Additional information to condensed consolidated financial statements for the period from 1 January 2008 till 31 December 2008

Transcription

1 Additional information to condensed consolidated financial statements for the period from 1 January This additional information contains both stand-alone financial results of PROCHEM S.A. (PROCHEM, the Company, the Issuer) and consolidated financial data of the PROCHEM S.A. Capital Group (Prochem Group, the Group). Establishment of the Company and the principal object of its activity Prochem S.A. (hereinafter referred to as the Issuer, Prochem or the Company ) with its registered office in Warsaw, ul. Powązkowska 44c is entered into the National Court Register (KRS) under the number The core activity of the Company in accordance with the Polish Classification of Activities (PKD) is specified under the 7420A symbol architectural and engineering activities and related technical consultancy. According to the classification of the Warsaw Stock Exchange the Company is classified in the construction sector. Prochem S.A. is the parent company of the capital group. The parent company Prochem SA was created as a result of a transformation of a state-owned enterprise Przedsiębiorstwa Projektowania i Realizacji Inwestycji Przemysłu Chemicznego Prochem. The notarial deed and articles of association were signed on 1 October The basis for the presentation and preparation of the financial statements The Issuer s financial statements and comparative financial data do not contain consolidated data due to the fact that the Company has no organisational units which prepare stand-alone financial statements. No business combinations occurred during the period for which the financial statements were prepared. The condensed consolidated financial statements of the PROCHEM SA Capital Group and the condensed financial statements of PROCHEM SA for four quarters of 2008 and a similar period of the comparative year were prepared in accordance with the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS). The condensed consolidated financial statements as of 31 December 2008 were prepared under the going concern assumption for the foreseeable future and a statement is made that there are no circumstances indicating any threats to the ability of the Issuer and capital group entities to continue as a going concern. The following procedures were applied at the preparation of the consolidated financial statements of Prochem S.A. Capital Group: Data of subsidiaries were stated in the financial statements with the application of the acquisition accounting method which consists in combining financial statements of the parent company and subsidiaries by adding up each item of assets, liabilities, equity, revenues and costs. Shares in associates were valued in the consolidated financial statements under the equity method. Consolidated subsidiaries and associates were included in the consolidated financial statements starting from the date control over them was acquired by the parent company. The goodwill of subordinated entities is the excess of the cost of the acquisition of financial assets by the parent company over the market value of net assets of the subordinated entity, pro rata to the share acquired in the equity of that entity. The negative goodwill of subordinated entities is the excess of the market value of net assets of a 2008 till 31 December

2 subordinated entity over the cost of the acquisition of financial assets incurred by the parent company, pro rata to the share acquired in the equity of that entity. As of the date of the acquisition of a subsidiary and associate (acquisition of control), assets, liabilities and contingent liabilities of a subsidiary are valued at the fair value. Subsidiaries sold during the financial year are consolidated until the date of the sale. Minority interests are reported at the value attributable to them. If a loss attributable to a minority shareholder exceeds the minority interest in the equity of that subsidiary, the excess of losses and further losses are charged to majority interests. If at a later time a subsidiary reports profits, those profits are allocated in full to majority interests until losses attributable to minority interests are offset. The PROCHEM S.A. Group treats transactions with minority shareholders as transactions with external entities. Profit or loss on a sale of shares to minority shareholders is presented in the profit and loss account. A purchase of shares from minority shareholders results in goodwill being the difference between the amount paid and the value of acquired shares in net assets of a subsidiary. Associates are considered to be entities in which Prochem holds between 20% and 50% of the total number of votes in deciding bodies or it may exert significant influence on their financial and operating policy in other manner. Investments in associates are valued under the equity method and are initially recognised at the acquisition cost. The goodwill of an associate recognised on the acquisition date and reduced by any impairment allowances is reported in the balance sheet. The share in the profit or loss of an associate is reported in the profit and loss account. If a share in the loss of associate is equal to or exceeds the share of the Prochem Group in that entity, the Group does not recognise further losses unless it undertook to do so. Unrealised gains between the Group and an associate are eliminated to the level of the Group s share in the associate. The cost of acquisition of shares in associates is subject to adjustments with any effects of changes in the fair value of net assets, attributable to the value of the share held from the acquisition date to the date of the financial statements as well as with effects of identified impairment. The following adjustments and eliminations were applied in the presented condensed consolidated financial statements: Eliminations: - shares held by the parent company against the share capital of subsidiaries, - inter-company receivables and payables, and any other settlements of a similar nature, between the consolidated entities, - revenues and costs of inter-company purchase and sale transactions conducted within the capital group, Adjustments: - gains or losses which arose from business transactions conducted between consolidated entities. The condensed consolidated financial statements of the Group are presented in Polish zloty ( PLN ), which is the functional currency and presentation currency. Transactions denominated in foreign currencies are initially stated at the currency foreign exchange rate of the National Bank of Poland applicable on the transaction date. Balance sheet items of assets and liabilities denominated in foreign currencies are valued at the average foreign exchange rate of the National Bank of Poland applicable on the balance sheet date. Gains and losses resulting from the settlement of these transactions and the balance sheet valuation of assets 2008 till 31 December

