LIBET S.A.

REPORT OF THE MANAGEMENT BOARD

ON OPERATIONS OF LIBET S.A.

FOR THE PERIOD FROM 01 JANUARY 2012 TO 31 DECEMBER 2015

Wrocław, 18 March 2016

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Report of the Management Board on the operations for the year ended on 31 December 2015 Table of Contents 1. OPERATIONS OF THE COMPANY ................................................................................................................... 4 1.1 Key information on the Company .................................................................................................................. 4 1.2 Products and services .................................................................................................................................... 4 1.3 Sales markets .................................................................................................................................................. 5 1.4 Related entities and capital expenditures .................................................................................................... 5 1.5 Significant events ........................................................................................................................................... 5 1.6 Risk factors and threats ................................................................................................................................. 6 1.7 Projected development of the entity ............................................................................................................. 6 1.8 Investment plans ............................................................................................................................................ 7 2. FINANCIAL POSITION ...................................................................................................................................... 7 2.1 Revenue and financial result of the Company ............................................................................................. 7 2.2 Company's asset position ............................................................................................................................ 9 2.3 Company's cash flows .................................................................................................................................. 10 2.4 Loans and borrowings drawn ...................................................................................................................... 11 2.5 Loans and borrowings granted .................................................................................................................... 11 2.6 Suretyships, guarantees, off-balance sheet items ..................................................................................... 11 2.7 Financial instruments and financial risk management principles ............................................................ 11 2.8. Financial resources management assessment ......................................................................................... 11 2.9 Principles of presenting selected data in foreign currencies ................................................................... 12 3. OTHER INFORMATION…………….….............................................................................................................. 13 3.1 Significant agreements ................................................................................................................................. 13 3.2 Transactions with related entities. .............................................................................................................. 13 3.3 Issue of securities ......................................................................................................................................... 13 3.4 Purchase of treasury shares ........................................................................................................................ 13 3.5 Forecast realisation. ..................................................................................................................................... 13 3.6. Court proceedings ....................................................................................................................................... 13 3.7 Untypical events and factors ....................................................................................................................... 13 3.8 Changes in the entity management methods ............................................................................................. 14 3.9 Agreements with people managing the entity ............................................................................................ 14 3.10 Remuneration of managing and supervising people ............................................................................... 14 3.11 Equity based compensation plans ............................................................................................................ 14 3.12 Shares held by managing and supervising people .................................................................................. 14 3.13 Agreements affecting changes in the shareholding ................................................................................ 14 3.14 Employee share plan control systems ...................................................................................................... 14 3.15 Description of rules for appointment and dismissal of members of the management board and their rights, in particular the right to decide on the issue or redemption of shares………………………………………………………………………………………………………………….……. 14 3.16 Description of amendments to the statute or articles of association of the issuer…………………………………………………………………………………………………………………..……. 15 3.17 A general meeting and its key powers, and a description of rights of shareholders and the manner of their exercising, in particular those arising from the regulations of the general meeting, if such rules were adopted, provided that the information in this regard do not arise directly from the law……………………………………………………………………………………………………….…………..………. 15 3.18 Information relating to the audit of the financial statement .................................................................... 15 4. CORPORATE GOVERNANCE PRINCIPLES .................................................................................................. 15

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4.1 Applied principles of corporate governance .............................................................................................. 15 4.2 System of internal control within reporting ................................................................................................ 15 4.3 Significant shareholders .............................................................................................................................. 16 4.4 Holders of shares carrying special inspection rights ............................................................................... 16 4.5 Voting right limitation ................................................................................................................................... 16 4.6 Limitations relating to transfer of titles to shares ..................................................................................... 17 4.7 Composition of the Management Board and the Supervisory Board ...................................................... 17 STATEMENT OF THE MANAGEMENT BOARD ON THE RELIABILITY OF THE FINANCIAL STATEMENTS................ 18 STATEMENT OF THE MANAGEMENT BOARD ON THE SELECTION OF THE ENTITY AUTHORISED TO AUDIT……. 18

