January 2019 assumes that this year inflation will have the 2.3 per cent rate against 1.6 per cent in 2018. As a result of the increase in electrical energy prices, the inflation level in the subsequent years may be under pressure of potential price rise of electrical energy. The government intervention in the energy market in the end of 2018 and beginning of 2019 helped curb the inflation in 2019, but its efficiency in the long run is doubtful. In May 2018 the European Commission published its proposal of the distribution of European funds among the member countries under the Cohesion Policy during the EU next financial perspective, for the years 2021-2027. The proposed value of funds allocated to Poland is EUR73bn in current prices, against EUR83bn in current prices which will be received by Poland within the present financial perspective. Despite a drop in the allocation value, Poland will remain the largest beneficiary of the EU funds. The structure of the allocation distribution for different activities is still unknown, but the scale of support in the sphere of infrastructure projects will most probably be enough to keep the significant role of the EU funds for the development of Polish building sector in the years to come.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Recently, the segment of building engineering for the power sector has maintained good growth rate owing to the progress in building of several big power units of 5.8GW total capacity. The projects in Jaworzno, Opole, Turów, Stalowa Wola and Warsaw- Żerań are under construction, of the advanced stage in certain cases, while the units in Kozienice, Włocławek and Płock have already been put to operation or successfully commissioned. The project of building a new coal-fired 1000MW unit located in Ostrołęka power plant is in the initial stage of completion. The Ministry of Energy says that the new unit in Ostrołęka will be the last facility of this type having so substantial value to be built in Poland. As announced, the supply of new projects in the area of energy production will be focused on smaller facilities, mostly using fuels other than coal. Several important investments are at the stage of planning or tenders, they include a power station in the “clean coal” technology at the Bogdanka coal mine, two new units 700MW each in Dolna Odra power plants complex, or a coal-fired unit in Puławy. In the opinion of Minister of Energy Krzysztof Tchórzewski, building of the block in Bogdanka should start in 2020. The public tender for building of the units in Dolna Odra power plant is planned to be announced in 2019, while the contract award for the unit in Puławy should take place in the first quarter of 2019. The purpose of the recently commissioned or currently under construction large investments in the conventional energy sector is to replace the generating capacity of the units which do not meet the environmental standards established by the European Union. In the long-term perspective, that is after the year 2030, further growth in electricity production will be conditional on the change of this structure. In November 2018 the Ministry of Energy submitted for public consultation a draft version of “Energy Policy of Poland until 2040” (PEP2040). Its concept of diversification of the installed capacity of the system assumes gradual phasing-out of conventional energy sources and the increase of the scale of investments in photovoltaic and offshore wind power plants, and also a nuclear power plant. Until 2040, the estimated value of investments to be implemented according to the policy will reach even PLN 400 billion, of which PLN 120-180 billion is the estimated cost of a nuclear power plant.

In the nearest years the implementation of further investment programmes in the electricity and gas transmission and distribution market must be expected. In the beginning of 2018 the Polish National Grid (PSE) announced public consultations of the development plan for 2018-2017. According to the draft, PSE expenditure on development of infrastructure in this period will exceed PLN12bn. After the 2017 stoppage in new contracts for transmission networks, the value of contracted works increased in 2018. Conclusion of three big, substantial turnkey contracts in 2018 helped attain the 2016 level of contracting, when the contracts for aggregate price of PLN0.7bn were signed. Nevertheless, they are values that significantly differ from the contracting levels in the year 2013-2015. In February 2019 did not conduct any big tender in the scope of building works. Low activity of the purchaser in 2019 may result in throwback to the low contracting level of 2017. In 2018 the transmission market entered the phase of growth in the volume of performed building works, the maximum annual value of which may exceed PLN2bn. Positive signals as to speed of implementation of the investment programme are also received form the gas transmission market. In August 2018 Gaz-System commenced public consultations regarding the plan of gas network development in 2020-2029. The plan involves the increase of the network length by around 3 800 km in the years 2020-2029. Vast part of building works planned under this programme was ordered within the recent three years. In 2016-2018 Gaz System signed 15 EPC contracts for construction of big pipelines for the aggregate net price of PLN 2.0bn. Long term development of the sectors mentioned above will show strong correlation with the growth rate of the energy production market, while the long-term growth in the gas transmission market will depend on the progress of works on further diversification of gas sources of supply from origins other that East.

In the perspective of the nearest years, efficient and successful tendering for contracts, whose scale could replace the currently performed strategic projects, is vital for the financial liquidity. Supplementation of the current order backlog proportional to the progress in completion of the strategic projects is one of priorities of the Management Board of the parent company. Although the impact of the strategic contracts on performance of the Company and Group is tremendous, additional contracts currently obtained and planned to be obtained in the nearest future should have an increasing share in performance of the Group, providing it with additional inflows.

1.3 The strategy adopted by the issuer and its corporate group

ELEKTROBUDOWA SA as a public company listed on the Warsaw Stock Exchange is committed to consistent building of the value for all of its Shareholders. At present the Management Board is drawing up a new, seven-year Strategic Development Plan for the Group covering the years 2019-2025. The plan is designed to provide a strong impulse for development, through setting clear strategic goals which fulfil the SMART criteria (Specific, Measurable, Attainable, Realistic, Time-Bound) and the plan of strategic activities which will lead to attaining these goals . The new Strategic Development Plan is intended to restore the sound financial condition of ELEKTROBUDOWA SA, strengthen its position in the Polish market, increase its activity in foreign markets and improve its profitability through control and reduction of project-related risks.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

2 Basic information about ELEKTROBUDOWA SA and ELEKTROBUDOWA Group

2.1 Business profile

The core business activity of ELEKTROBUDOWA Group comprises broadly understood execution of complete electrical facilities and systems and manufacture of power equipment.

The parent company ELEKTROBUDOWA SA is the biggest Polish company in the electrical installation sector which manufactures power equipment, provides comprehensive electrical services and builds complete facilities for power sector and the industrial sector. The Company produces power equipment and offers provision of electrical installations. Its offer is comprehensive: comprises engineering, design and delivery of electrical equipment, installation, commissioning tests and start up. Products manufactured by the Company include low and medium voltage switchgear, high voltage gas-insulated switchgear, busducts, containerized transformer and distribution substations, control, signaling and protection devices. ELEKTROBUDOWA SA has its customers among power plants, heat and power plants, electricity distribution companies, metal ore mines, lignite mines, heavy industry, chemical and food processing plants, public utility building.

The business activity of the subsidiary ENERGOTEST sp. z o.o. comprises services related to construction, modernization and operation of power generating facilities, production of data processing devices, electricity switching and control devices, installation and maintenance of switchgear and controlgear, also tests and technical surveys.

Principal business activity of the associate VECTOR Ltd. comprises manufacturing of electrical components, parts for electrical vacuum devices, and also providing construction works and wholesale of electrical production facilities, including communication devices.

Business scope of the associate SAUDI ELEKTROBUDOWA LLC comprises sale of low, medium and high voltage electrical systems, including switchgear and distribution panels and electrical substations as well as installation and maintenance services for energy control and distribution systems.

95 % of the Group’s revenue have been generated by the parent company, ELEKTROBUDOWA SA.

2.2 Divisions and branches

As at 31 December 2018 , the organizational structure of ELEKTROBUDOWA SA included two divisions, identified according to their scope of business, corresponding to the identified areas of activity. The divisions are not subject to disclosure in the National Court Register.

Principal business activity of the Divisions: The Production Division manufactures switchgear (low voltage, medium voltage, high voltage gais-insulated), containerized mobile substations, busducts and has also a mechanical processing plant.

The Project Execution Division renders services in the scope of domestic and foreign project management and turnkey projects execution.

The Project Execution Division has a Branch in Finland. This permanent establishment has been established in consequence of signing long-term contracts for works to be performed outside Poland. Business activity of the Branch was registered in Finland according to the applicable double tax treaty, to which Poland is a party.

2.3 Structure of ELEKTROBUDOWA Group

ELEKTROBUDOWA Group consists of the parent company ELEKTROBUDOWA SA and its subsidiaries and associates.

An organisational chart of the Group as at 31 December 2018:

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

ELEKTROBUDOWA SA

associates subsdiaries

the Power Equipment SAUDI Production Plant ENERGOTEST sp. z o.o. ELEKTROBUDOWA LLC VECTOR Ltd.

2.4 Organisational and equity ties

% interest in Method of Company Registered seat share capital consolidation and % vote

a subsidiary ENERGOTEST sp. z o.o. Gliwice, 100%

Poland full method a subsidiary ELEKTROBUDOWA UKRAINE Ltd. (*) Zaporizhia 62%

Ukraine full method an associate The Power Equipment Production Plant Votkinsk, 49%

"VECTOR” Ltd. Russia equity method an associate SAUDI Riyadh, 33% ELEKTROBUDOWA LLC the Kingdom of Saudi Arabia equity method *) On 12 June 2018 the parent company lost control over the subsidiary

2.5 Changes in the structure of the Group

The Supervisory Board of the parent company ELEKTROBUDOWA SA adopted a resolution on withdrawal from the subsidiary ELEKTROBUDOWA UKRAINE Ltd., in which it held a 62% share in capital. On 12 June 2018 the Management Board of the Company submitted a statement of withdrawal from the company for the attention of Director of ELEKTROBUDOWA UKRAINE Ltd., the company having its registered office in Zaporizhia. According to the Ukrainian law, with the moment when the above mentioned statement was served, ELEKTROBUDOWA SA lost control over ELEKTROBUDOWA UKRAINE Ltd. In the consolidated financial statements the Group obtained a positive result in the amount of 43 thousand PLN, following the settlement of withdrawal from ELEKTROBUDOWA UKRAINE Ltd.

2.6 Changes to the rules of managing the Company and the Group

In 2017, no changes were introduced in the rules of managing the Group.

3 Business activity of ELEKTROBUDOWA Group and ELEKTROBUDOWA SA

3.1 External and internal factors important for development of ELEKTROBUDOWA Group

Irrespective of the factors described below, one of key issues vital for the development of ELEKTROBUDOWA Group will be the results of negotiations with the financial institutions with regard to provision of funds and issuing guarantees for. Details concerning the current stage of the negotiations with the banks financing the activity of ELEKTROBUDOWA were disclosed in

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

the current report 23/2019 of 23 April 2019 and in note 2 to the separate Financial Statements of the Company and note 1.2 to the Consolidated Financial Statements.

In the opinion of the Management Board of the parent company the following external and internal factors essentially influence performance of the Group in the reporting period or are expected to have an essential impact on its future:

• External factors: - Poland’s and global economic situation; - situation in the power sector in Poland and in the world; - competition in the market where ELKTROBUDOWA Group operates; - financial situation and market position of customers, consortium partners, subcontractors and suppliers of ELKTROBUDOWA Group; - timely settlement of payments by the purchasers, - market prices of materials used for production by ELKTROBUDOWA Group and of third party services as well as costs of employee benefits; - currency exchange rates, - involvement of financial institutions in respect of providing funds and issuing contract bonds, - technical progress in power equipment, mainly switchgear and busducts, - changes in tax regulations.

• Internal factors: - concluding and performance of material contracts by Companies of ELEKTROBUDOWA Group; - maintaining financial liquidity of Companies of ELEKTROBUDOWA Group; - ability to achieve the assumed growth in performance and efficiency in the process of reorganization, - improvement of management processes in Companies of ELEKTROBUDOWA Group, including the process of managing long-term contracts and operating costs (“fixed” costs); - retaining of and recruiting new well-qualified staff.

3.2 Essential risk and threat factors

ELEKTROBUDOWA Group identifies the following threats and risk which may affect its business in the nearest future:

Risks associated with macroeconomic conditions or relating to the industry sector in which the companies of ELEKTROBUDOWA Group operate: • risks deriving from macroeconomic situation, such as GDP growth rates, unemployment rate, salaries/wages, growth rate of industrial and building-installation production, the level of investment expenditure, currency exchange rates; • risks associated with the political environment, energy policy and uncertainties relating to its future changes; • foreign currency risk; • interest rate risk; • competition growth risk; • risk of growth of subcontracting costs.

Risk factors specific for the Companies of ELEKTROBUDOWA Group:  risk of failure to perform or improper performance of contracts by the Companies of the Group, risk of non-payment or delay in payment by purchasers in respect of contracts performed by the Companies of the Group  risk associated with performing contracts of high contract price and the limited range of recipients of products and services provided by Companies of the Group;  risk of increase in operating costs;  risk of underestimating the costs of project execution;

Furthermore, the Company identifies additional risks where the exposure of Companies of the ELEKTROBUDOWA Group or risk materialisation may depend on the results of negotiations with the financial institutions, such as:

 risk associated with obtaining new contracts;  risk associated with not obtaining financial guarantees necessary to be awarded and perform contracts;  risk associated with unavailability of external financing on the assumed level and expected terms;  risk associated with inability of the Group to maintain financial liquidity on an appropriate level.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Detailed information concerning the current stage of negotiations with the banks financing the activity of ELEKTROBUDOWA was provided in the current report 23/2019 of 23 April 2019 and is also presented in note 2 to the separate financial Statements of ELEKTROBUDOWA SA and the same note of the Consolidated Financial Statements. While the financial statements have been prepared under the assumption of the ability to continue as a going concern in the foreseeable future, in the situation that the assumptions laid down in the note are not implemented and the desired effects of undertaken steps are not achieved, the company could be facing further restriction of its capability to obtain funds necessary for conducting current operating activity.

Regulatory risk factors:  risk associated with changes in the regulations relating to the power sector;  risk associated with environmental protection;  risk associated with changes of tax regulations, their interpretation and changes of the individual interpretations of tax regulations;  risk associated with entering into contracts with the related parties.

Information about the objectives and rules of risk management adopted by the Group is provided in the consolidated financial statements for the year ended 31 December 2018 (note 6).

3.3 Atypical factors and events which had a significant impact on performance in the financial year

3.3.1 Contract with PKN Orlen S.A. for building of Metathesis unit

Since August 2016 the Company has been performing a contract for building of Metathesis Unit for Polski Koncern Naftowy Orlen S.A. The contract price is PLN 132 million and EUR 26 million. The scope of the contract covers turnkey engineering, procurement and construction of Metathesis Unit in PKN Orlen S.A. production plant in Płock with the 24-month time for completion.

PKN Orlen S.A. („PKN Orlen”) provided ELEKTROBUDOWA SA („Company”) with a basic design of the installation received from the licensor, i.e. Lummus Technology Inc. from the CB&I group (the USA) and a Building Permit Decision together with a building design.

During performance of the contract a number of events occurred, defects and deficiencies of the Basic Design were found, which caused delays in engineering and performance of works. They included inconsistences or discrepancies, deficiencies caused by the necessity to adapt the Basic Design to the site conditions, it was also necessary to make amendments after the HAZOP examination. Those circumstances needed to be consulted with the Purchaser, Licensor and again with Purchaser; they also involved the necessity to perform adaptation work and some additional works. In effect of the above occurrences the Company had to perform numerous additional works and change orders, which contributed to delays in contract performance, a drop in margin and recognition of a PLN 40 million loss on the contract.

Further, the Company suffered a delay at the stage of Commissioning, which was caused by suppliers of pumps and gas chromatographs. The Company is considering the possibility to lay a claim against manufacturers of the equipment.

Following the failure to meet the contractual deadline for handover of the installation, the Management of the Company, after having carried out a relevant analysis in the course of establishing the result for H1 2018, decided to adjust the contract valuation by downward adjustment of sales revenue. In consequence, the 2018 financial result of the Company was reduced by approx. PLN 61 million. The company adjusted the contract valuation in accordance with the IFRS 15 and a general prudence concept followed in drafting the financial statements, however, in the opinion of the Company the delay in the contract performance was principally caused by reasons not attributed to the Company, as it mainly resulted from changes and deficiencies of the basic design and, delays caused, in its opinion, by technical problems of equipment delivered by third party suppliers (mainly pumps and gas chromatographs).

In November 2018 PKN Orlen informed the Company about charging liquidated damages of PLN 29 million (current report 47/2018) for late performance of some works under the contract and indicated that the damages had partial nature as the installation had not been taken over for operation as at the date of issuing the debit notes.

In the opinion of the Management, the liquidated damages, which the Company may have to pay, have been overestimated compared with the prevailing market standards. As stipulated in the contract the contractor may release itself from payment of the liquidated damages to the extent it proves that the delay occurred for reasons not attributable to it. Considering the conditions in which the contract was performed, the Management Board is of the opinion that there are reasonable grounds to request their reduction.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

On 5 April 2019 a commissioning document was signed. As at the date of approval of these financial statements the works relating to handing over the installation for operation were completed. It is expected by the Management that a certificate of acceptance of the plant for operation will be signed on 30 April 2019. After the certificate is signed, the Company will apply to PKN Orlen S.A. for final settlement of payment for the performed work.

On 23 April 2019 ELEKTROBUDOWA SA was served a request for summons to a conciliation hearing submitted on behalf of Polski Koncern Naftowy ORLEN S.A. in which PKN Orlen is requesting to summon the Company to a conciliation hearing concerning payment of PLN 15 million together with statutory interest by the Company to PKN Orlen. The claim of PKN Orlen concerns the liquidated damages charged in November 2018, in the part which has not yet been deducted by PKN Orlen from the remuneration to which the Company is entitled in respect of performance of the contract. The submitted request for summons includes preliminary conciliation proposals put forward by PKN Orlen, and the Company is also willing to settle the dispute amicably. The Company is going to present relevant conciliation proposals during the proceedings.

The table below presents the impact of performance of the contract for building the Metathesis Unit for PKN Orlen on the selected items of the consolidated statement of profit or loss in 2018:

Impact of Metathesis on the 2018 performance

12 months 12 months ended Decrease in Loss on the total ended Statement of profit or loss 31 December revenue contract METATHESIS 31 December 2018 2018 (if Metathesis is eliminated) Sales revenue 763 496 (61 424) 69 465 8 041 755 455 Cost of goods sold (829 492) - (109 534) (109 534) -719 958 Gross profit / (loss) on sales (65 996) (61 424) (40 069) (101 493) 35 497 Selling costs (954) - - - (954) General administrative expenses (21 079) - - - (21 079) Other operating income 24 182 - - - 24 182 Other operating costs (23 295) - - - (23 295) Operating profit / (loss) (87 142) (61 424) (40 069) (101 493) 14 351 Finance income 43 - - - 43 Finance costs (1 882) - - - (1 882) Share of profit of the associates 2 766 - - - 2 766 Gross profit / (loss) (86 215) (61 424) (40 069) (101 493) 15 278

3.4 Structure of sales revenue

3.4.1 Structure of sales revenue generated by ELEKTROBUDOWA Group

The structure of revenue by products generated by the Group in 2018 and 2017 is presented in the table below:

12 months ended 31 12 months ended 31 Change Structure of net revenue from sales December 2018 December 2017 of products, goods and materials amount amount amount % share % share % share in PLN’000 in PLN’000 in PLN’000 construction and erection services 597 422 78% 719 943 80% (122 521) -17% electrotechnical products 140 013 19% 159 875 18% (19 862) -12% other services 24 011 3% 21 150 2% 2 861 14% materials 2 051 0% 1 933 0% 118 6% Total 763 496 100% 902 901 100% (139 405) -15% 7

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Sales revenue in 2018 reached the amount of PLN 763 496 thousand and recorded a drop on the previous year by PLN 139 405 thousand.

Participation of the operating segments of ELEKTROBUDOWA Group in 2018 and 2017 sales was as follows:

Project Production Automation Project Revenue from sales of construction and erection Execution Segment Segment Execution services by business segments Segment Segment

12 months ended 31 December 2018 559 129 9 953 28 340 597 422

12 months ended 31 December 2017 661 291 26 178 32 474 719 943

Sales made by the Project Execution Segment of ELEKTROBUDOWA Group

The share of the Project Execution Segment in total sales of the Group approximated the previous year’s level and was 79%.

Major customers of the Project Execution Segment in 2018, by volume of sales:

Sales revenue in Customer Contract/ order PLN’000 Emerson Process supply of electrical systems form the construction of the supercritical 87 664 Management sp. z o.o. 910MW power unit in the power station Jaworzno III - Power Pant II AREVA NP GMBH Supplies and installtion works for the Nuclear Power Plant in Finland 65 309 PSE S.A. Modernization of the 220/110kV station Konin 58 231 Extension and modernization of SKAWINA station including connection PSE S.A. 41 025 of the 2x2x400kV line Polimex Opole sp. z o.o. Performance of work for the project "Building of Units 5 and 6 in the 38 091 sp. k Opole Power Plant" Wood Environment & Construction of Aegis Missile Defense System Complex in Redzikowo 23 083 Infrastructure Solutions

Basell Orlen Polyolefins Sp. Performance of building works relating to the project „Modernization 19 331 z o.o. of the Polypropylene 3 (PP3) plant and NPP Logistics Platform

Construction of a new heat generation unit with fluidized bed boiler, Tauron Ciepło Sp. z o.o. heating and condensing turbine and associated plants in the generation 14 769 plant, Tychy Electrical installation works – Building of a new power unit in Turów Budimex S.A. 13 078 power plant Delivery, installation and commissioning of electrical equipment and Tauron Serwis 10 818 systems of the external coal handling plant of the 910MW unit Turnkey engineering, procurement and construction of the Metathesis PKN Orlen S.A. 8 041 Unit in the Production Plant in Płock

GE Power Warszawa Commissioning of units 5 and 6 in 2X900MW Opole power plant 3 001

Modernization of primary and secondary circuits of the generator Elektrownia Opole 2 548 connection of units 1- 4 Modernization of automation systems of units 9 and 10 in Kozienice ENEA Wytwarzanie 1 148 power plant EL Opole - Units 5 and 6 – protection, synchronization and metering Polimex Opole 1 106 systems Modernisation of excitation systems of TGH-120 generators No. 7, 8, 9, PGNiG TERMIKA 1 104 10 installed in EC Siekierki, Warsaw

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Major construction contracts (including amendments) concluded by the Companies of ELEKTROBUDOWA Group in 2018:

Concluded on Scope of contract Investor Contract price in PLN’000

Polimex Opole Sp. z o.o. Sp. k. Additional works for the project of Building 2018-03-15 (former Polimex Projekt Opole Sp. 5 433 of units 5 and 6 in Opole power plant z o.o.)

Automation and I&C systems and fitting Gdańska Stocznia "Remontowa" 2018-03-22 7 089 works im. J. Piłsudskiego SA

Construction of a coupling control room in Grupa Azoty Z-dy Azotowe 2018-05-16 bldg. H-40 stage II and modernization of 3 890 "Puławy" S.A. R220 switchgear

Construction of a 110/6kV connection for 2018-05-21 JSW KOKS S.A. 16 835 the supply system of the Radlin Coke Plant

Construction of a 110/6kV connection for 2018-06-29 JSW KOKS S.A. 1 365 the supply system of the Radlin Coke Plant

Polimex Opole Sp. z o.o. Sp. k. Additional works for the project of Building 2018-05-23 (former Polimex Projekt Opole Sp. 3 586 of units 5 and 6 in Opole power plant z o.o.) Polimex Opole Sp. z o.o. Sp. k. Delivery, installation, cable connection, 2018-05-30 (former Polimex Projekt Opole Sp. 3 656 cable trays and earthing of the cable trays z o.o.)

Additional electrical installation works in 2018-06-29 AREVA NP GMBH 50 158 the Nuclear Power Plant in Finland

Change of the scope + extension of the contract for the construction of Aegis Wood Environment & 2018-05-31 6 274 Missile Defense System Complex in Infrastructure Solutions, Inc. Redzikowo Modernization of the 110kV switchyard in 2018-05-16 the 110/15kV station in Grodzisk in ENEA Operator Sp. z o.o. 3 300 connection with connection of FW Ujazd

Engineering, delivery, performance, 2018-07-09 commissioning of cable trays and 0.4kV Euroglas Polska Sp. z o.o. - Ujazd 12 675 cables

Polimex Opole Sp. z o.o. Sp. k. Additional works for the project: Building of 2018-09-21 (former Polimex Projekt Opole Sp. 3 393 Units 5 and 6 in Opole power plant z o.o.) - Warszawa

Construction and erection works relating to Tauron Dystrybucja SA 2018-08-31 re-building of the network switching station 2 086 Kraków RS-16 Ptaszków

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Construction and erection works relating to Tauron Dystrybucja SA 2018-08-31 re-building of the network switching station 1 600 Kraków RS-16 Ptaszków

Connection of the Traction Substation PKP ENEA Operator Sp. z o.o. 2018-09-28 6 890 Nekla (GPZ Nekla) Poznań

1150-0001 Engineering and construction of Fenice Poland Sp. z o.o. 2018-08-14 gas-fueled boiler house 3x38 MW at the site 21 062 Bielsko-Biała of FCA Tychy Engineering and construction of gas-fueled Fenice Poland Sp. z o.o. 2018-08-14 boiler house 3x38 MW at the site of FCA 3 900 Bielsko-Biała Tychy – the scope of a consortium partner Engineering and construction of gas-fueled Fenice Poland Sp. z o.o. 2018-08-14 boiler house 3x38 MW at the site of FCA 510 Bielsko-Biała Tychy – the scope of OP

Complete modernization of generator Enea Elektrownia Połaniec SA 2018-11-30 3 105 busducts of the power unit No. 5 (former ENGIE Energia Polska S.A.)

Polimex Opole Sp. z o.o. Sp. k. Additional works for the project: Building of 2018-10-16 (former Polimex Projekt Opole Sp. 3 528 Units 5 and 6 in Opole power plant z o.o.)

Sales of the Production Segment according to products of ELEKTROBUDOWA Group

The 2018 sales of the production activity generated the revenue of PLN 140 013 thousand, which was a 12% drop on the previous year. Sales revenue is recognized at the moment the goods are transferred to the customer.

Structure of sales of goods with breakdown to products is presented in the table below:

12 months ended 31 December 2018 12 months ended 31 December 2017 Structure of revenue from sale of products value in PLN’000 % share value in PLN’000 % share Medium voltage switchgear 56 362 40% 58 556 36% Low voltage switchgear 17 927 13% 20 713 13% DC switchgear 6 449 5% - - Busducts 15 020 11% 42 582 27% OPTIMA switchgear 17 568 13% 16 106 10% Containerised substations 20 354 14% 15 585 10% Other products 6 333 4% 6 333 4% Total 140 013 100% 159 875 100%

A key item in sales of ELEKTROBUDOWA Group is switchgear, the equipment installed in transformer stations. Swichgear panels are used for electricity distribution and also provide protection of electrical equipment against the effects of short- circuit or overvoltage.

Sales of switchgear in 2018 generated the revenue of PLN 98 306 thousand, and was by PLN 2 931 thousand greater compared with the previous year.

Major customers in respect of sales of the Production Segment in 2018:

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Sales revenue in Customer Contract / order PLN’000 FORTUM POWER Manufacture and delivery of ELPE busduct (IPB) 3 565 AND HEAT OY JSW KWK Extension of RGD-2 6kV switchgear on the level of 650 m by additional panels of typu KNURÓW- PREM-G1Dm swgr, including specifications, for the coal mine KWK "Knurów- 1 820 SZCZYGŁOWICE Szczygłowice" Ruch Szczygłowice. Polimex Opole Engineering, supply, installation, commissioning and participation in trial run of AC 473 sp. z o.o. sp. k and DC switchgear (small power / guaranteed voltage) - Package P43 Narodowe Centrum Badań Jądrowych Overhaul maintenance of high voltage switchgear in "Świerk" electrical station. 1 250 (National Centre for Nuclear Research) Narodowe Modernization of a MV battery centre located in the Main Electrical Station „Świerk", Centrum Badań 633 at the site of the National Centre for Nuclear Research in Otwock Jądrowych Package 22 Delivery and installation of MV 10kW and 6kV switchgear, including spare Polimex Opole parts and specialist equipment, maintenance tools, including supervision over 758 sp. z o.o. sp. k commissioning of MV switchgear (participation in start-up) Polimex Opole Delivery, installation and commissioning of LV busducts (690V and 400V) - Package P- 452 sp. z o.o. sp. k 34 INTERNATIONAL R011-A and R011-B switchgear; Modernization of the transformer and distribution PAPER-KWIDZYN stations R011-A and R011-B including transformer bays, installation of fibre optic 351 sp. z o.o. cable and RP-15 station in U14 U15 building. INTERNATIONAL PAPER-KWIDZYN Electrical works relating to building of new electrical precipitators of the soda boiler. 548 sp. z o.o.

Sales markets of ELEKTROBUDOWA Group

Sales revenue generated by the Group, categorized according to sectors of economic activity

12 months ended 31 December 2018 12 months ended 31 December 2017 Areas of activity by sectors of the economy value in PLN’000 % share value in PLN’000 % share Power generation 426 250 56% 360 500 40% Chemical industry 66 904 9% 223 107 25% Mining 31 986 4% 49 703 6% Paper & pulp 7 524 1% 13 576 2% Industrial automation 3 797 0% 105 0% Power distribution 14 893 2% 9 701 1% Metallurgy 15 699 2% 4 381 0% Transport 8 909 1% 1 615 0% Automotive 11 934 2% 1 214 0% Other areas 87 744 11% 95 085 10% Exports 87 856 12% 143 914 16% Total 763 496 100% 902 901 100%

In 2018, the power generating sector was, traditionally, the biggest source of income for the Group. The biggest project executed for this sector was the contract for works relating to construction of a new supercritical 910MW power unit in the Jaworzno power plant. Sales for this project amounted to PLN 87 664 thousand, and had the 11.48% share in total sales revenues.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Material in the sales by industry was also the share of the chemical industry. The biggest revenue generated in this sector concerned modernization of the polypropylene plant and NPP logistics platform for Basell Orlen Polyolefin sp. z o.o. (sales revenue amounting to 19 331 thousand PLN, i.e. 2.35% in total sales revenue).

The next major item of revenue were other areas. This category includes Construction of Missile Defense System Complex in Redzikowo for Wood Environment & Infrastructure Solutions, Inc. The sales in 2018 amounted to PLN 23 083 thousand.

The above named sectors of economy have been on the top of the Group’s sales structure for years.

Geographical structure of sales of ELEKTROBUDOWA Group

12 months ended 31 December 2018 12 months ended 31 December 2017 Geographical structure value in PLN’000 % share value in PLN’000 % share

Poland 675 640 88% 758 987 84% Finland 72 617 10% 128 326 14% Other countries 15 239 2% 15 588 2% Total 763 496 100% 902 901 100%

The main markets in which ELEKTROBUDOWA Group operates are: • Poland • Finland

Revenue from sales to Finland were mainly relating to the performance of the contract for electrical and I&C systems for the Nuclear Power Plant OLKILUOTO 3, Finland. The value of sales invoiced for this contract in 2018 amounted to PLN 68 578 thousand.

3.4.2 The structure of sales revenue of ELEKTROBUDOWA SA

The structure of sales revenue generated by ELEKTROBUDOWA SA is presented below:

12 months ended 31 12 months ended 31 Change Structure of net revenue from sale of December 2018 December 2017 products, goods and materials value in value in value in % share % share % share PLN’000 PLN’000 PLN’000 construction and erection services 570 862 79% 689 786 80% (118 924) -17% electrotechnical products 134 565 19% 155 221 18% (20 656) -13% other services 16 853 2% 16 229 2% 624 4% materials 2 051 0% 1 933 0% 118 6% Total 724 331 100% 863 169 100% (138 838) -16%

In 2018 and in 2017 the operational segments of ELEKTROBUDOWA SA participated in sales as follows:

Revenue from sales of construction and erection services by Project Execution Production Total business segments Segment Segment

12 months ended 31 December 2018 560 909 9 953 570 862

12 months ended 31 December 2017 663 608 26 178 689 786

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The breakdown of sales of products by type is presented below:

12 months ended 31 December 2018 12 months ended 31 December 2017 Structure of revenue from sale of products value in PLN’000 % share value in PLN’000 % share Medium voltage switchgear 56 362 42% 58 556 38% Low voltage switchgear 17 983 13% 20 769 13% DC switchgear 6 449 5% 0 0% Busducts 15 020 11% 42 582 28% OPTIMA switchgear 17 568 13% 16 106 10% Containerised substations 20 354 15% 15 585 10% Other products 829 1% 1 623 1% Total 134 565 100% 155 221 100%

Geographical structure of sales of ELEKTROBUDOWA SA

12 months ended 31 December 2018 12 months ended 31 December 2017 Geographical structure value in PLN’000 % share value in PLN’000 % share

Poland 637 541 88% 719 631 83% Finland 72 617 10% 128 326 15% Other countries 14 173 2% 15 212 2% Total 724 331 100% 863 169 100%

The main markets in which ELEKTROBUDOWA SA operates are: • Poland • Finland

Sales markets of ELEKTROBUDOWA SA

Areas of activity 12 months ended 31 December 2018 12 months ended 31 December 2017 by sectors of the economy value in PLN’000 % share value in PLN’000 % share Power generation 400 110 55% 329 841 38% Chemical industry 62 797 9% 217 849 25% Mining 31 304 4% 49 260 6% Paper & pulp 7 204 1% 13 576 2% Industrial automation 1 678 0% 105 0% Power distribution 12 434 2% 7 936 1% Metallurgy 14 313 2% 3 322 0% Transport 8 909 1% 1 615 0% Automotive 11 934 2% 1 214 0% Other areas 86 858 12% 94 913 11% Exports 86 790 12% 143 538 17% Total 724 331 100% 863 169 100%

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

3.5 Prospects for business development in the nearest year

In the current year ELEKTROBUDOWA group is going to continue its activity in all major sectors of the power market in Poland, and also in the markets of Finland and Russia.

In 2019 the growth and prospects for development of ELEKTROBUDOWA Group and ELEKTROBUDOWA SA will be influenced by the following factors and events: • ensuring the liquidity and being provided with access to further guarantees issued by Banks or insurance companies in order to enable performance of new contracts. Details about the current stage of negotiations with the banks financing the business activity ELEKTROBUDOWA were presented in the current report 23/2019 of 23 April 2019, and also in note 1.2 to the Consolidated financial statements and note 2 to the separate financial statements of ELEKTROBUDOWA SA; • the outcomes of the negotiations with PKN ORLEN on the liquidated damages for delay in performance of the contract for building of the Metathesis unit are outlined in point 3.3.1; • obtaining new, significant contracts will depend on the outcomes of the negotiations with the financial institutions; • the level of competition in tenders.

The Group’s order backlog as at 31 December 2018 had the amount of PLN 619 746 thousand. The contracts awarded in the construction segment for the power sector constitute a vast part of the order backlog.

In 2019 in the power segment ELEKTROBUDOWA Group plans to tender for contracts in the Polish and foreign markets, which total value is PLN 3.2 billion; the plans for 2019 assume that it will be awarded contracts for the total value of at least PLN 555.8 million. Implementation of these assumptions is conditional on the outcome of the negotiations with the financing institutions on provision of necessary funds in the form of contract guarantees, as presented in more details in point 3.1. of this report.

3.6 Sources of supply

In 2018 neither ELEKTROBUDOWA Group nor ELEKTROBUDOWA SA was dependent on a single supplier whose share in the their sales revenues would exceed 10%.

3.7 Contingent receivables and liabilities

Sureties, guarantees and other contingent liabilities and receivables are presented in note 38 to the Consolidated financial statements of ELEKTROBUDOWA Group and in note 38 to the financial statements of ELEKTROBUDOWA SA.

As at 31 December 2018 and as at 31 December 2017 neither the parent company ELEKTROBUDOWA SA nor the subsidiaries extended any sureties of credits or loans.

In 2018 the parent company ELEKTROBUDOWA SA and the subsidiaries did not receive guarantees from the related companies and did not provide them with any guarantees.

3.8 The use of proceeds from the issue of securities

In the period covered by this report no securities were issued etiher within the ELEKTROBUDOWA Group or outside the Group.

4 Analysis of the position of ELEKTROBUDOWA SA in respect of its assets and finance

4.1 Major economic and financial figures concerning ELEKTROBUDOWA SA

The financial situation of ELEKTROBUDOWA SA in 2018 may be characterised by the selected economic and financial figures recognised in the statement of financial position and the statement of profit or loss (summarized together with the comparative data for 2017 in the table below).

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

12 months ended 31 12 months ended 31 Change December 2018 December 2017 Statement of profit or loss value in value in value in % share % share % change PLN’000 PLN’000 PLN’000 Sales revenue 724 331 100,0 863 169 100,0 (138 838) 16,1 Cost of goods sold (797 115) 110,0 (772 853) 89,5 (24 262) 3,1 Gross profit / (loss) on sales (72 785) 10,0 90 316 10,5 (163 101) 180,6 Selling costs (779) 0,1 (1 169) 0,1 390 33,3 General administrative expenses (17 290) 2,4 (16 985) 2,0 (305) 1,8 Other operating income 23 869 3,3 7 278 0,8 16 591 228,0 Other operating costs (16 029) 2,2 (13 017) 1,5 (3 012) 23,1 Operating profit / (loss) (83 014) 11,5 66 423 7,7 (149 437) 225,0 Finance income 13 914 1,9 4 042 0,5 9 872 244,2 Finance costs (10 663) 1,5 (3 923) 0,5 (6 740) (171,8) Gross profit / (loss) (79 763) 11,0 66 542 7,7 (146 305) 219,9 Income tax 12 907 1,8 (14 512) 1,7 27 419 188,9 Net profit / (loss) (66 856) 9,2 52 030 6,0 (118 886) 228,5

The net loss on sales in 2018 amounted to PLN 79 763 thousand and was generally contributed to the delay in performance of the contract for Building of the Metathesis Unit carried out for PKN Orlen and the PLN 101 493 thousand loss generated on this contract in (of which PLN 61 424 thousand as a decrease of the sales revenue, refer to point 3.3.1).

According to the adopted accounting standards, for the contracts open as at the balance sheet date the Company recognises the so called variable compensation, which means that a part or the whole of a variable amount is only included in the transaction price if, and to the extent that, it is highly probable that its inclusion will not result in a reversal of significant accumulated revenue in the future and the uncertainty has been subsequently resolved. At the moment the variable compensation is identified the Company estimates its amount and adjusts the contract price by reducing the contractual price. As at 31 December 2018 the Company reduced the sales revenue by a total amount of PLN 63 569 thousand. Of which PLN 61 424 thousand results from the dispute on performance of Building of the Metathesis Unit” carried out for PKN Orlen S.A. Additionally, in the case when the total costs related to a construction contract performance exceed total expected revenue, the entities of the Group, at the moment it is identified, create provisions for losses, recognized in the consolidated statement of financial activity in the item line: “Liabilities due to valuation of long-term contracts”. . As at 31 December 2018 the provisions for losses on contracts amounted to PLN 10 784 thousand. In 2018 the balance of provisions for losses on contracts increased by PLN 9 252 thousand.

The selling costs did not substantially change in 2018 and dropped by PLN 390 thousand on the previous year, while the general administrative expenses rose by PLN 305 thousand. The costs had a 2.4% share in the sales revenue, compared to 2.10% in 2017.

The result of other operating activity in the 12 months of 2018 was a positive number of PLN 7 840 thousand. Other operating income in the period of 12 months of 2018 amounted to PLN 23 869 thousand and included the reversal of liquidated damages and penalties in the amount of PLN 5 732 thousand, the result of receivables impairment allowances of PLN 5 001 thousand, gains due to penalties and compensations received in the amount of PLN 5 234 thousand, and also written off prescribed debt of PLN 2 713 thousand. Major items of other operating expenses were: liquidated damages for failure to meet the contractual obligations in the amount of PLN 2 870 thousand, costs of employee benefits and compensations in the amount of PLN 2 551 thousand, and the PLN 2 333 thousand amount of the provision for litigations. Comparing to 2107: the result of other operating activity was negative and was PLN 5 739 thousand. Other operating income items included the result of receivables impairment allowances of PLN 2 518 thousand, interest on cash at banks amounting to PLN 1 001 thousand, penalties and compensations received in the amount of PLN 1 117 thousand and the reversal of the inventory impairment allowance of PLN 702 thousand.