3 and liabilities denominated in foreign currencies are recognised in the profit and loss account. Items of the financial statements are split into short-term and long-term items (current and noncurrent) in accordance with IAS 1. Adopted accounting principles Tangible fixed assets are recognised in accordance with IAS 16. Tangible fixed assets are initially measured at the cost of acquisition or manufacturing cost. The principles of the measurement subsequent to the initial recognition: Land, buildings and structures are carried at a revalued amount, being its fair value at the date of revaluation, determined by experts, less subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value will be determined by experts on a regular basis every two years. Other tangible fixed assets are carried at the acquisition cost or manufacturing cost, increased by potential costs of improvements and decreased by accumulated depreciation and accumulated impairment losses. The value of fixed assets earmarked for liquidation, decommissioned due to changes in the technology or other reasons are revalued by recording an impairment write-down. An impairment write-down is charged to other operating expenses. Tangible fixed assets classified as assets held for sale are recognised in accordance with IFRS 5. Intangible assets are recognised in accordance with IAS 38. An intangible asset is measured at the acquisition cost less amortisation charges and impairment losses. Tangible fixed assets and intangible assets are depreciated/amortised. The Company records amortisation or depreciation write-downs for a fixed asset and intangible assets by consistently and methodically spreading its initial value over a specific useful life of the asset. Subsequent expenditure on fixed assets is recognised at its carrying amount if it is probable that future economic benefits associated with those assets will flow to the company and this cost can be measured reliably. All other costs of repairs and maintenance of fixed assets are recognised in the profit and loss account in reporting periods in which they were incurred. Land and construction in progress is not depreciated. Gains and losses on disposal of fixed assets are determined by comparing revenues from sales with the carrying amount of a particular fixed asset and are recognised in the profit and loss account. Leases Leased assets are recognised at the amount determined as at the beginning of a lease. Each lease fee is divided into a part constituting a liability and a financial part. The liability is reported in the balance sheet under the Other liabilities item. Financial expenses are recognised in the profit and loss account. Tangible fixed assets being the object of a lease are depreciated throughout their expected useful lives. Investments Investments in subsidiaries, associates or joint ventures are recognised in accordance with IAS 39 upon the initial recognition a financial asset is measured at fair value through profit or loss. Shares in other entities are measured at the acquisition cost less impairment losses. As of 31 December 2008 the parent company, PROCHEM SA, performed an impairment test for shares held in particular entities. The test did not identify any reasons requiring a recognition of an till 31 December 2008

4 impairment write-down. Investment properties are initially measured at acquisition cost or manufacturing cost, taking into account transaction costs. Subsequent to initial recognition, all investment properties are measured at fair value and a gain or loss resulting from the change in the fair value is recognised in the profit and loss account. Current assets Inventories this item comprises materials, goods for resale, semi-finished products and work in progress. Inventories are measured at the lower of acquisition cost, manufacturing cost or net realisable value. The cost is determined with the use of the FIFO first in first out method. Loans are created when the company transfers funds directly to a debtor without intending to introduce its receivable into trading. Loans are recognised as current assets if their maturities do not exceed 12 months from the balance sheet date. Loans with maturities over 12 months from the balance sheet date are reported in fixed assets. Receivables are initially recognised at fair value (originally booked amounts) and subsequently measured at the amortised cost with the use of effective interest rate, taking into account an impairment write-down. An impairment write-down for receivables is recorded if there is objective evidence that the company will not receive all due amounts resulting from original conditions of receivables and it is recognised in the profit and loss account under the other expenses item. The amount of a write-down is the difference between the carrying amount of receivables and the present value of estimated future cash flows, discounted with the effective interest rate. Cash and cash equivalents include cash in hand and cash at bank, bank term deposits with the original maturity of up to three months as well as financial assets at fair value through profit or loss which meet the requirement of the cash equivalent definition. Cash and cash equivalents are valued at their nominal value. Cash equivalents classified as financial assets are measured at fair value through profit or loss. The fair value is determined on the basis of market quotations as of each balance sheet date. Short-term liabilities are recognised at originally invoiced amounts at the amount payable. Long-term liabilities are valued at their amortised cost using the effective interest rate. Payments of dividends to Company s shareholders are recognised as a liability in the Company s financial statements upon the adoption of a relevant resolution at a General Meeting of Company s Shareholders. Provisions are calculated at a justified and reliably estimated amount. Provisions are recognised for the Group s actual (legal or constructive) obligation arising from past events and if it is probable that an outflow of resources will be required to settle this obligation and the amount of that obligation can be reliably estimated. Employee benefits the Group pays contributions under an obligatory pension scheme which depend on the amount of gross salaries paid, in accordance with applicable laws. PROCHEM Group has no other pension schemes. In order to determine the present value of future liabilities in respect of retirement severance pay and related staff costs, an actuarial valuation is performed. Equity and other assets and liabilities are recognised at the nominal value, of which: Equity the share capital is reported at the nominal value of issued and registered shares. Reserve capital is comprised of share premium, annual appropriations of net profit and appropriations from the result of revaluation of fixed assets in previous years till 31 December 2008