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1 OPERATIONS OF THE COMPANY

1.1. Key information on the Company

Predecessor entity of Libet S.A. (further on referred to as the "Company"), Cydia Sp. z o.o. company (from

1 October 2010 Libet Sp. z o.o., from 14 December 2010 Libet S.A.) was established pursuant to the

Notarial Deed No Rep. A 2705/2008 dated 18 March 2008 in the office of the Notary Public - Danuta

Kosim-Kruszewska, Magdalena Witkowska, Spółka Cywilna. The registered office of Cydia Sp. z o.o. was

Warsaw, pl. Piłsudskiego 1, Poland.

During the period from the establishment to 29 March 2010 (date of Libet Group acquisition) Cydia Sp. z

o.o. did not pursue any business activity, was not a parent to any group, and did not have any equity

holdings in other entities. The Issuer’s financial year is the calendar year. On 29 March 2010 Cydia Sp. z

o.o. purchased 100% shares in Libet S.A., seated in Wrocław, ul. Powstańców Śląskich 5, incorporated

under the notarial deed of 16 November 1996 before Hanna Olszewska in Rawicz (Repertory No A

4234/1996). As at the acquisition date Libet S.A. held 100% of shares in Libet 2000 Sp. z o.o.

On 1 October 2010 Cydia Sp. z o.o. merged with Libet S.A. under the conditions of Article 492 § 1 of the

Commercial Companies Code via the takeover of the assets and liabilities of the acquired company (Libet

S.A.) by the acquirer (Cydia Sp. z o.o.). The acquiring entity (predecessor entity of the Issuer) changed its

name to Libet Sp. z o.o. on the same date, and on 14 December 2010 it was transformed into a joint-

stock company (spółka akcyjna) operating under the name of Libet S.A. (further on the "Issuer").

On 21 April 2011 the Issuer obtained a permit of the Board of the Warsaw Stock Exchange for listing of all

its shares, and on 28 April 2011 it was first listed on the Warsaw Stock Exchange. As at the date of

preparation of these statements the Company's shareholding is presented in par. 1.3 below. Currently,

the Issuer is registered with the National Court Register in the District Court for Wrocław-Fabryczna, 6th

Commercial Division under the number of KRS 373276.

The financial statements of the Company cover the period of 12 months ended on 31 December 2015

and include the comparative data for the period of 12 months ended on 31 December 2014 and as at 31

December 2014, pursuant to the requirements of the Regulation of the Minister of Finance dated 19

February 2009 regarding current and periodic information published by issuers of securities and

conditions of recognising as equivalent the information required by the laws of a state not being a

member state.

1.2. Products and services

Libet is a leading Polish producer of concrete surface materials

manufactured in the technology of vibropressing. Products are offered in three segments:

− premium segment

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− standard segment

− industrial segment.

Premium products are addressed to the most demanding customers. These include the highest quality

surface materials, such as premium cobblestone (Decco line), terrace slabs (Impressio line) and natural

stone slabs (Patio line). Premium product recipients are mainly individual customers. Such a group of

recipients is able to pay a higher price for premium products than for the standard cobblestone in order to

develop the surrounding of their households using materials of high quality and aesthetic features. A

numerous group of recipients of the premium products are also commercial customers (e.g. shopping

centres) and developers who use Libet's highest segment products to develop lands around their facilities

(e.g. parks, gardens, areas around shopping centres). Standard segment products are addressed to

customers who value the quality of offered products, but at the same time the price is a very important

factor for them while making purchase decisions. The standard segment offers concrete cobblestone,

stockades and elements of small architecture. Recipients of the standard products include both individual

customers and public and commercial sector customers. Products from the standard segment are used e.g.

for the development of parking places, pavements, squares, and also surfaces by public utility facilities and

houses. The industrial segment produces concrete cobblestone, paving flags, concrete paving kerbs,

turfstones and dished channels. Recipients of the products from the industrial segment are almost

exclusively local government units and public institutions. Products from this segment are used also for the

construction of pavements, sideways, areas around roads, parking places.

