Management Report Towarzystwo Finansowe SKOK S.A. from Issuer activity for 2011

Transcription

1 Management Report Towarzystwo Finansowe SKOK S.A. from Issuer activity for 2011 Gdańsk, 26 th April 2012 Towarzystwo Finansowe SKOK S.A. with its registered office in Gdańsk at ul. Arkońska 11, entered into register of entrepreneurs kept by the District Court Gdańsk - Północ in Gdańsk 7 th commercial division under National Court Register number NCR Tax Identification Number NIP: share capital: PLN ,00 - fully paid in.

2 I. CHARACTERISTICS OF THE COMPANY Name (business name): Towarzystwo Finansowe SKOK S.A. Registered office: Gdańsk Address: ul. Arkońska 11, Gdańsk Telephone: (+48 58) Fax: (+48 58) Website: Financial statements for the period from 1 st January to 31 st December 2011 have been prepared in accordance with International Accounting Standards / International Financial Reporting Standards (IFRS) and related interpretations published in the form of European Commission regulations. Financial statements have been prepared assuming that Towarzystwo Finansowe SKOK S.A.(hereinafter the "Company", "Issuer", "CU Financial Society") shall continue to operate in the foreseeable future. At the date of this report there are no circumstances indicating a threat to continuation of Company's business. The functional currency and currency of presentation in the financial statements is the Polish Zloty (PLN). All figures in the financial statements are presented in thousands of PLN, unless indicated otherwise. 1. Business overview of the Company The main areas of activity of the Company are: issuing and servicing payment cards, management of cash dispenser networks: SKOK 24, ecard and Global Cash, authorization and settlement of cash transactions, software development services for financial institutions, serving banking and insurance products, services for telephone and Internet distribution channels; electronic banking; call centre, including conducting active marketing campaigns, telephone hotline, and recovery services; outsourcing services in provision of information technology infrastructure, maintenance and operation of software, regional service of users; support for operations and development of entities in the system of Cooperative Savings and Credit Unions (hereinafter the "CU") by providing them with comprehensive solutions and services in information technology; provides money transfer services in international trade, as a representative of Western Union. 2. Information about organizational or capital relations of the Issuer with other entities and identification of its main domestic and foreign investments (securities, financial instruments, intangible assets and real

3 property), including capital investments made outside its group of related entities and description of methods for their financing. MAIN SHAREHOLDER SKOK Holding S.a.r.l. At 31 st December 2011 SKOK Holding S.a.r.l. had shares in the Company, representing 32,35% of the share capital of the Issuer, which constituted 63,93% of the overall amount of votes at the ordinary meeting. Chairman of the Management Board of SKOK Holding S.à.r.l. also serves as Member of the Supervisory Board. Vice-Chairman of SKOK Holding S.a.r.l. also serves as Vice-Chairman of the Supervisory Boards of the Issuer. Cooperative Credit and Savings Union of Franciszek Stefczyk (hereinafter: "SKOK Stefczyka") At 31 st December 2011 SKOK Stefczyka had shares in the Company, representing 65,99% of the share capital of the Issuer, which constituted 32,78% of the overall amount of votes at the ordinary meeting. Chairman of the Management Board of SKOK Stefczyka is Secretary of the Supervisory Board of the Company. Chairman of the Supervisory Board of SKOK Stefczyka is a Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. Treasurer of the Supervisory Board of SKOK Stefczyka is Vice-Chairman of the Supervisory Boards of the Issuer and Vice-Chairman of SKOK Holding S.a.r.l. OTHER RELATED ENTITIES CU Management Society Sp. z o.o. SKA (Ltd) Limited Partnership (hereinafter: "TZ SKOK SKA") The Company has named shares of TZ SKOK SKA, representing 41,64% of the share capital of the TZ SKOK SKA. Chairman of the Supervisory Board of TZ SKOK SKA is Chairman of the Supervisory Board of ecard S.A., and Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. At the date of publication of the report it has 9,716,166 shares, representing 15.04% of the share capital of the Issuer. ecard S.A. ecard joint stock company is an entity in which the Chairman, Vice-Chairman and Member of the Management Board are the Chairman and two members of the Management Board of the Issuer.

