11.1.1.  Composition of the Management Board

As at January 1st 2014, the Issuer’s Management Board was composed of:

1. Mr Mariusz Zawisza − President,
2. Mr Jerzy Kurella – Vice-President of the Management Board, Trade,
3. Mr Jarosław Bauc – Vice-President, Finance,
4. Mr Zbigniew Skrzypkiewicz – Vice-President, Exploration and Production,
5. Mr Andrzej Parafianowicz – Vice-President, Corporate Affairs.

On April 3rd 2014, the PGNiG Supervisory Board appointed Mr Waldemar Wójcik as Member of the PGNiG Management Board elected by the employees, for the joint three-year term of office commencing December 30th 2013.

On June 18th 2014, the Supervisory Board unanimously resolved to suspend Mr Andrzej Parafianowicz from duties as Vice-President of the PGNiG Management Board for Corporate Affairs pending an investigation concerning comments he made regarding the Company which have been released into the public domain.

On August 4th 2014, Mr Andrzej Parafianowicz resigned as PGNiG Management Board Member.

On December 29th 2014, the Supervisory Board removed Mr Jerzy Kurella from the PGNiG Management Board and the position of Vice-President for Trade.

As at December 31st 2014, the Issuer’s Management Board was composed of:

1. Mr Mariusz Zawisza − President,
2. Mr Jarosław Bauc – Vice-President, Finance,
3. Mr Zbigniew Skrzypkiewicz – Vice-President, Exploration and Production,
4. Mr Waldemar Wójcik – Vice-President.

Ms Violetta Jasińska-Jaśkowiak was the Company’s Commercial Proxy throughout 2014.

11.1.2.  Rules governing the operation of the Management Board

The Rules of Procedure for the Management Board are available on the Issuer’s website at www.pgnig.pl in the ‘Corporate Governance’ section.

The Management Board is composed of two to seven members. The number of Management Board members is determined by the Supervisory Board, being the body authorised to appoint individual Management Board members, or the entire Management Board. Management Board members are appointed for a joint term of three years. As long as the State Treasury remains a shareholder of the Issuer and the Issuer’s annual average headcount exceeds 500, the Supervisory Board appoints as a Management Board member one person elected by the employees, to serve for the Management Board’s term of office.

The Management Board manages the affairs of the Issuer and represents the Issuer in or out of court. The powers and responsibilities of the Management Board provide for management of all of the Issuer’s affairs, other than those which law or the Issuer’s Articles of Association reserve for the General Meeting or the Supervisory Board. The Management Board is headed by the President of the Management Board.

The responsibilities of the Management Board particularly include:

1. Preparation of annual business plans, including investment plans, the strategy for the Company and the PGNiG Group, as well as long-term strategic plans, and their submission to the Supervisory Board for approval;
2. Submission to the minister competent for matters pertaining to the State Treasury and the minister competent for economy, upon their request, of detailed reports on projects undertaken with a view to ensuring the country’s energy security;
3. Submission to the minister competent for matters pertaining to the State Treasury, within two months from the closing of the General Meeting approving the financial statements and the Directors’ Reports of the Company’s subsidiaries and related companies, of annual reports on the matters listed below, with an assessment of their content in the context of Poland’s energy security:
   1. Implementation of strategic investment projects or involvement in investment projects resulting in lasting or temporary deterioration of the economic efficiency of that subsidiary’s or related company’s operations, but that are necessary to ensure Poland’s energy security,
   2. Entry by the operator or owner of a distribution system or an interconnection gas pipeline into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a transmission network, distribution network, interconnection gas pipeline or direct gas pipeline, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   3. Entry by the operator or owner of a storage facility into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a storage facility, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   4. Entry by the owner of a generation unit or a cogeneration unit into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a generation unit or cogeneration unit, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   5. Entry into an obligational relationship with a foreign entity for hydrocarbon exploration, appraisal or production, within the meaning of the Polish Geological and Mining Law, if the value of the obligational relationship exceeds the PLN equivalent of EUR 5,000,000,
   6. with the proviso that items a) to e) above do not apply to information on credit agreements or maintenance services, including overhauls, geophysical, drilling and well services and projects, nor to services or deliveries under such agreements or projects,
   7. item e) does not apply to information on the activities of a foreign subsidiary’s contracts and agreements concluded as part of the day-to-day management of the organisational structure, including employment contracts, use of assets where the related liabilities are equal to or less than EUR 5,000,000, and day-to-day administrative expenses;
4. Submission of relevant information to the minister competent for matters pertaining to the State Treasury, within 21 days from the closing of the General Meeting of a subsidiary or related company which addressed the following matters:
   1. Implementation of strategic investment projects or involvement in investment projects resulting in lasting or temporary deterioration of the economic efficiency of that subsidiary’s or related company’s operations, but that are necessary to ensure Poland’s energy security,
   2. Entry by the operator or owner of a distribution system or an interconnection gas pipeline into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a transmission network, distribution network, interconnection gas pipeline or direct gas pipeline, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   3. Entry by the operator or owner of a storage facility into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a storage facility, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   4. Entry by the owner of a generation unit or a cogeneration unit into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a generation unit or cogeneration unit, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
   5. Entry into an obligational relationship with a foreign entity for hydrocarbon exploration, appraisal or production, within the meaning of the Polish Geological and Mining Law, if the value of the obligational relationship exceeds the PLN equivalent of EUR 5,000,000,
   6. Approval of annual budgets, with detailed information on resolutions adopted by the General Meeting of the subsidiary or related company on the matters specified in items a) to f), with an assessment of their implications for the country’s energy security,
   7. the above does not apply to information on credit agreements and maintenance services, including overhauls, geophysical, drilling and well services and projects, as well as services or deliveries under such agreements or projects,
   8. item e) does not apply to information on the activities of a foreign subsidiary’s contracts and agreements concluded as part of the day-to-day management of the organisational structure, including employment contracts, use of assets where the related liabilities are equal to or less than EUR 5,000,000, and day-to-day administrative expenses;
5. Preparation of economic and financial reviews of the Company and its subsidiaries acting as distribution or storage system operators, in the form defined by the minister competent for matters pertaining to the State Treasury, and their submission to the minister competent for matters pertaining to the State Treasury and the minister competent for economy by the end of the month in which a periodic report was published at the Warsaw Stock Exchange.

The Management Board submits to the Supervisory Board the following documents for assessment: financial statements for the preceding financial year, with the auditor’s opinion; the Directors’ Report on the Issuer’s operations in the preceding financial year, and a proposal for distribution of profit or coverage of loss for that financial year. These documents should be submitted without the Management Board being called upon to do so, and with sufficient time for the Supervisory Board to assess them before they are presented to the General Meeting.

Declarations of will may be made on behalf of the Issuer by two Management Board members acting jointly, or one Management Board member acting jointly with a commercial proxy. Any issues which fall beyond the scope of the day-to-day management of the Issuer’s affairs require adoption of a resolution.

In particular, the Management Board adopts resolutions on the following issues:

1. Adoption of the Management Board’s rules of procedure;
2. Adoption of organisational rules for the Issuer’s business;
3. Establishment and closure of branches;
4. Appointment of commercial proxies;
5. Division of powers between the Management Board members, provided that a relevant resolution of the Management Board must be approved by the Supervisory Board;
6. Appointment and removal from office of members of the governing bodies of the company’s subsidiaries or related companies, to the permitted extent of the company’s powers;
7. Contracting and extending loans and contracting credit facilities, except where the Articles of Association require the Supervisory Board’s approval of or opinion on the transaction;
8. Adoption of annual business plans, including investment plans, subject to the approval of the Supervisory Board;
9. Adoption of the strategy for the Company and the PGNiG Group and long-term strategic plans, subject to the approval of the Supervisory Board;
10. Assumption of contingent liabilities, including extension by the Issuer of guarantees and sureties, as well as issuance of promissory notes, except where the Articles of Association require the Supervisory Board’s approval or opinion;
11. Acquisition or disposal of non-current assets, including property, perpetual usufruct rights or interests in property, with a value equal to or higher than the PLN equivalent of EUR 50,000, except where the Articles of Association require the Supervisory Board’s approval or a resolution of the General Meeting;
12. Issues to be considered by the Supervisory Board or the General Meeting upon the Management Board’s request;
13. Approval of detailed reports on the performance of projects undertaken with a view to ensuring the country’s energy security which are submitted to the minister competent for matters pertaining to the State Treasury and the minister competent for the economy, upon their request;
14. Formation of another company, subscription for, acquisition of or disposal of shares in another company, including definition of the terms and procedures for their disposal, with a value not exceeding the PLN equivalent of EUR 2,000,000, provided that such transaction does not require approval by the General Meeting;
15. Donations, release of debtors from their debt obligations and entry into other agreements beyond the scope of business defined in the Issuer’s Articles of Association;
16. Execution of sale or purchase transactions and contracts or other disposal agreements, as well as the making of declarations of will and assumption of liabilities in respect of: gas fuels (including LNG and LNG regasification), crude oil, natural gasoline, other oil and gas derivatives, electricity, heat, emission allowances for greenhouse gases or other substances; property rights under certificates of origin for electricity, hard coal, lignite, biomass, ancillary control services, other derivative rights based on gas fuels or electricity; other financial instruments and commodities, provision of transmission capacities for electricity, performance of balancing and dispatching services or provision of transmission capacities for gas fuels with a value exceeding 20% of the Issuer’s share capital (however, in the case of contracts with a value exceeding the PLN equivalent of EUR 100,000,000, the opinion of the Supervisory Board is required, except where the Articles of Association specifically require the Supervisory Board’s approval);
17. Entry into legal transactions other than those listed in items 1 to 16, if their value exceeds the PLN equivalent of EUR 400,000.

In those matters which do not require adoption of a Management Board resolution, each Management Board member attends to the responsibilities assigned to them on an individual basis. During Management Board meetings, each Management Board member has the duty to brief the other Management Board members on their material decisions and the results of their supervisory work, in particular with respect to supervision of the Issuer’s business units, in accordance with the division of powers between the Management Board members.

Management Board meetings are held as needed. Each Management Board member may submit a request to the President of the Management Board (or acting President) to call a Management Board meeting in connection with matters requiring an urgent decision by the Management Board or for the purpose of presenting information on matters of significance to the Issuer. The Chairperson of the Supervisory Board is also entitled to request that a Management Board meeting be called, by providing the President of the Management Board with a written agenda for the meeting. In addition, the Chairperson of the Supervisory Board has the right to demand of the President of the Management Board that certain items be placed on the agenda of a Management Board meeting.

In accordance with the Articles of Association of PGNiG S.A., in justified cases votes may be cast by written ballot or by means of remote communication, with the minutes of such voting to be approved at the next meeting of the Management Board.

The Supervisory Board defines the rules and amounts of remuneration for Management Board members, unless applicable mandatory provisions of law state otherwise.

11.2.   Activities of supervisory bodies – Supervisory Board

11.2.1.  Composition of the Supervisory Board

As at January 1st 2014, the PGNiG Supervisory Board was composed of:

1. Mr Wojciech Chmielewski – Chairman of the Supervisory Board,
2. Mr Marcin Moryń – Deputy Chairman of the Supervisory Board,
3. Mr Mieczysław Kawecki – Secretary of the Supervisory Board,
4. Ms Agnieszka Chmielarz – Member of the Supervisory Board,
5. Mr Józef Głowacki – Member of the Supervisory Board,
6. Mr Janusz Pilitowski – Member of the Supervisory Board,
7. Ms Ewa Sibrecht-Ośka – Member of the Supervisory Board,
8. Ms Jolanta Siergiej – Member of the Supervisory Board.

On March 26th 2014, the Extraordinary General Meeting of PGNiG S.A. appointed Mr Andrzej Janiak as member of the Company’s Supervisory Board.

