Report on audit of the consolidated financial statements of PRI POL-AQUA S.A. Capital Group for the period from 1 January 2009 to 31 December 2009

Transcription

1 POL-AQUA APPENDIX 3

2 Page 1 of 18 KORYCKA, BUDZIAK & AUDYTORZY S. z o.o. Auditors and Tax Consultants Nexia International Report on audit of the consolidated financial statements of PRI POL-AQUA S.A. Capital Group for the period from 1 January 2009 to 31 December 2009 Warsaw, May 2010

3 Page 2 of 18 TABLE OF CONTENTS 1. GENERAL PART...3 l. i. INFORMATION ON THE AUDITED CAPITAL GROUP...3 i.2. MEMBERS OF PRI POL-AQUA" S.A CAPITAL GROUP INFORMATION ON THE PARENT INFORMATION ON THE AUDITED FINANCIAL STATEMENTS INFORMATION ON AUDIT OF FINANCIAL STATEMENTS OF ENTITIES INCLUDED IN CONSOLIDATION AUDIT SCOPE AND BASIS CONSOLIDATED FINANCIAL STATEMENTS FOR PREVIOUS YEAR ANALYSIS OF THE CAPITAL GROUP S FINANCIAL POSITION DATA AND RATIOS CHARACTERIZING ECONOMIC AND FINANCIAL POSITION INTERPRETATION OF THE PRESENTED DATA AND RATIOS... I I 2.3. GENERAL CONCLUSION... I I 3. DETAILED PART INTERNAL CONTROL SYSTEM FOR THE ACCOUNTING PROCEDURES STOCK-TAKING CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT ON COMPREHENSIVE INCOME ACCOUNTING PRINCIPLES (POLICY) AND FINANCIAL DATA PRESENTATION METHODS CONSOLIDATION GOODWILL EQUITY, INCLUDING MINORITY INTERESTI CONSOLIDATION EXCLUSIONS AND ADJUSTMENTS CONTINGENT LIABILITIES ADDITIONAL INFORMATION ANDNOTES REPORT ON ACTIVITIES OF THE CAPITAL GROUP POST BALANCE DATE EVENTS SUMMARY CLAUSE FINAL PROVISIONS...18

4 Page 3 of GENERAL PART 1.1. INFORMATION ON THE AUDITED CAPITAL GROUP The audit covered the consolidated financial statements of PRI POL-AQUA S.A. Capital Group (further referred to as POL-AQUA Capital Group) prepared as of 31 December 2009 for the financial year from 1 January to 31 December COMPOSITION OF PRI POL-AQUA S.A. CAPITAL GROUP POL-AQUA Capital Group consists of the following entities: Entity Registered office Relationship Przedsiębiorstwo Robót Inżynieryjnych Piaseczno dominant entity POL-AQUA S.A.. PA Conex Sp. z o.o. Płock subsidiary POL-AQUA holds a 100% interest Vectra S.A. Płock subsidiary POL-AQUA holds a 100% interest PA Energobudowa Sp. z o.o. (former Opole subsidiary POL-AQUA holds a 100% interest name: Przedsiębiorstwo Budownictwa Inżynieryjnego WPBK Sp. z o.o.) PA Wyroby Betonowe Sp. z o.o. Elbląg subsidiary POL-AQUA holds a 100% interest Weneda Sp. z o.o. Opole subsidiary POL-AQUA holds a 100% interest POL-AQUA WOSTOK Ltd. Moscow, Russia subsidiary POL-AQUA holds a 51% interest; the company does not conduct any operations Mostostal Pomorze S.A. Gdańsk subsidiary POL-AQUA holds a 79,99% interest since 2 January 2008 Teco Sp. z o.o. Wrocław subsidiary POL-AQUA holds a 100% interest since 21 July 2008 Placidus Investments Sp. z o.o. Warsaw subsidiary POL-AQUA holds a 60% interest since 7 July 2008 Baltic Dom 2 Sp. z o.o. Warsaw associate POL-AQUA holds a 44% interest since 24 September 2009 On 1 October 2009, a merger of the subsidiaries PA Energobudowa Sp. z o.o., BS-WPBK Opole Sp. z o.o. and Kampol Sp. z o.o. was registered. The operating activities of the aforementioned companies are continued by the company PA Energobudowa Sp. z o.o INFORMATION ON THE PARENT The Parent, which prepared the consolidated financial statements, is Przedsiębiorstwo Robót Inżynieryjnych POL-AQUA S.A., with its seat in Piaseczno, ul. Dworska (further referred to as the Parent or PRI POL-AQUA S.A.). According to its Articles of Association, the Company has the right to conduct a wide range of activities, in particular construction of other hydroengineering structures activity code PKD B.