1.3. Sales markets

Sales are almost in 100% performed on the domestic market. Materials are acquired mainly on the

domestic market. No supplier or recipient has a share exceeding 10%. Suppliers and recipients, apart from

associated entities, are not formally linked to the issuer.

1.4. Related entities and capital expenditures

The Company is a parent company of two companies:

(1) Libet 2000 Sp. z o.o. – 100% in the share capital,

(2) BaumaBrick. Sp. z o.o. – 100% in the share capital.

The parent company and subsidiaries compose Libet Capital Group. The financial statements of Libet

Capital Group were published concurrently with this report.

1.5. Significant events

The economic situation in 2015 was similar to the previous years. Construction and assembly production

decelerated at the end of the year.

Libet reported a significant growth in the volume of production and sales. The Group continued the

implementation of the development strategy for the range of Premium products, e.g. investing and

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developing the distribution channels via a new partner programme. Distribution channels were secured

implementing the Platinum sale bonus point programme.

Libet continued developing the dedicated sales through large DIY stores. High-margin complementary

products, supplementing the existing offer of the Company, were introduced to the range of products.

The Company changed the method of fixed costs calculation in months in which there is no production

due to the seasonality of the sector in which the Company operates. In 2014, the Company activated fixed

costs relating to December 2014 as costs to be recognised in the following year. A a result of the

reverification of the adopted accounting method, the Company’s Management Board amended the rule

that fixed costs relating to non-productive months may be activated but exclusively within the given

financial year. However, they cannot be shifted between particular years (described in detail in note 37 of

the non-consolidated financial statements).

1.6. Risk factors and threats

The factors that may significantly affect the Company’s results in the following year

include:

1. Macroeconomic forecasts: According to the forecasts the GDP in Poland will grow by 3.6% in 2016

(similarly to the previous year). Current average forecasts of inflation for 2016 total to 0.7%.

2. Situation in the construction sector: In 2016 further improvements will be observable in the

construction sector resulting mainly from the proneness of investors to undertake new

investments, mainly in the developer construction sector. The new budget perspective of the EU

from 2016 will also have a positive impact here, however in the current year we will have to, to a

larger extent, deal with replacement investments, and a higher inflow of the EU funds should occur

just in 2017.

3. New products, trends and development of sales network: taking into account the forecasts of the

cobblestone market dynamics, verified as to the current economic forecasts, an actual growth is on

the level of ca. 3%. At the same time, the greatest drops in 2016 should be expected in the public

sector, hence lower sales volumes will relate in particular to industrial products and Premium

products included in investments.

4. Prices of raw materials and selling prices: in relation to the interviews with cobblestone producers

in 2016 stabilisations are projected in sales and prices in the group of industrial and standard

products. In the Premium product category long-term growth perspectives are anticipated within

volumes and prices.

1.7. Predicted development of the entity

Worsening economic situation and slowdown in the construction dynamics has an observable impact on

the Company's development. In the whole 2015 the Board continued implementing the savings policy as

planned. Detailed analyses of many areas of the Company's operations and renegotiation of numerous less

and more significant agreements, and also performance of production process optimisation activities.

Similar expectations are related to the changes in partner programme conditions for Customers from APS

(Authorised Points of Sale) introduced in 2015. New agreements entail benefits not only for Libet, but for

its all partners. Although the first effects of new terms of cooperation were felt by the Company already in

2015, the more concrete results, relating to a higher loyalty of Customers, are expected just this year. The

effects of investments in the quality of customer service, which is growing due to works of local market

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development coordinators, will be of some importance as well. Their tasks include creation and

maintaining relations both with wholesale customers and direct recipients, such as developers or

architects.

The Management Board presently sees no grounds allowing to state that the ability of the Group to fulfil

undertaken obligations is at risk, and sees no threats to the realisation of current investment intentions.

1.8. Investment plans

The Management Board of Libet is consistently pursuing the implementation of the long-term strategy of

the Company. In 2016 the Company plans the development in three key areas, in the Board's assessment.

