POLNORD SA CAPITAL GROUP

POLNORD SA CAPITAL GROUP CONSOLIDATED REPORT FROM 1 JANUARY 2013 TO 31 DECEMBER 2013 GDYNIA, 21 MARCH 2014

THE CONSOLIDATED REPORT 2013 INCLUDED: A. LETTER OF PRESIDENT B. MANAGEMENT REPORT ON ACTIVITIES OF POLNORD SA CAPITAL GROUP FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013 C. CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS D. STATEMENT OF THE MANAGEMENT BOARD OF CONSOLIDATED FINANCIAL STATEMENT FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013 E. STATEMENT OF THE MANAGEMENT BOARD ON THE ENTITY AUTHORISED TO AUDIT FINANCIAL STATEMENTS F. INDEPENDENT AUDITOR S OPINION OF THE OF THE CONSOLIDATED FINANCIAL STATEMENT FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013 G. INDEPENDENT AUDITOR S REPORT OF THE CONSOLIDATED FINANCIAL STATEMENT FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013

LETTER OF PRESIDENT 3 A. LETTER OF PRESIDENT

LETTER OF PRESIDENT 4 Dear Sirs and Madams, On behalf of the Management Board of Polnord SA and myself I present the Consolidated Annual Report of the for the year 2013. This document is directed to our shareholders, bondholders, capital and financial market participants and to other stakeholders, including in particular the Customers and employees. The Polnord Capital Group concentrates its business on the Polish property development market. The market is strongly connected with the economic situation in our country. In Q2 2013, after five quarters of downward trend, the economic growth rate stopped decelerating in Poland, which indicates that in 2013 the macroeconomic situation became stabilised. Low interest rates were among the factors which stimulated the housing market. Notwithstanding the mortgage loans cost cuts, a strong outflow of capital from low-interest deposits to the real estate market was observed. These trends resulted in slowing down the five-year declining trend in prices of apartments, and there are many reasons to believe that the trend will reverse with the prices starting to grow. For the Polnord Capital Group, 2013 was a year of many changes, challenges and successes. Starting at the beginning of 2013, each consecutive quarter brought significant increase in sales. The fourth quarter ended with the record net result of 401 apartments sold. The sales during the entire 2013 amounted to 1,094 apartments, which is the third result on the market among the listed companies. In comparison, in 2012 906 apartments were sold. As at the end of 2013, the Polnord Capital Group was implementing 10 multi-stage residential projects comprising 1,600 apartments with 85 thousand sq. m of unit usable area (UUA). In 2013, the Group commenced construction of 934 units with the total area of approx. 47 thousand sq. m. The recently commenced development projects are located mainly in Gdańsk ( Dwa Tarasy ) and Ząbki near Warsaw ( Neptun ), and the third stage of the Warsaw investment ( Śródmieście Wilanów ), as well as the next stage of the investment in Olsztyn ( Osiedle Tęczowy Las ). Moreover, through the acquisition of 50% of shares in Semeko Aquasfera Sp. z o.o., Polnord Group participated in realization of the Aquasfera project in Reda near Gdynia. In 2013, the Polnord Capital Group generated net profit in the amount of PLN 4.758 thousand, and its sales revenues reached the level of PLN 241.776 thousand. Revenues were generated mainly by the 852 units handed over for use, constructed within the housing projects located in Warsaw, Tricity, Wrocław and Szczecin. As at 31.12.2013, the Group offer included 1,316 premises. In 2014, the Group plans to launch 16 investments. 12 constitute subsequent phases of the projects already being implemented, while the other 4 are investment projects initiated, by Polnord itself or with partners, in new attractive locations in Warsaw, Tricity and Wrocław. The projects to be launched may potentially expand the offer by at least 2,200 premises with their total usable area of approx. 123 thousand sq. m. 2013 was a year of continued actions aiming at optimising the effectiveness of the Group s organisational structure and at reducing indebtedness. The results of these efforts are mirrored in the systematic decrease in selling, general and administrative costs, and the Group s indebtedness level. Aiming at further material cost-cutting we also endeavour to realise the assets which do not belong to the core business activity of the Group or to its adopted strategy. An important element, which has a positive effect on our financial result and cash position, is the pursuit of compensations due to the Group from the Capital City of Warsaw for the land designated for construction of public roads and for takeover by the relevant enterprise of the infrastructure constructed within the Miasteczko Wilanów area in Warsaw.

LETTER OF PRESIDENT 5 I would like to use this opportunity to thank all the Employees and Associates of the Polnord Capital Group, whose engagement and professionalism made it possible to achieve good results in the past year. I would like to thank our shareholders, bondholders, and business partners we appreciate your trust and look forward to fruitful cooperation in the current year. Please be assured that we will make all efforts to continue building a leadership position on the housing market, and to maximize the value of the Company, in the interests of its shareholders. Yours faithfully, Piotr Wesołowski President of the Management Board Polnord SA

Directors Report for 2013 6 B. MANAGEMENT REPORT ON ACTIVITIES OF POLNORD SA CAPITAL GROUP FOR THE PERIOD FROM JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013

Directors Report for 2013 7 SPIS TREŚCI I. COMPANY INFORMATION... 9 1 INTRODUCTION 9 2 MARKET ENVIROMENT 10 3 POLNORD SA CAPITAL GROUP STRATEGY 11 4 SUMMARY OF ACTIVITIES IN 2013 STRATEGY IMPLEMENTATION 11 5 DIVIDENT POLICY 14 6 COMPOSITION OF THE POLNORD CAPITAL GROUP SA 15 7 GOVERNING BODIES OF THE COMPANY 21 8 REMUNERATION AND CASH AWARDS PAID, DUE TO THE MANAGEMENT AND SUPERVISORY BOARD OF THE COMPANY 26 9 SHAREHOLDERS HOLDING AT LEAST 5% OF THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING OF THE COMPANY 28 II. ACTIVITIES OF THE CAPITAL GROUP... 34 1 MAIN PRODUCTS, GOODS AND SERVICES 34 2 MAIN SALES MARKET 34 3 THE GROUP S DEPENDENCE ON PROVIDERS AND RECIPIENTS 34 4 OPERATIONAL ACTIVITIES OF THE GROUP 35 5 DEVELOPMENT PROJECTS INCLUDED IN THE INCOME STATEMENT (INCLUDING COMPETED PROJECTS) 38 III. FINANCIAL DATA... 40 1 CONSOLIDATED PROFIT AND LOSS ACCOUNT - COMMENT 40 2 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) - COMMENTS 42 3 FACTORS AND EVENTS, ESPECIALLY THOSE OF A NON-TYPICAL CHARACTER, THAT HAD AN IMPACT ON THE PROFIT/LOSS OF THE COMPANY 48 4 DIFFERENCES BETWEEN FINANCIAL RESULTS AND A RECENTLY PUBLISHED FORECAST 48 5 ASSESMENT OF ABILITY TO FULFIL INVESTMENT PLANS 48 IV. OTHER NOTES AND EXPLANATIONS... 49 1 OTHER SIGNIFICANT EVENTS IN 2013: 49 2 LITIGATIONS PENDING BEFORE COURT, RELEVANT ARBITRATION AUTHORITIES, OR PUBLIC ADMINISTRATION AUTHORITIES54 3 THE INFORMATION ON THE CONCLUSION BY POLNORD SA OR ITS SUBSIDIARY OF ONE OR MORE TRANSACTIONS WITH RELATED PARTIES, IF THEY ARE MATERIAL, INDIVIDUALLY OR JOINTLY, AND IF THEY ARE NOT ARM'S-LENGTH TRANSACTIONS. 57 4 ISSUES OF SECURITIES USE OF INFLOWS FROM THE ISSUE 57 5 INDEBTEDNESS OF THE CAPITAL GROUP 59 6 INFORMATION ON GRANTED/RECEIVED SURETIES AND GUARANTEES 60 7 INFORMATION ON CONTRACTED AND TERMINATED LOAN AGREEMENTS 61 8 INFORMATION ON CONTRACTED, GRANTED AND TERMINATED LOAN AGREEMENTS 62 9 IMPORTANT RISK FACTORS AND THREATS 63 10 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE NOT INCLUDED IN THIS REPORT, THAT MAY HAVE A SIGNIFICANT IMPACT ON THE FUTURE FINANCIAL RESULTS 65 V. STATEMENT IN THE APPLICATION OF CORPORATE GOVERNANCE... 66 1 RULES OF CORPORATE GOVERNANCE BY WHICH THE COMPANY IS BOUND AND THE PUBLICLY ACCESSIBLE LOCATION OF THE TEXT 66 2 INFORMATION ON THE EXTENT TO WHICH THE COMPANY DIVERGED FROM THE RULES OF CORPORATE GOVERNANCE, SPECIFICATION OF SUCH PROVISIONS AND EXPLANATION FOR NOT APPLYING THEM 66

Directors Report for 2013 8 3 OPERATION OF THE GENERAL MEETING AND ITS ESSENTIAL RIGHTS, RIGHTS OF THE SHAREHOLDERS AND THE MODE OF EXERCISING THESE RIGHTS 68 4 COMPOSITION, RULES FOR CHANGING THE COMPOSITION AND OPERATION OF THE COMPANY'S MANAGING AND SUPERVISORY BODIES AND THEIR COMMITTEES 69 5 DESCRIPTION OF THE MAIN CHARACTERISTICS OF THE COMPANY'S INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN RELATION TO THE PROCESS OF PREPARING FINANCIAL STATEMENTS 74 6 SHAREHOLDERS HOLDING, DIRECTLY OR INDIRECTLY THROUGH SUBSIDIARIES, SIGNIFICANT STAKES OF SHARES 75 7 HOLDERS OF SECURITIES VESTED WITH SPECIAL RIGHTS OF CONTROL 77 8 LIMITATIONS REGARDING THE RIGHT TO VOTE, SUCH AS A RESTRICTED RIGHT TO VOTE BY HOLDERS OF A SPECIFIC SHARE OR NUMBER OF VOTES, TIME RESTRICTIONS ON THE RIGHT TO VOTE OR PROVISIONS UNDER WHICH, IN COOPERATION WITH THE COMPANY, CAPITAL RIGHTS LINKED TO SECURITIES ARE SEPARATED FROM THE HOLDING OF SECURITIES 77 9 RESTRICTIONS ON THE TRANSFER OF THE OWNERSHIP TITLE TO THE COMPANY'S SECURITIES 77 10 RULES FOR AMENDING THE COMPANY'S STATUTE 78

Directors Report for 2013 Chapter I 9 I. COMPANY INFORMATION Unless the context indicates otherwise, the terms Company, Polnord SA, Polnord, Parent Company or other terms with similar meanings and their grammatical forms shall mean Polnord SA, while the terms: Group, Capital Group, POLNORD Capital Group or other terms with similar meanings and their grammatical forms shall mean the Capital Group composed of Polnord SA and entities subject to consolidation. The term Report refers to this Consolidated Annual Report for 2013, and Directors Report applies to the Report of the Management Board on the business operations of the for the period from 01.01.2013 to 31.12.2013, and Consolidated Financial Statements means the consolidated financial statements of the Polnord SA Capital Group for the period from 01.01.2013 to 31.12.2013. 1 INTRODUCTION Polnord SA is one of the most experienced companies on the construction and developer market in Poland. It was established in 1977 as a construction export general contractor. In 1988, it was named Polnord. In 1999, the Company's shares were introduced to trading on the Warsaw Stock Exchange main market. The Company is currently listed in swig 80 and WIG-Deweloperzy indices. Since 2007, the core business of Polnord Group has been development and sale of residential and commercial properties. Polnord implements development projects through special purpose vehicles, which are established without or with partners. Polnord Group operates mainly on the Polish market (especially in Warsaw, Tricity, Szczecin, Łódź and Wrocław), and to a smaller and smaller extent on the Russian market. The Company's objective is to maximize the value of the Company, in the interests of its shareholders, by building a leadership position on the housing market. According to the Polnord Group strategy adopted in late 2012, the group is firmly committed to increasing the volume of housing sales by focusing on the segment of residential real estate in the most absorbent and fast-growing markets in Poland - Warsaw and Tricity. Polnord SA is a founding member of the Polish Association of Developers with its purpose being promoting a code of good practices in the customer developer relations. Polnord SA holds the Developer s Certificate continuously since 2000 which is awarded by the Polish Association of Developers and confirms the Company s professionalism as well as guarantees its integrity in acting for the benefit of a customer. Polnord Group has one of the largest land reserves among Polish developers, allowing at present to carry out projects with usable area of nearly 1 million sq. m. Employing the experience and know-how from the investing and developing activities, Polnord has completed its projects in Warsaw (housing estates: Dobry Dom and Śródmieście Wilanów at ul. Kazachska, as well as Królewskie Przedmieście at Aleja Rzeczypospolitej on Pola Wilanowskie), in Łódź (City Park complex at ul. Żeligowskiego), in Gdańsk (housing estates: Ostoja Myśliwska at Morena and 2 Potoki at ul. Czermińskiego/Przywidzka), in Sopot (Sopocka Rezydencja at ul. Łokietka), in Olsztyn (Osiedle Tęczowy Las) in Szczecin (Ku Słońcu at ul. Kazimierska). Moreover, for several years it also successfully implements its investments in commercial premises sector, managing Wilanów Office Park project in Warsaw.

Directors Report for 2013 Chapter I 10 2 MARKET ENVIRONMENT The situation on the Polish real estate development market was steadily improving since the beginning of 2013. The factors stimulating demand on the housing market include historically low interest rates and relatively low real estate prices. The level of interest rates translated into a higher creditworthiness of individuals connected with lower costs of debt servicing. Furthermore, since the beginning of 2013, a strong outflow of capital from low-interest deposits to, among other things, the real estate market, was observed. At the beginning of 2013 the downward trend in flats prices slowed down. Figure 1. NBP reference rate in 2011-2013 The activity of flats buyers significantly increased in the middle of the year. Significant impact on demand resulted from the information on Recommendation S III entering into force since 2014, accompanied by noticeable decreases in prices. In accordance with the new provisions of the Recommendation the mortgage loans financing 100% of the real property price disappeared from the banks offers. The minimum own contribution required since the beginning of the new year amounts to 5%. Source: NBP In 2014, the housing market, especially in the segment of popular flats, will be affected by the Mieszkanie dla Młodych government support programme. In 2004 the government will earmark PLN 600 million for subsidies to own contribution, which will to some extent mitigate the consequences of the recommendation S III entering into force at the same time and will increase the creditworthiness of buyers taking advantage of this programme in real terms. Figure 2. Number of flats sold on the primary market in Warsaw, Tricity, Crocow, Wrocław, Poznań, and Łódź from the first quarter of 2011 to the fourth quarter of 2013 (in thousands) The fund for a flat for rent will be the second programme of a significant importance to the real estate market. The programme, prepared by the government in cooperation with Bank Gospodarstwa Krajowego, provides for an investment of PLN 5 billion in order to purchase real properties for rent. The fund s portfolio will eventually include 20 thousand flats, including entire buildings that the funds plans to purchase from developers. Works are underway on the final shape of the programme but according to the announcements a purchase of the first properties is expected as early as in the first half of 2014. Source: REAS

Directors Report for 2013 Chapter I 11 3 POLNORD SA CAPITAL GROUP STRATEGY Polnord s objective is to maximise the value of the Company, in the interests of its Shareholders, by building a leadership position on the housing market and optimising the operating activities. The Company s strategy adopted at the end of 2012 is based on four pillars. Significant increase in the volume of units sold The Group's strategic objective is to achieve annual sales in excess of 1,500 units already in 2014. To achieve this goal a dynamic extension of the offer is necessary. The Group plans to launch the implementation of 16 new development projects or consecutive phases of the already implemented projects by the end of 2014, which will increase the Group's offer by approximately 2,200 flats. At the same time, Polnord is constantly looking for new investment opportunities that will enable an increase in sales. The Company is preparing to buy land in prime locations, e.g. in Warsaw and Tricity, and is starting new, high-margin investments in cooperation with its business partners Diagram 1. Strategy Focus of activities on the housing market Polnord focuses its activities on housing projects on the Polish market, particularly in Warsaw and Tricity and their suburbs. These are very absorbent and fast-growing markets which enable profitable development investments. The vast experience of the Company and its knowledge of local markets is a competitive advantage of Polnord. Reduction of selling, general and administrative expenses In 2013, the Company continued to reduce operating costs, in particular selling, general and administrative expenses. The Group's objective was to reduce in 2013 the selling, general and administrative expenses by approximately 17-20% compared to 2012, and in subsequent years to stabilise them at approximately PLN 28 million per year (excluding expenses of Fadesa Polnord Poland and its subsidiaries). Debt reduction The strategic objective of the Polnord Management Board is to considerably reduce the Group s indebtness. Funds for the debt reduction will come primarily from the sale of non-operating assets that are not used in the principal operations of the Company and from compensations received. Polnord plans to reduce net consolidated debt by 1/3 as compared to net debt as of 31.12.2012, i.e. to the amount of approximately PLN 425 million by the end of 2014. It means that in 2014 Polnord plans to reduce the Group s debt about PLN 100 million, as net debt as at 31.12.2013 amount PLN 537 million. 4 SUMMARY OF ACTIVITIES IN 2013 STRATEGY IMPLEMENTATION Focus of activities on the housing market and increase in the volume of units sold As at the end of 2013, the Polnord Capital Group was implementing 10 multi-stage residential projects comprising 1,600 units with the total usable area of 85 thousand sq. m of unit usable area (UUA). By the end of 2013, the Group commenced construction of 934 units with the total area of approx. 47 thousand sq. m developed as part of investments in Warsaw, Tricity, Wrocław and Olsztyn. Under IFRS, sales revenues are recognized in profit or loss at the time of the handover of the premises, which does not fully reflect the Group s activity in the reporting period. In order to present the results of the Group s

Directors Report for 2013 Chapter I 12 activity in 2013 and in Q4 2013 table 1 below was prepared, showing the impact of the agreements signed in 2013 separately for Q4 2013 on the result and operating cash flows that will be recognized in the financial statements at the time of handover of the units. Reduction of selling, general and administrative expenses Irrespective of the intensification of sales activities, the Group continues activities aimed at the reduction of its selling, general and administrative expenses which in 2013 amounted to PLN 34,705 thousand, a decrease of 28% compared to the last year with PLN 48,175 thousand in 2012. It is the lowest level of selling, general and administrative expenses since 2007. Debt reduction In 2013 gross interest debt decreased by PLN 112,929 thousand, while net interest debt decreased by PLN 98,721 thousand. The charts below show the dynamics of the selected financial and operational data.

Directors Report for 2013 Chapter I 13 Table 1. Expected operating income and planned direct margin on sales from units sold on 2013 Investment 2013 4Q 2013 number 1) of premises sold revenues 2) direct margin on sales 2) * direct cost allocated to land 2) ** net operating income 2) *** number 1) of premises sold revenues 2) direct margin on sales 2) * direct cost allocated to land 2) ** net operating income 2) *** [units] [PLN 000] [PLN 000] [PLN 000] [PLN 000] [units] [PLN 000] [PLN 000] [PLN 000] [PLN 000] Królewskie Przedmieście 1 708 83 125 208 Investment sold out Dobry Dom 3 2 088 222 470 692 Investment sold out Śródmieście Wilanów (build. A) 66 29 589 8 580 5 965 14 545 14 6 942 2 013 1 400 3 413 Śródmieście Wilanów (build. C) 79 38 018 9 505 6 103 15 608 18 8 390 2 098 1 347 3 445 Śródmieście Wilanów (build. D) 75 21 922 5 480 4 270 9 750 43 11 520 2 880 2 244 5 124 Neptun 16 4 667 1 097 526 1 623 11 3 207 754 362 1 116 Ostoja Myśliwska 47 14 968 4 426 720 5 146 10 3 976 1 262 191 1 453 Apartamenty Albatros 1 420-120 120 1 420-120 120 2 Potoki I 19 3 524 704 357 1 061 4 721 144 73 217 2 Potoki II 57 9 060 1 359 1 020 2 379 22 3 460 519 390 909 2 Potoki III 17 2 845 142 295 437-10 1 1 2 Sopocka Rezydencja 43 23 308-4 662 19 043 14 381 8 4 795-959 3 792 2 833 Dwa Tarasy I 28 920 184 123 307 28 920 184 123 307 Aquasfera 76 9 135 2 353 1 468 3 821 76 9 135 2 353 1 468 3 821 Osiedle Tęczowy Las (build. 4) 8 1 942 562 114 676-181 52 11 63 Osiedle Tęczowy Las (build. 5) 49 11 210 1 569 567 2 136 24 5 607 785 284 1 069 Osiedle Tęczowy Las (build. 6) 3 467 93 30 123 3 467 93 30 123 Ku Słońcu I 21 6 407 896 1 510 2 406 7 2 189 306 516 822 Ku Słońcu II (build. 2) 94 23 669 3 550 3 968 7 518 15 5 855 878 982 1 860 Ku Słońcu II (build. 1) 25 3 212 418 558 976 25 3 212 418 558 976 City Park 30 8 051-2 490 2 490 1 213-384 384 Ostoja Wilanów 209 47 048 8 268 9 522 17 790 47 11 213 3 252 2 355 5 607 Osiedle Innova 127 17 009 5 282 3 231 8 513 44 5 974 1 972 1 135 3 107 TOTAL 1 094 280 187 50 111 62 595 112 706 401 88 407 19 005 17 766 36 771 1) Data not weighted with Polnord s share 2) Data weighted with Polnord s share * direct margin on sales calculated as revenue from sales reduced by costs of land, design and workmanship (excluding financial costs) ** as at the balance sheet date, the land is owned by the Group. The investment implementation will allow return on investment *** net income calculated as revenue from sales contracts, reduced by direct costs and increased by the value of the land The above figures represent estimates to the Management Board s best knowledge at the date of this Report.

Directors Report for 2013 Chapter I 14 Figure 3. Selected financial and operational data Net profit and gross sales profitablilty Net sales of units [kpln] 12 000 10 000 8 000 13,1% 10 655 9 498 13,4% 13,3% 19,4%* 6 000 9,2% 3 700 8,0%* 4 000 6,4% 4,5% 1 877 1 455 1 269 1 888 2 000 146 0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 25% 20% 15% 10% 5% 0% 450 400 350 300 250 200 150 100 50 0 [units] 401 289 292 289 283 266 253 213 210 198 212 234 186 178 177 190 138 121 131 145 127 128 130 99 124 123 77 91 84 95 63 50 49 70 82 93 76 27 48 5 19 25 28 16 31 1083 906 1094 [units] 1200 1000 800 600 400 200 0 * corrected by a write-down for inventories, that does not affect development projects Net sales Polnord Other (Rosja, Aquasfera) Quarterly net sales Fadesa Selling, general and administrative expenses Net interest debt 5 DIVIDENT POLICY As far as the dividend policy is concerned, the Management Board applies the principle of making payments in proportion to the amount of generated profit and to the financial position of the Company. The Company intends to pay regular dividends in the future. When making proposals concerning the possibility of dividend payout, the Management Board takes into account the need to ensure to the Company the liquidity and capital necessary for business development. As at the date of the Report, the Issuer's Management Board does not plan to recommend the payment of dividend for the years 2013-2015. This situation may change, if the Group obtains significant inflows in the form of compensation from the Capital City of Warsaw and MPWiK described in Chapter IV, item 2. of the Directors Report. In the last two financial years, the Company did not declare and did not pay dividends due to the decision to keep in the Company funds for investments and business development and to secure liquidity due to the slowdown on the real estate market. On 28.06.2013 the Company's Ordinary General Meeting, by way of resolution No 5/2013, decided to fully allocate Polnord SA 2012 net profit to supplementary capital.

Directors Report for 2013 Chapter I 15 6 COMPOSITION OF THE POLNORD CAPITAL GROUP SA Composition of the Polnord Capital Group SA includes Polnord SA as the parent company and companies subject to consolidation. The Group s financial statements were prepared for the financial year ended 31.12.2013 and cover the period from 01.01.2013 to 31.12.2013, and they contain relevant comparative data as at 31.12.2012 and for the period from 01.01.2012 to 31.12.2012. The duration of the Parent Company and companies comprising the Group as at 31.12.2013 is indefinite. Table 2. Basic Company data Full name (company name) POLNORD Spółka Akcyjna Registered office 81-310 Gdynia, ul. Śląska 35/37 Number in the National Court Registered (KRS) 0000041271 Tax identification Number (NIP) 583-000-67-67 Statistical Identification Number (REGON) Registered share capital PKD (Polish Classification of Business Activities) Website 000742457 65.266.054 PLN (paid in full) 6810 Z buying and selling of own real estate www.polnord.pl Detailed information on subsidiaries, mutually dependent entities and associates in the Group as at 31.12.2013 are presented in Chapter VI, item 2 of the Consolidated Financial Statements. The diagram presented below illustrates the structure of organizational and capital links of Polnord as at 31.12.2013.

Directors Report for 2013 Chapter I 16 POLNORD SA Polnord Szczecin Ku Słońcu Sp. z o.o. (formerly Polnord Szczecin I Sp. z o.o.) 100% shares Polnord Łódź City Park Sp. z o.o. (formerly Polnord Łódź II Sp. z o.o.) 100% shares Polnord Sopot II Sp. z o.o. 100% shares 100% shares Fadesa Polnord Polska Sp. z o.o. Stacja Kazimierz Sp. z o.o. 49% shares 50% shares Polnord Olsztyn Tęczowy Las Sp. z o.o. (formerly Osiedle Tęczowy Las Polnord Spółka Akcyjna SKA) 100% shares Polnord Warszawa-Ząbki Neptun Sp. z o.o. (formerly Polnord Wilanów B2 Sp. z o.o.) 100% shares Polnord Gdańsk Dwa Tarasy Sp. z o.o. 100% shares Śródmieście Wilanów Sp. z o.o. (formerly Polnord Warszawa - Wilanów I Sp. z o.o.) 100% shares SURPLUS Sp. z o.o. (formerly Skarbiec Nieruchomości 3 Sp. z o.o.) 100% shares SURPLUS Sp. z o.o. SKA (formerly Skarbiec Nieruchomości 3 Sp. z o.o. SKA) 100% shares Stacja Kazimierz Sp. z o.o. SKA 50% shares Stacja Kazimierz I Sp. z o.o. 50% shares Stacja Kazimierz I Sp. z o.o. SKA 50% shares Semeko Aquasfera Sp. z o.o. 50% shares Polnord Marketing Sp. z o.o. 100% shares Stroj Dom ZSA (Rosja) 100% shares 10 H Sp. z o.o. 100% shares Polnord - Apartamenty Sp. z o.o. 100% shares Hydrosspol Sp. z o.o. w likwidacji 30% shares SURPLUS Sp. z o.o. Domitus SKA FPP Powsin Sp. z o.o. 100% shares Osiedle Innova Sp. z o.o. 100% shares FPP Osiedle Moderno Sp. z o.o. 100% shares Wilanów Office Park - budynek B1 Sp. z o.o. (formerly Polnord Warszawa - Wilanów III Sp. z o.o.) 100% shares Wilanów Office Park - budynek B3 Sp. z o.o. (formerly Polnord Warszawa - Wilanów IV Sp. z o.o.) 100% shares Consolideted using the full method Conolidated using the proportional method Not included in the consolidation Consolidated using the equity method Polnord Gdynia Brama Sopocka Sp. z o.o. 100% shares Moreover, Polnord has 1,757,295 shares in the share capital of Korporacja Budowlana Dom SA, corresponding to 1,757,295 votes, representing 17.70% of the share capital of Korporacja Budowlana Dom SA and 17.70% of the total voting rights in the general meeting of shareholders of Korporacja Budowlana Dom SA. A detailed description of the rules for preparing the consolidated financial statements is presented in chapter VI item 5 of the Consolidated Financial Statements, in section Additional Notes and Explanations.

Directors Report for 2013 Chapter I 17 Identification of the effects of changes in the structure of the Capital Group, including those resulting from mergers of businesses, acquisitions or disposals of the Company s Capital Group entities, long-term investments, division, restructuring and discontinuation of activity In 2013, there were the following changes in equity and organisational relations of Polnord: Entity name Description of the event Polnord subsidies and Registration of merger of companies On 02.04.2013, in the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register the merger of Polnord (the Acquirer ) with the following companies, wholly owned subsidiaries: Polnord - Łódź I Sp. z o.o. with its registered office in Gdynia, Polnord- Łódź III sp. z o.o. with its registered office in Gdynia, Polnord Nieruchomości Inwestycyjne Sp. z o.o. with its registered office in Gdynia, and PD Development sp. z o.o. with its registered office in Gdynia (the Acquired Companies ). The merger took place pursuant to Art. 492(1)(1) of the Commercial Companies Code, by transferring all assets of the Acquired Companies to the Acquirer (merger by acquisition) without increasing the share capital of the Acquirer. The merger of companies was accounted for in Polnord SA books of accounts under the acquisition method. The share of Polnord SA in the capital of all absorbed companies amounted to 100%. Registration of the capital increase Surplus Sp. z o.o. SKA On 03.04.2013 an increase in the share capital of Surplus Sp. z o.o. SKA from an amount of PLN 15 million to PLN 16 million i.e. the amount of PLN 1 million through the issuance of 1 thousand shares with a nominal value of PLN 1 thousand each and an issue value of PLN 100 thousand each was registered by the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register. The newly issued shares were acquired by Polnord SA in exchange for noncash contributions. Shareholders exercise rights to 6.001 shares with a total nominal value of PLN 6,001 thousand. The remaining shares are own shares of Surplus Sp. z o.o. SKA purchased for their redemption. Registration of the new company Polnord Gdańsk Dwa Tarasy Sp. z o.o. On 18.04.2013, Polnord Gdańsk Dwa Tarasy Sp. z o.o. with its registered office in Gdynia was established, with its share capital of PLN 5 thousand (100 shares of PLN 50 each). All shares were acquired and overlaid with a cash contribution by Polnord. The company was registered on 22.05.2013 in the Register of Entrepreneurs of the National Court Register by the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register Registration of the new company Stacja Kazimierz I Sp. z o.o. On 23.04.2013 Stacja Kazimierz I Sp. z o.o. with its registered office in Warsaw was registered by the District Court for the Capital City of Warsaw in Warsaw 13th Commercial Division of the National Court Register, with its share capital of PLN 5 thousand (100 shares of PLN 50 each). 50 shares with a total value of PLN 2.5 thousand were taken and overlaid with a cash contribution by Polnord SA; the remaining 50 shares with a total value of PLN 2.5 thousand were taken by MS Waryński Development SA.

Directors Report for 2013 Chapter I 18 Registration of the change in the company s name and transformation Osiedle Tęczowy Las PD Development Sp. z o.o. Spółka Komandytowo- Akcyjna On 10.05.2013 the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register registered the change of the company's name Osiedle Tęczowy Las PD Development Sp. z o.o. Spółka Komandytowo- Akcyjna into Osiedle Tęczowy Las Polnord Spółka Akcyjna Spółka Komandytowo- Akcyjna as Polnord SA as a successor of PD Development Sp. z o.o. became a general partner in the company. Subsequently, on 03.06.2013 the District Court for Gdańsk-Północ in Gdańsk, 8th Commercial Division of the National Court Register registered a transformation of Osiedle Tęczowy Las Polnord Spółka Akcyjna Spółka Komandytowo-Akcyjna into Polnord Olsztyn Tęczowy Las Spółka z ograniczoną odpowiedzialnością. The transformation took place in accordance with Art. 556 (2) and Art. 563 of the Commercial Companies Code. Registration of the new company 10 H Sp. z o.o. On 16.05.2013, 10 H Sp. z o.o. with its registered office in Gdynia was established, with its share capital of PLN 5 thousand (100 shares of PLN 50 each). All shares were acquired and and overlaid with a cash contribution by Polnord. The company was registered on 28.05.2013 in the Register of Entrepreneurs of the National Court Register by the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register. Registration of the new company Stacja Kazimierz I Sp. z o.o. Spółka Komandytowo- Akcyjna On 29.05.2013 Stacja Kazimierz I Sp. z o.o. Spółka Komandytowo-Akcyjna with its registered office in Warsaw was registered by the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register, with its share capital of PLN 50 thousand (100 shares of PLN 500 each). 50 series B registered shares with a total value of PLN 25 thousand were taken and overlaid with a cash contribution by Polnord SA, the remaining 50 series A registered shares with a total value of PLN 25 thousand were taken by MS Waryński Development SA. Conclusion of the agreement on the sale of shares for redemption Surplus Sp. z o.o. SKA On 24.06.2013 Surplus Sp. z o.o. SKA performing the preliminary agreement on the sale of shares for redemption of 18.09.2012 entered into agreement with a Polnord shareholder (successor to PD Development Sp. z o.o.) under which Surplus Sp. z o.o SKA, upon fulfilling the required conditions, purchased on 25.06.2013 4.951 thousand series B own shares with the numbers: 10,018-14,968 with a total nominal value of PLN 4,951 thousand. In accordance with Art.364 (2) of Commercial Companies Code Surplus Sp. z o.o. SKA does not exercise participation rights carried by its own shares. Entering into rights and obligations of the company Surplus Sp. z o.o. On 28.06.2013 Surplus Sp. z o.o. entered into the rights and obligations of Pompey Sp. z o.o. as general partner of Pompey Sp. z o.o. Domitus SKA with its registered office in Warsaw which has a capital contribution to the company in the amount of PLN 100. Acquisition of shares in the company Polnord SA On 08.07.2013, Polnord SA acquired 100% of shares of Pompey Sp. z o.o. Domitus SKA with its registered office in Warsaw, with the total nominal value of PLN 50 thousand.

Directors Report for 2013 Chapter I 19 Reduction of the share capital Surplus Sp. z o.o. SKA Pompey Sp. z o.o. Domitus SKA On 08.07.2013 the Extraordinary General Shareholder's Meeting of Surplus Sp. z o.o. SKA adopted a resolution on redemption of 33 own shares of the series A registered shares with a total nominal value of PLN 33 thousand and 14.917shares of the company's own series B registered shares with a total nominal value of PLN 14,917 thousand representing a total of 14,950 own shares with a total nominal value of PLN 14,950 thousand acquired by the Company for redemption from Surplus Sp. z o.o. and Polnord SA. On 08.07.2013 the Extraordinary General Shareholder's Meeting of Surplus Sp. z o.o. SKA also adopted a resolution on reduction of the share capital from PLN 16 million to PLN 1,050 thousand. Reduction of the share capital was subject to the procedure notifying the creditors of share capital reduction referred to in Art. 456 (1) of the Commercial Companies Code; in accordance with the decision of the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register issued on 15.11.2013. Registration of changing the name On 22.07.2013, a change of the name Pompey Sp. z o.o. Domitus SKA into Surplus Sp. z o.o. Domitus SKA was registered as well as change of its registered office of Warsaw into Gdynia were registered. Registration of the new company Stacja Kazimierz Sp. z o.o. On 06.09.2013, the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register entered Stacja Kazimierz Sp. z o.o., with its registered office in Warsaw, with its share capital in the amount of PLN 5 thousand (100 shares of PLN 50 each) into the register of entrepreneurs of the National Court Register. 50 shares with a total value of PLN 2.5 thousand were taken and overlaid with a cash contribution by Polnord SA; the remaining 50 shares with their total value of PLN 2.5 thousand were taken by MS Waryński Development SA. Registration of the new company Polnord Gdynia Brama Sopocka Sp. z o.o. On 16.09.2013, Polnord Gdynia Brama Sopocka Sp. z o.o. with its registered office in Gdynia was established, with its share capital of PLN 5 thousand (100 shares of PLN 50 each). All shares were acquired and overlaid with a cash contribution by Polnord. The company was registered on 09.10.2013 in the Register of Entrepreneurs of the National Court Register by the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register. Registration of the new company Stacja Kazimierz Sp. z o.o. SKA On 03.10.2013, the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register entered into the register of entrepreneurs of the National Court Register Stacja Kazimierz sp. z o.o. SKA, with its registered office in Warsaw, with its share capital of PLN 50,000 (100 shares of PLN 500 each). 50 series B registered shares with a total value of PLN 25 thousand were taken and overlaid with a cash contribution by Polnord SA, the remaining 50 series A registered shares with a total value of PLN 25 thousand were taken by MS Waryński Development SA.

Directors Report for 2013 Chapter I 20 Acquisition of shares Polnord SA Polnord- Apartamenty Sp. z o.o. On 07.10.2013, Polnord SA acquired from Semeko Grupa Inwestycyjna Sp. z o.o., with its registered office in Gdynia, 50% of shares in the SPV Semeko Aquasfera Sp. z o.o. with its registered office in Gdynia for the price of PLN 10 million. The shares were taken and overlaid with a cash contribution Registration of the capital increase On 28.10.2013 an increase in the share capital of Polnord-Apartamenty Sp. z o.o. from an amount of PLN 50 thousand to PLN 1,050 thousand was registered by the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register. Registration of the capital increase Surplus Sp. z o.o. Domitus S.K.A. On 18.12.2013 an increase in the share capital of Surplus Sp. z o.o. Domitus S.K.A. from an amount of PLN 50 thousand to PLN 3,550 thousand was registered by the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register. The following changes took place after the balance sheet date: Entity name Description of the event Transformation of the Company Surplus Sp. z o.o. SKA On 16.01.2014 the Extraordinary General Shareholder's Meeting of Surplus Sp. z o.o. SKA adopted a resolution on transformation of Surplus Sp. z o.o. SKA into a registered partnership (Polish spółka jawna). The transformation took place on 29.01.2014, i.e. at the moment of registering the registered partnership resulting from transformation of Surplus Sp. z o.o. SKA in the District Court for Gdańsk - Północ in Gdańsk, 8th Commercial Division of the National Court Register. Registering the capital increase Polnord Łódź City Park Sp. z o.o. On 20.01.2014 an increase in the share capital of Polnord Łódź City Park Sp. z o.o. from an amount of PLN 50 thousand to PLN 1,050 thousand was registered by the District Court for the Capital City of Warsaw in Warsaw, 8th Commercial Division of the National Court Register. As at 31.12.2013, the percentage of voting rights held by the Group in the subsidiaries, jointly controlled entities and in associates corresponded to the percentage held in the share capital of those entities. Changes in the methods of managing the Company and the Capital Group In 2013 no changes were introduced into the methods of managing the Company and the Capital Group. Companies excluded from consolidation Hydrosspol Sp. z o.o., a company under liquidation which ceased its operation was not included in the consolidated financial statements. The financial data of this company are insignificant from the perspective of the consolidated statements.