In the period of 12 months of 2018 the Company generated a positive result of the financial activity, PLN 3 251 thousand. The result was owed to the PLN 10 912 thousand amount of the dividend received from the associate “Vector” based in Russia.

Considering the unfavourable situation on the contract for „Building of the Metathesis Unit” for PKN Orlen S.A., a relevant provision that was created, and trends in the market environment (a decrease of the level of orders for turnkey projects), after many profitable years ELEKTROBUDOWA SA closed the year with a net loss of PLN 66 856 thousand.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The statement of financial position of ELEKTROBUDOWA SA as at 31 December 2018 compared to the statement as at 31 December 2017 is presented in the table below:

As at As at Change 31 December 2018 31 December 2017 Statement of financial position value in % value in % value in PLN’000 share PLN’000 share PLN’000 ASSETS Non-current assets 230 225 29.8 217 778 24.8 12 447 Property, plant and equipment 85 636 11.1 84 125 9.6 1 511 Intangible assets 23 697 3.1 21 479 2.4 2 218 Investments in subsidiaries 36 200 4.7 44 981 5.1 (8 781) Investments in associates 21 516 2.8 21 516 2.5 (0) Trade receivables and other financial receivables 2 064 0.3 4 427 0.5 (2 363) Deferred income tax assets 59 870 7.8 39 517 4.5 20 353 Other non-financial assets 1 242 0.2 1 733 0.2 (491) Current assets 541 546 70.2 659 368 75.2 (117 822) Inventories 69 854 9.1 42 253 4.8 27 601 Trade receivables and other financial receivables 332 570 43.1 331 237 37.8 1 333 Income tax receivables 10 639 1.4 1 146 0.1 9 493 Receivables due to valuation of long-term contracts 103 666 13.4 154 822 17.7 (51 156) Other non-financial assets 5 288 0.7 18 360 2.1 (13 072) Cash and cash equivalents 19 529 2.5 111 550 12.7 (92 021) TOTAL ASSETS 771 771 100.0 877 146 100.0 (105 375)

As at 31 December 2018 the value of the assets dropped by PLN 105 375 thousand compared to the amount as at the end of December 2017 and was PLN 771 771 thousand. The main changes in the statement of financial position are attributable to the following events:

Non-current assets

The non-current assets increased by PLN 12 447 thousand, principally due to the following events: • an increase in the balance of the intangible assets by PLN 2 218 thousand, which includes the expenditure on development work and the implementation of the class ERP system; • a decrease in the balance of investment in subsidiaries, following the impairment loss allowance for shares in ENERGOTEST sp. z.o.o. made for the amount of PLN 8 781 thousand; • a decrease in the balance of long-term construction contracts retention amounts retained by the Company’s buyers, by PLN 2 363 thousand; • an increase in the balance of the deferred income tax assets by PLN 20 353 thousand, caused by the increase in the balance of deductible temporary differences on the items on the liabilities side due to valuation of contracts, and creation of assets on tax loss in the amount of PLN 11 830 thousand.

Current assets

In the same period the current assets were reduced by PLN 117 822 thousand, mainly as a result of the following events: • a reduction of the balance of cash and cash equivalents by PLN 92 021 thousand, principally due to payment of the dividend and due to greater commitment of expenditure in the current operating activity; • a reduction of the balance of valuation of long-term construction contracts by PLN 51 156 thousand, which is a seasonal fluctuation observable annually, due to intensification of settlement of budgets near the end of each financial year by public customers; • an increase in the balance of inventories by PLN 27 601 thousand, generally due to the increase of work in progress.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

As at As at Change 31 December 2018 31 December 2017 Statement of financial position value in % value in % value in PLN’000 share PLN’000 share PLN’000 EQUITY AND LIABILITIES Equity 295 439 38,3 428 459 48,8 (133 020) Share capital 10 003 1,3 10 003 1,1 0 Supplementary capital 371 515 48,1 369 334 42,1 2 181 Currency translation differences on entities operating abroad (1 011) (0,1) (2 184) (0,2) 1 173 Retained earnings / (uncovered losses) (85 069) (11,0) 51 306 5,8 (136 375) Total liabilities 476 332 61,7 448 687 51,2 27 645 Non-current liabilities 25 937 3,4 42 102 4,8 (16 165) Employee benefit liabilities 5 321 0,7 4 805 0,5 516 Provisions for other liabilities and other charges 16 013 2,1 27 790 3,2 (11 777) Trade payables and other financial liabilities 4 603 0,6 5 820 0,7 (1 217) Other non-financial liabilities 0 0,0 3 687 0,4 (3 687) Current liabilities 450 395 58,4 406 585 46,4 43 810 Trade payables and other financial liabilities 206 186 26,7 187 741 21,4 18 445 Income tax liabilities 196 0,0 4 210 0,5 (4 014) Liabilities due to valuation of long-term contracts 149 040 19,3 108 076 12,3 40 964 Loans and borrowings 18 676 2,4 0 0,0 18 676 Employee benefit liabilities 7 906 1,0 14 706 1,7 (6 800) Provisions for other liabilities and other charges 21 775 2,8 27 806 3,2 (6 031) Other non-financial liabilities 45 241 5,9 63 621 7,3 (18 380) Accruals 1 374 0,2 425 0,0 949 TOTAL EQUITY AND LIABILITIES 771 771 100,0 877 146 100,0 (105 375)

Equity and liabilities

On the side of equity and liabilities, the biggest changes related to:

• a decrease in the amount of the “retained profit” item in consequence of the loss of the current year and payment of the dividend;

• a decrease of the balance of non-current liabilities by PLN 16 165 thousand, mainly due to: - a drop in the balance of provisions for non-current liabilities and other charges by PLN 11 777 thousand, principally as a result of reclassification of the provisions for warranty repairs, penalties and other risk associated with the performance of contracts to the category of current provisions; - a drop in the balance of other non-financial liabilities by PLN 3 687 thousand due to the transfer of advances received for the contracts being performed from non-current to current;

• an increase in the balance of current liabilities by PLN 43 810 thousand, which was the result of the following events: - an increase in the balance of payables due to valuation of the construction contracts in the amount of PLN 40 964 thousand, as result of the reduction of revenue by the amounts of liquidated damages for delay in performing of some contracts, - an increase in the balance of payables due to credits by the amount of PLN 18 676 thousand, - a drop in the balance of other non-financial liabilities by PLN 18 380 thousand, principally due to settlement of advances for the completed construction contracts, - an increase in the balance of trade and other payables by the amount of PLN 18 445 thousand.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

4.2 Basic financial and non-financial indicators for ELEKTROBUDOWA SA

I. Profitability ratios 2018 2017

1. Net profit margin -9.23% 6.03% net profit (loss) / sales revenue 2. Gross profit margin -11.01% 7.71% gross profit (loss) / sales revenue 3. Net return on sales -7.55% 8.36% net profit (loss) on sales / sales revenue 4. Gross return on sales -10.05% 10.46% gross profit (loss) on sales / sales revenue 5. Operating profit margin -11.46% 7.70% operating profit (loss) / sales revenue 6. Return on equity (ROE) -18.47% 12.20% net profit (loss) / average equity capital 7. Return on assets (ROA) -8.11% 5.85% net profit (loss) / average assets II. Turnover ratios rok 2018 rok 2017

1. Trade receivables turnover ratio (days) 148 120 average trade debtors x 360 days / sales revenue 2. Trade accounts payable turnover ratio (days) 81 54 average trade creditors x 360 days / sales revenue 3. Inventory turnover (days) 28 21 average inventories x 360 days / sales revenue 4. Assets turnover 0,88 0,97 sales revenues /average total assets

4.3 Managing the financial resources in ELEKTROBUDOWA SA

The balance of cash as at 31 December 2018 was PLN 19 529 thousand and was by PLN 92 021 thousand lower than as at 31 December 2017. The drop was attributable to the following factors: • suspension of payments by PKN Orlen for the performed works, towards future liquidated damages for delay in performance of the contract for building of the Metathesis unit; • significantly lower than in previous years profitability and cash generated by construction activities; • a decrease in the net balance of advances from customers; • the dividend payout by the Company in August and December 2018 in the amount approximating the net profit generated by the Company for 2017; • increased commitment of expenditure in the performance of selected contracts.

The amounts of the Company’s debt due to bank loans and lease agreements are presented in the table below. The debt as at 31 December 2018 increased considerably as a result of the increase in the level of debt due to committed credit facilities for financing the operating activity.

Liabilities due to bank loans and borrowings and lease commitments 31.12.2018 31.12.2017

Non-current 2 312 107 Current 19 914 1 309 Total 22 226 1 416

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The structure of finance of ELEKTROBUDOWA SA is illustrated by the following ratios:

Ratio 31.12.2018 31.12.2017

Equity to assets ratio 0.38 0.49 (share capital)/(total assets) Equity to non-current assets ratio 1.28 1.97 (share capital)/(non-current assets)

Ratio 31.12.2018 31.12.2017

Debt ratio 0.62 0.51 (total assets – shareholders’ equity)/(total assets) Debt to equity ratio 1.61 1.05 (total assets – shareholders’ equity)/(shareholders’ equity)

At the end of 2018 the sustainability of the financial structure, described by the above ratios, deteriorated. The equity to non-current assets ratio decreased considerably, due to the payout of a high dividend and the loss generated on the contract with PKN Orlen, for building of the Metathesis unit. For the same reasons the debt to equity ratio was significantly higher, despite a considerable decrease in the balance sheet total.

As at the end of 2018 and 2017 the ratios which measure the financial liquidity of the Company had the following values:

Ratio 31.12.2018 31.12.2017

Current ratio 1.25 1.62 (current assets)/(current liabilities) Quick ratio 1.09 1.52 (current assets - inventories)/(current liabilities)

The Company’s situation regarding its liquidity has been described in detail in the Financial Statements of ELEKTROBUDOWA SA for 2018 (note 7.4).

In 2018 ELEKTROBUDOWA SA was following the policy of financing its operations from its own funds and committed overdraft facilities. Details of granted credit limits and borrowings are presented in note 8.3 of this report.

The Company maintains active cooperation with banks and insurance companies with respect to guarantees, which is reflected in the guarantee lines granted for contract guarantees such as bid bonds, advance payment bods, performance bonds and warranty bonds, and also guarantees to secure timely payment of debt.

Most of the agreements with banks concerning the committed multipurpose limits up to the total amount of PLN 648 576 thousand, refer to the bank guarantee facilities available in the amount of PLN 446 576 thousand. As at 31 December 2018 they were utilised in the amount of PLN 261 867 thousand mostly for performance bonds.

Within the cooperation with insurance companies concerning contract bonds, the Company was granted an aggregate limit of PLN 202 000 thousand, of which PLN 66 500 thousand was utilized as at 31 December 2018.

Access to further guarantees provided by banks / insurance companies will be of key importance in respect of the Company’s liquidity. The insufficient amounts of guarantee facilities may result in a restricted ability to enter into trade contracts which could generate revenue for the Company.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

5 Analysis of the financial situation and assets of ELEKTROBUDOWA Group

5.1 Basic economic and financial figures referring to ELEKTROBUDOWA Group

The consolidated statement of profit or loss of ELEKTROBUDOWA Group for 2018 compared to the same period of 2017 is presented in the table below:

12 months ended 31 12 months ended 31 Change The consolidated statement of profit or December 2018 December 2017 loss value in value in value in % share % share % change PLN’000 PLN’000 PLN’000 Sales revenue 763 496 100.0 902 901 100.0 (139 405) (15.4) Cost of goods sold (829 492) 108.6 (804 232) 89.1 (25 260) 3.1 Gross profit / (loss) on sales (65 996) 8.6 98 669 10.9 (164 665) (166.9) Selling costs (954) 0.1 (1 285) 0.1 331 (25.8) General administrative expenses (21 079) 2.8 (21 035) 2.3 (44) 0.2 Other operating income 24 182 3.2 6 568 0.7 17 614 268.2 Other operating costs (23 295) 3.1 (13 166) 1.5 (10 129) 76.9 Operating profit / (loss) (87 142) 11.4 69 751 7.7 (156 893) (224.9) Finance income 43 0.0 51 0.0 (8) (15.8) Finance costs (1 882) 0.2 (1 451) 0.2 (431) 29.7 Share of profit of the associates 2 766 0.4 6 061 0.7 (3 295) (54.4) Gross profit / (loss) (86 215) 11.3 74 412 8.2 (160 627) (215.9) Income tax 14 468 1.9 (15 804) 1.8 30 272 (191.5) Net profit / (loss) (71 747) 9.4 58 608 6.5 (130 355) (222.4)

The net loss on sales in 2018 amounted to PLN 65 996 thousand and was generally contributed to the delay in performance of the contract for Building of the Metathesis Unit carried out for PKN Orlen and the PLN 101 493 thousand loss generated on this contract in (of which PLN 61 424 thousand as a decrease of the sales revenue).

According to the adopted accounting standards, for the contracts open as at the balance sheet date the Group recognises the so called variable compensation, which means that a part or the whole of a variable amount is only included in the transaction price if, and to the extent that, it is highly probable that its inclusion will not result in a reversal of significant accumulated revenue in the future and the uncertainty has been subsequently resolved. At the moment the variable compensation is identified the companies of the Group estimate its amount and adjusts the contract price by reducing the contractual price. As at 31 December 2018 the Group reduced the sales revenue by a total amount of PLN 63 569 thousand, of which PLN 61 424 thousand results from the dispute on performance of Building of the Metathesis Unit” carried out for PKN Orlen S.A. Additionally, when the total costs related to a construction contract performance exceed total expected revenue, the entities of the Group, at the moment it is identified, create provisions for losses, recognized in the consolidated statement of financial activity in the item line: “Liabilities due to valuation of long-term contracts”. As at 31 December 2018 the provisions for losses on contracts amounted to PLN 10 784 thousand. In 2018 the balance of provisions for losses on contracts increased by PLN 9 252 thousand.

The selling costs did not substantially change in 2018 and dropped by PLN 331 thousand on the previous year, while the general administrative expenses rose by PLN 44 thousand. The costs had a 2.8% share in the sales revenue, compared to 2.3% in 2017.

The result of other operating activity in the 12 months of 2018 was a positive number of PLN 887 thousand. Other operating income in the period of 12 months of 2018 amounted to PLN 24 182 thousand and included the reversal of liquidated damages and penalties in the amount of PLN 5 732 thousand, the result of receivables impairment allowances of PLN 5 020 thousand, gains due to penalties and compensations received in the amount of PLN 5 234 thousand, and also written off prescribed debt of PLN 2 713 thousand. Major items of other operating expenses were: the impairment of goodwill of ENERGOTEST sp. z o.o. for the amount of PLN 7 154 thousand, liquidated damages for failure to meet the contractual obligations in the amount of PLN 2 873 thousand, costs of employee benefits and compensations in the amount of PLN 2 551 thousand, and the PLN 2 437 thousand amount of the provision for litigations.

Comparing to 2107: the result of other operating activity was negative and was PLN 6 598 thousand. Other operating income items included the result of receivables impairment allowances of PLN 1 736 thousand, interest on cash at banks amounting to PLN 1 041 thousand, penalties and compensations received in the amount of PLN 1 117 thousand and the reversal of the inventory impairment allowance of PLN 713 thousand. 20

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

In the period of 12 months of 2018 the Group generated a positive result of the financial activity, PLN 927 thousand. The result was owed to share of the profit of the associate “Vector” based in Russia.

Considering the unfavourable situation on the contract for “Building of the Metathesis Unit” for PKN Orlen S.A. and trends in the market environment (a decrease of the level of orders for turnkey projects), after many profitable years ELEKTROBUDOWA Group closed the year with a net loss of PLN 71 747 thousand.

The items of the consolidated statement of financial position of the Group as at 31 December 2018 compared to the statement as at 31 December 2017 are presented in the table below:

As at As at Change 31 December 2018 31 December 2017 Items of the consolidated statement of financial position value in value in value in % share % share PLN’000 PLN’000 PLN’000 ASSETS Non-current assets 209 202 27.1 203 598 22.9 5 604 Property, plant and equipment 87 309 11.3 86 524 9.7 785 Intangible assets 41 974 5.4 46 270 5.2 (4 296) Investments in associates 15 255 2.0 25 302 2.8 (10 047) Financial assets at fair value 227 0.0 230 0.0 (3) Trade and other receivables 2 100 0.3 4 459 0.5 (2 359) Deferred income tax assets 61 095 7.9 39 080 4.4 22 015 Other non-financial assets 1 242 0.2 1 733 0.2 (491) Current assets 564 050 72.9 686 632 77.1 (122 582) Inventories 73 171 9.5 44 841 5.0 28 330 Trade receivables and other financial receivables 342 608 44.3 343 777 38.6 (1 169) Income tax receivables 11 052 1.4 1 146 0.1 9 906 Receivables due to valuation of long-term contracts 108 438 14.0 163 401 18.4 (54 963) Other non-financial assets 5 525 0.7 18 715 2.1 (13 190) Cash and cash equivalents 23 255 3.0 114 752 12.9 (91 497) TOTAL ASSETS 773 252 100.0 890 230 100.0 (116 978)

As at 31 December 2018 the consolidated value of the assets dropped by PLN 116 978 thousand compared to the amount as at the end of December 2017 following the increase in non-current assets by PLN 5 604 thousand and the reduction of current assets by PLN 122 582 thousand.

Non-current assets

The change in the amount of non-current assets as at 31 December 2018 compared to its amount as at 31 December 2018 was principally attributed to: • a decrease in the balance of the intangible assets by PLN 4 296 thousand following the impairment loss on the development works and the impairment loss on goodwill of ENERGOTEST sp. z o.o. in the amount of PLN 7 154 thousand, offset by the increase in the intangible assets in connection with the expenditure on implementation of the class ERP system; • a decrease in the balance of investment in the associates, following the payout of the 2017 dividend; • an increase in the balance of the deferred income tax assets by PLN 22 015 thousand, caused by the increase in the balance of deductible temporary differences on the valuation of contracts and creation of an asset on tax loss in the amount of PLN 11 830 thousand.

Current assets

In the same period the current assets were reduced by PLN 122 582 thousand, mainly as a result of the following events: • a reduction of the balance of cash and cash equivalents by PLN 91 497 thousand, principally due to the payout of the dividend and due to greater commitment of expenditure in the current operating activity;

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

• a reduction of the balance of valuation of long-term construction contracts by PLN 54 963 thousand, which is a seasonal fluctuation observable annually, due to intensification of settlement of budgets by public customers near the end of each financial year; • an increase in the balance of inventories by PLN 28 330 thousand, generally due to the increase of work in progress.

As at As at Change 31 December 2018 31 December 2017 Items of the consolidated statement of financial position value in value in value in % share % share PLN’000 PLN’000 PLN’000 EQUITY AND LIABILITIES Equity 290 534 37.6 430 925 48.4 (140 391) Share capital 10 003 1.3 10 003 1.1 0 Supplementary capital 370 143 47.9 367 963 41.3 2 180 Capital from valuation of financial assets at fair value 177 0.0 180 0.0 (3) Currency translation differences on entities operating abroad (12 836) (1.7) (11 852) (1.3) (984) Retained earnings / (uncovered losses) (76 954) (10.0) 64 654 7.3 (141 608) Total equity attributable to shareholders of ELEKTROBUDOWA SA 290 534 37.6 430 948 48.4 (140 414) Non-controlling interests 0 0.0 (23) (0.0) 23 Total liabilities 482 718 62.4 459 305 51.6 23 413 Non-current liabilities 26 311 3.4 42 433 4.8 (16 122) Employee benefit liabilities 5 601 0.7 5 058 0.6 543 Provisions for other liabilities and other charges 16 013 2.1 27 790 3.1 (11 777) Trade payables and other financial liabilities 4 696 0.6 5 898 0.7 (1 202) Other non-financial liabilities 0 0.0 3 687 0.4 (3 687) Current liabilities 456 407 59.0 416 872 46.8 39 535 Trade payables and other financial liabilities 206 866 26.8 189 891 21.3 16 975 Income tax liabilities 194 0.0 4 210 0.5 (4 016) Liabilities due to valuation of long-term contracts 150 548 19.5 111 623 12.5 38 925 Loans and borrowings 18 694 2,4 0 0,0 18 694 Employee benefit liabilities 8 609 1,1 15 541 1,7 (6 932) Provisions for other liabilities and other charges 21 964 2,8 27 995 3,1 (6 031) Other non-financial liabilities 48 158 6,2 67 187 7,5 (19 029) Accruals 1 374 0,2 425 0,0 949 TOTAL EQUITY AND LIABILITIES 773 252 100,0 890 230 100,0 (116 978)

Equity and liabilities

On the side of equity and liabilities, the biggest changes related to:

• a decrease in the amount of the “retained profit” by the amount of PLN 141 608 thousand in consequence of the generated loss of PLN 71 747 thousand and payment of the dividend;

• a decrease of the balance of non-current liabilities by PLN 16 122 thousand, mainly due to: - a drop in the balance of provisions for non-current liabilities and other charges by PLN 11 777 thousand, principally as a result of reclassification of the provisions for warranty repairs, penalties and other risk associated with the performance of contracts to the category of current provisions; - a drop in the balance of other non-financial liabilities by PLN 3 687 thousand due to the transfer of advances received for the contracts being performed (carried to current liabilities);

• an increase in the balance of current liabilities by PLN 39 535 thousand, which was the result of the following events: - an increase in the balance of payables due to valuation of the construction contracts in the amount of PLN 38 925 thousand, as a result of the reduction of revenue by the amounts of liquidated damages for delay in performing of some contracts, - an increase in the balance of payables due to loans by the amount of PLN 18 694 thousand,

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

- a drop in the balance of other non-financial liabilities by PLN 19 029 thousand, principally due to settlement of advances for the completed construction contracts, - an increase in the balance of trade and other payables by the amount of PLN 16 975 thousand.

5.2 Basic financial and non-financial indicators of ELEKTROBUDOWA Group

I. Profitability ratios 2018 2017

1. Net profit margin -9.40% 6.49% net profit (loss) / sales revenue 2. Gross profit margin -11.29% 8.24% gross profit (loss) / sales revenue 3. Net return on sales -5.76% 8.46% net profit (loss) on sales / sales revenue 4. Gross return on sales -8.64% 10.93% gross profit (loss) on sales / sales revenue 5. Operating profit margin -11.41% 7.73% operating profit (loss) / sales revenue 6. Return on equity (ROE) -19.89% 13.72% net profit (loss) / average equity capital 7. Return on assets (ROA) -8.63% 6.51% net profit (loss) / average assets average cash / average current assets II. Turnover ratios 2018 2017

1. Trade receivables turnover ratio (days) 146 119 average trade debtors x 360 days / sales revenue 2. Trade accounts payable turnover ratio (days) 77 51 average trade creditors x 360 days / sales revenue 3. Inventory turnover (days) 28 21 average inventories x 360 days / sales revenue 4. Assets turnover 0.92 1 sales revenues /average total assets

5.3 Managing the financial resources in ELEKTROBUDOWA Group

The balance of cash available to ELEKTROBUDOWA Group as at 31 December 2018 was PLN 23 255 thousand and was by PLN 91 497 thousand lower than as at 31 December 2017.

The most important factors which had an impact on the above change in the financial resources available to ELEKTROBUDOWA Group during the year 2018 included: • suspension of payments by PKN Orlen for the performed works, towards future liquidated damages for delay in performance of the contract for building of the Metathesis unit; • significantly lower than in previous years profitability and cash generated by construction activities; • a decrease in the net balance of advances from customers; • the dividend paid by ELEKTROBUDOWA SA; • increased commitment of expenditure on the performance of selected contracts.

As at the end of 2018 the Group’s debt due to loans and leases was PLN 20 828 thousand higher than as at 31 December 2017 (see table below).

The third party borrowings of the Group mainly includes the debt of ELEKTROBUDOWA SA due to bank overdrafts used for financing the company’s current operations and the lease agreements concluded in order to finance the purchase of fixed tangible assets items.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Details of the credit limit facilities and borrowings are provided in note 8.3 of this report.

Liabilities due to bank loans and borrowings and lease 31.12.2018 31.12.2017 commitments non-current 2 312 107 current 19 932 1 309 Total 22 244 1 416

The structure of finance of ELEKTROBUDOWA Group is illustrated by the following ratios:

Ratio 31.12.2018 31.12.2017

Equity to assets ratio (share capital attributable to the shareholders of the parent 0.38 0.48 company)/(total assets) Equity to non-current assets ratio (share capital attributable to the shareholders of the parent 1.39 2.12 company)/(non-current assets)

Ratio 31.12.2018 31.12.2017

Debt ratio (total assets - equity attributable to the shareholders of the parent 0.62 0.52 company )/(total assets) Debt to equity ratio (total assets – equity attributable to the shareholders of the parent 1.66 1.07 company)/(equity attributable to the shareholders of the parent company)

At the end of 2018 the sustainability of the financial structure, described by the above ratios, deteriorated. The equity to non-current assets ratio decreased, due to the reduction of equity following the payout of a dividend.

As at the end of 2018 and 2017 the ratios which measure the financial liquidity of the Group had the following values:

Ratio 31.12.2018 31.12.2017

Current ratio 1.29 1.65 (current assets)/(current liabilities)

Quick ratio 1.12 1.54 (current assets - inventories)/(current liabilities)

In 2018 the Group was following the policy of financing its operations from its own funds and committed overdraft facilities. Details of granted credit limits and borrowings are presented in note 8.3 of this report.

The Group maintains active cooperation with banks and insurance companies with respect to guarantees, which is reflected in the guarantee lines granted for contract guarantees such as bid bonds, advance payment bods, performance bonds and warranty bonds, and also guarantees to secure timely payment of debt.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Most of the agreements with banks concerning the committed multipurpose limits up to the total amount of PLN 648 576 thousand, refer to the bank guarantee facilities available in the amount of PLN 512 500 thousand. As at 31 December 2018 they were utilised in the amount of PLN 266 567 thousand.

Within the cooperation with insurance companies concerning contract bonds, the companies of the Group were granted an aggregate limit of PLN 204 000 thousand, of which PLN 66 695 thousand was utilized as at 31 December 2018.

Access to further guarantees provided by banks / insurance companies will be of key importance in respect of the liquidity. The insufficient amounts of guarantee facilities may result in a restricted ability to enter into trade contracts which could generate revenue for ELEKTROBUDOWA Group.

6 Clarification of differences between the financial results recognised in the annual report and the forecasts of the results for the year which were announced earlier.

Published on 6 February 2018 the 2018 Forecast for ELEKTROBUDOWA SA assumed that the orders received would amount to PLN 994.2 million, the annual sales revenue would be generated on the level of PLN 899.4 million and the net profit will amount to PLN 41.9 million.

The consolidated Forecast for ELEKTROBUDOWA Group, also published on 6 February 2018 assumed that the annual sales revenue would be generated on the level of PLN 959.6 million and the net profit will amount to PLN 46 million (the profit attributable to the shareholders of the Company: PLN 45.6 million).

Having considered the performance of the first half of 2018, on 10 September 2018 the Management Board of ELEKTROBUDOWA SA decided to adjust the Forecasts of ELEKTROBUDOWA Group and ELEKTROBUDOWA SA, and announced a new forecast of performance as at the end of 2018. The 2018 forecast published on 10 September 2018 assumed:

ELEKTROBUDOWA SA: orders PLN 835.4 million sales revenue PLN 851.8 million net loss PLN 37.6 million

ELEKTROBUDOWA GROUP: sales revenue PLN 898.5 million net loss PLN 44.7 million net loss attributable to the shareholders of the parent company PLN 44.7 million

The major factor which contributed to the adjustment of the separate and consolidated forecasts was the fact of reduction of sales revenue by PLN 61 million due to the delay in performance of the contract for Building of the Metathesis Unit for PKN Orlen, and also a loss generated on this contract in the first half of 2018 (refer to note 3.3.1). The change of orders volume in the 2018 forecast was the result of postponement to 2019 of contract awarding dates in a few significant tender procedures.

On 15 November 2018 the Company informed about an adjustment of the 2018 forecast in respect of orders of the Company. The 2018 financial forecast assumed receiving orders for the total amount of PLN 835.4 million. After the adjustment the forecast level of orders for the Company is PLN 601.3 million. The change of orders volume is the result of postponement to 2019 of contract awarding dates in a few significant tender procedures. The remaining scope of the 2018 forecast was not changed.

On 24 April 2019 the Management Board of ELEKTROBUDOWA SA, in the current reports 25/2019 and 26/2019, disclosed the estimated results of the Group and the Company for the year 2018.

The divergence of the achieved financial results recognised in the annual report from the forecast results announced earlier was attributed to the following circumstances: • The reduction of the sales revenue due to the risk of potential liquidated damages on the contract for Building of the Metathesis Unit for PKN Orlen S.A.; • a decline in effectiveness of winning new, profitable contracts; • failure to realize a part of the income planned for contracts expected to be awarded, but not awarded in the second half of 2018; • the process of updating the budgets of contracts, also those where an increase of performance costs was identified.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Having reviewed the Company’s information policy and with consideration to the common market practice in this respect, the Management Board of ELEKTROBUDOWA SA decided to resign from publishing the financial forecasts of the Company and of the ELEKTROBUDOWA Group for the reporting period beginning on 1 January 2019. The Company is going to report its financial results in the periodic (financial) reports, while in the cases where it is required in order to comply with the applicable regulations, the estimated financial results will be published in current reports..

7 Major events which significantly affected the activity and performance of the Group during the year 2018, and also later until the date of preparation of the financial statements

On 20 November 2018 – The Company disclosed receiving the information about a claim by Polski Koncern Naftowy ORLEN S.A. for payment of PLN 29 million liquidated damages, in connection with performance of the contract for turnkey engineering, procurement and construction of the Metathesis Unit in the Purchaser’s Production Plant in PKN Orlen S.A. claimed delay in performance of some contractual works and indicated that the damages had partial nature as the plant had not been taken over for operation yet. The Company has doubts as to the formal correctness of the received claim and opposes the stance presented therein. ELEKTROBUDOWA SA will take actions in order to secure the Company’s interest and to reach amicable settlement of the dispute; however, it does not rule out the possibility of seeking the settlement in court, if necessary.

On 26 November 2018 – the Company informed about receiving from Bank Handlowy w Warszawie S.A. an amendment signed by both parties, to the Framework Agreement on the Revolving Line for contract guaranties concluded on 23 September 2005. Under the Amendment the amount of the limit of exposure within which the Bank may provide the Company with guaranties specified in the Agreement was reduced from 130 million PLN to 105 million PLN. The other provisions of the Agreement remained unchanged.

On 30 November 2018 – the Company provided the updated information concerning the claim by Polski Koncern Naftowy ORLEN S.A. (“Purchaser”) for payment of liquidated damages charged in connection with performance of the contract for turnkey engineering, procurement and construction of the Metathesis Unit in the Purchaser’s Production Plant in Płock (“Contract”). The Management Board of ELEKTROBUDOWA SA (“Company”, “Contractor") informe that the Company had returned the received debit notes to the Purchaser without having entered them in the accounts, pointing out that they had not been correctly issued. The Company challenged the basis of the Purchaser’s claim and pointed out that the calculations of damages include incorrect dates of acceptance, therefore they had no factual and legal basis; it was also pointed out that the Purchaser had not taken into consideration the stipulations of the Contract which provide that the Contractor might exempt himself from the obligation to pay liquidated damages to the extent he could prove that the delay was caused by the circumstances for which he had not been responsible. In the opinion of the Company, the Purchaser is in possession of security for the claim disputed by the Company, such as amounts retained from payments and contract bonds provided by the Contractor. Therefore the Company has requested the Purchaser to stop withholding current due payments.

On 17 December 2018 – the Company informed that the District Court of Satakunta province in Pori, Finland (“Court”) rendered a judgement in the proceedings instituted in 2011 and 2012 against the Company by the Finnish Electrical Workers’ Trade Union („TU”), by which it awarded from the Company for the TU: c. 4.72 mEUR in the case L-11/9634 and c. 3.24 mEUR in the case L-12/100, increased by due interest for delay, and also ca. 0.4 mEUR costs of proceedings and ca. 0.1 mEUR compensation (“Judgement”). The dispute concerned claims pursued by the TU related to the employment contracts of the workers posted by the Company to perform works at the construction site of the nuclear power plant OLKILUOTO 3 in Finland. The Judgement has been rendered in the first instance and is lacking force of law. The Company does not agree with the Judgement in principle and as to the amounts of claims.

On 6 February 2019 the Company disclosed the receipt of a copy of a statement of claim brought by Miejskie Przedsiębiorstwo Komunikacyjne w Poznaniu sp. z o.o. (“Plaintiff” or “MPK”) to the Regional Court in Poznań, dated 7 January 2019. According to the statement, the Plaintiff’s claim is for approx. 20.18 million PLN, plus statutory interest for delay and the costs of court proceedings, from the Company and ZUE S.A. („ZUE”), jointly and severally. The Plaintiff derives its claim from the contract for civil and other works and activities necessary for complete performance of the task project of building the Franowo tramway depot in Poznań („Contract”). The Contract was made in July 2011 between the Company and ZUE after MPK had awarded the contract to them as partners of a consortium, in an open tender procedure to which the provisions of the act of 29 January 2004 Public Procurement Law were applicable.

On 13 February 2019 – the Company informed that it had received from Bank Handlowy w Warszawie S.A. (“Bank”) an Amendment (“Amendment”), signed by both parties, to the Framework Agreement on the Revolving Line for contract guaranties (“Agreement”) concluded with on 23 September 2005. Under the Amendment the amount of the limit of exposure within which the Bank may provide the Company with guaranties specified in the Agreement has been reduced from 105 million PLN to 95 million PLN.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

On 28 February 2019 – the Company informed about signing the Amendment to the credit agreement having the form of a multi-purpose credit limit facility (“Amendment”) concluded on 24 February 2006 with Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna based in Warsaw (“Bank”). Under the Amendment the multi-purpose limit amount was reduced from 100 million PLN to 42 million PLN. Also, the Company is to additionally collateralize its accounts in PKO BP SA by establishing registered and financial pledges. Furthermore, the parties extended the validity period of the limit until 26 April 2019.

On 4 March 2019 – the Company informed about the receipt of letters from ING Bank Śląski S.A. („Bank”) in which the Bank is notifying about the actions that had been taken in connection with events of breach of the terms of the Multipurpose Credit Facility Agreement No. 687/2011/00004937/00 of 25 March 2011. Following the above, the Bank reduced the limit of availability of the credit from 50 million PLN to 40.35 million PLN and, in accordance with the agreement, established an additional security in the form of a deposit of 6 million PLN (15% of exposure), informing that amounts credited to the assignment accounts would not be transferred to the Company’s current account

On 8 March 2019 – the Company informed that an appeal against the judgement by the court of first instance in the litigation with the Finnish Electrical Workers’ Trade Union (“Judgement”) was lodged within the required time limit. The dispute concerns the claims pursued by the TU related to the employment contracts of the workers posted by the Company to perform works at the construction site of the nuclear power plant OLKILUOTO 3 in Finland. In its appeal the Company objects to the judgement as to the principle and the amount. A number of objections, both substantive and procedural, have been raised. The appeal includes a motion to refer to the Court of Justice for preliminary ruling in the issue of interpretation of the EU law in respect of universality of application of the Finland’s collective agreements, their clarity and transparency. The Company is of the opinion that the judgment infringes both the principles of European law and the basic principles of the legal system in Poland, therefore the Company decided to appeal against the Judgement.

On 14 March 2019 – the Company disclosed the receipt from mBank S.A. („Bank”) of an Amendment to the Framework Agreement 11/234/06/Z/PX dated 25 September 2006, signed by both parties. Under the Amendment the existing limit available for financing current activities has been reduced from 120.0 million PLN to 85.0 million PLN. The period of validity of the agreement has not been changed. At the same time the parties signed an amendment to the Agreement on overdraft in the current account concluded within the frame of the Framework Agreement, by which the limit of availability was reduced from 10.0 million PLN to 8.0 million PLN valid from 15 March 2019 to 31 October 2019. The Bank’s receivables are secured by the Mortgage Agreement, in which the amount of the collateral was reduced to 85.0 million PLN accordingly to the sum in the signed Amendment and in the agreement of the assignment of receivables. Additionally, the Bank introduced a security in the form of a registered pledge on the rights to funds in the accounts held by the Company in the Bank.

On 09 April 2019 – the Company informed, with reference to the current report No. 1/2019 of 2 January 2019 and earlier reports related to the contract (Contract) with Polskie Sieci Elektroenergetyczne S.A. (Purchaser) for performance of the project “Extension and Modernization of the Byczyna Station, Including Connection of the 400kV Line” (Project), that on 9 April 2019 the parties agreed the rules of finalizing and settlement of remuneration and costs of Project execution. On the basis of those arrangements the date of final acceptance of the Project-related works has been scheduled for the 2nd quarter of 2019. Irrespective of the above, Purchaser has committed itself to reimburse reasonable and duly substantiated costs incurred by Contractor due to remaining on standby duty until the first synchronization of the 910MW unit in Jaworzno power plant with the grid and performance of works associated with “measurements, tests, start-ups and commissioning” in the extended period of contract performance, that is in February – November 2019. Also, pursuant to the arrangements, within mutual settlements Issuer will pay to Purchaser 2.1 million PLN as liquidated damages for delay in completion of some contractual works, while Purchaser will pay to Company additional amount of ca. 0.5 million PLN for the works exceeding the contractual scope. The other terms of Project and Contract have not been significantly changed.

On 23 April 2019 –the Company informed that that on 23 April 2019 the Company was served a request for summons to a conciliation hearing submitted on behalf of Polski Koncern Naftowy ORLEN S.A. („PKN Orlen”), in which PKN Orlen is requesting to summon the Company to a conciliation hearing concerning a payment of PLN 15’087’639.44 together with statutory interest by the Company to PKN Orlen. The claim of PKN Orlen concerns the liquidated damages charged on the basis of the request of which the Company informed in its current report 47/2018 of 20 November 2018, in the part which has not yet been deducted by PKN Orlen from the remuneration to which the Company is entitled in respect of performance of the contract for turnkey engineering, procurement and construction of Metathesis Unit in the Purchaser’s production plant in Płock (“Contract”). The submitted request for summons includes preliminary conciliation proposals put forward by PKN Orlen, and in the opinion of the Company confirms readiness of PKN Orlen for amicable settlement of the dispute relating to Metathesis project. The Company also declares its will to settle the dispute amicably and is going to present relevant conciliation proposals during the proceedings.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

On 23 April 2019 – the Company informed that a law firm which represents Issuer’s financing institutions, including: Bank Handlowy w Warszawie S.A., mBank S.A., Bank Polska Kasa Opieki S.A., ING Bank Śląski S.A., Powszechna Kasa Oszczędności Bank Polski S.A., Haitong Bank S.A., Spółka Akcyjna Oddział w Polsce, BNP Paribas Bank Polska S.A. [together as: „Financing Institutions”] submitted to the Company a draft “agreement concerning funding the Company’s activity” prepared by the Financing Institutions, which establishes a model of financing and the terms on which the Financing Institutions will be providing the Company with financial products, particularly credit limits and limits for guarantees, until July 2019. It is an intention of the Financing Institutions to include the insurance companies cooperating with the Issuer in the Agreement.

Relevant talks are being held in connection with reductions of the available credit and guarantee limits by the banks, of which the Company informed in its current reports 12/2019, 13/2019 and 16/2019 submitted in February and March 2019, as a follow up to credit risk assessment made by those institutions in connection with deterioration of some of the Company’s financial ratios, generally attributed to the interim financial results for H1 2018, including, but not limited to, prolonged construction of Metathesis Unit and associated provisions, decrease of financial resources due to payment of the dividend, and downward revision of the financial results, disclosed by the Company in its relevant current and periodic reports.