Mainly, making the cooperation with Authorised Points of Sale closer, whose aim is a growth in sales

revenue generated on Premium products. Libet implemented numerous activities aiming at the

enhancement in the efficiency of activities of its key distributors. Cyclic trainings are conducted for

salespeople, Libet designers assist distributors in the preparation of the Premium products exhibition (the

so-called Gardens). The development of new products and product groups is being consistently pursued.

The Company cooperates with many designers and architects. Libet will consistently develop the Stampo

product line - individualised products of architectural concrete designated for demanding customers.

The Company will still focus on the optimisation of production processes in order to increase the margin

levels. Investment tasks will be concentrated on the development of the current Premium products and on

the development of new products from that group.

2 FINANCIAL POSITION

2.1 Revenue and financial result of the Company

Period of 12 months ended on 31/12/2014

Period of 12 months ended on 31/12/2015

PLN ‘000 PLN ‘000

Net sales revenue 271,532

297,582

Operating profit (loss) 8,570

7,080

Profit (loss) before tax 4,967

6,063

Net profit (loss) 3,260

7,127

Net cash flows from operating activities

12,936

34,025

Net cash flows from investing activities

-27,809

-18,139

Net cash flows from financing activities

15,377

-16,537

State as at 31/12/2014

State as at 31/12/2015

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PLN ‘000 PLN ‘000

Total assets 390,371

393,591

Non-current liabilities 85,884

79,167

Current liabilities 96,018

111,313

Equity 99,077

103,338

Share capital 500

500

Sales revenue

In 2015 sale revenue grew by PLN 26,050 thou. as compared to the previous year. It results from the

Company’s development. Also infrastructural investments implemented by local governments indirectly

affected the level of sales revenue.

Costs of operations

In relation to the development of the distribution networks, and focusing on the development of sales of

Premium products the Company generated a higher level of operating costs. The Company invested in the

development of the chain of relationship points (Platinum network), the first results of these investments

are visible both in the higher volumes and higher margin on sales. Premium products are products for the

production of which more expensive materials are used, and at the same time, a growth in the volume of

sold products was connected with the growth in the cost of products sold.

Operating result (EBIT)

Libet S.A. generated the operating profit in the amount of PLN 7,080 thou. as compared to PLN 8,570 thou.

in the previous year. The result was mostly affected by activities connected with a higher volume of

production and development of the sales network.

Other operating revenue and costs

In 2015 the balance of other operating revenue and costs was positive and amounted to PLN 2,911 thou.

The most important impact on the presented balance had a negative goodwill depreciation. (Details in note

18 and 19 of the Financial Statements)

Net profit

The net result for 2015 amounted to PLN 7,127 thou. In 2014 the Company reported a profit in amount of

PLN 3,260 thou. The result was mainly affected by the activities related to the construction of the network

of relationship, the so called Platinum, points. Expenditures on the network development will bring

indicative benefits in next years in the Company’s assessment.

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2.2 Company's asset position

The selected figures of the non-consolidated cash flow statement as at 31 December 2015 and 31

December 2014 are presented in the table below.

Period Period

Change Change 12 months ended on

31/12/2014

12 months ended on 31/12/2015

PLN ‘000 PLN ‘000 PLN ‘000 %

Fixed assets 264,286 269,719 5,434 2.01%

Tangible fixed assets 199,453 198,634 -818 -0.41%

Other non-current assets 64,833 71,085 6,252 8.80%

Current assets 126,086 123,872 -2,214 -1.79%

Inventories 71,850 76,046 4,196 5.52%

Trade receivables 36,472 34,193 -2,279 -6.67%

Cash and cash equivalents 1,225 574 -652 -113.60%

Other current assets 16,538 13,060 -3,479 -26.64%

Equity 99,077 103,338 4,261 4.12%

Liabilities and provisions for liabilities

291,295 290,254 -1,041 -0.36%

Non-current liabilities 85,884 79,167 -6,717 -8.48%

Current liabilities 96,018 111,313 15,295 13.74%

A drop in inventories in relation to the state as at 31 December 2014 (by PLN 4,196 thou.) results from the

inventory management optimisation in the Company.

