Wawel S.A. 1. Condensed financial statement for IIIrd quarter 2011 made pursuant to International Standards of Financial Reporting

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1 Wawel S.A. 1 Condensed financial statement for IIIrd quarter 2011 made pursuant to International Standards of Financial Reporting

2 Wawel S.A. 2 I. INTRODUCTION TO THE FINANCIAL STATEMENT 1. Legal status and basic subject of activity as per the Polish Classification of Activities (PKD) Wawel Spółka Akcyjna seated in Kraków. The Company is registered in the National Court Register kept by the District Court for Kraków - Śródmieście, 11th Commercial Department in Kraków under the number According to the sections of the Polish Classification of Activities the basic subject of the company s activity is production of cocoa, chocolate and confectionary products denoted with the symbol (PKD 2007) 1082Z. The Company s shares are traded in the official market of the WSE. According to the classification adopted by the WSE, the Company is acting in the food industry sector. 2. The Company s duration is indefinite. 3. The periods for which the financial statement and comparable data are presented. The financial data presented cover the period from 1st January to 30th September The comparable data cover the period from 1st January to 3oth September Information concerning the composition of the Management Board and the Supervisory Board MANAGEMENT BOARD President of the Management Board Member of the Management Board Dariusz Orłowski Wojciech Winkel SUPERVISORY BOARD Chairman of the Supervisory Board Vice Chairman of the Supervisory Board Secretary of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Hermann Opferkuch Eugeniusz Małek Paweł Bałaga Nicole Richter Christoph Köhnlein Paweł Tomasz Brukszo 5. Wawel S.A. does not incorporate any internal organizational units drawing up their independent financial statements. 6. The Issuer is not a dominant entity in relation to other entities and it does not draw up a consolidated statement.

3 Wawel S.A. 3 FINANCIAL SITUATION STATEMENT (PLN k) state as of state as of state as of state as of Assets I. Fixed assets Fixed tangible assets Goodwill Intangible assets: Long term receivables Shares in affiliates valued by equity method Long-term accruals, including assets due to deferred income tax other accruals II. Current assets Inventory Receivables due to deliveries and services Short-term accruals Short-term financial assets Assets classified as the ones held for sale Total assets Liabilities I. Equity Share capital Capital from issue of the shares above their nominal value Retained profits/uncovered losses profits/losses from previous years profits/losses from current year II. Liabilities and provisions for liabilities Provisions for liabilities Provision due to the deferred income tax Provision for retirement and similar benefits long-term short-term Others provisions Long-term liabilities Short-term liabilities Liabilities due to deliveries and services and other liabilities 3.2. Accruals and deferred income Total liabilities Book value Number of shares Book value per one share in PLN 162,04 152,20 147,47 135,08

4 Wawel S.A. 4 TOTAL INCOME STATEMENT (PLN k) 3rd quarter quarters qumulative period rd quarter quarters qumulative period 2010 I. Net income from the sale of products, goods and materials, including: 1. Net income from sales of products 2. Net income from sales of goods and materials II Costs of products, goods and materials sold, including: (72 349) ( ) (52 832) ( ) 1. Manufacturing cost of products sold (66 089) ( ) (49 161) 2. Value of the goods and materials sold (6 260) (17 094) (3 671) ( ) (11 891) III. Gross profit (loss) from sales Sales costs (22 963) (64 097) (17 192) (54 710) Management Board costs (7 652) (21 170) (6 529) (19 344) IV. Profit (loss) from sales Other operating income Other operating costs (403) (2 017) (405) (1 429) V. Profit (loss) from operating activity Financial incomes Financial costs - (1 711) (637) (876) Shares in profit of an affiliated unit (54) (123) VI. Gross profit (loss) Income tax (3 509) (8 913) (2 553) (6 972) VII. Profit (loss) for the period Net profit (loss) (annulled) Average weighted number of ordinary shares Profit (loss) per one ordinary share (in PLN) , ,77