In connection with the expiry of the Supervisory Board’s term of office, the Annual General Meeting held on May 15th 2014:

- removed the following persons from the PGNiG Supervisory Board as of May 15th 2014:

1. a) Ms Agnieszka Chmielarz,
2. b) Mr Wojciech Chmielewski,
3. c) Mr Józef Głowacki,
4. d) Mr Andrzej Janiak,
5. e) Mr Mieczysław Kawecki,
6. f) Mr Marcin Moryń,
7. g) Mr Janusz Pilitowski,
8. h) Ms Ewa Sibrecht-Ośka,
9. i) Ms Jolanta Siergiej,

and appointed the following persons to the Supervisory Board as of May 15th 2014:

1. a) Mr Wojciech Chmielewski,
2. b) Mr Sławomir Borowiec,
3. c) Mr Andrzej Janiak,
4. d) Mr Bogusław Nadolnik,
5. e) Mr Janusz Pilitowski,
6. f) Ms Agnieszka Trzaskalska,
7. g) Mr Ryszard Wąsowicz,
8. h) Ms Agnieszka Woś,
9. i) Ms Magdalena Zegarska.

On June 30th 2014, PGNiG received a letter of resignation from Ms Agnieszka Trzaskalska, whereby she resigned as member of the PGNiG Supervisory Board, without stating a reason, with effect from June 30th 2014.

On November 5th 2014, PGNiG received a letter of resignation from Mr Bogusław Nadolnik, whereby he resigned as member of the PGNiG Supervisory Board, without stating a reason, with effect from November 6th 2014.

As at December 31st 2014, the Supervisory Board consisted of seven members:

1. Mr Wojciech Chmielewski – Chairman of the Supervisory Board,
2. Ms Agnieszka Woś – Deputy Chairperson of the Supervisory Board,
3. Ms Magdalena Zegarska – Secretary of the Supervisory Board,
4. Mr Janusz Pilitowski – Member of the Supervisory Board,
5. Mr Sławomir Borowiec – Member of the Supervisory Board,
6. Mr Andrzej Janiak – Member of the Supervisory Board,
7. Mr Ryszard Wąsowicz – Member of the Supervisory Board.

The Supervisory Board’s term of office expires on May 15th 2017.

11.2.2.  Rules governing the operation of the Supervisory Board

The Supervisory Board operates in accordance with the rules set out in the Commercial Companies Code, the Articles of Association and the Rules of Procedure for the Supervisory Board. The Rules of Procedure for the Supervisory Board have been adopted by a Supervisory Board resolution and are available on the Issuer’s website at www.pgnig.pl in the ‘Corporate Governance’ section.

The Issuer’s Supervisory Board is composed of five to nine members appointed by the General Meeting. One Supervisory Board member should meet the independence criteria specified in the Articles of Association. As long as the State Treasury remains a shareholder of the Issuer, the State Treasury, represented by the minister competent for matters pertaining to the State Treasury, acting in this respect in agreement with the minister competent for economy, has the right to appoint and remove one member of the Supervisory Board. If the Supervisory Board is composed of up to six members, two members are appointed from among the candidates elected by the Issuer’s employees. If the Supervisory Board is composed of seven to nine members, three members are appointed from among the candidates elected by the Issuer’s employees.

Supervisory Board members are appointed for a joint term of office lasting three years.

The Supervisory Board exercises ongoing supervision of the Issuer’s activities in all areas of its operations, and presents its opinions on all matters submitted by the Management Board for consideration to the General Meeting. The powers and responsibilities of the Supervisory Board particularly include:

1. Assessment of the Directors’ Report on the Issuer’s operations and of the financial statements for the preceding financial year, in terms of their consistency with the accounting books, supporting documentation, and the actual state of affairs;
2. Assessment of the Management Board’s proposals concerning distribution of profit or coverage of loss;
3. Submission to the General Meeting of written reports on results of the activities referred to in items 1 and 2;
4. Assessment of the consolidated financial statements with respect to their consistency with the accounting books, supporting documentation, and the actual state of affairs, as well as assessment of the Directors’ Report on the Issuer’s operations, and reporting to the General Meeting on the results of these assessments;
5. Appointment of an auditor to audit the financial statements;
6. Approval of annual business plans, including investment plans;
7. Approval of the strategy for the Company and the PGNiG Group and long-term strategic plans;
8. Adoption of detailed rules governing the Supervisory Board’s operation;
9. Approval of the consolidated text of the Articles of Association, drawn up by the Issuer’s Management Board;
10. Approval of the Rules of Procedure for the Management Board;
11. Approval of the organisational rules for the Issuer’s enterprise;
12. Approval of the Management Board’s resolution on division of powers between the Management Board members;
13. Issue of opinions on all matters submitted by the Management Board for consideration to the General Meeting;
14. Issue of opinions on detailed reports concerning the performance of projects undertaken with a view to ensuring the country’s energy security, submitted by the Management Board to the minister competent for matters pertaining to the State Treasury and the minister competent for economy;
15. Issue of opinions on requests to be submitted to the shareholder State Treasury, represented by the minister competent for matters pertaining to the State Treasury, to approve: 1) any changes to the material provisions of existing trade agreements for import of natural gas to Poland, as well as the execution of new trade agreements, 2) any strategic investment projects or the Company’s involvement in investment projects which, permanently or temporarily, impair the economic efficiency of the Company’s business activities, but which are necessary to ensure Poland’s energy security;
16. Granting of approval to the Management Board for:
    1. Acquisition of non-current assets with a value falling between the PLN equivalent of EUR 500,000 and EUR 2,000,000, except where the transaction has been provided for in any annual business plans, including investment plans, long-term strategic plans and investment plans for development of the transmission system, previously approved by the Supervisory Board,
    2. Disposal of non-current assets with a value falling between the PLN equivalent of EUR 500,000 and EUR 1,000,000, except where the transaction has been provided for in any of the plans referred to in a) above, and approved by the Supervisory Board,
    3. Assumption of other liabilities whose value exceeds 20% of the Company’s share capital, except where the liability has been provided for in the plans referred to in item 6 and approved by the Supervisory Board, or arises from execution of or amendments to an agreement on provision of gas fuel transmission or distribution services to the Company,
    4. Execution of an agreement of the type discussed in Art. 19b of the Act on Commercialisation and Privatisation, dated August 30th 1996,
    5. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a transmission network, distribution network, interconnection gas pipeline or direct gas pipeline, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    6. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a storage facility, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    7. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a generation unit or cogeneration unit, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    8. Entry into an obligational relationship with a foreign entity for hydrocarbon exploration, appraisal or production, within the meaning of the Polish Geological and Mining Law, if the value of the obligational relationship exceeds the PLN equivalent of EUR 5,000,000,
    9. – with the proviso that items e) to h) above do not apply to credit agreements or maintenance services, including overhauls, geophysical, drilling and well services and projects, as well as services or deliveries under such agreements or projects,
    10. – item h) does neither apply to the activities of a foreign subsidiary pertaining to contracts and agreements concluded as part of day-to-day management of the organisational structure, including employment contracts, use of assets where the related liabilities are equal to or less than EUR 5,000,000, and day-to-day administrative expenses;
17. Appointment and removal of Management Board members;
18. Definition of rules and amounts of remuneration for Management Board members, unless applicable mandatory provisions of law state otherwise;
19. Suspension of Management Board members from their duties – on material grounds, and by an absolute majority of votes;
20. Delegation of Supervisory Board members to temporarily replace Management Board members unable to perform their duties;
21. Conduct of the qualification procedure referred to in Art. 19a of the Act on Commercialisation and Privatisation;
22. Granting of permission for establishment and closure of the Issuer’s foreign branches;
23. Granting of permission to Management Board members to accept positions in the governing bodies of other companies, where such permission is required by law;
