Report of the Supervisory Board of Echo Investment S.A. on the results of:

Report of the Supervisory Board of Echo Investment S.A. on the results of: -assessment of the separate financial statements of Echo Investment S.A. and the consolidated financial statements of Echo Investment Capital Group for 2011, - assessment of the company's Management Board report on the operations of Echo Investment S.A. and Echo Investment Capital Group in 2011, - assessment of the situation of Echo Investment S.A. and Echo Investment Capital Group in 2011, - assessment of the Management Board's proposals concerning allocation of 2011 net profit, - work of the Supervisory Board of Echo Investment S.A. in 2011

1. CONCLUSIONS FROM ASSESSMENT OF THE SEPARATE AND CONSOLIDATED FINANCIAL STATEMENTS, MANAGEMENT REPORTS ON THE OPERATIONS OF THE COMPANY AND OF ECHO INVESTMENT CAPITAL GROUP IN 2011, AND THE SITUATION OF THE COMPANY AND ECHO INVESTMENT CAPITAL GROUP IN 2011 The Supervisory Board of Echo Investment S.A., acting pursuant to Article 382 paragraph 3 of the Code of Commercial Companies, has assessed: a) the separate financial statements for the year 2011, including: - separate balance sheet prepared as at December 31, 2011, with the balance total of assets and liabilities of PLN 1,591,953 thousand, - separate profit and loss statement for the period from January 1, 2011 to December 31, 2011, showing revenue of PLN 418,418 thousand, a gross profit of PLN 15,822 thousand and a net profit of PLN 16,517 thousand, - separate cash flow statement for the period from January 1, 2011 to December 31, 2011, showing an increase in cash of PLN 20,559 thousand, - separate statement of changes in equity for the period from January 1, 2011 to December 31, 2011, showing an increase in equity of PLN 16,517 thousand, - additional information on conformity with the accounting books, records, and facts, b) the Management report on the activities of Echo Investment S.A. in 2011 c) the consolidated financial statements for 2011, including: - consolidated balance sheet prepared as at December 31, 2011, with the balance total of assets and liabilities of PLN 5,367,318 thousand, - consolidated profit and loss statement for the period from January 1, 2011 to December 31, 2011, showing revenue of PLN 406,935 thousand, a gross profit of PLN 199,711 thousand and a net profit of PLN 176,468 thousand, - consolidated cash flow statement for the period from January 1, 2011 to December 31, 2011, showing an increase in cash of PLN 182,096 thousand, - consolidated statement of changes in equity for the period from January 1, 2011 to December 31, 2011, showing an increase in equity of PLN 188,638 thousand, - additional information on conformity with the accounting books, records, and facts, d) the Management report on the operations of Echo Investment Capital Group in 2011. The Management Board of Echo Investment S.A. hired Pricewaterhouse Coopers Sp. z o.o. with its registered office in Warsaw to carry out the audit of both separate and consolidated financial statements. The audit company was represented by Piotr Wyszogrodzki, Statutory Auditor, registration no. 90091. The Supervisory Board has familiarized itself with the statutory auditors opinions and reports concerning the individual and consolidated financial statements. Having acquainted itself with the separate and consolidated financial statements and based on the statutory auditor's opinion and report, the Supervisory Board hereby states that the data contained in the separate financial statements of Echo Investment S.A. and in the consolidated statements of Echo Investment Capital Group fairly and correctly describe the assets and financial condition and reflect in a transparent and fair manner all information REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 2