5 Wawel S.A. 5 STATEMENT OF CHANGES IN EQUITY (PLN K) Share capital Surplus from selling shares above their nominal value total Retained profits/uncovered losses Due to IFSR transition Supplement ary capital Revaluation capital Profit/loss Total equity As of 30th June Increases rd quarter result of the current period forwarding the revaluation capital to supplementary capital Decreases forwarding the revaluation capital to supplementary capital As of 30th September As of 1st January Increases rd quarter 2011 (qumulated) - result of the current period distribution of undivided profit pursuant to GMS resolution forwarding the revaluation capital to supplementary capital Decreases distribution of undivided profit pursuant to GMS resolution designation for dividend forwarding the revaluation capital to supplementary capital As of 30th September As of 1st January change in accounting policy As of 1st January 2010 after change in accounting policy Increases result of the current period distribution of undivided profit pursuant to GMS resolution forwarding the revaluation capital to supplementary capital Decreases distribution of undivided profit pursuant to GMS resolution designation for dividend forwarding the revaluation capital to supplementary capital As of 31st December rd quarter 2010 (qumulated) As of 1st January change in accounting policy As of 1st January 2010 after change in accounting policy Increases result of the current period distribution of undivided profit pursuant to GMS resolution forwarding the revaluation capital to supplementary capital Decreases distribution of undivided profit pursuant to GMS resolution designation for dividend forwarding the revaluation capital to supplementary capital As of 30th September

6 Wawel S.A. 6 3rd quarter quarters qumulative period rd quarter quarters qumulative period 2010 CASH-FLOW STATEMENT (PLN k) A. Cash-flow from operating activity I. Gross profit (loss) II. Total adjustments Depreciation Interest and dividends Profit/loss due to the exchange differences 4. Tax paid in period (Profit) loss from investment activity 6. Change in reserve Change in inventory Change in receivables Change in short-term liabilities (excluding the loans and credits) Change in accruals Other adjustments III Net cash from operating activity B. Cash-flow from investment activity 1. Sales of the intangible assets and fixed tangible assets 2. Purchase of the intangible assets and fixed tangible assets 3. Inflows from financial assets including inflows in related parties Expenses for financial assets including expenses in related parties Other investments expenses IV. Net cash-flow from investment activity C. Net cash-flow from financial activity 1. Dividends and other payments to shareholders V. Net cash-flow from financial activity D. Net cash-flow, Total E. Balance change of the cash: change in cash from foreign exchange differences F. Opening balance of cash G. Closing balance of cash (F+/- D)

7 Wawel S.A. 7 III. ADDITIONAL INFORMATION FOR FINANCIAL STATEMENT 1. INFORMATION ON APPLIED ACCOUNTING PRINCIPLES: The Company s condensed report for the period from to was prepared pursuant to the International Standards of Financial Reporting, in particular to the ISFR No. 34 "Mid-year Financial Reporting". In the period from to , the Issuer has changed the accounting principles used in relation to those used in the last annual financial statements. The financial statement for 2010 was transformed in order to assure the data comparability. The Company has changed the measurement of the production in progress into the measurement at full manufacturing cost from The decision of the Company s management on change of the measurement of the production in progress is caused by the fact that the Company has applied the simplified measurement of the production in progress according to the consumed direct materials so far and the applied change will cause that the data contained in the financial statement will be more utility and reliable and will meet the principles of IAS/IFRS in full. The financial statement for 2010 was transformed and: - In assets, the production in progress was revalued to the amount according to the full manufacturing cost - The arisen difference resulting from this revaluation was charged against the equity, in the itemprofit of the previous years. The table below presents the specification of the differences arisen as a result of transformation of the financial statement for 2010 (in k PLN): Net profit in k PLN nine months of 2011 Net profit before change of accounting principles adjustment for - Manufacturing cost of products sold -571 Net profit after change of accounting principles Equity in k PLN Equity before change of accounting principles adjustment for - Retained profits/uncovered losses Equity after change of accounting principles Financial statement in k PLN Inventories before change of accounting principles adjustment for - The products in progress Inventories after change of accounting principles