4 Person acting as Vice-Chairman of the Supervisory Board of ecard also serves as Vice-Chairman of the Supervisory Boards of the Issuer and Vice-Chairman of SKOK Holding S.a.r.l. The person acting as Chairman of the Supervisory Board of ecard joint stock company also serves as a member of the Supervisory Board of the Issuer and Chairman of the Management Board of SKOK Holding S.a.r.l. Member of the Supervisory Board of ecard joint stock company, also acts as Secretary of the Supervisory Board of the Issuer and Chairman of the Management Board of Stefczyk Cooperative Savings and Credit Union. Cooperative Research Institute Labour Cooperative (hereinafter: "SIN SP") Chairman of the Management Board of SIN SP is a Member of the Supervisory Board of the Company and the Chairman of SKOK Holding S.à.r.l. Cooperative and Mutual Insurance Society (hereinafter:: "TUW SKOK") This entity is related due to the control by SKOK Holding S.a.r.l., which as at 31 st December 2011 had 86.81% shares in TUW SKOK. Therefore, TUW SKOK was under control of the same entity as the Issuer. Chairman of the Management Board of TUW SKOK is Vice-Chairman of the Management Board of SKOK Holding S.a.r.l. and Vice-Chairman of the Supervisory Boards of the Issuer. Chairman of the Supervisory Board of TUW SKOK is the Chairman of SKOK Holding S.a.r.l. and member of the Supervisory Board of the Issuer. Cooperative Life Insurance Society Joint Stock Company (hereinafter: "TU SKOK śycie") This entity is related due to the control by SKOK Holding S.a.r.l., which as at 31 st December 2011 had 73.93% shares in TU SKOK śycie. Therefore, TU SKOK śycie was under control of the same entity as the Issuer. Chairman of the Management Board of TU SKOK śycie is Vice-Chairman of the Supervisory Board of Issuer and Vice-Chairman of the Management Board of SKOK Holding S.à.r.l. Chairman of the Supervisory Board of TU SKOK śycie is a Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. Asekuracja Sp. z o.o. (Ltd.) The company is related because of the control by SKOK Holding S.a.r.l., which as at 31 st December 2011 had 100% shares in Asekuracja Sp. z o. o. (Ltd.) Therefore Asekuracja Sp. z o. o. (Ltd.) is an entity controlled by the same entity as the Issuer.

5 Chairman of Asekuracja Sp. z o. o. (Ltd.) is Vice-Chairman of the Supervisory Board of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. Chairman of the Supervisory Board of Asekuracja Sp. z o. o. (Ltd.) is a Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. Member of the Supervisory Board of Asekuracja Sp. z o. o. (Ltd.) is Chairman of the Supervisory Board of the Issuer. Cooperative Savings and Credit Unions Investment Fund Society Joint Stock Company (hereinafter: ("TFI SKOK") Chairman of TFI SKOK is Chairman of the Supervisory Board of the Issuer. Chairman of the Supervisory Board of TFI SKOK is Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. Vice-Chairman of the Supervisory Board of TFI SKOK is Vice-Chairman of the Supervisory Boards of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. SKOK Family Tours Sp. z o.o. (Ltd.) The company is related because of the control by SKOK Holding S.a.r.l., which as at 31 st December 2011 had 100% shares in SKOK Family Tours sp. z o. o. (Ltd.) Stefczyk Leasing TZ SKOK Sp. z o.o. SKA ( Stefczyk Leasing ) The company is related because of the control by SKOK Stefczyka, which as at 31 st December 2011 had 100% shares in Stefczyk Leasing. Media SKOK Sp. z o.o. (Ltd.) The company is related because of the control by the same entity as the Issuer by SKOK Holding S.a.r.l., which as at 31 st December 2011 had 100% shares in Media SKOK Sp. z o. o. (Ltd.) Chairman of the Supervisory Board of Media SKOK Sp. z o.o. (Ltd.) is Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.a.r.l. Vice-Chairman of the Supervisory Board of Media SKOK Sp. z o.o. is Vice-Chairman of the Supervisory Boards the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. Member of the Supervisory Board of Media SKOK Sp. z o. o. is Secretary of the Supervisory Board of the Issuer. The Society for Promotion of Financial Education (hereinafter: "SKEF") Chairman of the Audit Committee of SKEF is Vice-Chairman of the Supervisory Boards of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l.

6 Ecco Holiday Sp. z o.o. (Ltd.) Chairman of the Supervisory Board of Ecco Holiday Sp. z o.o. (Ltd.) is Vice- Chairman of the Supervisory Board of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. Ecco Travel Sp. z o.o. (Ltd.) Chairman of the Supervisory Board of Ecco Travel Sp. z o.o. (Ltd.) is Vice-Chairman of the Supervisory Board the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. CU Management Society Sp. z o.o. (Ltd.) (hereinafter: "TZ SKOK") Chairman of the Supervisory Board of TZ SKOK is Vice-Chairman of the Supervisory Board of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. Vice-Chairman of the Supervisory Board of TZ SKOK is Secretary of the Supervisory Board of the Issuer. Apella S.A. Chairman of the Supervisory Board of Apella is a Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.à.r.l. Fundacja Wspierania Ubezpieczeń Wzajemnych (hereinafetere: FWUW ) Chairman of the Supervisory Board of FWUW is Member of the Supervisory Board of the Issuer and Chairman of SKOK Holding S.à.r.l. Vice-Chairman of the Supervisory Board of FWUW is Vice-President of the Supervisory Board of the Issuer and Vice-Chairman of SKOK Holding S.à.r.l. 3. Changes in the basic principles of management of the Issuer's business. There were no changes in basic management principles of the Issuer's business. 4. Value of remuneration, bonuses or benefits, including those resulting from incentive or bonus programs based on the capital of the Issuer, including programs based on bonds with the right of priority, exchangeable, subscription warrants (in cash, in kind or any other form), paid, due or potentially due to each of the persons managing and supervising the Issuer in the Issuer' business, irrespective of whether they were properly counted in costs, or the resulted from profit sharing. Information on the above mentioned data are included in the financial statements for 2011, in Note No. 41.