5 Page 4 of 18 In 2009, the Company s activities included engineering, road construction, construction of oil and gas transmission pipelines as well as general contracting services in projects involving cubature structures as well as other services in the power construction sector. In the audited period, PRI POL-AQUA SA operated pursuant to the: Company's Articles of Association, Code of Commercial Companies, Act of 15 September 2000 (J. of L. No. 94, item 1037, as amended). The Parent: - is registered in the National Court Register under KRS No has a number assigned in the REGON statistical system has assigned PKD symbol for its core activity B - is a VAT payer and has a NIP number assigned on 12 November is an EU VAT payer and has a NIP EU number assigned on 19 May 2004 PL As of 31 December 2009, the value of the share capital amounted to PLN 27,500 thousand, consisting of 27,500,100 shares with a face value of PLN 1.00 each. All the shares (series A to F) are ordinary bearer shares. As at 31 December 2009, PRI POL-AQUA SA shareholder structure was as follows: Item Number of shares Value (in PLN) Share (%) DRAGADOS SA. 18,150,066 18,150, DIM S.a.r.L. 2,729,059 2,729, Marek Stefański 428, , other shareholders 6,192,670 6,192, TOTAL 27,500,100 27,500, The Parent s management bodies are: - Shareholders Meeting - Supervisory Board - Management Board The supervisory body of PRI POL-AQUA SA is the Supervisory Board, which had the following members in 2009: Full name Function Marek Stefański Chairman of the Supervisory Board since 13 March 2009 Mariusz Ambroziak Vice Chairman of the Supervisory Board Leon Stanisław Komornicki Member of the Supervisory Board Krzysztof Rafał Gadkowski Member of the Supervisory Board Janusz Steinhoff Member of the Supervisory Board Sławomir Petelicki Secretary of the Supervisory Board until 13 May 2009 Marcin Paweł Wierzbicki Member of the Supervisory Board

6 Page 5 of 18 As at this report date, the Supervisory Board of PRI POL-AQUA SA had the following members: Full name Function Marek Sobiecki Chairman of the Supervisory Board since 10 February 2010 Ignacio Segura Suriñach Vice Chairman of the Supervisory Board since 10 February 2010 Ricardo Cuesta Castiñeyra Secretary of the Supervisory Board since 10 February 2010 Alberto Laverón Simavilla Member of the Supervisory Board since 10 February 2010 Adolfo Valderas Martinez Member of the Supervisory Board since 10 February 2010 Janusz Steinhoff Member of the Supervisory Board Krzysztof Rafał Gadkowski Member of the Supervisory Board The changes in the Supervisory Board s composition were adopted at the Extraordinary Shareholders Meeting of POL-AQUA held on 10 February In 2009, the Company was managed by the Management Board comprising the following members: Marek Stefański President of the Management Board (until 31 January 2009) Piotr Chełkowski President of the Management Board since 1 February 2009 (previously Member of the Management Board) Iwona Rudnikowska Vice President of the Management Board Sławomir Tomasz Niewiadomski Member of the Management Board until 31 March 2009 Robert Molo Member of the Management Board Janusz Andrzej Lewandowski Member of the Management Board 26 June 2009 Andrzej Napierski Member of the Management Board As at this report date, the Management Board of PRI POL-AQUA SA had the following members: Piotr Chełkowski Eduardo Martinez Martinez Robert Molo President of the Management Board First Vice President of the Management Board since 10 February 2010 Member of the Management Board According to the excerpt from the National Court Register (KRS) of 22 March 2010, two Members of the Management Board of PRI POL-AQUA SA acting jointly or a Member of the Management Board acting jointly with the Proxy are authorized to represent the Company by their representations or signatures. The Management Board operations are governed by Management Board s Regulations approved by the Supervisory Board. Joint branch representation powers, limited to matters related to the General Contracting Branch are vested in Mr. Tadeusz Wiktor Malinowski INFORMATION ON THE AUDITED FINANCIAL STATEMENTS The audited consolidated financial statements have been drawn by the Parent in line with the International Accounting Standards, International Financial Reporting Standards, and related interpretations published as regulations of the European Commission.