8 Wawel S.A. 8 Tangible fixed assets The tangible fixed assets include also the fixed assets (assets which are in condition enabling their operation pursuant to the management s expectations) as well as the fixed assets under construction (assets which are under construction or other adjustment to operation pursuant to the management s expectation). The tangible fixed assets are valued and presented in the financial statement prepared as for the balance day in the net book value. The net book value is understood as the initial value less the amortization write-offs and impairment loss. Due to unimportant amount of difference in relation to amortization, pursuant to the economic useful life estimation, low-valued fixed assets with the initial value to 3,500 PLN are a subject of once chagrining against costs when it is purchased, and the record is limited to the out-book quantities records. The value of low-valued assets in comparison to the valuable tangible fixed assets is unimportant. The initial value of the tangible fixed assets is set at the purchase price or manufacture costs. The purchase price or manufacture costs include the purchase price and other costs directly related to adapting the assets to be used. The manufacture cost or the purchase price of the tangible fixed assets, if the value is important in relation to the value of the whole assets includes also the estimated costs of disassembling and removing and the costs of recovering the location/land to the previous condition, to which the entity is obliged due to the purchase of manufacture. The fixed assets are amortized, when they are available for use, from the month when the assets is adjusted to the location and conditions necessary for its use pursuant to the management s expectations for the period corresponding to the estimated useful life including the residual value. The fixed assets are amortized using the linear method. The following typical economic useful life estimations are applied to the fixed assets: Buildings and facilities years Technical equipment and machinery 3-20 years Transport means and other 4-7 years The particular components of fixed assets which value is important in comparison to the value of the whole fixed asset are amortized separately pursuant to the economic useful life estimation. The correctness of the applied amortization rates is periodically verified (once a year) causing the adjustment of the amortization write-offs in the next years. The costs of the important redecorations, repairs and the periodically inspections are calculated to the tangible fixed assets and are amortized pursuant to their economic useful life estimation. In turn the costs of current maintenance of fixed assets and their preservations affect the period financial result when there were incurred. Intangible assets As the intangible assets are included identifiable non-cash assets and without physical form. The intangibles assets are presented, if it is possible that they will cause the inflow of economic benefits, which may be related to these assets and their value may be assessed in a reliable manner. The initial measurement of the intangible assets is performed pursuant to the purchase price or manufacturing cost. After the initial measurement the intangible assets are valued pursuant to the initial value less the depreciation and impairment loss. Except for the R&D works expenses which fulfill the activation criterion the other intangible assets generated by the Company on its own are not a subject of activation and are presented in the profit and loss statement for the period when they were incurred. The intangible assets with the specified useful life estimation are amortized using the linear method, when they are available for use i.e. when the intangible asset compound is in the place and condition enabling its intended use by the management in the period corresponding to useful life estimation. The correctness of applied periods and amortization rates is periodically verified but not less than at the

9 Wawel S.A. 9 end of the fiscal year, and the possible adjustment of amortization write-off is made in the next periods. The base to calculate the amortization write off is the initial value less the residual value. The principle is that the residual value of intangible assets is equal to zero except for: - If the Company has an agreement with the not-related party on selling these rights after the set useful life estimation then the residual value is equal to the value determined in the right sale agreement, - If there is the active market for such rights and the value may be set in a reliable manner ansd it is high possible that this market will exists after useful life estimation of such asset. The following typical economic useful life estimations of tangible assets are applied: Obtained licenses, rights to patents and similar values 2-10 years Purchased computer software 2-10 years Intangible assets with non-specified useful life estimation are not a subject of amortization. Their value is less the possible impairment loss. The intangible assets with non-specified useful life estimation are a subject of the assessment regarding the impairment once a year. Other intangible assets are verified reading the impairment only when the circumstances or changes occurred which may indicate that their carrying amount may be unrecoverable. Perpetual usufruct right The perpetual usufruct right, obtained under administrative decision, is included only to out-balance sheet records. Impairment loss As for each balance day the Company assesses if the external or internal assumptions occurred which indicate that there is a risk of no possibility to recover the carrying amount of the fixed assets and intangible assets and then the review regarding the impairment is performed. If the carrying amount of the assets exceeds the estimated recoverable value, then the value of these assets is reduced to the level of the recoverable value by the proper impairment loss and presenting the write-down in the profit and loss statement. The recoverable value is the higher from two values: usable value or fair value less the costs of sale. The usable value is the current, estimated value of future cash-flow, which are expected due to further use of the asset and its liquidation. The fair value less the costs of sale is the amount obtainable from sale of the asset under the transaction on market conditions between interested and well-informed parties, after deduction of the liquidation costs. The recoverable value is set for the particular assets, unless the relevant assets do not generates the cash-flow by itself. The assets, which do not generate the cash-flow by themselves, are grouped at the lowest level, where the cash-flows are created notwithstanding the flows from other assets (i.e. cash-generating units). During estimation of the usable value the anticipated cash-flows are discounted to their current value using the discount rate reflecting the current market estimation of money value in time. As for each balance date the verification is carried out if the impairment loss should not be partially or at all reversed. The assumptions indicating the need to reverse the impairment loss are the mirror s reflection of the assumptions on establishing the impairment loss. In such case the carrying amount of the asset is increased to its recoverable value. The increased amount cannot exceed the asset carrying amount, which would be set (after amortization), if the impairment loss regarding this asset was not included in the previous years. After reversal of the impairment loss, in the next periods the amortization write-off concerning the relevant asset is adjusted in a manner which allows during the rest of useful life estimation of this asset to make the systematic deduction of its verified carrying amount less the final value. The reversal of the impairment loss for the goodwill is mot made. The reversal of the impairment loss is presented in the profit and loss statement as the revenue. Fixed assets held for sale The fixed assets held for sale are the assets meeting the following criterion:

10 Wawel S.A The managing staff of the proper level submitted the declaration of sale; - The assets are available for immediate sale in the current condition; - The active seeking of potential purchaser were initiated - The sale transaction is highly probable and it may be settled within 12 months after the decision of sale was made; - The sale price is reasonable to the current fair value; - The probability of introduction of the significant changes to the assets disposal plan is slight. In case of meeting the criterion to be recognized as held-for-sale after the balance day, the change of the classification of asset under the state as for the end of the year preceding the event is not made. The change of classification is reflected in this reporting period when the classification criterion was met. When the relevant asset is intended for sale the amortization is stopped. The assets held for sale, excluding the financial assets and investment properties, are measured at the lower of two amounts: carrying amount or fair value less the costs of sale. In case of increase of the fair value less the costs of sale in the later period the revenue is recognized in the amount not higher than revaluation allowance recognized. Inventory Inventories are the assets: - Designated to be sold during normal business activity; - Being in manufacturing progress designated to be sold or - Having a form of materials or raw materials used to the manufacturing process. As for the balance day the inventories are valued pursuant to the higher of two values: Purchase price/manufacturing costs or getable net sale price depending on this which amount is lower, considering the loss of economic value. The getable net sale price is the estimated sale price obtained during the normal business activity, less the finishing costs and estimated costs necessary to put the asset into trading. The costs incurred to put every asset to the current place and condition is presented in the following manner: Materials- at the purchase price set using the standard cost method adjusted by the deviations from the actual prices. Applying the deviations from the actual prices causes that the effect is similar to valuation pursuant to the actual purchase by price set by FIFO method. Finished products- the costs of the direct materials and workmanship and the proper margin of the direct manufacturing costs set with the assumption the normal use of production capacity, excluding the outsourced financing costs. The products in progress- at the record prices pursuant to the value of technical manufacturing costs including the degree of product processing. Goods- at the purchase price Receivables The receivables due to the deliveries and services and other receivables as for the date of inception are presented in the current value of anticipated payments and are included to the later periods pursuant to the amortized cost using the effective percent rate and are less the write down of the doubt receivables. The Company applies the simplified receivables valuation methods if it does not cause deformation of information contained in the financial statement, in particular in the case when the period to the payment date is not long. (less than 12 months) The receivables, referring to which the Company applies the simplifications, are valued at the moment of initial measurement and in the period after the initial measurement (including as for the balance day) in the payable amount.

11 Wawel S.A. 11 Pecuniary assets and equivalents of pecuniary assets The pecuniary assets include cash at hand and on bank accounts. The equivalents of the pecuniary assets are short-term investments with high liquidity (with the initial maturity date to three months), easy exchangeable into the specified amount of the moneys and exposed on slight risk of the value change. The balance of the pecuniary assets and their equivalents, presented in the cash-flow statement consists of the pecuniary assets and their equivalents above less the non-paid credits in the current accounts if they constitute the integral part of pecuniary assets management. Own equity The own equity is included in the accounting books with the division into the types and according to the principles specified by law and provisions of the Statute. The share capital is presented according to the nominal value, in the amount corresponding to the Articles of Association and the entry to the National Court Register. Declared but not contributed amounts are presented as the due contributions to capital. The own shares and the due contributions to the share capital reduce the own equity amount. The capital from share issue above their nominal value is established from the surplus of the share issue price over their nominal value less the issue costs. The shares issue costs incurred at establishing the joint-stoc company or increasing the share capital reduces the shares issue capital below their nominal value to the amount of the surplus of issue value over the nominal value of shares and the other part is presented in the retained profits. The change in the valuation of the fair value of the instruments securing cash-flow in the part recognized as effective securing are referred to the capital items capital due to using the hedge accounting. The own equity established as a result of exchange of the debt securities, liabilities and loans into the shares is presented in the nominal value of such securities, liabilities and loans, upon consideration of the unamortizated discount or premium, calculated interests and unpaid to the day of exchange, which will not be paid out, non-performed exchange differences and capitalized issuance costs. The retained profits include: - Amounts arisen from the profit division; - Forwarding the revaluation reserve (the revaluation reserve includes also the difference between the fair value and purchase price, upon reducing by the deferred tax, of the assets available for sale, if there is fixed market price in the regulated market or the fair value of them can be fixed in the reliable manner). - Undivided result from previous years; - Financial result of the current year; - Paid advance payments to dividends and - The results of the errors from the previous periods. The received loans and credits The received loans and bank credits are initially presented at the fair value of received inflows less the transaction costs. Next they are valued at amortized purchase price using the effective percent rate method. The difference between the net inflows and buyback value is presented in the costs or financial revenues in the period when the credit or loan is used. The Company applies simplified loan or credit valuation methods which are valued pursuant to the amortized costs if it does not cause deformation of the information included in the financial statement, in particular when the period from the loan or credit payment date is not long. The loans or credits referring to which the Company applies the simplifications, are valued at the moment of initial measurement and in the period after the initial measurement (including as for the balance day) in the payable amount. Outsourced financing costs The outsourced financing costs i.e. loan and credit costs, including the Exchange differences arisen as a result of taking the loans and credits in the foreign currency, concerning the assets, which adjustment to use or sell requires a lot of time, pursuant to IAS 23 are capitalized.