The Management of the Company intends to conclude, as soon as possible, a long-term target agreement (or a number of agreements) with the Financing Institutions, in which the parties would establish the conditions of availability of financial products on a satisfying level enabling to obtain additional working capital and guarantee instruments required for current activity of the Company and its development, including the possibility of winning and fulfilling further orders and contracts in the future [Target Agreement]. At present, it is an intention of the Company and the Financing Institutions to develop a temporary financing model valid until July 2019, which will establish the terms of financing until the target financing terms are developed.

8 Significant contracts

8.1 Insurance contracts concluded for the ELEKTROBUDOWA Group Companies

The ELEKTROBUDOWA Group (including ELEKTROBUDOWA SA) was a party to the following General Insurance Contacts:

 General Contractors’/Erection All Risks Insurance Contract. The insurer is TUiR WARTA S.A. The insurance covers the construction and erection works, including materials used for the contracts which value does not exceed PLN 50 million. The contract includes extensions of the basic insurance cover with sublimits for certain additional clauses. The insurance contract was concluded for the period from 20 December 2017 to 31 May 2019.

 Third Party Civil Liability Insurance. The insurer is TUiR WARTA S.A. The insurance covers the contractual and tortious liability of the Insured in respect of the assets and conducting the activity covered by the insurance, with the exclusion of liability for product and performed services. The sum insured is PLN 61 million per one occurrence and PLN 65 million per all occurrences in the insurance period. The contract includes extensions of the basic insurance cover with sublimits of the guaranteed sum. The insurance contract was concluded for the period from 20 December 2017 to 31 May 2019.

 Designer’s civil Liability Insurance. The insurer is TUiR WARTA S.A. The insurance covers the civil liability in respect of performing design work, including the activities related to an author’s supervision. The sum insured is PLN 10 million per one and all occurrences in the insurance period. The contract includes extensions of the basic insurance cover with sublimits of the guaranteed sum. The insurance contract was concluded for the period from 20 December 2017 to 31 May 2019.

 Directors & Officers Liability Insurance. The Insurer is Colonnade Insurance S.A. The insurance covers the liability of the insured members in respect of claims associated with the function performed by them in the company’s governing bodies, and also the company’s liability in respect of claims relating to the securities. The sum insured is PLN 50 million per one and all occurrences in the insurance period. The contract includes extensions of the basic insurance cover with sublimits of the guaranteed sum. The insurance contract was concluded for the period from 15 June 2018 to 14 June 2019.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

 Excess Directors & Officers Liability Insurance. The Insurer is Tempo Underwriting. The insurance covers the liability of the insured members in respect of claims associated with the function performed by them in the company’s governing bodies, and also the company’s liability in respect of claims relating to the securities. The sum insured is PLN 50 million per one and all occurrences in the insurance period. The contract includes extensions of the basic insurance cover with sublimits, after the coverage of the basic policy is exhausted. The insurance contract was concluded for the period from 15 June 2018 to 14 June 2019.

 Property, cargo and electronic equipment insurance. The Insurer is Aviva Towarzystwo Ubezpieczeń Ogólnych S.A. The insurance covers the fixed tangible assets and current assets of the Insured. The insurance contract was concluded for the period from 1 March 2017 to 31 May 2019.

 Civil Liability Insurance – the policy 912700165861. The insurer is TUiR WARTA S.A. The insurance covers the civil liability in respect of conducted activity, including product liability and liability for the performed services (section I), architects’ and designers’ civil liability (section II). The sum insured is PLN 20 million per one and all occurrences, with a sublimit for section II (professional indemnity insurance) PLN 5 million per one and all occurrences. The contract includes extensions of the basic insurance cover with sublimits of the guaranteed sum. The insurance contract was concluded for the period from 1 October 2018 to 31 May 2019.

 Property, cargo and electronic equipment insurance. Energotest sp. z o.o., is covered by the insurance contract concluded by ELEKTROBUDOWA SA with Aviva Towarzystwo Ubezpieczeń Ogólnych S.A. The insurance contract was concluded for the period from 19 January 2019 to 31 May 2019.

 General motor vehicle insurance agreement for the car float of Energotest sp. z o.o. concluded with Towarzystwo Ubezpieczeń i Reasekuracji „WARTA” S.A. The general agreement covers all vehicles owned by the insured on the date of its signing. The general agreement was concluded for the period from 15 February 2019 to 14 February 2020.

8.2 Related party transactions

In the reporting period the companies of the ELEKTROBUDOWA Group did not enter into significant trasactions with the related companies other than on arm’s length basis The transactions between the parent company and its related companies (subsidiaries and associates) are reported in note 37.1 to the separate financial statements for the year ended 31 December 2018.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

8.3 Loans and borrowings

As at 31 December 2018 the ELEKTROBUDOWA Group had the following credit facilities:

Registered Contract Amount of credit /loan/ Lending Contract Lender Security office amount of loan/credit to be repaid rate validity in PLN'000 currency in PLN'000 currency ING BANK ŚLĄSKI assignment of receivables from trade contracts; registered pledges S.A. Katowice on equipment including assignment of rights of an insurance overdraft on current 10 000 PLN 4 997 PLN WIBOR 1M 30/05/2020 * policy; collateral mortgage up to PLN 3 000 thousand incl. account (cross + bank margin assignment of an insurance policy selling with guarantees) BANK HANDLOWY assignment of receivables from trade contracts; mortgage up S.A. Warsaw to PLN 26 200 thousand, including assignment of rights of an overdraft 15 000 PLN 10 709 PLN WIBOR 1M 07/11/2019 * insurance policy; 2 blank promissory notes collaterized by the said + bank margin mortgage limit for credit cards 200 PLN - PLN BANK PEKAO S.A. Warsaw assignment of receivables from trade contracts; mortgage up overdraft 7 500 PLN - PLN WIBOR 1M 30/04/2019 * to PLN 22 400 thousand including assignment of rights of an + bank margin insurance policy, 2 blank promissory notes PKO BP S.A. Warsaw assignment of receivables from trade contracts; mortgage up to overdraft 15 000 PLN - PLN WIBOR 1M 28/02/2019 * PLN 150 000 thousand including assignment of rights of an + bank margin insurance policy mBank S.A. Warsaw assignment of receivables from trade contracts; mortgage up overdraft 10 000 PLN 2 970 PLN WIBOR ON 31/10/2019 * to PLN 4 000 thousand , including assignment of rights of an + bank margin insurance policy, 6 blank promissory notes BGŻ BNP PARIBAS BANK Warsaw 1 170 PLN 18 PLN WIBOR 1M 03/10/2019 a blank promissory note, general assignment of existing and future POLSKA S.A. + bank margin debtors, statement of submitting to enforcement ovedraft 58 700 18 694

* Short-term loans without fixed maturity dates; the dates quoted above are the dates of contracts validity. After the reporting date the limit of availability in mBANK S.A. was decreased from PLN 10 000 thousand to 8 000 thousand PLN, the limit in ING Bank Śląski S.A. was decreased from 10 000 thousand PLN to 8 900 thousand PLN. The credit limit in Bank PEKAO S.A. available up to 7 500 thousand PLN was reduced due to necessity to submit collaterals stipulated in the relevant contract. The limits in Bank Handlowy S.A. and in BGŻ BNP PARIBAS Bank Polska S.A. remained on the same level.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

As at 31 December 2018 ELEKTROBUDOWA SA had the following finance lease agreements:

Net initial value monthly net the date of the last Lessor of the leased asset instalments instalment

Siemens Finance sp. z o.o. 758 14 2019-01-15 EFL S.A. 512 10 2019-11-18 mLeasing sp. z o.o. 3 688 94 2022-02-15 4 958 118

8.4 Main capital investments and equity investments in 2018

In 2018 neither the parent company nor other companies of the Group made equity investments in entities outside the ELEKTROBUDOWA Group. The equity investments within the ELEKTROBUDOWA Group are presented in note 2.6 to this report.

8.5 Information about loans granted in the financial year

No loans were granted in 2018.

9 Other information

9.1 The contracts which may involve a change in the shareholding structure

The Management Board of ELEKTROBUDOWA SA is not in possession of any information about agreements which might involve future changes in the shareholding structure.

9.2 Shares held by the managing or supervising persons

As at 31 December 2018 President of the Management Board, Roman Przybył held 10 000 shares in ELEKTROBUDOWA SA.

As at 31 December 2017 the managing and supervising persons did not have any shares or the rights to shares of ELEKTROBUDOWA SA.

As at the date of publication of these financial statements President of the Management Board, Roman Przybył held 10 000 shares and a member of the Management Board, Krzysztof Czajka held 150 shares of ELEKTROBUDOWA SA.

9.3 Purchase of treasury shares

In 2018 ELEKTROBUDOWA SA did not purchase its own shares.

9.4 Employee share ownership programme

The Group does not carry any employee share ownership programmes.

9.5 Assessment of the feasibility of implementing the investment plans

The investment expenditure of the ELEKTROBUDOWA Group in 2019 is planned on the level of approximately PLN 13 200 thousand, of which around PLN 1 700 thousand to be spent by ELEKTROBUDOWA SA, and around PLN 1700 thousand by ENERGOTEST. Major layouts refer to the purchase of machines and equipment for manufacture and implementation of IT projects. The investment expenses will be funded from the companies’ own resources and from borrowed capital. Implementation of these assumptions is conditional of the outcome of negotiations with the financing institutions held in order to ensure necessary funding in the form of bonds, for details refer to point 3.1.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

9.6 Auditor

Following the recommendation of the Audit Committee, on 8 June 2018 the Supervisory Board of the Company chose PricewaterhouseCoopers Sp. z o.o. based in Warsaw, at 14, Lecha Kaczyńskiego St., 00-633 Warszawa. The auditor was appointed to review the H1 financial statements for 2018, 2019, 2020, 2021 and to audit the annual statements for the years 2018, 2019, 2020, 2021 of ELEKTROBUDOWA SA and the ELEKTROBUDOWA Group.

The agreed net remuneration for the review of the half-year separate and consolidated financial statements and auditing the annual separate and consolidated financial statements is PLN 155 thousand per each financial year.

9.7 Litigations

Significant lawsuits and court cases are presented in note 41 to the consolidated financial statements of the ELEKTROBUDOWA Group for 2018.

9.8 Employment

Employment in the Group has been described in Note 42 to the consolidated financial statements for the year ended 31 December 2017.

9.9 Major R&D accomplishments

Optima-145 switchgear. A series of complementary tests were performed on the devices of the switchgear main circuit, a certificate was obtained for a circuit breaker for the rated operating sequence O-0.3s-CO-60s-CO (earlier O-0.3s-CO-180s-CO)

MV switchgear Optima 24 with the increased short-circuit ratings 31.5kA. Most tests were performed, of which the most important:  Circuit breaker GMX 2500A 31.5kA/3s, O-0.3sec- CO-15sec-CO;  Circuit breaker GMX 1250A 31.5kA/3s, O-0.3sec- CO-15sec-CO;  Disconnector 3P 2500A, 31.5Ka;  Disconnector 3P 1250A, 31.5kA.

The project is in a vast part refunded by subsidized by NCBiR (the National Centre for Research and Development) under the agreement No POIR.04.01.04-00-0073/15-00. The implementation has the purpose of boosting the competitiveness of the Optima 24 switchgear through increasing its current ratings.

MV switchgear PREM 12G Smart. Works were continued on a compact switchgear dedicated for mining. The switchgear was designed for the parameters: 12kV, 1250A, 25kA IP 54. A complete process of type tests was conducted and the approval for use in mining was obtained, issued by the State Mining Authority WUG. The implementation has the purpose of replacing the present line of type PREM-G1dm switchgear and maintaining a leading position in the segment of switchgear for the customer KGHM Polska Miedź SA. The switchgear cab have various applications in mines, and where the sites conditions require installation of equipment with high level of tightness, IP 54.

D-24P switchgear. Complementary tests were performed, with regard to seismic tests. The purpose was to check the possibility of installation in the seismic environment, and thus to gain competitive advantage.

A supply panel of RT-1 switchgear. A new design solution was developed of direct current switchgear with a new line test system. By implementation of the solution which meets the customers’ expectations the company expects to gain competitive advantage.

Diode rectifier 1700A 3.3kV. The performance test of the rectifier designed for the power supply of railway traction were successfully completed.

NGWR. Complementary tests of low voltage switchgear NGWR 120kA/1s for rated current 4000A and alternative equipment of main circuits according to the currently valid standard PN-EN 61439.

Unimoduls switchgear. Works on the new draw-out low voltage switchgear for the ratings: : 1kV; 7500A; 105kA/1. The purpose of this implementation is to standardise the production of this class switchgear and to reduce technical costs of manufacture owing to replacement of the currently manufactured NGWR and RNM-2 switchgear.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

9.10 Sponsorship

The Group does not conduct sponsorship activity, understood as profit-oriented promotional / marketing activity, the effects of which are measurable by performance indicators, such as advertising value equivalent, product and service sales growth ratio, or the company share price. The Group’s actions in this respect are limited to participation in small, local initiatives of social nature. The Group is maintaining the policy of supporting social activity concerning charity campaigns, social policy, health protection and promotion, science, education, learning, promotion of sport and physical culture. The support is mainly manifested by donations in cash or in kind, particularly for the benefit of non-profit organizations or other entities realizing public actions (the Group does not give donations to individuals). Funding provided by the Group is generally used for implementation of statutory objectives of the organizations, and also for supporting school contests, scientific circles or financial aid for organization of Christmas Eve supper for lonely people.

10 The remuneration policy in ELEKTROBUDOWA SA

10.1 The remuneration system and its amendments in the past year

In the period from 1 January to 31 December 2018 the parent company had in place a Collective Labour Agreement concluded on 25 August 2017 between the employer and the trade unions acting in the Company, which regulates the employee remuneration rules. The Company Collective Labour Agreement established the remuneration strategy and principles of compensation for all employees of ELEKTROBUDOWA SA except members of managing and supervising bodies and workers posted outside the territory of the Republic of Poland.

10.2 Terms and amounts of remuneration of the Management Board Members

The remuneration policy for the Management Board was established by a competent body, the Supervisory Board and is as follows: Remuneration of Management Board Members consists of two components: - a fixed part, paid monthly, the amount depending on the performed function, - a variable part, paid after the end of the year and after approval of the financial statements by the Annual General Meeting, which depends on achieving the economic and financial targets assumed for the relevant year (a base target – net profit of the Group, individual multiplier determined individually for each member of the management board according to their individual targets), with 75% of the variable remuneration to be paid after the approval of the financial statements for 2018 while 25% of the variable remuneration to be paid after the approval of the financial statements for 2019 on condition that the net profit, which is a bonus target, for 2019 is higher than the net profit for 20172018.1

The table below shows the amounts of remuneration paid to Members of the Management Board in the period from 1 January to 31 December 2018, divided into the fixed and variable components.

Basic salary Variable part Last and first name Position

in PLN’000 Przybył Roman President of the Management Board, CEO (since 28.08.2018) 201 - Juszczyk Janusz President of the Management Board, CEO (until 28.08.2018) 442 526 Świgulski Adam Vice President, CFO (od dnia 27.04.2018) 290 - Skrzypczak Paweł Vice President, CFO (do dnia 26.04.2018) 177 394 Paleczny Wojciech Vice President, Marketing Management Director 357 264 Member of the Management Board Janczyk Piotr 98 274 HR and Systems Director (until 26.04.2018)

The Company does not apply long-term incentive plans for members of the Management Board. The remuneration system is focused on short-term (annual) growth in shareholder value and on the Company’s business stability, with the stipulation that the variable part of remuneration is dependent on the net profit progress in the following year.

1 Amendment of the rules for bonuses compared to 2017. In 2017 the “suspended” amount which depends on the net profit progress in 2018 relative to the net profit for 2017 constituted 15 % of the variable remuneration component 33

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

10.3 Non-monetary components of the remuneration of the Management Board Members and key managers

Beside fixed and variable remuneration, Members of the Management Board are entitled to financial benefits and benefits in kind which include the use of a company car for private purpose, accommodation and reimbursement of insurance or pension contributions. The table below presents financial and non-financial fringe benefits received by the Board Members in the period from 1 January to 31 December 2018.

Total fringe benefits Last and first name Position in PLN’000

Przybył Roman President of the Management Board, CEO 12 Juszczyk Janusz President of the Management Board, CEO 18 Skrzypczak Paweł Vice President, CFO 21 Świgulski Adam Vice President, CFO 38 Paleczny Wojciech Vice President, Marketing Management Director 15 Janczyk Piotr Member of the Management Board, HR and Systems Director 12

10.4 Agreements concluded with the managing persons providing for compensation in the case of resignation or dismissal

Non-compete agreements have been made with Members of the Management Board which require them to refrain from any activity competitive to the activity of the Company specified in its governing documents during their employment and for the period from 3 to 12 months after termination thereof. - Competitive activity includes in particular: - conducting business, on own behalf or through a third person, the scope of which is the same as some or all of the business activity conducted by the Company; - being a partner or member of a governing body of an incorporated company or any other business enterprise which scope of activity is the same as some or all of the business activity conducted by the Company; - acting as a sales representative, agent, legal or commercial representative of a competitive enterprise, - employment under an employment contract or a civil law contract in enterprises competitive with the Company, - being engaged in any other way in business competitive to the Company.

In exchange for complying with the ban of conducting competitive activity by a member of the Management Board in the period after termination of the employment relationship, the Company shall pay compensation in the amount ranging from 80% to 100% of the monthly remuneration received before terminating the employment contract, for each month of the non-compete period.

10.5 Terms and amounts of remuneration of the Members of the Supervisory Board

The remuneration policy concerning the Supervisory Board has been determined by competent bodies –General Meeting of shareholders and is as follows: Remuneration of the Supervisory Board members is based on average remuneration paid in the enterprise sector for the last month of the quarter preceding the date of payment of the remuneration. A monthly remuneration of the Supervisory Board Members: - Chairperson: 2 times the above mentioned remuneration, - Vice Chairperson: 1.8 times the above mentioned remuneration, - other Members of the Supervisory Board: 1.5 times the above mentioned remuneration, - Chair of the Audit Committee: additional 0.7 of the above amount, - other Members of the Audit Committee: additional 0.5 of the above amount.

The table below presents the remuneration for Members of the Supervisory Board in 2018.

total remuneration Last and first name Position in PLN’000

Żbikowski Karol Chairman of the Supervisory Board 132 Mosiek Tomasz Vice Chairman, Chair of the Audit Committee 146 Małek Artur Member of the Supervisory Board, Member of the Audit Committee 117 Sołdek Andrzej Member of the Supervisory Board, Member of the Audit Committee 59 Staszewski Hubert Member of the Supervisory Board 175 Krystek Grzegorz Member of the Supervisory Board 88 Hernik Konrad Member of the Supervisory Board 3

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The Company does not apply long-term incentive plans for members of the Supervisory Board.

10.6 Evaluation of the remuneration policy

The Management Board assesses that the remuneration policy in place at the Company ensures linking the interests of shareholders and employees, particularly short-terms interests, through linking the incentive system for managers with the economic and financial performance, including: the net profit of the Group, net profitability, sales revenue, the volume of orders, the volume of export sales, sales profitability of the remuneration fund and relevant individual tasks.

10.7 Commitments due to pension and similar benefits for former managing and supervising personnel

The Company has no commitments arising from pensions and similar benefits for former managing and supervising personnel.

11 Statement of compliance with the corporate governance rules by the parent company

Acting pursuant to § 70 section 6 point 5) of the Regulation of Minister of Finance of 29 March 2018 on current and interim information provided by issuers of securities and with the conditions of acknowledging the equivalence of information required by laws of a non-member country, and to Best Practice of GPW Listed Companies 2016, the Management Board of the parent company provides a statement of compliance with corporate governance principles in 2018.

11.1 The set of corporate governance rules applied by the Company

11.2 The scope of non-compliance with the corporate governance rules

In 2018 ELEKTROBUDOWA SA followed the stipulations of the set of corporate governance rules specified in “Best Practice for GPW Listed Companies 2016”, while the recommendations and principles listed below were applied in a limited scope:

I.Z.2. A company whose shares participate in the exchange index WIG20 or mWIG40 should ensure that its website is also available in English, at least to the extent described in principle I.Z.1. This principle should also be followed by companies not participating in these indices if so required by the structure of their shareholders or the nature and scope of their activity.

The principle is followed in a limited scope, as only the selected elements are available in English on the Company’s website.

IV.R.2. If justified by the structure of shareholders or expectations of shareholders notified to the company, and if the company is in a position to provide the technical infrastructure necessary for a general meeting to proceed efficiently using electronic communication means, the company should enable its shareholders to participate in a general meeting using such means, in particular through: 1) real-life broadcast of the general meeting; 2) real-time bilateral communication where shareholders may take the floor during a general meeting from a location other than the general meeting; 3) exercise of the right to vote during a general meeting either in person or through a plenipotentiary.

The Company informs that it has applied the first point of the recommendation, as it provides real-life broadcast of the general meeting and after the meeting closes, uploads its script on the company’s webpage. In the opinion of the Company, implementation of the second and third point of the recommendation might cause the exposure to risks of technical and legal nature, which may have impact on correct and undisturbed course of general meetings.

11.3 Internal control and risk management system

Internal control is an instrument supporting the management in the process of managing and taking decisions, and also in preventing and detecting faults, abuse or any irregularities.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

ELEKTROBUDOWA SA has implemented multi-stage control mechanisms, strictly inter-related and complementing one another, which operate according to the three lines of defense model.

The first line of defense: operational management. It covers the responsibility for current risk management within the conducted activity. Generally, it is performed by low- and mid-level managers who are managing the risk in day-to-day operations. Operational managers, in performing their everyday duties, identify hazards, assess risks and take actions in order to reduce the hazards. Senior managers have overall responsibility for all activities performed by the first line. In practice it means that in certain high-risk areas senior management directly oversees low- and mid-level managers and join in the performance of first line duties. Both services provided by ELEKTROBUDOWA SA and its products are unique in the sense that each time they are tailored according to particular needs of a particular customer. Each service and each product is different and may generate different risks. A project is an attempt to use certain opportunity, and each opportunity is bound with certain risk. A risk in a project and in a production order comes from the impossibility of eliminating an uncertainty associated with future events at each stage of performance. The objective of risk management on the operational level is to: - ensure better control of problem which may arise during the performance of a project, - reduce the probability of an event to occur, - mitigate or eliminate negative impact of a risk, - draft plans of preventative actions in case of occurrence of unforeseen situations, - correctly formulate estimates of costs. - The second line of defense: internal monitoring and supervision. Comprises control functions, risk management and compliance functions established by the management in order to ensure that the existing risk management processes implemented by managers of the first line of defense are adequate and operating as intended. The staff in the second line of defense collaborates closely with the operational management and collect information necessary for the senior managers. Basic responsibilities of the second line functions include current monitoring of a corporate risk (also called a strategic or material risk) and control of performance of tasks. The staff in the second line of defense collaborates closely with the operational management and collect information necessary for the senior managers. of the organization and changes with time. In ELEKTROBUDOWA SA the relevant functions or appointed staff perform control independently of the day-to-day activity of the operational staff. They cover the following areas:  financial controlling,  control of financial and accounting documents,  control of signed contracts,  purchases,  quality assurance and environmental protection,  occupational health and safety,  IT security,  fraud management,  human resources and comminication,  infrastructure,  other, depending on the needs of the company (referred by the Management Board or the Supervisory Board). It is expected that the second line of defense will show appropriate objectivism and will be providing important and useful information for senior management. Therefore the above functions serve a vital purpose and are conferred with rights to report directly to senior management.

Third line of defense: Internal audit. In ELEKTROBUDOWA SA, Internal audit is an independent, objective activity which purpose is to facilitate and add value to the operating activity. It is performed by regular, periodic evaluation of processes of risk management, internal control framework and organizational governance. The activity of Internal audit contributes to the improvement of operation of the organization. Organizational independence and objectivism is supported by direct reporting to the Management Board and the Supervisory Board; duties of the Internal audit do not include responsibility for the operating activity of the Company.

Each of the three lines has a different role in the risk management process and different tasks for which it is accountable and assessed. Key roles in the model are those of senior management and the Supervisory Board. They are jointly responsible for establishing the Company goals, defining overall strategy for achieving these goals and establishing organizational structure to facilitate effectiveness of risk management. Their commitment is decisive for the success of the whole model.

External audits of the financial statements have an important role in the internal control in place in ELEKTROBUDOWA SA. They provide opinions and assessment of the financial reporting.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The accounting policy concerning financial reporting in place in the Company is applied both in budgeting and forecasting process and in periodical management accounting, so the Company uses coherent accounting principles in presenting its financial data in the financial statements, periodic financial reports and other reports submitted to the shareholders.

Organisation of the financial risk management process separates the functions of units responsible for negotiating market transactions from the functions of units responsible for their authorization, settlement and preparation of information about valuation of those transactions. Such an organizational structure, which follows the global best practices of risk management, enables the control of business transacting process and elimination of the transactions which have not been authorized by the Company governing bodies.

The areas of risks to which the Company is exposed, are described in detail in Note 7 of the financial statements for the year ended 31 December 2017.

One of essential elements of control in the process of preparing the financial statements is their verification by an independent auditor. Tasks of an auditor include in particular: a review of the half-year financial statements and the preliminary and basic auditing of annual financial statements. An auditor is selected by the Supervisory Board through tender invitation, from among prime auditing entities which guarantee high standards of service and the required independence.

11.4 Shareholders with substantial shareholdings

Według posiadanych przez ELEKTROBUDOWA SA informacji, struktura akcjonariatu Spółki na dzień 31 grudnia 2018 roku przedstawia się w sposób następujący:

As at 31 December 2018 As at 31 December 2017

number of number of shares = shares = Shareholders percentage percentage number of number of votes votes Aviva OFE Aviva Santander (former: AVIVA OFE AVIVA BZ WBK SA) 573 441 12.08 583 220 12.28 PKO BP Bankowy OFE 470 313 9.91 470 313 9.91 Nationale-Nederlanden OFE 252 214 5.31 469 499 9.89 AXA Otwarty Fundusz Emerytalny 446 553 9.41 446 553 9.41 OFE PZU "Złota Jesień" 561 040 11.82 443 381 9.34 Aegon Otwarty Fundusz Emerytalny 343 747 7.24 343 747 7.24 Allianz Polska Otwarty Fundusz Emerytalny 319 523 6.73 299 523 6.31 MetLife Otwarty Fundusz Emerytalny 271 562 5.72 271 562 5.72 Generali Otwarty Fundusz Emerytalny 241 640 5.09 241 640 5.09 Other shareholders 1 267 575 26.70 1 178 170 24.81 Total number of shares in the share capital 4 747 608 100.00 4 747 608 100.00

Struktura kapitału podstawowego ELEKTROBUDOWA SA:

Value of Right Series Type of Type of Number of Date of Type of preference series to dividend /issue shares restriction shares registration /issue at par (since)

ordinary A no preference none 3 248 750 6 497 1995-06-07 1995-01-01 bearer ordinary B no preference none 722 250 1 953 1995-12-11 1995-01-01 bearer ordinary C no preference none 249 096 498 2006-12-06 2006-01-01 bearer ordinary D no preference none 527 512 1 055 2008-01-23 2008-01-01 bearer 4 747 608 10 003

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

To each ordinary share of nominal value 2.00 PLN, fully paid, a single vote at the General Meeting of ELEKTROBUDOWA SA is attached. Shares of all series have the same preferences as to eligibility to dividend and capital return. All shares were taken upon cash contribution. ELEKTROBUDOWA SA has no treasury shares. The subsidiaries and associates do not hold shares in ELEKTROBUDOWA SA.

11.5 Holders of securities with special control rights

ELEKTROBUDOWA SA has not issued any securities carrying special control rights for their holders.

11.6 Restrictions on voting rights

There are no restrictions on voting rights attached to the securities of the Company. There are no deadlines for exercising voting rights, or systems whereby, with the Company’s cooperation, the financial rights attached to the securities are separated from the holding of securities.

11.7 Restrictions on the transfer of securities

There are no restrictions on the transfer of the ownership rights of the Company’s securities.

11.8 Rules of appointment and removal of the managing persons, and their rights

The Management Board of the Company

Pursuant to the Company’s Articles of Association, the Management Board consists of 3 to 7 members appointed for subsequent three-year terms of office. The number of Management Board members is decided by the Supervisory Board. President of the Management Board is appointed by the Supervisory Board and other members are appointed on President’s motion by the Supervisory Board. The Extraordinary General Meeting of 18 December 2018 passed a resolution on amending the Articles of ELEKTROBUDOWA SA which included the amendment of Article 10.3 by changing its wording to: “3. The Supervisory Board appoints President of the Management Board and other Members of the Board.” The amendments were registered by the District Court Katowice – East in Katowice on 16 January 2019. A Member or the whole Management Board may be removed by the Supervisory Board before the lapse of the term of office. A Management Board Member may be removed or suspended also by the General Meeting.

Operation and powers of the Board

Operation of the Management Board is defined in the Articles of Association and in the Regulations of the Management Board approved by the Supervisory Board. Regulations of the Management Board are available on the Company website at www.elektrobudowa.pl under: Company / Corporate Documents.

The Management Board shall manage the affairs of the company and represent the company.

The Management Board holds meetings presided by its President. President of the Management Board is also Chief Executive Officer. Resolutions of the Management Board are adopted by absolute majority of votes. In the case of equal number of votes President of the Management Board has got a casting vote. All matters that are not reserved for General Meeting or the Supervisory Board fall within the competence of the Management Board. Two members of the Management Board acting jointly or one member of the Management Board acting jointly with a commercial proxy (Polish: prokurent) are authorized to represent the company. The Management Board may grant a commercial proxy only with a prior consent of the Supervisory Board. Management Board Members shall refrain from professional or other activities which might cause a conflict of interest or adversely affect his/her reputation as member of the governing body of the Company, and where a conflict of interest arises, immediately disclose it. The present joint term of office of the Company’s Management Board started on 27 April 2018. There is an internal division of responsibilities for individual areas of the company’s activity among management board members.

In 2017 the Company’s Management Board held 20 meetings and passed 27 resolutions.

The scope of activities of the Management Board includes, in particular: • organization of the Company’s operations to ensure the fulfilment of its tasks as set forth in its Articles; 38

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

• development of the strategy and main objectives of the Company, including their implementation; • development of draft plans and programmes of the Company’s operations and ensuring their economic and financial effectiveness, during their development and implementation; • concluding contracts of employment and other agreements with the Company’s employees and other persons, which do not fall within competences of the Supervisory Board in the subjective or objective scope; • making declarations and statements on behalf of the Company, representing the Company before third parties in accordance with the Articles; • within its powers, implementing recommendations made by the Supervisory Board and the General Meeting; • convening ordinary and extraordinary general meetings; • appointment and revocation of commercial proxy, subject to approval by the Supervisory Board; • concluding civil law agreements with business entities and institutions on behalf of the Company, in matters referring to the Company’s activity; • keeping the records and documents related to General Meetings, the Supervisory Board, the Management Board and the Company’s operations; • providing and making available to the General Meeting and the Supervisory Board all statements, balance sheets, profit and loss accounts and other fair information on the standing and results of the Company; • proposing solutions to the General Meeting or the Supervisory Board in matters falling within their competences.

The Management Board has not powers to decide about the issuance or buyback of the shares.

The Supervisory Board

The Supervisory Board is composed of 5 to 7 members, including Chair and its Deputy. Members of the Supervisory Board are appointed by General Meeting for a joint term of office. The terms of office of the Supervisory Board lasts three years. Members of the Supervisory Board shall elect their Chair from among themselves, and on his/her motion a Vice-Chairperson.

As long as the Company is a listed company, at least two members of the Supervisory Board should be Independent Members. At least one Independent Member shall be competent in accounting and finance..

A person who is an employee of the Company or its subsidiary or associate or has entered into a similar agreement with any of them cannot be deemed to meet the independence criteria. In addition, a relationship with a shareholder precluding the independence of a Member of the Supervisory Board as understood in this principle is an actual and significant relationship with any shareholder who holds at least 5% of the total vote in the Company. Each Independent Member of the Supervisory Board should provide the other Members as well as the Company’s Management Board with a written statement of meeting the independence criteria referred to in the Articles.

Each Supervisory Board Member shall refrain from a professional or other activity which might cause a conflict of interest or could adversely affect his/her reputation as member of the governing body of the Company, and if a conflict of interest arises, immediately disclose it. The mandate of a member of the Supervisory Board expires at the latest on the date of the General Meeting which approves the financial report for the last full financial year of service as a member of the Board. A mandate of the Board member expires also in case of his death, resignation or removal. Member of the Supervisory Board may be removed at any time by the General Meeting. Members of the Board who left their posts can be re-elected. In case of resignation, removal or death of a member of the Board the vacancy is filled for the period until the end of the term of office of the Supervisory Board.

Operation and powers of the Board

The Supervisory Board acts pursuant to the rules defined in the Polish Code of Commercial Companies, the Articles of the Company and the Regulations of the Supervisory Board. Regulations of the Supervisory Board were adopted by the resolution of the Supervisory and are available on the Company website at www.elektrobudowa.pl under: Company / Corporate Documents.

The Supervisory Board exercises permanent supervision over all areas of the activities of the Company and gives opinion on all matters referred by the Management Board to the General Meeting for consideration.

The Supervisory Board exercises its duties collectively. It may, however, delegate its members to individually perform certain acts of supervision.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

The powers of the Supervisory Board include in particular: a) a) evaluating the annual Management reports on the Company activity and the financial statements for the previous financial year, for their conformity with books and documents as well as with the actual state of affairs and the Management Board’s proposals concerning distribution of profit or covering of a loss, and also submitting annually to the General Meeting a written report of the outcome of the evaluation; b) preparation and submitting to the General Meeting of: (i) an assessment of the Company’s standing including an assessment of the internal control, risk management and compliance systems and the internal audit function; such assessment shall cover all significant controls, in particular financial reporting and operational controls, (ii) a report on the activity of the Supervisory Board containing at least the following information:  composition of the Board and its Committees;  supervisory board members’ fulfilment of the independence criteria;  number of meetings of the supervisory board and its committees in the reporting period;  self-assessment of the supervisory board; (iii) an assessment of the Company’s compliance with the disclosure obligations concerning compliance with the corporate governance principles defined in Best Practice of GPW Listed Companies 2016 and the regulations on current and periodic reports published by issuers of securities, (iv) an assessment of the rationality of the Company’s policy referred to in recommendation I.R.2 of the Best Practice (i.e. sponsoring, charity or similar activity) or information about the absence of such policy; c) consideration and approval of issues to be the subject of resolution of the General Meeting; d) appointment and removal of members of the Management Board; e) suspending in duties, for important reasons, a member of the Management Board or the entire Management Board, f) delegating a member or members of the Supervisory Board to temporarily perform the duties of the members of the Management Board who were dismissed or resigned or are not capable of performing their duties for other reasons, g) approval of the Regulations of the Management Board and Regulations of the Supervisory Board, h) approval of annual budgets and strategic plans of the Company, i) giving consent for: (i) contracting liabilities by the Company or expenditure related to a single transaction or a series of related transactions which exceed the equivalent of USD 100 000 (one hundred thousand) valid as per average USD exchange rate announced by the National Bank of Poland on the day preceding the day in which the Management Board applied to the Supervisory Board for the approval, if the expenditure had not been provided by the approved budget and surpassed ordinary management, (ii) nabycie udziałów/akcji lub objęcie udziałów/akcji oraz zbycie udziałów/akcji w innych spółkach, (iii) joining other legal persons and disposal of assets of the Company, which value exceeds 10% (ten per cent) of the net value of tangible fixed assets, excluding stock circulated within the normal operation, (iv) taking loans or credits with over one year maturity, which were not included in the approved budget, other than trade credits arising from the normal business operation, (v) extending guarantees or sureties not provided in the approved budget and encumbrance of the Company assets not provided for in the budget, (vi) entering into contracts by persons next of kin to the members of the Management Board or in any ways related to them in every case, and with employees of the Company who directly report to the members of the Management Board in case of a single contract or a series of related contracts for the value exceeding the equivalent of USD 10 000 (ten thousand) valid as per average USD exchange rate announced by the National Bank of Poland on the day the contract was concluded, (vii) employing (against employment contracts or civil law contracts) counsellors, and other persons external for the Company, particularly as consultants, lawyers, agents, if the annual, total costs of engaging the above persons, not provided for in the budget could exceed the equivalent of USD 100 000 (one hundred thousand) valid as per average USD exchange rate announced by the National Bank of Poland on the day preceding the day in which the Management Board applied to the Supervisory Board for approval, (viii) payment of advance dividend, (ix) purchase or disposal of real property, perpetual usufructuary right or a share in the real property, with the exclusion of cases when performance of such legal transaction is necessary to fulfil the requirements of tender specifications and execution of a contract awarded in the tender procedure if performance of the said legal transaction is required by the contract in order to complete the project. (x) as long as the Company remains a listed company and subject to Article 17.2.11 of the Company Articles of Association – giving consent to concluding by the company a significant agreements with a shareholder holding 5% or more votes in the Company or with an entity being a related party to the Company as defined in the international reporting standards (adopted pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards). A consent is not required for typical arm’s length transactions entered into within the operating activity of the Company with the entities included in the Group, (xi) granting a commercial proxy, j) selection of a certified auditor to audit the financial statements, based on the recommendation of the Audit Committee. If the decision on selection of the auditing company made by the Supervisory Board differs from the Audit Committee’s recommendation, the Supervisory Board shall, within 14 days after taking the decision, provides a justification of non-compliance

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

with the Audit Committee’s recommendation and submits the justification to the General Meeting. The justification shall be submitted to the nearest General Meeting, k) representing the Company in contracts made between the Company and the members of the Management Board, as well as in disputes with them, l) determining remuneration for the members of the Management Board.

11.9 Rules for amending the Articles of Association

The Company’s Articles of Association may be amended by way of a resolution passed by the General Meeting and must be recorded in the register of entrepreneurs. The resolution to amend the Articles of Association shall be passed by a majority of three fourths. The General Meeting may authorize the Supervisory Board to draw up a uniform text of the Company’s Articles After the amendments of the Articles of the Company are recorded in the register of entrepreneurs the Company submits a relevant current report.

11.10 General Meeting

11.10.1. Operation and powers

Operation of the General Meeting of ELEKTROBUDOWA SA and its essential powers are regulated by the Articles of Association and the By-Laws of the General Meeting. General Meeting of ELEKTROBUDOWA SA can be held as ordinary (annual) or extraordinary, pursuant to the Polish Code of Commercial Companies and the Company’s Articles, and also pursuant to the By-laws of the General Meeting. General Meetings are held in Katowice or in Warsaw. Annual General Meeting shall be convened by the Management Board of the company. Annual General Meeting shall be held within six months of the end of each financial year. Extraordinary General Meeting shall be convened by the Management Board on its own initiative, on a written request of the Supervisory Board, its Chair, any three members of the Supervisory Board or on a written request of shareholders representing at least 5% (five percent) of the share capital. Extraordinary General Meeting shall be convened within 14 (fourteen) days from the date of filing a relevant request. The right to convene a General Meeting serves the Supervisory Board, its Chair or any three members if it is not convened by the Management Board within 14 days after a relevant request has been filed. Extraordinary General Meeting can also be convened by shareholders representing at least a half of the share capital or at least half of the total votes in the Company. General Meeting may adopt resolutions only in matters included in the agenda, unless the entire share capital is represented at the Meeting and no-one present objected to holding the Meeting or placing specific matters in the agenda. The agenda is determined by the body which has convened the General Meeting. The Supervisory Board, its Chairperson or any three members, as well as shareholders representing at least 5% (five percent) of the share capital may demand that specific matters are placed in the agenda of the nearest General Meeting. If such a demand is filed after the General Meeting has been convened, it shall be considered as a request for convening Extraordinary General Meeting. A General Meeting is valid and may adopt resolutions irrespective of the number of shareholders and represented shares present at the Meeting, unless provisions of the Law or the Articles provide otherwise. Each share shall give the right to one vote at the General Meeting. Resolutions of the General Meeting are adopted by absolute majority of votes, unless provisions of the Law or the Articles provide otherwise.