A higher volume of production in relation to 2015 resulted in a higher by PLN 15,295 thou. level of current

liabilities.

Period Period

of 12 months

ended on 31/12/2014

of 12 months ended on

31/12/2015

Current ratio 1.31 1.11

Quick ratio 0.01 0.01

Debt ratio 74.6% 73.7%

Current ratio: current assets / current liabilities

Quick ratio: current assets minus inventories / current liabilities

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Debt ratio: liabilities/total assets

The liquidity ratios in the Company were on the similar level as in the previous year.

The table below presents the ageing of trade receivables. The list does not include receivables subject to a

full write-off.

Outstanding, not subject to write-

downs

Outstanding, not subject to write-downs

Data in PLN ‘000

Total due < 90 90 – 180 180-360 >360

31 December 2015 34,194 22,801 8,107 1,675 923 688

31 December 2014 36,472 21,230 9,455 1,227 614 3,946

The overdue receivables level was kept with slight time shifts. However, in the Company's assessment it is

not justified to cover the overdue receivables with write-downs due to a number of securities which will

allow to recover the receivables in the case of a permanent discontinuation of settling own liabilities by the

Company's debtors. These include among others avals and liens and bank guarantees.

2.3 Company's cash flows

The selected figures of the cash flow statement for 2015 and 2015 are presented in the table below.

Period Period

Change 12 months ended on

31/12/2014

12 months ended on

31/12/2015

PLN ‘000 PLN ‘000 PLN ‘000

Net cash from operating activities

12,936 34,025 21,089

Net cash from investing activities

-27,809 -18,139 9,670

Net cash from financing activities

15,377 -16,537 -31,914

Change in the balance of cash

504 -652 -1,155

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Net cash flows in 2015 amounted to PLN -652 thou.

Net cash flows from operating activities amounted to PLN 34,025 thou. The greater value of cash flows as in

the previous year was significantly affected by a greater level of non-trade receivables.

Within the investing activities there was an excess of expenditures over inflows mainly in relation to the

implementation of the replacement and repair investments.

Within the financing activities the greatest impact on the cash flows had the repayment of drawn loans.

2.4 Loans and borrowings drawn

In 2015, Libet paid the loan instalments in accordance with the schedules to the loan agreements

being in force.

2.5 Loans and borrowings granted

Not applicable

2.6 Suretyships, guarantees, off-balance sheet items

Not applicable

2.7 Financial instruments and financial risk management principles

Apart from long-term investments described in note 5, loans described in note 14 and cash and cash

equivalents, the Company possessed no other significant financial instruments as at 31 December

2015.

2.8 Assessment of financial resources management

The liquidity risk is a risk consisting in problems with settling by the Company its financial liabilities

when due. The goal of the Company is to guarantee, to the highest possible extent, that its liquidity is

always kept on the level allowing for settling the liabilities when due, incurring no unacceptable losses

or a negative impact on the Company's reputation.

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2.9 Principles of presenting selected data in foreign currencies