7 5. Any agreements concluded between the Issuer and its management, entitling to remuneration in case of their resignation or dismissal from their position without a valid reason or if their removal or dismissal takes place due to a merger of the Issuer by acquisition. Any agreements, entitling the management to compensation in case of their resignation or dismissal from their position without a valid reason or if their removal or dismissal takes place due to a merger of the Issuer by acquisition. 6. Determination of the total number and nominal value of all shares of the Issuer and shares in affiliated entities of the Issuer held by managers and supervisors (for each person separately.) Shareholder Alicja Kuran-Kawka Member of Management Board Marcin Golas Member of Management Board Rafał Matusiak Chairman of the Supervisory Board Grzegorz Buczkowski Vice-Chairman of the Supervisory Board Andrzej Sosnowski Member of the Supervisory Board Grzegorz Bierecki Member of the Supervisory Board Number of shares / Number of votes at a general meeting Share of share capital Nominal value of shares in PLN Share in the total number of votes at the General Meeting on 31 st December 2011 Share in the total number of votes at the General Meeting on 26 th April ,002% ,005% 0,005% ,002% ,005% 0,005% ,001% ,002% 0,002% ,055% ,109% 0,109% ,039% ,078% 0,078% ,060% ,119% 0,119% Other persons managing and supervising the Issuer did not own shares in the Company as at the balance sheet date or the date of submission of the report. 7. Information about agreements known to the Issuer (including those entered into after the balance sheet day), which could in the future result in change in proportions of shares held by existing shareholders and bondholders. The Issuer is not aware of any agreements, which could result in changes in the proportion of shares held by existing shareholders.

8 8. Information about the system for verification of employee share schemes. The Company does not keep employee share scheme. 9. Information on purchase of own shares, in particular on purpose of their acquisition, the number and nominal value, indicating what part of capital they represent, the purchase price and sale price of such shares in the event of their sale. In 2011 the Company, did not acquire its own shares.

9 II. CHARACTERISTICS OF THE COMPANY BUSINESS 1. Information on the basic products, goods or services along with determination of their value and quantity and share of individual products, goods and services (if they are relevant) or their groups in the Issuer's total sales, as well as changes in this area in a given accounting year. The main sources of revenues in 2011 were income from card and ATM activities and IT services. Card and ATM activities The company provides services of issuing and service of payment cards, management of ATM networks: SKOK 24, ecard and Global Cash and authorization and settlement of non-cash-transactions. In 2011 card and ATM activities brought the Company income in the amount of PLN 40,193 thousand, i.e. about PLN 4, 316 thousand more (increase by 23%) in relation to The share of the above mentioned activities in income from sales reached the level of 45%. IT Services As a result of the Issuer s merger with the company Hardware Software Outsourcing Sp. z o.o.. the portfolio of services provided in IT environment was extended, among others, by electronic banking, software development services, call centre, outsourcing services. In 2011 the Company reached revenue at the amount of PLN 44,637 thousand, which constituted 50% of the total value of revenue on sales. Money transfer services (Western Union) With regard to money transfer services, the Company is a representative of Western Union Limited. This activity is carried out in cooperation with Cooperative Savings and Credit Unions. Income in 2011 increased by PLN 603 thousand (increase by 15%) in relation to 2010 and amounted to PLN thousand. Income from Western Union transfers in 2011 accounted for 5% of the total value of income from sales. In 2011 the number of conducted transactions also increased, which in relation to the previous year increased by 12%. Income in 2011 in the various business lines were as follows (in PLN thousands):

10 Growth rate Cards and ATMs % Western Union % IT Services Other % Total % 2. Information on sales markets, including breakdown between domestic and foreign markets, and information about the sources of supply of materials for production, in goods and services, identifying the dependence on one or more customers and suppliers, and in case if the share of one customer or supplier reaches at least 10% of total sales revenue - name (business name) of the supplier or customer, its share in sale and supply and its formal ties with the CU Financial Society Joint Stock Company. In 2011, all sales were made on the domestic market. The only recipients of services in 2011, which share constitutes at least 10% of sales income was SKOK Stefczyka which share of sales was 49%. SKOK Stefczyka relations with the Issuer are described in section I.2. The basis for the provision of services is mainly Agreement on participation in the ATM network of 24 th September