Directors Report for 2013 Chapter I 21 7 GOVERNING BODIES OF THE COMPANY Management Board As at 31.12.2013, the Company's Management Board was composed of: According to the Company's Statute, the Company s Management Board may be composed of 2 to 6 members, appointed for a joint three-year term of office. On 30.06.2011, the Company s Supervisory Board appointed the Company s Management Board for another joint three-year term of office which will end on the day of the General Meeting approving the financial statements of the Company for 2013. Short description of the Members of the Management Board: Piotr Wesołowski - President of the Management Board He is a graduate of the Gdańsk University of Physical Education. He has been active in the construction industry for over 20 years. In 1991 he established UNI-BUD MARMURY, a company in which he acted as the President of the Management Board. He disposed of the shares in April 2005 followed by establishing WES- BUD Nieruchomości, a developing company in which he acted until taking over the position of the Vice President of the Management Board in Polnord. Since 08.11.2012 he is the President of the Management Board of the Company and from 24.06.2005 to 07.11.2012 he was the Vice President of the Management Board. Tomasz Sznajder - Vice President of the Management Board He graduated from the Faculty of Management and Economics at the Gdańsk University of Technology and he participated in PhD studies at Warsaw School of Economics. Since 2009 he is the CFO in the Company. During 2006 2008 he acted as the Managing Director in the production plant in Kwidzyn (producing cardboard packaging) belonging to the large international capital group SCA in Sweden. During 1999 2005 he worked as a finance and banking expert and manager including 3 years in the Investment Banking Department in BGŻ SA, dealing with issues of debt securities. Since 08.11.2012 he is the Vice President of the Management Board of the Company and in the period from 14.08.2012 to 07.11.2012 he was a Member of the Management Board. Changes in the composition of the Company's Supervisory Board in 2013: Date Description of the event Name and surname 19.03.2013 19.03.2013 Resignation from the function of the Vice President of the Management Board Granting a commercial proxy to make declaration of intent with one member of the Management Board Andrzej Podgórski Anna Kreft Krystyna Mirecka

Directors Report for 2013 Chapter I 22 During the period from the balance sheet date to the date of publication hereof no changes in the composition of the Company's Management Board took place. Supervisory Board As at 31.12.2013, the Company's Supervisory Board was composed of: The Supervisory Board is composed of 5 to 7 members. The current three-year term of office of the Supervisory Board began on 28.06.2013 and will end on the day of the General Meeting approving the financial statements of the Company for 2015. Short description of the Members of the Supervisory Board: Andrzej Podgórski He is a graduate of the Faculty of Chemistry at the University of Warsaw, gained a PhD in chemical science. In 1991 he passed the exams required from the members of supervisory boards. During 1968 1990 he was scientifically active in Poland, Canada, the U.S. For three years (1991 1993) he worked at the Ministry of Ownership Transformation, initially as an advisor to the Deputy Secretary of State and since 1992 as the Director of the Capital Privatization Department, responsible for major transactions involving the sale of shares in the State Treasury companies. Over the period of 1994 2002 he worked in the banking and brokerage sector as a director and Member of the Management Board of Polski Bank Rozwoju SA and the President of the Management Board of Dom Inwestycyjny BRE Bank S.A. Since September 2002 to 01.11.2007 he was a Member of the Management Board of Prokom Investments SA, responsible for launching and financing projects, mainly in real estate development, as well as capital investment exit strategy. From 01.11.2007 to 19.03.2013 he was the Vice President of the Management Board of Polnord SA. He has vast experience in supervisory functions. For eight years (1998 2006) he was the Chairman of the Supervisory Board at Polnord. On 20.03.2013 the Extraordinary General Meeting appointed Mr. Andrzej Podgórski as a Member of the Supervisory Board and on 29.01.2014, during an Extraordinary General Meeting of Shareholders, he was entrusted the position of the Chairman of the Supervisory Board. Piotr Nadolski A graduate of Warsaw School of Economics, specialization in Quantitive Analysis and Information Systems, MA in 1998. He was a member of management boards in: Sandfield Capital a venture capital entity as President of the Management Board (2007-2012), V National Investment Fund Victoria SA (Ballinger Capital Group) as President of the Management Board of the national investment fund (2003-2007). He was also the Vice President of the Management Board of FUND.1 National Investment Fund (Ballinger Capital group). Over the period 1995 1996 Mr Piotr Nadolski worked as a financial analyst at Warta-Vita SA. Since 2010 he has been a partner at Lighthouse Capital. He has experience in supervisory functions. On 29.01.2014, during a General Meeting he was appointed the Vice Chairman of the Supervisory Board.

Directors Report for 2013 Chapter I 23 Piotr Chudzik A graduate of the Faculty of Economics at the University of Łódź. Holds MBA diploma from Richard Ivey School of Business, University of Western Ontario, Canada. He has over 20 year of experience in investment banking and corporate finance acquired during his professional career in Poland, CEE and in Canada. Over the period 1993 1996 he was a Member of the Management Board at Hambros Central Europe Sp. z o.o. During 1998 1999 he was a Vice President at Bankers Trust, Investment Banking Division. He was the Head of Corporate Finance at Deutsche Bank in Warsaw and in London from 1999 to 2007. During 2007 2013 he was the Managing Director for Central Europe at Nomura International, Investment Banking Division in London and a Member of the Management Board at Nomura Corporate Advisory CEE Sp. z o.o. in Warsaw. He passed the exam for candidates and members of supervisory boards of the entities in which the State Treasury is a shareholder, conducted by the Commission of the Treasury Minister. He has experience in performing supervisory functions. Marcin Dukaczewski He studied International Relations at the Faculty of Journalism and Political Science of the University of Warsaw. Since 2001 he was connected with Prokom Investments SA Capital Group where we participated in the main IT and capital projects within Prokom Software SA as well as in investment and commercial projects implemented by Bioton SA, Petrolinvest SA, Polnord SA and other entities of the Prokom Investments SA Group. He is the Vice President of the Management Board of Prokom Investments SA. He has experience in performing supervisory functions. Maciej Grelowski He has degree a degree in economics. Lecturer of management and corporate governance at universities he also gained his experience as an advisor on corporate matters. Since February 2007 r. he was an advisor to the Management Board at Operator Logistyczny Paliw Płynnych Sp. z o.o. and during 2005 2006 he was the President of Polski Instytut Dyrektorów (Polish Institute of Directors). He has experience in performing supervisory functions. Artur Jędrzejewski He graduated from Warsaw School of Economics with MA Diploma in finance and banking. During the period 1999 2002 he continued studying at Warsaw School of Economics (PhD studies) specializing in Insurance and Pension Funds. In 2003 he graduated from the University in Minnesota with the Master of Business Administration diploma (WEMBA). He used to be the President of Management Board in the following companies: Carlson Capital Partners Sp. z o.o. (2002 2011) and Gaudi Management SA (2007 2011). Mr Artur Jędrzejewski worked also in Netia Telekom SA as the Business Analysis Director and Budget Officer. During 2001 2002 he was the Mergers and Acquisitions Director at BRE Corporate Finance SA. Since 2003 he is the Managing Director at Carlson Private Equity Ltd. with its registered office in the U.K. and since 2010 he is the President of the Management Board at Bouchard & Cie A.G. with its registered office in Switzerland. Artur Jędrzejewski also has vast experience in supervisory functions. Zygmunt Roman He studied law at the University of Gdańsk. He passed judicial exam and the exam for legal counsels. Mr Zygmunt Roman worked as legal counsel at Bank Gdański SA during 1994 1996 and in the law office of Cameron McKenna&Co. (1997 1999). In 1995 1997 he was a judge at the Warsaw Stock Exchange. In 1995 1996 he was the Member of the Supervisory Board in one of the companies in II NFI SA. Since 1996 Mr Zygmunt Roman is a partner at Law Office of Windmill Gąsiewski & Roman. More details are presented in current report No 13/2014 of 29.01.2014.

Directors Report for 2013 Chapter I 24 Changes in the composition of the Company's Supervisory Board in 2013: In 2013, the composition of the Supervisory Board changed as follows: Date Description of the event Name and surname 19.03. 2013 Resignation from the function of a Member of the Supervisory Board Barbara Ratnicka-Kiczka Appointment by the Company's Extraordinary 20.03. 2013 General Meeting as a Member of the Andrzej Podgórski, Piotr Chudzik Supervisory Board 28.06.2013 02.12.2013 Resignation 03.12.2013 Appointment by the Company's Ordinary General Meeting to the Supervisory Board for a joint three-year term of office Appointment by the Company's Extraordinary General Meeting as a Member of the Supervisory Board Ryszard Krauze, Tomasz Buzuk, Piotr Chudzik, Marcin Dukaczewski, Maciej Grelowski, Andrzej Podgórski, Przemysław Sęczkowski, Andre Spark, Wiesław Walendziak, Piotr Wawrzynowicz Ryszard Krauze from the function of the Supervisory Board Chairman and a Member of the Supervisory Board and Przemysław Sęczkowski, Andre Spark, Wiesław Walendziak, Piotr Wawrzynowicz and Tomasz Buzuk from their positions of members of the Company s Supervisory Board Artur Jędrzejewski, Piotr Nadolski, Zygmunt Roman The following changes took place after the balance sheet date to the date of publishing this Report in the composition of the Supervisory Board of the Company: Date Description of the event Name and surname 29.01.2014 29.01.2014 Dismissal of all the Members of the Supervisory Board The Extraordinary Meeting of Shareholders made changes in the composition of the Supervisory Board of the Company. To enable the appointment of the Supervisory Board of the Company following the mode and principles set forth in 13(2) of the Company s Articles of Association, the Extraordinary General Meeting of Shareholders of the Company changed the composition of the Supervisory Board: Appointing of 3 Members of the Supervisory Board Prokom Investments SA with its registered office in Gdynia, acting pursuant to 13(2)(a) of the Company s Articles of Association, appointed 3 members of the Supervisory Board, i.e.: Piotr Chudzik, Maciej Grelowski, Marcin Dukaczewski, Artur Jędrzejewski, Piotr Nadolski, Andrzej Podgórski, Zygmunt Roman Andrzej Podgórski jako Przewodniczący Rady Nadzorczej, Marcin Dukaczewski, Maciej Grelowskiego

Directors Report for 2013 Chapter I 25 29.01.2014 Appointing of 4 Members of the Supervisory Board The remaining shareholders present at the Extraordinary Shareholder s Meeting, except PROKOM Investments Spółka Akcyjna with its registered office in Gdynia and its affiliates and entities acting in concert with that company, representing 25.89% of the total number of votes in the Company, acting pursuant to Article 13(2)(b) of the Company s Articles of Association from 4 candidates proposed by shareholders representing at least 1% of the Company s share capital: Piotr Nadolski jako Wiceprzewodniczący Rady, Piotr Chudzik who meets the independence criteria indicated in Annex II to the Recommendation of the European Commission of 15 February 2005 on the role of nonexecutive or supervisory directors of listed companies and on the committees of the (supervisory) board and referred to in 13(5) of the Company s Articles of Association, Artur Jędrzejewski and Zygmunt Roman Therefore, currently the Supervisory Board consists of: *a member of the Supervisory Board who meets the independence criteria indicated in Annex II to the Recommendation of the European Commission of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board and referred to in Article 13(5) of the Company s Articles of Association 7.1. Information on shares or rights for shares (options) of Polnord SA held by Members of the Management and Supervisory Bodies of Polnord SA According to the Company s knowledge the below listed Members of the Management and Supervisory Bodies of Polnord SA held the following numbers of the Company s shares: Table 3. Company shares held by members of the Management Board and Supervisory Board at 31.12.2013 and 21.03.2014 Name Function Number of shares Piotr Wesołowski President of the Management Board 38,227 Tomasz Sznajder Vice President of the Management Board 26,877 Marcin Dukaczewski Member of the Supervisory Board 7,115 Within the Company s Management Options Program, the following Members of the Management Board hold subscription warrants convertible to series S shares of Polnord:

Directors Report for 2013 Chapter I 26 Table 4. Subscription warrants held by members of the Management Board as at 31 December 2013 and as at 21 March 2014 Name Number of warrants held Issue price of S series shares (change price) The deadline for the exercise of rights of [PLN] warrants Piotr Wesołowski - President of the Management Board Tomasz Sznajder Vice President of the Management Board 50,000 9.00 31.12.2016 33,267 9.00 31.12.2016 Each Warrant entitles to subscription of one series S Share. 7.2. Agreements concluded by and between the Company and management staff which stipulate a compensation in the event of their resignation or dismissal from the occupied position The benefits due to the Members of the Management Board in connection to termination of the employment contract are specified in the particular employment contracts concluded with the Members of the Management Board. Pursuant to the employment contracts with the Members of the Management Board, if a Member of the Management Board is not appointed for the next term or is dismissed from the position of the Member of the Management Board during the term or if the mandate of the Member of the Management Board expires before the date of the General Meeting of Shareholders approving the financial statements of the Company for the financial year, the Company is obliged to pay the compensation in the amount of 12 months salary. The above compensation does not apply if the mandate of the Member of the Management Board expires due to the fault of that Member of the Management Board or at his/her request as well as if the termination occurs due to his/her fault. During the period of the employment contract and one year from the expiry or termination of the employment contract concluded with the Members of the Management Board, each of them is obliged to refrain from any activity competitive to the Company. Due to the binding prohibition of competition after the expiry of the employment contract, the Members of the Management Board are entitled to compensation in the amount of half of the gross monthly remuneration, paid monthly. 8 REMUNERATION AND CASH AWARDS PAID, DUE TO THE MANAGEMENT AND SUPERVISORY BOARD OF THE COMPANY Remuneration of the Management Board of Polnord SA Total remuneration together with the awards of the particular Members of the Company s Management Board in 2013 (paid and due) amounted to PLN 2,938.6 thousand,

Directors Report for 2013 Chapter I 27 Table 5. Remuneration of the Management Board of Polnord SA Description Gross remunerations with awards [PLN 000] Gross remunerations under other titles (option contract, additional benefit) Compensation for termination of the contract [PLN 000] Evaluation of subscription warrants [PLN 000] Total gross remuneration [PLN 000]** [PLN 000] Piotr Wesołowski President of the Management Board Tomasz Sznajder Vice President of the Management Board 1,310.0 10.2-33.5 1,353.7 1,040.0 9.1-22.3 1,071.4 Andrzej Podgórski Vice President 210.4 3.1 300.0-513.5 of the Management Board 1) TOTAL 2,560.4* 22.4 300.0 55.8 2,938.6 1) until 19.03.2013 the Vice President of the Management Board. * In the item Gross remuneration with awards total awards amounted to PLN 400 thousand. ** The above listed Members of the Management Board did not receive the remuneration for performing their functions in subordinated entities. Remuneration of the Supervisory Board of Polnord SA Total amount of the remuneration paid and due to the Members of the Company s Supervisory Board by Polnord SA in the period from 01.01.2013 to 31.12.2013 amounted to PLN 256.7 thousand. Table 6. Remuneration of the Supervisory Board of Polnord SA Description Gross remunerations [in PLN thousands] *) Ryszard Krauze 1) 14.0 Tomasz Buzuk 2) 26.1 Piotr Chudzik 3) 16.0 Marcin Dukaczewski 34.1 Maciej Grelowski 33.1 Artur Jędrzejewski 4) 3.0 Piotr Nadolski 4) 3.0 Andrzej Podgórski 3) 19.0 Barbara Ratnicka-Kiczka 5) 14.1 Zygmunt Roman 4) 3.0 Przemysław Sęczkowski 2) 15.1 Andre Spark 2) 28.1 Wiesław Walendziak 2) 25.1 Piotr Wawrzynowicz 2) 23.0 TOTAL 256.7 *) including the remuneration due for December 2013 paid in January 2014 1) on 02.12.2013 he resigned from the function of a President of the Supervisory Board 2) on 02.12.2013 he resigned from the function of a Member of the Supervisory Board 3) appointed as Member of the Supervisory Board on 20.03.2013

Directors Report for 2013 Chapter I 28 4) appointed as Member of the Supervisory Board on 03.12.2013 5) on 19.03.2013 she resigned from the function of a Member of the Supervisory Board 9 SHAREHOLDERS HOLDING AT LEAST 5% OF THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING OF THE COMPANY The share capital of the Company as at 31.12.2013 amounted to PLN 65,266,054 and was divided into 32,633,027 ordinary bearer shares with the nominal value of PLN 2.00 each. In 2013 the change in the amount of the share capital occurred as a result of issuance of 7 million series R shares. The share capital of the Company as at 31.12.2012 amounted to PLN 51,266,054 and was divided into 25,633,027 ordinary bearer shares with the nominal value of PLN 2.00 each. According to the Company s knowledge, as at 31 December 2013, the following shareholders held shares vested with at least 5% of votes at the General Meeting: Table 7. Shareholding of Polnord SA as at 31.12.2013 Shareholder Number of shares/votes Nominal value of shares [PLN] % of share capital/votes Prokom Investments SA in Gdynia 6,451,416 12,902,832 19.77 Osiedle Wilanowskie Sp. z o.o. in Gdynia (subsidiary of Prokom Investments SA) Templeton Emerging Markets Investment Trust in Great Britain*) Pioneer Pekao Investment Management SA in Warsaw (all customers of PPIM)**) 1,508,492 3,016,984 4.62 3,457,452 6,914,904 10.59 3,119,628 6,239,256 9.56 Other shareholders (total) 18,096,039 36,192,078 55.46 TOTAL 32,633,027 65,266,054 100.00 *) the share of Templeton Emerging Markets Investment Trust in the share capital and total number of votes is 10.59% due to the acquisition of R series shares in the execution of pre-emptive rights. **) of which Pioneer Fundusz Inwestycyjny Otwarty holds 2,858,188 shares in the share capital of the Company, corresponding to 2,858,188 votes, representing 8.76% of the total number of votes and in the capital. In 2013, the changes in the Company's shareholding resulted from the registration by the court of an increase of the share capital and acquisition/sale of shares by the following shareholders: Date of notification to the Company 26.02.2013 Name of entity notifier Templeton Asset Management Ltd. with its registered office in Singapore Description of the event FTIF Templeton Eastern Europe Fund, with its registered office in Luxembourg, decreased its share below the threshold of 5% of voting rights in the Company, as a result of sale of 1,830,188 of the Company's shares on 22 February 2013. Following the sale of the Company's shares, FTIF Templeton Eastern Europe Fund does not hold any of the Company's shares.

Directors Report for 2013 Chapter I 29 26.02.2013 20.12.2013 Templeton Asset Management Ltd. with its registered office in Singapore District Court Gdańsk- Północ, 8th Commercial Division of the National Court Register Templeton Emerging Markets Investment Trust, with its registered office in the United Kingdom, exceeded the 10% share in the overall number of votes in the Company, as a result of the purchase of 1,591,049 of the Company's shares on 22 February 2013. Following the purchase of the Company's shares, Templeton Emerging Markets Investment Trust holds 2,715,806 of the Company's shares, which represent 10.59% of the share capital and are vested with 2,715,806 votes, accounting for 10.59% in the overall number of votes in the Company. Templeton Asset Management Ltd. manages an investment portfolio of Templeton Emerging Markets Investment Trust, which invests in the shares of Polish companies. Registration of the increase in the Company's share capital. The Company s share capital has been increased from PLN 51,266,054 to PLN 65,266,054 as a result of the issue of 7 million of ordinary R series bearer shares with the nominal value of PLN 2.00 each, aimed at current shareholders of the Company. Decrease in the percentage share: a) held directly by Prokom in the share capital and total number of votes in Polnord by approx. 5.40% and going below the threshold of 25% and 20%, and 23.12.2013 Prokom Investments SA ( Prokom ) b) held indirectly by Prokom together with Osiedle Wilanowskie Sp. z o.o. with its registered office in Gdynia ( Osiedle Wilanowskie ) a subsidiary of Prokom, in the share capital and total number of votes in the Company by approx. 6.66% and going below the threshold of 25%. The above change was caused by the fact of registering the Company share capital increase by the District Court in Gdańsk on 20 December 2013. As a result of registering the Polnord capital increase by the District Court in Gdańsk, Prokom holds: a) directly 6,451,416 shares in the share capital of the Company, corresponding to 6,451,416 votes, representing 19.77% of the share capital of the Company and 19.77% of total votes, and b) indirectly, together with Osiedle Wilanowskie, a total of 7,959,908 shares of the Company, corresponding to 7,959,908 votes, representing 24.39% of the share capital of the Company and 24.39% of total votes. Prokom subsidiaries other than Osiedle Wilanowskie hold no shares in the Company.

Directors Report for 2013 Chapter I 30 30.12.2013 Pioneer Pekao Investment Management SA ( PPIM ) An increase in the total engagement up to the level of 9.56% of the total number of votes at the general meeting of Polnord with regards to the financial instruments belonging to the portfolios managed within the financial instruments portfolio management services provided by PPIM. The above change was caused by the acquisition of R series shares and registration of the increase in the share capital of Polnord, which caused a change in the share in the total number of votes in the Company. Upon the change in the share, all Customers of PPIM hold 3,119,628 shares in the share capital of the Company, corresponding to 3,119,628 votes, representing 9.56% of the share capital of the Company and 9.56% of total votes in the general meeting. The shareholders holding the above mentioned number of votes at the general meeting of Polnord are investment funds established by Pioneer Pekao Towarzystwo Funduszy Inwestycyjnych SA: a) Pioneer Fundusz Inwestycyjny Otwarty, holding 2,858,188 shares in the share capital of the Company, corresponding to 2,858,188 votes, representing 8.76% of the share capital of the Company and 8.76% of total votes at the general meeting. b) Specjalistyczny Fundusz Inwestycyjny Otwarty Telekomunikacji Polskiej. The investment funds portfolios constitute a subgroup of all the portfolios of PPIM PPIM Customers. The following changes took place after the balance sheet date in the composition of the Company s shareholder: Date of notification to the Company 23.01.2014 Name of entity notifier SEB Asset Management SA Description of the event The increase in engagement up to the level of 5.37% of the total number of votes at the General Meeting. The above change is due to the acquisition of the Company's shares on 21 January 2014. Upon the change in the share, SEB Asset Management S.A. holds 1,752,593 shares in the share capital of the Company, corresponding to 1,752,593 votes, representing 5.37% of the share capital of the Company and 5.37% of total votes at the general meeting.

Directors Report for 2013 Chapter I 31 28.01.2014 24.02 2014 Templeton Asset Management Ltd. with its registered office in Singapore an indirect subsidiary of Franklin Resources Inc. Templeton Asset Management Ltd. with its registered office in Singapore an indirect subsidiary of Franklin Resources Inc. Decreasing the share of the clients and funds managed by Templeton Asset Management Ltd. in the total amount of shares in the Company by approx. 2% and on the decrease of the share held by Templeton Emerging Markets Investment Trust, with its registered office in the United Kingdom, and exceeding the 10% share in the overall number of votes in Polnord. The above change was caused by the sale of 400 thousand shares of Polnord by Templeton Emerging Markets Investment Trust which took place on 21 January 2014. Upon concluding the transaction of the Company shares sale, the customers and funds managed by Templeton Asset Management Ltd. hold a total of 2,893,477 of the Company's shares, out of which 2,893,477 shares are held by Templeton Emerging Markets Investment Trust, which represent 8.87% of the share capital and are vested with 2,893,477 votes, accounting for 8.87% in the overall number of votes in the Company. Change in the share of the clients and funds managed by Templeton Asset Management Ltd. in the total amount of shares in the Company by and exceeding the 5% share in the overall number of votes in Polnord by Templeton Emerging Markets Investment Trust, with its registered office in the United Kingdom. The above change was caused by the sale of 139,911 shares of Polnord by Templeton Emerging Markets Investment Trust which took place on 13 February 2014. Upon concluding the transaction of the Company shares sale, the customers and funds managed by Templeton Asset Management Ltd. hold a total of 1,492,920 of the Company's shares, out of which 1,492,920 shares are held by Templeton Emerging Markets Investment Trust, which represent 4.57% of the share capital and are vested with 1,492,920 votes, accounting for 4.57% in the overall number of votes in the Company. As at the Report date (21.03.2014), the Company's shareholders included: Table 8. Composition of the Polnord Capital Group as at the Report date Shareholder Number of shares/votes Par value of shares [PLN] % of share capital/votes Prokom Investments SA in Gdynia 6,451,416 12,902,832 19.77 Osiedle Wilanowskie Sp. z o.o. in Gdynia (subsidiary of od Prokom Investments SA) Pioneer Pekao Investment Management SA in Warsaw (all customers of PPIM)*) 1,508,492 3,016,984 4.62 3,119,628 6,239,256 9.56 SEB Asset Management SA 1,752,593 3,505,186 5.37 Other shareholders (total) 19,800,898 39,601,796 60.68 TOTAL 32,633,027 65,266,054 100.00 *) of which Pioneer Fundusz Inwestycyjny Otwarty holds 2,858,188 shares in the share capital of the Company, corresponding to 2,858,188 votes, representing 8.76% of the total number of votes and in the capital.

Directors Report for 2013 Chapter I 32 9.1. Information concerning agreements known to the Company which may change the proportion of shares held in the future In the future changes may occur in the structure of shares held by the current shareholders resulting from exercise of any rights: to exchange all or part of the convertible bonds which Polnord will be able to issue pursuant to the Resolution of the Extraordinary Shareholders Meeting of Polnord of 20.03.2013 on amendment of Resolution 6/2009 of the Extraordinary Shareholders Meeting of Polnord with its registered office in Gdynia of 30.09.2009. The amendment of the Resolution involves increasing the maximum nominal value of convertible bonds which Polnord is entitled to issue from PLN 200 million to PLN 225 million while the possible issue of the convertible bonds may occur within the contingent capital adopted in 2009. Polnord has so far issued bonds convertible into shares with their total nominal value of PLN 199.8 million. Increasing the level of the maximum nominal value of convertible bonds up to about PLN 225 million will enable the Company to issue of new bonds of PLN 25 million. to subscription warrants issued by the Company within the Management Options Programme ( MO Programme ) introduced in 2013. Within the MO Programme the Company may issue free of charge up to 350 thousand of subscription warrants, each of them entitling to subscribe one series S bearer share. On 20.12.2013 the first tranche of the A series warrants amounting to 116,667 warrants was issued. 9.2. Information concerning control system of the employee share programme On 19.12.2013 the Company s Supervisory Board adopted a resolution on adopting the Regulations on management options programme ( MO Regulations ).

Directors Report for 2013 Chapter I 33 MO Regulations were adopted pursuant to Resolution No. 1/2013 and Resolution No. 2/2013 of the Extraordinary General Meeting of Shareholders of Polnord held on 25.10.2013 on conditional increase of the Company s share capital excluding the preemptive rights of the current shareholders and on issuing subscription excluding the preemptive rights of the current shareholders ( MO Programme ). MO Programme is directed at the Management Board of the Company and at the employees and associates of key importance for implementing the Company strategy, with their total number of 6 individuals ( Entitled Individuals ). The MO Programme s objective is to create an incentive scheme through close connection of the Entitled Individuals interests with the interest of the Company and its other shareholders. The Regulations specify detailed rules of MO Programme functioning and in particular the terms and conditions of acquiring registered subscription warrants as well as conditions for acquiring and performing the subscription right to S series Polnord shares ( Shares ) by the Entitled Individuals. The MO Programme provides for the issue of no more than 350 thousand subscription warrants for no consideration, issued in three tranches ( Warrants ). Each Warrant entitles to subscription of one Share. The Share issue price for all Warrants amounts to PLN 9.00. On 20.12.2013 the Entitled Individuals made their declaration of accession to the MO Programme obtaining the right to subscribe A Series Warrants with their total number of 116,667. On 20.12.2013 the First Tranche of 116,667 A Series Warrants was issued and delivered to the Entitled Individuals, while a total of 83,267 A Series Warrants was received by the Members of the Company s Management Board. According to the OM Regulations, the Second Tranche of Warrants, amounting to 116,667 B Series Warrants, may be issued and delivered to the Entitled Individuals after 1 (one) year from the date of the Extraordinary Meeting of Shareholders on 25.10.2013, i.e. after 25.10.2014, no later than until 23.12.2014. The Third Tranche of Warrants, amounting to 116,666 C Series Warrants, may be issued and delivered to the Entitled Individuals after 25.10.2015, no later than until 23.12.2015. The right to subscribe the Shares shall be possible to exercise by the Entitled Individual not sooner than on 01.01.2015 and not later than until 31.12.2016.

Directors Report for 2013 Chapter II 34 II. ACTIVITIES OF THE CAPITAL GROUP 1 MAIN PRODUCTS, GOODS AND SERVICES In the reporting period the Group generated revenue from sales in the amount of PLN 241,776 thousand. Sale of residential and commercial premises is the main source of the Group's revenue with its level of 92.0%. Breakdown of the Group's revenue according to their sources is presented below: Table 9. Polnord Capital Group revenue by source Source of revenue Sales [ 000 PLN] 2013 2012 Share [%] Sales [ 000 PLN] Share [%] Sale of flats and commercial space* 222,486 92.0 266,064 92.0 Sales of land plots 2,931 1.2 8,167 2.8 Lease 12,445 5.2 10,767 3.7 Other 3,914 1.6 4,130 1.5 TOTAL 241,776 100.0 289,128 100.0 *in accordance with the Accounting Policy revenue from the sales is accounted for at the moment of delivering the premises to the customers, the amount of the revenue from sale of premises is therefore not identical to the value of the sale agreements concluded during the reporting period. 2 MAIN SALES MARKET Poland was the core area of business of the Polnord Capital Group in 2013.The Group operated in the domestic market mainly in Warsaw, Tricity, Szczecin, Łódź, Olsztyn and Wroclaw. The territorial structure of revenue from sale is presented in the table below: Table 10. Territorial structure of revenue Source of revenue Sales [PLN thousand] 2013 2012 Share [%] Sales [PLN thousand] Share [%] Poland 241,776 100 278,524 96.3 Russia 10,604 3.7 TOTAL 241,776 100.0 289,128 100.0 3 THE GROUP S DEPENDENCE ON PROVIDERS AND RECIPIENTS Recipients of services During the described period, with regards to selling the residential units and commercial premises the Capital Group was not dependent on any recipient of services, due to the fact that the Group s customers are mainly individuals.

Directors Report for 2013 Chapter II 35 Providers of services In 2013 the largest provider of civil engineering works for the Polnord Capital Group was Korporacja Budowlana Dom Sp. z o.o. with its registered office in Kartoszyn. Its works value amounting to PLN 54,762.6 thousand. 4 OPERATIONAL ACTIVITIES OF THE GROUP 4.1. Information on the number of units sold, on the offer and the commenced projects The table below presents information on the number of premises sold by the Polnord Group within particular projects as well as the Group's offer as at 31.12.2013. During the whole 2013 the Polnord Capital Group companies sold 1,094 premises (including cancellations) of which 401 premises were sold in Q4 of 2013. In 2013 the Group companies commenced sales in three new investments and three investments constituting subsequent phase of the implemented projects. The commenced projects listed below allowed for increasing the offer by 934 premises with their total usable area amounting to 47 thousand sq. m. Table 11. Sales and offer as at 31.12.2013 r. Project Usable area (sq. m) General information Number of premises Commission to use data Company implementing the project Premises sold (net-including cancellations) until 31.12.2012 1.1.2013-31.12.2013 including Q4 Offer as at 31.12.2013 Warsaw Commissioned project Ostoja Wilanów II-VI 98 250 1 146 2009-2011 Fadesa Polnord 1 082 56 2 8 Królewskie Przedmieście 34 017 443 IVQ 2011 Surplus 442 1 - - Dobry Dom 10 659 155 IIIQ 2011 Śródmieście Wilanów 152 3 - - Śródmieście Wilanów (building A) Projects under development 9 532 170 IVQ 2013 Śródmieście Wilanów 103 66 14 1 Ostoja Wilanów VII 19 430 324 IIQ 2014* Fadesa Polnord 92 153 45 79 Śródmieście Wilanów (building C) 10 565 162 IIIQ 2014* Śródmieście Wilanów 60 79 18 23 Projects started in 2013 Śródmieście Wilanów (building D) 9 533 189 IIQ2015* Śródmieście Wilanów - 75 43 114 Neptun 6 204 109 II/IIIQ2015* Polnord Ząbki Neptun - 16 11 93 Tricity Commissioned projects Apartamenty Albatros 3 631 60 IQ 2010 Polnord Apartamenty 59 1 1 - Ostoja Myśliwska I-II 13 706 242 2011-2012 Polnord Apartamenty 178 47 10 17 2 Potoki I 7 475 162 IVQ 2012 Polnord Apartamenty 126 19 4 17 2 Potoki II 7 142 162 IVQ 2013 Polnord Apartamenty 13 57 22 92 2 Potoki III (bud. 1-3) 4 468 96 IVQ2012 Polnord Apartamenty - 17-79 2 Potoki III (bud 4-5) 2 771 60 IIQ 2013 Polnord Apartamenty - - - 60

Directors Report for 2013 Chapter II 36 Sopocka Rezydencja 9 672 162 IQ 2012 Polnord Sopot II 103 43 8 16 Projects started in 2013 Dwa Tarasy I 7 336 162 IVQ 2014* Polnord Dwa Tarasy - 28 28 134 Aquasfera (Pacific) 11 114 213 Olsztyn Commissioned projects Osiedle Tęczowy Las (building 4) Osiedle Tęczowy Las (building 5) Projects started in 2013 Osiedle Tęczowy Las (building 6) Szczecin Commissioned projects IVQ 2013/ IIIQ 2014* Semeko Aquasfera - 76 76 137 4 590 91 IIIQ 2012 OTL Polnord 80 8-3 5 838 103 IVQ 2013 OTL Polnord 26 49 24 28 6 743 149 IIQ 2015 * OTL Polnord - 3 3 146 Ku Słońcu I 12 203 222 IVQ 2011 Ku Słońcu II (building 2) 7 657 157 IVQ 2012 Projects under development Ku Słońcu II (bud. 1) 7 701 158 IVQ 2014* Łódź Commissioned projects Polnord Szczecin Ku Słońcu Polnord Szczecin Ku Słońcu Polnord Szczecin Ku Słońcu 170 21 7 31 50 94 15 13-25 25 133 City Park I-III 14 833 235 2009-2012 Polnord Łódź City Park 198 30 1 7 Wrocław Commissioned projects Osiedla Innova I-V 21 150 421 2012-2013 Osiedle Innova 321 92 23 8 Projects started in 2013 Osiedle Innova VI 3 194 56 IIIQ2014* Osiedle Innova - 23 9 33 Osiedle Innova VII 3260 56 2009-2011 Osiedle Innova - 12 12 44 Total-commissioned projects Total-projects under development, including; 267 594 4 087 3 103 604 131 380 85 080 1 578 152 490 270 936 Projects started in 2013 47 384 934-233 182 701 TOTAL 352 674 5 665 3 255 1 094 401 1 316 * Planned date of commissioning for use Data not weighted with Polnord's share in the project

Directors Report for 2013 Chapter II 37 4.2. Projects to be launched In 2014 the Group plans to launch 16 investments of which 12 constitute subsequent phases of projects already being implemented. The other 4 are the investments being initiated, by Polnord itself or with partners, in new attractive locations in Warsaw, Tricity and Wrocław. Projects to be launched create a potential to expand the offer by about 2,200 premises with their total usable area of approx. 123.2 thousand sq. m. Haffnera (Phase I) 3,000 sq. m UUA 50 units Expected commencement 2/3Q2014 Expected completion 2Q2016 Aquasfera (Reda near Gdynia) build. Indian 8,908 sq. m UUA 173 units Expected commencement 3/4Q2014 Expected completion 2Q2016 Ku Słońcu (Phase III) 8,780 sq. m UUA 180 units Expected commencement 3Q2014 Expected completion 2Q2016 Osiedle Innova II 10,270 sq. m UUA 209 lokali Expected commencement 2Q2014 Expected completion 2/3Q2016 Osiedle Moderno 7,245 sq. m UUA 158 units Expected commencement 1Q2014 Expected completion 4Q2015 Brama Sopocka 6,400 sq. m UUA 102 units Expected commencement 2Q2014 Expected completion 4Q2015 ŁÓDŹ Dwa Tarasy (Phase II) 8,386 sq. m UUA 172 units Expected commencement 2/3Q2014 Expected completion 3Q2015 Ostoja Wilanów (Phase V, build. B4) 9.344 sq. m UUA 137 units Expected commencement 4Q2014 Expected completion 4Q2016 Ostoja Wilanów (Phase VI, build. C2) 12,259 sq. m UUA 184 units Expected commencement 1Q2014 Expected completion 1Q2016 Ostoja Wilanów (Phase VIII) 4,352 sq. m UUA 65 units Expected commencement 2Q2014 Expected completion 2Q2016 Śródmieście Wilanów (build. E) 8,800 sq. m UUA 155 units Expected commencement 3Q2014 Expected completion 4Q2015 City Park (Phase IV) 11,017 sq. m UUA 209 units Expected commencement 1/2Q2014 Expected completion 1Q2016 Stacja Kazimierz (Phase I) 8.575 sq. m UUA, 184 units Expected commencement 2Q2014 Expected completion 1Q2016 Neptun (Ząbki near Warsaw), (Phase II) 5.438 sq. m UUA 105 units Expected commencement 2/3Q2014 Expected completion 4Q2015 Śródmieście Wilanów (bud F) 6.400 sq. m UUA 121 units Planowane rozpoczęcie 2Q2014 Planowane zakończenie 3Q2015 SMART Aparthotel (Phase I) 3,982 sq. m UUA 195 units Expected commencement 2Q2014 Expected completion 2Q2016 Investments planned to be launched independently (by the wholly owned subsidiaries of Polnord) Investments planned to be launched, implemented by companies jointly controlled by Polnord

Directors Report for 2013 Chapter II 38 4.3. Land purchase In March 2013, Polnord Warszawa - Ząbki Neptun signed an agreement transferring the ownership of a plot of land in Ząbki near Warsaw, with its area of 22.6 thousand sq. m. It is a plot of land adjacent to the plot purchased in 2012. This area is allocated for Neptun housing estate. In May 2013 the Company purchased a plot in Jurata with an area of 2.8 thousand sq. m. The local spatial development plan assumes single and multi-family residential development in this area. In June 2013, Polnord signed contracts under which it will acquire the rights and claims arising from the decree of 26.10.1945 on ownership and use of land within the City of Warsaw (called the "Bierut Decree") with respect to properties located mainly in the districts of Śródmieście and Mokotów. Final decisions issued in the substantial majority of cases stated the annulment of the administrative decision of the Presidium of the National Council of the Capital City of Warsaw refusing to grant temporary ownership of land. Thus, the legitimacy of these claims was settled. Administrative proceedings for granting the right of perpetual usufruct of the land, ultimately for Polnord, are in the final stage. Due to the contracts, in the next two years Polnord expects to obtain land attractive for investors for future investments or to obtain adequate financial compensation. 5 DEVELOPMENT PROJECTS INCLUDED IN THE INCOME STATEMENT (INCLUDING COMPETED PROJECTS) The table below presents projects included in the income statement in 2013, the projects marked with colour are the ones completed in 2013. Project Table 12. Financial result per project for the period of 2013 Premises delivered to customers Revenue 2013 Gross profit Gross margin Premises sold to be delivered Units* Area of premises PLN 000 % PLN 000 % Units* [sq. m]* Warszawa Ostoja Wilanów II-VII 80 8 042 47 108 17% 4 432 9% 231 Królewskie Przedmieście 5 596 3 338 1% 143 4% - Dobry Dom 5 498 3 178 1% 732 23% - Śródmieście Wilanów (build. A) 136 7 366 50 698 19% 10 012 20% 33 Tricity Ostoja Myśliwska I 2 354 1 605 1% 419 26% 8 Ostoja Myśliwska II 49 2 885 13 727 5% 3 844 28% 6 2 Potoki I 32 1 671 6 613 2% 1 128 17% - 2 Potoki II 58 2 162 8 951 3% 1 084 12% 12 2 Potoki III (build. 1-3) 15 714 2 664 1% 225 8% 2 Sopocka Rezydencja 50 3 017 25 943 10% -8 331-32% 6 Olsztyn Osiedle Tęczowy Las (build. 4) 14 589 2 489 1% 755 30% 1 Osiedle Tęczowy Las (build. 5) 50 2 873 11 223 4% 1 705 15% 25 Szczecin Ku Słońcu I 25 1 710 7 882 3% 83 1% 4 Ku Słońcu II (build. 2) 125 6 260 29 224 11% 2 283 8% 7

Directors Report for 2013 Chapter II 39 Łódź City Park II 11 870 3 381 1% -113-3% 1 City Park III 23 1 451 5 730 2% -453-8% 1 Wrocław Osiedle Innova I-III 15 733 4 178 2% 1 782 43% - Osiedle Innova IV-V 157 7 555 41 968 16% 12 837 31% 19 Total 852 49 346 269 899 100% 32 567 12% 356 * Data not weighted with Polnord's share in the project; data not weighted Aquasfera project In 2013 the number of delivered premises amounted to 893 of which 41 premises were issued in Aquasfera project implemented by Semeko Aquasfera which is valued in the Consolidated Financial Statement using the equity method.