7 Page 6 of 18 The audited statements comprise: - statement of financial position prepared as of 31 December 2009, with total assets and liabilities plus equity of PLN 1,135,912 thousand; - statement of comprehensive income for the financial year from 1 January 2009 to 31 December 2009, disclosing a total net loss of PLN 37,440 thousand; - statement of changes in consolidated equity for the period from 1 January 2009 to 31 December 2009, disclosing a decrease in equity by PLN 33,995 thousand; - consolidated cash flow statement for the financial year from 1 January 2009 to 31 December 2009, showing a cash inflow of PLN 36,027 thousand during the financial year; - additional information on the adopted accounting principles (policy) and notes to the financial statements. The audit also covered the Activity Report presenting the activities of the Capital Group in the period from 1 January 2009 to 31 December as regards consistency of the data presented in the Activity Report with the data in the financial statements. The consolidated financial statements include financial statements of all the entities within the Capital Group INFORMATION ON AUDIT OF FINANCIAL STATEMENTS OF THE ENTITIES INCLUDED IN CONSOLIDATION The consolidated financial statements of the Capital Group have been drawn based on consolidation documentation and separate financial statements of the group entities. Name and address of the Company PRI POL-AQUA S.A. in Piaseczno Balance sheet date of the financial statements Entity auditing the financial statements Korycka, Budziak & Audytorzy Sp. z o.o. - Registration No. 84 PA Conex Sp. z o.o. in Płock Misters Audytor Sp. z o.o. Registration No. 63 Vectra S.A. in Płock Misters Audytor Sp. z o.o. - Registration No. 63 PA Energobudowa Misters Audytor Sp. z o.o. (previous name: PUI WPBK Sp. z o.o.) in Opole Registration No. 63 PA Wyroby Betonowe Sp. z o.o. in Elbląg Misters Audytor Sp. z o.o. Registration No. 63 Weneda Sp. z o.o. in Opole Misters Audytor Sp. z o.o. - Registration No. 63 POL-AOUA WOSTOK Not audited Ltd in Moscow (Russia) Type of opinion on the financial statements Unqualified with comments Unqualified with comments Unqualified opinion Unqualified opinion Unqualified opinion Unqualified opinion

8 Page 7 of 18 Name and address of the Company Balance sheet date of the financial statements Entity auditing the financial statements Mostostal Pomorze S.A Misters Audytor Sp. z o.o. - Registration No. 63 Teco Sp. z o.o Misters Audytor Sp. z o.o. Registration No. 63 Placidus Investments Sp. z Misters Audytor Sp. z o.o. - o.o. Registration No. 63 PKO Inwestycje Sarnia Dolina Sp. z o.o Not audited Type of opinion on the financial statements Unqualified opinion Unqualified opinion Unqualified opinion + annex to the opinion with comments The consolidation of the financial statements of the entities included in the consolidated financial statements was performed using the following method: subsidiaries - full consolidation method; associate - equity method AUDIT SCOPE AND BASIS Pursuant to the agreement of 29 June 2009, the Company s Management Board hired Korycka, Budziak & Audytorzy Sp. z o.o. with its seat in Warsaw, ul. Solec 22, an entity authorized to audit financial statements, registration number 84 on the list kept by the National Board of Certified Auditors to audit the consolidated financial statements prepared for the period from 1 January 2009 to 31 December The agreement was concluded based on resolution 1/Vl/2009 of P.R.I. POL-AQUA S.A. Supervisory Board of 2 June 2009 on selection of a certified auditor. The audit was performed by the auditing team headed by Barbara Górecka-Zacharczyk, certified auditor (Registration No. 1180). Both Korycka, Budziak & Audytorzy Sp. z o.o. (the Auditors) as well as the certified auditors and other members of the auditing team, who conducted the audit on its behalf, are independent from the audited Company in the meaning of Article 56 of the Act of 7 May 2009 on certified auditors and their selfgovernment, entities authorized to audit financial statements and public supervision. The scope of planned audit was not limited in any way. The Parent of POL-AQUA Capital Group provided data (consolidation documentation), information and documents requested by the certified auditor.