significant for assessment of the result of business operations, yield and identification of any risks during the assessed period. The financial information contained in the Management reports of the parent company, concerning the operations of Echo Investment S.A. and Echo Investment Capital Group in 2011, has been taken directly from the audited financial statements and conforms to the said statements. The opinion of the statutory auditor confirms that the statements have been prepared correctly in all substantial aspects, i.e. in compliance with the accounting principles according to the International Financial Reporting Standards and related interpretations published as regulations of the European Commission and, with respect to issues not regulated by the said Standards, in accordance with the requirements and provisions of the Accounting Act of September 29, 1994 and secondary provisions issued on its basis, and according to properly maintained books of accounts. Moreover, the statements conform to the provisions of the company s Articles of Association. The reservation included by the auditor, PricewaterhouseCoopers Sp. z o.o., in its report from the review of the consolidated financial statements of Echo Investment Group, concerning reserves on account of deferred tax liability on the revenues derived by the Issuer from limited joint-stock partnerships via a Polish closed investment fund and a Cyprian company being left in individual items of the statements, results from a divergence between the auditor and the Management Board of the Issuer that prepared the statements, with regard to the assessment of the risk of a possibility of tax treatment of such revenues. According to the explanations obtained by the Supervisory Board from the Management of the company, the reason for introducing and maintaining the aforementioned reserves on account of deferred tax liability in the report for 2011, were and are more or less official pieces of information concerning planned changes in the rules of taxation, resulting from an agreement of June 4, 1992 between the Government of the Republic of Poland and the Government of the Republic of Cyprus on the avoidance of double taxation with regard taxes on revenue and property, as well as justified by the economic situation of Cyprus doubts with regard to maintaining its 10-pct tax rate on the revenue derived in Cyprus, which was a direct cause of and maintains justified doubts regarding the tax rate on the revenue derived by the Issuer via the Cypriot company (its taxation in Cyprus and the possible taxation also in Poland). The influence of the reserve created and maintained on account of the deferred tax liability in individual items of the consolidated statements for 2011 is as follows: a) in the balance sheet the assets and the reserve for deferred tax liability are overstated by PLN 17,837 thousand and PLN 49,201 thousand respectively and the earned surplus in the shareholders equity is understated by PLN 31,364 thousand, b) in the profit and loss statement the tax on revenue was overstated and the net profit was understated by PLN 31,364 thousand. When presenting the company s results in the financial statement for 2011, having taken into consideration the justified doubts regarding the possibility of tax treatment of its revenues derived via its Cypriot subsidiary, the Management Board, acting in accordance with the prudent valuation principle resulting from the International Financial Reporting Standards, made a decision on maintaining an adequate reserve for deferred tax liability, acting on the assumption that creating such a reserve and showing its amount and source in the statement, while assuming at the same time that a reservation of the auditor concerning the reserve would also be presented, would be the most cautious and transparent way of presenting the Issuer s results, which would exclude any possible future corrections that would be surprising for shareholders. The stance of the Management Board was sequentially accepted by the Supervisory Board and the Audit Committee operating within its structure. According to the information obtained by the Management Board of the Issuer the situation concerning the amendments to the tax agreement concluded with the Republic of Cyprus as well as taxation principles and rates in Cyprus is constantly monitored by the company and its tax consultants. The adopted principle of cautious approach to the potential tax issue and the consequent possible removal of the divergence concerning the creation of an adequate reserve between the Management Board of the Issuer and the auditor, PricewaterhouseCoopers Sp. z o.o., will depend on resolving current doubts, which is independent of the Issuer. REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 3

The aforementioned issues specified in the reservation of the auditor, were of interest to the Supervisory Board of the Issuer (including the Audit Committee, the members of which are members of the Supervisory Board at the same time), during a meeting which took place on November 29, 2011. The Supervisory Board obtained a detailed explanation from the Management Board of the company with regard to the reasons for creating the reserve and the prudent valuation principle applied in this case, their intent to avoid any surprising negative corrections of the financial result in the future as well as the Management Board s stance concerning the transparency of the results in the form suggested by the Management Board, having taken into consideration the fact that the auditor included an appropriate reservation in their report. The Chairman of the Audit Committee, Mr Mariusz Waniołka, presented the opinion of the Committee to the Supervisory Board, according to which the Audit Committee, having considered the serious doubts, approves the principle applied by the Management Board, which provides for the risk of possible additional taxation of the revenue derived via the Cypriot subsidiary by way of maintaining an appropriate reserve. Having analysed the profit and loss statement for 2011 the Supervisory Board concludes that the profit in the Capital Group grew by 20% compared to 2010 and amounted to PLN 176.5 mln. The sale of projects and an increase of the fair value of properties, which results from the weakening of PLN to EUR exchange rate, as well as the valuation of new projects developed in 2011 resulted in a high operating profit of the Capital Group at a level of PLN 539 mln. The result on financial operations (financial revenue, financial costs and profit/loss on foreign exchange derivatives), amounting to PLN -164 mln compared to PLN -72 mln in 2010, had a considerably negative influence on the consolidated profit. The weakening of PLN to EUR exchange rate resulted in a significant change in FX differences related to foreign currency loans. They amounted to PLN -175 mln in 2011 compared to PLN 41 mln in 2010. The analysis of the balance sheet shows an increase of PLN 134 mln in the company s balance sheet total and an increase of PLN 876 mln in the balance sheet total of Echo Investment Capital Group. Liabilities of Echo Investment Capital Group increased by 27%, however its cash assets increased at the same time. The analysis of financial ratios of Echo Investment Capital Group (both debt and liquidity ratios) prove that the increase of debt carries no liquidity risk. Ratios remain at safe levels and prove its good financial condition, which is presented in the chart below: Debt ratios 2011 2010 Total debt ratio 56.1% 52.6% Total liabilities/total assets Debt to equity ratio 145.8% 126,0% Total liabilities/equity Current liquidity ratio 1.91 1.87 Current assets/short-term liabilities Quick liquidity ratio Current assets stocks/short-term liabilities 1.13 0.94 In 2011 Echo Investment Capital Group implemented its strategic objective of a long-term and stable growth of the company s value. The company continued activities aimed at building a fast and modern organization ensuring efficient implementation of high-margin projects in the retail, office, residential and hotel sectors as well as effective management of the portfolio of its own projects. The year 2011 was marked by the construction of a lot of projects, such as the extended Galeria Echo shopping centre in Kielce, the third stage of the Malta Office Park building in Poznań, the Aquarius office building in Wrocław, the Osiedle Południowe estate of single-family houses in Dyminy near Kielce, the residential buildings: Klimt House in Warsaw, Kasztanowa Aleja and Pod Klonami in Poznań, Dom pod Słowikiem in Kraków and Przy Słowiańskim Wzgórzu in Wrocław. In 2011 the Group s activities also focused on continuing the preparation of other projects for development. The company continues its work on the optimisation of development processes of individual projects. It carefully observes the situation on the property market. The decisions concerning the development of concrete projects are made individually on the basis of up to date analyses. In order to minimize the risk related to unfavourable market changes the company does not exclude dividing its projects into stages like it has been done so far. In 2011 the Group concentrated on the commercialization of its projects, which contributed to high occupancy rates in its retail projects developed in Łomża and Bełchatów as well as the office project in Wrocław. Galeria Echo, REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 4