In the case mentioned in art. 397 of the Code of Commercial Companies a resolution on dissolution of the company shall be adopted by a majority of three fourths of votes. A resolution of abandoning to consider the matter placed on the agenda can be passed only for important reasons. A relevant motion shall be substantiated in detail. Voting shall be open. A secret ballot shall be ordered in the case of election and on motions to remove members of authorities or liquidators of the company, or to hold such persons liable, and in matters concerning personal issues. Furthermore, a secret ballot shall be ordered at the request of at least one shareholder from among those present or represented at the General Meeting. Resolutions concerning a substantial change in the objects of the company shall always be taken in an open voting by roll call.

General Meeting is opened by Chairperson of the Supervisory Board or a person appointed by him, then from those with the right to vote a Chair of the General Meeting shall be elected. In case those persons are absent, the General Meeting is opened by President of the Management Board or a person appointed by the Management Board. - consideration and approval of the Management Board report on activities of the Company and the financial statements for the previous financial year; - discharging the Company’s governing bodies; - decisions concerning claims for redressing damage inflicted upon formation of the Company or exercising management or supervision; - disposal or lease of the company or an organized part of it, or establishment of a limited property right thereon; - issue of convertible bonds or bonds with priority right;

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

- buy-back of own shares which are to be offered to employees or persons who were employed in the Company or its related entity during the period of at least three years; - adopting a resolution on distribution of profit or covering a loss; - changes to the objects of activities of the Company; - amendments to the Articles of Association; - increase or decrease of the share capital; - redemption of shares (except immediate redemption: of shares acquired with infringement of provisions of Art. 362 §1 and §2 of the CCC, which were not disposed of within a year after they had been acquired by the company and the remaining part of Company’s own shares which exceeds 10% of the share capital, or the shares not disposed of within two years since acquisition); - merger, division or transformation of the Company; - dissolution or liquidation of the Company; - setting the dividend record day and the dividend payment day; - conclusion by the Company of a contract of credit, loan, surety or another similar agreement with a member of the Management Board, the Supervisory Board, auditing committee, a commercial proxy (Polish: prokurent), a trustee for a liquidation or for the benefit of any of those persons; - determining the remuneration of members of the Supervisory Board; - concluding an agreement with a subsidiary, which provides for managing the subsidiary or transferring the profit by such an entity.

11.10.2. Shareholders’ rights and their exercise

Shareholders have the right to participate in General Meetings and to exercise voting rights attached to shares held by them. Each shareholder of the Company has the right to participate in a General Meeting. One share carries one vote. The Company maintains its website on which it discloses, since the date of announcement of convening a General Meeting: - announcement of convening a General Meeting, - information about total number of the Company’s shares and number of votes attached to them on the day of the announcement and, if there are different types of shares, also informs about the types of shares and number of votes carried by each type of shares, - documents to be submitted to the General Meeting; - draft resolutions or, if no resolutions are expected to be voted, comments by the Management Board or the Supervisory Board on the issues included in the agenda or issues to be included in the agenda before the date of the General Meeting; - proxy forms for voting through a proxy.

A Shareholder’s right Description of the Shareholder’s rights

Convening of a General A shareholder representing 5% (five per cent) of the share capital may request the convening of Meeting (GM) an Extraordinary General Meeting. Shareholders representing at list half of the share capital or at least half of votes in the Company man convene an EGM.

Placing an issue in the A shareholder or shareholders representing 5% (five per cent) of the Company’s share capital agenda of a GM may request placing of certain issues on the agenda of a GM. The request shall be submitted to the Management Board of the Company not later than twenty one days prior to the scheduled date of the General Meeting. The request shall include a justification of or a draft resolution on the proposed item of the agenda. The request may be submitted by email to:[email protected] Access to the list of A list of shareholders entitled to participate in the General Meeting shall be displayed in the shareholders Company’s headquarters for review during three business days before the General Meeting. Shareholders may also request that the list of eligible shareholders be sent to them free of cost via electronic mail, providing their own electronic address to which it is going to be sent. The request shall be sent to:[email protected] Participation in a GM Only those who have been shareholders of ELEKTROBUDOWA SA for 16 days prior to the holding of the General Meeting (registration date) have the right to participate in the GM. In order to participate in the GM the shareholders shall request the entity which maintains their securities account to issue a personal certificate of entitlement to attend the General Meeting. The request shall be made not earlier than the date of announcement of convening the GM and not later than on the first weekday after the registration of participation in the GM.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Representation of a A shareholder who is a natural person may participate in the General Meeting and exercise the shareholder by a proxy voting right in person or by proxy. A shareholder who is not a natural person may participate in the GM and exercise the voting right through a person authorized to make representations and sign on his behalf or by proxy. Election of Chair of a GM Shareholders elect a chair from among those entitled to participate in the GM. A Chair is elected by ballot, by an absolute majority of votes. If only one candidate has been put forward, the Chair may be elected unanimously.

Election of a committee In order to additionally check the attendance list, a General Meeting may elect a committee for that purpose. The committee shall comprise at least three persons. If such a motion has been put forward by shareholders representing at least one tenth of the share capital represented at the GM, the committee must be elected. Proposers of the motion may elect one member of the committee. The shareholder concerned is entitled to appeal the decision of the committee to the General Meeting. Submitting a proposal A shareholder or shareholders representing 5% (one twentieth) of the Company’s share capital of a resolution may request placing of certain issues on the agenda of the nearest GM; such request may include a draft resolution relating to the proposed item on the agenda. Before the date of the General Meeting, a shareholder or shareholders representing 5% (one twentieth) of the Company’s share capital may submit to the Company, in writing or by means of electronic communication, proposals of resolutions relating to issues included in the agenda or which are to be included in the agenda of the GM. During the GM each shareholder may submit proposals of resolutions relating to issues included in the agenda.

Objections Shareholders who voted against a resolution and who want to appeal against it after the resolution was passed, shall make the objection and request its recording in the minutes before proceeding to the next item of the agenda. The shareholder who made the objection shall be provided with the possibility of brief justification of his objection.

11.10.3. General Meetings in 2018

In 2018 two General Meetings were held: the Annual General Meeting of 26 April 2018 and the Extraordinary General Meeting of 18 December 2018. The Annual General Meeting held on 26 April 2018 decided upon: - approval of the annual report on the activity of the Company and ELEKTROBUDOWA Group, and of the financial statements for 2017; - giving an discharge to all Members of the Management Board and the Supervisory Board; - distribution of the 2017 net profit in the following way: - the amount of PLN 49 849 884.00 was allocated to dividend payout (PLN 1050 per share), - the remaining PLN 2 180 378.67 was allocated to the Company’s supplementary capital. The Annual General Meeting of ELEKTROBUDOWA SA established the record date on 20 July 2018, and dividend payment dates as: 3 August 2018 – 1st tranche of PLN 24 924 942.00 (PLN 5.25 per share), 19 October 2018 – 2nd tranche of PLN 24 924 942.00 PLN (PLN 5.25 per share). The Extraordinary General Meeting held on 18 December 2018 appointed Konrad Hernik as Member of the Supervisory Board of the current, 10th term of office.

11.11 Composition and its changes during the past financial year, operation of the Company’s managing and supervising bodies and their committees

11.11.1. The Management Board of ELEKTROBUDOWA SA

In the period from 1 January 2017 to 26 April 2018 the Management Board of the Company comprised: Juszczyk Janusz - President of the Management Board, Skrzypczak Paweł - Vice President of the Management Board, Paleczny Wojciech - Vice President of the Management Board, Janczyk Piotr - Member of the Management Board.

On 26 April 2018 the 9th term of office of the Management Board expired.

On 26 April 2018 the company’s Supervisory Board determined that the Management Board of ELEKTROBUDOWA SA in the 10th term of office commencing on 27 April 2018 will consist of three members. 43

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

On 26 April 2018 the Supervisory Board, upon recommendation by President, appointed Wojciech Paleczny and Adam Świgulski to the Management Board of ELEKTROBUDOWA SA of the 10th term of office, entrusting them with the functions of Vice President of the Management Board.

As at 27 April 2018 the Management Board had the following composition: Janusz Juszczyk – President of the Management Board; Wojciech Paleczny – Vice President of the Management Board; Adam Świgulski – Vice President of the Management Board.

The Supervisory Board, on its meeting on 28 August 2018 passed a resolution on dismissing Janusz Juszczyk from the Management Board of the Company, also from the position of President of the Company’s Management Board.

Also in the meeting on 28 August 2018 the Supervisory Board passed a resolution on appointing Roman Przybył to the Management Board of the 10th term of office, also as President of the Company’s Management Board.

As at 31 December 2018 the Management Board of the Company comprised: Przybył Roman - President, Świgulski Adam - Vice President, Paleczny Wojciech - Vice President.

On its meeting on 8 January 2019 the Supervisory Board adopted a resolution to dismiss Wojciech Paleczny from the Management Board of the Company, including the dismissal from the function of its Vice President.

On the same meeting of 8 January 2019, the Supervisory Board resolved to change the number of members of the Management Board of ELEKTROBUDOWA SA in the term of office commenced on 27 April 2018, increasing the size of the Board up to five Members.

Also on 8 January 2019, on the motion of President of the Management Board, the Supervisory Board appointed Hubert Staszewski and Krzysztof Czajka as Members of the Management Board of ELEKTROBUDOWA SA of the current 10th term of office, effective as of 8 January 2019.

On 8 January 2019, on the motion of President of the Management Board, the Supervisory Board appointed Sławomir Staszak as Member of the Management Board of ELEKTROBUDOWA SA of the current 10th term of office, effective as of 31 January 2019.

On 31 January 2019 Sławomir Staszak resigned from the position of Member of the Management Board.

The composition of the Management Board has not changed until the date of publication of this Report.

11.11.2. The Supervisory Board of ELEKTROBUDOWA SA

As at 1 January 2018 the Company’s Supervisory Board had the following composition:

Żbikowski Karol - Chairman, Mosiek Tomasz - Deputy Chairman, Krystek Grzegorz - Member, Małek Artur - Member, Sołdek Andrzej - Member, Staszewski Hubert - Member.

On 8 May 2018 Andrzej Sołdek submitted a statement of resignation from the Supervisory Board, effective from 30 June 2018.

On 18 December 2018 the Extraordinary General Meeting of ELEKTROBUDOWA SA appointed Konrad Hernik as member of the Supervisory Board of the current, 10th term of office.

As at 31 December 2018 the Supervisory Board of ELEKTROBUDOWA SA had the following composition: Żbikowski Karol - Chair of the Supervisory Board, Mosiek Tomasz - Deputy Chair of the Supervisory Board, Krystek Grzegorz - Member of the Supervisory Board , Małek Artur - Member of the Supervisory Board , Hernik Konrad - Member of the Supervisory Board , Staszewski Hubert - Member of the Supervisory Board .

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Hubert Staszewski resigned from the function of member of the Supervisory Board of the Company, effective from 8 January 2019.

The composition of the Supervisory Board has not changed until the date of publication of this Report.

In 2018 the Supervisory Board held 9 meetings in Katowice and Warsaw, on which an aggregate of 25 resolutions were passed. Also, the Board voted 12 times by means of distant communication, which resulted in 18 resolutions being passed.

The Supervisory Board reviewed the declarations of fulfilment of the independence criteria as defined in the Best Practice of GPW Listed Companies 2016, submitted by Members of the Supervisory Board, with regard to the relationships and circumstances that had occurred during the year 2018 and assessed that no information is available to the Board about the existence of any relationships or circumstances which would be an evidence of non-fulfilment by any Member of the Supervisory Board in 2018 the independence criteria defined in the Best Practice of GPW Listed Companies 2016.

Fulfilment of the First and last name Function performed on the Period of service independence Supervisory Board criteria acc. to Best Practice 2016

1. Karol Żbikowski Chair of the Supervisory from 1.01.2018 YES Board to 31.12.2018 2. Tomasz Mosiek Vice Chair of the Supervisory from 1.01.2018 YES Board to 31.12.2018 3. Konrad Hernik Member of the Supervisory from 18.12.2018 YES Board to 31.12.2018 4. Grzegorz Krystek Member of the Supervisory from 1.01.2018 YES Board to 31.12.2018 5. Artur Małek Member of the Supervisory from 1.01.2018 YES Board to 31.12.2018 6. Andrzej Sołdek Member of the Supervisory from 1.01.2018 YES Board to 30.06.2018 7. Hubert Staszewski Member of the Supervisory from 1.01.2018 YES Board to 31.12.2018

The Supervisory Board assessed that all its Members in the period of performance of their functions on the Supervisory Board of ELEKTROBUDOWA SA in 2018 fulfilled the independence criteria within the meaning of Best Practice of GPW Listed Companies 2016, as declared in the statements submitted by them.

11.11.3. Audit Committee and Nominations and Remuneration Committee

The Supervisory Board sets up standing committees which act as advising and opinion-making bodies for the Board. In 2018 two Supervisory Board’s standing committees: the Audit Committee and the Nominations and Remuneration Committee were operating.

Composition, duties and rules of operation of the committees are defined in their Regulations, adopted by the Supervisory Board.

The Audit Committee

The Audit Committee is appointed by the Supervisory Board from among its members and is composed of at least three members, of whom at least one shall be competent in accounting or in auditing the financial statements. At least one member of the Audit Committee, or each member in a specific scope, shall have knowledge and skills in the industry where the Company operates. Majority of Members of the Audit Committee, among them its Chair, must meet the independence criteria laid down in Art. 129.3 of the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight (Journal of Laws of 2017, item 1089). The Supervisory Board decides about the number of members of the Audit Committee.

On 1 January 2018 the Audit Committee consisted of: Tomasz Mosiek - Chair of the Committee, Artur Małek - Member, Andrzej Sołdek - Member.

On 8 May 2018 Andrzej Sołdek submitted a resignation from the Supervisory Board, effective from 30 June 2018. On 26 June 2018 the Supervisory Board appointed Karol Żbikowski to the composition of the Audit Committee.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Following the above, from 1 July 2018 to 31 December 2018 the Audit Committee consisted of: Tomasz Mosiek - Chair of the Committee, Artur Małek - Member, Karol Żbikowski - Member.

On 8 January 2019 the Supervisory Board appointed Konrad Hernik to the composition of the Audit Committee.

From 8 January 2019 until the date this report was drawn up the composition of the Audit Committee has not changed.

Tomasz Mosiek, Artur Małek, Karol Żbikowski, Andrzej Sołdek, Konrad Hernik submitted declarations to the Company stating that they meet the criteria of independence referred to in the Act on Statutory Auditors, Audit Firms and Public Oversight.

The Supervisory Board made an appraisal of all persons who performed the functions of Members of the Audit Committee of the Supervisory Board of ELEKTROBUDOWA SA in 2018, in respect of fulfilment of the independence criteria laid down in Art. 129.3 of the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight (Journal of Laws of 2017, item 1089).

Fulfilment of the Function performed Period of service independence First and last name on the Audit Committee criteria acc. to the Act on Statutory Auditors 1. Tomasz Mosiek Chair of the Audit from 1.01.2018 YES Committee to 31.12.2018 2. Artur Małek Member of the Audit from 1.01.2018 YES Committee to 31.12.2018 3. Andrzej Sołdek Member of the Audit from 1.01.2018 YES Committee to 30.06.2018 4. Karol Żbikowski Member of the Audit from 26.06.2018 YES Committee to 31.12.2018

The Supervisory Board, as a part of an annual procedure, reviewed the declarations of fulfilment of the independence criteria within the meaning of the Act on Statutory Auditors, submitted by Members of the Audit Committee, with regard to the relationships and circumstances that had occurred during the year 2018, and assessed that no information is available to the Board about existence of any relationships or circumstances which would be an evidence of non-fulfilment by any Member of the Supervisory Board in 2018 the independence criteria defined in the Act on Statutory Auditors. The Supervisory Board assessed that in the period of performance of their functions on the Audit Committee in 2018 the Members of the Audit Committee referred to above fulfilled the independence criteria within the meaning of the Act on Statutory Auditors, as declared in the statements submitted by them.

Tomasz Mosiek, Artur Małek, Karol Żbikowski, Andrzej Sołdek, Konrad Hernik submitted declarations to the Company that they have knowledge and skills in accounting or audits of financial statement.

Tomasz Mosiek

Graduated from the Poznan University of Technology with the diploma of MSc in Construction Engineering in 1990. In 1991 he obtained a stockbroker’s licence, while in 1995 an investment adviser’s licence. Completed also a number of courses in financial risk management, pension funds management, derivative instruments and in Polish and foreign bond markets.

He started his career in 1991 as commodity exchange broker in Poznańska Giełda Kapitałowa, then in Wielkopolski Dom Maklerski SA. In 1992 – 1994, in the brokerage of Pomorski Bank Kredytowy SA, first as broker then Head of Secondary Market Team and Head of Investment Team. In 1995, analyst in Creditanstalt Securities SA. From 1995 to 1998 – fund manager in Towarzystwo Funduszy Inwestycyjnych “Korona" SA. In 1999 - 2001 he was acting Investing Director – Member of the Management Board of Zurich Powszechne Towarzystwo Emerytalne SA. In 2001 - 2005 he worked for VIVID.PL S.A. as Finance Director – Member of the Management Board and then its President. In 2004, investment adviser in Erste Securities Polska S.A. Between 2005 and 2007: investment adviser in Towarzystwo Ubezpieczeń Allianz Polska SA and Towarzystwo Ubezpieczeń Allianz Życie Polska S.A., and investment adviser – fund manager in Towarzystwo Funduszy Inwestycyjnych Allianz Polska S.A. From 2007 to 2008 he was with AZEN Sp. z o.o., from December 2007 to April 2008 as President of its Management Board. In 2009: investment adviser in AXA Towarzystwo Funduszy Inwestycyjnych SA, Warsaw.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Artur Małek

A graduate of the Cracow University of Economics, Faculty of Finance and Banking, and the alumnus of a post–graduate course in the School of Entrepreneurship and Management of the Cracow University of Economics, Faculty of Finance and Accounting. He has also completed an Executive MBA course at Oxford Brookes University/Polish Open University and the ICAN Institute – the Strategic Leadership Academy programme, Warsaw, and a number of training courses in the field of management and finance. He started his career in Optimus-ic SA (now Comp SA) where he was Planning Manager in 1997 – 2000. From 2000 to 2004 worked for Novitus SA (now Comp SA) as Financial Controller and from 2004 to 2010 for Wola Info SA (now Devoteam SA) as Controlling Director. Since 2008 he worked for Noblestar Polska sp. z o.o. where he was Finance Director until 2010. In 2010- 2014: Finance Director of Benefit Systems SA. Since 2011 he has been on the Management Board of Fitness MCG sp. z o.o. while since 2014 Finance Director of Calypso Fitness SA. He has been on supervisory boards of a number of companies. At present he is member of Supervisory Boards of Vistula Group SA and Medicalgorithmisc SA and Chairman of the Supervisory Board of EFC Fitness SA.

Karol Żbikowski

A graduate of the Warsaw School of Economics, Foreign Trade Faculty. Also completed a post-graduate course in Investment Banking - London Guildhall University and Banking Academy in Gdańsk. In 1994 he obtained a stockbroker’s licence. In 1994 - 1997 he was employed in Capital Operations Centre of Bank Handlowy w Warszawie SA, while in 1997 - 2003 worked for Societe Generale Securities Polska as Member of the Management Board (1997 - 1998) and President of the Management Board (1999 - 2003). In 2003 - 2005 he was an advisor for Enterprise Investors, and in 2004 - 2005 partner in Investor Relations Partners. In 2005 he counseled for the Management Board of Orbis SA. Since 2005 worked for Unicredit CAIB group as President of the Management Board of IR Services sp. z o.o., since 2006 as Managing Director of Unicredit Markets & Investment Banking. From 2008 to 2011 he was on the management board of Wydawnictwa Szkolne i Pedagogiczne S.A. (WSiP). In 2011 – 2015, Vice President and President of Management Board of lncentive Solutions Polska. At present he conducts activity in business consulting. He was chair of supervisory boards of companies in WSiP Group –Alfa Logis, logistics operator, and Zielona Sowa, editorial office. Also, he was on the supervisory boards of Fasing SA Group, Elektrim Telekomunikacja Sp. z o.o., Cersanit S.A., WSiP S.A., Magellan S.A., Echo lnvestment S.A. At present he is on supervisory boards of Sanok Rubber Company S.A., BBI Development S.A., and Prochem S.A. where he is Chairman.

Konrad Hernik

A graduate of the Academy of Economics in Cracow, faculties: Organization and Management and Marketing and Management. He also completed a post-graduate course in Financial Mathematics at the Jagiellonian University in Cracow. Since 2018, President of the Management Board of Buma Factory Sp. z o.o. Sk., Cracow in the Buma Group, responsible for strategic and operational management. Since 2017 he has been Vice President of the Management Board of Automotive Experts & more Sp. z o.o., Cracow, responsible for the areas of strategic management, finance management, pursuit of synergies, optimization of processes, mergers and acquisitions. From 2004 to 2017 he was involved in Armatura Group: in 2004 – 2016 as President of the Management Board in Armatura Kraków SA, responsible for strategic and operational management, finance management, building and development of the corporate group. In the companies within Armatura Group he was President of: Armatoora SA (2009-2016), Armagor SA (2009- 2014), Arm Property Sp. z o.o. (2015-2016), Armatoora SA i wsp. Sp. k. and Vice President & Treasurer in KFA USA Inc. Elgin USA (2004-2005). Between 2001 and 2004 he was Economics and Finance Manager in Excellent SA and Excellent Profile S.j., responsible for the corporate finance management and support for operating activity management. From 2000 to 2001 in Jagiellonia Group: Managing Director in the publishing house Jagiellonia SA and Director of Jagiellonia Inwestycje Sp. z o.o. In 1998 – 2000 he performed the function of Finance Director of Instal Kraków SA, and in 1997 – 1998: Head of the Bank Portfolio Management Team in the Capital Investment Department of Bank Przemysłowo – Handlowy in Cracow. Earlier, from 1993 to 1997 he worked for Penetrator Group, Cracow. Since 2017 Konrad Hernik has had a seat on the Supervisory Board of Invena SA in Gdańsk. Earlier he was on supervisory boards of: Aquaform SA (2014-2016), Armaton SA (2013-2015), Armadimp SA (2012- 2014), Krakchemia SA (2007 - 2010), Maryland Sp. z o.o. (2001 – 2004), Energopol Południe SA (1998 – 2000), Polnord SA (1998 – 1999), Bankowe Towarzystwo Leasingowe (1998). Since 2018 Konrad Hernik has been 2018 Director of the Małopolska Region of the Association of Polish Economists having its registered office in Warsaw. In 2013 – 2017 Vice President for Commerce of the Chamber of Industry and Commerce (IPH) in Cracow.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

Tomasz Mosiek, Artur Małek, Karol Żbikowski, Konrad Hernik submitted the statements that they have knowledge and skills in the industry where the Company operates.

First and last name Education Professional experience:

Tomasz Mosiek MSc in construction engineering (Poznań Since 2008: Member of the Supervisory Board and University of Technology, Civil Member of the Audit Committee, ELEKTROBUDOWA Engineering Department, 1990) SA

Artur Małek 1989–1994, Secondary Technical School, Since 2014: Member of the Supervisory Board and ZSEM in Nowy Sącz, profile: electronics Member of the Audit Committee, ELEKTROBUDOWA SA

Karol Żbikowski MSc in International Trade, the Warsaw Since 2014: Member of the Supervisory Board School of Economics, faculty: ELEKTROBUDOWA SA, of which 4 years as its Chair Management, 1996. (from 22 May 2014 to date)

Konrad Hernik University of Economics in Cracow, Since 2018: Member of the Supervisory Board and faculties: Organisation and Member of the Audit Committee, ELEKTROBUDOWA Management, Marketing and SA; Management 1998 - 2000 Finance Director Instal Kraków SA.

The Supervisory Board made an appraisal of all persons who performed the functions of Members of the Audit Committee of the Supervisory Board of ELEKTROBUDOWA SA in 2018, in respect of expertise and skills in accounting or auditing the financial reports and in knowledge of the industry in which the Company operates.

Expertise- Function in the Audit Expertise - First and last name Period of service accounting / audit. Committee industry fin. reports 1. Tomasz Mosiek Chair of the Audit from 1.01.2018 YES YES Committee to 31.12.2018 2. Artur Małek Member of the Audit from 1.01.2018 YES YES Committee to 31.12.2018 3. Andrzej Sołdek Member of the Audit from 1.01.2018 NO YES Committee to 30.06.2018 4. Karol Żbikowski Member of the Audit from 26.06.2018 YES YES Committee to 31.12.2018

The Supervisory Board assessed that the above Members of the Audit Committee, during performance of their functions in the Audit Committee in 2018 fulfilled the criteria of knowledge and skills in accounting or auditing the financial statements, as declared in the statements submitted by them.

The Supervisory Board assessed that the Members of the Audit Committee: Tomasz Mosiek, Artur Małek and Karol Żbikowski, during performance of their functions in the Audit Committee in 2018 fulfilled the criteria of knowledge and skills in the industry where the Company operates, as declared in the statements submitted by them.

In 2018 the auditing firm which audited the Company’s financial statements did not provide any other permitted non-audit services for ELEKTROBUDOWA SA.

In 2017 ELEKTROBUDOWA SA draw up and implemented the “Policy and procedure of selecting a statutory auditor/audit firm to audit the financial statements of ELEKTROBUDOWA SA and ELEKTROBUDOWA Group” (hereinafter referred to as Selection Policy) and „Policy of providing acceptable non-audit services for ELEKTROBUDOWA SA by a statutory auditor/audit firm carrying out the audit, its affiliates and by a member of the audit firm’s network” (hereinafter referred to as Policy on Provision of Additional Services).

The Selection Policy lays down the rules and procedure of selecting a statutory auditor/audit firm to audit the financial statements of ELEKTROBUDOWA SA and ELEKTROBUDOWA Group, which ensure independence of the auditors and high quality of the audit of the financial statements of ELEKTROBUDOWA SA and its subsidiaries. The Policy covers such issues as the role of the Company’s governing bodies in appointing a statutory auditor/audit firm to audit its financial statements, specification 48

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

of the steps to be taken prior to the selection by the company of a statutory auditor/audit firm to audit the financial statements, principles the Company shall be governed by in selection of a statutory auditor/audit firm, restrictions to entrusting statutory audits exceeding the normative maximum level and to duration of the audit engagement, formal requirements of participation in a tender preceding the selection of statutory auditors/audit firms, basic evaluation criteria for offers of auditor firms and a procedure of selecting a new statutory auditor/audit firm.

The purpose of Policy on Provision of Additional Services includes: determination of rules of ordering additional, non-audit services to statutory auditors/audit firms, ensuring minimization of the financial and operating risks and compliance with legal requirements and continual improvement of quality of the financial reporting, as well as fairness, independence, objectivism, responsibility and reliability of the statutory auditors/audit firms performing tasks for ELEKTROBUDOWA SA. The Policy covers a prohibition of providing services other than an audit of the financial statements, acceptable non-audit services, principles of ordering the auditors other services which are not an audit of the financial statements, restrictions on the amount of the remuneration of a statutory auditor/audit firm in connection with the provision of non-audit services.

The Audit Committee, having reviewed the documents provided by the Management Board, including the “Report on the proceedings related to implementation of the procedure of selection of a statutory auditor/audit firm to audit the financial statements of ELEKTROBUDOWA Group and the evaluation and analysis of offers” which includes grading of the submitting offers on the basis of the adopted criteria and on the Board’s own analysis and assessment, presents to the Supervisory Board two alternative entities which could be entrusted with the order for the statutory audit, pointing at its justified preference concerning one of them. The Audit Committee pointed at two possible appointees, PWC Sp. z o.o. and Ernst&Young Audyt Sp. z o.o., recommending to select PWC Sp. z o.o. to carry out an audit of the financial statements and a preceding interim review. The recommendation was free from and impact by a third party and contractual arrangements with third parties.

The Audit Committee passed unanimously a resolution on giving a recommendation to the Supervisory Board to appoint a statutory auditor/audit firm to audit the financial statements in ELEKTROBUDOWA SA. The Audit Committee did not raise any comments to the process of selecting an auditor, as the process was being monitored by the Audit Committee on a current basis.

During the past year there were 11 eleven) meetings of the Audit Committee on which 9 resolutions were adopted.

According to the Regulations of the Audit Committee its principal role is to advise and support the Supervisory Board in performance of its control and supervisory obligations defined in the Articles, in the scope of:

 monitoring the implementation of financial review activities, assessment, control and monitoring of independence of the statutory auditor and the audit firm;  reporting the findings of the review to the Supervisory Board and explaining how the review contributed to fairness of the Company’s financial reporting and what was the role of the Committee in the review process;  monitoring of the financial reporting process;  monitoring the efficiency of internal control systems and the risk management systems, compliance and internal audit, also with respect to financial reporting;  issuing to the Supervisory Board recommendations in matters concerning the appointment of statutory auditors and audit firms.

The Nominations and Remuneration Committee

The Committee has at least three members, including its Chair, appointed and removed by the Supervisory Board for its tenure from among Supervisory Board Members. The Supervisory Board decides about the number of members of the Committee. The Supervisory Board elects members of the Committee during its first meeting of a term of office, while the Chair is elected by members of the Committee from among themselves. Majority of members of the Committee are independent of the Company. A member of the Committee is deemed independent if he meets the criteria laid down in Annex II to the European Commission Recommendation of 15 February 2005 on the role of non- executive or supervisory directors of listed companies and on the committees of the (supervisory) board, and the guidelines of Best Practice of GPW Listed Companies 2016.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

On 1 January 2018 the Nominations and Remuneration Committee consisted of: Karol Żbikowski - Chair of the Committee, Tomasz Mosiek - Member, Hubert Staszewski - Member.

On 21 February 2018, by resolution No. 15/X/2018 of the Supervisory Board Grzegorz Krystek was appointed to the Nominations and Remuneration Committee

Following the above, from 21 February until 31 December 2018 composition of the Nomination and Remuneration Committee was as follows: Karol Żbikowski - Chair of the Committee, Grzegorz Krystek - Member, Tomasz Mosiek - Member, Hubert Staszewski - Member.

On 8 January 2019 Hubert Staszewski resigned from the function of member of the Supervisory Board of the Company.

The composition of the Nominations and Remuneration Committee did not change from 8 January 2019 till the date of drawing up these financial statements.

All Members of the Nominations and Remuneration Committee have submitted statements that they meet the independence criteria laid down in Annex II to the European Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board, and additional requirements of Best Practice of GPW Listed Companies 2016.

During the past year there were 3 (three) meetings of the Committee, during which 1 (one) resolution was adopted.

According to the Regulations, the scope of activity of the Nominations and Remuneration Committee includes: - recommendation to the Supervisory Board concerning resolutions on the number of Members of the Management Board; - giving opinions on candidates’ eligibility to perform functions on the Company’s Management Board and recommending adoption of relevant resolutions to the Supervisory Board, giving opinions on Members of the Management Board to be removed from their function in the Management Board and recommending adoption of relevant resolutions to the Supervisory Board; - giving opinions, drawing up and recommending to the Supervisory Board of the rules for remuneration for Members of the Company’s Management Board, and periodic review of the rules; - preparation opinions and recommendations for the Supervisory Board concerning the rules of remuneration for top managers of the Company; - giving opinions and recommendation to the Supervisory Board of incentive programmes in place in the Company and recommending relevant changes; - assessment of the human resources management system valid in the Company.

11.12 Diversity policy

The parent company ELEKTROBUDOWA SA has followed the formal rules of equal treatment in employment and counteracting mobbing practices since 2009.

The purpose of these rules is to ensure the employees’ right to be treated with respect in their working environment, with respect to their personal interests and dignity, to ensure equal treatment in employment and to counteract abuse, sexual harassment and mobbing. According to these rules: - all employees without distinction of any kind, such as sex, age, disability, race, religion, national origin, political orientation, trade union membership, ethnic origin, belief, sexual orientation, and also irrespective of being employed for a definite or indefinite term or on a full-time or part-time basis, shall be equally treated in establishing and terminating employment relationship, in the terms of employment, promotion and access to vocational training; - pracownicy mają prawo do jednakowego wynagrodzenia za jednakową pracę lub za pracę o jednakowej wartości; - - all internal documents are prepared with respect to the principle of equal treatment in employment, so as none of their provisions would cause unfavourable disproportion or particular disadvantage for establishing or terminating employment relationship, terms of employment, promotion or access to vocational training;

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

- unacceptable are the acts of encouraging or commanding another person to violate the principle of equal treatment in employment; - unacceptable is any unwelcome behaviour with the purpose or effect of violating the dignity of an employee and of creating an intimidating, hostile, degrading, humiliating or offensive environment (abuse); - unacceptable is any unwanted conduct relating to sexual context or with reference to the employee’s sex taking place with the purpose or effect of violating the dignity of an employee, degrading humiliating an employee; such conduct may include physical, verbal or extra-verbal elements (sexual harassment); - any manifestation of mobbing understood pursuant to the Polish Labour Code provisions as “actions or behaviour referring to an employee, or directed against an employee, comprising persistent and drawn-out harassment or intimidation of that employee which have the effect that the employee’s own assessment of his/her vocational value is compromised, causing – or aimed at – humiliation or ridicule of the employee and/or his/her isolation or elimination from the workplace team” are deemed as highly reprehensible and must not be tolerated. Mobbing practices against inferiors or co-workers is a gross violation of employee obligations and may result in termination of employment without notice at fault of the perpetrator. The Company declares support for those who have been affected by mobbing acts in workplace; - the employees whose right to equal treatment in employment has been violated or who have been subject to mobbing have a right and an obligation to report the incident to their direct superiors or higher level superiors or Human Resources Specialists. When violation of the principle of equal treatment in employment has been reported, explanatory proceedings are resumed.

Since 18 November 2015 ELEKTROBUDOWA SA has been a signatory of the Diversity Charter, an international initiative launched in such European countries as Poland, France, Spain, Italy, Austria, Germany, Sweden, Belgium, Ireland, Finland, Estonia and Luxembourg, and promoted by the European Commission. The Diversity Charter is a written obligation signed by organisations which declare to introduce the prohibition on discrimination in the workplace and decide to undertake measures to create and promote diversity and declare their readiness to involve all employees and business and social partners in such activity. The Company does not apply a separate diversity policy to its administrative, managing or supervising bodies. In 2018 in ELEKTROBUDOWA SA three internal instances of irregularities in the relations between employees were reported, of which one showing signs of xenophobia. The reported cases were investigated and the corrective actions implemented. The investigations did not detect any signs of violation of the rule of equal treatment in employment or the signs of workplace harassment. In connection with the above mentioned case, a special meeting of employees was provided in which the topics of diversity in workplace were discussed.

12 The 2018 non-financial information statement of Elektrobudowa SA and ELEKTROBUDOWA Group

Presented below 2018 Non-financial Information Statement of ELEKTROBUDOWA Group and the company ELEKTROBUDOWA SA further: Statement), which is a separate part of the Management Report on the Activity of ELEKTROBUDOWA SA and ELEKTROBUDOWA Group (further: Group)2 contains information pertaining to the Company and the Group for the period from 1 January to 31 December 2018. The Statement has been prepared in accordance with the Polish Non-financial Information Standard (SIN) and follows the provisions of the Act of 29 September 1994 on Accounting. The Statement has not been subjected to an external verification.

12.1 Stakeholders of the Group and non-financial issues The Group is aware that, taking into account the size and nature of the conducted business, it operates in the environment of numerous stakeholders (i.e. individuals and groups who affect the activity of the organization and/or are affected by the organization because of its decisions, actions and their results). The stakeholders have specific, various needs which the Group tries to consider in its everyday decisions and business activity. In result of the internal analysis, performed with the involvement of representatives of various functional areas of the company and its managing personnel, the Group’s stakeholders have been identified and then a stakeholders map has been developed, basing on the scale of the interaction of the company, different stakeholder groups and their potential interest in the activity of the companies. The companies are committed to maintaining good relations with the stakeholders and, wherever possible, they try to involve them in finding solutions and answers to issues relating to their actions, being aware of accountability for the outcome of such actions.

2 The Groups’ entities include ELEKTROBUDOWA SA and the subsidiary ENERGOTEST sp. z o.o. The subsidiary ELEKTROBUDOWA UKRAINE Ltd. based in Zaporozhia has not been considered; ELEKTROBUDOWA SA withdrew from the company on 12 June 2018 by submitting a statement of withdrawal to the Director of ELEKTROBUDOWA UKRAINE Ltd. 51

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ELEKTROBUDOWA Stakeholders The Group Channels of contact and involvement SA opinion and satisfaction surveys, a continual dialogue with an Employees Employee Representative / Trade Unions representatives, cyclical   meetings with key managers, corporate newsletters, corporate magazine, in-company (integration) meetings, meetings of working groups, the Code of Ethics Public administration   reports, statements, web page Public reports, General Meeting of Shareholders, www page, Supervisory   Shareholders/Stockholders Boards’ meetings Suppliers and opinion and satisfaction surveys, direct meetings, audits, the Code   subcontractors of Ethics The Group   reports, meetings, statements Finance and insurance reports, meetings, analyses   institutions Certification bodies   reports, audits, reviews Customers and investors opinion and satisfaction surveys, direct meetings, conferences, seminars and trade fairs, stock exchange and press   communications, www page, training, technical support, social media Competitors trade fairs and conferences, business meetings, partnership in   projects, www page Media press publications and releases, trade conferences and briefings,   annual reports, press communications Business and trade organizations and   active membership, trade meetings, business conferences associations Non-governmental organizations and reports, statements, dialogue sessions, www page, information   associations (including brochures ecological) Capital market direct meetings, reports, presentations of results and important  events, www page Local communities dialogue sessions, information meetings, www page, pages  dedicated to specific, performed projects Students and pupils Meetings during Recruitment Fairs, thematic presentations at  universities and schools, internship programmes, partnerships with schools, web page tab Career, publications for students Table 1 Stakeholders of the Group and ELEKTROBUDOWA SA3

12.2 Key non-financial issues Taking into account the nature of conducted business activity, an undertaking’s commitments, also the commitments resulting from its legal environment, values and business strategy, as well as identified stakeholders and their opinions, the entities of the Group have defined the following key disclosure areas:

ELEKTROBUDOWA SA ENERGOTEST sp. z o. o. Environmental impact   Preventive approach to the environment  Raw material and other materials  Energy and fuels  Biodiversity  Emissions  Waste  Compliance with the environmental protection regulations   Responsibility for the environmental impact of products   Employees   Employment and employee benefits  

3 Key stakeholders of ENERGOTEST sp. z o.o. include also research communities 52

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

ELEKTROBUDOWA SA ENERGOTEST sp. z o. o. Employee development (training and education)   Occupational health and safety   Diversity and equality of opportunities at workplace   Equality of pay for men and women   Employee relations and freedom of association   Ethics at workplace   Respect of human rights, including prevention of child labour and   elimination of compulsory labour Responsible business practices   Preventing corruption and bribery   Product safety, including adequate marking   Responsible marketing   Protection of privacy   Corporate governance  Social commitment   Support for communities and communication with communities  Cooperation with schools and universities  

Tab. 2 Areas of key non-financial issues

12.3 Governance The Group does not operate according to a single common business model and a single strategy, because of different scale and nature of activity conducted by its entities, their size, technological differences and different organizational culture. Because of different legal forms, different are also the corporate governance solutions.