Directors Report for 2013 Chapter III 40 III. FINANCIAL DATA 1 CONSOLIDATED PROFIT AND LOSS ACCOUNT - COMMENT For the period For the period Description [PLN 000] From 01.01.2013 from 01.01.2012 to 31.12.2013 to 31.12.2012 Revenues from sales 241 776 289 128 Revenue from sales of products, goods and materials 225 417 274 231 Sales of services revenue 3 914 4 130 from related parties 1 930 1 607 Lease revenue 12 445 10 767 Prime cost of sales (201 105) (247 381) Impairment write-down for inventories (7 586) (12 340) Gross profit (loss) on sales 33 085 29 407 Revaluation of investment property 38 934 87 107 Cost of sales (8 057) (16 035) General and administrative expenses (26 648) (32 140) Other operating income 12 096 112 028 Other operating expenses (26 830) (23 973) Gross operating profit (loss) 22 580 156 394 Financial income 4 984 12 282 Financial expenses (38 060) (99 092) Result on the sale of subsidiary (28 637) Udział w zysku jednostki stowarzyszonej 1 143 (228) Share in profit of associate (7 642) Gross profit (loss) (9 353) 33 077 Income tax 17 895 (4 575) Net profit (loss) on continued operations 8 542 28 502 Net profit (loss) on discontinued operations (3 784) (2 762) Net profit/(loss) for the financial year 4 758 25 740 In the 2013, the Polnord Group generated net profit in the amount of PLN 4,758 thousand and sales revenue in the amount of PLN 241,776 thousand. Revenues were generated mainly by the 852 premises delivered for use, constructed within the housing projects located in Warsaw, Tricity, Wrocław and Szczecin. Gross return on sales in the reporting period amounted to 13.7%, compared to the last year with 10.2%. Gross profit from sales includes also the impairment loss of inventories which does not apply directly to the developing activity but to the held plot of land which was subject to a preliminary sale agreement (impairment loss value PLN 1,040 thousand) and the capital expenditures on the investments which were terminated or suspended (impairment loss value PLN 1,097 thousand). Profitability adjusted with the above impairment loss amounts to 14,6%. The remaining amount of impairment relates to investments in Sopot and Łódź. The increase in profitability was

Directors Report for 2013 Chapter III 41 caused by commencing handing over process of high margin investment units (with gross margin on sale over 20%), such as Śródmieście Wilanów. Due to the fact that in accordance with IAS 18 revenues and costs on developing activity are recognised in the income statement at the moment of handing over the units to their buyers, the gross result on the sale does not reflect the sales activities performed in the particular period (sale agreement may be concluded much earlier than the unit is handed over, i.e. at each stage of the investment implementation, not only upon its completion). Therefore, the expected result of sales activities in 2013 is presented in Table 1 in Chapter I, Section 4 of this Director s Report. Due to the significant progress of commercialization of the office building B3 constructed within Wilanów Office Park project (about 90% of the area) completed in Q3 of 2012, Wilanów Office Park - Building B3 Sp. z o.o. reassessed the property using the income method. The result of this valuation (value of PLN 17,541 thousand) was reflected in the position of the revaluation of investment properties. In addition, the Capital Group has revised the valuation of land in Sopot, following plans of the city to change the spacial development plan. According to an independent expert's valuation, value of the land increased by PLN 12,370 thousand. At the same time, the adjustment reducing the fair value of other properties affects the income statement item (detailed information on property investments is contained in Chapter III (2.1) of this Directors Report). The Polnord Group restructuring which started in 2012, results in a significant decrease in costs of sales and general administrative expenses to the level of PLN 34,705 thousand (PLN 9,346 thousand for Q4 2013), which is the lowest level for years. For comparison's purposes - costs of sales and general administrative expenses in the same period of 2012 amounted to PLN 48,175 thousand, which means that costs decreased by 28%. The decrease in other operating income by 89% compared to the previous year is due to the recognition of non-recurring items concerning revenues from compensations in 2012. In 2013, new proceedings were instituted for compensations from the Capital City of Warsaw and Municipal Water Supply and Sewage Company (MPWiK) (details in Table 14 in Chapter IV (2), however they were not included in the result and were only disclosed as contingent assets. Other operating costs in the amount of PLN 26,830 thousand included mainly the costs incurred in favour of Asseco Poland SA in relation to termination of the lease agreement for office space which took place in Q3 of 2013. Concluding the conditional lease agreement was related to Asseco Poland SA purchasing a property in Wilanów in 2010. The non-recurring cost in the amount of PLN 17,602 thousand constitutes the total liability of the Company towards Asseco Poland SA. At the end of 2013 the amount outstanding due to the above is EUR 500 thousand. Another important item in the other operating costs is the amount of PLN 3,486 thousand related to legal costs of non-recurring type, associated with the process of obtaining compensations. The financial income of PLN 4,984 thousand consisted mainly of interest income which were not subject to the consolidation adjustments. Financial expenses amounted to PLN 38,060 thousand and they included in particular interest of PLN 32,487 thousand. Other expenses mainly related to foreign exchange losses (PLN 2,794 thousand) and bank commissions (PLN 686 thousand). Interest paid in 2013 amounted to PLN 47,536 thousand and were lower by PLN 20,292 thousand compared to the previous year. Net indebtedness decreased by PLN 98,721 thousand, compared to the end of 2012. Current tax liability amounted to PLN 209 thousand while the reversal of temporary differences in income tax had positive effect on the result in the amount of PLN 18,104 thousand. This was a consequence of creating the financial structure in the Capital Group, described in details in Chapter IV (1), hereof. The implementation of new investments and the continuation of existing ones along with measures to further optimize the Polnord Group's operating costs will positively influence the results of operations in subsequent reporting periods.

Directors Report for 2013 Chapter III 42 2 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) - COMMENTS Description [PLN 000] As at 31.12.2013 Structure As at 31.12.2012 Structure ASSETS Fixed assets 1 366 075 62% 1 243 044 55% Tangible fixed assets 13 442 1% 14 223 1% Investment property 1 009 935 46% 947 668 42% Intangible assets 701 0% 898 0% Investments in associates measured with equity method 11 299 1% Financial assets 9 275 0% 19 425 1% Deferred tax assets 65 086 3% 45 353 2% Long-term receivables 133 855 6% 92 995 4% Goodwill 122 482 6% 122 482 5% Current assets 851 342 38% 1 014 472 45% Inventories 584 587 26% 661 356 29% Trade and other receivables 130 136 6% 185 832 8% Other short-term financial assets 62 635 3% 77 290 3% Receivables due to VAT, other taxes, customs duties, insurance and other 8 096 0% 12 887 1% Income tax receivables 224 0% 1 255 0% Prepayments and accrued income 9 875 0% 5 855 0% Cash and cash equivalents 55 789 3% 69 997 3% TOTAL ASSETS 2 217 417 100% 2 257 516 100% Non-current assets Investment properties are the most significant item of non-current assets. Their value increased by PLN 62,267 thousand and is related mainly to the revaluation of office building B3 located in Wilanów Office Park and the property in Sopot (described in the comments to the result). Additionally, the Group acquired a plot of land for investment in Jurata, presented in this balance sheet item. More details about the Investment properties are presented in point 2.1 below. Increased value of the investments into subsidiaries assessed using the equity method is caused by the acquisition of 50% of shares in Semeko Aquasfera Sp. z o.o. implementing a developing project in Reda near Gdynia. Financial assets include mainly stock of listed companies held by Polnord. Decrease in value of these assets results from the stock valuation in market prices as at the balance sheet date. An increase in long-term receivables is primarily due to the conclusion of agreements under which Polnord SA became a party to the preliminary agreement for the purchase of the rights and claims in respect of property located in Warsaw, described in more detail in Chapter II, point 4.3. Current assets Inventories as at 31.12.2013 amounted to PLN 584,587 thousand and were lower by PLN 76.769 thousand than as at the end of the previous year. The decrease in the inventories' value was caused by the intensified handovers of units in Q4 2013. Detailed summary of inventories is presented in item 2.1 below.

Directors Report for 2013 Chapter III 43 Trade and other receivables as at 31.12.2013 amounted to PLN 130,136 thousand and were lower by PLN 55,696 thousand than as at 31.12.2012. This item consists of trade receivables from non-related parties in the amount of PLN 44,765 thousand. Their value decreased by PLN 34,873 thousand, compared to the end of 2012. The most significant item is the claim in respect of the preliminary agreement for the purchase of rights and claims whose implementation is expected within 12 months. A value of other receivables at the end of the 2013 amounted to PLN 76,543 thousand and was by PLN 8,737 thousand lower than at the end of 2012. The main items are road compensatory receivables of PLN 39,900 thousand and claims against MPWiK in the amount of PLN 13,900 thousand. The value of these items did not change, compared to the end of 2012.Other short-term financial assets are mainly the borrowings granted by the Group companies which are not subject to the consolidation adjustments. A decrease in other short-term financial assets is due to a redemption of bonds held by Polnord by issuer. Description [PLN 000] As at 31.12.2013 Structure As at 31.12.2012 Structure TOTAL EQUITY AND LIABILITIES Equity (attributable to shareholders of the parent company) 1 370 110 62% 1 327 558 59% Share capital 65 266 3% 51 266 2% Share premium 1 061 668 48% 1 028 116 46% Foreign exchange differences on translation of a foreign operation (1 660) 0% (295) 0% Other reserve capitals 265 963 12% 228 799 10% Retained profits/uncovered losses (21 127) (1%) 19 672 1% Total equity 1 370 110 62% 1 327 558 59% Long-term liabilities 519 719 23% 532 034 24% Interest-bearing bank loans and borrowings 456 101 21% 464 846 21% Provisions 153 0% 196 0% Other liabilities 1 900 0% 3 748 0% Deferred income tax provision 61 562 3% 61 957 3% Prepayments and accrued income 3 0% 1 287 0% Short-term liabilities 327 588 15% 397 924 18% Trade and other liabilities 30 332 1% 34 178 2% Current long-term portion of bank loans and borrowings 67 467 3% 45 419 2% Short-term revolving loans 788 0% Other short-term loans and borrowings 69 410 3% 194 854 9% Liabilities due to VAT, other taxes, customs duties, insurance and other 5 843 0% 1 624 0% Income tax liabilities 1 0% 1 0% Prepayments and accrued income 6 089 0% 3 502 0% Advance payments received 78 609 4% 53 397 2% Provisions 69 837 3% 64 161 3% Total liabilities 847 307 38% 929 958 41% TOTAL EQUITY AND LIABILITIES 2 217 417 100% 2 257 516 100%

Directors Report for 2013 Chapter III 44 Equity Equity increased by PLN 42,552 thousand as a consequence of issuing R series shares described in detail in Chapter IV item 4 hereof. The proceeds of the issue less its costs amounted to PLN 47,552 thousand. Long-term liabilities An increase in the long-term liabilities under bank loans and borrowings is related to implementing the Capital Group strategy on the indebtedness reduction. Details on the issues and bond redemption, which took place in the 2013, are described in detail in Chapter IV (4) of this Management Report. Short-term liabilities A value of current portion of long-term bank loans, borrowings, short-term open-end loans and other shortterm loans and borrowings taken together decreased by PLN 104,184 thousand. This is a consequence of the decrease in the overall level of gross debt of the Group by PLN 112,929 thousand. A value of advance payments of all projects increased by PLN 25,212 thousand and it results from the fact of the increase in the units sales volume by almost 9%, leading to increased payments from contractors in lieu of the purchased premises. Provisions Provisions in the consolidated financial statements as at 31.12.2013, compared to provisions as at 31.12.2012 increased by PLN 5,238 thousand, of which the deferred tax liability decreased by PLN 395 thousand. 2.1. Statement of inventories and investment properties The graphs below present the current statement of inventories and investment properties along with the land bank breakdown as both inventories and investment properties. Inventory Compared to 31.12.2012, neither a size nor a structure of inventories did change significantly. Within the land bank included in the inventory, land held by the Group in Warsaw is the largest item - it constitutes over 47% of the total value of the land included in the inventory. The third phase of Śródmieście Wilanów investment has been commenced on the part of the land. Project and cost analyses relating to the implementation of the next office building within Wilanów Office Park investment are also carried out.

Directors Report for 2013 Chapter III 45 STRUCTURE OF INVENTORY INVENTORY LAND BANK AS AT 31.12.2013 [mpln] 800 661,4 662,2 667,3 658,7 584,6 700 0,3 0,1 1,0 0,7 26,7 26,7 600 26,7 26,7 0,1 26,7 500 358,6 361,8 354,7 313,6 400 313,6 300 200 100 0 153,2 164,5 190,0 205,7 106,5 122,6 109,2 94,9 88,3 137,7 31.12.2012 31.03.2013 30.06.2013 30.09.2013 31.12.2013 Units completed Units under construction Land bank Infrastructure Other The most significant item of inventory of PLN 62.5 million is land in Wilanów held for Śródmieście Wilanów investment, regarding phases being implemented and planned to be implemented. The available land in Wilanów will facilitate the construction of 15,000 sq. m of usable area within Śródmieście Wilanów investment, excluding building D realisation of which started in the second half of 2013. A portion of Group s inventories constitutes collateral for the repayment of loans received by Group Companies to finance development projects and for bonds. As at 31.12.2013 the carrying amount of inventories encumbered with the mortgage collateral was PLN 333,102 thousand and as at 31.12.2012 it amounted to PLN 330,899 thousand. Investment property At the end of 2013, the value of investment property amounted to PLN 1,009.9 million and was PLN 62 million higher than at the end of 2012. The increase was mainly attributable to the revaluation of office building B3 located in Wilanów Ofice Park about PLN 17.5 million, revaluation of land in Sopot by PLN 12.4 million as well as associated with the purchase of new land in Jurata for PLN 4.7 million.

Directors Report for 2013 Chapter III 46 STRUCTURE OF INVESTMENT PROPERTIES INVESTMENT PROPERTIES LAND BANK AS AT 31.12.2013 [mpln] 1200 947,7 973,2 990,7 1 025,2 1 009,9 1000 33,2 34,4 33,7 32,5 31,5 71,6 94,7 96,9 99,5 99,5 93,0 93,0 93,0 90,1 800 90,1 600 400 749,9 751,0 767,1 803,1 788,8 200 0 31.12.2012 31.03.2013 30.06.2013 30.09.2013 31.12.2013 Land bank Office building B1 (Wilanów) Office building B3 (Wilanów) Stroj-Dom (Russia) Table 13. List of plots of the highest value located in Wilanów Location Plot No. Area [aq. m] Reported value [PLN 000] Investment plans Warszawa Wilanów* Warszawa Wilanów* Warszawa Wilanów* 2/70 93,581 147,671 2/48 72,421 88,933 2/101 29,023 52,996 The area adjacent to the planned S2 Warsaw Southern bypass. The plot available for service and residential purposes. Possibility to build up the plot by 95,6 thousand sq. m. The Company does not expect to implement an investment on this plot in the 3 years. The plot designated for residential buildings and facilities for public services as well as sports and recreational facilities. The Company does not expect to implement an investment on this plot in the 3 years. The Company considers applying for a change in the land development plan. The whole area intended for implementation will begin in 2014. SMART Aparthotel investment whose On 29.01.2014, the Company received a decision approving the first phase of the construction project involving more than 190 units. The investment described in detail in Chapter II, Section 4.2. Warszawa Wilanów* 2/96 2/228 30,899 53,263 The plots constitute a single area in the vicinity of the planned S2 Warsaw Southern bypass. In 2014, a housing estate with the total usable area of approximately 30 thousand sq. m is planned to be designed. Warszawa Wilanów* 9 21,627 38,410 Plot is located adjacent to plots 2/96 and 2/228. A housing estate with the total usable area of approximately 20 thousand sq. m is planned to be designed in this area. Warszawa Wilanów* 2/115 2/97 23,211 26,993 The Company signed a preliminary agreement on a sale of the land concerned. TOTAL 270,762 408,266 **The listed plots in Wilanów represent 78% of the value of investment land located in Warsaw, classified as investment properties. Most of this land is located in the southern part of Miasteczko Wilanów south of ul. Płaskowicka Bis and Aleja Rzeczypospolitej. These areas are well connected to the city centre, have full technical support and infrastructure. In the neighbourhood there are social, education and medical facilities. There are plans to build a large shopping centre in surrounding areas.

Directors Report for 2013 Chapter III 47 Table 14 List of plots of the highest value located in other locations Location Plot No. Area [aq. M] Reported value [PLN 000} Investment plans Dopiewiec near Poznań 188/1 184/6 184/7 184/8 497,447 128,395 The land is covered by the local master plan. According to its provisions, the development yield is approximately 346 thousand sq. m, but the Company plans approx. 173 thousand sq. m of the residential and 34 thousand sq. m of retail space, so as to preserve the natural landscape of the plots. Sopot 38 28,047 59,666 The estimated development yield assumes a possibility of implementing multi-family houses with approximately 7 thousand sq. m of living space, aparthotel-type buildings with the area of approximately 5.7 thousand sq. m, an office building with the area of approximately 7.9 thousand sq. m and a hotel building with 140-150 rooms. The Company assumes obtain a construction permit for residential approx. 8 thousand sq. m of retail space in 2014. Łódź 568/30 568/32 568/33 19,474 40,042 Possibly of implementing multi-family residential development with approximately 44 thousand sq. m of living space, with services on the ground floors of approximately 2.5 thousand sq. m of retail space. Dobrzewino 224/6 134,500 16,624 The land is covered by the local master plan. According to its provisions, the land may be divided into approximately 139 plots of approximately 1,000 sq. m each on which four-family houses may be built. Kowale near Gdańsk 109/54 40,672 9,477 The land is designated for residential development with approximately 8,5 thousand sq. m of living space and for service facilities with the area of approximately 3.3 thousand sq. m. The Company does not expect to implement any investment on this plot in the next 3 years. Głosków near Piaseczno 18/2-18/14 42,468 6,511 30 single-family houses may be built on the plot. Outline planning permissions were obtained for 11 planned houses. A procedure aimed at obtaining outline planning permissions for other houses was started. TOTAL 762,608 260,715

Directors Report for 2013 Chapter III 48 Some of these investment properties of the Group constitute collateral for the repayment of loans and bonds. As at 31.12.2013 the carrying amount of investment properties encumbered with the mortgage collateral was PLN 866,170 thousand and as at 31.12.2012 it amounted to PLN 901,012 thousand. 3 FACTORS AND EVENTS, ESPECIALLY THOSE OF A NON-TYPICAL CHARACTER, THAT HAD AN IMPACT ON THE PROFIT/LOSS OF THE COMPANY In the 2013 there were no factors or events, especially those of a non-typical character, which would have had an impact on the reported financial results of Polnord Capital Group. 4 DIFFERENCES BETWEEN FINANCIAL RESULTS AND A RECENTLY PUBLISHED FORECAST The Capital Group did not publish a forecast of its 2013 results. 5 ASSESMENT OF ABILITY TO FULFIL INVESTMENT PLANS Polnord SA and the Group companies focus their activity on the operations related to the land reserves as well as on acquisition of attractive plots of land for developing projects. The Company intends to continue financing its activity and activity of SPVs by using bank loans, issuing debt securities and investing its own funds. The funds generated in this manner shall enable implementing the Capital Group strategy.

Directors Report for 2013 Chapter IV 49 IV. OTHER NOTES AND EXPLANATIONS 1 OTHER SIGNIFICANT EVENTS IN 2013: a) Significant Agreements: Agreement with MS Waryński Development SA On 12.02.2013 Polnord and MS Waryński Development SA ("MS Waryński") signed an investment agreement (the "Agreement") regarding the performance of the residential and office investment on the property situated in Warsaw at ul. Jana Kazimierza, district of Wola (the "Development Project ). The Agreement defines the principles of the performance of the Development Project. The Development Project will be implemented in an attractive location with its area exceeding 3 ha, presently owned by MS Waryński. The Development project will result in approx. 45 thousand sq. m of usable area, including 15% of office space. The Development Project will be carried out in four phases (three residential phases and one office phase). A special purpose vehicle ("SPV") will be established for the performance of each stage in which Polnord and Waryński will hold 50% of shares each. Polnord will provide development services to the SPV, for a consideration and will be responsible for the sale of units. Approx. 184 residential units will be built in the first phase. Distribution of profits under the Development Project will be proportional to the number of shares held in the SPV. More details are presented in current report No 9/2013 of 13.02.2013. Agreement with SGB Bank SA On 19.04.2013 Polnord concluded an agreement with SGB Bank SA based in Poznań (the "Bank ) regarding organising and servicing the bond issue up to the amount of PLN 46 million (the "Agreement ) pursuant to which the Bank undertook to acquire, on its own account, three-year secured bonds of the Company with their total par value of PLN 46 million. On 13.05.2013 the issuance of the above bonds took place and their redemption term is established on 13.05.2016. The issuance is aimed to finance development projects performed by the Polnord Capital Group. More details are presented in current report No 33/2013 of 19.04.2013 and No 35/2013 of 13.05.2013. Agreement with Semeko Grupa Inwestycyjna Sp. z o.o. with its registered office in Gdynia ( Semeko ) Pursuant to the agreement with Semeko dated 01.07.2013 on joint venture under the name of Aquasfera located in Reda near Gdynia, on 07.10.2013, Polnord acquired from Semeko 50% of shares in the SPV Semeko Aquasfera Sp. z o.o. with its registered office in Gdynia ( Aquasfera SPV ) for the price of PLN 10 million. Semeko holds the remaining 50% of shares in Aquasfera SPV. Aquasfera SPV is a new SPV established for the joint implementation of the residential project called Aquasfera ( Aquasfera Project ) by Polnord and Semeko. Semeko brought to Aquasfera SPV an organised part of the company related to the Aquasfera Project as a contribution in kind. The main assets brought as a contribution in kind by Semeko include a plot with the area of approximately 2 hectares, construction expenditures incurred and sale agreements related to the first building. Neither credit obligations nor other significant trade payables have been brought as a part of contribution in kind. As part of Aquasfera Project approximately 560 flats with their total usable area amounting to 27.5 thousand sq. m and approximately 2 thousand sq. m of commercial and service space will be constructed on the plot brought to the Aquasfera SPV. Three buildings will be erected under Aquasfera Project. More details are presented in current report No 43/2013 of 03.07.2013 and No 55/2013 of 08.10.2013.

Directors Report for 2013 Chapter III 50 Agreement on arranging Company s bond issue On 12.09.2013, Polnord signed an agreement with Noble Securities SA with its registered office in Kraków ("Noble") on arranging an issue of three-year ordinary bonds of the Company with the total nominal value of PLN 50 million ("Bonds"). The bonds will be secured with the Company s real properties. On 7.11.2013, the parties concluded an annex to the above agreement under which the issue date was postponed to Q1 2014. On 11.02.2014 Polnord issued bonds with their total nominal value of PLN 50 million. More details are presented in current report No 49/2013 of 12.09.2013 and No 59/2013 of 07.11.2013. Preliminary agreement on the sale of real property On 22.10.2013, Polnord signed a preliminary agreement with a third party on the sale of two plots of land No 2/97 and 2/115 with their total area of 23.211 sq. m located in the Wilanów district of Warsaw for the net amount of PLN 27 million, i.e. gross PLN 33.2 million. The agreement transferring the ownership will be signed and the price will be paid after the conditions provided for in the preliminary agreement are satisfied, which should take place in Q2 2014. Funds received from the sale of the above mentioned plots will be fully used for an early partial redemption of Company s bonds with the value of PLN 28 million issued on 26.09.2012, maturing on 28.09.2015. More details are presented in the current report No. 56/2013 of 23.10.2013. Withdrawal from the lease agreement by POL-AQUA S.A. On 31.10.2013, Przedsiębiorstwo Robót Inżynieryjnych POL-AQUA SA wrote a letter including a declaration on withdrawal from the lease agreement of 27 December 2010, concluded with Wilanów Office Park Budynek B1 Sp. z o.o. Due to the content of the lease agreement the company considered the withdrawal from the agreement by Przedsiębiorstwo Robót Inżynieryjnych POL-AQUA S.A. to be entirely groundless. Overdue receivables are asserted in court. A contribution in kind in the form of receivables to a subsidiary Due to the increase in the share capital of Surplus Sp. z o.o. Domitus SKA with its registered office in Gdynia, a wholly owned subsidiary of Polnord ( Surplus ), on 26.11.2013 Polnord concluded an agreement on acquisition of shares and an agreement on transfer of receivables to cover shares in the increased share capital of Surplus. In connection with the above transaction, in exchange for the contribution in kind in the form of receivables due to Polnord on account of loans granted to date to special-purpose vehicles from the Polnord Capital Group and to affiliated companies operating in Poland, amounting to PLN 354,230,165.08 in total (the Contribution in kind ), Polnord subscribed to 70 thousand of new shares of Surplus with the total issue price of PLN 354,230,165.08, while the unit nominal share value amounted to PLN 50.00, and the unit issue price - to PLN 5,060.43 (the Shares ). Subscription of Shares constitutes a long-term investment. The value of the Contribution in kind was determined on the basis of the book value of receivables of Polnord as at 31.10.2013 which reflects their fair value. The above was confirmed in the opinion prepared by an independent statutory auditor. The market value surplus of the Contribution in kind above the amount of Surplus increased share capital of PLN 350,730,165.08 increases the reserve capital of Surplus. The main purpose of the above transaction is to carry out a reorganisation of the capital and organisational structure of the Polnord Capital Group within the scope of financing operations of specialpurpose vehicles. In order to optimise management of funds, Polnord will entrust Surplus with the function of a financing centre for the Capital Group, i.e. financing the Polnord Capital Group companies with loans and optimising cash flows between them.

Directors Report for 2013 Chapter III 51 The said transaction will not affect the data presented in the consolidated financial statements. In the individual financial statements of the Company, there will be a transfer of value from financial assets balance sheet item to investments in subsidiaries, co-subsidiaries and associated companies. As a result of subscribing for the said Shares, Polnord will have a total of 71 thousand Surplus shares entitling to 71 thousand votes at the General Meeting, which will represent 100% in the share capital of Surplus and 100% in the total number of votes. The book value of assets constituting the subject matter of the Contribution in kind in the Polnord accounting books amounted to PLN 354,230,165.08. More details are presented in current report No 66/2013 of 26.11.2013. b) Other events Approval of the prospectus by Polish Financial Supervision Authority On 19.11.2013, the Polish Financial Supervision Authority issued a decision concerning approval of the Company s prospectus prepared in relation to the public offering of 7 million series R shares, aimed at current shareholders and due to the intended applying for admission and listing of series R shares, pre-emptive rights to series R shares, and rights to series R shares on the regulated market. More details are presented in current report No 62/2013 of 19.11.2013. Registration of the conditional increase of the Company's share capital On 29.11.2013 the District Court Gdańsk-Północ in Gdańsk, 8th Commercial Division of the National Court Register made an entry in the Register of Entrepreneurs of the National Court Register about the amendments in the Company Articles of Association regarding the conditional increase of the Company's share capital, pursuant to Resolution No 1/2013 of the Extraordinary General Meeting of Polnord of 25.10.2013. The Company s share capital was conditionally increased by the amount of no less than PLN 2 and not exceeding PLN 700 thousand by way of issuing no less than 1 and not more than 350 thousand S series common bearer shares with nominal value of PLN 2 each ( S Series Shares ). The purpose of the conditional increase of the Company's share capital is granting subscription warrants (executive options) to the Company s Management Board and to the key Company s employees and associates, i.e. granting the rights to subscribe the S Series Shares at the issue price amounting to PLN 9. The right to subscribe the S Series Shares shall be possible to exercise by the owners of the subscription warrants according to the terms and conditions specified in Resolution No 2/2013 of the Extraordinary General Meeting of 25.10.2013, not sooner than on 01.01.2015 and not later than until 31.12.2016. More details are presented in current report No 71/2013 of 02.12.2013. Registration of the increase in the Company's share capital On 20.12.2013, the Company received a Decision of the District Court Gdańsk-Północ in Gdańsk, 8th Commercial Division of the National Court Register of 20.12.2013 on the registration of the increase in the Company s share capital and on the amendment of the Company s Articles of Association. The Company s share capital has been increased from PLN 51,266,054 to PLN 65,266,054 as a result of the issue of 7 million of ordinary R series bearer shares with the nominal value of PLN 2.00 each, offered on the basis of the prospectus approved by the Polish Financial Supervision Authority on 19.11.2013 which was drawn

Directors Report for 2013 Chapter III 52 up in relation to the public offering of 7 million ordinary R series bearer shares aimed at current shareholders of the Company. More details are presented in current report No 83/2013 of 20.12.2013. c) General Meetings of Shareholders of POLNORD SA Extraordinary General Meeting of Shareholders of 20.03.2013 On 20.03.2013, the Company s Extraordinary General Meeting was held and it adopted resolutions regarding: merger of Polnord SA with its registered office in Gdynia with the companies: Polnord Łódź I sp. z o.o. with its registered office in Gdynia, Polnord Łódź III sp. z o.o. with its registered office in Gdynia, PD Development sp. z o.o. with its registered office in Gdynia and Polnord Nieruchomości Inwestycyjne Sp. z o.o. with its registered office in Gdynia; change of the value of remuneration for Members of the Company's Supervisory Board; amendment of the Company s Articles of Association; amendment of Article 1(2) of Resolution No 6/2009 of the 23rd Extraordinary General Meeting of Polnord Spółka Akcyjna in Gdynia of 30.09.2009. More details are presented in current report No 23/2013 of 20.03.2013. Ordinary General Meeting of Shareholders of 28.06.2013 On 28.06.2013, the Company s Ordinary General Meeting was held and it passed the resolutions regarding: approval of the Company s 2012 Directors Report on company's activities and the 2012 financial statements; acknowledgement of the fulfilment of duties by the Company s authorities in 2012; approval of the Polnord Capital Group s consolidated financial statements for 2012; 2012 profit distribution; appointment of Members of the Supervisory Board for the new term of office; amendment of Article 5(1) of the Company Articles of Association by completing the scope of the Company's activities. More information is presented in current report No 38/2013 of 28.06.2013. Extraordinary General Meeting of Shareholders of 23.08.2013 On 23.08.2013, the Company s Extraordinary General Meeting of Shareholders was held and it passed the following resolutions: on an increase in the Company's share capital with the pre-emptive right by issue of series [R] shares; on the amendment of the Company's Articles of Association. More details are presented in current report No 47/2013 of 23.08.2013. Extraordinary General Meeting of Shareholders of 25.10.2013 On 25.10.2013, the Company s Extraordinary General Meeting of Shareholders was held and it passed resolutions regarding: conditional increase of the Company's share capital without the pre-emptive right for the existing shareholders; issue of subscription warrants without the pre-emptive right for the existing shareholders.

Directors Report for 2013 Chapter III 53 More details are presented in the current report No 57/2013 of 25.10.2013. Extraordinary General Meeting of Shareholders of 03.12.2013 On 03.12.2013, the Company s Extraordinary General Meeting was held and it passed resolutions regarding: amendment of the Company s Articles of Association; changes in the composition of the Supervisory Board of the Company and establishing the number of its members. More details are presented in current report No 73/2013 of 03.12.2013. d) Insurance agreements/policies In 2013 Polnord concluded the following basic insurance policies for the period from 20.10.2013 to 19.10.2014: Insurance policy on third party liability insurance under business activity up to the amount of EUR 3 million. The insurance company is ERGO HESTIA SA in Sopot. Insurance policy covering the liability of the capital companies board members. The insurance company is AIG Europe Limited Sp. z o.o. General insurance agreement on construction risks the insurance covers contracts for civil engineering works within the territory of Poland. The insurance agreement was signed with Towarzystwo Ubezpieczeń ERGO HESTIA SA in Sopot. Property insurance with Towarzystwo Ubezpieczeń ERGO HESTIA SA in Sopot including: all-risk property insurance (buildings and constructions, equipment, machinery, devices, power tools, working capital and cash) as well as insurance of electronic equipment against all risks. e) Agreement with the entity authorized to audit financial statements On 16.08.2013, pursuant to Resolution of the Supervisory Board of 19.06.2013, the Company concluded an agreement for audit services with BDO Sp. z o.o. with its seat it Warsaw, including: audit of the interim individual and consolidated financial statements as at 30.06.2013 as well as the individual and consolidated financial statements as at 31.12.2013 and preparing the consolidation materials for the shareholder s auditor. Total remuneration for the above works amounts to PLN 241 thousand, including PLN 147 thousand for audit of the annual individual and consolidated financial statements, PLN 90 thousand for audit of the interim individual and consolidated financial statements, and PLN 4 thousand for preparing the materials. Moreover, the remuneration for audit of the annual individual financial statements of subsidiaries amounts to PLN 66 thousand. In 2012 BDO Sp. z o.o. also provided audit services in accordance with the agreement of 03.08.2012, including: audit of the interim individual and consolidated financial statements as at 30.06.2012 as well as the individual and consolidated financial statements as at 31.12.2012. Total remuneration for the above works amounted to PLN 234 thousand, including PLN 144 thousand for audit of the annual individual and consolidated financial statements, PLN 85 thousand for audit of the interim individual and consolidated financial statements, and PLN 5 thousand for preparing the materials. In addition, the remuneration for audit of the annual individual financial statements of subsidiaries amounts to PLN 86 thousand.

Directors Report for 2013 Chapter IV 54 2 LITIGATIONS PENDING BEFORE COURT, RELEVANT ARBITRATION AUTHORITIES, OR PUBLIC ADMINISTRATION AUTHORITIES Table 15. List of claims Claims sold Road compensatory receivables from the Capital City of Warsaw Date of the agreement Area in question Amount received Potential receipts Receivable I (sold to Bank PBP SA) 29.06.2011 15,9 ha PLN 101,5 million - Receivable II (sold to Bank PBP SA) 17.07.2012 6,74 ha PLN 43,4 million - Supplementary agreement under contracts (participation in cash surplus over PLN 144,9 million) Claims under litigation Road compensatory receivables from the Capital City of Warsaw 27.12.2012 - PLN 20 million PLN 5 million Date of submission Claim amount Tort damages from the capital City of Warsaw 16.09.2013 PLN 123,0 million Compensation for 10 hectares of areas dedicated for public roads * 28.06.2013 PLN 182,2 million Case status Case pending (value of the claim increases over time) Motion to initiate negotiations was filed Receivables in consolidated financial statements - PLN 39,9 million Compensation for water and sewage infrastructure from MPWiK Claim for compensation for non-contractual use of the water and sewage infrastructure in Miasteczko Wilanów Claim for take-over, for remuneration, of the water and sewage network in Miasteczko Wilanów Claim for take-over, for remuneration, of the sanitary sewerage in Miasteczko Wilanów Date of submission Claim amount 25.04.2012 PLN 11,8 million ** Case status Case pending (value of the claim increases over time) 05.03.2013 PLN 57,3 million ** Case pending - Approx PLN 55 million In preparation Receivables in consolidated financial statements PLN 72 million * Claim is pursued by Polnord through the SPV, 10 H Sp. z o.o. with its registered office in Gdynia ** The amount of the principal claim does not include statutory interest

Directors Report for 2013 Chapter IV 55 Description of litigation proceedings initiated in 2013: Claim against Miejskie Przedsiębiorstwo Wodociągów i Kanalizacji On 05.03.2013 Polnord SA filed to the District Court in Warsaw, 16th Commercial Division a claim against Miejskie Przedsiębiorstwo Wodociągów i Kanalizacji w m.st. Warszawie SA with its registered office in Warsaw for take-over, for remuneration, of a part of the water and sewage network, constructed during the investment of Miasteczko Wilanów in Warsaw. The Company demands a substitute declaration of intent and a gross payment of PLN 57,3 million ("Remuneration") to Polnord SA. The remuneration amount consists of the value of equipment, all costs of construction and related costs of construction (excluding operating costs) spent in relation to the investment, using a valuation based on the indicators used in construction. Legal basis for the petition: Article 49 (2) of the Civil Code and Article 31 of the Act of 7 June 2001 on public water supply and waste water drainage ("Act"). As part of the Miasteczko Wilanów development in Warsaw, water and sewage infrastructure was constructed with its estimated gross value, based on appraisal by independent experts, amounting to PLN 57,3 million gross. In spite of requests and reminders submitted according to the Act, MPWiK did not consent to purchase the constructed facilities, which it uses in its business and from which it derives regular financial benefits. The above-mentioned Article 49 (2) of the Polish Civil Code and the Act impose on the defendant an obligation to purchase, for remuneration, the constructed water and sewage infrastructure. The Company's Management Board emphasises that the statement of the claim mentioned above excludes the remuneration due to the Company for the construction of the storm sewage system on the premises of Miasteczko Wilanów and remuneration for usufruct by the defendant, on a non-contractual basis, of the system in question, due to the Company independently for each year of its usufruct by the defendant. The above-mentioned remuneration will be subject to a separate lawsuit forthcoming by the Company. Initiating proceedings against the Capital City of Warsaw for payment of tort indemnity On 28.06.2013 Polnord SA filed a claim to the Court in Warsaw against the Capital City of Warsaw ("City") and the State Treasury (the Voivode of Masovia Province") for indemnity of the damage incurred by the Company as a result of unlawful decisions on refusal to pay indemnity for public roads in Wilanów.The initial value of the claim amounted to PLN 140 million. Since 2009 Polnord has been in the dispute with the City regarding the indemnity for the take-over by the City of ownership of land plots separated for public roads in Miasteczko Wilanów in Warsaw. As regards plots of the total area of ca. 16 hectares, in the years 2009-2010 the President of the Capital City of Warsaw and the Voivode of Masovia Province issued decisions to refuse to pay indemnities due to the Company. As a result of the appeal filed by the Company, in the judgement issued on 21.12.2010 the Regional Administrative Court revoked all administrative decisions and unambiguously stated that the claims of Polnord for indemnities for land separated for public roads are fully justified under Article 98 (3) of the Real Property Management Act. The decision issued by the Regional Administrative Court was upheld by the Supreme Administrative Court on 05.06.2012. As a result of the unlawful decisions issued by the City and the Voivode of Masovia Province, Polnord had to raise means for financing activities from other sources, which was connected with real material damage. Due to the lack of cash receipts on account of indemnities, the Company had to finance investment activities by means of debt financing, and it had to bear the costs related to service of such financing. Moreover, because of the delay in the settlement of the dispute the Company sold to the receivables from the City to Polski Bank Przedsiębiorczości SA for an amount that is significantly lower than the indemnity due to the Company. Despite requests for a pre-trial settlement, on 30.07.2013, due to no settlement, the proceedings were completed, therefore, the Company brought an action on 16.09.2013 in which it claims compensation in the amount of PLN 123million (calculated as at 30.06.2013). Due to the type of the claim the above amount is

Directors Report for 2013 Chapter IV 56 increased with interest. The initiation of court proceedings is connected with the pursuit by the Company of claims related to gross and obvious default of the City in determining and paying indemnities. The Company is convinced that its claims are justified and makes efforts to satisfy them as soon as practicable. The Company has made many attempts to reach a compromise with the City, but they were futile. Initiating proceedings against the Capital City of Warsaw for payment of indemnity for plots in Warsaw On 28.06.2013, through its special purpose vehicle, Surplus Sp. z o.o. SKA with its registered office in Warsaw (wholly owned by Polnord), Polnord submitted a motion to the Capital City of Warsaw, pursuant to the provision of Article 98 (1) and (3) of the Real Property Management Act, for undertaking negotiations on determination and payment of indemnities for plots located in the district of Wilanów in Warsaw of the total area of 10 ha, separated for public roads (the "Plots"). The total amount of the indemnity is estimated as PLN 182.2 million in compliance with the valuation adopted in the appraisal report prepared by the certified property valuer. Plots were separated under valid administrative decisions related to the separation for public roads, as a result of which the ownership of the plots was assigned to the Capital City of Warsaw (the "City"), in compliance with Article 98 (1) of the Real Property Management Act which is confirmed in the following judgements of: (i) the Regional Administrative Court in Warsaw dated 21.12.2010 and (ii) the Supreme Administrative Court dated 05.06.2012, issued in analogical cases, applicable to the factual situation. Before the said separation decisions became valid, Polnord had the right of perpetual usufruct of the plots in question; thus, in compliance with the above-mentioned decisions, Polnord is entitled to indemnity under the provision of Article 98 (3) of the Real Property Management Act (a subsidiary of Polnord had the right of perpetual usufruct of one plot). Plots were listed in the preliminary donation agreement dated 30.09.2008 as amended and in the donation agreement dated 18.12.2009; however, due to the earlier transfer under the ownership law to the City under the provision of Article 98 (1) of the Real Property Management Act, these agreements had no legal effect, as the City had already been entitled to the plots ex lege. This opinion stems directly from the above-mentioned decisions of the Regional Administrative Court in Warsaw and the Supreme Administrative Court, according to which the ownership of plots was transferred to the City after the separation decisions had become valid. At the same time it should be pointed out that a lack of legal effect of the above-mentioned donation agreements does not affect the City's indemnity obligation defined in the provision of Article 98 (3) of the Real Property Management Act. Surplus Sp. z o.o. SKA is entitled to file the motion as the claim for payment of compensation was filed to Surplus Sp. z o.o. SKA by Polnord and PD Development Sp. z o.o. under the resolution of the General Meeting of Shareholders dated 21.12.2012. An increase in the share capital of Surplus Sp. z o.o. SKA was effected under a valid decision of the District Court for the Capital City of Warsaw dated 03.04.2013. In connection with Surplus Sp. z o.o. SKA receiving the letter from the Office of the Capital City of Warsaw containing a refusal to initiate negotiations pursuant to the motion of Surplus Sp. z o.o. SKA of 28.06.2013, on 19.09.2013 Surplus Sp. z o.o. SKA filed a motion for issuing a decision on granting the indemnity for expiry of the perpetual usufruct rights with the President of the Capital City of Warsaw. On 31.12.2013 Surplus Sp. z o.o. SKA sold the above receivable from the City to 10 H Sp. z o.o. with its registered office in Gdynia (owned in total by Polnords SA) which is due to participate in the proceedings initiated by Surplus Sp. z o.o. SKA. The above described proceedings relate to the largest receivables of the group and were conducted between 01.01.2013 and 31.12.2013 by Polnord SA or its subsidiaries. In the period from 01.01.2013 to 31.12.2013 proceedings related to receivables of Polnord SA were pending with their total value constituting at least 10% of the Company's equity.

