PBG S.A. FINANCIAL STATEMENT DRAWN UP AS AT 31 DECEMBER 2006 AND FOR THE PERIOD ENDED 31 DECEMBER 2006

Transcription

1 PBG S.A. FINANCIAL STATEMENT DRAWN UP AS AT 31 DECEMBER 2006 AND FOR THE PERIOD ENDED 31 DECEMBER 2006 DRAWN UP AS PER THE INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION 1/94

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3 TABLE OF CONTENTS 1. INTRODUCTION TO THE FINANCIAL STATEMENT OF PBG S.A., A GENERAL INFORMATION ADOPTED ACCOUNTING PRINCIPLES 6 2. FINANCIAL STATEMENT OF PBG S.A BALANCE SHEET OFF-BALANCE SHEET ITEMS PROFIT AND LOSS ACCOUNT CASH FLOW STATEMENT STATEMENT OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENT NOTES TO THE BALANCE SHEET NOTES TO OFF-BALANCE SHEET ITEMS NOTES TO THE PROFIT AND LOSS ACCOUNT ADDITIONAL NOTES FINANCIAL INSTRUMENTS HEDGING FINANCIAL INSTRUMENTS LEASES OFF-BALANCE SHEET ITEMS (CONTINGENT LIABILITIES) EVENTS AFTER THE BALANCE SHEET DATE OTHER INFORMATION THE ISSUER'S RELATED-PARTY TRANSACTIONS 93 3/94

4 1. INTRODUCTION TO THE FINANCIAL STATEMENT DRAWN UP FOR THE PERIOD FROM 01 JANUARY 2006 TO 31 DECEMBER GENERAL INFORMATION Name: PBG S.A. was established following the transformation of the limited liability company Technologie Gazowe Piecobiogaz Sp. z o.o. (resolution no. 1 of the Extraordinary General Meeting of Partners of Technologie Gazowe Piecobiogaz Sp. z o.o. of 1 December 2003). The Issuer s legal predecessor was established in 1997 by Mr. Jerzy Wiśniewski and Mrs. Małgorzata Wiśniewska. Registered office: Wysogotowo k/poznania ul. Skórzewska 35, Przeźmierowo Registry court: Local Court in Poznań, XXI Commercial Division of the National Court Register, entry no.: KRS Core business: general construction works in the area of linear facilities: pipelines, power lines, traction lines, telecommunication lines transmission lines (Polish Classification of Economic Activities PKD 4521 C). Sector of business according to the classification adopted by the Warsaw Stock Exchange: Construction. Subsidiaries as at 31 December 2006 ATG sp. z o.o. subsidiary covered by the consolidated financial statement, PGS sp. z o.o. subsidiary covered by the consolidated financial statement, INFRA sp. z o.o. subsidiary covered by the consolidated financial statement, METOREX sp. z o.o. subsidiary covered by the consolidated financial statement, KRI sp. z o.o. associate covered by the consolidated financial statement, Włocławek S.A. subsidiary covered by the consolidated financial statement, 4/94

5 Śląsk S.A. subsidiary covered by the consolidated financial statement, KB GAZ S.A. subsidiary covered by the consolidated financial statement. Company authorities: Board of Directors: - Jerzy Wiśniewski President of the Board of Directors, - Tomasz Woroch Vice President of the Board of Directors, - Przemysław Szkudlarczyk Vice President of the Board of Directors, - Tomasz Tomczak Vice President of the Board of Directors, - Mariusz Łożyński Member of the Board of Directors. Supervisory Board: - Maciej Bednarkiewicz Chairman of the Supervisory Board, - Wiesław Lindner Vice Chairman of the Supervisory Board, - Jacek Krzyżaniak Secretary of the Supervisory Board, - Małgorzata Wiśniewska Member of the Supervisory Board, - Dariusz Sarnowski Member of the Supervisory Board, - Adam Strzelecki Member of the Supervisory Board, - Mirosław Dobrut Member of the Supervisory Board. Approval of the financial statement for publication The financial statement for 2006 was approved for publication (authorised for issue) by the Board of Directors on 25 April The Company s financial statement was prepared based on the assumption that the Company shall remain a going concern in the foreseeable future. There are no circumstances which could indicate a threat to the Company s ability to remain a going concern. Company s duration: Unlimited. Reporting periods covered by the financial statement and form of the financial statement: The Company s financial statement covers the period from to and the comparative period from to The Company does not include any internal organisational units preparing their own financial statements. 5/94