9 Page 8 of 18 The Parent s Management Board provided the certified auditor with a written representation, confirming in particular: that the financial statements of the Capital Group and the consolidation documentation supporting the financial statements were complete and fair; that all events that occurred after the balance sheet date and which could have an impact on the accurateness of the opinion on fairness and correctness of the consolidated financial statements as well as the evaluation of the assets and financial position of the Capital Group were disclosed; and that no accounting operations aimed at falsely improving the view of the financial position of the Capital Group. The audit of the consolidated financial statements and consolidation documentation was performed from 12 April to 17 May The audit of the consolidation documentation and consolidated financial statements was performed in accordance with: 1. section 7 of the Accounting Act of 29 September 1994 (J. of L. of 2009 No. 152, item 1223, as amended); 2. national auditing standards issued by the National Board of Certified Auditors in Poland. The objective of our audit was to form a written opinion on whether the consolidated financial statements for the period from 1 January 2009 to 31 December 2009 were correct and whether they fairly and clearly presented the assets and financial position as well as the profit or loss of the Capital Group in line with the accounting principles arising from the International Accounting Standards, International Financial Reporting Standards and related interpretations published in the form of regulations of the European Commission; and to the extent not regulated by the Standards in line with the provisions of the Accounting Act and its implementing regulations. The audit covered the assets, financial position, profit or loss as well as profitability of the Capital Group; we did not audit the data of the individual entities included in the consolidation. It was not part of the audit to identify and explain any events subject to prosecution, e.g. fraud or other irregularities, which might have occurred outside of the accounting system of entities included in consolidation CONSOLIDATED FINANCIAL STATEMENTS FOR THE PREVIOUS YEAR The consolidated financial statements of the POL-AQUA Capital Group for the financial year ended on 31 December 2008 were audited by the authorized entity Korycka Budziak & Audytorzy Sp. z o.o. An opinion with the following comment was issued on the audited consolidated financial statements: We have included the following comment in our opinion on the financial statements of P.R.I. POL- AQUA S.A. prepared as of 31 December 2007:

10 Page 9 of 18 Without qualifying the accuracy and fairness of the audited financial statements, we would like to point out that the Dominant Entity recognized under other operating revenues the amount of PLN 19,980,000 constituting revenue from assignment of receivables pertaining to the seller s guarantee obligations arising from Article of the agreement enforcing the sale of an organized part of the enterprise as well as Article 3.3 of the enterprise sale agreement. Pursuant to Article 44b, clause 8 and 9 of the Accounting Act, the amounts received as compensation under the guarantee clause of the aforementioned agreements should be recognized as an adjustment of the acquisition price and reduce goodwill arising from the enterprise acquisition transaction. If the revenue generated from the sale of the aforementioned receivables had been recognized as an acquisition price adjustment, it would have reduced P.R.I., POL-AQUA S.A. s asset value as of 31 December 2007 and net profit for 2007 by approx. PLN 14 million. According to the legal opinion presented to the certified auditor and based on the analysis of the aforementioned agreement terms, the revenue from the receivable assignment agreement concluded by the Dominant Company should not be treated as related to guarantee claim enforcement, but rather as revenue from sale of receivables, and therefore they do not decrease the enterprise sale price. Recognition of the above mentioned revenues as related to a legal title separate from guarantee claims is consistent with the representation submitted by the acquirer of the receivables, which states that the buyer's obligation to pay the price is independent inter alia from the existence of guarantee-related receivables. As regards the assessment of the consolidated financial statements of P.R.I. POL-AQUA S.A. prepared as of 31 December 2007, we think that this comment is still valid. The Capital Group s consolidated financial statements for the financial year 2008 were approved by the Extraordinary Shareholders Meeting of P.R.I. POL-AQUA S.A. on 25 June 2009 (Resolution No. 27) and published in Monitor Polski-B No. 2360, item of 25 November 2009.