12 Wawel S.A. 12 Provisions The provisions are liabilities, which amount or payment date are uncertain. The Companies established the provisions in case when the Company has the obligation (legal or custom) following the previous events and when it is possible that fulfillment of this obligation will cause the necessity of expenditure of the reserves being the economic benefits and the amount of this obligation can be assessed in a reliable manner. The provisions are established at the amount constituting the most reliable estimate of expenses necessary to fulfill this obligation as for balance day. The amount of established provisions is verified as of the balance day in order to correct them to the amount of the estimations compliant with the current knowledge. Release of provisions occurs in the case when it stops to be possible that to fulfill the obligation it is necessary to use the assets containing the economic benefits. Use of the provisions is executed only pursuant to the intended use, to which they were initially established. In case when the influence of the money change in time is important, the amount of provision is set on the level of the current value of expected future expenses necessary to satisfy the obligation. Increase of the provision due to the lapse of time is charged against the financial costs in case applying the dicount method. Provisions for anniversary awards and retirement severance pay Pursuant to the effective pay-roll systems the employees are entitled to anniversary awards and retirement severance pays. The anniversary awards are paid to employees after working out the specified number of years. The retirement severance pays are paid once at the moment of going into retirement. The amount of retirement severance pays and anniversary awards depends on the practice and the average employee's salary. The anniversary awards are included to the other long-term employees allowances, but the retirement severance pays are included to the programs of specified allowances after employment. The provision for the liabilities due to the retirement severance pays and anniversary awards are created in order to classify the costs to the periods to which they are related to. The current value of such liabilities at the end of every fiscal year is calculated by the independent actuaries and re-estimated if there are important assumptions affecting the amount of this liability. The calculated liabilities are equal to the discounted payments, which will be made in future, including but not limited to employment rotation, planned growth of pay-roll level and refer to the period till the end of the fiscal year. The effects of the changes of the actuary s estimations are presented in the profit and loss statement. Liabilities The liabilities due to the deliveries and services and other liabilities are valued pursuant to the amortized cost using the effective percent rate. The Company applies simplified liabilities valuation methods, including the financial liabilities which are valued pursuant to the amortized costs if it does not cause deformation of the information included in the financial statement, in particular when the period from the liabilities payment date is not long. The liabilities, including the financial liabilities, referring to which the Company applies the simplifications, are valued at the moment of initial measurement and in the period after the initial measurement (including as for the balance day) in the payable amount. The other non-financial liabilities include in particular the liabilities due to taxes, liabilities due to payroll, and liabilities due to received advance payments, which will be settled by the supply of goods, services or assets. The other non-financial liabilities are presented in the payable amount. Revenues The revenues from the sale of goods, services and materials are presented if the amount of revenues may be valued in the reliable manner, there is a possibility that the Company will obtain the economic benefits due to the transactions and other proportional costs may be valued in a reliable manner. The