Directors Report for 2013 Chapter IV 57 3 THE INFORMATION ON THE CONCLUSION BY POLNORD SA OR ITS SUBSIDIARY OF ONE OR MORE TRANSACTIONS WITH RELATED PARTIES, IF THEY ARE MATERIAL, INDIVIDUALLY OR JOINTLY, AND IF THEY ARE NOT ARM'S-LENGTH TRANSACTIONS In the reporting period there were no significant transactions other than arm s-length transactions. 4 ISSUES OF SECURITIES USE OF INFLOWS FROM THE ISSUE Issues of shares According to the resolution of the Extraordinary General Meeting of Shareholders dated 23.08.2013, on the share capital increase, an issue of 7 million series R shares with pre-emptive rights took place in 2013. On 19.11.2013, the Polish Financial Supervision Authority issued a decision concerning approval of the Company s prospectus prepared in relation to the public offering of 7 million series R shares, aimed at current shareholders and due to the intended applying for admission and listing of series R shares, pre-emptive rights to series R shares, and rights to series R shares on the regulated market. From 26.11.2013 to 06.12.2013, within performance of pre-emptive rights, 1,916 of basic subscriptions for R series 6,630,009 shares were made. Moreover, 298 additional subscriptions for 21,935,675 R series shares were made. The subscriptions reduction level amounted to approx. 98.3% and from additional subscriptions 369,991 R series shares were subscribed. Within the performed subscription on 17.12.2013 the Management Board of Polnord alloted 7 million R series shares. The issue price amounted to PLN 7.15 per share. The value of subscription (constituting the product of shares subject to subscription and issue price of one share) amounted to: PLN 50,050 thousand, the issue costs amounted to PLN 2,498 thousand and constituted 5% of the issue price. The purpose of the issue was to obtain capital for the Group to finance the planned housing projects. The Company intends to use the funds for the particular housing projects in the amounts and in accordance with the priority of their utilisation listed in the table below. The priority order of the issue purposes complies with the schedule of commencing the particular housing projects. The funds from the issue will constitute part of the own contribution for financing the listed projects. In line with the previous practice, remaining part of the necessary expenditures will derive from bank loans and customers payments. The Company intends to cofinance implementation of the future housing projects in approx. 70% using the debt and customers payments. Table 16. Use of proceeds from the issue of R series shares until 21 March 2014 Purpose of the issue of R shares Amount [PLN 000] The funds transferred to companies / expenditure incurred [PLN 000] Remaining funds to provide [PLN 000] Dwa Tarasy (Gdańsk Ujeścisko) 5,000 5,000 - Neptun (Ząbki near Warsaw) 8,000 7,000 1,000 Brama Sopocka (Gdynia) 12,000 10,295 1,705 Stacja Kazimierz (Warszawa, Wola) 10,000-10,000 SMART Aparthotel (Warszawa, Wilanów) 10,000 364 9,636 Buyout bonds maturing in March 2014 2,552 2,552 - TOTAL 47,552 25,211 22,341

Directors Report for 2013 Chapter IV 58 On 20.12.2013, the court registered increasing of the share capital resulting from the issue of 7 million R ordinary series bearer shares, while on 03.01.2014 the Management Board of the Warsaw Stock Exchange S.A. in Warsaw ( WSE ) adopted a resolution No 8/2014 on admitting series R ordinary bearer shares of the Company to trading on the WSE Main Market. As of 08.01.2014 the WSE s Management Board decided to admit to regular trading 7 million of the Company s R series common bearer shares with nominal value of PLN 2 each. Also on 08.01.2014, the Central Securities Depository of Poland (Krajowy Depozyt Papierów Wartościowych S.A.) registered these shares and marked them with code PLPOLND00019. Issue of bonds In the first half of 2013, Polnord issued bonds with their total nominal value of PLN 116.5 million, including: Table 17. Bond issue in 2013 Bond issue in 2013 Date of the issue Date of maturity Overall par value of bonds [PLN 000] Issuing agent 16.01.2013 16.01.2016 19,000 DM Banku BPS SA 18.01.2013 18.01.2016 20,000 DM Banku BPS SA 22.01.2013 22.01.2016 26,500 DM Banku BPS SA (bonds listed on Catalyst) 30.04.2013 20.11.2013 5,000 BRE Bank SA 13.05.2013 13.05.2016 46,000 SGB Bank SA TOTAL 116,500 Redemption of bonds In the first half of 2013, Polnord issued bonds of a total nominal value of PLN 143.4 million: Table 18. Buy/out of bonds in 2013 Buy/out of bonds in 2013 Buyout date Date of maturity Overall par value of bonds [PLN 000] Issuing agent 16.01.2013* 22.01.2013 19,000 DM Banku BPS SA 18.01.2013* 22.01.2013 20,000 DM Banku BPS SA 22.01.2013 22.01.2013 26,500 DM Banku BPS SA 30.04.2013 30.04.2013 40,000 BRE Bank SA

Directors Report for 2013 Chapter IV 59 26.09.2013** 31.03.2014 1,984 DM IDM SA 27.09.2013** 28.09.2015 500 BRE Bank SA 20.11.2013 20.11.2013 5,000 BRE Bank SA 03.12.2013 03.12.2013 30,400 BRE Bank SA TOTAL 143,384 * early redemption ** partial redemption 5 INDEBTEDNESS OF THE CAPITAL GROUP As at 31.12.2013, the amount of liabilities: for issued bonds together with the repayment schedule was as follows: As at the end of 2013, Polnord s debt due to bonds issued was PLN 310 million. The issues and redemption of bonds which occurred after the balance sweet date were described In Chapter IV (10) of the Directors Report. for Loans taken out (excluding interest accrued) together with the repayment schedule: Table 19. Indebtedness from the issued bonds Issue date Offering party Debt as at 31.12.2013 Bonds redemption schedule (par value) [mpln] Maturity par value [mpln] 1Q2014 2Q2014 3Q2014 4Q2014 2015 2016 29.03.2012 DM IDM 16,5 16,5 31.03.2014 28.06.2012 mbank 30,0 30,0 26.06.2015 12.07.2012 mbank 10,0 10,0 26.06.2015 20.08.2012 SGB Bank 60,0 60,0 20.08.2016 05.09.2012 mbank 10,0 10,0 26.06.2015 21.09.2012 SGB Bank 8,5 8,5 21.09.2016 26.09.2012 mbank 39,5 39,5 28.09.2015 24.10.2012 DM Banku BPS 24,0 24,0 24.10.2015 16.01.2013 DM Banku BPS 19,0 19,0 16.01.2016 18.01.2013 DM Banku BPS 20,0 20,0 18.01.2016 22.01.2013 DM Banku BPS 26,5 26,5 22.01.2016 13.05.2013 SGB Bank 46,0 46,0 13.05.2016 310,0 16,5 0,0 0,0 0,0 113,5 180,0

Directors Report for 2013 Chapter IV 60 Table 20. Summary of loans of [in million PLN] Borrower Bank Type Current limit [mpln] Debt as at 31.12.2013 r. without interest [mpln] Share of Polnord Schedule of capital repayment (current debt) [mpln] 1Q14 2Q14 3Q14 4Q14 po 2015 Maturity date Polnord SA mbank SA overdraft 25,0 23,8 100% 23,8 27.06.2014 Polnord SA DZ Bank Polska SA 23,0 5,1 100% 5,1 overdraft 31.05.2014 34,0 19,0 100% 5,0 14,0 Śródmieście Wilanów Sp. z o.o. Bank Zachodni WBK SA investment (land) 8,1 8,1 100% 8,1 31.01.2015 Wilanów Office Park - Budynek B1 Sp. z o.o. PKO BP SA refinanse 62,8 62,8 100% 62,8 31.12.2030 Wilanów Office Park - Budynek B3 Sp. z o.o. PKO BP SA development (B3) 36,1 36,1 100% 0,3 0,5 0,5 34,8 30.04.2025 Polnord Apartamenty Sp. z o.o. Polnord Sopot II Sp. z o.o. Polnord Szczecin Ku Słońcu Sp. z o.o. Polnord Gdańsk Dwa Tarasy Sp. z o.o. Alior Bank SA development 5,6 5,6 100% 1,9 1,9 1,9 30.09.2014 PKO BP SA development 13,0 13,0 100% 0,1 6,3 0,1 6,4 30.09.2015 PKO BP SA investment (land) 6,3 6,3 100% 0,6 5,8 31.12.2016 PKO BP SA development 28,0 28,0 100% 7,9 8,1 7,4 4,6 30.11.2014 Alior Bank SA development 12,0-100% 31.12.2015 Polnord Warszawa-Ząbki Neptun Sp. z o.o. Bank BPS SA investment (land) 16,2 16,2 100% 0,4 15,8 31.12.2019 Fadesa Polnord Polska Sp. z o.o. Osiedle Innova Sp. z o.o. PEKAO SA PEKAO SA development 118,2 38,6 49% 38,6 30.06.2015 investment (land) 2,0 2,0 49% 2,0 31.01.2014 VAT 35,0-49% 30.06.2015 development 19,9 2,7 49% 2,7 31.12.2015 VAT 5,0-49% 30.06.2015 Loans not weighted with Polnord's share: Loans weighted with Polnord's share: 267,3 245,2 17,3 53,3 16,1 5,6 175,0 70,6 21,7 175,0 16,3 53,3 16,1 5,6 153,9 69,6 21,7 153,9 Gross debt of the Polnord Capital Group under loans taken out (excluding interest accrued), weighted by the share of Polnord amounted to PLN 245.2 million, while total debt including the debt arising from bonds issued by the Company (excluding interest accrued) amounted to PLN 555.2 million. Net debt (including cash in the Group s bank accounts in the amount of PLN 55.8 million) reached the level of PLN 499.4 million. In 2013, the net debt decreased from PLN 591.5 million to PLN 499.4 million, i.e. by PLN 92.1 million, and only in Q4 of 2013, it was decreased by PLN 82.6 million. The significant decrease in the Group s debt in Q4 of 2013 was a result of cash inflow amounting to PLN 50 million from the issue of new R series shares of the company. The remaining amount of PLN 32.6 million by which the debt was reduced derived from funds resulting from the Group s basic activity. The above debt amounts include the debt under loans and bonds, however they do not take into account the debt under loans obtained by Fadesa Polnord Polska Sp. z o.o. from the Spanish shareholder. 6 INFORMATION ON GRANTED/RECEIVED SURETIES AND GUARANTEES a) Sureties granted by the Capital Group In 2013 Polnord granted loan sureties in the total amount of PLN 37,849 thousand..

Directors Report for 2013 Chapter IV 61 Table 21. Summary of sureties granted in 2013. Company Subject of the guarantee The amount of the guarantee [PLN 000] Period Polnord Apartamenty Sp. z o.o. Loan surety in Alior Banku, 18 mpln 17,978 25.04.2013 30.09.2014 Polnord Apartamenty Sp. z o.o. Loan surety im PKO BP SA, 13 mpln 19,871 18.09.2013 30.09.2016 TOTAL 37,849 *) *) In Consolidated Financial Statements are eliminated As at 31.12.2013 the below listed sureties granted by Polnord and Fadesa Polnord Polska were active and amounted to PLN 389,194 thousand in total. In 2013 Polnord granted loan sureties in the total amount of PLN 37,849 thousand Table 22. Summary of active sureties as at 31.12.2013. Warrantor The total value of guarantees given on behalf of: [PLN 000] Group companies non-group companies Total [PLN 000] Polnord SA 265.675 2.523 268.198 Fadesa Polnord Polska Sp. z o.o. 120.996-120.996 TOTAL 386.671 *) 2.523 389.194 *) In Consolidated Financial Statements are eliminated b) Sureties received by the Capital Group In 2013 Polnord did not receive any sureties, while the Group companies obtained sureties from Polnord. c) Granted/received guarantees In 2013 the Group companies did not grant any guarantees. In 2013 Wilanów Office Park Budynek B3 Sp. z o.o. received rent payment guarantees from contractors under the lease agreements in total amount of PLN 1,701 thousand. 7 INFORMATION ON CONTRACTED AND TERMINATED LOAN AGREEMENTS In 2013, the Group's companies entered into the following new loan agreements and annexes to the existing agreements: Śródmieście Wilanów Sp. z o.o. on 14.01.2013 entered into a loan agreement with Bank Zachodni WBK SA. On the basis of the agreement, the bank granted the company an investment loan to the amount of PLN

Directors Report for 2013 Chapter IV 62 26,000 thousand, to partially finance the costs of building C in Śródmieście Wilanów project. On 26.08.2013, at the request of the company, the agreement was terminated. On 28.02.2013 Polnord Sopot II Sp. z o.o. signed an annex extending the term of the loan to the loan agreement dated 08.09.2008 concluded with PKO BP SA, to finance the cost of acquiring the right of perpetual usufruct of land located in Sopot. The loan repayment schedule was changed by the annex and the final maturity date was set for 31.12.2016. The loan was repaid in total on 14.02.2014. On 27.03.2013 Polnord Apartamenty Sp. z o.o. signed a loan agreement for implementation of the development project "2 Potoki etap II in Gdańsk. The bank granted the company a loan to the amount of PLN 17,978 thousand, with final maturity date on 30.09.2014. The loan interest amounts to WIBOR 3M increased by the bank s margin. On 18.09.2013 Polnord Apartamenty Sp. z o.o. concluded a loan agreement in the amount of PLN 13,247 thousand for refinancing the outlays related to construction of the 2 Potoki III housing estate located in Gdańsk at ul. Guderskiego 51-59 with final maturity date on 30.09.2015. The loan interest amounts to WIBOR 3M increased by the bank s margin. On 18.11.2013 Polnord Gdańsk Dwa Tarasy Sp. z o.o. concluded a loan agreement in the amount of PLN 12,000 thousand for financing the expenditures related to construction of a housing estate within the Dwa Tarasy I project located in Gdańsk at ul. Płocka with final maturity date on 31.12.2015. The loan interest amounts to WIBOR 3M increased by the bank s margin. On 13.06.2013 Polnord Łódź City Park Sp. z o.o. fully repaid the loan on a property development project realization in Łódź named "City Park" granted pursuant to a loan agreement dated 30.07.2007, as amended. In 2013 Polnord did not enter into any new loan agreement but it signed annexes to the agreements on current account overdraft facilities with BRE Bank SA and DZ Bank Polska SA. On 26.06.2013 Polnord SA concluded an annex to the agreement on current account overdraft facility in the amount of PLN 25,000 thousand, extending the term of the loan for one year, i.e. until 27.06.2014. On 20.12.2013 the Company signed an annex to the agreement on current account overdraft facility with DZ Bank Polska SA amending the repayment schedule of the loan with its limit up to PLN 57,000 thousand with the final repayment date until 31.05.2014. Since 03.01.2014 the limit amounts to PLN 42,000 thousand, while since 31.03.2014 PLN 37,000 thousand. Both in 2013 and during the period from the balance sheet date to the date of publication hereof no loan agreements were terminated. 8 INFORMATION ON CONTRACTED, GRANTED AND TERMINATED LOAN AGREEMENTS In 2013 concluded a range of agreements on borrowings, both as the creditor and as a borrower, mainly with the Group companies which are eliminated in the consolidated financial statements. On 26.11.2013, Polnord made a non-monetary contribution to Surplus Sp. z o.o. Domitus SKA with its registered seat in Gdynia ( Surplus ), a company owned by Polnord in 100%, in the form of receivables due to Polnord on account of loans granted to date to special-purpose vehicles from the Polnord Capital Group and to affiliated companies operating in Poland, amounting to PLN 354,230 thousand in total. The main purpose of the above transaction is to carry out a reorganisation of the capital and organisational structure of the Polnord Capital Group within the scope of financing operations of special-purpose vehicles. In order to optimise management of funds, Polnord entrusted Surplus with the function of a financing centre for

Directors Report for 2013 Chapter IV 63 the Capital Group, i.e. financing the Polnord Capital Group companies with loans and optimising cash flows between them. The subject transaction was described in more detail in Chapter IV (1) of the Directors Report. The table below presents the list of loan agreements concluded in 2013 which are include in consolidation: Table 23. Summary of loan agreements concluded in 2013 Lender Borrower Date of signing an agreement Contractual payment date Total amount of the loan [PLN 000] Debt as at 31.12.2013 [PLN 000] Interest rate POLNORD BIOTON 2013-04-19 2014-12-31 10,800 9,550 FIXED POLNORD ASSECO POLAND S.A. DOMITUS DOMITUS DOMITUS SEMEKO AQUASFERA 2013-10-22 7 days to close out 1,000 1,000 FIXED POLNORD 2013-04-25 2013-05-14 8,000 - FIXED STACJA KAZIMIERZ SEMEKO AQUASFERA SEMEKO AQUASFERA 2013-11-15 2016-11-22 40 40 FIXED 2013-11-28 2014-12-31 500 500 FIXED 2013-12-20 2014-12-31 500 500 FIXED Lender Borrower Contractual Date of signing an payment agreement date Total amount of the loan [PLN 000] Debt as at 31.12.2013 [PLN 000] Interest rate FPP Powsin 2013-01-29 2015-12-31 360 360 WIBOR 3M +margin FPP Powsin 2013-01-10 2015-12-31 1,900 1,900 WIBOR 3M +margin Fadesa Polnord Polska FPP Powsin 2013-01-17 2015-12-31 1,900 1,900 WIBOR 3M +margin FPP Powsin 2013-01-24 2015-12-31 575 575 WIBOR 3M +margin FPP Powsin 2013-04-26 2015-12-31 4,525 4,525 WIBOR 3M +margin FPP Powsin 2013-05-22 2015-12-31 7,753 7,753 WIBOR 3M +margin FPP Osiedle Moderno 2013-12-20 2016-12-31 100 100 WIBOR 3M +margin Both in 2013 and during the period from the balance sheet date to the date of publication hereof no loan agreements were terminated. 9 IMPORTANT RISK FACTORS AND THREATS Factors with potentially negative effect on the Company s and the Polnord Capital Group s business: Policy of the banking sector towards property development companies;

Directors Report for 2013 Chapter IV 64 The volume of loans granted to property development companies significantly influences the number of projects launched. Polnord SA, by issuing stocks and bonds, effectively neutralises this risk, is able to implement the strategy adopted by the Group and initiate new property development projects. Banking sector s mortgage loan policy towards natural persons; The recommendations issued by the Polish Financial Supervision Authority in recent years have significantly affected the mortgage loans market. Recommendations S II and S III introduced more strict requirements for borrowers. The purpose of Recommendation T is to improve the quality of risk management in banks and to prevent borrowers from taking on excessive debt. Recommendation T set the credit worthiness level by defining, among other things, the relation between loan instalments and monthly income as the indicator of the maximum loan amount. Recommendation S stipulates that the maximum level of expenditures related to the repayment of mortgage loans in foreign currencies in relation to average net income should not exceed 42%, while the credit worthiness must be calculated with the assumption that the loan is raised for 25 years. Recommendation S II influences how the banks calculate their customers credit worthiness by limiting the amount of the available loans, in particular foreign currency loans. Recommendation S III introduced as of 01.01.2014, a mandatory 5% deposit, which ultimately is expected to reach 20% in 2017. At the same time, banks will no longer be able to grant loans indexed or denominated in foreign currencies, and the maximum repayment period shall not exceed 35 years. The above regulations as well as any following which may be issued in the future may limit access to mortgage loans which may contribute to a decrease in the effective demand for flats. Prices of flats The main factor which guarantees a successful completion of an investment is the sale of the completed development projects (flats, houses) at the planned price, ensuring the expected margin for the developer. There is a risk that the Company may not sell all of the completed investments for the planned prices. Recently, the Company has observed a stabilisation of the prices of residential units and a movement in the residential market. Oversupply of residential units Currently, the residential market is characterized by oversupply, resulting from built and unsold in the previous year's units as well as development projects in progress. Large supply in the market may limit the Group's revenue. From several quarters the size of the supply on the primary residential market has been steadily declining. Possible loss of qualified subcontractors The bad financial situation in the construction industry may result in a collapse of some companies. This results in a limited availability of services and may raise the Company's costs of operation. Acquiring land for prospective property development projects When acquiring land for new investments, it may be the case that an investment is delayed or the costs of preparing land for implementing a project increase. This may lead to an investment being less profitable than originally expected. Instability of the tax system One of the characteristics of the Polish tax system is its instability. Tax regulations change very frequently. In addition, tax authorities use both the tax regulations as well as tax interpretations issued by other authorities or court rulings. Such interpretations, judgements of other revenue authorities or courts are often inconsistent in the line of solutions and are subject to changes depending on a date and place of the interpretations or

Directors Report for 2013 Chapter IV 65 decisions issuance. Therefore, the values of the financial statements may change after inspection by tax authorities. The Company may be obliged to pay significant amounts of extra tax, interest and fines. Obtaining adequate administrative permits To run a successful business in the property development industry, permits, decisions or administrative approvals required for implementing construction projects must be obtained. There is a risk that the absence or withdrawal of adequate administrative permits during the implementation of a project may negatively affect the capacity to implement or complete property development projects. Macroeconomic factors Slowdown of the economic growth, stagnation of remunerations and increase in the effective tax rate as well as deterioration of the situation on the labour market, limitations of the government programmes supporting acquisition of new flats may translate into a deterioration of the public sentiment and, therefore, on the purchasing power of the society, leading to drop in demand for the products offered by the Group. 10 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE NOT INCLUDED IN THIS REPORT, THAT MAY HAVE A SIGNIFICANT IMPACT ON THE FUTURE FINANCIAL RESULTS After the balance-sheet date, i.e. on: 11.02.2014, the Company issued 50 thousand three-year bonds with the total nominal value of PLN 50 million maturing on 11.02.2017 ( Bonds ). The Bond issue was not a public one. All issued Bonds were acquired and fully paid up. Noble Securities SA acted as the issue underwriter. The bonds may be introduced to an alternative trading system on the Catalyst market. Financial funds obtained as a result of the Bond issue will be used for financing development projects implemented by the Polnord Capital Group and for refinancing the existing debt. On 12.02.2014, the Company partially repurchased Bonds with their total nominal value of PLN 10 million maturing on 13.05.2016 in order to redeem them. The Bond repurchase price was equal to the nominal value increased by interest due until repurchase date. Funds for the above redemption originated from inflows from the Bond issue performed on 11.02.2014. On 17.02.2014, the Company repurchased before maturity another portion of Bonds of the total nominal value of PLN 13,570 thousand with the purpose to redeem them ( Bonds ). The maturity date of Bonds was 31.03.2014. The repurchase price of Bonds was equal to the nominal value increased by interest due until repurchase date. Bonds of the total nominal value of PLN 2,946 thousand will remain to be repurchased on 31.03.2014. Except for the aforesaid bonds, the Company is not obliged to repurchase any Company s bonds in 2014.

Directors Report for 2013 Chapter V 66 V. STATEMENT IN THE APPLICATION OF CORPORATE GOVERNANCE 1 RULES OF CORPORATE GOVERNANCE BY WHICH THE COMPANY IS BOUND AND THE PUBLICLY ACCESSIBLE LOCATION OF THE TEXT In 2013, the Company applied the rules included in the document Code of Best Practice for WSE Listed Companies, adopted by the WSE Committee on 4 July 2007, as amended. The text of the rules of corporate governance is publicly available on the website http://www.corp-gov.gpw.pl/, which is the official website of the Warsaw Stock Exchange, and discusses the rules of corporate governance for the listed companies. 2 INFORMATION ON THE EXTENT TO WHICH THE COMPANY DIVERGED FROM THE RULES OF CORPORATE GOVERNANCE, SPECIFICATION OF SUCH PROVISIONS AND EXPLANATION FOR NOT APPLYING THEM In 2013, the Company fully applied most of the rules contained in the Code of Best Practice for WSE Listed Companies, except for the following rules, which are not applied consistently or temporarily or which are applied to a limited extent: Rule II.1.1 Publishing basic corporate documents, in particular the internal regulations of the Company's governing bodies, on the corporate website. In the opinion of the Company's Management Board, the internal documents, in particular the Company's organisational rules and regulations, the rules and regulations of the Supervisory Board and the Management Board and similar documents, stem from the Company's experience and constitute its property. For this reason, it is not in the Company's interest to disclose and make publicly known its internal organisational solutions, which are not legally required to be made available and, in certain situations, may be used against the Company's interest, e.g. by its competitors. The Company's Management Board does not recognise the need for publishing the said documents on a website. The Company's shareholders have full access to the documents necessary to assess the activity of the Company and its governing bodies, such as quarterly reports, annual statements, Statute and rules and regulations of the GSM. Where reasonable, in specific situations the Management Board may submit the basic internal regulations to the interested legal or natural persons who request such information in writing. Rule II.1.9a) Placing on the website of an audio or video recording of the course of the general meeting. The Company does not intend to record general meetings in audio or video form or to place the recordings on its website. In the opinion of Polnord, the documentation and course of the hitherto general meetings ensure transparency of the Company and protect the rights of all shareholders. Moreover, the content of the resolutions passed is presented by the Company in the form of current reports and published on the website, thanks to which the investors have an opportunity to get familiar with the issues discussed during the general meeting. The Company does not exclude the application of the above rule in the future. Rule II.1.11 and the related Rule III.2 Publishing information about the relation of Supervisory Board members with a shareholder representing at least 5% of votes at the Company's General Meeting on the website. The relevant information will be published on the website immediately after it is received from the members of the Supervisory Board.

Directors Report for 2013 Chapter V 67 Rule III.6 At least two members of the Supervisory Board should meet the criteria of being independent from the Company and entities with significant connections with the Company. The composition of the Company's Supervisory Board should reflect the Company's shareholding structure as adequately as possible, allowing for adequate and effective monitoring of the implementation of the Company's strategy and business model as well as proper protection of the interest of the shareholders. Rule IV.10 The Company should provide its shareholders with an opportunity to take part in the general meeting with the use of means of electronic communication, consisting in: 1) transmitting the general meeting in real time, 2) two-way communication in real time, during which shareholders may speak in the course of the general meeting from a place other than the venue of the general meeting. In the opinion of the Management Board of the Company, the above rule is not and will not be applied due to logistics difficulties and technical and legal threat for proper and effective general meeting, in particular due to a real risk of technical disturbances making it impossible to conduct uninterrupted, two-way communication with shareholders staying in places other than the meeting room. In the Company's opinion, the current rules related to participation in general meetings allow to properly and effectively exercise the rights resultant from shares and to sufficiently protect interests of all shareholders, including minority shareholders. Furthermore, the application of the rule mentioned above would generate additional costs on the part of the Company. However, the Company does not exclude the possibility of applying rule IV.10 in the future. Company's position on the recommendations contained in the first part of the Code of Best Practice for WSE Listed Companies. In reference to the first part of the recommendations of the Code of Best Practice for WSE Listed Companies, the Company s position is as follows: According to recommendation I.5, the Company should have a remuneration policy in place as well as rules for defining the policy. The remuneration of the members of the Company's Supervisory Board is specified by the General Meeting, while the remuneration of the members of the Management Board is determined by the Supervisory Board. The remunerations of the members of the Management Board are based on their duties, skills and responsibility in their position and the generated economic results. In addition, the Company publishes information on remuneration of managerial and supervisory staff in the annual report. According to recommendation I.9, the Company ensures a balanced proportion of women and men in the Management Board and the Supervisory Board. However, the appointment of the members of the Management Board and the Supervisory Board is the sole decision of the Company's Supervisory Board and General Meeting, respectively. For the appointment of the members of the Management Board and the Supervisory Board, the decisive criteria include knowledge, experience, competence and skills necessary in specific functions in the Company. Other factors, such as the sex of the candidate, are not among the above criteria. In reference to recommendation I.10 regarding the support for various forms of artistic and cultural expression, sports, education or science, the Capital Group promotes various social initiatives and sees them as a part of its development strategy and competitive advantage, and attempts to reach as many of the Capital Group's potential customers as possible in the markets where it operates.

Directors Report for 2013 Chapter V 68 3 OPERATION OF THE GENERAL MEETING AND ITS ESSENTIAL RIGHTS, RIGHTS OF THE SHAREHOLDERS AND THE MODE OF EXERCISING THESE RIGHTS The General Meeting may be ordinary or extraordinary. As the Company's governing body, it operates according to the mode and procedures defined in the provisions of the Commercial Companies Code, Statute, the Company's rules of corporate governance and the provisions of the Rules and Regulations of the General Meeting, adopted by way of Resolution No. 1 /2010 of the 24th Extraordinary General Meeting of POLNORD SA of 8 January 2010. The responsibilities of the General Meeting include: examining and approving the Company's management reports and financial statements, distributing profits and covering losses and allocating resources to the supplementary and reserve fund, acknowledgement of the fulfilment of duties by members of the Supervisory Board and the Management Board, appointing and dismissing Supervisory Board members, increasing or decreasing the share capital, amending the Company's Statute, dissolving and winding up the Company, examining and deciding on requests submitted by the Supervisory Board, adopting the Rules and Regulations of the General Meeting, any other business stipulated by the provisions of the Commercial Companies Code. The Ordinary General Meeting takes place in the Company's registered office or in Warsaw and is convened by the Company's Management Board not later than six months after the end of each financial year, or by the Company's Supervisory Board, if the Management Board does not convene the Extraordinary General Meeting within the said term. Participation in the General Meeting is only possible for persons who are the Company's shareholders 16 days before the date of the General Meeting ( Record Date ), provided that the shareholders provide the entity maintaining their securities account with a request for issuing a personal certificate regarding the right to participate in the General Meeting in the period between the announcement of convening the General Meeting and the first weekday following the Record Date, as well as shareholders whose shares, in the form of a document, are submitted in the Company's registered office not later than on the day of registering participation in the General Meeting and are not collected before the end of that day. Members of the Company's Management Board and Supervisory Board who are not shareholders may attend the General Meeting but do not have the right to take the floor. At the invitation of the Company's Management Board or Supervisory Board, other persons may participate in the meeting. The Company's Extraordinary General Meeting is convened, when required, by the Management Board, on its own initiative, or at the request of shareholders representing at least 1/20 of the share capital. The Extraordinary General Meeting may be also convened by: The Supervisory Board, if it deems it advisable, and by shareholders representing at least half of the share capital or at least half of the total votes in the Company. The General Meeting has a quorum irrespectively of the number of the represented shares, unless the provisions of the Commercial Companies Code stipulate otherwise. Resolutions are passed by an absolute majority of valid votes, unless the provisions of the Commercial Companies Code stipulate otherwise. The vote

Directors Report for 2013 Chapter V 69 may take place using the traditional method, voting cards or using a computer system for casting and counting votes. The General Meeting is opened by the Chairman of the Supervisory Board or a person authorised by the Chairman, who immediately orders that a Chairman of the Meeting is appointed. After signing and checking the attendance list, the Chairman of the Meeting confirms that the General Meeting has been convened correctly and that it has a quorum, and presents the agenda, which is then subject to vote. The Chairman of the Meeting presides over the meeting according to the adopted agenda, universally binding provisions, the Company's Statute, the adopted rules of corporate governance and the Rules and Regulations of General Meetings of POLNORD SA. Without the consent of the General Meeting, the Chairman does not have the right to remove or change the sequence of any items on the agenda. The General Meeting may pass a resolution on cancelling specific items from the agenda, and on changing the sequence of items on the agenda, except for removing an item included in the agenda at the request of a shareholder. During the General Meeting, the speakers may address only the issues included in the agenda and currently discussed. Every shareholder has the right to ask questions on every issue included in the agenda. The members of the Management Board and the Supervisory Board are obliged to provide answers and explanations to the asked questions, if it is relevant for the assessment of an issue on the agenda. A request regarding formal issues can be submitted by every shareholder. In formal issues, the Chairman of the Meeting allows the participants to speak out of order. Requests regarding formal issues mean requests regarding the procedure of the meeting and of the vote. The General Meeting adopts resolutions concerning issues included in the agenda, after voting. The vote is open, subject to the relevant provisions of the Statute and the Commercial Companies Code. Resolutions adopted by the General Meetings are published on the www.polnord.pl website. 4 COMPOSITION, RULES FOR CHANGING THE COMPOSITION AND OPERATION OF THE COMPANY'S MANAGING AND SUPERVISORY BODIES AND THEIR COMMITTEES Supervisory Board of the Company As at 31 December 2013, the Company's Supervisory Board was composed of: The Supervisory Board is composed of 5 to 7 members. The current three-year term of office of the Supervisory Board began on 28 June 2013 and will end on the day of the General Meeting approving the financial statements of the Company for 2015.

Directors Report for 2013 Chapter V 70 Changes in the composition of the Company's Supervisory Board in 2013: In 2013, the composition of the Supervisory Board changed as follows: Date Description of the event Name and surname 19.03. 2013 Resignation from the function of a Member of the Supervisory Board Barbara Ratnicka-Kiczka Appointment by the Company's 20.03.2013 Extraordinary General Meeting as a Member of the Supervisory Board Andrzej Podgórski, Piotr Chudzik 28.06.2013 02.12.2013 Resignation 03.12.2013 Appointment by the Company's Ordinary General Meeting to the Supervisory Board for a joint three-year term of office Appointment by the Company's Extraordinary General Meeting as a Member of the Supervisory Board Ryszard Krauze, Tomasz Buzuk, Piotr Chudzik, Marcin Dukaczewski, Maciej Grelowski, Andrzej Podgórski, Przemysław Sęczkowski, Andre Spark, Wiesław Walendziak, Piotr Wawrzynowicz Ryszard Krauze from the function of the Supervisory Board Chairman and a Member of the Supervisory Board and Przemysław Sęczkowski, Andre Spark, Wiesław Walendziak, Piotr Wawrzynowicz and Tomasz Buzuk from their positions of members of the Company s Supervisory Board Artur Jędrzejewski, Piotr Nadolski, Zygmunt Roman Principles of operation of the Supervisory Board According to the Company's Statute, in the period until 3 December 2013 (i.e. until the adoption by the 29 th Extraordinary GSM of POLNORD SA of Resolution No. 3/2013 on changes in the composition of the Supervisory Board and determination of the number of members of the Supervisory Board), the Supervisory Board was composed of 5 to 11 members, appointed by the General Meeting for a joint three-year term of office. The Supervisory Board appoints from among its members a Chairman and Vice-Chairman and, when necessary, also a Secretary of the Board. Currently the Supervisory Board is composed of 5 to 7 members, appointed during the General Meeting in accordance with the following principles: a) PROKOM Investments SA with its registered office in Gdynia shall appoint 3 members of the Supervisory Board, including the Chairman; b) other shareholders representing jointly at the General Meeting not less than 15% of the total number of votes in the Company shall appoint 4 members of the Supervisory Board, including the Vice-Chairman from among the candidates proposed by shareholders representing at least 1% of the Company's share capital, save that PROKOM Investments SA with its registered office in Gdynia, its affiliates and entities acting in concert with it shall have no right to propose candidates or vote on the appointment of members of the Supervisory Board in accordance with this item b). If PROKOM Investments SA with its registered office in Gdynia together with affiliates and entities acting in concert with it does not have at the General Meeting votes in the number corresponding to at least 15% of the total number of votes in the Company or any shareholder has a number of votes exceeding 33% of the total number of votes in the Company, all members of the Supervisory Board shall be appointed in accordance with the general principles and the rules specified in item a) and item b) above shall not apply.

Directors Report for 2013 Chapter V 71 If the shareholders referred to in item b) above represent at the General Meeting less than 15% of the total number of votes in the Company, no members of the Supervisory Board shall be elected and the Management Board shall immediately convene another General Meeting in order to appoint members of the Supervisory Board. The term of office of the current Supervisory Board, subject to Article 386(2) in conjunction with Article 369(4) of the Commercial Companies Code shall be extended in such a case until the date of such next General Meeting. If at the next General Meeting the shareholders referred to in item b) above represent again less than 15% of the total number of votes in the Company, all members of the Supervisory Board shall be appointed in accordance with the general principles and the rules specified in item a) and item b) shall not apply. If the shareholders referred to in item b) above appoint fewer than 4 members of the Supervisory Board, the Management Board shall promptly convene another General Meeting to appoint other members of the Supervisory Board. If at the next General Meeting the shareholders referred to in item b) above do not appoint other members of the Supervisory Board, such other members of the Supervisory Board shall be appointed in accordance with the general principles and may be appointed at the same General Meeting while the rules specified in item a) and item b) above shall not apply. In the case of resignation of any member of the Supervisory Board, the Management Board shall promptly convene the General Meeting in order to appoint in its place a new member of the Supervisory Board in accordance with the principles set out above. Actions undertaken by the Supervisory Board shall be valid provided that the Supervisory Board consists of at least 5 persons. On 28 June 2013, the 22 nd Ordinary GSM of Polnord SA appointed the Supervisory Board for the current threeyear term of office. The composition of the Supervisory Board appointed by the Company s 22 nd Ordinary GSM was changed by the Company s 29 th Extraordinary GSM on 3 December 2013. According to 13(10), in connection with 10(4) of the Statute, the mandate of a Supervisory Board member expires, at the latest, on the day of the General Meeting approving the financial statements for the last financial year in which the member held the post of a Supervisory Board member except for the situation referred to above, where the term of office of the current Supervisory Board is extended. The Supervisory Board operates under the provisions of the Commercial Companies Code, the provisions of the Company's Statute and the Rules and Regulations of the Supervisory Board, which specifies its organisation and activities, and according to the Code of Best Practice for WSE Listed Companies. The Supervisory Board supervises the Company in all areas of its operation. The Supervisory Board passes resolutions or issues statements on matters within its scope of competence, according to the Company's Statute and under the procedure stipulated by the provisions of the Statute or the applicable legal regulations. The Supervisory Board holds its meetings regularly during the year. In addition, according to Article 388(3) of the Commercial Companies Code and 17(2) and (3) of the Company's Statute, the Supervisory Board passes resolutions by way of a correspondence vote (in writing) or using means of direct telecommunication. The Management Board provides the Supervisory Board with exhaustive information on all important matters regarding the Company's operation.

Directors Report for 2013 Chapter V 72 Audit Committee As at 31 December 2013, the Audit Committee of the Supervisory Board was composed of: In 2013, the composition of the Audit Committee changed as follows: Date Description of the event Name and surname 19.06.2013 19.06.2013 09.10.2013 The Supervisory Board dismissed from the Audit Committee The Supervisory Board appointed to the Audit Committee The Supervisory Board changed the composition of the Audit Committee again, by appointing Mr Wiesław Walendziak, acting as the Vice- Chairman of the Committee Mr Andrzej Podgórski, to act as the Vice- Chairman of the Committee Mr Piotr Chudzik as the Vice-Chairman of the Committee in place of Mr Andrzej Podgórski (appointed by members of the Supervisory Board as its Vice-Chairman). Maciej Grelowski is the member of the Audit Committee fulfilling the requirements of being independent and holding qualifications in accounting and financial revision, as stipulated by the Act on statutory auditors, their professional associations, entities authorised to audit financial statements and on public supervision of 7 May 2009. In particular, the Audit Committee is responsible for: a) monitoring the financial reporting process, b) monitoring the effectiveness of the systems for internal control, internal audit and risk management, c) monitoring financial revision activities, d) monitoring the independence of the statutory auditor.