11 2007 and Agreement on outsourcing IT services and equipment lease of February 1 st None of the suppliers reached at least 10% share in sales income. 3. Information about concluded agreement, which are significant for the Issuer' business, including known to the Issuer agreements between the shareholders (partners), insurance, cooperation or collaboration agreements. On 7 th October 2011 the Issuer signed the Annexe to the PLN Current Account Credit Agreement (of which the Company informed in the Current Report RB 36/2010 of 10 th December 2010) (hereinafter referred to as the "Annexe"). Based on the Annexe the Company was granted a loan in the amount not exceeding PLN 120,000 thou. in the period from 13 th October 2011 to 12 th October 2012 which shall be assigned and utilised to finance a cash injection to the ATM network operated by the Company. (Current Report RB 39/2011 of 10 th October 2011). Moreover, in 2011, the Company did not enter into insurance, cooperation and collaboration agreements that are of significant importance to the Company. Also, the Company is not aware of any information on any agreements significant for the Company concluded in 2011 between the shareholders. 4. Information on important transactions entered into by the Issuer or its subsidiary with related entities on terms other than market terms, with their amounts and information specifying character of those transactions. In 2011, there have been no transactions entered into by the Company with related parties on terms other than market terms. 5. Information on concluded and terminated in a given year agreements for loans, with stating at least their amount, type and interest rate, currency and maturity. Apart from the mentioned in point II.3 annexe in 2011, the Company has not taken and did not terminate any credits and loans. 6. Information on loans granted in the financial year, with particular emphasis on loans granted to affiliates of the issuer, indicating at least the amount, type and interest rate, currency and maturity, as well as issued and received, during the fiscal year, warranties and guarantees, with particular regard to guarantees granted to related entities of the issuer. In 2011 the Company did not receive or grant loans. 7. Assessment, together with the reasons, on the management of financial resources, with particular emphasis on the ability to meet undertaken

12 obligations, and to identify potential threats and actions that the issuer has taken or intends to take to counteract these threats. Financial situation of the Issuer, in the opinion of the Management Board does not constitute a threat to its continuing operation, and for implementation of investment plans. The company has a secure capital structure and financial resources enable the Company to fully implement its undertaken commitments: assets are fully covered by the fixed capital of the Company, share of equity in fixed capital (equity, long-term liabilities and provisions for liabilities) is 91%, liquidity ratios indicate that the Company does not have problems with the current payment of liabilities: the most liquid assets - cash - constitute 70% of the value of short-term liabilities. In 2011, in relation to 2010, significant improvement of capital structure of the Company occurred, demonstrated by the indicators of general debt and indebtedness of equity, presented in item III.10. No threats occur related to maintaining the cash flow and solvency in the long-term perspective. 8. Assessment of the feasibility of investment plans, including equity investments, compared to the resources available, including possible changes in the structure of financing this activity. Company's Management Board believes that the Issuer is able to finance investment plans from measures generated from operating activities and obtaining funding from the issue of shares and debt instruments. 9. In case of issuing securities during the period covered by the report - a description of how proceeds from the issue were used by the Issuer until preparation of the report on activities. On 11 January 2011 the Company issued the Commercial Investment - Term Bills of Exchange (KWIT) at the amount of PLN 8,000, which were repaid on 10 February The offer was addressed to the National Cooperative Savings and Credit Union (Krajowa Spółdzielcza Kasa Oszczędnościowo-Kredytowa) (hereinafter referred to as: KSKOK ). The aim of the issue was to acquire funds to supply the ATM network administered by the Issuer (Current report 2/2011 of 12 January 2011). Pursuant to the merger of the Issuer with HSO Sp. z o.o., registered on 9 February 2011, the Company issued 19,897,668 shares which were released to the acquired Company partners (Current Report 7/2011 of 10 February 2011). On 16 February bearer bonds were issued, denominated in Polish Zloty, not released for public trading, at the par value of PLN 1,000,000 each and the issue price of PLN 972,663, with the redemption date on 16 August 2011 (Current Report 8/2011 of 17 February 2011). The bonds were allocated to KSKOK. The bonds were not hedged. The issue was aimed at repayment of liabilities due to the bonds issued on 17 August On 16 August 2011, KWITs were issued at the amount of PLN 25,000 thousand with the aim of repayment of indebtedness due to issuance of the aforementioned bonds and in order to acquire cash to supply the ATM network administered by the Issuer (Current Report 34/2011 of 17 August 2011). The KWITs were repaid on 17 October 2011.