13 Wawel S.A. 13 revenues from sale of goods, products and materials are presented if the significant risk and benefits related to their ownership are transferred into the purchaser. The revenues include the amounts received and payable due to the delivered products and goods less the commercial discounts and goods and services VAT tax. The amount of revenues is set pursuant to the fair value of received or payable payment. The fees paid in advance concerning the agreements concluded by the Company in the current period are presented as the revenues of future periods. The revenues due to dividens are presented when the rights of shareholders to receive them are set. Loyalty programs. The Company recognizes the in-kind prizes granted in Loyalty Programs pursuant to 13 Interpretation IFRIC Loyalty Programs concerning the recognition of the goods and services transferred by the companies free of charge under such programs. The Company grants its customers the loyalty credits under the sale transactions understood as the sale of goods to customer, which the customer may exchange into the free goods in future after meeting the specified conditions. The Company recognizes the loyalty credits awarded to the customer as the separate element of sale transactions, in which they were awarded. The part of payment received or payable due to the transaction is allocated to the granted credits and there is the deferment of the revenues recognition due to this title. The payment referred to the loyalty credits is measured under the fair value so the amount for which the loyalty credits may be sold separately under the conditions of the market transaction between well informed and interested parties. The fair value is adjusted by the fair value of prizes, which would be offered to the customers, who did not gathered loyalty credits at initial sale and the interests from the loyalty credits for which it may be expected that they will not be used by customers. The entity delivers the prizes to the customer by itself so the payment allocated to the loyalty credits is recognized as the revenue when the points are exchanges and after meeting the obligation to deliver the prize. The amount recognized as the revenue is set basing on the number of credits which were exchanged in comparison to the total number of credits which are expected to be exchanged. Costs/expenses The Company presents the costs pursuant to the proportionality of revenues principle and costs and prudence concept. The manufacture costs of sold products include the manufacture costs of sold products and services including the auxiliary activity costs. The costs of sale include the costs of sale support, commercial costs and distribution costs. The costs of general management include the costs related to the management and administration of the Company as a whole. Activity sectors According to the requirements of IFRS 8, the internal operating segments should be identified basing on internal reports related to these items/matters/issues of the Companies which are verified on a regular basis by the persons authorizing to decide on allocation of resources of the relevant segment and to assess its financial result. The Company runs homogenous business activity consisting in manufacturing and sale of confectioneries. But for the needs of the management, the internal financial reporting system allows identifying the financial results according to the market criterion. The investments expenses/costs are not allocated to the segments acc. to the markets, because the fixed assets used by the all segments in the business activity are located in Poland. Income tax The income tax is the burden of the gross financial result and covers the current tax and deferred tax. The current income tax is the amount set under the tax provisions, which is calculated from the taxable income for the relevant period.

14 Wawel S.A. 14 The current income tax is presented as the liability in the amount which has not been paid. If the amount already paid due to the current income tax exceeds the amount to be paid, the surplus is presented as the receivables. The deferred tax is calculates using the balance method. The deferred tax reflects the net tax effect of the temporary differences between the carrying amount of the relevant assets or liabilities and its taxable value. The assets and provisions due to deferred income tax are calculated using the valid tax rates anticipated for the future years, when it is expected that the temporary differences are realized pursuant to the tax rates published or set as for the balance day. The assets due to the deferred income tax from the negative temporary differences as well as not-used tax losses are recognized only when if it is possible that in the future there will be sufficient taxable base from which these differences will be deducted. The provisions due to deferred tax are establisehed notwithstanding the date of realization. The assets and provisions due to the deferred income tax are not discounted and are classified in the balance sheet as the fixed assets or long-term liabilities. Profit per one share The profit per one share is calculated by dividing the net profit for the relevant period owing the shareholders of ordinary shares by the weighted average number of shares in the relevant period. The diluted profit per one share for each period is calculated by division of the net profit for the relevant period, corrected with the profit changes resulting from change of the potential ordinary shares into the ordinary shares by the corrected weighted average number of ordinary shares. Transactions in foreign currency The functional currency of the Company is polish zloty. The transactions carried out in the currency other than functional currency are presented at the exchange rate of this currency as for the transaction date; but: - the amounts of invoices are measured at the average exchange rate of NBP announced on the business day preceding the date of invoice, - inflows (revenues) are valued at the purchase exchange rate applied by the bank serving the entity, - expenditures are valued at the sale exchange rate applied by the bank serving the entity. As for balance date: - The pecuniary items in the foreign currency included the currencies possessed by the Company and receivables and liabilities to be received or paid, in the set or settable number of currency units, are calculated using the closing exchange rate i.e. instant exchange rate as for the balance day; i.e. at the average exchange rate of NPB binding as for the balance day. - Non-pecuniary items valued at the historical purchase price or manufacturing costs expressed in the foreign currency are calculated using the exchange rate from the transaction date and - non-pecuniary items values at the fair value expressed in the foreign currency are calculated using the exchange rate which was binding on the date when the fair value was set. The exchange differences arisen as a result of settlement of pecuniary items or calculation of the pecuniary items by the exchange rates other than these by which they were calculated at the initial measurement for the relevant period or in the previous financial statements the Company presents in the financial result of the period when they arise, except for the pecuniary items being the securing of the currency risk, presented in accordance with the accounting policy principles for securing of cashflows. The exchange differences are presented in the net amount in the profit and loss statement. In order to re-store the settlements condition from before the balance sheet valuation as the principle of correcting entry is accepted under the date of the first day of the new fiscal year of the recording the balance sheet valuation of the other assets and liabilities. Management Board estimations and assumptions To prepare the financial statement pursuant to IFRS requires from the Management Board to make the professional judgments, estimations and assumptions which affect the accepted principles and presented values of assets, liabilities, revenues and costs. The estimations and assumptions related to