11 Page 10 of ANALYSIS OF THE FINANCIAL POSITION OF THE CAPITAL GROUP 2.1. DATA AND RATIOS PRESENTING ASSETS AND FINANCIAL POSITION The following data and ratios present the Capital Group's profit or loss in 2009 in comparison to the profit or loss generated/incurred by the Capital Group in previous year; the figures below also present the assets and financial position of the Group as of 31 December 2009 as compared to the closing balance of 2008: Item *) Total assets (PLN 000) Non-current assets (PLN 000) Current assets (PLN 000) Equity (PLN 000) Total liabilities and provisions (PLN 000) Sales revenues (PLN 000) Operating expenses (PLN 000) Profit/loss from sales (PLN 000) Profit/loss before tax (PLN 000) (41 683) Net profit/loss (PLN 000) (35 547) Return on assets (%) (0.32) (1.00) Net profit/loss Total assets Return on equity (%) (6.20) 2.08 Net profit/loss Equity Profit margin (%) (2.52) 0.97 Net profit/loss Revenues from sales of goods and products Liquidity liquidity ratio I (x) Current Assets Short-term liabilities Liquidity liquidity ratio II (x) Total current assets stocks Short-term liabilities Liquidity liquidity ratio III (x) Cash and cash equivalents Short-term liabilities Receivables turnover (days) (trade debtors/1,22+construction contract assets)*365 revenues from sales of goods and products Debt turnover (days) trade creditors/1.22 x 365 days cost of products, goods and materials sold Stock turnover (days) 2 5 Stock x 365 days cost of products, goods and materials sold Sustainability of financing structure (%) equity + provisions and long-term liabilities Total equity and liabilities Earnings per share (in PLN) (1.36) 0.46 Net profit/loss Average number of shares in the period *) data for 2007 are disclosed including for presentation adjustments and adjustments of fundamental errors

12 Page 11 of INTERPRETATION OF THE DATA AND RATIOS PRESENTED At the end of 2009, the Capital Group's total asset value remained at a similar level as compared to the beginning of the year (decrease by approx. 0.01%). As in previous years, current assets were the main item in the Capital Group s asset structure as at 31 December There are changes in the structure trends, i.e. the share of current assets has been decreasing. They currently represent 55.14% of the total asset value, as compared to 58.50% last year. The Group s equity decreased by PLN 33,995 thousand; its share in the Capital Group's asset financing decreased by over 6 percentage points, while its share in financing was nearly 41.66% at the balance sheet date. In 2009, P.R.I POL-AQUA S.A. Capital Group companies generated sales revenues which were by PLN 111,489 thousand higher than the revenues generated in the previous year, i.e. an 8% increase. In 2008, sales revenues increased by 84% as compared to Operating expenses incurred in 2009 increased by PLN 132,764 thousand. The expense growth rate was higher than the revenue growth rate (over 11%). In the audited year, the Capital Group incurred a net loss as well as operating loss. The significant deterioration of the profit/loss account was caused by a loss on other operating expenses and revenues, which, in turn, was the result of high impairment applied to assets. In 2009, the profitability ratios had negative values as a result of a gross and net loss incurred by the POL- AQUA Capital Group. The liquidity ratios remained at a similar, relatively safe level in both analyzed periods. Favorable changes, calculated based on consolidated data, were observed in receivables turnover in days (shorter by 29 days), debt turnover in days (shorter by 26 days) and stock turnover in days (shorter by 3 days) GENERAL CONCLUSION Despite unfavorable performance in 2009, the presented data and ratios as well as the information obtained during the audit indicate that there is no risk for most of the entities included in the consolidated financial statements of POL-AQUA Capital Group of not being able to continue as a going concern in the year following the audited year due to planned discontinuation or material limitation of their current operations. The opinion on the financial statements of the related party PA Conex Sp. z o.o. contained the following comment: The Management Board of the Company indicated in the notes to the financial statements that in order for the Company to continue as a going concern, PA Conex Sp. z o.o. needed restructuring. Based on the documents provided we are not able to determine whether the restructuring will bring the intended results and whether the Company will be able to continue as a going concern.