6 1.2. ADOPTED ACCOUNTING PRINCIPLES BASIS OF THE FINANCIAL STATEMENT, REPORTING CURRENCY, AND APPROXIMATION OF AMOUNTS The financial statement of PBG S.A. has been drawn up as per the International Financial Reporting Standards, version approved by the European Union, and in matters not provided for in the IFRS as per the Polish Accounting Act of 29 September 1994 and its implementing provisions. Pursuant to Art. 45 section 1c of the Accounting Act, the Annual General Meeting of Shareholders of PBG S.A. adopted resolution no. 19 of 25 June 2005 and decided that Company s financial statements for reporting periods starting from 1 January 2005 shall be prepared in accordance with the International Accounting Standards, International Financial Reporting Standards and related interpretations of the European Commission published in the form of regulations of the European Commission ( IAS ). Reporting currency of this consolidated financial statement is PLN, and all amounts are presented in PLN thousands (PLN '000) (unless indicated otherwise). ADOPTED ACCOUNTING PRINCIPLES The financial statement was drawn up based on the historical cost principle, with the exception of financial assets held for sale, investment property, and derivatives, which are carried at fair value. The carrying amount of the disclosed hedged assets and liabilities is adjusted by the changes in fair value which may be allocated to risks against which these assets and liabilities are hedged. INTANGIBLE ASSETS Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset (cost of acquisition or construction) can be measured reliably. Intangible assets are initially carried at cost (of purchase or construction). They are subsequently measured at cost less amortisation and total impairment losses. Intangible assets are amortised based on the straight-line method over their expected useful life. Useful life of intangible assets is as follows: - Licenses 5 10 years - Software 1 5 years INTANGIBLE ASSETS CONSTRUCTED BY THE ENTITY COSTS OF R&D WORKS Costs of research works are not capitalised and are recognised directly in the P&L account as costs of the period in which they are incurred. Costs of development works are capitalised only when: - a specific project is implemented (such as new software or procedures); - it is likely that an element of assets will bring economic benefits in the future; - project-related costs can be estimated in a reliable way. 6/94

7 Costs of development works are amortised on a straight line basis over the expected period of their economic useful life. If the element of assets constructed by the entity cannot be identified separately, costs of development works are recognised in the P&L account in the period in which they are incurred. TANGIBLE FIXED ASSETS (PP&E) Land, buildings and structures used in the process of production and provision of goods and services, as well as for administrative purposes, are carried in the balance sheet at historical cost less accumulated depreciation and impairment losses. Construction in progress to be used for production, lease, or administrative purposes, is recognised in the balance sheet at the cost of construction less impairment losses. These assets are depreciated as of the date they are put into use, in line with the principles adopted for the Company s PP&E. Plant and machinery, transport vehicles, and other PP&E are carried in the balance sheet at historical cost less accumulated depreciation and impairment losses. Depreciation is calculated for all PP&E, except for land and construction in progress, over the estimated period of their economic useful life and based on the straight-line method, at the following annual depreciation rates: Item Annual depreciation rate group 0 land and perpetual usufruct of land - group I buildings and facilities 1.5% - 2.5% group II civil- and hydro-engineering structures 2 % - 10% group III boilers and power equipment 7%-35 % group IV general-purpose machinery and equipment 7%-40% group V special-purpose machinery and equipment 3%-35% group VI technical plant and equipment 5%-20% group VII transport vehicles 3%-20 % group VIII tools, accessories, furniture 5%-20% Any subsequent outlays are recognised in the carrying amount of an asset or are presented as a separate asset only if it is likely that this asset will bring economic benefits to the Company in the future and its costs can be reliably estimated. Any other costs incurred after the initial recognition, including costs of repairs or operation (use) are charged to the financial result of the period in which they were incurred, except for material costs of general overhauls, which are recognised in the carrying amount of this asset. The residual values and useful lives of assets are reviewed and adjusted if appropriate at least annually. If the carrying amount of an asset exceeds its estimated residual value, the carrying amount is immediately written down to the residual amount. 7/94