5 Revenues from sales include fair value of revenues from sales of services and goods for resale. Revenues from construction services are measured in accordance with IAS 11 Construction contracts. Revenue from the performance of unfinished construction service, covered by the contract, performed as of the balance sheet date is recognised in proportion to the stage of completion of the service. The degree of completion of a service is measured in terms of the share of costs incurred from contract effective date until the determination date of revenue in total costs of such service. The correctness of methods adopted for determination of the degree of service completion and expected total costs and revenues from the performance of the service is verified as of the end of each quarter. Income tax tax charges comprise current corporate income tax and a change in the deferred tax provisions or assets. Current tax liabilities are determined on the basis of currently applicable tax laws and taxable income calculated. Restatement of financial statements The consolidated financial statements of the Prochem Capital Group and condensed stand-alone financial statements of PROCHEM SA for the period from 1 January till 31 December 2008 are comparable with the data in the financial statements for the period from 1 January till 31 December A list of adjustments is presented in the reconciliation tables below. Adjustments relate to: recording local tax in Hungary by the Issuer for 2006, which was paid in 2008 retained profit (loss) (PLN 320 thousand); settlement of income tax on the activity conducted in Hungary, which was paid to the Hungarian Tax Office in 2008 retained profit (loss) PLN 138 thousand; adjustment of the settlement of discounts granted to an investor in 2004 and 2005, which pursuant to a court verdict constitute within the meaning of VAT regulations a rebate granted to an investor and not a financial agency service retained profit (loss) PLN 130 thousand. PROCHEM SA Liabilities As of Adjustment Balance after adjustment as of Revaluation reserve Retained profit (loss) Total equity Other liabilities Total short-term liabilities TOTAL LIABILITIES Liabilities As of Adjustment Balance after adjustment as of Liabilities Equity Revaluation reserve till 31 December

6 Retained profit (loss) Equity Total equity Short-term liabilities Other liabilities Total short-term liabilities TOTAL LIABILITIES Selected financial data containing key items of the condensed financial statements (also translated into EUR) Net revenues from sales and profit denominated in PLN and the cash flow statement were translated into EUR at the exchange rate determined as the arithmetic mean of average exchange rates published by the President of the National Bank of Poland as of the last day of each month as follows: for four quarters of 2007 PLN/EUR for four quarters of 2008 PLN/EUR Balance sheet data were translated at the average exchange rate published by the President of the National Bank of Poland as of the date of the financial statements which as of the balance sheet date was: PLN/EUR as of 31 December 2007 PLN/EUR as of 31 December till 31 December

7 SELECTED FINANCIAL DATA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Four quarters of 2008 (for the period from till ) in PLN thousands Four quarters of 2007 (for the period from till ) Four quarters of 2008 (for the period from till ) Four quarters of 2007 (for the period from till ) in EUR thousands Continuing operations Revenues Gross profit (loss) on sales Profit on continuing operations before income tax and financial expenses Profit (loss) before taxation Net profit (loss) of which attributable to: Shareholders of the Parent Company Minority shareholders Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Total net cash flows Total assets Total long-term assets Total current assets (short-term) Equity of the Parent Company Minority capital Total equity Total long-term liabilities Total short-term liabilities Weighted average number of shares (in units) Net book value per ordinary share of the Parent Company (in PLN) Profit (loss) per ordinary share of the Parent Company (in PLN) SELECTED FINANCIAL DATA CONDENSED FINANCIAL STATEMENTS OF PROCHEM S.A. Continuing operations Four quarters of 2008 (for the period from till ) Four quarters of 2007 (for the period from till ) in PLN thousands Four quarters of 2008 (for the period from till ) Four quarters of 2007 (for the period from till ) in EUR thousands Revenues Gross profit (loss) on sales Profit on continuing operations before tax and financial expenses