Directors Report for 2013 Chapter V 73 Management Board of the Company As at 31 December 2013, the Company's Management Board was composed of: According to the Company's Statute, the Company s Management Board can be composed of 2 to 6 members, appointed for a joint three-year term of office. On 30 June 2011, the Company s Supervisory Board appointed the Company s Management Board for another joint three-year term of office which will end on the day of the General Meeting approving the financial statements of the Company for 2013. Principles of operation of the Management Board, including principles for appointing and dismissing managerial staff, and the rights of managerial staff The Company's Management Board operates based on the provisions of the Commercial Companies Code, the provisions of the Company's Statute and the Code of Best Practice for WSE Listed Companies. The Management Board is the Company's executive body; it manages the Company and represents it before third parties. All members of the Management Board are obliged and entitled to jointly manage the Company's affairs. The Management Board has the right to make all decisions that are not reserved for other bodies of the Company. The Management Board is obliged to manage the Company's assets and affairs with due diligence required in business, to observe the law, the provisions of the Company's Statute and the resolutions adopted by the General Meeting and the Supervisory Board, as part of their responsibilities. The rules for appointing the Company's Management Board are specified in Article 368(3) and (4) of the Commercial Companies Code and (10)(2) of the Company's Statute. The Management Board can be appointed from among the shareholders or include other people. The Supervisory Board appoints the President of the Management Board and, at his/her request, other members of the Management Board. The mandate of a member of the Management Board expires, at the latest, on the day on which the General Meeting approves the financial statements for the last full financial year in which he/she performed the duties of a member of the Management Board. According to the Company's Statute, the Management Board can be composed of 2 to 6 members, appointed for a joint three-year term of office. The number of Management Board members is specified by the Supervisory Board. During the meeting held on 30 June 2011, the Company's Supervisory Board appointed the Management Board for another joint three-year term of office, which commenced as of the end of the Company's 20 th Ordinary GSM on 30 June 2011. Representations and signing on behalf of the Company require joint action by two members of the Management Board or joint action of a member of the Management Board and a proxy. Resolutions of the Management Board are adopted by an absolute majority of votes. In the case of a tied vote, the President of the Management Board has the decisive vote.

Directors Report for 2013 Chapter V 74 A member of the Management Board, pursuant to Article 370(1) of the Commercial Companies Code and 10(5) of the Company Statute, may be dismissed or suspended by the Supervisory Board at any time for valid reasons. 5 DESCRIPTION OF THE MAIN CHARACTERISTICS OF THE COMPANY'S INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN RELATION TO THE PROCESS OF PREPARING FINANCIAL STATEMENTS To ensure reliability of the produced financial statements, the Company has implemented an internal control and risk management system, and continues to develop it. This system includes the following areas: Controlling, Accounting, Reporting and consolidation, Financial forecasts and analyses. As part of the internal control and risk management system, the Company has implemented a number of organisational solutions and procedures by introducing corporate standards that ensure the effectiveness of control, identification and elimination of risks. These solutions include: Organisational and financial separation of property development projects by establishing special purpose vehicles; Standardising the Accounting Policy, reporting principles and accounting records in the Capital Group; Using an organised financial reporting model for internal and external requirements; Clear designation of duties and responsibilities of financial staff, middle and senior management; Regular and formal verification of budget assumptions and financial forecasts; Having the financial statements reviewed and audited by a statutory auditor. The preparation of financial statements and current management reporting of the Company is the responsibility of highly qualified employees of the financial and accounting department. By creating the opportunity to participate in specialist training and higher education, the Company ensures that its employees constantly improve their qualifications, are familiar with the latest requirements imposed by external regulations, as well as solutions and tools used in the general area of finance. In the process of preparing its financial statements, the Company uses dedicated IT tools which allow for constantly monitoring accounting operations and controlling calculations. The main IT systems used in the Capital Group include: Integrated IT system for recording transactions according to the accounting policy adopted by the Company (Asseco Softlab ERP); Electronic circulation log for purchase invoices; Calculation package for property development investments, including the budget of an investment (revenue, costs and cash flow) and its performance; Consolidation package for preparing the Capital Group's financial statements. From the perspective of minimising the risk of an error and the reliability of the produced financial statements, the Company's Controlling Department plays a key role in the Capital Group; in cooperation with the Company's middle and senior management staff and governing bodies of the Capital Group's companies, it verifies, reconciles and consolidates basic financial data regarding the Capital Group's property development investments. The reporting system developed is a tool which allows the Company's Management Board to regularly obtain information supporting the decision-making process regarding the executed property development projects

Directors Report for 2013 Chapter V 75 and key business areas, and to identify risks which should be disclosed in the financial statements. It includes cyclical reports on costs, sales and stages of completion of individual projects. According to the applicable laws, the Company's financial statements are reviewed or audited by an independent statutory auditor who is confirmed to have high qualifications. The independent statutory auditor is selected by the Company's Supervisory Board, based on an authorisation of the General Meeting. 6 SHAREHOLDERS HOLDING, DIRECTLY OR INDIRECTLY THROUGH SUBSIDIARIES, SIGNIFICANT STAKES OF SHARES According to the Company s knowledge, as at 31 December 2013, the following shareholders held shares vested with at least 5% of votes at the General Meeting: Shareholder Number of shares/votes Nominal value of shares [PLN] % of capital/votes Prokom Investments SA in Gdynia 6,451,416 12,902,832 19.77% Osiedle Wilanowskie Sp. z o.o. in Gdynia (subsidiary of Prokom Investments SA) Templeton Emerging Markets Investment Trust ( in the UK*) Pioneer Pekao Investment Management SA in Warsaw (all customers of PPIM)**) 1,508,492 3,016,984 4.,62% 3,457,452 6,914,904 10.59% 3,119,628 6,239,256 9.56% Others shareholders in total 18,096,039 36,192,078 55.46% TOTAL 32,633,027 65,266,054 100.00% *) the share of Templeton Emerging Markets Investment Trust in the share capital and total number of votes is 10.59% due to the acquisition of R series shares in the execution of pre-emptive rights. **) of which Pioneer Fundusz Inwestycyjny Otwarty holds 2,858,188 shares in the share capital of the Company, corresponding to 2,858,188 votes, representing 8.76% of the total number of votes and in the capital. In 2013, the changes in the Company's shareholding resulted from the registration by the court of an increase of the share capital and acquisition/sale of shares by the following shareholders: Date of notification to the Company 26.02.2013 Entity name Templeton Asset Management Ltd. with its registered office in Singapore Description of the event FTIF Templeton Eastern Europe Fund, with its registered office in Luxembourg, decreased its share below the threshold of 5% of voting rights in the Company, as a result of sale of 1,830,188 of the Company's shares on 22 February 2013. Following the sale of the Company's shares, FTIF Templeton Eastern Europe Fund does not hold any of the Company's shares.

Directors Report for 2013 Chapter V 76 26.02.2013 20.12.2013 Templeton Asset Management Ltd. with its registered office in Singapore District Court Gdańsk-Północ, 8th Commercial Division of the National Court Register Templeton Emerging Markets Investment Trust, with its registered office in the United Kingdom, exceeded the 10% share in the overall number of votes in the Company, as a result of the purchase of 1,591,049 of the Company's shares on 22 February 2013. Following the purchase of the Company's shares, Templeton Emerging Markets Investment Trust holds 2,715,806 of the Company's shares, which represent 10.59% of the share capital and are vested with 2,715,806 votes, accounting for 10.59% in the overall number of votes in the Company. Templeton Asset Management Ltd. manages an investment portfolio of Templeton Emerging Markets Investment Trust, which invests in the shares of Polish companies. Registration of the increase in the Company's share capital. The Company s share capital has been increased from PLN 51,266,054 to PLN 65,266,054 as a result of the issue of 7,000,000 of ordinary R series bearer shares with the nominal value of PLN 2.00 each, aimed at current shareholders of the Company. Decrease in the percentage share: a) held directly by Prokom in the share capital and total number of votes in Polnord by approx. 5.40% and going below the threshold of 25% and 20%, and b) held indirectly by Prokom together with Osiedle Wilanowskie Sp. z o.o. with its registered office in Gdynia ( Osiedle Wilanowskie ) a subsidiary of Prokom, in the share capital and total number of votes in the Company by approx. 6.66% and going below the threshold of 25%. 23.12.2013 Prokom Investments SA ( Prokom ) The above change was caused by the fact of registering the Company share capital increase by the District Court in Gdańsk on 20 December 2013. As a result of registering the Polnord capital increase by the District Court in Gdańsk, Prokom holds: a) directly 6,451,416 shares in the share capital of the Company, corresponding to 6,451,416 votes, representing 19.77% of the share capital of the Company and 19.77% of total votes, and b) indirectly, together with Osiedle Wilanowskie, a total of 7,959,908 shares of the Company, corresponding to 7,959,908 votes, representing 24.39% of the share capital of the Company and 24.39% of total votes. Prokom subsidiaries other than Osiedle Wilanowskie hold no shares in the Company.

Directors Report for 2013 Chapter V 77 30.12.2013 Pioneer Pekao Investment Management SA ( PPIM ) An increase in the total engagement up to the level of 9.56% of the total number of votes at the general meeting of Polnord with regards to the financial instruments belonging to the portfolios managed within the financial instruments portfolio management services provided by PPIM. The above change was caused by the acquisition of R series shares and registration of the increase in the share capital of Polnord, which caused a change in the share in the total number of votes in the Company. Upon the change in the share, all Customers of PPIM hold 3,119,628 shares in the share capital of the Company, corresponding to 3,119,628 votes, representing 9.56% of the share capital of the Company and 9.56% of total votes in the general meeting. The shareholders holding the above mentioned number of votes at the general meeting of Polnord are investment funds established by Pioneer Pekao Towarzystwo Funduszy Inwestycyjnych SA: a) Pioneer Fundusz Inwestycyjny Otwarty, holding 2,858,188 shares in the share capital of the Company, corresponding to 2,858,188 votes, representing 8.76% of the share capital of the Company and 8.76% of total votes at the general meeting. b) Specjalistyczny Fundusz Inwestycyjny Otwarty Telekomunikacji Polskiej. The investment funds portfolios constitute a subgroup of all the portfolios of PPIM PPIM Customers. 7 HOLDERS OF SECURITIES VESTED WITH SPECIAL RIGHTS OF CONTROL The Company did not issue any securities vested with special rights to control the Company. 8 LIMITATIONS REGARDING THE RIGHT TO VOTE, SUCH AS A RESTRICTED RIGHT TO VOTE BY HOLDERS OF A SPECIFIC SHARE OR NUMBER OF VOTES, TIME RESTRICTIONS ON THE RIGHT TO VOTE OR PROVISIONS UNDER WHICH, IN COOPERATION WITH THE COMPANY, CAPITAL RIGHTS LINKED TO SECURITIES ARE SEPARATED FROM THE HOLDING OF SECURITIES In the Company, there are no limitations regarding the right to vote, such as a restricted right to vote by holders of a specific share or number of votes, time restrictions on the right to vote or provisions under which, in cooperation with the Company, capital rights linked to securities are separated from the holding of securities. 9 RESTRICTIONS ON THE TRANSFER OF THE OWNERSHIP TITLE TO THE COMPANY'S SECURITIES According to Article 337 of the Commercial Companies Code, in connection with 8(1) of the Company's Statute, the Company's shares may be transferred without any limitations. The only limitations introduced by the Company on the transfer of the ownership title to the Company's securities involve the subscription warrants issued under the Managerial Options Scheme. According to the provisions of Resolution No. 2/2013 of the 28 th Extraordinary GSM of Polnord SA of 25 October 2013 on the issue of subscription warrants without the pre-emptive right for the existing shareholders, the subscription warrants were non-transferable.

Directors Report for 2013 Chapter V 78 The Company did not introduce any restrictions on exercising the right of vote. 10 RULES FOR AMENDING THE COMPANY'S STATUTE The Company's Statute is amended according to Article 430(1) of the Commercial Companies Code and 22(1)(6) of the Company's Statute, by way of a resolution of the Company's General Meeting. At least 26 days before the Company's General Meeting is held, the Company's Management Board, in the announcement on convening the General Meeting pursuant to Article 402 1 of the Commercial Companies Code, presents the text of the draft amendments to the Company Statute and the existing provisions to be amended, pursuant to Article 402(2) of the Commercial Companies Code. In addition, after the Company's General Meeting adopts the amendments to the Statute, every amendment, in order to be valid, must be entered into the register of entrepreneurs of the National Court Register maintained by the court competent for the Company's registered office; this entry is made at the request submitted, according to Article 430(2) of the Commercial Companies Code, by the Management Board not later than three months after the day when the General Meeting adopted the resolution. Once registered, every amendment to the Company's Statute is published in the Polish Official Gazette (Monitor Sądowy i Gospodarczy).

Consolidated financial statement for 2013 79 C. CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM JANUARY 1ST 2013 TO DECEMBER 31ST 2013 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS

Consolidated financial statement for 2013 80 CONTENT CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM JANUARY 1ST 2013 TO DECEMBER 31ST 2013 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS 79 I. CONSOLIDATED PROFIT AND LOSS ACCOUNT... 82 II. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 83 III. CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)... 84 IV. CONSOLITATED CASH FLOW STATEMENT... 86 V. STATEMENT OF CHANGES IN CONSOLIDATED EQUITY... 87 VI. NOTES AND EXPLANATIONS... 88 1 GENERAL INFORMATION 2 COMPOSITION OF THE POLNORD CAPITAL GROUP 3 APPROVAL OF THE FINANCIAL STATEMENTS 4 MATERIAL VALUES BASED ON PROFESSIONAL JUDGEMENT AND ESTIMATES 5 BASIS FOR THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS 6 CHANGES IN THE APPLIED ACCOUNTING PRINCIPLES 7 ERROR ADJUSTMENT 8 CHANGE ESTIMATES 9 IMPORTANT ACCOUNTING PRINCIPLES 10 INFORMATION ON BUSINESS SEGMENTS 11 REVENUES AND EXPENSES 12 INCOME TAX 13 DISCONTINUED OPERATIONS 14 EMPLOYEE BENEFIT ASSETS AND LIABILITIES UNDER THE COMPANY SOCIAL BENEFITS FUND 15 EARNINGS PER SHARE 16 OTHER COMPREHENSIVE INCOME 17 DIVIDENDS PAID 18 PROPERTY, PLANT AND EQUIPMENT 19 INVESTMENT PROPERTY 20 INTANGIBLE ASSETS 21 INVESTMENTS IN AFFILIATES MEASURED WITH EQUITY METHOD 22 BUSINESS COMBINATIONS 23 SHARE IN JOINT VENTURES 24 FINANCIAL ASSETS AVAILABLE FOR SALE 25 OTHER (LONG-TERM) FINANCIAL ASSETS 26 EMPLOYEE BENEFITS 27 INVENTORY 28 TRADE AND OTHER RECEIVABLES 29 CASH AND CASH EQUIVALENTS 30 SHARE CAPITAL AND SUPPLEMENTARY/RESERVE CAPITAL 31 INTEREST-BEARING BANK LOANS AND BORROWINGS

Consolidated financial statement for 2013 81 32 PROVISIONS 33 TRADE AND OTHER (SHORT-TERM) LIABILITIES 34 OPERATING LEASE LIABILITIES 35 INVESTMENT LIABILITIES 36 COURT PROCEEDINGS 37 GUARANTEES 38 TAX RETURNS 39 CONTINGENT LIABILITIES AND ASSETS 40 INFORMATION ABOUT RELATED PARTIES 41 OBJECTIVES AND PRINCIPLES OF FINANCIAL RISK MANAGEMENT 42 FINANCIAL INSTRUMENTS 43 EMPLOYMENT STRUCTURE 44 AUDITOR S REMUNERATION 45 EVENTS AFTER THE BALANCE SHEET DATE

Consolidated financial statement for 2013 82 I. CONSOLIDATED PROFIT AND LOSS ACCOUNT for the period from 1 January to 31 December 2013 (in thousands of PLN) Note For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Sales revenue 11.1 241 776 289 128 Revenue from sales of products, goods and materials 225 417 274 231 from related parties Revenue from sale of services 3 914 4 130 from related parties 1 930 1 607 Lease revenue 12 445 10 767 from related parties 13 Prime cost of sale 11.2 ( 201 105) ( 247 381) Inventory revaluation allowance ( 7 586) ( 12 340) Gross profit (loss) on sales 33 085 29 407 Revaluation of investment property 11.3 38 934 87 107 Selling costs ( 8 057) ( 16 035) General administrative expenses ( 26 648) ( 32 140) Other operating revenue 11.4 12 096 112 028 Other operating expenses 11.5 ( 26 830) ( 23 973) Gross operating profit (loss) 22 580 156 394 Financial revenue 11,6 4 984 12 282 Financial expenses 11.7 ( 38 060) ( 99 092) Result on sale / occasional acquisition of subsidiary 11.8 ( 28 637) Share in profit of associated company 23 1 143 ( 228) Impairment of goodwill 22 ( 7 642) Gross profit (loss) ( 9 353) 33 077 Income tax 12 17 895 ( 4 575) Net profit (loss) on continued operations 8 542 28 502 Net profit (loss) on discontinued operations 13.1 ( 3 784) ( 2 762) Net profit / (loss) for the financial year 4 758 25 740 Attributable to: Shareholders of the parent company 4 758 25 740 Minority shareholders

Consolidated financial statement for 2013 83 II. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period from 1 January to 31 December 2013 (in thousands of PLN) Note For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Net profit / (loss) for the financial year 4 758 25 740 Other comprehensive income: 16 ( 9 992) ( 1 175) Items that may be reclassified to profit or loss in the future: Foreign exchange gains/losses on translation ( 1 365) ( 1 175) Valuation of financial assets available for sale ( 10 651) Income tax on components of other comprehensive income 2 024 Comprehensive income for the period ( 5 234) 24 565 Attributable to: Shareholders of the parent company ( 5 234) 24 565 Minority shareholders

Consolidated financial statement for 2013 84 III. CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) As at 31 December 2013 (in thousands of PLN) Note As at 31.12.2013 As at 31.12.2012 ASSETS Fixed assets 1 366 075 1 243 044 Tangible fixed assets 18 13 442 14 223 Investment property 19 1 009 935 947 668 Intangible assets 20 701 898 Investments in associates measured with equity method 23 11 299 Financial assets 24, 25 9 275 19 425 Deferred tax assets 12.3 65 086 45 353 Long-term receivables 133 855 92 995 Goodwill 22 122 482 122 482 Current assets 851 342 1 014 472 Inventories 27 584 587 661 356 Trade and other receivables 28 130 136 185 832 Other short-term financial assets 62 635 77 290 Receivables due to VAT, other taxes, customs duties, insurance and other 8 096 12 887 Income tax receivables 224 1 255 Prepayments and accrued income 9 875 5 855 Cash and cash equivalents 29 55 789 69 997 TOTAL ASSETS 2 217 417 2 257 516

Consolidated financial statement for 2013 85 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) CONTINUED As at 31 December 2013 (in thousands of PLN) LIABILITIES As at As at 31.12.2013 31.12.2012 Equity (attributable to stockholders of the parent company) 1 370 110 1 327 558 Share capital 30.1 65 266 51 266 Share premium 1 061 668 1 028 116 Foreign exchange differences on translation of a foreign operation ( 1 660) ( 295) Other reserve capitals 30.3 265 963 228 799 Retained profits/uncovered losses ( 21 127) 19 672 Total equity 1 370 110 1 327 558 Long-term liabilities 519 719 532 034 Interest-bearing bank loans and borrowings 31 456 101 464 846 Provisions 32 153 196 Other liabilities 1 900 3 748 Deferred income tax provision 12.3 61 562 61 957 Prepayments and accrued income 3 1 287 Short-term liabilities 327 588 397 924 Trade and other liabilities 33 30 332 34 178 Current long-term portion of bank loans and borrowings 31 67 467 45 419 Short-term revolving loans 31 788 Other short-term loans and borrowings 31 69 410 194 854 Liabilities due to VAT, other taxes, customs duties, insurance and other 33 5 843 1 624 Income tax liabilities 1 1 Prepayments and accrued income 6 089 3 502 Advance payments received 78 609 53 397 Provisions 32 69 837 64 161 Total liabilities 847 307 929 958 TOTAL EQUITY AND LIABILITIES 2 217 417 2 257 516

Consolidated financial statement for 2013 86 IV. CONSOLIDATED CASH FLOW STATEMENT for the period from 01 January to 31 December 2013 (in thousands of PLN) For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Cash flows from operating activities Gross profit/(loss) ( 13 137) 30 315 Adjustments: 99 437 20 031 Share in the result of associates valued under the equity method ( 1 143) 228 Depreciation and amortisation 1 113 1 585 Net interest and dividends 29 297 34 033 Profit/(loss) on investing activities ( 42 228) ( 14 352) (Increase)/decrease in receivables 4 027 ( 81 024) (Increase)/decrease in inventories 77 963 91 342 Increase/(decrease) in short-term liabilities excluding loans and borrowings 27 172 ( 23 699) Change in prepayments and accruals ( 2 868) 2 550 Change in provisions 5 397 12 781 Income tax paid 597 207 Other 110 ( 3 620) Net cash generated by operating activities 86 300 50 346 Cash flows from investing activities Inflows 31 407 100 495 Sale of tangible fixed assets and intangible assets 820 309 Sale of investment properties 252 Sale of financial assets 82 547 Interest received 1 710 2 208 Repayment of loans granted 9 477 15 179 Redemption of third party bonds 19 400 Outflows ( 25 430) ( 67 136) Purchase of tangible fixed assets and intangible assets ( 580) ( 918) Purchase of investment properties ( 14 456) ( 27 514) Purchase of financial assets ( 8 272) ( 34 006) Acquisition of shares in subsidiary, less acquired cash ( 12) ( 3 991) Loans granted ( 2 110) ( 594) Other ( 113) Net cash used in investing activities 5 977 33 359 Cash flows from financing activities Inflows 227 905 407 816 Inflows from issuance of shares 50 050 Inflows from loans/borrowings taken out 61 355 181 816 Inflows from issuance of bonds 116 500 226 000 Outflows ( 334 390) ( 474 280) Repayment of finance lease liabilities ( 185) ( 243) Repayment of loans/borrowings ( 143 285) ( 139 509) Interest paid ( 47 536) ( 67 828) Redemption of bonds ( 143 384) ( 266 700) Net cash generated by financing activities ( 106 485) ( 66 464) Net increase/decrease in cash and cash equivalents ( 14 208) 17 241 Net foreign exchange gains/losses ( 39) Cash and cash equivalents at the beginning of the period 69 997 52 795 Cash and cash equivalents at the end of the period, of which 55 789 69 997 Restricted cash 57 123

Consolidated financial statement for 2013 87 V. STATEMENT OF CHANGES IN CONSOLIDATED EQUITY for the period from 1 January to 31 December 2013 (in thousands of PLN) Attributable to shareholders of the parent company Share capital Share premium Equity shares Foreign exchange differences on translation of a foreign operation Other reserve capitals Retained profits/uncovered (losses) Total Non-controlling interest Total equity As at 01.01.2012 47 606 1 011 356 880 133 690 89 041 1 282 573 1 282 573 Share issue 3 660 20 590 24 250 24 250 Share issue costs ( 3 830) ( 3 830) ( 3 830) Equity shares Result carried forward from previous period Dividend 95 109 ( 95 109) Total comprehensive income ( 1 175) 25 740 24 565 24 565 As at 31.12.2012 51 266 1 028 116 ( 295) 228 799 19 672 1 327 558 1 327 558 As at 01.01.2013 51 266 1 028 116 ( 295) 228 799 19 672 1 327 558 1 327 558 Share issue 14 000 36 050 50 050 50 050 Share issue costs ( 2 498) ( 2 498) ( 2 498) Result carried forward from previous period 45 557 ( 45 557) Managerial Option scheme 234 234 234 Total comprehensive income ( 1 365) ( 8 627) 4 758 ( 5 234) ( 5 234) As at 31.12.2013 65 266 1 061 668 ( 1 660) 265 963 ( 21 127) 1 370 110 1 370 110 Grupa Kapitałowa Polnord SA

Consolidated financial statement for 2013 88 VI. NOTES AND EXPLANATIONS 1 GENERAL INFORMATION The ( Group ) is composed of the parent company Polnord SA, its subsidiaries, jointly-controlled subsidiaries and affiliates indicated in point 2 below. The consolidated financial statements were prepared for the year ended 31.12.2013 and covers the period from 01.01.2013 to 31.12.2013 and contain relevant comparative data as at 31.12.2012 and for the period from 01.01.2012 to 31.12.2012. Basic data of the parent company are set out in the Management Report on the Group's activities in Chapter I, point 6. The core business of the consists in the development and sale of residential and commercial property. Polnord SA executes development and commercial projects, mainly using special purpose vehicles. The duration of the Parent Company and of the member companies of the Group, as at 31.12.2013, is indefinite. 2 COMPOSITION OF THE POLNORD CAPITAL GROUP Polnord SA is the parent company of the Polnord Group. Detailed information on subsidiaries, jointly-controlled entities and associates in the Group as at 31.12.2013 are presented below. Note 2.1. Composition of the Polnord Capital Group Company name Registered office Par value of shares held [PLN] % of capital/ votes Consolidation method Polnord Szczecin Ku Słońcu Sp. z o.o. Gdynia 50.000 100% Full Polnord Łódź City Park Sp. z o.o. Gdynia 1.050.000 100% Full Polnord Apartamenty Sp. z o.o. Gdynia 1.050.000 100% Full Polnord Sopot II Sp. z o.o. Gdynia 25.173.500 100% Full Polnord Olsztyn Tęczowy Las Sp. z o.o. Gdynia 5.000.000 100% Full Polnord Warszawa Ząbki Neptun Sp. z o.o. Gdynia 50.000 100% Full Śródmieście Wilanów Sp. z o.o. Gdynia 50.000 100% Full WILANÓW OFFICE PARK budynek B1 Sp. z o.o. Gdynia 8.582.656 100% Full WILANÓW OFFICE PARK budynek B3 Sp. z o.o. Gdynia 700.000 100% Full Surplus Sp. z o.o. Warszawa 50.000 100% Full Surplus Sp. z o.o. SKA Warszawa 1.051.000 100% Full Polnord Marketing Sp. z o.o. Gdynia 53.605.000 100% Full Polnord Gdańsk Dwa Tarasy Sp. z o.o.** Gdynia 5.000 100% Full

Consolidated financial statement for 2013 89 Polnord Brama Sopocka Sp. z o.o.** Gdynia 5.000 100% Full 10H Sp. z o.o.** Gdynia 5.000 100% Full Surplus Sp. z o.o. DOMITUS SKA** Gdynia 3.550.000 100% Full Stroj-Dom ZSA Saratow 99.290 100% Full Hydrosspol Sp. z o.o. w likwidacji (Rosja) Gdańsk 15.000 30% Not included Stacja Kazimierz I Sp. z o.o.** Warszawa 2.500 50% Equity method Stacja Kazimierz I Sp. z o.o. SKA** Warszawa 25.000 50% Equity method Stacja Kazimierz Sp. z o.o.** Warszawa 2.500 50% Equity method Stacja Kazimierz Sp. z o.o. SKA ** Warszawa 25.000 50% Equity method Semeko Aquasfera Sp. z o.o.** Gdynia 10.000.000 50% Equity method Fadesa Polnord Polska Sp. z o.o. Warszawa 8.134.000 49% Proportionate FPP Powsin Sp. z o.o.* Warszawa 2.474.500 49% Proportionate Osiedle Innova Sp. z o.o.* Warszawa 3.454.500 49% Proportionate FPP Osiedle Moderno Sp. z o.o.* Warszawa 2.450 49% Proportionate *indirect subsidiarity through Fadesa Polnord Polska Sp. z o.o. ** consolidated from the date of control/ joint control As at 31.12.2013, the Group s share in the overall number of votes in subsidiaries, jointly-controlled entities and affiliates is equal to the Group s share in these companies capitals. Changes in equity relations of Polnord SA with other entities that occurred in 2013 and after the balance sheet date as at date of preparation of these financial statements are described in detail in the Management Report on the company's activities in Chapter VI, point. 6. During the reporting period there were also changes in names of subsidiaries. A list of changes is included in the table below: Note 2.2. List of changes in names of subsidiaries Current name Polnord Szczecin Ku Słońcu Sp. z o.o. Polnord Łódź City Park Sp. z o.o. Polnord Olsztyn Tęczowy Las Sp. z o.o. Polnord Warszawa Ząbki Neptun Sp. z o.o. Śródmieście Wilanów Sp. z o.o. Wilanów Office Park budynek B1 Sp. z o.o. Wilanów Office Park budynek B3 Sp. z o.o. Former name Polnord Szczecin I Sp. z o.o. Polnord Łódź II Sp. z o.o. Polnord Osiedle Tęczowy Las PD Development Sp. z o.o. SKA Polnord Wilanów B2 Sp. z o.o. Polnord Warszawa Wilanów I Sp. z o.o. Polnord Warszawa Wilanów III Sp. z o.o. Polnord Warszawa Wilanów IV Sp. z o.o. Polnord SA was consolidated for the period from 01.01.2013 to 31.12.2013 with companies belonging to the Group as at 31.12.2013. Due to the merger of Polnord SA with PD Development Sp. z o.o., Polnord Łódź I Sp. z o.o., Polnord Łódź III Sp. z o.o. and Polnord Nieruchomości Inwestycyjne Sp. z o.o. through a transfer of all assets of the acquired companies to the acquiring company - Polnord SA (merger by acquisition). Acquired companies were consolidated under the full method for the period from 01.03.2013 until 31.03.2013. The merger took place on 02.04.2013 by the the acquisition method. Polnord share in the capital of all the acquired companies constituted 100%.

Consolidated financial statement for 2013 90 Non-consolidated companies The consolidated statements do not include Hydrosspol Sp. z o.o., in liquidation, which discontinued its business. This company s financial figures are immaterial for the overall consolidated financial statements. 3 APPROVAL OF THE FINANCIAL STATEMENTS These consolidated financial statements were approved for publication by the Management Board on 21.03.2014. 4 MATERIAL VALUES BASED ON PROFESSIONAL JUDGEMENT AND ESTIMATES 4.1 Professional judgement In the application of the accounting principles (policy) to the issues discussed below, the most important aspect, apart from the accounting estimates, was the professional judgment of the management. 4.2 Important estimates Estimates and judgements are constantly verified. They result from previous experience and other factors, including forecasts related to future events which seem justified in a given situation. Compared to 31.12.2012, the Group did not change significantly estimates and assumptions. The Group prepares estimates and makes assumptions for its future business. Typically, accounting estimates produced in this manner are rarely consistent with the actual results. The estimates and assumptions which involve a significant risk of major adjustments of the carrying value of assets and liabilities in the next financial year are presented below: Estimate of receivables revaluation allowances. The level of receivables revaluation allowances is established based on the expected risk related to the receivables and based on the established collaterals, which influence how effectively debt can be recovered. Despite the fact that the assumptions are made to the best of our knowledge, the actual results may differ from the expected results; Estimates of deferred tax assets as per IAS 12. The established deferred tax asset is based on, among other things, tax losses. According to the Group s forecasts, these amounts can be used. Given the high volatility of the economic situation, the actual results and income may differ from the planned results and income; The Management Board makes decisions to their best knowledge, based on the legal opinions provided; Estimate of potential costs related to tax and court proceedings against the parent company. As at the balance sheet date, the Group is a claimant and a defendant in a number of court proceedings. When preparing financial statements, the opportunities and risks related to the proceedings are analysed, and provisions for potential losses are established based on the results of such analyses. However, there is a risk that a court or a tax authority makes a decision different from the one expected by the company, and the established provisions may prove insufficient; The fair value of investment property is established by an independent professional real property appraiser.

Consolidated financial statement for 2013 91 5 BASIS FOR THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS These consolidated financial statements have been prepared in line with the historical cost principle, except for investment property, financial assets available for sale and warrants granted (Managerial Options), which are measured at fair value. Except for the above items, the statements do not contain any items that are measured with another method, according to the principles adopted by the Group. The accounting principles (policy) used when preparing these financial statements for the financial year ended on 31 December 2013 are consistent with the accounting principles applied to the financial statements for the financial year ended on 31 December 2012, except for changes in IAS/IFRS described below. The same principles were applied to the current period and to the comparative period, unless the respective standard or interpretation stipulates prospective application only. The consolidated financial statements are presented in thousands of Polish zloty, unless indicated otherwise. The consolidated financial statements have been prepared based on the going concern assumption. Therefore, as at the day of approving these financial statements for publication, there are no circumstances threatening the Group companies going concern status. 5.1 Compliance declaration These consolidated financial statements have been prepared in compliance with the applicable International Financial Reporting Standards (IFRS), as adopted by the EU. The IFRS include standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC). The financial statements of most subsidiaries have been prepared according to the accounting principles (policy) resulting from the International Financial Reporting Standards and the related interpretations published as Regulations of the European Commission, and, to the extent not regulated by these Standards, as per the requirements of the Polish Accounting Act and secondary legislation based on the Act. The remaining financial statements of subsidiaries have been prepared according to the provisions of the Accounting Act and, for the purpose of the consolidation of the Capital Group, the consolidated financial statements include suitable adjustments and restatements as per the accounting principles in line with the IAS/IFRS. In these consolidated financial statements, the Group has applied all International Financial Reporting Standards effective as of 01.01.2013 as well as standards which came into effect before 31.12.2013. The Group has analysed new standards and interpretations and amendments to the existing standards and interpretations. The amendments to the standards and interpretations, except for the required new disclosures, do not affect the financial results presented in these consolidated financial statements. Changes resulting from amendments to IFRS Amendments to IAS 19 Employee Benefits effective for annual periods beginning on or after 01.01.2013. Amendments to IAS 1 Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income effective for annual periods beginning on or after 01.01.2012, Amendments to IAS 12 Income tax: Recovery of Underlying Assets effective for annual periods beginning on or after 01.01.2012; in the EU effective for annual periods beginning on or after 01.01.2013 at the latest,

Consolidated financial statement for 2013 92 Amendments to IFRS 1 First-time Adoption of IFRS: heavy hyperinflation and exemption from rigid deadlines for first-time adopters of IFRS effective for annual periods beginning on or after 01.07.2011 in the EU, effective for annual periods beginning on or after 01.01.2013 at the latest, IFRS 13 Fair Value Measurement effective for annual periods beginning on or after 01.01.2013, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine effective for annual periods beginning on or after 01.01.2013, Amendments to IFRS 7 Financial Instruments: Disclosures: Offsetting financial assets and financial liabilities effective for annual periods beginning on or after 01.01.2013, Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards: government loans effective for annual periods beginning on or after 01.01.2013, Amendments following the review of IFRS (published in May 2012) effective for annual periods beginning on or after 01.01.2013, - IAS 1 - The amendment clarifies the difference between voluntarily submitted additional comparative data and comparative data, as a minimum, - IAS 16 - The amendment clarifies that the main spare parts and maintenance equipment that meet the definition of tangible fixed assets are not stocks, - IAS 32 - The amendment removes the existing requirements for recognition of tax with IAS 32 and requires the application of IAS 12 in respect of taxes on income resulting from the distribution to the owners of financial instruments, - IAS 34 - The amendment clarifies the requirements of IAS 34 relating to information on the total value of assets and liabilities for each reportable segment in order to enhance consistency with the requirements of IFRS 8 Operating Segments. In accordance with the amendment, a total value of the assets and liabilities of the reporting segment must be disclosed only if: the valuesare regularly reported to the chief operating decision maker of the unit and there was a significant change for that segment in a total value of assets and liabilities disclosed in the preceding annual financial statements. The above changes had no impact on the financial position or performance of the Group. Changes introduced by the Group The Group did not adjust the presentation of comparative figures for the financial year ended on 31 December 2013 and/or as at 31 December 2012. Standards not yet in force (new standards and interpretations) The Group did not decide to apply the published standards or interpretations to these financial statements before such standards and interpretations come into effect. The following standards and interpretations have been issued by the International Accounting Standards Committee or the International Financial Reporting Interpretations Committee, but were not yet effective as at the balance sheet date: IFRS 10 Consolidated Financial Statements approved by the EU on 11.12.2012, effective for annual periods beginning on or after 01.01.2013 in the EU, effective for annual periods beginning on or after 01.01.2014 at the latest. IFRS 11 Joint arrangements approved by the EU on 11.12.2012, effective for annual periods beginning on or after 01.01.2013 in the EU, effective for annual periods beginning on or after 01.01.2014 at the latest.

Consolidated financial statement for 2013 93 IFRS 12 Disclosure of Interests in Other Entities - approved by the EU on 11.12.2012 (effective for annual periods beginning on or after 01.01.2014 ). IAS 27 (revised in 2011,) Separate Financial Statements - approved by the EU on 11.12.2012, in the EU applicable for annual periods beginning on or after 01.01.2014 at the latest. IFRS 28 (amended in 2011) Investments in Associates and Joint Ventures approved in the EU on 11.12.2012, effective for annual periods beginning on or after 01.01.2013 in the EU, effective for annual periods beginning on or after 01.01.2014 at the latest. IFRS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities, approved by the EU on 13.12.2012 (effective for annual periods beginning on or after 01.01.2014 ). Amendments to various standards, Improvements to IFRSs (2012) - approved by the EU on 27.03.2013 (effective for annual periods beginning on or after 01.01.2014 ). Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)- approved by the EU on 04.04.2013 (effective for annual periods beginning on or after 01.01.2014 ). Amendments to IFRS 39, Novation of Derivatives and Continuation of Hedge Accounting (published on 27.06.2013) effective for annual periods beginning on or after 01.01.2014 not approved by the EU by the date of approval of these financial statements. Amendments to IFRS 36, Disclosures for Non-Financial Assets (published on 29.05.2013) effective for annual periods beginning on or after 01.01.2014 not approved by the EU by the date of approval of these financial statements. First phase of IFRS 9 Financial Instruments: Classification and Measurement effective for annual periods beginning on or after 01.01.2015 not approved by the EU by the date of approval of these financial statements. IFRS 14 Regulatory deferral account balances applicable to annual periods starting on 1 January 2016 not approved by the EU until the date of approval of these financial statements, Amendments to IAS 19 Employee benefits (Defined benefit plans: employee contributions) - applicable to annual periods starting on 1 July 2014 or later not approved by the EU until the date of approval of these financial statements Interpretation of IFRIC 21 Public levies - applicable to annual periods starting on 1 January 2014 or later not approved by the EU until the date of approval of these financial statements, Financial statements for 2013 97

Consolidated financial statement for 2013 94 Amendments to various standards Amendments to IFRS (cycle 2010-2012) applicable to annual periods starting on 1 July 2014 or later not approved by the EU until the date of approval of these financial statements Amendments to various standards Amendments to IFRS (cycle 2011-2013) applicable to annual periods starting on 1 July 2014 or later not approved the by EU until the date of approval of these financial statements As at the day of preparing these financial statements, it is not possible to credibly estimate the effects of the adoption of the new standards. 5.2. Currency for measurements and financial statements The items included in the financial statements of individual companies of the Group are measured in the currency of the main business environment in which a given company operates (functional currency). The parent company s functional and presentation currency is the Polish zloty (PLN). The reporting currency of the Group s financial statements is the Polish zloty (PLN). The functional currencies of some of the Group companies are other than the Polish zloty (PLN). These companies financial statements, prepared in their functional currencies, are included in these consolidated financial statements after being converted into PLN according to the principles of IAS 21. Note 5.2.1. Foreign exchange rates EXCHANGE RATES ADOPTED FOR BALANCE SHEET VALUATION PURPOSES Currency 31.12.2013 31.12.2012 USD 3,0120 3,0996 EUR 4,1472 4,0882 RUB 0,0914 0,1017 EXCHANGE RATES ADOPTED FOR INCOME STATEMENT VALUATION PURPOSES Currency 01.01.2013-31.12.2013 01.01.2012-30.06.2012 USD 3,1653 3,2312 EUR 4,2140 4,1736 RUB 0,0990 0,1043

Consolidated financial statement for 2013 95 Note 5.2.2. Selected financial data consolidated financial statement 01.01.2013-30.12.2013 PLN '000 EUR '000 01.01.2012-31.12.2012 01.01.2013-31.12.2013 01.01.2012-31.12.2012 INCOME STATEMENT Revenue on sales 241 776 289 128 57 415 69 275 Gross profit (loss) on sales 33 085 29 407 7 857 7 046 Gross operating profit (loss) 22 580 156 394 5 362 37 472 Gross profit (loss) ( 9 353) 33 077 ( 2 221) 7 925 Net profit (loss) on continued business activities 8 542 28 502 2 028 6 829 Net profit (loss) for the financial year 4 758 25 740 1 130 6 167 BALANCE SHEET 31.12.2013 31.12.2012 31.12.2013 31.12.2012 Equity 1 370 110 1 327 558 330 370 324 729 Long-term liabilities 519 719 532 034 125 318 130 139 Short-term liabilities 327 588 397 924 78 990 97 335 Fixed assets 1 366 075 1 243 044 329 397 304 057 Current assets 851 342 1 014 472 205 281 248 146 Assets in total 2 217 417 2 257 516 534 678 552 203 6 CHANGES IN THE APPLIED ACCOUNTING PRINCIPLES No changes in the accounting principles occurred in the reporting period. 7 ERROR ADJUSTMENT No error adjustment was made in these consolidated financial statements. 8 CHANGE ESTIMATES No material changes of estimates were made in these consolidated financial statements. 9 IMPORTANT ACCOUNTING PRINCIPLES The Group s financial year is the calendar year, i.e. the period from 1 January to 31 December. The Parent Company s accounting books are maintained at the registered office of Polnord SA in Gdynia, at ul. Śląska 35/37. No changes in the accounting principles occurred in the reporting period. 9.1 Consolidation principles These consolidated financial statements include all subsidiaries, jointly-controlled subsidiaries and associates, except for entities that did not run any operations and entities that discontinued their operations. All material balances and transactions between the subsidiaries have been omitted for the purpose of consolidation. The consolidated financial statements have been prepared using consistent accounting principles in all of the consolidated entities 9.2 Investments in associates Investments in associates are measured with the equity method. These are entities on which the Parent Company, directly or through subsidiaries, has a significant influence and which are not the Parent Company s subsidiaries or joint ventures. The financial statements of associates are the basis for measuring the shares held

Consolidated financial statement for 2013 96 by the Parent Company using the equity method. The financial year of the associates and of the Parent Company is identical. The associates prepare their statements according to the IFRS for the purposes of the Group s consolidated financial statements. Investments in associates are disclosed in the balance sheet at the purchase price plus later changes in the Parent Company s share in these entities net assets, and less any possible impairment losses. The profit and loss account reflects the share in the results of associates. When changes are recognised directly in the equity of associates, the Parent Company recognises its share in every change and discloses it, where reasonable, in the statement of changes in equity. 9.3 Share in joint ventures The Group s share in joint ventures before 01.01.2013 is recognised using proportionate consolidation method, in which the proportionate share in the assets, liabilities, revenues and expenses of a joint venture is disclosed, item after item, together with similar items in the consolidated financial statements. Joint ventures taken after 31.12.2013 are recognized using the equity method. Before the financial data of a joint venture is included in the consolidated financial statements, suitable adjustments are made to ensure that this data complies with the IFRS applied by the Group. Investments in jointly-controlled subsidiaries are examined for impairment, when there are circumstances indicating that impairment has taken place or that an impairment loss established in the previous years is no longer required. 9.4. Translation of foreign currency items Transactions denominated in currencies other than the Polish zloty are converted into the Polish zloty at the exchange rate applicable on the day preceding the transaction date. As at the balance sheet date, monetary assets and liabilities denominated in currencies other than the Polish zloty are converted into the Polish zloty at the average exchange rate, applicable as at the end of the reporting period, for a given currency, announced by the National Bank of Poland. Foreign exchange differences arising from the translation are recognised under financial revenues (expenses) or, in the situations specified by the accounting principles (policy), they are capitalised in the value of the assets accordingly. Non-monetary assets and liabilities recognised according to the historical cost in a foreign currency are disclosed at the historical cost from the day of transaction. Financial statements of foreign operations are translated into PLN as follows: balance sheet items: according to the average exchange rate published by the National Bank of Poland as at the balance sheet day; items from the profit and loss account: according to the arithmetical mean of the average exchange rates published by the National Bank of Poland for every day ending a financial month. Foreign exchange differences resulting from this translation are recognised directly in equity under a separate item. At the time of sale of a foreign operation, the accumulated deferred foreign exchange differences recognised in equity and related to a given foreign operation are recognised in the profit and loss account 9.5. Tangible fixed assets (property, plant and equipment) PP&E is measured at the purchase price or the manufacturing cost, less depreciation allowances and impairment losses. As at the day of adopting the IFRS, i.e. 01.01.2004, the Parent Company measured its PP&E at fair value adopted as costs as at that day.