24. Granting of approval for the Company to form another company with share capital exceeding the PLN equivalent of EUR 2,000,000, or to subscribe for, acquire or dispose of shares in another company with a value exceeding the PLN equivalent of EUR 2,000,000, including definition of the terms and procedure for such disposal. If a transaction requires approval by the General Meeting, the Supervisory Board only issues an opinion concerning the proposal;
25. Monitoring of the Issuer’s debt level;
26. Issue of opinions on Management Board recommendations for appointment or removal of the Issuer’s representatives on the management and supervisory boards of System Gazociągów Tranzytowych EuRoPol GAZ S.A. and submission of such recommendations for approval to the shareholder State Treasury, represented by the minister competent for matters pertaining to the State Treasury;
27. Issue of opinions on the exercise of voting rights by the Issuer’s representative at the General Meeting of System Gazociągów Tranzytowych EuRoPol GAZ S.A.;
28. Approval of how the Issuer’s representative should vote at the General Meetings of the distribution system operators, with respect to approval of the operators’ annual budgets;
29. Approval of how the Issuer’s representative should vote at the General Meetings of the distribution system operators, with respect to approval of the operators’ long-term strategic plans;
30. Approval of how the Issuer’s representative should vote at the General Meetings of the distribution system operators, with respect to:
    1. Amendments to a company’s articles of association,
    2. Increase or reduction of a company’s share capital,
    3. Merger, transformation or demerger of a company,
    4. Sale of a company’s shares,
    5. Sale and lease of a company’s business or organised part, or creation of proprietary interests therein,
    6. Dissolution and liquidation of a company,
    7. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a distribution network, interconnection gas pipeline or direct gas pipeline, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000, excluding credit agreements and maintenance services, overhauls, well services and projects, as well as services or deliveries under such agreements or projects;
31. Approval of how the Issuer’s representative should vote at the General Meetings of the storage system operators, with respect to:
    1. Amendments to a company’s articles of association,
    2. Increase or reduction of a company’s share capital,
    3. Merger, transformation or demerger of a company,
    4. Sale of a company’s shares,
    5. Sale and lease of a company’s business or organised part, or creation of proprietary interests therein,
    6. Dissolution and liquidation of a company,
    7. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a storage facility, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000, excluding credit agreements and maintenance services, overhauls, well services and projects, as well as services or deliveries under such agreements or projects;
32. Approval of how the PGNiG S.A. representative should vote at the General Meeting of a company in which the Company holds at least a 50% interest, or which owns a transmission network, distribution network, interconnection gas pipeline, direct gas pipeline, storage facility, or a generation or cogeneration unit (in the case of companies owning generation or cogeneration units – provided that it is engaged in energy trading activities within the meaning of the Polish Energy Law), subject to items 30 and 31, with respect to the following matters:
    1. Amendments to their articles of association,
    2. Increase or reduction in their share capital,
    3. Their merger, transformation or demerger,
    4. Sale of their shares,
    5. Disposal, lease or creation of limited property rights in their business or its organised part,
    6. Their dissolution and liquidation,
    7. Creation of a pledge or other forms of encumbrance over their shares,
    8. Obliging their shareholders to make additional contributions to equity,
    9. Issue of bonds/notes,
    10. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a transmission network, distribution network, interconnection gas pipeline or direct gas pipeline, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    11. Entry into an obligational relationship with a foreign entity in relation for the planning, analysis, construction, expansion or disposal of a storage facility, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    12. Entry into an obligational relationship with a foreign entity for the planning, analysis, construction, expansion or disposal of a generation unit or cogeneration unit, within the meaning of the Polish Energy Law, if the obligational relationship is related to infrastructure with a present value or – in the case of new infrastructure or infrastructure being planned – with an estimated value exceeding the PLN equivalent of EUR 500,000,
    13. Entry into an obligational relationship with a foreign entity for hydrocarbon exploration, appraisal or production, within the meaning of the Polish Geological and Mining Law, if the value of the obligational relationship exceeds the PLN equivalent of EUR 5,000,000,
    14. – with the proviso that items j) to m) above do not apply to credit agreements or maintenance services, including overhauls, geophysical, drilling and well services and projects, as well as services or deliveries under such agreements or projects,
    15. – item m) does not apply to a foreign subsidiary’s activities pertaining to contracts and agreements concluded as part of the day-to-day management of the organisational structure, including employment contracts, use of assets where the related liabilities are equal to or less than EUR 5,000,000, and day-to-day administrative expenses;
33. Issue of opinions on Management Board proposals for assumption of liabilities with a value exceeding the PLN equivalent of EUR 100,000,000.