which was handed over to users in 2011, turned out to be a great success. In connection with further development of projects for lease in the following years, the commercialization process will be continued with regard to projects in the pipeline in the years to come. In 2011 the company observed the market in order to acquire more investment plots, as a result of which it extended its land bank by some new areas. The company intends to continue its observations of the market in order to find good location for investment projects. The large land bank enabling the company to develop projects in all market segments provides the Group with good development prospects for the future while the preparation work, which has already been partly completed, ensures undisturbed launch of subsequent projects in the following years, thanks to which, according to the information provided by the Management, the Group will be able to continue its fast and stable growth. By 2017 the Group is planning to launch 20 office projects, 15 shopping centres and 24 residential projects (including 2 projects involving the sale of plots with house designs) on the plots it owns. Their leasable area will amount to app. 782,000 sqm and the saleable area to 225,000 sqm (including 57,000 sqm of plots with designs of detached houses). The company s operations in 2011 were recognized by the development industry, which was reflected in granting Galeria Echo in Kielce an award in the Best Enlarged Retail Development category at the MAPIC international real estate fair in Cannes. 2. REPORT ON THE OPERATIONS OF THE SUPERVISORY BOARD IN 2011 In 2011, the Supervisory Board of Echo Investment S.A. was acting in compliance with its regulations, the company s Articles of Association, Best Practices of Warsaw Stock Exchange Listed Companies adopted by the company and valid provisions of law, while focusing on the company's reasonable interest and benefit of its Shareholders at the same time. In 2011, members of the Supervisory Board, particularly including the Chairman and the Vice Chairman, maintained regular contact with members of the Management Board of the company while engaging in frequent consulting sessions regarding specific areas of the company's operations. The Supervisory Board was exercising regular supervision over the activity of the company in all areas. The range of these duties included: - analysis and assessment of current financial results and interim financial statements of the company, - analysis of data received from the Management Board concerning the company's operations, - approval of liabilities being contracted by the company and agreements being signed with respect of the company's business. The structure of the Supervisory Board did not change in 2011. The structure of the Supervisory Board as at December 31, 2011 was as follows: - Wojciech Ciesielski Chairman of the Supervisory Board - Andrzej Majcher Vice Chairman of the Supervisory Board - Mariusz Waniołka Vice Chairman of the Supervisory Board - Robert Oskard Member of the Supervisory Board - Karol Żbikowski - Member of the Supervisory Board - Tomasz Kalwat Member of the Supervisory Board In 2011, the Supervisory Board passed 18 resolutions in the course of performing its duties, regarding issues arising out of the Polish Code of Commercial Companies, and the Articles of Association of Echo Investment S.A. The Audit Committee of Echo Investment S.A. In accordance with the provisions of the Regulations of the Audit Committee of March 18, 2011, the Audit Committee is a permanent committee of the Supervisory Board of Echo Investment S.A. The regulations of the Audit Committee were published on the website of Echo Investment S.A. in the section dedicated to investor relations at: www.echo.com.pl/statut_i_regulaminy.php. REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 5