12.3.1 Business model and business strategy4 ELEKTROBUDOWA SA is one of the biggest Polish companies in the electrical installation sector, operating continually since 1953. Since 1996 it has been listed on the Warsaw Stock Exchange. The Company’s offer includes comprehensive services for the power generation, transmission and distribution sectors and broadly understood industrial sector, comprising engineering, procurement of materials and services, commissioning and start-up, and also technical consultancy and service, also performed as a general contractor. The objects of the Company include also manufacture and comprehensive delivery of power equipment: high voltage, medium voltage and low voltage switchgear, high-current busducts and electrical stations and systems. The Company renders services relating to construction, modernization, extension and overhauls of power facilities and industrial plants. As one of few Polish companies ELEKTROBUDOWA SA is experienced in performance of electrical systems for nuclear power facilities. Major part of the Company’s revenue is generated from power investments in the sectors of power generation, transmission and distribution and in the industrial sector. The level of investments in each of the above sectors is directly related to the growth level of GDP. The Company principally operates in its country of incorporation, but also in the markets of Russia, Ukraine, Saudi Arabia, Finland. The Company has the Integrated Management System in place, which ensures that the company operates in compliance with the quality, OHS and environmental standards. ELEKTROBUDOWA SA has two Strategic Business Units – SBU Production of Equipment and SBU Contract Execution. The specificity of their activity is different, therefore they have different business models. However, both models have one feature in common – the same source of generating returns, that is: unique in the scale of Poland expertise, experience and number of electricians and commissioning and test specialists. As far as Contract Execution is concerned, the Company is focused on big and technically difficult projects which only a few can perform. For this reason it is necessary to maintain relatively large own workforce, which the Company may quickly mobilize when needed. The Company during its years of experience managed to develop an efficient and effective system of organization and performance of contract as well as an efficient cost control system, which is its competitive advantage.

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Having own resources gives the Company high reliability in the eyes of its customers, in terms of quality and meeting the deadlines, and ensure constant contact with potential investors, providing a valuable source of information about investments planned by them. As far as Production of Equipment is concerned, the Company’s unique knowledge and expertise enabled designing and launching – as the only Poland’s company - high voltage gas-insulated switchgear. The company has its own design and research centre and own manufacturing facilities. Some works, less profitable, are subcontracted, reducing the total manufacture costs in this way. Elektrobudowa cooperates with research centres which conduct certification and update the certificates of the Company’s products, what is a condition for approval for use and hence trading in the market. The business model of the Strategic Business Units Production of Equipment has been recently enhanced by implementation of the KAIZEN system of continuous improvement, which is expected to provided sources of new ideas and improvements in the manufacture process organization, leading to permanent, continuous improvement of the production profitability. In its activity ELEKTROBUDOWA SA strives at building permanent and positive relationships with all of its stakeholders, with consideration to the social and environmental concerns. Generally, it is focused on promoting ethical behaviour, transparency of operations and the least possible environmental impact. Guided by the idea of corporate social responsibility, in its activity Elektrobudowa SA puts special attention to the following concerns: corporate governance, employee rights, rational use of natural resources, safety of waste management, fair market practices, preventing the risks of abuse and social commitment.

ENERGOTEST sp. z o. o. provides the services of turnkey performance of projects in the area of electrical power automation and automation systems, commissioning of electrical systems, acceptance tests of power units, periodic tests and reviews; designing high and medium voltage power units and substations covering all trades, construction and manufacture of innovative equipment for the power industry. The outcome of the Company’s activity includes: project engineer service, systems: ECONTROL, AQUARIUS, EMAC, ET-DCS, devices: AZRS, APZ, WN, WNd, WNf, PB, DCtest, ZŁ, ZIo, EKM, ETT. The Company is active in three market segments: power generation, power transmission and distribution and some industry branches. Among the key customers of ENERGOTEST sp. z o.o. are Energy Groups and big industrial companies. The impact made by customers on the company is material, because of the principles and tender procedures related to contract terms proposed by them, combined with the demand of highest standards of equipment and work and the requirement of consent for acceptance of unlimited technical and economic risks. Order award procedure is also relevant as they are awarded according to the purchasers’ internal regulations or in various electronic auctions. The company uses its own sales channels and distributors of equipment or business partners (partnership agreements). Its business activity is focused mainly on the domestic market, but it also begins to use the export potential of its products in West- and South- European countries. Competitors of the company include big international corporations and domestic companies in the electrical and automation industry, with whom the company competes mainly by price and by quality. The company’s core resources necessary for performance of its business and crucial for conducting its operating activity and implementing the directions of its strategic development include: - human resources – highly qualified employees (engineers, specialists in the field of protection equipment, automation, electronics and IT) representing deep knowledge in electrical automation, process automation, control systems, electrical design engineering, SCADA and I&C, designing, constructing and manufacture of equipment with the use of digital technology and energoelectronics; - specialist software tools of various producers (COPA - DATA, Siemens, GE, ABB, ZEG), development and design environments (VISUAL DSP+++, C++Builder, AUTOCAD, EPLAN, etc.). As ENERGOTEST sp. z.o.o. is an engineering company which relies on expertise and skills of its employees, the total remuneration costs have the biggest share in the operating expenses. The biggest expenditure is required for funding the comprehensive services required for performance of big projects, for example for construction of a power unit. Approximately 80% of the company’s revenue comes from sale of power automation and design services, and around 20% from the sale of products and services relating to them The business model adopted by the company is based on adapting the intended use and functionality of products to the customer’s needs. It is built on high efficiency, comprehensiveness of supplies, customers’ recognition and references from them, establishing long-term, unique relations with customers owing to high technical and ethical standards, profound understanding of issues from the scope of own activity and operation of customer’s facilities. ENERGOTEST sp. z o.o.is pursuing the Customer Intimacy strategy by providing best complete solutions to target customers. The strategy is based on deep recognition of the customers’ needs and the ability to meet their specific requirements, and on precise segmentation of markets and identifying niches in which the company’s offer exactly responds to the requirements.

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

It is a mission of ENERGOTEST sp. z o.o. to create an innovative, profitable organization which ensures: boosting the effectiveness and competitiveness of customers through providing highly specialized, comprehensive and innovative solutions for automation and power systems; satisfying value for Owners; providing the employees with opportunities for development grounded on the social ethics principles, transfer of knowledge and skills. In the years to come the organic growth is planned for ENERGOTEST sp. z o.o.5 First of all the company is going to penetrate markets where it is already well established, then the markets where its presence has been weak so far. Various products are due to be included in the offer: constructing DCS systems in collaboration with their suppliers, type Smart Load offloading systems with the use of PMU; production of synchro-phasors; production of relays for the PSE stations; launching the production of synchro-checks or synchronizers for PSE, including dedicated “synchronizing” systems, development of type ZŁ protection units (protection against arcing). According to the adopted business model the company does not rely on satisfying the excessive environmental or social requirements imposed by the stakeholders 6. A sequence of actions in the supply chain of ENERGOTEST sp. z o.o. is presented in the Purchases procedure, which defines rules and procedures to be followed during purchase of materials/ services valid within the company. The purpose of the procedure is to ensure that the purchased products meet the relevant requirements of the Integrated Management System (IMS) relating to production and/or services performed by the company and satisfying the specific needs of customers. The procedure regulates the issues concerning selection and evaluation of a customer, purchasing process, delivery inspection, corrective and preventive measures. Selection and evaluation of suppliers is based on their ability to fulfill the requirements set in the specifications of contracts and orders and also in the IMS, being governed by free market principles such as quality of goods and services, reliability and professionalism of a supplier and the price offer attractiveness. ENERGOTEST sp. z o.o. cooperates mainly with contractors (legal and natural persons), intermediaries, wholesalers. The suppliers are domestic and foreign manufacturers of equipment and parts or their distributors (wholesalers), and also suppliers of minor specialist services (natural persons, economic entities of all size, domestic or foreign). In 2018 the company cooperated with 562 suppliers, of which 541 domestic and 21 foreign (from Belgium, Germany, France, Italy, the Czech Republic, Lithuania, the United Kingdom, Austria, Ireland, Slovakia and the USA). In 2017 there were 371 suppliers, of which 356 domestic and 15 foreign (from Belgium, China, Germany, Slovakia, the USA, the UK, Italy, Switzerland). The supplier’s obligations are set forth in General Purchase Terms and Conditions, which are an integral part of a Sales Agreement concluded by and between ENERGOTEST sp. z o.o. as a buyer, and a seller indicated in the Sales Agreement and which apply to all purchase agreements made by ENERGOTEST sp. z o.o.

Membership in associations and organizations ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are members of:

ELEKTROBUDOWA SA ENERGOTEST sp. z o.o. Stowarzyszenie Emitentów Giełdowych w Warszawie  /The Polish Association of Listed Companies/ Polskie Stowarzyszenie Elektroinstalacyjne  The Polish Electroinstallation Association/ Regionalna Izba Gospodarcza – Katowice  /The Regional Chamber of Commerce and Industry in Katowice/ Klub Polskie Forum ISO 9000 w Warszawie  Oddział Zagłębia Węglowego Stowarzyszenia Elektryków Polskich (SEP) – Katowice  /The Association of Polish Electrical Engineers, Branch in Katowice/ SEP – branch Konin  Fundacja Bezpieczne Górnictwo – Katowice  /The Safe Mining Foundation, Katowice/ Polsko - Białoruska Izba Handlowo - Przemysłowa Warszawa  /Poland-Belarus Chamber of Commerce and Industry in Warsaw/ SEP, branch Gliwice  Izba Projektowania Budowlanego  /The Chamber of Construction Design/ Towarzystwo Elektrowni Wodnych  The Polish Association of Water Power Plants/ Wrocław University of Technology - Smart Power Grids consortium , Poland 

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ELEKTROBUDOWA SA is also a signatory of the Diversity Charter, an international initiative for promotion and propagation of the policy of equal employment and diversity management in workplace.

12.3.2 Corporate Governance7 Structure The ELEKTROBUDOWA Group consists of: - ELEKTROBUDOWA SA (the parent company); - ENERGOTEST sp. z o.o. (a subsidiary); - Power Equipment Production Plant VECTOR sp. z o.o. (an associate); - SAUDI ELEKTROBUDOWA LLC (an associate).

The organisational structure of ELEKTROBUDOWA SA consists of the following organisational: - Strategic Business Units Production of Equipment; - Strategic Business Units Contract Execution; - Internal Auditor; - Infrastructure Management; - Occupational Health and Safety; - Integrated Managment System; - Management Office; - HR; - Strategy and Risks; - IT; - Trade; - Finance.

The present shape of the organisational structure of ELEKTROBUDOWA SA is the result of continuation of organisational changes in the Company started in 2018. As at the end of 2018 the structure of ELEKTROBUDOWA SA included: the Head Office based in Katowice and two organizational units – Company Divisions not disclosed in the National Court Register, i.e. Production Division and Project Execution Division. Located in Katowice Head Office performed strategic, coordinating and control functions for the Company. Production Division was focused on the manufacture, delivery and services relating to erection and service of prefabrication from the company’s factories for the domestic and foreign market, particularly for: power plants, heat and power plants, electricity distribution sector, fuel industry, chemical industry, metallurgy, paper & pulp, mining and transport. The Project Execution Division operated in the domestic and foreign markets where it performed engineering, procurement and erection services for the power sector, all kinds of erection services in turnkey electrical and industrial projects performed as a general contractor, maintenance of power equipment, pre-commissioning, commissioning and start-up of power equipment and systems. ENERGOTEST sp. z o.o. has a functional organizational structure consisting of four business line departments organized around key product and technical competences. The business departments (manufacture and prefabrication of goods, design and analyses, power automation, systems and automation) are supported by staff units which provide services or the whole company.

Supervising and managing bodies According to the Articles of Association of ELEKTROBUDOWA SA its governing bodies include the General Meeting of Shareholders, the Supervisory Board and the Management Board.

The Supervisory Board Rules for operation of the Supervisory Board with its Committees and of the Management Board of ELEKTROBUDOWA SA are regulated, beside generally applicable law, by the Company’s Articles of Association, and by the By-Laws of the Supervisory Board, as appropriate. The Supervisory Board exercises on-going supervision of the Company’s affairs in all spheres activity and gives opinions on all issues referred by the Management Board to the General Meeting for consideration. The Supervisory Board exercises its duties collectively. It may, however, delegate its members to individually perform certain acts of supervision.

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The Supervisory Board had two standing committees, the Audit Committee and the Nominations and Remuneration Committee, which act as advising and opinion-making bodies for the Board. The Management Board

The Management Board manages the affairs of the company and represent the company. The Management Board holds meetings presided by its President. President of the Management Board is also Chief Executive Officer. Resolutions of the Management Board are adopted by absolute majority of votes. In the case of equal number of votes President of the Management Board has got a casting vote. All matters that are not reserved for General Meeting or the Supervisory Board fall within the competence of the Management Board. Two members of the Management Board acting jointly or one member of the Management Board acting jointly with a commercial proxy (Polish: prokurent) are authorized to represent the company. Two members of the Management Board acting jointly or one member of the Management Board acting jointly with a commercial proxy (Polish: prokurent) are authorized to represent the company.

ENERGOTEST is supervised by the Supervisory Board elected by a sole shareholder, ELEKTROBUDOWA SA. ENERGOTEST sp. z o.o. implements recommendations of ELEKTROBUDOWA SA with regard to communication with the capital market, doing it via the parent company. The company draws up monthly financial reports for the Controlling Department of ELEKTROBUDOWA SA, keeps quarterly financial reporting to the Accounting Department of ELEKTROBUDOWA SA, prepares, on an ad hoc basis, reports, statements, financial and non-financial information on the request of ELEKTROBUDOWA SA.

Certified management systems 8 Both ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. have the Integrated Management System in place, comprising: - quality management system acc. to PN-EN ISO 9001:2015, - environmental management system acc. to PN-EN ISO 14001:2015, - occupational health and safety management system acc. to PN-N 1800:2004, - occupational health and safety management system acc. to BS OHSAS 18001:2007. In ELEKTROBUDOWA SA the IMS has been supplemented with the NATO requirements defined in the document AQAP- 2110:2016. In the Strategic Business Units Contract Execution (former Project Execution Division), the IMS has been supplemented with: the quality assurance requirements during construction of nuclear power plants NSQ 100 (without certification); the requirements for welding - according to PN-EN ISO 3834-2:2007 – refers to the Płock Contract; in-factory control of production according to the requirements of EN 1090-1:2009+A1:2011 and the requirements for execution of steel structures and aluminum structures specified in the standard EN 1090-2:2009 – refers to the Płock Contract. In the Strategic Business Units Production of Equipment (former Production Division) ZSZ the IMS has been supplemented with the quality requirements for welding - according to PN-EN ISO 3834-2:2007 – refers to the Tychy Factory (Busduct Factory); in- factory control of production according to the requirements of EN 1090-1:2009+A1:2011 and execution of aluminum structures specified in the standard EN 1090-3:2008 – refers to the Tychy Factory.

Best practice of corporate governance

In 2018 ELEKTROBUDOWA SA complied with the corporate governance principles contained in the document “Best Practice for GPW Listed Companies 2016” (further: “Best Practice 2016”). The text of Best Practice 2016 applicable to the Company is available on the web page of GPW (Warsaw Stock Exchange) at: www.gpw.pl/dobre-praktyki and on the Issuers website www.elektrobudowa.pl under: Investor Relations / Corporate governance. The Company does not apply the corporate governance practices which exceed the requirements laid down in the Polish regulations. Information about implementation of recommendations and principles included in Best Practice 2016 by the Company is available on the Company website. ENERGOTEST sp. z o.o. has not developed its corporate governance policy, as the company is governed by the proportionality and adequacy principles relative to the parent company. All aspects of managing the organization have been described in the Quality Manual of the Integrated Management System. The Management took the responsibility of managing the Integrating System, that is for establishing the integrated policy and objectives and accountability for their implementation. The accountability refers to leadership and oversight of the whole activity of the organization, provision of resources and shaping the working conditions and atmosphere.

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12.3.3 Risk Management9 The Group has no single, uniform business risk management policy, as it is composed of organizations which have different scale and nature of conducted business, different sizes and different organizational cultures. For the risk management in the Group a concept of three lines of defense is applied, which assumes a lower line is verified, monitored and controlled by a higher line, which means that the first line is monitored by the second and the third, while the second line is monitored by the third one. Each of the lines has a different role in the risk management process and a different scope of tasks. The first line of defense (operational management) is accountable for the current risk management within the conducted activity. Generally, it is performed by low- and mid-level managers who design and implement risk management controls in day-to-day operations. The rules and guidelines on managing the risks understood as threats to and opportunities for projects performed by ELEKTROBUDOWA SA are set down in the Procedure for managing risks and opportunities of the performed projects. The second line of defense (internal monitoring and supervision) covers risk management and compliance functions established by the management in order to ensure that the existing risk management processes implemented by managers of the first line of defense are adequate and operating as intended. Its basic responsibility is to monitor corporate risks and control of performance of tasks on a current basis. The third line of defense (internal audit) is performed by independent, regular, periodic evaluation of processes of risk management, internal control framework and organizational governance. In order to identify the events which may influence the performance of the goals assumed by the ELEKTROBUDOWA Group, expert consultations are conducted. Key managers and chief specialists representing all areas of the activity – employees who have vast knowledge and who know well the activity of the Group are asked for opinions on the related hazards. Identification of corporate/significant risk is done with the use of a hazard identification and assessment questionnaire. ELEKTROBUDOWA SA, with the view of the size of the Company and its market position, realities of the market in which it operates and requirements applicable to the listed companies, and also the management system in place, applies solutions which allow for managing risks. The risk management system10 consists of: risk identification, risk assessment, controls and monitoring. The risk is assessed using the categories of impact and likelihood of occurrence. What is assessed is the so called gross risk, that is risk as such, as if no controls were implemented, with the use of four-grade scale for impact and likelihood. Risk management in the Company (understood as opportunities and threats, events that may bring about both positive and negative results) includes project risk management (horizontal management) and managing risks material for the Company (vertical/process management). Both processes are described in the Integrated Management System. Management of the key risks associated with running the Company has been assigned to officers responsible for specific areas at the top management level (finance, marketing, human resources), managers of the company units. Therefore it is possible to control risk effectively and take corrective decision on a current basis. A register of risks relating to the company’s activity has been created. The company risk register includes the categories of environmental and social risks, and the risks of corrupt practices, bribery and other unethical behavior. A list of key risks has been defined, together with approaches to managing those risks and persons responsible for specific risks management. A list of key risks is created every year and approved by the Management Board of the Company. At present, major threats which impact the execution of the objectives set by ELEKTROBUDOWA SA include the risks of: financial risk, liquidity risk, risks related to provided security, quotations, project execution, human factor, limited development opportunities in this country, entering new foreign markets and building up new competences. Those hazards receive the highest attention of the management, engage the biggest resources and measures to limit the effects or reduce the possibility of their occurrence. As far as environmental risks 11 are concerned, the identified risks included the lack of profound knowledge about nature protected at the construction sites, the risk of unexpected events to occur, involving irreversible changes in the nature, the risk associated with improper waste management, risk of legal actions and penalties for failure to comply with environmental requirements. Social risks include the risk of shortage of experienced staff who would know, observe and enforce compliance with the OHS rules, risk of accidents at work, risk of subcontractors’ non-compliance with OHS rules, the risk of malfunctioning communication process, human factor risk (the risk of shortage of personnel with required skills, loss of key employees, inadequate working conditions), the risk of unequal treatment in workplace, the risk of employee protests, the risk of protests of local communities associated with the performed work, the risk of information safety mismanagement. The companies are committed to comply with the law and to react to any manifestations of corruption. Areas of the related risks are regulated by the procedure for identification and management of risk of irregularities and abuse and counteracting corruption. Managing fraud risk is a responsibility of Fraud Risk Manager. His duties identification of the areas of business activity which are susceptible to frauds, conducting systemic actions aimed at detecting irregularities, fraud or corrupt practices in various areas of the Company (particularly the areas where occurrence of such risk is the most probable), examining the reasons of irregularities, fraudulent or corruptive acts, and appointing persons responsible for different areas of such actions and defining their scope of responsibility. The overriding goal of fraud risk management is to create systemic solutions that would reduce the possibility of

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occurrence of potential fraud, by implementation of adequate preventive measures, creating formal and organizational solutions and increasing the employee awareness in this area. The risk management system is subject to annual evaluation by Internal Auditor, the outcome of such evaluation is reported to the Management Board and the Supervisory Board in the form of a written statement. Duties of Internal Auditor include also initiating and collaborating in preparation of preventive and corrective measures, and exercising control of implementation of and compliance with risk mitigation/elimination procedures. Basing on current results of risk analysis and estimation, the auditor drafts an audit plan, subject to approval by the Management Board and the Supervisory Board. In order to improve risk management and increase the probability of achievement of the set objectives and targets, the Company has internal control 12. The internal control system consists of five interconnected components (based on the COSO13 framework), strictly related with the organization management process: - the control environment (employees with their individual features and the environment they are acting in); - risk assessment (identification and analysis of relevant risks to achievement of the objectives set by the organization); - multi-stage controls (based on procedures, activities that help ensure Management directives are carried out, their selection is based on the outcome of economic analysis of their application); - information and communication (flow of information within the company, and also capturing and receiving signals flowing from the outside, effective communication with the company’s environment); - monitoring. In ENERGOTEST sp. z o.o., risk management 14 is an element of the Integrated Management System. Risk Management is a continuous process closely associated with the Company’s goals. The Company conducts risk assessment in the organization context. Through the context, the organization articulates its objectives and defines internal and external areas of its activity. In order to assess materiality of risk, the company applies risk criteria which result from the estimated amounts of financial expenditure in the case of its materialization. The expenditure is the result of: penalties, changes to the contract work schedule, quality of products and how the customers/market perceive ENERGOTEST sp. z o.o. What is assessed is the so called gross risk, that is risk as such, as if no controls were implemented. The outcome of the risk assessment shows the areas where relevant preventive actions have to be taken and which potential threats and their results are the most material. The outcome of these activities is subject to ongoing monitoring and review, also mandatory reviews, during management review. Additionally, when a need arises, the reviews within the management board meetings are performed. The risk analysis results in an assessment followed by preparation of preventive actions for the identified risks. Business risk is the most important aspect for the company, of which currency exchange risk which is taken into account in price estimations. Environmental and social risk management has an impact on the operation of the company, but the impact is not material because of the size of the organization and its impacts on the environment and community. Major unacceptable risks identified by the company include: risk of growing competition, difficulty in recruiting skilled personnel, risk of treating a price as decisive factor in selecting an offer, and a risk of underpricing by local, smaller companies.

12.3.4 Ethics management Acting in accordance with the legal, social and ethical norms is an unquestionable foundation of business activity of the Group. Overall principles by which all employees of ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. should be guided, wanted and unwanted attitudes and behaviour in relations with the internal and external environment , pertaining to key issues for the whole organization, and also values which are the core elements of the corporate ethical culture are described in the Codes15. In ENERGOTEST sp. z o.o. it is Kodeks Etyczny ENERGOTEST sp. z o.o, in ELEKTROBUDOWA SA – the second edition of the code, Kodeks Postępowania Etycznego ELEKTROBUDOWY SA16. In 2018 the code was translated into English and this language version is available on the website: https://www.elektrobudowa.pl/pl/download/The-Code-of-Ethical-Conduct-in-ELEKTROBUDOWA-SA,5627.pdf Guidance on what acts are acceptable and which are not, that is a set of expected behaviour is provided in Kodeksie Postępowania Etycznego ELEKTROBUDOWY SA in two blocks: our commitments—internal relations and our commitments– external environment. The first block develops such topics as: employees cooperation, diversity policy, occupational health and safety, care for the company’s property and image, data protection and information security, preventing conflicts of interest, and accepting and offering material benefits. The second block addresses the issues concerning the relations with: customers, competitors, suppliers and subcontractors, shareholders and the issues related to actions focused on the protection of the natural environment. The guidance provided in the documents mentioned above are binding and as a rule have to be observed irrespective of circumstances, with the awareness that no code can replace common sense and good judgement of a situation. For it is impossible to

12 G.2.3. 13 COSO (The Committee of Sponsoring Organizations of the Treadway Commission) – an organisation dedicated to developing best practice and to education in respect of transparency of an organisation. 14 G.3.1. 15 G.4.1. 16 Works on the new document in ELEKTROBUDOWA SA took a few months. The text of the draft Code was subject to long discussions and was being rewritten to include the opinions and arguments of the parties involved in its development. 59

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predict all situation which may occur in the business environment, also “ethically difficult” situations. Employees are encouraged to analyse possible actions and decisions and assess their probable consequence in such cases. Both companies have undertaken certain actions in the sphere of internal communication relating to ethical culture and its principles. They obligated their employees to acquaint themselves with and to apply the principles set in the Codes and have recorded, in the form of a register, the fact of signing by the employees relevant statements of commitment to acquaint with the text of the applicable Code and to comply with its provisions. Copies of the Codes are also presented to the new employees when they are signing their employment contracts. In ELEKTROBUDOWA SA, as a new edition of the Code was issued, in 2017 each employee has received a printed copy thereof. Compliance with the rules established in the above Codes and taking actions to prevent their infringement is the responsibility of each employee of both companies, aware of the community they create in their place of work and of the related rights and obligations. Additionally, the new Code of Ethical Conduct in ELEKTROBUDOWA SA introduced the function of the company Ombudsman, to whom any infringements of the Code shall be reported. Any infringement shall be reported by email to [email protected] or by regular mail to the Company’s postal address in Katowice17. If an infringement of the Code is reported, the Ombudsman has to appoint a Committee responsible for taking explanatory proceedings to ascertain whether and in what extent the provisions of the Code have been violated. Personnel engaged in the proceeding shall not disclose the received information and are obliged to protect personal data of the reporting person.

ELEKTROBUDOWA SA values ENERGOTEST sp. z o. o. values

Responsibility and integrity Compliance with law We meet our commitments. We do not make promises we are not able The company and all employees in its behalf shall comply to fulfil. The foundations of our acting are laid on law abiding, with the law, respect the rules of social coexistence and respecting the rules of social coexistence and following good practices follow good practices applicable in the countries where the applicable in the countries where the company’s business operations company’s business operations are conducted. are conducted. We work in compliance with ethical standards and do

not derive personal gain at the expense of other people or at the expense of the company. Integrity, professional competence and care Responsibility for the Company’s interest are the features on which our reputation is ENERGOTEST sp. z o.o. fulfils its commitments. The based. company does not make promises it is not able to keep. Transparency Makes every effort to assure that its customers, shareholders and employees know that it always keeps its We conform to corporate governance rules, and are committed to word. Its overriding goal is such management of the constructive, open and transparent dialogue with business partners. company that the provided services fulfil Customer’s all We make every effort to provide our stakeholders information that is expectations and ensure absolute reliability. fair, up-to-date, true and complete. We shall not accept deliberate distortion of facts, intentions or opinions and thus purposeful misleading. Integrity and impartiality Our partners trust us because of our professional Professionalism competence and integrity - the features on which our reputation is based. The Company with high reliability We aim at being an expert in our field through developing our complies with the principle of conformity of its products competencies and seeking technical and organizational solutions. We with the declared technical parameters. We do not accept believe that ensuring the highest quality of provided services and deliberate distortion of facts, intentions or opinions and products is of key importance for our success and adds to the growth of thus purposeful misleading trust between the company and its stakeholders. We do our best to maintain the highest level of managing tools and take responsibility for Transparency the consequences of our decisions and actions. We are committed to constructive, open and transparent Pursuit of success and constant progress dialogue with our partners. We respect all our stakeholders and employees. We take care to provide our stakeholders We set and work towards ambitious goals, which are possible to reach with fair, up-to-date, complete and true information. owing to our focus on innovation and determination to achieve success. We take proactive approach, act with courage and Professionalism commitment, actively seeking changes for the better, streamlining the We strive for being an expert in our field through processes and reducing errors. Any failure is deemed as an occasion for developing our competencies and expertise and seeking reflection and drawing the right conclusions for future. the solutions which will help improve the quality of our Cooperation services. We believe that we will be able to achieve more if we combine the Pursuit of success strengths of all individuals. We respect our workmates, irrespective of We set ambitious goals for the company and the their position in the company. We are committed to building positive employees, supporting innovativeness, acquisition of partnership, guided by good intentions and mutual confidence. We knowledge, team work and the spirit of success. We take appreciate the value coming from diversity of the work teams. We an initiative, act with courage and commitment, actively

17 S.3.4. In 2018 no complaints referring to the area of employment practices were reported. 60

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share information, knowledge and experience with others, working striving for changes to the better, improving the processes together for solutions which will get us closer to achieving the goals set and reducing errors. by the company. Instead of competition we choose cooperation – within our teams, in the whole Company and in the corporate Group. In 2018, like in 2017, in ENERGOTEST sp. z o.o. no complaints of potential breach of ethical standards were recorded. In ELEKTROBUDOWA SA three internal instances of irregularities in the relations between employees were reported in 2018, of which one showing signs of xenophobia18. The reported cases were investigated and the corrective actions implemented. The investigations did not detect any signs of violation of the rule of equal treatment in employment or the signs of workplace harassment. In connection with the above mentioned case, a special meeting of employees was provided in which the topics of diversity in workplace were discussed. No information was received about similar situations relating to the companies’ suppliers19. No ethical audits requested by the buyers were conducted in the organization20. In principle, ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are interested in obtaining cooperation only from the organizations which act ethically, however so far they have not conducted an analysis of the supply chain in respect of observance of ethical principles, have not imposed relevant obligations on the suppliers or subcontractors, for example by including adequate clauses in contracts21 and have not formally verified their fulfilment or conducted audits verifying compliance with these rules22.

12.4 Environmental issues The Group does not have a uniform environmental policy, because of different scope of business activity of the companies and therefore different scope of environmental impact. ELEKTROBUDOWA SA has its environmental policy, which stems from the Integrated Management System policy of which it is an integral part. The company implemented a certified environmental management system according to PN EN ISO 14001 standard. Every year an Environmental Management Programme is prepared which accounts for objectives and targets focused on mitigation of impact of the activity on the environment. Conformity of the actions with the applicable laws and procedures of the environmental management system is verified during the reviews of the management system and the internal audits. The company is aware of occurrence of environmental risks. In execution of the pro-environmental policy a number of procedures and related instructions are applied, particularly in the scope of identification and assessment of environmental aspects, control, monitoring and evaluation of actions related to environmental aspects, including waste handling instruction and instruction for suppliers for ELEKTROBUDOWA SA in the scope of environmental, quality and safety requirements. In its activity the Company is guided by a preventive approach to protection of the environment. Comparably to ENERGOTEST sp. z o.o., before commencement of new projects the Company identifies, assesses and registers the so called environmental aspects. Consideration is taken into own (internal for the company) and local (external) circumstances and opinions of the interested parties, and also to real and potential hazards (taking into account: king of executed processes, quantities and kinds of used media – water, electricity, gas, materials and raw materials used in the processes, amounts of produced waste, effluents, dust and gas emissions, waste handling). The company also analyses possible effects of its environmental impact in the case of changes to processes, technologies of services and products, as well as legal requirements and their amendments, normal working conditions and emergency situations.

For the company, the main sources of direct and indirect impact on the environment in connection with the conducted activity, and thus the main areas with which certain risks are associated, include:: - process of paint coating in the powder paint shop, - welding processes, - burning of fossil fuels in energy installations, - burning of fuels in engines of vehicles, - painting and drying processes in liquid paint shops, - waste produced during the manufacture of products and execution of services, - fugitive emissions to air of gases and dust in painting and welding processes during manufacture of products and execution of services, - emission of harmful gases and dusts to atmosphere from wet paint shop, - works which affect biodiversity. The Company takes actions focused on elimination or mitigation of impact of the above sources on the environment, applying, whenever possible, the best available technologies which enable maintaining cleanliness of production and thus regular decrease of emissions, reduction of use of raw materials, electricity and water, sewage treatment and failure prevention.

18 G.4.5. 19 G.4.5. 20 G.4.3. 21 G.4.7. 22 G.4.2.; G.4.3.; G.4.4. 61

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ELEKTROBUDOWA SA is also committed to raising ecological awareness of its employees, for example by joining the World Non-Waste Day, in Poland coordinated and sponsored by the waste recovery facility. The Company submits required by law annual reports on economic use of the environment in its business activity and on produced waste; it also reports to GUS (Central Statistical Office) its investment in protection of the environment; is recording the emissions levels in the KOBiZE base while well as equipment and emissions level in the Central Register of Operators, Database of Reports. In February 2018 the Tax Office notified the Company about a bank account attachment concerning the amounts of overdue debt having arisen from not paid due fees which should have been paid pursuant to the waste management declaration submitted to Żnin commune. Total amount of relevant penalty was PLN 1 513.55. In 2017 a monetary sanction of PLN 500 was levied on ELEKTROBUDOWA SA for delay in submission in 2013 of a summary of types and volume of waste, manners of its managing, and plant and equipment used for waste disposal, to the Marshal’s Office of the West Pomeranian province23. The environmental requirements binding the Company’s employees also apply to its suppliers and subcontractors. The requirements are set in the Instruction for suppliers in respect of environmental, quality and safety requirements, which applies particularly to the suppliers of installation, building and after-sales services, presented to a prospective supplier as one of environmental requirements before submitting a quotation. During the stage of quotation, a supplier has to inform in his quotation about equipment, technologies and, if any, chemicals needed for performing the scope of offered works and about environmental hazards of the works and remedies to overcome them, as well as information about quantities and ways of handling waste produced in result of the activity. Suppliers have to acquaint themselves with the material environmental aspects identified by the Company in connection with performance of the project and to familiarize themselves with the Integrated System Policy of ELEKTROBUDOWA SA. A supplier has to provide a written confirmation of knowledge and acceptance of the Instruction, which has the form of a Supplier’s Statement of Getting Acquainted with the Instruction. Taking into account the type of performed activity, the interaction between the environment and ENERGOTEST sp. z o.o is relatively small. The main objective of the Environmental Management System implemented in ENERGOTEST sp. z o.o. according to ISO 14001 is continual improvement od actions in respect of environmental protection and increasing the related awareness and responsibility of the employees. The company implements the environmental goals defined in the IMS Policy and imposed by binding laws applicable to its business activity. The company identifies the environmental aspects, that is those elements of actions of the organization, goods or services which may interrelate with the environment, such as noise, emissions to air, produced waste, energy consumption, and their environmental impact. Identification and verification of the environmental aspects covers the current, past and new or planned projects, activities, goods and services resulting from the scope of the IMS system and is applied to the aspects in the normal conditions and in the predictable emergency conditions. Each identified aspect is assessed and, basing on the outcome of the assessment, classified as ordinary (less significant for the environment) or material. The identification and verification is performed: before and after introducing new or modified processes, before introducing new or modified services, in cases of amendment to applicable legal requirements or when potential hazards or failures occur, in accordance with the schedule of monitoring of key environmental aspects. For the identified environmental aspects the scale of their impact is measured, and, basing on the risk management procedure, an analysis of environmental risk is conducted – a plan of monitoring the significant environmental aspects is prepared and subjected to approval by the Head of the company. Pursuant to the applicable law, ENERGOTEST meets the reporting requirements, it also entered into a contract with a recovery organization. Implementation of the environmental management system by the company is done with the help of the procedure for managing and monitoring environmental aspects and the instruction for waste handling and the instruction for preparation of environmental impact reports. In the case of cooperation with suppliers/subcontractors, all required environmental requirements are identified at the stage of review of contracts due to be signed and included in the instructions for subcontractors.

12.4.1 Materials and raw materials24 In its activity ELEKTROBUDOWA SA uses mostly non-renewable materials/raw materials supplied by third parties, such as: - related process materials: primers, wet paints and enamels, solvents, welding wire, soldering paste, hydrochloric and sulfuric acid, gardobond and gardostrip, powder paints, propane, welding argon, technical oxygen, technical nitrogen; - semi-finished products: aluminium sheet, stainless sheet steel, sheet steel, pipes, aluminium and copper shapes, sheet copper; - package materials: wood, plastics.

23 E.7.3.; E.7.4. 24 Environmental issues described further in the Non-Finance Report refer only to ELEKTROBUDOWA SA, because, as indicated earlier, taking into account the nature of their activity, interaction between the environment and ENERGOTEST sp. z o.o. is relatively small. 62

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To the best of its knowledge, in the manufacturing process the Company does not use raw materials which would have significant impact on the environment. Similarly, the use of its products on the subsequent stages from delivery and installation until the end of their useful lives is bound with little burned for the natural environment – materials of the switchgear enclosures can be re-used, and after withdrawing the switchgear from operation it is easily decommissioned by specialist companies. In respect of some purchased materials, if the investor so requires, the Company conducts detailed verification of their producers or place of production (as in the case of the required EU manufacture).

Material/raw material consumption per unit of sales Quantity Material / raw material Unit revenue (unit/PLNm) 2017 2018 2017 2018 Welding argon m3 982.00 9 849.00 1.138 13.598 Technical nitrogen m3 20 598.50 23 249.50 23.863 32.099 Aluminium sheet Mg 1 076.82 776.95 1.247 1.073 Acid-proof sheet metal Mg 83.42 93.78 0.097 0.129 Copper sheet Mg 14.73 4.89 0.017 0.007 Sheet AlZn Mg 417.88 570.58 0.484 0.788 Zinc-coated sheet metal Mg 202.72 194.38 0.235 0.268 Sheet steel Mg 513.86 482.66 0.595 0.666 Wood* Mg 2.40 2.50 0.003 0.003 Welding wire Mg 6.58 7.25 0.008 0.010 Primer Mg 0.70 1.32 0.001 0.002 Wet paints and enamels Mg 12.20 7.56 0.014 0.010 Powder paints Mg 12.46 8.01 0.014 0.011 Gardobond and gardostrip Mg 1.52 1.06 0.002 0.001 Propane (transport) Mg 1.10 1.70 0.001 0.002 Insulators pcs 157 235.00 22 741.00 182.154 31.397 Aluminum shapes Mg 122.19 184.49 0.142 0.255 Copper shapes Mg 280.25 324.31 0.325 0.448 Steel shapes Mg 80.29 111.40 0.093 0.154 Hydrochloric and sulfuric acid Mg 0.50 0.98 0.001 0.001 Soldering paste Mg 0.00 0.26 0.000 0.000 Conductors and cables m 6 811.00 9 278.00 7.890 12.810 Solvents Mg 4.85 3.06 0.006 0.004 Technical oxygen m3 2 793.40 734.46 3.236 1.014 Plastics* Mg 4.30 5.40 0.005 0.007 Tab. 3 Materials and raw materials important for the manufacturing activity of ELEKTROBUDOWA SA according to weight or volume and their consumption per unit of revenue in 2017 - 201825

Because of growing prices of materials and to follow the idea of sustainable development the Company is constantly monitoring the quantities of purchased and used materials and their most effective use. Initiatives taken by ELEKTROBUDOWA SA in 2017 - 2018 to reduce the consumption of materials: - purchased sheets of sizes matching the sizes of details produced in big quantities. For details of large overall dimensions (1-2.5m2) produced in quantities bigger than 30 pcs, dimensions of purchased sheets enable almost waste-free production. The parts of sheet that remain after having cut big forms are used in the production of small details; - purchase of not lubricated sheet metal which does not require degreasing helps reduce the consumption of extraction naphtha, - replacing welded elements by bolted or riveted, what contributes to reduction of quantity of non-conforming products in the welding process, - establishing our own testing laboratory where the company performs tests which clearly help reduce the consumption of materials used for manufactured products; - introducing new, multi blade tools for machines and working machines, to improve the quality of goods and reduce the number of non-conforming products.