8 Net profit (loss) Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Total net cash flows Total assets Total long-term assets Total current assets (short-term) Total equity Total long-term liabilities Total short-term liabilities Weighted average number of ordinary shares (in units) Net book value per ordinary share (in PLN) Profit (loss) per ordinary share (in PLN) Brief description of significant achievements or failures of the Issuer in the period covered by the report together with a list of the most important events related to them. According to the current report of 29 October, the Management Board of Prochem S.A. made a decision to suspend negotiations with shareholders and the management of Chemgineering Holding AG regarding preliminary conditions of a merger of the companies which were conducted pursuant to a letter of intent signed in May The parties decided that the recent instability on capital and currency markets does not foster the determination of the shares exchange ratio. At the same time, the uncertainty regarding the development of the economic situation on the markets on which the companies operate hinders the estimation of synergies after the merger. Simultaneously, Prochem S.A. and Chemgineering Holding AG decided to continue the cooperation on acquiring orders for design services and implementing investment projects in the pharmaceutical industry in the country and abroad allowing to use the expertise of both companies. 2. Description of factors and events, in particular untypical ones, which materially affect the financial results achieved. In the fourth quarter of 2008 no untypical transactions were executed which would have a material impact on the financial results achieved. In the fourth quarter of 2008 the following events had a material impact on results achieved by the Issuer: a) it established deferred tax provisions at PLN 44 thousand and reversed deferred tax provisions of PLN 60 thousand established in previous periods, b) it utilised deferred tax assets of PLN 405 thousand and established deferred tax assets at PLN 486 thousand, c) it established provisions for receivables at PLN thousand and reversed provisions for receivables at PLN 36 thousand, d) it established provisions for the settlement of contracts with a Hungarian company which suspended its activity due to the financial crisis in October 2008 at PLN thousand, 8

9 e) it established provisions for accrued costs incurred on completed contracts at PLN thousand, f) it reversed a holiday accrual at PLN 87 thousand, g) it reversed a provision for retirement and disability pension benefits at PLN 8 thousand. In the capital group in the fourth quarter of 2008: 1. income tax assets increased by PLN 752 thousand, income tax provision also increased by PLN thousand, 2. provisions for receivables were established at PLN thousand and provisions for receivables at PLN 67 thousand were reversed, 3. provisions were established at PLN thousand for the settlement of contracts with a Hungarian company which suspended its activity due to the financial crisis in October 2008, 4. provisions for accrued costs incurred on completed contracts at PLN thousand were established, 5. a holiday accrual at PLN 87 thousand was reversed, 6. a provision for retirement and disability pension benefits at PLN 380 thousand was established. 3. Explanations concerning the seasonal or cyclical nature of the Issuer s activity in the presented period. The issue of the seasonal or cyclical nature does not apply to the Issuer. 4. Information on issue, redemption and repayment of debt and equity securities. On 9 and 10 January 2008 the Issuer repurchased own shares in order to redeem them. The average price of repurchased shares was PLN per share. The face value of one share is PLN 1 and the total face value of repurchased shares is PLN 3 000, which constitutes 0.08% of the equity and 0.08% of votes at the general meeting. On 21 June 2008 the General Meeting of Shareholders of PROCHEM SA adopted a resolution on redeeming the above own shares of the Issuer. Following the redemption, the Company s share capital amounts to PLN thousand and the number of votes from all shares at the General Meeting of Shareholders is On 22 and 23 December 2008 the Issuer repurchased own shares in order to redeem them. The average unit price of shares was PLN 20 per share. The face value of purchased shares is PLN On 13 February 2009 the Issuer repurchased own shares in order to redeem them. The average unit price of shares was PLN per share. The face value of purchased shares is PLN As of the date of this information Prochem SA has own shares repurchased for redemption, which constitutes 0.13% of the share capital and entitles to votes at the General Meeting of Shareholders, i.e. 0.13%. The Issuer did not issue or repay debt and equity securities. 5. Information on dividend paid (or declared), in total and per one share, broken down into ordinary and preference shares. On 21 June 2008 the General Meeting of Shareholders of Prochem SA adopted a resolution on a 9

10 payment of dividend from 2007 profit in the amount of PLN thousand, i.e. PLN 0.70 per one share (ordinary or preference share). The date of determining the right to dividend 7 July 2008, the payment was made on 24 July Specification of events which occurred after the date of the condensed quarterly financial statements which are not disclosed in the financial statements and which may materially impact future financial results of the Issuer. No events occurred after the balance sheet date which might materially impact future financial results of the Issuer. 7. Information on changes in contingent liabilities or contingent assets which occurred since the end of the last financial year. Total value of guarantees and sureties granted by the Capital Group companies on their behalf as of 31 December 2008 is PLN thousand, of which: a) own bank performance guarantees and warranties PLN thousand b) advance repayment guarantee PLN thousand c) guarantee for a promissory note for the performance of a contract PLN thousand d) guarantee for a loan granted to subsidiary PLN 240 thousand e) payment guarantee PLN 883 thousand f) bid bond PLN 420 thousand. The above amount includes sureties and guarantees granted by the Issuer in the amount of PLN thousand, of which: a) own bank performance guarantees and warranties PLN thousand b) advance repayment guarantee PLN thousand c) guarantee for a promissory note for the performance of a contract PLN thousand d) payment guarantee PLN 883 thousand e) bid bond PLN 420 thousand. Since the end of the last financial year the Capital Group recorded a decrease in contingent liabilities by PLN thousand, in the case of the Issuer the decrease in liabilities was PLN thousand. As of 31 December 2008 total contingent receivables of the Capital Group in respect of performance guarantees and sureties received amounted to PLN thousand and they all concerned contingent receivables of the Issuer. Since the end of the last financial year contingent receivables increased by PLN thousand. 8. Description of the organisation of the Capital Group, with the list of consolidated companies. Issuer s Capital Group In addition to the data of the parent company, Prochem S.A., the consolidated financial statements prepared as of 31 December 2008 and for the period from 1 January till 31 December 2008 contain the data of the following companies: Fully consolidated subsidiaries: Prochem Inwestycje Sp. z o.o. with its registered office in Warsaw direct subsidiary (100.0%); 10