8 Construction in progress is carried in the total amount of all costs directly related to its acquisition or construction, including financing costs, less impairment losses. Construction in progress is not depreciated until finished and put into use. Any gain or loss arising on the sale/disposal or retirement of an asset is determined as the difference between the disposal proceeds and the net carrying amount of the asset and is immediately recognised in the P&L account. LEASES Leases are classified as finance leases whenever the terms of the lease contract transfer substantially all the risks and potential rewards of ownership to the Company. All other types of lease are treated as operating lease. Assets used based on a finance lease contract are treated as the Company s assets and are measured as at the inception of the lease contract at fair value of the leased asset or current value of minimum lease payments, whichever is lower. Lease payments are apportioned between finance charges (interest) and reduction of the outstanding liability (lease obligation) so as to achieve a constant rate of interest on the remaining balance of the liability. Rentals payable under operating leases are charged to the P&L account on a straight-line basis over the term of the lease. INVESTMENT PROPERTY Investment property is property held to earn rentals and/or held for capital appreciation. Investment property is carried at fair value as at the balance sheet date. Gains and losses resulting from changes in fair value of investment property are recognised in the P&L account for the period in which they are generated. FIXED (NON-CURRENT) ASSETS AND DISPOSAL GROUPS HELD FOR SALE Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable within one year after the re-classification and the asset (or disposal group) is available for immediate sale in its present condition. IMPAIRMENT OF NON-FINANCIAL ASSETS At each balance sheet date, the Company assesses whether there are any objective indications that any assets (or group of assets) may be impaired. If such indications exist, the recoverable amount of the asset is estimated and an impairment loss is recognised, i.e. the difference between the recoverable amount and carrying amount of this asset. Recoverable amount is the higher of fair value less costs to sell and value in use. To analyse the impairment of assets, they are grouped at the lowest level possible where identifiable independent cash flows are generated (cash-generating unit). Irrespective of whether there are any indications that any assets may be impaired, the Company tests all elements of its intangible assets with unspecified useful life for impairment on an annual basis. 8/94

9 Any impairment loss is charged to the P&L account. INVENTORIES Inventories are carried at purchase price (as costs of purchase are immaterial, purchase price is equal to price of acquisition) or actual manufacturing costs not higher that net selling price. Cost of inventories includes costs of all materials that enter directly into production, and in certain cases costs of salaries and reasonable amount of indirect costs. Inventories of raw materials and goods are measured using the weighted average method. Net selling price equals the estimated price of sale less any costs necessary to finish the production process and bring inventories to sale or finding a buyer (i.e. costs of sale, marketing, etc.). BORROWING COSTS Borrowing costs directly related to acquisition or construction of assets are added to the cost of asset construction until this asset is ready for use. These costs are reduced by revenues from temporary investment of funds borrowed to construct this element of assets. All other borrowing costs are charged directly to the P&L account in the period in which they are incurred. GOVERNMENT GRANTS Government grants are recognised in the financial statement and matched with costs to be compensated with these grants. Government grants to fixed assets are recognised in the balance sheet under the item government grants (short- or long-term) and written off to the P&L account over the expected period of their use. FINANCIAL INSTRUMENTS Financial assets and liabilities are recognised in the Company s balance sheet as at the date when the Company becomes a party to a binding contract. In the course of its operations, the Company is exposed to many financial risks, for instance the currency risk. As part of its core business operations, the Company concludes contracts denominated in foreign currencies (mostly in Euro). The currency risk management policy adopted by the Board of Directors is based on the principle of securing future cash flows arising from these contracts to reduce the impact of currency rate variations on the Company s results. Currency risks are mainly hedged based on a natural mechanism, i.e. signing contracts with subcontractors in the contract currency to transfer these currency risks to subcontractors. If it is not possible, currency exposure is hedged on the financial market by using derivatives, currency forward transactions in particular. These financial instruments are carried at fair value. When hedging cash flows (if conditions set for the adoption of hedge accounting are satisfied), part of the profit or loss on a hedging instrument considered to be an effective hedge is charged directly to equity, and the ineffective portion is charged to the result of the current year. TRADE RECEIVABLES Trade and other receivables are carried in the accounts at nominal value adjusted by relevant allowance for irrecoverable (doubtful) receivables. 9/94

10 Trade receivables related to the construction contracts in progress and advance payments made are classified as short-term receivables they are expected to be settled during the normal business cycle. Receivables arising from guarantee deposits and loans with the maturity date within 12 months are recognised as short-term receivables. Long-term receivables are discounted to their current value at effective interest rates if the time value of money has a significant impact of these receivables. INVESTMENTS IN SECURITIES Investments in securities are classified as held for trading or available for sale and carried as at the balance sheet day at fair value. If securities are classified as held for trading, gains or losses resulting from changes in their fair value are recognised in the P&L account for the period. If securities are classified as available for sale, gains or losses resulting from changes in their fair value are charged directly to equity until the asset is sold or impairment is recognised. If this is the case, accumulated profits or losses previously recognised in equity are moved to the P&L account for the period. FINANCIAL PAYABLES Financial payables are classified based on their economic content resulting from the underlying contracts. BANK LOANS Interest-bearing bank loans are initially recorded at cost equal to fair value of the consideration received less direct borrowing costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. TRADE PAYABLES Trade payables are recognised at the current value of the expected amount payable as at the date when they occur, and subsequently carried at amortised cost. Trade payables related to implemented construction contracts and advance payments received are classified as short-term payables they are expected to be settled during the Company s normal business cycle. Receivables arising from guarantee deposits with the maturity date within 12 months are recognised as short-term receivables. Long-term payables are discounted to their current value at effective interest rates if the time value of money is significant. EQUITY INSTRUMENTS Equity instruments issued by the Company are recorded at the value of inflows less direct costs of issue. PROVISIONS Provisions are recognised for the Company s actual (legal or constructive) obligations arising from past events, for which it is probable that an outflow of resources embodying economic benefits will be required, which can be reasonably estimated. The amount of provisions is reviewed as at each balance sheet date and adjusted to the current forecast amount. If the effect of the time value of money is significant, the amount of provision is determined at the 10/94