Supervisory Board meetings are convened by the Chairperson or Deputy Chairperson of the Supervisory Board any time the Issuer’s interest so requires, but no less frequently than once every two months. Supervisory Board meetings are also convened at the request of a Supervisory Board member, or at the request of the Management Board. The Supervisory Board express its opinions exclusively in the form of resolutions. The Supervisory Board may adopt resolutions if at least half of all its members are present at a meeting, and all the members have been invited to participate. The Supervisory Board may only adopt resolutions on matters included in the agenda, which however can be amended if all members are present at a meeting and no member objects to the agenda being amended. The Supervisory Board adopts resolutions in an open vote by an absolute majority of votes. A secret vote is ordered at the request of a Supervisory Board member or when the issue put to vote concerns personnel matters. Members of the Management Board may be invited to participate in Supervisory Board meetings. In order to be valid, a resolution of the Supervisory Board on appointment of an auditor requires a favourable vote from a member of the Supervisory Board who meets the independence criteria defined in the Issuer’s Articles of Association. Except as specified in the Rules of Procedure for the Supervisory Board, the Supervisory Board may adopt resolutions by written ballot or by means of remote communication. Adoption of a resolution using any of these methods must be justified, and a draft resolution must be made available to all Supervisory Board members beforehand.

The Chairperson of the Supervisory Board is entitled to request that a Management Board meeting be called, by providing the President of the Management Board with a written agenda for the meeting. The Chairperson of the Supervisory Board may request of the President of the Management Board that certain matters be included in the agenda of a Management Board meeting. The Management Board must submit the following documents to the Supervisory Board for assessment: financial statements for the preceding financial year, with the auditor’s opinion; the Directors’ Report on the Issuer’s operations in the preceding financial year, and a proposal for distribution of profit or coverage of loss for that financial year. These documents should be submitted without the Management Board being called upon to do so, and with sufficient time for the Supervisory Board to assess them before they are presented to the General Meeting.

The Supervisory Board or its members delegated to perform certain supervisory functions independently are authorised to supervise all areas of the Issuer’s business, and in particular to examine all of the Issuer’s documents, demand that the Management Board and the Issuer’s employees produce reports and explanations, or review the Issuer’s assets.

The Supervisory Board may appoint standing or ad hoc committees (established as needed), to act as the Supervisory Board’s collegiate advisory and opinion-giving bodies. The Supervisory Board also has the right to seek opinions from legal counsels and to engage experts in relevant fields to provide opinions on matters within the Supervisory Board’s range of competences.

The amount of remuneration to be received by Supervisory Board members is set by the General Meeting, pursuant to the Act on Remuneration of Persons Managing Certain Legal Entities, dated March 3rd 2000 (Dz.U. No. 26, item 306, as amended).

For important reasons, the Supervisory Board may delegate individual members to perform certain supervisory functions independently for a specified term. A Supervisory Board member so delegated must submit written reports to the Supervisory Board on all actions taken.

11.3.   Committees

In 2014, there was one committee operating at the Company – the Audit Committee. The Audit Committee is composed of at least three members of the Issuer’s Supervisory Board.

In the period January 1st to December 31st 2014, the Audit Committee held five meetings and adopted five resolutions. In that time, the Committee did not adopt any resolutions by written ballot or by means of remote communication. At four of the meetings held, the Audit Committee met with the auditor and performed a review and assessment of the Company’s financial reporting system.

11.3.1.  Composition of the Audit Committee

As at January 1st 2014, the Audit Committee was composed of:

1. Ms Jolanta Siergiej – Deputy Chairman of the Audit Committee,
2. Mr Józef Głowacki – Member of the Audit Committee,
3. Mr Janusz Pilitowski – Member of the Audit Committee.