13 On 10 May 2011 the Management Board of the Issuer adopted the resolution on increasing the share capital in the framework of the target capital by the amount of PLN 31,500, (in words: thirty one million five hundred thousand Polish Zloty), i.e. from the amount of PLN 64,585,422 (in words: sixty four million five hundred eighty five thousand four hundred twenty two Polish Zloty) to the amount of PLN 96,085, (in words: ninety six million eighty five thousand four hundred twenty two Polish Zloty), by means of issue of 31,500,000 (in words: thirty one million five hundred thousand) new shares of J series, at the par value of PLN 1.00 (in words: one Polish Zloty) each share, depriving the hitherto shareholders of the subscription right. The J series shares were allocated under private subscription to the Cooperative Credit and Savings Union of Franciszek Stefczyk (Spółdzielcza Kasa Oszczędnościowo-Kredytowa im. F. Stefczyka), in exchange for in-kind contribution, under the form of 43,312,500 (in words: forty three million three hundred twelve thousand five hundred) registered shares of F series, holding the numbers from to , of the CU Management Society limited joint-stock partnership (Towarzystwo Zarządzające SKOK S.K.A. Sp. z o.o.), at par value of PLN 1.00 each share, authorising to 13.03% of the general number of voting rights at the general meeting of the CU Management Society limited joint-stock partnership (Current Report 16/2011 of 11 May 2011 and Current Report 18/2011 of 24 May 2011). On 21 June the Company issued KWITs at the amount of PLN 10,000 thousand (Current Report 27/2011 of 21 June 2011). The offer was addressed to KSKOK. The aim of the issue was to acquire funds to supply the ATM network administered by the Issuer. The aforementioned KWITs were refinanced on 20 July 2011 KWIT issuance at the amount of PLN 15,000 thousand, and the remaining amount of PLN 5,000 thousand was allocated for supplying the ATM network administered by the Issuer (Current Report 31/2011 of 20 July 2011). KWITs issue of 20 July 2011 was partly refinanced by KWIT issue of 22 August 2011 at the amount of PLN 8,000 thousand until 22 September 2011 (Current Report 37/2011 of 22 August 2011), whereas the remaining part at the amount of PLN 7,000 thousand was repaid on maturity date. On 14 July 2011, the Company issued KWITs at the amount of PLN 7,000 thousand (Current Report 30/2011 of 14 July 2011), which were refinanced on 16 August The offer was addressed to the National Cooperative Savings and Credit Union (Current Report 34/2011 of 17 August 2011). On 16 September 2011, the KWITs were repaid. On 30 June 2011 the General Meeting adopted the resolution on increasing the share capital of the Company by the amount of PLN 93,812, (in words: ninety three million eight hundred twelve thousand eight hundred seventy eight Polish Zloty), i.e. from the amount of PLN 96,085, (in words: ninety six million eighty five thousand four hundred twenty two Polish Zloty), to the amount of PLN 189,898, (in words: one hundred eighty nine million eight hundred ninety eight thousand three hundred Polish Zloty), by means of issuance of 93,812,878 (in words: ninety three million eight hundred twelve thousand eight hundred seventy eight) new shares of K series, at par value of PLN 1.00 each. On 26 October 2011 the Issuer received the notification of the District Court Gdańsk-Północ in Gdańsk, 7 th Commercial Department of the National Court Register, on entering on 21 October 2011 the increased share capital of the Company to the amount of PLN 189,898, The increase of the share capital was executed by means of issue of 93,812,878 registered non-voting shares of K series, at the par value of PLN 1,00 each, with preference in terms of dividend at the level of 150% of dividend in an ordinary share. The shares were taken over by the Cooperative Credit and Savings Union of Franciszek Stefczyk, in exchange for in-kind contribution, under the form of 98,503,522 of shares of the CU Management Society limited joint-stock partnership. After the registration of the

14 increased share capital, the general number of votes arising from all shares issued is 96,085,422. As of the day of publication of the report, the aggregate indebtedness due to KWIT is PLN 32,200 thousand, of the following redemption dates: 28 May 2012 (PLN 500 thousand); 31 December 2012 (PLN 4,200 thousand); 28 May 2013 (PLN 1,000 thousand); 28 May 2014 (PLN 1,000 thousand); 10 October 2014 (PLN 12,000 thousand); 31 October 2014 (PLN 12,000 thousand); 28 May 2015 (PLN 1,500 thousand); 10 October 2014 (PLN 12,000 thousand); 31 October 2014 (PLN 12,000 thousand); 28 May 2015 (PLN 1,500 thousand). 10. Explanation of differences between financial results disclosed in the annual report and previously published estimates of the results for the year. The Issuer does not publish forecasts for Presentation of the basic economic and financial values, as disclosed in annual financial statements, in particular description of factors and events, including those of unusual character, having a significant impact on the issuer's activities and achieved profits or incurred losses in the financial year and also presentation of prospects for issuer's business development, at least in the next accounting year. In the 1 st quarter of 2011, the merger with the company Hardware Software Outsourcing Sp. z o.o. with the seat in Sopot occurred (described in more detail in item III.8.3). As a result of the merger, the scope of services offered by the Company was extended. The value of revenue generated due to sales amounted to PLN 89,797 thousand and it constituted 222.7% of the previous year value. The operating activity costs incurred amounted to PLN 82,860 thousand and they were higher by PLN 45,791 thousand (increase by 124%), as compared to the year 2010, including: costs of products, services, goods and materials sold: PLN 74,697 thousand (increase by 131%); overhead costs: PLN 7,566 thousand (increase by 61%); costs of sales: PLN 597 thousand. The profit generated on sales for the current year amounted to PLN 6,938 thousand and it was higher against the profit on sales in 2010 by the amount of PLN 3,694 thousand. The gross profit generated in 2011 amounted to PLN 844 thousand and it is ten-fold higher than the result for the previous year. The level of the result was mainly influenced by the financial expenses at the amount of PLN 7,132 thousand. The financial expenses mainly consisted of interest on KWITs, bonds and the overdraft facility at the amount of PLN 7,079