11 Irydion Sp. z o.o. with its registered office in Warsaw direct subsidiary (100.0%); PRO-INHUT Sp. z o.o. with its registered office in Dąbrowa Górnicza indirect subsidiary (98.0%); Pro-Organika Sp. z o.o. with its registered office in Warsaw direct subsidiary (91.4%); Prochem Serwis Sp. z o.o. with its registered office in Warsaw indirect subsidiary (90.0%); PREDOM Sp. z o.o. with its registered office in Wrocław indirect subsidiary (81.1% share in capital and profit, 69.4% share in votes); ASI Polska Sp. z o.o. with its registered office in Gliwice indirect subsidiary (90.0%); Prochem Zachód Sp. z o.o. with its registered office in Słubice direct subsidiary (60.0%); PROTADE Sp. z o.o. with its registered office in Gdynia indirect subsidiary (72%) (ASI Polska Sp. z o.o. a subsidiary in 90.0%, holds 80.0%) ELPRO Sp. z o.o. Kraków indirect subsidiary (77.1%, including a 54.1% share in a 50% share of Elektromontaż Kraków) Elmont Inwestycje Sp. z o.o. Kraków indirect subsidiary (77.1%, including a 54.1% share in a 50% share of Elektromontaż Kraków) Elektromontaż Kraków S.A. direct subsidiary (54.1%) the company prepares consolidated financial statements which contain data of two 100% subsidiaries: 1. Elektromontaż Kraków Zakład Produkcji Urządzeń Sp. z o.o. with its registered office in Kraków, 2. ELMONT-POMIARY Sp. z o.o. with its registered office in Kraków 3. and associates: ELPRO Sp. z o.o. and Elmont Inwestycje Sp. z o.o. IRYD Sp. z o.o. with its registered office in Warsaw indirect subsidiary (100%) ATUTOR Integracja Cyfrowa Sp. z o.o. with its registered office in Warsaw indirect subsidiary (a 97.2% share is held by Prochem Inwestycje Sp. z o.o., a 100% subsidiary). Associates consolidated under the equity method: PRO PLM Sp. z o.o. with its registered office in Warsaw indirect associate (a 50% share is held by Prochem Inwestycje Sp. z o.o., a 100% subsidiary), PROMIS Sp. z o.o. with its registered office in Warsaw indirect associate (a 45% share in the voting right and 97.6% share in the share capital is held by Prochem Inwestycje Sp. z o.o., a 100% subsidiary), ITEL Sp. z o.o. Gdynia 35.2% share, TEOMA S.A. with its registered office in Warsaw indirect associate (a 19.5% share, of which a 7.5% share is held by Prochem Inwestycje Sp. z o.o., a 100% subsidiary). The consolidation is based on the principle of not consolidating companies which do not conduct the activity financial data of those companies do not distort the information on financial results of the Prochem S.A. Group. Companies not consolidated: Prochem RPI Sp. z o.o. with its registered office in Warsaw subsidiary Predom Projektowanie Sp. z o.o. with its registered office in Wrocław subsidiary 11