On April 23rd 2014, the PGNiG Supervisory Board appointed Mr Andrzej Janiak, meeting the independence criteria, as member of the Audit Committee.

On May 15th 2014, the Annual General Meeting of PGNiG S.A. removed from office all Supervisory Board members.

On August 7th 2014, the PGNiG Supervisory Board passed a resolution setting the number of Audit Committee members at four, and appointed the following persons to the Audit Committee: Ms Agnieszka Woś, Ms Magdalena Zegarska, Mr Andrzej Janiak and Mr Bogusław Nadolnik.

On August 11th 2014, the Audit Committee appointed Mr Bogusław Nadolnik as its Chairman.

On September 25th 2014, the PGNiG Supervisory Board passed a resolution setting the number of Audit Committee members at five.

On September 25th 2014, the PGNiG Supervisory Board appointed Mr Janusz Pilitowski as member of the Audit Committee.

On September 25th 2014, the Audit Committee appointed Mr Janusz Pilitowski as its Deputy Chairman.

On November 6th 2014, Mr Bogusław Nadolnik tendered his resignation from the PGNiG Supervisory Board.

As at December 31st 2014, the Audit Committee was composed of:

1. Mr Janusz Pilitowski – Deputy Chairman of the Audit Committee,
2. Ms Agnieszka Woś – Member of the Audit Committee,
3. Ms Magdalena Zegarska – Member of the Audit Committee,
4. Mr Andrzej Janiak – Member of the Audit Committee (independent member of the Supervisory Board).

As at December 31st 2014, the provision of the Rules of Procedure for the Supervisory Board’s Audit Committee stipulating that the Audit Committee should include at least one independent member was complied with.

11.3.2.  Rules governing the operation of the Audit Committee

The Audit Committee operates within the Supervisory Board as a standing committee, advising the Supervisory Board on matters for which the Board is responsible.

In accordance with the Rules of Procedure for the Supervisory Board’s Audit Committee, the Audit Committee is composed of at least three members of the Supervisory Board, including at least one member independent of the Issuer or entities materially related to the Issuer, who is appointed by the General Meeting under Par. 36.1 of the Articles of Association and is qualified in accounting and finance. The members of the Audit Committee are appointed by the Supervisory Board.

Meetings of the Audit Committee are held as needed, but at least once every quarter, and are convened by the Chairperson of the Committee. The Chairperson of the Audit Committee may invite other members of the Supervisory Board to an Audit Committee meeting, as well as members of the Issuer’s Management Board, the Issuer’s employees, or other persons whose participation in a given meeting is considered important to the performance of the Committee’s duties. The Audit Committee may adopt resolutions if at least a half of its members are present at a meeting and all the members have been properly invited. The Committee may adopt its resolutions by written ballot or by means of remote communication. Resolutions of the Audit Committee are adopted by a simple majority of votes cast. In the event of a tied vote, the Chairperson of the Audit Committee has the casting vote.

Every six months, the Audit Committee submits reports on its activities to the Supervisory Board. Each report is made available to the Issuer’s shareholders at the next General Meeting.

The responsibilities of the Audit Committee include, in particular:

1. Monitoring of the financial reporting process;
2. Checking of financial information presented by the Issuer for reliability;
3. Monitoring of internal control, internal audit and risk management systems for their effectiveness;
4. Monitoring of the audit/review process for financial statements by external auditors;
5. Issuing recommendations to the Supervisory Board on the selection, appointment, re-appointment and removal of an auditor of financial statements, as well as the terms and conditions of the auditor’s engagement;
6. Monitoring of the independence and objectivity of the auditor of financial statements;
7. Control of the nature and extent of services not related to audit or review of financial statements, but contracted from the auditor of financial statements;
8. Review of the external audit process’s effectiveness and monitoring of the response of the members of the Management Board and the Issuer’s employees to the external auditor’s recommendations;
9. Examining the reasons for termination of the agreement with an auditor of financial statements.