15 thousand. The financial expenses generated were mainly denominated by the level of external capital constituting the source of cash supply for the ATMs of SKOK24, ecard and Global Cash. After considering the remaining burdens of the gross financial result, the Company closed the year 2011 with the positive financial result at the level of PLN 1,089 thousand. As a result of the merger with Hardware Software Outsourcing Sp. z o.o., new perspectives of development opened for the Issuer, including, among others: creating the strong and economically stable entity integrating and concentrating the management of complementary environments, important for SKOK system: the IT and the technological environment, and increasing the Company attractiveness for the investors as a consequence of the growth of potential capitalising and effectiveness of the operations. The main perspectives of development of the Issuer s activity are associated with: development of non-cash transactions service, both for SKOK system entities and for external consumers; acquiring new consumers of the services provided in the scope of authorisation, transaction settlement and tele-information services; implementation of new services provided in ATMs; development of services associated with provision of complex solutions in the scope of IT infrastructure; strengthening the relationships with potential consumers of services offered by the Issuer through acquisition services, aimed at creating the strong structure of capital group nature. The market strategy developed assumes high quality of the services while maintaining competitive prices. Within the perspective of the forthcoming year, the Management Board of the Company will continue the activities targeted towards optimisation and development of the card and ATM operations, increased use of own authorisation and settlement centre, through implementation of new products. Simultaneously, new external consumers of the services offered for card and ATM activities and IT services will be searched for. 12. The evaluation factors and unusual events affecting the outcome of the activities for the accounting year, specifying the degree of influence of these factors or unusual events on the achieved result. In the opinion of the Issuer there were no unusual factors and events that had an impact on its performance and were not described in the text of this report.

16 III. OTHER INFORMATION 1. Description of significant risks and threats, identifying the extent to which the issuer is exposed. SIGNIFICANT RISK AND THREAT FACTORS Risk factors and threats associated with the Company's operations can be divided into two groups: a. Risks associated with current and future operations of the Company: risks associated with suppliers - cooperation of the Company with suppliers of i.a. software, telecommunications lines and companies that support ATMs, bears risks, i.a. the potential failure of hardware infrastructure and software. The existence of some of them may lead to difficulties in using services offered by the Company. For this purpose the Company selected and selects reputable suppliers of hardware and software used for conducted business. Restrictive agreements for provision of maintenance services, concluded with them ensure security and continuity of the system functioning; risk to security of information systems - the Company's business is subject to random events without human intervention, such as hardware damage, power failures, fires, flooding, and to events involving people, such as burglary, unauthorized access to data, which may disrupt security of the system and its smooth functioning. The company undertakes every effort to ensure that all transactions made were held subject to the rules of safety and confidentiality of clients and users data; risk of losing key employees - the competence of employed specialists have a significant impact on the Company's operations, particularly in the area of Centre for Cards and Terminals Service, and servicing settling payments by payment cards. The Company minimizes this risk level through an active personnel policy in the remuneration system, systematic training and promotion. b. Risks associated with the environment in which the Company operates: risks associated with macroeconomic situation in the country - there is a risk that in case of deterioration of the economic situation in Poland and a decrease in consumer demand, the dynamics of the Company's development may slow down; risks associated with currency exchange rates - the Company accounts for certain transactions in foreign currencies (USD and EUR). Fluctuations in exchange rates affect mainly the amount of income realized from the provision

17 of money transfer services and the value of these investments, settling of which is based on foreign currencies; risks associated with regulatory changes - changes in tax law and regulations relating to banking and payment and financial services and securities market, may increase the Company's operating costs, reducing operating margins and lowering profitability. Equal effect may have risk factors associated with regulations of international organizations of payment (Visa and MasterCard); risk of competition - there is a risk of increased operating costs as a result of the need to maintain market position against financial institutions that continuously modify offers of their products; risk of reducing charges for financial services - there is risk associated with the overall pressure on lowering commission fees for financial services; risks of changing interest rates - in connection with the use of foreign capital, the Issuer is exposed to the risk of interest rate changes. 2. Characteristics of internal and external factors relevant to the development of the issuer' business and a description of the Issuer's business development prospects, at least until the end of the accounting year following the financial year for which financial statements was prepared, included in the annual report, including elements of marketing strategy developed by it. EXTERNAL FACTORS Market of Cooperative savings and credit unions Cooperative Savings and Credit Unions in Poland have a high potential for growth, both quantitative and organizational. CU's associate more than 2.2 million members and have approximately establishments. In 2011, the number of members of credit unions has increased by 107 thousand., i.e. by 4.68% and the number of outlets to 41, i.e. 2,1%. The value of deposits at the end of September 2011 amounted to PLN 14 billion (an increase of 6.9% compared to 2010), and the value of granted loans amounted to PLN 10.8 billion (increase of 9.1% compared to 2010). Cooperative savings and credit unions in YEAR NUMBER OF ESTABLISHMENTS NUMBER OF MEMBERS (IN PLN THOUSANDS) DEPOSITS (PLN billion) Loans (PLN billion) ,558 1, ,254 1, , ,112 2, ,461 1,169 3,938 2, ,553 1,395 4,990 3,503