Consolidated financial statement for 2013 97 Straight-line depreciation allowances have been adopted to allocate the initial value of PP&E or the restated value to the period corresponding to the estimated economic life of PP&E, which is reflected by the business entity s use of economic benefits from a PP&E item. Low-value PP&E, i.e. up to PLN 3,500.00, is posted as costs at the time of commissioning to use. The residual value and the useful lives of PP&E are verified at least once a year and adjusted, when necessary. The economic lives of PP&E in the Capital Group are as follows: buildings, premises, civil and maritime engineering structures 10-50 years plant and machinery 2-25 years means of transport 3-10 years other PP&E 2-10 years The Capital Group does not depreciate land. The commenced investments involve PP&E under construction or assembly, which is disclosed at the purchase price or the manufacturing cost. PP&E under construction is not subject to depreciation until construction is completed and a PP&E item is commissioned to use. The residual value, the useful life and the depreciation method are verified and, when necessary, adjusted, effective from the beginning of the closed financial year. 9.6. Impairment of non-financial assets As at every balance sheet date, the Group verifies whether there are any circumstances indicating an impairment of any item of the assets. When such circumstances are identified or when an annual impairment test needs to be conducted, the Group estimates the recoverable value of a given asset. 9.7. Borrowing costs Borrowing costs are recognised as costs at the time when they are incurred, except for costs which can be directly assigned to the acquisition, construction or manufacture of an asset. In this situation, they are capitalised as a portion of the purchase price or the manufacturing costs of such asset, if it is probable that they will bring economic benefits to a business entity in the future and on the condition that the purchase price or the manufacturing cost can be credibly determined. 9.8. Investment property Investment property is real property (land, building or a part of a building, or both) that is owned or leased under finance lease and regarded as a source of revenue from rent or a real property held due to the increase in the property s value, or both; investment property is not used for manufacturing, supply of goods, provision of services or administrative activity and is not designated for sale as part of regular business of a company. After an initial recognition of a property, the company uses the model of measurement at fair value and measures all investment properties and investment properties under construction at fair value, except when the company is not able to credibly and regularly determine the fair value of investment property. Profit or loss on changes in the fair value of investment property affects the net profit or loss in the period in which such changes occur.

Consolidated financial statement for 2013 98 9.9. Goodwill Goodwill due to the acquisition of a business entity is initially recognised at the purchase price, which is the surplus of the costs of a business combination over the share of the acquiring entity in the net fair value of identifiable assets, liabilities and contingent liabilities. After the initial recognition, goodwill is disclosed at the purchase price less any accumulated impairment losses. The impairment test is conducted once a year. Goodwill is not amortised. 9.10. Intangible assets Intangible assets purchased in a separate transaction are initially measured at the purchase price or at the manufacturing cost. The purchase price of intangible assets purchased by way of a business combination is equal to the fair value of the business as at the day of combination. After the initial recognition, intangible assets are disclosed at the purchase price or the manufacturing cost, less amortisation and impairment losses. Expenditures on internally generated intangible assets, except for capitalised expenditures on development work, are not capitalised and are recognised in the costs of the period in which they were incurred. The Group verifies whether the useful life of intangible assets is definite or indefinite. Intangible assets with a limited useful life are amortised over their useful lives and tested for impairment each time when there are indications of impairment. The useful life and amortisation method of intangible assets with a limited useful life are verified at least at the end of every financial year. Changes in the expected useful life or the expected consumption of economic benefits from an asset are recognised by changing the useful life or the amortisation method correspondingly, and are regarded as changes in estimated values. The amortisation allowance for intangible assets with a limited useful life is recognised in the profit and loss account under the item which corresponds to the function of a given intangible asset. As at the balance sheet date, the Group does not hold any intangible assets with indefinite useful life. The useful lives are verified on an annual basis and, when necessary, adjusted, effective from the beginning of the closed financial year. Profits or losses on the cancellation of intangible assts from the balance sheet are measured according to the difference between proceeds from net sale and the carrying value of a given asset, and are recognised in the profit and loss account at the time when the asset is cancelled from the books. 9.11. Financial assets Financial assets are classified into the following categories: Financial assets held to maturity, Financial assets measured at fair value through the financial result, Borrowings and receivables, and Financial assets available for sale. Financial assets held to maturity are investments with specified or identifiable return and a fixed maturity which the Group intends to and can hold until maturity. Financial assets held to maturity are measured at the amortised cost, using the effective interest rate method. Financial assets held to maturity are classified as longterm assets, if they mature in more than 12 months from the balance sheet date.

Consolidated financial statement for 2013 99 Financial assets purchased to generate profit through short-term price variations are classified as financial instruments measured at the fair value through the financial result. Financial instruments measured at the fair value through the financial result are measured at the fair value in consideration of their market value as at the balance sheet date. Changes in the value of these financial instruments are accounted for in financial revenues or expenses. Financial assets measured at the fair value through the financial result are classified under current assets. Borrowings and receivables are financial assets not classified as derivatives; they bear identified or identifiable payments and are not listed on an active market. They are classified as current assets, if they mature not later than 12 months from the balance sheet date. Borrowings and receivables maturing in more than 12 months from the balance sheet date are classified as non-current assets. Borrowings and receivables are recognised at the amortised cost. All other financial assets are financial assets available for sale. Financial assets available for sale are recognised at their fair value, without deducting transaction costs and taking into account their market value as at the balance sheet date. If no quotations on an active market are available and their fair value cannot be credibly determined using alternative methods, financial assets available for sale are measured at the purchase price adjusted for impairment loss. Positive and negative differences between the fair value and the purchase price of assets available for sale (when there is a market price available determined on an active regulated market or when the fair value can be credibly determined using another method), less deferred tax, are recognised in the revaluation reserve. A decrease in the value of assets available for sale due to impairment is recognised in the profit and loss account as a financial expense. The purchase and sale of financial assets is recognised as at the day of transaction. When initially recognised, they are measured at the purchase price, i.e. at the fair value, including transaction costs. A financial asset is cancelled from the balance sheet, when the Group loses control over contractual rights constituting a financial instrument; this is usually the case when an instrument is sold or when all cash flows assigned to a given instrument are transferred to an independent third party. The table below presents methods for measuring financial assets and liabilities Category Balance sheet item Measurement Financial assets Financial assets held for trading Cash Fair value Financial assets held to maturity Loans granted by the company and receivables Short-term investments, deposits and financial assets Receivables Amortised purchase cost Amortised purchase cost Financial assets available for sale Trade and other receivables Investments in transferable securities Short-term and long-term receivables Fair value Amortised purchase cost

Consolidated financial statement for 2013 100 Financial liabilities Trade and other liabilities Other liabilities Amortised purchase cost Loans and borrowings Amortised purchase cost Revolving loans Amortised purchase cost 9.12. Impairment of financial assets As at every balance sheet date, the Group verifies whether there are objective indications of impairment of a financial asset or a group of financial assets. If there are objective indications that a loss has been incurred due to the impairment of borrowings and receivables measured at the amortised cost, the amount of the impairment loss equals the difference between the carrying value of a financial asset and the current value of the estimated future cash flows (except for future losses due to unrecovered receivables, not yet incurred), discounted using the original effective interest rate (i.e. the interest rate determined at original recognition). The carrying value of an asset is reduced and the loss is recognised in the profit and loss account. First, the Group verifies whether there are objective indications of impairment of financial assets which are individually material, and indications of impairment of financial assets which individually immaterial. If the analysis shows that there are no objective indications of impairment of an individually tested financial asset, irrespectively whether the asset is material or not, the Group includes such asset in the group of financial assets with similar loan risk characteristics and tests them all for impairment. Assets tested individually for impairment, assets for which an impairment loss has been recognised and assets for which it is decided that the impairment loss will not change are not taken into consideration when testing the whole group of assets for impairment. If, in the following period, the impairment loss decreases and the decrease can be objectively associated with an event that occurred after the impairment loss was recognised, the recognised impairment loss is reversed. A subsequent reversal of the impairment loss is recognised in the profit and loss account to the extent to which, as at the day of reversal, the carrying value of an asset does not exceed its amortised cost. 9.12.1. Financial assets disclosed at purchase price If there are objective indications of impairment of an unlisted equity instrument that is not disclosed at the fair value because its fair value cannot be credibly determined, or if there are objective indications of impairment of a derivative which must be settled by the provider of the unlisted equity instrument, the amount of the impairment loss is determined as the difference between the carrying value of a financial asset and the current value of the estimated future cash flows discounted using the current market interest rate for similar financial assets. 9.12.2 Financial assets available for sale If there are objective indications of impairment of a financial asset available for sale, the difference between the purchase price of such asset (less any capital repayments and amortisation) and its current fair value, less any impairment losses recognised in the profit and loss account, is cancelled from equity and transferred to the profit and loss account. The reversal of the impairment loss on equity instruments classified as available for sale cannot be recognised in the profit and loss account. If, in the subsequent period, the fair value of a debt instrument available for sale increases and such increase can be objectively associated with an event that occurred after the recognition of the impairment loss in the profit and loss account, the amount of the reversed impairment loss is recognised in the profit and loss account.

Consolidated financial statement for 2013 101 9.13. Inventory Inventory includes goods purchased for resale, such as goods purchased by the entity for resale, or land and other real property for resale. Inventory also includes finished products already manufactured or in the process of being manufactured by the company, along with materials and raw materials to be used for manufacturing. Materials and goods are measured at the purchase price or the manufacturing cost, less impairment losses. The value of land for developments is increased by borrowing costs. Work in progress inventory is measured according to the technical manufacturing costs, taking account of the progress of production. In particular, inventory includes: land for property development, finished residential structures and parking places, which are finished goods, expenditures on manufacturing residential structures and parking places, which constitute work in progress 9.14. Trade and other receivables Trade receivables are recognised and disclosed according to the originally invoiced amounts, taking account of an allowance for doubtful debt. A receivables allowance is estimated when the collection of a certain amount of receivables is no longer likely. Unrecoverable receivables are written off in the profit and loss account at the time when unrecoverability is confirmed. If the influence of time value of money is significant, the value of receivables is established by discounting forecast cash flows to the current value, using a gross interest rate that reflects the current market assessments of the time value of money. If discounting is used, the increase in receivables over time is recognised as financial revenue. 9.15. Cash and cash equivalents Cash and cash equivalents and short-term deposits disclosed in the balance sheet include cash in bank and cash in hand as well as short-term deposits whose original maturity does not exceed three months. The cash and cash equivalents balance disclosed in the consolidated cash flow statement includes the above-mentioned cash and cash equivalents, less overdraft facilities outstanding. 9.16. Interest-bearing bank loans, borrowings and debt securities All bank loans, borrowings and debt securities are originally recognised at their purchase price which is equal to the fair value of cash received, less the costs connected with obtaining a loan or a borrowing. After the original recognition, interest-bearing loans, borrowings and debt securities are measured according to their amortised cost, using the effective interest rate method. When establishing the amortised cost, costs related to obtaining a loan or a borrowing and the discount or bonuses obtained when a liability is settled are taken into consideration. Profits and losses are recognised in the profit and loss account at the time when a liability is cancelled from the balance sheet, and as a result of calculating an allowance.

Consolidated financial statement for 2013 102 9. 17. Trade and other liabilities Short-term trade liabilities are recognised at the amount payable. Financial liabilities which are not financial instruments measured at their fair value through the financial result are measured according to their amortised cost, using the effective interest rate method. 9.18. Provisions Provisions are created, when the Group is bound by an obligation (by law or custom) due to past events, and when it is probable that the fulfilment of this obligation will result in an outflow of economic benefits and the liability can be credibly estimated. If the Group expects that the costs included in a provision will be reimbursed, for example under an insurance agreement, the reimbursement is recognised as a separate asset, but only when it is certain that the reimbursement will actually take place. The costs of a provision are disclosed in the profit and loss account, less any reimbursements. If the influence of time value of money is significant, the amount of the provision is established by discounting forecast cash flows to the current value, using a gross interest rate that reflects the current market assessments of the time value of money and the potential risk related to a liability. If discounting is used, the increase in the provision over time is recognised as under financial expenses. 9.19. Retirement gratuities According to IAS 19, retirement gratuities are schemes of specific benefits after the employment period. The calculated liabilities are equal to discounted payments to be made in the future, taking account of the turnover of staff, and they relate to the period ending on the balance sheet date. Demographic information and information on the turnover of staff is based on historic data. Profits and losses on calculations are recognised in the profit and loss account. 9.20. Share-based payments The entity recognises goods or services received or purchased under share-based payment transactions at the time when it receives such goods or services. At the same time, it recognises the corresponding increase in equity, if the goods or services are received under a share-based payment transaction settled in equity instruments, or liability, if the goods or services are purchased under a share-based payment transaction settled in cash. If the goods or services received or purchased under a share-based payment transaction do not qualify for recognition under assets, the entity recognises them as costs.

Consolidated financial statement for 2013 103 9.21. Lease The Group as a lease Finance lease agreements which encumber the Group with all risk and all benefits from holding the subject of lease are recognised in the balance sheet as at the day when the lease starts according to one of the two values, whichever is lower: fair value of a PP&E item that is the subject of lease or current value of minimum lease fees. Lease fees are allocated to financial costs and decrease of lease liabilities balance to obtain a constant interest rate on the liability that remains to be repaid. Financial costs are recognised directly in the profit and loss account. PP&E used under finance lease agreements is depreciated for one of the two periods, whichever is shorter: estimated useful life of PP&E or lease period. Lease agreements under which the lessor retains essentially all risks and all benefits from holding the subject of lease are classified as operating lease agreements. Operating lease fees are recognised as costs in the profit and loss account for the duration of the lease, using the straight-line method. 9.22. Revenue Revenue is recognised in the probable amount of the Group s economic benefits related to a given transaction and when the revenue can be credibly measured. Revenue is recognised after deducting the goods and services tax (VAT) and discounts. The above criteria also apply to recognising revenue. 9.22.1 Sale of services, products and goods Revenue from the sale of goods is recognised, when material risk and benefits from the ownership title to goods and products rest with the purchaser and when revenue can be credibly measured. In property development contracts the Group recognises revenue (and the corresponding cost) under the contract at the time of the transfer of control and materials risks and benefits from the ownership to the buyer, using the completed contract method according to IAS 18. The transfer of control and material risks and benefits from the ownership title to the subject of the sale (premises) takes place upon the conclusion of the sale agreement in the form of a notarial deed at the latest. The Group may recognise the result under property development contracts earlier, i.e. at the date of commissioning the premises under an acceptance protocol, if the parties to the contract fulfil other conditions, in particular the buyer s payment of the full price of the apartment, and the parties intend to conclude the final contract and transfer the property in the form of a notarial deed. Borrowing costs incurred to finance investments which can be directly allocated to work in progress, in particular to the purchase of land and construction services, are capitalised as a portion of manufacturing cost of work in progress/portion of the land purchase price. Financial costs incurred in the reasonable period necessary to prepare land to fulfil a property development contract increase the land purchase price. Financial costs incurred during the implementation of a property development undertaking constitute a portion of the manufacturing cost. 9.22.2. Interest Interest revenue is recognised gradually, as it is accrued (taking account of the effective interest rate, which is the rate discounting prospective cash proceeds for the expected life of financial instruments) in relation to the net carrying value of a financial asset.

Consolidated financial statement for 2013 104 9.22.3. Dividends Dividends are recognised at the time when the shareholders rights to receive them are established. 9.22.4. Rent revenue Revenue from renting out investment property is recognised using the straight-line method over the rental period in relation to open contracts. 9.23. Taxes 9.23.1. Current tax Current tax liabilities and receivables for the current period and the previous periods are measured at the amount of the expected payment to tax authorities (subject to reimbursement from tax authorities), using tax rates and regulations which were legally or factually applicable as at the balance sheet date. 9.23.2. Deferred tax For the purpose of financial reporting, deferred tax is established with the method of balance sheet liabilities in relation to all temporary differences, as at the balance sheet date, between the taxable value of assets and liabilities and their carrying value disclosed in the financial statements. The deferred tax provision is recognised in relation to all positive temporary differences: except when the deferred tax provision is established as a result of an original recognition of goodwill or original recognition of an asset or a liability in a transaction that is not a business combination and, at the time when the transaction is concluded, the transaction does not affect the gross financial result or the taxable income or the tax loss, and in the event of positive temporary differences from investments in subsidiaries or associates and interests in joint ventures, except when the dates of reversing temporary differences are controlled by an investor and when it is probable that the temporary differences will not be reversed in the foreseeable future. Deferred tax assets are recognised in relation to all negative temporary differences as well as unused tax assets and unused tax losses brought forward, in the amount of the probable taxable income, allowing for the use of the said differences, assets and losses: except when the deferred tax assets related to negative temporary differences are established as a result of an original recognition of an asset or a liability in a transaction that is not a business combination and, at the time when the transaction is concluded, they do not affect the gross financial result or the taxable income or the tax loss, and in the event of negative temporary differences due to investment in subsidiaries or associates and interests in joint ventures, the deferred tax asset is recognised in the balance sheet only in the amount corresponding to the probability that, in the foreseeable future, the said temporary differences will be reversed and taxable income will be generated, allowing for the deduction of the negative temporary differences. The carrying value of a deferred income tax asset is verified as at each balance sheet date and is adequately reduced by the no longer probable amount of taxable income to be earned sufficient for partial or full settlement of a deferred income tax asset. The non-recognised deferred income tax asset is measured again on every balance sheet date and is recognised up to the amount reflecting the probability that taxable income will be generated in the future, allowing for the recovery of this asset.

Consolidated financial statement for 2013 105 Deferred income tax assets and deferred income tax provisions are measured using tax rates which are expected to apply when an asset is settled or a provision is released, based on the tax rates (and tax regulations) applicable as at the balance sheet date or tax rates and regulations which are certain to apply on the balance sheet date. Income tax related to items recognised directly in equity is recognised in equity rather than in the profit and loss account. The Group compensates deferred income tax assets and deferred income tax provisions only when it holds an enforceable legal title to compensate receivables and current tax provisions, and the deferred income tax is related to the same tax payer and the same tax authority. 9.23.3. Goods and services tax Revenues, costs and assets are recognised after deducting the goods and services tax, except for the following situations: when the goods and services tax paid when purchasing assets or services cannot be recovered from tax authorities; it is recognised as a portion of the purchase price of an asset or as a portion of a cost item, and receivables and liabilities disclosed in consideration of the goods and services tax. The net goods and services tax that is recoverable or payable to tax authorities is recognised in the balance sheet as a portion of receivables or liabilities. 9.24. Net earnings per share The net earnings per share for every period are calculated by dividing the net profit for a given period by the average weighted number of shares in a given reporting period. As of 2007, the Group has presented diluted earnings/losses per share because of the existence during various reporting periods of potentially diluting ordinary shares in connection with Managerial Option Scheme and convertible bonds. In addition, the Company presents annualised net profit in the financial statements, calculated by dividing the net profit for the last 12 months until the balance sheet date by the average weighted number of shares in that period. 10 INFORMATION ON BUSINESS SEGMENTS The basic model of classifying the Group s reporting is based on industry segments and the supplementary model is based on geographical segments. The Group settles the transactions between the segments in the same way as for non-related entities, using the current market prices. The tables below present the data on revenues and profits as well as some of the assets and liabilities of the Group s individual industry segments. An operating segment is a segment of the Group that is involved in a business which may generate revenues and incur expenses, such as revenues and expenses related to transactions with other segments of the Group. The operating result of each operating segment is regularly reviewed by the Group's main decision-making body for operating activities, which decides on the allocation of resources to a segment and evaluates the segment's business results. There is separate financial information about every segment. The operating result of each segment which is reported to the Group's decision-making bodies for operating activities includes items which may be directly allocated to a given segment as well as items which me be allocated indirectly, based on reasonable grounds. Unallocated items mainly involve joint (corporate) assets

Consolidated financial statement for 2013 106 (mainly related to the company's management), costs related to the company's registered office as well as income tax assets and liabilities As a result of the analysis of the information by the Management Board that was different than previous analyses, a change was made in the presentation of reporting segments. The corresponding information for earlier periods was not restated due to the fact that the cost of obtaining it would be disproportionate to its informative value. The Group mainly operates in Poland. In 2013, the group has not achieved revenue from continued operations outside the Poland. In 2013, no revenue on discontinued operations was generated outside Poland.

Consolidated financial statement for 2013 107 Continued operations Discontinued operations For the period from 01.01.2013 to 31.12.2013 or as at 31.12.2013 (Residential) Property development POLNORD Group FADESA Group Commercial projects General construction Other Eliminations Unallocated items Total Other Total of operations Revenue Sales to external customers 177 394 45 745 12 812 1 050 2 845 239 846 239 846 Sales between segments 10 458 1 331 7 600 ( 68 291) 50 832 1 930 1 930 Total segment revenues 187 852 45 745 12 812 2 381 7 600 ( 68 291) 53 677 241 776 241 776 Result Gross profit (loss) on segment sales 16 892 9 584 10 671 1 050 ( 5 112) 33 085 33 085 Revaluation of investment property 17 614 21 320 38 934 38 934 General administrative costs and costs of sales ( 21 133) ( 6 423) ( 1 604) ( 2 255) ( 3 290) ( 34 705) ( 129) ( 34 834) Other operational revenues and expenses ( 8) ( 55) ( 18 644) 3 973 ( 14 734) ( 3 046) ( 17 780) Profit (loss) on continued operations before tax and financial costs ( 4 249) 3 106 8 037 1 050 ( 2 255) 16 891 22 580 ( 3 175) 19 405 Financial revenues due to interest 175 248 90 2 128 2 641 2 641 Other financial revenues 2 343 2 343 7 2 350 Financial costs ( 12 739) ( 2 512) ( 8 700) ( 100) ( 14 009) ( 38 060) ( 616) ( 38 676) Share in profit of associated companies 1 143 1 143 1 143 Profit (loss) before tax and minority interest ( 15 670) 842 ( 573) 1 050 ( 2 355) 7 353 ( 9 353) ( 3 784) ( 13 137) Income tax ( 150) 2 333 32 ( 814) 16 494 17 895 17 895 Net profit (loss) for the financial year ( 15 820) 3 175 ( 541) 1 050 ( 3 169) 23 847 8 542 ( 3 784) 4 758

Consolidated financial statement for 2013 108 Assets and liabilities Segment assets 536 611 215 656 200 312 283 925 1 236 504 2 429 1 238 933 including cash 10 340 20 662 2 099 159 22 529 55 789 55 789 Investments in associates 11 299 11 299 11 299 Unallocated assets 967 185 967 185 967 185 Total assets 547 910 215 656 200 312 283 925 967 185 2 214 988 2 429 2 217 417 Segment liabilities and provisions 150 874 103 824 116 303 2 675 373 676 6 107 379 783 including credit commitments 77 188 54 971 98 942 361 877 592 978 592 978 Unallocated liabilities 467 524 467 524 467 524 Equity 1 370 110 1 370 110 1 370 110 Total liabilities and equity 150 874 103 824 116 303 2 675 1 837 634 2 211 310 6 107 2 217 417 Other segment disclosures Capital expenditures: 621 301 922 922 On property, plant and equipment 568 277 845 845 On intangible assets 53 24 77 77 Depreciation of property, plant and equipment 36 196 2 605 839 839 Amortisation of intangible assets 16 258 274 274 Impairment losses Property revaluation writes-off Other non-cash expenditures: 3 513 1 562 19 1 870 6 964 2 650 9 614 Provision for retirement gratuities 5 5 5 Provisions for holidays 37 470 507 507 Provisions for construction works 2 995 4 2 999 2 999 Provisions for interest 481 261 12 229 983 983 Provisions for liabilities 827 7 1 636 2 470 2 470 Provisions for court proceedings 2 650 2 650

Consolidated financial statement for 2013 109 11 REVENUES AND EXPENSES 11.1. Operating revenues Note 11.1 Operating revenue For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Sale of residential apartments 222 486 266 064 Sale of plots of land 2 931 8 167 Rent 12 445 10 767 Other 3 914 4130 Total operating revenue 241 776 289 128 11.2. Operating costs Note 11.2 - Operating expenses For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Depreciation/Amortisation 1 113 1 585 Consumption of materials and energy 1 708 3 052 Third-party services 130 175 167 189 Taxes and charges 4 286 5 137 Payroll 14 992 17 206 Social security and other benefits 1 897 2 319 Other costs by type 6 649 24 297 Total costs by type 160 820 220 785 Movement in products, prepayments and accruals ( 22 921) ( 4 713) Own work capitalised (negative value) Selling costs (negative value) ( 8 057) ( 16 035) General administrative expenses (negative value) ( 26 648) ( 32 140) Manufacturing costs of products sold 149 036 177 323 Value of materials sold 59 655 82 398 Prime cost of sale 201 105 247 381 Inventory revaluation allowance 7 586 12 340 In 2013, the main provider of construction and installation works (amounting to PLN 54,763 thousand) for the Polnord Capital Group was Korporacja Budowlana Dom Sp. z o.o., with its registered office in Kartoszyno. 11.3. Revaluation of investment property The Group obtained valuation surveys from independent property valuers, which confirmed the fair value of its real property. The result on the revaluation of investment property amounted to PLN 38,934 thousand. The movements and the fair value of investment property held by the company are presented in note 19.

Consolidated financial statement for 2013 110 11.4. Other operating revenues Note 11.4 - Other operating revenues For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Total release of provisions, including: 7 640 36 - for receivables 7 639 - other 1 36 Other, including: 4 456 111 992 - liabilities written off 52 - compensations for infrastructure 107 968 - other 4 404 4 024 Total other operating revenues 12 096 112 028 11.5. Other operating expenses Note 11.5 - Other operating expenses For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Total provisions established, including: 88 1 205 - revaluation of receivables 79 other 9 1 205 Other, including: 26 742 22 768 costs of disputes 615 361 unrecoverable receivables 96 70 value of infrastructure (compensation) 5 819 other 26 031 16 518 Total other operating expenses 26 830 23 973 11.6. Financial revenues Note 11.6 - Financial revenues For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Revenue from bank and commercial interest 2 641 5 075 Investment revenue 2 343 4 264 Positive FX differences 2 446 Other 497 Total financial revenues 4 984 12 282

Consolidated financial statement for 2013 111 11.7. Financial costs Note 11.7 - Financial costs For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Interest on bank loans, borrowings and bonds 32 487 43 191 Interest on other liabilities 284 597 Financial costs of finance lease agreements 14 40 Negative FX differences 2 795 3 383 Bank commissions and commissions on bank guarantees 686 8 143 Amortised borrowings 15 403 Other 1 794 28 335 Total financial expenses 38 060 99 092 In the reporting period, borrowing costs in the amount of PLN 10,000 thousand were capitalised under "Inventory" and "Investment property". 11.8. Result on sale/occasional purchase of subsidiary In 2013 there were no transaction of occasion purchase of subsidiaries POLNORD SA. 11.9. Depreciation of PP&E and amortisation of intangible assets, and revaluation allowances recognised in the consolidated profit and loss account Note 11.9- Depreciation of PP&E and amortisation of intangible assets, and revaluation allowances recognised in the consolidated profit and loss account For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Items recognised in prime cost of sale (cost of goods and products sold): Depreciation of PP&E and amortisation of intangible assets Impairment of PP&E 153 43 Total 153 43 Items recognised in general administrative expenses: Depreciation of PP&E and amortisation of intangible assets Impairment of PP&E 960 1 542 Total 960 1 542 11.10. Employee benefit costs Note 11.10 - Employee benefit costs For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Payroll 14 865 16 660 Costs of social security and other benefits 1 897 2 319 Post-employment benefits 975 547 Total 17 737 19 526

Consolidated financial statement for 2013 112 12 INCOME TAX The main items of the tax burden for the period ended on 31.12.2013 and for the comparative period ended on 31.12.2012 are as follows: Note 12.1 - Income tax For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Main items of the tax burden Consolidated profit and loss account: Income tax currently payable Burden due to income tax currently payable 203 3 829 Adjustments regarding current income tax brought forward 6 ( 1 794) Deferred income tax Due to occurrence and reversal of temporary differences ( 18 104) 2 540 Tax burden disclosed in the consolidated profit and loss account Consolidated statement of changes in equity: Deferred income tax Valuation of financial assets available for sale ( 2 024) Tax burden disclosed in the registered capital ( 2 024) ( 17 895) 4 575 The reconciliation of income tax on the gross financial result before tax, according to the statutory tax rate, and income tax calculated according to the Group s effective tax rate for the periods ending on 31.12.2013 and 31.12.2012 is as follows: Note 12.2 - Reconciliation of income tax on the gross financial result before tax, according to the statutory tax rate, and income tax calculated according to the Group s effective tax rate: For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Pre-tax gross profit/(loss) on continued operations ( 9 353) 33 077 Pre-tax profit/(loss) on discontinued operations ( 3 784) ( 2 762) Gross profit/(loss) before tax ( 13 137) 30 315 Tax according to the 19% statutory tax rate applicable in Poland ( 2 496) 5 760 Adjustments regarding current income tax brought forward 99 ( 1 794) Unrecognised tax losses 2 594 1 020 Non-tax deductible costs 1 667 17 254 Non-taxable revenue ( 1 656) ( 11 282) Other ( 18 103) ( 6 383) Tax according to the effective tax rate ( 17 895) 4 575 Income tax (burden) disclosed in the consolidated profit and loss account ( 17 895) 4 575 Income tax allocated to discontinued operations Total ( 17 895) 4 575

Consolidated financial statement for 2013 113 The regulations on the tax on goods and services, corporate income tax, or social security contributions are often amended, and thus, as a result sometimes there is no reference to established regulations by law or precedence. The applicable regulations are also inconsistent, resulting in ambiguous interpretations of tax regulations by national authorities and businesses. Tax settlements and other (e.g. customs or foreign currencies settlements) may be audited by the competent authorities, which are authorised to impose high fines, and additional liabilities disclosed as a result of such an audit have to be paid together with high interest. For this reason, tax risk in the countries in which the Group companies operate is significantly higher than in countries with a better developed tax culture. Tax settlements may be subject to an audit. As a result, the amounts disclosed in the consolidated financial statements may change later after they are finally established by tax authorities. Deferred income tax Deferred income tax results from the following items: Note 12.3 - Deferred income tax Balance Sheet As at 31.12.2013 As at 31.12.2012 Deferred income tax provision Foreign exchange differences 19 392 Accrued interest outstanding 8 406 19 494 Taxable revenue in subsequent periods 6 091 5 777 PP&E under finance lease 25 91 Measurement of real property 38 855 28 527 Provision for costs and prepayments/accruals 4 914 4 614 Adjustment of net assets to fair values 2 370 2 370 Unrealised margin 882 692 Gross deferred income tax provision 61 562 61 957 Deferred tax assets Provision for costs and prepayments/accruals 6 802 5 017 Foreign exchange differences 119 346 Accrued interest outstanding 5 778 3 101 Accelerated amortisation 110 108 Measurement of property development contracts 8 221 Losses deductible from future taxable revenue 26 001 13 101 Finance lease liabilities 9 57 Measurement of discounted receivables 952 1 234 Unrealised margin 5 871 5 032 Provision for retirement gratuities 29 37 Asset valuation 11 690 8 407 Trademark 7 717 8 692 Gross deferred tax assets 65 086 45 353 Deferred tax net Assets/Provision 3 524 ( 16 604)

Consolidated financial statement for 2013 114 Note 12.4 - Deferred income tax Profit and Loss Account For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Deferred income tax provision Foreign exchange differences ( 373) ( 1 243) Accrued interest outstanding ( 11 088) 4 669 Taxable revenue in subsequent periods 314 612 PP&E under finance lease ( 66) ( 69) Measurement of real property 10 328 17 035 Provision for costs and prepayments/accruals 300 ( 1 982) Unrealised margin 190 400 Sale of subsidiaries ( 3 955) Other ( 113) Gross deferred income tax provision ( 395) 15 354 Deferred tax assets Provision for costs and prepayments/accruals 1 785 778 Foreign exchange differences ( 227) ( 194) Accrued interest outstanding 2 677 ( 221) Accelerated amortisation 2 ( 28) Measurement of property development contracts ( 213) ( 187) Losses deductible from future taxable revenue 12 900 2 414 Finance lease liabilities ( 48) ( 56) Measurement of discounted receivables ( 282) ( 324) Unrealised margin 839 ( 3 984) Provision for retirement gratuities ( 8) ( 1) Asset valuation 1 259 5 925 Trademark ( 975) 8 692 Gross deferred tax assets 17 709 12 814 Deferred income tax burden ( 18 104) 2 540

Consolidated financial statement for 2013 115 13 DISCONTINUED OPERATIONS The data on discontinued operations in 2013 relates to the liquidated branch in Eschborn, Germany. Note 13.1 - Discontinued operations For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Results: Revenue Costs ( 3 175) ( 2 511) Gross profit/(loss) ( 3 175) ( 2 511) Financial revenues 7 Financial expenses ( 616) ( 251) Profit/(loss) before tax ( 3 784) ( 2 762) Loss on restatement to fair value, less purchase costs Pre-tax profit/loss on discontinued operations ( 3 784) ( 2 762) Income tax: - due to pre-tax profit/(loss) - due to restatement to fair value, less purchase costs Net loss allocated to discontinued operations ( 3 784) ( 2 762) Note 13.2 - Discontinued operations As at 31.12.2013 As at 31.12.2012 Assets Intangible assets Property, plant and equipment Trade receivables 2 429 3 217 Cash Liabilities Other liabilities 6 107 3 260 Net liabilities allocated to discontinued operations 3 678 43 Note 13.3 - Discontinued operations For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Cash flow from net cash Cash flow from operating activities ( 113) Cash flow from investing activities Cash flow from financial activities ( 582) Net cash inflow/ (outflow) ( 695) 14 EMPLOYEE BENEFIT ASSETS AND LIABILITIES UNDER THE COMPANY SOCIAL BENEFITS FUND The Act of 4 March 1994 on the Enterprise Social Benefits Fund, as amended, stipulates that businesses employing more than 20 full-time employees must establish the Enterprise Social Benefits Fund. The Group has established this fund and makes periodic allowances in the amount of the minimum allowance. The purpose of the Fund is to subsidise the Company's activity related to employee benefits, borrowings granted to the employees and other social costs. The following tables present sub-ledger accounts of assets, liabilities and costs of the Fund..