11 current amount of expected future expenses necessary to settle the obligation, and the discount rate is the estimated rate of return on risk-free deposits. Where discounting method is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Provisions established by the Company include in particular: - provision for liabilities - provision for warranty repairs and penalty payments - deferred tax provision. Provision are made for future liabilities whose establishment is certain or most probable, and which can be reliably estimated, and in particular for: - losses on business transactions in progress, - losses from guarantees and sureties granted - results of legal proceedings in progress - holiday leaves - retirement severance payments. Provisions for costs of warranty repairs are recognised when products are sold, based on the Board s best estimate of the Company s future expenditure required in the warranty period. Under IAS 1 Presentation of Financial Statements, provisions are presented as long-term and short-term provisions in the balance sheet. REVENUES FROM SALES Under IAS 18 Revenue, revenues from sales are recognised at fair value of the consideration received or receivable and represent amounts receivable for products, goods, and services provided in the normal course of business, net of discounts, Value-Added Tax and other sale-related taxes. Sale of goods is recognised when goods are delivered and ownership rights are passed to the buyer. Revenues from long-term contracts are recognised in proportion to the stage of completion of works, provided that reliable estimate of the result on the contract is possible. Stage of completion of works is defined as the share of costs incurred to complete the task in the total planned cost. If the contract result cannot be estimated reliably, any revenues related to this contract are recognised only up to the amount of actual incurred costs whose recovery is probable. Revenues from interest are accrued on a time basis, by reference to the principal amount outstanding and at the effective interest rate. Revenues from dividends are recognised when the shareholder's right to receive a dividend is established. As the Company has adopted the accrual basis, all costs of a reporting period are charged to the P&L account, irrespective of their actual date of settlement. Costs incurred but not related to the period are recognised in assets, and costs incurred and related to the period are recognised in liabilities. CURRENCY TRANSACTIONS In the Company s financial statement, transactions denominated in foreign currencies are converted at the exchange rate as at the transaction date. As at the balance sheet date, monetary assets and liabilities in foreign currencies are converted at the exchange rate set by the Company s bank as at this date. The Company s Bank is BZ WBK S.A. 11/94

12 Exchange rate as at the last day of the period, including: - the Bank's purchase rate - the Bank's selling rate Current period Comparative period Foreign exchange gains or losses are charged directly to the P&L account, unless these gains or losses arise from measurement of non-monetary assets and liabilities, in which case changes in fair value are charged directly to equity. Assets and liabilities of foreign companies denominated in foreign currencies are converted to the reporting currency at the exchange rate as at the balance sheet date. Revenues and costs recognised in financial statements of foreign entities are converted at average exchange rates from all months of the fiscal year. COSTS OF FUTURE RETIREMENT BENEFITS Payments to defined contribution schemes are charged to the P&L account when they become payable. Payments to the State pension schemes are treated as defined contribution schemes. In the case of defined benefit schemes, the cost of providing benefits are determined using the Projected Unit Credit Method, with actuarial valuations carried out at each balance sheet date. Actuarial gains and losses are recognised in total in the period in which they occur. Past service costs are recognised immediately to the extent that the benefits are already vested; otherwise they are amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of the assets of the retirement benefit plan. TAXES Obligatory reductions of financial result include current tax and deferred tax. Current tax liabilities are measured based on the tax result (tax base) for the fiscal year. Tax gains (losses) are different from book net gains (losses), as taxable revenues and tax deductible expenses in subsequent years as well as items of revenues and expenses which will never become taxable are eliminated. Tax liabilities are measured based on tax rates adopted for the current fiscal year. Deferred tax is the tax expected to be payable or recoverable in the future on differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred income tax provision is established for all taxable temporary differences. Deferred tax assets are recognised to the extent it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Tax assets or liabilities are not recognised if the temporary difference arises from goodwill or initial recognition of another asset or liability in a transaction which does not affect tax result or book result. 12/94