PLN ‘000 EUR ‘000

Period of 12 months ended on 31.12.2015

Period of 12 months ended on

31.12.2014

Period of 12 months ended on 31.12.2015

Period of 12 months ended on 31.12.2014

SELECTED FINANCIAL DATA

I. Net revenue from sale of goods for resale 297,582 271,532 71,103 64,879

II. Operating profit (loss) 7,080 8,570 1,692 2,048

III. Profit (loss) before tax 6,063 4,967 1,449 1,187

IV. Net profit (loss) 7,127 3,260 1,703 779

V. Net cash flows from operating activities 34,025 12,936 8,130 3,091

VI. Net cash flows from investing activities -18,139 -27,809 -4,334 -6,645

VII. Net cash flows from financing activities -16,537 15,377 -3,951 3,674

VIII. Total net cash flows -652 504 -156 120

XV. Number of shares 50,000,000 50,000,000 50,000,000 50,000,000

XVI. Profit (loss) per ordinary share (PLN / EUR) 0.14 0.07 0.03 0.02

Selected financial data relating to the financial standing

PLN ‘000 EUR ‘000

state as at state as at state as at state as at

31.12.2015 31.12.2014 31.12.2015 31.12.2014

IX. Total assets 393,591 390,371 92,342 91,587

X. Liabilities and provisions for liabilities 290,254 291,295 68,098 68,342

XI. Non-current liabilities 79,167 85,884 18,574 20,150

XII. Current liabilities 111,313 96,018 26,116 22,527

XIII. Equity 103,338 99,077 24,245 23,245

XIV. Share capital 500 500 117 117

Application for conversion of EUR exchange rates 31.12.2014 31.12.2013

Average exchange rate of the period 4.1852 4.1852

Exchange rate of the last reporting day 4.2623 4.2623

Financial data was converted to EUR according to the following principles:

− particular items of assets and liabilities according to average exchange rates announced as at 31.12.2015 and 31.12.2014 by the National Bank of Poland (Table 252/A/NBP/2015, Tab. 252/A/NBP/2014),

− particular items of the profit and loss statement and cash flows according to exchange rates constituting the arithmetic average of average exchange rates published by the National Bank of Poland as at the last day of each ended month, falling within reporting periods of 01.01.2015 – 31.12.2015 and 01.01.2014 – 31.12.2014. Particular items of the statement of comprehensive income and cash flows according to exchange rates constituting the arithmetic average of average exchange rates published by the National Bank

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of Poland as at the last day of each ended month, falling within reporting periods of 01.01.2015 – 31.12.2015 and 01.01.2014 – 31.12.2014

3 OTHER INFORMATION

3.1 Significant agreements

Loan agreement with BZ WBK and SGB described in par. 2.4. and current reports

Loan agreement with mBank S.A. described in par. 2.4. and current reports

Property lease agreement in Warsaw by 7A, Elektronowa street

Usable area lease agreement in Wrocław, by 5, Powstańców Śląskich street.

Lease agreement with Tomasz Jaworski

Property lease agreement in Cracow by Makuszyńskiego street

Production service agreement with a subsidiary, Libet 2000.

Loan agreement for a subsidiary, Libet 2000.

The aforementioned agreements were described in detail in the Prospectus and current reports.

3.2 Transactions with related parties

In the period covered with this report Libet S.A. did not conclude any significant transactions with its

affiliates on other than market terms. Significant transactions within the group were described in the non-

consolidated financial statements.

3.3 Issuance of securities

In 2015 the Company did not issue any securities.

3.4 Purchase of treasury shares

The Company did not purchase any treasury shares in 2015 and is not planning to purchase them in 2015.

3.5 Forecast realisation

The Company did not publish any projections of results.

3.6 Litigation

As at 31 December 2015 and as the date of publication of this report the Company was not a party to any

significant (i.e. affecting the Company's result) arbitration or court proceedings.

3.7 Untypical events and factors

Not applicable

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3.8 Changes in the entity management methods

In the period covered with this statement there were no changes in the fundamental management methods

both in the Company and in the Capital Group.

3.9 Agreements with people managing the entity

The Company did not conclude any separate agreements with managers relating to compensation on their

resignation or dismissal from the position held with no important reason.

3.10 Remuneration of managing and supervising people

Details relating to the remuneration of the Management Board and Supervisory Board are to be found in

note 31 to the financial statements of the Company for 2015.

3.11 Equity based compensation plans

Not applicable

3.12 Shares held by managing and supervising people

Members of the Management Board of Libet S.A. directly hold 5,000 (five thousand) shares of the Company,

and members of the Supervisory Board of Libet S.A. do not directly hold any shares on the Company.