13 Page 12 of DETAILED PART 3.1. INTERNAL ACCOUNTING CONTROL SYSTEM The internal accounting control system was subject to detailed audit in the individual Companies (except for the unaudited Companies). During the audit process no material issues, other than those described in individual reports, were identified that we would consider as constituting material weaknesses of the internal accounting control system STOCK-TAKING A detailed audit was performed of the Parent as well as its subsidiaries (except for Companies not subject to audit) to verify whether the stock-taking of assets of the Companies included in the consolidation was correct in terms of scope, dates, methods applied as well as correct verification and settlement of stocktaking results. Based on our audit we determined that the balance of assets of the consolidated Companies was confirmed by stock-taking to the required extent CONSOLIDATED STATEMENT OF FINANCIAL POSITION Items of the consolidated financial statements *) Non-current assets Intangible assets Goodwill Property, plant and equipment Investment property Deferred tax assets Other prepayments Other financial assets Investments accounted for on the basis of equity method Other non-current assets Current Assets Stock Construction contract assets Trade debtors Other receivables Assets held for sale - 5 Income tax credit Other short-term financial assets Prepayments Cash and cash equivalents Total Assets

14 Page 13 of 18 Items of the consolidated financial statements *) Equity Share capital Reserves Statutory reserves Cash flow hedges - (2 075) Exchange differences from translation of foreign operations 15 (7) Share in other comprehensive income of entities consolidated by equity (215) - method Profit/loss carried forward Current period s net profit (loss) (37 440) Minority shareholders capital Long-term liabilities Loans and credit facilities Other financial liabilities Provisions Deferred tax provisions Deferred income Short-term liabilities Loans and credit facilities Other financial liabilities Construction contracts Trade creditors Income tax liabilities Other short-term liabilities Provisions Deferred income Total liabilities and equity *) data for 2008 were disclosed including for presentation adjustments as well as adjustments of fundamental errors In 2009, entities of the POL-AQUA Capital Group individually implemented the accounting principles of the International Accounting Standards and International Standards on Auditing. In previous years, only POL-AQUA Capital Group s consolidated statements had been drawn in accordance with the aforementioned standards, while separate financial statements of the entities of the Capital Group had been drawn in accordance with the Accounting Act of 29 September The change in accounting principles applied by the individual entities of POL-AQUA Capital Group caused in particular impairment of the entire Group s property, plant and equipment on the basis of appropriate valuations. The consolidated financial statements of POL-AQUA Group include a PLN 3 million impairment charge on the property owned by a subsidiary, PA Conex Sp. z o.o. In the opinion on the financial statements of the entity, the certified auditor stated that: As of 31 December 2009, in the enclosed financial statements the Company disclosed under property, plant and equipment the amount of a completed capital expenditure project comprising a production hall with land. According to the appraisal provided by an independent property appraiser in December 2008, the assets were valued below the carrying amount.