15 Wawel S.A. 15 them are based on the historical experiences and many other factors which are deemed as being reasonable in these circumstances and their results make the base to prepare the professional judgment of the carrying amount of the assets and liabilities and which does not results from the other sources directly. In the material issues the Management Board making the estimation bases on the opinions of independent experts. The actual value may vary from the estimated value. Estimations and assumptions related to them are a subject of current verification. The change of the book estimations is presented in the period when they were made if it concerns only this period or in the current or future periods if the changes refer as to the current as future periods. Changes in principles, changes in estimations and errors from the previous years The change of the accounting principles (policy) is made in case of: - Change of the legal regulations concerning the accountancy; - When it leads to this that the information on influence of transaction, other events and contions on the financial condition, financial result or the cash-flow contained in the financial statement will be more usable and reliable. In case of change in the accounting principles (policy) it is assumed that the new accounting principles (policy) were applied from ever. The adjustments related to them are presented as the adjustments of own equity- in the item retained profits. IN order to ensure the comparability of the data the properly changes in the financial statements (comparable data) for the previous years should be made in such manner that these financial statements included also the made changes in accounting principles (policy). The items of the financial statement set under the estimation are a subject of verification in the situation when the circumstances being the base for these estimations change or as a result of obtaining new information, progressing of events or obtaining the more experience. The adjustments caused by removing the crucial errors from the previous periods are referred to the own equity- in the item retained profits. During preparing the financial statement the assumption should be taken that the error was corrected in the period when it had occurred. It means that the adjustment amount referring to the previous reporting period should be included in the profit and loss statement for such period. Cash-flow statement The cash-flow statement is prepared by indirect method. The balance of the pecuniary assets and their equivalents, presented in the cash-flow statement consists of the pecuniary assets and their equivalents less the non-paid credits in the current accounts if they constitute the integral part of pecuniary assets management. The received dividends are presented in the cash-flow from the investment activity. Paid dividends are presented in the cash-flow from the financial activity. The paid interests due to taken credits and loans, issued debt securities and financial lease are presented in the flows from the financial activity. Other paid interests are presented in the flows from the operating activity. The received interests due to the financial lease, granted loans and short-term securities are presented in the flows from the investment activity. Other received interests are presented in the flows from the operating activity. Cash-flows due to the income tax are included to the operating activity. Merge of business entities The merges of the business entities are settled by the purchase method. Applying this method consists of making the following activities: - Identification of the taking over entity; - Valuation of the merge cost; - Allocation of the merge of business entities, as for themerge date, to the taken up asssets and liabilities and contingent liabilities. The fair value of the assets, liabilities and contingent liabilities to allocate the merge business entities costs is set pursuant to the principles specified in the appendix B to ISFR 3.