12.4.2 Energy and fuels Because of the Company profile, the approach to consumption, management and processing of energy is an important aspect of its activity. Pursuant to the Energy Efficiency Act, in 2017 an external firm carried out an energy audit of the company, which covered all permanent locations of ELEKTROBUDOWA SA.

25 E.1.1.; E.1.2. 63

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The company monitors on a monthly basis the level of fuel and energy carriers consumption, basing on invoices issued by their suppliers, in particular: - consumption of electricity, heating, natural gas, heating oil, - consumption of petrol and diesel oil used by vehicles, - electricity consumption in permanent locations of ELEKTROBODOWA SA, peak power, power factor tgϕ. In summer in the Company Head Office in Katowice additionally the air conditioning system is monitored on a current basis with the purpose of setting an optimal temperature. The energy used in the operating activity conducted by ELEKTROBUDOWA SA generally include electrical energy provided by electrical energy sellers who operate in this country and the thermal energy from municipal heating networks.

Volume of energy consumption

in GJ Energy commodities used by the company 2017 2018 electrical energy (all locations) 22 337 18 395 thermal energy (including CO) 8 698 8 450 fuel oil 1 375 1 207 natural gas 12 889 12 577 liquid gas propane-butane LPG 38 119 fuels for combustion engines 453 329 total 45 790 41 076 Total energy consumption per unit of sales revenue (GJ/PLNm) 53.0 56.7 Table 4 Energy consumption in ELEKTROBUDOWA SA in 2017 – 201826 * data accounting for contracts

Energy from burning petrol, diesel oil and LPG propane-butane gas concerns mainly the use of the fleet of approx. 344 vehicles in roku 2018 (in 2017: 358).

Fuel use in GJ 2017 2018 motor petrol 4 464 5 072 diesel oil 21 621 22 455 liquid gas propane-butane LPG 241 136 total 26 327 27 663 Table 5 Use of engine fuels in ELEKTROBUDOWA SA in 2017 – 201827

The Company undertakes regular actions focused on effective management of energy consumption. They include: gradual replacement of old electrical equipment with new one after its depreciation (UPSs, desktop computers, scanners, printers), replacement of company cars with new models complying with EURO 5 and EURO 6 emission standards, purchase of less energy intensive equipment used in everyday work, such as drilling machines, grinders, shears, or replacement of traditional lighting equipment into LED. Initiatives taken by ELEKTROBUDOWA SA in 2017 to reduce the consumption of electricity: - introducing the insulation material of class v0 – made from environment-friendly materials; - application of such elements in the construction of equipment which enable the use of bigger number of prefabricated products (bars, sheet metal, etc.), which has significantly contributed to reduction of time and energy consumption of the manufacture process, - modernization of the external lighting system in the Warehouse in Dąbrowa Górnicza, - installation of the 22kW photovoltaic panel on the garage roof in the Company Head Office (reduction of electricity consumption from the Distribution Company and reducing CO2 emissions), - modernization of emergency lighting in the Head Office building with the use of LED light sources (reduction of electricity consumption, improvement of safety for employees in case of primary supply loss in the Head Office), - replacement of windows in the office rooms of the Company Head Office; - replacement of company cars by new models conforming to the EURO 6.1 and EURO 6.2 emission standards.

26 E.2.1., E.2.3. 27 E.2.1., E.2.3. 64

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Owing to photovoltaic panels installed in Katowice and Tychy the Company generated 85.8 GJ energy in 2018 (in 2017: 81 GJ). Therefore the proportion of energy from own renewable sources in ELEKTROBUDOWA SA in 2018 was 0.21% (in 2017: 0.18%).28 12.4.3 Biodiversity At present the Company is not conducting any operations in protected areas29, but it is aware that the projects it is engaged in may be performed in the areas of habitats of plant or animal species having biodiversity values. Such projects include construction of electrical stations which are classified as having impact on the environment, therefore they are operated in strictly defined conditions30. In 2018 environmental monitoring31 ordered by ELEKTROBUDOWA SA was conducted by an external firm, as a follow up of replacement plantings of trees in 2017 to which the company was committed, which had to meet specific requirements as to the tree species, trunk girth and root ball sizes32. The plantings were necessary after unavoidable felling of trees33 interfering with the performance of the investment Modernization of Konin 220/110kV station, including trees growing in the distance of approximately 5 km from the special protection area under Natura 2000, the Middle Warta Valley PLB 300002 and ca. 4 km from the special protection area under Natura 2000, the forest Puszcza Bieniszewska PLH30011. The company obtained relevant permits issued by the Municipal Office of Konin, which included the statement that the felling of trees would not have potentially significant impact on the area under Natura 2000. Since September 2017 the project site has been surrounded by herpetological fencing (to stop migrating amphibians and to control their movement)34, in order to lessen an impact of the project on the wildlife, particularly on amphibians. According to the decision issued by the Regional Director of Environmental Protection in Poznań maintained by the Mayor of the Town of Konin there was no need to conduct an assessment of environmental impact of the project, but the project works were due to be performed under environmental supervision35. As the project site was located outside the protected areas, it was concluded that no significant negative impact on the natural environment, including biodiversity, is expected, also in Natura 2000 protected areas situated approximately 4-5 km from the project site. In 2018 the environmental supervision36 was continued during the execution of the project Extension and modernization of Byczyna station including connecting the 400kV line in Jaworzno, which had the purpose of effectiveness and validity of the protective measures required according to the environmental decision – on the basis of the report prepared and decision issued by RDOŚ (Regional Directorate for Environmental Protection) – determining the current condition of natural habitat (wet Molinia meadows around the electrical station)37. Additionally the population of the protected plant species which were moved to substitute area situated outside the construction site was assessed. The results of the inspection showed that the habitat was diversified and the population of the protected plant species was higher than recorded in recent years, what could be attributed to mowing. . In connection with performance of the project Building of the Skawina 400kV line – cutting into lines Tarnów-Tucznawa and Rzeszów Tucznawa, tree clearance was necessary on the route of the new powerline, done on the grounds of Article 18 of the Act of 24 July 2015 on preparation and performance of strategic investments relating to transmission lines. The scope of the clearance covered all forests interfering with the building of the 400kV line. 12.4.4 Emissions Dust and gas emissions are another environmental aspect analysed by ELEKTROBUDOWA SA in connection with is business activity. The level of emissions is strictly connected with the volume of production in the given year what poses a challenge of controlling the amount of emissions. Emissions in the Company’s operations mainly result from painting and welding processes and from combustion of fuels in car engines and heating boilers.

28 E.2.2. The ratio refers only to the energy from own renewable sources – no information is available on the proportion of energy from the renewable sources in total energy supplied by its domestic distributors. 29 E.4.1 30 S.9.1 31 E.4.2 32 E.4.4. 33 E.4.3 34 E.4.4 35 E.4.2. 36 E.4.2. 37 In order to diminish the negative impact on local flora and fauna, mowing of meadows every year was recommended with the aim of preservation, in a longer perspective, of the meadow habitat. The recommendation was the consequence of such a situation: During execution of the project it became unavoidable to destroy habitats of three species, together with larval forms, of butterflies under strict protection: large copper (Lycaena dispar), dusky large blue butterflies (Phengaris nausithous and Phengaris teleius). The environmental decision obtained by the company permitted the larval forms of the species to be destroyed. Measures were taken to minimize the loss in population of the butterflies, such as mowing the meadows with burnet at the site of the project (in 2015), what involved a drop in attractiveness of the area for both dusky large blue butterflies. In result of the works around 3 h of wet Molinia meadows was liquidated. Additionally, pursuant to the received decision, in the period July - August 2015 strictly protected plants (marsh orchid , Gladiolus imbricatus and siberian iris) were moved from the project area to their substitute sites – plots situated outside the construction site. This decision included a requirement of mowing the substitute site in the first two years since replanting, with subsequent mowing every two years, which is done. Except the site were the plants were replanted, also the area around the electric station were mowed, with the purpose of preservation of favourable condition of the wet Molinia meadows together with their protected species of plants and animals. 65

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To reduce the adverse impact, the Company implements new technologies, replaces its machine park and vehicle fleet, invests in renewable energy sources and in this way contribute to reduction of direct and indirect emissions Total emission Mg/year Greenhouse gas 2017 2018 chrome and its compounds (Cr) 0,0000 0,0000 carbon dioxide (CO2)* 716.4633 688.9189 sulphur hexafluorides (SF6)* 0.0300 0.0619 manganese and its compounds (Mn) 0.0023 0.0026 methane (CH4)* 0.0000 0.0000 non-methane volatile organic compounds (NMVOC) 5.0360 7.8934 nickel and its compounds (Ni) 0.0000 0.0000 total dust 0.0804 0.0808 carbon oxide (CO) 0.1289 0.1297 nitrogen oxides (NOx) 0.5367 0.5185 polycyclic aromatic hydrocarbons - benzo(a)pyrene 0.0000 0.0000 hydrofluorocarbons (HFC)* 0.0000 0.0148 sulphur compounds SOx 0.0335 0.0269 organic compounds except disclosed in other items 0.0000 0.0000 Total greenhouse gases emissions 716.4933 688.9956 Total other substances emissions 5.8178 8.6519 Emission of greenhouse gases per unit of sales revenue (Mg/PLNm) 0.8300 0.9513 Emission of greenhouse gases per unit of sales revenue (Mg/PLNm) 0.0067 0.0119

Table 6 Direct emissions of greenhouse gases and other significant air emissions per unit of revenue38 *greenhouse gas Data and indicators according to KOBIZE guidelines (the National Centre for Emissions Management).

The CO equivalent for SF emission for the year 2018 is 1410.2 (in 2017: 684) Mg/year39. 2 6 Emissions from the consumed electrical energy Mg/MWH (benchmark value /amount of the consumed energy in ELEKTROBUDOWA SA) Substance 201740 2018 SO 2 4.5 3.7 NO x 4.6 3.8 CO 2 4 827.5 3 975.3 Total dust 0.3 0.2 CO 1.6 1.4 Total 4 838.5 3 984.3 Table 7 Indirect emissions resulting from generation of the consumed electrical energy *41

Method of calculation based on benchmark values of SO, NO, CO, CO and total dust emissions announced in the National Base on emissions of greenhouse gases and other substances operated by the National Centre for Emissions Management (KOBiZE) relative to the years 2017and 2018. Measures taken by ELEKTROBUDOWA SA in 2017 – 2018 to reduce air emissions: - laser processing limited only to elements from not galvanized sheet metal, what contributes to reducing of emission of metal oxide pollutants, - reduction of the extraction naphtha consumption - not lubricated sheet metal is bought which does not require degreasing, - reducing the number of welded details through introducing stud welding and PEM riveting technologies, - replacing welded elements by bolted or riveted, - organizing internal transport with the use for gas fueled or electrical vehicles, - application in HV switchgear of the sealing system keeping the SF6 leakage below 0.5%/year, in order to limit the scale of the environmental impact.

38 E.5.1., E.5.2., E.5.3., E.5.4 39 According to the GWP (global warming potential) 40 Data for 2017 have been corrected – calculation in 2017 was based on wrong emission benchmark values. 41 E.5.2. 66

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12.4.5 Waste

Wastes from repairs and demolition at the construction site is a material aspect which has an adverse impact on local biosphere. Its amount depends on the number and size of performed contracts and the stage of their completion. ELEKTROBUDOWA SA takes utmost care to perform works relating to removal of waste and to appropriate management of waste classified as hazardous, regulating this issue in a relevant instruction for handling of waste, including hazardous waste, which is generated in production processes and in projects performed by the Company. It is assumed that waste must be managed in the way assuring the protection of human health and lives and the protection of the environment. Actions which contribute or may contribute to waste generation have to be planned, designed and conducted with the use of such methods of production or forms of service and raw and process materials, as to first of all prevent or reduce generation of waste and their negative impact on human health and lives and the environment during the products manufacturing process and also during and after their use. All generated wastes are segregated, classified and managed in accordance with the applicable law, therefore they are not hazardous for humans and local biosphere. Waste, generation of which could not be prevented, should be, according to the approach applied by the Company, first of all recovered (prepared for re-use or recycled, and if it is not possible for technological reasons or is ecologically or economically unjustified – recovered in another way). Waste which could not be recovered have to be disposed of by its owner pursuant to the applicable environmental requirements. Waste is collected separately by ELEKTROBUDOWA SA and sent for recycling or recovery. The company has entered into an agreement with a recovery facility which takes over the responsibility for recovery and recycling of package materials. The scope of the agreement includes also submitting OPAK reports on packaging to the Central Statistical Office GUS. Other waste collected separately, such as paper, metal scrap, plastics, wood are sent to companies which specialize in collection of such waste (confirmed in the waste transfer note) and most of it is recycled or recovered in the facilities authorized to waste processing.

TYPE OF WASTE * Total in Mg WASTE CODE (ACCORDING TO THE CLASSIFICATION OF THE REGULATION OF THE MINISTER FOR THE ENVIRONMENT 2017 2018 ON WASTE CATALOGUE) 07 02 04* Other organic solvents. washing liquids and mother liquors 0.23 0.00 07 02 13 waste plastic 1.46 0.00 07 02 17 Waste containing silicones other than those mentioned in 07 02 16 2.64 0.52 07 02 99 Wastes not otherwise specified 3.30 0.00 08 01 11* Waste paint and varnish containing organic solvents or other dangerous substances 1.55 2.76 08 01 12 Waste paint and varnish other than those mentioned in 08 01 11 0.20 0.00 08 01 17* Wastes from paint or varnish removal containing organic solvents or other dangerous substances 0.66 4.20 08 02 01 Waste coating powders 0.00 0.26 08 03 18 Waste printing toner other than those mentioned in 08 03 17 0.06 0.00 12 01 01 Ferrous metal filings and turnings 16.82 74.12 12 01 02 Ferrous metals dust and particles 0.00 378.35 12 01 03 Non-ferrous metal filings and turnings 50.68 41.28 12 01 04 Non-ferrous metals dust and particles 0.00 50.70 12 01 08* Machining emulsions and solutions containing halogens 0.00 3.20 12 01 09* Machining emulsions and solutions free of halogens 0.82 0.15 12 01 99 Wastes not otherwise specified 33.22 0.00 13 02 05* Mineral-based non-chlorinated engine gear and lubricating oils 0.00 6.52 13 02 08* Other engine. gear and lubricating oils 1.10 1.22 13 03 01* Insulating or heat transmission oils containing PCBs 0.01 0.00 13 03 07* Mineral-based non-chlorinated insulating and heat transmission oils 0.50 0.00 15 01 01 Paper and cardboard packaging 29.71 21.49 15 01 02 Plastic packaging 8.75 4.08 15 01 03 Wooden packaging 104.16 11.20 15 01 10* Packaging containing residues of or contaminated by dangerous substances 2.10 1.84 Absorbents, filter materials (including oil filters not otherwise specified), wiping cloths, protective clothing 15 02 02* 2.64 2.16 contaminated by dangerous substances (e.g. PCB) 15 02 03 Absorbents, filter materials, wiping cloths and protective clothing other than those 0.06 0.42 16 01 19 Plastics 0.00 2.64 16 02 11* Discarded equipment containing chlorofluorocarbons, HCFC, HFC 0.07 0.11 Discarded equipment containing hazardous components other than those mentioned in 16 02 09 to 16 02 13* 41.08 11.83 16 0212 67

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018

TYPE OF WASTE * Total in Mg WASTE CODE (ACCORDING TO THE CLASSIFICATION OF THE REGULATION OF THE MINISTER FOR THE ENVIRONMENT 2017 2018 ON WASTE CATALOGUE) 16 02 14 Discarded equipment other than those mentioned in 16 02 09 to 16 02 13 73.32 20.76 16 02 16 Components removed from discarded equipment other than those mentioned in 16 02 15 0.24 0.44 16 05 04* Gases in pressure containers (including halons) containing dangerous substances 0.38 0.25 16 06 01* Lead batteries 0.00 1.08 16 06 02* Ni-Cd batteries 0.21 0.05 16 06 04* Alkaline batteries 0.00 0.13 16 06 05 Other batteries and accumulators 0.00 0.01 17 01 01 Construction and demolition concrete waste 3 006.67 52.67 17 01 03 Tiles and ceramic waste 47.40 0.78 17 01 07 Mixture of concrete, bricks, tiles and ceramics other than those mentioned in 17 01 06 14.63 59.35 17 01 82 Wastes not otherwise specified 0.82 0.00 17 02 01 Wood 16.47 76.02 17 02 03 Plastic 1.84 9.97 17 04 01 Copper, bronze, brass 17.62 0.00 17 04 02 Aluminium 141.84 51.39 17 04 05 Iron and steel 578.14 47.37 17 04 07 Mixed metals 23.00 5.08 17 04 11 Cables other than those mentioned in 17 04 10 99.01 42.88 17 05 03* Soil and stones containing dangerous substances (e.g. PCB) 31.89 0.00 17 05 04 Soil and stones other than those mentioned in 17 05 03 111.20 0.00 17 06 04 Insulation materials other than those mentioned in 17 06 01 and 17 06 03 0.25 5.00 17 09 04 Mixed construction and demolition wastes other than those mentioned in 17 09 01, 17 09 02 and 17 09 03 105.05 62.69 19 12 04 Plastic and rubber 0.00 1.38 20 01 01 Paper and cardboard 0.00 2.70 20 01 21* fluorescent tubes and other mercury-containing waste 0.00 0.20 Discarded electrical and electronic equipment other than those mentioned in 20 01 21, 20 01 23 and 20 01 36 0.00 0.12 20 01 35 total 4 571.79 1 059.35 Waste emission per unit of sales revenue (Mg/PLNm) 5.30 1.46

Table 6 Waste from the manufacturing activity of ELEKTROBUDOWA SA in 2017 - 201842

Any waste marked with an asterisk (*) is considered as a hazardous waste in the waste catalogue, unless the provisions of Article 7 of the Polish Act of 14 December 2012 on Waste apply.

43 All waste specified in the table (1 059.35 Mg) is transferred to specialist waste managing firms.

12.5 Employee issues There is no uniform personnel policy applicable throughout the Group, as it is composed of organizations of different sizes, with different scale and nature of conducted activity and different corporate culture. ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are aware of obligations they have to fulfil as employers and of the risk of reputation and the risk to continuity of their operating activity if they fail to provide suitable working conditions. ELEKTROBUDOWA SA has established its human capital management strategy which regulates the areas of: recruitment, employment, succession planning, remuneration and motivation, work evaluation, employee development, industrial relations shaping, employment restructuring, quality of work, monitoring and control of implementation of the strategy. Implementation of the strategy is manifested, among others, through training procedure and recruitment and selection procedure, the instruction of periodic evaluation of performance of ELEKTROBUDOWA SA managing staff or the instruction of calculation of human capital management evaluation indicators, and also Rules of Cooperation Agreement between ELEKTROBUDOWA SA and the Trade Unions functioning in the company. Issues related to working time and remuneration rules are regulated by the Company Collective Labour Agreement of 25 August 2017, which also addresses the issues of the motivating system. In ENERGOTEST sp. z o.o., implementation of human resources management is reflected, among others, in the procedure for establishing and terminating employment relationship, the procedure for upgrading skills in the system of non-compulsory training and the rules and terms of instruction of retraining and upgrading professional skills in and outside the formal school system.

42 E.6.1., E.6.4. 43 E.6.2. Dane na podstawie Kart przekazania odpadów 68

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Both companies have laid down the recruitment and selection process and the process of enhancing skills – the companies seek to employ highly qualified and competent personnel to guarantee that the strategic goals of an organization will be met. They are also focused on graduates and students, creating convenient development conditions and flexible work time for them. As a rule, both companies are interested in establishing cooperation with these organizations only, which comply with labour law, including the issues of anti-discrimination and anti-harassment policies, but they do not formally verify their compliance and do not include relevant clauses in contracts with suppliers.

12.5.1 Employment, remuneration and social security

Employment As at the end of 2018 ELEKTROBUDOWA SA had 1743 employees (by 2% more than in 2017), of which 230 women and 1513 men. In the period from January to December 2018 there were 320 new employee hires (in 2017: 248), while with 292 the employment was terminated (in 2017: with 321), of which 29 employees acquired the right to retirement or disability pension (44 employees in 2017). The Group had 1918 employees as at the end of 2018, (in2017: 1889). Throughout the year there were 339 new employee hires, and with 311 the employment was terminated (of which 36 acquired the right to retirement or disability pension). In 2017 it concerned 260, 341 and 46 people, respectively. As at the end of 2018, 81.5% of ELEKTROBUDOWA SA staff were employed against contracts for indefinite time, while in the Group 82% of staff worked against permanent contracts (in 2017 it was 74% and 76%, respectively).

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Permanent contract Fixed time contract full time part time full time part time ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA THE GROUP THE GROUP THE GROUP THE GROUP SA SA SA SA 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Women under 30 years of age 22.0 27.0 16.0 24.0 0.0 1.6 0.0 0.0 30.0 28.0 29.0 26.0 0.0 0.0 0.0 0.0 30 to 50 years 117.0 133.0 99.0 114.0 0.8 0.0 0.8 0.0 26.0 20.0 25.0 16.0 0.0 0.0 0.0 0.0 over 50 years 48.0 43.0 43.0 40.0 0.0 0.0 0.0 0.0 7.0 11.0 6.0 9.0 0.8 0.8 0.8 0.8 total 187.0 203.0 158.0 178.0 0.8 1.6 0.8 0.0 63.0 59.0 60.0 51.0 0.8 0.8 0.8 0.8 Men under 30 years of age 163.0 203.0 149.0 191.0 0.0 0.0 0.0 0.0 202.0 165.0 199.0 162.0 0.0 3.1 0.0 3.1 30 to 50 years 673.0 740.0 589.0 662.0 0.0 0.1 0.0 0.1 139.0 72.0 138.0 66.0 0.3 0.0 0.3 0.0 over 50 years 397.0 412.0 359.0 377.0 4.8 7.4 4.8 6.3 43.0 36.0 41.0 33.0 3.5 1.8 3.5 1.3 total 1 233.0 1 355.0 1 097.0 1 230.0 4.8 7.4 4.8 6.3 384.0 273.0 378.0 261.0 3.8 4.9 3.8 4.4 Total under 30 years of age 185.0 230.0 165.0 215.0 0.0 1.6 0.0 0.0 232.0 193.0 228.0 188.0 0.0 3.1 0.0 3.1 30 to 50 years 790.0 873.0 688.0 776.0 0.8 0.1 0.8 0.1 165.0 92.0 163.0 82.0 0.3 0.0 0.3 0.0 over 50 years 445.0 455.0 402.0 417.0 4.8 7.4 4.8 6.3 50.0 47.0 47.0 42.0 4.3 2.6 4.3 2.1 TOTAL 1 420.0 1 558.0 1 255.0 1 408.0 5.5 9.0 5.5 6.3 447.0 332.0 438.0 312.0 4.6 5.7 4.6 5.2

Table 7. Employment in full time equivalent as at 31 December 2017 and 2018 by type of a contract and working time, according to gender and age (with the exclusion of employees on parental leaves, unpaid leaves and rehabilitation benefits)44,45

As at the end of 2018, 13.2% of total number employees of ELEKTROBUDOWA SA and 13.8% employed in the Group were women (in 2017 it was 12.9% and 13.3%, respectively). Relatively small percentage of women – employees of ELEKTROBUDOWA SA, and also of the Group, is attributed to the nature of business conducted by the entities, which generally requires technical skills and competence, mostly electrical and related, which in our country is the domain of men. This tendency is reflected in the process of recruitment for technical jobs where most of applicants are male.

44 According to contractual working time valid as at the end of the year 45 S.2.1 70

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

6,5 THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA Women Men Total 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 below 30 years of 52.0 56.6 45.0 50.0 365.0 371.1 348.0 356.1 417.0 427.7 393.0 406.1 age 30 - 50 years 143.8 153.0 124.8 130.0 812.3 812.1 727.3 728.1 956.0 965.1 852.0 858.1 over50 years 55.8 54.8 49.8 49.8 448.3 457.1 408.3 417.5 504.1 511.9 458.1 467.3 TOTAL 251.6 264.4 219.6 229.8 1 625.5 1 640.3 1 483.5 1 501.7 1 877.1 1 904.6 1 703.1 1 731.5 Table 8. Employment in full time equivalents as at 31 December 2017 and 2018 by gender and age (with the exclusion of employees on parental leaves, unpaid leaves and rehabilitation benefits)46

THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA Women Men Total 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 dolnośląskie 0.0 0.0 0.0 0.0 10.0 11.0 10.0 11.0 10.0 11.0 10.0 11.0 lubuskie 0.0 0.0 0.0 0.0 6.0 1.0 6.0 1.0 6.0 1.0 6.0 1.0 łódzkie 2.0 3.0 2.0 3.0 33.5 19.5 33.5 19.5 35.5 22.5 35.5 22.5 małopolskie 4.0 5.0 4.0 5.0 57.5 64.5 57.5 64.5 61.5 69.5 61.5 69.5 mazowieckie 21.0 20.0 21.0 20.0 220.5 214.3 220.5 214.3 241.5 234.3 241.5 234.3 opolskie 2.0 3.0 2.0 3.0 79.0 94.0 79.0 94.0 81.0 97.0 81.0 97.0 pomorskie 6.0 6.0 5.0 6.0 38.0 45.0 32.0 38.0 44.0 51.0 37.0 44.0 śląskie 147.6 152.4 116.6 117.8 417.8 422.5 282.8 290.9 565.3 574.8 399.3 408.7 świętokrzyskie 0.0 0.0 0.0 0.0 2.0 0.0 2.0 0.0 2.0 0.0 2.0 0.0 warmińsko-mazurskie 0.0 0.0 0.0 0.0 0.0 2.0 0.0 2.0 0.0 2.0 0.0 2.0 wielkopolskie 66.0 70.0 66.0 70.0 613.3 656.6 613.3 656.6 679.3 726.6 679.3 726.6 zachodniopomorskie 1.0 3.0 1.0 3.0 40.0 50.0 40.0 50.0 41.0 53.0 41.0 53.0 Finland 2.0 2.0 2.0 2.0 107.0 60.0 107.0 60.0 109.0 62.0 109.0 62.0 Ukraine 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 Total 251.6 264.4 219.6 229.8 1 625.5 1 640.3 1 483.5 1 501.7 1 877.1 1 904.6 1 703.1 1 731.5 Tab. 9. Employment in full time equivalents as at 31 December 2017 and 2018 by location (with the exclusion of employees on parental leaves, unpaid leaves and rehabilitation benefits)47

46 According to contractual working time valid as at the end of the year 47 According to contractual working time valid as at the end of the year 71

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWASA

Women Men Total 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Job category / age [%] [%] [%] [%] [%] [%] [%] [%] [%] [%] [%] [%] manual labour under 30 years old 2 0.1 2 0.1 1 0.1 0 0.0 205 10.9 204 10.6 201 11.8 202 11.6 207 11.0 206 10.7 202 11.8 202 11.6 30 to 50 years old 9 0.5 11 0.6 9 0.5 10 0.6 382 20.2 374 19.5 374 21.9 362 20.8 391 20.7 385 20.1 383 22.4 372 21.3 over 50 years old 6 0.3 7 0.4 6 0.4 7 0.4 292 15.5 300 15.6 289 16.9 298 17.1 298 15.8 307 16.0 295 17.3 305 17.5 manual labour total 17 0.9 20 1.0 16 0.9 17 1.0 879 46.5 878 45.8 864 50.5 862 49.5 896 47.4 898 46.8 880 51.5 879 50.4 assistant under 30 years old 21 1.1 29 1.5 17 1.0 26 1.5 37 2.0 59 3.1 37 2.2 59 3.4 58 3.1 88 4.6 54 3.2 85 4.9 30 to 50 years old 33 1.7 30 1.6 28 1.6 26 1.5 21 1.1 24 1.3 20 1.2 23 1.3 54 2.9 54 2.8 48 2.8 49 2.8 over 50 years old 8 0.4 12 0.6 6 0.4 10 0.6 0 0.0 2 0.1 0 0.0 2 0.1 8 0.4 14 0.7 6 0.4 12 0.7 assistant total 62 3.3 71 3.7 51 3.0 62 3.6 58 3.1 85 4.4 57 3.3 84 4.8 120 6.4 156 8.1 108 6.3 146 8.4 specialist under 30 years old 26 1.4 25 1.3 24 1.4 23 1.3 106 5.6 94 4.9 92 5.4 81 4.6 132 7.0 119 6.2 116 6.8 104 6.0 30 to 50 years old 79 4.2 86 4.5 67 3.9 70 4.0 252 13.3 251 13.1 190 11.1 192 11.0 331 17.5 337 17.6 257 15.0 262 15.0 over 50 years old 38 2.0 33 1.7 35 2.0 31 1.8 96 5.1 95 5.0 63 3.7 63 3.6 134 7.1 128 6.7 98 5.7 94 5.4 specialist total 143 7.6 144 7.5 126 7.4 124 7.1 454 24.0 440 22.9 345 20.2 336 19.3 597 31.6 584 30.4 471 27.5 460 26.4 manager under 30 years old 3 0.2 1 0.1 3 0.2 1 0.1 18 1.0 19 1.0 18 1.1 19 1.1 21 1.1 20 1.0 21 1.2 20 1.1 30 to 50 years old 20 1.1 22 1.1 18 1.1 20 1.1 133 7.0 138 7.2 123 7.2 129 7.4 153 8.1 160 8.3 141 8.2 149 8.5 over 50 years old 4 0.2 3 0.2 3 0.2 2 0.1 54 2.9 51 2.7 50 2.9 48 2.8 58 3.1 54 2.8 53 3.1 50 2.9 managers total 27 1.4 26 1.4 24 1.4 23 1.3 205 10.9 208 10.8 191 11.2 196 11.2 232 12.3 234 12.2 215 12.6 219 12.6 Senior manager 30 to 50 years old 3 0.2 4 0.2 3 0.2 4 0.2 25 1.3 26 1.4 21 1.2 23 1.3 28 1.5 30 1.6 24 1.4 27 1.5 over 50 years old 0 0.0 0 0.0 0 0.0 0 0.0 15 0.8 16 0.8 12 0.7 12 0.7 16 0.8 16 0.8 12 0.7 12 0.7 senior managers total 3 0.2 4 0.2 3 0.2 4 0.2 40 2.2 42 2.2 33 1.9 35 2.0 44 2.3 46 2.4 36 2.1 39 2.2 Total 252 13.3 265 13.8 220 12.9 230 13.2 1636 86.7 1653 86.2 1490 87.1 1513 86.8 1889 100.0 1918 100.0 1710 100.0 1743 100.0

Table 10 Number of employees as at 31 December 2017 and 2018 according to age group, gender and job category (with the exclusion of employees on parental leaves, unpaid leaves and rehabilitation benefits)

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Permanent employment contract Fixed-time emplyment contract full time part time full time part time ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA THE GROUP THE GROUP THE GROUP THE GROUP SA SA SA SA 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Women under 30 years old 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 18.0 27.0 18.0 25.0 0.0 0.0 0.0 0.0 30 to 50 years old 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.0 18.0 14.0 15.0 0.0 0.0 0.0 0.0 over 50 years old 1.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 5.0 7.0 4.0 6.0 0.8 0.8 0.8 0.8 total 1.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 38.0 52.0 36.0 46.0 0.8 0.8 0.8 0.8 Men under 30 years old 0.0 31.0 0.0 31.0 0.0 0.0 0.0 0.0 135.0 151.0 131.0 147.0 0.4 3.1 0.0 3.1 30 to 50 years old 0.0 5.0 0.0 4.0 0.0 0.0 0.0 0.0 53.0 60.0 51.0 54.0 0.0 0.0 0.0 0.0 over 50 years old 1.0 3.0 1.0 3.0 0.0 0.0 0.0 0.0 27.0 28.0 24.0 26.0 1.5 0.0 1.5 0.0 total 1.0 39.0 1.0 38.0 0.0 0.0 0.0 0.0 215.0 239.0 206.0 227.0 1.9 3.1 1.5 3.1 Total under 30 years old 0.0 31.0 0.0 31.0 0.0 0.0 0.0 0.0 153.0 178.0 149.0 172.0 0.4 3.1 0.0 3.1 30 to 50 years old 0.0 5.0 0.0 4.0 0.0 0.0 0.0 0.0 68.0 78.0 65.0 69.0 0.0 0.0 0.0 0.0 over 50 years old 2.0 3.0 2.0 3.0 0.0 0.0 0.0 0.0 32.0 35.0 28.0 32.0 2.3 0.8 2.3 0.8 TOTAL 2.0 39.0 2.0 38.0 0.0 0.0 0.0 0.0 253.0 291.0 242.0 273.0 2.7 3.8 2.3 3.8 Table 11. New employee hires in full time equivalents in 2017 - 2018 by type of an employment contract and working time, according to gender and age48

THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA Women Men Total 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 under 30 years old 11.0 14.0 10.0 13.0 154.0 147.5 150.0 142.5 165.0 161.5 160.0 155.5 30 to 50 years old 12.0 13.0 11.0 13.0 87.0 72.4 78.0 68.4 99.0 85.4 89.0 81.4 over 50 years old 9.8 12.6 9.8 10.6 63.5 47.3 59.5 40.3 73.2 59.8 69.2 50.8 TOTAL 32.8 39.6 30.8 36.6 304.5 267.1 287.5 251.1 337.2 306.7 318.2 287.7

Table 12. Employee turnover in full time equivalents in 2017 - 2018 by gender and age49

48 S.2.2. According to working time valid as at the end of the year 49 S.2.3. According to working time valid as at the end of the year 73

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

THE GROUP ELEKTROBUDOWA SA

2017 2018 2017 2018 termination of termination of termination of termination of new hires new hires new hires new hires employment employment employment employment dolnośląskie 1.0 2.0 2.0 3.0 1.0 2.0 2.0 3.0 kujawsko-pomorskie 0.0 3.0 0.0 0.0 0.0 3.0 0.0 0.0 lubelskie 0.0 0.0 2.0 00 0.0 7.5 2.0 0.0 łódzkie 2.0 7.5 7.5 4.5 2.0 13.6 7.5 4.5 małopolskie 6.0 13.6 6.0 9.0 6.0 54.0 6.0 9.0 mazowieckie 42.0 54.0 55.0 55.4 42.0 15.0 55.0 55.4 opolskie 9.0 15.0 14.0 24.0 9.0 10.0 14.0 24.0 pomorskie 12.0 12.0 7.0 8.0 12.0 52.1 7.0 7.0 śląskie 85.7 69.1 83.5 73.8 74.3 1.0 64.5 55.8 świętokrzyskie 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 wielkopolskie 86.0 126.0 145.8 107.0 86.0 126.0 145.8 107.0 zachodniopomorskie 1.0 11.0 11.0 10.0 1.0 11.0 11.0 10.0 Finland 13.0 23.0 0.0 12.0 13.0 23.0 0.0 12.0 TOTAL 257.7 337.2 333.8 306.7 246.3 318.2 314.8 287.7

Table 13. Newly hired employees in full time equivalents and terminations of employment in 2017-2018 according to locations50

Performance of tasks for ELEKTROBUDOWA SA under civil law agreements as at the end of 2018 was realised by 18 persons and for the Group by 39 persons (as at the end of 2017: 30 and 41 persons, respectively) 51. Throughout the year 2018, 117 persons cooperated with the Group against civil law agreements (of which 85 with ELEKTROBUDOWA SA). During the year 2018 the Group signed 148 civil law agreements, of which 104 concluded by ELEKTROBUDOWA SA. The number of agreements terminated in 2018 was 124 and 101, respectively. Average annual remuneration for the persons cooperating under the agreements of this type in 2018 was PLN 13 603 in the Group (monthly: PLN 1 134), while in ELEKTROBUDOWA SA –PLN 14 062 and PLN 1 172, respectively52.

50 According to the working time valid as at the end of the year 51 S.2.4. 52 S.2.11. The values do not account for remuneration of persons hired on the basisi of a management contract, including members of the Supervisory Board 74

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Task-specific contract Contract of mandate total THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Women under 30 years old 0 0 0 0 1 1 1 0 1 1 1 0 30 to 50 years old 1 0 1 0 4 5 2 3 5 5 3 3 over 50 years old 1 1 1 1 4 1 4 1 5 2 5 2 total 2 1 2 1 9 7 7 4 11 8 9 5 Men under 30 years old 0 0 0 0 3 10 0 0 3 10 0 0 30 to 50 years old 0 1 0 1 10 11 7 7 10 12 7 8 over 50 years old 0 0 0 0 17 9 14 5 17 9 14 5 total 0 1 0 1 30 30 21 12 30 31 21 13 Total under 30 years old 0 0 0 0 4 11 1 0 4 11 1 0 30 to 50 years old 1 1 1 1 14 16 9 10 15 17 10 11 over 50 years old 1 1 1 1 21 10 18 6 22 11 19 7 TOTAL 2 2 2 2 39 37 28 16 41 39 30 18 Table 14. Persons performing tasks under civil law agreements by type of contract, according to gender and age as at 31 December 2017 and 201853

THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 Number of civil law contracts concluded with individuals in the priod 124 148 77 104 Number of civil law contracts terminated in the period 102 124 66 101 Number of persons cooperating on the basis of civil law contracts and rendering services within the company premises in the period 90 117 57 85 Average annual remuneration of persons cooperating on the basis of civil law contracts in the period (in PLN) 14 147 13 603 23 058 14 062 excluding the remuneration of persons employed under management contracts, also members of the Supervisory Board Table 15. Performance of tasks under civil law contracts in 2017 - 201854

In 2018, as in 2017 ELEKTROBUDOWA SA used the outsourcing services in the scope of the IT service, caretaking and cleaning services. In 2018 the IT department cooperated with 5-6 persons (in 2017: with 5) working on-site. The third line support (a team outside the company) consisted of additional 5-10 persons periodically working for ELEKTROBUDOWA SA. The Cleaning and caretaking tasks were 55 performed by: 12 persons in Katowice, 20 persons in Konin .

53 S.2.4. 54 S.2.4., S.2.11. 55 S.2.5., S.2.11- no information available about outsourcing of services in the other locations. The Company has no information about the remuneration for persons hired in outsourcing. 75

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Almost a 100% of employees of ELEKTROBUDOWA and the Group as at the end of 2018 had Polish citizenship. The persons with another citizenship employed by the Company accounted for a mere 0.5% of total employment.

ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA THE GROUP THE GROUP THE GROUP SA SA SA Wome n Me n Tot al 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Polish 249 262 217 227 1633 1648 1487 1508 1882 1910 1704 1735 Belarus 0 0 0 0 2 3 2 3 2 3 2 3 Ukrainian 3 3 3 3 2 2 1 2 5 5 4 5 TOTAL 252 265 220 230 1637 1653 1490 1513 1889 1918 1710 1743

Table 16. Employment according to citizenship (in persons) by gender, as at 31 December 2017 and 201856

As at the end of 2018 the Group had 16 employees with the adjudicated level of disability, of which 15 were employed in ELEKTROBUDOWA SA, what constitutes a 0.9% of total number of the Company’s employees and a 0.8% of the Group’s employees (in 2017 the percentage 0.6% both for the Company and for the Group57.

ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA THE GROUP THE GROUP THE GROUP SA SA SA Wome n Me n Tot al 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 under 30 years of age 0 0 0 0 1 2 1 2 1 2 1 2 30 to 50 years of age 1 3 1 3 3 3 3 3 4 6 4 6 over 50 years of age 2 2 1 1 5 6 5 6 7 8 6 7 TOTAL 3 5 2 4 9 11 9 11 12 16 11 15

Tab. 17. Employment of persons with the adjudicated level of disability (in persons) by gender and age as at 31 December 2017 and 201858

THE GROUP ELEKTROBUDOWA SA 2017 1 915 000 1 784 272 2018 1 956 333 1 814 619

Table 18. Amounts of contributions paid to the National Fund for the Rehabilitation of the Disabled (PFRON) in 2017-201859

56 S.2.7. 57 S.2.6. 58 S.2.6. 59 S.2.13. 76

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Remuneration The remuneration policy of ENERGOTEST sp. z o.o. is based on the Remuneration Rules in place in the company, the document which defines minimum pay rates for different job categories. In ELEKTROBUDOWA SA, the regulations set in the Company Collective Labour Agreement of 25 August 2017 apply; the Agreement regulates the remuneration and other employee issues, such as working hours and collaboration with trade unions active in the company.

The median of basic salary of women in the Group at the end of 2018 was 8.11% greater than the median of basic salary of men, while the median of total remuneration of women as at the end of 2018 was 17.04% lower than the median of total remuneration of men. In ELEKTROBUDOWA SA, the median of basic salary of women at the end of 2018 was 11.11% higher than the median of basic salary of men, while the median of total remuneration of women as at the end of 2018 was 12.55% lower than the median of total remuneration of men. Because of the specific nature of business carried out both by the Group and by ELEKTROBUDOWA SA, women are generally employed on non-manual positions. The ratio of an average basic salary of member of the Management Board relative to the lowest basic pay in ELEKTROBUDOWA SA had the level of 18.4 in 2018 and 16.75 in 2019. For the Group the levels were 16.66 and 15.8, respectively60.

THE GROUP ELEKTROBUDOWA SA Average basic pay Average total pay Average basic pay Average total pay Women Men Women Men Women Men Women Men

position 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 manual worker 2 550 2 759 3 037 3 152 3 101 3 494 4 125 4 520 2 568 2 658 3 030 3 140 3 138 3 539 4 129 4 538 assistant 3 502 3 534 3 211 3 525 3 745 3 656 3 793 4 041 3 516 3 552 3 205 3 526 3 727 3 689 3 789 4 048 specialist 4 346 4 686 4 992 5 170 4 727 5 089 5 862 6 125 4 269 4 641 4 648 4 872 4 610 5 074 5 343 5 779 manger 7 613 7 133 7 010 7 160 8 785 8 198 8 146 8 682 7 260 6 665 6 901 7 035 8 331 7 826 8 016 8 623 senior manager 12 000 14 275 14 062 15 051 19 389 18 800 18 335 20 347 12 000 14 275 13 982 15 215 19 389 18 800 18 242 21 450 total 4 426 4 643 4 416 4 680 4 930 5 129 5 503 6 013 4 368 4 607 4 207 4 489 4 847 5 145 5 257 5 874

THE GROUP ELEKTROBUDOWA SA Average Average Median Median Average Average Median Median Number Number basic pay total pay basic pay total pay basic pay total pay basic pay total pay position 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 manual worker 735 659 3 027 3 143 4 104 4 495 3 000 3 100 3 991 4 330 720 640 3 021 3 130 4 110 4 518 3 000 3 100 3 992 4 342 assistant 115 139 3 357 3 529 3 769 3 864 3 200 3 400 3 700 3 563 103 129 3 347 3 537 3 761 3 895 3 200 3 400 3 658 3 608 specialist 538 521 4 843 5 057 5 600 5 882 4 500 4 800 5 322 5 596 417 397 4 549 4 813 5 153 5 598 4 300 4 500 5 000 5 300 manger 215 212 7 078 7 157 8 217 8 630 6 500 6 750 7 583 7 974 198 197 6 939 6 997 8 049 8 542 6 500 6 500 7 500 7 900 senior manager 36 43 13 947 14 979 18 393 20 203 13 250 13 500 14 896 16 461 30 37 13 850 15 114 18 319 21 164 12 000 13 500 14 233 17 133 total 1639 1574 4 417 4 674 5 425 5 885 3 600 3 800 4 626 5 005 1468 1400 4 228 4 506 5 204 5 773 3 500 3 700 4 449 4 938

Relation of the average basic pay Relation of the average total pay Relation of the median basic pay Relation of the median total pay of women and men [%] of women and men [%] of women and men [%] of women and men [%]

60S.2.10. 77

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA THE GROUP ELEKTROBUDOWA SA position 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 manual worker 83.97 87.54 84.74 84.64 75.18 77.31 75.98 77.98 80.00 83.87 80.00 83.87 73.53 75.04 75.40 77.20 assistant 109.07 100.24 109.68 100.75 98.74 90.47 98.35 91.14 112.90 100.00 112.90 100.00 97.07 89.74 96.85 86.08 specialist 87.05 90.63 91.85 95.26 80.64 83.08 86.28 87.80 85.11 89.14 85.56 89.89 75.57 75.63 82.30 81.82 manger 108.59 99.62 105.19 94.74 107.84 94.43 103.93 90.75 107.69 104.48 107.69 103.85 113.06 103.62 112.11 97.95 senior manager 85.34 94.84 85.82 93.82 105.75 92.39 106.29 87.64 90.57 83.33 100.00 83.33 130.17 108.58 136.23 104.33 total 100.21 99.20 103.83 102.62 89.60 85.29 92.20 87.59 108.57 108.11 111.76 111.11 87.51 82.96 90.98 87.45 Table 19 Ratios referring to basic pay and total pay of women and men in different job categories as at 31 December 2017 and 201861

THE GROUP ELEKTROBUDOWA SA Average Average Median Median Average Average Median Median Number Number basic pay total pay basic pay total pay basic pay total pay basic pay total pay citizenship 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Polish 1633 1566 4 418 4 675 5 427 5 889 3 600 3 800 4 626 5 005 1462 1392 4 227 4 506 5 205 5 777 3 500 3 700 4 447 4 938 Belarus 2 3 4 750 4 167 5 400 4 941 4 750 4 500 5 400 5 083 2 3 4 750 4 167 5 400 4 941 4 750 4 500 5 400 5 083 Ukrainian 4 5 4 200 4 640 4 446 5 043 3 800 4 000 3 992 4 563 4 5 4 200 4 640 4 446 5 043 3 800 4 000 3 992 4 563 TOTAL 1639 1574 4 417 4 674 5 425 5 885 3 600 3 800 4 626 5 005 1468 1400 4 228 4 506 5 204 5 773 3 500 3 700 4 449 4 938

Table 20. Average salary of foreigners performing work for ELEKTROBUDOWA SA and the Group and employed by the companies62

Employee benefits63 Both ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. offer social benefits to their employees according to their Regulations of Managing the Company Social Benefit Fund in place in each of the companies. The persons entitled to the company social benefit fund (ZFŚŚ) include employees, their families, employees on parental leaves, old-age and disability pensioners, former employees and their families. In ELEKTROBUDOWA SA, the scope and form of the benefits are established in consultations with the company trade unions.

61 S.2.7; S.2.9. The analysis of salaries/wages was based on the data for full time employees, with the exclusion of: workers employed at export sites, juvenile workers, management board members, employees on unpaid leaves, parental leaves, sick benefits and rehabilitation benefits. As at the end of 2018 there were 1575 such employees in the Group and 1400 in ELEKTROBUDOWA SA. In 2017 the number was 1639 and 1468 employees, respectively. 62S.2.8. The analysis of salaries/wages was based on the data for full time employees, with the exclusion of: workers employed at export sites, juvenile workers, management board members, employees on unpaid leaves, parental leaves, sick benefits and rehabilitation benefits. As at the end of 2018 there were 1574 such employees in the Group and 1400 in ELEKTROBUDOWA SA. In 2017 the numbers were: 1639 and 1468 employees, respectively. 63S.2.15. 78

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

THE GROUP ELEKTROBUDOWA SA hardship and sickness benefits paid to employees and pensioners (former workers)   financial assistance in purchase of holiday packages for children and youth (summer and winter camps, the so called “green schools”);   loans for purchase, construction or maintenance of housing facilities;   subsidizing cultural, educational and sports activity (tickets for artistic, cultural, entertainment and sports events);   co-funding sports and recreation services and (swimming poll, fitness club or gym membership, MultiSport plan, co-funding the recreation   and sightseeing tours for employees); Integration events for employees, organization of evens for employees’ children (Santa Claus party, Children’s Day),financial support of the   activity of the Pensioners’ Club; care for children (nurseries, children's clubs, kindergartens);  co-funding school starter kits. 

Table 21 Spending catalogue of the resources from the company social benefit fund (ZFŚŚ)

THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 2 824 199 2 988 242 2 609 757 2 714 061

Table 22 Expenditure on the social activity funded from the ZFŚS in 2017-2018

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

All employees of ELEKTROBUDOWA SA are covered by the comprehensive medical care programme. In 2018 the sum of expenditure for health protection in the Company amounted to PLN 1 340 096 ( in 2017: PLN 1 755 806. Each employee is provided with a medical package which additionally includes voluntary profilactic vaccination against flue, they may also buy a medical care service for their immediate families on preferential terms.

Employees of ENERGOTEST sp. z o.o. have access to private medical care on preferential terms. The company is operating an employee pension plan which can be voluntarily joined by an employee under 60 years old after two years of employment. The Company employees are also covered by additional, employer-funded life insurance. Both companies foster and support the employees who have become parents and provide them with possibilities of enjoying their rights related to parenthood. Since 2010 ELEKTROBUDOWA SA has maintained a programme, ELEKTROBUDOWA SA - a Parent-Friendly Company which aim is to help employees who have become parents maintain a balance between the career and the private life. A mother coming back to work after the maternity leave is entitled to work shorter time, by an hour a day, irrespective of a break for feeding, maintaining her right to remuneration. The programme offers such facilities as flexible working time or possibility to work in the home-office system, depending on the requirements of a job position, and a possibility to work according to an individual work system agreed with the superiors, until a child is two years old. Since 2017 the Company offers financial aid for a nursery or pre-school fees funded from the resources of the Company Social Benefit Fund. In 2017, in the Group 20 women returned to work after maternity leave ended, of which 17 in ELEKTROBUDOWA SA. A percentage of women who, after the childbirth and return to work, decided to terminate their employment within 12 months since they had returned to work64 had the level of 0% as at the end of 2018, both in the Group and in ELEKTROBUDOWA SA.

THE GROUP ELEKTROBUDOWA THE GROUP ELEKTROBUDOWA THE GROUP ELEKTROBUDOWA SA SA SA Wome n Me n Tot al 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Number of employees 65 22 22 20 19 142 121 126 109 164 143 146 128 entitled to the leave Number of employees 22 22 20 19 82 75 67 66 104 97 87 85 who took the leave Number of employees who took the leave and 22 20 20 17 79 75 64 66 101 95 84 83 returned to work Number of employees who took the leave and after they returned to 21 19 19 16 71 63 56 54 92 83 75 70 work continued employment for 12 months Number of employees who took the leave and their employment was 2 3 1 3 11 12 11 12 13 14 12 15 terminated within 12 months 66 Tab. 23 Return to work indicators and employment retention after a parental leave indicators by gender67

THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 Return to work rate (the relation of total number of employees who did return to work after parental 97.12% 97.94% 96.55% 97.65% leave, to those who were due to return to work after taking parental leave) Tab. 24 Return to work rate and employment retention rate after parental leave 2017-201868

64 S.2.14. 65 An estimate – not every employee reports a childbirth. 66 Including women working under fixed time contracts, whose employment relationship lasted until childbirth. Data known as at the date of drawing up this report – not for each employee the 12-month period already lapsed. 67 S.2.14. 68 S.2.14. 80

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

12.5.2 Diversity and equal opportunity

For ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o., one of material risks in the area of employee issues is the risk of non-compliance with the principle of equal treatment of employees and equal rights for all. The Companies are aware that adequate diversity management is essential for achievement of business objectives and for creating a positive image outside the company. It is understood that materialization of such a risk could contribute to inadequate use of the employees’ potential which could result in their resignation and a likelihood of losing valuable, prospective candidates on the one hand, and could expose the Company to penalties and legal actions if a case of discrimination, abuse or harassment was identified, on the other. The Group does not apply a uniform policy of managing the diversity, but ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. attach great importance to strict compliance with the rules forbidding unequal treatment at work and counteract discrimination and mobbing at workplace. Commitment to providing all employees of ELEKTROBUDOWA SA with equal treatment in the working environment, with respect, protection of their personal interest and dignity, counteracting abuse, sexual harassment and mobbing, and also ensuring equal treatment in employment, is manifested through implementation of formal rules of equal treatment in employment and counteracting mobbing69. The first document (Principles of equal treatment in employment) stipulates that all employees are treated equally in establishing and terminating employment relationship, terms of employment, promotion and access to training aimed at improving professional skills. The rules provide important guidance for drafting other internal documents of the Company, particularly for the Company Collective Labour Agreement, Labour Regulations, Regulations of Managing the Company Social Benefit Fund; they are reflected also in the Recruitment and Selection Procedure. The document: Mobbing Counteracting Principles clearly states that any behaviour that is aimed at or results in destroying individual dignity and creating around an employee an atmosphere of intimidation, hostility, humiliation or causing embarrassment is unacceptable in the Company. Unacceptable is also the behaviour with sexual innuendo or referring to the sex of an employee, that aims at or results in infringing dignity, particularly creating around an employee an atmosphere of intimidation, hostility, humiliation or causing embarrassment. The Company’s approach to management of diversity and equal treatment of all employees was accounted for in the second version of the Code of Ethical Conduct, approved in the end of May 2017. Since 2015 it is a signatory of the Diversity Charter – an initiative for promotion and popularizing the policy of equal treatment in employment and managing diversity at workplace, which has been reported inside and outside the company. The approach to diversity management issue in ENERGOTEST sp. z o.o. is defined in the applicable Regulations, Procedures and Instructions (e.g. the Procedure for Establishing and Terminating Employment Relationship), and also in the Code of Ethics adopted by the company. The good practice, procedure and principles applied so far in all processes relating to personnel management by directly related individuals, have not required broader regulations to be introduced to internal rules. In 2017 in ENERGOTEST sp. z o.o. no incidents of discriminating nature were recorded. There was no occurrence of violation of the rule of equal treatment in employment and or mobbing practices was reported70. In ELEKTROBUDOWA SA w 2018 SA three internal instances of irregularities in the relations between employees were reported, of which one showing signs of xenophobia71. The reported cases were investigated and the corrective actions implemented. The investigations did not detect any signs of violation of the rule of equal treatment in employment or the signs of workplace harassment72. In connection with the above mentioned case, a special meeting of employees was provided in which the topics of diversity in workplace were discussed. In 2018 no information was received about similar situations relating to the companies’ suppliers. The companies did not conduct relevant audits to verify compliance with the above mentioned principles73.

12.5.3 Employee development

Employee development is a key issue for the company business activity and growth both for ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o., as they are aware of the risk resulting from inadequate management of employee development process, particularly the risk of stoppages in business operations due to the shortage of competent staff and the risk to incur costs of repeated recruitment processes or to impair the company’s image in the labour market and in the business environment.

69 S.6.1. 70 S.6.2; S.6.3. 71 S.6.2. 72 S.6.4 73 S.6.4. 81

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Therefore the companies take measures to secure the supply of competent, motivated and open to change personnel, capable of execution of the strategy, by creating conditions for personal development irrespective of gender, age of job position, through participation in various forms of education. Both companies try to satisfy the needs of their organizational units and to care for development of their employees on each level of the organization, assuming that management of human capital which comprises skills, experience, competence, values and attitudes of the employees is of key importance for effective functioning of the organization. Each company follows its employee development plan based on the training procedure which is a component of the ISO 9001 system applied by the companies. Every year the companies develop a plan and a budget of training targets, with consideration to the needs of a company and of its employees. Employees may also report their willingness to development projects on an ad hoc off-budget basis, subject to their superiors’ approval. Both companies are funding or co-funding the participation in general development courses, specialist training courses, professional courses, obtaining construction licences, education in higher schools - undergraduate, graduate and post-graduate courses; ELEKTROBUDOWA also funds or co-funds foreign language courses74. As far as possible, employees are provided with access to trade magazines, legislation, informational materials, bulletins which ensure easy and quick access to current knowledge, commentaries, publications, interpretations, etc. In 2018 a programme of MBA course for the managing personnel was continued (launched in the beginning of 2017), available for employees of ELEKTROBUDOWA SA and ENERGOTEST sp. z o. o., which provide with opportunity of broadening their knowledge in various areas, such as strategic management, business processes, project management, accounting, finance or business psychology. In ELEKTROBUDOWA SA, the course together with the School for Leaders(Academy for Managers which will teach how to determine own potential, build the leadership authority, people management, courses in legal aspects and commercial negotiations), and in 2017 also the Project Management Academy according to the PMI) is a component of the managers’ development programme, including succession (potential) managers. Investment in employee development in ELEKTROBUDOWA SA in 2017 covered also development of technical competence, which included training courses for direct labour (knowledge of the company’s products, installation of cables trays, obtaining relevant licences) and for testing and commissioning specialists (such as SF6 gas management or basics of configuration and testing of electrical protection on the basis of MiCOM P139 controller). Total expenditure incurred in 2018 by both companies for employee development amounted to PLN 1 446 143 which gives an average of PLN 768 per employee. (In 2017 it was PLN 1 893 526 and PLN 995, respectively. The share of training costs in the total 2018 remuneration fund of both companies was 0.8% ( 1.1% in 2017). THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 Total number of all participants of training 75 (individual and group training, language 905 739 809 724 courses) of which women 199 144 172 137 of which men 706 593 637 585 Average training hours per employee (total number of training hours provided to 12.10 8.83 12.47 9.47 employees /total number of employees) Average training hours per female (total number of training hours provided to female 15.96 12.60 16.50 14.10 employees /total number of employees) Average training hours per male (total number of training hours provided to male 11.51 8.22 11.87 8.76 employees /total number of employees) Average training hours per each employee category (total number of training hours provided to each category of employees /total number of employees in category) manual worker positions 3.78 4.15 3.83 4.21 asssistant positions 14.05 6.97 14.89 7.45 specialist positions 15.14 10.89 16.87 13.03 middle management positions 32.71 22.14 33.91 23.51 senior management positions 27.60 12.70 30.75 14.77 Training investment rate in PLN (cost of training/average number of employees) 994.75 768.40 1 010.30 762.11 Share of training costs in remuneration in % (training costs /a sum of: remuneration excluding severance and similar payments, social security (excluding social security fund 1.08% 0.81% 1.10% 0.79% FSS), compensations for shortened termination notice, other employee benefits) Table 25 Training indicators (refer to language courses, individual and group training courses, excluding vocational and OHS training, graduate courses)76

74 S.2.15. 75 Participants of more than one training. The number of employees with different identity numbers who participated in training (language courses, individual and group training courses, excluding vocational and OHS training or graduate courses) provided by ELEKTROBUDOWA SA in 2018 was 442, in 2017: 486) 76 S.5.1. 82

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

ELEKTROBUDOWA SA financed a 100% of cases of paid trainings, recognised in the table above (i.e. referring to approx. 442 employees. Also, in 2018 the company financed or co-financed graduate courses, started or continued (this concerned 76 employees in 2018) of which 27 employees on MBA courses (in which two employees of Energotest sp. z o.o. also took part).77 In 2017 it concerned 69 people. An employee of each company, who is upgrading his/her job skills is entitled to, in conformance with the stipulations of the Labour Code, at least78 to a day or a part-day leave, as necessary to arrive on time for relevant classes and for the time of the classes, and in specified cases (which particularly refers to employees-final year students) – also educational leave. The employee retains the right to remuneration for the ours of a part-day or whole-day absence or the educational leave. The rules of giving a leave are individually specified in each agreement on training. Apart from co-funding or funding the education fees, ELEKTROBUDOWA SA grants additional benefits to its employees, which include in particular reimbursement of travel costs, purchase of books, accommodation related to development of skills.

12.5.4 Employee relations and freedom of association ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are open to dialogue and needs of their employees, analysing their communicated comments. The companies take measures to ensure that the employees have access to key information concerning the activities which affect them, through notices or directives distributed through the Lotus Notes system generally available inside the company or by means of electronic mail (in ELEKTROBUDOWA SA additionally in the form of the corporate Newsletter). Both companies adhere to labour standards in respect of the right to freedom of association and collective bargaining, and conduct their operations basing on their internal rules adjusted to the applicable legislation. They respect the right of employees to form and to join their own organizations in order to promote their objectives. In ENERGOTEST sp. z o. o. there was no trade union as at 31 December 2018 (neither in 2017). Dialogue in all issues required by law was conducted directly with groups of the interested employees or with the Employee Representative79 elected in accordance with the Rules for Election of the Employee Representative. The election is held by direct universal suffrage in which every employee can participate, by putting forward his/her candidature personally or through other employees. According to the adopted assumptions resulting from the applicable legislation, consultations with the Employee Representative have been held and will be held in situations specified in applicable laws. In ELEKTROBUDOWA SA the employee issues are often considered with the intermediary of three trade unions80, which membership as at the end of 2018 covered 29% of all employees (in 2017: 30 %)81. Number of members 2017 2018 Trade Union of Employees of ELEKTROBUDOWA SA 314 304 Trade Union of Technical, Supervision and Administration Employees “KADRA” 100 99 Independent Self-governing Labour Union “Solidarność” 101 100 515 503 Table 26 Trade unions in ELEKTROBUDOWA SA as at the end of 2017 and 2018.82

To all employees of ELEKTROBUDOWA SA with employment contracts in 2018 (with the exclusion of members of the Management Board and workers posted abroad) the Company Collective Agreement applied, in place since 1 October 2017, concluded by and between the employer and the Company trade unions. ELEKTROBUDOWA SA is aware of risks associated with unforeseen claims or stoppages caused by strikes, which could undermine stability of the conducted activity and also cause tense atmosphere in the workplace or contribute to deterioration of the company image in the labour market and business environment, therefore it insists on constructive dialogue between the employer and the trade unions. The Company has maintained cooperation both in issues of current operating activity and development, and also in the issues related to economic and financial results or employment and remuneration policy. The trade unions actively participate in managing the company and shaping its personnel policy. The collaboration is based on the principles set forth in the relevant Agreement on Cooperation of 2004, which underlines that the Information and Consultation Committee, established by the trade unions in order to ensure the conditions of informing and consulting the employees, and the employer, conduct consultation in god faith and with respect to interests of both parties.

77 S.5.2. 78 S.5.2. 79 S.3.5. 80 S.3.5. 81 S.3.1.; S.3.2. 82 S.3.1.; S.3.2. 83

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Representatives of all trade unions hold regular meetings83 with representatives of the Management Board. Once a month the parties hold working sessions in which they discuss the current situation of the Company, including the employment and remuneration policy and social policy. Once a year there is a meeting dedicated to the assessment of implementation of the internal normative acts, establishing an estimate of social expenditure and the working time schedule for the subsequent year. Both in 2018 and in 2017 there were over a dozen of meetings. The major points raised by the unions in 2018 and 2017 included: social issues, rules of remuneration, occupational health and safety issues, medical care and preventive health system. In 2018 talks were also held on organisational changes in the company. In 2018 (as in 2017), in ELEKTROBUDOWA SA and in ENERGOTEST sp. z o.o. there were no actions recorded which could pose hazard to the right to freedom of association and to collective bargaining, or the incidents infringing these rights. There were no instances, either, of interfering in the work of the trade unions or actions causing disadvantage of workers associated in the trade unions. There were no labour disputes, ELEKTROBUDOWA SA was not a party to collective bargaining84 with the trade union organisations85 acting in the company.

12.5.5 Occupational health and safety There is no uniform occupational health and safety policy for applicable in the Group because of different scale and nature of activity conducted by its entities. The OHS policies applied by ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. stem from the Integrated Management System of which they are an integral part. They are the companies’ declarations of maintaining the appropriate level of the OHS system implementation, owing to raising the employee awareness and responsibility through creating the safety culture and promoting collaboration of all employees, and respecting the applicable legal requirements and standards (PN-N 18001 and OHSAS 18001), with consideration to maintaining the appropriate occupational health and safety standard necessary for successive performance of tasks, without exposing their employees to noxious, or hazardous and strenuous factors. ELEKTROBUDOWA SA – relevant to its business profile – is aware of the impact that safety management has on its operations, and also of the existence of many risks relating to this area. The risks in the OHS area occurring in ELEKTROBUDOWA SA, considered to be material, are: the risk of conducting instrumentation & control and commissioning tests, work on energized equipment, works at height, cable stripping, laying and terminating, operation of power equipment and systems at construction sites, work with the use of electrical tools and using the lifting slings. To mitigate the occurrence of those risks, the company has implemented a number of formal instructions which define the rules of performing and methods of supervision of the works, which involve material risk related to technology, organization, machines, equipment, tools, instruments and the environment in which the works are performed. Occupational health and safety management in ELEKTROBUDOWA SA is exercised on two levels, what results from the organization of the OHS service – by development and implementation of procedures and instructions on the central level (with the possibility of consultation by the whole OHS staff), and monitoring their use on the operational level. The OHS policy is incorporated through its procedures. In ELEKTROBUDOWA SA they are the procedures for: OH&S Monitoring, Hazard Identification and Work-Related Risk Assessment, Responding to near-misses, Hazard identification and responding to unsafe and emergency situations, Operating Control. Pursuant to the adopted procedures, all contracts performed by ELEKTROBUDOWA SA are subject to planned and ad hoc inspections by OHS Specialists who exercise OHS control over the company divisions. Also, the monitoring procedure imposes an obligation of regular reviews of OHS status at contract sites, with the participation of top Management. The purpose of such actions is to make the supervising staff aware of potential and real hazards occurring in their subordinate areas. In this way, an essential part of the advisory and control function of the OHS staff on the contracts is implemented. The outcome of the mentioned above inspections is recorded in the system documents and are subject to periodic analysis on the level of contracts and divisions. Basing on conclusions from the performed analyses, corrective and preventive actions are formulated. Progress of their implementation by the OHS staff and designated individuals on the operational level is verified in the form of periodic inspections carried out by the OHS personnel responsible for relevant organizational units. Regular inspections are supplemented by internal and external audits planned every year, positive results of which are the grounds for extending the Company’s IMS certification. In connection with the periodic reviews of the OHS management system, verification is made of the existence and validity of OHS-related procedures and documents and, if necessary, updates are prepared.

83 S.3.6. 84 S.3.3. 85 On 17 December 2018 the District Court in Finland (“Court”) rendered a judgement in the proceedings instituted in 2011 and 2012 against the Company by the Finnish Electrical Workers’ Trade Union („TU”), by which it awarded from the Company for the TU: ca. EUR 4.72m in the case L-11/9634 and ca. EUR 3.24m in the case L-12/100, increased by due interest for delay, and also ca. EUR 0.4m costs of proceedings and ca. EUR 0.1m compensation (“Judgement”). The dispute concerned claims pursued by the TU related to the employment contracts of the workers posted by the Company to perform works at the construction site of the nuclear power plant OLKILUOTO 3 in Finland. The Judgement has been rendered in the first instance and is lacking force of law. More at: https://www.elektrobudowa.pl/pl/relacje-inwestorskie-elektrobudowa/raporty-biezace/Wyrok-sadu-I-instancji-w-sporze-sadowym-z-Finskim-Zwiazkiem- Zawodowym-Pracownikow-Branzy-Elektrycznej/idn:23870. On 8 March 2019 ELEKTROBUDOWA SA appealed against the Judgement, objecting to the judgement as to the principle and amount. A number of objections, both substantive and procedural, have been raised. The appeal includes a motion to refer to the Court of Justice for preliminary ruling in the issue of interpretation of the EU law in respect of universality of application of the Finland’s collective agreements, their clarity and transparency. The Company is of the opinion that the judgment infringes both the principles of European law and the basic principles of the legal system in Poland, therefore the Company decided to appeal against it. . The expected timeframe of the procedure before a court of appeal is 1 – 1.5 year, while in the case of referring a request for preliminary ruling to the ECJ the procedure may be prolonged to about 3-4 years. 84

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Once a year, when an annual report on OHS status is drafted, the near-misses and accidents are re-assessed and the results of the re- assessment are used in formulating targets for the next year and for improving the solutions in the area of OHS. In order to minimize the risk occurring in the working environment, both companies are committed to its regular, on-going identification; in ELEKTROBUDOWA SA additional focus is made on appropriate flow of information among the dispersed organizational units of the company. The OHS risks are estimated on the operating level by relevant OHS personnel, in the form of inspections and reports, and on the strategic level through audits, inspections and annual reports. Both companies have the procedure for hazard Identification and work-related risk assessment and the procedure for responding to near-misses in place. In the event of a work-related accident, a post-accident order is prepared in ELEKTROBUDOWA SA in order to implement adequate prevention. Both companies consider appropriate education as an important element of safety management. OHS knowledge and understanding is promoted mainly by training, general and workplace induction, and periodic training. In ELEKTROBUDOWA SA the training is usually conducted by the Company’s OHS personnel. The trainers present issues related to the OHS aspects material for the Company. For top management additional thematic training courses are organized, often with lectures presenting characteristics of injuries, talks by representatives of specialist firms cooperating with the Company, speeches by representatives of labour supervision bodies (e.g. PIP (the National Labour Inspectorate) Inspectors), and workshops with qualified paramedics. Major issues are also presented in the OHS bulletin addressed to all interested employees. The pre-medical first aid issues are also a concern of ENERGOTEST sp. z o.o. and are, beside the issue of firefighting and evacuation, a topic of training provided by the company as a specific objective of OHS. ELEKTROBUDOWA SA has appointed an OHS committee, an advisory body for the employer. It consists of representatives of the employer and the employees. The OHS issues are also within the scope of the Company Social Labour Inspector, whose duties include working conditions inspection86. The policy and information about OHS management in both companies are presented on their websites. Their internal regulations are downloaded in Lotus Notes database available to all employees. Basic information referring to OHS are recognized annually in the OHS status analysis and presented during annual Management Reviews. ELEKTROBUDOWA SA also discloses selected information from the Status Report on OHS to all employees in its OHS Bulletin. In 2018 ELEKTROBUDOWA SA accomplished the following OHS goals: - update of Instruction for height work in the item referring to ladders, a template of ladder review sheet; - the Instruction for chemical substance surveillance was drawn up; - purchase of 3 defibrillation kits; - enhancement of the OHS management system in the area of preparedness for and response to emergency situations, including a trial evacuation in the Head office in Katowice and in the factory in Konin. For both companies a considerable challenge posed by OHS is the control of implementation and enforcement of OHS rules and regulations in the dispersed divisions and adapting the OHS solutions to new technologies and changes in the production process. ELEKTROBUDOWA SA is facing the challenge of adapting to the requirements of ISO 45001and of certification according to this standard, what involves the necessity to take certain actions by the Company management and the employees on the operational level. ELEKTROBUDOWA SA applies injury severity and frequency rates according to the formula used by ZUS (the Social Insurance Institution). Annual reports disclose aggregate information about the areas of occurrence of hazardous situation (near miss incidents).

ELEKTROBUDOWA ELEKTROBUDOWA ELEKTROBUDOWA THE GROUP THE GROUP THE GROUP SA SA SA Women Men Total 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Number of all reported 0 0 0 0 9 7 9 7 9 7 9 7 injuries Number of fatalities 0 0 0 0 0 0 0 0 0 0 0 0 Number of serious 0 0 0 0 0 0 0 0 0 0 0 0 injuries Number of injuries 0 0 0 0 9 7 9 7 9 7 9 7 resulting in lost days Number of lost days due to occupational 0 0 0 0 505 273 505 273 505 273 505 273 injuries

Table 27 Data referring to occupational injuries in 2017- 201887

86 S.4.9. 87 S.4.1; S.4.3.; S.4.4. 85

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 Injury frequency rate (number of injuries per 1000 employees) 5,26 3,98 5,26 3,98 Injury severity rate (number of lost days relative to number of injuries) 56,11 39,00 56,11 39,00

Table 28 Indicators referring to occupational injuries in 2017- 201888

THE GROUP ELEKTROBUDOWA SA 2017 2018 2017 2018 Number of identified cases of occupational diseases89 1 1 1 1 Number of employees exposed to exceeded maximum admissible 90 11 4 11 4 concentrations (MAC) or maximum admissible intensities (MAI)

Tab. 29 Indicators referring to occupational health and safety issues in 2017- 201891

In 2018 work-related injuries in ELEKTROBUDOWA SA occurred in the following provinces: mazowieckie (2), pomorskie (2), wielkopolskie (3), opolskie (1). The most frequent causes of accidents were 92: inadequate organization of work, : mental distraction, carelessness, lack of or improper personal protection equipment. The Company addresses these issues by providing regular training and instruction meetings to build the safe work awareness and culture. Having analysed the causes of accidents in 2017 it has been decided that more emphasis should be placed during the 2018 training to the matter of regular use of personal protection measures, worker’s focus on performed work and increasing supervision over the performed work. In examination of the causes of accidents in 2018 it was decided that more emphasis should be placed during the 2019 training to the matter of regular use of personal protection equipment, better concentration on performed work, drawing up and acquainting the workers with applicable instructions and increasing supervision over the performed work. Compliance with the OHS regulations by their suppliers/subcontractors is of vital importance for both companies. Selection and evaluation of suppliers/subcontractors is based on their ability to meet the specifications included in contracts and purchase orders, also the quality and OHS requirements. ELEKTROBUDOWA SA expects its suppliers to conform with the regulations applicable in the Company, including the requirements of OHSAS 18001, which are reflected in relevant provisions included in the contracts with suppliers, approved by the OHS specialists93. Both companies verify their suppliers with regard to OHS requirements, using the prequalification questionnaires for this purpose; they also reserve the right to periodic evaluation of suppliers / verifying audit in respect of occupational health and safety. Information about the OHS policy and management system is enclosed to contracts concluded with suppliers; in ELEKTROBUDOWA SA, elements of the OHA policy are also taught during the induction for suppliers’ employees (the instruction for suppliers / subcontractors). Both ENERGOTEST sp. z o.o. and ELEKTROBUDOWA SA require the suppliers to submit the Supplier’s statement of having acquainted with the Instruction for suppliers, which sets the OHS obligations during performance of work for the companies according to the requirements of the IMS systems and additional standards and special rules. To the performance of particularly hazardous work, frequent in the activity of ELEKTROBUDOWA SA (e.g. cable works), special instructions apply. In 2018 audits were carried out at subcontractors’ facilities for compliance with the OHS requirements94. During the cyclical inspections by ELEKTROBUDOWA OHS staff at subcontractors’ a few cases of noncompliance were identified. In the follow-up recommendations the subcontractors were requested to immediately remove the non-conformance and implement the recommendations, and report the implemented actions to the OHS staff of ELEKTROBUDOWA SA. On principle, in order to prevent and correct such non-conformance, the company includes relevant provisions in subcontracting agreements, carries out detail inspections and enforces contractual penalties to mitigate the unwanted behaviour; it also reserves the right to abandon further cooperation.

88 S.4.2.; S.4.5. 89 Data for 2017 adjusted 90 In previous years (2017) the company took measures, both organisational and technical, to reduce the number of its people exposed to exceeded hazardous conditions at workplace. They included: reorganisation/liquidation of workstands burdened with such conditions, increasing the frequency of changes on the most exposed workstands. 91 S.4.6.; S.4.7. 92 S.4.8. 93 S.4.10. – The company includes OHS clauses in contracts with suppliers, but is not able to provide the number or percentage of contracts with such provisions. 94 S.4.11. 86

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

12.6 Respect for human rights

There is no common policy regulating the issue of respecting human rights applicable throughout the Group, because of different scale and nature of activity conducted by its entities, their different sizes and corporate culture. ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. adopt responsible approach to obligations relating to this area, also their obligations towards employees, and recognize their function as a specialized social body which is required to comply with the applicable legislation and respect human rights95. The companies comply with the laws concerning respect of human rights and referring to employee relations, international and established by legislation of the countries where they operate, and they admit it is a preliminary and necessary condition for operation of any business. Going beyond basic, generally implemented human rights, in their operations the companies are guided by their Ethical Codes, which provide the grounds for elimination of any cases of infringement of human rights by the Companies– in ELEKTROBUDOWA SA it is Kodeks Postępowania Etycznego, in ENERGOTEST sp. z o.o. - Kodeks Etyczny ENERGOTEST sp. z o.o. ELEKTROBUDOWA SA supports and applies the principles laid down by the UN Global Compact initiative, including the principles referring to human rights, i.e. support and respect the protection of internationally proclaimed human rights and make sure that they are not complicit in human rights abuses, and to labour standards , i.e. upholding the freedom of association, the elimination of all forms of forced and compulsory labour, the effective abolition of child labour and the elimination of discrimination in respect of employment and occupation. ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. comply with the legal norms included in generally applicable laws, first of all in the Labour Code, and observe the basic provisions of the Universal Declaration of Human Rights of 1948 in respect of the right to freedom of thought, conscience and religion, opinion and expression, the right to just and favourable conditions of work, including the ban to be subjected to cruel, inhuman or degrading treatment. They respect employee rights covering elimination of all forms of forced or compulsory labour and benefitting from it, do not employ prisoners and observe legal norms which clearly indicate that for establishing an employment relationship a consent of an employee and an employer is required, and that the relevant documents signed by the parties shall be clear and shall not include any obscure provisions. The “voluntary” nature is also manifested by the possibility of terminating the employment contract at any time, following the applicable provisions of the Labour Code. Both Companies fulfil the recommendations of the International Labour Organization in respect of aspects indicated by ILO. They respect the right to decent working conditions, including decent pay and other forms of remuneration, in accordance with the national regulations and laws or provisions of collective agreements, practise equal pay for the work of equal value. They pay due remuneration directly to the interested employees, with consideration to those restrictions or deductions only which are permitted by applicable legislation, regulations or collective agreements. They respect the right to social protection, to organize and to strike96, to rest and leisure after a week’s work, to holidays, health and safety matters, protection of health and maternity and the possibility to combine work with family commitments. As far as possible, they enable practicing religious traditions. The employment procedures applied by the Companies are free from discrimination because of race, colour, sex, religion, national or social origin, political opinion, age or disability, marital or family status, personal relations, etc., which is formally confirmed by the recruitment procedures in place in ELEKTROBUDOWA SA, and also the rules of equal treatment in employment97. The companies do not employ children not benefit from such employment. However, having regard to the fact that Polish legislation allows employment of adolescent workers, ELEKTROBUDOWA SA has established patronage of two classes of a vocational school in Konin, the location of one of its production facilities. Students from this class are provided an opportunity to acquire knowledge based on practice. Students of the Konin school are employed by the Company in strict compliance with relevant provisions of the Labour Code which regulate the issue of juvenile labour. In ELEKTROBUDOWA SA, any instances of human rights infringement, as well as other improper practices occurring in the areas described in the Code of Ethical Conduct, may be reported to the company’s Ombudsman by email send to the address [email protected] or by regular mail to the company’s postal address in Katowice98. If an infringement is reported, the Ombudsman has to appoint a Committee responsible for taking explanatory proceedings to ascertain whether and in what extent the provisions of the Code have been violated. Personnel involved in the proceeding may not disclose the received information and are obliged to protect personal data of the reporting person. In 2018, as in 2017, neither ELEKTROBUDOWA SA nor ENERGOTEST sp. z o.o. recorded any cases of human rights abuse, including child labour or compulsory labour. No information was received, either, about such occurrence relating to the companies’suppliers99.