15 Page 14 of 18 The Company did not test for impairment. In view of the above, we are not able to give an opinion on the amount of a potential adjustment of asset value and its impact on the profit or loss. In view of the missing market value and value in use of the aforementioned property as of 31 December 2009, as mentioned by the certified auditor, we cannot be certain whether the write-down applied on the property in the consolidated financial statements correctly reflects its impairment as at that day. We would like to point out that the accounting records of the Parent, P.R.I. POI.-AQUA S.A. disclose an account receivable from Prokom Investments S.A. in the amount of PLN 9,203 thousand. This amount represents an unpaid balance of a transaction concluded on 19 December 2007 involving assignment of receivables from guarantee liabilities arising from the acquisition of General Contracting Branch. The extended deadline for the payment expired on 31 December 2009; the debt has not been paid by the debtor by the date of this report while the ordinary pledge established on the shares to secure the receivable expired upon stock exchange listing of Petrolinvest s L series shares. PRI POL-AQUA applied a 100% impairment charge on the receivable; as a result, neither the separate financial statements of the Parent, nor consolidated financial statements of POL-AQUA Capital Group disclose any carrying amount. Procom Investments S.A. does not question its debt to P.R.I. POL-AQUA S.A. (its existence and amount are certified by a notarial deed), while the legal opinion as well as generally available data on the debtor's financial position presented to the certified auditor confirm that the effective collection of the receivable is possible; and in our opinion, do not provide sufficient evidence to create a 100% impairment charge on the receivable as of 31 December The consolidated financial statements of the POL-AQUA Group include a PLN 3,410 thousand impairment charge recognized on some receivables booked by Placidus Investments Sp. z o.o. under accounts receivable from a related party to that subsidiary s minority shareholders. The Parent s Management Board justified the impairment charge in the consolidated financial statements of POL- AQUA Group by the fact that after the balance sheet date the relations had deteriorated between Placidus Investments Sp. z o.o. shareholders and the related party to the company s minority shareholders. In our opinion such argument does not justify an impairment write-down on 100% of the receivables charged to the profit or loss of In addition, we would like to point out that no provision was created in the consolidated financial statements for PLN 5,469 thousand claims filed in April 2010 against Placidus Investments Sp. z o.o. and pertaining to the years 2008 and 2009, resulting from an agreement on references signed in 2008 between Placidus Investments Sp. z o.o. and the aforementioned related party to the minority shareholders in the subsidiary. According to the information provided to the Auditor by the date of this opinion, the Management Board of Placidus Investments Sp. z o.o. had not closed their investigation examining whether the agreement on references signed in 2008 had been justified and legal, and whether liabilities pertaining to 2008 and 2009 had been estimated correctly in line with the aforementioned agreement. In view of these circumstances, the certified auditor who audited the financial statements of Placidus Investments Sp. z o.o. for 2009 prepared on 14 May 2010 an Amendment to his previous opinion on the financial statements, in which he pointed out that, since the Management Board of Placidus Investments Sp. z o.o. had not closed their investigation, the impact of the outcome of that investigation on the company's financial statements for 2009 could not be assessed.

16 Page 15 of 18 The opinion on the financial statements of the related party PA Conex Sp. z o.o. contained the following two comments: The Management Board of the Company indicated in the notes to the financial statements that in order for the Company to continue as a going concern, PA Conex Sp. z o.o. needed restructuring. Based on the documents provided we are not able to determine whether the restructuring will bring the intended results, and whether the Company will be able to continue as a going concern. The Company adjusted the measurement of revenues and expenses from contract as of 31 December 2008 and disclosed the results as an error in the previous years result. Based on the documents provided, in our opinion there are no grounds to recognize the adjustment of revenues in the amount of PLN 1,571 thousand pertaining to settlement of one of the contracts as adjustments of previous years. We believe that the company allocated the aforementioned amount to incorrect period, as the amount pertains to CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Revenues and expenses CONTINUED OPERATIONS Sales revenues Cost of goods sold Gross sales profit Selling costs Overhead Other operating revenues Other operating expenses Profit on operating activities (26 303) Financial revenues Financial expenses Profit (loss) before tax (41 683) Income Tax (2 801) Gain (loss) on shares in controlled entities measured by the equity method (215) Net profit (loss) on continued operations, of which: (39 097) Parent s shareholders (37 440) Minority shareholders (1 657) ACCOUNTING PRINCIPLES (POLICY) AND FINANCIAL DATA PRESENTATION METHODS The Parent s Management Board present the accounting principles and presentation methods for financial data of the Capital Group in note 3 to the introduction to the consolidated financial statements for the financial year ended 31 December Changes in the accounting policy of the Capital Group and in the presentation methods for consolidated financial data are presented in note 2.3. of the additional information to the consolidated financial statements.