18 2006 1,589 1,551 5,553 4, ,663 1,669 6,705 5, ,757 1,856 8,604 6, ,801 2,026 10,842 8, ,851 2,177 13,028 9, * Source: * preliminary results The market of payment cards (based on NBP data) Payment card market can be characterized on the basis of analysis of several key elements, among others: number and structure of issued payment cards, the volume of transactions done by payment cards, or the availability of ATMs available to cardholders. At the end of 2011, the number of payment cards in Poland amounted to nearly 32 million. Compared to 2010, this means increase in the number of cards of 61.2 thousand, i.e. by 0.19%. In terms of manner in which card payments transaction were carried out at the end of 2011 the structure of cards was as follows: debit cards accounted for 77.35%, charge cards for 0.99% and credit cards 21.66% of all payment cards issued. In ,772 million transactions were performed by payment cards (an increase of 14.3%), with a value of PLN 389 billion (an increase of 9.9%). A characteristic feature of the Polish market is the dominance of debit cards. Cards of this type not only dominated the market in terms of numbers, but also the volume of transactions. In 2011, the number of transactions made through these cards accounted for 87.6% of the total number of transactions made with payment cards. By the end of 2011 transactions carried out through debit card transactions were worth nearly PLN billion, which accounted for 90.8% of the total value of transactions with payment cards. In terms of points accepting POS terminals, a 10% increase was reported in year At the end of 2011 there were over 112 thousand such points. The number of merchants supporting payments via POS terminals reached almost 204 thousand. (an increase by 10.8%). In the past year there has been a 19% increase in the number of transactions, amounting to 988 million, worth a total of PLN 99 billion (increase by 15% compared to 2010). Average value of transactions at the POS terminal was PLN 100. At the end of 2011, the number of ATMs in Poland amounted to nearly 17.5 million. At those ATMs there were 707 million transactions carried out, worth a total of PLN 271 billion. Compared to 2010, these figures indicate that the number of ATMs increased by 6%, the number of ATM transactions by nearly 4% and value of transactions made at ATMs by nearly 7%. The average value of transactions made at ATMs in 2011 amounted to PLN 383.

19 INTERNAL FACTORS The most important internal factors affecting the development of the Company include a high technology level in Centre for Servicing Cards and Terminals, meeting international standards and providing the possibility of expanding the market for the Issuer to other entities outside the system, Cooperative savings and credit unions, and high potential of staff. PERSPECTIVES OF DEVELOPMENT Perspective of development are described in p. II Information about major achievements in research and development. In 2011, the Company did not have major achievements in research and development. 4. Information on natural environmental issues. Due to the nature of activity, no decision on the protection of the environment has been issued in relation to the Company in The company is also not required to obtain any consents or authorizations relating to environmental protection. The Company's activity has no impact on the natural environment. 5. Information on employment. In 2011, agreements were signed with 101 people and terminated a contract with 59 people. Employment figure rose to 398 people at the end of At the date of publication of the report in the Company employs 422 people, including in the Company's branch - Towarzystwo Finansowe SKOK S.A.- Division of HSO in Sopot people. 6. Information on: a) the date of conclusion an agreement by the issuer and entity authorized to audit financial statements for an audit or review financial statements and consolidated financial statements and the period for which this agreement was concluded, b) remuneration of the entity authorized to audit financial statements, paid or due for the accounting year separately for: - examination of annual financial statements, - other attestation services, including a review of financial statements, - tax advisory services, - other services. On 13 th July 2009, the Issuer has entered into an agreement with the Team of Financial Experts, "Auditor" Sp. z o.o. (Ltd.) on review of individual financial statements of the Issuer for the first half of , and conducting examination of individual financial statements of the Company for the period

20 The information contained in the table relate to 2010 and 2011 (in PLN z VAT). examination of annual financial statements Auditor Auditor ,75 other attestation services, including a review of financial statements ,25 tax advisory services not applicable other services Information on offices (establishments) held by the Company. Under resolution of the Management Board of the Company of 9 th February 2011, on the base of assets and the organizational structure of the acquired company Hardware Software Outsourcing Sp. z o. o. (Ltd.) in Sopot a Branch of the Company was established in Sopot, which operates under the business name: Cooperative Savings and Credit Union Financial Society Joint Stock Company - Branch HSO in Sopot. 8. Description of events significantly affecting issuer's activities that occurred during the financial year and after its end, until the date of approval of financial statements. 8.1 Merger with Hardware Software Outsourcing and registration of amendments to the Articles of Association On 14 January 2011, pursuant to art p. 1 of the Code of Commercial Companies, the Extraordinary General Meeting took the decision on the merger of the Issuer, as the acquiring company with the company Hardware Software Outsourcing sp. z o.o. with its seat in Sopot, as the acquired company, through the transfer of the whole assets of the acquired company to the acquiring company (Current Report 3/2011 published on 14 January 2011). On 9 February 2011, the registry court entered the merger and the amendments to the Articles of Association introduced (Current Report 7/2011 of 10 February 2011). On the basis of the acquired Company a Branch was established (described in more detail in item III.7 of this report). 8.2 Changes in the composition of the Management Board of the Company At the meeting of the Supervisory Board held on 17 March 201, according to the resolution no. 3, Mr Marcin Golas was appointed as the Member of the Board, supervising the IT services outsourcing area (Current Report 13/2011 of 18 March 2011). As of the day of submitting the report, the composition of the Management Board of the Issuer was as follows: Ewa Bereśniewicz-Kozłowska President of the Board, Marcin Golas Member of the Board, Alicja Kuran-Kawka - Member of the Board, Tomasz Krasiński - Member of the Board.