Consolidated financial statement for 2013 116 Note 14- Employee benefit assets and liabilities under the Enterprise Social Benefits Fund As at 31.12.2013 As at 31.12.2012 PP&E contributed to the Fund Borrowings granted to employees 15 33 Cash 28 113 Liabilities under the Fund 41 66 Balance after compensation 2 80 Allowances for the Fund in the financial period 67 83 15 EARNINGS PER SHARE Basic earnings per stock are calculated by dividing net profit for the period, allocated to ordinary stockholders of the Parent Company, by the weighted average number of the issued ordinary stocks over the period. In addition, the Group presents annualised net profit in the interim financial statements, calculated by dividing the net profit for the last 12 months until the balance sheet date by the average weighted number of stocks in that period. In the period between 01.01.2013 and 31.12.2013 the share capital of Polnord SA was increased. As at 31.12.2013, the share capital of Polnord SA is divided into 32,633,027 ordinary bearer stocks with a nominal value of PLN 2 each. Diluted earnings per stock are calculated by dividing net profit for the period, allocated to ordinary stockholders of the Parent Company (after deducting interest on redeemable preference stocks convertible to ordinary stocks) by the weighted average number of the issued ordinary stocks over the period (adjusted for dilutive options and dilutive redeemable preference stocks convertible to ordinary stocks). In 2007-2012 the Company operated a Managerial Options Scheme (MOS), which is described in more detail in the financial statements for previous periods. Since 31.12.2013, the Company has not operated any MOS. As at 31.12.2013 Managerial Option Scheme expired. As at 20.12.2013 the Company started another Managerial Option Scheme, which is described in more details in Chapter I (9.2.) of Management Report. Since 2009, convertible bonds issued between 2009 and 2012 by the Company have had a dilutive effect. As at 01.01.2013 the Company was not in convertible bond debt. In the 2013, no new convertible bonds were issued. The data on profit and stocks used for calculating earnings per stock is presented below:

Consolidated financial statement for 2013 117 Note 15.1 Basic earnings per share Nota For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Net profit (loss) for the period 4 758 25 740 Net profit (loss) on discontinued operations for the period ( 3 784) ( 2 762) Net profit (loss) on continued operations for the period 8 542 28 502 Average weighted number of ordinary shares for the period 25 824 808 24 052 361 Net earnings (losses) per ordinary share (PLN) 16.1 0,18 1,07 Net profit (loss) on discontinued operations, per ordinary share (PLN) ( 0,15) ( 0,11) Net profit (loss) on continued operations, per ordinary share (PLN) 0,33 1,18 Note 15.2 Diluted earnings per share Nota For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Net profit (loss) for the period 4 758 25 740 Net profit (loss) on discontinued operations for the period ( 3 784) ( 2 762) Net profit (loss) on continued operations for the period 8 542 28 502 Interest on convertible bonds 10 088 Net profit (loss) for the period used to calculate diluted earnings per share 4 758 35 828 Net profit (loss) on discontinued operations, for the period used to calculate diluted earnings per share ( 3 784) ( 2 762) Net profit (loss) on continued operations, for the period used to calculate diluted earnings per share 8 542 38 590 Dilution effect: Share options Convertible bonds 2 335 913 Average weighted diluted number of ordinary shares for the period 25 824 808 26 388 274 Net diluted earnings (losses) per ordinary share (PLN) 16.2 0,18 1,36 Net diluted profit (loss) on discontinued operations, per ordinary share (PLN) ( 0,15) ( 0,10) Net diluted profit (loss) on continued operations, per ordinary share (PLN) 0,33 1,46 16 OTHER COMPREHENSIVE INCOME Note 16.1 - Disclosure of income tax amounts related to every item of other comprehensive income For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Pre-tax Income tax Post-tax Pre-tax Income tax Post-tax Foreign exchange gains/losses on translation Valuation of financial assets available for sale Other ( 1 365) ( 1 365) ( 1 175) ( 1 175) ( 10 651) 2 024 ( 8 627) Other comprehensive income ( 12 016) 2 024 ( 9 992) ( 1 175) ( 1 175)

Consolidated financial statement for 2013 118 17 DIVIDENDS PAID No dividends were paid in 2013. The Company's Ordinary General Meeting, by way of resolution no. 5/2013 of 28.06.2013, decided to fully allocate POLNORDS SA's 20121 net profit to supplementary capital. 18 PROPERTY, PLANT AND EQUIPMENT The carrying value of PP&E used as at 31.12.2013 under finance lease agreements and leasehold agreements with a purchase option is PLN 127 thousand (PLN 510 thousand, as at 31.12.2012).

Consolidated financial statement for 2013 119 Note 18.1 - Tangible fixed assets (property, plant and equipment) from 01.01.2013 to 31.12.2013 Land (including perpetual usufruct) Buildings and structures Machines and equipment Means of transport PP&E under construction Other PP&E Total Net value as at 01.01.2013 942 10 304 617 823 655 882 14 223 Increases 397 76 113 80 416 1 082 Purchase 21 76 113 80 416 706 Lease Reclassification from PP&E under construction 376 376 Reclassification from inventory Decreases ( 5) ( 574) ( 256) ( 379) ( 376) ( 273) ( 1 863) Depreciation allowance for the reporting period ( 144) ( 247) ( 177) ( 271) ( 839) Impairment loss Group movements Sale ( 5) ( 430) ( 202) ( 637) Reclassification ( 376) ( 376) Liquidation ( 9) ( 2) ( 11) Net value as at 31.12.2013 937 10 127 437 557 359 1 025 13 442 As at 01.01.2013 Gross value 942 14 563 2 116 1 160 655 2 404 21 840 Depreciation and impairment loss ( 4 259) ( 1 499) ( 337) ( 1 522) ( 7 617) Net value 942 10 304 617 823 655 882 14 223 As at 31.12.2013 Gross value 937 14 171 2 023 942 359 2 713 21 145 Depreciation and impairment loss ( 4 044) ( 1 586) ( 385) ( 1 688) ( 7 703) Net value 937 10 127 437 557 359 1 025 13 442

Consolidated financial statement for 2013 120 Note 18.2 -Tangible fixed assets (property, plant and equipment) from 01.01.2013 to 31.12.2013 01.01.2012 to 31.12.2012 Land (including perpetual usufruct) Buildings and structures Machines and equipment Means of transport PP&E under construction Other PP&E Total Net value as at 01.01.2012 975 10 729 733 1 460 120 1 152 15 169 Increases 159 301 180 705 42 1 387 Purchase 159 144 180 84 29 596 Lease 315 315 Reclassification from PP&E under construction 157 13 170 Reclassification from inventory 306 306 Decreases ( 33) ( 584) ( 417) ( 817) ( 170) ( 312) ( 2 333) Depreciation allowance for the reporting period ( 364) ( 257) ( 384) ( 296) ( 1 301) Impairment loss Group movements ( 6) ( 8) ( 16) ( 30) Sale ( 33) ( 163) ( 90) ( 236) ( 522) Reclassification ( 170) ( 170) Liquidation ( 57) ( 64) ( 189) ( 310) Net value as at 31.12.2012 942 10 304 617 823 655 882 14 223 As at 01.01.2012 Gross value 975 14 616 2 489 2 775 120 2 679 23 654 Depreciation and impairment loss ( 3 887) ( 1 756) ( 1 315) ( 1 527) ( 8 485) Net value 975 10 729 733 1 460 120 1 152 15 169 As at 31.12.2012 Gross value 942 14 563 2 116 1 160 655 2 404 21 840 Depreciation and impairment loss ( 4 259) ( 1 499) ( 337) ( 1 522) ( 7 617) Net value 942 10 304 617 823 655 882 14 223

Consolidated financial statement for 2013 121 19 INVESTMENT PROPERTY Note 19.1 - Investment property As at 31.12.2013 As at 31.12.2012 Opening balance 947 668 288 792 Increases/decreases (sale, reclassification) 25 708 571 769 Impact of foreign exchange differences ( 2 375) Revaluation of investment property 38 934 87 107 Closing balance 1 009 935 947 668 Note 19.2 - Investment property under construction As at 31.12.2013 As at 31.12.2012 Opening balance 142 359 Increases/decreases (sale, reclassification) ( 142 359) Revaluation allowances Closing balance TOTAL investment property 1 009 935 947 668 Mortgages are established on some of the Company's investment property, securing the repayment of loans and bonds. The carrying value of investment property on which mortgages are established, as at the balance sheet date, amounts to PLN 866,170 thousand and as at 31.12.2012 amounts to PLN 901,012 thousand. Direct operating expenses of investments in real properties which generated rent revenue amounted to PLN 3,649 thousand and PLN 2,329 thousand in 2012. Direct operating expenses of investments in real properties which did not generate rent revenue amounted to PLN 27 thousand and in 2013 no such expenses were incurred. The balance sheet valuation of investment properties at fair value is repetitive and is conducted at level 3 of the fair value hierarchy. During the reporting period no movements occurred between the hierarchy levels. The fair value of investment properties was calculated by independent property appraisers. In estimating the fair value of properties an approach involving best and the most beneficial use of assets was adopted which does not differ from the current use. Commercial properties were valuated using the investment approach the discounted cash flows method with the use of rent rates based on agreements and the following data: Note 19.3 - Investment property Building B1 Building B3 rent loss index 3-6% 6% discount rate 6,51% 6,78% forecast period in years 10 5 Other investment properties constitute land plots which were valuated using the estimation procedure based on comparable transactions.

Consolidated financial statement for 2013 122 20 INTANGIBLE ASSETS Note 20.1 - Intangible assets from 01.01.2013 to 31.12.2013 Patents and licences Computer software Intangible assets under construction Other Total Net value as at 01.01.2013 93 709 65 31 898 Increases 61 16 77 Purchase 61 16 77 Decreases ( 27) ( 242) ( 5) ( 274) Impairment loss ( 27) ( 242) ( 5) ( 274) Amortisation allowance for the reporting period Reclassification Sale Group movements Net value as at 31.12.2013 66 528 65 42 701 As at 01.01.2013 Gross value 169 1 325 65 114 1 673 Amortisation and impairment loss ( 76) ( 616) ( 83) ( 775) Net value 93 709 65 31 898 As at 31.12.2013 Gross value 121 1 382 65 130 1 698 Amortisation and impairment loss ( 55) ( 854) ( 88) ( 997) Net value 66 528 65 42 701 Note 20.2 - Intangible assets from 01.01.2012 do 31.12.2012 Patents and licences Computer software Intangible assets under construction Other Total Net value as at 01.01.2012 121 683 74 49 927 Increases 5 257 226 4 492 Purchase 2 25 226 4 257 Reclassification 3 232 235 Other Decreases ( 33) ( 231) ( 235) ( 22) ( 521) Impairment loss Amortisation allowance for the reporting period ( 33) ( 229) ( 22) ( 284) Reclassification ( 235) ( 235) Sale Group movements ( 2) ( 2) Net value as at 31.12.2012 93 709 65 31 898 As at 01.01.2012 Gross value 164 1 386 74 110 1 734 Amortisation and impairment loss ( 43) ( 703) ( 61) ( 807) Net value 121 683 74 49 927 As at 31.12.2012 Gross value 169 1 325 65 114 1 673 Amortisation and impairment loss ( 76) ( 616) 0 ( 83) ( 775) Net value 93 709 65 31 898

Consolidated financial statement for 2013 123 As at 31.12.2013: Patents and licenses were amortised consistently over their economic useful life; Computer software was amortised consistently over its economic useful life of up to 5 years; Other intangible assets were amortised consistently over their economic useful lives of up to 5 years. 21 INVESTMENTS IN AFFILIATES MEASURED WITH EQUITY METHOD As at 31.12.2013, the Polnord SA Group did not include any subsidiaries measured with the equity method 22 BUSINESS COMBINATIONS Note 22 Business combinations Consolidated goodwill: Carrying value of consolidated goodwill For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Fadesa Polnord Polska Sp. z o.o. 122 450 122 450 Polnord Łódź City Park Sp. z o.o. 3 3 Śródmieście Wilanów Sp. z o.o. 3 3 Wilanów Office Park building B1 Sp. z o.o. 3 3 Polnord Apartamenty Sp. z o.o. 2 2 FPP Powsin Sp. z o.o. 6 6 Wilanów Office Park - building B3 Sp. z o.o. 3 3 Polnord Szczecin Ku Słońcu Sp. z o.o. 3 3 Polnord Sopot II Sp. z o.o. 4 4 Osiedle Innova Sp. z o.o. 5 5 Total carrying value 122 482 122 482 Changes in consolidated goodwill: Consolidated goodwill at the beginning of the period 122 482 130 124 Decreases in goodwill due to allowances ( 7 642) Decreases in goodwill due to sales Total carrying value as at the end of the period 122 482 122 482 Goodwill resulting from business acquisitions was reviewed in respect of the impairment as at the balance sheet date of 31 December 2013 and as at 31 December 2012. Goodwill was assigned to the property development segment and impairment tests were performed at this level. The above review used future cash flows which to the best knowledge of the Management Board will be generated by development projects implemented by the Group, the discount rate of 7.08% 7.44% and the risk premium at the level of risk premium observed for investments in shares above the risk of investments in Treasury bonds, estimated for countries with A2 Rating (including Poland), of 6.23%. The cash flow projections are based on schedules and financial plans of the Group. Acquisition and sale of businesses Changes that occurred in 2013 with regard to capital relations of Polnord SA with other entities are described in details in the Directors Report on the company's activities in Chapter I point 6.

Consolidated financial statement for 2013 124 23 SHARE IN JOINT VENTURES POLNORD SA s jointly-controlled entities: FADESA POLNORD POLSKA Sp. z o.o., FPP Powsin Sp. z o.o., Osiedle Innova Sp. z o.o., FPP OSIEDLE MODERNO Sp. z o.o., Stacja Kazimierz I Sp. z o.o. Stacja Kazimierz I Sp. z o.o. SKA Stacja Kazimierz Sp. z o.o. Stacja Kazimierz Sp. z o.o. SKA Semeko Aquasfera Sp. z o.o. As at 31.12.2013 and 31.12.2012, the Group s share in the assets and liabilities of joint ventures, as recognised in the consolidated financial statements using the proportionate method or with equity method, was as follows: Note 23.1 - Share in joint ventures As at 31.12.2013 As at 31.12.2012 Current (short-term) assets 211 961 224 343 Fadesa Polnord Polska Sp. z o.o. 137 118 146 204 FPP Powsin Sp. z o.o. 26 045 34 053 Osiedle Innova Sp. z o.o. 32 957 44 083 FPP Osiedle Moderno Sp. z o.o. 34 3 Stacja Kazimierz I Sp. z o.o. 39 Stacja Kazimierz I Sp. z o.o. SKA 22 Stacja Kazimierz Sp. z o.o. 58 Stacja Kazimierz Sp. z o.o. SKA Semeko Aquasfera Sp. z o.o. 15 688 Non-current (long-term) assets 55 286 36 279 Fadesa Polnord Polska Sp. z o.o. 47 971 35 231 FPP Powsin Sp. z o.o. 1 875 227 Osiedle Innova Sp. z o.o. 5 435 820 FPP Osiedle Moderno Sp. z o.o. 5 1 Total 267 247 260 622 Short-term liabilities 92 935 101 452 Fadesa Polnord Polska Sp. z o.o. 65 739 56 740 FPP Powsin Sp. z o.o. 8 339 17 055 Osiedle Innova Sp. z o.o. 18 825 27 651 FPP Osiedle Moderno Sp. z o.o. 8 6 Stacja Kazimierz I Sp. z o.o. 3 Stacja Kazimierz I Sp. z o.o. SKA Stacja Kazimierz Sp. z o.o. 21 Stacja Kazimierz Sp. z o.o. SKA Semeko Aquasfera Sp. z o.o. Long-term liabilities 114 397 104 147 Fadesa Polnord Polska Sp. z o.o. 74 465 80 066 FPP Powsin Sp. z o.o. 25 308 15 496 Osiedle Innova Sp. z o.o. 9 965 8 585 FPP Osiedle Moderno Sp. z o.o. 49 Stacja Kazimierz I Sp. z o.o. 50 Stacja Kazimierz I Sp. z o.o. SKA Stacja Kazimierz Sp. z o.o. 40 Stacja Kazimierz Sp. z o.o. SKA Semeko Aquasfera Sp. z o.o. 4 520 Total 207 332 205 599

Consolidated financial statement for 2013 125 The Group s share in revenues and costs of a joint venture, as recognised in the consolidated financial statements, was as follows: Note 23.2 - Share in joint ventures For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Revenue 50 313 81 439 Fadesa Prokom Polska Sp. z o.o. 23 127 35 019 Osiedle Innova Sp. z o.o. 22 618 33 046 SURPLUS Sp. z o.o. 16 SURPLUS Sp. z o.o.s.k.a. 2 754 PLP Development Group ZSA 10 604 Semeko Aquasfera Sp. z o.o. 4 568 Prime cost of sale ( 39 538) ( 64 190) Fadesa Prokom Polska Sp. z o.o. ( 21 417) ( 29 455) Osiedle Innova Sp. z o.o. ( 14 744) ( 22 819) SURPLUS Sp. z o.o.s.k.a. ( 2 512) PLP Development Group ZSA ( 9 404) Semeko Aquasfera Sp. z o.o. ( 3 377) Costs of sales and general administrative expenses ( 7 456) ( 8 939) Fadesa Prokom Polska Sp. z o.o. ( 5 232) ( 5 855) FPP Powsin Sp. z o.o. ( 69) ( 69) Osiedle Innova Sp. z o.o. ( 2 095) ( 1 254) FPP Osiedle Moderno Sp. z o.o. ( 20) ( 5) SURPLUS Sp. z o.o. ( 16) SURPLUS Sp. z o.o.s.k.a. ( 177) PLP Development Group ZSA ( 1 563) Stacja Kazimierz I Sp. z o.o. ( 16) Stacja Kazimierz I Sp. z o.o.ska ( 3) Stacja Kazimierz Sp. z o.o. ( 6) Semeko Aquasfera Sp. z o.o. ( 15) Revaluation of investment property 380 PLP Development Group ZSA 380 Other operating revenues - other operating expenses 1 783 1 955 Fadesa Prokom Polska Sp. z o.o. 1 082 188 Osiedle Innova Sp. z o.o. 701 308 SURPLUS Sp. z o.o.s.k.a. 1 459 Financial revenues - financial costs 1 496 20 197 Fadesa Prokom Polska Sp. z o.o. ( 212) 2 898 FPP Powsin Sp. z o.o. 748 ( 272) Osiedle Innova Sp. z o.o. 969 ( 15) SURPLUS Sp. z o.o.s.k.a. 64 PLP Development Group ZSA 17 522 Semeko Aquasfera Sp. z o.o. ( 9) Profit/(loss) before tax 6 598 30 842 Fadesa Prokom Polska Sp. z o.o. ( 2 652) 2 795 FPP Powsin Sp. z o.o. 679 ( 341) Osiedle Innova Sp. z o.o. 7 449 9 266 FPP Osiedle Moderno Sp. z o.o. ( 20) ( 5) SURPLUS Sp. z o.o.s.k.a. 1 588 PLP Development Group ZSA 17 539 Stacja Kazimierz I Sp. z o.o. ( 16) Stacja Kazimierz I Sp. z o.o.ska ( 3) Stacja Kazimierz Sp. z o.o. ( 6) Semeko Aquasfera Sp. z o.o. 1 167 Income tax burden 2 333 ( 3 727) Fadesa Prokom Polska Sp. z o.o. 2 907 ( 952) FPP Powsin Sp. z o.o. 455 65 Osiedle Innova Sp. z o.o. ( 1 033) ( 1 760) FPP Osiedle Moderno Sp. z o.o. 4 PLP Development Group ZSA ( 1 080) Net profit / (loss) 8 931 27 115

Consolidated financial statement for 2013 126 24 FINANCIAL ASSETS AVAILABLE FOR SALE Note 24 - Financial assets available for sale As at 31.12.2013 As at 31.12.2012 Shares/interests in unlisted companies 34 34 Shares of listed companies 9 148 16 768 Total financial assets available for sale 9 182 16 802 25 OTHER (LONG-TERM) FINANCIAL ASSETS Note 25 - Other (long-term) financial assets As at 31.12.2013 As at 31.12.2012 Borrowings granted 93 2 623 Total other (long-term) financial assets 93 2 623 26 EMPLOYEE BENEFITS 26.1. Employee share schemes In 2007-2012 in the Company operate Managerial Options Scheme (MO programme), which is described in more detail in the consolidated financial statements of the POLNORD SA Group for these years. As of 31.12.2012 Managerial Option Scheme expired. At 31.12.2013 the Company started another Managerial Option Scheme, wchich is described in more details in section 9.2. According to the requirements of IFRS 2, the Company was obliged to estimate, as at the day of granting the rights, the fair value of the granted warrants and to recognise this value as the Company s payroll cost, in the periods in which the rights were granted, in the profit and loss account in correspondence with other reserve capital in the balance sheet. The table below presents the figures and average weighted settlement prices (ŚWCR) of share options under the employee share options scheme.

Consolidated financial statement for 2013 127 Note 26.1 - Employee share schemes From 01.01.2013 to 31.12.2013 From 01.01.2012 to 31.12.2012 Number of options WARP in PLN Number of options WARP in PLN Unrealised at the beginning of the period - Granted over the period 116 667 Forfeit over the period Realised over the period Expired over the period Unrealised at the end of the period 116 667 - - - 42 067 42 067 - Share options vested at the end of the period had the following prices options: Date of expiry Price in the implementation in PLN 31.12.2013 31.12.2012 Number of options 31.12.2016 9,00 116 667 Price in the implementation in PLN Number of options The assumptions for the Black-Scholes-Merton: 31.12.2013 31.12.2012 Expected volatility (%) 18,06% not applicable Historical volatility (%) 18,06% not applicable Risk-free interest rate (%) 3,15% not applicable Expected option maturity (in years) 3 not applicable Average weighted share price (in PLN) 8,55 not applicable The fair value of 1 warrant 0,67 not applicable 26.2. Retirement benefits and other post-employment benefits The Group companies pay retirement gratuities to the employees who retire in the amount specified by the Labour Code or the amount specified by the Company s Remuneration Regulations, depending on which amount is more beneficial for the employee. Therefore, the Company establishes a provision for the current value of the retirement gratuities liability. The amount of this provision and the reconciliation presenting changes in the balance during the financial period are included in the table below.

Consolidated financial statement for 2013 128 Note 26.2 - Retirement benefits and other postemployment benefits As at 31.12.2013 As at 31.12.2012 Movements in provision for retirement gratuities As at the beginning of the reporting period 196 203 Creation of provision 5 6 Costs of benefits paid ( 8) Release of provision ( 48) ( 2) Change in the Group's composition ( 3) As at the end of the reporting period 153 196 Assumptions adopted by the actuary as at the balance sheet date to calculate the liability: Discount rate (%) 5,93% 5,93% Expected inflation rate (%) 3,50% 3,50% Expected remuneration growth rate (%) 3,50% 3,50% 26.3. Benefits due to termination of employment Benefits due to termination of employment amounted to PLN 975 thousand in 2013 and PLN 547 thousand in 2012. 27 INVENTORY Note 27 - Zapasy As at 31.12.2013 As at 31.12.2012 Materials (according to the purchase price) 211 292 Work in progress (according to the manufacturing cost) 106 449 153 183 Finished products: 137 725 122 556 According to the purchase price/manufacturing cost 141 116 129 320 According to the net realisable value 137 725 122 556 Goods 340 202 385 325 According to the purchase price/manufacturing cost 344 578 393 834 According to the net realisable value 340 202 385 325 Total inventory, at the lower of the two values: purchase (price manufacturing cost) and net realisable value 584 587 661 356 Revaluation allowances were made for inventory in the total amount of PLN 7,586 thousand in the 2013 and in the total amount of PLN 12,340 in the 2012. The repayment of the loans granted to the Group Companies for financing property development projects is secured by collaterals, such as real property on which these projects are implemented. The carrying value of inventory on which mortgages are established, as at the balance sheet date, amounts to PLN 333,102 thousand. After the period exceeding 12 months, the recovery of inventory value of PLN 40,701 thousand is expected. 28 TRADE AND OTHER RECEIVABLES Transactions with related parties are concluded according to market terms. In the opinion of the management, there is no additional credit risk above the level defined by the allowance for unrecoverable trade receivables of the Group.

Consolidated financial statement for 2013 129 Note 28- Trade and other receivables As at 31.12.2013 As at 31.12.2012 Receivables from related parties, including: 1 831 11 205 - Trade receivables 1 831 11 205 Receivables from other entities, including: 128 305 174 627 Trade receivables 44 765 79 638 - Disputed in court 6 996 9 708 - Other 76 544 85 281 Total (net) receivables 130 136 185 832 Receivables revaluation allowance 11 397 10 370 Gross receivables 141 533 196 202 29 CASH AND CASH EQUIVALENTS Cash in bank bears variable interest rates. Short-term deposits are made for periods ranging from one day to one month, depending on the Group s current cash requirements, and bear interest according to the interest rates defined for them. Note 29 - Cash and cash equivalents As at 31.12.2013 As at 31.12.2012 Cash in hand and cash in bank 51 276 57 919 Short-term deposits 4 513 12 078 Total 55 789 69 997 Cash and cash equivalents disclosed in the cash flow statement: As at 31.12.2013 As at 31.12.2012 Cash in hand and cash in bank 51 276 57 919 Short-term deposits 4 513 12 078 Overdrafts Total 55 789 69 997 Cash in hand and cash in bank allocated to discontinued operations Total cash and cash equivalents disclosed in the cash flow statement 55 789 69 997

Consolidated financial statement for 2013 130 30 SHARE CAPITAL AND SUPPLEMENTARY/RESERVE CAPITAL 30.1. Share capital Note 30.1 - Share capital As at 31.12.2013 As at 31.12.2012 Share capital Series A ordinary shares with a nominal value of PLN 2 each 356 356 Series B ordinary shares with a nominal value of PLN 2 each 614 614 Series C ordinary shares with a nominal value of PLN 2 each 970 970 Series D ordinary shares with a nominal value of PLN 2 each 1 500 1 500 Series E ordinary shares with a nominal value of PLN 2 each 3 880 3 880 Series F ordinary shares with a nominal value of PLN 2 each 10 000 10 000 Series G ordinary shares with a nominal value of PLN 2 each 7 951 7 951 Series I ordinary shares with a nominal value of PLN 2 each 1 700 1 700 Series J ordinary shares with a nominal value of PLN 2 each 7 986 7 986 Series M ordinary shares with a nominal value of PLN 2 each 670 670 Series L ordinary shares with a nominal value of PLN 2 each 242 242 Series K ordinary shares with a nominal value of PLN 2 each 361 361 Series N ordinary shares with a nominal value of PLN 2 each 3 000 3 000 Series O ordinary shares with a nominal value of PLN 2 each 2 532 2 532 Series P ordinary shares with a nominal value of PLN 2 each 2 462 2 462 Series Q ordinary shares with a nominal value of PLN 2 each 6 478 6 478 Series H ordinary shares with a nominal value of PLN 2 each 564 564 Series R ordinary shares with a nominal value of PLN 2 each 14 000 Total 65 266 51 266 Ordinary shares issued and fully paid-up As at 31.12.2013 As at 31.12.2012 As at the beginning of the reporting period 51 266 47 606 Issued in the reporting period 14 000 3 660 As at the end of the reporting period 65 266 51 266 Between 01.01.2013 and 31.12.2013, the share capital of POLNORD SA was increased which is wide describe with details in Chapter IV (4) of the Directors Report. As at 31.12.2013, the share capital of POLNORD SA was divided into 32,633,027 ordinary bearer shares with a nominal value of PLN 2 each. As at 20.12.2013, the Company started a new share option granting plan under which options for Company s shares were granted (item 26.1). Nominal value of shares All issued shares have a nominal value of PLN 2 and have been fully paid-in. Shareholders rights The shares of all series are vested with identical privilege to dividend and return on capital. Shareholders The Shareholding as at 31.12.2013 and as at the Report publication date was presented in the Directors Report, Chapter I (9).

Consolidated financial statement for 2013 131 30.2. Supplementary capital Supplementary capital was created from the share premium, less the share issue costs recognised as a decrease in supplementary capital. In addition, supplementary capital was also created from the statutory allowances for profit generated in previous financial years as well as from surplus from the distribution of profit in excess of the statutory allowance. Supplementary capital also comprises the measurement of a foreign operation and the revaluation fund for the sold PP&E. In the balance sheet, the share premium has been disclosed in a separate item. The 2013 share premium, less issue costs, of PLN 36,050 thousand relates to the increase in the share capital of POLNORD SA as part of the registered contingent share capital: by 7,000,000 series R shares. 30.3. Other capital Note 30.3 - Other capital Revaluation reserve Supplementary capital Other reserve capitals Total As at 01.01.2012 269 103 532 29 889 133 690 Other net comprehensive income: Other Deferred tax due to above-mentioned adjustments Other 95 109 95 109 Result brought forward 95 109 95 109 As at 31.12.2012 269 198 641 29 889 228 799 As at 01.01.2013 269 198 641 29 889 228 799 Other net comprehensive income: ( 8 627) ( 8 627) Valuation of financial assets available for sale ( 10 651) ( 10 651) Deferred tax due to above-mentioned 2 024 2 024 adjustments Other 45 557 234 45 791 Deferred tax due to above-mentioned 45 557 45 557 adjustments Managerial options 234 234 As at 31.12.2013 ( 8 358) 244 198 30 123 265 963 30.4. Type and purpose of other capital Reserve capital due to foreign exchange differences The balance of the reserve capital due to FX differences is adjusted for FX differences resulting from translation of financial statements of foreign related parties. Revaluation reserve The balance of the revaluation reserve relates to the surplus in excess of the purchase value/manufacturing cost of PP&E and intangible assets resulting from restatement to their fair value and to valuation of financial assets available for sale.

Consolidated financial statement for 2013 132 31 INTEREST-BEARING BANK LOANS AND BORROWINGS Note 31. Interest-bearing bank loans and borrowings SHORT-TERM As at 31.12.2013 As at 31.12.2012 Liabilities due to finance lease and leasehold agreements with purchase option 48 185 Bonds and debt bills 20 435 141 100 Overdrafts 23 832 23 538 Short-term portion of long-term loans 67 467 45 419 Revolving loans - 788 Other loans and borrowings 25 095 30 031 Total short-term loans and borrowings 136 877 241 061 LONG-TERM As at 31.12.2013 As at 31.12.2012 Liabilities due to finance lease and leasehold agreements with purchase option - 144 Bonds 293 500 201 000 Bank loans and borrowings: 162 601 263 702 Total long-term loans and borrowings 456 101 464 846

Consolidated financial statement for 2013 133 List of long-terms loans and borrowings as at 31 December 2013 Lending institution Currency loan amount Currency Outstanding amount as at the balance sheet date Current (short-term) portion of loans/borrowings Interest rate Maturity Securities 23 000 PLN 5 062 5 062 WIBOR RB + margin 2014-05-31 DZ Bank Polska S.A* 34 000 PLN 19 000 19 000 WIBOR 1M + margin 2014-05-31 BZ WBK SA 42 447 PLN 8 089 WIBOR 3M + margin 2015-01-31 44 800 PLN 6 327 562 WIBOR 3M + margin 2016-12-31 91 972 PLN 27 994 27 994 WIBOR 3M + margin 2014-11-30 PKO BP 66 100 PLN 62 848 - WIBOR 3M + margin 2030-12-31 47 433 PLN 36 094 1 326 WIBOR 3M + margin 2025-04-30 PKO BP 13 247 PLN 12 958 6 524 WIBOR 3M + margin 2015-09-30 - contractual mortgage on property - sola blank bill of exchange - contractual mortgage on property - sola blank bill of exchange - capped mortgage - funds blocked on an escrow account - registered pledge on capital share - registered pledges on bank accounts - authorisation to bank accounts - Agreement for the Subordination of Borrowings - contractual and capped mortgage on property - sola blank bill of exchange - debt collection clause - registered pledge on capital share - contractual and capped mortgage on property - debt collection clause - registered pledge on capital share - transfer of amounts due under sale and insurance agreements - contractual and capped mortgage - assignment of rights under insurance agreements - registered pledge on capital share - transfer of outstanding amounts under rent agreements - surety - assignment of rights under guarantee - bill of exchange - ordinary contractual and capped mortgage on property - transfer of outstanding amounts under construction site insurance agreement - sola blank bill of exchange and aval from a shareholder - registered pledge on the company s interests - clause for deducting outstanding amounts from the company s current account - transfer of outstanding amounts under a promised rent agreement - cash blocked on a bank account - mortage - surety - assignment of insurance policies

Consolidated financial statement for 2013 134 Lending institution Currency loan amount Currency Outstanding amount as at the balance sheet date Current (short-term) portion of loans/borrowings Interest rate Maturity Securities Bank Polskiej Spółdzielczości SA 16 200 PLN 16 200 400 WIBOR 3M+ margin 2019-12-31 ALIOR BANK 17 978 PLN 5 620 5 620 WIBOR 1M+ margin 2014-09-30 - mortage - registered pledge on capital share - surety - bill of exchange - mortage - transfer of debts - surety - assignment of insurance policies Pekao SA - loan raised by a joint venture Pekao SA - loan raised by a joint venture Pekao SA - loan raised by a joint venture Pekao SA - loan raised by a joint venture Pekao SA - loan raised by a joint venture 37 970 PLN 979 979 WIBOR 1M+ margin 2014-01-31 179 191 PLN 18 918 - WIBOR 1M+ margin 2015-06-30 17 150 PLN - - WIBOR 1M+ margin 2015-06-30 12 180 PLN 1 323 - WIBOR 1M+ margin 2015-12-31 2 450 PLN - - WIBOR 1M+ margin 2015-06-30 - capped mortgage - funds blocked - agreement on transfer of rights of insurance policies subordination agreement - support agreement Fadesa Polska Sp. z o.o. borrowing raised by a joint ventura 1 498 PLN 1 937 - WIBOR 3M+ margin 2015-12-31 none 6 053 PLN 6 719 - WIBOR 3M+ margin 2015-12-31 none TOTAL 230 068 67 467 * loans and borrowings contracted by Polnord SA

Consolidated financial statement for 2013 135 List of overdraft facilities as at 31.12.2013 Lending institution Currency loan/borrowing amount Currency Amount of borrowing/ loan Outstanding amount as at the balance sheet date Interest rate Maturity Securities BRE BANK SA * 25 000 PLN 25 000 23 832 WIBOR O/N +marge 2014-06-27 - contractual mortgage on property - sola blank bill of exchange Total 25 000 23 832 * loans and borrowings contracted by Polnord SA List of other short-term loans and borrowings as at 31.12.2013 r. Lending institution Currency loan/borrowing amount Currency Loan/borrowing amount in PLN Outstanding amount as at the balance sheet date Interest rate Secirities Martinsa Fadesa SA - borrowing raised by a joint venture 1 760 USD 6 940 5 636 EURIBOR 3M+ margin none Martinsa Fadesa SA - borrowing raised by a joint venture 764 EUR 3 017 617 EURIBOR 3M+ margin none Martinsa Fadesa SA - borrowing raised by a joint venture 1 037 EUR 3 916 5 230 EURIBOR 3M+ margin none Martinsa Fadesa SA - borrowing raised by a joint venture 1 225 EUR 4 577 6 187 EURIBOR 3M+ margin none Martinsa Fadesa SA - borrowing raised by a joint venture 1 472 EUR 5 418 7 425 EURIBOR 3M+ margin none Total 23 868 25 095

Consolidated financial statement for 2013 136 List of bonds as at 31.12.2013 r. Type of bonds Amount of the issued bonds Currency Outstanding amount as at the balance sheet date Current (short-term) outstanding portion (interest) Interest rate Maturity Securities Ordinary bonds F series 24 000 PLN 24 331 331 WIBOR 3M + marge 24.10.2015 - principal amount, interest every quarter Mortgage Ordinary bonds* 30 000 PLN 30 028 28 WIBOR 6M + marge 26.06.2015 - principal amount, interest every six months Mortgage Ordinary bonds* 16 516 PLN 16 522 16 522 WIBOR 3M + marge 31.03.2014 - principal amount, interest every quarter Unsecured bonds Ordinary bonds* 10 000 PLN 10 009 9 WIBOR 6M + marge 26.06.2015 - principal amount, interest every six months Mortgage Ordinary bonds* 10 000 PLN 10 009 9 WIBOR 6M + marge 26.06.2015 - principal amount, interest every six months Mortgage Ordinary bonds* 39 500 PLN 40 189 689 WIBOR 6M + marge 28.09.2015 - principal amount, interest every six months Mortgage Ordinary bonds A series 60 000 PLN 61 260 1 260 WIBOR 6M + marge 20.08.2016 - principal amount, interest every six months Mortgage Ordinary bonds B series 8 500 PLN 8 636 136 WIBOR 6M + marge 21.09.2016 - principal amount, interest every six months Mortgage Ordinary bonds I series 20 000 PLN 20 305 305 WIBOR 3M + marge 18.01.2016 - principal amount, interest every quarter Mortgage Ordinary bondsj series 19 000 PLN 19 298 298 WIBOR 3M + marge 16.01.2016 - principal amount, interest every quarter Mortgage Ordinary bonds H series 26 500 PLN 26 882 382 WIBOR 3M + marge 22.01.2016 - principal amount, interest every quarter Mortgage Ordinary bonds C series 46 000 PLN 46 466 466 WIBOR 6M + marge 13.05.2016 - principal amount, interest every six months Mortgage Total 313 935 20 435 * bonds issued by Polnord S.A.

Consolidated financial statement for 2013 137 32 PROVISIONS 32.1. Changes in provisions Note 32.1 - Provisions Provision for retirement gratuities and similar benefits Provision for guarantee repairs Provisions for holidays Provisions for rework Provisions for construction works Provisions for interest Provisions for liabilities Provisions for court proceedings As at 01.01.2013 196 801 874 15 627 40 613 6 246 64 357 Established during the financial year 5 507 2 999 983 2 470 2 650 9 614 Used ( 707) ( 1 362) ( 503) ( 353) ( 444) ( 3 369) Released ( 48) ( 564) ( 612) Presentation adjustment ( 33) 1 990 ( 1 957) As at 31.12.2013 153 601 2 511 16 074 44 156 6 495 69 990 Short-term 601 2 511 16 074 44 156 6 495 69 837 Long-term 153 153 Total Note 32.2 - Provisions Provision for retirement gratuities and similar benefits Provision for guarantee repairs Provisions for holidays Provisions for rework Provisions for construction works Provisions for interest Provisions for liabilities Provisions for court proceedings As at 01.01.2012 203 13 749 54 1 338 11 770 34 427 3 519 52 073 Established during the financial year 6 801 342 3 857 9 153 3 056 17 215 Used ( 8) ( 13) ( 749) ( 54) ( 252) ( 2 887) ( 180) ( 4 143) Released ( 2) ( 554) ( 10) ( 149) ( 715) Sale of entities ( 3) ( 70) ( 73) AS at 31.12.2012 196 801 874 15 627 40 613 6 246 64 357 Short-term 801 874 15 627 40 613 6 246 64 161 Long-term 196 196 Total

Cosnolidated financial statements for 2013 138 The main item of provisions is attributable to provisions for amounts with net interest owed to the Agricultural Property Agency, including interest, due to fees for perpetual usufruct of land in Wilanów (Warsaw). The provisions refer to the difference between the amount of the fee changed by the Agricultural Property Agency and the fee in force until 2007, including interest. In the opinion of the Group, the termination of the fee currently in force by the Agricultural Property Agency was ineffective. The Management Board of the parent company believes that the analysis of documentation indicates that the dispute will be probably resolved for the benefit of the Group but but a reliable estimate of the deadline for its completion is not possible, as it depends on the date decided by the judicial authorities, the activities of which the Group has no influence. Therefore, the provisioning was discontinued from Q4 2013. As at the balance sheet date the balance of provisions for the principal fee (difference) is PLN 41,566 thousand and interest on pastdue amounts is PLN 15,961 thousand. 33 TRADE AND OTHER (SHORT-TERM) LIABILITIES Note 33 - Trade and other (short-term) liabilities As at 31.12.2013 As at 31.12.2012 Trade liabilities Due to related parties 1 260 814 Due to other parties 28 538 32 792 Total trade liabilities 29 798 33 606 Liabilities due to taxes, custom duties, social security and other VAT 5 044 1 180 Personal income tax 164 212 Other 635 232 Total liabilities due to taxes, custom duties, social security and other 5 843 1 624 Other liabilities Liabilities due to employee remunerations 183 42 Liabilities due to a joint venture 25 Other liabilities 326 530 Total other liabilities 534 572 Accruals due to: Unused holidays Bonus payments Other 6 089 3 502 Total accruals due to: 6 089 3 502 Terms and conditions of the above financial liabilities: Transactions with related parties are concluded according to market terms. Trade and other liabilities do not bear interest. The difference between liabilities and receivables due to the goods and services tax is settled with the competent tax authorities on a monthly basis. 34 OPERATING LEASE LIABILITIES 34.1. Operating lease liabilities the Group as a leasee Not applicable.

Cosnolidated financial statements for 2013 139 34.2. Liabilities due to finance lease and leasehold agreements with purchase option Future minimum lease fees due to the aforesaid agreements and the current value of minimum net lease fees are as follows: Note 34.2 - Liabilities due to finance lease and leasehold agreements with purchase option As at 31.12.2013 As at 31.12.2012 Minimum fees Within 1 year 50 204 1 to 5 years 152 Total minimum lease fees 50 356 Less financial costs ( 2) ( 34) Current value of minimum lease fees 48 322 Current value of fees As at 31.12.2013 As at 31.12.2012 Within 1 year 48 178 1 to 5 years 144 Total minimum lease fees 48 322 Current value of minimum lease fees 48 322 35 INVESTMENT LIABILITIES As at 31.12.2013, there are no investment liabilities in the Group. 36 COURT PROCEEDINGS Court proceedings are described in details in Directors Report, Chapter IV (2). 37 GUARANTEES Informations about loans/guatantees and guarantees are descibed in details in Directors Report, Chapter IV (6). 38 TAX RETURNS Tax returns and other areas of activity which are governed by regulations (e.g. customs or foreign exchange aspects) may be audited by the competent administrative authorities authorised to impose high penalty fees and sanctions. The instability of legal regulations in Poland results in the lack of clarity and inconsistency in the law. Frequent differences in opinions on the legal interpretation of tax regulations within state authorities as well as in relations between state authorities and businesses result in uncertainty and conflicts. For this reason, tax risk in Poland is significantly higher than in countries with a better developed tax culture. Tax returns may be subject to audit for five years, starting from the end of the year when tax is paid. As a result of the conducted audits, the Company s tax returns may be encumbered with additional tax liabilities. In the Company s opinion, as at the balance sheet date, adequate provisions were created for the identified and measurable tax risk.