12 Pasterex sp. z o.o. with its registered office in Warsaw associate. Consolidated subsidiaries and associates were included in the consolidated financial statements starting from the date control over them was acquired by the parent company. 9. Description of effects of changes in the structure of the business entity, including as a result of a business combination, acquisition or sale of Capital Group companies, long-term investments, demerger, restructuring and discontinuation of activity. On 6 May 2008 Prochem Inwestycje Sp. z o.o., a 100% subsidiary of the Issuer, acquired 40% of shares in Atutor Integracja Cyfrowa Sp. z o.o. as a result of a purchase and sale transaction. On 6 May 2008 the Extraordinary General Meeting of Shareholders of ATUTOR INTEGRACJA CYFROWA Sp. z o.o. adopted a resolution on a capital increase of the company from PLN to PLN by creating 255 shares with the value of PLN each notarial deed Repertory No A4114/2008. Shares were acquired by PROCHEM INWESTYCJE for a cash consideration. The equity investment is a long-term investment. On 3 November 2008 PROCHEM SA received the information that the court registered the increased share capital of ATUTOR INTEGRACJA CYFROWA Sp. z o.o. an indirect subsidiary of PROCHEM SA. Currently, the share capital of that company is PLN The share of PROCHEM Inwestycje sp. z o.o. in the share capital and votes of ASI Polska Sp. z o.o. is 97.18%. Atutor Integracja Cyfrowa Sp. z o.o. changed its status from an associate to a subsidiary and was fully consolidated as of the date of the status change. Pursuant to the conditions of the share sale agreement of 30 May 2008, PROCHEM Inwestycje Sp. z o.o. purchased 100 (one hundred) shares in PKI Predom sp. z o.o. with the face value of PLN 50 (say: fifty) each at the price of PLN 800 (say: eight hundred PLN ) each, i.e. the total price of PLN (say: eighty thousand PLN). Post transaction, the share of PROCHEM S.A. in the share capital of the subsidiary, PKI Predom Sp. z o.o., is 81.09%. On 23 July 2008 the ownership of shares of ASI Polska Sp. z o.o. was transferred pursuant to the provision of the agreement on a sale of shares in the company of 20 May 2008 under which PROCHEM Inwestycje Sp. z o.o., a 100% subsidiary of the Issuer, sold 67 shares in ASI with the face value of PLN 500 each. The purchase price for shares was agreed mutually and was PLN per each share, which totals PLN Post transaction, the share of PROCHEM Inwestycje sp. z o.o. in the share capital and votes of ASI Polska Sp. z o.o. is 90%. In the fourth quarter of 2008 pursuant to the provisions of a share sale agreement of 6 November 2008 PROCHEM S.A. purchased (one thousand) shares of Elektromontaż Kraków S.A. with the face value of PLN 5 (say: five PLN) each for the total amount of PLN (say: thirty thousand PLN). Post transaction, the share of PROCHEM S.A. in the share capital and votes of Elektromontaż Kraków S.A. is 54.14%. Altogether, pursuant to share sale agreements concluded in 2008 the Issuer s share in the share capital of ELEKTROMONTAŻ KRAKÓW S.A increased PROCHEM SA purchased from minority shareholders shares of the subsidiary in total with the face value of PLN 5 each for the total amount of PLN 110 thousand (say: one hundred and ten thousand PLN). The value of purchased shares constitutes a 1.41% share in the share capital and votes. As a result of those transactions, the share in the share capital and votes increased and as of the date of the financial statements it is 54.14% On 22 December 2008 a subsidiary, Advanced Solutions International Polska Sp. z o.o. in Gliwice (a subsidiary of Prochem Inwestycje), sold all shares held by it in Qtech Sp. z o.o. with its registered office in Gdańsk to the president of the management board of Qtech, Mr Łukasz 12

13 Litwin. The sale of shares with the face value of PLN was effected on the basis of a trilateral mutual offset of liabilities on 22 December The value of the transaction was PLN , profit on the transaction was PLN 77 thousand. Post-balance sheet events: On 24 February 2009 the Issuer signed a share sale agreement pursuant to which it will acquire shares in a subsidiary with the face value of PLN 5 each for the total amount of PLN (say: thirty thousand PLN). The ownership of shares will be transferred to the Issuer on the date of the payment for shares, i.e. on 10 March After the transaction, the share of PROCHEM S.A. in the share capital and votes of Elektromontaż Kraków S.A. will be 54.45%. 10. Opinion of the Management Board regarding the viability of achieving previously published result forecasts for the given year, in the light of results presented in the quarterly report versus projected results. According to the latest revised forecast of financial results for the Prochem S.A. Capital Group published in the report No 27 of 2008 dated 13 November 2008 revenues from sales of services and goods were to amount to approximately PLN 330 million with net profit of approximately 14 million PLN. The Management Board of Prochem SA informs that for four quarters of 2008 the Prochem S.A. Capital Group achieved revenues from sales of services and goods of PLN 365 million, which are 10.6% higher than projected, and net profit of PLN 13 million, which is lower than projected by 7.1%. A decrease in the projected net profit was caused mainly by the level of provisions established: for the settlement of contracts with a Hungarian company which due to the financial crisis suspended its activity in October 2008 in the amount of PLN thousand, provisions for accrued costs incurred on completed contracts at PLN thousand and provisions for receivables of PLN thousand. The revenues achieved were influenced by December sales when a part of construction works was completed and sold. 11. Information on shareholders having directly or indirectly through subsidiaries at least 5% of the total number of votes at a general meeting of the Issuer as of the date of submission of a quarterly report, stating the number of shares held by those companies, their percentage share in the share capital, the number of votes resulting from them and their percentage share in total number votes at a general meeting as well stating changes in the ownership structure of significant stakes of the Issuer in the period since submission of previous quarterly report. According to the information possessed by the Company, as of the date of this report the following shareholders have at least 5% of votes at a general meeting of shareholders: description number of shares held % of votes in total number of votes 1. Prochem Holding Sp. z o.o Steve Tappan ING Towarzystwo Funduszy Inwestycyjnych SA, of which ING Parasol Specjalistyczny Fundusz Inwestycyjny Otwarty 4. Union Investment Towarzystwo Funduszy Inwestycyjnych S.A PTE PZU SA Millennium Towarzystwo % of share capital 13