95 After: Wytyczne dotyczące biznesu i praw człowieka. Wdrażanie dokumentu ramowego ONZ „Chronić, szanować i naprawiać”, Polski Instytut Praw Człowieka i Biznesu. (Guidelines for implementation of the UN "Protect, Respect and Remedy" Framework for Business and Human Rights) 96 More in section 11.5.3 Employee relations and freedom of association 97 More in section 11.5.4 - Employee relations and freedom of association 98 S.3.4. In 2018 there were no complaints in respect of employment practice area 99 S.7.1.; S.7.2.; S.8.1.; S.8.2. 87

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

In principle, ELEKTROBUDOWA SA an ENERGOTEST sp. z o.o. are committed to cooperate only with these organizations that observe human rights, but so far they have not conducted any analysis of the supply chain in respect of assessment of increased risk of violation of human rights, including the elimination of child labour or compulsory labour; they have not imposed relevant obligations on the suppliers or subcontractors (e.g. by including adequate clauses in contracts), and have not formally verified their fulfilment, neither by conducting audits verifying compliance with these rules100. The companies did not carry out any analysis of threats to human rights or infringement of human rights outside the supply chain.101

12.7 Social issues There is no common policy in respect of social issues applicable throughout the Group, because of different scale and nature of activity conducted by its entities, their different sizes and corporate culture. ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are implementing the relevant targets basic on their internally accepted best practice.

12.7.1 Social commitment and impact on local communities Support for communities102 Social commitment is one of the aspects of corporate social responsibility of ELEKTROBUDOWA SA. The Company is maintaining the policy of supporting social activity concerning charity campaigns, social policy, health protection and promotion, science, education, learning, promotion of sport and physical culture. The support is mainly manifested by donations in cash or in kind, particularly for the benefit of non-profit organizations or other entities realizing public actions (we do not give donations to individuals). The Group is not involved in sponsorship activity 103, understood as profit-oriented promotional / marketing activity, the effects of which are measurable by performance indicators, such as advertising value equivalent, product and service sales growth ratio, or the company share price. Its actions in this respect are limited to participation in small, local initiatives of social nature. Funding provided by ELEKTROBUDOWA SA is generally used for implementation of statutory objectives of the organizations, and also for supporting school contests, scientific circles or financial aid for organization of Christmas Eve supper for lonely people. For a few years employees of ELEKTROBUDOWA SA take part in the charity run which has the form of a relay race - Poland Business Run, to support beneficiaries of Jasiek Mela Foundation Poza Horyzonty (Beyond Horizons). ENERGOTEST sp. z o.o. has not yet defined the directions of its involvement in socially beneficial activity or the rules for cooperation with relevant organizations and institutions. The relevant activity is limited to performing the function of a supporting member of Associations and Societies in its industry and supporting research and educational centres. The financial support is generally focused on financing academic activity, research and development, collecting and popularizing technical and economic information concerning design engineering, overall development, and rational use of water and energy resources in this country, development of innovative technologies concerning smart power networks and commercialization of results of research and technical solutions developed by the supported organization, broadly understood educational, standardization, conferential activity, popularization of technical and organizational achievements. The company also provides financial support for cultural institutions or organisations on an ad hoc basis. Each decision of support is taken by the President of the Management Board after thorough analysis of each request and needs of the applicant. In 2018 ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. together earmarked PLN 47 700 on pro-social activity, including charity, of which ELEKTROBUDOWA SA – PLN 29 500. Most of it were donations for health protection and promotion. Beneficiaries who received the biggest support were: Konsorcjum Smart Power Grids Polska, Górnośląskie Centrum Rehabilitacji in Repty (the Upper Silesian Rehabilitation Centre) and the Municipal Kindergarten with classes forchildren with special educational needs in Jaworzno104. In 2017 the donations had the amounts of PLN 66 863 and PLN 61 363, respectively.

Communication with local communities Taking into account the profile of its business activity, ELEKTROBUDOWA SA is committed to the policy of open communication with local community, which covers consultations before commencing a project and informing local communities about potential hazards.

100 S.7.3.; S.8.3; S.7.4.; S.8.4. 101 S.7.6. 102 S.9.3. 103 S.9.5. 104 S.9.4. 88

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

The purpose of actions in the field of communication is to keep contact with those interested in the investment as close as possible, providing current information about work progress, circumstances and importance of the investment. Information campaigns are also focused on transparency of the conducted activity. To the meetings devoted to performance of big projects with potential environmental impacts105, the company invites the interested stakeholders: associations, foundations, environmental protection and ecology organizations, non-profit organizations, municipal administration, universities, inhabitants of the relevant regions. The consultations help involve these groups to actions which may minimize the company’s negative impact on the environment, they also perform an educational function in promoting the sustainable development issues. The Company takes effort to ensure that projects it carries out are understood and accepted by local communities and that they create opportunities for the region which is a beneficiary of implemented projects. In 2018 the company continued the Public Communication Programme approved in 2015 with respect to the project Modernization of the 220/110kV electrical station Konin106 - the quarterly photographic session were carried out and talks were held with the representatives of key stakeholders in the free-form interview (with the Municipal Office in Konin, the Wielkopolska Province Office Delegation in Konin, ZE PAK SA, the Polish Federation of Engineering Associations NOT in Konin). Within the frame of the Public Communication Programme implemented in Konin, a specially dedicated website is kept (http://stacjakonin.pl), and monitoring of the project environment and media monitoring conducted. Similar actions were implemented in 2018 and 2017 and are continued in relation to performance of the projects: Extension and modernization of Byczyna Electrical Station (http://stacjabyczyna.pl) and Extension and modernization of Skawina Electrical Station (http://www.stacjaskawina.pl). Each of the dedicated website provides essential project-related information, they also provide answers to the potentially asked questions and news from the construction sites. A special information leaflet with general data concerning the Investor, Contract Engineer and Contractor, significance of the station for the region, operation of the electrical station and its environmental impact, etc. for each project is prepared.107

Cooperation with schools and universities ELEKTROBUDOWA SA has had many years of experience in cooperation with universities and schools in Poland. So far the cooperation agreements have been signed with the Silesian Technical University in Gliwice, Katowice School of Economics (GWSH), the Faculty of Electrotechnical Engineering, Automatics, Computer Science and Electronics of the University of Science and Technology in Cracow (AGH), and also with the State School of Applied Sciences and the Mining and Power Engineering Secondary School in Konin, the Electrical Engineering Secondary School in Jaworzno, and the District School Complex in Bieruń. Under the cooperation agreements the Company supports the process of shaping professional careers of students and graduates, participates in drafting traineeship and internship programmes and promotes employment of students and graduates, presentation and promotion of each other’s achievements and conducting joint research projects. In 2018 on the grounds of signed in 2017 agreement between ELEKTROBUDOWA SA and the State School of Applied Sciences in Konin on cooperation in launching a dual learning faculty of mechanics and machine construction which provides an opportunity to combine academic study with practical experience. At present, four second-year students of this faculty work for one day in a week in the Konin factory of ELEKTROBUDOWA SA. In 2018 the Company continued the programme Praktyki pod napięciem (Live Practical Training) dedicated to students of the final year of such faculties as: Electrical Engineering, Automatics and Robotics, Power Engineering and Electronics. The successful applicants are offered traineeship in the Commissioning Section, a Design Office or at the construction site. The programme of training which lasts 2 – 3 months provides the possibility of getting acquainted with the specificity of work in ELEKTROBUDOWA SA and creates opportunities of gaining vocational experience in such areas as instrumentation and control works, broadening the students’ academic knowledge and an opportunity to write a dissertation in cooperation with the company. In 2018 there were 6 participants of the programme (5 in 2017). Whenever possible, the best student trainees can be

105 S.9.1; S.9.2. – the local community grievances may refer to the environmental impact of the project performance by ELEKTROBUDOWA SA. The Company tries to conduct public consultations relating to such projects. In 2018 no information was received about any complaints by local communities with regard to the activity conducted by the company. 106 First public consultations in Konin took place in February 2016, however, despite communication campaigns, they received little interest from the invited parties, what may be the effect of deeply rooted in the local community awareness of existence of the electrical station and also of the fact that the facility is located in the separated industrial zone and thus does not give much cause for concern, as it does not collide with the interests of the local communities. Next public consultations were held in April 2017, focused on informing about the current status of the project, works schedule and progress, the scale of its environmental impact and the applied safety measures. As before, the public showed little interest, despite wide-ranging information campaign. In the same month a power lesson was conducted for the pupils of the Mining and Electrical Schools, focused on the topic of the purpose and functions of modernization of the 220/110kV electrical station Konin, including the significance of the investment for Konin and for the National Power System (KSE). The lesson, which taught about the KSE, its activity and components, environmental impact and protection, received great interest from the pupils, who asked questions relating not only to the modernization of the station or to the KSE, but were interested in PSE S.A. (Investor) and ELEKTROBUDOWA SA (contractor of the project) as the traineeship providers or future employers. 107 S.9.2. 89

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

offered permanent employment in the Company. ENERGOTEST sp. z o.o. also offers traineeship for students of the Silesian Technical University, under the cooperation agreement signed by the parties. In 2018 the company had 2 trainees (3 in 2017). Opportunity to gain experience in practical training in ELEKTROBUDOWA is offered also to the secondary school pupils: the factory in Konin provides monthly vocational training for the pupils of the Mining and Power Engineering Secondary School during the school year (in 2018 there were 28 participants, in 2017 about 30). Later, graduates have a chance to work for the company. Vocational training is also provided for the pupils of the Basic Vocational School in Konin, preparing for the profession of electrician. As at 31 December 2018 the Company employed 39 adolescent workers (25 in 2017).

12.7.2 Product safety, including appropriate product labelling Product safety issue, including its appropriate labeling, has an essential influence on operation of both ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o., not only because of the necessity to adjust the products to expectations of customers, implementation of new products, growth of competitiveness in the market of new products which meet safety standards. Aware of the fact that potential safety problems are the main source of reputation risk, product recall and penalties which may significantly affect their activity, the companies admit that manufacture of product must be safe, both in terms of manufacturing process and for its end user, and give the issue a high priority. The Companies take relevant measures in order to curb the above risks. The issues of design and development, production and service of power n equipment are covered by the Integrated Management System (IMS). Manufacturing safety assurance is regulating by procedures and instructions of product constriction, design and manufacture which together compose the technological and design-production specifications, and the construction, testing and implementation of new products. The suppliers have to agree each deviation from the material specification with the product constructor, and supplies inspections are conducted in accordance with the dedicated supply control procedure. The companies performs a risk analysis to identify various risks occurring in the phase of product use, relating to safety and health of consumers, which also include correct marking. According to the procedures and instructions in place and the requirements of applicable standards and laws, the goods are subject to: - type tests: goods manufactured by the companies undergo comprehensive type tests performed by accredited independent test laboratories in accordance with the international norms and standards. The companies cooperate with several research institutes in the scope of type tests and advisory services, the products are tested for EMC compatibility In OBRUM Gliwice, EMAG and CTO compatibility tests, shock and vibration tests and environmental tests (temperatures) are performed. Some tests are performed internally. On the basis of type test reports, the accredited independent bodies issue certificats of conformity for the tested equipment; - routine tests: routine inspections and checks are conducted at all stages of production in the scope and points defined in relevant documents prepared by process engineers. The documents include: quality inspection plans, checking instructions and other process documents. Checks and tests are conducted by quality inspectors or within the employee self-control, as required by the relevant provision in the above mentioned documents. ELEKTROBUDOWA SA orders comprehensive type tests to be performed by accredited independent test laboratories in accordance with the international norms and standards. The company conducts consistent routine checks and tests at all stages of production. The scope of checks and tests of products in progress and the process points at which they are to be performed are defined in relevant documents prepared by process engineers. The documents include: quality inspection plans, checking instructions and other process documents. Checks and tests are conducted by quality inspectors or within the employee self-control, as required by the relevant provision in the above mentioned documents.

In order to eliminate potential hazards and to prevent workplace injuries involving its products, ELEKTROBUDOWA SA takes the following measures: - all low voltage products (switchgear and PONTIS busbar trunking system) are subject to conformity assessment according to the EU directives which have their equivalents in the Polish legislation. Products made by ELEKTROBUDOWA SA fulfil the safety requirements of the low voltage directive and are manufactured in accordance with the harmonized standards; - products are regularly tested for conformity with the provisions of the EMC (electromagnetic compatibility) directive – positive results of tests and low level of electromagnetic radiation emission which does not have adverse impact on living organisms; - a test which purpose is to ensure safety for operators of the equipment is an internal arcing test performed in order to check the structural strength of the switchgear to the effects of internal arcing. Irrespective of positive results of tests confirming structural strength of the switchgear in case of internal arcing, ELEKTROBUDOWA SA always adopts additional precautions which reduce the time of potential arcing by using special optoelectronic systems or limit switches. These measures are applied in order to increase safety of personnel and also to reduce the effects of arc fault on the environment – reducing the duration of arcing significantly reduces the amount of its toxic products harmful for the environment. An innovative, patented, extra-quick earthing switch has been designed for quick earthing and arc quenching; 90

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- following the applicable standards, switchgear panels manufactured by ELEKTROBUDOWA SA undergo factory tests performed by quality control inspectors - all finished products manufactured in the company are subjected to routine tests in accordance with the requirements of the following standards: medium voltage switchgear according to PN-EN 62271-200, low voltage switchgear according to PN-EN 61439. The scope of verification and the criteria for conformity assessment of finished goods manufactured in the factory in Konin are defined in the instruction of the Integrated Management System. Routine tests have the purpose of detecting defects of material or manufacture, and confirming that the product conforms to the type-tested product and to the specifications; - basic protection is provided by insulation of live parts, enclosures, partitions and by situating all live parts out of reach. It refers to medium voltage and low voltage switchgear and busducts which are subject to type tests and routine tests according to IEEE C37.23 and PN-EN 62271-1 for M V busduct and PN-EN 61439-1 and PN-EN 61439-6 for LV busduct; - manufactured in the most popular variants, type ELPE (isolated phase), ELPO (non-segregated phase) and PELPO busducts, air- insulated, with natural cooling, are designed as current conductors made from aluminium tubes or shapes in the aluminium enclosure. During normal operation of the busduct its enclosure is earthed, ensuring safety for personnel of operation in the immediate vicinity of busduct (live electrical equipment). The enclosure provides shielding which is able to block over 95% of the electromagnetic radiation generated when the conductor is energized; - the surveillance and monitoring system applied in the complete solutions of high voltage gas-insulated switchgear (GIS) enables continual monitoring of partial discharge level, the degree of wear of its components (i.e. circuit breaker) and recording and analysis of the gathered data. Therefore it is possible to predict potential hazards and eliminate them in time. During type tests of busduct, the magnetic field strength is defined and measured around the busduct. Usually, such measurement is also done by the busduct user, who defines the location of the magnetic field; obligation to perform such tests is defined by separate applicable regulations. The Company can perform an analysis/assessment of risk according to HAZOP or RISC SCORE method on request. Identification of finished goods manufactured by ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. is ensured by appropriate labelling with a rating plate with a unique factory number (this refers to goods for which rating plates are mandatory) or another marking agreed with the customer. For marking its products ENERGOTEST sp. z o.o. applies the guidelines set out in PN-EN-60100-27 Measurement Relays and Protection Equipment. Part 27 Product Safety Requirements and the provisions of the product manufacture instruction included in the Construction and Manufacture Specification. Labelling applies to all products of ENERGOTEST sp. z o.o., and should follow the principles of identification, final tests and acceptance of a finished product set out in the above named procedures of the IMS system. Finished goods are labelled with rating plates which display at least the following data: product name and type, manufacturer, serial number /year of manufacture, other specific technical parameters (such as rated supply voltage, auxiliary supply voltage). Verification of correctness of labelling, in accordance with the policy and detailed guidelines, is done by an employee liable for the product basing on the routine test instruction. In ELEKTROBUDOWA SA, the scope of data displayed on rating plates of switchgear conforms with the standards: PN-EN 62271-200 for medium voltage switchgear, PN-EN 61439-1 for low voltage switchgear. Busducts are manufactured in accordance with Polish and European standards PN-EN, IEC and in accordance with the American IEEE standard, which set out the requirements for designing, manufacture and tests. The above standards or any other regulations do not impose any requirements for special labelling of busduct – except for rating plates displaying the ratings – and do not require specifying, measurement or monitoring other parameters. Low voltage busduct (up to 1kV of alternating voltage and 1.5 kV of direct voltage), which are subject to conformity assessment according to EU directives, are provided with CE marking.

SWITCHGEAR MOBILE SUBSTATION BUSDUCT not required, unless otherwise provided by contract provisions Origin of materials used for the Not required, on customer request the company provides relevant (limiting origin of materials used product certificates of materials for production only to EU countries) . not required for MV and LV switchgear, Content, particularly with regard to . for GIS switchgear which use SF6 gas, all information substances that might produce a not required required by EU directives and applicable legislation is social or environmental impact provided together with its products ELEKTROBUDOWA SA provides the operation and maintenance manual. The Safe use of the product or service manual includes a detailed instruction of safe use, installation, servicing, transport, waste handling, etc.. . not required for MV and LV switchgear . for GIS switchgear which use SF6 gas, waste, product use and all information required by EU not required not required environmental/social impacts directives and applicable legislation is included in the relevant operation and maintenance manuals Table 30 Product and service information required by the organization's procedures for product and service information and labeling 91

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Both companies provide relevant presentations and training for customers to educate them in safe and responsible use of the offered products and services. Most useful information is provided also in User’s Instructions (in ELEKTROBUDOWA SA: in operation and maintenance manuals). In 2017 neither ELEKTROBUDOWA SA nor ENERGOTEST sp. z o.o. received information about any violation of product and service safety procedures/regulations or any incidents relating to safety of products offered to the customers. There was no reported occurrence of non-compliance relating to improper labeling of products or services. There were no administrative proceedings, also those concerning improper product labeling, and no fines were levied for failure to comply with laws or regulations relating to the use of product or service or due to improper labeling108.

12.7.3 Customer relations ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are fully aware that customer satisfaction contributes to strengthening their market position owing to the group of permanent recipients of their products and services, and that the shortage of focus on forming stable relations based on mutual respect and confidence, beneficial for the company and for the customers, poses a material risk to reputation and the risk to continuation of effective business activity. The companies present their approach to customer relations in their Codes of Ethics, underlining their commitment to fulfil the assumed obligations, responsibility for the offered products and services and provision of complete and true information about their offer, being governed by friendly, fair and clear principles of cooperation. The customer satisfaction aspect is monitored within the quality management system, with the focus on establishing good relations with customers for the benefit of the company and the Group development in the domestic and international markets and on building the employee awareness of importance of relations with the market; it is also reflected in the procedures for quotation and contracts with customers, customer satisfaction survey or the complaint handling instruction in place in the companies.

12.7.4 Marketing communications So far the Group has not maintained a formalized policy in respect of marketing communication, what is caused by different scale and nature of the conducted business activity. Neither ELEKTROBUDOWA SA or ENERGOTEST sp. z o.o. have developed a separate code or another document which sets out the principles of responsible marketing communication. Certain aspects are set out in the Codes of Ethics in place in the companies. The companies’ approach to shaping their relations with customers is manifested by the declaration, laid down in the Codes, to uphold integrity, complete and true presentation of information about its offer, preventing conscious distortion of facts, intentions and opinions, and therefore deliberate misleading. Beginning with 2017 ELEKTROBUDOWA SA prepares a Marketing Communications Programme for a subsequent year, which assumes participation of the company in such events as domestic and foreign trade fairs, symposia, seminars, conferences, advertising, and similar. In 2018 ELEKTROBUDOWA SA drew up the rules for marketing communication, acknowledging its relevance for supporting the company’s main operations and perceiving it as a vital element of impact on the growth, consolidation of the brand awareness and reach, taking into account related potential risks, particularly the risk of unintentional misleading of customers and the reputation risk; the rules are being implemented. In 2018, like in 2017, ELEKTROBUDOWA SA and ENERGOTEST sp. z o. o. did not record any cases of non-compliance with regulations and voluntary codes related to marketing communications (including advertising, promotion and sponsorship). There were no administrative proceedings against the Companies (e.g. by the Competition and Consumer Protection Office UOKiK) and no fines were levied for failure to comply with laws or regulations relating to the issues of reliability and ethics of marketing communications109.

12.7.5 Privacy protection ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. are aware of materiality of the aspect of appropriate data protection management. They observe generally binding law provisions on personal data protection and implement statutory regulations, concerned about the risk of personal data leak or unauthorized use of personal data which might result in claims for compensation of individuals who might suffer a loss due to non-compliance of personal data protection regulations, the risk of administrative proceedings against the company or impact of such incidents on the company reputation. The companies appointed their Information Security Controllers (ABI) and established Data protection security policy which has the aim of ensuring correct protection of personal data processed by each of the companies, understood as protection of data against intended or unintended disclosure to unauthorized individuals, unauthorized amendment or removal, processing with violating applicable laws, or data loss, damage or destruction.

108 S.11.1.; S.11.2.; S.11.3.; S.14.1.; S.14.2.; S.14.3. 109 S.12.1.; S.12.2.; S.12.3. 92

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In ENERGOTEST sp. z o.o. the issues related to classified information are regulated by the documents Classified Information Protection, Methods and procedure of processing classified information classified „restricted” and the scope and conditions of applying physical security measures for its protection and Methods and procedure of processing classified information classified “confidential”.

The Management Board of ELEKTROBUDOWA SA, aware of importance of issues related to protection of personal data connected with the protection of privacy right, particularly the rights of natural persons entrusting their personal data for appropriate and efficient protection of the data, declares: - Intention to undertake any technical or organisational actions necessary in respect of protection of rights and legitimate interests of the entity related to security of personal data; - commitment to constant improvement of awareness and qualifications of personnel processing the personal data in ELEKTROBUDOWA SA; - intention to consider the duties of employees – persons authorised to process personal data as fundamental work duties and to enforce their performance; - intention to undertake, in the required scope, cooperation with institutions appointed for the protection of personal data. The companies have reviewed the risk in order to identify hazards and incidents relating to personal data protection and provided training for the personnel, who keep the records and are authorized to process such data, in the scope of regulations on personal data protection and in the IT security controls. Persons authorized by ABI to process personal data are obliged to act in accordance with the applicable law and the internal regulations adopted by the companies in this respect, to keep the personal data and ways of their securing confidential, to protect personal data and means of their processing against unauthorized access, disclosure, alteration, damage or distortion, and also to report any incidents defined in the Security Policy, hazards and weaknesses of the personal data processing system. If occurrence of a hazard and/or incident is reported, ABI shall conduct an explanatory procedure and recommend corrective measures to eliminate such occurrence in the future. Personal data protection is implemented through: physical and technical (IT) measures, including systemic, established in the organisation’s procedures. The applied security measures have the purpose of fulfilling the above objectives and ensuring: - data confidentiality – understood as a feature ensuring that data is not made available to unauthorised persons; - data integrity – understood as a feature ensuring that the personal data have not been changed or destroyed by unauthorized processing; - data accountability - understood as a feature ensuring that the acts of a person can be assigned only to this person; - system integrity – understood as inability of any manipulation, deliberate or accidental. In 2018, as in 2017, ELEKTROBUDOWA SA and ENERGOTEST sp. z o. o. did not identify any incidents of breach of the procedures concerning the protection of personal data or incidents of leak or unauthorized use of personal data. There were no administrative proceedings against the companies in issues relating to personal data protection and no related fines were levied110.

12.8 Anti-corruption and anti-bribery Both ENERGOTEST sp. z o.o. and ELEKTROBUDOWA SA are committed to prevention of unethical behaviour, counteracting any employee engagement in corruptive practices, active (offering an advantage) and passive (receiving and advantage). Potential problems related to corruption and bribery are identified as serious source of risk of loss of reputation for companies and a risk of hindrance to conducting business activity. The Companies strictly require that their employees comply with the prohibition of receiving of unjustified advantage from the co-workers, purchasers of products and services, suppliers, customers, competitors and other business partners, and with the prohibition of offering such advantage to their business partners. Expectations of both companies in this respect are described in the documents which all employees are required to follow: the Code of Ethics of ENERGOTEST sp. z o.o. and the Code of Ethical Conduct in ELEKTROBUDOWA SA. The system of regulation of ethical and lawful behaviour, apart from the Codes, is comprised of many regulations which indicate specific areas and expected patterns of behaviour, and also, applicable in ELEKTROBUDOWA SA and in ENERGOTEST sp. z o.o., procedure for identification and management of risk of irregularities and abuse and counteracting corruption. The procedure applies to all incidents of irregularities and abuse and corrupt events and also to situations where there is a suspicion of their occurrence, and must be followed by every employee of the companies and persons acting on their behalf, irrespective of place of work, years of service or duties performed. It establishes uniform rules of handling the above cases and establishes the scope of examination of their reasons and identification of persons responsible for handling such cases and the scope of responsibilities for its areas. Six areas of the conducted business activity where the risk of irregularities and abuse is the most probable have been identified, and a typology of undesired behaviour in each area have been specified.

110 S.13.1; S.13.2.,S.13.3. 93

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The following activities are deemed particularly sensitive: the process of selection of suppliers and subcontractors, purchase of goods and services, renting facilities or equipment, project, contract, order, contract, purchase order performance, employing and establishing remuneration, maintaining financial books and registers111. Employees of both companies have an obligation to identify the risk of irregularities and abuse and corrupt acts in the scope of their tasks. The managing staff are additionally obliged to be alert to any potential possibilities of occurrence and real manifestation of irregularities, abuse or corrupt acts, related to the processes for which they are responsible. In the event of suspected irregularity and/or fraud or corrupt acts committed by managers, employees, business partners or other business-related entities, every employee and also other individuals having relevant information are required to immediately report their suspicion to Fraud Risk Manager who shall implement investigation proceeding covering the mentioned above areas of the highest level of risk of irregularity and/or fraud. The outcome of such investigation, together with recommended action, is reported directly to the Management Board. The implemented procedure and inspections have the purpose of eliminating any unethical behaviour, they also provide for the possibility of corrective actions, for example actions recommended in the follow up reports. Codes of Ethics of both companies are available on their websites, while the procedure is available inside the company as a component of the system documentation. Additionally, employees of ELEKTROBUDOWA SA have acquainted themselves with the anti-corruption and anti-bribery policy disclosed in the internally circulated corporate Newsletter, and also during in-company training in topics of counteracting corruption, provided by the Fraud Risk Manager. Since 2017 ELEKTROBUDOWA SA has also had in place the Regulations for preventing conflicts of interest and for entering into related party transactions . The Regulations follow the provisions of Chapter V of Best Practice of GPW Listed Companies 2016 and specify the criteria of and circumstances in which a conflict of interests may take place in the Company and set out the rules to follow in the situation of a conflict of interests or possibility of its occurrence; the document also regulates the issues related to entering into transactions with related parties in the situation of a conflict of interests. The Regulations have been implemented with the purpose of preventing conflicts of interests in the Company, and in the situation of a conflict – its effective management and monitoring, and also to ensure that the interest of the Company is protected against its adverse impact. In connection with the necessity to adapt the regulations and transparent conduct of ELEKTROBUDOWA SA to the requirements of generally binding law, in order to minimise the risk of financing terrorism or money laundering, in October 2018 the company adopted an order/regulations forbidding cash transactions of the value PLN 15 000 or higher. In 2018 and 2017 in ELEKTROBUDOWA SA and in ENERGOTEST sp. z o. o. there were no confirmed incident fulfilling the criteria of corruption 112. No disciplinary penalties were imposed on employees in connection with relevant irregularities. In respect of incidents classified as irregularities (understood as a violation of generally binding laws or regulations, norms and standards applicable in the company, resulting from acts or omissions, which caused or might have caused damage) identified in internal inspections carried out in ELEKTROBUDOWA SA, it has been found out that they were caused by human errors and negligence. The Company’s response included relevant corrective and remedial actions which consisted in removing the involved employees from performing their tasks, and through profound verification of areas where the irregularities had occurred, such as tender procedures and change of suppliers of services, tightening operating procedures, talks with the employees. So far ELEKTROBUDOWA SA and ENERGOTEST sp. z o.o. have not examined their supply chains with regard to evaluation of the increased risk of corruption incidents, and the solutions adopted by them in the sphere of ethics and prevention of corruption and bribery do not impose special obligations on their suppliers and subcontractors.

12.9 Specification of SIN indicators

Indicator Description Page(s) Notes

G.1. Description of a business model and strategic development directions

Description of the organization’s development strategy including social and environmental G.1.1. 54-56 aspects Characteristics of the adopted business model, including the description of the supply G.1.2. 54-56 chain, with particular attention to social and environmental impact G.2. Corporate government Description of the governance structure, with information whether and how the approach G.2.1. to non-financial aspects (social, environmental) management has been accounted for, risk 57-59 management and internal auditing system G.2.2. A list of certified management systems 58 Description of the internal control system, including monitoring of social and G.2.3. 60 environmental aspects of the business activity G.3. Social and environmental risk management

111 S.10.1. 112 S 10.2.; S.10.3. 94

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Indicator Description Page(s) Notes Description of the approach to risk management and accounting for social and G.3.1. 59-61 environmental aspects G.3.2. A list of identified social or environmental risks with a short description 60 G.4. Ethics management Indication whether the organization has a formal code of ethics/an equivalent document in G.4.1. 61 place Number of ethical audits performed at suppliers’, number of audits with identified G.4.2. 62 irregularities Number of ethical audits performed inside the organization at request of its recipients, G.4.3. 62 number of audits with identified irregularities Number and percentage of suppliers who signed an Ethics Charter/ commitment to comply G.4.4. 62 with the organization’s ethical standards Number of reported complaints about potential violation of ethical standards (if possible, G.4.5. 62 with a breakdown into internally / externally reported) No training was conducted in G.4.6. Number of provided trainings in the area of ethics, number of participants - topics dedicated strictly to ethics G.4.7. Percentage of contracts with business partners, which included a clause on ethics (by value) 62 E.1. Direct and indirect impact: materials and raw materials E.1.1. Type and quantity (weight/volume) of used material 65 E.1.2. Key materials consumption per unit of product or revenue 65 E.2. Direct and indirect impact: fuels and energy E.2.1. Total energy consumption in GJ by main sources 66 E.2.2. Percentage of renewable energy 66 Because of highly diversified production the ratio is E.2.3. Energy consumption per unit of product or revenue 66 calculated only per unit of revenue E.4. Direct and indirect impact: biodiversity A list and brief description of areas of high biodiversity value in the vicinity E.4.1. / sphere of impact of the organization (indicating the nature of the entity’s impact on areas 66 and habitats of valuable fauna and flora) E.4.2. Indication of type and frequency of environmental monitoring. 67 E.4.3. A description of confirmed environmental losses caused by the organization’s activities 67 A description of any actions with the purpose of environmental status monitoring and E.4.4. 67 preventing/reducing/compensating for negative impacts of the organization E.5. Direct and indirect impact: emissions E.5.1. Mass of greenhouse gas emissions 68 E.5.2. Mass of other air emissions by type (e.g. SOx, NOx, PM10, PM2.5) 68 E.5.3. Greenhouse gas emissions per unit of product or revenue 68 Because of highly diversified production the ratio is E.5.4. Other emissions per unit of product or revenue 68 calculated only per unit of revenue E.6. Direct and indirect impact: waste and effluents E.6.1. Total weight of waste by hazardous and other than hazardous, with significant categories 69-70 E.6.2. Total weight of waste by type and disposal method 70 Because of highly diversified production the ratio is E.6.4. Waste emissions per unit of product or revenue 70 calculated only per unit of revenue E.7. Other aspects of direct and indirect environmental impact Description of other significant pollutants emitted by the company’s operating activity E.7.1. - (including measurable quantities, if possible) A list of incidents with environmental impact and possible contamination in the reporting In 2017-2018 no accidents with E.7.2. - environmental impact were period including description) recorded A list of potential non-compliance with environmental laws and regulations resulting in E.7.3. 63 administrative proceedings Total monetary value of enforceable fines for non-compliance with environmental E.7.4. 63 regulations E.7.5. Percentage of contracts in which an environmental clause was included (by value) 63-64 100% Number of audits in respect of compliance with environmental laws and regulations by Such audits were not carried E.7.6. - subcontractors out S.2. Employment and remuneration

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Indicator Description Page(s) Notes Number of employees in full time equivalents by employment contract (acc. to age and S.2.1. 72 gender) as at the end of the reporting period Number of new hires in full time equivalents by type of employment contract (acc. to age S.2.2. 75 and gender) Number of employees in full time equivalents, outgoing in the reporting period (acc. to age S.2.3. 75 and gender) Number of employees under the civil law contracts by type of contract (acc. to age and gender) as at the end of the reporting period, number of civil law contracts with natural S.2.4. 76-77 persons concluded in the reporting period, number of civil law contracts with natural persons terminated in the reporting period S.2.5. Number of employees in outsourcing 77 S.2.6. Number of employees with disability and their percentage in total number of employees 78 S.2.7. Average remuneration of employees with employment contracts 79-80 Number and average salary of foreigners working for the entity or under the entity’s S.2.8. 80 supervision Ratio of average gross remuneration of women to men by employee category/employee S.2.9. 79-80 group Ratio of average remuneration of management board members to the lowest wage on the S.2.10. 79 entity (in full time job equivalent) Average remuneration of persons collaborating under civil law contracts and performing S.2.11. 76-77 services on the premises of the entity Average number of persons working under outsourcing contracts and performing services S.2.12. 77 on the premises of the entity Total amount of annual contributions to the National Fund for the Rehabilitation of the S.2.13. 78 Disabled PFRON Percentage of women who, after childbirth and return to work left the organization within S.2.14. 82 12 months after the return to work S.2.15. Additional information about non-salary benefits available to the employees 84-85 S.3. Employee relations and freedom of association S.3.1. Number of trade unions in the organization (representative and other) 85 S.3.2. Percentage of employees - trade union members (the so called unionization rate).) 85-86 Number of strikes in the past year and the related estimated impact on the organization’s S.3.3. 86 performance Information whether an entity has a procedure for filing complaints and nonconformities S.3.4. 61 („hot line") an on what basis (e.g. a relevant policy) Information whether an employee board has been appointed in the organization – and in S.3.5. the case of representatives other than the employee board or trade unions, and if the 86 representatives were appointed in elections accessible for all employees Information whether and if so, how and with what results the organization maintains a documented dialogue, in the form of cyclical, formal meetings with the purpose of S.3.6. 85-86 discussing mutual expectations, and the nature of most frequently raised issues and ways of handling the issues by the company governing bodies S.4. Occuaptional health and safety (OHS) Number of work injuries involving employees / persons working on the premises of the S.4.1. 88 entity S.4.2. Injury frequency rate (workplace injuries per 1000 employees) 88 S.4.3. Number of fatalities concerning employees / persons working on the premises of the entity 88 S.4.4. Total number of employee lost days caused by injuries 88 S.4.5. Injury severity rate (number of lost days per 1 injury) 88 S.4.6. Number of confirmed cases of occupational disease 88 Number of employees exposed to exceeded maximum admissible concentrations (MAC) or S.4.7. 88 maximum admissible intensities (MAI) A list of the most frequent causes of workplace accidents, job categories / work performed S.4.8. 88 by the injured at the moment of occurrence, type of injuries Involvement of trade unions (if applicable) in OHS issues (e.g. whether a Social Labour S.4.9. 87 Inspector was appointed, how they control the conformance with OHS regulations) S.4.10. Percentage of contracts with counterparties, which included an OHS clause (by value) 89 S.4.11. Liczba audytów pod kątem przestrzegania zasad BHP u podwykonawców 89 S.5. Development and education Average training hours (or days) per employee (by gender and category) – refers to training S.5.1. 84-85 organised by the employer S.5.2. Number of employees developing their job skills, who are entitled to relevant benefits from 84-85 96

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Indicator Description Page(s) Notes the employer (such as training leave), indicating the number of employees whose job skills development is funded or co-funded by the employer S.6. Diversity management Information whether the organization has anti-mobbing and anti-discrimination policies S.6.1. 83 implemented S.6.2. Number of reported incidents of discrimination, mobbing, sexual harassment, etc. 83 S.6.3. Number of confirmed incidents of discrimination, mobbing, sexual harassment, etc. 83 S.6.4. Number of audits performed at subcontractors’ in respect of counteracting discrimination 83 S.7. Human rights S.7.1. Number of reported incidents of human rights violation, also at subcontractors’ 94 S.7.2. Number of confirmed incidents of human rights violation, also at subcontractors’ 94 Percentage of contracts with business partners which include a human rights -related S.7.3. 94 clause (in terms of value) S.7.4. Number of audits performed at subcontractors’, relating to respect for human rights 94 Hazards for human rights and incidents of violation of human rights outsude the supply S.7.6. 94 chain S.8. Child labour and forced labour S.8.1. Number of reported cases of child labour or forced labour (including subcontractors) 90 S.8.2. Number of confirmed cases of child labour or forced labour (including subcontractors) 90 Percentage of contracts with business partners which a clause relating to human rights S.8.3. 90 including prohibition of child labour or forced labour (in terms of value) Number of audits performed at subcontractors’, relating to respect for human rights in the S.8.4. 90 scope of counteracting child labour or forced labour S.9. Local communities and social involvement Potential negative impacts on local communities related to the organization’s operations, S.9.1. 91 etc. Total number of grievances about impacts on society, their subject and the response by the S.9.2. 91 organization The organization’s social commitment policy and targets and implemented pro-social S.9.3. 90 activity, also for local community where the business is performed Total amount of charity donations in the reporting period (indicate the greatest S.9.4. 91 beneficiaries) S.9.5. Total amount spent for sponsorship (indicate the biggest sponsored partners) 90 Total number of hours worked by employees – voluntary workers, and the number of ELEKTROBUDOWA SA and the S.9.6. Group do not have a volunteers within the volunteering service program (if applicable) volunteering service program S.10. Anti-corruption S.10.1. Business areas which might be exposed to corrupt behaviour 96 S.10.2. Number of reported incidents of behaviour amounting to corruption 97 S.10.3. Number of confirmed incidents of corruption 97 S.11. Product safety and consumer safety S.11.1. Number of cases of breach of procedures related to product and service safety 94 Administrative proceedings against the company (e.g. by UOKiK) and the monetary value of S.11.2. fines levied for non-compliance with laws or regulations relating to the customer security 94 issues Monetary value of fines for non-compliance with laws and regulations concerning customer S.11.3. 94 security S.12. Marketing communications Number of incidents of non-compliance with regulations and voluntary codes concerning S.12.1. 95 marketing communications (including advertising, promotion, and sponsorship) Administrative proceedings against the company filed by UOKiK and monetary value of S.12.2. fines for non-compliance with laws and regulations concerning the reliability and ethics of 95 marketing communications Monetary value of fines for non-compliance with laws and regulations concerning the S.12.3. 95 reliability and ethics of marketing communications S.13. Privacy protection Number of incidents concerning leak or unauthorised use of personal data (of customers, S.13.1. 96 employees) Administrative proceedings against the company (e.g. by GIODO) and monetary value of S.13.2. 96 fines for non-compliance with laws and regulations concerning personal data protection Monetary value of fines for non-compliance with laws and regulations concerning personal There were no relevant S.13.3. - data protection administrative proceedings and 97

REPORT OF THE MANAGEMENT BOARD ON THE ACTIVITY OF ELEKTROBUDOWA SA AND THE ELEKTROBUDOWA GROUP IN 2018 (all amounts in the tables are stated in thousands of Polish zloty, unless otherwise specified)

Indicator Description Page(s) Notes no fines were levied S.14. Product labelling S.14.1. Number of incidents of non-compliance concerning improper product labelling 94 Administrative proceedings against the company (e.g. by UOKiK) and monetary value of S.14.2. 94 fines for improper product labelling S.14.3. Monetary value of fines for improper product labelling 94 S.15. Other social and market issues Administrative proceedings against the company filed by UOKiK and monetary value of There were no relevant S.15.5. - administrative proceedings and fines related to anti-competitive and anti-market practices no fines were levied

SIGNATURES OF MEMBERS OF THE MANAGEMENT BOARD

First and last name Position / Function Date Signature

Roman Przybył President of the Management Board

Adam Świgulski Vice President of the Management Board

Krzysztof Czajka Member of the Management Board

Hubert Staszewski Member