In the reporting period the Audit Committee comprised of: - Mariusz Waniołka Chairman of the Audit Committee, - Robert Oskard Member of the Audit Committee, - Karol Żbikowski Member of the Audit Committee, In 2011 work of the Audit Committee focused on: - the monitoring of the completeness and accuracy of the information published in interim financial reports of the company and Echo Investment Capital Group before their publication, - monitoring all problems, reservations and instructions resulting from the audit/review of financial statements, consultations with the auditor and the review of the completeness, preciseness and reliability of the financial information contained in Company s financial reports as well as reports of the entities comprising Echo Investment Capital Group, - assessment of the conformity of the accounting principles applied with the current regulations, - analysis of significant contracts concluded by the company and Echo Investment Capital Group, - systematic monitoring of the company s and Echo Investment Group s budgets, - systematic participation of particular Audit Committee members in the meetings of the Management Board, Supervisory Board and the General Meeting of Echo Investment Shareholders, while remaining at the disposal of the shareholders in order to answer their potential questions concerning the functioning of the Audit Committee. - review of the efficiency of particular elements of the internal control system, including financial reporting and security of IT solutions used, Evaluation of the internal control system and risk management at Echo Investment S.A. One of the responsibilities of the Audit Committee was the review of the effectiveness of the company s internal control system. On the basis of the observations made, the Audit Committee confirmed the effectiveness and proper functioning of the internal control system. According to the Audit Committee the basic features influencing the effectiveness of the control system included: - fixed and transparent organization structure - competence, knowledge and experience of the people participating in the internal control system, - management s supervision over the system and regular assessment of the company s operations, - verification of financial reports by an independent statutory auditor. Optimality and effectiveness of the control system are influenced by the automation in the form of: - decision ceilings, - supervision of the limits of particular employees, independent of people who have the limits at their disposal, configuration of the posting accounts, - automation of payments, - the ekod system (Electronic Document Circulation Card), including expense acceptance and preliminary assignment of costs. The detailed description of the main features of Echo Investment S.A. internal control systems and risk management with reference to the preparation of financial and consolidated statements has been presented by the Management Board in the Report on Application of Corporate Governance Principles in 2011. 3. STATEMENT OF THE SUPERVISORY BOARD CONCERNING ALLOCATION OF PROFIT The Supervisory Board has acquainted itself with the proposals of the Management Board of Echo Investment S.A. concerning exclusion of the net profit earned by Echo Investment S.A. in 2011 from division among shareholders and allocating the whole profit to the supplementary capital with the aim of financing current operations of Echo Investment S.A. The Supervisory Board accepts the Management Board's stand and intends to communicate such information to the General Meeting of Shareholders. REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 6

4. REQUESTS OF THE SUPERVISORY BOARD TO THE GENERAL MEETING OF SHAREHOLDERS The Supervisory Board hereby requests the General Meeting of Shareholders to: a) approve the Management Board report on the operations of Echo Investment S.A. in 2011, b) approve the separate financial statements of Echo Investment S.A. for 2011, c) approve the Management Board report on the operations of Echo Investment Capital Group in 2011, d) approve the consolidated financial statements of Echo Investment Capital Group for 2011, e) pass a resolution on exclusion of the net profit earned by Echo Investment S.A. in 2011 from distribution to shareholders and allocating the profit in its entirety to the supplementary capital with the aim of financing current operations of Echo Investment S.A., f) grant a vote of acceptance to members of the Management Board confirming the discharge of their duties in 2011, g) grant a vote of acceptance to members of the Supervisory Board confirming the discharge of then duties in 2011. Chairman of the Supervisory Board Wojciech Ciesielski... Vice Chairman of the Supervisory Board Andrzej Majcher... Vice Chairman of the Supervisory Board Mariusz Waniołka... Members of the Supervisory Board: Robert Oskard.. Karol Żbikowski. Tomasz Kalwat. Kielce, May 17, 2012 REPORT OF THE SUPERVISORY BOARD OF ECHO INVESTMENT S.A. 7