14 Funduszy Inwestycyjnych S.A. Since the submission of the previous report there were no changes in the ownership structure of significant stakes of the Issuer. 12. Statement of changes in the number of Issuer s shares or rights to shares (options) held by persons managing and supervising the Issuer, in accordance with the information possessed by the Issuer, since the submission of the previous quarterly report. As of the date of the quarterly report the following members of the Management Board and the Supervisory Board of the Company owned shares of PROCHEM SA: - Jarosław Stępniewski ; - Marek Kiersznicki ; - Krzysztof Marczak 9 013; - Andrzej Karczykowski ; - Marek Garliński ; - Steven G. Tappan Since the submission of the previous report there were no changes in the ownership structure of Issuer s shares. 13. Information on pending proceedings before court, a body competent for arbitration proceedings or a public administration body, including the information on: a) proceedings concerning liabilities or receivables of the Issuer or its subsidiary the value of which constitutes at least 10% of Issuer s equity, stating: the subject of the proceedings, the value of the subject of dispute, date of commencement of proceedings, parties to instituted proceedings and the position of the Issuer, b) two or more proceedings concerning liabilities and receivables the total value of which constitutes at least 10% of Issuer s equity respectively, stating the total value of proceedings separately in the group of liabilities and receivables together with the position of the Issuer in those proceedings, in respect of the largest proceedings in the group of liabilities and the group of receivables stating their subject, value of the subject of a dispute, date of commencement of proceedings and parties to instituted proceedings. PROCHEM SA is still a party to court proceedings concerning a settlement of a contract discontinued on 10 November 2005 on the General Implementation of the Investment for the investment task named ST-1 Adamowo-Baza Surowcowa Plebanka Pipeline signed with PERN SA. PROCHEM SA filed a suit with the court for a payment of PLN thousand in respect of a final settlement of the contract. PERN SA filed a statement of counter claim against the Company for a payment of PLN thousand in respect of a contract settlement. On 18 January 2008 the Regional Court in Warsaw issued a verdict on the above case pursuant to which it dismissed claims under the suit filed by Prochem S.A. (GRI Consortium) and also dismissed claims under the statement of counter claim filed by PERN Przyjaźń S.A. The grounds presented by the Court state that: The Court deemed that the claim for a payment by PERN Przyjaźń S.A. of PLN thousand was justified in principle and simultaneously the Court decided that this liability was not due yet. The Court decided that there was no basis to acknowledge claims under the statement of counter claim filed by PERN Przyjaźń S.A. 14

15 After reading the written grounds for the verdict, Prochem S.A. filed an appeal against that verdict in the part in which the Regional Court deemed the claim for a payment by PERN Przyjaźń S.A. of PLN thousand as premature and not due yet and in the part in which Prochem S.A. demanded that PERN Przyjaźń S.A. take over liabilities in respect of a return of guarantee deposits to contractors/suppliers. PERN Przyjaźń S.A. also appealed against the verdict in which the Regional Court dismissed its claim filed under the statement of counter claim. On 26 August 2008 the Court of Appeal in Warsaw issued a verdict on the appeal lodged by Prochem S.A. against the verdict of the Regional Court of 18 January 2008 in the case against PERN S.A. for a payment of PLN in respect of a final settlement of the Contract for General Implementation of the Investment for the investment task named ST-1 Adamowo- Baza Surowcowa Plebanka Pipeline. Pursuant to the above verdict, the Court of Appeal decided to transfer the case to the Regional Court for resolution by means of a settlement of the above mentioned contract. The grounds presented by the Court of Appeal show that, among others, the claim of Prochem S.A. concerning the contract settlement is not premature, as previously decided by the Regional Court. In addition, the Court of Appeal stated that the contract should be settled on the basis of the provisions of the contract. This opinion is consistent with the position of Prochem S.A. adopted in the proceedings. The value of the above proceedings exceeds 10% of Issuer s equity. Apart from the above, the value of other proceedings separately for the group of liabilities and the group of receivables does not exceed 10% of Issuer s equity. 14. Information on executing by the Issuer or its subsidiary one or numerous transactions with related parties if the value of those transactions (the total value of all transactions executed since the beginning of the financial year) exceeds a PLN equivalent of EUR if they are not typical and routine transactions executed at arm s length between related parties and their nature and conditions result from the current operating activity conducted by the Issuer or its subsidiary, excluding transactions with a related party executed by the Issuer being a fund, stating their total value and, in respect of an agreement of the largest value, stating the information on: a) a company with which the transaction was executed, b) relations between the Issuer or its subsidiary and a company being a party to the transaction, c) the subject of the transaction, d) material conditions of the transaction, in particular taking into account financial conditions and stating special conditions specified by the parties that are distinctive for that agreement, in particular those differing from conditions generally used in a particular type of agreements. In the fourth quarter of 2008 transactions (loans granted) were executed with directly and indirectly related parties whose total value exceeded a PLN equivalent of EUR The above transactions were based on market prices and in the opinion of the Management Board they were typical and routine transactions. Loans granted in the fourth quarter: PROCHEM S.A. granted to a subsidiary, Irydion sp. z o.o., a long-term loan of PLN 500 thousand. The interest rate for the loan was determined at the level of 6-month WIBOR at 15

