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