17 Page 16 of CONSOLIDATION GOODWILL The principles for measuring consolidation goodwill and applying impairment to goodwill are presented in note of the additional information to the consolidated financial statements and in note EQUITY, INCLUDING MINORITY SHAREHOLDERS The equity balance disclosed in the consolidated balance sheet prepared as of 31 December 2009 is consistent with the consolidation documentation. The consolidated financial data on equity are presented in table 6 to the consolidated financial statements. As of 31 December 2009, the equity of the minority shareholders did not disclose any carrying amount, due to: recognition in the consolidated financial statements of the Parent s bay back option on all minority shares in Mostostal Pomorze SA; surplus of losses allocated to the minority shares of Placidus Investments Sp. z o.o. over the minority equity of that entity; this surplus was charged to the Group s profit or loss CONSOLIDATION EXCLUSIONS AND ADJUSTMENTS Intragroup transactions between entities included in the consolidation were excluded from the consolidation. The exclusions of intragroup receivables and debts, unrealized margins on intragroup transactions recognized in assets, dividends received from the Capital Group entities and other transactions within the Capital Group are consistent with the consolidation documentation CONTINGENT LIABILITIES The contingent liabilities of the entities within the Capital Group are presented in note 10 to the consolidated financial statements ADDITIONAL INFORMATION AND EXPLANATIONS The Parent prepared additional information and notes in line with the provisions the International Accounting Standards, International Financial Reporting Standards as well as relevant interpretations published in form of regulations of the European Commission, and to the extent not regulated by these Standards in line with the provisions of the Accounting Act and its implementing regulations; and in line with the Minister of Finance s ordinance of 19 February 2009 on current and periodical information submitted by issuers of securities as well as conditions for recognizing as equivalent the information required by the laws of a non-member state (J. of L. No. 33 of 28 February 2009, item 259, as amended).

18 Page 17 of REPORT ON ACTIVITIES OF THE CAPITAL GROUP The Parent s Management Board provided the auditors with the activity report presenting the Capital Group s activities for the period from 1 January 2009 to 31 December The financial data presented in the activity report are consistent with the audited consolidated financial statements prepared as of 31 December The Activity Report of the Capital Group meets in all material respects the requirements set forth in Article 49 clause 2 of the Accounting Act as well as the provisions of the Minister of Finance s ordinance on current and periodical information submitted by issuers of securities as well as conditions for recognizing as equivalent the information required by the laws of a non-member state (J. of L. No. 33 of 28 February 2009, item 259, as amended) POST BALANCE SHEET EVENTS According to the Representation of the Parent s Management Board, no events occurred after 31 December 2009 that had not been recognized in the consolidated financial statements for 2009 and which would have had a material impact on these statements. Post balance sheet events that may materially affect the growth of POL-AQUA Capital Group over the next years are presented in note 15 to the consolidated financial statements SUMMARY CLAUSE 1. We audited the fairness and correctness of data included in individual items of the consolidated annual report RS-2009 prepared for the period from 1 January 2009 to 31 December 2009 and we confirmed its compliance with the requirements. 2. Based on our audit, we determined that the consolidation documentation was in all material respects complete and correct and it was consistent with the material criteria which should be met by consolidation documentation. 3. The summary evaluation of the consolidated financial statements is contained in our opinion, which constitutes a separate document.

19 Page 18 of FINAL PROVISIONS This report has been prepared in six counterparts, five for the Parent. The Report consists of 18 consecutively numbered pages, initialed by the key certified auditor. Key Certified Auditor No Barbara Górecka-Zacharczyk Entity authorized to audit financial statements No. 84 Korycka, Budziak & Audytorzy Sp. z o.o. ul. Solec 22, Warszawa [rectangular seal: President of the Management Board Ewa Orkwiszewska certified auditor] Warsaw, 17 May 2010