Members of the Board, Thomas Lehmann and Ireneusz Gronostaj and Member of the Supervisory Board Jerzy

Józef Gabrielczyk indirectly control, via an entity controlled jointly by them, 15,028,619 shares of the

Company, which constitutes 30.06% of the share capital of the Company. Until the date of publication of the

report the above mentioned situation did not change.

3.13 Agreements affecting changes in the shareholding

The Company holds no information on the concluded agreements, as a result of which

any changes may occur in the future in the percentage of shares held by existing shareholders.

3.14 Employee share plan control systems

In 2015 there were no employee share plans in the Company.

3.15 Description of rules for nominating and recalling members of the management board and their

rights, in particular the right to decide on the issue or redemption of shares,

According to the rules specified in the legal regulations relating to the functioning of joint stock companies, in

particular provisions relating to the commercial companies code and the Company’s statute.

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3.16 Description of amendments to the statute or articles of association of the issuer,

Amendment to the Statute according to the rules of the commercial companies code.

3.17 A general meeting and its key powers, and a description of rights of shareholders and the manner of their exercising, in particular those arising from the regulations of the general meeting, if such rules were adopted, provided that the information in this regard do not arise directly from the law.

According to the rules of operations and competence provided for in the legal regulations. The Rules of the General Meeting regulate the technical and procedural issues and have no impact on the powers / rights of shareholders which result from the law and the Statute.

3.18 Information relating to the audit of the financial statements

On 27 May 2015 the Supervisory Board of the Company adopted a resolution regarding selection of Deloitte

Audyt Spółka z o.o. sk as an entity authorised to audit financial statements. Details relating to the remuneration

for the audit are presented in note 44 to the financial statements of the Company which is part of the annual

report of the Company for 2015.

4 CORPORATE GOVERNANCE PRINCIPLES

4.1 Applied principles of corporate governance

Libet S.A. adopted for application the principles of corporate governance published in "Best Practices of WSE

Listed Companies" the document published in full on http://www.corp-gov.gpw.pl/lad_corp.asp.

4.2 System of internal control within reporting

The Company's Board is responsible for the system of internal control and efficiency of its functioning in the

process of preparation of financial statements. Having in mind the reliability of prepared financial statements

the Company implemented and actively develops the system of internal control and risk management. The

system covers e.g. the following areas:

Controlling

Accounting with reporting and consolidation,

Projections and financial analyses.

Within the system of internal control and risk management there are many organisational solutions and

procedures and corporate standards implemented guaranteeing the efficiency of the performed control and

identification and eliminating the risks. These include e.g.:

standardisation of the accounting policy, principles of reporting and accounting recording,

application of a structured model of financial reporting for internal and external needs,

clear division of duties and competences of financial services and medium and senior level

managers,

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cyclicality and formalisation of the process of verification and plan updating,

having financial statements audited and reviewed by an independent auditor,

implementation of the IFS company IT platform common for all the Group Companies.

The technical supervision over the process of preparation of financial statements and periodic reports of the

Company is performed by the Financial Director acting as the Vice-President of the Board. The organisation of

works connected with the preparation of annual and interim financial statements is the duty of the

Company's financial department. The Company has been monitoring the changes required by external

regulations and rules relating to the requirement of the stock exchange reporting on a continuous basis and

prepares for their implementation much in advance. Each month, having closed the accounting books, a

report is prepared containing the management information which presents the key financial data and

operating ratios of particular business segments. The Management Board, along with the managerial staff,

analyses and discusses the Company's results. Pursuant to the legal regulations being in force the Company

has its financial statements audited (reviewed) by an independent auditor. The selection of the auditor is

made by the Supervisory Board from among renown audit companies, guaranteeing high standards of

services and professional independence. Conclusions from the audit (review) are presented by an auditor to

the Company's Management Board and the Audit Committee, and then published in the opinion and report

of the certified auditor.