13 A deferred income tax liability (provision) is recognised for all temporary differences arising from investments in subsidiaries, associates, and joint ventures, unless the Company is able to control the timing of the reversal of the temporary difference and it is probable that the reversal will not occur in the foreseeable future. The carrying amount of deferred tax assets should be reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available in the future to allow the benefit of part or all of that deferred tax asset to be utilised. Deferred income tax is calculated at tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred income tax is recognised in the P&L account, except to the extent that the tax arises from items recognised directly in equity. If this is the case, deferred tax is also recognised directly in equity. EQUITY-SETTLED SHARE-BASED PAYMENTS Share-based payments scheme (equity-settled payment scheme) is available for the Issuer s Board members and employees, Board members and employees of other Capital Group companies, as well as natural persons and partners of partnerships which are parties to fixed-term co-operation contracts signed with the Issuer. Payments are settled in equity instruments ordinary bearer shares of the company PBG S.A. issued under Resolution of the General Meeting of Shareholders No 4 of 10 March 2004 (330,000 shares). Eligible Persons will acquire shares from the Underwriter at the issue price of PLN 1.00 per share plus the costs of the Underwriter s financing of share acquisition. The share-based scheme is measured at fair value at the date of grant. The fair value is expensed on a straight-line basis over the vesting period (i.e. starting on the date of grant and ending when all employees become fully entitled to the award). Fair value recognised in expenses is also adjusted based on the Group's estimates as to the potential future exercise of rights to equity instruments. SEGMENT REPORTING BUSINESS AND GEOGRAPHICAL SEGMENTS The Company publishes a consolidated financial statement, where results of its activities broken down into business and geographical segments are presented. BUSINESS COMBINATIONS In the period between 1 January 2006 and 31 December 2006, the following changes in organisational relations occurred: - Take-over of shares acquisition of series H shares of Śląsk S.A. In February 2006, following the allocation of shares, PBG S.A. acquired 1,690,000 series H shares of Śląsk S.A. in the subscription. The total amount of this transaction was PLN 48,165 k. These shares represented 65.87% of the company s share capital and 65.79% of the total vote. Śląsk became one of the PBG Capital Group companies and has been consolidated since 1 April The company s registered office is in Katowice at ul. Józefa Wolnego 4. Its core business includes construction of hydro-technical, civil engineering, and industrial facilities. 13/94

14 - Take-over of additional shares acquisition of series I shares of Śląsk S.A. In May 2006, following the allocation of shares, PBG S.A. took over additional 267,000 series I shares of Śląsk S.A. in the public offering for qualified investors. The total amount of this transaction was PLN 9,345 k. After the increased share capital of Śląsk S.A. following the issue of new series I shares was registered by the Registry Court, PBG S.A. holds the total of 1,957,000 ordinary shares of Śląsk S.A. After this transaction, the stake of PBG S.A. was reduced to 58.15% of the share capital and 58.10% of the total vote. - Take-over of shares of KB Gaz S.A. by acquisition In May 2006, PBG S.A. took over shares of KB Gaz S.A. PBG S.A. acquired 28,700 shares of the nominal value of PLN per share, representing 100% of the share capital of KB Gaz S.A, for the total amount of PLN 1,644 k. As a result, KB Gaz became one of the PBG Capital Group companies and has been consolidated since 1 July The company s registered office is in Szczecin at ul. Wojska Polskiego 129. The Company specialises in infrastructure investments connected with environmental protection, such as waterworks and wastewater systems, pumping stations and water treatment plants; low-, medium and high-pressure gas supply systems, as well as meter and regulator stations and gas boiler houses. 14/94

15 2. FINANCIAL STATEMENT OF PBG S.A. FOR THE PERIOD FROM 1 JANUARY 2006 TO 31 DECEMBER 2006 SELECTED FINANCIAL DATA in PLN 000 in EUR I. Net revenues from sales of products, goods and materials II. Operating profit (loss) III. Profit (loss) before tax IV. Net profit (loss) V. Net cash from operations VI. Net cash used in investments VII. Net cash flows from financial activity VIII. Total assets IX. Liabilities and provisions for liabilities X. Long-term liabilities and provisions XI. Short-term liabilities and provisions XII. Equity XIII. Share capital XIV. Number of shares XV. Profit (loss) per ordinary share (EPS) (in PLN/EURO) from continued operations ordinary profit diluted profit from continued and discontinued operations ordinary profit diluted profit XVI. Book value per share BVPS (in PLN/EURO) XVII. Diluted book value per share (in PLN/EURO) XVIII. Dividend per share declared or paid (in PLN/EURO) Reporting currency of this consolidated financial statement is PLN, and all amounts are presented in PLN thousands (PLN '000) (unless indicated otherwise). Average exchange rates of PLN: a) net revenues from sales of products, goods and materials, operating profit, profit before tax and net profit, as well as net cash flows from operations, net cash flows from investments, net cash flows from financial activity, and total net cash flows for 2006 were calculated at the average exchange rate of EURO arithmetic average of exchange rates set by the National Bank of Poland as at month end in each month of the period, i.e. : PLN b) net revenues from sales of products, goods and materials, operating profit, profit before tax and net profit, as well as net cash flows from operations, net cash flows from investments, net cash flows from financial activity, and total net cash flows for 2005 were calculated at the average exchange rate of EURO arithmetic average of exchange rates set by the National Bank of Poland as at month end in each month of the period, i.e. : PLN c) total assets, liabilities and provisions for liabilities, long-term payables, short-term payables, and share capital as at 31 December 2006 were calculated at the average exchange rate of EURO published by the President of NBP as at 29 December 2006, i.e. PLN /94