16 the end of each calendar year. The repayment date is 31 December The total value of loans granted by the Issuer to the subsidiary, Irydion, since the beginning of the year (between 1 January 2008 and 31 December 2008) was PLN thousand. The total value of loans granted by the Issuer to an indirect subsidiary, IRYD sp. z o.o. since the beginning of the year (between 1 January 2008 and 31 December 2008) was PLN 170 thousand. Irydion sp. z o.o., a subsidiary, granted a long-term loan of PLN 500 thousand to an indirect subsidiary, Elmont Inwestycje sp. z o.o. The interest rate for the loan was determined at the level of 6-month WIBOR at the end of each calendar year. The repayment date is 31 December The total value of loans granted by Irydion Sp. z o.o. to the subsidiary, Elmont Inwestycje Sp. z o.o., since the beginning of the year (between 1 January 2008 and 31 December 2008) was PLN thousand. Elektromontaż Kraków SA., a subsidiary, granted a long-term loan of PLN 500 thousand to an indirect subsidiary, Elmont Inwestycje sp. z o.o. The interest rate for the loan was determined at the level of 6-month WIBOR at the end of each calendar year. The repayment date is 31 December The total value of loans granted by Elektromontaż Kraków SA to the subsidiary, Elmont Inwestycje Sp. z o.o., since the beginning of the year (between 1 January 2008 and 31 December 2008) was PLN thousand. The total value of all loans granted by PROCHEM S.A. to the subsidiary, Irydion sp. z o.o., is PLN thousand and it exceeds 10% of Issuer s equity. 15. Information on granting by the Issuer or its subsidiary sureties for a loan or borrowing or on granting guarantees in total to one company or a subsidiary of that company, if the total value of existing sureties or guarantees constitutes an equivalent of at least 10% of Issuer s equity. No Capital Group company granted to other company any guarantees or sureties of the above value for a loan or borrowing. 16. Other information which in the opinion of the Issuer is material for the assessment of its situation concerning its staff, assets, financial standing and financial result and their changes as well as information which is material for the assessment of the Issuer s ability to fulfil obligations. Low debt and high financial liquidity allow Capital Group Companies to service their liabilities promptly and as they arise, therefore they are a reliable partner in business relations. 17. Information on factors which in the opinion of the Issuer will impact results achieved by the Issuer in the perspective of at least the next quarter. Results of subsequent quarters will depend mainly on effects achieved on the implementation of contracts acquired by Capital Group Companies as well as on the outcome of offers submitted by them on a sale of their services. The success of developer projects which have been commenced by the Capital Group will be also important in subsequent years. 18. Reporting by industry and geographical sectors. The breakdown of revenues of the Capital Group was performed on the basis of the industry division, which is a basic division, while a geographical division is supplementary. Sales structure by geography. Export sales for four quarters of 2008 amount to 0.7%. Market segments 16

17 The activity of the Capital Group in the fourth quarter of 2008 focused on engineering and construction services, including: a) industrial facilities and installations, b) public utility and office facilities. The structure of revenues from sales by main segments of the construction market is as follows: Items Net revenues from sales of finished goods, goods for resale and materials, of which: four quarters of 2007 four quarters of 2008 in PLN thousands (%) in PLN thousands (%) ) from sales of services, including: a) engineering and construction services b) lease of office space c) maintenance services d) other revenues ) from sales of goods for resale Jarosław Stępniewski President of the Management Board date (forename and surname) position/function signature Marek Kiersznicki Member of the Management Board date (forename and surname) position/function signature Krzysztof Marczak Member of the Management Board date (forename and surname) position/function signature Signature of a person keeping books of account Krzysztof Marczak Chief Financial Officer date (forename and surname) position/function signature 17