4.3 Significant shareholders

As at 31.12.2015 and until the publication of this report, the share of significant shareholders in the share

capital and in votes is presented in the table below:

Shareholder's name or company name Number of

shares % in share capital

Number of votes

Share in the total number of votes at

GM

Glaspin Consultants Limited and Lybet Limited 15,028,619 30.06% 15,028,619 30.06%

LEGG MASON funds 7,708,344 15.42% 7,708,344 15.42%

NATIONALE-NEDERLANDEN OFE 6,165,109 12.33% 6,000 000 12.00%

OFE PKO BP Bankowy 4,016,782 8.03% 4,016,782 8.03%

PZU "Złota Jesień" OFE 2,000,000 4.00% 2,000,000 4.00%

Other Shareholders 15,081,146 30.16% 15,246 255 30.49%

Total 50,000,000 100% 50,000,000 100%

4.4 Holders of shares carrying special control rights

There are no securities granting special control rights in relation to the Company.

4.5 Voting right limitation

The Company's shares do not entail any limitations relating to exercising the voting right.

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4.6 Limitations relating to transfer of titles to shares

The Company's shares do not entail any limitations relating to transfer of the title to shares.

4.7 Composition of the Management Board and the Supervisory Board

The Management Board's composition as at 31 December 2015 was as follows:

Thomas Lehmann - President of the Board

Ireneusz Gronostaj - Member of the Board

In the period from 01 January 2016 until the date of publication of these annual financial statements the composition of the

Management Board did not change.

As at 31 December 2014 and until 29 September 2015, the composition of the Supervisory Board was as follows:

Jerzy Gabrielczyk - Chairman of the Supervisory Board

Sławomir Bogdan Najnigier - Member of the Supervisory Board,

Heinz Geenen - Member of the Supervisory Board,

Tomasz Marek Krysztofiak - Member of the Supervisory Board,

Andrzej Bartos - Member of the Supervisory Board.

On 29 September 2015 Mr. Andrzej Bartos resigned from the function of a Member of the Supervisory Board.

As at 30 September 2015 and until 30 October 2015, the composition of the Supervisory Board was as follows:

Jerzy Gabrielczyk - Chairman of the Supervisory Board

Sławomir Bogdan Najnigier - Member of the Supervisory Board,

Heinz Geenen - Member of the Supervisory Board,

Tomasz Marek Krysztofiak - Member of the Supervisory Board,

On 30 October the Extraordinary General Shareholders Meeting nominated Mr. Piotr Łyskawa and Mr. Zbigniew Rogóż into

the composition of the Supervisory Board.

As of 30 October 2015, as at 31 December 2015 and as at the publication date of this report, the composition of the

Supervisory Board was as follows:

Jerzy Gabrielczyk - Chairman of the Supervisory Board

Sławomir Bogdan Najnigier - Member of the Supervisory Board,

Heinz Geenen - Member of the Supervisory Board,

Tomasz Marek Krysztofiak - Member of the Supervisory Board,

Piotr Łyskawa - Member of the Supervisory Board,

Zbigniew Rogóż - Member of the Supervisory Board.

18

STATEMENT OF THE MANAGEMENT BOARD ON THE RELIABILITY OF THE FINANCIAL STATEMENTS

The Board of Libet S.A. represents that according to its best knowledge the annual financial statements for

2015 and comparative data were prepared in accordance with the accounting principles in force and that they

truly, reliably and clearly represent the asset and liabilities and financial position of Libet S.A., and its financial

result. The Board of Libet S.A. also represents that the annual report of the Management Board on operations

includes a true image of the developments and achievements and position of the Company, including the

description of fundamental threats and risks.

STATEMENT OF THE MANAGEMENT BOARD ON THE SELECTION OF THE ENTITY AUTHORISED TO

AUDIT

The Board of Libet S.A. represents that the entity authorised to audit financial statements performing the audit

of the annual financial statements of the Company for 2015 was selected in accordance with legal regulations

and that the entity and certified auditors reviewing the statements satisfied the conditions necessary for

expression of an unbiased and independent opinion on the audited annual financial statements, pursuant to

legal regulations and professional standards being in force.

Thomas Lehmann Ireneusz Gronostaj

President of the Management Board Member of the Management Board