16 d) total assets, liabilities and provisions for liabilities, long-term payables, short-term payables, and share capital as at 31 December 2005 were calculated at the average exchange rate of EURO published by the President of NBP as at 30 December 2005, i.e. PLN Current period Comparative period Exchange rate as at the period end Average exchange rate (arithmetic average of exchange rates as at the last day of each month in the period) Highest exchange rate in the period Lowest exchange rate in the period Table 36/A/NBP/2006 Table 83/A/NBP/ Table 122/A/NBP/2006 Table 252/A/NBP/ Selected items of assets and liabilities converted into EURO at the exchange rate published by the President of the National Bank of Poland as at 29 December 2006: EUR 1 = PLN Selected items from the profit and loss account for 12 months of 2006 were converted into EURO at the exchange rate calculated as an arithmetic average of exchange rates set by the President of NBP in the past 12 months of 2006: January February March April May June July August September October November December / 12 = (average exchange rate for 12 months) 16/94

17 BALANCE SHEET Note as at as at A s s e t s FIXED ASSETS Tangible fixed assets (PP&E) Goodwill 0 0 Other intangible assets Other long-term financial assets Deferred income tax assets Long-term receivables: 0 0 From related parties 0 0 From other entities 0 0 Long-term prepaid expenses 0 0 CURRENT ASSETS Inventories Long-term contracts Short-term trade and other receivables Other short-term financial assets Short-term prepaid expenses Cash and cash equivalents Non-current assets classified as held for sale 0 0 TOTAL ASSETS L i a b i l i t i e s EQUITY Share capital Treasury shares (negative amount) 0 0 Reserve capital Revaluation reserve 0 0 Other reserves Capital from measurement of hedging transactions Profit (loss) brought forward from previous years Net profit (loss) LONG-TERM LIABILITIES AND PROVISIONS Long-term liabilities and provisions Long-term bank loans and credits Deferred income tax provision Long-term provisions Long-term payables under finance lease Other long-term payables Short-term liabilities and provisions Trade and other payables Employee benefits 0 21 Tax payables Short-term payables under finance lease Short-term bank loans and credits Short-term provisions Short-term accruals Payables related to non-current assets classified as held for sale 0 0 TOTAL LIABILITIES Book value Number of shares Book value per share BVPS (in PLN) Diluted number of shares Diluted book value per share (in PLN) /94

18 as at as at OFF-BALANCE SHEET ITEMS Note Contingent receivables 0 0 From related parties: guaranties and sureties received From other entities: guaranties and sureties received Contingent liabilities In respect of related parties: guarantees and sureties granted In respect of other entities: guarantees and sureties granted Other 0 0 TOTAL OFF-BALANCE SHEET ITEMS PROFIT AND LOSS ACCOUNT Note F u n c t i o n f o r m a t Continued operations Revenues from sales Net revenues from sales of products 0 0 Net revenues from sales of services Net revenues from sales of goods 0 0 Net revenues from sales of materials Selling costs (costs of products, services, goods and materials sold) Costs of products sold 0 0 Costs of services sold Costs of goods sold 0 0 Costs of materials sold Gross profit (loss) on sales Costs of sales 0 0 General administrative expenses Other operating revenues Other operating expenses Restructuring costs 0 0 Operating profit (loss) Financial expenses (net) 25; Financial revenues (net) 0 0 Profits/losses from investments in related parties 0 0 Profit (loss) before tax Income tax Net profit (loss) from continued operations Discontinued operations 0 0 Net loss from discontinued operations 0 0 Net profit (loss) Profit (loss) per ordinary share (in PLN): from continued operations ordinary profit diluted profit from continued and discontinued operations ordinary profit diluted profit /94

