LIBET : REPORT OF THE MANAGEMENT BOARD ON GROUP’S OPERATIONS FOR THE PERIOD FROM 01 JANUARY TO 31 DECEMBER 2015

d8c8fe47-b073-4bc2-8eed-dd7b0ee35f5c.pdf LIBET GROUP‌‌‌‌‌ REPORT OF THE MANAGEMENT BOARD ON GROUP'S OPERATIONS‌‌‌‌‌‌ FOR THE PERIOD FROM 01 JANUARY TO 31 DECEMBER 2015‌

Wrocław, 18 March 2016‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

Report of the Management Board on the operations for the year ended on 31 December 2015

Contents

1. OPERATIONS OF THE GROUP 4

2. Basic information on the Parent Company and the Group 4

3. Products and services 4

4. Sales markets 5

5. Structure of Capital Group 5

6. Significant events 5

7. Risk factors and threats 7

8. Predicted development of the entity 8

9. Investment plans 8

10. FINANCIAL POSITION 9

12. Revenue and financial result of the Group 9

13. Group's asset position 10

14. Group's cash flows 11

15. Loans and borrowings drawn 12

16. Loans and borrowings granted 12

17. Suretyships, guarantees, off-balance sheet items 12

18. Financial instruments and financial risk management principles 12

19. Assessment of financial resources management 12

20. Selected data in foreign currencies 13

1. OTHER INFORMATION 13

2. Significant agreements of the parent company 13

3. Transactions with related parties 14

4. Issuance of securities 14

5. Purchase of treasury shares 14

6. Forecast realisation 14

7. Litigation 14

8. Untypical events and factors 14

9. Changes in the entity management methods 14

10. Agreements with people managing the entity 14

11. Remuneration of managing and supervising people 15

12. Equity based compensation plans 15

13. Shares held by managing and supervising people 15

14. Agreements affecting changes in the shareholding 15

15. Employee share plan control systems 16

16. Information relating to the audit of the financial statements 16

17. CORPORATE GOVERNANCE PRINCIPLES 16

18. Applied principles of corporate governance 16

19. System of internal control within reporting 17

20. Significant shareholders 18

21. Holders of shares carrying special control rights 18

22. Voting right limitation 18

23. Limitations relating to transfer of titles to shares 18

24. Composition of the Management Board and the Supervisory Board of the Parent Company 18

25. Management Board's organisation 19

26. Description of amendments to the statute or articles of association of the Issuer 20

27. 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, 20

28. STATEMENT OF THE MANAGEMENT BOARD ON THE RELIABILITY OF THE FINANCIAL STATEMENTS 20

    STATEMENT OF THE MANAGEMENT BOARD ON THE SELECTION OF THE ENTITY AUTHORISED TO AUDIT 20

29. OPERATIONS OF THE GROUP

30. Basic information on the Parent Company and the Group

    Predecessor entity of Libet S.A. (further on referred to as the "Company"), Cydia Sp. z o.o. company (from 01 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 capital 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. 4.3 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.

    As at the date of preparation of the consolidated financial statements the Issuer's Group (further on referred to as "Group") comprised Libet S.A. as the parent company and 2 subsidiaries, Libet 2000 Sp. z o.o. and BaumaBrick Sp. z o.o. BaumaBrick does not conduct any significant operations.

    The financial statements of the Group 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 in accordance with the requirements of the International Accounting Standards (described in detail in note 2 of the of the consolidated financial statements).

31. Products and services

    Libet Group is a leading Polish producer of concrete surface materials produced in the technology of vibropressing. Products are offered in three segments:

    • premium segment

    • standard segment

    • industrial segment

32. 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 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