Cosnolidated financial statements for 2013 140 Proceedings related to overdue tax On 26 April 2005, based on the decision of 13 April 2005 of the General Tax Inspector, an audit procedure was initiated in our Company regarding the reliability of the declared taxation base and the correctness of calculating and paying: the corporate income tax for the years 1999-2002 and the goods and services tax (VAT) for the years 2000-2002 by Energobudowa, whose rights and obligations were assumed by the Company, as its legal successor. In the course of the procedure, the tax authorities issued a number of decisions on imposing fines and securing claims, which the Company appealed against. By way of decisions by the Director of the Tax Auditing Authority in Gdańsk of 16 and 23 October 2006, Polnord S.A. (later the Company ) was charged with overdue goods and services tax and corporate income tax for the years 1999-2002 totalling PLN 11,371,266. The maximum amount of interest on the said overdue tax, payable as at the day of delivering the said decision of the Director of the Tax Auditing Authority in Gdańsk, i.e. as at 30 October 2006, was a total of approx. PLN 9,895,015, with the assumption that no exclusion periods occurred in the calculation of late payment interest (this is a contentious issue; in the opinion of the tax authorities conducting the audit, such exclusion periods could not have occurred, while the Company believes that they should be taken into account when calculating late payment interest). At the same time, by way of decisions of the Director of the Tax Auditing Authority in Gdańsk of 30 October 2006, the Company was charged with late payment interest on the overdue advances on corporate income tax for the individual months between 1999 and 2002 in the total amount of PLN 935,460. LEGAL STATUS: A) Corporate income tax for 1999-2002: In its verdict of 25 March 2009, the Supreme Administrative Court ( NSA ) dismissed the cassation petition against the unfavourable verdict of the Voivodeship Administrative Court in Gdańsk ( WSA ) regarding the amount of corporate income tax obligation for 1999. Given the dismissal of the cassation complaint regarding the corporate income tax for 1999 and the fact that subsequent cases regarding the corporate income tax for the years 2000-2002 were identical to the adjudicated case, the Company decided to withdraw the cassation complaint regarding the amount of the corporate income tax for the years 2000-2002. The above-mentioned circumstances indicate that the unfavourable verdicts of the WSA in Gdańsk regarding the corporate income tax for the years 1999-2002 have become legally binding. Therefore, the dispute with the tax authorities has come to an end in this regard. On 22 November 2013, the Company filed an application for resuming of the proceedings on corporate income tax obligations for the year 1999 which ended with a final decision of the Director of the Tax Chamber in Gdańsk of 28 August 2007, No BP/4218-0089/06/MW. On 19 December 2013, the Director of the Tax Chamber in Gdańsk issued a decision on resuming of the proceedings on corporate income tax obligations. On 15 January 2014, the Director of the Tax Chamber in Gdańsk refused to repeal the final decision of 28 August 2007, No BP/4218-0089/06/MW (decision served on 20 January 2014). On 3 February 2014, the Company appealed against the aforesaid decision. On 10 February 2014, the Company brought an action to resume the court and administrative proceedings ended with a final decision of the Supreme Administrative Court of 25 March 2009, court file II FSK 1309/08, dismissing the appeal in cassation against the decision of the Provincial Administrative Court in Gdańsk of 6 March 2008, court file I SA/Gd 1028/07, dismissing the appeal against the decision of the Director of the Tax chamber in Gdańsk of 28 August 2007, BP/4218-0089/06/MW, on determining the corporate income tax obligation of the Appellant for the year 1999, indicating as the basis for resuming the judgment of the

Cosnolidated financial statements for 2013 141 Constitutional Tribunal of 8 October 2013, court file SK 40/12, published in the Journal of Laws of the Republic of Poland of 13 November 2013. B) VAT for the individual months between 2000 and 20002: The first case regarding a VAT liability for February 2000 was finally resolved positively by way of decision of the Director of the Tax Authority in Gdańsk of 30 November 2007, closing the case. In other cases (identical to the cases regarding the corporate income tax) regarding VAT for the individual months between 2000 and 2002, the Company decided to withdraw cassation complaints against the unfavourable verdicts of the WSA in Gdańsk. This decision was based on the NSA s dismissal of the cassation complaints in the case regarding the corporate income tax for 1999, which was identical to the cases regarding VAT. In this way, the unfavourable verdicts of the WSA in Gdańsk regarding VAT for the individual periods between 2000 and 2002 have become legally binding. Therefore, the dispute with the tax authorities has come to an end in this regard. On 22 November 2013, the Company applied for resuming the proceedings: on value added tax obligation for May 2000 ended with the final decision of the Director of the Tax Chamber in Gdańsk of 30 November 2007, No PT/4407-774/0606, and on value added tax obligation for August 2000 ended with the final decision of the Director of the Tax Chamber in Gdańsk of 30 November 2007, No PT/4407-775/0606. On 17 December 2013, the Director of the Tax Chamber in Gdańsk issued decisions on resuming the proceedings on value added tax obligations for May and August 2000. C) Interest on advances on corporate income tax for 1999-2002: The proceedings regarding interest on unpunctual payment of advances on the corporate income tax for May, June and October 1999 were resolved positively by way of decision by the Director of the Tax Authority in Gdańsk of 19 December 2006, repealing the appealed decision of the Director of the Tax Auditing Authority in Gdańsk. On 25 March 2009, the NSA suspended the court proceedings in cases regarding the amount of interest on advances on the corporate income tax for the years 2000-2002 until the NSA passes a resolution in a similar case regarding another tax payer. This resolution was passed on 7 December 2009 and the NSA, after passing the resolution, resumed the suspended proceedings regarding the said interest. On 18 March 2010, the NSA acknowledged the Company s cassation complaints in cases regarding interest on advances on the corporate income tax for the years 2000, 2001 and 2002 and, consequently, repealed the disputed verdicts of the WSA in Gdańsk and submitted the cases for renewed adjudication by the Court of first instance. On 7 and 28 June 2010, the WSA in Gdańsk, as a result of a renewed adjudication of the cases, passed three verdicts in which it repealed the disputed decisions by the Director of the Tax Authority in Gdańsk and the preceding decisions by the 1 st instance authority, under which the disputed interest on advances on the corporate income tax was charged. Pursuant to the cited verdicts, the cases were submitted to the 1 st instance authority for a renewed examination. As a result of a renewed procedure, the Director of the Tax Auditing Authority in Gdańsk, by way of decisions of 16 November 2010 and 2 December 2010, charged the Company again with late payment interest on the overdue advances on corporate income tax for the individual months between 2000 and 2002 in the total amount of PLN 772,874. The Company appealed against these decisions. After examining the appeal, the Director of the Tax Authority in Gdańsk repealed the decision of the 1st instance authority regarding interest on advances on the corporate income tax for 2000 and closed this case. Whereas with regard to interest on advances on the corporate income tax for 2001 and 2002, the appellate authority decided to reduce the amount of the disputed amounts due (from

Cosnolidated financial statements for 2013 142 PLN 434,950 to PLN 295,528 for 2001, and from PLN 224,198 to PLN 161,102 for 2002 respectively). The Company was charged with interest only on advances on the corporate income tax for the years 2001-2002 in the total amount of PLN 456,630. Since the difference between the amount of the discussed interest resulting from the final decisions and the amount of interest originally established and collected from the Company was reimbursed to the Company without any interest rate, the Company demanded that the tax authorities reimburse the interest rate on the surplus in question. On 8 February 2012, the Company requested the Head of the Pomeranian Tax Office in Gdańsk to reimburse the surplus due to unduly collected late payment interest on CIT advance payments between 2000 and 2002. Following the unfavourable decisions by the first and second instance tax authorities, the Company filed a complaint with the Voivodeship Administrative Court in Gdańsk. On 29 January 2013, the Voivodeship Administrative Court in Gdańsk repealed the decisions of the Director of the Tax Authority in Gdańsk (I SA/Gd 1282/12). The request for the reimbursement of surplus payments and interest on the unduly collected late payment interest for the duration of the inspection proceedings and for the period of securing outstanding tax amounts in the case related to CIT liabilities for 1999-2000 as well as VAT for individual months in 2000-2002 was delivered to the Head of the Pomeranian Tax Office in Gdańsk on 28 November 2011. On 27 February 2013, the Voivodeship Administrative Court in Gdańsk repealed the complaint of Polnord S.A. regarding the said Decision of Director of the Tax Authority. On 5 March 2013, a request was filed for preparing and delivering the substantiation of the verdict (I SA/Gd 1330/12). Independently of the proceedings regarding the amounts due, administrative proceedings are underway regarding the collection of the said amounts as well as enforcement proceedings intended to enforce the collection of these amounts (the enforcement proceedings do not involve the amounts due which have been secured in the form of a cash deposit, i.e. overdue corporate income tax for 1999 and overdue VAT for May and August of 2000). LEGAL STATUS of enforcement proceedings: On 24 March 2009, the NSA examined a cassation against the unfavourable verdict of the WSA in Gdańsk regarding the accusations in the enforcement of interest on advances on the corporate income tax for the years 2000-2002. Finally, the company s cassation complaint was dismissed by the NSA, ending the dispute regarding the correctness of the enforcement proceedings initiated and conducted with regard to interest on advances on the corporate income tax. It must be stressed that, with regard to the disputed tax obligations due to the corporate income tax and VAT for the years 2000-2002, two enforcement proceedings were initiated against the Company: the first procedure was based on the writs of execution of 9 November 2006 and the second procedure was based on the writs of execution of 15 December 2006. In the first enforcement procedure, the NSA has already examined the Company s cassation complaint against the unfavourable verdict of the WSA in Gdańsk regarding the accusations related to enforcement. In its verdict of 2 July 2009, the NSA dismissed the said cassation complaint and decided that the accusations in the course of execution of the first enforcement procedure are unjustified. However, the Company filed a constitutional complaint in this matter, claiming that the regulations based on which the Court's verdict was passed violate the Constitution of the Republic of Poland in that they differentiate between the situation of tax payers who are charged with late payment interest on overdue tax, depending on which authority (tax or tax auditing) identifies the overdue amount. In its verdict of 18 October 2011, case number SK 2/10, the Constitutional Tribunal acknowledged the Company s complaint and declared that the disputed regulations are unconstitutional. Based on the cited verdict, the Company filed for renewed court and administrative proceedings, ending in a legally binding verdict of the NSA, and demanded that the tax authorities

Cosnolidated financial statements for 2013 143 reimburse the unduly collected late payment interest on overdue tax (which was accrued and collected for the period of the audit proceedings and for the period of securing the disputed claims). In the course of the enforcement proceedings initiated based on the writs of execution of 15 December 2006, the WSA in Gdańsk, in its verdict of 29 April 2010, dismissed the Company s claim against the decision of the authorities to recognise the illegitimacy of accusations in conducting the enforcement proceedings in question. On 26 July 2010, the Company filed a cassation complaint against the cited verdict of the WSA in Gdańsk, which has not yet been examined. In connection with NSA's unfavourable verdict of 17 May 2012, the case was referred for re-examination to the Voivodeship Administrative Court in Gdańsk. On 16 October 2012, the Voivodeship Administrative Court in Gdańsk repealed the decisions of the first and second instance authorities (I SA/Gd 679/12). To complement the information on the current status of enforcement proceedings against the Company, it must be added that, in the enforcement proceedings regarding tax obligations due to CIT and VAT for the years 2000-2002, initiated based on the writs of execution of 9 November 2006, the Company also is in dispute with the authorities with regard to the legitimacy of the accrual and collection of the costs of enforcement from the Company. Regarding this case, in its verdict of 29 April 2010, the WSA in Gdańsk dismissed the Company s complaint regarding the unfavourable decision by the authorities on the costs of enforcement proceedings. On 1 July 2010, the Company filed a cassation complaint against the cited verdict of the WSA in Gdańsk. On 14 February 2013, the Supreme Administrative Court delivered a favourable verdict. (II FSK 420/12). On 22 May 2013, the Provincial Administrative Court in Gdańsk ruled against implementing the appealed decision (court file I SA/Gd 489/13). On 13 January 2014, the Director of the Tax Chamber in Gdańsk repealed the appealed decision and handed the case over to a 1st instance body to be heard again (date of the decision service 17 January 2014). On 10 February 2014, the Company brought an action to resume the court and administrative proceedings ended with a final decision of the Provincial Administrative Court in Gdańsk of 22 May 2009, court file I SA/Gd 489/13, repealing the decision of the Director of the Tax chamber in Gdańsk of 18 December 2007, IO/7240-0296/07, on finding the claims regarding the administrative proceedings groundless, indicating as the basis for resuming the judgment of the Constitutional Tribunal of 8 October 2013, court file SK 40/12, published in the Journal of Laws of the Republic of Poland of 13 November 2013, item 1313. As far as proceedings for securing claims are concerned, proceedings regarding the indications for securing the disputed tax obligations and proceedings regarding the extension of the term of securing these obligations (unjustified in our opinion) have to be mentioned. LEGAL STATUS of proceedings for securing claims: On 24 March 2009, the NSA dismissed two cassation complaints of the Company against the decisions of the WSA in Gdańsk, which rejected the court proceedings in cases involving complaints about the decision to secure the disputed tax obligations. It means that, in the two discussed cases regarding the decision to secure claims (based on which compulsory mortgages were entered into the land and mortgage register), the dispute with the authorities has come to an end. As far as the third case is concerned, the WSA following the NSA s verdict repealing the disputed decision by the WSA examined the claim and dismissed it because, in its opinion, the decision to secure claims was lawful. A cassation complaint was filed against this decision and has not yet been examined. On 11 March 2010, the NSA suspended the court proceedings in the case involving the cassation complaint until the Constitutional Tribunal has examined the Company s constitutional complaint, and indicated that the verdict of the Constitutional Tribunal may affect the outcome of the case involving the secured claims.

Cosnolidated financial statements for 2013 144 In the second type of cases (i.e. extension of the term for securing the claims), on 24 March 2009, the NSA dismissed the cassation complaints of the Director of the Tax Authority in Gdańsk against the verdicts of the WSA in Gdańsk, which were favourable for the Company, in four cases regarding the extension of the term for securing the disputed tax claims. At the same time, the NSA dismissed the Company s cassation complaints against the unfavourable verdicts of the WSA in Gdańsk in four similar cases. It means that in both cases the verdicts of the WSA in Gdańsk, which in the first case confirmed that the extension of the term for securing the claims is lawful and in the second case confirmed that such action is legitimate, have become legally binding. In the first case, the procedure returned to the administrative authorities and in the second case, the verdicts of the NSA mean that the case is closed. It must be said that the company has already won eight similar cases before the NSA. As a result, out of the 16 cases regarding the extension of the term for securing the claims, 12 cases ended with a court verdict that is positive for the Company. In the execution of these favourable verdicts, the tax authority repealed the decisions on extending the term for securing the claims and closed the proceedings in this case. The Company also claims the examination of the petitions for repealing the established security submitted along with complaints regarding the extension of the term for securing the claims. However, the Head of the Pomeranian Tax Authority in Gdańsk closed the proceedings regarding the said petitions as irrelevant. These decisions were upheld by the appellate authority and the Voivodeship Administrative Court in Gdańsk dismissed the filed complaints. The Company filed cassation complaints against the unfavourable verdicts of the WSA in Gdańsk, which were dismissed by the Supreme Administrative Court on 14 February 2013. 39 CONTINGENT LIABILITIES AND ASSETS Note 39 - Other contingent liabilities As at 31.12.2013 As at 31.12.2012 Liabilities due to compensations 16 250 26 250 Other contingent liabilities 2 523 2 523 Total contingent liabilities 18 773 28 773 Contingent assets Claims related to the infrastructure 142 327 Tort claims from the Capital City of Warsaw 123 036 Total contingent assets 265 363 As at 31 December 2013 only sureties granted by Polnord outside of the Group in the amount of PLN 2,523 thousand were active and they did not change in comparison with 31 December 2012. As at the balance sheet date there were no guarantees granted by the Group. Pursuant to the agreement on a sale of receivables of 17 July 2012 and the agreement of 29 June 2011, as a compensation for the acquisition by the Capital City of Warsaw of road real properties with the total area of 22.64 hectares, as part of the Wilanów investment, FM Bank PBP S.A. with its registered office in Warsaw (formerly: Polski Bank Przedsiębiorczości SA) paid to the Company the first price instalment for the receivable being purchased in the total amount of PLN 144,936 thousand. As a result of the additional agreement concluded with Polski Bank Przedsiębiorczości SA on the payment to POLNORD SA of additional amounts in respect of compensation receivables sold, the Company received additionally PLN 20,000 thousand and has the right to request further PLN 5,000 thousand upon the fulfillment of the condition contained in the agreement. The right to claim all receivables payable as a compensation is currently vested in FM Bank PBP S.A. (formerly: Polski Bank Przedsiębiorczości SA) which is interested in receiving the compensation as quickly as possible. Pursuant to the Agreement signed, POLNORD SA must return to FM Bank PBP S.A. (formerly: Polski Bank Przedsiębiorczości SA) a part of the additional amount paid if no

Cosnolidated financial statements for 2013 145 Settlement is concluded with the Debtor on the payment of all debts on specific dates. However, in assessing the potential date of the payment of the compensation one should take into account the Order No. 3435/12 of 12 October 2012 of the Mayor of Warsaw who established a negotiation team for the purposes of determination and payment of the compensation. This means that the City does not dispute the requirement to pay the receivable covered by the agreement mentioned at the beginning and that the only remaining issue is to determine the amount of the compensation. If the compensation is determined, it will be necessary to obtain from an expert a report on the real property valuation. Contingent assets represent the value of receivables under litigation less the values recognised in the balance sheet. 40 INFORMATION ABOUT RELATED PARTIES 40.1. Terms of transactions with related parties The tables below present the total amounts of transactions concluded with related parties for the respective reporting periods. These items have been adequately eliminated in the consolidation process. Transactions with related parties are carried out at market conditions.

Cosnolidated financial statements for 2013 146 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party POLNORD NIERUCHOMOŚCI INWESTYCYJNE Sp. z o.o. PD DEVELOPMENT Sp. z o.o. Polnord Łódź I Sp. z o.o. Polnord Łódź III Sp. z o.o. 1. Long-term investments borrowings granted 2. Long-term receivables 3. Short-term receivables a) trade b) other 4. Short-term investments-borrowings Total receivables and investments assets 5. Long-term liabilities a) borrowings b) other 6. Short-term liabilities a) trade b) borrowings Total liabilities Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Sale 38 14 17 16 a) products b) services 33 11 17 16 c) rent 5 3 2. Revenue from sale of goods and materials 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 1 237 84 56 1 013 Total 1 275 98 73 1 029 Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials b) services c) other costs 2. Purchase of goods/other assets 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses Total - - - -

Cosnolidated financial statements for 2013 147 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party POLNORD MARKETING Sp. z o.o. Fadesa Polnord Polska Sp. z o.o. STROJ DOM ZSA 1. Long-term investments borrowings granted 3 737 2. Long-term receivables POLNORD APARTAMENTY Sp. z o.o 3. Short-term receivables 38 945 a) trade 38 945 b) other 4. Short-term investments-borrowings 1 149 Total receivables and investments assets 38-4 886 945 5. Long-term liabilities a) borrowings b) other 6. Short-term liabilities 10 642 12 786 a) trade 10 642 12 786 b) borrowings Total liabilities 10 642 - - 12 786 Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Sale 145 6 066 a) products b) services 120 6 055 c) rent 25 11 2. Revenue from sale of goods and materials 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 82 3 667 133 4 364 Total 227 3 667 133 10 430 Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials b) services 7 600 c) other costs 2. Purchase of goods/other assets 10 418 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses Total 7 600 - - 10 418

Cosnolidated financial statements for 2013 148 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party POLNORD OLSZTYN TĘCZOWY LAS Sp. z o.o. Polnord Łódź City Park Sp. z o.o. Śródmieście Wilanów Sp. z o.o. Wilanów Office Park - budynek B1 Sp. z o.o 1. Long-term investments borrowings granted 2. Long-term receivables 12 467 3. Short-term receivables 25 91 8 438 130 a) trade 25 91 8 438 130 b) other 4. Short-term investments-borrowings Total receivables and investments assets 25 12 558 8 438 130 5. Long-term liabilities a) borrowings b) other 6. Short-term liabilities 276 8 a) trade 276 8 b) borrowings Total liabilities 276 8 - - Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Sale 2 626 645 13 354 454 a) products b) services 2 615 643 13 351 453 c) rent 11 2 3 1 2. Revenue from sale of goods and materials 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 370 3 455 3 610 127 Total 2 996 4 100 16 964 581 Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials b) services 2 c) other costs 2. Purchase of goods/other assets 1 139 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses Total 2-1 139 -

Cosnolidated financial statements for 2013 149 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party Wilanów Office Park - budynek B3 Sp. z o.o POLNORD Warszawa - Ząbki Neptun Sp. z o.o SURPLUS Sp. z o.o. SKA SURPLUS Sp. z o.o. 1. Long-term investments borrowings granted 2. Long-term receivables 3 376 3. Short-term receivables 2 890 361 61 13 a) trade 2 890 361 61 13 b) other 4. Short-term investments-borrowings Total receivables and investments assets 6 266 361 61 13 5. Long-term liabilities a) borrowings b) other 6. Short-term liabilities a) trade b) borrowings Total liabilities - - - - Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Sale 821 439 228 28 a) products 37 b) services 783 433 219 20 c) rent 1 6 9 8 2. Revenue from sale of goods and materials 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 1 874 350 6 Total 2 695 789 228 34 Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials b) services c) other costs 2. Purchase of goods/other assets 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses Total - - - -

Cosnolidated financial statements for 2013 150 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party 1. Long-term investments borrowings granted POLNORD SZCZECIN Ku Słońcu Sp. z o.o. 2. Long-term receivables 7 072 POLNORD SOPOT II S p. z o.o. Polnord Gdańsk Dwa Tarasy Sp. z o.o. Surplus Sp. z o.o. DOMITUS SKA 3. Short-term receivables 6 1 547 246 24 a) trade 6 1 547 246 24 b) other 4. Short-term investments-borrowings Total receivables and investments assets 7 078 1 547 246 24 5. Long-term liabilities a) borrowings b) other 6. Short-term liabilities 785 35 3 260 a) trade 785 35 b) borrowings 3 260 Total liabilities 785-35 3 260 Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Sale 3 458 1 703 238 - a) products b) services 3 457 1 692 233 c) rent 1 11 5 2. Revenue from sale of goods and materials 8 402 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 1 696 1 204 43 Total 5 154 2 907 8 683 - Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials b) services c) other costs 2. Purchase of goods/other assets 21 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses 20 Total - 21-20

Cosnolidated financial statements for 2013 151 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party 10H Sp. z o.o. Polnord Gdynia Brama Sopocka Sp. z o.o. TOTAL 1. Long-term investments borrowings granted 3 737 2. Long-term receivables 22 915 3. Short-term receivables 28 12 847 27 690 a) trade 28 12 847 27 690 b) other 4. Short-term investments-borrowings 1 149 Total receivables and investments assets 28 12 847 55 491 5. Long-term liabilities - a) borrowings b) other 6. Short-term liabilities 27 792 a) trade 24 532 b) borrowings 3 260 Total liabilities - - 27 792 - - - Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party TOTAL 1. Sale 22 50 30 362 a) products 37 b) services 15 47 30 213 c) rent 7 3 112 2. Revenue from sale of goods and materials 10 395 18 797 3. Other operating revenues - 4. Sale of PP&E 5. Financial revenues 23 371 Total 22 10 445 72 530 - Purchases and costs of mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party 1. Purchaes a) materials TOTAL b) services 7 602 c) other costs 2. Purchase of goods/other assets 11 578 3. Other operating expenses 4. Purchase of PP&E 5. Financial expenses 20 Total - - 19 200 - - - - -

Cosnolidated financial statements for 2013 152 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 POLNORD SA / Related party FPP Powsin Sp. z o.o. Osiedle Innova Sp. z o.o. FPP Osiedle MODERNO Sp. z o.o. TOTAL 1. Long-term investments borrowings granted 51 521 14 446 100 66 067 2. Long-term receivables - 3. Short-term receivables 17 009 32 818-49 827 a) trade 17 009 32 818 49 827 b) other 4. Short-term investments-borrowings - Total receivables and investments assets 68 530 47 264 100 115 894 5. Long-term liabilities - 8 813-8 813 a) borrowings 8 813 8 813 b) other 6. Short-term liabilities - - - - a) trade b) borrowings Total liabilities - 8 813-8 813 - - - - Revenue from mutual transactions Polnord SA Group for the period from 01.01.2013 to 31.12.2013 Related party FPP Powsin Sp. z o.o. Osiedle Innova Sp. z o.o. FPP Osiedle MODERNO Sp. z o.o. TOTAL 1. Sale - - - - a) products - b) services - c) rent - 2. Revenue from sale of goods and materials - 3. Other operating revenues 37 1 347 31 1 415 4. Sale of PP&E - 5. Financial revenues 2 668 2 551 5 219 Total 2 705 3 898 31 6 634 List of mutual receivables and liabilities Polnord SA Group as at 31.12.2013 Polnord Marketing Sp. z o.o. / Related party Wilanów Office Park - building B3 Sp. z o.o POLNORD Warszawa - Ząbki Neptun Sp. z o.o POLNORD SOPOT II S p. z o.o. TOTAL 1. Long-term investments borrowings granted - 2. Long-term receivables - 3. Short-term receivables 131 53 152 336 a) trade 131 53 152 336 b) other 4. Short-term investments-borrowings - Total receivables and investments assets 131 53 152 336 -

Cosnolidated financial statements for 2013 153 Specification of loan receivables and financial income at Surplus Sp. z o.o.domitus SKA as at 31.12.2013 r./ and for the year 2013 Related party Receivables Financial revenues DEBTOR Polnord Osiedle Tęczowy Las 8 372 117 Polnord Marketing 1 534 18 Polnord Apartamenty 57 802 608 Polnord Sopot II 27 777 279 Polnord Łódź City Park 20 203 165 Wilanów Office Park Budynek B3 37 461 411 Wilanów Office Park Budynek B1 3 885 35 Polnord Szczecin Ku Słońcu 33 706 378 Śródmieście Wilanów 53 250 639 Surplus Sp. z o.o. 86 1 Polnord Warszawa Wilanów Ząbki Neptun 5 886 79 Polnord Dwa Tarasy 15 548 209 Polnord SA 3 260 20 Semeko Aquasfera 2 021 19 Bioton 9 924 84 Fadesa 77 079 611 Stacja Kazimierz I Sp. z o.o. 51 1 Stacja Kazimierz Sp. z o.o. 40 - Total 357 885 3 674 Receivables/liabilities of the POLNORD SA Group as a 31.12.2013 r. Related party DEBTOR POLNORD Warszawa - Ząbki Neptun Sp. z o.o SURPLUS Sp. z o.o. SKA POLNORD SOPOT II Sp. z o.o. 10H Sp. z o.o. TOTAL CREDITOR Surplus Sp. z o.o. DOMITUS SKA POLNORD APARTAMENTY Sp. z o.o 1 1 WILANÓW OFFICE PARK - budynek B3 Sp. z o.o 16 16 SURPLUS Sp. z o.o. SKA 100 000 100 000 10H Sp. z o.o. 615 615 Total 16 615 1 100 000 100 632 Sale/purchase transactions between the entities of the POLNORD SA Group in the period from 01.01.2013 to 31.12.2013 Related party BUYER SURPLUS Sp. z o.o. SKA POLNORD SOPOT II S p. z o.o. Total SELLER POLNORD APARTAMENTY Sp. z o.o 7 7 10H Sp.z o.o. 500 SURPLUS Sp. Z o.o. 32 32 Total 532 7 39

Cosnolidated financial statements for 2013 154 40.2. Group s Parent Company In 2013, Prokom Investments SA was the stockholder holding the largest share in the share capital (votes at the GSM) of Polnord SA. As a result of registering the Polnord capital increase by the District Court in Gdańsk, Prokom holds directly 19.77 % and indirectly, together with Osiedle Wilanowskie 24.39 % of total votes. 40.3. Entity with significant influence on the Group: As at 31.12.2013 r. Prokom Investments SA holding directly 19,77% of the share capital of Polnord SA and 4,62% indirectly through a subsidiary, Osiedle Wilanowskie Sp. z o.o. List of mutual receivables and liabilities with a related party outside the Polnord SA Group as at 31.12.2013 Related party PROKOM INVESTMENTS SA PROKOM ŚLĄSKA Sp. z o.o. BIOTON SA TOTAL 1. Long-term investments borrowings granted - 2. Short-term receivables 620 424 49 1 093 a) trade 620 424 49 1 093 b) other 3. Short-term investments-borrowings - Total receivables and investments assets 620 424 49 1 093 4. Long-term liabilities a) borrowings b) other 5. Short-term liabilities 1 260 - - 1 260 a) trade 1 260 1 260 b) borrowings Total liabilities 1 260 - - 1 260 - - - - - Revenue from mutual transactions with a related party outside the Polnord SA Group 01.01.2013 to 31.12.2013 Related party PROKOM INVESTMENTS SA PROKOM ŚLĄSKA Sp. z o.o. BIOTON SA TOTAL 1. Sale 1 331 - - 1 331 a) products b) services 1 331 1 331 2. Revenue from sale of goods and materials - 3. Other operating revenues 4. Sale of PP&E 5. Financial revenues 174 1 548 1 722 Total 1 505-1 548 3 053 Purchases and costs of mutual transactions with a related party outside the Polnord SA Group from 01.01.2013 to 31.12.2013 Related party PROKOM INVESTMENTS SA PROKOM ŚLĄSKA Sp. z o.o. BIOTON SA - - - RAZEM 1. Purchaes 300 441-741 a) materials b) services c) other costs 300 441 741 2. Purchase of goods/other assets 5 850 5 850 3. Other operating expenses 4. Purchase of PP&E 65 65 5. Financial expenses 222 222 Total 6 437 441-6 878 - - -

Cosnolidated financial statements for 2013 155 40.4. Related parties (personal relations) There were no transactions with related parties that should be disclosed. 40.5. Loans to Directors In 2013 there were no loans granted to directors. 40.6. Other transactions involving members of the Management Board In 2013, there were no transactions in the Group involving members of the Management Board of the Group companies. 40.7. Remuneration of the Group s senior management Note 40.7 Remuneration of the Group s senior management- MANAGEMENT BOARD For the period from 01.01.2013 to 31.12.2013 For the period from 01.01.2012 to 31.12.2012 Short-term employee benefits (remunerations and surcharges) 3 122 4 783 Anniversary benefits and retirement gratuities Post-employment benefits Benefits due to termination of employment, noncompetition clause 300 218 Other option agreements, additional benefits 56 Total remuneration paid to senior management staff 3 478 5 001 Management Board 2 939 4 206 Supervisory Board 257 500 Management Board subsidiaries or associates 539 795 Supervisory Board subsidiaries or associates 16 Total 3 735 5 517 41 OBJECTIVES AND PRINCIPLES OF FINANCIAL RISK MANAGEMENT 41.1. Financial risk factors The main financial instruments used by the Group are bank loans, bonds and finance lease. The main purpose of these financial instruments is to obtain funds for the Group s operations. The Group also holds other financial instruments, such as trade receivables and liabilities, which arise in the course of its business, and cash. The Group companies do not conclude transactions involving derivatives. The main risks linked to the Group s financial instruments are interest rate risk, FX risk, liquidity risk and credit risk. The Management Board verifies and reconciles the principles for managing each risk; these principles are discussed below. 41.2. Credit risk The Group s financial assets exposed to concentrated credit risk include settlements with related parties and trade receivables. Trade receivables presented in the financial statements, less revaluation allowance for unrecoverable receivables, reflect the nature of the Group's business, which involves fulfilling a relatively small number of high-value contracts.

Cosnolidated financial statements for 2013 156 In the opinion of the parent company s Management Board, the credit risk to which the Group is exposed has been assessed correctly. It has been reflected in the accounting books by establishing adequate allowances for receivables. 41.3. FX risk Some of the contracts are concluded in currencies other than PLN, resulting in exposure to the FX risk. The table below shows the exposure of the gross financial result to possible variations of EUR and RUB exchange rates, assuming that other factors remain unchanged (in relation to receivables and borrowings in foreign currencies). Note 41.3 - Sensibility analysis (FX) Fair value as at EUR/PLN exchange rate 31.12.2013 (in thousands of PLN) Asset value in relation to initial Value of financial asset Change (in thousands of PLN) decrease by 20% 30 395 80% 37 994 ( 7 599) decrease by 10% 34 195 90% 37 994 ( 3 799) no change 37 994 100% 37 994 0 increase by 10% 41 793 110% 37 994 3 799 increase by 20% 45 593 120% 37 994 7 599 RUB/PLN exchange rate Fair value as at 31.12.2013 (in thousands of PLN) Asset value in relation to initial Value of financial asset Change (in thousands of PLN) decrease by 20% 13 055 80% 16 319 ( 3 264) decrease by 10% 14 687 90% 16 319 ( 1 632) no change 16 319 100% 16 319 0 increase by 10% 17 951 110% 16 319 1 632 increase by 20% 19 583 120% 16 319 3 264 EUR/PLN exchange rate Fair value as at 31.12.2013 (in thousands of PLN) Liabilities value in relation to initial Value of financial liability Change (in thousands of PLN) decrease by 20% 17 241 80% 21 552 4 310 decrease by 10% 19 396 90% 21 552 2 155 no change 21 552 100% 21 552 0 increase by 10% 23 707 110% 21 552 ( 2 155) increase by 20% 25 862 120% 21 552 ( 4 310) USD/PLN exchange rate Fair value as at 31.12.2013 (in thousands of PLN) Liabilities value in relation to initial Value of financial liability Change (in thousands of PLN) decrease by 20% 4 508 80% 5 636 1 127 decrease by 10% 5 072 90% 5 636 564 no change 5 636 100% 5 636 0 increase by 10% 6 199 110% 5 636 ( 564) increase by 20% 6 763 120% 5 636 ( 1 127) 41.4. Interest rate risk The Group holds liabilities due to loans with interest calculated based on a variable interest rate. Therefore, there is a risk that interest rates may increase over the rate which was applicable when the agreement was concluded. Given that, in the reporting period, the Group held both assets and liabilities bearing variable interest rates (thus offsetting the risk), in consideration of the slight variations of interest rates in previous

Cosnolidated financial statements for 2013 157 periods and the absence of any predictions regarding rapid changes in interest rates in the following reporting periods, the Group did not use interest rate hedges as at 31.12.2013, as it believed that the interest rate risk was insignificant. The current situation notwithstanding, the Group is monitoring exposure to the interest rate risk and interest rate forecasts, and does not preclude hedging measures in the future. The table below presents the exposure of the gross financial result to reasonable changes in interest rates, with the assumption that other factors remain unchanged (in relation to liabilities with a variable). The influence on the Group's equity has not been presented. Note 41.4.1 Sensibility analysis (percentage rate) Year ended 31 December 2013 Increase/decrease by percentage points Effect on the gross financial result PLN 1% ( 5 744) PLN -1% 5 744 The following table presents the carrying value od the Group s financial instruments exposed to the interest rate risk, by aging. Nota 41.4.2 - Interest rate risk - age structure As at 31.12.2013 Fixed interest rate <1 year 1 2 years 2-3 years 3-4 years 4-5 years >5 years TOTAL Liabilities due to finance lease and leasehold agreements with purchase option TOTAL Variable interest rate <1 year 1 2 years 2-3 years 3-4 years 4-5 years >5 years TOTAL Overdrafts 23 832 23 832 Bank loans 66 488 20 976 12 035 7 910 8 797 83 986 200 192 Share in loan/borrowing raised by a joint 54 971 venture 26 074 28 897 Bonds 20 435 89 500 204 000 313 935 Revolving loan Liabilities due to finance lease and 48 leasehold agreements with purchase option 48 TOTAL 136 877 139 373 216 035 7 910 8 797 83 986 592 978 Variable interest rate on financial instruments is updated at intervals shorter than one year. Other financial instruments of the Group not disclosed in the above tables do not bear interest and are, therefore, not exposed to the interest rate risk. 41.5. Liquidity risk The Group manages its liquidity risk by maintaining sufficient amounts of cash and transferable securities, and by ensuring the required funding in the form of loan facilities. The Group s objective is to ensure funding that is sufficient for its business.

Cosnolidated financial statements for 2013 158 42 FINANCIAL INSTRUMENTS 42.1. Fair value Between 01.01.2013 and 31.12.2013, there were no differences between the carrying value and the fair value of the Group s financial instruments. 42.2. Hedge accounting In 2013 and 2012, the Group did not conclude any transactions obliging it to use hedge accounting. 43 EMPLOYMENT STRUCTURE The Group s employment structure was as follows: Note 43 - Employment structure As at 31.12.2013 As at 31.12.2012 Management Board of the Parent Company 2 3 Management Boards of the Group Companies 4 4 Administration 52 60 Sales Department 14 16 Production Branch 26 25 Other 3 Total 98 111 44 AUDITOR S REMUNERATION In 2013, the financial statements are subject to review and audit by an auditing company, BDO Sp. z o.o., with its registered office in Warsaw. Walue of auditor s remuneration for the year ended 31.12.2013 is presented in the Directors Report in Chapter IV (1). 45 EVENTS AFTER THE BALANCE SHEET DATE Events after the balance sheet are described in the Directors Report in Chapter IV (10). Gdynia, 21 March 2014 Piotr Wesołowski Tomasz Sznajder Katarzyna Brzózka President of the Management Board Vice-President of the Management Board Chief Accountant

Managment Board statement 159 D. STATEMENT OF THE MANGEMENT BOARD OF CONSOLIDATED FINANCIAL STATEMENT FOR THE PERIOD FROM 1 JANUARY 2013 TO 31 DECEMBER 2013

Managment Board statement 160 Gdynia, 21 March 2014 STATEMENT Pursuant to 92 section 1 item 5 of the Regulation of the Minister of Finance of 19 February 2009, regarding current and interim information submitted by issuers of securities and the terms governing recognition of information required by the laws of a non-member state as equivalent information, the Management Board of Polnord SA hereby declares that according to its best knowledge the consolidated financial statements of Polnord Capital and comparative data have been prepared in line with the binding accounting principles and reflect the Company s and the Capital Group's material and financial statement and their financial results in a true, reliable and clear way. The Report on Activity of contains a true picture of its development and achievements, including a description of basic threats and risks. Piotr Wesołowski Tomasz Sznajder President of the Management Board Vice-President of the Management Board

Managment Board statement 161 E. STATEMENT OF THE MANAGEMENT BOARD ON THE ENTITY AUTHORISED TO AUDIT FINANCIAL STATEMENTS

Managment Board statement 162 Gdynia, 21 March 2014 STATEMENT Pursuant to 92 section 1 item 6 of the Regulation of the Minister of Finance of 19 February 2009, regarding current and interim information submitted by issuers of securities and the terms governing recognition of information required by the laws of a non-member state as equivalent information, the Management Board of Polnord SA hereby declares that the entity authorised to audit financial statements, auditing the Company s condensed consolidated financial statements of Polnord SA Capital has been elected pursuant to the provisions of the law and that the said entity and the statutory auditors who have audited these statements have met the conditions for expressing an impartial and independent opinion about the audited financial statements, pursuant to the binding provisions of the law and professional standards. Piotr Wesołowski Tomasz Sznajder President of the Management Board Vice-President of the Management Board

Independent Auditor s Opinion 163 F. INDEPENDENT AUDITOR S OPINION OF THE CONSLIDATED FINANCIAL STATEMENT FOR THE PERIOD JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013

Independent Auditor s Report 168 G. IDEPENDENT AUDITOR S REPORT OF THE CONSLIDATED FINANCIAL STATEMENT FOR THE PERIOD JANUARY 1 ST 2013 TO DECEMBER 31 ST 2013

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