19 CASH FLOW STATEMENT Indirect method Cash flow from operations Net profit before tax Adjustments: Amortisation of intangible assets Goodwill impairment write-downs 0 0 Depreciation of PP&E Impairment write-downs of tangible fixed assets 0 0 Profit (loss) from sale of tangible fixed assets Profit (loss) from sale of financial assets available for sale Profit (loss) on valuation of investment property carried at fair value 0 0 Profit (loss) from subsequent measurement of fair value of financial assets carried at fair value Costs of interest Share in profits (losses) of associates 0 0 Write-off of goodwill 0 0 Interest received Dividends received 0 0 Cash flow from operations before changes in working capital Change in inventories Change in receivables Change in payables Change in provisions Other adjustments Cash generated in business operations Interest paid Income tax paid Net cash from operations Cash flow from investments Outflows acquisition of intangible assets Inflows sale of intangible assets 0 0 Outflows acquisition of tangible fixed assets Inflows sale of tangible fixed assets Outflows acquisition of investment property 0 0 Inflows sale of investment property 0 0 Outflows acquisition of financial assets available for sale Inflows sale of financial assets available for sale Outflows acquisition of financial assets held for trading 0 0 Inflows sale of financial assets held for trading 0 0 Outflows acquisition of subsidiaries (less cash received) Inflows sale of subsidiaries Inflows from government grants received Loans granted Repayment of loans granted Interest received Dividends received 0 0 Net cash used in investments Cash flow from financial activity Net inflows issue of shares Buy-back of treasury shares Inflows issue of debt securities 0 0 Repayment of interest on s Redemption of debt securities 0 0 Inflows credits and loans incurred Repayment of credits and loans Repayment of interest on credits and loans Inflows from interest on deposits Repayment of finance lease payables Dividends paid out 0 0 Net cash flows from financial activity Increase (reduction) of net balance of cash and cash /94

20 equivalents Opening balance of cash and cash equivalents Change in cash and cash equivalents foreign exchange differences Closing balance of cash and cash equivalents /94

21 STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2006 Share capital Treasury shares (negative amount) Reserve capital Other reserves Capital from measurement of hedging transactions Profit (loss) brought forward from previous years Net profit (loss) Total equity Equity as at 1 January Issue of shares by PBG S.A Issue of shares by PBG S.A. - costs of issue charged to reserve capital Transfer of FY05 financial result to retained earnings Distribution of FY05 financial result transfer to reserve capital Distribution of FY05 financial result transfer to Company Social Fund Measurement of financial instruments charged to equity Measurement of shares covered by the share-based payment scheme (as per IFRS 2) Financial result for the period Equity as at 31 December /94

22 STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2005 Share capital Treasury shares (negative amount) Reserve capital Other reserves Capital from measurement of hedging transactions Profit (loss) brought forward from previous years Net profit (loss) Total equity Equity as at 1 January PP&E re-measured at fair value as at 1 January Distribution of FY04 financial result transfer to reserve capital Measurement of financial instruments charged to equity Measurement of shares covered by the share-based payment scheme (as per IFRS 2) Distribution of FY04 financial result transfer to Company Social Fund Transfer of FY04 financial result to retained earnings Financial result for the period Equity as at 31 December /94

23 3. ADDITIONAL NOTES TO THE FINANCIAL STATEMENT OF PBG S.A NOTES TO THE BALANCE SHEET Note 1 TANGIBLE FIXED ASSETS (PP&E) 2006 (current a) property, plant and equipment, including: land (including perpetual usufruct of land) buildings, facilities and civil- and hydro-engineering structures plant and machinery transport vehicles other PP&E b) construction in progress c) payments on account of PP&E Total tangible fixed assets BALANCE SHEET PROPERTY, PLANT & EQUIPMENT (OWNERSHIP STRUCTURE) 2006 (current a) freehold b) used based on the contract of lease, rental, or similar agreement, including: operating lease contract finance lease contract Total balance sheet PP&E OFF-BALANCE SHEET PP&E 2006 (current used based on the contract of lease, rental or similar agreement, including: land used under perpetual usufruct operating lease contracts Total off-balance sheet PP&E /94

24 CHANGES IN PROPERTY, PLANT & EQUIPMENT (by groups) as at 31 December land (including perpetual usufruct of land) - buildings, facilities and civiland hydroengineering structures - plant and machinery - transport vehicles - other PP&E Total PP&E a) opening balance gross value of PP&E b) increase acquisition of new PP&E acquisition of used PP&E 0 - PP&E accepted for use based on lease contracts 0 - other increase: modernisation/upgrade 0 c) decrease transfer of lease agreement disposal sale 0 - other, e.g. donations 0 - other, e.g. theft d) closing balance gross value of PP&E e) opening balance accumulated depreciation f) amortisation for the period increase decrease g) closing balance accumulated depreciation h) opening balance impairment write-downs 0 - increase 0 - decrease 0 i) closing balance impairment write-downs 0 j) closing balance net value of PP&E /94