16 Wawel S.A. 16 The difference between the purchase price and the fair value of the net assets is presented as the goodwill. The surplus of the fair value of identifiable assets, liabilities and contingent liabilities over the purchase price is presented as the other operating revenues of this period. Goodwill The Company s goodwill as for the merge date is valued at the purchase price, constituting the surplus of the merger costs over the share of taking over party in the net fair value of identifiable assets, liabilities and contingent liabilities set as for the taking over date (all crucial exchange dates in case of the taking overs as a result of several consequent transactions). The goodwill is allocated to the units (group of units) generating the pecuniary assets as for the merge date. The goodwill is tested regarding the impairment before the end of the reporting period, when the merge occurred, and then in every annual reporting period. In case of assumptions indicating the impairment, the test for impairment is carried out before the end of each reporting period, when the assumptions occurred. The goodwill is valued at the reporting date pursuant to the purchase price less the total impairment losses and reductions due to sale of the part of the shares, to which it was assigned. The write downs to the amount allocated to the relevant unit (group of units) generating the pecuniary assets of goodwill are not a subject of reversal. Investments in affiliates The investments in affiliates (entities on which the company has significant influence, but does not have a control or co-control) are presented in the financial statement using the ownership rights method on the base of the financial data from the financial statements of these entities as for the same reporting day as the individual financial statement of the dominant Company. After using the ownership rights method the investment is a subject of assessment regarding the possible impairment. It is assumed that the Company has a significant influence on the entity if it is able to participate in taking any decisions in the field of the financial and operating policy of the entity. In particular this condition is met when it holds directly or indirectly more than 20% but not more than 50% voting rights in the relevant entity, and the participation in taking decisions in the field of financial and operating policy is not limited nor contractually or actually but it is actually performed. 2. Information on adjustments due to the reserve, on provision and assets due to the deferred income tax executed in the period of IIIrd quarter 2011: - The balance of accrued provisions was increased by the amount of k PLN - The balance of the provision for the deferred income tax was increased by the amount of k PLN - The balance of the assets due to the deferred income tax was increased by the amount of k PLN 3. Information on provisions for assets made in the period of IIIrd quarter 2011: - The balance of provisions for receivables was decreased by the amount 134 k PLN. - The balance of provisions for inventory of materials was decreased by the amount 11 k PLN. 4. The results achieved in IIIrd quarter 2011 was characterized by the following amounts: Revenue from sale in IIIrd quarter 2011 was 120,9 million zlotys, that constitutes 134% in comparison to the same period in 2010, Gross profit from sale achieved in IIIrd quarter 2011 the level of 48,6 million zlotys, that constitutes 131% in comparison to the same period in 2010,

17 Wawel S.A. 17 In IIIrd quarter of 2011 the gross profit was 18,3 million zlotys, while in IIIrd quarter of 2010 the gross profit was 13,3 million zlotys, In IIIrd quarter of 2011 the net profit was 14,8 million zlotys, while in Ist quarter of 2010 the net profit was 10,8 million zlotys. To compare these two analysed periods the margin rates EBIDTA, EBIT, gross cashflow and net casflow was applied. The EBITDA rate - calculated as the operational profit plus amortization. EBITDA rate: IIIrd quarter IIIrd quarter EBIDTA rate ( in k PLN) Operational profit+amortization EBIDTA margin (% share in revenues) 17,1% 17,8% The EBIT rate - calculated as the operational profit. EBIT rate: Dynam / % IIIrd quarter 2011 IIIrd quarter 2010 Dynam / 2010 EBIT rate ( in k PLN) Operational profit % EBIT margin (% share in revenues) 14,7% 14,6% Gross cash flow rate - calculated as the gross profit plus amortization. Gross cash flow rate: IIIrd quarter IIIrd quarter Dynam / 2010 Gross cash flow rate (in k PLN) Gross profit+amortization % Gross cash flow margin (% share in revenues) 17,6% 17,9% Net cash flow rate- calculated as the net profit plus amortization. Net cash flow rate: IIIrd quarter IIIrd quarter Dynam / 2010 Net cash flow rate (in k PLN) Net profit+amortization % Net cash flow margin (% share in revenues) 14,7% 15,1% 5. Important events within the period The important events which occurred in the period of IIIrd quarter of 2011 were presented in the published current reports. 6. Important events after balance date: Do not occur 7. Information on operating sectors Pursuant to the requirements of IFRS 8, the operating sectors need to be identified basing on internal reports on these elements of the Company, which are verified on a regular basis by the persons deciding on allocation to the relevant sector and assessing the financial results. The Company runs homogenous business activity consisting of manufacture and sale of confectionery. However for the management needs the internal system of financial reporting allows identifying the financial results pursuant to the markets. And due to this fact after adopting IFRS 8 the identification of reporting sectors in the company did not changed.

18 Wawel S.A. 18 The results in the market segments are as follows: IIIrd quarter 2011 Item: Country Export Total Income from sales of products, goods and materials Cost of products, goods and materials sold Gross profit (loss) from sales PLN k IIIrd quarter 2010 Income from sales of products, goods and materials Cost of products, goods and materials sold Gross profit (loss) from sales PLN k The capital expenditures are not alocated according to the markets, because all of the fixed assets used are situated in Poland. 8. Seasonality of issuer s business activity. The business activity of the Issuer is characterized by the seasonality, which results from the structure of manufactured and sold products. Due to the fact that 75% - 80% of the sale constitute the products from the group of filled chocolate, full chocolate and chocolate candies, their sale is lower during the summer months, but the lowest level is in II quarter. The biggest revenues and profits are generated in I and IV quarter of the calendar year. The diagram below presents the amounts in sale revenues in the last four quarters of Company s activity in comparison to the same quarters of the previous year.