21 8.3 Purchase of shares in KSKOK On 2 May 2011 the Company acquired additional 35,150 (in words: thirty five thousand one hundred fifty) shares in the National Cooperative Savings and Credit Union (Krajowa Spółdzielcza Kasa Oszczędnościowo Kredytowa) (hereinafter referred to as: KSKOK ) at PLN 100 for each share, at the total amount of PLN 3,515,000 (three million five hundred fifteen thousand Polish Zloty) (Current Report 14/2011 of 29 April 2011). 8.4 Acquiring the shares of the CU Management Society Ltd., limited joint-stock partnership (Towarzystwo Zarządzające SKOK Sp. z o.o. S.K.A.) On 23 May 2011 the Company acquired 43,312,500 registered shares of the company CU Management Society Ltd., limited joint-stock partnership, at the par value of PLN 1 for each share, as the contribution in-kind. The initial value of the in-kind contribution was estimated at the amount of PLN 86,625, On 11 August 2011 the Company acquired 98,503,522 registered shares of CU Management Society Ltd., limited joint-stock partnership at the par value of PLN 1 for each share as the contribution in-kind. The initial value of the in-kind contribution was estimated at the amount of PLN 197,007, As of , the Company held 141,816,022 of registered shares of the company CU Management Society Ltd., limited joint-stock partnership at the par value of PLN 1 per each share, which makes % of the share in the share capital. 9. Information about financial instruments in the field of: a) risk of: price changes, credit, substantial cash-flow disruptions and loss of financial liquidity, to which the Company is exposed Risks are described in note 46 to Financial Statements of the Towarzystwo Finansowe SKOK S.A. for b) adopted by the Company objectives and methods of financial risk management, including methods of securing relevant types of planned transactions for which hedge accounting is applied. The Company does not apply hedge accounting. 10. Financial ratios and the current and projected financial situation of the issuer. Key financial indicators are presented in the table below: Description Operating return on sales (in%) Return on sales (in%)

22 Deficit of assets (in %) Deficit of equity (in %) Current liquidity ratio (times) Quick ratio (times) Immediate ratio (times) Coverage of fixed capital with equity (times) Overall debt ratio (in%) Debt-equity ratio (times) Share of equity in fixed capital (in %) Ration presented in the above table were calculated according to the following formulas: operational sales profitability - operating result to sales revenue, profitability of net sales - the net financial result to income from sales, return on assets - net financial result to total assets, return on equity - net financial result to equity, current liquidity ratio - current assets minus trade liabilities over 12 months to the value of short-term liabilities under 12 months, quick ratio - current assets minus trade liabilities over 12 months and inventories to the value of short-term liabilities under 12 months, immediate ration - value of short-term investments to short-term liabilities under 12 months, coverage of fixed assets with fixed capital - equity plus reserves and long-term liabilities to fixed assets, the overall debt ratio - total liabilities to total assets, debt equity ratio - total liabilities to equity; share of equity in fixed capital- share equity to fixed capital. In the opinion of the Management Board, the future financial situation will be influenced by factors described in the Company's growth prospects (points II.11 and III.2.) Proposed distribution of profit for 2011 years The Management Board proposes to allocate the net profit of the Company for the year 2011 in the amount of PLN thousand to cover losses from previous years. 11. Indication of the proceedings pending before the court, authority competent for arbitration or a public authority, including information on: a) proceedings relating to liabilities or debts of the issuer or its subsidiary, value of which constitutes at least 10% of the issuer's equity, stating:

23 object of the proceedings, the amount in dispute, the date of opening the proceedings, the parties to initiated proceedings and the position of the issuer, b) two or more proceedings regarding the obligations and debts, total value of which is at least 10% of the issuer's equity, stating the total amount of proceedings separately in the group liabilities and claims, together with the position of the issuer in this case and, for the most important proceedings in the group of obligations and the group of claims - an indication of their object, the amount in dispute, the date of initiating proceedings and the parties to the initiated the proceedings. In 2011, there were no any proceedings involving the Issuer, pending before government bodies, legal or arbitration proceedings, where a single or aggregate value exceeded 10% of the Issuer equity. Ewa Bereśniewicz-Kozłowska Chairperson of the Management Board Marcin Golas Member of the Management Board Alicja Kuran-Kawka Member of the Management Board Tomasz Krasiński Member of the Management Board