25 LIMITATION OF OWNERSHIP AND ADMINISTRATION OF FIXED ASSETS AS AT 31 DECEMBER 2006 Type of encumbrance Liability Registered pledge on financed vehicles Loan facilities in BRE Bank S.A. the outstanding amount as at 31 December 2006: PLN 52.2 k Mortgage PLN 6,000 k on the property in Wysogotowo (Land and Mortgage Register no. KW ), registered pledge on 21,854 shares of the company KRI Sp. z o.o. Loan facility in DZ Bank S.A. the outstanding amount as at 31 December 2006: PLN 7, k Registered pledge on vehicles the outstanding amount as at 31 December 2006: PLN Loan facilities in Nordea Bank S.A k Registered pledge on vehicles and machines Loan facility in Bank Polska Kasa Opieki the outstanding amount as at 31 December 2006: PLN S.A k Registered pledge on vehicles and machines the outstanding amount as at 31 December 2006: PLN Loan facility in Nord LB Bank S.A. 1, k Registered pledge on 500,000 dematerialised shares of Śląsk S.A. Loan facility in Kredyt Bank S.A. the outstanding amount as at 31 December 2006: PLN 4,000 k Capped mortgage up to PLN 18,000k on the property located in the Wysogotowo, no. KW ; capped mortgage on the property located in Wysogotowo, the Tarnowo Podgórne municipality, parcel no. 64/23, KW KW Loan facility in ING Bank Śląski S.A. PO1P ; registered pledge on financed assets the outstanding amount as at 31 December 2006: PLN 23,730.4 k Registered pledge on 682 shares of Metorex Sp. z o.o. the outstanding amount as at 31 December 2006: PLN 2,000 Loan facility in DnB Nord Polska S.A. k Note 2 OTHER INTANGIBLE ASSETS 2006 (current a) costs of completed R&D works 0 0 b) goodwill 0 0 c) acquired patents, licenses and similar rights, including: software d) other intangible assets Total intangible assets INTANGIBLE ASSETS (OWNERSHIP STRUCTURE) 2006 (current a) freehold b) used based on the contract of lease, rental, or similar agreement, including lease. 0 0 Total intangible assets /94

26 CHANGES IN INTANGIBLE ASSETS (by groups) as at 31 December 2006 a b c d e a) opening balance gross value of intangible assets costs of completed R&D works goodwill acquired patents, licenses and similar rights, including: software other intangible assets payment on account of intangible assets Total intangible assets b) increase purchase other 0 c) decrease sale other 0 d) closing balance gross value of intangible assets e) opening balance accumulated amortisation f) amortisation for the period increase decrease (sales-related) g) closing balance accumulated amortisation h) opening balance impairment write-downs 0 - increase 0 - decrease 0 i) closing balance impairment write-downs 0 j) closing balance net value of intangible assets /94

27 Note 3 LONG-TERM FINANCIAL ASSETS 2006 (current a) in subsidiaries and jointly-controlled entities shares debt securities other securities loans granted other long-term financial assets 0 0 b) in subsidiaries, jointly controlled entities and associates measured using the equity method shares debt securities other securities loans granted other long-term financial assets 0 0 c) in other entities shares debt securities other securities loans granted other long-term financial assets 0 0 Total long-term financial assets CHANGE IN LONG-TERM FINANCIAL ASSETS (BY GROUPS) 2006 (current a) opening balance shares loans granted other long-term financial assets 0 0 b) increase acquisition of shares loans granted loans granted (moved to long-term assets) c) decrease sale of shares loans repaid loans granted (moved to short-term assets) d) closing balance shares loans granted other long-term financial assets /94

28 SHARES IN RELATED PARTIES No a b c d e f g h i j k l. name of the company registered office core type of relation consolidation method and its legal form business used / valuation (subsidiary, jointly controlled entity, associate), indicating direct and indirect relations based on the equity method or indication that the entity is not consolidated / valued based on the equity method date of take-over of control / joint control / significant influence value of shares at cost total revaluation adjustments carrying amount of shares % of share capital held share in the total vote at the General Meeting basis of control/joint control/signific ant influence (other than indicated in j) or k)) 1 ATG Spółka z o.o. ul. Kolejowa 13, Poznań 2 KRI spółka z o.o. ul. Serdeczna 8, Wysogotowo k/poznania, Przeźmierowo 3 PGS Spółka z o.o. ul. Krotoszyńska, Odolanów 4 METOREX spółka z o.o. ul. Żwirki i Wigury 17A, Toruń wholesale of building materials and sanitary equipment distribution of gaseous fuels through mains, generation and distribution of heat, transport via pipelines, market research and public opinion polling services incidental to extraction of crude petroleum and natural gas general construction works in the area of linear facilities: pipelines, power lines, traction lines, telecommunication lines - transmission lines subsidiary fully consolidated subsidiary fully consolidated subsidiary fully consolidated subsidiary fully consolidated ,00% 100,00% ,99% 99,99% ,24% 92,24% ,56% 99,56% 28/94